<PAGE>
SCHEDULE 14A INFORMATION
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 [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Lukens Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF LUKENS APPEARS HERE]
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NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
April 2, 1997
TO OUR STOCKHOLDERS:
It is a pleasure for me to invite you to our Annual
Meeting of Stockholders, which will be held on
Wednesday, April 30, 1997, starting at 1:30 P.M. in the
Company's Administrative Resources Center, Modena Road,
South Coatesville, Pennsylvania.
The following pages of this Notice of Annual Meeting
and Proxy Statement describe the matters which will be
discussed and acted upon at the meeting. In addition, a
current report on the Company's business and activities
will be presented.
I hope you will attend; however, whether or not you do
plan to attend, it is important that your shares,
regardless of the number, be represented. Accordingly,
I urge you to complete, sign, date and return your
Proxy in the envelope enclosed for your convenience.
Sincerely yours,
/s/ R. W. Van Sant
R. W. Van Sant
Chairman, President and
Chief Executive Officer
<PAGE>
NOTICE OF
ANNUAL MEETING
April 2, 1997
TO THE STOCKHOLDERS OF LUKENS INC.:
This is to notify you that the Annual Meeting of Stockholders of Lukens Inc.
will be held at 1:30 P.M. on Wednesday, April 30, 1997, in the Company's
Administrative Resources Center, Modena Road, South Coatesville, Pennsylvania,
for the following purposes:
1. To elect four persons to the Board of Directors of the Company;
2. To act upon three stockholder proposals, which are opposed by the Board
of Directors, if properly presented at the meeting; and
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The record date for determining stockholders entitled to notice of and to
vote at the meeting or any adjournment thereof was March 7, 1997, and only
stockholders of record at the close of business on that date are entitled to
notice of and to vote at the meeting.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE ENCLOSED FOR
YOUR CONVENIENCE.
By Order of the Board of Directors
/s/ William D. Sprague
William D. Sprague
Vice President, General Counsel and
Secretary
<PAGE>
PROXY STATEMENT
April 2, 1997
LUKENS INC.
50 South First Avenue
Coatesville, Pennsylvania 19320
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Lukens Inc. (the "Company") of Proxies for the Annual
Meeting of Stockholders to be held April 30, 1997, or any adjournment thereof.
Copies of this Proxy Statement, the accompanying Proxy and the Company's
Annual Report for 1996 are being mailed to the stockholders on or about April
2, 1997.
Subject to the conditions set forth in the Notice of Annual Meeting
accompanying this Proxy Statement, the shares represented by each executed
Proxy will be voted in accordance with the instructions given. If no
instruction is made on an executed Proxy, the Proxy will be voted FOR all four
of the nominees to the Board, AGAINST each of the three stockholder proposals
and in the discretion of the proxies named on the proxy card with respect to
any other matters properly brought before the Annual Meeting and any
adjournments thereof. Any stockholder giving a Proxy has the power to revoke
it at any time before its exercise by attending the meeting and voting in
person, by giving notice of revocation to the Secretary of the Company or by
filing a later dated Proxy.
The holders of common stock and preferred stock of record at the close of
business on March 7, 1997 (the "Record Date") will be entitled to vote on all
matters to be voted upon at the Annual Meeting or any adjournment thereof. The
Proxy will also serve as voting instructions from participants to the trustees
under the Lukens Inc. Employees Capital Accumulation Plan, the Lukens Group
Employees Capital Accumulation Plan, the Lukens Inc. Capital Accumulation Plan
for Hourly Employees (USW, AFL-CIO, Coatesville, PA), the Washington Steel
Corporation Employees Capital Accumulation Plan (Washington, PA) and the
Washington Steel Corporation Employees Capital Accumulation Plan (Massillon,
OH) with respect to shares of common and/or preferred stock credited to a
participant's account on the Record Date and to American Stock Transfer &
Trust Company as the administrator under the Company's Dividend Reinvestment
Plan with respect to shares of common stock held therein on the Record Date.
Generally, each share of common stock is entitled to one vote per matter and
each share of preferred stock is entitled to three votes per matter, with
holders of common stock and holders of preferred stock generally voting
together as a single class. However, record holders are
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permitted to vote cumulatively with respect to the election of Directors. In
that case such holders have the right to multiply the number of shares which
they are entitled to vote by the number of Directors to be elected and to cast
the resulting number of votes all for one candidate or to distribute them
among any two or more candidates. In addition, the Lukens Inc. Employees
Capital Accumulation Plan provides that each participant may direct the
trustee how to vote such participant's pro rata portion of unallocated shares
of preferred stock, as well as shares of preferred stock that have not been
voted. Shares of common stock held in the Lukens Inc. Employees Capital
Accumulation Plan, the Lukens Group Employees Capital Accumulation Plan, the
Washington Steel Corporation Employees Capital Accumulation Plans and the
Dividend Reinvestment Plan for which signed Proxies are not returned will not
be voted. Shares of common stock held in the Lukens Inc. Capital Accumulation
Plan for Hourly Employees (USW, AFL-CIO, Coatesville, PA) that have not been
voted will, if directed by the Employee Benefits Finance Committee of the
Company, be voted by the trustee in the same proportion as the shares held
therein for which signed Proxies are returned by the participants. Shares held
in the Capital Accumulation Plans are subject to confidential voting
procedures.
The Company had approximately 14,805,589 shares of common stock and
approximately 476,203 shares of preferred stock issued and outstanding on the
Record Date. The presence at the meeting in person or by proxy of stockholders
entitled to cast at least a majority of the votes that all stockholders are
entitled to cast will constitute a quorum at the meeting. Abstentions will be
counted for the purpose of establishing a quorum but will not be voted. Broker
non-votes will not be counted for the purpose of establishing a quorum and
will not be voted. Stockholders entitled to vote may do so in person or by
proxy. The Company may require that any votes cast in person be cast by
written ballot.
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes. Directors in
each class are elected to serve for a term of three years. The terms are
staggered so that approximately one-third of the Board stands for election
each year. At the 1997 Annual Meeting of Stockholders, four persons will be
elected to the Board to serve until the 2000 Annual Meeting or until their
successors are elected and qualified. The four nominees who receive the most
votes at the Annual Meeting will be elected to the Board. Management of the
Company believes that the Directors listed below will serve in their positions
for the remainder of their terms.
The Company's Board of Directors has nominated T. Kevin Dunnigan, Ronald M.
Gross, W. Paul Tippett and R. W. Van Sant for terms expiring at the 2000
Annual Meeting of Stockholders. The persons named in the accompanying Proxy
intend to vote for the election of such nominees unless authority to vote for
one or more of such persons is specifically withheld in the Proxy. All of the
nominees are currently Directors of the Company. As far as
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is presently known, all of the nominees are willing and able to serve as
Directors. If any of them withdraws or otherwise becomes unavailable for any
reason, the persons named in the Proxy will use their best judgment in
selecting and voting for substitute nominees unless the Board of Directors
reduces the number of Directors constituting the entire Board.
NOMINEES FOR TERMS EXPIRING IN 2000
T. Kevin Dunnigan Mr. Dunnigan, 59, has been the Chief Executive
Officer of Thomas & Betts Corporation, a manufacturer
of electrical equipment, since 1985. He has also been
the Chairman of that corporation since 1992 and has
been a member of its board of directors since 1975.
Mr. Dunnigan has been a Director of the Company since
1994. He is Chairman of the Committee on the Board
and a member of the Executive Committee and the
Executive Development and Compensation Committee. He
is also a director of Elsag Bailey N.V. and C.R. Bard
Inc.
Ronald M. Gross Mr. Gross, 63, is currently Chairman and Chief
Executive Officer and a director of Rayonier Inc.
(formerly known as ITT Rayonier Inc.), a forest
products company. After joining Rayonier, Inc. in
March 1978 as President, Chief Operating Officer and
a director, Mr. Gross was elected Chief Executive
Officer in 1981 and Chairman in 1984. Mr. Gross also
serves as a director of The Pittston Company and as
President and a director of Rayonier Forest Resources
Company, the managing general partner of Rayonier
Timberlands, L.P., a publicly traded master limited
partnership. Mr. Gross has been a Director of the
Company since 1991 and is Chairman of the Executive
Development and Compensation Committee and a member
of the Committee on the Board and the Executive
Committee.
