AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY , 1994
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Lone Star Industries, Inc.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Lone Star Industries, Inc.
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rule 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:(1)
- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - --------------------------------------------------------------------------------
/ / 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:
- - --------------------------------------------------------------------------------
- - ---------------
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
[LOGO] LONE STAR INDUSTRIES, INC.
300 First Stamford Place
P.O. Box 120014
Stamford, CT 06912-0014
203-969-8600
May 11, 1994
Dear Stockholder,
On behalf of the Lone Star Board of Directors, I cordially invite you to
attend Lone Star's 1994 Annual Meeting of Stockholders to be held on Thursday,
June 9, 1994, commencing at 10:00 a.m. in the Marie Cole Auditorium of The
Greenwich Library in Greenwich, Connecticut.
The meeting will be Lone Star's first Annual Meeting since emerging from
Bankruptcy in April of this year. The business to be considered and voted upon
at the meeting is explained in the accompanying Notice of Annual Meeting and
Proxy Statement.
On behalf of the Board of Directors, I urge you to read the enclosed Proxy
Statement and then complete, sign and date the enclosed proxy card and return as
soon as possible, even if you currently plan to attend the meeting. Your vote is
important, regardless of the number of shares that you own; returning the
enclosed proxy card will not prevent you from voting in person but will assure
that your vote is counted even if you are unable to attend the meeting.
Sincerely,
David W. Wallace
Chairman of the Board and
Chief Executive Officer
<PAGE>
[LOGO]
LONE STAR INDUSTRIES, INC.
300 FIRST STAMFORD PLACE,
P. O. BOX 120014,
STAMFORD, CT 06912-0014
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Lone Star Industries, Inc., a
Delaware corporation, will be held on Thursday, June 9, 1994 at 10:00 a.m. in
the Marie Cole Auditorium of The Greenwich Library, 101 West Putnam Avenue,
Greenwich, Connecticut 06830. The purpose of the Annual Meeting is to consider
and vote on the following matters:
Proposal 1. To elect three directors for a three-year term ending in 1997.
Proposal 2. To approve the Lone Star Industries, Inc. Management Stock
Option Plan, as set forth and described in the attached Proxy
Statement.
Proposal 3. To approve the Lone Star Industries, Inc. Directors Stock Option
Plan, as set forth and described in the attached Proxy Statement.
Proposal 4. To approve the Employees Stock Purchase Plan, as set forth and
described in the attached Proxy Statement.
Proposal 5. To ratify the appointment by the Board of Directors of Coopers &
Lybrand as auditors of the Company for 1994.
Stockholders of record at the close of business on May 10, 1994, will be
entitled to vote at the meeting and at any adjournment thereof.
By Order of the Board of Directors,
JOHN J. MARTIN,
Senior Vice President, General
Counsel and Secretary
May 11, 1994
IMPORTANT
IF YOU CANNOT ATTEND THE MEETING IN PERSON, YOU ARE URGED TO SIGN AND
MAIL PROMPTLY THE ENCLOSED PROXY IN THE RETURN ENVELOPE PROVIDED, SO THAT
YOUR STOCK MAY BE REPRESENTED AT THE MEETING.
<PAGE>
[LOGO]
LONE STAR INDUSTRIES, INC.
300 FIRST STAMFORD PLACE,
P. O. BOX 120014,
STAMFORD, CT 06912-0014
------------------------
PROXY STATEMENT
MAY 11, 1994
------------------------
ANNUAL MEETING OF STOCKHOLDERS, JUNE 9, 1994
Lone Star Industries, Inc. ("Lone Star" or the "Company") emerged from
Reorganization under Title 11 of the Federal Bankruptcy Code on April 14, 1994
pursuant to a Modified Amended Consolidated Plan or Reorganization ("Plan of
Reorganization") confirmed by an order dated February 17, 1994 ("Confirmation
Order") of the Bankruptcy Court supervising the Reorganization ("Bankruptcy
Court"). During the Reorganization no meetings of stockholders were held and,
consequently, the 1994 annual meeting will be the first meeting of stockholders
since the annual meeting held on May 3, 1990.
The enclosed proxy is solicited on behalf of the board of directors of Lone
Star in connection with the annual meeting of stockholders to be held June 9,
1994, and has been mailed to you on or about May 13, 1994. Only stockholders of
record at the close of business on May 10, 1994, will be entitled to notice of
and to vote at this meeting. A record date stockholder list will be open to the
examination of stockholders for any purpose germane to the meeting, during
ordinary business hours for ten days prior to the meeting, at the offices of
Cummings & Lockwood, Two Greenwich Plaza, Greenwich, Connecticut. A stockholder
executing and returning a proxy in the accompanying form has the power to revoke
such proxy by written notice to the Secretary of Lone Star prior to the meeting
or by attending the meeting and voting in person. All proxies properly executed
and returned to Lone Star will be voted at the meeting.
The common stock is entitled to be voted on all Proposals to be considered
at the meeting. At May 10, 1994, there were outstanding 11,115,040 shares of
common stock entitled to one vote on all Proposals. Neither the certificate of
incorporation nor the by-laws of the Company provide for cumulative voting of
stock.
Concerning the vote required for Proposal 1, the nominees receiving the
greatest number of votes, up to the number of directors to be elected, are
elected directors. The affirmative vote of a majority of the shares of common
stock represented and entitled to vote at the meeting is required for approval
of Proposals 2, 3, 4 and 5. Shares voted as abstaining will be counted as
present and entitled to vote. Broker non-votes, if any, are not shares entitled
to vote.
The board of directors does not know of any matters which will come before
the meeting other than those referred to in the foregoing Notice. If any other
matters are properly presented at the meeting for action, it is intended that
the persons named in the proxy will vote thereon according to their discretion.
<PAGE>
PROPOSAL 1. ELECTION OF DIRECTORS
Pursuant to the Confirmation Order of the Bankruptcy Court the board of
directors of the Company was reconstituted effective February 17, 1994. The
present directors of Lone Star are as follows: Allen E. Puckett and David W.
Wallace are Class I directors with terms expiring at the 1994 Annual Meeting of
Stockholders; James E. Bacon and William M. Troutman are Class II directors with
terms expiring at the 1995 Annual Meeting of Stockholders; and Theodore F.
Brophy, Robert G. Schwartz and Jack R. Wentworth are Class III directors with
terms expiring at the 1996 Annual Meeting of Stockholders. All of the foregoing
persons had previously been directors of the Company except for Mr. Schwartz who
became a director on the date of the Confirmation Order. On May 9, 1994 the
board of directors nominated Arthur B. Newman for election as a Class I director
at the 1994 Annual Meeting.
Lone Star's Certificate of Incorporation provides for the division of the
board of directors into three classes with the directors in each class serving
for a term of three years. Each class of directors is to consist, as nearly as
may be possible, of one third of the total number of directors constituting the
entire board of directors.
Since the terms of the directors of Class I expire at the 1994 annual
meeting, three Class I directors are to be elected to serve until the 1997
annual meeting and until their successors are elected and qualified.
The Company's by-laws provide that any stockholder may nominate a person
for election to the board of directors at an annual meeting of stockholders only
if written notice of such stockholder's intent to make such a nomination is
delivered to the Secretary of the Company at its offices at 300 First Stamford
Place, Stamford, Connecticut 06912-0014 not more than 65 days prior to the date
of the annual meeting and not later than 10 business days after the giving of
notice of such annual meeting to the stockholders; provided that, if less than
15 days notice of the annual meeting is given to stockholders, notice of a
nomination must be delivered not later than the close of business on the fifth
day preceding the meeting. Each notice must set forth (a) the name, age,
business address and residence address of the nominee, (b) the principal
occupation or employment of the nominee, (c) the class and number of shares of
capital stock of the Company beneficially owned by the nominee, (d) any other
information concerning the nominee that would be required under the rules and
regulations of the Securities and Exchange Commission in a proxy statement
soliciting proxies for the election of such nominee as a director, (e) a signed
consent of the nominee to serve as a director, if elected, and (f) the name and
record address of, and the class and number of shares of capital stock of the
Company beneficially owned by, the stockholder making the nomination. The
Company may require a nominee to furnish such other information as may
reasonably be required to determine the eligibility of such nominee to serve as
a director.
Information concerning the nominees and the continuing members of the board
of directors is set forth below. All of such persons are incumbent directors,
except Arthur B. Newman who is a nominee, and hold no other positions with Lone
Star, except David W. Wallace who is Chairman of the Board and Chief Executive
Officer and William M. Troutman who is President and Chief Operating Officer.
The persons named in the accompanying proxy intend to vote for the election
as directors of Lone Star of the nominees named below. If, for any reason, any
nominee becomes unavailable for election, the proxies solicited by the board of
directors will be voted for such substituted nominee as is selected by the board
of directors or the board of directors, at its option, may reduce the number of
directors to constitute the entire board. The board of directors has no reason
to believe that any of the named nominees is not available or will not serve if
elected.
2
<PAGE>
NOMINEES FOR DIRECTOR--TERM TO EXPIRE 1997 (CLASS I)
Arthur B. Newman, 50, is a nominee for election as a director. He has been
a General Partner in The Blackstone Group, a private investment banking firm,
since May, 1991. Previously, Mr. Newman was a Managing Director and head of the
Restructuring and Reorganization Group of Chemical Bank from August 1989 and
prior thereto was a Senior Partner at Ernst & Young.
Allen E. Puckett, 74, has been a director since 1976 and is Chairman of the
Audit Committee of the board. Since April 1987 he has been Chairman Emeritus of
Hughes Aircraft Company, a manufacturer of aerospace and missile systems, data
processing systems and industrial electronics equipment. From 1978 to 1987 he
was Chairman of the Board and Chief Executive Officer of Hughes Aircraft
Company. Dr. Puckett is also a director of General Dynamics Corporation and
Logicon, Inc.
David W. Wallace, 70, has been a director since 1970 and has served as
Chairman of the Board and Chief Executive Officer of Lone Star since January
1991. He is also Chairman of the Executive Committee of the board. Mr. Wallace
was Chairman of the Board and Chief Executive Officer of Todd Shipyards
Corporation during the pendency of its Chapter 11 Bankruptcy case which began in
1987 and ended with approval of a plan of reorganization in late 1990. Prior to
July 1984, he was Chairman of the Board and President, Bangor Punta Corporation,
a diversified company whose operations included general aviation aircraft and
law enforcement equipment. Since 1985, Mr. Wallace has been Chairman of the
Board of FECO Engineered Systems, Inc., a manufacturer and engineer of high
technology industrial ovens. Mr. Wallace was also Chairman of the Board of
National Securities & Research Corporation, an advisor to a family of eleven
mutual funds, from 1988 to 1993. He is Chairman of the Board of The Putnam Trust
Company, and a director of Zurn Industries, Inc. and Holmes Protective Company.
CONTINUING DIRECTORS--TERM TO EXPIRE 1995 (CLASS II)
James E. Bacon, 63, has been a director since 1992, having been elected by
the board of directors, and is a member of the Executive, Audit and Compensation
and Stock Option Committees of the board. He is a private investor and
consultant. From 1986 to 1990, he was Executive Vice President and a Director of
United States Trust Company, a bank holding company, and a Trustee of United
States Trust Company of New York. Mr. Bacon was also a director of Todd
Shipyards Corporation from September 1991 to June 1992 and a director of Prime
Hospitality Corp. from July 1992 to January 1994. He is a trustee of Nuveen
Select Tax-Free Income Portfolio and a trustee of the Federation of Protestant
Welfare Agencies (N.Y.).
