<PAGE> 1
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- --------------------------------------------------------------------------------
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:
<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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
SPECIALTY CHEMICAL RESOURCES, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules Rules 14a-6(i)(1) 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: ...........................................................
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<PAGE> 2
SPECIALTY CHEMICAL RESOURCES, INC.
9055 S. Freeway Drive
Macedonia, Ohio 44056
LOGO
------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 3, 1999
------------------------------------
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 S. Freeway Drive, Macedonia, Ohio 44056
on June 3, 1999 at 10:00 a.m. (Cleveland time) for the following purposes:
I. To consider and vote upon a proposal to adopt an amendment to the
Company's Restated Certificate of Incorporation increasing the Company's
authorized shares of common stock, par value $.10 per share, to 30,000,000
shares, as more fully described in the accompanying Proxy Statement;
II. To elect seven Directors of the Company for the ensuing year;
III. To ratify the appointment of Grant Thornton LLP as the independent
accountants for the Company; and
IV. 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 28, 1999
are entitled to notice of, and to vote at, the Annual Meeting and any and all
adjournments or postponements thereof.
By Order of the Board of Directors
/s/ Edwin M. Roth
EDWIN M. ROTH
Chairman of the Board
April 30, 1999
PLEASE DATE AND EXECUTE THE ENCLOSED PROXY CARD AND PROMPTLY RETURN IT IN THE
ENCLOSED POSTAGE-PREPAID ENVELOPE. YOU MAY REVOKE YOUR PROXY IN THE MANNER
DESCRIBED IN THE PROXY STATEMENT AT ANY TIME BEFORE THE PROXY HAS BEEN VOTED AT
THE ANNUAL MEETING.
<PAGE> 3
SPECIALTY CHEMICAL RESOURCES, INC.
9055 S. Freeway Drive
Macedonia, Ohio 44056
LOGO
------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 3, 1999
------------------------------------
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 3, 1999 (the "Annual Meeting"), at the
office of Specialty Chemical Resources, Inc., 9055 S. Freeway Drive, Macedonia,
Ohio 44056.
Stockholders of record as of the close of business on April 28, 1999 are
entitled to notice of, and to vote at, the Annual Meeting and any and all
adjournments or postponements thereof. On that date there were outstanding
4,257,101 shares of Common Stock. In order to conduct business at the Annual
Meeting, the holders of at least one-third (1/3) of the outstanding shares of
Common Stock must be present at the Annual Meeting, in person or by proxy. 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 in the manner specified by a stockholder with
respect to the proposal to (i) amend the Company's Restated Certificate of
Incorporation to increase the Company's authorized Common Stock to 30,000,000
shares, (ii) elect the seven nominees named herein, and (iii) ratify the
appointment of Grant Thornton LLP as the independent accountants of the Company.
In the absence of such specification, the votes will be cast "FOR" each
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 Bylaws, properly
executed proxies that are (i) marked "abstain" or "withhold authority," as the
case may be, 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 and, therefore, will not be counted in determining
the number of shares necessary for approval.
This Proxy Statement and the enclosed proxy are first being sent to
stockholders on or about May 4, 1999. The Specialty Chemical 1998 Annual Report,
which includes the Company's financial statements, is being mailed with this
Proxy Statement.
<PAGE> 4
I. AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION
GENERAL
The Company's Board of Directors has determined that this amendment to the
Company's Restated Certificate of Incorporation is advisable and has voted to
recommend that the Company's stockholders adopt such amendment. The amendment
increases the number of authorized shares of Common Stock by 17,000,000 to a
total of 30,000,000 (the "Amendment").
If the Amendment is approved by the stockholders at the Annual Meeting, the
Amendment will become effective upon the filing of a certificate of amendment
with the Delaware Secretary of State, which is expected to be made shortly
following adoption of the Amendment by the stockholders.
