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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. )
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Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
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[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
STERLING CHEMICALS HOLDINGS, INC.
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December 21, 1999
Dear Stockholder:
We are pleased to invite you to attend the 2000 Annual Meeting of
Stockholders of Sterling Chemicals Holdings, Inc. to be held on Wednesday,
January 26, 2000 at 9:00 a.m. in Rooms Dogwood A and B of the Hyatt Regency
Hotel at 1200 Louisiana Street, Houston, Texas. 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 1999 and our plans for fiscal 2000. Directors and officers of the
Company will be present to respond to appropriate 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.
Thank you for your ongoing support and continued interest in
Sterling Chemicals Holdings, Inc.
Sincerely,
/s/ FRANK P. DIASSI
FRANK P. DIASSI
Chairman of the Board
/s/ PETER W. DE LEEUW
PETER W. DE LEEUW
President and Chief Executive Officer
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================================================================================
STERLING CHEMICALS HOLDINGS, INC.
1200 Smith Street, Suite 1900
Houston, Texas 77002-4312
(713) 650-3700
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 26, 2000
To Our Stockholders:
You are cordially invited to attend our Annual Meeting of Stockholders
to be held in Rooms Dogwood A and B of the Hyatt Regency Hotel at 1200 Louisiana
Street, Houston, Texas at 9:00 a.m. (Houston time) on Wednesday, January 26,
2000.
At the Annual Meeting you will be asked to vote on both of the following
proposals:
o The election of ten directors, each of whom will hold office until
our Annual Meeting of Stockholders in 2001 and until his successor
has been duly elected and qualified; and
o The ratification and approval of the appointment of Deloitte &
Touche LLP as our independent accountants for the fiscal year
ending September 30, 2000.
You are entitled to vote on each of these proposals if you were a stockholder at
the close of business on December 6, 1999. Our Board of Directors recommends a
vote FOR each of the nominated directors and FOR the appointment of Deloitte &
Touche LLP as our independent accountants for fiscal 2000. You may also be
asked to consider and act upon any other business that may properly come before
the Annual Meeting or any adjournment or postponement thereof.
Your vote is very important. If you do not expect to attend the Annual
Meeting in person, please sign, date and complete the enclosed proxy and return
it without delay in the enclosed envelope, which requires no postage if mailed
in the United States. Mailing your completed proxy will not prevent you from
later revoking that proxy and voting in person at the Annual Meeting. If you
want to vote at the Annual Meeting but your shares are held by an intermediary,
such as a broker or bank, you will need to obtain proof of ownership of your
shares as of December 6, 1999 from the intermediary.
By Order of the Board of Directors
/s/ DAVID G. ELKINS
DAVID G. ELKINS
Corporate Secretary
December 21, 1999
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STERLING CHEMICALS HOLDINGS, INC.
1200 Smith Street, Suite 1900
Houston, Texas 77002-4312
(713) 650-3700
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 26, 2000
GENERAL INFORMATION
Purpose of this Proxy Statement
We have prepared this Proxy Statement to solicit proxies on behalf of our Board
of Directors for use at our 2000 Annual Meeting and any adjournment thereof. We
intend to mail this Proxy Statement and accompanying proxy card to all of our
stockholders entitled to vote at the Annual Meeting on or about December 21,
1999.
Time and Place of Annual Meeting
The Annual Meeting will be held on Wednesday, January 26, 2000, at 9:00 a.m.
(Houston time) in Rooms Dogwood A and B of the Hyatt Regency Hotel at 1200
Louisiana Street, Houston, Texas.
Who May Vote
If you owned any shares of our common stock on December 6, 1999, as reflected in
our stock register, you may vote at the Annual Meeting.
How to Vote
You may vote in person at the Annual Meeting or by proxy. We recommend you vote
by proxy even if you plan to attend the Annual Meeting. You can always change
your vote at the Annual Meeting. If you want to vote at the Annual Meeting but
your shares are held by an intermediary, such as a broker or bank, you will need
to obtain proof of ownership of your shares as of December 6, 1999, or a proxy
to vote your shares, from the intermediary.
Quorum
In order to carry on any business at the Annual Meeting we must have a quorum.
This means that at least a majority of our outstanding shares eligible to vote
at the Annual Meeting must be represented at the Annual Meeting, either in
person or by proxy. Any shares owned by us or any of our subsidiaries are not
counted for this purpose. Shares of our common stock held by intermediaries that
are voted for at least one matter at the Annual Meeting will be counted as being
present for purposes of determining a quorum for all matters, even if the
beneficial owner's discretion has been withheld for voting on some or all other
matters (commonly referred to as a "broker non-vote").
Outstanding Shares
On December 6, 1999, there were 12,960,088 shares of our common stock
outstanding, 208,295 of which were held by Sterling Chemicals, Inc., our
wholly-owned subsidiary.
List of Stockholders
A list of our stockholders entitled to vote at the Annual Meeting will be
available for inspection at the Annual Meeting, as well as at our offices at
1200 Smith Street, Suite 1900, Houston, Texas 77002 for ten days prior to the
Annual Meeting. Any inspection of this list at our offices will need to be
conducted between 7:30 a.m. and 4:30 p.m. (Houston time). Please contact our
Corporate Secretary prior to coming to our offices to conduct an inspection.
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Votes Needed
Each share of our common stock is entitled to cast one vote for each director to
be elected and one vote on each other matter voted on at the Annual Meeting.
Directors will be elected by the favorable vote of a plurality of our shares of
common stock that are entitled to vote and are present at the Annual Meeting, in
person or by proxy, meaning that the ten candidates with the largest number of
affirmative votes will be elected as our directors. Under this format,
abstentions and broker non-votes will not affect the outcome of the election.
Ratification and approval of the appointment of Deloitte & Touche LLP as our
independent accountants for fiscal 2000, and any other business that may
properly come before the Annual Meeting for a vote, will require the favorable
vote of a majority of the shares of our common stock that are entitled to vote
on the matter and are present at the Annual Meeting, in person or by proxy
(unless a greater vote is required by law or our charter or bylaws). Therefore,
on these matters, an abstention from voting will have the same effect as a vote
against the proposal. However, broker non-votes are considered not to be present
for voting on these matters and, consequently, do not count as votes for or
against these proposals and are not considered in calculating the number of
votes necessary for approval.
How Proxies Work
Our Board of Directors is asking for your proxy. Giving us your proxy means that
you are authorizing us to vote your shares at the Annual Meeting in the manner
you direct. You may vote for all, some or none of our director candidates.
You may also vote for or against the other proposal or abstain from voting.
If you sign and return the enclosed proxy card and do not withhold authority to
vote for the election of any of our director candidates, all of your shares will
be voted for the election of each of our director candidates. If you withhold
authority to vote for any of our director candidates, none of your shares will
be voted for those candidates but all of your shares will be voted for the
election of the candidates as to whom you have not withheld authority to vote.
If any of our director candidates becomes unavailable for any reason before the
election, we may reduce the number of directors serving on our Board or our
Board may designate a substitute candidate. We have no reason to believe that
any of our director candidates will be unavailable. If our Board designates a
substitute candidate, the persons named in the enclosed proxy card will vote
your shares for such substitute if they are instructed to do so by our Board or,
if our Board does not do so, in accordance with their own best judgment.
If you sign and return the enclosed proxy card but do not specify how you want
your shares voted, your shares will be voted in favor of each of our director
candidates and in favor of the proposal to ratify and approve the appointment of
Deloitte & Touche LLP as our independent accountants for fiscal 2000.
If you sign and return the enclosed proxy card and any additional business
properly comes before the Annual Meeting, the persons named in the enclosed
proxy card will vote your shares on those matters as instructed by our Board or,
in the absence of any express instructions, in accordance with their own best
judgment. As of the date of this Proxy Statement, we were not aware of any other
matter to be raised at the Annual Meeting.
You may receive more than one proxy or voting card depending on how you hold
your shares. If your hold your shares through someone else, such as a broker or
a bank, you may get materials from them asking you how you want your shares
voted.
Revoking a Proxy
You may revoke your proxy at any time before your shares are voted by providing
our
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Corporate Secretary with either a new proxy with a later date or a written
notice of your desire to revoke your proxy at the following address: Sterling
Chemicals Holdings, Inc., 1200 Smith Street, Suite 1900, Houston, Texas 77002;
Attention: Corporate Secretary. You may also revoke your proxy at any time prior
to your shares having been voted by attending the Annual Meeting in person and
notifying either of the inspectors of election of your desire to revoke your
proxy. However, your proxy will not automatically be revoked merely because you
attend the Annual Meeting.
Solicitation of Proxies
We will bear the entire cost of preparing, printing and soliciting proxies. We
will send proxy solicitation materials to all of our stockholders of record as
of December 6, 1999 and to all intermediaries, such as brokers and banks, that
held any of our shares on that date on behalf of others. These intermediaries
will then forward solicitation materials to the beneficial owners of our shares
and we will reimburse them for their reasonable forwarding expenses. Our
directors, officers and employees may also solicit proxies in person or by
telephone.
