HITOX
CORPORATION
of America
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 6, 1997
The Annual Meeting of Shareholders of Hitox Corporation of America, a
Delaware corporation, will be held at the Omni Marina Hotel, 707 N. Shoreline,
Corpus Christi, Texas in the Riviera I Room, (entrance level), on Tuesday, May
6, 1997, at 9:00 a.m., local time, for the following purposes:
1. To elect a board of seven (7) directors.
2. To ratify the appointment of Ernst & Young LLP as independent
auditors for 1997 by the Board of Directors.
3. To transact such other business as may properly come before
the meeting.
The Board of Directors has established the close of business on March 14,
19967, as the record date for determining shareholders entitled to notice of
and to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Elizabeth K. Morgan, Secretary
March 31, 1997
YOUR VOTE IS IMPORTANT
Even if you plan to attend the meeting,
we urge you to mark, sign and date the
enclosed proxy and return it promptly
in the enclosed envelope.
HITOX CORPORATION OF AMERICA
418 Peoples Street
Post Office Box 2544
Corpus Christi, Texas 78403
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement and accompanying proxy is furnished by Hitox
Corporation of America (hereinafter the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company to be used
at the Annual Meeting of Stockholders to be held at 9:00 a.m. (local time) on
May 6, 1997, at the Omni Marina Hotel, 707 N. Shoreline, Corpus Christi, Texas,
and at any adjournment thereof. This Proxy Statement and the enclosed proxy
were mailed on or about March 31, 1997.
The Company will bear the cost of soliciting the proxies. In addition
to being solicited by mail, proxies may be solicited by personal interview,
telephone and telegram by directors, officers and employees of the Company.
The Company expects to reimburse brokers or other persons for their reasonable
out-of-pocket expenses in forwarding proxy material to the beneficial owner.
Any proxy may be revoked at any time prior to its exercise by written
notice to the Secretary of the Company or by submission of another proxy
having a later date. No notice of revocation or later dated proxy, however,
will be effective until received by the Company at or prior to the Annual
Meeting. Mere attendance at the meeting will not of itself revoke the proxy.
Properly executed proxies in the accompanying form, received in due time and
not previously revoked, will be voted at the Annual Meeting or any
adjournment thereof as specified therein by the person giving the proxy, but
if no specification is made, the shares represented by the proxy will be
voted in favor of the proposals shown thereon.
Only stockholders of record at the close of business on March 14, 1997,
(the "Record Date") will be entitled to notice of and to vote at the Annual
Meeting. There were outstanding at the close of business on the Record Date
4,657,487 shares of the Company's Common Stock, each of which is entitled to
vote in person or by proxy. The Common Stock is the only class of capital
stock outstanding and entitled to vote at the Annual Meeting. The holders
of a majority of the total shares of Common Stock issued and outstanding and
entitled to vote at the meeting, whether present in person or represented by
proxy, will constitute a quorum for the transaction of business at the
Meeting. A quorum being present at the Annual Meeting, election of the
director nominees requires the affirmative vote of a plurality of the shares
present, in person or by proxy, at the Meeting, and approval of Proposal 2
requires the affirmative vote of at least a majority of the shares present,
in person or by proxy, at the Meeting. Neither the Company's Certificate of
Incorporation nor its By-Laws provide for cumulative voting rights.
Abstentions and broker non-votes are each counted to determine the number of
shares present at the meeting, and thus, are counted in establishing a
quorum. Broker non-votes will not be counted in determining the number of
shares voted for or against the proposed matters, and therefore will not affect
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the outcome of the vote. Abstentions on a particular item (other than the
election of directors) will be counted as present and entitled to vote for
purposes of any item on which the abstention is noted, thus having the effect
of a "no" vote as to that proposal. With regard to the election of directors,
votes may be cast in favor of or withheld from each nominee; votes that are
withheld will be excluded entirely from the vote and will have no effect.
The Annual Report to Stockholders covering the Company's fiscal year
ended December 31, 1996 including audited financial statements, is enclosed
herewith, but does not form any part of the material for solicitation of
proxies.
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to those persons
known to the Company who, as of December 31, 1996, own or may be deemed to
own beneficially more than five percent of the Common Stock of the Company.
Name and Address of Number of Percent
Beneficial Owner Shares Beneficially Owned(1) of Class
------------------- ---------------------------- --------
Megamin Ventures Sdn Bhd 1,353,000(2) 29.1%
41 Jalan Sultan Azlan Shah Utara
31400 Ipoh, Perak Malaysia
Estate of Stephen C. Clark, Jr. 217,763(3) 4.7%
c/o The Clark Estates Inc.
