SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
CHEM INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
________________________________________________________________________________
1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
________________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
5) Total fee paid:
[_] Fee paid previously with preliminary materials:
________________________________________________________________________________
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
CHEM INTERNATIONAL, INC.
November 1, 1999
To Our Stockholders:
On behalf of the Board of Directors, it is our pleasure to invite you to
attend the 1999 Annual Meeting of Stockholders of Chem International, Inc. (the
"Company"), which will be held at 9:00 a.m. local time on November 24, 1999 at
the Company's Executive Offices, 225 Long Avenue, Hillside, New Jersey 07205.
At the Annual Meeting, you will be asked to vote on proposals:
1. To amend the Company's Stock Option Plan to increase the number of
shares of Common Stock reserved for issuance from 2,000,000 to
3,000,000;
2. To ratify the appointment of independent auditors of the Company for
the 2000 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,
Seymour Flug
President and
Chief Executive Officer
<PAGE>
CHEM INTERNATIONAL, INC.
201 Route 22
Hillside, New Jersey 07205
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 24, 1999
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 24, 1999, at 9:00 a.m., local time, at the Company's Executive
Offices, 225 Long Avenue, Hillside, New Jersey 07205, for the purpose of
considering and acting upon the following:
1. A proposal to amend the Company's Stock Option Plan to increase the
number of shares of Common Stock reserved for issuance from 2,000,000 to
3,000,000;
2. Ratification of the appointment of Amper, Politziner & Mattia, P.A. as
Chem's independent accountants for the fiscal year ending June 30, 2000;
and
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 1, 1999
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
1999 ANNUAL MEETING OF STOCKHOLDERS
To be held on November 24, 1999
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 1999
Annual Meeting of Stockholders of the Company (the "Annual Meeting") to be held
at the Company's Executive Offices, 225 Long Avenue, Hillside, New Jersey 07205
on November 24, 1999, 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 1, 1999.
Only holders of record of the Company's common stock, par value $.002 per
share ("Common Stock"), at the close of business on October 29, 1999 (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 5,178,300. 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) a proposal to amend the Company's Stock Option Plan to increase the number
of shares of Common Stock reserved for issuance from 2,000,000 to 3,000,000 and
(2) the ratification of the appointment of Amper, Politziner, & Mattia, P.A. as
Chem's independent auditors for the fiscal year ending June 30, 2000 (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. Approval of the proposal to amend the Company's Stock Option Plan requires
the affirmative vote of the holders of a majority of the shares of Common Stock
present or represented by proxy, and entitled to vote at the Annual Meeting. 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 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
<PAGE>
broker non-votes have no impact on the election of Directors except to reduce
the number of votes for the nominees. With respect to all other proposals,
broker non-votes are not counted as votes and, therefore, will not be included
in vote totals and abstentions will have the effect of a negative vote against
such other proposals.
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) FOR the proposal to
amend the Stock Option Plan; and (2) FOR the Independent Auditors Proposal, and
in accordance with the proxy holder'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.
BOARD OF DIRECTORS
On August 31, 1999, a vacancy on the Board of Directors was created by the
retirement of P. William Chesney. The Board of Directors is reviewing potential
candidates and intends to appoint a director to fill the vacancy at a later
date.
The following table sets forth certain information with respect to the
members of Chem's Board of Directors whose terms of office will continue after
the annual meeting.
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<TABLE>
<CAPTION>
Class of Director
Name and Principal Occupation Age Directors Since
- ----------------------------- --- --------- -----
<S> <C> <C> <C>
E. Gerald Kay 63 Class I 1980
Served as Chairman of the Board and President
of the Company, and its predecessor since 1980,
and was president until May 1999.
Riva Kay Sheppard 32 Class I 1991
Served as Vice President and director of the Company
since May 1991. Mrs. Sheppard is the daughter of E. Gerald
Kay and the sister of Christina Kay.
Christina Kay 29 Class II 1994
Served as Vice President and director of the Company
since December 1994. From March 1994 until
November 1994 she was an administrative assistant at
Squadron, Ellenoff, Plesent, Sheinfeld & Sorkin, a New
York City law firm. Prior to her employment at that firm
she was associated with Meridian Publishing. Ms. Kay is
the daughter of E. Gerald Kay and the sister of Riva
Sheppard.
Robert Canarick 49 Class II 1994
Served as a director of the Company since December
1994. Since January 1998 he has served as general
counsel of NIA Group, LLC an all lines independent
Insurance agency. From 1995 to 1998 Mr. Canarick was
Vice President and chief financial officer of UVW Elizabeth
Group, LLC, a predecessor of his present company.
