<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 240.14a-11(c) or Rule 240.14a-12
Sterling Chemicals, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
----------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------------
[_] 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>
STERLING CHEMICALS, INC.
1200 SMITH STREET
SUITE 1900
HOUSTON, TEXAS 77002-4312
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 24, 1996
To the Stockholders of Sterling Chemicals, Inc.:
An Annual Meeting of Stockholders of Sterling Chemicals, Inc. (the "Company")
will be held at Texas Commerce Center Auditorium, 601 Travis Street, Houston,
Texas at 9:00 A.M., Houston time, on Wednesday, January 24, 1996 for the
following purposes:
1. To elect seven directors to serve until the 1997 Annual Meeting and
until their successors are duly elected and qualified;
2. To consider and act upon a proposal to ratify the appointment of
Arthur Andersen LLP as the independent auditors of the books and accounts
of the Company for the fiscal year ending September 30, 1996; and
3. To consider and act upon such other business as may properly come
before the meeting or any adjournment(s) thereof.
Stockholders of record at the close of business on November 27, 1995 are
entitled to notice of and to vote at the meeting and any adjournment(s)
thereof.
You are cordially invited to attend the meeting. Whether or not you are
planning to attend the meeting, you are urged to complete, date and sign the
enclosed proxy and return it promptly in the accompanying envelope.
By Order of the Board of Directors
/s/ F. MAXWELL EVANS
F. Maxwell Evans
Secretary
Houston, Texas
December 21, 1995
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
TO ENSURE REPRESENTATION AT THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE WHETHER OR NOT
YOU INTEND TO BE PRESENT AT THE MEETING. NO ADDITIONAL POSTAGE IS NECESSARY IF
MAILED IN THE UNITED STATES.
- --------------------------------------------------------------------------------
<PAGE>
STERLING CHEMICALS, INC.
1200 SMITH STREET
SUITE 1900
HOUSTON, TEXAS 77002-4312
(713) 650-3700
December 21, 1995
----------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 24, 1996
INTRODUCTION
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of Sterling Chemicals, Inc. (the
"Company") for use at the Annual Meeting of Stockholders of the Company to be
held on Wednesday, January 24, 1996, and at any adjournment(s) thereof (the
"Annual Meeting") for the purposes set forth in this Proxy Statement and the
accompanying Notice. The Proxy Statement and the enclosed form of proxy are
first being sent to stockholders on or about December 21, 1995.
PROXIES
The shares represented by any proxy in the enclosed form, if such proxy is
properly executed and is received by the Company prior to or at the Annual
Meeting, will be voted in accordance with the specifications made thereon.
Proxies that are properly signed and returned but on which no specification has
been made by the stockholder will be voted for the election to the Board of
Directors of the nominees named herein and in favor of ratification of the
appointment of Arthur Andersen LLP as the independent auditors of the books and
accounts of the Company for the fiscal year ending September 30, 1996. The
enclosed form of proxy may be revoked at any time prior to the exercise thereof
by executing a new proxy with a later date, by voting in person at the Annual
Meeting, or by giving written notice to the Secretary of the Company of
revocation at any time before the proxy is voted at the Annual Meeting.
VOTING SECURITIES
Stockholders of record at the close of business on November 27, 1995 are
entitled to notice of and to vote at the Annual Meeting and any adjournment(s)
thereof. As of November 27, 1995, the issued and outstanding voting securities
of the Company consisted of 55,673,991 shares of common stock, par value $.01
per share (the "Common Stock"). Each share of Common Stock is entitled to one
vote on all matters that may properly come before the Annual Meeting. In the
election of directors, each share is entitled to cast one vote for each
director to be elected; cumulative voting is not permitted.
<PAGE>
QUORUM AND OTHER MATTERS
The presence at the Annual Meeting, in person or by proxy, of the holders of
a majority of the outstanding shares of Common Stock is necessary to constitute
a quorum. Shares of Common Stock represented by a properly signed and returned
proxy will be counted as present at the Annual Meeting for purposes of
determining a quorum, without regard to whether the proxy is marked as casting
a vote or abstaining. Shares of Common Stock held by nominees that are voted on
at least one matter coming before the Annual Meeting will also be counted as
present for purposes of determining a quorum, even if the beneficial owner's
discretion has been withheld (a "broker non-vote") for voting on some or all
other matters.
Directors will be elected by a favorable vote of a plurality of the shares of
Common Stock present, in person or by proxy, at the Annual Meeting and entitled
to vote. Accordingly, abstentions or broker non-votes will not affect the
election of the candidates receiving the plurality of votes.
All other matters to come before the Annual Meeting require the approval of a
majority of the shares of Common Stock present, in person or by proxy, at the
Annual Meeting and entitled to vote. Therefore, abstentions will have the same
effect as votes against the proposals on such matters. Broker non-votes,
however, will be deemed shares not present to vote on such matters, and
therefore will not count as votes for or against the proposals, and will not be
included in calculating the number of votes necessary for approval of such
matters.
Votes at the Annual Meeting will be tabulated by an Inspector of Election
appointed by the Company.
The Board of Directors is not aware of any matters that are expected to come
before the Annual Meeting other than those referred to in this Proxy Statement.
If any other matter should come before the Annual Meeting, the persons named in
the accompanying proxy intend to vote such proxies in accordance with their
best judgment.
ELECTION OF DIRECTORS
Directors will be elected by the favorable vote of a plurality of the shares
of Common Stock present, in person or by proxy, at the Annual Meeting and
entitled to vote. The Board of Directors recommends a vote FOR each of the
nominees listed and, unless authority to vote for the election of directors is
withheld as to any or all nominees, all shares represented by proxies will be
voted for the election of the nominees listed. If authority to vote for the
election of directors is withheld as to any but not all of the nominees listed,
all shares represented by any such proxy will be voted for the election of the
nominees as to whom authority is not withheld. If a nominee becomes unavailable
for any reason before the election, the shares represented by the proxies will
be voted for such person, if any, as may be designated by the Board of
Directors. However, the Board of Directors has no reason to believe that any
nominee will be unavailable. Any vacancy occurring following the election of
directors may be filled by the Board of Directors.
