<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CERADYNE, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] 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:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF CERADYNE, INC. APPEARS HERE]
3169 Redhill Avenue
Costa Mesa, California 92626
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held July 28, 2000
----------------
The Annual Meeting of Stockholders of Ceradyne, Inc., a Delaware corporation
(the "Company") will be held at the Radisson Hotel, 4545 MacArthur Blvd.,
Newport Beach, CA 92660, on Friday, July 28, 2000, at 10:00 a.m. local time,
for the following purposes, all as set forth in the attached Proxy Statement.
1. To elect seven directors to serve until the next annual meeting of
stockholders and until their successors are elected and have qualified.
2. To approve an amendment to the Company's 1994 Stock Incentive Plan to
increase the number of shares of Common Stock authorized for issuance
thereunder from 650,000 shares to 800,000 shares.
3. To transact such other business as may properly come before the
meeting and any adjournments thereof.
The Board of Directors intends to present for election as directors the
nominees named in the accompanying Proxy Statement, whose names are
incorporated herein by reference.
In accordance with the Bylaws of the Company, the Board of Directors has
fixed the close of business on May 25, 2000 as the record date for the
determination of stockholders entitled to vote at the Annual Meeting and to
receive notice thereof.
Stockholders are cordially invited to attend the meeting in person. However,
even if you do plan to attend the meeting, please complete, sign and date the
enclosed proxy card and return it without delay in the enclosed postage paid
envelope. If you do attend the meeting, you may withdraw your proxy and vote
personally on each matter brought before the meeting.
By Order of the Board of Directors
Howard F. George
Secretary
Costa Mesa, California
June 12, 2000
<PAGE>
[LOGO OF CERADYNE, INC. APPEARS HERE]
3169 Redhill Avenue
Costa Mesa, California 92626
----------------
ANNUAL MEETING OF STOCKHOLDERS
To Be Held July 28, 2000
This Proxy Statement is furnished in connection with the solicitation of the
enclosed proxy on behalf of the Board of Directors of Ceradyne, Inc., a
Delaware corporation (the "Company"), for use at the Annual Meeting of
Stockholders of the Company to be held on Friday, July 28, 2000, and at any
adjournments thereof. It is anticipated that this Proxy Statement and the
enclosed form of proxy will be first mailed to stockholders on or about June
12, 2000.
The purpose of the meeting and the matters to be acted upon are set forth in
the foregoing attached Notice of Annual Meeting. As of the date of this
statement, the Board of Directors knows of no other business which will be
presented for consideration at the meeting. However, if any other matters
properly come before the meeting, the persons named as proxies will vote on
them in accordance with their best judgment.
Stockholders are requested to date, sign and return the enclosed proxy to
make certain that their shares will be voted at the meeting. Any proxy given
may be revoked by the stockholder at any time before it is voted by delivering
written notice of revocation to the Secretary of the Company, by filing with
him a proxy bearing a later date, or by attendance at the meeting and voting
in person. All proxies properly executed and returned will be voted in
accordance with the instructions specified thereon. If no instructions are
specified, proxies will be voted FOR the election as directors of the seven
nominees below, and FOR approval of Proposal 2.
VOTING SHARES AND VOTING RIGHTS
The close of business on May 25, 2000 has been fixed as the record date for
stockholders entitled to notice of and to vote at the meeting. As of that
date, there were 8,169,138 shares of Common Stock of the Company outstanding
and entitled to vote, the holders of which are entitled to one vote per share.
The presence at the meeting, in person or by proxy, of a majority of the
outstanding shares of Common Stock is necessary to constitute a quorum for the
transaction of business.
In the election of directors, a stockholder may cumulate his or her votes
for one or more candidates, but only if such candidate's or candidates' names
have been placed in nomination prior to the voting and the stockholder has
given notice at the meeting, prior to the voting, of his or her intention to
cumulate votes. If any one stockholder has given such notice, all stockholders
may cumulate their votes for the candidates in nomination. If the voting for
directors is conducted by cumulative voting, each share will be entitled to a
number of votes equal to the number of directors to be elected, which votes
may be cast for a single candidate or may be
1
<PAGE>
distributed among two or more candidates in such proportions as the
stockholder thinks fit. The seven candidates receiving the highest number of
affirmative votes will be elected. If no such notice is given, there will be
no cumulative voting, which means a simple majority of the shares voting may
elect all of the directors.
Proxies marked "withheld" as to any director and broker non-votes will be
counted for purposes of determining the presence or absence of a quorum for
the transaction of business. However, proxies marked "withheld" and broker
non-votes have no legal effect on the election of directors under Delaware
law. Proxies marked "abstain" as to a particular proposal will be counted in
the tabulation of the votes cast, and will have the same effect as a vote
"against" that proposal. Broker non-votes will not be counted in determining
the total number of votes cast on Proposal 2 and, therefore, will have no
effect on whether that proposal is approved.
The following table sets forth information as of May 25, 2000, regarding the
beneficial ownership of the common stock of the Company by (i) each person or
group known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of common stock, (ii) each of the directors and nominees
for director of the Company, (iii) each of the executive officers named in the
Summary Compensation Table, and (iv) all current executive officers and
directors of the Company as a group.
