April __, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting
of Stockholders of CFC International, Inc. to be held at
the University of Chicago, Graduate School of
Business, The Conference Center, 450 North Cityfront Plaza
Drive, Chicago, Illinois on Monday, May 28, 1997 at 1:00
p.m. Central Time.
At the Annual Meeting, in addition to the election
of
directors, you will also be asked to consider an amendment
to our Companys certificate of incorporation increasing
the number of Voting Preferred Shares and a replacement
option granted to me by your Board of Directors to
purchase up to 10,000 of these shares. This amendment and
replacement option will assure my continuing voting control
of the Company in the event we issue a substantial number
of shares of Common Stock in an acquisition, merger, or
other transaction. Although no such transaction is
pending, your Board believes that the Company should be
in a position to issue a substantial number of additional
shares while maintaining my continuing voting control.
Your Board believes that my continuing control provides
CFC with protection against hostile takeover
attempts, which could cause disturbances in our growth
plans. As well, in a small, entrepreneurially-minded
company, quick decisions are essential. By having the
buck stop here, so to speak, with one individual who has
decades of industry experience in control, CFC will be
able to continue to act quickly in the best interests of
all of our shareholders.
We remain very optimistic about our business. In fact, I
have never been as excited about the near- and long-
term prospects of this Company. Growth is coming from all
of our international markets and in all of our product
lines. Our
new, state-of-the-art printing press will be fully
operational soon, increasing our capacity and quality in
the critical printed products area. I also remain
hopeful about and dedicated to growth through
acquisition, without dilution. These are, indeed, exciting
times at CFC International.
The election of directors, amendment to the certificate of
incorporation, replacement option and related matters are
more fully described in the enclosed Proxy Statement.
Please read the Proxy Statement closely and to mark, date
and sign the enclosed proxy and return it in the enclosed
envelope, which does not require postage if mailed in the
United States.
Sincerely,
Roger F. Hruby
Chairman of the Board &
Chief Executive Officer
YOUR VOTE IS IMPORTANT
Please Sign, Date, and Return Your Proxy Card
500 State Street, Chicago Heights, Illinois
60411 NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
May 28, 1997
You are cordially invited to attend the annual meeting
of stockholders of CFC International, Inc., which will be
held at the University of Chicago, Graduate School of
Business, The Conference Center, 450 North Cityfront Plaza
Drive, Chicago,
Illinois on Monday, May 28, 1997 at 1:00 p.m. Central
Time, for the following purposes:
1. To elect directors;
2. To consider and vote upon a proposal to approve an
amendment to the Companys Certificate of Incorporation
relating to the Companys Voting Preferred Stock and an
option to purchase 10,000 shares of such stock granted to
Roger F. Hruby. A copy of the Amendment and the Hruby
Option are included as Exhibit A to the proxy statement; and
3. To transact such other business as may properly
come
before the meeting.
Only stockholders of record at the close of business
on April 10, 1997 are entitled to vote at the meeting. A
list of such stockholders will be available for
examination by any stockholder for any purpose germane
to the meeting, during normal business hours, at Harris
Trust & Savings Bank, 311 West Monroe, 14th Floor,
Chicago, Illinois for a period of ten days prior to the
meeting.
A proxy statement and a proxy card solicited by the Board of
Directors are enclosed herewith. It is important that
your shares be represented at the meeting regardless of the
size of your holdings. Whether or not you intend to be
present at the meeting in person, we urge you to mark,
date and sign the enclosed proxy card and return it in
the envelope provided for that purpose, which does not
require postage if mailed in the United States. If you
attend the meeting, you may, if you wish, withdraw your
proxy and vote in person.
Dennis W. Lakomy
Vice President,
Chief Financial Officer,
Treasurer, and Secretary
YOU ARE URGED TO MARK, DATE, AND SIGN THE ENCLOSED
PROXY AND RETURN IT PROMPTLY. THE PROXY IS
REVOCABLE AT ANY TIME PRIOR TO ITS USE.
Chicago Heights, Illinois
[__________, 1997
CFC INTERNATIONAL, INC.
PROXY STATEMENT
ANNUAL MEETING OF
STOCKHOLDERS
May 28, 1997
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of CFC
International, Inc. (the Company or CFC) of proxies for use
at the annual meeting of stockholders of the Company to
be held at the University of Chicago, Graduate School
of Business, The Conference Center, 450 North Cityfront
Plaza Drive, Chicago, Illinois at 1:00 p.m. Central Time,
on May 28, 1997, and at any postponement or adjournment
thereof. Proxies properly executed and returned in a
timely manner will be voted at the meeting in accordance
with the directions noted thereon. If no direction is
indicated, they will be voted for the election of the
nominees named herein as directors, for the proposal to
approve an amendment to the Companys Certificate
of Incorporation relating to the Companys Voting Preferred
Stock and the Replacement Option (as defined below), and
on other matters presented for a vote in accordance with
the judgment of the persons acting under the proxies.
Any stockholder giving a proxy may revoke it at any time
before it is voted, either in person at the meeting, by
written notice to the Secretary of the Company, or by
delivery of a later-dated
proxy.
The Companys principal executive offices are located at
500 State Street, Chicago Heights, Illinois 60411
(telephone: 708/891-3456). It is expected that proxy
materials will be mailed to stockholders beginning on or
about April 15, 1997.
SHARES OUTSTANDING AND VOTING RIGHTS
Only stockholders of record at the close of business on
April 10, 1997 are entitled to vote at the annual meeting
of stockholders. The Companys only outstanding voting stock
is its common stock, par value $.01 per share (the
Common Stock), of which [ shares were outstanding as
of the close of business on April 10, 1997. Each share
of Common Stock is entitled to one vote. With respect to
the proposal to approve the Amendment to the Companys
Certificate of Incorporation, shares which are not
voted (whether by
abstention, broker non-vote, or otherwise) will have
the effect of a vote against the Amendment. (See
Proposal to Amend the Companys Certificate of
Incorporation Relating to the Number of Authorized Shares
of Voting Preferred Stock.)
