<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant / X /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / 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 Section 240.14a-11(c) or Section
240.14a-12
SARNIA CORPORATION
................................................................................
(Name of Registrant as Specified In Its Charter)
................................................................................
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ / $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 No.:
.......................................................................
3) Filing Party:
.......................................................................
4) Date Filed:
.......................................................................
<PAGE> 2
SARNIA CORPORATION
Dear Stockholder:
You are cordially invited to attend Sarnia Corporation's Annual Meeting of
Stockholders to be held at our offices, 6850 Versar Center, Springfield,
Virginia 22151 on Thursday, November 14, 1996, at 9:00 a.m. eastern standard
time.
The matters scheduled for consideration at the meeting are the election of
two directors and the ratification of the appointment of Sarnia's independent
accountants. We will also report to you on Sarnia's condition and performance,
and you will have the opportunity to question management on matters that affect
the interests of all stockholders.
You can reach Versar Center by car, from either I-395 or I-495. From I-395:
exit Edsall Road West to Backlick Road; left (south) on Backlick to Hechinger
Drive; left on Hechinger Drive to Versar Center. From I-495: exit Braddock Road
East to Backlick Road; right (south) on Backlick to Hechinger Drive; left on
Hechinger Drive to Versar Center.
The stockholders' interest in the affairs of Sarnia Corporation is
encouraged and it is important that your shares be represented at the meeting.
We hope you will be with us. WHETHER YOU PLAN TO ATTEND OR NOT, PLEASE COMPLETE,
SIGN, DATE, AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE IN THE
POSTPAID ENVELOPE PROVIDED. Giving your proxy will not limit your right to vote
in person or to attend the meeting, but it will assure your representation if
you cannot attend. Your vote is important.
Sincerely yours,
/s/ CHARLES I. JUDKINS, JR.
Charles I. Judkins, Jr.
President
October 11, 1996
<PAGE> 3
SARNIA CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Sarnia Corporation
The Annual Meeting of Stockholders of Sarnia Corporation (the "Company")
will be held at the Company's offices, 6850 Versar Center, Springfield, Virginia
22151, on Thursday, November 14, 1996, at 9:00 a.m. eastern standard time for
the following purposes:
1. To elect two directors for a three-year term expiring at the 1999
annual meeting of Stockholders;
2. To ratify the appointment of Arthur Andersen LLP as independent
accountants for fiscal year 1997; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only Stockholders of record at the close of business on September 30, 1996,
will be entitled to notice of and to vote at the meeting and any adjournments
thereof.
Your attention is directed to the Proxy Statement accompanying this Notice
for a more complete statement regarding the matters to be acted upon at the
meeting.
By Order of the Board of Directors,
/s/ PAMELA J. JOHN
Pamela J. John
Secretary
October 11, 1996
IMPORTANT NOTICE
YOUR PROXY IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE
AND RETURN THE ENCLOSED PROXY AS SOON AS POSSIBLE IN THE POST-PAID ENVELOPE
PROVIDED.
<PAGE> 4
SARNIA CORPORATION
------------------------------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 14, 1996
------------------------------------------------------------
Sarnia (formerly Versar Virginia, Inc.) was the wholly-owned subsidiary of
Versar, Inc., ("Versar") and since 1982 has owned and operated an 18.3 acre
office park in Springfield, Virginia known as Versar Center. On June 30, 1994,
Versar spun-off Sarnia to Versar's shareholders on a one to one basis. The
spin-off of Sarnia from Versar was to separate two distinct businesses with
different financial, investment and operating characteristics.
GENERAL
This Proxy Statement and the enclosed proxy card are being mailed on or
about October 11, 1996, to stockholders ("Stockholders") of Sarnia Corporation
("Sarnia" or the "Company") in connection with the solicitation by the Board of
Directors of the Company of proxies for use at the 1996 Annual Meeting of
Stockholders (the "Annual Meeting") to be held at the Company's offices at 6850
Versar Center, Springfield, Virginia 22151, on November 14, 1996, and any
adjournment thereof. Any person giving a proxy pursuant to this Proxy Statement
may revoke it at any time before it is exercised at the Annual Meeting by filing
with the Secretary of the Company an instrument revoking it or by delivering to
the Company a duly executed proxy bearing a later date. In addition, if the
person executing the proxy is present at the Annual Meeting, he or she may vote
their shares in person. Proxies in the form enclosed, if duly signed and
received in time for voting, and not so revoked, will be voted at the Annual
Meeting in accordance with the directions specified therein.
