SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<CAPTION>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c)
or Rule 14a-12
</TABLE>
SPURLOCK INDUSTRIES, INC.
- --------------------------------------------------------------------------------
Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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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.
----------------------------------------------------------------
[ ] 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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(4) Date Filed:
<PAGE>
SPURLOCK INDUSTRIES, INC.
April 29, 1997
Dear Shareholder:
You are cordially invited to attend our Annual Meeting of Shareholders
to be held on Tuesday, May 20, 1997 at 2:00 p.m. at the offices of Williams,
Mullen, Christian & Dobbins, 16th Floor, Two James Center, 1021 East Cary
Street, Richmond, Virginia 23219. At the Meeting, you will be asked to elect two
directors for a term of three years, and to ratify the appointment of
independent auditors for the Company for 1997. Enclosed with this letter is a
formal notice of the Meeting, a Proxy Statement and a form of proxy.
Whether or not you plan to attend the Annual Meeting, it is important
that your shares be represented and voted. Please complete, sign, date and
return the enclosed proxy promptly using the enclosed self-addressed envelope.
The enclosed proxy, when returned properly executed, will be voted in the manner
directed in the proxy.
We hope you will participate in the Annual Meeting, either in person or
by proxy.
Sincerely,
/s/ Irvine R. Spurlock
Irvine R. Spurlock
Chairman, President and
Chief Executive Officer
209 West Main Street | Waverly, Virginia 23890
(804) 834-8980 | FAX (804) 834-8985
<PAGE>
SPURLOCK INDUSTRIES, INC.
209 West Main Street
Waverly, Virginia 23890
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Spurlock Industries, Inc. (the
"Company") will be held on Tuesday, May 20, 1997 at 2:00 p.m. at the offices of
Williams, Mullen, Christian & Dobbins, 16th Floor, Two James Center, 1021 East
Cary Street, Richmond, Virginia 23219 for the following purposes:
1. To elect two directors to serve for a term of three years, and until
their successors are duly elected and qualified;
2. To consider and act upon a proposal to ratify the appointment of the
firm of Winter, Scheifley & Associates, P.C. as independent auditors
for the Company for the fiscal year ending December 31, 1997; and
3. To transact such other business as may properly come before the
Meeting.
Only shareholders of record at the close of business on April 4, 1997, the
record date fixed by the Board of Directors of the Company, are entitled to
notice of, and to vote at, the Annual Meeting.
By Order of The Board of Directors
H. Norman Spurlock, Jr.
Corporate Secretary
April 29, 1997
<PAGE>
SPURLOCK INDUSTRIES, INC.
209 West Main Street
Waverly, Virginia 23890
PROXY STATEMENT
This Proxy Statement is furnished to holders of common stock, no par
value ("Common Stock"), of Spurlock Industries, Inc. (the "Company"), in
connection with the solicitation of proxies by the Board of Directors of the
Company to be used at the Annual Meeting of Shareholders to be held on Tuesday,
May 20, 1997 at 2:00 p.m. at the offices of Williams, Mullen, Christian &
Dobbins, 16th Floor, Two James Center, 1021 East Cary Street, Richmond, Virginia
23219 (the "Annual Meeting") and any duly reconvened meeting after adjournment
thereof.
The Company is the successor to Air Resources Corporation ("Air
Resources"), following a merger which became effective July 15, 1996. The
Company was incorporated following the end of the fiscal year ended December 31,
1995, on January 27, 1996.
Any shareholder who executes a proxy has the power to revoke it at any
time by written notice to the Secretary of the Company, by executing a proxy
dated as of a later date, or by voting in person at the Annual Meeting. It is
expected that this Proxy Statement and the enclosed proxy card will be mailed on
or about April 29, 1997, to all shareholders entitled to vote at the Annual
Meeting.
The cost of soliciting proxies for the Annual Meeting will be borne by
the Company. The Company does not intend to solicit proxies otherwise than by
use of the mails, but certain officers and regular employees of the Company or
its subsidiaries, without additional compensation, may use their personal
efforts, by telephone or otherwise, to obtain proxies. The Company may also
reimburse banks, brokerage firms and other custodians, nominees and fiduciaries
for their reasonable out-of-pocket expenses in forwarding proxy materials to the
beneficial owners of shares of Common Stock.
On the record date of April 4, 1997, the date for determining those
shareholders entitled to notice of and to vote at the Annual Meeting, there were
outstanding 6,527,066 shares of Common Stock. Each share of Common Stock is
entitled to one vote on all matters to be acted upon at the Annual Meeting.
Executive officers and directors of the Company beneficially own in the
aggregate 3,870,800 shares of Common Stock, constituting 59.3% of the issued and
outstanding shares of that class.
Under the Virginia Stock Corporation Act, a majority of the shares of
the Common Stock entitled to vote, represented in person or by proxy,
constitutes a quorum for the transaction of business at any meeting of
shareholders. This quorum requirement currently equals 3,263,534 shares of the
Common Stock.
The Board of Directors of the Company is not aware of any matters other
than those described in the Proxy Statement that may be presented for action at
the Annual Meeting. However, if other matters do properly come before the Annual
Meeting, the persons named in the enclosed proxy card possess discretionary
authority to vote in accordance with their best judgment with respect to such
other matters.
