SCHEDULE 14A
------------
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. 1)
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-ll(c) or Section
240.14a-12
________________________________________________________________________________
- --------------------------------------------------------------------------------
CPAC, Inc.
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
- --------------------------------------------------------------------------------
Thomas J. Weldgen, Chief Financial Officer
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-ll(c)(l)(ii), 14a6(i)(1), or 14a6(j)(2)
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a6(i)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11
1) Title of each class of securities to which transaction applies
________________________________________________
------------------------------------------------
2) Aggregate number of securities to which transaction applies
________________________________________________
------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
________________________________________________
------------------------------------------------
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-ll(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:
________________________________________________
------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
----------------------------------------
CPAC, INC.
2364 LEICESTER ROAD
LEICESTER, NEW YORK 14481
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of CPAC,
Inc. will be held at the Genesee River Hotel-Restaurant and Reception Center,
134 North Main Street (Route 36), Mount Morris, New York 14510, on Wednesday,
August 5, 1998, at 11:00 A.M. E.D.T. for the following purposes:
1. To elect directors to serve until the next annual meeting of
Shareholders and until their successors are duly elected and qualified;
2. To ratify the appointment by The Board of Directors of Coopers &
Lybrand L.L.P. as independent auditors of the Company for its fiscal year ending
March 31, 1999; and
3. To transact any other business properly brought before the meeting or
any adjournments.
Accompanying this Notice is a Proxy and Proxy Statement. If you are unable
to be present in person, please sign and date the enclosed form of Proxy and
return it in the enclosed envelope which requires no postage. Only Shareholders
of record at the close of business on June 24 , 1998 will be entitled to vote at
the Annual Meeting and any adjournments thereof. The prompt return of your
Proxy will save the expense of further communications.
By Order of the Board of Directors
DATED: July 6, 1998 /s/ Robert Oppenheimer
---------------------------------
ROBERT OPPENHEIMER, Secretary
CPAC, INC.
2364 LEICESTER ROAD
LEICESTER, NEW YORK 14481
PROXY STATEMENT
---------------
DATE OF PROXY STATEMENT: JUNE 24, 1998
DATE OF MAILING: JULY 6, 1998
ANNUAL MEETING OF SHAREHOLDERS: AUGUST 5, 1998
THE ENCLOSED PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF CPAC, INC.
(HEREINAFTER THE "COMPANY"). Any Proxy given pursuant to such solicitation may
be revoked by the Shareholder at any time prior to the voting of the Proxy. The
signing of the form of Proxy will not preclude the Shareholder from attending
the Annual Meeting and voting in person. Shares represented by the Proxy will
be voted in accordance with the directions of the Shareholder. The directors
know of no matters to come before the meeting other than those set forth in the
Proxy, but in the event any other matter may properly be brought before the
meeting, the Proxy holders will vote the Proxies in their discretion on such
matters. All of the expenses involved in preparing and mailing this Proxy
Statement and the material enclosed herewith will be paid by the Company. The
Company will reimburse banks, brokerage firms and other custodians, nominees and
fiduciaries for expenses reasonably incurred by them in sending proxy material
to beneficial owners of stock.
Holders of 33 1/3% of the issued and outstanding common stock of the
Company must be present in person or by Proxy in order to establish a quorum
for the conduct of business at the Annual Meeting. Only record holders of the
common stock at the close of business on June 24, 1998 are entitled to vote at
the Annual Meeting. On that day 6,905,196 shares of common stock $.01 par value
per share, were issued and outstanding. Each such share is entitled to one vote
at the Annual Meeting.
A copy of the Annual Report filed with the Securities and Exchange
Commission on Form 10-K may be obtained by writing CPAC, Inc., P.O. Box 25,
Leicester, New York 14481, Attention: Thomas J. Weldgen, Vice President,
Finance.
SHAREHOLDER PROPOSALS
- ---------------------
Any proposal which a qualified Shareholder of the Company intends to
present at the 1999 Annual Meeting of Shareholders that is received by the
Company after February 25, 1999 will not be eligible for inclusion in the
Company's proxy statement and form of proxy for that meeting. To be a qualified
Shareholder, a Shareholder must have owned at least $1,000 in market value of
the Company's securities for at least one year before the date of submission of
the proposal to the Company.
PROPOSAL 1
----------
ELECTION OF DIRECTORS
---------------------
Under the By-laws of the Company, its Board of Directors is elected
annually to serve until the next annual meeting of Shareholders and until the
directors' successors are duly elected and shall qualify. Unless authority to
vote for the election of directors is withheld or the Proxy is marked to the
contrary therein, the enclosed Proxy will be voted for the election of the five
nominees named below. Messrs. Hendrickson, Isaacs, Oppenheimer, James, Jr. and
Burton are currently directors of the Company, with Messrs. Hendrickson,
Isaacs, Oppenheimer, James, Jr. and Burton having been elected at the annual
meeting of Shareholders in 1997. While management has no reason to believe that
any nominee will not be available as a candidate, should such a situation arise,
the Proxy may be voted for the election of other persons as directors. Each
nominee must receive at least a plurality of the shares of stock of the Company
present in person or by Proxy and entitled to vote at the Annual Meeting.
Management recommends that the nominees listed in the following table be
elected as directors of the Company, to serve until the next annual meeting of
Shareholders and until their successors are duly elected and shall qualify. The
table sets forth certain information with respect to each nominee.
PRINCIPAL SERVED AS
--------- ---------
NOMINEE OCCUPATION (1) AGE DIRECTOR SINCE
- ------- -------------- --- --------------
Thomas N. Hendrickson President and Chief 56 1969
(2) Executive Officer,
CPAC, Inc.
Robert C. Isaacs Senior Vice President, 58 1988
(3) CPAC, Inc.;
Chief Acquisitions Officer,
CPAC, Inc.
Robert Oppenheimer Attorney & Partner, 69 1969
(4) Chamberlain, D'Amanda,
Oppenheimer & Greenfield
Seldon T. James, Jr. Financial Consultant to 71 1972
(5) Corporations
John C. Burton Ernst & Young Professor 65 1991
(6) of Accounting and Finance,
Graduate School of Business,
Columbia University
NOTES:
- ------
(1) Each nominee has had the same principal occupation for the past five
(5) years. Robert C. Isaacs previously served as President of Trebla Chemical
Company until April 24, 1995. Effective April 1, 1996, Mr. Isaacs was appointed
Chief Acquisitions Officer of CPAC, Inc.
(2) Mr. Hendrickson is Chairman of the Board and Treasurer of the Company.
He is also Chairman of the Board and Chief Executive Officer of Profit Recovery
Systems, Inc., Trebla Chemical Company, Allied Diagnostic Imaging Resources,
Inc., CPAC Europe N.V. and The Fuller Brush Company, Inc. He is Chairman of the
Board, President and Managing Director of CPAC Italia S.r.1.
(3) Mr. Isaacs is Chief Operating Officer of The Fuller Brush Company,
Inc. and Trebla Chemical Company. He is a director of Trebla Chemical Company,
Allied Diagnostic Imaging Resources, Inc. and The Fuller Brush Company, Inc.
(4) Mr. Oppenheimer is Secretary to the Company and is a member of the law
firm of Chamberlain, D'Amanda, Oppenheimer & Greenfield, which firm serves as
general counsel to the Company. Mr. Oppenheimer is also a director and
Secretary of Trebla Chemical Company and The Fuller Brush Company, Inc. He is
Secretary of Profit Recovery Systems, Inc., Allied Diagnostic Imaging Resources,
Inc., CPAC Europe N.V., and CPAC Italia S.r.l. Mr. Oppenheimer receives no
compensation as director or as Secretary of the Company or its subsidiaries.
For the fiscal year ended March 31, 1998, Mr. Oppenheimer's firm was paid
$247,778 by the Company in legal fees for legal services rendered to the
Company.
(5) Mr. James, Jr. is a director of Profit Recovery Systems, Inc. He
receives no compensation in such capacity.
(6) Dr. Burton serves on the boards of directors of Scholastic, Inc. and
Salomon Swapco, Inc. and previously was a board member of Commerce Clearing
House, Inc. He is also a member of the Valuation Committee of E.M. Warburg
Pincus Venture Capital Funds. He is a consultant to numerous accounting and
business firms. From 1972 to 1976, Dr. Burton was Chief Accountant, Securities
and Exchange Commission. From 1982 to 1988, he was Dean of the Graduate School
of Business, Columbia University. From 1991 to 1994, he was a Public Governor
of the National Association of Securities Dealers, Inc. (NASD). In August,
1997, Dr. Burton was elected as the 59th member of The Accounting Hall of Fame.
The Accounting Hall of Fame was established in 1950 at The Ohio State University
for the purpose of honoring accountants who have made significant contributions
to the advancement of accounting since the beginning of the 20th century.
<TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
---------------------------------------------------
MANAGEMENT PRINCIPAL SHAREHOLDERS
----------------------------------
As of June 24, 1998, the following persons are known to the Company to be the beneficial owners of more than five percent of
the Company's issued and outstanding common stock, $.01 par value, the only class of its voting securities:
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT OF
---------------- --------------------------- ------
BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP (1) CLASS
<S> <C> <C>
Thomas N. Hendrickson 438,538 shares-outright 6.21%
5 Simmons Road ownership; (2)
Perry, New York 14530 28,264 shares attributable from .39%
ownership by spouse
Harvard Management 783,000 shares-outright ownership; 11.08%
Company, Inc.
