AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 10, 1995
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:
[X] Preliminary proxy statement
[ ] 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(j)(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 Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
_________________________________________________________________________
(2) Aggregate number of securities to which transactions applies:
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(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:
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[ ] 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:
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- ------------
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
PRELIMINARY COPY
[LOGO]
March 30, 1995
Dear Stockholder,
On behalf of the Lone Star Board of Directors, I cordially invite you to
attend Lone Star's 1995 Annual Meeting of Stockholders to be held on Thursday,
May 11, 1995, commencing at 10:00 a.m. in the Marie Cole Auditorium of The
Greenwich Library in Greenwich, Connecticut.
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>
PRELIMINARY COPY
[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, May 11, 1995 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:
<TABLE>
<S> <C>
Proposal 1. To elect two directors for a three-year term ending in 1998.
Proposal 2. To amend the Restated Certificate of Incorporation to increase the authorized
number of shares of common stock.
Proposal 3. To approve an amendment to the Employees Stock Purchase Plan.
Proposal 4. To ratify the appointment by the Board of Directors of Coopers & Lybrand L.L.P.
as auditors of the Company for 1995.
</TABLE>
Stockholders of record at the close of business on March 23, 1995, will be
entitled to vote at the meeting and at any adjournment thereof.
By Order of the Board of Directors,
JOHN S. JOHNSON,
Vice President, General
Counsel and Secretary
March , 1995
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>
PRELIMINARY COPY
[LOGO]
LONE STAR INDUSTRIES, INC.
300 FIRST STAMFORD PLACE,
P. O. BOX 120014,
STAMFORD, CT 06912-0014
-------------------
PROXY STATEMENT
MARCH , 1995
-------------------
ANNUAL MEETING OF STOCKHOLDERS, MAY 11, 1995
The enclosed proxy is solicited on behalf of the board of directors of Lone
Star Industries, Inc. ("Lone Star" or the "Company") in connection with the
annual meeting of stockholders to be held on Thursday, May 11, 1995, and has
been mailed to you on or about March , 1995. Only stockholders of record at
the close of business on March 23, 1995 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 March 23, 1995, there were outstanding shares of common
stock, each of which shares is entitled to one vote on each Proposal. Neither
the restated 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 outstanding and entitled to vote at the meeting is required for approval
of Proposal 2. 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 3 and 4. Shares voted as abstaining will be counted as present and
entitled to vote. Broker non-votes, if any, will be counted as present but 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.
PROPOSAL 1. ELECTION OF DIRECTORS
Lone Star's restated 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.
<PAGE>
Since the terms of the directors of Class II expire at the 1995 annual
meeting, two Class II directors are to be elected to serve until the 1998 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 and has been furnished by such nominees and
members of the board of directors to Lone Star. All of such persons are
incumbent directors 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,
either 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 either of the named nominees is not available or will
not serve if elected.
NOMINEES FOR DIRECTOR--TERM TO EXPIRE 1998 (CLASS II)
James E. Bacon, 64, has been a director since 1992 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
director of Accuhealth, Inc., a trustee of Nuveen Select Tax-Free Income
Portfolios and a trustee of the Federation of Protestant Welfare Agencies
(N.Y.).
William M. Troutman, 54, has been a director since 1992 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 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
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<PAGE>
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 1994 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 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, 66, 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 and is now Arthur M. Weimer Professor of
Business Administration at Indiana University. Professor Wentworth is also a
director of Kimball International, Inc., Market Facts, Inc., Bank One
Bloomington N.A. and KPT Inc.
CONTINUING DIRECTORS--TERM TO EXPIRE 1997 (CLASS I)
Arthur B. Newman, 51, has been a director since 1994 and is a member of the
Audit Committee of the board. He has been a General Partner in Blackstone Group
Holdings L.P., 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, 75, 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.
David W. Wallace, 71, 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.
COMMITTEES OF THE BOARD OF DIRECTORS
The board has standing Audit, Compensation and Stock Option and Executive
Committees. Seven 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 1994. No meeting of the Executive
Committee of the board was held in 1994. During 1994, each of the directors of
the Company attended at least 75% of the aggregate meetings of the board and
committees of the board on which such director served, with the exception of Mr.
Bacon who attended 73% of such meetings.
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<PAGE>
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 restated 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 five other most highly paid executive officers for the
three fiscal years ending December 31, 1994.
SUMMARY COMPENSATION TABLE
<TABLE><CAPTION>
LONG TERM COMPENSATION
----------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------- ---------------------- -------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
- ------------------------------ ---- --------- ----------- ------ ---------- ---------- ------- -------
OTHER ALL
NAME ANNUAL RESTRICTED SECURITIES OTHER
AND COMPEN- STOCK UNDERLYING LTIP COMPEN-
PRINCIPAL SATION AWARD(S) OPTIONS/ PAYOUTS SATION
POSITION YEAR SALARY($) BONUS($)(1) ($)(2) ($) SARS (#) ($) ($) (3)
- ------------------------------ ---- --------- ----------- ------ ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David W. Wallace,............. 1994 $ 200,000 600,000 -- -- 125,000 -- 3,000
Chairman of the Board of 1993 250,000 -- -- -- -- -- 2,249
Directors and Chief 1992 250,000 -- -- -- -- -- 2,189
Executive Officer
William M. Troutman........... 1994 300,000 360,000 -- -- 125,000 -- 3,625
President and Chief 1993 325,000 -- -- -- -- -- 2,249
Operating Officer 1992 325,000 -- -- -- -- -- 2,189
John J. Martin................ 1994 225,000 200,000 -- -- 25,000 -- 2,250
Senior Vice President and 1993 250,000 -- -- -- -- -- 2,249
President of Rosebud 1992 250,000 -- -- -- -- -- 2,189
Holdings, Inc. (4)
Roger J. Campbell............. 1994 170,000 185,000 -- -- 75,000 -- 2,597
Vice President--Cement 1993 170,000 -- -- -- -- -- 2,249
Operations 1992 170,000 -- -- -- -- -- 2,189
Michael W. Puckett............ 1994 160,000 180,000 -- -- 75,000 -- 3,050
Vice President--Cement Sales 1993 160,000 -- -- -- -- -- 2,249
and Concrete Operations 1992 160,000 -- -- -- -- 2,189
William E. Roberts...........` 1994 160,000 180,000 -- -- 75,000 -- 3,050
Vice President, Chief 1993 160,000 -- -- -- -- -- 2,249
Financial Officer, Treasurer 1992 150,000 -- -- -- -- -- 2,189
and Controller
</TABLE>
- ------------
(1) The bonuses paid in 1994 were in recognition of the significant contribution
of the executive officers to the Company's reorganization. The bonuses
either were approved specifically or were awarded pursuant to the Company's
Separation and Retention Plan approved by the board of directors and the
Bankruptcy Court (the "Bankruptcy Court") supervising the Company's
reorganization proceedings under Chapter 11 of the Federal Bankruptcy Code
(the "Reorganization Proceedings").
