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-12
SPARTECH CORPORATION
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(Name of Registrant as Specified In Its Charter)
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[LOGO]
SPARTECH CORPORATION
120 S. Central Avenue, Suite 1700
Clayton, Missouri 63105-1705
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 10, 2004
DEAR FELLOW SHAREHOLDER:
I cordially invite you to attend the 2004 Annual Meeting of Shareholders of
Spartech Corporation to be held at 10:00 a.m. on Wednesday, March 10, 2004, at
Washington University's Knight Center, One Brookings Drive, St. Louis, Missouri
63130 for the following purposes:
1. To elect three Class B directors to serve three-year terms.
2. To approve an amendment of the Certificate of Incorporation of the
Company to increase the authorized number of shares of Common Stock from
45,000,000 shares to 55,000,000 shares. The additional authorized shares
would be used: (i) to provide flexibility for the future issuance of stock
options and other stock-based compensation and incentive awards, and (ii)
for other corporate purposes, all as discussed in the accompanying Proxy
Statement.
3. To approve the Spartech Corporation 2004 Equity Compensation Plan.
4. To ratify the selection of Ernst & Young LLP as independent auditors
of the Company for the 2004 fiscal year.
5. To transact such other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on January 12, 2004 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 new "Accountable
and Lean" initiatives which will allow us to achieve our operating and financial
goals and be successful well into the future.
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 23, 2004 Chief Executive Officer
SPARTECH CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 10, 2004
To Our Shareholders:
The enclosed proxy is solicited by Spartech Corporation on behalf of its
Board of Directors for use at the Company's 2004 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 in person or by
telephone. The Company 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 proposals 2, 3 and 4, 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 23, 2004. 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 or revocation of a 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 1, 2003 accompanies this Proxy Statement.
OUTSTANDING SHARES AND VOTING PROCEDURES
The outstanding voting securities of the Company on January 12, 2004
consisted of 29,357,101 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 12, 2004
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, the vote of a majority of the issued and outstanding
shares of common stock is required to approve the proposal. With respect to
proposals 3 and 4, a majority of the votes cast in person or by proxy at the
Annual Meeting is required to approve the proposal, provided that the total vote
cast on proposal 3 must represent over 50% of the shares of common stock.
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 proposals 2,
3 and 4, 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 B directors elected at this Annual
Meeting will hold office until the Annual Meeting of Shareholders in 2007, the
Class C directors will continue in office until the Annual Meeting of
Shareholders in 2005, and the Class A directors will continue in office until
the Annual Meeting of Shareholders in 2006, and, in each case, until their
successors are duly elected and qualified.
The Board of Directors has nominated Bradley B. Buechler, Randy C. Martin
and Calvin J. O'Connor, present directors of the Company, to be reelected Class
B directors of the Company. Vita International Limited, the Company's largest
shareholder, and the Company's executive officers and directors have informed
the Company that they intend to cast their votes, aggregating 5,723,169, "FOR"
these Board nominees.
Mr. O'Connor is currently employed by British Vita PLC, which is the parent
company of Vita International and which in 2002 announced its intention to have
Vita International divest its shares of the Company. In the event of a
divestiture which would cause Vita's ownership to fall below 1,000,000 shares,
Mr. O'Connor has agreed to resign as a director or, if the divestiture occurs
before the 2004 Annual Meeting, to withdraw as a nominee. In either of such
events, the Board of Directors has determined not to replace Mr. O'Connor and to
reduce the size of the Board of Directors from nine to eight members. This
reduction would give the Governance Committee of the Board of Directors the
opportunity to consider the availability of candidates who qualify as
"independent" directors under current rules of the Securities and Exchange
Commission and the New York Stock Exchange and to 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:
Spartech
Director
Name, Age Principal Occupation and Other Since
Directorships
- ---------------------- ---------------------------------------- ------
Ralph B. Andy, 59 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, 55 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 and Chief Financial Officer
from 1983 to 1987. 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. He
currently stands for reelection.
Lloyd E. Campbell, 46 Mr. Campbell is the Managing Director and 2002
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.
Walter J. Klein, 57 Mr. Klein is a CPA and most recently 2003
was Vice President, Finance for Stepan
Company, a specialty chemicals company
listed on the New York Stock Exchange.
He brings more than 20 years of
industrial and financial expertise to the
Board. He was first elected to the Board
of Directors in 2003 by the other members
of the Board to fill a vacancy resulting
from an increase in the size of the Board
from eight to nine members. His term as
director expires at the 2006 Annual
Meeting.
Randy C. Martin, 41 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 1984 to 1995. 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. He
currently stands for reelection.
Calvin J. O'Connor, 51 Mr. O'Connor is a Chartered Accountant in 1998
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. He
currently stands for reelection, subject
to British Vita's continuing ownership of
a minimum number of the Company's shares
as described above.
Jackson W. Robinson, 61 Mr. Robinson is the President of Winslow 1993
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, 56 Mr. Scherrer has been a partner at 2000
Armstrong Teasdale LLP since 1979 and
Managing Partner of that 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. His term
as director expires at the 2006 Annual
Meeting.
Craig A. Wolfanger, 45 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.
His term as director expires at the 2006
Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE BOARD OF
DIRECTORS' SLATE OF NOMINEES.
CERTAIN BUSINESS RELATIONSHIPS AND TRANSACTIONS
Mr. Scherrer is the Managing Partner of Armstrong Teasdale LLP, which the
Company retained as its principal outside law firm during fiscal 2003 and
expects to retain through fiscal 2004.
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 2003, Parker/Hunter Incorporated received $8,000 for this service.
On September 2, 2003, 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 80,000 shares of its Common Stock from Mr.
Buechler at $21.19 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 ten trading days prior to the purchase.
BOARD OF DIRECTORS AND COMMITTEES
The Company's Board of Directors currently consists of nine directors, five
of whom are "independent" as defined under the Corporate Governance Standards of
the New York Stock Exchange. The Company's Corporate Governance Guidelines and
Director Independence Policy are set forth in the Investor Relations/Corporate
Governance section of the Company's website at www.spartech.com.
There were four regular meetings of the Board during fiscal 2003. Every
incumbent director attended at least 75% of the aggregate number of formal
meetings of the Board and of the committees on which he served. Because the
Company schedules its spring meeting of the Board of Directors in conjunction
with the Annual Meeting of Shareholders, the Company's directors normally attend
each Annual Meeting. The 2003 Annual Meeting was attended by seven of the eight
directors then serving.
In compliance with the NYSE Corporate Governance Standards, the Board holds
regularly scheduled executive sessions without management, and will at least
annually schedule an executive session with only independent directors. The
Board has elected Mr. Robinson as its Presiding Director, to preside over these
meetings and any other meetings of the Board at which the Chairman of the Board
is not present.
AUDIT COMMITTEE. The Audit Committee of the Board consists of Messrs.
Campbell, Klein (Chairman), Robinson and Wolfanger. It met four times during
fiscal 2003. The Audit Committee's function under its written Charter 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;
oversee the external reporting by the Company; consider the adequacy of the
internal accounting and auditing procedures of the Company; evaluate the
independence of the internal and external auditors; and approve and review any
non-audit services to be performed by the independent accountants. A copy of
the Audit Committee's Charter is attached to this proxy statement as Exhibit A.
