<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 /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
PIONEER COMPANIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
1
<PAGE> 2
PIONEER COMPANIES, INC.
700 LOUISIANA STREET, SUITE 4200
HOUSTON, TEXAS 77002
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 25, 1996
--------------------
To the Stockholders of
PIONEER COMPANIES, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Pioneer Companies, Inc., a Delaware corporation formerly known as GEV
Corporation (the "Company"), will be held at the Stamford Marriott Hotel,
Two Stamford Forum, Stamford, Connecticut on Tuesday, June 25, 1996, at
9:00 a.m. for the following purposes:
(1) To elect two directors to serve until their successors are
duly elected and qualified;
(2) To approve the Key Executive Stock Grant Plan;
(3) To ratify the appointment of Deloitte & Touche LLP as
independent certified public accountants for the Company for the fiscal year
ending December 31, 1996; and
(4) To consider and act upon any other matters which may properly
come before the Annual Meeting or any adjournment thereof.
In accordance with the provisions of the Company's By-Laws, the Board
of Directors of the Company has fixed the close of business on May 20, 1996 as
the date for determining stockholders of record entitled to receive notice of,
and to vote at, the Annual Meeting.
As of May 20, 1996, Mr. William R. Berkley, Chairman of the Board of
Directors of the Company, owned approximately 60.9% of the Company's Class A
Common Stock (representing approximately 60.4% of the voting power of the
Company's outstanding capital stock) and thus has sufficient voting power to
determine the results of he matters to be considered at the Annual Meeting.
Mr. Berkley has advised the Company that he will vote FOR each of the proposals
to be considered at the Annual Meeting.
Your attention is directed to the accompanying Proxy Statement.
You are cordially invited to attend the Annual Meeting. If you do not
expect to attend the Annual Meeting in person, please vote, date and return the
enclosed proxy as promptly as possible in the enclosed reply envelope.
By Order of the Board of Directors,
Kent R. Stephenson
Vice President, General Counsel and
Secretary
Dated: May __, 1996
2
<PAGE> 3
PIONEER COMPANIES, INC.
PROXY STATEMENT
- --------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
JUNE 25, 1996
- --------------------------------------------------------------------------------
SOLICITATION AND REVOCATION OF PROXIES
The enclosed proxy is solicited by the Board of Directors of Pioneer
Companies, Inc. (formerly known as GEV Corporation and referred to herein as
the "Company") for use at the Annual Meeting of Stockholders to be held at the
Stamford Marriott Hotel, Two Stamford Forum, Stamford, Connecticut on Tuesday,
June 25, 1996, at 9:00 a.m., and at any adjournment thereof. The giving of a
proxy does not preclude a stockholder from voting in person at the Annual
Meeting. The proxy is revocable before its exercise by delivering either
written notice of such revocation or a later dated proxy to the Secretary of
the Company at its executive office at any time prior to voting of the shares
represented by the earlier proxy. In addition, stockholders attending the
Annual Meeting may revoke their proxies by voting at the Annual Meeting. If a
returned proxy does not specify a vote for, and does not withhold authority to
vote for, a nominee for election as a director, the proxy will be voted for such
nominee. If a returned proxy does not specify a vote for or against any of the
other proposals, it will be voted in favor thereof. The expense of preparing,
printing and mailing this Proxy Statement will be paid by the Company. In
addition to the use of the mails, proxies may be solicited personally or by
telephone by regular employees of the Company without additional compensation.
The Company will reimburse banks, brokers and other custodians, nominees and
fiduciaries for their costs in sending the proxy materials to the beneficial
owners of the Company's Class A Common Stock, par value $.01 per share (the
"Class A Common Stock"), and the Class B Common Stock, par value $.01 per share
(the "Class B Common Stock" and, together with the Class A Common Stock, the
"Common Stock"). The Company's Annual Report for the fiscal year ended
December 31, 1995 is being mailed simultaneously with this Proxy Statement.
The approximate mailing date of the Proxy Statement and the proxy is May ---,
1996.
ACQUISITION OF PIONEER AMERICAS, INC.
On April 20, 1995, pursuant to a Stock Purchase Agreement (the
"Acquisition Agreement") between the Company and one of its subsidiaries and
the holders of the outstanding common stock and other common equity interests
of Pioneer Americas, Inc. (the "Sellers"), the Company acquired all of such
stock and interests of Pioneer Americas, Inc. ("Pioneer Americas") for a
purchase price equal to the sum of approximately (i) $102 million, paid in
cash, (ii) $11.5 million aggregate principal amount of subordinated promissory
notes of the Company (the "Seller Notes") and (iii) certain amounts payable
after the closing based upon earnings or proceeds attributable to certain of
the Company's direct and indirect real estate holdings which are not necessary
for the Company's chlor-alkali business. In addition, as further consideration
for such purchase (the "Acquisition"), the Company paid approximately $51.7
million to retire all outstanding indebtedness of Pioneer Americas and $5
million to redeem the outstanding preferred stock of Pioneer Americas.
The financing necessary to effect the Acquisition included (i) the
issuance by a subsidiary of the Company of $135 million aggregate principal
amount of senior notes, (ii) the issuance of the Seller Notes, (iii) the
issuance of 2,840,909 shares of Class A Common Stock to Interlaken Investment
Partners, L.P. (the "Interlaken Partnership") for a cash purchase price of $15
million, (iv) the issuance of 1,136,363 shares of Class A Common Stock to
certain directors, executives and other employees of Pioneer Americas for an
aggregate cash purchase price of $6 million, and (v) a $30 million bank credit
facility extended to subsidiaries of the Company. Following the Acquisition
the Company's name was changed to Pioneer Companies, Inc.
3
<PAGE> 4
BANKRUPTCY FILINGS
On February 11, 1991, the Company and each of what were then its five
operating subsidiaries filed voluntary petitions seeking reorganization under
chapter 11 of the United States Bankruptcy Code. On July 9, 1992, the Second
Amended Joint Plan of Reorganization filed by the Company and its dairy
subsidiaries (the "Reorganization Plan") became fully effective pursuant to a
confirmation order issued by the U.S. Bankruptcy Court. The Company's
operating subsidiaries subsequently ceased operations and disposed of
substantially all of their assets.
OUTSTANDING STOCK AND VOTING RIGHTS
Only stockholders of record at the close of business on May 20, 1996 are
entitled to notice of and to vote at the Annual Meeting. The number of shares
of voting stock of the Company outstanding on that date and entitled to vote
was (i) 7,984,621 shares of Class A Common Stock and (ii) 576,419 shares of
Class B Common Stock. Each share of Class A Common Stock is entitled to one
vote and each share of Class B Common Stock is entitled to one-tenth of one
vote. Class A Common Stock and Class B Common Stock will vote together as a
single class on all matters to be acted on at the Annual Meeting. Class B
Common Stock is fully convertible at any time into Class A Common Stock on a
share-for-share basis. Information as to persons beneficially owning 5% or
more of the Common Stock may be found under the heading "Security Ownership of
Certain Beneficial Owners and Management" herein.
Unless otherwise directed in the proxy, the persons named therein will
vote "FOR" the election of the director nominees listed below and "FOR" each of
the other proposals to be considered at the Annual Meeting.
