CHEM INTERNATIONAL, INC.
November 5, 1997
To Our Stockholders:
On behalf of the Board of Directors, it is our pleasure to invite you to
attend the Annual Meeting of Stockholders of Chem International, Inc. (the
"Company"), which will be held at 9:00 a.m. local time on November 26, 1997 at
the Headquarters Plaza Hotel, 3 Headquarters Plaza, Morristown, New Jersey
07960.
At the Annual Meeting, you will be asked to vote on proposals:
1. to elect two class I Directors for a three year term;
2. to ratify the appointment of independent auditors of the Company for
the 1998 fiscal year; and
3. to act upon such other business as may properly come before the
Meeting:
It is important that your shares be represented at the Annual Meeting,
whether or not you are able to attend. Accordingly, you are urged to sign, date
and mail the enclosed proxy promptly. If you later decide to attend the Annual
Meeting, you may revoke your proxy and vote your shares in person.
Sincerely,
E. Gerald Kay
President and
Chief Executive Officer
<PAGE>
CHEM INTERNATIONAL, INC.
201 Route 22
Hillside, New Jersey 07205
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
BE HELD ON NOVEMBER 26, 1997
TO THE STOCKHOLDERS OF
CHEM INTERNATIONAL, INC.:
NOTICE IS HEREBY GIVEN that an Annual Meeting of Stockholders (the
"Meeting") of Chem International, Inc., a Delaware corporation ( "Chem"), will
be held on November 26, 1997, at 9:00 a.m., local time, in the Headquarters
Plaza Hotel, 3 Headquarters Plaza, Morristown, New Jersey 07960 for the purpose
of considering and acting upon the following:
1. The election of two Directors to Chem's Board of Directors to serve a
three-year term as Class I Directors;
2. Ratification of the appointment of Moore Stephens, P.C. as Chem's
independent accountants for the fiscal year ending June 30, 1998;
3. The transaction of such other business as may properly come
before the Meeting or any adjournment thereof.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE "FOR" PROPOSALS NO. 1 AND NO. 2 TO BE PRESENTED
TO CHEM STOCKHOLDERS AT THE MEETING.
By Order of the Board of Directors.
Eleanor DiMartino
Secretary
Hillside, New Jersey
November 5, 1997
It is important that your shares be represented at this meeting in order
that a quorum may be assured.WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU
ARE URGED TO DATE, SIGN AND PROMPTLY MAIL THE ENCLOSED CARD IN THE POSTAGE
PREPAID ENVELOPE PROVIDED AND TO DO SO IN ADEQUATE TIME FOR YOUR DIRECTIONS TO
BE RECEIVED AND TABULATED PRIOR TO THE SCHEDULED MEETING.
<PAGE>
CHEM INTERNATIONAL, INC.
201 Route 22
Hillside, New Jersey 07205
PROXY STATEMENT
1997 ANNUAL MEETING OF STOCKHOLDERS
To be held on November 26, 1997
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors (the "Board") of Chem International,
Inc., ("Chem" or the "Company"), a Delaware corporation, to be voted at the
Annual Meeting of Stockholders of the Company (the "Annual Meeting") to be held
at the Headquarters Plaza Hotel, 3 Headquarters Plaza, Morristown , New Jersey
07960 on November 26, 1997, at 9:00 a.m. local time, or at any postponement or
adjournment thereof. This Proxy Statement, the Notice of Annual Meeting and the
accompanying form of proxy are first being mailed to stockholders on or about
November 5, 1997.
Only holders of record of the Company's common stock, par value $.002 per
share ("Common Stock"), at the close of business on October 28, 1997 (the
"Record Date"), are entitled to vote on the matters to be presented at the
Annual Meeting. The number of shares of Common Stock outstanding on such date
and entitled to vote was 4,335,000. Holders of Common Stock are entitled to one
vote on each matter to be voted upon by the stockholders at the Annual Meeting
for each share held.
At the Annual Meeting, stockholders will be asked to consider and vote upon
(1) the election of two directors to Chem's Board of Directors each to serve a
three-year term as Class I Directors and (2) the ratification of the appointment
of Moore Stephens, P.C. as Chem's independent auditors for the fiscal year
ending June 30, 1998 ( the" Independent Auditors Proposal"). At the Annual
Meeting stockholders may also be asked to consider and take action with respect
to such other matters as may properly come before the Annual Meeting.
