<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 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
Chase Industries Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:
-----------------------------------------------------------------------
<PAGE> 2
CHASE INDUSTRIES INC.
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 31, 2000
The Annual Meeting of Stockholders of Chase Industries Inc. (the "Company")
will be held at the offices of Fulbright & Jaworski L.L.P., 666 5th Avenue, 31st
Floor, Room GH, New York, New York, on Wednesday, May 31, 2000, at 10:00 a.m.
for the following purposes:
1. To elect seven (7) directors of the Company, each to serve until
the 2001 annual meeting of stockholders of the Company or until his
successor is elected and qualified;
2. To ratify the appointment of PricewaterhouseCoopers LLP as the
independent auditors for the Company for the year ending December 31, 2000;
and
3. To consider and transact such other business as may properly come
before the meeting or any adjournment thereof.
A copy of the Proxy Statement in which the foregoing matters are described
in more detail accompanies this Notice of Annual Meeting of Stockholders.
The transfer books of the Company will not be closed, but only stockholders
of record at the close of business on April 7, 2000, are entitled to notice of
and to vote at the meeting or any adjournment thereof. A complete list of these
stockholders will be available for examination at the offices of Vinson & Elkins
L.L.P. located at 1325 Avenue of the Americas, New York, New York 10019 during
normal business hours for ten days before the meeting.
Please sign, date and return your proxy in the enclosed return envelope as
promptly as possible. You may revoke your proxy at any time before the shares to
which it relates are voted at the meeting.
By Order of the Board of Directors
/s/ MICHAEL T SEGRAVES
MICHAEL T. SEGRAVES
Secretary
April 10, 2000
---------------------
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING OF
STOCKHOLDERS OF THE COMPANY IN ORDER THAT THE PRESENCE OF A QUORUM MAY BE
ASSURED. WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, PLEASE COMPLETE
AND SIGN THE ACCOMPANYING FORM OF PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
<PAGE> 3
CHASE INDUSTRIES INC.
14212 COUNTY ROAD M-50
MONTPELIER, OHIO 43543
---------------------
PROXY STATEMENT
---------------------
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 31, 2000
---------------------
SOLICITATION OF PROXIES BY THE BOARD OF DIRECTORS AND REVOCATION THEREOF
The accompanying Proxy is solicited by the Board of Directors of Chase
Industries Inc. (the "Company") for use at the Annual Meeting of Stockholders of
the Company to be held at the offices of Fulbright & Jaworski L.L.P., 666 5th
Avenue, 31st Floor, Room GH, New York, New York, on Wednesday, May 31, 2000, at
10:00 a.m., or any adjournment thereof (the "Annual Meeting"). The approximate
date on which this Proxy Statement and accompanying Proxy are first being sent
to stockholders is April 14, 2000.
The common stock of the Company, par value $.01 per share ("Common Stock"),
can be voted at the Annual Meeting only if the holder is present or represented
by proxy at the Annual Meeting. A stockholder executing and returning the Proxy
may revoke it at any time before it is exercised by giving written notice of the
revocation to the Secretary of the Company or by executing and delivering to the
Company a later-dated Proxy. Attendance at the Annual Meeting will not be
effective to revoke the Proxy unless written notice of revocation also has been
delivered to the Secretary of the Company before the Proxy is exercised.
The record date for the stockholders entitled to notice of and to vote at
the Annual Meeting is the close of business on April 7, 2000 (the "Record
Date").
QUORUM AND VOTING
The only class of outstanding voting securities of the Company is Common
Stock. As of the close of business on the Record Date, there were 9,084,877
shares of Common Stock outstanding and entitled to vote at the Annual Meeting
and 6,150,118 shares of nonvoting common stock, par value $.01 per share
("Nonvoting Common Stock"), outstanding. Each share of Nonvoting Common Stock is
convertible into one share of Common Stock at the option of the holder thereof
to the extent the conversion does not result in such holder or its affiliates,
directly or indirectly, owning or controlling a greater number of securities of
any kind issued by the Company than such holder and its affiliates are permitted
to own or control under the Small Business Investment Act of 1958, the Bank
Holding Company Act of 1956, and the regulations promulgated thereunder.
Holders of Common Stock of record at the close of business on the Record
Date are entitled to one vote for each share held on all matters submitted to a
vote of stockholders at the Annual Meeting or any adjournment thereof. Shares of
Common Stock issued upon the conversion of any Nonvoting Common Stock after the
Record Date will not be entitled to be voted at the Annual Meeting or any
adjournment thereof. The holders of shares of Common Stock do not have
cumulative voting rights.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock entitled to vote is necessary to constitute a
quorum at the Annual Meeting. If a quorum is not present (either in person or by
proxy), the stockholders entitled to vote who are present in person or by proxy
have the power to adjourn the Annual Meeting from time to time without notice,
other than an announcement at the Annual Meeting, until a quorum is present. At
any adjourned Annual Meeting at which a quorum is present in person or by proxy,
any business may be transacted that might have been transacted at the Annual
Meeting as originally notified.
<PAGE> 4
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
an automated system administered by the Company's transfer agent and will
determine whether or not a quorum is present. Abstentions and broker non-votes
are treated as shares that are present and entitled to vote for purposes of
determining the presence of a quorum for the transaction of business.
Abstentions and broker non-votes are tabulated separately, with abstentions
counted in tabulations of the votes cast on a proposal for purposes of
determining whether a proposal has been approved while broker non-votes relating
to a proposal are not counted as a vote cast with respect to that proposal.
The election of directors will be determined by plurality vote and the
ratification of the appointment of PricewaterhouseCoopers LLP requires the
approval of a majority of the outstanding shares of Common Stock that are
present at the Annual Meeting in person or by proxy and entitled to vote
thereon. Therefore, abstentions will have a neutral effect on the election of
directors and will have the effect of votes against the proposal to ratify the
selection of independent auditors, whereas broker non-votes will have a neutral
effect on the election of directors and the proposal to ratify the selection of
independent auditors.
Shares represented by each Proxy that is properly executed and returned and
upon which no contrary instructions are indicated about a specified matter will
be voted as follows with respect to the specified matter: FOR the election of
the seven persons named in this Proxy Statement as the nominees of the Board of
Directors of the Company (the "Board of Directors") for election to the Board of
Directors; FOR the ratification of the appointment of PricewaterhouseCoopers LLP
as the independent auditors for the Company for 2000; and in accordance with the
discretion of the holders of the Proxy with respect to any other business that
properly comes before the stockholders at the Annual Meeting. Although the Board
of Directors currently is not aware of any other business that may come before
the stockholders at the Annual Meeting, under the circumstances permitted by
Rule 14a-4(c) of the Securities Exchange Act of 1934 (the "Exchange Act") the
Board of Directors will have discretionary voting authority with respect to
proxies submitted for the 2000 Annual Meeting on any matter for which notice
thereof is first provided to the Company after February 21, 2000, without
including any discussion of such matter in this Proxy Statement.
PROPOSAL 1.
ELECTION OF DIRECTORS
The Board of Directors currently consists of seven members. The Board of
Directors has designated the following nominees for election as directors of the
Company, with their terms to expire at the annual meeting of stockholders in
2001 or when their successors are elected and qualified:
Martin V. Alonzo
Raymond E. Cartledge
Charles E. Corpening
John R. Kennedy
Robert D. Kennedy
Thomas F. McWilliams
William R. Toller
Each nominee currently is a director of the Company. For information about
each nominee, see "Directors and Executive Officers" below.
Should any nominee named in this Proxy Statement for the office of director
become unable or unwilling to accept nomination or election, the person acting
under the Proxy will vote for the election, in his stead, of any other person
whom the Board of Directors recommends. The Board of Directors has no reason to
believe that any nominee named above will be unable or unwilling to serve if
elected.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION
OF THE NOMINEES.
2
<PAGE> 5
DIRECTORS AND EXECUTIVE OFFICERS
GENERAL
The Board of Directors currently consists of one person who is an employee
of the Company and six persons who are not employees of the Company (i.e.,
outside directors). Set forth below are the names, ages and positions of the
Company's directors and executive officers as of the Record Date.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ---- --- -----------
<S> <C> <C>
Martin V. Alonzo.......................... 68 Chairman of the Board, President, Chief
Executive Officer and Director
John H. Steadman.......................... 50 President and Chief Operating Officer of
CBCC*
Parry D. Katsafanas....................... 52 President and Chief Operating Officer of
Leavitt+
Michael T. Segraves....................... 55 Chief Financial Officer, Vice President
and Secretary
Raymond E. Cartledge...................... 70 Director
Charles E. Corpening...................... 35 Director
John R. Kennedy........................... 69 Director
Robert D. Kennedy......................... 67 Director
Thomas F. McWilliams...................... 57 Director
William R. Toller......................... 69 Director
</TABLE>
- ---------------
* Chase Brass & Copper Company, Inc. ("CBCC"), is a wholly-owned subsidiary of
the Company through which the Company conducts its brass rod operations.
