<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
SPECIALTY CHEMICAL RESOURCES, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (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
[LOGO] SPECIALTY CHEMICAL RESOURCES, INC.
9055 Freeway Drive
Macedonia, Ohio 44056
------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 5, 1997
------------------------------------
To Our Stockholders:
The Annual Meeting (the "Annual Meeting") of Stockholders of Specialty
Chemical Resources, Inc. (the "Company") will be held at the offices of
Specialty Chemical Resources, Inc., 9055 Freeway Drive, Macedonia, Ohio 44056 on
June 5, 1997 at 10:00 a.m. (Cleveland time) for the following purposes:
I. To elect seven Directors of the Company for the ensuing year;
II. To ratify the appointment of Grant Thornton as the independent
accountants for the Company; and
III. To transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
Only stockholders of record as of the close of business on April 18, 1997
are entitled to notice of, and to vote at, the Annual Meeting.
By Order of the Board of Directors
/s/ Edwin M. Roth
EDWIN M. ROTH
Chairman of the Board
and President
April 29, 1997
PLEASE DATE AND EXECUTE THE ENCLOSED PROXY CARD AND PROMPTLY RETURN IT IN THE
ENCLOSED STAMPED ENVELOPE FOR WHICH NO ADDITIONAL POSTAGE IS REQUIRED IF MAILED
IN THE UNITED STATES.
<PAGE> 3
[LOGO] SPECIALTY CHEMICAL RESOURCES, INC.
9055 Freeway Drive
Macedonia, Ohio 44056
------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 5, 1997
------------------------------------
INTRODUCTION
This Proxy Statement is being furnished to stockholders of Specialty
Chemical Resources, Inc., a Delaware corporation (the "Company"), in connection
with the solicitation of proxies by the Board of Directors of the Company from
the holders of the Company's common stock, par value $.10 per share ("Common
Stock"), for use at the Annual Meeting of Stockholders of the Company to be held
at 10:00 a.m., Cleveland time, on June 5, 1997 (the "Annual Meeting"), at the
offices of Specialty Chemical Resources, Inc., 9055 Freeway Drive, Macedonia,
Ohio 44056.
Stockholders of record as of the close of business on April 18, 1997 are
entitled to notice of, and to vote at, the Annual Meeting and any adjournments
or postponements thereof. On that date there were outstanding 3,882,099 shares
of Common Stock. Each share of Common Stock is entitled to one vote on all
matters to come before the Annual Meeting. The Company has no other class of
voting securities outstanding.
Shares of Common Stock cannot be voted at the Annual Meeting unless the
holder thereof is present or represented by proxy. When proxies in the
accompanying form are returned, properly executed, the shares represented
thereby will be voted as specified on such proxies. All votes represented by the
enclosed proxy will be cast (i) for the seven nominees named herein, unless
authorization to do so is withheld by a stockholder, and (ii) in the manner
specified by a stockholder with respect to the proposal to ratify the
appointment of Grant Thornton as the independent accountants for the Company,
except that in the absence of such specification, the votes will be cast "FOR"
such proposal. Any stockholder giving a proxy has the right to revoke it at any
time prior to its exercise, either by delivering a notice in writing to the
Secretary of the Company or by voting in person at the Annual Meeting.
At the Annual Meeting, the results of stockholder voting will be tabulated
by the inspector of elections appointed for the Annual Meeting. Under Delaware
law and the Company's Restated Certificate of Incorporation and By-laws,
properly executed proxies that are (i) marked "abstain" or (ii) held in "street
name" by brokers and that are not voted on one or more particular proposals (if
otherwise voted on at least one proposal), will be counted for purposes of
determining whether a quorum has been achieved at the Annual Meeting.
Abstentions will have the same effect as a vote against the proposal to which
such abstention applies. Broker non-votes will not be treated as either a vote
for or a vote against any of the proposals to which such broker non-votes apply.
The approximate date on which this Proxy Statement and the enclosed proxy
are first being sent to stockholders is April 29, 1997.
