UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
SPARTECH CORPORATION
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(Name of Registrant as Specified In Its Charter)
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[LOGO]SPARTECH
SPARTECH CORPORATION
120 S. Central Avenue, Suite 1700
Clayton, Missouri 63105-1705
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 12, 2003
DEAR FELLOW SHAREHOLDER:
I cordially invite you to attend the 2003 Annual Meeting of Shareholders of
Spartech Corporation to be held at 10:00 a.m. on Wednesday, March 12, 2003, at
Washington University's Knight Center, One Brookings Drive, St. Louis, Missouri
63130 for the following purposes:
1. To elect two Class A directors to serve three-year terms.
2. To ratify the selection of Ernst & Young LLP as independent auditors
of the Company for fiscal 2003.
3. To transact such other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on January 13, 2003 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
formalized "Spartech Way" initiative which we regularly use to reinforce our
Integrity-Based Operating Philosophy.
I look forward to seeing each of you at the meeting, so please mark your
calendar for the second Wednesday in March. However, 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 24, 2003 Chief Executive Officer
SPARTECH CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 12, 2003
To Our Shareholders:
The enclosed proxy is solicited by the Board of Directors of Spartech
Corporation for use at the Company's 2003 Annual Meeting of Shareholders. 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 proposal 2, 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 24, 2003. 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 November 2, 2002 accompanies this Proxy Statement.
OUTSTANDING SHARES AND VOTING PROCEDURES
The outstanding voting securities of the Company on January 13, 2003
consisted of 29,249,454 shares of Common Stock, $0.75 par value per share,
entitled to one vote per share.
Only shareholders of record at the close of business on January 13, 2003
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.
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 proposal 2, a majority of the votes cast in person or by proxy at the
Annual Meeting is required to approve the proposal. Abstentions and broker non-
votes will be counted for the purpose of determining the presence or absence of
a quorum for the transaction of business. Abstentions will be counted in the
tabulations of the votes cast on proposal 2, and will therefore have the same
effect as negative votes. Broker non-votes, however, will not be counted for
the purpose of determining whether the proposal has been approved.
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 elected at this Annual
Meeting will hold office until the Annual Meeting of Shareholders in 2006, the
Class B directors will continue in 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 2005, and, in each case, until their
successors are duly elected and qualified.
The Board of Directors has nominated Richard B. Scherrer and Craig A.
Wolfanger, present directors of Spartech, to be reelected Class A 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 5,725,609, "FOR" these Board nominees.
On December 31, 2002, Roy Dobson, who had been a director since 2000,
resigned from the Board concurrently with his retirement from British Vita PLC.
In view of pending rule proposals by the New York Stock Exchange and the
Securities and Exchange Commission which will require a majority of a public
company's board of directors and certain of its committees to consist of
"independent" directors and will impose higher qualification standards for the
members of a public company's Audit Committee, the Board of Directors has
decided not to replace Mr. Dobson at this time and has reduced the size of the
Board of Directors from nine to eight members. Following issuance of the final
rules, the Governance Committee of the Board will consider the availability of
candidates who meet the standards reflected in the rules and who are otherwise
qualified, and will make recommendations to the full Board of Directors as to
the future size and composition of the Board. Such recommendations may or may
not include an increase in the size of the Board back to nine members.
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:
Name, Age Principal Occupation and Other Spartech
Directorships Director
Since
- ------------------ ------------------------------------ --------
Ralph B. Andy, 58 Mr. Andy is the Chairman and Chief 1998
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 2005 Annual Meeting.
Bradley B. Buechler, 54 Mr. Buechler is the Chairman of the 1984
Board, 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
of the Board in March 1999. Mr.
Buechler is a past Chairman of the
Sheet Producers Division of the Society
of the Plastics Industry, Inc. and
currently serves on several local
charitable boards. His term as director
expires at the 2004 Annual Meeting.
Lloyd E. Campbell, 45 Mr. Campbell is the Managing Director 2002
and Head of the Global Private
Placement Group at Rothschild, Inc. as
well as a member of that firm's
Investment Banking Committee. Prior to
joining Rothschild in June 2001, Mr.
Campbell was a Managing Director and
the Head of the Private Finance Group
at Credit Suisse First Boston. Mr.
Campbell also serves on the board of
directors of Alderwoods Group and the
board of trustees of Georgetown
University. In addition, he is the
Chairman and Founder of Pride First
Corporation, a non-profit organization
dedicated to improving the scholastic
achievement of young people in New York
City. His term as director expires at
the 2005 Annual Meeting.
