<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
The Carbide/Graphite Group, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
The Carbide/Graphite Group, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
[LOGO OF THE CARBIDE/GRAPHITE GROUP, INC.]
-----------------------------
One Gateway Center, 19th Floor
Pittsburgh, PA 15222
(412) 562-3700
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 9, 1997
To The Stockholders:
The Annual Meeting of Stockholders of The Carbide/Graphite Group, Inc., a
Delaware corporation (the Company), will be held at the Pittsburgh Hilton and
Towers, Gateway Center, Pittsburgh, PA 15222 on Tuesday, December 9, 1997 at
10:00 A.M. EST (the Annual Meeting), for the following purposes:
To elect three nominees to the Board of Directors to hold office until the
2000 Annual Meeting of Stockholders and until their respective successors
are elected and qualified.
To ratify the appointment of independent auditors for the fiscal year
ending July 31, 1998.
To transact such other business as may properly come before the Annual
Meeting.
Holders of record of the Company's $0.01 par value Common Stock (the Common
Stock) at the close of business on October 20, 1997 will be entitled to vote
at the Annual Meeting. All stockholders are cordially invited to attend the
Annual Meeting in person. However, whether or not you expect to attend the
Annual Meeting in person, it is requested that you promptly fill in, sign and
return the enclosed proxy card.
By order of the Board of Directors
Roger Mulvihill
Secretary
Pittsburgh, Pennsylvania
October 31, 1997
<PAGE>
-------------------------
PROXY STATEMENT
-------------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the Board) of the Company for use at the
Annual Meeting to be held on December 9, 1997 at the Pittsburgh Hilton and
Towers, Gateway Center, Pittsburgh, PA 15222 and any adjournment(s) or
postponement(s) thereof. The enclosed proxy is for the use of holders of
record of Common Stock at the close of business on October 20, 1997. This
proxy is a means by which stockholders may authorize the voting of their
shares at the Annual Meeting. Shares cannot be voted at the Annual Meeting
unless the owner of record is present to vote or is represented by a proxy.
Shares represented by proxies will be voted as specified by the stockholder.
Except as otherwise indicated on the proxy, shares will be voted for the
election of the nominees for director named herein and for the appointment of
Coopers & Lybrand L.L.P. as independent accountants for the fiscal year ending
July 31, 1998. Any person who has signed and returned a proxy may revoke it at
any time before it is exercised by submitting a subsequently executed proxy,
by giving notice of revocation to the Secretary of the Company or by voting in
person at the Annual Meeting. As of October 20, 1997, the date of record,
8,689,272 shares of Common Stock were issued and outstanding, the holders of
which are entitled to one vote for each share they hold. Accordingly, a quorum
will require the presence, in person or by proxy, of the holders of at least
4,344,637 shares of Common Stock. Abstentions are counted as votes present and
entitled to vote and have the effect of votes against a particular matter.
Directors are elected by a plurality of the votes cast with a quorum present.
In all matters other than the election of directors, the affirmative vote of
those persons holding of record in the aggregate at least a majority of shares
of Common Stock present in person or by proxy and entitled to vote at the
Annual Meeting or any adjournments thereof is necessary for approval by
stockholders. Broker non-votes are not counted in determining the number of
shares voted for or against a particular matter. Both abstentions and broker
non-votes are counted in determining the presence of a quorum. In the event
there are not sufficient votes for a quorum or to approve or ratify any
proposal at the time of the Annual Meeting, the Annual Meeting may be
adjourned in order to permit the further solicitation of proxies. The cost of
soliciting proxies will be borne by the Company. In addition to solicitation
by mail, proxies may be solicited personally or by telephone, telegraph or
facsimile by officers or employees of the Company. The Company will reimburse
brokers, dealers, bankers and trustees or their nominees for reasonable
expenses incurred by them in forwarding proxy materials to beneficial owners
of Common Stock. The Proxy Statement, accompanying proxy card and the
Company's 1997 Annual Report to Stockholders are first being sent or given to
shareholders on or about October 31, 1997.
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of September 26, 1997 with
respect to each stockholder who beneficially owns 5% or more of the Company's
outstanding Common Stock. Except as set forth below, each stockholder has sole
voting and investment power over all shares. This information is based upon
the latest report furnished to the Company or filed with the Securities and
Exchange Commission by such stockholder on or before September 26, 1997 and
may not be current:
<TABLE>
<CAPTION>
NUMBER
OF SHARES PERCENT OF
NAME BENEFICALLY OWNED CLASS
- ---- ----------------- ----------
<S> <C> <C>
The Capital Group of Companies, Inc. (1) 870,200 10.1%
333 South Hope Street
Los Angeles, California 90071
Wellington Management Company (2) 837,610 9.7
75 State Street
Boston, Massachusetts 02109
</TABLE>
Continued on page 2
<PAGE>
<TABLE>
<CAPTION>
NUMBER
OF SHARES PERCENT OF
NAME BENEFICALLY OWNED CLASS
- ---- ----------------- ----------
<S> <C> <C>
The Prudential Insurance Company of America (3) 834,000 9.7%
Prudential Plaza
Newark, New Jersey 07102-3777
Harris Associates, L.P. 825,000 9.6
Two N. LaSalle Street
Suite 500
Chicago, Illinois 60602-3790
</TABLE>
- --------
(1) Shares are owned directly or through The Capital Group of Companies,
Inc.'s wholly-owned subsidiaries Capital Research and Management Company
and Capital Guardian Trust Company.
(2) Wellington Management Company, in its capacity as investment adviser, is
the beneficial owner of the shares indicated which are owned by numerous
investment counsel clients.
(3) The Prudential Insurance Company of America may be deemed to have direct
or indirect voting and/or investment discretion over the shares indicated
which are held for the benefit of its clients.
----------------
PROXY PROPOSAL NO. 1
ELECTION OF DIRECTORS
Under the Company's Restated Certificate of Incorporation and By-laws, its
directors are divided into three classes, each class to be elected at
successive Annual Meetings of Stockholders for terms of three years. The three
directors whose terms expire at the Annual Meeting are Paul F. Balser, Robert
M. Howe and Ronald B. Kalich. Messrs. Balser, Howe and Kalich have been
nominated by the Board to stand for re-election as directors at the Annual
Meeting and to hold office until the 2000 Annual Meeting of Stockholders and
until their respective successors are duly elected and qualified or their
earlier resignation or removal.
In March 1997, Nicholas T. Kaiser retired from his positions as Chairman,
President and Chief Executive Officer of the Company. Mr. Kaiser has continued
as a director. On March 31, 1997, the Board of Directors elected Walter B.
Fowler as Chairman of the Board, President and Chief Executive Officer of the
Company. Mr. Fowler has been a member of the Company's Board since September
1995. In September 1997, the Board elected Charles E. Slater as a director of
the Company, replacing Ronald N. Clawson who had retired from his positions
with the Company, including his directorship, in April 1997. As a result of
the above activity, the Company currently has eight members of its Board of
Directors. The Board had reduced its membership from nine to eight in October
1996.
The three nominees have indicated a willingness to serve as directors, but
in the event any nominee should become unavailable to serve as a director at
the time of the Annual Meeting, an event which the Board does not expect, the
Board will nominate a different person, and the proxies named on the enclosed
proxy card will vote for the election of such nominee.
Section 6 of Article II of the Company's By-laws requires that advance
notification of nominations of directors or other business by stockholders be
given to the Secretary of the Company not less than 60 days nor more than 90
days prior to the first anniversary of the preceding year's annual meeting or
under certain circumstances not later than the close of business on the tenth
day following the earlier of (A) the day on which notice of the date of the
Annual Meeting was delivered to stockholders in accordance with the By-laws
and (B) the day on which public announcement of the date of such Annual
Meeting is first made by the Company. In addition, the notice of nomination
must set forth certain information regarding any nominee including (x) as to
each person whom the stockholder proposes to nominate for election or
reelection as a director, any information relating to such person that is
required to be disclosed in proxy solicitations pursuant to Schedule 14A under
the Securities Exchange Act of 1934, as amended (the Exchange Act) including
such person's written consent to be named in the Proxy Statement as a nominee
and to serving as a director if elected; (y) as to any other business
2
<PAGE>
that the stockholder proposes to bring before the Annual Meeting, a brief
description of the business desired to be brought before the Annual Meeting,
the reasons for conducting such business at the meeting and any material
interest in such business of such stockholder and the beneficial owner, if
any, on whose behalf the proposal is made; and (z) as to the stockholder
giving the notice and the beneficial owner, if any, on whose behalf the
nomination or proposal is made (I) the name and address of such stockholder as
it appears on the Company's books and of such beneficial ownership and (II)
the class and number of shares of Common Stock which are owned beneficially
and of record by such stockholder and such beneficial owner. Nominations which
are determined not to have been made in accordance with the procedures
established by Section 6 will be disregarded. The foregoing summary of Section
6 is qualified in its entirety by reference to the complete text of the
Company's By-laws.
