SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
QUANEX CORPORATION
(Name of Registrant as Specified in its Charter)
_____________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
<PAGE>
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Quanex Corporation
1900 West Loop South [QUANEX LOGO]
Suite 1500
Houston, Texas 77027
(713) 961-4600
- --------------------------------------------------------------------------------
January 24, 2000
Dear Fellow Stockholder:
You are cordially invited to attend the
Company's Annual Meeting of Stockholders to be
held at 5:00 p.m., C.S.T., on Wednesday, February
23, 2000, at the offices of Fulbright & Jaworski
L.L.P., 1301 McKinney, 51st Floor, Houston, Texas.
This year you will be asked to vote in favor
of two proposals. The proposals concern the
election of two directors and an amendment to the
Company's 1996 Employee Stock Option and
Restricted Stock Plan to increase the number of
shares of Common Stock authorized for issuance
thereunder. 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 YOU TO VOTE AT
YOUR EARLIEST CONVENIENCE, WHETHER OR NOT YOU PLAN
TO ATTEND THE ANNUAL MEETING.
Thank you for your cooperation.
Sincerely,
/s/ VERNON E. OECHSLE
Vernon E. Oechsle
Chairman of the Board
<PAGE>
[QUANEX LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 23, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Quanex
Corporation, a Delaware corporation (the "Company"), will be held at the
offices of Fulbright & Jaworski L.L.P., 1301 McKinney, 51st Floor, Houston,
Texas, on February 23, 2000, at 5:00 p.m., C.S.T., for the following purposes:
(1) To elect two directors to serve until the Annual Meeting of
Stockholders in 2003;
(2) To consider and act upon a proposal to amend the Company's 1996
Employee Stock Option and Restricted Stock Plan to increase the
number of shares of the Company's Common Stock, with respect to
which option and restricted stock awards may be granted under the
plan, by 600,000 to allow for the grant of additional options and
restricted stock awards under the plan; and
(3) 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 14, 2000,
as the record date for determining stockholders entitled to notice of and to
vote at the meeting. A complete list of the stockholders entitled to vote at the
meeting will be maintained at the Company's principal executive offices, will be
open to the examination of any stockholder 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 Stockholders for the fiscal year ended
October 31, 1999, accompanies this Notice.
By order of the Board of Directors,
/s/ MICHAEL W. CONLON
MICHAEL W. CONLON, Secretary
Houston, Texas
January 24, 2000
<PAGE>
[QUANEX LOGO]
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 23, 2000
This Proxy Statement and the accompanying form of proxy are to be first
mailed on or about January 24, 2000, to all holders of record on January 14,
2000, (the "Record Date"), 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 Stockholders to be
held at 5:00 p.m., C.S.T., on Wednesday, February 23, 2000, 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 specifications have been
made will be voted for the election as directors of the nominees listed herein
and in favor of proposal 2. 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 stockholder 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 the Record Date,
the date for determining stockholders who are entitled to receive notice of and
to vote at the meeting, there were 14,281,025 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 electronic data transfer 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 $4,000. 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 DIRECTORS
Two directors are to be elected at the meeting. The Company's Restated
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 two directors, John D. O' Connell and Vernon E. Oechsle, expire at the
2000 Annual Meeting. Mr. O' Connell will not stand for re-election. In order to
equally distribute the members of the Board of Directors among the classes,
Donald G. Barger, Jr. has resigned, effective as of the date of the 2000 Annual
Meeting, as a member of the Board of Directors with a term expiring at the 2001
Annual Meeting, and agreed to stand for re-election at the 2000 Annual Meeting.
Therefore, the proposed nominees for director for a term expiring at the 2003
Annual Meeting are Messrs. Oechsle and Barger. The respective terms of directors
expire on the dates set forth below.
<TABLE>
<CAPTION>
NOMINEES FOR ELECTION FOR TERMS DIRECTOR
EXPIRING AT THE 2003 ANNUAL MEETING PRINCIPAL OCCUPATION AGE SINCE
- ------------------------------------ -------------------------- --- --------
<S> <C> <C> <C>
Vernon E. Oechsle................... Chairman of the Board and Chief Executive Officer, 57 1995
Quanex Corporation
Donald G. Barger, Jr................ Vice President and Chief Financial Officer of 56 1995
Hillenbrand Industries, a manufacturer and provider
of products and services for the healthcare, funeral
services, and high security markets (Batesville,
Indiana)
DIRECTORS WHOSE TERMS
EXPIRE AT THE 2002 ANNUAL MEETING
- ------------------------------------
Michael J. Sebastian................ Retired since 1995 from Cooper Industries, Inc., 69 1991
manufacturer of electrical, automotive and industrial
equipment (Houston, Texas)
Russell M. Flaum.................... Executive Vice President of Illinois Tool Works, an 49 1997
international manufacturer of engineered metal and
plastic components (Glenview, Illinois)
Susan F. Davis...................... Vice President of Human Resources of Johnson 46 1998
Controls, Inc., a global market leader in automotive
systems and building controls (Milwaukee, Wisconsin)
DIRECTORS WHOSE TERMS
EXPIRE AT THE 2001 ANNUAL MEETING
- ------------------------------------
Carl E. Pfeiffer.................... Chairman Emeritus, Quanex Corporation 69 1966
Vincent R. Scorsone................. Retired since 1994 from Aluminum Company of America, 64 1995
a manufacturer of aluminum products (Pittsburgh,
Pennsylvania)
</TABLE>
Messrs. Oechsle 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 judgment 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.
Mr. Scorsone currently serves on the board of the Indspec Chemical Company.
Mr. Barger was appointed to his present position with Hillenbrand Industries in
March, 1998. Prior to that time, Mr. Barger was Vice President of Finance and
Chief Financial Officer of Worthington Industries, Inc.,
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a diversified steel processor, since September 1993 and was employed by B. F.
Goodrich Company, manufacturer of automobile tires and related products, from
1973 to 1993. Mr. Barger currently serves on the board of Gardner Denver
Machinery Inc. Mr. Sebastian retired from Cooper Industries, Inc. in 1995, and
for more than five years prior to his retirement, he served as Executive Vice
President. Mr. Sebastian currently serves on the boards of Cooper Cameron
Corporation and Gardner Denver Machinery Inc. Mr. Oechsle joined the Company in
1993 as Executive Vice President and Chief Operating Officer and served as
President and Chief Executive Officer from January, 1996 to February, 1999. Mr.
Oechsle was appointed to the Board of Directors of the Company in May 1995 and
elected Chairman of the Board in February, 1999. Prior to joining the Company,
Mr. Oechsle was Executive Vice President of the Automotive Sector of Allied
Signal Inc., an advanced technology and manufacturing company, since December
1990. Mr. Oechsle currently serves on the board of Precision Castparts
Corporation. Mr. Pfeiffer served as the Company's Chairman of the Board of
Directors from 1989 to 1995. Each of Ms. Davis and Mr. Flaum has been employed
in the principal occupation shown above or in a similar one with the same
employer for more than five years.
