<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
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[ ] 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 sec. 240.14a-11(c) or sec. 240.14a-12
Sterling Chemicals Holdings, Inc.
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0-11.
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the Form or Schedule and the date of its filing.
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<PAGE> 2
[COMPANY LOGO]
December 21, 1998
Dear Stockholder:
On behalf of the Board of Directors, it is our pleasure to invite you
to attend the 1999 Annual Meeting of Stockholders of Sterling Chemicals
Holdings, Inc. to be held in the Granger A Room of the DoubleTree Hotel located
at 400 Dallas, Houston, Texas at 9:00 a.m., Houston time, on Wednesday, January
27, 1999. A notice of the meeting, proxy statement and form of proxy are
enclosed with this letter.
During the meeting we will report on the operations of the Company
during fiscal 1998 and our plans for fiscal 1999. Directors and officers of the
Company will be present to respond to questions from stockholders.
We hope that you will be able to attend the meeting. If you are unable
to attend the meeting in person, it is very important that your shares be
represented and we request that you complete, date, sign and return the enclosed
proxy at your earliest convenience. If you choose to attend the meeting in
person, you may, of course, revoke your proxy and cast your votes personally at
the meeting. We look forward to seeing you at the meeting.
Sincerely,
/s/ FRANK P. DIASSI
FRANK P. DIASSI
Chairman of the Board
PETER W. DE LEEUW
President and Chief Executive Officer
<PAGE> 3
[COMPANY LOGO]
STERLING CHEMICALS HOLDINGS, INC.
1200 Smith Street
Suite 1900
Houston, Texas 77002-4312
-----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 27, 1999
To the Stockholders of Sterling Chemicals Holdings, Inc.:
An Annual Meeting of Stockholders of Sterling Chemicals Holdings, Inc. (the
"Company") will be held in the Granger A Room at the DoubleTree Hotel, 400
Dallas, Houston, Texas at 9:00 A.M., Houston time, on Wednesday, January 27,
1999 (the "Annual Meeting") for the following purposes:
1. To elect nine directors to serve until the Annual Meeting of
Stockholders in 2000 and until their successors have been duly
elected and qualified;
2. To ratify and approve the appointment of Deloitte & Touche LLP as
the independent accountants of the Company for the fiscal year
ending September 30, 1999; and
3. To consider and act upon such other business as may properly come
before the Annual Meeting or any adjournment or postponement
thereof.
Stockholders of record at the close of business on December 7, 1998 are
entitled to notice of and to vote at the Annual Meeting and any adjournment or
postponement thereof.
You are cordially invited to attend the Annual Meeting.
By Order of the Board of Directors
/s/ DAVID G. ELKINS
DAVID G. ELKINS
Corporate Secretary
Houston, Texas
December 21, 1998
================================================================================
YOUR VOTE IS IMPORTANT
Whether or not you expect to attend the Annual Meeting, in order to ensure
your representation, please complete, date, sign and promptly return
the enclosed proxy in the accompanying envelope, which requires no
postage if mailed in the United States. If you attend the
Annual Meeting and wish to vote in person,
your proxy will not be used.
================================================================================
<PAGE> 4
STERLING CHEMICALS HOLDINGS, INC.
1200 Smith Street
Suite 1900
Houston, Texas 77002-4312
(713) 650-3700
DECEMBER 21, 1998
----------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 27, 1999
----------------------
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 in the Granger A Room at the DoubleTree Hotel, 400 Dallas, Houston, Texas
at 9:00 A.M., Houston time, on Wednesday, January 27, 1999, and at any
adjournment or postponement thereof (the "Annual Meeting"). The Annual Meeting
is being held 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, 1998 and the enclosed form of proxy are first being mailed to
stockholders on or about December 21, 1998.
PROXIES
The shares represented by any proxy in the enclosed form which is properly
executed and received by the Company prior to or at the Annual Meeting (each, a
"Conforming Proxy") will be voted in accordance with the specifications made
thereon. Conforming Proxies that are properly signed and returned but on which
no specifications have been made by the stockholder will be voted in favor of
the proposals described in this Proxy Statement. The Board of Directors is not
aware of any matters that are expected to come before the Annual Meeting other
than those described in this Proxy Statement. However, if any other matters are
properly brought before the Annual Meeting, the persons named in the enclosed
form of proxy will vote the shares represented by each Conforming Proxy on those
matters as instructed by the Board of Directors or, in the absence of any
express instructions from the Board of Directors, in accordance with their own
best judgment. A stockholder who has executed and delivered a Conforming Proxy
may revoke that Conforming Proxy at any time before it is voted at the Annual
Meeting by (i) executing a new proxy with a later date and delivering the new
proxy to the Secretary or an Assistant Secretary of the Company, (ii) voting in
person at the Annual Meeting or (iii) giving written notice of the revocation to
the Secretary or an Assistant Secretary of the Company. The presence of a
stockholder at the Annual Meeting will not automatically cause the revocation of
a Conforming Proxy which has previously been delivered by such stockholder.
VOTING SECURITIES
Stockholders of record at the close of business on December 7, 1998 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting and
any adjournment or postponement thereof. As of the Record Date, the issued and
outstanding voting securities of the Company consisted of 12,928,108 shares of
common stock, par value $0.01 per share (the "Common Stock"), 199,266 shares of
which were held by Sterling Chemicals, Inc., a Delaware corporation and a
wholly-owned subsidiary of the Company ("Chemicals"). Each share of Common Stock
is entitled to one vote on each matter submitted to a vote at the Annual Meeting
other than the election of directors. In the election of directors, each share
of Common Stock is entitled to cast one vote for each director to be elected.
<PAGE> 5
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 and sufficient
to constitute a quorum. Shares of Common Stock represented by Conforming Proxies
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, meaning that the nine nominees with the largest number of
affirmative votes will be elected as directors. Accordingly, abstentions or
broker non-votes will not affect the election of directors.
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 two Inspectors of Election
appointed by the Company.
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, meaning that the nine nominees with the largest number of
affirmative votes will be elected as directors. 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 Conforming 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 in any Conforming Proxy, all shares represented by
any such proxy will be voted for the election of the nominees as to whom
authority is not withheld. If a nominee becomes unavailable for any reason
before the election, discretionary authority provided for in the Conforming
Proxies may be used to vote for a substitute or substitutes designated by the
Board of Directors or the number of directors may be reduced accordingly.
However, the Board of Directors has no reason to believe that any nominee will
be unavailable.
NOMINEES FOR ELECTION
Each member of the Board of Directors of the Company will be elected to hold
office until the next annual meeting of stockholders of the Company and until
his successor is duly elected and has qualified or until his earlier death,
resignation or removal. All nominees, except Peter W. De Leeuw, were previously
elected by the stockholders.
All nominees have consented to being named in this Proxy Statement and have
agreed to serve if elected. They have provided the following information with
respect to their names, ages, principal occupations or employment during the
past five years, the names of the corporations or other organizations, if any,
in which such occupation or employment is or was carried on and the periods
during which they have served as directors of the Company. For information with
respect to Common Stock ownership by the nominees, see the table in the section
of this Proxy Statement captioned "Principal Stockholders," including the
footnotes thereto.
Frank P. Diassi. Age 65. Mr. Diassi is Chairman of the Company's Board of
Directors. He is currently Managing General Partner of The Unicorn Group, L.L.C.
("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, including being a director of Arcadian Corporation. Mr.
Diassi currently serves as Chairman of the Board of Software Plus, Inc., a human
resource
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<PAGE> 6
software supplier. In addition, he serves as a director of Mail-Well, Inc.
("Mail-Well"), an envelope manufacturer and commercial printer, and several
private companies. Mr. Diassi has been a director of the Company since August
21, 1996.
Robert W. Roten. Age 64. Mr. Roten spent the first 25 years of his career
with Monsanto Company ("Monsanto") 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 served as
President and Chief Executive Officer of the Company from August 21, 1996 until
his retirement from the Company on March 31, 1998. Mr. Roten has been a director
of the Company since August 21, 1996. He has served as Vice Chairman of the
Company's Board of Directors since April 1, 1998. Mr. Roten is also a director
of xnet, Inc., a Houston-based computer consulting firm.