Election of each director requires the affirmative vote
of
the holders of a plurality of the shares of the
Companys Common Stock present in person or represented by
proxy and entitled to vote at the meeting. Approval of
the proposed amendment to the Companys certificate of
incorporation requires the affirmative vote of the holders
of a majority of the Companys outstanding Common Stock.
In general, approval of any other matter submitted to the
stockholders for their consideration requires the
affirmative vote of the holders of a
majority of the shares of the Common Stock present in person
or represented by proxy. An automated system administered
by the Companys transfer agent will tabulate the votes.
ELECTION OF DIRECTORS
Six directors are to be elected at the meeting. The Board
of Directors has designated the persons named below
as nominees for election as directors for a term expiring at
the annual meeting of stockholders in 1998. All of the
nominees are serving as directors as of the date of
this Proxy Statement.
The six nominees for director receiving the vote of
the holders of a plurality of the shares of Common Stock
present in person or represented by proxy and entitled to
vote at the meeting will be elected. Unless otherwise
instructed, properly executed proxies that are returned in a
timely manner will be voted for election of the six
nominees. If, however, any of the nominees should be unable
or should fail to act as a
nominee by virtue of an unexpected occurrence, the proxies
will be voted for such other person as will be determined
by the holders of the proxies in their discretion, or the
Board of Directors may make an appropriate reduction in the
number of directors to be elected.
Biographical information concerning the six nominees is
presented below:
Roger F. Hruby, age 62, has been a director of the
Company since its formation. Currently, Mr. Hruby also
serves as the Companys Chairman of the Board and Chief
Executive Officer. Prior thereto, Mr. Hruby was the
President and Chief Operating Officer of the Companys
predecessor, Bee Chemical, from 1977 until the sale of
that company to Morton Thiokol, Inc., in 1985, at which
time Mr. Hruby also became its Chief Executive Officer.
Mr. Hruby also organized the formation of Bee
Chemicals Japanese joint venture in 1970 and supervised
its growth from a start-up venture to a significant
manufacturing company with sales in excess of $40 million.
In 1986, Mr. Hruby formed the Company, which purchased
Bee Chemicals specialty transferable solid coatings
division from Morton Thiokol and has been Chairman of
the Board, Chief Executive
Officer, and until June 1995, President of the Company
since the date of its incorporation. Mr. Hruby has been
involved in the specialty chemical industry since 1958.
Mr. Hruby earned a
bachelors degree in chemistry from North Central College and
a Masters of Business Administration from the University
of
Chicago.
Robert J. DuPriest, age 56, has been a director of
the Company since August 1995. Mr. DuPriest also is the
President and Chief Operating Officer of the Company. He
joined the Company in 1990 as Vice President and Chief
Operating Officer, and became President in June 1995.
Prior to joining the Company, Mr. DuPriest served
from 1985 in successive management positions with Rank
Video Services of America, where he was responsible for
worldwide operations and joint ventures.
Mr. DuPriest earned a bachelors degree from
American University.
Dennis W. Lakomy, age 52, has been a director of the
Company since August 1995. Mr. Lakomy also is Vice
President, Chief Financial Officer, Secretary, and
Treasurer of the Company. He joined Bee Chemical in 1975
and served as Vice President and Controller of that company
from 1982 until co-founding CFC with Mr. Hruby in 1986.
Mr. Lakomy earned a bachelors degree in accounting from
Loyola University of Chicago and a Masters of Business
Administration from the University of Chicago.
William G. Brown, age 54, has been a director of the
Company
since August 1995. Mr. Brown currently is a partner of
Bell, Boyd & Lloyd, Chicago, Illinois, counsel to the
Company.
He
is also a Director of the MYR Group Inc., Medicus
Systems Corporation, Managed Care Solutions, Inc., and
Dovenmuehle Mortgage, Inc.
Richard Pierce, age 58, became a director of the Company
in August 1995. Before becoming a director, Mr. Pierce
served as an Advisory Director of the Company in 1991. He
currently is the Managing Director of the Chicago
office of Russell Reynolds Associates, Inc., an executive
recruiting firm, which he joined in 1976.
David D. Wesselink, age 54, became a director of the
Company in August 1995. Before becoming a director, Mr.
Wesselink served as an Advisory Director of the Company
since 1992.
He
has been Chief Financial Officer of Advanta Corporation,
a consumer credit company, since 1993. Prior thereto, he
served in several capacities with Household International, a
consumer and commercial financial services company,
including Chief Financial Officer, Treasurer and Vice
President, Research and Development.
The Board of Directors recommends that stockholders vote FOR
the election of each of the nominees for director.
Meetings and Committees of the Board
The three standing committees of the Board of Directors
of the Company are the Audit Committee, the Stock
Option Committee, and the Compensation Committee, the
functions and membership of which are described below.
The Board of Directors does not have a standing nominating
committee. The
Board of Directors held four meetings and acted four times
by unanimous written consent in 1996.
The Audit Committees functions include
making recommendations to the Board of Directors on the
selection of the Companys independent auditors,
reviewing the overall scope of the independent auditors
examination, reviewing the proposed annual financial
statements of the Company with the independent auditors
and reporting a summary of the Audit Committees
conclusions to the Board of Directors;
and
reviewing the Companys internal controls and
accounting policies with the independent auditors and
certain officers of the Company. The Audit Committee
currently consists of Messrs. Brown, Pierce and Wesselink.
The Stock Option Committee is responsible for
the
administration and interpretation of, and the granting
of options under the CFC International, Inc. Stock Option
Plan (the Stock Option Plan) and the CFC International,
Inc. Stock
Purchase Plan (the Stock Purchase Plan and,
collectively with the Stock Option Plan, referred to as
the Employee Plans). Messrs. Pierce and Wesselink currently
are members of the Stock Option Committee.
The Compensation Committee is responsible for approving
all employment contracts with, and salaries of, officers
of the Company.
The Compensation Committee also is responsible for
all bonuses, other payments, plans (other than the
Employee Plans), or programs, and benefits for the Companys
officers. Messrs. Hruby, Brown, and Pierce currently
comprise the Compensation Committee.
