<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, 2001
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Cabot Corporation which will be held on Thursday, March 8, 2001 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 10, 2001, 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 Letterhead]
<PAGE> 3
[CABOT LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 8, 2001
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 8, 2001, 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,
including five persons for terms expiring in 2004 and two for terms
expiring in 2003;
2. To act upon one management proposal relating to the adoption of the
Company's Short-Term Incentive Compensation Plan; 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 10, 2001,
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).
Stockholders may still vote in person if they do attend the Annual Meeting.
The Company's 2000 Annual Report to Stockholders and Form 10-K are 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, Two Seaport Lane, Suite 1300, Boston,
Massachusetts.
Please exercise your right to vote at your earliest convenient time.
By order of the Board of Directors,
John P. McGann
Secretary
Two Seaport Lane
Boston, Massachusetts
January 19, 2001
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information......................................... 1
ITEM NO. 1 -- Election of Directors......................... 2
Certain Information Regarding Directors................... 2
Information on the Board of Directors and its
Committees............................................. 6
Audit Committee Report.................................... 8
Beneficial Stock Ownership of Directors, Executive Officers
and Persons Owning More than Five Percent of Common
Stock..................................................... 9
Executive Compensation...................................... 11
Summary Compensation Table................................ 11
Option Grants in Last Fiscal Year......................... 14
Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values................................. 15
Pension Plan Table........................................ 16
Employment Contracts and Termination of Employment and
Change in Control Arrangements......................... 17
Compensation Committee Report on Executive Compensation... 17
Performance Graph........................................... 20
Certain Relationships and Related Transactions.............. 20
Compliance with Section 16(a) of the Exchange Act........... 21
ITEM NO. 2 -- Proposal to Approve Adoption of Short-Term
Incentive Compensation Plan............................... 21
Future Stockholder Proposals................................ 24
Annual Report on Form 10-K.................................. 24
Solicitation of Proxies..................................... 24
Miscellaneous............................................... 25
Exhibit A -- Charter of the Audit Committee................. A-1
Exhibit B -- Short-Term Incentive Compensation Plan......... B-1
</TABLE>
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<PAGE> 5
CABOT CORPORATION
TWO SEAPORT LANE, SUITE 1300
BOSTON, MASSACHUSETTS 02210-2019
PROXY STATEMENT
MAILED ON OR ABOUT JANUARY 19, 2001, FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 8, 2001
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 2001
Annual Meeting of Stockholders (the "Annual Meeting") to be held at 4:00 p.m.,
Eastern Standard Time, on Thursday, March 8, 2001, 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, 2001.
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 John P.
McGann, 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 10,
2001, are entitled to vote at the Annual Meeting. As of that date, the Company
had outstanding and entitled to vote 66,357,921 shares of common stock, par
value $1.00 per share ("Common Stock"), and 61,379 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 146.3782 votes. State Street Bank and
Trust Company, the trustee of the Cabot Corporation Employee Stock Ownership
Plan ("ESOP"), which became a part of the Cabot Corporation Retirement Savings
Plan effective December 31, 2000, 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 ESOP.
A quorum for the election of directors, the approval of the management
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 management proposal 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.
1
<PAGE> 6
ITEM NO. 1 -- ELECTION OF DIRECTORS
At the Annual Meeting, Kennett F. Burnes, John S. Clarkeson, Robert P.
Henderson, Roderick C.G. MacLeod and Ronaldo H. Schmitz will be nominated for
election to the class of directors whose terms expire in 2004, and, in order to
divide the directors more evenly among the classes of Directors following the
retirement from the Board of three directors from the same class during 2000,
John G.L. Cabot and John F. O'Brien will be nominated for election to the class
of directors whose terms expire in 2003. All of the nominees, except Dr.
Schmitz, 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 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 December 31, 2000 for each director of the Company,
is information regarding the Director's age, position(s) with the Company,
membership on committees of the Board of Directors of the Company, the period
during which the Director has served as a director and the Director's term of
office, family relationship with any other director or executive officer of the
Company, business experience during at least the past five years and other
directorships and similar positions held by the Director.
--------------------------------------------------------------------------------
[PHOTO OF SAMUEL BODMAN] SAMUEL W. BODMAN
Age: 62
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:
Cabot Microelectronics Corporation
John Hancock Mutual Life Insurance Company
Security Capital Group Incorporated
Thermo Electron Corporation
Westvaco Corporation
--------------------------------------------------------------------------------
[PHOTO OF KENNETT BURNES] KENNETT F. BURNES
Age: 57
Position: President and Chief Operating Officer
Committee Membership: Executive
Director since: 1992
Term of Office Expires: 2001 (Nominee for Election)
Business Experience:
Cabot Corporation:
President -- 1995 to present
Chief Operating Officer -- 1996 to present
Executive Vice President -- 1988 to 1995
Directorship:
Cabot Microelectronics Corporation
2
<PAGE> 7
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[PHOTO OF JOHN CABOT] JOHN G.L. CABOT(1)
Age: 66
Committee Memberships: Audit and Nominations
Director since: 1963
Term of Office Expires: 2001 (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.
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[PHOTO OF JOHN CLARKESON] JOHN S. CLARKESON
Age: 58
Committee Memberships: Compensation and Safety,
Health and
Environmental Affairs
Director since: 1998
Term of Office Expires: 2001 (Nominee for Election)
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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[PHOTO OF ARTHUR GOLDSTEIN] ARTHUR L. GOLDSTEIN
Age: 65
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
--------------------------------------------------------------------------------
[PHOTO OF ROBERT HENDERSON] ROBERT P. HENDERSON
Age: 69
Committee Memberships: Compensation (Chairman) and
Executive
Director since: 1990
Term of Office Expires: 2001 (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
Visible Markets, Inc.
3
<PAGE> 8
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[PHOTO OF GAUTAM KAJI] GAUTAM S. KAJI
Age: 59
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:
Centennial Group, Inc.
Infrastructure Development Finance Co.
Washington Asset Management Co.
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[PHOTO OF RODERICK MACLEOD] RODERICK C.G. MACLEOD(1)
Age: 50
Committee Memberships: Audit and Safety, Health and
Environmental Affairs
Director since: 1998
Term of Office Expires: 2001 (Nominee for Election)
Business Experience:
St. Martins Finance Ltd (private equity investment
company)
Co-founder and Principal -- 1985 to present
Directorships:
Oxford Forecasting Services Ltd.
Waverley Investments (UK) Ltd.
E.I.E.C. S.A.
T.V. Jobshop Plc.
--------------------------------------------------------------------------------
[PHOTO OF JOHN MCARTHUR] JOHN H. MCARTHUR
Age: 66
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.
BCE Emergis, Inc.
Glaxo SmithKline plc
HCA Healthcare Corporation
Rohm and Haas Company
Springs Industries, Inc.
Koc Holdings, A.S.
--------------------------------------------------------------------------------
[PHOTO OF JOHN O'BRIEN] JOHN F. O'BRIEN
Age: 57
Committee Memberships: Audit (Chairman) and
Nominations
Director since: 1990
Term of Office Expires: 2001 (Nominee for Election)
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.
4
<PAGE> 9
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[PHOTO OF DAVID RAGONE] DAVID V. RAGONE(2)
Age: 70
Committee Memberships: Compensation and Safety,
Health and Environmental Affairs
Director since: 1985
Term of Office Expires: 2003
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.
--------------------------------------------------------------------------------
[PHOTO OF RONALDO SCHMITZ] RONALDO H. SCHMITZ
Age: 62
Committee Memberships: (to be assigned)
Director since: (Nominee for Election)
Business Experience:
Deutsche Bank AG (banking):
Chairman Private Equity -- 2000 to present
Member of the Group Board -- 1991 to 2000
(retired)
Executive Vice President -- 1990
BASF AG:
Member of the Board of Managing Directors -- 1980
to 1990
Directorships:
Glaxo SmithKline plc
Legal & General Group Plc.
