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/_/ Preliminary Proxy Statement
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(as permitted by Rule 14a-69e)(2))
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Quaker Chemical Corporation
- --------------------------------------------------------------------------------
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________________________________________________________________________________
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/X/ No Fee Required.
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1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________________
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/_/ Fee paid previously with preliminary materials.
/_/ Check box if any part of the fee is offset as provided by
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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.
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4) Date filed: _____________________________________________________________
<PAGE>
QUAKER CHEMICAL CORPORATION
ELM AND LEE STREETS
CONSHOHOCKEN, PENNSYLVANIA 19428
------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
------------------------------
To the Shareholders of Quaker Chemical Corporation:
Notice is hereby given that the Annual Meeting of Shareholders of Quaker
Chemical Corporation (the "Company") will be held in Salons A and B,
Philadelphia Marriott West, Matsonford at Front Street, 111 Crawford Avenue,
West Conshohocken, Pennsylvania 19428, on Wednesday, May 10, 2000, at 9:00 A.M.,
local time, for the following purposes:
1. To elect four (4) Class II Directors, each to serve for three years
and until his respective successor is elected and qualified;
2. To consider and act upon a proposal to approve the adoption of the
Company's 2000 Employee Stock Purchase Plan;
3. To consider and act upon ratifying the appointment of
PricewaterhouseCoopers LLP as the Company's independent accountants
for the year 2000; and
4. To transact such other business as may properly come before the
Meeting or any adjournments thereof.
Only shareholders of record at the close of business on March 10, 2000 are
entitled to notice of and to vote at the Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. YOU ARE
CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU EXPECT TO
ATTEND IN PERSON, YOU ARE URGED TO COMPLETE, SIGN, DATE, AND RETURN THE ENCLOSED
PROXY IN THE SELF-ADDRESSED ENVELOPE ENCLOSED FOR YOUR CONVENIENCE; NO POSTAGE
IS REQUIRED IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors,
/s/ D. Jeffry Benoliel
------------------
D. Jeffry Benoliel
Secretary
Dated: March 30, 2000
<PAGE>
QUAKER CHEMICAL CORPORATION
---------------------------------
PROXY STATEMENT
---------------------------------
The solicitation of the accompanying proxy is made by and on behalf of the
Board of Directors of Quaker Chemical Corporation, a Pennsylvania corporation
(the "Company"), whose principal executive offices are located at Elm and Lee
Streets, Conshohocken, Pennsylvania 19428, for use at the Annual Meeting of
Shareholders to be held on Wednesday, May 10, 2000, and at any adjournments
thereof. The Meeting will be held in Salons A and B, Philadelphia Marriott West,
Matsonford at Front Street, 111 Crawford Avenue, West Conshohocken, Pennsylvania
19428 at 9:00 A.M., local time. The approximate date on which this Proxy
Statement and the accompanying form of proxy will first be sent or given to
shareholders is March 30, 2000. Any shareholder executing and delivering the
accompanying proxy has the power to revoke it at any time prior to its use by
giving notice of its revocation to the Secretary of the Company.
The Company will bear the cost of the solicitation of proxies. Proxies will
be solicited by mail, telephone, facsimile, electronic mail, and personal
contact by certain officers and regular employees of the Company. The Company
will, upon the request of record holders, pay reasonable expenses incurred by
record holders who are brokers, dealers, banks or voting trustees, or their
nominees, for mailing proxy material and the Company's Annual Report to
Shareholders to any beneficial holder of the Common Stock they hold of record.
Proxies in the accompanying form which are properly executed, returned to
the Company, and not revoked will be voted in accordance with the instructions
thereon, or, in the absence of specific instruction, will be voted for the
election of all four (4) of the nominees named therein, for approval of the
Company's 2000 Employee Stock Purchase Plan, and for ratification of the
appointment of PricewaterhouseCoopers LLP as the Company's independent
accountants for the year 2000.
As of March 10, 2000, the outstanding voting securities of the Company
consisted of 8,803,470 shares of Common Stock, $1.00 par value ("Common Stock").
As more specifically provided in Article 5 of the Company's Articles of
Incorporation, shareholders who, as of March 10, 2000, held shares of the
Company's Common Stock beneficially owned since March 1, 1997 are entitled to
cast ten (10) votes for each such share. Holders of shares the beneficial
ownership of which was acquired after March 1, 1997 are entitled to cast one (1)
vote per share, subject to certain exceptions described in Exhibit A to this
Proxy Statement. Based on the information available to the Company on March 10,
2000, the holders of 2,680,480 shares of Common Stock will be entitled to cast
ten (10) votes with respect to each such share, and the holders of 6,122,990
shares of Common Stock, including but not limited to those shares held in
"street" or "nominee" name or by a broker, clearing agency, voting trustee,
bank, trust company, or other nominee which have been presumed to have been
acquired by the beneficial owner subsequent to March 1, 1997 in accordance with
the terms and conditions of Article 5 of the Company's Articles of
Incorporation, will be entitled to cast one (1) vote with respect to each such
share, representing an aggregate of 32,927,790 votes. The aforementioned
presumption that a share is entitled to one (1) vote rather than ten (10) is
rebuttable upon presentation to the Company of written evidence to the contrary
in accordance with the procedures established by the Company and described in
Exhibit A to this Proxy Statement. The effect of rebutting the foregoing
presumption will be to increase the number of votes that may be cast at the
Meeting. Depending on the number of shares with respect to which the
aforementioned presumption is rebutted, the total number of votes that may be
cast at the Meeting could be increased to as many as 88,034,700. The presence,
in person or by proxy, of shareholders entitled to cast at least a majority of
the votes that all shareholders are entitled to cast on a particular matter will
constitute a quorum for the purpose of considering such matter. Abstentions, and
any shares as to which a broker or nominee indicates that it does not have
discretionary authority to vote on a particular matter, will be treated as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum but as unvoted for purposes of determining whether the
approval of shareholders has been obtained with respect to any such matter.
Only shareholders of record at the close of business on March 10, 2000 are
entitled to notice of and to vote at the Meeting or any adjournments thereof.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
CERTAIN BENEFICIAL OWNERS
The following table sets forth information, as of March 10, 2000, with
respect to persons known to the Company to be the beneficial owners (as defined
in Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of more than
five percent of its Common Stock (its only class of outstanding equity
securities). Peter A. Benoliel and DePrince, Race & Zollo, Inc. have sole voting
and dispositive power over the outstanding Common Stock listed opposite their
names. Investment Counselors of Maryland, Inc. has sole voting power over
385,000 shares, shared voting power over 75,000 shares, and sole dispositive
power over 460,000 shares opposite its name. Ronald J. Naples has sole voting
and dispositive power over 476,975 shares and shared voting and dispositive
power over 2,186 shares opposite his name.
NUMBER
OF SHARES PERCENT OF NUMBER
NAME AND ADDRESS OWNED(1) CLASS(2) OF VOTES
- ---------------- --------- ------------ --------
Peter A. Benoliel 464,600 5.3 4,646,000
130 Cornwall Lane
St. Davids, PA 19087
DePrince, Race & Zollo, Inc. 591,800(3) 6.7 591,800(3)
201 South Orange Street
Suite 850
Orlando, FL 32801
Investment Counselors of 460,000(3) 5.2 460,000(3)
Maryland, Inc.
803 Cathedral Street
Baltimore, MD 21201-5297
Ronald J. Naples 479,161(4) 5.2 605,903
411 Wister Road
Wynnewood, PA 19096
- ------------------
(1) Based upon information contained in filings made by the named person with
the Securities and Exchange Commission.
(2) Based upon 8,803,470 shares outstanding, adjusted to reflect options
currently exercisable or exercisable within sixty (60) days of the record
date by the named person.
(3) These shares, which are held in street name, are presumed under Article 5
of the Company's Articles of Incorporation to be entitled to one (1) vote
per share.
(4) Includes (i) 342,500 shares subject to options that are currently
exercisable or will become exercisable within sixty (60) days of the record
date and (ii) 2,186 shares held jointly with his spouse.
2
<PAGE>
DIRECTORS AND OFFICERS
The following table sets forth information, as of March 10, 2000, with
respect to beneficial ownership of the Company's Common Stock by each director,
each nominee for director, each executive officer named in the Summary
Compensation Table, and all directors and executive officers of the Company as a
group. Each director, nominee, and executive officer has sole voting and
dispositive power over the Common Stock listed opposite his/her name unless
otherwise noted.
NUMBER
OF SHARES PERCENT OF NUMBER OF
NAME OWNED CLASS(1) VOTES
- ---- --------- ------------ ---------
Joseph B. Anderson, Jr. 5,000(2) -- 50,000
Patricia C. Barron 12,243 -- 87,843
Peter A. Benoliel 464,600(3) 5.3 4,646,000
Donald R. Caldwell 5,992 -- 5,992
Robert E. Chappell 3,248 -- 12,248
William R. Cook 5,000 -- 5,000
Edwin J. Delattre 2,858(2) -- 8,348
Robert P. Hauptfuhrer 8,500 -- 73,300
Ronald J. Naples 479,161(2)(4) 5.2 605,903
Robert H. Rock 3,248 -- 12,248
Joseph W. Bauer 25,956(4) -- 3,206
Ian F. Clark 5,000(4) -- 0
Daniel S. Ma 47,586(4) -- 8,238
Marcus C. J. Meijer 114,950(4) 1.3 30,000
All directors and
executive officers as a
group (18 persons) 1,318,009(4) 13.9 5,559,443(5)
- ------------------
(1) Based upon 8,803,470 shares outstanding, adjusted to reflect options
currently exercisable or exercisable within sixty (60) days of the record
date by the named person. The percentage is less than 1%, except as
otherwise indicated.
(2) Includes 500 shares in the case of Mr. Anderson, 2,858 shares in the case
of Dr. Delattre, and 2,186 shares in the case of Mr. Naples held jointly
with their spouse.