REASONS FOR AND EFFECTS OF THE AMENDMENT
The Board of Directors of the Company is asking stockholders to adopt the
Amendment so that the Company will be able to reserve sufficient shares of
Common Stock for issuance upon conversion of (i) the accrued interest on the
Company's 6% Convertible Subordinated Notes Due 2009 (the "New Notes") and (ii)
the Company's 12% Subordinated Promissory Notes, dated March 15, 1999 (the
"Bridge Notes"). Additionally, the Company is asking stockholders to adopt the
Amendment so that it has additional shares of Common Stock available for
issuance under circumstances that are advantageous to the Company. These
circumstances may include raising additional capital or making acquisitions,
although the Company is not contemplating any such transactions at this time.
The Company issued the New Notes pursuant to a rights offering (the "1999
Rights Offering") to its stockholders and holders of its 6% Convertible
Subordinated Notes Due 2006 (the "Original Notes"), on an as converted basis,
which was completed on March 15, 1999. An aggregate of $1,360,000 principal
amount of New Notes was issued pursuant to the 1999 Rights Offering. The New
Notes are convertible into shares of Common Stock after March 15, 2002, upon a
change of control of the Company or in the event of an election contest in
connection with the election of Directors of the Company. The New Notes are
convertible at a rate of $.40 per share.
The Company has $304,800 aggregate principal amount of Bridge Notes
outstanding, which mature on January 15, 2001. The principal and accrued
interest on the Bridge Notes will be payable at maturity in cash, or at the
holder's option, in shares of Common Stock based upon the fair market value of
the Common Stock. However, the noteholders may demand full payment in shares of
Common Stock of principal and accrued interest on the Bridge Notes at any time
after the Company has authorized, unissued and unreserved shares of Common Stock
sufficient to pay, in full, the outstanding principal and interest under all the
Bridge Notes.
Currently, the Company has 13,000,000 shares of Common Stock authorized
pursuant to its Restated Certificate of Incorporation. As of April 28, 1999,
there were 4,257,101 shares of Common Stock issued and outstanding, 538,963
shares of Common Stock reserved for issuance pursuant to outstanding options,
and 4,798,236 shares of Common Stock reserved for issuance upon conversion of
the Original Notes.
Pursuant to the terms of the New Notes, 6,140,779 shares will need to be
reserved for issuance upon conversion of the New Notes, including accrued
interest, into Common Stock. It cannot be determined how many shares of Common
Stock will be required upon conversion of the Bridge Notes, but based on the
closing price on April 28, 1999, which was $0.25 per share, 1,219,200 shares of
Common Stock would be required upon conversion of the Bridge Notes.
If the Amendment is adopted, the Company will have authorized but unissued
shares of Common Stock, which would be available for issuance without further
action by the stockholders, unless such action is required by applicable law or
the rules of any stock exchange on which the Company's securities may be listed.
The existence of authorized and unissued Common Stock might be considered as
having the effect of discouraging an attempt by another person or entity,
through the acquisition of a substantial number of shares of Common Stock, to
acquire control of the Company with a view to effecting a merger, sale of the
Company's assets or similar transaction, since the issuance of Common Stock
could be used to dilute the share ownership
2
<PAGE> 5
and voting rights of such person or entity. Further, any of such authorized but
unissued Common Stock could be privately placed with purchasers who might
support incumbent management, making a change in control of the Company and
removal of incumbent management more difficult.
The Company is not proposing the Amendment in response to any effort to
accumulate the Common Stock or to obtain control of the Company by means of a
merger, tender offer or solicitation in opposition to management. In addition,
this proposal is not part of any plan by management to recommend a series of
similar amendments to the Board of Directors and the stockholders. Finally, the
Board does not currently contemplate recommending the adoption of any other
amendments to the Company's Restated Certificate of Incorporation which could be
construed to affect the ability of third parties to take over or change control
of the Company.
The New Notes, Original Notes and Bridge Notes may delay, defer or prevent
a change of control of the Company, even if it is favorable to the interests of
stockholders, because of the convertibility features of these securities. The
Original Notes have the same convertibility features as the New Notes. The
conversion of the New Notes, Original Notes or Bridge Notes into shares of
Common Stock may have a dilutive effect on existing stockholders, including any
stockholder attempting to effect a change of control of the Company.
