<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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 Section 240.14a-11(c) or Section 240.14a-12
STERLING CHEMICALS HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
STERLING CHEMICALS HOLDINGS, INC.
1200 SMITH STREET
SUITE 1900
HOUSTON, TEXAS 77002-4312
-----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 22, 1997
To the Stockholders of Sterling Chemicals Holdings, Inc.:
An Annual Meeting of Stockholders of Sterling Chemicals Holdings, 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 22, 1997 for
the following purposes:
1. To elect nine directors to serve until the 1998 Annual
Meeting and until their successors have been duly elected and qualified;
2. To consider and act upon a proposal to ratify the appointment
of Deloitte & Touche LLP as the independent auditors of the books and
accounts of the Company for the fiscal year ending September 30, 1997;
and
3. To consider and act upon such other business as may properly
come before the Annual Meeting or any adjournment(s) or postponement(s)
thereof.
Stockholders of record at the close of business on December 6, 1996 are
entitled to notice of and to vote at the Annual Meeting and any adjournment(s)
or postponement(s) thereof.
You are cordially invited to attend the Annual Meeting. Whether or not you
are planning to attend the Annual 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 20, 1996
- --------------------------------------------------------------------------------
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 HOLDINGS, INC.
1200 SMITH STREET
SUITE 1900
HOUSTON, TEXAS 77002-4312
(713) 650-3700
DECEMBER 20, 1996
-------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 22, 1997
INTRODUCTION
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of Sterling Chemicals Holdings, Inc. (the
"Company") for use at the Annual Meeting of Stockholders of the Company to be
held at Texas Commerce Center Auditorium, 601 Travis Street, Houston, Texas at
9:00 A.M., Houston time, on Wednesday, January 22, 1997, and at any
adjournment(s) or postponement(s) thereof (the "Annual Meeting") for the
purposes set forth in this Proxy Statement and the accompanying Notice of Annual
Meeting (the "Notice"). This Proxy Statement, the Notice, the Company's Annual
Report to Stockholders for the Fiscal Year Ended September 30, 1996, and the
enclosed form of proxy are first being mailed to stockholders on or about
December 20, 1996.
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 Deloitte & Touche LLP as the independent auditors of the books
and accounts of the Company for the fiscal year ending September 30, 1997. The
Board of Directors is not aware of any other matters that are expected to come
before the Annual Meeting. If any other matters are properly brought before the
Annual Meeting, the persons named in the accompanying proxy will vote the shares
represented by such proxies on such matters as instructed by the Board of
Directors of the Company, who have instructed the proxies to vote in accordance
with the proxies' own best judgment in the absence of express instruction from
the Board. The enclosed form of proxy may be revoked at any time before the
proxy is voted at the Annual Meeting by executing a new proxy with a later date
and delivering it to the Secretary of the Company, by voting in person at the
Annual Meeting, or by giving written notice of revocation to the Secretary of
the Company. The presence of a stockholder at the Annual Meeting will not
automatically revoke that stockholder's proxy.
VOTING SECURITIES
Stockholders of record at the close of business on December 6, 1996 (the
"Record Date"), are entitled to notice of and to vote at the Annual Meeting and
any adjournment(s) or postponement(s) thereof. As of the Record Date, the
issued and outstanding voting securities of the Company consisted of 11,140,837
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 other than the election of directors. 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 nominees 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.
CHANGE OF CONTROL
Merger with STX Acquisition Corp. Pursuant to an Amended and Restated
Agreement and Plan of Merger dated as of April 24, 1996 (the "Merger
Agreement"), on August 21, 1996 (the "Closing Date"), STX Acquisition Corp.
("STX Acquisition") merged with and into Sterling Chemicals, Inc., which was
renamed Sterling Chemicals Holdings, Inc. (the "Merger"). As used in this
section, the term "Company" refers both to Sterling Chemicals, Inc. prior to the
consummation of the Merger and, thereafter, to Sterling Chemicals Holdings,
Inc., the surviving corporation in the Merger.
An aggregate of approximately 5.0 million shares of Common Stock were
retained by existing stockholders of the Company (the "Rollover Shares"), and
the remaining shares of Common Stock were converted into the right to receive
$12.00 in cash. Upon consummation of the Merger, the Rollover Shares
represented approximately 46% of the outstanding Common Stock. In addition, (i)
each option, warrant or other right to acquire equity interests in the Company
and each security convertible into or exchangeable for such equity interests or
obligating the Company to enter into any such option, warrant or other right was
automatically canceled, with no consideration exchanged therefor, (ii) each
stock appreciation right ("SAR") was converted into the right to receive a cash
payment in an amount equal to the excess, if any, of $12.00 over the base price
provided for in such SAR, (iii) each share of outstanding phantom stock relating
to the Company was automatically converted into the right to receive a cash
payment in the amount of $12.00 and (iv) all outstanding shares of restricted
stock became immediately and fully vested. Following consummation of the
Merger, the Company conveyed substantially all of the assets and properties of
the Company to Sterling Chemicals, Inc., its wholly owned operating subsidiary
(formerly a wholly owned subsidiary of STX Acquisition known as STX Chemicals
Corp., and referred to herein as "Chemicals").
In connection with the Merger, a group of investors formed by The Sterling
Group, Inc. ("TSG") and The Unicorn Group, L.L.C. ("Unicorn") purchased a total
of 589,103 shares of STX Acquisition Common Stock (the "Equity Private
Placement"). In the Merger, each share of STX Acquisition Common Stock was
converted into ten shares of Common Stock. As a result, upon consummation of
the Merger the shares of STX Acquisition Common Stock purchased in the Equity
Private Placement were converted into 5,891,030 shares of Common Stock. As of
the Record Date, such shares represented approximately 53% of the outstanding
Common Stock.
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<PAGE>
Financing Arrangements. In addition to the funds raised in the Equity
Private Placement, the financing for the Merger also included the following:
Pursuant to the Merger Agreement, Chemicals entered into a bank credit
facility (the "Credit Facility") with Texas Commerce Bank National Association,
as administrative agent, and Credit Suisse and Chase Securities Inc. as co-
arrangers. The Credit Facility consists of (i) a six and one-half year $100.0
million revolving credit facility, (ii) a six and one-half year $200.0 million
term loan, (iii) an eight-year $150.0 million term loan and (iv) a four-year
$6.5 million term loan.
On the Closing Date, the Company issued in a registered public offering
(the "Public Offering") $191,751,000 representing 191,751 Units, each Unit
consisting of one 13 1/2% Senior Secured Discount Note Due 2008 and one warrant
to purchase three shares of Common Stock. Also in the Public Offering,
Chemicals issued $275,000,000 11 3/4% Senior Subordinated Notes Due 2006.
Proceeds of the Equity Private Placement, the Credit Facility and the
Public Offering were used primarily to purchase the Common Stock (other than the
Rollover Shares) and other equity interests in the Merger, to refinance the
Company's existing debt and to pay fees and expenses in connection with the
Merger.
