<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
CABOT CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
CABOT CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] 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
[CABOT LOGO]
January 16, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Cabot Corporation which will be held on Thursday, March 12, 1998 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.
Mailing of the enclosed Notice of Annual Meeting of Stockholders, Proxy
Statement and proxy card to you indicates that you were a Cabot Corporation
stockholder at the close of business on January 12, 1998, the record date for
determining those persons entitled to receive notice of, and 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,
/s/ Samuel W. Bodman
SAMUEL W. BODMAN
Chairman of the Board
and Chief Executive Officer
- --------------------------------------------------------------------------------
CABOT CORPORATION
- --------------------------------------------------------------------------------
75 State Street
- --------------------------------------------------------------------------------
Boston, Massachusetts 02109
- --------------------------------------------------------------------------------
(617) 345-0100
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<PAGE> 3
[CABOT LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 12, 1998
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 12, 1998, at 4:00 p.m., Eastern Standard Time,
for the following purposes:
1. To elect seven persons to the Board of Directors of the Company; and
2. 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 12, 1998,
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 1997 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 16, 1998
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information................................................................... 1
Item 1. -- Election of Directors...................................................... 1
Certain Information Regarding Directors............................................. 2
Information on the Board of Directors and its Committees............................ 6
Beneficial Stock Ownership of Directors, Nominees, Executive Officers and Persons
Owning More than Five Percent of Common Stock....................................... 8
Executive Compensation................................................................ 10
Summary Compensation Table....................................................... 10
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values.......................................................................... 12
Pension Plan Table............................................................... 12
Employment Contracts and Termination of Employment and Change in Control
Arrangements................................................................... 13
Compensation Committee Report on Executive Compensation.......................... 13
Performance Graph..................................................................... 16
Certain Relationships and Related Transactions........................................ 16
Future Stockholder Proposals.......................................................... 17
Solicitation of Proxies............................................................... 17
Miscellaneous......................................................................... 17
</TABLE>
i
<PAGE> 5
CABOT CORPORATION
75 STATE STREET
BOSTON, MASSACHUSETTS 02109
PROXY STATEMENT
MAILED JANUARY 16, 1998, FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 12, 1998
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 1998
Annual Meeting of Stockholders (the "Annual Meeting") to be held at 4:00 p.m.,
Eastern Standard Time, on Thursday, March 12, 1998, at the State Street Bank and
Trust Company, 225 Franklin Street, Boston, Massachusetts, and at any
adjournment or postponement of the Annual Meeting. This Proxy Statement and the
accompanying form of proxy were first mailed to stockholders on or about January
16, 1998.
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 Charles D.
Gerlinger, Secretary of the Company, by a duly executed proxy bearing a later
date received prior to the closing of the polls 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 the Company's common
stock and convertible preferred stock held for such participants by the trustees
of such plans.
Only stockholders of record as of the close of business on January 12,
1998, are entitled to vote at the Annual Meeting. As of that date, the Company
had outstanding and entitled to vote 67,807,778 shares of common stock, par
value $1.00 per share ("Common Stock"), and 68,103 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 87.47 votes. 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 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 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. Accordingly,
abstentions will have no effect on the election of directors.
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.
ITEM 1. -- ELECTION OF DIRECTORS
At the Annual Meeting, Charles P. Siess, Jr. will be nominated for election
to the class of directors whose terms expire in 1999, and Kennett F. Burnes,
John G.L. Cabot, John S. Clarkeson, Robert P. Henderson, Roderick C.G. MacLeod
and John F. O'Brien will be nominated for election to the class of directors
whose terms expire in 2001. All of the nominees, except Messrs. Clarkeson and
MacLeod, are currently directors of the Company and 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
1
<PAGE> 6
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 seven nominees.
CERTAIN INFORMATION REGARDING DIRECTORS
Set forth below, as of November 28, 1997, for each director and each
nominee for election as a 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.
- --------------------------------------------------------------------------------
PHOTO SAMUEL W. BODMAN
Age: 59
Position: Chairman of the Board and Chief Executive
Officer
Committee Membership: Executive (Chairman)
Director since: 1987
Term of Office Expires: 1999
Business Experience:
Cabot Corporation:
Chairman of the Board -- 1988 to present
President -- 1991 to 1995, 1987 to 1988
Chief Executive Officer -- 1988 to present
FMR Corp. (investment advisor and mutual fund
manager):
President and Chief Operating Officer -- 1983 to
1986
Directorships:
Cabot Oil & Gas Corporation
John Hancock Mutual Life Insurance Company
Security Capital Group Incorporated
Westvaco Corporation
- --------------------------------------------------------------------------------
PHOTO JANE C. BRADLEY(1)
Age: 70
Committee Memberships: Audit and Nominations
Director since: 1993
Term of Office Expires: 1999
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
- --------------------------------------------------------------------------------
PHOTO KENNETT F. BURNES
Age: 54
Position: President and Chief Operating Officer
Committee Membership: Executive
Director since: 1992
Term of Office Expires: 1998 (Nominee for Election)
Business Experience:
Cabot Corporation:
President -- 1995 to present
Chief Operating Officer -- 1996 to present
Executive Vice President -- 1988 to 1995
2
<PAGE> 7
- --------------------------------------------------------------------------------
PHOTO JOHN G.L. CABOT (1)
Age: 63
Committee Memberships: Audit and Safety, Health and
Environmental Affairs
Director since: 1963
Term of Office Expires: 1998 (Nominee for Election)
Business Experience:
Cabot Corporation:
Vice Chairman of the Board -- 1988 to 1995
Chief Financial Officer -- 1992 to 1995
Directorships:
Cabot Oil & Gas Corporation
Eaton Vance Corp.