Peter W. De Leeuw. Age 58. Mr. De Leeuw has been a member of the Board of
Directors of the Company and its President and Chief Executive Officer since
April 1, 1998. Prior to joining the Company, Mr. De Leeuw had been employed by
Shell Chemical Company since 1965, most recently serving as Vice President -
Growth. Shell Chemical Company, which is a subsidiary of Houston-based Shell Oil
Company, is a $5 billion leading manufacturer and distributor of chemical
products including PET, resins, solvents, elastomers and basic chemicals.
Allan R. Dragone. Age 72. Mr. Dragone is a director of Wellman, Inc., a
polyester fibers producer and plastic reclamation company, and DB Thin Films, a
maker of vacuum deposition of metallic thin films. He also served as a director
of Arcadian Corporation from 1989 to 1996, and served as Chairman of the Board
thereof from 1989 to 1990. Mr. Dragone was President and Chief Executive Officer
of Akzo America, Inc., a chemicals producer, from 1986 through 1989, and was
Chairman of the Board of Fiber Industries, Inc. ("Fiber Industries"), a
polyester fibers producer, from 1987 to 1989. He was Chairman of the Board of
the New York Racing Commission from 1990 to 1995, and currently serves as a
trustee thereof. Mr. Dragone has been a director of the Company since August 21,
1996.
John L. Garcia. Age 42. Mr. Garcia has been a Managing Director and Head of
the Global Chemical Investment Banking Group with Credit Suisse First Boston
Corporation ("CSFB") since 1994 and prior thereto was a Managing Director with
Wertheim Schroder & Co. Inc., an investment banking firm. Mr. Garcia also serves
as a director of Acetex Corporation, a chemical manufacturing company. Mr.
Garcia has been a director of the Company since August 21, 1996.
Frank J. Hevrdejs. Age 53. Mr. Hevrdejs has been a director of the Company
since August 21, 1996. Mr. Hevrdejs is a principal and President of The Sterling
Group, Inc. ("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 the Board 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 and Eagle U.S.A., Inc., an air-freight company.
Hunter Nelson. Age 46. 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. Prior to joining Fiber Industries, Mr.
Nelson was a partner in the law firm of Andrews & Kurth L.L.P., specializing in
general corporate and securities law. Mr. Nelson has been a director of the
Company since August 21, 1996. He also serves on the board of Sterling
Diagnostic Imaging, Inc. and other private companies.
George J. Damiris. Age 38. Mr. Damiris has been a director of the Company
since December 1, 1997. Mr. Damiris has been with Koch Industries, Inc. and its
affiliates (collectively "Koch") since 1989, currently serving as Vice President
of Koch Ventures, Inc. He was Executive Vice President of Koch's refining group
from 1996 to 1997, Vice President of Koch's chemical group from 1995 to 1996 and
served as President of Koch's gas services group from 1994 to 1995. Mr. Damiris
started Koch's international chemicals trading business in 1992 as Vice
President of Koch Supply and Trading. From 1989 through 1992, Mr. Damiris was
the Business Development Manager of Koch's petroleum group. Prior to joining
Koch, he held various positions in British Petroleum's refining and chemicals
divisions.
Rolf H. Towe. Age 60. Mr. Towe has served as Senior Managing Director of The
Clipper Group, L.P., since its formation in 1991 and is Vice President of
Clipper Asset Management, Inc. He was the Chairman of Executive Partner Limited,
an executive consulting firm, from 1989 to 1995. Earlier in his career, he held
various management positions over a period of nearly 20 years in Union Carbide
Corporation, a multinational chemicals and plastics manufacturer. Mr. Towe has
been a director of the Company
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<PAGE> 7
since January 28, 1998. Mr. Towe also serves as a director of American Heritage
Life Insurance Company, TravelCenters of America, Inc., a nationwide operator
and franchisor of auto and truck travel centers, and several private companies.
INFORMATION CONCERNING OPERATION OF THE BOARD OF DIRECTORS
In order to facilitate the functions of the Board of Directors, the Board of
Directors has created various standing committees, including an Audit and
Compliance Committee and a Compensation Committee. The Board of Directors does
not have a nominating committee.
Audit and Compliance Committee. The members of the Audit and Compliance
Committee are Hunter Nelson (Chairman), George J. Damiris and Robert W. Roten.
The Audit and Compliance Committee recommends the appointment of the Company's
independent auditors to the Board of Directors, meets with the auditors to
review their report on the financial operations of the business and approves the
audit services and any other services to be provided by such auditors. In
addition, the Audit and Compliance Committee reviews the practices employed by
the Company in preparing published financial statements. The Audit and
Compliance Committee also provides oversight with respect to the establishment
of and adherence to compliance programs, codes of conduct and other policies and
procedures concerning the conduct of the Company's business and with respect to
the Company's compliance with applicable legislation and regulations.
Compensation Committee. The members of the Compensation Committee are Frank
J. Hevrdejs (Chairman), Allan R. Dragone and Rolf H. Towe. The functions of the
Compensation Committee include establishing and reviewing remuneration levels
for all elected officers of the Company and its subsidiaries. The Compensation
Committee also administers the Company's executive compensation programs and
consults, from time to time, with outside experts concerning the performance of
its duties.
Meetings in Last Fiscal Year. During the fiscal year ended September 30,
1998, the Board of Directors held six meetings, the Audit and Compliance
Committee held five meetings and the Compensation Committee held one meeting. No
incumbent director attended fewer than 75% of the meetings of the Board of
Directors and all committees on which such director served, except for Mr.
Dragone who missed one meeting of the Board of Directors and the meeting of the
Compensation Committee held on the same day.
COMPENSATION OF DIRECTORS
Non-employee directors of the Company are paid a fee of $2,500 per quarter
($5,000 for the Vice Chairman) and an attendance fee of $1,000 for each meeting
of the Board of Directors that such director attends ($400 for telephonic
meetings lasting 30 minutes or more). Members of committees of the Board of
Directors are paid an attendance fee of $700 for each meeting of such committee
which such director attends ($1,400 for committee chairmen). In addition,
pursuant to the terms of the Sterling Chemicals Holdings, Inc. 1997 Nonqualified
Stock Option Plan for Non-Employee Directors (the "Non-Employee Director Plan"),
each non-employee director receives annual automatic grants of options to
purchase 1,000 shares of Common Stock (2,000 shares for the Vice Chairman) on
October 1 of each year, all of which fully vest upon the date of grant. Members
of the Board of Directors who are employees of the Company or its subsidiaries
do not receive a fee for their services as directors. All directors are
reimbursed for travel expenses for their services as directors.
Two of the non-employee directors of the Company are employed by
stockholders of the Company (or their affiliates) and, pursuant to established
policies of such employers, all directors' compensation earned by those
non-employee directors is paid to their respective employers.
The Non-Employee Director Plan allows each non-employee director to elect
not to participate in the Non-Employee Director Plan. Koch Capital Services,
Inc. ("Koch Capital") has agreed to deliver an executed election not to
participate under the Non-Employee Director Plan from each director that it
designates pursuant to the Voting Agreement described below under the caption
"Certain Transactions." In return, the Company has agreed to issue to Koch
Capital a number of options equal to those which would have otherwise been
granted to its designated director under the Non-Employee Director Plan. The
terms and conditions of the options granted to Koch Capital are substantially
similar those governing options granted to other non-employee directors, except
that the options granted to Koch Capital do not expire upon the termination of
service of its designated director.
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PROPOSAL NO. 2:
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Company has engaged Deloitte & Touche LLP ("Deloitte") as its
independent accountants for the fiscal year ending September 30, 1999. The Board
of Directors recommends a vote FOR the proposal to ratify the appointment of
Deloitte and, unless authority to vote for the appointment is withheld, all
shares represented by proxies will be voted for the appointment. Proposal No. 2
will be adopted by the affirmative vote of a majority of the shares of Common
Stock present, in person or by proxy, at the Annual Meeting and entitled to
vote. Deloitte has served as independent accountants for the Company for its
last three fiscal years, commencing with the fiscal year ended September 30,
1996. 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.
OTHER MATTERS TO BE PRESENTED AT ANNUAL MEETING
The Board of Directors does not intend to bring any other matters before the
Annual 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
Annual Meeting, the persons named in the enclosed form of proxy will vote the
shares represented by each Conforming Proxy on those matters as instructed by
the Board of Directors or, in the absence of any express instructions from the
Board of Directors, in accordance with their own best judgment.
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below are the current executive officers of the Company elected by
the Board of Directors.