OUTSTANDING SHARES, RECORD DATE AND SOLICITATION
Only holders of record of the Sarnia's common stock, no par value ("Common
Stock"), at the close of business on September 30, 1996 (the "Record Date") are
entitled to notice of and to vote at the Annual Meeting and any adjournment(s)
thereof. The number of shares of Common Stock outstanding and entitled to vote
as of the Record Date was 4,572,545. Each share of Common Stock is entitled to
one vote on all matters of business at the Annual Meeting.
The By-laws of the Company require that the holders of a majority of
outstanding shares of the Company's Common Stock entitled to vote at the Annual
Meeting be present in person or represented by proxy in order for a quorum to
exist for the transaction of business at that meeting. Assuming that such a
quorum is present for the Annual Meeting, then the two nominees for director who
receive the highest number of votes cast will be elected. On all other matters
considered at the meeting, the affirmative vote of a majority of the shares
voting, in person or by proxy, is required for approval. Abstentions and broker
non-votes will be counted as present for the purpose of computing the quorum,
but do not constitute a vote "FOR" or "AGAINST" any matter to be considered at
the Annual Meeting and will be disregarded in calculation of "votes cast".
Any proxy which is returned by a Stockholder properly completed and which
is not revoked will be voted at the Annual Meeting in the manner specified
therein. Unless contrary instructions are given, the persons designated as proxy
holders in the accompanying proxy card (or their substitutes) will vote FOR the
election of the Board of Directors' nominees and FOR Proposal 2 and in the
proxyholders' discretion with regard to all other matters. Any unmarked proxies,
including those submitted by brokers or nominees, will be voted in favor of the
proposals and the nominees for the Board of Directors, as indicated in the
accompanying proxy card.
1
<PAGE> 5
The cost of preparing, assembling and mailing this material will be borne
by Sarnia. In addition to solicitation by mail, solicitations may be made by
personal interview, telephone, and telegram by officers and regular employees of
the Company or its subsidiaries, acting without additional compensation. It is
anticipated that banks, brokerage houses, and other custodians, nominees, and
fiduciaries will forward this material to beneficial owners of shares entitled
to vote at the Annual Meeting, and such persons will be reimbursed for the
out-of-pocket expenses incurred by them in this connection.
The Annual Report of the Company for fiscal year 1996 on Form 10-K, the
Notice of Annual Meeting, this Proxy Statement, and the enclosed proxy card were
initially mailed in a single envelope to Stockholders on or about October 11,
1996.
PRINCIPAL SHAREHOLDERS
The table below sets forth, as of September 3, 1996 the only persons known
by the Company to be the beneficial owners of more than 5% of the outstanding
shares of Common Stock.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
PERCENT
AMOUNT AND NATURE OF
OF BENEFICIAL CLASS OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) STOCK
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Dr. Michael Markels, Jr.(2) 773,232 16.8%
6850 Versar Center
Springfield, VA 22151
- -----------------------------------------------------------------------------------------------
Dr. Robert L. Durfee(3) 834,374 17.4%
6850 Versar Center
Springfield, VA 22151
- -----------------------------------------------------------------------------------------------
Versar, Inc., Employee Savings and Stock Ownership
Plan(4) 404,983 8.9%
- -----------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) For purposes of this table, beneficial ownership has been determined in
accordance with the provisions of Rule 13d-3 under the Securities Exchange
Act of 1934, as amended, under which, in general a person is deemed to be
beneficial owner of a security if he or she has or shares the power to vote
or direct the voting of the security or the power to dispose or to direct
the disposition of the security, or if he or she has the right to acquire
beneficial ownership of the security within 60 days of September 3, 1996.
