<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Sun Coast Industries, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(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 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> 2
SUN COAST INDUSTRIES, INC.
P.O. BOX 769045
DALLAS, TEXAS 75376-9045
_________________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 5, 1995
_________________________________________
To the Shareholders of Sun Coast Industries, Inc.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Sun
Coast Industries, Inc. ("Sun Coast") will be held at the Dallas Marriott
Quorum, 14901 Dallas Parkway, Dallas, Texas on Tuesday, December 5, 1995, at
10:00 A.M., local time for the following purposes:
1. to elect six directors; and
2. to consider and act upon a proposal to transact such other
business as may properly come before the meeting and any
adjournment or adjournments thereof.
Only shareholders of record at the close of business on October 31,
1995 are entitled to notice of and to vote at the meeting.
The Annual Report to Shareholders of Sun Coast for the year ended June
30, 1995 is enclosed.
By Order of the Board of Directors
Cynthia R. Morris, Secretary
Dallas, Texas
November 1, 1995
PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY IN THE ENCLOSED,
SELF-ADDRESSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.
<PAGE> 3
SUN COAST INDUSTRIES, INC.
P.O. BOX 769045
DALLAS, TEXAS 75376-9045
_________________________________________
PROXY STATEMENT
_________________________________________
GENERAL
The accompanying proxy is solicited by the Board of Directors of Sun
Coast Industries, Inc. ("Sun Coast" or the "Company") for use at the Annual
Meeting of Shareholders of the Company to be held at the Dallas Marriott
Quorum, 14901 Dallas Parkway, Dallas, Texas on Tuesday, December 5, 1995, at
10:00 a.m., local time, or at any adjournment or adjournments thereof. The
approximate date on which this proxy statement and the accompanying proxy are
first being sent to shareholders is November 1, 1995.
PROXIES
A shareholder who executes a proxy may revoke it at any time before it
is voted. Attendance at the annual meeting shall not have the effect of
revoking a proxy unless the shareholder so attending shall, in writing, so
notify the secretary of the meeting at any time prior to the voting of the
proxy. A proxy which is properly signed and not revoked will be voted for the
nominees for election as directors listed herein unless contrary instructions
are given. The Board knows of no other business to come before the meeting,
but if other matters properly come before the meeting, the persons named in the
proxy intend to vote thereon in accordance with their best judgment.
VOTING PROCEDURES AND TABULATION
Sun Coast will appoint one or more inspectors of election to act at
the meeting and to make a written report thereof. Prior to the meeting, the
inspectors will sign an oath to perform their duties in an impartial manner and
to the best of their abilities. The inspectors will ascertain the number of
shares outstanding and the voting power of each of such shares, determine the
shares represented at the meeting and the validity of proxies and ballots,
count all votes and ballots, and perform certain other duties as required by
law.
The inspectors will tabulate the number of votes cast for or withheld
as to the vote on each nominee for director. Under applicable law, abstentions
and broker non-votes will have no effect on the voting on the election of
directors, provided a quorum is present, because directors are elected by a
plurality of the shares of Common Stock present in person or by proxy at the
meeting and entitled to vote. Under the rules of the New York Stock Exchange,
brokers that hold shares in street name have the authority to vote on certain
"routine" matters when they have not received instructions from beneficial
owners. Brokers that do not receive instructions are entitled to vote on the
election of directors.
VOTING SECURITIES
The only voting security of Sun Coast outstanding is its Common Stock,
par value $.01 per share. Only the holders of record of Common Stock at the
close of business on October 31, 1995, the record date for the meeting, are
entitled to notice of and to vote at the meeting. On the record date, there
were 4,011,629 shares of Common Stock outstanding and entitled to be voted at
the meeting. A majority of such shares, present in person or by proxy, is
necessary to constitute a quorum. Each share of Common Stock is entitled to
one vote.
<PAGE> 4
ELECTION OF DIRECTORS
Sun Coast's business and affairs are managed by its Board of
Directors, which exercises all corporate powers of the Company and establishes
broad corporate policies. Sun Coast's bylaws provide that the Board will
consist of not less than three nor more than 10 directors, with the actual
number determined from time to time by resolution of the Board. In October
1995 the Board fixed the number at six. At the annual meeting six directors
will be elected.
Directors are elected by plurality vote, and cumulative voting is not
permitted. All duly submitted and unrevoked proxies will be voted for the
nominees for director selected by the Board, except where authorization so to
vote is withheld. If any nominee should become unavailable for election for
any presently unforeseen reason, the persons designated as proxies will have
full discretion to vote for another person designated by the Board. Proxies
cannot be voted for a greater number of persons than the number of nominees for
the office of director named herein. Directors are elected to serve until the
next annual meeting of shareholders and until their successors have been
elected and qualified.
