SCHEDULE 14A
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 Section 240.14a-12
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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(2) Aggregate number 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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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] 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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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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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 8, 2003 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 2004 Annual Meeting.
2. To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company.
3. To transact such other business as may properly be brought before the
meeting.
Shareholders of record at the close of business on February 14, 2003 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, 2003
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.
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 8, 2003 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, 2003 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 2004 Annual Meeting must be received by the Secretary of the
Company no later than November 9, 2003 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 14, 2003 are
entitled to notice of, and to vote at, the Annual Meeting. At the record date,
15,483,836 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, which 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 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. The affirmative
vote of holders of a plurality of the shares of Common Stock present in person
or represented by proxy at the meeting and entitled to vote is required to elect
each director nominee.
1
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists as of March 1, 2003, 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
NAME AND ADDRESS -------------------
OF BENEFICIAL OWNER NUMBER PERCENT
------------------- ---------- -------
William C. Morris(1) 3,326,900 21.49%
100 Park Avenue
New York, New York 10017
FMR Corporation(2) 1,410,194 9.11%
82 Devonshire Street
Boston, MA 02109
Lewis L. Glucksman(3) 1,365,000 8.82%
Two Fifth Avenue, Apt. 16D/E
New York, New York 10011
Robert S. Rubin 1,150,000 7.43%
320 Park Avenue, 18th Floor
New York, New York 10022
Kayne Anderson Rudnick Investment Management, LLC(4) 1,145,116 7.40%
1800 Avenue of the Stars
Los Angeles, CA 90067
(1) Shares shown as beneficially owned by Mr. Morris include 595,000 shares of
Common Stock owned by Mr. Morris' wife and certain charitable foundations
as to which shares Mr. Morris disclaims any beneficial ownership.
(2) Based on a Schedule 13G filed with the Securities and Exchange Commission
as of December 31, 2002. FMR Corp. reported sole voting power as to 479,594
shares and sole dispositive power as to 1,410,194 shares and reported that
various persons shared the right to receive or the power to direct
dividends from, or the proceeds from the sale of, the shares.
(3) Shares shown as beneficially owned by Mr. Glucksman include 445,000 shares
of Common Stock owned by Mr. Glucksman's wife as to which shares Mr.
Glucksman disclaims any beneficial ownership.
(4) Based on a Schedule 13G filed with the Securities and Exchange Commission
as of December 31, 2002. Kayne Anderson Rudnick Investment Management, LLC
reported sole dispositive or voting power as to none of the shares and
reported that various persons shared the right to receive or the power to
direct dividends from, or the proceeds from the sale of, the shares. Kayne
Anderson Rudnick Investment Management, LLC disclaims any beneficial
ownership of the shares reported.
2
The following table sets forth the number of shares of Common Stock of the
Company beneficially owned by each of the current directors, director nominees
and executive officers and by all directors, director nominees and executive
officers as a group as of March 1, 2003.
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
-------------------------------- PERCENT OF
CURRENTLY ACQUIRABLE COMMON STOCK
DIRECTORS AND DIRECTOR NOMINEES OWNED WITHIN 60 DAYS BENEFICIALLY OWNED
----------- -------------- ------------------
Claude E. Cooke, Jr. 1,500 0 *
H. E. Lentz 4,000 0 *
William C. Morris(1) 3,326,900 0 21.49%
John J. Murphy 3,500 0 *
Jesse P. Orsini 500,000 0 3.23%
C. Mark Pearson 2,600 162,000 1.05%
Robert S. Rubin 1,150,000 0 7.43%
OTHER EXECUTIVE OFFICERS
Mark L. Edmunds 0 10,000 *
Paul G. Vitek 0 40,000 *
Christopher A. Wright 86,975 0 *
DIRECTORS, DIRECTOR NOMINEES AND
EXECUTIVE OFFICERS AS A GROUP(1) 5,075,525 212,000 33.69%
*Less than 1% of total shares outstanding
(1) Shares shown as beneficially owned by Mr. Morris include 595,000 shares of
Common Stock owned by Mr. Morris' wife and certain charitable foundations
as to which shares 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,
all of whom 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 (64) 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; Chairman of each of the
investment companies in the Seligman Group of Funds;
and Director of Kerr-McGee Corporation.
3
BUSINESS EXPERIENCE
DURING PAST 5 YEARS AND DIRECTOR
NAME (AGE) OTHER INFORMATION SINCE
---------- ----------------------- --------
Claude E. Cooke, Jr. (73) 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 (law firm)
from 1990 to 1996; employed by Exxon Production Research
Company from 1954 to 1986; the inventor of sintered bauxite,
the original ceramic proppant.
