[SPARTECH LOGO]
SPARTECH CORPORATION
120 S. Central Avenue, Suite 1700
Clayton, Missouri 63105-1705
DEAR FELLOW SHAREHOLDER:
I cordially invite you to attend the 2001 Annual Meeting of Shareholders of
Spartech Corporation to be held at 10:00 a.m. on Wednesday, March 14, 2001, at
the Pierre Laclede Center (Saint Louis Club-16th Floor), 7701 Forsyth Boulevard,
Clayton, Missouri 63105 for the following purposes:
1. To elect three Class B directors to serve three-year terms.
2. To approve the Spartech Corporation 2001 Stock Option Plan.
3. To ratify the selection of Arthur Andersen LLP as independent auditors of
the Company for the 2001 fiscal year.
4. To transact such other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on January 15, 2001
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Annual Meeting and at any and all adjournments
thereof.
After the formal business of the meeting is covered, I will give a brief
update on the Company's first quarter results and then discuss in more detail
our strategy for the future. This will include a review of our recently
introduced "Creating Positive Change" initiative and a discussion of our ongoing
"Focused Growth" and "Continuous Improvement" strategies.
I look forward to seeing each of you at the meeting, so please mark your
calendar for the second Wednesday in March. However, even if you are unable to
attend, you can ensure that your shares are represented at the meeting by
promptly completing your proxy and returning it in the enclosed envelope.
Sincerely,
/s/ Bradley B. Buechler
Bradley B. Buechler
St. Louis, Missouri Chairman, President and
January 19, 2001 Chief Executive Officer
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Page 1
SPARTECH CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 14, 2001
To Our Shareholders:
The enclosed proxy is solicited by the Board of Directors of Spartech
Corporation for use at the 2001 Annual Meeting of Shareholders of the Company.
All expenses for the preparation and mailing of this Proxy Statement and form
of proxy will be paid by the Company. In addition to solicitations by mail, a
number of regular employees of the Company may solicit proxies on behalf of the
Board of Directors in person or by telephone. Spartech will reimburse banks,
brokerage firms and other custodians, nominees and fiduciaries for reasonable
costs incurred by them in transmitting proxy materials to the beneficial owners
of the Company's Common Stock.
The persons named in the accompanying proxy were selected by the Board of
Directors of the Company. They have advised the Company of their intentions, if
no contrary instructions are given, to vote the shares represented by all
properly executed and unrevoked proxies received by them for the Board of
Directors' nominees for director and for management proposals 2 and 3, as set
forth in the Notice of Annual Meeting of Shareholders, and on any other matter
which may come before the Annual Meeting in accordance with their best judgment.
This Proxy Statement and the proxy solicited hereby are being first sent or
delivered to shareholders of the Company on or about January 19, 2001. Any
shareholder giving a proxy has the right to revoke it by notifying the Secretary
of the Company of such revocation, in writing, at any time before its exercise.
Execution of the proxy will not in any way affect the shareholder's right to
attend the Annual Meeting and vote in person.
A copy of Spartech's Annual Report to Shareholders for the fiscal year
ended October 28, 2000 accompanies this Proxy Statement.
OUTSTANDING SHARES AND VOTING PROCEDURES
The outstanding voting securities of the Company on January 15, 2001
consisted of 26,581,635 shares of Common Stock, $0.75 par value per share,
entitled to one vote per share.
With respect to proposal 1, a plurality of the votes cast in person or by
proxy at the Annual Meeting is required to elect directors. "Plurality" means
that the nominees who receive the largest number of votes cast are elected as
directors, up to the number of directors to be elected at the meeting. With
respect to proposals 2 and 3, a majority of the votes cast in person or by proxy
at the Annual Meeting is required to adopt the proposal. Abstentions and broker
non-votes are counted for the purpose of determining the presence or absence of
a quorum for the transaction of business. Abstentions are counted in the
tabulations of the votes cast on proposals presented to stockholders, and
therefore have the same effect as negative votes. Broker non-votes, however,
are not counted for the purpose of determining whether a proposal has been
approved.
Only shareholders of record at the close of business on January 15, 2001
are entitled to receive notice of and to vote at the Annual Meeting and at any
and all adjournments thereof. A majority of the outstanding shares of Common
Stock must be represented at the Annual Meeting in person or by proxy to
constitute a quorum.
Page 2
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. All directors hold
office for a term of three years. The Class A directors will continue in office
until the Annual Meeting of Shareholders in 2003, the Class B directors elected
at this Annual Meeting will hold office until the Annual Meeting of Shareholders
in 2004, and the Class C directors will continue in office until the Annual
Meeting of Shareholders in 2002, and, in each case, until their successors are
duly elected and qualified.
The Board of Directors has nominated Bradley B. Buechler and Calvin J.
O'Connor, present directors of the Company, and Randy C. Martin to be elected
Class B directors of the Company. Vita International Limited and the Company's
executive officers and directors have informed the Company that they intend to
cast their votes, aggregating 12,695,189, "FOR" these Board nominees.
Listed below are the members of the Company's Board of Directors, including
the nominees for election to the Board, with certain information about each of
them including their principal occupations for the last five years:
SPARTECH
DIRECTOR
NAME, AGE PRINCIPAL OCCUPATION AND OTHER SINCE
DIRECTORSHIPS
Ralph B. Andy, 56 Mr. Andy is the Chairman and 1998
Chief Executive Officer of
Pennatronics Corp. He was
Chairman and Chief Executive
Officer of Polycom Huntsman, Inc.
from 1977 until March 1998. His
term as director expires at the
2002 Annual Meeting.
Bradley B. Buechler, 52 Mr. Buechler is the Chairman, 1984
President and Chief Executive
Officer of the Company. He is a
CPA, and was Corporate Controller
and Vice President-Finance of the
Company from 1981 to 1984. He
became Chief Operating Officer of
the Company in 1985, President in
1987, Chief Executive Officer in
1991, and Chairman in March 1999.
Mr. Buechler is a member of the
National Board of Directors of
the Society of the Plastics
Industry, Inc. and also serves on
several local charitable boards.
He currently stands for re-
election.
W.R. Clerihue, 77 Mr. Clerihue was Chairman of the 1990
Board of the Company from 1991
until March 1999. He is retired
from Celanese Corporation, where
he last served as Executive Vice
President and Chief of Staff.
Mr. Clerihue also serves on the
board of directors of Reunion
Industries, Inc. His term as
director expires at the 2002
Annual Meeting.
Roy Dobson, 53 Mr. Dobson joined British Vita 2000
PLC in 1973, and he became
Managing Director of their
Industrials Group and was
appointed to its board of
directors in April 1998. His
term as director expires at the
2003 Annual Meeting.
John R. Kennedy, 70 Mr. Kennedy is the retired 1997
President and Chief Executive
Officer of Federal Paper Board
Company, Inc. He is also a
director of International Paper
Company, Chase Industries, Inc.,
Pioneer Companies, Inc. and Modis
Professional Services, Inc., and
Chairman of Georgetown
University's board of trustees.
His term as director expires at
the 2001 Annual Meeting, and he
is not standing for re-election.
Page 3
SPARTECH
DIRECTOR
NAME, AGE PRINCIPAL OCCUPATION AND OTHER SINCE
DIRECTORSHIPS
Randy C. Martin, 38 Mr. Martin is the Executive Vice __
President, Acrylic Products and
Chief Financial Officer of the
Company. He is a CPA, and was
with KPMG Peat Marwick from 1983
to 1995 most recently as a Senior
Audit Manager. Mr. Martin became
Corporate Controller of the
Company in September 1995 and was
named Vice President and Chief
Financial Officer in May 1996.
He became Executive Vice
President in September 2000. Mr.
Martin is being nominated as a
director for a term expiring at
the 2004 Annual Meeting.
Calvin J. O'Connor, 48 Mr. O'Connor is a Chartered 1998
Accountant in the United Kingdom.
He joined British Vita PLC and
became a member of its board of
directors in June 1996. In
November 1996 he became British
Vita's Finance Director. Prior
to joining British Vita, he was
the Group Financial Controller at
Courtaulds Textiles PLC. He
currently stands for re-election.
