SCHEDULE 14A
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 Materials Pursuant to ss 240.14a-11(c) or ss 240.14a-12
U S LIQUIDS 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)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------
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:
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
-----------------------------------------------------------------
|_| 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 fee 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:
---------------------------------------------
2) Form, Schedule, or Registration Statement No.:
---------------------------------------------
3) Filing Party:
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4) Date Filed:
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<PAGE>
U S LIQUIDS INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 5, 1998
To the Stockholders of U S Liquids Inc.:
The 1998 Annual Meeting of Stockholders of U S Liquids Inc. (the
"Company") will be held on May 5, 1998 at 1:00 P.M. (Houston time), at the
Hotel Sofitel, 425 E. North Belt, Houston, Texas 77060. The items of business to
be considered are:
1. The election of two directors to serve for a term of three years
each;
2. The ratification of the selection of independent accountants; and
3. Such other business as may properly come before the meeting or any
adjournment thereof.
The close of business on March 26, 1998 has been fixed as the record date
for the determination of the stockholders entitled to notice of and to vote at
the Annual Meeting.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING,
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE
ENCLOSED ENVELOPE TO ASSURE REPRESENTATION OF YOUR SHARES. SHOULD YOU ATTEND,
YOU MAY, IF YOU WISH, WITHDRAW YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors
Earl J. Blackwell, Secretary
Houston, Texas
April 2, 1998
<PAGE>
U S LIQUIDS INC.
411 N. SAM HOUSTON PARKWAY EAST, SUITE 400
HOUSTON, TEXAS 77060
PROXY STATEMENT
------------------------
This Proxy Statement is furnished to the stockholders of U S Liquids Inc.,
a Delaware corporation (the "Company"), in connection with the solicitation by
the Board of Directors of proxies to be voted at the 1998 Annual Meeting of
Stockholders of the Company and any adjournment thereof. The Annual Meeting will
be held on May 5, 1998 at 1:00 P.M. (Houston time) at the Hotel Sofitel, 425 E.
North Belt, Houston, Texas 77060. Information in this Proxy Statement is as of
March 1, 1998 unless otherwise stated. The approximate date on which this Proxy
Statement and enclosed form of proxy have been mailed to stockholders is April
2, 1998.
GENERAL INFORMATION
Stockholders of record at the close of business on March 26, 1998 (the
"Record Date") are entitled to notice of the Annual Meeting and to vote the
shares of common stock, par value $.01 per share (the "Common Stock"), held by
them on such date at the Annual Meeting or any adjournment thereof. A list of
stockholders entitled to vote at the Annual Meeting will be open for inspection
by any stockholder at the offices of the Company during normal business hours
for a period of at least ten business days before the Annual Meeting. As of the
Record Date, there were 7,499,022 shares of Common Stock outstanding and
entitled to vote at the Annual Meeting.
If the accompanying proxy card is properly signed and returned to the
Company and not revoked, it will be voted in accordance with the instructions
contained therein. Unless contrary instructions are given, the persons
designated as proxy holders in the accompanying proxy card will vote in favor of
the matters presented in this Proxy Statement, and as recommended by the Board
of Directors with regard to all other matters. A stockholder may revoke his or
her proxy at any time before it is exercised by filing with the Secretary of the
Company an instrument revoking the proxy or a duly executed proxy bearing a
later date. The proxy will be suspended if the stockholder attends the Annual
Meeting in person and requests to vote at the Annual Meeting. Attendance at the
Annual Meeting will not in itself constitute revocation of the proxy.
The presence at the Annual Meeting, in person or by proxy, of a majority of
the shares of Common Stock entitled to vote as of the Record Date will
constitute a quorum, and the affirmative vote of a majority of the shares
represented at the meeting will be required to approve all of the proposals set
forth herein. Directors will be elected by a plurality of the shares represented
at the meeting. Each share of Common Stock entitles the holder thereof to one
vote on each matter considered at the meeting. An abstention from voting on a
proposal will have the same effect as a vote against the proposal, and shares
which do not vote will have no effect assuming a quorum is present at the
meeting.
The Board of Directors recommends that the stockholders vote for each of
the nominees for director and for the ratification of the selection of Arthur
Andersen LLP as the Company's independent accountants for 1998. The enclosed
proxy is solicited on behalf of the Board of Directors.
2
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding beneficial
ownership of the Common Stock by (i) each stockholder of the Company who is
known by the Company to beneficially own more than five percent of the
outstanding Common Stock, (ii) each director and executive officer, and (iii)
all directors and executive officers as a group. Unless otherwise indicated, all
persons listed have an address c/o the Company's principal executive offices and
have sole voting and investment power with respect to their shares of Common
Stock, except to the extent authority is shared by spouses under applicable law.