In addition to the convertibility features of the New Notes, Original Notes
and Bridge Notes and the anti-takeover protection afforded the Company under the
Delaware General Corporation Law, the Board of Directors has the ability to
issue up to 2,000,000 shares of preferred stock in one or more series and to fix
the designation and relative powers, preferences and rights and qualifications,
limitations or restrictions of all shares of such series, including, without
limitation, dividend rates, conversion rights, voting rights, redemption and
sinking fund provisions, liquidation preferences and the number of shares
constituting each such series, without any further vote or action by the
stockholders. Issuances of preferred stock could make it more difficult for a
third party to acquire the Company.
1999 RIGHTS OFFERING AND ISSUANCE OF BRIDGE NOTES
Pursuant to the 1999 Rights Offering, each stockholder received one
subscription right for each 551 shares of Common Stock that such stockholder
held and each noteholder received one subscription right for each 551 shares of
Common Stock that such noteholder's Original Notes were convertible into. Each
subscription right entitled the holder to purchase $100 principal amount of New
Notes for $100.
The net proceeds of the 1999 Rights Offering were used to repay certain
indebtedness to each of Edwin Roth, CEW Partners and Martin Trust (collectively,
the "Investors"). The indebtedness was represented by three $500,000 principal
amount subordinated promissory notes originally due December 15, 1998, which
were extended until March 15, 1999, and which bear interest at a rate of 12% per
annum. The proceeds from these subordinated promissory notes were used to meet
current cash flow and working capital needs of the Company.
As agreed to by the Investors and the Company, the Company canceled these
subordinated promissory notes as payment of each Investor's subscription price
for the New Notes. The Bridge Notes were issued to the Investors in an amount
equal to the principal amount of the subordinated promissory notes that exceeded
the subscription price for the New Notes purchased by each Investor.
In the 1999 Rights Offering, Edwin Roth, Corey Roth, Terence Conklin, CEW
Partners and Martin Trust each received New Notes. Edwin Roth, CEW Partners and
Martin Trust are each the holder of one-third of the total aggregate principal
amount of the Bridge Notes. See "Common Stock Ownership" and "Transactions With
Management."
DESCRIPTION OF THE AMENDMENT
Paragraph A(1) of Article FOURTH of the Company's Restated Certificate of
Amendment will be replaced in its entirety by:
(1) Thirty Million (30,000,000) shares of Common Stock, with a par value of
ten cents ($.10) per share; and
3
<PAGE> 6
VOTE REQUIRED FOR ADOPTION OF THE AMENDMENT
The affirmative vote of a majority of the stockholders present, in person
or by proxy, and entitled to vote at the Annual Meeting, at which a quorum must
be present, is required to adopt the Amendment. Unless otherwise specified, the
shares represented by the enclosed proxy will be voted "FOR" the adoption of the
Amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL CONCERNING THE
ADOPTION OF THE AMENDMENT.
4
<PAGE> 7
II. 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, the affirmative vote of a majority of the stockholders present, in
person or by proxy, and entitled to vote at the Annual Meeting, at which a
quorum must be present, is required to elect Directors. 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, 71 Mr. Roth has been a Director and Chairman of the
Chairman of the Board of Board of Directors of the Company since its
Directors and Chief formation in June 1982. Mr. Roth was President of
Executive Officer the Company from June 1982 until June 1997. 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, 41 Mr. Roth has been President and Chief Operating
President, Chief Oper- Officer of the Company since June 1997, and a
ating Officer, Treasurer Director since October 1984. Mr. Roth served as
and Assistant Secretary Treasurer and Assistant Secretary from June 1992
until June 1997. Mr. Roth served as a Vice
President from June 1982 until June 1997. 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, 65 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.
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
Name, Age and Positions
With the Company
Other than Director Occupation and Other Information
----------------------- --------------------------------
<S> <C>
Geoffrey J. Colvin, 47 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.
Terence J. Conklin, 42 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, 72 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, 61 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 OFFICER
David F. Spink, 48 Mr. Spink has been Vice President and Chief
Vice President, Chief Financial Officer of the Company since June 1997.
Financial Officer and From January 1996 until June 1996, Mr. Spink was
Treasurer Vice President and from June 1996 to June 1997 was
Chief Financial Officer of Aerosol Systems, a
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.