Nominations for election of directors are made by the
Board of Directors and, pursuant to the Companys bylaws,
may be made by a committee appointed by the Board
or by any stockholder entitled to vote in the election
of directors. See Submission of Stockholder Proposals for
the 1998 Annual Meeting for procedures with respect to
nominations
by
stockholders.
During 1996, the Stock Option Committee held two
meetings. The Audit Committee met twice and the
Compensation Committee met once during 1996. In 1996,
during the time each director served in such capacity, no
director attended less than 75% of the aggregate of all
meetings of the Board and all meetings held by committees
of the Board on which such director served.
PROPOSAL TO AMEND THE COMPANYS CERTIFICATE OF
INCORPORATION RELATING TO THE NUMBER OF AUTHORIZED
SHARES OF VOTING PREFERRED STOCK AND THE REPLACEMENT
OPTION The Board of Directors has declared advisable and
approved
for submission to stockholders an amendment (the Amendment)
to the Companys Certificate of Incorporation and
a
replacement option (the Replacement Option) granted to Roger
F. Hruby, the Companys Chairman of the Board and
Chief Executive Officer, the texts of which together with a
copy of Article FOURTH of the Certificate of Incorporation
with the changes proposed in the Amendment are attached to
this Proxy Statement as Exhibit A. The following summary
is qualified by reference to Exhibit A, which is
incorporated herein by reference.
The Certificate of Incorporation currently provides
that each share of the Companys Voting Preferred Stock, par
value $.01 per share (Voting Preferred Stock), shall be
entitled to 1,000 votes. The Amendment, if approved,
would increase the number of authorized shares of Voting
Preferred Stock from 750 shares to 10,000 shares and
clarify the definition of Purchase Price of the Voting
Preferred Stock on which the dividend and liquidation
rights of such shares is based.
The
Amendment would not change any other terms of the
Voting Preferred Stock, and would not effect any other
changes in the Certificate of Incorporation.
The Certificate of Incorporation currently authorizes
750 shares of Voting Preferred Stock, none of which is
currently outstanding. The holders of Voting Preferred
Stock are entitled to (i) 1,000 votes per share on all
matters to be voted upon by stockholders; (ii) quarterly
dividends at an annual rate equal to the prime rate of
LaSalle Northwest National Bank, Chicago in effect as of
the prior December 31, applied to the per share
purchase price of the Voting Preferred Stock; and (iii)
a liquidation preference equal to the per share purchase
price plus any accumulated and unpaid dividends. The
Voting Preferred Stock has no pre-emptive, conversion,
redemption, or exchange rights.
Mr. Hruby currently has an option to purchase for $500 per
share part or all of 534 of the authorized but unissued
shares of Voting Preferred Stock (the Existing
Option). Mr.
Hrubys Existing Option is currently exercisable,
terminates upon his death, and is not transferable. The
Existing Option contains customary antidilutive
provisions. The Voting Preferred Stock was established
and Mr. Hrubys option was granted to ensure that, should
he elect to do so, Mr. Hruby would be able to control the
Company. Mr. Hruby has held such option since prior to the
Companys initial public offering in November 1995. In
connection with its approval of the Amendment, the
Board of Directors also approved, subject to stockholder
approval, granting Mr. Hruby a nontransferable
Replacement Option to purchase part or all of the
10,000 authorized but unissued shares of Voting
Preferred Stock. This option is exercisable for ten years
following the date of grant at an exercise price of $50 per
share provided, however, that in the event that the
Companys outstanding Common Stock is changed by any
combination or subdivision of shares or any similar
transaction or by any stock dividend, stock split,
reverse stock split or any similar transaction, the
purchase price and the number of shares granted under this
Replacement Option shall be proportionately adjusted..
The Replacement Option will also expire if Mr. Hruby ceases
to be Chairman of the Board of the Company for any
reason. In addition, pursuant to the Replacement Option,
Mr. Hruby has granted to the Company the right and option
to repurchase any shares of Voting Preferred Stock
purchased by Mr. Hruby upon exercise of the Replacement
Option for a price equal to the price paid to the Company
by Mr. Hruby, plus any accrued but unpaid dividends,
such repurchase option being exercisable at any time Mr.
Hruby ceases to be Chairman of the Board of Directors of the
Company.
Should Mr. Hruby exercise the Replacement Option, he will
be in a position to elect all of the directors of the
Company. In recommending approval of the proposed
Amendment and the Replacement Option, the Board
considered the advisability of maintaining Mr. Hrubys
voting control of the Company even if a
substantial number of additional shares of Common Stock are
issued in an acquisition, merger, public offering, or
other transaction, although no such transaction is
pending. The
Board also concluded that (i) reducing the term of the
option from Mr. Hrubys lifetime to the earlier of Mr. Hrubys
tenure as Chairman of the Board or ten years from the date
of grant and (ii) the repurchase option granted to the
Company to repurchase any outstanding shares of Voting
Preferred Stock if Mr. Hruby ceases to be Chairman of the
Board were both in the Companys and the Companys
stockholders best interest.
The existence of the Voting Preferred Stock and Mr.
Hrubys option to purchase such stock, may impede takeovers
of the Company and other transactions that in some
circumstances might be beneficial to the Companys other
stockholders. Such option and Voting Preferred Stock have
the overall effect of preventing, without the approval of
Mr. Hruby, the acquisition or exercise of control over the
Company and the removal of incumbent officers and
directors, thus providing such officers and directors
(including Mr. Hruby) with the right, subject to Mr. Hrubys
exercise of his right, to retain their positions. Such
option and Voting Preferred Stock might also limit
opportunities for stockholder participation in certain
types of transactions even though such transactions might be
favored by holders of a majority of the Companys Common
Stock and may also negatively impact the Companys ability
to enter into certain business combinations or to
engage in certain financing and acquisition transactions
upon exercise of the Replacement Option. Mr. Hruby would
hold approximately 89.6%
of the voting power of the Companys capital stock.
Approval of the Amendment requires the affirmative vote
of the holders of a majority of the Companys outstanding
Common Stock. Mr. Hruby beneficially owns and has the right
to vote 1,981,977 shares of Common Stock and also holds an
irrevocable proxy to vote an additional 538,670 shares of
Common Stock, giving Mr. Hruby the right to vote
approximately 63.2% of the outstanding Common Stock.