Stockholders Proposals
Our 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. Our bylaws contain several requirements that must be
satisfied in order for any of our stockholders to bring a proposal before one of
our annual meetings, including a requirement of delivering proper advance notice
to us. Stockholders are advised to review our bylaws if they intend to present a
proposal at any of our annual meetings.
Annual Report and Available Information
Our annual report to stockholders, including financial statements, accompanies
this Proxy Statement but does not constitute a part of the proxy solicitation
materials. We will furnish a copy of our annual report on Form 10-K (without
exhibits) for our fiscal year ended September 30, 1999, without charge, to any
person whose vote is solicited by this Proxy Statement upon written request to
the following address: Sterling Chemicals Holdings, Inc., 1200 Smith Street,
Suite 1900, Houston, Texas 77002; Attention: Manager of Investor Relations. In
addition, upon written request, we will furnish a copy of any exhibit to our
annual report on Form 10-K to any person whose vote is solicited by this Proxy
Statement upon payment of our reasonable expenses incurred in connection with
providing the copy of the exhibit.
Inspectors of Election
Our Board of Directors has appointed Ray Rosenbaum of Harris Trust and Savings
Bank and Kathi Holdsworth, our Assistant Secretary, as inspectors of election.
The inspectors of election will separately calculate affirmative and negative
votes, abstentions and broker non-votes for each of the proposals.
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ELECTION OF DIRECTORS
(Item 1 on the Proxy Card)
Our Board of Directors has nominated the director candidates named
below. Our Board oversees the management of our company on your behalf, reviews
our long-term strategic plans and exercises direct decision making authority in
key areas. Most of our directors - including eight of our ten candidates - are
not Sterling employees and only non-employee directors are eligible to serve on
our Audit and Compliance Committee or our Compensation Committee. All of our
directors are elected annually to serve until our next annual meeting and until
their respective successors are elected.
Personal information on each of our director candidates is provided
below. All of our director candidates currently serve on our Board and each of
our current directors was elected by our stockholders at our last annual meeting
except for William A. McMinn, who was elected by our Board in February of 1999.
Our Board held seven meetings in fiscal 1999. On average, our directors
attended 94% of the meetings of our Board or any of our committees on which they
served. Our only director who attended less than 75% of the meetings of our
Board and all committees on which he served was John L. Garcia, who attended 67%
of such meetings.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION TO OUR
BOARD OF EACH OF THE FOLLOWING CANDIDATES:
Frank P. Diassi Mr. Diassi, Chairman of our Board since August
Age 66 of 1996, is currently Managing General Partner
Director since August 1996 of The Unicorn Group, L.L.C., a private
financial organization. He organized Unicorn in
1981 and has originated investments in over 40
entrepreneurial companies. Mr. Diassi has been
Chairman of the Board of Hawkeye Chemical
Company and was a director of Arcadian
Corporation, at the time the largest nitrogen
fertilizer company in the Western hemisphere.
Mr. Diassi also currently serves as Chairman of
the Board of Software Plus, Inc., a human
resource software supplier, and Amerlux, Inc., a
manufacturer of lighting fixtures for commercial
and retail markets. In addition, he serves as a
founding director of Mail-Well, Inc., a NYSE
company that manufacturers envelopes and
provides commercial printing services, and
several private companies.
Robert W. Roten Mr. Roten spent the first 25 years of his career
Age 65 with Monsanto Company and served as Vice
Director Since August 1996 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 petrochemicals and plastics
marketing firm, from 1983 until 1986. He served
as our Vice President--Commercial from August of
1986 until September of 1991, when he became our
Vice President--Corporate Development. Mr. Roten
served as our Executive Vice President and Chief
Operating Officer from April of 1993 until
August of 1996, and served as our President and
Chief Executive Officer from August 21, 1996
until April of 1998. Mr. Roten has served as the
Vice Chairman of our Board of Directors since
April of 1998. Mr. Roten is currently a
principal in Double R Companies, Inc., a private
investment
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company, and has been a principal in Hickory
Acquisition Group, a chemical asset acquisition
company, since April of 1999, serving on its
Board of Directors during that entire period.
Mr. Roten is also currently President of Xnet,
Inc., a Houston-based computer and systems
consulting company, and has served on its Board
of Directors since June of 1995.
Peter W. De Leeuw Mr. De Leeuw has been a member of our Board of
Age 59 Directors and our President and Chief Executive
Director Since April 1998 Officer since April 1, 1998. Prior to joining
us, Mr. De Leeuw was employed by Shell Chemical
Company from 1965, most recently serving as its
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 Mr. Dragone was a director of Arcadian
Age 73 Corporation from 1989 to 1997 and served as its
Director Since August 1996 Chairman of the Board from 1989 to 1990. He was
President and Chief Executive Officer of Akzo
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. Mr. Dragone is a director of
DB Thin Films, a maker of vacuum deposition of
metallic thin films, and of Wellman, Inc., a
polyester fibers producer and plastic
reclamation company. He was Chairman of the
Board of the New York Racing Commission from
1990 to 1995 and currently serves as one of its
trustees.
John L. Garcia Mr. Garcia has been a Managing Director of AEA
Age 43 Investors Inc. since May of 1999. Mr. Garcia was
Director Since August 1996 a Managing Director and Head of the Global
Chemical Investment Banking Group with Credit
Suisse First Boston Corporation from 1994 until
April of 1999, and prior to that time, was a
Managing Director with Wertheim Schroder & Co.
Inc. Mr. Garcia also serves as a director of
Acetex Corporation, a chemical manufacturing
company, and EQT Investors, Inc., a private
Scandinavian equity fund.
Frank J. Hevrdejs Mr. Hevrdejs is a principal and President of The
Age 54 Sterling Group, Inc., which he co-founded in
Director Since August 1996 1982. Mr. Hevrdejs has actively participated in
acquisitions of over 40 businesses in the past
20 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 founding director of Mail-Well, Inc., a NYSE
company that manufactures envelopes and provides
commercial printing services, Eagle USA., an
air-freight company, and Chase Bank of Texas,
National Association, a national banking
association.
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Hunter Nelson Mr. Nelson is currently a principal and director
Age 47 of The Sterling Group, Inc. Prior to joining The
Director Since August 1996 Sterling Group 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 laws. Mr. Nelson served on the Board
of Directors of Sterling Diagnostic Imaging,
Inc. until it was sold in May of 1999.
George J. Damiris Mr. Damiris has been with Koch Industries, Inc.
Age 39 and its affiliates since 1989, currently serving
Director Since December 1997 as Vice President of Koch Ventures, Inc. and
Vice President and a director of Koch Telecom
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 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. Mr. Damiris is also a
director of 3DI, L.L.C., a service provider for
the geographic information systems industry,
PF.Net Holdings, Limited, a communications
company organized for the purpose of
constructing a nationwide fiber optics network,
and Sea Breeze Communication Company, which
holds title to easements and permits required
for the exercise of the right of eminent domain
for the telecommunications industry.
Rolf H. Towe Mr. Towe has served as Senior Managing Director
Age 61 of The Clipper Group, L.P. since its formation
Director Since January 1998 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, Mr. Towe held various management
positions over a period of nearly 20 years in
Union Carbide Corporation, a multinational
chemicals and plastics manufacturer. Mr. Towe
also serves as a director of Travel Centers of
America, Inc., a nationwide operator and
franchisor of auto and truck travel centers, and
several private companies.
William A. McMinn Mr. McMinn has been Chairman of the Board of
Age 69 Texas Petrochemicals Corporation since 1996. He
Director Since February 1999 served as Corporate Vice President and Manager
of the Industrial Chemical Group of FMC
Corporation, a manufacturer of machinery and
chemical products, from 1973 through 1985. He
became President and Chief Executive Officer of
Cain Chemical Inc., a producer of
petrochemicals, in 1987 and served in that
capacity until its acquisition by Occidental
Petroleum in May of 1988. He became Chairman of
the Board of Arcadian Corporation in August of
1990 and served in that capacity until it was
sold in March of 1997.
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DIRECTOR COMPENSATION
Members of our Board of Directors who are also our employees do not
receive additional compensation for serving on our Board, although all of our
directors are reimbursed for their travel expenses related to their services as
a director. Each of our non-employee directors is paid a fee of $2,500 per
quarter for his service as a director, with the exception that our Vice Chairman
is paid $5,000 per quarter. These non-employee directors also receive $1,000 for
each Board meeting they attend and $400 for each telephonic meeting lasting at
least 30 minutes in which they participate. Members of our Board committees are
paid $700 for each committee meeting they attend, with the Chairman of the
committee receiving $1,400. George J. Damiris, one of our non-employee
directors, is employed by Koch Ventures, Inc. and, under established policies of
Koch Ventures, Inc., all compensation earned by Mr. Damiris is paid directly to
his employer.
Under our 1997 Nonqualified Stock Option Plan for Non-Employee
Directors, each of our non-employee director receives fully vested options to
purchase 1,000 shares of our common stock on October 1 of each year, with the
exception of our Vice Chairman who receives options to purchase 2,000 shares.