All matters to be acted on at the Annual Meeting require the affirmative
vote of a majority of the voting power of the shares present in person or by
proxy at the Annual Meeting to constitute the action of the stockholders. In
accordance with Delaware law, abstentions will, while broker nonvotes will not,
be treated as present for purposes of the preceding sentences. A broker
nonvote is a proxy submitted by a broker in which the broker fails to vote on
behalf of a client on a particular matter for lack of instruction when such
instruction is required.
PROPOSAL 1: ELECTION OF DIRECTORS
As permitted by Delaware law, the Board of Directors of the Company is
divided into three classes, the classes being divided as equally as possible
and each class having a term of three years. Each year the term of office of
one class expires. This year the term of a class consisting of three directors
expires, and it is the intention of the Board of Directors that the shares
represented by proxy, unless otherwise indicated thereon, will be voted for the
reelection of Philip J. Ablove and Andrew M. Bursky as directors to hold office
for a term of three years until the Annual Meeting of Stockholders in 1999 and
until their successors are duly chosen. George H. Conrades, whose term would
also have expired at the Annual Meeting, resigned as a member of the Board of
Directors on May 9, 1996, and a successor has not yet been selected. That seat
on the Board of Directors will remain vacant until the Board of Directors,
acting in accordance with the By-Laws of the Company, elects a new director.
The persons designated as proxies reserve full discretion to cast votes
for other persons in the event the nominees, Messrs. Ablove and Bursky, are
unable to serve. However, the Board of Directors has no reason to believe that
the nominees will be unable to serve if elected. The proxies cannot be voted
for a greater number of persons than the two named nominees.
The following table sets forth information regarding the nominees and the
remaining directors who will continue in office after the Annual Meeting.
4
<PAGE> 5
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR OF
THE COMPANY BUSINESS EXPERIENCE
CONTINUOUSLY DURING PAST 5 YEARS,
NAME SINCE AGE AND OTHER INFORMATION
------------------------------ -------------- ------------------------------------------------------------------------------
<S> <C> <C>
Nominees to Serve in
Office Until 1999
Philip J. Ablove ............. 1991 Vice President and Chief Financial Officer of the Company since March 1996.
Mr. Ablove was a management consultant to the Company from October 1995 to
March 1996. He was a consultant and officer and director specializing in
financially distressed companies from 1983 to 1995, and he served as President
and Chief Executive Officer of the Company from October 1990 to July 1992,
and as a consultant to the Company from October 1990 to JanuarY 1991. Mr.
Ablove is 56 years of age.
Andrew M. Bursky (1)(2)....... 1994 Managing Director of Interlaken Capital, Inc., a private investment and
consulting firm, since May 1980. Mr. Bursky has been Chairman of the Board of
Strategic Distribution, Inc., a distributor of maintenance, repair and
operations products to industry, since July 1988, and he is a director of Fine
Host Corporation, a provider of contract food service management. Mr. Bursky
is 39 years of age.
Directors to Continue in
Office Until 1997
William R. Berkley (1)(2)..... 1988 Chairman of the Board of the Company since 1987. He also serves as Chairman
of the Board of several companies which he controls or founded. These include
W.R. Berkley Corporation, Fine Host Corporation and Interlaken Capital, Inc.
Mr. Berkley is also a director of Strategic Distribution, Inc. Mr. Berkley is
50 years of age.
Thomas H. Schnitzius......... 1995 Mr. Schnitzius has been a principal in the Houston investment banking firm of
Schnitzius & Vaughan since its formation in October 1987. Prior to 1987, he
was a principal in the investment banking firm of Schnitzius & Co., Ltd. Mr.
Schnitzius was a director of Pioneer Americas from April 1993 to April 1995.
Mr. Schnitzius is 53 years of age.
</TABLE>
5
<PAGE> 6
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR OF
THE COMPANY BUSINESS EXPERIENCE
CONTINUOUSLY DURING PAST 5 YEARS,
NAME SINCE AGE AND OTHER INFORMATION
-------------------------------- -------------- -----------------------------------------------------------------------------
<S> <C> <C>
Directors to Continue in
Office Until 1998
Donald J. Donahue (2)(3)..... 1988 Private investor since February 1996. Mr. Donahue has served as Vice Chairman
of the Board of Directors of the Company since May 1996. Mr. Donahue served as
Chairman of the Board of Magma Copper Company from 1987 to 1996 and as Chairman
of Nacolah Holding Co., a life and health insurance company, from 1990 to 1993.
From 1984 to 1985, Mr. Donahue served as Chairman and was a director of KMI
Continental Group, Inc., a natural resource conglomerate. From 1975 to 1984, he
was Vice Chairman and a director of Continental Group, Inc. Mr. Donahue is a
director of Chase Brass Industries Inc. He is also a director of Counselors
Tandem Securities Fund, Inc. and fifteen other registered investment companies
managed by EMW Warburg Pincus Counselors, Inc. Mr. Donahue is 71 years of age.
Richard C. Kellogg, Jr. ....... 1995 President of the Company since April 1995. Mr. Kellogg was a co-founder of
Pioneer Americas and has served as Chairman of the Board and as a director of
Pioneer Americas since its inception in 1988. Mr. Kellogg is 44 years of age.
Jack H. Nusbaum (1)(3)... 1988 Chairman of the New York law firm of Willkie Farr & Gallagher, where he has
been a partner for more than the past twenty-five years. Mr. Nusbaum is a
director of W.R. Berkley Corporation, The Topps Company, Inc. and Prime
Hospitality Corp. Mr. Nusbaum is 55 years of age.
</TABLE>
- ----------------------
(1) Member of Executive Committee.
(2) Member of Compensation and Stock Option Committee.
(3) Member of Audit Committee.
IT IS THE INTENTION OF THE PERSONS NAMED ON THE ENCLOSED FORM OF PROXY TO VOTE
"FOR" THE ELECTION OF THE NOMINEES FOR DIRECTOR NAMED ABOVE.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company met four times during 1995. Each of
the persons serving as a director in 1995 attended at least 75% of the total
number of meetings of the Board and meetings of the Committees of which the
director was a member during 1995. The Board has three standing committees:
the Executive Committee, the Compensation and Stock Option Committee and the
Audit Committee. The Board of Directors does not have a Nominating Committee
and the usual functions of such a committee are performed by the entire Board
of Directors.
6
<PAGE> 7
The Executive Committee, composed of Messrs. Berkley, Bursky and Nusbaum,
is authorized to act on behalf of the Board during periods between Board
meetings. The Committee did not meet during 1995.
The Compensation and Stock Option Committee establishes the level of
compensation to be paid to the officers of the Company and administers the
Company's 1995 Stock Incentive Plan. It will also administer the 1996 Key
Executive Stock Grant Plan, if approved by stockholders. The Committee did not
meet during 1995. The Committee is composed of Messrs. Berkley, Bursky and
Donahue.
The Audit Committee, which was composed of Messrs. Ablove and Donahue
during 1995, advises the Board as to the selection of the Company's independent
public accountants, monitors their performance, reviews all reports submitted
by them and consults with them with regard to the adequacy of internal
controls. The Committee met twice during 1995, and each of Messrs. Ablove and
Donahue attended both meetings. The Committee is currently composed of Messrs.
Donahue and Nusbaum.
The Board of Directors and each committee established by the Board also
take action by means of unanimous written consent from time to time. As a
result, the number of times the Board or any committee meets during any period
of time is not necessarily an accurate measure of the level of activity.