Randy C. Martin, 40 Mr. Martin is the Executive Vice 2001
President 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 1995 and
was named Vice President and Chief
Financial Officer in 1996. He became
an Executive Vice President in
September 2000. His term as director
expires at the 2004 Annual Meeting.
Calvin J. O'Connor, 50 Mr. O'Connor is a Chartered Accountant 1998
in the United Kingdom. He joined
British Vita PLC in 1996 and became
first a member of its board of
directors and later its Finance
Director. In January 2002, Mr.
O'Connor became Director of British
Vita's Industrial Operations. His term
as Spartech director expires at the
2004 Annual Meeting
Jackson W. Robinson, 60 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 & Jupiter
European Opportunities Trust PLC, and a
Trustee of Suffield Academy. His term
as director expires at the 2005 Annual
Meeting.
Richard B. Scherrer, 55 Mr. Scherrer has been a partner at 2000
Armstrong Teasdale LLP Since 1979 and
Managing Partner of the firm since
January 1998. Mr. Scherrer is a Fellow
in the International Society of
Barristers and is listed in The Best
Lawyers In America publication. He
currently stands for reelection.
Craig A. Wolfanger, 44 Mr. Wolfanger has been Senior Managing 2001
Director-Head of Investment Banking for
Parker/Hunter Incorporated since 1995
and 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. He currently stands for
reelection.
The Board of Directors recommends that shareholders vote "FOR" the Board of
Directors' slate of nominees.
CERTAIN BUSINESS RELATIONSHIPS AND TRANSACTIONS
Until October 2002, Mr. Andy owned 44% of Plastimerics, Inc. which
purchased approximately $1,058,000 of products from the Company during fiscal
2002. The Company's management believes that this arrangement was on terms no
less favorable to the Company than those which would have been 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 2002 and
expects to retain through fiscal 2003.
Mr. Wolfanger is Senior Managing Director-Head of Investment Banking for
Parker/Hunter Incorporated, which acts as remarketing agent for certain revenue
bonds issued to finance the Company's Lake Charles, Louisiana compounding plant.
During fiscal 2002, Parker/Hunter Incorporated received $8,000 for this service.
On September 3, 2002, pursuant to the provision in Mr. Buechler's
employment contract and approval from the non-management members of the Board of
Directors, the Company repurchased 87,250 shares of its Common Stock from Mr.
Buechler at $21.33 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.
BOARD COMMITTEES AND COMPENSATION
There were five regular meetings and two special meetings of the Board
during fiscal 2002. Every director attended at least 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, Mr. Dobson and Mr.
O'Connor, who generally alternated their attendance at the formal meetings
because of the time and expense related to international travel requirements.
The Board has an Audit Committee, currently consisting of Messrs. Campbell,
Robinson (Chairman) and Wolfanger, which met six times during fiscal 2002. The
Audit Committee's function under its written Charter from the Board is to
appoint the independent accountants to audit the Company's financial statements
and 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 approve and review any non-audit services to be performed by the
independent accountants.
The Board has a Compensation Committee, currently consisting of Messrs.
Andy (Chairman), Robinson and Wolfanger, which met twice during fiscal 2002.
The Compensation Committee's function is to review and approve, at least
annually, the compensation package for the Chief Executive Officer and the
financial terms of any other employment arrangement providing for compensation
of more than $150,000 per year, and to approve substantially all stock option
grants.
The Board has a Governance Committee, currently consisting of Messrs. Andy,
Campbell (Chairman), Robinson and Wolfanger. The Governance Committee was
formed on April 1, 2002 to develop and promote corporate governance principles
and oversee the evaluation of the board and management. The Committee's first
meeting was held in December 2002. The Governance Committee also combined the
duties of the former Nominating Committee and Special Committee. The Nominating
Committee's functions included reviewing the size and composition of the Board,
and reviewing possible director candidates and recommending director nominations
for presentation to shareholders. The Nominating Committee met once prior to
April 1, 2002. The Special Committee's function was to evaluate and take any
necessary action in response to any proposals relating to the acquisition of
control of the Company, or any proposals relating to a potential transaction
involving the Company's largest shareholder, British Vita PLC. The Special
Committee met once prior to April 1, 2002.
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 28, 2003 for consideration by the Governance Committee
for the next Annual Meeting.
