United States Securities and Exchange Commission
Washington, DC 20549
Gentlemen:
Pursuant to the requirements of the Securities Act of 1934, we are transmitting
the following Definitive Proxy Statement.
Sincerely,
SPARTECH CORPORATION
/S/Randy C. Martin
Randy C. Martin
Vice President Finance and
Chief Financial Officer
<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
SPARTECH CORPORATION
................................................................
(Name of Registrant as Specified in Its Charter)
REGISTRANT
.................................................................
(Name of Person(s) Filing Proxy Statement)
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:
4) Proposed maximum value of transaction:
5) Total fee paid:
/ / Check box if any part of the fee is offset as provided by
Exchange 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
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
SPARTECH CORPORATION
7733 Forsyth Boulevard - Suite 1450
Clayton, Missouri 63105
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 10, 1999
DEAR FELLOW SHAREHOLDER:
I cordially invite you to attend the 1999 Annual Meeting of Spartech
Shareholders to be held at 10:00 a.m. on Wednesday, March 10, 1999, at the
Pierre Laclede Center (Saint Louis Club-16th Floor) 7701 Forsyth Boulevard,
Clayton, Missouri 63105 for the following purposes:
1. To elect three Class C directors to serve three-year terms.
2. To ratify the selection of Arthur Andersen LLP as independent auditors
of the Company for the 1999 fiscal year.
3. To transact such other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on January 11, 1999
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Annual Meeting and at any and all adjournments
thereof.
After the formal business of the meeting is covered, I will give a brief
update on the Company's first quarter results and then discuss in more detail
our strategy for the future. This will include a review of our recently
introduced "Total Customer Satisfaction" program, a discussion of our new
"Pyramids of Productivity" initiative, and a short video highlighting these two
new efforts.
I look forward to seeing each of you at the meeting, so please mark your
calendar for the second Wednesday in March. However, if you are unable to
attend, you can ensure that your shares are represented at the meeting by
promptly completing your proxy and returning it in the enclosed envelope.
Sincerely,
/s/Bradley B. Buechler
Bradley B. Buechler
St. Louis, Missouri President and
January 15, 1999 Chief Executive Officer
<PAGE>
SPARTECH CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 10, 1999
To Our Shareholders:
The enclosed proxy is solicited by the Board of Directors of Spartech
Corporation (the "Company" or "Spartech") for use at the Annual Meeting of
Shareholders of the Company to be held at the Pierre Laclede Center (Saint Louis
Club-16th Floor) 7701 Forsyth Boulevard, Clayton, Missouri 63105, on Wednesday,
March 10, 1999 at 10:00 a.m. and at any and all adjournments thereof. All
expenses incident to the preparation and mailing of this Proxy Statement and
form of proxy will be paid by the Company. In addition to solicitations by
mail, a number of regular employees of the Company may solicit proxies on behalf
of the Board of Directors in person or by telephone. The Company will reimburse
banks, brokerage firms and other custodians, nominees, and fiduciaries for
reasonable costs incurred by them in transmitting proxy materials to the
beneficial owners of the Company's stock.
The persons named in the accompanying proxy were selected by the Board of
Directors of the Company. They have advised the Company of their intentions, if
no contrary instructions are given, to vote the shares represented by all
properly executed and unrevoked proxies received by them for the Board of
Directors' nominees for director and for management proposal 2, as set forth in
the Notice of Annual Meeting of Shareholders, and on any other matter which may
come before the Annual Meeting in accordance with their best judgment.
This Proxy Statement and the proxy solicited hereby are being first sent or
delivered to shareholders of the Company on or about January 15, 1999. Any
shareholder given a proxy has the right to revoke it by notifying the Secretary
of the Company of such revocation, in writing, at any time before its exercise.
Execution of the proxy will not in any way affect the shareholder's right to
attend the Annual Meeting and vote in person.
A copy of the Company's Annual Report to Shareholders for the fiscal year
ended October 31, 1998 accompanies this Proxy Statement.
OUTSTANDING SHARES AND VOTING PROCEDURES
The outstanding voting securities of the Company on January 11, 1999
consisted of 26,945,382 shares of Common Stock, entitled to one vote per share.
With respect to proposal 1, a plurality of the votes present in person or
represented by proxy at the Annual Meeting is required to elect directors.
"Plurality" means the nominees who receive the largest number of votes cast are
elected as directors up to the number of directors scheduled to be elected at
the Annual Meeting. With respect to proposal 2, a majority of the votes present
in person or represented by proxy at the Annual Meeting is required to adopt the
proposal. Abstentions and broker non-votes are counted for the purpose of
determining the presence or absence of a quorum for the transaction of business.
Abstentions are counted in the tabulations of the votes cast on proposals
presented to stockholders, and therefore have the same effect as negative votes.
Broker non-votes, however, are not counted for the purpose of determining
whether a proposal has been approved.