2
<PAGE>
NOMINEES FOR ELECTION
All members of the Board of Directors of the Company will be elected to hold
office until the next annual meeting of stockholders and until their respective
successors are duly elected and have qualified. All seven nominees currently
serve as directors of the Company. The following table sets forth information
with respect to each nominee for election as a director which has been
furnished by each such nominee. For more detailed information with respect to
Common Stock ownership by nominees, see the table in the section of this Proxy
Statement captioned "Principal Stockholders", including the footnotes thereto.
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK OWNED
BENEFICIALLY,
DIRECTLY OR
INDIRECTLY, AS OF PERCENT
NAME AND AGE PRINCIPAL OCCUPATION (1) NOVEMBER 27, 1995 OF CLASS
------------ ------------------------ ----------------- --------
<S> <C> <C> <C>
Gordon A. Cain (83)..... Chairman of the Board of the 6,632,850 11.9
Company(2)
J. Virgil Waggoner (68). President and Chief Executive Officer 4,112,438 7.4
of the Company
William A. McMinn (65).. Chairman of the Board of Arcadian 84,579 *
Corporation(3)
James J. Kerley (73).... Financial Consultant(4) 144,579 *
Gilbert M. A. Portal President of GMH International(5) -- *
(65)...................
Frank J. Pizzitola (72). Limited Managing Director of Lazard 10,000 *
Freres & Co., LLC(6)
Raymond R. Knowland Industrial Consultant(7) 2,500 *
(65)...................
</TABLE>
- --------
* Less than one percent.
(1) Unless otherwise indicated below, each director has held his position in
his principal occupation for more than five years. Except for Messrs.
Pizzitola and Knowland, who have served as directors from October 1992 and
December 1992, respectively, all nominees have served continuously as
directors since 1986. Additionally, Messrs. Cain and Waggoner have served
continuously since 1986 in their positions of Chairman of the Board of the
Company and President and Chief Executive Officer of the Company,
respectively. For background information on Mr. Waggoner, see the section
of this Proxy Statement captioned "Executive Officers of the Company."
(2) Mr. Cain was Chairman of the Board of The Sterling Group, Inc., a firm
organized in 1982 that specializes in leveraged acquisitions, from August
1982 until December 31, 1992. Prior to organizing The Sterling Group, Inc.,
Mr. Cain was involved in the purchase of a variety of businesses and
provided consulting services to these and other companies. Mr. Cain was the
Chairman of the Board of Vista Chemical Company from July 1984 until
October 1986 and Chairman of the Board of Cain Chemical, Inc. from its
organization in March 1987 until its acquisition by Occidental Petroleum
Corporation in May 1988. Mr. Cain has been on the Board of Directors of
Arcadian Corporation since May 1989 and Atlantic Coast Airlines, Inc. since
November 1991. Mr. Cain has been Chairman of the Board of Ultrair, Inc.
since November 1992. Mr. Cain is President of Beta Consulting, Inc., a
consulting and investment company and became Chairman of the Board of
Agennix Corporation and Lexicon Genetics in 1994 and 1995, respectively,
both start-up biomedical companies. Mr. Cain has served as Chairman of the
Company's Board of Directors since 1986.
(3) Mr. McMinn was Corporate Vice President and Manager of the industrial
chemical group of FMC Corporation, a manufacturer of machinery and chemical
products, from 1973 through 1985, when he retired. He became President and
Chief Executive Officer of Cain Chemical, Inc., a producer of
petrochemicals, in 1987 and served in that capacity until its acquisition
by Occidental Petroleum in May 1988. He became Chairman of the Board of
Directors of Arcadian Corporation, a fertilizer manufacturer, in August
1990. He has been a director of PM Holdings Corporation and its principal
operating subsidiary, Purina Mills, Inc., a leading manufacturer of animal
nutrition products, since October 1993.
3
<PAGE>
(4) Mr. Kerley has principally been a financial consultant since his retirement
in January 1986. From January 1993 through December 1994, however, he
served as Chairman of the Board of Rohr, Inc. From September 1981 through
December 1985 he was Vice Chairman of the Board of Directors and Chief
Financial Officer of Emerson Electric Co. For eleven years prior thereto,
Mr. Kerley was Chief Financial Officer of Monsanto Company. Mr. Kerley is a
director of Atlantic Coast Airlines, Inc., Borg Warner Automotive, Inc., DT
Industries, Inc. and ESCO Electronics Corporation. During the past five
years, Mr. Kerley has been, but is no longer, a member of the Boards of
Directors of various other corporations, including Mercantile
Bancorporation, Mercantile Bank, N.A., GenCorp, Rohr Industries, Inc.,
Cetus Corporation, Kellwood Company and Cyprus Minerals.
(5) Mr. Portal was President of Elf Aquitaine Petroleum, an oil and gas
exploration and production company and a division of Elf Aquitaine, Inc.,
and Senior Vice President of Elf Aquitaine, Inc. from 1982 to 1989. Mr.
Portal was Chairman and Chief Executive Officer of Elf Exploration, Inc.
from 1989 to 1990. In February 1990, he became Secretary General of the
European Petroleum Industry Association, a position he held until June
1995. In July 1995, Mr. Portal became President of GMH International, an
international oil and gas consulting firm. He is currently a director of
Sonat Offshore Drilling, Inc.
(6) Mr. Pizzitola has been a Limited Managing Director of Lazard Freres & Co.,
LLC, New York since January 1994 and was a General Partner thereof from
1973 through 1993. Mr. Pizzitola has been, but is no longer, a member of
the Boards of Directors of I-T-E Imperial, Allied Chemical Co., Pirelli
Enterprises Corp., Grand Metropolitan plc, Lyonnaise des Eaux, Westmark
International, Inc. and UWR Corporation. He is currently a director of
Lyonnaise American Holdings, Inc. and Sipex Corporation.
(7) Mr. Knowland held various directorships and executive positions for British
Petroleum Company plc ("BP") and certain of its subsidiaries from 1980
until April 1, 1992, including his positions as a Managing Director of BP
from March 1990 to March 1992, Chief Executive Officer of BP Chemicals
(International) Ltd. from December 1983 through March 1990 and Chairman
thereof from March 1990 to March 1992. Since that time he has been an
industrial consultant. He is currently a director of Laporte plc, British
Nuclear Fuels plc, Sentrachem International Holdings Ltd. and the British
Standards Institution.
