HITOX
CORPORATION
of America
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 18, 1999
The Annual Meeting of Shareholders of Hitox Corporation of America, a
Delaware corporation, will be held at the Omni Marina Hotel, 707 N.
Shoreline, Corpus Christi, Texas in the Riviera 4 Room, (entrance level), on
Tuesday, May 18, 1999, at 9:00 a.m., local time, for the following purposes:
1. To elect a board of six (6) directors.
2. To ratify the appointment of Ernst & Young LLP as independent
auditors for 1999 by the Board of Directors.
3. To transact such other business as may properly come before
the meeting.
The Board of Directors has established the close of business on March
24, 1999, as the record date for determining shareholders entitled to notice
of and to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Elizabeth K. Morgan, Secretary
April 14, 1999
YOUR VOTE IS IMPORTANT
Even if you plan to attend the meeting,
we urge you to mark, sign and date the
enclosed proxy and return it promptly
in the enclosed envelope.
<PAGE> 1
<PAGE>
HITOX CORPORATION OF AMERICA
722 Burleson Street
Post Office Box 2544
Corpus Christi, Texas 78403
---------------------------
PROXY STATEMENT
---------------------------
This Proxy Statement and accompanying proxy is furnished by Hitox
Corporation of America (hereinafter the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company to be used
at the Annual Meeting of Stockholders to be held at 9:00 a.m. (local time) on
May 18, 1999, at the Omni Marina Hotel, 707 N. Shoreline, Corpus Christi,
Texas, and at any adjournment thereof. This Proxy Statement and the enclosed
proxy were mailed on or about April 14, 1999.
The Company will bear the cost of soliciting the proxies. In addition
to being solicited by mail, proxies may be solicited by personal interview,
telephone and telegram by directors, officers and employees of the Company.
The Company expects to reimburse brokers or other persons for their
reasonable out-of-pocket expenses in forwarding proxy material to the
beneficial owner.
Any proxy may be revoked at any time prior to its exercise by written
notice to the Secretary of the Company or by submission of another proxy
having a later date. No notice of revocation or later dated proxy, however,
will be effective until received by the Company at or prior to the Annual
Meeting. Mere attendance at the meeting will not of itself revoke the proxy.
Properly executed proxies in the accompanying form, received in due time and
not previously revoked, will be voted at the Annual Meeting or any
adjournment thereof as specified therein by the person giving the proxy, but
if no specification is made, the shares represented by the proxy will be
voted in favor of the proposals shown thereon.
Only stockholders of record at the close of business on March 24, 1999,
(the "Record Date") will be entitled to notice of and to vote at the Annual
Meeting. There were outstanding at the close of business on the Record Date
4,657,487 shares of the Company's Common Stock, each of which is entitled to
vote in person or by proxy. The Common Stock is the only class of capital
stock outstanding and entitled to vote at the Annual Meeting. The holders of
a majority of the total shares of Common Stock issued and outstanding and
entitled to vote at the meeting, whether present in person or represented by
proxy, will constitute a quorum for the transaction of business at the
Meeting. A quorum being present at the Annual Meeting, election of the
director nominees requires the affirmative vote of a majority of the shares
present, in person or by proxy, at the Meeting, and approval of Proposal 2
requires the affirmative vote of at least a majority of the shares present,
in person or by proxy, at the Meeting. Neither the Company's Certificate of
Incorporation nor its By-Laws provide for cumulative voting rights.
Abstentions and broker non-votes are each counted to determine the number of
shares present at the meeting, and thus, are counted in establishing a
<PAGE> 2
<PAGE>
quorum. Broker non-votes will not be counted in determining the number of
shares voted for or against the proposed matters, and therefore will not
affect the outcome of the vote. Abstentions on a particular item (other than
the election of directors) will be counted as present and entitled to vote
for purposes of any item on which the abstention is noted, thus having the
effect of a "no" vote as to that proposal. With regard to the election of
directors, votes may be cast in favor of or withheld from each nominee; votes
that are withheld will be excluded entirely from the vote and will have no
effect.