W. Paul Tippett Mr. Tippett, 64, has been a Director of the Company
since 1989. He was the President of Springs
Industries, Inc., a manufacturer of finished fabrics,
home furnishings and industrial fabrics, from 1985
through 1989. Prior to that time Mr. Tippett was
Chairman and Chief Executive Officer of American
Motors Corporation. Mr. Tippett is Chairman of the
Finance Committee and a member of the Audit Committee
and the Executive Development and Compensation
Committee. He is also a director of Stride Rite
Corporation.
3
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R. W. Van Sant
Mr. Van Sant, 58, has been Chairman of the Board,
President and Chief Executive Officer of the Company
since December 1991. He held the offices of President
and Chief Operating Officer from October 1991 to
December 1991. Mr. Van Sant served as President and
Chief Executive Officer of Blount, Inc., a company
engaged in construction and manufacturing operations,
from December 1990 to October 1991. Mr. Van Sant has
been a Director of the Company since 1988, is
Chairman of the Executive Committee and is a member
of the Committee on the Board and the Finance
Committee. He is also a director of Amcast Industrial
Corporation.
DIRECTORS WITH TERMS EXPIRING IN 1999
Michael O. Alexander Mr. Alexander, 56, has been the President of The
International Forum Inc. since June 1993 and the
Director of the International Forum at the Wharton
School, University of Pennsylvania, since 1988. Mr.
Alexander has been a Director of the Company since
1993 and is a member of the Audit Committee, the
Executive Committee and the Finance Committee.
David B. Price, Jr. Mr. Price, 51, has been the President of the
Performance Materials Division of Monsanto Company
since 1995. Monsanto Company is a global producer of
chemicals, agricultural products, food ingredients
and pharmaceuticals. Previously at that company, he
was Vice President and General Manager of Commercial
Operations, the Industrial Products Division, from
1993 to 1995 and Vice President and General Manager
of the Performance Products Division from 1991 to
1993. Mr. Price was elected to the Board of Directors
in February 1996 and is a member of the Finance
Committee.
Joab L. Thomas Mr. Thomas, 64, President Emeritus of The
Pennsylvania State University, was President of that
university from 1990 to 1995. Mr. Thomas has been a
Director of the Company since 1992 and is a member of
the Audit Committee, the Executive Committee and the
Finance Committee. He is also a director of Mellon
Bank Corporation.
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DIRECTORS WITH TERMS EXPIRING IN 1998
Rod Dammeyer Mr. Dammeyer, 56, is the managing director of Equity
Group Investments, Inc. ("EGI"), which has major
investments in approximately 30 public and private
companies. He is also Chief Executive Officer and a
director of Anixter International Inc., where he has
been employed since 1985. Mr. Dammeyer was elected to
the Board of Directors of the Company in 1995. He is
a member of the Audit Committee, the Committee on the
Board and the Executive Development and Compensation
Committee. Mr. Dammeyer also serves as a director of
Antec Corporation, Capsure Holdings Corp., Falcon
Building Products, Inc., IMC Global Inc., Jacor
Communications, Inc., Revco D.S., Inc., Sealy
Corporation and TeleTech Holdings, Inc., companies in
which EGI has a major investment interest, and is a
trustee of Van Kampen American Capital, Inc. closed
end funds.
Sandra L. Helton Ms. Helton, 47, has been Senior Vice President and
Treasurer of Corning Incorporated since July 1994.
Corning Incorporated is an international corporation
focused in three business segments: Specialty
Materials, Communications and Consumer Products. From
1991 to July 1994 she served as Vice President and
Treasurer of that corporation. She has been a
Director of the Company since 1995. Ms. Helton is a
member of the Audit Committee, the Committee on the
Board and the Finance Committee.
William H. Nelson, III
Mr. Nelson, 68, was Executive Vice President and
President of the Natural Resources Division of Scott
Paper Company, primarily a manufacturer of pulp,
paper and forest-related products, from 1981 to 1986.
He has been a Director of the Company since 1972. He
is Chairman of the Audit Committee and a member of
the Executive Committee and the Executive Development
and Compensation Committee.
During the Company's 1996 fiscal year the Board of Directors held six
meetings. All members of the Board of Directors attended more than 75% of the
meetings of the Board and of the Committees of which such Directors were
members during the time period in which they served.
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MANAGEMENT
The following table sets forth as of March 7, 1997, the approximate number of
shares of common stock and preferred stock of the Company (rounded to the
nearest share) beneficially owned by each Director, by each Executive Officer
named in the Summary Compensation Table on page 9 and by all Directors and
Executive Officers of the Company as a group who were serving in such
capacities on that date.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY PERCENT
OWNED OF CLASS (1)
---------------------------------------------------
NAME COMMON PREFERRED COMMON PREFERRED
- ---- ---------- ----------------------- ------------
<S> <C> <C> <C> <C>
R. W. Van Sant 185,872(2) 725 less than 1% less than 1%
Michael O. Alexander 4,700(3) -0- less than 1% none
Rod Dammeyer 6,000(4) -0- less than 1% none
T. Kevin Dunnigan 3,400(5) -0- less than 1% none
Ronald M. Gross 6,500(3) -0- less than 1% none
Sandra L. Helton 2,500(6) -0- less than 1% none
T. Grant John 46,648(7) 367 less than 1% less than 1%
Richard D. Luzzi 23,886(8) 398 less than 1% less than 1%
William H. Nelson, III 5,800(3) -0- less than 1% none
James J. Norton 28,500(9) -0- less than 1% none
David B. Price, Jr. 1,500(4) -0- less than 1% none
Frederick J. Smith 40,310(10) 977 less than 1% less than 1%
Joab L. Thomas 6,600(11) -0- less than 1% none
W. Paul Tippett 5,500(3) -0- less than 1% none
All Directors and
Executive Officers as a
Group (19 Persons) 543,180(12) 7,386 3.6% 1.6%
</TABLE>
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(1) Rounded to the nearest one-tenth of one percent and based on (i) the
number of shares subject to options for common stock exercisable by such
person(s) on or before May 1, 1997, and 14,805,589 shares of common
stock, which on March 7, 1997, was the approximate number of shares
outstanding and (ii) 476,203 shares of preferred stock, which on March 7,
1997, was the approximate number of shares outstanding.
(2) Includes options to purchase 180,000 shares of common stock that are
currently exercisable.
(3) Includes options to purchase 4,000 shares of common stock that are
currently exercisable or will become exercisable on May 1, 1997.
(4) Includes options to purchase 1,000 shares of common stock that will
become exercisable on May 1, 1997.
(5) Includes options to purchase 3,000 shares of common stock that are
currently exercisable or will become exercisable on May 1, 1997.
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(6) Includes options to purchase 2,000 shares of common stock that are
currently exercisable or will become exercisable on May 1, 1997.
(7) Includes options to purchase 41,700 shares of common stock that are
currently exercisable and 1,541 shares of common stock held by his wife
in a retirement plan, as to which he disclaims beneficial ownership.
(8) Includes options to purchase 22,700 shares of common stock that are
currently exercisable.
(9) Represents 5,500 shares of common stock held jointly with his wife and
options to purchase 23,000 shares of common stock that are currently
exercisable.
(10) Includes options to purchase 32,800 shares of common stock that are
currently exercisable.
(11) Represents 2,600 shares of common stock held jointly with his wife and
options to purchase 4,000 shares of common stock that are currently
exercisable or will become exercisable on May 1, 1997.
(12) Includes options to purchase 462,143 shares of common stock that are
currently exercisable or will become exercisable on May 1, 1997 and
12,441 shares of common stock as to which beneficial ownership is
disclaimed.
COMMITTEES OF THE BOARD
Among the standing committees of the Board of Directors are the Audit
Committee, the Executive Development and Compensation Committee and the
Committee on the Board.
The Audit Committee is appointed by the Board and currently consists of six
members, none of whom is a member of the Company's management. It is
responsible for overseeing the Company's internal accounting and auditing
methods and procedures, and it recommends to the Board a firm of independent
public accountants for appointment by the Board. The Audit Committee meets
periodically with the auditors to review their findings and recommendations.