The nominees of the Board for directors of Sun Coast are named below.
Each of the nominees has consented to serve as a director if elected. The
table below sets forth certain information with respect to the nominees. All
the nominees are presently directors of Sun Coast and were elected as directors
at the 1994 annual meeting. Each has served continuously as a director since
the date of his first election to the Board in the year indicated.
<TABLE>
<S> <C>
JAMES D. IRELAND III, age 45, Mr. Ireland has been a managing director of Capital One Partners since January 1993
director since 1989 and is President of Briseis Capital Corporation. Both are privately-held merchant
banking and advisory firms. Mr. Ireland is also Chairman of First Colorado
Corporation, an owner of natural resource projects and real estate properties. He
is also a director of Cleveland-Cliffs, Inc., the largest North American producer
of iron ore, and numerous privately held companies primarily in the forest products
and financial services businesses.
JAMES H. MILLER, age 69, Mr. Miller retired in June 1992 as President of Sun Coast. He was elected a
director since 1988 director and Chief Operating Officer in 1988 and President in 1989. Mr. Miller had
been employed since 1950 by the subsidiary that today consists of Sun Coast's
Chemical, Consumer Products and Foodservice Divisions and had served as its
President and Chief Executive Officer since 1983.
JAMES R. PARISH, age 49, Mr. Parish has been President and sole shareholder of Parish Partners, Inc., a
director since 1994 privately-held investment, merchant banking and advisory firm, since April 1991.
Mr. Parish is also a director of several privately held firms, all primarily in the
food service and hospitality business. From 1983 until 1991, Mr. Parish was
Executive Vice President, Chief Financial Officer, Treasurer and a director of
Chili's, Inc. (now named Brinker International), a publicly held restaurant
company. Mr. Parish held executive and financial positions with several companies
in the investment banking, commodity-processing, food and beverage, and oil and gas
industries prior to his employment by Brinker International. In February 1995, Mr.
Parish agreed to serve as Chairman of the Board of Directors of Sfuzzi, Inc., a
Dallas-based restaurant company which in August 1995 filed a petition for
protection under Chapter XI of the Federal Bankruptcy Act.
</TABLE>
2
<PAGE> 5
<TABLE>
<S> <C>
R. CARTER PATE, age 41, Mr. Pate was elected President, Chief Executive Officer and a director of Sun Coast
director since 1993 in April 1993. Mr. Pate was a founder of Pate, Winters & Stone, Inc., a management
consulting firm headquartered in Dallas and served as its President from its
inception until joining Sun Coast. In addition, from January 1992 until April
1993, Mr. Pate was President and Chief Executive Officer of Tidel Engineering,
Inc., a manufacturer of cash and environmental control systems. He has also served
as Trustee of the Nelson Bunker Hunt Liquidating Trust and Chief Executive Officer
and Chief Financial Officer for companies in retailing, manufacturing and oil and
gas. Mr. Pate is on the Board of Trustees of Greensboro College, Greensboro, North
Carolina.
ARNO F. PIRKAU, age 53, Mr. Pirkau is President and General Manager of the Company's Closures Division. He
director since 1982 is a co-founder of Sun Coast and has been an Executive Vice President since 1988.
From the Closure Division's inception until 1988, he was its Vice President of
Manufacturing. In 1988 he was promoted to Executive Vice President. In 1991 he
additionally became the Closure Division's General Manager and in 1993 he was
elected its President.
STEPHEN P. SMILEY, age 46, Mr. Smiley was elected Chairman of the Board of Sun Coast in September 1992. He is
director since 1992 a co-founder of Cypress Capital Corporation, a private investment firm and has been
its President since 1991. Prior to founding Cypress Capital Corporation in 1991,
Mr. Smiley was most recently involved in venture capital and leveraged buyout
activities of Citicorp in Dallas, Texas. Mr. Smiley had been with the New York
based bank for 15 years, ten of which were spent in Dallas, where, in the mid-
1980s, he was in charge of energy lending. Mr. Smiley is a director of Dynamex,
Inc., a privately held company engaged in the courier business.
</TABLE>
There is no family relationship between any of the nominees or between
any of the nominees and any executive officer of the Company.
ADDITIONAL INFORMATION REGARDING THE BOARD OF DIRECTORS
During fiscal year 1995, the Board held 11 meetings. Each director
attended at least 75% of the meetings of the Board and the committees of which
such director was a member. The Board's committees include audit,
compensation, nominating and stock option committees. The current members of
those committees, number of meetings held by each committee in fiscal 1995 and
a brief description of the functions performed by each committee are set forth
below:
Audit Committee (7 meetings). James D. Ireland III and James
R. Parish. The primary responsibilities of the audit committee are to
review with the Company's auditors the scope of the audit procedures
to be applied in the conduct of the annual audit and the results of
the annual audit.