NAME AND ADDRESS NUMBER OF PERCENT OF
OF BENEFICIAL OWNER SHARES CLASS
- ------------------------------------- --------- ----------
Michael P. Lawlor(1)................. 150,100 2.0%
W. Gregory Orr(2).................... 626,000 8.3%
Earl J. Blackwell(3)................. 355,000 4.7%
William A. Rothrock IV(4)............ 67,500 *
Thomas B. Blanton.................... 700,780 9.3%
Alfred Tyler 2nd(5).................. 15,000 *
James F. McEneaney(6)................ 15,000 *
Sanifill, Inc.(7).................... 1,000,000 11.8%
1001 Fannin Street, Suite 4000
Houston, Texas 77002
William M. DeArman(8)................ 445,000 5.9%
5420 Huckleberry Lane
Houston, Texas 77056
All directors and executive officers
as a group (7 persons)(9).......... 1,929,380 25.7%
- ------------
(1) Excludes 300,000 shares which Mr. Lawlor has the right to acquire pursuant
to the terms of a stock option granted to Mr. Lawlor.
(2) Includes 250,000 shares held by The Wiley Gregory & Genene M. Orr Family
LLC, a limited liability company, over which Mr. Orr, as the manager, has
sole voting and investment power, 15,000 shares held by Mr. Orr's wife,
Genene Orr, 15,000 shares held by Mr. Orr's wife as custodian for two of Mr.
Orr's children, and 12,500 shares held individually by one of Mr. Orr's
children. Mr. Orr disclaims beneficial ownership of all shares held
individually by his children.
(3) Includes 180,000 shares held by The Earl J. and Christine J. Blackwell
Family LLC, a limited liability company, over which Mr. Blackwell, as the
manager, has sole voting and investment power and 100,000 shares held in an
individual retirement account for the benefit of Mr. Blackwell.
(4) Includes 5,000 shares which Mr. Rothrock has the right to acquire pursuant
to the terms of a stock option granted by the Company to him. Excludes
125,000 shares which, contingent upon the occurrence of certain events, may
be exercisable pursuant to a stock option granted to Mr. Rothrock.
(5) Includes 15,000 shares which Mr. Tyler has the right to acquire pursuant to
the terms of certain stock options granted by the Company to him.
(6) Includes 15,000 shares which Mr. McEneaney has the right to acquire pursuant
to the terms of certain stock options granted by the Company to him.
(7) Represents shares which Sanifill, Inc. has the right to acquire pursuant to
the terms of a warrant issued by the Company to Sanifill, Inc. on December
13, 1996.
(8) Includes 200,000 shares held by a trust of which Mr. DeArman is the sole
beneficiary, 12,500 shares held individually by one of Mr. DeArman's
children, and 47,500 shares held by trusts for the benefit of certain of Mr.
DeArman's children. Mr. DeArman disclaims beneficial ownership of all shares
held by or for the benefit of his children.
(9) Excludes 425,000 total shares subject to options granted to Messrs. Lawlor
and Rothrock that are not exercisable within 60 days of the Record Date.
* Constitutes less than one percent of the outstanding Common Stock.
3
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors consists of six members. The Board is divided into
three classes of equal size, with the members of each class serving for a term
of three years. At the Annual Meeting, stockholders will elect two directors who
will hold office until the annual meeting of stockholders in 2001. The Board has
nominated Alfred Tyler 2nd and James F. McEneaney to be elected at the Annual
Meeting. Both nominees presently serve on the Board and have consented to
continue to serve as a director if elected. If either nominee should be
unavailable to serve for any reason, which is not anticipated, the persons named
as proxies will vote the shares represented by all valid proxy cards for such
substitute nominee as the Board of Directors recommends.
The following is a brief account of the business experience during the past
five years of each director and each executive officer, including his principal
occupation and employment during that period, and the name and principal
business of any corporation or other organization in which each person has been
occupied or employed. Directorships in certain companies presently held by each
director or executive officer are also set forth.
Michael P. Lawlor (age 58) has served as a director of the Company since
June 1997. In August 1997, simultaneous with the effective date of the Company's
initial public offering (the "IPO"), Mr. Lawlor assumed the positions of
Chairman of the Board and Chief Executive Officer of the Company. From March
1996 to August 1997, Mr. Lawlor was a private investor. From December 1992 to
March 1996, Mr. Lawlor was Chief Executive Officer and a director of ITEQ, Inc.
f/k/a Air-Cure Technologies, Inc., a manufacturer of air treatment and air
moving and process systems, equipment and components. From 1970 to 1992, Mr.
