<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 [ ]
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Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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:
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<PAGE> 2
[CABOT LOGO]
January 19, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Cabot Corporation which will be held on Thursday, March 9, 2000 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 the beneficial owner of
shares of Cabot Corporation common stock on January 11, 2000, 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 or, if your proxy card or
voting instruction form so indicates, vote electronically via the Internet or
telephone.
Sincerely,
/s/ Samuel W. Bodman
SAMUEL W. BODMAN
Chairman of the Board
and Chief Executive Officer
[CABOT LOGO]
<PAGE> 3
[CABOT LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 9, 2000
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 9, 2000, at 4:00 p.m., Eastern Standard Time,
for the following purposes:
1. To elect three persons to the Board of Directors of the Company;
2. To act upon one stockholder proposal, if properly presented to the
meeting, relating to a limitation on the number of directorships for
executive officers; and
3. 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 11, 2000,
are entitled to receive notice of and to vote at the Annual Meeting. The
transfer books of the Company will not be closed.
It is important that your shares be represented and voted at the Annual
Meeting. Stockholders are urged to vote their shares by one of the following
methods whether or not they plan to attend the Annual Meeting:
- vote over the Internet or by telephone using the instructions on the
proxy card, if this option is available to you (please refer to your
proxy card to determine if this option is available to you); or
- complete, sign, date and return the accompanying proxy card in the
enclosed, self-addressed envelope (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 1999 Annual Report to Stockholders is being mailed to
stockholders with this Notice of Annual Meeting of Stockholders and Proxy
Statement.
A complete list of the stockholders entitled to vote at the meeting shall
be available for examination by any stockholder for ten days prior to the Annual
Meeting, for any purpose germane to the Annual Meeting, during ordinary business
hours at the offices of Cabot Corporation, 75 State Street, Boston,
Massachusetts.
Please exercise your right to vote at your earliest convenient time.
By order of the Board of Directors,
Sarah W.S. Kish
Secretary
Boston, Massachusetts
January 19, 2000
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information......................................... 1
ITEM NO. 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, 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
Compliance with Section 16(a) of the Exchange Act........... 17
ITEM NO. 2 -- Stockholder Proposal.......................... 17
Future Stockholder Proposals................................ 19
Annual Report on Form 10-K.................................. 19
Solicitation of Proxies..................................... 19
Miscellaneous............................................... 19
</TABLE>
i
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CABOT CORPORATION
75 STATE STREET
BOSTON, MASSACHUSETTS 02109
PROXY STATEMENT
MAILED ON OR ABOUT JANUARY 19, 2000, FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 9, 2000
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 2000
Annual Meeting of Stockholders (the "Annual Meeting") to be held at 4:00 p.m.,
Eastern Standard Time, on Thursday, March 9, 2000, 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
19, 2000.
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 Sarah W.S.
Kish, 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 11,
2000, are entitled to vote at the Annual Meeting. As of that date, the Company
had outstanding and entitled to vote 67,302,809 shares of common stock, par
value $1.00 per share ("Common Stock"), and 64,628 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, the approval of the stockholder
proposal and 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. A majority of the
votes properly cast is required to adopt the stockholder proposal expected to be
presented to the Annual Meeting.
The independent accountants for the Company are PricewaterhouseCoopers LLP.
Representatives of PricewaterhouseCoopers LLP 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 NO. 1 -- ELECTION OF DIRECTORS
At the Annual Meeting, David V. Ragone, Lydia W. Thomas and Mark S.
Wrighton will be nominated for election to the class of directors whose terms
expire in 2003. All of the nominees are currently directors of the Company and
were elected by the stockholders at previous Annual Meetings. The Board of
Directors
1
<PAGE> 6
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 three nominees.
CERTAIN INFORMATION REGARDING DIRECTORS
Set forth below, as of November 30, 1999 for each non-employee director of
the Company, and as of December 31, 1999 for each employee 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.
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[PICTURE] SAMUEL W. BODMAN
Age: 61
Position: Chairman of the Board and Chief Executive
Officer
Committee Membership: Executive (Chairman)
Director since: 1987
Term of Office Expires: 2002
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:
John Hancock Mutual Life Insurance Company
Security Capital Group Incorporated
Thermo Electron Corporation
Westvaco Corporation
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[PICTURE] JANE C. BRADLEY(1)
Age: 72
Committee Memberships: Compensation and Nominations
Director since: 1993
Term of Office Expires: 2000
Business Experience:
Smithsonian Institution National Board
Member -- 1993 to 1999
Boston Museum of Science:
Vice Chairman, Board of Trustees -- 1992 to 1998
Trustee -- 1989 to 1998
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
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[PICTURE] KENNETT F. BURNES
Age: 56
Position: President and Chief Operating Officer
Committee Membership: Executive
Director since: 1992
Term of Office Expires: 2001
Business Experience:
Cabot Corporation:
President -- 1995 to present
Chief Operating Officer -- 1996 to present
Executive Vice President -- 1988 to 1995
2
<PAGE> 7
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[PICTURE] JOHN G.L. CABOT(1)
Age: 65
Committee Memberships: Audit and Nominations
Director since: 1963
Term of Office Expires: 2001
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.
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[PICTURE] JOHN S. CLARKESON
Age: 57
Committee Memberships: Compensation and Safety,
Health and Environmental Affairs
Director Since: 1998
Term of Office Expires: 2001
Business Experience:
The Boston Consulting Group, Inc. (management
consulting):
Chairman of the Board -- January 1998 to present
Chief Executive Officer and President -- 1986 to
1997
Directorships:
The Boston Consulting Group, Inc.