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
Two (2) directors are to be elected at the Annual Meeting to serve for
a term of three (3) years expiring on the date of the Annual Meeting in 2000 and
until their respective successors are duly elected and qualified.
The election of each nominee for director requires the affirmative vote
of the holders of a plurality of the shares of Common Stock cast in the election
of directors. Votes that are withheld and shares held in street name that are
not voted in the election of directors will not be included in determining the
number of votes cast. It is intended that the votes represented by the proxies
will be cast for the election as directors of the nominees listed below, each of
whom is now a director of the Company. Each nominee has consented to being named
in the Proxy Statement and has agreed to serve if elected. If, at the time of
the Annual Meeting, any nominee is unable to serve as a director, votes will be
cast, pursuant to the enclosed proxy, for such substitute nominee as may be
nominated by the Board of Directors.
As of the date of this Proxy Statement, the Board of Directors has no
reason to believe that any of the nominees will be unable or unwilling to serve.
There are no current arrangements between any nominee and any other person
pursuant to which a nominee was selected.
The following information is furnished with respect to the nominees for
director:
Nominees for Election Whose Terms Expire in 2000
H. NORMAN SPURLOCK, JR., 35, has served as Executive Vice President
since August 1996, and as Secretary and a director of the Company since January
1996. From January 1996 until August 1996, he served as Vice President. Mr.
Spurlock was Vice President of Air Resources from March 1994 to July 1996,
Secretary from June 1994 to July 1996 and a director from December 1992 to July
1996. He was Treasurer of Air Resources from June 1993 to July 1994. Mr.
Spurlock has also served as Executive Vice President of Spurlock Adhesives, Inc.
("Spurlock Adhesives") a subsidiary of the Company and Air Resources, since
August 1996, and as Secretary and a director since 1989. From 1989 to August
1996, Mr. Spurlock served as Vice President of Spurlock Adhesives.
RAYMOND G. TUTTLE, 70, has served as a director of the Company since
January 1997. Mr. Tuttle has served as Chairman of the Board of Standard
Supplies Inc., a manufacturer of fabricated steel located in Rockville,
Maryland, from 1995 to the present, and as General Manager for approximately the
past 13 years. He also served as a member of the Board of Directors of Devlin
Lumber, a lumber distributor, since 1995.
Executive Officers and Directors. The business experience of H.
Norman Spurlock, Jr., and Raymond G. Tuttle, for the past five years is
summarized above.
The business experience of the remaining executive officers and
directors for the past five years is summarized below:
IRVINE R. SPURLOCK, 43, has served as Chairman of the Board of
Directors, President and Chief Executive Officer of the Company since August
1996, and as a director of the Company since January 1996. Mr. Spurlock was
Executive Vice President of the Company from January 1996 to August 1996. He was
Executive Vice President of Air Resources from June 1995 to July 1996 and a
director from December 1992 to July 1996. Mr. Spurlock has also served as
Chairman of the Board of Directors and
-2-
<PAGE>
Chief Executive Officer of Spurlock Adhesives, a subsidiary of the Company,
since August 1996, and as its President and a director since 1989.
HAROLD N. SPURLOCK, 72, has served as a director of the Company since
January 1996. Mr. Spurlock was Chairman of the Board of Directors and Chief
Executive Officer of the Company from January 1996 to August 1996. He served as
Chairman of the Board of Directors and Chief Executive Officer of Air Resources
from August 1992 to July 1996 and as President from July 1994 to July 1996. He
also served as Chairman of the Board of Spurlock Adhesives, a subsidiary of the
Company which he founded, from November 1989 until August 1996. In August 1996,
Mr. Spurlock became a Vice President of Spurlock Adhesives in charge of product
development.
PHILLIP S. SUMPTER, 57, has served as a director of the Company since
January 1996 and as its Executive Vice President and Chief Financial Officer
since March 1996. He was a director of Air Resources from December 1995 to July
1996. In March 1996, he was appointed Executive Vice President of Spurlock
Adhesives, a subsidiary of the Company and Air Resources. He was in private
practice as a business consultant from June 1993 to March 1996. He has also
served as Director of Marketing of Monadnock Lifetime Products, Inc., a
manufacturer of police protection equipment, since January 1995. Mr. Sumpter was
Chairman of the Board of Wibbies, Inc., a manufacturer of children's clothing,
from February 1990 to May 1993. In October 1993, Wibbies, Inc. filed a petition
for liquidation and sale of assets under Maryland law.
GLEN S. WHITWER, 52, has served as a director of the Company since
August 1996, and has been a principal of Whitwer & Company, Inc., a management
consulting firm located in Kensington, Maryland, since September 1994. He was
co-owner of Quinn, Whitwer & Co., Inc., a business consultant located in
Bethesda, Maryland, from October 1986 to September 1994.
