Quanex Corporation
1900 West Loop South
Suite 1500
Houston, TX 77027
(713) 961-4600
January 27, 1995
Dear Fellow Shareholder:
You are cordially invited to attend the Company's Annual Meeting of
Shareholders to be held at 8:30 a.m., C.S.T., on Thursday, March 2, 1995, at the
JW Marriott Hotel, Houston Galleria, 5150 Westheimer, Houston, Texas.
This year you will be asked to vote in favor of six proposals. The
proposals concern the election of three directors, an amendment to the 1989
Non-Employee Director Stock Option Plan, an amendment to the 1988 Stock Option
Plan, an amendment to the 1987 Non-Employee Director Stock Option Plan, an
amendment to the 1978 Employee Qualified and Non-Qualified Stock Option Plan,
and the appointment of independent auditors for fiscal 1995. These matters are
more fully explained in the attached proxy statement, which you are encouraged
to read.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU APPROVE THESE PROPOSALS AND
URGES THAT YOU RETURN YOUR SIGNED PROXY CARD AT YOUR EARLIEST CONVENIENCE,
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
Thank you for your cooperation.
Sincerely,
Carl E. Pfeiffer
Chairman of the Board
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 2, 1995
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Quanex
Corporation, a Delaware corporation (the "Company"), will be held at the JW
Marriott Hotel, Houston Galleria, 5150 Westheimer, Houston, Texas, on March 2,
1995, at 8:30 a.m., C.S.T., for the following purposes:
(1) To elect three directors to serve until the Annual Meeting of
Shareholders in 1998;
(2) To consider and act upon a proposal to amend the Company's 1989
Non-Employee Director Stock Option Plan;
(3) To consider and act upon a proposal to ratify an amendment to the
Company's 1988 Stock Option Plan;
(4) To consider and act upon a proposal to amend the Company's 1987
Non-Employee Director Stock Option Plan;
(5) To consider and act upon a proposal to ratify an amendment to the
Company's 1978 Employee Qualified and Non-Qualified Stock Option
Plan;
(6) To consider and act upon a proposal to ratify the appointment of
Deloitte & Touche LLP as independent auditors for the fiscal year
ending October 31, 1995; and
(7) To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Information with respect to the above matters is set forth in the Proxy
Statement that accompanies this Notice.
The Board of Directors has fixed the close of business on January 23,
1995, as the record date for determining shareholders entitled to notice of
and to vote at the meeting. A complete list of the shareholders entitled to
vote at the meeting will be maintained at the Company's principal executive
offices, will be open to the examination of any shareholder for any purpose
germane to the meeting during ordinary business hours for a period of ten days
prior to the meeting, and will be produced at the time and place of the
meeting during the whole time thereof.
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. YOUR
DESIGNATION OF A PROXY IS REVOCABLE AND WILL NOT AFFECT YOUR RIGHT TO VOTE IN
PERSON IF YOU FIND IT CONVENIENT TO ATTEND THE MEETING.
The Company's Annual Report to Shareholders for the year ended October 31,
1994, accompanies this Notice.
By order of the Board of Directors,
MICHAEL W. CONLON, Secretary
Houston, Texas
January 27, 1995
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 2, 1995
This Proxy Statement and the accompanying form of proxy are to be first
mailed on or about January 27, 1995, to all holders of record on January 23,
1995, of the Common Stock, $.50 par value ("Common Stock"), of Quanex
Corporation, a Delaware corporation (the "Company"), and are furnished in
connection with the solicitation of proxies by the Board of Directors of the
Company to be used at the Annual Meeting of Shareholders to be held at 8:30
a.m., C.S.T., on Thursday, March 2, 1995, and at any adjournment or
adjournments thereof. Shares of Common Stock represented by any unrevoked
proxy in the enclosed form, if such proxy is properly executed and is received
prior to the meeting, will be voted in accordance with the specifications made
on such proxy. Proxies on which no specification has been made will be voted
for the election as directors of the nominees listed herein and in favor of
proposals 2, 3, 4, 5, and 6. Proxies are revocable by written notice to the
Secretary of the Company at the address of the Company set forth below, or by
delivery of a later dated proxy, at any time prior to their exercise. Proxies
may also be revoked by a shareholder attending and voting in person at the
meeting.
The Common Stock is the only class of securities of the Company that is
entitled to vote at the meeting. As of the close of business on January 23,
1995, the record date for determining shareholders who are entitled to receive
notice of and to vote at the meeting, there were 13,429,533 shares of Common
Stock issued and outstanding. Each share is entitled to one vote. The presence
at the meeting, in person or by proxy, of the holders of a majority of shares
of Common Stock is necessary to constitute a quorum.
The cost of soliciting proxies will be borne by the Company. Solicitation
may be made personally or by mail, telephone or telegraph by officers,
directors and regular employees of the Company (who will not receive any
additional compensation for any solicitation of proxies), as well as by the
firm of Beacon Hill Partners, Inc., which has been retained by the Company to
assist in the solicitation for a fee of approximately $4,500. The Company will
also reimburse brokerage houses and other custodians, nominees and fiduciaries
for their reasonable expenses for sending proxy materials to the beneficial
owners of Common Stock. The mailing address of the Company's principal
executive office is 1900 West Loop South, Suite 1500, Houston, Texas 77027.
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MATTERS TO COME BEFORE THE MEETING
(1) ELECTION OF THREE DIRECTORS
Three directors are to be elected at the meeting. The Company's
Certificate of Incorporation and Bylaws both provide that the Board of
Directors shall be divided into three classes as nearly equal in number as
possible, with the terms of office of the classes expiring at different times.
The terms of office of three directors, Messrs. Broad, Walker, and Pfeiffer
expire at the 1995 Annual Meeting. Messrs. Broad and Walker will not stand for
re-election. The proposed nominees for director for a term expiring at the
1998 Annual Meeting are Carl E. Pfeiffer, Vincent R. Scorsone and Donald G.
Barger, Jr. The respective terms of directors expire on the dates set forth
below.
<TABLE>
<CAPTION>
NOMINEES FOR ELECTION FOR TERMS DIRECTOR
EXPIRING AT THE 1998 ANNUAL MEETING PRINCIPAL OCCUPATION AGE SINCE
<S> <C> <C> <C>
Carl E. Pfeiffer-------------------- Chairman of the Board, Quanex Corporation 64 1966
Vincent R. Scorsone----------------- Retired since 1994 from Alcoa Aluminum, a 59 --
manufacturer of aluminum products (Pittsburgh,
Pennsylvania)
Donald G. Barger, Jr.--------------- Vice President of Finance and Chief Financial Officer 51 --
of Worthington Industries, Inc., a manufacturer of
steel products (Columbus, Ohio)
DIRECTORS WHOSE TERMS EXPIRE AT THE 1997 ANNUAL MEETING
John D. O'Connell................... Chairman, Executive Advisory Board of GES Exposition 64 1981
Services, a Dial Corp. company, serving the
convention/exposition industry (Houston, Texas)
Robert C. Snyder.................... President and Chief Executive Officer, Quanex 61 1986
Corporation
DIRECTORS WHOSE TERMS EXPIRE AT THE 1996 ANNUAL MEETING
Donald J. Morfee.................... International consultant (Sarasota, Florida) 70 1976
Gerald B. Haeckel................... Financial consultant (Scottsville, Virginia) 65 1978
Michael J. Sebastian................ Executive Vice President Cooper Industries, Inc., 64 1991
manufacturer of electrical, automotive and industrial
equipment (Houston, Texas)
</TABLE>
Messrs. Pfeiffer, Scorsone and Barger have indicated a willingness to
serve if elected. If a nominee should be unable to serve or for good cause
will not serve, and if any other person is nominated, the persons designated
on the accompanying form of proxy will have discretionary authority to vote or
refrain from voting in accordance with their judgement on such other nominee
unless authority to vote on such matter is withheld. The nominees receiving a
plurality of votes cast at the meeting will be elected directors. Abstentions
and broker nonvotes will not be treated as a vote for or against any
particular director and will not affect the outcome of the election of
directors.
Each of the above persons, except for Messrs. Snyder, O'Connell, Scorsone
and Barger, has been employed in the principal occupation shown above or in a
similar one with the same employer for more than five years. Mr. Snyder has
been employed by the Company for over five years, having served as Chief
Executive Officer since October 1992, President since October 1989 and Chief
Operating Officer from 1984 to 1993. For more than five years prior to its
acquisition by GES Exposition Services in 1993, Mr. O'Connell was President
and Chief Executive Officer of United Exposition Service Co., Inc. Mr.
Scorsone was employed by Alcoa from 1960 until his retirement in 1994. His
position prior to retirement was Executive Vice President chairman counsel.
Mr. Scorsone currently serves on the board of the Indspec Chemical Company.