William M. Troutman, 53, has been a director since 1992 having been elected
by the board of directors, and is a member of the Executive Committee of the
board. Since 1986, he has been President and Chief Operating Officer of Lone
Star.
CONTINUING DIRECTORS--TERM TO EXPIRE 1996 (CLASS III)
Theodore F. Brophy, 71, has been a director since 1992, having been elected
by the holders of the cancelled $13.50 Cumulative Convertible Preferred Stock,
and is a member of the Executive and Audit Committees of the board. He is a
consultant and director of various companies. Until May 1988, Mr. Brophy was
Chairman and Chief Executive Officer of GTE Corporation, a telecommunications
company. In 1988, he was Chairman, United States Delegation to the World
Administrative Conference on Space Communications. Mr. Brophy is also a director
of Transcell Technologies Inc.
Robert G. Schwartz, 66, has been a director since February 1994, having
been elected pursuant to the Confirmation Order and is a member of the Executive
and Compensation and Stock Option Committees of the board. Mr. Schwartz retired
as Chairman of the Board of Directors, President and Chief Executive Officer of
the Metropolitan Life Insurance Company in 1993, having held these positions
since 1989. He has continued as a director of the Metropolitan Life Insurance
Company, and
3
<PAGE>
is also a director of CS First Boston, Inc., COMSAT Corporation, Lowe's
Companies, Inc., Mobil Corporation, Potlatch Corporation and The Reader's Digest
Association, Inc., and a member of the Board of Trustees of the Consolidated
Edison Company of New York. Mr. Schwartz is a member of the Business Council and
a Trustee of the Committee for Economic Development.
Jack R. Wentworth, 65, has been a director since 1992 and is Chairman of
the Compensation and Stock Option Committee of the board. From 1984 to 1993 he
was Dean of the Graduate School of Business at Indiana University and is now
Arthur M. Weimer Professor of Business Administration. Professor Wentworth is
also a director of Kimball International, Inc., Market Facts, Inc., Bank One
Bloomington NA. and KPT Inc.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has standing Audit, Compensation and Stock Option and Executive
Committees of the board. Eight meetings of the board of directors, two meetings
of the Audit Committee of the board and two meetings of the Compensation and
Stock Option Committee of the board were held during 1993. No meeting of the
Executive Committee of the board was held in 1993. Of the aggregate of (i) the
total number of meetings of the board and (ii) the total number of meetings of
all committees of the board on which a particular director served, all directors
attended at least 90% of such meetings except Mr. Puckett who attended 70%.
The functions of the Audit Committee are to recommend the principal
auditors of Lone Star, to consult with the principal auditors with regard to the
plan of audit, to review the report of audit and the accompanying management
letter, to consult with the principal auditors with regard to the adequacy of
internal controls, and to consult with Lone Star's internal auditors on the
above matters.
The functions of the Compensation and Stock Option Committee are to approve
compensation arrangements for senior management and to approve and recommend to
the board of directors the adoption of any compensation plans in which officers
and directors are eligible to participate, and to grant stock options or other
benefits under any such plans.
The Executive Committee is empowered to exercise all of the authority of
the board of directors, except that it does not have the power to rescind any
action previously taken by the board of directors or to take certain actions
enumerated in the Company's By-Laws (such as amend the Certificate of
Incorporation, change the Company's dividend policy or adopt an agreement of
merger or consolidation).
Lone Star has no nominating committee of the board of directors or
committee of the board performing a similar function.
4
<PAGE>
EXECUTIVE COMPENSATION
The following table shows compensation received by the Company's Chief
Executive Officer and the four other most highly paid executive officers for the
three fiscal years ending December 31, 1993.
SUMMARY COMPENSATION TABLE
<TABLE><CAPTION>
LONG TERM COMPENSATION
--------------------------------
ANNUAL COMPENSATION AWARDS
------------------------------------- --------------------------------
(A) (B) (C) (D) (E) (F) (G)
- - ----------------------------------------- --------- ----------- ------------- ------------- --------------- ---------------
NAME OTHER RESTRICTED SECURITIES
AND ANNUAL STOCK UNDERLYING
PRINCIPAL COMPEN-SATION AWARD(S) OPTIONS/
POSITION YEAR SALARY($) BONUS($) ($)(1) ($) SARS(#)
- - ----------------------------------------- --------- ----------- ------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
David W. Wallace,........................ 1993 $ 250,000 -- -- -- --
Chairman of the Board of Directors and 1992 250,000 -- -- -- --
Chief Executive Officer 1991 250,000 -- * -- 100,000
William M. Troutman...................... 1993 325,000 -- -- -- --
President and Chief Operating Officer 1992 325,000 -- -- -- --
1991 325,000 -- * -- --
John J. Martin........................... 1993 250,000 -- -- -- --
Senior Vice President, General Counsel 1992 250,000 -- -- -- --
and Secretary 1991 250,000 -- * -- --
Roger J. Campbell........................ 1993 170,000 -- -- -- --
Vice President--Cement Operations 1992 170,000 -- -- -- --
1991 170,000 -- * -- --
Pasquale P. Diccianni.................... 1993 165,000 -- -- -- --
Vice President--Cement Sales and 1992 165,000 -- 32,573 -- --
Aggregates 1991 165,000 -- * -- --
<CAPTION>
PAYOUTS
-------------
(A) (H) (I)
- - ----------------------------------------- ------------- -----------
ALL
NAME OTHER
AND LTIP COMPEN-
PRINCIPAL PAYOUTS SATION
POSITION ($) ($)(2)
- - ----------------------------------------- ------------- -----------
<S> <C> <C>
David W. Wallace,........................ -- 2,249
Chairman of the Board of Directors and -- 2,189
Chief Executive Officer -- *
William M. Troutman...................... -- 2,249
President and Chief Operating Officer -- 2,189
-- *
John J. Martin........................... -- 2,249
Senior Vice President, General Counsel -- 2,189
and Secretary -- *
Roger J. Campbell........................ -- 2,249
Vice President--Cement Operations -- 2,189
-- *
Pasquale P. Diccianni.................... -- 2,249
Vice President--Cement Sales and -- 2,189
Aggregates -- *
</TABLE>
- - ---------------
(1) Perquisites and other personal benefits were less than 10% of the total
annual salary and bonus for 1992 and 1993 for each of the named executive
officers except for Mr. Diccianni in whose case $18,782 was paid under an
executive medical plan in 1992.
(2) Contributions by the Company on behalf of the named executive officers under
the Savings Plan for Salaried Employees.
* Under the transition rules of the Securities and Exchange Commission, no
disclosure is required.
5
<PAGE>
EMPLOYMENT AGREEMENTS AND PLANS
David W. Wallace has an employment agreement with the Company pursuant
to which he is employed as Chairman of the Board of Directors and Chief
Executive Officer at a salary of $250,000 per annum and is eligible for an
annual bonus in the discretion of the Compensation and Stock Option Committee of
the board of directors. Either party may terminate the Employment Agreement upon
six months notice to the other. As discussed below, the Company has applied to
the Bankruptcy Court for approval to pay Mr. Wallace a confirmation bonus.
William M. Troutman and John J. Martin also have employment agreements
("Agreements" or "Agreement") with the Company. Mr. Troutman's Agreement is for
two years from August 20, 1992 (the "Initial Term") and Mr. Martin's Agreement
is for two years from May 18, 1992 (the "Initial Term"). Both Agreements
continue after the Initial Term until terminated by either party. In the event
that Lone Star terminates an Agreement, other than for Cause (as defined
therein), Lone Star is required to make a severance payment in an amount equal
to the employee's salary for the period from the effective date of termination
through the end of the Initial Term, or one year after the effective date of
termination, whichever is greater. As compensation, Mr. Troutman and Mr. Martin
shall continue to receive their present annual salaries of $325,000 and
$250,000, respectively. As discussed below, the Company has applied to the
Bankruptcy Court for approval to pay Mr. Troutman and Mr. Martin confirmation
bonuses. Mr. Troutman and Mr. Martin will participate in any employee program
established by Lone Star for its officers on the same terms and conditions as
the other officers of Lone Star.
In April 1994 the Bankruptcy Court granted an order respecting certain
claims in the Reorganization Proceedings and certain death, disability and
retirement benefits of Messrs. Troutman and Martin.
Mr. Troutman is entitled to receive annual retirement benefits at age 65 of
$225,000, including the benefits payable to him pursuant to the Salaried
Employees Pension Plan and an annuity purchased by Lone Star for Mr. Troutman in
1989. If Mr. Troutman ceases full-time employment with the Company between ages
55 and 62, he may elect to receive his retirement benefits reduced by 5% for
each year before age 62. Thereafter there will be no reduction. If Mr. Troutman
is disabled at any time, the retirement benefits shall commence immediately.
Upon his death the retirement benefits will be paid to his spouse until her
death.
Upon retirement, Messrs. Troutman and Martin, and their respective spouses,
will be entitled to full payment for certain medical services and expenses
pursuant to agreement between each of them and the Company which were approved
and ratified by the Bankruptcy Court. These medical benefit payments are to be
reduced by an annual deductible of $1,000 prior to age 65 and $750 thereafter,
with a lifetime benefit limit for each person of $1,000,000. Upon retirement,
Lone Star will also provide Messrs. Troutman and Martin retiree life insurance
on the same basis as that presently in effect for Lone Star's salaried retirees.
Mr. Martin will also be provided retirement benefits pursuant to an annuity
purchased for him in 1989.
In recognition of their significant contributions to the Reorganization,
the Company, with the approval of the board of directors, has applied to the
Bankruptcy Court for an order authorizing it to pay confirmation bonuses of
$750,000 to Mr. Wallace; $450,000 to Mr. Troutman; $250,000 to Mr. Martin;
$100,000 to Mr. Campbell; and $300,000 to other officers and employees. This
matter is scheduled to be heard in June 1994 by the Bankruptcy Court.
Because of the rejection and/or termination of employment agreements with
officers during 1991 and to enable the Company to retain and, if necessary, to
attract key personnel, the Bankruptcy Court entered an Order approving a
separation pay and retention award plan (the "Plan") pursuant to which the
Compensation and Stock Option Committee could designate certain key executive
personnel for separation pay and retention payment awards. Nineteen (19)
employees of the Company, including Messrs. Campbell and Diccianni and certain
other executive officers but not including Messrs. Wallace, Troutman and Martin,
were designated as such key employees (the "Key Employees").
6
<PAGE>
The Plan is comprised of two components.The first component provides the
Key Employees with a supplement to Lone Star's Standard Severance Pay Program
(described below) in the event of involuntary termination of their employment
(the "Separation Payments"). The second component provided for payments to Key
Employees which were designed to encourage such employees to remain with Lone
Star throughout the Reorganization Proceedings (the "Retention Award") and in
view of the effectiveness of the Plan of Reorganization such payments totaling
$1,139,598.60 have been made to Key Employees, including $85,000 for Mr.
Campbell and $82,500 for Mr. Diccianni, less applicable withholding. The
Separation Payments are equal to three months base salary and would be provided
to the Key Employees upon the occurrence of either of the following events which
may occur on or after the effective date of the Plan of Reorganization and prior
to February 17, 1995, the first anniversary of the confirmation of the Plan of
Reorganization (i) discharge from employment for reasons other than Cause (as
defined in the Plan); or (ii) termination of employment for Good Reason (as
defined in the Plan). A Separation Payment has been made by the Company to only
one Key Employee.