Rohm & Haas Company
--------------------------------------------------------------------------------
[PHOTO OF LYDIA THOMAS] LYDIA W. THOMAS
Age: 56
Committee Memberships: Audit and Safety, Health and
Environmental Affairs (Chairwoman)
Director since: 1994
Term of Office Expires: 2003
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
Directorships:
Charles Stark Draper Laboratory Inc.:
Member
5
<PAGE> 10
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[PHOTO OF MARK WRIGHTON] MARK S. WRIGHTON
Age: 51
Committee Memberships: Compensation and Safety,
Health and
Environmental Affairs
Director since: 1997
Term of Office Expires: 2003
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:
A.G. Edwards, Inc.
Helix Technology Corporation
Ionics, Incorporated
OIS Optical Imaging Systems, Inc.
--------------------------------------------------------------------------------
(1) Roderick C.G. MacLeod's spouse is a first cousin once removed of John
G.L. Cabot.
(2) In accordance with the Company's retirement policy, Mr. Ragone will
retire from the Board of Directors effective at the March 8, 2001
Annual Meeting of Stockholders.
INFORMATION ON THE BOARD OF DIRECTORS AND ITS COMMITTEES
General
The Board of Directors of the Company held seven meetings during the 2000
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 under the directors' names. 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 three times during fiscal year 2000. The
Report of the Audit Committee appears at the end of the "Information on the
Board of Directors and its Committees" section of this proxy statement, and the
Charter of the Audit Committee, which was amended and approved by the Board of
Directors on May 12, 2000 to comply with certain new requirements of the
Securities and Exchange Commission and the New York Stock Exchange, appears in
Exhibit A to this Proxy Statement.
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 17 through
20). 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") which became a part of the Cabot Corporation
Retirement Savings Plan effective December 31, 2000. It administers the
Company's supplemental employee benefit plans. It also administers the
short-term incentive, 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 four times and took action by
written consent two times during the 2000 fiscal year.
6
<PAGE> 11
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 one time during the 2000 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 2000 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 2000
fiscal year.
Board Compensation
Directors who are not employees of the Company were compensated during
fiscal year 2000 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 2000 fiscal year, no such
compensation was paid.
Mr. Cabot is a member of the board of directors of a former wholly-owned
subsidiary of the Company which was sold on September 19, 2000. During fiscal
year 2000, that subsidiary paid Mr. Cabot director fees totaling $4,500.
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 of their respective Committees held while they were members during the 2000
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.
The Board of Directors has 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.
7
<PAGE> 12
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors of Cabot Corporation is
composed of six non-employee directors. The Board has made a determination that
the members of the Audit Committee satisfy the requirements of the New York
Stock Exchange as to independence, financial literacy and experience. The
responsibilities of the Audit Committee are set forth in the Charter of the
Audit Committee, which was adopted by the Board of Directors of the Company on
May 12, 2000. A copy of the Charter is attached as Exhibit A to the Proxy
Statement of the Company prepared in connection with the 2001 Annual Meeting of
Stockholders. The Committee, among other matters, is responsible for the annual
recommendation of the independent accountants to be appointed by the Board of
Directors as the auditors of the Company and its subsidiaries, and 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 also reviews the Charter of the Audit
Committee. This is a report on the Committee's activities relating to fiscal
year 2000.
Review of Audited Financial Statements with Management
The Audit Committee reviewed and discussed the audited financial statements
with the management of the Company.
Review of Financial Statements and Other Matters with Independent
Accountant
The Audit Committee discussed with the independent auditors the matters
required to be discussed by SAS 61 (Codification of Statements on Auditing
Standards, AU Section 380), as may be modified or supplemented. The Audit
Committee has received the written disclosures and the letter from the
independent accountants required by Independence Standards Board Standard No. 1
(Independence Standards Board Standard No. 1, Independence Discussions with
Audit Committees), as may be modified or supplemented, and has discussed with
the independent accountant the independent accountant's independence.
Recommendation that Financial Statements be Included in Annual Report
Based on the reviews and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the last fiscal year
for filing with the Securities and Exchange Commission.
Other Matters
In accordance with the rules of the Securities and Exchange Commission, the
foregoing information, which is required by paragraphs (a) and (b) of Regulation
S-K Item 306, shall not be deemed to be "soliciting material," or to be "filed"
with the Commission or subject to the Commission's Regulation 14A, other than as
provided in that Item, or to the liabilities of section 18 of the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically requests that the information be treated as soliciting material or
specifically incorporates it by reference into a document filed under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended.
January 19, 2001
John F. O'Brien (Chairman)
John G. L. Cabot
Arthur L. Goldstein
Gautam S. Kaji
Roderick C. G. MacLeod
Lydia W. Thomas
8
<PAGE> 13
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 October 31, 2000 (as of November
30, 2000 with respect to State Street Bank and Trust Company and the directors
and executive officers of the Company) (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 current 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 ESOP (the ESOP and the
Savings Plan are 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 ESOP (see note 7 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 ESOP 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......................... 2,425,614 7,066,876 727,351 8,820,515 9,549,216(1) 14.39
AXA Financial, Inc. (and related
entities)
1290 Avenue of the Americas
New York, NY....................... 4,370,396 833,700 8,459,121 -0- 8,459,121 12.75
Directors and Executive Officers
--------------------------------
Samuel W. Bodman..................... 1,591,913 1,400 1,591,913 1,400 1,669,009(2) 2.52
Kennett F. Burnes.................... 504,419 -0- 504,419 -0- 601,376(3) *
John G.L. Cabot...................... 1,784,963 669,254 1,784,963 669,254 2,458,566(4) 3.71
John S. Clarkeson.................... 4,200 2,000 4,200 2,000 6,200 *
Robert L. Culver..................... 129,246 -0- 129,246 -0- 129,246 *
Arthur L. Goldstein.................. 8,200 -0- 8,200 -0- 8,200 *
Robert P. Henderson.................. 20,400 -0- 20,400 -0- 20,400 *
Gautam S. Kaji....................... 3,400 -0- 3,400 -0- 3,400 *
Roderick C.G. MacLeod................ 4,200 44,000 4,200 44,000 48,200 *
John H. McArthur..................... 7,318 -0- 7,318 -0- 7,318 *
William P. Noglows................... 162,104 -0- 162,104 -0- 162,104 *
John F. O'Brien...................... 16,800 -0- 16,800 -0- 16,800 *
David V. Ragone...................... 44,800 12,000 44,800 12,000 56,800(5) *
Ronaldo H. Schmitz (6)............... 0 -0- 0 -0- 0 *
Roland R. Silverio................... 41,645 -0- 41,645 -0- 41,645 *
Lydia W. Thomas...................... 9,600 -0- 9,600 -0- 9,600 *
Mark S. Wrighton..................... 5,800 -0- 5,800 -0- 5,800 *
All directors and executive officers
as a group (20 persons)............ 4,444,083 728,654 4,444,083 728,654 5,267,792(7) 7.94
</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) 1,487,154 shares of Common Stock held as
trustee of the Savings Plan; and (ii) 210,901 shares of Common Stock, and
8,984,547 additional shares of Common Stock issuable upon
9
<PAGE> 14
conversion of 61,379 shares of Convertible Preferred Stock (100% of the
class), held as trustee of the Employee Stock Ownership Plan.
(2) Includes 72,696 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 96,957 shares of Common Stock which Mr. Burnes has the right to
acquire pursuant to stock options.
(4) Includes 4,349 shares as to which beneficial ownership is disclaimed.
(5) Includes 12,000 shares as to which beneficial ownership is disclaimed.
(6) Dr. Schmitz is proposed to be elected at this Annual Meeting.
(7) Shares of Common Stock shown as being beneficially owned by directors and
executive officers as a group include: (i) 192,781 shares which such
individuals have the right to acquire pursuant to stock options; (ii) 24,634
shares held for their benefit by the State Street Bank and Trust Company as
trustee of the Savings Plan; (iii) 55,373 shares (including 51,818 shares
issuable upon conversion of 354 shares of Convertible Preferred Stock) held
for their benefit by the State Street Bank and Trust Company as trustee of
the Employee Stock Ownership Plan; and (iv) 17,749 shares of Common Stock as
to which beneficial ownership is disclaimed.
