<PAGE> 1
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:
<TABLE>
<S> <C>
/X/ Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
CABOT CORPORATION
- --------------------------------------------------------------------------------
(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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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> 2
PRELIMINARY COPY
[LOGO]
January , 1996
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Cabot Corporation which will be held on Thursday, March 7, 1996 at 4:00 p.m. in
the Enterprise Room on the fifth floor of the State Street Bank and Trust
Company, 225 Franklin Street, Boston, Massachusetts.
Receipt of the attached Notice of Annual Meeting of Stockholders, Proxy
Statement and proxy card indicates that you were the beneficial owner of shares
of Cabot Corporation common stock on January 8, 1996, the record date for
determining the persons eligible to vote at the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, it is important that
your shares be represented. Please complete, sign, date and mail the enclosed
proxy card in the postage-paid envelope provided.
Sincerely,
SAMUEL W. BODMAN
Chairman of the Board
and Chief Executive Officer
- --------------------------------------------------------------------------------
CABOT CORPORATION
- --------------------------------------------------------------------------------
75 State Street
- --------------------------------------------------------------------------------
Boston, Massachusetts 02109
- --------------------------------------------------------------------------------
(617) 345-0100
- --------------------------------------------------------------------------------
<PAGE> 3
PRELIMINARY COPY
[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 7, 1996
The Annual Meeting of Stockholders of Cabot Corporation (the "Company"), a
Delaware corporation, will be held in the Enterprise Room on the fifth floor of
the State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts, on Thursday, March 7, 1996, at 4:00 p.m., Eastern Standard Time,
for the following purposes:
1. To elect five persons to the Board of Directors of the Company;
2. To consider the adoption of the 1996 Equity Incentive Plan;
3. To consider and act upon a proposal to amend the Certificate of
Incorporation of the Company to increase the authorized common stock,
$1.00 par value, from 80,000,000 to 200,000,000 shares; and
4. To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
Only stockholders of record at the close of business on January 8, 1996,
are entitled to receive notice of and to vote at the Annual Meeting. The
transfer books of the Company will not be closed.
Stockholders are urged to complete, sign, date and return the accompanying
proxy card in the enclosed, self-addressed envelope, whether or not they plan to
attend the Annual Meeting. The self-addressed envelope requires no postage if
mailed in the United States. You may still vote in person if you do attend the
Annual Meeting.
The Company's 1995 Annual Report to Stockholders is being mailed to
stockholders with this Notice of Annual Meeting of Stockholders and Proxy
Statement.
It is important that your shares be represented and voted at the Annual
Meeting. Please exercise your right to vote and return a completed form of proxy
at your earliest convenient time.
By order of the Board of Directors,
Charles D. Gerlinger
Secretary
Boston, Massachusetts
January [12], 1996
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information.................................................................
Item 1. -- Election of Directors....................................................
Certain Information Regarding Directors...........................................
Information on the Board of Directors and its Committees..........................
Item 2. -- Adoption of 1996 Equity Incentive Plan...................................
Item 3. -- Amendment of Certificate of Incorporation to Increase Authorized
Shares............................................................................
Beneficial Stock Ownership of Directors, Executive Officers and Persons Owning More
than Five Percent of Common Stock.................................................
Executive Compensation..............................................................
Summary Compensation Table.....................................................
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values........................................................................
Pension Plan Table.............................................................
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements..................................................................
Compensation Committee Report on Executive Compensation........................
Performance Graph...................................................................
Certain Relationships and Related Transactions......................................
Certain Securities Filings..........................................................
Future Stockholder Proposals........................................................
Solicitation of Proxies.............................................................
Miscellaneous.......................................................................
</TABLE>
i
<PAGE> 5
PRELIMINARY COPY
CABOT CORPORATION
75 STATE STREET
BOSTON, MASSACHUSETTS 02109
PROXY STATEMENT
MAILED JANUARY [12], 1996, FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 7, 1996
GENERAL INFORMATION
This Proxy Statement and the accompanying form of proxy are furnished in
connection with the solicitation by and on behalf of the Board of Directors of
Cabot Corporation, a Delaware corporation (the "Company"), for use at the 1996
Annual Meeting of Stockholders to be held at 4:00 p.m. Eastern Standard Time, on
Thursday, March 7, 1996, at the State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts, and at any adjournment or postponement
of the meeting (the "Annual Meeting"). This Proxy Statement and the accompanying
form of proxy were first mailed to stockholders on or about January [12], 1996.
Stockholders attending the Annual Meeting may vote their shares in person
even though they have already given a proxy. Properly executed proxies not
revoked will be voted in accordance with the specifications thereon at the
Annual Meeting and at any adjournment or postponement thereof. You may revoke
your proxy at any time prior to its use by a written communication to Mr.
Charles D. Gerlinger, Secretary of the Company, by a duly executed proxy bearing
a later date or by attending the Annual Meeting and voting in person. Proxies
will also be considered voting instructions by participants in employee benefit
plans of the Company and a former subsidiary of the Company with respect to
shares of Company stock held for such participants by the trustees of such
plans.
Only stockholders of record as of the close of business on January 8, 1996,
are entitled to vote at the Annual Meeting. As of that date, the Company had
outstanding and entitled to vote shares of common stock, par value $1.00
per share ("Common Stock"), and shares of Series B ESOP convertible
preferred stock, par value $1.00 per share ("Convertible Preferred Stock"). Each
share of Common Stock is entitled to one vote and each share of Convertible
Preferred Stock is entitled to 43.735 votes. The State Street Bank and Trust
Company, the trustee of the Cabot Corporation Employee Stock Ownership Plan
("Employee Stock Plan"), is the record owner of all of the shares of Convertible
Preferred Stock and is entitled to vote such shares in accordance with
instructions from participants in, and the terms of, the Employee Stock Plan.
A quorum for the election of directors, the approval of the 1996 Equity
Incentive Plan, the amendment of the Certificate of Incorporation and for the
consideration of such other business as may properly be presented to the Annual
Meeting consists of a majority in interest of all shares of Common Stock and
Convertible Preferred Stock outstanding and entitled to vote at the Annual
Meeting, considered as a single class. Votes withheld for a nominee for election
as a director or that reflect abstentions or broker non-votes (i.e., shares as
to which the record owner has not received instruction from the beneficial owner
of the shares on a matter as to which under the applicable rules of the New York
Stock Exchange the record owner does not have authority to vote without such
instruction) will be treated as present at the Annual Meeting for the purpose of
determining a quorum but will not be counted as votes cast.
There is no provision for cumulative voting. A plurality of the votes
properly cast is required for the election of a director; the affirmative vote
by holders of a majority of the shares of Common Stock and Convertible Preferred
Stock outstanding and entitled to vote thereon, voting as a single class, is
required to amend the Company's Certificate of Incorporation; and the
affirmative vote of a majority of the votes present or represented by proxy and
entitled to vote is required to approve the 1996 Equity Incentive Plan.
Accordingly, abstentions and broker non-votes will have no effect on the
election of directors, but will have the effect of a vote against the amendment
to the Company's Certificate of Incorporation to increase the authorized Common
Stock. Abstentions will have the effect of a vote against the adoption of the
1996 Equity Incentive Plan, while broker non-votes will have no effect on the
outcome.
The independent accountants for the Company are Coopers & Lybrand L.L.P.
Representatives of Coopers & Lybrand L.L.P. are expected to be present at the
Annual Meeting with the opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate questions.
1
<PAGE> 6
ITEM 1. -- ELECTION OF DIRECTORS
At the Annual Meeting, Ms. Jane C. Bradley and Messrs. Samuel W. Bodman,
Arthur L. Goldstein, Gerrit Jeelof and John H. McArthur will be nominated for
election to the class of directors whose terms expire in 1999. All of the
nominees for election are currently directors of the Company. Mr. Goldstein was
elected a director by the Board during 1995. The remaining nominees were elected
by the stockholders at previous Annual Meetings. The Board of Directors expects
that all of the nominees will be available for election but, if any of the
nominees is not so available at the time of the Annual Meeting, proxies received
will be voted for substitute nominees to be designated by the Board of Directors
or, if no such designation is made by the Board, proxies will be voted for a
lesser number of nominees. In no event will the proxies be voted for more than
five nominees.
CERTAIN INFORMATION REGARDING DIRECTORS
Set forth below, as of November 30, 1995, for each director of the Company
is information regarding his or her age, position(s) with the Company,
membership on committees of the Board of Directors of the Company, the period
during which he or she has served as a director and his or her term of office,
family relationship with any other director or executive officer of the Company,
his or her business experience during at least the past five years and other
directorships and similar positions held by him or her.
- --------------------------------------------------------------------------------
[PHOTOGRAPH] SAMUEL W. BODMAN
Age: 57
Position: Chairman of the Board and Chief Executive
Officer
Committee Membership: Executive
Director since: 1987
Term of Office Expires: 1996 (Nominee for Election)
Business Experience:
Cabot Corporation:
Chairman of the Board -- October 1988 to present
President -- February 1991 to February 1995,
January 1987 to October 1988
Chief Executive Officer -- February 1988 to
present
FMR Corp. (investment advisor and mutual fund
manager):
President and Chief Operating Officer -- 1983 to
December 1986
Directorships:
Cabot Oil & Gas Corporation
John Hancock Mutual Life Insurance Company
Security Capital Group Incorporated
Westvaco Corporation
- --------------------------------------------------------------------------------
[PHOTOGRAPH] JANE C. BRADLEY(1)
Age: 68
Committee Memberships: Compensation and Nominations
Director since: 1993
Term of Office Expires: 1996 (Nominee for Election)
Business Experience:
Boston Museum of Science:
Vice Chairman, Board of Trustees -- 1992 to
present
Trustee -- 1989 to present
Overseer -- 1983 to 1989
Boston Symphony Orchestra:
Trustee Emerita -- 1988 to 1993
Vice Chairman, Board of Trustees -- 1985 to 1988
Harvard University:
Member, Board of Overseers -- 1983 to 1989
Directorship:
Fiduciary Trust Company
2
<PAGE> 7
- --------------------------------------------------------------------------------
[PHOTOGRAPH] KENNETT F. BURNES
Age: 52
Position: President
Committee Membership: Executive
Director since: 1992
Term of Office Expires: 1998
Business Experience:
Cabot Corporation:
President -- February 1995 to present
Executive Vice President -- October 1988 to
February 1995
Vice President and General Counsel -- November
1987 to October 1988
Directorship:
Neozyme Corporation II
- --------------------------------------------------------------------------------
[PHOTOGRAPH] JOHN G.L. CABOT(1)
Age: 61
Committee Membership: Safety, Health and
Environmental Affairs
Director since: 1963
Term of Office Expires: 1998
Business Experience:
Cabot Corporation:
Vice Chairman of the Board -- October 1988 to
September 1995
Chief Financial Officer -- October 1992 to
September 1995
Executive Vice President -- January 1985 to
October 1988
Directorships:
Cabot Oil & Gas Corporation
Eaton Vance Corp.
K N Energy, Inc. (Advisory Director)
- --------------------------------------------------------------------------------
[PHOTOGRAPH] ROBERT A. CHARPIE
Age: 70
Committee Memberships: Audit and Nominations
Director since: 1969
Term of Office Expires: 1997
Business Experience:
Ampersand Ventures (venture capital management):
Chairman -- March 1989 to present
Cabot Corporation:
Chairman of the Board -- September 1986 to
September 1988
Directorships:
Ashland Coal, Inc.
Ceramics Process Systems Corporation
Champion International Corporation
Daniel Products Co.
Federated Department Stores, Inc.
- --------------------------------------------------------------------------------
[PHOTOGRAPH] ARTHUR L. GOLDSTEIN
Age: 60
Committee Membership: Nominations
Director since: September 1995
Term of Office Expires: 1996 (Nominee for Election)
Business Experience:
Ionics, Incorporated (water purification):
Chairman of the Board -- 1990 to present
President and Chief Executive Officer -- 1971 to
present
Directorships:
Ionics, Incorporated
State Street Boston Corp.
State Street Bank and Trust Company
Unitrode Corporation
3
<PAGE> 8
- --------------------------------------------------------------------------------
[PHOTOGRAPH] ROBERT P. HENDERSON
Age: 64
Committee Memberships: Compensation (Chairman) and
Executive
Director since: 1990
Term of Office Expires: 1998
Business Experience:
Greylock Partnerships (private equity investments):
Greylock Investments Limited Partnership:
Managing Partner -- June 1985 to present
Greylock Limited Partnership:
Managing Partner -- February 1990 to present
Greylock Ventures Ltd.:
General Partner -- July 1984 to present
Greylock Capital Ltd.:
General Partner -- January 1987 to present
Directorships:
Eastern Enterprises Inc.
Filene's Basement, Inc.
Structural Dynamics Research Corp.
- --------------------------------------------------------------------------------
[PHOTOGRAPH] ARNOLD S. HIATT
Age: 68
Committee Memberships: Compensation and Safety,
Health and
Environmental Affairs
Director since: 1993
Term of Office Expires: 1997
Business Experience:
The Stride Rite Foundation:
Chairman -- 1982 to present
The Stride Rite Corporation (manufacturer and
retailer):
Chairman of the Board -- March 1982 to June 1992
Chief Executive Officer -- March 1982 to November
1989
President -- 1968 to January 1985; May 1985 to
July 1987
Directorships:
Director or trustee of various Dreyfus Corp. mutual
funds
- --------------------------------------------------------------------------------
[PHOTOGRAPH] GERRIT JEELOF
Age: 68
Committee Membership: Safety, Health and
Environmental Affairs (Chairman)
Director since: 1990
Term of Office Expires: 1996 (Nominee for Election)
Business Experience:
Philips Electronics N.V. (electronic equipment):
Member of Supervisory Board and Board of Governors
-- July 1990 to present
Vice Chairman of Board of Management and Executive
Vice President -- May
1986 to July 1990
North American Philips Corporation (electronic
equipment):
Chairman -- September 1988 to January 1991
European Community Chamber of Commerce (U.S.A.):
Chairman -- June 1989 to present
Directorships:
A.V.C.B. Reinsurance Co.
Centraal Beheer Insurance Co.