The Separation Payments would be in addition to and concurrent with those
provided under Lone Star's Standard Severance Payment Plan in the event of
involuntary termination of salaried employees. Under the Standard Severance
Payment Plan, those employees with less than five years service would receive a
payment equal to four weeks salary. Those employees working for five years or
more are entitled to severance payments equal to one week's salary for each year
of service, up to a maximum of fifty two weeks.
The Order of the Bankruptcy Court approving the Plan limited Retention and
Separation Payments to an aggregate of $2,400,000.
As part of its Plan of Reorganization, Lone Star and certain of its
subsidiaries transferred to Rosebud Holdings, Inc. and its subsidiaries certain
assets which have been determined in the Plan of Reorganization to be Non-Core
Assets. It is intended that these Non-Core Assets be sold and that the proceeds
therefrom be used to pay interest and reduce the principal on $138,118,000 of
10% Asset Proceeds Notes issued by Rosebud Holdings, Inc. and its subsidiaries
pursuant to the Plan of Reorganization. Lone Star has guaranteed payment of up
to $28,000,000 of the Asset Proceeds Notes. Lone Star has entered into a
Management Services and Asset Disposition Agreement with Rosebud Holdings, Inc.
and its subsidiaries pursuant to the Plan of Reorganization under which, among
other things, it will make management personnel available to market and seek to
dispose of the Non-Core Assets. In order to ensure that the values obtained for
the Non-Core Assets are maximized, Lone Star has established the Lone Star
Industries, Inc. Rosebud Incentive Plan ("Rosebud Plan"). The Rosebud Plan was
approved by the Bankruptcy Court in the Confirmation Order. The Rosebud Plan
provides that after payment of the Asset Proceeds Notes in full, a pool of 20%
of the net proceeds from remaining Non-Core Asset dispositions, up to a maximum
of $5,000,000, will be available for distribution among senior officers, senior
management and other key employees of Lone Star and its affiliates to be
selected by the Compensation and Stock Option Committee of Lone Star's Board of
Directors. That Committee will also determine the amounts of the incentive
awards. No individual may receive more than 15% of the aggregate funds awarded
nor is an individual eligible to receive an incentive payment unless he or she
is employed by Lone Star or an affiliate on the date(s) such payments are to be
distributed. Mr. David W. Wallace, Chairman of the Board of Lone Star, is not
eligible to receive incentive payments. As yet, no individuals have been
designated by the Compensation and Stock Option Committee to participate in the
Rosebud Plan.
Directors who are not Lone Star employees are compensated for their
services at an annual rate of $20,000 plus $1,000 for each board and board
committee meeting attended, have rights pursuant to certain indemnification
agreements, and are provided with $100,000 of life insurance. Such insurance
continues for directors who leave the board of directors after five or more
years of service as a director. In addition, directors who are not Lone Star
employees and who have five or more years of service as a director are entitled
to receive annual payments of $15,000 for ten years, commencing on the earlier
of the director's death (in which case payments are to be made to his
beneficiary) or his leaving the board
7
<PAGE>
of directors. Except for Messrs. Troutman and Wallace, no director is an
employee of Lone Star. Mr. Wallace, having served more than five years as a
non-employee director, is entitled to receive $15,000 for ten years upon his
retirement from the board. In 1988, Lone Star deposited $1,500,000 into a bank
trust fund to provide for payment of these annual payments and claims under the
directors' indemnification agreements; however, the rights of directors to such
payments are not limited by the amount of money in this fund. At December 31,
1993 the balance in this fund was $1,386,748 and eight persons were receiving
payments under the directors retirement program.
STOCK OPTIONS
The following information is provided concerning Stock Option Plans of Lone
Star in effect on December 31, 1993 but which were terminated and all options
outstanding thereunder were cancelled pursuant to the Plan of Reorganization
effective April 14, 1994.
Lone Star had 1982, 1986, 1987, 1988 and 1989 Stock Option Plans, all of
which were approved by the stockholders. These Plans were substantially
identical. Under the 1982, 1986, 1987, 1988 and 1989 Plans 550,000, 700,000,
700,000, 750,000 and 1,000,000 shares of common stock, respectively, were
reserved for issuance and options for approximately 2,902,197 shares remained
available for grant at December 31, 1993. All options granted under these
Plans were granted at a price equal to the fair market value of Lone Star
common stock on the date of grant (except for options granted to Mr. David W.
Wallace at a price higher than the market value on the date of grant). No
options were granted during 1991, 1992 and 1993 under these Plans except for
the options granted to Mr. Wallace.
The following table shows as of December 31, 1993 the number of shares
subject to options outstanding under all stock option plans, and the exercise
prices and the expiration dates of such options. The closing price for the old
Common Stock on New York Stock Exchange on that date was $2.00.
NUMBER OF SHARES OPTION
SUBJECT TO EXERCISE OPTION
OUTSTANDING OPTIONS PRICE EXPIRATION DATE
- - ------------------- --------- -----------------------
76,000 $ 34.875 February 18, 1997
43,506 35.625 February 24, 1997
103,735 24.00 October 20, 1997
89,000 28.50 February 18, 1998
163,750 29.00 December 13, 1998
94,750 13.50 February 15, 2000
100,000 5.00 January 17, 2001
The following table provides information on option exercises in fiscal 1993
by executive officers named in the Summary Compensation Table. No exercisable
options were in the money at December 31, 1993. The Company has no outstanding
stock appreciation rights.
AGGREGATED OPTION EXERCISES IN LAST YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE><CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
NUMBER OF UNEXERCISED OPTIONS/SARS
SHARES OPTIONS/SARS AT FISCAL YEAR
ACQUIRED VALUE AT FISCAL YEAR-END (#) END ($)
ON EXERCISE REALIZED -------------------------------- ------------------------------
NAME # $ EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - -------------------------------- ----------------- ------------- ----------- ------------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
David W. Wallace................ 0 $ 0 100,000 0 $ 0 $ 0
William M. Troutman............. 0 0 283,592 0 0 0
John J. Martin.................. 0 0 87,702 0 0 0
Roger J. Campbell............... 0 0 16,000 0 0 0
Pasquale P. Diccianni........... 0 0 16,000 0 0 0
</TABLE>
8
<PAGE>
PROPOSAL 2. APPROVAL OF LONE STAR INDUSTRIES, INC. MANAGEMENT STOCK OPTION PLAN
The board of directors of Lone Star adopted the Lone Star Management Stock
Option Plan ("Management Plan") on March 10, 1994 subject to approval by the
stockholders. This action was taken in order to provide the officers and key
management of Lone Star following the Reorganization with an increased incentive
to make significant contributions to the performance and growth of Lone Star and
its subsidiaries, to increase stock ownership of employees, and to attract and
retain employees of exceptional ability. As discussed below, grants of options
under the Management Plan will be made in the discretion of the Compensation and
Stock Option Committee. The Compensation and Stock Option Committee has not made
a determination as to the grant of options under the Management Plan and no
recommendation relating thereto has been made to that Committee. Accordingly, no
information can be given as to the number of options which may be granted during
1994.
The following summary is intended to describe certain important features of
the Management Plan. The Management Plan is set forth in full in Appendix A to
this proxy statement, and such summary is qualified in its entirety by reference
to the terms of the Management Plan.
Administration. The Management Plan shall be administered by the
Compensation and Stock Option Committee of Lone Star's board of directors. This
Committee shall have authority in its discretion to, among other things, (i)
grant options under the Management Plan, (ii) select employees to receive
options, and (iii) determine the number of options to be granted to each
employee.
Eligibility and Participation. The class of employees eligible to receive
stock options under the Management Plan are officers and other key management
employees, including those named in the Summary Compensation Table, who shall be
selected by the Committee from those employees who, in the opinion of the
Committee, are in positions which enable them to make significant contributions
to the performance and growth of Lone Star and its subsidiaries.
Determination of Option Price. The option price of a share of common stock
covered by each stock option shall be determined by the Committee but shall not
be less than the fair market value of a share of Lone Star's common stock on the
date of grant of such stock option. Such fair market value shall be the average
of the high and low prices of a share of common stock in New York Stock Exchange
composite market transactions on the date of the grant of the stock option.
Stock Options. Subject to adjustment, the aggregate number of shares of
Lone Star common stock which may be issued under options and which shall be
reserved for purposes of the Management Plan shall be 700,000. Stock options to
purchase full shares of common stock of Lone Star may at the discretion of the
Committee be Incentive Stock Options (as defined in Section 422 of the Internal
Revenue Code of 1986, as amended ("Code")).
Option Agreements. Each stock option shall be evidenced by an option
agreement containing such terms and conditions, consistent with the provisions
of the Management Plan, as the Committee shall from time to time determine. Such
terms and conditions, at the discretion of the Committee, may include, without
limitation, provisions with respect to the time or times at which the stock
option is exercisable, the effect of termination of employment upon right of
exercise, the manner of exercise of such stock option, and payment of income tax
withholding requirements in connection with the exercise of a Non-Incentive
Stock Option.
Option Term. The term within which each stock option is exercisable shall
be for such period as the Committee may determine, but such term shall not
exceed a period of ten years in the case of Incentive Stock Options and ten
years and one day in the case of Non-Incentive Stock Options from the date of
grant of an option.
9
<PAGE>
Adjustments Upon Changes in Capitalization. In the event of changes in Lone
Star's common stock by reason of stock dividends, stock-splits,
recapitalization, mergers, consolidations, combinations or exchanges of shares
and the like, the maximum number of shares of common stock and the number of
shares and option price per share of all stock subject to outstanding options
shall be adjusted as necessary to maintain the proportionate interests of the
options and preserve, without exceeding, the value of the options.
Limit on Value of Stock Options. The aggregate fair market value
(determined as of the time the options are granted) of common stock with respect
to which Incentive Stock Options are exercisable for the first time by an
employee during any calendar year shall not exceed $100,000. There is no such
limit on value with respect to Non-Incentive Stock Options.
Termination of Employment. During its term, an option may be exercised both
while the holder thereof continues to be an employee and during the three month
period following termination of employment. Such three month period shall be one
year in the case of disability or of death.
Suspension, Termination and Amendment. The Management Plan provides that
the board of directors may suspend or terminate the Management Plan and amend
any of its provisions; provided, however, that, the board may not, without
approval by the stockholders, amend the Management Plan if such approval is
required to comply with Rule 16b-3 under the Securities Exchange Act of 1934,
the Delaware General Corporation Law or, with respect to Incentive Stock
Options, Section 422 of the Code, or any applicable rules of the National
Association of Security Dealers, Inc. or the New York Stock Exchange or any
successor provisions.
Tax Consequences. Under the Code, if shares are issued to a holder upon
exercise of an Incentive Stock Option, no liability for Federal Regular Tax (as
defined in Section 26(b) of the Code) will result to the holder at the time of
grant or exercise of the option. If the holder makes no disposition of the
acquired shares within two years from date of grant and one year from date of
exercise of the option, the gain or loss which is recognized on subsequent
disposition of such shares for purposes of the Regular Tax will be treated as
long-term capital gain or loss. Under such circumstances, Lone Star will not be
entitled to any deduction for Federal income tax purposes.