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[PICTURE] ARTHUR L. GOLDSTEIN
Age: 64
Committee Membership: Audit and Nominations
Director since: 1995
Term of Office Expires: 2002
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
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[PICTURE] ROBERT P. HENDERSON
Age: 68
Committee Memberships: Compensation (Chairman) and
Executive
Director since: 1990
Term of Office Expires: 2001
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
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[PICTURE] ARNOLD S. HIATT
Age: 72
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
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[PICTURE] GAUTAM S. KAJI
Age: 58
Committee Memberships: Audit and Safety, Health and
Environmental Affairs
Director since: 1998
Term of Office Expires: 2002
Business Experience:
World Bank:
Managing Director, Operations and Chairman Loan
Committee, World Bank Group -- 1994 to 1997
Regional Vice President, East Asia and Pacific,
World Bank -- 1991 to 1994
Directorships:
Infrastructure Development Finance Co.
Washington Asset Management Co.
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[PICTURE] RODERICK C.G. MACLEOD(1)
Age: 49
Committee Memberships: Audit and Safety, Health and
Environmental Affairs
Director Since: 1998
Term of Office Expires: 2001
Business Experience:
Private Investor
Directorships:
Select Appointments (Holdings) Plc.
Oxford Forecasting Services Ltd.
Waverley Investments (UK) Ltd.
E.I.E.C. S.A.
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[PICTURE] JOHN H. MCARTHUR
Age: 65
Committee Memberships: Compensation and Nominations
(Chairman)
Director since: 1990
Term of Office Expires: 2002
Business Experience:
Harvard University:
Dean of Graduate School of Business
Administration -- 1980 to 1995
World Bank:
Senior Advisor to the President, World Bank
Group -- 1995 to present
Directorships:
The AES Corporation
BCE Inc.
Glaxo Wellcome plc
Rohm and Haas Company
Springs Industries, Inc.
Koc Holdings, A.S.
4
<PAGE> 9
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[PICTURE]
JOHN F. O'BRIEN
Age: 56
Committee Memberships: Audit (Chairman) and
Nominations
Director since: 1990
Term of Office Expires: 2001
Business Experience:
Allmerica Financial Corporation (holding company):
President and Chief Executive Officer -- 1995 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
Directorships:
ABIOMED, Inc.
Allmerica Financial Corporation
Allmerica Investment Trust (Trustee)
Allmerica Securities Trust (Trustee)
The TJX Companies, Inc.
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[PICTURE]
DAVID V. RAGONE
Age: 69
Committee Memberships: Compensation and Safety,
Health and Environmental Affairs
Director since: 1985
Term of Office Expires: 2000 (Nominee for Election)
Business Experience:
Massachusetts Institute of Technology:
Senior Lecturer -- 1988 to 1998
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.
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[PICTURE]
CHARLES P. SIESS, JR.
Age: 72
Committee Memberships: Audit and Safety, Health and
Environmental Affairs
Director since: 1988
Term of Office Expires: 2000
Business Experience:
Cabot Oil & Gas Corporation (energy exploration and
production):
Chairman of the Board -- 1995 to 1999, 1989 to
1992
President -- 1995 to 1998
Chief Executive Officer --1995 to 1998, 1989 to
1992
Bridas S.A.P.I.C. (oil exploration):
Acting General Manager -- 1993 to 1994
Directorships:
Cabot Oil & Gas Corporation
Rowan Companies, Incorporated
5
<PAGE> 10
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[PICTURE] LYDIA W. THOMAS
Age: 55
Committee Memberships: Audit and Safety, Health and
Environmental Affairs (Chairwoman)
Director since: 1994
Term of Office Expires: 2000 (Nominee for Election)
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
- --------------------------------------------------------------------------------
[PICTURE] MARK S. WRIGHTON
Age: 50
Committee Memberships: Compensation and Safety,
Health and Environmental Affairs
Director since: 1997
Term of Office Expires: 2000 (Nominee for Election)
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 1999
fiscal year. The Board has five standing Committees: 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 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 fiscal year 1999.
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
6
<PAGE> 11
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 two times during the 1999 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 did not meet but took action
by written consent two times during the 1999 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 1999 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 outside 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 1999
fiscal year.
Board Compensation
Directors who are not employees of the Company were compensated during
fiscal year 1999 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 for 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 1999 fiscal year, Mr. Wrighton was
paid $1,200 for such services.
Mr. Cabot is a member of the board of directors of Cabot LNG Corporation, a
wholly-owned subsidiary of the Company. During fiscal year 1999, Cabot LNG
Corporation paid Mr. Cabot director fees totaling $7,500.
Under the Cabot Corporation Deferred Compensation Plan, directors are
permitted 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 Cabot 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 1999 fiscal year.
Board Retirement Policy
The Board of Directors has adopted a retirement policy, which requires each
director to 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.
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<PAGE> 12
In July 1999, the Board of Directors adopted a retirement policy for
employee directors, which requires each employee director to submit his or her
resignation to the Chairman of the Board or, in the case of the Chairman of the
Board, to a meeting of the Board of Directors, (i) prior to and, if accepted,
effective at the Annual Meeting of Stockholders following the calendar year of
such director's sixty-fifth birthday, or (ii) if the director ceases to be an
employee of the Company prior to such annual meeting, then no later than the
date of and, if accepted, effective upon the termination of such director's
employment with the Company.