BANKRUPTCY ACTIONS
Mr. Bursky was an executive officer of Idle Wild Farm, Inc., a privately
owned manufacturer of frozen food. In October 1993, while he was an executive
officer, Idle Wild filed a chapter 11 petition for reorganization under federal
bankruptcy law. Blue Lustre Products, Inc., a privately-owned company engaged
in the sale and leasing of carpet cleaning equipment and other carpet cleaning
products, which Mr. Bursky also serves as an executive officer, filed a chapter
11 petition for reorganization under federal bankruptcy law in October 1995.
From 1983 to 1993, Mr. Kellogg served as vice president of Trans Marketing
Houston, Inc. ("TMHI"), an international trading company that he co-founded
which dealt in refined petroleum products and chemicals. TMHI filed for
bankruptcy in April 1993 and a liquidation plan was approved by the bankruptcy
court in December 1993.
COMPENSATION OF DIRECTORS
In 1992, the Board of Directors established a policy under which each
director who is not also an employee of the Company receives an annual retainer
and a fee for each meeting attended. Pursuant to the Company's 1993
Non-Employee Director Stock Plan, the Company granted each non-employee
director who served throughout the year 3,320 shares of Class A Common Stock in
payment of the 1995 annual retainer of $22,000, and each director was paid
$2,000 for each Board of Directors meeting attended in 1995. Mr. Schnitzius
received 2,328 shares in payment of the retainer as a result of his service
during a portion of the year.
7
<PAGE> 8
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the shares of
Class A Common Stock and Class B Common Stock owned on May 13, 1996 by each
person who is known by the Company to be the beneficial owner of more than 5
percent of either class of Common Stock as of such date. Except as otherwise
indicated, all shares of Common Stock shown in the table are held with sole
voting and investment power.
<TABLE>
<CAPTION>
SHARES PERCENT
NAME AND ADDRESS OF BENEFICIALLY OF
TITLE OF CLASS BENEFICIAL OWNER OWNED CLASS
------------------ ------------------------------------------------------------ ------------- ---------
<S> <C> <C> <C>
Class A William R. Berkley (1) 4,859,818 60.9
Common Stock 165 Mason Street
Greenwich, CT 06830
Richard C. Kellogg, Jr.(2) 481,325 6.0
700 Louisiana Street, Suite 4200
Houston, Texas 77002
Frans G.J. Speets(2) 481,325 6.0
1954 Clover Court
Pleasanton, California 94566
Class B Chemical Bank (3) 576,419 100.0
Common Stock Special Loan Group
270 Park Avenue
48th Floor
New York, NY 10017
</TABLE>
- -----------------
(1) Includes 2,840,909 shares held by Interlaken Investment Partners,
L.P. Mr. Berkley is the sole owner of a company that indirectly
controls Interlaken Investment Partners, L.P.; as such, he may be
deemed to be the beneficial owner of shares of Class A Common Stock
held by such entity. Mr. Berkley's holdings (including the shares
owned by Interlaken Investment Partners, L.P.) represent 60.4% of the
voting power of the Company's outstanding capital stock as of May 20,
1996.
(2) The holdings of each of Messrs. Kellogg and Speets represents 6.0% of
the voting power of the Company's outstanding capital stock as of May
20, 1996.
(3) Information obtained from a Schedule 13G, dated July 21, 1992, filed
with the Securities and Exchange Commission by Chemical Bank
("Chemical"). The filing reported that Chemical had acquired 578,419
shares of Class B Common Stock of which it was the beneficial owner
with sole voting and dispositive power. The holdings of Chemical
represent 0.7% of the voting power of the outstanding Common Stock as
of May 20, 1996, and 7.3% of the number of shares of Common Stock
outstanding as of May 20, 1996.
8
<PAGE> 9
The following table sets forth information regarding beneficial
ownership of the Company's Class A Common Stock as of May 13, 1996 by each of
the Company's directors and the nominees for director named herein, each of the
executive officers of the Company named in the Summary Compensation Table under
the caption "Executive Compensation", and all directors and executive officers
of the Company as a group. Percentages of Class A Common Stock are based on
the 7,984,621 shares outstanding as of May 20, 1996.
<TABLE>
<CAPTION>
PERCENT
NAME OF SHARES OF CLASS
TITLE OF CLASS BENEFICIAL OWNER BENEFICIALLY OWNED
- -------------------- -------------------------------------- ---------------- -----------
<S> <C> <C> <C>
Class A Philip J. Ablove...................... 10,486 *
Common Stock William R. Berkley.................... 4,859,818 60.9
Andrew M. Bursky...................... 175,695 2.2
Donald J. Donahue**................... 187,486 2.3
Richard C. Kellogg, Jr................ 481,325 6.0
Jack H. Nusbaum....................... 10,236 *
Thomas H. Schnitzius.................. 2,328 *
Paul J. Kienholz...................... 25,000 *
James E. Glattly...................... 50,000 *
Verrill M. Norwood.................... 12,500 *
Kent R. Stephenson.................... 2,500 *
All directors and executive officers
as a group (15 persons).......... 5,932,027 74.3
</TABLE>
- ---------------
* less than 1%
** 75,000 of such shares are held by the Donahue Family Partnership,
which Mr. Donahue serves as the general partner.
The Company knows of no current arrangements, including any pledge by
any persons of securities of the Company, the operation of which may at a
subsequent date result in a change of control of the Company.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning
compensation for service to the Company and its subsidiaries paid (i) during
the last three fiscal years to William R. Berkley, Chairman of the Board of the
Company, who received no compensation for acting in a capacity similar to that
of a chief executive officer during the period ending on April 20, 1995, (ii)
during the period from April 21 to December 31, 1995 to Richard C. Kellogg, Jr.,
President of the Company, who acted in a capacity similar to that of a chief
executive officer during such period, and (iii) during the period from April
21, 1995 to December 31, 1995 to the Company's other four most highly
compensated executive officers serving as such at the end of 1995:
9
<PAGE> 10
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM
-------------------------------------------- COMPENSATION ALL OTHER
OTHER ANNUAL AWARDS COMPEN-
NAME AND PRINCIPAL POSITION YEAR(1) SALARY($) BONUS($) COMPENSATION(2)($) OPTIONS(3)(#) SATION($)
- ----------------------------- ------- ---------- --------- ------------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
William R. Berkley 1995 8,000(4) 0 22,000 0 0
Chairman of the Board 1994 0 0 6,000 0 0
1993 2,000(4) 0 4,000 0 0
Richard C. Kellogg, Jr. 1995 206,731 135,900 0 123,076 4,590(5)
President
Paul J. Kienholz 1995 173,243 124,125 0 52,500 539,092(6)
President, Pioneer Chlor
Alkali Co., Inc. ("PCAC")
James C. Glattly 1995 114,327 69,675 0 50,000 2,453(5)
Vice President,
Sales & Marketing, PCAC
Verrill M. Norwood 1995 104,423 58,793 0 25,000 320,893(7)
Vice President,
Environmental, Health
& Safety, PCAC
Kent R. Stephenson 1995 96,975 58,343 0 10,000 3,465(5)
Vice President and
General Counsel
</TABLE>
- ---------------------
(1) Each of Messrs. Kellogg, Kienholz, Norwood, Glattly and Stephenson were
officers of Pioneer Americas on April 20, 1995, when that company was
acquired by the Company. After the acquisition, each served as an
executive officer of the Company (including service as an executive
officer of one or more subsidiaries of the Company), and information is
provided for each only with respect to services provided to the Company
and its subsidiaries during the portion of the year beginning on April 21.