If a holder sells any shares obtained on the exercise of an Incentive Stock
Option within two years from date of grant or one year from date of exercise of
the option, the holder will be subject to Regular Tax at ordinary income rates
on a portion of the sale proceeds equal to the difference between the fair
market value of the acquired shares on the date of exercise and the option
price. Any excess of the sale price over the fair market value on the date of
exercise will be subject to Regular Tax as a capital gain. If the shares are
sold at a price less than the fair market value on the date of exercise but
greater than the option price, then the amount of ordinary income will be
limited to the difference between the sales price and the option price. Under
the circumstances described in this paragraph, Lone Star will be entitled to a
deduction for Federal income tax purposes in an amount equal to the ordinary
income recognized by the holder (unless Section 162(m) of the Code applies, in
which event all or a portion of the deduction could be disallowed).
For purposes of computing a holder's Alternative Minimum Taxable Income
under Section 56 of the Code, Incentive Stock Options are treated as
Non-Incentive Stock Options (discussed in the next paragraph).
A holder who is granted a Non-Incentive Stock Option will not realize any
taxable income upon the grant of the option. Upon exercise of the option, the
excess of the fair market value of the shares on the date the option is
exercised over the option price will be taxable as ordinary income to the
holder. Federal income tax up to a maximum of 28% of any gain taxed as ordinary
income plus appropriate state taxes must be paid as withholding tax at the time
such ordinary income is recognized by the holder in connection with exercise of
a Non-Incentive Stock Option. In that event, Lone Star will be entitled to
10
<PAGE>
a deduction for Federal income tax purposes in an amount equal to the ordinary
income recognized by the holder (unless Section 162(m) of the Code applies, in
which event all or a portion of the deduction could be disallowed).
At a holder's election, payment of income tax withholding requirements in
connection with the exercise of a Non-Incentive Stock Option may be made by Lone
Star withholding or a holder delivering shares of Lone Star common stock, valued
at fair market value. (If a holder uses appreciated Lone Star common stock to
satisfy the withholding obligation, the holder will recognize taxable gain in an
amount equal to the difference between the fair market value of the stock and
the holder's tax basis.) The stock option agreements provide that the election
(which is irrevocable, subject to the Committee's approval of the right which
can be withdrawn by the Committee) must be made either at least six months prior
to the date the stock option exercise becomes taxable, or during a ten day
"window period" beginning on the third day following the public release of any
of Lone Star's quarterly or annual summary earnings statements prior to the date
the stock option exercise becomes taxable.
Term. The Management Plan will expire by its terms on March 10, 2004.
The favorable vote of a majority of the shares represented at the meeting
will be necessary for approval of the Management Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
"FOR" APPROVAL OF THE LONE STAR INDUSTRIES, INC.
MANAGEMENT STOCK OPTION PLAN
PROPOSAL 3. APPROVAL OF LONE STAR INDUSTRIES, INC. DIRECTOR'S STOCK OPTION PLAN
The board of directors of Lone Star adopted the Lone Star Industries, Inc.
Directors Stock Option Plan ("Directors Plan") on March 10, 1994, subject to
approval by the stockholders. This action was taken in order to attract
ownership in Lone Star by outside directors of Lone Star whose continued
services are considered essential to Lone Star's growth and progress, and to
provide them with a further incentive to continue as directors. Subject to
approval by stockholders, it is expected that options to purchase 4,000 shares
of common stock will be granted to directors under the Directors Plan during
1994.
The following summary is intended to describe certain important features of
the Directors Plan. The Directors Plan itself is set forth in full in Appendix B
to this proxy statement, and such summary is qualified in its entirety by
reference to the terms of the Directors Plan.
Participation in the Directors Plan. Each non-employee member of the board
of directors shall be a participant in the Directors Plan. No person who is also
an employee of Lone Star or one of its subsidiaries shall be a participant
except with respect to any option received prior to becoming an employee.
Stock Options. Commencing in 1994 and continuing each year thereafter, each
director who was not an employee of Lone Star or one of its subsidiaries during
the six month period preceding the date options are distributed shall receive,
on the first business day following the final adjournment of Lone Star's annual
meeting of stockholders, an option to purchase 1,000 shares of Lone Star's
common stock, provided there is a sufficient number of shares available;
otherwise the number of shares subject to such option shall be prorated among
the eligible directors. Subject to adjustment, the aggregate number of shares of
Lone Star common stock which may be issued under options and which shall be
reserved for purposes of the Directors Plan shall be 50,000.
Determination of Option Price. The option price of a share of common stock
covered by each stock option shall be the fair market value of a share of Lone
Star's common stock on the date of the grant of
11
<PAGE>
such stock option. Such fair market value shall be the average of the high and
low prices of a share of common stock in New York Stock Exchange composite
market transactions on the date of the grant of the stock option. In no event
shall the purchase price be less than the par value of the shares.
Option Term. Stock options shall be exercisable for ten (10) years from the
date of distribution.
Adjustments Upon Changes in Capitalization. In the event of changes in Lone
Star's common stock by reason of stock dividends, stock split, recapitalization,
mergers, consolidations, or exchange of shares and the like, the maximum, number
of shares of common stock subject to this plan and the number of shares and
option price per share of all stock subject to outstanding options shall be
adjusted as shall be necessary to maintain the proportionate interests of the
options.
Term. The Directors Plan will expire by its terms on March 10, 2004.
The favorable vote of a majority of the shares represented at the meeting
will be necessary for approval of the Directors Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
"FOR" APPROVAL OF THE LONE STAR INDUSTRIES, INC.
DIRECTORS STOCK OPTION PLAN
PROPOSAL 4. APPROVAL OF EMPLOYEES STOCK PURCHASE PLAN
The board of directors of the Company adopted the Employees Stock Purchase
Plan ("Stock Purchase Plan") on March 10, 1994 subject to approval by the
stockholders. The purposes of the Stock Purchase Plan are to provide eligible
employees with an opportunity to become shareholders of the company, and to
assist them in their long-range savings program. Participation in the Stock
Purchase Plan is voluntary and accordingly, no information can be given as to
levels of compensation under the Stock Purchase Plan during 1994.
The following summary is intended to describe certain important features of
the Stock Purchase Plan. The Stock Purchase Plan itself is set forth in full in
Appendix C to this proxy statement, and such summary is qualified in its
entirety by reference to the terms of the Stock Purchase Plan.
Under the Stock Purchase Plan, eligible employees may elect to purchase
shares of common stock of the Company by means of a payroll deduction system. An
employee may authorize monthly payroll deductions in amounts not less than 2%
and not more than 6% of base pay. The Company contributes 25% of such deduction
and promptly forwards the total amount to a broker for credit to the account of
the employee maintained by the broker. The broker then purchases shares of the
Company's common stock and upon such purchase the employee acquires immediate
full ownership of the shares purchased for the account of the employee. The
Company pays all brokerage commissions on purchases of securities under the
Stock Purchase Plan.
All regular full-time salaried employees and eligible hourly employees of
the Company and of participating subsidiaries who have attained majority are
eligible to participate in the Stock Purchase Plan at their election. As of
December 31, 1993, approximately 518 employees including the executive officers
listed in the Summary Compensation Table were eligible to participate in the
Stock Purchase Plan.
The Company reserves the right to discontinue use of its payroll deduction
facilities for this purpose at any time such action is deemed advisable in its
judgment, and it also reserves the right to amend or discontinue the Stock
Purchase Plan at any time. Any such amendment or termination will not result in
the forfeiture of any funds deducted from the pay of any participant, or of any
shares or fractional interest in shares purchased for the participant, or of any
dividends or other distribution in respect of such shares, effective before the
effective date of amendment or termination of the Stock Purchase Plan.
12
<PAGE>
The number of shares purchased by the broker with funds of the Stock
Purchase Plan depends upon the market price of common stock at the time such
purchases are made. Such purchases are allocated by the broker, at the average
cost thereof, to the individual accounts established for participants, in
proportion to the respective amount received for each participant's account.
All purchases are made in accordance with certain conditions imposed on the
broker by the Securities and Exchange Commission which are designed to guard
against undue impact on the market price of the Company's common stock by reason
of purchases made pursuant to the Stock Purchase Plan.
At the time of purchase each participant for whose account funds were
received immediately acquires full ownership of all shares and of any fractional
interest in shares purchased for such participant's account. All shares are
registered in the name of the broker and remain so registered until delivery is
requested. A participant may request that a certificate for any or all full
shares be delivered to the participant at any time. Although the participant may
not assign or hypothecate an interest in the Stock Purchase Plan as such, upon
purchase of shares under the Stock Purchase Plan such shares may be sold,
assigned, hypothecated or otherwise dealt with as would be the case with respect
to any other shares of the Company a participant might own. No person has any
rights under the Stock Purchase Plan or under any contract in connection
therewith to create any lien on any shares of common stock purchased under the
Stock Purchase Plan.
A participant's account is credited with all dividends paid in respect of
full shares and any fractional interest in shares held in the participant's
account. Cash dividends are reinvested in common stock as promptly as
practicable following receipt thereof by the broker unless the participant
instructs the broker to the contrary.
A participant may instruct the broker at any time to sell any or all full
shares and the fractional interest in any shares allocable to the participant's
account. Upon such sale the broker will mail the participant a check for the
proceeds, less a brokerage commission and any transfer taxes which are payable
by the participant.
The broker delivers to each participant as promptly as practicable all
notices of meetings, proxy statements and other material distributed by the
Company to its stockholders. The full shares of stock in each participant's
account will be voted in accordance with the participant's proxy instructions
duly delivered to the broker.
The Company has designated Merrill Lynch, Pierce, Fenner & Smith,
Incorporated, a member of the New York Stock Exchange, as the broker, to open
and maintain an account in the name of each participant to make purchases of
shares of common stock of the Company on the New York Stock Exchange.
The Company contribution is treated as "earned income" to the employee
under present U.S. tax law. Consequently, the Company withholds federal income
taxes (and state and local taxes where applicable) from each participant's
actual salary. Hence, when a participant authorizes a deduction of a specific
amount, more than that amount will actually be withheld from the participant's
salary to cover the withholding taxes due on the Company contribution. Any
dividends on all shares purchased for a participant's account under the Stock
Purchase Plan and any gain on a participant's sale of shares purchased under the
Stock Purchase Plan are also subject to income tax. For purposes of determining
taxable gain or loss on sales of shares purchased under the Stock Purchase Plan,
the cost will be the purchase price of such shares, including the portion of the
purchase price contributed by the Company.
The favorable vote of a majority of the shares represented at the meeting
will be necessary for approval of the Stock Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
"FOR" APPROVAL OF THE LONE STAR INDUSTRIES, INC.
EMPLOYEES STOCK PURCHASE PLAN
13
<PAGE>
OTHER BENEFIT PLANS
SALARIED EMPLOYEES PENSION PLAN
In 1984 Lone Star terminated its Retirement Plan for Salaried Employees and
established the Lone Star Industries, Inc. Salaried Employees Pension Plan with
the same type of benefits as the terminated plan. All benefits earned under the
provisions of the terminated plan became fully vested and guaranteed annuity
contracts were purchased to cover such benefits.