The Charter is also posted in the Investor Relations/Corporate Governance
section of the Company's website, www.spartech.com. The Board has determined
that the Audit Committee Chairman, Mr. Klein, qualifies as an "audit committee
financial expert" and that all members of the Audit Committee are "independent"
under the NYSE Corporate Governance Standards.
COMPENSATION COMMITTEE. The Compensation Committee of the Board consists of
Messrs. Andy (Chairman), Klein, Robinson and Wolfanger. It met twice during
fiscal 2003. 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 $200,000 per year, and to approve substantially all stock option
grants. The Compensation Committee has a written Charter, which is posted in
the Investor Relations/Corporate Governance section of the Company's website,
www.spartech.com. The Board has determined that all members of the Compensation
Committee are "independent" under the NYSE Corporate Governance Standards.
GOVERNANCE COMMITTEE. The Governance Committee of the Board consists of
Messrs. Andy, Campbell (Chairman), Robinson and Wolfanger. It met four times
during fiscal 2003. The Governance Committee's functions include ensuring that
the Company is governed in an appropriate manner, ensuring that the membership
of the Board continues to have a high degree of quality and independence by
performing the functions generally carried on by a Nominating Committee,
reviewing and making recommendations to the Board as to the appropriate amount
and form of compensation for non-employee directors, and ensuring that any
future change of control of the Company would occur, if at all, only on terms
fair to the Company's shareholders. The Governance Committee has a written
Charter, which is posted in the Investor Relations/Corporate Governance section
of the Company's website, www.spartech.com. The Board has determined that all
members of the Governance Committee are "independent" under the NYSE Corporate
Governance Standards.
CODE OF ETHICS
The Company has adopted a Code of Ethics for its Chief Executive Officer
and Senior Financial Officers. It has posted such Code of Ethics on its website
and intends to satisfy the disclosure requirement under Item 10 of Form 8-K by
posting such information on its website. The Company also has adopted a Code of
Business Conduct and Ethics for Directors, Officers and Employees. Both Codes
are posted in the Investor Relations/Corporate Governance section of the
Company's website, www.spartech.com.
COMPENSATION OF DIRECTORS
During 2003, the Company paid each non-management director other than
Mr. O'Connor an annual fee of $27,000 and paid the same fee to British Vita PLC
for providing the services of Mr. O'Connor. Upon the resignation of Roy Dobson
from the Board of Directors on December 31, 2002, the Company ceased paying
British Vita PLC an additional fee of $36,000 for services provided to the
Company by its directors. Beginning January 1, 2004 the annual fee paid to each
non-management director other than Mr. O'Connor increased to $40,000 and British
Vita PLC will be paid the same fee for providing the services of Mr. O'Connor.
Mr. Robinson will receive an additional $20,000 annual fee as Presiding
Director, Mr. Klein will receive an additional $15,000 annual fee as Audit
Committee Chairman, Mr. Andy will receive an additional $10,000 annual fee as
Compensation Committee Chairman, and Mr. Campbell will receive an additional
$10,000 annual fee as Governance Committee Chairman. Each non-management
director other than Mr. O'Connor receives $1,200 for each Board and Committee
Meeting attended and British Vita PLC receives the same fee for each Board
meeting attended by Mr. O'Connor. The Company also reimburses each director
for the expenses incurred in attending each meeting.
Certain non-management directors have been granted options to purchase
Common Stock of the Company periodically during their terms as directors. 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;
upon his election to the Board effectiveJanuary 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;
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; and on September
4, 2003 Mr. Klein 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 $22.49.
Subject to shareholder approval of proposals 2 and 3 at the Annual
Meeting, it is the current intention of the Governance Committee to replace
future grants of stock options to the Board of Directors with an annual grant to
each non-management director of restricted stock units under the 2004 Equity
Compensation Plan having a value of $30,000 based on the market value of the
Company's common stock at the date of grant. Although these restricted stock
units would be immediately vested, they would be non-transferable and non-
redeemable until one year after the end of the director's service on the Board.
At that time, they would be exchanged for shares of the Company's common stock,
thus providing the directors with an incentive to increase the long-term value
of the common stock.
DIRECTOR NOMINATIONS
The Governance Committee of the Board of Directors is responsible under its
Charter for identifying and selecting qualified candidates for election to the
Board prior to each annual meeting of the shareholders. In addition,
shareholders who wish to recommend a candidate for election to the Board may
submit such recommendation to the Presiding Director of the Company. Any
recommendation must include name, contact information, background, experience
and other pertinent information on the proposed candidate and must be received
in writing by November 26, 2004 for consideration by the Governance Committee
for the 2005 Annual Meeting.
Although the Governance Committee is willing to consider candidates
recommended by shareholders, it has not adopted a formal policy with regard to
the consideration of any director candidates recommended by security holders.
The Committee believes that a formal policy is not necessary or appropriate both
because of the small size of the Board and because the Company has historically
afforded representation on its Board to major shareholders on a case by case
basis. For at least the past several years, the Company has not had any
recommendations by shareholders for nominations to the Board.
The Governance Committee does not have specific minimum qualifications
that must be met by a candidate for election to the Board of Directors in order
to be considered for nomination by the Committee. In identifying and evaluating
nominees for director, the Committee considers each candidate's qualities,
experience, background and skills, as well as any other factors which the
candidate may be able to bring to the Board. The process is the same whether
the candidate is recommended by a shareholder, another director, management or
otherwise. The Company does not pay a fee to any third party for the
identification or evaluation of candidates.
COMMUNICATION WITH DIRECTORS
The Company has established procedures for shareholders or other
interested parties to communicate directly with the Board of Directors. Such
parties can contact the Board by mail at: Spartech Board of Directors,
Attention: Jackson W. Robinson, Presiding Director, Sixty State Street, 12th
Floor, Boston, MA 02109. All communications made by this means will be received
directly by the Presiding Director.
The Company has arranged for a third-party company, called The
Network, to provide an Ethics Hotline for employees, security holders and other
interested parties to communicate concerns involving internal controls,
accounting or auditing matters directly to the Audit Committee. The Company's
Ethics Hotline phone number is 800-886-2144 (U.S. and Canada) or 770-582-5285
(International). The Ethics Hotline can also be used to communicate other
concerns to the Company's management. Concerns can be reported anonymously, if
the caller chooses.
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 $200,000 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/Walter J. Klein /s/Jackson W. Robinson
Ralph B. Andy Walter J. Klein Jackson W. Robinson
Chairman
/s/ Craig A. Wolfanger
Craig A. Wolfanger
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 2003.
