<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Crystal Oil Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
CRYSTAL OIL COMPANY
229 Milam Street
Shreveport, Louisiana 71101
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
MAY 30, 1996
Notice is hereby given that the Annual Meeting of Shareholders of
Crystal Oil Company (the "Company") will be held at 888 Seventh Avenue, 32nd
Floor, New York, New York, on May 30, 1996, at 9:30 A.M., Eastern Time, for
the following purposes:
1. To elect six directors of the Company to hold office until the next
annual meeting of shareholders and until their respective successors
are duly elected and qualified.
2. To approve an amendment to the Company's 1992 Employee Stock Option
Plan to increase the number of shares of the Company's Common Stock,
$.01 par value, that may be subject to options granted under the Plan
from 200,000 shares to 300,000 shares.
3. To ratify the selection by the Board of Directors of the Company of
KPMG Peat Marwick LLP as the Company's independent auditors for 1996.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 15,
1996, as the record date for the determination of shareholders entitled to
notice of and to vote at the Annual Meeting and any adjournment or
adjournments thereof.
The Board of Directors welcomes the personal attendance of shareholders
at the meeting. However, whether or not you expect to be present at the
meeting, please fill in, date and sign the enclosed proxy and return it to
the Company in the enclosed envelope, which requires no postage if mailed in
the United States.
By Order of the Board of Directors,
/s/ J.A. BALLEW
J. A. Ballew
Secretary
Dated: April 25, 1996
<PAGE>
CRYSTAL OIL COMPANY
229 Milam Street
Shreveport, Louisiana 71101
_________________
PROXY STATEMENT
_________________
April 25, 1996
This Proxy Statement is being furnished in connection with a
solicitation of proxies by the Board of Directors of Crystal Oil Company, a
Louisiana corporation (the "Company"), to be used at the Annual Meeting of
Shareholders of the Company (the "Annual Meeting") to be held on May 30,
1996, at 9:30 A.M., Eastern Time, at 888 Seventh Avenue, 32nd Floor, New
York, New York, and at any adjournment or adjournments thereof.
If the enclosed form of proxy is properly executed and returned, it will
be voted at the Annual Meeting, or at any adjournment or adjournments
thereof, in accordance with the specifications thereof. If no instructions
are specified in the proxy, the shares represented thereby will be voted for
the election of the nominees listed herein as directors and in favor of the
proposals set forth herein. A proxy may be revoked, at any time before it
has been voted, upon written notice to the Secretary of the Company, by
submitting a subsequently dated proxy or by attending the Annual Meeting and
withdrawing the proxy.
The record date for the determination of shareholders entitled to notice
of and to vote at the Annual Meeting has been fixed by the Board of Directors
to be the close of business on April 15, 1996 (the "Record Date"). As of the
Record Date, the Company had outstanding 2,658,042 shares of Common Stock,
$.01 par value ("Common Stock"), and 14,788,328 shares of $.06 Senior
Convertible Voting Preferred Stock, $.01 par value ("Senior Preferred
Stock"). Each outstanding share of Common Stock will be entitled to one vote
on each matter considered at the Annual Meeting and each outstanding share of
Senior Preferred Stock will be entitled to .001 of a vote on each matter
considered at the Annual Meeting. There are no other classes of voting
securities of the Company outstanding.
This Proxy Statement and the enclosed form of proxy will be mailed on or
about April 26, 1996, to shareholders of record on the Record Date entitled
to vote at the Annual Meeting. The Company will bear the cost of
solicitation of proxies by the Board of Directors, including charges and
expenses of brokerage firms, banks and others for forwarding solicitation
material to beneficial owners. In addition to the use of the mails, proxies
may be solicited by officers and employees of the Company, without
remuneration, by personal contact, telephone or telegraph. The Company has
retained Morrow & Company to aid in the solicitation of proxies, for whose
services the Company will pay a fee of $3,000, plus out-of-pocket costs and
expenses.
A copy of the Company's Annual Report to Shareholders for the fiscal
year ended December 31, 1995, is enclosed.
<PAGE>
MATTERS TO COME BEFORE THE MEETING
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Annual Meeting, six directors are to be elected to hold office
until the next annual meeting of shareholders and until their respective
successors shall have been elected and qualified. It is the intention of the
persons named in the enclosed form of proxy to vote such proxy for the
election of the nominees named below. The nominees have indicated that they
are willing to serve as directors. The Board of Directors does not
contemplate that any of the nominees will be unable or become unavailable for
any reason. However, should any of the following nominees for the Board of
Directors be unable to serve as a director or become unavailable for any
reason, proxies that do not withhold authority to vote for the nominee will
be voted for another nominee to be selected by the Board of Directors.
Nominees receiving a plurality of votes cast at the Annual Meeting will be
elected as directors. Abstentions and broker non-votes will not be treated
as a vote cast for or against any particular director and will not affect the
outcome of the election of directors.
The following table sets forth for each nominee (i) the name and age of
such nominee, (ii) the positions and offices with the Company of such nominee
and (iii) the year during which such nominee first became a director. Such
table has been prepared from information obtained from the respective
nominees. The term of office of each director is until the next annual
meeting of shareholders or until his earlier resignation or his successor is
duly elected and qualified.
<TABLE>
<CAPTION>
POSITIONS
AND OFFICES SERVED AS
NAME AGE WITH THE COMPANY DIRECTOR SINCE (1)
---- --- ---------------- ------------------
<S> <C> <C> <C>
J. N. Averett, Jr. (2) . . . . . . . . . 53 President and Director 1985
Gary S. Gladstein (3). . . . . . . . . . 51 Director 1989
Robert B. Hodes (4). . . . . . . . . . . 70 Director 1989
Lief D. Rosenblatt (5) . . . . . . . . . 42 Director 1989
George P. Giard, Jr. (6) . . . . . . . . 57 Director 1987
Donald G. Housley (7). . . . . . . . . . 59 Director 1987
</TABLE>
_______________
(1) Messrs. Gladstein, Hodes and Rosenblatt were recommended as directors to
the Company by Quantum Fund N.V. and Quantum LDC Partners (collectively,
"Quantum"), which, together with George Soros, controls approximately
64.2% of the total voting power of the Company. Messrs. Gladstein and
Rosenblatt are also employed by Soros Fund Management, the investment
advisor to Quantum.
(2) Mr. Averett has served as President of the Company since November 1985.
Mr. Averett is a member of the Executive Committee of the Board of
Directors of the Company.
(3) Mr. Gladstein has served as a Managing Director of Soros Fund Management,
an investment advisory firm, for more than the past five years.
Mr. Gladstein is also a director of Joseph A. Bank Clothiers, Inc. and
Mueller Industries, Inc. Mr. Gladstein is a member of the Audit Committee
and Compensation Committee of the Board of Directors of the Company (the
"Compensation Committee").
(4) Mr. Hodes is a partner with the law firm of Willkie Farr & Gallagher and
has served in such capacity for more than the past five years. Mr. Hodes
is also a director of Aerointernational Inc., W. R. Berkley Corporation,
Loral Corporation, SS/L Inc. and The Cremer Foundation. Mr. Hodes is a
member of the Audit Committee of the Board of Directors of the Company.
(5) Mr. Rosenblatt has served as a Managing Director of Soros Fund Management
for more than the past five years. Mr. Rosenblatt is also a director of
Food 4 Less, Inc. Mr. Rosenblatt is a member of the Executive Committee
of the Board of Directors of the Company.
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<PAGE>
(6) Mr. Giard has been Chairman of the Board and Chief Executive Officer of
Presidio Oil Company, a company engaged in the exploration and production
of crude oil and natural gas, since January 1986. Mr. Giard also has been
a partner in Oil & Gas Finance Limited, a private energy investment firm,
since 1981. Mr. Giard is a member of the Executive Committee, Audit
Committee and Compensation Committee of the Board of Directors of the
Company.
(7) Mr. Housley is an independent investor. Mr. Housley is a member of the
Audit Committee and Compensation Committee of the Board of Directors of
the Company.
PROPOSAL NO. 2
PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S 1992 EMPLOYEE STOCK OPTION
PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK THAT MAY BE
SUBJECT TO OPTIONS GRANTED UNDER THE PLAN
FROM 200,000 SHARES TO 300,000 SHARES
The Company maintains a 1992 Employee Stock Option Plan (the "ESO
Plan"). The ESO Plan currently provides the Compensation Committee with the
authority to grant to eligible employees of the Company and its subsidiaries
options to purchase up to an aggregate of 200,000 shares of Common Stock.