Only shareholders of record at the close of business on January 11, 1999
are entitled to receive notice of and to vote at the Annual Meeting and at any
and all adjournments thereof. A majority of the outstanding shares of stock
entitled to vote must be represented at the Annual Meeting in person or by proxy
to constitute a quorum.
1
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. All directors hold
office for a term of three years. The current Class A directors will hold
office until the Annual Meeting of Shareholders in 2000, the current Class B
directors will hold office until the Annual Meeting of Shareholders in 2001, and
the Class C directors elected at this Annual Meeting will hold office until the
Annual Meeting of Shareholders in 2002, and, in each case, until their
successors are duly elected and qualified.
The Board of Directors has nominated Ralph B. Andy, W.R. Clerihue and
Jackson W. Robinson, present directors of the Company, to be reelected Class C
directors of the Company. Vita International Limited ("Vita"); TCW Special
Placements Fund I, TCW Special Placements Fund II, and TCW Capital, all
California limited partnerships (collectively "The TCW Group" or "TCW"); the
executive officers; and the directors have informed the Company that they intend
to cast their votes, aggregating 14,446,750 in total, "for" these Board
nominees.
Listed below are the members of the Company's Board of Directors, including
the nominees for election to the Board, with certain information about each of
them including their principal occupations for the last five years:
<TABLE>
<CAPTION>
<S> <C> <C>
Spartech
Director
Name, Age Principal Occupation and Other Directorships Since
Ralph B. Andy, 54 Mr. Andy was Chairman and Chief Executive 1998
Officer of Polycom Huntsman, Inc. from
October 1977 to March 1998. He currently
stands for re-election.
Bradley B. Buechler, 50 Mr. Buechler is the President and Chief 1984
Executive Officer of the Company. He is a
CPA, and was Corporate Controller and Vice
President-Finance of the Company from 1981
to 1984. He became Chief Operating Officer
of the Company in 1985, President in 1987,
and Chief Executive Officer effective
October 1, 1991. Mr. Buechler is a member
of the National Board of Directors of the
Society of the Plastics Industry, Inc. and
also serves on several local charitable
boards. His term as director expires at the
2001 Annual Meeting.
Thomas L. Cassidy, 70 Mr. Cassidy has been a Managing Director of 1986
Trust Company of the West and a senior
partner of TCW Capital since 1984. He also
serves on the board of directors of DeVlieg-
Bullard, Inc., and Reunion Industries, Inc.
His term as director expires at the 2000
Annual Meeting.
W.R. Clerihue, 75 Mr. Clerihue has been Chairman of the Board 1990
for the Company since 1991. He is retired
from Celanese Corporation, where he last
served as Executive Vice President and Chief
of Staff. Mr. Clerihue also serves on the
board of directors of Reunion Industries,
Inc. He currently stands for re-election.
John R. Kennedy, 68 Mr. Kennedy is retired President and Chief 1997
Executive Officer of Federal Paper Board
Company, Inc. He is also a director of
International Paper Company, DeVlieg-
Bullard, Inc., Chase Brass Industries, Inc.,
Holnam Inc., Pioneer Plastics, and Chairman
of Georgetown University's board of
directors. His term as director expires at
the 2001 Annual Meeting.
2
<PAGE>
David B. Mueller, 45 Mr. Mueller is the Executive Vice President, 1994
Chief Operating Officer and Secretary of the
Company. He is a CPA, and was previously
Corporate Controller of Apex Oil Company
from 1981 through 1988. Mr. Mueller became
Vice President & Chief Financial Officer of
the Company in 1988 and was named Secretary
in 1991. He became Executive Vice President
and Chief Operating Officer in 1996. His
term as director expires at the 2000 Annual
Meeting.
Calvin J. O'Connor, 46 Mr. O'Connor is a Chartered Accountant in 1998
the United Kingdom. He joined British Vita
PLC and became a member of their board of
directors in June of 1996. In November 1996
he became British Vita's Finance Director.
Prior to joining British Vita, he was the
Group Financial Controller at Courtaulds
Textiles PLC. His term as director expires
at the 2001 Annual Meeting.
Jackson W. Robinson, 56 Mr. Robinson is President of Winslow 1993
Management Company, an operating division of
Eaton Vance Management, having held that
position since 1983. He is also a director
of Jupiter International Green Investment
Trust, Jupiter-European Investment Trust,
and a Trustee of Suffield Academy. Mr.
Robinson currently stands for re-election.
Alan R. Teague, 51 Mr. Teague is a director of Vita 1997
International and also the Secretary of
British Vita PLC. His term as director
expires at the 2000 Annual Meeting.
</TABLE>
The Board of Directors recommends that shareholders vote FOR the Board of
Directors' slate of nominees standing for election.