QUORUM AND VOTE REQUIREMENTS
The presence, in person or by proxy, of holders of record of a majority of
the shares of Common Stock issued and outstanding and entitled to vote is
required for a quorum to transact business at the Annual Meeting, but if a
quorum should not be present, the Annual Meeting may be adjourned from time to
time until a quorum is obtained. Directors are elected by a plurality of votes
cast. The Independent Auditors Proposal and all other matters to properly come
before the Meeting will be determined by the affirmative vote of the holders of
a majority of the shares of
<PAGE>
Common Stock present, in person or by proxy, and entitled to vote at the Annual
Meeting. Broker "non-votes" (i.e. proxies from brokers or nominees indicating
that such persons have not received instructions from the beneficial owner or
other persons entitled to vote shares as to a matter with respect to which the
brokers or nominees do not have discretionary power to vote) and shares for
which duly executed proxies have been received but with respect to which holders
of shares have abstained from voting will be treated as present for purposes of
determining the presence of a quorum at the Annual Meeting. Abstentions and
broker non-votes have no impact on the election of Directors except to reduce
the number of votes for the nominees. Broker "non- votes" are only counted for
purposes of determining whether a quorum is present and, therefore, will not be
included in vote totals and will have no effect on the outcome of the votes on
all other proposals to be acted upon at the Annual Meeting. Abstentions will be
counted as present and entitled to vote, and will have the effect of a negative
vote with respect to all other proposals to be acted upon at the Annual Meeting.
SOLICITATION AND REVOCATION
PROXIES IN THE FORM ENCLOSED ARE BEING SOLICITED BY, AND ON BEHALF
OF, THE BOARD. THE PERSONS NAMED IN THE ACCOMPANYING FORM OF PROXY
HAVE BEEN DESIGNATED AS PROXIES BY THE BOARD.
All Common Stock represented by properly executed proxies which are returned
and not revoked prior to the time of the Annual Meeting will be voted in
accordance with the instructions, if any, given thereon. If no instructions are
provided in an executed proxy, it will be voted (1) in favor of the nominees for
election as directors named below and (2) FOR the Independent Auditors Proposal,
and in accordance with the proxyholder's discretion as to any other business
raised at the Annual Meeting. Any stockholder who executes a proxy may revoke it
at any time before it is voted by delivering to the Company a written statement
revoking such proxy, by executing and delivering a later dated proxy, or by
voting in person at the Annual Meeting. Attendance at the Annual Meeting by a
stockholder who has executed and delivered a proxy to the Company shall not in
and of itself constitute a revocation of such proxy.
The Company will bear its own cost of the solicitation of proxies. Proxies
will be solicited initially by mail. Further solicitation may be made by
directors, officers and employees of the Company personally, by telephone or
otherwise, but any such person will not be specifically compensated for such
services. The Company also intends to make, through banks, brokers or other
persons, a solicitation of proxies of beneficial holders of the Common Stock.
Upon request, the Company will reimburse brokers, dealers, banks and similar
entities acting as nominees for reasonable expenses incurred in forwarding
copies of the proxy materials relating to the Annual Meeting to the beneficial
owners of Common Stock which such persons hold of record.
<PAGE>
PROPOSAL NO. 1-ELECTION OF DIRECTORS
The following table sets forth certain information with respect to the
members of Chem's Board of Directors, including the two incumbent Class I
Directors (Mr. Kay and Ms. Riva Kay) who have been nominated by the Board of
Directors for re-election as Class I Directors at the Annual Meeting.
The Board of Directors knows of no reason why any of its nominees will be
unable or will refuse to accept election. If any nominee becomes unable or
refuses to accept election, the Board of Directors will either reduce the number
of directors to be elected or select a substitute nominee. If a substitute
nominee is selected, proxies will be voted in favor of such nominee.
The class I Directors shall be elected by a plurality of the votes cast.
<TABLE>
Class of Director
Name, Principal Occupation Age Directors Since
<S> <C> <C> <C>
E. Gerald Kay 61 Class I 1980
Served as Chairman of the Board and President
of the Company since 1980. Mr. Kay is also a
director of Trans Global Services, Inc . a publicly
traded temporary personnel company and International Magnetic
Imaging, Inc. a medical diagnostic imaging company.
Riva Kay 30 Class I 1991
Served as Vice President and a director of the
Company since May 1991. Ms. Kay is the daughter
of E. Gerald Kay and the sister of Christina Kay.
