<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
<TABLE>
<S> <C> <C> <C>
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
[ ] Confidential, for Use of the Commission
Check the appropriate box: only (as permitted by Rule 14a-6(e)(2))
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule
14a-11(c) or Rule 14a-12
</TABLE>
THE CARBIDE/GRAPHITE GROUP, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Payment of Filing Fee (check the appropriate box):
<TABLE>
<S> <C> <C>
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
Not Applicable
(2) Aggregate number of securities to which transaction applies:
Not Applicable
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
Not Applicable
(4) Proposed maximum aggregate value of transaction:
Not Applicable
(5) Total fee paid:
Not Applicable
[ ] Fee paid previously with preliminary materials
Not Applicable
[ ] 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:
Not Applicable
(2) Form, Schedule or Registration Statement No.:
Not Applicable
(3) Filing Party:
Not Applicable
(4) Date Filed:
Not Applicable
</TABLE>
<PAGE> 2
[CARBIDE/GRAPHITE LOGO]
The Carbide/Graphie Group, Inc.
---------------------------------------
One Gateway Center, 19th Floor
Pittsburgh, PA 15222
(412) 562-3700
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 7, 1999
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of The Carbide/Graphite Group, Inc., a
Delaware corporation (the Company), will be held at The Westin William Penn, 530
William Penn Place, Pittsburgh, Pennsylvania 15219 on Tuesday, December 7, 1999
at 10:00 A.M. EST (the Annual Meeting), for the following purposes:
To elect two nominees to the Board of Directors to hold office until the
2002 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, 2000.
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 18, 1999 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 22, 1999
<PAGE> 3
------------------------------------
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 7, 1999 at The Westin William Penn, 530
William Penn Place, Pittsburgh, PA 15219 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 18, 1999. 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 PricewaterhouseCoopers LLP
as independent accountants for the fiscal year ending July 31, 2000. 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 18, 1999, the date of record, 8,337,842 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 4,168,922 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 1999 Annual Report on Form 10-K are first being sent or given
to shareholders on or about October 29, 1999.
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of September 24, 1999 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 with respect to all shares shown to be beneficially
owned by such stockholder. This information is based upon the latest written
report furnished to the Company or filed with the Securities and Exchange
Commission by such stockholder on or before September 24, 1999 and may not be
current. Common Stock outstanding as of September 24, 1999 was 8,337,842 shares.
<TABLE>
<CAPTION>
NUMBER
OF SHARES PERCENT OF
NAME BENEFICIALLY OWNED CLASS
- ---- ------------------ ----------
<S> <C> <C>
Southeastern Asset Management, Inc. (1) 1,740,000 20.9%
6075 Poplar Avenue, Suite 900
Memphis, Tennessee 38119
The Prudential Insurance Company of America (2) 833,800 10.0
Prudential Plaza
Newark, New Jersey 07102-3777
</TABLE>
Continued on page 2
<PAGE> 4
<TABLE>
<CAPTION>
NUMBER
OF SHARES PERCENT OF
NAME BENEFICIALLY OWNED CLASS
- ---- ------------------ ----------
<S> <C> <C>
Dimensional Fund Advisors, Inc. 524,400 6.3%
1299 Ocean Avenue
Santa Monica, California 90401-1038
Wellington Management Company (3) 429,970 5.2
75 State Street
Boston, Massachusetts 02109
</TABLE>
- ------------
(1) Shares are owned by Longleaf Partners Small-Cap Fund for which Southeastern
Asset Management, Inc. is the investment adviser.
(2) 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.
(3) 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.
------------------------
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 two directors
whose terms expire at the Annual Meeting are Walter B. Fowler and Charles E.
Slater. Messrs. Fowler and Slater have been nominated by the Board to stand for
re-election as directors at the Annual Meeting and to hold office until the 2002
Annual Meeting of Stockholders and until their respective successors are duly
elected and qualified or their earlier resignation or removal.
The 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 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
2
<PAGE> 5
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 8, 1999.
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 EACH OF
THE NOMINEES.
THE BOARD OF DIRECTORS AND
OFFICERS OF THE COMPANY
The following is information as to each director, executive officer, and
certain other officers of the Company as of September 24, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Walter B. Fowler (3)(5) 45 Chairman, President and Chief Executive Officer and Director
(Nominee for term expiring in 2002)
Walter E. Damian 59 Vice President--Human Resources
Ararat Hacetoglu 44 Vice President and General Manager--Carbide Products
Michael F. Supon 41 Vice President and General Manager--Electrodes and Graphite
Specialty Products
Jim J. Trigg 50 Vice President and General Manager--Seadrift Coke, L.P.