Mr. Barger was appointed to his present position with Worthington Industries,
Inc., in September 1993 and was employed by
2
B. F. Goodrich Company, manufacturer of automobile tires and related products,
Akron, Ohio from 1973 to 1993. Each person has been previously elected a
director by the shareholders of the Company, except for Messrs. Scorsone and
Barger.
Pursuant to the Company's Bylaws, the Board of Directors has established
several committees, including an Executive Committee, an Audit Committee, a
Management Development Committee, a Nominating Committee and a Salary
Administration, Incentive Compensation and Stock Option Committee (the
"Compensation Committee"). During the fiscal year ended October 31, 1994, the
Board of Directors met five times. During the fiscal year ended October 31,
1994, the Audit Committee met two times, the Compensation Committee met seven
times, and the Executive Committee, the Management Development Committee and
the Nominating Committee did not meet. All directors attended more than 75% of
the combined number of Board meetings and meetings of committees of which they
are members.
Messrs. Haeckel, Morfee, Sebastian, Pfeiffer and Walker are the current
members of the Audit Committee. The Audit Committee recommends to the Board
the selection and discharge of the Company's independent auditors, reviews the
professional services performed by the auditors, the plan and results of their
auditing engagement, and the amount of fees charged for audit and non-audit
services by the auditors, and evaluates the Company's system of internal
accounting controls. In addition, this Committee is responsible for directing
and supervising any special investigations that it deems necessary.
Messrs. Morfee, Sebastian and O'Connell are the current members of the
Compensation Committee. This Committee recommends to the Board the
compensation to be paid to the Company's directors, officers and key
employees, recommends to the Board the employment, promotion and replacement
of senior management personnel, and is responsible for administering the
Company's Executive Incentive Compensation Plan, its stock option plans, and
other employee benefit programs that require director participation.
Messrs. Pfeiffer, Haeckel, Morfee, Snyder and O'Connell are the current
members of the Executive Committee, which acts on behalf of the Board between
regularly scheduled meetings of the Board of Directors.
Messrs. O'Connell, Pfeiffer, Walker and Broad are the current members of
the Nominating Committee. This Committee is responsible for recommending to
the Board nominees for election as directors of the Company. In performing
this function, the Committee will consider nominees recommended by
shareholders of the Company, provided such recommendations are received before
November 1 of each year with respect to the annual shareholders' meeting that
is held thereafter. Recommendations should be addressed to the chairman of the
Nominating Committee and sent to him at the Company's principal executive
office.
Messrs. Morfee, Pfeiffer, Sebastian, O'Connell and Snyder are the current
members of the Management Development Committee. This committee is responsible
for recommending development and succession of the executive management of the
Company.
The Company's Bylaws provide that, subject to certain limitations
discussed below, any shareholder entitled to vote in the election of directors
generally may nominate one or more persons for election as directors at the
meeting. The Company's Bylaws also provide that a shareholder must give
written notice of such shareholder's intent to make such nomination or
nominations, either by personal delivery or by United States mail, postage
prepaid, to the Secretary of the Company not later than (i) with respect to an
election to be held at an Annual Meeting of Shareholders, 90 days prior to the
anniversary date of the date of the immediately preceding Annual Meeting, and
(ii) with respect to an election to be held at a Special Meeting of
Shareholders for the election of directors, or otherwise, the close of
business on the tenth day following the date on which a written statement
setting forth the date of such meeting is first mailed to shareholders
provided that such statement is mailed no earlier than 120 days prior to the
date of such meeting. Notwithstanding the foregoing, if
3
an existing director is not standing for re-election to a directorship which
is the subject of an election at such meeting or if a vacancy exists as to a
directorship which is the subject of an election, whether as a result of
resignation, death, an increase in the number of directors, or otherwise, then
a shareholder may make a nomination with respect to such directorship at any
time not later than the close of business on the tenth day following the date
on which a written statement setting forth the fact that such directorship is
to be elected and the name of the nominee proposed by the Board of Directors
is first mailed to shareholders. Each notice of a nomination from a
shareholder shall set forth: (a) the name and address of the shareholder who
intends to make the nomination and of the person or persons to be nominated;
(b) a representation that the shareholder is a holder of record of stock of
the Company entitled to vote at such meeting and intends to appear in person
or by proxy at the meeting to nominate the person or persons specified in the
notice; (c) a description of all arrangements or understandings between the
shareholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by the shareholder; (d) such other information regarding each nominee
proposed by such shareholders as would be required to be included in a proxy
statement filed pursuant to the Securities Exchange Act of 1934 and the rules
and regulations thereunder (or any subsequent provisions replacing such Act,
rules or regulations); and (e) the consent of each nominee to serve as a
director of the Company if so elected. The presiding officer of the meeting
may refuse to acknowledge the nomination of any person not made in compliance
with the foregoing procedure. Subject to the exceptions discussed above,
written notice of a shareholder's intent to nominate a person for director at
the 1996 Annual Meeting must be given on or before December 3, 1995.
Directors (other than Mr. Snyder who is an officer of the Company) are
currently paid an annual fee of $17,000 and a fee of $900 for attendance at
each meeting of the Board and any committee on which they serve. In addition,
Mr. Pfeiffer receives a fee of $25,000 per year for serving as Chairman of the
Board. Messrs. Haeckel and Morfee receive an additional $2,000 annually for
services as the Chairman of the Audit Committee and the Compensation
Committee, respectively. Travel and lodging expenses incurred by directors to
attend such meetings are also paid by the Company. Non-employee directors are
the beneficiaries of life insurance policies provided by the Company at a cost
ranging from approximately $1,900 to $5,373 per director for fiscal 1994.
At the Annual Meeting of Shareholders held on February 23, 1988, the
shareholders approved the Quanex Corporation Non-Employee Director Plan, which
provides for the granting of options to non-employee directors to purchase up
to an aggregate amount of 100,000 shares of Common Stock. The Non-Employee
Director Plan initially provided that each non-employee director of the
Company as of the 1987 Annual Meeting and each future non-employee director as
of his election as a director of the Company would be granted an option to
purchase 10,000 shares of Common Stock at a price per share of Common Stock
equal to the fair market value of the Common Stock as of the date of the
grant. During 1988, the Non-Employee Director Plan was amended to provide that
the grant of options thereunder to future non-employee directors would occur
on the date of the first anniversary of their election rather than upon their
election. Options granted under the Non-Employee Director Plan become
exercisable in one-third increments maturing cumulatively on each of the first
through third anniversaries of the date of the grant and must be exercised no
later than ten years from the date of grant. No options may be granted under
the plan after June 22, 1997.
At the Annual Meeting of Shareholders held on February 22, 1990, the
shareholders of the Company approved the Quanex Corporation 1989 Non-Employee
Director Stock Option Plan (the "1989 Plan"), which provides for the granting
to non-employee directors of options to purchase an aggregate of 210,000
shares of Common Stock. The 1989 Plan provides for grants of options with
respect to 3,000 shares of Common Stock to all non-employee directors on each
October 31 on which the director serves as a director of the Company. Options
granted under the 1989 Plan may be exercised by the holder thereof in whole or
in part at any time or from time to time commencing six months after the date
of grant and must be exercised no later than ten years from the date of grant.
No options may be granted under the 1989 Plan after December 5, 1999.
4
The Company also has in effect a Non-Employee Director Retirement Plan,
which provides non-employee directors who have served on the Board of
Directors of the Company for at least ten full years an annual payment after
retirement from the Board equal to the base annual director retainer fee
received by the director at the time such director ceases to serve on the
Board (currently $17,000). Under the Non-Employee Director Retirement Plan,
the Company will continue to make an annual payment for a period equal to the
aggregate length of time the director served on the Board of Directors as a
Non-Employee Director, unless earlier terminated due to (i) the death of the
director, (ii) the expiration of two years following the termination of the
Non-Employee Director Retirement Plan or (iii) the director serving as a
director, officer or employee of a competitor of the Company.
(2) - (5) APPROVAL OF AMENDMENTS TO THE STOCK OPTION PLANS
The Board of Directors of the Company has approved, upon recommendation of
the Compensation Committee, an amendment to each of the Company's 1988 Stock
Option Plan (the "1988 Plan"), 1978 Employee Qualified and Non-Qualified Stock
Option Plan (the "1978 Plan"), 1989 Non-Employee Director Stock Option Plan
(the "1989 Plan") and 1987 Non-Employee Director Stock Option Plan (the "1987
Plan"). The amendments to the 1989 Plan and 1987 Plan were approved subject to
stockholder approval and the amendments to the 1988 Plan and the 1978 Plan
provide that they will not be effective as to any person subject to Section 16
of the Securities Exchange Act of 1934 unless such amendment is ratified by
the shareholders.