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Beneficial of
Name of Beneficial Owner Ownership(1) Class
------------------------ ------------ -------
<S> <C> <C>
Joel P. Moskowitz 1,163,110 14.4%
3169 Redhill Avenue
Costa Mesa, CA 92626
Ford Motor Company 1,207,299 14.9%
The American Road
Dearborn, MI 48121 544,900(2) 6.7%
Dimensional Fund Advisors, Inc.
1299 Ocean Ave., 11th Floor
Santa Monica, CA 90401
Leonard M. Allenstein 117,000(3) 1.4%
Richard A. Alliegro 26,500(4) *
Dr. Peter Beardmore -- --
Paul N. Blumberg -- --
Earl E. Conabee 31,184(5) *
Gerhart D. DeBoer -- --
Frank Edelstein 47,400(6) *
Wilford D. Godbold, Jr. -- --
Donald A. Kenagy 19,195(7) *
Melvin A. Shader 30,000 *
Milton L. Lohr 27,000(8) *
David P. Reed 64,067(9) *
Howard F. George 21,557(10) *
All current executive
officers and directors as a
group (14 persons as listed
above) 1,547,013(11) 19.4%
</TABLE>
2
<PAGE>
--------
* Less than 1%
(1) Except as otherwise noted, the beneficial owners have sole voting and
investment powers with respect to the shares indicated, subject to
community property laws where applicable.
(2) Based on information contained in a statement on Schedule 13G dated
February 14, 2000, as filed with the Securities and Exchange Commission.
As stated in such Schedule 13G, all shares are held on behalf of advisory
clients of Dimensional Fund Advisors, Inc., which disclaims beneficial
ownership of such shares.
(3) Includes 27,000 shares subject to options held by Mr. Allenstein which
are currently exercisable or will become exercisable within 60 days of
May 25, 2000.
(4) Includes 22,000 shares subject to options held by Mr. Alliegro which are
currently exercisable or will become exercisable within 60 days of May
25, 2000.
(5) Includes 2,400 shares subject to options held by Mr. Conabee which are
currently exercisable or will become exercisable within 60 days of May
25, 2000.
(6) Includes 29,500 shares subject to options held by Mr. Edelstein which are
currently exercisable or will become exercisable within 60 days of May
25, 2000.
(7) Includes 8,400 shares subject to options held by Mr. Kenagy which are
currently exercisable or will become exercisable within 60 days of May
25, 2000.
(8) Includes 27,000 shares subject to options held by Mr. Lohr which are
currently exercisable or will become exercisable within 60 days of May
25, 2000.
(9) Includes 43,100 shares subject to options held by Mr. Reed which are
currently exercisable or will become exercisable within 60 days of May
25, 2000.
(10) Includes 21,000 shares subject to options held by Mr. George which are
currently exercisable or will become exercisable within 60 days of May
25, 2000.
(11) Includes 180,400 shares subject to options which are currently
exercisable or will become exercisable within 60 days of May 25, 2000.
3
<PAGE>
ELECTION OF DIRECTORS
(Proposal 1)
In accordance with the bylaws of the Company, the number of directors
constituting the Board of Directors is currently fixed at seven. All seven
directors are to be elected at the 2000 Annual Meeting and will hold office
until the 2001 Annual Meeting and until their respective successors are
elected and have qualified. It is intended that the persons named in the
enclosed proxy will, unless such authority is withheld, vote for the election
of the seven nominees proposed by the Board of Directors. In the event that
any of them should become unavailable prior to the Annual Meeting, the proxy
will be voted for a substitute nominee or nominees designated by the Board of
Directors, or the number of directors may be reduced accordingly. If
additional persons are nominated for election as directors, the proxy holders
intend to vote all proxies received by them according to the cumulative voting
rules to assure the election of as many of the nominees listed below as
possible. In such event, the specific nominees to be voted for will be
determined by the proxy holders. All of the nominees named below have
consented to being named herein and to serve if elected.
Set forth below are the names and ages of the nominees for election to the
Board of Directors, the present position with the Company of each nominee, the
year each nominee was first elected a director of the Company, the principal
occupation of each nominee, directorships held with other public companies,
and additional biographical data. The beneficial ownership of the Company's
Common Stock by each of the nominees as of May 25, 2000 is set forth in the
table under "Voting Shares and Voting Rights" above.
<TABLE>
<CAPTION>
Year First
Elected
Name Age Present Position With the Company Director
---- --- --------------------------------- ----------
<S> <C> <C> <C>
Joel P. Moskowitz 61 Chairman of the Board, President and
Chief Executive Officer 1967
Leonard M. Allenstein 61 Director 1983
Richard A. Alliegro 69 Director 1992
Paul N. Blumberg 56
Frank Edelstein 74 Director 1984
Wilford D. Godbold, Jr. 62
Milton L. Lohr 74 Director 1986
</TABLE>
Joel P. Moskowitz co-founded the Company's predecessor in 1967. He served as
President of the Company from 1974 until January 1987, and from September 1987
to the present. Mr. Moskowitz also serves as Chairman of the Board and Chief
Executive Officer of the Company, which positions he has held since 1983.
Mr. Moskowitz currently serves on the Board of Trustees of Alfred University.
Mr. Moskowitz obtained a B.S. in Ceramic Engineering from Alfred University in
1961 and an M.B.A. from the University of Southern California in 1966.
