<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
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<PAGE> 2
CRYSTAL OIL COMPANY
229 Milam Street
Shreveport, Louisiana 71101
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
JUNE 4, 1998
Notice is hereby given that the Annual Meeting of Shareholders of
Crystal Oil Company (the "Company") will be held at the Windsor Court Hotel, 300
Gravier Street, New Orleans, Louisiana, on June 4, 1998, at 9:30 A.M., Central
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 Amended and Restated
Articles of Incorporation, as amended, that would increase the
number of authorized shares of the Company's common stock,
$.01 par value, from 4,000,000 shares to 20,000,000 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 1998.
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 21,
1998, 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,
J. A. Ballew
Secretary
Dated: April 24, 1998
<PAGE> 3
CRYSTAL OIL COMPANY
229 Milam Street
Shreveport, Louisiana 71101
-----------------------
PROXY STATEMENT
-----------------------
April 24, 1998
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 June 4, 1998,
at 9:30 A.M., Central Time, at the Windsor Court Hotel, 300 Gravier Street, New
Orleans, Louisiana, 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 21, 1998 (the "Record Date"). As
of the Record Date, the Company had outstanding 2,668,122 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 27, 1998, 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 $3,500, plus out-of-pocket costs and expenses.
A copy of the Company's Annual Report to Shareholders for the fiscal
year ended December 31, 1997, is enclosed.
<PAGE> 4
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)................................. 55 President, Chief 1985
Executive Officer
and Director
Gary S. Gladstein (3).................................. 53 Director 1989
Robert B. Hodes (4).................................... 72 Director 1989
Lief D. Rosenblatt (5)................................. 44 Director 1989
George P. Giard, Jr. (6)............................... 59 Director 1987
Donald G. Housley (7).................................. 61 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, control approximately 63.9%
of the total voting power of the Company. Messrs. Gladstein and Rosenblatt
are also employed by Soros Fund Management LLC ("SFM"), 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 SFM, an investment
advisory firm, for more than the past five years and has also served as a
member of the Management Committee of SFM since 1997. Mr. Gladstein is also
a director of Jos. A. Bank Clothiers, Inc., Cresud, S.A., IRSA Inversiones
y Representaciones S.A., Quantum Dolphin P.L.C. and Global Telesystems
Group, Inc. Mr. Gladstein is a member of the Audit Committee and
Compensation Committee of the Board of Directors of the Company.
(4) Mr. Hodes is counsel to the law firm of Willkie Farr & Gallagher and has
served in such capacity or as a partner for more than the past five years.
Mr. Hodes is also a director of W. R. Berkley Corporation, Globalstar
Telecommunications, Ltd., LCH Investments N.V., K & F Industries, Inc.,
Loral Space & Communications Corporation, Ltd., Mueller Industries, Inc.,
Restructured Capital Holdings,
- 2 -
<PAGE> 5
Ltd., R.V.I. Guaranty Co., Ltd. and Space Systems/Loral, Inc. 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 SFM for more than the
past five years. Mr. Rosenblatt is a member of the Executive Committee of
the Board of Directors of the Company.
(6) Mr. Giard has served as Chairman of the Board and Chief Executive Officer
of Panamerican Oil Company, an oil and gas exploration and production
company, since January 1997. From 1986 to 1996, Mr. Giard was Chairman of
the Board and Chief Executive Officer of Presidio Oil Company, an oil and
gas exploration and production company. 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
APPROVAL OF AMENDMENT TO THE AMENDED AND RESTATED ARTICLES OF INCORPORATION, AS
AMENDED, TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has recommended the adoption of an amendment to
the Company's Amended and Restated Articles of Incorporation, as amended, that
will increase the authorized shares of Common Stock from 4,000,000 shares to
20,000,000 shares. Of the 4,000,000 shares of Common Stock currently authorized,
at the Record Date there were 2,668,122 shares of Common Stock outstanding, an
aggregate of 192,875 shares of Common Stock reserved for issuance pursuant to
options under the Company's stock option plan and stock ownership plan, an
aggregate of 33,274 shares of Common Stock reserved for issuance pursuant to the
conversion privileges of outstanding Senior Preferred Stock and an aggregate of
449,308 shares of Common Stock reserved for issuance pursuant to the exercise
privileges of outstanding warrants, leaving a total of 656,421 shares of Common
Stock authorized and available for future issuances for corporate purposes,
including acquisitions and employee benefit plans.