600 Atlantic Avenue
Boston, MA 02210
FMR Corporation 708,600 shares-outright ownership 10.03%
82 Devonshire Street
Boston, MA 02109
433,854 shares-outright ownership
Turnco Family Partnership, LLP 6.14%
3900 Broadway
Great Bend, Kansas 67530
(1) Number of shares includes shares of the Company's common stock subject to options but only those shares which may be
purchased within sixty ( 60 ) days of June 24, 1998.
(2) Includes 23,437 shares which may be purchased through an option granted December 8, 1993 and 46,875 shares which may be
purchased through exercise of an option granted February 9, 1994 pursuant to the Company's 1991 Employees' Incentive Stock Option
Plan. Includes 82,500 shares which may be purchased through exercise of an option granted February 8, 1996 and 8,625 shares which
may be purchased through exercise of an option granted on August 6, 1997 pursuant to the Company's Executive Long Term Stock
Investment Plan.
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------
As of June 24, 1998, the Company's directors and its four "named
executive officers" (listed individually below) and all its directors and
officers (listed as a group below) beneficially owned shares of the Company's
common stock, $.01 par value, the only class of its voting securities, as
follows:
<TABLE>
<CAPTION>
NAME AMOUNT BENEFICIALLY OWNED(1) PERCENT
---- ---------------------------- -------
OF CLASS
--------
<S> <C> <C>
Thomas N. Hendrickson, 466,802 shares (2) 6.45%
Chief Executive Officer
and Director
Robert C. Isaacs, 98,749 shares (3) 1.36%
Senior Vice President
and Director
Robert Oppenheimer 78,825 shares (4) 1.09%
Secretary and Director
Seldon T. James, Jr., 81,936 shares (5) 1.13%
Director
John C. Burton 26,406 shares (6) .36%
Director
Thomas J. Weldgen, 29,019 shares (7) .40%
Vice President, Finance and
Chief Financial Officer
Wendy F. Clay, 24,581 shares (8) .34%
Vice President,
Administration;
CPAC, Inc. Equipment
Division President
All executive officers and 806,318 shares (9) 11.14%
directors (seven persons)
</TABLE>
(1) Number of shares includes shares subject to options but only
those shares which may be purchased within sixty ( 60 ) days of June 24, 1998.
(2) Includes 28,264 shares owned by Mr. Hendrickson's spouse. Includes
23,437 shares which may be purchased through exercise of an option granted on
December 8, 1993 and 46,875 shares which may be purchased through exercise of an
option granted on February 9, 1994 pursuant to the Company's 1991 Employees'
Incentive Stock Option Plan. Includes 82,500 shares of the Company's common
stock which may be purchased through exercise of an option granted on February
8, 1996 and 8,625 shares which may be purchased through exercise of an option
granted on August 6, 1997 pursuant to the Company's Executive Long Term Stock
Investment Plan.
(3) Includes 11,718 shares which may be purchased through exercise of an
option granted on November 18, 1994, 9,375 shares which may be purchased through
exercise of an option granted on October 20, 1995, 67,500 shares which may be
purchased through exercise of an option granted on February 8, 1996, and 6,250
shares which may be purchased through exercise of an option granted on August 6,
1997 pursuant to the Company's Executive Long Term Stock Investment Plan.
(4) Includes 10,000 shares which may be purchased through exercise of an
option granted on August 7, 1996, 3,000 shares which may be purchased through
exercise of an option granted on August 9, 1996, and 2,000 shares which may be
purchased through exercise of an option granted on August 8, 1997 pursuant to
the Company's NonEmployee Directors Stock Option Plan.
(5) Includes 17,250 shares owned by Mrs. Seldon T. James, Jr. Includes
10,000 shares which may be purchased through exercise of an option granted on
August 7, 1996, 3,000 shares which may be purchased through exercise of an
option granted on August 9, 1996 and 2,000 shares which may be purchased through
exercise of an option granted on August 8, 1997 pursuant to the Company's
NonEmployee Directors Stock Option Plan.
(6) Includes 10,000 shares which may be purchased through exercise of an
option granted on August 7, 1996, 3,000 shares which may be purchased through
exercise of an option granted on August 9, 1996 and 2,000 shares which may be
purchased through exercise of an option granted on August 8, 1997 pursuant to
the Company's NonEmployee Directors Stock Option Plan.
(7) Includes 3,437 shares which may be purchased through exercise of an
option granted on December 8, 1993 pursuant to the Company's 1991 Employees'
Incentive Stock Option Plan, 4,687 shares which may be purchased through an
option granted November 18, 1994, 4,375 shares which may be purchased through
exercise of an option granted October 20, 1995, 3,000 shares which may be
purchased through exercise of an option granted June 5, 1996 and 2,500 shares
which may be purchased through exercise of an option granted June 24, 1997
pursuant to the Company's Executive Long Term Stock Investment Plan. Mr.
Weldgen, age 46, joined the Company as Chief Financial Officer of the Company
and its subsidiary companies on March 2, 1992 and was appointed Vice President-
Finance on April 5, 1998. Previously, Mr. Weldgen was Senior Manager with the
accounting firm of Coopers & Lybrand L.L.P. from 1987 to 1990 and a Partner in
such firm from 1990 until becoming Chief Financial Officer of the Company.
(8) Includes 4,687 shares which may be purchased through exercise of an
option granted December 8, 1993 pursuant to the Company's 1991 Employees'
Incentive Stock Option Plan, 3,906 shares which may be purchased through
exercise of an option granted November 18, 1994, 3,125 shares which may be
purchased through exercise of an option granted October 20, 1995, 2,000 shares
which may be purchased through exercise of an option granted June 5, 1996, and
2,500 shares which may be purchased through exercise of an option granted June
24, 1997 pursuant to the Company's Executive Long Term Stock Investment Plan.
Ms. Clay was appointed Vice President, Administration on July 1, 1992 and was
appointed Executive Vice President of the CPAC Equipment Division on April 1,
1994, and was promoted to President of the CPAC Equipment Division effective
June 8, 1998. She has been with the Company since December, 1982.
(9) Includes 78,436 shares which may be purchased through exercise of
options granted pursuant to the Company's 1991 Employees' Incentive Stock Option
Plan. Includes 212,061 shares which may be purchased through exercise of
options granted pursuant to the Company's Executive Long Term Stock Investment
Plan. Includes 45,000 shares which may be purchased through exercise of options
granted pursuant to the Company's NonEmployee Directors Stock Option Plan.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
- -------------------------------------------------------
Based upon its review of copies of Forms 3 and 4 and 5 received by it, the
Company believes that, to the extent such Forms were required to be filed, such
Forms were timely filed pursuant to Section 16 of the Securities Exchange Act of
1934, and that no director, officer and/or 10% Shareholder required to file such
Forms failed to either file them or file them in timely fashion.
NONEMPLOYEE DIRECTORS STOCK OPTION PLAN
- ---------------------------------------
The NonEmployee Directors Stock Option Plan approved by the Shareholders
calls for the automatic grant of an option for 3,000 shares to each nonemployee
director elected at the annual meeting of Shareholders on the first Friday after
such annual meeting, at a price equal to the fair market value on such date.
INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
----------------------------------------------
The Board of Directors of the Company met seven times during the fiscal
year ended March 31, 1998. Each director attended, either in person or by
telephonic conference as permitted by the Company's By-laws, 100% of the total
number of such meetings and 100% of the total number of meetings of the
committees of The Board on which he served during the 1998 fiscal year.
Directors of the Company who are not officers of the Company may be compensated
for attendance at meetings and for other agreed upon consulting services
rendered to the Company. In the fiscal year ended March 31, 1998, Dr. Burton
was paid $20,000 and Mr. James, Jr. was paid $31,000 and payments in that amount
will continue to Mr. James, Jr. for the remainder of his life. In addition,
the Company maintains a corporate office in New York City which is made
available to Mr. James, Jr. when he wishes to use it.
The Audit Committee of The Board of Directors, which met two times in
fiscal year 1998, is composed of three directors, the majority of whom are not
officers, namely Dr. Burton and Messrs. James, Jr. and Oppenheimer. The Audit
Committee (1) annually recommends to The Board a firm of independent public
accountants for appointment as auditors of the Company; (2)reviews with the
independent auditors the scope and results of each annual audit; (3) reviews
with the independent auditors and the Company's internal financial personnel,
suggestions or recommendations made by either of them; (4) reviews with
appropriate Company officers the performance of the independent auditors and the
internal financial personnel; (5) considers the possible effect on the
independence of the independent auditors of each professional service rendered
or to be rendered by such auditors; (6) reviews with appropriate Company
officers and financial personnel, significant accounting treatments and
estimates, and approves in advance all changes to accounting principles
contemplated by such personnel; (7) conducts appropriate reviews of all related
party transactions on an ongoing basis and reviews potential conflict of
interest situations where appropriate; and (8) reviews and makes recommendations
to The Board of Directors regarding the Annual Report to Shareholders.