The ESO Plan is intended to advance the best interest of the Company by
providing certain key employees, including officers and employee directors,
who have substantial responsibility for the Company's management and growth,
with additional incentive by increasing their proprietary interest in the
success of the Company, and thereby encouraging them to remain in the
Company's employ.
As of the Record Date, options to purchase an aggregate of 102,875
shares of Common Stock were outstanding and no additional shares of Common
Stock were available under the ESO Plan for the grant of future options. The
Board of Directors believes that the receipt by employees of options to
purchase Common Stock is an important component of compensation and is
therefore proposing that the ESO Plan be amended to increase the number of
shares of Common Stock that may be subject to options under the ESO Plan by
100,000 to 300,000. The Board of Directors is also proposing to amend the
ESO Plan to restrict the number of shares that may be subject to new grants
of options in any one year to any one employee to 50,000 in order to qualify
the ESO Plan as a performance plan for purposes of Section 162(m) of the
Internal Revenue Code of 1986 (the "Code").
The following is a summary of the material provisions of the ESO Plan.
ADMINISTRATION OF THE ESO PLAN
The ESO Plan is administered by the Compensation Committee. The
Compensation Committee is comprised of not less than three directors of the
Company selected by the Board of Directors of the Company from time to time.
The current members of the Compensation Committee are George P. Giard, Jr.,
Donald G. Housley and Gary S. Gladstein, all of whom are non-employee
directors. It is the Board's policy that the Compensation Committee be
composed of non-employee directors, and it is anticipated that this policy
will be continued.
ELIGIBILITY AND PARTICIPATION
The individuals eligible to participate in the ESO Plan are such key
employees, including officers and employee directors, of the Company, or of
any parent or subsidiary corporation, as the Compensation Committee may
determine from time to time. Approximately 5 persons are currently eligible
to participate in the ESO Plan. Notwithstanding any other provisions of the
ESO Plan to the contrary, the aggregate fair market value (determined as of
the date the option is granted) of the stock with respect to which incentive
stock options are exercisable for the first time by the optionee in any
calendar year (under the ESO Plan and any other incentive stock option plan
of the Company and any parent and subsidiary corporations thereof) may not
exceed $100,000. No individual will be eligible to receive an option under
the ESO Plan while such individual is a member of the Compensation Committee.
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The ESO Plan is proposed to be amended to add a restriction on the
number of shares that may be subject to new grants of options in any one year
to 50,000. This restriction is being added to allow the ESO Plan to be a
performance plan for purposes of Section 162(m) under the Code so as to allow
the Company to exclude compensation attributable to the exercise of options
under the ESO Plan from the $1 million compensation limitation on deductions
of employee compensation under Section 162(m) of the Code. The number of
restricted shares will be subject to adjustment for stock splits, stock
dividends and other reclassifications of the Common Stock.
SHARES SUBJECT TO OPTIONS
The ESO Plan currently provides for the granting of stock options in the
aggregate amount of 200,000 shares of Common Stock, subject to adjustment for
changes in capitalization. If this proposal is approved, the ESO Plan would
provide for the granting of stock options in the aggregate amount of 300,000
shares of Common Stock, subject to adjustment for changes in capitalization.
Such shares may be treasury shares or authorized but unissued shares. If any
outstanding options expire or terminate, the shares of Common Stock allocable
to the unexercised portion of such option may again be subject to option
under the ESO Plan. The Compensation Committee has the discretion to grant
either "incentive stock options" (within the meaning of Section 422 of the
Code) ("ISOs") or "non-statutory" stock options ("NSOs"). A description of
these two types of stock options appears below under the heading "Federal
Income Tax Consequences".
GRANT AND EXERCISE OF OPTIONS
Each option granted under the ESO Plan is required to be embodied in a
written option agreement, which is subject to the terms and conditions of the
ESO Plan and which will contain such other provisions as the Compensation
Committee in its discretion deems advisable.
The price at which shares may be purchased pursuant to an option,
whether an ISO or an NSO, is determined by the Compensation Committee, but in
no event may such price be less than the fair market value of the shares of
Common Stock on the date the option is granted. In the case of any eligible
employee who owns or is deemed to own stock possessing more than 10% of the
total combined voting power of all classes of stock of the corporation
employing the employee or of its parent or subsidiary corporation, the option
price at which shares may be purchased pursuant to any option that is an ISO
granted under the ESO Plan may not be less than 110% of the fair market value
of the Common Stock on the date such option is granted.
No option is exercisable after the expiration of ten years from the date
such option is granted. The Compensation Committee in its discretion may
provide that such option will be exercisable throughout such ten-year period
or during any lesser period of time commencing on or after the date of grant
of such option and ending upon or before the expiration of such ten-year
period. The Compensation Committee in its discretion may change or
accelerate the terms of exercise, but in no event will any option be
exercisable after the tenth anniversary of the date of the grant. In the
case of any eligible employee who owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the corporation
employing the employee or of its parent or subsidiary corporation, no option
that is an ISO will be exercisable after the expiration of five years from
the date such option is granted.
Options are exercised by the optionee by the delivery to the Company of
a written notice stating (i) that such optionee wishes to exercise such
option on the date such notice is delivered, (ii) the number of shares of
stock with respect to which the option is to be exercised, (iii) the address
to which the certificate representing such shares of stock should be mailed
and (iv) the social security number of the optionee. Such written notice
must be accompanied by the payment by cashier's check of (i) the option price
of such shares of stock and (ii) the amount of money necessary to satisfy any
resulting withholding tax liability. Subject to certain limitations set
forth in the ESO Plan, and in the sole discretion of the Compensation
Committee, payment may be made in shares of stock owned by the optionee. The
ESO Plan does not provide for the successive, simultaneous stock payment
procedure, which is commonly referred to as "pyramiding".
Effective as of March 8, 1996, the Compensation Committee granted to
five officers and employees ISOs (the "1996 ISO Grants") to purchase an
aggregate of 24,000 shares of Common Stock
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<PAGE>
at $32.75 per share. The closing sale price of the Common Stock on the
American Stock Exchange on the date of grant and on the Record Date was
$32.75 and $33.125 per share, respectively.
The following table sets forth information as to the 1996 ISO Grants and
options currently outstanding under the 1992 Plan granted to (i) the persons
named in the Summary Compensation Table, (ii) all current executive officers
as a group and (iii) all employees, including all current officers who are
not executive officers, as a group.
NEW PLAN BENEFITS
TO BE RECEIVED UNDER THE ESO PLAN
<TABLE>
<CAPTION>
NUMBER OF SHARES OPTIONS
NAME POSITION SUBJECT TO OPTION(1) OUTSTANDING
- ---- -------- -------------------- -----------
<S> <C> <C> <C>
J. N. Averett, Jr. President 11,000 61,125
J. A. Ballew Chief Financial 5,000 16,750
Officer
All current executive officers 21,500 100,375
as a group
All employees, including all 24,000 102,875
current officers who are not
executive officers, as a group
</TABLE>
(1) Of the shares listed, none of the options are subject to shareholder
approval of the amendment other than an option to purchase 2,375
shares granted to Mr. Averett.
The 1996 ISO Grants are subject to four year vesting on the basis of
one-fourth of the shares subject to the 1996 ISO Grants vesting on each
anniversary date of the date of grant. The 1996 ISO Grants will expire ten
years after the date of grant, subject to earlier termination as described
herein. The 1996 ISO Grants also will immediately vest upon a Change in
Control. For purposes of the 1996 ISO Grants, a Change in Control is defined
as the occurrence of one or more of the following events: (i) any "person",
including a "group", as those terms are used in Section 13(d)(3) of the
Securities Exchange Act of 1934 (the "Exchange Act"), other than an affiliate
of the Company as of the date of grant, becomes the beneficial owner,
directly or indirectly, of securities of the Company representing 50% or more
of the combined voting power of the Company's then outstanding voting
securities; (ii) the Company is merged or consolidated with another
corporation and immediately after giving effect to the merger or
consolidation either (A) less than 50% of the outstanding voting securities
of the surviving or resulting entity are then beneficially owned in the
aggregate by (1) the shareholders of the Company immediately prior to such
merger or consolidation or (2) if a record date has been set to determine the
shareholders of the Company entitled to vote on such merger or consolidation,
the shareholders of the Company as of such record date or (B) the Board of
Directors, or similar governing body, of the surviving or resulting entity
does not have as a majority of its members the persons specified in clause
(iii)(A) and (B) below; (iii) if at any time the following do not constitute
a majority of the Board of Directors of the Company (or any successor entity
referred to in clause (ii) above): (A) persons who are directors of the
Company on January 1, 1992, and (B) persons who, prior to their election as a
director of the Company (or successor entity if applicable), were nominated,
recommended or endorsed by a formal resolution of the Board of Directors of
the Company; or (iv) the Company transfers substantially all of its assets to
another corporation which is a less than 50% owned subsidiary of the Company.