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of October 1, 1999, 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 of five percent or more of the outstanding shares of
the Company.
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<PAGE>
Shares
Officers, Directors and Beneficially Percent of Shares
Principal Stockholders Owned (1) Beneficially Owned
- ---------------------- --------- ------------------
E. Gerald Kay 2,903,906 (2)(4) 54.4%
Riva Kay Sheppard 419,327 (3)(5) 7.9%
Christina Kay 419,327 (3)(5) 7.9%
Eric Friedman 166,666 (3) 3.1%
Robert Canarick 25,000 (6) *
All directors and
executive officers
as a group (5 persons) 3,934,226 (7) 67.1%
- ----------
* 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 160,606 shares subject to presently exercisable stock options.
(3) Includes 166,666 shares subject to presently exercisable stock options.
(4) Shares dispositive power with Christina Kay with respect to 152,661 shares
and Riva Sheppard with respect to 152,661 shares.
(5) Shares dispositive power with E. Gerald Kay with respect to 152,661 shares.
(6) Includes 25,000 shares subject to presently exercisable stock options.
(7) Includes 685,604 shares subject to presently exercisable stock options.
DIRECTORS
The Board of Directors held three meetings during the fiscal year ended
June 30, 1999. All directors attended at least 75% of the meetings of the Board
and the committees on which he or she served.
No compensation was paid to any director for his or her services to the
Board of Directors or any committee. The only standing committee of the Board of
Directors is the Audit Committee, whose member is currently Mr. Canarick. The
Audit Committee periodically consults with the Company's management and
independent public accountants of financial matters, including the Company's
internal financial controls and procedures. The Audit Committee met once in
Fiscal 1999, and all members attended the meeting. Mr. Chesney, prior to his
retirement served on the Audit committee. The Company's stock option plan is
administered by a committee currently composed of Mr. Canarick.
EXECUTIVE OFFICERS
The following individuals are executive officers of the Company but are not
Directors or Nominees for Director:
Seymour Flug, age 64, has been the President and Chief Executive Officer of
the Company since May 1999. Prior to 1995 he was Chairman of the Board of Diners
Club International and a managing director of Citibank. From 1996 thru 1998 he
was President of IBN Limited, a Company engaged in the implementation of a
payment system in the former Soviet Union. From 1998 thru May of 1999 Mr. Flug
was engaged as a management and financial consultant.
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<PAGE>
Eric Friedman, age 50, has been the Chief Financial Officer and Treasurer
of the Company since June 1996. From June 1978 through 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.
Abdulhameed Mirza, age 50 has been Vice President of Technology since
February 1999. From September 1996 thru February 1999 Mr. Mirza was Technical
Director at Natures Bounty, Inc. Prior to that he was Vice President of Solgar
Vitamin and Herb from September 1991 thru September 1996.
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 1999, 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, 1999, 1998,
1997, certain compensation information as to the Chief Executive Officer and
each executive officer of the Company who served as an executive officer during
the fiscal year ended June 30, 1999, and whose salary and bonus exceeded
$100,000 in 1999 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------- ------------
Securities
Name and Underlying All Other
Principal Position Year Salary Bonus Stock Options Compensation
- ------------------ ---- ------ ----- ------------- ------------
<S> <C> <C> <C> <C> <C>
E. Gerald Kay (6) 1999 250,000 -- 60,606 9,545(5)
Chairman of the Board 1998 250,000 -- -- 34,396(2)(5)
1997 150,000 -- 100,000 11,454(5)
Seymour Flug (7) 1999 7,692 -- -- 1,408(8)
President and Chief
Executive Officer
Eric Friedman 1999 215,000 4,139 66,666 3,429(5)
Chief Financial Officer 1998 215,000 -- -- 10,820(5)
and Vice President 1997 215,000 -- 100,000 6,059(3)(5)
Ronald Smalley (1) 1999 76,292 2,115 -- 5,267(4)(5)
Vice President 1998 103,000 1,919 -- 9,043(4)(5)
1997 100,000 2,688 25,000 5,553(4)(5)
</TABLE>
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<PAGE>
(1) The amount shown for 1999 reflects less than a full year of
compensation for Mr. Smalley who left the company on February 26, 1999.
(2) Includes the Company's portion of premiums amounting to $25,090 during
the fiscal year ended June 30, 1998 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.
(3) Includes an automobile allowance of $6,000 in fiscal 1997.
(4) Includes an automobile allowance of $2,400 in fiscal 1999 and $3,600 in
fiscal 1998 and 1997.
