UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
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Check the appropriate box:
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COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
CALGON CARBON CORPORATION
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(Name of Registrant as Specified In Its Charter)
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Notes:
[LOGO OF CALGON CARBON CORPORATION]
CALGON CARBON CORPORATION
CALGON CARBON CORPORATION P.O. BOX 717 PITTSBURGH, PA 15230-0717 TELEX671 1837 CCC PGH
PANAFAX: 412-787-6713
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Calgon Carbon Corporation at 1:00 p.m., Eastern Daylight Saving Time, on
Tuesday, May 1, 2001 at the principal executive office of the Company, 400
Calgon Carbon Drive, Pittsburgh, Pennsylvania.
Information about the business of the meeting and the nominees for election as
Directors is set forth in the notice of the meeting and the Proxy Statement,
which are attached. This year you are asked to elect three Directors for the
Class of 2004 and one new Director for the Class of 2002, and to ratify the
independent auditors of the Company for 2001.
It is important that your shares be represented at the meeting. Even if you
plan to attend the meeting in person, we hope that you will send a proxy voting
on the matters to be considered. Please sign, date and return your proxy in the
enclosed envelope as promptly as possible.
Very truly yours,
/s/ James A. Cederna
James A. Cederna
President
March 29, 2001
CALGON CARBON CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Calgon Carbon Corporation will be held
at the principal executive office of the Company, 400 Calgon Carbon Drive,
Pittsburgh, Pennsylvania, on Tuesday, May 1, 2001 at 1:00 p.m., Eastern
Daylight Saving Time, for the following purposes:
(1) To elect three Directors for the Class of 2004;
(2) To elect one Director for the Class of 2002;
(3) To ratify the independent auditors of the Company for 2001; and
(4) To transact such other business as may properly come before the
meeting.
Please refer to the accompanying Proxy Statement for a description of the
matters to be considered at the meeting.
Holders of record of the Company's Common Stock as of the close of business on
March 20, 2001 are entitled to notice of and to vote at the meeting.
Please sign, date and return the enclosed proxy promptly in the envelope
provided, which requires no United States postage.
Joseph A. Fischette
Secretary
March 29, 2001
CALGON CARBON CORPORATION
PROXY STATEMENT
Table of Contents
Page
----
Voting Securities and Record Date.......................................... 1
Security Ownership of Management and Certain Beneficial Owners............. 1
Board of Directors and Committees of the Board............................. 4
Election of Directors ..................................................... 6
Executive Compensation..................................................... 8
Independent Auditors....................................................... 14
Vote Required.............................................................. 17
Other Business............................................................. 17
Stockholder Proposals...................................................... 17
CALGON CARBON CORPORATION
PROXY STATEMENT
Annual Meeting of Stockholders
May 1, 2001
The enclosed proxy is solicited on behalf of the Board of Directors of Calgon
Carbon Corporation (the "Company") for use at the Annual Meeting of
Stockholders to be held at 1:00 p.m., Eastern Daylight Saving Time, on
Tuesday, May 1, 2001 at the principal executive office of the Company, 400
Calgon Carbon Drive, Pittsburgh Pennsylvania. The accompanying Notice of
Annual Meeting of Stockholders sets forth the purposes of the meeting.
The enclosed proxy may be revoked at any time before its exercise by giving
written notice of revocation to the Secretary of the Company. The shares
represented by proxies in the form solicited by the Board of Directors will be
voted at the meeting. If a choice is specified on the proxy with respect to a
matter to be voted upon, the shares represented by the proxy will be voted in
accordance with that specification. If no choice is specified, the shares will
be voted as stated below in this Proxy Statement.
It is expected that this Proxy Statement and the accompanying form of proxy
will first be mailed to stockholders on or about March 29, 2001. The Company's
Annual Report to Stockholders for 2000 is enclosed with this Proxy Statement
but does not form a part of the proxy soliciting material. The cost of
soliciting proxies will be borne by the Company. Following the original
mailing of the proxy soliciting material, regular employees of the Company may
solicit proxies by mail, telephone, telecopy, telegraph, electronic means and
personal interview. The Company may also hire a proxy solicitation firm or may
request brokerage houses and other nominees or fiduciaries to forward copies
of the proxy soliciting material and 2000 Annual Report to beneficial owners
of the stock held in their names, and the Company will reimburse them for
reasonable out-of-pocket expenses incurred in doing so.
VOTING SECURITIES AND RECORD DATE
Holders of the Company's Common Stock of record as of the close of business on
March 20, 2001 are entitled to receive notice of and to vote at the meeting.
At the record date, the Company had outstanding 38,801,509 shares of Common
Stock, the holders of which are entitled to one vote per share. The Company
does not have cumulative voting.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
Management
The following table shows the number of shares of Common Stock beneficially
owned by each Director of the Company, by James A. Cederna, William E. Cann,
Joseph A. Fischette and Benjamin F. Ward, Jr., executive officers of the
Company, by Jonathan H. Maurer, who is no longer an executive officer of the
Company but who is named in the summary compensation table, and by all
Directors and executive officers of the Company as a group, as of the record
date. Unless otherwise indicated in the footnotes to the table, each person
named and all Directors and executive officers as a group have sole voting
power and sole investment power with respect to the shares. As used herein,
"beneficial ownership" means the sole or shared power to vote, or to direct
the voting of, a security, or the sole or shared investment power with respect
to a security (i.e., the power to dispose of, or to direct the disposition of,
the security). A person is deemed to have "beneficial ownership" of any
security that the person has the right to acquire within 60 days after the
record date.
1
Number of Percent
Name of Beneficial Owner Shares(1) of Class
------------------------ --------- --------
Robert W. Cruickshank 37,632 *
Arthur L. Goeschel 105,100 *
Thomas A. McConomy 4,544,380 11.7%
Nick H. Prater 24,600 *
Julie S. Roberts(2) 12,000 *
Seth E. Schofield 24,100 *
John P. Surma(3) 7,500 *
Harry H. Weil(4) 28,200 *
Robert L. Yohe 34,600 *
James A. Cederna 464,415 *
William E. Cann 50,000 *
Joseph A. Fischette(5) 166,158 *
Benjamin F. Ward, Jr. 78,000 *
Jonathan H. Maurer 31,600 *
All directors and executive officers
as a group (15 persons)(2)(3)(4)(5)(6) 5,677,220 14.4%
--------
*Less than 1%.
(1) Includes (i) 24,600 shares in the case of each of Messrs. Cruickshank,
Goeschel and Weil, 23,600 shares in the case of Mr. Prater, 22,600 shares
in the case of Mr. McConomy, 22,100 shares in the case of each of Messrs.
Schofield and Yohe and 7,000 shares in the case of each of Ms. Roberts and
Mr. Surma, granted under the Company's 1993 Non-Employee Directors' Stock
Option Plan, (ii) 375,000 shares in the case of Mr. Cederna, 42,500 shares
in the case of Mr. Cann, 54,000 shares in the case of Mr. Fischette,
63,000 shares in the case of Mr. Ward and 31,500 shares in the case of Mr.
Mauer granted under the Company's Stock Option Plan and (iii) 759,200
shares in the case of all Directors and executive officers as a group, in
each case covered by options granted under the aforementioned plans. The
"percent of class" set forth above for any individual and the group (but
not for the other individuals listed above) is computed as though such
shares optioned to such individual or the group, as the case may be, were
outstanding.
(2) Includes 5,000 shares as to which Ms. Roberts shares voting and investment
power with her husband.
(3) Includes 500 shares held by Mr. Surma's wife.
(4) Includes 200 shares held by Mr. Weil's wife, as to which beneficial
ownership is disclaimed by Mr. Weil.
(5) Includes 9,708 and 16,638 shares in the case of Mr. Fischette and all
Directors and executive officers as a group, respectively, held under the
Company's Employees Growth Participation Plan and allocated to the
accounts of such executive officers. That plan was terminated in 1990.
(6) Does not include Mr. Maurer who was not an executive officer as of the
record date.
2
Other Beneficial Owners
Information as of December 31, 2000 with respect to the only persons not
otherwise disclosed in the Management table and known by the Company to be the
beneficial owner of more than 5% of the Company's Stock as of the record date
is as follows:
Beneficial Ownership
of Common Stock
----------------------
Number Percent
Name and Address of Shares of Class
---------------- ------------ ---------
ICM Asset Management, Inc. 4,196,031 10.8%
601 W. Main Avenue
Suite 600
Spokane, WA 99201
ICM Asset Management, Inc. has sole investment power over all shares. Voting
authority has been granted to it by clients owning 2,501,731 shares.