Based on this provision and the date of mailing of this Notice and the
Annual Meeting, any nominations by stockholders for directors, together with
other required information and consents, should be delivered to the Secretary
of the Company by November 10, 1997.
If a quorum is present at the Annual Meeting, the election of directors will
require the affirmative vote of a plurality of the votes cast at the Annual
Meeting in person or by proxy.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR SUCH
NOMINEES.
THE BOARD OF DIRECTORS AND
OFFICERS OF THE COMPANY
The following is information as to each director, executive officer, and
certain other officers and former officers of the Company as of September 26,
1997 except for the footnotes which relate to Board Committee services during
the fiscal year ended July 31, 1997.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Walter B. Fowler 43 Chairman, President and Chief Executive Officer and Director
(Term expiring in 1999)
Walter E. Damian 57 Vice President--Human Resources
Ararat Hacetoglu 42 Vice President and General Manager--Carbide Products
Michael F. Supon 39 Vice President and General Manager--Electrodes and
Graphite Specialty Products
Jim J. Trigg 48 Vice President and General Manager--Seadrift Coke, L.P.
Stephen D. Weaver 43 Vice President--Finance and Chief Financial Officer
Nicholas T. Kaiser(1) 63 Retired Chairman, President and Chief Executive Officer
and Director (Term expiring in 1998)
James G. Baldwin
(1)(2)(3) 72 Director (Term expiring in 1998)
James R. Ball
(1)(2)(3)(5) 54 Director (Term expiring in 1998)
Paul F. Balser (2)(3) 55 Director (Nominee for term expiring in 2000)
Robert M. Howe (4) 57 Director (Nominee for term expiring in 2000)
Ronald B. Kalich
(2)(4)(5) 49 Director (Nominee for term expiring in 2000)
Charles E. Slater 63 Director (Term expiring in 1999)
Roger Mulvihill 61 Secretary
Ronald N. Clawson 57 Retired President--Carbide Products
</TABLE>
- --------
(1) Member of the Board's Benefits Committee.
(2) Member of the Board's Nominating Committee.
(3) Member of the Board's Compensation Committee.
(4) Member of the Board's Audit Committee.
(5) Member of the Board's Stock Option Committee.
3
<PAGE>
Officers of the Company are elected annually by the Board for a term
expiring at the next annual meeting of the Board or as otherwise determined by
the Board.
Walter B. Fowler was elected as the Company's Chairman, President and Chief
Executive Officer in March 1997 and has been a director of the Company since
September 1995. Previously, Mr. Fowler was President--Electrodes and Graphite
Specialty Products of the Company from March 1995 to March 1997 and had been
Vice President--General Manager, Graphite Electrode Products of the Company
from January 1995 to March 1995 and Vice President--General Manager, Graphite
Specialties of the Company from July 1991 to March 1995. He served as Chief
Financial Officer and Treasurer of the Company from October 1988 to October
1991, and Vice President--Finance and Assistant Secretary from August 1988 to
July 1991.
Walter E. Damian has been the Company's Vice President--Human Resources
since August 1988.
Ararat Hacetoglu has been Vice President and General Manager, Carbide
Products since April 1997. Previously, Mr. Hacetoglu was Vice President and
Plant Manager--Louisville in the Carbide Products segment of the Company from
March 1993 to April 1997.
Michael F. Supon has been Vice President and General Manager, Electrodes and
Graphite Specialty Products since April 1997. Previously, Mr. Supon was Vice
President--Technical from December 1996 to April 1997. Also, Mr. Supon served
as Director of Product Engineering and Quality Services from January 1996 to
December 1996 and Director of Product and Process Engineering from March 1991
to January 1996. All of Mr. Supon's positions have been with the Graphite
Electrode Products segment of the Company.
Jim J. Trigg has been Vice President and General Manager, Seadrift Coke,
L.P. since June 1994. Previously, Mr. Trigg was Vice President and Plant
Manager--Seadrift of the Company from February 1993 to June 1994 and
Production Manager--Seadrift from August 1988 to February 1993.
Stephen D. Weaver has been Vice President--Finance and Chief Financial
Officer of the Company since October 1991.
Nicholas T. Kaiser has been a member of the Company's Board of Directors
since August 1988. Mr. Kaiser was the Company's Chairman of the Board and
Chief Executive Officer from October 1994 to March 1997 and was President of
the Company from October 1991 to March 1997.
James G. Baldwin has been a director of the Company since August 1988 and he
was the Company's Chairman of the Board and Chief Executive Officer from
August 1988 to October 1994.
James R. Ball was elected to the Company's Board in March 1994. From July
1992 to December 1994, Mr. Ball was President and Chief Executive Officer of
Vista Chemical Company. Since 1995, he has been a consultant and private
investor. Mr. Ball also served on the Board of Directors of Rexene Corporation
from April 1996 to August 1997.
Paul F. Balser has been a member of the Company's Board since August 1988
and was Vice President of the Company from August 1988 until June 1992. He was
a partner of Centre Partners L.P., the managing general partner of Centre
Capital Investors L.P. (CCI) from 1986 until August 1995. In August 1995, Mr.
Balser resigned as an officer of the managing general partner of Centre
Partners L.P., to become a founding partner of Generation Capital Partners
L.P., a private investment partnership. Mr. Balser currently serves on the
Boards of Directors of Kansas City Southern Industries, Inc., Scientific Games
Holdings, Inc. and a number of privately held companies.
Robert M. Howe has been a member of the Company's Board since April 1996.
From March 1986 to December 1995, Mr. Howe was the President, Chief Operating
Officer and a director of MAPCO, Inc. Mr. Howe is also currently a director of
T.D. Williamson, Inc.
4
<PAGE>
Ronald B. Kalich was elected to the Company's Board in March 1994. Mr.
Kalich is currently Group President of The Marmon Group, Inc., a position he
has held since 1993. Previously, Mr. Kalich served as Group Vice President of
Danaher Corporation from 1991 to 1993.
Charles E. Slater was elected to the Company's Board in September 1997. Mr.
Slater is currently the Executive Director of the Iron & Steel Society, a
position he has held since 1992.
Roger Mulvihill has been a Secretary of the Company since August 1988. He
has been a partner with the law firm of Dechert Price & Rhoads since December
1991.
Ronald N. Clawson retired from his positions with the Company in April 1997.
Mr. Clawson was a director from September 1995 and was the Company's
President--Carbide Products from March 1995 until his retirement. From July
1991 to March 1995, Mr. Clawson served as Vice President--General Manager,
Carbide Products of the Company and served as Vice President and Plant
Manager--Niagara Falls in the Company's Graphite Electrode Products segment
from August 1988 to July 1991.
COMMITTEES OF THE BOARD OF DIRECTORS
The committees of the Board of Directors for fiscal 1997 are described
below.
Benefits Committee
The Benefits Committee consisted of three directors plus Walter E. Damian,
Vice President--Human Resources and reviews the operations of the Company's
pension plans and its medical insurance plans. During fiscal 1997, the
Benefits Committee held one meeting.
Nominating Committee
The Nominating Committee consisted of four directors, a majority of whom may
not be employees of the Company. The Nominating Committee is responsible for
nominating individuals for election as directors of the Company. The
Nominating Committee will consider nominees for election as directors
recommended by stockholders (See "Election of Directors" on page 2 of this
Proxy Statement for a discussion of the procedures under the By-laws relating
to the recommendation of nominees by stockholders). During fiscal 1997, the
Nominating Committee held one meeting.