Mr. Hruby has indicated his intention to vote in favor
of the Amendment, provided that the Amendment receives the
affirmative vote of a majority of the shares of the
Companys outstanding Common Stock which are voted with
respect to the Amendment, other than shares owned by Mr.
Hruby. Shares of Common Stock that are not voted
(whether by abstention, broker non-vote, or otherwise)
will have the effect of a vote against the Amendment
for the purposes of satisfying the statutory requirement
of approval by holders of a majority of the outstanding
Common Stock, but will not affect the determination of Mr.
Hruby as to whether to vote his shares in favor of the
Amendment.
The Board of Directors recommends that stockholders vote FOR
approval of the Amendment and the Replacement Option.
Other Matters
Management knows of no other matters to be brought
before the annual meeting other than those described above.
If any other business should come before the meeting, it
is intended that the persons named in the enclosed proxy
will vote the shares in accordance with their best
judgment on any such matter.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of March 24,
1997, certain information regarding the beneficial ownership
of the Companys Common Stock by each person known by the
Company to be the beneficial owner of 5% or more of
the outstanding Common Stock, by each director, nominee
for director, and Named Executive Officer (as defined
below), and by all directors and executive officers as a
group. As of such date, there were 112 record holders
and approximately 1,200 beneficial holders of Common
Stock.
Shares
Benefic
ially Owned
Name (1) Number
Percent Roger F. Hruby (2) 2,520,607
63.2
Robert J. DuPriest 89,509 2.2
Dennis W. Lakomy 317,537 8.0
William G. Brown (3) 158,769 4.0
Richard Pierce 1,000 *
David D. Wesselink 1,000 *
RFH Investments, LP (4) 999,160 25.1
All directors and executive officers as a group
(7 persons) (2) (3) 2,549,752 63.9
_________________________
* Represents less than 1% of the outstanding Common
Stock.
(1) The address of all of the persons named or identified
above is c/o CFC International, Inc., 500 State Street,
Chicago Heights, Illinois 60411.
(2) Includes 999,160 shares of Common Stock owned by RFH
Investments, LP, a limited partnership of which Mr. Hruby is
the managing general partner (and of which all of the
partners are members of Mr. Hrubys immediate family or
trusts for the benefit of such family members), but does not
include 523,404 shares of Class B Common Stock owned by RFH
Investments, LP. The shares of Common Stock shown above as
beneficially owned by Mr. Hruby also include 538,670 shares
of Common Stock which Messrs. DuPriest and Lakomy and
members of Mr. Browns family beneficially owned immediately
after the IPO, which they still
hold, and for which Mr. Hruby holds an irrevocable voting
proxy. In addition to the Common Stock set forth in the
table above, Mr. Hruby owns an option to purchase 534 shares
of the Companys Voting Preferred Stock. (For a discussion
of the options terms, see Certain Transactions and Proposal
to Amend the Companys Certificate of Incorporation Relating
to the Number of Authorized Shares of Voting Preferred Stock
and the Replacement Option.)
(3) Includes 157,067 shares of Common Stock which are owned
by the William Gardner Brown 1993 GST Trust, a trust for the
benefit of Mr. Browns family and of which Mr. Brown is not a
beneficiary nor is he, or a member of his immediate family,
a trustee.
(4) RFH Investments, LP also owns 523,404 shares of Class B
Common Stock, which is substantially equivalent to the
Common Stock in all respects except that the Class B Common
Stock generally is not entitled to vote on any matters
submitted to a vote of the Companys stockholders.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The directors and certain officers of the Company are
required to report their transactions in the Common Stock to
the Securities and Exchange Commission within a specified
period following a transaction. During 1996, the directors
and officers filed all such reports within the specified time
period.
MANAGEMENT COMPENSATION
The following table provides certain summary information
concerning the compensation paid or accrued during the year
ended December 31, 1996 to the Companys Chief Executive
Officer and to each of the other executive officers of the
Company who received compensation in excess of $100,000 during
the last fiscal year (the Named Executive Officers). The
Company does not have a restricted stock award program or a
long-term incentive plan.
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Awards
Other Securities
Annual UnderlyingAll Ot
her
Name and Principal SalaryBonus CompensationOptions/SARsComp
ensation
Position Year ($) ($) ($) (#) ($)*
Roger F. Hruby
Chairman of the Board1996285,00028,500 24,000(1) -
3,000
and Chief Executive 1995285,000 28,500 - -
3,000
Officer 1994282,08828,500 - - 3,000
Robert J. DuPriest1996181,50018,1506,727(2) 10,000 3,000
President and Chief 1995165,000 51,150 523(2) -
3,000
Operating Officer 1994165,000 16,500
3,300
Dennis W. Lakomy
Vice President, Chief1996165,37516,537 - -
3,000
Financial Officer, 1995157,500 15,750 - -
3,000
Treasurer and Secretary1994157,50015,750
3,150
_________________________
* Reflects matching contributions made by the Company
pursuant to the Companys contributory retirement savings
plan, which covers eligible employees who qualify as to age
and length of service. Under the plan, the Company makes
matching contributions equal to 50% of the first 4% of the
employees income that the employee contributes.
(1) A $1 million life insurance policy on Mr. Hruby is paid
for by the Company, with Mr. Hrubys estate as the
beneficiary. The amount shown above is the premium paid for
such policy.
(2) In connection with Mr. DuPriests exercise of options
covering 31,414 shares of Common Stock on November 24, 1995,
the Company loaned him $81,838 for the payment of taxes on
the gain realized upon the exercise of those options. The
Company loaned Mr. DuPriest another $28,715 to pay the final
estimated taxes due on January 15, 1996. The loan accrues
no interest and is due on January 31, 2001. The amount
shown above represents taxable income from imputed interest
in accordance with Internal Revenue Service requirements.
The following table sets forth individual grants of stock
options made to the Named Executive Officers during 1996.