The following table shows the estimated annual benefits payable upon
retirement to persons in specified compensation and years of credited service
classifications under the Salaried Employees Pension Plan:
<TABLE><CAPTION>
ESTIMATED ANNUAL PENSION BENEFIT PAYABLE AT NORMAL RETIREMENT
ASSUMING THE FOLLOWING YEARS OF CREDITED SERVICE
------------------------------------------------------------------------
ASSUMED AVERAGE
ANNUAL COMPENSATION 10 15 20 25 30 35
- - -------------------------------------- --------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
$125,000.............................. $ 18,900 $ 27,800 $ 36,800 $ 45,800 $ 54,800 $ 63,700
150,000............................... 23,000 33,900 44,900 55,900 66,800 77,800
175,000............................... 27,100 40,000 53,000 65,900 78,900 91,800
200,000............................... 31,200 46,100 61,100 76,000 90,900 105,800
250,000............................... 39,400 58,300 77,200 96,100 115,000 133,900
300,000............................... 47,700 70,500 93,400 116,300 139,100 162,000
350,000............................... 55,900 82,700 109,600 136,400 163,200 190,100
400,000............................... 64,100 94,900 125,700 156,500 187,300 218,100
</TABLE>
The compensation covered by the Plan includes base pay, subject to ERISA
limitations of $228,860 for 1992, $235,840 for 1993 and $150,000 for 1994. Base
pay is shown in the second column of the Summary Compensation Table.
The years of Credited Service for Roger J. Campbell, Pasquale P. Diccianni,
John J. Martin, William M. Troutman and David W. Wallace are 8, 29, 14, 11 and
3, respectively.
The benefits shown in this table are payable for the lifetime of the
individuals. The benefits shown are payable without reduction at age 62 or
later, and are not subject to any deductions or offsets. However, ERISA
currently limits benefits payable at age 65 to $115,641 for 1993 and $118,800
for 1994.
REPORT AND PERFORMANCE GRAPH
Notwithstanding anything to the contrary set forth in any of Lone Star's
previous filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934, both as amended, that might incorporate future filings, including the
Company's Annual Report on Form 10-K for 1993, in whole or in part, the
following Report and Performance Graph shall not be incorporated by reference
into any such filings.
REPORT OF THE COMPENSATION AND
STOCK OPTION COMMITTEE ON EXECUTIVE COMPENSATION
Since December 10, 1990, the Company has been in reorganization under
Chapter 11 of the Federal Bankruptcy Code. Under a January, 1991 Order of the
Bankruptcy Court handling the Company's bankruptcy, all employee related
agreements (except for indemnification arrangements) between the Company and its
employees, in existence at the time of the filing for Bankruptcy, were
terminated (including the Company's Supplemental Retirement Plan which covered
designated key executives of the Company). The Bankruptcy Court also ordered,
that prior to implementing any
14
<PAGE>
agreement with an employee earning in excess of $100,000 per year, the Company
is to submit the terms of such agreement to the official committees involved in
the Company's bankruptcy. The Company's Plan of Reorganization was confirmed on
February 17, 1994 and became effective on April 14, 1994.
The Board of Directors of the Company has a Compensation and Stock Option
Committee, the present members of which are Messrs. Jack R. Wentworth
(Chairman), James T. Bacon and Robert G. Schwartz. Under the By-Laws of both old
Lone Star and reorganized Lone Star and pursuant to Resolutions of the Board of
Directors, the Compensation Committee is authorized to (i) approve and/or
recommend to the Board of Directors compensation arrangements for senior
management, (ii) adopt compensation plans in which Officers and Directors are
eligible to participate and (iii) grant stock options and any other benefits
under the Company's stock option plans. There have been two meetings of the
Compensation and Stock Option Committee since the Company's filing for
bankruptcy one on March 1, 1993 and another on November 11, 1993.
The compensation and terms of employment of Messrs. David W. Wallace,
Chairman of the Board and Chief Executive Officer, William M. Troutman, a
Director and President and Chief Operating Officer and John J. Martin, Senior
Vice President, General Counsel and Secretary are covered by separate employment
contracts entered into (and prior to fiscal 1993) subsequent to the Company's
bankruptcy, after approval by the Board of Directors of the Company and by
Orders of the Bankruptcy Court. These agreements are still in effect.
There has been no change in the compensation of David W. Wallace, the
Chairman of the Board of Directors and Chief Executive Officer of the Company
since January 1991 when the employment contract between him and the Company
became effective.
Further, no executive officer of the Company has received an increase in
salary since the December 1990 commencement of the bankruptcy proceedings
(except for one officer who was promoted to a position of increased
responsibility and in connection with such promotion was granted a salary
increase by the Board of Directors).
In 1992 the Board of Directors and the Bankruptcy Court approved a
Severance Pay and Retention Award Plan covering certain designated executives
(not including Messrs. Wallace, Martin and Troutman). In March 1994 the Board of
Directors approved the payment, subject to Bankruptcy Court approval, of bonuses
for seven senior executives of the Company including, Messrs. Wallace
($750,000), Troutman ($450,000) and Martin ($250,000). Four other executives are
to receive bonuses of $100,000 each. These bonuses were approved by the Board of
Directors in recognition of the significant contribution of the executives
involved to the successful completion of the Company's bankruptcy proceedings. A
Bankruptcy Court hearing on the application to pay these bonuses has been
scheduled for June, 1994.
The Stock Option Plans in existence at the time of the Company's filing for
Bankruptcy (which were approved by shareholders) were terminated on the February
17, 1994 confirmation of the Company's Plan of Reorganization and new Stock
Option Plans (consisting of a plan for options for up to 700,000 shares of
Common Stock, to be granted to executives, and a plan for options for up to
50,000 shares of Common Stock, to be granted to Directors) were approved as part
of the Plan of Reorganization. The Company intends to seek ratification of those
Plans at the 1994 meeting of shareholders. It is expected that grants under the
Stock Option Plan to executives will be made by the then members of the
Compensation and Stock Option Committee of the Board of Directors, subject to
the ratification of the Plan at the 1994 Annual Meeting of Stockholders. The
grant of Stock Options under the Directors' plan to incumbent Directors are
automatic.
When the present Compensation and Stock Option Committee considers
executive compensation, it will be guided by the experience of the executive
involved, the performance of the Company and the
15
<PAGE>
executive's expected contribution to that performance and compensation
arrangements in businesses similar to that of the Company. If appropriate in the
judgment of the Committee, recommendations of a compensation consulting firm
will be sought in connection with the determination of executive compensation.
No member of the Committee is a former or current officer or employee of
the Company or any of its subsidiaries.
MEMBERS OF THE COMPENSATION AND STOCK OPTION COMMITTEE
Jack R. Wentworth (Chairman)
James E. Bacon
Robert G. Schwartz
PERFORMANCE GRAPH
COMPARATIVE FIVE-YEAR TOTAL RETURNS
LONE STAR, S&P 500, AND PEER GROUP
Set forth below is a line graph comparing the cumulative total return on
the Company's (LCE) old common stock against the cumulative total return of
Standard & Poor's 500 and a Peer Group for the period of five years commencing
December 31, 1988 and ending December 31, 1993. On April 14, 1994, the Company's
old common stock was cancelled and new common stock issued.
[ PERFORMANCE GRAPH ]
1988 1989 1990 1991 1992 1993
- - --------- --------- --------- --------- --------- ---------
$100.00 $ 68.13 $ 10.22 $ 13.63 $ 10.71 $ 7.79
$100.00 $ 131.49 $ 127.32 $ 166.22 $ 179.15 $ 197.05
$100.00 $ 107.95 $ 77.10 $ 84.25 $ 100.97 $ 131.89
Assumes $100 invested at the close of trading on December 31, 1988 in Lone
Star's common stock, S&P 500, and a Peer Group. The five year returns for the
Company, the S&P 500 and Peer Group assume reinvestment of dividends and were
sourced from Frank Russell Company and were computed from Value Line, Inc.'s
Cement and Aggregates Industry Data Base. The Peer Group is comprised of eight
cement and aggregates companies: CalMat Co., Dravo Corp., Florida Rock
Industries, Inc., Lafarge Corp., Medusa Corporation, Southdown, Inc., Texas
Industries, Inc. and Vulcan Materials Company.
16
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
On the effective date of the Plan of Reorganization, April 14, 1994, all
preferred stock and all old common stock of Lone Star was cancelled, annulled
and extinguished. Pursuant to the Plan of Reorganization the holders of old
common stock receive (a) .032441 of a share of new common stock and (b) .165413
of a warrant to purchase one share of new common stock for each share of
cancelled old common stock. In addition, unsecured creditors of Lone Star
receive a distribution of shares of new common stock depending on the amount of
their allowed claims. As a result of these actions the following tables are
based on reports received by the Company from the distribution agent and
transfer agent indicating the ownership or right to ownership of new common
stock and warrants issued as a result of the Plan of Reorganization as of April
14, 1994.
(a) The following table sets forth information concerning the persons or
group of persons who owned of record or, to the Company's knowledge, have the
right to acquire ownership of more than 5% of the outstanding new common stock
and warrants of Lone Star.
<TABLE><CAPTION>
NAME AND ADDRESS OF NUMBER NUMBER PERCENT
BENEFICIAL OWNERS(1) OF SHARES OF WARRANTS OF CLASS(2)
- - -------------------------------------------------------------------------- ----------- ----------- -------------
<S> <C> <C> <C>
Metropolitan Life Insurance Company and Metropolitan Insurance and Annuity 1,807,572 891,609 16.9%
Company
One Madison Avenue
New York, NY 10010
The TCW Group, Inc. and Affiliates (3) 1,897,514(4) 0 11.9%(4)
18th Floor
865 South Figueroa St.
Los Angeles, CA 90071
</TABLE>
- - ---------------
(1) Scope Industries, 233 Wilshire Boulevard, Suite 790, Santa Monica, CA 90401
reported in Schedule 13D filings that it owned in excess of 5% of the
outstanding old common stock prior to its cancellation.
(2) The Percent of Class is based on the 12,000,000 shares of new common stock
and the 4,003,333 warrants to purchase shares of new common stock being
issued under the Plan of Reorganization.
(3) TCW Special Credits, an affiliate of The TCW Group, Inc. serves as general
partner of various limited partnerships and investment advisor of various
funds and third party accounts with power to vote and direct the disposition
of shares of common stock of Lone Star owned by such limited partnerships,
funds and third party accounts. TCW Asset Management Company, a subsidiary
of The TCW Group, Inc. is the managing general partner of TCW Special
Credits. The TCW Group, Inc. may be deemed to be a beneficial owner of such
shares for purposes of the reporting requirement of the Securities Exchange
Act of 1934; however, The TCW Group Inc. and its affiliates expressly
disclaim beneficial ownership of these shares.
(4) Does not include 105,685 shares of new common stock to be issued upon
allowance of certain claims in the Reorganization.
(b) The following table sets forth information pertaining to Lone Star new
common stock and warrants owned by the directors and executive officers named in
the Summary Compensation Table and by all directors and executive officers of
Lone Star as a group as of April 14, 1994 and as of May 9, 1994 by Mr. Arthur B.
Newman a nominee for election as a director.
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Except as noted, each such person or group has sole voting and investment
power as to shares and warrants owned:
<TABLE><CAPTION>
NAME OF INDIVIDUAL OR NUMBER NUMBER PERCENT
IDENTITY OF GROUP OF SHARES OF WARRANTS OF CLASS(2)
- - ---------------------------------------------------------------------------- ----------- ------------- -----------------
<S> <C> <C> <C>
James E. Bacon.............................................................. 16 83 *
Theodore F. Brophy.......................................................... 0 0 *
Arthur B. Newman............................................................ 0 0 *
Allen E. Puckett............................................................ 185 413 *
Robert G. Schwartz.......................................................... 0 0 *
William M. Troutman......................................................... 105 538 *
David W. Wallace(5)......................................................... 152 777 *
Jack R. Wentworth........................................................... 6 33 *
Roger J. Campbell........................................................... 167 0 *
Pasquale P. Diccianni....................................................... 633 663 *
John J. Martin.............................................................. 492 418 *
All Directors, Nominee for Director and Executive
Officers as a group (15 persons)............................................ 2,398 2,943 *
</TABLE>
- - ---------------
* Represents less than 1% of the outstanding shares of Lone Star
common stock and warrants to purchase Lone Star common stock.