Under this Plan, each of our non-employee directors has the ability to elect not
to participate in the Plan. As discussed in this Proxy Statement under "Certain
Transactions," Koch Capital Services, Inc., who holds a significant amount of
our common stock, currently has the right under a voting agreement to designate
a person for election to our Board. We have entered into an agreement with Koch
Capital under which we have agreed to issue to Koch Capital the options that
would have otherwise been granted to the director it designates if its designee
delivers to us an executed election not to participate under the Plan. The terms
and conditions of these options are substantially similar to those governing the
options granted to our other non-employee directors, with the main exception
being that the options granted to Koch Capital do not expire upon the
termination of service of its designated director.
BOARD COMMITTEES
Our Board of Directors has created various standing committees to help
carry out its duties, including an Audit and Compliance Committee and a
Compensation Committee. Generally speaking, our Board committees work on key
issues in greater detail than would be possible at full Board meetings. We do
not have a standing nominating committee.
Audit and Compliance Committee
Our Audit and Compliance Committee is made up of three non-employee
directors, including Hunter Nelson (Chairman), George J. Damiris and Robert W.
Roten, and met six times in fiscal 1999. Our Audit and Compliance Committee
recommends the appointment of our independent auditors to our Board, meets with
these auditors to review their report on the financial statements of the
business and approves the audit and other services to be provided by these
auditors. In addition, our Audit and Compliance Committee reviews our Form 10-K
and Form 10-Q reports and our practices in preparing published financial
statements. Our Audit and Compliance Committee also provides oversight with
respect to the establishment of and adherence to corporate compliance programs,
codes of conduct and other policies and procedures concerning our business and
our compliance with all relevant laws.
Compensation Committee
Our Compensation Committee is made up of three non-employee directors,
including Frank J. Hevrdejs (Chairman), Allan R. Dragone and Rolf H. Towe, and
met twice in fiscal 1999. Our Compensation Committee establishes and reviews
compensation for all of our elected officers and those of our subsidiaries and
also administers our executive compensation programs. Our Compensation Committee
consults, from time to time, with outside experts concerning the performance of
its duties.
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RATIFICATION OF INDEPENDENT ACCOUNTANTS
(Item 2 on the Proxy Card)
Our Board of Directors, at the recommendation of our Audit and
Compliance Committee, has appointed Deloitte & Touche LLP as our independent
accountants for the fiscal year ending September 30, 2000. We are asking that
you ratify that appointment. Deloitte has been our independent accounting firm
for our last four fiscal years and we believe that they are well qualified for
the job. Representatives of Deloitte will be present at the Annual Meeting to
answer appropriate questions and to make a statement, if they desire to do so.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
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EXECUTIVE OFFICERS OF THE COMPANY
Personal information with respect to each of our executive officers is
set forth below.
Frank P. Diassi Mr. Diassi has been the Chairman of our Board of
Age 66 Directors since August of 1996. See "Election of
Directors" above for more information about Mr.
Diassi.
Peter W. De Leeuw Mr. De Leeuw has been our President and Chief
Age 59 Executive Officer since April 1, 1998. See
"Election of Directors" above for more
information about Mr. De Leeuw.
Richard K. Crump Mr. Crump has served as our Vice
Age 53 President--Strategic Planning since December 1,
1996. Prior to that time, Mr. Crump served as
our Director--Commercial from August of 1986
until October of 1991 and our Vice
President--Commercial from October of 1991 until
December 1, 1996. In his current position, Mr.
Crump has responsibility for our strategic
planning, which includes acquisition and merger
activity. Prior to joining us, 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 until August of 1986.
Gary M. Spitz Mr. Spitz has been our Chief Financial Officer
Age 44 and one of our Vice Presidents since January 19,
1998. Prior to joining us, Mr. Spitz was 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 held various financial positions with
divisions of W. R. Grace and Company since 1979.
David G. Elkins Mr. Elkins has been our General Counsel and
Age 57 Secretary and one of our Vice Presidents since
January 1, 1998. Mr. Elkins previously was a
senior partner in the law firm of Andrews &
Kurth, L.L.P., where he specialized in corporate
and securities matters.
Robert O. McAlister Mr. McAlister joined us in 1991 and has been our
Age 60 Vice President--Human Resources and
Administration 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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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Our executive compensation program is administered by the Compensation
Committee of our Board of Directors. This Committee, which is comprised of
non-employee directors, is responsible for discharging the compensation
responsibilities of our Board of Directors. The Committee reviews general
compensation issues and determines the compensation of all of our senior
executives and other key employees and recommends and administers our employee
benefit plans that provide benefits to our senior executives. The Committee has
furnished the following report on executive compensation for inclusion in this
Proxy Statement.
Compensation Philosophy and Objectives
Sterling's senior executive compensation program is designed to
motivate, reward and retain the management talent needed to achieve its business
goals and maintain a leadership position in the petrochemicals industry. Under
this program, a significant portion of the potential compensation of Sterling's
senior executives is dependent on increased stockholder value. This program
offers Sterling's senior executives salary levels and compensation incentives
designed to:
o attract, motivate and retain talented and productive executives
o recognize individual performance and Sterling's performance relative
to the performance of other companies of comparable size, complexity
and quality
o support Sterling's short-term and long-term goals
We believe that this approach ensures an appropriate link between the
compensation of Sterling's senior executives and the accomplishment of
Sterling's goals and its stockholders' objectives.
We use a number of sources to determine whether the compensation
program provided to Sterling's senior executives is competitive. Our primary
method of determining competitiveness involves obtaining compensation review
data from independent compensation consultants, which we use to compare our
compensation program to those offered by a group of chemical and allied products
corporations. We also compare our compensation program to those offered by a
select group of non-chemical companies that we feel are comparable in size and
performance. We do not compare our compensation program against those offered by
each of the companies included in the S&P Chemicals Index used in the Stock
Performance Graph contained in the Proxy Statement because we do not consider
many of those companies to be competitors of Sterling, either in the market or
for executive talent.
Total Compensation
The three major components of Sterling's senior executive compensation
program are base salary, annual incentive compensation and stock-based
compensation. Our goal is to set base salaries for Sterling's senior executives
at or below competitive market rates of comparable companies, while providing
annual and stock-based compensation opportunities, which are linked to
Sterling's financial performance, above competitive market rates. We believe
that focusing executive compensation on variable incentive pay will help
Sterling to meet its performance goals and enhance stockholder value in the long
term.
-10-
<PAGE> 14
Base Salaries
Our strategy is to reduce the emphasis on fixed compensation for
Sterling's senior executives by positioning their base salaries at or below
industry levels. Initially, these base salaries are set at levels intended to
reflect the individual's experience, level of responsibility, job classification
and competence. Under our strategy, dramatic changes in base salary are not
generally made unless required to adjust for market movements, promotions or
significant changes in responsibility or individual performance. Except with
respect to the grant of stock options, Sterling's Board of Directors provides
final approval of the compensation of all of Sterling's senior executive
officers, including the Chairman of the Board and the Chief Executive Officer.
Annual Incentive Compensation
Sterling's senior executives and other qualified employees can earn
additional cash compensation under Sterling's Profit Sharing Plan and Bonus
Plan. The additional compensation available under each of these plans is
intended to reward the achievement of annual corporate financial goals.
Generally, no additional compensation is available under either of the plans
unless Sterling's financial performance meets threshold levels established by us
and Sterling's Board of Directors at the beginning of each fiscal year. The
amount of additional compensation available under these plans is based on these
threshold levels, formulae set for the individual's job classification (with
individuals having greater management responsibility having the opportunity to
earn larger percentages) and on individual performance. We administer both of
these plans and recommend the total amount of annual compensation to Sterling's
Board of Directors. Sterling's Board of Directors approves the aggregate amount
of incentive compensation awards to all participants and we then approve
individual awards. In evaluating an individual's performance, we rely on the
members of Sterling's senior management. No awards were made under either plan
in fiscal 1999.
Stock-Based Compensation
We are permitted to grant incentive stock options, non-qualified stock
options, stock appreciation rights, restricted stock awards, performance awards
and phantom stock awards to Sterling's senior executives and key employees under
Sterling's Omnibus Stock Awards and Incentive Plan. We determine the terms and
amounts of awards to be granted to individuals under the Omnibus Plan based upon
a variety of factors, including:
o level of responsibility and job classification
o job performance
o present and potential contributions to Sterling's long term success
o the extent that the base salary of the individual is below industry
levels based on the compensation survey described above
The primary purpose of stock-based compensation is to provide
Sterling's senior executives and key employees with incentives to concentrate on
Sterling's performance over the long term. We believe that stock-based
compensation is an appropriate and effective method for aligning the interests
of Sterling's senior executives and key employees with Sterling's long term goal
of maximizing stockholder value because the employees will not receive any
benefit from this compensation unless the stock price rises.