The Compensation Committee of The Board of Directors, which met three times
in fiscal 1998, is composed of three directors, the majority of whom are not
officers, namely Mr. James, Jr., Dr. Burton and Mr. Oppenheimer. The
Compensation Committee (1) reviews and makes recommendations to The Board of
Directors on employment policies, forms and levels of compensation, including
specifically, the Company's Incentive Compensation Plan and the performance and
level of compensation of the officers and top management personnel of the
Company; and (2) reviews and makes recommendations to The Board on the
operation, performance and administration of the Company's other employee
benefit plans, including the Company's 401(k) profit sharing plan.
The Executive Long Term Stock Investment Committee of The Board of
Directors, which met two times in fiscal 1998, is composed of three directors,
the majority of whom are not officers of the Company, and all of whom are
ineligible under the Company's Executive Long Term Stock Investment Plan, namely
Mr. James, Jr., Dr. Burton and Mr. Oppenheimer. For further information
concerning the operation of the Executive Long Term Stock Investment Committee
and the Executive Long Term Stock Investment Plan during fiscal 1998, see Page
20 of this Proxy Statement.
There is no standing Nominating Committee of The Board of Directors, The
Board acting as a committee of the whole, serving as the Nominating Committee.
There are no agreements or arrangements for the nomination or appointment of any
person to The Board of Directors.
EMPLOYMENT AGREEMENT
- --------------------
Effective September 20, 1995, the Company and Mr. Hendrickson entered into
an employment agreement for a term of five years, which term is automatically
extended for an additional one year on each of the first three anniversary
dates, provided that Mr. Hendrickson is in the employ of the Company on that
date. Under the agreement, subject to the control of the Board of Directors,
Mr. Hendrickson's duties shall be those of Chief Executive Officer of CPAC, Inc.
The agreement sets forth a basic salary at an initial annual rate of $350,000
subject to increases in such base pay equal to the percent of increase given to
other senior officers of the Company, or such other percent as determined by the
Board of Directors.
In addition, to his base pay, Mr. Hendrickson is automatically a
participant in the Company's Incentive Compensation Plan, as described on Page
19 of this Proxy Statement. Mr. Hendrickson is also entitled to all rights and
benefits for which he shall be eligible under any stock option plan, bonus,
participation or extra compensation plans, pensions, group insurance or other
benefits which the Company may provide for him or for its employees generally.
In the event of his disability, his base salary shall be continued for the
remainder of the contract term in effect at the time of his disability, but he
will not be entitled to bonus for the period after his disability other than a
bonus payable at the end of the fiscal year in which he becomes disabled,
prorated on the basis of the number of days in which he was employed.
If Mr. Hendrickson is terminated by the Company other than for cause, he is
entitled to receive his base salary for the duration of the agreement, without
further extension, with annual increments equal to the percent increase given to
other senior officers of the Company; receive annually during such term a bonus
equal to the highest annual bonus received in the three fiscal years of the
Company immediately preceding his termination and be granted non-qualified stock
options at the price and for the term of the qualified options which he holds at
the date of termination, which options shall be effective upon the first date
when he can no longer exercise his qualified stock options.
EXECUTIVE COMPENSATION
----------------------
The following table sets forth certain information for the fiscal years
ended March 31, 1998, 1997 and 1996 concerning compensation paid to or accrued
for the Chief Executive Officer and the most highly compensated executive
officers of the Company whose total annual salary and bonus exceeded $100,000.
<TABLE>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
-------------------
<CAPTION>
(A) (B) (C) (D)(1) (E)(2)
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
--------------------------- ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Thomas N. Hendrickson 1998 $370,519 $190,641 $5,880
President and Chief 1997 $331,346 $417,638 $5,880
Executive Officer 1996 $354,281 $374,625 $5,705
Robert C. Isaacs 1998 $264,881 $92,114 $4,020
Senior Vice President 1997 $314,654 $289,710 $5,700
1996 $306,114 $258,630 $5,525
Thomas J. Weldgen 1998 $120,288 $36,245 $6,235
Vice President-Finance and 1997 $111,352 $81,049 $6,101
Chief Financial Officer 1996 $104,630 $74,853 $4,925
Wendy F. Clay 1998 $97,200 $23,881 $5,100
Vice President, Administration 1997 $94,171 $53,798 $5,100
CPAC, Inc. Equipment 1996 $86,756 $37,189 $4,925
Division President
</TABLE>
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS PAYOUTS
(F)(3)(4) (G) (H)(5) (I)(1)(6)(7)(8)(9)
RESTRICTED
STOCK OPTIONS LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR AWARDS SARS (#) PAYOUTS COMPENSATION
- ------
<S> <C> <C> <C> <C> <C>
Thomas N. Hendrickson 1998 - 34,500 - $ 68,475
President and Chief 1997 - - - $114,225
Executive Officer 1996 - 137,500 - $113,805
Robert C. Isaacs 1998 - 25,000 - $ 4,750
Senior Vice President 1997 - - - $ 4,500
1996 - 131,250 - $ 4,500
Thomas J. Weldgen 1998 - 8,000 - $ 4,750
Vice President-Finance and 1997 - 3,000 - $ 4,500
Chief Financial Officer 1996 - 4,375 - $ 3,094
Wendy F. Clay 1998 - 3,000 - $ 4,430
Vice President, Administration 1997 - 2,000 - $ 4,161
CPAC, Inc. Equipment 1996 - 3,125 - $ 2,063
Division President
</TABLE>
NOTES:
- ------
(1) See additional information on the Company's Incentive Compensation
Plan on Page 19 of the Proxy Statement.
(2) Amounts represent auto expense allowances.
(3) On April 13, 1994, the Company entered into a deferred compensation
arrangement pursuant to which the Company issued 23,437 shares of the Company's
common stock ( as adjusted for each of the five for four stock splits
distributed to shareholders on January 12, 1995 and May 15, 1996 respectively )
to Mr. Hendrickson, which shares are subject to forfeiture in the event certain
conditions are not met. Such restrictions lapse with respect to one fourth of
the shares awarded on April 13, 1996, 1997, 1998 and 1999, respectively.
(4) These shares, as adjusted for the January 12, 1995 and May 15, 1996
stock splits, were awarded on November 18, 1994 under the Company's Executive
Long Term Stock Investment Plan. See Page 20 of this Proxy Statement.
(5) There are no Long Term incentive payouts.
(6) Amounts include matching contributions made by the Company to the
Company's 401(k) retirement plan: Mr. Hendrickson - $4,750; Mr. Isaacs - $4,750;
Mr. Weldgen - $4,750; and Ms. Clay - $4,430.
(7) The Company is assignee of a $50,000 life insurance policy on the life
of Mr. Hendrickson. The Company has entered into a split dollar agreement with
Mrs. Thomas N. Hendrickson. In the event of Mr. Hendrickson's death, the cash
value of the policy determined according to the agreement is payable to the
Company and the balance is payable to Mrs. Hendrickson. The Company is the
owner of the policy and pays all premiums. For the fiscal year ended March 31,
1998, the amount includible by Mr. Hendrickson in income was $725.
(8) On January 10, 1980, the Company established the terms of a salary
continuation agreement for Mr. Hendrickson, funded in part by key man ordinary
life insurance owned by and payable to the Company. The Company has purchased a
$310,000 ordinary life insurance policy on the life of Mr. Hendrickson.
Pursuant to the salary continuation agreement, if he dies while in the employ of
the Company, his beneficiary will receive $40,000 per year for 10 years. If he
retires from the Company after reaching age 60, he or his beneficiary will
receive an amount equal to two times the cash value of his key man policy as of
the date of retirement. For the fiscal year ended March 31, 1998 the premium
for such policy was approximately $6,100. The amount accrued for the salary
continuation agreement for the fiscal year ended March 31, 1998 was $6,900.
(9) On October 13, 1992, the Company entered into a Deferred Compensation
Arrangement with Mr. Hendrickson and contributed $250,000 to a Trust in order to
provide itself with a source of funds to meet its obligations thereunder. The
Company deferred $50,000 of Mr. Hendrickson's compensation for the 1998 fiscal
year. This amount was contributed to the Trust part of which contribution was
used to fund a $325,000 variable, universal life insurance policy on the life of
Mr. Hendrickson with the Trust as the beneficiary thereof. The Arrangement
calls for the payment of the principal amount contributed to the Trust, plus
earnings thereon, in ten annual payments of principal and earnings, to
Mr. Hendrickson and/or his beneficiaries in the event his service with the
Company is terminated by it prior to age 55; upon his actual retirement after
attainment of age 55; upon his actual retirement or separation from service due
to total disability or a change in control; or upon his death. Under the
Arrangement, the principal of the Trust, as well as all earnings, are subject to
the claims of the Company's general creditors in the event of the Company's
insolvency or bankruptcy and Mr. Hendrickson and/or his beneficiaries are
unsecured creditors of the Company. Mr. Oppenheimer and Mr. James, Jr. are the
Trustees of the Trust created under the Arrangement. They receive no
compensation in such capacity. The Company pays all expenses associated with
the administration and investment of the Trust. The Trust's assets, except for
an insurance policy, are invested with an independent investment firm. The
amount accrued for the Deferred Compensation Arrangement for the fiscal year
ended March 31, 1998, was $50,000.