ROBECO Investment Funds
V.N.U. Publishing
4
<PAGE> 9
- --------------------------------------------------------------------------------
[PHOTOGRAPH] JOHN H. MCARTHUR
Age: 61
Committee Memberships: Compensation and Nominations
(Chairman)
Director since: 1990
Term of Office Expires: 1996 (Nominee for Election)
Business Experience:
Harvard University:
Professor, Graduate School of Business
Administration -- October 1995 to
present
Dean of Graduate School of Business Administration
-- 1980 to October 1995
Directorships:
BCE, Inc.
Chase Manhattan Corporation
Rohm and Haas Company
Springs Industries, Inc.
- --------------------------------------------------------------------------------
[PHOTOGRAPH] JOHN F. O'BRIEN
Age: 52
Committee Memberships: Audit (Chairman) and
Nominations
Director since: 1990
Term of Office Expires: 1998
Business Experience:
Allmerica Financial Corporation (holding company):
President and Chief Executive Officer -- January
1995 to present
Allmerica Financial Life Insurance and Annuity
Company (insurance company):
Chairman of the Board -- August 1989 to present
Allmerica Funds (investment company):
Chairman of the Board -- April 1991 to present
Allmerica Investment Trust (investment company):
Chairman of the Board -- October 1989 to present
Allmerica Property & Casualty Companies, Inc.
(insurance company):
President and Chief Executive Officer -- August
1992 to present
Allmerica Securities Trust (investment company):
Chairman of the Board -- November 1989 to present
Citizens Corporation (insurance holding company):
Chairman of the Board and Chief Executive Officer
-- December 1992 to
present
First Allmerica Financial Life Assurance Company of
America
(insurance company):
President and Chief Executive Officer -- August
1989 to present
Directorships:
ABIOMED, Inc.
Allmerica Financial Corporation
Allmerica Financial Life Insurance and Annuity
Company
Allmerica Funds (Trustee)
Allmerica Investment Trust (Trustee)
Allmerica Property & Casualty Companies, Inc.
Allmerica Securities Trust (Trustee)
Citizens Corporation
First Allmerica Financial Life Assurance Company of
America
5
<PAGE> 10
- --------------------------------------------------------------------------------
[PHOTOGRAPH] DAVID V. RAGONE
Age: 65
Committee Memberships: Audit and Safety, Health and
Environmental Affairs
Director since: 1985
Term of Office Expires: 1997
Business Experience:
Massachusetts Institute of Technology:
Senior Lecturer -- July 1988 to present
Visiting Professor -- July 1987 to July 1988
ASMV Management Company Limited Partnership (venture
capital
management):
Partner -- March 1992 to present
General Partner -- January 1989 to March 1992
Case Western Reserve University:
President -- 1980 to June 1987
Directorships:
Augat Inc.
SIFCO INC.
- --------------------------------------------------------------------------------
[PHOTOGRAPH] CHARLES P. SIESS, JR.
Age: 68
Committee Memberships: Audit and Safety, Health and
Environmental Affairs
Director since: 1988
Term of Office Expires: 1998
Business Experience:
Cabot Oil & Gas Corporation (energy exploration and
production):
Chairman, President and Chief Executive Officer --
May 1995 to present, December 1989 to December
1992
Bridas S.A.P.I.C. (oil exploration):
Acting General Manager -- February 1993 to January
1994
Directorships:
Cabot Oil & Gas Corporation
CAMCO, Inc.
Rowan Companies, Incorporated
- --------------------------------------------------------------------------------
[PHOTOGRAPH] MORRIS TANENBAUM
Age: 67
Committee Memberships: Compensation and Nominations
Director since: 1981
Term of Office Expires: 1997
Business Experience:
AT&T Corp.:
Vice Chairman -- September 1986 to July 1991
Directorships:
American Electric Power Company, Inc.
Battelle Memorial Institute
- --------------------------------------------------------------------------------
[PHOTOGRAPH] LYDIA W. THOMAS
Age: 51
Committee Memberships: Audit and Safety, Health and
Environmental Affairs
Director since: 1994
Term of Office Expires: 1997
Business Experience:
The MITRE Corporation:
Center for Environment, Resources and Space:
Senior Vice President and General Manager --
February 1992 to Present
Vice President -- 1989 to February 1992
Technical Director -- 1982 to 1989
Charles Stark Draper Laboratory Inc.:
Member
- --------------------------------------------------------------------------------
(1) John G.L. Cabot is a first cousin of the spouse of Jane C. Bradley.
6
<PAGE> 11
INFORMATION ON THE BOARD OF DIRECTORS AND ITS COMMITTEES
General
The Board of Directors of the Company held eight meetings during the 1995
fiscal year. The Board has five standing Committees: the Audit Committee,
Compensation Committee, Executive Committee, Nominations Committee and Safety,
Health and Environmental Affairs Committee (the "SH&E Committee"). Membership on
each Committee is listed above on pages through . The Audit, Compensation,
Nominations and SH&E Committees are presently composed entirely of non-employee
directors. The Executive Committee is presently comprised of two employee
directors and one non-employee director.
Board Committees
The Audit Committee annually recommends the independent accountants to be
appointed by the Board of Directors as the auditors of the Company and its
subsidiaries. It reviews the arrangements for and the results of the auditors'
examination of the Company's books and records, auditors' compensation, internal
accounting control procedures and the activities and recommendations of the
Company's internal auditors. It also reviews the Company's accounting policies
and control systems. The Committee reports to the Board on Audit Committee
activities and makes such investigations as it deems appropriate. The Audit
Committee met five times during fiscal year 1995.
The Compensation Committee establishes policies applicable to executive
compensation and determines the salaries, bonuses and other remuneration of the
officers of the Company who are also directors (for a further description of
those policies and activities, see the Committee's Report on pages and ). In
addition, the Committee determines whether any discretionary contributions will
be made by the Company to the Cabot Retirement Incentive Savings Plan ("CRISP").
It administers the Company's supplemental employee benefit plans. It also
administers the Equity Incentive Plan, including the adoption of the rules and
regulations therefor, the designation of participants and the determination of
the size and terms of awards. The Committee reviews the activities of the
Company's Benefits and Investment Committees and reviews the Company's Human
Resources policies and compliance activities. It also makes recommendations to
the Board of Directors with respect to directors' compensation. The Compensation
Committee met five times during the 1995 fiscal year.
The Executive Committee reviews and, where appropriate, approves corporate
action with respect to the conduct of the business of the Company between Board
meetings. Actions taken by the Executive Committee are regularly reported to the
Board at its next meeting. The Executive Committee met once during the 1995
fiscal year.
The Nominations Committee considers and proposes nominees for membership on
the Board of Directors. Nominees suggested by stockholders and sent to the
Committee in care of the Chairman of the Board will be considered by the
Committee. The Nominations Committee met two times during the 1995 fiscal year.
The SH&E Committee reviews the Company's safety, health and environmental
management programs and major hazards analyses and consults with the Company's
internal and outside advisors regarding the management of those programs. It
also reviews the Company's environmental spending. The SH&E Committee met three
times during the 1995 fiscal year.
Board Compensation
Directors who are not employees of the Company were compensated during
fiscal year 1995 by the issuance of 800 shares of Common Stock, pursuant to the
Company's Non-Employee Directors' Stock Compensation Plan, and a $3,500
quarterly cash payment. In the case of Mr. Goldstein, who became a director in
September 1995, this compensation was 100 shares of Common Stock and a cash fee
of $1,750. Non-employee directors also received $1,200 for attending each Board
meeting and each meeting of a Committee of which they were a member.
Non-employee directors who are Committee chairmen also received an additional
fee of $500 per quarter. Directors who are employees of the Company received no
additional compensation for their duties as directors. All directors were also
reimbursed for travel expenses incurred for attending all Board and Committee
meetings and were covered by the Company's travel accident insurance policy.
7
<PAGE> 12
From time to time the Company's directors provide advice and consultation
to the Company, in addition to their regular duties as directors, for which they
are compensated by the Company. During the 1995 fiscal year Messrs. Henderson
and Siess were paid $1,200 and $6,000, respectively, for such services.
All directors, except Mr. Jeelof, attended at least 75% of the meetings of
the Board and Committees held while they were members during the 1995 fiscal
year.
ITEM 2. -- ADOPTION OF 1996 EQUITY INCENTIVE PLAN
General
The Company uses stock or stock-based awards as a part of its overall
compensation program in order to align the long-term interests of its employees
with those of its stockholders. In December 1995, the Board of Directors of the
Company approved the 1996 Equity Incentive Plan, subject to adoption by the
stockholders. The 1996 Equity Incentive Plan is similar to the Equity Incentive
Plan approved by the stockholders in 1989 (the "1989 Equity Incentive Plan")
and, upon stockholder adoption of the 1996 Equity Incentive Plan, no new awards
will be made under the 1989 Equity Incentive Plan. Under the 1996 Equity
Incentive Plan, key employees of Cabot Corporation and its subsidiaries would be
eligible to receive a variety of stock and stock-based awards ("Awards"), which
are described more fully below. The Compensation Committee of the Board of
Directors administers the 1996 Equity Incentive Plan and determines who shall
participate in the 1996 Equity Incentive Plan and the amount and type of Awards
to be made to such participants.
Subject to adjustment for stock splits and similar events (including the
2-for-1 stock split described in Item 3 below), the maximum number of shares of
Common Stock that may be issued under the 1996 Equity Incentive Plan is
1,400,000 shares plus (i) any shares which are forfeited under the 1989 Equity
Incentive Plan and 1996 Equity Incentive Plan after the 1996 Equity Incentive
Plan becomes effective; plus (ii) the number of shares repurchased by the
Company in the open market and otherwise with an aggregate price no greater than
the cash proceeds received by the Company from the sale of shares under the 1996
Equity Incentive Plan; plus (iii) any shares surrendered to the Company in
payment of the exercise price of options issued under the 1996 Equity Incentive
Plan. In addition, no Award may be issued that would bring the total of all
outstanding awards under the 1989 Equity Incentive Plan and the 1996 Equity
Incentive Plan to more than 9.9% of the total number of shares of Common Stock
of the Company at the time outstanding. Shares issued under the 1996 Equity
Incentive Plan may be authorized but unissued shares or shares reacquired by the
Company and held in its treasury. As of November 30, 1995, 377,650 shares of
Common Stock remained available for grants under the 1989 Equity Incentive Plan.
Upon adoption of the 1996 Equity Incentive Plan by the stockholders, no
additional awards may be made under the 1989 Equity Incentive Plan.
The 1996 Equity Incentive Plan will enable the Company to make Awards of
additional shares of Common Stock to eligible employees. The Board of Directors
believes that the 1996 Equity Incentive Plan will also provide the Company with
flexibility in designing and providing incentive compensation for key employees
in order to attract and retain employees who are in a position to make
significant contributions to the success of the Company, to reward employees for
such contributions and to encourage employees to take into account the long-term
interests of the Company through ownership of the Company's Common Stock.
Accordingly, the Board of Directors believes that the proposal to adopt the 1996
Equity Incentive Plan is in the best interests of the Company and its
stockholders and recommends that the stockholders approve its adoption.
The Board of Directors recommends a vote FOR Item 2.
Summary of the 1996 Equity Incentive Plan
The full text of the 1996 Equity Incentive Plan is set forth in Exhibit A,
attached hereto. The following description of certain features of the 1996
Equity Incentive Plan is qualified in its entirety by reference to the full text
of the plan. Capitalized terms used in this description have the same meaning as
defined in the 1996 Equity Incentive Plan.
Administration; Eligible Employees. The 1996 Equity Incentive Plan is
administered by the Compensation Committee, consisting of at least three members
of the Board of Directors none of whom shall be an employee of the Company.
Officers and other key employees of the Company and its subsidiaries who are
responsible for or contribute to the management, growth or profitability of the
business of the Company and its
8
<PAGE> 13
subsidiaries are eligible to participate in the 1996 Equity Incentive Plan. In
fiscal year 1995, actual awards under the 1989 Equity Incentive Plan were made
to 231 eligible employees.
Purchase Restricted Stock. An Award of purchase restricted stock entitles
the recipient to acquire shares of Common Stock, subject to restrictions
determined by the Compensation Committee, for consideration which may be either
(i) an amount which is not less than 40% of the fair market value of the Common
Stock at the time of grant, or (ii) an amount less than 40% of the fair market
value of the Common Stock at the time of grant if the Award is made to a person
who becomes an employee of the Company in connection with an acquisition in
substitution for an equity award in the acquired entity ("Substitute Awards"),
or if the Compensation Committee has expressly determined to grant the discount
in lieu of a comparable amount of salary or cash bonus. However, no more than
200,000 shares, subject to any adjustment for stock splits or similar events,
shall be issued at less than 40% of the fair market value in lieu of salary or
cash bonus.
The Company has issued Awards under the 1989 Equity Incentive Plan since
1991 in the form of purchase restricted stock at a 50% discount from the fair
market value at the date of the grant. The Compensation Committee and Board of
Directors believe that these Awards have encouraged participants to hold shares
in the Company and to become more attuned to the concerns of stockholders.
Employee share ownership requires a substantial monetary commitment by the
employees in order to pay the purchase price of the restricted stock and taxes
associated with the Award. The Compensation Committee and the Board of Directors
believe that discounts of as much as 60% of the fair market value of the shares
may be appropriate to enable participants to retain more shares and become
long-term stockholders.
Restrictions on purchase restricted stock lapse at such time or times and
on such conditions as the Compensation Committee may specify, at the time of
grant. However, not more than 3% of the shares of Common Stock available under
the 1996 Equity Incentive Plan will be awarded as purchase restricted stock with
restrictions scheduled to lapse faster than ratably over a three-year period
from the date of grant. Until the restrictions lapse, shares of restricted stock
are non-transferable. Recipients of purchase restricted stock have all rights of
a stockholder with respect to the shares, including voting and dividend rights,
subject only to the conditions and restrictions generally applicable to
restricted stock or specifically set forth in the instrument evidencing the
Award.
The Compensation Committee may also grant shares for a purchase price equal
to less than 40% of fair market value of the Common Stock at the time of grant
for Substitute Awards and where the discount is in lieu of a comparable amount
of salary or cash bonus. In practice, the Company for the last several years has
issued very few Awards of restricted stock for less than 40% of fair market
value. In general, those Awards were issued to persons as an incentive to join
the Company.