The purpose of the amendment to increase the authorized number of
shares of Common Stock is to provide the Company with greater flexibility in
effecting acquisitions and financings. The Company expects that future growth of
the Company may require the use of its Common Stock from time to time either as
consideration for acquisitions or as part of a financing for the Company either
through the use of Common Stock or securities convertible into Common Stock. The
proposed amendment would provide the Company with additional flexibility to
effect these acquisitions and financings without the delay and expense
associated with obtaining the approval or consent of stockholders at the same
time the shares are needed. Such shares may be issued in conjunction with either
a public offering or a private placement of shares of Common Stock.
The increase in the authorized number of shares of Common Stock will be
effected through an amendment to the first paragraph of the Fourth Article of
the Company's Amended and Restated Articles of Incorporation, as amended. As
amended, such paragraph would read as follows:
*Fourth: The aggregate number of shares which the corporation shall
have authority to issue is 71,200,773 shares consisting of two classes.
The designation of each class, the number of shares of each class and
the par value of the shares of each class are as follows:
<TABLE>
<CAPTION>
Number of Par Value
Shares Class Per Share
------ ----- ---------
<S> <C> <C>
20,000,000 Common Stock $.01
51,200,773 Preferred Stock $.01*
</TABLE>
- 3 -
<PAGE> 6
The Company does not have any current plans, proposals or
understandings that would require the use of the additional shares of Common
Stock to be authorized. The Company, however, anticipates that some portion of
the additional shares would be utilized by the Company in the future for
acquisitions as well as for public offerings of Common Stock or securities
convertible or exchangeable into shares of Common Stock. Such shares would also
be used for the Company's stock based plans. Unless required by law, regulatory
authorities or applicable rules of the American Stock Exchange, it is not
anticipated that any future authorization by a vote of shareholders will be
sought for the issuance of any shares of Common Stock. Shareholders of the
Company do not have any preemptive rights to purchase additional shares of
Common Stock, whether now or hereafter authorized.
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock is required for approval of the proposed amendment to the
Company's Amended and Restated Articles of Incorporation, as amended.
Abstentions and broker non-votes will not be treated as either a vote for or
against the proposal. However, because the proposal requires the affirmative
vote of a majority of the outstanding shares, abstentions and broker non-votes
will have the same effect as a vote against the proposal.
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
On March 17, 1998, 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, 1998, 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, 1998.
- 4 -
<PAGE> 7
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 Securities Exchange Act of 1934 (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> <C>
Quantum Fund N.V.(4)
Quantum Partners LDC(4)
Kaya Flamboyan 9 Common Stock 1,628,066 61.1% 1,644,595 (5) 61.3%
Curacao, Netherlands Antilles Senior Preferred Stock 2,078,748 14.1% 2,078,748 14.1%
George Soros(6)
888 Seventh Avenue Common Stock 1,708,713 64.1% 1,755,215 (6) 64.7%
New York, NY 10106 Senior Preferred Stock 2,078,748 14.1% 2,078,748 14.1%
Metropolitan Life Insurance Company(7) Common Stock 261,340 9.8% 261,340 9.8%
One Madison Avenue
New York, NY 10010-3690
The Baird Family Group(8)
The Cameron Baird Foundation(8) Common Stock -- -- 16,060 *
Bridget B. Baird, Successor Trustee(8) Senior Preferred Stock 7,137,976 48.3% 7,137,976 48.3%
Jane D. Baird (8)
Aires Hill Corporation(8)
1350 One M&T Plaza
Buffalo, NY 14203
W. R. Huff Asset Management Company,
L.P.(9)
30 Schuyler Place Common Stock -- -- 5,420 *
Morristown, NJ 07960 Senior Preferred Stock 2,409,112 16.3% 2,409,112 16.3%
Lehman Brothers Inc.(10)
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.
- ------------------
(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.