(2) Mr. Berkley is not an officer of the Company. Pursuant to the 1993
Non-Employee Director Stock Plan, he received grants of 3,320 shares of
Class A Common Stock, valued at $22,000, in payment of his 1995 annual
director's retainer, 4,000 shares of Class A Common Stock, valued at
$6,000, in payment of his 1994 annual director's retainer and director's
meeting fees, and 2,667 shares of Class A Common Stock, valued at $4,000,
in payment of his 1993 annual director's retainer.
(3) Expressed in terms of the numbers of shares of the Company's Class A
Common Stock underlying options granted during the year. All such options
were granted under the Company's 1995 Stock Incentive Plan.
(4) Represents director's meeting fees.
(5) Represents amounts contributed to match a portion of the employee's
contributions under a 401(k) plan.
(6) Includes (a) $533,206, representing payment upon the termination of a
salary continuation agreement in effect since 1988, together with payment
for the resulting tax liability, and (b) $5,886, which was contributed to
match a portion of contributions under a 401(k) plan.
(7) Includes (a) $318,575, representing payment upon the termination of a
salary continuation agreement in effect since 1993, together with payment
for the resulting tax liability, and (b) $2,318, which was contributed to
match a portion of contributions under a 401(k) plan.
10
<PAGE> 11
PENSION PLAN
PCAC's pension plan provides defined benefit retirement coverage to the
executive officers of the Company and substantially all of PCAC's employees. At
the normal retirement age of 65, participants receive benefits based on their
credited service and their covered compensation for the average of their
highest five complete consecutive plan years out of their last ten complete
consecutive plan years. Covered compensation under the plan includes base pay,
overtime and shift differential pay and certain annual performance and sales
incentive programs and commissions, but excludes all other items of
compensation. However, the Internal Revenue Code limits remuneration which may
be taken into account (subject to certain grandfather rules) under the pension
plan for 1995 to $150,000. The benefits in the table set forth below are
computed as a straight life annuity at age 65. Benefits are not subject to any
deduction for social security since the basic benefit formula incorporates the
average social security breakpoint in calculating the benefit. Pioneer's other
operating subsidiaries do not have similar plans.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE(1)
-----------------------------------------------------------
REMUNERATION 15 20 25 30 35
------------ --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
$125,000 . . . . . . . . . . . . . . . . . $ 27,153 $ 36,204 $ 45,255 $ 54,306 $ 63,357
150,000 . . . . . . . . . . . . . . . . . 32,778 43,704 54,630 65,556 76,482
175,000 . . . . . . . . . . . . . . . . . 32,778 43,704 54,630 65,556 76,482
200,000 . . . . . . . . . . . . . . . . . 32,778 43,704 54,630 65,556 76,482
225,000 . . . . . . . . . . . . . . . . . 32,778 43,704 54,630 65,556 76,482
250,000 . . . . . . . . . . . . . . . . . 32,778 43,704 54,630 65,556 76,482
300,000 . . . . . . . . . . . . . . . . . 32,778 43,704 54,630 65,556 76,482
400,000 . . . . . . . . . . . . . . . . . 32,778 43,704 54,630 65,556 76,482
450,000 . . . . . . . . . . . . . . . . . 32,778 43,704 54,630 65,556 76,482
500,000 . . . . . . . . . . . . . . . . . 32,778 43,704 54,630 65,556 76,482
</TABLE>
- --------------------
(1) The estimated years of credited service for each of the named executive
officers of the Company as of December 31, 1995 were: Mr. Kellogg -- 4
years; Mr. Kienholz -- 7 years; Mr. Glattly -- 7 years; Mr. Norwood -- 4
years; and Mr. Stephenson -- 2 years.
Messrs. Kienholz and Norwood also participate in a supplemental retirement
plan which was established by the Company in 1995 in order to fund amounts due
to such individuals under agreements reached when they were hired in 1988 and
1993, respectively. Under such plan, Mr. Kienholz began receiving supplemental
retirement payments in the amount of $1,703 per month when he reached age 65 in
December 1995, and Mr. Norwood will receive supplemental retirement payments in
the amount of $1,428 per month when he reaches age 65 in July 1996.
11
<PAGE> 12
OPTION GRANTS IN 1995
The following table provides information on option grants in 1995 to the
named executive officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------ POTENTIAL REALIZABLE
PERCENT VALUE AT ASSUMED
NUMBER OF OF TOTAL ANNUAL RATES OF STOCK
SHARES OPTIONS EXERCISE PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM (2)
OPTIONS EMPLOYEES PRICE EXPIRATION --------------------------
NAME (1) GRANTED (#) IN 1995 (PER SHARE) DATE 5%($) 10%($)
------------------------ ------------ --------- ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard C. Kellogg, Jr. 123,076 25.5% $6.50 4/20/05 $503,110 $1,274,981
Paul J. Kienholz 52,500 10.9 6.50 4/20/05 214,609 543,863
James E. Glattly 50,000 10.3 6.50 4/20/05 204,390 517,965
Verrill M. Norwood 25,000 5.2 6.50 4/20/05 102,195 258,983
Kent R. Stephenson 10,000 2.1 6.50 4/20/05 40,878 103,593
</TABLE>
(1) Options to the named individuals were granted under the Company's 1995
Stock Incentive Plan at fair market value on the date of grant. The
options granted to Mr. Kellogg are first exercisable in 15,384-share
increments on April 20 in each of the years 1998 through 2005. The
options granted to Mr. Kienholz are first exercisable in 15,384-share
increments on April 20 in the years 1998 through 2000, with an additional
6,348 shares first exercisable on April 20, 2001. The options granted to
Mr. Glattly are first exercisable in 15,384-share increments on April 20
in the years 1998 through 2,000, with an additional 3,848 shares
exercisable on April 20, 2001. Of the options granted to Mr. Norwood,
15,384 are first exercisable on April 20, 1998, and the remaining 9,616
are first exercisable on April 20, 1999. All of the options granted to
Mr. Stephenson are exercisable on and after April 20, 1998.
(2) These amounts represent assumed rates of appreciation in market value from
the date of grant until the end of the option term, at the rates set by
the Securities and Exchange Commission, and therefore are not intended to
forecast possible future appreciation, if any, in the Company's stock
price. The Company did not use an alternative formula for a grant date
valuation, as it is not aware of any formula which will determine with
reasonable accuracy a present value based on future unknown or volatile
factors.
AGGREGATED 1995 OPTION EXERCISES
AND YEAR-END OPTION VALUES
The following table shows with respect to the named executive officers the
number of shares covered by both exercisable and non-exercisable stock options
as of December 31, 1995. Also reported are the values for "in-the-money"
options which represent the positive spread between the exercise price of any
such existing stock options and the year- end price of the Class A Common
Stock. No shares of Class A Common Stock were issued during 1995 to any
individual as the result of the exercise of stock options.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISABLE
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT DECEMBER 31, 1995 (#) DECEMBER 31, 1995 ($) (2)
----------------------------------- --------------------------------
NAME (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---------------------- ------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
Richard C. Kellogg, Jr. -0- 123,076 -0- $30,769
Paul J. Kienholz -0- 52,500 -0- 13,125
James E. Glattly -0- 50,000 -0- 12,500
Verrill M. Norwood -0- 25,000 -0- 6,250
Kent R. Stephenson -0- 10,000 -0- 2,500
</TABLE>
(1) The closing price of the Class A Common Stock on December 29, 1995, the
last trading day of the Company's fiscal year, was $6.75 per share.
