<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:
[ ] 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
Sarnia Corporation
- --------------------------------------------------------------------------------
(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):
[ ] 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:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<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 Wednesday, November 18, 1998, at 9:00 a.m. eastern standard
time.
The matters scheduled for consideration at the meeting are the election of
a director 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 14, 1998
<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 Wednesday, November 18, 1998, at 9:00 a.m. eastern standard time for
the following purposes:
1. To elect a director for a three-year term expiring at the 2001 annual
meeting of stockholders;
2. To ratify the appointment of Arthur Andersen LLP as independent
accountants for fiscal year 1999; 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 October 2, 1998,
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 14, 1998
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 18, 1998
------------------------------------------------------------
GENERAL
This Proxy Statement and the enclosed proxy card are being mailed on or
about October 14, 1998, 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 1998 Annual Meeting of
Stockholders (the "Annual Meeting") to be held at the Company's offices at 6850
Versar Center, Springfield, Virginia 22151, on November 18, 1998, and any
adjournment or postponement thereof. Any person giving a proxy pursuant to this
Proxy Statement may revoke it at any time before it is exercised at the 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 revoke such proxy by voting 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 Sarnia's common stock, no par value ("Common
Stock"), at the close of business on October 2, 1998 (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. Abstentions and "broker
non-votes" (which occur if a broker or other nominee does not have discretionary
authority and has not received voting instructions from the beneficial owner
with respect to the particular item) are counted for purposes of determining the
presence or absence of a quorum for the transaction of business. Assuming that
such a quorum is present for the Annual Meeting, in all matters other than
election of directors, the affirmative vote of the majority of shares present in
person or by proxy at the Annual Meeting and entitled to vote thereon are
required to approve the proposals set forth herein. For such purpose,
abstentions are counted for purposes of calculating shares entitled to vote but
are not counted as shares voting and therefore have the effect of a vote against
each such proposal. Also, for these purposes, broker non-votes are not counted
as shares eligible to vote and therefore have no effect. Directors will be
elected by a plurality of the votes of the shares present in person or
represented by proxy and entitled to vote. Accordingly, abstentions and broker
non-votes will have no effect on the outcome of the election of directors.
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' nominee, FOR proposal 2 and in the proxy
holders' discretion with regard to all other matters. Any unmarked proxies,
including those submitted by brokers (other than broker non-votes) 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 all proxy 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 proxy materials 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 regard.
The Annual Report of the Company for fiscal year 1998 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 14,
1998.
PRINCIPAL SHAREHOLDERS
The table below sets forth, as of September 15, 1998, 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>
<S> <C> <C>
AMOUNT AND NATURE PERCENT
OF BENEFICIAL OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) CLASS OF STOCK
Dr. Michael Markels, Jr.(2) 773,232 16.9%
6850 Versar Center
Springfield, VA 22151
Dr. Robert L. Durfee(3) 834,374 18.2%
6850 Versar Center
Springfield, VA 22151
Versar, Inc. Employee Savings and Stock Ownership
Plan(4) 346,770 7.9%
Gerald T. Halpin 648,250 14.1%
6850 Versar Center
Springfield, VA 22151
</TABLE>
- ---------------
(1) For purposes of this table, beneficial ownership has been determined in
accordance with the provisions of Rule 13d-3 under the Securities and
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
15, 1998.
(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 346,770 shares of Common Stock held by the Versar, Inc., Employee
Savings and Stock Ownership Plan (the "ESSOP"), 346,770 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(a) 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 except for three reports on Form 4 by Thomas Hotz reporting
purchases of stock which was required to be filed by March 10, April 10 and May
10, 1998 and was filed July 22, 1998.
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. One Class II director is to be elected at the Annual Meeting for a
three-year term expiring at the 2001 Annual Meeting of Stockholders.
NOMINEE FOR ELECTION
The Board of Directors of the Company recommends the election of Gerald T.
Halpin who was nominated to serve as a Class II director of Sarnia for a
three-year term until the 2001 Annual Meeting and until his successor has been
duly elected and qualified. The persons named in the proxy will vote for the
election of the nominee named below unless authority is withheld. Mr. Halpin is
presently a director of the Company and has served as such since June 1994. If
for any reason the 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>
Gerald T. Halpin 75 II President of WEST*GROUP MANAGEMENT, LLC., a real
Term Expires in 2001 estate development and construction firm, and
its predecessor since 1970. A director of
Sarnia since June 1994.
