CHEM INTERNATIONAL, INC.
November 1, 2000
To Our Stockholders:
On behalf of the Board of Directors, it is our pleasure to invite you to
attend the 2000 Annual Meeting of Stockholders of Chem International, Inc. (the
"Company"), which will be held at 9:00 a.m. local time, on November 22, 2000 at
the Companys Executive Offices, 225 Long Avenue, Hillside, New Jersey 07205.
At the Annual Meeting, you will be asked to vote on proposals:
1. To elect two class I Directors for a three year term and to elect two
class III Directors for a two year term;
2. To amend the Companys Stock Option Plan to increase the number of
shares of Common Stock reserved for issuance from 3,000,000 to
5,000,000;
3. To ratify the appointment of independent auditors of the Company for
the 2001 fiscal year;
4. To approve an amendment to the Company's certificate of incorporation
to change its corporate name to "Integrated Health Technologies,
Inc.;" and
5. 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 22, 2000
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 22, 2000, at 9:00 a.m., local time, at the Companys Executive
Offices, 225 Long Avenue, Hillside, New Jersey 07205, 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 and the election of two Directors to
Chem's Board of Directors to serve a two- year term as Class III Directors;
2. A proposal to amend the Company's Stock Option Plan to increase the
number of shares of Common Stock reserved for issuance from 3,000,000 to
5,000,000;
3. Ratification of the appointment of Amper, Politziner & Mattia, P.A. as
Chems independent accountants for the fiscal year ending June 30, 2001;
4. A proposal to amend the Company's certificate of incorporation to change
its corporate name to "Integrated Health Technologies, Inc."; and
5. 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, NO. 2, NO. 3, AND NO. 4 TO BE PRESENTED TO CHEM
STOCKHOLDERS AT THE MEETING.
By order of the Board of Directors.
Eleanor DiMartino
Secretary
Hillside, New Jersey
November 1, 2000
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
2000 ANNUAL MEETING OF STOCKHOLDERS
To be held on November 22, 2000
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 2000
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 22, 2000, 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, 2000.
Only holders of record of the Company's common stock, par value $.002 per
share ("Common Stock"), at the close of business on October 25, 2000 (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) the election of two directors to Chem's Board of Directors each to serve a
three-year term as Class I Directors and the election of two Class III Directors
each to serve a two-year term, (2) a proposal to amend the Company's Stock
Option Plan to increase the number of shares of Common Stock reserved for
issuance from 3,000,000 to 5,000,000, (3) a proposal to amend the Company's
certificate of incorporation to change its corporate name to "Integrated Health
Technologies, Inc.", and (4) the ratification of the appointment of Amper,
Politziner, & Mattia, P.A. as Chem's independent auditors for the fiscal year
ending June 30, 2001 (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
<PAGE>
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 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) in favor of the nominees
for election as directors named below; (2) FOR the proposal to amend the Stock
Option Plan; (3) FOR the proposal to change the Company's corporate name; and
(4) 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.
2
<PAGE>
PROPOSAL NO. 1-ELECTION OF DIRECTORS
The Board of Directors has fixed at seven the number of Directors that will
constitute the Board for the ensuing three year period and consequently has
added two new Class III Directors whose term will expire in two years.
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 Sheppard) and the two new Class III
Directors (Mr. Flug and Mr. DeSantis) who have been nominated by the Board of
Directors for re-election as 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
and class III Directors shall be elected by a plurality of votes cast.
<TABLE>
<CAPTION>
Age Class of Directors
--- Director Since
-------- -----
<S> <C> <C> <C>
E. Gerald Kay 64 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 33 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 30 Class II 1994
Served as Vice President and director of the Company
since December 1994. Ms. Kay is the daughter of
Gerald Kay and the sister of Riva Kay Sheppard.
Robert Canarick 50 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.
Kevin Kilcullen 40 Class III 2000
Served as a director of the Company since March 20, 2000.
Mr. Kilcullen is a partner in the law firm of Drinker Biddle
And Sanley, LLP, a large regional law firm.
Seymour Flug 65 Class III 2000
Served as President of the Company since May 1999.