Stock Options. Stock options enable the participant to purchase shares of
Common Stock at a price specified by the Compensation Committee at the time the
Award is made. The 1996 Equity Incentive Plan permits the granting of
non-transferable stock options that qualify as incentive stock options under
Section 422A of the Internal Revenue Code ("incentive options" or "ISOs") and
non-transferable stock options that do not so qualify ("non-statutory options").
The exercise price of all stock options will be determined by the Compensation
Committee and, except for Substitute Awards, will not be for an amount less than
the fair market value per share of the Common Stock at the time of grant unless
the Compensation Committee expressly determines to grant the discount in lieu of
a comparable amount of salary or cash bonus. The Compensation Committee will
determine when an option may be exercised and its term, which may not exceed ten
years.
Appreciation Rights. The Compensation Committee may also grant
non-transferable appreciation rights ("Appreciation Rights"), which may be
either standard stock appreciation rights or performance appreciation rights.
Upon exercise of a stock Appreciation Right, the holder would be entitled to
receive an amount, in cash or shares of Common Stock (as determined by the
Compensation Committee), equal to the fair market value of a share of Common
Stock on the date of exercise (increased, if the Compensation Committee
provides, by the value of dividends on the Common Stock), less the fair market
value on the date the right is granted. A performance Appreciation Right is a
form of stock Appreciation Right pursuant to which the amount the holder is
entitled to receive is adjusted upward or downward under rules established by
the Compensation Committee to take into account the performance of the Common
Stock over a period of time in relation to the performance of a selected group
of stocks or a stock index, or other criteria selected by the Compensation
Committee. Appreciation Rights may be granted separately from or in tandem with
the grant of an option.
9
<PAGE> 14
Performance Awards. A performance award entitles the recipient to receive,
without payment, an amount in cash or shares of Common Stock or a combination
thereof following the attainment of performance goals ("Performance Award"). The
Compensation Committee will determine the performance goals, period or periods
during which performance is to be measured and other applicable terms and
conditions of the Award.
Events Affecting Outstanding Awards. If a participant ceases to be an
employee of the Company because of death or total and permanent disability: (1)
purchase restricted stock held by a participant becomes immediately free of
restrictions; (2) stock options and Appreciation Rights held by a participant
become immediately exercisable and continue to be exercisable until the third
anniversary of the date such employment ended or, if earlier, the date on which
the Award would have terminated if the participant had remained an employee; and
(3) any payment or benefit under a Performance Award to which such participant
has not become irrevocably entitled will be forfeited and the Award canceled
unless otherwise provided in the instrument evidencing the Award or unless the
Compensation Committee otherwise agrees.
If a participant ceases to be an employee of the Company for any reason
other than as specified in the preceding paragraph, or as otherwise determined
by the Compensation Committee in any particular case: (1) purchase restricted
stock held by a participant must be transferred to the Company at a price equal
to the purchase price originally paid by the participant; (2) stock options and
Appreciation Rights not exercisable when employment ended will terminate; (3)
stock options and Appreciation Rights which were exercisable will continue to be
exercisable until the earlier of the date which is three months after the
participant's employment ended or the date on which the Award would have
terminated if the participant had remained an employee; and (4) any payment or
benefit under a Performance Award to which the participant has not become
irrevocably entitled will be forfeited and the Award canceled, unless otherwise
provided in the instrument evidencing the Award or unless the Compensation
Committee otherwise agrees.
Dividends and Deferrals; Nature of Rights as Stockholders Under the 1996
Equity Incentive Plan. Except as specifically provided by the 1996 Equity
Incentive Plan, the receipt of an Award will not give a participant rights as a
stockholder; the participant will obtain such rights, subject to any limitations
imposed by the plan or the instrument evidencing the Award, upon actual receipt
of Common Stock. However, the Compensation Committee may, on such conditions as
its deems appropriate, provide that a participant will receive a benefit in lieu
of cash dividends that would have been payable on any or all Common Stock
subject to the participant's Award had such stock been outstanding. The
Compensation Committee may also provide for payment to the participant of
amounts representing such dividends, either currently or in the future, or for
the investment of such amounts on behalf of the participant.
Adjustments for Stock Dividends, etc. The Compensation Committee will make
appropriate adjustments to the maximum number of shares of Common Stock that may
be delivered under the 1996 Equity Incentive Plan and to outstanding Awards to
reflect stock dividends, stock splits, and similar events. The Compensation
Committee may also make appropriate adjustments to take into account material
changes in law or accounting matters or certain other corporate changes or
events.
Amendment and Termination. The Compensation Committee may at any time
discontinue granting Awards under the 1996 Equity Incentive Plan. The Board of
Directors may at any time or times amend the 1996 Equity Incentive Plan or any
outstanding Award for any purpose which may at the time be permitted by law, or
may at any time terminate the plan as to any further grants of Awards, provided
that no such amendment will, without the approval of the stockholders of the
Company, increase the maximum number of shares of Common Stock available under
the plan; extend the time within which Awards may be granted; or amend the
provisions of the 1996 Equity Incentive Plan relating to amendments.
Change in Control Provisions. The 1996 Equity Incentive Plan provides that
in the event of a "Change in Control" (as defined in Exhibit A to that plan):
(a) purchase restricted stock will immediately become free of all restrictions
and conditions; (b) each outstanding stock option and Appreciation Right will
immediately become exercisable in full; (c) conditions on other Awards which
relate solely to the passage of time and continued employment will be removed
but other conditions will continue to apply unless otherwise provided in the
instrument evidencing the Awards or by agreement between the Company and the
participant; and (d) unless otherwise provided in the Award, during the 60 day
period following the Change in Control, a participant holding a stock option or
an Appreciation Right will have the right to surrender all or part of his or her
Award to the Company and receive a cash payment equal, in general, to the
difference between (i) the
10
<PAGE> 15
exercise price and (ii) the value of the Common Stock determined by reference to
the highest reported value of the Common Stock in the 60 day period ending on
the date of the Change in Control or, if higher, the highest price paid for the
stock by certain persons described in the definition of the term "Change in
Control".
Stock Withholding. In the case of an Award under which Common Stock may be
delivered, the Compensation Committee may permit the participant or other
appropriate person to elect to have the Company hold back from the shares to be
delivered, or to deliver to the Company, shares of Common Stock having a value
sufficient to satisfy any Federal, state and local withholding tax requirements.
Tax Aspects Under the U.S. Internal Revenue Code
Purchase Restricted Stock. A recipient of purchase restricted stock
generally will be subject to tax at ordinary income rates on the fair market
value of the stock at the time the stock is either transferable or is no longer
subject to forfeiture, minus any amount paid for such stock. However, a
recipient who makes a proper election under Section 83(b) of the U.S. Internal
Revenue Code will realize ordinary income on the date of issuance equal to the
fair market value of the restricted stock at the time of issuance (measured as
if the stock were unrestricted and could be sold immediately), less any amount
paid for such stock. Upon sale of the stock after the forfeiture period has
expired, the holding period to determine whether the recipient has long-term or
short-term capital gain or loss begins when the restriction period expires (or
upon issuance of the shares, if the recipient elected immediate recognition of
income under Section 83(b)). The Company will generally be entitled to a
deduction in the amount of the income recognized.
Incentive Options. No taxable income is realized by the participant upon
the grant or exercise of an ISO. However, the exercise of an ISO may result in
alternative minimum tax liability for the participant. If no disposition of the
shares of Common Stock issued to a participant pursuant to the exercise of an
ISO is made by the participant within two years from the date of grant or within
one year after the transfer of such shares to the participant, then upon the
sale of such shares, any amount realized in excess of the option price (the
amount paid for the shares) will be taxed to the participant as a long-term
capital gain and any loss sustained will be a long-term capital loss, and no
deduction will be allowed to the Company for Federal income tax purposes.
If shares of Common Stock acquired upon the exercise of an ISO are disposed
of prior to the expiration of the two-year and one-year holding periods
described above (a "disqualifying disposition"), generally the participant will
realize ordinary income in the year of disposition in an amount equal to the
excess (if any) of the fair market value of the shares at exercise (or, if less,
the amount realized on an arms-length sale of such shares) over the option price
thereof, and the Company will be entitled to deduct such amount. Any further
gain realized will be taxed as a short-term or long-term capital gain and will
not result in any deduction by the Company. Special rules will apply where all
or a portion of the exercise price of the ISO is paid by tendering shares of
Common Stock.
If an ISO is exercised at a time when it no longer qualifies for the tax
treatment described above, the option is treated as a non-statutory stock
option. Generally, an ISO will not be eligible for the tax treatment described
above if it is exercised more than three months following termination of
employment (one year following termination of employment by reason of total and
permanent disability), except in certain cases where the ISO is exercised after
the death of the participant.
Non-statutory Options. With respect to non-statutory stock options under
the 1996 Equity Incentive Plan, no income is realized by the participant at the
time the option is granted. Generally, at exercise, ordinary income is realized
by the participant in an amount equal to the difference between the option price
and the fair market value of the Common Stock on the date of exercise, and the
Company receives a tax deduction for the same amount. At disposition, any
appreciation or depreciation after the date of exercise is treated either as a
short-term or long-term capital gain or loss depending on how long the shares
have been held.
Appreciation Rights and Performance Awards. No income will be realized by
a participant in connection with the grant of an Appreciation Right or a
Performance Award. When the Appreciation Right is exercised or the Performance
Award is paid, the participant will generally be required to include as taxable
ordinary income in the year of such exercise or payment an amount equal to the
amount of cash received and the fair market value of any stock received. The
Company will generally be entitled to a deduction for Federal income tax
purposes at the same time equal to the amount includable as ordinary income by
such participant.
11
<PAGE> 16
The capital gain or loss holding period for any Common Stock distributed will
begin when the recipient recognizes ordinary income in respect of that
distribution.
Dividends. Dividends paid on Common Stock (including restricted stock)
will be taxed at ordinary income rates. Generally, the Company will not be
entitled to any deduction for dividends. However, dividends paid with respect to
purchase restricted stock as to which the participant has not elected immediate
recognition of income under Section 83(b), will be treated as additional
compensation deductible by the Company at such time as the dividends are
included in the participant's income.
Payments in Respect of a Change in Control. The 1996 Equity Incentive Plan
provides for acceleration or payment of Awards in the event of a Change in
Control as defined in the 1996 Equity Incentive Plan. Such acceleration or
payment may cause the consideration involved to be treated in whole or in part
as "parachute payments" under the Internal Revenue Code. Acceleration of
benefits under other Company stock and benefit plans and severance contracts
with employees upon a Change in Control could also be "parachute payments." Any
such "parachute payments" which are determined to be "excess parachute payments"
will be non-deductible to the Company and the recipient will be subject to a 20%
excise tax on all or part of such payments.
Section 162(m) Limitations. Deductions by the Company with respect to
Awards to certain executive officers of the Company may be limited by the
so-called one million dollar cap under Section 162(m) of the U.S. Internal
Revenue Code.
The foregoing is a summary of the principal current Federal income tax
consequences of transactions under the 1996 Equity Incentive Plan. It does not
describe all Federal tax consequences under the 1996 Equity Incentive Plan, nor
does it describe state, local or foreign tax consequences.
The Board of Directors of the Company recommends a vote FOR the adoption of
the 1996 Equity Incentive Plan. Proxies solicited on behalf of the Board of
Directors will be voted in accordance with the specifications made on the form
of proxy. Where no specification is made, proxies will be voted FOR the adoption
of the 1996 Equity Incentive Plan.
An affirmative vote in favor of the 1996 Equity Incentive Plan by a
majority of the votes present or represented by proxy and entitled to vote is
required for approval of that plan.
ITEM 3. -- AMENDMENT OF CERTIFICATE OF INCORPORATION TO INCREASE AUTHORIZED
SHARES
The Board of Directors recommends that the Certificate of Incorporation be
amended so as to increase the authorized number of shares of Common Stock, $1.00
par value, from 80,000,000 to 200,000,000 shares. A copy of the vote of the
Board of Directors approving and recommending adoption of the proposed amendment
is attached hereto as Exhibit B. At the Annual Meeting, the stockholders will
vote upon a proposal to approve the amendment as set forth in the Exhibit.
As of November 30, 1995, the Company had 36,298,492 shares of Common Stock
issued and outstanding. As of that date, approximately 5,731,000 shares of
Common Stock were reserved for issuance on conversion of the Convertible
Preferred Stock held by the Employee Stock Plan and on the exercise of options
granted under, and in connection with awards made or to be made under, the 1989
Equity Incentive Plan and the 1996 Equity Incentive Plan (if adopted at the
Annual Meeting).
The Board of Directors has authorized the split of the Common Stock
2-for-1, in the form of a stock dividend, by authorizing distribution of one
additional share of Common Stock for each share issued on the record date,
subject to the approval of the stockholders of the proposed amendment of the
Certificate of Incorporation.
After giving effect to the 2-for-1 split, based upon the shares issued and
outstanding on or about November 30, 1995 a total of 72,596,984 shares of Common
Stock will be issued and outstanding. In addition, approximately 11,462,000
shares of Common Stock will be reserved for issuance on conversion of the
Convertible Preferred Stock held by the Employee Stock Plan and on the exercise
of options granted under, and in connection with awards made or to be made
under, the 1989 Equity Incentive Plan and the 1996 Equity Incentive Plan (if
adopted at the Annual Meeting), after giving effect to the split. Approximately
115,941,000 shares which are not required for the stock split or reserved for
use for the 1989 Equity Incentive Plan, the 1996 Equity Incentive Plan or
conversion of the Convertible Preferred Stock, will be available for use by the
12
<PAGE> 17
Company in connection with any transactions approved by the Board of Directors
including any additional future stock split and possible future financings and
acquisitions. These shares as well as those reserved for Company benefit plans
will be issuable by the Company without further authorization of the
stockholders and on such terms and for such consideration as may be determined
by the Board of Directors, except as may be required for a particular
transaction by applicable law or regulatory agencies or by the rules of any
stock exchange on which the Company's securities may then be traded.