Frank P. Diassi. Age 65. Mr. Diassi has served as Chairman of the Board of
Directors of the Company since August 1996. See "Proposal No. 1: Election of
Directors" above for more information about Mr. Diassi.
Peter W. De Leeuw. Age 58. Mr. De Leeuw has served as President and Chief
Executive Officer of the Company since April 1, 1998. See "Proposal No. 1:
Election of Directors" above for more information about Mr. De Leeuw.
Richard K. Crump. Age 52. Mr. Crump has served as Vice President--Strategic
Planning of the Company since December 1, 1996. 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. In his current position, Mr.
Crump has responsibility for strategic planning for the Company, which includes
acquisition and merger activity.
Gary M. Spitz. Age 43. Mr. Spitz joined the Company as Vice President and
Chief Financial Officer on January 19, 1998. Mr. Spitz previously held the
position of Vice President and Chief Financial Officer of Grace Davison (a
division of W.R. Grace and Company), a catalyst manufacturing and chemicals
company. Mr. Spitz has held various financial positions with divisions of W. R.
Grace and Company since 1979.
David G. Elkins. Age 56. Mr. Elkins joined the Company as Vice President,
General Counsel and Secretary on January 1, 1998. Mr. Elkins previously was a
senior partner at Andrews & Kurth, L.L.P., where he has practiced law in the
area of corporate and securities matters.
Robert O. McAlister. Age 59. Mr. McAlister joined the Company in 1991 and
has served as Vice President--Human Resources and Administration of the Company
since July 26, 1995. From 1974 to 1987, he was employed by Champlin Petroleum
Company, a subsidiary of Union Pacific Corporation, where he held a variety of
positions in Human Resources, Marketing and Strategic Planning. From 1987 to
1991, he served as Vice President of Human Resources for Champlin Refining and
Chemicals, Inc., a joint venture between Champlin Petroleum and Petroleos de
Venezuela, S.A., the national oil company of Venezuela.
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<PAGE> 9
Stewart H. Yonts. Age 53. Mr. Yonts 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 and Assistant Secretary on October 1, 1994.
He was employed by Tenneco, Inc. from 1976 to 1980, last serving as Tax Counsel.
Mr. Yonts was Tax Manager of Home Petroleum Corporation from 1980 to 1982 and
Director of Taxes of MCO Resources, Inc., a natural resources company, from 1982
to 1986.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION(1)
During fiscal 1998, the Compensation Committee (the "Committee") consisted
of the following non-employee members of the Company's Board of Directors: Frank
J. Hevrdejs (Chairman), Allan R. Dragone and Rolf H. Towe. The Committee's role
is to discharge the compensation responsibilities of the Board of Directors. In
that connection, the Committee reviews general compensation issues and
determines the compensation of all officers and other key employees of the
Company and its subsidiaries. The Committee also recommends and administers
those employee benefit plans that provide benefits to the executive officers.
The Committee's overall policy regarding compensation of the Company's
executive officers is to provide salary levels and compensation incentives that
will (i) attract, motivate and retain talented and productive executives, (ii)
recognize individual performance and the performance of the Company relative to
the performance of other companies of comparable size, complexity and quality
and (iii) support both the short-term and the long-term goals of the Company.
The Committee believes this approach ensures an appropriate link between the
compensation of the Company's executives and the accomplishment of the Company's
goals and stockholders' objectives.
In order to develop a competitive compensation program for officers and key
employees, the Company has obtained compensation review data prepared by
independent compensation consultants. For comparison purposes, the Committee
defines the marketplace by comparing the Company to a group of chemical and
allied products corporations. A select group of non-chemical companies chosen
for size and performance comparability to the Company was used as a secondary
source of comparison. The compensation peer group is not the same as the S&P
Chemicals Index which appears in the Stock Performance Graph because the
Committee believes the Company does not compete with many of the corporations
that are included in such index.
The Company's executive compensation program consists of a base salary,
short-term incentive compensation and long-term incentive compensation. The
Committee's goal is to set base salaries at or below competitive market rates of
comparable companies, while setting short-term and long-term incentive gain
opportunity, linked to Company financial performance, above competitive market
rates. The Committee believes that focusing executive compensation on variable
incentive pay will allow the Company to meet its performance goals and enhance
stockholder value.
Base Salary. The Committee periodically reviews base salaries for all
executive officers. Generally, base salaries are determined according to the
individual executive's experience level, job classification level and
performance. As indicated above, the Committee sets a target range for base
salaries at or below that of the competitive market based upon information
compiled by its compensation consultants.
Short-Term Incentive Compensation. The Company maintains a Profit Sharing
Plan designed to benefit all executive officers and qualified employees and a
Bonus Plan providing for annual bonuses to executive officers and key employees
based on the Company's annual financial performance. The Company must meet
certain threshold financial performance levels before awards are made under
either plan. No awards were made under either plan in fiscal 1998.
Long-Term Incentive Compensation. The Company maintains an Omnibus Stock
Awards and Incentive Plan (the "Omnibus Plan") under which the Committee may
grant incentive stock options, non-qualified stock options, stock appreciation
rights, restricted stock awards, performance awards and phantom stock awards to
executive officers and key employees. The terms and
- --------------------------
(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 of
Directors 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.
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<PAGE> 10
amounts of the awards are determined by the Committee in accordance with the
Omnibus Plan. During fiscal 1998, awards under the Omnibus Plan consisted of
non-qualified stock options to acquire an aggregate of 479,057 shares of Common
Stock (of which 3,900 expired during fiscal 1998 upon the resignation of the
recipients thereof) and grants of an aggregate of 22,500 shares of Restricted
Stock (as defined in the Omnibus Plan). The Committee determines the number of
options to be granted to an individual executive based upon a variety of
factors, including the individual's job classification level, the extent to
which his base salary is below industry levels and his present and potential
contributions to the Company's success.
Chief Executive Officer Compensation. Mr. Roten, who served as Chief
Executive Officer of the Company for the first six months of fiscal 1998, was
paid a base salary during fiscal 1998 at a rate of $240,000 per annum. Mr. De
Leeuw, who became President and Chief Executive Officer on April 1, 1998, was
paid a base salary during fiscal 1998 at a rate of $300,000 per annum. Based
upon information compiled by its compensation consultants, the Committee
believes that both Mr. Roten's and Mr. De Leeuw's fiscal 1998 salaries were
below the mid-point salary paid to similar individuals in the competitive
market. In fiscal 1998, Mr. De Leeuw also received awards under the Omnibus Plan
of non-qualified stock options with respect to 125,000 shares of Common Stock,
each with an exercise price of $12.00, and 10,000 shares of Restricted Stock. In
addition, in fiscal 1998, Mr. De Leeuw was granted options with respect to an
additional 100,000 shares of Common Stock, each with an exercise price per share
of the lesser of $12 and the most recent valuation per share under the Company's
Employee Stock Ownership Plan, all of which options expired on September 12,
1998 without being exercised.
Tax Treatment. The Committee considers the anticipated tax treatment of the
Company's executive compensation program. Section 162(m) of the Code generally
limits the annual corporate tax deduction for compensation paid to executive
officers to $1 million, unless certain conditions are met. The Company's policy
is to qualify all executive compensation for deduction under applicable tax laws
to the maximum extent possible. As the fiscal 1998 compensation subject to the
$1 million threshold of Section 162(m) for the Chief Executive Officer and the
four most highly compensated officers of the Company (other than the Chief
Executive Officer) was below such threshold, the Committee believes the
requirements of Section 162(m) will not affect the tax deductions available to
the Company in connection with its executive compensation for the 1998 fiscal
year.
The Compensation Committee of the Board of Directors
Frank J. Hevrdejs (Chairman)
Allan R. Dragone
Rolf H. Towe
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE COMPENSATION
Set forth below is information regarding compensation arrangements and
benefits paid or made available to (i) the Chief Executive Officer of the
Company and (ii) the four most highly compensated executive officers of the
Company (including the Chief Executive Officer, collectively, the "Named
Executive Officers") for the three fiscal years ended September 30, 1998. As Mr.
Roten served as Chief Executive Officer of the Company through March 31, 1998,
Mr. Roten is also included as a Named Executive Officer. Compensation during
such fiscal years included participation in certain stock option, SAR and other
benefit plans sponsored by the Company or its subsidiaries that were terminated
in connection with the Company's recapitalization in August of 1996 (the
"Recapitalization").
