STERLING SUGARS, INC.
P. O. BOX 572
FRANKLIN, LOUISIANA 70538
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Sterling Sugars, Inc. will be held
the Conference Room, St. Mary Parish Library, 206 Iberia Street, Franklin
Louisiana, on Monday, November 29, 1999 at 10:00 a.m. for the following
purposes:
1. Election of directors to serve for one year or until their
successors are elected and qualified.
2. To consider and vote upon a proposal to change the state of
incorporation of the Company from Delaware to Louisiana (the
"Reincorporation").
3. Transaction of such other business as may properly come before the
meeting or any adjournments thereof.
The close of business on October 4, 1999 has been fixed as the record date
for determining stockholders entitled to notice of and to vote at the
meeting.
By order of the Board of Directors
J. Patout Burns, Jr.
Secretary
Franklin, Louisiana
November 12, 1999
YOUR VOTE IS IMPORTANT
Whether or not you expect to attend the meeting, please mark, date, sign
and promptly return the enclosed proxy in the accompanying envelope, which
requires no postage if mailed in the United States. You may, of course
revoke your proxy and vote in person.
<PAGE>
STERLING SUGARS, INC.
P. O. BOX 572
Franklin, Louisiana 70538
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of Sterling
Sugars, Inc. ("the Company") for use at the Annual Meeting of Stockholders
to be held on November 29, 1999 and at any adjournments thereof. If
properly and timely completed and returned, the proxy will be voted in the
manner you specify thereon. If no manner is specified, the proxy will be
voted for election of the nominees for director hereinafter named.
The proxy may be revoked at any time before it is voted and you may
vote in person if you attend the meeting.
The cost of soliciting proxies will be borne by the Company. In
addition to use of the mails, proxies may be solicited by telephone and
personal contacts.
It is expected that this proxy statement and related materials will
first be mailed to stockholders on or about November 12, 1999.
STOCKHOLDERS' PROPOSALS
In order for proposals by stockholders to be considered for inclusion
in the proxy and proxy statement relating to the year 2000 Annual Meeting of
Stockholders, such proposals must be received at the Company's principal
executive office no later than June 30, 2000.
VOTING SECURITIES
Only stockholders of record as of the close of business on October 4,
1999 are entitled to vote at the meeting. At that time, 2,500,000 shares of
the Company's Common Stock (being the Company's only class of authorized
stock) were outstanding. Each share is entitled to one vote.
The following table provides information as of September 30, 1999
concerning each stockholder known by the Company to be the beneficial owner
(as determined by Rule 13d-3 of the Securities and Exchange Commission) of
more than five percent (5%) of its outstanding stock:
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Name and Address of Shares Beneficially Percent of
Beneficial Owner Owned (1) Class
---------------------------------------------------------------------------
M. A Patout & Son, Ltd. 1,543,868 61.75%
3512 J. Patout Burns Road
Jeanerette, Louisiana 70544
Peter V. Guarisco 511,531(2) 20.46%
P. O. Box 2588
Morgan City, Louisiana 70380
Capital Management Consultants, Inc. 204,431(2) 8.18%
P. O. Box 2588
Morgan City, Louisiana 70380
Hellenic, Inc. 143,100(2) 5.72%
P. O. Box 2588
Morgan City, Louisiana 70380
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(1) Based on information furnished by beneficial owners. Includes direct
and indirect ownership and, unless otherwise indicated, also includes
sole voting and investment power with respect to reported holdings.
(2) Includes 143,100 shares owned by Hellenic, Inc. and 204,431 shares owned
of record by Capital Management Consultants, Inc. Mr. Guarisco shares
voting and investment power with respect to such shares. Mr. Guarisco
disclaims beneficial ownership of these shares.
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PROPOSAL 1: ELECTION OF DIRECTORS
In accordance with the Company's by-laws, seven directors are to be
elected at the annual meeting to serve a term of one year from November 29,
1999 or until their successors are elected and qualified. The election of
directors shall be determined by a majority of the votes actually cast, and
the abstention or failure of any stockholder to vote will not affect this
determination. Each shareholder is entitled to one vote per share. Unless
you specify otherwise, proxy holders will vote for election of the
management nominees named below. Should any of the nominees become
unavailable for election, which is not anticipated, proxy holders may, in
their discretion, vote for other nominees recommended by the Board.
The following table lists the nominees for election as director and shows
as of September 30, 1999, the beneficial ownership (as determined in
accordance with Rule 13d-3 of the Securities and Exchange Commission) of the
Company's outstanding common stock by each nominee and by all directors and
executive officers as a group:
First Shares
Elected Beneficially Percent of
Name Age Director Owned (1) Class
---------------------------------------------------------------------------
Bernard E. Boudreaux, Jr. 62 1996 1,000 *
Dr. James Patout Burns, Jr. 59 1994 1,544,368(2) 61.77%
Craig P. Caillier 37 1996 100 *
Peter V. Guarisco 71 1986 511,531(3) 20.46%
Victor Guarisco, II (4) 35 1992 18,990 *
Rivers Patout (5) 34 1994 100 *
William S. Patout, III 67 1997 100 *
All directors and named
executive officers as a group 2,076,189 83.05%
---------------------------------------------------------------------------
*Less than 1%
(1) Based on information furnished by nominees. Includes direct and
indirect ownership and unless otherwise indicated includes sole voting
and investment power with respect to reported holdings.
