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:
_________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
_________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_________________________________________________________________
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:________________________________________________________
4) Date Filed:__________________________________________________________
<PAGE>
U S LIQUIDS INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 11, 1999
To the Stockholders of U S Liquids Inc.:
The 1999 Annual Meeting of Stockholders of U S Liquids Inc. (the
"Company") will be held on May 11, 1999 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 April 6, 1999 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 12, 1999
<PAGE>
U S LIQUIDS INC.
411 N. SAM HOUSTON PARKWAY EAST, SUITE 400
HOUSTON, TEXAS 77060-3545
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 1999 Annual Meeting of
Stockholders of the Company and any adjournment thereof. The Annual Meeting will
be held on May 11, 1999 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 19, 1999 unless otherwise stated. The approximate date on which this Proxy
Statement and enclosed form of proxy have been mailed to stockholders is April
12, 1999.
GENERAL INFORMATION
Stockholders of record at the close of business on April 6, 1999 (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 15,873,370 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. If a quorum is present, directors will be elected by a
plurality of the votes cast by the holders of Common Stock entitled to vote at
the Annual Meeting. "Plurality" means that the individuals who receive the
largest number of votes are elected as directors up to the maximum number of
directors to be chosen at the Annual Meeting. An abstension or broker non-vote
will have no effect on the election of directors under Delaware law. To ratify
the selection of Arthur Andersen LLP as the Company's independent accountants
for 1999, the affirmative vote of a majority of the shares present or
represented and entitled to vote is required. Abstensions will have the effect
of votes against the proposal to ratify the selection of Arthur Andersen LLP.
Broker non-votes will have no effect on the outcome of the proposal.
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 1999. 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.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF PERCENT OF
OF BENEFICIAL OWNER SHARES CLASS
- - ------------------------------------- --------- ----------
<S> <C> <C>
Michael P. Lawlor(1)................. 250,100 1.6%
W. Gregory Orr(2).................... 621,000 3.9
Earl J. Blackwell(3)................. 355,000 2.2
Gary J. Van Rooyan................... 10 *
Thomas B. Blanton.................... 550,260 3.5
William A. Rothrock IV(4)............ 113,750 *
Alfred Tyler 2nd(5).................. 20,000 *
James F. McEneaney, Jr.(6)........... 20,000 *
John N. Hatsopoulos(7)............... 15,000 *
Roger A. Ramsey(8)................... 10,400 *
Franklin Resources Inc.(9)........... 1,217,460 7.7
777 Mariners Island Boulevard, 6th
Fl.
San Mateo, California
Pilgrim Baxter & Associates
Ltd.(10)........................... 1,013,400 6.4
825 Duportail Road
Wayne, Pennsylvania 19087
Sanifill, Inc.(11)................... 1,000,000 5.9
1001 Fannin Street, Suite 4000
Houston, Texas 77002
Provident Investment Counsel,
Inc.(12)........................... 668,890 4.2
300 North Lake Avenue
Pasadena, California 91101-4022
All directors and executive officers
as a group (10 persons)(13)........ 1,955,520 12.2
</TABLE>
- - ------------
(1) Includes 100,000 shares which Mr. Lawlor has the right to acquire pursuant
to the terms of a stock option granted by the Company to him.
(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 7,500 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 41,250 shares which Mr. Rothrock has the right to acquire pursuant
to the terms of certain stock options granted by the Company to him.
Excludes 62,500 shares issuable pursuant to a stock option granted to Mr.
Rothrock, which vests upon the successful completion of certain corporate
development business activities.
(5) Represents shares which Mr. Tyler has the right to acquire pursuant to the
terms of certain stock options granted by the Company to him.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
3
<PAGE>
(6) Includes 19,000 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 Mr. Hatsopoulos has the right to acquire pursuant
to the terms of certain stock options granted by the Company to him.
(8) Includes 10,000 shares which Mr. Ramsey has the right to acquire pursuant
to the terms of a stock option granted by the Company to him.
(9) Includes shares owned by one or more open or closed-end investment
companies or other managed accounts which are advised by direct and
indirect investment advisory subsidiaries of Franklin Resources, Inc. The
Company has been advised that such advisory subsidiaries of Franklin
Resources have sole investment and/or voting power over such shares. The
Company has also been advised that Charles B. Johnson and Rupert H.