30 Wall Street
New York, NY 10005
Residuary Trust u/w of Stephen C. Clark, Jr. 144,996(3) 3.1%
c/o The Clark Estates Inc.
30 Wall Street
New York, NY 10005
Anne L. Peretz 492,261(3)(4) 10.6%
c/o The Clark Estates Inc.
30 Wall Street
New York, NY 10005
Residuary Trust u/w of Susan C. Twining 62,921(3)(5) 1.4%
c/o The Clark Estates Inc.
30 Wall Street
New York, NY 10005
Jane Forbes Clark II 241,839(3) 5.2%
c/o The Clark Estates Inc.
30 Wall Street
New York, NY 10005
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NAP & Co. 847,778(6) 15.4%
Pecks Management Partners, Ltd.
One Rockefeller Plaza
New York, NY 10020
Northman & Co. 199,107(6) 4.1%
Pecks Management Partners, Ltd.
One Rockefeller Plaza
New York, NY 10020
Fuelship & Co. 164,226(6) 3.4%
Pecks Management Partners, Ltd.
One Rockefeller Plaza
New York, NY 10020
(See following footnotes)
(l) Beneficial ownership as reported in the above table has been determined
in accordance with Rule 13d-3 promulgated under the Securities Exchange
Act of 1934, as amended.
(2) Megamin Ventures Sdn Bhd is an investment holding corporation organized
under the laws of Malaysia which provides management services. Mr. Keng
Kay Lim, a director of the Company, is the controlling shareholder of
Megamin Ventures Sdn Bhd and exercises sole voting power over these
shares, and therefore may be deemed to be the beneficial owner.
(3) The Estate of Stephen C. Clark, Jr., Residuary Trust u/w of Stephen C.
Clark, Jr., Mrs. Peretz, Ms. Clark and the Residuary Trust u/w of Susan
C. Twining may be deemed to be a "group" as that term is used in
Section 13d-3 of the Securities Exchange Act of 1934, as amended.
(4) Includes 30,216 shares held by the four children of Mrs. Peretz and
13,220 held by the Peretz Family Investments. Mrs. Peretz disclaims all
beneficial ownership in these 43,436 shares.
(5) Includes 7,932 shares held by the two surviving children of Mrs.
Twining. The Residuary Trust u/w of Susan C. Twining disclaims all
beneficial ownership in these 7,932 shares.
(6) NAP & Co., Northman & Co., and Fuelship & Co. of which Pecks Management
Partners, Ltd. serves as investment manager, may be deemed to be a "group"
as that term is used in Section 13d-3 of the Securities Exchange Act of
1934, as amended. The share amounts opposite each entity's name represent
a total 1,211,111 shares issuable upon exercise of warrants to purchase
1,111,111 shares of Common Stock issued on February 28, 1995, at an
exercise price of $4.50, and warrants to purchase an aggregate 100,000
shares issued on September 30, 1994, and February 28, 1995, having an
exercise price of $2.50 per share. Because Pecks Management Partners,
Ltd. serves as investment manager, it may be deemed to be a beneficial
owner of such shares, although it disclaims such beneficial ownership.
The address of Pecks Management Partners, Ltd, is One Rockefeller Plaza,
New York, New York 10020. See "Certain Transactions."
3
ELECTION OF DIRECTORS
The By-Laws of the Company provide that the Board of Directors shall
consist of not less than six (6). At the Annual Meeting, seven (7) directors
are to be elected to the Board of Directors, each to hold office until the
1998 Annual Meeting or until their successor is elected and qualifies. The
persons named as proxies in the enclosed proxy card, who have been
designated by the Board of Directors, unless otherwise instructed in such
proxy, intend to vote the shares represented by the proxy for the election
of the nominees listed in the table below for the office of director of the
Company. The nominees have been proposed by the Board of Directors. If any
such nominee should become unavailable for election, the persons named as
proxies intend to vote for such substitute nominee as may be proposed by the
Board of Directors, unless otherwise instructed in such proxy. No
circumstances are now known, however, that would prevent any of the nominees
from serving and the nominees have agreed to serve if elected.
The information appearing below with respect to the business experience during
the past five years of each nominee for director, directorships held and age
has been furnished by each director as of February 25, 1997. All of the
nominees are presently directors of the Company.