Compensation Committee (15 meetings). James D. Ireland III
and Stephen P. Smiley. The primary responsibilities of the
compensation committee are to review and recommend to the Board the
setting of the compensation levels of the executive officers of the
Company, including those officers who are also directors, and to
oversee compensation of the officers of the Company's subsidiaries.
3
<PAGE> 6
Stock Option Committee (action taken by written consent).
James D. Ireland III and Stephen P. Smiley. The stock option
committee administers the Company's employee stock option plans,
including the 1994 Long-Term Incentive Plan, and, in accordance with
Rule 16b-3 of the Securities Exchange Act of 1934, makes the final
determination regarding grants of stock options, restricted shares and
other stock based awards to eligible employees.
Nominating Committee (2 meetings). James D. Ireland III,
James H. Miller, R. Carter Pate and Stephen P. Smiley. The nominating
committee reviews candidates for election to the Board and recommends
qualified candidates to fill existing vacancies or newly created
directorships.
Compensation Committee Interlocks and Insider Participation. The
current members of the compensation committee identified above were the only
persons who served on the committee during 1995. Mr. Smiley is the Chairman of
the Board of the Company.
COMPENSATION OF DIRECTORS
Fees and Expenses; Other Arrangements. In fiscal 1995, all directors
of the Company, except those who were full time employees, were entitled to
reimbursement of out-of-pocket expenses in connection with attendance at Board
Meetings, plus fees of generally $500 per meeting ($200 for some meetings) and
$1,000 per month.
Beginning in December 1993, Mr. Smiley, as Chairman of the Board,
began receiving a salary at a rate of $50,000 per year. In fiscal 1995, in
addition to director's fees of $14,100, he received $50,000 in salary. Unlike
Sun Coast's other executive officers, Mr. Smiley is not a full-time employee.
Director Stock Options. At the 1994 Annual Meeting, shareholders
approved the 1994 Director Stock Option Plan, pursuant to which each newly
elected nonemployee director shall be granted an option to purchase 1,000
shares of Common Stock and each nonemployee director and the Chairman of the
Board will receive an option to purchase 500 shares of Common Stock on June 30,
each year. The options under the plan are granted at fair market value on the
grant date and become exercisable, subject to certain conditions, in five equal
annual installments on the first five anniversaries of the grant date and
terminate ten years from the grant date, unless terminated sooner, as more
fully described below. Pursuant to the plan, on June 30, 1995 Messrs. Ireland,
Miller, Parish and Smiley each received options to purchase 500 shares of
Common Stock at $9.50 per share.
4
<PAGE> 7
EXECUTIVE OFFICERS
Sun Coast's executive officers are as follows:
<TABLE>
<CAPTION>
NAME OFFICE HELD SINCE
---- ----------- -----
<S> <C> <C>
Stephen P. Smiley Chairman of the Board 1992 (1)
R. Carter Pate President and Chief Executive Officer 1993 (1)
Arno F. Pirkau Executive Vice President 1988 (1)
Cynthia R. Morris Executive Vice President, Chief Financial Officer, Treasurer and 1993
Secretary
</TABLE>
_________________
(1) Member of the Board of Directors. See "Election of Directors" above
for more information.
Ms. Morris, age 41, has held her office since September 1993. From
July 1991 until September 1993 she was an Audit Partner in the public
accounting firm of Price Waterhouse, where she began her career in 1980. Ms.
Morris was the partner-in-charge of the Mergers and Acquisitions Group of Price
Waterhouse in Dallas. At Price Waterhouse she served retail, franchising and
manufacturing clients.
PRINCIPAL SHAREHOLDERS
As of October 1, 1995, the following are the only persons known to the
Company to be the beneficial owners of more than five percent of the Common
Stock:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF TOTAL NUMBER OF SHARES PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
---------------- ------------------ --------
<S> <C> <C>
James M. Hoak . . . . . . . . . . . . . . . . . . . . . . . . . . . 381,709(1) 9.5%
13355 Noel Road, Suite 1350
Dallas, Texas 75240
Pioneering Management Corporation . . . . . . . . . . . . . . . . . 329,800(2) 8.2%
60 State Street
Boston, Massachusetts 02114
</TABLE>
_________________
(1) Includes (i) 9,149 shares, of which Mr. Hoak disclaims beneficial
ownership, owned by his wife and (ii) 500 shares with respect to which
Mr. Hoak has the right to acquire beneficial ownership upon exercise
of currently exercisable options (the percentage is calculated on the
basis that such shares are deemed outstanding).