During the Company's 1996 fiscal year this Committee held three meetings.
The Executive Development and Compensation Committee is appointed by the
Board and currently consists of five members. This Committee is responsible
for the administration of the Lukens Performance Incentive Plan, the 1985
Stock Option and Appreciation Plan and the supplemental retirement plans;
makes recommendations to the Board concerning such other executive
compensation arrangements and plans as it deems appropriate; reviews the
Company's policies and plans for the development and succession of executive
personnel; and performs such other duties as the Board may assign. During the
Company's 1996 fiscal year the Executive Development and Compensation
Committee held three meetings.
The Committee on the Board is appointed by the Board and currently consists
of five members. This Committee is empowered to consult with the Chief
Executive Officer on
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candidates for nomination to the Board; to recommend to the Board policies and
guidelines for qualification for service as a Director and for Director
compensation; and to monitor performance by individual Directors. This
Committee will consider nominees for Director recommended by stockholders
provided such recommendations are made in writing addressed to the Secretary
of the Company prior to the first of December so that the Committee may review
all recommendations in advance of the January meeting of the Board at which
time the nominees for election at the next Annual Meeting are customarily
considered. During the Company's 1996 fiscal year the Committee on the Board
held two meetings.
To be eligible for election to the Board of Directors, persons nominated
other than by the Committee on the Board must be nominated in accordance with
certain procedures set forth in the By-laws, which require that the Secretary
of the Company receive timely notice of such proposed nomination. Such notice
must be received by the Secretary not less than 50 days nor more than 75 days
prior to the meeting at which the Directors are to be elected (or, if fewer
than 65 days notice or prior public disclosure of the meeting date is given or
made to stockholders, no later than the 15th day following the day on which
the notice of the date of the meeting was mailed or such public disclosure was
made). Such notice must contain certain information about the nominee,
including his or her age, business and residence address and principal
occupation, the class and number of shares of capital stock beneficially owned
and such other information as will be required to be included in a Proxy
Statement soliciting proxies for the election of the proposed nominee, and
certain information about the stockholder proposing to nominate that person.
The Company may also require any proposed nominee to furnish other information
reasonably required by the Company to determine the proposed nominee's
eligibility to serve as a Director.
In addition to the foregoing, the Executive Committee and the Finance
Committee are standing Committees of the Board.
SUMMARY OF EXECUTIVE COMPENSATION
The following information for the fiscal years ended December 31, 1994,
December 30, 1995 and December 28, 1996 is given as to the Chief Executive
Officer and each of the four other most highly compensated Executive Officers
of the Company who were serving as Executive Officers at the end of the 1996
fiscal year and whose base salary and bonus exceeded $100,000 during the 1996
fiscal year.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------- ------------
AWARDS
------------
OTHER SECURITIES
NAME AND ANNUAL UNDERLYING ALL OTHER
PRINCIPAL COMPEN- OPTIONS/ COMPEN-
POSITION(S) YEAR SALARY($) (1) BONUS($) (1) SATION($) (1) SARS(#) SATION($) (1)
- ----------------------- ---- ------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
R. W. Van Sant 1996 $603,056 $ -0- $ 65,657(2) 59,412(3) $ 15,592(4)
Chairman, 1995 $565,563 $214,529 $ 51,043 27,735 $321,143
President and Chief 1994 $536,508 $104,380 (5) -0- $ 18,247
Executive Officer
T. G. John 1996 $232,800 $ -0- $141,545(6) 22,510(3) $ 10,494(7)
Senior Vice President, 1995 $204,959 $ 63,365 $ 34,914 21,305 $ 9,986
Commercial 1994 $178,223 $ 50,741 $ 71,461 13,000 $ 9,726
R. D. Luzzi 1996 $184,920 $ -0- $ 21,098(8) 14,298(3) $ 8,038(9)
Vice President, 1995 $174,899 $ 51,808 (5) 13,882 $ 7,466
Human Resources 1994 $160,020 $ 25,000 $ 22,540 5,000 $ 7,041
J. J. Norton 1996 $205,572 $ -0- (5) 21,398(3) $ 6,750(10)
Senior Vice President 1995 $193,210 $ 58,199 (5) 17,882 $ 6,750
1994 $181,840 $ 96,703 $ 48,075 -0- $ 3,025
F. J. Smith 1996 $184,020 $ -0- (5) 20,517(3) $ 8,795(11)
Senior Vice President, 1995 $156,762 $ 43,813 $ 20,155 11,659 $ 8,582
Operations 1994 $141,900 $ 18,000 $ 17,913 5,000 $ 8,218
</TABLE>
- ---------
(1) Rounded to the nearest dollar.
(2) Includes $39,764 imputed to Mr. Van Sant for use of the Company airplane.
(3) Represents the aggregate of options granted as part of such Executive
Officer's annual bonus and regular annual option grants. See page 14.
(4) Represents $6,750 of Company contributions to the Lukens Inc. Employees
Capital Accumulation Plan adopted pursuant to Section 401(k) of the
Internal Revenue Code of 1986, as amended; $5,850 of Company-paid
premiums for life insurance coverage above $50,000; and $2,992 of
premiums paid by the Company on another term life insurance policy which
covers Mr. Van Sant and is owned by the Company. The Company is the
beneficiary under this second policy but has assigned the right to
proceeds equal to 2 1/2 times Mr. Van Sant's compensation to his
designee.
(5) Does not exceed the lesser of $50,000 or 10% of the total of such
person's annual salary and bonus.
(6) Includes $125,466 paid by the Company in connection with Mr. John's
relocation from the Company's Washington, Pennsylvania facility to its
Coatesville, Pennsylvania facility.
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(7) Represents $6,750 of Company contributions to the Lukens Inc. Employees
Capital Accumulation Plan and $3,744 of Company-paid premiums for life
insurance coverage above $50,000.
(8) Includes an automobile allowance provided by the Company of $13,512.
(9) Represents $6,750 of Company contributions of Lukens Inc. Employees
Capital Accumulation Plan and $1,288 of Company-paid premiums for life
insurance coverage above $50,000.
(10) Represents $6,750 of Company contributions to the Lukens Inc. Employees
Capital Accumulation Plan.
(11) Represents $6,750 of Company contributions to the Lukens Inc. Employees
Capital Accumulation Plan and $2,045 of Company-paid premiums for life
insurance coverage above $50,000.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
The Company has entered into an agreement with Mr. Van Sant which provides
for his employment by the Company until his 65th birthday. The agreement
provides for the following compensation: a minimum base salary of $603,056 per
annum, an annual bonus calculated and paid in accordance with the Lukens
Performance Incentive Plan at a target amount of 60% of base salary and
certain employee benefits. Pursuant to the agreement and adjusted to reflect a
50% stock dividend, Mr. Van Sant was issued 330,000 options to purchase common
stock of the Company at an exercise price of $23.375 per share, which, as
adjusted, was 85% of the fair market value of such common stock on the date of
the grant. Such options vest at a rate of 30,000 per year. The agreement
further provides that if Mr. Van Sant's employment is terminated by the
Company prior to his 65th birthday, other than for disability or for cause, he
will be entitled to continue to receive his full salary and certain other
benefits under the agreement until the earlier of the third anniversary of his
termination or his 65th birthday.
Messrs. Van Sant, John, Luzzi, Norton and Smith, as well as five other
Executive Officers, are parties to agreements pursuant to which the Company
agreed to pay such persons a lump-sum amount generally equal to the sum of
approximately three times such person's annual base salary rate in effect in
the year of a change in control plus such person's average Lukens Performance
Incentive Plan award over the preceding three years, in the event of a change
in control of the Company and the termination of such person's employment at
any time during the two-year period thereafter. The Company also generally
agreed to provide three years additional pension and welfare benefits and to
"cash-out" such person's outstanding options. The total pension benefits and
the option "cash-out" will be payable in lump-sums. These
10
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agreements provide for the payment of an amount necessary to pay any excise
tax, and any taxes thereon, due on the payments. The purpose of the agreements
is to assure the continued dedication of such persons to their duties and
their unbiased counsel in the event of an unsolicited tender offer.