Stockholders do not have any preemptive or other rights to subscribe for any
shares of Common Stock which may be issued. No use of unissued shares beyond the
2-for-1 stock split is presently contemplated by the Board of Directors.
The Board of Directors believes that the adoption of the proposed amendment
to the Certificate of Incorporation and the 2-for-1 split should result in a
broadening of the public interest in the Common Stock and thus be helpful to the
maintenance of an orderly market in the stock and be beneficial to the holders
of the Common Stock. In addition, the additional authorized but unissued shares
of Common Stock will be available for use by the Company in possible future
financings and acquisitions, and for other corporate purposes.
The Board of Directors recommends a vote FOR Item 3.
The stock split will not result in any taxable gain or loss to stockholders
for Federal income tax purposes, but a stockholder's cost or other tax basis for
each of his or her presently held shares will be allocated equally between that
share and the one additional share which will be issued as a result of the
split.
Stockholders should be aware that if the stock split is effective,
brokerage commissions and transfer taxes that are based on the number of shares
sold may be higher, post-split, for the sale of shares having the same aggregate
value. The actual brokerage commissions which a stockholder would have to pay
will be dependent on brokerage practices, as well as the value and the quantity
of stock sold.
Furthermore, stockholders should understand that the additional authorized
but unissued Common Stock which will be available if the amendment to the
Certificate of Incorporation is approved, could have the effect of discouraging
others from attempting unsolicited takeovers of the Company and, as a
consequence, may inhibit temporary fluctuations in the market price of the
Company's Common Stock that might result from actual or rumored unsolicited
takeover attempts.
If the proposed amendment is approved, stockholders will not have to
surrender their existing stock certificates, which will continue to represent
the same number of shares as they presently do. On or about March 22, 1996, each
stockholder of record on the record date of the split will be mailed an
additional stock certificate representing the same number of shares of Common
Stock as the number of shares held by such holder on the record date for the
split, which date is expected to be on or about March 15, 1996. In addition,
Preferred Share Purchase Rights will be issued with respect to new shares of
Common Stock issued by the Company as part of that split, in accordance with the
terms of the Company's Shareholder Rights Agreement, dated November 10, 1995.
The proposed stock split will not involve a change in the par value of the
Common Stock. The increase in the Common Stock account on the Company's balance
sheet in connection with the split will result from a transfer from the
additional paid-in capital account and the retained earnings account.
The Company will apply to the New York, Boston and Pacific Stock Exchanges
for listings of the additional shares of Common Stock to be issued in connection
with the split.
The Board of Directors of the Company recommends a vote FOR the adoption of
the proposed amendment of the Certificate of Incorporation. Proxies solicited on
behalf of the Board of Directors will be voted in accordance with the
specification made on the form of proxy. Where no specification is made, proxies
will be voted FOR the adoption of the proposed amendment.
The affirmative vote in favor of the proposed amendment of the Certificate
of Incorporation by the holders of a majority of the shares of Common Stock and
Convertible Preferred Stock outstanding and entitled to vote thereon, voting as
a single class, is required for its adoption.
13
<PAGE> 18
BENEFICIAL STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND PERSONS OWNING
MORE THAN FIVE PERCENT OF COMMON STOCK
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of November 30, 1995 (except as
described below) by (a) each person known by the Company to own beneficially
more than 5% of its Common Stock, (b) each director of the Company and each of
the executive officers named in the Summary Compensation Table below, and (c)
all current directors and executive officers as a group. The number of shares of
Common Stock shown as beneficially owned by State Street Bank and Trust Company
includes shares issuable upon conversion of Convertible Preferred Stock held by
that Bank as trustee of the Employee Stock Plan. The number of shares of Common
Stock shown for each person who is an employee of the Company includes shares
issuable upon conversion of shares of Convertible Preferred Stock allocated to
his respective account under the Employee Stock Plan and shares issuable upon
the exercise of stock options. Shares shown as beneficially owned by the
executive officers with respect to the CRISP (including shares issued to the
CRISP for Company contributions accrued as of November 30, 1995) and the
Employee Stock Plan (which shares were determined as of September 30, 1995) are
also reflected in the total number of shares owned beneficially by State Street
Bank and Trust Company (see note 1 below).
<TABLE>
<CAPTION>
VOTING POWER INVESTMENT POWER
--------------------- --------------------- PERCENT OF
NAME SOLE SHARED SOLE SHARED TOTAL CLASS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Holders of More than Five
Percent of Common Stock
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA................ 434,477 764,800 4,502,580 888,450 5,391,030(1) 13.70
Directors and Executive
Officers
Samuel W. Bodman............. 524,000 6,519 524,000 6,519 701,191(2) 1.92
Jane C. Bradley.............. 57,340 1,142,074 57,340 1,142,074 1,199,414(3) 3.30
Kennett F. Burnes............ 114,927 5,960 114,927 5,960 215,559(4) *
John G.L. Cabot.............. 845,592 782,812 845,592 782,812 1,688,408(5) 4.64
Robert A. Charpie............ 29,600 54,100 29,600 54,100 83,700(6) *
John D. Curtin, Jr........... 49,000 5,221 49,000 5,221 107,557(7) *
Arthur L. Goldstein.......... 100 -0- 100 -0- 100 *
Paul J. Gormisky............. 18,474 2,539 18,474 2,539 21,013(8) *
Robert P. Henderson.......... 6,200 -0- 6,200 -0- 6,200 *
Arnold S. Hiatt.............. 4,000 -0- 4,000 -0- 4,000 *
Gerrit Jeelof................ 4,003 -0- 4,003 -0- 4,003 *
John H. McArthur............. 4,592 -0- 4,592 -0- 4,592 *
John F. O'Brien.............. 4,400 -0- 4,400 -0- 4,400 *
David V. Ragone.............. 5,600 18,800 5,600 18,800 24,400(9) *
Charles P. Siess, Jr......... 17,334 -0- 17,334 -0- 17,334 *
Morris Tanenbaum............. 21,228 -0- 21,228 -0- 21,228 *
Lydia W. Thomas.............. 800 -0- 800 -0- 800 *
Robert Rothberg.............. 38,000 3,490 38,000 3,490 41,490(10) *
All directors and executive
officers as a group (19
persons).................. 1,773,648 1,524,188 1,773,648 1,524,188 3,694,456(11) 10.06
</TABLE>
- ---------------
* Less than one percent.
(1) Shares of Common Stock shown as being beneficially owned by the State
Street Bank and Trust Company include: (i) 1,000,011 shares of Common Stock
held as trustee of the CRISP; and (ii) 118,082 shares of Common Stock, and
3,066,260 additional shares of Common Stock issuable upon conversion of
70,110 shares of Convertible Preferred Stock (100% of the class), held as
trustee of the Employee Stock Plan.
14
<PAGE> 19
(2) Includes the following shares held for the benefit of Mr. Bodman by the
trustees of the following Company benefit plans: CRISP -- 2,710 shares of
Common Stock; Employee Stock Plan -- 3,809 shares of Common Stock
(including 3,092 shares issuable upon conversion of 70 shares of
Convertible Preferred Stock held for his benefit). The shares of
Convertible Preferred Stock allocated to Mr. Bodman's account under the
Employee Stock Plan constitute less than 1% of the Convertible Preferred
Stock of the Company. Shares of Common Stock shown as being beneficially
owned by Mr. Bodman include 170,672 shares of Common Stock which Mr. Bodman
has the right to acquire pursuant to stock options and 24,000 shares as to
which beneficial ownership is disclaimed.
(3) Includes 1,142,074 shares as to which beneficial ownership is disclaimed
and 503,146 shares as to which voting power is shared with John G.L. Cabot
and is reflected in the aggregate number of shares owned beneficially by
Mr. Cabot (see note 5 below).
(4) Includes the following shares held for the benefit of Mr. Burnes by the
trustees of the following Company benefit plans: CRISP -- 2,348 shares of
Common Stock; Employee Stock Plan -- 3,372 shares of Common Stock
(including 2,796 shares issuable upon conversion of 63 shares of
Convertible Preferred Stock held for his benefit). The shares of
Convertible Preferred Stock allocated to Mr. Burnes' account under the
Employee Stock Plan constitute less than 1% of the Convertible Preferred
Stock of the Company. Shares of Common Stock shown as being beneficially
owned by Mr. Burnes include 94,672 shares of Common Stock which Mr. Burnes
has the right to acquire pursuant to stock options and 240 shares as to
which beneficial ownership is disclaimed.
(5) Includes the following shares held for the benefit of Mr. Cabot by the
trustees of the following Company benefit plans: CRISP -- 45,007 shares of
Common Stock; Employee Stock Plan -- 3,439 shares of Common Stock
(including 2,829 shares issuable upon conversion of 64 shares of
Convertible Preferred Stock held for his benefit). The shares of
Convertible Preferred Stock allocated to Mr. Cabot's account under the
Employee Stock Plan constitute less than 1% of the Convertible Preferred
Stock of the Company. Shares of Common Stock shown as being beneficially
owned by Mr. Cabot include (i) 60,004 shares of Common Stock which Mr.
Cabot has the right to acquire pursuant to stock options (see note 2 on
page ), (ii) 734,366 shares as to which beneficial ownership is
disclaimed, and (iii) 503,146 shares as to which voting power is shared
with Jane C. Bradley and is reflected in the aggregate number of shares
owned beneficially by Ms. Bradley (see note 3 above).
(6) Includes 54,100 shares as to which beneficial ownership is disclaimed.
(7) Includes the following shares held for the benefit of Mr. Curtin by the
trustees of the following Company benefit plans: CRISP -- 2,417 shares of
Common Stock; Employee Stock Plan -- 2,804 shares of Common Stock
(including 2,380 shares issuable upon conversion of 54 shares of
Convertible Preferred Stock held for his benefit). The shares of
Convertible Preferred Stock allocated to Mr. Curtin's account under the
Employee Stock Plan constitute less than 1% of the Convertible Preferred
Stock of the Company. Shares of Common Stock shown as being beneficially
owned by Mr. Curtin include 53,336 shares of Common Stock which Mr. Curtin
has the right to acquire pursuant to stock options.
(8) Includes the following shares held for the benefit of Mr. Gormisky by the
trustees of the following Company benefit plans: CRISP -- 1,112 shares of
Common Stock; Employee Stock Plan -- 1,427 shares of Common Stock
(including 1,228 shares issuable upon conversion of 28 shares of
Convertible Preferred Stock held for his benefit). The shares of
Convertible Preferred Stock allocated to Mr. Gormisky's account under the
Employee Stock Plan constitute less than 1% of the Convertible Preferred
Stock of the Company.
(9) Includes 6,000 shares as to which beneficial ownership is disclaimed.
(10) Includes the following shares held for the benefit of Mr. Rothberg by the
trustees of the following Company benefit plans: CRISP -- 879 shares of
Common Stock; Employee Stock Plan -- 611 shares of Common Stock (including
578 shares issuable upon conversion of 13 shares of Convertible Preferred
Stock held for his benefit). The shares of Convertible Preferred Stock
allocated to Mr. Rothberg's account under the Employee Stock Plan
constitute less than 1% of the Convertible Preferred Stock of the Company.
(11) Shares of Common Stock shown as being beneficially owned by directors and
executive officers as a group include: (i) 396,620 shares which such
individuals have the right to acquire pursuant to stock options; (ii)
56,035 shares held for their benefit by the State Street Bank and Trust
Company as trustee of the CRISP; (iii) 17,859 shares of Common Stock
(including 14,998 shares issuable upon conversion of 339 shares of
Convertible Preferred Stock) held for their benefit by the State Street
Bank and Trust Company as trustee of the Employee Stock Plan (see note 1
above); and (iv) 1,459,494 shares of Common Stock as to which beneficial
ownership is disclaimed.
15
<PAGE> 20
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The Summary Compensation Table provides certain compensation information
for the Chief Executive Officer of the Company, the four other most highly
compensated executive officers of the Company who were employed by the Company
on September 30, 1995, and one former executive officer of the Company who was
not serving as such on September 30, 1995, for services rendered by them during
fiscal years 1995, 1994 and 1993. The information includes base salaries,
bonuses and long-term compensation grants made to each such executive officer in
those years as well as information regarding the value of certain other
compensation reportable for such executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION -------------
--------------------- RESTRICTED ALL OTHER
NAME & PRINCIPAL SALARY BONUS STOCK COMPENSATION
POSITION YEAR ($) ($) ($)(1) ($)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Samuel W. Bodman 1995 $645,833 $800,000 $ 800,000 $116,957
Chairman of 1994 $581,250 $500,000 $ 368,438 $132,784
the Board 1993 $550,000 $150,000 $ 228,120 $ 56,810
Kennett F. Burnes 1995 $445,833 $450,000 $ 500,000 $106,233
President 1994 $395,833 $300,000 $ 245,625 $ 87,195
1993 $375,000 $100,000 $ 171,090 $ 38,693
John G.L. Cabot(2) 1995 $314,583 $125,000 $ 160,000 $ 30,157
Vice Chairman & 1994 $375,000 $100,000 $ 122,813 $ 52,905
Chief Financial Officer 1993 $375,000 $ 75,000 $ 114,060 $ 23,235
John D. Curtin, Jr.(3) 1995 $296,875 -- -- $ 50,227
Executive Vice 1994 $375,000 $100,000 $ 184,219 $ 67,905
President 1993 $375,000 $100,000 $ 171,094 $ 38,693
Paul J. Gormisky 1995 $162,500 $ 85,000 $ 120,000 $ 21,535
Vice President & 1994 $126,667 $ 40,000 $ 61,406 $ 17,255
Controller 1993 $104,167 $ 25,000 $ 45,625 $ 6,980
Robert Rothberg(4) 1995 $254,167 $200,000 $ 240,000 $ 55,977
Vice President & 1994 $225,595 $100,000 $ 456,188 $ 44,030
General Counsel
</TABLE>
- ---------------
(1) The value of the shares of restricted stock set forth in the Table was
determined based upon the fair market value of such shares on the date of
grant less the amount paid by the named executive officer to the Company
for such shares. The following named executive officers were granted the
following shares of restricted stock in May 1995 under the Company's 1989
Equity Incentive Plan: Mr. Bodman: 40,000 shares; Mr. Burnes: 25,000
shares; Mr. Cabot: 8,000 shares; Mr. Gormisky: 6,000 shares; and Mr.