Leonard M. Allenstein has served on the Board of Directors of the Company
since 1983. Mr. Allenstein has been a private investor and businessman for
more than the past five years. From 1978 until December 1986, Mr. Allenstein
was a founder and general partner of Bristol Restaurants, which owns and
operates restaurants in the Southern California area.
Richard A. Alliegro has served on the Board of Directors of the Company
since 1992. Mr. Alliegro retired from Norton Company in 1990 after 33 years,
where his last position was Vice President, Refractories and Wear, for
Norton's Advanced Ceramics operation. He served as President of Lanxide
Manufacturing Co., a subsidiary
4
<PAGE>
of Lanxide Corporation, from May 1990 to February 1993. Mr. Alliegro currently
is the owner of AllTec Consulting, Inc., a ceramic technology consulting firm.
Mr. Alliegro obtained B.S. and M.S. degrees in Ceramic Engineering from Alfred
University in 1951 and 1952, respectively, and serves as a member of the Board
of Trustees of that university.
Dr. Paul N. Blumberg is a new nominee for the Board of Directors of the
Company. Since 1999, Dr. Blumberg has held the position of Director in
Research and Vehicle Technology at Ford Motor Company. From 1994 to 1999, he
was Director of Product Development Systems at Ford Motor Company. From 1982
to 1994, he was President and Principal Engineer at Ricardo North America
Inc., a contract engineering firm specializing in internal combustion engines
and in engine driven systems. Dr. Blumberg obtained B.S. and M.S. degrees in
Chemical Engineering from the Massachusetts Institute of Technology and a
Ph.D. in Chemical Engineering from the University of Michigan.
Frank Edelstein has served on the Board of Directors of the Company since
1984. Mr. Edelstein has been a Vice President of Stone Creek Capital, Inc., an
investment banking firm, since November 1986. From 1979 to November 1986, he
was Chairman of the Board of International Central Bank & Trust Company, which
was acquired by Continental Insurance Co. in July 1983. Mr. Edelstein is
currently a director of Arkansas Best Corp. and IHOP Corp.
Wilford D. Godbold, Jr. is a new nominee for the Board of Directors of the
Company. Mr. Godbold is currently a private investor. From 1982 to 1998, Mr.
Godbold was employed by Zero Corporation, a manufacturer of packaging systems
for the electronics industry, where he served as President and Chief Executive
Officer from 1984 to 1998. From 1966 to 1982, he was engaged in the private
practice of law with Gibson Dunn & Crutcher, specializing in mergers and
acquisitions, corporate finance and general corporate law. Mr. Godbold holds
an A.B. degree in Political Science from Stanford University, and a J.D. from
UCLA Law School. Mr. Godbold is a director of Sempra Energy and K2, Inc.
Milton L. Lohr served as a director of the Company from 1986 until October
1988, when he resigned to accept a position as Deputy Undersecretary of
Defense for Acquisitions. He held that position until May 1989 and was re-
elected as a director of the Company in July 1989. Mr. Lohr is currently a
partner of L. F. Global Investments, LLC, a San Diego based financial
institution with activities in money management funds, venture capital and
asset management coupons. He served as the first Deputy Under Secretary of
Defense for Acquisition in both the Reagan and Bush administrations, with
responsibility to assist in overseeing the Department of Defense's major
acquisition programs as well as exercising oversight of international programs
and U.S. Arms Control Compliance activities. He also served as U.S.
Acquisition Representative to the NATO Conference of National Armament
Directors and provided leadership guiding U.S. armament cooperative programs,
and in developing and establishing policy initiatives aimed at promoting
cooperation on major weapon systems and technology among the NATO Allies. He
also served on the Four Power Group with members from the UK, France, Germany
and the U.S. Mr. Lohr previously held the position of President of Defense
Development Corporation, a defense-related research and development company,
from 1990 to 1993. Mr. Lohr also held the position of Senior Vice President of
Titan Systems, a defense-related research and development company, from 1986
to 1988, and was founder and CEO of Defense Research Corporation, a defense
consulting firm, from 1983 to 1986. Mr. Lohr served from 1969 to 1983 as
Executive Vice-President of Flight Systems, Inc., a firm engaged in aerospace
and electronic warfare systems. Mr. Lohr has over thirty-five years experience
in government positions and aerospace and defense management.
Directors are elected annually and hold office until the next annual meeting
of stockholders and until their successors have been elected and qualified.
The Company has agreed to nominate a representative of Ford Motor
5
<PAGE>
Company for election as a director pursuant to an agreement made in March
1986, pursuant to which agreement Ford acquired a total of 1,207,299 shares of
the Company's Common Stock. Joel P. Moskowitz and members of his family have
agreed to vote a portion of their shares of the Company's Common Stock, if
necessary, for the election of Ford's nominee. Dr. Paul N. Blumberg is Ford's
current representative.
Information Regarding the Board of Directors and its Committees
The Board of Directors of the Company held four meetings during 1999. Each
director attended at least 75% of the aggregate of all meetings of the Board
and its committees on which he served during 1999.
The Board of Directors has established Audit, Compensation and Stock Option
Committees. The Audit Committee meets with the Company's independent
accountants to review the Company's financial condition and internal
accounting controls. This committee, which is composed of Messrs. Beardmore,
Edelstein, Shader and Lohr met twice during 1999. The Compensation Committee's
function is to review and make recommendations to the Board regarding
executive officers' compensation. This committee, which is composed of
Messrs. Beardmore, Edelstein, Alliegro, Shader and Lohr, met once during 1999.