</TABLE>
Under agreements dated August 30, 1996 and February 1, 1999 (the "Voting
Agreements") among CEW Partners, Martin Trust, Edwin Roth and Corey Roth, Edwin
Roth and Corey Roth agreed, among other things, 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 greater than 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 greater than 5% beneficial owner of the Company's
Common Stock. See "Common Stock Ownership."
The Board of Directors held seven meetings during the fiscal year ended
December 31, 1998. In 1998, all of the Directors attended more than 75% of the
meetings of the Board of Directors and any Board committees on which they serve.
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.
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 one meeting during the fiscal year ended December 31, 1998.
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<PAGE> 9
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 one meeting during the fiscal year ended
December 31, 1998.
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 one meeting during the fiscal year ended December
31, 1998.
DIRECTOR REMUNERATION
Directors who are not employed by the Company were entitled to receive in
1998 an annual fee of $16,000, 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. These Directors deferred receipt of annual fees during 1998.
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 1998, the Directors and executive officers of
the Company complied with all such filing requirements, except that Geoffrey
Colvin did not timely file a Form 4 upon the acquisition of shares of Common
Stock and New Notes by CEW Partners, which are attributed to Mr. Colvin by
virtue of the Commission's beneficial ownership rules.
7
<PAGE> 10
COMMON STOCK OWNERSHIP
The following table sets forth, as of April 5, 1999, 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 875,771(2)(3)(4)(5) 20.24%
Specialty Chemical Resources, Inc.
9055 S. Freeway Drive
Macedonia, Ohio 44056
Corey B. Roth 147,562(2)(3)(4)(5) 3.43%
David F. Spink 17,500(3)(4) *
George N. Aronoff 41,574(3) *
Victor Gelb 22,857(3) *
Geoffrey J. Colvin 362,953(3)(4)(5)(6) 8.52%
Terence J. Conklin 5,000(3)(4)(5) *
Lionel N. Sterling 52,964(3)(4) 1.24%
All Directors and officers as a 1,519,932(3)(4)(5) 34.11%
group
(eight individuals)
CEW Partners 357,953(4)(5) 8.41%
30 Rockefeller Plaza
Suite 2500
New York, New York 10020
Martin Trust 357,953(4)(5) 8.41%
c/o Trust Investments, Inc.
52 Stiles Road
Salem, New Hampshire 03079
Wolverine Investors (7) 531,600(8) 12.49%
200 West Madison Street
Suite 3800
Chicago, Illinois 60606
</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 6,249 shares of Common Stock owned by the Edwin M. Roth Family
Foundation, Inc., a not-for-profit Ohio corporation. Edwin Roth and Corey
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 April 5, 1999 the right to acquire upon the
exercise of options: Mr. Edwin Roth, 70,000; Mr. Corey Roth, 40,000; Mr.
Spink, 10,000; Mr. Aronoff, 22,857; Mr. Gelb, 22,857; Mr. Sterling, 22,857;
Mr. Colvin, 5,000; Mr. Conklin, 5,000; and all officers and Directors as a
group, 298,571.
(4) Excludes shares of Common Stock issuable upon conversion of the Original
Notes, which are not convertible until December 31, 2001 unless there is a
change of control of the Company or an election contest for Directors, in
which case the Original Notes would be immediately convertible. If the
Original Notes, along with accrued interest, were convertible on April 16,
1999, then each of the following would
8
<PAGE> 11
have been entitled to receive the following number of shares of Common
Stock: Mr. Edwin Roth, 652,051; Mr. Corey Roth, 115,927; Mr. Spink, 154,569;
Mr. Sterling, 24,731; Mr. Conklin, 57,963; Martin Trust, 945,191; and CEW
Partners, 945,191. The shares issuable upon conversion of the Original Notes
owned by CEW Partners may be attributable to Mr. Colvin by virtue of the
fact that Mr. Colvin is a partner of the General Partner of CEW Partners.
Mr. Colvin disclaims beneficial ownership of such shares.
(5) Excludes shares of Common Stock issuable upon conversion of the New Notes,
which are not convertible until March 15, 2002 unless there is a change of
control of the Company or an election contest for Directors in which case
the New Notes would be immediately convertible. If the New Notes, along with
accrued interest, were convertible on April 16, 1999, then each of the
following would have been entitled to receive the following number of shares
of Common Stock; Mr. Edwin Roth, 860,500; Mr. Corey Roth, 128,500; Mr.