(5) The disclosed amount includes the Company's matching contributions
under the Company's 401-K plan
(6) Mr. Kay resigned his position as President and Chief Executive Officer
in May 1999.
(7) The amount shown for 1999 reflects less than a full year of
compensation for Mr. Flug who was employed by the Company from May 24,
1999.
(8) Includes an automobile allowance of $ 1,408 in fiscal 1999.
Employment Agreements
Effective July 1, 1999 (February 16, 1999 as to Mr. Mirza), the Company
entered into employment agreements with Eric Friedman, Vice President, and
Abdulhameed Mirza, Vice President of the Company. The employment contracts,
which expire June 30, 2002 for Mr. Friedman and February 28, 2001 for Mr. Mirza
provide for such executives to receive annual base salaries as follows: Eric
Friedman $215,000 for the fiscal years ending June 30, 2000, 2001 and 2002 and
Mr. Mirza $90,000 for the period ending February 28, 2000 and $100,000 for the
period ending February 28, 2001.
The contracts provide that the Company and the employees shall negotiate an
increase in such employees' salary for each succeeding contract 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
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 wit 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.
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<PAGE>
OPTION GRANTS
DURING THE FISCAL YEAR ENDED JUNE 30, 1999
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, 1999.
% of Total
Granted to
Securities Options Employees in Exercise Expiration
Name Granted (#)(1) Fiscal Year Price (2) Date
- ---- -------------- ----------- --------- ----------
E. Gerald Kay 60,606 16.6% 1.65 October 7, 2003
Eric Friedman 66,666 18.2% 1.50 October 7, 2008
(1) The date of grant for these options was October 7, 1998, which became
exercisable on October 7, 1999.
(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 60,606 of incentive stock options granted to Mr. Kay which is equal
to 110% of the fair market value on the date of grant.
AGGREGATED OPTIONS EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTIONS VALUES
The following tables 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,
1999 based on the last sale price of a share of Common Stock on June 30, 1999 of
$1.25.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR FISCAL YEAR END
ACQUIRED VALUE END (#) ($)
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
E. Gerald Kay -- -- 100,000/ 60,606 0/0
Eric Friedman -- -- 100,000/ 66,666 0/0
</TABLE>
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<PAGE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
The Company leases manufacturing and office facilities from Gerob Realty
Partnership whose partners are E. Gerald Kay, Riva Sheppard and Christina Kay
(stockholders and directors of the Company). The lease which expires on December
31, 1999 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 Sheppard 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.
CHANGE OF AUDITORS
Effective May 5, 1999, the Company dismissed its prior certifying accounts,
Moore Stephens, P.C. ("Moore") and retained as its new certifying accountants,
Amber, Politziner & Mattia, P.A. Moore'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 Moore 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. 1 APPROVAL OF AMENDMENT OF STOCK OPTION PLAN
At the Annual Meeting, stockholders will be asked to approve an amendment
to the Company's Stock Option Plan (the "Option Plan") to increase by 1,000,000
the number of shares of Common Stock reserved for issuance under the Option Plan
to an aggregate of 3,000,000 shares. The Board of Directors approved the
amendment October 1, 1999. The amendments and the Option Plan are summarized
below. A copy of the Option Plan is available upon stockholder's written request
to the Company, 201 Route 22, Hillside, New Jersey, 07205, Attention: Secretary.
Description of the Amendment
The amendment increases by 1,000,000 the number of shares of Common Stock
reserved for issuance under the Option Plan to an aggregate of 3,000,000 shares.
If approved by the stockholders, the amendment shall be effective immediately.
Reasons for the Amendment
The Board of Directors believes that stock options are an important
incentive for attracting, retaining and motivating employees and officers
through the opportunity of equity participation. In the view of the Board of
Directors, stock options uniquely focus the attention of the officers and
employees on the Company's goal of increasing shareholder value, since the
options only provide a reward to the extent that the stock price increases. The
Board of Directors further believes that stock option grants have been a key
element in the Company's growth. The amendment to increase the number of shares
of Common Stock under the Option Plan is intended to enable the Company to
continue to have an adequate number of shares of Common Stock available for
stock options.
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<PAGE>
As of September 30, 1999, 725,175 shares of Common Stock remained available
for the grant of stock options under the Option Plan. Based on the number of
shares remaining under the Option Plan, and the shares anticipated to be needed
for the granting of options to attract and retain key employees, sufficient
shares are not expected to be available for the grant of stock options without
increasing the number of shares available under the Option Plan.
Description of the Option Plan
The Option Plan was adopted by the Board of Directors on August 30, 1996.
