STERLING SUGARS, INC.
P. O. BOX 572
Franklin, Louisiana 70538
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Sterling Sugars, Inc. will be held in
the Conference Room, St. Mary Parish Library, 206 Iberia Street, Franklin,
Louisiana, on Monday, November 22, 1999 at 10:00 a.m. for the following
purposes:
1. Election of directors to serve for one year or until their
successors are elected and qualified.
2. To consider and vote upon a proposal to change the state of
incorporation of the Company from Delaware to Louisiana
(the "Reincorporation")
3. Transaction of such other business as may properly come
before the meeting or any adjournments thereof.
The close of business on October 4, 1999 has been fixed as the record date
for determining stockholders entitled to notice of and to vote at the
meeting.
By order of the Board of Directors
J. Patout Burns, Jr.
Secretary
Franklin, Louisiana
November 3, 1999
YOUR VOTE IS IMPORTANT
Whether or not you expect to attend the meeting, please mark, date, sign
and promptly return the enclosed proxy in the accompanying envelope, which
requires no postage if mailed in the United States. You may, of course
revoke your proxy and vote in person.
STERLING SUGARS, INC.
P. O. BOX 572
Franklin, Louisiana 70538
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of Sterling
Sugars, Inc. ("the Company") for use at the Annual Meeting of Stockholders
to be held on November 22, 1999 and at any adjournments thereof. If properly
and timely completed and returned, the proxy will be voted in the manner you
specify thereon. If no manner is specified, the proxy will be voted for
election of the nominees for director hereinafter named.
The proxy may be revoked at any time before it is voted and you may
vote in person if you attend the meeting.
The cost of soliciting proxies will be borne by the Company. In
addition to use of the mails, proxies may be solicited by telephone and
personal contacts.
It is expected that this proxy statement and related materials will
first be mailed to stockholders on or about November 3, 1999.
STOCKHOLDERS' PROPOSALS
In order for proposals by stockholders to be considered for inclusion
in the proxy and proxy statement relating to the year 2000 Annual Meeting of
Stockholders, such proposals must be received at the Company's principal
executive office no later than June 30, 2000.
VOTING SECURITIES
Only stockholders of record as of the close of business on October 4,
1999 are entitled to vote at the meeting. At that time, 2,500,000 shares of
the Company's Common Stock (being the Company's only class of authorized
stock) were outstanding. Each share is entitled to one vote.
The following table provides information as of September 30, 1999
concerning each stockholder known by the Company to be the beneficial owner
(as determined by Rule 13d-3 of the Securities and Exchange Commission) of
more than five percent (5%) of its outstanding stock:
2
Name and Address of Shares Beneficially Percent of
Beneficial Owner Owned (1) Class
- -----------------------------------------------------------------------------
M. A Patout & Son, Ltd. 1,543,868 61.75%
3512 J. Patout Burns Road
Jeanerette, Louisiana 70544
Peter V. Guarisco 511,531(2) 20.46%
P. O. Box 2588
Morgan City, Louisiana 70380
Capital Management Consultants, Inc. 204,431(2) 8.18%
P. O. Box 2588
Morgan City, Louisiana 70380
Hellenic, Inc. 143,100(2) 5.72%
P. O. Box 2588
Morgan City, Louisiana 70380
- -----------------------------------------------------------------------------
(1) Based on information furnished by beneficial owners. Includes direct and
indirect ownership and, unless otherwise indicated, also includes sole voting
and investment power with respect to reported holdings.
(2) Includes 143,100 shares owned by Hellenic, Inc. and 204,431 shares owned
of record by Capital Management Consultants, Inc. Mr. Guarisco shares voting
and investment power with respect to such shares. Mr. Guarisco disclaims
beneficial ownership of these shares.
3
PROPOSAL 1: ELECTION OF DIRECTORS
In accordance with the Company's by-laws, seven directors are to be
elected at the annual meeting to serve a term of one year from November 22,
1999 or until their successors are elected and qualified. The election of
directors shall be determined by a majority of the votes actually cast, and
the abstention or failure of any stockholder to vote will not affect this
determination. Each shareholder is entitled to one vote per share. Unless
you specify otherwise, proxy holders will vote for election of the management
nominees named below. Should any of the nominees become unavailable for
election, which is not anticipated, proxy holders may, in their discretion,
vote for other nominees recommended by the Board.
The following table lists the nominees for election as director and
shows as of September 30, 1999, the beneficial ownership (as determined in
accordance with Rule 13d-3 of the Securities and Exchange Commission) of the
Company's outstanding common stock by each nominee and by all directors and
executive officers as a group:
First Shares
Elected Beneficially Percent of
Name Age Director Owned (1) Class
- ----------------------------------------------------------------------------
Bernard E. Boudreaux, Jr. 62 1996 1,000 *
Dr. James Patout Burns, Jr. 59 1994 1,544,368(2) 61.77%
Craig P. Caillier 37 1996 100 *
Peter V. Guarisco 71 1986 511,531(3) 20.46%
Victor Guarisco, II (4) 35 1992 18,990 *
Rivers Patout (5) 34 1994 100 *
William S. Patout, III 67 1997 100 *
All directors and named
executive officers as a group 2,076,189 83.05%
- ----------------------------------------------------------------------------
*Less than 1%
(1) Based on information furnished by nominees. Includes direct and indirect
ownership and unless otherwise indicated includes sole voting and investment
power with respect to reported holdings.