Agreements Among Stockholders. In connection with the Equity Private
Placement, the purchasers therein entered into a Stockholders Agreement and a
Tag-Along Agreement. The Stockholders Agreement restricts transfer of shares of
Common Stock held by such stockholders (with certain exceptions) unless such
shares are first offered to the Company's employee stock ownership plan (the
"New ESOP"), second to the Company and finally to other stockholders party to
the agreement. In addition, the agreement restricts the ability of any
stockholder who is a party to the agreement to initiate a disposition of a
control position in the Company without first complying with the right of first
refusal provisions. The Tag-Along Agreement provides that if any of the parties
thereto propose to transfer, sell or otherwise dispose of an aggregate of 51% or
more of the Common Stock issued and outstanding at the time of such transfer,
all other holders of Common Stock will have the right to participate in such
transfer on a pro rata basis and on the same terms and conditions. All shares
of Common Stock purchased in the Equity Private Placement are subject to the
Stockholders Agreement and the Tag-Along Agreement. In addition, an aggregate
of 250,000 shares purchased by certain employees of the Company pursuant to the
Company's 1996 Employee Stock Purchase Plan are also subject to the Stockholders
Agreement and the Tag-Along Agreement.
On the Closing Date, a Voting Agreement (the "Voting Agreement") was
entered into among Frank J. Hevrdejs, Frank P. Diassi, William C. Oehmig, Hunter
Nelson, Susan O. Rheney (Trustee of The Rheney Living Trust), Koch Capital
Services, Inc. (formerly known as Koch Equities Inc.) ("Koch Capital"),
affiliates of Clipper Capital Partners, L.P. (collectively, "The Clipper
Group"), FSI No. 2 Corporation (a wholly owned subsidiary of Fayez Sarofim &
Co.), and Olympus Growth Fund II, L.P. ("Olympus Growth") and Olympus Executive
Fund, L.P. ("Olympus Executive"). The Voting Agreement provides for each of
such parties to vote shares of Common Stock owned or subsequently acquired by
such parties in favor of a nominee to the Board of Directors of the Company to
be selected by each of Koch Capital and The Clipper Group. The rights of Koch
Capital and The Clipper Group to select a nominee under the Voting Agreement are
terminated in the event their ownership of Common Stock represents less than 5%
of the total outstanding shares of Common Stock.
PROPOSAL NO. 1:
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
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<PAGE>
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.
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 nine nominees
currently serve as directors of the Company. Mr. J. Virgil Waggoner served as a
director prior to the Merger, Messrs. George B. Gregory and Robert B. Calhoun
were appointed by the Board of Directors on September 18, 1996, and the
remaining directors have served on the Board since August 21, 1996, the Closing
Date of the Merger. The following discussion 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.
Frank P. Diassi. Age 63. Mr. Diassi is Chairman of the Company's Board of
Directors. Mr. Diassi is currently Managing General Partner of Unicorn, a
private financial organization. He organized Unicorn in 1981 and has originated
investments in over 40 entrepreneurial companies. Prior to forming Unicorn, Mr.
Diassi organized and operated several businesses ranging from chemical
distribution to the manufacturing of organic chemicals and detergent products.
In addition, he had a number of years of executive experience with the
petrochemical department of Continental Oil Company. He has been Chairman of
the Board of Hawkeye Chemical Company and was a founding director of Arcadian
Corporation, the largest nitrogen fertilizer company in the Western hemisphere.
Mr. Diassi currently serves as Chairman of the Board of Software Plus, Inc. In
addition, he serves as a director of Mail-Well, Inc. ("Mail-Well"), an envelope
manufacturer and commercial printer, and several private companies.
J. Virgil Waggoner. Age 69. Mr. Waggoner is Vice Chairman of the
Company's Board of Directors. Mr. Waggoner served as President and Chief
Executive Officer of the Company from 1986 until his retirement in August 1996.
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, a commodity
chemical 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 since July 1983 and February 1994,
respectively. He is currently President and Chief Executive Officer of JVW
Investments, Ltd., a private company.
Robert W. Roten. Age 62. 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 and became President and Chief
Executive Officer of the Company in August 1996.
Allan R. Dragone. Age 70. Mr. Dragone has been a director of Arcadian
Corporation since 1989, and served as Chairman of the Board from 1989 to 1990.
He was President and Chief Executive Officer of Azko America, Inc., a chemicals
producer, from 1986 to 1989, and was Chairman of the Board of Fiber Industries,
Inc., a polyester fibers producer, from 1987 to 1989. He also is a director of
United Water Resources, Inc., a water services company; a director of Wellman,
Inc., a polyester fibers producer and plastic reclamation company; and a
director of Purina Mills, Inc. ("Purina Mills"), an animal feed producer. He
was Chairman of the Board of the New York Racing Commission from 1990 to 1995,
and currently serves as a trustee.
-4-
<PAGE>
John L. Garcia. Age 40. Mr. Garcia has been a Managing Director and Head
of the Global Chemical Investment Banking Group with CS First Boston Corporation
since 1994 and prior thereto was a Managing Director with Wertheim Schroder &
Co. Inc. Mr. Garcia also serves as a director of Acetex Corporation.
Frank J. Hevrdejs. Age 51. Mr. Hevrdejs is a principal and President of
TSG, which he co-founded in 1982. Mr. Hevrdejs has actively participated in
acquisitions of over 40 businesses in the past 15 years. He is Chairman of
First Sterling Ventures Corp., an investment company, Enduro Holdings, Inc., a
structural and electrical manufacturing company, and Fibreglass Holdings, Inc.,
a truck accessory manufacturer. He is also a director of Mail-Well, Purina
Mills, and Eagle U.S.A., an air-freight company.
Hunter Nelson. Age 44. Mr. Nelson is currently a principal with TSG.
Prior to joining TSG in 1989, he served as vice president of administration and
general counsel of Fiber Industries, Inc., a producer of polyester fibers. Mr.
Nelson was previously a partner in the law firm of Andrews & Kurth L.L.P.
specializing in general corporate and securities law. Mr. Nelson serves on the
board of Sterling Diagnostic Imaging, Inc. and other private companies.
George B. Gregory. Age 33. Mr. Gregory is employed by Koch Capital, a
wholly owned subsidiary of Koch Industries, Inc. ("Koch Industries"), and
currently serves as chief financial officer of Koch Chemical Company. Prior to
joining Koch Capital in June 1995, Mr. Gregory worked as a consultant for
Monitor Company and as a chemist for E. I. DuPont de Nemours & Company.
Robert B. Calhoun. Age 54. Mr. Calhoun has been President of Clipper
Asset Management Corporation, the sole general partner of The Clipper Group,
L.P., a private investment firm, since 1991, and of Clipper Capital Corporation,
the sole general partner of Clipper Capital Partners, L.P., an affiliated
private investment firm, since 1993. From 1975 to 1991, Mr. Calhoun was a
Managing Director of CS First Boston Corporation. Mr. Calhoun is also a
director of Avondale Incorporated and Interstate Bakeries Corporation.
INFORMATION CONCERNING OPERATION OF THE BOARD OF DIRECTORS
In order to facilitate the functions of the Board of Directors, the Board
has created various committees including an Audit Committee, a Compensation
Committee, a Finance Committee and an Environmental, Health and Safety
Committee. The Board does not have a nominating committee.
The members of the Audit Committee are Hunter Nelson (Chairman), George B.