Director
Name and Principal Occupation Age Since
------------------------------- --- -------
ROBERT J. CRESCI 53 1992
Managing Director, Pecks Management Partners, Ltd.
A director of Bridgeport Machines, Inc.; Serv-Tech, Inc.;
Vestro Natural Foods, Inc.; Natures Elements, Inc.;
EIS International, Inc.; Garnet Resources Corp.;
Sepracor, Inc.; Olympic Financial, Ltd.; GeoWaste, Inc.;
HarCor Energy, Inc.; Meris Laboratories, Inc.
Film Roman, Inc.; Educational Medical, Inc. and several
private companies.
WILLIAM B. HAYES 71 1990
Chairman of the Board since September 1994.
Consultant and Investor.
THOMAS A. LANDSHOF 57 1994
President and Chief Executive Officer since August
1994. President of Consultants Group from April
1992 to August, 1994. Corporate Vice President
Lilly Industries, Inc. prior to 1990 until
April 1992.
KENG KAY LIM 60 1997
Chairman, Megamin Ventures Sdn Bhd and Investor.
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KEVIN S. MOORE 42 1992
Senior Vice President, The Clark Estates, Inc.
A director of Ducommun, Inc., PremiumWear, Inc.
and Golf-Technology Holding, Inc.
MICHAEL A. NICOLAIS 71 1982
Senior Managing Director, Carret & Co., Inc.
A director of Basin Exploration Co.
and of Southdown, Inc.
BERNARD A. PAULSON 68 1992
Chief Executive Officer, Inspection Group Inc.
Retired President of Koch Refining Company
with over 40 years experience with other
companies in the refining and petrochemical
industries, including Kerr-McGee Corporation.
Mr. Cresci was nominated to serve as a director pursuant to a Note
Purchase Agreement, dated June 15, 1992, between the Company and purchasers of
the Company's subordinated notes ("Notes"), NAP & Co., Northman & Co., and
Fuelship & Co. (the "Noteholders"). Pursuant to that agreement, the Company
has agreed to use its best efforts to include the Noteholders' designee, Mr.
Cresci, on the slate of nominees proposed by the Company for election to the
Board of Directors, and to solicit proxies in favor of such designee, together
with the other nominees in the Company-sponsored slate. Such obligation will
continue so long as the Noteholders hold at least 25% of the original aggregate
principal amount of the Notes, at least 25% of shares of common stock issuable
under warrants issued to the Noteholders (see "Certain Transactions") (the
"Warrant Stock"), or warrants to purchase at least 25% of the warrant stock.
Directors' Attendance
During the year ended December 31, 1996, there were four meetings of the
Board of Directors of the Company. No incumbent director attended fewer
than 100% of the aggregate of all meetings of the Board and of the Committees
of the Board on which such director served.
Directors' Compensation
Non-employee members of the Board of Directors are compensated by the
Company for board meetings attended in the amount of $1,000 and a quarterly
retainer of $1,500 with the chairman receiving an additional $500 per quarter.
All directors are reimbursed for their reasonable travel expenses incurred
in attending meetings of the Board or any Committee or otherwise in
connection with their service as a director. Additionally, compensation of
$500 is paid to the non-employee directors for each committee meeting
attended.
The 1990 Incentive Plan, approved at the May 18, 1990, Annual Meeting of
Shareholders provides that each non-employee director of the Company on the
first business date after each Annual Meeting of Shareholders of the Company,
beginning with the 1990 Annual Meeting of Shareholders, will automatically
5
be granted a non-qualified option for 2,500 shares of Common Stock under the
Plan. Each option so granted to a non-employee director will have an
exercise price per share equal to the fair market value of the common stock
on the date of grant of such option. Each such option will be fully
exercisable at the date of grant and will expire upon the tenth anniversary
of the date of grant. On May 8, 1996, Messrs. Cresci, Hayes, Moore,
Nicolais, and Paulson were each granted options to purchase 2,500 shares at
the per share exercise price of $3.50, none of which were exercised during
fiscal 1996.
Employee directors receive no additional compensation for service on the
Board of Directors or on Committees of the Board.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Officers, directors and greater than ten-percent stockholders are
required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file. Based solely on its review of the copies of
such forms received by it, or written representations from certain reporting
persons that no Forms 5 were required for those persons, the Company
believes that during the fiscal year ended December 3l, 1996, all filing
requirements applicable to its officers, directors and greater than ten
percent beneficial owners were complied with.