-11-
<PAGE> 15
The Omnibus Plan permits us to specify the number of shares covered by
awards and the vesting schedule. We have generally imposed a five-year vesting
schedule for all awards in order to provide an incentive to create stockholder
value over time, since the full benefit of the awards cannot be realized unless
there is appreciation in stock value over a number of years. However, options
granted under the Omnibus Plan become fully exercisable in the event of the
optionee's termination of employment by reason of death, disability or
retirement and may become fully exercisable in the event of a "change of
control." No option may be exercised after the tenth anniversary of the date of
grant or the earlier termination of the option. All options are granted with an
exercise price at or above the fair market value of a share of Sterling's common
stock on the date of grant.
During fiscal 1999, we awarded non-qualified stock options to acquire
an aggregate of 73,350 shares of Sterling's common stock under the Omnibus Plan.
We did not make any other awards under the Omnibus Plan in fiscal 1999. Also
during fiscal 1999, options to acquire an aggregate of 106,372 shares expired as
a result of resignations by several employees.
Repricing of Options
In December of 1998, we reduced the exercise price of all outstanding
stock options held by Sterling's then current employees to $6.00 per share. As
the trading price of Sterling's common stock had dropped significantly over the
prior year, we felt that this action was necessary to preserve the value placed
on these stock options as a form of incentive compensation, to bolster employee
morale and to further motivate key employees to help Sterling meet its financial
goals, thereby enhancing stockholder value. Although the trading price for a
share of Sterling's common stock was somewhat below $6.00 per share at the time
of this reduction, we felt that an exercise price of $6.00 per share was fair
and appropriate and that repricing these options at this amount would be in the
best interests of Sterling's stockholders. The following table shows the impact
of the repricing on Sterling's executive officers.
<TABLE>
<CAPTION>
Length of
Number of Original
Securities Market Price Exercise Option Term
Underlying of Stock at Price New Remaining
Options Time of at Time of Exercise at Date of
Name and Title Date Repriced Repricing Repricing Price Repricing
- ------------------------ ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Frank P. Diassi 12/14/98 95,238 $ 4.375 $ 12.00 $ 6.00 113 months
Chairman of the 12/14/98 63,492 $ 4.375 $ 12.00 $ 6.00 97 months
Board of Directors
Peter W. De Leeuw 12/14/98 125,000 $ 4.375 $ 12.00 $ 6.00 112 months
President and Chief
Executive Officer
Richard K. Crump 12/14/98 30,159 $ 4.375 $ 12.00 $ 6.00 113 months
Vice President - 12/14/98 20,106 $ 4.375 $ 12.00 $ 6.00 97 months
Strategic Planning
Gary M. Spitz 12/14/98 45,000 $ 4.375 $ 12.00 $ 6.00 110 months
Chief Financial Officer
and Vice President
David G. Elkins 12/14/98 60,000 $ 4.375 $ 12.00 $ 6.00 109 months
Vice President, General
Counsel and Secretary
Robert O. McAlister 12/14/98 17,460 $ 4.375 $ 12.00 $ 6.00 113 months
Vice President - HR 12/14/98 11,640 $ 4.375 $ 12.00 $ 6.00 97 months
and Administration
Stewart H. Yonts 12/14/98 1,200 $ 4.375 $ 9.50 $ 6.00 113 months
Treasurer 12/14/98 800 $ 4.375 $ 12.00 $ 6.00 97 months
</TABLE>
-12-
<PAGE> 16
Compensation to the Chairman of the Board and the Chief Executive Officer
Frank P. Diassi has been Sterling's Chairman of the Board since August
21, 1996. Peter W. De Leeuw has been Sterling's President and Chief Executive
Officer since April 1, 1998. In fiscal 1999, Messrs. Diassi and De Leeuw were
paid base salaries of $333,344 and $312,504, respectively. We used the same
executive compensation practices described above to determine the compensation
paid to Messrs. Diassi and De Leeuw in fiscal 1999 and believe that their fiscal
1999 salaries were below the mid-point salary paid to similar individuals in the
competitive market. In fiscal 1999, neither Mr. Diassi nor Mr. De Leeuw received
any awards under the Omnibus Plan.
Tax Treatment
We consider the anticipated tax treatment of our executive compensation
program when setting levels and types of compensation. Section 162(m) of the
Internal Revenue Code generally disallows a tax deduction to public companies
for compensation paid to the company's chief executive officer or any of the
other four most highly compensated executive officers in excess of $1 million in
any year, with certain performance-based compensation being specifically exempt
from this deduction limit. In fiscal 1999, no employee of Sterling subject to
this limit received compensation in excess of $1 million. Consequently, we
believe that the requirements of Section 162(m) will not affect the tax
deductions available to Sterling in connection with its executive compensation
for the 1999 fiscal year.
Additional Information
No portion of this report shall be deemed to be incorporated by
reference into any filing under the Securities Act or under the Securities
Exchange Act through any general statement incorporating by reference the Proxy
Statement in which this report appears in its entirety, except to the extent
that Sterling specifically incorporates this report or a portion of this report
by reference. In addition, this report shall not otherwise be deemed to be filed
under either of such Acts except the extent required by Item 402 of Regulation
S-K.
Respectfully submitted,
The Compensation Committee
of the Board of Directors
Frank J. Hevrdejs (Chairman)
Allan R. Dragone
Rolf H. Towe
-13-
<PAGE> 17
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Executive Compensation
The following table shows the compensation paid to our five most highly
compensated executive officers for the three fiscal years ended September 30,
1999, including our Chairman of the Board and our Chief Executive Officer.
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
----------------------------------------
NAME AND FISCAL OTHER ANNUAL
PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION
- ------------------------------ ------ -------- --------- -------------
<S> <C> <C> <C> <C>
Frank P. Diassi .............. 1999 $333,344 $ 0 $ 0
Chairman of the Board of 1998 300,000 0 0
Directors 1997 334,231 0 0
Peter W. De Leeuw(4) ......... 1999 312,504 0 0
President and Chief 1998 162,500 0 0
Executive Officer
Richard K. Crump ............. 1999 200,000 10,000 0
Vice President-- 1998 194,167 0 0
Strategic Planning 1997 187,500 0 0
Gary M Spitz(6) .............. 1999 193,333 0 0
Vice President and Chief 1998 126,818 25,000(7) 166,364(8)
Financial Officer
David G. Elkins(10) .......... 1999 200,000 20,000 0
Vice President, General 1998 150,000 0 0
Counsel and Secretary
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-----------------------------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
AWARD(S) OPTIONS/SARS(2) COMPENSATION(3)
----------- --------------- ---------------
<S> <C> <C> <C>
$ 0 158,730 $35,406
0 95,238 34,606
0 63,492 4,693
0 125,000 21,050
95,000(5) 125,000 18,349
0 50,265 9,885
0 30,159 10,139
0 20,106 1,080
0 45,000 3,478
50,000(9) 45,000 3,309
0 60,000 27,546
55,000(11) 60,000 9,654
</TABLE>
- -------------------------
(1) Includes amounts deferred under our 401(k) Savings and Investment Plan.
(2) On December 14, 1998, we repriced all outstanding stock options to lower
the exercise price to $6 per share. As no options were granted to any of
our officers appearing in this table during fiscal 1999, figures for
fiscal 1999 are included solely to reflect the repricing of options
granted during fiscal 1997 and fiscal 1998.
(3) Consists of premiums for group life insurance and premiums for executive
life insurance paid by us as follows:
<TABLE>
<CAPTION>
Fiscal Executive
Year Group Life Life
------ ---------- ----------
<S> <C> <C> <C>
Frank P. Diassi............ 1999 $16,326 $19,080
1998 15,526 19,080
1997 4,693 0
Peter W. De Leeuw.......... 1999 5,851 15,199
1998 3,150 15,199
Richard K. Crump........... 1999 2,255 7,630
1998 2,508 7,631
1997 1,080 0
Gary M. Spitz.............. 1999 747 2,731
1998 578 2,731
David G. Elkins............ 1999 3,618 23,928
1998 3,038 6,616
</TABLE>
-14-
<PAGE> 18
(4) Mr. De Leeuw joined us as our President and Chief Executive Officer
effective April 1, 1998, meaning that he was employed by us during fiscal
1998 for only six months.
(5) Mr. De Leeuw was granted 10,000 shares of restricted stock on March 16,
1998. Of such shares, 5,000 shares are currently subject to forfeiture if
Mr. De Leeuw's employment is terminated under certain specified
circumstances. Such forfeiture provisions expire in two equal increments
on March 16, 2000 and March 16, 2001 or, if earlier, upon the occurrence
of certain specified events. If any dividends are paid on these shares
prior to the expiration of the forfeiture provisions, Mr. De Leeuw is
entitled to receive the dividends only upon the expiration of the
forfeiture provision, without any interest being paid on that amount. As
of the last day of fiscal 1999, such shares had a value of $35,000 based
on the closing market price per share on September 30, 1999.
(6) Mr. Spitz joined us as our Vice President and Chief Financial Officer on
January 19, 1998, meaning that he was employed by us during fiscal 1998
for only approximately eight and one-half months.
(7) Consists of a signing bonus paid pursuant to Mr. Spitz's Employment
Agreement.