(2) Includes shared voting and investment power with respect to 1,543,868
shares owned by M. A. Patout & Son, Ltd.
(3) Mr. Guarisco's reported holdings reflect shared voting and investment
power with respect to 143,100 shares owned by Hellenic, Inc. and 204,431
shares owned by Capital Management Consultants, Inc. Mr. Guarisco disclaims
beneficial ownership of such shares.
(4) Peter V. Guarisco is the father of Victor Guarisco, II.
(5) William S. Patout, III is the father of Rivers Patout.
(6) See "Information Concerning Management - Executive Officers".
4
Business Experience of Directors
- --------------------------------
The following paragraphs describe all Company offices held by nominees
and their principal occupations for the last five years.
Bernard E. Boudreaux, Jr. is Chairman of the Board and general counsel
of the Company and District Attorney, Sixteenth Judicial District of
Louisiana.
Dr. James Patout Burns, Jr., Secretary of the Company, is the Edward A.
Malloy Professor of Catholic Studies at Vanderbilt Divinity School,
Nashville, Tennessee. Dr. Burns was formerly Thomas and Alberta White
Professor of Christian Thought and Chair of the Program in Religious Studies
at Washington University, St. Louis, Missouri.
Craig P. Caillier, President and Chief Executive Officer of the Company.
Peter V. Guarisco is Chairman of the Board and President of Hellenic,
Inc., a privately owned company having diverse business interests, Morgan
City, Louisiana.
Victor Guarisco, II is President of Cottonwood, Inc., a privately owned
real estate management and development company, Morgan City, Louisiana.
Rivers Patout is Vice President for Property Development of the Company
and Assistant General Manager of M. A. Patout & Son, Ltd., Jeanerette,
Louisiana.
William S. Patout, III is President and Chief Executive Officer of M. A.
Patout & Son, Ltd., Jeanerette, Louisiana.
INFORMATION CONCERNING MANAGEMENT
- ---------------------------------
Executive Officers
- ------------------
The table below sets forth the beneficial ownership of the name
executive officers.
Name Age Shares Beneficially
Owned Percent of Shares
- -----------------------------------------------------------------------------
Craig P. Caillier
Chief Executive Officer and
Director 37 100 0.004%
- -----------------------------------------------------------------------------
Business Experience of Executive Officers
- -----------------------------------------
Craig P. Caillier, for five years prior to his association with the
Company, was Assistant General Manager and Secretary/Treasurer of M. A.
Patout & Son, Ltd., Jeanerette, La. Before his election as President and CEO
of the Company, he was Senior Vice President and General Manager of the
Company.
5
Executive Compensation
- ----------------------
Mr. Caillier, the Company's President and Chief Executive Officer,
became an executive officer of the Company in fiscal 1994. The following
table sets forth information concerning Mr. Caillier's compensation during
the Company's last three fiscal years.
Annual Compensation
-------------------
Name and Principal Other Annual
Position Year Salary Bonus Compensation (1)
- ----------------------------------------------------------------------------
Craig P. Caillier 1999 $86,033 $28,684 $3,442
President and CEO 1998 79,583 63,474 4,292
1997 73,833 63,219 4,112
- ----------------------------------------------------------------------------
(1) Company contributions to 401(k) savings plan.
As amended in 1986, the Company's Retirement Plan provides benefits at
retirement to full-time salaried and hourly factory employees and to
full-time agricultural employees (other than those hired at age 60 or older)
who are at least 21 years of age and have at least one year of service.
Contributions to the plan, which are funded entirely by the Company, are
computed on an actuarial basis. The plan classifies employees as agricultural
and factory employees. Benefits for factory employees (a classification that
includes the Company's executive officers) are determined by multiplying the
employee's years of service by the sum of (i) .60 percent times Final Average
Earnings up to Covered Compensation and (ii) 1.20 percent times Final Average
Earnings in excess of Covered Compensation. The term "Covered Compensation"
means the average annual earnings used to calculate the participant's social
security benefit. This average covers his entire employment history
(including employment prior to employment by Sterling Sugars, if any), and
assumes continued employment to age 65. It also assumes that, during each
year of employment, the participant always earned the maximum amount subject
to social security withholding (the Taxable Wage Base). Each year, the
Plan's actuaries provide a table that determines the Covered Compensation
level for participants reaching age 65 in each of the succeeding years. The
Covered Compensation level increases over time (generally every year) as the
Taxable Wage Base itself increases. As a result, Covered Compensation is
relatively low for participants nearing the average retirement age of 65 and
increases for younger participants. The actual final determination of a
Participant's Covered Compensation amount is therefore made at the time of
termination of employment or retirement.
Mr. Caillier is 37 years old and has approximately five years of
credited service. Set out below is a table that shows the estimated annual
pension benefits for employees retiring at age 65 with varying years of
credited service and final earnings.