Lawlor held various positions with Browning-Ferris Industries, Inc. ("BFI"), a
national waste services company. Mr. Lawlor started with BFI in 1970, became a
corporate officer in 1978, and from 1970 to 1988 was responsible for all of
BFI's landfill operations, during which time total landfill revenues grew from
$1 million to $500 million annually. Mr. Lawlor was the Chairman of the Wildlife
Habitat Enhancement Council, a nonprofit conservation organization, from 1992 to
1996. Mr. Lawlor's term on the Board of Directors expires in 2000.
W. Gregory Orr (age 42) is a co-founder of the Company and served as
Chairman of the Board, Chief Executive Officer and President of the Company from
November 1996 to August 1997. Mr. Orr currently serves as a director and the
Chief Operating Officer and President of the Company. From 1995 until December
1996, Mr. Orr was the President and Chief Operating Officer of a subsidiary of
Sanifill, Inc. ("Sanifill"), a national waste services company acquired by USA
Waste Services, Inc. in 1996. From 1990 to 1991, Mr. Orr was Regional Vice
President of Sanifill's Atlantic Region, and from 1991 to 1995, Mr. Orr was a
Vice President of Operations of Sanifill, during which time Mr. Orr was
responsible for reviewing and approving up to $75 million in annual capital
spending projects, as well as reviewing and approving operating budgets and
acquisition opportunities. Mr. Orr was also responsible for the initial
development of Sanifill's marketing and development program including assisting
in the formation of the management team and systems and infrastructure
development. From 1981 to 1989, Mr. Orr served in various capacities with BFI,
including Divisional Vice President. Mr. Orr's term on the Board of Directors
expires in 2000.
Earl J. Blackwell (age 55) is a co-founder of the Company and has served as
Chief Financial Officer, Senior Vice President-Finance and Secretary of the
Company from November 1996 to the present. From 1991 to December 1996, Mr.
Blackwell was Divisional Chief Financial Officer for Sanifill.
William A. Rothrock IV (age 45) became a director of the Company in June
1997. Since 1990, he has been Vice President-Business Development for Sanifill
and, subsequently, USA Waste Services, Inc. From 1984 to 1990, Mr. Rothrock was
Divisional Vice President-Landfill Marketing for BFI. Mr. Rothrock's term on the
Board of Directors expires in 1999.
Thomas B. Blanton (age 51) has been a director of the Company since June
1997. From 1991 to June 1997, Mr. Blanton served as the sole director and
President of Mesa Processing, Inc., T&T Grease Service, Inc. and Phoenix Fats &
Oils, Inc. (the "Mesa Companies"), which the Company acquired in June 1997.
Mr. Blanton has owned and operated fats and oils businesses for over 30 years.
In February 1991,
4
<PAGE>
Mr. Blanton and Metro Fab, Inc., a metal fabrication company of which Mr.
Blanton was the President and sole shareholder and director, filed voluntary
petitions for bankruptcy under Chapter 7 of the Bankruptcy Code. The Company
does not believe that either of these events is material to an evaluation of the
ability or integrity of Mr. Blanton. Mr. Blanton's term on the Board of
Directors expires in 1999.
Alfred Tyler 2nd (age 55) became a director of the Company in June 1997.
Mr. Tyler has over 20 years experience in the environmental services industry,
most recently as the President and Chief Executive Officer of Enviro-Gro
Technologies, a provider of sludge management services. In late 1992, Enviro-Gro
was sold to Wheelabrator Technologies and Mr. Tyler resigned his positions to
manage his other investments. From 1989 to the present, Mr. Tyler has been the
President and the sole stockholder of Weston Investments, Inc., a private
investment company. Mr. Tyler is also the President of Days Cove Reclamation
Company, a landfill operation and construction company, and a partner and
managing director of Bedford Capital Corporation, a New York consulting firm.
Mr. Tyler's term on the Board of Directors expires in 1998.
James F. McEneaney (age 59) became a director of the Company in October
1997. He is the retired President and Chief Operating Officer of The Ryland
Group Inc., positions he held from 1990 to 1992. Mr. McEneaney also served as
Executive Vice President and a director of The Ryland Group, Inc. from 1981 to
1992. Mr. McEneaney also was a founder of The Fortress Group, Inc., which was
organized to "roll-up" homebuilders in North America. He served as the
company's Chief Executive Officer from July 1995 through December 1995, and as a
member of its Board of Directors from 1995 until May 1997. Since August 1993,
Mr. McEneaney has served as the President of MacCan Associates, Inc., a
management consulting firm. Currently, Mr. McEneaney serves as Vice Chairman of
the Board of Anne Arundel Health Systems, Inc. Mr. McEneaney's term on the Board
of Directors expires in 1998.