CERTAIN TRANSACTIONS
Mr. Andy owns 80% of RKL Associates, L.P., which entered into a consulting
agreement with the Company in connection with the Company's purchase of Polycom
Huntsman, Inc. ("Polycom") providing for payments by the Company aggregating
$750,000 over three years. Mr. Andy also owns 50% or less of Plastimerics, Inc.,
which purchased approximately $552,000 of products from Polycom during fiscal
1998, and three other companies which provided approximately $851,000 of
warehousing, trucking, and recycling services during fiscal 1998. The activity
being reported for fiscal 1998 is only for seven months since Polycom was
acquired by the Company on March 31, 1998. The Company's management believes
that these arrangements are on terms no less favorable to the Company than those
which would be obtained from unaffiliated parties.
3
<PAGE>
BOARD COMMITTEES
AND COMPENSATION
There were four meetings of the Board during fiscal 1998. No director
attended fewer than 75% of the formal meetings of the Board and Board Committees
of which he was a member, with the exception of the designees of British Vita,
who, because of long and costly international travel requirements, alternate
their attendance at the formal meetings.
The Board has an Audit Committee, currently consisting of Messrs. Andy,
Clerihue, Kennedy, and Robinson, which formally met twice during fiscal 1998.
The Audit Committee's function is to recommend the appointment of independent
accountants to audit the Company's financial statements and to perform other
services related to the audit; review the scope and results of the audit with
the independent accountants; review with management and the independent
accountants the Company's interim and year-end operating results; consider the
adequacy of the internal accounting and auditing procedures of the Company; and
review the non-audit services to be performed by the independent accountants and
consider the effect of such performance on the accountants' independence.
The Board has a Compensation Committee, currently consisting of Messrs.
Cassidy, Clerihue, Kennedy, O'Connor, and Robinson, which formally met twice
during fiscal 1998. The Compensation Committee's function is to review all
compensation arrangements in excess of $125,000 per annum, as well as any
employment contracts, and recommended annual stock option grants.
The Board has a Nominating Committee, currently consisting of Messrs.
Cassidy, Kennedy, and O'Connor, which formally met once during fiscal 1998. The
Nominating Committee serves the following functions: reviews the size and
composition of the Board; reviews possible director candidates and recommends
director nominations for presentation to shareholders; and reviews assignments
of Board members to various Board committees. Shareholders who wish to recommend
a candidate for election to the Board may submit such recommendation to the
Secretary of the Company. Any recommendation must include name, address,
appropriate background, experience, and other pertinent information on the
proposed candidate and must be received in writing by December 1, 1999 for
consideration by the Nominating Committee for the next Annual Meeting.
An annual fee of $27,000 is paid for the services of each non-management
director, and expenses for attendance at each meeting are reimbursed. In
addition, the Company pays an annual fee of $36,000 to British Vita PLC for
services provided to the Company by its directors. Mr. Clerihue, the Company's
Chairman of the Board, receives an additional $21,000 per annum for service to
the Company. Each non-management director, except for the British Vita
representatives, also receives $1,200 for each Board or Committee Meeting
attended.
Certain non-management directors have received options to purchase Common
Stock of the Company upon membership to the Board and periodically during their
terms as directors. These options were issued outside of the Incentive and
Restricted Stock Option plans of the Company, and the terms were determined at
the time of the grant. In fiscal year 1994, Jackson W. Robinson was granted
30,000 options with a five-year term and an exercise price at the then fair
market value of the Company's Common Stock of $5.00 per share. No options were
granted in fiscal year 1995. In fiscal year 1996, W.R. Clerihue and Jackson W.
Robinson were granted 10,000 and 5,000 options, respectively, with a ten-year
term and an exercise price at the then fair market value of the Company's Common
Stock of $11.00 per share. In fiscal year 1997, John R. Kennedy was granted
30,000 options with a ten-year term and an exercise price at the then fair
market value of the Company's Common Stock of $13.375 per share and W.R.
Clerihue, Jackson W. Robinson, and John R. Kennedy were granted 20,000, 10,000,
and 5,000 options, respectively, with a ten-year term and an exercise price at
the then fair market value of the Company's Common Stock of $15.875 per share.
No options were granted in fiscal 1998.
4
<PAGE>
BOARD COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
To Our Shareholders:
The Compensation Committee of the Board of Directors is responsible for
approving compensation levels for all executive officers and for any employee
with base compensation in excess of $125,000 per annum or with an employment
contract. Our objective is to provide compensation that is fair and equitable
to both the employee and the Company. Consideration is given to the employee's
overall responsibilities, professional qualifications, business experience,
technical expertise, and their resultant combined value to the Company's long-
term performance and growth.
In establishing compensation levels for the Chief Executive Officer and
Chief Operating Officer, we consult independent surveys published by
compensation and benefit consulting firms. Annual bonuses for these two
employees are based on the operating results of the Company. Their total
compensation is established at levels approximating the average reported for
companies of comparable size to Spartech for these respective positions. At the
recommendation of the CEO, the Compensation Committee agreed that no increase in
the base salaries of the CEO and COO was required for 1998 or 1999.