Jackson W. Robinson, 58 Mr. Robinson is the President of 1993
Winslow Management Company, a
division of Adams Harkness & Hill
in Boston, having held that
position since 1983. He is also
a director of Jupiter Global
Green Investment Trust PLC and
Jupiter European Opportunities
Trust PLC, and a Trustee of
Suffield Academy. His term as
director expires at the 2002
Annual Meeting.
Richard B. Scherrer, 53 Mr. Scherrer has been a partner 2000
of Armstrong Teasdale LLP since
January 1979 and the Managing
Partner of that firm since
January 1998. Mr. Scherrer is a
Fellow in the International
Society of Barristers and is
listed in America's Best
Lawyers,1999-2000 Edition. His
term as director expires at the
2003 Annual Meeting.
Craig A. Wolfanger, 42 Mr. Wolfanger has been Senior 2001
Managing Director - Head of
Investment Banking for
Parker/Hunter Incorporated since
1995 and also serves on its Board
of Directors. Prior to joining
Parker/Hunter, he was an
investment banker with Kidder,
Peabody & Co. Incorporated, Alex.
Brown & Sons Incorporated and PNC
Securities Corp. Mr Wolfanger
was elected to the Board in
January 2001 to fill the vacancy
created by the resignation of
David B. Mueller. His term as
director expires at the 2003
Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE BOARD OF
DIRECTORS' SLATE OF NOMINEES.
Page 4
BOARD COMMITTEES AND COMPENSATION
There were five meetings of the Board during fiscal 2000. Every director
attended 75% of the aggregate number of formal meetings of the Board and of the
committees on which he served, with the exception of the designees of British
Vita, who alternate their attendance at the formal meetings because of long and
costly international travel requirements, Mr. Kennedy, and former director David
B. Mueller.
The Board has an Audit Committee, currently consisting of Messrs. Andy,
Clerihue, Kennedy and Robinson, which met three times during fiscal 2000. The
Audit Committee's function is to recommend the appointment of independent
accountants to audit the Company's financial statements and to perform other
services related to the audit; review the scope and results of the audit with
the independent accountants; review with management and the independent
accountants the Company's interim and year-end operating results; consider the
adequacy of the internal accounting and auditing procedures of the Company; and
review the non-audit services to be performed by the independent accountants and
consider the effect of such performance on the accountants' independence.
The Board has a Compensation Committee, currently consisting of Messrs.
Clerihue, Kennedy, O'Connor, Robinson and Scherrer, which met twice during
fiscal 2000. The Compensation Committee's function is to review all
compensation arrangements under employment contracts or which are in excess of
$150,000 per year, and approve all stock option grants.
The Board has a Nominating Committee, currently consisting of Messrs. Andy,
Clerihue, Dobson, Robinson and Scherrer, which met once during fiscal 2000. The
Nominating Committee's function is to review the size and composition of the
Board; review possible director candidates and recommend director nominations
for presentation to shareholders; and review assignments of Board members to
various Board committees. Shareholders who wish to recommend a candidate for
election to the Board may submit such recommendation to the Secretary of the
Company. Any recommendation must include name, address, appropriate background,
experience and other pertinent information on the proposed candidate and must be
received in writing by November 30, 2001 for consideration by the Nominating
Committee for the next Annual Meeting.
The Company pays each non-management director an annual fee of $27,000, and
reimburses each of them for the expenses incurred in attending each meeting. In
addition, the Company pays an annual fee of $36,000 to British Vita PLC for
services provided to the Company by its directors, and Mr. Clerihue, the
Company's former Chairman of the Board, receives an additional $21,000 per year
for services to the Company. Each non-management director, except for the
British Vita representatives, also receives $1,200 for each Board and Committee
Meeting attended.
Certain non-management directors have been granted options to purchase
Common Stock of the Company periodically during their terms as directors. No
options were granted in fiscal 1998 or 1999. On November 1, 1999 Messrs. Andy,
Cassidy, Clerihue, Kennedy and Robinson were granted options for 10,000 shares
each with a ten-year term and an exercise price at the then fair market value of
the Company's Common Stock of $28.625. On December 6, 2000 Mr. Scherrer was
granted an option for 15,000 shares, with a ten-year term and an exercise price
at the then fair market value of the Company's Common Stock of $11.19; and upon
his election to the Board effective January 2, 2001 Mr. Wolfanger was granted an
option for 15,000 shares, with a ten-year term and an exercise price at the then
fair market value of the Company's Common Stock of $20.56.
Page 5
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
To Our Shareholders:
The Compensation Committee of the Board of Directors is responsible for
approving compensation levels for all executive officers and for any employee
who has an employment contract or compensation in excess of $150,000 per year.
Our objective is to provide compensation that is fair and equitable to both the
employee and the Company, considering the employee's overall responsibilities,
professional qualifications, business experience and technical expertise, and
the resultant combined value of the employee to the Company's long-term
performance and growth.
In establishing the compensation level for the Chief Executive Officer, we
consult independent published surveys and studies by compensation and benefit
consulting firms. We endeavor to establish his total compensation at levels
approximating the 75th percentile reported for publicly-traded companies of
comparable size to Spartech for this position. His annual bonus is based on the
operating results of the Company. In connection with the renewal of the Chief
Executive Officer's employment contract in November 1999, we adjusted his base
salary and bonus arrangement in an effort to better align such amounts with
industry practices and the results of current studies. We also considered the
Company's key operating results, including the fiscal 2000 earnings per share
increase of 16% from 1999, a return on equity of 25%, and internal sales growth
of 8%. As a result, we increased the Chief Executive's base salary to $625,000
and reduced his bonus percentage to 0.9% of earnings before income taxes
(previously calculated at 1.0% of earnings before interest and income taxes).
The Compensation Committee periodically reviews the compensation levels
established for each employee for whom we are responsible and approves
adjustments recommended by the Chief Executive Officer to reflect changes in
responsibility for various executives of the Company or economic conditions. We
believe that by providing fair and equitable compensation levels, the Company
will continue to attract and maintain qualified individuals who are dedicated to
the long-term performance and growth of Spartech. The Compensation Committee
also approves the stock options to be awarded to employees, based upon their
individual performance and the economic value created by their respective
operating units.
The Company maintains broadly based stock ownership guidelines for its key
managers (totaling over 90 today). Under these guidelines, the Company's Chief
Executive Officer is expected to hold Company Common Stock having an aggregate
market value equal to four times base pay, Executive Vice Presidents three times
base pay, and other key managers up to two times their base pay. Participants
are expected to reach their respective goals over a four-year period beginning
with the year in which they were first granted options. Unexercised stock
options are not counted toward achieving these targets.
Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended,
limits the Company's tax deduction to $1 million per year (the "Compensation
Cap") for certain compensation paid in a given year to the Chief Executive
Officer and the four highest compensated executives other than the Chief
Executive Officer named in the Proxy Statement. The code and regulations issued
under the Code exclude from the Compensation Cap amounts based on attainment of
pre-established, objective performance goals, if certain other requirements are
met. The Committee's policy is to structure compensation programs, including
stock option and bonus plan awards, for covered executives that will be
deductible without limitation.
W.R. Clerihue John R. Kennedy
Chairman
Calvin J. O'Connor Jackson W. Robinson Richard B. Scherrer
Page 6
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes compensation earned by the Company's Chief
Executive Officer and the other most highly compensated executive officers whose
aggregate salary and bonus exceeded $100,000 for fiscal 2000.
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
NAME AND FISCAL OTHER ANNUAL OPTIONS
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION GRANTED (#)
($) (1)
Bradley B. Buechler 2000 $637,019 $725,670 $112,064 110,000
Chairman, President and 1999 $405,000 $877,070 $74,449 37,500
Chief Executive Officer 1998 $405,000 $697,280 $82,653 200,000
George A. Abd (2) 2000 $207,423 $210,000 $33,481 9,000
Executive Vice President, 1999 $200,500 $170,000 $33,403 6,500
Color & Specialty 1998 $122,485 $99,110 $21,250 25,000
Compounds
Randy C. Martin 2000 $170,481 $125,000 $19,972 10,000
Executive Vice President, 1999 $149,423 $90,000 $18,684 7,500
Acrylic Products and 1998 $134,615 $65,000 $18,654 12,000
Chief Financial Officer
David G. Pocost 2000 $165,241 $120,000 $18,832 10,000
Executive Vice President, 1999 $144,375 $85,000 $18,911 7,500
Extruded Sheet 1998 $121,135 $60,000 $15,344 12,000
and Profile Products
Jeffrey D. Fisher (3) 2000 $176,346 $75,000 $17,157 -
Vice President and 1999 $ 58,558 $20,000 $ - 10,000
General Counsel 1998 $ - $ - $ - -
David B. Mueller (4) 2000 $451,731 $428,000 $71,057 65,000
Executive Vice President & 1999 $250,000 $526,242 $44,250 27,500
Chief Operating Officer 1998 $254,807 $418,368 $49,940 150,000
(1)The amounts disclosed in this column for fiscal year 2000 include
Company contributions to non-qualified deferred compensation arrangements on
behalf of Mr. Buechler, $100,000; Mr. Abd, $15,000; Mr. Martin, $15,000; Mr.