With the exception of Mr. Blanton, there are no arrangements or
understandings between the Company and any person pursuant to which any person
was selected as a director. In connection with the acquisition of the Mesa
Companies, the Company caused Mr. Blanton to be appointed to the Board of
Directors of the Company. In addition, for as long as Mr. Blanton is the
beneficial owner of at least 5% of the outstanding Common Stock, the Company is
obligated to nominate Mr. Blanton for election to the Company's Board of
Directors and Messrs. Orr, Blackwell and William M. DeArman are obligated to
vote all of the shares of Common Stock controlled by them in favor of Mr.
Blanton's election to the Board of Directors.
CERTAIN INFORMATION CONCERNING THE BOARD OF DIRECTORS
DIRECTORS' COMPENSATION
Directors who are also employees of the Company or one of its subsidiaries
do not receive additional compensation for serving as directors. Each director
who is not an employee of the Company or one of its subsidiaries receives a fee
of $1,000 for each Board and committee meeting (unless held on the same day as a
Board meeting) actually attended. Directors are also reimbursed for
out-of-pocket expenses incurred in attending meetings of the Board of Directors
or committees thereof.
Under the Company's Directors' Stock Option Plan, each director who is not
an employee of the Company and has not been an employee of the Company at any
time during the 12 months preceding his initial election or appointment to the
Board is automatically granted an option to purchase 10,000 shares of Common
Stock at the time of his or her initial election or appointment. In addition,
each outside director is automatically granted an option to purchase 5,000
shares of Common Stock on January 1 of each year. Such options have an exercise
price equal to the fair market value of the Common Stock on the date of grant,
vest in full on the date of the grant and expire at the earlier of ten years
from the date of grant or one year after the director ceases to be a member of
the Board.
AUDIT AND COMPENSATION COMMITTEES
Until June 1997, no committees of the Board of Directors existed. Messrs.
Orr and Blackwell, the only directors of the Company from November 1996 to June
1997, participated in deliberations concerning executive compensation.
5
<PAGE>
In June 1997, the Board of Directors established an Audit Committee and a
Compensation Committee. The members of both the Audit Committee and the
Compensation Committee are Messrs. McEneaney, Rothrock and Tyler. The principal
duties of the Audit Committee are to recommend to the Board of Directors the
selection of the Company's independent accountants, discuss and review with the
Company's independent accountants the audit plan, auditor's report and
management letter and the Company's accounting policies, and review the
accounting procedures and internal control procedures recommended by the
Company's independent accountants. The principal duties of the Compensation
Committee are to establish and review the objectives, structure, cost and
administration of the Company's major compensation and benefit policies and
programs, review annually officers' and key employees' salaries, management
incentives and stock options, and administer the Company's stock option plan,
management incentive plans and other long-term incentive plans.
The Board met on 3 occasions during 1997, while the Audit and Compensation
Committees met on 1 and 2 occasions, respectively. Each director attended at
least 75% of the total number of meetings of the Board of Directors and the
committees of the Board on which he served.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. McEneaney, Rothrock and Tyler served on the Compensation Committee
during 1997. During 1997, Mr. Rothrock also served as Vice President-Business
Development for USA Waste Services, Inc., which acquired Sanifill in 1996.
On December 13, 1996, the Company acquired certain assets from Sanifill and
two of its subsidiaries (the "Campbell Wells Acquisition"). The assets
acquired in the Campbell Wells Acquisition included four oilfield waste
processing facilities in Louisiana, one oilfield waste processing facility in
Texas, all equipment and capital improvements related to the treatment
facilities, and approximately $8.1 million of working capital. In consideration
for these assets, the Company issued a $27.8 million promissory note to Sanifill
(the "Sanifill Note"), issued to Sanifill a transferable 10-year warrant for
the purchase of 1 million shares (post-reverse split) of Common Stock at an
exercise price (as adjusted for the subsequent reverse stock split) of $2.00 per
share (the "Sanifill Warrant") and assumed certain outstanding liabilities of
Sanifill including, without limitation, approximately $2.0 million of accounts
payable. In December 1997, the Company paid the Sanifill Note in full.
On September 18, 1997, the Company filed a shelf registration statement
under Rule 415 of the Securities Act of 1933 registering, among other things,
the shares of Common Stock issuable upon exercise of the Sanifill Warrant. The
Company has agreed to keep this shelf registration statement continuously
effective until the earlier of three years after the date of final exercise of
the Sanifill Warrant and such time as the holder of the Sanifill Warrant has
sold all of the shares issuable upon exercise thereof. The number of shares that
may be offered by Sanifill pursuant to this registration statement in any
calendar year is subject to certain limitations.