(2) Includes shared voting and investment power with respect to 1,543,868
shares owned by M. A. Patout & Son, Ltd.
(3) Mr. Guarisco's reported holdings reflect shared voting and investment
power with respect to 143,100 shares owned by Hellenic, Inc. and 204,431
shares owned by Capital Management Consultants, Inc. Mr. Guarisco
disclaims beneficial ownership of such shares.
(4) Peter V. Guarisco is the father of Victor Guarisco, II.
(5) William S. Patout, III is the father of Rivers Patout.
(6) See "Information Concerning Management - Executive Officers".
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Business Experience of Directors
- --------------------------------
The following paragraphs describe all Company offices held by nominees
and their principal occupations for the last five years.
Bernard E. Boudreaux, Jr. is Chairman of the Board and general counsel of
the Company and District Attorney, Sixteenth Judicial District of Louisiana.
Dr. James Patout Burns, Jr., Secretary of the Company, is the Edward A.
Malloy Professor of Catholic Studies at Vanderbilt Divinity School,
Nashville, Tennessee. Dr. Burns was formerly Thomas and Alberta White
Professor of Christian Thought and Chair of the Program in Religious Studies
at Washington University, St. Louis, Missouri.
Craig P. Caillier, President and Chief Executive Officer of the Company.
Peter V. Guarisco is Chairman of the Board and President of Hellenic,
Inc., a privately owned company having diverse business interests, Morgan
City, Louisiana.
Victor Guarisco, II is President of Cottonwood, Inc., a privately owned
real estate management and development company, Morgan City, Louisiana.
Rivers Patout is Vice President for Property Development of the Company
and Assistant General Manager of M. A. Patout & Son, Ltd., Jeanerette,
Louisiana.
William S. Patout, III is President and Chief Executive Officer of M. A.
Patout & Son, Ltd., Jeanerette, Louisiana.
INFORMATION CONCERNING MANAGEMENT
Executive Officers
- ------------------
The table below sets forth the beneficial ownership of the named
executive officers.
Shares Beneficially
Name Age Owned Percent of Shares
--------------------------------------------------------------------------
Craig P. Caillier 37 100 .004%
Chief Executive Officer and
Director
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Business Experience of Executive Officers
- -----------------------------------------
Craig P. Caillier, for five years prior to his association with the
Company, was Assistant General Manager and Secretary/Treasurer of M. A.
Patout & Son, Ltd., Jeanerette, La. Before his election as President and
CEO of the Company, he was Senior Vice President and General Manager of
the Company.
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Executive Compensation
- ----------------------
Mr. Caillier, the Company's President and Chief Executive Officer,
became an executive officer of the Company in fiscal 1994. The following
table sets forth information concerning Mr. Caillier's compensation during
the Company's last three fiscal years.
Annual Compensation
Name and Principal Other Annual
Position Year Salary Bonus Compensation (1)
---------------------------------------------------------------------------
Craig P. Caillier 1999 $86,033 $28,684 $3,442
President and CEO 1998 79,583 63,474 4,292
1997 73,833 63,219 4,112
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(1) Company contributions to 401(k) savings plan.
As amended in 1986, the Company's Retirement Plan provides benefits
at retirement to full-time salaried and hourly factory employees and to
full-time agricultural employees (other than those hired at age 60 or older)
who are at least 21 years of age and have at least one year of service.
Contributions to the plan, which are funded entirely by the Company, are
computed on an actuarial basis. The plan classifies employees as agricultural
and factory employees. Benefits for factory employees (a classification
that includes the Company's executive officers) are determined by multiplying
the employee's years of service by the sum of (i) .60 percent times Final
Average Earnings up to Covered Compensation and (ii) 1.20 percent times
Final Average Earnings in excess of Covered Compensation. The term "Covered
Compensation" means the average annual earnings used to calculate the
participant's social security benefit. This average covers his entire
employment history including employment prior to employment by Sterling
Sugars, if any), and assumes continued employment to age 65. It also
assumes that, during each year of employment, the participant always earned
the maximum amount subject to social security withholding (the Taxable Wage
Base). Each year, the Plan's actuaries provide a table that determines the
Covered Compensation level for participants reaching age 65 in each of the
succeeding years. The Covered Compensation level increases over time
(generally every year) as the Taxable Wage Base itself increases. As a
result, Covered Compensation is relatively low for participants nearing the
average retirement age of 65 and increases for younger participants. The
actual final determination of a Participant's Covered Compensation amount
is therefore made at the time of termination of employment or retirement.
Mr. Caillier is 37 years old and has approximately five years of
credited service. Set out below is a table that shows the estimated annual
pension benefits for employees retiring at age 65 with varying years of
credited service and final earnings.