The Stock Option Committee is composed of Mr. Moskowitz and Dr. Beardmore.
This committee, which acted by written consent four times during 1999,
administers the Company's 1983 Stock Option Plan, the company's 1994 Stock
Incentive Plan, and the 1995 Employee Stock Purchase Plan. The Company does
not have a standing nominating committee.
Directors are paid fees for their services on the Board of Directors in such
amounts as are determined from time to time by the Board. During 1999, a fee
of $500 per month plus $1,000 for each Board meeting attended was paid to each
non-employee director, other than the Ford representative, Dr. Beardmore, who
did not receive a fee.
6
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table shows certain information concerning the compensation of
the Chief Executive Officer and the five other most highly compensated
executive officers of the Company whose aggregate compensation for services in
all capacities rendered during the year ended December 31, 1999 exceeded
$100,000 (collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
Annual Long Term
Compensation Compensation
---------------- ------------
Securities
Underlying
Options
Name and (# of
Principal Position Year Salary Bonus Shares)
------------------ ---- -------- ------- ------------
<S> <C> <C> <C> <C>
Joel P. Moskowitz 1999 $240,085 $16,027 --
Chairman of the Board, 1998 228,191 -- --
Chief Executive Officer 1997 212,988 19,976 --
and President
David P. Reed 1999 $132,919 -- 10,000
Vice President 1998 121,295 -- 10,000
1997 118,056 $24,594 13,500
Howard F. George 1999 $104,327 -- --
Vice President 1998 101,062 -- 5,000
1997 94,300 6,210 --
Earl E. Conabee 1999 $106,872 -- --
Vice President 1998 101,220 -- 4,000
1997 96,731 -- 2,000
Donald A. Kenagy 1999 $108,350 -- 5,000
Vice President 1998 103,142 -- 4,000
1997 98,411 -- 2,000
Gerhart D. DeBoer(1) 1999 $106,068 $11,000 5,000
Vice President 1998 102,270 -- 5,000
1997 36,705 -- 20,000
</TABLE>
--------
(1)Mr. DeBoer's employment with the Company commenced in September 1997.
Employment Agreement
In July 1994, the Company entered into a five-year employment agreement with
Mr. Moskowitz, pursuant to which he serves as Chairman of the Board of
Directors, Chief Executive Officer and President of the Company. The
employment agreement was amended on May 3, 1999 to extend the term for two
years, to July 2001. Effective February 23, 2000, Mr. Moskowitz' base salary
under this agreement was increased to $259,000 per year. Under the agreement,
if Mr. Moskowitz' employment is terminated by the Company (other than as a
result of death, incapacity or for "good cause" as defined in the agreement)
or if Mr. Moskowitz elects to resign for "good reason" (as defined in the
agreement), Mr. Moskowitz will be entitled to receive severance pay in an
amount equal to his annual base salary, at the rate in effect on the date of
termination, payable on normal pay dates for the remainder of the term of the
agreement. "Good reason" includes a "change in control" of the
7
<PAGE>
Company, a removal of Mr. Moskowitz from any of his current positions with the
Company without his consent, or a material change in Mr. Moskowitz' duties,
responsibilities or status without his consent. A "change in control" of the
Company shall be deemed to occur if (1) there is a consolidation or merger of
the Company where the Company is not the surviving corporation and the
shareholders prior to such transaction do not continue to own at least 80% of
the common stock of the surviving corporation, (2) there is a sale of all, or
substantially all, of the assets of the Company, (3) the stockholders approve
a plan for the liquidation or dissolution of the Company, (4) any person
becomes the beneficial owner, directly or indirectly, of 30% or more of the
Company's outstanding Common Stock or (5) if specified changes in the
composition of the Company's Board of Directors occur.
Option Grants in Last Fiscal Year
The following table sets forth certain information concerning grants of
options to each of the Named Executive Officers during the year ended December
31, 1999. In addition, in accordance with the rules and regulations of the
Securities and Exchange Commission, the following table sets forth the
hypothetical gains or "option spreads" that would exist for the options. Such
gains are based on assumed rates of annual compound stock appreciation of 5%
and 10% from the date on which the options were granted over the full term of
the options. The rates do not represent the Company's estimate or projection
of future Common Stock prices, and no assurance can be given that any
appreciation will occur or that the rates of annual compound stock
appreciation assumed for the purposes of the following table will be achieved.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual
Percent of Rates of Stock Price
Total Options Appreciation for Option
Name Options Granted Granted to Exercise Term(2)
---- (# of Employees in Price Expiration ------------------------
Shares)(1) Fiscal Year ($/Share) Date 5% ($) 10% ($)
--------------- ------------- --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Joel P. Moskowitz -- -- -- -- -- --
David P. Reed 5,000 4.3% $3.250 1/08/09 $10,220 $25,898
5,000 4.3% 3.531 9/23/09 11,103 28,138
Howard F. George -- -- -- -- -- --
Earl E. Conabee -- -- -- -- -- --
Donald A. Kenagy 5,000 4.3% 3.250 1/08/09 10,220 25,898
Gerhart D. DeBoer 5,000 4.3% 3.250 2/08/09 10,220 25,898
</TABLE>
--------
(1) The per share exercise price of all options granted is the fair market
value of the Company's Common Stock on the date of grant. Options have a
term of 10 years and become exercisable in five equal installments, each
of which vests at the end of each year after the grant date, except for
Mr. DeBoer, whose options have a term of two years and became exercisable
on October 30, 1999.