In connection with the Campbell Wells Acquisition, the Company and Sanifill
executed non-competition agreements under which each party agreed not to compete
with the other in certain businesses for a period of five years. In its
non-competition agreement, Sanifill agreed not to engage in the collection,
transfer, transportation, treatment or disposal of oilfield waste during the
restricted period. In return, the Company agreed not to engage in the
collection, treatment or disposal of municipal solid wastes, construction debris
or demolition debris during the restricted period, or own any interest in any
company engaged in any such business.
In December 1996, the Company granted to Mr. Rothrock a nonqualified option
to purchase 187,500 (post-reverse split) shares of Common Stock at a price of
$.02 per share. These options vest at the rate of 33 1/3% per year commencing in
1997, but only if Mr. Rothrock presents to the Company an introduction or
business opportunity pursuant to which the Company completes during such
calendar year an acquisition of the stock or substantially all of the assets of
another party. During 1997, the Company did not complete any acquisitions as a
result of an introduction or business opportunity presented by Mr. Rothrock and,
thus, 62,500 of the options held by Mr. Rothrock have terminated. If in either
calendar year 1998 or 1999, the
6
<PAGE>
Company does not complete any such acquisition as a result of an introduction or
business opportunity presented by Mr. Rothrock, the option shall terminate with
respect to an additional 62,500 shares. Vested options expire at the earlier of
ten years from the date of grant or one year after the death of Mr. Rothrock.
On June 17, 1997, the Company acquired all of the outstanding stock of the
Mesa Companies. Mr. Blanton received 1,062,500 shares of Common Stock in
exchange for his capital stock of the Mesa Companies. Pursuant to the terms of
the acquisition agreements, Mr. Blanton became a director of the Company. In
addition, pursuant to the terms of the acquisition agreements, the Company used
approximately $1.2 million of the net proceeds of the IPO to repay various debts
of the Mesa Companies, all of which had been personally guaranteed by Mr.
Blanton and of which approximately $200,000 was owed to Tommy Yount, the
brother-in-law of Mr. Blanton. The Company regularly purchases used cooking oil
and other food processing residuals that Mr. Yount collects from generators of
such materials. During 1997, the Company purchased approximately $243,000 of
such materials from Mr. Yount.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
compensation of the Company's executive officers (the "Named Executive
Officers") during 1996 and 1997. The Company was incorporated in November 1996.
Messrs. Orr and Blackwell were the only executive officers who received any
compensation from the Company in 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------- AWARDS
OTHER ------------- ALL
ANNUAL STOCK OPTIONS OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) (SHARES) COMPENSATION
- ---------------------------------------- --------- ---------- ---------- --------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Michael P. Lawlor....................... 1997 $ 59,231 $ 87,500 $ 0 300,000 $ 0
Chairman of the Board and 1996 N/A N/A N/A N/A 0
Chief Executive Officer(2)
W. Gregory Orr.......................... 1997 $ 125,000 $ 125,000 $ 0 0 $ 0
President and Chief 1996 2,403 0 0 0 0
Operating Officer(3)
Earl J. Blackwell....................... 1997 $ 99,840 $ 100,000 $ 0 0 $ 0
Chief Financial Officer, 1996 1,923 0 0 0 0
Senior Vice President
and Secretary(4)
</TABLE>
- ------------
(1) Excludes perquisites and other benefits, the aggregate amount of which does
not exceed the lesser of $50,000 or 10% of the total of such officer's
annual salary and bonus.
(2) Mr. Lawlor was employed by the Company in August 1997.
(3) Mr. Orr was employed by the Company in November 1996. Mr. Orr served as the
Chief Executive Officer of the Company from November 1996 to August 1997.
(4) Mr. Blackwell was employed by the Company in November 1996.
7
<PAGE>
OPTIONS GRANTED
The following table sets forth information concerning stock options granted
during the last fiscal year to the Named Executive Officers.
OPTION/SAR GRANTS IN 1997(1)
<TABLE>
<CAPTION>
POTENTIAL
REALIZED
VALUE AT
ASSUMED
ANNUAL RATES
OF
INDIVIDUAL GRANTS STOCK PRICE
- ---------------------------------------------------------------------------------------------------------- APPRECIATION
PERCENTAGE OF FOR
OPTIONS TOTAL OPTIONS EXERCISE OPTION TERM
GRANTED GRANTED TO PRICE ------------
NAME (SHARES) EMPLOYEES IN 1997 (PER SHARE) EXPIRATION DATE 5%
- ---------------------------------------- -------- ----------------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Michael P. Lawlor....................... 300,000 57% $9.50 08/20/07 $ 2,248,917
W. Gregory Orr.......................... 0 0 N/A N/A N/A
Earl J. Blackwell....................... 0 0 N/A N/A N/A
</TABLE>
POTENTIAL
REALIZED
VALUE AT
ASSUMED
ANNUAL RATES
OF
STOCK PRICE
APPRECIATION
FOR
OPTION TERM
------------
NAME 10%
- ---------------------------------------- ------------
Michael P. Lawlor....................... $ 3,598,818
W. Gregory Orr.......................... N/A
Earl J. Blackwell....................... N/A
- ------------
(1) No stock appreciation rights (SARs) were granted in 1997.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table provides certain information on stock option exercises
in 1997 by the Named Executive Officers and the value of such officers'
unexercised options at December 31, 1997.