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Pension Table
-------------
Years of Service
---------------------------------------
Final Earnings 10 15 20 25
-----------------------------------------------------------------------
$ 50,000 $ 4,632 $ 6,948 $ 9,264 $ 11,580
$ 75,000 7,632 11,448 15,264 19,080
$ 100,000 11,632 15,948 21,264 26,580
-----------------------------------------------------------------------
Effective February 1, 1992 the Company established the Sterling Sugars,
Inc. Employee's Savings Plan and Trust for the benefit of all eligible
full-time salaried and hourly employees and full-time salaried agricultural
employees who are at least 21 years old and have completed at least one year
of service with the Company. The Plan is referred to as a 401(k) retirement
plan, a form of a defined contribution plan. Through elective deferrals,
employees may contribute from one to six percent of their annual gross
compensation into the Plan. The Company is obligated to match contributions
to the extent of fifty percent of the first six percent of an employee's
elective deferrals. Any additional Company contributions are discretionary.
The Plan was amended effective February 1, 1994 to change eligibility
requirements and investment election dates and to credit service for a
related employer. Newly hired employees are now eligible to participate on
the first day of the calendar month following completion of age and service
requirements. Investment changes will be made effective April 1 instead of
February 1 and October 1 instead of August 1 of each year. Credited service
was also amended to include service with M. A. Patout & Son, Ltd., a
related employer.
Directors' Compensation
- -----------------------
Directors receive an annual retainer of $5,000 and an attendance fee
of $500 per meeting plus reimbursement for travel and related expenses
incurred in attending board and committee meetings.
Compensation Policies of the Board of Directors
- -----------------------------------------------
The Board of Directors does not have a compensation committee and
executive compensation determinations are made by the entire Board. Mr.
Caillier's compensation is based on his performance and the overall
profitability of the Company, as well as the Board's forecasted future
performance as determined in the best judgment of the Board. Mr. Caillier's
compensation is not directly tied to one specific factor such as an increase
in the price of the Company's stock, return on equity or net profit and
there are no specific formulas used in the calculation of compensation.
7
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Stock Performance Graph
-----------------------
The following graph presents the cumulative total return on the
Company's common stock for the five year period ended July 31, 1999 compared
to the cumulative total return assuming reinvestment of dividends for
all stocks quoted on the NASDAQ Market Value Index. Because there is no
published industry or line of business index comparable to Sterling, a peer
group was selected based on similar publicly traded companies with market
capitalization of $17.4 million to $17.5 million as of July 31, 1999. This
peer group consists of the following five companies: Hungarian Tel & Cable
CP, Metrobancorp., Outlook Group Corp., Silicom, Ltd. and Twin City Bancorp.
Year Sterling NASDAQ Peer Group
------------------------------------------------------
1994 100 100 100
1995 123 95 79
1996 148 132 67
1997 180 174 77
1998 197 205 69
1999 191 320 54
Certain Transactions
- ---------------------
On November 15, 1994, the Company entered into a technical service
contract with M. A. Patout & Son, Ltd. ("Patout"). The contract provides
that Patout will provide technical and engineering services to the Company
in return for a fee equal to ten percent of the Company's net income before
income taxes from the manufacture, production and sale of raw sugar and
molasses each year, provided that net income from the foregoing exceeds
$500,000. The agreement was to expire on January 31, 1999 but because of
the change in the Company's fiscal year end, the agreement was extended to
July 31, 1999. The agreement also provides Patout an option to acquire
50,000 shares of treasury stock owned by the Company on or before December
31, 1998, at a price of $3.25 per share. Patout exercised its option on
April 12, 1995 and acquired 50,000 shares of treasury stock for $162,500.
There was no technical service fee due for the year ended July 31, 1999.
Mr. Bernard E. Boudreaux, Jr., Chairman of the Board of the Company,
served in fiscal 1999 and will serve in fiscal 2000, as general counsel for
the Company on a retainer basis.
Other Information
- ------------------
Persons who are directors or executive officers of the Company, and
persons who beneficially own more than 10% of the Company's common stock,
are required to file with the Securities and Exchange Commission periodic
reports of changes in their ownership of the Company's stock. Based solely
on a review of the forms furnished to the Company pursuant to the rules of
the Securities and Exchange Commission, such persons complied with the
filing requirements during the last three fiscal years of the Company
except M. A. Patout & Son, Ltd. was late filing four reports covering nine
transactions, and Mr. Boudreaux was late in filing Form 3.
The Company has no standing nominating or compensation committees or
committees performing similar functions. The Company's Audit and Ethics
Committee is empowered to engage and evaluate the performance of the
Company's public accountants and review year-end and other financial
statements when appropriate. The Committee, which consisted of Messrs.
Boudreaux, R. Patout and P. Guarisco, did not meet during fiscal 1999.
One meeting of Board of Directors was held during the last fiscal year.
All directors attended the meeting.
PROPOSAL 2: REINCORPORATION
The Board of Directors of the Company has determined that it is in the
best interests of the Company to change the state of incorporation of the
Company from Delaware to Louisiana, subject to approval by the stockholders
(the "Reincorporation"). The Reincorporation will be effected by merging
the Company into Sterling Sugars - Louisiana, Inc., a newly organized
Louisiana corporation and wholly-owned subsidiary of the Company ("Sterling
Louisiana") that will be the surviving corporation (the "Surviving
Corporation").