- --------------------------------------------------------------------------------
PHOTO JOHN S. CLARKESON
Age: 55
Nominee for Election
Business Experience:
The Boston Consulting Group, Inc. (management
consulting):
Chairman of the Board -- Commencing January 1998
Chief Executive Officer and President -- 1985 to
1997
Directorships:
Director, manager or supervisor of various Boston
Consulting Group subsidiaries
- --------------------------------------------------------------------------------
PHOTO ARTHUR L. GOLDSTEIN
Age: 62
Committee Membership: Nominations
Director since: 1995
Term of Office Expires: 1999
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 Corporation
State Street Bank and Trust Company
- --------------------------------------------------------------------------------
PHOTO ROBERT P. HENDERSON
Age: 66
Committee Memberships: Compensation (Chairman) and
Executive
Director since: 1990
Term of Office Expires: 1998 (Nominee for Election)
Business Experience:
Greylock Management Corporation (private equity
investment management):
General Partner of managed funds -- 1983 to
present
Greylock Limited Partnership (private equity
investments):
Managing Partner -- 1990 to present
Directorships:
Allmerica Financial Corporation
Filene's Basement, Inc.
3
<PAGE> 8
- --------------------------------------------------------------------------------
PHOTO ARNOLD S. HIATT
Age: 70
Committee Memberships: Compensation and Nominations
Director since: 1993
Term of Office Expires: 2000
Business Experience:
The Stride Rite Foundation:
Chairman -- 1982 to present
The Stride Rite Corporation (manufacturer and
retailer):
Chairman of the Board -- 1982 to 1992
Chief Executive Officer -- 1982 to 1989
Directorships:
Director or trustee of various Dreyfus Corporation
mutual funds
- --------------------------------------------------------------------------------
PHOTO RODERICK C.G. MACLEOD(1)
Age: 47
Nominee for Election
Business Experience:
St. Martin Finance Ltd. (private equity investment
company):
Co-founder, principal and advisor -- 1986 to
present
Adia S.A. (now ADECCO S.A.)(staffing industry):
General Manager and Senior Vice President -- 1986
to 1991 Vice President, Business Development --
1981 to 1985
Directorships:
Select Appointments (Holdings) Plc.
Oxford Forecasting Services Ltd.
- --------------------------------------------------------------------------------
PHOTO JOHN H. MCARTHUR
Age: 63
Committee Memberships: Compensation and Nominations
(Chairman)
Director since: 1990
Term of Office Expires: 1999
Business Experience:
Harvard University:
Dean of Graduate School of Business
Administration -- 1980 to 1995
Directorships:
The AES Corporation
BCE Inc.
Glaxo Wellcome plc
Rohm and Haas Co.
Springs Industries, Inc.
The Vincam Group, Inc.
4
<PAGE> 9
- --------------------------------------------------------------------------------
PHOTO JOHN F. O'BRIEN
Age: 54
Committee Memberships: Audit (Chairman) and
Nominations
Director since: 1990
Term of Office Expires: 1998 (Nominee for Election)
Business Experience:
Allmerica Financial Corporation (holding company):
President and Chief Executive Officer -- 1995 to
present
Allmerica Financial Life Insurance and Annuity
Company (insurance company):
Chairman of the Board -- 1989 to present
Allmerica Funds (investment company):
Chairman of the Board -- 1991 to present
Allmerica Investment Trust (investment company):
Chairman of the Board -- 1989 to present
Allmerica Securities Trust (investment company):
Chairman of the Board -- 1989 to present
Citizens Corporation (insurance holding company):
Chairman of the Board and Chief Executive
Officer -- 1992 to present
President -- 1994 to present
First Allmerica Financial Life Insurance Company:
President and Chief Executive Officer -- 1989 to
present
Directorships:
ABIOMED, Inc.
Allmerica Financial Corporation
Allmerica Financial Life Insurance and Annuity
Company
Allmerica Funds (Trustee)
Allmerica Investment Trust (Trustee)
Allmerica Securities Trust (Trustee)
Citizens Corporation
First Allmerica Financial Life Insurance Company
The TJX Companies, Inc.
- --------------------------------------------------------------------------------
PHOTO DAVID V. RAGONE
Age: 67
Committee Memberships: Compensation and Safety,
Health and Environmental Affairs
Director since: 1985
Term of Office Expires: 2000
Business Experience:
Massachusetts Institute of Technology:
Senior Lecturer -- 1988 to present
Visiting Professor -- 1987 to 1988
ASMV Management Company Limited Partnership (venture
capital management):
Partner -- 1992 to present
General Partner -- 1989 to 1992
Directorship:
SIFCO INC.