With respect to ownership of shares which are held in the Versar ESSOP (as
defined below in footnote 4) but allocated to individuals' accounts, the
information is current as of September 3, 1996.
(2) For a description of the nature of the beneficial ownership of Dr. Markels,
see "SECURITY HOLDINGS OF MANAGEMENT". The information with respect to
shares of Common Stock held by Dr. Markels is based upon filings with the
Securities and Exchange Commission.
(3) Dr. Durfee's beneficial ownership of shares includes 34,000 shares owned by
adult children of Dr. Durfee as to which he shares voting and investment
power, and 187,500 shares Dr. Durfee has the right to acquire upon
conversion of shares of the Company's Series A Cumulative Convertible
Preferred Stock ("Preferred Stock") held by him. The information with
respect to shares of Common Stock held by Dr. Durfee is based upon filings
with the Securities and Exchange Commission.
(4) Of the 404,983 shares of Common Stock held by the Versar, Inc., Employee
Savings and Stock Ownership Plan (the "ESSOP"), 404,983 shares are allocated
to individual ESSOP participants' accounts and are voted by the Trustees.
The ESSOP Trustees have investment power over all shares of Common Stock
held by the ESSOP. The ESSOP Trustees are Michael Markels, Jr., Benjamin M.
Rawls and James C. Dobbs. Each disclaims beneficial ownership of the Common
Stock held by the ESSOP. The information with respect to shares of Common
Stock held by the ESSOP is based upon filings with the Securities and
Exchange Commission and a report by the Company's stock transfer agent.
2
<PAGE> 6
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon copies of reports furnished to Sarnia, the Company believes that
all reports required to be filed by persons subject to Section 16 of the
Securities Exchange Act of 1934, and the rules and regulations thereunder, have
been timely filed.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Articles of Incorporation were amended in May 1994 to
increase the Board of Directors to five members and "classify" the directors
into three classes (I, II and III), with directors in each class serving
three-year terms and with one or two directors standing for election in any one
year. Two directors are to be elected at the Annual Meeting for a three-year
term expiring at the 1999 Annual Meeting of Stockholders.
NOMINEES FOR ELECTION
The Board of Directors of the Company recommends the election of Benjamin
M. Rawls and James N. Schwarz who were nominated to serve as directors of Sarnia
for three-year terms until the 1999 Annual Meeting and until their successors
have been duly elected and qualified. The persons named in the proxy will vote
for the election of the nominees named below unless authority is withheld.
Messrs. Rawls and Schwarz are presently directors of the Company and have served
as such for the time indicated opposite their names. If for any reason a nominee
should become unavailable to serve, an event that management does not
anticipate, proxies will be voted for such other person as may be designated by
the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE & CLASS BUSINESS EXPERIENCE AND OTHER INFORMATION
- ----------------------- --------------------- -----------------------------------------------
<S> <C> <C>
Benjamin M. Rawls 55 III Chairman of the Board of Sarnia Corporation
since 1994; Chairman of the Board of Versar,
Inc. since November 1993 and President and
Chief Executive Officer of Versar since April
1991; President and Chief Executive Officer
of Rawls Associates, Inc., a management
consulting firm, from April 1988 to March
1991; President and Chief Executive Officer
of R-C Holding, Inc. (currently known as Air
& Water Technologies Corporation) from July
1987 to April 1988; Chairman of Metcalf &
Eddy, Inc., a subsidiary of
Research-Cottrell, Inc. from 1984 to April
1988; a director of Versar since 1991 and a
director of Sarnia since 1991.
James N. Schwarz 51 III Director of the Company since May 1996;
Partner, Ginsburg, Feldman and Bress since
1996; Sr. Vice President, General Counsel and
Corporate Secretary of Steuart Petroleum
Company from 1991 to 1995; Executive Vice
President, General Counsel and Corporate
Secretary of Dart Stores, Inc. from 1988 to
1991.