The amendment to each of the foregoing plans generally provides that the
termination of employment of a holder of an option under such plan by reason
of such holder's death, permanent disability or, under certain circumstances,
retirement will no longer accelerate the termination date of such option and
such option will continue to vest following such termination of employment.
The amendments to the 1989 Plan and 1987 Plan also provide that a director may
be eligible to retire for purposes of such plans upon the completion of the
earlier of six years service and two full three-year terms of office.
The purpose of the amendments is to provide additional incentive to the
holders of options under the plans for the benefit of the Company and its
stockholders by eliminating the current provisions of the plans that force the
optionee (or optionee's executors, administrators or devisees) to exercise his
or her option within a short period of time following the optionee's
retirement, disability or death and by assuring the optionee that the benefits
contemplated to be provided by the options granted under the Company's stock
option plans will not be reduced as a result of the death, disability or
retirement of an optionee prior to the vesting of the optionee's options. In
recommending the amendments to the Board of Directors of the Company, the
Compensation Committee expressed its belief that the present limitations on
the times during which options may be exercised after retirement, death or
disability result in some loss of incentive for management to focus on the
long term and sometimes unfairly denies management, or their heirs, the
benefit of management's policies which result in a long term benefit to the
Company occurring after retirement, death or disability.
The amendments will not affect the exercise period for any option that is
an incentive stock option under the Internal Revenue Code of 1986, as amended
(the "Code"), or provide for the extension of the exercise period or continued
vesting of options in the event of a voluntary termination of the employment
relationship of an optionee with the Company other than in the context of
retirement, death or disability. In addition, the amendments will not increase
the number of shares of Common Stock that may be subject to options under any
of the plans or otherwise extend the term of any option.
The following is a summary of certain features of each of the stock option
plans, as they are proposed to be amended.
5
1978 EMPLOYEE QUALIFIED AND NON-QUALIFIED STOCK OPTION PLAN AND 1988 STOCK
OPTION PLAN ("EMPLOYEE OPTION PLANS")
The 1978 Plan permitted and the 1988 Plan permits the grant of any form of
stock option to eligible employees and the grant of stock appreciation rights
in tandem with such options. The Employee Option Plans are each administered
by the Compensation Committee. The individuals who were eligible to
participate in the 1978 Plan and who are eligible to participate in the 1988
Plan are such full-time key employees, including officers and
employee-directors, of the Company, or any parent or subsidiary corporation of
the Company, as the Compensation Committee may determine from time to time
(approximately 39 persons at October 31, 1994).
Under the 1978 Plan and the 1988 Plan, 675,000 shares and 750,000 shares,
respectively, of Common Stock were initially reserved for issuance upon
exercise of options, which may be granted at option prices equal to or greater
than the fair market value of the Common Stock on the date of grant. At
October 31, 1994, options to purchase a total of 20,629 shares and 481,672
shares were outstanding under the 1978 Plan and the 1988 Plan, respectively.
The outstanding options under the 1978 Plan expire on various dates from April
22, 1997, to October 26, 1998, and the option prices range from $4.1875 to
$14.00. The outstanding options under the 1988 Plan expire on various dates
from July 31, 1999, to October 13, 2004, and the option prices range from
$9.25 to $25.625. The aggregate market value of the Common Stock subject to
options under the 1978 Plan and the 1988 Plan as of January 16, 1995, was
$446,102 and $10,416,157, respectively.
Under the terms of the 1978 Plan, no further options may be granted to
employees thereunder. Options granted under the 1988 Plan may be either
Incentive Stock Options or Non-statutory Stock Options (each as defined in
such plan). In general, options may be exercised under the 1988 Plan for a
period of up to ten years from the date of grant (with such vesting
requirements as may be set by the Compensation Committee). Subject to certain
limitations, and in the sole discretion of the Compensation Committee, the
payment of the exercise price of options granted under the 1988 Plan may be
made with shares of stock owned by the optionee.
No option granted under the Employee Option Plans may be exercisable after
the expiration of ten years from the date of grant. In addition, (i) the
holder of an option under the 1978 Plan and the holder of a Non-statutory
Stock Option under the 1988 Plan who severs the employment relationship
between the Company and the optionee for any reason other than his death,
disability or retirement, and (ii) the holder of an Incentive Stock Option
under the 1988 Plan who severs the employment relationship between the Company
and the optionee for any reason other than his death or disability, will be
entitled to exercise his option only (i) in respect to the number of shares
that the optionee would have been entitled to purchase had the optionee
exercised the option on the date of such severance of employment and (ii)
during the time period commencing with the severance of employment and ending
one day prior to the expiration of three months following the date of such
severance. The foregoing provisions were not modified by the amendments to the
Employee Option Plans.
If the employment relationship with the Company of a holder of an
Incentive Stock Option under the 1988 Plan is terminated by reason of death or
disability, then the optionee (or his executors, administrators or devisees in
the case of death) will be entitled to exercise the option (i) in respect of
the number of shares that the optionee would have been entitled to purchase
had the optionee exercised the option on the date of termination and (ii)
during the time period commencing with the termination and ending one year
following the date of the termination. The foregoing provision was not
modified by the amendment to the 1988 Plan. There are no outstanding Incentive
Stock Options under the 1978 Plan.
If the employment relationship with the Company of a holder of a
Non-statutory Stock Option under the Employee Option Plans is terminated by
reason of death, disability or retirement, then the optionee (or his
executors, administrators or devisees in the case of death) will be entitled
to exercise the option following such termination and such option will
continue fully in effect and the option will continue to vest notwithstanding
the termination of employment. Prior to the amendment of the
6
Employee Option Plans, upon the death, disability or retirement of an
optionee, the optionee (or his executors, administrator or devisees) could
have exercised such option (i) in respect of the number of shares that the
optionee would have been entitled to purchase had the optionee exercised the
option on the date of termination and (ii) during the time period commencing
with the termination and ending one year following the date of such
termination.
Under current interpretations of the Code, the grant of an option to a
participant under either of the Employee Option Plans will not result in any
income tax consequences to the participant. Generally, the exercise of an
Incentive Stock Option under the 1988 Plan will not result in any income tax
consequences to a participant if the Incentive Stock Option is exercised by
the participant within a specified period. A participant will recognize income
at the date of exercise of a Non-statutory Stock Option under the 1988 Plan or
an option under the 1978 Plan on the difference between (i) the fair market
value of the shares acquired pursuant to the exercise of the option and (ii)
the exercise price of the option. The Company anticipates that it will be
entitled to a deduction in the same amount as the income recognized by a
participant due to the exercise of an option.
1987 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN AND 1989 NON-EMPLOYEE DIRECTOR
STOCK OPTION PLAN ("DIRECTOR OPTION PLANS")
The 1987 Plan and the 1989 Plan initially provided for the granting to
non-employee directors of the Company (currently seven) options to purchase up
to an aggregate of 100,000 shares and 210,000 shares, respectively, of Common
Stock.
The 1987 Plan provides that on the first anniversary following each
non-employee director's initial election as a director, such director will be
granted an option to purchase 10,000 shares of Common Stock at a price per
share of Common Stock equal to the fair market value of the Common Stock as of
the date of grant. Options granted under the 1987 Plan become exercisable in
one-third increments maturing cumulatively on each of the first through third
anniversaries of the date of grant and must be exercised no later than ten
years from the date of grant. At October 31, 1994, options to purchase a total
of 20,000 shares were outstanding under the 1987 Plan. The outstanding options
under the 1987 Plan expire from June 23, 1997 to December 3, 2002, and the
option prices range from $6.00 to $20.50. The aggregate market value of Common
Stock subject to options under the 1987 Plan as of January 16, 1995, was
$432,500.
The 1989 Plan provides for the granting to non-employee directors of
options with respect to 3,000 shares of Common Stock on each October 31, on
which the director serves as a director of the Company. Options granted under
the 1989 Plan may be exercised by the holder in whole or in part at any time
or from time to time commencing six months after the date of grant and must be
exercised no later than ten years from the date of grant. At October 31, 1994,
options to purchase an aggregate of 87,000 shares were outstanding under the
1989 Plan. The options expire on various dates from December 6, 1999 to
October 31, 2004 and the option prices range from $10.50 to $24.875. The
aggregate market value of Common Stock subject to options under the 1989 Plan
as of January 16, 1995, was $1,881,375.
A director who ceases to be a member of the Company's Board of Directors
for any reason other than his death, disability or retirement may exercise
options he holds granted under the Director Option Plans (i) in respect to the
number of shares that he would have been entitled to purchase had he exercised
the option on the date he ceased to be a member of the Board of Directors and
(ii) during the period commencing upon such cessation of service and
terminating three months after such cessation. The Director Option Plans are
silent as to what constitutes "retirement". The proposed amendment to the
Director Option Plans would provide that an optionee will be treated as having
retired from the Company's Board of Directors if he or she completes either
two full three-year terms or six years of service on the Company's Board of
Directors.