(2) The potential realizable value is calculated from the exercise price per
share, assuming the market price of the Company's Common Stock appreciates
in value at the stated percentage rate from the date of grant to the
expiration date. Actual gains, if any, are dependent on the future market
price of the Common Stock.
8
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
The following table sets forth certain information regarding option
exercises during the year ended December 31, 1999 by the Named Executive
Officers, the number of shares covered by both exercisable and unexercisable
options as of December 31, 1999 and the value of unexercised in-the-money
options held by the Named Executive Officers as of December 31, 1999:
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
No. of Unexercised Options In-the-Money Options
Shares At Fiscal Year End at Fiscal Year End(/1/)
Acquired Value ------------------------- -------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joel P. Moskowitz -- -- -- -- -- --
David P. Reed 2,500 $6,875 38,400 27,100 $109,249 $42,439
Howard F. George -- -- 21,000 9,000 3,500 14,000
Earl E. Conabee 3,000 8,250 1,600 4,400 1,400 5,600
Donald A. Kenagy -- -- 6,600 9,400 11,400 21,850
Gerhart D. DeBoer -- -- 30,000 -- 35,155 --
</TABLE>
--------
(1) Based upon the closing price of the Common Stock on December 31, 1999, as
reported by the Nasdaq National Market ($4.563 per share).
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission ("SEC") initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Officers, directors and greater than ten percent shareholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended December 31, 1999, its
officers, directors and greater than ten percent beneficial owners complied
with all Section 16(a) filing requirements.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEES
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The following Report on Executive Compensation shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933 or under
the Securities Exchange Act of 1934, except to the extent the Company
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
The Compensation Committee. Executive compensation decisions are made by the
five-member Compensation Committee of the Board of Directors. Each member of
the Compensation Committee is a non-employee director. The Compensation
Committee reviews compensation programs and policies, monitors the performance
and compensation of executive officers, and other key employees and makes
appropriate recommendations and reports to the Board of Directors. All
executive compensation decisions made by the
9
<PAGE>
Compensation Committee are reviewed by the entire Board of Directors, except
for decisions regarding awards under the 1994 Stock Incentive Plan, which are
administered by the Stock Option Committee.
Compensation Policies. The Company maintains a compensation program designed
to attract and retain highly qualified executives and to motivate management.
The Company's compensation philosophy, as reflected in its compensation and
benefit arrangements, is that an executive's "at risk" compensation should be
tied directly to his or her contribution to the Company's success in achieving
performance objectives and that compensation incentives should align executive
officers' and shareholders' interests.
The Company's executive compensation program consists of three main
components: (1) base salary, (2) bonus, and (3) long-term incentives in the
form of stock options. Bonuses and stock options constitute the "at risk"
portion of the compensation program. The compensation of executive officers
for 1999 reflected the Compensation Committee's commitment to coordinating pay
with Company and individual performance. In establishing specific compensation
levels for the executive officers in 1999, the Compensation Committee
considered information provided by the Company's Chief Executive Officer, Mr.
Joel P. Moskowitz.
At the present time, none of the compensation payable to the executive
officers is subject to limitation under Section 162M of the Internal Revenue
Code (which limits the deductibility of compensation of $1 million per
executive, per year).
Salaries. The general policy of the Compensation Committee is to establish
executive base salaries that are (i) competitive and consistent with those
provided to others holding similar positions in industry, and (ii) consistent
with each executive's actual and expected contributions to the Company's
short-term and long-term success. The Board of Directors, acting on the
Compensation Committee's recommendation, increased Mr. Moskowitz's base salary
in 1999. The increase reflected the Compensation Committee's and the Board of
Directors' assessment of his performance in light of the Company's performance
in the prior fiscal year as compared to its annual budget as approved by the
Board of Directors. Salary increases for the other senior executives effected
during 1999 were based on similar considerations including individual
performance and position tenure.
Bonus Awards. Bonuses paid to executive officers are based primarily on a
targeted percentage of net income before taxes, and in part on discretionary
factors determined by the Compensation Committee based on the individual
performance of each executive.
Stock Options. Stock options are periodically granted to executive officers
and other key employees under the Company's 1994 Stock Incentive Plan (the
"Plan"). The Plan is administered by the Stock Option Committee of the Board
of Directors, which consists of the Chief Executive Officer and one other
director, neither of whom participates in the Plan. Stock options are viewed
as a form of long-term compensation and are intended to enable the Company to
obtain and retain competent personnel who will contribute to the Company's
success by their ability, ingenuity and industry and to provide incentives to
the participating officers and other key employees that are linked directly to
increases in stockholder value and should, therefore, inure to the benefit of
the stockholders. In determining the size of each stock option grant, the
Stock Option Committee evaluates several factors, including primarily the
executive's actual and potential contributions to the Company's long-term
success, and, to a lesser extent, the amount of options currently held by the
executive for whom an option grant is being considered. Stock options are
granted at the fair market value of the Company's stock on the date of grant
and generally vest over a period of five years.
