<PAGE> 1
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 1a-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)
SUN COAST INDUSTRIES, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ X ] $125 per Exchange Act Rule 14a-6(i)(1).
[ ] $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 0-11:1
---------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------
5) Total Fee Paid:
---------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] 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.
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints Cynthia R. Morris and Eddie M. Lesok,
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 Westin Galleria, 13340 Dallas Parkway,
Dallas, Texas on Friday, December 6, 1996 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 seven 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:
H. Stephen Bartlett
James D. Ireland III
Eddie M. Lesok
James H. Miller
James R. Parish
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.)
<PAGE> 3
SUN COAST INDUSTRIES, INC.
P.O. BOX 769045
DALLAS, TEXAS 75376-9045
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 6, 1996
------------------------------
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 Westin Galleria, 13340
Dallas Parkway, Dallas, Texas on Friday, December 6, 1996, at 10:00 A.M., local
time for the following purposes:
1. to elect seven 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 November 5,
1996 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, 1996 is enclosed.
By Order of the Board of Directors
Cynthia R. Morris, Secretary
Dallas, Texas
November 6, 1996
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> 4
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 Westin Galleria, 13340
Dallas Parkway, Dallas, Texas on Friday, December 6, 1996, 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 6, 1996.
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 November 5, 1996, the record date for the meeting, are
entitled to notice of and to vote at the meeting. On the record date, there
were 4,004,229 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> 5
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 ten directors, with the actual
number determined from time to time by resolution of the Board. In October
1996 the Board fixed the number at seven. At the annual meeting seven
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, with the exception of Steve Bartlett, are presently directors of
Sun Coast. Of the nominees who are presently directors, all, with the
exception of Eddie Lesok, were elected as directors at the 1995 annual meeting.
Mr. Lesok was elected a member of the Board of Directors upon the resignation
of R. Carter Pate, the former President and Chief Executive Officer of the
Company. Each of the nominees who is presently a director has served
continuously as a director since the date of his first election to the Board in
the year indicated.
H. STEPHEN BARTLETT, age 49 Mr. Bartlett is a principal shareholder
and Chairman of the Board of Meridian
Products Corp. ("Meridian"), which is
a privately held, custom manufacturer
of injection molded plastics in Dallas,
Texas . He founded Meridian in 1976.
Mr. Bartlett served as Mayor of
Dallas, Texas, from December 1991 to
June 1995. From 1983 to 1991, he
served as a member of the U.S.
Congress, representing Texas' Third
Congressional District. In March 1996,
Mr. Bartlett was appointed to Fannie
Mae's National Advisory Council.
Since completing his service as Mayor
of Dallas in June 1995, Mr. Bartlett
has principally been occupied with the
business of Meridian.
JAMES D. IRELAND III, age 46, Mr. Ireland was elected Chairman of the
director since 1989 Board of Sun Coast in April 1996. He
has been a managing director of Capital
One Partners since January 1993, a
privately-held merchant banking and
advisory firm. Mr. Ireland is also
Chairman of First Colorado Corporation,
an owner of natural resource projects
and real estate properties, and
Terresolve Technologies Ltd., a
manufacturer of environmentally friendly
lubricant products. He is also a
director of Cleveland-Cliffs, Inc., the
largest North American producer of iron
ore, and numerous privately held
companies.
EDDIE M. LESOK, age 48, director Mr. Lesok was elected President, Chief
director since April 1996 Executive Officer and a director of Sun
Coast in April 1996. From September 1995
until April 1996, Mr. Lesok was self-
employed. Mr. Lesok was Chairman of
the Board and Chief Executive Officer
of Color Tile, Inc. from 1988 until
September 1995. Prior to 1988, he
held other executive positions at Color
Tile, Inc. In January 1996 Color Tile,
Inc., filed a petition for protection
under Chapter XI of the Federal
Bankruptcy Act.
2
<PAGE> 6
JAMES H. MILLER, age 70, Mr. Miller, who retired in June 1992
director since 1988 as President of Sun Coast, served as
interim President from February to April
1996. He was elected a 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 50, Mr. Parish has been President and sole
director since 1994 shareholder of Parish Partners, Inc., a
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. A plan of
reorganization permitting Sfuzzi,
Inc. to emerge from Chapter XI was
confirmed in October 1996.