<PAGE> 4
I. ELECTION OF DIRECTORS
At the Annual Meeting, seven Directors are to be elected for the ensuing
year to hold office until the next Annual Meeting and until their successors
shall have been elected and shall have qualified. Pursuant to the Company's
By-laws, provided that a quorum is present, Directors are elected by a majority
of the votes cast in the election. Unless otherwise specified, the shares
represented by the enclosed proxy will be voted "FOR" the election of the seven
nominees named below. In the event that any nominee refuses or is unable to
serve as a Director (which is not now anticipated), the persons named as proxies
reserve full discretion to vote for such other person as may be nominated.
INFORMATION AS TO THE NOMINEES, THE BOARD OF DIRECTORS
AND THE EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is information about each nominee for election as a
Director and each executive officer of the Company (based on information
supplied by him), including his name, age, positions with the Company (other
than as a Director) and principal occupations during the past five years.
<TABLE>
<CAPTION>
Name, Age and Positions
With the Company
Other than Director Occupation and Other Information
- ---------------------------------------- --------------------------------------------------
<S> <C>
NOMINEES
Edwin M. Roth, 69 Mr. Roth has been a Director and President of the
President and Chairman of Company and Chairman of the Board of Directors of
the Board of Directors the Company since its formation in June 1982. Mr.
Roth was Chief Executive Officer of Aerosol
Systems, Inc. ("ASI"), a former subsidiary of the
Company acquired effective December 31, 1988 and
merged into the Company effective December 30,
1992, from January 1989 until December 1992. Mr.
Roth is the father of Corey B. Roth, a Director
and executive officer of the Company.
Corey B. Roth, 39 Mr. Roth has been a Vice President of the Company
Vice President, Treasurer since June 1982, a Director since October 1984 and
and Assistant Secretary Treasurer and Assistant Secretary since June 1992.
Mr. Roth served as Secretary from October 1984
until June 1992 and Treasurer from November 1987
until January 1990. Mr. Roth was Vice President of
Administration of ASI from April 1989 until
December 1992. Mr. Roth is the son of Edwin M.
Roth.
George N. Aronoff, 63 Mr. Aronoff has been a Director of the Company
Secretary since May 1989 and Secretary since June 1992. Mr.
Aronoff was also a Director of the Company from
February 1982 until September 1984. Mr. Aronoff
has been a partner in the Cleveland law firm of
Benesch, Friedlander, Coplan & Aronoff LLP,
counsel to the Company, for more than the past
five years.
Geoffrey J. Colvin, 45 Mr. Colvin has been a Director of the Company
since August 1996. For more than the past five
years, Mr. Colvin has been a partner of CEW
Partners, a private investment partnership.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
Name, Age and Positions
With the Company
Other than Director Occupation and Other Information
- ---------------------------------------- --------------------------------------------------
<S> <C>
Terence J. Conklin, 40 Mr. Conklin has been a Director of the Company
since August 1996. For more than the past five
years, Mr. Conklin has been President of Trust
Investments, Inc., which acts as the family office
and private investment company to the Martin Trust
family.
Victor Gelb, 70 Mr. Gelb has been a Director of the Company since
May 1989. Mr. Gelb is President and Chief
Executive Officer of Victor Gelb Inc., a
manufacturer of reinforcement fibers, a position
which he has held for more than five years. Mr.
Gelb is also a Director of Pioneer Standard
Electronics, Inc.
Lionel N. Sterling, 59 Mr. Sterling has been a Director of the Company
since May 1989. Mr. Sterling was also a Director
of the Company from February 1982 until September
1984. Since January 1987, Mr. Sterling has been
President of Equity Resources Inc., a private
investment company. Mr. Sterling is also a
Director of i-Stat Corporation.