Pocost, $15,000; Mr. Fisher, $11,907; and Mr. Mueller, $67,078; and Company
contributions to a qualified profit sharing plan on behalf of Mr. Abd,
$15,856.
(2)Mr. Abd commenced employment with the Company on March 31, 1998 in
connection with the Company's acquisition of Polycom Huntsman, Inc. and was
elected as an executive officer in September 2000.
(3)Mr. Fisher commenced employment with the Company on July 1, 1999.
(4)Mr. Mueller transitioned from his responsibilities as Executive Vice
President and Chief
Operating Officer to a consulting arrangement effective October 28, 2000.
Page 7
_______________________________
OPTION GRANTS
The following table summarizes option grants made during fiscal 2000 to the
executive officers named above.
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
FOR OPTION TERM(1)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES EXERCISE EXPIRATION
NAME GRANTED (#) IN FISCAL YEAR PRICE DATE 5%($) 10%($)
Bradley B. Buechler 110,000 (2) 22.7% $28.625 10/31/09 $ 1,980,232 $ 5,018,297
George A. Abd 3,250 (3) .6% $28.625 10/31/04 $ 25,703 $ 56,797
5,750 (2) 1.2% $28.625 10/31/09 $ 103,512 $ 262,320
Randy C. Martin 3,250 (3) .6% $28.625 10/31/04 $ 25,703 $ 56,797
6,750 (2) 1.4% $28.625 10/31/09 $ 121,514 $ 307,941
David G. Pocost 3,250 (3) .6% $28.625 10/31/04 $ 25,703 $ 56,797
6,750 (2) 1.4% $28.625 10/31/09 $ 121,514 $ 307,941
Jeffrey D. Fisher __ __ __ __ __ __
David B. Mueller 65,000 (2) 13.4% $28.625 10/31/09 $ 1,170,137 $ 2,965,357
(1)The rates of appreciation presented of 5% and 10% are set by the Securities
and Exchange Commission, and therefore, are not intended to forecast future
appreciation of the Company's stock price.
(2)These represent options issued under the Restricted Stock Option Plan where
neither the options nor Common Stock acquired may be sold or otherwise
disposed of for three years after the date of grant of the option. The
options were granted at market value, vest in four equal annual installments
beginning November 1, 2000 and are transferable to family members, or to
other transferees with Board approval.
(3)These represent options issued under the Incentive Stock Option Plan and
were granted at market value, vest in four equal annual installments
beginning November 1, 2000 and are non-transferable.
OPTION EXERCISES AND OUTSTANDING OPTIONS
The following table summarizes all options exercised in fiscal 2000 and
unexercised options at the end of fiscal 2000 for the executive officers named
above.
NAME SHARES
ACQUIRED
ON VALUE
EXERCISE REALIZED
(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
Bradley B. Buechler 200,000 $4,131,250 569,375 (3) 138,125 (5) $ 2,574,375 __
George A. Abd __ __ 26,625 (4) 13,875 (5) __ __
Randy C. Martin 3,000 $ 70,875 22,875 (4) 15,625 (5) $ 19,125 __
David G. Pocost __ __ 26,625 (4) 15,625 (5) $ 48,750 __
Jeffrey D. Fisher __ __ 2,500 (4) 7,500 (5) __ __
David B. Mueller 215,000 $5,211,125 216,875 (3) 85,625 (5) $ 127,500 __
(1)The values represent the difference between the exercise price of the
options and the price of the Company's Common Stock on the date of exercise
and at fiscal year end, respectively. At the end of fiscal 2000 the
Company's stock price was less than the exercise prices for a majority of
the exercisable options and all unexercisable options.
(2)The Board has resolved that at no time will the total unexercised options to
employees be in excess of 10% of the then outstanding common shares.
(3)These represent options issued under the Restricted Stock Option Plan where
neither the options or Common Stock acquired may be sold or otherwise
disposed of for three years after the date of grant of the option.
(4)A portion of the unexercised options were issued from the Restricted Stock
Option Plan (Mr. Abd, 25,375; Mr. Martin, 6,625; Mr. Pocost, 6,625; and Mr.
Fisher, 1,750) where neither the options nor Common Stock acquired may be
sold or otherwise disposed of for three years after the date of grant of the
option.
(4) These represent the unvested portion of options granted in 1998 and 1999
which vest in four equal annual installments beginning one year after date of
grant.
Page 8
EMPLOYMENT AND CONSULTING AGREEMENTS
Mr. Buechler
On November 1, 1999, the Company entered into an Amended and Restated
Employment Agreement with Mr. Buechler, which modified but continued Mr.
Buechler's existing employment agreement. The Agreement will continue until
terminated either by the Company on three years' notice or by Mr. Buechler on
one year's notice. Notice of termination may not be given before November 1,
2002, except that if a "Change of Control" (described below) occurs, Mr.
Buechler may give notice of termination at any time on or after November 1,
2000. For 24 months after termination of the Agreement, Mr. Buechler may not
disclose any Company trade secrets, solicit the Company's customers, business or
employees, or otherwise compete directly with the Company.
The Agreement provides for compensation consisting of: (i) an annual base
salary of $625,000 subject to periodic review by the Board, (ii) an annual bonus
equal to 0.9% of the Company's annual earnings before income taxes, subject to
certain adjustments and exceptions, (iii) a one-time stock option grant of
110,000 shares at November 1, 1999 which are in addition to options granted
under previous versions of his employment agreement, and any other options which
the Board may grant him in the future under the Company's stock option plans,
(iv) an annual contribution to a trust maintained for Mr. Buechler commonly
known as a "rabbi trust," of 15% of base salary plus the amount of premium that
would be paid for term life insurance of $1,250,000, and (v) a provision that
Mr. Buechler may require the Company to repurchase during any twelve-month
period that the Agreement is in effect, beginning November 1, 1999, a number of
shares of Company Common Stock beneficially owned by Mr. Buechler not to exceed
15% of his then-current holdings of Common Stock and currently-exercisable
options, subject to certain other terms and conditions, at the average of the
publicly-reported high and low sale prices of the Common Stock on the New York
Stock Exchange over the three trading days prior to the sale.
If the Company terminates Mr. Buechler's employment for any reason other
than "Cause" (defined below), or if Mr. Buechler terminates his employment with
"Justification" (defined below) or with prior notice (as discussed above), then
he will receive a cash severance benefit equal to two times his then current
base salary plus the aggregate amount of the bonuses paid or earned by him in
the two years before the notice of termination is given. However, if a Change
of Control has occurred before the termination, the severance benefit becomes
2.95 times the sum of base salary plus one-third of the aggregate amount of
bonuses paid or earned by him in the three years before the notice of
termination is given. In either case, if the severance benefit and any other
payments received as a result of the termination are subject to the excise tax
imposed on excessive termination payments under the Internal Revenue Code, the
Company will pay Mr. Buechler an additional severance amount so that he will
receive the same net amount he would have received if there had been no excise
tax.
The Agreement defines certain terms, as follows:
A "Change of Control" takes place if any of the following occurs: (i) the
Board of Directors approves and recommends to the Company's shareholders (A) any
consolidation or merger of the Company where either the Company is not the
surviving corporation or the Company's shares are exchanged and the shareholders
do not retain the same proportionate voting interest in the Company or its
successor, (B) a sale or other transfer of all or substantially all of the
Company's assets, other than to a subsidiary, or (C) the liquidation or
dissolution of the Company; (ii) any person acquires a majority of the Company's
voting stock; (iii) the Board of Directors approves any transaction whose
purpose or likely effect is to cause the Company's Common Stock to be held by
fewer than 300 persons or not to be listed on any national securities exchange;
or (iv) there is a change in a majority of the Company's Board of Directors
within any 24 consecutive months, unless each new director was approved by a
majority of the continuing directors.
