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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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:
[ ] 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 R
CARBO CERAMICS INC.
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(Name of Registrant as Specified In Its Charter)
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(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:
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(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):
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[ ] 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:
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CARBO CERAMICS INC.
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Shareholders of CARBO Ceramics Inc.:
Notice is hereby given that the Annual Meeting of Shareholders of CARBO Ceramics
Inc. will be held Tuesday, April 10, 2001 at 9:00 A.M. local time, at the
Mansion on Turtle Creek, 2821 Turtle Creek Boulevard, Dallas, Texas, for the
following purposes:
1. To elect six directors, the names of whom are set forth in the
accompanying proxy statement, to serve until the 2002 Annual Meeting.
2. To ratify and approve the CARBO Ceramics Inc. 1996 Stock Option Plan
for Key Employees, as amended.
3. To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company.
4. To transact such other business as may properly be brought before the
meeting.
Shareholders of record at the close of business on February 15, 2001 are the
only shareholders entitled to notice of and to vote at the Annual Meeting of
Shareholders.
By Order of the Board of Directors,
/s/ PAUL G. VITEK
Paul G. Vitek
Secretary/Treasurer
March 12, 2001
IMPORTANT
Whether or not you expect to attend the meeting, please vote, sign, date and
return the enclosed proxy in the enclosed self-addressed envelope as promptly as
possible. If you attend the meeting, you may vote your shares in person, even
though you have previously signed and returned your proxy.
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CARBO CERAMICS INC.
6565 MacArthur Boulevard
Suite 1050
Irving, Texas 75039
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
The enclosed Proxy is solicited on behalf of the Board of Directors of CARBO
Ceramics Inc. (the "Company") for use at the Company's Annual Meeting of
Shareholders ("Annual Meeting") to be held April 10, 2001 at 9:00 A.M local
time, or at any adjournment or postponement thereof, for the purposes set forth
herein and in the accompanying Notice of Annual Meeting of Shareholders. The
Annual Meeting will be held at the Mansion on Turtle Creek, 2821 Turtle Creek
Boulevard, Dallas, Texas.
The Company's principal executive offices are located at 6565 MacArthur
Boulevard, Suite 1050, Irving, Texas 75039. The telephone number at that address
is (972) 401-0090.
The cost of preparing, assembling, and mailing the proxy material and of
reimbursing brokers, nominees, and fiduciaries for the out-of-pocket and
clerical expenses of transmitting copies of the proxy material to the beneficial
owners of shares held of record by such persons will be borne by the Company.
The Company does not intend to solicit proxies otherwise than by use of the
mail, but certain employees of the Company, without additional compensation, may
use personal efforts, by telephone or otherwise, to obtain proxies. These proxy
solicitation materials are being mailed on or about March 12, 2001 to all
shareholders entitled to vote at the Annual Meeting.
A shareholder giving a proxy pursuant to this solicitation may revoke it at any
time before its use by delivering to the Secretary of the Company a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the Annual Meeting and voting in person.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company that are intended to be presented at
the Company's 2002 Annual Meeting must be received by the Secretary of the
Company no later than November 11, 2001 in order to be considered for inclusion
in the proxy statement and form of proxy for that meeting.
RECORD DATE, SHARES OUTSTANDING AND VOTING
Only shareholders of record at the close of business on February 15, 2001 are
entitled to notice of, and to vote at, the Annual Meeting. At the record date,
14,875,850 shares of the Company's Common Stock were issued and outstanding and
entitled to be voted at the meeting.
Every shareholder is entitled to one vote for each share held with respect to
each matter, including the election of directors, that comes before the Annual
Meeting. Shareholders do not have the right to cumulate their votes in the
election of directors. If a shareholder specifies how the proxy is to be voted
with respect to any of the proposals for which a choice is provided, the proxy
will be voted in accordance with such specifications. If a shareholder fails to
specify with respect to such proposals, the proxy will be voted FOR all director
nominees, FOR the ratification and approval of the CARBO Ceramics Inc. 1996
Stock Option Plan for Key Employees, as amended, and FOR the ratification of the
appointment of Ernst & Young LLP as independent auditors. Broker non-votes and
abstentions are not treated as votes cast or shares entitled to vote with
respect to such proposals.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists as of March 1, 2001, with respect to each person who
is known to the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock of the Company, the name and address of such
owner, the number of shares of Common Stock beneficially owned and the
percentage such shares comprised of the outstanding shares of Common Stock of
the Company. Except as indicated, each holder has sole voting and dispositive
power over the listed shares.
SHARES BENEFICIALLY
OWNED
-------------------
NUMBER PERCENT
--------- -------
NAME AND ADDRESS
OF BENEFICIAL OWNER
-------------------
William C. Morris (1) 4,161,500 27.97%
100 Park Avenue
New York, New York 10017
Lewis L. Glucksman 1,625,000 10.92%
388 Greenwich Street
New York, New York 10013
FMR Corporation (2) 1,546,700 10.40%
82 Devonshire Street
Boston, MA 02109
Robert S. Rubin 1,249,100 8.40%
388 Greenwich Street
New York, New York 10013
George A. Weigers 904,000 6.08%
871 Cooley Mesa Road
Gypsum, CO 81637
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(1) Shares shown as beneficially owned by Mr. Morris include 710,000 shares of
Common Stock owned by Mr. Morris' wife and charitable foundations as to
which Mr. Morris disclaims any beneficial ownership.
(2) Based on Schedule 13G filed with the Securities and Exchange Commission as
of December 31, 2000. FMR Corp. held sole dispositive power as to 574,200
shares and various persons shared the right to receive or the power to
direct dividends from, or the proceeds from the sale of, the shares.
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The following table sets forth the number of shares of Common Stock of the
Company beneficially owned by each of the current directors and executive
officers and by all directors and executive officers as a group as of March 1,
2001.
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
------------------------------- PERCENT OF
CURRENTLY ACQUIRABLE COMMON STOCK
DIRECTORS OWNED WITHIN 60 DAYS BENEFICIALLY OWNED
----------- -------------- ------------------
Claude E. Cooke, Jr. 1,500 0 *
William C. Morris (1) 4,161,500 0 27.97%
John J. Murphy 3,500 0 *
Jesse P. Orsini 500,000 200,000 4.64%
Robert S. Rubin 1,249,100 0 8.40%
OTHER EXECUTIVE OFFICERS
Terry P. Keefe 2,500 35,000 *
C. Mark Pearson 2,600 110,000 *
Paul G. Vitek 0 47,400 *
DIRECTORS AND
EXECUTIVE OFFICERS AS A GROUP (1) 5,920,700 392,400 41.35%
*Less than 1% of total shares outstanding
(1) Shares shown as beneficially owned by Mr. Morris include 710,000 shares of
Common Stock owned by Mr. Morris' wife and charitable foundations as to
which Mr. Morris disclaims any beneficial ownership.
ELECTION OF DIRECTORS
NOMINEES
A board of six directors is to be elected at the meeting. Each director elected
to the board will hold office until the next Annual Meeting or until his or her
successor has been elected and qualified. Unless otherwise instructed, the proxy
holders will vote the proxies received by them for the six nominees named below,
five of who are presently directors of the Company. In the event that any
nominee is unable or declines to serve as a director at the time of the Annual
Meeting, the proxies will be voted for any nominee who shall be designated by
the present Board of Directors to fill the vacancy, unless the size of the Board
is reduced. The proxies cannot be voted for a greater number of persons than the
number of nominees named in this proxy statement. It is not expected that any
nominee will be unable or will decline to serve as a director.
BUSINESS EXPERIENCE
DURING PAST 5 YEARS AND DIRECTOR
NAME (AGE) OTHER INFORMATION SINCE
---------------------- ------------------------------------------------------------- --------
William C. Morris (62) Chairman of the Board of the Company; Chairman of the 1987
Board of Directors of J. & W. Seligman & Co., Incorporated
(investment advisory firm); Chairman of the Board of
Tri-Continental Corporation; and Chairman of the Boards of
the companies in the Seligman family of investment companies.