ARNO F. PIRKAU, age 54, Mr. Pirkau is President and General
director since 1982 Manager of the Company's Closures
Division. He 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 47, Mr. Smiley served as Chairman of the
director since 1992 Board of Sun Coast from September 1992
until April 1996. He is Executive Vice
President of Hunt Financial Corporation.
From 1991 until joining Hunt in
1996, he was President of Cypress
Capital Corporation, a private
investment firm. Prior to 1991, Mr.
Smiley was involved in venture capital
and leveraged buyout activities of
Citicorp in New York and Dallas, Texas
for 15 years. Mr. Smiley is a director
of Dynamex, Inc., a public company
engaged in the courier business, and of
Ergo Science Corporation, a public
company engaged in the bio-pharmaceutical
business.
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 1996, the Board held 15 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, 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 (2 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.
3
<PAGE> 7
Compensation Committee (1 meeting). 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.
Stock Option Committee (1 meeting). 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.
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 1996. Mr. Smiley was the Chairman
of the Board of the Company, until April 1996 when Mr. Ireland was elected as
the Chairman.
COMPENSATION OF DIRECTORS
Fees and Expenses; Other Arrangements. In fiscal 1996, 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 additional compensation at a rate of $50,000 per year. In
fiscal 1996, in addition to director's fees of $12,600, he received $29,167 as
compensation for serving as Chairman of the Board. Beginning in May 1996, Mr.
Ireland, as the new Chairman of the Board, began receiving compensation of
$50,000 per year in addition to director's fees. In fiscal 1996 he received
$8,333 for serving as Chairman of the Board, in addition to director's fees of
$17,600. Mr. Miller served as interim President and CEO from February 1996
through April 1996, for which he received a salary of $40,000 in addition to
director's fees in fiscal 1996 of $12,300.
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. Pursuant to
the plan, on June 30, 1996 Messrs. Ireland, Miller, Parish and Smiley each
received options to purchase 500 shares of Common Stock at $4.25 per share.
4
<PAGE> 8
EXECUTIVE OFFICERS
Sun Coast's executive officers are as follows:
<TABLE>
<CAPTION>
NAME OFFICE HELD SINCE
---- ----------- -----
<S> <C> <C>
James D. Ireland III Chairman of the Board 1996 (1)
Eddie M. Lesok President and Chief Executive Officer 1996 (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 42, 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 LLP, 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, 1996, 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . 381,209(1) 9.5%
13355 Noel Road, Suite 1350
Dallas, Texas 75240
Pioneering Management Corporation . . . . . . . . . . . . . . . . . 394,300(2) 9.8%
60 State Street
Boston, Massachusetts 02114
Manning & Napier Advisors, Inc. . . . . . . . . . . . . . . . . . . 393,800(3) 9.8%
1100 Chase Square
Rochester, New York 14604
Wellington Management Company . . . . . . . . . . . . . . . . . . . 238,100(4) 5.9%
75 State Street
Boston, Massachusetts 02109
</TABLE>
- -----------------
(1) Includes 9,149 shares, of which Mr. Hoak disclaims beneficial
ownership, owned by his wife.
(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. Pioneering Management Corporation has sole voting and
dispositive power with respect to such shares.
5
<PAGE> 9
(3) Beneficial ownership of such shares reported in a Schedule 13G filed
by Manning & Napier Advisors, Inc., a registered investment advisor,
with respect to its beneficial ownership of the Company's Common
Stock. Manning & Napier Advisors, Inc. has sole voting and
dispositive power with respect to such shares.
(4) Beneficial ownership of such shares reported in a Schedule 13G filed
by Wellington Management Company, a registered investment advisor and
a parent holding company, with respect to its beneficial ownership of
the Company's Common Stock. Wellington Management Company has shared
voting power with respect to 43,100 shares and shared dispositive
power with respect to 238,100 shares.
6
<PAGE> 10
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of October 1, 1996 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
H. Stephen Bartlett . . . . . . . . . . . . . . . . . . . . . . -- --
James D. Ireland III . . . . . . . . . . . . . . . . . . . . . 61,938 (1) 1.5%(1)
Eddie M. Lesok . . . . . . . . . . . . . . . . . . . . . . . . 500 --
James H. Miller . . . . . . . . . . . . . . . . . . . . . . . . 102,630 (2) 2.5%(2)
James R. Parish . . . . . . . . . . . . . . . . . . . . . . . . 4,478 (3) 0.1%(3)
Arno F. Pirkau . . . . . . . . . . . . . . . . . . . . . . . . 101,628 (4) 2.5%(4)
Stephen P. Smiley . . . . . . . . . . . . . . . . . . . . . . . 3,378 (5) 0.1%(5)
Named Executive Officers (excluding
any director named above)
Cynthia R. Morris . . . . . . . . . . . . . . . . . . . . . . . 54,500 (6) 1.3%(6)
All directors and executive
officers as a group (7 persons) . . . . . . . . . . . . . . . 329,052 (7) 7.9%(7)
</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) 900 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 40,900 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 500 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 51,200 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.