(3) Does not include 7,800 shares held of record by Mr. Benoliel's wife.
(4) Includes 22,750 shares in the case of Mr. Bauer; 5,000 shares in the case
of Mr. Clark; 45,000 shares in the case of Mr. Ma; 111,950 shares in the
case of Mr. Meijer; 342,500 shares in the case of Mr. Naples; and 653,450
shares in the case of all directors and officers as a group subject to
options that are currently exercisable or will become exercisable within
sixty (60) days of the record date.
(5) Represents 16.9% of all votes entitled to be cast at the Meeting, based on
information available on March 10, 2000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely (i) on the Company's review of certain reports filed with the
Securities and Exchange Commission ("SEC") pursuant to Section 16(a) of the
Securities Exchange Act of 1934 (the "Act"), as amended, and (ii) written
representations of the Company's directors and officers, the Company believes
that all reports required to be filed pursuant to the 1934 Act with respect to
transactions in the Company's Common Stock through December 31, 1999 were filed
on a timely basis.
3
<PAGE>
ELECTION OF DIRECTORS
The Articles of Incorporation, as amended, provide that the Company shall
have a Board of Directors that is divided into three (3) classes, each class to
consist, as nearly as may be possible, of one-third of the total number of
directors. One class shall be elected each year to serve as directors for a term
of three (3) years. Directors elected to fill vacancies and newly created
directorships serve for the balance of the term of the class to which they are
elected. At the present time, there are ten (10) directors including three (3)
Class I Directors, four (4) Class II Directors, and three (3) Class III
Directors.
The proxies will be voted in accordance with the instructions set forth
therein, and proxies for which no contrary instructions are given will be voted
for the Class II nominees, Donald R. Caldwell, Robert E. Chappell, William R.
Cook, and Robert P. Hauptfuhrer, each of whom is presently serving as a director
of the Company, with Messrs. Caldwell, Chappell, and Hauptfuhrer having been so
elected by the shareholders at the Annual Meeting held on May 7, 1997 and Mr.
Cook being appointed by the Board of Directors of the Company on January 19,
2000 to fill the vacancy created by the resignation of Mr. Lennox K. Black,
effective October 11, 1999. If any nominee withdraws or otherwise becomes unable
to serve, which is not anticipated, the proxies will be voted for a substitute
nominee who will be designated by the Board of Directors. The following table
sets forth information concerning the nominees and the Company's directors who
will continue to serve in that capacity following the Meeting:
<TABLE>
<CAPTION>
FIRST BECAME PRINCIPAL OCCUPATION FOR
NAME AND (AGE) A DIRECTOR THE PAST FIVE YEARS
-------------- ------------ ------------------------
<S> <C> <C>
Class I -- Directors elected in 1999 to serve until the Annual Meeting in 2002:
Peter A. Benoliel (68) 1961 Former Chairman of the Board and Chief
Executive Officer of the Company.
Ronald J. Naples (54) 1988 Chairman of the Board of the Company since May
1997; Chief Executive Officer of the Company
since October 1995; and President of the
Company from October 1995 until March 1998.
Formerly Chairman of the Board and Chief
Executive Officer, Hunt Corporation, a
producer and distributor of office and
graphic display products.
Robert H. Rock (49) 1996 President, MLR Holdings, LLC, an investment
company with holdings in the publishing and
information businesses. Formerly Chairman and
majority owner of IDD Enterprises, a
publisher of magazines, newsletters, and a
provider of on-line data for financial
executives. Member of the Board of Directors
of Alberto-Culver Company, Hunt Corporation,
and The Penn Mutual Life Insurance Company.
Class II -- Directors nominated for election in 2000 to serve until the Annual Meeting in 2003:
Donald R. Caldwell (53) 1997 Chief Executive Officer and Founder, Cross
Atlantic Technology Fund, LLC, a venture
capital fund with offices in the United
States, Ireland, and England. Formerly
President and Chief Operating Officer,
Safeguard Scientifics, Inc. from February
1996 to March 1999 and its Executive Vice
President from 1993 to 1996. Member of the
Board of Directors of First Consulting Group,
Inc., Diamond Technology Partners, Inc., and
Kanbay, LLC.
Robert E. Chappell (55) 1997 Chairman and Chief Executive Officer, The Penn
Mutual Life Insurance Company, being Chairman
since January 1997, Chief Executive Officer
since April 1995, and President from 1994
until 1996. Member of the Board of Directors
of P. H. Glatfelter Company.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
FIRST BECAME PRINCIPAL OCCUPATION FOR
NAME AND (AGE) A DIRECTOR THE PAST FIVE YEARS
-------------- ------------ ------------------------
<S> <C> <C>
William R. Cook (56) 2000 President and Chief Executive Officer, Severn
Trent Services, Inc., a water purification
products, laboratory and operating services,
and utility management software company.
Formerly Vice Chairman and Co-Chief Executive
Officer of Hercules, Incorporated from 1998
to January 1999 and Chairman, President, and
Chief Executive Officer of BetzDearborn,
Inc., having served as its Chairman from 1996
to 1998 and its President and Chief Executive
Officer from 1993 to 1998. Member of the
Board of Directors of Teleflex Incorporated.
Robert P. Hauptfuhrer (68) 1977 Former Chairman of the Board and Chief
Executive Officer, Oryx Energy Company, an
energy company. Trustee, 1838 Investment
Advisors Fund.
Class III -- Directors elected in 1998 to serve until the Annual Meeting in 2001:
Joseph B. Anderson, Jr. (57) 1992 Chairman and Chief Executive Officer, Chivas
Industries LLC, an interior trim automotive
supplier and manufacturer. Member of the
Board of Directors of Meritor Automotive,
Inc. and R. R. Donnelly & Sons Co.
Patricia C. Barron (57) 1989 Clinical Associate Professor and Senior Fellow,
Stern School of Business, New York
University. Formerly Corporate Vice
President, Business Operations Support, and
President, Xerox Engineering Systems
Division, Xerox Corporation. Member of the
Board of Directors of ARAMARK Corporation,
Reynolds Metals Company, and Teleflex
Incorporated.
Edwin J. Delattre (58) 1984 Dean, School of Education and Professor of
Philosophy, College of Arts and Sciences,
Boston University.
</TABLE>
There are no family relationships between any directors, executive
officers, or nominees for election as directors of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS; MEETINGS
The Company has an Executive Committee whose principal functions are to act
for the Board of Directors in situations requiring prompt action when a meeting
of the full Board is not feasible; to make recommendations to the Board
concerning programs of external corporate development; and to establish
guidelines as to capital structure and deployment of capital resources. The
current members of the Committee, which met once in 1999, are P. A. Benoliel
(Chairman), R. E. Chappell, R. P. Hauptfuhrer, R. J. Naples, and R. H. Rock.
The Company has an Audit Committee whose principal functions are to
recommend the selection of independent accountants; approve the scope of audit
and specification of non-audit services provided by such accountants and the
fees for such services; and review audit results, internal accounting
procedures, and programs to comply with applicable laws and regulations relating
to financial accountability. The current members of the Committee, which met
three times in 1999, are R. P. Hauptfuhrer (Chairman), J. B. Anderson, Jr., P.
C. Barron, and D. R. Caldwell.
The Company has a Compensation/Management Development Committee whose
principal functions are to review and recommend officers' compensation; review
the performance of officers and management development and succession; review
compensation levels throughout the Company; and administer the Company's
Long-Term Performance Incentive Plan. The current members of the Committee,
which met four times in 1999, are R. H. Rock (Chairman), D. R. Caldwell, R. E.
Chappell, and E. J. Delattre.
5
<PAGE>
The Company has a Nominating Committee whose principal role is to ensure
that the Board of Directors has the depth and range of relevant experience to
provide optimal governance of the Company and growth in shareholder value. To
accomplish this, the Committee has responsibility to review Board membership,
provide leadership in the nomination of directors, and review shareholder
proposals. The current members of the Committee, which met three times during
1999, are E. J. Delattre (Chairman), P. A. Benoliel, P. C. Barron, R. P.
Hauptfuhrer, and R. J. Naples. The Committee will consider candidates
recommended by shareholders when submitted in writing not later than November
30, 2000 with a statement of the candidate's business experience, business
affiliations, and confirmation of the candidate's willingness to serve as a
nominee. Nominations should be submitted to the Secretary of the Company.
During the year ended December 31, 1999, six regular meetings of the Board
of Directors were held. During 1999, each of the directors was in attendance in
person or by teleconference at no less than 75% of the aggregate number of
meetings of the Board of Directors and Committees of the Board on which he or
she then served, except for Mr. Batchelor, who did not attend either of the two
Board meetings held prior to his decision not to stand for reelection to the
Board at the Annual Meeting of Shareholders held on May 12, 1999; Mr. Black, who
attended four of the five Board meetings and one of the two meetings of the
Committee to which he was assigned; and Mr. Chappell, who attended four of the
six Board meetings and two of the four meetings of the Committee to which he was
assigned. The reasons for their absences were known to and are satisfactory to
the Board of Directors.
6
<PAGE>
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table sets forth certain summary information concerning
compensation paid or accrued by the Company and its subsidiaries for the years
ended December 31, 1997, 1998, and 1999 as to the Company's Chief Executive
Officer, Mr. Naples, and each of the Company's other four most highly
compensated officers who served as executive officers at December 31, 1999
(hereinafter referred to as the named executive officers).