Stephen D. Weaver 45 Vice President--Finance and Chief Financial Officer
Nicholas T. Kaiser (3)(5) 65 Director (Term expiring in 2001)
James G. Baldwin (1)(4) 74 Director (Term expiring in 2001)
James R. Ball (1)(2)(5) 56 Director (Term expiring in 2001)
Paul F. Balser (1)(4) 57 Director (Term expiring in 2000)
Robert M. Howe (3)(4) 59 Director (Term expiring in 2000)
Ronald B. Kalich (1)(2)(5) 51 Director (Term expiring in 2000)
Charles E. Slater (3)(4) 65 Director (Nominee for term expiring in 2002)
Roger Mulvihill 63 Secretary
</TABLE>
- ------------
(1) Member of the Board's Compensation Committee.
(2) Member of the Board's Stock Option Committee.
(3) Member of the Board's Nominating Committee.
(4) Member of the Board's Audit Committee.
(5) Member of the Board's Governance Committee.
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.
3
<PAGE> 6
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 and Plant Manager--Louisville from August 1992 to March
1993.
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. Mr. Kaiser received $21,000 in
compensation for his services as a director of the Company for fiscal 1999.
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. Mr. Baldwin received $26,000 in compensation for
his services as a director of the Company for fiscal 1999. Mr. Baldwin also
received $4,500 in cash compensation during fiscal 1999 for certain consulting
services. Mr. Baldwin resigned as a director on October 22, 1999.
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 currently serves on the Board of Directors of Quanta
Services, Inc. and he previously served on the Board of Rexene Corporation from
April 1996 to August 1997. Mr. Ball received $24,500 in compensation for his
services as a director of the Company for fiscal 1999.
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. Mr. Balser received $26,000 in compensation
for his services as a director of the Company for fiscal 1999.
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. Mr. Howe received $20,000 in compensation for his services
as a director of the Company for fiscal 1999.
Ronald B. Kalich was elected to the Company's Board in March 1994. Mr.
Kalich is currently a Marmon Group Executive, a position he has held since 1993,
and President of Getz Bros. and Co., Inc. Previously, Mr. Kalich served as Group
Executive of Danaher Corporation from 1991 to 1993. Mr. Kalich is also currently
a director of Thomas & Betts, Inc. and National-Standard Company. Mr. Kalich
received $25,500 in compensation for his services as a director of the Company
for fiscal 1999.
Charles E. Slater was elected to the Company's Board in September 1997. Mr.
Slater is currently the President of The Concrete Reinforcing Steel Institute, a
position he has held since March 1998. Previously,
4
<PAGE> 7
Mr. Slater was the Executive Director of the Iron & Steel Society, a position he
held since 1992. Mr. Slater received $24,000 in compensation for his services as
a director of the Company for fiscal 1999.
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.
In connection with its investigation of price fixing by producers of
graphite products in the United States and abroad, the Antitrust Division of the
Department of Justice (DOJ) has granted the Company and certain former and
present senior executives entrance into its Corporate Leniency Program. Pursuant
to this program, the Company has entered into an agreement with the DOJ under
which the Company and the such executives who cooperate will not be subject to
criminal prosecution. Mr. Fowler has agreed to participate in the Corporate
Leniency Program. Mr. Fowler is a nominee for re-election as director for the
term expiring in 2002.
COMMITTEES OF THE BOARD OF DIRECTORS
The committees of the Board of Directors for fiscal 1999 are described
below.
Compensation and Stock Option Committees
The Compensation Committee consists of four directors and is responsible
for policies, procedures and other matters relating to compensation of the
executive officers as a group and the chief executive officer individually. In
addition, the Compensation Committee reviews the operations of the Company's
pension plans and its medical insurance plans. During fiscal 1999, the
Compensation Committee held five meetings.
The Stock Option Committee consists of two directors and has authority to
grant options pursuant to the Company's stock option plans. During fiscal 1999,
the Stock Option Committee held two meetings.
Nominating Committee
The Nominating Committee consists 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 1999, the Nominating Committee held
two meetings.
Audit Committee
The Audit Committee consists of four 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 1999, the Audit Committee held four meetings.
Governance Committee
The Governance Committee consists of four members. The Governance Committee
is responsible for Board governance matters, such as Board compensation,
evaluation and committee assignments. During fiscal 1999, the Governance
Committee held two meetings.
The Board has 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 several civil antitrust actions currently pending.
In September 1998, the Board also formed a committee which currently
consists of Messrs. Howe, Kalich and Slater to explore various strategic
opportunities.
5
<PAGE> 8
The Board held eight meetings during fiscal 1999. 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.
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 24, 1999 by the Company's directors, executive
officers and by all such officers and directors as a group. Each of the
Company's officers and directors can be reached through the Company's corporate
offices located at One Gateway Center, 19th Floor, Pittsburgh, PA 15222.