10
<PAGE> 15
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, 2000, and one former executive officer of the Company, for
services rendered by them during fiscal years 2000, 1999, and 1998. 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 AWARDS
ANNUAL COMPENSATION ------------------------------
-------------------- SECURITIES ALL OTHER
UNDERLYING COMPENSATION
NAME AND PRINCIPAL SALARY BONUS RESTRICTED OPTIONS/SARS ------------
POSITION YEAR ($) ($)(1) STOCK ($)(2) (#)(3) ($)(4)
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Samuel W. Bodman 2000 $775,000 $650,000 $3,132,938 60,000 $150,773
Chairman of the 1999 $750,000 $375,000 $2,079,000 -- $217,205
Board and Chief 1998 $731,250 $750,000 $2,330,735 -- $210,007
Executive Officer
Kennett F. Burnes 2000 $541,667 $500,000 $1,708,875 60,000 $ 87,511
President and Chief 1999 $525,000 $250,000 $1,228,500 -- $148,316
Operating Officer 1998 $512,500 $500,000 $1,377,253 -- $139,045
Robert L. Culver 2000 $341,667 $250,000 $1,071,438 5,000 $ 71,648
Executive Vice 1999 $325,000 $120,000 $ 567,000 -- $ 75,483
President and Chief 1998 $318,750 $200,000 $ 688,627 -- $ 60,105
Financial Officer
William P. Noglows 2000 $350,000 $250,000 $1,166,375 60,000 $ 44,006
Executive Vice 1999 $318,750 $120,000 $ 529,200 -- $ 50,741(5)
President 1998 $283,750 $200,000 $ 582,684 -- $ 46,409(5)
Robert Rothberg (6) 2000 $300,000 $100,000 -- 5,000 $ 48,993
Vice President 1999 $295,000 $ 80,000 $ 434,700 -- 61,149
and General Counsel 1998 $275,000 $160,000 $ 529,688 -- 62,915
Roland R. Silverio (7) 2000 $208,333 $ 75,000 $ 303,800 -- $ 18,522
Vice President 1999 $195,000 $ 40,000 $ 283,500 -- 11,683
1998 $ 75,000 $ 55,000 $ 169,500 -- 3,780
</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
were 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, Rothberg and
Silverio 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 2000 under the Company's 1999
Equity Incentive Plan: Mr. Bodman: 165,000 shares; Mr. Burnes: 90,000
shares; Mr. Culver: 50,000 shares; Mr. Noglows: 55,000 shares; and Mr.
Silverio: 16,000 shares.
The number and value (calculated at fair market value as of September 30,
2000 ($31.6875 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, 2000 (including the shares referred to in the
column headed "Restricted Stock" were as follows: Mr. Bodman: 385,000 shares
($12,199,688); Mr. Burnes: 220,000 shares ($6,971,250); Mr. Culver: 112,500
shares ($3,564,844); Mr. Noglows: 110,500 shares ($3,501,469); Mr. Rothberg:
48,000 shares ($1,521,000); and Mr. Silverio: : 39,000 shares ($1,235,813).
11
<PAGE> 16
Effective as of the close of business on Friday, September 29, 2000, the
Company distributed to its shareholders all of its remaining shares of
Common Stock of Cabot Microelectronics Corporation ("Cabot
Microelectronics"). The foregoing valuations reflect the closing price of
the Company's Common Stock on that day, without giving effect to that
distribution and the resulting adjustment of the Company's Common Stock
price. The Cabot Microelectronics shares were distributed to stockholders,
including the named executive officers, at the rate of 0.2804 shares of
Cabot Microelectronics per share of Cabot Corporation.
Except for the special incentive grants discussed in the following paragraph
and where otherwise noted, the restricted stock set forth in the Table
vests, in whole, three years from the date of grant. In accordance with the
Company's 1998 long-term incentive compensation program 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 1998, and in accordance with the Company's 1999 and 2000
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 2000.
Some of the funds for the payment for restricted stock purchased in 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 2000 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. Also included in
the Table above are special grants awarded under the Company's Equity
Incentive Plans in May 2000 to Mr. Culver (15,000 shares) and Mr. Noglows
(15,000 shares) which were awarded without cost to those executives and
which will vest in equal installments on the third, fourth and fifth
anniversaries of the awards. Dividends are paid on the shares of restricted
stock.
In addition to the long-term incentive grants, on November 9, 2000 certain
executive officers were awarded special incentive grants consisting of
shares of restricted Common Stock in recognition of their contribution to
transactions during the year which created value for the shareholders,
including the spin-off of Cabot Microelectronics Corporation and the sale of
the liquefied natural gas ("LNG") business. The restricted shares will vest
on June 1, 2001, so long as the recipient is an employee of the Company on
that date, and were granted without cost to the executive officer. The
following named executive officers were granted the following shares of
restricted stock, which are not included in the Table above (with the value
shown based on the closing price of $23.375 per share of the Company's
Common Stock on the date of the award), under these special incentive grants
under the Company's 1999 Equity Incentive Plan: Mr. Bodman: 23,500 shares
($543,313); Mr. Burnes: 11,000 shares ($257,125); Mr. Culver: 1,000 shares
($23,375); and Mr. Noglows: 2,000 shares ($46,750).
(3) In connection with the initial public offering of the common stock of Cabot
Microelectronics and the subsequent spin-off to Cabot Corporation
stockholders of the remaining common stock of Cabot Microelectronics
referred to above in note (2), in April 2000 the indicated named executive
officers received from Cabot Microelectronics the number of options to
purchase common stock of Cabot Microelectronics as set forth in the Table
above. See the Option Grants in Last Fiscal Year table below.
(4) 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 2000 and contributions to the Employee Stock Ownership Plan and
accruals under a supplemental employee stock ownership plan (collectively,
the "ESOPs") for fiscal year 2000 on behalf of the named executive officers
in the following amounts: Mr. Bodman: CRISP: $54,141, ESOPs: $96,632; Mr.
Burnes: CRISP: $30,469, ESOPs: $57,042; Mr. Culver: CRISP: $25,969, ESOPs:
$45,679; Mr. Noglows: CRISP: $23,063, ESOPs: $20,943; Mr. Rothberg: CRISP:
$13,312, ESOPs: $37,058; and Mr. Silverio: CRISP: $5,937, ESOPs: $12,585.
The supplemental retirement incentive savings plan and supplemental employee
stock ownership plan were established by the
12
<PAGE> 17
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 ESOP 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,
Culver and Rothberg would have accrued for the fiscal year under the ESOP 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 $20,000 per
year for any named executive officer.
(5) These amounts do not include approximately $36,000 and $73,000 of relocation
expenses paid by the Company to Mr. Noglows in 1999 and 1998, respectively,
in connection with his relocation from Illinois to Massachusetts.
(6) Mr. Rothberg resigned from the Company, effective September 30, 2000. He
served as General Counsel to the Company until July 14, 2000. The vesting
date of his 1998 and 1999 long-term incentive awards was accelerated to
September 29, 2000.
(7) Mr. Silverio was re-hired and elected a Vice President of the Company on May
8, 1998, and he was designated an executive officer on September 11, 1998.
13
<PAGE> 18
OPTION GRANTS IN LAST FISCAL YEAR
As referenced in notes (2) and (3) to the Summary Compensation Table above,
the following table shows all individual grants of stock options under the Cabot
Microelectronics Corporation stock option plans to the named executive officers
of Cabot Corporation during the fiscal year ended September 30, 2000.