(5) Includes 900 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
<PAGE> 11
(6) Includes 53,500 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.
(7) Includes 147,900 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.
8
<PAGE> 12
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:
o 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;
o provide compensation relative to, and differentiated by, the
individual employee's performance;
o provide incentive compensation that varies directly with both Company
performance and the individual employee's contribution to that
performance; and
o 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 fiscal 1995 the
Committee retained a compensation consultant to evaluate the Company's
compensation programs and make recommendations for their refinement.
9
<PAGE> 13
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 1996, Eddie Lesok began his service to Sun Coast as Chief
Executive Officer upon the resignation of R. Carter Pate. In setting the
compensation for the Chief Executive Officer, the compensation committee
reviewed an analysis of the compensation levels of executives at 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.
THE COMPENSATION AND STOCK OPTION
COMMITTEES
James D. Ireland III
Stephen P. Smiley
10
<PAGE> 14
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, 1996.
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>
Eddie M. Lesok . . . . 1996 $ 46,462 $ 15,000 $1,340 (2) 100,000 $ -0-
President and Chief
Executive Officer of
Sun Coast(1)
R. Carter Pate . . . . 1996 $140,000 $ -0- $4,200 (2) -0- $ 354,070 (3)
President and Chief 1995 $240,000 $ 40,000 $7,200 (2) 10,000 $ 6,696 (3)
Executive Officer of 1994 $200,000 $ 40,000 $7,200 (2) 25,000 $ 763 (3)
Sun Coast
Arno F. Pirkau . . . . 1996 $144,000 $ 60,000 $7,800 (2) -0- $ 13,105 (4)
Executive Vice 1995 $144,000 $ 40,000 $8,294 (2) 5,000 $ 5,023 (4)
President of Sun 1994 $123,878 $ 51,458 $7,380 (2) 10,000 $ 9,969 (4)
Coast and President
of Sun Coast
Closures, Inc.
Cynthia R. Morris . . . 1996 $160,000 $225,000(5) $7,200 (2) 20,000 $ 1,000 (6)
Executive Vice 1995 $160,000 $ 20,000 $ -0- 7,500 $ 2,400 (6)
President, Chief 1994 $104,166 $ 24,000 $ -0- 60,000 $ 276 (6)
Financial Officer,
Treasurer and
Secretary of
Sun Coast
</TABLE>
- --------
(1) Mr. Lesok was elected President and Chief Executive Officer of Sun
Coast in April 1996, at an annual salary of $240,000 with bonus
provisions for achieving target results.
(2) The Company pays car allowances of $600 per month to each of Mr. Lesok
and Ms. Morris and $650 per month to Mr. Pirkau and paid various other
auto expenses for Mr. Pirkau. The Company paid Mr. Pate a $600 per
month car allowance prior to his resignation in February 1996.
(3) In fiscal 1996 this amount consisted of (a) $350,000 in severance pay
and (b) club dues, profit-sharing match and other perquisites of
$4,070. See "--Severance and Change of Control Arrangements." In
fiscal 1995 and 1996, these amounts consisted of $0 and $289,
respectively, of Company contributions to a defined contribution plan
and club dues, profit sharing match and other perquisites of $6,696 and
$474, respectively.
(4) These amounts consisted in fiscal years 1996, 1995 and 1994 of Company
contributions to a defined contribution plan of $0, $0 and $9,042,
respectively, and term life insurance premiums, club dues, profit
sharing match and other perquisites of $13,105, $5,023 and $927,
respectively.
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<PAGE> 15
(5) This amount was paid pursuant to a Retention Bonus Agreement. See "--
Severance and Change of Control Arrangements."
(6) In fiscal 1996 this amount consisted of $1,000 of profit sharing match.
See "Certain Transactions." In fiscal 1995 and 1994, this amount
represents profit sharing match.