INFORMATION CONCERNING OPERATION OF THE BOARD OF DIRECTORS
In order to facilitate the various functions of the Board of Directors, the
Board has created two committees: an Audit Committee and a Compensation
Committee. The Board does not have a nominating committee.
The members of the Audit Committee are Messrs. Kerley (Chairman), Portal,
Pizzitola and Knowland. The functions of the Audit Committee are to recommend
to the Board of Directors the retention or discharge of the Company's
independent auditors; review and approve the engagement of the independent
auditors to conduct audits of the Company, including the scope, extent and
procedures of the audits and the fees to be paid therefor; review, in
consultation with the independent auditors, the audit results and their
proposed opinion letters or audit reports and any related management letters;
review and approve the audited financial statements of the Company; consult
with the independent auditors and management of the Company, together or
separately, on the adequacy of internal accounting controls and review the
results thereof; review the independence of the independent auditors; review
and approve the engagement of the independent auditors for non-audit services;
direct and supervise investigations into matters within the scope of the Audit
Committee's duties; and perform such other functions as may be necessary or
appropriate in the efficient discharge of its duties.
The members of the Compensation Committee are Messrs. McMinn (Chairman),
Cain, Portal, Pizzitola and Knowland. The functions of the Compensation
Committee include discussing, modifying (if appropriate) and approving the
recommendations of management with regard to the compensation arrangements of
the
4
<PAGE>
Company's Chief Executive Officer and other executive officers, recommending
and administering those employee benefit plans that provide benefits to the
Company's executive officers and performing such other functions as may be
necessary or appropriate in the efficient discharge of its duties.
During the year ended September 30, 1995, the Board of Directors held five
meetings, the Audit Committee held three meetings and the Compensation
Committee held two meetings. No director attended fewer than 75% of all
director and committee meetings.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid by the Company for the
three fiscal years ended September 30, 1995, to (i) its Chief Executive Officer
and (ii) its four most highly compensated executive officers whose salary and
bonus received from the Company for services rendered during fiscal 1995
exceeded $100,000 and who were serving as executive officers at the end of
fiscal 1995 (collectively, the "Named Executive Officers"). The Company's
executive officers, including the Named Executive Officers, are referred to
collectively as the "Executive Officers."
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------
ANNUAL
COMPENSATION(3) AWARDS PAYOUTS
----------------- ------------------------------- ------------
RESTRICTED SECURITIES
STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS AWARD(S) OPTIONS/SARS PAYOUTS COMPENSATION
POSITION YEAR ($)(1) ($)(2) ($) (#) ($) ($)(4)
------------------ ---- -------- -------- ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Virgil Waggoner,..... 1995 $325,000 $506,851 $ -0- -0- $-0- $ 9,675
President and 1994 279,166 134,987 -0- -0- -0- 1,916
Chief Executive Officer 1993 275,000 -0- -0- -0- -0- 11,452
Robert W. Roten,........ 1995 205,000 266,394 -0- 20,000/-0- -0- 9,364
Executive Vice
President and 1994 177,500 71,579 -0- -0- -0- 8,817
Chief Operating Officer 1993 175,000 -0- -0- -0- -0- 9,450
Robert N. Bannon,....... 1995 180,000 233,906 -0- 15,000/-0- -0- 9,045
President--Sterling 1994 152,500 61,353 -0- -0- -0- 7,561
Pulp Chemicals, Ltd. 1993 150,000 -0- -0- -0-/262,500 -0- 8,100
Richard K. Crump,....... 1995 180,000 233,906 -0- 15,000/-0- -0- 9,045
Vice President-- 1994 152,500 61,353 -0- -0- -0- 7,561
Commercial 1993 150,000 -0- -0- -0- -0- 8,100
Jim P. Wise,............ 1995 180,000 413,906(5) 186,975 12,500/-0- -0- 1,620
Vice President--Finance 1994 3,409 -0- -0- -0- -0- 31
and Chief Financial
Officer 1993 -0- -0- -0- -0- -0- -0-
</TABLE>
- --------
(1) Includes amounts deferred under the Company's 401(k) Savings and Investment
Plan.
(2) Paid pursuant to the Company's Profit Sharing Plan.
(3) No Named Executive Officer received any perquisites and other personal
benefits the aggregate amount of which exceeded the lesser of either
$50,000 or 10% of the total annual salary and bonus reported for 1995 in
the Summary Compensation Table.
(4) For fiscal year 1995, All Other Compensation includes matching
contributions paid by the Company pursuant to the Company's 401(k) Savings
and Investment Plan, as follows: Mr. Waggoner, $6,750, Mr. Roten, $7,519,
Mr. Bannon, $7,425, Mr. Crump, $7,425 and Mr. Wise, $0; and premiums for
group term life insurance paid by the Company as follows: Mr. Waggoner,
$2,925, Mr. Roten, $1,845, Mr. Bannon, $1,620, Mr. Crump, $1,620 and Mr.
Wise, $1,620.
(5) In addition to payments pursuant to the Company's profit sharing plan, this
amount includes an additional $90,000 in cash and the value of 12,000
shares of Common Stock awarded to Mr. Wise. On the date of the award, the
fair market value of the Common Stock was $7.50 per share.
5
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following sets forth certain information relating to options granted in
fiscal 1995 to purchase shares of Common Stock of the Company.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
PERCENT OF RATES
NUMBER OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE(1) EXPIRATION --------------------
NAME GRANTED (#) FISCAL YEAR (PER SHARE) DATE(3) 0% 5% 10%
---- ----------- ------------ ----------- --------------- ---- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Virgil Waggoner...... -0- -0- -- -- $-0- $ -0- $ -0-
Robert W. Roten......... 20,000 24% $13.50 October 1, 2004 -0- 169,802 430,310
Robert N. Bannon........ 15,000 18% 13.50 October 1, 2004 -0- 127,351 322,733
Richard K. Crump........ 15,000 18% 13.50 October 1, 2004 -0- 127,351 322,733
Jim P. Wise............. 12,500 15% 13.50 October 1, 2004 -0- 106,126 268,944
</TABLE>
- --------
(1) Options were granted at 100% of fair market value on the date of grant.