EXECUTIVE OFFICERS
John H. Ehlert, 44 Mr. Ehlert has been a Vice President of the
Vice President, and Company since April 1992. He was President of ASI
President of Aerosol from April 1992 until December 1992, when ASI was
Systems Division merged into the Company, at which time he became
President of the Aerosol Systems Division.
David F. Spink, 46 Mr. Spink has been Vice President and Chief
Vice President and Financial Officer of the Company since June 1996.
Chief Financial Officer From January 1996 until June 1996, Mr. Spink was
Vice President and Chief Financial Officer of the
Aerosol Systems Division of the Company. From
November 1994 until January 1996, Mr. Spink was a
self-employed Strategic Planning and Financial
Consultant. From 1993 until 1994, Mr. Spink was
Director of Planning and Analysis for B.F.
Goodrich and from 1992 until 1993 was Controller,
Research Division for B.F. Goodrich. For the
fifteen years prior to 1992, Mr. Spink worked for
B.F. Goodrich in a progression of
financial/analytical positions.
</TABLE>
Under an Agreement dated August 30, 1996 (the "Voting Agreement") among CEW
Partners, Martin Trust, Edwin M. Roth and Corey B. Roth, among other things,
Edwin M. Roth and Corey B. Roth agreed to vote their shares of Common Stock for
the election of Messrs. Colvin and Conklin as Directors of the Company. Mr.
Colvin is a principal of CEW Partners, a 5% beneficial owner of the Company's
Common Stock. Mr. Conklin is President of Trust Investments, Inc., which acts as
the family office and private investment company to Martin Trust, a 5%
beneficial owner of the Company's Common Stock.
The Board of Directors held eight meetings during the fiscal year ended
December 31, 1996. All of the Directors were present at all of the meetings. The
Board of Directors has an Audit Committee, a Nominating Committee, and a Stock
Option and Compensation Committee. The general functions of such Board
committees, the identity of each committee member and the number of committee
meetings held by each committee during the last fiscal year are set forth below.
3
<PAGE> 6
The Audit Committee acts as a liaison between the Company's independent
auditors and the Board of Directors, reviews the scope of the annual audit,
reviews the Company's annual and quarterly financial statements and reviews the
sufficiency of the Company's internal accounting controls. The Audit Committee
consists of Geoffrey J. Colvin, Victor Gelb and Lionel N. Sterling. The Audit
Committee held two meetings during the fiscal year ended December 31, 1996. Each
of the members of the Audit Committee attended the meetings.
The Nominating Committee is responsible for making recommendations to the
Board of Directors with respect to the organization and size of the Board and
its committees, for selecting candidates for election to the Board of Directors
and its committees and for considering the qualifications of Directors. There is
no established procedure for submission of nominations by stockholders. The
Nominating Committee consists of George N. Aronoff, Corey B. Roth and Edwin M.
Roth. The Nominating Committee held two meetings during the fiscal year ended
December 31, 1996. Each of the members of the Nominating Committee attended the
meetings.
The Stock Option and Compensation Committee is responsible for the approval
of grants of options under the Company's stock option plan for officers and key
employees of and consultants to the Company and makes recommendations regarding
the compensation of officers and key employees of the Company. The Stock Option
and Compensation Committee consists of George N. Aronoff (except with respect to
stock option matters), Terence J. Conklin and Victor Gelb. The Stock Option and
Compensation Committee held two meetings during the fiscal year ended December
31, 1996. Each of the members of the Stock Option and Compensation Committee
attended the meetings.
DIRECTOR REMUNERATION
Directors who are not employed by the Company received in 1996 an annual
fee of $12,000, reimbursement for travel expenses, a fee of $500 for each Board
meeting attended and a fee of $500 for each meeting of a committee of the Board
attended that was not held on the same day as a Board meeting.