Director of Kerr-McGee Corporation.
Claude E. Cooke, Jr. (71) Of Counsel with Baker Botts LLP (law firm); 1996
Partner, Hutcheson & Grundy LLP (law firm) from 1996 to 1997;
Of Counsel with Pravel, Hewitt, Kimball & Krieger from 1990 to
1996; employed by Exxon Production Research Company from
1954 to 1986; the inventor of sintered bauxite, the original
ceramic proppant.
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BUSINESS EXPERIENCE
DURING PAST 5 YEARS AND DIRECTOR
NAME (AGE) OTHER INFORMATION SINCE
-------------------- -------------------------------------------------------------- --------
John J. Murphy (69) Chairman of the Board of Dresser Industries, Inc. (hydrocarbon 1996
energy services and products) in 1996; Chairman and
Chief Executive Officer of Dresser Industries,
Inc. from 1983 to 1995; President of Dresser Industries, Inc.
from 1982 to 1992; Director of PepsiCo., Inc., Kerr-McGee
Corporation, W.R. Grace & Co. and Shaw Industries, Ltd.
Jesse P. Orsini (60) President and Chief Executive Officer for the Company 1987
since its founding in 1987. Mr. Orsini will be retiring as an
executive officer of the Company effective April 10, 2001 and
will continue to serve the Company in a consulting capacity.
C. Mark Pearson (44) Appointed to serve as the Company's President and Chief --
Executive Officer effective April 10, 2001. Senior Vice
President, Marketing & Technology for the Company since
January 2001; Vice President, Marketing & Technology for
the Company from March, 1997 to 2001; Associate Professor
of Petroleum Engineering at the Colorado School of Mines
from 1995 to March, 1997; Arco Petroleum Company from
1984 to 1995.
Robert S. Rubin (69) Managing Director of Salomon Smith Barney (investment 1997
banking firm) and predecessor firms since 1989.
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETING ATTENDANCE
The Board of Directors met four times during the last fiscal year. The Board of
Directors has Audit and Compensation Committees, each comprised of three
members. The Board of Directors does not have a nominating committee. Each
director attended at least 75% of the aggregate number of meetings of the Board
of Directors and the committees of which such director is a member.
The Audit Committee consists of Claude E. Cooke, Jr. (Chairman), John J. Murphy
and Robert S. Rubin. The Committee met twice during the last fiscal year. The
Audit Committee recommends engagement of the independent auditors, considers the
fee arrangement and scope of the audit, reviews the financial statements and the
independent auditors' report, considers comments made by the independent
auditors with respect to the Company's internal control structure, and reviews
internal accounting procedures and controls with the Company's financial and
accounting staff. The Audit Committee is governed by a written charter approved
by the Board of Directors. A copy of this charter is included as Appendix A to
this proxy statement.
The Compensation Committee consists of William C. Morris (Chairman), Robert S.
Rubin and John J. Murphy. The Committee met three times during the last fiscal
year. The Compensation Committee establishes policies relating to the
compensation of executive officers and key management employees of the Company,
reviews and approves the President and Chief Executive Officer's recommendations
on incentive compensation awards and oversees the administration of the
Company's stock option plan.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company's financial reporting process on behalf
of the Board of Directors. Management has the primary responsibility for the
financial statements and the reporting process including the systems of internal
controls. In fulfilling its oversight responsibilities, the Committee has
reviewed with management the audited financial statements in the Annual Report
including a discussion of the acceptability and quality of the accounting
principles, the reasonableness of significant judgments and the clarity of
disclosures in the financial statements.
The Committee reviewed with the independent auditors, who are responsible for
expressing an opinion on the conformity of those audited financial statements
with generally accepted accounting principles, their judgments as to the
acceptability and quality of the Company's accounting principles and such other
matters appropriate for discussion with the Committee under generally accepted
auditing standards. In addition, the Committee has
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discussed with the independent auditors their independence from management and
the Company and considered the compatibility of nonaudit services with the
auditor's independence.
The Committee discussed with the Company's independent auditors the overall
scope and plans for their audit. The Committee meets with the independent
auditors, with and without management present, to discuss the results of their
examinations, their evaluations of the Company's internal controls, and the
overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors (and the Board has approved) that the
audited financial statements be included in the Annual Report on Form 10-K for
the year ended December 31, 2000 for filing with the Securities and Exchange
Commission. The Committee and the Board have also recommended, subject to
shareholders' ratification, the selection of the Company's independent auditors.
CARBO Ceramics Inc. Audit Committee
Claude E. Cooke, Jr., Chairman
John J. Murphy
Robert S. Rubin
March 12, 2001
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning annual
compensation for the Company's Chief Executive Officer and executive officers
whose total salary and bonus exceeded $100,000 for services rendered in all
capacities to the Company during the year ended December 31, 2000:
SUMMARY COMPENSATION TABLE
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ANNUAL COMPENSATION
----------------------------------
OTHER
ANNUAL
COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1) SATION (2)
------------------------------------ ---- --------- --------- ----------
Jesse P. Orsini, Director, President 2000 $ 275,000 $ 131,608 $ 13,879
and Chief Executive Officer 1999 275,000 81,315 13,074
1998 275,000 302,469 18,345
C. Mark Pearson, Sr. Vice President 2000 105,000 120,000 13,879
of Marketing and Technology 1999 98,580 75,000 13,074
1998 93,000 160,000 18,345
Paul G. Vitek, Sr. Vice President of 2000 105,000 115,000 13,879
Finance & Administration and 1999 98,580 75,000 13,074
Chief Financial Officer 1998 93,000 155,000 18,345
Terry P. Keefe, Vice President of 2000 102,000 110,000 13,879
Manufacturing 1999 97,200 70,000 13,074
1998 93,000 145,000 18,345
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(1) For Messrs. Pearson, Vitek and Keefe, bonus consists of amounts payable
under the Company's incentive compensation plan, which includes a deferred bonus
payable in equal annual amounts over a consecutive three-year period that may be
forfeited to the Company under certain circumstances. The deferred portion of
the bonus for Messrs. Pearson, Vitek and Keefe was $25,000 each in 2000 and
$85,000, $80,000 and $75,000, respectively for 1998. No deferred bonus was
awarded in 1999.
(2) Consists of Company contributions to the savings and profit sharing plan.
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The following table sets forth certain information concerning options exercised
during 2000 and presents the value of unexercised options held by the named
executives at December 31, 2000:
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS
SHARES AT FISCAL YEAR-END AT FISCAL YEAR-END
ACQUIRED EXERCISABLE (E)/ EXERCISABLE (E)/
NAME ON EXERCISE (#) VALUE REALIZED UNEXERCISABLE (U) UNEXERCISABLE (U)
---------------- --------------- -------------- -------------------- ------------------
Jesse P. Orsini -- $ -- 250,000E $ 5,109,500E
C. Mark Pearson -- -- 27,500U 473,920U
-- -- 82,500E 1,421,760E
Paul G. Vitek 55,000 1,086,250 55,000E 1,124,090E
Terry P. Keefe -- -- 110,000E 2,248,180E
The Company has entered into an employment agreement with Mr. Orsini, which will
expire upon his retirement from the Company on April 10, 2001 (the "Employment
Term"), pursuant to which Mr. Orsini is employed as President and Chief
Executive Officer of the Company. During the Employment Term, Mr. Orsini will
receive an annual base salary of not less than $250,000 and an incentive bonus
for each fiscal year (prorated for 2001) equal to the sum of (a) 0.5% of the
Company's earnings before interest and taxes for such fiscal year ("EBIT") up to
$20,000,000 plus (b) 1.0% of EBIT between $20,000,000 and $25,000,000 plus (c)
2.0% of EBIT in excess of $25,000,000. Mr. Orsini will also be entitled to
continue to participate in all benefit plans available to other executive
officers of the Company during the Employment Term, other than the Company's
Incentive Compensation Plan. In the event that Mr. Orsini's employment is
terminated by the Company without cause during the Employment Term, Mr. Orsini
will receive two years' base salary, payable in installments, and a prorated
incentive bonus, any unvested stock options that he holds under the Company's
stock option plan will vest immediately and all of his outstanding options under
the Company's stock option plan will be exercisable for a period of 30 days
following termination. In the event that Mr. Orsini's employment is terminated
for any other reason, Mr. Orsini will receive his base salary earned to the date
of termination and any earned but unused vacation and any stock options that he
holds will terminate in accordance with the terms of the Company's stock option
plan. In addition, in the event of Mr. Orsini's death or disability or if Mr.