Compensation and Stock Option Committees
The Compensation Committee consisted of three directors. The Compensation
Committee is responsible for policies, procedures and other matters relating
to compensation of the executive officers as a group and the chief executive
officer individually. During fiscal 1997, the Compensation Committee held
three meetings.
The Stock Option Committee consisted of two directors and has authority to
grant options pursuant to a management stock option plan adopted in April 1995
(the 1995 Plan). During fiscal 1997, the Stock Option Committee held two
meetings.
Audit Committee
The Audit Committee consisted of two directors. The Audit Committee is
responsible for policies, procedures and other matters relating to accounting,
internal financial controls and financial reporting, including the engagement
of independent auditors and the planning, scope, timing and cost of any audit
and any other services they may be asked to perform, and will review with the
auditors their report on the Company's financial statements following
completion of each such audit. During fiscal 1997, the Audit Committee held
one meeting.
The Board held five meetings during fiscal 1997. Each incumbent director
attended at least 75% of the aggregate number of meetings of the Board and the
committees of the Board on which such director served.
5
<PAGE>
In September 1997, the Board of Directors approved a restructuring of its
committees. This restructuring included the consolidation of the Compensation
and Benefits Committees into the Compensation Committee and the establishment
of the Board Governance Committee, which consists of four members and will
deal with Board governance matters, such as Board compensation, evaluation,
committee assignments, and the like. In addition, the membership of the audit,
nominating and compensation committees was expanded to four members. In June
1997, the Board also formed a Special Committee, which currently consists of
Messrs. Ball, Balser, Howe, Kalich and Slater, to review and make
recommendations to the Board regarding various aspects of certain antitrust
claims involving the Company that are the subject of previously reported Grand
Jury proceedings and a consolidated civil antitrust action in the United
States District Court for the Eastern District of Pennsylvania.
OWNERSHIP OF SECURITIES BY DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN OTHER
OFFICERS
The following is a summary of the beneficial ownership of the Company's
Common Stock as of September 26, 1997 by the Company's directors, executive
officers, certain other officers and by all such officers and directors as a
group.
<TABLE>
<CAPTION>
NAME OF OFFICER OR DIRECTOR NUMBER OF SHARES BENEFICIALLY OWNED (1) PERCENTAGE OF CLASS (2)
- --------------------------- --------------------------------------- -----------------------
<S> <C> <C>
Officers:
Walter B. Fowler (3) 115,000 1.3%
Walter E. Damian (4) 30,500 0.4
Ararat Hacetoglu (5) 46,000 0.5
Michael F. Supon (6) 21,000 0.2
Jim J. Trigg (7) 33,000 0.4
Stephen D. Weaver (8) 49,270 0.6
Roger Mulvihill 8,000 0.1
Directors:
Nicholas T. Kaiser (9) 244,000 2.8
James G. Baldwin (10) 38,700 0.4
James R. Ball (11) 18,700 0.2
Ronald B. Kalich (12) 13,700 0.2
Robert M. Howe (13) 4,700 0.1
Paul F. Balser (14) 3,700 *
Charles E. Slater (15) 2,000 *
All executive officers
and directors as a group
(14 persons) 628,270 7.0
</TABLE>
- --------
* Less than 0.1%.
(1) Unless otherwise noted, each stockholder has or will have sole voting and
investment power with respect to the shares shown.
(2) Shares issuable upon the exercise of Common Stock options were added to
the Company's total Common Stock outstanding for purposes of this
computation, if applicable.
(3) Number of shares indicated includes 50,000 shares of Common Stock, 35,000
shares of Common Stock issuable upon the exercise of fully vested stock
options and 30,000 shares of Common Stock issuable upon the exercise of
non-vested stock options.
(4) Number of shares indicated includes 8,000 shares of Common Stock, 3,500
shares of Common Stock issuable upon the exercise of fully vested stock
options and 19,000 shares of Common Stock issuable upon the exercise of
non-vested stock options.
(5) Number of shares indicated includes 27,000 shares of Common Stock issuable
upon the exercise of fully vested stock options and 19,000 shares of
Common Stock issuable upon the exercise of non-vested stock options.
6
<PAGE>
(6) Number of shares indicated includes 2,000 shares of Common Stock issuable
upon the exercise of fully vested stock options and 19,000 shares of
Common Stock issuable upon the exercise of non-vested stock options.
(7) Number of shares indicated includes 5,000 shares of Common Stock, 7,667
shares of Common Stock issuable upon the exercise of fully vested stock
options and 20,333 shares of Common Stock issuable upon the exercise of
non-vested stock options.
(8) Number of shares indicated includes 20 shares of Common Stock, 25,250
shares of Common Stock issuable upon the exercise of fully vested stock
options and 24,000 shares of Common Stock issuable upon the exercise of
non-vested stock options.
(9) Number of shares indicated includes 242,000 shares of Common Stock and
2,000 shares of Common Stock issuable upon the exercise of non-vested
stock options.
(10) Number of shares indicated includes 36,700 shares of Common Stock
issuable upon the exercise of fully vested stock options and 2,000 shares
of Common Stock issuable upon the exercise of non-vested stock options.
(11) Number of shares indicated includes 15,000 shares of Common Stock, 1,700
shares of Common Stock issuable upon the exercise of fully vested stock
options and 2,000 shares of Common Stock issuable upon the exercise of
non-vested stock options.
(12) Number of shares indicated includes 10,000 shares of Common Stock, 1,700
shares of Common Stock issuable upon the exercise of fully vested stock
options and 2,000 shares of Common Stock issuable upon the exercise of
non-vested stock options.
(13) Number of shares indicated includes 1,000 shares of Common Stock, 1,700
shares of Common Stock issuable upon the exercise of fully vested stock
options and 2,000 shares of Common Stock issuable upon the exercise of
non-vested stock options.
(14) Number of shares indicated includes 1,700 shares of Common Stock issuable
upon the exercise of fully vested stock options and 2,000 shares of
Common Stock issuable upon the exercise of non-vested stock options.
(15) Number of shares indicated represents 2,000 shares of Common Stock
issuable upon the exercise of non-vested stock options.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
received by those who served as the chief executive officer and each of the
other most highly compensated executive officers who received compensation in
excess of $100,000 (collectively, the Named Executive Officers) for services
rendered in all capacities during the Company's indicated fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------- ------------------
NAME AND OTHER ANNUAL COMMON STOCK ALL OTHER
PRINCIPAL POSITION (1) YEAR SALARY BONUS (2) COMPENSATION UNDERLYING OPTIONS COMPENSATION
---------------------- ---- -------- --------- ------------ ------------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Nicholas T. Kaiser 1997 $838,593(3) -- $25,380(4) 2,000(5) $71,285(6)
Chairman of the Board, 1996 322,254 -- 25,380 -- 67,361
President and Chief Executive 1995 309,169 -- 25,380 -- 66,156
Officer (Retired March 31,
1997)
Ronald N. Clawson 1997 677,485(7) -- -- -- 19,614(8)
President-Carbide Products 1996 221,591 -- -- -- 22,272
(Retired April 30, 1997) 1995 202,508 -- -- -- 20,438
Walter B. Fowler 1997 259,336 195,602 -- 30,000(9) 26,596(10)
Chairman of the Board, 1996 221,591 -- -- 15,000(9) 20,771
President and Chief 1995 202,508 -- -- -- 19,519
Executive Officer
(Elected March 31, 1997)
Stephen D. Weaver 1997 177,336 106,402 -- 15,000(9) 18,326(11)
Vice President-Finance, 1996 158,625 -- -- 13,500(9) 15,178
Chief Financial Officer and 1995 145,125 133,334 -- -- 14,016
Assistant Secretary
Walter E. Damian 1997 140,672 84,403 -- 12,000(9) 15,256(12)
Vice President-Human 1996 128,671 -- -- 10,500(9) 12,496
Resources 1995 122,504 -- -- -- 11,203
Jim J. Trigg 1997 135,333 64,133 -- 15,000(9) 14,968(13)
Vice President & General 1996 118,769 -- -- 8,000(9) 11,565
Manager-Seadrift Coke L.P. 1995 112,462 -- -- -- 10,136
Ararat Hacetoglu 1997 124,000 59,600 -- 15,000(9) 13,971(14)
Vice President & General 1996 104,587 -- -- 6,000(9) 9,569
Manager-Carbide Products 1995 96,667 -- -- -- 8,616
</TABLE>
- --------
(1) Except as noted, the positions listed for each of the Named Executive
Officers are those held during the fiscal year ended July 31, 1997.