The Annual Report to Stockholders covering the Company's fiscal year
ended December 31, 1998 including audited financial statements, is enclosed
herewith, but does not form any part of the material for solicitation of
proxies.
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to those persons
known to the Company who, as of December 31, 1998, own or may be deemed to
own beneficially more than five percent of the Common Stock of the Company.
Name and Address of Number of Percent
Beneficial Owner Shares Beneficially Owned (1) of Class
------------------ ----------------------------- --------
Megamin Ventures Sdn Bhd 1,353,000 (2) 29.1%
41 Jalan Sultan Azlan Shah Utara
31400 Ipoh, Perak
Malaysia
The Clark Estates, Inc. 1,159,780 (3) 24.9%
One Rockefeller Plaza
31st Floor
New York, NY 10020
Pecks Management Partners, Ltd. 1,211,111 (4) 22.9%
One Rockefeller Plaza
New York, NY 10020
(See following footnotes)
(l) Beneficial ownership as reported in the above table has been determined
in accordance with Rule 13d-3 promulgated under the Securities Exchange
Act of 1934, as amended.
<PAGE> 3
<PAGE>
(2) Megamin Ventures Sdn Bhd is an investment holding corporation organized
under the laws of Malaysia which provides management services. Mr.
Christopher J. McGougan, a director of the Company, is the Executive
Director of Megamin Ventures Sdn Bhd and exercises shared voting and
investment power over these shares; however, Mr. McGougan disclaims such
beneficial ownership.
(3) Information is based on a Schedule 13G filed with the SEC dated January
22, 1997 and other information provided by The Clark Estates, Inc. The
Clark Estates, Inc. provides administrative and investment services to a
number of Clark family accounts which beneficially own an aggregate of
1,159,780 shares, including Jane Forbes Clark who owns 459,602 shares
and Anne L. Peretz who owns 448,825 shares. Kevin S. Moore, Senior Vice
President of The Clark Estates, Inc., has been granted powers of
attorney to exercise voting and investment power as to 1,159,780 shares.
The Clark Estates, Inc. and Mr. Moore have shared voting and investment
power as to 1,159,780 shares; Jane Forbes Clark has shared voting and
investment power as to 459,602 shares; Anne L. Peretz has shared voting
and investment power as to 448,825 shares.
(4) Pecks Management Partners, Ltd. does not own any outstanding shares of
Hitox Corporation Common Stock. The amounts shown in the table consists
solely of shares issuable pursuant to outstanding Warrants held by NAP &
Co., Northman & Co. and Fuelship & Co. exercisable at $4.50 per share
with respect to 1,111,111 shares and at $2.50 per share with respect to
100,000 shares. NAP & Co., Northman & Co., and Fuelship & Co., of which
Pecks Management Partners, Ltd. serves as investment manager, may be
deemed to be a "group" as that term is used in Section 13d-3 of the
Securities Exchange Act of 1934, as amended. NAP & Co. owns Warrants to
purchase 847,778 shares, Northman & Co. owns Warrants to purchase
199,107 shares, and Fuelship & Co. owns Warrants to purchase 164,226
shares of the 1,211,111 shares. Because Pecks Management Partners, Ltd.
serves as investment manager, it may be deemed to be a beneficial owner
of the shares that may be issued pursuant to such Warrants, although it
disclaims such beneficial ownership.
<PAGE> 4
<PAGE>
ELECTION OF DIRECTORS
The By-Laws of the Company provides that the Board of Directors shall
consist of not less than six (6). At the Annual Meeting, six (6) directors
are to be elected to the Board of Directors, each to hold office until the
2000 Annual Meeting or until his successor is elected and qualifies. The
persons named as proxies in the enclosed proxy card, who have been designated
by the Board of Directors, unless otherwise instructed in such proxy, intend
to vote the shares represented by the proxy for the election of the nominees
listed in the table below for the office of director of the Company. The
nominees have been proposed by the Board of Directors. If any such nominee
should become unavailable for election, the persons named as proxies intend
to vote for such substitute nominee as may be proposed by the Board of
Directors, unless otherwise instructed in such proxy. No circumstances are
now known, however, that would prevent any of the nominees from serving and
the nominees have agreed to serve if elected.