(2) Beneficial ownership of such shares reported in a Schedule 13G filed
by Pioneering Management Corporation, a registered investment advisor,
with respect to its beneficial ownership of the Company's Common
Stock.
5
<PAGE> 8
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of October 1, 1995 the beneficial
ownership of Common Stock (the only equity securities of the Company presently
outstanding) by each director and nominee for director of the Company, each
named executive listed in the Summary Compensation Table and all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
---------------------------------------
NUMBER PERCENT OF
NAME OF SHARES CLASS
- ---- --------------- ---------------
<S> <C> <C>
Directors
James D. Ireland III . . . . . . . . . . . . . . . . . . . . . 61,538 (1) 1.5%(1)
James H. Miller . . . . . . . . . . . . . . . . . . . . . . . . 102,230 (2) 2.5%(2)
James R. Parish . . . . . . . . . . . . . . . . . . . . . . . . 4,178 (3) 0.1%(3)
R. Carter Pate . . . . . . . . . . . . . . . . . . . . . . . . 55,597 (4) 1.4%(4)
Arno F. Pirkau . . . . . . . . . . . . . . . . . . . . . . . . 106,628 (5) 2.6%(5)
Stephen P. Smiley . . . . . . . . . . . . . . . . . . . . . . . 2,978 (6) 0.1%(6)
Named Executive Officers (excluding
any director named above)
Cynthia R. Morris . . . . . . . . . . . . . . . . . . . . . . . 25,500 (7) 0.6%(7)
All directors and executive
officers as a group (7 persons) . . . . . . . . . . . . . . . 358,649 (8) 8.6%(8)
- -----------------
</TABLE>
(1) Includes (i) 1,989 shares, of which Mr. Ireland disclaims beneficial
ownership, owned by his wife, (ii) 1,990 held in custodial accounts
for the benefit of his minor children and (iii) 500 shares with
respect to which Mr. Ireland has the right to acquire beneficial
ownership upon exercise of currently exercisable options (the
percentage is calculated on the basis that such shares are declared
outstanding).
(2) Includes 40,500 shares with respect to which Mr. Miller has the right
to acquire beneficial ownership upon exercise of currently exercisable
options and the percentage is calculated on the basis that such shares
are deemed outstanding.
(3) Includes 200 shares with respect to which Mr. Parish has the right to
acquire beneficial ownership upon exercise of currently exercisable
options and the percentage is calculated on the basis that such shares
are deemed outstanding.
(4) Includes 45,000 shares with respect to which Mr. Pate has the right to
acquire beneficial ownership upon exercise of currently exercisable
options and the percentage is calculated on the basis that such shares
are deemed outstanding.
(5) Includes 62,200 shares with respect to which Mr. Pirkau has the right
to acquire beneficial ownership upon exercise of currently exercisable
options and the percentage is calculated on the basis that such shares
are deemed outstanding.
6
<PAGE> 9
(6) Includes 500 shares with respect to which Mr. Smiley has the right to
acquire beneficial ownership upon exercise of currently exercisable
options and the percentage is calculated on the basis that such shares
are deemed outstanding.
(7) Includes 20,000 shares with respect to which Ms. Morris has the right
to acquire beneficial ownership upon exercise of currently exercisable
options and the percentage is calculated on the basis that such shares
are deemed outstanding.
(8) Includes 168,900 shares with respect to which such persons have the
right to acquire beneficial ownership upon exercise of currently
exercisable options and the percentage is calculated on the basis that
such shares are deemed outstanding.
EXECUTIVE COMPENSATION
The Compensation Committee Report appearing below and the information
presented herein under the caption "Executive Compensation -- Performance
Graph" shall not be deemed to be "soliciting material" or to be "filed" with
the Securities and Exchange Commission ("SEC") or subject to the SEC's proxy
rules, except for the required disclosure herein, or to the liabilities of
Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act"), and
such information shall not be deemed to be incorporated by reference into any
filing made by the Company under the Exchange Act or under the Securities Act
of 1933.
REPORT OF THE COMPENSATION COMMITTEE AND THE STOCK
OPTION COMMITTEE
To the Shareholders of
Sun Coast Industries, Inc.:
The compensation committee of the Board of Directors currently
consists of James D. Ireland III and Stephen P. Smiley. The committee makes
recommendations to the Board concerning the compensation of Sun Coast's
executive officers and oversees compensation of the officers of the Company's
subsidiaries. In administering Sun Coast's compensation program, the
compensation committee recommends grants of stock options to Sun Coast's stock
option committee, which also currently consists of Messrs. Ireland and Smiley.