-7-
<PAGE> 11
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
------------------------------------ ------------------------
RESTRICTED SECURITIES
NAME AND FISCAL OTHER ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY (1) BONUS COMPENSATION AWARD(S) OPTIONS COMPENSATION
- ------------------------------------- ------ ---------- -------- ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Frank P. Diassi ..................... 1998 $ 300,000 $ 0 $ 0 $ 0 95,238 $ 34,606(2)
Chairman of the Board of 1997 334,231 0 0 0 63,492 4,693(3)
Directors
Peter W. De Leeuw(4) ................ 1998 162,500 0 0 95,000(5) 125,000 18,349(6)
President and Chief
Executive Officer
Robert W. Roten(7) .................. 1998 120,000 0 0 0 0 109,466(8)
President and Chief 1997 231,250 0 0 0 38,942 3,247(3)
Executive Officer 1996 205,000 105,313(9) 0 0 0 9,403(10)
Richard K. Crump .................... 1998 194,167 0 0 0 30,159 10,139(11)
Vice President-- 1997 187,500 0 0 0 20,106 1,080(3)
Strategic Planning 1996 180,000 92,469(9) 0 0 0 8,462(12)
Gary M Spitz(13) .................... 1998 126,818 25,000(14) 166,364(15) 47,500(16) 45,000 3,309(17)
Vice President and Chief
Financial Officer
Robert O. McAlister ................. 1998 155,167 0 0 0 17,460 24,749(18)
Vice President--Human 1997 151,000 0 0 0 11,640 1,357(3)
Resources and Administration 1996 146,000 54,611(9) 0 0 0 7,112(19)
</TABLE>
- -------------------------
(1) Includes amounts deferred under the Company's 401(k) Savings and Investment
Plan.
(2) Consists of $15,526 in premiums for group term life insurance and $19,080
in premiums for executive life insurance paid by the Company.
(3) Consists of premiums for group term life insurance paid by the Company.
(4) Mr. De Leeuw joined the Company as President and Chief Executive Officer
effective April 1, 1998, meaning that he was employed by the Company during
fiscal 1998 for six months.
(5) Mr. De Leeuw was granted 10,000 shares of restricted stock on March 16,
1998. Of such shares, 7,500 shares are subject to forfeiture if Mr. De
Leeuw's employment is terminated under certain specified circumstances.
Such forfeiture provisions expire in three equal increments on March 16,
1999, March 16, 2000 and March 16, 2001 or, if earlier, upon the occurrence
of certain specified events. As of the last day of fiscal 1998, such shares
had a value of $70,000 based on the closing market price per share on
September 30, 1998.
(6) Consists of $3,150 in premiums for group term life insurance and $15,199 in
premiums for executive life insurance paid by the Company.
(7) Mr. Roten resigned from the Company effective March 31, 1998, meaning that
he was employed by the Company during fiscal 1998 for six months.
(8) Consists of $3,861 in premiums for group term life insurance paid by the
Company, compensation for unused vacation time of $62,305 paid upon Mr.
Roten's resignation from employment with the Company and $42,300 paid
pursuant to a Consulting Agreement between Mr. Roten and the Company. See
"Certain Transactions."
(9) Paid pursuant to the Company's Profit Sharing Plan.
(10) Consists of matching contributions paid by the Company pursuant to the
Company's 401(k) Savings and Investment Plan of $7,558 and $1,845 in
premiums for group term life insurance paid by the Company.
(11) Consists of $2,508 in premiums for group term life insurance and $7,631 in
premiums for executive life insurance paid by the Company.
(12) Consists of matching contributions paid by the Company pursuant to the
Company's 401(k) Savings and Investment Plan of $6,842 and $1,620 in
premiums for group term life insurance paid by the Company.
(13) Mr. Spitz joined the Company as Vice President and Chief Financial Officer
on January 19, 1998, meaning that he was employed by the Company during
fiscal 1998 for approximately eight and one-half months.
(14) Consists of a signing bonus paid pursuant to the Spitz Employment Agreement
(as defined below).
(15) Consists of moving expenses paid by the Company.
-8-
<PAGE> 12
(16) Mr. Spitz was granted 5,000 shares of restricted stock on January 19, 1998.
Of such shares, 3,750 shares are subject to forfeiture if Mr. Spitz's
employment is terminated under certain specified circumstances. Such
forfeiture provisions expire in three equal increments on January 19, 1999,
January 19, 2000 and January 19, 2001 or, if earlier, upon the occurrence
of certain specified events. As of the last day of fiscal 1998, such shares
had a value of $35,000 based on the closing market price per share on
September 30, 1998.
(17) Consists of $578 in premiums for group term life insurance and $2,731 in
premiums for executive life insurance paid by the Company.
(18) Consists of $3,041 in premiums for group term life insurance and $21,708 in
premiums for executive life insurance paid by the Company.
(19) Consists of matching contributions paid by the Company pursuant to the
Company's 401(k) Savings and Investment Plan of $5,798 and $1,314 in
premiums for group term life insurance paid by the Company.
OPTION GRANTS IN LAST FISCAL YEAR
The following sets forth certain information relating to options to purchase
shares of Common Stock granted to Named Executive Officers in fiscal 1998.
Except as otherwise noted, all of such options were granted under the Company's
Omnibus Stock Awards and Incentive Plan (the "Omnibus Plan").
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL RATES
NUMBER OF TOTAL OF STOCK PRICE APPRECIATION
SECURITIES OPTIONS FOR OPTION TERM (2)
UNDERLYING GRANTED TO EXERCISE -----------------------------------
OPTIONS EMPLOYEES IN PRICE EXPIRATION
GRANTED (#) FISCAL YEAR PER SHARE DATE(1) 0% 5% 10%
------------ ------------- --------- ------------------ ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Frank P. Diassi...... 95,238 13% 12.00 April 22, 2008 $ 0 $ 253,338 $ 1,080,350
Peter W. De Leeuw.... 125,000 18% $ 12.00 March 16, 2008(3) 0 434,312 1,580,069
100,000(4) 14% 12.00(4) September 12, 1998(4) NA NA NA
Robert W. Roten...... 0 0% NA NA NA NA NA
Richard K. Crump..... 30,159 4% 12.00 April 22, 2008 0 80,224 342,114
Gary M. Spitz........ 45,000 6% 12.00 January 19, 2008(5) 0 193,003 627,184
50,000(6) 7% 12.00 April 30, 1998(6) NA NA NA
Robert O. McAlister.. 17,460 2% 12.00 April 22, 2008 0 46,445 198,061
</TABLE>
- -------------------------
(1) Except as otherwise noted, all options vest in increments of 25% on April
22, 1999, April 22, 2000, April 22, 2001 and August 21, 2001.
(2) The dollar amounts set forth under these columns are the result of
calculations of assumed annual rates of stock price appreciation from the
date of grant of the options awarded to the date of expiration of such
options of 0%, 5% and 10%. Based on these assumed annual rates of stock
price appreciation of 0%, 5% and 10%, the Company's stock price (i) at
January 19, 2008 is projected to be $10.00, $16.29 and $25.94,
respectively, (ii) at March 16, 2008 is projected to be $9.50, $15.47 and
$24.64, respectively, and (iii) at April 22, 2008 is projected to be $9.00,
$14.66 and $23.34, respectively. These assumptions are not intended to
forecast future appreciation of the Company's stock price. The Company's
stock price may increase or decrease in value over the time period set
forth above. Optionees will not realize value under their option grants
without stock price appreciation, which will benefit all stockholders. The
potential realizable value computation does not take into account federal
or state income tax consequences of option exercises or sales of
appreciated stock.
(3) Options vest in increments of 20% on March 16, 1999, March 16, 2000, March
16, 2001, March 16, 2002 and March 16, 2003.
(4) Pursuant to the terms of the De Leeuw Employment Agreement, Mr. De Leeuw
was granted options with respect to 100,000 shares of Common Stock, each
with an exercise price per share of the lesser of $12 and the most recent
valuation per share under the ESOP. All of these options expired on
September 12, 1998 without having been exercised.
(5) Options vest in increments of 20% on January 19, 1999, January 19, 2000,
January 19, 2001, January 19, 2002 and January 19, 2003.