(8) Consists of moving expenses paid by us.
(9) Mr. Spitz was granted 5,000 shares of restricted stock on January 19,
1998. Of such shares, 2,500 shares are currently subject to forfeiture if
Mr. Spitz's employment is terminated under certain specified
circumstances. Such forfeiture provisions expire in two equal increments
on January 19, 2000 and January 19, 2001 or, if earlier, upon the
occurrence of certain specified events. If any dividends are paid on these
shares prior to the expiration of the forfeiture provisions, Mr. Spitz is
entitled to receive the dividends only upon the expiration of the
forfeiture provision, without any interest being paid on that amount. As
of the last day of fiscal 1999, such shares had a value of $17,500 based
on the closing market price per share on September 30, 1999.
(10) Mr. Elkins joined us as our Vice President, General Counsel and Secretary
effective January 1, 1998, meaning that he was employed by us during
fiscal 1998 for only nine months.
(11) Mr. Elkins was granted 5,000 shares of restricted stock on January 1,
1998. Of such shares, 2,500 shares are currently subject to forfeiture if
Mr. Elkins' employment is terminated under certain specified
circumstances. Such forfeiture provisions expire in two equal increments
on January 1, 2000 and January 1, 2001 or, if earlier, upon the occurrence
of certain specified events. If any dividends are paid on these shares
prior to the expiration of the forfeiture provisions, Mr. Elkins is
entitled to receive the dividends only upon the expiration of the
forfeiture provision, without any interest being paid on that amount. As
of the last day of fiscal 1999, such shares had a value of $17,500 based
on the closing market price per share on September 30, 1999.
Aggregate Year-end Option Values
The following table provides information on the value of unexercised
stock options, as of September 30, 1999, held by our five most highly
compensated officers, including our Chairman of the Board and our Chief
Executive Officer. There were no exercises of options or stock appreciation
rights during fiscal 1999 by any of these officers, and none of these officers
held any stock appreciation rights at September 30, 1999.
<TABLE>
<CAPTION>
Number Of Securities Value Of Unexercised
Underlying Unexercised Options In-The-Money Options/SARs At
At September 30, 1999 September 30, 1999*
------------------------------------------ -----------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
--------------------------- ------------------- ---------------------- ----------------- -----------------------
<S> <C> <C> <C> <C>
Frank P. Diassi 36,507 122,223 -- --
Peter W. De Leeuw 25,000 100,000 -- --
Richard K. Crump 15,581 34,684 -- --
Gary M. Spitz 9,000 36,000 -- --
David G. Elkins 15,000 45,000 -- --
--------------------------- ------------------- ---------------------- ----------------- -----------------------
</TABLE>
-15-
<PAGE> 19
* The "value" of unexercised options is based on the amount, if any, by
which the market price of a share of our common stock on the relevant
date exceeds the exercise price of the option. The actual gain, if any,
that one of our officers realizes from the exercise of options will
depend on the market price of a share of our common stock at the time
of exercise. An "In-The-Money" option is an option for which the
exercise price is lower than the market price of a share of our common
stock on the relevant date. None of our officers held options with an
exercise price below the market price of a share of our common stock as
of September 30, 1999.
Option Grants in Last Fiscal Year
We did not grant any stock options in fiscal 1999 to any of our five
most highly compensated officers, including our Chairman of the Board and our
Chief Executive Officer.
Employment Agreements
PETER W. DE LEEUW
On March 16, 1998, we entered into an Employment Agreement with Mr. De
Leeuw under which we engaged Mr. De Leeuw to serve as our President and Chief
Executive Officer. Under his Employment Agreement, Mr. De Leeuw earns a base
salary that was initially set at $300,000 per year (subject to increase at the
discretion of our Board) and he participates in our bonus/incentive plans. In
addition, when Mr. De Leeuw signed his Employment Agreement, we granted Mr. De
Leeuw 10,000 shares of our common stock (5,000 of which are currently subject to
forfeiture if Mr. De Leeuw's employment is terminated under specified
circumstances) and options to purchase 125,000 shares of our common stock for
$12 per share (with 20% of such options vesting annually on each March 16,
commencing in 1999). On December 14, 1998, we reduced the exercise price of
these options to $6. Mr. De Leeuw was also granted the right to purchase up to
100,000 additional shares of our common stock but that right expired on
September 12, 1998 without having been exercised.
Either we or Mr. De Leeuw may terminate Mr. De Leeuw's Employment
Agreement at any time, for any reason or for no reason. However, if, prior to
March 16, 2000, Mr. De Leeuw terminates his employment for a Good Reason (as
defined in his Employment Agreement) or we terminate Mr. De Leeuw's employment
for any reason other than Misconduct or Disability (as those terms are defined
in his Employment Agreement), we are required to pay Mr. De Leeuw an amount
equal to 200% of his base salary and certain other sums. In addition, for 24
months after a termination of Mr. De Leeuw's Employment Agreement under these
circumstances at any time (whether before or after March 16, 2000), Mr. De Leeuw
is entitled to continuing coverage under all of our life, healthcare, medical
and dental insurance plans and programs (excluding disability), so long as Mr.
De Leeuw pays any required employee premiums under these plans or programs or
COBRA. However, we are not required to make these payments or provide these
coverages if Mr. De Leeuw's employment is terminated after his "normal
retirement date" under our Pension Plan and our obligation to provide continuing
coverage under our benefits plans immediately ends if Mr. De Leeuw obtains other
employment where he is provided with substantially similar benefits. Finally, if
Mr. De Leeuw's Employment Agreement is terminated under these circumstances at
any time, all vesting and similar requirements and all conditions to entitlement
to benefits are deemed satisfied under these plans and programs, meaning that
all options held by Mr. De Leeuw would immediately vest and all forfeiture
provisions for any restricted stock would immediately lapse.
-16-
<PAGE> 20
GARY M. SPITZ
On January 19, 1998, we entered into an Employment Agreement with Mr.
Spitz under which we engaged Mr. Spitz to serve as our Chief Financial Officer
and one of our Vice Presidents. Under his Employment Agreement, Mr. Spitz earns
a base salary that was initially set at $180,000 per year (subject to increase
at the discretion of our Board) and he participates in our bonus/incentive
plans. In addition, when Mr. Spitz signed his Employment Agreement, we paid Mr.
Spitz a $25,000 signing bonus and granted Mr. Spitz 5,000 shares of our common
stock (2,500 of which are currently subject to forfeiture if Mr. Spitz's
employment is terminated under specified circumstances) and options to purchase
45,000 shares of our common stock for $12 per share (with 20% of such options
vesting annually on each January 19, commencing in 1999). On December 14, 1998,
we reduced the exercise price of these options to $6. Mr. Spitz was also granted
the right to purchase up to 50,000 shares of our common stock but that right
expired on April 30, 1998 without having been exercised.
Either we or Mr. Spitz may terminate Mr. Spitz's Employment Agreement
at any time, for any reason or for no reason. However, if, prior to January 19,
2000, Mr. Spitz terminates his employment for a Good Reason (as defined in his
Employment Agreement) after the occurrence of a specified change of control or
we terminate Mr. Spitz's employment for any reason other than Misconduct or
Disability (as those terms are defined in his Employment Agreement), we are
required to pay Mr. Spitz an amount equal to 200% of his base salary and certain
other sums. In addition, for 24 months after a termination of Mr. Spitz's
Employment Agreement under these circumstances at any time (whether before or
after January 19, 2000), Mr. Spitz is entitled to continuing coverage under all
of our life, healthcare, medical and dental insurance plans and programs
(excluding disability), so long as Mr. Spitz pays any required employee premiums
under these plans or programs or COBRA. However, we are not required to make
these payments or provide these coverages if Mr. Spitz's employment is
terminated after his "normal retirement date" under our Pension Plan and our
obligation to provide continuing coverage under our benefits plans immediately
ends if Mr. Spitz obtains other employment where he is provided with
substantially similar benefits.
DAVID G. ELKINS
On November 12, 1997, we entered into an Employment Agreement with Mr.
Elkins under which we engaged Mr. Elkins to serve as our General Counsel and
Corporate Secretary and one of our Vice Presidents. Under his Employment
Agreement, Mr. Elkins earns a base salary that was initially set at $200,000 per
year (subject to increase at the discretion of our Board) and he participates in
our bonus/incentive plans. In addition, when Mr. Elkins signed his Employment
Agreement, we granted Mr. Elkins 5,000 shares of our common stock (2,500 of
which are currently subject to forfeiture if Mr. Elkins' employment is
terminated under specified circumstances) and options to purchase 60,000 shares
of our common stock for $12 per share (with 25% of such options vesting annually
on each January 1, commencing in 1999). On December 14, 1998, we reduced the
exercise price of these options to $6. Mr. Elkins was also granted the right to
purchase up to 80,000 shares of our common stock but that right expired on April
30, 1998 without having been exercised.