(5) Does not include 16 shares and 83 warrants of Mr. Wallace's wife
as to which he disclaims beneficial ownership.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
As authorized by the stockholders at the 1988 Annual Meeting, Lone Star has
entered into indemnification agreements with Mr. John J. Martin, an executive
officer, and each of the directors named in this Annual Report except Mr. Robert
G. Schwartz. The Company intends to enter into an indemnification agreement with
Mr. Robert G. Schwartz and, if elected a director, with Mr. Arthur B. Newman.
The provisions of each indemnification agreement provide for
indemnification to the fullest extent permitted by law. They cover all amounts
paid in connection with any threatened, pending or completed action, suit or
proceeding, or any inquiry or investigation, whether civil, criminal,
administrative or otherwise (a "proceeding"), related to the fact that such
director or officer is or was a director, officer, employee, agent or fiduciary
of Lone Star or is or was serving at the request of Lone Star in any capacity
with another entity, or by reason of anything done or not done by such director
or officer in any such capacity.
Indemnification would not, however, be available if a person or body
appointed by Lone Star's Board of Directors who is not a party to the proceeding
for which indemnification is sought and who may be or consist of one or more
members of the Board (or, under certain circumstances discussed below,
independent legal counsel) determines that such indemnification is not permitted
under applicable law and such determination is not successfully challenged
before a court. A director's or officer's rights under the indemnification
agreement are not exclusive of any other indemnity rights; however, the
agreements prevent double payment.
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The indemnification agreements provide for the prompt advancement of
expenses incurred in connection with any proceeding and obligate the director or
officer to reimburse Lone Star for amounts so advanced if it is subsequently
determined that the director or officer is not entitled to indemnification. The
indemnification agreements further provide that the director or officer is
entitled to indemnification for, and advancement of, expenses incurred in any
proceeding seeking to collect from Lone Star an indemnity claim or advancement
of expenses under the indemnification agreements, Lone Star's By-Laws or
otherwise, or in seeking to recover under a directors' and officers' liability
insurance policy, whether or not the director or officer is successful. Pursuant
to the indemnification agreements all legal actions brought against the director
or officer by or in the right of Lone Star must be brought within a period of
two years from the date of the accrual of such actions (or any shorter period
that would otherwise be applicable), after which period any such cause of action
will be extinguished.
After a change in control (as defined) of Lone Star not approved by Lone
Star's board of directors, all determinations to be made by or on behalf of Lone
Star regarding a director's or officer's right to indemnification and to the
advancement of expenses are required to be made by independent legal counsel to
be selected by the director or officer and approved by the board. In the event
of a potential change in control (as defined) of Lone Star, the director or
officer may require Lone Star to establish a trust for such director's or
officer's benefit and to fund such trust in an amount sufficient to cover
reasonably anticipated costs in connection with any claims.
Pursuant to the Plan of Reorganization, Lone Star assumed, to the extent
such obligations have not been rejected prior to Confirmation, all obligations
relating to indemnification and exculpation of Lone Star, and its subsidiaries
and affiliates, respective present or former directors, officers, employees,
fiduciaries, agents or controlling persons as arise under applicable laws or as
provided in any of (i) Lone Star's Restated Certificate of Incorporation, (ii)
Lone Star's by-laws, (iii) any agreement with Lone Star or (iv) the certificate
of incorporation, by-laws or similar documents or agreements of any of Lone
Star's subsidiaries, all as in effect prior to or as of the Effective Date, and
in each case with respect to matters occurring on or prior to the Effective
Date.
Also pursuant to the Plan of Reorganization, all of Lone Star's present and
former officers and directors (collectively, the "Released Parties") were
discharged and released from any and all claims asserted or assertable by any
person arising in any way out of such person's relationship with or work
performed for Lone Star on or prior to the Effective Date; except, however, that
(i) the foregoing discharge and release only applies to those claims for which
the Released Parties are entitled to indemnification by Lone Star pursuant to
applicable laws or as provided in any of (a) Lone Star's Restated Certificate of
Incorporation, (b) Lone Star's by-laws, (c) any agreement with Lone Star, or (d)
the certificates of incorporation, by-laws or similar documents or agreements of
any of Lone Star's subsidiaries, all as in effect prior to or as of the
Effective Date, and in each case with respect to matters occurring on or prior
to the Effective Date, and (ii) the discharge and release does not apply to (a)
any of Lone Star's present officers or directors who were released prior to the
Effective Date by order of the bankruptcy court and as to such individuals, the
terms of their respective releases shall govern, (b) any of Lone Star's present
officers or directors who are the subject of a proceeding to recover property or
money commenced by Lone Star prior to the Effective Date, or (c) any claims
asserted or assertable by or against any of Lone Star's present or former
officers or directors in the following litigations pending in the United States
District Court for the District of Connecticut: (1) Cohn v. Lone Star
Industries, Inc., et al., Civ. No. B-89-617 (JAC), and (2) Garbarino, et ano. v.
Stewart, et al., Civ. No. B-90-631 (JAC).
Mr. Robert G. Schwartz, a director of Lone Star, was formerly Chairman of
the Board of Directors, President and Chief Executive Officer of the
Metropolitan Life Insurance Company ("MetLife") and continues as a director of
MetLife. In connection with Lone Star's reorganization, MetLife filed claims for
approximately $1,120,000 due to the rejection by Lone Star of a lease for office
space in Houston, Texas and, with an affiliate, for approximately $50,000,000
outstanding principal amount of
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Lone Star's defaulted 9.50% Promissory Notes due 1991. These claims have been
allowed and paid in accordance with the terms of the Plan of Reorganization.
MetLife was also the holder of 275,000 shares of Lone Star's $13.50 Cumulative
Convertible Preferred Stock which has been cancelled as of the effective date of
the Plan of Reorganization and for which shares of new common stock and warrants
to purchase new common stock are being issued to MetLife in accordance with the
terms of the Plan of Reorganization.
Mr. Arthur B. Newman, a nominee for election as a director of Lone Star, is
a General Partner in The Blackstone Group. Pursuant to an Order of the
Bankruptcy Court, Lone Star and its subsidiaries in Reorganization employed The
Blackstone Group as financial advisor during the Reorganization. Fees paid to
The Blackstone Group were in accordance with the Order.
PROPOSAL 5. RATIFICATION OF APPOINTMENT OF AUDITORS
The board of directors has recommended that stockholders ratify its
appointment of Coopers & Lybrand as principal independent auditors of the
Company for the year ending December 31, 1994. Coopers & Lybrand has performed
the annual audits of the Company's accounts for many years. A representative of
Coopers & Lybrand is expected to be present at the meeting to respond to any
questions stockholders may have concerning the audited financial statements of
the Company and to make a statement, if he so desires.
The board of directors recommends a vote FOR ratification of the
appointment of Coopers & Lybrand as principal independent auditors for 1994. If
ratification is not approved, the board of directors will reconsider its
appointment of Coopers & Lybrand.
EXPENSES OF SOLICITATION
The cost of solicitation of proxies will be paid by the Company. In
addition to solicitation by use of the mails, certain officers and regular
employees of the Company may solicit the return of proxies by telephone or
personal interviews.
The Company has engaged the services of Morrow & Co., Inc. to assist in the
solicitation of proxies from brokers, nominees, fiduciaries and other
custodians. The fee of such firm will be $7,500 plus expenses.
PROPOSALS FOR 1995 ANNUAL MEETING
It is expected that the 1995 Annual Meeting of Stockholders will be held on
May 18, 1995 in accordance with the by-laws of the Company. Consequently,
stockholder proposals intended to be presented at that Meeting should be
received at the Company's offices at 300 First Stamford Place, Stamford,
Connecticut 06912-0014, attention of the Corporate Secretary, no later than
December 19, 1994 (120 days prior to the estimated mailing date) for eligibility
for inclusion in the 1995 Annual Meeting Proxy Statement and form of proxy.
By Order of the Board of Directors,
JOHN J. MARTIN
Senior Vice President, General
Counsel and Secretary
May 11, 1994
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APPENDIX A
LONE STAR INDUSTRIES, INC. MANAGEMENT STOCK OPTION PLAN
1. PURPOSE
The purpose of the Lone Star Industries, Inc. Management Stock Option Plan
(the "Plan") is, by the means of stock options, to provide officers and key
management, professional and technical employees ("Employees") of Lone Star
Industries, Inc. (the "Company") and its present and future subsidiaries (within
the meaning of Section 424 of the Internal Revenue Code of 1986, as amended (the
"Code")), with an increased incentive to make significant contributions to the
performance and growth of the Company and its subsidiaries, to increase stock
ownership of Employees, and to attract and retain Employees of exceptional
ability.
2. ADMINISTRATION
(a) The Plan shall be administered by the Compensation and Stock Option
Committee of the Board of Directors (the "Committee") appointed by the Board of
Directors consisting of two or more members of the Board each of whom shall be a
disinterested person within the meaning of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 (the "1934 Act").
(b) The Committee shall have full and complete authority in its discretion,
but subject to the provisions of the Plan: to authorize the grant of options
under the Plan; to select those Employees to be granted stock options under the
Plan; to determine the number of stock options to be granted to an Employee; to
determine the time or times at which such options shall be granted; to establish
the terms and conditions to be contained in option agreements under the Plan; to
remove any restrictions and conditions upon such stock options; and to adopt
such rules and regulations and to make all other determinations deemed necessary
or desirable for administration of the Plan.
(c) All decisions of the Committee pursuant to the provisions of the Plan,
all determinations and selections made by the Committee pursuant to such
provisions and related orders and resolutions of the Board shall be final and
conclusive.
3. ELIGIBILITY AND PARTICIPATION
The class of employees eligible to receive stock options under the Plan are
officers and other key management, professional and technical employees who
shall be selected by the Committee from those employees who, in the opinion of
the Committee, are in positions which enable them to make significant
contributions to the performance and growth of the Company and its subsidiaries.
4. STOCK OPTIONS
Stock options to purchase full shares of common stock, par value $1 per
share ("Common Stock"), of the Company may at the discretion of the Committee be
Incentive Stock Options (as defined in Section 422 of the Code) or Non-Incentive
Stock Options or both. Incentive Stock Options and Non-Incentive Stock Options
are sometimes hereinafter collectively referred to as "stock options" or
"options".
5. DETERMINATION OF OPTION PRICE
The option price of a share of Common Stock covered by each stock option
shall be determined by the Committee but shall not be less than the fair market
value of a share of Common Stock on the date of grant of such stock option. Such
fair market value shall be the average of the high and low prices of a share of
Common Stock in New York Stock Exchange composite market transactions, as
reported by The Wall Street Journal, on the date of grant of the stock option.
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6. OPTION TERM
The term within which each stock option is exercisable shall be for such
period as the Committee may determine, but such term shall not exceed a period
of ten years in the case of Incentive Stock Options and ten years and one day in
the case of Non-Incentive Stock Options from the date of grant of an option.