(2) Except for Mr. Weaver, all amounts shown in this column represent a bonus
earned in fiscal 1997 under the Incentive Bonus Plan (See "Bonus Plans" on
page 16). Mr. Weaver's bonus amounts include the following: 1997--$106,402
related to a bonus earned in fiscal 1997 under the Incentive Bonus Plan;
1995--$133,334 related to a bonus paid on September 30, 1995.
(3) For fiscal 1997, Mr. Kaiser's salary included $231,343 in regular salary
and $607,250 in salary continuation and severance benefits accrued by the
Company in connection with Mr. Kaiser's retirement.
(4) Other annual compensation represents payments to adjust for the tax
effects of the Company's payment of term life insurance premiums.
8
<PAGE>
(5) Represents options for Common Stock granted under a Non-Employee Director
Stock Option Plan (the Director's Plan). The options were granted on July
31, 1997 and will be vested and exercisable a year from the date of grant
if Mr. Kaiser is then a director. The options expire on July 31, 2007 and
have an exercise price of $28.875 per share.
(6) All other compensation for 1997 includes: $34,000 of premiums for life
insurance paid by the Company during fiscal 1997; $3,966 of premiums for
group term life insurance; and $9,029 of Company match contributions and
$24,290 of profit sharing under the Company's savings investment plan
adopted pursuant to Section 401(k) of the Internal Revenue Service Code
of 1986, as amended (the Savings Investment Plan).
(7) For fiscal 1997, Mr. Clawson's salary included $179,253 in regular salary
and $498,232 in retirement and vacation pay benefits accrued by the
Company in connection with Mr. Clawson's retirement.
(8) All other compensation for 1997 includes: $1,816 of premiums for group
term life insurance; and $3,862 of Company match contributions and
$13,936 of profit sharing under the Savings Investment Plan.
(9) Options were granted under the 1995 Plan. All options granted in fiscal
1997 have an exercise price of $22.375 per share and expire on March 31,
2007. Except for Mr. Fowler's, all options granted in fiscal 1997 vest
and become exercisable at a rate of one-third per year on March 31, 1998,
1999 and 2000, respectively. One-third of Mr. Fowler's options granted in
1997 vested immediately, while the remaining options vest at a rate of
one-half per year on March 31, 1998 and 1999, respectively. All options
granted in fiscal 1996 have an exercise price of $15.75 per share and
expire on July 31, 2006. All options granted in fiscal 1996 vest and
become exercisable at a rate of one-third per year on July 31, 1997, 1998
and 1999, respectively.
(10) All other compensation for 1997 includes: $362 of premiums for group term
life insurance; and $5,234 of Company match contributions and $21,000 of
profit sharing under the Savings Investment Plan.
(11) All other compensation for 1997 includes: $230 of premiums for group term
life insurance; and $4,795 of Company match contributions and $13,301 of
profit sharing under the Savings Investment Plan.
(12) All other compensation for 1997 includes: $845 of premiums for group term
life insurance; and $3,911 of Company match contributions and $10,500 of
profit sharing under the Savings Investment Plan.
(13) All other compensation for 1997 includes: $359 of premiums for group term
life insurance; and $4,109 of Company match contributions and $10,500 of
profit sharing under the Savings Investment Plan.
(14) All other compensation for 1997 includes: $137 of premiums for group term
life insurance; and $3,334 of Company match contributions and $10,500 of
profit sharing under the Savings Investment Plan.
----------------
The following table sets forth certain information regarding awards of
options for Common Stock to the Named Executive Officers during fiscal 1997.
COMMON STOCK OPTIONS GRANTED IN FISCAL 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF STOCK
SHARES GRANTED TO PRICE APPRECIATION
UNDERLYING EMPLOYEES FOR OPTION TERM(2)
OPTIONS IN FISCAL EXERCISE EXPIRATION ---------------------
NAME GRANTED(1) YEAR PRICE DATE 5% 10%
- ---- ---------- ---------- -------- ---------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Walter B.
Fowler 30,000 17.0% $22.375 3/31/2007 $422,146 $1,069,800
Stephen D.
Weaver 15,000 8.5 22.375 3/31/2007 211,073 534,900
Jim J. Trigg 15,000 8.5 22.375 3/31/2007 211,073 534,900
Ararat
Hacetoglu 15,000 8.5 22.375 3/31/2007 211,073 534,900
Walter E.
Damian 12,000 6.8 22.375 3/31/2007 168,858 427,920
Nicholas T.
Kaiser 2,000 1.1 28.875 7/31/2007 36,319 92,039
</TABLE>
- --------
(1) Mr. Kaiser's options were granted under the Directors' Plan. Such options
were granted at the fair market value on the date of grant and will be
vested and exercisable a year from date of grant if Mr. Kaiser
9
<PAGE>
is then a Director. All other options granted in fiscal 1997 were granted at
fair market value on the date of grant under the 1995 Plan. Except for Mr.
Fowler, such options vest and become exercisable at a rate of one-third per
year on March 31, 1998, 1999 and 2000, respectively. One-third of Mr.
Fowler's options were immediately vested and exercisable, with the remaining
options becoming vested and exercisable at a rate of one-half per year on
March 31, 1998 and 1999, respectively.
(2) The dollar amounts are the result of calculations at the 5% and 10% annual
capital appreciation rates prescribed by the Securities and Exchange
Commission and are not intended to forecast any possible appreciation of
the Company's stock price.
----------------
The following table provides information related to options exercised by the
Named Executive Officers during fiscal 1997 and the number and value of options
held as of July 31, 1997.
AGGREGATE OPTION EXERCISES IN FISCAL 1997 AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AS OF IN-THE-MONEY OPTIONS
ACQUIRED JULY 31, 1997 AS OF JULY 31, 1997(1)
ON VALUE --------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Nicholas T. Kaiser 205,000 $3,777,500(2) -- 2,000(3) -- --(4)
Ronald N. Clawson 40,000 796,250(5) 20,000(6) -- $537,500 --
Walter E. Damian 25,000 489,375(7) 3,500(8) 19,000(9) 45,938 $169,875
Stephen D. Weaver 9,250 187,313(10) 25,250(11) 24,000(12) 616,719 215,625
Jim J. Trigg 10,000 181,250(13) 7,667(14) 20,333(15) 169,379 167,496
Ararat Hacetoglu 2,500 55,625(16) 27,000(17) 19,000(18) 698,125 150,000
Walter B. Fowler -- -- 35,000(19) 30,000(20) 668,125 261,250
</TABLE>
- --------
(1) Value is calculated based on the difference between $28.875, the fair
market value of the Company's Common Stock on July 31, 1997, and the
exercise price of options outstanding.
(2) Options exercised had an exercise price of $1.00 per share and were
exercised throughout fiscal 1997 when the fair value of the Company's
Common Stock ranged from $16.125 to $24.50 per share.
(3) Options were granted under the Director's Plan and have an exercise price
of $28.875 per share. The options expired in July 2007 and will be vested
and exercisable a year from the date of grant if Mr. Kaiser is then a
Director.
(4) Options were granted at $28.875 per share, the fair market value of the
Company's Common Stock as of July 31, 1997.
(5) 20,000 of the options exercised had an exercise price of $1.00 per share
and were exercised when the fair value of the Company's Common Stock was
$19.75 per share. 20,000 of the options exercised had an exercise price of
$2.00 per share and were exercised when the fair market value of the
Company's Common Stock ranged from $22.25 to $24.625 per share.
(6) Options were granted under the 1991 Plan and have an exercise price of
$2.00 per share. The options are fully vested and exercisable and expire in
September 1998.
(7) Options exercised had an exercise price of $1.00 per share and were
exercised throughout fiscal 1997 when the fair value of the Company's
Common Stock ranged from $19.375 to $22.25 per share.