The Company currently anticipates that future options granted under the ESO
Plan will have similar vesting and other terms.
RIGHTS OF OPTIONEES
No optionee will have rights as a shareholder with respect to the shares
covered by his option until the date of issuance of a stock certificate for
such shares. The granting of any option by the Company will not impose any
obligation on the Company to employ or continue to employ any optionee.
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<PAGE>
The right of the Company to terminate the employment of any officer or other
employee will not be diminished or affected by reason of the fact that an
option has been granted to him.
CHANGES IN THE COMPANY'S CAPITAL STRUCTURE
As set forth in Section 16 of the ESO Plan, the number, class and per
share exercise price of shares of stock subject to outstanding options are
subject to adjustment under the ESO Plan if the Company effects certain
changes in its capital structure. The existence of outstanding options will
not affect in any way the right or power of the Company or its shareholders
to make or authorize any or all adjustments, recapitalizations, reorganizations
or other changes in the Company's capital structure or its business, or any
merger or consolidation of the Company, or any issue of bonds, debentures,
preferred or prior preference stock ahead of or affecting the Common Stock or
the rights thereof, or the dissolution or liquidation of the Company, or any
sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise.
AMENDMENT OF THE ESO PLAN
The Board of Directors may modify, revise or terminate the ESO Plan at
any time and from time to time; provided, however, that without the further
approval of the holders of shares representing a majority of the total voting
power of the Company at a meeting of shareholders, or if the provisions of
the Company's Amended and Restated Articles of Incorporation or By-Laws or if
applicable state law prescribes a greater degree of shareholder approval for
this action, without the degree of shareholder approval thus required, the
Board of Directors may not (i) change the aggregate number of shares that may
be issued under options pursuant to the ESO Plan, (ii) extend the term during
which an option may be exercised or the termination date of the ESO Plan or
(iii) materially change the class of employees eligible to receive options
under the ESO Plan unless, in each such case, the Board of Directors of the
Company shall obtain an opinion of legal counsel to the effect that
shareholder approval of the amendment is not required (a) by law, (b) by the
applicable rules and regulations of, or any agreement with, any national
securities exchange on which the Common Stock is then listed or if the Common
Stock is not so listed, the rules and regulations, or any agreement with, the
National Association of Securities Dealers, Inc. and (c) in order to make
available to the optionee, with respect to any option granted under the ESO
Plan, the benefits of Rule 16b-3 of the Rules and Regulations under the
Exchange Act, or any similar or successor rule. In addition, the Board will
have the power to make such changes in the ESO Plan and in the regulations
and administrative provisions under the ESO Plan or in any outstanding option
as in the opinion of counsel for the Company may be necessary or appropriate
from time to time to enable any option granted pursuant to the ESO Plan to
qualify as an ISO under Section 422 of the Code and the regulations that may
be issued thereunder.
DURATION OF THE ESO PLAN; REGISTRATION OF SHARES
The ESO Plan became effective as of March 24, 1992, and no options will
be granted pursuant to the ESO Plan after March 24, 2002. It is the
Company's intention to register the additional shares covered by the ESO Plan
with the Securities and Exchange Commission (the "Commission") as soon as
practicable after approval by shareholders.
TRANSFER OF OPTIONS
Options are not transferable by the optionee other than by will or under
the laws of descent and distribution, and are exercisable, during his
lifetime, only by the optionee.
EFFECT OF TERMINATION OF EMPLOYMENT
Except as may be otherwise expressly provided in the ESO Plan, all
options will terminate on the earlier of the date of the expiration of the
option or one day less than three months after the date of the severance,
upon severance of the employment relationship between the Company and the
optionee, whether with or without cause, for any reason other than the death,
disability or retirement of the optionee, during which period the optionee
will be entitled to exercise the option in respect of the number of shares
that the optionee would have been entitled to purchase had the optionee
exercised the option on the date of such severance of employment.
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In the event of severance because of the disability of the holder of any
option while in the employ of the Company and before the date of expiration
of the option, the option will terminate on the earlier of such date of
expiration or one year following the date of such severance because of
disability, during which period the optionee will be entitled to exercise the
option in respect of the number of shares that the optionee would have been
entitled to purchase had the optionee exercised the option on the date of
such severance because of disability.
In the event of the death of the holder of any option while in the
employ of the Company and before the date of expiration of the option, the
option will terminate on the earlier of such date of expiration or one year
following the date of death. After the death of the optionee, his executors,
administrators or any person or persons to whom his option may be transferred
by will or by the laws of descent and distribution will have the right, at
any time prior to the expiration of an option, to exercise the option, in
respect of the number of shares that the optionee would have been entitled to
purchase if he had exercised the option on the day of his death while in the
employ of the Company.
In the event of the retirement of the holder of any NSO, in accordance
with the provisions of the Company's then existing policies regarding
retirement as applied by the Compensation Committee, before the date of
expiration of the option, the option will terminate on the earlier of such
date of expiration or one year following the date of such retirement and, if
such optionee should die within the one year period, any rights he may have
to exercise the option will be exercisable by his executor or administrator
or the person or persons to whom the option has been transferred by will or
by the laws of descent and distribution, as appropriate, for the remainder of
the one year period.
SUBSTITUTION OPTIONS
Options may be granted under the ESO Plan from time to time in
substitution for stock options held by employees of other corporations who
are about to become employees of the Company, or whose employer is about to
become a parent or subsidiary corporation of the Company, conditioned in the
case of an ISO upon the employee becoming an employee of the Company or a
parent or subsidiary corporation of the Company, as the result of the merger
or consolidation of the Company with another corporation, or the acquisition
by the Company of substantially all the assets of another corporation, or the
acquisition by the Company of at least 50% of the issued and outstanding
stock of another corporation as the result of which it becomes a subsidiary
of the Company. The terms and conditions of the substitute options so granted
may vary from the terms and conditions set forth in the ESO Plan to such extent
as the Board of Directors of the Company at the time of grant may deem
appropriate to conform, in whole or in part, to the provisions of the stock
options in substitution for which they are granted, but with respect to stock
options that are ISOs, no such variation will be such as to affect the status
of any such substitute option as an "incentive stock option" under Section 422
of the Code.
FEDERAL INCOME TAX CONSEQUENCES
In the case of NSOs the optionee is not taxed upon receipt of the
option. When the option is exercised, the optionee is taxed at ordinary
income rates on the difference between the option price and the fair market
value of the acquired shares on the date of exercise. The Company receives a
deduction for compensation expense for this amount, and there is a withholding
requirement on the date of exercise.
For ISOs, the optionee does not have income upon the grant of the option
or when the option is exercised. However, the excess of the fair market
value of the acquired shares as of the date of exercise over the option price
may constitute income for purpose of the participant's alternative minimum
tax computation. If the optionee holds the option at least two years from the
date of grant and holds the stock at least one year from the date of the
transfer of the shares, the optionee is taxed at the time of the disposition
of the stock on the capital gain or loss based on the difference between the
price on the date of the disposition and the option price. Absent an early
disposition of the stock acquired by exercise of an ISO, the Company will not
be entitled to a deduction for compensation expense as a result of the grant,
exercise or sale of ISO shares by the optionee. If the optionee disposes of
the stock prior to expiration of the holding period, he will generally
recognize ordinary income in the year of sale equal to the excess, if any, of
(i) the lesser of (A) the fair market value of the shares as of the date of
exercise and (B) the amount realized on the sale over (ii) the option price.
Any additional amount realized should be treated as a long-term or short-term
capital gain based on the optionee's holding period. In this case,
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the Company will be entitled to deduct the amount of ordinary income recognized
by the optionee with respect to the sale.