The Compensation Committee periodically reviews the compensation levels
established for each employee for whom we are responsible and approves
adjustments recommended by the Chief Executive Officer to reflect changes in
responsibility for various executives of the Company or economic conditions. We
believe that by providing fair and equitable compensation levels, the Company
will continue to attract and maintain qualified individuals who are dedicated to
the long-term performance and growth of Spartech. The Compensation Committee
also approves the stock options to be awarded to key employees. Stock option
awards are granted to individuals based upon the individual's performance and
the EVA (registered trademark) results of their respective operating unit. In
addition, effective with the stock options granted in November 1998 (fiscal year
1999), the CEO evaluated the Company's methodology for determining stock option
awards based on estimated fair market value of the options granted to employees
and compared these amounts to peer group and industry standards. As a result,
the number of shares granted in November 1998 represent less than half the
options granted in the prior year. We anticipate using this level of grants as
a base for future option awards. In addition, effective with the options
granted in November 1998, all options now include a four year vesting provision.
In December 1996, the Board authorized broadly based stock ownership
guidelines for approximately 75 key managers of the Company. Under the
guidelines adopted by the Board, the Company's Chief Executive Officer is
expected to hold Company Common Stock equal to four times base pay, the Chief
Operating Officer three times base pay, and other key managers up to two times
their base pay. Participants are expected to reach their respective goals over a
four-year period. Unexercised stock options are not counted toward achieving
these targets. A majority of these 75 individuals have met their second year
targets as of December 1998.
Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended (the
"Code"), limits the Company's tax deduction to $1 million per year (the
"Compensation Cap") for certain compensation paid in a given year to the Chief
Executive Officer ("CEO") and the four highest compensated executives other than
the CEO named in the Proxy Statement (the "covered executives"). The code and
regulations issued under the Code exclude from the Compensation Cap amounts
based on attainment of pre-established, objective performance goals, if certain
other requirements are met. The Committee's policy is to structure compensation
programs, including stock option and bonus plan awards, for covered executives
that will be deductible without limitation. The committee also considers it
important to retain flexibility to design compensation programs that recognize a
full range of performance criteria important to the Company's success, even
where compensation payable under such programs may not be fully deductible.
Thomas L. Cassidy W.R. Clerihue
John R. Kennedy Calvin J. O'Connor Jackson W. Robinson
5
<PAGE>
EXECUTIVE COMPENSATION
<TABLE>
Summary Compensation Table
The following table summarizes compensation earned by the Company's Chief
Executive Officer and each other executive officer whose aggregate salary and
bonus exceeds $100,000 annually.
<CAPTION>
Long-Term
Compensation
Name and Fiscal Annual Compensat Options All Other(1)
ion
Principal Position Year Salary Bonus ($) Granted Compensation
($) (#) ($)
<S> <C> <C> <C> <C> <C> <C>
Bradley B. Buechler 1998 $405,000 $697,280 200,000 (2) $82,653
President and Chief 1997 $400,524 $497,010 75,000 $65,661
Executive Officer 1996 $359,423 $344,920 55,000 $60,025
David B. Mueller 1998 $254,807 $418,368 150,000 (2) $49,940
Executive Vice 1997 $246,462 $298,206 60,000 $42,844
President
Chief Operating 1996 $223,078 $206,952 50,000 $38,625
Officer,
and Secretary
Daniel J. Yoder 1998 $156,923 $85,000 15,000 (2) $20,010
Vice President 1997 $147,193 $70,000 9,000 $18,893
Materials
and Technology 1996 $148,077 $ 50,000 14,750 $17,687
Randy C. Martin 1998 $134,615 $65,000 12,000 (2) $18,654
Vice President 1997 $119,616 $40,000 9,000 $16,974
Finance and
Chief Financial 1996 $111,346 $ 27,500 -- $5,166
Officer
David G. Pocost 1998 $121,135 $60,000 12,000 (2) $15,344
Vice President 1997 $104,039 $37,500 7,500 $13,480
Engineering,
Quality and MIS 1996 $80,577 $24,000 5,250 $10,739
</TABLE>
(1) The amounts disclosed in this column for fiscal year 1998 include Company
contributions to non-qualified defined contribution arrangements on behalf of
Mr. Buechler, $62,338; Mr. Mueller, $39,200; Mr. Yoder, $15,000; Mr. Martin,
$15,000, and Mr. Pocost, $11,000.
(2) Following a detail management review of option awards made during the last
ten years, effective with the November 1998 (fiscal 1999) awards the Company has
substantially modified its philosophy on the number of annual option grants per
employee. Therefore, the November 1998 (fiscal 1999) grants to these
individuals were Mr. Buechler, 37,500; Mr. Mueller, 27,500; Mr. Yoder, 7,000;
Mr. Martin, 7,500, and Mr. Pocost, 7,500.