(6) Pursuant to the terms of the Spitz Employment Agreement, Mr. Spitz was
granted options with respect to 50,000 shares of Common Stock, each with an
exercise price per share of $12. All of these options expired on April 30,
1998 without having been exercised.
-9-
<PAGE> 13
AGGREGATE YEAR-END OPTION VALUES
The following table provides information on the value of the Named Executive
Officers' unexercised options at September 30, 1998. There were no exercises of
options or SARs during fiscal 1998 by any of the Named Executive Officers, and
no such officer held SARs at September 30, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS/SARS AT
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
------------------------------- ------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Frank P. Diassi......... 12,698 146,032 -- --
Peter W. De Leeuw....... -- 125,000 -- --
Robert W. Roten(1)...... 40,942 -- $ -- $ --
Richard K. Crump........ 4,021 46,244 -- --
Gary M. Spitz........... -- 45,000 -- --
Robert O. McAlister..... 2,328 26,772 -- --
</TABLE>
- -------------------------
(1) All options held by Mr. Roten vested upon his retirement, which was
effective on March 31, 1998, and may be exercised at any time within one
year after March 31, 1998.
EMPLOYMENT AGREEMENTS
De Leeuw Employment Agreement. On March 16, 1998, Peter W. De Leeuw entered
into an Employment Agreement (the "De Leeuw Employment Agreement") with the
Company and Chemicals pursuant to which each of the Company and Chemicals
engaged Mr. De Leeuw to serve as its President and Chief Executive Officer until
such employment is terminated in accordance with the terms of the De Leeuw
Employment Agreement. Under the De Leeuw Employment Agreement, Mr. De Leeuw
earns a base salary initially set at $300,000 per annum (subject to increase at
the discretion of the Board) and participates in the bonus/incentive plans of
the Company and Chemicals. In addition, upon execution of the De Leeuw
Employment Agreement, Mr. De Leeuw was granted awards under the Omnibus Plan of
10,000 shares of Common Stock (7,500 of which are subject to forfeiture if Mr.
De Leeuw's employment is terminated at certain times under specified
circumstances) and options to purchase 125,000 shares of Common Stock for $12
per share (with 20% of such options vesting annually on each March 16,
commencing in 1999). Mr. De Leeuw was also granted the right to purchase up to
100,000 shares of Common Stock at a price per share equal to the lesser of $12
and the most recent valuation under the ESOP. Such right was not exercised and
expired on September 12, 1998.
Under the terms of the De Leeuw Employment Agreement, each of Mr. De Leeuw
and the Company may terminate Mr. De Leeuw's employment at any time and for any
reason by delivering a notice of termination to the other. If, prior to March
16, 2000, Mr. De Leeuw terminates his employment for a Good Reason (as defined
in the De Leeuw Employment Agreement) or the Company terminates Mr. De Leeuw's
employment for any reason other than Misconduct or Disability (as such terms are
defined in the De Leeuw Employment Agreement), the Company and Chemicals are
required to pay Mr. De Leeuw an amount equal to 200% of his base salary plus
certain other sums. In addition, for 24 months after the date of any such
termination, Mr. De Leeuw is entitled to continued coverage under all life,
healthcare, medical and dental insurance plans and programs (excluding
disability) of the Company and Chemicals provided Mr. De Leeuw pays the regular
employee premiums required by such plans or programs or COBRA. Finally, upon any
such termination, any vesting, lapse of time or similar requirements under any
plan or program of the Company or Chemicals is accelerated and all conditions to
Mr. De Leeuw's entitlement to any benefits under any such plans or programs are
deemed satisfied (e.g., all options immediately vest and all forfeiture
contingencies applicable to any restricted stock awards immediately lapse).
However, neither the Company nor Chemicals is required to make any such payment
or provide any such coverage if the termination of Mr. De Leeuw's employment
takes effect after Mr. De Leeuw's "normal retirement date" under the Pension
Plan (as defined below), and the obligation of the Company and Chemicals to
continue to provide coverage under benefits plans ceases if Mr. De Leeuw becomes
employed elsewhere and is provided with substantially similar benefits.
Spitz Employment Agreement. On January 19, 1998, Gary M. Spitz entered into
an Employment Agreement (the "Spitz Employment Agreement") with the Company and
Chemicals pursuant to which each of the Company and Chemicals engaged Mr. Spitz
to serve as a Vice President and Chief Financial Officer until such employment
is terminated in accordance with the terms of the Spitz Employment Agreement.
Under the Spitz Employment Agreement, Mr. Spitz earns a base salary initially
set at $180,000 per annum (subject to increase at the discretion of the Board)
and participates in the bonus/incentive plans of the Company and
-10-
<PAGE> 14
Chemicals. Under the Spitz Employment Agreement, Mr. Spitz was paid a signing
bonus of $25,000 upon commencing work at the Company and Chemicals. In addition,
upon execution of the Spitz Employment Agreement, Mr. Spitz was granted awards
under the Omnibus Plan of 5,000 shares of Common Stock (3,750 of which are
subject to forfeiture if Mr. Spitz's employment is terminated at certain times
under specified circumstances) and options to purchase 45,000 shares of Common
Stock for $12 per share (with 20% of such options vesting annually on each
January 19, commencing in 1999). Mr. Spitz was also granted the right to
purchase up to 50,000 shares of Common Stock at a price per share equal to $12.
Such right was not exercised and expired on April 30, 1998.
Under the terms of the Spitz Employment Agreement, each of Mr. Spitz and the
Company may terminate Mr. Spitz's employment at any time and for any reason by
delivering a notice of termination to the other. If, prior to January 19, 2000,
Mr. Spitz terminates his employment for a Good Reason (as defined in the Spitz
Employment Agreement) after the occurrence of a specified change of control or
the Company terminates Mr. Spitz's employment for any reason other than
Misconduct or Disability (as such terms are defined in the Spitz Employment
Agreement), the Company and Chemicals are jointly required to pay Mr. Spitz an
amount equal to 200% of his base salary plus certain other sums. In addition,
for 24 months after the date of any such termination, Mr. Spitz is entitled to
continued coverage under all life, healthcare, medical and dental insurance
plans and programs (excluding disability) of the Company and Chemicals provided
Mr. Spitz pays the regular employee premiums required by such plans or programs
or COBRA. However, neither the Company nor Chemicals is required to make any
such payment or provide any such coverage if the termination of Mr. Spitz's
employment takes effect after Mr. Spitz's "normal retirement date" under the
Pension Plan, and the obligation of the Company and Chemicals to continue to
provide coverage under benefits plans ceases if Mr. Spitz becomes employed
elsewhere and is provided with substantially similar benefits.
PENSION PLANS
Salaried Employees' Pension Plan. 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 employees of the Company who had been hired by Monsanto (from which the
Company acquired its Texas City, Texas petrochemical plant) prior to April 1,
1986 are based on each such individual's vested percentage times years of
service multiplied by 1.4% of Average Earnings (as defined below). All other
employees of the Company, including employees of the Company who had been hired
by Monsanto on or after April 1, 1986, 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 and (ii) average
compensation received during the final 36 months of employment. However, as a
result of certain limitations imposed under the Internal Revenue Code of 1986,
as amended (the "Code"), benefits payable under the Pension Plan are effectively
limited in amount to those payable to a participant having Average Earnings of
$160,000.
For those Company employees who were (i) employed by the Company prior to
October 1, 1986 and (ii) 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 and 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. For those Company employees who (i) were
previously employed by Cytec Industries Inc. ("Cytec") and joined the Company on
January 31, 1997 and (ii) elect to retire from the Company on or before January
31, 1999, the Company supplements the standard pension payable to each such
employee such that the employee's total combined pension from the Company and
from the Cytec Nonbargaining Employees' Retirement Plan equals the amount such
employee would have received had he or she remained an employee of Cytec until
retirement.
The following table ("Table A") illustrates the aggregate of the annual
normal retirement benefits payable under the Pension Plan, the Equalization Plan
(as defined below) and the Supplemental Plan (as defined below) based on 1.4% 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, the Equalization Plan and the Supplemental Plan without
substantial change and payment in the form of a single life annuity.