VOTE REQUIRED AND RECOMMENDATION FOR APPROVAL
The Board of Directors recommends a vote FOR this proposal. The Board
of Directors of the Company has approved the proposed amendment to the ESO
Plan. However, the amendment and the 1996 ISO Grants will not become
effective unless holders having a majority of the voting power of the Common
Stock and Senior Preferred Stock, voting as a single class, represented at
the Annual Meeting vote "FOR" the approval of the amendment. The enclosed
form of proxy provides a means for shareholders to vote for the approval of
this proposal, to vote against the approval of this proposal or to abstain
from voting with regard to the approval of this proposal. Each properly
executed proxy received in time for the meeting will be voted as specified
therein. Because abstentions and broker non-votes will be considered in the
determination of the number of shares present in person or by proxy at the
Annual Meeting, abstentions and broker non-votes will have the same effect as
a vote against the amendment. If a shareholder executes and returns a proxy
but does not specify otherwise, the shares represented by such shareholder's
proxy will be voted "FOR" the approval of this proposal.
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
On March 8, 1996, the Board of Directors, upon the recommendation of its
Audit Committee, appointed the firm KPMG Peat Marwick LLP as independent
auditors for the year ending December 31, 1996, subject to ratification by
the shareholders at the Annual Meeting. KPMG Peat Marwick LLP was originally
appointed as independent auditors of the Company by the Board of Directors,
upon recommendation of its Audit Committee, on May 13, 1987.
Representatives of KPMG Peat Marwick LLP are expected to attend the
Annual Meeting, will be afforded an opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions by
shareholders.
The affirmative vote of a majority of the voting power of the Common
Stock and Senior Preferred Stock, voting as a single class, cast at the
Annual Meeting is necessary for ratification of the selection of KPMG Peat
Marwick LLP. Because abstentions and broker non-votes will not be considered
to have been cast for or against the proposal, they will have no effect on
the vote on the ratification of the selection of KPMG Peat Marwick LLP. If
shareholders do not ratify the selection of KPMG Peat Marwick LLP, the Board
of Directors will consider the selection of other independent auditors for
the year ending December 31, 1996.
-8-
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of the Record Date, the beneficial
ownership of each person (including any "group" as that term is used in
Section 13(d)(3) of the Exchange Act) who is known by the Company to be the
beneficial owner of more than 5% of the outstanding Common Stock and Senior
Preferred Stock. Unless otherwise indicated, each person listed has sole
voting and investment power with respect to the shares beneficially owned.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
(EXCLUDING SHARES DEEMED (INCLUDING SHARES DEEMED
OWNED PURSUANT TO RIGHTS OWNED PURSUANT TO RIGHTS
TO ACQUIRE)(1) TO ACQUIRE)(2)
NAME AND ADDRESS ------------------------- -------------------------
OF BENEFICIAL OWNER TITLE OF CLASS SHARES PERCENT(3) SHARES PERCENT(3)
------------------- -------------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C>
Quantum Fund N.V.(4)
Quantum Partners LDC
Kaya Flamboyan 9 Common Stock 1,628,066 61.3% 1,644,595 (5) 61.5%
Curacao, Netherlands Antilles Senior Preferred Stock 2,078,748 14.1% 2,078,748 14.1%
George Soros(6) Common Stock 1,708,713 64.3% 1,755,215 (6) 64.9%
888 Seventh Avenue
New York, NY 10106
Chemical Banking Corporation(7) Common Stock 405,606 15.3% 405,606 15.3%
270 Park Avenue
New York, NY 10017
Metropolitan Life Insurance Company(8) Common Stock 280,580 10.6% 280,580 10.6%
One Madison Avenue
New York, NY 10010-3690
The Baird Family Group(9)
The Cameron Baird Foundation(9) Common Stock -- -- 14,075 *
Bridget B. Baird, Successor Trustee(9) Senior Preferred Stock 6,255,676 42.3% 6,255,676 42.3%
Jane D. Baird (9)
Aires Hill Corporation(9)
1350 One M&T Plaza
Buffalo, NY 14203
W. R. Huff Asset Management Company,
L.P.(10) Common Stock -- -- 5,420 *
30 Schuyler Place Senior Preferred Stock 2,409,112 16.3% 2,409,112 16.3%
Morristown, NJ 07960
Lehman Brothers Inc.(11)
3 World Financial Center Common Stock -- -- 3,543 *
New York, NY 10285 Senior Preferred Stock 1,575,034 10.7% 1,575,034 10.7%
</TABLE>
*Represents less than one percent (1%) of outstanding class.
-9-
<PAGE>
____________________
(1) The number and percentage of securities owned excludes any shares that
the person may be deemed to be the beneficial owner of pursuant to
Rule 13d-3 promulgated under the Exchange Act as a result of any rights
that such person may have to acquire beneficial ownership of such
security within 60 days.
(2) The number and percentage of securities owned includes all shares that
the person may be deemed to be the beneficial owner of pursuant to
Rule 13d-3 promulgated under the Exchange Act as a result of any rights
that such person may have to acquire beneficial ownership of such
security within 60 days.
(3) The percentages shown in the above table are calculated on the basis of
the 2,658,042 shares of Common Stock and 14,788,328 shares of Senior
Preferred Stock that were issued and outstanding as of the Record Date.
(4) Quantum owns in the aggregate 1,628,066 shares of Common Stock directly.
George Soros, operating as a sole proprietorship under the name Soros
Fund Management ("SFM"), is the investment advisor to Quantum and its
investment subsidiaries. Pursuant to its investment advisory contract
with Quantum and its principal subsidiaries, SFM exercises direct
investment discretion with respect to the portfolio assets held for the
account of Quantum. In addition, SFM is responsible for developing the
overall investment strategy of Quantum and its subsidiaries. Mr. Soros,
as the sole proprietor and the person who ultimately controls SFM, may
be deemed to be the beneficial owner of the securities owned by Quantum
as a result of SFM's contractual authority to exercise investment
discretion with respect to such securities. The foregoing information,
as well as the information set forth in Note 5 hereof, is based solely
on information provided to the Company by Quantum, Amendment No. 12 to
the joint Schedule 13D dated February 22, 1996 of Quantum and George
Soros.
(5) The number of shares of Common Stock beneficially owned by Quantum and
George Soros includes 4,677 shares of Common Stock that are issuable upon
conversion of 2,078,748 shares of Senior Preferred Stock and 6,397 shares
of Common Stock that are issuable upon the exercise of 12,795,331 $.075
Warrants and 5,455 shares that are issuable upon the exercise of
10,911,024 $.10 Warrants, which warrants are owned by Quantum.
(6) George Soros directly owns an aggregate of 80,647 shares of Common Stock.
In addition, Mr. Soros may be deemed to be the beneficial owner of the
shares beneficially owned by Quantum described above as a result of SFM's
contracted authority to exercise investment discretion with respect to
such securities. The number of shares of Common Stock and percentage of
beneficial ownership of Mr. Soros includes 16,340 shares of Common Stock
that are issuable upon the exercise of 32,681,208 $.075 Warrants and
13,633 shares of Common Stock that are issuable upon the exercise of
27,266,098 $.10 Warrants. The foregoing information is based solely on
information provided to the Company in filings by George Soros with the
Commission with respect to his beneficial ownership of Common Stock.
(7) Chemical Banking Corporation, through its subsidiary Texas Commerce Bank
National Association, owns beneficially all of the shares of Common Stock
listed. The foregoing information is based solely on Amendment No. 1 to
the joint Schedule 13G dated February 7, 1996, of Chemical Banking
Corporation and Texas Commerce Bank filed with the Commission with
respect to its beneficial ownership of Common Stock.
(8) Metropolitan Life Insurance Company, through its subsidiary State Street
Research and Management Company, Inc., owns beneficially all the shares
of Common Stock listed. The foregoing information is based solely on
Amendment No. 6 to the Schedule 13G dated February 13, 1996, of
Metropolitan Life Insurance Company filed with the Commission with
respect to its beneficial ownership of Common Stock and information
obtained directly from State Street Research and Management Company,
Inc.
-10-
<PAGE>
(9) The Baird Family Group owns in the aggregate 6,255,676 shares of Senior
Preferred Stock that may be converted into 14,075 shares of Common Stock.