(2) The dollar amounts set forth under these columns are the result of
calculations of assumed annual rates of stock price appreciation from
October 1, 1994 (the date of grant of the options awarded) to October 1,
2004 (the date of expiration of such options) of 0%, 5% and 10%. Based on
these assumed annual rates of stock price appreciation of 0%, 5% and 10%,
respectively, the Company's stock price at October 1, 2004 is projected to
be $13.50, $21.99 and $35.02, respectively. These assumptions are not
intended to forecast future appreciation of the Company's stock price. The
Company's stock price may increase or decrease in value over the time
period set forth above. Optionees will not realize value under their option
grants without stock price appreciation which will benefit all
stockholders. The potential realizable value computation does not take into
account federal or state income tax consequences of option exercises or
sales of appreciated stock.
(3) The options granted on October 1, 1994 are exercisable from the third
through the tenth anniversaries of the date of grant.
AGGREGATED SAR EXERCISES IN FISCAL 1995 AND YEAR-END OPTION/SAR VALUES
The following table provides information on SAR exercises in fiscal 1995 by
the Named Executive Officers and the value of such officers' unexercised
options and SARs at September 30, 1995.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
OPTIONS/SARS AT SEPTEMBER 30, 1995
SHARES VALUE AT SEPTEMBER 30, 1995 (#) ($)(2)
ACQUIRED ON REALIZED -------------------------- -------------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ --------- ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. Virgil Waggoner...... -0- $ -0- -0- -0- $-0- $ -0-
Robert W. Roten......... -0- -0- -0- 20,000/-0- -0- -0-/-0-
Robert N. Bannon........ -0- 1,004,883 -0- 15,000/131,250(1) -0- -0-/557,813
Richard K. Crump........ -0- -0- -0- 15,000/-0- -0- -0-/-0-
Jim P. Wise............. -0- -0- -0- 12,500/-0- -0- -0-/-0-
</TABLE>
- --------
(1) In September, 1992, the Company initiated a Stock Appreciation Rights
("SAR") Program (the "Program") pursuant to the Omnibus Stock and Incentive
Plan, to provide additional compensation to certain Executive Officers and
other employees of the Company. Under the Program, the Company offered each
participant the right to purchase a specified number of shares of the
Company's Common Stock and granted 20 SARs for each share purchased. In
fiscal 1993, Mr. Bannon purchased 13,125 shares and was granted 262,500
SARs. During fiscal 1995, the participants unanimously agreed, at the
Company's request, to amend the Program to, among other things, limit the
potential value of the SARs by placing a ceiling on the amounts that the
Company may be required to pay upon exercise of the SARs. Under the amended
Program, Mr. Bannon exercised 25% of his SARs on October 10, 1994 and an
6
<PAGE>
additional 25% of his SARs on September 1, 1995 for the fixed amount payable
to him of $9.00 and $6.31 per SAR, respectively, and is permitted to
exercise up to 50% and 100% of his remaining SARs on September 1, 1996, and
September 1, 1997, respectively, limited by the maximum amount payable on
such dates of $10.00 per SAR and $11.00 per SAR, respectively, provided he
is still employed by the Company on such date. The amounts indicated in the
column entitled "Value Realized ($)" represent the amount paid to the holder
of the SARs upon exercise thereof.
(2) An "In-the-Money" option or SAR is an option or SAR for which the market
price on the date the option or SAR was granted is less than the market
price of the Common Stock at September 30, 1995. All of the value shown
reflects stock price appreciation since the granting of the option or SAR,
as the case may be.
PENSION PLANS
The Company has established a defined benefit Salaried Employees' Pension
Plan (the "Pension Plan") covering substantially all salaried employees,
including the Company's Executive Officers. Pension costs are borne solely by
the Company and determined annually on an actuarial basis with contributions
made accordingly. The pension benefits payable under the Pension Plan for
individuals hired by Monsanto Company ("Monsanto") (from which the Company
acquired its Texas City facilities) prior to April 1, 1986 are based on such
individual's vesting percentage times years of service multiplied by 1.4% of
Average Earnings (as defined). Individuals hired by Monsanto on or after April
1, 1986 and other individuals hired by the Company receive a pension payable
under the Pension Plan based on such individual's vested percentage times years
of service multiplied by 1.2% of Average Earnings (as defined). Average
Earnings excludes, among other things, amounts received under the Company's
Profit Sharing Plan and is generally defined as the greater of (i) average
compensation received during the highest three of the final five calendar years
of employment or (ii) average compensation received during the final 36 months
of employment. Compensation covered by the Pension Plan consists of base salary
only.
For those Company employees who were (i) employed by the Company prior to
October 1, 1986, (ii) previously employed by Monsanto and (iii) accruing a
Monsanto pension plan benefit, the Company recognizes Monsanto pension plan
years of service offset by any vested benefit under the Monsanto pension plan.
For those Company employees as of August 21, 1992 who were (i) previously
employed by Albright & Wilson based in the United States and (ii) participants
in the Tenneco, Inc. Retirement Plan, the Company recognizes Tenneco, Inc.
Retirement Plan years of service offset by any vested benefit under that plan.
A participant will become vested only after five years of service.
Table A illustrates the annual normal retirement benefits payable under the
Pension Plan based on 1.4% of Average Earnings, without reduction for any
offset amounts. Table B illustrates the annual normal retirement benefits
payable under the Pension Plan based on 1.2% of Average Earnings, without
reduction for any offset amounts. Such benefit levels assume retirement at age
65, the years of service shown, continued existence of the Pension Plan without
substantial change and payment in the form of a single life annuity.
