<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:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CRYSTAL OIL CO.
- --------------------------------------------------------------------------------
(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)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(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.:
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(3) Filing party:
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(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
MAY 20, 1999
Notice is hereby given that the Annual Meeting of Shareholders of
Crystal Oil Company (the "Company") will be held at 888 Seventh Ave, 32nd Floor,
New York, New York, on May 20, 1999, 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 ratify the selection by the Board of Directors of the Company
of KPMG LLP as the Company's independent auditors for 1999.
3. 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 5,
1999, 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 14, 1999
<PAGE> 3
CRYSTAL OIL COMPANY
229 Milam Street
Shreveport, Louisiana 71101
---------------
PROXY STATEMENT
---------------
April 14, 1999
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 20, 1999, at 9:30 A.M.,
Eastern Time, at 888 Seventh Ave., 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 5, 1999 (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 7,360,753 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 16, 1999, 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, 1998, 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.
Robert B. Hodes, a current director of the Company, will not be seeking
reelection to the Company=s Board of Directors at the annual meeting. Neal
Moszkowski has been nominated to serve as a director of the Company after the
Annual Meeting.
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)............... 56 President, Chief 1985
Executive Officer
and Director
Gary S. Gladstein (3)................ 54 Director 1989
Lief D. Rosenblatt (4)............... 45 Director 1989
George P. Giard, Jr. (5)............. 60 Director 1987
Donald G. Housley (6)................ 62 Director 1987
Neal Moszkowski (7).................. 33 Nominee N/A
</TABLE>
- --------
(1) Messrs. Gladstein, Rosenblatt and Moszkowski 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. Mr. Gladstein is employed by
Soros Fund Management LLC ("SFM"), the investment advisor to Quantum. Mr.
Rosenblatt is employed by Satellite Fund Management LLC. Mr. Moszkowski is
a partner of Soros Private Equity Partners, L.L.C.
(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. and Quantum Dolphin P.L.C. Mr. Gladstein is a
member of the Audit Committee and Compensation Committee of the Board of
Directors of the Company.
- 2 -
<PAGE> 5
(4) Mr. Rosenblatt has been employed by Satellite Fund Management LLC since
January 1999. Prior to January 1999, Mr. Rosenblatt was 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.
(5) 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.
(6) 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.
(7) Mr. Moszkowski has been a partner of Soros Private Equity Partners, L.L.C.
since August 1998. From August 1993 to August 1998, Mr. Moszkowski was an
Executive Director of Goldman Sachs International and a Vice President of
Goldman Sachs & Co. in its Principal Investment Area. If elected, Mr.
Moszkowski will become a member of the Audit Committee of the Board of
Directors of the Company.
PROPOSAL NO. 2
--------------
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
On March 3, 1999, the Board of Directors, upon the recommendation of its
Audit Committee, appointed the firm KPMG LLP as independent auditors for the
year ending December 31, 1999, subject to ratification by the shareholders at
the Annual Meeting. KPMG 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 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 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 LLP. If shareholders do not ratify the selection of KPMG LLP,
the Board of Directors will consider the selection of other independent auditors
for the year ending December 31, 1999.
- 3 -
<PAGE> 6
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>
Quantum Fund N.V.(4)
Quantum Partners LDC(4)
Kaya Flamboyan 9 Common Stock 1,628,066 61.0% 1,632,743(5) 61.1%
Curacao, Netherlands Antilles Senior Preferred Stock 2,078,748 28.2% 2,078,748 28.2%
George Soros(6)
888 Seventh Avenue Common Stock 1,708,713 64.0% 1,713,390(6) 64.1%
New York, NY 10106 Senior Preferred Stock 2,078,748 28.2% 2,078,748 28.2%
State Street Research & Management
Company(7)
One Financial Center, 30th Floor
Boston, MA 02111-2690 Common Stock 255,740 9.6% 255,740 9.6%
Lehman Brothers Inc.(8)
3 World Financial Center Common Stock -- -- 3,543 *
New York, NY 10285 Senior Preferred Stock 1,575,034 21.4% 1,575,034 21.4%
</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.
(3) The percentages shown in the above table are calculated on the basis of
the 2,668,122 shares of Common Stock and 7,360,753 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
- 4 -
<PAGE> 7
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.
(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 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) This information is based solely on the Schedule 13G dated February 8,
1999, of State Street Research & Management Company filed with the
Commission with respect to its beneficial ownership of Common Stock.
(8) 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.