6
Pension Table
-------------
Years of Service
---------------------------------
Final Earnings 10 15 20 25
----------------------------------------------------------------------
$ 50,000 $ 4,632 $ 6,948 $ 9,264 $11,580
75,000 7,632 11,448 15,264 19,080
100,000 11,632 15,948 21,264 26,580
Effective February 1, 1992 the Company established the Sterling
Sugars, Inc. Employee's Savings Plan and Trust for the benefit of all
eligible full-time salaried and hourly employees and full-time salaried
agricultural employees who are at least 21 years old and have completed at
least one year of service with the Company. The Plan is referred to as a
401(k) retirement plan, a form of a defined contribution plan. Through
elective deferrals, employees may contribute from one to six percent of
their annual gross compensation into the Plan. The Company is obligated to
match contributions to the extent of fifty percent of the first six percent
of an employee's elective deferrals. Any additional Company contributions
are discretionary. The Plan was amended effective February 1, 1994 to change
eligibility requirements and investment election dates and to credit service
for a related employer. Newly hired employees are now eligible to
participate on the first day of the calendar month following completion of
age and service requirements. Investment changes will be made effective
April 1 instead of February 1 and October 1 instead of August 1 of each year.
Credited service was also amended to include service with M. A. Patout & Son,
Ltd., a related employer.
Directors' Compensation
- -----------------------
Directors receive an annual retainer of $5,000 and an attendance fee
of $500 per meeting plus reimbursement for travel and related expenses
incurred in attending board and committee meetings.
Compensation Policies of the Board of Directors
-----------------------------------------------
The Board of Directors does not have a compensation committee and
executive compensation determinations are made by the entire Board. Mr.
Caillier's compensation is based on his performance and the overall
profitability of the Company, as well as the Board's forecasted future
performance as determined in the best judgment of the Board. Mr. Caillier's
compensation is not directly tied to one specific factor such as an increase
in the price of the Company's stock, return on equity or net profit and
there are no specific formulas used in the calculation of compensation.
7
Stock Performance Graph
-----------------------
The following graph presents the cumulative total return on the
Company's common stock for the five year period ended July 31, 1999 compared
to the cumulative total return assuming reinvestment of dividends for
all stocks quoted on the NASDAQ Market Value Index. Because there is no
published industry or line of business index comparable to Sterling, a peer
group was selected based on similar publicly traded companies with market
capitalization of $17.4 million to $17.5 million as of July 31, 1999. This
peer group consists of the following five companies: Hungarian Tel & Cable
CP, Metrobancorp., Outlook Group Corp., Silicom, Ltd. and Twin City Bancorp.
Year Sterling NASDAQ Peer Group
--------------------------------------------------------------
1994 100 100 100
1995 123 95 79
1996 148 132 67
1997 180 174 77
1998 197 205 69
1999 191 320 54
Certain Transactions
--------------------
On November 15, 1994, the Company entered into a technical service
contract with M. A. Patout & Son, Ltd. ("Patout"). The contract provides
that Patout will provide technical and engineering services to the Company
in return for a fee equal to ten percent of the Company's net income before
income taxes from the manufacture, production and sale of raw sugar and
molasses each year, provided that net income from the foregoing exceeds
$500,000. The agreement was to expire on January 31, 1999 but because of
the change in the Company's fiscal year end, the agreement was extended to
July 31, 1999. The agreement also provides Patout an option to acquire
50,000 shares of treasury stock owned by the Company on or before December
31, 1998, at a price of $3.25 per share. Patout exercised its option on
April 12, 1995 and acquired 50,000 shares of treasury stock for $162,500.
There was no technical service fee due for the year ended July 31, 1999.
Mr. Bernard E. Boudreaux, Jr., Chairman of the Board of the Company,
served in fiscal 1999 and will serve in fiscal 2000, as general counsel for
the Company on a retainer basis.
Other Information
------------------
Persons who are directors or executive officers of the Company, and
persons who beneficially own more than 10% of the Company's common stock, are
required to file with the Securities and Exchange Commission periodic reports
of changes in their ownership of the Company's stock. Based solely on a
review of the forms furnished to the Company pursuant to the rules of the
Securities and Exchange Commission, such persons complied with the filing
requirements during the last three fiscal years of the Company except M. A.
Patout & Son, Ltd. was late filing four reports covering nine transactions,
and Mr. Boudreaux was late in filing Form 3.
8
The Company has no standing nominating or compensation committees or
committees performing similar functions. The Company's Audit and Ethics
Committee is empowered to engage and evaluate the performance of the
Company's public accountants and review year-end and other financial
statements when appropriate. The Committee, which consisted of Messrs.
Boudreaux, R. Patout and P. Guarisco, did not meet during fiscal 1999.
One meeting of Board of Directors was held during the last fiscal year.
All directors attended the meeting.
PROPOSAL 2: REINCORPORATION
The Board of Directors of the Company has determined that it is in the
best interests of the Company to change the state of incorporation of the
Company from Delaware to Louisiana, subject to approval by the stockholders
(the "Reincorporation"). The Reincorporation will be effected by merging the
Company into Sterling Sugars - Louisiana, Inc., a newly organized Louisiana
corporation and wholly-owned subsidiary of the Company ("Sterling Louisiana")
that will be the surviving corporation (the "Surviving Corporation").