H. E. Lentz (58) Consultant to Lehman Brothers Inc. (investment banking firm)
since January 2003; Managing Director of Lehman Brothers Inc.
and Principal in its Merchant Banking Group from 1998 to 2000;
Director of Rowan Companies, Inc. and Peabody Energy Corporation.
John J. Murphy (71) 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 W.R. Grace & Co.
and ShawCor Ltd.
C. Mark Pearson (47) President and Chief Executive Officer of the Company since 2001
April 2001. Senior Vice President, Marketing & Technology
of the Company from January to April 2001;
Vice President, Marketing & Technology of the Company
from March 1997 to 2001; Associate Professor of
Petroleum Engineering at the Colorado School of Mines
from 1995 to March, 1997; various positions with Atlantic
Richfield Company from 1984 to 1995.
Robert S. Rubin (71) Senior Vice President of Bank One Corporation since 1997
2002; Director of Salomon Smith Barney (investment
banking firm) and predecessor firms from 1989 to 2001.
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETING ATTENDANCE
The Board of Directors met six times during the last fiscal year. The Board of
Directors has Audit and Compensation Committees, each comprised of three
members, and a Corporate Governance and Nominating Committee comprised of four
members. 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. As required by the New York Stock Exchange rules regarding
Audit Committees, the Company's Board of Directors has reviewed the
qualifications of its Audit Committee and has determined that all members of the
current Audit Committee have no relationship to the Company that may interfere
with the exercise of their independence from management and the Company. The
Audit Committee recommends engagement of the independent auditors, approves 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.
The Compensation Committee consists of William C. Morris (Chairman), John J.
Murphy and Robert S. Rubin. The Committee met six 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.
4
The Corporate Governance and Nominating Committee consists of William C. Morris
(Chairman), John J. Murphy, Robert S. Rubin and Claude E. Cooke, Jr. The
Committee met once during the last fiscal year. The Corporate Governance and
Nominating Committee establishes corporate governance principles and guidelines
applicable to the Company. These principles and guidelines address, among other
matters, the size, composition and responsibilities of the Board of Directors
and its Committees, including its oversight of management and consultations with
management. The Committee also advises the Board of Directors with respect to
the charters, structures and operations of the various Committees of the Board
of Directors. The Committee is also responsible for identifying individuals
qualified to become members of the Board, to recommend Director nominees for
each annual meeting of shareholders and to recommend nominees for election to
fill any vacancies on the Board of Directors. The Corporate Governance and
Nominating Committee considers nominees recommended by shareholders.
Shareholders desiring to make such recommendations should timely submit the
candidate's name, together with biographical information and the candidate's
written consent to be nominated and, if elected, to serve to: Chairman,
Corporate Governance and Nominating Committee of the Board of Directors of CARBO
Ceramics Inc., 6565 MacArthur Boulevard, Suite 1050, Irving, Texas, 75039.
REPORT OF THE AUDIT COMMITTEE
The Committee met twice during the last fiscal year. In addition, the Committee
Chairman, on behalf of the Committee, reviewed with management and the
independent auditors the interim financial information included in the Company's
March 31, 2002, June 30, 2002 and September 30, 2002 quarterly reports on Form
10-Q prior to their filing with the Securities and Exchange Commission.
The independent auditors provided the Committee a written statement describing
all the relationships between the auditors and the Company that might bear on
the auditors' independence consistent with Independence Standards Board Standard
No. 1, "Independence Discussions with Audit Committees". The Committee also
discussed and reviewed with the independent auditors all communications required
by generally accepted auditing standards, including those described in Statement
of Auditing Standards No. 61, as amended, "Communication with Audit Committees".
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 Company's
annual report on Form 10-K 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 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 that the audited financial statements be
included in the annual report on Form 10-K for the year ended December 31, 2002
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, 2003
5
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; and
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 the 1996 Stock Option Plan of Pinnacle Technologies, Inc., as
amended and restated May 31, 2002 (together "the stock option plans"); 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 2002, the portion of
incentive compensation that was deferred for executive officers, excluding the
President and Chief Executive Officer, was approximately 52 percent.
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 stock
option plans 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.
CEO COMPENSATION. C. Mark Pearson was 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
6
Company that will expire on December 31, 2003. 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. In 2001, at the time of his appointment as President and Chief
Executive Officer of the Company, Dr. Pearson was granted additional options to
purchase 100,000 shares of the Company's Common Stock at a weighted average
price of $34.52 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, 2003
7
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, 2002.
