<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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(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:
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(4) Date Filed:
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<PAGE> 2
PIONEER COMPANIES, INC.
700 LOUISIANA STREET, SUITE 4300
HOUSTON, TEXAS 77002
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 25, 2000
---------------------
Pioneer Companies, Inc. will hold its Annual Meeting of Stockholders at the
Westin Stamford, One Stamford Place, Stamford, Connecticut, on Thursday, May 25,
2000, at 2:00 p.m.
We are holding this meeting:
- to elect two directors to serve until the Annual Meeting of Stockholders
in 2003;
- to ratify the appointment of Deloitte & Touche LLP as Pioneer's
independent certified public accountants for the current year; and
- to transact any other business that properly comes before the meeting.
Pioneer's Board of Directors has selected April 19, 2000 as the record date
for determining stockholders entitled to vote at the Annual Meeting.
As of April 19, 2000, William R. Berkley, Chairman of Pioneer's Board of
Directors, owned approximately 59.9% of Pioneer's Class A Common Stock
(representing approximately 56.6% of the voting power of Pioneer's outstanding
capital stock). As a result, Mr. Berkley has sufficient voting power to
determine the results of the matters to be considered at the Annual Meeting. Mr.
Berkley has advised that he will vote FOR each of the proposals to be considered
at the Annual Meeting.
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: April 24, 2000
<PAGE> 3
PIONEER COMPANIES, INC.
700 LOUISIANA STREET, SUITE 4300
HOUSTON, TEXAS 77002
PROXY STATEMENT
---------------------
GENERAL INFORMATION
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the annual meeting of Pioneer Companies, Inc., stockholders will act
upon the matters outlined in the notice of meeting on the cover page of this
proxy statement, including the election of three directors and ratification of
Pioneer's independent auditors. In addition, Pioneer's management will report on
Pioneer's performance during 1999 and respond to questions from stockholders.
Pioneer's Annual Report for the fiscal year ended December 31, 1999 is being
mailed with this Proxy Statement.
The annual meeting will be held on Thursday, May 25, 2000, at the Westin
Stamford, One Stamford Place, Stamford, Connecticut, beginning at 2:00 p.m. The
approximate mailing date of the Proxy Statement and the proxy is April 24, 1999.
WHO IS SOLICITING PROXIES?
Pioneer's Board of Directors is soliciting the enclosed proxy for use at
the annual meeting. Pioneer is paying the expense of preparing, printing and
mailing this Proxy Statement, and Pioneer will reimburse banks, brokers and
other custodians, nominees and fiduciaries for their costs in sending the Proxy
Statement to the beneficial owners of the common stock.
WHO CAN VOTE AT THE MEETING?
Only those who owned Pioneer's Class A Common Stock, Class B Common Stock
or Series A Preferred Stock of record at the close of business on the record
date, April 19, 2000, are entitled to receive notice of the annual meeting and
to vote the shares of common stock or preferred stock that they held on that
date at the meeting, or at any postponements or adjournments of the meeting.
WHAT ARE THE VOTING RIGHTS OF THE PIONEER STOCKHOLDERS?
Each outstanding share of Pioneer's Class A Common Stock is entitled to one
vote on each matter to be voted on at the meeting. Each share of Class B Common
Stock is entitled to one-tenth of one vote and each share of preferred stock is
entitled to 9.8 votes. The common stock and preferred stock will vote together
as a single class on all matters to be acted on at the meeting. Class B Common
Stock is fully convertible at any time into Class A Common Stock on a
share-for-share basis, and Preferred Stock is fully convertible at any time into
Class A Common Stock at a conversion rate of 9.8 shares of Class A Common Stock
for each share of Preferred Stock.
HOW DO I VOTE?
If you complete and properly sign the enclosed proxy card and return it to
Pioneer, it will be voted as you direct. A stockholder who gives a proxy for use
at the annual meeting can revoke it by providing Pioneer's Vice President and
Secretary with notice that the proxy is being revoked, or by submitting a later
dated proxy. If you attend the annual meeting in person, you can revoke your
proxy by voting at the meeting.
If your proxy card does not either specify a vote for or withhold authority
to vote for a nominee for election as a director, the proxy will be voted for
such person. If your proxy card does not specify a vote for or against
ratification of the selection of the independent accountants, it will be voted
in favor.