</TABLE>
3
<PAGE> 7
DIRECTORS CONTINUING IN OFFICE
The following information is provided regarding the other directors, whose
terms will continue after the Annual Meeting.
<TABLE>
<CAPTION>
NAME AGE & CLASS BUSINESS EXPERIENCE AND OTHER INFORMATION
- ----------------------- --------------------- -----------------------------------------------
<S> <C> <C>
Gerald T. Halpin 73 II President and Chairman of the Board of
Term Expires in 1998 WEST*GROUP, Inc., a real estate development
and construction firm, and its predecessor
since 1970; and a director of Sarnia since
June 1994.
Michael Markels, Jr. 70 I Chairman of the Board, President and Chief
Term Expires in 1997 Executive Officer of Ocean Farming, Inc.
since 1995; Co-founder, Director and Chairman
Emeritus of Versar, Inc. A director of Sarnia
since 1982.
Thomas Hotz 36 I Partner of Magnum Capital Partners, L.L.C.
Term Expires in 1997 since 1996; a Managing Director of Julien J.
Studley, Inc., a national real estate firm,
from 1989 to 1995. A director of Sarnia since
June 1994.
</TABLE>
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of Sarnia has standing Executive, Audit, and
Compensation Committees.
The Executive Committee is composed of Messrs. Rawls (Chairman) and
Schwarz, and the Committee has all powers and authority of the Board of
Directors except, as otherwise limited by law, to act in the Board's stead when
the Board is not in session.
The Audit Committee, composed exclusively of directors who are not
employees of the Company, consists of Messrs. Hotz (Chairman), Markels and
Rawls. This committee's primary responsibilities are to provide oversight of
Sarnia's accounting and financial controls, review the scope of and procedures
to be used in the annual audit, review the financial statements and results of
the annual audit, and evaluate the performance of the independent accountants
and Sarnia's financial and accounting personnel.
The Compensation Committee, the members of which are Messrs. Markels
(Chairman) and Halpin, are responsible for reviewing and adjusting compensation
paid to the President of Sarnia and all executive officers, and administers any
stock or other compensation plans of Sarnia.
DIRECTORS COMPENSATION
Directors who are not employees of Sarnia are normally paid an annual fee
of $1,000 plus an attendance fee of $500 for each meeting of the Board of
Directors and its committees. In fiscal year 1996 the directors agreed to the
accrual of all fees. In addition, under the Sarnia 1994 Stock Option Plan on
each anniversary date of the plan (December 1), each director who is not an
employee of the Company and who on such anniversary date is a member of the
Board, is to be granted a non-qualified stock option with an exercise price
equal to the then current fair market value to purchase either (1) 25,000 shares
of common stock if such director has served at least one year on the Board and
has not yet been awarded an option under the Plan provisions providing for
option grants to non-employee directors, or (2) an option to purchase 500 shares
of common stock if such director has already received an award under the Plan
provisions providing for option grants to non-employee directors. All such
options shall be fully vested and exercisable as of the date of grant.
BOARD AND COMMITTEE MEETINGS
During fiscal year 1996, the Board of Directors met five times. The Audit
Committee met five times, and the Compensation Committee met once. The Executive
Committee did not meet. All directors attended at least 75% of all meetings of
the Board and committees on which they served.
4
<PAGE> 8
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Judkins, the Company's President and Chief Executive Officer serves as
a director of Versar. Dr. Markels, a director and former officer of Versar and
Mr. Halpin, a former director and member of Versar's Compensation Committee who
resigned in May 1996, serve as members of Sarnia's Compensation Committee.