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------------- ---------------------------- ----------
(a) (b) (c) (d) (e) (f) (g) (h)
RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING
PRINCIPAL COMPENSATION AWARD(S) OPTIONS/ LTIP
POSITION YEAR SALARY($) BONUS($) ($)(1) ($)(2) SARS(#)(3) PAYOUTS($)
--------- ---- --------- -------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald J. Naples, 1999 425,000 340,000 0 114,750 35,000 0
Chairman of the 1998 575,938(5) 305,550(6) 0 0 14,000 614,625
Board and Chief 1997 635,938(5) 331,406(6) 0 590,625(7) 0 0
Executive Officer
Joseph W. Bauer, 1999 260,428 138,000 0 37,294 17,500 0
President and Chief 1998 202,731 132,886 0 0 30,000 75,000
Operating Officer
Ian F. Clark, 1999 155,125 97,500 0 18,647 10,000 0
Vice President
& Global Industry
Leader - Steel/
Fluid Power
(March 17, 1999 to
December 31, 1999)
Daniel S. Ma, 1999 171,038(11) 84,895 112,550(12) 12,909 10,000 0
Vice President 1998 171,703(11) 83,066 91,508(12) 0 6,000 245,850
and Managing 1997 170,280(11) 70,020 90,086(12) 0 0 0
Director
Asia/Pacific
Marcus C. J. 1999 215,871(11) 93,159 0 24,384 15,000 0
Meijer, Senior 1998 237,046(11) 92,588 0 0 10,000 368,775
Vice President 1997 202,302(11) 90,021 0 0 0 0
and Global
Industry Leader -
Metalworking/CMS
<CAPTION>
(a) (i)
NAME AND ALL OTHER
PRINCIPAL COMPENSATION
POSITION ($)(4)
--------- ------------
<S> <C>
Ronald J. Naples, 14,400(8)
Chairman of the 3,712(8)
Board and Chief 950,763(8)
Executive Officer
Joseph W. Bauer, 54,044(9)
President and Chief 174,190(9)
Operating Officer
Ian F. Clark, 42,000(10)
Vice President
& Global Industry
Leader - Steel/
Fluid Power
(March 17, 1999 to
December 31, 1999)
Daniel S. Ma, 0
Vice President 0
and Managing 0
Director
Asia/Pacific
Marcus C. J. 0
Meijer, Senior 0
Vice President 0
and Global
Industry Leader -
Metalworking/CMS
</TABLE>
- ------------------
(1) During the year ended December 31, 1999, certain of the individuals named
in column (a) received personal benefits not reflected in the amounts set
forth for such individual in column (e), the dollar value of which did not
exceed the lesser of $50,000 or 10% of the total of annual salary and bonus
reported for such individual in columns (c) and (d).
(2) During the year ended December 31, 1999, Messrs. Naples, Bauer, Clark, Ma,
and Meijer each were granted a target stock award of 8,000, 2,600, 1,300,
900, and 1,700 shares, respectively. Payment of the award is contingent
upon meeting the same performance targets set for the performance incentive
units for the 1999-2001 performance period (see Note 3 to the Long-Term
Incentive Plan Award table below). The number of shares each of the
officers will receive will be based upon performance and will range from 0%
to 200% of the target award. At target, the CEO and other named officers
will receive stock in the amounts stated above. For purposes of this
Summary Compensation Table, the amount listed in Column (f) reflects the
value of the stock award at target based on $14.3438 per share, the average
of the lowest and highest sale price for the Common Stock on the New York
Stock Exchange on March 17, 1999, the date the award was granted.
7
<PAGE>
(3) Options to purchase shares of the Company's Common Stock.
(4) Does not include discount on any Common Stock purchased by certain officers
pursuant to the Company's Employee Stock Purchase Plan.
(5) Includes compensation earned by Mr. Naples pursuant to the 1995 Naples
Restricted Stock Plan and Agreement (i) for 1998, the fair market value of
15,000 shares of Common Stock awarded to Mr. Naples on October 2, 1998,
which shares had a fair market value of $225,937.50 (based on the last
reported sale price for the Common Stock on the New York Stock Exchange on
October 2, 1998 of $15.0625 per share) and (ii) for 1997, the fair market
value of 15,000 shares of Common Stock delivered to Mr. Naples on October
2, 1997, which shares had a fair market value of $285,937.50 (based on the
last reported sale price for the Common Stock on the New York Stock
Exchange on October 2, 1997 of $19.0625 per share).
(6) Represents (i) for 1998, the fair market value (based on the last reported
sale price for the Common Stock on the New York Stock Exchange on December
31, 1998 of $18.00 per share of 16,975 shares of restricted Common Stock
awarded to Mr. Naples in lieu of an annual cash incentive bonus and (ii)
for 1997, the fair market value (based on the last reported sale price for
the Common Stock on the New York Stock Exchange on December 31, 1997 of
$18.9375 per share) of 17,500 shares of restricted Common Stock awarded to
Mr. Naples in lieu of an annual cash incentive bonus (see Note 7 and the
Compensation/Management Development Committee Report below).
(7) Represents for 1997, the fair market value (based on the last reported sale
price for the Common Stock on the New York Stock Exchange on May 7, 1997 of
$16.875 per share) of 35,000 shares of restricted Common Stock which Mr.
Naples was eligible to receive in 1997 and 1998 in lieu of an annual cash
bonus if pre-established financial criteria applicable to all
incentive-based employees were met, of which (see Note 6 above) 17,500
shares were earned in 1997 and 16,975 shares were earned in 1998.
(8) Represents (i) for 1999 and 1998, compensation earned under the Company's
Profit Sharing Plan and (ii) for 1997, the fair market value (based on the
last reported sale price for the Common Stock on the New York Stock
Exchange on December 31, 1997 of $18.9375 per share) of (a) 50,000 shares
of restricted Common Stock ($946,875) earned by Mr. Naples in 1997 under
the 1995 Naples Restricted Stock Plan and Agreement at the rate of 1,000
shares for each $.01 increase in the Company's net income per share of
Common Stock in excess of $1.10 (after elimination of the effects of
foreign currency fluctuations) and (b) $3,888 earned under the Company's
Profit Sharing Plan.
(9) Includes (i) for 1999, $14,400 earned under the Company's Profit Sharing
Plan and (ii) for 1999 ($39,644) and for 1998 ($174,190) relocation
expenses paid to Mr. Bauer in connection with his employment by the Company
which included reimbursement for temporary living expenses, closing costs,
and loss on sale of residence.
(10) Represents relocation expenses paid to Mr. Clark in connection with his
employment with the Company.
(11) Mr. Ma's and Mr. Meijer's compensation was paid in Hong Kong dollars and
Dutch guilders, respectively. For purposes of this presentation, Mr. Ma's
and Mr. Meijer's salary and bonus for each year have been translated into
U.S. dollars using the applicable exchange rates for the conversion of
currencies into U.S. dollars on December 31 of such year.
(12) Represents housing benefits paid to Mr. Ma in connection with his
assignment for the Company in Hong Kong.
8
<PAGE>
Options/SAR Grants in the Last Fiscal Year
During 1999, the Company granted stock options (without any stock
appreciation rights) to the named executive officers as follows:
STOCK OPTION GRANTS LAST YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZED VALUE
AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
-------------------------------------------------------------- --------------------
(a) (b) (c) (d) (e) (f) (g)
NUMBER OF
SECURITIES
UNDERLYING % OF TOTAL EXERCISE
OPTIONS OPTIONS GRANTED OR BASE
GRANTED TO EMPLOYEES PRICE EXPIRATION
NAME (#)(1) IN 1999 ($/SH)(2) DATE 5%($) 10%($)
- ---- ---------- --------------- --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Ronald J. Naples 35,000 22.2 14.3438 3/17/06 315,726 800,111
Joseph W. Bauer 17,500 11.1 14.3438 3/17/06 157,863 400,056
Ian F. Clark 10,000 6.3 14.0625 3/15/09 88,438 224,120
Daniel S. Ma 10,000 6.3 14.3438 3/17/06 90,207 228,603
Marcus C. J. Meijer 15,000 9.5 14.3438 3/17/06 135,311 342,905
</TABLE>
- ------------------
(1) All of the options listed above are non-qualified stock options. Of the
options granted to Messrs. Bauer, Ma, Meijer, and Naples, 50% were
exercisable as of March 17, 2000, 25% will be exercisable on March 17, 2001,
and the remaining 25% will be exercisable on March 17, 2002. Of the 10,000
options granted to Mr. Clark, 5,000 were exercisable as of March 15, 2000,
2,500 will be exercisable on March 15, 2001, and 2,500 will be exercisable
on March 15, 2002.
(2) The purchase price of a share of Common Stock is the fair market value of a
share of Common Stock on the date of grant.
Aggregate Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
The following table provides information related to options to purchase the
Company's Common Stock held by the named executive officers during the year
ended December 31, 1999 and the number and value of such options held as of the
end of such year. The Company does not have any outstanding stock appreciation
rights.
AGGREGATE OPTION/SAR EXERCISES IN LAST YEAR
AND YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
NUMBER OF SECURITIES VALUE OF UNEXERCISED
VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES ACQUIRED REALIZED OPTIONS AT YEAR END(#) AT YEAR END($)
NAME ON EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- --------------- -------- ----------- ------------- ----------------------------
<S> <C> <C> <C> <C> <C>
Ronald J. Naples 0 0 318,000 42,000 56,250/0
Joseph W. Bauer 0 0 0 47,500 0/0
Ian F. Clark 0 0 0 10,000 0/1,875
Daniel S. Ma 0 0 37,000 13,000 0/0
Marcus C. J. Meijer 0 0 85,000 20,000 0/0
</TABLE>
- ------------------
(1) Based on the last sale price on December 31, 1999 on the New York Stock
Exchange of $14.25 per share.