The Baird Family Group is comprised of thirteen family members, Aires
Hill Corporation and Belmont Contracting Co., Inc., private holding
companies of the Baird family, The Cameron Baird Foundation, a charitable
foundation trust controlled by the Baird family and Citizens Growth
Properties, a business trust controlled by the Baird family. The
foregoing information, as well as the other information set forth in this
Note, is based solely on Amendment No. 16 to the joint Schedule 13D dated
March 6, 1996, of the Baird family filed with the Commission with respect
to their beneficial ownership of the Senior Preferred Stock. The Cameron
Baird Foundation owns in the aggregate 1,623,821 shares of Senior
Preferred Stock that may be converted into 3,653 shares of Common Stock,
Bridget B. Baird, Successor Trustee, owns in the aggregate 1,400,200
shares of Senior Preferred Stock that may be converted into 3,150 shares
of Common Stock, Jane D. Baird owns in the aggregate 1,104,100 shares of
Senior Preferred Stock that may be converted into 2,484 shares of Common
Stock and Aries Hill Corporation owns in the aggregate 804,800 shares of
Senior Preferred Stock that may be converted into 1,810 shares of Common
Stock.
(10) W. R. Huff Asset Management Company, L.P. owns in the aggregate 2,409,112
shares of Senior Preferred Stock that may be converted into 5,420 shares
of Common Stock. Such shares are held on behalf of The Northern Trust
Company as trustee of the Allied-Signal Inc. Master Pension Trust. The
foregoing information is based solely on the Schedule 13G dated
November 13, 1991, of W. R. Huff Asset Management Company, L.P. filed
with the Commission with respect to its beneficial ownership of Senior
Preferred Stock.
(11) Lehman Brothers Inc. owns in the aggregate 1,575,034 shares of Senior
Preferred Stock, which may be converted into 3,543 shares of Common
Stock. The foregoing information is based on the Schedule 13D dated
February 20, 1992, of Lehman Brothers Inc., a subsidiary of Lehman
Brothers Holding, Inc., filed with the Commission with respect to its
beneficial ownership of Senior Preferred Stock.
-11-
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of the Record Date, the beneficial
ownership of the equity securities of the Company of each of the
directors of the Company, each executive officer named in the Summary
Compensation Table and all executive officers and directors of the
Company as a group. Unless otherwise indicated, the named person
directly owns the securities listed and exercises sole voting and
investment power with respect thereto. Such table has been prepared
from information obtained from the respective directors and executive
officers.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
(EXCLUDING SHARES DEEMED (INCLUDING SHARES DEEMED
OWNED PURSUANT TO RIGHTS OWNED PURSUANT TO RIGHTS
TO ACQUIRE)(1) TO ACQUIRE)(2)
------------------------ -------------------------
NAME TITLE OF CLASS SHARES PERCENT(3) SHARES PERCENT(3)
---- -------------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C>
J. N. Averett, Jr. Common Stock 4,147 * 51,647(4) 1.9%
$.075 Warrants 1,000,000 1.0% 1,000,000 1.0%
$.10 Warrants 2,000,000 1.3% 2,000,000 1.3%
Gary S. Gladstein Common Stock 1,850 * 1,850 *
Robert B. Hodes Common Stock 100 * 100 *
Lief D. Rosenblatt (5) Common Stock -- -- -- --
George P. Giard, Jr. Common Stock 540 * 578(6) *
$.10 Warrants 39,075 * 39,075 *
$.125 Warrants 39,075 * 39,075 *
Donald G. Housley (7) Common Stock 22,454 * 26,825(8) 1.0%
Senior Preferred Stock 79,999 * 79,999 *
$.075 Warrants 140,000 * 140,000 *
$.10 Warrants 4,297,748 2.8% 4,297,748 2.8%
$.125 Warrants 3,949,149 1.5% 3,949,149 1.5%
J. A. Ballew Common Stock 592 * 9,592(9) *
$.075 Warrants 1,000,000 1.0% 1,000,000 *
$.10 Warrants 1,000,000 * 1,000,000 *
All executive officers Common Stock 30,579 1.2% 100,613(10) 3.7%
and directors of the Senior Preferred Stock 79,999 * 79,999 *
Company as a group $.075 Warrants 3,140,000 3.2% 3,140,000 3.2%
(9 persons) $.10 Warrants 8,336,823 5.5% 8,336,823 5.5%
$.125 Warrants 3,988,224 1.5% 3,988,224 1.5%
</TABLE>
*Represents less than one percent (1%) of outstanding class.
-12-
<PAGE>
_________________
(1) The number and percentage of securities owned excludes any shares that
the person may be deemed to be the beneficial owner of pursuant to
Rule 13d-3 promulgated under the Exchange Act as a result of any
rights that such person may have to acquire beneficial ownership of
such security within 60 days.
(2) The number and percentage of securities owned includes all shares that
the person may be deemed to be the beneficial owner of pursuant to
Rule 13d-3 promulgated under the Exchange Act as a result of any
rights that such person may have to acquire beneficial ownership of
such security within 60 days.
(3) The percentages shown in the above table are calculated on the basis
of the 2,658,042 shares of Common Stock, 14,788,328 shares of Senior
Preferred Stock, 96,963,866 $.075 Warrants, 152,742,753 $.10 Warrants,
259,078,740 $.125 Warrants, 194,414,877 $.15 Warrants and 195,415,983
$.25 Warrants that were issued and outstanding as of the Record Date.
(4) The number of shares and percentage of beneficial ownership includes
47,500 shares of Common Stock that are issuable upon the exercise of
1,000,000 $.075 Warrants, 2,000,000 $.10 Warrants and stock options to
acquire 46,000 shares of Common Stock owned by Mr. Averett and 937
shares of Common Stock that are owned by him through the Company's
Employee Stock Ownership Plan.
(5) Mr. Rosenblatt does not own any of the Company's securities.
(6) The number of shares and percentage of beneficial ownership includes
38 shares of Common Stock that are issuable upon the exercise of
39,075 $.10 Warrants and 39,075 $.125 Warrants, owned by Mr. Giard.
(7) Of the securities listed above, 10,150 shares of Common Stock,
3,223,177 $.10 Warrants and 2,994,577 $.125 Warrants are owned
directly. In addition, Mr. Housley may be deemed to be the beneficial
owner of 12,304 shares of Common Stock, 79,999 shares of Senior
Preferred Stock, 140,000 $.075 Warrants, 1,074,571 $.10 Warrants and
954,572 $.125 Warrants that are owned by Mr. Housley's mother, for
whom he exercises investment power with respect to such securities.
(8) Of the shares of Common Stock listed above, 13,258 shares of Common
Stock (including 3,108 shares that may be received upon the conversion
or exercise of other securities) are owned directly and 13,567 shares
of Common Stock (including 1,263 shares that may be received upon the
conversion or exercise of other securities) are owned by Mr. Housley's
mother, for whom he exercises investment power with respect to such
shares. The number of shares of Common Stock and percentage of
beneficial ownership of Mr. Housley includes 179 shares of Common
Stock that are issuable upon the conversion of 79,999 shares of Senior
Preferred Stock. In addition, the number of shares of Common Stock
and percentage of beneficial ownership of Mr. Housley includes 70,
2,148 and 1,974 shares of Common Stock that are issuable upon the
exercise of the $.075 Warrants, $.10 Warrants and $.125 Warrants,
respectively.
(9) The number of shares of Common Stock and percentage of beneficial
ownership of Mr. Ballew includes 9,000 shares of Common Stock that are
issuable upon the exercise of 1,000,000 $.075 Warrants, 1,000,000
$.10 Warrants, stock options to acquire 8,000 shares of Common Stock
and 592 shares of Common Stock owned by him through the Company's
Employee Stock Ownership Plan.
(10) The number of shares of Common Stock and percentage of beneficial
ownership attributable to all directors and executive officers of the
Company as a group includes 179 shares of Common Stock that are
issuable upon the conversion of 79,999 shares of Senior Preferred
Stock that may be beneficially owned by such persons. In addition,
the number of shares of Common Stock and percentage of beneficial
ownership attributable to such persons include 1,570, 4,167, 1,993,
and 62,125 shares of Common Stock, respectively, that are issuable
upon the exercise of the 3,140,000 $.075 Warrants, 8,336,823 $.10
Warrants, 3,988,224 $.125 Warrants, stock options to
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<PAGE>
acquire 62,125 shares of Common Stock and 2,395 shares of Common Stock
owned through the Company's Employee Stock Ownership Plan that may be
beneficially owned by such persons.