(2) Perquisites and other personal benefits were less than 10% of the total
annual salary and bonus for 1992, 1993 and 1994 for each of the named
executive officers.
(3) Contributions by the Company on behalf of the named executive officers under
the Savings Plan for Salaried Employees and Employees Stock Purchase Plan.
(4) Mr. Martin was also General Counsel and Secretary of the Company until
August 24, 1994.
5
<PAGE>
EMPLOYMENT AGREEMENTS AND PLANS
Employment Agreements and Change in Control and Severance Arrangements
Effective July 1, 1994, the Company entered into two-year employment
agreements (the "Employment Agreements") with David W. Wallace, William M.
Troutman and John J. Martin. Pursuant to such agreements, Mr. Wallace agreed to
be employed as Chairman and Chief Executive Officer of the Company at an annual
salary of $150,000; Mr. Troutman agreed to be employed as President and Chief
Operating Officer of the Company at an annual salary of $275,000; and Mr. Martin
agreed to be employed as Senior Vice President of the Company and President of
Rosebud Holdings, Inc., a subsidiary of the Company, at an annual salary of
$200,000. Messrs. Wallace and Troutman's employment agreements are renewable for
successive two-year terms.
The Employment Agreements respecting Messrs. Wallace and Troutman may be
terminated (i) by either party upon written notice at least six months prior to
the expiration of the current term, (ii) by the Company for any reason other
than "cause" (as defined in the Employment Agreements) by written notice setting
forth the effective date of termination (which shall be at least six months
after such notice), (iii) by Mr. Wallace or Mr. Troutman if terminated for "good
reason" (as defined in the Employment Agreements), (iv) in the case of Mr.
Wallace, by him as a result of any "incapacity" (as defined in his Employment
Agreement), and (v) by the Company for "cause" (as defined in the Employment
Agreements). If the Company terminates an Employment Agreement other than for
cause, or if Messrs. Wallace and Troutman terminate their respective Employments
for "good reason," the Company 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 later of (i) the initial term, or (ii) one year (or 18
months if terminated for "good reason") after the effective date of termination,
whichever is greater. Upon a "change in control" (as defined in the Employment
Agreement) of the Company, Mr. Wallace and Mr. Troutman may terminate their
employment with the Company and receive severance pay equal to two years'
salary.
Mr. Martin's Employment Agreement may be terminated (i) by the Company for
any reason other than "cause" or "unsatisfactory performance" (both as defined
in the Employment Agreement) by written notice setting forth the effective date
of the termination (which shall be at least seven days after receipt of such
notice), (ii) by the Company for cause or unsatisfactory performance, and (iii)
by Mr. Martin for "good reason" (as defined in the Employment Agreement). If the
Company terminates Mr. Martin's Employment Agreement other than for cause, or
Mr. Martin terminates the Employment Agreement for good reason, he is entitled
to receive a severance payment equal to his salary for the remainder of the term
of his agreement. In the event the Company terminates Mr. Martin's Employment
Agreement for unsatisfactory performance, the Company is required to make a
severance payment (a) of $250,000 if such termination is prior to July 1, 1995,
and (b) of an amount equal to the lesser of (i) $200,000, or (ii) Mr. Martin's
salary through the expiration of the term of his Employment Agreement, if such
termination occurs on or after July 1, 1995. Upon a "change of control" (as
defined in the Employment Agreement) of the Company, Mr. Martin may terminate
his employment with the Company and receive severance pay equal to the full
amount of unpaid compensation through the remaining term of his Agreement.
Effective July 1, 1994, the Company entered into change of control
agreements (the "Change of Control Agreements") with nine of its executive
officers, including Messrs. Campbell, Puckett and Roberts, but not including
Messrs. Wallace, Troutman and Martin. Pursuant to such agreements, each officer
other than one officer, during the five-year period commencing on July 1, 1994,
will be entitled to receive a lump-sum cash payment equal to two years of his
base salary in the event of termination of such officer's employment as a result
of the occurrence of certain events subsequent to a change in control of the
Company (as defined in such agreements). The agreement for one officer provides
that, during a two-year period commencing on July 1, 1994, he will be entitled
to a lump-sum cash payment equal to one year's base salary (subject to
reduction) in the event of termination of his employment as a
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<PAGE>
result of the occurrence of certain events following a sale (as defined in the
agreement) of the Company's subsidiary, New York Trap Rock Corporation. Pursuant
to the Employment and Change in Control Agreements, if such officers receive
severance payments they also will be entitled to medical and other insurance
benefits for a specified period of time following termination of employment.
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. Wallace, 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. 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.
Wallace, 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.