- 5 -
<PAGE> 8
(3) The percentages shown in the above table are calculated on the basis of
the 2,668,122 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 under the name Soros Fund Management LLC ("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 person who
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. 13 to the joint Schedule 13D dated January 1, 1997 of Quantum, SFM,
George Soros and Stanley F. Druckenmiller.
(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) 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. 8 to the Schedule 13G dated February 4, 1998, 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.
(8) The Baird Family Group owns in the aggregate 7,137,976 shares of Senior
Preferred Stock that may be converted into 16,060 shares of Common Stock.
The Baird Family Group is comprised of twelve 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. 19 to the joint Schedule 13D dated
October 9, 1997, 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 1,887,721 shares of Senior
Preferred Stock that may be converted into 4,247 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 1,205,100 shares of
Senior Preferred Stock that may be converted into 2,711 shares of Common
Stock and Aries Hill Corporation owns in the aggregate 1,221,900 shares
of Senior Preferred Stock that may be converted into 2,749 shares of
Common Stock.
- 6 -
<PAGE> 9
(9) 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.
(10) 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.
- 7 -
<PAGE> 10
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 (Including Shares Deemed
Deemed Owned Pursuant Owned Pursuant to Rights
to Rights to Acquire)(1) to Acquire)(2)
--------------------------- ---------------------------
Name Title of Class Shares Percent(3) Shares Percent(3)
---- -------------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
J. N. Averett, Jr. Common Stock 4,536 * 65,036 (4) 2.4%
$.075 Warrants 1,000,000 1.0% 1,000,000 1.0%
$.10 Warrants 2,000,000 1.3% 2,000,000 2.0%
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 940 * 978 (6) *
$.10 Warrants 39,075 * 39,075 *
$.125 Warrants 39,075 * 39,075 *
Donald G. Housley (7) Common Stock 16,302 * 19,499 *
Senior Preferred Stock 39,999 * 39,999 *
$.10 Warrants 3,223,177 2.1% 3,223,177 2.1%
$.125 Warrants 2,994,577 1.2% 2,994,577 1.2%
J. A. Ballew Common Stock 937 * 16,062 (8) *
$.075 Warrants 1,000,000 1.0% 1,000,000 1.0%
$.10 Warrants 1,000,000 * 1,000,000 *
All executive officers Common Stock 26,038 * 115,273 (9) 4.2%
and directors of the Senior Preferred Stock 39,999 * 39,999 *
Company as a group $.075 Warrants 3,000,000 3.1% 3,000,000 3.1%
(9 persons) $.10 Warrants 7,262,252 4.8% 7,262,252 4.8%
$.125 Warrants 3,033,652 1.2% 3,033,652 1.2%
</TABLE>
*Represents less than one percent (1%) of outstanding class.
- ------------------
(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.
- 8 -
<PAGE> 11
(3) The percentages shown in the above table are calculated on the basis of
the 2,668,122 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
60,500 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 59,000 shares of Common Stock owned by Mr. Averett and 1,326
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) The number of shares and percentage of beneficial ownership includes 89
shares of Common Stock that are issuable upon the conversion of 39,999
shares of Senior Preferred Stock and 3,108 shares of Common Stock that
are issuable upon the exercise of 3,223,177 $.10 Warrants and 2,994,577
$.125 Warrants that are owned by Mr. Housley.
(8) The number of shares of Common Stock and percentage of beneficial
ownership of Mr. Ballew includes 15,125 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 14,125 shares of Common Stock and 937
shares of Common Stock owned by him through the Company's Employee Stock
Ownership Plan.
(9) 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 89 shares of Common Stock that are issuable
upon the conversion of 39,999 shares of Senior Preferred Stock that are
beneficially owned by such persons. In addition, the number of shares of
Common Stock and percentage of beneficial ownership attributable to such
persons include 1,500, 3,630, 1,516 and 82,500 shares of Common Stock,
respectively, that are issuable upon the exercise of the 3,000,000 $.075
Warrants, 7,262,252 $.10 Warrants, 3,033,652 $.125 Warrants, stock
options to acquire 82,500 shares of Common Stock and 3,606 shares of
Common Stock owned through the Company's Employee Stock Ownership Plan
that may be beneficially owned by such persons.
- 9 -
<PAGE> 12
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. Two meetings of the Audit Committee were held
in 1997.
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 1997.