Long-Term
Compensation
Annual Compensation
Name and Principal Fiscal Salary Bonus (1) Other Annual Options
Position Year Compensation (2) Granted
- ------------------ ------ -------- --------- ----------------- ------------
Bradley B. Buechler 2003 $727,212 $479,889 $ 207,326 100,000
Chairman, 2002 $649,038 $486,567 $ 111,465 200,000
President, and 2001 $649,038 $ - (1) $ 135,381 30,000
Chief Executive
Officer
George A. Abd 2003 $281,260 $240,000 $ 21,076 30,000
Executive Vice 2002 $247,000 $240,000 $ 21,686 25,000
President Color 2001 $230,000 $200,000 $ 16,132 22,000
and Specialty
Compounds
Randy C. Martin 2003 $275,750 $175,000 $ 20,200 30,000
Executive Vice 2002 $250,682 $150,000 $ 20,542 25,000
President and Chief 2001 $216,828 $112,500 $ 19,305 22,500
Financial Officer
David G. Pocost 2003 $227,652 $120,000 $ 20,240 30,000
Executive Vice 2002 $213,571 $120,000 $ 20,580 25,000
President, Extruded 2001 $211,538 $107,500 $ 19,026 22,500
Sheet and Rollstock
Jeffrey D. Fisher 2003 $205,000 $ 85,000 $ 19,931 15,000
Vice President and 2002 $205,342 $ 75,000 $ 19,867 15,000
General Counsel 2001 $197,788 $ 67,500 $ 18,757 15,000
(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 2003 include Company
contributions to non-qualified deferred compensation arrangements on behalf
of Mr. Buechler, $198,393; 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 2003 to the
executive officers named above.
Individual Grants Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation For Option
Term (1)
Name Number of % of Total Exercise Expiration
Securities Options Price Date
Underlying Granted to
Options Employees
Granted in Fiscal
Year
5% 10%
- -------------------- ----------- --------- ---------- ---------- ---------- ----------
Bradley B. Buechler 100,000 (2) 22.4% $18.08 12/11/12 $1,137,041 $2,881,486
George A. Abd 30,000 (2) 6.7% $18.08 12/11/12 $ 341,112 $ 864,446
Randy C. Martin 30,000 (2) 6.7% $18.08 12/11/12 $ 341,112 $ 864,446
David G. Pocost 30,000 (2) 6.7% $18.08 12/11/12 $ 341,112 $ 864,446
Jeffrey D. Fisher 15,000 (2) 3.3% $18.08 12/11/12 $ 170,556 $ 432,223
(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 12, 2003.
Option Exercises and Outstanding Options
The following table summarizes all options exercised in fiscal 2003 and
unexercised options at the end of fiscal 2003 for the executive officers named
above.
Name Shares Value Number of Unexercised Options Value of Unexercised
Acquired Realized (1) at Fiscal Year End "In-the-Money" Options
on at Fiscal Year End (1)
Exercise
Exercisable Unexercisable Exercisable Unexercisable
- ------------------ ---------- ---------- ----------- ------------- ----------- -------------
Bradley B. Buechler 75,000 $ 839,625 412,500 265,000 (2) $1,939,100 $1,001,850
George A. Abd 7,187 $ 44,583 48,625 60,000 (2) $ 134,264 $ 326,888
Randy C. Martin 5,000 $ 23,950 36,000 60,000 (2) $ 204,668 $ 326,888
David G. Pocost 5,000 $ 26,500 36,000 60,000 (2) $ 204,668 $ 326,888
Jeffrey D. Fisher - - 21,250 33,750 (2) $ 97,726 $ 189,825
(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
2001, 2002 and 2003 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 for 2004 of $750,000 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) an amount equal to the taxes payable
by Mr. Buechler on the annual contribution to the "split dollar" policy. The
agreement also contains 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, Pocost and Fisher
The Company has also entered into a three-year employment agreement with
Mr. Abd, expiring February 28, 2006, three-year employment agreements with Mr.
Martin and Mr. Pocost expiring January 1, 2006, and a three-year employment
agreement with Mr. Fisher expiring November 30, 2006. The annual base
compensation under these agreementsfor 2004,
subject to periodic review for cost of living and/or merit and other
increases, is currently $310,000, $300,000, $240,000 and $225,000 respectively.
In addition, the agreements require the Company to maintain term life insurance
in the amount of $500,000 for Mr. Abd, $300,000 for Mr. Martin and Mr. Pocost
and $250,000 for Mr. Fisher, 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 1, 2003
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
Securities to be exercise price of remaining available
issued upon outstanding for future issuance
exercise of options, warrants under equity
outstanding and rights compensation plans
options, warrants (excluding securities
and rights reflected in column
(a))
---------------- --------------- --------------------
Equity
compensation
plans approved
by security
holders 2,522,000 $19.50 (1)
Equity
compensation
plans not
approved by
security holders None None None
Total 2,522,000 $19.50
(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.
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 2003, the Audit Committee:
Retained Ernst & Young LLP to perform the fiscal 2003 audit.
Reviewed and discussed with management the Company's audited financial
statements for the fiscal year ended November 1, 2003 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 1, 2003 be included in the Company's Annual Report on Form 10-K for
filing with the Securities and Exchange Commission.
/s/Walter J. Klein /s/Lloyd E. Campbell /s/Jackson W. Robinson
Walter J. Klein Lloyd E. Campbell Jackson W. Robinson
Chairman
/s/Craig A. Wolfanger
Craig A. Wolfanger
FEES PAID TO AUDITORS
During fiscal 2002 and 2003, the Company retained its principal auditor,
Ernst & Young LLP, to provide services in the following categories and amounts:
2002 2003
----------- ----------
Audit Fees $ 271,195 $ 277,530
Financial Information Systems
Design and Implementation
Fees None None
All Other Fees $ 78,242 $ 230,598
Other Fees primarily related to work performed in connection with the
filing of the Company's shelf registration statement on Form S-3, the review of
internal controls, the audit of employee benefit plans and tax consulting
services. The Audit Committee has considered whether the provision of 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, 2003 to be the beneficial owner of more than 5% of the 29,351,907
shares of Common Stock outstanding as of that date.
Number of Percentage of
Common Shares Common Shares
Beneficially Beneficially
Owned(1) Owned
Directors and Executive Officers: -------------- --------------
Calvin J. O'Connor 5,382,836 (2) 18.3%
Bradley B. Buechler 585,390 (3) 2.0%
Ralph B. Andy 175,261 (4) *
George A. Abd 78,629 (5) *
David G. Pocost 75,931 (5) *
Randy C. Martin 74,682 (5) *
Jackson W. Robinson 55,000 (5) *
Richard B. Scherrer 44,350 (5) *
Jeffrey D. Fisher 36,215 (5) *
Craig A. Wolfanger 31,700 (5) *
William F. Phillips 20,115 (5) *
Lloyd E. Campbell 17,407 (5) *
Jeffrey C. Blessing 15,967 (5) *
Walter J. Klein 15,000 (5) *
Phillip M. Karig 9,000 (5) *
All Directors and Executive Officers as a 6,617,483 (5) 21.9%
Group (15 persons)
Other Beneficial Owners In Excess of 5% of
the Common Shares Outstanding:
Vita International Limited 5,382,836 (2) 18.3%
Oldham Road
Middleton, Manchester
M24 2DB England
Columbia Wanger 2,342,000 (6) 8.0%
Asset Management, 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 shares owned by Vita International Limited.
(3) Includes 495,000 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, 68,001; Mr. Pocost, 55,375; Mr. Martin, 55,375; Mr.