(8) Options were granted under the 1995 Plan and have an exercise price of
$15.75 per share. The options are fully vested and exercisable and expire
in July 2006.
10
<PAGE>
(9) 7,000 of the options were granted under the 1995 Plan and have an
exercise price of $15.75 per share. The options vest and become
exercisable at a rate of 3,500 per year on July 31, 1998 and 1999. 12,000
of the options were granted under the 1995 Plan and have an exercise
price of $22.375 per share. The options vest and become exercisable at a
rate of 4,000 per year on March 31, 1998, 1999 and 2000.
(10) Options exercised had an exercise price of $2.00 per share and were
exercised when the fair value of the Company's Common Stock was $22.25
per share.
(11) 20,750 of the options were granted under the 1991 Plan and have an
exercise price of $2.00 per share. The options are fully vested and
exercisable and expire in September 1998. 4,500 of the options were
granted under the 1995 Plan and have an exercise price of $15.75 per
share. The options are fully vested and exercisable and expire in July
2006.
(12) 9,000 of the options were granted under the 1995 Plan and have an
exercise price of $15.75 per share. The options vest and become
exercisable at a rate of 4,500 per year on July 31, 1998 and 1999. 15,000
of the options were granted under the 1995 Plan and have an exercise
price of $22.375 per share. The options vest and become exercisable at a
rate of 5,000 per year on March 31, 1998, 1999 and 2000.
(13) Options exercised had an exercise price of $2.00 per share and were
exercised throughout fiscal 1997 when the fair value of the Company's
Common Stock ranged from $19.125 to $23.00 per share.
(14) 5,000 of the options were granted under a 1993 option agreement and have
an exercise price of $2.00 per share. The options are fully vested and
exercisable and expire in March 2000. 2,667 of the options were granted
under the 1995 Plan and have an exercise price of $15.75 per share. The
options are fully vested and exercisable and expire in July 2006.
(15) 5,333 of the options were granted under the 1995 Plan and have an
exercise price of $15.75 per share. The options vest and become
exercisable at a rate of 2,667 on July 31, 1998 and 2,666 on July 31,
1999. 15,000 of the options were granted under the 1995 Plan and have an
exercise price of $22.375 per share. The options vested and become
exercisable at a rate of 5,000 per year on March 31, 1998, 1999 and 2000.
(16) Options exercised had an exercise price of $2.00 per share and were
exercised when the fair value of the Company's Common Stock was $24.25
per share.
(17) 25,000 of the options were granted under a 1993 option agreement and have
an exercise price of $2.00 per share. The options are fully vested and
exercisable and expire in March 2000. 2,000 of the options were granted
under the 1995 Plan and have an exercise price of $15.75 per share. The
options are fully vested and exercisable and expire in July 2006.
(18) 4,000 of the options were granted under the 1995 Plan and have an
exercise price of $15.75 per share. The options vest and become
exercisable at a rate of 2,000 per year on July 31, 1998 and 1999. 15,000
of the options were granted under the 1995 Plan and have an exercise
price of $22.375 per share. The options vest and become exercisable at a
rate of 5,000 per year on March 31, 1998, 1999 and 2000.
(19) 20,000 of the options were granted under the 1991 Plan and have an
exercise price of $2.00 per share. The options are fully vested and
exercisable and expire in September 1998. 5,000 of the options were
granted under the 1995 Plan and have an exercise price of $15.75 per
share. The options are fully vested and exercisable and expire in July
2006. 10,000 of the options were granted under the 1995 Plan and have an
exercise price of $22.375 per share. The options are fully vested and
exercisable and expire in March 2007.
(20) 10,000 of the options were granted under the 1995 Plan and have an
exercise price of $15.75 per share. The options vest and become
exercisable at a rate of 5,000 per year on July 31, 1998 and 1999. 20,000
of the options were granted under the 1995 Plan and have an exercise
price of $22.375 per share. The options vest and become exercisable at a
rate of 10,000 per year on March 31, 1998 and 1999.
11
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Company's
Common Stock with the cumulative total return of the companies listed in the
NASDAQ Stock Market--US Index (the NASDAQ Index) and the S&P Iron and Steel
Index (the S&P Index) for the period from September 14, 1995, the date on
which the Common Stock began public trading, to July 31, 1997. As compared to
a basis of $100 as of September 14, 1995, the Company's index was $193, the
NASDAQ Index was $158 and the S&P Index was $115, all as of July 31, 1997.
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG THE CARBIDE/GRAPHITE GROUP, INC., NASDAQ INDEX AND S&P IRON & STEEL INDEX
<TABLE>
<CAPTION>
THE CARBIDE/GRAPHITE NASDAQ S&P IRON & STEEL
Measurement period GROUP, INC. INDEX INDEX
(Fiscal year Covered) -------------------- ------------- --------------------
<S> <C> <C> <C>
Measurement PT -
9/14/95 $100 $100 $100
FYE 10/95 $ 88 $102 $ 92
FYE 1/96 $107 $104 $110
FYE 4/96 $118 $117 $104
FYE 7/96 $107 $107 $ 84
FYE 10/96 $109 $120 $ 86
FYE 1/97 $139 $136 $ 94
FYE 4/97 $151 $124 $ 95
FYE 7/97 $193 $158 $115
</TABLE>
COMPENSATION OF DIRECTORS
For fiscal 1997, Messrs. Baldwin, Ball, Balser, Howe and Kalich each
received $25,000 in director's fees. In addition, Mr. Kalich received $15,000
in fees for his services in connection with the search for a new Chief
Executive Officer for the Company. A portion of directors fees earned by each
outside director were credited to a deferred compensation plan established in
fiscal 1996. Such deferral was at the discretion of the director, subject to
limitations summarized in the plan documents (see the "Deferral Plan"
described below). Messrs. Clawson, Fowler and Kaiser received no compensation
for their services as directors of the Company in fiscal 1997.
In June 1997, the Company restructured its compensation policy for its non-
employee directors. Non-employee directors will receive a $5,000 per year
retainer for services as a member of the Board. Also, each Board committee
chair will receive a $1,500 per year Chairmanship fee. For Board activities,
each non-employee director will receive $2,000 for in-person Board meetings,
$1,000 for conference call Board meetings, $1,000 for in-person Board
committee meetings and $500 for conference call Board committee meetings.
On August 26, 1996, the Company established the Directors' Plan. Pursuant to
the Director's Plan, each non-employee director was granted on August 26, 1996
an option to purchase 1,700 shares of Common Stock of the Company, subject to
certain adjustments provided for under the Directors' Plan, at $18.25 per
share, the fair
12
<PAGE>
market value of the Common Stock on the date of grant. The option became
exercisable in full if the non-employee director was a member of the Board on
July 31, 1997. Pursuant to the Directors' Plan, each non-employee director who
is then a member of the Board would also be granted options to purchase an
additional 1,700 shares of Common Stock on July 31, 1997 and July 31, 1998 at
the fair market value on such dates, subject to similar requirements regarding
exercisability. Future non-employee directors are eligible for participation
in the Directors' Plan. The options have a term of ten years and may be
exercised for cash or, under certain circumstances, Common Stock or additional
unexercised options of the Company. In June 1997 the number of shares subject
to such options was increased from 1,700 shares to 2,000 shares effective with
the grant on July 31, 1997. The exercise price of such options was $28.875 per
share, the fair market value of the Common Stock on July 31, 1997.
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company is a party to employment or severance agreements with Messrs.
Kaiser, Clawson, Fowler, Damian and Trigg.
Mr. Kaiser entered into a restated employment agreement with the Company as
Chief Executive Officer in January 1, 1995, to terminate on December 31, 1997.
The employment agreement provided for a minimum annual salary of $320,000. In
March 1997, Mr. Kaiser retired. Pursuant to his March 1997 revised employment
agreement, Mr. Kaiser is to receive his annual base salary at the time of his
retirement, $347,000, for the remainder of 1997 and as severance for 1998. In
addition, the Company will provide for the continuation of health insurance
benefits until January 1, 2001. Mr. Kaiser may have certain duties of a senior
executive nature assigned to him for the remainder of 1997.
Mr. Clawson entered into an employment agreement with the Company as
President--Carbide Products in March 1995 to terminate on December 31, 1997.