9
<PAGE>
Long-Term Performance Incentive Plan Awards in Last Fiscal Year
During 1999, the Company granted performance incentive units pursuant to
the Company's Long-Term Performance Incentive Plan to the named executive
officers as follows:
LONG-TERM INCENTIVE PLAN -- AWARDS LAST YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK PRICE-BASED PLAN
-----------------------------------------------
(a) (b) (c) (d) (e) (f)
NUMBER OF PERFORMANCE
SHARES, OR OTHER
UNITS PERIOD UNTIL
OR OTHER MATURATION OR THRESHOLD TARGET MAXIMUM
NAME(1) RIGHTS(#)(2) PAYOUT ($ OR #)(3) ($ OR #)(3) ($ OR #)(3)
- ------- ------------ ----------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Ronald J. Naples 65,000 1999 through 2001 3,250 65,000 130,000
Joseph W. Bauer 88,790 1999 through 2001 4,440 88,790 177,580
Ian F. Clark(4) 2,200 1997 through 2000 1,863 37,263 74,525
37,263 1999 through 2001 1,175 23,500 47,000
Daniel S. Ma 59,194 1999 through 2001 2,960 59,194 118,388
Marcus C. J. Meijer 83,737 1999 through 2001 4,186 83,737 167,474
</TABLE>
- ------------------
(1) The Compensation/Management Development Committee awarded performance
incentive units to the named executive officers, except in the case of Mr.
Clark who received his units on March 15, 1999, the date he joined the
Company.
(2) Performance incentive units. Stock awards were issued in tandem with the
performance incentive units, and payment of such awards is contingent upon
meeting the same performance targets as provided for with the performance
incentive units. (See Note 2 to the Summary Compensation Table.)
(3) The value on maturation of a performance incentive unit is determined by
performance over a time period as plotted on a grid defined by two axes; one
axis sets forth average return on assets, and one axis sets forth average
earnings per share for the period 1999-2001. Each performance incentive unit
has a stated value of $1.00, and the 1999 performance incentive unit grid
results in a zero payout for performance of less than 11.5% return on assets
or less than an average earnings per share of $1.70 over the performance
period. A payout of $1.00 per unit will be made if performance reaches the
target, and a payout of $2.00 per unit will be made if performance reaches
the maximum of the measurement scale.
(4) Mr. Clark joined the Company on March 15, 1999. As part of his initial
employment agreement, Mr. Clark also received 2,200 performance incentive
units for the 1997-2000 plan period. These performance incentive units (as
opposed to the units issued for the 1999-2001 period) were issued at the
exercise price of stock options granted in connection with the original
grant of performance incentive units in 1997 of $16.9375, and the 1997
performance incentive unit grid results in a zero payout for performance of
less than 5% return on assets or less than an average earnings per share of
$1.40 over the performance period. A payout of $16.9375 per unit will be
made if performance reaches the target, and a payout of $33.875 per unit
will be made if performance reaches the maximum of the measurement scale.
Employment Agreements with Executive Officers
Chief Executive Officer
Ronald J. Naples assumed the position of President and Chief Executive
Officer of the Company on October 2, 1995. Effective that date, Mr. Naples
entered into an employment agreement with the Company for a term ending December
31, 1998. Effective January 1, 1999, the Company and Mr. Naples entered into a
new employment agreement ("Employment Agreement") for a five (5) year term
ending on December 31, 2003 and continuing thereafter for successive terms of
one (1) year unless timely notice to terminate is given by either the Company or
Mr. Naples. Mr. Naples' base salary was initially set at an annual rate of
$425,000 which is to be reviewed annually after January 1, 2000. Mr. Naples is
eligible to participate in the Company's Annual Incentive Compensation Plan and
Long-Term Performance Incentive Plan.
The Employment Agreement further provides that upon the termination of Mr.
Naples' employment for reasons other than Mr. Naples' death or disability or by
the Company for "cause" or by Mr. Naples for other than "good reason" (each as
defined in the Employment Agreement), the Company will pay Mr. Naples
termination benefits ranging from 250% to 300% of his base salary and annual
bonus depending upon when
10
<PAGE>
such termination occurs. Furthermore, if Mr. Naples' employment is terminated
within three (3) years of a "Significant Transaction" (as defined in the
Employment Agreement) or if Mr. Naples resigns for any reason between nine (9)
and eighteen (18) months following a Significant Transaction, the Company will
pay Mr. Naples a termination benefit of 300% of his base salary and annual
bonus. In addition, subject to certain conditions, if Mr. Naples' employment is
terminated, his right to exercise his stock options may be accelerated. Under
Mr. Naples' prior Employment Agreement, the Company made loans to cover
withholding and additional taxes on stock awards previously earned in 1995,
1997, and 1998 in the principal amount of $828,570. Each loan has a ten (10)
year term and bears interest ranging from 5.55% to 6.4% depending on the date
the loan was made. The aggregate principal balance owing as of December 31, 1999
as a result of such loans was $828,570 exclusive of accrued interest of $25,191.
All other executive officers of the Company are employed pursuant to
employment agreements, which agreements provide for each officer's salary and
the basis upon which his bonus, if any, is to be calculated. Salary and bonuses,
if any, are adjusted annually by the Compensation/Management Development
Committee. Except in the case of Mr. Meijer, each employment agreement is for an
initial term of one (1) year and thereafter is automatically renewed for
successive one (1) year terms unless either party gives written notice of
termination at least ninety (90) days prior to the expiration of the then
current term. Mr. Meijer's employment agreement provides for continued
employment until either party gives the other party three (3) months' notice of
termination. In addition, Mr. Meijer's agreement provides for a payment equal to
two (2) years salary, bonus, and vacation if he elects to resign from his
position within twelve (12) months of a change in control. Also, if the Company
terminates Mr. Meijer's employment for other than cause, it shall pay to Mr.
Meijer an amount equal to two (2) months income (as defined in Mr. Meijer's
employment agreement) for each year of service up to a maximum of twenty-four
(24) months. In addition, Mr. Bauer is entitled to twenty-four (24) months
salary and bonus, and Messrs. Clark and Ma are each entitled to eighteen (18)
months salary and bonus if they are terminated (other than for cause) within
three (3) years of a change in control, and in all other cases, Messrs. Bauer
and Clark are entitled to severance equal to twelve (12) months of salary if
terminated by the Company (other than for cause).
Pension and Death Benefits
Substantially all of the Company's U.S. employees are covered by a
noncontributory qualified defined benefit retirement plan (the "Pension Plan").
The method of funding the Pension Plan does not readily permit the calculation
of the required contribution, payment, or accrual applicable to any covered
individual. The formula for determining the annual pension benefit is based upon
two formulas, a past service formula for service through December 1, 1996 and a
future service formula for service beginning December 1, 1996, as follows: (a)
1.1% of the employee's Highest Average Earnings (HAE) (which means the average
of the employee's three highest consecutive years of pay including overtime,
shift differential, bonuses, and commissions) before December 1, 1996 plus .5%
of HAE over the employee's Covered Compensation as defined in the Pension Plan
(which depends on the employee's birth date and is determined from an Internal
Revenue Service table which is updated each year) times the employee's service
up to December 1, 1996; and (b)(i) for the employee's service after December 1,
1996 until past and future service total 35 years, 1.15% of annual pay plus .6%
of annual pay over the employee's Covered Compensation and (ii) for the
employee's service after December 1, 1996 beyond 35 years, 1.3% of annual pay.
Listed below for each of the persons named is the estimated annual pension
benefit payable to them and their credited service under the Pension Plan. The
estimate of the annual pension benefit was made by adding to the accrued
benefits as of November 30, 1999 an estimate of benefits that will be accrued
from December 1, 1999 to age 65 based upon W-2 or other information.
YEARS
CREDITED
ESTIMATED ANNUAL SERVICE AS OF
NAME PENSION BENEFIT 12/31/99
---- ---------------- -------------
Ronald J. Naples $29,493 3
Joseph W. Bauer 21,476 1
Ian F. Clark 24,192 0
Daniel S. Ma 28,165 6
Marcus C. J. Meijer 84,760(1) 8
- ------------------
(1) The pension benefit for Mr. Meijer is provided by a policy funded through
premiums paid to an insurance company. The premiums are currently equal to
16.75% of Mr. Meijer's annual pensionable salary.
11
<PAGE>
The Company also provides supplemental retirement income in accordance with
the provisions of a Supplemental Retirement Income Program (the "Program") which
became effective on November 6, 1984. The Program, which is a "non-qualified
plan" for federal income tax purposes, is intended to provide to officers of the
Company elected to office by the Board of Directors additional retirement income
in certain cases. Generally speaking, an officer who, as of age 65, has
completed at least 30 years of employment with the Company and/or its affiliated
companies will qualify for the maximum benefit under the Program which will
entitle him to receive annually from the date of retirement until death such
payments, if any, as are required to maintain his "net post-retirement income,"
as defined, at a level equal to 80% of his "net pre-retirement income," as
defined. For an officer who otherwise qualifies to participate in the Program
but, as of age 65, has completed less than 30 years of employment (15 years in
the case of Mr. Naples), the maximum benefit is reduced by 2% (2.667% in the
case of Mr. Naples) for each such full year of employment less than 30 (15 years
in the case of Mr. Naples). Further, under certain circumstances, Mr. Naples'
benefit commencement date may be reduced to age 60. Because the benefits payable
under the Program depend on various post-retirement factors that are not
presently known or knowable (e.g., defined benefit pension calculation, number
of years employed less than 30, social security benefit at age 65, federal,
state, and local income taxes on pension and social security benefits), it is
impossible to determine in advance which officers might be eligible to receive
payments under the Program or the amount payable to any participant. Payments
were made pursuant to the Program during the year ended December 31, 1999 in the
aggregate amount of $286,042.
Listed below for each named executive officer is the estimated annual
payment to be made under the Program assuming that (a) the named executive
officer retires at age 65; (b) the officer's compensation (salary plus
incentive) remains at its current level; (c) the estimated pension benefit is as
set forth above; (d) social security benefits remain unchanged and at the
current level; and (e) there is no change to the current federal, state, and
local income tax rates applicable to pension and social security benefits.