<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) 173,000 2.0%
Ararat Hacetoglu (4) 77,000 0.9
Jim J. Trigg (5) 71,485 0.8
Walter E. Damian (6) 64,086 0.8
Stephen D. Weaver (7) 63,897 0.8
Michael F. Supon (8) 54,000 0.6
Roger Mulvihill 8,000 0.1
Directors:
Nicholas T. Kaiser (9) 209,400 2.5
James G. Baldwin (10) 44,100 0.5
James R. Ball (11) 24,100 0.3
Paul F. Balser (12) 20,100 0.2
Ronald B. Kalich (13) 19,100 0.2
Robert M. Howe (14) 12,100 0.1
Charles E. Slater (15) 10,200 0.1
All executive officers and directors as
a group
(14 persons) 850,568 9.7
</TABLE>
- ------------
(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 58,000 shares of Common Stock, 55,000
shares of Common Stock issuable upon the exercise of fully vested stock
options and 60,000 shares of Common Stock issuable upon the exercise of
non-vested stock options.
(4) Number of shares indicated includes 12,000 shares of Common Stock, 30,000
shares of Common Stock issuable upon the exercise of fully vested stock
options and 35,000 shares of Common Stock issuable upon the exercise of
non-vested stock options.
(5) Number of shares indicated includes 13,485 shares of Common Stock, 23,000
shares of Common Stock issuable upon the exercise of fully vested stock
options and 35,000 shares of Common Stock issuable upon the exercise of
non-vested stock options.
(6) Number of shares indicated includes 9,586 shares of Common Stock, 22,500
shares of Common Stock issuable upon the exercise of fully vested stock
options and 32,000 shares of Common Stock issuable upon the exercise of
non-vested stock options.
(7) Number of shares indicated includes 7,897 shares of Common Stock, 21,000
shares of Common Stock issuable upon the exercise of fully vested stock
options and 35,000 shares of Common Stock issuable upon the exercise of
non-vested stock options.
6
<PAGE> 9
(8) Number of shares indicated includes 5,000 shares of Common Stock, 14,000
shares of Common Stock issuable upon the exercise of fully vested stock
options and 35,000 shares of Common Stock issuable upon the exercise of
non-vested stock options.
(9) Number of shares indicated includes 195,000 shares of Common Stock, 11,000
shares of Common Stock issuable upon the exercise of vested stock options
and 3,400 shares of Common Stock issuable upon the exercise of non-vested
stock options.
(10) Number of shares indicated includes 35,000 shares of Common Stock, 5,700
shares of Common Stock issuable upon the exercise of fully vested stock
options and 3,400 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, 5,700
shares of Common Stock issuable upon the exercise of fully vested stock
options and 3,400 shares of Common Stock issuable upon the exercise of
non-vested stock options.
(12) Number of shares indicated includes 11,000 shares of Common Stock, 5,700
shares of Common Stock issuable upon the exercise of fully vested stock
options and 3,400 shares of Common Stock issuable upon the exercise of
non-vested stock options.
(13) Number of shares indicated includes 10,000 shares of Common Stock, 5,700
shares of Common Stock issuable upon the exercise of fully vested stock
options and 3,400 shares of Common Stock issuable upon the exercise of
non-vested stock options.
(14) Number of shares indicated includes 3,000 shares of Common Stock, 5,700
shares of Common Stock issuable upon the exercise of fully vested stock
options and 3,400 shares of Common Stock issuable upon the exercise of
non-vested stock options.
(15) Number of shares indicated represents 2,800 shares of Common Stock, 4,000
shares of Common Stock issuable upon the exercise of vested stock options
and 3,400 shares of Common Stock issuable upon the exercise of non-vested
stock options.
7
<PAGE> 10
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
received by the chief executive officer and each of the four next 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
COMPENSATION
ANNUAL COMPENSATION ------------------
-------------------------------------- COMMON STOCK
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION OPTIONS(2) COMPENSATION
------------------ ---- ------ -------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Walter B. Fowler 1999 $350,004 $195,831 -- 40,000 $26,137(3)
Chairman of the Board, 1998 316,668 -- -- 30,000 23,307
President and Chief 1997 259,336 195,602 -- 30,000 26,596
Executive Officer
Stephen D. Weaver 1999 206,004 69,926 -- 20,000 16,800(4)
Vice President-Finance, 1998 191,341 -- -- 15,000 16,687
Chief Financial Officer
and 1997 177,336 106,402 -- 15,000 18,326
Assistant Secretary
Michael F. Supon 1999 170,004 56,289 -- 20,000 14,225(5)
Vice President & General 1998 151,667 -- -- 15,000 13,426
Manager-Electrodes and 1997 117,336 56,934 -- 15,000 14,087
Graphite Speciality
Products
Ararat Hacetoglu 1999 170,004 53,262 -- 20,000 12,465(6)
Vice President & General 1998 151,667 -- -- 15,000 12,545
Manager-Carbide Products 1997 124,000 59,600 -- 15,000 13,971
Jim J. Trigg 1999 170,000 56,765 -- 20,000 14,134(7)
Vice President & General 1998 151,538 -- -- 15,000 15,294
Manager-Seadrift Coke
L.P. 1997 135,333 64,133 -- 15,000 14,968
</TABLE>
- ------------
(1) All amounts shown in this column represent bonuses earned in fiscal 1999
and fiscal 1997 under the Incentive Bonus Plan (See "Bonus Plans" on page
17).