Rothberg: 12,000 shares.
The number and value (calculated at fair market value as of September 30,
1995 ($53.125 per share), less the amount paid by the named executive
officer) of all restricted stock of the Company held by the named executive
officers on September 30, 1995 (including shares referred to in the column
headed "Restricted Stock" as to which the restrictions had not lapsed),
were as follows: Mr. Bodman: 90,000 shares ($3,384,685); Mr. Burnes: 60,000
shares ($2,270,779); Mr. Cabot: 28,000 shares ($1,090,624); Mr. Gormisky:
15,000 shares ($569,843); and Mr. Rothberg: 38,000 shares ($1,488,311).
These shares are not vested, and may be forfeited if the individual's
employment terminates prior to the lapse of the restrictions.
The restricted stock set forth in the Table vests, in whole, three years
from the date of grant, except that with respect to Mr. Rothberg, an award
of 6,000 shares of restricted stock, made on October 18, 1993,
16
<PAGE> 21
vests in equal annual installments over a three year period from the date
of grant. As of September 30, 1995, 2,000 shares of Mr. Rothberg's award
had vested, and 4,000 remained unvested and are reflected in Mr. Rothberg's
Restricted Stock holdings set forth in the preceding paragraph. Mr. Curtin
did not hold any restricted stock on September 30, 1995 (see "Certain
Relationships and Related Transactions" below). In accordance with the
Company's long-term incentive compensation program under the 1989 Equity
Incentive Plan, each of the named individuals paid to the Company 50% of
the fair market value of the shares of stock listed in this footnote on the
date of grant (except for 6,000 of the shares held by Mr. Rothberg, which
shares were granted to him without payment). Some of the funds for the
payment for restricted stock were borrowed from Merrill Lynch Bank & Trust
Company by four of the named executive officers under a loan facility
available to all recipients of restricted stock grants under this program.
The recipients, including the named executive officers, borrowing funds
from that Bank are obligated to pay interest on the loans at the prime rate
and to repay the funds borrowed. Shares purchased with borrowed funds must
be pledged to the Bank as collateral for the loans when the restrictions
lapse. The Company also guarantees payment of the loans in the event the
recipients fail to honor their obligations. Dividends are paid on the
shares of restricted stock.
The information in the column headed "All Other Compensation" includes
contributions to the CRISP and accruals under a supplemental retirement
incentive savings plan or arrangement for fiscal year 1995 and
contributions to the Employee Stock Plan and accruals under a supplemental
employee stock ownership plan or arrangement ("ESOP") for fiscal year 1995
on behalf of the named executive officers in the following amounts: Mr.
Bodman: CRISP: $36,328, ESOP: $80,629; Mr. Burnes: CRISP: $50,391, ESOP:
$55,842; Mr. Cabot: CRISP: $11,156, ESOP: $19,001; Mr. Curtin: CRISP:
$15,176, ESOP: $35,051; Mr. Gormisky: CRISP: $11,531, ESOP: $10,004; and
Mr. Rothberg: CRISP: $16,959, ESOP: $39,018. The supplemental retirement
incentive savings plan and arrangement and the supplemental employee stock
ownership plan and arrangement were established by the Company to provide
benefits to executive officers and other officers and managers of the
Company in circumstances in which the maximum limits established under the
Employee Retirement Income Security Act of 1974 ("ERISA") and the Internal
Revenue Code (the "Code") prevent participants in the CRISP or the Employee
Stock Plan from receiving some of the benefits provided under those
qualified plans. In addition to the supplemental benefits relating to such
limits, Messrs. Bodman, Burnes, Curtin (no further accruals after July 13,
1995) and Rothberg each accrued an additional benefit under the
supplemental employee stock ownership plan equal to the total benefit each
would have accrued for the fiscal year under the Employee Stock Plan if the
limitations of ERISA and the Code were not applicable.
The Company provides executive officers and other managers, including the
named executive officers, with death benefit protection in the amount of
three times their salaries, including $50,000 of group life insurance
coverage. No amount has been included in the column headed "All Other
Compensation" for this benefit because no amount was accrued by the Company
for the benefit and the benefit, other than the group life insurance (which
is available to all employees in amounts determined by the level of their
salaries), is not funded by insurance on the lives of any of the named
executive officers other than Mr. Cabot. The Company's cost of the program
generally is funded by insurance on the lives of various other present and
former managers of the Company. The value of this benefit, based upon the
taxable income which it would constitute if it were insurance, does not
exceed approximately $17,000 per year for any named executive officer.
(2) Mr. Cabot retired as an employee of the Company in September 1995.
(3) Mr. Curtin resigned as an employee and director of the Company in July
1995, and is Chief Executive Officer of Cabot Safety Corporation, of which
the Company owns an approximately 42.5% equity interest.
(4) Mr. Rothberg joined the Company in October 1993.
17
<PAGE> 22
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information with respect to the exercise of
stock options by named executive officers during fiscal 1995, the number of
unexercised stock options held by each named executive officer on September 30,
1995, and the value of the unexercised in-the-money options at that date. The
options shown in the table were granted during the years 1988 through 1991 and
vested in equal amounts over a period of four years from the date of grant. All
outstanding options were vested as of September 30, 1995, and, therefore, are
exercisable.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT FISCAL
SHARES AT FISCAL YEAR-END(#) YEAR-END($)(1)
ACQUIRED VALUE --------------------- ------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE EXERCISABLE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Samuel W. Bodman........ -- -- 170,672 $6,139,184
Kennett F. Burnes....... -- -- 94,672 $3,420,189
John G.L. Cabot......... -- -- 96,004(2) $3,460,146
John D. Curtin, Jr...... 26,668(3) $ 918,379 53,336 $1,996,349
Paul J. Gormisky........ 6,604(4) $ 263,794 -- --
Robert Rothberg......... -- -- -- --
</TABLE>
- ---------------
(1) The value of unexercised in-the-money options at September 30, 1995, was
determined by taking the difference between the fair market value of Cabot
Common Stock on September 30, 1995 ($53.125 per share) and the option
exercise price, times the number of options outstanding at that date. The
values have not been realized and may not be realized. Except as described
in footnote 2 below, the options have not been exercised and may never be
exercised. In the event the options are exercised, their value will depend
upon the fair market value of the underlying Cabot Common Stock on the date
of exercise.
(2) Subsequent to September 30, 1995, Mr. Cabot exercised options to acquire
20,000 shares of Common Stock and sold options to acquire 76,004 shares of
Common Stock to the Company (see "Certain Relationships and Related
Transactions" below).
(3) The Company purchased options to acquire 26,668 shares of the Company's
Common Stock from Mr. Curtin at a purchase price equal to the fair market
value of the underlying shares at the close of business on the day prior to
purchase less the aggregate exercise price of such options (see "Certain
Relationships and Related Transactions" below). No shares of Common Stock
were issued to Mr. Curtin as a result of that transaction.
(4) The Company purchased options to acquire 6,604 shares of the Company's
Common Stock from Mr. Gormisky at a purchase price equal to the fair market
value of the underlying shares at the close of business on the day prior to
purchase less the aggregate exercise price of such option (see "Certain
Relationships and Related Transactions" below). No shares of Common Stock
were issued to Mr. Gormisky as a result of that transaction.
PENSION PLAN TABLE
Under the Cash Balance Plan (the "Plan"), for each year beginning with the
Plan year commencing October 1, 1988, the Company provides participants
including the executive officers named in the Summary Compensation Table with
annual pay-based credits of 3% of eligible compensation during the first five
years of service, 3.5% for the next five years and 4% after 10 years of service
plus additional credits of 2% of earnings in excess of the Social Security Wage
Base. All balances in the accounts of participants are credited with interest at
the one-year U.S. Treasury bill rate determined as of November of the previous
year until the participants commence receiving benefit payments. For the Plan
year 1995, the interest rate was 6.54%. At retirement, participants eligible for
benefits may receive the balance standing in their account in a lump sum or as a
monthly pension having equivalent actuarial value. Benefits for service through
September 30, 1988 are based on the Plan formula then in effect, and have been
provided for through the purchase of a group annuity
18
<PAGE> 23
contract issued by an insurance company. Certain employees, including Mr. Cabot,
have additional balances attributable to their previous participation in the
Plan or prior plans, as explained further below.
The Plan, as amended effective October 1, 1988, included special
grandfathering provisions for participants who met certain age and service
requirements at September 30, 1988. The Plan provides for the payment to those
participants of any shortfall if the sum of (a) the amount actually payable
under the Plan attributable to their account balances, (b) the value of their
annuity, and (c) the amount which would be standing to the participant's credit
at retirement if the Company had contributed 4% of earnings after October 1,
1988 with interest credited at the rate of the change in the Standard & Poor's
400 stock index does not equal or exceed the value of the retirement income
calculated on the basis of the pre-amendment pension formula. The pension
figures for Mr. Cabot appearing below include the effect of the grandfathering
described in this paragraph.
The Pension Plan Table appearing below sets forth the estimated annual
benefit payable to each of the individuals named in the Summary Compensation
Table as a single life annuity at age 65 under the Cash Balance Plan and under a
supplemental plan or arrangement, if applicable, except for Mr. Cabot. A
supplemental plan and arrangement were created by the Company to provide
benefits to executive officers and other officers and managers of the Company in
circumstances in which the maximum limits established under ERISA and the Code
prevent participants from receiving some of the benefits provided under the Cash
Balance Plan, a qualified plan. In addition to the supplemental benefit relating
to such limits, Messrs. Bodman, Burnes, Curtin (no further accruals after July
13, 1995) and Rothberg each accrued an additional benefit under the supplemental
cash balance plan equal to the total benefit each would have accrued for the
fiscal year under the Cash Balance Plan if such limitations were not applicable.
The amounts set forth in the following table assume that Messrs. Bodman, Burnes,
Gormisky and Rothberg each continue to be employed by the Company until age 65
at his annual base salary at September 30, 1995. In the case of Mr. Cabot, who
retired on September 30, 1995, the amount set forth in the table is Mr. Cabot's
actual pension benefit. In the case of Mr. Curtin, who no longer accrues a
benefit under the Cash Balance Plan, but who continues to earn interest on the
amount accrued for his benefit, the amount set forth in the table assumes that
Mr. Curtin continues to be employed by Cabot Safety Corporation until age 65.
<TABLE>
PENSION PLAN TABLE
<CAPTION>
ANNUAL BENEFIT
EXECUTIVE OFFICER PAYABLE
-----------------------------------------------
<S> <C>
Samuel W. Bodman............... $227,141
Kennett F. Burnes.............. $219,853
John G.L. Cabot................ $201,820
John D. Curtin, Jr............. $ 34,151
Paul J. Gormisky............... $ 90,650
Robert Rothberg................ $144,235
</TABLE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
None of the executive officers named in the Summary Compensation Table has
an employment agreement with the Company.
In July 1995, the Company restructured the ownership of its safety and
specialty composite materials business into a newly formed corporation, Cabot
Safety Corporation, of which the Company owns an approximately 42.5% equity
interest. As part of that transaction, John D. Curtin, Jr., an officer and
director of the Company, resigned and became the Chief Executive Officer of
Cabot Safety Corporation. In connection with Mr. Curtin's termination of
employment, the Compensation Committee vested Mr. Curtin in 15,000 shares of
restricted stock which had been awarded to him in 1993.
On September 30, 1995, John G.L. Cabot retired as Vice Chairman and Chief
Financial Officer of the Company. In connection with Mr. Cabot's retirement, the
Compensation Committee vested Mr. Cabot in an aggregate of 28,000 shares of
restricted stock which had been awarded to him in 1993, 1994 and 1995.
19
<PAGE> 24
All of the executive officers named in the Summary Compensation Table
participate or participated in benefit plans sponsored by the Company including
the Cash Balance Plan, CRISP, Employee Stock Plan and 1989 Equity Incentive
Plan. Each of those plans provides that upon the occurrence of a change in
control, any benefits granted or contributed by the Company for the benefit of
participants, including those executive officers, will vest in such individuals.
The Company has entered into a management continuity agreement with Paul J.
Gormisky, a Vice President and the Controller of the Company, pursuant to which
payments will be made under certain circumstances following a change in control
of the Company as defined in the agreement. The agreement is automatically
renewable by the Company for successive one-year terms each December unless
prior written notice of non-renewal is given. The agreement provides that, in
the event Mr. Gormisky's employment is terminated by the Company without cause
(as defined in the agreement) or by Mr. Gormisky for good cause (as defined)
following a change in control, the Company will make a lump sum severance
payment to him of an amount not to exceed two times the greater of his annual
base salary on such termination or as in effect immediately prior to the change
in control of the Company. In addition, the Company will provide Mr. Gormisky
upon such termination with various other employee benefits including life and
health insurance benefits substantially similar to those being received prior to
such termination to the extent not otherwise receivable. Messrs. Bodman, Burnes
and Rothberg do not have such agreements.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of Cabot Corporation
is composed of five non-employee directors. It is responsible for, among other
matters, establishing policies applicable to the compensation of the Company's
executive officers and reporting on such policies to the Board of Directors and
stockholders; determining the salaries, incentive compensation and other
remuneration of executive officers of Cabot who are directors; and reviewing
salaries, compensation and remuneration for all other officers of Cabot. The
Committee regularly reviews the effectiveness of the Company's executive
compensation practices and revises them as appropriate. This is a report on the
compensation philosophy and practices of the Committee during fiscal year 1995.
Executive Compensation Philosophy
The Committee's philosophy is to compensate the Company's executive
officers based on factors described below in a range that is generally
competitive with compensation paid by other comparable companies. Certain of the
companies compared for compensation purposes are included in the Standard &
Poor's Chemicals Index or the Standard & Poor's Specialty Chemicals Index, both
of which indices are used in the Performance Graph on page . The objectives
of the Committee's executive compensation practices are to attract and retain
highly qualified executives, motivate them to achieve the business objectives of
the Company and link their long-term interests with those of the stockholders.