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, 1999 (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 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 Employee Stock Plan and the Savings Plan referred to collectively
herein as the "Plans"). The number of shares of Common Stock shown below
includes shares issuable upon the exercise of stock options and, for each person
who is a participant in the Plans, shares issuable upon conversion of shares of
Convertible Preferred Stock allocated to such participant's respective account
under the Employee Stock Plan (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
NAME SOLE SHARED SOLE SHARED TOTAL OF 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........... 2,340,357 7,438,339 596,743 9,218,703 9,815,446(1) 13.48
FMR Corp.
82 Devonshire Street
Boston, MA........... 537,200 -0- 6,786,500 -0- 6,786,500 10.11
Sanford C. Bernstein and
Co., Inc.
767 Fifth Avenue
New York, NY......... 2,279,617 834,263 6,046,311 -0- 6,046,311 9.00
Directors and Executive Officers
- --------------------------------
Samuel W. Bodman........ 1,265,000 1,400 1,265,000 1,400 1,439,736(2) 2.14
Jane C. Bradley......... 121,080 2,197,118 121,080 2,197,118 2,318,198(3) 3.45
Kennett F. Burnes....... 403,727 -0- 403,727 -0- 497,063(4) *
John G.L. Cabot......... 1,786,363 1,348,669 1,786,363 1,348,669 3,135,032(5) 4.67
John S. Clarkeson....... 2,600 2,000 2,600 2,000 4,600 *
Robert L. Culver........ 91,697 -0- 91,697 -0- 91,697 *
Arthur L. Goldstein..... 6,600 -0- 6,600 -0- 6,600 *
Robert P. Henderson..... 18,800 -0- 18,800 -0- 18,800 *
Arnold S. Hiatt......... 14,639 -0- 14,639 -0- 14,639 *
Gautam S. Kaji.......... 1,800 -0- 1,800 -0- 1,800 *
Roderick C.G. MacLeod... 36,600 10,000 36,600 10,000 46,600 *
John H. McArthur........ 10,676 -0- 10,676 -0- 10,676 *
William P. Noglows...... 104,731 -0- 104,731 -0- 113,567(6) *
</TABLE>
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<PAGE> 13
<TABLE>
<CAPTION>
VOTING POWER INVESTMENT POWER
----------------------- ----------------------- PERCENT
NAME SOLE SHARED SOLE SHARED TOTAL OF CLASS
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John F. O'Brien......... 15,200 -0- 15,200 -0- 15,200 *
David V. Ragone......... 17,600 37,600 17,600 37,600 55,200(7) *
Charles P. Siess, Jr.... 7,468 -0- 7,468 -0- 7,468 *
Lydia W. Thomas......... 8,000 -0- 8,000 -0- 8,000 *
Mark S. Wrighton........ 4,200 -0- 4,200 -0- 4,200 *
Donald R. Young......... 98,390 -0- 98,390 -0- 107,190(8) *
All directors and
executive officers as
a group (23
persons)............. 4,247,854 2,631,525 4,247,854 2,631,525 7,163,687(9) 10.62
</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) 1,601,020 shares of Common Stock held as
trustee of the Savings Plan; and (ii) 184,308 shares of Common Stock, and
5,653,011 additional shares of Common Stock issuable upon conversion of
64,628 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 1,400 shares as to which beneficial
ownership is disclaimed.
(3) Includes 2,197,118 shares as to which beneficial ownership is disclaimed and
969,262 shares as to which voting power is shared with John G.L. Cabot and
reflected in the aggregate number of shares owned beneficially by Mr. Cabot
(see note 5 below).
(4) Includes 93,336 shares of Common Stock which Mr. Burnes has the right to
acquire pursuant to stock options.
(5) Includes 1,348,669 shares as to which beneficial ownership is disclaimed,
and 969,262 shares as to which voting power is shared with Jane C. Bradley
and reflected in the aggregate number of shares owned beneficially by Ms.
Bradley (see note 3 above).
(6) Includes 8,836 shares of Common Stock which Mr. Noglows 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. Mr. Young resigned from the Company,
effective January 30, 2000.
(9) Shares of Common Stock shown as being beneficially owned by directors and
executive officers as a group include: (i) 284,308 shares which such
individuals have the right to acquire pursuant to stock options; (ii) 27,208
shares held for their benefit by the State Street Bank and Trust Company as
trustee of the Savings Plan; (iii) 36,767 shares (including 32,888 shares
issuable upon conversion of 376 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) 3,559,187 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, 1999, for services rendered by them during fiscal years 1999,
1998 and 1997. 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 AND PRINCIPAL SALARY BONUS STOCK ------------
POSITION YEAR ($) ($)(1) ($)(2) ($)(3)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Samuel W. Bodman 1999 $750,000 $375,000 $2,079,000 $217,205
Chairman of the 1998 $731,250 $750,000 $2,330,735 $210,007
Board and Chief 1997 $675,000 $500,000 $1,146,000 $219,170
Executive Officer
Kennett F. Burnes 1999 $525,000 $250,000 $1,228,500 $148,316
President and Chief 1998 $512,500 $500,000 $1,377,253 $139,045
Operating Officer 1997 $475,000 $300,000 $ 716,250 $140,655
Robert L. Culver 1999 $325,000 $120,000 $ 567,000 $ 75,483
Executive Vice 1998 $318,750 $200,000 $ 688,627 $ 60,105
President 1997(4) $150,000 $ 75,000 $ 608,813 $ 19,146
William P. Noglows 1999 $318,750 $120,000 $ 529,200 $ 50,741(5)
Executive Vice 1998 $283,750 $200,000 $ 582,684 $ 46,409(5)
President 1997 $231,250 $165,000 $ 322,313 $ 41,231
Donald R. Young(6) 1999 $318,750 $120,000 $ 529,200 $ 49,053
Executive Vice 1998 $293,750 $200,000 $ 582,684 $ 48,444
President 1997 $268,750 $150,000 $ 322,313 $ 45,754(7)
</TABLE>
- ---------------
(1) Each of the named executive officers set forth in the Table was given the
choice, with respect to his 1999 bonus, of receiving, in lieu of the cash
awards set forth above, a non-qualified stock option (an "Option"), or 50%
of the cash award above and the remainder in the form of an Option. The
number of shares of Common Stock for which an Option is exercisable is
determined by multiplying the amount of cash foregone, by virtue of having
selected an Option, by 1.5 and dividing that amount by $6.74. The Options
are exercisable immediately, at a per share exercise price of $18.875. Mr.