Audit Committee
The Audit Committee held one independent meeting and one meeting in
conjunction with the full board during the Company's fiscal year ended
December 31, 1996. The Audit Committee reviews the professional services
provided by the Company's independent auditors and the independence of such
auditors from management of the Company. The Committee also reviews the
scope of the examination of the financial statements by the independent
auditors, the annual financial statements of the Company and such other
matters with respect to accounting, auditing, and financial reporting
practices and procedures of the Company. The Committee is composed of two
outside Directors of the Company: Messrs. Hayes and Nicolais (Chairman).
Executive Committee
The Executive Committee's primary responsibilities are to review and
authorize actions required in the management of the business and affairs of the
Company, in instances where it is not practicable to convene the full Board.
Members of the Committee are Messrs. Cresci, Hayes, Landshof, and Moore
(Chairman). The Committee did not meet in 1996.
Compensation and Incentive Plan Committee
This Committee is composed entirely of disinterested non-employee directors
consisting of Messrs. Cresci, Moore (Chairman), and Paulson. The Committee met
once in 1996.
6
The Committee formulates and presents to the Board of Directors
recommendations as to the base salaries for all officers of the Company
based upon salary studies of companies of similar size and activity and
management recommendations. The Committee specifically reviews, approves,
and establishes the compensation for the President and Chief Executive
Officer. The Committee is authorized to select persons to receive awards
under the 1990 Incentive Plan, to determine the terms and provisions of the
awards, if any, the amount of the awards, and otherwise administer the Plan
to the full extent provided in the Plan. Except for the automatic annual
grants to non-employee directors described under "Directors' Compensation",
none of the members of the Committee are eligible to receive grants under
the 1990 Incentive Plan.
7
EXECUTIVE COMPENSATION
The following table sets forth information concerning cash compensation
paid by the Company to the President and Chief Executive Officer of the
Company for the year ended December 31, 1996:
Annual Compensation
Long Term
Name and Compensation All Other
Principal Position Year Salary($) Bonus($) Options/SARs(#)(3) Compensation($)
- ------------------ ---- --------- --------- ----------------- ----------------
Thomas A. Landshof 1996 $131,250 $29,302(5) -0- $1,988
President and CEO 1995 $129,087 $21,785(2) 150,000 $19,880(4)
1994(1) $49,520 -0- -0- $9,136(4)
(1) Mr. Landshof joined the Company as President and Chief Executive
Officer in August, 1994.
(2) $6,785 earned in fiscal year; deferred to 1996.
(3) In February 1995, Mr. Landshof was granted 150,000 options under the
1990 Incentive Plan at an exercise price of $2.625 exercisable over three
years at 75,000 options, 37,500 options and 37,500 options respectively.
(4) Reimbursement for relocation and temporary living expenses.
(5) $4,502 earned in fiscal year; deferred to 1997.
There were no options or SARs granted to the Chief Executive Officer during
1996.
The following table sets forth information concerning the exercise of
options by the Chief Executive Officer of the Company for the year
ended December 31, 1996, and the fiscal year-end value of unexercised options.
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
Number of Unexercised Value of Unexercised
Options/SARs at FY- In-the-Money Options/
Shares Acquired Value End (#) Exercisable/ SARs at FY-End ($)
Name or Exercised Realized Unexercisable Exercisable/Unexercisable
- ---- --------------- -------- --------------------- -------------------------
Thomas A. Landshof 0 0 112,500/37,500 $14,062/$4,688(1)
(1) Value is stated based on the closing price of $2.75 per share of
the Company's Common Stock on Nasdaq SmallCap Market on December 31,
1996, less exercise price of $2.625.
8
Security Ownership of Management
The following table sets forth the number of shares of the Company's Common
Stock beneficially owned by each director and nominee for director and all
directors and executive officers of the Company as a group as of December 31,
1996.
Amount
Beneficially Percent
Name of Individual or Group Owned (1) of Class
---------------------------- ------------ --------
Robert J. Cresci 1,222,986 (2)(3) 20.8%
William B. Hayes 67,500 (4) 1.4%
Thomas A. Landshof 116,900 (5) 2.5%
Keng Kay Lim 1,353,000 (6) 29.1%
Kevin S. Moore 1,172,280 (7)(8) 25.1%
Michael A. Nicolais 27,500 (9) <1%
Bernard A. Paulson 12,500 (8) <1%
All directors and executive officers as a group
(9 persons) 3,987,866 (10) 65.2%
(1) Unless otherwise indicated, each person has sole voting and investment
power over the shares indicated.