6
<PAGE>
Option Grants
<TABLE>
The following table summarizes option grants made during fiscal 1998 to the
executive officers named above.
<CAPTION>
----------------------------------Individual Grants---------------------------
% of Potential
Number of Total Realizable Value
Securities Options at Assumed Annual
Underlying Granted Rates of Stock
Options to Exercise Expirati Price Appreciation
Name Granted(#) Employee Price on Date For Option Term(1)
s in
Fiscal
Year
5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Bradley B. Buechler 200,000 (2) 25.2% $15.875 11/02/07 $1,996,740 $5,060,132
David B Mueller 150,000 (2) 18.9% $15.875 11/02/07 $1,497,555 $3,795,099
Daniel J. Yoder 15,000 (3) 1.9% $15.875 11/02/02 (3) $116,169 $285,857
Randy C. Martin 12,000 (3) 1.5% $15.875 11/02/02 (3) $86,218 $209,955
David G. Pocost 12,000 (3) 1.5% $15.875 11/02/02 (3) $86,218 $209,955
</TABLE>
(1) The rates of appreciation presented of 5% and 10% are set by the Securities
and Exchange Commission, and therefore, are not intended to forecast future
appreciation of the Company's stock price.
(2) These represent options issued under the Restricted Stock Option Plan where
neither the options or Common Stock acquired may be sold or otherwise disposed
of for three years after the date of grant of the option.
(3) A portion of this grant was issued from the Restricted Stock Option Plan
(Mr. Yoder, 9,000; Mr. Martin, 6,000; and Mr. Pocost, 6,000 expiring on November
2, 2007) where neither the options or Common Stock acquired may be sold or
otherwise disposed of for three years after the date of grant of the option.
Option Exercises and Outstanding Options
<TABLE>
The following table summarizes all options exercised in fiscal 1998 and
unexercised options at the end of fiscal 1998 for the executive officers named
above.
<CAPTION>
Value of
Number of Unexercised
Shares Unexercised "In-the-Money"
Options
Acquired Value at Fiscal Year Options at
On End(2)
Name Exercise Realized($) (All Fiscal Year
(#) (1) Exercisable) End(1)
<S> <C> <C> <C> <C>
Bradley B. 94,500 $1,258,268 960,000 (3) $10,611,875
Buechler
David B. -- -- 425,000(3) $ 3,630,625
Mueller
Daniel J. Yoder 5,000 $66,250 60,750 (4) $549,688
Randy C. Martin 3,000 $26,250 28,000 (4) $166,625
David G. Pocost 3,000 $33,625 25,750 (4) $150,625
</TABLE>
(1) The values represent the difference between the exercise price of the
options and the price of the Company's Common Stock on the date of exercise and
at fiscal year end, respectively.
(2) The Board has resolved that at no time will the total unexercised options to
employees be in excess of 10% of the then outstanding common shares.
(3) These represent options issued under the Restricted Stock Option Plan where
neither the options or Common Stock acquired may be sold or otherwise disposed
of for three years after the date of grant of the option.
(4) A portion of the unexercised options were issued from the Restricted Stock
Option Plan (Mr. Yoder, 9,000; Mr. Martin, 6,000; and Mr. Pocost, 6,000) where
neither the options or Common Stock acquired may be sold or otherwise disposed
of for three years after the date of grant of the option.
7
<PAGE>
Employment Agreements
Messrs. Buechler and Mueller
On November 1, 1997, the Company entered into Amended and Restated
Employment Agreements (the "Agreements") with Messrs. Buechler and Mueller (the
"Employees"), which modified but continued the Employees' existing employment
agreements. Each Agreement will continue until terminated either by the Company
on three years' notice or by the Employee on one year's notice. Notice of
termination may not be given before November 1, 2000, except that if a "Change
of Control" (described below) occurs, the Employee may give notice of
termination at any time on or after November 1, 1998. For 24 months after
termination of the Agreement, the Employee may not disclose any Company trade
secrets, solicit the Company's customers, business or employees, or otherwise
compete directly with the Company.
The Agreements provide for compensation consisting of: (i) annual base
salaries of $390,000 for Mr. Buechler and $250,000 for Mr. Mueller, subject to
periodic review by the Board, (ii) bonuses equal to 1% for Mr. Buechler and 0.6%
for Mr. Mueller of the Company's annual earnings before interest and income
taxes, subject to certain adjustments and exceptions, (iii) one-time stock
option grants of 200,000 shares for Mr. Buechler and 150,000 shares for Mr.
Mueller, at November 1, 1997 which are in addition to options granted under
previous versions of their employment agreements and any other options which the
Board may grant them in the future under the Company's stock option plans, and
(iv) annual pension plan contributions of 15% of base salary plus the amount of
premium that would be paid for term life insurance of $1,250,000 for Mr.
Buechler and $750,000 for Mr. Mueller.