Pursuant to the Company's Bylaws, the Board of Directors has established
several committees, including an Executive Committee, an Audit and Environmental
Compliance Committee, a Compensation and Management Development Committee, a
Nominating and Corporate Governance Committee and a Finance and Investment
Committee. During fiscal 1999, the Board of Directors met five times, the
Compensation and Management Development Committee met three times, and the Audit
and Environmental Compliance Committee met twice. The Nominating and Corporate
Governance Committee, the Finance and Investment Committee, and the Executive
Committee each met once. All directors attended more than 75% of the combined
number of Board meetings and meetings of committees of which they are members.
The current members of the Audit and Environmental Compliance Committee are
Ms. Davis and Messrs. Pfeiffer, Flaum and Barger, who is Chairman. The Audit and
Environmental Compliance Committee's responsibilities to the Board include the
following:
1) Review the accounting and financial policies and procedures of the
Company, including the internal accounting control system and financial
reporting processes and procedures and review any issues identified by
the independent auditors and/or the internal auditing department
regarding accounting and financial policies and procedures, together
with their recommendations.
2) Recommend the annual nomination of independent auditors of the Company
for appointment by the Board of Directors.
3) Review the scope and results of the Company's internal audit activity,
together with the specifics of the annual audit plan. Review any
accounting changes having a major impact on the obligations or
financial statements of the Company, review filings made with the
Securities and Exchange Commission as required, and hold such other
conferences and conduct such other reviews with the independent
auditors or with management as may be desired either by the Audit and
Environmental Compliance Committee or the independent auditors.
4) Review annually the Company's risk management program.
5) Review annually the Company's program relating to monitoring compliance
with the Company's Statement of Business Policies.
6) Review the Company's compliance with applicable laws and regulations
relating to health, safety, and the environment which may represent
material financial exposure to the Company.
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<PAGE>
The current members of the Compensation and Management Development
Committee are Ms. Davis and Messrs. O'Connell and Sebastian, who is Chairman.
This Committee's responsibilities to the Board include the following:
1) Review, approve and report to the Board of Directors regarding the
Company's overall compensation policy, including compensation
philosophy and strategy, short- and long-term incentive plans and
programs, stock ownership plans, and employee benefit plans.
2) Review and report to the Board of Directors annually on the performance
of the Chief Executive Officer and review with the Chief Executive
Officer the performance of each of the senior executives of the
Company. Senior executives include all officers of the Company and the
president or senior manager of each business group.
3) Review and approve the compensation to be paid to officers and key
employees of the Company.
4) Review and approve the establishment and administration of stock bonus
plans and stock option plans for employees and non-employee directors.
5) Serve as the appropriate committee to administer the Company's
Executive Incentive Compensation Plan (EICP) and to approve the
establishment of targets for such Plan and to approve all awards under
such Plan.
6) Review the structural organization of the Company and assist the Chief
Executive Officer in developing recommendations for the selection of
senior management personnel and their replacements and successors.
7) Review the adequacy of the management development program/process to
assure a capable cadre of personnel to support the senior managerial
needs of the Company.
The current members of the Executive Committee are Messrs. Pfeiffer,
Sebastian, O'Connell and Oechsle, who is Chairman. This committee acts on behalf
of the Board between regularly scheduled meetings of the Board of Directors.
The current members of the Nominating and Corporate Governance Committee
are Messrs. Scorsone, Sebastian, and O'Connell, who is Chairman. This
Committee's responsibilities to the Board include the following:
1) Study and review with management the overall effectiveness of the
organization of the Board and the conduct of its business, and make
recommendations to the Board of Directors, as appropriate.
2) Develop and maintain criteria and procedures for the identification and
recruitment of candidates for election to serve as directors of the
Company.
3) Review the appropriateness and adequacy of information supplied to
directors prior to and during Board of Directors meetings.
4) Review director class each year and recommend directors for election or
re-election.
5) Review and make recommendations to the Board of Directors with respect
to compensation to be paid or provided to members of the Board of
Directors.
6) Evaluate annually the performance of the Board of Directors.
7) Consider nominees for director recommended by stockholders of the
Company, provided such recommendations are addressed to the chairman of
the Committee at the Company's principal executive office and received
by the chairman before November 1 of each year with respect to the
annual stockholders' meeting that is held thereafter.
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<PAGE>
The current members of the Finance and Investment Committee are Messrs.
Barger, Flaum, Pfeiffer and Scorsone, who is Chairman. This committee's
responsibilities to the Board include the following:
1) Review, as appropriate, advise and consult with senior management
concerning the general financial affairs of the Company including the
capital structure of the Company, financing plans, cash flow
projections, dividend policy, stock re-purchase programs, currency
exchange agreement procedure, loan agreements, capital investment
policy, and appropriate target rates of return.
2) Monitor and review the establishment of investment objectives,
policies, and performance criteria for the management of the Company's
retirement and benefit plan assets.
The Company's Bylaws provide that, subject to certain limitations discussed
below, any stockholder 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 stockholder must give written notice of
such stockholder'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 Stockholders, 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 Stockholders 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 stockholders provided that such statement is mailed no earlier
than 120 days prior to the date of such meeting. Notwithstanding the foregoing,
if 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
stockholder 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 stockholders. Each notice of a nomination from a stockholder shall set
forth: (a) the name and address of the stockholder who intends to make the
nomination and of the person or persons to be nominated; (b) a representation
that the stockholder 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 stockholder 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 stockholder; (d) such other
information regarding each nominee proposed by such stockholders 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 stockholder's intent to nominate a person
for director at the 2001 Annual Meeting must be given on or before November 25,
2000.
Directors (other than Mr. Oechsle, who is an officer of the Company) have
been paid a fee of $5,250, four times a year at regular quarterly meetings and
$1,250 for attendance at each meeting of the Board and $1000 for each committee
meeting attended. At its meeting in December, the Board approved an increase in
the quarterly fee to $6,000. With the exception of the Executive Committee
Chair, Committee Chairs receive a fee of $625 four times a year. Travel and
lodging expenses incurred by directors to attend such meetings are also paid by
the Company. Non-employee directors who first became directors prior to July 1,
1997, are the beneficiaries of life insurance policies provided by the Company
at a cost ranging from approximately $2,000 to $5,000 per director for fiscal
1999.
5
<PAGE>
At the Annual Meeting of Stockholders held on February 23, 1988, the
stockholders approved the Quanex Corporation 1987 Non-Employee Director Stock
Option Plan (the "1987 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 1987 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 1987 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 1987 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. Pursuant to the terms of this plan, options may no longer be granted
under this plan.
At the Annual Meeting of Stockholders held on February 22, 1990, the
stockholders 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 currently provides for grants of options with
respect to 2,000 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, except as specified below, must be exercised no later than ten years
from the date of grant. The 1989 Plan, as subsequently amended, provides that
options granted under the 1989 Plan after December 31, 1999 may continue to be
exercisable and shall continue to vest for a period of not longer than three
years after the death, disability or retirement of the non-employee director and
that option agreements entered into after September 30, 1997 may provide that
the options are transferable to or for the benefit of certain family members. On
October 30, 1999, each of Ms. Davis and Messrs. Barger, Flaum, O'Connell,
Scorsone and Sebastian was granted an option under the 1989 Plan to purchase
2,000 shares of Common Stock with an exercise price per share of $21.6875.
Pursuant to the terms of this plan, options may no longer be granted under this
plan.