Approval of the Reincorporation requires the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock. THE BOARD
OF DIRECTORS CONSIDERS THE REINCORPORATION TO BE IN THE BEST INTERESTS OF THE
COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS THAT YOU VOTE "FOR" THE
REINCORPORATION.
General
- -------
If approved, the Reincorporation will be accomplished pursuant to the
Resolutions. The Resolutions provide that the Board of Directors of the
Company may decide to abandon the Reincorporation at any time.
If the Reincorporation is approved, Sterling Louisiana will be governed
by the Louisiana Business Corporation Law ("LBCL") and its Articles of
Incorporation and Bylaws (together, the "Louisiana Charter"), which will
change some of your rights as a shareholder. See "Principal Changes in the
Company's Charter and Bylaws to be Effected by Reincorporation" and "Certain
Differences Between the Corporation Laws of Louisiana and Delaware and
Corresponding Charter and Bylaws Provisions." However, there will be no
change in the business, management, assets, liabilities or net worth of the
Company.
Conversion of Shares
- --------------------
When the Reincorporation becomes effective (the "Effective Date"), each
outstanding share of the Company's Common Stock will be automatically
converted and exchanged for one share of common stock, par value $1.00 per
share, of the Surviving Corporation ("Surviving Corporation Stock") and the
Sterling Louisiana Common Stock held by the Company will be canceled. Stock
certificates which now represent outstanding shares of Common Stock will
automatically represent the same number of shares of Sterling Louisiana
Common Stock on the Effective Date. You will not be required to exchange
your Company stock certificates for Surviving Corporation stock certificates.
9
Following the Reincorporation, previously outstanding Company stock
certificates may be delivered in effecting sales, through a broker or
otherwise, of shares of Sterling-Louisiana Common Stock. The Common Stock is
presently traded in the over the counter market under the symbol "SSUG" and,
after the Reincorporation, Sterling Louisiana Common Stock will continue to
be traded in the over the counter market under that symbol.
No Changes in Business Plan, Management, Assets, Liabilities, Net Worth or
- --------------------------------------------------------------------------
Capitalization
- --------------
The proposed Reincorporation will not change the business, management,
assets, liabilities, net worth or capitalization of the Company. Pursuant
to the Reincorporation, the name of the Surviving Corporation will be
Sterling Sugars, Inc., all of the previously outstanding shares of Common
Stock of the Company shall be automatically converted into the same number
of shares of Surviving Corporation Common Stock and the business of the
Company shall be conducted by Surviving Corporation in the same places and
in the same manner as the business of the Company currently is conducted.
The directors and the executive officers of the Company will serve as the
directors and executive officers of Surviving Corporation until their
respective successors are elected. Promptly after the effectiveness of the
Reincorporation, the Company will issue an appropriate press release
announcing the Reincorporation.
Reasons for Reincorporation
- ---------------------------
The Company proposes to reincorporate as a Louisiana corporation for
several reasons. Primarily, the Company wishes to be governed by Louisiana
law with respect to its corporate activities since all of its business
operations take place in Louisiana. Additionally, the Company believes that
for purposes of any Louisiana litigation in which it may be involved it would
be beneficial to be a Louisiana corporation with respect to those
proceedings.
No appraisal rights are available to holders of Common Stock in respect
of the Reincorporation.
Principal Changes in the Company's Charter and Bylaws to be Effected by
- -----------------------------------------------------------------------
Reincorporation
- ---------------
Upon completion of the Reincorporation, the Louisiana Charter will govern
the rights of the stockholders of Surviving Corporation. Although the
provisions of the Louisiana Charter are similar to those of the Company's
Certificate of Incorporation, as amended ("Certificate of Incorporation") and
Bylaws (collectively, the "Delaware Charter") in many respects, the
Reincorporation includes implementation of certain provisions in the
Louisiana Charter that affect the rights of stockholders and management.
Approval by the stockholders of the Reincorporation will constitute approval
of the terms of the Louisiana Charter, including the provisions described
below. The following discussion is qualified in its entirety by reference to
10
the Louisiana Business Corporation Law ("LBCL") and the Delaware General
Corporation Law ("DGCL") and applicable charter and bylaw provisions.
Certain Differences Between the Corporation Laws of Louisiana and Delaware and
- ------------------------------------------------------------------------------
Corresponding Charter and Bylaw Provisions
- ------------------------------------------
As a result of the Reincorporation, Company stockholders, whose rights are
governed by the DGCL, will become shareholders of the Surviving Corporation
and their rights as shareholders will then be governed primarily by the
LBCL.
Certain differences between the DGCL and LBCL are set forth below. The
following summary does not purport to be complete and is qualified in its
entirety by reference to the provisions of the LBCL and the DGCL and
applicable charter and bylaw provisions.