WARREN E. BEAM, JR., CPA, 40, has served as Treasurer and Controller
of the Company since January 1996. Mr. Beam was Treasurer of Air Resources from
July 1994 to July 1996 and Controller from June 1993 to July 1996. Mr. Beam has
been Treasurer of Spurlock Adhesives, a subsidiary of the Company and Air
Resources, since January 1993 and Controller since October 1992. He previously
served as controller of B.C. Wood Products, Inc., Ashland, Virginia, from March
1986 to September 1992.
Family Relationships. There are no family relationships between any
director and executive officer, except that Harold N. Spurlock is the father of
Irvine R. Spurlock and H. Norman Spurlock, Jr.
Compensation of Directors. The Company pays each director who is not
an employee of the Company $2,000 per meeting.
Meetings and Committees of the Board of Directors. During the fiscal
year ended December 31, 1996, there were six meetings of the Board of Directors
of the Company. No director attended fewer than 100 percent of the total number
of meetings of the Board of Directors of the Company. The Board of Directors has
no audit, nominating, compensation or other committees.
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a)
of the Securities Exchange Act of 1934, as amended, requires the Company's
directors and executive officers and persons who beneficially own more than 10%
of the Company's Common Stock to file initial reports of ownership and reports
of changes in ownership of Common Stock with the Securities and Exchange
Commission (the "Commission"). Such persons are required by Commission
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
-3-
<PAGE>
To the Company's knowledge, based solely upon a review of the copies of
such reports furnished to the Company, the Company believes that applicable
Section 16(a) filing requirements were satisfied for events and transactions
that occurred in 1996.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of April 4, 1997, by (i) each person who
is known to the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock, (ii) each director and nominee of the
Company, (iii) the Company's "Named Executive Officers" set forth in the Summary
Compensation Table presented in this Proxy Statement, and (iv) all of the
directors and executive officers of the Company as a group. For the purposes of
the following table, beneficial ownership has been determined in accordance with
the provisions of Rule 13d-3 under the Exchange Act, under which, in general, a
person is deemed to be a beneficial owner of a security if he or she has or
shares the power to vote or direct the voting of the security or the power to
dispose or direct disposition of the security, or if he or she has the right to
acquire beneficial ownership of the security within 60 days. Except as otherwise
indicated (i) each shareholder identified in the table possesses sole voting and
investment power with respect to his shares, and (ii) the mailing address of
each individual is Spurlock Industries, Inc., 209 West Main Street, Waverly,
Virginia 23890.
Name and Address of Common Stock
Beneficial Owner Beneficially Owned Percent of Class*
- ---------------- ------------------ -----------------
Irvine R. Spurlock (1)(2)(3) 3,434,800 52.6
Harold N. Spurlock (1) 3,670,800 56.2
Phillip S. Sumpter (4) 50,000 0.8
H. Norman Spurlock, Jr. (1)(2)(3) 3,414,800 52.3
Raymond G. Tuttle 0 0
Glen S. Whitwer 0 0
Lee Rasmussen 346,283 5.3
14945 E. Radcliffe Drive
Aurora, CO 80015
Executive officers and 3,870,800 59.3
directors as a group (seven persons)
--------------
*Based on 6,527,066 shares of Common Stock outstanding at April 4, 1997.
(1) Includes beneficial ownership of 3,364,800 shares held by the Spurlock
Family Limited Partnership (the "Partnership"). The general partner of
the Partnership is the Spurlock Family Corporation, control of which
is held 1/3 each by Harold N. Spurlock, Irvine R. Spurlock and H.
Norman Spurlock, Jr.
(2) Pursuant to an agreement between Lloyd B. Putman, H. Norman Spurlock,
Jr. and Irvine R. Spurlock, dated January 12, 1996, Messrs. Spurlock
and Spurlock each purchased 507,400 shares of Air Resources' common
stock from Mr. Putman in consideration of a joint promissory note due
in installments ending May 2000. In accordance with the stock purchase
agreement, the shares purchased have been pledged as security for the
promissory note, but Messrs. Spurlock and Spurlock retained the right
to vote their respective shares until an event of default thereunder.
Messrs. Spurlock transferred all such shares to the Partnership in
1996.
(3) Includes options to purchase 50,000 shares of Common Stock at $.50 per
share pursuant to the 1995 Stock Incentive Plan.
(4) Includes options to purchase 50,000 shares of Common Stock at $.55 per
share pursuant to the 1995 Stock Incentive Plan.
-4-
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or accrued to the
Chief Executive Officer of the Company and its other most highly paid executive
officers (the "Named Executive Officers") for the last fiscal year in all
capacities in which they served the Company.
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Compensation
Annual Compensation Award
------------------- -----
Securities
Name and Other Annual Underlying
Principal Position Year Salary Bonus Compensation Options
------------------ ---- ------ ----- ------------ -------
<S> <C> <C> <C> <C> <C>
Irvine R. Spurlock, Chairman of the 1996 $179,880 -- (1) --
Board, President and Chief 1995 $186,725 $ 9,060(2) (1) 50,000(3)
Executive Officer
Harold N. Spurlock, Vice President 1996 $220,130 -- (1) --
of Spurlock Adhesives 1995 $194,500 -- (1) --
Phillip S. Sumpter, Executive Vice 1996 $141,942 -- (1) 50,000(3)
President and Chief Financial 1995 -- -- -- --
Officer(4)
H. Norman Spurlock, Jr. 1996 $178,835 -- (1) --
Executive Vice President and 1995 $181,966 9,060(2) (1) 50,000(3)
Secretary
</TABLE>
- ------------------
(1) The value of perquisites and other personal benefits did not exceed
the lesser of $50,000 or 10% of the total annual salary and bonus
shown in the table.