12
<PAGE> 13
EMPLOYMENT AGREEMENTS AND SEVERANCE AND CHANGE-IN-CONTROL ARRANGEMENTS
On April 20, 1995, the Company entered into a five-year employment
agreement with Richard M. Kellogg, Jr. pursuant to which Mr. Kellogg serves as
President of the Company. The agreement provides for an annual salary of at
least $300,000.
On April 20, 1995, PCAC extended its existing employment agreement with
Mr. Kienholz, pursuant to which Mr. Kienholz serves as President of PCAC. The
agreement provides for an annual salary of at least $200,000, and provides for
continuing employment until October 31, 1996.
On April 20, 1995, Pioneer Americas, Inc. ("PAI") entered into three-year
employment agreements with Messrs. Glattly and Norwood and a two-year
employment agreement with Mr. Stephenson. The employment agreement with Mr.
Glattly provides that he will serve as Vice President--Sales of PAI for an
annual salary of at least $165,000. The employment agreement with Mr. Norwood
provides that he will serve as Vice President--Environmental Affairs of PAI for
an annual salary of at least $143,100. The employment agreement with Mr.
Stephenson provides that he will serve as Vice President and General Counsel of
PAI for an annual salary of at least $140,000.
Under each of the employment agreements referred to above, the employee
will be entitled to receive other benefits made available to executive officers
and to receive bonus compensation in accordance with any management incentive
plan established by the Board of Directors. Each of the employment agreements
(except for the agreement with Mr. Kienholz) provides that if the executive's
employment thereunder is terminated by the employer without "just cause" or by
the employee for "good reason" (as such terms are defined in the employment
agreement), the executive shall continue to receive his annual salary until the
last date of the employment term or, if later, the first anniversary of the
termination date, subject to certain provisions for offset, and will continue
to receive certain other benefits provided for in the agreement. Termination
following a change in control does not constitute "just cause" or "good
reason", but "good reason" does include the failure of any successor to the
employer by operation of law to assume the employment agreement.
On March 8, 1996, Philip J. Ablove, who is a director of the Company and a
nominee for reelection as a director at the Annual Meeting, was elected Vice
President and Chief Financial Officer of the Company, after serving as a
management consultant to the Company since October 1995. The Company has
agreed to pay Mr. Ablove an annual salary of $225,000, and if Mr. Ablove is
terminated for other than cause during the first year of his employment, he
will be entitled to continue to receive his salary for a period ending on the
earlier of the date upon which he finds alternative employment or the date
occurring twelve months after his termination. Following any change of control
during his employment by the Company, he would be entitled to a severance
payment equal to at least twelve months' salary. It has also been agreed that
Mr. Ablove will be granted an option to purchase 50,000 shares of Class A
Common Stock under the Company's 1995 Stock Incentive Plan.
KEY MAN INSURANCE
The Company is the beneficiary of a key-man life insurance policy with
respect to each of Messrs. Kellogg and Glattly. Each $5 million level-term
policy has a term of ten years.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
In connection with the acquisition of Pioneer Americas, Inc. by the
Company on April 20, 1995, Richard C. Kellogg, Jr., who may be deemed the
Company's chief executive officer, and the persons who subsequently became
executive officers of the Company (with the exception of Paul J. Kienholz)
entered into employment agreements which provided for a base salary level and
the grant of options under the Company's 1995 Stock Incentive Plan. Mr.
Kienholz agreed to an amendment to an existing employment agreement which also
provided for a base salary level. During the balance of 1995, such executives
were paid salaries at the levels specified in the agreements, and
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<PAGE> 14
the executives received the option grants which were specified in the
agreements (with Mr. Kienholz' option grant at a level which was also agreed in
connection with the acquisition).
The employment agreements also provide for participation in such bonus
plans as are adopted by the Company. Under the Company's bonus plan, annual
cash bonuses are paid to designated managers and executives based upon both
individual performance and the profit performance of the Company. Based on
actual profit performance against planned performance, the Committee
establishes the total cash bonus pool available to be paid. With the approval
of the Committee, the pool is allocated to individual managers and executives,
including Mr. Kellogg, based upon their performance against annual goals. All
employees of the Company, including Mr. Kellogg and the other named executives,
participate in a Shared Earnings Plan that provides an annual cash bonus if
actual earnings before interest, taxes, depreciation and amortization
performance exceeds the amount contained in the plan which is approved by the
Board of Directors at the beginning of the year, with each employee receiving a
specified percentage of salary determined by reference to the amount of such
excess.
For 1996 and subsequent years, compensation for executives of the Company
will be made up of three components, base salary, annual cash bonus, and
long-term incentives. The Compensation and Stock Option Committee of the Board
of Directors will review each of the components on an annual basis to ensure
that compensation is competitive within the chemical industry and promotes the
alignment of executive and stockholder interests.
Salary levels are compared to industry survey data on an annual basis to
ensure that compensation levels allow the Company to attract and retain
highly-competent executives. The Committee has approved a new plan, the Key
Executive Stock Grant Plan, pursuant to which phantom stock awards will be used
to provide long-term compensation, in part by effectively deferring a portion
of the otherwise-payable annual cash bonus. The new plan has been approved by
the Board of Directors, and the stockholders of the Company are being asked to
approve the plan at the 1996 Annual Meeting.
William Berkley
Andrew M. Bursky
Jack H. Nusbaum
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
William R. Berkley, a member of the Compensation and Stock Option
Committee, is the Chairman of the Board of Directors of the Company and, as of
May 20, 1996, may be deemed to beneficially own approximately 61.5% of the
Class A Common Stock (representing approximately 61.1% of the voting power of
the Company). Mr. Berkley is the Chairman of the Board of Fine Host
Corporation, and Andrew M. Bursky, also a member of the Compensation and Stock
Option Committee, serves as a member of the board of directors of Fine Host
Corporation. Jack H. Nusbaum, a member of the Compensation and Stock Option
Committee, is a Senior Partner and Co-Chairman in the law firm of Willkie Farr
& Gallagher, which has acted as counsel to the Company from time to time.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
The graph set forth below compares the cumulative total stockholder return
on the Class A Common Stock for the period commencing December 31, 1990 and
ending December 31, 1995 to the cumulative total return on the Standard &
Poor's 500 Stock Index and a peer group of chemical companies (Air Products &
Chemicals, Dow Chemical, DuPont, Eastman Chemical, Hercules, Monsanto, Praxair,
Rohm & Haas and Union Carbide), the operations of which were similar to those
of the Company from April 20, 1995 through December 31, 1995. For
14
<PAGE> 15
the period beginning on July 9, 1992, the graph relates to the Class A Common
Stock, and the earlier period of the graph relates to the Company's Common
Stock as it existed prior to that date. Dates are for fiscal years ending
December 31 in each of the years indicated. The Company believes that the peer
group was not relevant prior to April 20, 1995, since during periods prior to
January 1995 the Company was in the dairy business, and also since during the
period from July 1992 to January 1995 the Company's operating subsidiaries had
an independent board of directors (as a result of the Reorganization Plan).