Either we or Mr. Elkins may terminate Mr. Elkins' Employment Agreement
at any time, for any reason or for no reason. However, if, prior to January 1,
2000, Mr. Elkins terminates his employment for a Good Reason (as defined in his
Employment Agreement) or we terminate Mr. Elkins' employment for any reason
other than Misconduct or Disability (as those terms are defined in his
Employment Agreement), we are required to pay Mr. Elkins an amount equal to 300%
of his base salary and certain other sums. In addition, for 36 months after a
termination of Mr. Elkins' Employment Agreement under these circumstances at any
time (whether before or after January 1, 2000), Mr. Elkins is entitled to
-17-
<PAGE> 21
continuing coverage under all of our life, healthcare, medical and dental
insurance plans and programs (excluding disability), so long as Mr. Elkins pays
any required employee premiums under these plans or programs or COBRA. However,
we are not required to make these payments or provide these coverages if Mr.
Elkins' obtains other employment where he is provided with substantially similar
benefits. Finally, if Mr. Elkins' Employment Agreement is terminated under these
circumstances, all vesting and similar requirements and all conditions to
entitlement to benefits are deemed satisfied under these plans and programs,
meaning that all options held by Mr. Elkins would immediately vest and all
forfeiture provisions for any restricted stock would immediately lapse.
Under his Employment Agreement, Mr. Elkins is entitled to participate
in, and receive benefits under, most of our employee benefit plans as if his
employment with us commenced on January 1, 1993 or, in the case of our
post-retirement healthcare plan, January 1, 1988. In addition, Mr. Elkins is
entitled under his Employment Agreement to receive pension benefits which are
supplemental to the pension benefits payable to Mr. Elkins under our Pension
Plan, Equalization Plan and Supplemental Plan described below.
Pension Plans
Salaried Employees' Most of our salaried employees, including our
Pension Plan Chief Executive Officer and our other four most
highly compensated officers, participate in our
defined benefit Salaried Employees' Pension
Plan. We determine the pension costs under this
Plan each year on an actuarial basis and make
all necessary contributions. The pension
benefits payable under this Plan are determined
by multiplying the employee's "vested
percentage" by the sum of (i) the number of
years the employee is given credit as having
worked for us times 1.2% of his or her "Average
Earnings" plus (ii) the number of years the
employee is given credit as having worked for us
(not to exceed 35) times 45% of the amount which
his or her "Average Earnings" exceeds the
average (without indexing) of his or her Social
Security taxable wage bases during the 35-year
period ending on December 31 of the year in
which he or she attains Social Security
retirement age. Generally, an employee's
"Average Earnings" will be either the average
compensation received by the employee during the
three years in which the employee was paid the
most in his or her final five years of
employment or the average compensation received
by the employee during the last 36 months of his
or her employment, whichever is larger,
excluding amounts received under our Profit
Sharing and Bonus Plan. However, due to certain
limitations imposed under the Internal Revenue
Code, benefits payable to an employee under this
Plan are effectively limited in amount to those
benefits that would be payable to an employee
having Average Earnings of $160,000.
Pension Benefit Each of our salaried employees who is eligible
Equalization Plan to participate in our Pension Plan is also
eligible to participate in our Pension Benefit
Equalization Plan. Our Equalization Plan pays
additional benefits to employees whose benefits
under our Pension Plan are limited as a result
of specified limitations under the Internal
Revenue Code. The amount of benefits payable
under our Equalization Plan is designed to
eliminate the effect of these limitations on the
aggregate pension benefits payable to
-18-
<PAGE> 22
the participants but not provide any additional
benefits beyond that amount. These benefits are
generally payable at the times we pay benefits
under our Pension Plan. We have paid benefits
under our Equalization Plan to former employees.
Supplemental Each of our employees who are a part of
Employee management or who are considered "highly
Retirement Plan compensated" and subject to limitations on the
amount of Pension Plan benefits they may receive
under the Internal Revenue Code is also eligible
to participate in our Supplemental Employee
Retirement Plan. Our Supplemental Plan pays
additional benefits to employees whose benefits
under our Pension Plan are limited as a result
of such employee's Average Earnings exceeding
$160,000 or due to the removal of certain Social
Security integration benefits from the Pension
Plan. The amount of benefits payable under our
Supplemental Plan is designed to eliminate the
effect of these limitations on the aggregate
pension benefits payable to the participants but
not provide any additional benefits beyond that
amount. These benefits are generally payable at
the same time as when we pay benefits under our
Pension Plan. We have paid benefits under our
Supplemental Plan to former employees.
The following table sets forth the aggregate amount of annual normal
retirement benefits that would be payable under the Pension Plan, the
Equalization Plan and the Supplemental Plan if an employee retired during
calendar 1999 at the age of 65 with the years of service shown (assuming the
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 $ 6,762 $ 13,525 $ 20,287 $ 26,668
100,000 15,012 30,025 45,037 58,543
150,000 23,262 46,525 69,787 90,418
200,000 31,512 63,025 94,537 122,293
250,000 39,762 79,525 119,287 154,168
300,000 48,012 96,025 144,037 186,043
350,000 56,262 112,525 168,787 217,918
400,000 64,512 129,025 193,537 249,793
</TABLE>
As of September 30, 1999, the credited years of service under these
Plans of our Chief Executive Officer and our other four most highly compensated
officers was:
Frank P. Diassi.................. 3 years
Peter W. De Leeuw................ 2 years
Richard K. Crump................. 13 years
Gary M. Spitz.................... 2 years
David G. Elkins.................. 2 years
-19-
<PAGE> 23
Assuming retirement at age 65 (or after five years of service, if later) and the
continuation of their current levels of base salary until retirement, the total
retirement benefits payable each year to our Chief Executive Officer and our
other four most highly compensated officers under the Equalization Plan and/or
the Supplemental Plan would be:
<TABLE>
<CAPTION>
Gross Payment Net Payment
Under Equalization Reduction for Payments Under Equalization
and Supplemental Plans Under Pension Plan and Supplemental Plans
--------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
Frank P. Diassi $ 28,384 $ 12,854 $ 15,530
Peter W. De Leeuw 40,112 18,926 21,186
Richard K. Crump 75,617 59,235 16,382
Gary M. Spitz 68,628 53,506 15,122
David G. Elkins* 27,966 21,965 6,001
</TABLE>
* Excludes supplemental pension benefits payable to Mr. Elkins under his
Employment Agreement.
CERTAIN TRANSACTIONS
The holders of 6,654,963 shares of our common stock, representing
approximately 52% of our outstanding shares, are parties to a Third Amended and
Restated Voting Agreement dated as of February 1, 1999. Four of our directors,
Messrs. Diassi, Hevrdejs, Nelson and McMinn, are parties to the Voting
Agreement. Other parties to the Voting Agreement include William C. Oehmig,
Susan O. Rheney (as Trustee of the Rheney Living Trust), Koch Capital Services,
Inc., affiliates of Clipper Capital Partners, L.P. who are commonly referred to
collectively as "The Clipper Group", FSI No. 2 Corporation, a wholly owned
subsidiary of Fayez Sarofim & Co., Olympus Growth Fund II, L.P., Olympus
Executive Fund, L.P., Credit Suisse First Boston, Gordon A. Cain and James
Crane. The parties to the Voting Agreement are required to vote any shares of
our common stock owned by them in favor of three nominees to our Board of
Directors, one to be designated by each of Koch Capital, The Clipper Group and
Gordon A. Cain. George J. Damiris is the current designee of Koch Capital, Rolf
H. Towe is the current designee of The Clipper Group and William A. McMinn is
the current designee of Mr. Cain. The rights of each of Koch Capital and The
Clipper Group to designate nominees under the Voting Agreement terminates on the
earlier of August 21, 2006 or the time at which they beneficial own less than 5%
of our outstanding shares, respectively. The right of Mr. Cain to designate a
nominee terminates upon the earlier of (i) December 15, 2008 and (ii) the later
of (a) the expiration of the Standby Purchase Agreement to which he is a party
and (b) the time at which Mr. Cain beneficial owns less than 5% of our
outstanding shares.
The holders of 8,770,831 shares of our common stock, representing
approximately 69% of our outstanding shares, are parties to a Stockholders
Agreement originally dated as of August 21, 1996 and a Tag-Along Agreement dated
as of August 21, 1996. The Stockholders Agreement restricts the transfer of
shares of our common stock held by the parties (with certain exceptions),
including any disposition of a control position, unless such shares are first
offered to be sold to our ESOP, then to us and then to the other parties to the
Stockholders Agreement. The Tag-Along Agreement provides that if any party to
the agreement, either by themselves or together with others, proposes to
transfer a total of 51% or more of our outstanding shares of common stock, that
party must give notice of the proposed transfer to each person that retained
shares of our common stock in our recapitalization conducted in August of 1996,
and each of these stockholders will have the right to have any shares they
retained in that recapitalization included in the transfer on a pro rata basis
and on the same terms and conditions.