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, to make
recommendations to the Board of Directors with respect to option grants under
the Company's stock option plans and to administer the other employee benefit
plans of the Company and make awards thereunder. One meeting of the Compensation
Committee was held in 1997.
The Board of Directors of the Company does not have a standing
Nominating Committee.
During 1997, there were six meetings of the Board of Directors. All
current directors of the Company attended 75% or more of the combined number of
Board meetings and meetings of the committees of the Board of which they are
members, except for Lief D. Rosenblatt who attended 662/3% of the combined
number of Board meetings and meetings of committees of the Board of which he is
a member.
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)........................ 55 1985 President, Chief Executive Officer
and Director
J. A. Ballew (2).............................. 42 1986 Senior Vice President, Treasurer,
Secretary and Chief Financial Officer
David L. Hayden (3)........................... 43 1990 Vice President/Engineering
Paul E. Holmes (4)............................ 41 1990 Vice President/Controller
</TABLE>
- ----------
(1) See "Election of Directors" for biographical information.
- 10 -
<PAGE> 13
(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. Hayden has been associated with the Company since 1982 and is currently
Vice President/Engineering.
(4) Mr. Holmes has been associated with the Company since 1978 and is currently
Vice President/Controller.
REPORT ON EXECUTIVE COMPENSATION
The Board of Directors of the Company 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 Board of Directors 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, including bonus and other incentive
compensation, also take into account the efforts of the Company's executive
officers in pursuing new opportunities, such as the Company's recent acquisition
of Petal Gas Storage Company.
The base and bonus compensation of the Company's executive officers are
reviewed and approved annually by the Compensation Committee of the Board of
Directors (the "Committee"), which is comprised entirely of non-employee
directors. Prior to 1997, stock based compensation was also approved by the
Committee. Beginning in 1997 following changes in the rules of the Securities
and Exchange Commission (the "Commission") regarding the administration of stock
based plans under Rule 16b-3 promulgated under the Exchange Act, the Company
amended its stock based plans to provide for the administration of such plans by
the full Board of Directors, with Mr. Averett abstaining from voting on such
matters. As a result, stock based compensation, such as grants of stock options
under the Company's stock option plans, are currently approved by the full Board
of Directors of the Company upon the recommendation and advice of the Committee.
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 salaries
of the Company's officers, the 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. In light of the foregoing factors,
increases in the base salaries of the Company's four executive officers were
approved in March 1998.
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 Committee on a
subjective basis in light of such factors as the 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
- 11 -
<PAGE> 14
tax in excess of $1,000,000. Mr. Averett received a bonus of $50,820 under his
employment agreement with the Company based on the Company's results for 1997.
In addition to the above described contractual bonuses, on March 23, 1998,
the Company granted cash bonuses to Messrs. Averett and Ballew of $15,000 and
$10,000, respectively, in recognition of their services to the Company during
1997, including pursuing new acquisition opportunities in the DeSoto field and
with Petal Gas Storage Company and expanding the revenue from the operations of
the Company's Hattiesburg Gas Storage facility.
LONG-TERM INCENTIVE COMPENSATION
The Board of Directors 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 Board of Directors 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 Board. The Board of
Directors 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 Board of Directors 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 Board of Directors
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. The employees receiving options and the number of
shares subject to option grants are recommended by the Committee and approved by
the full Board of Directors after consideration of the Committee's
recommendation and other relevant matters. 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 Committee and the Board of Directors 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 Committee and the Board of Directors 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.
On April 2, 1997, the Company granted options to purchase an aggregate of
20,000 shares of Common Stock at an exercise price of $34.50 per share to its
four executive officers. The market price of the Common Stock at the time of
grant was $34.50 per share. On March 17, 1998, the Company also granted options
to purchase an aggregate of 50,000 shares of Common Stock at an exercise price
of $42.00 per share to five of its executive officers and employees. The market
price of the Common Stock at the time of grant was $41.00 per share. These
grants were made following the Committee's assessment of each of the optionee's
contributions to the successful efforts by the Company to achieve growth and
shareholder value in 1997, and the anticipated contribution of each optionee to
the Company in the future as the Company pursues new opportunities for growth.