SUMMARY COMPENSATION TABLE
-------------------------------------------------------------------------------------------------------
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------- -------------
OTHER NUMBER OF
ANNUAL SECURITIES
COMPEN- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) SATION(2) OPTIONS
--------------------------- ------ -------- -------- --------- -------------
C. Mark Pearson, President 2002 $200,000 $216,471 $ 16,464 --
and Chief Executive Officer(3) 2001 180,400 314,136 14,558 100,000
2000 105,000 120,000 13,879 --
Paul G. Vitek, Senior Vice President of 2002 160,000 182,000 16,464 --
Finance & Administration and 2001 128,000 240,000 14,558 30,000
Chief Financial Officer 2000 105,000 115,000 13,879 --
Mark L. Edmunds, Vice President of 2002 112,500 95,000 1,875 40,000
Operations
(1) For Dr. Pearson and Messrs. Vitek and Edmunds, bonus includes deferred
amounts under the Company's incentive compensation plan, which are payable
in equal annual amounts over a consecutive three-year period and may be
forfeited to the Company under certain circumstances. The deferred portion
of the bonus for Messrs. Vitek and Edmunds was $95,000 and $50,000,
respectively for 2002. The deferred portion of the bonus for Dr. Pearson
and Mr. Vitek was $30,000, and $110,000, respectively for 2001 and $25,000
each for 2000.
(2) Consists of Company contributions to the savings and profit sharing plan.
(3) Dr. Pearson became President and Chief Executive Officer on April 10, 2001.
He had previously served as Senior Vice President of Marketing and
Technology and Vice President of Marketing.
The following table sets forth certain information concerning options granted
during 2002 to the named executives:
INDIVIDUAL GRANTS (1)
---------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE OR
UNDERLYING TO EMPLOYEES IN BASE PRICE EXPIRATION GRANT DATE
NAME OPTIONS GRANTED FISCAL YEAR PER SHARE DATE PRESENT VALUE(2)
--------------------- --------------- --------------- ----------- ---------- ----------------
Mark L. Edmunds 40,000 33% $41.50 4/10/2012 $746,400
(1) All options become exercisable in four equal annual installments commencing
on the first anniversary of the date of grant or earlier upon the change in
control of the Company.
(2) Option values reflect Black-Scholes model output for options. The
assumptions used in the model were expected volatility of .498, risk-free
rate of return of 4.59%, dividend yield of 1.0%, and time to exercise of
five years.
8
The following table sets forth certain information concerning options exercised
during 2002 and presents the value of unexercised options held by the named
executives at December 31, 2002:
NUMBER OF SECURITIES VALUE OF 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)
--------------------------- --------------- --------------- -------------------- --------------------
C. Mark Pearson -- $ -- 110,000E $ 1,484,500E
25,000E --
75,000U --
Paul G. Vitek -- -- 25,000E 417,500E
7,500E --
22,500U --
Mark L. Edmunds -- -- 40,000U --
The Company has entered into an employment agreement with Dr. Pearson pursuant
to which Dr. Pearson is employed as President and Chief Executive Officer of the
Company. The agreement runs through December 31, 2003 and extends automatically
for successive one-year periods. During the term of this agreement, Dr. Pearson
will receive an annual base salary of not less than $200,000 and an incentive
bonus for each fiscal year 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. Dr. 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 Dr. Pearson's death
or disability during the employment term, Dr. Pearson, or his estate, will
receive a prorated incentive bonus for the year in which his employment
terminates. In the event that Dr. Pearson's employment is terminated by the
Company without cause during the employment term, Dr. 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 Dr. Pearson's employment is terminated by the Company or that
Dr. Pearson voluntarily terminates his employment for good reason (as defined),
during the one-year period following a change in control of the Company, Dr.
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 Dr. Pearson's employment is
terminated for any other reason, Dr. 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 Dr.
Pearson's employment for any reason.
9
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information about the Company's Common Stock that
may be issued upon the exercise of options all of the Company's existing equity
compensation plans as of December 31, 2002, including the CARBO Ceramics Inc.
1996 Stock Option Plan for Key Employees and the 1996 Stock Option Plan of
Pinnacle Technologies, Inc., as amended and restated May 31, 2002.
