<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 Rule 14a-11(c) or Rule 14a-12
Lone Star Technologies, Inc.
- ----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- ----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------
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
O-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
-------------------------------------------
2) Form Schedule or Registration Statement No.:
----------------------
3) Filing Party:
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4) Date Filed:
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<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 8, 1997
Notice is hereby given that the Annual Meeting of Shareholders of Lone
Star Technologies, Inc. ("LST"), a Delaware corporation, will be held on the
8th day of May, 1997, at 9:00 a.m., local time, in the Trinity II Room,
fourth floor, The Westin Galleria Hotel, 13340 Dallas Parkway, Dallas, Texas,
for the following purposes:
(1) To elect two members to the Board of Directors of LST;
(2) To vote upon approval of amendments to the 1985 Long-Term Incentive
Plan of LST; and
(3) To transact any other business as may properly come before the meeting
or any adjournment thereof.
The close of business on March 25, 1997 is the record date for the
determination of shareholders entitled to notice of and to vote at the meeting
or any adjournment thereof. A complete list of the shareholders entitled to
vote at the meeting will be available for examination by any shareholder at the
office of the Secretary of LST, 5501 LBJ Freeway, Suite 1200, Dallas, Texas
75240 (telephone: 972/386-3981) during the ten-day period preceding the meeting.
We hope that you will be represented at the meeting by signing the enclosed
proxy card and returning it in the accompanying envelope as promptly as
possible, whether or not you expect to be present in person. Your vote is
important - as is the vote of every shareholder - and the LST Board of Directors
appreciates the cooperation of shareholders in returning proxies to vote at the
meeting.
By order of the Board of Directors,
Robert F. Spears
Secretary
Dallas, Texas
April 3, 1997
<PAGE>
LONE STAR TECHNOLOGIES, INC.
5501 LBJ Freeway, Suite 1200
P.O. Box 803546
Dallas, Texas 75380-3546
PROXY STATEMENT
SOLICITATION AND REVOCATION OF PROXIES
The enclosed proxy is solicited by and on behalf of the Board of Directors of
LST, for use at the Annual Meeting of Shareholders to be held on May 8, 1997, or
at any adjournment thereof. Any shareholder giving a proxy may revoke it prior
to the voting of the proxy on any matter (without affecting, however, any vote
already cast on any other matters) by:
(a) notifying LST of such revocation in writing prior to or at the Annual
Meeting,
(b) delivering to LST a duly executed proxy relating to the same shares
dated subsequent to the date of the original proxy, or
(c) voting the same shares in person at the Annual Meeting.
The principal executive offices of LST are located at 5501 LBJ Freeway, Suite
1200, Dallas, Texas 75240 (telephone: 972/386-3981). This Proxy Statement and
the enclosed proxy were mailed to shareholders on or about April 3, 1997.
All shares represented by unrevoked proxies will be voted at the meeting or any
adjournment thereof as specified by the persons giving such proxies. If no
contrary specification is made, the shares represented by proxies will be voted
FOR the election as directors of the nominees named herein and FOR approval of
the amendments to the 1985 Long-Term Incentive Plan of LST described herein.
OUTSTANDING SHARES AND VOTING RIGHTS
As of March 25, 1997, the record date for the determination of shareholders
entitled to vote at the Annual Meeting, there were 20,671,945 outstanding shares
of LST Common Stock. This is the only class of stock of LST outstanding, and
each share of Common Stock is entitled to one vote on all matters properly
coming before the Annual Meeting.
ELECTION OF DIRECTORS
The Certificate of Incorporation and By-Laws of LST provide for a Board of
Directors comprised of three classes of directors, as nearly equal in number
as possible, with each class of directors to be elected for three-year terms.
Therefore, the nominees for election to the class of directors whose terms
are expiring at an Annual Meeting are elected for a term expiring at the
Annual Meeting of Shareholders held in the third year following the year of
their election. If any director is appointed by the Board of Directors
between Annual Meetings
2
<PAGE>
to succeed a director who has resigned, died or been removed, or to fill a
vacancy on the Board of Directors created by an increase in the size of the
Board of Directors, the shareholders at the next Annual Meeting following the
appointment will vote to elect a director to complete the unexpired term or
to serve a full three-year term if the unexpired term ends at that Annual
Meeting. Directors are elected by plurality vote.
At the 1997 Annual Meeting, shareholders will be asked by LST to reelect Messrs.
Hegi and McCord to the Board of Directors. The recent experience of the
nominees is summarized below. The nominees standing for election at this Annual
Meeting are standing for election for terms expiring at the 2000 Annual Meeting.