<PAGE> 4
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock and preferred stock outstanding on the
record date will constitute a quorum, permitting the meeting to conduct its
business. As of the record date, 10,647,035 shares of Class A Common Stock,
858,830 shares of Class B Common Stock and 55,000 shares of Series A Preferred
Stock were outstanding.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
All matters to be acted on at the meeting require the affirmative vote of a
majority of the voting power of the shares present in person or by proxy at the
meeting to constitute the action of the stockholders. If you hold your shares in
"street name" through a broker or other nominee, your broker or nominee may not
be permitted to exercise voting discretion with respect to some matters that may
be acted upon. Thus, if you do not give your broker or nominee specific
instructions, your shares may not be voted on those matters and will not be
counted in determining the number of shares necessary for approval. Shares
represented by such "broker non-votes" will not be counted in determining
whether there is a quorum. If you are a record holder and you abstain from
voting with respect to any matter, your shares will be counted in determining
whether there is a quorum.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the recommendations
of the Board of Directors. The Board's recommendation is set forth together with
the description of each item in this proxy statement. With respect to any other
matter that properly comes before the meeting, the proxy holders will vote as
recommended by the Board of Directors or, if no recommendation is given, in
their own discretion.
STOCK OWNERSHIP
WHO ARE THE LARGEST OWNERS OF PIONEER'S STOCK?
The following table shows, as of April 19, 2000, certain information
regarding the shares of common stock and preferred stock owned by each person or
entity who is known by Pioneer to be the beneficial owner of more than five
percent of any class of stock. Except as noted, each person or entity has sole
voting and investment power over the shares shown in the table.
<TABLE>
<CAPTION>
SHARES
NAME AND ADDRESS OF BENEFICIALLY PERCENT
TITLE OF CLASS BENEFICIAL OWNER OWNED OF CLASS
- -------------- ------------------- ------------ --------
<S> <C> <C> <C>
Class A Common Stock William R. Berkley (1)................... 6,375,335 58.8
165 Mason Street
Greenwich, Connecticut 06830
Richard C. Kellogg, Jr.(2)............... 792,243 7.3
2716 University Boulevard
Houston, Texas 77005
Frans G.J. Speets(3)..................... 663,685 6.1
2400 Fountainview, #204
Houston, Texas 77057
Class B Common Stock Chemical Bank (4)........................ 858,830 100.0
Special Loan Group
270 Park Avenue, 48th Floor
New York, NY 10017
Preferred Stock OCC Tacoma, Inc.(5)...................... 55,000 100.0
5005 LBJ Freeway
Dallas, Texas 75380-9050
</TABLE>
2
<PAGE> 5
- ---------------
(1) Includes 3,723,850 shares held by Interlaken Investment Partners, L.P. Mr.
Berkley is the sole owner of a company that indirectly controls Interlaken,
and so he may be deemed to be the beneficial owner of the shares held by
Interlaken. Mr. Berkley's holdings (including the shares owned by
Interlaken) represent 55.6% of the voting power of Pioneer's outstanding
capital stock.
(2) Includes 161,327 shares that Mr. Kellogg has the right to acquire within 60
days of April 19, 2000 through the exercise of stock options. Mr. Kellogg's
holdings (including the shares that can be obtained through the exercise of
options) represent 6.9% of the voting power of Pioneer's outstanding capital
stock.
(3) Includes 32,769 shares that Mr. Speets has the right to acquire within 60
days of April 19, 2000 through the exercise of stock options. Mr. Speets'
holdings (including the shares that can be obtained through the exercise of
options) represent 5.8% of the voting power of Pioneer's outstanding capital
stock.
(4) Information obtained from a Schedule 13G, dated July 21, 1992, filed with
the Securities and Exchange Commission by Chemical Bank. The filing reported
that Chemical Bank had acquired 858,830 shares of Class B Common Stock (as
adjusted for the one-for-four reverse stock split on April 27, 1995, and the
four seven-percent stock dividends paid to stockholders since that date), of
which it was the beneficial owner with sole voting and dispositive power.
The holdings of Chemical Bank represent 7.5% of the voting power of the
outstanding capital stock.
(5) The holdings of OCC Tacoma, Inc. represent 4.7% of the voting power of the
outstanding capital stock.
HOW MUCH STOCK DO PIONEER'S DIRECTORS AND EXECUTIVES OWN?
The following table shows, as of April 19, 2000, information regarding
beneficial ownership of Pioneer's common stock by each of Pioneer's directors
and the nominees for director named herein, each of Pioneer's executive officers
named in the Summary Compensation Table shown below, and all of Pioneer's
directors and executive officers as a group. Included within beneficial
ownership are shares that an individual has the right to acquire within 60 days
of April 19, 2000 through the exercise of stock options. Percentages of common
stock are based on the shares outstanding as of April 19, 2000, together with
the shares that would be issued if the options are exercised.