(2) Options were granted under the 1998 Plan and the 1995 Plan. All options
granted in fiscal 1999 have an exercise price of $13.9375 per share and
expire on July 31, 2009. All options granted in fiscal 1999 vest and become
exercisable at a rate of one-third per year on July 31, 2000, 2001 and
2002, respectively. All options granted in fiscal 1998 have an exercise
price of $21.53125 per share and expire on July 31, 2008. All options
granted in fiscal 1998 vest and become exercisable at a rate of one-third
per year on July 31, 1999, 2000 and 2001, respectively. 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 fiscal 1997 vested immediately, while the remaining options
vested at a rate of one-half per year on March 31, 1998 and 1999,
respectively.
(3) All other compensation for 1999 includes: $587 of premiums for group term
life insurance; and $10,350 of Company match contributions and $15,200 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).
(4) All other compensation for 1999 includes: $320 of premiums for group term
life insurance; and $6,180 of Company match contributions and $10,300 of
profit sharing under the Savings Investment Plan.
8
<PAGE> 11
(5) All other compensation for 1999 includes: $200 of premiums for group term
life insurance; and $5,525 of Company match contributions and $8,500 of
profit sharing under the Savings Investment Plan.
(6) All other compensation for 1999 includes: $263 of premiums for group term
life insurance; and $3,702 of Company match contributions and $8,500 of
profit sharing under the Savings Investment Plan.
(7) All other compensation for 1999 includes: $536 of premiums for group term
life insurance; and $5,098 of Company match contributions and $8,500 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 1999.
COMMON STOCK OPTIONS GRANTED IN FISCAL 1999
<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 40,000 16.3% $ 13.9375 7/31/2009 $350,609 $888,511
Stephen D. Weaver 20,000 8.1 13.9375 7/31/2009 175,304 444,256
Michael F. Supon 20,000 8.1 13.9375 7/31/2009 175,304 444,256
Ararat Hacetoglu 20,000 8.1 13.9375 7/31/2009 175,304 444,256
Jim J. Trigg 20,000 8.1 13.9375 7/31/2009 175,304 444,256
</TABLE>
- ------------
(1) All options granted during fiscal 1999 were granted at the fair market
value on July 31, 1999, the grant date, under the 1998 Plan. All options
vest and become exercisable at a rate of one-third per year on July 31,
2000, 2001 and 2002, 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 1999 and the number and value of
options held as of July 31, 1999.
AGGREGATE OPTION EXERCISES IN FISCAL 1999 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, 1999 AS OF JULY 31, 1999(1)
ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ararat Hacetoglu 10,000 $90,000(2) 30,000(3) 35,000(4) $131,313 --
Jim J. Trigg 1,500 19,825(5) 23,000(6) 35,000(7) -- --
Walter B. Fowler -- -- 55,000(8) 60,000(9) -- --
Stephen D. Weaver -- -- 21,000(10) 35,000(11) -- --
Michael F. Supon -- -- 14,000(12) 35,000(13) -- --
</TABLE>
- ------------
(1) Value is calculated based on the difference between $13.9375, the fair
market value of the Company's Common Stock on July 31, 1999, and the
exercise price of options outstanding. Options with an exercise price
greater than $13.9375 per share were not included in this computation.
9
<PAGE> 12
(2) 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 $11.00 per
share.
(3) 11,000 of the options were granted under the 1993 Plan. The options have an
exercise price of $2.00 per share and expire on March 9, 2000. The
remaining options were granted under the 1995 Plan. 4,000 of the options
have an exercise price of $15.75 per share and expire on July 31, 2006.
10,000 of the options have an exercise price of $22.375 per share and
expire on March 31, 2007. 5,000 of the options have an exercise price of
$21.53125 per share and expire on July 31, 2008.
(4) 15,000 of the options were granted under the 1995 Plan. 5,000 of the
options have an exercise price of $22.375 per share, vest on March 31, 2000
and expire on March 31, 2007. 10,000 of the options have an exercise price
of $21.53125 per share, vest at a rate of 5,000 per year on July 31, 2000
and 2001, respectively, and expire on July 31, 2008. 20,000 of the options
were issued under the 1998 Plan. Such options have an exercise price of
$13.9375 per share, vest at a rate of one-third per year on July 31, 2000,
2001 and 2002, respectively, and expire on July 31, 2009.
(5) All 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 was
$15.22 per share.
(6) All options were granted under the 1995 Plan. 8,000 of the options have an
exercise price of $15.75 per share and expire on July 31, 2006. 10,000 of
the options have an exercise price of $22.375 per share and expire on March
31, 2007. 5,000 of the options have an exercise price of $21.53125 per
share and expire on July 31, 2008.