- 5 -
<PAGE> 8
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>
J. N. Averett, Jr. Common Stock 4,702 * 77,327(4) 2.8%
Gary S. Gladstein Common Stock 1,850 * 1,850 *
Robert B. Hodes Common Stock 100 * 100 *
Lief D. Rosenblatt (5) -- -- -- -- --
George P. Giard, Jr. Common Stock 1,940 * 1,940 *
Donald G. Housley (6) Common Stock 16,302 * 16,391 *
Senior Preferred Stock 39,999 * 39,999 *
Neal Moszkowski (7) -- -- -- -- --
J. A. Ballew Common Stock 1,198 * 21,573(8) *
David L. Hayden Common Stock 837 * 10,087(9) *
All executive officers, Common Stock 27,685 1.0% 136,399(10) 4.9%
directors and nominees of Senior Preferred Stock 39,999 * 39,999 *
the Company as a group (10
persons)
</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.
(3) The percentages shown in the above table are calculated on the basis of
the 2,668,122 shares of Common Stock and 7,360,753 shares of Senior
Preferred Stock that were issued and outstanding as of the Record Date.
- 6 -
<PAGE> 9
(4) The number of shares and percentage of beneficial ownership includes
stock options to acquire 72,625 shares of Common Stock owned by Mr.
Averett and 1,492 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 89
shares of Common Stock that are issuable upon the conversion of 39,999
shares of Senior Preferred Stock that are owned by Mr. Housley.
(7) Mr. Moszowski, a nominee for director of the Company, does not own any
of the Company's securities.
(8) The number of shares of Common Stock and percentage of beneficial
ownership of Mr. Ballew includes stock options to acquire 20,375 shares
of Common Stock and 1,098 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 of Mr. Hayden includes stock options to acquire 9,250 shares of
Common Stock and 807 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 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 stock options to acquire 108,625 shares of Common Stock
and 4,153 shares of Common Stock owned through the Company's Employee
Stock Ownership Plan that may be beneficially owned by such persons.
- 7 -
<PAGE> 10
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 1998.
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 1998.
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 1998.
The Board of Directors of the Company does not have a standing Nominating
Committee.
During 1998, there were four 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.
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 to 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)........................ 56 1985 President, Chief Executive Officer
and Director
J. A. Ballew (2).............................. 43 1986 Executive Vice President, Treasurer and
Secretary
David L. Hayden (3)........................... 44 1990 Senior Vice President/Engineering
Paul E. Holmes (4)............................ 42 1990 Vice President/Controller
</TABLE>
________
(1) See "Election of Directors" for biographical information.
(2) Mr. Ballew has been associated with the Company since 1985 and currently
serves as Executive Vice President, Treasurer and Secretary.
- 8 -
<PAGE> 11
(3) Mr. Hayden has been associated with the Company since 1982 and is currently
Senior 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 acquisition of
Petal Gas Storage Company in the first quarter of 1998.
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. 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, with Mr. Averett abstaining from voting on such
matters, 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 1999.
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 tax in excess
of $1,000,000. Mr. Averett received a bonus of $13,380 under his employment
agreement with the Company based on the Company's results for 1998.
In addition to the above described contractual bonuses, on March 2, 1999,
the Company granted cash bonuses to Messrs. Ballew and Hayden of $10,000 and
$10,000, respectively, in recognition of their services to the Company during
1998, including pursuing new acquisition opportunities with Petal Gas Storage
Company and the expansion of the caverns at the Petal storage facility.
- 9 -
<PAGE> 12
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, with Mr. Averett abstaining from voting on such
matters, 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 March 17, 1998, the Company 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. On March 3, 1999, the Company also
granted options to purchase an aggregate of 27,625 shares of Common Stock at an
exercise price of $36.25 to seven of its executive officers and employees. The
market price of the Common Stock at the time of grant was $36.25 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 1998, 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 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 $55,000 contribution to the ESOP for 1998 and a $60,000 contribution to the
ESOP for 1999, which represented approximately 5% of the
- 10 -
<PAGE> 13
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
$270,000, 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 March 1999 from $235,000
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 $13,380
with respect to 1998 results.
In addition to the cash bonus paid to Mr. Averett for 1998, 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, Mr. Averett was granted on March 17, 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. Mr Averett was also granted in March 1999 an option
to purchase an aggregate of 12,025 shares of Common Stock at an exercise price
of $36.25 per share. The market price of the Common Stock on the date of grant
was $36.25 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 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 1998.
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
- 11 -
<PAGE> 14
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 commence 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 full credit against
this fee in the event the Company is not otherwise reimbursed by additional
parties to this project for a portion of the $50,000 per month fee. During 1998,
Panamerican received $500,000 pursuant to this arrangement.