+ Leavitt Tube Company, Inc. ("Leavitt"), is a wholly-owned subsidiary of the
Company through which the Company conducts its steel tube operations.
The current term of office of each director will expire at the Annual
Meeting. At the Annual Meeting, successors to the directors will be elected to
serve until the next annual meeting of stockholders and until their successors
are elected and qualified.
Executive officers of the Company are appointed by and serve at the
discretion of the Board of Directors.
The Company, Citicorp Venture Capital Ltd. ("CVC") and Mr. Alonzo are
parties to a Voting Agreement (the "Voting Agreement") pursuant to which the
Company has agreed to use its best efforts to cause up to two designees of CVC
and one designee of Mr. Alonzo to be nominated for election as directors of the
Company, and each of CVC and Mr. Alonzo have agreed to vote their respective
shares of Common Stock in favor of such designees. Pursuant to the Voting
Agreement, at any time the Board of Directors consists of five or more directors
and CVC owns 20% or more of the outstanding Common Stock (after giving effect to
the full conversion of all outstanding shares of Nonvoting Common Stock), CVC
will be entitled to two such designees, and at any time the Board of Directors
consists of fewer than five directors or CVC owns less than 20% of the
outstanding Common Stock (after giving effect to the full conversion of all
outstanding shares of Nonvoting Common Stock), CVC will be entitled to one such
designee. CVC has designated Charles E. Corpening and Thomas F. McWilliams as
its director nominees and Mr. Alonzo has designated himself as a director
nominee pursuant to the Voting Agreement.
The Company's existing bank credit facility also requires Mr. Alonzo to
continue to serve on the Board of Directors as long as he is physically able to
do so.
There are no family relationships among the directors or executive officers
and, except as to the designation of Messrs. Corpening, McWilliams and Alonzo as
director nominees pursuant to the Voting Agreement, there were no arrangements
or understandings between any such director or executive officer and any other
person pursuant to which his selection as a director or an officer was made.
3
<PAGE> 6
Set forth below is certain biographical information regarding the executive
officers and directors of the Company.
Martin V. Alonzo. Mr. Alonzo has served as Chairman of the Board, President
and Chief Executive Officer ("CEO") of the Company since the Company began
operations in August 1990. Mr. Alonzo also served as President of Leavitt from
August 1996 until March 1997. From 1987 until 1990, Mr. Alonzo pursued
entrepreneurial opportunities, which included advising the Maxxam Group in
connection with its acquisition of Kaiser Aluminum Corporation and, in
conjunction with CVC, analyzing prospective acquisitions, primarily of metals
related companies. From 1967 until 1987, Mr. Alonzo was employed by AMAX, Inc.,
a large mining and integrated aluminum company, in various capacities, including
senior vice president and president -- industrial minerals division, executive
vice president and president -- specialty and light metals operations and, from
1984 until July 1987, executive vice president and chief financial officer. Mr.
Alonzo also served as a director of Alumax Inc., an integrated aluminum company,
from 1974 to 1987.
John H. Steadman. Mr. Steadman has served as President and Chief Operating
Officer of CBCC since January 2000. He joined CBCC in October 1999 and served as
Executive Vice-President until being appointed President and Chief Operating
Officer. Prior to joining CBCC, Mr. Steadman was employed by Noranda Aluminum,
Inc. from 1979 to 1999. Over the course of his career with Noranda, Mr. Steadman
served as President of its aluminum road wheel subsidiary, American Racing
Equipment, from 1996 through 1999 and as President of its rolled products
subsidiary, Norandal USA, from 1989 through 1996. Prior to that he held various
administrative and financial positions with Noranda Aluminum, R. J. Reynolds and
RCA Corporation.
Parry D. Katsafanas. Mr. Katsafanas has served as President and Chief
Operating Officer of Leavitt since December 1997. Prior to such time, Mr.
Katsafanas had served as Vice President -- Sales and Marketing of Leavitt since
Leavitt acquired the steel tubing operations from UNR Industries, Inc., in
August 1996. Prior to joining Leavitt, Mr. Katsafanas had been employed by the
steel tubing division of UNR Industries, Inc., since 1974, serving in various
sales capacities, including as regional sales manager from 1981 until July 1993
and as Vice President -- Sales and Marketing from July 1993 until August 1996.
Michael T. Segraves. Mr. Segraves has served as Vice President and
Secretary of the Company since September 1996, and as Chief Financial Officer
since February 1997. Prior to joining the Company, Mr. Segraves was employed
from 1992 to 1996 as vice president of administration and chief financial
officer of AMP Circuits, a wholly-owned subsidiary of AMP Incorporated, a
manufacturer in the electronics industry. From 1990 through 1992, Mr. Segraves
was chief financial officer of Browning Ferris Industries' European subsidiary,
headquartered in Utrecht, The Netherlands. Prior to these positions, Mr.
Segraves was employed at Ford Motor Company and Tenneco, Inc., in various
financial management positions.
Raymond E. Cartledge. Mr. Cartledge was elected as a director of the
Company in May 1995. Mr. Cartledge served as chairman of the board and chief
executive officer of Union Camp Corporation, a paper and packaging company, from
1986 until 1994, and as chairman of the board of Savannah Foods & Industries,
Inc., until his retirement in 1997. Mr. Cartledge also serves as a director of
UCAR International, Inc., Delta Air Lines Inc. and Sunoco, Inc.
Charles E. Corpening. Mr. Corpening was elected as a director of the
Company in May 1995. Since 1994, Mr. Corpening has been a vice president of CVC,
which beneficially owns approximately 48.3% of the outstanding Common Stock (see
"Security Ownership of Certain Beneficial Owners and Management" below). Prior
to joining CVC, Mr. Corpening was a vice president of Roundtree Capital Corp., a
private investment firm based in Stamford, Connecticut from 1990 until 1994. Mr.
Corpening was employed in the merchant banking division of the Rockefeller Group
from 1988 until 1990 and worked in the mergers and acquisitions group of
PaineWebber, Inc. from January 1987 until December 1988. Mr. Corpening received
a masters of business administration from Columbia University Business School in
1993. Mr. Corpening also serves as a director of Davco Restaurants Inc.
4
<PAGE> 7
John R. Kennedy. Mr. John Kennedy was elected as a director of the Company
in November 1994. From 1975 until his retirement in 1996, Mr. Kennedy served as
president and chief executive officer of Federal Paper Board Company, Inc. Mr.
Kennedy also serves as a director of De Vlieg-Ballard, Inc., International Paper
Company, Holnam, Inc., Spartech Corporation, Pioneer Companies, Inc. and Modis
Professional Services.
Robert D. Kennedy. Mr. Robert Kennedy was appointed as a director of the
Company in February 2000. Mr. Kennedy served as Chairman and Chief Executive
Officer of Union Carbide Corporation from 1986 until 1995. Mr. Kennedy also
served as Chief Executive Officer of UCAR International Inc. from March 1998
until July 1998, and as Chairman from March 1998 until September 1999. Mr.
Kennedy also serves as a director of Sunoco, Inc., KMart, International Paper
Company, Lionore Mining International Inc. and the National Association of
Corporate Directors.
Thomas F. McWilliams. Mr. McWilliams has served as a director of the
Company since August 1990, and served as Vice President of the Company from July
1993 until September 1994. Since 1983, Mr. McWilliams has been affiliated with
CVC and has served as vice president and a managing director of CVC as well as a
member of CVC's investment committee. Mr. McWilliams also serves as a director
of each of MMI Products, Inc., Royster-Clark, Inc., HydroChem Industrial
Services, Inc., Ergo Science Corporation and Airxcel Inc.
William R. Toller. Mr. Toller was elected as a director of the Company in
October 1996. From October 1990 until July 1996, Mr. Toller served as chairman
and chief executive officer of Witco Corporation, a specialty chemical company.