Mergers
- -------
The LBCL permits a merger to become effective without the approval of the
surviving corporation's shareholders if the articles or certificate of
incorporation, as the case may be, of the surviving corporation do not change
following the merger, each share of such corporation outstanding immediately
prior to the effective date of the merger is an identical outstanding or
treasury share of the surviving corporation after the merger, the amount of
the surviving corporation's common stock to be issued or delivered under the
plan of merger does not exceed 15% of the total shares of outstanding voting
stock immediately prior to the acquisition, and the board of directors of the
surviving corporation adopts a resolution approving the plan of merger. In
contrast, the DGCL permits a merger to become effective without the approval
of the surviving corporation's shareholders if the articles or certificate of
incorporation of the surviving corporation does not change, the amount of the
surviving corporation's common stock to be issued or delivered under the plan
of merger does not exceed 20% of the total shares of outstanding voting stock
immediately prior to the acquisition, and the board of directors of the
surviving corporation adopts a resolution approving the plan of merger.
When shareholder approval is required under Louisiana law, a merger must
be approved by the holders of two-thirds of the outstanding shares of the
Louisiana corporation entitled to vote thereon, or by such amount as required
by the articles of incorporation, but not less than a majority. If a class
of stock is entitled to vote as a class, the merger must also be approved by
two-thirds of the outstanding shares of stock of each class entitled to vote
as a class, or as provided by the articles of incorporation, but not less
than a majority. In contrast, where shareholder approval is required under
Delaware law, a merger can generally be approved by a majority vote of the
outstanding shares of capital stock of each class entitled to vote thereon.
11
Appraisal Rights
- ----------------
Shareholders of Louisiana corporations are entitled to exercise certain
dissenters' rights in the event of a sale, lease, exchange or other
disposition of all of the property and assets of the corporation, and, with
the exceptions discussed below, a merger or consolidation, unless the action
was approved by at least 80% of the corporation's total voting power. In the
case of a short form merger, dissenters' rights exist without regard to the
percentage of the voting power which authorized the merger, and even if the
merger was not approved by the shareholders. Unless the articles of
incorporation provide otherwise, Louisiana law provides that shareholders do
not have appraisal rights in connection with a merger where, on the record
date fixed to determine the shareholders entitled to vote, the stock of the
corporation is listed on a national securities exchange or is listed on the
Nasdaq National Market, unless the shares of such shareholders were not
converted by the merger or consolidation solely into shares of the surviving
corporation.
Shareholders of a Delaware corporation have rights of appraisal in
connection with certain mergers or consolidations. In addition, a Delaware
corporation may, but is not required to, provide in its certificate of
incorporation that appraisal rights shall be available to shareholders in the
event of an amendment to the certificate of incorporation, the sale of all
or substantially all of the assets of the corporation, or the occurrence of
any merger or consolidation regarding which appraisal rights are not
otherwise available and in which that Delaware corporation is not the
surviving or resulting company. No such provision is included in the
Company's Certificate of Incorporation.
However, no appraisal rights are available under Delaware law for the
holders of any shares of a class or series of stock of a Delaware
corporation that is a party to a merger if that corporation survives the
merger and the merger did not require the vote of the holders of that class
or series of such corporation's stock; provided, however, that under
Delaware law appraisal rights will be available in any event to shareholders
of a Delaware corporation who are required to accept consideration for their
shares other than the consideration described below.
Further, Delaware law provides that shareholders do not have appraisal
rights in connection with a merger where, on the record date, the stock of
the corporation is listed on a national securities exchange, is listed on
the Nasdaq National Market or is held of record by more than 2,000
shareholders, unless any of the following exceptions concerning consideration
paid to the shareholder for his shares are met. Appraisal rights will be
available to shareholders of a Delaware corporation in the event of a merger
or consolidation if such shareholders are required by the terms of an
agreement of merger or consolidation to accept for their stock anything other
than (i) shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof,
(ii) shares of stock of any other corporation or depository receipts in
respect thereof, which at the effective date of the merger or consolidation
will be either listed on a national securities exchange, designated as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or held of record by more
than 2,000 shareholders, (iii) cash in lieu of fractional shares or
fractional depository receipts of a corporation described in (i) and (ii)
12
above, or (iv) any combination of the shares of stock, depository receipts
and cash in lieu of fractional shares or fractional depositary receipts
described in (i), (ii) and (iii) above.
Special Meetings
- ----------------
A special meeting of shareholders of a Louisiana corporation may be called
by the president or the board of directors, or in any manner provided for in
the articles or bylaws. Also, any shareholder or shareholders holding in the
aggregate one-fifth (or such amount fixed in the articles or bylaws) of the
total voting power, may file a written request for a meeting. Shareholders
of Delaware corporations do not have a right to call special meetings unless
that right is included in the corporation's certificate of incorporation or
bylaws. The Company's Certificate of Incorporation does not grant
shareholders the right to call special meetings.
Actions Without a Meeting
- -------------------------
Under Louisiana law, shareholders may act without a meeting if a written
consent is signed by all the shareholders entitled to vote on the matter.
If the articles provide that such a consent may be signed by fewer than all
of the shareholders having voting power on any question, the consent need be
signed only by shareholders holding that proportion of the total voting power
on the question which is required by the articles or bylaws, whichever
requirement is higher.
Delaware law provides that shareholders may take action without a meeting
if a written consent is signed by the shareholders having the minimum number
of votes that would be necessary to take such action at a meeting, unless
prohibited in the certificate of incorporation.