SECURITY HOLDINGS OF MANAGEMENT
The following table sets forth certain information regarding the ownership
of Sarnia's Common Stock and Preferred Stock by the Company's directors, the
Company's Chief Executive Officer and one other executive officer and the
Company's directors and executive officers as a group, as of September 3, 1996.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
SHARES OF COMMON AND
PREFERRED STOCK
BENEFICIALLY OWNED
INDIVIDUAL OR GROUP AS OF SEPTEMBER 3, 1996(1)
- ------------------------------------------------------------------------------------------------------------
CLASS AND NUMBER PERCENT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Michael Markels, Jr. Common 773,232(2) 16.8%
Preferred 0 0%
- ------------------------------------------------------------------------------------------------------------
Gerald T. Halpin Common 648,250(3) 12.5%
Preferred 10,000 33.3%
- ------------------------------------------------------------------------------------------------------------
Thomas Hotz Common 25,000(4) *
Preferred 0 0
- ------------------------------------------------------------------------------------------------------------
Benjamin M. Rawls Common 288,437(5) 6.0%
Preferred 3,000 10.0%
- ------------------------------------------------------------------------------------------------------------
Charles I. Judkins, Jr. Common 325,514(6) 6.8%
Preferred 3,000 10.0%
- ------------------------------------------------------------------------------------------------------------
William G. Denbo Common 8,487(7) *
Preferred 0 0
- ------------------------------------------------------------------------------------------------------------
James N. Schwarz Common 0 0%
Preferred 0 0%
- ------------------------------------------------------------------------------------------------------------
All directors and executive officers as Common 2,094,857 35.1%
a group (8 persons) Preferred 16,000 53.3%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
* Less than 1%
(1) For the purposes of this table, beneficial ownership has been determined in
accordance with the provisions of Rule 13d-3 under the Securities Exchange
Act of 1934, as amended, under which, in general, a person is deemed to be
the beneficial owner of a security if he or she has or shares the power to
vote or to direct the voting of the security or the power to dispose or to
direct the disposition of the security, or if he or she has the right to
acquire beneficial ownership of the security within 60 days of September 3,
1996. With respect to ownership of shares which are held in the Versar ESSOP
but allocated to individuals' accounts, the information is current as of
September 3, 1996.
(2) Includes 331,500 shares owned by adult children of Dr. Markels as to which
he shares voting and investment power and 25,000 shares which Dr. Markels
has the right to acquire upon the exercise of options. Dr. Markels is a
Trustee of the Versar ESSOP and as such he has shared investment power over
404,983 shares, none of which are included in the above table. Dr. Markels
disclaims beneficial ownership of the shares held by the Versar ESSOP.
(3) Includes 625,000 shares Mr. Halpin has the right to acquire upon conversion
of shares of the Company's Preferred Stock.
5
<PAGE> 9
(4) Includes 25,000 which Mr. Hotz has the right to acquire upon the exercise of
options.
(5) Includes 50,000 shares Mr. Rawls has the right to acquire upon the exercise
of options and 187,000 shares Mr. Rawls has the right to acquire upon the
conversion of shares of the Company's Preferred Stock. Mr. Rawls is a
Trustee of the Versar ESSOP and as such he has shared investment power over
404,983 shares, none of which are included in the above table. Mr. Rawls
disclaims beneficial ownership of the shares held by the Versar ESSOP.
(6) Includes 50,000 shares Mr. Judkins has the right to acquire upon the
exercise of options and 187,500 shares Mr. Judkins has the right to acquire
upon the conversion of shares of the Company's Preferred Stock.
(7) Includes 5,000 shares Mr. Denbo has the right to acquire upon the exercise
of options.
EXECUTIVE COMPENSATION
CASH COMPENSATION
The following table sets forth information on compensation paid by Sarnia
for services rendered in all capacities during the three fiscal years ended June
30, 1996, to the Company's Chief Executive Officer, and to one other executive
officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION
- ------------------------------------------------------------------------------------------------------
OTHER ANNUAL ALL OTHER
NAME, PRINCIPAL POSITION, SALARY BONUS COMPENSATION COMPENSATION
AND FISCAL YEAR $(1) $ $ $
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charles I. Judkins, Jr.