Mr. Toller currently serves as a director of Commodore Separation Technologies,
Inc., FusePlus, Inc., Commodore Applied Technologies, Inc. and The United States
Chamber of Commerce. Mr. Toller also is a member of the Board of Trustees for
the International Center for the Disabled in New York City and the Whitehead
Institute for Biomedical Research in Boston, Massachusetts.
MEETINGS AND COMMITTEES OF DIRECTORS
The Board of Directors has an Audit Committee (the "Audit Committee") and a
Compensation Committee (the "Compensation Committee"). The Board of Directors
does not have a nominating committee.
The Audit Committee makes recommendations to the Board of Directors
concerning the selection of the Company's independent accountants, reviews and
approves the scope of the annual audit and discusses internal accounting
procedures and financial controls with the Company's management and auditors.
The Audit Committee also reviews compliance by Company management and employees
with Company policies and may initiate and supervise any special investigations
it deems necessary. The members of the Audit Committee are William R. Toller
(Chairman), John R. Kennedy and Thomas F. McWilliams, all of whom are
independent outside directors. The Audit Committee held one meeting in 1999.
The Compensation Committee is responsible for setting annual base and cash
bonus compensation levels of executive officers and for establishing and
administering the Company's compensation policies and practices, administering
the Company's stock option plans, and supervising the administration of the
Company's other employee benefit plans. The members of the Compensation
Committee are John R. Kennedy (Chairman), Raymond E. Cartledge and Thomas F.
McWilliams. The Compensation Committee held two meetings in 1999.
During 1999, the Board of Directors held six meetings. Each of the
directors, other than John R. Kennedy and Charles E. Corpening, attended at
least 75% of the aggregate of all meetings held by the Board of Directors and
(if applicable) all meetings of committees of the Board of Directors on which
such director served during 1999.
5
<PAGE> 8
MANAGEMENT COMPENSATION
BOARD COMPENSATION
Cash Compensation. Each member of the Board of Directors who is not an
employee or officer of the Company or any subsidiary of the Company
("Non-Employee Director") receives an annual retainer of $15,000 for service as
a director, plus $1,000 for each meeting of the Board of Directors attended and
$500 for each meeting of a committee of the Board of Directors attended, and
reimbursement of all ordinary and necessary expenses incurred in attending any
meeting of the Board of Directors or any committee of the Board of Directors.
Employees of the Company who also serve as members of the Board of Directors do
not receive any additional compensation for service as a director, but are
reimbursed for related expenses.
Stock Option Awards. Each Non-Employee Director is granted, on the date
such person is elected or appointed as a director, stock options to purchase
7,500 shares of Common Stock at an exercise price equal to the average closing
price of the Common Stock for the five trading days immediately preceding the
date of grant (the "Average Fair Market Value"). All stock options granted to
Non-Employee Directors vest in equal proportions on each of the first five
anniversaries of the date of grant, provided that the person has been a director
of the Company continuously through that date. Non-Employee Directors reelected
to successive terms do not receive additional grants of stock options upon any
such reelection. Prior to May 14, 1997, these grants of stock options were made
pursuant to the Company's 1994 Long-Term Incentive Plan (the "1994 Incentive
Plan"). As of May 14, 1997, all such awards are made pursuant to the Company's
1997 Non-Employee Director Stock Option Plan (the "Director Stock Option Plan").
Also, pursuant to the Director Stock Option Plan, each Non-Employee
Director may elect to defer all or a portion (in 25% increments) of such
director's annual cash retainer for a calendar year and, if such director elects
to defer all or a portion of his or her annual retainer, such director also may
elect to defer his meeting fees, and receive, in lieu thereof, stock options
equal to the value of the deferred retainer and meeting fees. Stock options
granted in lieu of a director's deferred retainer and meeting fees will be
granted as of the last day of each calendar quarter (the date on which the
meeting fees for such quarter and the quarterly payments of the annual cash
retainer are paid, in arrears) in the year to which the election relates. The
number of stock options granted each quarter is determined by dividing the sum
of (i) 25% of the total annual retainer amount deferred and (ii) if meeting fees
have been deferred, the total amount of meeting fees to which the Non-Employee
Director is entitled for such calendar quarter, by 50% of the Average Fair
Market Value (as defined above) for the last five trading days of that calendar
quarter, and also will have an exercise price equal to 50% of that Average Fair
Market Value. Each stock option granted to Non-Employee Directors in lieu of
their annual retainer and, if applicable, meeting fees vests fully and is
exercisable immediately upon grant.
In 1999, each of Messrs. Donahue and Toller elected to defer 50% of their
respective annual retainers, while each of Messrs. Cartledge, Corpening, John
Kennedy and McWilliams elected to defer 100% of their respective annual
retainers. For 2000, Mr. Toller has elected to defer 50% of his annual retainer
and Messrs. Cartledge, Corpening, John Kennedy, Robert Kennedy and McWilliams
have elected to defer 100% of their respective annual retainers. In 1999,
Messrs. Corpening, John Kennedy and McWilliams elected to defer their respective
meeting fees. Messrs. Corpening, John Kennedy and McWilliams also have elected
to defer their respective meeting fees for 2000.
The Director Stock Option Plan provides that, upon a "change in control" of
the Company, (1) all outstanding stock options will become immediately and fully
vested and exercisable in full and (2) in the discretion of the Compensation
Committee, each holder of a stock option will be granted a corresponding stock
appreciation right. For the definition of "change in control" as used in the
Director Stock Option Plan, see "Employment Agreements and Termination of
Employment and Change-in-Control Arrangements -- Other Change-in-Control
Arrangements -- Stock Option Plans" below.
6
<PAGE> 9
COMPENSATION OF EXECUTIVE OFFICERS
The compensation paid by the Company to its executive officers is
administered by the Compensation Committee and generally consists of base
salaries, annual cash incentives, equity incentives in the form of stock
options, contributions to Company-sponsored 401(k) plans and miscellaneous
perquisites.
The following table sets forth the total compensation awarded to, earned by
or paid by the Company to its CEO and to each of the other three executive
officers of the Company whose total cash compensation exceeded $100,000 for
services rendered during 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
-----------------------------------
OTHER ANNUAL SECURITIES ALL OTHER
COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(2) OPTIONS(3) ($)(4)
- --------------------------- ---- --------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Martin V. Alonzo............... 1999 350,000 (5) 0 59,392(5) 51,443
Chairman of the Board, 1998 350,000 250,000 0 75,000(6) 54,945
President and CEO 1997 300,000 (7) 0 55,762(7) 55,024
Duane R. Grossett(8)........... 1999 225,000 150,000 0 0 26,692
President and Chief Operating 1998 225,000 140,000 0 75,000(6) 28,077
Officer of CBCC 1997 190,000 140,000 0 0 23,021
Parry D. Katsafanas............ 1999 200,000 40,000 0 0 14,669
President and Chief Operating 1998 200,000 0 0 27,000(6) 16,639
Officer of Leavitt 1997 155,000 36,503 0 0 14,298
Michael T. Segraves............ 1999 175,250 80,000 0 0 19,700
Chief Financial Officer 1998 168,750 80,000 0 30,000(6) 19,150
1997 153,750 80,000 0 0 14,753
</TABLE>
- ---------------
(1) No restricted stock awards were granted to any named executive officer
during the period reported.
(2) While the named executive officers may have received certain perquisites in
1999, such perquisites did not exceed the lesser of $50,000 or 10% of such
executive's salary and bonus.
(3) Number of Securities underlying options reported for 1998 and 1997 has been
adjusted to reflect the three-for-two split of the Company's outstanding
Common Stock effective June 6, 1998 (the "Stock Split").
(4) The amounts disclosed in this column for 1999 include:
(i) premiums and imputed income paid by the Company with respect to term
life insurance for the benefit of Messrs. Alonzo, Grossett, Katsafanas
and Segraves in the amounts of $13,143, $4,392, $1,169 and $2,125,
respectively;
(ii) contributions by the Company to the Company's 401(k) Profit Sharing
Plan in the amount of $8,000 for the benefit of each of Messrs.
Alonzo, Grossett, Katsafanas and Segraves;
(iii) contributions by the Company to the Company's 401(k) Savings and
Investment Plan for the benefit of Messrs. Alonzo, Grossett,
Katsafanas and Segraves in the amounts of $4,800, $4,800, $3,500 and
$4,800, respectively; and
(iv) contributions by the Company to the Company's supplemental retirement
plans for the benefit of Messrs. Alonzo, Grossett, Katsafanas and
Segraves in the amounts of $25,500, $9,500, $2,000 and $4,775,
respectively.