Christina Kay 27 Class II 1994
Served as Vice President and a director of the Company
since December 1994. From March 1994 until November
1994 she was an administrative assistant at Squadron,
Ellenoff, Plesant and Sorkin, a New York City law firm.
Prior to her employment at that firm she was associated
with Meridan Publishing. Ms. Kay is the daughter of
E. Gerald Kay and the sister of Riva Kay.
Robert Canarick 47 Class II 1994
Served as a director of the Company since December 1994.
Since January 1995, he has served as Vice President and Chief Financial
Officer of UVW Elizabeth Group, LLC an all lines independent insurance agency.
From 1989 to December 1994, Mr. Canarick was President of The Elizabeth
Agency, Inc., a predecessor of his present Company. Mr. Canarick is a member
of the Audit Committee.
Leonard Stowe 59 Class III 1994
Served as a director of the Company since 1994. Since
April 1997, he has served as Vice President of Nations Credit
Commercial Funding, Inc. From April 1996 until April 1997, he
served as Vice President of CIT Credit Finance. From 1970
to April 1996, Mr. Stowe was employed by Gibraltar Corp.
of America, a subsidiary of UJB Financial Corp. Mr. Stowe
is a member of the Audit Committee.
Recommendation and Vote
</TABLE>
The Board unanimously recommends a vote FOR the election of the Nominees
to the Board.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of October 1, 1997, the beneficial
ownership of Common Stock of the Company by each executive officer and director,
all executive officers and directors as a group, and each person known to the
Company to own beneficially or five percent or more of the outstanding shares of
the Company.
<TABLE>
<S> <C> <C>
Shares
Officers, Directors and Beneficially Percent of Shares
Principal Stockholders Owned (1) Beneficially Owned
E. Gerald Kay 1,894,678(2) 42.7%
Riva Kay 252,661(3) 5.7%
Christina Kay 252,661(4) 5.7%
Eric Friedman 100,000(5) 2.3%
Ronald Smalley 25,000(6) *
Robert Canarick 25,000(7) *
Leonard Stowe 25,000(8) *
All directors,
executive officers
as a group (7 persons) 2,575,000 53.5%
- -----------------
*Less than 1%
(1) Unless otherwise indicated by footnote, the named persons have sole voting
and investment power with respect to the share of Common Stock
beneficially owned.
(2) Includes 100,000 shares subject to presently exercisable stock options.
</TABLE>
<PAGE>
(3) Includes 100,000 shares subject to presently exercisable stock options (4)
Includes 100,000 shares subject to presently exercisable stock options. (5)
Includes 100,000 shares subject to presently exercisable stock options (6)
Includes 25,000 shares subject to presently exercisable stock options. (7)
Includes 25,000 shares subject to presently exercisable stock options. (8)
Includes 25,000 shares subject to presently exercisable stock options
DIRECTORS
The Board of Directors held ten meetings during the fiscal year ended June
30, 1997, and all directors attended at least 75% of those meetings.
No compensation was paid to any director for his services to the Board of
Directors or any committee..
The only standing committee of the Board of Directors is the Audit
Committee, whose members are Messrs. Canarick and Stowe. The Audit Committee
periodically consults with the Company's management and independent public
accountants on financial matters, including the Company's internal financial
controls and procedures. The Audit Committee meet once in Fiscal 1997, and all
members attended the meeting. The Company's stock option plan is administered by
a committee composed of Messrs. Canarick and Stowe.
EXECUTIVE OFFICERS
The following individuals are executive officers of the Company but are not
Directors or Nominees for Director:
Eric Friedman, age 49, has been the Vice President and Treasurer of the
Company since June 1996. From June 1978 though May 1996, he was a partner in
Shachat and Simson, a certified public accounting firm that audited the
Company's financial statements from June 1976 until June 1995. Mr. Friedman is a
director of All Communications Corporation, Inc., a publicly traded video
conferencing and communications company.
Ronald Smalley , age 52, has been Vice President-Technology of the Company
since April 1993. From 1991 to March 1993, Mr. Smalley was Manager of OTC
Development at SmithKline Beecham, in charge of product development.
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on a review of Forms 3,4 and 5 submitted to the Company during and
with respect to Fiscal 1997, all statements of beneficial ownership required to
be filed with the Securities and Exchange Commission (the"Commission") were
timely filed.