Potential
Realizable Value
at Assumed
Percent of Total Annual Rates of
Stock Options Granted Exercise
Price Appreciation For
Date of Options to Employees or BaseExp
iration for Option Term (2)
Grant Granted in Fiscal Year Price
(1) Date 5% 10%
Roger F. Hruby - - - - - - -
Robert J. DuPriest3/1/96 10,000 13.8% $10.87 3/1/06$68,392
$173,320
Dennis W. Lakomy - - - - - -
- -
____________________
(1) Under the Stock Option Plan, the exercise price must be
the fair market value of the Common Stock on the date of
grant and the options granted generally become exercisable as
to onefourth of the grant on each of the first, second,
third, and fourth anniversary of the date of grant.
(2) These amounts represent certain assumed annual rates of
appreciation calculated from the exercise price, as required
by the rules of the Securities and Exchange Commission.
Actual gains, if any, on stock option exercises and Common
Stock holdings are dependent on the future performance of the
Common Stock. There can be no assurance that the amounts
reflected in this table will be achieved.
Option Exercises and Year-End Valuation
The following table provides certain information with
respect to the Named Executive Officers concerning the
exercise of options and/or stock appreciation rights (SARs)
during 1996 and unexercised options and SARs held on December
31, 1996:
AGGREGATE 1996 OPTION/SAR EXERCISES AND VALUES
Number of SecuritiesValue of Une
xercised
Underlying Unexercised In-the-Money
Options/
Shares Acquired Value Options/SARs at
12/31/96 SARs at 12/31/96*
on Exercise
RealizedExercisableUnexercisableEx ercisable Unexercisable
Name (#) ($) (#) (#) ($) ($)
Roger F. Hruby - - - - - -
Robert J. DuPriest - - - 10,000 -
3,750
Dennis W. Lakomy - - - - - -
____________________
* This column indicates the aggregate amount, if any, by
which the market value of the Common Stock on December 31,
1996 exceeded the options exercise price and is based on the
closing per share sale price of the Common Stock on such date
of $11.25 as quoted on the Nasdaq National Market.
Directors Compensation
Directors of the Company who are not employees of the
Company are paid $1,500 for each board meeting attended and
$750 each board committee meeting attended which is not held
on the same day as a board meeting, but are not paid an annual
retainer. Directors of the Company who are also employees of
the Company are not paid any compensation for serving as
directors.
Upon the closing of the Companys initial public offering of
Common Stock (the IPO), each of the Companys non-employee
directors, Messrs. Brown, Pierce and Wesselink, were
automatically granted, pursuant to the CFC International, Inc.
Directors Stock Option Plan, a one-time option covering
10,000 shares of Common Stock. Each of the options has a term
of ten years and a per share exercise price of $9.50. The
options become exercisable as to one-fourth of the grant on
each of the first, second, third, and fourth anniversary of
the date of grant.
Compensation Committee Interlocks and Insider Participation
Until August 1995, Mr. Hruby, the Companys Chief Executive
Officer, approved the terms of the compensation of the
Companys executive officers. In August 1995, the Companys
Board of Directors formed a Compensation Committee, which is
currently comprised of Messrs. Hruby and Brown and chaired by
Mr. Pierce, which determines the compensation of the Companys
executive officers in the future.
William G. Brown, a director of the Company, is a partner of
the law firm of Bell, Boyd & Lloyd. The Company has utilized,
and anticipates that it will continue to utilize, the services
of such firm.
In accordance with rules promulgated by the Securities and
Exchange Commission, the information included under the
captions Report of the Compensation Committee and
Performance Graph will not be deemed to be filed or to be
proxy soliciting material or incorporated by reference in any
prior or future filings by the Company under the Securities
Act of 1933 as amended, or the Securities Exchange Act of
1934, as amended (the Exchange Act).
REPORT OF THE COMPENSATION COMMITTEE
The compensation of the Companys executive officers is
generally determined by the Compensation Committee of
the Board of Directors. The Compensation Committee
currently consists of three directors of whom a
majority are not officers or employees of the Company.
The following report with respect to certain compensation
paid or awarded to the Companys executive officers during
1996 is furnished by the directors who then comprised the
Compensation Committee.
General Policies
The Companys compensation program is intended to enable
to the Company to attract, motivate, reward, and retain
the management talent required to achieve corporate
objectives in
a highly competitive industry, and thereby
increase
stockholder value. It is the Companys policy to
provide
incentives to its senior management to achieve both short-
term and long-term objectives. To attain these
objectives, the Companys executive compensation program is
composed of a base salary and a stock option grants.
Section 162(m) of the Internal Revenue Code of 1986,
as amended, limits the deduction for federal income tax
purposes of certain compensation paid by any publicly held
corporation to its chief executive officer and its four
other highest
compensated officers to $1 million per each such
executive (the $1 million cap). The compensation currently
paid to the Companys executive officers, including
pursuant to the
Employee Plans, is not expected to exceed the $1 million
cap. See Base Salary.
Base Salary
Base salaries for executive officers are determined by
a subjective assessment of the executive
officers
responsibilities and position within the Company, and
the performance of the executive officer. Base
salaries are reviewed annually and from time to time by
the Compensation Committee and adjusted appropriately.
Prior to the creation of the Compensation Committee,
Mr. Hruby reviewed base salaries annually and adjusted
them as appropriate.
Stock Options
Options may be granted to executive officers, as well
as other employees of the Company, upon joining the Company
and each year thereafter under the Employee Plans.
Options are granted to executive officers taking into
account factors
including salary, position, and responsibilities. In
1996,
the Stock Option Committee granted options to purchase
77,673 shares of Common Stock pursuant to the Stock Option
Plan and options to purchase 14,114 shares of Common Stock
pursuant to the Stock Purchase Plan.