(5) Mr. Alonzo was awarded a $250,000 cash bonus in 2000 for his services in
1999. Pursuant to the Company's 1997 Executive Deferred Compensation Stock
Option Plan (the "Executive Stock Option Plan"), Mr. Alonzo elected to
forego 100% of such cash bonus and received, in lieu thereof, options to
purchase an aggregate of 59,392 shares of Common Stock. See "Option/SAR
Grants in Last Fiscal Year" table and note (1) thereto.
(6) Options were awarded pursuant to the 1994 Incentive Plan, vest in 20%
increments on each anniversary of the date of grant, and have an exercise
price equal to the market price of the Common Stock on the date of grant.
(7) Mr. Alonzo was awarded a $450,000 cash bonus in 1998 for his service in
1997. Pursuant to the Executive Stock Option Plan, Mr. Alonzo had elected to
forego 100% of such cash bonus and received, in lieu thereof, options to
purchase an aggregate of 55,762 shares of Common Stock, as reported in the
Company's 1998 Proxy Statement. For a discussion of the Executive Stock
Option Plan, see "Option/SAR Grants in Last Fiscal Year" table and note (1)
thereto.
(8) Mr. Grossett retired from CBCC effective January 4, 2000.
7
<PAGE> 10
The following table sets forth options granted during 1999 to the executive
officers named in the Summary Compensation Table ("Named Executive Officers").
No stock appreciation rights were granted during 1999.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% OF TOTAL MARKET
OPTIONS/SARS PRICE ON GRANT DATE
GRANTED TO EXERCISE OR DATE OF PRESENT
OPTIONS/SARS EMPLOYEES IN BASE PRICE GRANT EXPIRATION VALUE
NAME GRANTED(#) FISCAL YEAR(2) ($/SHARE) $/SHARE(3) DATE ($)(4)
- ---- ------------ -------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Mr. Alonzo............. 14,569(1) 9.8% 4.29 8.63 02/09/10 69,348
15,025(1) 10.1% 4.16 8.63 02/09/10 85,342
14,173(1) 9.5% 4.41 8.63 02/09/10 80,644
15,625(1) 10.5% 4.00 8.63 02/09/10 86,875
</TABLE>
- ---------------
(1) Options were granted pursuant to the Company's 1997 Executive Deferred
Compensation Stock Option Plan (the "Executive Stock Option Plan"). Under
the Executive Stock Option Plan, each eligible employee may elect to forego
all or a portion (in 25% increments) of such employee's annual cash bonus
for a calendar year (which bonus will be determined after that calendar year
end) and receive, in lieu thereof, stock options equal to the value of the
forgone cash bonus. Stock options granted in lieu of an employee's foregone
cash bonus are granted as of the date the annual cash bonus for the year to
which an election relates is determined. The stock options related to an
annual bonus amount forgone are granted in four series, with the number of
stock options granted with respect to each series determined by dividing 25%
of the cash bonus amount by 50% of the average closing price of the Common
Stock for the last five trading days of each calendar quarter (in each case,
the "Average Quarter-End Price") in the calendar year to which the bonus
relates, with the stock options calculated for each calendar quarter
representing one series. Stock options granted in each series have an
exercise price equal to 50% of the Average Quarter-End Price for the
calendar quarter to which such series relates. Stock options granted under
the Executive Stock Option Plan vest fully immediately upon grant. In 1999
Mr. Alonzo elected to forego 100% of his cash bonus for 1999. Mr. Alonzo's
cash bonus for 1999 of $250,000 was determined on February 9, 2000, and,
therefore, the stock options reported were granted on February 9, 2000, and
relate to Mr. Alonzo's cash bonus for 1999.
(2) Calculated giving effect to Mr. Alonzo's stock option grants reported for
fiscal year 1999. See Note (1) above.
(3) The grant date market price reported represents the closing market price of
the Common Stock on February 9, 2000, the actual date of grant. See Note (1)
above.
(4) The grant date present value was determined by using a modified
Black-Scholes pricing model with the following assumptions and adjustment:
(i) stock price volatility of 32.57% for Mr. Alonzo's options, calculated
using daily stock prices of the Company for the period of years and prior to
the grant date equal to the expected term of the option as specified in
clause (iv) below; (ii) risk-free rates of return from 5.37% to 6.58%,
representing the interest rates on 6 year U.S. Treasury securities on the
date of grant; (iii) no dividends paid on the Company's Common Stock
consistent with current Company practice; and (iv) an assumed exercise date
of 6 years from the date of grant. The Company's use of this model should
not be construed as an endorsement of its accuracy. Whether the model's
assumptions will prove to be accurate cannot be known as of the date of this
Proxy Statement. The ultimate value of the options, if any, will depend on
the future value of the Company's Common Stock, which cannot be forecast
with reasonable accuracy, and the optionees' investment decisions.
8
<PAGE> 11
The following table sets forth information with respect to options to
purchase the Company's Common Stock held by the Named Executive Officers during
and as of the end of fiscal year 1999. No options or stock appreciation rights
were exercised by such persons during 1999.
AGGREGATED OPTION EXERCISES IN 1999
AND 1999 YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE OPTIONS AT FY-END(#) AT FY-END($)
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(2)
- ---- ----------- ----------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Mr. Alonzo................... 0 N/A 460,762(3)/45,000 570,954(3)/0
Mr. Grossett................. 0 N/A 60,000/90,000 0/0
Mr. Katsafanas............... 0 N/A 16,200/28,800 0/0
Mr. Segraves................. 0 N/A 24,000/36,000 0/0
</TABLE>
- ---------------
(1) Stock option information set forth in the table has been adjusted to reflect
the three-for-two split of the Company's outstanding Common Stock effective
June 6, 1998.
(2) Based on the closing price ($8.125) of the Common Stock on December 31,
1999, as reported in the New York Stock Exchange composite transactions
listing.
(3) Includes options to purchase 55,762 shares of Common Stock granted in lieu
of Mr. Alonzo's $450,000 cash bonus for 1997, which options had a value of
$25,329 as of December 31, 1999. See note (7) to "Summary Compensation
Table." Excludes options to purchase 59,392 shares granted February 9, 2000,
as disclosed in the "Option/SAR Grants in Last Fiscal Year" table and note
(1) thereto.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Employment Agreements
Martin V. Alonzo. The Company and Mr. Alonzo are parties to an employment
agreement dated November 10, 1994, which is effective through December 31, 2000,
and automatically will be extended on a year-to-year basis unless terminated by
the Company or Mr. Alonzo on 30 days' notice before the start of the following
year. The employment agreement provided for an original annual salary of
$300,000, which was increased to $350,000 by the Compensation Committee
effective January 1, 1998. Mr. Alonzo's annual salary is subject to future
annual increases at the discretion of the Board of Directors. Mr. Alonzo also is
entitled to annual cash incentives at the discretion of the Board of Directors.
Under the employment agreement, if Mr. Alonzo's employment is terminated in
certain circumstances, including a termination by the Company in violation of
the agreement or a termination by Mr. Alonzo for good reason (as defined in the
employment agreement), the Company will be required to pay Mr. Alonzo a
severance payment in an amount equal to one and one-half times the sum of Mr.
Alonzo's then current base salary and the average of Mr. Alonzo's bonus for the
three previous years. If Mr. Alonzo's employment is terminated by the Company in
violation of the agreement or by Mr. Alonzo for good reason following a "change
in control" of the Company, Mr. Alonzo also will be entitled (in addition to any
other severance payments he may be owed) to receive a lump sum payment of cash
in an amount equal to 2.99 times Mr. Alonzo's annualized includable compensation
(determined within the meaning of the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code")), and to continue participation for four years in
all employee benefit plans in which he was entitled to participate immediately
before termination of his employment (or in substantially similar plans). A
"change in control" of the Company has the same meaning in Mr. Alonzo's
employment agreement as discussed below under "Other Change-in-Control
Arrangements -- Stock Option Plans." The Company also has agreed to reimburse
Mr. Alonzo for reasonable legal fees and costs that Mr. Alonzo incurs in
connection with the resolution in Mr. Alonzo's favor of any dispute or
controversy under his employment agreement.
Duane R. Grossett. CBCC entered into an employment agreement with Duane R.
Grossett upon the commencement of his employment as CBCC's President and Chief
Operating Officer in October 1996. Mr. Grossett's employment agreement was
effective through January 4, 2000, the effective date of Mr. Grossett's
retirement.