During fiscal 1996, the Company retained the law firm of Benesch,
Friedlander, Coplan & Aronoff LLP as counsel to the Company. Mr. Aronoff, a
Director of the Company, is a partner with this law firm. The Company plans to
retain this firm during the coming year.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
The Company is required to identify any director or executive officer who
failed to file, on a timely basis, with the Securities and Exchange Commission
(the "Commission") a required report relating to ownership and changes in
ownership of the Company's equity securities. Based on material provided to the
Company, it believes that during 1996, the Directors and executive officers of
the Company complied with all such filing requirements, except that David Spink
did not timely file a Form 3 upon his becoming an officer of the Company and a
Form 4 upon his purchase of shares of Common Stock of the Company. Additionally,
Terence J. Conklin and Geoffrey J. Colvin did not timely file a Form 3 upon
their becoming Directors of the Company. As of the date of this Proxy Statement,
Messrs. Spink, Conklin and Colvin have filed all required Forms 3 and 4.
4
<PAGE> 7
COMMON STOCK OWNERSHIP
The following table sets forth, as of March 31, 1997, based on information
provided to the Company by the persons named in the table, the number of shares
of Common Stock owned by each Director, each executive officer and by the
Directors and executive officers of the Company as a group, and the persons or
groups of persons known to the Company to be the beneficial owners of more than
5% of the Common Stock of the Company.
<TABLE>
<CAPTION>
Name, and Address if applicable, of Amount and Nature of Percentage
Beneficial Owner Beneficial Ownership(1) Ownership
- -------------------------------------- ----------------------- ---------
<S> <C> <C>
Edwin M. Roth 740,772(2)(3)(4) 18.48%
Specialty Chemical Resources, Inc.
9055 Freeway Drive
Macedonia, Ohio 44056
Corey B. Roth 139,230(2)(3)(4) 3.50%
John H. Ehlert 41,667(3)(4)(5) 1.05%
David F. Spink 10,833(3)(4) *
George N. Aronoff 35,324(3) *
Victor Gelb 16,964(3) *
Geoffrey J. Colvin 232,953(4)(7) 5.90%
Terence J. Conklin 2,000
Lionel N. Sterling 46,714(3)(4) 1.18%
All Directors and officers as a group 1,027,254(3) 24.92%
(eight individuals)
CEW Partners(6) 232,953(4) 5.90%
30 Rockefeller Plaza
Suite 2500
New York, New York 10020
Martin Trust(6) 237,000(4) 6.00%
c/o Trust Investments, Inc.
52 Stiles Road
Salem, New Hampshire 03079
Pioneering Management Corporation (6) 387,000 9.80%
60 State Street
Boston, Massachusetts 02109
Dimensional Fund Advisors Inc.(6) 217,600(8) 5.51%
1299 Ocean Avenue
Eleventh Floor
Santa Monica, California 90401
</TABLE>
- ---------------
* Less than one percent.
(1) Except as otherwise indicated, the persons listed as beneficial owners of
the shares of Common Stock have sole voting and investment power with
respect to those shares.
(2) Includes 6,250 shares of Common Stock owned by the Edwin M. Roth Family
Foundation, Inc., a not-for-profit Ohio corporation. Edwin M. Roth and Corey
B. Roth are both officers and trustees of such foundation and have shared
voting and investment power with respect to the shares of Common Stock owned
by such foundation.
(3) Includes the following number of shares of Common Stock which such persons
have or had within 60 days after March 31, 1997 the right to acquire upon
the exercise of options: Mr. Edwin M. Roth, 60,000; Mr. Corey B. Roth,
31,667; Mr. Ehlert, 26,667; Mr. Spink, 3,333; Mr. Aronoff, 16,607; Mr. Gelb
16,607; Mr. Sterling, 16,607; and all current officers and Directors as a
group, 171,488.
5
<PAGE> 8
(4) Excludes shares of Common Stock issuable upon conversion of the Company's 6%
Convertible Subordinated Notes due 2006, which are not convertible until
December 31, 2001.
(5) Includes 15,000 shares of Common Stock granted to Mr. Ehlert in July 1995 as
a restricted stock award of which 5,000 are subject to forfeiture until
certain restrictions lapse.