The point at which the Company believes that the comparison with the peer group
did become relevant, April 20, 1995, is indicated on the graph. The graph
assumes a $100 investment in the Company's Common Stock and in each index on
December 31, 1990, and that all dividends paid by companies included in each
index were reinvested.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
Pioneer Companies, Inc. 100 15 23 25 25 113
S&P 500 100 130 140 155 157 215
Diversified Chemicals 100 130 143 160 185 242
</TABLE>
TRANSACTIONS WITH MANAGEMENT AND OTHERS
As described above under "Acquisition of Pioneer Americas, Inc.," on April
20, 1995, the Interlaken Partnership purchased 2,840,909 shares of Class A
Common Stock from the Company for a cash purchase price of $5.28 per share, as
part of the Company's financing of the Acquisition. Mr. Berkley, through
controlled entities, is the general partner of the Interlaken Partnership and
also owns approximately 32% of the limited partnership interests in the
Interlaken Partnership, and Donald J. Donahue, a director of the Company, owns
approximately 1.3% of the limited partnership interests in the Interlaken
Partnership. The Company's sale of Class A Common Stock to the Interlaken
Partnership was approved by a majority of the Company's disinterested and
independent directors, who determined that the terms of the sale were at least
as favorable to the Company as if they had been reached with non-affiliated
parties.
Also in connection with the Acquisition, certain directors, executives and
other employees of Pioneer Americas purchased an aggregate of 1,136,363 shares
of Class A Common Stock for a cash purchase price of $5.28 per share. Certain
of such persons are now executive officers of the Company, including Messrs.
Kellogg, Kienholz, Glattly, Norwood and Stephenson, who purchased 481,325,
25,000, 50,000, 12,500 and 2,500 shares, respectively. Such
15
<PAGE> 16
persons were not then affiliates of the Company, and the price paid was
determined through arm's-length negotiation.
The Company paid Interlaken Capital, Inc., out of the proceeds of the
Acquisition financing, a fee of $1.6 million as compensation for advisory
services provided by Interlaken Capital, Inc. in connection with the
Acquisition. Interlaken Capital, Inc. is a private investment and consulting
firm controlled by William R. Berkley. The firm was also paid a fee of $300,000
for advisory services rendered to the Company in connection with the
acquisition of Kemira Water Treatment, Inc. by a subsidiary of the Company in
February 1996 (the "KWT Transaction"). Each of such fees was approved by the
disinterested and independent members of the Board of Directors, who determined
that the fees for such services were each in an amount which was at least as
favorable to the Company as if it had been paid to a non-affiliated party for
similar services.
Thomas H. Schnitzius, who was elected as a director of the Company
following the Acquisition, is a principal of Schnitzius & Vaughan, an investment
banking firm. Prior to the Acquisition, Pioneer Americas had retained
Schnitzius & Vaughan to provide merger and acquisition and financial advisory
services to Pioneer Americas in connection with the Acquisition, and in
connection with the KWT Transaction. As compensation for financial services
rendered to Pioneer Americas by Schnitzius & Vaughan in connection with the
Acquisition, the firm was paid a fee of approximately $1.0 million, plus
reimbursement of reasonable out-of-pocket expenses relating to such services.
The firm was also paid a fee of $300,000, plus reimbursement of reasonable
out-of-pocket expenses, for services rendered in connection with the KWT
Transaction. The firm provides financial advisory services on an on-going basis
to the Company, for which it has received fees of $178,000 in the aggregate
since April 1995. The firm is currently paid a retainer for such services of
$16,000 per month.
Pursuant to the Acquisition Agreement, certain assets not necessary for
the Company's chlor-alkali business are held by subsidiaries of the Company for
the benefit of the Sellers. Such assets include (i) real property (the "Excess
Land") in St. Gabriel, Louisiana, Henderson, Nevada and Mojave, California, and
(ii) 32% of the equity interest in Basic Investments, Inc. ("Basic") and
directly or indirectly, 37.22% of the partnership interest in Victory Valley
Land Company, L.P. Any proceeds from such assets are held in an separate
account for the benefit of the Sellers, subject to offset against any claims by
the Company under environmental and other warranties provided by the Sellers in
the Acquisition Agreement. As of April 30, 1996, the account had a balance of
$1,223,000; distributions to the Sellers of funds held in the account will not
occur before April 20, 2000. Included among the Sellers are Messrs. Kellogg,
Kienholz, Glattly and Norwood, who have interests in the account and in any
liability of 29.4%, 1.4%, 0.7% and 0.7%, respectively.
A subsidiary of the Company is party to an agreement with Basic for the
delivery of water to the Company's Henderson production facility. The agreement
provides for the delivery of a minimum of eight million gallons of water per
day. The agreement expires on December 31, 2014, unless terminated earlier in
accordance with the provisions thereof. Basic also charges the Company and
other companies in the Henderson industrial complex for power distribution
services. Since April 20, 1995, the Company has paid Basic approximately
$1,017,000 for the provision of such services. At March 31, 1996, the net
amount owed to Basic was $67,582.
As Sellers under the Acquisition Agreement, Messrs. Kellogg, Kienholz,
Glattly and Norwood each also hold Seller Notes in the principal amounts of
$4,512,330, $155,435, $77,718 and $77,718, respectively. The Company has paid
such individuals interest on such Seller Notes in the amounts of $344,417,
$11,864, $5,932 and $5,932, respectively, since April 20, 1995.
A subsidiary of Pioneer Americas sold caustic soda to Trans Marketing
Houston, Inc. ("TMHI") for export from 1988 to 1993 and participated in certain
joint insurance programs. Mr. Kellogg co-founded TMHI and served as one of its
directors and executive officers. Pioneer Americas wrote off $1.3 million of
receivables in 1992 and charged an additional $1.1 million against income in
1993 related to sales to TMHI that were deemed uncollectible. In April 1993,
TMHI filed for bankruptcy. A plan of reorganization was confirmed in the TMHI
bankruptcy case in January 1994. Pursuant to the plan, assets of TMHI,
including certain causes of action, were transferred to a liquidating trust,
and a third party liquidating trustee was appointed to liquidate those assets
for the benefit of
16
<PAGE> 17
creditors of TMHI. In October 1994, the liquidating trustee filed a preference
action under the bankruptcy code against Pioneer Americas, alleging that
certain transactions between Pioneer Americas and TMHI during the period from
December 1992 to April 1993 occurred while TMHI was insolvent, such that the
approximately $2.2 million paid to Pioneer Americas by TMHI in connection with
those transactions can be recovered for the benefit of the trust. Pioneer
Americas continues to assert available defenses to such claims and believes
that the outcome of the action will not have a material adverse effect on the
Company. Should the trustee prevail in the action, the Company may recover all
or a portion of any resulting liability from the Sellers as a result of
applicable warranties in the Acquisition Agreement.
Mr. Kellogg and the Company are parties to a stockholders agreement with
Mr. Berkley and the Interlaken Partnership providing that, so long as Mr.
Kellogg's employment agreement (as described above under "Executive
Compensation") is in effect, Mr. Berkley and the Interlaken Partnership will
vote their shares of Class A Common Stock for Mr. Kellogg's election to the
Company's Board of Directors and that Mr. Kellogg will vote his shares of Class
A Common Stock for the Board of Directors' nominees for election as directors.
During 1991, the Company borrowed funds on an unsecured basis on several
occasions from Mr. Berkley for working capital purposes at times when it had
reached the borrowing limit under its bank credit agreement. Each such loan
was permitted indebtedness under the credit agreement, bore interest at an
annual rate of the prime rate plus 1% and was repaid as soon as funds were
available. On February 1 and February 4, 1991, Mr. Berkley loaned an aggregate
of $4,200,000 to the Company for working capital purposes. No principal
payments have been made on this loan. The loan represents an allowed unsecured
claim subject to the same treatment as all other similarly situated
unaffiliated unsecured claims of the bankruptcy estate of the Company.