Under the Director Option Plans, as proposed to be amended, if the holder
of an option ceases to be a member of the Company's Board of Directors because
of his death, permanent disability or
7
retirement, then such optionee (or his executors, administrators or devisees)
will continue to be able to exercise such option notwithstanding such
cessation of service and each such option will continue fully in effect and
the option will continue to vest notwithstanding the termination of the Board
membership. Currently, the Director Option Plans provide that an optionee (or
his executor, administrators or devisees) may exercise such option (i) in
respect of the number of shares that the optionee would have been entitled to
purchase had the optionee exercised the option on the date of such termination
of Board membership and (ii) during the time period commencing with the date
of such termination of Board membership and ending one year following such
date.
Under current interpretations of the Code, the grant of an option to a
participant under either of the Director Option Plans will not result in any
income tax consequences to the participant. A participant will recognize
income at the date of exercise of an option under the Director Option Plans on
the difference between (i) the fair market value of the shares acquired
pursuant to the exercise of the option and (ii) the exercise price of the
option. The Company anticipates that it will be entitled to a deduction in the
same amount as the income recognized by a participant due to the exercise of
an option.
VOTE REQUIRED AND RECOMMENDATION FOR APPROVAL
The Board of Directors of the Company has adopted the amendment to each of
the Employee Option Plans and Director Option Plans. However, the amendment to
Director Option Plans and the amendment to the Employee Option Plans as to any
person subject to Section 16 of the Securities Exchange Act of 1934 will not
be effective unless the holders of at least a majority of the outstanding
shares of Common Stock vote "FOR" the approval (or ratification, as the case
may be) of each amendment.
The enclosed form of proxy provides a means for shareholders to vote for
the approval of the amendment to each plan, to vote against the approval of
the amendment to each plan or to abstain from voting with regard to approval
of the amendment to each plan. Each properly executed proxy received in time
for the meeting will be voted as specified therein. If a shareholder executes
and returns a proxy but does not specify otherwise, the shares represented by
such shareholder's proxy will be counted for approval of the amendment to each
plan. Because the vote required for approval of the amendments requires the
affirmative vote of a majority of the outstanding shares of Common Stock,
abstentions and unvoted positions in brokerage accounts with respect to each
proposal will have the same effect as a vote against such proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE
AMENDMENT TO EACH OF THE 1989 PLAN, THE 1988 PLAN, THE 1987 PLAN AND THE 1978
PLAN.
(6) RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, upon recommendation of its Audit Committee, has
appointed the firm of Deloitte & Touche as independent auditors for the year
ending October 31, 1995, subject to ratification of the shareholders at the
1995 Annual Meeting. Representatives of Deloitte & Touche LLP are expected to
attend the meeting, will be afforded an opportunity to make a statement if
they desire to do so, and will be available to respond to appropriate
questions by shareholders.
The affirmative vote of the holders of a majority of the shares of Common
Stock present in person or by proxy at the meeting is necessary for
ratification of the selection of Deloitte & Touche. Because abstentions and
broker nonvotes will be considered in the determination of the number of
shares present in person or by proxy in the Annual Meeting, abstentions and
broker nonvotes will have the same effect as a vote against ratification.
8
FURTHER INFORMATION
PRINCIPAL SHAREHOLDERS
The following table sets forth as of November 30, 1994, the beneficial
ownership of each person who is known by the Company to be the beneficial
owner of more than five percent of the Company's Common Stock. Such
information is based upon information provided to the Company by such persons.
AMOUNT AND
NATURE OF
BENEFICIAL
NAME AND ADDRESS OWNERSHIP PERCENT
FMR Corportion, 82 Devonshire Street,
Boston, MA 02109................... 1,463,729(1) 10.9
Wellington Management Company, 75
State Street,
Boston, MA 02109................... 1,192,600(2) 8.9
(1) Sole voting power over 77,629 shares and sole dispositive power over all
shares.
(2) Shares voting power for 860,106 shares.
The following table sets forth as of November 30, 1994, the number and
percentage of beneficial ownership of shares of Common Stock and the Preferred
Stock for each current director and nominee for director of the Company, the
executive officers named in the compensation table below and all officers and
directors as a group.
DEPOSITARY
PREFERRED
SHARES SHARES OF COMMON STOCK
BENEFICIALLY BENEFICIALLY OWNED(1)
OWNED AS OF NOVEMBER 30, 1994
AS OF ----------------------
NOVEMBER 30, NUMBER PERCENTAGE
NAME 1994(2) OF SHARES OF SHARES
Fred J. Broad........................ 0 26,000 *
Donald J. Morfee..................... 2,000 22,389(3) *
Gerald B. Haeckel.................... 0 25,200 *
John D. O'Connell.................... 500 15,452 *
Vernon E. Oechsle.................... 0 20,012 *
Carl E. Pfeiffer..................... 0 142,266 1.1
Michael J. Sebastian................. 1,000 13,459 *
Robert C. Snyder..................... 10,840 144,390 1.1
Robert L. Walker..................... 0 11,401 *
Vincent R. Scorsone.................. 0 0 *
Donald G. Barger, Jr................. 0 0 *
Ted F. Olt........................... 9,089 55,342 *
Wayne M. Rose........................ 0 46,487 *
Robert V. Kelly, Jr.................. 0 78,144 *
All officers and directors as a group
(16 persons)....................... 23,429 748,940(4) 5.4
* Less than 1.0%
(1) Unless otherwise indicated, directors have sole voting and investment
power with respect to the shares they own. The beneficial ownership of
shares of Messrs. Broad, Haeckel, Kelly, Morfee, O'Connell, Olt, Pfeiffer,
Rose, Sebastian, Snyder, and Walker includes 22,000, 12,000, 43,332,
9,000, 6,000, 38,332, 60,000, 41,666, 9,666, 84,199, and 9,000, shares,
respectively, that may be acquired through exercise of stock options. The
beneficial ownership of shares of Messrs. Morfee, Sebastian, Snyder, Olt
and O'Connell and all officers and directors as a group includes 1,587,
793, 8,603, 396, 7,213 and 11,379 shares, respectively, that may be
acquired through conversion of shares of Preferred Stock. The beneficial
ownership of shares of Messrs. Snyder and Oechsle includes 7,331 and 4,412
shares, respectively, of Restricted Stock.
(2) Each Depositary Preferred Share represents 1/10th of a share of Preferred
Stock.
(3) Includes 4,905 shares owned by Mr. Morfee's wife as to which beneficial
ownership is disclaimed.
(4) Includes 453,461 shares that may be acquired through the exercise of
outstanding stock options. Also includes 7,331, 4,412, 2,720 and 2,691
shares of restricted stock for Messrs. Snyder, Oechsle, Rose and Kelly,
respectively, and 22,400 shares of restricted stock for all officers and
directors as a group.
9
EXECUTIVE OFFICERS
Set forth below is certain information concerning the present executive
officers of the Company, each of whom serves at the pleasure of the Board of
Directors. There is no family relationship between any of these individuals or
any of the Company's directors.
NAME AND AGE OFFICE AND LENGTH OF SERVICE
Robert C. Snyder; 61................. President since 1989 and Chief Executive
Officer since 1992
Vernon E. Oechsle; 52................ Executive Vice President and Chief
Operating Officer since 1993
Wayne M. Rose; 48.................... Vice President and Chief Financial
Officer since 1987
James C. Hill; 47.................... Vice President since 1984 (also Group
President since 1983)
Robert V. Kelly, Jr.; 56............. Vice President since 1979 (also Group
President since 1982)
*T. F. Olt; 59....................... President of Nichols-Homeshield
since 1989
*Patrick H. Wannell; 55.............. President of LaSalle Steel Company
since 1991
Joseph K. Peery; 55.................. Vice President -- Human Resources
since 1984
Viren M. Parikh; 52.................. Controller since 1993
* Although Messrs. Olt and Wannell are not executive officers of the Company,
each performs a policymaking function for the Company. Mr. Olt in his
capacity as the President of the Company's Nichols-Homeshield Division and,
as the result of policy changes effected in June 1994, Mr. Wannell in his
capacity as President of the Company's LaSalle Steel Company subsidiary.
Accordingly, for purposes of this Proxy Statement, each is considered to be
an executive officer of the Company.
Mr. Olt recently determined that a Form 4 filed by him in May 1992
incorrectly reflected that he acquired 1,000 shares of Convertible
Exchangeable Preferred Stock of the Company instead of the 1,300 shares
actually acquired.
Messrs. Rose, Hill, Olt, Peery, and Kelly have been principally employed
in the positions shown above for more than five years. Mr. Snyder has been
with the Company for more than five years and has held various operational
positions, including Chief Operating Officer, Group President and Executive
Vice President, President of the Company's former Viking Metallurgical
subsidiary and General Manager of the Company's former Atlantic Tube Division.