AGGREGATED OPTION/SAR EXERCISES IN 1997 AND 12/31/97 OPTION/SAR VALUES(1)
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-
MONEY
NUMBER OF UNEXERCISED OPTIONS AT
OPTIONS AT DECEMBER 31, DECEMBER
NUMBER OF 1997 (SHARES) 31, 1997(2)
SHARES ACQUIRED --------------------------- -----------
NAME ON EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE
- ------------------------------------- --------------- -------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Michael P. Lawlor.................... N/A N/A 0 300,000 $ 0
W. Gregory Orr....................... N/A N/A 0 0 $ 0
Earl J. Blackwell.................... N/A N/A 0 0 $ 0
</TABLE>
VALUE OF
UNEXERCISED
IN-THE-
MONEY
OPTIONS AT
DECEMBER
31, 1997(2)
---------------
NAME UNEXERCISABLE
- ------------------------------------- ---------------
Michael P. Lawlor.................... $1,387,500
W. Gregory Orr....................... $ 0
Earl J. Blackwell.................... $ 0
- ------------
(1) No SARs are outstanding.
(2) Based on the closing price of the Common Stock on the American Stock
Exchange on the final trading day of 1997.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Each of Messrs. Lawlor, Orr and Blackwell has entered into an employment
agreement with the Company providing for an annual base salary of $175,000,
$150,000 and $120,000, respectively, with the right to receive incentive
compensation at the discretion of the Board of Directors. Each employment
agreement is for a term of five years with the term to be extended an additional
one year on each anniversary date of the employment agreement, unless either
party gives notice that the term of the employment agreement should not be so
extended. If the employee's employment is terminated by the Company without
cause, then the employee will continue to receive his base salary and employee
benefits for the remainder of the term of his employment agreement. If his
employment is terminated by the Company with cause, then the employee will not
be entitled to earn any further compensation or benefits under his employment
agreement. If the Company undergoes a "change in control", then, under certain
circumstances, the employee will have the right to require the Company to pay to
him a lump sum amount equal to approximately three times his "base amount", as
defined in Section 280G of the Internal Revenue Code. This base amount is
generally equal to the average annual gross income of the employee for the five
taxable years ending before the date on which the change in control occurs. This
payment will be in lieu of any further compensation or benefits payable to the
employee under the employment agreement. The employment agreement also contains
a covenant by the employee not to compete with the Company at any time during
his employment and for a period of two years after the termination of his
employment, except for a termination subsequent to a change in control.
8
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee is responsible for establishing and reviewing
the Company's arrangements and programs for compensating executive officers of
the Company. The Compensation Committee is currently composed of Messrs.
McEneaney, Rothrock and Tyler.
The Company's executive compensation program is designed to provide
competitive compensation and benefit programs that attract and retain capable
executives who are integral to the success of the Company, reward them for
superior performance and provide them with an economic incentive to increase
stockholder value. The Compensation Committee believes its policies are best
implemented by providing compensation comprised of separate components, all of
which are designed to motivate executive performance. These components are a
salary, short-term incentive compensation (bonus) and, in appropriate cases,
long-term incentive compensation (stock options). The bonuses and stock options
are in addition to executives' yearly base salaries, which are intended to be
competitive with companies which the Compensation Committee believe are
comparable to the Company.
BASE SALARY
In setting each executive officer's base salary, the Compensation Committee
takes into consideration, among other things, the executive officer's level of
experience, responsibilities and performance and salaries for comparable
positions at other companies in the same or similar businesses of the Company.
In making salary recommendations or decisions, the Compensation Committee
exercises its discretion and judgment based on these and other relevant factors.
The Compensation Committee does not apply any specific formula to determine the
weight of any particular factor.
INCENTIVE BONUS AWARDS
Short-term incentive compensation plans are intended to provide executive
officers with an incentive to act in a manner that accentuates Company
performance and, therefore, stockholder value. The Compensation Committee
believes that growth in earnings per share is an appropriate measure of
short-term corporate performances. Accordingly, the Compensation Committee has
adopted an incentive compensation plan under which each Named Executive Officer
is entitled to earn an annual bonus of up to 100% of his base salary depending
upon the growth of the Company's earnings per share in excess of targeted
levels.