The information appearing below with respect to the business experience
during the past five years of each nominee for director, directorships held
and each director as of February 19, 1999 has furnished age. All of the
nominees are presently directors of the Company.
Director
Name and Principal Occupation Age Since
----------------------------- --- --------
ROBERT J. CRESCI 55 1992
Managing Director, Pecks Management Partners, Ltd.
A director of Bridgeport Machines, Inc.; Sepracor, Inc.;
Arcadia Financial, Ltd.; EIS International, Inc.;
Aviva Petroleum Inc.; Quest Educational Corporation;
Film Roman, Inc.; SeraCare, Inc.; Source Media, Inc.;
Candlewood Hotel Co., Inc.; Castle Dental Centers, Inc.
and several private companies.
WILLIAM B. HAYES 73 1990
Chairman of the Board since September 1994.
Consultant and Investor.
CHRISTOPHER J. McGOUGAN 53 1998
Executive Director, Megamin Ventures Sdn Bhd.
Director of several private companies.
KEVIN S. MOORE 44 1992
Senior Vice President, The Clark Estates, Inc.
A director of Ducommun, Inc.
MICHAEL A. NICOLAIS 73 1982
Senior Managing Director, Carret & Co., Inc.
A director of Basin Exploration Co.
<PAGE> 5
<PAGE>
BERNARD A. PAULSON 70 1992
Acting Chief Executive Officer since October 1997.
Chairman, The Automation Group, Inc.
A director of Orion Refining Corporation.
Retired President of Koch Refining Company with
over 50 years experience in the refining and
petrochemical industries, including
Kerr-McGee Corporation.
Mr. Cresci was nominated to serve as a director pursuant to a Note
Purchase Agreement, dated June 15, 1992, between the Company and purchasers
of the Company's subordinated notes ("Notes"), NAP & Co., Northman & Co. and
Fuelship & Co. (the "Noteholders"). Pursuant to that agreement, the Company
has agreed to use its best efforts to include the Noteholders' designee, Mr.
Cresci, on the slate of nominees proposed by the Company for election to the
Board of Directors, and to solicit proxies in favor of such designee,
together with the other nominees in the Company-sponsored slate. Such
obligation will continue so long as the Noteholders hold at least 25% of
shares of common stock issuable under warrants issued to the Noteholders (the
"Warrant Stock"), or warrants to purchase at least 25% of the Warrant Stock.
Additionally, pursuant to a Voting Agreement dated June 15, 1992, among
the Noteholders and The Clark Estates, The Clark Estates agreed to vote its
shares in favor of the designee of the Noteholders for election to the
Company's Board of Directors, until the Noteholders ceased to own at least an
aggregate 25% of the Notes. The Noteholders' designee also agreed to vote
their shares in favor of a designee of The Clark Estates (currently Mr.
Moore) for election to the Company's Board of Directors, until The Clark
Estates ceased to own, in the aggregate, at least 25% of the number of shares
owned on the date of that Agreement. On July 31, 1996, the Notes were
prepaid. Accordingly, the requirement that The Clark Estates vote its shares
in favor of the Noteholders' designee (currently Mr. Cresci) has terminated;
however, the requirement that the Noteholders' vote in favor of the The Clark
Estates' designee remains effective.
Directors' Attendance
During the year ended December 31, 1998, there were seven meetings of
the Board of Directors of the Company. No incumbent director attended fewer
than 75% of the aggregate of all meetings of the Board and of the Committees
of the Board on which such director served.