Mr. Snyder was named Chief Executive Officer of the Company on October 1,
1992. Mr. Oechsle was named Chief Operating Officer of the Company on August
1, 1993. Prior to that Mr. Oechsle was Executive Vice President of the
Automotive Sector of Allied Signal since December 1990 and Group Vice
President of Dana Corporation since January 1985. Mr. Wannell has been with
the Company in the capacity shown above since 1991. Prior to his present
position Mr. Wannell was Vice President Sales and Marketing for LaSalle Steel
Company. Mr. Parikh has been with the Company for more than five years and
from November 1, 1983, served as Tube Group Controller until April 1, 1993
when he was named Quanex Corporation Controller.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
The Compensation Committee (the Committee) of your Board of Directors is
pleased to present its annual report to shareholders on executive
compensation. This report summarizes the responsibilities of the Committee,
the compensation policy and objectives that guide the development and
administration of the executive compensation program, each component of the
program, and the basis on which the compensation for the Chief Executive
Officer, corporate officers and other key executives was determined for the
fiscal year ended October 31, 1994.
10
During the fiscal year, the Committee was comprised of the following Board
members, all of whom were non-employee directors of the Company: Donald J.
Morfee, Chairman, John D. O'Connell, and Michael J. Sebastian. The Committee's
responsibilities are, among other things, to oversee the development and
administration of the compensation program for corporate officers and key
executives, and administer the executive annual incentive and stock plans.
During the fiscal year, the Committee met six times and completed a detailed
evaluation of the compensation program.
EXECUTIVE COMPENSATION PHILOSOPHY
The objective of the executive compensation program is to create strong
financial incentive for corporate officers and key executives to achieve
demanding performance plans by offering them the opportunity to earn above
average compensation when the Company achieves above average results. To
achieve this objective, the Company emphasizes variable incentive pay. The
total compensation program includes base salary, annual cash incentive
compensation, longer term stock based grants and awards, and executive
benefits.
On an annual basis the Committee, in conjunction with executive
management, assesses the effectiveness of the overall program and compares the
compensation levels of its executives to the compensation received by
executives in similar companies with comparable positions. The primary market
comparisons are made to a broad group of manufacturing companies, adjusted for
size and job responsibilities. This group is broader than the peer companies
included in the Relative Market Performance graph presented elsewhere in this
proxy and is used because it is more representative of the executive market in
which the Company competes for talent and provides a consistent and stable
market reference from year to year. As a secondary validation, however, the
pay levels of the peer companies included in the Relative Market Performance
graph are compared against the broad manufacturing group and have been found
to be comparable. Data sources include national survey databases, proxy
disclosures, and general trend data provided by consultants.
Variable incentives, both annual and longer term, are important components
of the program and are used to link pay and performance results. Longer term
incentives are designed to create a heavy emphasis on the increase in
shareholder value as measured by share price appreciation and dividends. The
annual incentive plans measure a combination of corporate and division
profitability using Return on Common Equity ("ROE") and Return on Investment
("ROI") and cash flow. Executives with Company-wide responsibilities are
primarily measured on overall Company results compared to the results of the
broad group of manufacturing companies noted above. Executives with specific
business unit responsibilities are measured on both Company-wide and their
business unit results. Variable incentive awards and performance standards are
calibrated such that total compensation will generally approximate the market
75th percentile when Company performance results are at the 75th percentile.
Section 162(m) of the Internal Revenue Code of 1986, as amended, currently
imposes a $1 million limitation on the deductibility of certain compensation
paid to each of the Company's five highest paid executives. Excluded from this
limitation is compensation that is "performance based". For compensation to be
performance based it must meet certain criteria, including being based on
predetermined objective standards approved by shareholders. In general, the
Company believes that compensation relating to options granted under its
current employee stock option plans should be excluded from the $1 million
limitation calculation. Compensation relating to the Company's restricted
stock and incentive compensation awards do not currently qualify for exclusion
from the limitation, given the discretion that is provided to the Committee
under the Company's plans in establishing the performance goals for such
awards. The Committee believes that maintaining the discretion to evaluate the
performance of the Company's management is an important part of its
responsibilities and inures to the benefit of the Company's shareholders. The
Committee, however, intends to take into account the potential application of
Section 162(m) with respect to incentive compensation awards and other
compensation decisions made by it in the future. The Committee
11
does not currently anticipate that any of the Company's executives will
receive compensation in fiscal 1995 that would not be deductible as a result
of the application of Section 162(m).
Following is a discussion of each of the principal components of the
executive total compensation program.
BASE SALARY
The base salary program targets the median of the primary comparison
group. Each executive is reviewed individually on an annual basis. Salary
adjustments in 1994 were based on the individual's experience and background,
performance during the prior year, the general movement of salaries in the
marketplace, and the Company's financial position. Due to these factors, an
executive's base salary may be above or below the median at any point in time.
ANNUAL INCENTIVE COMPENSATION
The Committee administers the Executive Incentive Compensation Plan
("EICP") for its corporate officers and selected key executives. The goal of
the EICP is to reward participants in proportion to the performance of the
Company and/or the business unit for which they have direct responsibility,
and their individual contributions to the Company's success.
During 1994, incentive compensation under the EICP was awarded to each of
the executives named in the cash compensation table. The EICP relies heavily
on predetermined, objective performance measures. For 1994, the performance
measures included cash flow to revenue ratio against plan, and return on
common equity and return on investment, both compared to an industry peer
group established at the beginning of the fiscal year. Each participant has a
discretionary component. Target performance is calibrated at the 75th
percentile of the peer companies. If this performance level is achieved, the
resulting incentive awards, in combination with base salary, are targeted at
the 75th percentile of the market. The executive total cash compensation
levels for 1994 were consistent with Company-wide performance results.
LONGER TERM STOCK BASED COMPENSATION
The goal of the Company's stock based incentive plans is to directly link
a significant portion of the executive's compensation to the enhancement of
shareholder value. In addition, longer term incentives encourage management to
focus on longer term development and prosperity of the Company, in addition to
annual operating profits.
The Company regularly grants stock options to its key executives based on
competitive multiples of base salary. Senior executives typically receive a
higher multiple and, as a result, have a greater portion of their total
compensation linked to the longer term success of the Company. In determining
the appropriate grant multiples, the Company compares itself to publicly
traded companies of comparable size for whom stock is a significant part of
total compensation. The ultimate value of any stock option is based solely on
the increase in value of the shares over the grant price. Options typically
are granted at fair market value on the date of grant, have a term of ten
years, and vest over a three year period. During fiscal 1994, the Committee
granted options to purchase shares of Common Stock to each of the executives
named in the cash compensation table consistent with this policy.
In 1994, the Company also awarded its officers restricted shares which
vest over an eight year period. The vesting period may be accelerated
(performance vesting) to as little as three years if certain thresholds
relating to total shareholder returns are met. These awards are intended to
increase the actual share ownership among senior executives, and encourage
retention of executive talent. Restricted stock awards are not made on a
regular basis.
12
EXECUTIVE BENEFITS
The Company believes that it is critical in attracting and retaining top
caliber executives to provide comprehensive benefits that address the unique
circumstances of executives. In particular, limitations imposed on the
benefits payable from qualified welfare and retirement plans give rise to the
need for supplemental non-qualified plans to replace the benefits lost due to
these limitations and provide a mechanism for recruiting and retaining long
service executives. The Company provides corporate officers with supplemental
retirement and life insurance benefits.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Chief Executive Officer, Mr. Robert Snyder, participates in the
executive compensation program described in this report.
In 1994, Mr. Snyder's base salary was increased from $378,000 to $415,000
based on market comparisons to the primary comparison group.
For 1994, Mr. Snyder received an annual incentive award of $293,000.
Sixty-six percent of Mr. Snyder's incentive award was based on objective
performance measures (cash flow, ROE, and ROI) and thirty-four percent was
based on a discretionary evaluation by the Committee. Factors that were
considered in determining the discretionary component of this award included
his performance in achieving significant improvements in profitability and
actions taken in 1994 to diversify and expand the Company's markets,
manufacturing capacity and customer base, which the Committee believes will
have positive long term impact on revenues and profitability of the Company.
In 1994, Mr. Snyder received stock options for 48,000 shares of Common
Stock with an exercise price of $25.625 per share (fair market value on the
date of grant). In addition, Mr. Snyder was awarded 7,331 shares of restricted
stock which will vest in eight years unless accelerated based on total return
to shareholders.