</TABLE>
3
<PAGE> 7
DIRECTORS CONTINUING IN OFFICE
The following information is provided regarding the other directors of the
Company, whose terms will continue after the Annual Meeting.
<TABLE>
<CAPTION>
NAME AGE & CLASS BUSINESS EXPERIENCE AND OTHER INFORMATION
---- ----------- -----------------------------------------
<S> <C> <C>
Michael Markels, Jr. 72 I Term Expires in Chairman of the Board, President and Chief
2000 Executive Officer of Ocean Farming, Inc. since
1995; Co-founder, director since 1969 and
Chairman Emeritus of Versar, Inc. since 1993. A
director of Sarnia since 1982.
Thomas Hotz 38 I Term Expires in Partner of Magnum Capital Partners, L.L.C. since
2000 1996; Managing Director of Julien J. Studley,
Inc., a national real estate firm, from 1989 to
1995. A director of Sarnia since June 1994.
Benjamin M. Rawls 57 III Term Expires Chairman of the Board of Sarnia Corporation since
in 1999 1994; Chairman of the Board of Versar, Inc.
since 1993 and President and Chief Executive
Officer of Versar since 1991; a director of
Versar since 1991 and a director of Sarnia since
1991.
James N. Schwarz 53 III Term Expires Director of the Company since May 1996; Partner,
in 1999 Patton Boggs LLP since September 1998; Partner,
Ginsburg, Feldman and Bress from 1996 to August
1998; 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>
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 Hotz.
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. Schwarz (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, is responsible for reviewing and adjusting compensation
paid to the President of Sarnia and all executive officers and administering any
stock or other compensation plans of Sarnia.
BOARD AND COMMITTEE MEETINGS
During fiscal year 1998, the Board of Directors met four times. The Audit
Committee met four times. The Compensation Committee met once and 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
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 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Markels and Halpin serve on the Company's Compensation Committee.
Neither of such directors is an officer or employee of the Company. During
fiscal year 1998, no compensation committee interlocks existed with respect to
the Company and any other enity.
5
<PAGE> 9
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 who is named
in the Summary Compensation Table on page 7 and the Company's directors and
executive officers as a group, as of September 15, 1998.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
INDIVIDUAL OR GROUP AS OF SEPTEMBER 15, 1998(1)
CLASS AND NUMBER PERCENT
<S> <C> <C>
Michael Markels, Jr. (2) Common 773,232 16.9%
Preferred 0 0%
Gerald T. Halpin (3) Common 673,500 14.1%
Preferred 10,000 33.3%
Thomas Hotz (4) Common 40,500 *
Preferred 0 0
Benjamin M. Rawls (5) Common 301,037 6.6%
Preferred 3,000 10.0%
Charles I. Judkins, Jr. (6) Common 325,014 7.1%
Preferred 3,000 10.0%
William G. Denbo (7) Common 18,487 *
Preferred 0 0
James N. Schwarz Common 15,000 *
Preferred 0 0
All directors and executive officers as a Common 2,171,514 47.5%
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 l3d-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 15,
1998.
(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
346,770 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.
(4) Includes 25,000 shares 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
346,770 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 20,000 shares Mr. Denbo has the right to acquire upon the exercise
of options.
6
<PAGE> 10
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, 1998, to the Company's Chief Executive Officer, and the one other executive
officer who received compensation (collectively, the "Named Executive
Officers"). Two other executive officers, Lawrence W. Sinnott and Pamela J. John
received no compensation from the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
OTHER ANNUAL ALL OTHER
NAME, PRINCIPAL POSITION, SALARY BONUS COMPENSATION COMPENSATION
AND FISCAL YEAR $ $ $ $
<S> <C> <C> <C> <C>
Charles I. Judkins, Jr.(1)
President and Chief Executive Officer
1998 $44,596 $ 5,000 0 0
1997 35,096 0 0 0
1996 35,888 0 0 0
William G. Denbo
Vice President and General Manager
1998 $71,159 $ 7,500 0 $833(3)
1997 71,265(2) 6,000 0 603(3)
1996 67,319 15,000 0 483(3)
</TABLE>
- ---------------
(1) Mr. Judkins is presently being compensated by Sarnia at the rate of $528 per
day worked and typically works between 5 and 6 days a month.
(2) The salary for fiscal year 1997 reflects payments for 27 pay periods instead
of 26 due to the change in financial reporting by the Company. This change
did not have any effect on the total salary received by Mr. Denbo for the
calendar year 1997.
(3) The amounts shown in this column for Mr. Denbo consist of payments for
insurance premiums on term life insurance.