TABLE A
<TABLE>
<CAPTION>
YEARS OF SERVICE
-------------------------------
AVERAGE EARNINGS 10 20 30 40
---------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
$ 50,000.................................. $ 7,000 $14,000 $21,000 $28,000
100,000.................................. 14,000 28,000 42,000 56,000
150,000.................................. 21,000 42,000 63,000 84,000
200,000.................................. 21,000 42,000 63,000 84,000
250,000.................................. 21,000 42,000 63,000 84,000
300,000.................................. 21,000 42,000 63,000 84,000
350,000.................................. 21,000 42,000 63,000 84,000
400,000.................................. 21,000 42,000 63,000 84,000
</TABLE>
7
<PAGE>
TABLE B
<TABLE>
<CAPTION>
YEARS OF SERVICE
-------------------------------
AVERAGE EARNINGS 10 20 30 40
---------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
$ 50,000 $ 6,000 $12,000 $18,000 $24,000
100,000.................................. 12,000 24,000 36,000 48,000
150,000.................................. 18,000 36,000 54,000 72,000
200,000.................................. 18,000 36,000 54,000 72,000
250,000.................................. 18,000 36,000 54,000 72,000
300,000.................................. 18,000 36,000 54,000 72,000
350,000.................................. 18,000 36,000 54,000 72,000
400,000.................................. 18,000 36,000 54,000 72,000
</TABLE>
The benefits under the Pension Plan are computed by multiplying Average
Earnings by credited years of service times the respective percentages referred
to above. The benefits payable under the Pension Plan are not reduced by any
benefits payable under Social Security or other offset amounts. The benefits
payable to Table A participants are reduced by the amount of pension benefits
which participants may be entitled to under Monsanto's pension plan. The number
of credited years of service of each of the Named Executive Officers are as
follows: J. Virgil Waggoner--39 years; Robert W. Roten--34 years; Richard K.
Crump--9 years; Robert N. Bannon--24 years; and Jim P. Wise--1 year.
PENSION BENEFIT EQUALIZATION PLAN
The Company maintains the Sterling Chemicals, Inc. Pension Benefit
Equalization Plan (the "Equalization Plan"). The Equalization Plan provides
additional benefits to employees whose retirement benefits under the Pension
Plan are reduced, curtailed or otherwise limited as a result of certain
limitations under the Internal Revenue Code of 1986, as amended. The additional
benefits provided by the Equalization Plan are in an amount equal to the
benefits under the Pension Plan which are reduced, curtailed or limited by
reason of the application of such limitations. All employees who participate in
the Pension Plan are eligible to participate in the Equalization Plan. Benefits
have been paid to participants under the Equalization Plan and such benefits
are generally payable at the time, and in the manner, benefits are payable
under the Pension Plan.
SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN
The Company maintains the Sterling Chemicals, Inc. Supplemental Employee
Retirement Plan (the "Supplemental Plan"). The Supplemental Plan also provides
additional benefits to certain employees whose retirement benefits under the
Pension Plan are reduced, curtailed or otherwise limited because such
employee's annual compensation is in excess of $150,000 or because certain
Social Security integration benefits were removed from the Pension Plan. The
additional benefits provided by the Supplemental Plan are in an amount equal to
the benefits under the Pension Plan which are reduced, curtailed or limited by
reason of the applications of such limitations. Only those employees who are a
part of management or are "highly compensated" and are selected by the
Compensation Committee may participate in the Supplemental Plan. No benefits
have been paid to participants under the Supplemental Plan and such benefits
are generally payable at the time, and in the manner, benefits are payable
under the Pension Plan.
Assuming retirement at age 65, or their current age, if older, and the
continuation of their current levels of base salary until such retirement,
total retirement benefits under the Equalization Plan and/or the Supplemental
Plan payable to Messrs. Waggoner, Roten, Crump, Bannon, and Wise will be
$122,003, $86,098, $53,616, $85,389, and $30,847 per year, respectively,
reduced by the value of the benefits payable under the Pension Plan, which are
$71,761, $62,148, $44,680, $69,105, and $25,706 per year, respectively.
8
<PAGE>
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION(1)
The Company's executive compensation program is administered by the
Compensation Committee of the Company's Board of Directors, which is composed
of the non-employee directors listed at the end of this report. The
Committee's role is to discharge the compensation responsibilities of the
Board of Directors. In discharging its functions, the Committee discusses,
modifies (if appropriate) and approves the recommendations of management with
regard to the compensation arrangements of the Company's Executive Officers,
including the Chief Executive Officer, and the other Executive Officers of the
Company who are named in the Summary Compensation Table. Additionally, the
Compensation Committee recommends and administers those employee benefit plans
that provide benefits to the Executive Officers. This report sets forth the
major components of Executive Officer compensation and the basis upon which
the Compensation Committee determined Executive Officer compensation
(including the compensation of the Chief Executive Officer) for the past three
fiscal years ended September 30, 1995.
Compensation Policy and Guidelines
The goals of the Company's compensation policy are to align executive
compensation with the Company's long-term business objectives and performance,
to enable the Company to attract and retain high-quality Executive Officers
and other employees who will contribute to the long-term success of the
Company and to reward its Executive Officers and other employees for their
successful efforts in attaining objectives beneficial to the growth and
profitability of the Company.
The executive compensation program for fiscal year 1995, as in past years,
consisted primarily of (1) base salaries, which are not related directly to
the Company's performance but which are set below median levels based on
comparative industry data, and (2) profit sharing bonuses, which are entirely
based upon the Company's performance, to be paid out of the Company's Salaried
Employees' Profit Sharing Plan ("Plan").
Since its inception, the Company has maintained the philosophy that
compensation of its Executive Officers and others should be directly and
substantially related to the Company's operating performance. This philosophy
is effectuated by weighing executive compensation heavily towards profit
sharing payments based on the Company's performance. As a result of this
philosophy, in years when the Company has had extraordinary success, its
Executive Officers have been well compensated and in less profitable years,
the Executive Officers' compensation has been negatively impacted to a
substantial degree. The Board of Directors and the Compensation Committee
believe that the base salary plus profit sharing structure provides proper
incentives to the Executive Officers by directly relating their compensation
to the Company's performance.
Pursuant to the Plan, profit sharing payments are based on the Company's
earnings before deducting interest, taxes, depreciation, amortization and SAR
accruals above an amount designated by the Compensation Committee ("Threshold
Level"). The Threshold Level must be reached before any profit sharing bonuses
are awarded. Once the Threshold Level is met, profit sharing bonuses are
awarded based upon certain percentages of performance above the Threshold
Level. The Threshold Level is established annually and is intended to provide
for all major cash operating expenditures of the Company, such as debt
service, capital needs and taxes. In general, the calculations used to
determine the Threshold Level on an annual basis would not allow a profit
sharing percentage to accrue if there were no profits.