Page 9
"Cause" for termination of Mr. Buechler's employment by the Company occurs
only if he is convicted of a felony, or commits an act or omission (including
failure to follow lawful instructions of the Board of Directors) resulting or
intended to result in his personal gain at the expense of the Company's property
or business. However, Mr. Buechler will not be liable merely for his bad
judgment, acts or omissions done in good faith or in connection with any tender,
merger offer or other restructuring proposal.
"Justification" for termination of his employment by Mr. Buechler occurs
only if the Company reassigns or restricts him in a way inconsistent with his
position, duties, responsibilities and status as Chairman of the Board,
President and Chief Executive Officer or fails to pay him any salary, option or
bonus within seven days after he notifies the Company that such amount is due,
or otherwise adversely affects or materially reduces any other benefits or
rights of he has under the Agreement.
Messrs. Martin, Pocost and Fisher
The Company has also entered into three-year employment agreements with Mr.
Martin, expiring January 1, 2003; with Mr. Pocost, expiring January 1, 2003; and
with Mr. Fisher, expiring June 30, 2002. The annual base compensation under
these agreements, subject to periodic review for cost of living and/or merit and
other increases, is currently $205,000, $200,000 and $190,000 for Messrs.
Martin, Pocost, and Fisher respectively. In addition, the agreements with
Messrs. Martin and Pocost require the Company to maintain term life insurance in
the amount of $250,000 for the employees' designated beneficiaries for the term
of the agreements, all premiums thereon to be paid by the Company. The
agreements also provide for annual bonuses based upon individual performance and
the overall results of the Company's operations.
Mr. Mueller
On November 1, 1999 the Company entered into an Amended and Restated
Employment Agreement with Mr. Mueller substantially identical to that with Mr.
Buechler except that Mr. Mueller's agreement provided for a base salary of
$435,000, a bonus of 0.5% of the Company's annual earnings before income taxes,
a one-time share option grant of 65,000 shares, and annual rabbi trust
contributions based on $750,000 of term life insurance.
On October 28, 2000 Mr. Mueller's employment agreement was terminated by
mutual consent, and he transitioned from his responsibilities as Executive Vice
President and Chief Operating Officer to a consulting agreement, under which he
will continue to advise the Company on strategic acquisitions and other special
projects. Under the consulting agreement, which commenced on November 1, 2000
and will continue through October 28, 2005, the Company will pay Mr. Mueller a
fee of $545,000 for each year of the Agreement for consulting services and his
covenant not to compete with the Company. The Company will also maintain and
pay Mr. Mueller's group health coverage during the term of his consulting
agreement and contribute the sum of $65,000 to his rabbi trust in December 2001
and December 2002 as deferred compensation.
Page 10
AUDIT COMMITTEE CHARTER
On June 8, 2000, pursuant to the rules and regulations of the Securities
and Exchange Commission and the New York Stock Exchange, the Board of Directors
adopted a Charter for the Audit Committee. The Charter describes the
composition and responsibilities of the Audit Committee and the qualifications
of its members. A copy of the Audit Committee Charter is attached to this Proxy
Statement as Exhibit A.
Among its other responsibilities, the Audit Committee reports annually on
certain matters related to the annual audit of the Company's financial
statements. This report is set out below.
AUDIT COMMITTEE REPORT
December 6, 2000
To Our Shareholders:
We have reviewed and discussed with the Company's management the audited
financial statements of the Company as of and for the fiscal year ended October
28, 2000.
We have discussed with the Company's independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended, of the Auditing Standards Board
of the American Institute of Certified Public Accountants.
We have received and reviewed the written disclosures and the letter from
the Company's independent auditors required by Independence Standard No. 1,
Independence Discussions with Audit Committees, as amended, of the Independence
Standards Board, and we have discussed with the auditors their independence.
Based on the above reviews and discussions, we recommended to the Board of
Directors that the audited financial statements of the Company referred to above
be included in the Company's Annual Report on Form 10-K for the fiscal year
ended October 28, 2000 for filing with the Securities and Exchange Commission.
W.R. Clerihue Ralph B. Andy
Chairman
John R. Kennedy Jackson W. Robinson
Page 11
COMMON STOCK PERFORMANCE GRAPH
The following graph compares cumulative total Company shareholder return
for the last five fiscal years with overall market performance, as measured by
the cumulative return of the Standard & Poor's 500 Stock Index and the Standard
& Poor's Specialty Chemicals Index, assuming an initial investment of $100 at
the beginning of the period and the reinvestment of all dividends.
LINE GRAPH
Common Stock Performance Graph
FISCAL YEAR END
10/28/95 11/2/96 11/1/97 10/31/98 10/30/99 10/28/00 CAGR*
SPARTECH STOCK PRICE $6-3/8 $11 $15-7/8 $18 $28-5/8 $13 16.8%
Assumed $100 Investment:
SPARTECH CORPORATION $100 $175 $256 $294 $474 $217 16.8%
S&P 500 $100 $121 $158 $190 $235 $238 18.9%
S&P Specialty Chemicals Index $100 $110 $123 $109 $110 $89 (2.3)%
*Compound annual growth rate.
Page 12
SECURITY OWNERSHIP
The table set forth below identifies the aggregate shares of Common Stock
beneficially owned by each director, by each executive officer, by the executive
officers and directors as a group, and by each person known to the Company as of
December 31, 2000 to be the beneficial owner of more than 5% of the 26,627,435
shares of Common Stock outstanding as of that date.
NUMBER PERCENTAGE
OF OF
COMMON COMMON
SHARES SHARES
BENEFICIALLY BENEFICIALLY
OWNED (1) OWNED
Directors and Executive Officers:
Roy Dobson / Calvin J. O'Connor 12,195,313 (2) 45.8%
Bradley B. Buechler 727,798 (3) 2.7%
Ralph B. Andy 295,261 (4) 1.1%
David B. Mueller 240,200 (5) *
W.R. Clerihue 70,000 (5) *
John R. Kennedy 50,000 (5) *
Jackson W. Robinson 39,000 (5) *
David G. Pocost 38,044 (5) *
Randy C. Martin 36,862 (5) *
George A. Abd 33,917 (5) *
Richard B. Scherrer 29,350 (5) *
Jeffrey D. Fisher 4,697 (5) *
All Directors and Executive
Officers as a Group (13 persons) 13,760,442 (5) 49.7%
Other Beneficial Owners
In Excess of 5% of the
Common Shares Outstanding:
Vita International Limited 12,195,313 (2) 45.8%
Soudan Street
Middleton, Manchester
M24 2DB England
FMR Corp. 1,699,450 (6) 6.4%
Fidelity Management &
Research Company
82 Devonshire Street
Page 13
NOTES TO SECURITY OWNERSHIP TABLE:
* Denotes that the percentage of common shares beneficially owned is less than
1%.
(1)Includes shares issuable upon exercise of currently exercisable options as
noted for the respective owners.
(2)Messrs. Dobson and O'Connor, each a director of the Company, are also
directors of Vita International Limited and directors of British Vita PLC;
as such, these amounts represent Common Stock owned by Vita International
Limited.
(3)Includes 606,250 shares issuable upon exercise of currently exercisable
options.
(4)Includes 10,000 shares issuable upon exercise of currently exercisable
options, and 285,261 owned by RBA Partners, L.P. Mr. Andy is the sole
shareholder of RBA Investments, Inc., which is a 0.1% general partner of RBA
Partners, L.P. As such, Mr. Andy, through RBA Investments, Inc. has
investment and voting power over the shares owned by RBA Partners, L.P.
(5)Includes shares issuable upon exercise on currently exercisable options, as
follows: Mr. Mueller, 240,000; Mr. Clerihue, 40,000; Mr. Kennedy, 45,000;
Mr. Robinson, 25,000; Mr. Pocost, 25,751; Mr. Martin, 25,251; Mr. Abd,
30,501; Mr. Scherrer, 15,000; Mr. Fisher, 2,500; and all directors and
executive officers as a group, 1,065,253.