The principal components of Cabot's executive compensation are base salary,
performance-based annual incentive payments and long-term incentive grants. Base
salary is intended to recognize current responsibilities and reward past and
current performance. Base salary levels for the Company's executive officers are
generally positioned in the middle range of market practices for comparable
positions with companies being compared. Base salaries for a particular year are
the fixed portion of executive compensation and, along with other parts of the
compensation package, are aimed at attracting and retaining executives. Annual
incentive payments are based on an evaluation of performance against objectives
which are reviewed at the beginning and conclusion of each fiscal year, with the
objective of motivating and rewarding the executive officers for the
accomplishment of the Company's annual business plan. The long-term incentive
grants are intended to promote superior future performance. They are aimed
primarily at retaining executives and satisfying the objective of linking
executives' long-term interests with those of the stockholders. Each long-term
incentive grant involves a specific number of shares of Common Stock, which the
executive officer may elect either to purchase as shares of restricted stock at
50% of the market price of such stock on the date of grant or to receive as non-
qualified stock options exercisable at 100% of the market price of such stock on
the date of the grant. Both the restricted stock and the stock options are
subject to a three-year vesting period, and the benefits (other than dividends
paid on the restricted stock) will be forfeited if the officer leaves the
Company prior to the end of such three-year period for any reason other than
death, disability or retirement, unless the Committee, in its sole discretion,
determines otherwise.
20
<PAGE> 25
The Committee's evaluations of Cabot's executive officers have been based
on the Committee's review of each officer's performance, responsibilities,
achievements in managing his individual business units or staff responsibilities
and expectations of future performance. The Committee's evaluations also take
into consideration Mr. Bodman's views of the performance of the other executive
officers. The Committee also obtains other Board members' evaluations of Mr.
Bodman's performance and seeks their input on Mr. Bodman's compensation. In
1995, the Committee's evaluations have included judgments on overall performance
and have relied, in substantial part, on performance measured against objectives
in the Company's budget for fiscal 1995 and in the Company's long range plans.
Chief Executive Officer's Compensation
The Committee determines Mr. Bodman's compensation level based upon four
areas of performance, namely, financial results of the Company, improvement in
the Company's shareholder value, leadership efforts by him and business
development results. For fiscal year 1995, each of those four areas was given
approximately equal weight. In comparing Mr. Bodman's performance and
responsibilities with those of comparable companies, the Committee identifies
companies having similar types of businesses and characteristics and evaluates
the compensation practices of those companies in light of the Company's
practices. The salary increase, incentive payment and long-term incentive grant
made to Mr. Bodman as described in this report were made based on the
Committee's view of Mr. Bodman's performance as described below.
Salary. A $50,000 salary increase was granted to Mr. Bodman in fiscal year
1995, in recognition of his leadership efforts in the development of the
Company's businesses and its strong past performance and current year financial
results. The decision of the Committee to give this increase as compared to a
much more significant annual incentive payment described below reflects the
effort of the Committee to place greater emphasis on rewarding executives for
superior performance with variable compensation.
Annual Incentive Payment. For purposes of determining a performance-based
annual incentive payment for the Chief Executive Officer, the Committee
considered the continued very strong financial performance of the Company and
the effective implementation of the strategic plans of the Company. Among the
specific factors which influenced the Committee were the Company's strengthened
financial results (a more than doubling of earnings, a very substantial increase
in sales and operating profit and an increase in operating profits as a
percentage of sales from 11% in 1994 to 16.4% in 1995), improvement in
stockholders' value (a return on equity for fiscal year 1995 of 26.3% and a
total stockholders' return of 98% including reinvested dividends), demonstrated
leadership (developing long-term supply arrangements and making further strides
in managing production capacity) and advances in the development of the
Company's businesses (with the introduction of several new products and the
completion of the Cabot Safety restructuring). The Committee considered these
results highly satisfactory and reflective of outstanding performance and
leadership by Mr. Bodman, justifying significant incentive recognition.
Accordingly, the Committee determined to make a $800,000 performance-based
incentive payment to Mr. Bodman for 1995.
Long-Term Incentive Grant. The Committee determines long-term incentive
grants for the Chief Executive Officer on the basis of his responsibilities, his
past performance and his opportunity to affect the future performance of the
Company. On this basis, in fiscal year 1995, Mr. Bodman received a grant of
40,000 shares of Cabot Common Stock. Factors considered by the Committee in
making that grant included the continuing improvement in the financial results
of the Company, the strengthened management team which had been put in place and
the improvement in new product development and research and development. Mr.
Bodman exercised his grant by purchasing shares of restricted stock and elected
under Section 83(b) of the Internal Revenue Code to be taxed currently on the
compensation relating to the purchase of the restricted stock, notwithstanding
the three-year vesting provision.
One Million Dollar Cap on Deductibility of Compensation
The Committee has reviewed the proposed regulations under Section 162(m) of
the Internal Revenue Code which limit the deductibility of compensation paid by
public companies to specified executive officers whose compensation, under
certain circumstances, exceeds one million dollars in a particular year. Based
on Mr. Bodman's and the other named executive officers' compensation in fiscal
1995, it does not appear that Section 162(m) will have a significant impact on
the Company in the near term. Given the importance to the Company of proper
incentives and the relative costs to the Company under Section 162(m), the
Committee
21
<PAGE> 26
believes that the proper focus should be on improving the effectiveness of the
Company's compensation plans and not primarily on the costs under Section
162(m). The Committee will continue to monitor the impact of Section 162(m) on
the Company.
January , 1996
Robert P. Henderson (Chairman)
Jane C. Bradley
Arnold S. Hiatt
John H. McArthur
Morris Tanenbaum
PERFORMANCE GRAPH
The following graph compares the cumulative return for Cabot Common Stock
during the five fiscal years commencing October 1, 1990, with the S&P 500 Stock
Index, the S&P Midcap 400 Index, the S&P Specialty Chemicals Index and the S&P
Chemicals Index. The graph assumes $100 was invested on October 1, 1990 in Cabot
Common Stock and $100 in each of the S&P Indexes. The comparison assumes that
all dividends are reinvested.
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
<CAPTION>
S&P SPECIALTY
MEASUREMENT PERIOD CABOT S&P 500 STOCK S&P MIDCAP CHEMICALS S&P CHEMICALS
(FISCAL YEAR COVERED) CORPORATION INDEX 400 INDEX INDEX INDEX
<S> <C> <C> <C> <C> <C>
1990 100.00 100.00 100.00 100.00 100.00
1991 141.41 131.17 150.30 134.35 146.68
1992 211.21 145.66 169.03 156.41 160.93
1993 249.91 164.60 209.65 169.41 174.07
1994 250.32 170.67 213.01 162.70 229.15
1995 496.14 221.43 267.90 209.22 271.96
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Normally, directors and officers of the Company are prohibited by Company
policy from selling Cabot Common Stock in the market except during certain
"window periods" and then only with the permission of the Company. The purchases
of shares of Cabot Common Stock and options described below were each made
during a period when the Company was repurchasing shares in the market and/or
officers and directors of the Company were prohibited from selling shares in the
market because it was not a "window period." The shares repurchased by the
Company in the transactions described below were applied toward the Company's
stock repurchase programs.
In July 1995, in connection with the vesting of shares of restricted stock
which had been awarded to employees of the Company in 1992 under the Company's
1989 Equity Incentive Plan, the Company purchased an aggregate of 69,697 shares
of its Common Stock from certain of those employees, as a means of enabling
those employees to satisfy certain withholding tax and loan obligations which
arose from the vesting of such shares. The purchase price paid for each such
share of stock was $55.375, the closing price of the
22
<PAGE> 27
Company's Common Stock on the New York Stock Exchange on July 10, 1995. As part
of that transaction, the Company purchased: 3,073 shares from Kennett F. Burnes,
the President and a director of the Company; 2,514 shares from John G.L. Cabot,
the former Vice Chairman and Chief Financial Officer of the Company and
presently a director of the Company; and 1,955 shares from Kenyon C. Gilson, a
Vice President and the Chief Financial Officer of the Company.
On July 11, 1995, the Company restructured its safety products and
specialty composites businesses into a new Cabot Safety Corporation, owned by
the Company, Vestar Equity Partners, L.P. and several members of Cabot Safety
Corporation's management, including John D. Curtin, Jr., a former Executive Vice
President and director of the Company. As part of that transaction, Mr. Curtin
purchased approximately 4.95% of the common stock of the new Cabot Safety
Corporation for $990,000, which he paid in cash. In connection with that
transaction, on July 11, 1995, the Company repurchased from Mr. Curtin 41,000
shares of the Company's restricted Common Stock (including 11,000 shares which
had vested on the previous day) and options to acquire 26,668 shares of the
Company's Common Stock. The purchase price for 26,000 shares of the Common Stock
was equal to the closing price of the Company's Common Stock on the New York
Stock Exchange on July 10, 1995, and the purchase price for the remaining 15,000
shares of Common Stock was $12.2813 per share, the purchase price originally
paid for those shares by Mr. Curtin. The purchase price for the options was
equal to the closing price of the Company's Common Stock on the New York Stock
Exchange on July 10, 1995 less the exercise price of the options. The aggregate
purchase price paid to Mr. Curtin in the transactions was $2,542,349.
In August 1995, the Company purchased 3,000 shares of the Company's Common
Stock from Mr. Gilson and 2,000 shares of the Company's Common Stock from Mr.
Charles P. Siess, Jr., a director of the Company, for a purchase price of $56.75
per share, the closing price of the Company's Common Stock on the New York Stock
Exchange on the date prior to purchase. In addition, the Company also purchased
options to acquire 6,604 shares of the Company's Common Stock from Paul J.
Gormisky, a Vice President and the Controller of the Company, for an aggregate
purchase price of $263,794. The purchase price of Mr. Gormisky's options was the
closing price of the Company's Common Stock on the New York Stock Exchange on
the day prior to the purchase less the exercise price of such options.
In November and December 1995, the Company, in five transactions, purchased
options to acquire 76,004 shares of the Company's Common Stock from Mr. John
G.L. Cabot for an aggregate purchase price of $2,407,675. That purchase price of
the options was the average of the high and low price of Cabot Common Stock on
the New York Stock Exchange on the day prior to the purchase less the aggregate
exercise price of the options.
The Company has an informal arrangement with Mitretek Systems, a newly
formed spin-off of The MITRE Corporation, pursuant to which Mitretek Systems
will conduct carbon black research on behalf of the Company. It is presently
anticipated that the total fees for such research will be approximately
$130,000. Dr. Lydia W. Thomas, a director of the Company, is a Senior Vice
President and General Manager of Mitretek Systems and a former Senior Vice
President and General Manager of the Center for Environment, Resources and Space
of The MITRE Corporation.
CERTAIN SECURITIES FILINGS
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who beneficially own more than 10%
of the Company's stock, to file initial reports of ownership and reports of
changes of ownership with the Securities and Exchange Commission ("SEC") and New
York Stock Exchange. Executive officers, directors and greater than 10%
beneficial owners are required by SEC regulation to furnish the Company with all
Section 16(a) reports they file with the SEC.
The Company has been advised by Mr. John G.L. Cabot, a director, that the
beneficial ownership of 2,250 shares of Cabot Common Stock bequeathed to him had
not been timely reported on a Form 5. A corrective report has subsequently been
filed.
23
<PAGE> 28
FUTURE STOCKHOLDER PROPOSALS
Any stockholder proposal intended for inclusion in the proxy statement for
the 1997 Annual Meeting must be received by the Company at its offices at 75
State Street, Boston, Massachusetts 02109-1806, by September [14], 1996, and
should be sent to the attention of Mr. Charles D. Gerlinger, Secretary.
SOLICITATION OF PROXIES
The cost of soliciting proxies in the enclosed form will be borne by the
Company. In addition to solicitation by mail, officers and other employees of
the Company may solicit proxies personally, by telephone, by facsimile and by
telegraph. The Company may request banks and brokers or other similar agents or
fiduciaries to transmit the proxy material to the beneficial owners for their
voting instructions and will reimburse them for their expenses in so doing. D.F.
King & Co., Inc., New York, New York, has been retained to assist the Company in
the solicitation of proxies at a fee estimated not to exceed $10,000.
MISCELLANEOUS
The management does not know of any matters to be presented at the Annual
Meeting other than those set forth in the Notice of Annual Meeting of
Stockholders. However, if any other matters properly come before the Annual
Meeting, the persons named in the enclosed proxy card intend to vote the shares
to which the proxy card relates on such matters in accordance with their best
judgment unless otherwise specified in the proxy card.
By order of the Board of Directors,
Charles D. Gerlinger
Secretary
Boston, Massachusetts
January [12], 1996
24
<PAGE> 29
EXHIBIT A
1996 EQUITY INCENTIVE PLAN
1. PURPOSE
The purpose of this 1996 Equity Incentive Plan (the "Plan") is to advance
the interests of Cabot Corporation (the "Company") by enhancing its ability to
(a) attract and retain employees who are in a position to make significant
contributions to the success of the Company and its subsidiaries; (b) reward
employees for such contributions; and (c) encourage employees to take into
account the long-term interests of the Company and its stockholders through
ownership of shares of the Company's common stock ("Stock").
2. ADMINISTRATION
The Plan will be administered by the Compensation Committee or such other
committee (the "Committee") of the Board of Directors of the Company (the
"Board") as the Board may from time to time designate; provided that any
Committee administering the Plan shall consist of at least three directors, none
of whom shall be employees of the Company. The Committee will have authority,
not inconsistent with the express provisions of the Plan and in addition to
other authority granted under the Plan, to (a) grant awards ("Awards") and
determine the terms and conditions of each Award; (b) modify or waive, on a case
by case basis, any term or condition of, or compliance by a Participant with any
obligation to be performed by him or her under, a previously granted Award; (c)
prescribe forms, rules and procedures (which it may vary from time to time) as
appropriate for the administration of the Plan; and (d) interpret the Plan and
decide any questions and settle all controversies and disputes that may arise in
connection with the Plan. Such determinations and actions of the Committee, and
all other determinations and actions of the Committee made or taken under
authority granted by any provision of the Plan, will be conclusive and will bind
all parties.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan will become effective on the date on which it is approved by the
stockholders of the Company. Upon this Plan becoming effective, no additional
awards shall be made under the Equity Incentive Plan approved by the
stockholders of the Company at the 1989 Annual Meeting of Stockholders (the
"Prior Plan") but awards made under the Prior Plan shall be governed by the
terms of the Prior Plan.