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<PAGE> 24
In May of 1999, we engaged Credit Suisse First Boston Corporation and
Donaldson Lufkin & Jenrette Securities Corporation as Joint-Book Running
Managers in connection with our issuance of $295 million in 12-3/8% Senior
Secured Notes due 2006. Credit Suisse First Boston and DLJ also underwrote our
new $155 million Revolving Credit Agreement with The CIT Group/Business Credit,
Inc. which funded on the same day as the 12-3/8% Senior Secured Notes. We paid
Credit Suisse First Boston a total of $5,218,750 under these arrangement in
fiscal 1999. John L. Garcia, one of our directors, was a Managing Director and
Head of the Global Chemical Investment Banking Group of Credit Suisse First
Boston from 1994 until April of 1999.
Since October 1, 1991, we have had ongoing commercial relationships in
the ordinary course of business with certain affiliates of Koch Industries,
Inc., including agreements for the supply of raw materials, sales of
petrochemicals and transportation of natural gas. During the fiscal year ended
September 30, 1999:
o we made product sales to and purchased raw materials from Koch Chemical, an
indirect wholly owned subsidiary of Koch Industries
o we made payments to John Zink Company, an indirect wholly owned subsidiary
of Koch Industries, in consideration for certain contracting and
construction services performed at our facilities in Texas City, Texas
o we made payments to Koch Gateway Pipeline Company for the transportation of
natural gas to the our acrylic fiber plant through a pipeline in which it
is a partner
Each of these relationships represented less than 1% of our revenues, with the
exception that our raw material purchases from Koch Chemical totaled around 3.1%
of our revenues. In addition, in 1998 we filed a lawsuit against John Zink
Company seeking recovery for certain types of damages we sustained in connection
with a release of nickel carbonyl from our methanol unit on July 30, 1997. This
lawsuit has been voluntarily dismissed but, under a tolling agreement between
the parties, may be refiled at any time.
We paid The Sterling Group, Inc. approximately $12,782 in fiscal 1999
in advisory fees and reimbursement of expenses. Two of our directors, Messrs.
Hevrdejs and Nelson, are principals of The Sterling Group, with Mr. Hevrdejs
also serving as the President of The Sterling Group. Frank P. Diassi, our
Chairman of the Board, Peter W. De Leeuw, our President and Chief Executive
Officer, Robert W. Roten, our Vice Chairman of the Board and former President
and Chief Executive Officer, William A. McMinn, one of our directors, Gary M.
Spitz, our Chief Financial Officer, Richard K. Crump, our Vice
President--Strategic Planning, and David G. Elkins, our Vice President, General
Counsel and Secretary, have all previously co-invested with principals of The
Sterling Group in various transactions unrelated to our company.
Under engagement letters dated April 15, 1998 and April 27, 1998, we
engaged Chem Systems, an IBM company, to perform certain consulting services
related to our styrene monomer business. In addition, on August 10, 1998, we
engaged Chem Systems to conduct a site study of our Texas City, Texas facilities
and to benchmark our best practices and organizational structures against top
quartile performers in the industry. Finally, in connection with our refinancing
in July of 1999, we paid Chem Systems amounts owed to them by Donaldson Lufkin &
Jenrette Securities Corporation related to the performance of an appraisal of
some of our assets required for the refinancing. During fiscal 1999, we paid
Chem Systems an aggregate of $421,164 pursuant to these arrangements. Peter
Spitz, who is the father of Gary M. Spitz (our Chief Financial Officer and one
of our Vice Presidents), was the Director of
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<PAGE> 25
Chem Systems until August of 1999. Peter Spitz did not personally perform any
direct services under any of these arrangements.
On April 1, 1998, we entered into a Consulting Agreement with Mr.
Roten, the Vice Chairman of our Board of Directors and our former President and
Chief Executive Officer, pursuant to which we, in exchange for certain
consulting services provided by Mr. Roten, paid Mr. Roten $10,000 per month
(minus any fees or other compensation paid to Mr. Roten in such month for
serving as one of our directors) through March 1999. During fiscal 1999, we paid
Mr. Roten $75,900, $60,000 of which was paid pursuant to the Consulting
Agreement and the remainder of which was paid for serving as a our director and
committee member.
As of December 15, 1998, we entered into separate Standby Purchase
Agreements with each of Gordon A. Cain, Mr. McMinn, James Crane, Mr. Diassi, Mr.
Hevrdejs and Koch Capital Services, Inc. Pursuant to the terms of these
agreements, these parties committed to purchase up to 2,500,000 shares of our
common stock at a price of $6.00 per share, if, as and when we request at any
time prior to December 15, 2001. In order to induce these parties to enter into
the Standby Purchase Agreements, we issued to them warrants to purchase an
aggregate of 300,000 shares of our common stock at an exercise price of $6.00
per share. In addition, under the Standby Purchase Agreements, we agreed to
issue to these parties additional warrants to purchase up to 300,000 additional
shares of our common stock if, as and when they purchase shares of our common
stock under these agreements. Any shares of our common stock purchased under the
Standby Purchase Agreements or on the exercise of the warrants issued under the
Standby Purchase Agreements will be subject to the terms of the Voting
Agreement, the Stockholders Agreement and the Tag-Along Agreement described
above.
-22-
<PAGE> 26
PERFORMANCE GRAPH
The following Stock Performance Graph compares our cumulative total
stockholder return on shares of our 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,
1994 in shares of our common stock, the S&P 500 Index and the S&P Chemicals
Index and that dividends were reinvested.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
9/94 9/95 9/96 9/97 9/98 9/99
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Sterling Chemicals Holdings, Inc.................... 100 61 91 91 52 44
S&P 500............................................. 100 130 156 219 239 306
S&P Chemicals....................................... 100 119 153 200 180 211
</TABLE>
In connection with our recapitalization in August of 1996, our 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. We believe that this delisting, combined with the
contemporaneous significant reductions in the overall number of outstanding
shares and record holders of our common stock, have significantly reduced the
liquidity of the trading market for shares of our common stock.
We cannot give you any assurance as to future trends in the cumulative
total return on shares of our common stock or of the following indices and we do
not make or endorse any predictions as to future stock performance.
-23-
<PAGE> 27
AMOUNT AND NATURE OF SHARES BENEFICIALLY OWNED
The following table sets forth certain information regarding the
ownership of our common stock as of December 6, 1999 by (i) each of our
directors and each person nominated to become one of our directors, (ii) each of
our executive officers named in the Executive Compensation Table, (iii) all
those known by us to be the beneficial owner of more than 5% of our common stock
and (iv) all of our directors and executive officers as a group. Unless
otherwise noted, the mailing address of each such owner is 1200 Smith Street,
Suite 1900, Houston, Texas 77002-4312.
In addition, an aggregate of 611,810 shares of our common stock are
held by the Sterling Chemicals ESOP on behalf of our employees, including
certain of our executive officers, representing approximately 5% of our
outstanding shares of common stock, of which 338,109 shares have been allocated
to employees' accounts to date. These shares are held of record by Merrill Lynch
& Co. Incorporated, as trustee, who disclaims beneficial ownership of such
shares. Merrill Lynch exercises sole power to vote these shares until they are
allocated to the account of one of our employees, who then has sole power to
vote his or her respective ESOP shares.