The Option Plan provides for the granting of "non-qualified stock options" and
"incentive stock options" to acquire Common Stock (collectively, Options) to
employees, officers, directors, and consultants of the Company. An aggregate of
3,000,000 shares of Common Stock have been reserved for issuance under the
Option Plan, subject to stockholder approval of the amendment. In the event that
any outstanding options expire or are terminated, the shares allocable to such
expired or terminated Options shall again become available for the granting of
Options. If any shares acquired pursuant to the exercise of Options are
repurchased by the Company, such shares shall again become available for the
granting of Options.
The terms and conditions of individual option agreements may vary, subject
to the following guidelines: (i) the exercise price of Options may not be less
than market value on the date of grant, (ii) the term of all Options shall
expire on the tenth anniversary of the date of grant, and (iii) no Options may
be granted after August 30, 2006.
The Option Plan is administered by the Stock Option Committee of the Board
of Directors (the "Committee"). The Committee determines, among other things:
(i) which officers and employees of the Company shall be granted Options, (ii)
the number of shares subject to each such Option, (iii) the amount to be paid by
a grantee upon exercise of Options, (iv) the time or times and the conditions
subject to which Options may be exercised, and (v) the form of consideration
that may be used to pay for shares issued upon exercise of such Options.
The Option Plan provides that the maximum number of shares of Common Stock
for which Options may be granted to an employee during any fiscal year of the
Company shall not exceed 100,000 shares of Common Stock.
The Board of Directors has the authority to amend the Option Plan at any
time, provided that stockholder approval is required to (i) increase the limits
provided in Section 8.01 of the Option Plan (except by adjustment under Section
8.03), (ii) change or expand the types of Options that may be granted under the
Option Plan, (iii) change the class of persons eligible to receive options under
the Option Plan, (iv) materially increase either the benefits accruing to
participants under the Option Plan or the cost of the Option Plan to the
Company, (v) effect a change relating to incentive stock options which is
inconsistent with Section 422 of the Code or regulations issued thereunder, or
(vi) make any other change that requires approval of the Company's stockholders
under applicable law.
The Board of Directors may terminate the Option Plan at any time. The
Option Plan will terminate on, and Options may not be granted after, August 30,
2006, unless terminated by the Board of Directors prior thereto. The termination
of the Option Plan will not alter or impair any rights or obligations previously
granted under the Option Plan.
The Option Plan provides that Options granted thereunder will not be
transferable other than by will or by laws of decent and distribution, and
during an optionee's lifetime, Options will be exercisable only by an optionee.
As of September 30, 1999, incentive stock options to purchase a total of
426,862 shares of Common Stock have been granted under the Stock Option Plan,
including 285,711 to current executive officers as a group (Mr. Friedman,
95,237; Mrs. Riva Sheppard, 95,237; Ms. Christina Kay, 95,237) and
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<PAGE>
86,580 to Mr. Kay who is a current director; and non-qualified stock options to
purchase a total of 498,313 shares of Common Stock have been granted under the
Stock Option Plan, including 214,287 to current executive officers as a group
(Mr. Friedman, 71,429; Mrs. Riva Sheppard 71,429; and Christina Kay, 71,429) and
74,026 to Mr. Kay who is a current director. The options are exercisable at a
price of $1.50 per share and $3.50 per share for options granted in 1998 and
1996 respectively, except Mr. Kay's incentive stock options which are
exercisable at $1.65 per share and $3.85 per share for options granted in 1998
and 1996 respectively. The 1996 options are exercisable beginning October 16,
1997 and expire on October 16, 2006, except for Mr. Kay's incentive stock
options which expire on October 16, 2001. The 1998 options are exercisable
beginning October 7, 1999 and expire on October 7, 2008 except for Mr. Kay's
incentive stock options which expire on October 7, 2003.
Future grants of options under the Option Plan are in the discretion of the
Committee and, thus the amount of such grants, if any, are not presently
determinable.
The market value of the Common Stock as of the close of business on
September 30,1999, as reflected by the closing price of the Common Stock on the
NASDAQ SmallCap Market, was $.50 per share.
Federal Income Tax Consequences
The tax consequences of incentive stock options and non-qualified options
are complex. Therefore, the description of tax consequences set forth below is
necessarily general in nature and does not purport to be complete. Moreover,
statutory provisions are subject to change, as are their interpretations, and
their application may vary in individual circumstances. The tax consequences
under applicable state and local income tax laws may not be the same as under
the federal income tax laws.