The Compensation Committee and the Board of Directors believe that the
executive compensation program, and the incentives related to profit sharing,
should be carried throughout the Company. As a result, the Plan is similar to
the plan in which all other employees of the Company participate. The
Compensation
- --------
(1) Notwithstanding Securities and Exchange Commission ("SEC") filings by the
Company that have incorporated or may incorporate by reference other SEC
filings (including this proxy statement) in their entirety, the Board
Compensation Committee Report on Executive Compensation shall not be
incorporated by reference into such filings and shall not be deemed to be
"filed" with the SEC except as specifically provided otherwise or to the
extent required by Item 402 of Regulation S-K.
9
<PAGE>
Committee and the Board of Directors believe that the Plan and the profit
sharing plan in effect for the Company's other employees have been responsible
for a great deal of the Company's success and have resulted in a motivated and
efficient work force.
While the Compensation Committee generally follows these guidelines, the
Compensation Committee may from time to time provide additional compensation to
the Company's Executive Officers in connection with promotions, assignments of
additional responsibilities, or other factors which, in the Compensation
Committee's opinion, merit compensation increases. On October 25, 1995, the
compensation Committee awarded Mr. Jim P. Wise $90,000 in cash and 12,000
shares of Common Stock. On the date of the award, the fair market value of the
Common Stock was $7.50 per share. This award was made in recognition of Mr.
Wise's performance of his responsibilities as Chief Financial Officer during
fiscal 1995 including a comprehensive and successful debt restructuring for the
Company.
The Executive Officers own a substantial number of shares of the Company's
Common Stock. Additionally, the Executive Officers and other employees
currently are eligible to acquire interests in Company stock through the
Company's Employee Stock Ownership Plan ("ESOP"), and certain Executive
Officers have been granted stock options, shares of restricted stock and SARs
all pursuant to the Omnibus Stock and Incentive Plan. The Committee believes
that the current substantial Common Stock ownership levels of Executive
Officers, their participation in the Company's ESOP and grants of stock
options, restricted stock and SARs further encourage long-term performance and
Company growth by more closely aligning the Executive Officers' interests with
the equity owners' interests.
The principal elements of the compensation program for the Executive
Officers, including the Chief Executive Officer, for fiscal year ended
September 30, 1995 are explained in more detail below.
Base Salary. The Compensation Committee determines base salary levels of
the Executive Officers, including the Chief Executive Officer, by referring
to published industry reports and surveys on executive compensation, then
sets the base salary levels below base salary medians of executive officers
in other chemical companies with annual sales of less than $1 billion. Base
salaries for Executive Officers, including the Chief Executive Officer, are
not related directly to the Company's performance. In fiscal year 1995, the
base salaries for the Executive Officers, including the Chief Executive
Officer, whose base salary was $325,000, were well below median industry
levels of comparably sized chemical companies.
Profit Sharing. The Threshold Level of performance designated by the
Compensation Committee for fiscal year 1995 of $89 million was exceeded by
approximately $195 million. Accordingly, profit sharing bonuses aggregating
$1,474,963 were paid for fiscal year 1995 performance to the Named
Executive Officers, including the Chief Executive Officer, whose profit
sharing bonus was $506,851.
The Compensation Committee believes that the 1995 compensation levels
disclosed in this Proxy Statement are reasonable and appropriate.
THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Mr. William A. McMinn (Chairman)
Mr. Gordon A. Cain
Mr. Gilbert M. A. Portal
Mr. Frank J. Pizzitola
Mr. Raymond R. Knowland
COMPENSATION ARRANGEMENTS FOR AND TRANSACTIONS WITH MEMBERS OF THE BOARD OF
DIRECTORS
Members of the Board of Directors of the Company, other than those directors
who are employees of the Company, receive a fee of $16,000 per year and an
attendance fee of $600 per meeting and are reimbursed for travel expenses for
their services as directors. Members of the Board of Directors of the Company
who are employees of the Company do not receive a fee for their services as
directors.
10
<PAGE>
The Company maintains the Sterling Chemicals, Inc. Amended and Restated Stock
Appreciation Rights Plan for Non-Employee Directors (the "SAR Plan") for the
benefit of certain non-employee members of the Board of Directors. Pursuant to
the SAR Plan, each member of the Board of Directors at the time of the adoption
of the SAR Plan who was not an employee of the Company or any of its
subsidiaries (a "Participant") was awarded 40,000 SARs on January 27, 1993 at a
base price of $4.00 per SAR. The aggregate number of SARs that were awarded to
all Participants under the SAR Plan is 200,000. The SAR Plan was amended in
October 1994 to limit the potential value of the SARs by placing a ceiling on
the amounts that the Company may be required to pay upon the exercise of the
SARs. Participants were given greater flexibility with respect to the dates on
which they may exercise their SARs. Under the amended Program, each Participant
exercised 25% of his SARs on October 10, 1994 and an additional 25% of his SARs
on September 1, 1995 for the fixed amount payable to him of $9.00 and $6.31 per
SAR, respectively, and is permitted to exercise up to 50%, and 100% of his
remaining SARs on September 1, 1996, and September 1, 1997, respectively,
limited by the maximum amount payable on such dates of $10.00 per SAR and
$11.00 per SAR, respectively, provided the Participant is a member of the Board
of Directors on each such date. All unexercised SARs terminate at 12:01 a.m. on
September 2, 1997.
STOCK PERFORMANCE GRAPH
The following Stock Performance Graph compares the Company's cumulative total
stockholder return on its Common Stock for a five-year period with the
cumulative total return of the Standard & Poor's Stock Index and the Standard &
Poor's Chemicals Index. The graph assumes $100 was invested on September 30,
1990 in the Company's Common Stock, the S&P 500 Index and the S&P Chemicals
Index and that dividends were reinvested.
There can be no assurance as to future trends in the cumulative total return
of the Company's Common Stock or of the following indices. The Company does not
make or endorse any predictions as to future stock performance.
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
BASED ON $100 INVESTED ON SEPTEMBER 30, 1990 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING SEPTEMBER 30.
<CAPTION>
SEP-90 SEP-91 SEP-92 SEP-93 SEP-94 SEP-95
------ ------- ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Sterling Chemicals, Inc. $100 $ 96 $ 79 $ 73 $270 $165
S & P 500 $100 $131 $146 $165 $171 $221
S & P Chemicals $100 $147 $161 $173 $228 $271
</TABLE>
11
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership, as "beneficial ownership" is defined under Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), of the Common
Stock as of November 27, 1995, by (i) each person known by the Company to be
the beneficial owner of more than 5% of the outstanding shares of Common Stock,
(ii) each director and nominee for director of the Company, (iii) each Named
Executive Officer of the Company, and (iv) all of the directors and executive
officers as a group. Unless otherwise indicated, each of the stockholders has
sole voting and investment power with respect to the shares beneficially owned.