Options The following table sets forth the details of options granted to the
- --------
individuals listed in the Summary Compensation Table during fiscal year 1998.
<TABLE>
OPTION/SAR GRANTS TABLE
OPTION/SAR GRANTS IN LAST FISCAL YEAR
-------------------------------------
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Terms (2)
------------------------------------------------ -----------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE
NAME AND PRINCIPAL OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION (3) (4)
POSITION GRANTED (1) FISCAL YEAR ($/SHARE) DATE 5% - ($) 10% - ($)
---------------------------- ----------- ----------- --------- --------------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Thomas N. Hendrickson 34,500 21.8% 11.62 8/05/2007 204,797 535,685
President & Chief
Executive Officer
Robert C. Isaacs 25,000 15.8% 11.62 8/05/2007 148,404 388,177
Senior Vice President
Thomas J. Weldgen 8,000 5.1% 11.56 6/23/2007 47,233 122,417
Vice President-Finance and
Chief Financial Officer
Wendy F. Clay 3,000 1.9% 11.56 6/23/2007 17,712 45,906
Vice President
Administration
CPAC, Inc. Equipment
Division President
</TABLE>
Options were granted under "Executive Long Term Stock Investment Plan" described
on Page 20 of this proxy statement and may be exercised at any time for a period
of ten years from date of grants.
NOTES TO OPTION/SAR GRANTS TABLE
(1) Options become exercisable in cumulative annual increments of the greater
of 25% or 2,500 shares beginning one year from the date of grant.
(2) The dollar amounts under these columns are the result of calculations at 5%
and 10% rates set by the Securities and Exchange Commission and therefore
are not intended to forecast possible future appreciation, if any, of the
Company's stock price. No gain to the optionees is possible without an
increase in stock price appreciation, which will benefit all shareholders
commensurately. A zero percent gain in stock appreciation will result in
zero dollars for the optionee.
(3) Represents the potential appreciation of the options, determined by
assuming an annual compounding rate of appreciation of 5% per year over the
remaining term of the grants from March 31, 1998. The compound growth rate
for the August 6, 1997 grants is 57.8% for Messrs. Hendrickson and Isaacs.
The compound growth rate for the June 27, 1997 grants is 57.0% for
Mr. Weldgen and Ms. Clay.
(4) Represents the potential appreciation of the options, determined by
assuming an annual compounding rate of appreciation of 10% per year over
the remaining term of the grants from March 31, 1998. The compound growth
rate for the August 6, 1997 grants is 144.1% for Messrs. Hendrickson and
Isaacs. The compound growth rate for the June 27, 1997 grants is 141.5%
for Mr. Weldgen and Ms. Clay.
Options The following table shows information for the named executives
- -------
concerning exercises of options and SARs during fiscal 1998 and the number and
value of unexercised options and SARs held at March 31, 1998:
<TABLE>
OPTIONS/SAR EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUE
----------------------------------------------------------------------------------------
<CAPTION>
Number of Securities
Underlying Unexercised In-The-Money
Options/SARs at Fiscal Options/SARs at Fiscal
Year-End (#) Year-End($)
------------------------------ -------------------------------
SHARES
ACQUIRED ON $ VALUE
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas N. Hendrickson - - 152,812 89,500 393,152 0
Robert C. Isaacs - - 89,570 82,305 45,216 7,984
Thomas J. Weldgen - - 13,828 8,500 29,493 0
Wendy F. Clay 3,320 21,702 12,742 3,000 35,532 0
</TABLE>
NOTES TO OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
(1) Represents the difference between the option exercise price and the closing
market price for the Company's stock at March 31, 1998. The in-the-money
options at March 31, 1998, pertain to option grants at December of 1993,
February of 1994, November of 1994, and October of 1995, with exercise
prices of $5.08, $5.76, $8.80, and $11 respectively. The closing market
price for the Company's stock at March 31, 1998, was $11.12.
REPORTS OF THE COMPENSATION COMMITTEE AND THE EXECUTIVE LONG TERM STOCK
- -----------------------------------------------------------------------
INVESTMENT COMMITTEE
- ---------------------
The following reports, submitted by the Compensation Committee and the
Executive Long Term Stock Investment Committee of The Board of Directors,
provide information regarding policies and practices concerning the compensation
of the Chief Executive Officer and the other executive officers of the Company
included in the Summary Compensation Table.
COMPENSATION COMMITTEE REPORT
One function of the Compensation Committee is to review all matters
relating to the compensation of senior executives of the Company, and to make
recommendations to The Board of Directors or Long Term Stock Investment
Committee, as appropriate, for specific actions in regard to such matters.
During fiscal 1998, the Compensation Committee was composed of Messrs. James,
Jr., Oppenheimer and Dr. Burton, the majority of whom are not officers.
COMPENSATION PHILOSOPHY
The philosophy for compensating executives of the Company is to provide a
reasonable mix of cash and equity with a significant portion of total
compensation at risk, depending upon performance of the executive and the
Company. In this way, executives are encouraged and rewarded for thinking and
acting like owners, rather than employees. An Incentive Compensation Plan was
established in 1986 and approved by The Board of Directors. This Plan has been
designed to focus the best efforts of executives on the achievement of financial
growth objectives, intended to benefit both the Company and its Shareholders.
Recognizing that it is always in the best interest of the Shareholders to
attract, retain and motivate exceptional executive talent, the Company's
components of executive compensation provide meaningful upside incentives for
superior performance and results, while clearly linking the executives'
interests to those of the Shareholders.
Base Salary. When the Incentive Compensation Plan was established, the
-----------
base salary policy was targeted at approximately 80% of the highest base salary
paid to executives in commensurate positions within similar organizations and
industries in the area. To establish these initial ranges, an overall review
was carried out by a nationally recognized executive compensation consulting
firm, based on national surveys of executive compensation for other companies
within an appropriate bank of sales. Periodically Independent Consultants have
been retained by the Compensation Committee to keep this information up to date.
Such salary information is subject to periodic update by the Compensation
Committee.
Annual Incentive Compensation. The incentive component of the Incentive
------------------------------
Compensation Plan rewards executives for achieving or exceeding specific
financial and growth target objectives, which link directly with the current and
long term growth strategy of the Company, and ultimately lead to increased
Shareholder value. At the beginning of each fiscal year, objectives are
established at the corporate, subsidiary, and individual executive levels by the
Compensation Committee. Annual cash incentive compensation targets are fixed to
allow executives to earn total cash compensation (consisting of base salary plus
annual incentive compensation payments) for successful achievement of
outstanding results. In 1994, a new study of executive salaries and overall
compensation was completed for the Compensation Committee by a national
consulting firm. The compensation consultants recommended to the Compensation
Committee that the cash incentive plan be modified in order to provide
management with greater incentive to strive for exceptional results. The
Company modified the plan beginning with the April 1, 1994 fiscal year and the
plan, as modified, continues in existence currently. The result of the
modifications was to give executives a smaller award than previously if there
was a small increase in earnings, but the opportunity for a larger bonus if
earnings per share increased significantly.
Long Term Non-Cash Incentives. Long Term, non-cash incentive awards are
------------------------------
discussed below in the Executive Long Term Stock Investment Committee report.
COMPENSATION PRACTICE
Awards to executives pursuant to the Company's Incentive Compensation plan
are attained by meeting increased earning per share targets agreed upon at the
start of each fiscal year. The Compensation Committee believes that incentives
to increase earnings per share are the best way to enhance shareholder value.
However, there are instances when an action which will have an adverse impact on
earnings in the short term will result in a long term benefit to the Company.
The acquisition of the Cleaning Technology Division from Ivax Industries was
such a case. The Compensation Committee believes that the Company's executives
should be encouraged to make such acquisitions, and granted a discretionary
bonus to off-set the reduction in the 1998 Incentive Plan awards resulting from
the estimated decrease in earnings per share related to the acquisition.
The Compensation Committee believes that the compensation and benefits
packages afforded to the Company's executive officers are commensurate with
competitive practices for similar positions held by employees of companies of
similar size. With total compensation significantly weighted toward rewards for
sustained Long Term growth, the Committee believes the Company's compensation
program is effective for providing continued incentive to pursue its aggressive
Long Term growth strategies.
Federal tax legislation (IRC 162(m)) limits publicly-held companies such
as CPAC, Inc. from deducting for tax purposes, annual compensation paid to the
Chief Executive Officer and the four highest paid officers other than the Chief
Executive Officer in excess of $1,000,000 per person in certain situations. The
tax deductibility of amounts paid by the Company to its executive officers in
fiscal 1998 will not be affected by IRC 162(m). It is also anticipated that
amounts paid by the Company to its executives in fiscal 1999 will not be
affected by IRC 162(m).