Gregory and J. Virgil Waggoner. The functions of the Audit Committee include
the following: making recommendations to the Board of Directors concerning the
selection and termination of the Company's auditor; reviewing the auditor's
compensation and the scope and proposed terms of its engagement as well as the
nature and effect of any non-audit services provided; reviewing the auditor's
independence; considering the range of audit and non-audit fees and, in
consultation with the auditor, the adequacy of the Company's internal financial
controls; serving as a channel of communication between the auditor and the
Board of Directors; reviewing the results of each audit, including any
qualifications in the auditor's opinion and any related management letter;
reviewing the Company's annual financial statements and any significant issues
that arose in connection with the preparation of those financial statements;
reviewing major issues regarding accounting practices; considering major changes
and other questions regarding the Company's auditing and accounting principles
and practices to be followed when preparing the Company's financial statements;
reviewing the procedures employed by the Company in preparing published
financial statements; meeting periodically with management to review major
financial risk exposures; and performing such other functions as may be
necessary or appropriate in the efficient discharge of the aforementioned
duties. In the event the Company appoints an internal auditing executive, the
Audit Committee would also review the appointment, function and performance of
such internal auditor.
The members of the Compensation Committee are Frank J. Hevrdejs (Chairman),
Allan R. Dragone and Robert B. Calhoun. The functions of the Compensation
Committee are to establish remuneration levels for officers of Holdings and its
subsidiaries, review significant employee benefit programs and establish and
administer executive compensation programs (including bonus plans, stock option
and other equity-base programs, deferred compensation plans and other
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<PAGE>
cash or stock incentive programs); establish, from time to time, the annual fees
to be paid to each director of the Company and each of its subsidiaries and the
fees to be paid to each director of the Company and each of its subsidiaries in
connection with the attendance by such director at meetings of the relevant
Board of Directors or committee thereof; at the Company's expense, to retain and
consult with such professional advisors and other experts as the Compensation
Committee shall deem necessary or appropriate in connection with the performance
of its duties and the exercise of its authority and powers; and perform such
other functions as may be necessary or appropriate in the efficient discharge of
its duties.
The members of the Finance Committee are Robert B. Calhoun, (Chairman),
Frank J. Hevrdejs, Allan R. Dragone and John L. Garcia. The functions of the
Finance Committee are to formulate financing plans for the ongoing operations of
the Company and its subsidiaries, any acquisitions contemplated to be made by
the Company or any of its subsidiaries and other similar matters; to make
recommendations to the Company's Board with respect to, among other things, the
respective levels and terms of such borrowings and issuances of securities; and
perform such other functions as may be necessary or appropriate in the efficient
discharge of the aforementioned duties.
The members of the Environmental, Health and Safety Committee are J. Virgil
Waggoner (Chairman), George B. Gregory and Robert W. Roten. The functions of
the Environmental, Health and Safety Committee are to establish Board-level
policies, practices and procedures of, and a compliance program for, the Company
and its subsidiaries with respect to employee safety and health, environmental
protection and product safety; establish Board-level policies with respect to
the engagement of independent environmental auditors or the assignment of
specific company personnel to conduct internal and external compliance and
management audits on a regular and systematic basis; evaluate the engagement of
independent environmental auditors; establish procedures to ensure prompt
notification to the Board of material regulatory actions, administrative orders,
notices of violation and claims; and perform such other functions as may be
necessary or appropriate discharge of the aforementioned duties.
During the year ended September 30, 1996, the Board of Directors held nine
meetings and the Audit Committee and the Compensation Committee each held one
meeting. No director attended fewer than 75% of director meetings or of
meetings of committees on which such director served.
COMPENSATION OF DIRECTORS
Prior to the Merger, fees payable to non-employee directors of the Company
were $16,000 per year and an attendance fee of $600 for each meeting of the
Board or a committee thereof. Members of the Board of Directors who were
employees of the Company or its subsidiaries did not receive a fee for their
services as directors. All directors were reimbursed for travel expenses for
their services as directors. It is expected that the Board of Directors and the
Compensation Committee will establish a revised Board compensation policy
applicable to services provided following the Merger.
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<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
Set forth below is information regarding compensation arrangements and
benefits paid or made available to (i) the Chief Executive Officer and (ii) the
four most highly compensated executive officers of the Company (collectively,
the "Named Executive Officers") for the three fiscal years ended September 30,
1996. Compensation during such fiscal years included participation in certain
stock option, SAR and other benefit plans sponsored by the Company or its
subsidiaries which were terminated in connection with the Merger. See "Change
of Control."
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION (1) AWARDS
---------------- -------------
<S> <C> <C> <C> <C> <C> <C>
RESTRICTED SECURITIES ALL OTHER
SALARY BONUS STOCK UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) (2) ($) (3) AWARD(S) OPTIONS/SARS ($) (4)
- ---------------------------------------------------------------------------------------------------------------------
Robert W. Roten...................... 1996 $205,000 $ 105,313 $ -0- -0- $ 9,403
President and Chief 1995 205,000 266,394 -0- 20,000/-0- 9,364
Executive Officer (5) 1994 177,500 71,579 -0- -0- 8,817
- ---------------------------------------------------------------------------------------------------------------------
J. Virgil Waggoner................... 1996 297,917 200,372 -0- -0- 101,549(6)
President and Chief 1995 325,000 506,851 -0- -0- 9,675
Executive Officer (5) 1994 279,166 134,987 -0- -0- 1,916
- ---------------------------------------------------------------------------------------------------------------------
Robert N. Bannon..................... 1996 180,000 92,469 -0- -0- 8,462
Vice President--Operations, 1995 180,000 233,906 -0- 15,000/-0- 9,045
President--Petrochemicals Division 1994 152,500 61,353 -0- -0- 7,561
---------------------------------------------------------------------------------------------------------------------
Richard K. Crump..................... 1996 180,000 92,469 -0- -0- 8,462
Vice President-- 1995 180,000 233,906 -0- 15,000/-0- 9,045
Strategic Planning 1994 152,500 61,353 -0- -0- 7,561
- ---------------------------------------------------------------------------------------------------------------------
Jim P. Wise ......................... 1996 180,000 92,469 -0- -0- 204,255(7)
Vice President--Finance and 1995 180,000 413,906(8) 186,975 12,500/-0- 1,620
Chief Financial Officer 1994 3,409 -0- -0- -0- 31
- ---------------------------------------------------------------------------------------------------------------------
F. Maxwell Evans..................... 1996 153,500 56,345 -0- -0- 7,415
Vice President, General 1995 148,334 149,417 -0- 10,000/-0- 8,010
Counsel and Secretary 1994 142,500 43,718 -0- -0- 6,391
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------
(1) 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 the
relevant fiscal year in the Summary Compensation Table.
(2) Includes amounts deferred under the Company's 401(k) Savings and Investment
Plan.
(3) Paid pursuant to the Company's Profit Sharing Plan.
(4) For fiscal year 1996, All Other Compensation includes matching
contributions paid by the Company pursuant to the Company's 401(k) Savings
and Investment Plan, as follows: Mr. Roten, $7,558, Mr. Waggoner, $8,438,
Mr. Bannon, $6,842, Mr. Crump, $6,842, Mr. Wise, $4,388, and Mr. Evans,
$6,033; and premiums for group term life insurance paid by the Company as
follows: Mr. Roten, $1,845, Mr. Waggoner, $2,492, Mr. Bannon, $1,620, Mr.
Crump, $1,620, Mr. Wise, $1,620, and Mr. Evans, $1,382.