Chief Executive Officer Compensation
During 1996, the Companys most highly compensated
executive officer was Roger F. Hruby, Chairman and
Chief Executive Officer of the Company since the date of
its incorporation. Prior to the creation of the Compensation
Committee, Mr. Hruby determined his annual compensation
using the same criteria used to determine compensation
levels for other corporate officers and was based on
his assessment of his overall
performance and on information regarding awards made
by similar companies. Following the creation of the
Compensation Committee, the Compensation Committee
reviewed Mr. Hrubys
compensation arrangements using the same criteria that it
uses to determine compensation levels for other corporate
officers. No specific weighting was assigned to these
factors. Based on its review, the Compensation Committee
believes that Mr. Hrubys experience, dedication and
knowledge have been of vital importance to the
successful and ongoing growth of the administration and
operations of the Company. In the
Compensation Committees view, Mr. Hrubys fiscal 1996
compensation package reflects an appropriate balance of
(i)
the Companys performance in fiscal 1996, (ii) Mr. Hrubys own
performance level, and (iii) competitive standards.
Mr.
Hrubys compensation consists of base salary and bonus.
Compensation
Committee
Members
Richard Pierce
William G. Brown
Roger F. Hruby
PERFORMANCE GRAPH
CORPORATE PERFORMANCE GRAPH (See Appendix
A)
The following graph compares the percentage change in
the cumulative total returns on the Companys Common Stock,
the Nasdaq Composite Index, and the S&P Chemical Composite
Index (assuming reinvestment of any dividends) for the
period beginning on November 16, 1995, the effective date
of the registration of the Common Stock under Section
12 of the Exchange Act, and ending on December 31, 1996,
the last day of the Companys 1996 fiscal year.
Company/Index Name* 11/16/95
12/29/95 12/31/96
CFC International, Inc. $100.00 $90.79
$118.42
Nasdaq Composite Index 100.00 100.73
123.60
S&P Chemical Composite Index 100.00 105.55
127.68
_________________________
* Assumes $100 invested on November 16, 1995 in the
Companys
Common Stock, the Nasdaq Composite Index, and the
S&P Chemical Composite Index. Historical results are
not
necessarily indicative of future performance.
CERTAIN TRANSACTIONS
In August 1995, the Company granted to Mr. Hruby an
option to purchase, at an exercise price of $500 per
share, 534 shares of its Voting Preferred Stock, par
value $.01 per share, subject to antidilutive
adjustments. The holders of Voting Preferred Stock will
be entitled to (i) 1,000 votes per share on all matters to
be voted upon by stockholders; (ii) quarterly dividends at
an annual rate equal to the prime rate of LaSalle
Northwest National Bank, Chicago in effect as of the prior
December 31, applied to the per share purchase price
(initially $500) of the Voting Preferred Stock; and (iii)
a liquidation preference equal to the per share purchase
price (initially $500) plus any accumulated and unpaid
dividends. The Voting Preferred Stock has no pre-emptive,
conversion, redemption, or exchange rights. Mr. Hrubys
option is currently exercisable, terminates upon his
death, and is not transferable.
In connection with Mr. DuPriests exercise of
options covering 31,414 shares of Common Stock on November
24, 1995, the Company loaned him $81,838 for the payment of
a portion of the taxes on the gain realized upon the
exercise of those options. Additionally, on January
15, 1996, the Company loaned Mr. DuPriest an additional
$28,715 for the payment of the remainder of the taxes on
the gain realized upon the exercise of those options.
In the event Mr. DuPriest sells any shares of Common Stock
received pursuant to the exercise of those options prior to
the maturity of these loans, he will be obligated to
repay the loans from the proceeds, net of applicable
taxes, received from such sale. No interest accrues
under either loan and both mature on January 31, 2001.
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors, pursuant to the recommendation of
the Audit Committee, has selected the accounting firm of
Price Waterhouse LLP to serve as the independent accountants
of the Company for its current fiscal year ending December
31, 1997. Price Waterhouse LLP has served as the Companys
independent auditors since 1986. Representatives of Price
Waterhouse LLP are expected to be present at the annual
meeting, and they will have an opportunity to make a
statement if they so desire and will be available to respond
to appropriate questions from stockholders.
SOLICITATION OF PROXIES
Proxies will be solicited by the Board of Directors
through the use of the mail. Proxies may also be
solicited by directors, officers, and a small number of
other employees of the Company personally, or by mail,
telephone, facsimile, or otherwise, but such persons will
not be compensated for such services. Brokerage
firms, banks, fiduciaries, voting trustees, or other
nominees will be requested to forward the soliciting
material to the beneficial owners of stock held of record
by them, and the Company has hired Proxy Services
Corporation to coordinate the solicitation of proxies by
and through such holders for a fee of approximately $1,000
plus expenses. The entire cost
of the Board of Directors
solicitation will be borne by the Company.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL
MEETING
In accordance with rules promulgated by the Securities
and Exchange Commission, any stockholder who wishes to
submit a proposal for inclusion in the proxy material to be
distributed by the Company in connection with the 1998
Annual Meeting must do so no later than December 1,
1997. Any such proposal should be submitted in writing to
the Secretary of the Company at is principal executive
offices. Upon submitting a proposal, the stockholder
shall provide the Company with a written notice which
includes the stockholders name and address, the number
of shares of Common Stock that such stockholder holds
of record or beneficially, the dates upon which such
shares were acquired, and documentary support for a claim of
beneficial ownership.
GENERAL
It is important that proxies be returned promptly. If
you are unable to attend the meeting, you are urged,
regardless of the number of shares owned, to date, sign and
return without delay your proxy card in the enclosed
addressed envelope.
By Order of the Board
of
Directors
Dennis W. Lakomy
Vice President, Chief
Financial Officer
Treasurer and Secretary
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF
INCORPORATION
OF
CFC INTERNATIONAL, INC.
CFC International, Inc., a Delaware corporation
(the Corporation), certifies that the following amendment of
the Certificate of Incorporation of the Corporation has been
duly adopted in accordance with the provisions of Sections
222 and 242 of the General Corporate Law of the State of
Delaware:
Article FOURTH of the Certificate of Incorporation
is
amended as follows:
1.The number 10,750,750 in the second line of Article
FOURTH is deleted and the number 10,760,000 is inserted in
lieu thereof.
2.The number 750 in the fifth line of Article FOURTH is
deleted and the number 10,000 is inserted in lieu thereof.