Orsini terminates his employment following a change in control of the Company,
Mr. Orsini will receive a prorated incentive bonus for the year in which his
employment terminates. The agreement also contains a five-year non-competition
covenant that would become effective upon termination of Mr. Orsini's employment
for any reason.
The Company has entered into an employment agreement with Mr. Pearson pursuant
to which Mr. Pearson will be employed as President and Chief Executive Officer
of the Company effective April 10, 2001 through December 31, 2002. During the
term of this agreement, Mr. Pearson will receive an annual base salary of not
less than $200,000 and an incentive bonus for each fiscal year (prorated for
2001) equal to the sum of (a) 0.5% of the Company's earnings before interest and
taxes for such fiscal year ("EBIT") up to $20,000,000 plus (b) 1.0% of EBIT in
excess of $20,000,000. Mr. Pearson will also be entitled to continue to
participate in all benefit plans available to other executive officers of the
Company during the employment term, other than the Company's Incentive
Compensation Plan. In the event of Mr. Pearson's death or disability during the
employment term, Mr. Pearson, or his estate, will receive a prorated incentive
bonus for the year in which his employment terminates. In the event that Mr.
Pearson's employment is terminated by the Company without cause during the
employment term, Mr. Pearson will receive two years' base salary, payable in
installments, and a prorated incentive bonus, any unvested stock options that he
holds under the Company's stock option plan will vest immediately and all of his
outstanding options under the Company's stock option plan will be exercisable
for a period of 30 days following termination. In the event that Mr. Pearson's
employment is terminated by the Company or that Mr. Pearson voluntarily
terminates his employment for good reason (as defined), during the one-year
period following a change in control of the Company, Mr. Pearson will receive
two years' base salary, payable in installments, and a prorated incentive bonus,
any unvested stock options that he holds under the Company's stock option plan
will vest immediately and all of his outstanding options under the Company's
stock option plan will be exercisable for a period of 30 days following
termination. In the event that Mr. Pearson's employment is terminated for any
other reason, Mr. Pearson will receive his base salary earned to the date of
termination and any earned but unused vacation and any stock options that he
holds will terminate in accordance with the terms of the Company's stock option
plan. The agreement also contains a two-year non-competition covenant that would
become effective upon termination of Mr. Pearson's employment for any reason.
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DIRECTORS' FEES
Directors who are employees of the Company are not compensated for serving as
directors. Directors who are not employees of the Company are paid $4,000 per
calendar quarter plus $1,000 per meeting for attending meetings of the Board of
Directors or meetings of any committee thereof not immediately preceding or
following a meeting of the Board of Directors. The Chairman of the Board of
Directors is paid $8,000 per calendar quarter plus $1,000 per meeting for
attending meetings of the Board of Directors or meetings of any committee
thereof not immediately preceding or following a meeting of the Board of
Directors. All directors are reimbursed for out-of-pocket expenses incurred by
them in attending meetings of the Board of Directors and its committees and
otherwise in performing their duties as directors.
BOARD OF DIRECTORS' AFFILIATIONS
Jesse P. Orsini currently serves as President and CEO of the Company and has
been an employee of the Company since its founding in 1987. Upon his retirement
from the Company on April 10, 2001, and for a period of one year thereafter (the
"Consulting Period"), Mr. Orsini will provide consulting services to the Company
at management's request. Mr. Orsini's compensation for such services will be
$75,000 per year. In addition, during the Consulting Period, the Company will
continue to provide medical insurance coverage to Mr. Orsini.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION POLICY. The goal of the Company's compensation policy is to ensure
that executive compensation is related to and supports the Company's overall
objectives of improving profitability and enhancing shareholder value. To
achieve this goal, the Compensation Committee has adopted the following
guidelines to direct compensation decisions:
o provide a competitive compensation package that enables the Company to
attract and retain superior management personnel;
o relate compensation to the performance of the Company and the
individual;
o align employee objectives with the objectives of shareholders by
encouraging executive stock ownership.
ELEMENTS OF COMPENSATION. The Committee believes that the above objectives are
best achieved by combining current and deferred cash compensation with equity
based compensation. The Company's compensation program for executive officers
and other key managers consists of (i) base salary; (ii) performance-based
current and deferred bonuses based upon the Company's net income before tax;
(iii) stock option grants under the Company's 1996 Stock Option Plan for Key
Employees; and (iv) matching contributions and discretionary contributions under
the Company's Savings and Profit Sharing Plan.
Base Salary. Executives' base salary levels are reviewed annually to determine
whether they are near the median range for persons holding similar positions
with companies that are of a similar size. It is the goal of the Compensation
Committee to set salary ranges for the Company's executive officers at the 50th
percentile when compared to these similar businesses. The Compensation Committee
uses various salary surveys, prepared by independent compensation analysts, to
determine the salary level that falls at the 50th percentile. Individual
salaries are established within the salary range based on individual performance
in the most recently completed twelve months.
Current and Deferred Bonuses. Since the inception of the Company, it has been
management's objective to have a significant portion of key employee
compensation performance-based. In order to achieve this objective the Company
established the CARBO Ceramics Inc. Incentive Compensation Plan ("the Incentive
Compensation Plan") that generates an incentive compensation "pool", the size of
which is determined by the net income before tax that is generated by the
Company annually. Upon its formation, the Compensation Committee reviewed and
ratified the Incentive Compensation Plan.
The President and Chief Executive Officer of the Company recommends to the
Compensation Committee a distribution of the pool among key employees, including
executive officers, of the Company. Individual performance is the key factor
considered by the President and Chief Executive Officer in determining the
recommended distribution for each key employee and executive officer. In order
to retain the services of key employees and executive officers, it is intended
that a portion of the amount awarded under the Incentive Compensation Plan be
paid on a deferred basis over a three year period and is subject to forfeiture
if the executive's employment with the Company ceases for any reason other than
death, permanent disability or normal retirement. In 2000, the portion of
incentive compensation that was deferred was approximately 22 percent for
executive officers, excluding the President and Chief Executive Officer.
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Stock Options. The Compensation Committee strongly believes that the interests
of shareholders and executives become more closely aligned when executives are
provided with an opportunity to acquire a proprietary interest in the Company
through ownership of the Company's Common Stock. Accordingly, key employees and
executive officers of the Company are eligible to participate in the 1996 Stock
Option Plan for Key Employees whereby they are granted options to purchase
shares of the Company's Common Stock in the future at a price that is specified
at the time of the grant. Stock options are granted with an exercise price of no
less than the fair market value on the date of the grant and are exercisable in
four equal annual installments beginning one year after the date of the grant.
Individual stock option grants are determined based on individual and company
performance. No stock options were granted to executive officers of the Company
in 2000.
CEO COMPENSATION. Jesse P. Orsini has been President and Chief Executive Officer
of the Company since its inception in 1987. Mr. Orsini's compensation package
has been designed to encourage short and long-term performance in line with
shareholder interests. Mr. Orsini has an employment agreement with the Company
that will expire upon his retirement from the Company on April 10, 2001. Under
the terms of the agreement, Mr. Orsini will receive an annual base salary of not
less than $250,000 per year and an incentive bonus based on the net income
before tax generated by the Company. In light of the existence of the employment
agreement between the Company and Mr. Orsini, none of the incentive bonus earned
under the terms of the agreement is deferred. In 1996, Mr. Orsini was granted
options to purchase 250,000 shares of the Company's Common Stock at a price of
$17.00 per share under the terms of the 1996 Stock Option Plan for Key
Employees. The Compensation Committee believes that Mr. Orsini's total
compensation is reflective of his position and responsibility and that he is
paid comparably to chief executive officers of companies of similar size and
complexity.