(6)Based on information presented as of December 31, 2000 in FMR Corp.'s latest
available Schedule 13G, FMR Corp. beneficially owned 1,699,450 shares of
Common Stock including 1,309,650 shares beneficially owned by Fidelity
Management & Research Company as a result of its serving as investment
adviser to various investment companies and other funds and 389,800
beneficially owned by Fidelity Management Trust Company as trustee or
managing agent for various private investment accounts and other funds. FMR
Corp. has sole voting power with respect to the 389,800 shares and sole
investment power with respect to all 1,699,450 shares.
CERTAIN BUSINESS RELATIONSHIPS AND TRANSACTIONS
Mr. Andy owns 80% of RKL Associates, L.P., which entered into a consulting
agreement with the Company in connection with the Company's purchase of Polycom
Huntsman, Inc. providing for payments by the Company aggregating $750,000 over
three years ending in April 2001. Mr. Andy also owns 50% or less of
Plastimerics, Inc., which purchased approximately $1,147,000 of products from
the Company during fiscal 2000, and three other companies which provided
approximately $823,000 of warehousing, trucking and recycling services to the
Company during fiscal 2000. The Company's management believes that these
arrangements are on terms no less favorable to the Company than those which
would be obtained from unaffiliated parties.
Mr. Scherrer is the Managing Partner of Armstrong Teasdale LLP, which the
Company retained as its principal outside law firm during fiscal 2000 and
expects to retain through fiscal 2001.
On October 2, 2000, pursuant to the approval of the non-management members
of the Board of Directors, the Company repurchased 95,000 shares of its Common
Stock from Mr. Buechler at $16.96 per common share. The purchase price was the
average of the publicly reported high and low sale prices of the common stock on
the New York Stock Exchange over the three trading days prior to the purchase.
Page 14
PROPOSAL 2: TO APPROVE THE 2001 STOCK OPTION PLAN
DESCRIPTION OF THE PLAN
The Board of Directors adopted the 2001 Stock Option Plan on December 6,
2000, subject to shareholder approval. The full text of the Plan is attached to
this Proxy Statement as Exhibit B.
Purposes of the Plan. The purposes of the Plan are to promote the long-
term financial interests of the Company and its shareholders, by enhancing the
Company's ability to attract and retain persons eligible to participate in the
Plan through incentive compensation opportunities that are competitive with
those of other similar companies, and by providing an incentive for the
participants in the Plan to identify their interests with those of the Company's
other shareholders through compensation based on the value of the Company's
Common Stock. The Plan replaces the Company's 1991 Restricted Stock Option Plan
(the "Restricted Plan") and the Company's 1991 Incentive Stock Option Plan (the
"Incentive Plan"), both of which will expire on October 1, 2001. If the Plan is
approved by the shareholders, the Board does not intend to grant any further
options under the Restricted Plan or the Incentive Plan.
Eligible Persons. Under the Plan, the Compensation Committee of the
Company's Board of Directors may grant options to purchase shares of the
Company's Common Stock to employees of the Company or its subsidiaries, or to
members of the Company's Board of Directors.
Maximum Number of Shares Available Under the Plan. The maximum number of
shares for which options may be granted under the plan during any fiscal year of
the Company is 10% of the Company's outstanding shares of Common Stock as of the
end of the previous fiscal year, which is the same limitation that currently
exists under the Restricted Plan. In the event of any stock split, reverse
stock split or stock dividend in excess of 5%, or any other recapitalization,
combination or exchange affecting the Common Stock generally, the number and
kind of shares available for issuance under the Plan will be appropriately and
automatically adjusted.
In addition to the annual limitation on option grants set out in the Plan,
the Board of Directors has resolved that the number of options outstanding at
any given time under all Company option plans, including the Restricted Plan and
the Incentive Plan, to a maximum of 10% of the Company's then issued and
outstanding shares of Common Stock; however, the Board may increase or eliminate
this additional restriction in its discretion. If options for fewer than the
maximum amount of shares are granted in any fiscal year, the excess will not
carry over and will not increase the number of shares available for options in a
future year.
If an option expires or is terminated without being exercised, the unissued
shares may again become subject to options, but shares subject to issuance under
options which are settled in cash, and shares which are withheld at the time of
exercise to pay the exercise price or taxes due upon exercise will not be
available for new option grants.
As part of its previously announced Common Stock repurchase program, the
Company currently intends to continue its practice of minimizing the dilutive
effect of its stock option plans through the acquisition of shares to offset
option exercises.
Terms of Individual Options. The Compensation Committee generally has the
authority to administer the Plan and to determine who will receive options under
the Plan, the number of shares for which options will be granted to each
recipient, and the terms of each individual option, including when and for how
long it will be exercisable, what events (such as termination of employment)
will cause it to terminate, how the exercise price may be paid, and any
restrictions on transfer of the option or the underlying shares.
Page 15
However, all options will be subject to the following limitations stated in the
Plan:
The exercise price may not be less than the fair market value of the
underlying shares at the time of the grant, and it may not be decreased
after the option is issued.
No individual may be granted options under the Plan during any fiscal year
of the Company for more than 5% of the outstanding shares of Common Stock,
determined as of the prior fiscal year end; this is the same limitation that
currently exists under the Restricted Plan.
Types of Options. Options may be granted under the Plan in any form,
including as "incentive stock options" under Section 422 of the Internal Revenue
Code ("Incentive Options"). An Incentive Option may entitle the holder to
favorable treatment for federal income tax purposes upon its exercise, as
described below. To qualify for treatment as an Incentive Option, an option
must satisfy certain additional limitations:
Incentive Options may not be granted for more than 3,000,000 shares over the
life of the Plan.
Members of the Board are not eligible to receive Incentive Options.
No Incentive Option may be granted under the Plan after December 6, 2010.
The maximum term of an Incentive Option is ten years.
Incentive Options may not be transferred other than by will or the laws of
descent and distribution, and during the lifetime of the original grantee
may be exercised only by him or her.
An Incentive Option granted to a person who owns stock possessing more than
10% of the total combined voting power of all classes of stock of the
Company (or any subsidiary or parent company) must have a maximum term of
only five years (rather than ten years) and an exercise price of at least
110% (rather than 100%) of the fair market value of the underlying shares on
the grant date.
Amendment and Termination. The Board may amend or terminate the Plan at any
time; however, no amendment may increase the maximum number of shares for which
options or Incentive Options may be granted without shareholder approval, and no
amendment or termination may adversely affect the rights of option holders
without their written consent.
Registration of Option Shares. The Plan itself does not contain any
provisions regarding the resale of shares issued upon exercise of options
granted under the Plan. It is the Company's intention to register the options
and the underlying shares under the Securities Act of 1933 in order to permit
the public resale of the shares after exercise of the options.
TAX TREATMENT OF OPTIONS OTHER THAN INCENTIVE OPTIONS
Issuance of Option. The issuance of an option under the Plan will have no
tax effects on either the option holder or the Company.
Exercise of Option. Upon the exercise of an option by the original holder,
the holder will recognize ordinary income in an amount equal to the excess of
the aggregate fair market value of the purchased shares on the exercise date
over the aggregate exercise price. The income recognized by the original holder
on exercise of an option will also be subject to Social Security and Medicare
taxes. The holder's basis in the shares received will equal the fair market
value of the shares as of the date of exercise.
Page 16
The tax effects of exercise of the option will be different if the holder
surrenders previously-held shares in payment of the exercise price. In that
event, the exercise will generally be treated as a non-taxable, like-kind
exchange of the shares surrendered for the same number of shares received under
the option. The shares received will have the same basis and capital gains
holding period as the shares surrendered. The value of the number of shares
received in excess of the number surrendered will be ordinary income to the
holder. The Company will receive an income tax deduction corresponding in time
and amount to the taxable income recognized by the option holder.
Gift of Option, Exercise by Recipient. The gift of an option will not
result in federal income tax consequences to either the donor or the recipient.
There may be gift tax consequences to the donor. Upon the exercise of the
option by the recipient, the recipient will not have taxable income, but the
original holder will recognize ordinary income in an amount equal to the excess
of the aggregate fair market value of the purchased shares on the exercise date
over the aggregate exercise price for the option. This income will also be
subject to Social Security and Medicare taxes. The recipient's basis in the
shares will equal the fair market value of the shares as of the date of
exercise. The Company will receive an income tax deduction corresponding in
time and amount to the taxable income recognized by the option holder.