The Company pays each non-management director an annual fee of $27,000, and
reimburses each of the directors for the expenses incurred in attending each
meeting. During fiscal 2002, the Company paid a fee of $36,000 to British Vita
PLC for services provided to the Company by its directors. Each non-management
director, except for the British Vita representatives, also receives $1,200 for
each Board and Committee Meeting attended, except for the Special Committee,
whose members received a fee of $2,250 per month through March 2002.
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
and Robinson were each granted options for 10,000 shares 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. On December 6, 2001 Messrs. Andy,
Robinson, Scherrer and Wolfanger were each granted options 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 $21.10; and upon his election to the Board effective
March 13, 2002 Mr. Campbell 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 $24.50.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
To Our Shareholders:
The Compensation Committee of the Board of Directors is responsible for
reviewing and approving at least annually the compensation package for the Chief
Executive Officer, and the financial terms of any other employment arrangement
providing for compensation of more than $150,000 per year. The Compensation
Committee also approves substantially all stock options awarded to employees,
based upon their individual performance and the economic value created by their
respective operating units. 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.
The Compensation Committee periodically reviews the compensation
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.
In establishing the compensation for the Chief Executive Officer, we have
consulted independent published surveys and studies by compensation and benefit
consulting firms. We have endeavored to establish Mr. Buechler's total
compensation at levels approximating the 75th percentile reported for this
position for publicly-traded companies of comparable size to Spartech.
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.
/s/ Ralph B. Andy /s/ Jackson W. Robinson /s/ Craig A. Wolfanger
Ralph B. Andy Jackson W. Robinson Craig A. Wolfanger
Chairman
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes compensation earned by the Company's Chief
Executive Officer and the four other most highly compensated executive officers
whose aggregate salary and bonus exceeded $100,000 for fiscal 2002.
Long Term
Compensation
Options Granted
Annual Compensation
Name and Principal Position Fiscal Salary Bonus (1) Other Annual
Year Compensation(2)
- --------------------------- ------ ----------- ---------------- --------------- ---------------
Bradley B. Buechler 2002 $649,038 $486,567 $111,465 200,000
Chairman, President, and 2001 $649,038 $ - (1) $135,381 30,000
Chief Executive Officer 2000 $637,019 $725,670 $112,064 110,000
George A. Abd 2002 $247,000 $240,000 $ 21,686 25,000
Executive Vice President, 2001 $230,000 $200,000 $ 16,132 22,500
Color and Specialty 2000 $207,423 $210,000 $ 33,481 9,000
Compounds
Randy C. Martin 2002 $250,682 $150,000 $ 20,542 25,000
Executive Vice President and 2001 $216,828 $112,500 $ 19,305 22,500
Chief Financial Officer 2000 $170,481 $125,000 $ 19,972 10,000
David G. Pocost 2002 $213,571 $120,000 $ 20,580 25,000
Executive Vice President, 2001 $211,538 $107,500 $ 19,026 22,500
Extruded Sheet and 2000 $165,241 $120,000 $ 18,832 10,000
Rollstock
Jeffrey D. Fisher 2002 $205,342 $ 75,000 $ 19,867 15,000
Vice President and 2001 $197,788 $ 67,500 $ 18,757 15,000
General Counsel 2000 $176,346 $ 75,000 $ 17,157 -
(1) Under the Company's bonus plan, discretionary bonuses are paid to all
its executive officers except its Chief Executive Officer, Mr. Buechler. Mr.
Buechler's bonus is determined under a formula provided in his employment
agreement, which requires the Company's annual pre-tax earnings to meet a
minimum threshold each year in order to entitle him to a bonus. For fiscal
2001, the Company's pre-tax earnings did not reach the minimum threshold
required.
(2) The amounts disclosed in this column for fiscal year 2002 include
Company contributions to non-qualified deferred compensation arrangements on
behalf of Mr. Buechler, $102,163; Mr. Abd, $15,000; Mr. Martin, $15,000; Mr.
Pocost, $15,000; and Mr. Fisher, $15,000.
Option Grants
The following table summarizes option grants made during fiscal 2002 to the
executive officers named above.