C. Mark Pearson has been appointed to the position of President and Chief
Executive Officer of the Company effective April 10, 2001. Dr. Pearson's
compensation package has been designed to encourage short and long-term
performance in line with shareholder interests. Dr. Pearson has an employment
agreement with the Company that will expire on December 31, 2002. Under the
terms of the agreement, Dr. Pearson will receive an annual base salary of not
less than $200,000 per year and an incentive bonus based on the net income
before tax generated by the Company. In light of the existence of the employment
agreement between the Company and Dr. Pearson, none of the incentive bonus
earned under the terms of the agreement is deferred. In 1997, Dr. Pearson was
granted options to purchase 110,000 shares of the Company's Common Stock at a
weighted average price of $20.20 per share under the terms of the 1996 Stock
Option Plan for Key Employees. The Compensation Committee believes that Dr.
Pearson's total compensation is reflective of his position and responsibility
and that he is paid comparably to chief executive officers of companies of
similar size and complexity.
INTERNAL REVENUE CODE SECTION 162(M). Section 162(m) of the Internal Revenue
Code and the regulations thereunder place a limit of $1,000,000 on the amount of
compensation that may be deducted by the Company in any year with respect to
certain of the Company's most highly compensated officers. Section 162(m) does
not however, disallow a deduction for qualified "performance-based
compensation," the material terms of which are disclosed to and approved by
shareholders. Awards pursuant to the Company's 1996 Stock Option Plan for Key
Employees generally should qualify as "performance-based compensation," provided
the plan is approved by shareholders. The Board of Directors plans to take such
actions in the future to satisfy the requirements of Section 162(m) and minimize
the loss of tax deductions related to compensation as they deem necessary and
appropriate in light of the Company's compensation objectives.
CARBO Ceramics Inc. Compensation Committee
William C. Morris, Chairman
John J. Murphy
Robert S. Rubin
March 12, 2001
RATIFICATION AND APPROVAL OF THE 1996 STOCK OPTION PLAN FOR KEY EMPLOYEES, AS
AMENDED
GENERAL. In 1996, the Company adopted a stock option plan pursuant to which
options to purchase shares of Common Stock may be granted to certain officers
and key employees of the Company and its affiliates chosen by the Compensation
Committee which administers such plan (as it may be amended, the "Option Plan").
The purpose of the Option Plan is to advance the interests of the Company and
its shareholders by providing officers and key employees of the Company, upon
whose judgment, initiative and efforts the successful conduct of the business of
the Company largely depends, with an additional incentive to perform in a
superior manner as well as to attract people with experience and ability. Under
the Option Plan, the Compensation Committee is currently authorized to grant
options to purchase an aggregate of 1,000,000 shares of Common Stock. Subject
to, and effective upon, receipt of the requisite approval by the Company's
shareholders pursuant to the Option Plan, the Board of Directors has amended
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the Option Plan to increase the aggregate number of shares with respect to which
the Compensation Committee may grant options under the Option Plan to 1,250,000
shares of Common Stock.
In addition to soliciting the approval of the Company's shareholders for such
amendment, the Board of Directors is soliciting the ratification and approval of
the Option Plan in order to facilitate compliance with Section 162(m) of the
Internal Revenue Code of 1986 (the "Code"), to the extent applicable. Section
162(m) limits the ability of publicly held companies to deduct compensation paid
during a fiscal year to a "covered employee" (as defined in Section 162(m)) in
excess of $1,000,000, unless such compensation qualifies as "performance-based
compensation" (as defined in Section 162(m)) or meets another exception
specified in Section 162(m). If the shareholders do not ratify and approve the
Option Plan, the Board of Directors and the Compensation Committee will consider
alternative ways to achieve the goals currently met through the Option Plan and
to provide appropriate compensation in light of competitive market conditions.
SUMMARY OF THE OPTION PLAN. The following general description of the material
terms of the Option Plan is qualified in its entirety by reference to the Option
Plan attached as Appendix B.
Under the Option Plan, the Compensation Committee is authorized to grant options
to purchase an aggregate of 1,250,000 shares of Common Stock and to set the
terms of each option, including conditions relating to its vesting and exercise.
To the extent options terminate, expire or are cancelled without having been
exercised, new options may be granted with respect to the underlying shares.
Under the Option Plan, no individual may be granted options to purchase more
than an aggregate of 500,000 shares of Common Stock. The persons eligible to
receive options under the Option Plan are such officers and key employees of the
Company or its affiliates who are largely responsible for the management, growth
and protection of the business of the Company and its affiliates. As of February
28, 2001, approximately 20 employees of the Company and its affiliates were
eligible to receive options under the Option Plan. The Compensation Committee
has the authority to designate the eligible persons who will be granted options
and the number of shares subject to such options. Directors of the Company who
are not employees of the Company or its affiliates may not be granted options
under the Option Plan. The market value of a share of Common Stock as of
February 28, 2001 was $39, which was the closing price of a share of the Common
Stock on that day as reported by the New York Stock Exchange composite tape.
Options granted under the Option Plan are "non-statutory options" (options which
do not afford income tax benefits to recipients, but the exercise of which may
provide tax deductions for the Company). Each option will have an exercise price
per share equal to the fair market value of a share of Common Stock on the date
of grant. The exercise price of an option (and any withholding taxes required
upon exercise) may be paid by the option holder in cash or, with the approval of
the Compensation Committee, with shares of previously-owned Common Stock, or
partly in cash and partly with such shares (or, in the case of tax withholding,
by the withholding of shares upon exercise). In the event of termination of
employment of an option holder for any reason other than cause, disability or
death, options that were exercisable at the time of such termination shall
remain exercisable for thirty days after such termination (at which time they
will expire) and options that were not exercisable at the time of such
termination shall expire upon such termination. In the event of termination of
employment of an option holder on account of disability or death, options that
were exercisable at the time of such termination shall remain exercisable for
one year after such termination (at which time they will expire) and options
that were not exercisable at the time of such termination shall expire upon such
termination. In the event of termination of employment of an option holder for
cause, all outstanding options granted to such option holder shall expire upon
such termination. No option shall remain exercisable for more than ten years
after its date of grant. Upon a change in control of the Company, each option
outstanding at such time shall become fully and immediately exercisable and
shall remain exercisable until its expiration, termination or cancellation in
accordance with the terms of the Option Plan.
No options granted under the Option Plan will be transferable by the option
holder other than by will or by the laws of descent and distribution and options
may only be exercised during his or her lifetime by the option holder, or by the
option holder's guardian or legal representative.
The Board of Directors reserves the right to terminate or amend the Option Plan
at any time (although the approval of the Company's shareholders is required to
increase the number of shares of Common Stock that may be issued under the
Option Plan, to materially increase the benefits accruing to any option holders
or to materially modify eligibility requirements for participation in the Option
Plan). The Compensation Committee is authorized, however, to make certain
adjustments to the Option Plan and any outstanding options in the event of a
change in the capitalization of the Company due to certain corporate events
specified in the Option Plan. The Compensation Committee is also authorized to
accelerate the exercisability of any option and to extend the term of any option
(to a date not more than ten years from its date of grant). The right of the
Compensation Committee to grant options under the Option Plan will terminate on
April 26, 2006.
NEW PLAN BENEFITS. The future option grants which will be made to eligible
recipients under the Option Plan (including the amendment) upon its ratification
and approval by the Company's shareholders are not determinable at this time.
Any such grant of options will be in the discretion of the Compensation
Committee in accordance with the terms of the Option Plan. In 2000, no options
were granted to executive officers of the Company and options with respect to a
total of 20,000 shares of Common Stock were granted to other employees under the
Option Plan. As of March 1, 2001, options with respect to a total of 915,000
shares of Common Stock were granted under the Option
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Plan of which 641,150 remain outstanding. Options currently held by Messrs.