<TABLE>
<CAPTION>
Percent of
Number of Right to Restricted Outstanding
Name Shares Owned(1) Acquire(2) Stock(3) Total Shares
- --------------------------------------- --------------- ---------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
Frank P. Diassi........................ 699,420 (4) 81,904 0 781,324 6.0%
Peter W. De Leeuw...................... 31,596 25,000 5,000 61,596 *
George J. Damiris(5)................... 1,128,223 54,031 0 1,182,254 9.2%
Allan R. Dragone....................... 55,385 5,000 0 60,385 *
John L. Garcia......................... 34,757 (6) 5,000 0 39,757 *
Frank J. Hevrdejs...................... 915,582 (7) 25,000 0 940,582 7.4%
William A. McMinn...................... 125,500 41,000 0 166,500 1.3%
Hunter Nelson.......................... 60,758 5,000 0 65,758 *
Robert W. Roten........................ 163,297 4,000 0 167,297 1.3%
Rolf H. Towe(8)........................ 2,004,184 61,020 0 2,065,204 16.1%
Richard K. Crump....................... 45,713 19,604 0 65,317 *
David G. Elkins........................ 17,996 30,000 2,500 50,496 *
Gray M. Spitz.......................... 12,996 18,000 2,500 33,496 *
Clipper Capital Associates, Inc.(9).... 2,004,184 59,020 0 2,063,204 16.1%
Koch Industries, Inc.(10).............. 1,128,223 54,031 0 1,182,254 9.2%
Fayez Sarofim & Co.(11)................ 687,548 0 0 687,548 5.4%
Olympus Growth Fund II, L.P.(12)....... 620,383 58,387 0 678,770 5.3%
Olympus Executive Fund, L.P.(12)....... 7,293 633 0 7,926 *
Directors and Officers as a
Group (14 persons).................. 5,316,082 385,908 10,000 5,711,990 43.5%
</TABLE>
- -------------------------
* Less than 1%
(1) Includes shares of our common stock for which the named person:
o has sole voting and investment power or
o has shared voting and investment power with his or her spouse
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<PAGE> 28
Includes shares of our common stock held by Merrill Lynch, as Trustee of
our Savings and Investment Plan or as Trustee of our ESOP and allocated
to the named person's account as follows:
<TABLE>
<CAPTION>
SIP ESOP
------ --------
<S> <C> <C>
Frank P. Diassi................................... 0 1,160
Peter W. De Leeuw................................. 0 496
Robert W. Roten................................... 36,806 664
Richard K. Crump.................................. 7,478 1,160
Gary M. Spitz..................................... 0 496
David G. Elkins................................... 0 496
Directors and Officers as a Group................. 47,578 5,597
</TABLE>
Excludes shares of our common stock that:
o are restricted stock holdings or
o may be acquired through the exercise of stock options within
60 days
Excludes shares of our common stock and currently exercisable warrants to
acquire shares of our common stock held by persons other than the named
person who are parties to the Voting Agreement described in "Certain
Transactions." Each of Messrs. Diassi, Hevrdejs, McMinn and Nelson,
Clipper Capital Associates, Inc., Koch Industries, Inc., Olympus Growth
Fund II, L.P., Olympus Executive Fund, L.P. and Fayez Sarofim & Co. is a
party to the Voting Agreement. Other parties to the Voting Agreement
include William C. Oehmig, who beneficially owns 361,772 shares of our
common stock, The Rheney Living Trust (Susan O. Rheney and Clarke Rheney,
Trustees), which beneficially owns 48,307 shares of our common stock, CS
First Boston Merchant Investments 1995/96, L.P., which beneficially owns
75,900 shares of our common stock, and Von D. Oehmig, who beneficially
owns 2,083 shares of our common stock. In addition, Gordon A. Cain, who
beneficially owns currently exercisable warrants to acquire 160,000
shares of our common stock, and James Crane, who beneficially owns
currently exercisable warrants to acquire 30,000 shares of our common
stock, are parties to the Voting Agreement. All of 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 and, as a
result, may be deemed to have beneficial ownership of all of the shares
of our common stock subject to the Voting Agreement. All shares of our
common stock owned by the parties to the Voting Agreement are subject to
the Voting Agreement, irrespective of whether such shares are currently
owned or subsequently acquired, through purchase, the exercise of
warrants or otherwise. The Voting Agreement expires at the time described
in "Certain Transactions." Currently, an aggregate of 6,654,963 shares of
our common stock, representing approximately 52% of our outstanding
shares of common stock, are subject to the Voting Agreement. Each of the
named persons expressly disclaims membership in such group and beneficial
ownership of any shares of our common stock or warrants to acquire shares
of our common stock held by the other parties to the Voting Agreement.
(2) Shares of our common stock that can be acquired through the exercise of
warrants or stock options within 60 days.
(3) Shares of our common stock subject to a vesting schedule, forfeiture risk
or other similar restrictions.
(4) Includes (i) 20,000 shares of our common stock held as Trustee of the
Gabrielle Diassi Trust, (ii) 40,000 shares of our common stock held as
Trustee of the Diassi Children's Trust, (iii) 10,000 shares of our common
stock held as Trustee of the Brianna Diassi Trust, (iv) 10,000 shares of
our common stock held as Trustee of the Nicholas Diassi Trust and (v)
10,000 shares of our common stock held by Mr. Diassi's wife. Mr. Diassi
disclaims beneficial ownership of all of these shares.
(5) Represents shares of our common stock and warrants and options to acquire
shares of our common stock held by Koch Capital Services, Inc., a wholly
owned subsidiary of Koch Industries, Inc., with respect to which Mr.
Damiris, as Vice President of Koch Ventures, Inc., may be deemed to have
beneficial ownership. Mr. Damiris disclaims beneficial ownership of these
shares, warrants and options.
(6) Represents shares of our common stock 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. Mr. Garcia may be deemed to have beneficial
ownership of such shares.
(7) Includes 1,990 shares of our common stock owned by Mr. Hevrdejs' wife. Mr.
Hevrdejs disclaims beneficial ownership of such shares.
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<PAGE> 29
(8) Represents shares of our common stock and includes warrants to acquires
shares of our common stock held by The Clipper Group (see Note 9) 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. Mr. Towe disclaims beneficial
ownership of such shares and warrants.
(9) Clipper Capital Associates, Inc. ("Clipper") may be deemed to be the
beneficial owner of such shares of our 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 our common
stock and indirectly beneficially own 201,776 shares of our 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 our common stock. Clipper II may be deemed to
directly beneficially own 516,031 shares of our 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 our common
stock. Clipper IV may be deemed to directly beneficially own 296,328
shares of our 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 acquire shares of our 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.
(10) Represents shares of our common stock held by Koch Capital Services, Inc.,
a wholly owned subsidiary of Koch Industries, Inc. which may be deemed to
be the beneficial owner of such shares. The mailing address of Koch
Capital Services, Inc. and Koch Industries, Inc. is 4111 East 37th Street
North, Wichita, Kansas 67220.
(11) Represents shares of our common stock directly beneficially owned by FSI
No. 2 Corporation, a wholly owned subsidiary of Fayez Sarofim & Co., which
may be deemed to be the beneficial owner of such shares. The majority
owner of Fayez Sarofim & Co. is Fayez Sarofim. The mailing address of FSI
No. 2 Corporation, Fayez Sarofim & Co. and Fayez Sarofim is Two Houston
Center, Suite 2907, Houston, Texas 77010.
(12) Olympus Growth Fund II, L.P. and Olympus Executive Fund, L.P. are Delaware
limited partnerships principally engaged in making investments. OGP II,
L.P., a Delaware limited partnership, is the sole general partner of
Olympus Growth Fund II, L.P. and OEF, L.P., a Delaware limited
partnership, is the sole general partner of Olympus Executive Fund L.P.
Each of OGP II, L.P. and OEF, L.P. has the same three general partners,
being LJM, L.L.C., RSM, L.L.C. and Conroy, L.L.C., each of which is a
Delaware limited liability company. The majority owners of LJM, L.L.C.,
RSM, L.L.C. and Conroy, L.L.C. are Louis J. Mischianti, Robert S. Morris
and James A. Conroy, respectively. The mailing address of each of these
entities and individuals is Metro Center, One Station Place, Stamford,
Connecticut 06902.
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<PAGE> 30
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
officers, directors and anyone who beneficially owns at least 10% of our common
stock to file reports regarding their ownership of our common stock and any
changes in that ownership with the SEC. We believe that during fiscal 1999, our
officers, directors and 10% stockholders complied with all Section 16(a) filing
requirements. In making this statement we have relied on our review of copies of
these reports furnished to us and written representations from our officers and
directors.
STOCKHOLDER PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING
In order for a stockholder proposal to be included in our proxy
statement for our annual meeting to be held in 2001, the proposal must be
submitted before August 19, 2000 to the following address: Sterling Chemicals
Holdings, Inc., 1200 Smith Street, Suite 1900, Houston, Texas 77002; Attention:
Corporate Secretary. In order for a stockholder proposal that is not included in
that proxy statement to be brought before our annual meeting to be held in 2001,
the proposal must be submitted after August 29, 2000 but before September 28,
2000 to the same address.
* * *
Whether or not you plan on attending the meeting, please complete, date
and sign the enclosed proxy and return it in the enclosed envelope. No postage
is required for mailing in the United States.
By Order of the Board of Directors
/s/ DAVID G. ELKINS
DAVID G. ELKINS
Corporate Secretary
Houston, Texas
December 21, 1999
-27-
<PAGE> 31
STERLING CHEMICALS HOLDINGS, INC.
For The Annual Meeting To Be Held January 26, 2000
The undersigned hereby constitutes and appoints Frank P. Diassi and Peter W.
De Leeuw, 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 Rooms Dogwood A and B of the Hyatt Regency Hotel located at 1200
Louisiana Street, Houston, Texas at 9:00 a.m., Houston time, on Wednesday,
January 26, 2000, 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, 1999 is hereby acknowledged.
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 "FOR" 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
(CONTINUED AND TO BE SIGNED AND DATED ON OTHER SIDE)
- --------------------------------------------------------------------------------
<PAGE> 32
STERLING CHEMICALS HOLDINGS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
[ ]
The undersigned hereby revokes any proxies heretofore given and directs said
attorneys to act or vote as follows:
1. Election of Directors
Director 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,
Rolf H. Towe and William A. McMinn.
Nominee Exceptions:
-------------------------------------
FOR WITHHELD FOR ALL
ALL FOR ALL EXCEPT
[ ] [ ] [ ]
2. Proposal to ratify the appointment of Deloitte &
Touche LLP as independent accountants of the
Company for the fiscal year ending September 30, 2000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
SIGN HERE EXACTLY AS NAME(S) APPEAR(S) ON ADDRESS
LABEL
Date
-----------------------------------------------------
Signature(s)
-------------------------------------------------
Date
-----------------------------------------------------
Signature(s)
---------------------------------------------
NOTE: When shares are held by joints 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.
- -------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