<PAGE> 6
<PAGE>
Directors' Compensation
Non-employee members of the Board of Directors are compensated by the
Company for board meetings attended in the amount of $1,000 and a quarterly
retainer of $1,500 with the chairman receiving an additional $500 per
quarter. All directors are reimbursed for their reasonable travel expenses
incurred in attending meetings of the Board or any Committee or otherwise in
connection with their service as a director. Additionally, compensation of
$500 is paid to the non-employee directors for each committee meeting
attended.
The Company's 1990 Incentive Plan (the "Plan"), approved at the May 18,
1990 Annual Meeting of Shareholders, provides that each non-employee director
of the Company on the first business date after each Annual Meeting of
Shareholders of the Company, beginning with the 1990 Annual Meeting of
Shareholders, will automatically be granted a non-qualified option for 2,500
shares of Common Stock under the Plan. Each option so granted to a non-
employee director will have an exercise price per share equal to the fair
market value of the common stock on the date of grant of such option. Each
such option will be fully exercisable at the date of grant and will expire
upon the tenth anniversary of the date of grant. On May 20, 1998, Messrs.
Cresci, Hayes, McGougan, Moore, Nicolais, and Paulson were each granted
options to purchase 2,500 shares at the per share exercise price of $2.063,
none of which were exercised during fiscal 1998.
On October 30, 1997, and until the selection of a new President and
Chief Executive Officer, the Board of Directors appointed Bernard A. Paulson,
Director, as interim Chief Executive Officer with compensation of $4,000 per
month and $1,000 per day for negotiation of special projects. Additionally,
the Board of Directors retained William B. Hayes, Chairman, as consultant
with compensation of $500.00 each day of consultation. During fiscal year
1998, the Company paid consulting fees to Mr. Paulson and Mr. Hayes in the
amount of $50,000 and $17,750 respectively.
Employee directors receive no additional compensation for service on the
Board of Directors or on Committees of the Board.
Section 16(a) Beneficial Ownership Reporting Compliance
Officers, directors and greater than ten-percent stockholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file. Based solely on its review of the copies of such
forms received by it, or written representations from certain reporting
persons, the Company believes that during the fiscal year ended December 3l,
1998, all filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were complied with.
<PAGE> 7
<PAGE>
Audit Committee
The Audit Committee held one meeting in conjunction with the full board
during the Company's fiscal year ended December 31, 1998. The Audit
Committee reviews the professional services provided by the Company's
independent auditors and the independence of such auditors from management of
the Company. The Committee also reviews the scope of the examination of the
financial statements by the independent auditors, the annual financial
statements of the Company and such other matters with respect to accounting,
auditing, and financial reporting practices and procedures of the Company.
The Committee is composed of three outside Directors of the Company: Messrs.
Hayes, McGougan, and Nicolais (Chairman).
Compensation and Incentive Plan Committee
This Committee is composed entirely of disinterested non-employee
directors consisting of Messrs. Cresci, Moore (Chairman), and Paulson. The
Committee met twice in 1998.
The Committee formulates and presents to the Board of Directors
recommendations as to the base salaries for all officers of the Company. The
Committee specifically reviews, approves, and establishes the compensation
for the President and Chief Executive Officer. The Committee is authorized
to select persons to receive awards under the Company's 1990 Incentive Plan,
to determine the terms and provisions of the awards, if any, the amount of
the awards, and otherwise administer the Company's 1990 Incentive Plan to the
full extent provided in such Plan. Except for the automatic annual grants to
non-employee directors described under "Directors' Compensation", none of the
members of the Committee are eligible to receive grants under the 1990
Incentive Plan.