(5) Upon consummation of the Merger, Mr. Roten succeeded Mr. Waggoner as
President and Chief Executive Officer. Prior to the Merger, Mr. Roten was
Executive Vice President and Chief Operating Officer.
(6) Includes $90,619 compensation for unused vacation time paid upon Mr.
Waggoner's resignation as an officer of the Company.
(7) Includes $198,247 paid upon consummation of the Merger pursuant to a change
of control provision of Mr. Wise's employment agreement. Such agreement
was terminated in connection with the Merger.
(8) 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 restricted Common Stock awarded to Mr. Wise. The fair market
value of such restricted Common Stock was $8.13 per share.
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<PAGE>
Option/SAR Grants in Last Fiscal Year. There were no stock option or
SAR grants in fiscal 1996.
Aggregate Option/SAR Exercises in Fiscal 1996 and Year-end Option/SAR
Values. The following table provides information on SAR exercises in fiscal
1996 by the Named Executive Officers. Upon consummation of the Merger, each
outstanding option to acquire Company Common Stock was canceled, each
outstanding SAR was converted into the right to receive a cash payment equal to
the excess, if any, of $12.00 over the base price provided for in such SAR, and
the Company's existing stock option and SAR plans were terminated. Accordingly,
there were no stock options or SARs outstanding at September 30, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SEPTEMBER 30, 1996(#) SEPTEMBER 30, 1996($)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE (#) REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Roten............. -0- $ -0- -- -- -- --
J. Virgil Waggoner.......... -0- -0- -- -- -- --
Robert N. Bannon............ 131,250 1,050,000 -- -- -- --
Richard K. Crump............ -0- -0- -- -- -- --
Jim P. Wise................. -0- -0- -- -- -- --
F. Maxwell Evans............ 118,130 945,040 -- -- -- --
</TABLE>
- -------------
(1) The amounts indicated in the column entitled "Value Realized ($)" represent
the amount paid to the holder of the SARs upon consummation of the Merger.
Pension Plans.
The Company maintains a defined benefit Salaried Employees' Pension
Plan (the "Pension Plan") covering substantially all salaried employees,
including the Named 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 (from which the Company acquired its Texas City,
Texas petrochemical plant (the "Texas City Plant")) prior to April 1, 1986 are
based on such individual's vested 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. 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.
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.
-8-
<PAGE>
The following table ("Table A") illustrates the aggregate of the
annual normal retirement benefits payable under the Pension Plan, Equalization
Plan and Supplemental Plan (as defined) based on 1.4% of Average Earnings,
without reduction for any offset amounts.
YEARS OF SERVICE
-------------------------------------
AVERAGE EARNINGS 10 20 30 40
- ------------------ ------- ------- ------- -------
$ 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
The following table 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,
Equalization Plan and Supplemental Plan without substantial change and payment
in the form of a single life annuity.
YEARS OF SERVICE
-------------------------------------
AVERAGE EARNINGS 10 20 30 40
- ------------------ ------- ------- ------- -------
$ 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
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: Robert W. Roten--35 years; J. Virgil Waggoner--40 years;
Richard K. Crump--10 years; Robert N. Bannon--25 years; Jim P. Wise--2 years;
and F. Maxwell Evans--4 years. Mr. Waggoner was originally hired by Monsanto
prior to April 1, 1986, and retired as an employee of the Company in connection
with the Merger. Accordingly, Mr. Waggoner's pension benefits commenced on
September 1, 1996 and are based upon 40 years of service and 1.4% of his Average
Earnings.
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 "Code"). 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
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<PAGE>
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 subject to limitations on
Pension Plan benefits imposed by the Code may participate in the Supplemental
Plan. 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, as of
September 30, 1996, total retirement benefits under the Equalization Plan and/or
the Supplemental Plan payable to Messrs. Roten, Crump, Bannon, Wise and Evans
will be $86,098, $53,616, $85,389, $30,847, and $31,731 per year, respectively,
reduced by the value of the benefits payable under the Pension Plan, which are
$62,148, $44,680, $69,105, $25,706, and $30,609 per year, respectively. Mr.
Waggoner's actual benefits paid under the Equalization Plan and/or the
Supplemental Plan are $134,758, reduced by actual benefits under the Pension
Plan of $71,341.
Termination Pay Plan.
On April 24, 1996, the Company adopted a Consolidated Termination Pay
Plan for All Salaried Employees of the Company and its Subsidiaries, which
supersedes and replaces all prior termination pay plans (collectively, the
"Prior Plans"). The Consolidated Termination Pay Plan was amended and restated
on May 20, 1996 and further amended on August 19, 1996 (as amended, the
"Consolidated Plan"). With the exception of Mr. Waggoner, each of the Named
Executive Officers is covered by the Consolidated Plan.
The Consolidated Plan provides that if, within the 24-month period
following a "change of control," the employment of any full time salaried
employee of Sterling Chemicals, Inc. (or any wholly owned direct or indirect
subsidiary thereof, or any successor thereto) is terminated for any reason
(other than the employee's death or disability, resignation or retirement or
termination for cause), or such employee is requested to accept a new job which
is less than equivalent to his or her job immediately prior to the change of
control in terms of compensation, job level, job responsibilities or credits,
such employee shall be entitled to receive termination pay. Such an event
giving rise to termination pay under the plan is defined as a "Triggering
Event."
The termination pay payable to any eligible employee following a
Triggering Event is equal to 36 months' pay (for certain members of senior
management, including the Named Executive Officers), or 24 months' pay (for all
other salaried employees) (the relevant period being referred to as such
employee's "Termination Pay Period") at the employee's base pay rate in effect
at the time of the change of control, and is payable as and when such base
salary would otherwise have been payable to such employee if such employee had
not been terminated. An affected employee is to receive continued health
benefits for the Termination Pay Period, and an amount equal to the projected
amount of profit sharing that would have been received by the affected employee
under the Company's Amended and Restated Salaried Employees' Profit Sharing Plan
during the Termination Pay Period.
Other amounts payable upon a Triggering Event include benefits accrued
under the Company's pre-Merger employee stock ownership plan (the "Old ESOP"),
the Company's Amended and Restated Savings and Investment Plan (the "Savings
Plan"), the Pension Plan, the Supplemental Plan or the Equalization Plan, or any
similar plan in effect for Canadian employees, which would be forfeited by the
employee due to the Triggering Event. The Consolidated Plan also provides for
outplacement services and gross-up payments for any excise tax imposed by
Section 4999 of the Code or any interest or penalty thereon.
Assuming that Messrs. Roten, Crump, Bannon, Wise and Evans were
entitled to receive payments under the Consolidated Plan as of September 30,
1996, and assuming projected profit sharing amounts of zero for the Termination
Pay Period, such payments would have totaled $615,000, $540,000, $540,000,
$540,000, and $466,500, respectively.
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<PAGE>
For purposes of the Consolidated Plan, a "change of control" means (i)
the acquisition of or the ownership of 50% or more of the total voting stock of
the Company then issued and outstanding, by any person or group of affiliated
persons, or entities not affiliated with the Company as of April 24, 1996,
either with or without the consent of the Company, or (ii) individuals who were
members of the Board of the Company immediately prior to a meeting of the
stockholders of the Company involving a contest for the election of directors do
not constitute a majority of the Board immediately following such election
unless the election of such new directors was recommended to the stockholders by
management of the Company, or (iii) in addition to (i) and (ii) above, with
respect to employees of Sterling Pulp Chemicals, Ltd. and Sterling Pulp
Chemicals US, Inc., only, the acquisition of or the ownership of 50% or more of
the total voting stock of Sterling Pulp Chemicals, Ltd. or Sterling Canada, Inc.