Beneficial Ownership
of Common Stock
----------------------
Number Percent
Name and Address of Shares of Class
---------------- ------------ ---------
Dimensional Fund Advisors, Inc. 2,683,100 6.91%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Dimensional Fund Advisors Inc. ("Dimensional"), an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940, furnishes
investment advice to four investment companies registered under the Investment
Company Act of 1940, and serves as investment manager to certain other
investment vehicles, including commingled group trusts. (These investment
companies and investment vehicles are the "Portfolios.") In its role as
investment adviser and investment manager, Dimensional possessed both sole
investment and voting power over 2,683,100 shares of the Company as of
December 31, 2000. The Portfolios own all Company shares, and Dimensional
disclaims beneficial ownership of such securities.
Beneficial Ownership
of Common Stock
----------------------
Number Percent
Name and Address of Shares of Class
---------------- ------------ ---------
David J. Greene & Company, LLC 2,125,060 5.48%
599 Lexington Avenue
New York, NY 10022
David J. Greene & Company, LLC reports that it has sole voting power over
47,000 shares and shared voting power over 1,539,890 shares, and sole
dispositive power over 47,000 shares and shared dispositive power over
2,078,060 shares. David J. Greene & Company, LLC disclaims beneficial
ownership in any of such shares.
Beneficial Ownership
of Common Stock
----------------------
Number Percent
Name and Address of Shares of Class
---------------- ------------ ---------
SG Cowen Asset Management Inc. 3,080,628 7.94%
560 Lexington Avenue
New York, NY 10022
3
SG Cowen Asset Management reports that it has sole voting power over 87,700
shares and shared voting power over 2,883,528 shares and sole dispositive
power over 87,700 shares and shared dispositive power over 2,992,920 shares.
SG Cowen also states that as an investment adviser, it holds a portion of the
securities on behalf of its clients, none of whose individual interests
exceeds five percent.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The business of the Company is under general supervision of a Board of
Directors as provided by the laws of Delaware, the Company's state of
incorporation. The Board of Directors has established committees to assist it,
consisting of the Executive Committee, the Compensation Committee, the Audit
Committee and the Corporate Governance Committee.
Executive Committee. The Executive Committee consists of Messrs. McConomy
(Chairman), Cederna, Goeschel and Weil. The Executive Committee, during the
intervals between meetings of the Board, when prompt action is needed and it
is impossible or inconvenient to convene a full meeting of the Board, may
exercise limited powers granted by the Board of Directors in the management of
the business and affairs of the Company.
Compensation Committee. The Compensation Committee consists of Messrs.
Cruickshank (Chairman), Prater, Schofield and Surma. The Compensation
Committee's overall responsibility is to determine and implement the Company's
general policies with respect to the compensation of its executive officers.
The Compensation Committee determines the base salary payable to each
executive officer, as well as the bonus, if any, payable to each executive
officer, and to certain key employees, pursuant to the Company's Incentive
Plan or otherwise. The Committee also administers the Company's Stock Option
Plan and has the authority to grant options thereunder. Other matters related
to the compensation of executive officers and key employees, such as the terms
of employment contracts and certain employee benefits, are also reviewed by
the Compensation Committee.
Audit Committee. The Audit Committee consists of Messrs. Weil (Chairman),
Goeschel and Schofield and Ms. Roberts. It is the responsibility of the Audit
Committee to review and approve the Company's consolidated financial
statements each year prior to their announcement to the public and their
distribution to the stockholders in the Annual Report. Among other things, the
Audit Committee consults separately with the Company's chief financial officer
and his staff, and with the Company's independent external auditors, as to the
proposed audit plan, any difficulties encountered in carrying out the audit
plan, significant decisions made in preparing the financial statements, any
disagreements between management and the independent auditors as to the
application of accounting principles or other matters, and the form and
content of the notes to the financial statements and Management's Discussion
and Analysis of the financial statements. The Audit Committee also reviews the
Company's quarterly financial statements but does not customarily perform
similar functions with respect to other financial statements which cover less
than a full fiscal year. The Audit Committee reviews other financial reporting
and accounting matters when requested to do so by management or the
independent auditors, and satisfies itself that the Company's system of
internal controls is functioning adequately and reliably. The Audit Committee
believes that the independent auditors are ultimately accountable to the Board
of Directors and the Audit Committee. In this connection the Audit Committee
discusses with the independent auditors the quality, as well as the
acceptability, of the Company's accounting principles as applied in its
financial reporting. The Audit Committee periodically reviews all
relationships between the Company and the independent auditors which might
impact the objectivity and independence of the independent auditors. Each year
the Audit Committee evaluates the performance of the independent auditors and
recommends to the Board of Directors the retention or, if appropriate,
replacement of the independent auditors. The Audit Committee also investigates
and reports to the Board as to any alleged breach of law or of the Company's
internal policies which is brought to its attention.
4
Corporate Governance Committee. The Corporate Governance Committee consists of
Messrs. Yohe (Chairman), Cruickshank and McConomy. The Corporate Governance
Committee is responsible for the functioning of the Board and its committees,
with the goal of causing the Board and its committees to satisfactorily
address the major issues related to the performance and well-being of the
Company. Among the duties of the Corporate Governance Committee is to review
the size and composition of the Board of Directors and to make recommendations
with respect to nominations for election or appointment of Directors. The
Corporate Governance Committee will consider nominees recommended by
stockholders provided that stockholders submit the names of nominees and the
other information required by Section 1.08 of the By-Laws of the Company in
writing to the Secretary of the Company. Such information should be received
no later than January 28, 2002 with respect to nominations for election at the
2002 Annual Meeting of Stockholders.
During 2000, the Compensation Committee held four meetings, the Corporate
Governance Committee held two meetings, the Audit Committee held seven
meetings, and the Executive Committee did not meet. The Board of Directors
held eight meetings during 2000.
Compensation of Directors
Board and Committee Fees. Directors who are full-time employees of the Company
or a subsidiary receive no additional compensation for services as a member of
the Board or any committee of the Board. Directors who are not employees of
the Company receive an annual retainer of $18,000 for Board service. The
retainer fees are payable in cash or Common Stock of the Company as described
below. Non-employee Directors also receive a fee of $1,500 for each Board and
committee meeting attended, and the Chairmen of each committee receive an
additional annual retainer of $3,000. No committee meeting fees are paid for
committee meetings held by telephone or on the same day as a Board meeting.
1999 Phantom Stock Plan. The 1999 Phantom Stock Plan provides each non-
employee director with phantom stock with a value upon issuance of $7,000 each
year. No actual stock of the Company is issued under this plan. Instead, each
director is credited on the day following the Annual Meeting of Stockholders,
in an account maintained for the purpose, with the fair market value of shares
of the Company's Common Stock equal to $7,000. Directors are also credited
with the fair market value of shares equal to the amount of the cash dividends
which would have been paid if the phantom stock were actual Common Stock. As
the actual fair market value of the Company's Common Stock changes, the
credited value of the director's phantom stock will change accordingly. When
the director leaves the Board for any reason, including death or disability,
the director will be entitled to be paid, in cash, the entire amount then
credited in the account.
1997 Directors' Fee Plan. The 1997 Directors' Fee Plan provides Directors with
payment alternatives for retainer (but not meeting) fees payable as a member
of the Board or as the Chairman of any committee. Pursuant to the Plan,
Directors are permitted to receive their retainer fees in a current payment of
cash or in a current payment of shares of Common Stock of the Company based
upon the fair market value of the Common Stock upon the date of payment of the
fee, or to defer payment of the retainer fees for subsequent payment of shares
of Common Stock pursuant to a stock deferral election. Payment of Common Stock
placed in a deferred stock account will be made in the calendar year following
the calendar year during which a Director ceases to be a Director of the
Company, including by reason of death or disability.
1993 Non-Employee Directors' Stock Option Plan. The 1993 Non-Employee
Directors' Stock Option Plan, as amended in 1997, provides for an annual grant
on the day following the Annual Meeting of Stockholders of option shares equal
to a number of shares which will result in a Black-Scholes calculated value of
$25,000 on the date of grant. The options vest and become exercisable six
months after the date of grant and, in general, expire ten years after the
date of grant. There are previously issued options outstanding under the pre-
1997 Plan, all of which have option prices in excess of the fair market value
of the Common Stock on December 31, 2000.
5
ELECTION OF DIRECTORS
The Board of Directors, acting pursuant to the bylaws of the Company, has
determined that the number of Directors constituting the full Board of
Directors shall be ten at the present time. The Board size will decrease to
nine after the Annual Meeting. The Board is to be divided into three classes
of nearly equal size. One such class is elected every year at the Annual
Meeting for a term of three years.
The Board of Directors has, upon recommendation of the Corporate Governance
Committee, nominated Robert W. Cruickshank, Julie S. Roberts and Thomas A.
McConomy for reelection as Directors in the Class of 2004, and nominated John
P. Surma for reelection as a Director in the Class of 2002, and each of them
has agreed to serve if elected. Mr. Surma and Ms. Roberts were appointed to
the Board in July 2000. Mr. Arthur Goeschel is retiring from the Board as of
the Annual Meeting. Messrs. Cruickshank and McConomy and Ms. Roberts will hold
office until the 2004 Annual Meeting of Stockholders, and Mr. Surma will hold
office until the 2002 Annual Meeting of Stockholders, or in any case until the
Director's prior death, disability, resignation or removal. Proxies are
solicited in favor of these nominees and will be voted for them unless
otherwise specified.