- --------------------------------------------------------------------------------
PHOTO CHARLES P. SIESS, JR.
Age: 70
Committee Memberships: Audit and Safety, Health and
Environmental Affairs (Chairman)
Director since: 1988
Term of Office Expires: 1998 (Nominee for Election)
Business Experience:
Cabot Oil & Gas Corporation (energy exploration and
production):
Chairman, President and Chief Executive
Officer -- 1995 to present
Chairman and Chief Executive Officer -- 1989 to
1992
Bridas S.A.P.I.C. (oil exploration):
Acting General Manager -- 1993 to 1994
Directorships:
Cabot Oil & Gas Corporation
CAMCO, Inc.
Rowan Companies, Incorporated
5
<PAGE> 10
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PHOTO MORRIS TANENBAUM
Age: 69
Committee Memberships: Compensation and Nominations
Director since: 1981
Term of Office Expires: 2000
Business Experience:
AT&T Corp.:
Vice Chairman -- 1986 to 1991
Directorship:
American Electric Power Company, Inc.
- --------------------------------------------------------------------------------
PHOTO LYDIA W. THOMAS
Age: 53
Committee Memberships: Audit and Safety, Health and
Environmental Affairs
Director since: 1994
Term of Office Expires: 2000
Business Experience:
Mitretek Systems, Inc. (research and development for
public interest):
President and Chief Executive Officer -- 1996 to
present
Senior Vice President and General Manager -- 1996
The MITRE Corporation, Center for Environment,
Resources and Space:
Senior Vice President and General Manager -- 1992
to 1996
Vice President -- 1989 to 1992
Technical Director -- 1982 to 1989
Charles Stark Draper Laboratory Inc.:
Member
- --------------------------------------------------------------------------------
PHOTO MARK S. WRIGHTON
Age: 48
Committee Memberships: Compensation and Safety,
Health and Environmental Affairs
Director since: 1997
Term of Office Expires: 2000
Business Experience:
Washington University in St. Louis:
Chancellor and Professor of Chemistry -- 1995 to
present
Massachusetts Institute of Technology:
Provost -- 1990 to 1995
Head of Department of Chemistry -- 1987 to 1990
Directorships:
Helix Technology Corporation
Ionics, Incorporated
OIS Optical Imaging Systems, Inc.
- --------------------------------------------------------------------------------
(1) John G.L. Cabot is a first cousin of Jane C. Bradley's spouse; Roderick
C.G. MacLeod's spouse is a first cousin once removed of John G.L. Cabot
and Jane C. Bradley's spouse.
INFORMATION ON THE BOARD OF DIRECTORS AND ITS COMMITTEES
General
The Board of Directors of the Company held six meetings during the 1997
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 2 through 6. The Audit, Compensation,
Nominations and SH&E Committees are presently composed entirely of non-employee
directors. The Executive Committee is presently composed 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
6
<PAGE> 11
results of the auditors' examination of the Company's books and records,
auditors' compensation, internal accounting control procedures and activities
and recommendations of the Company's internal auditors. It also reviews the
Company's accounting policies, control systems and compliance activities. The
Committee reports to the Board on Audit Committee activities and makes such
investigations as it deems appropriate. The Audit Committee met two times during
the 1997 fiscal year.
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 13 through
15). In addition, the Committee determines whether any discretionary
contributions will be made by the Company to the Cabot Retirement Incentive
Savings Plan (the "Savings Plan"). It administers the Company's supplemental
employee benefit plans. It also administers the long-term equity incentive
plans, 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
certain compliance activities. It also makes recommendations to the Board of
Directors with respect to directors' compensation. The Compensation Committee
met three times and took action by written consent three times during the 1997
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 two times and took action
by written consent four times during the 1997 fiscal year.
The Nominations Committee considers and proposes to the Board of Directors
policies for the Board and 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 1997 fiscal year.
The SH&E Committee reviews the Company's safety, health and environmental
management programs and major hazards analyses. The Committee consults with the
Company's internal and external safety, health and environmental advisors
regarding the management of those programs. It also reviews the Company's
environmental spending. The SH&E Committee met three times during the 1997
fiscal year.
Board Compensation
Directors who are not employees of the Company were compensated during
fiscal year 1997 by the issuance of 1,600 shares of Common Stock, pursuant to
the Company's Non-Employee Directors' Stock Compensation Plan, and four
quarterly cash payments of $3,500. 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 in attending all
Board and Committee meetings and were covered by the Company's travel accident
insurance policy.
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 1997 fiscal year Mr. Wrighton was
paid $1,200 for such services.
During fiscal 1997, the Board of Directors approved an amendment to the
Cabot Corporation Deferred Compensation Plan, permitting directors to defer
receipt of their cash retainer and Board and Committee meeting fees for a period
of at least three years or until they leave the Board of Directors. Such
deferred amounts are accrued in a memorandum account and either (i) credited
with interest at a rate equal to Moody's Corporate Bond Rate, or (ii) treated as
invested in phantom stock units, based on the market price of shares of Company
Common Stock at the time of deferral with phantom dividends being accrued and
treated as if reinvested in phantom stock units.
All incumbent directors attended at least 75% of the meetings of the Board
and Committees held while they were members during the 1997 fiscal year.