10
<PAGE>
<TABLE>
<CAPTION>
Members of the Compensation Members of the Stock Option
Committee Committee
--------------------------- ---------------------------
<S> <C> <C> <C>
Peter Beardmore Richard A. Alliegro Joel P. Moskowitz Peter Beardmore
Frank Edelstein Melvin A. Shader
Milton L. Lohr
</TABLE>
CERTAIN TRANSACTIONS
On March 11, 1986, the Company sold 526,316 shares of its Common Stock to
Ford Motor Company ("Ford") at a price of $19.00 per share, for a total
purchase price of $10,000,000. At the same time, the Company and Ford created
a new corporation, Ceradyne Advanced Products, Inc. ("CAPI"), and entered into
agreements involving a broad-based technology transfer, licensing and joint
development program. Under the agreements, Ford contributed technology and a
portfolio of United States and foreign patents relating to technical ceramics
to CAPI in exchange for 80% of CAPI's capital stock, and Ceradyne acquired the
remaining 20% of CAPI in exchange for $200,000. The technology and patents
contributed by Ford were developed in the Ford Research Laboratories over a
15-year period. Under the March 11, 1986 agreements, the Company was granted
an option to acquire Ford's 80% interest in CAPI in exchange for an additional
680,983 shares of Ceradyne Common Stock, which the Company exercised effective
February 12, 1988. As a result, Ceradyne now owns 100% of CAPI and Ford owns a
total of 1,207,299 shares of the Company's Common Stock. The Company and Ford
also entered into a joint development agreement which includes a commitment by
Ford to contribute up to $5,000,000, on a matching value basis with Ceradyne,
for the development by Ceradyne of technical ceramic products oriented towards
the automotive market. Through December 31, 1999, Ford has contributed to the
Company, on a cost sharing basis, a total of $4.8 million in cash and
equipment under this joint development program.
So long as Ford continues to own 5%, or more, of the Company's outstanding
Common Stock, Ceradyne has agreed to use its best efforts to cause one person
designated by Ford to be elected a member of the Ceradyne Board of Directors
and, under certain circumstances in the event the Company issues additional
shares of its Common Stock in a public or private transaction, to permit Ford
to purchase, at the same price and terms upon which sold by the Company in
such transaction, additional shares of Ceradyne Common Stock to enable Ford to
maintain its percentage ownership of the Company.
In connection with the sale of stock to Ford, Joel P. Moskowitz, Chairman of
the Board, Chief Executive Officer and President of the Company, and members
of his immediate family agreed to vote shares of the Company's Common Stock
owned by them in favor of the election of Ford's nominee to the Board of
Directors. However, they may first vote that number of shares that is
necessary to assure the election of Joel P. Moskowitz as a director of the
Company, and any shares that are not necessary to assure the election of Mr.
Moskowitz and a Ford nominee to the Board of Directors may be voted by them
without restriction.
11
<PAGE>
COMPANY STOCK PERFORMANCE GRAPH
The following graph denotes a comparison of the cumulative total return to
stockholders of the Company, the Nasdaq Stock Market (U.S. Companies), and the
Nasdaq stocks (SIC 3200-3299 U.S. Companies, stone, clay, glass and concrete
products) from December 31, 1994 to December 31, 1999:
Comparison of Five Year Cumulative Total Returns
Performance Graph for
Ceradyne, Inc.
[PERFORMANCE GRAPH APPEARS HERE]
LEGEND
<TABLE>
<CAPTION>
CRSP Total Returns
Index for: 12/1994 12/1995 12/1996 12/1997 12/1998 12/1999
------------------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Ceradyne, Inc. 100.0 239.5 315.8 165.8 152.6 192.1
Nasdaq Stock Market
(US Companies) 100.0 141.3 173.9 213.1 300.4 556.9
NASDAQ Stocks
(SIC 3200-3299
US Companies) 100.0 101.9 129.0 129.6 106.3 114.4
</TABLE>
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 12/30/94.
12
<PAGE>
AMENDMENT TO THE 1994 STOCK INCENTIVE PLAN TO
INCREASE THE NUMBER OF AUTHORIZED SHARES
(Proposal 2)
The Board of Directors has approved, subject to stockholder approval, an
amendment to the 1994 Stock Incentive Plan (the "1994 Plan") to increase the
number of shares of Common Stock authorized for issuance thereunder from
650,000 to 800,000. Presently, there are available for issuance under the 1994
Plan approximately 1,000 shares of Common Stock. The additional 150,000 shares
will be reserved for future use by being offered to existing or new directors
and employees who meet the qualifications for participation in the Plan. The
Board of Directors believes that the proposed amendment to increase the number
of shares of Common Stock authorized under the Plan is necessary to continue
the effectiveness of the 1994 Plan in achieving the Company's objective to
attract and retain the services of qualified persons upon whose judgment,
initiative and efforts the successful conduct and development of the Company's
business largely depends, by providing them with an opportunity to participate
in the ownership of the Company and thereby have an interest in the success
and increased value of the Company.
The following table sets forth information with respect to options granted,
under the 1994 Plan, to the persons designated during the year ended December
31, 1999.