ESTIMATED PAYMENT
NAME UNDER THE PROGRAM
---- -----------------
Ronald J. Naples $263,718
Joseph W. Bauer 88,292
Ian F. Clark 63,078
Daniel S. Ma 52,505
Marcus C. J. Meijer 0(1)
- ------------------
(1) Mr. Meijer does not participate in the Pension Plan and, therefore, is not
eligible for payments under the Program.
Certain of the Company's executive officers are entitled to a death benefit
if employed by the Company at the time of death. The benefit, equal to 1 1/3
times the deceased officer's then current annual salary plus $30,000, is payable
in installments at various times over a 40 month period after death. The
Company's policy is not to provide currently for this contingent future
liability.
COMPENSATION OF DIRECTORS
Employees of the Company are not paid any fees for services as a director
of the Company. Directors who are not employees of the Company are paid an
annual retainer of $18,000. Directors who are not current or former employees of
the Company are paid a fee of $1,000 for each Board and each Committee meeting
attended. Committee Chairmen are paid an annual retainer as follows: Audit
Committee, $2,000; Nominating Committee and Compensation/Management Development
Committee, $1,500; Executive Committee, $48,000.
Each member of the Board is required to hold at least 5,000 shares of the
Company's Common Stock, and, until 5,000 shares are accumulated, 75% of the
annual retainer is paid in the form of shares.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Individual increases for officers are recommended by the Chief Executive
Officer other than for himself and acted upon by the Compensation/Management
Development Committee.
12
<PAGE>
COMPENSATION/MANAGEMENT DEVELOPMENT COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
Introduction
The Compensation/Management Development Committee (the "Committee") of the
Board is comprised of four independent non-employee directors. The Committee is
responsible for establishing and maintaining the Company's executive
compensation and management development programs which have been designed to
attract and retain performance-oriented key executives who are committed to the
long-term success of the Company and the enhancement of shareholder value.
The purpose of the Company's executive compensation program is to
compensate on the basis of performance. Accordingly, a considerable portion of
an executive officer's total compensation is incentive-based and tied directly
to the achievement of pre-established business goals. By relating executive
compensation to the results achieved, compensation is linked to the interests of
all shareholders. The program has three components: a base salary; an annual
incentive cash payment; and compensation realized from options, common stock,
and cash payments issued under the Company's Long-Term Performance Incentive
Plan (the "Plan").
Competitive Reward Systems
In order to attract, motivate, and retain executives, the Company positions
its executive officer base pay levels at the median of a broad cross section of
both chemical, chemical specialty, and general industry companies, using a
database available through a human resources consulting company. The Company
positions, assuming maximum incentive payments, the total compensation for
executives in the seventy-fifth percentile of the comparator group. Because base
salaries are targeted at the median, the compensation focus for executives is
clearly on long-term incentives. With respect to executive officers in other
countries, the base pay is determined based upon the regions in which they are
located. While average base pay is at the median of the companies surveyed
according to recent data, attainment of the maximum incentive portion would
place total compensation in the seventy-fifth percentile of the survey group.
Compensation Components
Base salary is reviewed annually, and increases are based primarily on
performance against pre-established goals with major emphasis on the attainment
of financial objectives and the extent of the individual's penetration of
his/her salary range. Increases in salary in 1999 were determined by considering
market data, responsibilities of the position, job performance, and the
Company's overall financial results. In the case of some foreign-based executive
officers, salary increases may be mandated by the laws in the particular country
or region even when similar increases are not granted to officers residing in
the United States.
The incentive compensation component is paid on an annual basis in the form
of a cash bonus. The incentive is designed to be a short-term award for specific
results and performance in a given year and to be competitive within the
marketplace. In 1999, the major portion of the incentive award was based on the
attainment of a previously established consolidated corporate Profit-Before-Tax
("PBT") target. In the case of the business unit heads, there is also a
management discretionary award, which is paid if certain regional financial
objectives are attained. The actual incentive award payout is based on the
attainment of corporate financial goals and, in certain cases, regional
financial goals.
At the beginning of the year, the Chief Executive Officer ("CEO")
recommends bonus gates at three levels of consolidated corporate PBT performance
as follows: (1) Threshold -- the PBT level at which an entry bonus is earned;
(2) Mid -- the PBT level at which a mid-level bonus is earned; and (3) Maximum
- -- the PBT level at which the maximum bonus is earned. The maximum financial
bonus amount is determined by multiplying the compensation salary grade midpoint
of the position by a previously established incentive award percentage. The
greater the weight of the position and resultant impact on profitability of the
Company, the greater the percentage. In the case of the CEO, the maximum
financial award that might be paid is 80% of his salary. The applicable maximum
percentage for executive officers is lower and can range from 45% to 60% of
salary grade midpoint. Depending upon the performance level achieved, the bonus
amount can be as high as the Maximum, or if performance is below the Threshold
level, no bonus will be paid.
The discretionary bonus award may be paid on the attainment of
pre-established goals and within pre-established boundaries.
13
<PAGE>
In 1999, pre-tax profits were slightly above the Maximum level, and,
accordingly, the CEO and all other executive officers did receive bonuses
calculated at the Maximum level.
The final component is compensation realized from the Long-Term Performance
Incentive Plan comprising a combination of grants of incentive stock options,
non-qualified options, Common Stock, and cash issued under the Plan. Awards
under the Plan play an important role in the Company's executive compensation
structure thereby making compensation more dependent upon the long-term
performance of the Company. With stock options, executive officers receive gains
only if the stock price improves over the fair market value at the date of the
grant. The payment of the Common Stock and performance incentive cash awards is
dependent upon meeting certain predetermined performance targets, which under
the 1999-2001 performance period is based on average earnings per share growth
rate and pre-tax return on assets. The purpose of issuing stock options and
stock and performance incentive cash awards is to motivate executive officers to
make the types of long-term changes in the Company's business that will affect
long-term total return to shareholders. The amounts of the awards are based on
the relative position of each executive officer within the organizational
structure of the Company and past practice and performance factors independent
of the terms and amounts of awards previously granted.
Consistent with this philosophy, the Company encourages and in some cases
requires executives to hold stock delivered through equity-based plans. In 1999,
the Committee established stock ownership guidelines for officers and key
employees of the Company. The guidelines for stock ownership range from stock
worth 25% to 300% of base salary depending on job level. Penalties may be
applied to those who do not meet the guidelines within four years of becoming
covered by the guidelines.
The Company's practice is to grant stock options combined with Common Stock
and performance incentive cash awards to executive officers every year for
rolling three-year performance periods. On March 17, 1999, the Committee granted
options, stock awards, and performance incentive cash awards for the 1999-2001
period to the CEO and all of the other named executive officers.
Compensation of Chief Executive Officer
The compensation of the CEO, Ronald J. Naples, for the 1999 year was
established in early 1999 by the Compensation/Management Development Committee
(the "Committee") and was incorporated into Mr. Naples' new Employment Agreement
with the Company, as reported in detail elsewhere in this Proxy Statement. The
total compensation package for Mr. Naples was established by the Committee at
levels considered by the Committee to be reasonable after having taken into
account Mr. Naples' performance over the past three years and comparing his
compensation package within industries against which all of the other Company
positions are compared as discussed earlier in this report.
Deductibility of Compensation for Tax Purposes
Section 162(m) of the Internal Revenue Code (the "Code"), enacted in 1993,
generally imposes a $1,000,000 limit on the amount of compensation deductible by
the Company in regard to compensation paid to the Company's CEO and the four
most highly compensated executive officers. Although the reported compensation
of the Company's CEO set forth in the Summary Compensation Table above in prior
years was in excess of $1,000,000, the $1,000,000 threshold for Section 162(m)
purposes was not exceeded due to a variety of factors. Accordingly, all of the
compensation paid in 1999 to the Company's CEO and the other four most highly
compensated executive officers is expected to be fully deductible for tax
purposes by the Company. It is considered unlikely that the compensation of any
of the CEO or the other four most highly compensated executive officers will
exceed the Section 162(m) $1,000,000 threshold in the near future. Therefore,
the Company has not adopted any policy with respect to qualifying compensation
paid to executive officers for deductibility under Section 162(m) of the Code.
Compensation/Management Development
Committee
Robert H. Rock, Chairman
Donald R. Caldwell
Robert E. Chappell
Edwin J. Delattre
14
<PAGE>
Performance Graph
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on the Company's Common Stock against
the cumulative total return of the S&P SmallCap 600 Stock Index, and the S&P
Chemicals (Specialty) Index for the period of five (5) fiscal years commencing
December 31, 1994 and ending December 31, 1999.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG QUAKER CHEMICAL CORPORATION, THE S & P SMALLCAP
600 INDEX AND S & P CHEMICALS (SPECIALTY) SMALLCAP INDEX
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts
the following plot points:
QUAKER S&P SMALLCAP S&P CHEMICALS
CHEMICAL CORP 600 INDEX (SPECIALTY) - SMALLCAP
Dec 94 100 100 100
Dec 95 74.97 129.96 115.31
Dec 96 95.71 157.67 189.56
Dec 97 115.38 198.01 240.24
Dec 98 114.48 195.42 254.44
Dec 99 95.05 219.66 253.09
- ----------
* $100 invested on 12/31/94 in stock or index-- including reinvestment of
dividends. Fiscal year ending December 31.
15
<PAGE>
APPROVAL OF THE 2000 EMPLOYEE STOCK PURCHASE PLAN
On March 22, 2000, the Board of Directors adopted the Quaker Chemical
Corporation 2000 Employee Stock Purchase Plan (the "Plan"), which will become
effective upon shareholder approval. The maximum number of shares of the
Company's Common Stock available for purchase by eligible employees in one or
more annual offerings under the Plan is 500,000, subject to adjustments for
stock splits, stock dividends, and recapitalization.
The following summary of the Plan is qualified by reference to the complete
text of the Plan which is attached as Exhibit B to this Proxy Statement.