In general, a "change in control" will be deemed to occur if (i) during a
period of two consecutive years, the individuals who constituted the Board of
Directors at the beginning of such period cease to constitute a majority of
the Board, (ii) any person or group acquires 20% or more of the combined
voting power of the Company's then outstanding securities, (iii) the Company
is acquired by merger or consolidation or (iv) the Company is liquidated or
substantially all of its assets are sold.
DIRECTOR COMPENSATION
An annual retainer of $24,000 is paid to Directors who are not employees of
the Company and an attendance fee of $900 is paid to such Directors for each
day or part of a day they attend a regular or special meeting of the Board. A
fee is also payable to such Directors for attendance at Board Committee
meetings. The fee is $800 for all Committees, except that members of the
Executive Committee are paid an attendance fee of $900. Attendance fees are
paid for Committee meetings on Board meeting days except for Committee
meetings of an administrative nature. An annual retainer of $2,500 per
Committee is also paid to Directors who serve as Committee Chairmen. Directors
who serve a partial year are paid a pro rata share of the annual retainer
based upon the number of months served.
Any Director of the Company who is separately compensated for Board services
may elect to defer compensation for distribution at a later date. Deferred
amounts may be invested in mutual funds or interest-bearing accounts and may
be paid in a lump sum or in annual installments over a period of ten years.
The Company currently maintains a plan pursuant to which each non-employee
Director with five years or more of uninterrupted service on the Board will
receive annual retirement payments at the time of retirement from the Board.
After five years of service, a Director will receive retirement payments in an
amount equal to 50% of the Director's base retainer. The percentage will
increase by 10% for each full year of service thereafter to a maximum of 100%
of the base retainer after ten years. These retirement payments may continue
for a period equal to the lesser of the years of service on the Board or ten
years. In the event of the death of a Director, the benefits which would have
been payable to such Director will be paid to the Director's designated
beneficiary for the remainder of the period. In the event of a change in
control, this Plan also provides for a lump-sum payment of the present value
of the total accrued benefits payable calculated as if the Director had
retired on the date of the change in control. The Board has decided to
terminate this plan, effective May 1, 1997, and to replace
11
<PAGE>
it with a plan that will provide non-employee Directors with compensation that
is tied to the value of the Company's common stock and therefore more aligned
with the interests of the Company's stockholders.
Pursuant to the Company's Stock Option Plan for Non-Employee Directors, each
Director who is not an employee of the Company or any of its subsidiaries
receives an annual grant of options to purchase 1,000 shares of the Company's
common stock at an exercise price equal to the fair market value of the
Company's common stock on the date of grant. Options become exercisable one
year after the date of grant and expire ten years after the date of grant,
except that options terminate three years after a person ceases to be a
Director.
RETIREMENT PLANS
The Lukens Inc. Salaried Employees Retirement Plan provides retirement
benefits to certain salaried employees who retire or otherwise terminate
employment after completing five or more years of service. The Lukens Inc.
Supplemental Retirement Plan for Lukens Performance Incentive Plan
Participants provides supplemental retirement benefits to participating
managerial level employees. Benefits under this Plan are offset by benefits
payable under the Lukens Inc. Salaried Employees Retirement Plan. In addition,
the Lukens Inc. Supplemental Retirement Plan for Designated Executives
provides supplemental retirement benefits to participating executives. Under
this Plan benefits for participating executives are calculated by crediting
the executive with service in addition to the executive's actual period of
service as an employee. Benefits payable under this Plan are offset by
benefits payable under the Lukens Inc. Salaried Employees Retirement Plan.
Each of the Executive Officers named in the Summary Compensation Table on
page 9 participates in the Lukens Inc. Salaried Employees Retirement Plan.
Messrs. John, Luzzi and Smith also participate in the Lukens Inc. Supplemental
Retirement Plan for Lukens Performance Incentive Plan Participants. Mr. Van
Sant also participates in the Lukens Inc. Supplemental Retirement Plan for
Designated Executives. Benefits under these Plans are payable monthly and are
based upon formulas which consider years of service and compensation (as
defined in the Plans) and age at retirement.
12
<PAGE>
The following table shows the approximate annual retirement benefits that
Messrs. Van Sant, John, Luzzi and Smith would receive under the Plans
described above based on credited years of service if they retire at normal
retirement age. Mr. Norton, who participates in the Lukens Inc. Salaried
Employees Retirement Plan but not in any of the Company's supplemental
retirement plans, would receive an annual retirement benefit of $25,346 if he
retires at normal retirement age. Lesser amounts may be payable following a
termination of employment before normal retirement age.
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------------
REMUNERATION (1) 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
- ---------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 16,700 $ 25,000 $ 33,300 $ 41,700 $ 43,300 $ 44,100 $ 49,100
200,000 33,600 50,500 67,300 84,100 94,100 104,100 114,100
300,000 53,600 80,500 107,300 134,100 149,100 164,100 179,100
400,000 73,600 110,500 147,300 184,100 204,100 224,100 244,100
500,000 93,600 140,500 187,300 234,100 259,100 284,100 309,100
600,000 113,600 170,500 227,300 284,100 314,100 344,100 374,100
700,000 133,600 200,500 267,300 334,100 369,100 404,100 439,100
800,000 153,600 230,500 307,300 384,100 424,100 464,100 504,100
900,000 173,600 260,500 347,300 434,100 479,100 524,100 569,100
1,000,000 193,600 290,500 387,300 484,100 534,100 584,100 634,100
</TABLE>
- ---------
(1) The estimated benefit calculated is based on salary plus bonus, as
designated in the Summary Compensation Table on page 9.
Benefits payable under the Lukens Inc. Supplemental Retirement Plan for
Lukens Performance Incentive Plan Participants and the Lukens Inc.
Supplemental Retirement Plan for Designated Executives are computed on a
straight life annuity basis and are subject to offset by any Social Security
benefits to which the participant is entitled.
Messrs. John, Luzzi and Smith have credited service of approximately four,
four and 26 years, respectively, in the Lukens Inc. Salaried Employees
Retirement Plan and in the Lukens Inc. Supplemental Retirement Plan for Lukens
Performance Incentive Plan Participants. Mr. Van Sant has credited service of
approximately five years under the Lukens Inc. Salaried Employees Retirement
Plan and 24 years under the Lukens Inc. Supplemental Retirement Plan for
Designated Executives. Each Plan, with the exception of the Lukens Inc.
Salaried Employees Retirement Plan, contains provisions for a present value
lump-sum payment payable in the event of a change in control.
STOCK OPTION DATA
Under the Company's 1985 Stock Option and Appreciation Plan, options to
purchase common stock of the Company are granted on an annual basis to certain
officers and other key employees of the Company and its subsidiaries at the
fair market value of the common stock on the date of grant. Under the Lukens
Performance Incentive Plan, options to purchase
13
<PAGE>
common stock of the Company are also granted to Executive Officers as part of
their annual bonuses; these options are governed by the terms of the 1985
Stock Option and Appreciation Plan. The following table contains information
regarding each type of option grant to each Executive Officer named in the
Summary Compensation Table on page 9 during the 1996 fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE OR
OPTIONS IN FISCAL BASE PRICE EXPIRATION GRANT DATE
NAME GRANTED(#) YEAR (1) ($/SH) DATE (2) PRESENT VALUE ($)
- ---- ---------- ---------- ----------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
R. W. Van Sant 29,412(3) 9.8% $28.69 1/02/03 $220,590(4)
30,000(5) 10.0% $27.50 1/31/06 $233,700(6)
T. G. John 9,510(3) 3.2% $28.69 1/02/03 $ 71,325(4)
13,000(5) 4.3% $27.50 1/31/06 $101,270(6)
R. D. Luzzi 6,798(3) 2.3% $28.69 1/02/03 $ 50,985(4)
7,500(5) 2.5% $27.50 1/31/06 $ 58,425(6)
J. J. Norton 8,398(3) 2.8% $28.69 1/02/03 $ 62,985(4)
13,000(5) 4.3% $27.50 1/31/06 $101,270(6)
F. J. Smith 7,517(3) 2.5% $28.69 1/02/03 $ 56,378(4)
13,000(5) 4.3% $27.50 1/31/06 $101,270(6)
</TABLE>
- ---------
(1) Rounded to the nearest one-tenth of one percent.