<TABLE>
<CAPTION>
Name and Position Dollar Value* Number of Shares
----------------- ------------- ----------------
<S> <C> <C>
Joel P. Moskowitz -- --
Chairman of Board,
Chief Executive Officer and President
David P. Reed $3.39 10,000
Vice President
Howard F. George -- --
Vice President
Earl E. Conabee -- --
Vice President
Donald A. Kenagy $3.25 5,000
Vice President
Gerhart D. DeBoer $3.25 5,000
Vice President
All Current Executive Officers as a Group
(6 persons) $3.32 20,000
Non-Employee Director Group (7 persons) $3.32 35,000
Non-Executive Officer Employee Group (27
persons) $3.39 76,000
</TABLE>
--------
* This figure represents the exercise price of the options, which is equal to
the fair market value of the shares of Common Stock at the date of grant of
the option. As of May 25, 2000, the market value of the Company's Common
Stock as reported by the NASDAQ Stock Market was $8.125 per share.
Vote Required for Approval and Recommendation of Board of Directors
The affirmative vote of the holders of a majority of shares of Common Stock
present or represented and entitled to vote at the Annual Meeting is required
to approve the adoption of the amendment to the 1994 Plan, assuming the
presence of a quorum.
13
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THIS
PROPOSAL.
Description of the 1994 Plan
The following description of the 1994 Plan is qualified in its entirety by
reference to the 1994 Plan. A copy of the 1994 Plan will be available at the
Annual Meeting and can also be obtained by a shareholder making a written
request to the Company's Secretary.
The 1994 Plan provides that options may be granted to employees, officers
and directors (including non-employee officers and directors), consultants and
other service providers of the Company and of any present or future subsidiary
of the Company. As of May 30, 2000, approximately 350 persons were eligible to
participate in the 1994 Plan. Options can be granted for the purchase of up to
800,000 shares of Common Stock, subject to stockholder approval of the
Amendment. The 1994 Plan provides for appropriate adjustments in the number
and kind of shares subject to the 1994 Plan and to outstanding options in the
event of stock splits, stock dividends or certain other similar changes in the
capital structure of the Company. Options may be granted either as "incentive
stock options" as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), or as nonqualified stock options.
The 1994 Plan is administered by the Stock Option Committee (the
"Committee") of the Board of Directors, which selects the recipients of
options. The Committee also determines the number of shares, the exercise
price, the term, any conditions on exercise, the consequences of any
termination of employment, and other terms of each option. The term of options
may not exceed ten years from the date of grant (five years in the case of an
incentive stock option granted to a person who owns more than 10% of the
combined voting power of all classes of stock of the Company). The option
exercise price may not be less than 100% of fair market value per share of the
Common Stock on the date of grant (110% of fair market value in the case of an
incentive stock option granted to a person who owns more than 10% of the
combined voting power of all classes of stock of the Company). There is no
restriction as to the maximum number of options that may be granted to any
optionee, except that the aggregate fair market value of the Common Stock
(determined as of the date of grant) with respect to which incentive stock
options granted under the 1994 Plan and any other plan of the Company become
exercisable for the first time by any optionee during any calendar year may
not exceed $100,000.
The option price is payable in full upon exercise, and payment may be made
in cash, or in the discretion of the Committee by delivery of shares of Common
Stock (valued at their fair market value at the time of exercise), the
optionee's promissory note in a form and on terms acceptable to the Committee,
the cancellation of indebtedness of the Company to the optionee, the waiver of
compensation due or accrued to the optionee for services rendered, a "same day
sale" commitment from the optionee and a broker-dealer that is a member of the
National Association of Securities Dealers, Inc. ("NASD Dealer") whereby the
optionee irrevocably elects to exercise the option and to sell a portion of
the shares so purchased to pay for the exercise price and whereby the NASD
Dealer irrevocably commits upon receipt of such shares to forward the exercise
price to the Company, "margin" commitment from the optionee and an NASD Dealer
whereby the optionee irrevocably elects to exercise the option and to pledge
the shares purchased to the NASD Dealer in a margin account as security for a
loan from the NASD Dealer in the amount of the exercise price and whereby the
NASD Dealer irrevocably commits upon receipt of such shares to forward the
exercise price to the Company, or by any combination of the foregoing methods
of payment.
Options granted under the 1994 Plan may not be transferred by an optionee
other than by will or by the laws of descent and distribution.
14
<PAGE>
The Board of Directors has the right at any time to terminate or amend the
1994 Plan, but no such action may terminate options already granted or
otherwise affect the rights of any optionee under an outstanding option
without the optionee's consent. Unless sooner terminated by the Board of
Directors, the 1994 Plan will terminate on April 11, 2004.
Federal Income Tax Consequences
The Federal income tax discussion set forth below is intended for general
information only. State and local income tax consequences are not discussed,
and may vary from locality to locality.
Incentive Stock Options. There is no taxable income to an employee when an
incentive stock option is granted to him or when that option is exercised;
however, generally the amount by which the fair market value of the shares at
the time of exercise exceeds the option price will be included in the
optionee's alternative minimum taxable income upon exercise. If stock received
on exercise of an incentive option is disposed of in the same year the option
was exercised, and the amount realized is less than the stock's fair market
value at the time of exercise, the amount includable in alternative minimum
taxable income does not exceed the amount realized on the sale or exchange of
the stock, less the taxpayer's basis in such stock. Gain realized by an
optionee upon sale of stock issued on exercise of an incentive stock option is
taxable as long-term capital gain, and no tax deduction is available to the
Company, unless the optionee disposes of the shares within two years after the
date of grant of the option or within one year after the date of exercise. In
such event the difference between the option exercise price and the fair
market value of the shares on the date of the optionee's exercise will be
taxed at ordinary income rates, and subject to Section 162(m) of the Code,
which limits the deductibility of compensation in excess of $1,000,000 per
executive officer, the Company will be entitled to a deduction to the extent
the employee must recognize ordinary income.