7. OPTION AGREEMENTS
Each stock option shall be evidenced by an option agreement containing such
terms and conditions, consistent with the provisions of the Plan, as the
Committee shall from time to time determine. Such terms and conditions, at the
discretion of the Committee, may include, without limitation, provisions with
respect to the time or times at which the stock option is exercisable, the
effect of termination of employment upon right of exercise, the manner of
exercise of such stock option, the payment for Common Stock either with other
shares of Common Stock or with cash or with both, and payment of income tax
withholding requirements in connection with the exercise of a Non-Incentive
Stock Option by the Company withholding or an Employee delivering shares of
Common Stock.
8. DATE OF GRANT
The date of grant of a stock option shall occur when the granting of the
stock option is authorized by the Committee, or such later date as may be
specified by the Committee in such authorization.
9. LIMIT ON VALUE OF INCENTIVE STOCK OPTIONS
The aggregate fair market value (determined as of the time the option is
granted) of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by an Employee during any calendar year (under
all plans of the Company or any subsidiary of the Company which provide for the
granting of Incentive Stock Options) shall not exceed $100,000.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event of changes in the Common Stock by reason of stock dividends,
split-ups, recapitalizations, mergers, consolidations, combinations or exchanges
of shares and the like, the maximum number of shares of Common Stock subject to
the Plan and the number of shares and option price per share of all stock
subject to outstanding options shall be adjusted by the Committee as shall be
necessary to maintain the proportionate interest of the optionees and preserve,
without exceeding, the value of the options.
11. TERMINATION OF EMPLOYMENT
During its term, an option may be exercised both while the holder thereof
continues to be an Employee and during the three month period following
termination of employment. Such three month period shall be one year in the case
of disability (within the meaning of Section 22(e)(3)of the Code) or of death.
12. TRANSFERABILITY OF OPTIONS
Options under the Plan shall not be assignable or transferable, or subject
to encumbrance or charge of any nature, otherwise than (i) by will or the laws
of descent and distribution; (ii) pursuant to a qualified domestic relations
order as defined in the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder; and (iii) to members of the Employee's
immediate family (i.e., the Employee's children, grandchildren and spouse), or
to one or more trusts for the benefit of such immediate family members, or
partnerships in which such family members are the only partners, provided that
any such transfer shall be permitted only if: (1) the option holder does not
receive any
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consideration for such transfer, (2) written notice of such proposed transfer
and the details thereof shall have been furnished to the Committee, and(3) the
stock option agreement with respect to the options being transferred (including
any amendment thereof), which shall have been approved by the Committee,
expressly permits such transfer. Any options transferred to such immediate
family members, trusts or partnerships will continue to be subject to the same
terms and conditions that were applicable to such options immediately prior to
their transfer. Any transfer in violation of this paragraph shall be void and of
no effect. Unless transferred in accordance with this paragraph, a stock option
may be exercised, during the lifetime of the Employee to whom such stock option
was granted, only by such Employee.
13. AMENDMENT AND TERMINATION
The Board of Directors of the Company may at any time and from time to time
amend, suspend or terminate the Plan in whole or in part; provided, however,
that the Board of Directors may not amend the Plan without the approval of the
Company's shareholders if such approval is required to comply with Rule 16b-3
under the 1934 Act or the Delaware General Corporation Law or, with respect to
Incentive Stock Options, Section 422 of the Code, or any applicable rules of the
National Association of Securities Dealers, Inc. or the New York Stock Exchange
or any successor provisions. No such amendment, suspension or termination may,
without the consent of the Employee to whom an option shall theretofore have
been granted, adversely affect the rights of such Employee under such option.
14. COMMON STOCK RESERVED FOR PLAN
Subject to adjustment as provided in Section 10 hereof, the aggregate
number of shares of Common Stock which may be issued under options and which
shall be reserved for purposes of the Plan shall be 700,000. Authorized but
unissued shares or treasury shares or both may be utilized for purposes of the
Plan. Such number of reserved shares shall be reduced if and to the extent that
treasury shares rather than authorized but unissued shares of Common Stock shall
be utilized for purposes of the Plan. If any stock option shall expire or
terminate for any reason without having been exercised in full, the unpurchased
shares under such option shall again become available for purposes of the Plan.
15. USE OF COMMON STOCK FOR INCOME TAX WITHHOLDING REQUIREMENTS
Any option granted hereunder may provide, at the discretion of the
Committee, for appropriate arrangements for the satisfaction by the Company and
the Employee of all federal, state, local or other income tax withholding
requirements applicable to the exercise of the option. Such arrangements may
include, in the Committee's discretion, the right of the Employee to require the
Company to withhold in the form of shares of Common Stock from any transfer of
shares of Common Stock to an Employee in connection with the exercise of an
option or to receive transfers of shares of Common Stock from the Employee in
connection with the exercise of an option.
16. MISCELLANEOUS PROVISIONS
(a) Nothing in the Plan or in any stock option granted pursuant to the Plan
shall confer on any Employee the right to continue in the employ of the Company
or any of its subsidiaries or affect in any way the right of the Company or any
such subsidiary to terminate such Employee's employment at any time.
(b) The grant of stock options under the Plan shall not confer upon any
Employee any of the rights of a stockholder until due exercise of the Employee's
stock option and until the Employee shall have received a certificate or
certificates therefor.
(c) No option may be exercised with respect to a fractional share.
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<PAGE>
17. DURATION OF PLAN
The Plan shall expire on the tenth anniversary of the earlier of the
approval by the Board or the stockholders of the Company unless earlier
terminated, and no stock option shall be granted after expiration or termination
but stock options previously granted shall remain outstanding in accordance with
their applicable terms and conditions and the terms and conditions of the Plan.
18. SECTION 16(B) COMPLIANCE.
It is the intention of the Company that the Plan shall comply in all
respects with Rule 16b-3 under the 1934 Act and, if any Plan provision is later
found not to be in compliance with Section 16 of the 1934 Act, the provision
shall be deemed null and void, and in all events the Plan shall be construed in
favor of its meeting the requirements of Rule 16b-3. Notwithstanding anything in
the Plan to the contrary, the Board, in its absolute discretion, may bifurcate
the Plan so as to restrict, limit or condition the use of any provision of the
Plan to participants who are officers subject to Section 16 of the 1934 Act
without so restricting, limiting or conditioning the Plan with respect to other
participants.
19. EFFECTIVE DATE OF PLAN
The Plan shall be effective as of April 14, 1994, subject to approval
thereof by not less than a majority of the shares of voting stock represented at
a duly held meeting of stockholders of the Company.
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APPENDIX B
LONE STAR INDUSTRIES, INC. DIRECTORS STOCK OPTION PLAN
1. PURPOSE
The purpose of the Lone Star Industries, Inc. Directors Stock Option Plan
(the "Plan") is, by the means of stock options, to encourage ownership in Lone
Star Industries, Inc. (the "Company") by outside directors of the Company whose
continued services are considered essential to the Company's growth and progress
and to provide them with a further incentive to continue as directors of the
Company.
2. ADMINISTRATION
(a) The Plan shall be administered by the board of directors of the Company
(the "Board").
(b) Grants of options under the Plan and the amount and nature of such
grants shall be automatic in accordance with Section 4 hereof.
(c) All decisions of the Board pursuant to the provisions of the Plan shall
be final and conclusive.
3. PARTICIPATION IN THE PLAN
Each non-employee member of the Board shall be a participant in the Plan.
No person who is also an employee of the Company or one of its subsidiaries
shall be a participant except with respect to any options received prior to
becoming such an employee.
4. STOCK OPTIONS
Each director who was not an employee of the Company or one of its
subsidiaries during the six month period preceding the date options are
distributed shall receive on the first business day following the final
adjournment of the Company's Annual Meeting of Stockholders during the term of
the Plan an option to purchase 1,000 shares of the Company's common stock, par
value $1 per share ("Common Stock"), provided there is a sufficient number of
shares available; otherwise the number of shares shall be prorated.
5. DETERMINATION OF OPTION PRICE
The option price of a share of Common Stock covered by each stock option
shall be the fair market value of a share of Common Stock on the date of grant
of such stock option. Such fair market value ("Fair Market Value") shall be the
average of the high and low prices of a share of Common Stock in New York Stock
Exchange composite market transactions, as reported by The Wall Street Journal,
on the date of grant of the stock option. In no event shall the purchase price
be less than the par value of the shares.
6. OPTION TERM
The term within which each stock option is exercisable shall be ten years
from the date of distribution of an option. No option shall be exercised prior
to six months after the date on which the option was distributed. While an
optionee is a director of the Company and in the case of an optionee who ceases
to be a director of the Company by reason of retirement, full and complete
disability, or death, an option may be exercised prior to its expiration only by
the optionee or, in the case of death, by the executor or administrator of
optionee's estate or by a person who acquired the right to exercise such option
by bequest or inheritance. All option privileges continue for five(5) years
after retirement, full and complete disability or death, but not after the
expiration of the option term. Otherwise, an option
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may only be exercised within the ninety day period after an optionee ceases to
be a director of the Company.
7. OPTION AGREEMENTS
Each stock option shall be evidenced by an option agreement containing such
terms and conditions, consistent with the provisions of the Plan, as the Board
shall from time to time determine.
8. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event of changes in the Common Stock by reason of stock dividends,
split-ups, recapitalizations, mergers, consolidations, combinations or exchanges
of shares and the like, the maximum number of shares of Common Stock subject to
the Plan and the number of shares and option price per share of all stock
subject to outstanding options shall be adjusted as necessary to maintain the
proportionate interest of the optionees and preserve, without exceeding, the
value of the options.
9. TRANSFERABILITY OF OPTIONS
Options under the Plan shall not be assignable or transferable, or subject
to encumbrance or charge of any nature, otherwise than by will or the laws of
descent and distribution. A stock option may be exercised, during the lifetime
of a director to whom such stock option was granted, only by such director.
10. AMENDMENT AND TERMINATION
The Board may at any time and from time to time amend, suspend or terminate
the Plan in whole or in part; provided, however, that the Board may not amend
the Plan without the approval of the Company's stockholders if such approval is
required to comply with Rule 16b-3 under the Securities Exchange Act of 1934
(the "1934 Act") or the Delaware General Corporation Law or any applicable rules
of the National Association of Securities Dealers, Inc. or the New York Stock
Exchange; and provided further, that the Plan shall not be amended more than
once every six months, other than to comport with changes in the Internal
Revenue Code of 1986, as amended, the Employee Retirement Income Security Act,
or the rules thereunder. No such amendment, suspension or termination may,
without the consent of a director to whom an option shall theretofore have been
granted, adversely affect the rights of such director under such option.
11. COMMON STOCK RESERVED FOR PLAN
Subject to adjustment under Section 8, the aggregate number of shares of
Common Stock which may be issued under options and which shall be reserved for
purposes of the Plan shall be 50,000. Authorized but unissued shares or treasury
shares or both may be utilized for purposes of the Plan. Such number of reserved
shares shall be reduced if and to the extent that treasury shares rather than
authorized but unissued shares of Common Stock shall be utilized for purposes of
the Plan. If any stock option shall expire or terminate for any reason without
having been exercised in full, the unpurchased shares under such option shall
again become available for purposes of the Plan.
12. PAYMENT
(a) Payment for all shares shall be made in cash or with Common Stock or a
combination of both delivered at the time that an option, or any part thereof,
is exercised. No shares shall be issued until full payment therefor has been
made. Common Stock used as payment shall have been owned by the optionee not
less than six months preceding the date the option is exercised and shall be
valued at it Fair Market Value.