(6) All information contained in this table regarding the identified beneficial
owner and its security ownership, including related footnotes, is based on
the Schedule 13D or Schedule 13G filing made by such beneficial owner as of
the date of such filing.
(7) Includes 232,953 shares of Common Stock held by CEW Partners of which Mr.
Colvin is a partner of the General Partnership. Mr. Colvin disclaims
beneficial ownership of these shares.
(8) Dimensional Fund Advisors Inc. has sole voting power over 155,000 shares and
sole investment power over 217,600 shares. Certain officers of Dimensional
Fund Advisors Inc. also serve as officers of DFA Investment Dimensions Group
Inc. (the "Fund") and The DFA Investment Trust Company (the "Trust"). In
their capacities as officers of the Fund and the Trust, these persons vote
38,100 additional shares which are owned by the Fund and 24,500 shares which
are owned by the Trust. These shares are included in the number of shares
over which Dimensional Fund Advisors Inc. has sole investment power.
In September 1996, the Company issued $4,000,000 original principal amount
of 6% Convertible Subordinated Notes due 2006 in a rights offering to its
stockholders. In connection with the rights offering, CEW Partners, Martin
Trust, Edwin M. Roth and Corey B. Roth (Messrs. Roth collectively being referred
to as the "Roths") entered into the Voting Agreement that provides, among other
things, that neither CEW Partners nor Martin Trust, on the one hand, and neither
of the Roths, on the other hand, may sell their shares of Common Stock of the
Company or such Notes that they own without extending to the others the right to
purchase such shares and Notes on the same terms as those being offered by a
third party. Notwithstanding the foregoing, CEW Partners and Martin Trust may
make a disposition pursuant to (i) a tender or exchange offer by a person other
than CEW Partners and Martin Trust or their respective affiliates if such person
has been approved by the Roths, (ii) a brokers' transaction meeting certain
volume limitations, (iii) a bona fide pledge of shares to a major brokerage firm
or financial institution or an affiliate thereof not affiliated with it for
money borrowed, (iv) a transaction involving the Company, or (v) a transaction
involving any one of their affiliates or a tax-exempt charitable institution,
provided that any such transferee must agree to be bound by the terms of the
Voting Agreement. The Voting Agreement expires on the earliest of (i) March 31,
2000, (ii) Edwin M. Roth no longer being the Chief Executive Officer of the
Company, or (iii) the mutual agreement of the parties.
6
<PAGE> 9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth the compensation paid to or deferred for the
executive officers of the Company at December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------
AWARDS
ANNUAL COMPENSATION ----------------------- PAYOUTS
----------------------------------- RESTRICTED -------
NAME AND OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS COMPENSATION
POSITION YEAR ($0) ($) ($) ($) (#)(2) ($) ($)(3)
- ----------------- ---- ------- ------ ------------ ---------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Edwin M. Roth, 1996 275,000 0 0 0 0 0
President & 1995 275,000 0 0 0 50,000 0 0
Chairman 1994 250,000 75,000 0 0 20,000 0 0
Corey B. Roth, 1996 195,000 0 0 0 0 6,738
Vice President 1995 195,000 0 0 0 30,000 0 6,738
& Treasurer 1994 167,500 50,000 0 0 10,000 0 6,738
John H. Ehlert, 1996 185,000 0 0 0 0 0
Vice President 1995 185,000 0 0 58,125(4) 30,000 0 9,181
1994 155,000 50,000 0 0 10,000 0 9,181
David F. Spink 1996 76,120 0 0 0 10,000 0 0
Vice President
</TABLE>
- ---------------
(1) Mr. Spink, who joined the Company in January 1996, became an executive
officer of the Company in June 1996. This amount represents aggregate salary
paid to Mr. Spink during 1996.
(2) There were no SAR grants by the Company in 1995 or 1996.
(3) Represents the dollar value of term life insurance premiums paid during each
fiscal year by the Company for the benefit of Messrs. Corey Roth and Ehlert.