Orsini, Vitek, Keefe and Pearson under the Option Plan are set forth above under
the caption "Executive Compensation."
U.S. FEDERAL INCOME TAX CONSEQUENCES. An option holder will not be deemed to
receive any income at the time an option is granted, nor will the Company be
entitled to any deduction at that time. When any part of an option is exercised,
the option holder will be deemed to have received ordinary income in an amount
equal to the excess, if any, of the aggregate fair market value of the shares of
Common Stock received on the exercise of the option over the total exercise
price of the option paid. Any ordinary income realized by an option holder upon
exercise of an option will increase his or her tax basis in the shares of Common
Stock received and the capital gain holding period will commence on the date
following the date of exercise. An option holder who surrenders previously-owned
Common Stock in payment of the exercise price of an option will not recognize
gain or loss on his or her surrender of such shares. If the option holder
surrenders previously-owned Common Stock in payment of any or all of the
exercise price of an option, however, the shares of Common Stock received upon
exercise of such option equal in number to the shares of previously-owned Common
Stock so surrendered would have the tax basis and capital gain holding period
applicable to such surrendered Common Stock. In such case, the additional shares
of Common Stock received upon exercise would have a tax basis equal to the
amount taxable as ordinary income upon such exercise (as described above) plus
the cash paid on exercise (if any) and a new capital gain holding period
commencing on the date following the date of exercise. The Company generally
will be entitled to a federal income tax deduction in an amount equal to the
amount of ordinary income realized by the option holder.
Upon any subsequent sale of the shares of Common Stock acquired upon the
exercise of an option, the option holder will realize gain (generally, the
excess of the amount received over the fair market value of the shares on the
date ordinary income was recognized) or loss (generally, the excess of the fair
market value of the shares on the date ordinary income was recognized over the
amount received), either long-term or short-term capital gain or loss depending
upon his or her holding period for such shares.
Options that are granted, accelerated or enhanced upon the occurrence of a
change in control of the Company may give rise, in whole or in part, to "excess
parachute payments" within the meaning of Section 280G of the Code and, to such
extent, will be non-deductible by the Company and subject to a 20% excise tax by
the option holder. An affirmative majority of all votes cast on this matter is
required for approval and ratification of the Plan. The Board of Directors
recommend the shareholders vote "FOR" ratification and approval of the Company's
1996 Stock Option Plan for Key Employees, as amended.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Subject to ratification by the shareholders, the Board of Directors has
reappointed Ernst & Young LLP as independent auditors to audit the financial
statements of the Company for the current fiscal year. Fees for the last fiscal
year were annual audit $94,000, audit related services $58,000, and all other
nonaudit services $24,000.
Ernst & Young LLP has acted as auditors for the Company since its formation in
1987. Representatives of the firm of Ernst & Young LLP are expected to be
present at the Annual Meeting and will have an opportunity to make a statement
if they so desire and will be available to respond to appropriate questions.
The Audit Committee and the Board of Directors recommend the shareholders vote
"FOR" such ratification.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before the Annual
Meeting. However, if other matters should properly come before the Annual
Meeting, it is the intention of each of the persons named in the proxy to vote
in accordance with his judgment on such matters.
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STOCK PERFORMANCE GRAPH
The following graph sets forth the cumulative total shareholder return (assuming
reinvestment of dividends) to CARBO Ceramics Inc. shareholders during the period
beginning April 23, 1996, and ending December 31, 2000, as well as an overall
stock market index (The S&P Composite Index) and a peer group index (Oil and Gas
Field Service Stocks, Source: Media General Financial Services):
[PERFORMANCE GRAPH]
4/23/96 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
CARBO CERAMICS 100 124.45 191.87 106 134.37 232.29
S&P COMPOSITE 100 115 153.37 197.2 238.7 216.96
OIL & GAS FIELD SERVICE STOCKS 100 119.37 180.92 93.03 124.8 172.23
The stock performance graph assumes $100 was invested on April 23, 1996. For
CARBO Ceramics Inc. the initial public offering price of $17 per share was used
to establish the value as of April 23, 1996.
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APPENDIX A
AUDIT COMMITTEE CHARTER
Organization
This charter governs the operations of the audit committee. The committee shall
review and reassess the charter at least annually and obtain the approval of the
board of directors. The committee shall be appointed by the board of directors
and shall comprise at least three directors, each of whom are independent of
management and the Company. Members of the committee shall be considered
independent if they have no relationship that may interfere with the exercise of
their independence from management and the Company. All committee members shall
be financially literate, and at least one member shall have accounting or
related financial management expertise.
Statement of Policy
The audit committee shall provide assistance to the board of directors in
fulfilling their responsibility to the shareholders, potential shareholders, and
investment community relating to corporate accounting, reporting practices of
the corporation, and the quality and integrity of the financial reports of the
corporation. In so doing, it is the responsibility of the audit committee to
maintain free and open means of communication between the directors, the
independent auditors and the financial management of the corporation.
Responsibilities and Processes
The primary responsibility of the audit committee is to oversee the Company's
financial reporting process on behalf of the board and report the results of
their activities to the board. Management is responsible for preparing the
Company's financial statements, and the independent auditors are responsible for
auditing those financial statements. In carrying out its responsibilities, the
Committee believes its policies and procedures should remain flexible, in order
to best react to changing conditions and circumstances.
The following shall be the principal recurring processes of the audit committee
in carrying out its oversight responsibilities. The processes are set forth as a
guide with the understanding that the committee may supplement them as
appropriate.
The committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately accountable to
the board and the audit committee, as representatives of the Company's
shareholders. The committee shall have the ultimate authority and responsibility
to evaluate and, where appropriate, recommend the replacement of the independent
auditors. The committee shall discuss with the auditors their independence from
management and the Company including the matters in the written disclosures
required by the Independence Standards Board and shall consider the
compatibility of nonaudit services with the auditors' independence. Annually,
the committee shall review and recommend to the board the selection of the
Company's independent auditors, subject to shareholders' approval.
The committee shall discuss with the independent auditors the overall scope and
plans for their audit including the adequacy of staffing and compensation. Also,
the committee shall discuss with management and the independent auditors the
adequacy and effectiveness of the accounting and financial controls, including
the Company's system to monitor and manage business risk and legal and ethical
compliance programs. Further, the committee shall meet separately with the
independent auditors, with and without management present, to discuss the
results of their examinations.
The committee shall review the interim financial statements with management and
the independent auditors prior to the filing of the Company's Quarterly Report
on Form 10-Q. Also, the committee shall discuss the results of the quarterly
review and any other matters required to be communicated to the committee by the
independent auditors under generally accepted auditing standards. The chair of
the committee may represent the entire committee for the purposes of this
review.
The committee shall review with management and the independent auditors the
financial statements to be included in the Company's Annual Report on Form 10-K
(or the annual report to shareholders if distributed prior to the filing of Form
10-K), including their judgment about the acceptability and quality
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of the accounting principles, the reasonableness of significant judgments, and
the clarity of the disclosures in the financial statements. Also, the committee
shall discuss the results of the annual audit and any other matters appropriate
for discussion with the independent auditors under generally accepted auditing
standards.
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APPENDIX B
CARBO CERAMICS INC.
1996 STOCK OPTION PLAN FOR KEY EMPLOYEES
(As Adopted by the Board of Directors on April 9, 1996
and Approved by the Shareholders on April 16, 1996)
1. Purpose of the Plan
The purpose of the Carbo Ceramics Inc. l996 Stock Option Plan is to
advance the interests of the Company and its shareholders by providing officers
and key employees of the Company and its affiliates, upon whose judgment,
initiative and efforts the successful conduct of the business of the Company and
its affiliates largely depends, with incentives and rewards to encourage them to
continue in the employ of the Company and its affiliates and to perform in a
superior manner.
2. Definitions
As used in the Plan, the following definitions apply to the terms
indicated below:
(a) "Affiliate" shall mean a "parent corporation" or a "subsidiary
corporation" of the Company as such terms are defined in Section 424 of the
Code.