Compensation Committee
Donald J. Morfee, Chairman
John D. O'Connell
Michael J. Sebastian
13
<PAGE>
The following table sets forth information concerning the cash
compensation and additional incentive compensation paid by the Company to the
Chief Executive Officer and to each of its four most highly compensated
executive officers for each of the last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------------
AWARDS
ANNUAL COMPENSATION ----------------------- PAYOUTS
----------------------------------------- -------
(E) (F)
OTHER RESTRICTED (H)
(A) (C) (D) ANNUAL STOCK (G) LTIP
NAME AND PRINCIPAL (B) SALARY BONUS<F4> COMPENSATION<F5> AWARD(S)<F6> OPTIONS/ PAYOUTS
POSITION YEAR ($) ($) ($) ($) SARS(#) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Robert C. Snyder, 1994 $ 396,516 $ 293,000 0 151,202 48,000 0
Chief Executive Officer 1993 378,000<F2> 106,000 0 0 37,600 0
1992 290,000 62,790 0 0 40,000 0
Vernon E. Oechsle, 1994 275,016 172,000 0 90,998 28,000 0
Executive Vice President 1993 65,000<F3> 0 0 0 46,800 0
and Chief Operating Officer
T.F. Olt, 1994 205,000 53,000 0 0 15,000 0
President of 1993 205,000 0 0 0 12,000 0
Nichols-Homeshield(1) 1992 200,000 33,920 0 0 20,000 0
Wayne M. Rose, 1994 192,000 112,000 0 56,100 15,000 0
Vice President and 1993 187,000 43,000 0 0 12,000 0
Chief Financial Officer 1992 175,000 34,976 0 0 20,000 0
Robert V. Kelly, Jr., 1994 190,000 115,000 0 55,502 15,000 0
Vice President and 1993 185,000 74,000 0 0 12,000 0
MacSteel President 1992 175,000 52,286 0 0 20,000 0
<CAPTION>
(I)
(A) ALL OTHER
NAME AND PRINCIPAL COMPENSATION<F7>
POSITION ($)
<S> <C>
Robert C. Snyder, $ 3,750
Chief Executive Officer 5,513
5,438
Vernon E. Oechsle, 3,750
Executive Vice President 0
and Chief Operating Officer
T.F. Olt, 13,325
President of 10,281
Nichols-Homeshield(1) 12,992
Wayne M. Rose, 4,529
Vice President and 4,614
Chief Financial Officer 4,810
Robert V. Kelly, Jr., 4,243
Vice President and 4,833
MacSteel President 5,330
<FN>
<F1>Although Mr. Olt is not an executive officer of the Company, he performs a
policymaking function for the Company as the President of the Company's
Nichols-Homeshield Division. Accordingly, for purposes of this Proxy
Statement, he is considered to be an executive officer of the Company.
<F2>First full year as Chief Executive Officer.
<F3>Joined the Company on August 1, 1993.
<F4>Annual bonus amounts are earned and accrued during the fiscal years
indicated and paid in the following year.
<F5>The dollar value of perquisites and other personal benefits were less than
the lesser of either $50,000 or 10 percent of the total of annual salary
and bonus for each named officer and therefore has been excluded.
<F6>Awards consist of restricted common stock valued at the market closing
price on the date of grant. Dividends are paid on the restricted shares to
the same extent as paid on the Common Stock. At the end of fiscal 1994,
Messrs. Snyder, Oechsle, Rose and Kelly respectively held 7,331, 4,412,
2,720, and 2,691 shares of restricted stock valued at $182,359, $109,749,
$67,660 and $66,939 based on the October 31, 1994 closing price of
$24.875.
<F7>Represents matching contributions by the Company to defined contribution
plans.
</TABLE>
14
<PAGE>
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR<F1>
<CAPTION>
INDIVIDUAL
GRANTS
- -------------------------------------------------------------------------------------------------------- GRANT DATE
(C) VALUE
% OF TOTAL -------------
OPTIONS/
(B) SARS (D) (F)
OPTIONS/ GRANTED TO EXERCISE GRANT
SARS EMPLOYEES OR BASE (E) DATE
(A) GRANTED(1) IN FISCAL PRICE EXPIRATION PRESENT
NAME (#) YEAR ($/SHARE) DATE VALUE ($)<F2>
<S> <C> <C> <C> <C> <C>
Robert C. Snyder................................. 48,000 24.1% $ 25.625 10-13-04 $ 568,800
Vernon E. Oechsle................................ 28,000 14.1 25.625 10-13-04 331,800
T. F. Olt........................................ 15,000 7.5 25.625 10-13-04 177,750
Wayne M. Rose.................................... 15,000 7.5 25.625 10-13-04 177,750
Robert V. Kelly, Jr.............................. 15,000 7.5 25.625 10-13-04 177,750
<FN>
<F1>All stock options granted in fiscal 1994 become exercisable in 33 1/3%
increments maturing cumulatively on each of the first through third
anniversaries of the date of grant and must be exercised no later than ten
years from the date of grant.
<F2>Calculated using the Black-Scholes option pricing model. The calculation
assumes volatility of 0.352, a risk free interest rate of 7.9%, an annual
dividend yield of 2.19%, a 10-year option term, and option grants at
$25.625 per share. The actual value, if any, an executive may realize will
depend on the excess of the stock price over the exercise price on the
date the option is exercised. There is no assurance the value realized by
an executive will be at or near the value estimated by the Black-Scholes
model.
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
(E)
(D) VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
(B) (C) AT FY-END (#) AT FY-END ($)
(A) SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Robert C. Snyder................... -0- $-0- 84,199/86,401 $ 645,465/$209,073
Vernon E. Oechsle.................. 10,000 44,850 5,600/]59,200 26,600/ 215,400
T. F. Olt.......................... -0- -0- 38,332/29,668 285,241/ 83,009
Wayne M. Rose...................... -0- -0- 41,666/29,668 368,498/ 83,009
Robert V. Kelly, Jr................ -0- -0- 43,332/29,668 370,366/ 83,009
</TABLE>
15
<PAGE>
ANNUAL RETIREMENT BENEFIT EXAMPLES AT AGE 65
YEARS OF SERVICE
--------------------------------------------
REMUNERATION 15 20 25 30 OR OVER
$125,000........................ $ 51,563 $ 68,750 $ 85,938 $ 100,000
$150,000........................ 61,875 82,500 103,125 120,000
$175,000........................ 72,188 96,250 120,313 140,000
$200,000........................ 82,500 110,000 137,500 160,000
$225,000........................ 92,813 123,750 154,688 180,000
$250,000........................ 103,125 137,500 171,875 200,000
$300,000........................ 123,750 165,000 206,250 240,000
$350,000........................ 144,375 192,500 240,625 280,000
$400,000........................ 165,000 220,000 275,000 320,000
$450,000........................ 185,625 247,500 309,375 360,000
$500,000........................ 206,250 275,000 343,750 400,000
$550,000........................ 226,875 302,500 378,125 440,000
$600,000........................ 247,500 330,000 412,500 480,000
$650,000........................ 268,125 357,500 446,875 520,000
$700,000........................ 288,750 385,000 481,250 560,000
The above retirement benefit examples are subject to deduction for
benefits under Social Security. Benefits provided under the Company's pension
plans are determined on a life annuity basis but optional forms of benefits
are available. Compensation used for the Company's pension plans is
essentially the individual's cash compensation plus deferrals under the 401(k)
Savings Plan and is that compensation shown as "Salary" and "Bonus" in the
Summary Compensation Table. The Company's Salaried Employees' Pension Plan
uses an average of the five highest consecutive calendar years compensation
and the Company's Supplemental Benefit Plan uses an average of the highest 36
consecutive months of compensation.
As of November 1, 1994, the individuals (other than Mr. Olt who
participates in a separate defined contribution plan) named in the Summary
Compensation Table had the following years of service under the Company's
pension plans: R.C. Snyder -- 15; V.E. Oechsle -- 1; W.M. Rose -- 12; R.V.
Kelly, Jr. -- 17.
16
RELATIVE MARKET PERFORMANCE PRESENTATION
The following graph compares the Company's cumulative total stockholder
return for the last five years with the cumulative total return of the
Standard & Poors 500 Composite Stock Index (the "S & P 500") and the Company's
industry peer group. The Company changed its peer group in fiscal 1994 to
reflect changes in products and markets resulting primarily from divestitures.