EXECUTIVE COMPENSATION
The following table shows, for the fiscal years ended June 30, 1997, 1996
and 1995, certain compensation information as to the Chief Executive Officer and
each of the most highly compensated executive officers of the Company who served
as executive officers during the fiscal year ended June 30, 1997 (the "Named
Executive Officers").
<TABLE>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Securities
Name and underlying All Other
principal Position Year Salary Bonus Stock Options Compensation
------------------------ ----- ----------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C>
E. Gerald Kay 1997 $ 150,000 $ - 100,000 $ 11,454(5)
Chairman of the Board, 1996 134,850 - - 13,846(2)(5)
President and Chief 1995 230,550 250,000 - 40,885(2)(5)
Executive Officer
Eric Friedman
Chief Financial Officer and 1997 215,000 104,135 100,000 6,059(3)(5)
Vice President(1) 1996 16,538 - - -
Ronald Smalley 1997 100,000 2,688 25,000 5,553(4)(5)
Vice President 1996 100,000 4,419 - 5,478(4)(5)
1995 100,000 - - 11,481(4)(5)
</TABLE>
(1) The amount shown for 1996 reflects less than a full year of compensation
for Mr. Friedman who was employed by the Company from June 1, 1996.
(2) Includes the Company's portion of premiums amounting to $5,947 and $16,147
during the fiscal years ended June 30, 1996 and 1995 , respectively, on a
split dollar life insurance arrangement on Mr. Kay's life. The Company
also provides Mr. Kay with the use of a Company car.
<PAGE>
(3) Includes an automobile allowance of $6,000 in 1997. (4) Includes an
automobile allowance of $3,600 in 1997, 1996 and 1995. (5) The disclosed amount
includes the Company's matching contributions under the Company's
401-K plan and, for 1995 only, contributions to the defined benefit
pension plan.
Employment Agreements
Effective July 1, 1996 (January 1, 1996 as to Mr. Smalley), the Company
entered into employment agreements with E. Gerald Kay, President, Eric Friedman,
Vice President and Ronald Smalley, Vice President of the Company. The employment
contracts, each of which expires June 30, 1999 provide for such executives to
receive annual base salaries as follows: E. Gerald Kay $150,000 for fiscal year
ending June 30, 1997, and $250,000 for fiscal years ending June 30, 1998 and
1999; Eric Friedman, $215,000 and Ronald Smalley $100,000.
The contracts provide that the Company and the employees shall negotiate an
increase in such employees' salary for each succeeding contract year (July 1 of
each year) and upon failure of the parties to agree on such increase, the
employees' base salary shall be increased by a percentage equal to the
percentage increase in the consumer price index for all urban consumers, North
Eastern area, for the preceding calendar year. Each of these employees has
agreed to devote his full time and best efforts to fulfill their duties and
responsibilities to the Company. Each of them will be entitled to participate in
employee benefit plans and to receive stock options under the Company's stock
option plan on the basis commensurate with their salary and the amount of stock
options granted to other management employees.
The Company has the right to terminate the employment agreements for "cause"
as defined in the employment agreements and the Company also has the right to
terminate an employee without cause, upon not less than thirty days' prior
written notice, provided that the employee shall be entitled to the full
compensation due for the remainder of the employment term. The employee may
terminate the agreement at any time upon thirty days' prior written notice. In
such event the employee shall only be entitled to the compensation due through
the date of termination. Such employees have also agreed not to disclose any
confidential information of the Company during the term of employment or
thereafter. These employees have agreed not to compete with the Company during
the term of employment and for a period of one year after the date of
termination of employment with the Company in the event that such employment is
terminated for cause or the employee voluntarily leaves prior to the end of the
employment term.
OPTION GRANTS
DURING THE FISCAL YEAR ENDED JUNE 30, 1997
<PAGE>
<TABLE>
The following table sets forth individual grants of stock options by Chem
pursuant to the Chem International, Inc. Stock Option Plan to the Named
Executive Officers during the fiscal year ended June 30, 1997.
% of Total
Granted to
Securities Options Employees in Exercise Expiration
Name Granted (#)(1) Fiscal Year Price (2) Date
- ----------------- ------------------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
E. Gerald Kay 74,026 12.4% $3.50 October 16, 2006
E. Gerald Kay 25,974 4.3% $3.85 October 16, 2001
Eric Friedman 100,000 6.7% $3.50 October 16, 2006
Ronald Smalley 25,000 4.2% $3.50 October 16, 2006
(1) The date of grant for these options was October 16, 1996, which became
exercisable on October 16, 1997.