Approval of the Reincorporation requires the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock. THE BOARD
OF DIRECTORS CONSIDERS THE REINCORPORATION TO BE IN THE BEST INTERESTS OF
THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS THAT YOU VOTE "FOR" THE
REINCORPORATION.
General
- -------
If approved, the Reincorporation will be accomplished pursuant to the
Resolutions. The Resolutions provide that the Board of Directors of the
Company may decide to abandon the Reincorporation at any time.
If the Reincorporation is approved, Sterling Louisiana will be governed by
the Louisiana Business Corporation Law ("LBCL") and its Articles of
Incorporation and Bylaws (together, the "Louisiana Charter"), which will
change some of your rights as a shareholder. See "Principal Changes in the
Company's Charter and Bylaws to be Effected by Reincorporation" and
"Certain Differences Between the Corporation Laws of Louisiana and Delaware
and Corresponding Charter and Bylaws Provisions." However, there will be no
change in the business, management, assets, liabilities or net worth of the
Company.
Conversion of Shares
- --------------------
When the Reincorporation becomes effective (the "Effective Date"), each
outstanding share of the Company's Common Stock will be automatically
converted and exchanged for one share of common stock, par value $1.00 per
share, of the Surviving Corporation ("Surviving Corporation Stock") and the
Sterling Louisiana Common Stock held by the Company will be canceled. Stock
certificates which now represent outstanding shares of Common Stock will
automatically represent the same number of shares of Sterling Louisiana
Common Stock on the Effective Date. You will not be required to exchange
your Company stock certificates for Surviving Corporation stock
certificates.
Following the Reincorporation, previously outstanding Company stock
certificates may be delivered in effecting sales, through a broker or
otherwise, of shares of Sterling-Louisiana Common Stock. The Common Stock
is presently traded in the over the counter market under the symbol "SSUG"
and, after the Reincorporation, Sterling Louisiana Common Stock will
continue to be traded in the over the counter market under that symbol.
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No Changes in Business Plan, Management, Assets, Liabilities, Net Worth or
- ---------------------------------------------------------------------------
Capitalization
- --------------
The proposed Reincorporation will not change the business, management,
assets, liabilities, net worth or capitalization of the Company. Pursuant
to the Reincorporation, the name of the Surviving Corporation will be
Sterling Sugars, Inc., all of the previously outstanding shares of Common
Stock of the Company shall be automatically converted into the same number
of shares of Surviving Corporation Common Stock and the business of the
Company shall be conducted by Surviving Corporation in the same places and
in the same manner as the business of the Company currently is conducted.
The directors and the executive officers of the Company will serve as the
directors and executive officers of Surviving Corporation until their
respective successors are elected. Promptly after the effectiveness of the
Reincorporation, the Company will issue an appropriate press release
announcing the Reincorporation.
Reasons for Reincorporation
- ---------------------------
The Company proposes to reincorporate as a Louisiana corporation for
several reasons. Primarily, the Company wishes to be governed by Louisiana
law with respect to its corporate activities since all of its business
operations take place in Louisiana. Additionally, the Company believes that
for purposes of any Louisiana litigation in which it may be involved it
would be beneficial to be a Louisiana corporation with respect to those
proceedings.
No appraisal rights are available to holders of Common Stock in respect
of the Reincorporation.
Principal Changes in the Company's Charter and Bylaws to be Effected by
- ------------------------------------------------------------------------
Reincorporation
- ---------------
Upon completion of the Reincorporation, the Louisiana Charter will govern
the rights of the stockholders of Surviving Corporation. Although the
provisions of the Louisiana Charter are similar to those of the Company's
Certificate of Incorporation, as amended ("Certificate of Incorporation")
and Bylaws (collectively, the "Delaware Charter") in many respects, the
Reincorporation includes implementation of certain provisions in the
Louisiana Charter that affect the rights of stockholders and management.
Approval by the stockholders of the Reincorporation will constitute approval
of the terms of the Louisiana Charter, including the provisions described
below. The following discussion is qualified in its entirety by reference
to the Louisiana Business Corporation Law ("LBCL") and the Delaware General
Corporation Law ("DGCL") and applicable charter and bylaw provisions.
10
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Certain Differences Between the Corporation Laws of Louisiana and Delaware and
- ------------------------------------------------------------------------------
Corresponding Charter and Bylaw Provisions
- ------------------------------------------
As a result of the Reincorporation, Company stockholders, whose rights are
governed by the DGCL, will become shareholders of the Surviving Corporation
and their rights as shareholders will then be governed primarily by the
LBCL.
Certain differences between the DGCL and LBCL are set forth below. The
following summary does not purport to be complete and is qualified in its
entirety by reference to the provisions of the LBCL and the DGCL and
applicable charter and bylaw provisions.