7
<PAGE> 12
Board Retirement Policy
The Board of Directors has adopted a retirement policy, which states that a
director shall submit his or her resignation to the Chairman of the Board prior
to, and effective at, the Annual Meeting of Stockholders of the Company next
following the calendar year of (i) such director's seventieth birthday, in the
case of a director first elected to the Board prior to his or her sixtieth
birthday, or (ii) such director's seventy-second birthday, in the case of a
director first elected to the Board on or after his or her sixtieth birthday.
BENEFICIAL STOCK OWNERSHIP OF DIRECTORS, NOMINEES, 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 28, 1997 (including
shares of Common Stock subsequently issued to the trustee of the Savings Plan
for Company contributions accrued as of that date) by (a) each person known by
the Company to own beneficially more than 5% of its Common Stock, (b) each
director and nominee for election as a director of the Company and each of the
executive officers named in the Summary Compensation Table below, and (c) all
current directors, nominees 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 Employee
Stock Plan and the Savings Plan referred to collectively herein as the "Plans").
The number of shares of Common Stock shown for each person who is a participant
in the Plans includes shares issuable upon conversion of shares of Convertible
Preferred Stock allocated to such participant's respective account under the
Employee Stock Plan, as well as the shares issuable upon the exercise of stock
options (see note 9 below). The shares of Common Stock allocated to the accounts
of named participants in the Plans constitute less than 1% of the Common Stock
of the Company and the shares of Convertible Preferred Stock allocated to the
accounts of named participants in the Employee Stock Plan constitute less than
1% of the Convertible Preferred Stock of the 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................ 863,402 9,459,460 413,148 9,915,614 10,328,762(1) 13.93%
Directors, Nominees and Executive Officers
- ------------------------------------------
Samuel W. Bodman............. 1,075,045 2,790 1,075,045 2,790 1,251,170(2) 1.83%
Jane C. Bradley.............. 117,880 2,284,148 117,880 2,284,148 2,402,028(3) 3.52%
Kennett F. Burnes............ 305,021 -0- 305,021 -0- 494,365(4) *
John G.L. Cabot.............. 1,789,372 1,398,064 1,789,372 1,398,064 3,187,436(5) 4.67%
Winfred R. Cates............. 56,297 -0- 56,297 -0- 98,969(6) *
John S. Clarkeson............ -0- 2,000 -0- 2,000 2,000 *
Arthur L. Goldstein.......... 3,400 -0- 3,400 -0- 3,400 *
Robert P. Henderson.......... 15,600 -0- 15,600 -0- 15,600 *
Arnold S. Hiatt.............. 11,305 -0- 11,305 -0- 11,305 *
Roderick C.G. MacLeod........ 24,000 10,000 24,000 10,000 34,000 *
John H. McArthur............. 8,469 -0- 8,469 -0- 8,469 *
John F. O'Brien.............. 12,000 -0- 12,000 -0- 12,000 *
David V. Ragone.............. 14,400 37,600 14,400 37,600 52,000(7) *
Robert Rothberg.............. 108,449 4,000 108,449 4,000 112,449 *
Charles P. Siess, Jr......... 31,868 -0- 31,868 -0- 31,868 *
Morris Tanenbaum............. 45,656 -0- 45,656 -0- 45,656 *
Lydia W. Thomas.............. 4,800 -0- 4,800 -0- 4,800 *
Mark S. Wrighton............. 1,000 -0- 1,000 -0- 1,000 *
</TABLE>
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<PAGE> 13
<TABLE>
<CAPTION>
VOTING POWER INVESTMENT POWER PERCENT
--------------------- ---------------------- OF
NAME SOLE SHARED SOLE SHARED TOTAL CLASS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Donald R. Young.............. 74,446 -0- 74,446 -0- 83,246(8) *
All directors, nominees and
executive officers as a
group (21 persons)........ 3,741,399 2,732,310 3,741,399 2,732,310 6,887,860(9) 10.03%
</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) 1,755,262 shares of Common Stock held as
trustee of the Savings Plan; and (ii) 219,629 shares of Common Stock, and
5,956,969 additional shares of Common Stock issuable upon conversion of
68,103 shares of Convertible Preferred Stock (100% of the class), held as
trustee of the Employee Stock Plan.
(2) Includes 173,336 shares of Common Stock which Mr. Bodman has the right to
acquire pursuant to stock options and 2,790 shares as to which beneficial
ownership is disclaimed.
(3) Includes 2,284,148 shares as to which beneficial ownership is disclaimed,
and 1,006,292 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 189,344 shares of Common Stock which Mr. Burnes has the right to
acquire pursuant to stock options.
(5) Includes 1,398,064 shares as to which beneficial ownership is disclaimed,
and 1,006,292 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 42,672 shares of Common Stock which Mr. Cates has the right to
acquire pursuant to stock options.
(7) Includes 12,000 shares as to which beneficial ownership is disclaimed.
(8) Includes 8,800 shares of Common Stock which Mr. Young has the right to
acquire pursuant to stock options.