CABOT MICROELECTRONICS CORPORATION OPTIONS
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
---------------------------------------------------------------------- STOCK PRICE
NUMBER OF PERCENT OF APPRECIATION FOR
SECURITIES TOTAL OPTIONS OPTION
UNDERLYING GRANTED TO TERM($)(3)
OPTIONS EMPLOYEES IN EXERCISE OR BASE EXPIRATION -------------------------
NAME GRANTED(#)(1) FISCAL YEAR(2) PRICE($/SH) DATE 5% 10%
(A) (B) (C) (D) (E) (F) (G)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Samuel W. Bodman......... 60,000 4.75 20.00 4/4/2005 331,538 732,612
Kennett F. Burnes........ 60,000 4.75 20.00 4/4/2005 331,538 732,612
Robert L. Culver......... 5,000 0.40 20.00 4/4/2005 27,628 61,051
William P. Noglows....... 60,000 4.75 20.00 4/4/2005 331,538 732,612
Robert Rothberg.......... 5,000 0.40 20.00 4/4/2005 27,628 61,051
Roland R. Silverio....... -- -- -- -- --
</TABLE>
---------------
(1) In connection with the initial public offering of the common stock of Cabot
Microelectronics and the subsequent spin-off to Cabot Corporation
stockholders of the remaining common stock of Cabot Microelectronics
referred to above in the Summary Compensation Table in notes (2) and (3), in
April 2000 the indicated named executive officers received from Cabot
Microelectronics the number of options to purchase common stock of Cabot
Microelectronics as set forth in the Table above. These options have an
exercise price of $20.00 per share, are valid for five year terms, and are
exercisable immediately, except as described below. Messrs. Bodman, Burnes
and Noglows were elected to serve as directors of Cabot Microelectronics,
and in connection with that service, in April 2000 each of them was granted
15,000 options to purchase Cabot Microelectronics common stock which vest at
the rate of 25% immediately upon the date of the award and the remainder
vest in equal installments on the next three anniversary dates of the award,
plus an additional 5,000 options which vest at the rate of 25% in equal
installments on the first four anniversary dates of the award. All of these
awards are included in the above Table. The closing price of Cabot
Microelectronics common stock on the last trading day of fiscal year 2000
was $48.00 per share. None of the named executive officers had exercised any
of such options as of September 30, 2000.
(2) The percent of total options granted to employees in fiscal year 2000 by
Cabot Microelectronics Corporation, based on 1,264,310 total options awarded
in the fiscal year as reported in Cabot Microelectronics Form 10-K for the
fiscal year ended September 30, 2000.
(3) As required by the rules of the Commission, potential values stated are
based on the prescribed assumption that the Cabot Microelectronics
Corporation's common stock will appreciate in value from the date of the
grant to the end of the option term (five years from the date of grant) at
annualized rates of 5% and 10% (total appreciation of 28% and 61%),
respectively, and therefore are not intended to forecast future
appreciation, if any, in the price of the Cabot Microelectronics
Corporation's common stock. These dollar amounts are also calculated based
on the assumption that the options are exercised at the end of the full
five-year term of the option. The options would have no value to the option
holders if the price of the common stock does not increase above the
exercise price of the options.
14
<PAGE> 19
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 Cabot Corporation stock options held by each named executive officer
on September 30, 2000, 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 1999 and typically vested in equal amounts over periods of three or four
years from the date of grant. All outstanding options were vested as of
September 30, 2000, and, therefore, are currently exercisable.
CABOT CORPORATION OPTIONS
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS OPTIONS AT
ON VALUE AT FISCAL FISCAL
EXERCISE(#) REALIZED($) YEAR-END(#) YEAR-END($)(1)
--------------- ----------- --------------------- --------------
NAME EXERCISABLE EXERCISABLE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Samuel W. Bodman.......................... 173,336 1,892,938 72,696 534,599
Kennett F. Burnes......................... 106,672 2,270,075 96,957 713,012
Robert L. Culver.......................... -- -- -- --
William P. Noglows........................ 22,186 293,100 -- --
Robert Rothberg........................... -- -- -- --
Roland R. Silverio........................ -- -- -- --
</TABLE>
---------------
(1) The value of unexercised in-the-money options at September 30, 2000 was
determined by taking the difference between the fair market value of Cabot
Common Stock on September 30, 2000 ($31.6875 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.
As a result of the spin-off of the common stock of Cabot Microelectronics
referred to above in notes (2) and (3) to the Summary Compensation Table, the
Company adjusted the exercise price and the number of options outstanding at
September 30, 2000 to maintain the same intrinsic value as prior to the
spin-off. The stock option adjustment ratio was 1.742268, representing the
Company's Common Stock closing price prior to the spin-off ($31.6875) divided by
the opening price after the spin-off ($18.1875). The number of outstanding stock
options was increased by multiplying the number of options by the stock option
adjustment ratio for each award, and the exercise price of outstanding stock
options was decreased by dividing the exercise price by the stock option
adjustment ratio for each award.
15
<PAGE> 20
The following table sets forth information with respect to the number of
unexercised Cabot Microelectronics stock options held by each named executive
officer on September 30, 2000, and the value of the unexercised in-the-money
options at that date. The options shown in the table were granted during 2000
(see note (3) to the Summary Compensation Table above). All outstanding options
shown are currently exercisable.
CABOT MICROELECTRONICS CORPORATION OPTIONS
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS OPTIONS AT
ON VALUE AT FISCAL FISCAL
EXERCISE(#) REALIZED($) YEAR-END(#) YEAR-END($)(1)
--------------- ----------- --------------------- --------------
NAME EXERCISABLE EXERCISABLE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Samuel W. Bodman.......................... -- -- 43,750 1,225,000
Kennett F. Burnes......................... -- -- 43,750 1,225,000
Robert L. Culver.......................... -- -- 5,000 140,000
William P. Noglows........................ -- -- 43,750 1,225,000
Robert Rothberg........................... -- -- 5,000 140,000
Roland R. Silverio........................ -- -- -- --
</TABLE>
---------------
(1) The value of vested and unexercised in-the-money options at September 30,
2000 was determined by taking the difference between the fair market value
of Cabot Microelectronics Corporation common stock on September 30, 2000
($48.00 per share) and the option exercise price, multiplied by the number
of shares underlying such options at that date. The values had not been
realized because the options had not been exercised as of that date. In the
event the options are exercised, their value will depend upon the fair
market value of the underlying Cabot Microelectronics 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 2000, the interest rate was 5.55%. 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, Culver
and Rothberg each accrued an additional benefit under the supplemental cash
balance plan equal to the total benefit each would have accrued for the fiscal
year under the Plan if such limitations were not applicable. The amounts set
forth in the following table assume that Messrs. Bodman, Burnes, Culver, Noglows
and Silverio, but not Mr. Rothberg, each continue to be employed by the Company
until age 65 at his annual base salary at September 30, 2000 and with an annual
bonus equal to the average of his annual bonuses for fiscal years 1998, 1999 and
2000. The definition of "compensation" in the Plan was amended effective July 1,
1996 to include bonuses.
16
<PAGE> 21
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ANNUAL BENEFIT
EXECUTIVE OFFICER PAYABLE
-------------------------------------------------------
<S> <C>
Samuel W. Bodman....................... $212,200
Kennett F. Burnes...................... $221,900
Robert L. Culver....................... $137,600
William P. Noglows..................... $201,700
Robert Rothberg (1).................... $ 49,900
Roland R. Silverio..................... $ 36,400
</TABLE>
(1) Mr. Rothberg resigned from the Company, effective September 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 Messrs. Robert L. Culver, Robert
Rothberg and Roland R. Silverio, 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 Silverio
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 five non-employee directors. It is responsible for, among other
matters, establishing policies applicable to the compensation of the Company's
executive officers and reporting on such policies to the Board of Directors and
stockholders, determining the salaries, incentive compensation and other
remuneration of executive officers of Cabot who are directors, and reviewing
salaries, compensation and remuneration for all other officers of Cabot. The
Committee regularly reviews the effectiveness of the Company's executive
compensation practices and revises them as appropriate. This is a report on the
compensation philosophy of the Committee and its executive compensation
activities relating to fiscal year 2000.
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
17
<PAGE> 22
Performance Graph which follows this report. 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 2000
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 2000. 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 maintain or reduce those maximum awards for all 2000
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 2000 participant in
the Short-Term Plan was determined using the same bases for evaluation but
without a maximum limit.