(7) 15,000 of the options were granted under the 1995 Plan. 5,000 of the
options have an exercise price of $22.375 per share, vest on March 31, 2000
and expire on March 31, 2007. 10,000 of the options have an exercise price
of $21.53125 per share, vest at a rate of 5,000 per year on July 31, 2000
and 2001, respectively, and expire on July 31, 2008. 20,000 of the options
were issued under the 1998 Plan. Such options have an exercise price of
$13.9375 per share, vest at a rate of one-third per year on July 31, 2000,
2001 and 2002, respectively, and expire on July 31, 2009.
(8) All options were granted under the 1995 Plan. 15,000 of the options have an
exercise price of $15.75 per share and expire on July 31, 2006. 30,000 of
the options have an exercise price of $22.375 per share and expire on March
31, 2007. 10,000 of the options have an exercise price of $21.53125 per
share and expire on July 31, 2008.
(9) 20,000 of the options were granted under the 1995 Plan. Such options have
an exercise price of $21.53125 per share, vest at a rate of 10,000 per year
on July 31, 2000 and 2001, respectively, and expire on July 31, 2008.
40,000 of the options were granted under the 1998 Plan. Such options have
an exercise price of $13.9375 per share, vest at a rate of one-third per
year on July 31, 2000, 2001 and 2002, respectively, and expire on July 31,
2009.
(10) All options were granted under the 1995 Plan. 6,000 of the options have an
exercise price of $15.75 per share and expire on July 31, 2006. 10,000 of
the options have an exercise price of $22.375 per share and expire on March
31, 2007. 5,000 of the options have an exercise price of $21.53125 per
share and expire on July 31, 2008.
(11) 15,000 of the options were granted under the 1995 Plan. 5,000 of the
options have an exercise price of $22.375 per share, vest on March 31, 2000
and expire on March 31, 2007. 10,000 of the options have an exercise price
of $21.53125 per share, vest at a rate of 5,000 per year on July 31, 2000
and 2001, respectively, and expire on July 31, 2008. 20,000 of the options
were issued under the 1998 Plan. Such options have an exercise price of
$13.9375 per share, vest at a rate of one-third per year on July 31, 2000,
2001 and 2002, respectively, and expire on July 31, 2009.
(12) All options were granted under the 1995 Plan. 4,000 of the options have an
exercise price of $15.75 per share and expire on July 31, 2006. 5,000 of
the options have an exercise price of $22.375 and expire on March 31, 2007.
5,000 of the options have an exercise price of $21.53125 per share and
expire on July 31, 2008.
10
<PAGE> 13
(13) 15,000 of the options were granted under the 1995 Plan. 5,000 of the
options have an exercise price of $22.375 per share, vest on March 31, 2000
and expire on March 31, 2007. 10,000 of the options have an exercise price
of $21.53125 per share, vest at a rate of 5,000 per year on July 31, 2000
and 2001, respectively, and expire on July 31, 2008. 20,000 of the options
were issued under the 1998 Plan. Such options have an exercise price of
$13.9375 per share, vest at a rate of one-third per year on July 31, 2000,
2001 and 2002, respectively, and expire on July 31, 2009.
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, 1999. As compared to a basis
of $100 as of September 14, 1995, the Company's index was $93, the NASDAQ Index
was $256 and the S&P Index was $90, all as of July 31, 1999.
COMPARISON OF 46 MONTH CUMULATIVE TOTAL RETURN*
AMONG THE CARBIDE/GRAPHITE GROUP, INC., THE NASDAQ STOCK MARKET (US) INDEX
AND THE S&P IRON & STEEL INDEX
<TABLE>
<CAPTION>
THE
CARBIDE/GRAPHITE NASDAQ STOCK
GROUP, INC. MARKET (U.S.) S&P IRON & STEEL
---------------- ------------- ----------------
<S> <C> <C> <C>
'9/95' 100.00 100.00 100.00
'10/95' 88.00 102.00 92.00
'1/96' 107.00 104.00 110.00
'4/96' 118.00 117.00 104.00
'7/96' 107.00 107.00 84.00
'10/96' 109.00 120.00 86.00
'1/97' 139.00 136.00 94.00
'4/97' 151.00 124.00 95.00
'7/97' 193.00 158.00 115.00
'10/97' 238.00 158.00 102.00
'1/98' 227.00 161.00 95.00
'4/98' 215.00 186.00 115.00
'7/98' 147.00 186.00 87.00
'10/98' 83.00 177.00 84.00
'1/99' 83.00 252.00 84.00
'4/99' 87.00 252.00 100.00
'7/99' 93.00 265.00 90.00
</TABLE>
*$100 INVESTED ON 9/14/95 IN STOCK OR
INDEX--INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING JULY 31.