(9) Shares of Common Stock shown as being beneficially owned by directors,
nominees and executive officers as a group include: (i) 414,152 shares which
such individuals have the right to acquire pursuant to stock options; (ii)
109,910 shares held for their benefit by the State Street Bank and Trust
Company as trustee of the Savings Plan; (iii) 36,689 shares of Common Stock
(including 31,705 shares issuable upon conversion of 362 shares of
Convertible Preferred Stock) held for their benefit by the State Street Bank
and Trust Company as trustee of the Employee Stock Plan; and (iv) 2,690,710
shares of Common Stock as to which beneficial ownership is disclaimed.
9
<PAGE> 14
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The Summary Compensation Table provides certain compensation information
for the Chief Executive Officer of the Company and the four other most highly
compensated executive officers of the Company who were employed by the Company
on September 30, 1997, for services rendered by them during fiscal years 1997,
1996 and 1995. 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 ------------ ALL OTHER
--------------------- RESTRICTED COMPENSATION
NAME & PRINCIPAL SALARY BONUS STOCK ------------
POSITION YEAR ($) ($) ($)(1) ($)(2)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Samuel W. Bodman 1997 $675,000 $500,000 $1,146,000 $219,170
Chairman of the 1996 $675,000 $650,000 $1,281,752 $135,101
Board and Chief 1995 $645,833 $800,000 $ 800,000 $116,957
Executive Officer
Kennett F. Burnes 1997 $475,000 $300,000 $ 716,250 $140,655
President 1996 $475,000 $375,000 $ 801,095 $106,210
1995 $445,833 $450,000 $ 500,000 $106,233
Winfred R. Cates 1997 $230,000 $ 70,000 $ 214,875 $ 38,196
Senior Vice 1996 $230,000 $100,000 $ 272,372 $ 37,555
President 1995 $221,250 $150,000 $ 150,000 $ 24,916
Robert Rothberg 1997 $260,000 $120,000 $ 286,500 $ 64,890
Vice President and 1996 $260,000 $150,000 $ 320,438 $ 54,801
General Counsel 1995 $254,167 $200,000 $ 240,000 $ 55,977
Donald R. Young 1997 $268,750 $150,000 $ 322,313 $ 45,754(3)
Vice President 1996 $250,000 $160,000 $ 320,438 $ 33,034(3)
1995 $201,250 $150,000 $ 130,000 $ 21,659(3)
</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 1997 under the Company's 1996
Equity Incentive Plan: Mr. Bodman: 80,000 shares; Mr. Burnes: 50,000 shares;
Mr. Cates: 15,000 shares; Mr. Rothberg: 20,000 shares; and Mr. Young: 22,500
shares.
The number and value (calculated at fair market value as of September 30,
1997 ($26.9375 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, 1997 (including the shares referred to in the
column headed "Restricted Stock"), were as follows: Mr. Bodman: 240,000
shares ($4,046,496); Mr. Burnes: 150,000 shares ($2,529,060); Mr. Cates:
47,000 shares ($791,231); Mr. Rothberg: 64,000 shares ($1,079,374); and Mr.
Young: 55,500 shares ($936,530).
The restricted stock set forth in the Table vests, in whole, three years
from the date of grant. In accordance with the Company's long-term incentive
compensation program under the 1996 Equity Incentive Plan, each of the named
individuals paid to the Company 40% of the fair market value of the shares
of stock awarded in 1996 and 1997 listed in this footnote on the date of
grant, and under the Equity Incentive Plan adopted in 1988, each of the
named individuals paid to the Company 50% of the fair market value of the
shares of stock awarded in 1995 listed in this footnote on the date of
grant. Some of the funds for the payment for restricted stock were borrowed
from Merrill Lynch Bank & Trust Co. (the "Bank") by all of the named
executive officers under a loan facility available to all recipients of
restricted
10
<PAGE> 15
stock grants under this program. The recipients, including the named
executive officers, borrowing funds from the 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.
(2) The information in the column headed "All Other Compensation" includes
matching contributions to the Savings Plan and accruals under a supplemental
retirement incentive savings plan (collectively, the "CRISP") for fiscal
year 1997 and contributions to the Employee Stock Plan and accruals under a
supplemental employee stock ownership plan (collectively, the "ESOP") for
fiscal year 1997 on behalf of the named executive officers in the following
amounts: Mr. Bodman: CRISP: $74,531, ESOP: $144,639; Mr. Burnes: CRISP:
$47,812, ESOP: $92,843; Mr. Cates: CRISP: $17,269, ESOP: $20,927; Mr.
Rothberg: CRISP: $16,734, ESOP: $46,490; and Mr. Young: CRISP: $21,066,
ESOP: $24,688. The supplemental retirement incentive savings plan and
supplemental employee stock ownership plan 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 Savings Plan
or the Employee Stock Plan from receiving some of the benefits provided
under those qualified plans. Included in the amounts shown above are
accruals for an additional benefit under the supplemental employee stock
ownership plan equal to the total benefit each of Messrs. Bodman, Burnes and
Rothberg 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. The Company's cost of the program generally is funded by
insurance on the lives of various other present and former employees of the
Company. The value of this benefit, based upon the taxable income which it
would constitute if it were insurance, does not exceed $18,000 per year for
any named executive officer.