Separation and Retention Plan
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 "Separation and Retention Plan"),
pursuant to which the Compensation and Stock Option Committee could designate
certain key executive personnel for separation pay and retention payment awards.
Messrs. Campbell, Puckett and Roberts and certain other executive officers but
not including Messrs. Wallace, Troutman and Martin, were designated as such key
employees (the "Key Employees").
The Separation and Retention Plan terminated on February 17, 1995.
The Separation and Retention Plan was comprised of two components. The first
component provided 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") during the existence of the
Plan. The second component provided for payments to Key Employees which were
designated 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
were made to Key Employees in 1994, including $85,000 for Mr. Campbell, $80,000
for Mr. Puckett and $80,000 for Mr. Roberts, less applicable withholding.
The Separation Payments would be equal to three months base salary and would
be provided to the Key Employees upon the occurrence of either of the following
events which might occur on or after April 14, 1994, the effective date of the
plan of reorganization (the "Plan of Reorganization") in the Reorganization
Proceedings 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 Separation and Retention Plan); or
(ii) termination of employment for Good Reason (as defined in the Separation and
Retention Plan).
The Separation Payments were in addition to 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 receive a payment equal to four weeks salary.
Those employees working for five years or more are entitled to severance
payments
7
<PAGE>
equal to one week's salary for each year of service, up to a maximum of
fifty-two weeks. Separation Payments were made by the Company to six Key
Employees.
Rosebud Incentive Plan
As part of the Plan of Reorganization, Lone Star and certain of its
subsidiaries transferred to Rosebud Holdings, Inc. and its subsidiaries
(collectively "Rosebud") 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 due 1997 (the
"Asset Proceeds Notes") issued by Rosebud 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 pursuant to the Plan of Reorganization under
which, among other things, Lone Star 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 Order confirming the
Plan of Reorganization.
The Rosebud Plan provides that after payment of the Asset Proceeds Notes in
full, a pool of 20% of the net proceeds from remaining Rosebud asset
dispositions, up to a maximum of $5,000,000, will be available for distribution
to key employees of the Company to be selected by the Compensation and Stock
Option Committee of the Company's board of directors. That Committee also will
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 the Company on the date(s)
such payments are to be distributed. Mr. David W. Wallace, Chairman of the Board
of the Company, 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' Compensation
Directors who are not Lone Star employees ("Non-Employee Directors") are
compensated for their services at an annual rate of $20,000, plus $1,000 for
each board and board committee meeting attended. Non-Employee Directors also
have rights pursuant to certain indemnification agreements and are provided with
$100,000 of life insurance. Such insurance continues for Non-Employee Directors
who leave the board of directors after five or more years of service as a
director. In addition, Non-Employee Directors who have five or more years of
service as a director are entitled to receive annual payments of $15,000 for 10
years (the "Director Deferred Compensation"), 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 of directors. All of the directors are Non-Employee
Directors except for Messrs. Troutman and Wallace. Mr. Wallace, having served
more than five years as a Non-Employee Director, is entitled to receive $15,000
for 10 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. At December
31, 1994 the balance in this fund was $1,319,217. In December 1994 the Company
established an additional bank trust fund for current and future directors of
the Company in which the Company deposited $750,000. The purpose of this trust
is the same as the trust established in 1988. In connection with these
arrangements, if there is a change in control of the Company, each current and
future Non-Employee Director automatically will be deemed to have at least five
years of service as a director and will become entitled to receive the Director
Deferred Compensation. The rights of Non-Employee Directors to payment of the
Director Deferred Compensation and claims under the directors' indemnification
agreements are not limited by the amount of money in these trusts.
Effective as of April 14, 1994, the Company established the Directors Stock
Option Plan (the "Directors Plan") in which Non-Employee Directors are eligible
to participate. The Directors Plan was
8
<PAGE>
approved by the stockholders at the 1994 annual meeting. The Directors Plan
provides for the issuance of options to purchase up to 50,000 shares of common
stock, subject to adjustment under certain circumstances. Each year during the
term of the Directors Plan, each eligible Non-Employee Director automatically
will be granted an option to purchase 1,000 shares of common stock. Pursuant to
the Directors Plan, the per share exercise price of an option will be the fair
market value of a share of common stock on the date of grant. All of such
options vest six months and expire 10 years after the date of grant. The
Directors Plan is administered by the board of directors and expires on March
10, 2004. Pursuant to the Directors Plan, on June 10, 1994 each Non-Employee
Director was granted a 10-year option to purchase 1,000 shares of common stock
at $15.6875 per share, which option vested in full on December 10, 1994.
STOCK OPTIONS
Effective as of April 14, 1994, the Company established the Management Stock
Option Plan (the "Management Plan") in which officers and other key management
employees are eligible to participate. The Management Plan was approved by the
stockholders at the 1994 Annual Meeting. The Management Plan provides for the
issuance of incentive and non-qualified stock options to purchase up to 700,000
shares of common stock, subject to adjustment under certain circumstances. The
Compensation and Stock Option Committee of the board of directors has the
exclusive authority to determine the persons eligible to participate and to
determine the amount and the terms and conditions of the awards made to each
participant, within the parameters of the Management Plan. Pursuant to the
Management Plan, the per share exercise price of an option will not be less than
the fair market value of a share of common stock on the date of grant. All of
such options will expire 10 years from the date of grant. The Management Plan
terminates on March 10, 2004.