Each proxy solicited hereby which is given prior to the voting at the Annual
Meeting and is not revoked will be voted FOR the election of the nominees named
in the following table for terms of office expiring in 2000 at the Annual
Meeting, unless a contrary specification is made in the proxy. If for any
reason any nominee should become unavailable for election, then, unless a
contrary specification is made in the proxy, votes will be cast pursuant to
authority granted by the proxy for a substitute nominee designated by the Board
of Directors, or, in the absence of a designation by the Board of Directors, for
a substitute nominee designated by any of the persons authorized by the proxy to
vote as proxies. The Board of Directors is not aware that any nominee will be
unwilling or unable to serve.
The following tables set forth, for the nominees for director and for the
directors whose current terms extend beyond the 1997 Annual Meeting, the
principal occupation or employment for each during at least the past five years,
the year in which each joined the Board of Directors, the year in which their
current terms on this Board expire and other business directorships held. One of
the directors, Mr. Mercer, was recommended for nomination to the Board before
his election in 1995 by Alpine Capital, L.P. and the other shareholders
reporting share ownership information with Alpine in footnote (2) to the table
under the heading "Principal Shareholders" in this Proxy Statement.
The Board of Directors recommends that shareholders vote FOR the election of the
nominees named in the table.
NOMINEES FOR DIRECTOR
<TABLE>
Name (Age) Business Experience and Other Information Year First Elected
- ---------- ----------------------------------------- --------------------
<S> <C> <C>
FREDERICK B. HEGI, JR. (53) 1985
General Partner, Wingate Partners L.P. (private investments) since 1987; President, Valley
View Capital Corporation (private investments) since 1982; Chairman and Chief Executive
Officer, United Stationers, Inc. (wholesale office products) since November 1996. Director:
United Stationers, Inc. and Loomis, Fargo & Co. His current term expires in 1997. (1,2)
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
3
<PAGE>
WILLIAM C. MCCORD (69) 1991
Retired from ENSERCH Corporation in 1993; Chairman and Chief Executive Officer of ENSERCH
Corporation (diversified energy, engineering, and construction company) from 1987 to 1993.
Director: ENSERCH Corporation, Enserch Exploration, Inc. and Pool Energy Services Co. His
current term expires in 1997.(1,2)
CONTINUING DIRECTORS
CHARLES L. BLACKBURN (69) 1991
Retired from Maxus Energy Corporation in 1995; Chairman, President and Chief Executive
Officer of Maxus Energy Corporation (oil and gas producer) from 1987 to 1995. Director:
Maxus Energy Corporation. His current term expires in 1998. (1,2)
JAMES E. MCCORMICK (69) 1991
Retired from Oryx Energy Company in 1992; President and Chief Operating Officer of Oryx
Energy Company (formerly Sun Exploration and Production Company, oil and gas exploration and
production company) from 1988 to 1992. Director: BJ Services Co., Snyder Oil Corporation and
TESCO Corporation. His current term expires in 1998. (1,2)
THOMAS M. MERCER, JR. (53) 1995
Partner since April 1995 of Ceres Capital Partners and owner since 1993 of The Mercer
Financial Company (financial advisory and investment banking services); President of the
employee benefits division of Pre-Paid Legal Services, Inc. during part of 1993 and 1994;
Executive Vice President and Managing Director of corporate banking for First Gibraltar
Bank, F.S.B. (federal savings bank) from 1989 to 1993. His current term expires in 1998.
(1,2)
DEAN P. GUERIN (75) 1989
Investments since June 1994. Chairman and Chief Executive Officer, Berry Barnett Food
Distribution Company, Inc. (wholesale food distribution company) from 1990 to 1994; retired
as Chairman of the Board of Eppler, Guerin and Turner, Inc. (investment banking firm) in
1986. Director: Seagull Energy Corporation and Trinity Industries, Inc. His current term
expires in 1999. (1,2)
JOHN P. HARBIN (79) 1987
Chairman of the Board, Chief Executive Officer and President of LST since May 1989; retired
as Chairman of the Board of Halliburton Company (oil field services and engineering/construction)
in 1983. His current term expires in 1999.
During 1996, there were six meetings of the Board of Directors and three meetings of Board
committees. All of the directors attended all of the meetings of the Board of Directors and
committees of the Board on which they served.