Robinson, 40,000; Mr. Scherrer, 30,000; Mr. Fisher, 32,500; Mr. Wolfanger,
30,000; Mr. Phillips, 13,188; Mr. Campbell, 15,000; Mr. Blessing, 12,375; Mr.
Klein, 15,000; Mr. Karig, 7,500 and all directors and executive officers as a
group, 894,314.
(6) Based on information presented as of December 31, 2003 in Columbia
Wanger Asset Management, L.P.'s ("WAM") latest available Schedule 13G, WAM
beneficially owned 2,342,000 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.
[GRAPH]
11/1/98 10/31/99 10/30/00 10/28/01 11/3/02 11/1/03 CAGR*
------- -------- -------- -------- ------- ------- -------
SPARTECH STOCK PRICE $18.00 $28.63 $13.00 $21.05 $18.79 $23.18 7.0%
Assumed $100 Investment:
SPARTECH CORPORATION $ 100 $ 161 $ 74 $ 123 $ 112 $ 140 7.0%
S&P 500 $ 100 $ 124 $ 126 $ 99 $ 82 $ 96 (0.9%)
S&P Specialty Chemicals Index $ 100 $ 107 $ 74 $ 90 $ 104 $ 114 2.6%
*Compound annual growth rate.
PROPOSAL 2: TO AMEND THE CERTIFICATE OF INCORPORATION
The Company's Board of Directors has unanimously determined that the
following amendment to the Company's Certificate of Incorporation is advisable
and has unanimously voted to recommend the amendment to the Company's
shareholders for adoption. The amendment will increase the authorized capital
stock of the Company designated as Common from 45,000,000 shares to 55,000,000
shares. The proposed amendment will replace the first paragraph of Article
Fourth of the Company's Certificate of Incorporation with the following:
FOURTH: The total number of shares of stock which the Corporation shall
have the authority to issue is Fifty-Nine Million (59,000,000), of which
Four Million (4,000,000) shares shall be Preferred Stock, $1.00 per
share par value, (hereinafter called "Preferred Stock"), and Fifty-Five
Million (55,000,000) shares shall be Common Stock, $.75 per share par value
(hereinafter called "Common Stock").
As of January 12, 2004 there were 29,357,101 shares of Common Stock
outstanding. In addition, the Company's stock option plans provide for the
grant of options to acquire additional shares of Common Stock. As of January
12, 2004, options to acquire an aggregate of 2,918,704 shares of Common Stock
have been granted pursuant to option plans. The additional authorized shares
that would be available for issuance if the proposed amendment is approved may
be issued for any proper corporate purpose by the Board of Directors at any time
without further shareholder approval (subject, however, to applicable statutes
or the rules of the New York Stock Exchange which require shareholder approval
for the issuance of shares in certain circumstances). The Board of Directors
believes it is desirable to give the Company this flexibility in considering
such matters as stock dividends, raising additional capital, acquisitions,
awards under the 2004 Equity Compensation Plan described below, or other
corporate purposes. The authorization of such shares will enable the Company to
act promptly and without additional delay if appropriate circumstances arise
which require the issuance of such shares. The Company has no present
agreements or commitments to issue any of the additional authorized shares. No
shareholder of the Company has any preemptive right to acquire any of the
additional authorized shares, so the issuance of the additional authorized
shares may correspondingly dilute the percentage interests of current
shareholders.
The Board of Directors recommends that shareholders vote FOR this proposal.
PROPOSAL 3: TO APPROVE THE 2004 EQUITY COMPENSATION PLAN
Description of the Plan
The Board of Directors adopted the Spartech Corporation 2004 Equity Compensation
Plan on December 11, 2003, subject to shareholder approval.
Implementation of the Plan is also subject to an increase in the authorized
shares of the Company's common stock, as provided in proposal 2, described
above. 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 will permit the Company to change to a greater usage of restricted
stock as long-term incentive compensation, reducing the Company's reliance on
stock options. Previously, the Company utilized stock options as its principal
form of long-term compensation.
If the Plan is approved by the shareholders, it will replace the Company's
2001 Stock Option Plan, and no further options will be granted under the 2001
Stock Option Plan.
Types of Awards. Unlike the 2001 Stock Option Plan, which provides only
for the granting of stock options, awards under the 2004 Equity Compensation
Plan may be in any one or more of the following forms:
Stock Options, which give the recipient the right to purchase Company
common stock at a price, for a period of time, and on certain other terms and
conditions.
Restricted stock, which consists of shares of common stock issued to a
participant subject to certain terms and conditions.
Restricted stock units, which give a participant the right to receive
shares of common stock at a specified future time subject to certain terms and
conditions.
The Board of Directors believes that broadening the plan to permit the
award of restricted stock and restricted stock units will provide the Company
with greater flexibility in structuring appropriate incentive compensation and
is consistent with current trends in corporate long-term incentive compensation,
which are de-emphasizing stock options as the exclusive form of equity-based
incentive compensation for employees of more mature companies.
Eligible Recipients; Granting of Awards. Awards under the Plan may be
granted by the Compensation Committee of the Board to any of the approximately
3,325 employees of the Company or its subsidiaries, or by the Governance
Committee of the Board to members of the Company's Board of Directors. In
addition, the Plan permits the Board to delegate to the Company's Chief
Executive Officer the power to grant a limited number of awards to employees of
the Company or its subsidiaries other than executive officers or directors of
the Company.
The granting of awards to employees under the Plan is completely
discretionary. Historically the Company has granted equity incentives
consisting of stock options primarily to management and supervisory employees as
a part of their annual compensation package, but has also granted stock options
to winners of the Company's annual incentive award programs such as its "POP"
teams.
The granting of awards to members of the Board under the Plan is also
discretionary. However, in December 2003 the Governance Committee proposed to
revise the compensation structure for non-employee members of the Board, as
described previously in this proxy statement. Under the revised structure,
subject to shareholder approval of the Plan, a major part of the compensation
package for the Company's non-employee directors would consist of annual awards
of restricted stock units under the Plan, replacing the current practice of
alternate-year grants of stock options. The Governance Committee currently
proposes to grant to each non-employee director a number of restricted stock
units equal to $30,000 divided by the market value of a share of common stock at
the time of the grant. The Committee has not yet determined when or on what
schedule these grants would be made.
Shares Subject to the Plan. Awards may be granted under the Plan for up to
3,000,000 shares of common stock. This represents approximately 10% of the
number of shares of common stock outstanding on January 12, 2004. On that date,
the closing price of the common stock on the New York Stock Exchange was $25.01
per share.
The maximum number of shares subject to awards under the Plan may not be
increased without shareholder approval. However, 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 Company's common stock
generally, the number and kind of shares available for issuance under the Plan
and any outstanding awards will be appropriately and automatically adjusted.
Although the 2001 Stock Option Plan also authorizes the issuance of up to
3,000,000 shares, options for only approximately 1,440,149 shares have been
granted to date under the 2001 Stock Option Plan. Because that plan will be
terminated if the new Plan is approved, the resulting net increase in the total
number of shares approved for issuance will be only approximately
1,559,851 shares.