In June 1994, incentive and non-qualified options to purchase an aggregate
of 700,000 shares of common stock were granted pursuant to the Management Plan,
which options were granted at the fair market value of the common stock on the
date of grant and expire 10 years from such date. Options were granted to
officers and other key management employees, including Messrs. Wallace,
Troutman, Martin, Campbell, Puckett and Roberts, who received options to
purchase 125,000, 125,000, 25,000, 75,000, 75,000 and 75,000 shares,
respectively. All of such options vest in four equal installments, with the
first 25% vesting on July 1, 1994 and the balance on January 1, 1995, 1996 and
1997, except for options granted to (i) Messrs. Wallace and Troutman which
vested in full on the date of grant and (ii) Mr. Martin which vest in the
following three installments: 6,504 on each of July 1, 1994 and January 1, 1995
and the balance of January 1, 1996.
9
<PAGE>
OPTIONS/SAR GRANTS IN
LAST FISCAL YEAR
The following table sets forth information regarding stock options granted
to the executive officers named in the Summary Compensation Table during the
fiscal year ended December 31, 1994.
<TABLE><CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (2)
- -------------------------------------------------------------------- ---------------------------
(A) (B) (C) (D) (E) (F) (G)
% OF
TOTAL
NUMBER OF OPTIONS/SARS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES OR BASE
OPTIONS/SARS IN FISCAL PRICE EXPIRATION
NAME GRANTED #(1) YEAR ($/SH) DATE 5% ($) 10% ($)
- ---------------------------- ------------ ------------ -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
David W. Wallace............ 125,000 17.86% $ 15.375 6/8/04 $ 1,209,375 $ 3,063,125
William M. Troutman......... 125,000 17.86 15.375 6/8/04 1,209,375 3,063,125
John J. Martin.............. 25,000 3.57 15.375 6/8/04 241,875 612,625
Roger J. Campbell........... 75,000 10.71 15.375 6/8/04 725,625 1,837,875
Michael W. Puckett.......... 75,000 10.71 15.375 6/8/04 725,625 1,837,875
William E. Roberts.......... 75,000 10.71 15.375 6/8/04 725,625 1,837,875
All Shareholders (3)........ $116,100,000 $294,060,000
</TABLE>
- ------------
(1) Stock options are awarded with an exercise price equal to the fair market
value of the common stock on the date of award.
(2) The values shown assume that the price of the common stock will appreciate
at the annual rates shown. These rates are arbitrarily assumed rates
established by the Securities and Exchange Commission and are not intended
as a forecast of future appreciation. The actual gain, if any, realized by
the recipient will depend upon the actual performance of the common stock.
(3) This line shows the increase in aggregate market value of the common stock
considered to be outstanding as of the date of the initial grant (12,000,000
shares) assuming the annual rates of stock price appreciation set forth
above over the ten-year period used for the named executives.
10
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information on stock option exercises during
the fiscal year ended December 31, 1994 by executive officers named in the
Summary Compensation Table. In 1994, no options were exercised and the Company
had and continues to have no outstanding stock appreciation rights.
<TABLE><CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED VALUE FISCAL YEAR-END (#)(1) AT FISCAL YEAR END ($)(1)
ON EXERCISE REALIZED ----------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------ ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David W. Wallace.................... 0 $0 125,000(2) 0 $ 265,625 $ --
William M. Troutman................. 0 0 125,000 0 265,625 --
John J. Martin...................... 0 0 6,504 18,496 13,821 39,304
Roger J. Campbell................... 0 0 18,750 56,250 39,844 119,531
Michael W. Puckett.................. 0 0 18,750 56,250 39,844 119,531
William E. Roberts.................. 0 0 18,750 56,250 39,844 119,531
</TABLE>
- ------------
(1) The closing price of a share of common stock on the New York Stock Exchange
for the last trading day of 1994 was $17.50.
(2) On January 4, 1995, Mr. Wallace transferred a portion of his options to
purchase 70,000 shares of common stock to his wife, which options were
subsequently exercised by his wife on such date.
SALARIED EMPLOYEES PENSION PLAN
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
- ----------------------------------------------- ------- ------- ------- ------- ------- -------
<C> <S> <C> <C> <C> <C> <C> <C>
$125,000 .................................... $18,500 $27,000 $35,500 $44,000 $52,500 $61,000
150,000 .................................... 22,500 32,900 43,300 53,700 64,100 74,500
175,000 .................................... 26,500 38,800 51,100 63,400 75,700 87,900
200,000 .................................... 30,500 44,700 58,900 73,100 87,200 101,400
250,000 .................................... 38,600 56,500 74,500 92,400 110,400 128,300
300,000 .................................... 46,600 68,400 90,100 111,800 133,600 155,300
350,000 .................................... 54,700 80,200 105,700 131,200 156,700 182,200
400,000 .................................... 62,700 92,000 121,300 150,000 179,900 209,200
</TABLE>
The compensation covered by the Salaried Employees Pension Plan includes
base pay, subject to ERISA limitations of $228,860 for 1992, $235,840 for 1993
and $150,000 for 1994 and later years. Base pay is shown in the second column of
the Summary Compensation Table.
The years of Credited Service for Roger J. Campbell, John J. Martin, Michael
W. Puckett, William E. Roberts, William M. Troutman and David W. Wallace are 9,
15, 25, 21, 12 and 4, 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 $118,800 for 1994 and $120,000
for 1995.
11
<PAGE>
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 1994, 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
General Philosophy
The Company's general philosophy for the compensation of its executives is
based on the premise that levels and types of compensation should be established
to support the Company's business strategy and long-term development and enhance
stockholder value. Such compensation must also be competitive with that offered
by comparable companies in order to attract, retain and reward executives
capable of achieving those objectives.
When the Committee considers executive compensation it is guided by the
experience of the executive involved, future initiatives for and challenges to
the Company, the executive's expected contribution to the Company's 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. The Committee considers annually the compensation of the Company
executives and held two meetings in 1994.
Base Salary
The Company was in reorganization under Chapter 11 of the Federal Bankruptcy
Code from December 10, 1990 to April 14, 1994, the date on which its Plan of
Reorganization became effective. During that period no then executive officer of
the Company received an increase in salary (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).