Jack H. Nusbaum, a director of the Company, is Chairman of the law firm
of Wilkie Farr & Gallagher, which acts as counsel to the Company from time to
time.
Each transaction involving officers of the Company, its controlling
persons or affiliates was authorized at the time of the transaction or
subsequently ratified by a majority of the Company's disinterested directors.
It is the Company's practice not to enter into any transactions with affiliated
parties unless a majority of the disinterested and independent directors
determines that the terms of such transactions are at least as favorable to the
Company as those available in similar transactions made with non-affiliated
parties.
PROPOSAL 2: APPROVAL OF THE KEY EXECUTIVE STOCK GRANT PLAN
On May 14, 1996, the Board of Directors adopted the Key Executive Stock
Grant Plan (the "Plan"), subject to stockholder approval, under which up to
500,000 shares of Class A Common Stock are reserved for issuance pursuant to
the grant of stock based awards under the Plan. The Company is seeking
stockholder approval of the Plan for the purpose of complying with Rule 16b-3
promulgated pursuant to the Securities Exchange Act of 1934.
PURPOSE AND ELIGIBILITY
The purpose of the Plan is to provide a means through which the Company
and its subsidiaries may attract able persons to enter and remain in the employ
of the Company and its subsidiaries as key executives (those persons identified
in the Plan for automatic participation and those designated for participation
by the Company's President) and to provide a means whereby part of the
incentive compensation payable to key executives is in the form of stock
ownership, thereby strengthening their commitment to the welfare of the Company
and its subsidiaries and promoting an identity of interest between stockholders
and such executives. Under the Plan, each key executive as a participant in
the Plan will have the amount of his or her targeted annual cash bonus award
automatically reduced by 50% and in lieu thereof receive a phantom stock grant
equal to 100% of the participant's targeted annual cash bonus award, before
reduction.
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<PAGE> 18
Participants in the Plan will be those senior executives of the Company or
its subsidiaries whose contributions are expected to materially affect the
business success of the Company and its value to the stockholders. Certain
senior executives, who are listed by position in an attachment to the Plan,
will automatically participate in the Plan, and other key executives will be
recommended for participation in the Plan by the President of the Company and
approved by the Compensation Committee of the Board of Directors. There are
currently nine senior executives of the Company or its subsidiaries eligible to
participate in the Plan.
ADMINISTRATION
The Plan will be administered by the Compensation Committee, although a
Management Committee selected by the Company's President will perform the
ministerial duties of the Compensation Committee under the Plan, subject to
approval by that Committee.
INCENTIVE CASH BONUSES
The Company maintains an annual incentive compensation bonus plan (the
"ICBP"). The ICBP provides for an annual incentive compensation bonus
dependent upon the Company's actual earnings before interest, taxes,
depreciation and amortization ("EBITDA") equaling or exceeding the amount of
EBITDA included in the Company's fiscal year profit plan, as approved by the
Board of Directors with respect to the Company's Shared Earnings Plan. For
purposes of the ICBP, the Compensation Committee may adjust planned EBITDA to
take into account unanticipated events. If EBITDA performance makes bonus
payments available under the Shared Earnings Plan, a bonus pool is established
under the ICBP by the Compensation Committee in a discretionary amount.
However, the maximum individual bonus under the ICBP will range from 20% to 60%
of the participant's base salary, depending on his or her position, subject to
adjustment for the phantom stock portion of the award to be granted to key
executives under the Plan. The amount of any participant's individual award
is based on individual performance as measured against business goals and
objectives. Individual awards are subject to approval by the Compensation
Committee.
PHANTOM STOCK AWARDS
When target bonuses are payable under the ICBP, the cash bonus otherwise
to be paid to a participant in the Plan will be reduced automatically by 50%.
The reduction will in effect "fund" 50% of the phantom stock award. The number
of shares of Phantom Stock automatically credited to a participant's Phantom
Stock Account for any year in which he or she is entitled to receive a cash
bonus will be equal to the number determined by dividing the amount of the
participant's target cash bonus for the bonus year (before the 50% reduction)
by the average value of a share of the Company's Class A Common Stock as of the
end of each month in that bonus year. Subject to a voluntary deferral election
(to a phantom cash account) by the participant, if permitted by the Management
Committee, the remaining 50% of the participant's target bonus award for the
year will be paid to the participant in cash as soon as reasonably practicable
following the Compensation Committee's approval of the payment of incentive
awards under the ICBP.
Each participant's Phantom Stock Account will be credited with whole and
fractional shares of Phantom Stock as of the date of the granting of awards
under the ICBP, and with phantom (notional) dividends with respect to the
credited Phantom Stock, which will be credited as being reinvested in
additional shares of Phantom Stock. All credits and debits to a participant's
Phantom Stock Account, after the account is established, will be made based on
the fair market value of the Company's Class A Common Stock on the applicable
date.
Shares of Phantom Stock credited to a participant's Phantom Stock Account
and any dividends subsequently credited thereon will not vest (i.e., will
remain forfeitable) until the second January 1 following the date on which the
Phantom Stock Award was approved by the Compensation Committee; provided,
however, if the participant's employment is terminated due to death,
disability, retirement with the consent of the Compensation Committee, or by
the Company for other than cause, all shares of Phantom Stock then credited to
the participant's account will be immediately vested in full. If a participant
terminates employment for any reason other than as provided above, or
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<PAGE> 19
if the Company terminates a participant's employment for cause, all nonvested
shares of Phantom Stock then credited to the participant's Account will be
immediately forfeited.
Unless electively deferred to a later payment date (if permitted by the
Management Committee), upon vesting the participant will receive the value of
the shares of Phantom Stock credited to his or her Phantom Stock Account
through the issuance of whole shares of the Company's Class A Common Stock,
with cash for any fractional share, as soon as reasonably practicable.
EFFECT OF CHANGE IN CONTROL OF THE COMPANY
In the event of a Change in Control of the Company all shares of Phantom
Stock credited to the accounts of participants in the Plan will become
immediately vested, and the value of the equivalent number of shares of Class A
Common Stock will be issued to the participants in cash in full settlement of
outstanding Phantom Stock Account balances. Any voluntary deferral accounts
(whether a Phantom Stock or cash account) will also be cashed out. For
purposes of the Plan, a Change in Control is defined as (unless the Board of
Directors otherwise directs by resolution adopted prior thereto) (1) the
acquisition by any person or group of persons, acting in concert, other than
William R. Berkley or his affiliates, of 30% or more of either the outstanding
Common Stock or the combined voting power of the Company's outstanding
securities, (2) a change in the majority membership of the Board over a
two-year period not authorized by at least three-quarters of the directors then
still in office who were directors at the beginning of such two-year period, or
(3) a liquidation or dissolution of the Company or a sale of substantially all
of the Company's assets.
TERMINATION AND AMENDMENT
The Board may from time to time amend, suspend or terminate the Plan, in
whole or in part, at any time; provided that any amendment that would increase
the aggregate number of shares of Company Stock which may be issued under the
Plan or materially modify the requirements as to eligibility for participation
in the Plan shall be subject to the approval of Company's stockholders, except
as provided below. No amendment, suspension or termination of the Plan may
impair the right of a participant or his or her beneficiary to receive the
benefit accredited prior to the effective date of such amendment, suspension or
termination.