Conklin, 25,750; Martin Trust, 996,000 and CEW Partners, 966,000. The shares
issu able upon conversion of the New Notes owned by CEW Partners may be
attributable to Mr. Colvin by virtue of the fact that Mr. Colvin is a
partner of the General Partner of CEW Partners. Mr. Colvin disclaims
beneficial ownership of such shares.
(6) Includes 357,953 shares of Common Stock held by CEW Partners of which Mr.
Colvin is a partner of the General Partner. Mr. Colvin disclaims beneficial
ownership of these shares.
(7) All information contained in this table regarding the identified beneficial
owner and its security ownership, including related footnotes, is based
solely on the Schedule 13D or Schedule 13G filing made by such beneficial
owner as of the date of such filing.
(8) Wolverine Investors, an Illinois general partnership, is the holder of
246,600 shares of Common Stock. Lakeview Trust, 1990 Bronx Trust, 1990 Bronx
Trust #1, 1990 Des Moines Trust #1, JJ 1994 Trust and 1990 Des Moines Trust
(collectively, the "Trusts") are the general partners of Wolverine
Investors. 1990 Des Moines Trust is also the holder of an additional 3,600
shares of Common Stock for which it has sole voting and investment power.
Newton Minow and Daniel Tisch are trustees of each of the Trusts. Charles H.
Goodman is a trustee of each of 1990 Bronx Trust, 1990 Bronx Trust #1, 1990
Des Moines Trust #1 and 1990 Des Moines Trust. The beneficiaries of each of
the Trusts are family members of J. Ira Harris who from time to time
provides investment advice to Wolverine Investors and the Trusts with
respect to the acquisition or disposition of the Common Stock.
9
<PAGE> 12
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, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------- --------------------- -------
RESTRICTED
OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS COMPENSATION
POSITION YEAR ($0) ($)(3) ($) ($) (#)(1) ($) ($)
------------------ ---- ------ ------ ------------ ---------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Edwin M. Roth, 1998 $295,000 0 0 0 0 0 0
Chairman & 1997 $295,000 0 0 0 75,000 0 0
Chief Executive 1996 $275,000 $35,000 0 0 0 0 0
Officer
Corey B. Roth, 1998 $215,000 0 0 0 0 0 0
President & 1997 $215,000 0 0 0 50,000 0 0
Chief Operating 1996 $195,000 $25,000 0 0 0 0 6,738(2)
Officer
David Spink 1998 $145,000 0 0 0 0 0 0
Vice President 1997 $125,000 0 0 0 25,000 0 0
& Treasurer 1996 $ 76,120 $25,000 0 0 10,000 0 0
</TABLE>
- ---------------
(1) There were no SAR grants by the Company in 1996, 1997 or 1998.
(2) Represents the dollar value of term life insurance premiums paid during 1996
by the Company for the benefit of Mr. Corey Roth. At the end of 1998, the
Company canceled this life insurance policy and received the cash surrender
value.
(3) Bonuses were paid in fiscal 1997 but were granted for services performed in
fiscal 1996.
10
<PAGE> 13
OPTION AND SAR GRANTS
The following table summarizes options granted in the last fiscal year to
the executive officers of the Company and potential realizable value of the
options assuming a 5% and 10% annually compounded stock price appreciation.