(b) "Board of Directors" shall mean the Board of Directors of the
Company.
(c) "Cause" shall mean, with respect to any Participant, (i) any
failure by the Participant substantially to perform his duties to the Company;
(ii) any act or omission involving dishonesty, fraud, willful misconduct or
gross negligence on the part of the Participant that is or may be materially
injurious to the Company; and (iii) any felony or other crime involving moral
turpitude committed by the Participant.
(d) "Change in Control" shall mean (i) the occurrence of a change in
control of the Company of a nature that would be required to be reported or is
reported in response to Item l of the current report on Form 8-K, as in effect
on the IPO Date, pursuant to Sections l3 or l5(d) of the Exchange Act; or (ii)
any Person is or becomes the "beneficial owner" (as defined in Rule l3d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company's
outstanding securities (other than any Person who was a "beneficial owner" of
securities of the Company representing 30% or more of the combined voting power
of the Company's outstanding securities prior to the IPO Date); or (iii)
individuals who constitute the Board of Directors on the IPO Date (including
individuals named as prospective directors in the prospectus included in the
registration statement relating to the IPO) (the "Incumbent Board") cease for
any reason to constitute at least a majority of the members of the Board of
Directors, provided that any person becoming a director subsequent to the date
hereof whose appointment to fill a vacancy or to fill a new Board of Directors
position was approved by a vote of at least three-quarters of the directors
comprising the Incumbent Board, or whose nomination for election by the
Company's shareholders was approved by the same nominating committee serving
under an Incumbent Board, shall be, for purposes of this clause (iii),
considered as though he were a member of the Incumbent Board; or (iv) the
occurrence of any of the following of which the Incumbent Board does not approve
(A) merger or consolidation in which the Company is not the surviving
corporation or (B) sale of all or substantially all of the assets of the
Company; or (v) stockholder approval pursuant to a proxy statement soliciting
proxies from stockholders of the Company, by someone other than the then current
management of the Company, of a plan of reorganization, merger or consolidation
of the Company with one or more corporations as a result of which the
outstanding shares of the class of securities then subject to the plan of
reorganization are exchanged or converted into cash or property or securities
not issued by the Company; or (vi) voting securities have been tendered and not
withdrawn during the tender offer period pursuant to a tender offer for 30% or
more of the voting securities of the Company.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
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(f) "Committee" shall mean the committee that the Board of
Directors shall appoint from time to time to administer the Plan. Prior to the
IPO Date, the "Committee" shall mean those members of the Board of Directors who
are not eligible to receive Options under the Plan.
(g) "Common Stock" shall mean shares of the common stock, $.01 par
value per share, of the Company.
(h) "Company" shall mean Carbo Ceramics Inc., a Delaware corporation.
(i) "Disability" shall mean any physical or mental impairment which
qualifies a Participant for (i) disability benefits under any long-term
disability plan maintained by the Company or (ii) Social Security disability
benefits, or as otherwise determined by the Board of Directors.
(j) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(l) "Fair Market Value" of a share of Common Stock with respect to any
day shall be (i) the closing sales price on the immediately preceding business
day of a share of Common Stock as reported on the principal securities exchange
on which shares of Common Stock are then listed or admitted to trading or (ii)
if not so reported, the average of the closing bid and asked prices on the
immediately preceding business day as reported on the Nasdaq National Market or
(iii) if not so reported, as determined by the Committee in its absolute
discretion. For purposes of the grant of Options in contemplation of the IPO,
Fair Market Value shall mean the initial public offering price of the shares of
the Common Stock.
(m) "IPO" shall mean the initial public offering of the Common Stock of
the Company pursuant to a registration statement on Form S-1 filed by the
Company with the Securities and Exchange Commission.
(n) "IPO Date" shall mean the date of closing of the IPO.
(o) "Option" shall mean an option to purchase shares of Common Stock of
the Company granted pursuant to Section 6 hereof.
(p) "Participant" shall mean an officer or key employee of the Company
or one of its Affiliates who is eligible to participate in the Plan and to whom
an Option is granted pursuant to the Plan and, upon his death, his successors,
heirs, executors and administrators, as the case may be.
(q) "Person" shall mean a "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act.
(r) "Plan" shall mean the Carbo Ceramics Inc. l996 Stock Option Plan
for Key Employees, as it may be amended from time to time.
3. Stock Subject to the Plan
Subject to adjustment as provided in Section 7 hereof, the Committee
may grant Options to Participants under the Plan with respect to a number of
shares of Common Stock that in the aggregate does not exceed 1,000,000 shares.
No Participant in the Plan may be granted Options to purchase more than an
aggregate of 500,000 shares of Common Stock. To the extent that Options
terminate, expire or are canceled without having been exercised, the shares
covered thereby shall continue to count against the maximum aggregate number of
shares of Common Stock with respect to which Options may be granted to a
Participant.
To the extent Options granted under the Plan are exercised, the shares
covered thereby will be unavailable for future grants under the Plan. To the
extent that Options granted under the Plan terminate, expire or are canceled
without having been exercised, new Options may be granted with respect to the
shares covered thereby.
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Shares of Common Stock issued under the Plan may be either newly issued
shares or treasury shares, as determined by the Committee.
4. Administration of the Plan
The Plan shall be administered by the Committee of the Board of
Directors consisting of two or more persons, each of whom shall be a
"disinterested person" within the meaning of Rule l6b-3 promulgated under
Section l6 of the Exchange Act. The Committee shall from time to time designate
the officers and key employees of the Company or its Affiliates who shall be
granted Options and the amount and type of such Options.
The Committee shall have full authority to administer the Plan,
including authority to interpret and construe any provision of the Plan and the
terms of any Option issued thereunder and to adopt such rules and regulations
for administering the Plan as it may deem necessary. Decisions of the Committee
shall be final and binding on all parties.
The Committee may, in its absolute discretion, accelerate the date on
which any Option granted under the Plan becomes exercisable or extend the term
of any Option to a date not more than ten (10) years from the date such Option
was granted.
In addition, the Committee may, in its absolute discretion, grant
Options to Participants on the condition that such Participants surrender to the
Committee for cancellation such other Options (including, without limitation,
Options with higher exercise prices) as the Committee specifies.
Whether an authorized leave of absence, or absence in military or
government service, shall constitute termination of employment shall be
determined by the Committee.
No member of the Committee shall be liable for any action, omission, or
determination relating to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee and each other director or employee of the
Company or its Affiliates to whom any duty or power relating to the
administration or interpretation of the Plan has been delegated against any cost
or expense (including counsel fees) or liability (including any sum paid in
settlement of a claim with the approval of the Committee) arising out of any
action, omission or determination relating to the Plan, unless, in either case,
such action, omission or determination was taken or made by such member,
director or employee in bad faith and without reasonable belief that it was in
the best interests of the Company.
5. Eligibility
The persons who shall be eligible to receive Options pursuant to the
Plan shall be such officers and key employees of the Company or its Affiliates
who are largely responsible for the management, growth and protection of the
business of the Company or its Affiliates. Directors who are not employees or
officers of the Company or its Affiliates shall not be eligible to receive
Options under the Plan.
6. Options
The Committee may grant Options pursuant to the Plan, which Options
shall be evidenced by agreements in such form as the Committee shall from time
to time approve. Options shall comply with and be subject to the following terms
and conditions:
(a) Exercise Price
The exercise price per share of any Option granted under the Plan shall
be the Fair Market Value of a share of Common Stock on the date on which such
Option is granted; provided, that such price may not be less than the minimum
price required by law.
(b) Term and Exercise of Options
(1) Each Option shall be exercisable on such date or dates, during such
period and for such number of shares of Common Stock as shall be determined by
the Committee on the day on which such
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Option is granted and set forth in the Option agreement with respect to such
Option; provided, however, that no Option shall be exercisable after the
expiration of ten years from the date such Option was granted; and, provided,
further, that each Option shall be subject to earlier termination, expiration or
cancellation as provided in the Plan.