MANAGEMENT
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors of the Company has a standing Audit Committee,
which is currently comprised of Messrs. Gladstein, Hodes, Giard and Housley.
The Audit Committee is charged with the duties of recommending to the Board
the appointment of independent auditors; reviewing the compensation of such
auditors; assuring that proper guidelines are established for the
dissemination of financial information; conferring with the independent
auditors to assure that the personnel of the Treasurer's and Controller's
departments are adequately trained and supervised; meeting periodically with
the independent auditors, Board of Directors and certain officers of the
Company to insure the adequacy of internal controls and reporting; reviewing
the Company's consolidated financial statements; and performing any other
duties or functions deemed appropriate by the Board. One meeting of the
Audit Committee was held in 1995.
The Board of Directors of the Company has an Executive Committee, which
is currently comprised of Messrs. Averett, Giard and Rosenblatt. The
Executive Committee of the Board of Directors has the authority to exercise
all powers of the Board of Directors that may be legally delegated to it
under Louisiana law, except that it does not have the authority to declare a
dividend or to authorize the issuance of shares of stock. No meetings of the
Executive Committee were held in 1995.
The Board of Directors of the Company has a Compensation Committee,
which is currently comprised of Messrs. Giard, Housley and Gladstein. The
Compensation Committee has the authority to review the performance of the
employees of the Company and make recommendations to management with respect
thereto, to review the compensation policies of the Company and to administer
the employee benefit plans of the Company and make awards thereunder. One
meeting of the Compensation Committee was held in 1995.
The Board of Directors of the Company does not have a standing
Nominating Committee.
During 1995, there were seven meetings of the Board of Directors.
Except for Mr. Rosenblatt who attended 71% of the combined number of Board
meetings and meetings of committees of the Board of which he is member, all
current directors of the Company attended more than 75% of the combined
number of Board meetings and meetings of the committees of the Board of which
they are members.
-14-
<PAGE>
EXECUTIVE OFFICERS
The following table lists the names, ages, positions and periods of
service with the Company of the Company's current executive officers. Such
persons were elected by the Board of Directors of the Company and serve until
their earlier resignation or until they are removed or replaced by the Board
of Directors.
<TABLE>
<CAPTION>
SERVED AS
EXECUTIVE
NAME AGE OFFICER SINCE CURRENT POSITION
---- --- ------------- ----------------
<S> <C> <C> <C>
J. N. Averett, Jr. (1) . . . 53 1985 President and Director
J. A. Ballew (2) . . . . . . 40 1986 Senior Vice President, Treasurer,
Secretary and Chief Financial Officer
Paul E. Holmes (3) . . . . . 39 1990 Vice President/Controller
David L. Hayden (4). . . . . 41 1990 Vice President/Engineering
</TABLE>
(1) See "Election of Directors" for biographical information.
(2) Mr. Ballew has been associated with the Company since 1985 and currently
serves as Senior Vice President, Treasurer, Secretary and Chief
Financial Officer.
(3) Mr. Holmes has been associated with the Company since 1978 and is currently
Vice President/Controller.
(4) Mr. Hayden has been associated with the Company since 1982 and is currently
Vice President/Engineering.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is pleased to present this report regarding
the compensation policies and practices of the Company applicable to its
chief executive officer and other executive officers.
GENERAL POLICY
The Company's compensation policy applicable to its executive officers
is to offer compensation opportunities that the Compensation Committee
believes are competitive and reasonable based on a number of factors,
including the individual's performance and contribution to the future growth
of the Company, the financial and operational results of the Company and
industry and market conditions. Compensation decisions for 1995 also took
into consideration the Company's executive officers' efforts in effecting the
Company's 1995 acquisition of First Reserve Gas Company ("FRGC") and the
innovative financing therefor and subsequent profitable operation thereof
after the acquisition. Future compensation decisions, including bonus and
other incentive compensation, will also take into account the efforts of the
Company's executive officers in pursuing new opportunities, such as the First
Reserve transaction, for the future growth of the Company.
The specific compensation of the Company's executive officers is
reviewed and approved annually by the Compensation Committee, which is
comprised entirely of non-employee directors. The components of the
Company's executive compensation program are summarized below.
BASE SALARIES
The base salaries of the Company's executives are determined based on
their positions with the Company, their experience, the cost of living in
their area of employment and competitive market factors. Base salaries are
reviewed annually and adjusted where deemed appropriate. In reviewing the
base
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<PAGE>
salaries of the Company's officers, the Compensation Committee considers data
from published reports regarding reported compensation for companies located
in the Shreveport, Louisiana area and for other companies of similar size and
complexity. These reports are used as a check on the general competitiveness
of the Company's salaries and not as a means to mathematically establish
salaries within specified percentiles of salary ranges.
BONUSES
Bonus compensation is provided to the Company's executive officers from
time to time based on the financial results of the Company, the executive's
past personal performance and related prior specific operational and other
achievements. Accordingly, bonus decisions are determined by the
Compensation Committee on a subjective basis in light of such factors as the
Compensation Committee considers relevant. Bonus compensation for Mr. Averett
is determined primarily pursuant to his employment agreement with the
Company, which provides Mr. Averett with an annual cash bonus equal to 2% of
the Company's net profits before income tax in excess of $1,000,000. Mr.
Averett received a bonus of $27,891 under his employment agreement with the
Company based on the Company's results for 1995.
A special retention bonus arrangement was also adopted in late 1994 in
connection with the Company's decision to dispose of its domestic oil and gas
properties at that time. Under this arrangement, a semi-annual bonus equal
to 1/8th of the officer's annual base salary was to be paid for a period of
two years following the transaction as long as the officer remained in the
employ of the Company. This arrangement was implemented to provide incentive
for the officers to remain in the employ of the Company following the asset
disposition and to work toward the successful redeployment of the net
proceeds from the sale for the future growth of the Company. Messrs. Averett
and Ballew received bonuses in 1995 of $50,000 and $22,500, respectively,
pursuant to this agreement.
LONG-TERM INCENTIVE COMPENSATION
The Compensation Committee believes that long term incentive
compensation is a key component of the Company's compensation program and
that the value of long term incentive compensation should be directly related
to increases in shareholder value. Thus, in addition to base salaries and
bonuses, the Company provides long-term incentive compensation to its
executive officers through stock options under the Company's stock option
plan and contributions to a broad-based employee stock ownership plan.
Awards under these plans are intended to provide incentives to the
participants to increase shareholder value by providing benefits that are
directly related to the market value of the Common Stock.
STOCK OPTIONS.
Under the Company's stock option plan, the Compensation Committee has
the authority to grant options to purchase shares of Common Stock to the
Company's executive officers and key employees for terms of up to ten years,
with exercise prices equal to or greater than the market price of the Common
Stock at the time of grant and with vesting conditions established by the
Compensation Committee. The Compensation Committee believes that options
provide a desirable form of incentive to the Company's officers in that
options received by an officer will be of no value to the officer unless the
value of the Common Stock increases.
It is the policy of the Compensation Committee that options not be
granted under the Company's stock option plan as a matter of course. Rather,
decisions as to whether to grant options to an officer are made by the
Compensation Committee on an annual basis in light of the circumstances,
including the officer's contributions to the Company over the prior year and
the expected contributions by the officer in the future. If an option is
granted to an officer, the number of shares of Common Stock subject to the
granted option will be based on, among other things, the level of
responsibility of the officer, the anticipated contribution of the officer to
the future growth of the Company, the number of shares that the Compensation
Committee believes would be necessary to provide the officer with a
meaningful incentive to improve shareholder value and the potential dilution
that might result from the grant. The Compensation Committee also considers
the amount and terms of the options held by the officers. Vesting
requirements will generally be placed on options in order to relate the
benefits of any options granted to an officer to the continued employment of
the officer with the Company.
-16-
<PAGE>
On April 17, 1995, the Company granted options to purchase an aggregate
of 17,500 shares of Common Stock at an exercise price of $31.125 per share to
three of its executive officers. The market price of the Common Stock at the
time of grant was $31.125 per share. These grants were made following the
Compensation Committee's assessment of each of the optionee's contributions
to the successful efforts by the Company to achieve growth and shareholder
value in 1995, and the anticipated contribution of each optionee to the
Company in the future as the Company pursues new opportunities for growth.
EMPLOYEE STOCK OWNERSHIP PLAN.