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 2.0 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. In 2000,
certain other awards of restricted Common Stock were also granted without cost
to certain executive officers which vest in equal installments on the third,
fourth and fifth anniversaries of the awards, subject to forfeiture under
similar terms.
Special Incentive Grants. In addition to the long-term incentive grants,
certain executive officers were granted shares of restricted Common Stock in
recognition of their contribution to transactions during the year which created
value for the shareholders, including the spin-off of Cabot Microelectronics
Corporation and the sale of the LNG business. The restricted shares will vest on
June 1, 2001, so long as the recipient is an employee of the Company on that
date.
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 2000, 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 2000.
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<PAGE> 23
Chief Executive Officer's Compensation
The Committee based Mr. Bodman's compensation on eight factors: (i) the
Company's financial results; (ii) achievement of previously established
non-financial criteria, such as identifying and developing the best possible
senior management team, and maintaining compliance with legal and ethical
standards; (iii) improvement in the Company's shareholder value; (iv) the
successful initial public offering and subsequent spin-off to the Company's
stockholders of the Common Stock of Cabot Microelectronics Corporation; (v) the
completion of the sale of the Company's liquified natural gas business; (vi)
leadership in developing new and existing businesses; (vii) success in creating
and sustaining a high-performance, exciting and interesting working environment
across Cabot; and (viii) the compensation level of chief executive officers of
companies with similar businesses and characteristics. For fiscal year 2000,
each of those factors was given approximately equal weight, except that more
consideration was given to the spin-off of Cabot Microelectronics Corporation
and the sale of the liquified natural gas business. 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's base salary at the end of calendar year 1999 was
$750,000, the same as the salary paid to him in calendar year 1998. After
careful review of pay practices at comparable companies, the Committee approved
an increase effective June 1, 2000 of $75,000, or 10%, bringing Mr. Bodman's
base salary to $825,000. Maintaining Mr. Bodman's salary at the same level in
calendar year 1999 as 1998 reflected 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 2000 of $650,000. Because Mr. Bodman was a 2000 participant in
the Short-Term Plan, described below, the Committee's starting point for
determining his incentive payment was $662,500, as determined by the plan's
formula. The Committee then exercised its discretion to reduce that amount to
$650,000 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 2000, Mr. Bodman received a grant of
165,000 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. Mr. Bodman also received 23,500 shares of restricted common
stock in connection with the special incentive grants described above.
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
19
<PAGE> 24
plans to review the issue from time to time. The stockholders are being asked to
approve the adoption of a new Short-Term Incentive Compensation Plan at the 2001
Annual Meeting.
January 19, 2001
Robert P. Henderson (Chairman)
John S. Clarkeson
John H. McArthur
David V. Ragone
Mark S. Wrighton
PERFORMANCE GRAPH
The following graph compares the cumulative return for Cabot Common Stock
during the five fiscal years commencing October 1, 1995, 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, 1995 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
<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>
1995 100.00 100.00 100.00 100.00 100.00
1996 106.47 120.33 114.00 107.74 129.06
1997 104.51 169.00 158.58 121.72 168.64
1998 98.21 184.29 148.58 95.72 151.43
1999 95.18 235.53 186.45 115.92 178.15
2000 129.28 266.82 267.02 90.90 133.08
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In May 2000, in connection with the vesting of shares of restricted stock
that had been awarded to employees of the Company in 1997 under the 1996 Equity
Incentive Plan, the Company purchased an aggregate of 151,416 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
$27.625, the closing price of the Company's Common Stock on the New York Stock
Exchange on May 8, 2000. As part of that transaction, the Company purchased: 357
shares from John E. Anderson, Vice President of the Company, 1,538 shares from
William T. Anderson, Vice President and Controller of the Company; 18,530 shares
from Samuel W. Bodman, Chief Executive Officer and Chairman of the Board of the
Company; 15,377 shares from Kennett F. Burnes, President, Chief Operating
Officer and a director of the Company; 4,054 shares from Robert L. Culver,
Executive Vice President and Chief Financial Officer of the Company; 5,654
shares from William P. Noglows, Executive Vice President of the Company; and
6,151 shares from Robert Rothberg, Vice President of the Company.
20
<PAGE> 25
The Company made an interest-free loan in 1998 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 2000 was $157,500. As of January 9, 2001, the
amount outstanding under this loan was $76,875. The Company also made an
interest-free loan in 2000 to Roland R. Silverio, a Vice President of the
Company, in connection with his relocation. The largest amount outstanding at
any one time under this loan during fiscal year 2000 was $300,000. As of January
9, 2001, the amount outstanding under this loan was $300,000. The Company also
made an interest-free loan in 1999 to John E. Anderson, a Vice President of the
Company, in connection with his relocation. The largest amount outstanding at
any one time under this loan during fiscal year 2000 was $390,000. As of January
9, 2001, the amount outstanding under this loan was $365,000.
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 1998, 1999 and 2000 (as described in note 2
to the Summary Compensation Table above, the 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. The amounts listed opposite each executive officer's name
in the table below indicate the largest amount outstanding at any one time under
such loan under the Cabot Loan Program during fiscal year 2000, and the amount
outstanding as of September 30, 2000.
LOANS TO EXECUTIVE OFFICERS IN CONNECTION
WITH LONG-TERM INCENTIVE PROGRAM
<TABLE>
<CAPTION>
LARGEST
AMOUNT
OUTSTANDING AMOUNT
DURING OUTSTANDING AT
FISCAL YEAR SEPTEMBER 30,
NAME OF EXECUTIVE OFFICER 2000 2000
--------------------------------------------------------------------------
<S> <C> <C>
John E. Anderson............................ $ 203,175 $ 203,175
William T. Anderson......................... $ 218,775 $ 218,775
Samuel W. Bodman............................ $3,787,437 $3,787,437
Kennett F. Burnes........................... $2,177,000 $2,177,000
Robert L. Culver............................ $ 986,875 $ 986,875
Ho-il Kim................................... $ 149,875 $ 149,875
William P. Noglows.......................... $ 940,737 $ 940,737
Robert Rothberg............................. $ 187,402 $ 187,402
Roland R. Silverio.......................... $ 364,700 $ 364,700
</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 that Mr. Kennett F. Burnes, a Director and an
executive officer, made a sale of certain shares of Cabot Common Stock which 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 -- PROPOSAL TO APPROVE ADOPTION OF SHORT-TERM INCENTIVE COMPENSATION
PLAN
General
Under Section 162(m) of the Internal Revenue Code ("Section 162(m)"), in
general, the maximum deduction that a publicly held corporation may claim for
compensation in any year to its chief executive officer or any of its other top
four named executive officers, ranked by pay, is $1,000,000. Qualifying
performance-
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<PAGE> 26
based compensation is not subject to this deduction limitation. To qualify for
the performance-based exception, compensation must be payable only upon
achievement of performance goals that have been established by a committee
consisting solely of outside directors based on performance criteria and
individual award limits approved by the corporation's shareholders.
On November 12, 1998, the Compensation Committee of the Company's Board of
Directors, which consisted entirely of outside directors, approved the
Short-Term Incentive Compensation Plan (the "Original STIC Plan"), which was
approved by the stockholders of the Company at the Annual Meeting on March 11,
1999. On December 19, 2000, the Compensation Committee of the Company's Board of
Directors, which continues to consist entirely of outside directors, approved a
new Short-Term Incentive Compensation Plan (the "STIC Plan") described below.
The STIC Plan is intended to satisfy the applicable provisions of, and is being
submitted to stockholders pursuant to, Section 162(m).
The STIC Plan, which will be administered by the Compensation Committee,
provides incentives for certain senior executives of the Company to achieve a
high level of financial performance for the Company, while preserving the
Company's ability to deduct the cost of such incentives for tax purposes.
Accordingly, the Board of Directors believes that approval of the STIC Plan is
in the best interests of the Company and its stockholders and recommends that
the stockholders approve its adoption.