(2) Includes 847,778 shares issuable upon the exercise of warrants held by
NAP & Co., 199,107 shares issuable upon the exercise of warrants held by
Northman & Co., and 164,226 shares issuable upon the exercise of
warrants held by Fuelship & Co., of which Mr. Cresci exercises sole
voting power as Managing Director of Pecks Management Partners, Ltd.
(3) Includes options to acquire 11,875 shares that are subject to stock
options exercisable at or within sixty days of the Record Date.
(4) Includes 67,500 shares that are subject to stock options that are
exercisable at or within sixty days of the Record Date.
(5) Includes 112,500 shares that are subject to stock options that are
exercisable at or within sixty days of the Record Date.
(6) Consists of 1,353,000 shares held by Megamin Ventures Sdn Bhd, a Malaysian
corporation, of which Mr. Lim has controlling interest and exercises sole
voting power.
(7) Includes 1,159,780 shares held by the Estate of Stephen C. Clark, Jr.,
the Residuary Trust u/w of Stephen C. Clark, Jr., Anne L. Peretz, Jane
Forbes Clark II and the Residuary Trust u/w of Susan C. Twining that may
be deemed to be beneficially owned by Mr. Moore in accordance with Rule
13d-3 promulgated under the Securities Exchange Act of 1934, as amended.
Also included are: 30,216 shares held by the four children of Anne L.
Peretz, and 13,220 shares held by Peretz Family Investments over which
Mr. Moore exercises authority pursuant to power of attorney and 7,932
shares held by the two children of the late Mrs. Susan C. Twining. Mr.
Moore disclaims all beneficial ownership in these 1,159,780 shares. Mr.
Moore is Senior Vice President The Clark Estates, Inc., an entity that
acts on behalf of the Estate of Stephen C. Clark, Jr. Residuary Trust u/w
9
of Stephen C. Clark, Jr., Mrs. Peretz, Ms. Clark and the Residuary Trust
u/w of Susan C. Twining with respect to such shares.
(8) Includes 12,500 shares that are subject to stock options that are
exercisable at or within sixty days of the Record Date.
(9) Includes 17,500 shares that are subject to stock options that are
exercisable at or within sixty days of the Record Date.
(10) Includes 247,675 shares which officers and directors as a group have the
right to acquire pursuant to stock options and 1,211,111 shares that the
entities named in number (2) above have the right to acquire pursuant to
warrants which are exercisable at or within sixty days of the Record Date.
CERTAIN TRANSACTIONS
On June 15, 1992, the Company completed a Note Purchase Agreement in
which the Company authorized the issuance and delivery of convertible
subordinated notes (the "Notes") in an aggregate amount of up to $8.5 million.
The Company sold a principal amount of $5 million of such Notes to a group of
investors consisting of the NAP & Co., Northman & Co., and Fuelship & Co. The
Notes were convertible into shares of the Company's Common Stock at a
conversion price of $9.00 per share or 555,555 shares and, subject to an
adjusted conversion price of $7.50 and $6.00, if 1994 and 1995 earnings targets
were not met. The Company was in default under certain of its loan covenants
with its senior lending bank for the four quarters of 1994. Because of such
defaults, the Company was also in default of the Note Purchase Agreement. At
December 31, 1993, the Company was also in default under certain covenants
contained in the Note Purchase Agreement.
On September 30, 1994, the Company and the holders of the Notes entered
into an amendment of the Note Purchase Agreement pursuant to which such
holders agreed that upon an event of default under the Company's senior debt,
the Company could be prevented by its senior lender from making any payments
in respect of the Notes. The Company was in default on its senior debt from
June 1, 1994, until February 15, 1995. No payments had been made on the
Notes since December, 1993, by reason of the subordination provisions of the
Note Agreement, which precludes payment during a senior debt default. In
consideration for such amendment by the holders of the Notes, as of September
30, 1994, the Company issued to such holders warrants to purchase 50,000
shares of the Company's Common Stock at an exercise price of $2.50 per share.
During 1995, the Company made past due interest payments to the holders of the
Notes which were due June 15, 1994 and December 15, 1994 in the amount of
$262,500 each, plus interest.