There were no SAR grants by the Company in 1998.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
- -------------------------------------------------------------------------------------- ---------------------
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS/SARS
OPTIONS/SARS GRANTED
GRANTED TO EMPLOYEES IN EXERCISE OR BASE 5% 10%
NAME (#) FISCAL YEAR PRICE ($/SH) EXPIRATION DATE ($) ($)
---- ------------ ---------------- ---------------- --------------- --- ---
<S> <C> <C> <C> <C> <C> <C>
Edwin M. Roth 0 0% -- -- -- --
Corey B. Roth 0 0% -- -- -- --
David F. Spink 0 0% -- -- -- --
</TABLE>
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 95,000/50,000(1) $0/$0
Corey B. Roth 0 $0 56,667/33,333(1) $0/$0
David F. Spink 0 $0 15,000/20,000(1) $0/$0
</TABLE>
- ---------------
(1) On March 12, 1997, Mr. Edwin Roth, Mr. Corey Roth and Mr. Spink were awarded
options to purchase 75,000, 50,000 and 25,000 shares of Common Stock,
respectively. However, the award provided that the options would terminate
on the second anniversary of the date of the grant if the average of the
fair market value (as defined in the stock option plan) of the Company's
Common Stock on such anniversary date did not equal or exceed the option
price on the date of grant. These options terminated on March 12, 1999.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Aronoff, a Director of the Company and a member of the Stock Option and
Compensation Committee, is a partner with the law firm of Benesch, Friedlander,
Coplan & Aronoff LLP. During fiscal 1998, the Company retained this law firm and
plans to retain this law firm during the coming year.
REPORT OF THE STOCK OPTION AND COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The 1998 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
11
<PAGE> 14
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 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 1998, 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 bonuses declared for Mr. Edwin M. Roth or any of the other executive officers
for services performed in 1998. The Committee awards stock options as incen
tives to keep valuable employees, 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. No options were awarded to
executive officers in 1998.
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 Conklin
George N. Aronoff
12
<PAGE> 15
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, 1993,
the last trading day before the beginning of the Company's fifth preceding
fiscal year, and ending December 31, 1998. The results assume that $100 was
invested on December 31, 1993 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>
CHM RUSSELL 2000 INDEX CHEMICAL (SPECIALTY)
--- ------------------ --------------------
<S> <C> <C> <C>
'1993' 100 100 100
'1994' 43.64 98.02 104.65
'1995' 29.09 125.89 134.7
'1996' 21.82 146.59 161.42
'1997' 15.45 179.23 200.12
'1998' 5.45 174.23 178.01
</TABLE>
Notes: (1) CHM data for the period ended December 31, 1993 and thereafter
reflects the closing price of the Common Stock as reported in the
AMEX-Composite Transactions.
TRANSACTIONS WITH MANAGEMENT
During fiscal 1998, 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.
On June 15, 1998, Edwin Roth, CEW Partners and Martin Trust each loaned
$500,000 to the Company in exchange for subordinated promissory notes. In
connection with the issuance of these subordinated promissory notes, Edwin Roth,
CEW Partners and Martin Trust and the Company agreed at the time that the notes
would be refinanced with the net proceeds of a pro rata rights offering of
Company debt to its stockholders and its holders of Original Notes. This debt
was to be convertible into, or include detachable warrants to purchase, at least
3,000,000 shares of Common Stock for a price not greater than approximately $.50
per share. As part of this refinancing agreement, Edwin Roth, CEW Partners and
Martin Trust agreed that one-third of the aggregate number of all rights
distributed to them would be exercisable by each of them,
13
<PAGE> 16
or their affiliates, which in the case of Edwin Roth, includes Corey Roth,
regardless of the actual number of rights issued to each of them.
In connection with the 1999 Rights Offering completed in connection with
the refinancing of the subordinated notes discussed above, Edwin Roth, Corey
Roth, CEW Partners and Martin Trust entered in the Allocation Agreement as of
February 1, 1999. The Allocation Agreement provided that the aggregate principal
amount of New Notes received by all parties to the Allocation Agreement would be
re-allocated so that each of (i) CEW Partners, (ii) Martin Trust and (iii) Edwin
Roth and Corey Roth would receive one-third of the total aggregate principal
amount of New Notes purchased by them in the 1999 Rights Offering.
In connection with the 1999 Rights Offering, Edwin Roth, CEW Partners and
Martin Trust each agreed with the Company to have $398,400 principal amount of
their subordinated promissory notes canceled by the Company as payment of the
subscription price for their New Notes, leaving a principal balance outstanding
on each subordinated promissory note of $101,600. Each of Edwin Roth, CEW
Partners and Martin Trust received a Bridge Note in that amount as consideration
for cancellation of the remaining principal balance on each subordinated
promissory note.