Burnes elected to take his entire bonus in the form of an Option. Messrs.
Bodman and Noglows each elected to take one-half of his bonus in cash and
the remainder in the form of an Option. Messrs. Culver and Young each
elected to take his bonus in cash.
(2) 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 1999 under the Company's 1999
Equity Incentive Plan: Mr. Bodman: 110,000 shares; Mr. Burnes: 65,000
shares; Mr. Culver: 30,000 shares; Mr. Noglows: 28,000 shares; and Mr.
Young: 28,000 shares.
The number and value (calculated at fair market value as of September 30,
1999 ($23.75 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, 1999 (including the shares referred to in the
column headed "Restricted Stock", except for Mr. Culver's sign-on shares
described in note 4 below), were as follows: Mr. Bodman: 300,000 shares
($3,916,250); Mr. Burnes: 180,000 shares ($2,352,875); Mr. Culver: 80,000
shares ($1,030,813); Mr. Noglows: 78,000 shares ($1,022,388); and Mr. Young:
78,000 shares ($1,022,388).
10
<PAGE> 15
Except for a portion of Mr. Culver's 1997 restricted stock award (see note 4
below), the restricted stock set forth in the Table vests, in whole, three
years from the date of grant. In accordance with the Company's 1997 and 1998
long-term incentive compensation programs under the Company's 1996 Equity
Incentive Plan, each of the named individuals paid to the Company 40% of the
fair market value on the date of grant of the shares of stock awarded in
1997 and 1998, and in accordance with the Company's 1999 long-term incentive
compensation program under the 1999 Equity Incentive Plan, each of the named
individuals paid to the Company 30% of the fair market value on the date of
grant of the shares of stock awarded in 1999. Some of the funds for the
payment for restricted stock purchased in 1997 and 1998 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
stock grants under this program. As of June 30, 1999, the Company purchased
all of the outstanding loans from the Bank under that facility and
established its own loan program (the "Cabot Loan Program"), which is
available to all recipients of restricted stock grants. All of the funds for
the payment for restricted stock purchased in 1999 by the named executive
officers were borrowed from the Company under the Cabot Loan Program. (See
"Certain Relationships and Related Transactions" below.) The recipients,
including the named executive officers, borrowing funds under the Cabot Loan
Program are obligated to pay interest on the loans at 6% per annum and to
repay the funds borrowed. Shares purchased with borrowed funds must be
pledged to the Company as collateral for the loans. Dividends are paid on
the shares of restricted stock.
(3) 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 1999 and contributions to the Employee Stock Plan and accruals under a
supplemental employee stock ownership plan (collectively, the "ESOP") for
fiscal year 1999 on behalf of the named executive officers in the following
amounts: Mr. Bodman: CRISP: $84,375, ESOP: $132,830; Mr. Burnes: CRISP:
$57,656, ESOP: $90,660; Mr. Culver: CRISP: $29,531, ESOP: $45,952; Mr.
Noglows: CRISP: $28,055, ESOP: $22,686; and Mr. Young: CRISP: $26,367, ESOP:
$22,686. 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 Culver and
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 it would
constitute if it were insurance, does not exceed approximately $20,800 per
year for any named executive officer.
(4) Mr. Culver became an employee of the Company on April 1, 1997. Of the 32,500
shares of restricted stock granted to Mr. Culver in 1997, 15,000 (the
"Sign-On Shares") were granted to him for no cash purchase price in
connection with his commencing employment with the Company; the value of the
Sign-On Shares at the time of grant was $358,125. As of September 30, 1999,
all of the Sign-On Shares had vested.
(5) These amounts do not include approximately $36,000 and $73,000 of relocation
expenses paid by the Company to Mr. Noglows in 1999 and 1998, respectively,
in connection with his relocation from Illinois to Massachusetts.
(6) Mr. Young resigned from the Company, effective January 30, 2000.
(7) This amount does not include a payment of $198,715 made to Mr. Young in
fiscal year 1997 in connection with his assignment in Pacific Asia. This
relocation and expatriate equalization payment was made pursuant to the
Company's expatriate policy. Portions of that payment relate to prior years'
taxes.