The information is based upon information furnished to the Company by each
individual or entity named below.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
OWNERSHIP OF OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
Gordon A. Cain...................................... 6,632,850(1) 11.9
1200 Smith Street
Suite 1900
Houston, Texas 77002-4312
J. Virgil Waggoner.................................. 4,112,438(2) 7.4
1200 Smith Street
Suite 1900
Houston, Texas 77002-4312
William A. McMinn................................... 84,579 *
1200 Smith Street
Suite 1900
Houston, Texas 77002-4312
James J. Kerley..................................... 144,579 *
1200 Smith Street
Suite 1900
Houston, Texas 77002-4312
Gilbert M. A. Portal................................ -- --
1200 Smith Street
Suite 1900
Houston, Texas 77002-4312
Frank J. Pizzitola.................................. 10,000 *
1200 Smith Street
Suite 1900
Houston, Texas 77002-4312
Raymond R. Knowland................................. 2,500 *
1200 Smith Street
Suite 1900
Houston, Texas 77002-4312
Robert W. Roten..................................... 996,734(3) 1.8
1200 Smith Street
Suite 1900
Houston, Texas 77002-4312
Robert N. Bannon.................................... 175,623(4) *
1200 Smith Street
Suite 1900
Houston, Texas 77002-4312
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
OWNERSHIP OF OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
Richard K. Crump............................. 476,072(5) *
1200 Smith Street
Suite 1900
Houston, Texas 77002-4312
Jim P. Wise.................................. 13,850 *
1200 Smith Street
Suite 1900
Houston, Texas 77002-4312
All executive officers and directors of the
Company as a group
(14 persons)................................ 12,800,986(1)(2)(6) 23.0
</TABLE>
- --------
* Less than 1%
(1) Includes 375,000 shares held in Mr. Cain's Keogh Plan, over which Mr. Cain
has sole voting power and includes 2,100,000 shares with respect to which
Mr. Cain disclaims beneficial ownership, held by a private family
foundation for which Mr. Cain serves as the Chairman of the Board of
Trustees and has shared voting and disposition powers.
(2) Includes 50,602 shares held by Mr. Waggoner's wife, with respect to which
Mr. Waggoner disclaims beneficial ownership. Includes 76,716 shares over
which Mr. Waggoner has sole voting power held by Merrill Lynch Trust
Company of Texas ("Merrill Lynch"), as Trustee of the Sterling Chemicals,
Inc. Employee Stock Ownership Plan ("ESOP") as of September 30, 1995 and
allocated to Mr. Waggoner's account.
(3) Includes 48,586 shares over which Mr. Roten has sole voting power held by
Merrill Lynch, as Trustee of the ESOP as of September 30, 1995 and
allocated to Mr. Roten's account.
(4) Includes 28,475 shares over which Mr. Bannon has sole voting power held by
Merrill Lynch, as Trustee of the ESOP as of September 30, 1995 and
allocated to Mr. Bannon's account.
(5) Includes 36,930 shares over which Mr. Crump has sole voting power held by
Merrill Lynch, as Trustee of the ESOP as of September 30, 1995 and
allocated to Mr. Crump's account.
(6) Includes 216,581 shares held by Merrill Lynch, as Trustee of the ESOP and
allocated through September 30, 1995 to the accounts of such officers.
Employees of the Company, including the Company's Executive Officers, own
6,041,330 shares of Common Stock through the ESOP, which represents 10.9% of
the outstanding shares. These shares are held of record by Merrill Lynch, as
trustee of the ESOP, who disclaims beneficial ownership of the shares. The ESOP
shares are allocated to the account of each employee who has sole voting power
of their respective ESOP shares.
13
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The following list sets forth the names, ages and offices of the executive
officers of the Company. The periods during which such persons have served in
such capacities are indicated in the description of business experience of such
persons below.
<TABLE>
<CAPTION>
NAME AND AGE POSITION WITH THE COMPANY
- ------------ -------------------------
<S> <C>
J. Virgil Waggoner (68)......... President, Chief Executive Officer and Director
Executive Vice President and Chief Operating
Robert W. Roten (61)............ Officer
Vice President--Finance and Chief Financial
Jim P. Wise (52)................ Officer
Richard K. Crump (49)........... Vice President--Commercial
Robert N. Bannon (50)........... Vice President--Operations, President Sterling
Pulp Chemicals, Ltd.
F. Maxwell Evans (51)........... Vice President, General Counsel and Secretary
Vice President--Human Resources and
Robert O. McAlister (56)........ Administration
Stewart H. Yonts (50)........... Treasurer
</TABLE>
From 1950 to 1980 Mr. Waggoner was employed by Monsanto Company, last serving
as Group Vice President and Managing Director of Monsanto's Plastics and Resins
Company. Mr. Waggoner was President of El Paso Products Company (now a
subsidiary of Rexene Corporation), a commodity chemicals and plastics company,
from 1980 to 1983 and was a self-employed industry consultant from 1983 to
1986. Mr. Waggoner has been on the Boards of Directors of Kirby Corporation and
Mail-Well Holdings, Inc. since July 1993 and February 1994, respectively. Mr.
Waggoner has served as President of the Company since 1986.
Mr. Roten spent the first 25 years of his career with Monsanto Company and
served as Vice President for sales and marketing for El Paso Products Company
from 1981 to 1983. Mr. Roten was President of Materials Exchange, Inc., a
Houston-based petrochemical and plastics marketing firm, from 1983 until 1986.
He served as Vice President-Commercial of the Company from August 1986 until
September 1991, when he became Vice President-Corporate Development. Mr. Roten
became Executive Vice President and Chief Operating Officer of the Company in
April 1993.