If any nominee becomes unable or unwilling to serve as a Director, it is
intended that the proxies will be voted for the election of such other person,
if any, as shall be designated by the Board of Directors.
Information concerning the nominees for Director and the other Directors who
will continue in office after the meeting is set forth below, together with
information concerning the Company's executive officers who are not Directors.
Name Age Position with the Company
---- --- -------------------------
Class of 2004
Robert W.
Cruickshank 55 Director
Julie S.
Roberts 46 Director
Thomas A.
McConomy 67 Director
Class of 2003
James A.
Cederna 50 Director and President and CEO
Harry H.
Weil 67 Director
Robert L.
Yohe 64 Director
Class of 2002
Nick H.
Prater 72 Director
Seth E.
Schofield 61 Director
John P.
Surma 46 Director
Executive Officers
William E. 45
Cann Senior Vice President--Chief Financial Officer
Joseph A. 54 Senior Vice President, General Counsel
Fischette and Secretary
Robert P.
Markle 50 Senior Vice President
Robert P. 50
O'Brien Senior Vice President
Benjamin F.
Ward, Jr. 57 Senior Vice President
Mr. Cederna has been President and Chief Executive Officer of the Company
since April 1999. Mr. Cederna was President of Arizona Chemical Co., a
manufacturer of specialty chemicals derived from wood and a company of
International Paper Corp., from September 1996 until April 1999, and prior
thereto he was President of Columbian Chemical Co., a manufacturer of carbon
black and an affiliate of Phelps Dodge Corp.
Mr. Cann has been the Senior Vice President and Chief Financial Officer of the
Company since October 1999. Mr. Cann was the Vice President and Treasurer of
Reichhold Inc., a chemical manufacturer, from November 1996 until September
1999, and prior thereto he was the Director, International Finance at
Reichhold.
6
Mr. Fischette has been an executive officer of the Company since 1985.
Mr. Markle has been Senior Vice President--Sales & Marketing of the Company
since July 2000. Mr. Markle was Vice President of Business Development of
Columbia-CGI, a capital investment firm, from June 1999 to June 2000, Vice
President--Sales & Marketing of Calgon Corporation, a chemical company not
affiliated with the Company, from July 1996 to July 1999, and prior thereto he
was Vice President--Sales of Betz Laboratories, a chemical company.
Mr. O'Brien has been the Senior Vice President--Engineered Solutions of the
Company since January 2000. Mr. O'Brien was President of the Company's
Advanced Separation Technologies subsidiary from January 1999 until January
2000, Vice President of the Company's affiliate Chemviron Carbon from January
1997 until January 1999, and prior thereto he was Vice President--Commercial
and Industrial Business Units of the Company.
Mr. Ward has been Senior Vice President--Technology since August 1997. Prior
thereto, Mr. Ward was Research Director of Westvaco Corp., a pulp, paper and
chemical manufacturer.
Mr. McConomy has been a Director of the Company since its formation in 1985.
Mr. McConomy is a private investor. He also served as Chairman of the Board,
President and Chief Executive Officer of the Company. Mr. McConomy is also a
director of Equitable Resources, Inc. Mr. McConomy's brother James H. McConomy
is a partner of the law firm of Meyer, Unkovic & Scott LLP, which provides
legal services in excess of $60,000 a year to the Company.
Mr. Cruickshank has been a Director of the Company since November 1985. Mr.
Cruickshank is President of R.W. Cruickshank & Co. He is also a director of
Friedmans, Inc. and Hurco, Inc.
Mr. Prater has been a Director of the Company since August 1990. Until June
1990, when he retired, Mr. Prater was President and Chief Executive Officer of
Mobay Corporation (now called Bayer Corporation), a chemical producer. He is
also a director of Koppers Industries, Inc.
Ms. Roberts has been a Director of the Company since July 2000. Ms. Roberts
has been Chief Financial Officer of ExecuStay by Marriott, a division of
Marriott International Corporation, a leading hospitality company, since
September 2000. Ms. Roberts was Vice President--Financial Planning and
Analysis at Marriott from September 1998 to September 2000, Vice President--
Reservations at US Airways, a major air carrier, from October 1996 to February
1998, and prior thereto was Vice President and Assistant to the Chairman at US
Airways.
Mr. Schofield has been a Director of the Company since December 1995. From
February 1996 to July 2000, Mr. Schofield was the Chairman of Base
International, a provider of corporate protection and security. From June 1992
until January 1996, when he retired, Mr. Schofield was Chairman and Chief
Executive Officer of USAir Group, a major air carrier. Mr. Schofield is also a
director of USX Corporation.
Mr. Surma has been a Director of the Company since July 2000. Mr. Surma has
been President, Marathon Ashland Petroleum LLC, an energy firm, since January
2001. Mr. Surma was Senior Vice President--Supply & Transportation of Marathon
Ashland Petroleum LLC from January 2000 to December 2000, President Speedway
Super America LLC, a petroleum product retailer and a wholly-owned subsidiary
of Marathon Ashland Petroleum LLC, from September 1998 to December 1999,
Senior Vice President--Finance of Marathon Oil Company, an energy firm, from
February 1997 to August 1998, and prior thereto was a Partner at Price
Waterhouse, an accounting firm.
Mr. Weil has been a Director of the Company since its formation in 1985. Mr.
Weil is a retired partner of the law firm of Reed Smith LLP, which provides
legal services to the Company.
Mr. Yohe has been a Director of the Company since December 1995. Until March
1994, when he retired, Mr. Yohe was Vice Chairman of Olin Corporation, a
producer of chemicals, microelectronic materials, metals,
7
sporting ammunition and defense and aerospace products. Mr. Yohe is also a
director of Airgas, Inc., Marsulex, Inc., LaRoche Industries, Inc. and The
Middleby Corporation.
EXECUTIVE COMPENSATION
In 1985 the Board of Directors created a Compensation Committee, consisting of
at least three Directors who are not employees of the Company. One of the
functions of the Compensation Committee is to review the compensation of the
Company's executive officers and methodology from which such compensation is
derived. The Compensation Committee then makes recommendations to the Board of
Directors on such matters, except for the granting of stock options, which is
done by the Committee alone.
The following is the report of the members of the 2000 Compensation Committee,
Messrs. Cruickshank (Chairman), Prater, Schofield and Surma concerning 2000
compensation of the Company's executive officers.
Compensation Committee Report on Executive Compensation
General policies with respect to executive compensation
----------------------------------------
The Compensation Committee's policies with respect to executive compensation
are intended to achieve three principal goals.
First, they are intended to create base compensation levels sufficient to
attract and retain talented and dedicated executive officers. To accomplish
this, the Committee periodically compares the Company's base salaries with
those currently paid for similar positions by other companies. The Committee
also reviews the total compensation package available to executive officers to
ensure it remains competitive.
Second, the compensation policies are intended to provide a direct link
between both individual performance and performance of the Company as a whole,
with the officer's compensation. This is done through bonuses available to
executive officers.
Third, the compensation policies are intended to provide executive officers
with the opportunity to acquire an equity stake in the Company through the
granting of stock options. These options are granted at full market prices and
with delayed vesting provisions.
The Committee's general philosophy is that salaries for the Company's
executive officers should be somewhat less than the median salaries paid by
other companies for comparable positions, so that the potential compensation
of an executive officer in a particular year will be more heavily weighted
toward incentive compensation such as bonus and stock options.
Compensation in 2000
----------------
Salary. Base salaries are designed to be at levels at or slightly below those
of executive officers of comparable companies. The Committee considers a
number of factors in its discretion and does not determine base salaries by
any formula or objective basis. The Committee also uses outside consultants
from time to time in this area.
In 2000, the Committee reviewed the salaries of the executive officers and
recommended changes from 0% to 7%.
Bonus. In late 1999, the incentive compensation system was modified to attempt
to provide a more direct link between the employees bonus and performance. The
new compensation system is based on both economic profit and individual
performance. In this context, economic profit is defined as "Net Operating
Profit After Taxes" (NOPAT) compared to the "Cost of Capital Employed".
Economic profit is measured at various levels in the corporation and the
objective is to link changes in economic profit with executive bonuses. In
addition, individuals also have specific performance objectives that influence
their bonus. The interaction of economic
8
profit and individual performance determines an employee's bonus. Based on the
Company's performance, the Committee did not grant any bonuses for 2000. In
2001, the incentive compensation system has been expanded to include all
salaried employees.
Stock options. Under the terms of the Company's Stock Option Plan adopted in
1985, the Committee determines which employees will be granted stock options,
the number of options granted, the rate and period of vesting, and other
relevant terms.