The Bridge Notes mature on January 15, 2001 and bear interest at a rate of
12% per annum. The principal and accrued interest on the Bridge Notes is payable
at maturity in cash, or at the holder's option, in shares of Common Stock based
upon the fair market value of the Common Stock. However, in certain
circumstances, the noteholders may demand full payment in shares of Common Stock
of principal and accrued interest on the Bridge Notes prior to maturity. See
"Amendment of Restated Certificate of Incorporation--Reasons for and Effects of
the Amendment."
On February 11, 1999, the Company paid the $112,500 aggregate accrued and
unpaid interest as of January 31, 1999 on these subordinated promissory notes to
the Investors in shares of Common Stock. The number of shares issued to the
Investors was calculated based on the average closing price of the Common Stock
for the five consecutive trading days prior to the day immediately before the
payment date, which was $.30 per share. A total of 375,000 shares of Common
Stock were issued equally among Edwin Roth, CEW Partners and Martin Trust.
In April 1999, the Company received a subordinated loan from Harris Trust
and Savings Bank in the principal amount of $1,000,000. This loan is secured
only by the collateralized, subordinated guarantees of Edwin Roth, CEW Partners
and Martin Trust. Each of Edwin Roth, CEW Partners and Martin Trust have
guaranteed one-third ( 1/3) of the loan.
14
<PAGE> 17
III. INDEPENDENT PUBLIC ACCOUNTANTS
The public accounting firm of Grant Thornton LLP was the Company's
independent public accountants for fiscal 1998 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 LLP 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 LLP AS THE INDEPENDENT ACCOUNTANTS FOR THE
COMPANY.
INCORPORATION BY REFERENCE
Specialty Chemical's 1998 Annual Report, which contains the Company's
financial statements, is incorporated by reference into this Proxy Statement and
is deemed to be a part of this Proxy Statement. The 1998 Annual Report
accompanies this Proxy Statement.
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 the Company's proxy
statement for presentation at the 2000 Annual Meeting of Stockholders, it must
be received, in writing, by the Secretary of the Company at its principal
executive offices, 9055 S. Freeway Drive, Macedonia, Ohio 44056, not later than
January 1, 2000. If the Company is not notified of a stockholder proposal before
March 16, 2000, then the proxies held by management of the Company for the 2000
Annual Meeting of Stockholders will provide discretionary authority to vote
against such stockholder proposal, even though the proposal is not discussed in
the Proxy Statement.
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
Cleveland, Ohio
April 30, 1999
15
<PAGE> 18
SPECIALTY CHEMICAL RESOURCES, INC.
9055 S. Freeway Drive
Macedonia, Ohio 44056
THIS PROXY IS SOLICITED ON
BEHALF
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 3, 1999, at 10:00 a.m. (Cleveland
time), at the offices of Specialty Chemical Resources, Inc., 9055 S.
Freeway Drive, Macedonia, Ohio 44056, or at any adjournment(s) or
postponement(s) thereof, as follows:
I. Adoption of Amendment to Specialty Chemical Resources, Inc.
Restated Certificate of Incorporation increasing the authorized
shares of common stock to 30,000,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
II. Election of directors
<TABLE>
<S> <C>
[ ] FOR the seven nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for the nominees listed below
</TABLE>
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.)
----------------------------------------------------------------------
III. Ratification of the appointment of Grant Thornton LLP as the
independent accountants for Specialty Chemical Resources, Inc.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IV. In their discretion on all other matters that may properly come
before the meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSALS I,
II AND III.
(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 (1) FOR THE AMENDMENT TO SPECIALTY
CHEMICAL'S RESTATED CERTIFICATE OF INCORPORATION, (2) FOR THE SEVEN
NOMINEES TO THE BOARD LISTED ON THE REVERSE SIDE AND (3) FOR THE
RATIFICATION OF GRANT THORNTON LLP AS SPECIALTY CHEMICAL'S INDEPENDENT
ACCOUNTANTS.
PLEASE DATE, SIGN EXACTLY AS NAME APPEARS BELOW, AND RETURN THIS PROXY
IN THE ENCLOSED POSTAGE PREPAID ENVELOPE.
Dated: , 1999
----------------
----------------------------
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.