(3) These amounts do not include payments of $198,715, $150,252 and $281,990
made to Mr. Young by the Company in fiscal years 1997, 1996 and 1995,
respectively, in connection with his assignment in Pacific Asia. These
relocation and expatriate equalization payments were made pursuant to the
Company's expatriate policy. Portions of those payments relate to prior
years' taxes.
11
<PAGE> 16
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information with respect to the number of
unexercised stock options held by each named executive officer on September 30,
1997, and the value of the unexercised in-the-money options at that date. None
of the named executive officers exercised stock options during fiscal 1997. The
options shown in the table were granted during the years 1988 through 1991 and
vested in equal amounts over a period of four years from the date of grant. All
outstanding options were vested as of September 30, 1997, and, therefore, are
currently exercisable.
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES IN-THE-MONEY
UNDERLYING OPTIONS AT
UNEXERCISED OPTIONS FISCAL
AT FISCAL YEAR-END(#) YEAR-END($)(1)
--------------------- -----------------
NAME EXERCISABLE EXERCISABLE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Samuel W. Bodman.......................................... 173,336 $ 3,322,960
Kennett F. Burnes......................................... 189,344 $ 3,491,184
Winfred R. Cates.......................................... 42,672 $ 786,216
Robert Rothberg........................................... -- --
Donald R. Young........................................... 8,800 $ 166,650
</TABLE>
- ---------------
(1) The value of unexercised in-the-money options at September 30, 1997, was
determined by taking the difference between the fair market value of Company
Common Stock on September 30, 1997 ($26.9375 per share) and the option
exercise price, multiplied by the number of shares underlying such options
at that date. The values have not been realized and may not be realized. 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 Company Common Stock on the date of exercise.
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 1997, the interest rate was 5.42%. 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 contract issued by an
insurance company. Certain employees, including Mr. Cates, have rights to
additional benefits 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 S&P Midcap 400
Index does not equal or exceed the value of the retirement income calculated on
the basis of the pre-amendment pension formula.
12
<PAGE> 17
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 Plan and the supplemental
cash balance plan (collectively the "CBP"). The supplemental cash balance plan
was 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 Plan, a qualified plan. In addition to
the supplemental benefit relating to such limits, Messrs. Bodman, Burnes and
Rothberg each accrued an additional benefit under the supplemental cash balance
plan equal to the total benefit each would have accrued for fiscal year 1997
under the Plan if such limits were not applicable. The amounts set forth in the
following table assume that Messrs. Bodman, Burnes, Cates, Rothberg and Young
each continue to be employed by the Company until age 65 at his annual base
salary at September 30, 1997 and with an annual bonus equal to the average of
his annual bonuses for fiscal years 1995, 1996 and 1997. The definition of
"compensation" in the Plan was amended effective July 1, 1996 to include
bonuses.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ANNUAL BENEFIT
EXECUTIVE OFFICER PAYABLE
-----------------------------------------------
<S> <C>
Samuel W. Bodman............... $278,700
Kennett F. Burnes.............. $268,500
Winfred R. Cates............... $115,700
Robert Rothberg................ $181,000
Donald R. Young................ $184,600
</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.
All of the executive officers named in the Summary Compensation Table
participate in benefit plans sponsored by the Company including the CBP, CRISP,
ESOP, the Equity Incentive Plan adopted in 1988 and the 1996 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.
In January 1998, the Board of Directors approved the Cabot Corporation
Senior Management Severance Protection Plan (the "Senior Management Plan") and
the Cabot Corporation Key Employee Severance Protection Plan (the "Key Employee
Plan," and together with the Senior Management Plan, the "Severance Plans").
Under the Severance Plans, in case of a change in control, a participant whose
employment with the Company terminates within three years after the change in
control other than for cause, disability, death or certain other specified
reasons, is entitled to a severance benefit. Under the Senior Management Plan,
the severance benefit is two times the participant's annual cash compensation
(salary plus bonus); under the Key Employee Plan, the severance benefit is equal
to one times the participant's annual cash compensation. To the extent a
participant in either of the Severance Plans is entitled to severance benefits
of the type provided under the Severance Plans under any other plan or program
provided by the Company or its affiliates, or pursuant to any agreement with the
Company or its affiliates, the provision of such other benefits counts toward
the Company's obligation to provide the benefits under the Severance Plans so
that the benefits are not duplicative. In addition, a person who is a
participant in both Severance Plans shall only receive benefits under the Senior
Management Plan. Messrs. Bodman, Burnes, Cates, Rothberg and Young are
participants in the Senior Management Plan. The Severance Plans were not adopted
in response to any particular threat.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of Cabot Corporation
is composed of six 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
13
<PAGE> 18
the Company who are directors; and reviewing salaries, compensation and
remuneration for all other officers of the Company. 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 of
the Committee and its executive compensation activities during fiscal year 1997.