The agreement provided for a minimum annual salary of at least $220,000. In
April 1997, Mr. Clawson retired. Pursuant to the terms of his severance
agreement, Mr. Clawson is to receive $19,917 monthly for 24 months and upon
the request of the Company will provide consulting services with respect to
the Company's operations and activities. He will also be entitled to receive
his pro rated portion of profit sharing benefits under the Company's Savings
Investment Plan, will receive health and life insurance benefits for 24 months
and is entitled to exercise stock options to purchase 20,000 shares of the
Common Stock until September 23, 1998, pursuant to the terms of the 1991 Stock
Option Plan.
In April 1997, Mr. Fowler entered into an employment agreement with the
Company as Chief Executive Officer to terminate on March 31, 1999. Pursuant to
the terms of the agreement, he is to receive annual cash compensation of
$300,000 and incentive compensation in the form of stock options to purchase
up to 30,000 shares of Common Stock and annual incentive awards up to 100% of
his base pay pursuant to the terms of the Incentive Bonus Plan. In the event
of termination by the Company for other than death, disability or cause, as
defined, Mr. Fowler will receive his salary for the remainder of the term of
the agreement or 24 months, whichever is longer. If terminated due to a change
of control event, Mr. Fowler would receive a lump sum payment equal to 2.99
times his base salary at the time of termination. The agreement also provides
for certain payments in the event of Mr. Fowler's death or disability.
The Company entered into separation agreements with Messrs. Trigg and Damian
with respect to their employment as, respectively, Vice President and General
Manager--Seadrift Coke, L.P. and Vice President--Human Resources. Pursuant to
the terms of the agreements, Messrs. Trigg and Damian will each be granted one
year of severance pay and medical coverage if terminated other than for cause.
James G. Baldwin retired from his position as Chairman of the Board and
Chief Executive Officer of the Company in October 1994 and as an employee of
the Company on July 31, 1995. Pursuant to his employment agreement, Mr.
Baldwin will receive the continuation of his health and life insurance
benefits through fiscal 1998. Mr. Baldwin has agreed to serve as a director of
the Company at least until the expiration of his current term as a director in
1998.
13
<PAGE>
SAVINGS INVESTMENT PLAN
The Company has adopted the Savings Investment Plan for substantially all
salaried employees. Employee contributions of not more than 6% of employee
compensation are matched 50% by the Company in lieu of a pension plan.
Additional employer contributions may be made at the discretion of the Board
based on the Company's current year performance.
DEFERRAL PLAN
The Company has implemented a compensation deferral plan (the Deferral Plan)
for the benefit of its directors and officers, currently 18 individuals,
including the Named Executive Officers. The Deferral Plan became effective for
compensation that would otherwise be paid on or after January 1, 1996. Under
the Deferral Plan, participants are allowed to defer a portion or all of their
base salary, director's fees or bonuses. Contributions to the Deferral Plan
are invested, as the participants direct, into a variety of fixed income,
balanced and equity funds. The Deferral Plan also restores the Saving
Investment Plan matching contribution lost on deferred compensation up to
$235,840 (as such amounts may be increased under Section 415(d) of the Code).
Distributions from the Deferral Plan generally will be made upon retirement,
disability or upon termination of employment, unless further deferred by the
participant.
1995 STOCK-BASED INCENTIVE COMPENSATION PLAN
Introduction. The Board adopted the 1995 Plan in April 1995, and the
shareholders of the Company approved the 1995 Plan in August 1995. The purpose
of the 1995 Plan is to assist the Company, and its Subsidiaries and
Affiliates, in attracting and retaining valued employees by offering them a
greater stake in the Company's success and a closer identity with it, and to
encourage ownership of the Company's Common Stock by such employees. The 1995
Plan permits awards of stock options and/or stock appreciation rights (SARs)
to eligible employees that qualify as "performance-based compensation" under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the Internal
Revenue Code).
The total number of shares of the Company's Common Stock available for
awards under the 1995 Plan is 400,000 shares (subject to adjustments for stock
splits, stock dividends and the like). No employee may be granted (i) an award
of, or exercisable for, more than a specified number of shares of Common Stock
in any one calendar year, or (ii) incentive stock options first exercisable in
any one calendar year for shares of Common Stock having an aggregate fair
market value in excess of $100,000.
The following summary description of the 1995 Plan is qualified in its
entirety by the full text of the 1995 Plan, as amended, copies of which may be
obtained by the Company's stockholders upon request to the Office of the
Corporate Secretary of the Company.
Administration. The 1995 Stock Option Plan Committee designated by the Board
(the Committee) has full power to interpret and administer the 1995 Plan and
full authority to act in selecting the employees to whom awards of options or
SARs under the 1995 Plan (Awards) shall be granted, in determining the type
and amount of Awards to be granted to each such employee, the terms and
conditions of Awards granted under the 1995 Plan and the terms and agreements
that shall be entered into with employees to whom an Award is granted (the
Holders). Effective August 1996, all grants under the 1995 Plan must be
approved by the Committee. The Committee members must be Board members who are
not employees of the Company and, for periods prior to August 1996, who are
not eligible to participate in the 1995 Plan. The Board has the power to
amend, suspend or terminate the 1995 Plan at any time except that stockholder
approval is required to increase the total number of shares available for
issuance pursuant to the 1995 Plan, change the class of employees eligible to
be Holders, decrease the price at which the Common Stock may be purchased upon
the exercise of an option, withdraw the administration of the 1995 Plan from
the Committee, change the provisions of Section 9 of the 1995 Plan, or take
any other action that requires stockholder approval under Section 16(b) of the
1934 Act.
Eligibility. Any employee is eligible to receive an Award, except that any
employee employed by an affiliate (any entity (other than a 50% or more
subsidiary) in which the Company has a substantial direct or indirect equity
interest, as determined by the Board) shall not be eligible to receive an
incentive stock option. "Employee" means an officer or other key employee,
consultant or advisor of the Company, a subsidiary or an affiliate, including
a director who is such an employee, consultant or advisor.
14
<PAGE>
Awards. Under the 1995 Plan, eligible employees may be awarded stock options
and/or SARs. Stock options may be either incentive stock options or non-
qualified stock options. Incentive stock options are intended to be "incentive
stock options" under Section 422 of the Internal Revenue Code; non-qualified
stock options are those stock options which do not qualify under Section 422
of the Internal Revenue Code. The price at which shares of Common Stock may be
purchased upon the exercise of an option is determined by the Committee but
must be at least equal to the fair market value of such shares on the date of
the award. Payment of the option price must be paid in full in cash at the
time of exercise or, with the consent of the Committee, in whole or in part in
shares of Common Stock valued at fair market value. With the consent of the
Committee, payment upon the exercise of a non-qualified stock option may be
made in whole or in part by the delivery of additional, unexercised non-
qualified stock options (based on the difference between the fair market value
of the Common Stock for which they are exercisable and the exercise price of
such additional non-qualified stock options) or by a "cashless exercise."
A SAR entitles the recipient to receive a payment equal to the excess of the
fair market value of the shares of Common Stock covered by the SAR on the date
of exercise over the exercise price of the SAR. Such payment may be in cash,
in shares of Common Stock, or any combination thereof, as the Committee may
determine. A SAR may be awarded in tandem with options or separately.
Stock options and SARs will be exercisable over a period to be designated by
the Committee, but not prior to six months or more than ten years (or five
years for certain incentive stock options) after the date of the award. All
options and SARs awarded under the 1995 Plan are non-transferable other than
by will or by operation of the laws of descent and distribution. The total
number of shares of the Company's Common Stock available for awards under the
1995 Plan is 400,000 shares (subject to adjustments for stock splits, stock
dividends and the like), which equals approximately 4.6% of the total number
of shares of Common Stock outstanding as of September 26, 1997. The closing
price of Common Stock reported on the NASDAQ National Market System at
September 26, 1997 was $33.3125. As of September 26, 1997, 245,000 options for
Company Common Stock had been issued under the 1995 Plan.
Term. The 1995 Plan became effective in May 1995 and shall remain in full
force and effect until the earlier of May 1, 2005 or the date it is terminated
by the Board.