<TABLE>
<CAPTION>
SHARES
NAME OF BENEFICIALLY PERCENT
TITLE OF CLASS BENEFICIAL OWNER OWNED OF CLASS
- -------------- ---------------- ------------ --------
<S> <C> <C> <C>
Class A Common Stock William R. Berkley....................... 6,375,335 56.8
Michael J. Ferris........................ 404,259 3.6
Philip J. Ablove......................... 79,908 *
Andrew M. Bursky......................... 342,536 3.1
Donald J. Donahue**...................... 260,238 2.3
Richard C. Kellogg, Jr................... 792,243 7.1
John H. Kennedy.......................... 8,134 *
Jack H. Nusbaum.......................... 27,573 *
Thomas H. Schnitzius..................... 17,534 *
Norman E. Thogersen...................... -0- *
John R. Beaver........................... 15,025 *
Kent R. Stephenson....................... 28,633 *
All directors and executive officers
as a group (12 persons)................ 8,351,418 74.4
</TABLE>
- ---------------
* Less than one percent
** 98,308 of such shares are held by the Donahue Family Partnership, which Mr.
Donahue serves as the general partner.
Pioneer does not know of any current arrangements, including any pledge by
any persons of Pioneer securities, that may result in a change of control of
Pioneer in the future.
3
<PAGE> 6
PROPOSAL 1:
ELECTION OF DIRECTORS
DIRECTORS STANDING FOR ELECTION
Pioneer's Board of Directors is divided into three classes, having
three-year terms that expire in successive years. This year 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 William R. Berkley and
Michael J. Ferris as directors. If reelected, they will hold office for a term
of three years, until the annual meeting in 2002, and until their successors are
duly chosen. Thomas H. Schnitzius, whose term also expires in 2000, will not be
standing for reelection, and the Board of Directors has determined to leave a
vacancy on the Board of Directors, pending the completion of a search for a
suitable person to serve as a director. If the vacancy is filled by the Board of
Directors during the year, the person so appointed would stand for election by
the stockholders at the annual meeting to be held in 2001.
The persons designated as proxies reserve full discretion to cast votes for
other persons in the event either of the two nominees is 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 shows information regarding the nominees and the
remaining directors who will continue in office after the annual meeting.
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR OF
PIONEER BUSINESS EXPERIENCE
CONTINUOUSLY DURING PAST 5 YEARS,
NAME SINCE AGE AND OTHER INFORMATION
- ---- ------------ -------------------------
<S> <C> <C>
Nominees to Hold Office Until 2003
William R. Berkley(1)(2)(4)............... 1988 Mr. Berkley has been Pioneer's Chairman of
the Board since 1987. He also serves as
Chairman of the Board of several other
companies which he controls or founded.
These include W.R. Berkley Corporation, a
property and casualty insurance company, and
Interlaken Capital, Inc., a private
investment and consulting firm. Mr. Berkley
is also a director of Strategic
Distribution, Inc., a distributor of
maintenance, repair and operations products.
Mr. Berkley is 54 years of age.
Michael J. Ferris(1)...................... 1997 Mr. Ferris has been Pioneer's President and
Chief Executive Officer since January 1997.
Prior to joining Pioneer, he was employed by
Vulcan Materials Company from March 1974 to
January 1997, and he served as an Executive
Vice President of Vulcan from 1996 to 1997.
Vulcan is engaged in the production of
industrial materials and commodities with
significant positions in two industries,
construction aggregates and chemicals. Mr.
Ferris is also a director of ChemFirst,
Inc., a specialty chemical company. Mr.
Ferris is 55 years of age.
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR OF
PIONEER BUSINESS EXPERIENCE
CONTINUOUSLY DURING PAST 5 YEARS,
NAME SINCE AGE AND OTHER INFORMATION
- ---- ------------ -------------------------
<S> <C> <C>
Directors to Continue in Office Until 2001
Donald J. Donahue(1)(2)(3)(4)............. 1988 Mr. Donahue has been a private investor
since February 1996, and he has served as
Pioneer's Vice Chairman of the Board of
Directors 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. 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 75 years of
age.
Richard C. Kellogg, Jr. .................. 1995 Mr. Kellogg has been a private investor
since January 1997. He served as Pioneer's
President from April 1995 to January 1997.
Mr. Kellogg was a co-founder of Pioneer
Americas, Inc. and served as Chairman of the
Board and as a director of that company from
its formation in 1988 until its acquisition
by Pioneer in 1995. Mr. Kellogg is 48 years
of age.
Jack H. Nusbaum(3)(4)..................... 1988 Mr. Nusbaum is Chairman of the New York law
firm of Willkie Farr & Gallagher, where he
has been a partner for more than twenty-five
years. Mr. Nusbaum is a director of W.R.