11
<PAGE> 16
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information with respect to the number of
unexercised stock options held by each named executive officer on September 30,
1999, and the value of the unexercised in-the-money options at that date. The
options shown in the table were granted during the years 1989 through 1991 and
vested in equal amounts over a period of four years from the date of grant. All
outstanding options were vested as of September 30, 1999, and, therefore, are
currently exercisable.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES IN-THE-MONEY
UNDERLYING OPTIONS AT
SHARES ACQUIRED VALUE UNEXERCISED OPTIONS FISCAL
ON EXERCISE(#) REALIZED($) AT FISCAL YEAR-END(#) YEAR-END($)(1)
--------------- ----------- --------------------- --------------
NAME EXERCISABLE EXERCISABLE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Samuel W. Bodman............... -- -- 173,336 2,770,451
Kennett F. Burnes.............. 29,336 484,959 106,672 1,696,329
Robert L. Culver............... -- -- -- --
William P. Noglows............. -- -- 8,836 141,556
Donald R. Young(2)............. -- -- 8,800 138,600
</TABLE>
- ---------------
(1) The value of unexercised in-the-money options at September 30, 1999, was
determined by taking the difference between the fair market value of Cabot
Common Stock on September 30, 1999 ($23.75 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 Cabot Common Stock on the date of exercise.
(2) Mr. Young resigned from the Company, effective January 30, 2000.
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 1999, the interest rate was 4.53%. 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.
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
Culver 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 Plan if such limitations were not applicable. The amounts set forth in
the following table assume that Messrs. Bodman, Burnes, Culver, Noglows and
Young each continue to be employed by the Company until age 65 at his annual
base salary at September 30, 1999 and with an annual bonus equal to the
12
<PAGE> 17
average of his annual bonuses for fiscal years 1997, 1998 and 1999. 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............... $259,800
Kennett F. Burnes.............. $261,100
Robert L. Culver............... $135,700
William P. Noglows............. $203,300
Donald R. Young(1)............. $190,400
</TABLE>
(1) Mr. Young resigned from the Company, effective January 30, 2000.
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, the
CRISP, the ESOP, the 1996 Equity Incentive Plan and the 1999 Equity Incentive
Plan; all of such executive officers, except Robert L. Culver, participated in
the Equity Incentive Plan adopted in 1989, which is also sponsored by the
Company. 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, or by law, 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, Culver, Noglows 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 seven 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 of the Committee and its executive compensation
activities relating to fiscal year 1999.
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 Standard &
Poor's Chemicals Index or the Standard & Poor's Specialty Chemicals Index, both
of which indices are used in the
13
<PAGE> 18
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 Cabot's executive compensation are base salary,
performance-based annual incentive payments and long-term incentive grants.
Base Salary. Base salary is the foundation to which performance-based
incentive compensation is added. An executive's base salary is based primarily
on base salaries for similar positions paid by comparable companies, taking into
account the Company's use of incentive compensation awards as part of an
executive's total compensation package. The Committee attempts to set base
salaries such that, together with the incentive compensation, it will be able to
attract and retain key executives.
Performance-Based Annual Incentive Payments. Annual incentive payments for
executive officers are based on an evaluation of performance against objectives
that 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.
The annual incentive payment for each executive officer who was a 1999
participant in the Cabot Corporation Short-Term Incentive Compensation Plan (the
"Short-Term Plan"; see "One Million Dollar Cap on Deductibility of Compensation"
below) was determined by starting with a formula contained in the Short-Term
Plan, which specifies the maximum aggregate dollar amount of short-term
incentive awards that can be made to all participants in the Short-Term Plan in
respect of fiscal year 1999. The Committee then applied a percentage, determined
by the Committee for that participant at the beginning of the year, to that
aggregate amount. The resulting dollar amount was the maximum short-term
incentive award that could be made to that participant. The Committee then
exercised its discretion to reduce those maximum awards for all 1999 Short-Term
Plan participants to levels it believes are appropriate using the bases for
evaluation described at the beginning of this paragraph. The annual incentive
payment for each executive officer who was not a 1999 participant in the
Short-Term Plan was determined using the same bases for evaluation but without a
maximum limit. At the time the Committee approved the 1999 short-term incentive
awards, it authorized Cabot to offer certain employees, including those listed
in the Summary Compensation Table above, a choice, with respect to his or her
1999 bonus, of receiving, in lieu of a cash award, a non-qualified stock option
(an "Option"), or 50% of the cash award and the remainder in the form of an
Option. The number of shares of Common Stock for which an Option is exercisable
is determined by multiplying the amount of cash foregone, by virtue of having
selected an Option, by 1.5, and dividing by $6.74. The Options are exercisable
immediately, at a per share exercise price of $18.875.
Long-Term Incentive Grants. 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. During the past year, each long-term
incentive grant involved a specific number of shares of Common Stock (the "Grant
Number") that the executive officer could elect either to purchase as shares of
restricted stock at 30% of the market price of such stock on the date of grant
or to receive as a non-qualified stock option for a number of shares of Cabot
common stock equal to 1.6 times the Grant Number, 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 already paid on the
restricted stock) are 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 Cabot's executive officers are based on the
Committee's review of each officer's performance, responsibilities, achievements
in managing his or her individual business unit or staff, and expectations of
such officer's future performance. The Committee's evaluations also take into
consideration Mr. Bodman's views of the performance of the executive officers
other than himself. In 1999, the short-term incentive payment for each executive
officer other than Mr. Bodman was based 50% on the Corporation's financial
performance and 50% on the officer's performance measured against his or her
individual goals and objectives for fiscal 1999.
Chief Executive Officer's Compensation
The Committee based Mr. Bodman's compensation on six factors: (i) the
Company's financial results; (ii) achievement of previously established
non-financial criteria, such as identifying and developing the best
14
<PAGE> 19
possible senior management team, and maintaining compliance with legal and
ethical standards; (iii) improvement in the Company's shareholder value; (iv)
leadership in developing new and existing businesses; (v) success in creating
and sustaining a high-performance, exciting and interesting working environment
across Cabot; and (vi) the compensation level of chief executive officers of
companies with similar businesses and characteristics. For fiscal year 1999,
each of those factors was given approximately equal weight. 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. The Committee informed the other Board members
of its decisions and solicited their comments on Mr. Bodman's compensation.