At the Annual Meeting of Stockholders held on February 22, 1996, the
stockholders of the Company approved an amendment to the Quanex Corporation
Deferred Compensation Plan (the "DC Plan") that provided for (i) the addition
of a Common Stock election as an option for certain participants and (ii) a 20%
Company matching award for participants electing to make their deferrals in the
form of Common Stock. Under the terms of the DC Plan, officers and directors may
elect to defer a portion of their incentive bonuses and director fees,
respectively, awarded or earned during the ensuing plan year to a Common Stock
account. If a participant elects to make a deferral to a Common Stock account
for a period of three full years or more, a matching award equal to 20% of the
amount deferred is made by the Company to such participant's account. The number
of shares of Common Stock credited to a participant's deferral and matching
account is the number of full shares of Common Stock that could have been
purchased with the dollar amount deferred or matched based on the closing price
of the Common Stock on the New York Stock Exchange (the "NYSE") on the day
that the amount deferred would have been paid had it not been deferred.
Dividends and other distributions declared and paid on the Common Stock will be
accrued in the participant's account based upon the number of shares of Common
Stock credited to such account. No shares of Common Stock or payments in respect
thereof, however, are issued or made to any participant until distribution in
accordance with the DC Plan. All participant deferrals and Company matching
awards are 100% vested; provided, however, that if a participant receives a
benefit from the DC Plan for any reason, other than death, disability or
retirement, within three years after a deferral was credited to a Common Stock
account, any matching awards made by the Company with respect to the deferral
that is held less than three years will be forfeited. Under the terms of the DC
Plan, as subsequently amended, in the event of a "change in control" of the
Company, any amount credited to a participant's account is fully
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vested and is payable in cash within five days after the change of control
occurs. A "change in control" is defined generally as (i) an acquisition of
securities resulting in an individual or entity or group thereof becoming,
directly or indirectly, the beneficial owner of 20% or more of either (a) the
Company's then-outstanding Common Stock or (b) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors, (ii) a change in a majority of the persons who are
members of the Board of Directors as of June 1, 1999 (the "Incumbent Board"),
(iii) generally, a reorganization, merger or consolidation or sale of the
Company or disposition of all or substantially all of the assets of the Company,
or (iv) the approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company. For this purpose, an individual will
be treated as a member of the Incumbent Board if he becomes a director
subsequent to June 1, 1999 and his election, or nomination for election by
Quanex's stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board; unless his initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of an individual, entity or
group other than the Board. During 1999, the DC Plan was amended to provide that
if a participant in the DC Plan is entitled to a cash payment of a bonus under
the Quanex Corporation Executive Incentive Compensation Plan and the Company
determines that section 162(m) of the Internal Revenue Code of 1986, as amended,
may not allow the Company to take a deduction for part or all of the bonus then,
the payment of the amount of the bonus that is not deductible by the Company
will be delayed and deferred under the provisions of the Plan until the 76th day
following the end of the fiscal year of the Company in which the bonus was
earned. During 1999, Messrs. Barger and Scorsone elected to defer director fees
of $8,125 and $16,875, respectively, under the DC Plan in the form of Common
Stock and their accounts were credited with 376 and 797 shares of Common Stock,
respectively. In addition, pursuant to the terms of the DC Plan, the Company
made matching awards to their respective accounts of 78 and 163 shares of Common
Stock.
At the Annual Meeting of Stockholders held on February 26, 1998, the
stockholders of the Company approved the Quanex Corporation 1997 Non-Employee
Director Stock Option Plan (the "1997 Plan"), which provides for the granting
to non-employee directors of options to purchase an aggregate of 400,000 shares
of Common Stock. The 1997 Plan currently provides for grants of options, to be
determined by the Board of Directors, to all non-employee directors on each
October 31 on which the director serves as a director of the Company. During
1998, Mr. Flaum was granted an option under the 1997 Plan to purchase 10,000
shares of Common Stock with an exercise price per share of $18.25. Option
agreements for options granted under the 1997 Plan may provide that the options
are transferable to or for the benefit of certain family members. The 1997 Plan,
as subsequently amended, provides that options granted under the 1997 Plan after
December 31, 1999 may continue to be exercisable and shall continue to vest for
a period of not longer than three years after the death, disability or
retirement of the non-employee director. During 1999, Ms. Davis and Mr. Pfeiffer
were granted options under the 1997 plan to purchase 6,000 and 2,000 shares of
Common Stock, respectively, with an exercise price of $26.00 and $21.6875,
respectively. There are currently 382,000 shares of Common Stock remaining
available for option grants under this plan.
The Company also has in effect the Quanex Corporation Non-Employee Director
Retirement Plan (the "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. Under the 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 Retirement Plan or (iii) the director
serving as a director, officer or employee of a competitor of the Company.
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<PAGE>
(2) AMENDMENT TO THE 1996 EMPLOYEE STOCK OPTION AND RESTRICTED STOCK PLAN
On October 12, 1995, the Board of Directors of the Company approved,
subject to approval of the stockholders, upon recommendation of the Compensation
Committee, the Quanex Corporation 1996 Employee Stock Option and Restricted
Stock Plan (the "1996 Plan"). The 1996 Plan was approved at the February 22,
1996 Annual Meeting of the Company's Stockholders.
On January 6, 2000, the Board of Directors of the Company approved, subject
to approval of the stockholders, an amendment (the "Amendment") to the 1996
Plan. The following is a summary of the Amendment, a copy of which is attached
as Exhibit A to this Proxy Statement and is hereby incorporated herein by
reference, and certain provisions of the 1996 Plan. Such summary does not
purport to be a complete statement of the 1996 Plan or the Amendment and is
qualified in its entirety by reference to the full text of the 1996 Plan and the
Amendment. The grant of an option and the award of shares of restricted stock
under the 1996 Plan are collectively referred to in this summary as an
"Award".
PURPOSE AND ADMINISTRATION OF THE 1996 PLAN
The 1996 Plan is intended to advance the best interest of the Company by
providing certain full-time employees, including officers and employee
directors, who have substantial responsibility for the Company's management and
growth, with additional incentive by increasing their proprietary interest in
the success of the Company, and thereby encouraging them to remain in the
Company's employ.
The 1996 Plan is administered by the Compensation and Management
Development Committee (the "Compensation Committee"). The Compensation
Committee is comprised of not less than three directors of the Company selected
by the Board of Directors. The current members of the Compensation Committee are
Ms. Davis and Messrs. O'Connell and Sebastian, all of whom are non-employee
directors. It is the Board's policy that the Compensation Committee be composed
of non-employee directors, and it is anticipated that this policy will be
continued.
ELIGIBILITY AND PARTICIPATION
The individuals eligible to participate in the 1996 Plan are full-time, key
employees, including officers and employee directors, of the Company or of any
parent or subsidiary corporation, as the Compensation Committee may determine
from time to time. Approximately 45 persons currently participate in the 1996
Plan. No individual will be eligible to receive an Award while such individual
is a member of the Compensation Committee.