COMPENSATION OF DIRECTORS
Refer to "The Board of Directors and Officers of the Company" section
beginning on page 3 of this Proxy Statement for details on compensation of each
outside director for fiscal 1999. A portion of directors' fees earned by each
outside director were credited to a deferred compensation plan. Such deferral
was at the discretion of the director, subject to limitations summarized in the
plan documents (see the "Deferral Plan" described below). Mr. Fowler received no
compensation for his service as Chairman of the Board and a director of the
Company in fiscal 1999.
11
<PAGE> 14
Non-employee directors receive a $5,000 per year retainer for services as a
member of the Board. Also, each Board committee chair receives a $1,500 per year
Chairmanship fee. For Board activities, each non-employee director receives
$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.
During fiscal 1996, the Company adopted the Non-Employee Director
Stock-Based Incentive Compensation Plan (the Director Plan). Options granted
under the Director Plan generally have a term of ten years and are granted with
an exercise price equal to the fair market value of the Company's Common Stock
on the date of grant. Such options vest and become exercisable on the one-year
anniversary date of the option grant, with the stipulation that the non-employee
director receiving the option continues as a director of the Company on such
anniversary date. Options under the Director Plan may be exercised for cash and,
under certain circumstances, Common Stock and additional unexercised options of
the Company.
There have been four annual option grants under the Director Plan since its
inception. Except for Mr. Slater, option grants of 1,700, 2,000, 2,000 and 3,400
per outside director occurred on August 26, 1996 and July 31, 1997, 1998 and
1999, respectively. The exercise price of such options was $18.25, $28.875,
$21.53125 and $13.9375 per share, respectively. In the case of Mr. Slater,
option grants of 2,000, 2,000 and 3,400 occurred on September 9, 1997 and July
31, 1998 and 1999, respectively. The exercise price of such options was
$34.6875, $21.53125 and $13.9375 per share, respectively.
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company is a party to employment, termination or severance agreements
with Messrs. Fowler, Weaver, Damian, Trigg, Hacetoglu, Supon and Kaiser as set
forth below.
In September 1999, Mr. Fowler entered into an employment agreement with the
Company as Chief Executive Officer which will terminate on August 31, 2001.
Pursuant to the terms of the agreement, he is to receive annual cash
compensation of at least $350,000 and incentive compensation in the form of
stock options to purchase 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 of his employment by the Company for other than death,
disability or cause, or other than by virtue of a change in control, as defined
therein, Mr. Fowler is to receive severance in a lump sum equal to twice the
amount of his base salary plus twice the amount of the average of his bonus plan
payouts for the previous two years. 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 plus, subject to certain exceptions, 2.99 times the average of his bonus
plan payouts for the previous two years at the time of termination. The
agreement also provides for certain payments in the event of Mr. Fowler's death
or disability.
Effective February 1, 1998, Mr. Weaver entered into an employment agreement
with the Company as Vice President--Finance and Chief Financial Officer which
terminates on January 31, 2000. Pursuant to the terms of the agreement, he is to
receive annual cash compensation of at least $190,000 and incentive awards of up
to 60% of his base pay pursuant to the terms of the Incentive Bonus Plan. In the
event of termination of his employment by the Company for other than death,
disability or cause, as defined therein, Mr. Weaver 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. Weaver will 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. Weaver's death
or disability.
The Company entered into severance agreements with Messrs. Trigg, Damian,
Hacetoglu and Supon with respect to their employment as, respectively, Vice
President and General Manager--Seadrift Coke, L.P., Vice President--Human
Resources, Vice President and General Manager--Calcium Carbide Products and Vice
President and General Manager--Electrodes and Graphite Specialty Products.
Pursuant to the terms of the agreements, Messrs. Trigg, Damian, Hacetoglu and
Supon will each be granted one year of severance pay and medical coverage if
terminated other than for cause.
In March 1997, Mr. Kaiser retired from his positions with the Company,
other than his position as a director. Pursuant to his March 1997 revised
employment agreement, Mr. Kaiser received his annual base salary at the
12
<PAGE> 15
time of his retirement, $347,000, for the remainder of 1997 and as severance for
calendar 1998. In addition, the Company will provide for the continuation of Mr.
Kaiser's health insurance benefits until January 1, 2001.
SAVINGS INVESTMENT PLAN
The Company has adopted the Savings Investment Plan for substantially all
salaried employees, including the Named Executive Officers. Employee
contributions of not more than 6% of employee compensation are matched at a rate
of 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 17 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
General. The Board adopted the 1995 Stock-Based Incentive Compensation Plan
(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
Secretary of the Company.
Administration. The Stock Option Committee (the Committee) designated by
the Board 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.
13
<PAGE> 16
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.
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.
As of September 24, 1999, all 400,000 options for Common Stock available
for grant under the 1995 Plan had been granted. Of the 400,000 options granted
under the 1995 Plan, 367,500 options for Common Stock, representing 4.4% of the
Common Stock outstanding, had not yet been exercised as of September 24, 1999.
The closing price of the Company's Common Stock as reported on the NASDAQ
National Market System on September 24, 1999 was $10.875 per share. The average
exercise price of outstanding options granted under the 1995 Plan is $21.35 per
share.