- 12 -
<PAGE> 15
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 Board
of Directors or the Committee. It is the current policy of the Board of
Directors 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 Committee authorized
a $50,000 contribution to the ESOP for 1997 and a $55,000 contribution to the
ESOP for 1998, which represented approximately 5% of the compensation of the
participating employees. 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., are determined pursuant to a one year employment
agreement between the Company and Mr. Averett that is renewable annually. Under
such agreement, Mr. Averett currently receives an annual base salary of
$235,000, 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. Mr. Averett's
base compensation was increased to its current level in April 1998 from $212,000
based on such factors.
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 $50,820
with respect to 1997 results.
In addition to the cash bonus paid to Mr. Averett for 1997, the 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 2, 1997, the Committee granted to Mr.
Averett an option to purchase an aggregate of 10,000 shares of Common Stock at
an exercise price of $34.50 per share, the market price of the stock on the date
of grant. Mr. Averett was also granted in March 1998 an option to purchase an
aggregate of 23,500 shares of Common Stock at an exercise price of $42.00 per
share. The market price of the Common Stock on the date of grant was $41.00 per
share. The number of shares subject to such option was determined by the
Committee after considering Mr. Averett's other compensation arrangements with
the Company and reflects the number of shares which the 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 Committee and the Board of Directors 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.
DEDUCTION LIMITATION
Section 162(m) of the Internal Revenue Code of 1986, as amended, 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 its option plan
should be excluded from the $1 million limitation. The Committee and the Board
of Directors believes that maintaining the discretion to evaluate the
performance
- 13 -
<PAGE> 16
of the Company's management is an important part of its responsibilities and
benefits the Company's shareholders. The Committee and the Board of Directors
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 Committee and the Board of Directors does not currently
anticipate that Section 162(m) will limit the deductibility of any compensation
paid by the Company to its executive officers during 1997.
SUMMARY
After review of the existing compensation programs of the Company, the
Committee and the Board of Directors 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
Committee and the Board of Directors 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 Committee and
the Board of Directors 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.
J.N. Averett, Jr.
Gary S. Gladstein*
Robert B. Hodes
Lief D. Rosenblatt
George P. Giard, Jr.*
Donald G. Housley*
*Compensation Committee Member
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company has entered into arrangements with Panamerican Oil Company
("Panamerican"), an oil and gas exploration company of which George P. Giard, a
director of the Company, is Chairman of the Board, Chief Executive Officer and
a principal stockholder, to actively seek development activities in oil and gas
fields in South America. Under the arrangement between the Company and
Panamerican, the Company is paying to Panamerican a monthly fee of $50,000 for
all costs and expenses relating to the project in South America. The Company
has also agreed to pay to Panamerican a fee of $150,000 in the event the
Company and Panamerican are successful in obtaining a contract for development
of certain reserves in South America. The Company, however, will be entitled to
a credit against this fee of $17,500 per month for each monthly fee previously
paid in the event another party is added to the program. In addition, the
Company will be entitled to a reimbursement of $17,500 per month for each
monthly fee previously paid if Panamerican is unsuccessful in obtaining a
proposed contract. During 1997, Panamerica received $300,000 pursuant to this
arrangement.
- 14 -
<PAGE> 17
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, 1997,
exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
-------------------------- ------------
Securities
Name and Underlying All Other
Principal Position Year Salary Bonus Options Compensation(1)
- ---------------------------- ---- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
J. N. Averett, Jr. 1997 $ 209,000 $ 65,820 10,000 $ 2,016
President and Chief 1996 200,000 127,500 11,000 1,872
Executive Officer 1995 200,000 77,891 10,000 864
J. A. Ballew 1997 126,000 10,000 4,500 412
Senior Vice President, 1996 117,917 30,750 5,000 379
Treasurer, Secretary and 1995 106,875 23,750 5,000 112
Chief Financial Officer
</TABLE>
- ----------
(1) Represents life insurance premiums paid by the Company.
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, 1997. 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 50% $34.50 04/02/07 $184,177
J. A. Ballew 4,500 23% 34.50 04/02/07 82,880
</TABLE>
- ----------
(1) Stock options granted on April 2, 1997. Options vest in one-quarter
increments on an annual basis and become fully vested on April 2, 2001.