Mergers
- -------
The LBCL permits a merger to become effective without the approval of the
surviving corporation's shareholders if the articles or certificate of
incorporation, as the case may be, of the surviving corporation do not
change following the merger, each share of such corporation outstanding
immediately prior to the effective date of the merger is an identical
outstanding or treasury share of the surviving corporation after the merger,
the amount of the surviving corporation's common stock to be issued or
delivered under the plan of merger does not exceed 15% of the total shares
of outstanding voting stock immediately prior to the acquisition, and the
board of directors of the surviving corporation adopts a resolution
approving the plan of merger. In contrast, the DGCL permits a merger to
become effective without the approval of the surviving corporation's
shareholders if the articles or certificate of incorporation of the
surviving corporation does not change, the amount of the surviving
corporation's common stock to be issued or delivered under the plan of
merger does not exceed 20% of the total shares of outstanding voting stock
immediately prior to the acquisition, and the board of directors of the
surviving corporation adopts a resolution approving the plan of merger.
When shareholder approval is required under Louisiana law, a merger must
be approved by the holders of two-thirds of the outstanding shares of the
Louisiana corporation entitled to vote thereon, or by such amount as
required by the articles of incorporation, but not less than a majority.
If a class of stock is entitled to vote as a class, the merger must also be
approved by two-thirds of the outstanding shares of stock of each class
entitled to vote as a class, or as provided by the articles of incorporation,
but not less than a majority. In contrast, where shareholder approval is
required under Delaware law, a merger can generally be approved by
a majority vote of the outstanding shares of capital stock of each class
entitled to vote thereon.
Appraisal Rights
- ----------------
Shareholders of Louisiana corporations are entitled to exercise certain
dissenters' rights in the event of a sale, lease, exchange or other
disposition of all of the property and assets of the corporation, and, with
11
<PAGE>
the exceptions discussed below, a merger or consolidation, unless the action
was approved by at least 80% of the corporation's total voting power.
In the case of a short form merger, dissenters' rights exist without regard
to the percentage of the voting power which authorized the merger, and even
if the merger was not approved by the shareholders. Unless the articles of
incorporation provide otherwise, Louisiana law provides that shareholders
do not have appraisal rights in connection with a merger where, on the
record date fixed to determine the shareholders entitled to vote, the stock
of the corporation is listed on a national securities exchange or is listed
on the Nasdaq National Market, unless the shares of such shareholders were
not converted by the merger or consolidation solely into shares of the
surviving corporation.
Shareholders of a Delaware corporation have rights of appraisal in
connection with certain mergers or consolidations. In addition, a Delaware
corporation may, but is not required to, provide in its certificate of
incorporation that appraisal rights shall be available to shareholders in
the event of an amendment to the certificate of incorporation, the sale of
all or substantially all of the assets of the corporation, or the occurrence
of any merger or consolidation regarding which appraisal rights are not
otherwise available and in which that Delaware corporation is not the
surviving or resulting company. No such provision is included in the
Company's Certificate of Incorporation.
However, no appraisal rights are available under Delaware law for the
holders of any shares of a class or series of stock of a Delaware
corporation that is a party to a merger if that corporation survives the
merger and the merger did not require the vote of the holders of that class
or series of such corporation's stock; provided, however, that under
Delaware law appraisal rights will be available in any event to shareholders
of a Delaware corporation who are required to accept consideration for their
shares other than the consideration described below.
Further, Delaware law provides that shareholders do not have appraisal
rights in connection with a merger where, on the record date, the stock of
the corporation is listed on a national securities exchange, is listed on
the Nasdaq National Market or is held of record by more than 2,000
shareholders, unless any of the following exceptions concerning
consideration paid to the shareholder for his shares are met. Appraisal
rights will be available to shareholders of a Delaware corporation in the
event of a merger or consolidation if such shareholders are required by the
terms of an agreement of merger or consolidation to accept for their stock
anything other than (i) shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository receipts in
respect thereof, (ii) shares of stock of any other corporation or
depository receipts in respect thereof, which at the effective date of the
merger or consolidation will be either listed on a national securities
exchange, designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc. or
held of record by more than 2,000 shareholders, (iii) cash in lieu of
fractional shares or fractional depository receipts of a corporation
described in (i) and (ii) above, or (iv) any combination of the shares of
stock, depository receipts and cash in lieu of fractional shares or
fractional depositary receipts described in (i), (ii) and (iii) above.
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Special Meetings
- ----------------
A special meeting of shareholders of a Louisiana corporation may be called
by the president or the board of directors, or in any manner provided for in
the articles or bylaws. Also, any shareholder or shareholders holding in
the aggregate one-fifth (or such amount fixed in the articles or bylaws) of
the total voting power, may file a written request for a meeting.
Shareholders of Delaware corporations do not have a right to call special
meetings unless that right is included in the corporation's certificate of
incorporation or bylaws. The Company's Certificate of Incorporation does
not grant shareholders the right to call special meetings.
Actions Without a Meeting
- -------------------------
Under Louisiana law, shareholders may act without a meeting if a written
consent is signed by all the shareholders entitled to vote on the matter.
If the articles provide that such a consent may be signed by fewer than all
of the shareholders having voting power on any question, the consent need
be signed only by shareholders holding that proportion of the total voting
power on the question which is required by the articles or bylaws, whichever
requirement is higher.
Delaware law provides that shareholders may take action without a meeting
if a written consent is signed by the shareholders having the minimum
number of votes that would be necessary to take such action at a meeting,
unless prohibited in the certificate of incorporation.