MR. HENDRICKSON'S 1998 CASH COMPENSATION
Mr. Hendrickson founded the Company in 1969 and has been Chief Executive
Officer and President since that time. Mr. Hendrickson was awarded incentive
compensation as shown in the Summary Compensation table above, under the caption
"Bonus", for his performance during fiscal 1998. This amount was comprised of
two components. The first amount of $117,186, was computed in accordance with
targeted earnings per share amounts, as computed under the Incentive
Compensation Plan. The second amount of $73,455 was a discretionary bonus
awarded Mr. Hendrickson in recognition of his efforts in growing the Company by
completing the acquisition of CTG during fiscal 1998, which the Board of
Directors and Compensation Committee believe is in the best long term interests
of the Company and its shareholders, despite the short-term impact on fiscal
1998 earnings. Mr. Hendrickson would have been entitled to a maximum bonus of
$460,650 if earnings per share would have reached $1.15 on a diluted basis.
SUMMARY
In summary, the Compensation Committee believes the compensation strategy
that is now in place will provide the necessary incentives to retain and
motivate the Company's executives for the achievement of short and long term
goals which will significantly benefit Shareholders in the future.
Seldon T. James, Jr.,
Chairman
John C. Burton
Robert Oppenheimer
EXECUTIVE LONG TERM STOCK INVESTMENT COMMITTEE REPORT
The Executive Long Term Stock Investment Committee administers the
Company's Executive Long Term Stock Investment Plan and makes all decisions
concerning equity -based incentive awards for the Company's executives and
management under the Plan. During fiscal 1998, the Committee was comprised of
Messrs. James, Jr., Oppenheimer and Dr. Burton, none of whom is an employee
of the Company or eligible to receive awards under the Plan.
LONG TERM STOCK INCENTIVE COMPENSATION PHILOSOPHY
To help insure that executives are continually focused on the longer term
goals of the Company, equity awards are made to key executives in accordance
with the terms, conditions and restrictions of the Executive Long Term Stock
Investment Plan which has been approved by the Shareholders. See Page 20 of the
Proxy Statement for a narrative description of the Plan.
It is believed that a principal factor influencing market price of the
Company's stock is the Company's performance as reflected in its sales,
earnings, cash flows, and other results. By granting stock awards to Company
executives, such individuals are encouraged to focus their efforts on achieving
improvements in the Company's performance.
MR. HENDRICKSON'S 1998 LONG TERM STOCK INCENTIVE COMPENSATION
The stock awards made to Mr. Hendrickson in fiscal 1998 were determined to
be reasonable and appropriate for his position and level of expertise. The
awards were made in the form of stock options and were designed to provide him
with a continued substantial ownership position in the Company and to closely
tie his interest to the interest of the Shareholders. Since these incentive
awards will yield meaningful income to Mr. Hendrickson only if the Company stock
appreciates in value over the coming years, they provide an incentive, in
keeping with the philosophy outlined above, for Mr. Hendrickson to achieve
improvements in Company performance that will yield solid increased Shareholder
value.
Seldon T. James, Jr., Chairman
John C. Burton
Robert Oppenheimer
COMMON STOCK PERFORMANCE
- ------------------------
As part of the executive compensation presented in this Proxy Statement,
the Securities and Exchange Commission requires a five-year comparison of stock
performance for the Company with stock performance of appropriate similar
companies. The Company's common stock is traded on the National Association of
Securities Dealers' National Market System (NASDAQ/NMS) and one appropriate
comparison is with the NASDAQ U.S. Composite Index performance. Because there
is no similar single "peer company" in the NASDAQ system with which to compare
stock performance, the second index which the Company believes most closely
approximated its performance is the NASDAQ Non-Financial Index.
Comparison of Five Year-Cumulative Total Returns
Performance Graph for
CPAC, INC.
DESCRIPTION
- -----------
In the graph, the X-axis is represented by $0 to $280 and the Y-axis is
represented by the dates 03/31/93 through 03/31/98. The following table shows
the points of data used to plot the Comparison of Five Year-Cumulative Total
Returns Performance Graph for CPAC, Inc.
TABLE
- -----
Company Index: CUSIP Ticker Class Sic Exchange
12614510 CPAK 3823 NASDAQ
Fiscal Year-end is 03/31/98
Market Index: Nasdaq Stock Market (US Companies)
Peer Index: Nasdaq Non-Financial Stocks
SIC 0100-5999. 7000-9999 US & Foreign
DATE COMPANY INDEX MARKET INDEX PEER INDEX
---- ------------- ------------ ----------
03/31/93 100.000 100.000 100.000
04/30/93 97.368 95.733 95.867
05/28/93 93.947 101.449 103.623
06/30/93 87.725 101.916 103.730
07/30/93 83.548 102.036 102.851
08/31/93 91.903 107.310 108.876
09/30/93 98.264 110.506 111.834
10/29/93 91.246 112.989 115.335
11/30/93 81.419 109.622 111.948
12/31/93 96.198 112.678 115.247
01/31/94 93.368 116.098 119.111
02/28/94 110.344 115.015 117.879
03/31/94 119.586 107.941 109.717
04/29/94 116.739 106.540 107.197
05/31/94 108.197 106.800 106.369
06/30/94 114.671 102.894 101.175
07/29/94 118.971 105.004 103.831
08/31/94 154.806 111.699 110.911
09/30/94 159.950 111.413 111.208
10/31/94 167.155 113.602 114.448
11/30/94 155.627 109.834 110.705
12/30/94 152.745 110.141 110.818
01/31/95 165.714 110.759 110.428
02/28/95 172.919 116.616 116.118
03/31/95 162.111 120.074 120.225
04/28/95 158.509 123.855 124.539
05/31/95 151.304 127.051 127.394
06/30/95 183.726 137.347 139.019
07/31/95 176.521 147.443 149.624
08/31/95 194.534 150.433 151.588
09/29/95 208.943 153.892 154.999
10/31/95 212.546 153.010 153.421
11/30/95 194.534 156.603 156.301
12/29/95 203.540 155.768 154.444
01/31/96 194.534 156.536 155.557
02/29/96 199.937 162.493 162.458
03/29/96 205.341 163.033 162.222
04/30/96 205.341 176.558 177.947
05/31/96 220.652 184.665 186.873
06/28/96 184.627 176.341 176.514
07/31/96 184.627 160.639 158.606
08/30/96 180.124 169.639 167.488
09/30/96 204.891 182.615 180.975
10/31/96 229.658 180.598 177.685
11/29/96 247.670 191.762 188.378
12/31/96 270.186 191.589 187.686
01/31/97 243.167 205.205 202.203
02/28/97 211.645 193.861 188.001
03/31/97 213.897 181.205 175.058
04/30/97 189.130 186.870 180.877
05/30/97 193.633 208.056 202.773
06/30/97 218.400 214.422 207.470
07/31/97 202.639 237.057 230.333
08/29/97 207.142 236.696 230.003
09/30/97 193.633 250.699 243.062
10/31/97 184.627 237.722 228.342
11/28/97 191.382 238.912 227.975
12/31/97 184.627 235.166 220.318
01/30/98 181.250 242.631 230.208
02/27/98 193.633 265.420 253.832
03/31/98 200.388 275.211 263.298
LEGEND
------
Symbol Total Returns Index for:
- ------ ------------------------
___.___. CPAC, Inc.
______ Nasdaq Stock Market (US Companies)
- --------- Nasdaq Non-Financial Stocks
SIC 0100-5999, 7000-9999 US & Foreign
03/31/93 03/31/94 03/31/95 03/31/96 03/31/97 03/31/98
-------- -------- -------- -------- -------- --------
100.0 119.6 162.1 205.3 213.9 200.4
100.0 107.9 120.1 163.0 181.2 275.2
100.0 109.7 120.2 162.2 175.1 263.3
Notes:
- ------
Assumes $100 invested on April 1, 1993, in CPAC, Inc., Common Stock, and an
identical amount in both the NASDAQ U.S. and NASDAQ Non-Financial Indices. The
lines represent monthly index levels derived from compounded daily returns that
include all dividends. The indexes are reweighted daily, using the market
capitalization on the previous trading day.
Total Return assumes the reinvestment of all dividends. On November 18, 1994,
The Board of Directors announced that it had discontinued its cash dividend
indefinitely.
There can be no assurance that the Company's stock performance will continue in
the future with the same or similar trends depicted in the graph above. The
Company will not make or endorse any predictions as to future stock performance.
NCENTIVE COMPENSATION PLAN
- ---------------------------
On June 4, 1986, the Compensation Committee of The Board recommended, and
The Board of Directors approved, the establishment of an Incentive Compensation
Plan for certain personnel who do not receive hourly compensation, commission
payments, or other forms of incentive compensation.
After objectives and standards have been established for an employee, and
the employee is included in the Incentive Compensation Plan, the maximum
incentive bonus payable shall be dependent upon the employee's position within
the Company and shall be the following percentage of base pay:
CATEGORY PERCENT
Chief Executive Officer 75%
Senior Operating and Staff Executives 50%-60%
Key Management 30%-40%
Other Managers and Supervisors 20%
The Board adopted a policy for the Chief Executive Officer and certain
selected corporate executives pursuant to which the entitlement to, and the
amount of the total bonus paid, would be dependent upon the Company's success in
attaining budgeted profits and specified goals in earnings per share. Under
this policy, exceptional performance as measured by and reflected in specified
increases in earnings per share could result in such employee earning up to 148%
of that employee's base pay percent as indicated in the table above.