Upon emergence from reorganization the salaries of the executive officers
were reviewed and were appropriately adjusted to reflect their responsibilities.
With a view to the Company's size, the salaries of senior executives, including
that of Mr. David W. Wallace, the Chairman of the Board and Chief Executive
Officer, are determined based on the Committee's judgment concerning individual
contribution to the business, level of responsibility, career experience and
competitiveness in the industry. No particular formulas or measures are used.
However, because of the belief that a major portion of the compensation of the
executive officers should be directly aligned with the stockholders it was
determined that salaries of certain senior executive officers be reduced and
that a larger portion of their compensation should be derived from potential
long-term rewards under the Company's stock option plan. Consequently, the
annual salary of Mr. Wallace, was reduced from $250,000 to $150,000 effective
July 1, 1994 and the Company entered into a two year employment agreement with
Mr. Wallace providing for the foregoing salary and renewable for successive
two-year terms.
Bonuses
The Company does not have a bonus plan for executive officers for 1995.
In 1994 the Board of Directors approved the payment of a bonus to Mr.
Wallace of $600,000, and bonuses of lesser amounts to each of six other
executives. These bonuses were based upon the successful results achieved by the
Company in its reorganization, the significant contribution of these executives
in
12
<PAGE>
achieving those results, and the fact that no bonuses were paid by the Company
during the reorganization (a forty month period). The bonuses were approved by
the Bankruptcy Court supervising the Company's reorganization and paid in 1994.
In addition, during 1994 one time bonuses equal to one half annual salary
were paid to certain executive officers of the Company, not including Mr.
Wallace, pursuant to a Severance Pay and Retention Award Plan approved by the
directors and the Bankruptcy Court in 1992. This Plan was established to retain
the services of, and to provide an incentive for, these executives during the
reorganization.
Stock Options
At the 1994 annual meeting of stockholders, the Company's Management Stock
Option Plan was approved by vote of the stockholders. This Plan is designed to
develop, retain and reward effective management through an ability to obtain
significant share ownership in the Company.
The Plan is the sole long term incentive compensation program of the Company
for executive officers. The Committee believes that a significant portion of a
senior executive's compensation should be dependent on value created for the
stockholders and options are an excellent vehicle to accomplish this by tying an
executive's interests directly to the stockholders interests.
The Plan authorizes options for 700,000 shares of common stock of the
Company. Options covering all of these shares were granted to the executive
officers of the Company in June 1994 by the Committee. No member of the
Committee is a participant in this Plan. The number of options granted to an
executive officer was based on individual performance and level of
responsibility. The Committee believes that the award level must be sufficient
in size to provide a strong incentive for an executive to work for the long term
business interests of the Company and become significant owners of the business.
All options were granted at $15.375, the fair market value on the date of grant.
Mr. Wallace received an award of stock options covering 125,000 shares. This
award reflects both his strong leadership during the reorganization and his
contribution to the on-going operating results of the Company. In making this
determination, the Committee also considered the long term nature of the
business, the need for stability in management following reorganization and the
corporate actions instituted by Mr. Wallace during the reorganization which are
being continued thereafter. Specific quantitative measures or formulas were not
used by the Committee for these determinations nor were they considered to be
sufficiently comprehensive for the purposes.
General
The Committee believes that the Company has an appropriate and competitive
compensation program comprising a sound base salary position combined with long
term incentives of stock options.
No member of the Committee is a former or current executive officer or
employee of the Company or of any of its subsidiaries.
James E. Bacon
Robert G. Schwartz
Jack R. Wentworth, Chairman
March , 1995
13
<PAGE>
PERFORMANCE GRAPH
COMPARATIVE 1994 TOTAL RETURNS
COMMENCING MAY 3
LONE STAR, S&P 500, AND PEER GROUP
Set forth below is a line graph comparing the cumulative total return on the
Company's old common stock against the cumulative total return of Standard &
Poor's 500 and a Peer Group for the period commencing May 3, 1994 and ending
December 31, 1994. On April 14, 1994, the Company's old common stock was
cancelled and new common stock issued in connection with the Plan of
Reorganization and on May 3, 1994 the new common stock commenced trading on the
New York Stock Exchange.
COMPARISON OF 1994 CUMULATIVE TOTAL RETURN
LONE STAR INDUSTRIES, STANDARD & POORS 500 AND VALUE LINE CEMENT/AGGREGATES
INDEX
(PERFORMANCE RESULTS 5/3/94 THROUGH 12/31/94)
5/3/94 6/94 9/94 12/94
Lone Star Industries $100.00 $99.17 $119.84 $115.70
S&P 500 $100.00 $99.15 $103.99 $103.97
Peer Group $100.00 $93.54 $102.09 $93.44
* Assumes $100 invested at the opening of trading on May 3, 1994 in Lone
Star's common stock, S&P 500, and Value Line Cement/Aggregates Index, a Peer
Group. The returns for the Company, the S&P 500 and Peer Group assume
reinvestment of dividends and were computed by Value Line, Inc. 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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table presents certain information regarding the beneficial
ownership of common stock at February 1, 1995 provided to the Company by (a)
each stockholder known by the Company to be the beneficial owner of more than
five percent of the outstanding shares of common stock, (b) each
14
<PAGE>
director, (c) each executive officer named in the Summary Compensation Table,
and (d) all directors and current executive officers as a group.
<TABLE><CAPTION>
AMOUNT AND NATURE PERCENTAGE OF
NAME AND ADDRESS OF OF BENEFICIAL OWNER- OUTSTANDING SHARES
BENEFICIAL OWNERS SHIP OF COMMON STOCK OF COMMON STOCK (1)
- -------------------------------------------------------- -------------------- -------------------
<S> <C> <C>
Metropolitan Life Insurance Company and Metropolitan 2,725,380(2) 21.0%
Insurance and Annuity Company...........................