(2) Award of 50,000 shares of Air Resources' common stock, the per share
fair market value of which was $.1812 based on the average of the
average bid and asked prices on the National Daily Quotation Sheets on
the date of award.
(3) Represents shares of Air Resources' common stock. As of July 26, 1996,
these options were automatically converted to options to purchase
shares of Common Stock.
(4) Represents compensation for Mr. Sumpter's employment with the Company
beginning April 1, 1996.
The executive officers of the Company participate in other benefit
plans provided to all full-time employees of the Company who meet eligibility
requirements, including group life insurance, hospitalization and major medical
insurance.
-5-
<PAGE>
Option Grants, Exercises and Holdings. The following table sets forth
information with respect to the grant of options made in 1996 to executive
officers of the Company named in the Summary Compensation Table.
<TABLE>
<CAPTION>
Stock Option Grants in Last Fiscal Year
Individual Grants
-----------------
Percent of Potential Realizable
Number of Total Value at Assumed
Securities Options Exercise Annual Rates of
Underlying Granted to or Base Stock Price
Options Employees Price Per Expiration Appreciation for
Name Granted in 1996 Share Date Option Term
- ---- ------- ------- ----- ---- -----------
5% 10%
-- ---
<S> <C> <C> <C> <C> <C> <C>
Phillip S. Sumpter 50,000 66% $.55 July 11, 2006 $0 $0
</TABLE>
No options were exercised by any of the Named Executive Officers of the
Company during the fiscal year ended December 31, 1996. The following table sets
forth information with respect to unexercised options held by them as of the end
of the fiscal year:
<TABLE>
<CAPTION>
Fiscal Year End Options
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options
Fiscal Year End at Fiscal Year End (1)
--------------- ----------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Irvine R. Spurlock 50,000 _ $0 _
Phillip S. Sumpter 50,000 _ $0 _
H. Norman Spurlock, Jr. 50,000 _ $0 _
</TABLE>
- ------------
(1) The value of unexercised in-the-money options at fiscal year end was
calculated by determining the difference between the fair market value
of the Company's Common Stock underlying the options on December 31,
1996 per share and the exercise price of the options ($0.50 for Messrs.
Spurlock and Spurlock and $0.55 for Mr. Sumpter).
Report of the Board of Directors on Executive Compensation. The
Company's compensation policies applicable to its executive officers are
administered by the Board of Directors, two of whom are non-employee directors.
The goal of the policies is to attract, motivate, reward and retain the
management talent required to achieve the Company's business objectives, at
compensation levels which are fair and equitable and competitive with those of
comparable companies. This goal is furthered by the Board of Directors' policy
of linking compensation to individual and corporate performance and by
encouraging
-6-
<PAGE>
significant stock ownership by management in order to align the financial
interests of management with those of the shareholders.
The three main components of executive compensation are base salary,
annual cash or stock bonus awards, and equity participation in the form of stock
options under the Company's 1995 Stock Incentive Plan. Each year the Board of
Directors reviews the total compensation package of each executive officer to
ensure that it meets the above described goal. As part of this review, the Board
of Directors considers corporate performance information, compensation survey
data and the recommendations of management.
Base Salary. Base salaries for executive officers are reviewed annually
to determine whether adjustments may be necessary. Factors considered by the
Board of Directors in determining base salaries for executive officers include
personal performance of the executive officer in light of individual levels of
responsibility, the overall performance and profitability of the Company during
the preceding year, economic trends that may be affecting the Company, and the
competitiveness of the executive officer's salary with the salaries of executive
officers in comparable positions at companies of comparable size or operational
characteristics. Each factor is weighed by the Board of Directors in a
subjective analysis of the appropriate level of compensation for that executive
officer. For purposes of assessing the competitiveness of salaries, the Board of
Directors reviews compensation data from national surveys and selected groups of
approximately twenty to fifty companies with similar size or operational
characteristics to determine ranges of total compensation in the individual
components of such compensation. Such compensation data indicates that the
Company's salary levels are slightly above the median of such data when compared
to executive positions of similar scope and responsibility.
Irvine R. Spurlock became the President and Chairman of the Board of
Directors of the Company in 1996. Mr. Spurlock's base salary for the fiscal year
ended December 31, 1996 was $179,880. The salary was set following a thorough
review and evaluation by the Board of Directors of Mr. Spurlock's personal
performance in light of his management responsibilities, the level of
profitability of the Company during the fiscal year ended December 31, 1996, and
the competitiveness of Mr. Spurlock's salary to those of other chief executive
officers in comparable companies.