7
<PAGE> 11
The following table sets forth certain information with respect to stock
options granted to the Named Executive Officers under the Company's 1994 Stock
Option Plan during the fiscal year ended June 30, 1998.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZED
VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE
APPRECIATION
FOR
INDIVIDUAL GRANTS OPTION TERM(3)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE OR
UNDERLYING OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED#(1) FISCAL YEAR ($ PER SHARE)(2) DATE 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
William G. Denbo 25,000 100% 0.375 2/26/08 30,064 70,605
Charles I. Judkins,
Jr. 0 -- -- -- -- --
</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. 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 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.
(3) 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.
The following table sets forth certain information with respect to stock
options exercised and fiscal year end values of options held under the Company's
1994 Stock Option Plan during the fiscal year ended June 30, 1998.
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 6/30/98 IN-THE-MONEY
EXERCISE REALIZED (#) OPTIONS/SARS AT 6/30/98
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
<S> <C> <C> <C> <C>
Charles I. Judkins, Jr. 0 0 50,000/0 $40,625/$0
William G. Denbo 0 0 20,000/30,000 $16,250/$24,375
</TABLE>
- ---------------
(1) On June 30, 1998, the closing price of the Company's Common Stock was
$0.8125.
8
<PAGE> 12
COMPARISON OF 24 MONTH CUMULATIVE TOTAL RETURN*
AMONG SARNIA, INC., THE S&P 500 INDEX
AND THE DOW JONES REAL ESTATE INVESTMENT INDEX
[CHART]
* $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 1997 1998
<S> <C> <C> <C> <C> <C>
Sarnia Corporation $100 $100 $100 $100 $230
Peer Group $100 $104 $126 $167 $174
S&P 500 $100 $125 $158 $213 $277
</TABLE>
9
<PAGE> 13
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 1998.
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.
The Compensation Committee also believes it is in the Company's and its
stockholders' interest that stock ownership by management and stock-based
performance compensation arrangements be encouraged, thereby aligning
managements' and shareholders' interest in the enhancement of shareholder value.
Thus, the Committee has also increasingly utilized these elements in the
Company's compensation packages for its executive officers.
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 1998, the Committee took into
account the strong financial performance of the Company for its fourth year
operation as an independent, publicly-owned entity. In fiscal year 1997, gross
revenue increased approximately 4% to $2,911,000 and net losses were
approximately the same as prior years. Further, the continued refinancing of the
Company's debt and renewal of key tenants have positioned the Company for future
growth. In addition, the buildings owned by the Company 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 $49,596 in fiscal year 1998, on the basis of $528 per day worked. It is
expected that compensation in fiscal year 1999 will remain at that level. Based
on the performance of the Company in 1997, Mr. Judkins was awarded a bonus of
$5,000.
OTHER EXECUTIVE OFFICERS
In fiscal year 1998, William Denbo, Vice President and General Manager was
paid $71,159 which reflected no salary increase. In consideration of Mr. Denbo's
efforts in generating Sarnia's financial performance and creating good tenant
satisfaction, he was awarded a $7,500 bonus and granted 25,000 incentive stock
options.
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 1999 be ratified by the Stockholders. Arthur Andersen
served as the Company's independent accountants for fiscal years 1996 through
1998. Representatives of Arthur Andersen will be present at the Annual Meeting,
will be given an
10
<PAGE> 14
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.
1999 ANNUAL MEETING
It is presently contemplated that the 1999 Annual Meeting of Stockholders
will be held on or about November 17, 1999. In order for any appropriate
Stockholder proposal to be included in the proxy materials for the 1999 Annual
Meeting of Stockholders, it must be received by the Secretary of the Company no
later than June 17, 1999, 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
11
<PAGE> 15
SARNIA CORPORATION
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 18, 1998
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 Wednesday, November 18, 1998 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 14, 1998. 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 NOMINEE 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. 10208-0081
<PAGE> 16
<TABLE>
<S> <C>
______
|______|
(1) Election of Director VOTE FOR the nominee /X/ WITHHOLD authority to vote /X/
listed below. for the nominee listed below.
Nominee: Gerald T. Halpin
(2) Ratification of the appointment of Arthur Andersen as independent
accountants for fiscal year 1999.
FOR /X/ AGAINST /X/ ABSTAIN /X/
(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.
Change of Address and /X/
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: _____________________, 1998
----------------------------------
----------------------------------
(Signatures)
PLEASE INDICATE VOTES /X/
(X) IN BLACK OR BLUE INK.
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED
ENVELOPE.
</TABLE>