If a stock option expires or is terminated without being exercised, or if a
stock award is forfeited prior to becoming fully vested, the unissued shares may
again become subject to being awarded under the Plan. However, shares subject
to issuance under options which are settled in cash or are withheld at the time
of exercise to pay the exercise price, or shares which are withheld to pay taxes
due upon exercise of an option or vesting of a stock award will not be available
for new option grants.
The Company recently extended the term of its previously announced Common
Stock repurchase program in order to be able to continue its practice of
minimizing the dilutive effect of its stock option plans through the acquisition
of shares to offset option exercises. The Company expects to continue the same
practice with respect to shares issued pursuant to the 2004 Equity Compensation
Plan, depending on the cash available for such purpose and the market price of
its common stock.
Terms of Individual Awards. All awards under the Plan will be subject to
the following limitations:
No award to employees may vest, or become non-forfeitable, earlier than
at a rate of 25% per year from the date of grant.
No individual may receive awards under the Plan during any fiscal year of
the Company for more than 2% of the outstanding shares of Common Stock,
determined as of the prior fiscal year end; this is a reduction from the 5%
limitation under the 2001 Stock Option Plan.
Subject to these limitations and the other provisions of the Plan, the
applicable Committee will determine in each case the persons to receive awards,
the particular type of award, the size of the award, and the terms and
conditions of each award, including the vesting schedule, the duration of an
option, what events (such as termination of employment) will cause the award to
terminate prior to exercise or vesting, the manner and timing of payment of the
option exercise price or the taxes due upon exercise or vesting, and any
restrictions on transfer of the award or the underlying shares.
Stock Options. All stock options granted under the Plan will be subject to
the following limitations:
The exercise price may not be less than the fair market value of the
underlying shares at the time of the grant.
The exercise price may not be decreased after the stock option is issued.
No stock option shall contain any "reload" provision entitling the
optionee to the automatic grant of additional options in connection with
any exercise of the original option.
The Committee may determine to grant some stock options as "incentive stock
options" under Section 422 of the Internal Revenue Code. An incentive stock
option entitles the holder to favorable treatment for federal income tax
purposes upon its exercise, as described below. To qualify for treatment as an
incentive stock option, a stock option must satisfy the following additional
limitations:
Members of the Board are not eligible to receive incentive stock options.
The maximum term of an incentive stock option is ten years.
Incentive stock 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 the grantee.
No individual may receive in any calendar year incentive stock options to
purchase shares having a value of more than $100,000, measured as of the
date of the option.
An incentive stock 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.
Restricted Stock. A participant who receives restricted stock will
not be able to dispose of the stock until the conditions for vesting, such
as continued employment, have been satisfied; but until the conditions are
satisfied the participant will have all the other rights of a stockholder
with respect to the shares awarded, including the right to vote the shares
and to receive dividends on the shares. However, the terms of the award
may require the shares and dividends to be kept in escrow to assure
repayment to the Company in the event they are forfeited because of failure
of the conditions.
Restricted Stock Units. A participant who receives restricted stock
units will have the right to receive, at the end of the restricted period,
one share of common stock for each unit. Until then, the participant will
not be able to dispose of the units and, unless otherwise provided in an
individual award, will not have any rights of a stockholder, including the
right to vote or receive dividends on the underlying shares. The
Governance Committee has determined that the restricted period for the
initial awards of restricted stock units to directors will extend until one
year after the director leaves the Board, but the Committee may vary this
period for future awards.
Duration, Amendment and Termination of Plan. No awards may be made
under the Plan until its approval by shareholders or after December 31,
2010.
The Board may amend or terminate the Plan at any time; however,
shareholder approval will be required for any amendment which would:
Materially increase the maximum number of shares which may be issued
pursuant to awards under the Plan,
Expand the types of awards that may be granted under the Plan,
Materially extend the term of the Plan,
Permit the granting of stock options at less than fair market value,
Permit the repricing of outstanding options, or
Increase the number of shares which may be granted to any single
participant in the Plan.
Any amendment must also comply with the rules and regulations of the
New York Stock Exchange and the Securities and Exchange Commission. No
amendment or termination may adversely affect the rights of any participant
under any existing award without the written consent of the participant.
Securities Registration. The Plan does not contain any provisions
regarding the resale of shares issued upon exercise of options granted
under the Plan. However, it is the Company's intention to register the
securities issuable as awards under the Plan as well as the underlying
shares of Company common stock under the Securities Act of 1933 promptly
after shareholder approval, in order to permit the public resale of the
shares by award recipients.
Tax Treatment of Awards
Stock Options. The following general discussion does not purport to
describe all of the possible tax effects of the exercise of an option or a
disposition of option shares. It assumes that the option is held by the
original holder and exercised for cash. The tax effects of exercise of the
option may be different if the option is transferred or if the holder
surrenders previously-held shares in payment of the exercise price.
Generally, the issuance of a stock option under the Plan will have no
tax effects on either the option holder or the Company. However, changes
in the accounting rules applicable to the Company have been proposed which,
if enacted, would require the Company to treat the value of stock options
as an expense on its books when the options are granted.
Upon the exercise of a stock option other than an incentive stock
option, the holder will recognize ordinary income in an amount equal to the
excess of the fair market value of the purchased shares on the exercise
date over the exercise price, and this income 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, and upon a subsequent sale of the shares the holder will
recognize capital gain or loss based on the increase or decrease in value
from the date of exercise to the date of sale.
Incentive Stock Options. The exercise of an incentive stock option
will not generate taxable income or capital gain to the option holder or a
deduction to the Company, but the excess of the fair market value on the
exercise date over the exercise price will be included for purposes of
determining whether the holder is subject to the alternative minimum tax
and if so, the amount of such tax. If the holder retains the shares for a
holding period ending two years after the grant of the option or one year
after exercise, whichever is later, the holder will recognize capital gain
or loss based on the increase or decrease in value from the date of
exercise to the date of sale and the company will not receive a tax
deduction. However, if the holder disposes of the shares before the end of
the holding period, 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, and the Company will receive an income tax
deduction corresponding in time and amount to the taxable income recognized
by the option holder.
Restricted Stock. Generally, the issuance of restricted stock or
restricted stock units will have no tax effects on either the option holder
or the Company because the shares or units are not immediately vested.
As restricted stock vests, and is no longer subject to a "substantial risk
of forfeiture," the award becomes taxable and the holder will recognize
ordinary income in an amount equal to the fair market value of the vested
shares. Upon a subsequent sale of the shares, the holder will recognize
capital gain or loss based on the increase or decrease in value from the
date of vesting to the date of sale.
Restricted Stock Units. The tax effects are the same as for
restricted stock, but because the units do not become taxable until the
holder actually or constructively receives the underlying shares it is
possible to defer the income tax effects of the award. Even though the
units may become vested, or non-forfeitable, if the terms of the restricted
stock units defer payout of the shares and prohibit transfer until payout,
the holder's recognition of income for income tax purposes will be
correspondingly deferred. For example, the restricted stock units proposed
to be granted to non-employee directors will not be transferable or payable
in shares of common stock, and therefore will not be taxable, until one
year after the director ceases to serve on the Board. Although the
Company's tax deduction is correspondingly deferred, the Company benefits
from the fact that the directors do not need to pay income tax on the units
awarded during their service on the Board and are therefore able to
maintain a greater ownership stake in the Company.