Term. The 1995 Plan became effective in May 1995 and will 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, will 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.
14
<PAGE> 17
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 has 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.
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.
THE 1998 STOCK-BASED INCENTIVE COMPENSATION PLAN
General. The 1998 Stock-Based Incentive Compensation Plan (the 1998 Plan)
was approved by the Company's stockholders in December 1998. The purpose of the
1998 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. No employee may be granted
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
aggregate number of shares of the Company's Common Stock issued under the 1998
Plan will not exceed 450,000 shares (subject to adjustments for stock splits,
stock dividends and the like).
The 1998 Plan permits awards to eligible employees of stock options and/or
SARs that qualify as "performance-based compensation" under Section 162(m) of
the Internal Revenue Code of 1986, as amended (the Internal Revenue Code).
Section 162(m) of the Code limits the deductibility of compensation paid to the
Company's Chief Executive Officer and to each of the next four most highly paid
officers unless that compensation is "performance based."
The following summary description of the 1998 Plan is qualified in its
entirety by the full text of the 1998 Plan, copies of which may be obtained by
the Company's stockholders upon request to the Office of the Secretary of the
Company.
Administration. The Committee has full power to interpret and administer
the 1998 Plan and full authority to act in selecting the employees to whom
awards of options or SARs under the 1998 Plan (Awards) are 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 1998 Plan and the terms and
agreements entered into with employees to whom an Award is granted (the
Holders). All grants under the 1998 Plan have to be approved by the Committee.
The Committee members have to be Board members who are not employees of the
Company or any parent, subsidiary, or Seadrift or any affiliate. No Committee
member can receive any compensation from the Company except in his capacity as
director. All have to otherwise qualify as "outside directors" under Section
162(m) of the Code and "non-employee directors" under Rule 16b-3 promulgated by
the Securities and Exchange Commission. The Board has the power to amend,
suspend or terminate the 1998 Plan at any time, except that stockholder approval
is required to increase the total number of shares available for issuance
pursuant to the 1998 Plan, change the class of employees eligible to be Holders,
withdraw the administration of the 1998 Plan from the Committee, change the
provisions of the 1998 Plan describing when a shareholder vote is required for
plan modification, or take any other action that would require stockholder
approval under the "short swing profit recapture" rules of Section 16(b) of the
Securities Exchange Act of 1934.
Eligibility. Employees, consultants and advisors of the Company, or a
subsidiary or Seadrift or any other affiliate, including any director who is an
employee, consultant or advisor, are eligible to receive Awards. Directors,
consultants and advisors who are not employees, and employees of Seadrift or any
other affiliate (any
15
<PAGE> 18
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), are
not, however, eligible to receive incentive stock options. Employees,
consultants, and advisors of the Company or a subsidiary would be eligible to
receive incentive stock options as well as non-qualified options and SARs.
Awards. Under the 1998 Plan, eligible employees can 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 options that do not qualify under Section
422 of the Internal Revenue Code. The price at which shares of Common Stock can
be purchased upon the exercise of an option is determined by the Committee, but
has to be at least equal to the fair market value of such shares (or 110% of
fair market value for certain incentive stock options) on the date of the Award.
Payment of the option price has to be made 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 can 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 in any combination thereof, as the Committee
may determine. A SAR may be awarded in tandem with options or separately.
Stock options and SARs may 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 incentive
stock options awarded under the 1998 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 that are available for Awards under the
1998 Plan is 450,000 shares (subject to adjustments for stock splits, stock
dividends and the like), which equals approximately 5.4% of the total number of
shares of Common Stock outstanding as of September 24, 1999. Awards for 246,000
shares, representing 3.0% of the total number of shares of Common Stock
outstanding as of September 24, 1999, under the 1998 Plan were made during
fiscal 1999. The closing price of Common Stock reported on the NASDAQ National
Market System on September 24, 1999 was $10.875 per share. The average exercise
price of options outstanding granted under the 1998 Plan is $13.9375 per share.
The Committee retains the power to amend the terms of, or cancel and
regrant, stock options and SARs for the benefit of any Holder. All terms of the
options and SARs can be amended, subject to the specific limitations set forth
in the Plan. Any incentive stock option amended by the Committee becomes a
non-qualified option.
In the event of a dissolution or liquidation of the Company, a merger or
consolidation in which the Company is not the surviving corporation, or any
other transaction wherein the Company's stockholders give up all their equity
interest in the Company, the successor company, if any, may substitute its own
substantially similar options and SARs, or it could elect to terminate the Plan.
Termination would result in expiry of all awards at such a time and on such
conditions as the Board determines.
Term. The 1998 Plan became effective December 3, 1998 and will remain in
full force and effect until the earlier of December 3, 2008 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, 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 1998 Plan is as
follows:
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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 is a
long-term capital gain or loss. The Company is not 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 option holder recognizes no taxable income and the Company is not
entitled to an income tax deduction if a non-qualified option is awarded. Upon
exercise of a non-qualified option, the Holder generally would 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 Holder would realize short-term or long-term capital gain or loss,
depending upon whether the Stock had 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 Holder recognizes income with
respect to the option exercise.