(2) Outstanding options may expire earlier due to death, disability or
termination of employment. The Company has agreed to cash-out outstanding
options of certain Executive Officers upon a change in control. See pages
10-11.
(3) Non-qualified options granted as part of the Executive Officer's annual
bonus. The options granted in 1996 will become exercisable on January 2,
1999.
(4) Based on the Black-Scholes option pricing model, using the following
assumptions: (a) 7 year option term; (b) 5.5% risk-free interest rate; (c)
27.4% volatility; and (d) 3.5% dividend yield.
(5) Regular option grants under the 1985 Stock Option and Appreciation Plan
include options which qualify as incentive stock options under Section 422
of the Internal Revenue Code of 1986, as amended, and options which do not
so qualify. The options granted in 1996 became exercisable on January 31,
1997.
(6) Based on the Black-Scholes option pricing model, using the following
assumptions: (a) 10 year option term; (b) 5.7% risk-free interest rate;
(c) 27.4% volatility; and (d) 3.6% dividend yield.
14
<PAGE>
The following table presents information about stock options exercised during
the 1996 fiscal year by the Executive Officers named in the Summary
Compensation Table on page 9 and the amount and value of unexercised options
held by such Executive Officers at fiscal year-end, distinguishing between
options that were vested (i.e., exercisable at year-end) and options that were
not vested (i.e., becoming exercisable in the future).
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
YEAR-END (#) FISCAL YEAR-END($)
------------------------- -------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
R. W. Van Sant -0- -0- 150,000 267,147 (1) (1)
T. G. John -0- -0- 28,700 30,815 (1) (1)
R. D. Luzzi -0- -0- 15,200 20,680 (1) (1)
J. J. Norton -0- -0- 10,000 29,280 (1) (1)
F. J. Smith -0- -0- 19,800 26,176 (1) (1)
</TABLE>
- ---------
(1) None of the options were in-the-money at the end of fiscal year 1996.
15
<PAGE>
REPORT OF EXECUTIVE DEVELOPMENT AND
COMPENSATION COMMITTEE
The members of the Executive Development and Compensation Committee of the
Board, none of whom is an employee of the Company, hereby present to the
stockholders of the Company this report concerning the compensation of the
Company's Executive Officers, including the Executive Officers named in the
Summary Compensation Table set forth on page 9. The role of the Committee,
among other things, is to establish the broad compensation policy of the
Company with respect to its Executive Officers and to determine the actual
amounts of the salary and bonus components of the compensation of each such
person as well as to approve the performance standards and award opportunities
for the incentive programs for Executive Officers.
COMPENSATION POLICY
The goal of the Company's executive compensation program is to attract,
motivate and retain executives of the highest caliber. In the belief that this
goal is most effectively achieved by closely linking executive compensation to
corporate performance and returns to stockholders, the Company has established
an executive compensation plan that conditions a substantial portion of such
compensation on the Company's achievement of specified performance goals and
on increases in the value of the Company's common stock. Effective in 1995 and
based on recommendations made by an independent executive compensation
consultant, the Committee made certain changes in the method of determining
incentive awards which conditioned a greater proportion of incentive
compensation for Executive Officers on the long-term performance of the
Company's common stock.
In determining compensation for the Company's Executive Officers for 1996,
the Committee relied on compensation guidelines established with the
assistance of such compensation consultant. These guidelines were developed by
reference to a peer group of companies, including some steel companies, that
had revenues generally comparable to the Company's and were engaged in heavy
manufacturing. The Committee believes that this sampling reflects the
marketplace in which the Company competes for senior executives and is large
enough to be meaningful.
This comparative sampling of companies used by the Committee for compensation
guidelines is different from the S & P Iron & Steel--500 Index, which is the
group of companies used for purposes of the performance graph set forth on
page 20, comparing cumulative stockholder return on common stock. Comprised of
steel companies exclusively, this group and the Company operate in similar
environments and thus are similarly affected in terms of regulation,
competition, industry trends and the other factors that affect performance.
However, in recruiting, the Company looks to a wider field which includes
manufacturing
16
<PAGE>
companies, not just steel companies, and so considers compensation in relation
to this wider group.
The compensation guidelines provide that fixed compensation should fall at or
near the 50th percentile of the comparative group. For variable "at risk"
compensation, the Committee sets targets that will provide an incentive to
management to achieve above-average performance. Incentive compensation is
paid only in years in which the Company is successful in meeting those
targets.
The Company's executive compensation program for 1996 had three principal
components, each described more fully below: (i) base salaries, (ii) awards
under the Lukens Performance Incentive Plan (the "LPIP"), consisting of cash
bonuses and the grant of stock options, and (iii) incentives under the
Company's 1985 Stock Option and Appreciation Plan (the "Stock Option Plan"),
consisting of the grant of stock options. Cash awards under the LPIP are based
primarily on achievement of pre-established levels of return on net assets and
operating earnings and thus are directly linked to Company performance. The
values of option awards under the LPIP and the Stock Option Plan indirectly
reflect the Company's performance through changes in the market price of the
Company's common stock. Both the LPIP and the Stock Option Plan have been
designed to align the interests of the Company's Executive Officers with those
of the Company's stockholders.
Effective for 1997, the Company's executive compensation program has been
changed so that total cash compensation has been targeted below the market
median and the long-term components of compensation have been designed in
order to have executive compensation more aligned with stockholder interests.
In setting compensation for Executive Officers, the Committee will, where
appropriate, take into account the $1,000,000 deduction limitation under
Section 162(m) of the Internal Revenue Code. None of the Executive Officers
has yet been affected by this limitation.
SPECIFIC COMPONENTS OF COMPENSATION PROGRAM
Salary. Base salaries for Executive Officers are the fixed component of their
total compensation package. In general, base salaries are set and adjusted
based on comparative standards and individual performance. For 1996, the
Committee determined the base salary for each Executive Officer, taking into
account Mr. Van Sant's evaluation of such Executive Officer's performance and
his recommendations to the Committee concerning adjustments to such Executive
Officer's base salary.
Bonus. Under the LPIP, the Committee determines the annual awards for the
Executive Officers (including Mr. Van Sant) based on (i) the performance of
the Company, as measured
17
<PAGE>
by attained levels of return on net assets and operating earnings and (ii) the
achievement of individual or team objectives. For 1996, the corporate
objectives determined 70%, and the individual or team objectives determined
30%, of each Executive Officer's award. The specific threshold, target and
maximum levels of return on net assets and operating earnings that are
established each year by the Committee for corporate performance are based on,
among other things, past Company performance and past industry performance.
Team performance goals, some of which have threshold, target and maximum
levels, were proposed for 1996 by Mr. Van Sant and approved by the Committee,
taking into consideration current issues and projects for which such Executive
Officer was responsible. Based on responsibility undertaken, position with the
Company and competitive standards, the Committee then establishes a percentage
of salary to be awarded as a bonus to participating Executive Officers at 100%
achievement of target corporate and individual or team objectives. Such
percentages range from 45% to 60% (for the Chief Executive Officer).
At the beginning of the year, the Committee determines what each Executive
Officer's LPIP award would be for that year, assuming that the target
corporate and team objectives are achieved. One-half of the projected LPIP
award at target is then granted in the form of stock options to each Executive
Officer. The number of stock options to be awarded is determined by taking
one-half of the total LPIP award at target, multiplying it by 135% (to
compensate for the risk of a longer term, non-cash award), and dividing that
product by the Black-Scholes value for the Company's common stock (a pricing
model for calculating the present value of options). Options granted as part
of an LPIP award are governed by the terms of the Stock Option Plan.
Cash awards for the remaining one-half of the LPIP award are made at the end
of the year based on the Committee's objective determination of whether the
thresholds for the applicable corporate and team goals were met. Executive
Officers may receive a bonus based on the achievement or partial achievement
of one set of performance factors (corporate or team) even if the threshold
for the other set of performance factors is not met.
For 1996, the Company did not meet the threshold levels of return on net
assets and operating earnings, and so none of the Executive Officers received
a cash award based on those performance factors. In addition, none of the
Executive Officers received a cash bonus based on the achievement of team
objectives in 1996.