The following table sets forth certain information with respect to
options to purchase Common Stock granted during the fiscal year ended June 30,
1996 to each of the named executive officers. No SARs were granted during
fiscal 1996.
OPTION GRANTS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
Grant Date
Individual Grants Value (1)
--------------------------------------------------------------------------------------------- ---------
Number of Securities % of Total Options
Underlying Options Granted to Employees Exercise
Granted in Price Expiration Grant Date
Name (no. of shares) Fiscal Year ($/Sh) Date Present Value
---- ----------------- ---------------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Eddie M. Lesok 100,000 82.0% $5.00 06/03/2006 $334,000
R. Carter Pate -0- -- -- -- --
Arno F. Pirkau -0- -- -- -- --
Cynthia R. Morris 20,000 16.4% $5.375 02/12/2006 $ 67,400
</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, 1996, and unexercised options held at June 30, 1996, by each of the named
executive officers. None of the executive officers has been granted SARs.
12
<PAGE> 16
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options In-the-Money Options at
at 6/30/96 6/30/96(1)
Exercisable/
Shares Acquired Unexercisable Exercisable/
Name on Exercise Value Realized (no. of shares) Unexercisable
---- ----------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
Eddie M. Lesok -0- $ -0- -0-/100,000 $-0-/$-0-
R. Carter Pate -0- $ -0- -0-/-0- $-0-/$-0-
Arno F. Pirkau 6,000 $ 3,750 51,200/12,000 $-0-/$-0-
Cynthia R. Morris -0- $ -0- 45,500/42,000 $-0-/$-0-
</TABLE>
- ------------
(1) The high sales price per share on June 28, 1996 was $4.25 as reported by the
New York Stock Exchange.
13
<PAGE> 17
CHANGE OF CONTROL ARRANGEMENTS
The Company has entered into Severance Agreements with Mr. Lesok,
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.
In August 1995 the Company entered into a Severance Agreement with
Mr. Pate, formerly President, Chief Executive Officer and director of the
Company, on substantially the same terms as the Severance Agreements with Mr.
Lesok, Mr. Pirkau and Ms. Morris. Upon Mr. Pates's resignation in February
1996, the Company paid Mr. Pate a severance amount equal to that provided under
the "termination without cause" provision of his Severance Agreement --
approximately $325,000.
In March 1996 the Company entered into a Retention Bonus Agreement
with Ms. Morris, following a determination by the Board of Directors that it
was in the best interest of the Company to assure that the Company would have
her continued dedication following Mr. Pate's resignation and during the
transition to a new Chief Executive Officer. Pursuant to the terms of the
agreement, Ms. Morris received compensation of $225,000 additional to her
salary on September 30, 1996.
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
14
<PAGE> 18
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'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.
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,
1991, 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, 1991 -- JUNE 30, 1996
<TABLE>
<CAPTION>
===================================================================================================================
6/28/91 6/30/92 6/30/93 6/30/94 6/30/95 6/28/96
===================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Dow Equity Market Index 100.00 114.33 131.15 132.41 166.63 211.83
- -------------------------------------------------------------------------------------------------------------------
Containers & Packaging 100.00 115.64 111.49 113.48 141.79 141.34
- -------------------------------------------------------------------------------------------------------------------
Sun Coast Industries, Inc. 100.00 267.86 514.29 617.86 435.71 192.86
===================================================================================================================
</TABLE>
15
<PAGE> 19
CERTAIN TRANSACTIONS
During fiscal 1994 the Company on a non-recourse basis loaned R. Carter Pate,
formerly President, Chief Executive Officer and a director of the Company, and
Cynthia R. Morris, an Executive Vice President and Chief Financial Officer of
the Company, $100,000 and $50,000, respectively, to make open market purchases
of Common Stock. The Common Stock so purchased secured the loans. In December
1995 the Company cancelled the loans in exchange for the Common Stock purchased
with the loans.
On January 15, 1996 the Company loaned Mr. Pirkau $33,000 to exercise options
to purchase Common Stock. This loan, made on a recourse basis, was made at an
interest rate equal to the Company's cost of funds.
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 reports on Form 5 of grants
of stock options to Mr. Lesok and Ms. Morris were 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, 1997. 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.
16
<PAGE> 20
OTHER MATTERS
Proposals which shareholders intend to present at the 1997 Annual Meeting of
Shareholders must be received by Sun Coast no later than August 6, 1997, 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
17