Management shall determine the category of each employee, but personnel
shall not be granted a bonus as a Senior Operating or Staff Executive without
approval of The Board of Directors.
Before including an individual in the Plan, or establishing that percentage
of compensation which the employee should receive as incentive, management will
review the incremental benefit to the Company which results from the employee
attaining the objectives established. On an annual basis, management will
submit a review of the Plan to The Board of Directors, showing the amount
committed to the Incentive Compensation Plan for each category of employee and,
for each level of employee, the estimated incremental benefit to the Company.
Each employee included in the Incentive Compensation Plan shall receive the
incentive compensation payment quarterly in a check separate from his/her
regular pay, which check shall be accompanied by a written report reviewing the
employee's progress in meeting established objectives, and explaining the basis
on which his/her bonus was determined. A copy of such written report shall be
filed with the Compensation Committee.
In order to reinforce the objectives and to provide greater motivation,
incentive compensation will be paid to participants in the Plan on a quarterly
basis. Payments during the first three quarters will be equal to 50% of the
amount which management believes the employee would be entitled to as a bonus,
based upon the compensation paid to the employee through the end of the quarter,
and considering his/her performance through that date, and the likelihood the
employee will attain established objectives by the end of the fiscal year.
The final payment of the bonus will be made as soon as practical following
completion of the independent audit for the fiscal year, and will include that
portion of the bonus withheld during the first three quarters and all of the
bonus for the fourth quarter to which the employee is determined to be entitled.
No employee will be asked to refund any bonus which has been previously paid.
No employee shall be entitled to a bonus unless employed by the Company at the
time of distribution. Participation in the Incentive Compensation Plan shall
not be deemed to constitute a contract of employment, guaranteeing to an
employee employment for any period of time.
The Board established that management should develop objectives and
standards for the two categories labeled Key Management and Other Managers and
Supervisors.
EXECUTIVE LONG TERM STOCK INVESTMENT PLAN
On June 8, 1994, The Board of Directors adopted an Executive Long Term
Stock Investment Plan ("Stock Investment Plan") and reserved in the aggregate
350,000 shares of the Company's common stock for issuance thereunder. The Board,
at the same meeting, voted to terminate the 1991 Incentive Stock Option Plan
as to the grant of additional options thereunder. The Shareholders approved the
adoption of the Stock Investment Plan and the reservation of 350,000 shares
thereunder at the annual meeting of Shareholders held on August 10, 1994. On
August 7, 1996, the Shareholders approved an amendment to the Executive Long
Term Stock Investment Plan, increasing to 950,000, the shares reserved for
issuance to key employees.
The salient features of the Stock Investment Plan are as follows:
A) PURPOSES
The purposes of the Stock Investment Plan are to: (1) closely
associate the interests of the management of the Company and its subsidiaries
with the Company's Shareholders by reinforcing the relationship between
participant rewards and Shareholder gains; (2) provide management with an equity
ownership in the Company commensurate with Company performance, as reflected in
increased Shareholder value; (3) maintain competitive compensation levels; and
(4) provide an incentive to management for continuous employment with the
Company.
B) ADMINISTRATION
The Stock Investment Plan is administered by the Executive Long Term
Stock Investment Plan Committee ( the "Committee"). Members of the Committee
serve one-year terms, renewable automatically, unless terminated at the
discretion of The Board of Directors. At its meeting held June 8, 1994, The
Board appointed Seldon T. James, Jr., John C. Burton, and Robert Oppenheimer to
constitute the Committee.
The Committee is responsible for the overall administration,
governance, management and interpretation of the Stock Investment Plan, having
the authority, in its sole discretion and from time to time, to: (1) grant
options/or stock awards in such form and number as it may determine; (2) impose
such limitations, restrictions and conditions upon any such option and/or stock
award as the Committee deems appropriate, consistent with the purposes of the
Stock Investment Plan; and (3) interpret the Stock Investment Plan, adopt, amend
and rescind rules and regulations relating to the Stock Investment Plan, and
make all other determinations and take all other actions as are necessary and/or
advisable for the implementation and administration of the Stock Investment
Plan.
C) ELIGIBILITY FOR PARTICIPATION
Participants in the Stock Investment Plan will be selected by the
Committee from the executive officers and other key employees of the Company and
its subsidiaries who occupy responsible managerial or professional positions and
who have the capability of making a substantial contribution to the success of
the Company. Under the terms of the Stock Investment Plan, in selecting a
participant and in determining the form and number of equity awards, the
Committee has and will continue to consider factors it deems relevant,
including the person's functions, responsibilities, value of services to the
Company and/or its subsidiaries, as well as the individual's past and potential
contributions to the Company's profitability and sound growth.
D) TYPES OF AWARDS
Awards under the Stock Investment Plan may be in the form of any
one or more of the following: (1)Nonqualified Stock Options; (2) Incentive
Stock Options; (3) Reload Options; or (4) Restricted Performance Shares.
1. Nonqualified Stock Options
The Committee may from time to time, and subject to the provisions of
the Stock Investment Plan and such other terms and conditions as it may
prescribe, grant to any eligible employee one or more Nonqualified Stock Options
to purchase for cash or shares the number of shares allotted by the Committee.
a. Terms and Conditions
--------------------
Nonqualified Stock Options are subject to the following
terms and conditions:
(i) Price: The exercise price, as determined by the
-----
Committee, generally will not be less than the fair market value of the shares
with respect to which an option is granted at the time of the granting of the
option. The Committee, however, is explicitly authorized to grant Nonqualified
Stock Options, the exercise price of which is less than the fair market value of
the shares at the time of the grant of the option. Fair market value is the mean
between the high and low bid prices for the Company's stock as quoted on the
NASDAQ National Market System;
(ii) Term of Options: The term of each option is to be
----------------
decided by the Committee and is not subject to any specified (e.g., five or ten)
number of years. Such term may be modified, or the Nonqualified Stock Option
terminated, at any time by mutual agreement between the Committee and the
employee;
(iii) Payment Upon Exercise: An employee granted a
---------------------
Nonqualified Stock Option under the Stock Investment Plan may pay for the
Company's stock upon exercise either with cash or with Company stock already
owned by him, valued at the fair market value of the stock on the date of
exercise. Fair market value is the mean between the high and the low bid prices
for the Company's stock as quoted on the NASDAQ National Market System.
b. Certain Material Restrictions
-----------------------------
Nonqualified Stock Options are subject to the
following material restrictions:
(i) Nonqualified Stock Options are exercisable only
while the optionee is an employee of the Company or within a three month period
immediately following the employee's termination of employment;
(ii) Nonqualified Stock Options are exercisable only
by the optionee and are not assignable, transferable or subject to any other
party acquiring rights therein;
(iii) Upon the death of the optionee prior to his
complete exercise of a Nonqualified Stock Option, the remaining portion of the
option may be exercised only by his estate or on behalf of any person(s) to whom
his rights pass under his Will or by operation of law;
(iv) An optionee has no rights as a Shareholder with
respect to the shares subject to a Nonqualified Stock Option, including voting
rights or dividend rights, until the Company has received full payment therefor,
and has issued a stock certificate to him representing the shares purchased upon
exercise;
(v) Shares of common stock issued upon the exercise of a
Nonqualified Stock Option may not be sold, transferred, pledged or otherwise
disposed of by the optionee for a period of six months from the date of grant of
the option.
2. Incentive Stock Options
The Committee may, from time to time, and subject to the
provisions of the Stock Investment Plan and such other terms and conditions as
it may prescribe, grant to any eligible employee, one or more Incentive Stock
Options intended to qualify under Section 422 of the Internal Revenue Code of
1986 to purchase for cash or shares the number of shares allotted by the
Committee.
a. Terms and Conditions
--------------------
Incentive Stock Options are subject to the
following terms and conditions:
(i) Price: The exercise price, as determined by the
-----
Committee, may not be less than the fair market value of the shares with respect
to which an Incentive Stock Option is granted at the time of the granting of the
Incentive Stock Option. In the case of an employee owning more than 10% of the
Company's common stock, the exercise price may not be less than 110% of the fair
market value of such stock at the time of grant. See the discussion above for
the definition of fair market value.
(ii) Term of Options: While the term of each Incentive
---------------
Option is to be decided by the Committee, no Incentive Option will be granted
with a term of greater than ten years ( five years in the case of a greater than
10% Shareholder) from the date it was granted, and such term may be modified or
the Incentive Stock Option terminated at any time by mutual agreement between
the Committee and the employee;
(iii) Payment Upon Exercise: An employee granted an
---------------------
Incentive Stock Option may pay for the Company's stock either with cash or with
Company's stock already owned by him, valued at the fair market value of the
stock on the date of exercise. Fair market value is calculated in the same
manner as in the case of Nonqualified Stock Options discussed above.
b. Certain Material Restrictions
-----------------------------
Incentive Stock Options are subject to the same material restrictions
as govern Nonqualified Stock Options. In addition, Incentive Stock Options are
subject to a rule under Section 422 of the Internal Revenue Code that the
aggregate fair market value of stock with respect to which an Incentive Stock
Option is exercisable for the first time during any calendar year by any
optionee cannot exceed $100,000, such value being determined on the date of the
grant of the option.