The Board of Directors recommends that shareholders vote FOR this proposal.
PROPOSAL 4: TO RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS
In December 2003, the Audit Committee appointed Ernst & Young LLP as
independent auditors of the Company for fiscal 2004. 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 fiscal 2002. 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.
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 1, 2003.
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders intended for inclusion in the Company's
proxy statement for the 2005 Annual Meeting must be received by the Company
no later than September 25, 2004. In addition, if a shareholder fails to
notify the Company on or before December 9, 2004 of a proposal which such
shareholder intends to present at the Company's 2005 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.
MATERIAL INCORPORATED BY REFERENCE
The Company incorporates by reference into this proxy statement the
consolidated financial statements of the Company, supplementary financial
information, management's discussion and analysis of financial condition
and results of operations, changes in and disagreements with accountants on
accounting and financial disclosure and quantitative and qualitative
disclosures about market risk contained in our Annual Report on Form 10-K
filed on January 17, 2004 and our Quarterly Reports on Form 10-Q filed on
March 10, 2003; June 10, 2003; and September 8, 2003.
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 23, 2004 Secretary
Exhibit A
AUDIT COMMITTEE
OF THE SPARTECH CORPORATION BOARD OF DIRECTORS
CHARTER
(Adopted June 8, 2000; Amended June 5, 2003)
I. Purposes and Objectives.
The Audit Committee (the "Committee") of the Board of Directors (the
"Board") of Spartech Corporation (the "Company") shall be solely
responsible for selecting and engaging independent public accountants (the
"Auditors") to perform the annual audit of the Company's financial
statements, monitoring and evaluating the Auditors' performance, and
terminating the Auditors.
The Committee shall serve as an independent and objective party to monitor
and evaluate the Company's financial reporting process, internal control
systems and internal audit function, the integrity of the Company's
financial statements, and the Company's and management's compliance with
laws, regulations and policies relating to financial and auditing matters.
The Committee shall otherwise assist the Board in fulfilling the Board's
responsibilities to shareholders, potential shareholders, securities
exchanges, regulatory agencies and the investment community relating to the
Company's financial statements and related legal and regulatory
requirements.
II. Qualifications of Committee Members.
Membership on the Audit Committee shall be subject to the following
qualifications and requirements:
A. Independence Requirements.
The members of the Committee shall satisfy the general requirement of
independence as described in the "Spartech Corporation Key Practices and
Procedures for Committees of the Board of Directors" as in effect from time
to time (the "Key Practices and Procedures").
The members of the Committee shall also satisfy the additional independence
requirements of Rule 10A-3(b)(1) under the Securities Exchange Act of 1934,
as amended, subject to the exemptions provided in Rule 10A-3(c) thereof,
and any additional requirements imposed from time to time by applicable
laws and regulations of the Securities and Exchange Commission or 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 in the exercise of its business judgment.
C. Audit Committee Financial Expert.
From time to time as and when required by applicable laws and regulations,
the Board shall determine and disclose whether at least one member of the
Committee is an "audit committee financial expert" as defined in the
regulations of the Securities and Exchange Commission, and the Board shall
take such disclosure requirement into account when selecting members of the
Committee.
D. Accounting/Financial Management Expertise.
At least one member of the Committee shall have accounting or related
financial management expertise as required by the New York Stock Exchange.
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 in the exercise of its business judgment consistent
with any definitions promulgated by the Securities and Exchange Commission.
The Board may presume that a person who satisfies the definition of "audit
committee financial expert" as defined in the regulations of the Securities
and Exchange Commission has accounting or related financial expertise.
E. Other Public Company Service
A director who simultaneously serves on the audit committee of three or
more public companies other than the Company may not simultaneously serve
on the Committee unless the Board determines in the exercise of its
business judgment that such simultaneous service would not impair the
ability of the member to effectively serve on the Committee, and unless
such determination by the Board is disclosed in the Company's annual proxy
statement.
F. Limitation on Compensation.
The member may not receive any compensation from the Company other than
compensation received solely for service as a member of the Board or a
committee thereof. Compensation prohibited by this provision includes,
without limitation, any fees paid directly or indirectly for services as a
consultant or as a legal or financial advisor, regardless of the amount.
III. Duties and Responsibilities With Regard to Auditors.
A. Engagement of Auditors.
The Committee has sole and direct authority and responsibility for:
Selecting, appointing, retaining and compensating the Auditors,
evaluating their performance (including the performance of the lead partner
on the engagement), and terminating their engagement.
Oversight of the Auditors, including resolving any disagreements between
management and the Auditors.
Pre-approving all non-audit services to be performed by the Auditors
which are not prohibited by applicable law or regulation, to the extent
such pre-approval is required by applicable law or regulation.
The Auditors shall be engaged to report directly to the Committee.
B. Accountability of Auditors.
The Auditors are accountable and responsible to the Committee for the
satisfactory performance of their 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.
C. Independence of Auditors.
The Committee is responsible for ensuring the Auditors' independence, and
in furtherance of such responsibility:
The Committee shall ensure that the Auditors periodically submit to the
Committee a formal written statement delineating all relationships between
the Auditors and the Company, and the Committee shall actively engage in a
dialogue with the Auditors with respect to any disclosed relationships or
services that may impact the objectivity and independence of the Auditors.
The Committee shall recommend to the full Board of Directors any action
that the Committee deems appropriate in response to the Auditors' report to
satisfy itself of the Auditors' independence.
The Committee shall ensure that the Auditors are not retained by the
Company to perform any non-audit services prohibited by applicable law or
regulation.
The Committee shall establish clear hiring policies for employees or
former employees of the Auditors.
D. Annual Report by Auditors.
At least annually, the Committee shall obtain and review a report by the
Auditors describing:
The Auditors' internal quality-control procedures.
Any material issues raised by the most recent internal quality-control
review or peer review of the Auditors, or by any inquiry or investigation
by governmental or professional authorities within the preceding five years
respecting one or more independent audits undertaken by the Auditors, and
any steps taken to deal with such issues.
To permit the Committee to assess the Auditors' independence, all
relationships between the Auditors and the Company.
E. Evaluation of Auditors.
At least annually, on the basis of the foregoing report and its assessment
of the Auditors' work throughout the year, and taking into account the
opinions of management and the Company's internal auditors, the Committee
shall evaluate the Auditors' qualifications, performance and independence,
including a review and evaluation of the Auditors' lead audit partner. In
addition to assuring the regular rotation of the lead audit partner as
required by law, the Committee shall also consider whether there should be
a regular rotation of the audit firm itself. The Committee shall present
its conclusions to the full Board.
F. Other Responsibilities With Regard to Auditors.
The Committee is also responsible for:
Meeting with the Auditors and Company management to discuss the proposed
scope of the annual audit and the audit procedures to be utilized.
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.
Discussing with Company management and the Auditors the Company's
quarterly unaudited and annual audited financial statements, including the
disclosures under "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Reviewing the Company's annual audited financial statements and related
footnotes, and any significant internal audit reports to management.