Election and Removal of Directors
- ---------------------------------
If the articles so provide, cumulative voting is allowed by a Louisiana
corporation in electing or removing directors. A director elected by
cumulative voting may not be removed if the votes cast against his removal
would be sufficient to elect him if cumulatively voted. The articles of
Sterling Louisiana do not provide for cumulative voting.
A majority of the stockholders of a Delaware corporation may remove a
director with or without cause, unless the certificate of incorporation
provides otherwise, except in the case of a corporation whose board is
classified and elected for staggered terms, in which case directors may be
removed only for cause. The Company's Certificate of Incorporation does not
provide for a classified board.
Voting on Other Matters
- -----------------------
Under Louisiana law, an amendment to the articles of incorporation requires
the approval of the holders of at least two-thirds of the voting power
present, or such proportion of the total voting power as the articles may
require, unless the articles of incorporation provide differently, but not
less than a majority. If an amendment would adversely affect the rights of
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<PAGE>
a class or series, then the amendment must also have the approval of the
voting power of the class or series present, or of the total voting power
of the class or series, as the articles may require, of each class or series
so affected, unless a different number, not less than a majority, is
specified in the articles of incorporation. A class or series that is or
would be adversely affected by an amendment to the articles of incorporation
shall have the right to vote as a class on the amendment, whether or not the
articles of incorporation so provide. Delaware law provides that amendments
to the certificate of incorporation must be approved by the holders of a
majority of the corporation's stock entitled to vote thereon, and the
holders of a majority of the outstanding stock entitled to vote thereon as
a class.
If the corporation is not insolvent, the sale, lease, exchange or other
disposition of all, or substantially all, the property and assets, including
its goodwill, franchise, or other rights of a Louisiana corporation,
requires the approval of the holders of at least two-thirds of the voting
power present (or by such greater or lesser proportion, not less than a
majority, of the voting power present or of the total voting power, as the
articles may require.) A Delaware corporation may sell, lease or exchange
all or substantially all of its property and assets when and as authorized
by the holders of a majority of the outstanding stock of the corporation
entitled to vote thereon, unless the certificate of incorporation requires
the vote of a larger portion of the outstanding stock. The Company's
Certificate of Incorporation requires a majority vote.
Under Louisiana law, the voluntary dissolution of a corporation requires
the approval of the holders of a majority of the voting power present or of
the total voting power as the articles may require (including the holders
of each class or series entitled to vote thereon as a class), unless a
different amount, not less than a majority, is specified in the
corporation's articles of incorporation. Delaware law requires that
dissolution must be approved by the holders of a majority of the
corporation's stock entitled to vote thereon, unless the certificate of
incorporation requires the vote of a larger portion of the outstanding
stock.
Preemptive Rights
- -----------------
Under Louisiana law, shareholders have preemptive rights only if provided
for in the articles of incorporation. The articles of incorporation of
Sterling Louisiana do not provide for preemptive rights. Shareholders of
the Company also do not possess such preemptive rights.
Dividends
- ---------
A Delaware corporation may pay dividends not only out of surplus (the
excess of net assets over capital) but also out of net profits for the
current or preceding fiscal year if it has no surplus; provided, however,
that if the capital of the corporation has been decreased to an amount less
than the aggregate amount of the capital represented by the issued and
outstanding stock having a preference upon the distribution of assets, no
dividends may be declared out of net profits.
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A Louisiana corporation may also pay dividends from either surplus or net
profits, but with slightly different restrictions than under Delaware law.
Reserved earned surplus may not be used to pay dividends, nor may dividends
be paid from surplus where the corporation is insolvent or would be made
insolvent by the payment of dividends. Dividends paid out of surplus are
also subject to any restrictions in the articles of incorporation.
Dividends out of net profits may not be made if the corporation's assets
are, or would be, exceeded by its liabilities or when the net assets are,
or would be reduced to, less than the aggregate amount payable upon
liquidation on the issued shares which have a preferential right to
participate in the corporation's assets in the event of a liquidation.
Liquidation Rights
- ------------------
Pursuant to Louisiana law, any net assets remaining after liquidation are
to be paid to the shareholders according to their respective rights and
preferences.
Similarly, under Delaware corporate law, shareholders are entitled to
share ratably in the distribution of assets upon the dissolution of their
corporation. Preferred shareholders typically do not participate in the
distribution of assets of a dissolved corporation beyond their established
contractual preferences. Once the rights of preferred shareholders have
been fully satisfied, common shareholders are entitled to the distribution
of any remaining assets. The Company currently has no preferred stock
outstanding.
Limitation of Liability and Indemnification
- -------------------------------------------
Both Louisiana and Delaware corporate law permit a corporation to set
limits on the extent of a director's liability. The Company's Certificate
of Incorporation and Sterling Louisiana's articles of incorporation both
establish such limits to the maximum extent permitted by applicable law.
Both Louisiana and Delaware law permit a corporation to indemnify its
officers, directors, employees and agents if such person acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation. In the case of a criminal action, under
Louisiana law, indemnification is allowed, if there was no reasonable cause
to believe the conduct was unlawful. Indemnification is not allowed under
Delaware law, absent a court order to the contrary, if an officer,
director, employee or agent of the bank or corporation is finally adjudged
liable to the corporation. Under Louisiana law, indemnification is not
allowed, absent a court order to the contrary, if an officer, director,
employee or agent of the bank or corporation is finally adjudged liable to
the corporation for willful or intentional misconduct in the performance of
his duty to the corporation. The Company's Certificate of Incorporation
provides for indemnification of its officers and directors to the fullest
extent authorized by law.