In accordance with the terms of each the Company's employee stock option plans,
including the 1994 Long-Term Incentive Plan, the Board has selected the stock
option committee to administer those plans and, in accordance with Rule 16b-3
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), make
the final determination regarding grants of stock options, restricted shares
and other stock based awards to eligible employees.
COMPENSATION PHILOSOPHY
The compensation philosophy that is applicable to Sun Coast's
executive officers conforms to the compensation philosophy applicable to the
Company's employees generally. Sun Coast's compensation program is designed
to:
- -- provide compensation comparable to that offered by companies with
similar businesses, allowing Sun Coast to attract, retain and motivate
competent employees who have the ability and experience to contribute
materially to its long-term success;
- -- provide compensation relative to, and differentiated by, the
individual employee's performance;
7
<PAGE> 10
- -- provide incentive compensation that varies directly with both Company
performance and the individual employee's contribution to that
performance; and
- -- provide an appropriate linkage between compensation and the creation
of shareholder value through awards tied to the Company's performance
and through facilitating employee stock ownership.
EXECUTIVE OFFICERS' COMPENSATION PROGRAM
The Company's executive officers' compensation program is comprised of
base salary, annual performance bonus, long-term incentive compensation
(traditionally in the form of stock options, although the 1994 Long-Term
Incentive Plan permits other stock-based awards) and various benefits,
including medical benefits and a profit sharing and savings plan, which are
generally available to all employees of the Company. During the past year the
Committee retained a compensation consultant to evaluate the Company's
compensation programs and make recommendations for their refinement.
BASE SALARY
The compensation committee reviewed the salaries of Sun Coast's
executive officers in fiscal 1995. The Committee made salary decisions about
the executive officers based upon the elements of its compensation philosophy
set forth above. First, salaries were competitively set relative to other
companies in the same industry and other companies of comparable size. Second,
the compensation committee considered the performance of the individual
executive officers with respect to the areas of his or her responsibility,
including an assessment of the value of each to the Company. Third, internal
equity among employees was factored into the decision. Finally, the
compensation committee considered the Company's financial performance and its
ability to absorb any increases in salaries.
ANNUAL PERFORMANCE BONUS
Each executive officer, including the Chief Executive Officer, is
eligible to receive an annual performance bonus award. These bonuses are paid
pursuant to a bonus pool formula established in advance of each fiscal year.
The formula recognizes Company earnings results, budget projections and trends
in both Company financial results and United States industrial compensation
practices. Maximum dollar ceilings are defined for each executive officer,
tied to performance goals.
STOCK OPTION AWARDS
From time to time, the stock option committee has granted options
under plans to its executive officers to align the officers' interests with
those of the shareholders. Under the 1994 Long-Term Incentive Plan, the stock
option committee may grant to Sun Coast's executive officers stock options,
restricted stock and other stock based awards. In general, stock based awards
are granted on an annual basis if warranted by the Company's growth and
profitability. The compensation committee and stock option committee believe
that stock options and stock based awards encourage the recipients to enhance
the value of the Common Stock throughout the option or award period by
continually improving the Company's performance. The compensation committee,
in formulating its recommendations to the stock option committee, and the stock
option committee, in granting options or other stock based awards to an
executive officer, evaluate the Company's overall financial performance for the
year, the desirability of long-term service from the officer and the size of
grants to executives with similar responsibilities at other companies. To
encourage long-term performance, options typically vest over a five-year period
and remain outstanding for ten years.
CHIEF EXECUTIVE OFFICER COMPENSATION
In April 1993, R. Carter Pate began his service to Sun Coast as Chief
Executive Officer. The Company's then most recent Chief Executive Officer had
resigned in September 1992 and its Chief Operating Officer and President had
retired in July 1992. From September 1992 to April 1993, the Company had an
interim president. Thus, Mr. Pate assumed the duties of both the Chief
Executive Officer and the Chief
8
<PAGE> 11
Operating Officer of the Company. In setting Mr. Pate's compensation, the
compensation committee reviewed an analysis of the compensation levels of
executives at 17 comparable publicly traded plastics manufacturing companies.
This analysis included information regarding base salary, bonus, stock option
grants and overall market performance of these companies. The compensation
committee also had recommendations from management and information available
from the executive compensation study performed by the Company's compensation
consultant which presented market averages for various executive level
positions.