SHARES SUBJECT TO THE PLAN
The Company has reserved 500,000 shares of Class A Common Stock for
issuance under the Plan. Such shares may be shares of original issuance or
treasury shares or a combination of the foregoing. Any shares of Class A
Common Stock which are issuable with respect to shares of Phantom Stock that
are forfeited will again be available for issuance under the Plan. In the
event that the number of shares of Class A Common Stock available under the
Plan is insufficient on any applicable date, then all key executives who would
otherwise be entitled to have shares of Phantom Stock credited on such date
shall share ratably in the number of shares of Phantom Stock then available for
crediting under the Plan, and thereafter all credits shall be made in cash. In
the event of a change in the capitalization of the Company due to a stock
split, stock dividend, recapitalization, merger, consolidation, combination, or
similar events, the aggregate number of shares subject to the Plan and the
shares of Phantom Stock then credited shall be adjusted accordingly by the
Compensation Committee to reflect such change.
FEDERAL TAX CONSEQUENCES
The grant of shares of Phantom Stock under the Plan will not result in
income for the participant in the Plan or in a tax deduction for the Company.
Upon the issuance of shares of Class A Common Stock in settlement of the
outstanding Phantom Stock Account balance of a participant, the participant
will recognize ordinary income equal to the fair market value of any shares of
Class A Common Stock received and the Company will be entitled to a tax
deduction in the same amount, provided the amount is reasonable compensation
and is not an "excess parachute" payment, as provided in Section 280G of the
Internal Revenue Code, or nondeductible under Section 162(m) of the Internal
Revenue Code as being nonperformance-based compensation in excess of $1
million. The foregoing
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summary of certain federal tax consequences with respect to the Plan is not
comprehensive and is based upon laws and regulations currently in effect. Such
laws and regulations are subject to change.
RECOMMENDATION AND VOTE
Approval of the adoption of the Plan requires the affirmative vote of the
holders of a majority of the voting power of the shares of Common Stock
present, in person or by proxy, at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE PLAN.
PROPOSAL 3: APPOINTMENT OF INDEPENDENT AUDITORS
Deloitte & Touche LLP has been appointed by the Board of Directors as
independent certified public accountants to audit the financial statements of
the Company for the fiscal year ending December 31, 1996. The Board of
Directors is submitting this matter to a vote of stockholders in order to
ascertain their views. If the appointment of Deloitte & Touche LLP is not
ratified at the Annual Meeting, the Board of Directors will reconsider its
action and will appoint auditors for the 1996 fiscal year without further
stockholder action. Further, even if the appointment of auditors is ratified
by stockholder action, the Board of Directors may at any time in the future in
its discretion reconsider the appointment of auditors without submitting the
matter to a vote of stockholders.
Deloitte & Touche LLP has served as the independent accountants of the
Company for a number of years. Following the Acquisition the Board of
Directors approved the engagement of Deloitte & Touche LLP as the independent
accountants of Pioneer Americas, Inc., effective October 16, 1995. Ernst &
Young LLP had been the independent accountants for Pioneer Americas prior
to its dismissal. The reports of Ernst & Young LLP on the financial statements
of Pioneer Americas for the two fiscal years preceding its dismissal did
not contain an adverse opinion or a disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope or accounting principles.
In connection with the audits of the financial statements of Pioneer Americas
for each of the two fiscal years ended December 31, 1994, and in the
subsequent interim period, there were no disagreements with Ernst & Young LLP
on any matters of accounting principles or practices, financial statement
disclosure or auditing scope and procedures which, if not resolved to the
satisfaction of Ernst & Young LLP, would have caused Ernst & Young LLP to make
reference to the matter in their report.
It is expected that representatives of Deloitte & Touche LLP will attend
the Annual Meeting, will have the opportunity to make a statement if they
desire to do so and will be available to respond to appropriate stockholder
questions.
IT IS THE INTENTION OF THE PERSONS NAMED ON THE ENCLOSED FORM OF PROXY TO
VOTE "FOR" RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP
UNLESS OTHERWISE DIRECTED.
OTHER MATTERS
NOTICE REQUIREMENTS
It is anticipated that the next Annual Meeting of Stockholders after the
one scheduled for June 25, 1996 will be held on or about May 20, 1997. All
stockholder proposals relating to a proper subject for action at the 1997
Annual Meeting to be included in the Company's Proxy Statement and form of
proxy relating to that meeting must be received by the Company for its
consideration at its principal executive offices no later than January __,
1997, all in accordance with the provisions of Rule 14a-8 promulgated under the
Securities Exchange Act of 1934. Any such proposal should be submitted by
certified mail, return receipt requested.
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COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who own more than ten
percent of the Company's Class A Common Stock or Class B Common Stock, to file
reports of ownership and changes in ownership with the Securities and Exchange
commission. Based solely on its review of Section 16(a) reports furnished to
the Company, the Company has identified the following instances of reports for
the fiscal year ended December 31, 1995 which were not filed in a timely
manner. The issuance of shares to Mr. Donahue in payment of the annual
retainer for service as a director and fees for meetings attended during 1994
was reported approximately five months late, and his contribution of shares to
a family partnership was reported approximately three months late.
As of the date hereof, the Board of Directors knows of no other business
that will be presented for consideration at the Annual Meeting. If other
business shall properly come before the Annual Meeting, the persons named in
the proxy will vote according to their best judgment.
By order of the Board of Directors,
WILLIAM R. BERKLEY
Chairman of the Board
May __, 1996
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PIONEER COMPANIES, INC.
Proxy Solicited on Behalf of the Board of Directors of the Company
for Annual Meeting June 25, 1996
The undersigned hereby constitutes and appoints Philip J. Ablove and Kent R.
Stephenson, and each of them, his true and lawful agents and proxies with full
power of substitution in each, to represent the undersigned at the Annual
Meeting of Stockholders of Pioneer Companies, Inc. to be held at the Stamford
Marriott Hotel, Two Stamford Forum, Stamford, Connecticut on Tuesday, June 25,
1996, at 9:00 a.m., and any adjournments thereof, on all matters coming before
said meeting.
Directors recommend a vote "FOR" election of both nominees and "FOR" proposals
2 and 3.
1. Election of two directors to a class expiring in 1999.
FOR nominees listed below ____ ____ Withhold authority to vote for
nominees
Philip J. Ablove and Andrew M. Bursky
FOR, except vote withheld from the following nominee(s)_____________________
2. Proposal to approve the Company's Key Executive Stock Grant Plan.
FOR ____ AGAINST ____ ABSTAIN ____
3. Proposal to ratify the Board of Directors' selection of Deloitte & Touche
LLP as independent public accountant of the Company.
FOR ____ AGAINST ____ ABSTAIN ____
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting. You are encouraged to specify
your choices by marking the appropriate boxes, but you need not mark any boxes
if you wish to vote in accordance with the Board of Directors' recommendations.
The Proxy cannot vote your shares unless you sign and return this card in the
enclosed postage paid envelope.
<PAGE> 23
This proxy, when properly executed, will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR both Nominees,
and FOR Items 1 and 2.
Date_________________________________
_____________________________________
(Signature)
_____________________________________
(Signature if held jointly)
Note: Please sign exactly as name
appears hereon. Joint owners should
each sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title as
such.
The signor hereby revokes all proxies
heretofore given by the signer to vote
at said meeting or any adjournments
thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE. THANK YOU.