<PAGE> 8
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning cash compensation
paid by the Company to the Acting Chief Executive Officer, the Senior Vice
President, and the former Chief Executive Officer:
Summary Compensation Table
--------------------------
Long Term
Name and Compensation All Other
Principal Position Year Salary($) Bonus($) Options/SARs(#) Compensation($)
- ------------------ --- --------- -------- --------------- ---------------
Bernard A. Paulson 1998 50,000(1) 2,500(2) 13,500(3)
Acting CEO 1997 10,000(1) 2,500(2) 10,500(3)
Kelso C. Brooks, Jr. 1998 96,923 17,945(4) 30,000(5) 3,130(4)
Sr. Vice President 1997 95,485 14,162(6)
1996 77,800 5,373(7)
Thomas A. Landshof 1997 117,479(8) 95,540(9)
Former President
and CEO 1996 131,250 29,302 1,988
(1) Consulting compensation. See "Directors' Compensation". Mr. Paulson
became Acting Chief Executive Officer in October 1997.
(2) Automatic options granted annually to each director.
(3) Board of Director and Committee Meeting fees.
(4) Earned in fiscal year; $17,945 deferred to 1999; $3,130 profit sharing.
(5) In March 1998, Mr. Brooks was granted 30,000 options under the 1990
Incentive Plan at an exercise price of $1.531 exercisable over five years
at 6,000 options per year.
(6) $10,000 promotion bonus; $4,162 year-end bonus.
(7) Earned in fiscal year; $2,573 deferred to 1997.
(8) Mr. Landshof resigned from the Company on October 30, 1997.
(9) Includes $49,349 severance pay accrued fiscal year; deferred to 1998, and
other benefits.
<PAGE> 9
<PAGE>
The following table sets forth information concerning options granted
the Senior Vice President of the Company in 1998. No SARs were granted.
Option/SAR Grants in Last Fiscal Year
-------------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in base price Expiration
Name Granted (#) Fiscal Year ($/Share) Date
---- ----------- ------------ --------- ----------
Kelso C. Brooks, Jr. 30,000 14.7 $1.531 03/03/08
Aggregated Option/SAR Exercises in Last Fiscal Year
---------------------------------------------------
and FY-End Option/SAR Values
----------------------------
Number of Securities
Shares Underlying Unexercised Value of Unexercised
Acquired Options/SARs at FY- In-the-Money Options/
or Value End (#) Exercisable/ SARs at FY-End ($)
Exercised(#) Realized($) Unexercisable Exercisable/Unexercisable
- ------------ ----------- -------------------- -------------------------
Name: Kelso C. Brooks, Jr.
0 0 6,000/24,000 $2,814/$11,256 (1)
(1) Value is stated based on the closing price of $2.00 per share of the
Company's Common Stock on Nasdaq SmallCap Market on December 31, 1998,
less exercise of $1.531.
Security Ownership of Management
The following table sets forth the number of shares of the Company's
Common Stock beneficially owned by each director and nominee for director and
all directors and executive officers of the Company as a group as of December
31, 1998.
<PAGE> 10
<PAGE>
Amount
Beneficially Percent
Name of Individual or Group Owned (1) of Class
- --------------------------- ------------ --------
Robert J. Cresci 1,227,986 (2)(3) 20.8%
William B. Hayes 76,500 (4) 1.6%
Christopher J. McGougan 1,355,500 (5) 29.1%
Kevin S. Moore 1,177,280 (6)(7) 24.9%
Michael A. Nicolais 32,500 (8) <1.0%
Bernard A. Paulson 59,500 (7)(9) <1.0%
All directors and executive officers as a group
(9 persons) 3,971,266 (10) 65.8%
(1) Unless otherwise indicated, each person has sole voting and investment
power over the shares indicated.
(2) Includes 847,778 shares issuable upon the exercise of warrants held by
NAP & Co., 199,107 shares issuable upon the exercise of warrants held by
Northman & Co., and 164,226 shares issuable upon the exercise of warrants
held by Fuelship & Co., of which Mr. Cresci exercises sole voting power
as Managing Director of Pecks Management Partners, Ltd.
(3) Includes options to acquire 16,875 shares that are subject to stock
options that are exercisable at or within sixty days of the Record Date.