Number of % of Potential Realizable
Securities Total Value at Assumed Annual
Underlying Options Rates of Stock Price
Granted Appreciation for Option
to Term (1)
Employees
Name Options in Fiscal Exercise Expiration 5% 10%
Granted Year Price Date
- -------------------- ----------- --------- --------- ----------- ----------- -----------
Bradley B. Buechler 200,000 (2) 33.9% $21.10 12/5/11 $2,653,935 $6,725,593
George A. Abd 25,000 (2) 4.2% $21.10 12/5/11 $331,741 $840,699
Randy C. Martin 25,000 (2) 4.2% $21.10 12/5/11 $331,741 $840,699
David G. Pocost 25,000 (2) 4.2% $21.10 12/5/11 $331,741 $840,699
Jeffrey D. Fisher 15,000 (2) 2.5% $21.10 12/5/11 $199,045 $504,419
(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)All options were granted at market value and vest in four equal annual
installments beginning December 6, 2002.
Option Exercises and Outstanding Options
The following table summarizes all options exercised in fiscal 2002 and
unexercised options at the end of fiscal 2002 for the executive officers named
above.
Shares
Number of Unexercised Value of Unexercised "In-
Options at Fical Year End the-Money" Options at
Fiscal Year End (1)
Name Shares Acquired on Exercise Value Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------- ---------------------------- -------------- ----------- -------------- ------------ -------------
Bradley B. Buechler 105,000 $1,460,000 402,500 250,000 (2) $1,263,250 $171,000
George A. Abd 2,188 $18,139 41,689 44,123 (2) $31,264 $128,242
Randy C. Martin 6,000 $23,490 26,627 44,373 (2) $66,173 $128,242
David G. Pocost 6,000 $28,410 26,627 44,373 (2) $66,173 $128,242
Jeffrey D. Fisher - - 11,251 28,749 (2) $28,508 $85,492
(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.
(2) These represent the unvested portion of options granted during fiscal
2000, 2001 and 2002 which vest in four equal annual installments beginning
one year after date of grant.
Employment Agreements
Mr. Buechler
Effective November 1, 2002, 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,
2005, 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,
2003. 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 $700,000 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
100,000 shares on December 12, 2002, which is in addition to options granted
under previous versions of his employment agreement and any other options which
the Board may grant him after 2002 under the Company's stock option plans, (iv)
an annual contribution to a "split dollar" life insurance policy maintained for
Mr. Buechler equal to 15% of his base salary plus the amount of the premium on
$1,250,000 of term life insurance, 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, 2002, a number of shares of his
Common Stock not exceeding 15% of his then-current holdings of Common Stock plus
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 ten 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.
"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 he has under the Agreement.
Messrs. Abd, Martin and Pocost
The Company has also entered into a three-year employment agreement with
Mr. Abd, expiring February 28, 2006, and three-year employment agreements with
Mr. Martin and Mr. Pocost expiring January 1, 2006. The annual base
compensation under these agreements, subject to periodic review for cost of
living and/or merit and other increases, is currently $300,000, $275,000 and
$225,000 respectively. In addition, the agreements with Messrs. Abd, Martin and
Pocost require the Company to maintain term life insurance in the amount of
$500,000 for Mr. Abd and $300,000 for Mr. Martin and Mr. Pocost, 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.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth certain information as of November 2, 2002
regarding the Company's 1991 Incentive Stock Option Plan, 1991 Restricted Stock
Option Plan and 2001 Stock Option Plan:
(a) (b) (c)
Plan category Number of Weighted-average Number of
securities to be exercise price securities
issued upon of outstanding remaining
exercise of options, available for
outstanding warrants, and future issuance
options, rights under equity
warrants, and compensation
rights plans (excluding
securities
reflected in
column (a))
- ---------------- ----------- --------------- ---------------
Equity 2,382,000 $19.23 (1)
compensation
plans approved
by security
holders
Equity None None None
compensation
plans not
approved by
security holders
Total 2,382,000 $19.23
(1) The maximum number of shares for which options may be granted under the
Company's 2001 Stock Option 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. No options may be granted under the 2001 Stock Option Plan after
December 31, 2010. No further options may be granted under any other stock
option plans of the Company. 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 stock option plans will be
appropriately and automatically adjusted.
In addition to the annual limitation on option grants set out in the 2001
Stock Option Plan, the Board of Directors has resolved that the number of
options outstanding at any given time under all Company stock option plans,
including the 1991 Incentive Stock Option Plan and the 1991 Restricted Stock
Option Plan, shall not exceed 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.