Bonus Awards. The Company from time to time will award to its executive
officers bonuses in the form of cash and/or shares of Common Stock. The
determination of such bonus awards is made by the Board of Directors and is
generally based on the same factors used to determine base salary, as described
above. Particular attention is given to those executive officers who contribute
in a substantial degree to the success of the Company.
1995 Stock Incentive Plan. The incentive plan provides for
administration by a committee, which shall include at least two outside
directors, or, if no committee is designated by the Board of Directors, by the
Board of Directors. As of the date of this Proxy Statement, no committee has
been designated by the Board of Directors to administer the plan.
The shareholder-approved incentive plan is designed to provide current
and deferred incentive compensation to officers, directors and key employees of
the Company who contribute in a substantial degree to the success of the
Company. The incentive plan affords these selected individuals a means of
participating in, and an incentive to contribute further to, such success.
Grants are made to executive officers based on salary, responsibility and
performance of the individual officer, director or employee.
The exercise price per share for options granted under the incentive
plan is determined by the Board of Directors on the date of grant. Under certain
circumstances, the exercise price shall not be less than the fair market value
of Common Stock on the date of grant. Accordingly, if there is no appreciation
-7-
<PAGE>
in the market price for Common Stock, the options are valueless. The term of any
option granted under the incentive plan is fixed by the Board of Directors on
the date of grant.
Deductibility of Executive Compensation. Section 162(m) of the Internal
Revenue Code of 1986, as amended, applicable for 1995 and thereafter, generally
disallows a tax deduction to public companies for compensation over $1 million
paid in any year (not including amounts deferred) to a company's chief executive
officer and to the four other most highly compensated officers. Qualifying
performance-based compensation will not be subject to the deduction limit if
certain requirements are met. The Company believes that all compensation paid in
1995 to such officers is deductible under Section 162(m) because such
compensation is less than the threshold amount and is structured in a manner
believed to qualify as performance-based compensation not subject to the
deduction limit.
Board of Directors
Irvine R. Spurlock, Chairman
Harold N. Spurlock
H. Norman Spurlock, Jr.
Phillip S. Sumpter
Raymond G. Tuttle
Glen S. Whitwer
Compensation Committee Interlocks and Insider Participation. The
Board of Directors of Air Resources had no compensation committee. Executive
compensation is examined and approved by the entire Board of Directors. For the
fiscal year ended December 31, 1996, the Board of Directors included the
following officers and employees of the Company and/or Air Resources and/or
Spurlock Adhesives, who participated in deliberations of the Board of Directors
concerning executive officer compensation: Harold N. Spurlock, H. Norman
Spurlock, Jr., Irvine R. Spurlock and Phillip S. Sumpter.
Performance Graph. Set forth below is a line graph comparing the yearly
percentage change in the Company's cumulative total shareholder return
(including reinvestment of dividends) on the Common Stock with (a) the S&P's
SmallCap 600 Index, representing a broad equity market index assuming
reinvestment of dividends, and (b) a cumulative total return, assuming
reinvestment of dividends, of a peer group selected by the Company on an
industry and line-of-business basis (the "Peer Group"), in each case assuming
that $100 is invested on December 31, 1991.
-8-
<PAGE>
[The Performance Graph is a line graph which displays the indexed returns (in
dollars) set forth in the second table below entitled "Indexed Returns($)."]
Set forth below are the annual return percentages and index returns for
the S&P SmallCap 600 Index, the Peer Group and for the Company, as presented in
the Performance Graph above. The shareholder returns shown in the graph and the
table are not necessarily indicative of future performance.
Total Shareholder Returns (Dividends Reinvested)
- ------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL RETURN PERCENTAGE
Years Ending December 31
Company Name/Index 1992 1993 1994 1995 1996
- ------------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
S&P SmallCap 600 Index 21.04% 18.79% - 4.77% 29.96% 21.32%
Peer Group -2.32% 46.05% 39.84% 31.66% - 8.56%
Spurlock Industries, Inc. 83.33% -93.18% 0.00% 333.39% - 0.83%
</TABLE>
<TABLE>
<CAPTION>
INDEXED RETURNS ($)
Years Ending December 31
Base
Period
Company Name/Index 1991 1992 1993 1994 1995 1996
- ------------------ ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
S&P SmallCap 600 Index 100 121.04 143.78 136.92 177.95 215.89
Peer Group 100 97.68 142.66 199.50 262.66 240.18
Spurlock Industries, Inc. 100 183.33 12.50 12.50 54.17 53.72
</TABLE>
The Peer Group companies include ChemFirst Inc., Geon Company (included
from 1994 forward) and Mississippi Chemical Corp. (included from 1994 forward).
These companies were selected by the Company because they are generally in the
same industry and line of business as the Company.
TRANSACTIONS WITH MANAGEMENT
Employment Agreements. Pursuant to an Agreement and Plan of
Reorganization dated April 22, 1992 (the "Spurlock Adhesives Agreement"), Air
Resources, among other things, acquired all of the capital stock of Spurlock
Adhesives from Harold N. Spurlock. The Spurlock Adhesives Agreement required Air
Resources to purchase all of Mr. Spurlock's shares of Air Resources' common
stock at his request upon the termination of his employment by Air Resources.