Purpose of the Plan
The purpose of the Plan is to provide all eligible employees of the Company
and certain subsidiaries an opportunity to purchase stock of the Company and to
foster interest in the Company's success, growth, and development.
Description of the Plan
The Plan is intended to be an "employee stock purchase plan" within the
meaning of Section 423 of the Internal Revenue Code of 1986, as amended (the
"Code"); it is not intended to constitute a qualified plan as contemplated by
Section 401(a) of the Code. The Plan is not subject to the provisions of the
Employee Retirement Income Security Act of 1974.
Under the Plan, shares will be offered to certain employees of the Company
and its designated subsidiaries as the Board of Directors may from time to time
designate. Each eligible employee will be given the opportunity to pay for the
shares by way of lump sum prepayments of not less than $250 or more than $2,500
per month or by payroll deductions in an amount not less than $10 per pay period
for salaried employees or $5 per pay period for hourly employees. No participant
will have a right to purchase shares in any one plan year to the extent that the
value of such shares would exceed the lesser of $25,000 or the employee's base
salary for the plan year.
The Company will make a series of annual offerings under the Plan
commencing January 1, 2001. The price to be paid for shares by eligible
employees who elect to participate in an annual offering will be 85% of the
market price of the Common Stock on the last day of each calendar month during
that annual offering. On each such date, each employee will be deemed to have
purchased as many full shares as the amount in his account is sufficient to pay
for at that price. In the event the number of shares which might otherwise be
purchased by all participants on any such date exceeds the number of shares
available for purchase, each participant will be entitled to purchase a pro rata
portion of the available shares. Shares available in an annual offering may not
be purchased more than 12 months after the effective date of the annual offering
and any amount remaining in an employee's account at the expiration of each
annual offering will be refunded to the participant.
Eligibility
In general, to be eligible to participate in the Plan, an employee must
customarily be employed for more than 20 hours per week and have been employed
by the Company for at least three (3) months. No employee who holds, or after
the purchase of shares under the Plan would hold, 5% or more of the voting power
of the voting shares of the Company is eligible to participate under the Plan.
It is not presently possible to estimate the number of shares included in each
annual offering and the level of participation by all eligible employees. Under
the prior plan, 75,000 shares were included in each offering and approximately
15% of the eligible employees participated.
Use of Funds
As and when payments are made by employees, they will be placed in the
general funds of the Company. Until shares credited to an employee's account are
registered in the name of the employee, the shares will be registered in the
name of the Plan, the Plan Committee or a nominee account, as determined by the
Plan Committee which shall consist of three (3) members who shall be appointed
by the Board of Directors.
Market Value
The average market price of the Company's Common Stock on March 10, 2000 was
$15.22.
16
<PAGE>
Federal Income Tax Consequences
Under the provisions of the Internal Revenue Code, no income will be
recognized by an employee for Federal income tax purposes upon the employee's
election to participate in the Plan or upon the employee's purchase of shares
under the Plan. However, an employee will have a taxable event if the employee
disposes of the shares purchased pursuant to the Plan or if the employee dies
while owning shares so purchased. The tax consequences to an employee will vary
depending on whether the disposition occurs before or after the expiration of
the applicable holding period, which ends upon the expiration of two years from
the date the shares were purchased by the employee under the Plan.
A disposition of shares prior to the expiration of the applicable holding
period (a "disqualifying disposition"), will cause the recognition of ordinary
income by the employee (included in gross income as compensation) in the year of
disposition equal to the amount by which the fair market value of the shares at
the time the shares were purchased exceeds the purchase price. Upon a
disposition of shares by an employee after the expiration of the applicable
holding period, or upon the death of the employee while holding shares acquired
under the Plan (whether death occurs before or after the expiration of the
applicable holding period), the employee will recognize ordinary income
(includable in gross income as compensation) to the extent of the lesser of (a)
the amount by which the fair market value of the shares at the time of
disposition exceeds the purchase price or (b) the amount by which the fair
market value of the shares at the time the shares were purchased exceeds the
purchase price. Provided the shares are capital assets in the hands of the
employee, if the price at which they are sold exceeds their adjusted cost basis,
the excess will be a capital gain, and if the price is less than their adjusted
cost basis, the loss will be a capital loss. This capital gain or loss will
constitute long-term capital gain or loss if the shares have been held for more
than one year at the time of disposition and short-term capital gain or loss if
they have been held for one year or less at the time of disposition. The basis
of the shares in the employee's hands at the time of a disposition will consist
of the price paid by the employee for the shares, increased by the amount (if
any) included in the employee's gross income as compensation.
Company Deduction
The Company is entitled to a tax deduction only to the extent that the
employee recognizes ordinary income because the employee sells or otherwise
disposes of the shares of Common Stock before the holding period expires.
Registration Statement
If the shareholders approve the Plan, the Company expects to file a
registration statement with the Securities and Exchange Commission with respect
to the shares of Common Stock to be offered under the Plan. Offerings under the
Plan will be made pursuant to that Registration Statement, as amended, after it
has been declared effective by the Commission. The expenses of the offerings
will be paid by the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE ADOPTION OF
THE COMPANY'S 2000 EMPLOYEE STOCK PURCHASE PLAN.
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has appointed PricewaterhouseCoopers
LLP, independent accountants, to examine the accounts of the Company for the
year ending December 31, 2000 and to report on the Company's financial
statements for that period. The firm of PricewaterhouseCoopers LLP has acted as
independent accountants for the Company since 1968. Representatives of
PricewaterhouseCoopers LLP will be present at the Meeting to make a statement if
they desire to do so and to respond to appropriate questions.
There is no requirement that the appointment of PricewaterhouseCoopers LLP
as the Company's independent accountants be submitted to the shareholders for
their approval. However, the Board of Directors believes that shareholders
should be provided an opportunity to express their views on the subject. The
Board of Directors will not be bound by a negative vote but may take any
negative vote into consideration in future years.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP.
17
<PAGE>
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
TO BE INCLUDED IN MANAGEMENT'S PROXY AND
PROXY STATEMENT FOR THE NEXT ANNUAL MEETING
OF SHAREHOLDERS
In order for a shareholder's proposal(s) to be considered for inclusion in
the Company's Proxy Statement and proxy for the 2001 Annual Meeting of
Shareholders, the shareholder must present his or her proposal(s) to the Company
not later than November 30, 2000.
DEADLINE FOR PROPOSALS AS TO WHICH MANAGEMENT
WILL NOT HAVE DISCRETIONARY AUTHORITY
At the 2001 Annual Meeting of Shareholders, Management of the Company will
have discretionary authority to act upon such matters as may be brought before
the Meeting or any adjournment thereof as to which written notice was not
received by the Company on or before February 13, 2001.
OTHER MATTERS
The Board of Directors does not know of any matters other than the matters
described herein and procedural matters to be presented at the Meeting. If any
other matters properly come before the Meeting, the persons named in the
accompanying proxy will vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors,
/s/ D. Jeffry Benoliel
------------------
D. Jeffry Benoliel
Secretary
Dated: March 30, 2000
18
<PAGE>
EXHIBIT A
SHAREHOLDER VOTING ADMINISTRATIVE PROCEDURES
Voting Rights
At the Annual Meeting of Shareholders held May 6, 1987, shareholders
approved an amendment to the Articles of Incorporation, pursuant to which the
holders of the Company's $1.00 par value Common Stock on May 7, 1987 (the
"Effective Date") became entitled to 10 votes per share of Common Stock with
respect to such shares, and any shares of Common Stock acquired after the
Effective Date, subject to certain exceptions, shall only be entitled to 1 vote
per share until such shares have been owned beneficially for a period of at
least 36 consecutive calendar months, dating from the first day of the first
full calendar month on or after the date the holder acquires beneficial
ownership of such shares (the "Holding Period"). Each change in beneficial
ownership with respect to a particular share will begin a new "1 vote" Holding
Period for such share. A change in beneficial ownership will occur whenever any
change occurs in the person or group of persons having or sharing the voting
and/or investment power with respect to such shares within the meaning of Rule
13d-3 of the General Rules and Regulations under the Securities Exchange Act of
1934. Under the amendment, a share of Common Stock held of record on a record
date shall be presumed to be owned beneficially by the record holder and for the
period shown by the shareholder records of the Company. A share of Common Stock
held of record in "street" or "nominee" name by a broker, clearing agency,
voting trustee, bank, trust company, or other nominee shall be presumed to have
been held for a period of less than the required 36 month Holding Period. The
foregoing presumptions are rebuttable upon presentation to the Company of
satisfactory evidence to the contrary. Such evidence can include trade
confirmations and account statements indicating ownership through the required
Holding Period. Nevertheless, the Company, at its sole discretion, will
determine the adequacy of the evidence presented. The amendment also provides
that no change in beneficial ownership will be deemed to have occurred solely as
a result of any of the following:
(1) a transfer by any gift, devise, bequest, or otherwise through the laws
of inheritance or descent;
(2) a transfer by a trustee to a trust beneficiary under the terms of the
trust;
(3) the appointment of a successor trustee, guardian, or custodian with
respect to a share; or
(4) a transfer of record or a transfer of a beneficial interest in a share
where the circumstances surrounding such transfer clearly demonstrate
that no material change in beneficial ownership has occurred.
Maintaining Records
The Company's registrar and transfer agent, American Stock Transfer & Trust
Company, maintains the Company's register of shareholders. A single register is
maintained, but individual holdings are coded to indicate automatically the
number of votes that each shareholder is entitled to cast. Internal mechanisms
automatically convert the voting rights by a 10-to-1 ratio for those
shareholders who have held their shares for the required Holding Period.
Additionally, the register can be adjusted manually, in order to respond to
shareholders whose shares were held in "street" or "nominee" name if shares
acquired were held by the same party for the required Holding Period.