-11-
<PAGE> 15
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------
AVERAGE EARNINGS 10 20 30 40
----------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 50,000............. $ 7,000 $ 14,000 $ 21,000 $ 28,000
100,000............. 14,000 28,000 42,000 56,000
150,000............. 21,000 42,000 63,000 84,000
200,000............. 22,400 44,800 67,200 89,600
250,000............. 22,400 44,800 67,200 89,600
300,000............. 22,400 44,800 67,200 89,600
350,000............. 22,400 44,800 67,200 89,600
400,000............. 22,400 44,800 67,200 89,600
</TABLE>
The following table ("Table B") illustrates the aggregate of the annual
normal retirement benefits payable under the Pension Plan, the Equalization Plan
and the Supplemental 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, the
Equalization Plan and the Supplemental Plan without substantial change and
payment in the form of a single life annuity.
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------
AVERAGE EARNINGS 10 20 30 40
----------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 50,000............. $ 6,000 $ 12,000 $ 18,000 $ 24,000
100,000............. 12,000 24,000 36,000 48,000
150,000............. 18,000 36,000 54,000 72,000
200,000............. 19,200 38,400 57,600 76,800
250,000............. 19,200 38,400 57,600 76,800
300,000............. 19,200 38,400 57,600 76,800
350,000............. 19,200 38,400 57,600 76,800
400,000............. 19,200 38,400 57,600 76,800
</TABLE>
The benefits under the Pension Plan are computed by multiplying Average
Earnings by credited years of service times the respective percentages referred
to above. The benefits payable under the Pension Plan are not reduced by any
benefits payable under Social Security or other offset amounts. The benefits
payable to Table A participants are reduced by the amount of pension benefits to
which such participants may be entitled under Monsanto's pension plan and the
benefits payable to Table B participants are reduced by the amount of pension
benefits to which such participants may be entitled under Monsanto's, Tenneco's
or Cytec's pension plan. The number of credited years of service under the
Pension Plan of each of the Named Executive Officers are as follows: Peter W. De
Leeuw--one year; Robert W. Roten--37 years; Frank P. Diassi--two years; Richard
K. Crump--12 years; Gary M. Spitz--one year; and Robert O. McAlister--eight
years. Mr. Roten was originally hired by Monsanto prior to April 1, 1986 and
retired as an employee of the Company on March 31, 1998. Accordingly, Mr.
Roten's pension benefits commenced on April 1, 1998 and are based upon 37 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 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 provides additional benefits to certain employees whose
retirement benefits under the Pension Plan are reduced, curtailed or otherwise
limited because such employee's annual compensation is in excess of $160,000 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 after five years of service, if later) and
the continuation of their current levels of base salary until such retirement,
as of September 30, 1998, total retirement benefits under the Equalization Plan
and/or the Supplemental Plan
-12-
<PAGE> 16
payable to Messrs. De Leeuw, Diassi, Crump, Spitz and McAlister will be $28,008,
$18,000, $59,794, $49,492 and $26,714 per year, respectively, reduced by the
value of the benefits payable under the Pension Plan, which are $14,938, $9,600,
$47,835, $43,993 and $26,548 per year, respectively. Mr. Roten retired from
employment with the Company on March 31, 1998. The total actual retirement
benefits under the Equalization Plan and the Supplemental Plan payable to Mr.
Roten are $81,223 per year, reduced by $53,282 of actual benefits payable under
the Pension Plan.
CERTAIN TRANSACTIONS
The holders of 6,628,300 shares of Common Stock, representing approximately
52% of the outstanding shares of Common Stock, have entered into an Amended and
Restated Voting Agreement (the "Voting Agreement") dated as of December 15,
1998, which amended and restated an existing Amended and Restated Voting
Agreement dated as of as of January 22, 1997. The parties to the Voting
Agreement are Frank P. Diassi, Frank J. Hevrdejs and Hunter Nelson, each a
director of the Company, and William C. Oehmig, Susan O. Rheney (as Trustee of
the Rheney Living Trust), 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.), Olympus Growth Fund II, L.P. ("Olympus
Growth"), Olympus Executive Fund, L.P. ("Olympus Executive"), CSFB, Gordon A.
Cain, William A. McMinn, James Crane and certain transferees of Messrs. Diassi,
Hevrdejs and Oehmig. The Voting Agreement requires each of such parties to vote
all shares of Common Stock owned or subsequently acquired by them in favor of
three nominees to the Board of Directors of the Company, one to be selected by
each of Koch Capital, The Clipper Group and Gordon A. Cain. George J. Damiris is
the current designee of Koch Capital and Rolf H. Towe is the current designee of
The Clipper Group. The right of Mr. Cain to designate a nominee to the Board of
Directors of the Company will become exercisable on February 1, 1999, or sooner
if he purchases shares of Common Stock under the Purchase Agreement to which Mr.
Cain is a party. The rights of Koch Capital and The Clipper Group to select its
respective nominees under the Voting Agreement each terminates on August 21,
2006, or sooner in the event its beneficial ownership of Common Stock represents
less than 5% of the outstanding Common Stock. The right of Mr. Cain to select
his nominee terminates upon the earlier of (i) December 15, 2008 and (ii) the
later of (a) the expiration of the Purchase Agreement to which he is a party and
(b) the time at which Mr. Cain has beneficial ownership of less than 5% of the
outstanding Common Stock.
The holders of 8,977,646 shares of Common Stock, representing approximately
71% of the outstanding shares of Common Stock, are parties to that certain
Sterling Chemicals Holdings, Inc. Stockholders Agreement dated effective as of
August 21, 1996 (as amended, the "Stockholders Agreement") and that certain
Tag-Along Agreement dated effective as of August 21, 1996 (the "Tag-Along
Agreement"). The Stockholders Agreement restricts the transfer of shares of
Common Stock held by such stockholders (with certain exceptions), including any
disposition of a control position in the Company, unless such shares are first
offered to be sold to the Sterling Chemicals, Inc. Employee Stock Ownership
Trust created pursuant to the Sterling Chemicals, Inc. Employee Stock Ownership
Plan, then to the Company and then to the other stockholders of the Company that
are a party to the Stockholders Agreement. The Tag-Along Agreement provides that
if any of the parties thereto, alone or in concert, proposes to transfer, sell
or otherwise dispose of an aggregate of 51% or more of the shares of Common
Stock issued and outstanding at the time of such transfer, such party must give
notice of such proposed transfer to each person that retained shares of Common
Stock in the Recapitalization and each such person will have the right to have
such shares included in such transfer on a pro rata basis and on the same terms
and conditions.
In connection with the Recapitalization, the Company and TSG entered into an
agreement (the "Consulting Agreement"), which provided that if the Company or
any of its subsidiaries determined 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 such subsidiary would retain TSG as
a consultant with respect to the transaction, provided that TSG's fees were
competitive and the Company and TSG mutually agreed on the terms of the
engagement. In addition, under the Consulting Agreement, the Company is
obligated to indemnify TSG against liabilities relating to their services. The
Company paid TSG approximately $20,732 in fiscal 1998, primarily as
reimbursement for expenses incurred in connection with due diligence activities
for various potential acquisitions and some remaining consulting and advisory
fees related the Company's July 1997 acquisition of assets from Saskatoon
Chemicals, Ltd. and the Company's January 1997 acquisition of the acrylic fibers
business from Cytec. The Consulting Agreement expired by its terms on April 23,
1998. Mr. Frank J. Hevrdejs, a director of the Company, was a founder and is a
principal of TSG and Hunter Nelson, also a director of the Company, is a
principal of TSG. Mr. Frank P. Diassi, Chairman of the Company's Board of
Directors, Peter W. De Leeuw, President and Chief Executive Officer of the
Company, Mr. J. Virgil Waggoner, who served as Vice Chairman of the Company's
Board of Directors until April 1, 1998 and as a member of the Company's Board of
Directors until April 1, 1998, Robert W. Roten, the current Vice Chairman of the
Company's Board of
-13-
<PAGE> 17
Directors and the former President and Chief Executive Officer of the Company,
Gary M. Spitz, the Chief Financial Officer of the Company, and Richard K. Crump,
Vice President--Strategic Planning 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
and transportation of natural gas. For the fiscal year ended September 30, 1998,
(i) product sales to and raw material purchases from Koch Chemical, an indirect
wholly owned subsidiary of Koch Industries; (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 Company's
facilities in Texas City, Texas; (iii) payments to Koch Gateway Pipeline Company
for the transportation of natural gas to the Company's acrylic fiber plant
through a pipeline in which it is a partner, and (iv) payments to an affiliate
of Koch Industries under an ISDA Master Agreement, each represented less than 1%
of the Company's revenues other than raw material purchases from Koch Chemical
which were in an aggregate amount equal to approximately 3% of the Company's
revenues. In addition, the Company filed a lawsuit against John Zink Company
pursuant to which the Company is seeking recovery for certain types of damages
sustained in connection with a release of nickel carbonyl from its methanol unit
on July 30, 1997. Such lawsuit is currently the subject of a tolling agreement
while the parties seek to negotiate a mutually acceptable resolution of the
Company's claims.