9
<PAGE> 12
Other Change-in-Control Arrangements
Stock Option Plans
The 1994 Incentive Plan provides for the granting of incentive awards to
the Company's officers and employees in the form of stock options, stock
appreciation rights and restricted stock. Pursuant to the 1994 Incentive Plan,
upon a "change in control" of the Company, (1) in the discretion of the
Compensation Committee each holder of a stock option will be granted a
corresponding stock appreciation right, (2) all outstanding stock appreciation
rights and stock options will become immediately and fully vested and
exercisable in full, and (3) the restriction period on any restricted stock
award will be accelerated and the restrictions will expire.
The Executive Stock Option Plan permits eligible employees to receive, in
lieu of all or a portion of their annual cash bonus, immediately exercisable
stock options with a value calculated based on the value of the bonus amount
deferred. See "Management Compensation -- Compensation of Executive
Officers -- Option/ SAR Grants in Last Fiscal Year" table above and note (1)
thereto. The Executive Stock Option Plan provides that, upon a "change in
control" of the Company, in the discretion of the Compensation Committee each
holder of a stock option may be granted a corresponding stock appreciation
right.
In general, under each of the 1994 Incentive Plan, the Executive Stock
Option Plan and the Director Stock Option Plan (see "Management
Compensation -- Board Compensation -- Stock Option Awards" above), a "change in
control" of the Company occurs in any of the following four situations: (1) a
person other than (a) the Company, certain companies affiliated with the
Company, benefit plans of the Company or of certain companies affiliated with
the Company or of a company with the same ownership as the Company, (b) CVC or
(c) certain affiliates of CVC, acquires 50% or more of the voting power of the
Company's outstanding voting securities; (2) a person described in clause (1)
announces a tender offer for 50% or more of the Company's outstanding voting
securities and the Board of Directors approves or does not oppose the tender
offer, provided an event described in clause (1), (3) or (4) occurs within one
year of such tender offer; (3) the Company merges or consolidates with another
corporation or partnership, or the Company's stockholders approve such a merger
or consolidation, other than mergers or consolidations in which the Company's
voting securities are converted into securities having the majority of voting
power in the surviving company; or (4) the Company liquidates or sells all or
substantially all its assets, or the Company's stockholders approve such a
liquidation or sale, except sales to corporations having substantially the same
ownership as the Company.
Change of Control Agreement
The Company and Michael T. Segraves are parties to a change of control
agreement which is effective through December 31, 2000, and automatically will
be extended on a year-to-year basis unless terminated by the Company or Mr.
Segraves on 30 days' notice before the start of the following year. If Mr.
Segraves' employment with CBCC is terminated by the Company without cause (as
defined in Mr. Segraves' change of control agreement) or by Mr. Segraves for
good reason (as defined in Mr. Segraves' change of control agreement) following
a "change in control," the Company will be required to pay to Mr. Segraves a
lump sum severance payment in an amount equal to the sum of (1) Mr. Segraves'
then current base salary (or, if greater, Mr. Segraves' base salary at the time
of the change in control or, if applicable, the occurrence of the event giving
rise to Mr. Segraves' right to terminate his employment for good reason) and (2)
Mr. Segraves' prior year's bonus, and to maintain for one year health insurance
for the benefit of Mr. Segraves and his family as in effect prior to the
termination of his employment. For purposes of Mr. Segraves' change in control
agreement, a "change in control" occurs in any of the situations that
constitutes a change in control as defined above under "Other Change-in-Control
Arrangements -- Stock Option Plans" or in the event (1) CBCC liquidates or sells
all or substantially all its assets or the Company approves such a liquidation
or sale, except sales to corporations owned (directly or indirectly) by the
Company's stockholders in the same proportions as their ownership of the
Company's stock or (2) the Company ceases to own at least a majority of the
voting securities of CBCC, other than pursuant to a transaction after which all
of the voting securities of CBCC (or a company into which it is merged) which
are not owned by the Company are owned by the Company's
10
<PAGE> 13
stockholders in the same proportion as their ownership of the Company. The
Company also has agreed to reimburse Mr. Segraves for reasonable legal fees and
costs that Mr. Segraves incurs in connection with the resolution in Mr.
Segraves' favor of any dispute or controversy under his change of control
agreement.
INDEMNITY AGREEMENTS
The Company has entered into indemnity agreements with each of its
directors and executive officers. Those agreements require the Company, to the
extent permitted under applicable law, to indemnify such persons against all
expenses, judgments, fines and penalties incurred in connection with the defense
or settlement of any actions brought against them by reason of the fact that
they are or were directors or executive officers of the Company or assumed
certain responsibilities at the direction of the Company. Each indemnification
agreement also provides that, upon a potential change in control of the Company
and if the indemnified director or executive officer so requests, the Company
will create a trust for the benefit of the indemnified director or executive
officer in an amount sufficient to satisfy payment of any liabilities and suits
against which the Company has indemnified the director or executive officer. The
Company expects to enter into similar agreements with persons selected to be
directors and executive officers in the future.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
John R. Kennedy, Donald J. Donahue (who resigned from the Board on January
1, 2000) and Thomas F. McWilliams served as members of the Compensation
Committee during 1999. Raymond E. Cartledge succeeded Mr. Donahue as a member of
the Compensation Committee effective February 9, 2000. None of such persons are
officers or employees or former officers or employees of the Company, except for
Mr. McWilliams who served as Vice President of the Company from July 1993 until
September 1994. During the period that Mr. McWilliams served as Vice President
of the Company, he did not receive any compensation from the Company for his
service as an officer.
None of the executive officers of the Company served as a member of the
compensation committee or board of directors of any other company during 1999.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
STRATEGY AND OBJECTIVES
The Company's executive compensation program is administered by the
Compensation Committee, which is comprised entirely of Non-Employee Directors.
The Compensation Committee determines any annual increase in the base salary of
the CEO, the annual bonus to be paid to the CEO, and, based on recommendations
of the CEO, the compensation to be provided to the other executive officers. The
Compensation Committee also administers the 1994 Incentive Plan pursuant to
which equity incentives are provided to employees at the discretion of the
Compensation Committee and determines individuals eligible to participate in the
1997 Executive Deferred Compensation Stock Option Plan described below.
In determining compensation levels and developing compensation programs for
the Company's executive officers, the Compensation Committee analyzes the
relationship between base salary, annual cash incentives, equity incentives and
benefits. The underlying objectives of the Company's compensation strategy
include the following:
- Attract and retain superior executive talent, and motivate those
executives to achieve optimum short-term and long-term corporate
operating results;
- Align the interests of executive officers with the creation of
stockholder value and ensure long-term growth orientation through
equity-based plans; and
- Provide a compensation package that recognizes individual contributions
as well as overall business results.
11
<PAGE> 14
COMPONENTS OF COMPENSATION
The key elements of the Company's executive compensation program are base
salary, annual cash bonuses and equity incentive compensation. These elements
are addressed separately.
The Compensation Committee does not exclusively use quantitative methods or
mathematical formulas in setting any element of compensation. In determining
each component of compensation, the Compensation Committee considers all
elements of an executive's total compensation package, recommendations of the
CEO (as discussed below) and other objective and subjective criteria the
Compensation Committee deems appropriate with respect to each executive officer.
Base Salaries. The base salary of each of the executive officers, other
than the CEO, is reviewed annually, with adjustments made based primarily on the
recommendations of the CEO. In reviewing base salaries the CEO considers various
factors, including the performance of the executive officer with respect to
specific objectives and increases in responsibilities. The specific objectives
for each executive officer are established by such officer after consultation
with the CEO, and vary for each executive position and for each year. In
addition, in the first quarter of each year, the Board of Directors approves the
Company's business plan developed by management for the current year. The
business plan establishes objectives for the current year with respect to areas
such as marketing, operations, capital expenditures and financial performance.
In reviewing annual base salaries, the CEO and the Compensation Committee also
consider each executive officer's responsibilities related to achieving the
objectives in the business plan and, in an effort to provide competitive
compensation, from time to time reviews salaries of similarly situated employees
in comparator companies.
The financial performance of the Company, primarily operating income,
EBITDA (earnings before interest, taxes, depreciation and amortization) and net
income, also is considered in determining annual adjustments to base salaries,
but more emphasis is placed on divisional financial performance in determining
annual cash bonuses rather than base salaries. When the CEO completes his
reviews, he makes a recommendation to the Compensation Committee for its review
and approval.