Proxy Administration
As indicated above, record ownership proxy administration is relatively
simple. The transfer agent will mail proxy cards to all shareholders, and each
proxy card will reflect the number of votes that the shareholder is entitled to
cast, not the number of shares held. If shareholders have deposited shares with
brokers, clearing agencies, voting trusts, banks, and other nominees, such
shareholders will normally be entitled to one vote per share. If they can
provide evidence that they have held their shares for the Holding Period, they
can increase the number of votes that may be cast to 10 votes per share by
proper notification to the Company. Equally, if a shareholder believes that he
or she is entitled to 10 votes per share by virtue of falling within one of the
exceptions set forth above, that can be accomplished through proper notification
to the Company. Acceptable substantiation will in most cases be a letter from
the shareholder explaining the circumstances and stating why he or she feels
that the common shares held by such shareholder are entitled to 10 votes per
share, either because the shares have been held for the required Holding Period
or because the shareholder falls within one of the exceptions set forth above.
The Company reserves the right to change what it deems to be acceptable
substantiation at any time if it appears from experience that the present
definition is inadequate or is being
19
<PAGE>
abused, and further reserves the right at any time to require that a particular
shareholder provide additional evidence that one of the exceptions is
applicable.
Where evidence is presented that is satisfactory, the shareholder records
will be manually adjusted as appropriate. The shareholder submitting the
evidence will be advised as to any action taken or not taken, which will be
posted by ordinary mail to the shareholder's registered address.
Special proxy cards are not used, and no special or unusual procedures are
required in order properly to execute and deliver the proxy card for tabulation
by the transfer agent.
Summary
The procedures set forth above have been reviewed with representatives of
various brokers and banks, as well as counsel to the Company. Those
representatives have made helpful and valuable suggestions, which have been
incorporated in the procedures.
The Company is confident that these procedures are efficient in addressing
the complications of multi-vote casting and tabulating, but the Company is
prepared to revise them if experience dictates the need for revision.
If a Shareholder has questions concerning the Shareholder Voting Procedures
or would like to present evidence of ownership through the required 36 month
Holding Period, please contact Irene Kisleiko, the Company's Assistant
Secretary, at (610) 832-4119.
20
<PAGE>
EXHIBIT B
QUAKER CHEMICAL CORPORATION
2000 EMPLOYEE STOCK PURCHASE PLAN
------------------------------
1. Purpose. The purpose of the Quaker Chemical Corporation 2000 Employee
Stock Purchase Plan (the "Plan") is to provide all eligible employees of
Quaker Chemical Corporation, a Pennsylvania corporation (the "Company"),
and all eligible employees of the Company and its Designated Subsidiaries
an opportunity to purchase stock of the Company through offerings thereof
and to foster interest in the Company's success, growth, and development.
It is the intention of the Company that the Plan shall qualify as an
"Employee Stock Purchase Plan" within the meaning of Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code"). The provisions of
the Plan shall, accordingly, be construed so as to extend and limit
participation in a manner consistent with the requirements of that Section
of the Code.
2. Definitions.
(a) "Account" means the record which shall be maintained by the
Company for each Participant for each Offering and which
shall reflect the method(s) of making payments, the amount
of payments made, the number of shares of Stock purchased,
the number of shares of Stock distributed, the amount of
dividends received on shares of Stock which have not been
distributed, and the amount of dividends distributed.
(b) "Base Salary" means straight-time earnings, excluding
payments for overtime, commissions, incentive compensation,
bonuses, and other special payments, except to the extent
that the inclusion of any such item is specifically
designated by the Committee.
(c) "Board" means the Board of Directors of the Company.
(d) "Committee" means the committee established under Paragraph
11 to administer the Plan.
(e) "Designated Subsidiary" means a Subsidiary that has been
designated by the Board from time to time, in its sole
discretion, to be eligible as an Employer in the Plan.
(f) "Employee" means any person, including any officer, who is
employed by an Employer and whose customary employment is
more than twenty (20) hours per week.
(g) "Employer" means, collectively, the Company and its
Designated Subsidiaries.
(h) "Fair Market Value of Stock on the Investment Date" means
the mean between the highest and lowest reported selling
prices for the Stock on the Investment Date, or if sales are
not reported for the Stock, the mean between the closing bid
and asked prices for the Stock on the Investment Date.
(i) "Investment Date" means the last day of each calendar month
in each Plan Year in which the organized securities trading
markets in the United States are open for business.
(j) "Offering" means an announcement to Employees pursuant to
Paragraph 4 that Stock may be purchased under the Plan
during the ensuing Plan Year.
(k) "Participant" means an Employee who has agreed to
participate in an Offering and has met the requirements of
Paragraphs 3 and 5.
(l) "Plan Year" means the twelve (12) month period commencing on
January 1 and ending on December 31.
(m) "Stock" means, subject to the provisions of Paragraph 14,
shares of the Common Stock, $1.00 par value, of the Company.
(n) "Subsidiary" means any corporation, other than the Company,
in an unbroken chain of corporations, beginning with the
Company if, at the time an option is granted under the Plan,
each of the corporations, other than the last corporation in
the unbroken chain, owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one
of the other corporations in such chain.
21
<PAGE>
3. Eligibility.
(a) Any Employee who has been employed by an Employer for at
least three (3) full calendar months shall be eligible to
participate in the Plan, but the right to purchase Stock
under the Plan shall commence as of the first day of the
calendar month next following the completion of said three
(3) full calendar months of continuous employment with an
Employer.
(b) Any provision of the Plan to the contrary notwithstanding,
no Employee shall have the right to purchase Stock under the
Plan:
(i) If, immediately after such right to purchase is
granted, such Employee would own Stock, and/or hold
outstanding options to purchase Stock, possessing 5% or
more of the total combined voting power or value of all
classes of capital stock of the Company or of any
Subsidiary corporation of the Company; or
(ii) If such Employee's rights to purchase Stock under all
employer stock purchase plans of the Company and its
Subsidiaries would accrue at a rate which exceeds in
any Plan Year in which such right is outstanding at
any time the lesser of shares of Stock having a fair
market value of $25,000 or such Employee's Base Salary
for the Plan Year.
4. Offerings. At least thirty (30) days prior to each Plan Year the Company
may (but shall not be obligated to) announce an Offering to Employees to
purchase Stock under the Plan during the ensuing Plan Year. The
announcement shall specify the maximum number of shares of Stock that may
be purchased in said Offering by all eligible Employees.
5. Participation.
(a) An Employee who is or will be eligible to participate in the
Offering may do so by one or both of the following methods:
(i) Completing and filing with the Committee a Withholding
Purchase Agreement in which the Employee shall elect to
participate by payroll deduction and shall authorize
the amount (in whole dollars and which shall be not
less than $10 per pay period for salaried employees and
$5 per pay period for hourly employees) which shall be
withheld from the Employee's Base Salary in each pay
period throughout the Plan Year.
(ii) From time to time during the Plan Year (not more
frequent than once a month), file with the Committee a
Prepayment Purchase Agreement in which the Employee
shall elect to participate by lump sum payment and
indicate the amount of the lump sum (which shall not
be less than $250 or more than $2,500) which is being
paid by the Employee with the Prepayment Purchase
Agreement.
(b) All payments made by a Participant shall be credited to the
Participant's Account.
(c) A Participant may amend a Withholding Purchase Agreement
previously filed once and not more than once per calendar
quarter and may discontinue participation in an Offering as
provided in Paragraph 8. Any such amendment shall be
implemented and put into effect by Employer with reasonable
promptness.
(d) On a quarter-annual basis, the Committee shall send to each
Participant a statement of the Participant's Account. The
statement shall reflect all Account balances as of the end
of the calendar quarter and transactions in the Account
during the quarter.
6. Grant of Options. Each Participant in an Offering will be deemed to have
been granted an option to purchase as many full shares of Stock as may have
been purchased in the Participant's Account in the Plan Year pursuant to
the provisions of Paragraph 7.
7. Purchases of Stock.
(a) The option price of Stock purchased by a Participant on an
Investment Date shall be 85% of the Fair Market Value of
Stock on the Investment Date.
(b) At the close of business on each Investment Date, the
uninvested Participant payment balance of each Participant's
Account shall be determined, the Participant will purchase
as many full shares of Stock as possible at the option price
of Stock on said Investment Date, the Participant's Account
shall be charged for the dollar amount of such purchase, and
the Participant's Account shall be credited with the number
of shares of Stock purchased.
22
<PAGE>
(c) Purchases of Stock under the Plan shall continue to be
effected and shall be charged and credited to the Accounts
of Participants throughout the Plan Year until such time as
the maximum number of shares announced as being subject to
purchase in the Offering (unless such number shall have been
increased in a subsequent announcement made during the Plan
Year) shall have been purchased by all Participants. If, on
an Investment Date the number of shares which might
otherwise be purchased exceeds the number of shares
remaining for purchase in the Offering, the shares available
for purchase shall be allotted among the Participants pro
rata based on the total number of shares subject to purchase
by all Participants on the Investment Date.
(d) Dividends paid on shares of Stock credited to a
Participant's Account shall be held by the Committee, until
withdrawn by a Participant or distributed to a Participant,
in a separate non-interest bearing fund and shall be
credited to the Participant's Account. On a quarter-annual
basis, the Committee shall distribute to Participant any
dividends (which have not been previously distributed or
withdrawn) credited to the Participant's Account.
(e) At the end of a Plan Year or when the maximum number of
shares of Stock included in the Offering have been
purchased, any uninvested Participant payment balance in a
Participant's Account shall be refunded to the Participant,
any dividends (which have not been previously distributed or
withdrawn) then credited to the Participant's Account shall
be distributed to the Participant, and a certificate
representing the number of shares of Stock then credited to
the Participant's Account shall be registered in the name of
and issued to the Participant. When all shares included in
an Offering have been purchased, all outstanding Withholding
Purchase Agreements and Prepayment Purchase Agreements shall
be cancelled.