Johnson, Jr. are the principal stockholders of Franklin Resources and,
thus, may each be deemed to be the beneficial owner of such shares.
(10) Includes shares owned by clients of Pilgrim Baxter & Associates Ltd., a
registered investment adviser. The Company has been advised that Pilgrim
Baxter & Associates has sole power to vote 972,800 shares and sole power to
dispose of all 1,013,400 shares.
(11) Represents shares which Sanifill, Inc. has the right to acquire pursuant to
the terms of a warrant issued by the Company to Sanifill.
(12) Includes shares owned by clients of Provident Investment Counsel, Inc., a
registered investment adviser. The Company has been advised that Provident
Investment has sole power to vote 594,790 shares and sole power to dispose
of all 668,890 shares.
(13) Excludes 662,500 total shares subject to options granted to Messrs. Lawlor,
Orr, Blackwell, Van Rooyan and Rothrock that are not exercisable within 60
days of the Record Date.
* Constitutes less than one percent of the outstanding Common Stock.
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides that the Board of
Directors shall consist of not less than three members. The current number of
directors is eight. However, Mr. Blanton has advised the Company that, due to
the demands of his own business, he cannot accept a nomination for another term
as a director, and, as a result, the Board of the Directors has decided to
reduce the number of directors to seven. For election purposes, directors are
divided into two groups of two directors and a third group of three directors.
Each group holds office for three years. The Certificate of Incorporation
further provides that one group of the Board shall be elected at each annual
meeting.
At the Annual Meeting, stockholders will elect two directors who will hold
office until the annual meeting of stockholders in 2002. The Board has nominated
William A. Rothrock IV and John N. Hatsopoulos 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 59) has served as a director of the Company since
June 1997. On August 25, 1997, 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., a national waste services
company. Mr. Lawlor started with Browning-Ferris in 1970, became a corporate
officer in 1978, and from 1970 to 1988 was responsible for all of
Browning-Ferris' landfill operations,
4
<PAGE>
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 43) 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 two subsidiaries
of Sanifill, Inc., a national waste services company acquired by Waste
Management, 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. From 1981 to 1989, Mr. Orr served in
various capacities with Browning-Ferris, including Divisional Vice President.
Mr. Orr's term on the Board of Directors expires in 2000.
Earl J. Blackwell (age 56) 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.
Gary J. Van Rooyan (age 53) became Vice President and General Counsel of
the Company in September 1998. Mr. Van Rooyan has been engaged in the practice
of law for over 23 years, nearly 13 of which have been in the waste industry.
From August 1996 until September 1998, Mr. Van Rooyan was Senior Corporate
Counsel for Browning-Ferris. From 1986 until August 1996, Mr. Van Rooyan held
positions as Regional General Counsel for various regions of Browning-Ferris.
From 1981 through 1985, Mr. Van Rooyan served as Senior Counsel for the Dresser
Atlas Oilfield Services Group of Dresser Industries. From 1975 until 1981, Mr.
Van Rooyan was engaged in the private practice of law.
William A. Rothrock IV (age 46) became a director of the Company in June
1997. Since 1990, he has been Vice President-Business Development for Sanifill
and, subsequently, Waste Management, Inc. From 1984 to 1990, Mr. Rothrock was
Divisional Vice President-Landfill Marketing for Browning-Ferris. Mr. Rothrock's
term on the Board of Directors expires in 1999.
Alfred Tyler 2nd (age 56) 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 2001.
James F. McEneaney, Jr. (age 60) became a director of the Company in
October 1997. He is the retired President and Chief Operating Officer of Ryland
Homes, positions he held from 1980 to 1992. Mr. McEneaney also served as
Executive Vice President and a director of The Ryland Group, Inc. from 1981 to
1993. Mr. McEneaney also was a founder of The Fortress Group, Inc., which was
organized to consolidate home builders 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 2001.