(4) Consists of 72,500 shares that are subject to stock options that are
exercisable at or within sixty days of the Record Date, and 4,000
shares held under William B. Hayes Living Trust.
(5) Consists of 2,500 shares that are subject to stock options that are
exercisable at or within sixty days of the Record Date, 1,353,000 shares
held by Megamin Ventures Sdn Bhd, a Malaysian corporation, of which Mr.
McGougan has shared voting and investment power, and 5,000 shares held
jointly by Mr. McGougan and his spouse.
(6) Includes 1,159,780 shares held by the Clark family including Jane
Forbes Clark who owns 459,602 shares and Anne L. Peretz who owns 448,825
shares that may be deemed to be beneficially owned by Mr. Moore in
accordance with Rule 13d-3 promulgated under the Securities Exchange Act
of 1934, as amended. Mr. Moore, Senior Vice President of The Clark
Estates, Inc., has been granted powers of attorney to exercise voting
and investment power as to these 1,159,780 shares. The Clark Estates,
Inc. and Mr. Moore have shared voting and investment power as to
1,159,780 shares; Jane Forbes Clark has shared voting and investment
power as to 459,602 shares; Anne L. Peretz has shared voting and
investment power as to 448,825 shares.
(7) Includes 17,500 shares that are subject to stock options that are
exercisable at or within sixty days of the Record Date.
(8) Includes 22,500 shares that are subject to stock options that are
exercisable at or within sixty days of the Record Date, and 10,000
shares held by Mr. Nicolais.
<PAGE> 11
<PAGE>
(9) Includes 42,000 shares held jointly by Mr. Paulson and his spouse.
(10) Includes 163,375 shares which officers and directors as a group have the
right to acquire pursuant to stock options and 1,211,111 shares that the
entities named in number (2) above have the right to acquire pursuant to
warrants which are exercisable at or within sixty days of the Record
Date.
CERTAIN TRANSACTIONS
Following the completion of the sale of one million shares of Common
Stock to Megamin Ventures Sdn Bhd, the Company in February 1997 elected Keng
Kay Lim to the Company's Board of Directors. Mr. Lim resigned from the Board
of Directors following re-election at the 1998 Annual Meeting, and
Christopher J. McGougan, Executive Director of Megamin Ventures Sdn Bhd, was
elected to the Board of Directors of the Company succeeding Mr. Lim, and as
Mr. Lim's designee. Mr. Lim, through Megamin Ventures Sdn Bhd, is also the
controlling shareholder of Malaysian Titanium Corporation Sdn Bhd ("MTC"),
the Company's principal raw materials supplier. During 1995, 1996, 1997 and
1998 the Company paid MTC $2,964,000, $4,266,250, $4,077,400 and $4,375,753
respectively, for the purchase of raw materials (principally synthetic
rutile), under a supply contract that expires in December 1999. The Company
intends to negotiate a new supply contract with MTC prior to the expiration
of the current one.
RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE
YEAR ENDING DECEMBER 31, 1999
Upon the recommendation of the Audit Committee, the Board of Directors
has approved the retention of Ernst & Young LLP, certified public
accountants, to serve as independent auditors to audit the accounts of the
Company for the year ending December 31, 1999, subject to ratification of
such approval by the Company's stockholders. Ernst & Young LLP served as
independent auditors for the Company for the year ended December 31, 1998.
<PAGE> 12
<PAGE>
DATE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the next Annual
Meeting to be held in May, 2000 must be received by the Secretary of the
Company at its principal executive offices at 722 Burleson Street (P. O. Box
2544), Corpus Christi, TX 78403 for inclusion in the proxy statement and form
of proxy relating to that meeting no later than December 1, 1999.
OTHER BUSINESS
The Board knows of no other business to be brought before the Annual
Meeting. If, however, other business should properly come before the Annual
Meeting, the persons named in the accompanying proxy will vote the proxy as
in their discretion they may deem appropriate, unless directed in the proxy
to do otherwise.
<PAGE> 13
<PAGE>