The new STIC Plan would liberalize the determination of performance awards
by increasing the performance measures that could be taken into account by the
Compensation Committee in determining awards and by providing that any automatic
adjustment in performance measures attributable to extraordinary items and
similar events would apply to maximize payouts, subject to discretionary
reductions in actual award payments by the Compensation Committee. Under the new
STIC Plan, no participant could receive more than $3,000,000 in award payments
in any fiscal year of the Company.
The determination of amounts to be awarded under the STIC Plan would be
based on one or more objectively determinable "Performance Goals" set in advance
by the Compensation Committee. These Performance Goals would be based on
performance criteria set out in the STIC Plan. The Committee retains the ability
to reduce the amount of any award below the level permitted by the STIC Plan.
If the STIC Plan is approved by the stockholders at the 2001 Annual
Meeting, no additional awards will be made under the Original STIC Plan. Awards
for the current year have been made under the new STIC Plan and are contingent
upon stockholder approval of the STIC Plan.
The Board of Directors recommends a vote FOR Item 2.
Summary of Short-Term Incentive Compensation Plan
The full text of the STIC Plan is set forth in Exhibit B, attached hereto.
The following description of certain features of the STIC Plan is qualified in
its entirety by reference to the full text of the plan. Capitalized terms used
in this description have the same meaning as defined in the STIC Plan.
Administration; Eligible Employees. The STIC Plan is administered by the
Compensation Committee of the Board of Directors or, if any member of the
Compensation Committee is not an outside director, by a subcommittee of the
Compensation Committee consisting of those members of the Compensation Committee
who are outside directors (such committee or subcommittee referred to herein as
the "Committee"). The Committee shall interpret the STIC Plan, although it may
delegate to management non-discretionary administrative functions. Only officers
of the Company are eligible to participate in the STIC Plan. Participation is
limited to those officers who are selected by the Committee.
Determination of Awards. The term "Award" as used in the Plan means an
award opportunity that is granted to a participant within a specified period
after the beginning of the performance period (the "Performance Period") to
which the Award relates. A participant who is granted an Award shall be entitled
to a payment, if any, under the Award only if all conditions to payment have
been satisfied in accordance with the Plan and the terms of the Award. Except as
otherwise specified by the Committee in connection with the grant of an Award,
the Performance Period applicable to Awards under the Plan shall be the fiscal
year of the Company. Not later than (i) the ninetieth (90th) day after the
beginning of the Performance Period, in the case of a Performance Period of 360
days or longer, or (ii) the end of the period constituting the first quarter of
the Performance Period, in the case of a Performance Period of less than 360
days, the Committee shall
22
<PAGE> 27
select the participants, if any, who are to receive Awards for such Performance
Period and, in the case of each Award, shall establish the Performance Goals
used to determine the amount of awards, the amount or amounts that will be
payable if the Performance Goals are achieved, and such other terms and
conditions as the Committee deems appropriate. As used in the Plan, the term
"Performance Goal" means an objectively determinable goal or target based on any
one or any combination of the following (determined, in the case of
Company-related measures, on a consolidated basis or on the basis of one or more
subsidiaries, divisions or other geographic or business units): (i) sales;
revenues; assets; expenses; earnings before or after deduction for all or any
portion of interest, taxes, depreciation or amortization, whether or not on a
continuing operations or an aggregate or per share basis; return on equity,
investment, capital or assets; inventory level or turns; one or more operating
ratios; borrowing levels, leverage ratios or credit rating; market share;
capital expenditures; cash flow; stock price; or stockholder return; or (ii)
acquisitions and divestitures (in whole or in part); joint ventures and
strategic alliances; spin-offs, split-ups and the like; reorganizations;
recapitalizations; restructurings; financings (issuance of debt or equity); or
refinancings. A Performance Goal need not be based on an increase or improvement
under the applicable measure. An Award may specify more than one Performance
Goal and, with respect to any Performance Goal, may specify levels of
achievement at which different levels of payment may be earned.
No more than $3,000,000 may be paid under the STIC Plan to any participant
in any fiscal year of the Company. Also, no payment of an Award will be made
until the Committee certifies in accordance with the provisions of Section
162(m) that the applicable Performance Goals have been satisfied. The Committee
in its discretion may permit deferral of payments that have been earned under
the STIC Plan. In the event of deferral, the $3,000,000 annual limitation will
be applied by reference to the fiscal year in which the Award would have been
paid absent deferral.
In determining whether a Performance Goal has been satisfied, the STIC Plan
provides that automatic adjustment will be made to the relevant measures for the
following items to the extent they are objectively determinable: extraordinary
and non-recurring items, changes in tax laws, items relating to discontinued
operations, items relating to a divested business or a sale of one or more
businesses, restructuring charges, accounting changes and other special or
non-recurring gains or losses. The automatic adjustments prescribed by the STIC
Plan will be applied in each case so as to make the relevant Performance Goal
easier to achieve, subject to the Committee's general authority to reduce Award
payments.
Termination of Employment. Except as otherwise determined by the Committee
at the time it makes an award, a participant in the STIC Plan who is not
employed by the Company at the end of the award period will not receive an award
for that period. If the participant's employment terminated because of death or
disability, the Committee has the discretion to authorize payment of an award to
such participant or such participant's estate at the time the other awards are
paid for that award period.
Plan Benefits
At this point it is impossible to determine those people who will be
participants in the STIC Plan beyond the 2001 Award Year, and the amounts that
will be received by participants in respect of the 2001 Award Year and future
Award Years. The table below shows the maximum amounts that could have been paid
under the Original STIC Plan to the Company's chief executive officer and its
four most highly compensated officers, other than the chief executive officer,
in respect of fiscal year 2000; no other amounts were paid under the Original
STIC Plan for the fiscal year.
<TABLE>
<CAPTION>
MAXIMUM AWARD
NAME AND POSITION FOR FISCAL YEAR 2000
----------------------------------------------------------------------------------
<S> <C>
Samuel W. Bodman, Chairman and Chief Executive Officer $ 662,500
Kennett F. Burnes, President and Chief Operating Officer $ 530,000
Robert L. Culver, Executive Vice President and Chief
Financial Officer $ 265,000
William P. Noglows, Executive Vice President $ 265,000
Available Pool $2,650,000
</TABLE>
The four executive officers named above are among those individuals
selected by the Compensation Committee to participate in the STIC Plan for
fiscal year 2001.
23
<PAGE> 28
Tax Aspects Under the U.S. Internal Revenue Code
A participant in the STIC Plan generally will be subject to tax at ordinary
income rates on the amount of the award at the time the award is paid, and the
Company will be entitled to a tax deduction for the amount of the award. The
Company will deduct any required withholding taxes from the payments made under
the STIC Plan. The foregoing summary of the principal current Federal income tax
consequences relating to awards under the STIC Plan does not describe all
Federal tax consequences, or any local, state or foreign tax consequences,
associated with the STIC Plan.
Term of STIC Plan. If approved by the stockholders, the STIC Plan will
remain in effect until terminated by the Committee, subject to any additional
stockholder approvals required by Section 162(m).
The Board of Directors of the Company recommends a vote FOR the approval of
the material terms of the Short-Term Incentive Compensation Plan. Proxies
solicited on behalf of the Board of Directors will be voted in accordance with
the specifications made on the form of proxy. Where no specification is made,
proxies will be voted FOR the approval of the Short-Term Incentive Compensation
Plan.
An affirmative vote in favor of the Short-Term Incentive Compensation Plan
by a majority of the votes properly cast is required for approval of the STIC
Plan.
FUTURE STOCKHOLDER PROPOSALS
Any stockholder proposal intended for inclusion in the proxy statement for
the 2002 Annual Meeting of Stockholders of the Company must be received by the
Company at its offices at Two Seaport Lane, Suite 1300, Boston, Massachusetts
02210-2019, by September 20, 2001, and should be sent to the attention of John
P. McGann, Secretary. If a stockholder of the Company intends to present a
proposal at the 2002 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 Two Seaport Lane, Suite
1300, Boston, Massachusetts 02210-2019, attention John P. McGann, Secretary, not
earlier than December 9, 2001, and not later than January 8, 2002.