Sale of Option, Exercise by Purchaser. If an option is transferred by
sale, the original holder will have ordinary income equal to the amount of the
sale price. The timing of this income will depend on how and when the sale
price is paid. The Company will receive an income tax deduction corresponding
in time and amount to the taxable income recognized by the option holder. Upon
the subsequent exercise of the option by the purchaser, there will be no further
income recognition by either the original holder or the purchaser, and no
further deduction for the Company. The purchaser's basis in the shares will be
the sum of the exercise price and the amount paid for the option.
Sale of Shares. Upon the sale of option shares after exercise, the selling
shareholder will recognize capital gain or loss in an amount equal to the sale
price less the shareholder's basis in the shares. The capital gain or loss will
be short-term or long-term depending on how long the shares were held after
exercise.
TAX TREATMENT OF INCENTIVE OPTIONS
Issuance of Option. The issuance of an Incentive Option under the Plan
will have no tax effects on either the option holder or the Company.
Exercise of Option. The exercise of an Incentive Option will not generate
taxable income or capital gain to the option holder or a deduction to the
Company. However, the excess of the fair market value on the exercise date over
the exercise price is included for purposes of determining whether the holder is
subject to the alternative minimum tax and if so, the amount of such tax. In
addition, the manner of exercise and the fair market value of the Common Stock
at the time of exercise may affect the taxes due upon a subsequent disposition
of the shares, as described below. The holder's basis in the shares received
upon exercise of the option will equal the exercise price of the option if the
option is exercised for cash. However, if the holder surrenders previously-held
shares in payment of the exercise price, the exercise will generally be treated
as a non-taxable, like-kind exchange of the shares surrendered for the shares
received under the option, and the shares received will have the same aggregate
basis and capital gains holding period as the shares surrendered, so that the
per-share basis of the option shares may be less than the per-share basis of the
shares surrendered.
Sale of Option Shares. The tax effects of a sale of shares received upon
the exercise of an Incentive Option will depend on whether or not the holder
disposes of the shares during a holding period ending two
Page 17
years after the grant of the option or one year after exercise, whichever is
later. The holder's disposition of the shares before the end of the holding
period will be deemed a "disqualifying disposition." Even a surrender of the
shares to the Company to exercise further stock options will be a disqualifying
disposition. However, a transfer by reason of the holder's death, an exchange
pursuant to certain types of corporate reorganizations, a pledge, or a transfer
incident to a divorce will not be deemed a disqualifying disposition.
Upon the sale of option shares by the holder after the end of the holding
period, so that there is no disqualifying disposition, the selling holder will
recognize capital gain or loss in an amount equal to the sale price less the
holder's basis in the shares. The capital gain or loss will be short-term or
long-term depending on how long the shares were held after exercise. The sale
of the shares will have no tax effect on the Company.
If there is a disqualifying disposition:
The holder will recognize ordinary income in an amount equal to the excess
of either the sale price or the fair market value of the purchased shares on
the exercise date, whichever is less, over the exercise price of the option.
The Company will receive an income tax deduction corresponding in time and
amount to the taxable income recognized by the option holder.
If the sale price was greater than the fair market value on the exercise
date, the holder will recognize capital gain in an amount equal to the
excess. The gain will be short-term or long-term depending on how long the
shares were held after exercise. The sale will have no tax effect on the
Company.
If the sale price was less than the exercise price, the holder will
recognize a capital loss in an amount equal to the exercise price less the
sale price and the holder's basis in the shares. The loss will be short-
term or long-term depending on how long the shares were held after exercise.
The sale will have no tax effect on the Company.
The above discussion is a general discussion only and does not purport to
describe all of the possible tax effects of the exercise of an option or a
disposition of option shares.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THIS PROPOSAL.
PROPOSAL 3: TO RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company, on the recommendation of the Audit
Committee, appointed Arthur Andersen LLP as independent auditors of the Company
for fiscal 2001. The Board proposes that the shareholders ratify at this Annual
Meeting the appointment of Arthur Andersen LLP as independent auditors for
fiscal 2001. Arthur Andersen LLP has served as the Company's independent
auditors since fiscal 1986. The Company has had no disagreements with Arthur
Andersen LLP on any matters of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures. In the event a majority
of the votes cast at the Annual Meeting are not voted in favor of the
appointment, the Board will reconsider its selection.
Arthur Andersen LLP has advised the Company that its representatives will
be present at the Annual Meeting, where they will have the opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THIS PROPOSAL.
Page 18
DISCRETIONARY VOTING OF PROXIES ON OTHER MATTERS
Management does not intend to bring before the Annual Meeting any matters
other than those disclosed in the Notice of Annual Meeting of Shareholders, and
it does not know of any business which persons other than management intend to
present at the meeting. Should any other matter requiring a vote of the
shareholders arise, the proxies in the enclosed form confer upon the person or
persons entitled to vote the shares represented by such proxies discretionary
authority to vote such shares in respect of any such other matter in accordance
with their best judgment.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own beneficially more than ten
percent of a registered class of the Company's equity securities to file with
the Securities and Exchange Commission and the New York Stock Exchange initial
reports of ownership and reports of changes in ownership of common stock and
other equity securities of the Company. Such officers, directors and greater
than ten percent beneficial owners are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms filed by them.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations from its directors
and executive officers that no other reports were required, all Section 16(a)
filing requirements applicable to its officers, directors and greater than ten
percent beneficial owners were complied with on a timely basis during the fiscal
year ended October 28, 2000.
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders intended for inclusion in the Company's proxy
statement for the 2002 Annual Meeting must be received by the Company no later
than September 21, 2001. In addition, if a shareholder fails to notify the
Company on or before December 5, 2001 of a proposal which such shareholder
intends to present at the Company's 2002 Annual Meeting other than through
inclusion of such proposal in the Company's proxy materials for the meeting,
then management proxies may use their discretionary voting authority with
respect to such proposal if it is presented at the meeting.
SHAREHOLDERS ARE URGED TO SIGN, DATE, AND RETURN PROMPTLY THE ENCLOSED
PROXY IN THE ACCOMPANYING ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. YOUR COOPERATION IS APPRECIATED.
By Order of the Board of Directors
/s/ Jeffrey D. Fisher
Jeffrey D. Fisher
January 19, 2001 Secretary
Page 19
Exhibit A
AUDIT COMMITTEE
OF THE SPARTECH CORPORATION BOARD OF DIRECTORS
CHARTER
(ADOPTED JUNE 8, 2000)
I. MISSION AND OBJECTIVES.
The Audit Committee ("Committee") shall assist the Board of Directors of
Spartech Corporation (the "Company") in fulfilling its responsibilities to
shareholders, potential shareholders and the investment community relating
to the Company's accounting and financial reporting and the quality and
integrity of the Company's financial statements.
To fulfill its mission, the Committee shall:
Serve as an independent and objective party to monitor the Company's
financial
reporting process and internal control system.
Review and appraise the audit efforts of the Company's independent public
accountants and internal auditing department.
Provide an open avenue of communication among the Board of Directors,
independent accountants, internal auditing department and financial and
executive management.
Regularly report its activities to the Board of Directors.
II.COMMITTEE STRUCTURE AND PROCEEDINGS.
A. Number and Selection of Members.
The Committee shall consist of at least three members of the Board of
Directors, the exact number to be fixed from time to time by the Board of
Directors. The members of the Committee shall be appointed from time to
time by the Board of Directors, taking into account any recommendations of
the Nominating Committee, and they shall serve at the pleasure of the Board
of Directors. The Board of Directors shall designate one of the members as
the Chairman of the Committee, or if for any reason the Board does not make
such designation the members shall elect a Chairman from among themselves.
B. Meetings.
The Committee shall meet at least quarterly (provided that there is business
to conduct), and shall meet at such other times as its responsibilities may
require. The Committee shall keep minutes of its proceedings, and for this
purpose shall from time to time designate a Secretary of the Committee, who
need not be a member of the Committee.
C. Quorum and Voting.
A majority of the whole Committee shall constitute a quorum for the
transaction of business at any meeting. A majority vote of the whole
Committee shall be required to approve any action of the
Page 20
Committee, except that procedural matters may be approved by a majority of
the members present. Any action required or permitted to be taken by the
Committee may be taken without a meeting, if all the members of the
Committee consent to the action in writing and the writing or writings are
filed with the minutes of the proceedings of the Committee.