SHARES SUBJECT TO THE 1996 PLAN
The 1996 Plan currently provides for the granting of Awards with respect to
an aggregate amount of not more than 750,000 shares of Common Stock, subject to
adjustment for changes in capitalization. Such shares may be treasury shares or
authorized but unissued shares. If any outstanding Award expires or terminates,
the shares of Common Stock allocable to the unexercised portion of such Award
may again be available for purposes of Awards under the 1996 Plan. The 1996 Plan
provides that the maximum number of shares of Common Stock subject to options
that may be awarded to any employee under the 1996 Plan during any consecutive
three-year period is 250,000; and the maximum number of shares of Common Stock
that may be awarded to any employee pursuant to a restricted stock award under
the 1996 Plan during any consecutive three-year period is 250,000. Further, the
1996 Plan provides that no employee may exercise the election permitted under
Section 83(b) of the Internal Revenue Code of 1986, as amended, with respect to
an Award without the written approval of the Compensation Committee. If the
Compensation Committee permits such an election with respect to any Award, the
Company will require the Award recipient to pay the Company an amount necessary
to satisfy the Company's tax withholding obligation.
Given the Company's growth over the last several years, the number of
shares available under the 1996 Plan has been depleted. As of December 31, 1999,
options to purchase 650,709 shares of
8
<PAGE>
Common Stock and awards for 6,000 shares of restricted Common Stock have been
granted under the 1996 Plan and approximately 149,326 shares of Common Stock
remained available under the 1996 Plan. During fiscal 1999 all executive
officers and employee directors as a group received options to purchase 204,500
shares of the Company's Common Stock and awards for 6,000 shares of restricted
Common Stock, under the 1996 Plan. The Company's Board of Directors has
determined that, to continue promoting the interests of the Company and its
stockholders and to attract, maintain and motivate its key employees with
compensatory arrangements and benefits by ensuring that a sufficient number of
shares of Common Stock is available for purposes of granting options and
restricted stock awards under the 1996 Plan, it is in the best interest of the
Company to increase the number of shares available for options and restricted
stock awards under the 1996 Plan by 600,000 for a new total of 1,350,000 shares.
CERTAIN CONSIDERATIONS
Stockholders should know that certain disadvantages may result from the
adoption of the Amendment, including a reduction in their interests in the
Company with respect to earnings per share, voting liquidation value and book
and market value per share if options to acquire shares of Common Stock are
granted.
VOTE REQUIRED AND RECOMMENDATION FOR APPROVAL
The Board of Directors of the Company has adopted the Amendment. However,
the Amendment will not be effective unless the holders of a majority of the
shares of Common Stock present in person or by proxy at the meeting and entitled
to vote thereon vote "FOR" the approval of the Amendment. The enclosed form of
proxy provides a means for stockholders to vote for the approval of the
Amendment, to vote against the approval of the Amendment or to abstain from
voting with regard to approval of the Amendment. Each properly executed proxy
received in time for the meeting will be voted as specified therein. If a
stockholder executes and returns a proxy but does not specify otherwise, the
shares represented by such stockholder's proxy will be counted for approval of
the Amendment. Abstentions will be counted toward the calculation of a quorum,
but are not treated as either a vote for or a vote against the proposal.
Therefore, an abstention has the same effect as a vote against the proposal.
Under Delaware law, any unvoted positions in brokerage accounts, while present
for general quorum purposes, are not entitled to vote. Therefore, such unvoted
shares will have no effect on the outcome of the vote on the Amendment. THE
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE
AMENDMENT.
9
<PAGE>
FURTHER INFORMATION
PRINCIPAL STOCKHOLDERS
The following table sets forth as of November 30, 1999, 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 outstanding Common Stock. Such
information is based upon information provided to the Company by such persons.
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME AND ADDRESS OWNERSHIP (%)
- ------------------------------------- ----------- -------
Dimensional Fund Advisors, Inc.,
1299 Ocean Avenue, 11th Floor
1 Santa Monica, CA 90401.................. 830,302(1) 5.8
- ------------
(1) Dimensional Fund Advisors, Inc. ("Dimensional"), an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940,
furnishes investment advice to four investment companies registered under
the Investment Company Act of 1940, and serves as investment manager to
certain other investment vehicles, including commingled group trusts. In its
role as investment advisor and investment manager, Dimensional possesses
both voting and investment power with respect to all shares owned.
10
<PAGE>
The following table sets forth as of December 31, 1999, the number and
percentage of beneficial ownership of shares of Common Stock and the principal
amount of the Company's 6.88% Convertible Subordinated Debentures (the
"Debentures") for each current director and nominee for director of the
Company, the executive officers named in the compensation table on page 17 of
this Proxy Statement, and all officers and directors as a group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
FACE VALUE OF SHARES OF BENEFICIALLY OWNED(1)
DEBENTURES COMMON STOCK --------------------------
BENEFICIALLY OWNED OF NUMBER PERCENTAGE
NAME OWNED RECORD OF SHARES OF SHARES
- ------------------------------------- -------------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Donald G. Barger, Jr................. 0 1,000 21,000 *
James H. Davis....................... 0 5,034 84,999 *
Susan F. Davis....................... 0 1,000 1,000 *
Russell M. Flaum..................... 0 0 5,333 *
Robert V. Kelly, Jr.................. 0 31,958 91,099 *
John D. O' Connell................... $ 12,500 10,710 17,396 *
Vernon E. Oechsle.................... 0 28,712 198,699 1.4
Carl E. Pfeiffer..................... 0 17,865 13,000 *
Wayne M. Rose........................ 0 11,475 111,433 *
Terry A. Schroeder................... 0 1,868 34,333 *
Vincent R. Scorsone.................. $100,000 5,000 24,174 *
Michael J. Sebastian................. $150,000 21,000 13,760 *
All officers and directors as a group
(15 persons)....................... $312,500 140,042 658,011 4.5
- ------------
</TABLE>
* Less than 1.0%
(1) Unless otherwise indicated, directors and officers have sole voting and
investment power with respect to the securities they own. The beneficial
ownership of shares of Ms. Davis and Messrs. Barger, Davis, Flaum, Kelly,
Oechsle, O'Connell, Pfeiffer, Rose, Schroeder, Scorsone, and Sebastian, and
all officers and directors as a group includes 1,000, 21,000, 84,999, 5,333,
91,099, 198,699, 17,000, 13,000, 111,433, 34,332, 21,000, 9,000 and 648,094
shares, respectively, that may be acquired through exercise of stock
options. The beneficial ownership of shares of Messrs. O'Connell, Scorsone,
and Sebastian, and all officers and directors as a group includes 396,
3,174, 4,760 and 9,917 shares, respectively, that may be acquired through
conversion of the Debentures held by them. The beneficial ownership of
shares does not include 1,659, 60,844, 40,350, 19,549, 3,975 and 146,635
shares of Common Stock that have been credited under the DC Plan to the
accounts of Messrs. Barger, Davis, Oechsle, Rose, Scorsone and all officers
and directors as a group, respectively, in connection with deferral of
director fees and bonuses and related Company matching contributions under
the DC Plan. See footnotes 1 and 3 to the Summary Compensation Table.
11
<PAGE>
EXECUTIVE OFFICERS
Set forth below is certain information concerning the 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.