Election and Removal of Directors
- ---------------------------------
If the articles so provide, cumulative voting is allowed by a Louisiana
corporation in electing or removing directors. A director elected by
cumulative voting may not be removed if the votes cast against his removal
would be sufficient to elect him if cumulatively voted. The articles of
Sterling Louisiana do not provide for cumulative voting.
A majority of the stockholders of a Delaware corporation may remove a
director with or without cause, unless the certificate of incorporation
provides otherwise, except in the case of a corporation whose board is
classified and elected for staggered terms, in which case directors may be
removed only for cause. The Company's Certificate of Incorporation does not
provide for a classified board.
Voting on Other Matters
- -----------------------
Under Louisiana law, an amendment to the articles of incorporation
requires the approval of the holders of at least two-thirds of the voting
power present, or such proportion of the total voting power as the articles
13
may require, unless the articles of incorporation provide differently, but
not less than a majority. If an amendment would adversely affect the rights
of a class or series, then the amendment must also have the approval of the
voting power of the class or series present, or of the total voting power of
the class or series, as the articles may require, of each class or series so
affected, unless a different number, not less than a majority, is specified
in the articles of incorporation. A class or series that is or would be
adversely affected by an amendment to the articles of incorporation shall
have the right to vote as a class on the amendment, whether or not the
articles of incorporation so provide. Delaware law provides that amendments
to the certificate of incorporation must be approved by the holders of a
majority of the corporation's stock entitled to vote thereon, and the
holders of a majority of the outstanding stock entitled to vote thereon as a
class.
If the corporation is not insolvent, the sale, lease, exchange or other
disposition of all, or substantially all, the property and assets, including
its goodwill, franchise, or other rights of a Louisiana corporation, requires
the approval of the holders of at least two-thirds of the voting power
present (or by such greater or lesser proportion, not less than a majority,
of the voting power present or of the total voting power, as the articles may
require.) A Delaware corporation may sell, lease or exchange all or
substantially all of its property and assets when and as authorized by the
holders of a majority of the outstanding stock of the corporation entitled to
vote thereon, unless the certificate of incorporation requires the vote of a
larger portion of the outstanding stock. The Company's Certificate of
Incorporation requires a majority vote.
Under Louisiana law, the voluntary dissolution of a corporation requires
the approval of the holders of a majority of the voting power present or of
the total voting power as the articles may require (including the holders of
each class or series entitled to vote thereon as a class), unless a different
amount, not less than a majority, is specified in the corporation's articles
of incorporation. Delaware law requires that dissolution must be approved by
the holders of a majority of the corporation's stock entitled to vote
thereon, unless the certificate of incorporation requires the vote of a
larger portion of the outstanding stock.
Preemptive Rights
- -----------------
Under Louisiana law, shareholders have preemptive rights only if provided
for in the articles of incorporation. The articles of incorporation of
Sterling Louisiana do not provide for preemptive rights. Shareholders of the
Company also do not possess such preemptive rights.
Dividends
- ---------
A Delaware corporation may pay dividends not only out of surplus (the
excess of net assets over capital) but also out of net profits for the
current or preceding fiscal year if it has no surplus; provided, however,
that if the capital of the corporation has been decreased to an amount less
than the aggregate amount of the capital represented by the issued and
outstanding stock having a preference upon the distribution of assets, no
dividends may be declared out of net profits.
14
A Louisiana corporation may also pay dividends from either surplus or net
profits, but with slightly different restrictions than under Delaware law.
Reserved earned surplus may not be used to pay dividends, nor may dividends
be paid from surplus where the corporation is insolvent or would be made
insolvent by the payment of dividends. Dividends paid out of surplus are
also subject to any restrictions in the articles of incorporation. Dividends
out of net profits may not be made if the corporation's assets are, or would
be, exceeded by its liabilities or when the net assets are, or would be
reduced to, less than the aggregate amount payable upon liquidation on the
issued shares which have a preferential right to participate in the
corporation's assets in the event of a liquidation.
Liquidation Rights
- ------------------
Pursuant to Louisiana law, any net assets remaining after liquidation are
to be paid to the shareholders according to their respective rights and
preferences.
Similarly, under Delaware corporate law, shareholders are entitled to
share ratably in the distribution of assets upon the dissolution of their
corporation. Preferred shareholders typically do not participate in the
distribution of assets of a dissolved corporation beyond their established
contractual preferences. Once the rights of preferred shareholders have been
fully satisfied, common shareholders are entitled to the distribution of any
remaining assets. The Company currently has no preferred stock outstanding.
Limitation of Liability and Indemnification
- -------------------------------------------
Both Louisiana and Delaware corporate law permit a corporation to set
limits on the extent of a director's liability. The Company's Certificate of
Incorporation and Sterling Louisiana's articles of incorporation both
establish such limits to the maximum extent permitted by applicable law.
Both Louisiana and Delaware law permit a corporation to indemnify its
officers, directors, employees and agents if such person acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation. In the case of a criminal action, under
Louisiana law, indemnification is allowed, if there was no reasonable cause
to believe the conduct was unlawful. Indemnification is not allowed under
Delaware law, absent a court order to the contrary, if an officer, director,
employee or agent of the bank or corporation is finally adjudged liable to
the corporation. Under Louisiana law, indemnification is not allowed, absent
a court order to the contrary, if an officer, director, employee or agent of
the bank or corporation is finally adjudged liable to the corporation for
willful or intentional misconduct in the performance of his duty to the
corporation. The Company's Certificate of Incorporation provides for
indemnification of its officers and directors to the fullest extent
authorized by law.