- 12 -
<PAGE> 15
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, 1998,
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. 1998 $229,250 $ 13,380 23,500 $3,150
President and Chief 1997 209,000 65,820 10,000 2,016
Executive Officer 1996 200,000 127,500 11,000 864
J. A. Ballew 1998 144,500 10,000 10,500 488
Executive Vice President, 1997 126,000 10,000 4,500 412
Treasurer and Secretary 1996 117,917 30,750 5,000 379
David L. Hayden 1998 105,000 10,000 8,000 326
Senior Vice President/ 1997 88,750 10,000 3,000 260
Engineering 1996 82,708 24,500 3,000 235
</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, 1998. 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
Name Underlying Employees Exercise Grant Date
Options in Fiscal Price Expiration Present
Granted(1) Year (Per Share) Date Value(2)
- ----------------------------- ---------------- ---------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
J. N. Averett, Jr. 23,500 44% $42.00 03/17/08 $369,721
J. A. Ballew 10,500 20% 42.00 03/17/08 165,194
David L. Hayden 8,000 16% 42.00 03/17/08 125,862
</TABLE>
________
(1) Stock options granted on March 17, 1998. Options vest in one-quarter
increments on an annual basis and become fully vested on March 17, 2002.
(2) Based upon Black-Scholes option valuation model. The calculation assumes
volatility of 21.9%, a risk free rate of return of 5.65%, a 10 year option
term, option grants at $42.00 per share and that no dividends are paid
during the life of the option.
- 13 -
<PAGE> 16
The following table shows aggregate option exercises during the year ended
December 31, 1998, and option values at December 31, 1998, 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- 59,000 39,000 $875,500 $68,438
J. A. Ballew -0- -0- 14,125 17,625 148,813 31,750
David L. Hayden -0- -0- 5,875 12,125 65,969 16,031
</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, 1998,
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, 1998. 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 $55,000 contribution to the ESOP for the fiscal
year ended December 31, 1998.
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. 166 (1)
J. A. Ballew 161 (1)
David L. Hayden 120 (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 1998, Messrs. Gladstein, Hodes, Rosenblatt,
Giard and Housley received $3,000, $1,500, $2,000, $2,500 and $3,000,
respectively, pursuant to such arrangements, which compensation included fees
paid for attendance at Board and Board committee meetings.
- 14 -
<PAGE> 17
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 Executive Vice President of the
Company and the Senior Vice President of the Company 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, David L. Hayden and all executive officers and key employees of the
Company as a group are $810,000, $442,500, $320,000 and $1,730,000,
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 $270,000 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.
- 15 -
<PAGE> 18
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, 1998. The graph assumes
that the value of the investment in the Common Stock and each index was $100 at
December 31, 1993, 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>
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Crystal Oil Company 100 135 139 166 201 174
Dow Jones Equity Market Index 100 101 139 171 229 294
Dow Jones Energy-Oil Secondary Index 100 97 112 138 147 107
</TABLE>
- 16 -
<PAGE> 19
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company=s officers and
directors, and persons who beneficially own more than 10% of a registered class
of the Company=s equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and
greater than 10% stockholders are required by the regulations promulgated under
Section 16(a) to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 4 were
required for those persons, the Company believes that, during the fiscal year
ended December 31, 1998, all officers, directors and greater than 10%
stockholders complied with all filing requirements applicable to them, except
that George P. Giard, Jr. did not file a Form 4 on a timely basis for the months
of March and April 1998 to report the purchase of an aggregate of 1,000 shares
of Common Stock of the Company on the open market.
SHAREHOLDER PROPOSALS
Shareholder proposals for inclusion in the Proxy Statement for presentment
to the 2000 Annual Meeting of Shareholders must be received at the office of the
Company, 229 Milam Street, Shreveport, Louisiana 71101, no later than December
9, 1999, to be considered for inclusion in the Proxy Statement relating to such
meeting. Shareholder proposals submitted outside the processes of Rule 14a-8
promulgated under the Securities Exchange Act of 1934, as amended, will be
considered untimely if received by the Company after February 22, 2000.
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 14, 1999
- 17 -
<PAGE> 20
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 20, 1999, or any adjournment or
adjournments thereof, on the following matters more particularly described in
the Proxy Statement dated April 14, 1999.
Receipt is hereby acknowledged of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated April 14, 1999, and the Annual
Report of Crystal Oil Company for the year ended December 31, 1998.
(Continued on Reverse Side)
<PAGE> 21
Please mark your
X votes as in this
- ----- example.
<TABLE>
<CAPTION>
For all nominees listed at right WITHHELD AUTHORITY to vote
(except as marked to the contrary). for all nominees listed at right.
<S> <C> <C> <C>
1. ELECTION OF J.N. Averett, Jr., Gary S. Gladstein,
DIRECTORS Lief D. Rosenblatt, George P. Gland, Jr.,
--------- ---------- Donald G. Housley, and Neal Moszkowski
(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 ratify the appointment of
KPMG LLP as the independent auditors
of the Company for 1999. ------- ------- -------
3. In their discretion the Proxies are
authorized to vote upon such other
business as may properly come before
the meeting.
</TABLE>
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 vote FOR
the election of the nominees listed herein or any substitute for them and FOR
Proposal 2.
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 __________________, 1999
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