Base Salary. Mr. Bodman received a base salary for calendar year 1999 of
$750,000, the same as the salary paid to him in calendar year 1998. Maintaining
Mr. Bodman's salary at the same level in calendar year 1999 as 1998 reflects the
Committee's desire to provide Mr. Bodman with a base salary comparable to the
base salaries for chief executive officers at comparable companies, and to
further its goal of putting a greater emphasis on incentive compensation than on
base salary in terms of executives' total compensation packages. In addition,
the Committee considered Mr. Bodman's leadership in developing the Company's
business during a period in which chemical industry market conditions were
relatively unfavorable.
Annual Incentive Payment. Mr. Bodman received an annual incentive payment
for fiscal year 1999 of $375,000 or, at his option, either a non-qualified
option exercisable for 83,456 shares of Common Stock, or a cash award of
$187,500 and an option for 41,728 shares of Common Stock. Because Mr. Bodman was
a 1999 participant in the Short-Term Plan, described below, the Committee's
starting point for determining his incentive payment was $910,750, as determined
by the plan's formula. The Committee then exercised its discretion to reduce
that amount and, in doing so, considered the Company's performance compared both
to its business plan and its peer companies. The Committee also considered Mr.
Bodman's achievements in building a strong management team and advancing the
flow of new products. The Committee considered these indications of 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 1999, Mr. Bodman received a grant of
110,000 restricted shares of Cabot common stock. Factors considered by the
Committee in making that grant included Mr. Bodman's support of research and
development investments for the purpose of improving long-term returns and
attracting and retaining employees, as well as the Company's efforts to develop
new and existing businesses. Mr. Bodman exercised his grant by purchasing shares
of restricted stock.
One Million Dollar Cap on Deductibility of Compensation
Section 162(m) of the Internal Revenue Code limits 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. In March 1999, in order to reduce the impact of
Section 162(m), Cabot's stockholders approved the Short-Term Plan, which is
intended to comply with the requirements for tax deductibility under Section
162(m) with respect to the annual incentive payments made under this plan.
Compensation paid to Mr. Bodman and the other named executive officers, other
than payments made under the Short-Term Plan, remain subject to Section 162(m).
At present, the loss of deductions under Section 162(m) does not have a material
impact on the Company. However, the Committee plans to review the issue from
time to time.
January 19, 2000
Robert P. Henderson (Chairman)
Jane C. Bradley
John S. Clarkeson
Arnold S. Hiatt
John H. McArthur
David V. Ragone
Mark S. Wrighton
15
<PAGE> 20
PERFORMANCE GRAPH
The following graph compares the cumulative return for Cabot Common Stock
during the five fiscal years commencing October 1, 1994, 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, 1994 in Cabot
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>
<CAPTION>
S&P 500 STOCK S&P MIDCAP 400 S&P SPECIALTY S&P CHEMICALS
CABOT CORPORATION INDEX INDEX CHEMICALS INDEX INDEX
----------------- ------------- -------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
1994 100.00 100.00 100.00 100.00 100.00
1995 198.19 129.74 125.77 128.59 118.68
1996 211.01 156.12 143.37 138.55 153.17
1997 207.13 219.27 199.44 156.52 200.14
1998 194.65 239.11 186.86 123.09 179.72
1999 188.64 305.59 234.49 149.06 211.44
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In May 1999, in connection with the vesting of shares of restricted stock
that had been awarded to employees of the Company in 1996 under the 1996 Equity
Incentive Plan, the Company purchased an aggregate of 318,737 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
$27.00, the closing price of the Company's Common Stock on the New York Stock
Exchange on May 10, 1999. As part of that transaction, the Company purchased:
2,144 shares from William T. Anderson, Controller of the Company; 32,126 shares
from Samuel W. Bodman, Chief Executive Officer and Chairman of the Board of the
Company; 34,282 shares from Kennett F. Burnes, President, Chief Operating
Officer and a director of the Company; 8,432 shares from William P. Noglows,
Executive Vice President of the Company; 5,682 shares from Robert Rothberg, Vice
President and General Counsel of the Company; and 13,713 shares from Donald R.
Young, Executive Vice President of the Company.
In October of 1998, the Company purchased 7,500 shares of the Company's
Common Stock for a purchase price of $28.1250 per share from Robert Rothberg, a
Vice President and General Counsel of the Company. In November of 1998, the
Company purchased 5,000 shares of the Company's Common Stock for a purchase
price of $29.1250 per share from Robert L. Culver, an Executive Vice President
and Chief Financial Officer of the Company. In April of 1999, the Company
purchased 2,350 shares of the Company's Common Stock for a purchase price of
$26.8125 per share from Catharine M. de Lacy, a Vice President of the Company.
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.
The Company made a $155,000 loan to Catharine M. de Lacy, Vice President of
the Company, in connection with her relocation to the Boston, Massachusetts
area. This note is payable on demand and is interest-free for the first four
years. The largest amount outstanding at any one time under this loan during
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<PAGE> 21
fiscal year 1999, and the amount outstanding on January 10, 2000, was $155,000.
The Company made an interest-free loan to William P. Noglows, Executive 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 1999 was $300,000. As of January 10, 2000, the amount
outstanding under this loan was $160,625.