Inspection of Books and Records
- -------------------------------
Under Louisiana law, any person, except a business competitor, who has
been a shareholder of record for at least six months preceding his demand,
and who is the holder of at least 5% of all of the outstanding shares of a
15
corporation, is entitled to examine the corporation's books and records for
any proper and reasonable purpose. Two or more shareholders who meet the six
month ownership requirement, may aggregate their shares in order to meet the
percentage requirement and exercise their right of inspection jointly. A
business competitor may exercise a right of inspection if it owns 25% of the
outstanding shares for a period of six months. Under Delaware law, any
shareholder has such a right.
Antitakeover Provisions
- -----------------------
Delaware has enacted antitakeover legislation. Section 203 of the DGCL
makes it more difficult to effect certain transactions between a Delaware
corporation (or its majority-owned subsidiaries) and an "Interested
Stockholder." The term "Interested Stockholder" is defined to include any
person owning 15% or more of the outstanding voting stock of a Delaware
corporation and affiliates and associates of such person. In general, under
Section 203, for a period of three years following the date that a
stockholder becomes an Interested Stockholder, the following types of
transactions ("Business Combinations") between a Delaware corporation and
such Interested Shareholders are prohibited unless certain conditions are
met: (i) mergers or consolidations, (ii) sales, leases, exchanges or other
dispositions of 10% or more of (a) the aggregate assets of the corporation
or (b) the aggregate market value of all the outstanding stock of the
corporation, (iii) issuance or transfer by the corporation of shares of its
stock that would have the effect of increasing the Interested Stockholder's
proportionate share of stock of the corporation, (iv) receipt by the
Interested Stockholder of the benefit of loans, advances, guarantees,
pledges or other financial benefits provided by the corporation, and (v) any
other transaction that has the effect of increasing the proportionate share
of the stock of the corporation owned by the Interested Stockholder. The
three-year ban will not apply: (i) if, prior to the date upon which the
Interested Stockholder becomes such, the board of directors approves either
the proposed Business Combination or the transaction which would result in
the stockholder becoming an Interested Stockholder, (ii) if, upon the
consummation of the transaction that results in such stockholder becoming an
Interested Stockholder, the stockholder will own at least 85% of the voting
stock of the Delaware corporation which was outstanding on the date such
transaction commenced, or (iii) if such Business Combination is approved by
the board of directors and, at a meeting, by the holders of at least 66 2/3%
of the outstanding voting stock not owned by the Interested Stockholder.
This statute applies automatically to several classes of Delaware
corporations, unless a majority of a corporation's shareholders elects to be
excluded from the statute's coverage by amendment to the bylaws or
certificate of incorporation of the corporation or its original certificate
of incorporation elects to be excluded from this statute. The Company has not
elected to opt out currently of the anti-takeover protection of Section 203
of the DGCL and, accordingly, such provisions apply to the Company.
Louisiana law provides that upon the acquisition by a person of at least
20% of such corporation's outstanding shares ("Control Shares"), such person
must give the corporation notice of such acquisition. The shareholders of
the corporation have the right to determine the voting rights to be accorded
to the shares acquired in the control share acquisition. Should Control
Shares be accorded full voting rights and the acquiring person has acquired
Control Shares with a majority or more of all voting power, all shareholders
have dissenters' rights in such transactions.
16
Securities Law Consequences
- ---------------------------
After the Reincorporation, the Surviving Corporation will be a
publicly-held company, its Common Stock will continue to be qualified traded
in the over the counter market, and it will file with the Securities and
Exchange Commission and provide you with the same type of information the
Company has previously filed and provided. The shares of the Surviving
Corporation to be issued in exchange for shares of the Company are not being
registered under the Securities Act, in reliance upon an exemption with
respect to a merger which has as its sole purpose a change in the domicile
of the corporation. Stockholders whose stock in the Company is freely
tradable before the Reincorporation will own freely tradable shares of the
Surviving Corporation after the Reincorporation. Shareholders holding
restricted securities of the Surviving Corporation will be subject to the
same restrictions on transfer as those to which their present shares of
stock in the Company are subject. For purposes of computing compliance with
the holding period of Rule 144 under the Securities Act, shareholders will
be deemed to have acquired their shares in Surviving Corporation on the date
they acquired their shares in the Company. In summary, the Surviving
Corporation and its shareholders will be in the same respective positions
under the federal securities laws after the Reincorporation as before the
Reincorporation.
Federal Income Tax Consequences
- -------------------------------
The Reincorporation is intended to qualify as a reorganization within the
meaning of Section 368(a) of the Code. This means that no gain or loss will
be recognized by holders of the Common Stock upon receipt of Surviving
Corporation Common Stock in the Reincorporation, and no gain or loss will be
recognized by the Company or the Surviving Corporation as a result of the
Reincorporation. In addition, each former holder of Common Stock will have
the same basis in the Surviving Corporation shares received in the
Reincorporation as such holder had surrendered in the Reincorporation, and
such holder's holding period with respect to Surviving Corporation Common
Stock will include the period that the holder held the corresponding Common
Stock surrendered in exchange therefore, provided such Common Stock was held
by the holder as a capital asset at the time of the Reincorporation. The
basis in the assets deemed transferred by the Company to the Surviving
Corporation in the Reincorporation will remain the same, and the rules of
Section 381 will result in a carryover of tax attributes from the Company to
the Surviving Corporation.