Option Plan. Under the Company's Stock Option Plan, options to purchase
common stock of the Company are granted on an annual basis to Executive
Officers at the fair market value of such common stock on the date of grant.
Because the compensation element of options is dependent on increases in the
market value of such common stock, stock options represent compensation that
is tied to the Company's performance for up to 10 years (the period during
which such options may be exercised).
18
<PAGE>
For 1996, the Committee set a range of the number of options that could be
granted for each level of Executive Officer. The number of options within the
applicable range granted to each Executive Officer was based on the
Committee's subjective assessment of such Executive Officer's individual
performance and other qualitative factors the Committee considered
appropriate.
1996 COMPENSATION OF CHIEF EXECUTIVE OFFICER
R. W. Van Sant has been Chairman, President and Chief Executive Officer of
the Company since December 1991. Mr. Van Sant's initial base salary of
$500,000 was established pursuant to the employment agreement discussed on
page 10 based upon the scope of his responsibilities for the Company and
comparative group standards. The Committee believes that the terms of Mr. Van
Sant's employment agreement are consistent with the compensation policies of
the Committee. His salary was $565,563 for 1995 and was increased to $603,056
for 1996 due to the Company's improved financial performance in 1995.
Mr. Van Sant received an LPIP award of options for 29,412 shares of common
stock with respect to 1996 based on the calculation for LPIP options discussed
above for the other Executive Officers. He did not receive an LPIP cash award
with respect to 1996 because neither the corporate nor team objectives for
such year were met.
Pursuant to his employment agreement, in 1991 Mr. Van Sant was granted
options for 330,000 shares of common stock that vest at a rate of 30,000
shares for each year of his continued employment with the Company. In
addition, he was granted options for 30,000 shares of common stock in 1996
pursuant to the Company's Stock Option Plan.
Executive Development and Compensation Committee
Ronald M. Gross, Chairman
Rod Dammeyer
T. Kevin Dunnigan
William H. Nelson, III
W. Paul Tippett
19
<PAGE>
PERFORMANCE GRAPH
The following graph illustrates a five-year comparison at fiscal year-end from
1991 through 1996 of the Company's cumulative total stockholder return on
common stock with the cumulative total return on the S&P 500 Stock Index and
the S&P Iron & Steel--500 Index (formerly known as the S&P Steel Index). These
values assume an investment of $100 on December 31, 1991 and reinvestment of
dividends. The companies included in the S&P Iron & Steel--500 Index are
Allegheny Teledyne, Inc., Armco Inc., Bethlehem Steel Corporation, Inland Steel
Industries, Inc., Nucor Corp., USX Corp.-U.S. Steel Group and Worthington
Industries Inc.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
YEARS ENDING
---------------------------------------
1991 1992 1993 1994 1995 1996
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
LUKENS INC. $100 161.66 138.03 121.52 123.94 91.13
S&P 500 INDEX $100 107.62 118.46 120.03 165.13 203.05
S&P IRON & STEEL--500 INDEX $100 130.84 172.15 167.44 155.26 138.61
</TABLE>
20
<PAGE>
STOCKHOLDER PROPOSALS
The following three proposals have been submitted by the stockholders named
below. The Company will furnish, orally or in writing as requested, the
addresses and claimed share ownership positions of the proponents of these
stockholder proposals, promptly upon written or oral request directed to the
Secretary of the Company. Each proposal will be approved if it receives the
affirmative vote of the majority of shares present in person or represented by
proxy at the meeting and entitled to vote on the matter (abstentions will have
the effect of a negative vote and broker non-votes will have no effect on the
outcome of the proposals). The proposals have been carefully considered by the
Board, which has concluded that their adoption would not be in the best
interests of the Company or its stockholders. For the reasons stated after
each proposal and its supporting statement, the Board recommends a vote
AGAINST each proposal.
If a stockholder wishes to present a proposal at the 1998 Annual Meeting, the
proposal must comply with the regulations of the Securities and Exchange
Commission and must be received by the Vice President, General Counsel and
Secretary of the Company at 50 South First Avenue, Coatesville, Pennsylvania
19320 no later than December 2, 1997, in order for it to be included in the
Proxy Statement for such meeting.
PROPOSAL 2--DECLASSIFIED BOARD PROPOSAL--PROPOSED BY ROBERT SCHAAL
Resolved that the shareholders of Lukens Inc. (the "Company") recommend that
the Board of Directors take all actions necessary to cause the certificate of
incorporation and the by-laws of the Company to be amended so that the
Company's Board of Directors, consisting of no more than 11 directors, will
stand for election at each annual meeting of the shareholders of the Company.
The stockholder proposal will permit the shareholders of the Company to
express their desire that the Board of Directors take the necessary actions to
cause the certificate of incorporation and the by-laws of the Company to be
amended to remove the classified or "staggered" board provisions.
Specifically, the amendments contemplated by the Proposal, if implemented by
the Board of Directors and approved by the shareholders of the Company, would
eliminate the provisions relating to the division of the directors of the
Company into three (3) classes, would fix the term of office of each of the
directors to one year, and would set the total number of directors at eleven
(11).
Once the amendments are accomplished, the entire Board of Directors of the
Company will stand for election at each annual meeting of the shareholders of
the Company. The Company's
21
<PAGE>
current classified board scheme does not allow the directors to be responsible
to the shareholders for their actions in managing the Company, including
actions which result in the decline in value of the Company's stock.
The Stockholder Proposal will ensure that the directors are either responsive
to the interests of the very shareholders who have elected them to office or
will be subject to being replaced. In this manner, this annual election
procedure will make the directors directly accountable to the shareholders and
make them more responsible to devising methods to enhance shareholder values.
In addition, removal of the staggered board provisions will make it possible
to replace a majority of the directors at any given annual meeting rather than
forcing the shareholders to wait for two or more annual meetings to accomplish
that same result under the current classified board provisions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE FOREGOING PROPOSAL FOR
THE FOLLOWING REASONS:
The current system of electing Directors to three-year terms has been in
place since 1987. This system is very common and is permitted by the laws of
the State of Delaware and by the rules of the New York Stock Exchange. The
Board does not believe that Directors who are elected for three-year terms are
any less accountable to stockholders than Directors elected annually because
the same standards of performance apply regardless of the length of a
Director's term.
The system of three-year terms promotes continuity and stability in the
conduct of business by the Board, since generally two-thirds of the Directors
at all times will have had prior experience with the business affairs,
strategies and policies of the Company. This experience enables the Directors
to plan in a reasonable fashion for the future business of the Company, and to
judge the performance of management against long-term goals established by the
Board. In addition, it permits Directors to effectively represent the
interests of all stockholders in a variety of circumstances.
The use of three-year terms is also intended to encourage any persons who may
seek to acquire control of the Company, or to further some other personal
goal, to initiate such action through negotiation with the Board--which is in
a position to act to protect all of the stockholders of the Company. The Board
believes that declassification weakens the ability of the Board to negotiate
favorable terms with a proponent of an unfriendly or unsolicited proposal. An
attempt to effect a change of control of the Board at a single stockholders'
meeting, even if unsuccessful, can seriously disrupt the conduct of the
business of the Company and cause it to incur substantial expense.
22
<PAGE>
Moreover, adoption of the proposal would not in itself eliminate three-year
terms. If adopted, the proposal would only serve as a recommendation to the
Board of Directors to take the steps necessary to require Directors to stand
for election annually. Such steps would include the repeal of the provisions
relating to three-year terms in the Company's Restated Certificate of
Incorporation (as amended to date), which requires the affirmative vote of
two-thirds of the outstanding shares entitled to vote at a subsequent meeting
of stockholders, unless approved by a majority of the continuing Directors, in
which case the affirmative vote of a majority of the outstanding shares is
required.
The Board believes that its obligation is to enhance the Company's business
competitiveness for the long-term, and provide sustained, long-term return to
the Company's stockholders. The Board continues to believe that the present
system of three-year terms is in the best interest of the stockholders, and
that the stockholders should oppose efforts to eliminate three-year terms. For
these reasons, the Board of Directors recommends a vote AGAINST the proposal.
PROPOSAL 3--DIRECTOR AND EMPLOYEE STOCK OPTION PROPOSAL--PROPOSED BY ALBERT W.