Pursuant to engagement letters dated April 15, 1998 and April 27, 1998, the
Company engaged Chem Systems Inc. ("Chem Systems") to perform certain consulting
services related to the Company's styrene monomer business. In addition, on
August 10, 1998, the Company accepted a proposal from Chem Systems pursuant to
which the Company engaged Chem Systems to conduct a site study of the Company's
Texas City, Texas facilities and to benchmark the Company's best practices and
organizational structures against top quartile performers in the industry.
During fiscal 1998, the Company paid Chem Systems approximately $31,369 pursuant
to the engagement letters and approximately $70,000 pursuant to the benchmarking
proposal. Peter Spitz, who is the father of Gary Spitz (the Chief Financial
Officer and a Vice President of the Company), is the Director of Chem Systems.
Peter Spitz does not perform any direct services under either of such
arrangements.
Gary M. Spitz was hired as Chief Financial Officer of the Company effective
January 19, 1998. On May 25, 1998, the Company loaned Mr. Spitz $228,000 to be
used exclusively for the down payment of a new principal residence for Mr. Spitz
and his family in the greater Houston metropolitan area. The loan, including
accrued interest at the rate of 5.37% per annum, was fully repaid on July 1,
1998 out of the proceeds of the sale of Mr. Spitz's existing residence in
Columbia, Maryland.
On April 1, 1998, the Company entered into a Consulting Agreement with Mr.
Roten, the Vice Chairman of the Board of Directors and former President and
Chief Executive Officer of the Company, pursuant to which the Company, in
exchange for certain consulting services provided by Mr. Roten, pays Mr. Roten
$10,000 per month (minus any fees or other compensation paid to Mr. Roten in
such month for serving as a director of the Company or any of its subsidiaries)
through March 1999. During fiscal 1998, the Company paid Mr. Roten $42,300
pursuant to such Consulting Agreement.
As of December 15, 1998, the Company entered into separate Standby Purchase
Agreements (collectively, the "Purchase Agreements") with each of Gordon A.
Cain, William A. McMinn, James Crane, Mr. Diassi, Mr. Hevrdejs and Koch Capital
(collectively, the "Purchasers"). Pursuant to the terms of the Purchase
Agreements, the Purchasers committed to purchase up to 2,500,000 shares of
Common Stock, at a price of $6.00 per share, if, as and when requested by the
Company at any time prior to December 15, 2001. In order to induce the
Purchasers to enter into the Purchase Agreements, the Company issued to them
warrants to purchase an aggregate of 300,000 shares of Common Stock at an
exercise price of $6.00 per share. In addition, pursuant to the terms of the
Purchase Agreements, the Company agreed to issue to the Purchasers additional
warrants to purchase up to 300,000 additional shares of Common Stock if, as and
when they purchase shares of Common Stock under the Purchase Agreements. Any
shares of Common Stock purchased under the Purchase Agreements or the warrants
issued to the Purchasers as contemplated by the Purchase Agreements will be
subject to the terms of the Voting Agreement, the Stockholders Agreement and the
Tag-Along Agreement.
PERFORMANCE GRAPH
The following Stock Performance Graph compares the Company's cumulative
total stockholder return on its shares of Common Stock for a five-year period
with the cumulative total return of the Standard & Poor's Stock Index and the
Standard & Poor's
-14-
<PAGE> 18
Chemicals Index. The graph assumes $100 was invested on September 30, 1993 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 Recapitalization, 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, 1993 IN STOCK OR INDEX--
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING SEPTEMBER 30.
<TABLE>
<CAPTION>
SEP-93 SEP-94 SEP-95 SEP-96 SEP-97 SEP-98
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
STERLING CHEMICALS
HOLDINGS, INC........................ 100 372 228 338 338 193
S&P 500 .............................. 100 104 135 162 227 248
S&P CHEMICALS ........................ 100 132 156 202 263 237
</TABLE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of December 7, 1998, 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, an aggregate of 639,635 shares of Common Stock
are held by the Sterling Chemicals, Inc. Employee Stock Ownership Plan (the
"ESOP") on behalf of the employees of the Company, including certain of the
Company's executive officers, representing approximately 5% of the outstanding
Common Stock, of which 205,317 shares have been allocated to employees' accounts
to date. These shares are held of record by Merrill Lynch & Co. Incorporated
("Merrill Lynch"), as trustee, who disclaims beneficial ownership of such
shares. Merrill Lynch exercises sole power to vote the shares of Common Stock
held by the ESOP until such time as shares are allocated to the account of an
employee, who then has sole power to vote his or her respective 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.
-15-
<PAGE> 19
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------
NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1) SHARES PERCENT
---------------------------------------- ---------- --------
<S> <C> <C>
Frank P. Diassi.............................................................. 714,321 (2)(3) 5.6%
Allan R. Dragone............................................................. 59,385 (4) *
John L. Garcia............................................................... 38,757 (5) *
George J. Damiris............................................................ 1,151,254 (6) 9.0%
Frank J. Hevrdejs............................................................ 928,782 (2)(7) 7.3%
Hunter Nelson................................................................ 64,758 (2)(8) *
Rolf H. Towe................................................................. 2,064,204 (9) 16.1%
Robert W. Roten.............................................................. 204,239 (10) 1.6%
Richard K. Crump............................................................. 53,259 (11) *
Peter W. De Leeuw............................................................ 21,100 *
Gary M. Spitz................................................................ 20,000 (12) *
Robert O. McAlister.......................................................... 24,842 (13) *
Clipper Capital Associates, Inc.............................................. 2,063,204 (2)(14) 16.1%
Koch Industries, Inc......................................................... 1,151,254 (2)(15) 9.0%
Fayez Sarofim & Co........................................................... 687,548 (2)(16) 5.4%
Olympus Growth Fund II, L.P.................................................. 678,770 (2)(17) 5.3%
Olympus Executive Fund, L.P.................................................. 7,926 (2)(17) *
All executive officers and directors of the Company as a group (13 persons).. 5,390,862 (18) 41.7%
</TABLE>
- -------------------------
* 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) Such stockholder is a party to the Voting Agreement. See "Certain
Transactions." Other parties to the Voting Agreement include William C.
Oehmig, who beneficially owns 361,772 shares of Common Stock, and the
Rheney Living Trust (Susan O. Rheney and Clarke Rheney, Trustees), which
beneficially owns 48,307 shares of Common Stock, CS First Boston Merchant
Investments 1995/96, L.P., which beneficially owns 75,900 shares of Common
Stock, Gordon A. Cain, who beneficially owns currently exercisable warrants
("Warrants") to acquire 160,000 shares of Common Stock, William McMinn, who
beneficially owns Warrants to acquire 40,000 shares of Common Stock, James
Crane, who beneficially owns Warrants to acquire 30,000 shares of Common
Stock, and certain transferees of Messrs. Diassi, Hevrdejs and Oehmig, who
beneficially own an aggregate of 22,216 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 6,628,300
shares of Common Stock, representing 52% of the outstanding Common Stock,
are subject to the Voting Agreement and any shares of Common Stock acquired
by any of such parties, including through the exercise of Warrants, shall
become 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 and Warrants, other than shares
and Warrants identified herein as beneficially owned by such party.
(3) Includes (i) 20,000 shares held as Trustee of the Gabrielle Diassi Trust,
(ii) 40,000 shares held as Trustee of the Diassi Children's Trust, (iii)
10,000 shares held as Trustee of the Brianna Diassi Trust, (iv) 10,000
shares held as Trustee of the Nicholas Diassi Trust, (v) 10,000 shares held
by Mr. Diassi's wife, (vi) 664 shares held by Merrill Lynch, as Trustee of
the ESOP, and allocated to Mr. Diassi's account, and (vii) 25,397 shares
subject to options granted by the Company that are currently exercisable.