Annual Cash Bonuses. Annual cash bonuses to executive officers, other than
the CEO, are determined by the Compensation Committee after considering the
recommendations of the CEO. The CEO in developing his bonus recommendations for
the other executive officers, as well as the Compensation Committee in
evaluating the CEO's recommendations, consider primarily the financial
performance of the Company as described above, the performance of the division
at which an executive officer is employed and whether such division attained or
exceeded the objectives set forth in the Company's annual business plan, and the
performance of the Company and the executive's division in relation to industry
conditions and performance of comparable companies. The CEO and the Compensation
Committee also consider individual performance which contributed to the
Company's financial performance or otherwise assisted the Company's efforts to
achieve the objectives set forth in its business plan. Failure of the Company or
an executive's division to attain or exceed the objectives in the business plan
does not, however, necessarily prevent any cash bonus from being paid, although
it may affect the size of cash bonuses paid. No specific weighting was assigned
to any of the factors considered in determining annual adjustments to base
salaries and cash bonuses for the executive officers.
Certain executive officers may elect to defer all or a portion of their
annual cash bonus and receive, in lieu thereof, stock options under the
Company's 1997 Executive Deferred Compensation Stock Option Plan as described
below under "Equity Incentive Compensation."
Equity Incentive Compensation. The Compensation Committee endorses the view
that equity ownership by management is beneficial in aligning management's and
stockholders' interests in the enhancement of stockholder value. The
equity-based compensation plans described below facilitate equity ownership by
management.
1994 Incentive Plan. Through the 1994 Incentive Plan, the Company has
utilized stock options (and has the ability to utilize stock appreciation rights
and restricted stock) as components of executive compensation to ensure external
competitiveness of the total executive compensation package, motivate executives
to
12
<PAGE> 15
improve long-term stock performance, encourage equity ownership of the Company
by executive officers and align executive interests with the enhancement of
stockholder value.
In granting stock options or other stock-based compensation under the 1994
Incentive Plan, the Compensation Committee considers the total number of shares
available for future grants under the 1994 Incentive Plan, prior grants
outstanding and estimated requirements for future grants. Individual awards,
with the exception of grants to the CEO, generally are proposed to the
Compensation Committee by the CEO. The Compensation Committee then discusses
with the CEO his proposals and recommendations and determines individual awards,
taking into consideration the CEO's recommendations, each participant's position
and scope of responsibilities, the strategic and operational goals of the
Company, the expected future performance of each participant to achieve these
goals and unvested options, if any, held by each participant. Awards granted to
the CEO are determined separately by the Compensation Committee based on the
same criteria as grants to other employees, as well as the Compensation
Committee's perception of the CEO's expected future contributions to the
Company's achievement of its long-term performance goals. The Compensation
Committee historically has elected to grant more options in one lump sum, rather
than grant a smaller number on an annual basis, to create an immediately
meaningful incentive to enhance stockholder value in the Company at the time of
grant.
The exercise price for awards granted under the 1994 Incentive Plan, the
term of such awards, the vesting of such awards and the other terms and
conditions of such awards are determined by the Compensation Committee, in its
discretion. All stock options previously granted to executive officers under the
1994 Incentive Plan have an exercise price equal to the market price on the date
of grant and vest in 20% increments over five years from the date of grant.
Stock options granted under the 1994 Incentive Plan must expire not more than
ten years from their date of grant.
Executive Stock Option Plan. In 1997, the stockholders of the Company
adopted the 1997 Executive Deferred Compensation Stock Option Plan (the
"Executive Stock Option Plan"), which provides for the granting of stock options
to eligible executive employees of the Company and its subsidiaries, at the
employee's election, in lieu of all or a portion of such employee's annual cash
bonus. Under the Executive Stock Option Plan, grants of stock options are made
only to those executive officers and key management personnel of the Company and
its subsidiaries as the Compensation Committee from time to time may designate.
The Compensation Committee designated Martin V. Alonzo (Chairman of the Board,
President and CEO of the Company), Duane R. Grossett (President and Chief
Operating Officer of CBCC) and Parry D. Katsafanas (President and Chief
Operating officer of Leavitt) as eligible to participate in the Executive Stock
Option Plan for 1999. Only Mr. Alonzo elected to participate in the Executive
Stock Option Plan for 1999.
COMPENSATION OF THE CEO
Mr. Alonzo's employment agreement provides that Mr. Alonzo's base salary
will be reviewed annually and may be increased at the discretion of the
Compensation Committee. For 1998, the Compensation Committee increased Mr.
Alonzo's base salary from $300,000 to $350,000 based on the Company's 1997
financial performance and operating accomplishments and to increase Mr. Alonzo's
base salary to a level more competitive with the median CEO salaries for
comparator companies as reflected in a report provided by an independent
executive compensation consultant engaged by the Committee in 1998 as described
in the Company's 1999 Proxy Statement. The Compensation Committee anticipates
that any future increase in the CEO's base salary will be based on the
Compensation Committee's assessment of the CEO's performance and its
expectations as to his future contributions to the Company and salaries provided
by comparator companies.
In 2000, the Company also awarded to Mr. Alonzo a cash bonus of $250,000
for 1999 services. In determining Mr. Alonzo's cash bonus, the Compensation
Committee considered the Company's financial and operating performance in 1999,
as well as the Company's efforts in attaining strategic objectives. Under the
terms of his employment agreement, Mr. Alonzo will continue to be eligible for
annual cash bonuses at the discretion of the Compensation Committee. The
Compensation Committee anticipates that future cash bonuses paid to the CEO will
be based primarily on the financial performance of the Company, as well as the
13
<PAGE> 16
individual performance of Mr. Alonzo in supporting the Company's financial
performance and attainment of strategic Company objectives. As described in note
(5) of the "Summary Compensation Table" and note (1) of the "Option/SAR Grants
in Last Fiscal Year" table, Mr. Alonzo elected to forego 100% of his 1999 cash
bonus under the Executive Stock Option Plan and received, in lieu thereof, stock
options to purchase a total of 59,392 shares of Common Stock.
POLICY WITH RESPECT TO $1 MILLION DEDUCTION LIMIT
The Company's executive compensation strategy is to be cost and tax
effective. Therefore, the Company's policy is to avail itself of all proper
deductions under the Internal Revenue Code, where practical, while maintaining
the flexibility to approve compensation arrangements which it deems to be in the
best interests of the Company and its stockholders, but which may not always
qualify for full tax deductibility. Section 162(m) of the Internal Revenue Code
generally imposes a $1 million per person annual limit on the amount the Company
may deduct as compensation expense for its CEO and its four other highest paid
officers. Although the total compensation of the executive officers did not
exceed this deduction limitation in 1999, certain factors involved in the
Company's compensation program may impact on whether the deduction limitation is
exceeded in the future. The 1994 Incentive Plan is intended to permit
compensation associated with stock options and stock appreciation rights to be
excluded from the deduction limitations, but certain payments under the 1994
Incentive Plan, including grants of restricted stock, may be included as
compensation for purposes of calculating the deduction limitation, potentially
impacting the deduction limitation. In addition, under current Internal Revenue
Service regulations, income attributable to options (and stock appreciation
rights) granted under the Executive Stock Option Plan may not qualify for an
exemption from the $1 million annual limit on deductible compensation imposed by
Section 162(m) of the Internal Revenue Code. To the extent the total non-exempt
compensation paid (or deemed paid) by the Company to such an officer for a year
exceeds $1 million, such excess is not deductible by the Company if the officer
is employed by the Company as of the end of that year.
As the Company moves forward in its efforts to create stockholder value in
the years ahead, the Compensation Committee will continue to review, monitor and
evaluate the Company's program for executive compensation to assure that it is
internally effective in support of the Company's strategy, competitive in the
marketplace to attract, retain and motivate the talent needed to achieve the
Company's financial objectives, and appropriately rewards the creation of value
on behalf of the Company's stockholders.
This report has been provided by the Compensation Committee, which consists
of the following members:
John R. Kennedy, Chairman
Raymond E. Cartledge
Thomas F. McWilliams
14
<PAGE> 17
PERFORMANCE GRAPH
Set forth below is a graph comparing the total stockholder return on the
Company's Common Stock, the Standard & Poor's 500 Composite Index, the Russell
2000 Index, the Dow Jones Industrials Index, and a group of the Company's
current peers. The peer group consists of Brush Wellman, Inc., Mueller
Industries, Inc., Olin Corporation, Wolverine Tube, Inc. and Maverick Tube, Inc.