In order for the Reincorporation to qualify as a reorganization under the
Code, certain requirements must be satisfied, including, without limitation,
the so-called "continuity of interest requirement." To satisfy the
continuity of interest requirement, holders of Common Stock must not,
pursuant to a plan or intent existing at or prior to the Reincorporation,
sell, exchange, transfer, or otherwise reduce the risk of loss relating to,
so many of either (i) their shares of Common Stock in anticipation of the
Reincorporation or (ii) their shares of Surviving Corporation shares of
Common Stock to be received in the Reincorporation, such that the Company
shareholders, as a group, would no longer have a significant equity interest
in the business being conducted by the Surviving Corporation after the
Reincorporation.
17
The foregoing discussion of certain federal income tax aspects of the
Reincorporation is based on the Code, applicable regulations promulgated or
proposed thereunder, administrative rulings by the Internal Revenue Service
and judicial authority as of this date, all of which are subject to change,
possibly with retroactive effect. There can be no assurance that future
changes in the foregoing precedents will not adversely affect the tax
consequences discussed or that there will not be differences of opinion as
to the interpretation of such precedents. Accordingly, stockholders of the
Company should consult their own tax advisers as to the specific consequences
of the Reincorporation under their particular circumstances, including the
application of federal, state, local and foreign income and other tax laws.
ACCOUNTANTS
-----------
It is anticipated that Broussard, Poche, Lewis & Breaux, will be asked
to serve as the Company's independent public accountants for the fiscal year
ending July 31, 2000. A representative of the firm is expected to be present
at the annual meeting and to be available to respond to appropriate
questions. He will have the opportunity to make a statement if he desires.
At the Company's Board of Directors meeting on February 8, 1999 the Board
appointed the accounting firm of Broussard, Poche', Lewis & Breaux, LLP as
independent accountants for the Registrant for 1999. The work of LeGlue &
Company was terminated at that time.
During the two most recent fiscal years and the interim periods subsequent
to July 31, 1998, there have been no disagreements with LeGlue & Company on
any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure or any reportable events.
LeGlue's report on the financial statements for the past two years
contained no adverse opinion or disclaimer and was not qualified or modified
as to uncertainty, audit scope or accounting principles.
OTHER MATTERS
-------------
The matters to be acted upon at the Annual Meeting of Stockholders are
set forth in the accompanying notice. The Board knows of no other business to
come before the meeting, but if other matters requiring a vote are properly
presented to the meeting or any adjournments thereof, proxy holders will
vote, or abstain from voting hereon in accordance with their best judgment.
By Order of the Board of Directors
J. Patout Burns, Jr.
Secretary
18
STERLING SUGARS, INC. (Solicited by the Board of Directors)
The undersigned hereby appoints J. Patout Burns, Jr., Craig P. Caillier
and Peter V. Guarisco and each of them, proxies with full power of
substitution, to represent and vote all shares of Common Stock of Sterling
Sugars, Inc. which the undersigned is entitled to vote at the Annual Meeting
of Stockholders of said corportation to be held in the Conference Room, St.
Mary Parish Library, 206 Iberia Street, Franklin, Louisiana on Monday,
November 22, 1999 at 10:00 a.m. and at any adjournment thereof (1) as
hereinafter specified upon the election of directors and (2) in their
disretion upon such other business as may properly come before the meeting
or any adjournment thereof.
(1)A VOTE FOR THE FOLLOWING NOMINEES IS RECOMMENDED BY THE BOARD OF DIRECTORS
Election of Directors
For all nominees listed below _______________
Withhold authority to vote for all nominees listed below _________
(Except as indicated to the contrary below)
Bernard E. Boudreaux, Jr., Dr. J. Patout Burns, Jr., Craig P. Caillier,
Peter V. Guarisco, Victor Guarisco, II, Rivers Patout and William S.
Patout, III
INSTRUCTION:
(To withhold authority to vote for any individual nominee, write that
nominee's name in the space provided below)
___________________________________________________________________________
(2)REINCORPORATION
FOR ________ AGAINST _________ ABSTAIN _________
All as set forth in the Notice and Proxy Statement for the meeting,
receipt of which is acknowledged
CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE
19
When properly executed and returned, this proxy will be voted in the manner
specified. If no manner is specified, the shares represented hereby will be
voted for election of the nominees named on the reverse hereof.
DATE____________________________,1999
_____________________________________
SIGNATURE OF HOLDER
NOTE: Please sign as your name appears
hereon. When signed as attorney-in-fact
executor, administrator, trustee or
guardian, please give your full title as
such. If a corporation, please sign in
full corporate name by authorized
officer. If a partnership, please sign
in full partnership name by authorized
person.
PLEASE MARK, DATE, SIGN AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES
20