Prior to 1999 he was Chairman of the Board of Diners
Club International.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Dean DeSantis 37 Class III 2000
Since 1998 Mr. DeSantis has been the President of Rali Inc.,
a property development company in Southern Florida. Prior to
1998 he was the COO of Rexall Sundown, Inc and served as
a director of the Company until July of 2000.
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of October 1, 2000, 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.
<TABLE>
<CAPTION>
Shares
Officers, Directors and Beneficially Percent of Shares
Principal Stockholders Owned (1) Beneficially Owned
---------------------- --------- ------------------
<S> <C> <C>
E. Gerald Kay 3,653,906 (2)(5) 60.2%
Seymour Flug 250,000 (3) 4.6%
Riva Kay Sheppard 569,327 (4)(6) 10.4%
Christina Kay 569,327 (4)(6) 10.4%
Eric Friedman 316,666 (4) 5.8%
Robert Canarick 25,000 (7) *
Kevin Kilcullen 25,000 (8) *
All directors and
executive officers
as a group (7 persons) 5,509,226 (9) 75.3%
------------------
* Less than 1%
</TABLE>
(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 910,606 shares subject to presently exercisable stock
options.
(3) Includes 250,000 shares subject to presently exercisable stock options.
(4) Includes 316,666 shares subject to presently exercisable stock options.
(5) Shares dispositive power with Christina Kay with respect to 152,661 shares
and Riva Kay Sheppard with respect to 152,661 shares.
(6) Shares dispositive power with E. Gerald Kay with respect to 152,661 shares.
(7) Includes 25,000 shares subject to presently exercisable stock options.
(8) Includes 25,000 shares subject to presently exercisable stock options.
(9) Includes 1,960,604 shares subject to presently exercisable stock options.
4
<PAGE>
DIRECTORS
The Board of Directors held three meetings during the fiscal year ended
June 30, 2000. 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 members are Messrs. Canarick and
Kilcullen. 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 2000, 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:
Eric Friedman, age 52, 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 Wire One Technologies, Inc., a publicly traded video
conferencing and communications company.
Abdulhameed Mirza, age 51 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 2000, 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, 2000, 1999,
1998, 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, 2000, and whose salary and bonus exceeded
$100,000 in 2000 (the "Named Executive Officers").
5
<PAGE>
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 (3) 2000 74,685 -- 750,000 32,155 (1) (2)
Chairman of the Board 1999 250,000 -- 60,606 9,545 (2)
1998 250,000 -- -- 34,396 (1) (2)
Seymour Flug 2000 113,038 -- 250,000 -- (5)
President and Chief 1999 7,682 -- -- 1,408 (4)
Executive Officer
Eric Friedman 2000 215,000 3,305 150,000 2,636 (2)(5)
Chief Financial Officer 1999 215,000 4,139 66,666 3,429 (2)(5)
and Vice President 1998 215,000 -- -- 10,820 (2)(5)
Riva Kay Sheppard 2000 100,000 3,846 150,000 5,274 (2)(5)
Vice President
</TABLE>
(1) Includes the Company's portion of premiums amounting to $24,245 and $25,090
during the fiscal years ended June 30, 2000 and 1998 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.
(2) The disclosed amount includes the Company's matching contributions under
the Company's 401-K plan.
(3) Mr. Kay resigned his position as President and Chief Executive Officer in
May 1999.
(4) Includes an automobile allowance of $1,408 in fiscal 1999.
(5) The Company also provides the individuals with the use of a Company car.
Employment Agreements
Effective July 1, 1999 (February 16, 1999 as to Mr. Mirza), the Company
entered into employment agreements with Eric Friedman, Vice President, Riva Kay
Sheppard, Vice President, and Abdulhameed Mirza, Vice President of the Company.
The employment contracts, which expire June 30, 2002 for Mr. Friedman and Ms.
Sheppard 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, 2001 and 2002, Ms. Sheppard $100,000 for the fiscal years
ending June 30, 2001 and 2002 and Mr. Mirza $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
6
<PAGE>
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.
OPTION GRANTS
DURING THE FISCAL YEAR ENDED JUNE 30, 2000
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, 2000.