</TABLE>
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
4
<PAGE>
COMPENSATION OF DIRECTORS. Each director of LST who is not an officer of LST or
any of its subsidiaries receives an annual retainer of $25,000, plus expenses
incurred in connection with attendance at meetings of the Board of Directors or
any committee of the Board of Directors of which he is a member. In addition to
the annual retainer, each director receives attendance fees of $1,000 for each
meeting of the Board of Directors and $1,000 for each committee meeting attended
whether or not there was a Board meeting that same day. Each director may elect
to receive his retainer and meeting fees in cash or LST shares, or he may defer
receipt under a phantom stock arrangement. Mr. Harbin, an officer and employee
of LST, receives no compensation for serving as a director of LST. Following
the Annual Meeting in 1993 and following each Annual Meeting every second year
after that, each director then in office who is not an employee of LST or its
subsidiaries ("non-executive director") automatically receives a stock option
for 25,000 shares of Common Stock of LST under the terms of the 1985 Long-Term
Incentive Plan of LST (subject to an overall limitation of 750,000 shares that
may be issued for such options) with an exercise price at the fair market value
of the Common Stock on the date the options are granted. Each person who was a
non-executive director at the time (which does not include Mr. Harbin) received
options after the 1993 and 1995 Annual Meetings, and each of the current non-
executive directors will receive options after the 1997 Annual Meeting. No non-
executive director exercised any options during 1996.
EXECUTIVE OFFICERS
All executive officers of LST are elected annually by and serve at the pleasure
of the Board of Directors, or in the case of Mr. Best, at the pleasure of the
Board of Directors of Lone Star Steel Company ("Steel"), a subsidiary of LST,
which he serves as Chief Executive Officer. The following sets forth
information concerning the current executive officers of LST. Information
regarding Mr. Harbin is provided above in the Directors' listing.
Name(Age) Business Experience and Other Information
- --------- -----------------------------------------
RHYS J. BEST (50)
President and Chief Executive Officer of Steel since December 1989.
ROBERT F. SPEARS (53)
Vice President, General Counsel and Secretary of LST since July 1996;
General Counsel of Financial Industries Corporation (life insurance holding
company), Austin, Texas, from 1991 to July 1996.
CHARLES J. KESZLER (34)
Vice President - Finance and Treasurer of LST since February 1996; Director
of Taxes and Pension Investments of Steel from 1994 to February 1996; Vice
President from 1992 to 1993 and Assistant Vice President from 1990 to 1992
of American Federal Bank, F.S.B. (a federal savings bank and a subsidiary
of LST until its sale in 1993).
5
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows beneficial ownership of shares of Common Stock of LST
by each director of LST, each executive officer of LST named in the Summary
Compensation Table in this Proxy Statement and all directors and executive
officers of LST as a group at February 28, 1997. Each beneficial owner has sole
voting power and sole investment power as to the shares listed opposite his
name.
<TABLE>
Name of Director,
Executive Officer or Group Number of Shares(1) Percent of Class(2)
- -------------------------- ------------------- -------------------
<S> <C> <C>
Charles L. Blackburn 25,000 *
Dean P. Guerin 54,711 *
John P. Harbin 118,750 *
Frederick B. Hegi, Jr. 52,865 *
William C. McCord 52,000 *
James E. McCormick 51,000 *
Thomas M. Mercer, Jr. 8,750 *
Rhys J. Best 76,918 *
All directors and
executive officers as a group (10) 443,494(3) 2.11
</TABLE>
- -----------------------
*Less than 1%.
(1) Includes (a) 25,000 shares for Mr. Blackburn, 66,250 shares for Mr. Harbin,
50,000 shares each for Messrs. Guerin, Hegi, McCord and McCormick, 6,250
shares for Mr. Mercer and 61,250 shares for Mr. Best which may be acquired
within 60 days of February 28, 1997 pursuant to options granted by LST
under its 1985 Long-Term Incentive Plan and (b) 3,711 shares issuable to
Mr. Guerin upon conversion of LST convertible debentures he holds.
(2) Percentages are calculated on 21,036,906 shares, the number that would have
been outstanding if the stock options and convertible debentures described
in the prior footnote had been exercised and converted on February 28,
1997.
(3) Includes a total of 364,961 shares which may be acquired within 60 days of
February 28, 1997 pursuant to options and convertible debentures held by
all directors and executive officers as a group.
Additional share ownership information regarding principal shareholders of LST
who are neither executive officers nor directors is shown in the table under the
heading "Principal Shareholders" in this Proxy Statement.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation of each
person who was serving as an executive officer of LST at the end of 1996 and
received salary and bonus exceeding $100,000 during 1996 (the "named executive
officers").