ANNUAL REPORT ON FORM 10-K
The Company is providing 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 2000. To request an
additional copy of the 10-K, please write to John P. McGann, Secretary, Cabot
Corporation, Two Seaport lane, Suite 1300, Boston, MA 02210-2019.
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.
24
<PAGE> 29
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,
John P. McGann
Secretary
Boston, Massachusetts
January 19, 2001
25
<PAGE> 30
EXHIBIT A
CABOT CORPORATION
CHARTER OF THE AUDIT COMMITTEE
The Board of Directors of Cabot Corporation (the "Company") has established
an Audit Committee (the "Committee") with general responsibility and specific
duties as described below.
COMPOSITION:
The Committee shall be comprised of not less than three Directors who shall
meet the requirements of Section 303 of The New York Stock Exchange Listed
Company Manual. Committee membership shall be approved by the Board of
Directors.
RESPONSIBILITY:
The Committee's responsibility is to assist the Board of Directors in
fulfilling its fiduciary responsibilities as to accounting policies and
reporting practices of the Company. The Committee is empowered to retain persons
having special competence as necessary to assist the Committee in fulfilling its
responsibility. While the Committee has the responsibilities and powers set
forth in this Charter, it is not the duty of the Committee to plan or conduct
audits (this is the responsibility of the Independent Accountant) or to
determine that the Company's financial statements are complete and accurate
(this is the responsibility of management). The Committee and the Board of
Directors have the ultimate authority and responsibility to select, evaluate
and, where appropriate, replace the Independent Accountant; the Independent
Accountant is ultimately accountable to the Board of Directors and the
Committee.
MEETINGS:
The Committee shall meet as often as the members shall determine to be
necessary or appropriate, but at least two times during each fiscal year. At any
meeting of the Committee, the lesser of (i) a majority of the then Committee
members and (ii) three Committee members, shall constitute a quorum.
SPECIFIC DUTIES:
The Committee is to:
1. Review the Committee's Charter annually, and update as appropriate.
2. Discuss with management its recommendation of the Independent
Accountant to be selected, recommend to the Board of Directors the
Independent Accountant to be selected, and review and approve any
discharge of the Independent Accountant.
3. Review and concur in the appointment, replacement, reassignment, or
dismissal of the Director of Internal Audit.
4. Ensure that it receives periodic written statements from the
Independent Accountant regarding its independence and delineating all
relationships between it and the Company consistent with Independence
Standards Board Standard No. 1, and discuss with the Independent
Accountant any such disclosed relationships and their impact on the
Independent Accountant's objectivity and independence. If so determined
by the Committee, recommend that the Board take appropriate action in
response to the Independent Accountant's report to satisfy itself of
the Independent Accountant's independence.
5. Based on the criteria set forth in Item 306(a) of Regulation S-K and,
if so determined by the Committee, recommend to the Board of Directors
that the audited financial statements for each fiscal year be included
in the Company's Annual Report on Form 10-K in respect of such year.
6. Review with management and the Director of Internal Audit the adequacy
and the scope of the annual internal audit plan, and any significant
audit findings.
7. Review the scope of the Independent Accountant's annual audit.
A-1
<PAGE> 31
8. Review with management and the Independent Accountant, upon completion
of their audit, financial results for the year prior to their release
to the public. Review and discuss with management the audited financial
statements. Discuss with the Independent Accountant the matters
required to be discussed by the Statement on Auditing Standards No. 61
relating to the conduct of the year-end audit.
9. Discuss with the Independent Accountant the quality of the Company's
financial accounting personnel, and any relevant recommendations that
the Independent Accountant may have.
10. Report Committee actions to the Board of Directors with such
recommendations, as the Committee may deem appropriate.
11. Prepare the report required by the rules of the Securities and
Exchange Commission to be included in the Company's annual proxy
statement, commencing with the proxy statement for the 2001 Annual
Meeting.
12. Perform such other functions as may be required by law, the Company's
Certificate of Incorporation or its By-Laws.
A-2
<PAGE> 32
EXHIBIT B
CABOT CORPORATION
SHORT-TERM INCENTIVE COMPENSATION PLAN
The purpose of this Short-Term Incentive Compensation Plan (the "Plan") is
to provide incentives for certain senior executives of Cabot Corporation (the
"Company") to achieve a sustained, high level of financial success for the
Company. The Plan is intended to comply with the requirements for tax
deductibility imposed by Internal Revenue Code Section 162(m) as in effect from
time to time ("Section 162(m)") with respect to Awards paid pursuant to the
Plan.
I. ADMINISTRATION
The Plan will be administered by the Compensation Committee of the Board of
Directors or, if any member of the Compensation Committee is not an "outside
director" for the purposes of Section 162(m), by a subcommittee of the
Compensation Committee consisting of those members of the Compensation Committee
who are "outside directors" for such purposes. The Compensation Committee or
subcommittee administering the Plan is referred to herein as the "Committee."
The Committee may delegate to other persons administrative functions that do not
involve discretion. The Committee shall have the authority to interpret this
Plan, and any interpretation or decision by the Committee with regard to any
questions arising under the Plan shall be final and conclusive on all
participants in the Plan.
II. ELIGIBILITY; PARTICIPANTS
Only officers of the Company shall be eligible to participate in the Plan.
The Committee shall select, from among those eligible, the persons who shall
from time to time participate in the Plan. Participation by an individual with
respect to one award under the Plan shall not entitle the individual to
participate with respect to subsequent awards, if any.
III. GRANT OF AWARDS
The term "Award" as used in the Plan means an award opportunity that is
granted to a Participant within a specified period after the beginning of the
performance period (the "Performance Period") to which the Award relates. A
Participant who is granted an Award shall be entitled to a payment, if any,
under the Award only if all conditions to payment have been satisfied in
accordance with the Plan and the terms of the Award. Except as otherwise
specified by the Committee in connection with the grant of an Award, the
Performance Period applicable to Awards under the Plan shall be the fiscal year
of the Company. Not later than (i) the ninetieth (90th) day after the beginning
of the Performance Period, in the case of a Performance Period of 360 days or
longer, or (ii) the end of the period constituting the first quarter of the
Performance Period, in the case of a Performance Period of less than 360 days,
the Committee shall select the Participants, if any, who are to receive Awards
for such Performance Period and, in the case of each Award, shall establish the
following:
(a) the Performance Goals (as defined in Section IV below) applicable to
the Award;
(b) the amount or amounts that will be payable (subject to reduction in
accordance with Section V) if the Performance Goals are achieved; and
(c) such other terms and conditions as the Committee deems appropriate with
respect to the Award.
Once the Committee has established the terms of an Award in accordance with
the foregoing, it shall not thereafter adjust such terms except to reduce
payments, if any, under the Award in accordance with Section V. Notwithstanding
the foregoing, if achievement under a Performance Goal would be affected by an
Identified Item (as hereinafter defined), such Identified Item shall be
disregarded if disregarding it would make the Performance Goal easier to achieve
and shall be taken into account if taking it into account would make the
Performance Goal easier to achieve. For purposes of the Plan, the term
"Identified Item" means any of the following to the extent it is objectively
determinable (for example, but without limitation, if the item appears as or can
be objectively derived from a separate line item in the financial statements of
the Company): an extraordinary or non-recurring item, a change in tax laws, an
item relating to discontinued operations, an
B-1
<PAGE> 33
item relating to a divested business or a sale of one or more businesses, a
restructuring charge, an accounting change or any other special, unusual or
non-recurring gain or loss. Nothing in the rules set forth above for the
treatment of Identified Items shall be construed as restricting the ability of
the Committee to reduce Award payments under Section V.