Incentive stock options granted pursuant to the 1996 Option Plan are
intended to qualify as "Incentive Stock Options" within the meaning of Section
422 of the Code. If an optionee makes no disposition of the shares acquired
pursuant to exercise of an incentive stock option within one year after the
transfer of shares to such optionee and within two years from grant of the
option, such optionee will realize no taxable income as a result of the grant or
exercise of such option; any gain or loss that is subsequently realized may be
treated as long-term capital gain or loss, as the case may be. Under these
circumstances, the Company will not be entitled to a deduction for federal
income tax purposes with respect to either the issuance of such incentive stock
options or the transfer of shares upon their exercise.
If shares subject to incentive stock options are disposed of prior to the
expiration of the above time periods (a "disqualifying disposition"), the
optionee will recognize ordinary income in the year in which the disqualifying
disposition occurs, the amount of which will generally be the lesser of (i) the
excess of market value of the shares on the date of exercise over the option
price, or (ii) the gain recognized on such disposition. Such amount will
ordinarily be deductible by the Company for federal income tax purposes in the
same year, provided that the Company satisfies certain federal income tax
reporting requirements. In addition, the excess, if any, of the amount realized
on a disqualifying disposition over the market value of the shares on the date
of exercise will be treated as capital gain.
Non-qualified options may also be granted under the Option Plan. An
optionee who exercises a non-qualified option will recognize as taxable ordinary
income, at the time of exercise, an amount equal to the excess of the fair
market value of the shares on the date of exercise over the exercise price. Such
amount will ordinarily be deductible by the Company in the same year, provided
that the Company satisfies certain federal income tax withholding requirements
that may be applicable.
The discussion above pertaining to a deduction for the Company is qualified
by the application of Section 162(m) of the Code. Pursuant to Section 162(m),
the maximum allowable deduction for compensation paid or accrued by the Company
with respect to the chief executive officer of the Company or any of the four
most highly compensated officers of the Company (other than the chief
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executive officer) is limited to $1 million per year. However, compensation is
tax deductible with regard to such limitations if the compensation satisfies the
performance-based requirements of the rules and regulations under Section
162(m). The Option Plan is intended to meet the requirements of Section 162(m).
Recommendation and Vote
The amendment to the Option Plan will be submitted to stockholders for
their approval at the Annual Meeting. The proposal to adopt the amendment to the
Option Plan must be approved by the holders of a majority of the shares of
Common Stock present or represented by proxy and entitled to vote at the Annual
Meeting.
The Board unanimously recommends a vote FOR the approval of the Amendment to the
Stock Option Plan.
PROPOSAL NO. 2 RATIFICATION OF
THE APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of Chem has appointed the firm of Amper, Politziner
& Mattia, P.A., independent auditors, to audit the consolidated financial
statements of Chem International, Inc. and its subsidiaries for the fiscal year
ending June 30, 2000, subject to ratification by the Chem Stockholders.
A member of Amper, Politziner & Mattia, P.A. is expected to be present at
the Annual Meeting and to be provided with the 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 PROPOSAL
Stockholder proposals to be included in the Company's proxy statement with
respect to the 2000 Annual Meeting of Stockholders must be received by the
Company at its Executive Offices located at 201 Route 22, Hillside, New Jersey
07205 no later than July 5, 2000.
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DISCRETIONARY AUTHORITY
A duly executed proxy given in connection with the Company's 2000 Annual
Meeting of Stockholders will confer discretionary authority on the proxies named
therein, or any of them, to vote at such meeting on any matter of which the
Company does not have written notice on or before September 18, 2000, which is
forty-five days prior to the date on which the Company is first mailing its
proxy materials for its 1999 Annual Meeting of Stockholders, without advice in
the Company 2000 Proxy Statement as to the nature of such matter.
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, in as much 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, 1999 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
Seymour Flug
President and Chief Executive Officer
November 3, 1999
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Proxy
CHEM INTERNATIONAL, INC.
ANNUAL MEETING
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
CHEM INTERNATIONAL, INC. ANNUAL MEETING
TO BE HELD ON 11/24/99 AT 09:00 A.M. EST FOR HOLDERS AS OF 10/29/99
(continued on reverse side)
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this proxy will be voted
for Proposals 1 and 2.
1. TO APPROVE THE PROPOSAL TO AMEND THE COMPANY'S STOCK OPTION PLAN.
|_| FOR |_| AGAINST |_| ABSTAIN
- --------------------------------------------------------------------------------
2. TO APPROVE THE PROPOSAL TO RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS.
|_| FOR |_| AGAINST |_| ABSTAIN
NOTE: SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT THEREOF
Dated:_____________________________
___________________________________
Signature
___________________________________
Signature if held jointly