The employee, director, consultant or advisor recognizes no taxable income
and the Company is not entitled to an income tax deduction if a SAR were
awarded. Upon exercise of a SAR, the Holder generally would 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 any applicable conditions of Section 162(m) of the Internal Revenue
Code were 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 personal goals, as well as performance targets relating to
earnings before interest, taxes, depreciation and amortization (EBITDA) which
are 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. Approximately 31 salaried employees are currently eligible to
participate in the Incentive Bonus Plan, including the Named Executive Officers.
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 an amount equal
to 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. Ball, Balser and Kalich, none of whom currently is an executive officer
of the Company; however, Mr. Balser served as an officer of the Company in the
past. Executive officer compensation is determined by the Compensation
Committee.
STOCK OPTION COMMITTEE
The Stock Option Committee of the Board of Directors is comprised of Mr.
Ball and Mr. Kalich, neither of whom currently is an executive officer of the
Company or receives any compensation from the Company in any capacity other than
as a director. Awards under the 1998 Plan are determined by the Stock Option
Committee.
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REPORT OF COMPENSATION COMMITTEE
The Compensation Committee, which is currently comprised of three
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. The Compensation Committee
considers, among other things, compensation statistics for executives of
companies that are similar in size and other characteristics to the Company in
determining the compensation of its executives. Messrs. Fowler, Weaver, Damian,
Trigg, Hacetoglu and Supon have entered into employment and/or severance
agreements with the Company. See "Employment Agreements" on page 12 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 achieving personal goals and EBITDA
targets which have been established by the Board. Meeting such objectives will
trigger awards as a percentage of base pay dependent on management level of 10%,
20%, 30% or 50%. Exceeding such 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 and 1998 Plans.
Generally, stock options have a term of 10 years and vest ratably over three
years. Option exercise prices equal the fair market value of the Common Stock on
the date of grant. Incentive stock options are 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 12 of this Proxy Statement. 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 Specialty 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 Mr. Fowler's contributions with
respect to the Company's significant capital expenditure program, including its
modernization plan and his management of the Company in recent periods under
difficult business conditions.
Respectfully Submitted,
Compensation Committee
/S/ James R. Ball
/S/ Paul F. Balser
/S/ Ronald B. Kalich
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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 and fees paid under such policies in fiscal 1999
totaled $268,755. Both policies were extended for fiscal 2000 for premiums
totaling $231,417.
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.
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 1999 all Section 16(a) filing
requirements applicable to its directors, officers and greater than 10%
beneficial owners were met.
------------------------
PROXY PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Company's independent auditors for the fiscal year ended July 31, 1999
were PricewaterhouseCoopers LLP, independent public accountants. On October 19,
1999, the Board appointed PricewaterhouseCoopers LLP to audit the financial
statements of the Company for the fiscal year ending July 31, 2000. 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 representatives of PricewaterhouseCoopers LLP will be
present at the Annual Meeting to respond to appropriate questions, and will have
the opportunity to make a statement if they chose to do so.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE RATIFICATION OF
PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL
YEAR ENDING JULY 31, 2000.
------------------------
SHAREHOLDER PROPOSALS FOR 2000
Shareholder proposals intended to be presented at the 2000 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, 2000. 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.
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<PAGE> 22
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, 1999. REQUESTS SHOULD BE DIRECTED
TO:
WILLIAM M. THALMAN,
TREASURER
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 22, 1999
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CARGB-PS-99
<PAGE> 24
[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 had been [ ]
noted on the reverse side of this card.
CONTROL NUMBER:
RECORD DATE SHARES:
FOR ALL WITH- FOR ALL
NOMINEES HOLD EXCEPT
1. Election of each of the following two 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 2002:
WALTER B. FOWLER AND CHARLES E. SLATER
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 OF
THE NOMINEE. YOUR SHARES WILL BE VOTED FOR THE REMAINING NOMINEE.
FOR AGAINST ABSTAIN
2. Ratification of the appointment of Pricewaterhouse- [ ] [ ] [ ]
Coopers LLP as independent auditors for the
Company for the fiscal year ending July 31, 2000.
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.
Please be sure to sign and date this Proxy.
Date
- ----------------------------- ----------------------------- ---------------
Stockholder sign here Co-owner sign here
DETACH CARD DETACH CARD
<PAGE> 25
THE CARBIDE/GRAPHITE GROUP, INC.
Proxy for Annual Meeting of Stockholders - December 7, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby authorizes and appoints Walter B. Fowler and Stephen D.
Weaver, 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 Westin William
Penn, 530 William Penn Place, Pittsburgh, PA 15219 on Tuesday, December 7, 1999
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 DIRECTION, 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?
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