In determining whether to grant options, the Committee takes into account the
number of outstanding options, the market price of the Company's Common Stock,
the performance of the Company and its prospects, potential dilution which
could result from exercise of options and the benefits of linking the
employees' incentive to the market price of the stock. These matters are at
the discretion of the Committee, and are not determined by any formula or
weighting of particular factors.
In determining whether to grant options to a particular individual, the
Committee considers the individual's level of responsibility, the relationship
between successful individual effort and Company results, incentive
compensation available from other companies, the number of unexercised options
held by the individual, and other relevant factors.
In 2000, the Committee granted 781,500 options to employees. Executive
officers (other than Mr. Cederna) received a total of 175,000 options which
currently remain outstanding.
The Stock Option Plan makes stock appreciation rights, payable in cash, and
restricted shares available for grant, but the Committee has not granted any.
Compensation of the chief executive in 2000
-------------------------------
In April 1999, the Company hired James A. Cederna as President and Chief
Executive Officer. Under the terms of his employment agreement, Mr. Cederna
receives a base pay of $500,000. The Company's economic plan was not achieved
in 2000 and therefore no bonus was paid to Mr. Cederna. Also under the terms
of his employment agreement, Mr. Cederna received 100,000 stock options, one
fourth of which vested immediately and the remainder of which vest over a
three-year period. These options reflect the Committee's desire to link a
major portion of Mr. Cederna's future compensation to increases in the market
price of the Company's Common Stock and thus directly benefit stockholders.
Tax policy
-------
If an executive officer's compensation from the Company were to exceed $1
million in any taxable year (which the Committee does not now expect), the
excess over $1 million, with certain exceptions, would not be deductible by
the Company, under Section 162(m) of the Internal Revenue Code of 1986, as
amended. The Committee is aware of this rule, and will take it into account if
the $1 million limit is ever applicable. One exception to the disallowance of
such deductions under Section 162(m) involves compensation paid pursuant to
stockholder-approved compensation plans that are performance-based. The
Company's Stock Option Plan contains provisions which are intended to cause
grants of stock options under such plan (after April 1999) to be eligible for
this performance-based exception (so that compensation upon exercise of such
options should be deductible under the Code). Payments of cash compensation to
executives (and certain other benefits which could be awarded under the plan,
such as restricted stock) are not at present eligible for this performance-
based exception.
ROBERT W. CRUICKSHANK SETH E. SCHOFIELD
NICK H. PRATER JOHN P. SURMA
9
Summary Compensation Table
Annual Compensation
--------------------------------------------
Other
Name and Principal Annual All Other
Position Year Salary ($) Bonus ($) Compensation ($) Compensation ($)(1)
------------------ ---- ---------- --------- ---------------- -------------------
James A. Cederna 2000 500,004 0 86,254(2) 810
President and 1999 352,566 732,813(4) -- 141,659
Chief Executive
Officer(3)
William E. Cann 2000 211,674 0 -- 62,103
Senior Vice President 1999 50,001 0 -- 0
Chief Financial
Officer(5)
Joseph A. Fischette 2000 215,268 0 -- 0
Senior Vice President, 1999 213,637 0 -- 0
General Counsel and
Secretary 1998 195,696 25,000 -- 348
Jonathan H. Maurer 2000 205,200 0 -- 0
Senior Vice President(6) 1999 193,797 0 -- 0
1998 178,710 35,000 -- 290
Benjamin F. Ward, Jr. 2000 217,308 0 -- 862
Senior Vice President 1999 215,258 0 -- 0
1998 205,008 30,000 -- 1,395
--------
(1) Consists of premiums paid by the Company on term life insurance policies
on the lives of the named individuals, except for (i) Mr. Cederna, which
includes taxable reimbursed relocation expenses of $141,659 in 1999 and
(ii) Mr. Cann, which includes taxable reimbursed relocation expenses of
$62,103 in 2000.
(2) Consists of, among other things, the following other annual compensation:
reimbursement of personal financial advisor expenses of $31,743 and tax
gross-up of $35,632.
(3) Mr. Cederna became employed as President and Chief Executive Officer in
April 1999.
(4) Includes a cash bonus of $250,000 and Common Stock issued to Mr. Cederna
upon his employment at the Company then valued at $482,813.
(5) Mr. Cann became employed as Senior Vice President and Chief Financial
Officer in October 1999.
(6) Mr. Maurer left the employ of the Company effective December 31, 2000.
10
Option/SAR Grants in Last Fiscal Year
Individual Grants
------------------------------------------------ Potential Realizable
Value at Assumed
Number of % of Total Annual Rate of Stock
Securities Options/SARs Price Appreciation
Underlying Granted to Exercise or For Option Term
Options/SARs Employees in Base Price Expiration ---------------------
Name Granted (#) Fiscal Year ($/sh) Date 5% ($) 10% ($)
---- ------------ ------------ ----------- ---------- --------- -----------
James A. Cederna........ 100,000 11.3% $6.50 4/3/10 $ 409,000 $ 1,036,000
William E. Cann......... 5,000 * 7.18 1/20/09 22,600 57,200
14,000 * 5.19 12/19/09 45,640 115,780
Joseph A. Fischette..... 5,000 * 7.18 1/20/09 22,600 57,200
8,000 * 5.19 12/19/09 26,080 66,160
Jonathan H. Mauer....... 15,000 * 7.18 1/20/09 67,800 171,600
Benjamin F. Ward, Jr.... 3,000 * 7.18 1/20/09 13,560 34,320
12,000 * 5.19 12/19/09 39,120 99,240
--------
*Less than 1%.
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money
Acquired on Value Options at FY-End (#) Options at FY-End ($)(1)
Exercise Realized ------------------------- -------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
James A. Cederna........ 0 $ 0 225,000 275,000 $0 $ 0
William E. Cann......... 0 0 40,000 49,000 0 7,000
Joseph A. Fischette..... 0 0 51,500 13,000 0 4,000
Jonathan H. Maurer...... 0 0 31,500 15,000 0 0
Benjamin F. Ward, Jr.... 0 0 61,500 15,000 0 6,000
--------
(1) Based upon the exercise price of the options and the fair market value of
the Common Stock of the Company as of December 31, 2000.
Employment Agreements
All the executive officers of the Company have entered into employment
agreements with the Company. The agreements generally provide for continued
employment of the officers until terminated by the Company with or without
cause. Officers terminated without cause are entitled to severance
compensation of up to one year's base salary plus equivalent benefits until
the employee is employed by another employer for compensation at least equal
to 90% of his prior compensation at the Company. The agreements provide for a
base salary and for bonus compensation as determined by the Company. The
agreements also contain change in control provisions pursuant to which, if a
change in control (as defined in the agreements) occurs, the employee is
permitted to terminate employment on a date which is within the period
beginning on the first anniversary of such change in control and ending on the
second anniversary. If an employee terminates his or her employment as
provided above, or if the Company terminates the employee other than a
termination for cause within three years after the change in control, the
Company is required to pay severance compensation to the employee for up to 36
months (or, if earlier, until the employee is employed by another employer for
compensation at least equal to 90% of his prior compensation) equal to his or
her monthly compensation (including salary but not bonuses) for the calendar
year
11
immediately prior to termination. In addition, for such period the employee
will receive equivalent benefits as were provided at the time of termination
and any then unvested stock benefits held by the employee will vest. The
agreements also contain confidentiality and non-compete provisions.
Mr. Cederna has an employment agreement which provides that he shall be
employed through April 1, 2002. His employment will continue, unless otherwise
terminated in accordance with the agreement, for successive renewal periods of
one year each, commencing on January 1 in each renewal period. If Mr.
Cederna's employment is terminated due to board dissatisfaction or without due
cause, Mr. Cederna is entitled to severance compensation as described below
for a severance period of 24 calendar months, and Mr. Cederna would not be
entitled to acceleration of vesting on any stock benefits then held by him. If
Mr. Cederna's employment is terminated after a change in control, Mr. Cederna
is entitled to severance benefits as described below for a severance period of
36 calendar months, and all stock benefits not vested at the time of
termination would vest. If Mr. Cederna's employment is terminated for due
cause by the Company, then Mr. Cederna is not entitled to any severance pay or
any acceleration of stock benefits. If Mr. Cederna's employment is terminated
by Mr. Cederna upon a breach by the Company of the agreement, then Mr. Cederna
is entitled to severance compensation for a severance period of three calendar
months, or through the initial term of the contract, whichever is longer, and
Mr. Cederna's stock benefits would be accelerated. If Mr. Cederna's employment
is terminated by Mr. Cederna following a change in control, then Mr. Cederna
is entitled to severance compensation for a severance period of six calendar
months after such termination, and Mr. Cederna's stock benefits would be
accelerated. If Mr. Cederna's employment is terminated by Mr. Cederna for any
other reason, then Mr. Cederna is not entitled to any severance pay or any
acceleration of stock benefits.