EASTBURN
Stock options for current directors, officers and other key employees should
be granted at a target price equal to or greater than the highest price
reached in the past three years.
Stock options are intended to more closely align the interests of the
management with those of the shareholders. Currently stock options are granted
annually at the market price on the day of the grant. This practice unfairly
rewards the current management when the Company performs poorly by granting
options at depressed prices. Granting options at a target price equal to or
greater than the high of the past three years will insure equal consideration
of both parties.
A vote for the motion will be in favor of establishing a target price for
options.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE FOREGOING PROPOSAL FOR
THE FOLLOWING REASONS:
The Board believes that the Company's current policy of granting options
which are exercisable at the market price on the day of the grant to
directors, officers and key employees is an appropriate and generally accepted
method of providing a form of incentive compensation to such individuals.
Although the proponent states that this policy "unfairly rewards" these
individuals by "granting options at depressed prices," the Board believes that
the options represent unrealized value to the recipient unless the price of
the Company's common stock increases.
The Executive Development and Compensation Committee has adopted a
compensation philosophy that relates the level of compensation to the
Company's success in meeting annual
23
<PAGE>
and long-term goals and is competitive with other major companies not only in
the steel industry but in industry generally. The Committee sets the executive
pay ranges, including stock options, based upon comparative data from similar
companies. A key element of executive compensation structure is that there is
a significant upside in the individual's compensation depending on the
Company's performance, financial and otherwise.
The Board believes that this philosophy enables it to attract and retain the
most qualified individuals to manage the Company's business. In determining
executives' compensation, the Executive Development and Compensation Committee
relies on competitive data and carefully assesses the Company's overall
performance and individual achievement.
The Board also believes that the Company must offer a competitive
compensation program to attract and retain highly qualified persons to serve
as directors, officers and key employees. In this regard, many U.S. companies
with which the Company competes for candidates for such positions offer
compensation in the form of stock options; in most instances, the Board
believes, such options are exercisable at the market price on the day of the
grant, as is currently the case at the Company. The Company's compensation
program would compare unfavorably to the programs of other companies with
market price options and as a result the Company would be at a competitive
disadvantage unless it increased base compensation.
The Board believes that setting the exercise price of stock options granted
to officers, directors and key employees at the three-year high market price
of the common stock, as called for in the proposal, would interfere with the
Company's ability to attract, retain and reward key executives in a manner
commensurate with their contributions to the Company and, accordingly,
recommends a vote AGAINST the proposal.
PROPOSAL 4--STOCKHOLDER RIGHTS AGREEMENT PROPOSAL--PROPOSED BY W. R. WILSON
Resolved that the shareholders of Lukens Inc. (the "Company") recommend that
the Board of Directors rescind and terminate the Renewed Rights Agreement
adopted by the Board of Directors on September 25, 1996 and refrain from
amending or extending the Rights Agreement dated as of July 29, 1987, as
amended as of July 25, 1990, or adopting any other Rights Agreement, including
the Renewed Rights Agreement, unless and until otherwise recommended by the
holders of a majority of the outstanding Common Stock of the Company.
The Stockholder Proposal is designed to permit the shareholders of the
Company to express to the Company's Board of Directors their desire that the
recently adopted Renewed Rights Agreement be rescinded and terminated, that
the Rights issued pursuant to the original Rights Agreement--commonly known as
a "Poison Pill" (which Rights Agreement was originally adopted by the Company
on July 29, 1987)--be allowed to expire according to their terms on
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<PAGE>
August 10, 1997 and that no amended or additional Rights Agreement, including
the Renewed Rights Agreement, be adopted by the Board of Directors without the
consent of the holders of a majority of the Common Stock of the Company.
The Company's Poison Pill unnecessarily restricts the free and open ability
of shareholders to receive and accept offers to purchase all or a majority of
the outstanding stock of the Company. Should the Board of Directors comply
with the Stockholder Proposal and allow the original Poison Pill defensive
device to expire by its terms, the Company and its Board of Directors will be
better positioned to advance the interests of the shareholders and maximize
shareholder values by being able to receive offers to acquire the Company's
outstanding stock at a premium to the Company's market price, which offers may
not materialize if the Poison Pill was still in place.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE FOREGOING PROPOSAL FOR
THE FOLLOWING REASONS:
The Rights Agreement, which was adopted by the Company in 1987 and amended in
1990, and the Renewed Rights Plan, which was adopted by the Board in September
1996 (collectively, the "Rights Plans"), were adopted to protect the interests
of the Company and all of its stockholders in the event of unsolicited offers
to acquire the Company. The Board believes that the Stockholder Proposal would
restrict the Board's ability to protect the interests of all stockholders in
the event that the stockholders and the Company were confronted with coercive
or unfair takeover tactics.
The Rights Plans are not intended to prevent an acquisition of the Company on
terms that are favorable and fair to all stockholders and will not be used for
that purpose. The Rights Plans are designed to deal with unilateral actions by
hostile buyers that are calculated to deprive the Board and the Company's
stockholders of their ability to determine the Company's destiny by creating
an incentive for a potential acquiror to negotiate in good faith with the
Board. The Rights Plans should not affect any prospective buyer willing to
make an offer at a full and fair price and will not interfere with a merger or
other business combination transaction that the Board approves as fair and as
constituting a recognition of full value to stockholders.
Coincidentally, in a letter to the Company's stockholders dated August 10,
1987, the proponent, at that time a member of the Board, discussed the
benefits of the Rights Agreement to the Company's stockholders. In this
letter, the proponent described certain provisions in the Rights Agreement as
"safeguard[ing] your interests in the event of unsolicited offers to acquire
Lukens," including "offers that do not treat all shareholders equally, the
acquisition of sufficient shares to gain control without offering fair value
to all shareholders, and other coercive or unfair takeover tactics that could
impair the Board's ability to represent your
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interests fully." As described by the proponent, of particular concern to the
Board at that time in adopting the Rights Plans was the need to "protect
Lukens shareholders against being forced to sell prematurely their shares of
Lukens Common Stock for less than fair value following an unsolicited takeover
attempt." The Board continues to have the concerns articulated by the
proponent in his 1987 letter and continues to believe that the Rights Plans
are the best available means of protecting the stockholders' rights to retain
equity in the Company and the full value of their investments, while not
foreclosing a fair acquisition bid for the Company.
Under Delaware law, the Board is responsible for managing the Company's
business and affairs, including the evaluation of any unsolicited offers. The
Board specifically examined its fiduciary responsibilities under Delaware law
when it adopted the Rights Plans. In addition, the Board consulted with the
Company's outside legal and financial advisors and gave careful and thoughtful
consideration to the interests of the Company's stockholders and the effect of
the Rights Plans on them. Based on the Board's collective business experience
and knowledge of the Company, it believes that the adoption of the Rights
Plans was a valid exercise of its fiduciary obligations to all stockholders.
In furtherance of its members' fiduciary duties, the Board fully intends to
continue to evaluate the best interests of the Company and the Company's
stockholders before amending or extending the current Rights Plans and before
adopting any new rights plan. The Board believes that its recommendation to
vote against the Stockholder Proposal is also consistent with its fiduciary
duties. Accordingly, the Board recommends a vote AGAINST the proposal.
26
<PAGE>
PRINCIPAL HOLDERS OF STOCK
The following table sets forth information, as of December 31, 1996,
regarding each person who is known by the Company to beneficially own more
than 5% of any class of stock of the Company. Such information was provided to
the Company by such persons or is based on data available to the Company.
<TABLE>
<CAPTION>
SHARES
TITLE BENEFICIALLY PERCENT
NAME AND ADDRESS OF CLASS OWNED OF CLASS(1)
- ---------------- --------- ------------- -----------
<S> <C> <C> <C>
State Street Bank and Trust Company Preferred 480,045(2)(3) 100.0%
225 Franklin Street
Boston, MA 02110
Merrill Lynch & Co., Inc. Common 2,192,400(4) 14.8%
World Financial Center, North Tower
250 Vesey Street
New York, NY 10281
President and Fellows of Harvard Common 1,198,256(5) 8.1%
College
c/o Harvard Management Company,
Inc.