Does not include Warrants to purchase 20,000 shares of Common Stock issued
to Mr. Diassi on December 15, 1998.
(4) Includes 4,000 shares subject to options granted by the Company that are
currently exercisable.
(5) Of such shares, 4,000 represent shares subject to options granted by the
Company that are currently exercisable. The remainder are 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, including 19,031 shares subject to
Warrants and 4,000 shares subject to options that are currently exercisable
which are held by Koch Capital, a wholly owned subsidiary of Koch
Industries, with respect to which, as Vice President of Koch Ventures,
Inc., Mr. Damiris may be deemed to have beneficial ownership. Mr. Damiris
disclaims beneficial ownership of such shares, Warrants and options.
-16-
<PAGE> 20
(7) Includes 1,990 shares owned by Mr. Hevrdejs' wife and 4,000 shares subject
to options granted by the Company that are currently exercisable. Does not
include Warrants to purchase 20,000 shares of Common Stock issued to Mr.
Hevrdejs on December 15, 1998.
(8) Includes 4,000 shares subject to options granted by the Company that are
currently exercisable.
(9) Includes 1,000 shares subject to options granted by the Company that are
currently exercisable. Also includes shares held by The Clipper Group with
respect to which Mr. Towe, as Senior Managing Director of The Clipper
Group, L.P. and Vice President of Clipper Asset Management, Inc., may be
deemed to have beneficial ownership but as to which Mr. Towe disclaims
beneficial ownership.
(10) Includes 37,470 shares held by Merrill Lynch, as Trustee of the ESOP, and
allocated to Mr. Roten's account, and 40,942 shares subject to options
granted by the Company that are currently exercisable.
(11) Includes 8,142 shares held by Merrill Lynch, as Trustee of the ESOP, and
allocated to Mr. Crump's account, and 8,042 shares subject to options
granted by the Company that are currently exercisable.
(12) Includes 9,000 shares subject to options granted by the Company that are
exercisable within 60 days.
(13) Includes 3,930 shares held by Merrill Lynch, as Trustee of the ESOP, and
allocated to Mr. McAlister's account, and 4,656 shares subject to options
granted by the Company that are currently exercisable.
(14) 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 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 650 Madison Ave., 9th Floor, New York, New York 10022. 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 11,831 shares of Common Stock and indirectly
beneficially own 201,776 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 444,537 shares of Common Stock.
Clipper II may be deemed to directly beneficially own 516,031 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
592,701 shares of Common Stock. Clipper IV may be deemed to directly
beneficially own 296,328 shares of Common Stock. Clipper Curacao, Inc., 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. The
share amounts set forth in this footnote include Warrants to purchase
Common Stock in the amounts of 28 shares with respect to Clipper
Associates; 13,605 shares with respect to Clipper I; 18,149 shares with
respect to Clipper II; 18,149 shares with respect to Clipper III; and 9,089
shares with respect to Clipper IV.
(15) Koch Industries may be deemed to be the beneficial owner of such shares of
Common Stock, which are directly beneficially owned by Koch Capital.
Includes 19,031 shares subject to Warrants and 4,000 shares subject to
options that are currently exercisable. The mailing address of Koch
Industries and Koch Capital is 4111 East 37th Street North, Wichita, KS
67220. Does not include Warrants to purchase 30,000 shares of Common Stock
issued to Koch Capital on December 15, 1998.
(16) 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.
(17) Olympus Growth and Olympus Executive are Delaware limited partnerships
principally engaged in making investments. The shares amounts include
shares subject to Warrants in the amount of 58,387 shares with respect to
Olympus Growth and 633 shares with respect to Olympus Executive. OGP II,
L.P., a Delaware limited partnership ("OGP"), is the sole general partner
of Olympus Growth, and OEF, L.P., a Delaware limited partnership ("OEF"),
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, Stamford, Connecticut
06902.
-17-
<PAGE> 21
(18) Includes 54,791 shares held by Merrill Lynch, as Trustee of the ESOP, and
allocated to the accounts of certain of such officers and directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 1998, the Reporting Persons complied with all
Section 16(a) filing requirements applicable to them except that Mr. Frank J.
Hevrdejs, a director of the Company, was late in filing a Form 4 which respect
to the acquisition of an aggregate of 37,080 shares of Common Stock in two
separate transactions.
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.
DATES 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 Annual Meeting of Stockholders to
be held in 2000, such proposals must be received by the Company at its principal
executive offices not later than August 23, 1999. In order for stockholder
proposals that are not included in such Proxy Statement to be brought before the
Annual Meeting of Stockholders to be held in 2000, such proposals must be
received by the Company at its principal executive offices not later than
September 29, 1999 and not earlier than August 30, 1999.
* * *
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.
STERLING CHEMICALS HOLDINGS, INC. WILL FURNISH A COPY OF ITS ANNUAL REPORT
ON FORM 10-K FOR THE YEAR ENDED SEPTEMBER 30, 1998, WITHOUT EXHIBITS, WITHOUT
CHARGE TO EACH PERSON WHO FORWARDS A WRITTEN REQUEST TO STERLING CHEMICALS
HOLDINGS, INC., ATTENTION MICHAEL NOONAN, INVESTOR RELATIONS, 1200 SMITH STREET,
SUITE 1900, HOUSTON, TEXAS 77002-4312.
By Order of the Board of Directors
/s/ DAVID G. ELKINS
DAVID G. ELKINS
Corporate Secretary
Houston, Texas
December 21, 1998
-18-
<PAGE> 22
- --------------------------------------------------------------------------------
STERLING CHEMICALS HOLDINGS, INC.
FOR THE ANNUAL MEETING TO BE HELD JANUARY 27, 1999
The undersigned hereby constitutes and appoints Frank P. Diassi,
Peter W. De Leeuw and David G. Elkins, and each of them, attorneys and
agents, with full power of substitution to vote as proxy all the
shares of common stock, par value $0.01 per share, of Sterling
Chemicals Holdings, Inc. (the "Company") standing in the name of the
undersigned at the Annual Meeting of Stockholders of the Company to be
held in the Granger A Room of the DoubleTree Hotel located at 400
Dallas, Houston, Texas at 9:00 a.m., Houston time, on Wednesday,
January 27, 1999, and at any adjournment or postponement thereof, in
accordance with the instructions noted below, and with discretionary
authority with respect to such other matters as may properly come
before such meeting or any adjournment or postponement thereof.
Receipt of notice of such meeting and the Proxy Statement therefor
dated December 21, 1998 is hereby acknowledged.
The undersigned hereby revokes any proxies heretofore given and
directs said attorneys to act or vote as follows:
<TABLE>
<S> <C>
1. ELECTION OF [ ] FOR all nominees listed
DIRECTORS
<CAPTION>
<S> <C>
1. ELECTION OF [ ] WITHHOLD AUTHORITY to vote for all
DIRECTORS nominees listed
</TABLE>
[ ] FOR all nominees listed, except that authority
to vote withheld for the following nominee(s):
ELECTION OF DIRECTORS NOMINEES:Frank P. Diassi, Robert W. Roten,
Peter W. De Leeuw, Allan R.
Dragone, John L. Garcia, Frank J.
Hevrdejs, Hunter Nelson, George J.
Damiris and Rolf H. Towe.
2. Proposal to ratify the appointment of Deloitte & Touche LLP as
independent accountants of the Company for the fiscal year
ending September 30, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed and dated on other side)
- --------------------------------------------------------------------------------
P
R
O
X
Y
<PAGE> 23
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
AND WILL BE VOTED IN ACCORDANCE WITH THE STOCKHOLDER'S SPECIFICATIONS
HEREON. IN THE ABSENCE OF ANY SUCH SPECIFICATION, THIS PROXY WILL BE
VOTED IN FAVOR OF EACH NOMINEE FOR DIRECTOR AND "FOR" THE PROPOSAL TO
RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT
ACCOUNTANTS OF THE COMPANY.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF THE COMPANY.
SIGN HERE EXACTLY AS NAME(S)
APPEAR(S) ON ADDRESS LABEL
Date , ______________________199_
Signature(s)_____________________
Date ______________________, 199_
Signature(s)_____________________
NOTE: When shares are held by
joint tenants, both should sign.
When signing as attorney,
trustee, administrator, executor,
guardian, 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 full
partnership name by authorized
person.
- --------------------------------------------------------------------------------