<TABLE>
<CAPTION>
NAME AND AGE OFFICE AND LENGTH OF SERVICE
- ------------------------------------- -------------------------------------------------------------
<S> <C>
Vernon E. Oechsle; 57............... Chairman of the Board since 1999, Chief Executive Officer
since 1996, President since 1995 and Chief Operating
Officer from 1993 to 1995
James H. Davis; 64.................. President and Chief Operating Officer since 1999, Executive
Vice President and Chief Operating Officer since 1995
Terry M. Murphy; 51................. Vice President of Finance and Chief Financial Officer since
1999
Wayne M. Rose; 53................... President of Engineered Products Group since 1998, Vice
President of Finance and Corporate Development and Chief
Financial Officer since 1997 and Vice President and Chief
Financial Officer since 1987
Paul J. Giddens; 55................. Vice President of Human Resources since 1998
Robert V. Kelly, Jr.; 61............ Vice President since 1979 (also Group President since 1982)
Viren M. Parikh; 57................. Controller since 1993
*Terry A. Schroeder; 51.............. President of Nichols Aluminum since 1996
</TABLE>
- ------------
* Although Mr. Schroeder is not an executive officer of the Company, he performs
a policymaking function for the Company in his capacity as the President of
the Company's Nichols Aluminum Division. Accordingly, for purposes of this
Proxy Statement, he is considered to be an executive officer of the Company.
Mr. Kelly has been principally employed in the position shown above for
more than five years. Mr. Oechsle was elected Chairman of the Board on February
25, 1999 and was named President and Chief Executive Officer of the Company on
January 1, 1996. Prior to that time, Mr. Oechsle was President since 1995 and
Chief Operating Officer of the Company since 1993. Prior to that time, 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. Davis was named President and Chief Operating Officer of the Company
on February 25, 1999 and Executive Vice President and Chief Operating Officer of
the Company on January 1, 1996 and prior to that time, was Executive Vice
President, Manufacturing Operations of the Company since September 16, 1995.
Prior to that time, Mr. Davis was President and Chief Executive Officer of
Horsehead Resources Development Company, Inc., an environment services company,
since 1990 and Senior Vice President of Horsehead Industries since 1984. Mr.
Murphy was named Chief Financial Officer and Vice President of Finance of the
Company on July 1, 1999. Prior to that time, Mr. Murphy was Senior Vice
President, Finance and Chief Financial Officer for The Barnes Group Inc., a
manufacturer of aerospace components, from 1997 to 1999 and Vice President and
Chief Financial Officer of Kysor Industrial Corporation, a manufacturer of
commercial refrigeration products, from 1992 to 1997. Prior to that time, Mr.
Murphy was Vice President of Finance, Treasurer and Chief Financial Officer of
Northwest Telecommunications from 1986 to 1992. Mr. Rose was named President of
Engineered Products Group of the Company on December 15, 1998 and prior to that
time was Vice President of Finance and Corporate Development and Chief Financial
Officer of the Company since February 1997. Prior to that time, Mr. Rose was
Vice President and Chief Financial Officer of the Company since 1987. Mr.
Giddens was named Vice President of Human Resources of the Company on September
1, 1998 and prior to that time was Corporate Director of Human Resources for
Barnes Group, Inc. since June 1997 and Vice President of Human Resources for
York & Associates, Inc., a business information systems consulting firm, since
October 1996. Prior to that time, Mr. Giddens was Corporate Director of Human
Resources for Georgia Pacific Corporation, a forest products company, since July
1992 and
12
<PAGE>
Manager of Human Resources & Organizational Development for General Electric
Company since April 1985. 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 Controller. Mr. Schroeder was named President of
the Company's Nichols Aluminum Division on August 19, 1996. Prior to that time,
Mr. Schroeder served as President and General Manager of Borg Warner
Automotive's Controls Group business since 1993 and as Vice President -- General
Manager for the Commercial Industrial Division of ITT Cannon since 1988.
13
<PAGE>
QUANEX CORPORATION
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE REPORT
TO STOCKHOLDERS
ON EXECUTIVE COMPENSATION
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE REPORT
The Compensation and Management Development Committee (the "Committee")
of your Board of Directors is pleased to present its annual report which is
intended to update stockholders on the results of the executive compensation
program. 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 end October
31, 1999.
During the fiscal year ended October 31, 1999, the Committee was comprised
of the following Board Members, all of whom were non-employee directors of the
Company: Michael J. Sebastian, Chairman, Susan F. Davis, and John D. O'Connell.
The Committee's responsibilities are to oversee the development and
administration of the total compensation and benefits programs for corporate
officers and key executives, and administer the executive annual incentive and
stock incentive plans. In addition to these duties, the Committee also oversees
the senior management selection, development and succession processes of the
Company. During the fiscal year, the Committee met three times.
EXECUTIVE COMPENSATION PHILOSOPHY
The objective of the executive compensation program is to create financial
incentive for corporate officers and key executives to achieve 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 executive 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 and the performance of the Company to the compensation
received by executives and the performance of similar companies. 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 market in
which the Company competes for executive 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 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 which are
updated annually.
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 total
stockholder value as measured by share price appreciation and dividends. The
annual incentive plans measure a combination of corporate and group
profitability using return on equity, return on investment, and cash flow.
Executives with Company-wide responsibilities are measured on overall Company
results. Executives with specific business unit responsibilities are measured on
both Company-wide and 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 the Company's five highest
14
<PAGE>
paid executives. Excluded from the 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 stockholders. 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. Compensation relating to the
Company's restricted stock and incentive compensation awards do not currently
qualify for exclusion from limitations, 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 results in increased benefit to the Company's stockholders.
Incentive awards for fiscal 1999 were determined solely on the predetermined
quantitative performance standards. The Committee, however, will continue 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 following is a discussion of each of the principal components of the
total executive compensation program. There have been no major changes in the
executive compensation program during the 1999 fiscal year.
BASE SALARY
The base salary program targets the median of the primary comparison group.
Each executive is reviewed on an annual basis. Salary adjustments are 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. Overall, the base salaries of the corporate
officers and key executives approximate the median.
ANNUAL INCENTIVE COMPENSATION
The Committee administers the Executive Incentive Compensation Program
("EICP") for 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.
The EICP relies primarily on predetermined, objective performance measures.
For officers with corporate responsibilities, the performance measures include
the ratio of cash flow to revenues, return on common equity, and return on
investment. For group and subsidiary executives, the performance measures
include the business unit ratio of cash flows to revenues and business unit
return on controllable investment.
Based primarily on objective standards established at the beginning of the
fiscal year, awards are calibrated at the 75th percentile if the Company
achieves 75th percentile performance results. For fiscal 1999, the performance
results and incentive awards were consistent with this strategy.
LONG-TERM STOCK BASED COMPENSATION
The goal of the Company's long-term stock based incentive program is to
directly link a significant portion of the executive's compensation to the
enhancement of stockholder value. In addition, longer term incentives encourage
management to focus on the longer term development and prosperity of the
Company, in addition to annual operating profits. The Company encourages its top
management group to own and maintain significant stock holdings.
The Company annually 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 increases in stockholder value. 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
15
<PAGE>
is based solely on the increase in value of the shares over the grant price.
Options have historically been granted at fair market value on the date of the
grant, have a term of ten years, and vest over a three year period. During
fiscal 1999 the Committee granted options to purchase shares of common stock to
executive officers of the Company consistent with this policy.
EXECUTIVE BENEFITS
The Company believes that in attracting and retaining top caliber
executives, it is critical 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. Oechsle, participates in the executive
compensation program described in this report.
In June 1999, Mr. Oechsle's salary was increased from $500,000 to $530,000.