The per share purchase price set by the Spurlock Adhesives Agreement was the
highest market bid price at which such shares have traded in the preceding
twelve months. The Spurlock Adhesives Agreement also provided for Air Resources
to purchase all of Mr. Spurlock's shares of Air Resources' common stock upon his
death at the request of his heirs upon mutually agreeable terms. These
provisions of the Spurlock Adhesives Agreement relating to Air Resources'
obligations to purchase Mr. Spurlock's shares were terminated by mutual
agreement effective April 15, 1996, without compensation to Mr. Spurlock.
On August 21, 1996, Harold N. Spurlock and Spurlock Adhesives entered
into a certain Employment and Retirement Benefit Agreement (the "Employment
Agreement") which provides, among other things, for Mr. Spurlock's employment
and certain retirement benefits. Pursuant to the Employment
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<PAGE>
Agreement, Mr. Spurlock has agreed to serve as vice president for product
development, and as a member of the Company's and Spurlock Adhesives' Boards of
Directors, until August 31, 1999.
For his services, Mr. Spurlock will receive under the Employment
Agreement a base salary of $180,000 per year, reimbursement of expenses in
accordance with the general policies of Spurlock Adhesives, and such additional
or special compensation as the Board of Directors of Spurlock Adhesives may
determine from time to time. Mr. Spurlock will not receive any additional
compensation for service on the Company's Board of Directors and that of
Spurlock Adhesives.
The Employment Agreement provides that Mr. Spurlock's employment with
Spurlock Adhesives will be terminated by reason of his death or permanent
disability, by Mr. Spurlock upon 30 days notice in writing, or by Spurlock
Adhesives with cause. "Cause" is deemed to exist under the Employment Agreement
if Mr. Spurlock (i) willfully refuses to perform services thereunder, (ii)
materially breaches the provisions thereof relating to trade secrets, and
confidential information, retention of documents, and noncompetition, (iii)
engages in acts of dishonesty or fraud, or (iv) engages in other serious
misconduct. If Mr. Spurlock's employment with Spurlock Adhesives terminates for
cause, or due to death, permanent disability or voluntary termination, any
portion of his fixed salary, which is earned but unpaid as of the date of such
termination shall be paid to him, or his designated beneficiary in the event of
death.
The Employment Agreement provides for a retirement benefit equal to
$100,000 per year to be received by Mr. Spurlock upon his retirement from
employment at or after August 31, 1999, or permanent disability prior to such
date, for a period of five years. In the event of Mr. Spurlock's death prior to
or after such date, Mr. Spurlock's wife would receive such benefit during such
five year period. Any benefit payable to Mr. Spurlock's wife would cease upon
her death. Neither Mr. Spurlock nor his wife would be entitled to any retirement
or death benefit under the Employment Agreement in the event that he voluntarily
terminated his employment with Spurlock Adhesives prior to August 31, 1999
without "good reason." Under the Employment Agreement, "good reason" is deemed
to exist if, and only if:
(a) Spurlock Adhesives generally fails to timely pay the amounts
and benefits provided to Mr. Spurlock under the Employment Agreement;
(b) the assignment to Mr. Spurlock of duties materially
inconsistent with and inferior to Mr. Spurlock's position, duties and
responsibilities and status as a vice president; or
(c) the transfer of Mr. Spurlock's place of employment further
than 30 miles beyond the limits of Petersburg, Virginia without his prior
consent.
The Employment Agreement requires Mr. Spurlock to keep in confidence
certain trade secrets and confidential information of Spurlock Adhesives during
the term of his employment and for a period of five years thereafter. Mr.
Spurlock has further agreed not to remove or retain any documents of Spurlock
Adhesives. Also, for so long as Mr. Spurlock is employed by Spurlock Adhesives
and as long as he is receiving retirement benefits, he has agreed not to compete
with Spurlock Adhesives. In connection therewith, Mr. Spurlock has also agreed
in the Employment Agreement not to solicit employees of Spurlock Adhesives for a
period of 12 months following termination of his employment for any reason.
Indemnification Agreements. On December 21, 1995, Air Resources entered
into an Indemnification Agreement with Phillip S. Sumpter upon his appointment
to the Board of Directors. The Company succeeded to and assumed all the rights
and obligations of Air Resources under the Indemnification Agreement, which was
subsequently superseded by a new Indemnification Agreement between such parties
dated January 30, 1997. Similar Indemnification Agreements were entered into
between the Company and Glen S. Whitwer and Raymond G. Tuttle on September 19,
1996 and January
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30, 1997, respectively. Such agreements provide for the indemnification of such
directors against claims, losses, liabilities, damages, costs and expenses that
each may suffer as a result of his service as a director of the Company, to the
full extent that such indemnification is permitted and not prohibited by
applicable federal or state law, including securities law, or the Articles of
Incorporation of the Company.
Certain Related Transactions. Described below are obligations of the
Company which have been personally guaranteed by certain executive officers,
directors and shareholders of the Company. All such personal guarantees were
released during 1996 due to the repayment of all such obligations by the
Company.