3.The words as determined pursuant to the Stock
Option Agreement dated as of October 24, 1995 between the
Corporation and Roger F. Hruby in Section 4.2.1 of Article
FOURTH are deleted and the words paid to the Corporation
upon issuance are inserted in lieu thereof.
IN WITNESS WHEREOF, the Corporation has caused
this certificate to be signed by its Chairman and
Secretary this _____ day of _____________, 1997.
CFC INTERNATIONAL, INC.
By
Roger F. Hruby,
Chairman
ATTEST:
Dennis Lakomy, Secretary
ARTICLE FOURTH FROM
RESTATED CERTIFICATE OF
INCORPORATION OF CFC
INTERNATIONAL, INC.
WITH PROPOSED CHANGES MARKED
FOURTH: The total number of shares of all
classes of stock which the Corporation shall have authority
to issue is 10,760,000 10,750,750 of which (i) 10,000,000
shares, par value $.01 per share, are to be of a class
designated Common Stock (Common Stock); (ii) 750,000
shares, par value $.01 per share, are to be of a class
designated Class B Common Stock (Class B Stock); and
(iii) 10,000 750 shares, par value $.01 per share, are to
be of a class designated Voting Preferred Stock (Voting
Preferred Stock).
The Common Stock and Class B Stock shall rank on
a parity, share for share, in the payment of dividends and
in the distribution of assets in the event of any
liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, and shall
be identical in all other respects except for voting rights
which shall be in accordance with the provisions of Section
4.1.2 below and for conversion rights which shall be in
accordance with the provisions of Section 4.1.4 below.
4.1. Common Stock and Class B Stock Provisions.
4.1.1. Dividend Rights. Subject to the
provisions of applicable law and the preferences
of the Voting Preferred Stock, the holders of
the Common Stock and the holders of Class B
Stock shall be entitled to receive dividends at
such times and in such amounts as may be
determined by the Board of Directors provided
that no dividend shall be declared or paid on
the outstanding shares of Common Stock unless an
identical dividend, in an equal amount per
share, is concurrently declared and paid
on the outstanding shares of Class B Stock, and
provided, further, that similarly no dividend shall
be declared or paid on the outstanding shares of
Class B Stock unless an identical dividend, in an
equal amount per share, is concurrently declared and
paid on the outstanding shares of Common Stock.
4.1.2. Voting Rights. The holders of Common
Stock shall have one vote for each share on each
matter submitted to a vote or consent of the
stockholders of the Corporation and, except as and
to the extent otherwise provided by law, the holders
of Class B Stock shall not be entitled to vote on
any matter at any meeting or by consent of
Stockholders.
4.1.3. Liquidation Rights. In the event of any
liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after
payment or provision for payment of the debts and
other liabilities of the Corporation and the
preferential amounts to which the holders of the
Voting Preferred Stock shall be entitled, the
holders of the Common Stock and Class B Stock shall
be entitled to share ratably in the remaining assets
of the Corporation.
4.1.4. Conversion of Class B Stock. The Class B
Common Stock shall be convertible into Common Stock,
share for share, in accordance with the provisions
hereafter set forth:
(a) Shares of Class B Stock shall be
convertible, at the option of the holder thereof, at
any time if the beneficial owner of such shares is
not a Hruby Family Member. For this purpose,
beneficial ownership shall include any ownership the
direct or indirect benefit of which accrues to any
Hruby Family Member. The term Hruby Family Member
shall mean and include the following persons:
(i) Roger F. Hruby and Nadeane L. Hruby; (ii) a
lineal descendant of a grandparent of Roger F. Hruby
or Nadeane L. Hruby or a spouse of any such lineal
descendant; (iii) any estate of or trust for the
benefit of any of the persons referred to in clauses
(i) through (ii); (iv) any partnership, corporation,
trust or other form of business or investment entity
or association controlled, managed or owned
beneficially to any material extent by any one or
more of any of the persons referred to in clauses
(i) through (iii).
(b) Before any holder of shares of Class B
Stock shall be entitled to convert his shares or to
receive a certificate representing the shares of
Common Stock into which his shares have been
converted, he shall surrender the certificate or
certificates therefor, duly endorsed to the
Corporation or in blank, at the office of the
Corporation, and shall give written notice to the
Corporation at its office that the beneficial owner
of such shares is not a Hruby Family Member, that he
elects to convert his shares and the name or names
(with addresses) in which he wishes the certificate
or certificates of Common Stock to be issued. The
Corporation will, as soon as practicable thereafter,
issue and deliver at its office to such holder of
shares, or to his nominee or nominees, certificates
for the number of shares of Common Stock to which he
shall be entitled.
(c) The Corporation shall at all times reserve
and keep available, free from preemptive rights, out
of its authorized but unissued Common Stock, solely
for the purpose of effecting the conversion of the
shares of the Class B Stock, the number of shares of
Common Stock deliverable upon the conversion of all
shares of Class B Stock then outstanding.
(d) In the case of any consolidation or merger
of the Corporation with or into any other
Corporation (other than a consolidation or merger in
which the Corporation is the continuing corporation)
or in the case of any sale or transfer of all or
substantially all of the assets of the Corporation,
the holder of each share of Class B Stock shall
after such consolidation, merger, sale or transfer
have the right to convert such share into the kind
and amount of shares of stock and other securities
and property which such holder would have been
entitled to receive upon such consolidation, merger,
sale or transfer if he had held the Common Stock
issuable upon the conversion of such share of Class
B Common Stock immediately prior to such
consolidation, merger, sale or transfer.
4.2. Voting Preferred Stock Provisions.
4.2.1. Liquidation Rights. In the event of any
liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the
holders of the Voting Preferred Stock shall be
entitled to receive an amount equal to the purchase
price per share paid to the Corporation upon
issuance , as determined pursuant to the Stock
Option Agreement dated as of October 24, 1995
between the Corporation and Roger F. Hruby (the
Purchase Price) of such shares plus any accrued
and unpaid dividends thereon before any distribution
shall be made to the holders of the Common Stock.