The Merger constituted a "change of control" under the Consolidated Plan. No
payments are currently expected to be made under such plan in connection with
the Merger.
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. 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 Named Executive Officers. Additionally, the
Compensation Committee recommends and administers those employee benefit plans
that provide benefits to the executive officers.
Prior to, and at the time of, the Merger, a standing committee of the
Board of Directors designated as the Compensation Committee (the "Prior
Committee") was in place which was composed of the non-employee directors of the
pre-Merger Board of Directors (the "Prior Board") identified as such at the end
of this report. As a result of the Merger, each member of the Prior Committee
ceased to be a director of the Company and, consequently, ceased to be a member
of the Prior Committee. Following the Merger, the Board of Directors designated
a new Compensation Committee to supersede and replace the Prior Committee (the
"Current Committee"). The Current Committee is currently composed of the non-
employee directors of the Board of Directors of the Company identified as such
at the end of this report.
The major components of executive officer compensation for the fiscal
year ended September 30, 1995, and the basis upon which such compensation was
determined, were set forth in the report of the Prior Committee contained in the
Proxy Statement for the 1996 Annual Meeting of Stockholders of the Company (the
"1995 Compensation Committee Report"). For convenience, a copy of the 1995
Compensation Committee Report is included as Annex A to this Proxy Statement.
As none of the members of the Current Committee were directors of the Company
prior to the Merger, this Compensation Committee Report refers to the 1995
Compensation Committee Report for the description of the major components of
executive officer compensation and the basis upon which such compensation was
based for the fiscal year ended on September 30, 1996. The members of the
Current Committee are not aware of any significant variations in fiscal 1996
from the policies described in the 1995 Compensation Committee Report. The
Current Committee will establish the components and the basis upon which
executive officer compensation is based for the fiscal year ended September 30,
1997.
- ------------
(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.
-11-
<PAGE>
Compensation Policy and Guidelines
Reference is hereby made to the description of the Company's
compensation policy and philosophy, the major components of executive officer
compensation and the basis upon which such compensation was determined as
contained in the 1995 Compensation Committee Report (included as Annex A hereto)
for the purpose of describing such items for the fiscal year ended September 30,
1996.
The executive compensation program for the executive officers of the
Company, including the Chief Executive Officer, for fiscal year 1996 consisted
primarily of (1) base salaries, which were not related directly to the Company's
performance but which were set below median levels based on comparative industry
data, and (2) profit sharing bonuses, which were entirely based upon the
adjusted earnings of the Company exceeding a pre-designated threshold (set at
$99 million for the fiscal year ending September 30, 1996), and were paid out of
the Company's Salaried Employees' Profit Sharing Plan (the "Profit Sharing
Plan"). In fiscal year 1996, the base salaries for the executive officers,
including the Company's former Chief Executive Officer (Mr. Waggoner), whose
base salary was $325,000, were well below median industry levels of comparably
sized chemical companies and the threshold was exceeded by approximately $22
million. Accordingly, profit sharing bonuses aggregating $639,437 were paid for
the Company's 1996 fiscal year to the Named Executive Officers, including the
former Chief Executive Officer, whose profit sharing bonus was $200,372.
Although such profit sharing bonuses were paid with respect to the Company's
1996 fiscal year, the Profit Sharing Plan is expected to be revised or replaced
for fiscal 1997.
The executive officers of the Company have historically owned and
continue to own a substantial number of shares of the Company's Common Stock.
Additionally, the executive officers and other employees are eligible to
participate in the New ESOP, which was established at the time of the Merger.
Under the New ESOP, certain executive officers of the Company are eligible for
allocations under the New ESOP in the form of cash and/or Common Stock on the
terms and the times specified in the New ESOP. The Current Committee believes
that substantial ownership of Common Stock by its executive officers and their
participation in the New ESOP further encourages long-term performance and
Company growth by more closely aligning its executive officers' interests with
the equity owners' interests.
The Current Committee intends to undertake a comprehensive review of
the Company's compensation program for executive officers, including the
Chairman and the Chief Executive Officer, during the Company's 1997 fiscal year.
Although no specific plans or proposals have been developed or considered by the
Current Committee, the Current Committee is in general agreement with the prior
philosophy of the Company, insofar as such philosophy adhered to the concept
that the executive compensation program should provide proper incentives to its
executive officers and have a significant relationship to the Company's
operating performance. The Current Committee expects to adopt a stock option
plan and a new profit sharing plan.
The Compensation Committee of the Board of Directors
Following the Merger, the Board of Directors of the Company
established the Current Committee to supersede and replace the Prior Committee.
The names of the members of the Current Committee are listed below. The Prior
Committee consisted of William A. McMinn (Chairman), Gordon A. Cain, Gilbert M.
A. Portal, Frank J. Pizzitola and Raymond R. Knowland.
Frank J. Hevrdejs (Chairman)
Allan R. Dragone
Robert B. Calhoun
CERTAIN TRANSACTIONS
In connection with the Merger, STX Acquisition, Chemicals and TSG
entered into an agreement (the "Consulting Agreement") pursuant to which TSG
provided consulting and advisory services, including the organization
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<PAGE>
of STX Acquisition and Chemicals, structuring and financing of the Merger,
arrangements for outside consulting services, advice with respect to employee
benefit and compensation arrangements and other matters, and STX Acquisition
agreed to indemnify TSG against liabilities relating to their services. In
addition, Unicorn provided similar services to STX Acquisition and Chemicals in
connection with the Merger. Upon consummation of the Merger, the Company paid
TSG and Unicorn one-time transaction fees of approximately $8.4 million and $4.4
million, respectively, for these services and reimbursed TSG and Unicorn for
their expenses. The transaction fees received by TSG are consistent with fees
which TSG has received in other transactions for which it has provided similar
consulting and advisory services, but were not negotiated on an arm's length
basis. In addition, the Consulting Agreement provides that if the Company or
any of its subsidiaries determines prior to April 23, 1998 to dispose of or
acquire any assets or businesses or to offer its securities for sale or to raise
any debt or equity financing, the Company or its subsidiary will retain TSG as a
consultant with respect to the transaction, provided that TSG's fees are
competitive and the Company and TSG mutually agree on the terms of the
engagement. Frank J. Hevrdejs and Hunter Nelson, each a director and
stockholder of the Company and a party to the Voting Agreement, and William C.
Oehmig and Susan O. Rheney, each a stockholder of the Company and a party to the
Voting Agreement, are the principals of TSG. Frank P. Diassi, Chairman of the
Board of Directors, a stockholder of the Company and a party to the Voting
Agreement, is the Managing General Partner of Unicorn. See "Change of Control"
and "Principal Stockholders."
Also in connection with the Merger, CS First Boston Corporation served
as managing underwriter for the Public Offering and provided certain financial
advisory services to STX Acquisition and Chemicals, for which such firm received
underwriting discounts and commissions and financial advisory fees totaling
approximately $17 million. John L. Garcia, a director and stockholder of the
Company, is a Managing Director of CS First Boston Corporation.