IMPACT OF RECENT TAX LEGISLATION
Under the Revenue Reconciliation Act of 1993, effective January 1,
1994, Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), was amended to eliminate, subject to certain exceptions, the
deductibility of certain compensation in excess of $1 million paid to the Chief
Executive Officer and the four other most highly compensated officers. The
determination of whether compensation is performance-based depends on a number
of factors including shareholder approval of the plan under which the
compensation is paid, the exercise price at which options or similar awards are
granted, the disclosure to and approval by shareholders of applicable
performance standards, the composition of the compensation and stock option
committees and the certification by those committees that performance standards
were satisfied. Although the salary and bonus of Company's Chief Executive
Officer and its other officers is in each case well under $1 million, the
ultimate value of options granted to them is open-ended; therefore,
consideration of Section 162(m) is relevant to the recommendations of the
compensation committee and the deliberations of the stock option committee.
The policy of the Company is to design its compensation programs to
preserve the tax deductibility of compensation paid to its executive officers
and other members of management. However, the committee may determine, taking
into consideration the relevant factors at a given time, to make awards or
approve compensation that does not qualify for a compensation deduction for tax
purposes, if the committee believes it is in the Company's interest do so.
THE COMPENSATION AND STOCK OPTION
COMMITTEES
James D. Ireland III
Stephen P. Smiley
9
<PAGE> 12
The following table summarizes the compensation during the past three
years of the Sun Coast executive officers whose compensation exceeded $100,000
during the fiscal year ended June 30, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
---------------
Annual Compensation Awards
------------------------------------------------------------------
Securities
Name and Underlying
Principal Other Annual Options All Other
Position Year Salary Bonus Compensation (no. of shares) Compensation
--------- ---- ------------ -------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
R. Carter Pate . . . . . 1995 $ 240,000 $ 40,000 $ 7,200(1) 10,000 $ 6,696(2)
President and Chief 1994 $ 200,000 $ 40,000 $ 7,200(1) 25,000 $ 763(2)
Executive Officer of 1993 $ 35,000(3) $ -0- $ 1,200(1) 100,000 $ -0-
Sun Coast
Arno F. Pirkau . . . . . 1995 $ 144,000 $ 40,000 $ 8,294(1) 5,000 $ 5,023(4)
Executive Vice 1994 $ 123,878 $ 51,458 $ 7,380(1) 10,000 $ 9,969(4)
President of Sun 1993 $ 119,892 $ 47,895 $ 7,380(1) 5,000 $ 9,969(4)
Coast and President
of SCC
Cynthia R. Morris . . . . 1995 $ 160,000 $ 20,000 $ -0- 7,500 $ 2,400(6)
Executive Vice 1994 $ 104,166(5) $ 24,000 $ -0- 60,000 $ 276(6)
President, Chief
Financial Officer,
Treasurer and
Secretary of
Sun Coast
</TABLE>
_________
(1) The Company pays Mr. Pate and Mr. Pirkau $600 and $650 per month car
allowances, respectively, and paid various other auto expenses for Mr.
Pirkau.
(2) For Mr. Pate, these amounts consisted in fiscal years 1995 and 1994 of
Company contributions to a defined contribution plan of $0 and $289,
respectively, and club dues, profit sharing match and other
perquisites of $6,696 and of $474, respectively.
(3) Mr. Pate was elected President and Chief Executive Officer in April
1993 at an annual salary of $200,000, with bonus provisions for
achieving target results.
(4) For Mr. Pirkau, these amounts consisted in fiscal years 1995, 1994 and
1993 of Company contributions to a defined contribution plan of $0,
$9,042 and $9,042, respectively, and term life insurance premiums,
club dues, profit sharing match and other perquisites of $5,023, $927
and $927, respectively.
(5) Ms. Morris was elected Chief Financial Officer, Secretary and
Treasurer of Sun Coast on September 1, 1993, at an annual salary of
$125,000 with bonus provisions for achieving financial and acquisition
results.
(6) For Ms. Morris, this amount represents profit sharing match.
10
<PAGE> 13
The following table sets forth certain information with respect to options
to purchase Common Stock granted during the fiscal year ended June 30, 1995 to
each of the named executive officers. No SARs were granted in 1995.
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL YEAR 1995
Grant Date
Individual Grants Value (1)
--------------------------------------------------------------------------------------------- ---------
Number of Securities % of Total Options
Underlying Options Granted to Employees Exercise
Granted in Price Expiration Grant Date
Name (no. of shares) Fiscal Year ($/Sh) Date Present Value
---- ----------------- ---------------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
R. Carter Pate 10,000 22.2% $9.50 6/30/2005 $59,900
Arno F. Pirkau 5,000 11.1% $9.50 6/30/2005 $29,950
Cynthia R. Morris 7,500 16.7% $9.50 6/30/2005 $44,925
</TABLE>
_______________
(1) The "grant date present value" shown is a hypothetical value based upon
application of the "Black-Scholes" model which often is used to estimate
the market value of transferable options by calculating the probability,
based on the volatility of the stock subject to the options, that the
stock price will exceed the option exercise price at the end of the
option term. The Company's stock options are not transferable and, the
Black-Scholes estimate notwithstanding, an option granted under the
Stock Option Plan will have value to the optionee only if and to the
extent the market price of the Company's stock rises above the market
price on the date the option was granted.