President and Chief Executive Officer
- ------------------------------------------------------------------------------------------------------
1996 $35,888 0 0 0
1995 38,561 0 0 0
1994 0 0 0 0
- ------------------------------------------------------------------------------------------------------
William G. Denbo
Vice President and General Manager
- ------------------------------------------------------------------------------------------------------
1996 $67,319 $15,000 0 $483(2)
1995 64,893 0 0 455(2)
1994 63,657 0 0 445(2)
- ------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) Mr. Judkins, who became President and Chief Executive Officer of Sarnia in
June 1994, was not paid any compensation in fiscal year 1994 which ended
June 30, 1994. He is presently being compensated at the rate of $528 per day
and plans to work between 5 and 6 days a month.
(2) The amounts shown in this column for Mr. Denbo consist of payments for
insurance premiums on term life insurance.
6
<PAGE> 10
The following tables set forth certain information with respect to stock
options granted to the Named Executive Officers and exercised under the
Company's 1994 Stock Option Plan during the fiscal year ended June 30, 1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
POTENTIAL
REALIZED
VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- ----------------------------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE OR
UNDERLYING OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED#(1) FISCAL YEAR(2) ($ PER SHARE)(3) DATE 5%($) 10%($)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Charles I. Judkins, Jr. 25,000 19% 0.375 10/31/05 14,550 22,100
25,000 19% 0.1875 12/17/05 7,275 11,050
- ----------------------------------------------------------------------------------------------------------------
William G. Denbo 25,000 9.5% 0.1875 12/18/05 7,275 11,050
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) The options were granted for a term of 10 years, 20% of which were vested
immediately and 80% of which vest equally over a four year period, subject
to earlier termination in certain events related to termination of
employment, except options for 50,000 shares granted Mr. Judkins. The 1994
Stock Option Plan includes a change-in-control provision providing for
immediate vesting upon the happening of certain events defined as a
change-in-control of the Company. The option plan grants the Compensation
Committee broad discretion to change or modify the material terms of the
option grants.
(2) The total number of options granted to employees and directors in fiscal
year 1996 was 262,500.
(3) The exercise price equals the fair market value of the underlying Common
Stock on the date of the grant for all options disclosed in this table.
(4) The dollar amounts in these columns are determined using assumed rates of
appreciation set by the Securities and Exchange Commission and are not
intended to forecast future appreciation, if any, in the market value of the
Company's Common Stock. Such amounts are based on the assumptions that the
named persons hold the options for their full ten-year term. The actual
value of the options will vary in accordance with the market price of the
Company's Common Stock.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED ON VALUE OPTIONS/SARS AT 6/30/96 IN-THE-MONEY
EXERCISE REALIZED (#) OPTIONS/SARS AT 6/30/96
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charles I. Judkins, Jr. 0 0 50,000/0 $7,813/$0
- --------------------------------------------------------------------------------------------------------------------
William G. Denbo 0 0 5,000/20,000 $1,563/$6,250
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) On June 27, 1996, the closing price of the Company's Common Stock was
$0.3125.
(2) 25,000 options granted Mr. Judkins were out-of-the-money which means that
the option exercise price for those options exceed the closing price of the
Company's Common Stock on June 27, 1996.
7
<PAGE> 11
COMPARISON OF 24 MONTH CUMULATIVE TOTAL RETURN*
AMONG SARNIA, INC., THE S&P 500 INDEX
AND THE DOW JONES REAL ESTATE INVESTMENT INDEX
<TABLE>
<CAPTION>
DOW JONES
MEASUREMENT PERIOD REAL ESTATE
(FISCAL YEAR COVERED) SARNIA, INC. S&P 500 INVESTMENT
<S> <C> <C> <C>
7/5/94 100 100 100
6/27/95 100 125 104
6/30/96 100 158 126
</TABLE>
* $100 INVESTED ON 7/5/94 IN STOCK OR INDEX -- INCLUDING REINVESTMENT OF
DIVIDENDS.
CUMULATIVE SHAREHOLDER'S RETURN TABLE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
CUMULATIVE SHAREHOLDER'S RETURN
- -----------------------------------------------------------------------------------------------
LAST TRADING DATE IN FISCAL
YEARS
- -----------------------------------------------------------------------------------------------
1994 1995 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sarnia Corporation $100 $100 $100
- -----------------------------------------------------------------------------------------------
Peer Group $100 $104 $126
- -----------------------------------------------------------------------------------------------
S&P 500 $100 $125 $158
- -----------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 12
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee ("Committee") of the Board of Directors has
furnished the following report on executive compensation for fiscal year 1996.