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 comparable companies. Certain of the
companies compared for compensation purposes are included in the S&P Chemicals
Index or the S&P Specialty Chemicals Index, both of which indices are used in
the Performance Graph on page 16. The objectives of the Committee's executive
compensation policies 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 the Company's executive compensation are base
salary, performance-based annual incentive payments and long-term incentive
grants. Base salary is a fixed amount that is the foundation to which
performance-based incentive compensation is added as earned. The level of base
salary is determined in general by comparing base salaries for similar positions
paid by comparable companies but is also set on a basis which enables the
Company to offer a total compensation package which will attract and retain key
executives. Annual incentive payments are based on an evaluation of performance
against objectives which are set at the beginning of each fiscal year and
reviewed at its conclusion, with the objective of motivating the executive
officers to carry out the Company's annual business plan by rewarding them upon
its accomplishment. 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 Company Common Stock, which the executive officer may elect either
to purchase as shares of restricted stock at 40% 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 of both types of grants (other than dividends
paid on the restricted stock) will be forfeited if the executive leaves the
Company prior to the end of such three-year period for any reason other than
death or disability, unless the Committee, in its sole discretion, determines
otherwise.
The Committee's evaluations of the Company's executive officers are 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 executive
officers other than himself. The Committee obtains other Board members'
evaluations of Mr. Bodman's performance and seeks their input on Mr. Bodman's
compensation. In 1997, short-term incentive payments were based 50% on meeting
corporate financial objectives and 50% on the Committee's evaluations of the
performance of a manager measured against objectives in the Company's budget for
fiscal 1997 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, the Company's financial results and achievement of
other previously established non-financial criteria, improvement in the
Company's shareholder value, his leadership efforts and business development
results. For fiscal year 1997, 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 compared to the Company's practices. The base salary,
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.
Base Salary. Mr. Bodman received a base salary for fiscal year 1997 of
$675,000, the same salary paid to him in fiscal year 1996 and authorized by the
Committee in May 1995. The decision of the Committee not to give a salary
increase reflects the decision of the Committee to place greater emphasis on
rewarding executives for performance with incentive compensation.
14
<PAGE> 19
Annual Incentive Payment. Mr. Bodman received an annual incentive payment
for fiscal year 1997 of $500,000; he received an annual incentive payment for
fiscal year 1996 of $650,000. In determining the 1997 payment, the Committee
noted that fiscal year 1997 had been a difficult year for the Company because of
economic and competitive pressures, particularly in Europe, and because of the
slowdown in the electronics industry in the first part of the fiscal year.
Nevertheless, the Committee noted that the Company had achieved a return on
shareholders' equity before special items of 14.2%, a level that placed the
Company approximately in the middle of the group of comparable companies, and
that the price of the Company's Common Stock had retained nearly the strength
shown in fiscal year 1996. The Committee also considered Mr. Bodman's
achievements in advancing several new products and businesses including the
construction of new plants and production lines in Canada and Malaysia and the
bringing "on stream" of new inkjet and specialty fluids products. The Committee
also regarded the efforts by management to achieve several non-financial
objectives including cost reductions, increased revenues from new products and
businesses and establishment of a new Visions and Values program as being
important to the Company. The Committee considered these results highly
satisfactory and reflecting very good performance and leadership by Mr. Bodman.
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 1997, Mr. Bodman received a grant of
80,000 shares of Cabot Common Stock, the same number of shares granted to him in
fiscal year 1996. Factors considered by the Committee in making the 1997 grant
included the sound financial and strategic position of the Company and growth of
the Company's efforts to advance new products and businesses. Mr. Bodman
exercised his grant by purchasing shares of restricted stock.
One Million Dollar Cap on Deductibility of Compensation
The Committee reviewed the 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, determined in
accordance with Section 162(m), exceeds one million dollars in a particular
year. Based on Mr. Bodman's and the other named executive officers' compensation
in fiscal 1997, the Committee determined that it is unlikely 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 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 16, 1998
Robert P. Henderson (Chairman)
Arnold S. Hiatt
John H. McArthur
David V. Ragone
Morris Tanenbaum
Mark S. Wrighton
15
<PAGE> 20
PERFORMANCE GRAPH
The following graph compares the cumulative return for Company Common Stock
during the five fiscal years commencing October 1, 1992, 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, 1992 in
Company Common Stock and $100 in each of the S&P Indexes. The comparison assumes
that all dividends are reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
[LINE GRAPH]
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
LOGO
1992 1993 1994 1995 1996 1997
Cabot Corporation 100.00 118.32 118.52 234.90 250.09 245.48
S&P 500 Stock Index 100.00 113.00 117.17 152.02 182.93 256.92
S&P Miccap 400 Index 100.00 124.03 136.02 158.49 180.68 251.33
S&P Specialty Chemicals Index 100.00 108.31 104.02 133.76 144.12 162.81
S&P Chemicals Index 100.00 108.16 142.39 168.99 218.09 284.98
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Normally, directors and officers of the Company are prohibited by Company
policy from selling Company Common Stock in the market except during certain
"window periods" and then only with the permission of the Company. The purchases
of shares of Company Common Stock 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 May 1997, in connection with the vesting of shares of restricted stock
which had been awarded to employees of the Company in 1994 under the Company's
Equity Incentive Plan adopted in 1988, the Company purchased an aggregate of
203,252 shares of its Common Stock from certain 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 $24.6250, the closing price of the Company's Common
Stock on the New York Stock Exchange on May 13, 1997. As part of that
transaction, the Company purchased: 24,081 shares from Kennett F. Burnes,
President, Chief Operating Officer and a director of the Company; 5,645 shares
from Winfred R. Cates, Senior Vice President of the Company; 6,260 shares from
Kenyon C. Gilson, Executive Vice President (resigned effective July 31, 1997) of
the Company; 5,164 shares from Paul J. Gormisky, Vice President and (at that
time) Controller of the Company; 7,056 shares from Robert Rothberg, Vice
President and General Counsel of the Company; and 6,233 shares from Donald R.