If the Company terminates the Employees' employment for any reason other
than "Cause" (defined below), or if the Employee terminates his employment with
"Justification" (defined below) or with prior notice (as discussed above), then
the Employee will receive a cash severance benefit equal to two times his then
current base salary plus the aggregate amount of the bonuses paid or earned by
the Employee in the two years before the notice of termination is given.
However, if a Change of Control has occurred before the termination, the
severance benefit becomes 2.95 times the sum of base salary plus one-third of
the aggregate amount of bonuses paid or earned by the Employee in the three
years before the notice of termination is given. In either case, if the
severance benefit and any other payments received as a result of the termination
are subject to the excise tax imposed on excessive termination payments under
the Internal Revenue Code, the Company will pay the Employee an additional
severance amount so that the Employee will receive the same net amount he would
have received if there had been no excise tax.
The Agreements define certain terms, as follows:
A "Change of Control" takes place if any of the following occurs: (i) the
Board of Directors approves and recommends to the Company's shareholders (A) any
consolidation or merger of the Company where either the Company is not the
surviving corporation or the Company's shares are exchanged and the shareholders
do not retain the same proportionate voting interest in the Company or its
successor, (B) a sale or other transfer of all or substantially all of the
Company's assets, other than to a subsidiary, or (C) the liquidation or
dissolution of the Company; (ii) any person acquires a majority of the Company's
voting stock; (iii) the Board of Directors approves any transaction whose
purpose or likely effect is to cause the Company's Common Stock to be held by
fewer than 300 persons or not to be listed on any national securities exchange;
or (iv) there is a change in a majority of the Company's Board of Directors
within any 24 consecutive months, unless each new director was approved by a
majority of the continuing directors.
"Cause" for termination of the Employees' employment by the Company occurs
only if the Employee is convicted of a felony, or commits an act or omission
(including failure to follow lawful instructions of the Board of Directors)
resulting or intended to result in his personal gain at the expense of the
Company's property or business. However, the Employee will not be liable merely
for his bad judgment or acts or omissions done in good faith or in connection
with any tender or merger offer or other restructuring proposal.
"Justification" for termination of the Employees' employment by the
Employee occurs only if the Company reassigns or restricts the Employee in a way
inconsistent with his position, duties, responsibilities and status as President
and Chief Executive Officer in the case of Mr. Buechler or as Executive Vice
President and Chief Operating Officer in the case of Mr. Mueller, or fails to
pay the Employee any salary, option or bonus within seven days after the
Employee notifies the Company that such amount is due, or otherwise adversely
affects or materially reduces any other benefits or rights of Employee under the
Agreement.
8
<PAGE>
Messrs. Yoder, Martin, and Pocost
The Company entered into the following employment agreements: with Mr.
Yoder on June 30, 1998 through June 29, 2001; with Mr. Martin on March 31, 1997
through March 30, 1999; with Mr. Pocost on February 1, 1997 through January 31,
1999. The annual base compensation, subject to periodic review for cost of
living and/or merit and other increases for Mr. Yoder, Martin, and Pocost was
$162,500, $120,000, and $105,000, respectively. In addition, the Agreement
requires the Company to maintain term life insurance in the amount of $250,000
for the employee's designated beneficiaries for the term of the Agreement, all
premiums thereon to be paid by the Company. The Agreement provides for annual
bonuses based upon performance and the overall results of the Company's
operations.
COMMON STOCK PERFORMANCE GRAPH
<TABLE>
The following graph compares cumulative total Company shareholder return
for the last five years, with overall market performance, as measured by the
cumulative return of the Standard & Poor's 500 Stock Index and the Standard &
Poor's Specialty Chemicals Index, assuming an initial investment of $100 at the
beginning of the period and the reinvestment of all dividends.
Fiscal Year Ended
<CAPTION>
10/93 10/94 10/95 10/96 10/97 10/98 CAGR*
<S> <C> <C> <C> <C> <C> <C> <C>
Spartech Stock Price $3 3/4 $5 3/4 $6 3/8 $11 $15 7/8 $18 36.9%
Assumed $100
Initial Investment:
Spartech Corporation $100 $153 $170 $297 $435 $500 38.0%
S&P 500 $100 $101 $124 $150 $196 $235 18.6%
S&P Specialty $100 $85 $101 $111 $125 $111 2.1%
Chemicals Index
</TABLE>
*Compound annual growth rate.
9
<PAGE>
SECURITY OWNERSHIP
<TABLE>
The table set forth below identifies the aggregate shares of Common Stock
beneficially owned by each director, by each executive officer, by the executive
officers and directors as a group, and by each person known to the Company as of
December 31, 1998 to be the beneficial owner of more than 5% of the 26,871,350
shares of Common Stock outstanding as of that date.