Severance compensation means, in general, the amount of salary and cash bonus
received by Mr. Cederna for the calendar year immediately prior to the year in
which notice of termination is given. The severance period shall end on the
date, if ever, when Mr. Cederna is employed by another employer for total
compensation equal to at least 90% of his severance compensation. In addition,
during the severance period Mr. Cederna would receive equivalent benefits as
were provided to him at the time of termination. Mr. Cederna's agreement also
contains confidentiality and non-compete provisions.
Mr. Cederna's agreement provides that he shall be entitled to an annual grant
of stock options to purchase 100,000 shares of Common Stock at the fair market
value of such stock on the first business day of April of each year, subject
to customary vesting provisions. In addition, Mr. Cederna's agreement provides
that, in connection with his annual bonus under the Company's Incentive Plan,
the plan will provide that in the case of Mr. Cederna no such bonus is to
exceed 125% of his annual salary.
12
Performance Graph
Comparison of Five-Year Cumulative Total Return*
Among Calgon Carbon's Common Stock, S&P 500 Composite Index
and S&P Chemicals-Specialty Composite Index
[LINE GRAPH]
Measurement period
S&P 500
Measurement PT - CALGON CARBON CORP. S&P 500 INDEX CHEMICALS (SPECIALTY)
------------------ ------------------- ------------- ---------------------
FYE 12/31/95 $100 $100 $100
FYE 12/31/96 $104.84 $122.96 $102.57
FYE 12/31/97 $ 94.48 $163.98 $127.01
FYE 12/31/98 $ 68.34 $210.85 $108.16
FYE 12/31/99 $ 56.21 $255.21 $119.73
FYE 12/31/00 $ 55.65 $231.98 $106.50
* Assumes that the value of the investment in Calgon Carbon Common
Stock and each index was $100 on December 31, 1995 and that all
dividends were reinvested.
Pension Benefits
The Company's Retirement Plan for Salaried Employees is a non-contributory
defined benefit pension plan. In addition, the Company has a Supplemental
Retirement Plan, which is applicable to certain employees selected by the
Board of Directors, designed to supplement retirement benefits under the
Retirement Plan for Salaried Employees which have been limited by various
Internal Revenue Code provisions. At present no executive officers participate
in such Supplemental Retirement Plan. The following table shows the estimated
annual pension benefits which would be payable under the above-stated plans in
the form of a single life annuity, for
13
various levels of average annual compensation and years of service, based upon
retirement at age 65 in the calendar year 2000, before any reduction to take
account of benefits payable by the Company's former owner, Merck & Co., Inc.
(by agreement with Merck, benefits payable under Company plans are reduced by
the benefit amounts payable to the individual by Merck, which are computed
utilizing a 2.5% compensation increase assumption).
Average annual
compensation for highest
five consecutive years Annual benefits for years of service (1)
in 10-year period -----------------------------------------------------
preceding retirement 15 years 20 years 25 years 30 years 35 years
-------------------- -------- -------- -------- -------- --------
$150,000 $ 32,925 $ 43,900 $ 54,875 $ 65,850 $ 76,825
200,000 44,550 59,400 74,250 89,100 103,950
250,000 56,175 74,900 93,625 112,350 131,075
300,000 67,800 90,400 113,000 135,600 158,200
350,000 79,425 105,900 132,375 158,850 185,325
400,000 91,050 121,400 151,750 182,100 212,450
450,000 102,675 136,900 171,125 205,350 239,575
500,000 114,300 152,400 190,500 228,600 266,700
--------
(1) Under Section 415 of the Internal Revenue Code of 1986, the amount of
annual benefits which may be paid under the Retirement Plan for Salaried
Employees to any employee may not exceed $140,000 during 2001 and $135,000
during 2000 and under Section 401(a)(17) of the Code the amount of annual
compensation of each employee taken into account under such plan for any
year may not exceed $170,000 during 2000 and 2001. These limitations have
not been reflected in the table.
Other than the reduction with respect to Merck benefits discussed above, the
benefits payable under the plans are not subject to any deduction for Social
Security or other offset amounts. Covered compensation for purposes of the
chart above includes salary and incentive awards which are reported in the
"bonus" column of the summary compensation table. As of December 31, 2000,
Messrs. Cederna, Cann, Fischette, Ward and Maurer had one, one, 21, 3 and 10
years of service, respectively, under the plans. Pursuant to his employment
agreement, Mr. Cederna is entitled to retirement income under the plan, when
combined with amounts then payable to Mr. Cederna under the retirement plans
of former employers of Mr. Cederna, equal to the retirement income he would
have received under the plan (without the application of any maximum amount of
retirement income specified in the plan) if his years of credited service
under the plan had included the years of his full-time employment by such
other employers.
INDEPENDENT AUDITORS
Report of the Audit Committee
Under the charter of the Audit Committee adopted by the Board of Directors in
1999, the Committee's mission is to be the principal means by which the Board
of Directors oversees management's preparation and public disclosure of
financial information about the Company. The objective is to make available to
the public financial statements and other financial information of high
quality, accurate, complete, timely, fairly presented, and complying with all
applicable laws and accounting standards.
In overseeing the audit process for the year 2000, the Audit Committee
obtained from Deloitte & Touche LLP, the Company's independent auditors, their
letter required by Independence Standard No. 1, "Independence Discussions with
Audit Committees," describing all relationships between the auditors and the
Company that might, in their opinion, bear on their independence. In that
letter Deloitte & Touche LLP stated that in their
14
judgment they are, in fact, independent. The Committee discussed with the
auditors the contents of that letter and concurred in the judgment of
independence.
The Committee reviewed with the auditors their audit plan, audit scope and
identification of audit risks. Subsequently, the Audit Committee reviewed and
discussed the audited financial statements of the Company as of and for the
year ended December 31, 2000, first with both management and the independent
auditors, and then with the auditors alone. This discussion covered the
quality, not just the acceptability, of the Company's financial reporting
practices and the completeness and clarity of the related financial
disclosures. The Committee also received and discussed, with and without
management present, all communications from Deloitte & Touche LLP required by
generally accepted auditing standards, including those described in Statement
on Auditing Standards No. 61, "Communications with Audit Committees."
The Audit Committee then recommended to the Board of Directors that the
audited financial statements be approved by the Board, be included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000, for
filing with the Securities and Exchange Commission, and be included in the
Company's annual report to stockholders for the year 2000.
In periodic meetings with the Company's financial management and the
independent auditors, the Audit Committee discussed and approved quarterly
interim financial information prior to its release to the public. The
Committee also performed the other functions required of it by its charter.
Management, not the Audit Committee, has the principal responsibility for
maintaining adequate internal controls and information reporting systems, and
for preparing financial statements and other reports to the public and to
regulatory bodies. Similarly, professionally trained personnel of the Company,
or of accounting firms and law firms retained for the purpose, are primarily
responsible for compliance with legal and accounting standards. The
independent auditors are responsible for auditing the annual financial
statements and reviewing the quarterly financial information.
A copy of the Audit Committee's charter is attached as Attachment A to this
Proxy Statement.
ARTHUR L. GOESCHEL JULIE S. ROBERTS
SETH E. SCHOFIELD HARRY H. WEIL, CHAIRMAN
On April 7, 2000, the Board of Directors of the Company, upon recommendation
of the Audit Committee, approved the dismissal of the Company's independent
accountants, PricewaterhouseCoopers LLP ("PWC") to be effective immediately.
The audit reports of PWC on the Company's financial statements as of December
31, 1999 and 1998 and for the years then ended did not contain an adverse
opinion or a disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principles. In connection with the
audits of the Company's financial statements as of December 31, 1999 and 1998
and for the years then ended and through the date of this report, the Company
believes there were no disagreements (as defined in Item 304 of Regulation S-
K). PWC believes that discussions surrounding two potential charges to the
Company's restructuring reserve, which were never recorded, constitute a
disagreement as defined in Item 304 of Regulation S-K. With the exception of
this difference of opinion, there were no issues with PWC on any matters of
accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which matters, if not resolved to the
satisfaction of PWC, would have caused PWC to make reference to the matter in
its reports on the financial statements for such years. The Company's Audit
Committee was informed by PWC about the discussions related to the
restructuring reserve. PWC stated that they agreed with the accounting for the
final restructure reserve. The Company has also authorized PWC to respond
fully to any and all inquiries of the successor accountant.
15
During the years ended December 31, 1999 and 1998 and through April 7, 2000,
there were no reportable events as defined in Item 304(a)(1)(v) of Regulation
S-K.
Ratification of Appointment of Independent Auditors
On April 7, 2000, the Audit Committee recommended and the Board of Directors
approved, the retention of Deloitte & Touche LLP as its new independent
accountants for the year ending December 31, 2000. During the years ended
December 31, 1999 and 1998 and through April 7, 2000, neither the Company nor
anyone else on its behalf consulted Deloitte & Touche LLP regarding any of the
matters or events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-K.