AUDIT COMMITTEE REPORT
Spartech's management has the primary responsibility for the Company's
financial reporting process, including its systems of internal controls, and for
the financial statements resulting from that process. The Company's independent
auditors are responsible for expressing an opinion on the conformity of those
audited financial statements with accounting principles generally accepted in
the United States. The Audit Committee, which is comprised entirely of
independent directors, retains the independent auditors and oversees the
Company's financial reporting process and the audit on behalf of the Board of
Directors.
In fulfilling our oversight responsibilities for 2002, the Audit Committee:
Retained Ernst & Young LLP to perform the fiscal 2002 audit.
Reviewed and discussed with management the Company's audited
financial statements for the fiscal year ended November 2, 2002 as well
as the quarterly unaudited financial statements.
Reviewed and discussed with management the quality and the
acceptability of the Company's financial reporting and internal
controls.
Discussed with the independent auditors the overall scope and
plans for their audit as well as the results of their examinations,
their evaluations of the Company's internal controls, and the overall
quality of the Company's financial reporting.
Reviewed with the independent auditors their judgments as to the
quality and the acceptability of the Company's financial reporting.
Received from the independent auditors the written disclosures and
letter required by Standard No. 1 of the Independence Standards Board,
and discussed with the independent auditors the auditors' independence
from management and the Company, including the impact of permitted non-
audit-related services approved by the Committee to be performed by the
independent auditors.
Discussed with the independent auditors and management such other
matters as are required to be discussed with the Audit Committee under
Statement on Auditing Standards No. 61 and other auditing standards
generally accepted in the United States, the corporate governance
standards of the New York Stock Exchange, and the Audit Committee's
Charter.
Based on the above reviews and discussions, we recommended to the Board of
Directors that the audited financial statements for the fiscal year ended
November 2, 2002 be included in the Company's Annual Report on Form 10-K for
filing with the Securities and Exchange Commission.
Jackson W. Robinson Lloyd E. Campbell Craig A. Wolfanger
Chairman
FEES PAID TO AUDITORS
During fiscal 2002, the Company retained its principal auditor, Ernst &
Young LLP, to provide services in the following categories and amounts:
Audit Fees $ 271,195
Financial Information Systems Design and
Implementation Fees None
All Other Fees $ 78,242
Other Fees primarily related to work performed in connection with the
filing of the Company's registration statement on Form S-3 and the audit of
employee benefit plans. The Audit Committee has considered whether the provision
of these non-audit services by the Company's principal auditor is compatible
with maintaining auditor independence and believes that they are.
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, 2002 to be the beneficial owner of more than 5% of the 29,246,204
shares of Common Stock outstanding as of that date.
Number of Percentage of
Common Shares Common Shares
Beneficially Owned (1) Beneficially
Owned
Directors and Executive Officers:
- --------------------------------- ----------------------- ---------------
Calvin J. O'Connor 5,382,836 (2) 17.5%
Bradley B. Buechler 567,000 (3) 1.8%
Ralph B. Andy 175,261 (4) *
George A. Abd 60,352 (5) *
David G. Pocost 57,168 (5) *
Randy C. Martin 56,029 (5) *
Jackson W. Robinson 55,000 (5) *
Richard B. Scherrer 44,350 (5) *
Craig A. Wolfanger 30,000 (5) *
Jeffrey D. Fisher 22,132 (5) *
William F. Phillips 21,297 (5) *
Lloyd E. Campbell 15,000 (5) *
Jeffrey C. Blessing 12,468 (5) *
Phillip M. Karig 5,500 (5) *
All Directors and Executive
Officers as a Group (14 persons) 6,504,393 (5) 21.2%
Other Beneficial Owners
In Excess of 5% of the
Common Shares Outstanding:
Vita International Limited 5,382,836 (2) 17.5%
Soudan Street
Middleton, Manchester
M24 2DB England
Liberty Wanger Asset Management, 2,322,000 (6) 7.6%
L.P.
227 West Monroe Street, Suite 3000
Chicago, IL 60606
Notes To Security Ownership Table:
*Less than 1%.
(1) Includes shares issuable upon exercise of currently exercisable options
as noted for the respective owners.
(2) Mr. O'Connor, a director of the Company, is also a director of Vita
International Limited and a director of British Vita PLC; as such, this
amount represents Common Stock owned by Vita International Limited.
(3) Includes 460,000 shares issuable upon exercise of currently exercisable
options.
(4) Includes 25,000 shares issuable upon exercise of currently exercisable
options, and 150,261 shares 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 of currently exercisable options,
as follows: Mr. Abd, 54,657; Mr. Pocost, 38,501; Mr. Martin, 38,501; Mr.