3. Reload Options
Concurrently with the award of a Nonqualified Stock Option
and/or Incentive Stock Option, the Committee may grant a Reload Option to enable
the employee to purchase a number of shares for either cash or shares. The
Reload Option becomes effective only if the employee uses common stock of the
Company owned by him for at least twelve months to purchase the shares issuable
to him upon his exercise of either the underlying Nonqualified or Incentive
Stock Option. The Reload Option is designed to replace those shares used as the
purchase price, and the number of Reload Options will equal the number of shares
of the Company's common stock used by the employee to exercise the underlying
option.
The Reload Option price generally will be the fair market
value of a share of the Company's common stock on the date the Reload Option
becomes effective, that is, the date on which the underlying option shall have
been exercised. Notwithstanding this general rule, where the exercise price of
the underlying option was less than the fair market value of the Company's
common stock on the date of the underlying stock option's grant, the Reload
Option price may, at the Committee's discretion, reflect the same percentage
discount from the fair market value of the Company's stock on the date of the
Reload Option's effectiveness. Fair market value shall be the mean between the
high and the low prices for the Company's common stock as quoted on the NASDAQ
National Market System.
4. Restricted Performance Shares
Concurrently with or subsequent to the grant of any
Nonqualified Stock Option, incentive Stock Option or Reload Option, the
Committee may, subject to the provisions of the Stock Investment Plan and such
other terms, conditions and restrictions as the Committee may prescribe, award
to an eligible employee one share of common stock for each aggregate four
options granted under the Nonqualified Stock Option, Incentive Stock Option or
Reload Option, as the case may be. Such shares shall constitute Restricted
Performance Shares and are awarded in consideration of the future performance of
substantial services to and/or on behalf of the Company and/or its subsidiaries
by such employee.
Upon issuance of the Restricted Performance Shares, the
employee has all of the rights of a Shareholder of the Company with respect to
such Restricted Performance Shares, including the right to vote and receive all
dividends as well as all other distributions paid or made with respect thereto.
Restricted Performance Shares may not be sold, transferred,
assigned, pledged, encumbered or otherwise alienated or hypothecated while they
are subject to forfeiture. Restricted Performance Shares are subject to
forfeiture in the event the employee terminates his service with the Company
prior to the date immediately following the last day of the option period with
respect to which the Shares were awarded, unless the termination is due to the
employee's death, his permanent and total disability, or a change in control of
the Company. In the event the employee exercises the option with respect to
which the Restricted Performance Shares were awarded, any Restricted Performance
Shares issued in connection with such option are automatically forfeited to the
extent of the option's exercise on a proportionate basis.
Upon the expiration of the forfeiture provisions, the
Restricted Performance Shares vest and at that time may be sold, transferred,
assigned, pledged, encumbered or otherwise alienated, subject to any and all
applicable federal and state securities law restrictions.
E) FEDERAL TAX CONSEQUENCES
1. Nonqualified Stock Options
Under current provisions of federal tax law, for regular as
well as for purposes of the federal alternative minimum income tax, the grant of
a Nonqualified Stock Option is not a taxable event for the employee. In
addition, upon the grant of such an option, the Company will receive no
business expense deduction.
Upon the exercise of a Nonqualified Stock Option, the
difference between the exercise price and the fair market value of the option
shares on the date of exercise constitutes ordinary, compensation income to the
optionee and is taxed to him at normal, ordinary tax rates, except to the extent
the shares are not transferable and subject to a substantial risk of forfeiture.
To the extent such difference is required to be included as compensation income
by the employee, the Company is entitled to a business expense deduction. Upon
the later sale of the optioned stock, long, mid-term or short-term capital gain
or loss will be recognized by the employee depending upon the holding period and
the extent to which the selling price
exceeds or is less than the employee's basis in the stock. The short-term rate
is the same rate that is applied to a taxpayer's ordinary income. The maximum
mid-term rate of 28% is generally applicable to assets held for at least 12
months. The maximum long-term rate of 20% is generally applicable to assets
held for at least 18 months.
2. Incentive Stock Options
The general rule is that no income, gain or loss is
recognized for regular income tax purposes by an optionee upon either the grant
or the exercise of an Incentive Stock Option. Upon the later sale of the shares
acquired pursuant to such an Option, long, mid-term or short capital gain or
loss (at the rates described above) will be recognized by the employee to the
extent the selling price exceeds or is less than the employee's basis in the
stock.
This tax treatment is available provided the shares acquired
by exercise of the Incentive Stock Option are held by the optionee for a period
of two(2) years from the date of the grant of the Option and at least one (1)
year from the date of the Option's exercise.
As a general rule, the Company will not be entitled to an
income tax deduction with respect to either the grant or the exercise of an
Incentive Stock Option.
If either of the one year, or two year holding periods just
described are not met, the difference between the fair market value of the
shares and the exercise price on the date of the Option's exercise constitutes
ordinary compensation income to the optionee in the optionee's taxable year in
which the disqualifying disposition occurs. The balance of the amount realized
in such year constitutes capital gain, taxable at the long, mid-term or short-
term rates described above. The Company is allowed a corresponding deduction
for the amount the optionee is required to include as ordinary compensation
income in the year of the disqualifying disposition.
For purposes of the alternative minimum income tax
calculation, an Incentive Stock Option is treated as if it were a Nonqualified
Stock Option. Consequently, upon the exercise of the Incentive Stock Option, the
difference between the exercise price and the fair market value of the shares on
the date of exercise is includible as alternative minimum gross income, and made
subject to special alternative minimum income tax rates.
3. Restricted Performance Shares
If property is transferred to a person in connection with
the performance of services, the fair market value of the property received in
excess of the amount paid for the property constitutes ordinary, compensation
income in the taxable year of receipt, unless the property is not transferable
and is subject to a substantial risk of forfeiture. The fair market value of the
property is includible in income when either of the restrictions lapse. The
Company is not allowed an income tax deduction until the recipient is required,
in accordance with gain or loss is recognized, the gain, if any, is taxed at
normal, ordinary tax rates, with a maximum rate of such rules, to include the
value of the property in income.
Under the Stock Investment Plan, when they are awarded by
the Committee, Restricted Performance Shares are not transferable and are
subject to a substantial risk of forfeiture. Consequently, until such
restrictions lapse, the fair market value of such Shares generally is not
includible in the recipient's income nor may the Company claim an income tax
deduction for the value of the Shares awarded. Upon the lapse of such
restrictions, the fair market value of the Shares at the time the restrictions
lapse is includible as ordinary, compensation income to the recipient and the
Company is entitled to an income tax deduction at that time equal to the amount
includible in the recipient's gross income. Upon the subsequent sale of the
Shares by the recipient, gain or loss will be recognized, either long term or
short term capital gain equal to the difference between the selling price and
the taxpayer's basis, depending upon the holding period of such Shares ( which
includes the period during which the restrictions apply).
F) REGISTRATION OF SHARES
The Company registered the 350,000 shares of its $.01 par value
common stock it reserved for issuance upon the exercise of options or the award
of shares under the Stock Investment Plan with the Securities and Exchange
Commission under the Securities Act of 1933. Such registration became effective
on October 29, 1994 and remains in effect. The Company registered the 600,000
share increase with the Securities and Exchange Commission. Such registration
became effective on October 3, 1996, and remains in effect. It is anticipated
that as a result of such registrations, nonaffiliates of the Company may resell
such registered shares acquired by them under the Stock Investment Plan without
federal securities laws restrictions.
G) OPTIONS AND AWARDS
The following information concerning the Stock Investment Plan
is provided as of the date of this Proxy Statement, namely, June 24, 1998:
Options for 582,953 shares are outstanding, of which 349,023 are
currently exercisable and 158,000 were granted during the fiscal year ended
March 31, 1998.
Options for 390,968 shares are outstanding for all executive
officers as a group, of which 212,061 are currently exercisable and 70,500 were
granted during the fiscal year ended March 31, 1998.
The market value of the securities underlying all options was
$5,756,661.
18,266 Restricted Performance Shares are currently outstanding,
of which 6,053 are outstanding for all executive officers as a group. None of
such Shares have vested.
The market value of Restricted Performance Shares was $180,377
per share.
PRIOR INCENTIVE STOCK OPTION PLANS
- ----------------------------------
The Board of Directors established and the Shareholders at the Annual
Meeting in August, 1991 approved, the 1991 Employees' Incentive Stock Option
Plan.
On June 8, 1994, the Board terminated the 1991 Plan as to the grant of
additional options thereunder and adopted the Stock Investment Plan. The
termination of the 1991 Plan did not terminate, accelerate or otherwise affect
unexercised options outstanding thereunder.
The following information is provided as of the date of this Proxy
Statement, namely, June 24, 1998:
Options for 104,433 shares are outstanding under the 1991 Plan, all of
which are currently exercisable. Options for 78,436 shares are outstanding under
the 1991 Plan for all executive officers as a group, all of which are currently
exercisable.
The market value of the securities underlying all options under the 1991
Plan was $1,031,276.
401(K) PROFIT SHARING PLAN
- --------------------------
On April 17, 1986, The Board of Directors adopted a profit sharing plan for
the benefit of all domestic employees of the Company and its subsidiaries who
have attained the age of twenty-one and who have one year of service. The
effective date of the Plan was May 1, 1986.