The following table sets forth certain information with respect to the
exercise of options to purchase Common Stock during the fiscal year ended June
30, 1995, and unexercised options held at June 30, 1995, by each of the named
executive officers. None of the executive officers has been granted SARs.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1995
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised In-
Options the-Money Options at
at 6/30/95 6/30/95(1)
Exercisable/
Shares Acquired Unexercisable Exercisable/
Name on Exercise Value Realized (no. of shares) Unexercisable
---- ----------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
R. Carter Pate - 0 - $ - 0 - 45,000/90,000 $0/$0
Arno F. Pirkau - 0 - $ - 0 - 53,200/16,000 $24,000/$0
Cynthia R. Morris - 0 - $ - 0 - 20,000/47,500 $0/$0
</TABLE>
(1) The high sales price per share on June 30, 1995 was $9.50 as reported by
the New York Stock Exchange.
11
<PAGE> 14
CHANGE OF CONTROL ARRANGEMENTS
The Company's 1994 Long-Term Incentive Plan contains certain "changes of
control" provisions which are applicable to awards issued under this plan. The
committee designated to administer the 1994 Long-Term Incentive Plan is
required to take action with respect to outstanding awards under the plan in
the event of any of the following: (i) the merger, consolidation or other
reorganization of the Company in which the outstanding Common Stock is
converted into or exchanged for a different class of securities of the Company,
a class of securities of any other issuer, cash or other property; (ii) the
sale, lease or exchange of all or substantially all of the assets of the
Company to another entity; (iii) the adoption by the shareholders of the
Company of a plan of liquidation and dissolution; (iv) the acquisition by any
person or entity of beneficial ownership of more than 20% of the Company's
outstanding capital stock; or (v) as a result of or in connection with a
contested election of directors, the persons who were directors of the Company
before such election shall cease to constitute a majority of the Board. In
such events, the Committee may (i) accelerate the vesting of awards, (ii)
require surrender of awards in exchange for payment based on the terms of the
awards or (iii) make such other adjustments to such awards as the Committee
deems appropriate to reflect the corporate change. In such events, the
committee may (i) accelerate the vesting of awards under the plan, (ii) require
surrender of awards in exchange for payment based on the terms of the awards or
(iii) make such other adjustments to such awards as the committee deems
appropriate to reflect the corporate change.
The Company has entered into Severance Agreements with Mr. Pate, Mr. Pirkau
and Ms. Morris. The purpose of the Agreements is to induce these key employees
to remain in the employment of the Company and to assure it of both present and
future continuity of services by the employees in the event of any actual or
threatened change of control of the Company. The Severance Agreements provide
severance pay and continuation of certain benefits should the Company or any
successor terminate the executive's employment for any reason other than
"cause", or should the executive terminate his or her employment for "good
reason" within one year following a Change of Control. Upon any such
termination, the executive would be entitled to receive his or her base annual
salary multiplied by a fraction (the "Employment Term Factor"), the numerator
of which is the sum of twelve plus the number of years the executive has served
with the Company, and the denominator of which is twelve. An executive's base
annual salary is defined as the greater of (i) the executive's annual salary on
the date of the earliest Change of Control to occur during the eighteen months
prior to the executive's termination or (ii) the executive's annual salary on
the date of the executive's termination, plus any bonuses or special incentive
payments received in the prior twelve months.
Generally, a "Change of Control" will be deemed to have occurred with respect
to the Severance Agreements in any of the following circumstances:
(i) the individuals serving as directors of the Company as of August 8,
1995, and those replacements or additions subsequently approved by a majority
vote of such directors, cease to make up at least 51% of the Board;
(ii) a merger, consolidation or reorganization in which the shareholders of
the Company prior to such merger, consolidation or reorganization ultimately
own 50% or less of the merged, consolidated or reorganized company; or
(iii) a liquidation or dissolution of the Company or disposition of
all or substantially all of the Company's assets.
The Company's Bylaws, as amended, provide for mandatory indemnification of
and advancement of expenses to officers and directors, including former
directors and officers, of the Company in circumstances involving a "change of
control." The Company has entered into separate agreements with each of its
officers and directors which embody these indemnification provisions.