During 1993, the Company sold its Viking Metallurgical Subsidiary and its
Bellville Tube Division. The current peer goup is comprised of: Alcan
Aluminum, Ltd., Alcoa, Armco Inc., Birmingham Steel Corp., Carpenter
Technology, CasTech Aluminum Group, Inc., Chaparral Steel Company, Inland
Steel Industries, Keystone Consolidated Industries, Inc., Laclede Steel Co.,
Lukens Inc., N S Group, Inc., Nucor Corp., Oregon Steel Mills, Inc., Reynolds
Metals Co., Roanoke Electric Steel Corp., and Worthington Industries. The 1993
peer group was comprised of: Alcan Aluminum, Ltd., Alcoa, Armco Inc.,
Birmingham Steel Corp., Carpenter Technology, Chaparral Steel Company,
Kennametal Inc., Keystone Consolidated Industries, Inc., Laclede Steel Co.,
Lukens Inc., Modine Manufacturing Co., Oregon Steel Mills, Inc., Precision
Castparts Corp., Reynolds Metals Co., Roanoke Electric Steel Corp., Trinity
Industries, and Worthington Industries.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
1989 1990 1991 1992 1993 1994
Quanex .............. 100 70 153 131 144 184
S&P 500 ............. 100 93 124 136 156 162
1994 Peer Group ..... 100 86 103 108 128 156
1993 Peer Group ..... 100 85 104 103 116 143
17
OTHER MATTERS AND SHAREHOLDER PROPOSALS
At the date of this proxy statement, management is not aware of any
matters to be presented for action at the meeting other than those described
above. However, if any other matters should come before the meeting, it is the
intention of the persons named as proxies in the accompanying proxy card to
vote in accordance with their judgement on such matters. Any proposals of
shareholders to be presented at the Annual Meeting to be held in 1996 that are
eligible for inclusion in the Company's proxy statement for the meeting under
applicable rules of the Securities and Exchange Commission must be received by
the Company no later than September 29, 1995.
The Company's Bylaws provide that, for business to be properly brought
before an Annual Meeting by a shareholder, the shareholder must have given
timely notice thereof in writing to the Secretary of the Company. To be
timely, a shareholder's notice must be delivered to or mailed and received at
the principal executive offices of the Company, not less than 60 days nor more
than 180 days prior to the anniversary date of the immediately preceding
Annual Meeting; provided, however, that in the event that the date of the
Annual Meeting is more than 45 days later than the anniversary date of the
immediately preceding Annual Meeting, notice by the shareholder to be timely
must be received not later than the close of business on the tenth day
following the earlier of the date on which a written statement setting forth
the date of the Annual Meeting was mailed to shareholders or the date on which
it is first disclosed to the public. A shareholder's notice to the Secretary
must set forth with respect to each matter the shareholder proposes to bring
before the Annual Meeting (a) a brief description of the business desired to
be brought before the Annual Meeting, (b) the name and address, as they appear
on the Company's books, of the shareholder making such proposal, (c) the class
and number of shares of the Company which are beneficially owned by the
shareholder and (d) any material interest of the shareholder in such business.
In addition, if the shareholder's ownership of shares of the Company, as set
forth in the notice is solely beneficial, documentary evidence of such
ownership must accompany the notice. Assuming the 1996 Annual Meeting is held
within 45 days of the anniversary date of the 1995 Annual Meeting, a
shareholder notice relating to the 1996 Annual Meeting must be received no
earlier than September 4, 1995, and no later than January 2, 1996.
Houston,Texas
January 27, 1995
18
APPENDIX A
Form of Proxy (Front)
PROXY
QUANEX CORPORATION
PROXY SOLICITED BY BOARD OF DIRECTORS
IF NO SPECIFICATION IS MADE, PROXIES WILL VOTE FOR THE ELECTION OF THE
NOMINEES NAMED ON THE REVERSE SIDE OR ANY SUBSTITUTE FOR THEM AND FOR ITEMS 2
THROUGH 6, AS RECOMMENDED BY THE BOARD OF DIRECTORS.
The undersigned shareholder of Quanex Corporation hereby appoints Donald J.
Morfee and Robert C. Snyder, and either of them, proxies of the undersigned with
power of substitution to vote, as designated on the reverse side of this card,
all shares which the undersigned would be entitled to vote at the Annual Meeting
of Shareholders to be held on March 2, 1995, at 8:30 A.M., C.S.T., or at any
adjournment or adjournments thereof, on the matters described in the enclosed
Proxy Statement dated January 27, 1995.
(Continued and to be signed on the other side)
Form of Proxy (Back)
/X/ PLEASE MARK YOUR
VOTES AS THIS
---------------------- -------------------------
COMMON DIVIDEND REINVESTMENT
Item 1 - Election of directors.
Nominees: FOR ALL NOMINEES WITHHOLD AUTHORITY
Carl E. Pfeiffer LISTED OR ANY TO VOTE FOR ALL
Vincent R. Scorsone SUBSTITUTES NOMINEES LISTED
Donald G. Barger, Jr. / / / /
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE STRIKE A LINE
THROUGH HIS NAME.
FOR AGAINST ABSTAIN
Item 2 - Approval of the Amendment to the 1989 / / / / / /
Non-Employee Director Stock Option Plan.
Item 3 - Ratifying the Amendment to the Company's / / / / / /
1988 Stock Option Plan.
Item 4 - Approval of the Amendment to the Company's / / / / / /
1987 Non-Employee Director Stock Option Plan.
Item 5 - Ratifying the Amendment to the Company's / / / / / /
1978 Stock Option Plan.
Item 6 - Ratifying the selection of Deloitte & Touche / / / / / /
as independent auditors for the fiscal
year ending October 31, 1995.
Item 7 - To vote in their discretion upon any other / / / / / /
business which may properly come before
the meeting.
WILL ATTEND / /
MEETING
Signature(s) ______________________ Date ______________________ , 1995
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
APPENDIX B
AMENDMENT TO
THE QUANEX CORPORATION
1978 STOCK OPTION PLAN
THIS AGREEMENT by Quanex Corporation (the "Company"),
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company previously
adopted the plan agreement known as the "Quanex Corporation 1978 Stock Option
Plan" (the "Plan"); and
WHEREAS, the Board of Directors of the Company retained the
right in Section 13 of the Plan to amend the Plan from time to time; and
WHEREAS, the Board of Directors of the Company has approved
the following amendment to the Plan;
NOW, THEREFORE, the Board of Directors of the Company agrees
that Section 10 of the Plan is hereby amended, effective with respect to both
Options outstanding on the date of the adoption of this Amendment and all
Options issued in the future under this Plan, as follows:
10. EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH. If, prior to
the date that any portion of an option shall first become
exercisable, the participant's employment with the Company and its
subsidiaries shall be terminated, with or without cause, for any
reason other than the death, permanent disability, or retirement of
the participant, the participant's right to exercise any portion of
that option shall terminate and all rights thereunder shall cease.
On or after the date that any portion of an option shall first
become exercisable, to the extent such rights shall not previously
have been exercised, the option shall terminate and become null and
void on the last day of the three month period commencing on the date
of termination of the participant's employment, whether voluntary or
involuntary, whether with or without cause, for any reason other than
the death, permanent disability, or retirement of the participant,
during which period the participant shall be entitled to exercise the
option in respect of the number of shares that the participant would
have been entitled to exercise such option had the participant
exercised the option right on the date of such termination of
employment.
In the event of the death, permanent disability, or retirement
of a holder of an option, before the date of expiration of such
option, such option shall continue fully in effect, including
provisions providing for subsequent vesting of such option, and shall
terminate on the date of expiration of the option notwithstanding any
provision to the contrary in the optionee's option agreement. After
the death of the optionee, his executors, administrators or any
person or persons to whom his option may be transferred by will or by
the laws of descent and distribution, shall have the right, at any
time prior to the termination of the option to exercise the option,
in respect to the number of shares that the optionee would have been
entitled to exercise if he were still alive.
In any event, a participant's option will terminate on the
last day of the ten year period commencing on the date of grant.
This Amendment shall be effective as of December 8, 1994;
provided that it shall not be effective as to any Option held by a person that
is subject to the reporting and liability provisions of Section 16(a) or Section
16(b) of the Securities Exchange Act of 1934 unless and until the Amendment is
approved by the holders of a majority of the outstanding shares of Common Stock
of the Company.
Dated: October 20, 1994
<PAGE>
AMENDMENT TO
THE QUANEX CORPORATION
1987 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
THIS AGREEMENT by Quanex Corporation (the "Company"),
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company previously
adopted the plan agreement known as the "Quanex Corporation Employee Stock
Option and Restricted Stock Plan" (the "Plan"); and
WHEREAS, the Board of Directors of the Company retained the
right in Section 13 of the Plan to amend the Plan from time to time; and
WHEREAS, the Board of Directors of the Company has approved
the following amendment to the Plan;
NOW, THEREFORE, subject to the requirement set forth below,
the Board of Directors of the Company agrees that Paragraph 9 of the Plan is
hereby amended, effective with respect to both Options outstanding on the date
of the adoption of this Amendment and all Options issued in the future under
this Plan, as follows:
9. Termination of Employment or Death of Optionee. Except as
may be otherwise expressly provided herein all Options shall
terminate on the earlier of the date of the expiration of the Option
or the date that is three months after the optionee ceases to be a
member of the Company's Board of Directors, for any reason other than
the death, permanent disability or, retirement of the optionee,
during which period the optionee shall be entitled to exercise the
Option in respect of the number of shares that the optionee would
have been entitled to purchase had the optionee exercised the Option
on the date the optionee ceased to be a member of the Company's Board
of Directors.