Berkley Corporation, a property and casualty
insurance holding company, Strategic
Distribution, Inc., a distributor of
maintenance, repair and operations products,
Prime Hospitality Corp., a national hotel
company, Fine Host Corporation, a publicly
traded contract food service management
company, and The Topps Company, Inc., a
baseball card and collectibles company. Mr.
Nusbaum is 59 years of age.
Directors to Continue in Office Until 2002
Philip J. Ablove.......................... 1991 Mr. Ablove has been Pioneer's Executive Vice
President and Chief Financial Officer since
November, 1999. He was Pioneer's Vice
President and Chief Financial Officer from
March 1996 to November 1999. He was a
consultant and officer and director
specializing in financially distressed
companies from 1983 to 1996, and in a
consulting role he served as Acting Chief
Financial Officer of Pioneer from October
1995 to March 1966. Mr. Ablove is 59 years
of age.
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR OF
PIONEER BUSINESS EXPERIENCE
CONTINUOUSLY DURING PAST 5 YEARS,
NAME SINCE AGE AND OTHER INFORMATION
- ---- ------------ -------------------------
<S> <C> <C>
Andrew M. Bursky(1)(2).................... 1994 Mr. Bursky has been a Managing Director of
Pegasus Investors, L.P. , a private
investment firm, since June 1999. From May
1980 to May 1999, he was a Managing Director
of Interlaken Capital, Inc., a private
investment and consulting firm. He has been
Chairman of the Board of Strategic
Distribution, Inc., a distributor of
maintenance, repair and operations products,
since July 1988. Mr. Bursky is 43 years of
age.
John R. Kennedy........................... 1998 Mr. Kennedy retired as President and Chief
Executive Officer of Federal Paper Board
Company, Inc. in 1996, after serving that
company since 1975. He also serves as a
director of International Paper Company,
Chase Brass Industries, Inc., De
Vlieg-Bullard, Inc., and Holnam Inc. Mr.
Kennedy is 69 years of age.
</TABLE>
- ---------------
(1) Member of Executive Committee.
(2) Member of Compensation and Stock Option Committee.
(3) Member of Audit Committee.
(4) Member of Administrative 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.
HOW ARE DIRECTORS COMPENSATED?
In 1992, the Board of Directors established a policy under which each
director who is not also a Pioneer employee receives an annual retainer and a
quarterly fee for attendance at meetings. The Board has established the annual
retainer at a level of $22,000, and the quarterly meeting fee at $2,000. Pioneer
granted each non-employee director 3,229 shares of Class A Common Stock under
Pioneer's 1993 Non-Employee Director Stock Plan in payment of the 1999 annual
retainer.
HOW OFTEN DID THE BOARD MEET DURING 1999?
Pioneer's Board of Directors met four times during 1999. Each of the
persons serving as a director in 1999 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 1999. Action by written consent is also considered by the
Board and its committees from time to time.
WHAT COMMITTEES HAS THE BOARD ESTABLISHED?
The Board has four standing committees: the Executive Committee, the
Compensation and Stock Option Committee, the Audit Committee and the
Administrative Committee.
Executive Committee. The Executive Committee, composed of Messrs. Berkley,
Bursky, Donahue and Ferris, is authorized to act on behalf of the Board during
periods between Board meetings. The Committee did not meet during 1999.
6
<PAGE> 9
Compensation and Stock Option Committee. The Compensation and Stock Option
Committee establishes the level of compensation to be paid to Pioneer's officers
and administers Pioneer's stock option plans. The Committee met once during
1999. Messrs. Berkley, Bursky and Donahue serve on the Committee.
Audit Committee. The Audit Committee, composed of Messrs. Donahue, Kennedy
and Nusbaum, advises the Board as to the selection of Pioneer'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 once during 1999.
Administrative Committee. The Administrative Committee, consisting of
Messrs. Berkley, Donahue and Nusbaum, was formed during 1997 to establish the
qualifications for service as a director and to seek suitable candidates for
such service. The Committee did not meet during 1999. The Committee will
consider individuals recommended by stockholders for service on the Board of
Directors. Such recommendations should be provided to Pioneer's Corporate
Secretary.
BANKRUPTCY ACTION
Mr. Bursky was an executive officer of Blue Lustre Products, Inc., a
privately-owned company engaged in the sale and leasing of carpet cleaning
equipment and other carpet cleaning products. In October 1995, while he was an
executive officer, Blue Lustre filed a chapter 11 petition for reorganization
under federal bankruptcy law.