Pursuant to the Spurlock Adhesives Agreement, Air Resources acquired
all of the stock of Spurlock Adhesives. At the time of the acquisition, Harold
N. Spurlock, formerly Chairman of the Board, President and Chief Executive
Officer of Air Resources and the Company, personally guaranteed a large portion
of Spurlock Adhesives' debt, including all debt then secured by real property
and/or equipment and debt owed to its largest trade creditor. Creditors at the
time agreed to allow the debt to remain outstanding after the acquisition of
Spurlock Adhesives on the condition that Mr. Spurlock continue to guarantee the
debt, that he remain as Chairman of the Board of Spurlock Adhesives, and that he
be appointed Chairman of the Board of Air Resources. Due to the repayment of
amounts due to such creditors in 1996, Mr. Spurlock's personal guarantee has
been released and the requirement that Mr. Spurlock serve as Chairman of the
Board of the Company and Spurlock Adhesives is no longer applicable.
In addition to Harold N. Spurlock's personal guarantee of the
above-described debt, Irvine R. Spurlock and H. Norman Spurlock, Jr., the
Company's current Chairman, President, and Chief Executive Officer, and
Executive Vice President and Secretary, respectively, and Harold N. Spurlock
also had personally guaranteed various other debts of the Company, which has
succeeded to and assumed all the rights and obligations of Air Resources, and of
Spurlock Adhesives. In May 1995, Irvine R. Spurlock and H. Norman Spurlock, Jr.
replaced a past director, Lloyd B. Putman, and a then serving director, Jesse A.
Adams, as guarantors on a note with an Arkansas bank. The loan in the original
principal amount of $500,000 was taken out in August 1992 to provide working
capital needed to operate the Company's facility in Malvern, Arkansas. The note
was secured by certain real property and equipment. On or about June 30, 1996,
the note was repaid in full and each of the personal guarantors were released
from any further obligation on the loan.
Both Harold N. Spurlock and his wife, Daphne R. Spurlock, had
guaranteed a loan from the Bank of Waverly (Virginia) secured by certain real
property and equipment relating to the construction of the Company's
formaldehyde plant in Waverly, Virginia. Mr. and Mrs. Spurlock also had
guaranteed a loan from First Union National Bank relating to the construction of
resin and formaldehyde production facilities in Waverly, Virginia. Both of these
loans were repaid in full as of July 9, 1996 and June 30, 1996, respectively,
and Mr. and Mrs. Spurlock were each released from their personal guaranties of
the loans upon such repayment.
Harold N. Spurlock, Daphne R. Spurlock and Irvine R. Spurlock had
guaranteed a loan from a trade creditor, Hydro Agri Tampa, Inc., that
represented trade debt converted to a note in 1991. The note was secured by
certain real property and equipment of Spurlock Adhesives. As of June 24, 1996,
the note was repaid in full and each of the personal guarantors were released
from any further obligation on the loan. Hydro Agri Tampa, Inc. was previously a
major supplier of urea to Spurlock Adhesives, but discontinued supply of such
raw material into the United States in 1991.
Each of Harold N. Spurlock, Irvine R. Spurlock and H. Norman Spurlock,
Jr. also guaranteed payments due under a lease with D.B. Western, Inc. for the
Waverly, Virginia formaldehyde plant. On December 19, 1991, Spurlock Adhesives
entered into a Formaldehyde Plant Lease with D.B. Western,
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under which D.B. Western agreed to construct a fully operational formaldehyde
plant at Waverly, Virginia and lease the facility to Spurlock Adhesives for ten
years at $55,000 per month, commencing at such time as the plant became
mechanically complete and ready for start up. The lease commenced in February,
1993. In July, 1996, Spurlock Adhesives exercised its option to purchase the
formaldehyde plant from D.B. Western and terminate the D.B. Western lease. As a
part of Spurlock Adhesives' acquisition of the formaldehyde plant and the
termination of the lease, Spurlock Adhesives obtained the release of each of the
personal guarantors from any obligation for lease payments due under the D.B.
Western lease. As of July 9, 1996, the amount of unpaid lease payments totaled
$471,000.
In connection with the Company's revolving credit line instituted in
February 1995, Harold N. Spurlock provided a personal guarantee as additional
security for all amounts borrowed under the facility, and Irvine R. Spurlock and
H. Norman Spurlock, Jr. provided limited guarantees in the amount of $250,000
each. As of June 28, 1996, the credit line was repaid in full and each of the
personal guarantors were released from any further obligation on the loan. The
Company's current credit facility with the National Canada Finance Corporation,
Richmond, Virginia, does not require the personal guaranties of the Company's
officers and directors.
Loan From Former Director and Officer. During 1992 and 1993, Lloyd B.
Putman, a former executive officer of Air Resources who resigned from the Board
of Directors in September 1994, loaned Air Resources $116,000. The loan, the
largest balance of which during 1996 was $65,958, bore an interest rate of 8%
per annum, payable with principal quarterly, and matured in December 1996. The
loan related to monies advanced by Mr. Putman to Air Resources' gas recovery
operations to help cover ongoing expenses for the development and production of
gas recovery technology. The loan was repaid in full as agreed on December 31,
1996.