Inspection of Books and Records
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Under Louisiana law, any person, except a business competitor, who has
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been a shareholder of record for at least six months preceding his demand,
and who is the holder of at least 5% of all of the outstanding shares of a
corporation, is entitled to examine the corporation's books and records for
any proper and reasonable purpose. Two or more shareholders who meet the
six month ownership requirement, may aggregate their shares in order to
meet the percentage requirement and exercise their right of inspection
jointly. A business competitor may exercise a right of inspection if it
owns 25% of the outstanding shares for a period of six months. Under
Delaware law, any shareholder has such a right.
Antitakeover Provisions
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Delaware has enacted antitakeover legislation. Section 203 of the DGCL
makes it more difficult to effect certain transactions between a Delaware
corporation (or its majority-owned subsidiaries) and an "Interested
Stockholder." The term "Interested Stockholder" is defined to include any
person owning 15% or more of the outstanding voting stock of a Delaware
corporation and affiliates and associates of such person. In general, under
Section 203, for a period of three years following the date that a
stockholder becomes an Interested Stockholder, the following types of
transactions ("Business Combinations") between a Delaware corporation and
such Interested Shareholders are prohibited unless certain conditions are
met: (i) mergers or consolidations, (ii) sales, leases, exchanges or other
dispositions of 10% or more of (a) the aggregate assets of the corporation
or (b) the aggregate market value of all the outstanding stock of the
corporation, (iii) issuance or transfer by the corporation of shares of its
stock that would have the effect of increasing the Interested Stockholder's
proportionate share of stock of the corporation, (iv) receipt by the
Interested Stockholder of the benefit of loans, advances, guarantees,
pledges or other financial benefits provided by the corporation, and (v)
any other transaction that has the effect of increasing the proportionate
share of the stock of the corporation owned by the Interested Stockholder.
The three-year ban will not apply: (i) if, prior to the date upon which the
Interested Stockholder becomes such, the board of directors approves either
the proposed Business Combination or the transaction which would result in
the stockholder becoming an Interested Stockholder, (ii) if, upon the
consummation of the transaction that results in such stockholder becoming
an Interested Stockholder, the stockholder will own at least 85% of the
voting stock of the Delaware corporation which was outstanding on the date
such transaction commenced, or (iii) if such Business Combination is
approved by the board of directors and, at a meeting, by the holders of at
least 66 2/3% of the outstanding voting stock not owned by the Interested
Stockholder.
This statute applies automatically to several classes of Delaware
corporations, unless a majority of a corporation's shareholders elects to
be excluded from the statute's coverage by amendment to the bylaws or
certificate of incorporation of the corporation or its original certificate
of incorporation elects to be excluded from this statute. The Company has
not elected to opt out currently of the anti-takeover protection of Section
203 of the DGCL and, accordingly, such provisions apply to the Company.
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Louisiana law provides that upon the acquisition by a person of at least
20% of such corporation's outstanding shares ("Control Shares"), such person
must give the corporation notice of such acquisition. The shareholders of
the corporation have the right to determine the voting rights to be accorded
to the shares acquired in the control share acquisition. Should Control
Shares be accorded full voting rights and the acquiring person has acquired
Control Shares with a majority or more of all voting power, all shareholders
have dissenters' rights in such transactions.
Securities Law Consequences
- ---------------------------
After the Reincorporation, the Surviving Corporation will be a
publicly-held company, its Common Stock will continue to be qualified
traded in the over the counter market, and it will file with the Securities
and Exchange Commission and provide you with the same type of information
the Company has previously filed and provided. The shares of the Surviving
Corporation to be issued in exchange for shares of the Company are not being
registered under the Securities Act, in reliance upon an exemption with
respect to a merger which has as its sole purpose a change in the domicile
of the corporation. Stockholders whose stock in the Company is freely
tradable before the Reincorporation will own freely tradable shares of the
Surviving Corporation after the Reincorporation. Shareholders holding
restricted securities of the Surviving Corporation will be subject to the
same restrictions on transfer as those to which their present shares of
stock in the Company are subject. For purposes of computing compliance
with the holding period of Rule 144 under the Securities Act, shareholders
will be deemed to have acquired their shares in Surviving Corporation on
the date they acquired their shares in the Company. In summary, the
Surviving Corporation and its shareholders will be in the same respective
positions under the federal securities laws after the Reincorporation as
before the Reincorporation.