(2) Based upon Black-Scholes option valuation model. The calculation assumes
volatility of 22.5%, a risk free rate of return of 6.25%, a 10 year option
term, option grants at $34.50 per share and that no dividends are paid
during the life of the option.
- 15 -
<PAGE> 18
The following table shows aggregate option exercises during the year
ended December 31, 1997, and option values at December 31, 1997, 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- 51,250 23,250 $1,144,563 $246,375
J. A. Ballew -0- -0- 10,500 10,750 193,625 114,438
</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, 1997,
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, 1997. 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 Company made a $50,000 contribution to the ESOP for the fiscal
year ended December 31, 1997.
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. 189 (1)
J. A. Ballew 157 (1)
</TABLE>
- ----------
(1) Fully vested as a result of the Company's sale of its oil and gas
properties in December 1994.
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 1997, Messrs. Gladstein, Hodes, Rosenblatt,
Giard and Housley received $3,500, $3,500, $2,500, $4,000 and $4,000,
respectively, pursuant to such arrangements, which compensation included fees
paid for attendance at Board and Board committee meetings.
- 16 -
<PAGE> 19
EXECUTIVE COMPENSATION AND 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 and
encourage the retention of its officers 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 expires on December 31, 1999
and automatically renews annually. 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)
cash retention bonuses that were paid through 1996. 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 and the Vice President of Engineering each receiving two and
one-half times their annual salary and two and one-half years of benefits and
the other executive officers and key employees of the Company each receiving one
and one-half times their annual salary and one and one-half years 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 $705,000, $375,000 and $1,497,500, respectively, if their employment were to
be terminated by the Company for any reason other than cause.
EMPLOYMENT AGREEMENT
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 $235,000 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 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.
- 17 -
<PAGE> 20
PERFORMANCE GRAPH
The following performance graph compares the performance of the Common
Stock to the Dow Jones Equity Market Index and the Dow Jones Energy-Oil
Secondary Index for the five years ended December 31, 1997. The graph assumes
that the value of the investment in the Common Stock and each index was $100 at
December 31, 1992, and that all dividends were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
Among Crystal Oil Company, Dow Jones Equity Market & Dow Jones-Oil Secondary
Index
[GRAPH]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Crystal Oil Company 100 95 129 132 158 192
Dow Jones Equity Market Index 100 110 111 152 188 251
Dow Jones Energy-Oil Secondary Index 100 111 107 124 153 163
</TABLE>
- 18 -
<PAGE> 21
SHAREHOLDER PROPOSALS
Shareholder proposals for inclusion in the Proxy Statement for
presentment to the 1999 Annual Meeting of Shareholders must be received at the
office of the Company, 229 Milam Street, Shreveport, Louisiana 71101, no later
than December 24, 1998, 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,
J. A. Ballew
Secretary
Dated: April 24, 1998
- 19 -
<PAGE> 22
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 June 4,
1998, or any adjournment of adjournments thereof, on the following matters more
particularly described in the Proxy Statement dated April 24, 1998.
Receipt is hereby acknowledged of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated April 24, 1998, and the Annual
Report of Crystal Oil Company for the year ended December 31, 1997.
(CONTINUED ON REVERSE SIDE)
<TABLE>
<S><C>
PLEASE MARK YOUR
/X/ 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 DIRECTORS / / / / J.N. Averett, Jr., Gary S. Gladstein
Robert B. Hodes, Lief D. Rosenblatt,
(INSTRUCTION: To withhold authority to vote for any George P. Giard, Jr. and Donald G. Housley
individual nominee, write that nominee's name
on the line provided below.)
- ----------------------------------------
2. PROPOSAL to approve an amendment to
the Company's Amended and Restated FOR AGAINST ABSTAIN
Articles of Incorporation, as amended,
that would increase the number of / / / / / /
authorized shares of the Company's
common stock, $.01 par value, from
4,000,000 shares to 20,000,000 shares.
FOR AGAINST ABSTAIN
3. PROPOSAL to ratify the appointment of KPMG
Peat Marwick LLP as the independent / / / / / /
auditors of the Company for 1998.
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 , 1998
- ------------------------------------------------ ---------------------
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
</TABLE>