One Madison Avenue
New York, NY 10010
The TCW Group, Inc. and Affiliates(3)................... 2,022,337 16.8%
18th Floor
865 South Figueroa St.
Los Angeles, CA 90071
Dickstein Partners Inc.(4).............................. 1,233,937(5) 10.2%
9 West 57th Street
New York, NY 10019
James E. Bacon.......................................... 3,099(6) (7)
Theodore F. Brophy...................................... 4,000(6) (7)
Arthur B. Newman........................................ 6,000(6) (7)
Allen E. Puckett........................................ 1,599(6) (7)
Robert G. Schwartz...................................... 6,000(6) (7)
William M. Troutman..................................... 126,022(6)(8) 1.0%
David W. Wallace........................................ 56,134(6)(9) (7)
Jack R. Wentworth....................................... 1,039(6) (7)
Roger J. Campbell....................................... 37,736(6) (7)
John J. Martin.......................................... 13,922(6) (7)
Michael W. Puckett...................................... 38,154(6) (7)
William E. Roberts...................................... 37,983(6) (7)
All directors and executive officers as a group (18 435,970(10) 3.5%
persons)................................................
</TABLE>
- ------------
(1) The percentage of outstanding shares of common stock calculation assumes
for each beneficial owner that all of the currently exercisable options and
warrants beneficially owned by such person or entity are exercised in full
by such beneficial owner and that no other options or warrants are deemed
to be exercised by any other stockholders.
(2) Includes 891,609 shares of common stock issuable upon exercise of warrants
held by such principal stockholder.
(3) TCW Special Credits, an affiliate of The TCW Group, Inc., serves as general
partner of various limited partnerships and investment advisor of various
trusts and third party accounts with power to vote and direct the
disposition of shares of common stock owned by such limited partnerships,
trusts 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
(Footnotes continued on following page)
15
<PAGE>
(Footnotes continued from preceding page)
requirement of the Securities Exchange Act of 1934; however, The TCW Group
Inc. and its affiliates expressly disclaim beneficial ownership of these
shares.
(4) Dickstein Partners Inc. and affiliates includes Dickstein & Co., L. P.,
Dickstein Focus Fund L.P., Dickstein International Limited, Dickstein
Partners L.P. and Mark Dickstein. Information included herein regarding the
foregoing entities was determined according to a Schedule 13D, dated
September 26, 1994, and Amendments No. 1 and 2 thereto, dated October 31,
1994 and January 5, 1995, respectively (collectively, the "Dickstein 13D"),
filed with the Securities and Exchange Commission.
(5) According to the Dickstein 13D, includes 792,927 shares of common stock
beneficially owned by Dickstein & Co., L.P., 83,908 shares of common stock
beneficially owned by Dickstein Focus Fund L.P. and 357,102 shares of
common stock beneficially owned by Dickstein International Limited.
Dickstein Partners L.P. beneficially may be deemed to own 876,835 shares of
common stock and each of Dickstein Partners Inc. and Mark Dickstein
beneficially may be deemed to own 1,233,937 shares of common stock.
Pursuant to the Dickstein 13D, the voting and dispositive power with
respect to the foregoing shares of common stock is shared; provided,
however, that each entity disclaims beneficial ownership of the shares of
common stock held by the other entities other than those shares in which it
has a pecuniary interest. Additionally, such stockholders may be entitled
to receive additional shares of common stock pursuant to the Plan of
Reorganization, upon resolution of all of the Company's pre-petition
claims.
(6) Includes shares of common stock which the directors and executive officers
had the right to acquire through the exercise of warrants held by them as
follows: James E. Bacon--83 shares; Allen E. Puckett--413 shares; William
M. Troutman--538 shares; David W. Wallace-- 777 shares; Jack R.
Wentworth--33 shares; and John J. Martin--418 shares. Also includes shares
of common stock which the directors and executive officers have the right
to acquire through the exercise of options within sixty (60) days from
February 1, 1995, as follows: James E. Bacon-- 1,000 shares; Theodore F.
Brophy 1,000 shares; Arthur B. Newman--1,000 shares; Allen E.
Puckett--1,000 shares; Robert G. Schwartz--1,000 shares; Jack R.
Wentworth--1,000 shares; William M. Troutman--125,000 shares; David W.
Wallace--55,000 shares; Roger J. Campbell-- 37,500 shares; John J.
Martin--13,008 shares; Michael W. Puckett--37,500 shares; and William E.
Roberts--37,500 shares. Does not include shares of common stock which the
executive officers have the right to acquire through the exercise of
options not exercisable within 60 days of February 1, 1995, as follows:
Roger J. Campbell--37,500 shares; and John J. Martin-- 11,992 shares;
Michael W. Puckett--37,500 shares; and William E. Roberts--37,500 shares.
(7) Represents less than 1% of the outstanding shares of common stock.
(8) Does not include 80 shares of common stock jointly held by Mr. Troutman's
father and son, as to which shares he disclaims beneficial ownership.
(9) Does not include 79,099 shares of common stock (including 83 shares of
common stock issuable upon exercise of warrants) held by Mr. Wallace's
wife, or 56,000 shares of common stock held by the Robert R. Young
Foundation of which Mr. Wallace is an executive officer, as to which shares
he disclaims beneficial ownership.
(10) Includes or excludes, as the case may be, shares of common stock as
indicated in the preceding footnotes. With respect to the executive
officers not named above, (i) includes 21 shares of common stock issuable
upon exercise of Warrants and 100,000 shares of common stock issuable upon
exercise of options exercisable within 60 days of February 1, 1995 and (ii)
excludes 100,000 shares of common stock issuable upon exercise of options
not exercisable within such time period and an aggregate of 1,799 shares of
common stock (including 668 shares of common stock issuable upon exercise
of warrants) held by the wives of three such officers, as to which shares
beneficial ownership is disclaimed by such officers.