The Board of Directors also has appointed Deloitte & Touche LLP as independent
auditors to audit the financial statements of the Company and its subsidiaries
for 2001. Deloitte & Touche LLP audited the financial statements of the
Company and its subsidiaries in 2000. Although the appointment of independent
auditors is not required to be submitted to a vote of the stockholders, the
Board believes that stockholders usually should participate in the selection
of the independent auditors through the ratification process.
The Board of Directors recommends a vote for the ratification of the
appointment of Deloitte & Touche LLP and unless otherwise directed therein,
the proxies solicited by the Board will be voted "FOR" the ratification of the
appointment of Deloitte & Touche LLP. In the event the stockholders fail to
ratify the appointment, the Board will consider such vote as a direction to
appoint other independent auditors for 2002.
Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting. They will have the opportunity to make statements if they
desire to do so and will be available to respond to appropriate questions.
Certain Fees
Audit Fees
The aggregate fees billed by Deloitte & Touche LLP, the member firms of
Deloitte Touche Tohmatsu and their respective affiliates (collectively
"Deloitte") for professional services rendered for the audit of the Company's
annual financial statements for the fiscal year ended December 31, 2000 and
for the reviews of the financial statements included in the Company's
Quarterly Reports on Form 10-Q for 2000 were $250,000.
Financial Information Systems Design and Implementation Fees
The aggregate fees billed by Deloitte for professional services rendered for
information technology services relating to financial information systems
design and implementation for the fiscal year ended December 31, 2000 were
$556,000.
All Other Fees
The aggregate fees billed by Deloitte for services rendered to the Company,
other than the services described above under the headings "Audit Fees" and
"Financial Information Systems Design and Implementation Fees," for the fiscal
year ended December 31, 2000 were $475,000.
The Audit Committee believes that the provision of the above services by
Deloitte is compatible with maintaining Deloitte's independence.
16
VOTE REQUIRED
The three nominees for election as Directors in the Class of 2004 and the one
nominee for election as a Director in the Class of 2002 at the Annual Meeting
who receive the greatest number of votes cast for the election of Directors of
their respective class at that meeting by the holders of the Company's Common
Stock, present in person or represented by proxy at the meeting and entitled
to vote at that meeting, a quorum being present, shall become Directors at the
conclusion of the tabulation of votes.
The proposal to ratify the independent auditors will be adopted if a majority
of the shares present in person or by proxy vote for the proposal. Since the
total shares voted "for," "against," or "abstain" are counted to determine the
minimum votes required for approval, if a stockholder abstains from voting, it
has the same legal effect as voting against. If a broker limits the number of
shares voted on the proposal on its proxy card or indicates that the shares
represented by the proxy card are not being voted on the proposal, it is
considered a broker non-vote. Broker non-votes are counted for purposes of
determining a quorum but are not counted as a vote or used to determine the
favorable votes required to approve the proposal.
OTHER BUSINESS
The Board of Directors does not know of any other business to be presented to
the Annual Meeting of Stockholders. If any other matters properly come before
the meeting, however, the persons named in the enclosed form of proxy will
vote the proxy in accordance with their best judgment.
STOCKHOLDER PROPOSALS
If any stockholder wishes to present a proposal to be acted upon at the 2002
Annual Meeting of Stockholders, the proposal must be received by the Secretary
of the Company by November 29, 2001 to be considered for inclusion in the
Company's Proxy Statement and form of proxy relating to the 2002 Annual
Meeting. The 2002 Annual Meeting is tentatively scheduled for April 30, 2002.
Section 1.08 of the By-laws of the Company requires that any shareholder
intending to present a proposal for action at an Annual Meeting must give
written notice of the proposal, containing the information specified in such
Section 1.08, so that it is received by the Company not later than the notice
deadline determined under such Section 1.08. This notice deadline will
generally be 60 days prior to the anniversary of the date of the Company's
Proxy Statement for the Annual Meeting for the previous year, or January 28,
2002 for the Company's Annual Meeting in 2002. Any shareholder proposal
received by the Secretary of the Company after January 28, 2002 will be
considered untimely under Rule 14a-4(c)(1) promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934.
Joseph A. Fischette
Secretary
March 29, 2000
17
Attachment A
to Proxy
Statement
CALGON CARBON CORPORATION
Audit Committee Charter
1. Mission statement
The Audit Committee's mission is to be the principal means by which the Board
of Directors oversees management's preparation and public disclosure of
financial information about the Company. The objective is to make available to
the public financial statements and other financial information of high
quality, accurate, complete, timely, fairly presented, and complying with all
applicable laws and accounting standards.
Management, not the Audit Committee, has the principal responsibility for
maintaining adequate internal controls and information reporting systems, and
for preparing financial statements and other reports to the public and to
regulatory bodies. Similarly, professionally trained personnel of the Company,
or of accounting firms and law firms retained for the purpose, are primarily
responsible for compliance with legal and accounting standards.
It is the Audit Committee's mission to play an active and informed role in
these processes. The Audit Committee will communicate frequently with Company
personnel and with accounting and law firms retained by the Company. The
Committee will be available to hear private communications from employees and
others as appropriate, and will keep those communications confidential if
requested. The Committee will inform itself and exercise independent judgment
about all matters it is authorized to consider. It will report regularly to
the Board of Directors in as much detail as the Board may request, and it will
make whatever recommendations to the Board and to management which the Audit
Committee believes will help the Company achieve the objectives reflected by
this Charter.
2. Public financial statements and financial reporting
A. Selection of external auditors
An important responsibility of the Audit Committee is to help the Board of
Directors select the independent accounting firm who will audit or review the
Company's financial statements (in this Charter that firm is called the
"external auditors"). The external auditors are ultimately accountable to the
Board of Directors and the Audit Committee as representatives of the Company's
stockholders. These stockholder representatives have the ultimate authority
and responsibility to select, evaluate and, where appropriate, replace the
external auditors. Whether to submit the selection of external auditors to the
stockholders for approval is within the discretion of the Board of Directors.
The Audit Committee will assess the qualifications, past performance and
independence of the external auditors, and particularly the personnel assigned
to the audit. The proposed terms of the external auditors' engagement by the
Company will be considered. This process will take place at least once a year,
and may take place more often if the Committee believes an interim evaluation
is needed. The Committee will consult with management. The Audit Committee
will then recommend to the Board of Directors whether the same external
auditors should continue to be retained, or whether replacement should be
considered.
If the Board decides to consider replacing the existing external auditors, the
Audit Committee will conduct a search for a suitable replacement. This will be
done in cooperation with management. When the Audit Committee believes the
search has developed sufficient information, the Committee will report the
results of the search to the Board and will recommend retention of a
particular independent accounting firm. The ultimate decision will be made by
the full Board of Directors.
The external auditors must be independent of the Company at all times. The
Audit Committee will determine at least annually whether the external auditors
are independent. In making that determination, the Audit Committee will
utilize, as a minimum, the standards of auditor independence and the
procedures then required by the rules
A-1
of the Securities and Exchange Commission and of any national securities
exchange on which the Company's securities are traded, as well as applicable
professional standards and principles of good corporate governance.
The Audit Committee will require the external auditors to submit to the Audit
Committee, whenever the Audit Committee believes appropriate but at least once
a year, a formal written statement delineating all relationships between the
Company and the external auditors or their personnel, such as stock ownership,
family and business relationships, non-audit services and the like. The Audit
Committee will actively engage in a dialog with the external auditors, and
separately with management, with respect to any disclosed relationships or
services which the Audit Committee believes may affect the objectivity and
independence of the external auditors. The Audit Committee will recommend that
the Board of Directors take appropriate action to ensure the independence of
the external auditors.
B. Annual financial statements
The Company's annual financial statements, which appear in its annual reports
to stockholders and to the SEC, will be prepared by management and audited by
the external auditors. The Company will not disclose those financial
statements to the public, file them with any regulatory body, or summarize
them in any press release or other public disclosure, unless and until they
are approved by the Audit Committee.
Before it will give its approval, the Audit Committee must conclude,
exercising its business judgment, that those financial statements (1) fairly
present the Company's financial position at the ends of the periods covered by
the audit, and the results of its operations during those periods, and (2) are
of high quality. The Audit Committee will report its conclusions to the Board
of Directors as soon as possible.
Prior to each annual audit, the external auditors will present a formal audit
plan to the Audit Committee. Among other things, the audit plan will cover
unusual audit procedures to be followed, preliminary judgments about audit
risk for business segments and locations, and rotation of audit emphasis, as
well as the audit of non-US operations, internal and external staffing,
reliance on computerized records and other internal controls and procedures,
and estimated timing for completion of various stages of the audit. The audit
plan will be discussed at a meeting of the Audit Committee with the external
auditors, the person in charge of any internal audit function of the Company,
and the Company's chief financial officer. The audit plan will be modified as
the Audit Committee may request, so long as the modifications do not
jeopardize the reliability of the audit or prevent adherence to high
professional standards.