IV. PERFORMANCE GOALS
As used in the Plan, the term "Performance Goal" means an objectively
determinable goal or target based on any one or any combination of the following
(determined, in the case of Company-related measures, on a consolidated basis or
on the basis of one or more subsidiaries, divisions or other geographic or
business units): (i) sales; revenues; assets; expenses; earnings before or after
deduction for all or any portion of interest, taxes, depreciation or
amortization, whether or not on a continuing operations or an aggregate or per
share basis; return on equity, investment, capital or assets; inventory level or
turns; one or more operating ratios; borrowing levels, leverage ratios or credit
rating; market share; capital expenditures; cash flow; stock price; or
stockholder return; or (ii) acquisitions and divestitures (in whole or in part);
joint ventures and strategic alliances; spin-offs, split-ups and the like;
reorganizations; recapitalizations; restructurings; financings (issuance of debt
or equity); or refinancings. A Performance Goal need not be based on an increase
or improvement under the applicable measure. An Award may specify more than one
Performance Goal and, with respect to any Performance Goal, may specify levels
of achievement at which different levels of payment may be earned.
V. CERTIFICATION OF PERFORMANCE; PAYMENT UNDER AWARDS
As soon as practicable after the close of a Performance Period, the
Committee shall take such steps as are sufficient to satisfy the certification
requirement of the regulations under Section 162(m) as to whether and to what
extent, if at all, the Performance Goal or Goals applicable to each Award
granted for the Performance Period have been satisfied. The Committee shall then
determine the actual payment, if any, under each Award. No amount may be paid
under an Award unless the Performance Goal or Goals applicable to the payment of
such amount have been certified as having been satisfied as set forth above.
However, the Committee may, in its sole and absolute discretion and with or
without specifying its reasons for doing so, after determining the amount that
would otherwise be payable under an Award for a Performance Period, reduce
(including to zero) the actual payment, if any, to be made under such Award. The
Committee may exercise the discretion described in the immediately preceding
sentence either in individual cases or in ways that affect more than one
Participant (for example, but without limitation, by disregarding in whole or in
part an Identified Item that has been taken into account under Section III above
or by taking into account, in whole or in part, an Identified Item that has been
disregarded under Section III above).
VI. PAYMENT LIMITS
No Participant may be paid more than $3,000,000 in any fiscal year of the
Company under Awards granted under the Plan. In the case of an Award where
payment is deferred pursuant to Section IX(b) below, the preceding sentence
shall be applied by assuming that payment of the Award was made at the time it
would have been paid absent the deferral.
VII. TAX WITHHOLDING
All payments under the Plan shall be subject to reduction for applicable
tax and other legally or contractually required withholdings.
VIII. AMENDMENT AND TERMINATION
The Committee may amend the Plan at any time and from time to time;
provided, that no amendment for which Section 162(m) would require shareholder
approval in order to preserve exemption for Award payments as performance-based
compensation shall be effective unless approved by the shareholders of the
Company in a manner consistent with the requirements of Section 162(m). The
Committee may at any time terminate the Plan.
B-2
<PAGE> 34
IX. MISCELLANEOUS
(a) Except as otherwise determined by the Committee at the time it grants
an Award, no payment shall be made under an Award unless the Participant is
employed by the Company on the last day of the Performance Period applicable to
the Award. Notwithstanding the foregoing, if a Participant ceases to be employed
by the Company during a Performance Period by reason of death or disability, the
Committee may in its discretion authorize payment of any Awards held by such
Participant to the Participant (or his or her estate) at the time other Awards
are paid in respect of the Performance Period.
(b) The Committee may, but need not, permit a Participant to defer payment
of an Award beyond the date that the Award would otherwise be payable. Any
amount deferred under the preceding sentence shall be adjusted for notional
interest or other notional earnings on a basis, determined by the Committee,
that preserves the eligibility of the Award payment as exempt performance-based
compensation under Section 162(m).
(c) No person shall have any claim or right to be granted an Award, nor
shall the selection for participation in the Plan for any Participation Period
be construed as giving a Participant the right to be retained in the employ of
the Company for that Participation Period or for any other period.
(d) The Plan and all Awards under the Plan shall be construed and
administered in a manner consistent with the exemption of Award payments as
exempt performance based compensation under Section 162(m). Subject to the
foregoing, the Committee shall have complete discretion to construe the Plan and
all matters arising under the Plan, and its determinations shall be binding on
all parties.
(e) The Plan shall be effective as of the date adopted, for the Performance
Period ending September 30, 2001, subject to receiving stockholder approval at
the 2001 Annual Stockholders Meeting and shall remain in effect for subsequent
Performance Periods until terminated by the Company's Board of Directors.
B-3
<PAGE> 35
SKU# 0928-PS-01
<PAGE> 36
January 19, 2001
Dear Plan Participant:
The Annual Meeting of Stockholders of Cabot Corporation will be held on March 8,
2001. The record date for determining stockholders entitled to vote at the
meeting was January 10, 2001. 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. While the CRISP and the CESP were merged into the ESOP
as of December 31, 2000 to form a new plan called the Cabot Retirement Savings
Plan ("RSP"), the shares you held in each of those old plans are now held in
corresponding accounts in your name in the new plan. You will be able to vote
shares allocated to your accounts by following the instructions on the enclosed
proxy card.
The number of shares allocated to you appears on the enclosed proxy card. If you
were 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 were 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 were 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 Trustees 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 Trustees of the RSP how to vote those shares for which no
instructions are received from other Plan participants plus shares held in the
Plan that have not been allocated to participants' accounts.
The Trustees 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, Fleet National Bank, N.A. c/o EquiServe, before March 1, 2001 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
0928-EBP-01
<PAGE> 37
ZCAB2B DETACH HERE
PROXY
[CABOT LOGO]
CABOT CORPORATION
ANNUAL MEETING OF STOCKHOLDERS -- MARCH 8, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Samuel W. Bodman, Ho-il Kim and John P. McGann,
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 8,
2001 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 "FOR" 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> 38
-----------------
VOTE BY TELEPHONE
-----------------
It's fast, convenient and immediate. Call Toll-Free on a Touch-Tone Phone
1-877-PRX-VOTE (1-877-779-8683).
--------------------------------------------------------------------------------
FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING PROXY STATEMENT/ANNUAL REPORT AND PROXY CARD.
2. CALL THE TOLL-FREE NUMBER 1-877-PRX-VOTE (1-877-779-8683).
3. ENTER YOUR 14-DIGIT VOTER CONTROL NUMBER LOCATED ON YOUR PROXY CARD ABOVE
YOUR NAME.
4. FOLLOW THE RECORDED INSTRUCTIONS.
--------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE any time.
----------------
VOTE BY INTERNET
----------------
It's fast, convenient, and your vote is immediately confirmed and posted.
--------------------------------------------------------------------------------
FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING PROXY STATEMENT/ANNUAL REPORT AND PROXY CARD.
2. GO TO THE WEBSITE http://www.eproxyvote.com/cbt
3. ENTER YOUR 14-DIGIT VOTER CONTROL NUMBER LOCATED ON YOUR PROXY CARD ABOVE
YOUR NAME.
4. FOLLOW THE INSTRUCTIONS PROVIDED.
--------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT!
Go to http://www.eproxyvote.com/cbt any time.
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET.
ZCAB2A DETACH HERE
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 1 AND ITEM 2.
THIS PROXY/VOTING INSTRUCTION CARD WILL BE VOTED "FOR" ITEM 1 AND ITEM 2 IF NO
CHOICE IS SPECIFIED.
1. Election of Directors.
NOMINEES FOR TERMS EXPIRING IN 2004: (01) Kennett F. Burnes, (02) John S.
Clarkeson, (03) Robert P. Henderson, (04) Roderick C.G. MacLeod, (05) Ronaldo
H. Schmitz
NOMINEES FOR TERMS EXPIRING IN 2003: (06) John G.L. Cabot, (07) John F.
O'Brien
FOR WITHHELD
ALL [ ] [ ] FROM ALL
NOMINEES NOMINEES
[ ] _____________________________________________________________________
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. Proposal to adopt Short-Term Incentive [ ] [ ] [ ]
Compensation Plan.
3. Transactions of such other business as may properly come 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: ______