The Plan constitutes a qualified retirement plan under sections 401(a) and
(k) of the Internal Revenue Code and contributions made by the Company to the
Plan are deductible for federal income taxes.
Under the Plan, the Company may make contributions to the Plan on behalf of
Plan participants in such amounts as the Board of Directors may determine,
subject to Internal Revenue Code limitations and restrictions on and the
deductibility of contributions to a qualified profit sharing plan. Subject to
similar restrictions on the amount of contributions to the section 401(k)
component of the Plan, the Company will match each contribution made by a Plan
participant, pursuant to a salary reduction agreement in effect for each Plan
Year in an amount equal to $.50 for each $1.00 of participant contribution. The
Company's contribution will not exceed up to a maximum of 3% of participant
compensation. A participant may contribute up to 15% of his compensation under
the salary reduction agreement to the Plan each year. If, in any Plan Year,
contributions are made to the Plan which result in any "excess contributions"
because they exceed the amount permitted to be contributed to the Plan under the
Internal Revenue Code, adjustments will be made to reduce the amount of that
Plan Year's contributions so as to comply with such restrictions.
Events that permit distribution under the Plan are generally termination of
service at normal retirement age (age 65), disability or death. A participant is
100% vested in all his contribution accounts upon termination of employment due
to normal retirement, death or disability. In the event of termination of
employment for any other reason, a participant is 100% vested in any
contributions he has made to the Plan and 100% vested in amounts contributed to
the Plan in the discretion of the Company's Board of Directors. With respect to
matching contributions, the vesting schedule set forth below applies:
COMPLETED YEARS OF SERVICE VESTED PERCENTAGE
-------------------------- -----------------
Less than 1 0%
1 20%
2 40%
3 60%
4 80%
5 100%
On April 1, 1995, the Plan was amended to allow the employee a choice of
six different investment options for his account balances under the Plan.
Under the Plan, a participant that meets " financial hardship "
requirements may borrow the lesser of 50% of his vested account balance or
$50,000. The minimum loan allowable is $1,000. Only one loan can be outstanding
at any time; the repayment period can vary from 1 to 5 years unless the loan is
used to purchase a primary residence, in which case the repayment period can be
up to 10 years.
A participant may borrow the lesser of 50% of his account balance up to
$10,000 without proving financial hardship. The minimum loan allowable is $1,000
and the repayment period can vary from 1 to a maximum of 3 years.
A Participant who has not attained age 59-1/2 and is not totally and
permanently disabled may withdraw amounts he has contributed pursuant to his
salary reduction agreement as well as the vested amount of the employer matching
contribution made to the Plan upon a showing of financial hardship.
The normal form of benefit under the Plan is a lump sum distribution or, if
the participant elects, a distribution in periodic payments of substantially
equal amounts for a selected number of years not to exceed five.
For the Plan Year ended March 31, 1998, the Company and its subsidiaries
made no discretionary contribution to the Plan. The amount of matching
contributions made under the Plan for such year was $4,750 in the case of Mr.
Hendrickson, $4,750 in the case of Mr. Isaacs, $4,750 in the case of
Mr. Weldgen, and $4,430 in the case of Ms. Clay. The total for all executive
officers as a group was $18,680.
STOCK PURCHASE PROGRAM
- ----------------------
In June, 1995, The Board of Directors approved a stock purchase program
whereby employees can contribute up to 10% of their total income (to a maximum
of $5,000 per annum), through payroll deductions, to purchase the Company's $.0l
par value common stock in open market transactions.
On a quarterly basis, the amount collected through payroll deductions is
used to purchase Company stock. The Company pays the broker's commission for
the purchase - if the stock is subsequently sold, the employee pays the broker's
commission.
For the fiscal year ended March 31, 1998, an average of 33 employees per
quarter purchased 3,053 shares of CPAC, Inc. common stock. The total cost to
the Company approximated $1,000. No executive officers participated in the
program.
PROPOSAL 2
----------
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
----------------------------------------------------
The Board of Directors, acting upon the recommendation of the Audit
Committee, as previously described, has appointed, subject to ratification by
the Shareholders at the forthcoming Annual Meeting, the firm of Coopers &
Lybrand L.L.P. as independent accountants of the Company for the fiscal year
ended March 31, 1999. Coopers & Lybrand L.L.P. has at no time had any direct or
indirect financial interest in the Company or any of its subsidiaries, nor,
other than providing certain non-audit services, any other connection with the
Company except that of independent auditors.
It is anticipated that representatives of Coopers & Lybrand L.L.P. will be
present at the annual meeting with the opportunity to make a statement if they
desire to do so and will be available to answer appropriate questions.
During the fiscal year ending March 31, 1998, the Company paid Coopers &
Lybrand L.L.P. approximately $129,000 for audit services and approximately
$76,000 for non-audit services. Non-audit services included due diligence
procedures in connection with acquisition of Cleaning Technologies Group,
foreign and domestic tax and accounting matters, assistance with various filings
with the Securities and Exchange Commission, and various state income tax
issues.
This proposal requires the affirmative vote of a majority of the shares of
common stock of the Company present in person or by Proxy and entitled to vote
at the Annual Meeting.
Management recommends a vote for the proposal to ratify the appointment of
Coopers & Lybrand L.L.P. as independent auditors of the Company for the fiscal
year ending March 31, 1999.
VOTING
Each nominee for director must receive at least a plurality of the shares
of common stock of the Company present in person or by Proxy and entitled to
vote at the Annual Meeting. Shareholders may vote for all nominees, withhold
authority to vote for all nominees or withhold authority to vote for any
individual nominee.
Each Proposal other than the election of directors requires a majority of
the total votes cast at the Annual Meeting on the Proposal ( including
abstentions ) in person or by Proxy.
BROKER NON-VOTES AND ABSTENTIONS
- --------------------------------
Broker non-votes will not be treated as votes cast or shares entitled to
vote on matters as to which the applicable rules of the National Association of
Securities Dealers, Inc. withhold the broker's authority to vote in the absence
of direction from the beneficial owner. Non-broker Shareholders who are present
in person or by Proxy and have the legal authority to vote their shares but who
abstain from voting for or against a given Proposal will adversely affect the
outcome of that Proposal.
VOTING OF PROXIES
- -----------------
The shares represented by all valid Proxies received will be voted in the
manner specified on the Proxies.
With respect to the election of directors, ANY VALID PROXY RECEIVED WHICH
IS EXECUTED BY THE SHAREHOLDER IN SUCH MANNER AS NOT TO WITHHOLD AUTHORITY TO
VOTE FOR THE ELECTION OF ALL NOMINEES OR ANY INDIVIDUAL NOMINEE SHALL BE DEEMED
TO GRANT AUTHORITY TO VOTE FOR ALL NOMINEES.
Where specified choices (including abstentions) with respect to any given
Proposal are not indicated, THE SHARES REPRESENTED BY ALL VALID PROXIES RECEIVED
WILL BE VOTED FOR APPROVAL OF THAT PROPOSAL.
MANAGEMENT RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" PROPOSALS 1 AND 2.
By Order of The Board of Directors
/s/ Robert Oppenheimer
------------------------------
Robert Oppenheimer, Secretary
CPAC, INC.
2364 LEICESTER ROAD, LEICESTER, NY 14481
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 5, 1998
The undersigned Shareholder of CPAC, Inc. hereby appoints and constitutes
Thomas N. Hendrickson and Robert Oppenheimer, and either of them, the proxy or
proxies of the undersigned, with full power of substitution and revocation, for
and in the name of the undersigned to attend the annual meeting of Shareholders
of the Company to be held at the Genesee River Hotel-Restaurant and Reception
Center, 134 North Main Street (Route 36), Mount Morris, New York 14510, on
Wednesday, August 5, 1998, at 11:00 A.M., EDT, and any and all adjournments of
said meeting, and to vote all shares of stock of CPAC, Inc. registered in the
name of the undersigned and entitled to vote at said meeting upon the matters
set forth below.
MANAGEMENT RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
1. ELECTION OF DIRECTORS: Election of the directors listed below to serve
until the annual meeting of Shareholders in 1999 and until their successors are
duly elected and qualified.
FOR all nominees listed below: WITHHOLD AUTHORITY to vote
(except as marked to the contrary below) for all nominees listed below:
[ ] [ ]
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH HIS NAME IN THE LIST BELOW:
Thomas N. Hendrickson, Robert C. Isaacs, Robert Oppenheimer, Seldon T.
James, Jr., John C. Burton
2. APPOINTMENT OF AUDITORS: Ratification of the appointment of Coopers &
Lybrand L.L.P. by The Board of Directors as independent auditors for the fiscal
year ending March 31, 1999.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
SHAREHOLDER. IF NO CHOICE (INCLUDING ABSTENTIONS) IS SPECIFIED FOR A GIVEN
PROPOSAL, THIS PROXY WILL BE VOTED FOR THAT PROPOSAL.
----------------------------
Signature
----------------------------
DATED: , 1998 Joint owners should each sign.
------------------ Executors, administrators, trustees,
guardians, corporate officers, and
other representatives should give
title.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