Nonqualified Stock Options. The recipient of a nonqualified stock option
will not realize taxable income upon the grant of the option, nor will the
Company then be entitled to any deduction. Generally, upon exercise of
nonqualified stock options the optionee will realize ordinary income and,
subject to Section 162(m) of the Code, the Company will be entitled to a
deduction in an amount equal to the difference between the option exercise
price and the fair market value of the stock at the date of exercise. The
Company will be required to withhold taxes on the ordinary income realized by
an optionee upon exercise of nonqualified stock options in order to be
entitled to the tax deduction. An optionee's basis for the stock for purposes
of determining his gain or loss on his subsequent disposition of the shares
generally will be the fair market value of the stock on the date of exercise
of the nonqualified stock option.
15
<PAGE>
GENERAL
Independent Accountants
The Board of Directors has selected Arthur Andersen LLP as independent
public accountants to audit the financial statements of the Company for the
2000 calendar year. Representatives of Arthur Andersen LLP will be present at
the Annual Meeting to respond to appropriate questions and will be given an
opportunity to make a statement if they so desire.
Stockholder Proposals and Advance Notice Procedures
The federal proxy rules (SEC Rule 14a-8) specify the requirements for
inclusion of stockholder proposals in the Company's Proxy Statement for the
Annual Meeting of Stockholders. Stockholders who wish to have proposals
included in the Company's Proxy Statement for action at the 2001 Annual
Meeting must submit their proposals in writing to the Secretary of the Company
at the address set forth on the first page of this Proxy Statement so that
they are received by the Secretary no later than February 12, 2001, and must
also comply with the other requirements set forth in SEC Rule 14a-8.
If a stockholder desires to bring business before the meeting which is not
the subject of a proposal properly submitted in accordance with SEC Rule 14a-
8, the stockholder must follow procedures outlined in the Company's Bylaws.
The Bylaws provide that a stockholder entitled to vote at the meeting may make
nominations for the election of directors or may propose that other business
be brought before the meeting only if (a) such nominations or proposals are
included in the Company's Proxy Statement or otherwise properly brought before
the meeting by or at the direction of the Board of Directors, or (b) the
stockholder has delivered written notice to the Company (containing certain
information specified in the Bylaws) not less than 60 days nor more than
90 days prior to the date of the meeting. However, if the Company has given
less than 70 days advance notice or public disclosure of the date the meeting
is to be held, written notice of a nomination or proposal to be submitted by a
stockholder at the meeting will be timely if it has been received by the
Company not later than the 10th business day following the date on which
notice of the meeting is mailed or the meeting date is otherwise publicly
disclosed.
A copy of the full text of the Bylaw provisions containing the advance
notice procedures described above may be obtained upon written request to the
Secretary of the Company.
Expenses of Solicitation
The cost of soliciting the enclosed form of proxy will be borne by the
Company. In addition, the Company will reimburse brokerage firms and other
persons representing beneficial owners of shares for their expenses in
forwarding solicitation material to such beneficial owners. Directors,
officers and regular employees of the Company may, without additional
compensation, also solicit proxies either personally or by telephone, telegram
or special letter.
Howard F. George
Secretary
June 12, 2000
16
<PAGE>
[LOGO OF CERADYNE, INC. APPEARS HERE]
Ceradyne, Inc.
This Proxy is Solicited on Behalf of the Board of Directors
For Annual Meeting of Stockholders July 28, 2000
The undersigned hereby appoints Joel P. Moskowitz and Howard F. George, and
each of them, as Proxies, with full power of substitution, to vote the shares of
Ceradyne, Inc. which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Stockholders of Ceradyne, Inc. to be held at
The Radisson Hotel, located at 4545 MacArthur Blvd., Newport Beach,
California 92660, on Friday, July 28, 2000 at 10:00 a.m. local time and at any
adjournment thereof.
[SEE REVERSE SIDE]
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
___ |
A [X] Please mark your | |
votes as in this |________
example.
FOR WITHHELD Nominees: FOR AGAINST ABSTAIN
1. Election [_] [_] Joel P. Moskowitz 2. Approve amendment to the Company's [_] [_] [_]
of Directors. Leonard M. Allenstein 1994 Stock Incentive Plan.
Richard A. Alliegro
For, except vote withheld from the Paul N. Blumberg 3. In their discretion, the Proxies are authorized to vote upon such
following nominee(s): Frank Edelstein other business as may properly come before the meeting.
(Instruction: To withhold authority Wilford D. Godbold, Jr.
to vote for any individual nominee Milton L. Lohr This Proxy confers discretionary authority to cumulate and
write that nominee's name on the distribute votes for any or all of the nominees named above for
space provided below.) which the authority to vote has not been withheld.
___________________________________
This proxy, when properly executed, will be voted in the manner
directed herein. If no direction is made, this Proxy will be voted
FOR the election of directors and FOR Proposal 2.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
SIGNATURE ___________________________________ DATE ___________ SIGNATURE ______________________________________ DATE ____________
NOTE: Please sign exactly as name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney,
as executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate
name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person.
</TABLE>