<TABLE>
<CAPTION>
% 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 167,000 10.6% .55 December 1, 2004
E. Gerald Kay 583,000 36.6% .55 December 1, 2009
Seymour Flug 250,000 15.7% .50 December 1, 2009
Eric Friedman 150,000 9.4% .50 December 1, 2009
Riva Sheppard 150,000 9.4% .50 December 1, 2009
</TABLE>
(1) The date of grant for these options was December 1, 1999, which become
exercisable on December 1, 2000.
(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 750,000 of 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,
2000 based on the last sale price of a share of Common Stock on June 30, 2000 of
$1.00.
7
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR FISCAL YEAR END
ACQUIRED VALUE END (#) ($)
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
E. Gerald Kay -- -- 160,606/750,000 0/337,500
Seymour Flug -- -- 0/250,000 0/125,000
Eric Friedman -- -- 166,666/150,000 0/ 75,000
Riva Sheppard -- -- 166,666/150,000 0/ 75,000
</TABLE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
The Company leases manufacturing and office facilities from Morristown
Holding, Inc. (formerly Gerob Realty Partnership) whose owners are E. Gerald
Kay, Riva Sheppard and Christina Kay (stockholders and directors of the
Company). The lease which expires on December 31, 2000 provides for an annual
rental of $60,000 plus payment of all real estate taxes. On August 30, 2000 the
Company acquired the manufacturing facilities from Morristown Holding, Inc. The
Company issued 1,050,420 shares of its common stock in exchange for the
property.
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. On April 28, 2000 the lease
was amended reducing the square footage and extending the lease to May 31, 2015.
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 2,000,000
the number of shares of Common Stock reserved for issuance under the Option Plan
to an aggregate of 5,000,000 shares. The Board of Directors approved the
amendment October 1, 2000. 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 2,000,000 the number of shares of Common Stock
reserved for issuance under the Option Plan to an aggregate of 5,000,000 shares.
If approved by the stockholders, the amendment shall be effective immediately.
8
<PAGE>
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.
As of September 30, 2000, 529,825 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
5,000,000 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 amount of incentive stock options
exercisable by any employee in any one calendar year may not exceed $100,000.
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
9
<PAGE>
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, 2000, incentive stock options to purchase a total of
1,313,862 shares of Common Stock have been granted under the Stock Option Plan,
including 935,711 to current executive officers as a group (Mr. Flug, 200,000;
Mr. Friedman, 245,237; Mrs. Riva Sheppard, 245,237; Ms. Christina Kay, 245,237)
and 253,850 to Mr. Kay who is a current director; and non-qualified stock
options to purchase a total of 1,201,313 shares of Common Stock have been
granted under the Stock Option Plan, including 264,287 to current executive
officers as a group (Mr. Flug 50,000; Mr. Friedman, 71,429; Mrs. Riva Sheppard
71,429; and Christina Kay, 71,429) and 657,026 to Mr. Kay who is a current
director. The options are exercisable at a price of $.50 per share, $1.50 per
share and $3.50 per share for options granted in 1999, 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. The 1999 options are exercisable
beginning December 1, 2000 and expire on December 1, 2009 except for Mr. Kay's
incentive stock options which expire on December 1, 2004
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, 2000 as reflected by the closing price of the Common Stock on the
NASDAQ SmallCap Market, was $1.50 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
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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 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 OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS 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, 2001, 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
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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.
PROPOSAL NO. 3 AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION TO CHANGE ITS CORPORATE NAME
The board of directors of the Company have recommended that the Company change
its corporate name to best reflect the diversification into new business
opportunities.
Recommendation and Vote
Approval of the proposed amendment 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 to amend the
certificate of incorporation.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSAL
Stockholder proposals to be included in the Company's proxy statement with
respect to the 2001 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, 2001.
DISCRETIONARY AUTHORITY
A duly executed proxy given in connection with the Company's 2001 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, 2001, which is
forty-five days prior to the date on which the Company is first mailing its
proxy materials for its 2000 Annual Meeting of Stockholders, without advice in
the Company 2001 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
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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, 2000 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, 2000
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