This increase was based on two primary considerations: First, the market
comparisons to the primary comparison group and an assessment of Mr. Oechsle's
positive job performance in assuming responsibility for guiding the operational
and strategic direction for the Company; Second, recognition of Mr. Oechsle's
added responsibilities since assuming the position and duties of Chairman of the
Board.
For fiscal 1999, Mr. Oechsle received an annual incentive award of $589,625
based on the objective performance measures set out in the EICP. Mr. Oechsle
elected to defer 25% of his incentive award into his Common Stock account under
the DC Plan. In accordance with the DC Plan, Mr. Oechsle received a Company
matching award equal to 20% of the shares credited, if they are held for at
least three years.
In fiscal 1999, Mr. Oechsle received 61,500 stock options with an option
price of $21.125 (fair market value on the date of the grant).
Respectfully submitted,
Compensation and Management Development
Committee
Michael J. Sebastian, Chairman
Susan F. Davis
John D. O'Connell
16
<PAGE>
The following table sets forth information concerning the cash compensation
and additional incentive compensation paid by the Company to the Chief Executive
Officer and to each of the Company's four most highly compensated executive
officers for each of the last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------- ---------------------- -------
(A) (B) (C) (D) (E) (F) (G) (H)
OTHER RESTRICTED
ANNUAL STOCK LTIP
NAME AND PRINCIPAL SALARY BONUS(1) COMPENSATION(2) AWARD(S) OPTIONS/ PAYOUTS
POSITION YEAR ($) ($) ($) ($) SARS(#) ($)
- ------------------------------------- ---- -------- -------- --------------- ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Vernon E. Oechsle, 1999 512,516 589,625 84,905 0 61,500 0
Chairman of the Board and 1998 485,428 440,883 92,238 0 70,000 0
Chief Executive Officer 1997 460,420 398,076 69,272 0 40,000 0
James H. Davis, 1999 331,846 354,501 13,484 0 32,000 0
President and 1998 317,840 266,095 14,405 0 37,000 0
Chief Operating Officer 1997 305,000 244,854 16,893 0 22,000 0
Wayne M. Rose, 1999 251,588 198,549 9,285 0 20,000 0
Vice President and 1998 240,003 183,960 8,595 0 22,000 0
Engineered Products President 1997 223,333 165,512 11,154 0 13,500 0
Robert V. Kelly, Jr., 1999 252,428 263,075 9,498 0 20,000 0
Vice President and MacSteel 1998 235,333 240,385 5,807 0 22,000 0
President 1997 221,167 201,925 5,468 0 13,000 0
Terry A. Schroeder(4) 1999 226,346 132,425 0 0 20,000 0
Nichols Aluminum President 1998 214,036 61,032 0 0 20,000 0
1997 205,962 60,000 0 0 11,500 0
<CAPTION>
(A) (I)
ALL OTHER
NAME AND PRINCIPAL COMPENSATION(3)
POSITION ($)
- ------------------------------------- ---------------
<S> <C>
Vernon E. Oechsle, 33,387
Chairman of the Board and 26,003
Chief Executive Officer 35,846
James H. Davis, 74,900
President and 57,019
Chief Operating Officer 52,971
Wayne M. Rose, 23,855
Vice President and 22,396
Engineered Products President 20,510
Robert V. Kelly, Jr., 4,000
Vice President and MacSteel 3,116
President 3,777
Terry A. Schroeder(4) 10,400
Nichols Aluminum President 12,500
- ------------
</TABLE>
(1) Annual bonus compensation amounts are earned and accrued during the fiscal
years indicated and paid in the following year. The bonus amounts for fiscal
year 1999 also include the dollar value of the portion of the bonuses
deferred by each of Messrs. Oechsle, Davis and Rose, which have been
credited to a Common Stock account under the Company's DC Plan. Under the
terms of the DC Plan, participants may elect to defer a portion of their
incentive bonus to a Common Stock account. If a participant elects to defer
a portion of his bonus to a Common Stock account for a period of three full
years or more, a matching award equal to 20% of the amount deferred is made
by the Company to such participant's account. The number of shares of Common
Stock credited to each participant's deferral and matching account is the
number of full shares of Common Stock that could have been purchased with
the dollar amount deferred and matched based upon the closing price of the
Common Stock on the NYSE on the day that the bonus would have been paid had
it not been deferred. No shares of Common Stock or payments in respect
thereof, however, are issued or made to any participant until distribution
in accordance with the DC Plan. All participant deferrals and Company
matching awards are 100% vested; provided, however, that if a participant
receives a benefit from the DC Plan for any reason, other than death,
disability or retirement, within three years after a deferral was credited
to a Common Stock account, any matching awards made by the Company with
respect to the deferral that is held less than three years will be
forfeited. In fiscal year 1999, the dollar value of the bonuses deferred
under the DC Plan to a Common Stock account by Messrs. Oechsle, Davis and
Rose were $147,406, $354,501 and $99,275, respectively. Such amounts, if not
deferred, would have been payable to each of such officers on December 8,
1999. Based upon the closing price of the Common Stock on the NYSE on such
date, of $19.375 per share, 7,608, 18,296 and 5,123 shares of Common Stock
were credited under the DC Plan to the accounts of Messrs. Oechsle, Davis
and Rose, respectively.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
17
<PAGE>
(2) Represents amounts reimbursed during the fiscal year for the payment of
taxes as well as perquisites and other personal benefits which totaled or
exceeded the lesser of $50,000 or 10% of the total annual salary and bonus
for each named officer. For individuals above whose perquisites and other
personal benefits met this threshold for any one year, these amounts were
included in all years presented for comparability. Of the perquisites and
other personal benefits reported in "Other Annual compensation" above, Mr.
Oechsle received financial planning services of $22,607, which exceeded 25%
of his total perquisites and other personal benefits in 1999.
(3) Includes matching contributions made by the Company to defined contribution
plans for each of the fiscal years indicated. The amounts shown also include
the dollar value of the number of shares of Common Stock credited by the
Company to the accounts of each participant in the DC Plan who elected to
defer a portion of their bonus in the form of Common Stock. For fiscal year
1999, the number of shares of Common Stock credited by the Company as
matching contributions under the DC Plan to the accounts of Messrs. Oechsle,
Davis and Rose were 1,522, 3,660 and 1,025 shares, respectively. Based on
the closing price of the Common Stock on the NYSE on December 8, 1999, of
$19.375 per share, the dollar value of the number of shares of Common Stock
credited by the Company in fiscal year 1999 to the accounts of Messrs.
Oechsle, Davis and Rose were $29,489, $70,912 and $19,859, respectively.
Based on the closing price of the Common Stock on the NYSE on December 9,
1998, of $18.6875 per share, the dollar value of the number of shares of
Common Stock credited by the Company in fiscal year 1998 to the accounts of
Messrs. Oechsle, Davis and Rose were $22,044, $53,219 and $18,396,
respectively. Based on the closing price of the Common Stock on the NYSE on
December 11, 1997, of $28.6875 per share, the dollar value of the number of
shares of Common Stock credited by the Company in fiscal year 1997 to the
accounts of Messrs. Oechsle, Davis and Rose were $31,846, $48,971 and
$16,551, respectively. Additionally, the amounts shown for Mr. Schroeder for
fiscal 1997 include moving expense reimbursements.