Under the Cabot Loan Program (see note 2 to the Summary Compensation Table
above), the Company made loans to certain of its employees in connection with
their purchase of restricted Common Stock under the Company's long-term
incentive compensation programs in 1997, 1998 and 1999 (as described in note 2
to the Summary Compensation Table above, the 1997 and 1998 loans were originally
made by Merrill Lynch Bank & Trust Co. and were purchased by the Company, as of
June 30, 1999). Such loans are available to all recipients of restricted stock
grants under these programs. Loans to executive officers of the Company under
the Cabot Loan Program that were outstanding at any time between June 30, 1999
(the inception of the Cabot Loan Program) and September 30, 1999, are set forth
in the table below. The amount listed opposite each officer's name is both the
largest amount outstanding at any one time under such loan between June 30 and
September 30, 1999, and the amount outstanding as of September 30, 1999.
LOANS TO EXECUTIVE OFFICERS IN CONNECTION
WITH LONG-TERM INCENTIVE PROGRAM
<TABLE>
<S> <C>
William T. Anderson............ $ 185,150
Samuel W. Bodman............... $3,208,750
Kennett F. Burnes.............. $1,922,125
Robert L. Culver............... $ 869,188
Catharine M. de Lacy........... $ 455,800
William P. Noglows............. $ 830,113
Robert Rothberg................ $ 186,300
Roland R. Silverio............. $ 234,500
Donald R. Young................ $ 830,113
</TABLE>
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors, and persons who beneficially own
more than 10% of the Company's Common Stock, to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission (the "SEC") and the 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 was advised by Ms. Catharine M. de Lacy, an executive officer,
that her sale of certain shares of Cabot Common Stock was not timely reported on
a Form 4. The sale of those shares consisted of one transaction and resulted in
the late filing of one report. A corrective report has been filed.
ITEM NO. 2 -- STOCKHOLDER PROPOSAL
The Company's Board of Directors recommends a vote AGAINST the following
proposal.
Marc S. Heilweil, Spectrum Advisory Services Inc., 1050 Crown Pointe
Parkway, Suite 950, Atlanta, Georgia 30338, who owns 3,200 shares of the
Company's Common Stock, submitted the following proposal and supporting
statement:
Proposal
"Marc S. Heilweil, President of Spectrum Advisory Services, Inc. who
manages in excess of 100,000 shares of Cabot Corporation common stock for
clients, and who personally owns 3,200 shares, submits the following proposal:
"SINCE the current Chief Executive Officer of the company is a director on
the board of at least three major companies other than Cabot; and given that the
company compensates its officers in a manner which
17
<PAGE> 22
merits the shareholders receiving the full attention of such officers, and that
such attention can not be given because of the burden of such directorships: and
"FURTHER, since the performance of the company for the past five years has
badly lagged that of the average industrial and average chemical company in its
earnings growth and share price performance;
"Now, therefore, be it RESOLVED:
"That the shareholders request the Board of Directors take action so that
no principal executive officer of the company is permitted to serve as a
director of more than two non-affiliated for-profit corporations.
"SUPPORTING STATEMENT
"Our chief Executive Officer, Samuel W. Bodman, serves as a director of
three major corporations:
"John Hancock Mutual Life Insurance Co.
Security Capital Group Inc.
Westvaco
"While it is no doubt useful, and customary for boards to seek the services
of chief executives of other companies, service on the boards of directors is a
serious responsibility which demands substantial time and attention from the
director. Mr. Bodman serves on the boards of companies whose substantial
activities often require attention in addition to scheduled board and committee
meetings. Most boards meet a minimum of four to six times a year. Such meetings
are often full day affairs. In addition, board members serve on special
committees of the board which adds to the burden of a directorship. There must
also be included travel time to attend meetings. We estimate that Mr. Bodman
must spend at least one full month of business time on the affairs of these
other companies.
"A number of authorities on corporate governance have urged that chief
executive officers of large companies serve on only one outside corporate board.
Mr. Bodman's service on at least three outside boards creates an intolerable
distraction from his responsibilities to the shareholders and employees of the
Cabot Corporation.
"As most of the readers of this proposal are aware, the performance of the
Cabot Corporation has been less than stellar. In the last five years, its
earnings growth and stock price have lagged peer companies. In addition, Cabot
Corporation has had to layoff a sizeable numbers of employees.
"Of course, this proposal covers other principal executive officers of the
company as well as Mr. Bodman. At present, it is Mr. Bodman's acceptance of so
many board positions that creates the need for action.
"If you agree that the Board should require all officers to limit their
outside business activities, vote FOR this resolution."
Board of Directors' Response
The Company's Board of Directors recognizes the concerns raised by the
proponent. However, the Board believes that service on outside boards can
enhance, as well as detract from, an officer's performance for the Company.
Service on an outside board can and does benefit the Company by providing
officers with valuable insight into how other companies handle issues that are
the same as or similar to issues the Company faces. At the same time, as
indicated by the proponent, service on outside boards involves a time
commitment. The Board believes that the Company is best served by striking a
careful balance, rather than by setting a rigid limit, and by reviewing the
performance of the officers to assure that the proper balance is maintained. The
Board of Directors makes such periodic reviews and, at this time, does not
believe that Mr. Bodman's service on outside boards interferes with his
leadership of the Company. Except for Mr. Bodman, service on outside boards by
the Company's principal executive officers is rare, and far less than the two
board limit suggested by the proponent.
With respect to the proponent's assertions regarding the Company's
performance, the Board directs the reader to the Performance Graph on page 16.
For the foregoing reasons, the Company's Board of Directors recommends a
vote AGAINST the approval of this proposal. Proxies solicited on behalf of the
Board of Directors will be voted in accordance with
18
<PAGE> 23
the specifications made on the form of proxy. Where no specification is made,
proxies will be voted AGAINST the approval of this proposal.