(2) Each Option shall be exercisable in whole or in part; provided,
that no partial exercise of an Option shall be for an aggregate exercise price
of less than $1,000; and, provided, further, that no fractional shares of Common
Stock shall be issued under the Plan. The partial exercise of an Option shall
not cause the expiration, termination or cancellation of the remaining portion
thereof. Upon the partial exercise of an Option, the agreements evidencing such
Option, marked with any notations deemed appropriate by the Committee, shall be
returned to the Participant exercising such Option together with the delivery of
the certificates described in Section 6(b)(5) hereof.
(3) An Option shall be exercised by delivering notice to the Company's
principal office, to the attention of its Secretary, no less than three business
days in advance of the effective date of the proposed exercise. Such notice
shall be accompanied by the agreements evidencing the Option, shall specify the
number of shares of Common Stock with respect to which the Option is being
exercised and the effective date of the proposed exercise and shall be signed by
the Participant. The Participant may withdraw such notice at any time prior to
the close of business on the business day immediately preceding the effective
date of the proposed exercise, in which case such agreements shall be returned
to him. Payment for shares of Common Stock purchased upon the exercise of an
Option shall be made on the effective date of such exercise either (i) in cash,
by certified check, bank cashier's check or wire transfer or (ii) subject to the
approval of the Committee, in shares of Common Stock previously owned by the
Participant and valued at their Fair Market Value on the effective date of such
exercise, or partly in shares of Common Stock with the balance in cash, by
certified check, bank cashier's check or wire transfer. Any payment in shares of
Common Stock shall be effected by the delivery of such shares to the Secretary
of the Company, duly endorsed in blank or accompanied by stock powers duly
executed in blank, together with any other documents and evidences as the
Secretary of the Company shall require from time to time. Notwithstanding any
provision in this Section 6(b)(3), the Committee may authorize deviations from
the procedures set forth in this Section 6(b)(3) in order to enable Participants
to engage in "cashless exercise" transactions through securities brokers and/or
the transfer agent for the Common Stock.
(4) During the lifetime of a Participant, each Option granted to him
shall be exercisable only by him or his guardian or legal representative. No
Option shall be assignable or transferable otherwise than by will or by the laws
of descent and distribution.
(5) Certificates for shares of Common Stock purchased upon the exercise
of an Option shall be issued in the name of the Participant and delivered to the
Participant as soon as practicable following the effective date of the Option
exercise.
(c) Effect of Termination of Employment
(1) In the event that the employment of a Participant with the Company
shall terminate for any reason other than for Cause or by reason of Disability
or death, (i) Options granted to such Participant, to the extent that they were
exercisable at the time of such termination, shall remain exercisable until the
expiration of thirty (30) days after such termination, on which date they shall
expire, and (ii) Options granted to such Participant, to the extent that they
were not exercisable at the time of such termination, shall expire at the close
of business on the date of such termination; provided, however, that no Option
shall be exercisable after the expiration of its term.
(2) In the event that the employment of a Participant with the Company
shall terminate on account of the Disability or death of the Participant, (i)
Options granted to such Participant, to the extent that they were exercisable at
the time of such termination, shall remain exercisable until the expiration of
one (1) year after such termination, on which date they shall expire, and (ii)
Options granted to such Participant, to the extent that they were not
exercisable at the time of such termination, shall expire at the close of
business on the date of such termination; provided, however, that no Option
shall be exercisable after the expiration of its term.
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(3) In the event of the termination of a Participant's employment for
Cause, all outstanding Options granted to such Participant shall expire at the
commencement of business on the date of such termination.
(d) Acceleration of Exercise Date Upon Change in Control
Upon the occurrence of a Change in Control, each Option granted under
the Plan and outstanding at such time shall become fully and immediately
exercisable and shall remain exercisable until its expiration, termination or
cancellation pursuant to the terms of the Plan.
7. Adjustment Upon Changes in Common Stock
(a) Shares Available for Grants
In the event of any change in the number of shares of Common Stock
outstanding by reason of any stock dividend or split, recapitalization, merger,
consolidation, combination or exchange of shares or similar corporate change
that is effective after the IPO Date, the maximum aggregate number of shares of
Common Stock with respect to which the Committee may grant Options shall be
appropriately adjusted by the Committee. In the event of any change in the
number of shares of Common Stock outstanding by reason of any other event or
transaction that is effective after the IPO Date, the Committee may, but need
not, make such adjustments in the number and class of shares of Common Stock
with respect to which Options may be granted as the Committee may deem
appropriate.
(b) Outstanding Options - Increase or Decrease in Issued Shares Without
Consideration
Subject to any required action by the shareholders of the Company, in
the event of any increase or decrease in the number of issued shares of Common
Stock resulting from a subdivision or consolidation of shares of Common Stock or
the payment of a stock dividend (but only on the shares of Common Stock), or any
other increase or decrease in the number of such shares effected without receipt
of consideration by the Company, in any case which is effective after the IPO
Date, the Committee shall proportionally adjust the number of shares of Common
Stock subject to each outstanding Option and the exercise price per share of
Common Stock of each such Option.
(c) Outstanding Options - Certain Mergers
Subject to any required action by the shareholders of the Company, in
the event that the Company shall be the surviving corporation in any merger or
consolidation (except a merger or consolidation as a result of which the holders
of shares of Common Stock receive securities of another corporation), each
Option outstanding on the date of such merger or consolidation shall pertain to
and apply to the securities which a holder of the number of shares of Common
Stock subject to such Option would have received in such merger or
consolidation.
(d) Outstanding Options - Certain Other Transactions
In the event of (i) a dissolution or liquidation of the Company, (ii) a
sale of all or substantially all of the Company's assets, (iii) a merger or
consolidation involving the Company in which the Company is not the surviving
corporation or (iv) a merger or consolidation involving the Company in which the
Company is the surviving corporation but the holders of shares of Common Stock
receive securities of another corporation and/or other property, including cash,
the Committee shall, in its absolute discretion, have the power to:
(A) cancel, effective immediately prior to the occurrence of
such event, each Option outstanding immediately prior to such event
(whether or not then exercisable), and, in full consideration of such
cancellation, pay to the Participant to whom such Option was granted an
amount in cash, for each share of Common Stock subject to such Option,
equal to the excess of (I) the value, as determined by the Committee in
its absolute discretion, of the property (including cash) received by
the holder of a share of Common Stock as a result of such event over
(II) the exercise price per share of such Option; or
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(B) provide for the exchange of each Option outstanding
immediately prior to such event (whether or not then exercisable) for
an option on some or all of the property for which such Option is
exchanged and, incident thereto, make an equitable adjustment as
determined by the Committee in its absolute discretion in the exercise
price of the Option, or the number of shares or amount of property
subject to the Option or, if appropriate, provide for a cash payment to
the Participant to whom such Option was granted in partial
consideration for the exchange of the Option.
(e) Outstanding Options - Other Changes
In the event of any change in the capitalization of the Company or
corporate change other than those specifically referred to in Sections 7(b), (c)
or (d) hereof, the Committee may, in its absolute discretion, make such
adjustments in the number and class of shares subject to Options outstanding on
the date on which such change occurs and in the per share exercise price of each
such Option as the Committee may consider appropriate to prevent dilution or
enlargement of rights.
(f) No Other Rights
Except as expressly provided in the Plan, no Participant shall have any
rights by reason of any subdivision or consolidation of shares of stock of any
class, the payment of any dividend, any increase or decrease in the number of
shares of stock of any class or any dissolution, liquidation, merger or
consolidation of the Company or any other corporation. Except as expressly
provided in the Plan, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number of shares of Common Stock subject to any Option or the exercise price of
any Option.
8. Rights as a Stockholder
No person shall have any rights as a stockholder with respect to any
shares of Common Stock covered by or relating to any Option granted pursuant to
this Plan until the date of the issuance of a stock certificate with respect to
such shares. Except as otherwise expressly provided in Section 7 hereof, no
adjustment to any Option shall be made for dividends or other rights for which
the record date occurs prior to the date such stock certificate is issued.