(4) On July 25, 1995, the Company granted Mr. Ehlert a restricted stock award of
15,000 shares of Common Stock. The market value of such shares was $58,125
on the date of the grant. Mr. Ehlert has all of the rights of a stockholder
with respect to such shares, including the right to vote the shares and to
receive dividends with respect to the shares. Of the 15,000 shares of Common
Stock granted to Mr. Ehlert, 5,000 are currently subject to certain
specified transfer restrictions and forfeiture provisions. These transfer
and forfeiture provisions will lapse on July 25, 1997 with respect to the
remaining 5,000 shares, in each case provided that Mr. Ehlert is employed by
the Company on such date, or, if earlier, such provisions will lapse upon a
change in control of the Company.
7
<PAGE> 10
OPTION AND SAR GRANTS
The following table summarizes options granted in the last fiscal year to
the executive officers of the Company and potential realizable value of the
options assuming a 5% and 10% annually compounded stock price appreciation.
There were no SAR grants by the Company in 1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENT OF ASSUMED
SECURITIES TOTAL ANNUAL RATES OF STOCK PRICE
UNDERLYING OPTIONS/SARS APPRECIATION FOR OPTION TERM
OPTIONS/SARS GRANTED -----------------------------------
GRANTED TO EMPLOYEES IN EXERCISE OR BASE 5% 10%
NAME (#)(1) FISCAL YEAR PRICE ($/SH) EXPIRATION DATE ($) ($)
- -------------- ------------ --------------- ---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Edwin M. Roth -- -- -- -- -- --
Corey B. Roth -- -- -- -- -- --
John H. Ehlert -- -- -- -- -- --
David F. Spink 10,000 100 1.625 2/29/01 4,490 9,921
</TABLE>
- ---------------
(1) Options are exercisable as to one-third of the shares covered on each of the
first, second and third anniversaries of the date of grant and the term of
each option grant is five years.
OPTION AND SAR EXERCISES
The following table summarizes the exercise of options for the Company's
Common Stock by the executive officers of the Company during the last fiscal
year and the year-end balances of exercisable and unexercisable options of the
executive officers. The Company has no outstanding SARs.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
SHARES ACQUIRED VALUE AT FISCAL YEAR-END AT FISCAL YEAR-END
ON EXERCISE REALIZED (#) ($)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -------------- --------------- -------- ------------------------- --------------------------
<S> <C> <C> <C> <C>
Edwin M. Roth 0 $0 120,000/160,000 $0/$0
Corey B. Roth 0 $0 71,667/95,000 $0/$0
John H. Ehlert 0 $0 61,667/85,000 $0/$0
David F. Spink 0 $0 0/10,000 $0/$0
</TABLE>
REPORT OF THE STOCK OPTION AND COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The 1996 compensation of Mr. Edwin M. Roth and the other executive officers
of the Company was recommended to the Board of Directors by the Stock Option and
Compensation Committee (the "Committee") which is composed of three non-employee
Directors. The Committee is responsible for approval (or recommendation to the
Board of Directors) of the compensation arrangements for senior management,
Directors and other key employees; review of benefit plans in which officers and
Directors are eligible to participate; periodic review of the equity
compensation plans of the Company and grants under such plans; and oversight of
management development to insure continuity of senior management.
While the Company does not have specific annual goals for each executive
officer upon which to base compensation decisions, the Committee believes that
there should be a strong correlation between executive compensation and
compensation paid by comparable companies as well as overall Company
performance, both to reward outstanding executive effort and to encourage it in
the future. In this way maximum stockholder return can be expected. The Company
presently uses a flexible array
8
<PAGE> 11
of salary, bonus and stock option plans to compensate and motivate its executive
officers. The nature and manner of application of these various compensation
tools for executive officers is determined subjectively by the Board of
Directors upon the recommendation of the Committee.