D. Rules.
The Committee may from time to time adopt rules not inconsistent with this
Charter, for the conduct of its meetings and the transaction of its other
business.
III. QUALIFICATIONS OF MEMBERS.
A. Independence.
Each member of the Committee shall be independent. For purposes of this
Charter, "independent" means:
Free from any relationship to the Company that may interfere with the
exercise of
the member's independence from management and the Company; and
Otherwise in compliance with any additional requirements of
independence
provided from time to time in the rules and regulations of the New York
Stock
Exchange.
The independence requirement shall be subject to any limitations and
exceptions permitted from time to time by the rules and regulations of the
New York Stock Exchange.
B. Financial Literacy.
Each member of the Committee shall be financially literate or shall become
financially literate within a reasonable period of time after his or her
appointment to the Committee. The interpretation of this financial literacy
requirement, and the determination of whether a member of the Committee
meets this financial literacy requirement, shall be made by the Board of
Directors in the exercise of its business judgment.
C. Accounting/Financial Management Expertise.
At least one member of the Committee shall have accounting or related
financial management expertise. The interpretation of this accounting or
related financial management expertise requirement, and the determination of
whether a member of the Committee has accounting or related financial
management expertise, shall be made by the Board of Directors in the
exercise of its business judgment.
IV.RESPONSIBILITIES WITH REGARD TO AUDITORS.
A. Accountability of Auditors.
The Company's independent public accountants ("Auditors") are ultimately
accountable and responsible to the Committee and the Board of Directors for
the satisfactory performance of there
Page 21
engagement by the Company. The Committee is not responsible for planning or
conducting audits or for determining that the Company's financial statements
are complete and accurate and are in accordance with generally accepted
accounting principles.
B. Independence of Auditors.
The Committee is responsible for:
Ensuring that the Auditors periodically submit to the Committee a
formal written
statement delineating all relationships between the Auditors and the
Company.
Actively engaging in a dialogue with the Auditors with respect to any
disclosed
relationships or services that may impact the objectivity and independence
of the
Auditors.
Recommending that the Board of Directors take appropriate action in
response to
the Auditors' report to satisfy itself of the Auditors' independence.
C. Other Responsibilities With Regard to Auditors.
The Committee is also responsible for:
Together with the Board, selecting, evaluating and, if necessary,
replacing the
Auditors (or nominating the outside auditor to be proposed for shareholder
approval in any proxy statement).
Approving the Auditors' compensation.
Ensuring that the Company's quarterly financial statements are reviewed
by the
Auditors prior to the filing of the Company's Form 10-Q to the extent
required by
Securities and Exchange Commission regulations.
Meeting with the Auditors and Company management to discuss the
proposed
scope of the annual audit and the audit procedures to be utilized.
Reviewing the Company's annual audited financial statements and related
footnotes, and any significant internal audit reports to management.
Discussing with the Auditors and/or Company management, as applicable:
- The Auditors' judgments about the quality (and not just the
acceptability) of the Company's accounting principles as applied
in its financial reporting.
- Any major issues regarding accounting and auditing principles
and practices or the conduct of the annual audit, including
any significant changes required in the Auditors' audit plan.
- Any significant financial risks or exposures and the steps management
has taken to monitor and control them.
- The adequacy and effectiveness of internal accounting and financial
controls, and any recommendations for improvements in such
controls.
Page 22
- Any other matters required to be discussed by applicable auditing
standards, rules or regulations.
- Any other matter that could significantly affect the
Company's financial statements.
V. OTHER COMMITTEE RESPONSIBILITIES.
A. Annual Assessment.
The Committee shall review and reassess the adequacy of this Charter on an
annual basis.
B. Reports to Exchange.
The Committee shall provide Company management with such information about
the Committee and its activities as may be necessary for the preparation of
any required reports to the New York Stock Exchange.
C. Proxy Statement Report.
The Committee shall provide reports complying with Securities and Exchange
Commission proxy rules, as required for inclusion in the Company's proxy
statements.
D. Other Responsibilities.
The Committee shall investigate any matter brought to its attention within
the scope of its duties, with the power to retain special legal, accounting
or other consultants to advise it.
VI.INTERPRETATION AND AMENDMENT.
This Charter shall be interpreted and implemented in a manner consistent
with the General Corporation Law of Delaware or the rules and regulations of
the Securities and Exchange Commission or the New York Stock Exchange.
Subject to that limitation, the Committee shall have the authority to
interpret this Charter to the extent necessary to carry out its duties and
responsibilities hereunder, subject always to the ultimate authority of the
Board of Directors.
This Charter may be amended from time to time by a majority vote of the full
Board of Directors.
Page 23
Exhibit B
SPARTECH CORPORATION
2001 STOCK OPTION PLAN
ARTICLE I
PURPOSE AND DEFINITIONS
1.1. PURPOSE. This Spartech Corporation 2001 Stock Option Plan (the "Plan")
has been established by Spartech Corporation (the "Company") to promote the
long-term financial interest of the Company and its shareholders by (i)
enhancing the Company's ability to attract and retain persons eligible to
participate in the Plan, through incentive compensation opportunities that
are competitive with those of other similar companies, and (ii) providing an
incentive for the participants in the Plan to identify their interests with
those of the Company's other shareholders, through compensation based on the
value of the Company's common stock.
1.2DEFINITIONS.
"BOARD" means the Board of Directors of the Company.
"COMMITTEE" has the meaning stated in Section 2.1.
"COMPANY" has the meaning stated in Section 1.1.
"ELIGIBLE PERSONS" means (i) the employees of the Company, (ii) the
employees of the Company's Subsidiaries, and (iii) except with respect to
Incentive Stock Options, the members of the Board.
"Incentive Stock Option" means an Option which is intended to satisfy the
requirements applicable to an "incentive stock option" described in Section
422(b) of the Internal Revenue Code.
"OPTION" means a right granted to an Eligible Person to purchase Shares
under this Plan, at a price, for a period of time, and on such other terms
and conditions as are established by the Committee consistent with this
Plan.
"PARTICIPANT" means an Eligible Person who has been granted an Option under
the Plan.
"PLAN" has the meaning stated in Section 1.1.
"SHARES" means shares of common stock of the Company, subject to any
adjustments under Section 3.4.
"SUBSIDIARY" means a corporation, limited liability company, partnership,
joint venture or other business entity of which at least a 50% voting or
profits interest is owned, directly or indirectly, by the Company, and any
other business venture designated by the Committee in which the Company has
a significant interest as determined in the discretion of the Committee.
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ARTICLE II
ADMINISTRATION; TERM AND AMENDMENT
2.1. ADMINISTRATION. The Plan shall be administered by a committee of the
Board comprised of two or more members of the Board who are "non-employee
directors" as defined in Rule 16b-3 under the Securities Exchange Act of
1934 (the "Committee"). The Committee shall approve the names of all
persons to whom options are proposed to be granted, and shall determine,
within the limits set forth in the Plan, the number of shares, the price and
the other terms of any option to be granted hereunder. The Committee may in
its discretion interpret the Plan; establish, amend and rescind rules and
regulations, forms, notices and agreements relating to the Plan; and make
all determinations necessary or advisable for the operation of the Plan.
Subject to the provisions of the Plan, the charter and bylaws of the Company
and applicable laws, all ultimate powers of approval shall be vested in the
Committee as a body, and the Committee shall have absolute and final
discretion with respect to all determinations under the Plan.
2.2. APPROVAL; DURATION. Subject to the approval of the shareholders of the
Company at the Company's 2001 annual meeting of its shareholders, the Plan
shall become effective as of the date of such meeting and shall continue
until all Options available hereunder have been granted and none of such
Options remain outstanding, or until such earlier date as the Plan may be
terminated by the Board.
2.3AMENDMENTS AND TERMINATION. The Board may at any time amend or terminate
the Plan; provided that (i) no amendment may increase the maximum numbers of
Shares that may be issued pursuant to Options or Incentive Stock Options
hereunder, without the further approval of the Company's shareholders
(except for adjustments under Section 3.4), and (ii) no amendment or
termination may adversely affect the rights of any Participant which exist
on the date the amendment or termination is adopted by the Board, without
the written consent of the Participant.