<CAPTION>
Number Percentage
of of
Common Common
Shares Shares
Beneficially Beneficially
Owned(1) Owned
<S> <C> <C>
Directors and Executive Officers:
Calvin J. O'Connor / Alan R. Teague 11,915,858(2) 44.3%
Thomas L. Cassidy 2,005,825(3) 7.5%
Bradley B. Buechler 1,089,165(4) 3.9%
David B. Mueller 460,935(5) 1.7%
Ralph B. Andy 286,761(6) 1.1%
Daniel J. Yoder 69,866(7) *
W.R. Clerihue 60,000(8) *
John R. Kennedy 40,000(9) *
David G. Pocost 31,078(10) *
Jackson W. Robinson 36,000(11) *
Randy C. Martin 29,762(12) *
All Directors and Executive
Officers as a Group (12 persons) 16,025,250(13) 56.3%
Other Beneficial Owners
In Excess of 5% of the
Common Shares Outstanding:
Vita International Limited
Soudan Street
Middleton, Manchester
M24 2DB England 11,915,858(2) 44.3%
The TCW Group
865 South Figueroa Street, Suite 1800
Los Angeles, CA 90017 2,005,825(3) 7.5%
FMR Corp.
Fidelity Management &
Research Company
82 Devonshire Street
Boston, MA 02109 1,636,500(14) 6.1%
</TABLE>
10
<PAGE>
Notes To Security Ownership Table:
* Denotes that the percentage of common shares beneficially owned is less
than 1%.
(1) Includes shares issuable upon exercise of options as noted for the
respective owners.
(2) Messrs. O'Connor and Teague, each a director of the Company, are also
directors of Vita International Limited and O'Connor is a director of British
Vita PLC; as such, these amounts represent Common Stock owned by Vita
International Limited.
(3) The TCW Group is comprised of TCW Special Placements Fund I, TCW Special
Placements Fund II, and TCW Capital, all California limited partnerships. Mr.
Cassidy, a director, is Managing Director of Trust Company of the West and is a
Senior Partner of TCW Capital; as such, this amount represents the Common Stock
owned by TCW Group, Inc. The shares of Common Stock are held beneficially by TCW
Special Placements Fund I (1,586,567 shares), TCW Special Placements Fund II
(406,966 shares), and TCW Capital (12,292 shares), as Investment Manager,
pursuant to an investment management agreement dated as of June 30, 1987. The
TCW Group, Inc. owns 100% of the stock of TCW Asset Management Company
("TAMCO"). TAMCO is the managing general partner of TCW Capital, a general
partnership. TCW Capital is a general partner of TCW Special Placements Fund I
and TCW Special Placements Fund II. An investment committee of TAMCO controls
the investment decisions and voting of the shares of Common Stock beneficially
owned by The TCW Group, Inc.; the committee includes Mr. Cassidy and two other
members unknown to the Company.
(4) Includes 960,000 shares issuable upon exercise of options presently
exercisable.
(5) Includes 425,000 shares issuable upon exercise of options presently
exercisable.
(6) Includes 1,500 shares owned by Mr. Andy's daughter, and 285,261 owned by
RBA Partners, L.P. Mr. Andy is the sole shareholder of RBA Investments, Inc., a
0.1% general partner of RBA Partners, L.P. As such, Mr. Andy, through RBA
Investments, Inc. has investment and voting power over the shares owned by RBA
Partners, L.P.
(7) Includes 50,750 shares issuable upon exercise of options presently
exercisable.
(8) Includes 30,000 shares issuable upon exercise of options presently
exercisable.
(9) Includes 35,000 shares issuable upon exercise of options presently
exercisable.
(10) Includes 24,750 shares issuable upon exercise of options presently
exercisable.
(11) Includes 29,000 shares issuable upon exercise of options presently
exercisable.
(12) Includes 24,000 shares issuable upon exercise of options presently
exercisable.
(13) Includes 1,578,500 shares issuable upon exercise of options presently
exercisable.
(14) Based on information presented as of December 31, 1998 in FMR Corp.'s
latest available Schedule 13G, FMR Corp. beneficially owned 1,636,500 shares of
Common Stock including 1,077,500 shares beneficially owned by Fidelity
Management & Research Company as a result of it serving as investment adviser to
various investment companies and other funds and 559,000 beneficially owned by
Fidelity Management Trust Company as trustee or managing agent for various
private investment accounts and other funds. FMR Corp. has sole voting power
with respect to the 559,000 shares and sole investment power with respect to all
1,636,500 shares.
11
<PAGE>
PROPOSAL 2: TO RATIFY APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company, on the recommendation of the Audit
Committee, appointed Arthur Andersen LLP as independent auditors of the Company
for fiscal 1999. The Board proposes that the shareholders ratify at this Annual
Meeting the appointment of Arthur Andersen LLP as independent auditors for
fiscal 1999. Arthur Andersen LLP has served as the Company's independent
auditors since fiscal 1986. The Company has had no disagreements with Arthur
Andersen LLP on any matters of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures. In the event a majority
of the votes cast at the Annual Meeting are not voted in favor of the
appointment, the Board will reconsider its selection.