Young, Vice President of the Company.
In July 1997, the Company purchased 100,000 shares of the Company's Common
Stock for a purchase price of $27.625 per share from Mr. Bodman. In February and
July 1997 the Company purchased 6,000 shares of the Company's Common Stock for a
purchase price of $23.500 per share and 9,100 shares of the Company's Common
Stock for a purchase price of $27.625 per share from Mr. Cates. In May 1997, the
16
<PAGE> 21
Company purchased 5,000 shares of the Company's Common Stock for a purchase
price of $25.000 per share, and 4,740 shares of the Company's Common Stock at a
purchase price of $25.250 per share from Mr. Gilson. In July 1997, the Company
purchased 5,000 shares of the Company's Common Stock for a purchase price of
$27.625 per share from Mr. Rothberg. The price paid for the above shares was the
closing price of the Company's Common Stock on the New York Stock Exchange on
the date of each respective purchase.
In July 1997, Kenyon C. Gilson entered into a Separation and Noncompetition
Agreement (the "Separation Agreement") with the Company in connection with his
resignation from the Company. The Separation Agreement provides that, as
consideration for Mr. Gilson's agreement to provide occasional consulting
services to the Company through calendar year 1998 and not to compete with the
Company with respect to certain businesses until July 1999, the Company will pay
Mr. Gilson an amount equal to the closing price of Company Common Stock on the
New York Stock Exchange on May 11, 1998, multiplied by 20,000, less $200,000.
Such payment is to be made in May 1998. In addition, pursuant to the Separation
Agreement, the Company repurchased 20,000 unvested shares granted to Mr. Gilson
under the Company's Equity Incentive Plan adopted in 1988 at a price of $10.00
per share, and 20,000 unvested shares granted to Mr. Gilson under the Company's
1996 Equity Incentive Plan at a price of $10.6813 per share. Those prices were
the prices paid by Mr. Gilson for such shares.
The Company made an interest-free loan to Winfred R. Cates, Senior Vice
President of the Company, in connection with his relocation to the Boston,
Massachusetts area. The largest amount outstanding at any one time under this
loan during fiscal year 1997 was $197,000. This loan was repaid by Mr. Cates
during fiscal year 1997.
FUTURE STOCKHOLDER PROPOSALS
Any stockholder proposal intended for inclusion in the proxy statement for
the 1999 Annual Meeting of Stockholders of the Company must be received by the
Company at its offices at 75 State Street, Boston, Massachusetts 02109-1806, by
September 19, 1998, and should be sent to the attention of Sarah W. Saunders,
Assistant 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 16, 1998
17
<PAGE> 22
0928-PS-98
<PAGE> 23
January 16, 1998
Dear Plan Participant:
The Annual Meeting of Stockholders of Cabot Corporation will be held on March
12, 1998. The record date for determining stockholders entitled to vote at the
meeting was January 12, 1998. Through your participation in the Cabot
Corporation Employee Stock Ownership Plan ("ESOP"), Cabot Retirement Incentive
Savings Plan ("CRISP"), Cabot Employee Savings Plan ("CESP") 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 enclosed proxy
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 of shares of Cabot Common Stock held for your account,
including the shares of Common Stock issuable upon conversion of Cabot
Convertible Preferred Stock held for your account, is shown at the top of the
card and is followed by the letters "ESP". If you are a participant in the CESP,
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 "CEP". 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 Trustee of the CRISP, the ESOP and the CESP 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 Company's transfer
agent, BankBoston, c/o Boston EquiServe L.P., before March 6, 1998 in the
enclosed postage-paid 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,
/s/ Samuel W. Bodman
Samuel W. Bodman
Chairman of the Board
and Chief Executive Officer
<PAGE> 24
[LOGO]
CABOT CORPORATION
P
R ANNUAL MEETING OF STOCKHOLDERS -- MARCH 12, 1998
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 12, 1998 at 4:00 p.m., EST, in the Enterprise Room of the State
Street Bank and Trust Company 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 FOR DIRECTORS IN PROPOSAL 1, 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> 25
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1
<TABLE>
<S> <C>
1. Election of Directors. 2. To transact such other business as may properly
NOMINEES: Kennett F. Burnes, John G.L. Cabot, come before the Annual Meeting and any
John S. Clarkeson, Robert P. Henderson, adjournment or postponement thereof.
Roderick C.G. MacLeod, John F. O'Brien
and Charles P. Siess, Jr.
</TABLE>
FOR WITHHELD
ALL [ ] FROM [ ]
NOMINEES ALL MARK HERE FOR ADDRESS
NOMINEES CHANGE AND NOTE AT LEFT [ ]
For, except vote withheld from the following nominee(s):
--------------------------------------------------
PLEASE SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY.
Signature: Date: Signature: Date:
--------------- ------- --------------- -------