8. Withdrawal.
(a) A Participant may withdraw all uninvested Participant
payment balances credited to the Participant's Account at
any time by giving written notice to the Committee. All such
sums shall be paid to the Participant with reasonable
promptness after receipt of the notice of withdrawal. A
Participant may withdraw all shares of Stock credited to the
Participant's Account at any time by giving written notice
to the Committee. As soon as reasonably practicable
thereafter, the Committee shall cause a certificate
representing said shares to be registered in the name of and
issued to the Participant. A Participant may withdraw all
dividends credited to the Participant's Account at any time
by giving written notice to the Committee. All such sums
shall be paid to the Participant with reasonable promptness
after receipt of the notice of withdrawal.
(b) A Participant's withdrawal of shares of Stock and/or of the
unexpended payment balances credited to the Participant's
Account shall constitute the Participant's withdrawal from
participation in the Offering for the Plan Year, but will
not have any effect upon the Participant's eligibility to
participate in any succeeding Offering. A Participant's
withdrawal of dividends will not have any effect upon the
Participant's eligibility to continue to participate in the
Offering for the Plan Year or in any succeeding Offering.
(c) In the event of a Participant's death, retirement, or
termination of employment with Employer, no further payments
shall be made by or on behalf of the Participant, no further
purchases of Stock shall be made by or on behalf of the
Participant, and the uninvested Participant payment balance,
credited shares of Stock, and unwithdrawn dividends in the
Account shall be paid with reasonable promptness to the
Participant or to the Participant's beneficiary.
9. Interest. No interest shall be credited to or paid on a Participant's
Account.
10. Stock.
(a) The shares of Stock to be purchased by Participants under
the Plan may be authorized and unissued shares or shares
held in the treasury (including shares purchased for use and
sale in connection with the Plan) of the Company, as may be
determined from time to time by the Board. The maximum
number of shares which shall be made available for sale
under the Plan during all Offerings shall be 500,000 shares
of Stock, subject to adjustment upon changes in
capitalization of the Corporation as provided in Paragraph 14.
(b) Until such time as shares of Stock credited to a
Participant's Account are registered in the name of the
Participant, the shares shall be registered in the name of
the Plan or in the name of the Committee or in a nominee
account (as determined by the Committee); and the Committee
shall afford the Participant the opportunity to vote said
shares and shall transmit to the Participant all mailings
made by the Company to its shareholders.
23
<PAGE>
11. Administration. The Plan shall be administered by a Committee consisting
of not less than three (3) members who shall be appointed by the Board.
Each member of the Committee shall be either a director, an officer, or an
Employee of an Employer. The Committee shall be vested with full authority
to engage and appoint agents and to make, administer, and interpret such
rules and regulations as it deems necessary to administer the Plan. Any
determination, decision, or action of the Committee in connection with the
construction, interpretation, administration, or application of the Plan
shall be final, conclusive, and binding upon all Employees and all
Participants and any and all persons claiming under or through any Employee
or Participant.
12. Designation of Beneficiary. A Participant may file with the Committee a
written designation of a beneficiary who is to receive any Stock and cash
in the Participant's Account in the event of such Participant's death. Such
designation of a beneficiary may be changed by the Participant at any time
upon written notice to the Committee. Upon the death of a Participant and
upon receipt by the Committee of proof of the Participant's death and of
the identity and existence of a beneficiary validly designated under the
Plan, the Company shall deliver such Stock and cash to such beneficiary. In
the absence of a validly designated beneficiary, the beneficiary shall be
deemed to be the executor or administrator of the estate of the
Participant, or if no such executor or administrator has been appointed (to
the knowledge of the Committee), the Company, in its discretion, may
deliver such Stock and cash to the spouse, if any, or to the children, if
any, or to those persons who would be entitled to inherit from the
Participant in accordance with the Inheritance Laws of the Commonwealth of
Pennsylvania. No beneficiary shall, prior to the death of the Participant,
acquire any interest in the Stock or cash credited to the Participant's
Account.
13. Transferability. No rights with regard to the exercise of an option or to
purchase or receive Stock under the Plan may be assigned, transferred,
pledged, or otherwise disposed of by an Employee or by a Participant and,
except as provided in Paragraph 8, rights granted under the Plan are
exercisable only by a Participant during the Participant's lifetime.
14. Changes in Capitalization. In the event of any stock dividend, split-up,
or recapitalization, as a result of which shares of any class shall be
issued in respect of the outstanding Stock, or Stock shall be changed into
the same or a different number of the same or another class or classes, the
number of shares of Stock which, at the time, had not been purchased under
the Plan shall be appropriately adjusted by the Company.
15. Use of Funds. All Participant payments received by the Company under the
Plan may be used by the Company for any corporate purpose and the Company
shall not be obligated to segregate such funds. All funds received by an
Employer, other than the Company, shall be immediately forwarded by such
Employer to the Company.
16. Government Regulations. The Company's obligations to sell and deliver
Stock under the Plan are subject to the approval of any governmental
authority required in connection with and compliance with any law or
regulation applicable to the authorization, issuance, or sale of such
Stock.
17. Excused Absences. If a Participant is granted a leave of absence, or if
his absence from service is excused on account of illness, disability, or
entering the armed forces, the Participant may, during such period of
absence, make payments in cash to the Participant's Account or payments may
be suspended, subject to any applicable law or governmental regulation, for
such period of time as the Committee in its sole discretion shall deem
reasonable.
18. Termination or Amendment. The Company reserves the right to abandon,
amend, modify, or suspend the Plan at any time without notice and to revoke
or terminate it at any time; provided, however, that no such amendment,
revocation, or termination shall, with respect to payments theretofore
credited to Participants' Accounts, adversely affect any existing
Withholding Purchase Agreement or Prepayment Purchase Agreement or Offering
and provided further that, except as may be required by law, no such
amendment shall change the number of shares authorized to be offered under
the Plan as provided in Paragraph 10 (other than a change merely reflecting
a change in capitalization), or change the price at which the shares will
be offered under the Plan to a price below that specified in Paragraph 7,
or change or modify the eligibility requirements of Employees set forth in
Paragraph 3.
19. Effective Date. The Plan shall become effective when it is approved by the
shareholders of the Company, provided that such approval is obtained within
twelve (12) months after March 22, 2000, the date on which the Plan was
adopted by the Board.
24
<PAGE>
QUAKER CHEMICAL CORPORATION
Elm and Lee Streets
Conshohocken, PA 19428
P
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
R
The undersigned hereby appoints Peter A. Benoliel and Ronald J. Naples and
O each of them proxies of the undersigned, to attend the Annual Meeting of
Shareholders of Quaker Chemical Corporation, a Pennsylvania corporation
X (the "Company"), to be held at the Philadelphia Marriott West, West
Conshohocken, Pennsylvania, on May 10, 2000, or any adjournment thereof,
Y and with all powers the undersigned would possess if present, to vote:
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS FOR all nominees listed below /_/ WITHHOLD AUTHORITY /_/
(except as marked to the contrary below) to vote for all nominees listed below
</TABLE>
Donald R. Caldwell, Robert E. Chappell, William R. Cook, and
Robert P. Hauptfuhrer
(Instruction: to withhold authority to vote for any individual nominee
write that nominee's name on the space provided below.)
---------------------------------------------------------------------------
2. PROPOSAL TO APPROVE THE ADOPTION OF THE COMPANY'S 2000 EMPLOYEE STOCK
PURCHASE PLAN.
FOR /_/ AGAINST /_/ ABSTAIN /_/
3. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR 2000.
FOR /_/ AGAINST /_/ ABSTAIN /_/
(CONTINUED ON REVERSE SIDE)
<PAGE>
(CONTINUED FROM REVERSE SIDE)
4. IN THEIR DISCRETION UPON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING
OR ANY ADJOURNMENT THEREOF FOR WHICH NOTICE HAS NOT BEEN RECEIVED BY
COMPANY ON OR BEFORE FEBRUARY 15, 2000.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2, AND 3.
The undersigned hereby also acknowledges receipt of the Notice of Annual
Meeting of Shareholders, the Proxy Statement with respect to said Meeting, and
the Company's Annual Report for the year ended December 31, 1999.
DATED: , 2000
----------------------------
----------------------------------------
(Signature)
(Signature should be exactly as name or
names appear on this Proxy)
PLEASE DATE, SIGN, AND RETURN PROMPTLY
<PAGE>
[QUAKER CHEMICAL LETTERHEAD]
March 30, 2000
Dear Quaker Shareholder:
Your enclosed proxy card shows the number of votes you are entitled to cast not
the number of shares that you own.
This reflects the action taken at the Annual Meeting of Shareholders on May 6,
1987 when shareholders approved an amendment to the Articles of Incorporation by
which holders of Common Stock became entitled to 10 votes per share of Common
Stock for shares which were held on that date. The amended Articles also provide
that with respect to shares acquired after May 6, 1987, all shares are entitled
to one vote per share until such shares are held for 36 consecutive months.
After 36 months, each share is entitled to 10 votes.
There are some exceptions to the above and those exceptions are listed in
Exhibit A "Shareholder Voting Administrative Procedures" to the enclosed Proxy
Statement.
Because we have no means of tracking ownership of shares held in "street" or
"nominee" name, such shares are presumed to have been held for a period of less
than 36 consecutive months.
Please review the number of votes that are listed on the proxy card. For all
shares purchased by you before March 1, 1997 (36 months before the record date),
you are entitled to 10 votes per share. For all shares purchased by you after
March 1, 1997, you are entitled to one vote per share.
If you feel that the votes listed do not accurately reflect the number of votes
you are entitled to cast, Exhibit A to the enclosed Proxy Statement outlines
procedures by which you may seek change. If you have any questions, please call
Irene M. Kisleiko, Assistant Corporate Secretary, at 610-832-4119.
To allow sufficient time to research your questions or act on your requests,
please call Ms. Kisleiko at Quaker Chemical as soon as possible.
Thank you.