The Company also provides long-term incentive compensation to its
officers and employees through the Company's Employee Stock Ownership Plan
("ESOP"). The ESOP is a broad based plan that is qualified under the
Internal Revenue Code of 1986 and provides for annual cash contributions by
the Company of up to 10% of annual compensation of all participating
employees to a trust for the purchase of shares of Common Stock for the
account of the employees. The amount of the contribution, if any, for any
given year is in the sole discretion of the Compensation Committee. It is
the current policy of the Compensation Committee that the amount of the
Company's contribution to the ESOP be determined after considering both
financial and operational results of the Company and that the contribution
serve both as a recognition of past performance and as an incentive for
future performance. The Compensation Committee authorized a $50,000
contribution to the ESOP for 1995, which represented approximately 5% of the
compensation of the participating employees. Benefits under the ESOP vest
over a five year period. The Company's asset disposition in 1994 accelerated
vesting under the ESOP for all contributions prior to such disposition.
Employees realize benefits under the ESOP with respect to contributions and
to the extent of growth in the market value of Common Stock.
COMPENSATION OF AND EMPLOYMENT AGREEMENT WITH CHIEF EXECUTIVE OFFICER
The base and fixed bonus compensation of the Company's Chief Executive
Officer, J.N. Averett, Jr., is determined pursuant to a one year employment
agreement between the Company and Mr. Averett that is renewable annually.
Under such agreement, Mr. Averett receives an annual base salary of $200,000,
which may be increased by mutual agreement between the Company and Mr.
Averett based on annual reviews by the Board of Directors of the Company of
market factors and Mr. Averett's performance in the prior year.
In addition to his base salary, Mr. Averett is entitled to receive under
his agreement with the Company an annual cash bonus in an amount equal to 2%
of the excess over $1,000,000 of the consolidated net profits before income
taxes of the Company in each year during the term of his employment
agreement. Under this arrangement, Mr. Averett received a cash bonus in the
amount of $27,891 with respect to 1995 results. This bonus reflects the
beneficial financial impact that the Company's acquisition of FRGC had on the
Company during 1995. Mr. Averett also received a $50,000 retention bonus
under the arrangement adopted in late 1994 in connection with the Company's
oil and gas property disposition in December 1994.
In addition to the cash bonus paid to Mr. Averett for 1995, the
Compensation Committee concluded that it would be appropriate to provide Mr.
Averett with additional incentive to further develop the businesses of the
Company to improve shareholder value through the grant of an option to
purchase additional shares of Common Stock. Accordingly, on April 17, 1995,
the Compensation Committee granted to Mr. Averett an option to purchase an
aggregate of 10,000 shares of Common Stock at an exercise price of $31.125
per share, the market price of the stock on the date of grant. The number of
shares subject to such option was determined by the Compensation Committee
after considering Mr. Averett's other compensation arrangements with the
Company and reflects the number of shares which the Compensation Committee
believed would provide Mr. Averett with a meaningful form of incentive to
continue to work toward the financial growth of the Company so as to improve
shareholder value.
The Compensation Committee believes that the combination of the
compensation provided to Mr. Averett under his employment agreement and the
benefits provided to him through the granting of options and his
participation in the ESOP closely align Mr. Averett's compensation with the
financial and stock performance of the Company.
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<PAGE>
DEDUCTION LIMITATION
Section 162(m) of the Code currently imposes a $1 million limitation on
the deductibility of certain compensation paid to the Company's five highest
paid executives. Excluded from the limitation is compensation that is
"performance based". For compensation to be performance based, it must meet
certain criteria, including being based on predetermined objective standards
approved by the shareholders of the Company. The Company believes that
compensation relating to options granted under the ESO Plan should be
excluded from the $1 million limitation. The Compensation Committee believes
that maintaining the discretion to evaluate the performance of the Company's
management is an important part of its responsibilities and benefits the
Company's shareholders. The Compensation Committee intends to take into
account the potential application of Section 162(m) with respect to incentive
compensation awards and other compensation decisions made by it in the
future. The Compensation Committee does not currently anticipate that
Section 162(m) will limit the deductibility of any compensation paid by the
Company to its executive officers during 1995.
SUMMARY
After review of the existing compensation programs of the Company, the
Compensation Committee believes that the Company's executive compensation
program is consistent with the compensation programs provided by other
companies comparable in size and complexity to the Company. Further, the
Compensation Committee believes that the components of the Company's
compensation program are necessary and appropriate to retain the services of
those officers and employees who are considered by the Compensation Committee
essential to the continued success, development and growth of the Company and
provide for compensation that is significantly dependent upon and related to
the Company's performance such that the financial interests of the Company's
executive officers will be closely aligned with those of the Company's
shareholders.
Gary S. Gladstein
George P. Giard, Jr.
Donald G. Housley
COMPENSATION AND TRANSACTIONS WITH MANAGEMENT
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information with respect to the Chief
Executive Officer and the other executive officers of the Company as to whom
the total annual salary and bonus for the fiscal year ended December 31,
1995, exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- ------------
OTHER SECURITIES
NAME AND ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION(2)
------------------ ---- -------- ------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
J. N. Averett, Jr. 1995 $200,000 $77,891 $-0- 10,000 $ 864
President 1994 193,333 90,000 -0- 7,500 1,231
1993 160,000 13,596 -0- 14,000 1,037
J. A. Ballew 1995 106,875 22,500 -0- 5,000 112
Senior Vice President, 1994 92,741 -0- 13,289 3,000 697
Treasurer, Secretary and Chief 1993 80,000 -0- 12,943 5,000 112
Financial Officer
</TABLE>
______________
(1) Excludes perquisites and other benefits because the aggregate amount of
such compensation does not exceed the lesser of either $50,000 or 10
percent of the total of annual salary and bonus reported for the named
executive officer.
(2) Represents life insurance premiums paid by the Company.
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<PAGE>
The following table shows, as to the executive officers named in
the Summary Compensation Table, information about option grants during
the year ended December 31, 1995. The Company does not grant any stock
appreciation rights.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
- ---------------------------------------------------------------------------- ----------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE GRANT DATE
OPTIONS IN FISCAL PRICE EXPIRATION PRESENT
NAME GRANTED(1) YEAR (PER SHARE) DATE VALUE(2)
- ----------------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
J. N. Averett, Jr. 10,000 57% $31.125 04/17/05 $219,432
J. A. Ballew 5,000 29% 31.125 04/17/05 109,716
</TABLE>
_____________
(1) Stock options granted on April 17, 1995. Options vest in one-quarter
increments on an annual basis and become fully vested on April 17, 1999.
(2) Based upon Black-Scholes option valuation model. The calculation
assumes volatility of .50, a risk free rate of return of 6.5%, a ten
year option term, option grants at $31.125 per share and that no
dividends are paid during the life of the option.
The following table shows aggregate option exercises during the year
ended December 31, 1995, and option values at December 31, 1995, for the
executive officers named in the Summary Compensation Table. The Company does
not grant any stock appreciation rights.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SHARES SECURITIES UNDERLYING UNEXERCISED
ACQUIRED ON VALUE UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
NAME EXERCISE REALIZED AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
- ----------------- ----------- -------- ---------------------------- -----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. N. Averett, Jr. -0- $ -0- 43,500 10,000 $458,500 $ -0-
J. A. Ballew 8,250 99,500 6,750 5,000 56,344 -0-
</TABLE>
___________
(1) Computed based upon the difference between aggregate market value of
the Common Stock issuable on the exercise of the option at December 31,
1995, and the exercise price for such shares. The actual value, if
any, of the unexercised options will be dependent upon the market price
of the Common Stock at the time of exercise. The value of unexercised
options has not been described to reflect present value.
The following table sets forth information regarding the number of
shares of Common Stock allocated to the account of the executive officers
named in the Summary Compensation Table as a result of contributions made to
the ESOP during the fiscal year ended December 31, 1995. The ESOP is
qualified under the Internal Revenue Code of 1986 and provides for annual
cash contributions by the Company of up to 10% of annual compensation of all
participating employees to a trust for the purchase of shares of Common Stock
for the account of the employees. The amount of the contribution, if any,
for any given year is in the sole discretion of the Compensation Committee.
The Compensation Committee authorized a $50,000 contribution to the ESOP for
the fiscal year ended December 31, 1995.