In the event the optionee ceases to be a member of the
Company's Board of Directors because of his death, permanent
disability or retirement from the Board of Directors of the Company,
before the date of expiration of his Option, such Option shall
continue fully in effect, including provisions providing for
subsequent vesting of such Option, and shall terminate on the date of
expiration of the Option notwithstanding any provision to the
contrary in the optionee's Option Agreement. After the death of the
optionee, his executors, administrators or any person or persons to
whom his Option may be transferred by will or by the laws of descent
and distribution, shall have the right, at any time prior to the
termination of the Option to exercise the Option, in respect to the
number of shares that the optionee would have been entitled to
exercise if he were still alive.
In any event, an Option shall terminate on the tenth
anniversary of the date of grant of such Option.
For purposes of this Paragraph 9, an Optionee will be treated
as having retired from the Company's Board of Directors if the
Optionee shall, at the time the Optionee ceases to be a member of the
Board of Directors of the Company, have served at least two full
three-year terms of office as a director of the Company or six years
of service as a director of the Company.
This Amendment shall be effective as of December 8, 1994, but
shall be subject to the approval of the holders of a majority of the outstanding
shares of Common Stock of the Company. If such approval is not obtained by
December 31, 1995, this Amendment shall be null and void and of no force or
effect.
Dated: October 20, 1994
<PAGE>
AMENDMENT TO
THE QUANEX CORPORATION
1988 STOCK OPTION PLAN
THIS AGREEMENT by Quanex Corporation (the "Company"),
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company previously
adopted the plan agreement known as the "Quanex Corporation 1988 Stock Option
Plan" (the "Plan"); and
WHEREAS, the Board of Directors of the Company retained the
right in Section 18 of the Plan to amend the Plan from time to time; and
WHEREAS, the Board of Directors of the Company has approved
the following amendment to the Plan;
NOW, THEREFORE, the Board of Directors of the Company agrees
that Paragraph 12 of the Plan is hereby amended, effective with respect to both
Non-statutory Options outstanding on the date of the adoption of this Amendment
and all Non-statutory Options issued in the future under this Plan, as follows:
12. Termination of Employment or Death of Optionee. Except as
may be otherwise expressly provided herein with respect to an Option
that is a Non-statutory Stock Option, all Options shall terminate on
the earlier of the date of the expiration of the Option or one day
less than three months after the date of severance, upon severance of
the employment relationship between the Company and the optionee,
whether with or without cause, for any reason other than the death,
disability or, in the case of Non-statutory Stock Options only,
Retirement of the optionee, during which period the optionee shall be
entitled to exercise the Option in respect of the number of shares
that the optionee would have been entitled to purchase had the
optionee exercised the Option on the date of such severance of
employment. Whether authorized leave of absence, or absence on
military or government service, shall constitute severance of the
employment relationship between the Company and the optionee shall be
determined by the Committee at the time thereof. In the event of
severance because of the disability of the holder of any Incentive
Stock Option while in the employ of the Company and before the date
of expiration of such Incentive Stock Option, such Incentive Stock
Option shall terminate on the earlier of such date of expiration or
one year following the date of such severance because of disability,
during which period the optionee shall be entitled to exercise the
Incentive Stock Option in respect to the number of shares that the
optionee would have been entitled to purchase had the optionee
exercised the Incentive Stock Option on the date of such severance
because of disability. In the event of the death of the holder of any
Incentive Stock Option while in the employ of the Company and before
the date of expiration of such Incentive Stock Option, such Incentive
Stock Option shall terminate on the earlier of such date of
expiration or one year following the date of death. After the death
of the optionee, his executors, administrators or any person or
persons to whom his Incentive Stock Option may be transferred by will
or by the laws of descent and distribution, shall have the right, at
any time prior to the termination of an Incentive Stock Option to
exercise the Incentive Stock Option, in respect to the number of
shares that the optionee would have been entitled to exercise if he
had exercised the Incentive Stock Option on the date of his death
while in employment. For purposes of Incentive Stock Options issued
under this Plan, an employment relationship between the Company and
the optionee shall be deemed to exist during any period in which the
optionee is employed by the Company, a corporation issuing or
assuming an option in a transaction to which Section 424(a) of the
Code applies, or a parent or subsidiary corporation of such
corporation issuing or assuming an option. For this purpose, the
phrase "corporation issuing or assuming an option" shall be
substituted for the word "Company" in the definitions of parent and
subsidiary corporations in Section 4 and the parent-subsidiary
relationship shall be determined at the time of the corporate action
described in Section 424(a) of the Code.
In the event of the death, disability, or Retirement of a
holder of a Non-statutory Stock Option, before the date of expiration
of such Non-statutory Stock Option, such Non-statutory Stock Option
shall continue fully in effect, including provisions providing for
subsequent vesting of such Option, and shall terminate on the date of
expiration of the Non-statutory Stock Option notwithstanding any
provision to the contrary in the optionee's Option Agreement. After
the death of the optionee, his executors, administrators or any
person or persons to whom his Non-statutory Stock Option may be
transferred by will or by the laws of descent and distribution, shall
have the right, at any time prior to the termination of the
Non-statutory Stock Option to exercise the
Non-statutory Stock Option, in respect to the number of shares that
the optionee would have been entitled to exercise if he were still
alive. Notwithstanding the foregoing provisions of this Section, in
the case of a Non-statutory Stock Option granted on or after December
8, 1994, the Committee may establish any option termination date in
the Option Agreement with respect to such Option that is not later
than ten years from the date of grant and impose restrictions on the
exercise of such Option.
This Amendment shall be effective as of December 8, 1994;
provided that it shall not be effective as to any Option held by a person that
is subject to the reporting and liability provisions of Section 16(a) or Section
16(b) of the Securities Exchange Act of 1934 unless and until the Amendment is
approved by the holders of a majority of the outstanding shares of Common Stock
of the Company.
Dated: October 20, 1994
<PAGE>
AMENDMENT TO
THE QUANEX CORPORATION
1989 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
THIS AGREEMENT by Quanex Corporation (the "Company"),
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company previously
adopted the plan agreement known as the "Quanex Corporation Employee Stock
Option and Restricted Stock Plan" (the "Plan"); and
WHEREAS, the Board of Directors of the Company retained the
right in Section 13 of the Plan to amend the Plan from time to time; and
WHEREAS, the Board of Directors of the Company has approved
the following amendment to the Plan;
NOW, THEREFORE, subject to the requirement set forth below,
the Board of Directors of the Company agrees that Paragraph 9 of the Plan is
hereby amended, effective with respect to both Options outstanding on the date
of the adoption of this Amendment and all Options issued in the future under
this Plan, as follows:
9. Termination of Employment or Death of Optionee. Except as
may be otherwise expressly provided herein all Options shall
terminate on the earlier of the date of the expiration of the Option
or the date that is three months after the optionee ceases to be a
member of the Company's Board of Directors, for any reason other than
the death, permanent disability or, retirement of the optionee,
during which period the optionee shall be entitled to exercise the
Option in respect of the number of shares that the optionee would
have been entitled to purchase had the optionee exercised the Option
on the date the optionee ceased to be a member of the Company's Board
of Directors.
In the event the optionee ceases to be a member of the
Company's Board of Directors because of his death, permanent
disability or retirement from the Board of Directors of the Company,
before the date of expiration of his Option, such Option shall
continue fully in effect, including provisions providing for
subsequent vesting of such Option, and shall terminate on the date of
expiration of the Option notwithstanding any provision to the
contrary in the optionee's Option Agreement. After the death of the
optionee, his executors, administrators or any person or persons to
whom his Option may be transferred by will or by the laws of descent
and distribution, shall have the right, at any time prior to the
termination of the Option to exercise the Option, in respect to the
number of shares that the optionee would have been entitled to
exercise if he were still alive.
In any event, an Option shall terminate on the tenth
anniversary of the date of grant of such Option.
For purposes of this Paragraph 9, an Optionee will be treated
as having retired from the Company's Board of Directors if the
Optionee shall, at the time the Optionee ceases to be a member of the
Board of Directors of the Company, have served at least two full
three-year terms of office as a director of the Company or six years
of service as a director of the Company.
This Amendment shall be effective as of December 8, 1994, but
shall be subject to the approval of the holders of a majority of the outstanding
shares of Common Stock of the Company. If such approval is not obtained by
December 31, 1995, this Amendment shall be null and void and of no force or
effect.
Dated: October 20, 1994