Federal Income Tax Consequences
- -------------------------------
The Reincorporation is intended to qualify as a reorganization within the
meaning of Section 368(a) of the Code. This means that no gain or loss will
be recognized by holders of the Common Stock upon receipt of Surviving
Corporation Common Stock in the Reincorporation, and no gain or loss will be
recognized by the Company or the Surviving Corporation as a result of the
Reincorporation. In addition, each former holder of Common Stock will have
the same basis in the Surviving Corporation shares received in the
Reincorporation as such holder had surrendered in the Reincorporation, and
such holder's holding period with respect to Surviving Corporation Common
Stock will include the period that the holder held the corresponding Common
Stock surrendered in exchange therefore, provided such Common Stock was held
by the holder as a capital asset at the time of the Reincorporation. The
basis in the assets deemed transferred by the Company to the Surviving
Corporation in the Reincorporation will remain the same, and the rules of
Section 381 will result in a carryover of tax attributes from the Company
to the Surviving Corporation.
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In order for the Reincorporation to qualify as a reorganization under the
Code, certain requirements must be satisfied, including, without limitation,
the so-called "continuity of interest requirement." To satisfy the
continuity of interest requirement, holders of Common Stock must not,
pursuant to a plan or intent existing at or prior to the Reincorporation,
sell, exchange, transfer, or otherwise reduce the risk of loss relating to,
so many of either (i) their shares of Common Stock in anticipation of the
Reincorporation or (ii) their shares of Surviving Corporation shares of
Common Stock to be received in the Reincorporation, such that the Company
shareholders, as a group, would no longer have a significant equity interest
in the business being conducted by the Surviving Corporation after the
Reincorporation.
The foregoing discussion of certain federal income tax aspects of the
Reincorporation is based on the Code, applicable regulations promulgated or
proposed thereunder, administrative rulings by the Internal Revenue Service
and judicial authority as of this date, all of which are subject to change,
possibly with retroactive effect. There can be no assurance that future
changes in the foregoing precedents will not adversely affect the tax
consequences discussed or that there will not be differences of opinion as
to the interpretation of such precedents. Accordingly, stockholders of the
Company should consult their own tax advisers as to the specific
consequences of the Reincorporation under their particular circumstances,
including the application of federal, state, local and foreign income and
other tax laws.
ACCOUNTANTS
It is anticipated that Broussard, Poche, Lewis & Breaux, will be asked to
serve as the Company's independent public accountants for the fiscal year
ending July 31, 2000. A representative of the firm is expected to be
present at the annual meeting and to be available to respond to appropriate
questions. He will have the opportunity to make a statement if he desires.
At the Company's Board of Directors meeting on February 8, 1999 the Board
appointed the accounting firm of Broussard, Poche', Lewis & Breaux, LLP as
independent accountants for the Registrant for 1999. The work of LeGlue &
Company was terminated at that time.
During the two most recent fiscal years and the interim periods subsequent
to July 31, 1998, there have been no disagreements with LeGlue & Company on
any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure or any reportable events.
LeGlue's report on the financial statements for the past two years
contained no adverse opinion or disclaimer and was not qualified or modified
as to uncertainty, audit scope or accounting principles.
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OTHER MATTERS
The matters to be acted upon at the Annual Meeting of Stockholders are
set forth in the accompanying notice. The Board knows of no other business
to come before the meeting, but if other matters requiring a vote are
properly presented to the meeting or any adjournments thereof, proxy holders
will vote, or abstain from voting hereon in accordance with their best
judgment.
By Order of the Board of Directors
J. Patout Burns, Jr.
Secretary
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STERLING SUGARS, INC. (Solicited by the Board of Directors)
The undersigned hereby appoints J. Patout Burns, Jr., Craig P. Caillier
and Peter V. Guarisco and each of them, proxies with full power of
substitution, to represent and vote all shares of Common Stock of Sterling
Sugars, Inc. which the undersigned is entitled to vote at the Annual Meeting
of Stockholders of said corportation to be held in the Conference Room, St.
Mary Parish Library, 206 Iberia Street, Franklin, Louisiana on Monday,
November 29, 1999 at 10:00 a.m. and at any adjournment thereof (1) as
hereinafter specified upon the election of directors and (2) in their
disretion upon such other business as may properly come before the meeting
or any adjournment thereof.
A VOTE FOR THE FOLLOWING NOMINEES IS RECOMMENDED BY THE BOARD OF DIRECTORS
1. Election of Directors
For all nominees listed below ______Withhold authority to vote for all
nominees listed below________
(Except as indicated to the contrary below)
Bernard E. Boudreaux, Jr., Dr. J. Patout Burns, Jr., Craig P. Caillier,
Peter V. Guarisco, Victor Guarisco, II, Rivers Patout and William S.
Patout, III
INSTRUCTION:
(To withhold authority to vote for any individual nominee, write that
nominee's name in the space provided below)
___________________________________________________________________________
2. Reincorporation:
For_______ Against_______ Abstain_______
All as set forth in the Notice and Proxy Statement for the meeting,
receipt of which is acknowledged
CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE
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When properly executed and returned, this proxy will be voted in the manner
specified. If no manner is specified, the shares represented hereby will be
voted for election of the nominees named on the reverse hereof.
DATE____________________________,1999
_____________________________________
SIGNATURE OF HOLDER
NOTE: Please sign as your name appears
hereon. When signed as attorney-in-fact
executor, administrator, trustee or
guardian, please give your full title as
such. If a corporation, please sign in
full corporate name by authorized
officer. If a partnership, please sign
in full partnership name by authorized
person.
PLEASE MARK, DATE, SIGN AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES
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