Robinson, 40,000; Mr. Scherrer, 30,000; Mr. Wolfanger, 30,000; Mr. Fisher,
18,750; Mr. Phillips, 14,875; Mr. Campbell, 15,000; Mr. Blessing, 9,500; Mr.
Karig, 4,000 and all directors and executive officers as a group, 778,784.
(6) Based on information presented as of December 31, 2002 in Liberty Wanger
Asset Management, L.P.'s ("WAM") latest available Schedule 13G, WAM
beneficially owned 2,322,000 shares of common stock. WAM has shared voting
and investment power with WAM Acquisition GP, Inc. the general partner of
WAM.
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.
[CHART]
GRAPH
11/1/97 10/31/98 10/30/99 10/28/00 11/3/01 11/2/02 CAGR*
------- -------- -------- -------- ----------- ------- --------
Spartech Stock Price $15.88 $18 $28.63 $13 $21.05 $18.79 5.0%
Assumed $100 Investment:
SPARTECH CORPORATION $100 $115 $185 $85 $141 $128 5.0%
S&P 500 $100 $120 $149 $151 $119 $99 (3.3)%
S&P Specialty Chemicals Index $100 $96 $103 $71 $87 $100 0.0%
*Compound annual growth rate.
PROPOSAL 2: TO RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS
In December 2002, the Audit Committee appointed Ernst & Young LLP as
independent auditors of the Company for fiscal 2003. The Audit Committee
proposes that the shareholders ratify the appointment at this Annual Meeting.
Ernst & Young LLP has served as the Company's independent auditors since April
30, 2002, when the Company terminated its engagement with Arthur Andersen LLP.
The Company has had no disagreements with Ernst & Young 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 or if the Audit Committee
determines that a change would be in the Company's and its shareholders' best
interests, the Committee will reconsider its selection.
Ernst & Young 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.
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 November 2, 2002.
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders intended for inclusion in the Company's proxy
statement for the 2004 Annual Meeting must be received by the Company no later
than September 26, 2003. In addition, if a shareholder fails to notify the
Company on or before December 10, 2003 of a proposal which such shareholder
intends to present at the Company's 2004 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 24, 2003 Secretary
[Proxy Card]
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE Please mark
"FOR" EACH ITEM. your votes as
indicated in |X|
this example
Item 1 - Election of Directors
Election of two Class A Directors to serve until the 2006 Annual Meeting.
NOMINEES: 01 Richard B. Scherrer and 02 Craig A. Wolfanger
FOR all the nominees WITHHOLD
listed above AUTHORITY
(except as marked to vote for all the
to the contrary) nominees listed above
|_| |_|
INSTRUCTION: To withhold authority to vote for any individual nominee, strike a
line through the name in the list above.
FOR AGAINST ABSTAIN
Item 2 - Ratify Independent Auditors |_| |_| |_|
Item 3 - In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting. This proxy when properly
executed will be voted in the manner directed herein.
Dated:____________________________________________________________________, 2003
________________________________________________________________________________
(Signature)
________________________________________________________________________________
(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 in full corporate name by President or 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.
- --------------------------------------------------------------------------------
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Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet and telephone voting is available through 4PM Eastern Time
the business day prior to annual meeting day.
Your Internet or telephone vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
- ------------------------------------ ------------------------------------ ---------------------
Internet Telephone
http://www.eproxy.com/seh 1-800-435-6710 Mail
Use the Internet to vote your proxy. Use any touch-tone telephone to Mark, sign and date
Have your proxy card in hand when vote your proxy. Have your proxy your proxy card
you access the web site. You will be OR card in hand when you call. You will OR and
prompted to enter your control be prompted to enter your control return it in the
number, located in the box below, to number, located in the box below, enclosed postage-paid
create and submit an electronic and then follow the directions envelope.
ballot. given.
- ------------------------------------ ------------------------------------ ---------------------
If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
SPARTECH CORPORATION PROXY
2003 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Bradley B. Buechler and Randy C. Martin,
and each of them with the 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
Washington University's Knight Center, One Brookings Drive, St. Louis, Missouri
63130, on Wednesday, March 12, 2003, 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 24, 2003.
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 AND 2 AND IN ACCORDANCE WITH THEIR BEST JUDGMENT UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
(Continued on the reverse side)
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