STOCK OPTIONS
In 1996, the Company established the 1996 Incentive Stock Option Plan (the
"Stock Option Plan"). The purpose of the Stock Option Plan is to promote the
long-term growth and profitability of the Company and the value of the Common
Stock by providing selected employees of the Company and its subsidiaries with
incentives to contribute to the success of the Company. The Stock Option Plan
provides for both the grant of incentive stock options pursuant to 422 of the
Internal Revenue Code of 1986 and options which do not qualify as incentive
stock options. In awarding options under the Stock Option Plan, the Compensation
Committee considers various factors, such as the past and expected future
performance of an employee and the extent to which an employee has been
compensated for his or her performance. The Compensation Committee has not
established any fixed formula for awarding options under the Stock Option Plan.
The exercise price for options issued under the Stock Option Plan must, in the
case of incentive stock options, be at least equal to the fair market value of
the Common Stock subject to the option at the time the option is granted, and in
the case of nonqualified stock options, be at least equal to 75% of the fair
market value of the shares subject to the option at the time it is granted. In
the case of an incentive stock option granted to an employee who holds more than
10% of the Common Stock of the Company, the exercise price must be at least 110%
of the fair market value of the shares subject to the option at the time it is
granted.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Michael P. Lawlor's compensation for 1997 was determined pursuant to an
employment agreement entered into shortly prior to completion of the IPO. Mr.
Lawlor's compensation, including base salary and bonus compensation, was
determined based upon a review of businesses in the Company's industry and
9
<PAGE>
negotiation between the Company and Mr. Lawlor. Pursuant to the term of his
employment agreement, Mr. Lawlor's base salary for 1997 was $175,000. The
Compensation Committee determines whether to increase Mr. Lawlor's base salary
and whether he is entitled to receive incentive compensation. For 1997, Mr.
Lawlor's participation in the Company's incentive compensation plan was limited
to half of the levels of other executive officers because he joined the Company
in mid-year. In connection with the IPO and pursuant to Mr. Lawlor's employment
agreement, he was granted an option to purchase 300,000 shares of Common Stock
at the IPO price of $9.50 per share.
W. Gregory Orr served as the Chief Executive Officer of the Company from
November 1996 to August 1997 and, therefore, his base salary for 1997 was
determined prior to the establishment of the Compensation Committee. Effective
as of January 1, 1998, the Compensation Committee increased Mr. Orr's base
salary from $125,000 to $150,000. No options or other long-term incentives were
granted to Mr. Orr in 1997; however, Mr. Orr did participate in the Company's
incentive compensation plan.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code generally limits the annual tax
deduction for applicable remuneration paid to the Company's Chief Executive
Officer and certain other highly compensated executive officers to $1,000,000.
The Compensation Committee does not believe that the applicable remuneration to
be paid to the Company's executives will exceed the deduction limit set by
Section 162(m).
MEMBERS OF THE COMMITTEE
JAMES F. MCENEANEY
WILLIAM A. ROTHROCK, IV
ALFRED TYLER 2ND
The foregoing report of the Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933 or the
Securities and Exchange Act of 1934 unless the Company specifically incorporates
this information by reference, and shall not otherwise be deemed filed under
such acts.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of its Audit Committee, has
appointed Arthur Andersen LLP as the Company's independent public accountants
for 1998. Stockholders are being asked to ratify this action, and proxies
solicited on behalf of the Board of Directors will be voted for ratification of
Arthur Andersen LLP as the Company's independent accountants unless otherwise
specified.
Arthur Andersen LLP has served as the Company's independent public
accounting firm since November 1996. A representative of Arthur Andersen LLP is
expected to attend the Annual Meeting. The representative will be afforded an
opportunity to make a statement, if he desires to do so. It is anticipated that
the representative will also be available to answer appropriate questions.
If the appointment of Arthur Andersen LLP is not ratified, the matter of
the appointment of independent public accountants will be considered by the
Board of Directors.
10
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph shows the cumulative total stockholder return on the
Company's Common Stock over the period commencing on August 20, 1997 (i.e., the
date of the IPO) and ending on December 31, 1997 as compared to the returns of
the American Stock Exchange Market Index (the "AMEX Index") and a peer group
composite selected by the Company (the "Peer Group Composite"). The graph
assumes $100 was invested on August 20, 1997 in the Company's Common Stock, the
AMEX Index and the Peer Group Composite and assumes reinvestment of dividends.