During the course of the audit, the external auditors, and management will
communicate frequently with the Audit Committee or its representative as to
any significant questions or problems that arise in the course of the audit.
These might include choices of accounting principles to be applied, proposed
departures from the audit plan, consultations with other accountants,
unreasonable delays by management or the unavailability of Company personnel,
disagreements between the external auditors and management, or issues
requiring special attention by the external auditors.
When the audit is nearly complete, a draft of the financial statements, notes,
and accompanying textual material will be presented to the Audit Committee.
The Committee will meet with the external auditors, the head of any internal
audit function, and the chief financial officer. At this meeting the draft
will be discussed in detail. One of the focuses of this discussion will be the
quality, not just the acceptability, of the financial principles applied in
the preparation of the financial statements and textual material. This
discussion will include such issues as the clarity of financial and other
disclosures, the degree of aggressiveness or conservatism of the accounting
principles and underlying estimates which have been used, and other
significant decisions made by management in preparing the financial statements
and textual material.
As part of this meeting, the Audit Committee will conduct private discussions
with the external auditors, without the presence of any Company personnel, and
will conduct similar private discussions, separately, with the
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Company's chief financial officer and with the person in charge of the
Company's internal audit function. These discussions will cover the matters
which applicable legal and professional standards then require the Committee
to address, and any other matters which any participant wishes to raise.
Promptly after the Audit Committee reaches its conclusions with respect to the
financial statements and accompanying textual material, the Committee will
report those conclusions to the Board of Directors, and will discuss those
conclusions, and any related recommendations, with the Board in as much detail
as the Board desires. The Audit Committee will recommend to the Board whether
or not the financial statements should be included in the Company's annual
report filed with the SEC.
C. Quarterly financial statements
The Company's quarterly results are reported to stockholders, and its
quarterly financial statements appear in its reports to the SEC for the first
three quarters of its fiscal year. The external auditors will "review" these
financial statements in accordance with applicable legal and professional
standards. Such a "review" is not an audit and does not result in
certification of the financial statements. When this "review" is completed,
the Audit Committee will discuss it with the external auditors and with
management. This discussion will cover the subjects required by applicable
legal and accounting standards, and will include significant adjustments,
management judgments and accounting estimates, significant new accounting
policies, and any disagreements with management.
The Company will not disclose the quarterly financial statements to the
public, file them with any regulatory body, or summarize them in any press
release or other public disclosure, unless and until they are approved by the
Audit Committee.
The Audit Committee will not approve these financial statements unless the
Committee is reasonably satisfied, based on the information presented to it
and in its business judgment, that the quarterly financial statements and
accompanying textual material are consistent with the standards set forth
above with respect to the annual financial statements, to the extent
practicable.
In making this business judgment, the Audit Committee will take into account
that quarterly financial statements customarily rely on judgments and
estimates to a greater extent than annual financial statements, may not
reflect year-end adjustments, and are not normally accompanied by explanatory
notes. Furthermore, the Committee will recognize that the internal and
external procedures used in preparing and reviewing quarterly financial
material are not as rigorous as those used for annual financial statements.
D. Other financial statements
In addition to annual and quarterly reports, financial statements may be
included in other documents which the Company files with regulatory bodies or
issues to the investing public for particular purposes, such as proxy
statements, registration statements for the issuance of securities, private
placement memoranda, and the like. The Audit Committee will review such
financial statements, and accompanying textual material, prior to their
issuance, utilizing the same criteria which would be applicable to such
financial statements and textual material if they were included in annual or
quarterly reports. This review will take place even if such financial
statements and textual material has previously been published by the Company,
although previously-used procedures need not be repeated unless the Audit
Committee decides otherwise.
However, the Company need not submit to the Audit Committee financial
statements furnished to private parties, such as banks, financial advisors and
the like, or to governmental agencies other than the SEC, so long as those
financial statements are not likely to be made available to the investing
public.
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E. Press releases, communications with analysts and other public statements
regarding financial results
The Company will not issue any press releases or other publicly available
written or graphic information concerning its financial position or the
results of its operations without the prior approval of the Audit Committee.
Management will notify the Audit Committee of any scheduled oral
communications with securities analysts, such as analyst conferences by
telephone or in person. The Audit Committee may monitor or participate in such
communications if it chooses to do so.
3. Internal controls
The Audit Committee will periodically review the Company's systems of internal
controls and its management information systems. The objective will be to
determine whether, in the Committee's business judgment, these systems are
adequate to provide timely, accurate and complete information to the Company's
management and to prevent theft, fraud, corruption, conflicts of interest,
disclosure of confidential information, and other improprieties. These systems
must provide reasonable assurance that all transactions by the Company are
properly authorized and recorded. The Audit Committee will consult with the
Company's external auditors and management about these matters, and will
report its conclusions and recommendations to the Board of Directors.
If the Company has an internal audit function, the Audit Committee will review
the annual internal audit plan, risk assessment and budget for internal audit,
and will consult with the person in charge of internal audit about the
Company's internal controls.
An important part of any internal control system is the "tone at the top." The
Audit Committee will try to make sure that management is communicating the
importance of internal controls and ethical behavior to all employees, and is
supporting the work of the Company's internal control personnel.
Each year the external auditors deliver a "management letter" to management
commenting on any perceived weaknesses in the Company's internal controls and
recommending improvements. A thoughtful management letter will deal with
significant matters, not trivia, and will suggest changes that are practical
and can make a real difference. The management letter's quality will be part
of the mix of information considered by the Audit Committee in deciding
whether to recommend further retention of the same external auditors. The
management letter should be delivered to the Company and the Audit Committee
without delay after the annual audit is completed. The Audit Committee will
discuss the management letter with the external auditors and with management.
Management's draft response will be discussed with the Audit Committee before
it is sent to the external auditors.
As part of its assessment of internal controls, the Audit Committee will
review the qualifications and performance of the person in charge of internal
audit, if one exists, and the organization and administration of employees
engaged in internal audit functions. The person in charge of internal audit
will have direct access at all times to the external auditors, the chief
executive officer, the Audit Committee and the Board of Directors. The Audit
Committee will play a role in the selection, compensation, responsibilities,
promotion or demotion, and replacement of the person in charge of internal
audit. What that role will be will depend on circumstances as they evolve, and
the Audit Committee will make recommendations to the Board from time to time
as to its role in these matters.
4. Compliance with law and with internal Company policies and codes of conduct
The Company's general policy is that its employees should always comply with
all applicable laws, should not engage in abusive conduct toward others, and
should follow ethical principles and high standards of honesty and fair
dealing. This policy is reflected in numerous publications directed to
employees. The Audit Committee will periodically review those publications to
satisfy itself that they embody this general policy and give adequate
A-4
guidance to employees. The Audit Committee will also periodically review the
Company's methods of monitoring compliance by its employees with these
publications and its general policy. These matters may be the subject of
reports and recommendations by the Audit Committee to the Board of Directors.
The Audit Committee will not be expected to review technical matters, such as
health and safety regulations, employee benefit questions or issues relating
to compliance with labor agreements.
The Audit Committee will review and may investigate any illegal or unethical
conduct by Company employees which is brought to the Committee's attention by
the external or internal auditors, by management, or by any employee of the
Company. The availability of the Audit Committee for this purpose will be
communicated regularly by the Company to all its employees. If the Audit
Committee concludes that any such conduct has occurred, it will recommend
remedial action to the Board in the specific case and, if appropriate,
generally.
5. Environmental compliance
The Company's general policy is to comply with all applicable laws regulating
the discharge of potentially polluting or hazardous materials into the
environment, and regulating the handling of potentially hazardous materials.
The Company's General Counsel has the principal responsibility for monitoring
compliance with these laws. The Audit Committee will consult periodically with
the General Counsel, and with other officers of the Company, to assess the
Company's compliance with these laws. These matters may be the subject of
reports and recommendations by the Audit Committee to the Board of Directors.
6. Special assignments by the Board of Directors
In addition to its other duties, the Audit Committee will be available to the
Board of Directors for special investigations and other assignments within its
general areas of expertise.
7. Reports, other communications
The Audit Committee will report to the Board of Directors about each meeting
of the Audit Committee. These reports will cover the subjects considered at
the meeting, the conclusions reached by the Audit Committee, and any
recommendations which the Audit Committee decides to make to the Board. The
reports may be oral or in writing, as the Board may request.
In addition, the Audit Committee will furnish reports to the stockholders, to
securities exchanges, and to regulatory bodies, as required from time to time.