Arthur Andersen LLP has advised the Company that its representatives will
be present at the Annual Meeting, where they will have the opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.
The Board of Directors recommends that shareholders vote FOR this proposal.
DISCRETIONARY VOTING OF PROXIES ON OTHER MATTERS
Management does not intend to bring before the Annual Meeting any matters
other than those disclosed in the Notice of Annual Meeting of Shareholders, and
it does not know of any business which persons other than management intend to
present at the meeting. Should any other matter requiring a vote of the
shareholders arise, the proxies in the enclosed form confer upon the person or
persons entitled to vote the shares represented by such proxies discretionary
authority to vote such shares in respect of any such other matter in accordance
with their best judgment.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own beneficially more than ten
percent of a registered class of the Company's equity securities to file with
the Securities and Exchange Commission ("SEC") and the New York Stock Exchange
initial reports of ownership and reports of changes in ownership of common stock
and other equity securities of the Company. Such officers, directors and greater
than ten percent beneficial owners are required by SEC regulations to furnish
the Company with copies of all section 16(a) forms filed by them.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations from its directors
and executive officers that no other reports were required, all Section 16(a)
filing requirements applicable to its officers, directors and greater than ten
percent beneficial owners were complied with on a timely basis during the fiscal
year ended October 31, 1998.
12
<PAGE>
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders intended for inclusion in the Company's proxy
statement for the 2000 Annual Meeting must be received by the Company no later
than September 17, 1999. In addition, if a shareholder fails to notify the
Company on or before December 1, 1999 of a proposal which such shareholder
intends to present at the Company's 2000 Annual Meeting other than through
inclusion of such proposal in the Company's proxy materials for the meeting,
then management may use their discretionary voting authority with respect to
such proposal if it is presented at the meeting.
Shareholders are urged to sign, date, and return promptly the enclosed
proxy in the accompanying envelope, which requires no postage if mailed in the
United States. Your cooperation is appreciated.
By Order of the Board of Directors
/s/David B. Mueller
David B. Mueller
Executive Vice President,
Chief Operating Officer
January 15, 1999 and Secretary
13
<PAGE>
Notice of Annual Meeting
and Proxy Statement
Annual Meeting of Shareholders
March 10, 1999
SPARTECH CORPORATION
7733 FORSYTH * SUITE 1450 * CLAYTON, MISSOURI 63105-1817
<PAGE>
PROXY CARD
SPARTECH CORPORATION PROXY
1999 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" EACH ITEM.
ITEM 1 - ELECTION OF DIRECTORS
Election of three Class C Directors to serve until the 2002 Annual Meeting.
NOMINEES: Ralph B. Andy, W.R. Clerihue and Jackson W. Robinson
/ / FOR all the nominees listed above
/ / WITHHOLD AUTHORITY to vote for all nominees listed above
/ / WITHHOLD AUTHORITY to vote for the nominee(s)that have a line through the
name above
ITEM 2 - RATIFY INDEPENDENT AUDITORS
/ / FOR
/ / AGAINST
/ / ABSTAIN
ITEM 3 - Transact Other Business
The proxies are authorized to vote, in their discretion, upon such other
business as properly may come before the Annual Meeting.
/ / AUTHORITY GRANTED
/ / AUTHORITY WITHHELD
Dated:____________, 19___
_________________________
Signature of Shareholder
_________________________
Signature if held jointly
(Front of Card)
Please sign exactly as the name appears hereon. When shares are held by joint
tenants, both should sign. When signing as an attorney, executor,
administrator, trustee, or guardian, please give full title as such. If a
corporation, please sign full corporate name by President for other authorized
officer. If a partnership, please sign in partnership name by authorized
person.
YOUR VOTE IS IMPORTANT TO US. PLEASE COMPLETE, DATE AND SIGN THE ABOVE PROXY
CARD AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE.
The undersigned hereby appoints W.R. Clerihue and Bradley B. Buechler, and
each of them with power to act alone and with full power of substitution and
revocation, as attorneys and proxies of the undersigned to attend the Annual
Meeting of Shareholders of Spartech Corporation ("the Company") to be held at
the Pierre Laclede Conference Center (Saint Louis Club-16th Floor) 7701 Forsyth
Boulevard, Clayton, Missouri, 63105, on Wednesday, March 10, 1999, commencing at
10:00 a.m., CST, and at any and all adjournments thereof, and to vote all shares
of Common Stock of the Company which the undersigned is entitled to vote with
respect to the following matters, all as set forth in the Notice of Annual
Meeting of Shareholders and Proxy Statement, dated January 15, 1999.
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
"FOR" ITEMS 1 AND 2 AND IN ACCORDANCE WITH THEIR BEST JUDGMENT UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
(Back of Card)