In 1996, as in prior years, the Company strived to provide an overall
compensation package for each executive officer that fairly reflected that
officer's contribution in relation to overall Company performance and that would
motivate that officer to improve such performance in the future. The bases used
to determine Mr. Edwin M. Roth's compensation were the same as those for the
other executive officers of the Company. Base salary and bonus compensation were
determined subjectively upon consideration of compensation history, expected
individual contribution and the Committee's belief that Mr. Roth's base salary
is in line with executive compensation paid by comparable companies. There were
no increases in the base salary in 1996 of Mr. Roth or the other executive
officers of the Company. In April 1997, bonuses were declared for Mr. Edwin M.
Roth ($35,000), Mr. Corey B. Roth ($25,000), Mr. Ehlert ($25,000) and Mr. Spink
($25,000) for services performed in 1996. Such bonuses were subjectively
determined based upon progress made by the Company in improving its results of
operations and liquidity position during 1996. The Committee awards stock
options as incentives to keep valuable executives, to motivate them, to
contribute to improvements in the stock performance of the Company and to
encourage and create ownership and retention of the Company's stock. In March
1997, the Board of Directors amended the Company's stock option plan to provide
that awards granted under the plan terminate on the second anniversary of the
date of the grant if the average of the fair market value (as defined in the
plan) of the Company's Common Stock on such anniversary date does not equal or
exceed the option price on the date of grant. The Committee awarded options to
purchase 10,000 shares of Common Stock to David F. Spink upon his joining the
Company in January 1996. Mr. Spink became a Vice President and the Chief
Financial Officer of the Company in June 1996.
COMPLIANCE WITH SECTION 162(m) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to a public corporation for compensation over $1 million paid to the
corporation's chief executive officer and four other most highly compensated
executive officers. Qualifying performance-based compensation will not be
subject to the cap if certain requirements are met. The Committee and the Board
of Directors intend to structure the compensation of its executive officers in a
manner that should insure that the Company does not lose any tax deductions
because of the $1 million compensation limit. The Committee does not expect that
this cap will cause the Company to lose any tax deductions in the foreseeable
future. The Company's salaries for its highest paid executives, when added to
annual bonus awards, do not approach $1 million.
Stock Option and Compensation
Committee
Victor Gelb
Terence J. Conklin
George N. Aronoff
9
<PAGE> 12
PERFORMANCE GRAPH
The following graph compares the performance of the Common Stock ("CHM") to
the Value Line Chemical Specialty Industry Index ("Industry Group") and the
Russell 2000 Index ("Russell 2000") for the period commencing December 31, 1991,
the last trading day before the beginning of the Company's fifth preceding
fiscal year, and ending December 31, 1996. The results assume that $100 was
invested on December 31, 1991 in CHM, Industry Group and Russell 2000 and that,
in the case of Industry Group and Russell 2000, dividends have been reinvested.
No dividends were paid on the Common Stock during this period.
COMPARISON OF CUMULATIVE TOTAL RETURN
CHM, INDUSTRY GROUP, RUSSELL 2000
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
CHM 100.00 114.29 130.95 57.14 38.10 28.57
RUSSELL 2000 INDEX 100.00 118.41 140.80 138.01 177.26 206.48
INDUSTRY GROUP 100.00 114.53 127.71 126.35 156.12 179.23
</TABLE>
Notes: (1) CHM data for the period ended December 31, 1991 reflects the closing
bid quotation reported in the Pink Sheets on August 1, 1991, the last
day during 1991 for which trading of the Common Stock was reported.
(2) CHM data for the periods ending December 31, 1992 and thereafter
reflects the closing price of the Common Stock as reported in the
AMEX-Composite Transactions.
TRANSACTIONS WITH MANAGEMENT
In October 1995, Mr. Edwin Roth purchased 3,500 shares of Cumulative
Convertible Preferred Stock at a price per share equal to $100, for an aggregate
purchase price of $350,000. On October 16, 1996, the Company issued $4,000,000
original principal amount of 6% Convertible Subordinated Notes due 2006 in a
rights offering to its stockholders, $350,000 of which was used to repurchase,
for the original purchase price, such shares of the Company's Cumulative
Convertible Preferred Stock.