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERFORMANCE OR
SHARES, UNITS OTHER PERIOD UNTIL
OR OTHER MATURATION OR
NAME RIGHTS PAYOUT
---- ------------- ------------------
<S> <C> <C>
J. N. Averett, Jr. 236 (1)
J. A. Ballew 204 (1)
</TABLE>
________________
(1) Fully vested as a result of the Company's sale of its oil and gas
properties in December 1994.
-19-
<PAGE>
DIRECTORS' FEES
Each director of the Company who is not an employee of the Company
receives $25,000 in cash per year. No compensation for serving as a director
is paid to any member of the Board of Directors who is also an employee of
the Company.
In addition to their annual fees as directors of the Company, the members
of the Board of Directors are paid a per meeting fee of $500 for each Board
and Board committee meeting attended. Further, the Company from time to time
requests its directors who are not employees to attend meetings and perform
services for the Company. Directors so employed by the Company are
compensated at the rate of $500 per day. During 1995, Messrs. Gladstein,
Hodes, Rosenblatt, Giard and Housley received $4,500, $3,000, $3,000, $4,500
and $4,500, respectively, pursuant to such arrangements, which compensation
included fees paid for attendance at Board and Board committee meetings.
EXECUTIVE COMPENSATION AND SEVERANCE AGREEMENT
SEVERANCE AGREEMENTS. In an effort to provide appropriate incentives for
the Company's officers and key employees to maximize the value of the
Company's assets as part of its disposition of assets to Apache Corporation
and to encourage the retention of those officers and employees who will be
important for the Company following the Company's 1994 disposition of its oil
and gas properties, the Company has entered into various Executive
Compensation and Severance Agreements with its executive officers and key
employees (the "Incentive Compensation and Severance Agreements"). The term
of each Incentive Compensation and Severance Agreement expire on December 31,
1999. In general, the Incentive Compensation and Severance Agreements
provide for (i) a cash payment to the executive equal to a multiple of the
executive's most recent base salary plus an extension of health and insurance
benefits for a period of time if the employment of the executive is
terminated either by the Company without "cause" (as defined below) or by the
executive due to a decrease in the executive's salary or a material change in
the duties and responsibilities of the executive as described therein and
(ii) certain cash bonus payments payable in equal semi-annual installments
over a two-year period aggregating 50% of the executive's base salary if the
executive is in the employ of the Company at that time. A voluntary
termination of employment by an officer or key employee without a decrease in
salary or a material change in duties or responsibilities will not entitle
the employee to severance payments under the Incentive Compensation and
Severance Agreements. The term "cause" is defined in the Incentive
Compensation and Severance Agreements to mean dishonesty, conviction of a
felony or the continued failure by the executive officer to perform material
duties consistent with the executive officer's position.
Under the terms of the Incentive Compensation and Severance Agreements,
the amount of any severance payments and length of such benefits will vary
depending on the executive, with the President of the Company receiving three
times his annual salary and three years of benefits, the Senior Vice
President of the Company receiving two times his annual salary and two years
of benefits and the other executive officers and key employees of the Company
each receiving their annual salary and one year of benefits. The amount of
severance payments that would be made to J. N. Averett, Jr., J. A. Ballew and
all executive officers and key employees of the Company as a group are
$600,000, $240,000 and $1,045,000, respectively, if their employment were to
be terminated by the Company following the Transaction for any reason other
than cause.
EMPLOYMENT CONTRACTS
As described in the report of the Compensation Committee, the Company has
an employment agreement with J. N. Averett, Jr. Under such agreement, Mr.
Averett has agreed to serve as Chief Executive Officer or President and Chief
Operating Officer through the term of the agreement. Mr. Averett's
employment agreement is a year to year contract with a provision that
provides that it will be automatically renewed at the end of each year unless
certain prior notices are provided. Mr. Averett's base compensation under
the employment agreement is currently $200,000 per year and may be increased
by mutual agreement between the Company and Mr. Averett. Mr. Averett is also
entitled to an annual cash bonus equal to 2% of the excess over $1,000,000 of
the consolidated net profits of the Company during each year during the term
of his employment agreement. Mr. Averett's employment agreement also
provides Mr. Averett with routine benefits such as insurance, vacations,
reimbursement of expenses, use of an automobile and other similar benefits
provided to senior members of management
-20-
<PAGE>
of the Company. The Company's employment agreement with Mr. Averett further
provides that in the event Mr. Averett's employment is terminated by Mr.
Averett for "good reason" or by the Company for any reason other than
"cause", Mr. Averett will be entitled to receive $100,000 in cash plus any
other compensation to which he may be entitled pursuant to the agreement.
PERFORMANCE GRAPH
The following performance graph compares the performance of the Company's
Common Stock to the Dow Jones Equity Market Index and the Dow Jones
Energy-Oil Secondary Index for the five years ended December 31, 1995. The
graph assumes that the value of the investment in the Company's Common Stock
and each index was $100 at December 31, 1990, and that all dividends were
reinvested.
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Crystal Oil Company 100 127 165 158 214 219
- -----------------------------------------------------------------------------------------
Dow Jones Equity Market Index 100 132 144 158 159 221
- -----------------------------------------------------------------------------------------
Dow Jones Energy-Oil Secondary Index 100 98 99 110 106 123
- -----------------------------------------------------------------------------------------
</TABLE>
-21-
<PAGE>
SHAREHOLDER PROPOSALS
Shareholder proposals for inclusion in the Proxy Statement for
presentment to the 1997 Annual Meeting of Shareholders must be received at
the office of the Company, 229 Milam Street, Shreveport, Louisiana 71101, no
later than December 27, 1996, to be considered for inclusion in the Proxy
Statement relating to such meeting.
OTHER INFORMATION
The Board of Directors is not aware that any matters other than those set
forth herein and the Notice of Annual Meeting of Shareholders will come
before the meeting. Should any other matters requiring the vote of the
shareholders arise, it is intended that proxies will be voted in respect
thereof in accordance with the best judgment of the person or persons voting
the proxy in the interest of the Company.
By Order of the Board of Directors,
/s/ J. A. BALLEW
------------------
J. A. Ballew
Secretary
Dated: April 25, 1996
-22-
<PAGE>
CRYSTAL OIL COMPANY
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Crystal Oil Company, a Louisiana
corporation (the "Company"), hereby appoints J.N. Averett, Jr., Gary S.
Gladstein and Donald G. Housley, and each of them, Proxies of the
undersigned, with the power of substitution, to vote, as designated hereon,
all of the shares of capital stock of the Company which the undersigned would
be entitled to vote at the annual meeting of shareholders to be held on May
30, 1996, or any adjournment or adjournments thereof, on the following
matters more particularly described in the Proxy Statement dated April 25,
1996.
Receipt is hereby acknowleged of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated April 25, 1996, and the Annual
Report of Crystal Oil Company for the year ended December 31, 1995.
(Continued on Reverse Side)
<PAGE>
/X/ Please mark your
votes as in this
example.
For all nominees listed at right WITHHELD AUTHORITY to vote
(except as marked to the contrary). for all nominees listed at right.
1. ELECTION OF / / / / J.N. Averett, Jr., Gary S. Gladstein,
DIRECTORS Robert B. Hodes, Lief D. Rosenblatt,
George P. Giard, Jr. and Donald G. Housley
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the line provided below.)
________________________________________________
FOR AGAINST ABSTAIN
/ / / / / /
2. PROPOSAL to approve an amendment to the Company's
1992 Employee Stock Option Plan to increase the
number of shares of the Company's Common Stock,
$.01 par value, that may be subject to options
granted under the Plan from 200,000 shares to
300,000 shares.
/ / / / / /
3. PROPOSAL to ratify the appointment of KPMG Peat
Marwick LLP as the independent auditors of the
Company for 1996.
4. In their discretion the Proxies are authorized to
vote upon such other business as may properly come
before the meeting.
This proxy, when properly executed, will be voted in the manner directed by
the undersigned shareholder. If no direction is made, this proxy will be
voted FOR the election of the nominees listed herein or any substitute for
them, FOR Proposal 2 and FOR Proposal 3.
Note: Please sign your name exactly as it appears hereon. Joint owners must
each sign. When signing as attorney, executor, administrator, trustee or
guardian, please give your full title as such. If a corporation, please sign
in the full corporate name by the president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
SIGNATURE(S) DATED , 1996
- ------------------------------------------------------------------------------
Please Mark, Sign, Date and Return This Proxy Card Promptly Using the Enclosed
Envelope.