No Award may be granted under the Plan after the tenth anniversary of the
date on which this Plan was adopted by the Board, but Awards previously granted
may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 8.6, the maximum number of
shares of Stock that may be delivered under the Plan will be (a) 1,400,000
shares of Stock; plus (b) any shares of Stock issued under the Plan or the Prior
Plan and forfeited after the effective date of this Plan by a Participant in the
Plan or the Prior Plan; plus (c) without duplication for shares counted under
the immediately preceding clause, a number of shares of Stock equal to the
number of shares repurchased by the Company in the open market or otherwise and
having an aggregate repurchase price no greater than the amount of cash proceeds
received by the Company from the sale of shares of Stock under the Plan; plus
(d) any shares of Stock surrendered to the Company in payment of the exercise
price of Options issued under the Plan. However, in no event shall the Company
(a) deliver more than 1,400,000 shares of Stock under the Plan (subject to
adjustment pursuant to Section 8.6) to the officers of the Company, or (b) issue
any Award under the Plan if after giving effect to such Award the aggregate of
all outstanding awards under the Plan and the Prior Plan (i.e., unexercised
Options, unvested Purchase Restricted Stock, or other awards that remain subject
to the restrictions of the Plan or the Prior Plan) would exceed 9.9% of the
total number of shares of Stock at the time outstanding.
Stock delivered under the Plan may be either authorized but unissued Stock
or previously issued Stock acquired by the Company and held in its treasury.
A-1
<PAGE> 30
5. ELIGIBILITY AND PARTICIPATION
Those eligible to receive Awards under the Plan will be key employees of
the Company or any of its subsidiaries ("Employees") who, in the opinion of the
Committee, are in a position to make a significant contribution to the success
of the Company or its subsidiaries. A "subsidiary" for purposes of the Plan is
an entity in which the Company owns, directly or indirectly, equity interests
possessing 40% or more of the total combined voting power of all classes of
equity. The Committee will from time to time select the eligible Employees who
are to be granted Awards ("Participants"), but no Participant shall receive
Awards under the Plan covering more than 500,000 shares of Stock.
6. TYPES OF AWARDS
6.1. PURCHASE RESTRICTED STOCK.
(a) Nature of Purchase Restricted Stock Award. An Award of Purchase
Restricted Stock entitles the recipient to acquire, at such time or times as the
Committee may determine, shares of Stock subject to the restrictions described
in paragraph (d) below ("Purchase Restricted Stock") for a consideration which
may be either (i) any amount which is not less than 40% of the fair market value
of the Stock at the time of grant, or (ii) an amount less than 40% of the fair
market value of the Stock at the time of grant if the Committee has expressly
determined to grant the discount in accordance with Section 6.5 or in lieu of a
comparable amount of salary or cash bonus. However, the number of shares issued
at less than 40% of the fair market value in lieu of salary or cash bonus shall
be no more than 200,000 shares (subject to adjustment pursuant to Section 8.6).
(b) Acceptance of Award. A Participant who is granted a Purchase
Restricted Stock Award will have no rights with respect to such Award unless,
within 90 days (or such shorter period as the Committee may specify) following
the date of the Award, the Participant accepts the Award by written instrument
delivered or mailed to the Company accompanied by payment in full of the
specified purchase price, if any, of the shares covered by the Award.
(c) Rights as a Stockholder. A Participant who receives Purchase
Restricted Stock will have all the rights of a stockholder with respect to the
Stock, including voting and dividend rights, subject to the restrictions
described in paragraph (d) below and any other conditions imposed by the
Committee at the time of grant.
(d) Restrictions. The restrictions on each grant of Purchase Restricted
Stock will lapse at such time or times, and on such conditions, as the Committee
may specify. However, not more than 3% of the shares of Stock available under
the Plan shall be awarded as Purchase Restricted Stock with restrictions
scheduled to lapse faster than ratably over a three year period from the date of
grant. Except as otherwise specifically provided by the Plan or by the Committee
in any particular case, until these restrictions lapse, Purchase Restricted
Stock may not be sold, assigned, transferred, pledged or otherwise encumbered or
disposed of, and if the Participant ceases to be an Employee, must be resold to
the Company for the amount of consideration (excluding services) paid for the
Stock or such other consideration as the Committee shall determine, or forfeited
to the Company if no consideration other than services was paid. The Committee
shall not accelerate the time at which the restrictions on all or any part of a
grant of Purchase Restricted Stock will lapse except as the Committee may
determine to be appropriate in connection with a Participant's termination as an
Employee.
6.2. OPTIONS.
(a) Nature of Options. An Option is an Award entitling the recipient on
exercise thereof to purchase Stock at a specified exercise price.
Both "incentive stock options," as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and Options that are not
incentive stock options, may be granted under the Plan. Any Option intended to
qualify as an incentive stock option will be referred to in the Plan as an
"ISO". Once an ISO has been granted, no action by the Committee that would cause
the Option to lose its status under the Code as an incentive stock option will
be effective without the consent of the Option holder.
(b) Exercise Price. The exercise price of an Option will be determined by
the Committee, but except as provided in Section 6.5 the Committee shall not set
the exercise price of an Option at less than the fair
A-2
<PAGE> 31
market value per share of the Stock at the time the Option is granted unless the
Committee expressly determines to grant the discount in lieu of a comparable
amount of salary or cash bonus.
(c) Duration of Options. The latest date on which an Option may be
exercised will be the tenth anniversary of the date the Option was granted, or
such earlier date as may have been specified by the Committee at the time the
Option was granted.
(d) Exercise of Options. An Option will become exercisable at such time or
times, and on such terms and conditions, as the Committee may specify. The
Committee may at any time accelerate the time at which all or any part of the
Option may be exercised.
Any exercise of an Option must be in writing, signed by the proper person
and delivered or mailed to the Company, accompanied by (1) any documents
required by the Committee and (2) payment in full for the number of shares for
which the Option is exercised.
6.3. APPRECIATION RIGHTS.
(a) Nature of Appreciation Rights. An Appreciation Right is an Award
entitling the recipient on exercise of the Right to receive an amount, in cash
or Stock or a combination thereof (such form to be determined by the Committee),
determined in whole or in part by reference to appreciation in Stock value.
An Appreciation Right may be either a standard Stock Appreciation Right or
a Performance Appreciation Right. A Stock Appreciation Right entitles the
Participant to receive, with respect to each share of Stock as to which the
Right is exercised, the excess of (1) the share's fair market value on the date
of exercise, increased if the Committee so provides by the value of dividends on
the Stock, over (2) its fair market value on the date the Right was granted. A
Performance Appreciation Right is a form of Stock Appreciation Right pursuant to
which the amount the recipient is entitled to receive is adjusted upward or
downward under rules established by the Committee to take into account the
performance of the Stock in comparison with the performance of other stocks or
an index of other stocks or to take into account other criteria determined by
the Committee to be appropriate to reflect the true performance of the Stock or
the Company.
Appreciation Rights shall be exercisable at such time or times (not later
than ten years from the date of grant), and on such terms, as the Committee may
specify.
(b) Tandem Appreciation Rights. Appreciation Rights may be granted in
tandem with, or independently of, Options granted under the Plan. The
relationship between an Option and any Tandem Appreciation Rights shall be set
forth in the respective instrument for the Option or the Tandem Appreciation
Right or both.
6.4. PERFORMANCE AWARDS.
(a) Nature of Performance Awards. A Performance Award entitles the
recipient to receive, without payment, an amount, in cash or Stock or a
combination thereof (such form to be determined by the Committee), following the
attainment of performance goals. Performance goals may be related to personal
performance, corporate performance, departmental performance or any other
category of performance deemed by the Committee to be important to the success
of the Company. The Committee will determine the performance goals, the period
or periods during which performance is to be measured and all other terms and
conditions applicable to the Award.
(b) Other Awards Subject to Performance Conditions. The Committee may, at
the time any Award described in this Section 6 is granted, impose the condition
(in addition to any conditions specified or authorized in this Section 6 or any
other provision of the Plan) that performance goals be met prior to the
Participant's realization of any payment or benefit under the Award.
6.5. SUBSTITUTE AWARDS.
In connection with any acquisition, the Committee may grant Awards to
persons who become Employees in connection with such acquisition in substitution
for equity incentives held by them in the seller or acquired entity. In such
case the Committee may set the prices and other terms of the substitute Awards
at such amounts and in such manner as may be appropriate to preserve for the
Participants the economic values of the
A-3
<PAGE> 32
equity incentives for which such Awards are substitutes, or otherwise to provide
such incentives as the Committee may determine are appropriate.
7. EVENTS AFFECTING OUTSTANDING AWARDS
7.1. DEATH AND DISABILITY.
If a Participant ceases to be an Employee by reason of death or total and
permanent disability (as determined by the Committee), the following will apply:
(a) Subject to paragraph (c) below, each Option and Appreciation Right
held by the Participant when his or her employment ended will immediately
become exercisable in full and will continue to be exercisable until the
earlier of (1) the third anniversary of the date on which his or her
employment ended, and (2) the date on which the Award would have terminated
had the Participant remained an Employee. If the Participant has died, his
or her Award may be exercised within such limits by his or her executor or
administrator or by the person or persons to whom the Award is transferred
by will or the applicable laws of descent and distribution (the
Participant's "legal representative").
(b) Subject to paragraph (c) below, each share of Purchase Restricted
Stock held by the Participant when his or her employment ended will
immediately become free of the restrictions.
(c) If when the Participant's employment ended exercise of an Option
or Appreciation Right or lapse of restrictions on Purchase Restricted Stock
was subject to performance or other conditions (other than conditions
relating solely to the passage of time and continued employment, which
automatically lapse pursuant to Section 7.1(a)) which had not been
satisfied at such time, the Committee may remove or modify such conditions
or provide that the Participant will receive the benefit of the Award if
and when the conditions are subsequently satisfied. If the Committee does
not take such action, however, such Award will terminate as of the date on
which the Participant's employment ended as described above.
(d) Any payment or benefit under a Performance Award to which the
Participant has not become irrevocably entitled will be forfeited and the
Award canceled as of the date on which the Participant's employment ended,
unless otherwise provided in the instrument evidencing the Award or
otherwise agreed to by the Committee.
If a Participant dies after his or her employment has ended but while an
Award held by him or her is still exercisable, his or her legal representative
will be entitled to exercise such Award until the earlier of (1) the third
anniversary of his or her death and (2) the date on which the Award would have
terminated had the Participant remained an Employee.
7.2. OTHER TERMINATION OF EMPLOYMENT.
If a Participant ceases to be an Employee for any reason other than those
specified in Section 7.1 above, except as otherwise determined by the Committee
in any particular case, the following will apply:
(a) All Options and Appreciation Rights held by the Participant that
were not exercisable when his or her employment ended will terminate. Any
Awards that were so exercisable will continue to be exercisable until the
earlier of (1) the date which is three months after the date on which his
or her employment ended and (2) the date on which the Award would have
terminated had the Participant remained an Employee.
(b) All Purchase Restricted Stock held by the Participant must be
transferred to the Company in accordance with Section 6.1 above.
(c) Any payment or benefit under a Performance Award to which the
Participant has not become irrevocably entitled will be forfeited and the
Award canceled, unless otherwise provided in the instrument evidencing the
Award or otherwise agreed to by the Committee.
For purposes of this Section 7.2, an Employee's employment will not be
considered to have ended (1) in the case of sick leave or other bona fide leave
of absence approved for purposes of the Plan by the Committee, so long as his or
her right to reemployment is guaranteed either by statute or by contract, (2) as
a result of a reduction in the Company's percentage ownership of the entity
employing the Employee, or (3) in the case of
A-4
<PAGE> 33
a transfer of the Employee to the employment of a person or entity acquiring all
or a portion of the business of the Company or any of its subsidiaries.
7.3. CHANGE IN CONTROL.
Notwithstanding any other provision of the Plan or of any Award, in the
event of a Change in Control as defined in Exhibit A the following will apply:
(a) Each outstanding Option and Appreciation Right will immediately
become exercisable in full.
(b) Each outstanding share of Purchase Restricted Stock will
immediately become free of all restrictions and conditions.
(c) Conditions on Performance Awards which relate solely to the
passage of time and continued employment will be removed. Performance or
other conditions (other than conditions relating solely to the passage of
time and continued employment) will continue to apply unless otherwise
provided in the instrument evidencing the Awards or in any other agreement
between the Participant and the Company or unless otherwise agreed to by
the Committee.
(d) During the 60-day period following the Change in Control, a
Participant holding an Option or an Appreciation Right will have the right
(by giving written notice to the Company) to surrender all or part of his
or her Award to the Company and receive a cash payment equal to (1) the
excess of the value per share of stock (as defined below) on the date of
exercise over the exercise price per share, adjusted, in the case of a
Performance Appreciation Right to take into account the performance of the
Stock in comparison to the other stocks or index specified by the
Committee, multiplied by (2) the number of shares subject to the
surrendered Award. Such right will not apply to any Option as to which the
Committee expressly excludes such right at the date of grant; provided,
however, if (i) the Change of Control is a merger to be accounted for as a
pooling of interest, (ii) adequate provision is made for all Participants
to receive, in substitution for their Awards, awards from the surviving
entity in the same form and terms (after giving effect to the foregoing
paragraphs (a), (b) and (c)) and with the same economic value as their
Awards under the Plan, and (iii) the Committee, in its discretion,
determines that the rights to receive cash payment under this paragraph (d)
are not in the best interests of the Company, then no Participant shall
have the right pursuant to this paragraph (d) to surrender his or her Award
to the Company for a cash payment. As used in this paragraph with respect
to an election by a Participant to receive cash in respect of an Award
which is not an ISO, the term "value per share" will mean the higher of (i)
the highest reported sales price, regular way, of a share of Stock on the
New York Stock Exchange Composite Transactions Index during the 60-day
period ending on the date of the Change in Control and (ii) if the Change
in Control is the result of the acquisition of Stock by a "person" (as
defined in Exhibit A), the highest price per share of the Stock paid by
such person. In the case of an election by a Participant to receive cash in
respect of an ISO, however, the term "value" will mean fair market value
unless otherwise agreed to by the Participant.