The Audit Committee will report to the stockholders at least annually, in the
Company's proxy statement for its annual meeting of stockholders. This report
will cover required consideration of financial information by the Committee,
as well as required discussions and communications among the Audit Committee,
the external auditors and management, as well as the work done by the
Committee during the year, and those conclusions of the Committee which it
believes should be communicated to the stockholders. The report will state
whether the Committee recommended to the Board of Directors that the annual
financial statements be included in the Company's annual report filed with the
SEC.
The Company's annual financial statements will be accompanied by a report of
management as to its responsibilities in preparing the financial statements
and accompanying textual material, in maintaining internal controls, and other
matters.
Members of the Audit Committee will meet often with management, the person in
charge of internal audit (if such a person exists), and the external auditors.
The objective will be build confidence in the work of the Committee, and to
establish free, easy and candid lines of communication about all subjects
within the Committee's responsibilities.
A-5
8. Audit Committee membership
The Audit Committee will consist of at least three directors, and more if
recommended by the Governance Committee and approved by the full Board of
Directors. The Governance Committee will nominate directors for appointment to
the Audit Committee. Appointments will be made by the full Board of Directors,
normally at or around the time of the annual meeting of the stockholders. Each
appointment will be for the remainder of the director's term of office as a
director, i.e., until the director leaves the Board or stands for reelection.
Once appointed, an Audit Committee member cannot be removed. A member whose
term expires may be reappointed, but does not have a right to reappointment.
If an Audit Committee member resigns from the Committee or leaves the Board
for any reason, the Board of Directors may fill the vacancy, upon nomination
by the Governance Committee, at the time the vacancy occurs. Such a vacancy
must be filled in that manner if the vacancy leaves the Audit Committee with
less than three members.
The Chairman of the Audit Committee will be nominated by the Governance
Committee and appointed by the full Board of Directors at or around the time
of the annual stockholders' meeting, or when a vacancy occurs in the office of
Chairman.
Compensation for service on the Audit Committee will be established from time
to time by the Governance Committee. No director will be prohibited from
serving on other Board committees in addition to the Audit Committee.
All members of the Audit Committee must be independent at all times while
serving on the Committee. For this purpose, "independent" means not having any
relationship to the Company that may interfere with the exercise of
independence from management and the Company.
No member of the Audit Committee may have any of the following relationships
while serving on the Committee:
(a) Employment by the Company or any of its affiliates within the
previous three years. For this purpose, service as a non-employee
executive officer will be considered as employment.
(b) Service within the previous three years as a partner, controlling
shareholder or executive officer of an organization that has a
business relationship with the Company or any of its affiliates,
unless the Board of Directors determines in its business judgment,
taking into account the materiality of the relationship to the
Company and the other organization, that the relationship does not
interfere with the director's exercise of independent judgment.
(c) A direct business relationship between the director and the Company
or any of its affiliates within the previous three years, such as a
consulting relationship, unless the Board of Directors determines in
its business judgment, taking into account the materiality of the
relationship to the Company and the director, that the relationship
does not interfere with the director's exercise of independent
judgment. Service as a director, or the receipt of benefits from past
employment, will not be considered a disqualifying business
relationship.
(d) Employment as an executive of another organization where any of the
Company's executive officers serve on that organization's
compensation committee.
(e) Being an immediate family member of a person who is, or has been
within the previous three years, an executive officer of the Company
or any of its affiliates. The rules of the New York Stock Exchange
define "immediate family" and "affiliate."
All members of the Audit Committee must be "financially literate." What
constitutes financial literacy will be determined by the Governance Committee
in its business judgment, but will at least mean the ability to read and
A-6
understand fundamental financial statements of the Company and its affiliates,
including a balance sheet, income statement and cash flow statement.
At least one member of the Audit Committee must have accounting or related
financial management expertise. What constitutes such expertise will be
determined by the Governance Committee in its business judgment, but normally
would include past employment experience in finance or accounting, or
requisite professional certification in accounting, or any other comparable
experience or background which results in the director's financial
sophistication, including being or having been a chief executive officer or
other senior officer with financial oversight responsibilities.
If the SEC, or any national securities exchange on which the Company's
securities are traded, adopts more restrictive definitions of independence,
financial literacy or accounting or related financial management expertise, or
imposes other requirements for membership on corporate audit committees, then
those more restrictive definitions or requirements will automatically apply
here.
This Charter's standards for membership on the Audit Committee, including
independence, financial literacy and (for at least one member) accounting or
related financial management expertise, will be administered by the Governance
Committee.
9. Audit Committee procedures
The number of Audit Committee meetings, and their timing, will be determined
by the Committee during each year, as needs develop. The Committee will
normally meet about five times a year. A written agenda of matters to be
considered at each meeting will be distributed to Audit Committee members in
advance, together with materials to be discussed at the meeting. Audit
Committee members will have enough time before the meeting to study these
materials and prepare for the meeting.
Each year the Company, with Audit Committee participation, will establish
schedules for (a) internal production of annual and quarterly financial
statements, of the annual report to stockholders, of the annual proxy
statement, and of other reports to regulatory bodies and securities exchanges,
(b) external audit or review, (c) Audit Committee review and consultation with
the external auditors and management, (d) publication of financial results by
press release, (e) meetings or conference calls with securities analysts, and
(f) filings with the SEC, securities exchanges and other regulatory bodies.
Any significant deviation from these schedules will be discussed by management
with the Audit Committee.
Meetings of the Audit Committee may be called by the Chairman or by any member
of the Committee. Meetings may be held at 10:00 a.m., local time, at the
principal executive office of the Company, or at any other time or place
acceptable to all members of the Committee. Notice of each meeting will be
given to all members of the Committee at least three days before the meeting,
in the case of notice by mail, or at least 24 hours before the meeting, in the
case of telephonic or electronic notice. Members may participate in a meeting
by telephone conference call. The presence in person or by telephone of two
members of the Committee will constitute a quorum. The Committee may invite
other directors, Company officers or employees, or any other person, to attend
any meeting. Action by the Committee may only be taken by majority vote of
those members present at a meeting or participating in the meeting by
telephone, or by the written consent of all members. Minutes of each meeting
will be taken by the Company's Secretary or his delegate, and distributed to
Committee members for their approval.
The Audit Committee may modify these procedures at any time, and may establish
other procedures. The Committee's procedures need not be in writing, and need
not be submitted to the full Board of Directors for approval.
At the request of the Audit Committee, Company officers and employees will
provide such information and assistance as the Committee believes necessary,
at the Company's expense. The Audit Committee is authorized
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to retain independent counsel, who may or may not be regular counsel for the
Company, and to retain independent advisors for accounting, financial or other
matters, all if and when the Audit Committee deems appropriate and on such
terms as the Audit Committee may agree. The fees and expenses of such counsel
and advisors will be paid by the Company.
The Audit Committee will review and reassess the adequacy of this Charter at
least annually. This Charter will be disclosed to the stockholders
periodically, and any significant changes in this Charter will be summarized
in the Audit Committee's report to the stockholders.
A-8
CALGON CARBON CORPORATION
Proxy Solicited on Behalf of the Board of Directors of
the Company for Annual Meeting of the Stockholders May 1, 2001
P James A. Cederna and Joseph A. Fischette, or either of them, are hereby
appointed proxies for the undersigned, with full power of substitution,
R to vote all the shares of Common Stock of Calgon Carbon Corporation
(the "Company") which the undersigned may be entitled to vote at the Annual
O Meeting of Stockholders of the Company scheduled for May 1, 2001, and
at any adjournment thereof, as directed on the reverse side of this proxy
X card and, in their discretion, on any other matters which may properly come
before the meeting.
Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS and will be
voted as specified on the reverse side hereof. If not specified, the
shares represented by this proxy will be voted FOR proposals 1, 2 and 3.
Please mark, sign and date this proxy card on the reverse ---------------
side hereof and return it in the enclosed envelope. | SEE REVERSE |
| SIDE |
---------------
--------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
Annual Meeting of Stockholders
of
Calgon Carbon Corporation
May 1, 2001
1:00 P.M.
Company's Office
400 Calgon Carbon Drive
Pittsburgh, Pennsylvania
[X] Please mark your
votes as in this
example.
This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR proposals
1, 2 and 3.
--------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR proposals 1, 2 and 3.
--------------------------------------------------------------------------------
1. To elect FOR WITHHELD The nominees are: 2. To elect a Director for FOR WITHHELD
Directors for [_] [_] Robert W. Cruickshank (2004) the class of 2002. [_] [_]
the class Thomas A. McConomy (2004) The nominee is:
of 2004. Julie S. Roberts (2004) John P. Surma (2002)
For, except vote withheld from the following nominee(s):
------------------------------------------------------- 3. Ratification of FOR AGAINST ABSTAIN
Deloitte & Touche LLP [_[ [_] [_]
as independent auditors
for 2001.
YES NO
I plan to attend the [_] [_]
annual meeting.
SIGNATURE(S) DATE
--------------------------------------------- --------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
--------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
Calgon Carbon Corporation
Please sign, date and return your proxy in the
enclosed envelope.