John N. Hatsopoulos (age 64) became a director of the Company in December
1998. Mr. Hatsopoulos is the Vice Chairman of the Board of Directors of Thermo
Electron Corporation. Mr. Hatsopoulos served as Thermo Electron's President from
1997 until 1999, and as its Chief Financial Officer and Executive Vice President
from 1988 until 1997. Currently, Mr. Hatsopoulos is a member of the Board of
Directors of Thermedics Inc., Thermo Fibertek, Inc., Thermo Instruments Systems
Inc., Thermo Power Corp., Thermo Terratech Inc., and Thermo Ecotek Corp. In
addition, he is a member of the Board of Directors of the
5
<PAGE>
NASDAQ/AMEX Stock Exchange, Lois/USA Inc. and Premier, Inc., a privately held
organization of hospitals and health systems. Mr. Hatsopoulos' term on the Board
of Directors expires in 1999.
Roger A. Ramsey (age 60) became a director of the Company in January 1999.
Mr. Ramsey is the retired Chairman and Chief Executive Officer of Allied Waste
Industries, Inc., positions he held from 1990 through 1998. Mr. Ramsey is a
member of the Board of Directors of Allied Waste. In addition, Mr. Ramsey is a
member of the Texas Christian University Board of Trustees and a director of
several private corporations. Mr. Ramsey's term on the Board of Directors
expires in 2000.
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. These 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
The Board of Directors has an Audit Committee and a Compensation Committee,
both of which were established in June 1997. The Company does not have a
nominating committee or a committee performing the functions of a nominating
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 plans, management incentive plans and
other long-term incentive plans.
The Board met on five occasions during 1998, while the Audit and
Compensation Committees met on three and two 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 1998. During 1998, Mr. Rothrock also served as Vice President-Business
Development for Waste Management, Inc.
In May 1998, the Company acquired from Waste Management all of the
outstanding capital stock of Northern A-1 Services, Inc. and substantially all
of the assets of City Environmental, Inc. and Universal Waste and Transit for
$13.7 million, $30.8 million and $2.7 million in cash, respectively. In
connection with the acquisition of the assets of City Environmental, the Company
also agreed, for a period of 20 years, to deliver to certain landfills operated
by Waste Management all of the nonhazardous waste generated from the operations
of the acquired business. The Company also agreed, for a period of 14 years
commencing in
6
<PAGE>
May 2003, to pay to Waste Management a monthly royalty fee equal to 6% of the
net revenues derived from the assets of City Environmental. In addition, Waste
Management agreed, for a period of 20 years, to deliver to the Company for
processing and disposal all leachate (up to a maximum of 35 million gallons per
year) from certain landfills operated by Waste Management in the Detroit,
Michigan area. The Company does not believe that Mr. Rothrock had a direct or
indirect material interest in any of these acquisitions.
During 1998, the Company completed an acquisition as a result of an
introduction or business opportunity presented by Mr. Rothrock. As a result,
under the terms of a stock option granted by the Company to Mr. Rothrock in
December 1996, Mr. Rothrock became entitled to purchase 31,250 shares of Common
Stock at a price of $.02 per share.
On December 31, 1998, the Company sold to a business owned by Mr. Blanton
substantially all of the assets used in the distribution of various grades of
fats, oils and feed proteins. These by-products have been sold by the Company
primarily to producers of livestock feed and various chemicals located in
Mexico. The purchase price for these assets was approximately $1.7 million, of
which $1.1 million was paid to the Company in March 1999. The remainder of the
purchase price is payable in monthly installments continuing through February 1,
2004. In connection with this sale, the Company also agreed, for a period of one
year, to sell to Mr. Blanton's business all fats, oils and feed proteins that
the Company recovers from certain waste streams and that conform to certain
specifications. Mr. Blanton's business may extend this supply agreement for four
additional one-year terms. The Company believes that the terms of this
transaction were as favorable to the Company as could have been negotiated with
an unaffiliated party.