Prior to the filing of the Company's Annual Report on Form 10-K with the
Securities and Exchange Commission, reviewing with the Auditors the
Company's Critical Accounting Policies, alternative GAAP treatments, and
material communications between the Auditors and Company management (such
as the "management letter" and "schedule of unadjusted differences").
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.
- The adequacy and effectiveness of internal accounting and financial
controls, and any recommendations for improvements in such controls.
- Any other matters required to be discussed by applicable auditing
standards, rules or regulations or which could significantly affect the
Company's financial statements.
Regularly reviewing with the Auditors:
- Any audit problems or difficulties, including restrictions on the
scope of the Auditors' activities or on access to requested information.
- Any items noted or proposed by the Auditors that were deemed
immaterial or otherwise not accepted by management.
- Any communications between the audit team and the Auditors' national
office respecting auditing or accounting issues presented by the
engagement.
- Any management or internal control letter issued, or proposed to be
issued, by the Auditors to the Company.
- Any significant disagreements with management.
- Management's response to such communications, problems, difficulties
or disagreements.
- The responsibilities, budget and staffing of the internal audit
function.
IV. Internal Auditing Function.
The Committee shall be responsible for monitoring, reviewing and evaluating
the performance of the Company's internal auditing function, including its
procedures and personnel.
V. Other Committee Responsibilities.
In addition to the foregoing responsibilities and the general
responsibilities of the Committee as described in the Key Practices and
Procedures:
Communication. The Committee shall provide an open avenue of
communication among the Board, the Auditors, internal auditing personnel
and management with respect to financial and auditing matters.
Oversight Meetings. In order to perform its oversight function and
provide a forum for issues warranting Committee attention, the Committee
shall meet separately with the Auditors, with management, and with the
internal auditors (or other personnel responsible for the internal audit
function).
Complaint Procedures. The Committee shall establish procedures for the
receipt, retention and treatment of complaints received by the Company
regarding accounting; internal accounting controls or auditing matters, and
for the confidential, anonymous submission by Company employees of concerns
regard questionable accounting or auditing matters.
Earnings Releases and Analyst Guidance. The Committee shall discuss
press releases concerning Company earnings, as well as financial
information and earnings guidance provided to analysts and rating agencies.
Such discussion may be done generally and need not be undertaken with
respect to each earnings release or each instance of earnings guidance.
Risk Assessment and Risk Management. The Committee shall, from time to
time as it deems necessary or advisable, discuss the Company's major
financial risk exposures and the steps management has taken to monitor and
control such exposures and Company policies with respect thereto, as well
as guidelines and policies to govern the process by which risk assessment
and risk management are undertaken.
Other Public Accounting Relationships. The Committee shall review and
evaluate any relationships between the Company and independent public
accounting firms other than the Auditors.
Proxy Statements. The Committee shall be responsible for preparing the
report required by the rules of the Securities and Exchange Commission to
be included in the Company's annual proxy statement.
Annual Charter Assessment. The Committee shall review and reassess the
adequacy of this Charter on an annual basis and recommend any changes to
the Board of Directors for approval.
Annual Performance Evaluation. The Committee shall cause its performance
to be evaluated annually.
Advice and Assistance. The Committee shall obtain advice and assistance
from outside legal, accounting or other advisors as the Committee deems
necessary to carry out its duties, and is empowered to retain and
compensate such advisors without seeking Board approval.
Reports to the Board. The Committee shall regularly report its
activities to the Board and shall review with the Board any issues that
arise with respect to the integrity of the Company's financial statements,
the Company's compliance with legal or regulatory requirements, the
performance and independence of the Auditors, and the performance of the
Company's internal audit function.
VI. Administration.
A. Key Practices and Procedures.
To the extent not otherwise specifically provided for herein or by specific
directive of the Board, the functioning of the Committee shall be subject
to and shall comply with the Key Practices and Procedures as in effect from
time to time, which are hereby incorporated in this Charter by reference.
B. Funding.
The Company shall provide to the Committee appropriate funding, as
determined by the Committee, for payment of compensation to outside legal,
accounting or other advisors employed by the Committee and for Committee
administrative expenses, without the need for approval by the Board or any
Company employee other than compliance with standard Company procedures for
authentication and recording of disbursements.
C. Interpretation and Implementation.
This Charter shall be interpreted and implemented in a manner consistent
with the General Corporation Law of Delaware or, to the extent applicable,
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 to the
ultimate authority of the Board under Delaware law.
D. Amendment.
This Charter may be amended from time to time by a majority vote of the
full Board.
Exhibit B
Spartech Corporation
2004 Equity Compensation Plan
ARTICLE I
PURPOSE AND DEFINITIONS
1.1 Purpose. This Spartech Corporation 2004 Equity Compensation 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.
1.2 Definitions.
"Award" means a right granted to an Eligible Person to receive Options,
Restricted Stock or Restricted Stock Units pursuant to the Plan.
"Board" means the Board of Directors of the Company.
"Committee" means (i) the Governance Committee of the Board with respect to
Awards to members of the Board in their capacity as directors of the
Company, or (ii) the Compensation Committee of the Board with respect to
all other Awards.
"Common Stock" means the authorized common stock of the Company, subject to
any adjustments under Section 2.3.
"Company" has the meaning stated in Section 1.1.
"Eligible Person" means:
(i) An employee of the Company or any of its Subsidiaries, with respect
to Awards of Options or Restricted Stock; or
(ii) A management or highly compensated employee of the Company or any of
its Subsidiaries, with respect to Awards of Restricted Stock Units; or
(iii) A non-employee member of the Board, with respect to Awards of
Options (other than Incentive Stock Options), Restricted Stock, or
Restricted Stock Units.
"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 Common
Stock 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 received an Award under the
Plan.
"Plan" has the meaning stated in Section 1.1.
"Restricted Stock" and "Restricted Stock Units" have the meanings stated in
Section 3.1.
"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.
ARTICLE II
Granting of Awards
2.1 Participation. Subject to the other terms and conditions of the 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 Awards under the Plan and who will thereby become
Participants in the Plan. The Committee shall also approve the names of
all persons to whom Awards are proposed to be made, and shall determine,
within the limits set forth in the Plan, the type of Award, the maximum
number of shares to be issued pursuant to the Award, the exercise price (if
any) to be paid by the Participant, the vesting schedule, and the
other terms and conditions of any Award to be granted hereunder.
The Committee may receive the recommendations of the officers and managers
of the Company with respect thereto.
2.2 Shares Available for Awards. The maximum amount of Common Stock for
which Awards may be granted under the Plan is Three Million (3,000,000)
shares. Award shares may be issued 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
Awards which expire or are cancelled without delivery of shares shall again
become available for Awards under the Plan; but shares subject to issuance
under Awards which are settled in cash, and shares which are withheld to
pay the exercise price or tax withholding with respect to an Award, shall
not be available for new Awards.
2.3 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 Common Stock generally, the number and kind of
shares of Common Stock available for issuance under the Plan shall be
appropriately and automatically adjusted. The Committee may in its
discretion provide for similar adjustments of outstanding Awards 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 Common Stock generally, in order to preserve the benefits or
potential benefits of the Awards.