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(b) Any option granted hereunder shall provide that a director may, at
least six months prior to the first exercise by such director of an option,
elect (which election shall be irrevocable and cover all options granted to the
director hereunder) to provide for the satisfaction of all obligations of the
Company and the optionee under all federal, state, local or other income tax
withholding requirements applicable to the exercise of the option (i) by the
Company's withholding shares of Common Stock from any transfer of shares of
Common Stock to such director in connection with the exercise of an option or
(ii) by such director's transferring shares of Common Stock to the Company.
Common Stock transferred to satisfy withholding obligations pursuant to the
immediately preceding sentence shall have been owned by the optionee not less
than six months preceding the date the option is exercised and shall be valued
at its Fair Market Value.
13. MISCELLANEOUS PROVISIONS
(a) The grant of stock options under the Plan shall not confer upon any
director any of the rights of a shareholder until due exercise of the director's
stock option and until the director shall have received a certificate or
certificates therefor.
(b) No option may be exercised with respect to a fractional share.
14. DURATION OF PLAN
The Plan shall expire on the tenth anniversary of the earlier of approval
of the Board or the stockholders of the Company unless earlier terminated, and
no stock option shall be granted after expiration or termination but stock
options previously granted shall remain outstanding in accordance with their
applicable terms and conditions and the terms and conditions of the Plan.
15. SECTION 16(B) COMPLIANCE.
It is the intention of the Company that the Plan shall comply in all
respects with Rule 16b-3 under the 1934 Act and, if any Plan provision is later
found not to be in compliance with Section 16 of the 1934 Act, the provision
shall be deemed null and void, and in all events the Plan shall be construed in
favor of its meeting the requirements of Rule 16b-3.
16. EFFECTIVE DATE OF PLAN
The Plan shall be effective as of April 14, 1994 subject to approval
thereof by not less than a majority of the shares of voting stock represented at
a duly held meeting of stockholders of the Company.
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APPENDIX C
LONE STAR INDUSTRIES, INC. EMPLOYEES STOCK PURCHASE PLAN
PURPOSES OF THE PLAN
The purposes of the Plan are to provide eligible employees with an
opportunity to become shareholders of Lone Star Industries, Inc. (the
"Company"), and to assist them in their long-range savings program by building
additional security for their financial needs, both before and after retirement.
The Company will contribute an amount equal to 25% of its participating
employees' actual payroll deductions and will absorb the cost of brokerage
charges in connection with purchases made pursuant to the Plan. Participation in
the Plan is entirely voluntary.
ELIGIBILITY
All regular full-time salaried and non-salaried employees of the Company
and of subsidiaries, except subsidiaries expressly excluded by action of the
Board of Directors, who have attained their majority are eligible to participate
in the Plan at their election. No employee, however, who is represented by a
collective bargaining agent is eligible to participate unless such eligibility
is specifically provided for by a collective bargaining agreement.
METHOD OF OPERATION
The Company shall designate a brokerage firm which is a member of the New
York Stock Exchange (the "Broker") to open and maintain an account in the name
of each participant and to make purchases of shares of Lone Star Industries,
Inc. common stock, par value $1 per share ("Common Stock"), on the New York
Stock Exchange. Nothing in the Plan shall restrict the substitution by the
Company in its discretion of a firm other than the one originally named as
broker under the Plan, or the right of any such broker to terminate its services
as broker under the Plan.
The Company will pay the Broker's administrative charges for maintaining
such accounts, and the brokerage commissions on purchases of securities made
with amounts deducted from the pay of participating employees, with amounts
contributed by the Company, and with reinvested dividends.
The Company will deduct funds from each participant's pay as authorized and
shall, as promptly as practicable, forward to the Broker the amounts deducted
for all participants, the Company's 25% contribution, and a list of participants
and the amount allocable to the account of each participant. Upon receipt
thereof from the Company, the Broker will as promptly as practicable purchase on
the New York Stock Exchange, as agent for the participants, as many shares of
Common Stock as such funds will permit.
PAYROLL DEDUCTIONS
Payroll deductions may be authorized by eligible employees in specified
amounts not less than the greater of $10 per month or 2% of base pay and not in
excess of 6% of base pay. Such payroll deduction authorizations will remain
effective until terminated in writing by a participant, and will be in even
multiples of $1.00. For the purpose of this provision, in the case of salaried
employees, base pay shall mean the amount of monthly salary of the participant
before deduction for taxes and before overtime or bonus or incentive payments.
In the case of salesmen paid on a commission basis, base pay for any month shall
mean the average of the commissions paid for the last three calendar years
divided by twelve. For newly-hired commission salesmen, base pay for the
purposes of the Plan shall be determined by local management, to be adjusted by
said management in its discretion at the end of any calendar
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year and to be adjusted to conform to the three year formula upon completion of
three calendar years of employment. In the case of non-salaried employees, base
pay shall mean the result obtained as follows:
Step 1--Multiply the number of hours worked in standard work week by
the employee's hourly rate of pay;
Step 2--Multiply the result of Step 1 by 52;
Step 3--Divide the result of Step 2 by 12.
The meaning of standard work week shall be determined by local management.
The payroll deduction may be revised or terminated at any time by the
employee's written request submitted to the Company. Commencement, revision or
termination of deductions will become effective as soon as practicable after an
employee's written request is received by the Company.
AMENDMENT OR TERMINATION
The Company reserves the right to discontinue use of its payroll deduction
facilities for this purpose at any time such action is deemed advisable in its
judgment, and it also reserves the right to amend or discontinue the Plan at any
time. Any such amendment or termination will not result in the forfeiture of any
funds deducted from the salary of any participant or contributed by the Company
on behalf of any participant, or of any share of Common Stock purchased for the
participant, or of any dividends or other distribution in respect of shares of
Common Stock, effective before the effective date of amendment or termination of
the Plan.
PARTICIPANT'S ACCOUNT WITH THE BROKER
The number of shares of Common Stock purchased by the Broker with funds of
the Plan will depend upon the market price of Common Stock at the time such
purchases are made. Such purchases will be allocated by the Broker, at the
average cost thereof, to the individual accounts established for participants,
in proportion to the respective amount received for each participant's account.
Allocation will be made in full shares of Common Stock and in fractional
interests in shares of Common Stock.
All purchases will be made in accordance with certain conditions imposed
upon the Broker by the Securities and Exchange Commission which are designed to
guard against undue impact on the market price of Common Stock by reason of
purchases made pursuant to the Plan.
At the time of purchase each participant for whose account funds were
received immediately will acquire full ownership of all shares of Common Stock
purchased for the participant's account. All shares of Common Stock will be
registered in the name of the Broker and will remain so registered until
delivery is requested. A participant may request that a certificate for any or
all of the participant's full shares be delivered to him at any time. Although a
participant may not assign or hypothecate an interest in the Plan as such, upon
purchase of shares of Common Stock under the Plan such shares may be sold,
assigned, hypothecated or otherwise dealt with as would be the case with respect
to any other shares of the Company a participant might own. No person has any
right under the Plan to create any lien on any shares of Common Stock purchased
under the Plan.
A participant's account will be credited with all dividends paid in respect
of the full shares of Common Stock and of any fractional interest in shares of
Common Stock held in a participant's account. Cash dividends will be reinvested
in Common Stock as promptly as practicable following receipt thereof by the
Broker unless a participant instructs the Broker to the contrary. Brokerage
commissions payable on purchases made with reinvested dividends will be paid by
the Company.
Any stock dividends or stock splits in respect of shares of Common Stock
held in a participant's account will be credited to the account without charge.
Any distribution to holders of Common Stock of
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other securities and rights to subscribe for additional shares will be sold and
the proceeds will be handled in the same manner as a cash dividend.
A participant may instruct the Broker at any time to sell any or all of the
participant's full shares of Common Stock and the fractional interest in any
shares of Common Stock allocable to the participant's account. Upon such sale
the broker will mail to the participant a check for the proceeds, less a
brokerage commission and any applicable transfer tax, each of which is payable
by the participant. Such instruction to the Broker, or a request for delivery of
certificates, will not affect a participant's status under the Plan unless the
participant also terminates a payroll deduction authorization.
Each participant will receive a confirmation from the Broker of changes in
the amount of Common Stock held for the participant's account. The relationship
between the Broker and a participant is the normal relationship of a broker and
client, and the Company assumes no responsibility in this respect.
The Broker will deliver to each participant as promptly as practicable, by
mail or otherwise, all notices of meetings, proxy statements and other material
distributed by the Company to its stockholders. The full shares of Common Stock
in each participant's account will be voted in accordance with the participant's
signed proxy instructions duly delivered to the Broker. There will be no charge
to a participant for the Broker's retention or delivery of Common Stock
certificates, or in connection with notices, proxies or other such material.
CLOSING PARTICIPANT'S ACCOUNT
A participant who terminates a payroll deduction authorization may request
the Broker to maintain or to close the participant's account. A participant may
direct that all full shares of Common Stock and any fractional interest in
shares of Common Stock in the participant's account be sold and the net proceeds
remitted to the participant, or the participant may request that the full shares
in the account be delivered to the participant along with a check representing
the net proceeds of the sale of the fractional interest in shares, less a
brokerage commission and any applicable transfer tax, each of which is payable
by the participant. An employee may thereafter re-enter the Plan by following
the procedure described above under the caption "Payroll Deduction".
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[LOGO]
LONE STAR INDUSTRIES, INC.
STAMFORD, CONNECTICUT
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints DAVID W. WALLACE, JOHN J. MARTIN and JOHN S.
JOHNSON, and each of them, proxies, with full power of substitution, to vote
with all powers the undersigned would possess if personally present at the
Annual Meeting of Stockholders of Lone Star Industries, Inc. to be held June 9,
1994 at 10:00 a.m. at The Greenwich Library, 101 West Putnam Avenue, Greenwich,
Connecticut, for each of the matters listed below and the transaction of such
other business as may properly come before the meeting (including adjournments).
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
ITEMS 1, 2, 3, 4 AND 5. ON ANY OTHER MATTER THAT MAY COME BEFORE THE MEETING
THIS PROXY WILL BE VOTED IN THE DISCRETION OF THE ABOVE-NAMED PERSONS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3, 4 AND 5.
Proposal 1--Election of Directors / / FOR (except as withheld
below) / / WITHHELD
ARTHUR B. NEWMAN, ALLEN E. PUCKETT AND DAVID W. WALLACE (TO WITHHOLD AUTHORITY
TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE THAT NOMINEE'S NAME ON THE SPACE
PROVIDED BELOW.)
________________________________________________________________________________
Proposal 2--Approval of Management Stock Option Plan
/ / FOR / / AGAINST / / ABSTAIN
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
Proposal 3--Approval of Directors Stock Option Plan
/ / FOR / / AGAINST / / ABSTAIN
Proposal 4--Approval of Employees Stock Purchase Plan
/ / FOR / / AGAINST / / ABSTAIN
Proposal 5--Ratification of Appointment of Independent Auditors
/ / FOR / / AGAINST / / ABSTAIN
Dated: ,
1994
_______________________________________________________________
Signature
Please DATE Proxy, SIGN Proxy as your
name appears at left and RETURN Proxy
in the enclosed envelope. If acting as
executor, administrator, trustee,
guardian, etc., you should so indicate
when signing. If the signer is a
corporation, please sign the full
corporate name, by duly authorized
officer. If shares are held jointly,
each stockholder named should sign.