In February 1996, the Company entered into a Commercial Demand Note to
borrow an additional $750,000 from its senior lender. The Demand Note was
secured by, among other things, the collateralized guarantee of Mr. Edwin M.
Roth. The Demand Note was repaid in September 1996.
10
<PAGE> 13
II. INDEPENDENT PUBLIC ACCOUNTANTS
The public accounting firm of Grant Thornton was the Company's independent
public accountants for fiscal 1996 and has been appointed, subject to
stockholder ratification at the Annual Meeting, to continue in such capacity for
the current fiscal year. A representative of Grant Thornton is expected to be
present at the Annual Meeting and will have an opportunity to respond to
appropriate questions and make a statement if he or she so desires.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF GRANT THORNTON AS THE INDEPENDENT ACCOUNTANTS FOR THE COMPANY.
OTHER MATTERS
All expenses of the Company in connection with this solicitation will be
borne by the Company. Solicitation will be made principally by mail, but
officers and regular employees may solicit proxies by telephone or personal
contact with nominal expense to the Company. The Company will request brokers
and other nominees who hold Common Stock in their names to solicit proxies from
the beneficial owners and will pay the standard charges and expenses associated
therewith.
In order for a stockholder proposal to be included in next year's proxy
statement for presentation at next year's meeting, it must be received by the
Secretary of the Company at its principal executive offices, 9055 Freeway Drive,
Macedonia, Ohio 44056, not later than January 20, 1998.
Management of the Company knows of no other matter that may come before the
Annual Meeting. If other matters properly come before the Annual Meeting, it is
intended that proxies in the accompanying form will be voted thereon in
accordance with the best judgment of the person voting the proxies.
By Order of the Board of Directors
/s/ Edwin M. Roth
EDWIN M. ROTH
Chairman of the Board
and President
Cleveland, Ohio
April 29, 1997
11
<PAGE> 14
<TABLE>
<S> <C>
SPECIALTY CHEMICAL RESOURCES, INC.
9055 Freeway Drive THIS PROXY IS SOLICITED ON BEHALF
Macedonia, Ohio 44056 OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Edwin M. Roth and Corey B. Roth, or
either of them, proxies of the undersigned with full power of
substitution, to vote for the undersigned at the Annual Meeting of
Stockholders to be held on June 5, 1997, at 10:00 a.m. (Cleveland
time), at the offices of Specialty Chemical Resources, Inc., 9055
Freeway Drive, Macedonia, Ohio 44056, or at any adjournment(s) or
postponement(s) thereof, as follows:
I. Election of directors
[ ] FOR the seven nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for the nominees listed below
EDWIN M. ROTH, COREY B. ROTH, GEORGE N. ARONOFF, GEOFFREY J.
COLVIN, TERENCE J. CONKLIN, VICTOR GELB, LIONEL N. STERLING
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name on the space provided
below.)
----------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE SEVEN NOMINEES LISTED
ABOVE.
II. Ratification of the appointment of Grant Thornton as the
independent accountants for Specialty Chemical Resources, Inc.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NUMBER II.
III. In their discretion on all other matters that may properly come
before the meeting.
(Continued on the reverse side)
(Continued from other side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR THE SEVEN NOMINEES LISTED ABOVE AND
FOR PROPOSAL II.
PLEASE DATE, SIGN EXACTLY AS NAME APPEARS BELOW, AND RETURN THIS PROXY
IN THE ENCLOSED POSTAGE PREPAID ENVELOPE.
Dated: , 1997
----------------
----------------------------
Signature
----------------------------
Signature, if held jointly
(If signing as attorney,
administrator, executor,
trustee, guardian, etc.,
please add your title as
such.)
No additional postage need
be affixed to the enclosed
envelope if mailed in the
United States. Your prompt
attention will be of
assistance.
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