The Committee provides oversight of all policies under which compensation is
paid to the Company's executive officers and stock options are granted. The
Committee consists entirely of non-employee directors.
COMPENSATION POLICIES
The Company's executive compensation policy is designed to establish
compensation levels to provide appropriate incentive and rewards to achieve or
exceed the financial goals set for each fiscal year. The purpose of such policy
is to enhance the Company's financial performance, maintain the existing assets,
and meet or exceed tenant service expectations, thus resulting in increased
shareholder value.
In addition to base salaries, the compensation program includes an
incentive compensation plan consisting of employee cash bonuses and stock
options granted under the Company's 1994 Stock Option Plan. The overall
objective of the executive compensation policies is to connect compensation with
performance and attract and retain qualified individuals resulting in long term
growth of the Company.
COMPENSATION
In determining compensation for fiscal year 1996, the Committee took into
account the strong financial performance of the Company for its second year
operation as an independent, publicly-owned entity. In fiscal year 1996, gross
revenue increased approximately 4% to $2,771,000 and net losses were
approximately the same as the prior year at $269,000. Further, the refinancing
of the Company's debt and renewal of key tenants position the Company for future
growth. In addition, the buildings were over 95% leased and major renovations
took place on the first and second floors of the 6850 Building.
CHIEF EXECUTIVE COMPENSATION
Charles I. Judkins, Jr., the Chief Executive Officer of the Company was
paid $35,888 in fiscal year 1996, that was on the basis of $528 per day. It is
expected that compensation in fiscal year 1997 will remain at that level. As a
director, Mr. Judkins was awarded a grant for 25,000 options under the 1994
Stock Option Plan. Further, based upon fiscal year 1995's performance he was
granted options for an additional 25,000 shares.
OTHER EXECUTIVE OFFICERS
In fiscal year 1996, William Denbo, Vice President and General Manager was
paid $67,319. In consideration of Mr. Denbo's efforts in generating Sarnia's
strong financial performance and creating good tenant satisfaction, he was
awarded a 3.7% salary increase for fiscal year 1996 and a $15,000 bonus. He was
also granted 25,000 options under the 1994 Stock Option Plan.
Michael Markels, Jr.
Gerald T. Halpin
PROPOSAL NO. 2
APPOINTMENT OF ACCOUNTANTS
The Board of Directors considers it desirable that its appointment of the
firm of Arthur Andersen LLP ("Arthur Andersen") independent accountants of the
Company for fiscal year 1997 be ratified by the Stockholders. Arthur Andersen
served as the Company's independent accountants for fiscal year 1996.
Representatives of Arthur Andersen will be present at the Annual Meeting, will
be given an opportunity to make a statement if they so desire, and will be
available to respond to appropriate questions from the Stockholders.
The Board of Directors recommends a vote "FOR" this proposal and the
enclosed proxy will be so voted unless the Proxy specifically indicates
otherwise.
9
<PAGE> 13
CHANGE IN CERTIFYING ACCOUNTANTS
Price Waterhouse LLP ("PW") served as the Company's principal accountant
for the fifteen fiscal years ended June 30, 1995. Because Arthur Andersen
offered a more favorable pricing structure, the Audit Committee of the Company's
Board of Directors recommended that the Company not renew, and the Board of
Directors determined not to renew, the engagement of PW on October 2, 1995 and
selected Arthur Andersen as the Company's principal accountant. As stated above,
the Company has engaged Arthur Andersen, independent accountant, as the
principal accountant to audit the consolidated financial statements of the
Company for the three fiscal years 1994, 1995 and 1996.
PW's report on the Company's financial statements for fiscal years 1994 and
1995 did not contain an adverse opinion or a disclaimer of opinion, nor was it
qualified or modified as to uncertainty, audit scope, or accounting principles.