(4) Joined the Company in August 1996 as President of the Company's Nichols
Aluminum Division. Although Mr. Schroeder is not an executive officer of the
Company, he performs a policy making function for the Company as the
President of the Company's Nichols Aluminum Division. Accordingly, for
purposes of this Proxy Statement, he is considered to be an executive
officer of the Company.
18
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION> GRANT DATE
INDIVIDUAL GRANTS VALUE
- --------------------------------------------------------------------------------------------- ------------
(A) (B) (C) (D) (E) (F)
% OF TOTAL
OPTIONS/
SARS
OPTIONS/ GRANTED TO EXERCISE GRANT
SARS EMPLOYEES OR BASE DATE
GRANTED(1) IN FISCAL PRICE EXPIRATION PRESENT
NAME (#) YEAR ($/SHARE) DATE VALUE ($)(2)
- ------------------------------------- ---------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Vernon E. Oechsle.................... 61,500 25.6 $ 21.125 10-20-09 $447,720
James H. Davis....................... 32,000 13.3 21.125 10-20-09 232,960
Wayne M. Rose........................ 20,000 8.3 21.125 10-20-09 145,600
Robert V. Kelly, Jr.................. 20,000 8.3 21.125 10-20-09 145,600
Terry A. Schroeder................... 20,000 8.3 21.125 10-20-09 145,600
- ------------
</TABLE>
(1) All stock options granted in fiscal 1999 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.
(2) Calculated using the Black-Scholes option pricing model. The calculation
assumes volatility of 40.38%, a risk free interest rate of 5.97%, an annual
dividend yield of 2.8%, a 5-year weighted average expected option life, and
option grants at $21.125 per share. The actual value, if any, an executive
may realize will depend on the excess of the stock price over the exercise
price on the date the option is exercised. There is no assurance the value
realized by an executive will be at or near the value estimated by the
Black-Scholes model.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END (#) AT FY-END ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ------------------------------------- --------------- ------------ --------------- ---------------------
<S> <C> <C> <C> <C>
Vernon E. Oechsle.................... - 0 - - 0 - 198,699/121,501 $140,656/$78,344
James H. Davis....................... - 0 - - 0 - 84,999/64,001 $44,375/$41,125
Wayne M. Rose........................ - 0 - - 0 - 111,433/39,167 $132,818/$25,000
Robert V. Kelly, Jr.................. - 0 - - 0 - 94,099/39,001 $61,568/$25,000
Terry A. Schroeder................... - 0 - - 0 - 34,332/37,168 $6,249/$23,751
</TABLE>
19
<PAGE>
ANNUAL RETIREMENT BENEFIT EXAMPLES AT AGE 65
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------
REMUNERATION 15 20 25 30 OR OVER
- ------------ ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
$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
$750,000..................................................... 309,375 412,500 515,625 600,000
$800,000..................................................... 330,000 440,000 550,000 640,000
$850,000..................................................... 350,625 467,500 584,375 680,000
$900,000..................................................... 371,250 495,000 618,750 720,000
</TABLE>
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 Quanex Corporation
Employee Savings Plan and is that compensation shown as "Salary" and "Bonus"
in the Summary Compensation Table. The Quanex Corporation Salaried Employees'
Pension Plan uses an average of the five highest consecutive calendar years
compensation and the Quanex Corporation Supplemental Benefit Plan uses an
average of the highest 36 consecutive months of compensation.
As of November 1, 1999, the individuals named in the Summary Compensation
Table had the following years of service under the Company's pension plans: Mr.
Oechsle -- 6; Mr. Davis -- 4; Mr. Rose -- 17; Mr. Kelly, Jr. -- 22. Mr.
Schroeder is an employee of the Company's Nichols Aluminum division and, as
such, he is not eligible to participate in the Company's pension plans. Mr.
Schroeder participates in the Nichols 401(k) Savings Plan, but does not
participate in a defined benefit or actuarial plan under which benefits are
determined primarily by final compensation and years of service.
CHANGE IN CONTROL ARRANGEMENTS
The Company has entered into change in control agreements with all of its
executive officers. The form of agreement provides that in the event of a
"change in control" of the Company, the executive agrees to remain in the
employ of the Company for a period of at least three years. A "change in
control" is defined generally as (i) an acquisition of securities resulting in
an individual or entity or group thereof becoming, directly or indirectly, the
beneficial owner of 20% or more of either (a) the Company's then-outstanding
Common Stock or (b) the combined voting power of the then-outstanding voting
securities of the Company entitled to vote generally in the election of
directors, (ii) a change in a majority of the members of the Board of Directors
as of the effective date of the agreement (the "Incumbent Board"), (iii)
generally, a reorganization, merger or consolidation or sale of the Company or
disposition of all or substantially all of the assets of the Company, or (iv)
the approval by the
20
<PAGE>
stockholders of the Company of a complete liquidation or dissolution of the
Company. For this purpose, an individual will be treated as a member of the
Incumbent Board if he becomes a director subsequent to the effective date of the
agreement and his election, or nomination for election by Quanex stockholders,
was approved by a vote of at least a majority of the directors then comprising
the Incumbent Board; unless his initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of an individual, entity or group other than the Board.
The agreement contemplates that upon a change in control, the executive will
continue to receive substantially the same compensation and benefits from the
Company (or its successor) that he received before the change. Upon an event
that is a change in control, all options to acquire Common Stock and all stock
appreciation rights pertaining to Common Stock held by the executive will
immediately vest and be fully exercisable, and all restrictions on restricted
Common Stock granted to the executive will be removed and the stock will be
fully transferable. If during the three-year period following a change in
control the executive's employment is terminated by the Company (or its
successor) other than for "cause" (as defined in the agreement), the executive
will be entitled to a payment equal to 3 times the sum of (a) the executive's
base salary and (b) the executive's annual bonus. Such payment is to be payable
in cash.
21
<PAGE>
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 for the Standard
& Poor's 500 composite Stock Index (the "S&P 500") and the Company's industry
peer group. The Peer Group is comprised of: Birmingham Steel Corp., Carpenter
Technology, Century Aluminum Co., Commonwealth Industries Inc., Kaiser Aluminum
Corp., Keystone Cons. Industries Inc., Laclede Steel Co., Mascotech Inc., NS
Group Inc., Oregon Steel Mills Inc., Roanoke Electric Steel Corp., Timken Co.,
and Worthington Industries.
COMPARATIVE FIVE-YEAR TOTAL RETURNS*
QUANEX CORP., S&P 500, PEER GROUP
(PERFORMANCE RESULTS THROUGH 10/31/1999)
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
1994 1995 1996 1997 1998 1999
|------------------------------------------------------------------------------|
| NX | $100.00 | $ 81.46 | $120.78 | $119.59 | $ 74.72 | $ 98.90 |
| S&P 500 | $100.00 | $126.44 | $156.90 | $207.29 | $252.85 | $317.75 |
| PEER GROUP | $100.00 | $ 91.07 | $104.33 | $134.77 | $ 83.10 | $ 85.19 |
|------------------------------------------------------------------------------|
Assumes $100 invested at the close of trading on the last trading day preceding
the first day of the fifth preceding fiscal year in NX common stock, S&P 500,
and Peer Group.
*Cumulative total return assumes reinvestment of dividends.