Performance-Based Compensation. It is intended that all compensation income
recognized by any Holder as the result of the exercise of options or SARs, or
the disposition of shares of common stock acquired on exercise of options or
SARs, shall be considered performance-based compensation excludable from such
Holder's "applicable employee remuneration" pursuant to section 162(m)(4)(C)
of the Internal Revenue Code.
Federal Tax Treatment. Under the present federal tax laws, the federal
income tax treatment of stock options and SARs under the 1995 Plan is as
follows:
An employee recognizes no taxable income and the Company is not entitled to
a deduction when an incentive stock option is awarded or exercised. If an
employee sells Common Stock acquired upon exercise, after complying with
requisite holding periods, any gain or loss realized upon such sale will be
long-term capital gain or loss. The Company will not be entitled to take a
deduction as a result of any such sale. If the employee disposes of such
Common Stock before complying with requisite holding periods, the employee
generally will recognize ordinary income equal to the difference between the
fair market value of the Common Stock on the date of exercise and the exercise
price, and the Company will be entitled to a corresponding income tax
deduction.
An employee recognizes no taxable income and the Company is not entitled to
an income tax deduction when a non-qualified option is awarded. Upon exercise
of a non-qualified option, an employee generally will realize ordinary income
in an amount equal to the excess of the fair market value of the Common Stock
over the exercise price, and, provided that the applicable conditions of
Section 162(m) of the Internal Revenue Code are met, the Company will be
entitled to a corresponding income tax deduction. Upon sale of the Common
Stock acquired, the employee will realize short-term or long-term capital gain
or loss, depending upon whether the Common Stock been held for more than one
year, equal to the difference between the sale price of the Common Stock and
the fair market value of the Common Stock on the date that the employee
recognizes income with respect to the option exercise.
15
<PAGE>
An employee recognizes no taxable income and the Company is not entitled to
an income tax deduction when a SAR is awarded. Upon exercise of a SAR, an
employee generally will realize ordinary income in an amount equal to the
difference between the fair market value of the Common Stock on the date of
exercise and the exercise price under the SAR, and, provided the applicable
conditions of Section 162(m) of the Internal Revenue Code are met, the Company
will be entitled to a corresponding income tax deduction.
BONUS PLANS
The Company has adopted an incentive bonus plan for certain executives,
including the Named Executive Officers (the Incentive Bonus Plan). The
Incentive Bonus Plan provides for the award of annual bonuses based on the
Company's meeting or exceeding a performance target relating to earnings
before interest, taxes, depreciation and amortization (EBITDA) which is
established annually by the Board. Satisfaction of EBITDA targets will trigger
awards equal to 10%, 20%, 30% or 50% of base pay depending on management
levels. EBITDA in excess of the established targets will increase bonus awards
subject to maximum awards of 20%, 40%, 60% or 100%, respectively, depending on
management levels. In fiscal 1998, approximately 33 salaried employees are
eligible to participate in the plan, including the Named Executive Officers.
Bonuses paid under the Incentive Bonus Plan totaled $1.4 million for fiscal
1997.
The Company has also adopted a discretionary bonus plan for salaried
employees not eligible for the Incentive Bonus Plan (the Discretionary Bonus
Plan). The Discretionary Bonus Plan provides for the payment of up to 2% of
the total annual salaries of non-executive employees. Awards under the
Discretionary Bonus Plan are solely at management's discretion.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is comprised of Messrs.
Baldwin, Ball, Balser and Kalich, none of whom are currently executive
officers of the Company; however, Messrs. Baldwin and Balser served as
officers of the Company in the past. Executive officer compensation is
determined by the Compensation Committee.
16
<PAGE>
REPORT OF COMPENSATION COMMITTEE
The Compensation Committee, which is currently comprised of four non-
employee directors, is responsible for guiding the Company in the development
and implementation of the Company's compensation policies, plans and programs.
The intended purposes of these programs are to: (i) promote the interests of
the Company and its stockholders by attracting and retaining officers and
other key employees of exceptional ability; (ii) maximize the Company's long-
term success and investment returns to stockholders; (iii) provide officers
and key employees who are important to the Company's sustained growth with a
proprietary interest in, and greater incentives to contribute to the success
of, the Company through ownership of the Company's Common Stock and stock
options; and (iv) provide incentives for officers and other key employees
which are competitive with those offered by other corporations in the business
and geographic areas in which the Company operates. The Compensation Committee
reviews and recommends the annual compensation of the Company's executive
officers and other members of management, which consists principally of base
salary, annual bonuses and stock option grants. Messrs. Kaiser, Clawson,
Fowler, Damian and Trigg have entered into employment and/or severance
agreements with the Company. See "Employment Agreements" on page 13 of this
Proxy Statement.
Base Salary. Base salary is designed to compensate executives and other key
employees for individual performance. Such base salaries are intended to (x)
take into consideration the relative intrinsic value of the subject executive
position to the Company, as measured by the position's scope of
responsibility, strategic importance, technological requirements and
complexity; (y) competitive salaries; and (z) individual performance.
Executives and other key employees may or may not receive annual base salary
increases, depending upon performance in the prior year and upon the
achievement of individual and corporate performance goals.
Annual Incentive Awards. Annual incentive awards will be granted under the
Incentive Bonus Plan and are based on EBITDA targets which have been
established by the Board. Meeting EBITDA objectives will trigger awards as a
percentage of base pay dependent on management level (10, 20, 30 or 50%).
Exceeding EBITDA targets will increase bonuses subject to maximum payments of
20%, 40%, 60% or 100% depending on management levels. EBITDA results in excess
of targets, but below maximum levels, will result in awards calculated
linearly between such points.
Long Term Incentives. Long term incentives are provided through annual stock
option grants to executives, principally through the 1995 Plan. Generally,
stock options will have a term of ten years and will vest equally over three
years. Option exercise prices will equal the fair market value of the Common
Stock on the date of grant. Incentive stock options will be granted to the
extent permitted by applicable tax law and options granted in excess of such
amounts will be non-qualified options. Outstanding options held by an employee
are considered in connection with the award of new options.
CEO Compensation. Mr. Fowler, the Chief Executive Officer of the Company, is
compensated pursuant to the terms of his Employment Agreement with the
Company. See "Employee Agreements" on page 13 of this Proxy Statement. Mr.
Fowler was selected by the Board to succeed the former chief executive
officer, Mr. Kaiser, upon his retirement after an executive search which was
supervised by the Compensation Committee. In developing Mr. Fowler's
compensation, the Compensation Committee considered Mr. Fowler's prior
performance in senior managerial roles with the Company's electrodes unit, its
largest business unit. Mr. Fowler served as President of the Electrodes and
Graphite Speciality Products of the Company from March 1995 through March
1997, as Vice President--General Manager, Graphite Electrode Products of the
Company from January 1995 through March 1995 and as Vice President--General
Manager, Graphite Specialties of the Company from July 1991 to March 1995. The
Committee also considered the importance of the Company's capital expenditure
program, including the modernization plan and Mr. Fowler's contribution in
this regard in reaching its determination.
Respectfully Submitted,
Compensation Committee
/S/ James G. Baldwin
/S/ James R. Ball
/S/ Paul F. Balser
/S/ Ronald B. Kalich
17
<PAGE>
DIRECTORS AND OFFICERS LIABILITY INSURANCE
The Company maintains $20 million of insurance providing payment either to
the Company for indemnification provided to its directors or officers, or
directly to its directors and officers, for certain liabilities which the
Company's directors and officers may incur in such capacities. The insurance
policies are issued by National Union Fire Insurance Company and The Reliance
Insurance Company. The premiums paid under such policies in fiscal 1997
totaled $442,500. Both policies were extended for fiscal 1998 for premiums
totaling $419,875.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
Pursuant to an agreement entered into in connection with the Company's
initial public offering of Common Stock in September 1995, the Company filed a
registration statement under the Securities Act of 1933, as amended (the
Securities Act), which became effective in March 1996, with respect to the
sale of certain shares of Common Stock held by management stockholders and
agreed to keep such registration in effect for at least 36 months. Shares of
Common Stock owned by the Company's directors are also covered by such
registration statement.