NUMBER OF SECURITIES WEIGHTED-AVERAGE NUMBER OF SECURITIES REMAINING
TO BE ISSUED UPON EXERCISE PRICE AVAILABLE FOR FUTURE ISSUANCE UNDER
EXERCISE OF, OF OUTSTANDING EQUITY COMPENSATION PLANS
OUTSTANDING OPTIONS, OPTIONS, WARRANTS (EXCLUDING SECURITIES REFLECTED
PLAN CATEGORY WARRANTS AND RIGHTS AND RIGHTS IN 1ST COLUMN)
---------------------------- ---------------------- ---------------------- -----------------------------------
Equity compensation
plans approved by 606,250 $29.38 63,000
security holders(1)
Equity compensation
plans not approved by 171,230 $21.79 9,670
security holders(2)(3)
---------------------- ---------------------- -----------------------------------
Total 777,480 $27.41 72,670
(1) Issued under the CARBO Ceramics Inc. 1996 Stock Option Plan for Key
Employees.
(2) Issued under the 1996 Stock Option Plan of Pinnacle Technologies, Inc., as
amended and restated May 31, 2002, which was assumed by the Company in the
acquisition of Pinnacle Technologies, Inc. in May 2002.
(3) For additional information about the 1996 Stock Option Plan of Pinnacle
Technologies, Inc., as amended and restated May 31, 2002, see note 8 to the
consolidated financial statements included in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 2002.
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
Mark L. Edmunds and Christopher A. Wright, officers of the Company, each did not
file one Form 3 in 2002.
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 $5,000 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 $9,000 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.
Jesse P. Orsini retired as President and Chief Executive Officer of CARBO
Ceramics on April 10, 2001 and is retiring as a director of the Company
following the 2003 Annual Meeting. The Company entered into a consulting
agreement with Mr. Orsini for a one-year period starting April 10, 2001, which
provided for a fixed monthly fee of $6,250 and reimbursement of certain business
expenses. The Company also agreed to the continuation of medical insurance
coverage for Mr. Orsini on the same terms as an employee until he turns 65 years
of age in 2006.
10
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.
AUDIT FEES. Ernst & Young's fees for the Company's 2002 annual audit and review
of interim financial statements were $111,500.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. Ernst & Young did
not render any professional services to the Company in 2002 with respect to
financial information systems design and implementation.
ALL OTHER FEES. Ernst & Young's fees for all other services during 2002 were
$281,070, including $181,975 for audit related services, $92,115 for tax
services, and $6,980 for non-audit services. Audit related services fees include
fees for employee benefit plan audits, work on SEC registration statements, due
diligence work and accounting consultation in connection with the acquisition of
Pinnacle Technologies, Inc.. Tax services primarily involve assistance with tax
return compliance. Non-audit services include various consultation services.
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.
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 December 31, 1997, and ending December 31, 2002, 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)
Company Name/Index Dec 97 Dec 98 Dec 99 Dec 00 Dec 01 Dec 02
------------------ ------ ------ ------ ------ ------ ------
CARBO CERAMICS INC 100 55.23 70.00 121.05 127.89 111.21
S&P 500 INDEX 100 128.58 155.63 141.46 124.65 97.10
PEER GROUP 100 52.51 73.78 112.24 70.32 65.27
The stock performance graph assumes $100 was invested on December 31, 1997. For
CARBO Ceramics Inc. the December 31, 1997 closing price of $32.00 per share was
used to establish the value as of December 31, 1997.
11
Please Mark Here
for Address
Change or [ ]
Comments
SEE REVERSE SIDE
FOR AGAINST ABSTAIN
1. To elect six Directors. The Board of 2. Proposal to ratify the appointment of Ernst & Young LLP, [ ] [ ] [ ]
Directors recommends a vote FOR certified public accountants, as independent auditors for
the nominees listed below. the fiscal year ending December 31, 2003.
FOR all WITHHOLD AUTHORITY
nominees listed to vote for all nominees listed
[ ] [ ]
01 Claude E. Cooke, Jr.
02 H. E. Lentz 3. In their discretion to vote upon such other business as
03 William C. Morris may properly come before the meeting.
04 John J. Murphy
05 C. Mark Pearson
06 Robert S. Rubin
INSTRUCTIONS: To withhold authority to vote
for any individual nominee, write that
nominee's name in the space provided below.
Exceptions The Board of Directors recommends that you vote FOR the
------------------------------------ nominees 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: , 2003
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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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FOLD AND DETACH HERE
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CARBO CERAMICS INC.
The undersigned hereby appoints C. Mark Pearson 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 14, 2003 at the Annual Meeting of
Shareholders to be held on April 8, 2003, or any adjournment or continuation
thereof.
(PLEASE SEE REVERSE SIDE)
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ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
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FOLD AND DETACH HERE