FUTURE STOCKHOLDER PROPOSALS
Any stockholder proposal intended for inclusion in the proxy statement for
the 2001 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 21, 2000, and should be sent to the attention of Sarah W.S. Kish,
Secretary. If a stockholder of the Company intends to present a proposal at the
2001 Annual Meeting of Stockholders of the Company without including it in the
Company's proxy statement, such stockholder must comply with the advance notice
provisions of the Company's By-Laws. Those provisions require that the Company
receive the proposal at its offices at 75 State Street, Boston, Massachusetts
02109-1806, attention Sarah W.S. Kish, Secretary, not earlier than December 8,
2000, and not later than January 8, 2001.
ANNUAL REPORT ON FORM 10-K
The Company will provide, upon written request and without charge, to each
person from whom a proxy is solicited, a copy of the Company's annual report on
Form 10-K, including the financial statements and schedules, for fiscal year
1999. To request a copy of the 10-K, contact Sarah W.S. Kish, Corporate
Secretary, Cabot Corporation, 75 State Street, Boston, MA 02109-1806.
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 and by facsimile. 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 form of proxy intend to vote the
shares to which the proxy relates on such matters in accordance with their best
judgment unless otherwise specified in the proxy.
By order of the Board of Directors,
Sarah W.S. Kish
Secretary
Boston, Massachusetts
January 19, 2000
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<PAGE> 24
SKU# 0928-PS-00
<PAGE> 25
[CABOT LOGO] January 19, 2000
Dear Plan Participant:
The Annual Meeting of Stockholders of Cabot Corporation will be
held on March 9, 2000. The record date for determining
stockholders entitled to vote at the meeting was January 11,
2000. 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 on the enclosed
proxy card. 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 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.
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.
Additionally, any shares registered in your name and shares that
you received under the Company's Long-Term Incentive Program that
are still restricted are reflected on the enclosed proxy card.
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, N.A. c/o
EquiServe, BEFORE MARCH 2, 2000 in the enclosed postage-paid
envelope. If you prefer, you may vote your shares via telephone
or the Internet, as explained on the proxy card.
Sincerely,
/s/ Samuel W. Bodman
Samuel W. Bodman
Chairman of the Board
and Chief Executive Officer
Cabot Corporation | 75 State Street | Boston, MA 02109-1806 | tel (617) 345 0100
| fax (617) 342 6103/6104 | www.cabot-corp.com
0928-EBP-00
<PAGE> 26
CBT01B DETACH HERE
PROXY
[CABOT LOGO] CABOT CORPORATION
ANNUAL MEETING OF STOCKHOLDERS -- MARCH 9, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Samuel W. Bodman, Robert Rothberg and Sarah W.S.
Kish, and each of them, proxies, with power of substitution, to vote the shares
of stock of Cabot Corporation that the undersigned is entitled to vote, as
specified on the reverse side of this card, and, if applicable, hereby directs
the trustee of the 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 that 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 9,
2000 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 IN PROPOSAL 1 AND "AGAINST" PROPOSAL 2, 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 CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
<PAGE> 27
- ----------------- ----------------
VOTE BY TELEPHONE VOTE BY INTERNET
- ----------------- ----------------
It's fast, convenient and immediate. It's fast, convenient and your vote is
Call Toll-Free on a Touch-Tone Phone immediately confirmed and posted.
1-877-PRX-VOTE (1-877-779-8683).
- -------------------------------------- ----------------------------------------
Follow these four easy steps: Follow these four easy steps:
1. Read the accompanying Proxy 1. Read the accompanying Proxy
Statement/Annual Report and Statement/Annual Report and
Proxy Card. Proxy Card.
2. Call the toll-free number 2. Go to the Website
1-877-PRX-VOTE (1-877-779-8683). http://www.eproxyvote.com/cbt
For shareholders residing outside
the United States call collect on 3. Enter your 14-digit Voter Control
a touch-tone phone 1-201-536-8073. Number located on your Proxy Card
above your name.
3. Enter your 14-digit Voter Control
Number located on your Proxy Card 4. Follow the instructions provided.
above your name.
4. Follow the recorded instructions.
- -------------------------------------- ----------------------------------------
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE any time. Go to http://www.eproxyvote.com/cbt
any time.
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET.
<PAGE> 28
CBT01A DETACH HERE
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 1 AND "AGAINST" ITEM 2.
<TABLE>
<S> <C>
THIS PROXY/VOTING INSTRUCTION CARD WILL BE VOTED "FOR" THIS PROXY/VOTING INSTRUCTION CARD WILL BE VOTED "AGAINST"
ITEM 1 IF NO CHOICE IS SPECIFIED. ITEM 2 IF NO CHOICE IS SPECIFIED.
1. Election of Directors.
NOMINEES: (01) David V. Ragone, (02) Lydia W. Thomas
and (03) Mark S. Wrighton FOR AGAINST ABSTAIN
FOR [ ] [ ] WITHHELD 2. Stockholder proposal to limit [ ] [ ] [ ]
ALL FROM ALL directorships for executive
NOMINEES NOMINEES officers.
[ ] ______________________________________ 3. Transactions of such other business as may properly come
For all nominees except as noted above before the meeting and any adjournments thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
Please date and sign as name is imprinted hereon, including
designation as executor, trustee, etc. if applicable. A
corporation must sign in its name by the president or other
authorized officers. All co-owners must sign.
Signature: __________________________ Date: ____________ Signature: __________________________ Date: ____________
</TABLE>