(2) The exercise price of the options is equal to the fair market value of
shares of Common Stock of Chem on the date of grant of the options except
for the 25,974 of incentive stock options granted to Mr. Kay which is
equal to 110% of the fair market value on the date of grant.
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR
END OPTION VALUES
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options during the last fiscal
year and unexercised options held at the end of the fiscal year ended June 30,
1997:
<TABLE>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES FISCAL YEAR FISCAL YEAR END
ACQUIRED VALUE END(#) ($)
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($)UNEXERCISABLE UNEXERCISABLE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
E. Gerald Kay -- -- 0/ 100,000 0/ 0
Eric Friedman -- -- 0/ 100,000 0/ 0
Ronald Smalley -- -- 0/ 25,000 0/ 0
</TABLE>
<PAGE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
The Company leases manufacturing and office facilities from Gerob Realty
Partnership whose partners are E. Gerald Kay, Riva Kay and Christina Kay (
stockholders and directors of the Company). The lease which expires on December
31, 1997 provides for an annual rental of $60,000 plus payment of all real
estate taxes.
Other warehouse and office facilities are leased from Vitamin Realty
Associates, L.L.C., a limited liability company, which is 90% owned by E. Gerald
Kay, Riva Kay and Christina Kay (all stockholders and directors of the Company)
and 10% owned by Eric Friedman, the Company's Chief Financial Officer. The lease
was effective on January 10, 1997 and provides for minimum annual rentals of
$346,000 through January 10, 2002 plus increases in real estate taxes and
building operating expenses. At its option, the Company has the right to renew
the lease for an additional five year period.
On September 10, 1982, the Company issued a note payable to Gerob Realty
Partnership, which note currently has principal remaining in the amount of
$276,444. The note was a fifteen year non-interest bearing note due on September
10, 1997. The note has been renewed for a new five year term.
CHANGE OF AUDITORS
Effective December 4, 1996, the Company dismissed its prior certifying
accountants, Cornick, Garber & Sandler, LLP("Cornick") and retained as its new
certifying accountants, Moore Stephens, P.C. Cornick's report on the Company's
financial statements during the most recent fiscal year contained no adverse
opinion or a disclaimer of opinion, and was not qualified as to uncertainty,
audit scope or accounting principles. There were no disagreements with Cornick
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure. The decision to change accountants
was approved by the Company's Board of Directors.
PROPOSAL NO. 2-RATIFICATION OF
THE APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of Chem has appointed the firm of Moore Stephens,
P.C., independent auditors, to audit the consolidated financial statements of
Chem International, Inc. and its subsidiaries for the fiscal year ending June
30,1998, subject to ratification by the Chem Stockholders.
A member of Moore Stephens, P.C. is expected to be present at the Annual
Meeting and to be
<PAGE>
provided with an opportunity to make a statement if such member desires to do so
and to be available to respond to appropriate questions from shareholders
Recommendation and Vote
Approval of the Independent Auditors Proposal requires the affirmative
vote of a majority of the shares of Common Stock present, in person or by proxy,
at the Annual Meeting.
The Board unanimously recommends a vote FOR the approval of the Independent
Auditors Proposal.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Stockholder proposals to be included in the Company's proxy statement
with respect to the 1998 Annual Meeting of Stockholders must be received by the
Company its executive offices located at 201 Route 22, Hillside, New Jersey
07205 no later than July 16, 1998.
OTHER BUSINESS OF THE MEETING
The Company is not aware of any matters to come before the Annual Meeting
other than those stated in this Proxy Statement. However, inasmuch as matters of
which management of the Company is not now aware may come before the Annual
Meeting or any adjournment, the proxies confer discretionary authority with
respect to acting thereon, and the persons named in such proxies intend to vote,
act and consent in accordance with their discretion with respect thereto.
ADDITIONAL INFORMATION
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED
JUNE 30, 1997 MAY BE OBTAINED WITHOUT CHARGE BY ANY STOCKHOLDER TO WHOM THIS
PROXY STATEMENT IS SENT, UPON WRITTEN REQUEST TO THE CHIEF FINANCIAL OFFICER,
CHEM INTERNATIONAL, INC., 201 ROUTE 22, HILLSIDE, NEW JERSEY 07205.
By Order of the Board of Directors
<PAGE>
E. Gerald Kay
Chairman, President and
Chief Executive Officer
November 5, 1997