The Company regularly purchases used cooking oil and other food processing
residuals that Tommy Yount, the brother-in-law of Mr. Blanton, collects from
generators of such materials. During 1998, the Company purchased approximately
$89,000 of such materials from Mr. Yount.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
compensation of the Chief Executive Officer and the two other executive officers
of the Company (the "Named Executive Officers") whose total salary and bonus
for the year ended December 31, 1998 exceeded $100,000. 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....................... 1998 $ 175,000 $ 269,750 $ 0 150,000 $3,433(3)
Chairman of the Board and 1997 59,231 87,500 0 300,000 0
Chief Executive Officer(2) 1996 N/A N/A N/A N/A N/A
W. Gregory Orr.......................... 1998 $ 149,231 $ 228,250 $ 0 120,000 $ 981(3)
President and Chief 1997 125,000 125,000 0 0 0
Operating Officer(4) 1996 2,403 0 0 0 0
Earl J. Blackwell....................... 1998 $ 119,380 $ 182,600 $ 0 80,000 $3,554(3)
Chief Financial Officer, 1997 99,840 100,000 0 0 0
Senior Vice President 1996 1,923 0 0 0 0
and Secretary(5)
</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.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
7
<PAGE>
(3) Represents contributions made by the Company to the Company's 401(k) &
Profit Sharing Plan on behalf of the named officer.
(4) Mr. Orr was employed by the Company in November 1996.
(5) Mr. Blackwell was employed by the Company in November 1996.
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 1998(1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- - ----------------------------------------------------------------------------------------------------------
PERCENTAGE OF
OPTIONS TOTAL OPTIONS EXERCISE
GRANTED GRANTED TO PRICE GRANT DATE
NAME (SHARES) EMPLOYEES IN 1998 (PER SHARE) EXPIRATION DATE PRESENT VALUE(2)
- - ---------------------------------------- -------- ----------------- ----------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Michael P. Lawlor....................... 150,000 18.9% $21.875 07/14/08 $297,750
W. Gregory Orr.......................... 120,000 15.1 21.875 07/14/08 238,200
Earl J. Blackwell....................... 80,000 10.1 21.875 07/14/08 158,800
</TABLE>
- - ------------
(1) No stock appreciation rights were granted in 1998.
(2) The Black-Scholes option pricing model was chosen to estimate the grant date
present value of the options set forth in this table, using a weighted
average of assumption values for the grants shown in the table. The
Company's use of this model should not be construed as an endorsement of its
accuracy at valuing options. All stock option valuation models, including
the Black-Scholes model, require a prediction about the future movement of
the stock price. The following assumptions were made for purposes of
calculating the grant date present value: an option term of 10 years,
weighted average volatility of 34.9%, no dividend yield, and weighted
average interest rate of 5.8%. The real value of the options in this table
depends upon the actual performance of the Common Stock during the
applicable period.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table provides certain information on stock option exercises
in 1998 by the Named Executive Officers and the value of such officers'
unexercised options at December 31, 1998.
AGGREGATED OPTION/SAR EXERCISES IN 1998 AND 12/31/98 OPTION/SAR VALUES(1)
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-
MONEY
NUMBER OF UNEXERCISED OPTIONS AT
OPTIONS AT DECEMBER 31, DECEMBER
NUMBER OF 1998 (SHARES) 31, 1998(2)
SHARES ACQUIRED --------------------------- -----------
NAME ON EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE
- - ------------------------------------- --------------- -------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Michael P. Lawlor.................... N/A N/A 100,000 350,000 $ 1,300,000
W. Gregory Orr....................... N/A N/A 0 120,000 0
Earl J. Blackwell.................... N/A N/A 0 80,000 0
<CAPTION>
NAME UNEXERCISABLE
- - ------------------------------------- --------------
<S> <C>
Michael P. Lawlor.................... $2,693,750
W. Gregory Orr....................... 75,000
Earl J. Blackwell.................... 50,000
</TABLE>
- - ------------
(1) No stock appreciation rights are outstanding.
(2) Based on the closing price of the Common Stock on the American Stock
Exchange on the final trading day of 1998.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Messrs. Lawlor, Orr and Blackwell have each entered into an employment
agreement with the Company providing for a 1998 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
8
<PAGE>
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.
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 believes 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, in 1998, the Compensation
Committee adopted an incentive compensation plan (the "Incentive Plan") under
which each Named Executive Officer was eligible to earn a cash bonus based 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 Section 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
9
<PAGE>
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.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Compensation Committee applied the executive compensation policies and
programs described above in determining the total compensation of Michael P.