Except as noted in the footnotes above (i) none of such shares is known by
the Company to be shares with respect to which such beneficial owner has the
right to acquire beneficial ownership and (ii) the Company believes the
beneficial holders listed above have sole voting and investment power regarding
the shares shown as being beneficially owned by them.
16
<PAGE>
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 Proxy Statement.
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.
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 had not been rejected prior to the order confirming the Plan of
Reorganization, 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 of the Plan of Reorganization, and in each case with
respect to matters occurring on or prior to such effective date. In addition,
Lone Star provides directors and officers insurance.
Also pursuant to the Plan of Reorganization, all of Lone Star's present and
former officers and directors, agents, employees, professionals and counsel
(collectively, the "Released Parties") were
17
<PAGE>
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 of the Plan of
Reorganization; 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 of the Plan
of Reorganization, and in each case with respect to matters occurring on or
prior to the effective date of the Plan of Reorganization, 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 of the Plan of
Reorganization 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 of the Plan of
Reorganization, 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. Arthur B. Newman, a director of the Company, is a General Partner in
Blackstone Group Holdings L.P., a limited partner of The Blackstone Group L.P.
Pursuant to an Order of the Bankruptcy Court, the Company employed The
Blackstone Group L.P. as its financial advisor during the Reorganization. Fees
paid to The Blackstone Group L.P. for services rendered in connection with the
Reorganization Proceedings prior to the confirmation of the Plan of
Reorganization were approved by the Bankruptcy Court and fees paid for services
rendered thereafter were not subject to Bankruptcy Court approval.
Mr. Robert G. Schwartz, a director of the Company, was formerly Chairman of
the Board of Directors, President and Chief Executive Officer of the
Metropolitan Life Insurance Company ("MetLife") and continues to serve as a
director of MetLife, a principal stockholder of the Company. In connection with
the Reorganization Proceedings, Metropolitan Insurance and Annuity Company
("MIAC") and its parent, MetLife, filed claims against the Company with respect
to their aggregate holdings of $50 million outstanding principal amount of the
Company's defaulted 9.5% Promissory Notes due 1991 and with respect to the
Company's rejection of a lease for office space at One Commerce Green located in
Houston, Texas. 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 was
cancelled as of the effective date of the Plan of Reorganization and for which
shares of common stock and warrants were issued to MetLife. In addition,
effective July 1993, MetLife, through various subsidiaries, has been a manager
of accounts established under group annuity contracts for the Lone Star
Industries, Inc. Savings Plan for Salaried Employees, for which services MetLife
is paid a fee based on a percentage of funds under management, together with
reimbursement for certain direct costs incurred by MetLife. For the year ended
December 31, 1994, MetLife received $34,700 for services rendered. This
management arrangement may be terminated by the Company at any time. Assets held
under management by MetLife were approximately $7,400,000 at December 31, 1994.
MetLife is currently a defendant in several cases in which the Company is
also a defendant. In certain of these cases, MetLife may have cross claims
against the Company. If MetLife brings a cross claim action against the Company,
the Company believes that it will have valid defenses available to it; provided,
however, there can be no assurance that the Company's defenses will prevail.
As of July 18, 1994, the Company, MetLife, MIAC and TCW Special Credits, as
agent and nominee for the entities listed on Schedule I thereto, entered into a
registration rights agreement (the "Registration Rights Agreement") pursuant to
which the Company agreed to register the securities of
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the Company held by such entities and maintain an effective registration
statement until such time as in the opinion of counsel a prospectus is not
required to be delivered in connection with the sale of the registered
securities. These parties also were granted "piggyback" registration rights.
Pursuant to the Registration Rights Agreement, the Company agreed to pay all
expenses incident to the registration, offering and sale of the securities
offered to the public other than commissions, fees and discounts of the
underwriters, dealers or agents. Under the Registration Rights Agreement, the
Company agreed to indemnify these parties against certain civil liabilities,
including liabilities under the Securities Act of 1933. In accordance with the
Registration Rights Agreement, the Company has registered the securities of
these entities on a Form S-1 Registration Statement, which became effective on
February 2, 1995.
PROPOSAL 2. APPROVAL OF AMENDMENT OF THE RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK.
The Company's Restated Certificate of Incorporation authorizes 25,0000,000
shares of common stock. At December 31, 1994, 12,000,016 shares of common stock
were issued and outstanding; 4,003,317 were reserved for issuance upon exercise
of the Company's outstanding warrants, and 750,000 were reserved for issuance in
connection with the Company's stock option plans. The Company's common stock is
listed on the New York Stock Exchange.
The board of directors believes that an increase in the number of authorized
shares of common stock will be in the Company's best interests and,
consequently, it has approved, declared advisable and recommends to the
stockholders of the Company the adoption of an amendment to the restated
certificate of incorporation which will increase the number of authorized shares
of common stock from 25,000,000 to 50,000,000. The proposed amendment is
attached hereto as Appendix A and is incorporated herein by reference.
The additional shares will give the Company greater flexibility in its
affairs by making them available for issuance in such transactions (including
for acquisitions, financings, stock-splits or dividends, and Lone Star's
employee benefit plans) and at such times as the board of directors approves.
The additional shares of common stock could also be used for issuance or
exchange under the terms of the Shareholder Rights Agreement, dated November 10,
1994, approved by the Company's board of directors (the "Rights Agreement"). The
terms of the Rights Agreement provide that, in certain circumstances, including
ownership by any person of 15% or more of the Company's common stock, holders of
the Company's common stock would have the right to purchase additional shares of
such common stock, or, in the event of a subsequent merger of the Company or
sale of more than 50% of its assets, the common stock of the surviving or
acquiring corporation, having a value equal to two times the then exercise price
of the rights.