600 Atlantic Avenue
Boston, MA 02210
Lazard Freres & Co. LLC Common 946,530(6) 6.4%
30 Rockefeller Plaza
New York, NY 10020
</TABLE>
- ---------
(1) Rounded to the nearest one-tenth of one percent and based on the number of
shares of the applicable class outstanding on December 31, 1996.
(2) Rounded to the nearest share.
(3) Held as trustee of the Lukens Inc. Employees Stock Ownership Trust under
the Lukens Inc. Employees Capital Accumulation Plan, as to which State
Street Bank and Trust Company disclaims beneficial ownership. The
trustee's duties include management of the trust and voting the preferred
stock held in the trust. See pages 1-2. Each share of preferred stock is
generally convertible into three shares of the Company's common stock. If
all of the shares of preferred stock were converted, State Street Bank and
Trust Company would hold 1,440,135 shares of common stock as trustee.
These shares, together with the 76,750 shares of common stock held in
separate or commingled funds managed by State Street Bank and Trust
Company, would represent approximately 10.25% of the Company's common
stock.
27
<PAGE>
(4) Includes 1,350,000 shares held by Merrill Lynch Asset Management, L.P.
("MLAM") as discretionary investment advisor to Merrill Lynch Global
Allocation Fund, Inc. and 840,150 shares held by MLAM as investment
advisor to private client accounts. MLAM shares voting and dispositive
power with respect to all of such shares. Merrill Lynch & Co., Inc., the
parent of MLAM, Princeton Services, Inc., the general partner of MLAM, and
Merrill Lynch Group, Inc., the parent of Princeton Services, Inc., may be
deemed to share with MLAM investment discretion and voting authority with
respect to such holdings, but disclaim beneficial ownership of such
shares. Also includes 2,250 shares as to which other entities affiliated
with Merrill Lynch & Co., Inc. share voting and dispositive power, and as
to which Merrill Lynch & Co., Inc. disclaims beneficial ownership.
(5) Includes 1,129,000 shares with respect to which President and Fellows of
Harvard College has sole voting and dispositive power, 38,500 shares with
respect to which The Harvard University Master Trust Fund has sole voting
and dispositive power and 30,756 shares with respect to which Harvard
Charitable Remainder Trust Equity Partnerships has sole voting and
dispositive power.
(6) Lazard Freres & Co. LLC has sole dispositive power with respect to all of
such shares and sole voting power with respect to 833,530 of such shares.
CERTAIN TRANSACTIONS
During fiscal year 1996, the Company had outstanding loans in the aggregate
amount of $270,000 to Mr. John, Senior Vice President, Commercial, and
$224,700 to Mr. C.B. Houghton, Jr., Vice President, Business Development, on
an interest free basis. The purpose of these loans was to assist them in their
relocation. Mr. Houghton repaid his loan during fiscal year 1996 and Mr. John
repaid $150,000 principal amount of his loan during fiscal year 1996.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934 generally requires
the Company's Directors and Executive Officers and persons who own more than
10% of a registered class of the Company's equity securities ("10% owners") 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
common stock and other equity securities of the Company. Directors, Executive
Officers and 10% owners are required by Securities and Exchange Commission
regulation to furnish the Company with copies of all Section 16(a) forms they
file. To the Company's knowledge, based solely on review of copies of such
reports furnished to the Company and written representations that no other
reports were required to be filed during the 1996 fiscal year, all Section
16(a) filing requirements applicable to its Directors, Executive Officers and
10% owners were met, except that Mr. Smith failed to timely report a
charitable contribution of 500 shares of the Company's common stock that he
made in December 1995. This transaction was reported in February 1997.
28
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
During the 1996 fiscal year Arthur Andersen LLP of Philadelphia,
Pennsylvania, served as independent public accountants to the Company. They
have been appointed as the Company's independent public accountants for the
1997 fiscal year by the Board of Directors. Representatives of Arthur Andersen
LLP are expected to be present at the Annual Meeting and will have the
opportunity to make a statement if they desire to do so. They will be
available to respond to proper questions regarding the independent public
accountants' responsibilities.
OTHER MATTERS
Management does not know of any matters other than those referred to in this
Proxy Statement that may come before the Annual Meeting. However, if any other
matters should properly come before the meeting, the persons named in the
accompanying Proxy will have discretionary authority to vote all Proxies with
respect to such matters in accordance with their best judgment.
EXPENSE OF SOLICITATION
The cost of soliciting Proxies will be borne by the Company. Some of the
officers and employees of the Company may solicit Proxies personally and by
telephone. In addition, Corporate Investor Communications, Inc. will provide
assistance in soliciting Proxies by mail, telephone, telegraph and personal
interview at an expected cost of $4,000 plus expenses.
FORM 10-K
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON SOLICITED BY THIS
PROXY STATEMENT, UPON THE WRITTEN REQUEST OF SUCH PERSON, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K. (IF EXHIBITS ARE REQUESTED, A CHARGE OF
25 CENTS PER PAGE WILL BE MADE.) SUCH WRITTEN REQUEST SHOULD BE DIRECTED TO
THE COMPANY AT 50 SOUTH FIRST AVENUE, COATESVILLE, PENNSYLVANIA 19320,
ATTENTION: VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY.
By Order of the Board of Directors
/s/ William D. Sprague
William D. Sprague
Vice President, General Counsel and
Secretary
29
<PAGE>
PROXY
LUKENS INC.
The undersigned:
(i) as a holder of record of Lukens Inc. common stock hereby appoints Michael
O. Alexander, Rod Dammeyer and Joab L. Thomas the proxies of the undersigned
(each with power to act alone and with power of substitution and with
discretionary authority to cumulate on the vote for the election of
Directors) to represent and vote, in the manner directed herein, the shares
of stock of Lukens Inc. which the undersigned would be entitled to vote if
personally present; or
(ii) as a participant (and, where applicable, a named fiduciary) in the
capital accumulation plan specified on the reverse side hereby instructs the
trustee of such plan to vote all shares of common stock and/or preferred
stock of Lukens Inc. which are credited to the undersigned's account in such
plan in the manner directed herein (with discretionary authority to cumulate
on the vote for the election of Directors)
at the Annual Meeting of Stockholders of Lukens Inc. to be held at the
Administrative Resources Center, Modena Road, South Coatesville, Pennsylvania,
on April 30, 1997, at 1:30 P.M., EDT, or at any adjournment thereof, and in the
proxies' or the trustee's discretion, as applicable, upon such other business
as may come before the meeting, all as set forth in the notice of the meeting
and in the proxy statement furnished herewith.
The shares represented hereby will be voted in accordance with the
specifications made on the reverse side or, IF NO SPECIFICATION IS MADE, THEY
WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS NOMINATED AND AGAINST
PROPOSALS 2, 3 AND 4 SPECIFIED ON THE REVERSE SIDE.
(PLEASE FILL IN, SIGN AND DATE ON REVERSE SIDE)
-----------
SEE REVERSE
SIDE
-----------
<PAGE>
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
MANAGEMENT RECOMMENDS A VOTE FOR THE DIRECTORS NOMINATED. MANAGEMENT RECOMMENDS
A VOTE AGAINST PROPOSALS 2, 3 AND 4.
FOR WITHHELD
1. ELECTION OF [_] [_]
DIRECTORS
For, except vote withheld from the following nominee(s):
- --------------------------------------------------------------------------------
NOMINEES: T. KEVIN DUNNIGAN, RONALD M. GROSS, W. PAUL TIPPETT AND
R. W. VAN SANT
To cumulate votes for any nominee(s), write the name(s) and the amount
allocated to such person(s) in the space provided below:
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. STOCKHOLDER PROPOSAL [_] [_] [_]
REGARDING DECLASSIFIED
BOARD OF DIRECTORS
3. STOCKHOLDER PROPOSAL [_] [_] [_]
REGARDING DIRECTOR
AND EMPLOYEE
STOCK OPTIONS
4. STOCKHOLDER PROPOSAL [_] [_] [_]
REGARDING STOCKHOLDER
RIGHTS AGREEMENT
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as corporate officer, attorney, executor, administrator,
trustee or guardian, please give full title as such.
- --------------------------------------------------------------------------------
Signature
- --------------------------------------------------------------------------------
Signature, if held jointly
DATE
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