Mr. Wise was employed by Transco Energy Company as Executive Vice President,
Chief Financial Officer and a member of the Board of Directors from November
1982 until September 1991. From September 1991 to July 1994, he was Chairman
and Chief Executive Officer of Neostar Group, Inc., a private investment
banking and financial advisory firm. From July 1994 to September 1994, he was
Senior Vice President and Chief Financial Officer of U.S. Delivery Systems,
Inc. Mr. Wise joined the Company on September 26, 1994 as Vice President-
Finance and Chief Financial Officer.
Mr. Crump was Vice President of Materials Management for El Paso Products
Company from 1976 through 1983 and Vice President of Sales for Rammhorn
Marketing from 1984 to August 1986. He served as Director-Commercial of the
Company from August 1986 until October 1991, when he became Vice President-
Commercial.
Mr. Bannon was employed by Monsanto Company for 15 years, most recently as
Manager, Strategic Operations-Sales. He became a Director in the Company's
Commercial Department in August 1986. He became the Director of Manufacturing
for the Company in October 1989, and served in that capacity until he became
Vice President-Operations in October 1991. Mr. Bannon has been the President of
Sterling Pulp Chemicals, Ltd. since August 1992 and is a Director of Mainland
Bank in Texas City, Texas.
Mr. Evans was a partner in the law firm of Bracewell & Patterson of Houston,
Texas from 1979 through December 1991. He received an LL.M. in Environmental
Law in August 1992. He became General Counsel and Secretary of the Company on
September 1, 1992 and was promoted to Vice President, General Counsel and
Secretary on July 26, 1995.
14
<PAGE>
Mr. McAlister was employed by Champlin Petroleum Company, a subsidiary of
Union Pacific Corporation from 1974 to 1987 where he held a variety of
positions in Human Resources, Marketing and Strategic Planning. In 1987, he
joined Champlin Refining and Chemicals, Inc., a joint venture between Champlin
Petroleum and PDVSA, the national oil company of Venezuela, as Vice-President
of Human Resources. He joined the Company in 1991 as Director of Human
Resources and was promoted to Vice President-Human Resources and Administration
on July 26, 1995.
Mr. Yonts was employed by Tenneco, Inc. from 1976 to 1980, last serving as
Tax Counsel. Mr. Yonts was Tax Manager of Home Petroleum Corporation from 1980
to 1982 and Director of Taxes of MCO Resources, Inc., a natural resources
company, from 1982 to 1986. He joined the Company as Tax Manager in August 1986
and served as Manager of Taxes and Benefits Accounting from November 1989 until
he became the Treasurer on October 1, 1994.
EXPENSES OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. Solicitations of
proxies are being made by the Company through the mail, and may also be made in
person or by telephone. Employees and directors of the Company may be utilized
in connection with such solicitation. The Company will also request brokers and
nominees to forward soliciting materials to the beneficial owners of the stock
held of record by such persons and will reimburse them for their reasonable
forwarding expenses.
RATIFICATION OF INDEPENDENT ACCOUNTANTS
On October 25, 1995, the Audit Committee of the Board of Directors of the
Company recommended and the Board of Directors of the Company approved the
engagement of the firm of Arthur Andersen LLP ("Arthur Andersen") as its
independent auditors for the year ending September 30, 1996, to replace the
firm of Coopers & Lybrand L.L.P. ("Coopers & Lybrand"). The termination by the
Company of the engagement of Coopers & Lybrand was effective upon the
completion of the audit for the year ended September 30, 1995, and the filing
of the Company's Annual Report on Form 10-K for such year.
During the two most recent fiscal years and the subsequent interim period
through October 30, 1995, there were no disagreements with Coopers & Lybrand on
any matter of accounting principles or practices, financial statement
disclosure, or audit scope or procedures, which disagreements, if not resolved
to their satisfaction, would have caused them to make reference in connection
with their report to the subject matter of the disagreement.
During the two most recent fiscal years and the subsequent interim period
through October 30, 1995, the Company has not been advised by Coopers & Lybrand
of any of the reportable events listed in Item 304(a)(1)(v)(A) through (D) of
Regulation S-K and during such period the Company has not consulted with Arthur
Andersen regarding any matter referenced under Item 304(a)(2) of Regulation S-
K.
The audit reports of Coopers & Lybrand on the consolidated financial
statements of the Company as of and for the fiscal years ended September 30,
1995 and 1994, did not contain any adverse opinion or disclaimer of opinion,
nor were they qualified or modified as to uncertainty, audit scope, or
accounting principles, except for an explanatory paragraph noting that the
Company changed its method of accounting for income taxes effective October 1,
1993.
The Board of Directors recommends a vote FOR the proposal to ratify the
appointment of Arthur Andersen and, unless authority to vote for the
appointment is withheld, all shares represented by proxies will be voted for
the appointment. The ratification of the appointment will require the
affirmative vote of the holders of a majority of the shares of Common Stock
present, in person or by proxy, at the Annual Meeting.
Representatives of Arthur Andersen and Coopers & Lybrand will be present at
the Annual Meeting, will be given an opportunity to make a statement, if they
desire to do so, and will be available to respond to appropriate questions.
15
<PAGE>
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
In order for stockholder proposals to be included in the Company's Proxy
Statement and proxy relating to the Company's 1997 Annual Meeting of
Stockholders, such proposals must be received by the Company at its principal
executive offices not later than August 23, 1996.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who beneficially own 10% of a registered class of the
Company's equity securities (the "Reporting Persons"), to file reports
regarding their ownership and changes in ownership with the SEC. Based solely
on a review of the copies of such forms furnished to the Company and written
representations from certain of the Reporting Persons, the Company believes
that during fiscal 1995, the Reporting Persons complied with all Section 16(a)
filing requirements applicable to them, except that Mr. Paul G. Vanderhoven,
who served as the Company's principal accounting officer in fiscal 1995,
inadvertently failed to timely report one stock purchase.
OTHER MATTERS
The Board of Directors does not intend to bring any other matters before the
meeting and has not been informed that any other matters are to be presented by
others. In the event any other matters properly come before the meeting, the
persons named in the enclosed form of proxy will vote all proxies in accordance
with their best judgment on such matters.
Whether or not you are planning to attend the meeting, you are urged to
complete, date and sign the enclosed proxy and return it in the enclosed
stamped envelope at your earliest convenience.
By Order of the Board of Directors
/s/ F. MAXWELL EVANS
F. Maxwell Evans
Secretary
16