7.4. MERGERS, CONSOLIDATIONS, ETC.
In the event of a merger or consolidation in which the Company is not the
surviving corporation or which results in the acquisition of substantially all
the Company's outstanding Stock by a single person or entity or by a group of
persons or entities acting in concert, or in the event of sale or transfer of
all or substantially all of the Company's assets (a "covered transaction"), all
outstanding Options and Appreciation Rights may be terminated by the Board as of
the effective date of the covered transaction, subject to the following: If the
covered transaction follows a Change in Control or would give rise to a Change
in Control, no Option or Appreciation Right will be terminated (without the
consent of the Participant) prior to the expiration of 20 days following the
later of (i) the date on which the Award became fully exercisable and (ii) the
date on which the Participant received written notice of the covered
transaction.
8. GENERAL PROVISIONS
8.1. DOCUMENTATION OF AWARDS.
Awards will be evidenced by written instruments prescribed by the Company
from time to time. Such instruments may be in the form of agreements, to be
executed by both the Participant and the Company, or
A-5
<PAGE> 34
certificates, letters or similar instruments, which need not be executed by the
Participant but acceptance of which will evidence agreement to the terms thereof
and hereof.
8.2. RIGHTS AS A STOCKHOLDER; DIVIDEND EQUIVALENTS.
Except as specifically provided by the Plan, the receipt of an Award will
not give a Participant rights as a stockholder; the participant will obtain such
rights, subject to any limitations imposed by the Plan or the instrument
evidencing the Award, upon actual receipt of Stock. However, the Committee may,
on such conditions as it deems appropriate, provide that a Participant will
receive a benefit in lieu of cash dividends that would have been payable on any
or all Stock subject to the Participant's Award had such Stock been outstanding.
Without limitation, the Committee may provide for payment to the Participant of
amounts representing such dividends, either currently or in the future, or for
the investment of such amounts on behalf of the Participant.
8.3. CONDITIONS ON DELIVERY OF STOCK.
The Company will not be obligated to deliver any shares of Stock pursuant
to the Plan or to remove any restriction from shares previously delivered under
the Plan (a) until all conditions of the Award have been satisfied or removed,
(b) until, in the opinion of the Company's counsel, all applicable federal and
state laws and regulations have been complied with, (c) if the outstanding Stock
is at the time listed on any stock exchange, until the shares to be delivered
have been listed or authorized to be listed on such exchange upon official
notice of notice of issuance, and (d) until all other legal matters in
connection with the issuance and delivery of such shares have been approved by
the Company's counsel. If the sale of Stock has not been registered under the
Securities Act of 1933, as amended, the Company may require, as a condition to
exercise of the Award, such representations or agreements as counsel for the
Company may consider appropriate to avoid violation of such Act and may require
that the certificates evidencing such Stock bear an appropriate legend
restricting transfer.
8.4. TAX WITHHOLDING.
The Company will withhold from any payment made pursuant to an Award an
amount sufficient to satisfy all federal, state and local withholding tax
requirements (the "withholding requirements").
In the case of an Award pursuant to which Stock may be delivered, the
Committee will have the right to require that the Participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the
Committee with regard to such requirements, prior to the delivery of any Stock.
If and to the extent that such withholding is required, the Committee may permit
the Participant or such other person to elect at such time and in such manner as
the Committee provides to have the Company hold back from the shares to be
delivered, or to deliver to the Company, Stock having a value calculated to
satisfy the withholding requirement.
If at the time an ISO is exercised the Committee determines that the
Company could be liable for withholding requirements with respect to a
disposition of the Stock received upon exercise, the Committee may require as a
condition of exercise that the person exercising the ISO agree (a) to inform the
Company promptly of any disposition of Stock received upon exercise, and (b) to
give such security as the Committee deems adequate to meet the potential
liability of the Company for the withholding requirements and to augment such
security from time to time in any amount reasonably deemed necessary by the
Committee to preserve the adequacy of such security.
8.5. NONTRANSFERABILITY OF AWARDS.
Except as otherwise specifically provided by the Committee, no Award may be
transferred other than by will or by the laws of descent and distribution, and
during a Participant's lifetime an Award requiring exercise may be exercised
only by him or her (or in the event of incapacity, the person or persons
properly appointed to act on his or her behalf).
A-6
<PAGE> 35
8.6. ADJUSTMENTS IN THE EVENT OF CERTAIN TRANSACTIONS.
(a) In the event of a stock dividend, stock split or combination of shares,
recapitalization or other change in the Company's capitalization, or other
distribution with respect to common stockholders other than normal cash
dividends, the Committee will make any appropriate adjustments to the maximum
number of shares that may be delivered under the Plan under Section 4 above.
(b) In any event referred to in paragraph (a) the Committee will also make
any appropriate adjustments to the number and kind of shares of stock or
securities subject to Awards then outstanding or subsequently granted, any
exercise prices relating to Awards and any other provisions of Awards affected
by such change. The Committee may also make such adjustments to take into
account material changes in law or in accounting practices or principles,
mergers, consolidations, acquisitions, dispositions, repurchases or similar
corporate transactions, or any other event, if it is determined by the Committee
that adjustments are appropriate to avoid distortion in the operation of the
Plan, but no such adjustments other than those required by law may adversely
affect the rights of any Participant (without the Participant's consent) under
any Award previously granted.
8.7. EMPLOYMENT RIGHTS.
Neither the adoption of the Plan nor the grant of Awards will confer upon
any person any right to continued employment with the Company or any subsidiary
or affect in any way the right of the Company or subsidiary to terminate an
employment relationship at any time. Except as specifically provided by the
Committee in any particular case, the loss of existing or potential profit in
Awards granted under the Plan will not constitute an element of damages in the
event of termination of an employment relationship even if the termination is in
violation of an obligation of the Company to the Employee.
8.8. DEFERRAL OF PAYMENTS.
The Committee may agree at any time, upon request of the Participant, to
defer the date on which any payment under an Award will be made.
8.9. PAYMENT FOR STOCK AND OPTIONS.
Stock purchased from the Company under this Plan either as Purchase
Restricted Stock or on exercise of an Option may be paid for with such legal
consideration as the Committee may determine.
9. DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION
The Committee may at any time discontinue granting Awards under the Plan.
The Board may at any time or times amend the Plan or any outstanding Award for
any purpose which may at the time be permitted by law, or may at any time
terminate the Plan as to any further grants of Awards, provided that (except to
the extent expressly required or permitted by the Plan) no such amendment will,
without the approval of the stockholders of the Company, (a) increase the
maximum number of shares available under the Plan, (b) extend the time within
which Awards may be granted, or (c) amend the provisions of this Section 9, and
no amendment or termination of the Plan may adversely affect the rights of any
Participant (without his or her consent) under any Award previously granted.
CABOT CORPORATION
By
--------------------------------------
A-7
<PAGE> 36
EXHIBIT A
A "Change in Control" shall be deemed to have occurred if:
(a) any "person" as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934 (the "1934 Act") (other than (i) the
Company, (ii) any subsidiary of the Company, (iii) any trustee or other
fiduciary holding securities under an employee benefit plan of the Company
or of any subsidiary of the Company, or (iv) any company owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), is or becomes the
"beneficial owner" (as defined in Section 13(d) of the 1934 Act), together
with all Affiliates and Associates (as such terms are used in Rule 12b-2 of
the General Rules and Regulations under the 1934 Act) of such person,
directly or indirectly, of securities of the Company representing 25% or
more of the combined voting power of the Company's then outstanding
securities;
(b) the stockholders of the Company approve a merger or consolidation
of the Company with any other company, other than (1) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company or any subsidiary of the Company, at least 65% of the combined
voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation or (2) a
merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no "person" (with the method of
determining "beneficial ownership" used in clause (a) of this definition)
acquires more than 50% of the combined voting power of the Company's then
outstanding securities; or
(c) during any period of two consecutive years (not including any
period prior to the execution of the Plan), individuals who at the
beginning of such period constitute the Board, and any new director (other
than a director designated by a person who has entered into an agreement
with the Company to effect a transaction described in clause (a), (b) or
(d) of this definition) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds ( 2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved cease for any reason to constitute
at least a majority thereof; or
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets.
A-8
<PAGE> 37
EXHIBIT B
VOTE OF THE BOARD OF DIRECTORS
After discussion and upon motion duly made and seconded, the following vote
was unanimously adopted by the Board of Directors of the Company on November 10,
1995:
VOTED: That the Board of Directors of Cabot Corporation hereby
approves and declares advisable the following amendment of the Certificate
of Incorporation of Cabot Corporation, and directs that said amendment be
considered at the Annual Meeting of Stockholders of Cabot Corporation to be
held on March 7, 1996, or any adjournment or postponement thereof:
Article FOURTH of the Certificate of Incorporation is hereby amended by
striking out the first paragraph thereof, which now reads as follows:
"FOURTH: The total number of shares of common stock which this
corporation shall have authority to issue is eighty million shares and the
par value of each of such shares is one dollar ($1.00) amounting in the
aggregate to eighty million dollars ($80,000,000)."
and inserting the following in place thereof:
"FOURTH: The total number of shares of common stock which this
corporation shall have authority to issue is two hundred million shares and
the par value of each of such shares is one dollar ($1.00) amounting in the
aggregate to two hundred million dollars ($200,000,000)."
B-1
<PAGE> 38
PRELIMINARY COPY
January [12], 1996
Dear Plan Participant:
The Annual Meeting of Cabot Corporation will be held on March 7, 1996. The
record date for determining stockholders entitled to vote at the meeting was
January 8, 1996. Through your participation in the Cabot Corporation
Employee Stock Ownership Plan (ESOP), Cabot Retirement Incentive Savings Plan
(CRISP) and/or the Cabot Oil & Gas Corporation Savings Investment Plan (SIP),
you are the beneficial owner of Cabot Common Stock and/or Cabot Convertible
Preferred Stock and have the right to instruct the Trustee of the Plan or Plans
in which you participate how to vote your shares.
The number of shares allocated to you appears at the top of the voting card on
which your name appears. If you are a participant in the CRISP, the number of
shares of Cabot Common Stock held for your account is shown at the top of the
card and is followed by the letters "CSP". If you are a participant in the
ESOP, the number followed by the letters "ESP" represents the number of shares
of Cabot Common Stock you are entitled to vote in your ESOP account, including
the shares of Common Stock issuable upon conversion of Cabot Convertible
Preferred Stock held in your account. If you are a participant in the SIP, the
number of shares of Cabot Common Stock held for your account is followed by the
letters "SIP".
I encourage you to exercise your right to vote these shares by completing the
enclosed proxy card instructing the Trustee as to your wishes. Your vote has a
doubly important impact. When you vote your shares, you participate directly in
the affairs of the Company equally with all other stockholders. In addition,
your vote also directs the Trustees of the CRISP and ESOP how to vote those
shares for which no instructions are received from other Plan participants plus
shares held in each of those Plans that have not been allocated to participants'
accounts.
To vote your shares, read the Notice of Meeting and Proxy Statement carefully,
mark and sign the enclosed proxy card, and return it to the Trustee before
March 1, 1996 in the enclosed self-addressed envelope.
The Trustee of each Plan will have the voting instructions of each participant
in the Plan tabulated and will vote the shares of the participants by
submitting a final proxy card representing each Plan's shares for inclusion in
the tally at the Annual Meeting. Your individual vote will not be disclosed to
anyone in the Company.
Sincerely,
Samuel W. Bodman
Chairman of the Board
and Chief Executive
<PAGE> 39
PRELIMINARY COPY
[LOGO]
CABOT CORPORATION
P
R Annual Meeting of Stockholders -- March 7, 1996
O
X THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Y
The undersigned hereby appoints Samuel W. Bodman, Robert Rothberg and
Charles D. Gerlinger, and each of them, proxies, with power of substitution, to
vote the shares of stock of Cabot Corporation which the undersigned is entitled
to vote, as specified on the reverse side of this card, and, if applicable,
hereby directs the Trustee of employee benefit plan(s) shown on the reverse
side hereof to vote the shares of stock of Cabot Corporation allocated to the
account(s) of the undersigned or otherwise which the undersigned is entitled
to vote pursuant to such employee benefit plan(s), as specified on the reverse
side of this card, at the Annual Meeting of Stockholders of Cabot Corporation
to be held on March 7, 1996, at 4:00 p.m., EST, in the Enterprise Room on the
fifth floor at 225 Franklin Street, Boston, Massachusetts, and at any
adjournment or postponement thereof.
WHEN THIS PROXY IS PROPERLY EXECUTED, THE SHARES TO WHICH THIS PROXY
RELATES WILL BE VOTED AS SPECIFIED AND, IF NO SPECIFICATION IS MADE, WILL BE
VOTED FOR ALL NOMINEES AND FOR PROPOSALS 2 AND 3, AND IT AUTHORIZES THE ABOVE
DESIGNATED PROXIES AND TRUSTEE, AS APPLICABLE, TO VOTE IN ACCORDANCE WITH THEIR
JUDGMENT ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
SEE REVERSE
SIDE
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE> 40
PLEASE MARK
/X/ VOTES AS IN
THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3
1. Election of Directors. 2. To adopt the 1996 Equity Incentive Plan.
NOMINEES: Samuel W. Bodman,
Jane C. Bradley, FOR ____ AGAINST ____ ABSTAIN ____
Arthur L. Goldstein,
Gerrit Jeelof and 3. To amend the Corporation's Certificate
John H. McArthur of Incorporation to increase the
authorized common stock to
FOR ____ WITHHELD ____ 200,000,000 shares.
ALL FROM
NOMINEES ____ ALL ____ FOR ____ AGAINST ____ ABSTAIN ____
NOMINEES
For, except vote withheld 4. To transact such other business as may
from the following properly come before the Annual Meeting
nominee(s): and any adjournment or postponement
thereof.
____________________________
PLEASE SIGN, DATE, AND RETURN THIS PROXY CARD
PROMPTLY.
MARK HERE ____
FOR ADDRESS
CHANGE AND ____
NOTE AT LEFT
Signature: __________________ Date __________
Signature: __________________ Date __________