During the Company's two fiscal years and the subsequent interim period
preceding the replacement of PW, there were no disagreements with PW on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreement(s), if not resolved to the
satisfaction of PW, would have caused it to make a reference to the subject
matter of the disagreement(s) in connection with its report. Further, PW did not
advise the Company during the Company's fiscal years 1994 and 1995 or during the
subsequent interim period preceding the Company's decision not to extend PW's
engagement of any "reportable events" as defined in subparagraph (a)(i)(v) of
Item 304 of Regulation S-K. PW was authorized by the Company to respond fully to
inquiries of Arthur Andersen. The Company had not consulted with Arthur Andersen
regarding application of accounting principles prior to their engagement.
Following the Board's decision on October 2, 1995, the Company provided
notice to PW and Arthur Andersen of its decision to replace PW with Arthur
Andersen and received a response from PW to the statements of the Company in
accordance with the requirements of Item 304(a) of Regulation S-K.
1997 ANNUAL MEETING
It is presently contemplated that the 1997 Annual Meeting of Stockholders
will be held on or about November 13, 1997. In order for any appropriate
Stockholder proposal to be included in the proxy materials for the 1997 Annual
Meeting of Stockholders, it must be received by the Secretary of the Company no
later than June 20, 1997, by certified mail, return receipt requested.
OTHER MATTERS
As of the date of this Proxy Statement, management of the Company has no
knowledge of any matters to be presented for consideration at the Annual Meeting
other than those referred to above. If any other matters properly come before
the Annual Meeting, the persons named in the accompanying proxy intend to vote
such proxy, to the extent entitled, in accordance with their best judgment.
By Order of the Board of Directors,
/s/ PAMELA J. JOHN
Pamela J. John
Secretary
10
<PAGE> 14
SARNIA CORPORATION
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 14, 1996
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby authorizes Michael Markels, Jr. and Benjamin M.
Rawls, and each of them individually, with power of substitution, to vote and
otherwise represent all of the shares of Common Stock of Sarnia Corporation
(the "Company"), held of record by the undersigned, at the Annual Meeting of
Stockholders of the Company to be held at the Company's offices, 6850 Versar
Center, Springfield, Virginia, on Thursday, November 14, 1996 at 9:00 a.m.
local time, and any adjournment(s) thereof, as indicated on the reverse side
hereof.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement dated in each case, October 11, 1996. All
other proxies heretofore given by the undersigned to vote shares of the
Company's Common Stock are expressly revoked.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DESCRIBED ON THE
REVERSE HEREOF BY THE STOCKHOLDER. IF NOT OTHERWISE DIRECTED, THIS PROXY WILL
BE VOTED FOR THE NOMINEES FOR DIRECTOR LISTED IN PROPOSAL 1 AND FOR THE
PROPOSAL REFERRED TO IN ITEM 2 ON THE REVERSE SIDE.
(Continued, and to be signed and dated on the reverse side)
SARNIA CORPORATION
P.O. BOX 11081
NEW YORK, N.Y. 10203-0801
<PAGE> 15
<TABLE>
<S> <C> <C> <C>
(1) Election of Directors VOTE FOR all nominees WITHHOLD authority to *EXCEPTION
listed below. vote for all nominees
listed below.
</TABLE>
Nominees: Benjamin M. Rawls and James N. Schwarz
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
THE "EXCEPTION" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW).
*Exception ___________________________________________________________________
(2) Ratification of the appointment of Arthur Andersen as independent
accountants for fiscal year 1997.
(3) In their discretion upon such other matters as may properly come before the
meeting or any adjournment(s) thereof and upon matters incident to the
conduct of the meeting.
FOR AGAINST ABSTAIN
Change of Address and
or Comments Mark Here
Please sign exactly as your name appears
herein. If you are signing for the
stockholder, please sign the stockholder's
name, your name and state the capacity in
which you are signing.
Dated _____________________________, 1996
_________________________________________
_________________________________________
(Signature)
PLEASE INDICATE VOTES
(X) IN BLACK OR BLUE INK.
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
IN THE ENCLOSED ENVELOPE.