WHAT ARE PIONEER'S POLICIES WITH RESPECT TO EXECUTIVE COMPENSATION?
The Compensation Committee of Pioneer's Board of Directors has furnished
the following report on executive compensation for 1999.
In 1999, compensation for Pioneer's executives was made up of two
components, base salary and long-term incentives. The Compensation and Stock
Option Committee of the Board of Directors reviews each of the components on a
regular 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 Pioneer to attract and retain
highly-competent executives. However, given the downturn in the industry's
business cycle and the anticipated effects on Pioneer's results, it was
determined that Pioneer's executive officers would not be awarded salary
increases during 1999. Long-term incentives have been provided in the form of
stock option grants to executives upon the commencement of service and
additional grants on a periodic basis. Grants are based on the perceived value
that an executive will provide to Pioneer.
A third component of compensation, an annual cash bonus, is provided to
Pioneer's executives, as well as all employees in most of Pioneer's operating
units, under Pioneer's Shared Earnings Plan. Under that plan, a specified return
on Pioneer's assets must be achieved before cash bonuses are paid. That return
was not achieved in 1999, and as a result no cash bonuses were paid for 1999
performance.
Michael J. Ferris has served as Pioneer's President and Chief Executive
Officer since January 4, 1997, pursuant to an employment agreement that provided
for an annual salary of not less than $350,000. Mr. Ferris' salary for service
as Pioneer's chief executive officer during 1999 was $400,000, an amount that
was determined on the same basis as the salaries of other executives of Pioneer.
He was awarded options for the purchase of 26,750 shares of Common Stock,
reflecting recognition by the Committee and the Board of Directors of Mr.
Ferris' efforts in guiding Pioneer during a difficult industry environment. His
participation in Pioneer's Shared Earnings Plan did not result in the payment of
any cash bonus with respect to 1999.
William Berkley
Andrew M. Bursky
Donald J. Donahue
7
<PAGE> 10
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 Pioneer and, as of April
19, 2000, may be deemed to beneficially own approximately 59.9% of the Class A
Common Stock (representing approximately 56.6% of the voting power of Pioneer's
stock).
During 1999, Pioneer entered into agreements with an affiliate of Strategic
Distribution, Inc. pursuant to which the affiliate provides procurement,
handling and data management for maintenance, repair and operating supplies at
Pioneer's facilities in Henderson, Nevada and St. Gabriel, Louisiana. Mr.
Berkley owns approximately twenty-five percent of Strategic Distribution's
common stock, and serves as a director of the company. Andrew R. Bursky, a
Pioneer director who is also a member of the Compensation and Stock Option
Committee, is a director and chairman of the board of Strategic Distribution.
Since January 1, 1999, Pioneer has paid the Strategic Distribution affiliate a
total of approximately $610,000 for services rendered to Pioneer under the
agreements.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
In accordance with the 1995 agreement relating to the acquisition of
Pioneer Americas, Inc. by Pioneer, certain assets not necessary for Pioneer's
chlor-alkali business are held for the benefit of the former owners of Pioneer
Americas. Those assets include certain excess real property in St. Gabriel,
Louisiana and Mojave, California, and Pioneer's 32% equity interest in Basic
Management, Inc. and, directly or indirectly, 37.22% of the partnership interest
in The LandWell Company, L.P. Any proceeds from the assets are held in a
separate contingent payment account for the benefit of the former owners,
subject to offset against any claims by Pioneer under environmental warranties
provided to Pioneer by the former owners. As of March 31, 2000, the contingent
payment account had a balance of approximately $6.6 million; distributions to
the former owners of funds held in the account will not occur before April 20,
2005. Included among the former owners are Richard C. Kellogg, Jr., a director
of Pioneer and the beneficial owner of 7.3% of Pioneer's Class A Common Stock,
and Frans G. J. Speets, who is the beneficial owner of 6.1% of Pioneer's Class A
Common Stock. Messrs. Kellogg and Speets have interests in the contingent
payment account of 39.4% and 29.4%, respectively.
During 1999 a dispute arose between the former owners and Pioneer regarding
the extent of the environmental indemnity and the proper form of notice to be
provided by Pioneer. Pioneer and the former owners are in the process of seeking
a negotiated settlement of the dispute. Pending resolution of the dispute, the
former owners agreed to the disbursement to Pioneer from the contingent payment
account of $250,000 for environmental costs incurred during the period from May
1, 1999, to September 30, 1999, and the former owners and Pioneer agreed that
Pioneer will be reimbursed for fifty percent of the amount of environmental
costs incurred after September 20, 1999, other than costs incurred in connection
with the closing of Pioneer's facility in City of Industry, California. At March
31, 2000, Pioneer had not been reimbursed for $2.1 million in costs it contends
are covered by the indemnity, pending resolution of the dispute.