On February 28, 1995, the Company and the holders of the Notes agreed to an
additional amendment of the Note Purchase Agreement. In consideration for such
amendment by the holders of the Notes, the Company issued to such holders
warrants to purchase an aggregate 50,000 shares of the Company's Common Stock
at an exercise price of $2.50 per share. This amendment provided for, among
other things, (i) a waiver of defaults under the Note Purchase Agreement
through December 31, 1996, (ii) the adjustment of certain financial covenants,
(iii) allowing the Company to prepay the Notes, in whole or in part, at any
time without penalty, and (iv) an extension of required repayments of principal
10
from September, 1996, to September, 1997, and the extension of the maturity
date from 1998 to 1999. The amendment also removed the conversion privilege of
the Notes. The conversion feature was replaced with warrants to purchase
1,111,111 shares of Common Stock (which is the number of shares into which
the Notes would have been convertible assuming a conversion price of $4.50)
at an exercise price of $4.50. The warrants will expire one year after the
maturity date of the Notes in 2000.
On June 25, 1996, the Company completed the sale of 1 million shares of
Common Stock at $4.00 per share to Megamin Ventures Sdn Bhd, a Malaysian
corporation. The proceeds were used to prepay $4,000,000 in outstanding
principal on the Notes held by the above mentioned investors, at par on July 1,
1996. On July 31, 1996, the Company prepaid the remaining $1,000,000 balance
with proceeds from a term loan with NationsBank of Texas, N.A. The Noteholders
continue to hold warrants to purchase 1,211,111 shares of Common Stock.
Following the completion of the sale of 1 million shares of Common Stock to
Megamin Ventures Sdn Bhd, the Company in February 1997 elected Keng Kay Lim to
the Company's Board of Directors, and Keng Kay Lim has been nominated for re-
election at the Annual Meeting to serve as a director for a term ending at the
1998 Annual Meeting. Mr. Lim, through Megamin Ventures Sdn Bhd, is also the
controlling shareholder of Malaysian Titanium Corporation Sdn Bhd ("MTC"), the
Company's principal raw materials supplier. During 1995 and 1996, the Company
paid MTC $2,964,000 and $4,266,250, respectively, for raw materials
(principally synthetic rutile), under a supply contract that extends through
1999, and will purchase raw materials from MTC in 1997.
RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE
YEAR ENDED DECEMBER 31, 1997
Upon the recommendation of the Audit Committee, the Board of Directors
has approved the retention of Ernst & Young LLP, certified public accountants,
to serve as independent auditors to audit the accounts of the Company for the
year ending December 31, 1997, subject to ratification of such approval by
the Company's stockholders. Ernst & Young LLP served as independent auditors
for the Company for the year ended December 31, 1996.
Representatives of Ernst & Young LLP will be present at the Annual Meeting
and will have an opportunity to make a statement if they desire to do so and to
respond to appropriate questions.
On September 19, 1995, management of the Company, as directed by the Board
of Directors, engaged the accounting firm of Ernst & Young LLP as its
independent certified public accountants and as the Company's independent
auditors, and dismissed the firm of Deloitte & Touche LLP, which was the
principal independent certified public accountant.
In connection with its audits for the two fiscal years ended December 31,
1994 and 1993, respectively, and any subsequent interim period through the date
of dismissal of Deloitte & Touche LLP, there were no disagreements with
11
Deloitte & Touche LLP on any matters of accounting principles, financial
statement disclosure, or auditing scope or procedures or any reportable events.
Deloitte & Touche LLP's report on the Company's financial statements for
the two fiscal years ended December 31, 1994 and December 31, 1993 contained no
adverse opinion or disclaimer of opinion. Deloitte & Touche LLP's report for
the fiscal year ended December 31, 1993 contained an uncertainty paragraph
regarding the Company's ability to continue as a going concern.
The decision to change independent certified public accountants was
recommended by the Company's audit committee and was approved by the Company's
Board of Directors.
DATE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the next Annual
Meeting to be held in May, 1998 must be received by the Secretary of the
Company at its principal executive offices at 418 Peoples Street, (P. O. Box
2544), Corpus Christi, TX 78403 for inclusion in the proxy statement and form
of proxy relating to that meeting no later than December 1, 1997.
OTHER BUSINESS
The Board knows of no other business to be brought before the Annual
Meeting. If, however, other business should properly come before the Annual
Meeting, the persons named in the accompanying proxy will vote the proxy as in
their discretion they may deem appropriate, unless directed in the proxy to do
otherwise.
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