ARTICLE III
GRANTS OF OPTIONS
3.1. PERIOD DURING WHICH OPTIONS MAY BE GRANTED. Options may be granted
from time to time during the term of the Plan in the discretion of the
Committee.
3.2. PARTICIPATION. Subject to the other terms and conditions of this Plan,
the Committee shall determine and designate, from time to time in its sole
discretion, from among the Eligible Persons, those persons who will be
granted one or more Options under the Plan and who will thereby become
Participants in the Plan. The Committee may receive the recommendations of
the various officers and divisional executives of the Company and its
Subsidiaries with respect thereto.
3.3SHARES AVAILABLE FOR OPTIONS. The total number of Shares for which Options
may be granted under this Plan during each fiscal year of the Company is ten
percent (10%) of the outstanding Shares (i.e. excluding treasury shares),
determined as of the prior fiscal year end. Such number shall not be
cumulative, so that if Options for fewer than the maximum number of Shares
are not in fact issued during any fiscal year, the excess shall not be
available for Options in the next fiscal year. Option Shares may come
either from authorized but unissued Shares or from shares reacquired by the
Company, whether purchased in the open market or in private transactions.
Shares subject to issuance under Options which expire or are cancelled
without delivery of Shares shall again become
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available for grants of Options under the Plan; but Shares subject to
issuance under Options which are settled in cash, and Shares which are
withheld to pay the exercise price or tax withholding with respect to an
Option, shall not be available for new Option grants.
3.4. ADJUSTMENTS TO SHARES. Upon any stock split, reverse stock split or
stock dividend in excess of 5%, or any other recapitalization, combination
or exchange affecting the Shares generally, the number and kind of Shares
available for issuance under the Plan shall be appropriately and
automatically adjusted. The Committee may in its discretion provide for
similar adjustments of outstanding Options upon any of such events or in the
event of any other combination or exchange of Shares, spin-off, split-up,
merger or consolidation or similar event affecting the Shares generally, in
order to preserve the benefits or potential benefits of the Options.
3.5LIMITATION ON INDIVIDUAL GRANTS. No Participant may be granted Options
under this Plan during any fiscal year of the Company for more than five
percent (5%) of the outstanding Shares (i.e. excluding treasury shares),
determined as of the prior fiscal year end.
ARTICLE IV
TERMS OF OPTIONS
4.1TYPES OF OPTIONS. Subject to the provisions of this Plan and applicable
laws and regulations, any Option may be granted as either an Incentive Stock
Option or any other form of stock option, as determined in the discretion of
the Committee.
4.2EXERCISE PRICE. The Committee shall determine the exercise price per Share
of all Options, except that the exercise price may not be less than the fair
market value of the Shares subject to the Option on the date the Option is
granted, or if greater, the par value of the Shares. Except as incidental
to adjustments under Section 3.4, the exercise price of an outstanding
Option may not be decreased after the date of grant, nor may an outstanding
Option be surrendered to the Company as consideration for the grant of a new
Option with a lower exercise price.
4.3PERIOD OF EXERCISE. The Committee shall determine the times at which any
Option granted hereunder may be exercised, including the times at which the
Option will first become exercisable in whole or in part.
4.4OTHER OPTION TERMS. The Committee shall determine the other terms of each
Option, including without limitation the procedures for exercising the
Option, the manner of payment of the exercise price and any tax withholding
obligations, and any restrictions on the exercise or transfer of the Option
or on the transfer of the underlying Shares, in its sole discretion.
4.5INCENTIVE STOCK OPTIONS. In addition to the other provisions of this Plan,
Incentive Stock Options shall be subject to all laws and regulations
applicable to Incentive Stock Options, and shall be subject to the following
provisions:
(i) The maximum number of Shares that may be issued pursuant to
Incentive Stock Options granted under this Plan is
3,000,000 Shares.
(ii) Members of the Board shall not be Eligible Persons with respect to
Incentive Stock Options.
(iii) No Incentive Stock Option may be granted under the Plan
after December 6, 2010.
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(iv) No Incentive Stock Option shall be exercisable in whole or in part
later than the day preceding the 10th anniversary of the grant
date.
(v) Incentive Stock Options may not be transferred other than
by will or the laws of descent and distribution, and may be
exercised during the lifetime of the Participant to whom it is
granted only by such Participant.
(vi) An Incentive Stock Option granted to a person who at the
time of the grant owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any
subsidiary or parent company (A) shall have an exercise price at
least 110% of the fair market value of the Shares subject to the
Option on the date the Option is granted and (B) shall not be
exercisable after the expiration of five years from the date the
Option is granted.
To the extent that an Incentive Stock Option does not meet the requirements
of Section 422(b) of the Internal Revenue Code the Option shall not be void
but shall be treated as an Option other than an Incentive Stock Option. No
Participant shall have any claim for damages or any other recourse against
the Company, the Board or the Committee because of the failure of any Option
to be an "incentive stock option."
4.6. OPTION AGREEMENTS. The grant and terms of each Option shall be
evidenced by a written agreement or other written documentation, a copy of
which shall be provided to the Participant. The Committee may require the
Participant to execute such agreement or otherwise accept the grant and
terms as a condition of the Option. In the event of any inconsistency
between the provisions of this Plan and the terms or conditions of an
Option, the provisions of this Plan shall govern.
4.7LIMITATION OF IMPLIED RIGHTS. Neither a Participant nor any other person
shall acquire any right in or title to any assets, funds or property of the
Company or any Subsidiary by reason of participation in the Plan or the
grant of any Option. Neither this Plan nor any Option will constitute a
contract of employment or give any Eligible Person any right to be retained
in the employ of the Company or a Subsidiary. No Eligible Person or
Participant will have any right under the Plan or any Option except to the
extent such right has accrued under the terms of the Plan and the Option,
and no Option shall give a Participant any rights as a shareholder of the
Company prior to the date on which the Participant duly exercises the Option
according to its terms.
ADOPTED BY THE BOARD DECEMBER 6, 2000.
PROXY CARD
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" EACH ITEM.
ITEM 1 - ELECTION OF DIRECTORS
Election of three Class B Directors to serve until the 2004 Annual Meeting.
NOMINEES: Bradley B. Buechler, Calvin J. O'Connor and Randy C. Martin
/ / FOR all the nominees listed above
/ / WITHHOLD AUTHORITY to vote for all nominees listed above
/ / WITHHOLD AUTHORITY to vote for the nominee(s)that have a line through the
name above
ITEM 2 - Approve 2001 Stock Option Plan
/ / FOR
/ / AGAINST
/ / ABSTAIN
ITEM 3 - Ratify Independent Auditors
/ / FOR
/ / AGAINST
/ / ABSTAIN
ITEM 3 - Transact Other Business
The proxies are authorized to vote, in their discretion, upon such other
business as properly may come before the Annual Meeting.
/ / AUTHORITY GRANTED
/ / AUTHORITY WITHHELD
Dated:____________, 2001
_________________________
Signature of Shareholder
_________________________
Signature if held jointly
Please sign exactly as the name appears hereon. When shares are held by joint
tenants, both should sign. When signing as an attorney, executor,
administrator, trustee, or guardian, please give full title as such. If a
corporation, please sign full corporate name by President for other authorized
officer. If a partnership, please sign in partnership name by authorized
person.
YOUR VOTE IS IMPORTANT TO US. PLEASE COMPLETE, DATE AND SIGN THE ABOVE PROXY
CARD AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE.
(Front of Card)
SPARTECH CORPORATION PROXY
2001 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints W.R. Clerihue and Bradley B. Buechler, and
each of them with power to act alone and with full power of substitution and
revocation, as attorneys and proxies of the undersigned to attend the Annual
Meeting of Shareholders of Spartech Corporation ("the Company)" to be held at
the Pierre Laclede Center (Saint Louis Club-16th Floor) 7701 Forsyth Boulevard,
Clayton, Missouri, 63105, on Wednesday, March 14, 2001, commencing at 10:00
a.m., CST, and at any and all adjournments thereof, and to vote all shares of
Common Stock of the Company which the undersigned is entitled to vote with
respect to the following matters, all as set forth in the Notice of Annual
Meeting of Shareholders and Proxy Statement, dated January 19, 2001.
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
"FOR" ITEMS 1 THROUGH 3 AND IN ACCORDANCE WITH THEIR BEST JUDGMENT UPON SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
(Back of Card)