PROXY PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Company's independent auditors for the fiscal year ended July 31, 1997
were Coopers & Lybrand L.L.P., independent public accountants. On September 9,
1997, the Board appointed Coopers & Lybrand L.L.P. to audit the financial
statements of the Company for the fiscal year ending July 31, 1998. The Board
desires to obtain the stockholders' ratification of such appointment. A
resolution ratifying the appointment will be offered at the Annual Meeting. If
the resolution is not adopted, the adverse vote will be considered as
direction to the Board to select other auditors. Ratification requires the
affirmative vote by holders of at least a majority of the shares of Common
Stock voting on such matter.
It is expected that a representative of Coopers & Lybrand L.L.P. will be
present at the Annual Meeting to respond to appropriate questions.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE RATIFICATION OF
COOPERS & LYBRAND L.L.P. AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL
YEAR ENDING JULY 31, 1998.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered
class of the Company's equity securities, to file reports of ownership and
change in ownership with the Securities and Exchange Commission. Officers,
directors and greater than 10% shareholders are required by Securities and
Exchange Commission regulations to furnish the Company with copies of all
Section 16(a) forms they file. Based solely on the review of the copies of
such forms furnished to the Company, the Company believes that during fiscal
1997 all Section 16(a) filing requirements applicable to its directors,
officers and greater than 10% beneficial owners were met.
SHAREHOLDER PROPOSALS FOR 1998
Shareholder proposals intended to be presented at the 1998 Annual Meeting of
Stockholders must be received by the Company for inclusion in its Proxy
Statement and form of proxy relating to that meeting by June 30, 1998.
Reference is also made to Section 6 of Article II of the Company's By-laws
regarding nomination of directors as discussed on page 2 of this Proxy
Statement.
18
<PAGE>
ANNUAL REPORT ON FORM 10-K
UPON WRITTEN OR ORAL REQUEST BY ANY STOCKHOLDER SOLICITED HEREBY, THE
COMPANY WILL PROVIDE WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FOR THE FISCAL YEAR ENDED JULY 31, 1997. REQUESTS SHOULD BE DIRECTED
TO:
WILLIAM M. THALMAN,
MANAGER OF INVESTOR RELATIONS
AND EXTERNAL REPORTING
THE CARBIDE/GRAPHITE GROUP, INC.
ONE GATEWAY CENTER, 19TH FLOOR
PITTSBURGH, PA 15222
(412) 562-3752
ANY BENEFICIAL OWNER SHOULD INCLUDE A GOOD FAITH REPRESENTATION THAT AS OF THE
RECORD DATE HE OR SHE IS A BENEFICIAL OWNER OF THE COMMON STOCK.
OTHER MATTERS
The Company knows of no other matters to be presented for action at the
Annual Meeting. However, if any other matters should properly come before the
Annual Meeting, it is intended that votes will be cast pursuant to the proxy
in respect thereto in accordance with the best judgment of the persons acting
as proxies.
The Board of Directors
October 31, 1997
19
<PAGE>
401K PLAN THE CARBIDE/GRAPHITE GROUP, INC. 401K PLAN
Proxy for Annual Meeting of Stockholders-December 9, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby authorizes and appoints Walter B. Fowler, Nicholas T.
Kaiser and James G. Baldwin, or either of them, as proxies with full power of
substitution in each, to vote all shares of $0.01 par value Common Stock, of The
Carbide/Graphite Group, Inc. (the Company) held of record by the undersigned at
the Annual Meeting of Stockholders (the Annual Meeting) to be held at The
Pittsburgh Hilton and Towers, Gateway Center, Pittsburgh, PA 15222 on Tuesday,
December 9, 1997 at 10:00 a.m., EST, and at any adjournments or postponements
thereof, on all matters that may properly come before the Annual Meeting.
This proxy, when properly executed will be voted (i) as directed on the reverse
side, or in the absence of such directions, this proxy will be voted FOR each of
the Nominees named in Proposal 1 and FOR Proposal 2 and (ii) in accordance with
the best judgment of the persons voting such proxies.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
Signature(s) must correspond exactly with the name(s) as shown on the reverse.
Where stock is registered jointly in the names of two or more persons, ALL must
sign. If this proxy is submitted by a corporation or partnership, it must be
executed in the full corporate or partnership name by a duly authorized person.
When signing in a fiduciary or representative capacity (as attorney, trustee,
corporate officer, etc.), give your full title as such.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ------------------------------------- --------------------------------------
- ------------------------------------- --------------------------------------
- ------------------------------------- --------------------------------------
<PAGE>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
- ------------------------------------------------------------------------------
THE CARBIDE/GRAPHITE GROUP, INC.
- ------------------------------------------------------------------------------
401K PLAN
Mark box at right if an address change or comment has been noted on
the reverse side of this card [ ]
RECORD DATE SHARES:
Please be sure to sign and date this Proxy. Date
Stockholder sign here Co-owner sign here
For All With- For All
1. Election of each of the following three Nominees hold Except
persons to the Board of Directors for the [ ] [ ] [ ]
length of term set forth below for such
person and until his successor is elected
and qualified.
NOMINEES FOR THREE YEAR TERM EXPIRING IN 2000:
Paul F. Balser, Robert M. Howe and Ronald B. Kalich
If you do not wish your shares voted "For" a particular nominee, mark the "For
All Except" box and strike a line through the name(s) of the nominee(s). Your
shares will be voted for the remaining nominee(s).
For Against Abstain
2. Ratification of the appointment of Coopers [ ] [ ] [ ]
& Lybrand L.L.P. as independent auditors
for the Company for fiscal year 1998.
3. In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting or at any adjournment(s)
thereof.
DETACH CARD DETACH CARD
<PAGE>
COMMON STOCK THE CARBIDE/GRAPHITE GROUP, INC. COMMON STOCK
Proxy for Annual Meeting of Stockholders-December 9, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby authorizes and appoints Walter B. Fowler, Nicholas T.
Kaiser and James G. Baldwin, or either of them, as proxies with full power of
substitution in each, to vote all shares of $0.01 par value Common Stock, of The
Carbide/Graphite Group, Inc. (the Company) held of record by the undersigned at
the Annual Meeting of Stockholders (the Annual Meeting) to be held at The
Pittsburgh Hilton and Towers, Gateway Center, Pittsburgh, PA 15222 on Tuesday,
December 9, 1997 at 10:00 a.m., EST, and at any adjournments or postponements
thereof, on all matters that may properly come before the Annual Meeting.
This proxy, when properly executed will be voted (i) as directed on the reverse
side, or in the absence of such directions, this proxy will be voted FOR each of
the Nominees named in Proposal 1 and FOR Proposal 2 and (ii) in accordance with
the best judgment of the persons voting such proxies.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
Signature(s) must correspond exactly with the name(s) as shown on the reverse.
Where stock is registered jointly in the names of two or more persons, ALL must
sign. If this proxy is submitted by a corporation or partnership, it must be
executed in the full corporate or partnership name by a duly authorized person.
When signing in a fiduciary or representative capacity (as attorney, trustee,
corporate officer, etc.), give your full title as such.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ------------------------------------ -----------------------------------
- ------------------------------------ -----------------------------------
- ------------------------------------ -----------------------------------
<PAGE>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
- --------------------------------------------------------------------------------
THE CARBIDE/GRAPHITE GROUP, INC.
- --------------------------------------------------------------------------------
COMMON STOCK
Mark box at right if an address change or comment has been noted on [ ]
the reverse side of this card.
RECORD DATE SHARES:
Please be sure to sign and date this Proxy. Date
Stockholder sign here Co-owner sign here
For All With- For All
1. Election of each of the following three Nominees hold Except
persons to the Board of Directors for the [ ] [ ] [ ]
length of term set forth below for such
person and until his successor is elected
and qualified.
NOMINEES FOR THREE YEAR TERM EXPIRING IN 2000:
Paul F. Balser, Robert M. Howe and Ronald B. Kalich
If you do not wish your shares voted "For" a particular nominee, mark the "For
All Except" box and strike a line through the name(s) of the nominee(s). Your
shares will be voted for the remaining nominee(s).
For Against Abstain
2. Ratification of the appointment of [ ] [ ] [ ]
Coopers & Lybrand L.L.P. as independent
auditors for the Company for fiscal year
1998.
3. In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting or at any adjournment(s)
thereof.
DETACH CARD DETACH CARD