The graph illustrates total stockholder return for each of the five fiscal years
ended December 31, 1999, and at February 29, 2000, of $100 invested at December
31, 1994, and assumes reinvestment of all dividends. The return of each company
in the peer group has been weighted according to its respective market
capitalization and information regarding the Company's share prices has been
adjusted to give effect to the three-for-two stock split effective June 6, 1998.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 2/29/00
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Chase Industries 100 131.17 206.48 264.92 162.66 126.62 139.29
Peer Group 100 148.16 159.22 223.09 138.05 196.80 164.13
S&P 500 100 137.55 169.11 225.52 289.96 350.96 327.03
Russell 2000 100 128.44 149.63 183.09 178.44 216.62 248.32
Dow Jones Industrials 100 136.94 176.53 220.50 260.55 331.57 292.09
</TABLE>
15
<PAGE> 18
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
To the Company's knowledge, set forth below is certain information, as of
the Record Date, regarding ownership of Common Stock by (i) each person who
beneficially owns 5% or more of the Common Stock, (ii) each director and
executive officer of the Company and (iii) all directors and executive officers
of the Company as a group. To the Company's knowledge, each person holds sole
voting and investment power over the shares shown unless otherwise indicated.
All of the stock information set forth in the table below and related notes has
been adjusted to reflect the three-for-two split of the Company's outstanding
Common Stock effective June 6, 1998 (the "Stock Split").
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF PERCENT OF TOTAL COMMON
NAME OWNERSHIP CLASS(1) STOCK(2)
- ---- ---------- ---------- ------------
<S> <C> <C> <C>
Citigroup Inc......................................... 7,290,346(3) 47.9%(4) 47.9%
399 Park Avenue
New York, New York 10043
Martin V. Alonzo...................................... 1,608,498(5) 16.7% 10.2%
c/o Chase Industries Inc.
14212 County Road M-50
Montpelier, Ohio 43543
FMR Corp.............................................. 908,200(6) 9.9% 6.0%
82 Devonshire Street
Boston, Massachusetts 02109
Dimensional Fund Advisors Inc......................... 608,750(7) 6.7% 4.0%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Thomas F. McWilliams.................................. 17,938(8) * *
Michael T. Segraves................................... 30,750(9) * *
Parry D. Katsafanas................................... 21,600(10) * *
John R. Kennedy....................................... 18,368(11) * *
Raymond E. Cartledge.................................. 16,463(12) * *
Charles E. Corpening.................................. 16,852(13) * *
William R. Toller..................................... 8,255(14) * *
John H. Steadman...................................... 1,000(15) * *
Robert D. Kennedy..................................... 394(16) * *
All directors and executive officers as a group (10
persons)............................................ 1,740,168(17) 17.9% 11.0%
</TABLE>
- ---------------
* Less than one percent
(1) Based on 9,084,877 shares of Common Stock outstanding as of the Record
Date.
(2) Gives effect to 6,150,118 shares of Nonvoting Common Stock outstanding as
of the Record Date. See Note (3) below.
(3) Amount reported includes 6,150,118 shares of Nonvoting Common Stock held of
record by Citicorp Venture Capital Ltd. ("CVC"). Each share of Nonvoting
Common Stock is convertible into one share of Common Stock at the option of
the holder thereof. See "Quorum and Voting" above. Based on information set
forth in Amendment No. 3 to Schedule 13G dated February 15, 2000, filed
with the SEC by Citigroup, Inc., Citigroup Holdings Company, Citicorp,
Citibank, N.A. and CVC (the "Citigroup Schedule 13G"). The Citigroup
Schedule 13G reflects that each of Citigroup Holdings Company, Citicorp,
Citibank, N.A. and CVC has shared voting power and shared dispositive power
for 1,139,827 shares of Common Stock and that Citigroup Inc. has shared
voting power and shared dispositive power for 1,140,227 shares of Common
Stock, in each case excluding the 6,150,118 shares of Nonvoting Common
Stock held by CVC.
(4) Gives effect to 6,150,118 shares of Nonvoting Common Stock held by CVC,
which are not included for purposes of calculating the percentage ownership
of any other stockholder. See Note (2) above. Without giving effect to the
outstanding Nonvoting Common Stock held by CVC such percentage would be
12.6%.
(5) Excludes 37,500 shares of Common Stock held by Mr. Alonzo's wife, as to
which Mr. Alonzo disclaims beneficial ownership. Includes 405,000 shares
subject to stock options granted under the 1994 Incentive Plan and 115,154
shares subject to such options granted under the Executive Stock Option
Plan, all of which currently are exercisable.
16
<PAGE> 19
(6) Based on information set forth in Amendment No. 2 to Schedule 13G dated
February 14, 2000 (the "Fidelity Schedule 13G"), filed with the SEC by FMR
Corp., Edward C. Johnson 3d, and Abigail P. Johnson. The Fidelity Schedule
13G reflects that (i) Fidelity Management & Research Company ("Fidelity"),
a wholly owned subsidiary of FMR Corp. ("FMR"), is the beneficial owner of
908,200 shares of Common Stock as a result of acting as investment advisor
to the Fidelity Low-Priced Stock Fund (the "LP Fund"), an investment
company registered under Section 8 of the Investment Company Act of 1940,
(ii) the LP Fund holds all 908,200 shares of the Common Stock reported,
(iii) Edward C. Johnson 3d, FMR (through its control of Fidelity), and the
LP Fund each has sole power to dispose of the 908,200 shares owned by the
LP Fund, and (iv) sole voting power of the shares reported resides with the
LP Fund's board of trustees. Fidelity carries out the voting of the shares
under written guidelines established by the LP Fund's boards of trustees.
(7) Based on information set forth in Schedule 13G dated February 11, 2000 (the
"DMF Schedule 13G"), filed with the SEC by Dimensional Fund Advisors Inc.
("DMF"). The DMF Schedule 13G reflects that DMF, an investment advisor
registered under the Investment Advisors Act of 1940, serves as investment
manager for certain other investment vehicles, including commingled group
trusts (collectively, the "Portfolios") and, in its role as investment
advisor and investment manager, possesses both voting and investment power
over 608,750 shares of Common Stock, all of which are held by the
Portfolios and beneficial ownership of which is disclaimed by DMF.
(8) Includes 10,438 shares subject to stock options granted under the Director
Stock Option Plan and 7,500 shares subject to stock options granted under
the 1994 Incentive Plan, all of which currently are exercisable. Excludes
223,045 shares of Common Stock held by a family trust in which shares Mr.
McWilliams has an indirect pecuniary interest but not a beneficial
ownership interest under Rule 13d-3 of the Securities Act of 1933.
(9) Includes 30,000 shares subject to stock options granted under the 1994
Incentive Plan that currently are exercisable.
(10) Consists solely of stock options granted under the 1994 Incentive Plan that
currently are exercisable.
(11) Includes 9,418 shares subject to stock options granted under the Director
Stock Option Plan and 7,500 shares subject to stock options granted under
the 1994 Incentive Plan, all of which currently are exercisable.
(12) Includes 5,963 shares subject to stock options granted under the Director
Stock Option Plan that currently are exercisable and 7,500 shares subject
to stock options granted under the 1994 Incentive Plan that are exercisable
within 60 days of the Record Date.
(13) Consists solely of 9,352 shares subject to stock options granted under the
Director Stock Option Plan that currently are exercisable and 7,500 shares
subject to stock options granted under the 1994 Incentive Plan that are
exercisable within 60 days of the Record Date.
(14) Consists solely of 3,755 shares subject to stock options granted under the
Director Stock Option Plan and 4,500 shares subject to stock options
granted under the 1994 Incentive Plan, all of which currently are
exercisable.
(15) Consists solely of 1,000 shares owned in joint tenancy with Mr. Steadman's
wife.
(16) Consists solely of stock options granted under the Director Stock Option
Plan that currently are exercisable.