A Pioneer subsidiary is party to an agreement with Basic Management, Inc.
for the delivery of water to the production facility in Henderson, Nevada. 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 under certain circumstances. Basic Management also charges Pioneer and
other companies in the Henderson industrial complex for power distribution
services. Richard C. Kellogg, Jr., a director of Pioneer, serves as chairman of
the board of directors of Basic Management. Since January 1, 1999, Pioneer has
paid Basic Management approximately $1.8 million for providing such services. At
March 31, 2000, the net amount owed to Basic Management was approximately
$200,000.
In connection with the 1995 acquisition agreement, Messrs. Kellogg and
Speets each also hold promissory notes payable by Pioneer in the principal
amounts of $4,512,330 and $3,366,062, respectively. Since January 1, 1999,
Pioneer has paid those individuals interest on the notes in the amounts of
approximately $540,000 and $402,000, respectively. The notes are payable in five
equal annual installments beginning on April 1, 2001.
8
<PAGE> 11
On April 20, 1995, the Company entered into a five-year employment
agreement with Mr. Kellogg pursuant to which he served as President of Pioneer.
Mr. Kellogg resigned as Pioneer's President on January 4, 1997. He continued to
perform services for Pioneer, and pursuant to the terms of the agreement Pioneer
continued to pay Mr. Kellogg an annual salary of $300,000 until the termination
of the agreement on April 20, 2000.
In connection with the 1995 acquisition agreement Pioneer also entered into
an employment agreement with Mr. Speets, pursuant to which Pioneer agreed to pay
Mr. Speets an annual salary of $190,000 through April 30, 2000.
Jack H. Nusbaum, a director of Pioneer, is Chairman of the law firm of
Willkie Farr & Gallagher, which acts as counsel to Pioneer from time to time.
Mr. Nusbaum is also a director of Strategic Distribution, Inc., an affiliate of
which has entered into the agreements with Pioneer that are discussed above
under "Compensation Committee Interlocks and Insider Participation."
Each transaction involving officers of Pioneer, its controlling persons or
affiliates was authorized at the time of the transaction or subsequently
ratified by a majority of Pioneer's disinterested directors. It is Pioneer's
practice not to enter into any transactions with affiliated parties unless a
majority of the disinterested and independent directors determines that the
terms of such transactions are at least as favorable to Pioneer as those
available in similar transactions made with non-affiliated parties.
9
<PAGE> 12
SUMMARY COMPENSATION TABLE
The following table provides information with respect to the compensation
of Pioneer's President and Chief Executive Officer and the four other most
highly paid executive officers. Where appropriate, share data reflects the three
seven percent stock dividends paid to holders of record during the last three
years.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION ALL OTHER
------------------------------ OTHER ANNUAL AWARDS COMPEN-
NAME AND PRINCIPAL POSITION YEAR(1) SALARY($) BONUS($) COMPENSATION(2)($) OPTIONS(3)(#) SATION($)(4)
--------------------------- ------- --------- -------- ------------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Ferris 1999 400,010 -- -- 26,750 4,800
President and Chief 1998 387,506 78,581 -- 28,622 4,200
Executive Officer 1997 345,965 200,000 80,505 490,005 4,200
Norman E. Thogersen 1999 217,645 -- 8,970 10,700 --
Executive Vice President 1998 187,594 78,790 13,200 13,738 --
and Chief Operating 1997 29,250 -- -- 30,625 --
Officer
Philip J. Ablove 1999 225,005 -- -- 8,025 4,800
Executive Vice President 1998 225,003 36,873 -- 9,159 4,125
and Chief Financial 1997 225,003 99,001 63,442 65,539 2,406
Officer
John R. Beaver 1999 122,354 -- -- 2,140 2,965
Vice President and 1998 118,965 9,593 -- 2,289 3,563
Controller 1997 104,748 25,950 41,315 12,250 1,260
Kent R. Stephenson 1999 168,004 -- -- 4,280 4,800
Vice President, General 1998 164,753 20,039 -- 4,579 4,800
Counsel and Secretary 1997 155,006 51,502 -- 12,250 3,361
</TABLE>
- ---------------
(1) Mr. Ferris was employed by Pioneer on January 4, 1997, and Mr. Thogersen was
employed by Pioneer on October 31, 1997.
(2) The amounts for Mr. Thogersen relate to the personal use of a company car
and premiums related to a company-paid life insurance policy. Other
indicated amounts relate to reimbursement of relocation and moving expenses.