Lawlor, the Company's Chief Executive Officer. As reflected in the Summary
Compensation Table on page 7, Mr. Lawlor's base salary for 1998 was $175,000.
This salary was determined pursuant to the terms of Mr. Lawlor's employment
agreement, which was entered into shortly prior to the Company's initial public
offering.
Under the terms of the Incentive Plan, Mr. Lawlor was eligible to earn a
cash bonus based upon the growth of the Company's earnings per share. Under the
terms of the Incentive Plan, Mr. Lawlor received a cash bonus of $269,750 for
the fiscal year ended December 31, 1998. In addition, based on the Company's
performance in 1998 and in recognition of Mr. Lawlor's personal contributions to
the Company's performance, Mr. Lawlor received options to purchase 150,000
shares of Common Stock at an exercise price of $21.875 per share (the market
value of the Common Stock on the day of grant). In evaluating Mr. Lawlor's
performance, the Compensation Committee noted the Company's strong earnings and
his leadership in executing the Company's aggressive acquisition program.
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, JR.
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 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 1999. 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 Company's initial public offering) and ending on December 31, 1998,
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.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
<TABLE>
<CAPTION>
08/20/97 12/31/97 06/30/98 12/31/98
<S> <C> <C> <C> <C>
-----------------------------------------------
U S Liquids Inc...................... $ 100.00 $ 103.67 $ 159.63 $ 165.14
Peer Group........................... 100.00 100.15 92.05 74.97
AMEX Index........................... 100.00 105.44 111.13 104.99
</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: BJ Services Co., Bouygues
Offshore, S.A., Cal Dive International, Inc., Computalog Ltd., Fracmaster Ltd.,
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, 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, except as
described below, during 1998 all Section 16(a) filing requirements applicable to
its executive officers, directors and 10% stockholders were met. Mr. Rothrock
inadvertently failed to timely report his purchase of shares of Common Stock in
August 1998. In addition, Mr. McEneaney failed to timely report his partial
exercise of a stock option that he received from the Company.
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.
SEC FORM 10-K
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR ITS LATEST FISCAL
YEAR IS AVAILABLE WITHOUT CHARGE TO ANY STOCKHOLDER OF THE COMPANY WHO REQUESTS
A COPY IN WRITING FROM MR. EARL J. BLACKWELL, CHIEF FINANCIAL OFFICER AND
SECRETARY, U S LIQUIDS INC., 411 N. SAM HOUSTON PARKWAY EAST, SUITE 400,
HOUSTON, TEXAS 77060-3545.
STOCKHOLDERS' PROPOSALS
If a stockholder wishes to present a proposal at the 2000 annual meeting of
stockholders, the proposal must be received by the Company at 411 N. Sam Houston
Parkway East, Suite 400, Houston, Texas 77060-3545, Attention Secretary, prior
to December 13, 1999.
By Order of the Board of Directors
Earl J. Blackwell, Secretary
Houston, Texas
April 12, 1999
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY AND
RETURN IT PROMPTLY IN THE ACCOMPANYING POSTAGE PAID ENVELOPE.
12
<PAGE>
PROXY
U S LIQUIDS INC.
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 11, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Earl J. Blackwell and Gary J. Van Rooyan,
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 April 6, 1999, at the Annual Meeting of Stockholders to be held on May 11,
1999 or any adjournment thereof.
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 ON THE REVERSE SIDE AND FOR THE
RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR 1999. YOU MAY REVOKE THIS PROXY AT ANY TIME
PRIOR TO THE VOTE THEREOF.
1. ELECTION OF DIRECTORS.
[ ] For all nominees listed to the right (except as marked to the contrary
below).
[ ] Withhold authority to vote for all nominees listed to the right.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
John N. Hatsopoulos
William A. Rothrock IV
2. RATIFICATION OF SELECTION OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR 1999.
[ ] For [ ] Against [ ] Abstain
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
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.
<PAGE>
Dated this ____ day of _________________,1999.
___________________________________________
Signature
___________________________________________
Signature
Please sign exactly as name appears on stock certificate. When shares are
held by joint tenants, both should sign. When signing as attorney, 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.
(Please sign, date and return promptly using the enclosed envelope.)