The Clipper Group and Koch Capital are principal stockholders of the
Company by virtue of their participation in the Equity Private Placement in
connection with the Merger, and are also parties to the Voting Agreement.
Pursuant to the Voting Agreement, each of the Clipper Group and Koch Capital has
the right to designate a nominee for the Company's Board of Directors, and the
remaining parties to the Voting Agreement have agreed to vote for such
designees. George B. Gregory is the current designee of Koch Capital and Robert
B. Calhoun is the current designee of the Clipper Group. See "Change of
Control" and "Principal Stockholders."
Mr. Gordon A. Cain, Chairman of the Company's Board of Directors prior
to the Merger, was the founder of TSG and was a principal and a stockholder
thereof until December 1993. Since that time Mr. Cain has had no equity or
other financial interest in TSG, although at TSG's invitation he has invested in
three transactions organized by TSG. Mr. Cain and William A. McMinn, a director
of the Company prior to the Merger, assist TSG as senior advisors on selected
transactions. Although Mr. McMinn has received certain advisory fees for such
services, Mr. Cain has not. Neither Mr. Cain nor Mr. McMinn participated in any
such capacity in connection with the Merger. Messrs. Cain and McMinn, along
with Mr. J. Virgil Waggoner, Vice-Chairman of the Company's Board of Directors,
Robert W. Roten, Chief Executive Officer and a director of the Company, and
Richard K. Crump, a Vice-President of the Company, have previously co-invested
with principals of TSG in several transactions.
Since October 1, 1991, the Company and certain affiliates of Koch
Industries have had ongoing commercial relationships in the ordinary course of
business, including, from time to time, supply of raw materials or sales of
petrochemicals. For the fiscal year ended September 30, 1996, (i) product sales
to and raw material purchases from Koch Chemical Company, an indirect wholly
owned subsidiary of Koch Industries, and (ii) payments to John Zink Company, an
indirect wholly owned subsidiary of Koch Industries, in consideration for
certain contracting and construction services performed at the Texas City Plant,
each represented less than 1% of the Company's revenues.
PROPOSAL NO. 2:
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Company has engaged Deloitte & Touche LLP ("Deloitte") as its
independent auditors for the fiscal year ending September 30, 1997. The Board
of Directors recommends a vote FOR the proposal to ratify the appointment
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<PAGE>
of Deloitte and, unless authority to vote for the appointment is withheld, all
shares represented by proxies will be voted for the appointment.
Representatives of Deloitte 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.
Termination of Coopers & Lybrand L.L.P. 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 ("Andersen") as its independent auditors for the year ending
September 30, 1996, to replace the firm of Coopers & Lybrand L.L.P. ("Coopers").
The termination by the Company of the engagement of Coopers 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. The
appointment of Andersen as the Company's independent auditors for the fiscal
year ending September 30, 1996 was ratified by the stockholders at the 1996
Annual Meeting of Stockholders.
During the two previous fiscal years and the subsequent period through
December 18, 1995, the date of filing of the Company's Annual Report on Form 10-
K, there were no disagreements with Coopers 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 previous fiscal years and the subsequent period through
December 18, 1995, the date of filing of the Company's Annual Report on Form 10-
K, the Company was not advised by Coopers of any of the reportable events listed
in Item 304(a)(1)(v)(A) through (D) of SEC Regulation S-K and during such period
the Company did not consult with Andersen regarding any matter referenced under
Item 304(a)(2) of the SEC Regulation S-K.
The audit reports of Coopers 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 Company requested that Coopers furnish a letter addressed to the
SEC stating whether Coopers agreed with the above statements. A copy of the
Coopers letter to the SEC stating that such firm agreed with the above
statements, dated December 18, 1995, was filed as Exhibit 16 to the Company's
Form 8-K, dated December 18, 1995.
Resignation of Arthur Andersen LLP. On August 21, 1996, Andersen
resigned effective immediately in connection with the Merger. The Company
engaged Deloitte as its independent auditors for the fiscal year ended September
30, 1996. Deloitte served as independent auditors of STX Acquisition prior to
the Merger.
Andersen did not perform an audit of the Company's financial
statements for any period. During the period of the engagement of Andersen,
there were no disagreements with Andersen on any matter of accounting principles
or practices or financial statement disclosure. The Company has not been
advised by Andersen of any of the reportable events listed in Item
304(a)(1)(v)(A) through (D) of Regulation S-K.
The Company requested that Andersen furnish a letter, addressed to the
SEC, stating whether Andersen agreed with the above statements. A copy of the
letter of Andersen to the SEC stating that such firm agreed with the above
statements, dated August 28, 1996, was filed as Exhibit 16.1 to the Company's
Form 8-K, dated August 21, 1996.
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<PAGE>
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, 1991 in the Company's Common Stock, the S&P 500 Index and the S&P
Chemicals Index and that dividends were reinvested.
In connection with the Merger, the Common Stock was delisted from the
New York Stock Exchange and is now included in the OTC Electronic Bulletin Board
maintained by the National Association of Securities Dealers, Inc. The Company
believes that the delisting combined with the reductions in the number of shares
of Common Stock outstanding and the number of record holders of Common Stock has
significantly reduced the liquidity of the trading market for the Common Stock.
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.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN BASED ON
$100 INVESTED ON SEPTEMBER 30, 1991 IN STOCK OR
INDEX - INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING SEPTEMBER 30.
[STOCK PERFORMANCE GRAPH APPEARS HERE]
[Following is a listing of each of the plot points illustrated in the graph:
Sterling Chemicals
Stock/Index: Holdings, Inc. S & P 500 S & P Chemicals
- ------------ -------------------- --------- ----------------
Date Value Value Value
---- ----- ----- -----
9/30/91 $ 100 $ 100 $ 100
9/30/92 $ 82 $ 111 $ 110
9/30/93 $ 76 $ 125 $ 118
9/30/94 $ 282 $ 130 $ 155
9/30/95 $ 172 $ 169 $ 184
9/30/96 $ 256 $ 203 $ 238]
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of December 13, 1996, 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, and (iv) all of the
directors and executive officers as a group. In addition, employees of the
Company, including certain of the Company's executive officers, own an aggregate
of 1,157,643 shares of Common Stock through the Old ESOP, which represents 10.4%
of the outstanding Common Stock. These shares are held of record by Merrill
Lynch & Co. Incorporated ("Merrill Lynch"), as trustee, who disclaims beneficial
ownership of such shares, and are allocated to the account of each employee who
has sole voting power of his respective Old ESOP shares. In connection with the
Merger, the Old ESOP was terminated and the Old ESOP shares will be distributed
to the respective employees upon receipt of a determination letter from the
Internal Revenue Service, expected during the second or third quarter of fiscal
1997. Employees of the Company, including the Company's executive officers,
will also own an aggregate of 541,670 shares of Company Common Stock through the
New ESOP, established in connection with the Merger, which represents 4.9% of
the outstanding shares of Common Stock. The New ESOP shares have not yet been
allocated to the accounts of individual employees, although the initial
allocation is expected to occur during the second quarter of fiscal 1997 at
which time such employees will have sole voting power of their respective
allocated New ESOP shares. 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>
COMMON STOCK
--------------------------
NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1) SHARES PERCENT
- ---------------------------------------- ---------------- -------
<S> <C> <C>
Frank P. Diassi............................................................. 541,670 (2) 4.9%
J. Virgil Waggoner.......................................................... 469,242 (3) 4.2
Robert B. Calhoun........................................................... 1,833,330 (4) 16.5
Allan R. Dragone............................................................ 20,000 *
John L. Garcia.............................................................. 29,170 (5) *
George B. Gregory........................................................... 1,000,000 (6) 9.0
Frank J. Hevrdejs........................................................... 750,001 (2) 6.7
Hunter Nelson............................................................... 52,410 (2)(7) *
Robert W. Roten............................................................. 146,709 (8) 1.3
Robert N. Bannon............................................................ 24,905 (9) *
Richard K. Crump............................................................ 37,391 (10) *
Jim P. Wise................................................................. 8,000 *
F. Maxwell Evans............................................................ 6,938 (11) *
Clipper Capital Associates, Inc............................................. 1,757,430 (2)(12) 15.8
Koch Industries, Inc........................................................ 1,000,000 (2)(13) 9.0
Fayez Sarofim & Co.......................................................... 574,617 (2)(14) 5.1
Olympus Growth Fund II, L.P................................................. 557,947 (2)(15) 5.0
Olympus Executive Fund, L.P................................................. 6,670 (2)(15) *
All executive officers and directors of the Company as a group (15 persons). 4,948,485 (16) 44.4
</TABLE>
-16-
<PAGE>
- ------------------------
* Less than 1%
(1) Unless otherwise noted, the mailing address of each such beneficial owner
is 1200 Smith Street, Suite 1900, Houston, Texas 77002-4312.