9. No Special Employment Rights; No Right to Option
Nothing contained in the Plan or any Option or related agreement shall
confer upon any Participant any right with respect to the continuation of his
employment by the Company or interfere in any way with the right of the Company
at any time to terminate such employment or to increase or decrease the
compensation of the Participant from the rate in existence at the time of the
grant of an Option.
No person shall have any claim or right to receive an Option hereunder.
The Committee's granting of an Option to a Participant at any time shall neither
require the Committee to grant an Option to such Participant or any other
Participant or other person at any time nor preclude the Committee from making
subsequent grants to such Participant or any other Participant or other person.
10. Withholding Taxes
(a) Cash Remittance
Whenever shares of Common Stock are to be issued upon the exercise of
an Option, the Company shall have the right to require the Participant to remit
to the Company in cash an amount sufficient to satisfy federal, state and local
withholding tax requirements, if any, attributable to such exercise, occurrence
or payment prior to the delivery of any certificate or certificates for such
shares. In addition, upon the cancellation or exchange of an Option pursuant to
Section 7(d) hereof, the Company shall have the right to withhold from any cash
payment required to be made pursuant thereto an amount sufficient to satisfy the
federal, state and local withholding tax requirements, if any, attributable to
such cancellation or exchange.
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(b) Stock Remittance
At the election of the Participant, subject to the approval of the
Committee, when shares of Common Stock are to be issued upon the exercise of an
Option, in lieu of the remittance required by Section 10(a) hereof, the
Participant may tender to the Company a number of shares of Common Stock, the
Fair Market Value of which at the tender date the Committee determines to be
sufficient to satisfy the federal, state and local withholding tax requirements,
if any, attributable to such exercise.
(c) Stock Withholding
Subject to subsection (d) hereof, at the election of the Participant,
subject to the approval of the Committee, when shares of Common Stock are to be
issued upon the exercise of an Option, in lieu of the remittance required by
Section 10(a) hereof, the Company shall withhold a number of such shares, the
Fair Market Value of which at the exercise date the Committee determines to be
sufficient to satisfy the federal, state and local withholding tax requirements,
if any, attributable to such exercise.
(d) Timing and Method of Elections
Notwithstanding any other provisions of the Plan, a Participant who is
subject to Section 16(b) of the Exchange Act may not make the election described
in Section 10(c) hereof prior to the expiration of six months after the date on
which the applicable Option was granted, except in the event of the death or
Disability of the Participant. A Participant who is subject to Section 16(b) of
the Exchange Act may not make such election other than (i) during the 10-day
window period beginning on the third business day following the date of release
for publication of the Company's quarterly and annual summary statements of
sales and earnings and ending on the twelfth business day following such date,
provided that such Option is exercised during the same or a subsequent 10-day
window period, or (ii) at least six months prior to the date as of which such
Option is exercised; provided, however, that no election may be made during the
l0-day window period provided for in clause (i) until the Company has been
subject to the reporting requirements of the Exchange Act for at least one year
prior to the withholding. Such elections shall be irrevocable and shall be made
by the delivery to the Company's principal offices, to the attention of its
Secretary, of a written notice signed by the Participant.
11. Amendment of the Plan
The Board of Directors may at any time suspend or discontinue the Plan
or revise or amend it in any respect whatsoever; provided, however, that without
approval of the shareholders of the Company no revision or amendment shall (i)
except as provided in Section 7 hereof, increase the number of shares of Common
Stock that may be issued under the Plan, (ii) materially increase the benefits
accruing to individuals holding Options granted pursuant to the Plan or (iii)
materially modify the requirements as to eligibility for participation in the
Plan.
12. No Obligation to Exercise
The grant to a Participant of an Option shall impose no obligation upon
such Participant to exercise such Option.
13. Transfers Upon Death
Upon the death of a Participant, outstanding Options granted to such
Participant may be exercised only by the executors or administrators of the
Participant's estate or by any person or persons who shall have acquired such
right to exercise by will or by the laws of descent and distribution. No
transfer by will or the laws of descent and distribution of any Option, or the
right to exercise any Option, shall be effective to bind the Company unless the
Committee shall have been furnished with (a) written notice thereof and with a
copy of the will and/or such evidence as the Committee may deem necessary to
establish the validity of the transfer and (b) an agreement by the transferee to
comply with all the terms and conditions of the Option that are or would have
been applicable to the Participant and to be bound by the acknowledgments made
by the Participant in connection with the grant of the Option.
Except as provided in this Section 13, no Option under the Plan shall
be transferable.
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14. Expenses and Receipts
The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Option may be used for general
corporate purposes.
l5. Failure to Comply
In addition to the remedies of the Company elsewhere provided for
herein, failure by a Participant to comply with any of the terms and conditions
of the Plan or the agreement executed by such Participant evidencing an Option,
unless such failure is remedied by such Participant within ten days after having
been notified of such failure by the Committee, shall be grounds for the
cancellation and forfeiture of such Option, in whole or in part, as the
Committee, in its absolute discretion, may determine.
16. Effective Date of Plan
The Plan shall become effective upon the date of signing of a
definitive underwriting agreement relating to the IPO.
17. Termination of the Plan.
The right to grant Options under the Plan will terminate ten (l0) years
after the IPO Date. The Board of Directors has the right to suspend or terminate
the Plan at any time, provided that no such action will, without the consent of
a Participant, adversely affect his rights under previously granted Options.
18. Applicable Law.
The Plan will be administered in accordance with the laws of the State
of Delaware, without reference to its principles of conflicts of law.
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CARBO CERAMICS INC.
AMENDMENT NO. 1 TO THE CARBO CERAMICS INC. 1996 STOCK OPTION PLAN FOR KEY
EMPLOYEES
Subject to, and effective upon, receipt of the requisite approval by
the shareholders of Carbo Ceramics Inc. (the Company"), the Board of Directors
of the Company hereby amends the first sentence of Section 3 of the Carbo
Ceramics Inc. 1996 Stock Option Plan for Key Employees by replacing the number
"1,000,000" therein with the number "1,250,000" (such amendment, "Amendment No.
1").
Dated:
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PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CARBO CERAMICS INC.
The undersigned hereby appoints Jesse P. Orsini and Paul G. Vitek, or any one of
them, as proxies, each with the power to appoint his substitute, and hereby
authorizes each of them to represent and to vote, as designated on the reverse
side, all the shares of Common Stock of Carbo Ceramics Inc. held of record by
the undersigned on February 15, 2001 at the Annual Meeting of Shareholders to be
held on April 10, 2001, or any adjournment or continuation thereof.
(PLEASE SEE REVERSE SIDE)
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26
PLEASE
MARK AS
INDICATED IN
THIS EXAMPLE
[X]
1. To elect six Directors. The Board of FOR all WITHHOLD AUTHORITY
Directors recommends a vote FOR the Nominees to vote for all
Nominees listed below. listed nominees listed EXCEPTIONS INSTRUCTIONS: To withhold authority
[ ] [ ] [ ] to vote for any individual nominee
Claude E. Cooke, Jr. mark the "Exceptions" box and write
William C. Morris that nominee's name in the space
John J. Murphy provided below.
Jesse P. Orsini
C. Mark Pearson Exceptions
Robert S. Rubin ------------------------
2. Proposal to ratify and approve the Carbo 3. Proposal to ratify the appointment 4. In their discretion to vote
Ceramics Inc. 1996 Stock Option Plan for of Ernst & Young LLP, certified upon such other business as
Key Employees, as amended. public accountants, as independent may properly come before the
auditors for the fiscal year ending meeting.
December 31, 2001.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ] [ ]
The Board of Directors recommends
that you vote FOR the nominee and
the proposal listed above. This
proxy when properly executed will
be voted in the manner directed
herein by the undersigned
shareholder. If no direction is
given, this proxy will be voted
FOR the nominees and the proposal.
DATED: , 2001
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-----------------------------------
(SIGNATURE OF SHAREHOLDER)
-----------------------------------
(SIGNATURE IF HELD JOINTLY)
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such, if a corporation, please
sign full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
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