Depending on the nature of the transaction in which the additional shares
are issued, further stockholder authorization may be required for such issuance
by the rules of the New York Stock Exchange or such other stock exchange on
which the Company's securities may be listed. In addition, because stockholders
do not have preemptive rights under the restated certificate of incorporation,
the rights of existing stockholders may (depending on the particular
circumstances in which additional common stock is issued) be diluted by any such
issuance.
The Company has no present plans, agreements or understandings for the
issuance of additional shares of common stock.
The proposed Amendment, if passed, would become effective upon the filing
with the Secretary of State of Delaware of a Certificate of Amendment, which
filing is expected to take place shortly after the stockholders approve the
Amendment.
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The board of directors recommends that you vote "FOR" approval of the
Amendment of the Lone Star Industries, Inc. restated certificate of
incorporation to increase the authorized number of shares of common stock.
PROPOSAL 3. APPROVAL OF AN AMENDMENT OF THE LONE STAR INDUSTRIES, INC. EMPLOYEES
STOCK PURCHASE PLAN
The stockholders of the Company approved the Company's Employees Stock
Purchase Plan ("Stock Purchase Plan") at the 1994 annual meeting of
stockholders. Pursuant to the terms of the Stock Purchase Plan, an eligible
employee may elect to purchase shares of common stock 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 his or her base pay. The number
of shares of common stock purchased for the employee in each transaction depends
upon the market price of the common stock at the time such purchases are made.
The employee acquires immediate and full ownership of all shares and fractional
interests in shares purchased for such employee's account at the time of such
purchase. As initially provided by the Stock Purchase Plan the Company would
contribute an amount equal to 25% of such deduction toward the purchase of
shares of common stock. In order to increase employee participation, the Company
pursuant to the terms of the Stock Purchase Plan increased its percentage
contribution from 25% to 50% of employees' contributions, except for officers.
Subject to stockholder approval, the Company contribution for officers will also
be increased to 50% of their contributions. The Company's contributions for the
portion of 1994 in which the Stock Purchase Plan was in effect was $347 for Mr.
Campbell; $800 for Mr. Puckett; $800 for Mr. Roberts; $1,375 for Mr. Troutman;
$750 for Mr. Wallace; $6,161 for all executive officers and $32,845 for all
employees. A 50% contribution is in line with the percentage of contribution
made by many companies which sponsor similar stock purchase plans. Further, the
board of directors believes that it is in the interests of the stockholders that
the officers, in particular, should have a substantial equity stake in the
Company and, thus, should be able to increase that stake in the same manner as
the non-officer employees pursuant to the Stock Purchase Plan.
Accordingly, the board of directors recommends a vote "FOR" the Amendment of
the Employees Stock Purchase Plan to change the Company's contribution to 50% of
the contribution for all participating employees.
PROPOSAL 4. RATIFICATION OF APPOINTMENT OF AUDITORS
The board of directors has recommended that stockholders ratify its
appointment of Coopers & Lybrand L.L.P. as principal independent auditors of the
Company for the year ending December 31, 1995. Coopers & Lybrand L.L.P. has
performed the annual audits of the Company's accounts for many years. A
representative of Coopers & Lybrand L.L.P. 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 or she so
desires.
The board of directors recommends a vote "FOR" ratification of the
appointment of Coopers & Lybrand L.L.P. as principal independent auditors for
1995. If ratification is not approved, the board of directors will reconsider
its appointment of Coopers & Lybrand L.L.P.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and persons who own more than ten percent of a
registered class of the Company's equity securities to file with the Securities
and Exchange Commission and the New York Stock Exchange initial reports of
ownership and reports of changes in ownership of equity securities of the
Company.
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Such persons are required by regulation of the Securities and Exchange
Commission to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, during the fiscal year ended December 31, 1994,
the Company's officers, directors and 10% stockholders complied with all
applicable Section 16(a) filing requirements, except that one report, covering
one transaction, was inadvertently filed late by each of William M. Troutman,
President and a director, James E. Bacon, a director, and Gerald F. Hyde, Jr., a
Vice President.
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 1996 ANNUAL MEETING
It is expected that the 1996 annual meeting of stockholders will be held on
May 9, 1996 in accordance with the by-laws of the Company. The Securities and
Exchange Commission has adopted regulations that govern the inclusion in the
Company's annual proxy material of stockholder proposals to be voted upon at
such meeting. Consequently, stockholder proposals for the 1996 annual 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 1, 1995 in order to be considered for inclusion in the 1996 annual
meeting proxy statement and form of proxy.
By Order of the Board of Directors,
JOHN S. JOHNSON
Vice President, General Counsel
and Secretary
March , 1995
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APPENDIX A
AMENDMENT OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF LONE STAR INDUSTRIES, INC.
FOURTH: The corporation shall have authority to issue Fifty Million
(50,000,000) shares of common stock, par value one dollar ($1.00) per share.
A-1
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PRELIMINARY COPY
[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, WILLIAM M. TROUTMAN 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 May 11,
1995 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 AND 4. 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 AND 4.
Proposal 1--Election of Directors. / / FOR (except as withheld below)
/ / WITHHELD
JAMES E. BACON AND WILLIAM M. TROUTMAN (TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE WRITE THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
Proposal 2--Approval of Amendment to Restated Certificate of Incorporation to
increase the number of shares of authorized Common Stock by 25,000,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
Proposal 3--Approval of Amendment to Employee Stock Purchase Plan
/ / FOR / / AGAINST / / ABSTAIN
Proposal 4--Ratification of Appointment of Independent Auditors
/ / FOR / / AGAINST / / ABSTAIN
Dated: ____________________________ , 1995
____________________________________
Signature
Please date Proxy, sign Proxy
as your name appears above 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.