(2) Each of such stockholders is a party to the Voting Agreement. See "Change
of Control--Agreements Among Stockholders." Other parties to the Voting
Agreement include William C. Oehmig, who beneficially owns 345,963 shares
of Common Stock, and the Rheney Living Trust (Susan O. Rheney and Clarke
Rheney, Trustees), which beneficially owns 41,670 shares of Common Stock.
The parties to the Voting Agreement may be deemed to be members of a
"group" within the meaning of Rule 13d-5(b)(1) under the Securities
Exchange Act of 1934, and accordingly may be deemed to have beneficial
ownership of all of the shares of Common Stock subject to the Voting
Agreement. An aggregate of 5,694,278 shares of Common Stock, representing
51.1% of the outstanding Common Stock, are subject to the Voting Agreement.
However, each party to the Voting Agreement expressly disclaims membership
in such group and beneficial ownership of such shares of Common Stock,
other than shares identified herein as beneficially owned by such party.
(3) Includes 57,936 shares over which Mr. Waggoner has sole voting power held
by Merrill Lynch, as Trustee of the Old ESOP, and allocated to Mr.
Waggoner's account.
(4) Mr. Calhoun is the sole stockholder of Clipper and Curacao, and as such may
be deemed to have beneficial ownership of shares of Common Stock
beneficially owned by Clipper Associates, Clipper I, Clipper II, Clipper
III and Clipper IV, each of which is defined and discussed below in
footnote (12). In addition, Mr. Calhoun may be deemed to have beneficial
ownership of shares of Common Stock beneficially owned by CS First Boston
Merchant Investments 1995/96, L.P. ("CSFB Investments"), a Delaware limited
partnership principally engaged in making investments. CSFB Investments
may be deemed to directly beneficially own 75,900 shares of Common Stock.
(5) Held by Clipper Capital Associates, L.P. ("Clipper Associates"), under a
nominee agreement pursuant to which Clipper Associates exercises sole
voting and dispositive power with respect to such shares.
(6) Represents shares held by Koch Capital, a wholly owned subsidiary of Koch
Industries, with respect to which, as Chief Financial Officer of the
chemical group of Koch Capital, Mr. Gregory may be deemed to have
beneficial ownership. Mr. Gregory disclaims beneficial ownership of such
shares.
(7) Mr. Nelson serves as Trustee for the new ESOP, which currently holds
541,670 shares of Company Common Stock on behalf of employees of the
Company. Mr. Nelson disclaims beneficial ownership of such shares.
(8) Includes 36,806 shares over which Mr. Roten has sole voting power held by
Merrill Lynch, as Trustee of the Old ESOP, and allocated to Mr. Roten's
account.
(9) Includes 21,727 shares over which Mr. Bannon has sole voting power held by
Merrill Lynch, as Trustee of the Old ESOP, and allocated to Mr. Bannon's
account.
(10) Includes 7,478 shares over which Mr. Crump has sole voting power held by
Merrill Lynch, as Trustee of the Old ESOP, and allocated to Mr. Crump's
account.
(11) Includes 1,704 shares over which Mr. Evans has sole voting power held by
Merrill Lynch, as Trustee of the Old ESOP, and allocated to Mr. Evans'
account.
(12) Clipper Capital Associates, Inc. ("Clipper") may be deemed to be the
beneficial owner of such shares of Common Stock by virtue of its
relationship with entities that have beneficial ownership of such shares as
discussed herein. Clipper and its affiliated entities described herein are
collectively referred to as "The Clipper Group." Clipper is the sole
general partner of Clipper Capital Associates, L.P. ("Clipper Associates"),
and is a Delaware corporation principally engaged in holding investments,
formed for the purpose of serving as general partner of Clipper Associates.
The mailing address of Clipper is Tower 49, 12 East 49th Street, New York,
NY 10017.
Clipper Associates is a Delaware limited partnership principally engaged in
making investments, directly or indirectly through other entities and is
the sole general partner of Clipper Equity Partners I, L.P. ("Clipper I")
and Clipper/Merchant Partners, L.P. ("Clipper II"), with sole voting and
dispositive power with respect to the securities held by such partnerships.
Each of Clipper I and Clipper II is a Delaware limited partnership,
principally engaged in making investments. Clipper Associates may be deemed
to directly beneficially own 2,160 shares of Common Stock and indirectly
beneficially own 174,990 shares of Common Stock by virtue of its status as
nominee under certain nominee agreements, pursuant to which it exercises
sole voting and dispositive power with respect to such shares. Clipper I
may be deemed to directly beneficially own 382,370
-17-
<PAGE>
shares of Common Stock. Clipper II may be deemed to directly beneficially
own 433,160 shares of Common Stock.
Each of Clipper/Merban, L.P. ("Clipper III") and Clipper/European Re, L.P.
("Clipper IV") is a Delaware limited partnership, principally engaged in
making investments. Clipper Associates is the sole investment general
partner of Clipper III and Clipper IV, having sole voting and dispositive
power with respect to securities held by such partnerships. Clipper III may
be deemed to directly beneficially own 509,830 shares of Common Stock.
Clipper IV may be deemed to directly beneficially own 254,920 shares of
Common Stock. Clipper Curaco, Inc. ("Curaco"), a corporation organized
under the laws of the British Virgin Islands, is the sole administrative
general partner of Clipper III and Clipper IV, responsible for the
administrative functions of such partnerships.
(13) Koch Industries may be deemed to be the beneficial owner of such shares of
Common Stock, which are directly beneficially owned by Koch Capital. The
mailing address of Koch Industries and Koch Capital is 4111 East 37th
Street North, Wichita, KS 67220.