4.2.2. Dividend Rights. The holders of Voting
Preferred Stock shall be entitled to receive from
net income during each twelve month period ending
December 31 a mandatory dividend per share at the
rate per annum equal to the prime rate of interest
announced by LaSalle Northwest National Bank, in
effect as of the prior December 31, applied to the
Purchase Price of each share for the period issued
and outstanding, payable quarterly on the 31st day
of March, the 30th day of June, the 30th day of
September, and the 31st day of December in each
year. The Voting Preferred Stock shall be non
cumulative. The holders of the Voting Preferred
Stock shall not be entitled to receive any dividends
thereon other than those specifically herein above
provided for.
4.2.3. Voting Rights. On each matter submitted to
a vote of the stockholders of the Corporation, the
holders of Voting Preferred Stock shall have 1,000
votes for each share.
CFC INTERNATIONAL, INC.
VOTING PREFERRED STOCK OPTION AGREEMENT
CFC International, Inc., a Delaware corporation (the
Company), hereby grants to Roger F. Hruby (the Optionee) an
option to purchase 10,000 shares of its Voting Preferred
Stock, par value $.01 per share (Voting Preferred Stock),
upon the terms and conditions set forth herein (the Option).
1. The purchase price payable upon exercise of the Option
shall be $50 per share, provided, however, that in the event
that the Companys outstanding Common Stock is changed by any
combination or subdivision of shares or any similar
transaction or by any stock dividend, stock split, reverse
stock split or any similar transaction, the purchase price and
the number of shares granted under this Option shall be
proportionately adjusted.
2. The exercise of the Option shall be subject to the
following conditions:
(a) The Option may be exercised in whole or in part and at
one time or from time to time by giving written notice to the
Company, attention of the Secretary, specifying the number of
shares to be purchased and accompanied by the full purchase
price for the shares to be purchased either in cash or by
check.
(b) At the time of any exercise of the Option, the Company
may require the Optionee to deliver to the Company a written
representation of present intention to purchase the shares for
his own account for investment and not for distribution. An
appropriate legend may be placed upon each certificate
delivered to the Optionee upon his exercise of part or all of
the Option.
(c) It is contemplated that the shares acquired upon the
exercise of the Option will not be registered under applicable
federal and state securities laws. Such shares cannot be
resold unless they are registered under such laws or unless an
exemption from registration is available. The certificate for
any such shares issued upon the exercise of the Option shall
bear a legend making appropriate reference to the provisions
of this paragraph.
3. The term of the Option shall continue until the earlier
of March 14, 2007, or the date on which the Optionee ceases to
serve as Chairman of the Board of the Company, at which time
the Option shall terminate.
4. The Option is not transferable and is exercisable only
by the Optionee himself. Without limiting the generality of
the foregoing, this Option is not exercisable by any legal
representative, attorney, hear, legatee, successor or assign
to the Optionee.
5. The Optionee shall not have any rights of a shareholder
with respect to the shares subject to the Option until such
shares are actually issued upon exercise of the Option.
6. By acceptance of this option certificate, the Optionee
agrees and accepts the termination and cancellation of the
option certificate delivered to the Optionee by the Company
dated October 24, 1995 to purchase 534 shares of its common
stock, par value $.01 per share, at a price of $500 per share.
7. By acceptance of this option certificate, the Optionee
agrees that at the time or times of his exercise of this
option he will enter into a an agreement with the Company
binding on all holders of shares of Voting Preferred Stock
issued by the Company pursuant to this option (the Holders)
pursuant to which the Holders shall grant to the Company the
right and option to purchase, exercisable at any time or times
after the date on which the Optionee ceases to be the Chairman
of the Board of the Company, part or all of the Holders
Voting Preferred, such option being exercisable pursuant to
the terms and conditions of this Section 7. Exercise of the
option by the Company to purchase shares of Voting Preferred
Stock shall be effected by written notice to the Holder or
Holders of the shares of Voting Preferred Stock which the
Company shall have elected, in its sole discretion, to
purchase stating the closing date and place of closing.
Payment of the purchase price to the Holder as hereinafter
provided shall be tendered to the Holder against delivery of
duly endorsed certificates representing the Voting Preferred
Shares purchased at the time and place set forth in such
written notice. If the Holder does not deliver duly endorsed
stock certificates at the closing representing all of the
Voting Preferred Shares being purchased, free of all adverse
claims, the transfer and sale of the Voting Preferred Shares
being purchased shall nonetheless be deemed to be effective as
of such date without any further action and the Company shall
record such transfer on the books and records of the Company,
provided that the Company shall hold the purchase price,
without interest, for payment at a subsequent date against
delivery of duly endorsed stock certificates. The option
granted by this Section 7 shall be exercisable on and after
the date on which the Optionee shall have ceased to be
Chairman of the Board of the Company whatever the reason,
whether voluntary or involuntary including death or
disability. The purchase price, payable in cash against
delivery of duly endorsed certificates representing the Voting
Preferred Shares being purchased, shall be the exercise price
paid by the Optionee to the Company for the Voting Preferred
Shares being purchased plus any accrued but unpaid dividends
thereon.
8. THIS OPTION AND THE TERMINATION AND CANCELLATION OF THE
OUTSTANDING OPTION CERTIFICATE ARE CONDITIONED ON THE APPROVAL
OF AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF THE
COMPANY INCREASING THE NUMBER OF AUTHORIZED SHARES OF VOTING
PREFERRED STOCK FROM 750 TO 10,000, AND IN THE EVENT THAT A
MAJORITY OF STOCKHOLDERS OF THE COMPANY HAVE NOT APPROVED THIS
AMENDMENT ON OR BEFORE JUNE 15, 1997, THIS OPTION CERTIFICATE
SHALL BE NULL AND VOID AND OF NO FURTHER FORCE AND EFFECT.
This Option agreement is executed and effective as of this
14th day of March, 1997.
CFC International, Inc.
By /s/ Robert J. DuPriest
President
I hereby assent to the terms and conditions stated above.
/s/ Roger F. Hruby
Roger F. Hruby, Optionee
APPENDIX A
CORPORATE PERFORMANCE GRAPH
This graph displays cumulative shareholder return with the
dollar amount on the Y axis and the time period on the X axis.