2.4 Limitation on Individual Grants. No Participant may receive Awards
under the Plan during any fiscal year of the Company for more than 2% of
the shares of Common Stock outstanding (i.e. excluding treasury shares) as
of the end of the Company's previous fiscal year.
2.5 Limited Delegation of Authority. Notwithstanding Section 2.1 or any
other provision of the Plan, the Board may, from time to time by express
resolution, pursuant to section 157(c) of the Delaware General Corporation
Law and subject to such limitations as are set out in such section or
included in such Board resolution, authorize one or more officers of the
Company to do one or both of the following: (i) designate Eligible Persons
other than the Company's executive officers and directors to be recipients
of Awards and (ii) determine the type and size of Awards to be received by
such Eligible Persons.
ARTICLE III
Terms Of Awards
3.1 Types Of Awards. Subject to the provisions of the Plan and applicable
laws and regulations, Awards may be made in the form of (i) Options, (ii)
shares of Common Stock subject to certain terms and conditions ("Restricted
Stock") or (iii) the right to receive shares of Common Stock in the future
subject to certain terms and conditions ("Restricted Stock Units"). The
terms and conditions of each Award shall be determined by the Committee in
its sole discretion and may include, by way of example, continued service
with the Company for a stated period of time and/or the attainment of
stated performance goals by the Participant, the Company or any business
unit thereof.
3.2 Terms of Options. With respect to each Option, the Committee shall
determine in its discretion the terms of the Option, including without
limitation:
(i) The exercise price per share, provided that the exercise price shall
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 2.3, 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.
(ii) The times at which any Option granted hereunder may be exercised,
including the times at which, and/or the conditions subject to which, the
Option will first become exercisable in whole or in part, which may
include, by way of example and not limitation, continued service with the
Company for a stated period of time and/or the attainment of stated
performance goals by the Participant, the Company or any business unit
thereof.
(iii) Such other terms as the Committee may deem appropriate, 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.
(iv) No Option granted under the Plan shall contain any "reload" provision
entitling the optionee to the automatic grant of additional options in
connection with any exercise of the original option.
3.3 Terms of Incentive Stock Options. In addition to the other provisions
of the Plan, Incentive Stock Options shall be subject to all laws and
regulations from time to time applicable to "incentive stock options," and
shall be subject to the following specific provisions:
(i) Members of the Board who are not also employees may not receive
Incentive Stock Options.
(ii) No Incentive Stock Option shall be exercisable in whole or in part
later than the day preceding the 10th anniversary of the grant date.
(iii) 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.
(iv) 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."
3.4 Rights of Holders of Restricted Stock. Except as otherwise provided
in an individual Award, a Participant who receives Restricted Stock shall
have all rights as a stockholder with respect to such shares, including the
right to vote the shares and receive dividends and other distributions.
3.5 Rights of Holders of Restricted Stock Units. Subject to the
restrictions set forth in an individual Award, a Participant who receives
Restricted Stock Units shall be eligible to receive, at the expiration of
the applicable restricted period, one share of Common Stock for each
Restricted Stock Unit awarded, at which time the Company shall issue to
each such Participant that number of shares of Common Stock. Except as
otherwise provided in an individual Award, a Participant who receives
Restricted Stock Units shall have no rights as a stockholder with respect
to such Restricted Stock Units until such time as shares for such Common
Stock are issued to the Participant.
3.6 Vesting. Awards to employees of the Company or a Subsidiary may not
vest earlier than at a rate of 25% per year from the date of grant, except
upon the death, disability or retirement of the employee or a change in
control of the Company.
3.7 Awards to Be in Writing. The grant, terms and conditions of each
Award 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 Award. In the
event of any irreconcilable inconsistency between the provisions of the
Plan and the terms or conditions of an Award, the provisions of the Plan
shall govern.
3.8 Limitation 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 Award. Neither the Plan nor any Award 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 Award or as a
shareholder of the Company except to the extent such right has accrued
under the terms of the Plan and the Award.
ARTICLE IV
Administration; Term And Amendment
4.1 Administration. The Plan shall be administered by the Committee, which
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.
4.2 Approval; Duration. Subject to the approval of the shareholders of the
Company at the Company's 2004 annual meeting of its shareholders, the Plan
shall become effective as of the date of such meeting. Awards may be made
from time to time thereafter in the discretion of the Committee, but no
Awards shall be made hereunder after December 31, 2010. The Plan shall
continue until all shares of Common Stock subject to outstanding Awards
have been issued and no Awards remain outstanding.
4.3 Amendments and Termination. The Board may at any time amend or
terminate the Plan; provided that no amendment may, without the further
approval of the Company's shareholders, (i) materially increase the maximum
amount of Common Stock that may be issued pursuant to Awards hereunder
(except for adjustments under Section 2.3), or (ii) expand the types of
Awards that may be granted, or (iii) materially extend the term of the
Plan, or (iv) permit the granting of Options at less than fair market
value, or (v) permit the repricing of outstanding Options (except for
adjustments under Section 2.3), or (vi) increase the maximum number of
shares which may be granted to any single Participant. Any amendment shall
comply with all applicable rules and regulations of the New York Stock
Exchange and the Securities and Exchange Commission. No amendment or
termination may adversely affect the rights of any Participant which exist
on the date the amendment or termination becomes effective, without the
written consent of the Participant.
Adopted by the Board of Directors December 11, 2003.
FORM OF PROXY
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" EACH ITEM.
Please Mark
Here for Address
Change or Comments | |
SEE REVERSE SIDE
Item 1 - Election of Directors
Election of three Class B Directors to serve until the 2007 Annual Meeting.
NOMINEES: 01 Bradley B. Buechler; 02 Randy C. Martin and 03 Calvin J. O'Connor.
If Mr. O'Connor withdraws as a nominee, only two directors will be elected and
no proxy votes will be cast for Mr. O'Connor.
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.
Item 2 - To approve an amendment of the Certificate of Incorporation of the
Company to increase the authorized number of shares of Common Stock from
45,000,000 to 55,000,000 shares
FOR AGAINST ABSTAIN
|_| |_| |_|
Item 3 - To approve the Spartech Corporation 2004 Equity Compensation Plan
FOR AGAINST ABSTAIN
|_| |_| |_|
FOR AGAINST ABSTAIN
Item 4 - Ratify Independent Auditors |_| |_| |_|
Item 5 - 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:____________________________________________________________________, 2004
________________________________________________________________________________
(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 11:59PM Eastern Time
on March 9, 2004.
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.
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Internet Telephone
http://www.eproxy.com/seh 1-800-435-6710 Mail
Use the Internet to vote. Use any touch-tone telephone to Mark, sign and date
Have your proxy card in hand when vote. Have your proxy your proxy card
you access the web site. OR card in hand when you call. OR and
return it in the
enclosed postage-paid
envelope.
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If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
SPARTECH CORPORATION PROXY
2004 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 10, 2004, 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 23, 2004.
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, 2, 3 AND 4 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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Address Change/Comments (Mark the corresponding box on the reverse side)
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