Source: Russell/Mellon Analytical Services
Factual material is obtained from sources believed to be reliable, but the
publisher is not responsible for any errors or omissions contained herein.
22
<PAGE>
OTHER MATTERS AND STOCKHOLDER PROPOSALS
The Board of Directors, upon recommendation of its Audit and Environmental
Compliance Committee, has appointed the firm of Deloitte & Touche LLP as
independent auditors for the year ending October 31, 2000. Representatives of
Deloitte & Touche 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 stockholders.
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 judgment on such matters. Any proposals of stockholders
to be presented at the Annual Meeting to be held in 2001 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 26, 2000.
The Company's Bylaws provide that, for business to be properly brought
before an Annual Meeting by a stockholder, the stockholder must have given
timely notice thereof in writing to the Secretary of the Company. To be timely,
a stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Company, not less than 60 days (which for the
2001 meeting would be December 22, 2000) nor more than 180 days (which for the
2001 meeting would be August 28, 2000) 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 (which for the 2001 meeting
would be April 9, 2001) later than the anniversary date of the immediately
preceding Annual Meeting, notice by the stockholder 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 stockholders or the date on which it is first
disclosed to the public. A stockholder's notice to the Secretary must set forth
with respect to each matter the stockholder 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 stockholder making such proposal, (c) the class and number of shares of
the Company which are beneficially owned by the stockholder and (d) any material
interest of the stockholder in such business. In addition, if the stockholder'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.
Houston, Texas
January 24, 2000
23
<PAGE>
EXHIBIT A
AMENDMENT
TO THE QUANEX CORPORATION
1996 EMPLOYEE STOCK OPTION AND RESTRICTED STOCK PLAN
THIS AGREEMENT by Quanex Corporation (the "Company"),
WITNESSETH:
WHEREAS, the Company maintains the Plan known as the "Quanex Corporation
1996 Employee Stock Option and Restricted Stock Plan", (the "plan");
WHEREAS, the Company retained the right in Section 12 of the Plan to amend
the Plan from time to time; and
WHEREAS, the directors of the Company have approved resolutions to amend
the Plan to increase the number of shares of the Company's Common Stock, $.50
par value, by 600,000 shares;
NOW, THEREFORE, effective February 23, 2000, the Company agrees that,
subject to and contingent upon the approval of this Agreement by the Company's
stockholders, Section 3 of the Plan is hereby amended in its entirety to read as
follows:
SECTION 3. STOCK SUBJECT TO THE PLAN
The total amount of the Common Stock with respect to which Awards may
be granted shall not exceed in the aggregate 1,350,000 shares. The class
and aggregate number of shares which may be subject to the Options granted
under the Plan shall be subject to adjustment under Section 7. The class
and aggregate number of shares which may be subject to the Restricted Stock
Awards granted under the Plan shall also be subject to adjustment under
Section 8. Shares may be treasury shares or authorized but unissued shares.
If any Award under the Plan shall expire or terminate for any reason
without having been exercised in full, or if any Award shall be forfeited,
the shares subject to the unexercised or forfeited portion of such Award
shall again be available for the purposes of the Plan.
A-1
<PAGE>
ANNUAL MEETING OF SHAREHOLDERS OF
QUANEX CORPORATION
February 23, 2000
------------------------------
| PROXY VOTING INSTRUCTIONS |
------------------------------
TO VOTE BY MAIL
- ---------------
Please mark, date, sign and mail your proxy card in the envelope provided as
soon as possible.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
- --------------------------------------------
Please call toll-free 1-800-PROXIES and follow the instructions. Have your
control number and the proxy card available when you call.
TO VOTE BY INTERNET
Please access the web page at "www.voteproxy.com" and follow the on-screen
instructions. Have your control number available when you access the web page.
------------------
YOUR CONTROL NUMBER IS -----------> | |
------------------
Please Detach and Mail in the Envelope Provided
A[X] Please mark your votes
as in this example
FOR ALL
NOMIMNEES WITHHOLD AUTHORITY
LISTED OR ANY TO VOTE FOR ALL
SUBSTITUTES NOMINEES LISTED
Item 1. To elect [ ] [ ] Nominees: Vernon E. Oechsle
two Donald G. Barger, Jr.
directors
to serve until Annual Meeting of
Shareholders in 2003;
INSTRUCTIONS: To withhold authority to vote for
any nominee strike a line through
his/her name.
FOR AGAINST ABSTAIN
Item 2. To consider and act upon a proposal [ ] [ ] [ ]
to amend the Company's 1996 Employee
Stock Option and Restricted Stock
Plan, and
Item 3. To transact such other business as may properly come before the meeting
or any adjournment or adjournments therof.
The signer hereby revokes all proxies heretofore given by the signer to
vote on said meeting or any adjournment(s) thereof.
PLEASE VOTE PROMPTLY
--------------------
WILL ATTEND
Signature(s)____________________________ Dated:____________2000 MEETING [ ]
NOTE: Please sign your name exactly as it appears hereon. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title as it appears hereon. When signing as joint tenants, all parties in the
joint tenancy must sign. When a proxy is given by a corporation, it should be
signed by an authorized officer.
<PAGE>
--------------------------------
WHEN PROXY IS OKAYED PLEASE SIGN
& DATE IT ABOVE
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 ITEM 2, AS
RECOMMENDED BY THE BOARD OF DIRECTORS.
The undersigned stockholder(s) of Quanex Corporation hereby appoints Carl
E. Pfeiffer and Vince R. Scorsone, 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 Stockholders to be held at the offices of Fulbright &
Jaworski L.L.P., 1301 McKinney, 51st Floor, Houston, Texas, on February 23,
2000, at 5:00 p.m., C.S.T., or at any adjournment or adjournments thereof, on
the matters described in the enclosed Proxy Statement dated January 24, 2000.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
<PAGE>
--------------------------------
WHEN PROXY IS OKAYED PLEASE SIGN
& DATE IT ABOVE
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
QUANEX CORPORATION
Please Detach and Mail in the Envelope Provided
A[X] Please mark your votes
as in this example
FOR ALL
NOMIMNEES WITHHOLD AUTHORITY
LISTED OR ANY TO VOTE FOR ALL
SUBSTITUTES NOMINEES LISTED
Item 1. To elect [ ] [ ] Nominees: Vernon E. Oechsle
two Donald G. Barger, Jr.
directors
to serve until Annual Meeting of
Shareholders in 2003;
INSTRUCTIONS: To withhold authority to vote for
any nominee strike a line through
his/her name.
FOR AGAINST ABSTAIN
Item 2. To consider and act upon a proposal [ ] [ ] [ ]
to amend the Company's 1996 Employee
Stock Option and Restricted Stock
Plan, and
Item 3. To transact such other business as may properly come before the meeting
or any adjournment or adjournments therof.
The signer hereby revokes all proxies heretofore given by the signer to
vote on said meeting or any adjournment(s) thereof.
PLEASE VOTE PROMPTLY
--------------------
WILL ATTEND
Signature(s)____________________________ Dated:____________2000 MEETING [ ]
NOTE: Please sign your name exactly as it appears hereon. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title as it appears hereon. When signing as joint tenants, all parties in the
joint tenancy must sign. When a proxy is given by a corporation, it should be
signed by an authorized officer.