STOCK PERFORMANCE GRAPH
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
<TABLE>
<CAPTION>
08-20-97 08-31-97 09-30-97 10-31-97 11-30-97 12-31-97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
U S Liquids Inc. ....... $ 100 $ 111 $ 128 $ 117 $ 106 $ 104
Peer Group.............. $ 100 $ 100 $ 109 $ 115 $ 105 $ 101
AMEX Index.............. $ 100 $ 100 $ 107 $ 104 $ 102 $ 105
</TABLE>
The Peer Group Composite is based one-third on an oil and gas field
services component (SIC Code 1389), one-third on an animal and marine fats and
oils component (SIC Code 2077), and one-third on an air and water resource and
solid waste management component (SIC Code 9511). The oil and gas field services
component is comprised of the following companies: American Oilfield Divers,
Inc., BJ Services Co., Bouygues Offshore, S.A., Cal Dive International, Inc.,
Computalog Ltd., Dailey International, Inc., Dawson Production Services, Inc.,
Freeport-McMoran Sulphur, Inc., Global Industries, Ltd., Golden Triangle
Industries, Inc., ICO Inc., Infinity, Inc., Newpark Resources, Inc., Oceaneering
International, Inc., Petrominerals Corporation, Pool Energy Services Co.,
Precision Drilling Corporation, Pride International, Inc., Schlumberger Limited,
Superior Energy Services, Inc., Transcoastal Marine Services, Inc., Tuboscope,
Inc., and Willbros Group, Inc. The animal and marine fats and oils component is
comprised of Darling International, Inc. and Zapata Corporation. The air and
water resource and solid waste management component is comprised of Edperbrascan
Corporation, nSTOR Technologies, Inc., Philip Services Corporation and Unidyne
Corporation.
11
<PAGE>
OTHER INFORMATION
COST OF PROXY SOLICITATION
The Company will bear the cost of soliciting proxies. In addition to
solicitation by mail, arrangements have been made with brokerage houses,
nominees, and other custodians and fiduciaries to send proxy material to their
principals and the Company will reimburse them for their expenses in doing so.
Proxies also may be solicited personally or by telephone or telegraph. All such
solicitations will be made by executive officers or other employees of the
Company who will not receive extra compensation therefor.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors and persons who own more than 10% of the Common
Stock to file reports of ownership and changes of ownership with the Securities
and Exchange Commission and to provide copies of those reports to the Company.
Based on a review of the reports it has received, or written representations
that no reports were required to be filed, the Company believes that during 1997
all Section 16(a) filing requirements applicable to its executive officers,
directors and 10% stockholders were met, except that Mr. McEneaney inadvertently
failed to file a Section 16(a) report when he was initially appointed to the
Board in October 1997.
ADDITIONAL MATTERS
While the notice for the Annual Meeting calls for the transaction of any
other business as may be properly presented, management is not aware of any
business to be submitted at the meeting which is not described in this Proxy
Statement. If any other business is properly presented, the persons named in the
proxy will act according to their best judgment on behalf of the stockholders
they represent.
STOCKHOLDERS' PROPOSALS
If a stockholder wishes to present a proposal at the 1999 Annual Meeting of
Stockholders, such proposal must be received by the Company at 411 N. Sam
Houston Parkway East, Suite 400, Houston, Texas 77060, Attention Secretary,
prior to December 3, 1998.
By Order of the Board of Directors
Earl J. Blackwell, Secretary
Houston, Texas
April 2, 1998
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY AND
RETURN IT PROMPTLY IN THE ACCOMPANYING POSTAGE PAID ENVELOPE.
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<PAGE>
PROXY
U S LIQUIDS INC.
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 5,1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Earl J. Blackwell and W. Gregory Orr, or
either of them, as proxies, each with full power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated below, all of the
shares of Common Stock of U S Liquids Inc. held of record by the undersigned on
March 26, 1998, at the Annual Meeting of Stockholders to be held on May 5, 1998
or any adjournment thereof.
1. ELECTION OF DIRECTORS.
[ ] For all nominees listed below (except as marked to the contrary
below).
[ ] Withhold authority to vote for all nominees listed below.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
James F. McEneaney
Alfred Tyler 2nd
2. RATIFICATION OF SELECTION OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR 1998.
[ ] For [ ] Against [ ] Abstain
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF ALL NOMINEES LISTED ABOVE AND FOR THE RATIFICATION
OF THE SELECTION OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR 1998. YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO THE VOTE
THEREOF.
<PAGE>
The undersigned hereby acknowledges receipt of the Proxy Statement and
hereby expressly revokes any and all proxies heretofore given or executed by him
with respect to the shares represented by the proxy.
Please sign exactly as name appears on stock certificate. 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 in full corporate name by President or other authorized
officer. If a partnership or limited liability company, please sign in the name
of the legal entity by authorized person.
Dated this ____ day of _________________,1998.
___________________________________________
Signature
___________________________________________
Signature
(Please sign, date and return promptly using the enclosed envelope.)