(14) Fayez Sarofim & Co. may be deemed to be the beneficial owner of such shares
of Common Stock, which are directly beneficially owned by FSI No. 2
Corporation, a wholly owned subsidiary of Fayez Sarofim & Co. The majority
owner of Fayez Sarofim & Co. is Fayez Sarofim. The mailing address of
Fayez Sarofim, Fayez Sarofim & Co. and FSI No. 2 Corporation is Two Houston
Center, Suite 2907, Houston, TX 77010.
(15) Olympus Growth and Olympus Executive are Delaware limited partnerships
principally engaged in making investments. OGP II, L.P., a Delaware
limited partnership ("OGP") is the sole general partner of Olympus Growth,
OEF, L.P., a Delaware limited partnership, is the sole general partner of
Olympus Executive. The three general partners of both OGP and OEF are LJM,
L.L.C. ("LJM"), RSM, L.L.C. ("RSM"), and Conroy, L.L.C. ("Conroy"); each of
LJM, RSM and Conroy is a Delaware limited liability company. The majority
owner of LJM is Louis J. Mischianti. The majority owner of RSM is Robert
S. Morris. The majority owner of Conroy is James A. Conroy. The mailing
address of Olympus Growth, Olympus Executive, OGP, OEF, LJM, RSM, Conroy
and Messrs. Mischianti, Morris and Conroy is Metro Center, One Station
Place, Stanford, Connecticut 06902.
(16) Includes 125,651 shares held by Merrill Lynch, as Trustee of the Old ESOP,
and allocated to the accounts of certain of such officers and directors.
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>
Frank P. Diassi (63) Chairman of the Board of Directors
Robert W. Roten (62) President, Chief Executive Officer and Director
Jim P. Wise (53) Vice President--Finance and Chief Financial Officer
Richard K. Crump (50) Vice President--Strategic Planning
Robert N. Bannon (51) Vice President--Operations, President--Petrochemicals
Division
F. Maxwell Evans (52) Vice President, General Counsel and Secretary
Robert O. McAlister (57) Vice President--Human Resources and Administration
Stewart H. Yonts (51) Treasurer
</TABLE>
-18-
<PAGE>
Frank P. Diassi. Mr. Diassi is currently Managing General Partner of
Unicorn, a private financial organization. He organized Unicorn in 1981 and has
originated investments in over 40 entrepreneurial companies. Prior to forming
Unicorn, Mr. Diassi organized and operated several businesses ranging from
chemical distribution to the manufacturing of organic chemicals and detergent
products. In addition, he had a number of years of executive experience with
the petrochemical department of Continental Oil Company. He has been Chairman
of the Board of Hawkeye Chemical Company and was a founding director of Arcadian
Corporation, the largest nitrogen fertilizer company in the Western hemisphere.
Mr. Diassi currently serves as Chairman of the Board of Software Plus, Inc. In
addition, he serves as a director of Mail-Well, Inc., an envelope manufacturer
and commercial printer, and several private companies. Mr. Diassi became
Chairman of the Board of Directors of the Company in August 1996.
Robert W. Roten. 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, and became President and Chief Executive
Officer in August 1996.
Jim P. Wise. 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.
Richard K. Crump. 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. Effective December 1, 1996, Mr. Crump became Vice
President--Strategic Planning, assuming responsibility for strategic planning
for the Company, which includes acquisition and merger activity.
Robert N. Bannon. 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. Mr. Bannon
served as Director of Manufacturing for the Company from October 1989 until
October 1991 and as Vice President--Operations since October 1991. Mr. Bannon
was also President of Sterling Pulp Chemicals, Ltd. from August 1992 through
November 1996. Effective December 1, 1996, Mr. Bannon became President of the
Company's Petrochemicals Division, assuming responsibility for petrochemical
operations at the Texas City Plant. Mr. Bannon is also a director of Mainland
Bank in Texas City, Texas.
F. Maxwell Evans. Mr. Evans joined the law firm of Bracewell & Patterson,
L.L.P. of Houston, Texas in 1973 and was a partner in the firm from 1979 through
December 1991. He received an L.L.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.
Robert O. McAlister. 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.
Stewart H. Yonts. 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
-19-
<PAGE>
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 preparing, printing and 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.
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 1998 Annual Meeting of
Stockholders, such proposals must be received by the Company at its principal
executive offices not later than August 22, 1997.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended 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 1996, the Reporting Persons complied with all
Section 16(a) filing requirements applicable to them, except that Messrs. Allan
R. Dragone and John L. Garcia, members of the Company's Board of Directors,
inadvertently reported an erroneous number of shares of Common Stock owned upon
becoming directors, which errors have been corrected with an amended filing.
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
-20-
<PAGE>
ANNEX A
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995 (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
- ------------
(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, this Annex
I - Board Compensation Committee Report on Executive Compensation for the
fiscal year ended September 30, 1995 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.
A-1
<PAGE>
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 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.
<PAGE>
P R O X Y
STERLING CHEMICALS HOLDINGS, INC.
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JANUARY 22, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Robert W. Roten and T. Hunter
Nelson, and each of them, attorneys and agents, with full power of substitution
to vote as proxy all the shares of Common Stock standing in the name of the
undersigned at the Annual Meeting of Stockholders of Sterling Chemicals
Holdings, Inc. ("Company") to be held at Texas Commerce Center Auditorium, 601
Travis Street, Houston, Texas at 9:00 A.M., Houston time, on Wednesday, January
22, 1997, and at any adjournments thereof, in accordance with the instructions
noted below, and with discretionary authority with respect to such other
matters as may properly come before said meeting or any adjournments thereof.
Receipt of notice of the meeting and Proxy Statement dated December 20, 1996 is
hereby acknowledged.
The undersigned hereby revokes any proxies heretofore given and directs said
attorneys to act or vote as follows:
Election of Directors Nominees:
Frank P. Diassi J. Virgil Waggoner Robert W. Roten
Frank J. Hevrdejs T. Hunter Nelson Robert B. Calhoun
Allan R. Dragone John L. Garcia George B. Gregory
-------------
SEE REVERSE
SIDE
-------------
<PAGE>
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
<TABLE>
<S> <C> <C> <C>
FOR WITHHOLD
all nominees listed AUTHORITY
(except as marked to to vote for all
the contrary below) nominees listed below
1. Election of [ ] [ ] 2. Proposal to ratify the appointment of Deloitte & Touche LLP,
Directors as independent auditors of the books and accounts of Sterling
Chemicals Holdings, Inc. for the year ending
For, except vote withheld from the following nominees(s): September 30, 1997.
FOR AGAINST ABSTAIN
- ---------------------------------------------------------------- [ ] [ ] [ ]
(Proxy -- Continued from other side)
This Proxy is solicited by the Board of Directors and will be voted in
accordance with the Stockholder's specifications hereon. In the absence of such
specification, the Proxy will be voted in favor of each nominee for director
and "For" the proposal to ratify the appointment of Deloitte & Touche LLP.
SIGNATURE(S) _______________________________ DATE ____________, 199__
SIGNATURE(S) _______________________________ DATE ____________, 199__
NOTE: *Please sign as name appears hereon. Joint owners each should
sign. When signing as attorney, trustee, administrator, executor,
etc., please indicate your full title as such. If a corporation,
please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by
authorized person.
</TABLE>