12
<PAGE> 15
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Common Stock
during the past five years with the average cumulative total return during the
same period on the stocks which comprise the Dow Jones Equity Market Index and
the Industrial Sector, Containers and Packaging. The Dow Jones Equity Market
Index is comprised of 700 United States companies in the industrial,
transportation, utilities and financial industries, weighted by market
capitalization. The graph assumes that $100 was invested on June 30, 1990, in
the Company's Common Stock and in the other indices, and that all dividends
were reinvested and are weighted on a market capitalization basis at the time
of each reported data point. The stock price performance shown below is not
necessarily indicative of future price performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
SUN COAST INDUSTRIES, INC., DOW JONES EQUITY MARKET INDEX
AND INDUSTRIAL SECTOR, CONTAINERS AND PACKAGING
JUNE 30, 1990 -- JUNE 30, 1995
[Performance Graph]
<TABLE>
<CAPTION>
Sun Coast Dow Jones
Measurement Period Industries, DJ Equity Industrial
(Fiscal Year Covered) Inc. Market Index Sector
--------------------- ----------- ------------ ----------
<S> <C> <C> <C>
1990 100 100 100
1991 175 108 126
1992 313 123 146
1993 600 141 140
1994 720 143 143
1995 507 179 179
</TABLE>
13
<PAGE> 16
CERTAIN TRANSACTIONS
During the fiscal year ended June 30, 1994 the Company loaned Mr. Pate and
Ms. Morris $100,000 and $50,000, respectively, to make open market purchases of
Common Stock. On September 13, 1994, the Company loaned Mr. Pirkau $12,985 to
exercise stock options. Each of these loans, secured by the underlying stock,
was made at an interest rate equal to the Company's cost of funds (prime).
COMPLIANCE WITH SECTION 16(A)
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and any persons who own more than 10% of a registered class
of the Company's equity securities to file with the Securities and Exchange
Commission and the New York Stock Exchange reports of ownership and changes in
ownership of the Common Stock. Officers, directors and greater than 10%
shareholders are required to furnish the Company with copies of all Section
16(a) forms they file. Based solely on review of the copies of these reports
furnished to the Company or written representations that no other reports were
required, the Company believes that, during fiscal 1995, all filing
requirements applicable to its officers, directors and greater than 10%
beneficial owners were complied with, except that the initial report on Form 3
of James R. Parish, a director, was inadvertently filed late.
AUDITORS
KPMG Peat Marwick LLP, which has served as the Company's independent public
accounts since 1991, has been selected to audit the financial statements of the
Company for the year ended June 30, 1996. This selection will not be submitted
to shareholders for ratification or approval. The representatives of KPMG Peat
Marwick LLP are expected to be present at the meeting to respond to appropriate
questions from the shareholders and will be given the opportunity to make a
statement should they desire to do so.
14
<PAGE> 17
OTHER MATTERS
Proposals which shareholders intend to present at the 1996 Annual Meeting of
Shareholders must be received by Sun Coast no later than August 2, 1996, to be
eligible for inclusion in the proxy material for the meeting.
The management is not aware of any matters not referred to in the attached
Notice of Meeting which will be presented for action at the meeting. If any
other matters properly come before the meeting, it is intended that the shares
represented by the proxy will be voted with respect thereto in accordance with
the judgment of the persons voting them.
By Order of the Board of Directors
Cynthia R. Morris, Secretary
15
<PAGE> 18
SUN COAST INDUSTRIES, INC.
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints Cynthia R. Morris and R. Carter Pate,
and either of them, Proxies for the undersigned, with the power of substitution
in each, to vote all shares of Common Stock of the undersigned in Sun Coast
Industries, Inc. with all the powers that the undersigned would have if
personally present, at the Annual Meeting of Shareholders of Sun Coast
Industries, Inc. to be held at the Dallas Marriott Quorum, 14901 Dallas
Parkway, Dallas, Texas on Tuesday, December 5, 1995 at 10:00 a.m., local time
and at any and all adjournments thereof.
(CONTINUED AND TO BE VOTED, SIGNED AND DATED ON REVERSE SIDE)
[X] Please mark your votes as in this example.
1. To elect six directors to hold office until the next Annual Meeting of
Shareholders.
[ ] FOR all nominees listed at right [ ] WITHHOLD AUTHORITY
(except as marked to the contrary at right)
NOMINEES:
James D. Ireland III
James H. Miller
James R. Parish
R. Carter Pate
Arno F. Pirkau
Stephen P. Smiley
2. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting or any
adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR EACH OF THE PROPOSALS SET FORTH ABOVE.
(PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.)
SIGNATURE DATE
------------------------------------- ------------------------
SIGNATURE DATE
------------------------------------- ------------------------
IF HELD JOINTLY
NOTE: (Please sign exactly as name appears on the proxy. When shares are
held by joint tenants, both should sign. When signing as attorney, as
executor, administrator or 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, please sign
in partnership name by authorized person.)