(3) Expressed in terms of the numbers of shares of Pioneer's Class A Common
Stock underlying options granted during the year. Option grants in 1999 were
under Pioneer's 1998 Stock Plan. All other option grants were under
Pioneer's 1995 Stock Incentive Plan, with the exception of 163,844 shares
granted to Mr. Ferris in 1997, which were granted pursuant to agreement
between Pioneer and Mr. Ferris.
(4) Represents amounts contributed to match a portion of the employee's
contributions under a 401(k) plan.
PENSION PLAN
Defined benefit retirement coverage is provided to U.S.-based executive
officers under Pioneer's Pension Plan. At the normal retirement age of 65,
participants under the plan 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 and annual performance and
incentive programs, but excludes all other items of compensation. In addition,
Pioneer maintains a nonqualified, unfunded plan, the Restoration Retirement
Plan, which provides benefits for key salaried employees. The plan provides
benefits in an amount equal to the amount that would be paid under the pension
plan but for the maximum compensation limit (currently $160,000) under the
Internal Revenue Code. Each of the executives named in the Summary Compensation
Table, with the exception of Mr. Thogersen, participates in the Restoration
Retirement Plan. The following table sets forth benefits payable under the
Pension Plan and the Restoration Retirement Plan, computed as a straight life
annuity
10
<PAGE> 13
beginning 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.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE (1)
---------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000................................. $23,802 $ 31,735 $ 39,669 $ 47,603 $ 55,537
150,000................................. 28,810 38,413 48,016 57,620 67,223
175,000................................. 33,818 45,091 56,364 67,636 78,909
200,000................................. 38,826 51,769 64,711 77,653 90,595
225,000................................. 43,835 58,446 73,058 87,669 102,281
250,000................................. 48,843 65,124 81,405 97,686 113,967
300,000................................. 58,860 78,480 98,099 117,719 137,339
400,000................................. 78,893 105,190 131,488 157,786 184,083
450,000................................. 88,909 118,546 148,182 177,819 207,455
500,000................................. 98,926 131,901 164,877 197,852 230,827
</TABLE>
- ---------------
(1) The estimated years of credited service for each of the named executive
officers of Pioneer as of December 31, 1998, were: Mr. Ferris -- 3 years;
Mr. Ablove -- 3 years; Mr. Beaver -- 3 years and Mr. Stephenson -- 6 years.
Under the Internal Revenue Code the amount of Pioneer's contributions under
its 401(k) Savings Plan are also limited if an individual's annual compensation
is in excess of $160,000. Under the Restoration Retirement Plan unfunded
benefits are provided to each of the executives named in the Summary
Compensation Table, with the exception of Mr. Thogersen, in an amount equal to
three percent of pay in excess of the salary limitation amount.
Defined benefit retirement coverage is provided to Mr. Thogersen under the
pension plan maintained by Pioneer's Canadian subsidiary. At the normal
retirement age of 65, Mr. Thogersen will be eligible to receive benefits equal
to 65% of his covered compensation for the average of his best consecutive 36
months of earnings, based on what will have been 42 years of credited service at
that time. Assuming an average annual increase of 3% from his 1999 compensation
level, Mr. Thogersen's annual pension benefit would be US$223,481. Covered
compensation under the plan includes base pay and annual performance and
incentive programs and commissions, but excludes all other items of
compensation. While Revenue Canada regulations limit pension benefits, pension
benefits due to Mr. Thogersen in excess of the limits will be provided under an
unfunded, excess pension plan.
OPTION GRANTS IN 1999
The following table provides information with respect to grants of stock
options during 1999 to the named executive officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------- VALUE AT ASSUMED
PERCENT ANNUAL RATES
NUMBER OF OF TOTAL EXERCISE OF STOCK
SHARES OPTIONS OR BASE PRICE APPRECIATION FOR
UNDERLYING GRANTED TO PRICE OPTION TERM
OPTIONS EMPLOYEES ($ PER EXPIRATION ----------------------
NAME GRANTED (#) IN 1999 SHARE) DATE 5%($) 10%($)
- ---- ----------- ---------- ------------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Ferris........................ 21,400 18.3 4.089 3/23/09 55,028 139,452
Norman E. Thogersen...................... 10,700 9.1 4.089 3/23/09 27,514 69,726
Philip J. Ablove......................... 8,025 6.8 4.089 3/23/09 20,635 52,294
John R. Beaver........................... 2,140 1.8 4.089 3/23/09 5,503 13,945
Kent R. Stephenson....................... 4,280 3.7 4.089 3/23/09 11,006 27,890
</TABLE>
11
<PAGE> 14
All of the options were granted under Pioneer's 1998 Stock Plan, with
exercise prices equal to the fair market value of the Common Stock on the date
of grant. All of the options are exercisable in full on or after March 23, 2002.