(17) Includes 645,574 shares subject to stock options that currently are
exercisable or that are exercisable within 60 days of the Record Date.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company and each of CVC and Mr. Alonzo are parties to a Registration
Rights Agreement (the "Registration Rights Agreement") pursuant to which each of
CVC and Mr. Alonzo are entitled to require the Company to file a registration
statement under the Securities Act of 1933 ("Securities Act") covering the sale
of some or all of the shares of Common Stock held by CVC and Mr. Alonzo, subject
to certain conditions. Pursuant to the Registration Rights Agreement, the
Company may be required to file on behalf of each of CVC and Mr. Alonzo an
unlimited number of registration statements on Form S-2 or Form S-3 under the
Securities Act, when available. At any time that the Company is not eligible to
use a Form S-2 or Form S-3 registration statement, CVC and Mr. Alonzo also may
require the Company to file a registration statement on their behalf on an
appropriate registration form, provided that the Company will not be required to
effect more than two such registrations on behalf of CVC or one such
registration on behalf of Mr. Alonzo during the term of the Registration Rights
Agreement. All such demand registrations require that the registration statement
relate to a minimum of, in the case of CVC, 5% of the outstanding Common Stock
or, in the case of Mr. Alonzo, 2% of the outstanding Common Stock. In addition,
in the event the Company proposes to register any of its shares of Common Stock
under the Securities Act, CVC and Mr. Alonzo will be entitled to require the
Company to include all or a portion of their shares in such registration,
subject to certain conditions. Each demand registration pursuant to the
Registration Rights Agreement must be at least 180 days apart.
Generally, all fees, costs and expenses of any registration under the
Registration Rights Agreement will be borne by the Company, provided that CVC
and Mr. Alonzo will be required to bear their respective pro rata share of
underwriting discounts and commissions. CVC and Mr. Alonzo may assign their
respective rights
17
<PAGE> 20
under the Registration Rights Agreement to persons to whom they transfer or
otherwise assign shares of the Common Stock that they hold, provided that the
shares transferred or assigned to that person represent five percent or more of
the outstanding Common Stock on a fully-diluted basis at the time of transfer.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on a review of the copies of Forms 3, 4, and 5 required to be
filed with the Securities and Exchange Commission pursuant to Section 16(a) of
the Exchange Act, and written representations from the Company's executive
officers and directors, the Company believes that all persons who were subject
to Section 16(a) of the Exchange Act during 1999 complied with the filing
requirements thereof.
PROPOSAL 2.
RATIFICATION OF AUDITORS
The Board of Directors has selected PricewaterhouseCoopers LLP as the
independent auditors of the Company for the current fiscal year. Coopers &
Lybrand L.L.P., predecessor company of PricewaterhouseCoopers LLP, and
PricewaterhouseCoopers LLP have audited the Company's financial statements since
the Company was formed in 1990. The Company expects that representatives of
PricewaterhouseCoopers LLP will be present at the Annual Meeting to respond to
appropriate questions and will have an opportunity to make a statement if they
desire to do so.
Stockholder ratification of the selection of PricewaterhouseCoopers LLP as
the independent auditors of the Company is not required by the Company's by-laws
or otherwise. However, the Board of Directors is submitting the selection of
PricewaterhouseCoopers LLP to the stockholders for ratification as a matter of
good corporate practice. If the stockholders fail to ratify the selection, the
Audit Committee and the Board of Directors will reconsider whether or not to
retain the firm. Even if the selection is ratified, the Audit Committee and the
Board of Directors in their discretion may direct the appointment of a different
independent accounting firm at any time during the year if they determine that a
change would be in the best interest of the Company and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
OF THE COMPANY VOTE FOR THE RATIFICATION OF THE SELECTION OF
PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR 2000.
OTHER BUSINESS
Management knows of no other matters that will come before the Annual
Meeting. However, if other matters do come before the Annual Meeting, as
permitted by Rule 14a-4(c) of the Exchange Act the Proxy holders will vote in
accordance with their best judgment.
18
<PAGE> 21
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
To qualify for inclusion in the proxy statement and form of proxy relating
to the 2001 annual meeting of stockholders, pursuant to Rule 14a-8 of the
Exchange Act a proposal intended by a stockholder for presentation at that
meeting must be received by the Company at its principal executive offices on or
before December 13, 2000. Pursuant to Rule 14a-4(c) of the Exchange Act, the
Board of Directors may exercise discretionary voting authority under proxies
solicited by it with respect to any matter properly presented by a stockholder
at the Company's 2001 annual meeting that the stockholder does not seek to have
included in the Company's proxy statement pursuant to Rule 14a-8 of the Exchange
Act if (except as described in the following sentence) the proxy statement
discloses the nature of the matter and how the Board of Directors intends to
exercise its discretion to vote on such matter, unless the Company is notified
of the proposal on or prior to March 1, 2001, and the stockholder satisfies the
other requirements of Rule 14a-4(c)(2). If the Company first receives notice of
such matter after March 1, 2001, the Board of Directors may exercise
discretionary voting authority with respect to any such matter, without
including any discussion of the matter in the proxy statement for the 2001
annual meeting. The Company reserves the right to reject, rule out of order or
take other appropriate action with respect to any proposal that does not comply
with the requirements described above and other applicable requirements.
GENERAL
Solicitation of Proxies may be made by mail, personal interview, telephone,
or telegraph by officers, directors, and regular employees of the Company. The
Company also may request banking institutions, brokerage firms, custodians,
nominees, and fiduciaries to forward solicitation material to the beneficial
owners of the Common Stock that those companies or persons hold of record, and
the Company will reimburse the forwarding expenses. The Company will bear all
costs of solicitation.
The Company's Annual Report to Stockholders for the year ended December 31,
1999, and the Company's Form 10-K for the year ended December 31, 1999, are
being sent to stockholders with this Proxy Statement and do not form any part of
the material for the solicitation of proxies.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS INCLUDED AS PART OF THE COMPANY'S ANNUAL
REPORT TO STOCKHOLDERS WHICH ACCOMPANIED THIS PROXY STATEMENT. ADDITIONAL COPIES
OF THE FORM 10-K WILL BE SENT TO ANY STOCKHOLDER WITHOUT CHARGE UPON WRITTEN
REQUEST ADDRESSED TO MICHAEL T. SEGRAVES, SECRETARY, AT THE OFFICES OF THE
COMPANY, 14212 COUNTY ROAD M-50, MONTPELIER, OHIO 43543.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WHETHER OR NOT YOU
EXPECT TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO COMPLETE, SIGN AND
RETURN THE PROXY IN THE ENCLOSED POSTAGE-PAID, ADDRESSED ENVELOPE.
By Order of the Board of Directors
/s/ MICHAEL T. SEGRAVES
MICHAEL T. SEGRAVES
Secretary
Montpelier, Ohio
April 10, 2000
19
<PAGE> 22
PROXY CHASE INDUSTRIES INC. PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Martin V. Alonzo and Thomas F.
McWilliams, or any of them, lawful attorneys and proxies of the undersigned
with full power of substitution, for and in the name place and stead of the
undersigned to attend the Annual Meeting of Stockholders of Chase Industries
Inc. (the "Company") to be held at the offices of Fulbright & Jaworski L.L.P.,
666 5th Avenue, 31st Floor, Room GH, New York, New York, on Wednesday, May 31,
2000, at 10:00 a.m., EDT, and any adjournment(s) or postponement(s) thereof,
with all powers the undersigned would possess if personally present and to vote
the number of votes the undersigned would be entitled to vote if personally
present.
(TO BE SIGNED ON THE OTHER SIDE)
- --------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
<PAGE> 23
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DESCRIBED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2.
Please Mark
your votes as [X]
indicated in
this example
<TABLE>
<S> <C> <C> <C> <C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2.
PROPOSAL 1 - THE ELECTION OF DIRECTORS
FOR all nominees WITHHOLD Nominees: Martin V. Alonzo, Raymond E. Cartledge, Charles E. Corpening, Robert D.
listed to the right AUTHORITY Kennedy, John R. Kennedy, Thomas F. McWilliams, William R. Toller
(except as marked to vote for all nominees
to the contrary) listed to the right Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name here:
[ ] [ ]
-----------------------------------------------------------------------------
PROPOSAL 2 - RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS The undersigned hereby revokes any proxies hereto-
LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY FOR 2000. fore given to vote upon or act with respect to such
shares and hereby ratifies and confirms all that said
attorneys, proxies, the substitutes or any of them may
FOR AGAINST ABSTAIN lawfully do by virtue hereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
[ ] [ ] [ ] PROMPTLY, USING THE ENCLOSED ENVELOPE. THANK YOU.
Date
-------------------------------------------------
-----------------------------------------------------
Signatures(s)
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS HEREON.
WHEN SHARES ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN.
WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE
OR CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY
PRESIDENT OR OTHER AUTHORIZED PERSON. IF A PARTNERSHIP,
PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
o FOLD AND DETACH HERE o