Indebtedness of Management. On June 30, 1995, Harold N. Spurlock, then
Chairman of the Board, President and Chief Executive Officer of the Company,
received a loan in the amount of $112,500 from Spurlock Adhesives. Principal and
interest at 9% per annum are payable in five equal annual installments
commencing in July 1996, the first of which was paid as agreed. The largest
aggregate amount of such debt outstanding during 1996 was $112,500. The balance
as of December 31, 1996 was $82,500. The loan relates to the purchase by Mr.
Spurlock of certain manufacturing assets in Malvern, Arkansas that were
contributed by Mr. Spurlock to Air Resources pursuant to the Spurlock Adhesives
Agreement.
The Board of Directors recommends that the shareholders vote FOR the
nominees set forth above.
PROPOSAL TWO
RATIFICATION OF AUDITORS
The Board of Directors has appointed, subject to ratification by the
shareholders, Winter, Scheifley & Associates, P.C. to perform the audit of the
Company's financial statements for the year ending December 31, 1997. Winter,
Scheifley & Associates, P.C. has acted as the Company's auditors for the past
six years and has reported on financial statements during that period. A
representative from Winter, Scheifley & Associates, P.C.
will not be present at the Annual Meeting.
The Board of Directors recommends a vote FOR ratification of the
appointment of Winter, Scheifley & Associates, P.C. as the Company's independent
auditors for 1997.
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<PAGE>
PROPOSALS FOR 1998 ANNUAL MEETING
Under the regulations of the Securities and Exchange Commission, any
shareholder desiring to make a proposal to be acted upon at the 1998 Annual
Meeting of Shareholders must cause such proposal to be received, in proper form,
by the Secretary of the Company, whose address is 209 West Main Street, Waverly,
Virginia 23890, no later than December 30, 1997, in order for the proposal to be
considered for inclusion in the Company's Proxy Statement. The Company presently
anticipates holding the 1998 Annual Meeting on or about May 19, 1998.
The Company's Bylaws also prescribe the procedure a shareholder must
follow to nominate Directors or to bring other business before shareholders'
meetings. For a shareholder to nominate a candidate for Director at the 1998
Annual Meeting of Shareholders, notice of nomination must be received by the
Secretary of the Company not less than 60 days and not more than 90 days prior
to the date of the 1998 Annual Meeting. The notice must describe various matters
regarding the nominee and the shareholder giving the notice. For a shareholder
to bring other business before the 1998 Annual Meeting of Shareholders, notice
must be received by the Secretary of the Company not less than 60 days and not
more than 90 days prior to the date of the 1998 Annual Meeting. The notice must
include a description of the proposed business, the reasons therefor, and other
specified matters. Any shareholder may obtain a copy of the Company's Bylaws,
without charge, upon written request to the Secretary of the Company.
OTHER MATTERS
The Company's 1996 Annual Report to Shareholders is being mailed to all
shareholders concurrently with this Proxy Statement on or about April 29, 1997.
An Annual Report will be provided without charge upon oral or written request to
any shareholder who was not a shareholder of record at the time of the mailings,
but is a shareholder of record as of April 4, 1997, the record date of the
Annual Meeting. Requests should be directed to H. Norman Spurlock, Jr.,
Secretary of the Company, at 209 West Main Street, Waverly, Virginia 23890,
telephone (804) 834-3113.
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Spurlock Industries, Inc.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Irvine R. Spurlock and H. Norman
Spurlock, Jr., jointly and severally, proxies, with full power to act alone, and
with full power of substitution, to represent the undersigned and to vote, as
designated below and upon any and all other matters that may properly be brought
before such meeting, all shares of Common Stock which the undersigned would be
entitled to vote at the Annual Meeting of Shareholders of Spurlock Industries,
Inc., a Virginia corporation (the "Corporation"), to be held at the offices of
Williams, Mullen, Christian & Dobbins, 16th Floor, Two James Center, 1021 East
Cary Street, Richmond, Virginia 23219 on Tuesday, May 20, 1997 at 2:00 p.m.,
local time, or any adjournments thereof, for the following purposes:
1. To elect as directors the two persons listed as nominees below.
<TABLE>
<CAPTION>
<S> <C>
[ ] FOR nominees listed below [ ] WITHHOLD AUTHORITY to
(except as written on the line below) vote for all nominees listed below
</TABLE>
Nominees for Election Whose Terms Expire in 2000:
H. Norman Spurlock, Jr.
Raymond G. Tuttle
(INSTRUCTION: To withhold authority to vote for any individual
nominee listed above, write that nominee's name on the space
provided.)
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2. To ratify the appointment of Winter, Scheifley & Associates, P.C.
as independent auditors for the Corporation for the fiscal year ending December
31, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon any
other business that may properly come before the meeting, or any adjournment
thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES LISTED IN ITEM 1 AND FOR ITEM 2.
Dated: ,1997
--------------------------
---------------------------------------
Signature
[Name and address
label]
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Signature if held jointly
(In signing as Attorney, Administrator,
Executor, Guardian or Trustee, please
add your title as such.)
PLEASE MARK, DATE, SIGN AND RETURN PROMPTLY