The amounts indicated as potential realizable values reflect 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
Pioneer's stock price. Pioneer did not use an alternative formula for a grant
date valuation, as it is not aware of any formula that will determine with
reasonable accuracy a present value based on future unknown or volatile factors.
AGGREGATED YEAR-END OPTION AMOUNTS
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, 1999, with respect to options to purchase Class A Common
Stock of Pioneer. 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. The closing
price of the Class A Common Stock on December 31, 1999, the last trading day of
Pioneer's fiscal year, was $7.063 per share. None of the named executive
officers exercised any stock options during the year.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS AT
1999 (#) DECEMBER 31, 1999 ($)(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Michael J. Ferris................................... 140,877 404,500 415,091 975,627
Norman E. Thogersen................................. -- 55,063 -- 31,822
Philip J. Ablove.................................... 65,539 17,184 162,930 23,866
John R. Beaver...................................... -- 16,679 -- 32,212
Kent R. Stephenson.................................. 13,107 21,109 27,656 38,577
</TABLE>
EMPLOYMENT AGREEMENTS AND SEVERANCE AND CHANGE-IN-CONTROL ARRANGEMENTS
On January 4, 1997, Pioneer entered into a three-year employment agreement
with Michael J. Ferris, providing for Mr. Ferris' service as Pioneer's President
and Chief Executive Officer. The agreement provided for an annual salary of not
less than $350,000. Under the agreement, Mr. Ferris was 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. The agreement terminated in accordance with its terms on
January 4, 2000. Mr. Ferris continues to serve as Pioneer's President and Chief
Executive Officer.
On March 8, 1996, Philip J. Ablove, who is a director of Pioneer, was
elected as an officer of the Company, after serving as a management consultant
to Pioneer since October 1995. Pioneer agreed to pay Mr. Ablove an annual salary
of $225,000. Following any change of control during his employment by Pioneer,
he is entitled to a severance payment equal to at least twelve months' salary.
12
<PAGE> 15
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, 1994, and
ending December 31, 1999,to the cumulative total return on the Standard & Poor's
500 Stock Index and the Standard & Poor's Midcap 400 Chemicals Stock Index
(Airgas, Inc., Cabot Corporation, Calgon Carbon Corporation, Georgia Gulf
Corporation, IMC Global Inc., Lyondell Petrochemical Company and Solutia Inc.).
Dates are for fiscal years ending December 31 in each of the years indicated.
The graph assumes a $100 investment in Pioneer's Common Stock and in each index
on December 31, 1994, and that all dividends paid by the companies included in
each index were reinvested.
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Pioneer 100 419.75 332.61 934.33 304.69 575.61
S&P 500 100 137.58 169.17 225.60 290.08 351.11
Midcap 400 Chemicals 100 120.94 120.43 125.32 94.44 76.45
</TABLE>
13
<PAGE> 16
PROPOSAL 2:
APPOINTMENT OF INDEPENDENT AUDITORS
Deloitte & Touche LLP has served as Pioneer's independent accountants for a
number of years, and the firm has been appointed by the Board of Directors as
independent certified public accountants to audit Pioneer's financial statements
for the fiscal year ending December 31, 2000. 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 2000 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.
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 May 25, 2000, will be held on or about May 24, 2001. All
stockholder proposals relating to a proper subject for action at the 2001 Annual
Meeting to be included in Pioneer's Proxy Statement and form of proxy relating
to that meeting must be received by Pioneer for its consideration at its
principal executive offices no later than December 23, 2000, 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.
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 not identified any instances of reports for the year ended
December 31, 1999, which were not filed in a timely manner.
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
April 24, 2000
14
<PAGE> 17
PIONEER COMPANIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE MAY 25, 2000 ANNUAL MEETING
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 Westin
Stamford, One Stamford Place, Stamford, Connecticut on Thursday, May 25, 2000,
at 2:00 p.m., and any adjournments thereof, on all matters coming before said
meeting.
DIRECTORS RECOMMEND A VOTE "FOR" ELECTION OF ALL NOMINEES AND "FOR" PROPOSAL 2.
1. ELECTION OF TWO DIRECTORS TO A CLASS EXPIRING IN 2002.
[ ] FOR nominees listed below [ ] WITHHOLD AUTHORITY to vote for nominees
William R. Berkley and Michael J. Ferris
[ ] FOR, except vote withheld from the following nominee(s)
- --------------------------------------------------------------------------------
2. 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> 18
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES AND FOR ITEM
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.