SUMMARY COMPENSATION TABLE
<TABLE>
Long-Term Comp Awards
Options (# of shares All Other
Name and Principal Position Year Salary($) Bonus($) of LST Common Stock) Compensation($)
- --------------------------- ---- --------- -------- ---------------------- ---------------
<S> <C> <C> <C> <C> <C>
John P. Harbin 1996 375,000 50,000 15,000 -
Chairman of the Board, 1995 360,412 50,000 25,000 -
Chief Executive Officer 1994 350,000 - - -
& President, LST
Rhys J. Best 1996 287,500 15,000 15,000 4,500
President & Chief Executive Officer, 1995 255,205 15,000 10,000 4,500
Steel 1994 250,000 20,000 - 4,500
</TABLE>
All other compensation listed in the last column represents company
contributions to a 401(k) Plan for Mr. Best.
Charles J. Keszler has served as Vice President-Finance and Treasurer of LST
since February 1996, and Robert F. Spears has served as Vice President, General
Counsel and Secretary of LST since July 1996. Neither Mr. Keszler nor Mr.
Spears received salary and bonus exceeding $100,000 in 1996.
CHANGE-IN-CONTROL ARRANGEMENTS WITH NAMED EXECUTIVE OFFICERS
Mr. Best and Steel entered into an agreement in 1990 that provides for a
continuation of his salary for one year if his employment is terminated for any
reason other than misconduct (as defined in the agreement) within two years
after any sale or liquidation of Steel or transfer of a majority of its assets.
Messrs. Harbin and Best have options granted under the 1985 Long-Term Incentive
Plan. The Plan provides that options, which ordinarily are not fully
exercisable until four years after grant, become fully exercisable if a change
of control (as defined in the Plan) of LST occurs.
OPTIONS
The following table shows the options that were granted under the 1985
Long-Term Incentive Plan in 1996 to the named executive officers. Each
option has an exercise price equal to the fair market value of LST's Common
Stock on the date of grant, has a ten year term and is exercisable as
follows: 25 percent on and after the first anniversary of the grant, and an
additional 25 percent on and after each of the next three anniversaries. The
rates of stock appreciation presented in this table for the shares under
options are not predictions of future stock prices.
7
<PAGE>
OPTION GRANTS TABLE
<TABLE>
Number of
Shares of
Common Stock % of Total Annual Rates of
Underlying Options Granted Stock Price Appreciation
Options to Employees Exercise Expiration for Option Terms
Name Granted (#) in 1996 Price ($/sh) Date 5%($) 10% ($)
- ---- ------------ --------------- ------------ ---------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
John P. Harbin 15,000 14.3% 11.06 2/20/2006 104,334 264,402
Rhys J. Best 15,000 14.3% 11.06 2/20/2006 104,334 264,402
</TABLE>
The following table reflects exercises of options by the named executive
officers during 1996 and unexercised options held by them at the end of 1996.
AGGREGATED OPTION EXERCISES IN 1996
AND 12/31/96 OPTION VALUES
<TABLE>
Number of Shares
of Common Stock Value of
Underlying In-The-Money
Shares Options at 12/31/96 Options at 12/31/96
Acquired on Value Exercisable/ Exercisable/
Name Exercise Realized($) Unexercisable(#) Unexercisable($)
- ---- ----------- ----------- ------------------- -------------------
<S> <C> <C> <C> <C>
John P. Harbin 37,500 357,420 43,750/46,250 475,781/416,407
Rhys J. Best - - 50,000/27,500 599,688/220,000
</TABLE>
No Options were repriced in 1996.
COMPENSATION COMMITTEE REPORT
LST is engaged in business as a manufacturer and supplier of oilfield and other
industrial metal products through Steel, LST's principal operating company.
Steel conducts business throughout the world, and its management is faced
continually with many challenges. The Compensation Committee believes that
successful compensation programs for executive officers and other key employees
must be geared to attract and retain quality personnel by providing rewards for
exemplary individual performance and must foster enhancement of shareholder
value. To reach these objectives, LST's executive compensation program consists
of current salary, bonus opportunity and a longer term incentive.
ANNUAL COMPENSATION
It is the Compensation Committee's practice to review and approve salaries and
bonus awards for executive officers annually. The Committee receives from the
chief executive officer compensation recommendations for the other executive
officers of LST. The Committee may request additional information and analysis
and ultimately determines in its discretion whether to approve recommended
changes. These determinations, which do not include the chief executive
officer's salary, are made
8
<PAGE>
by the Committee based on its own analysis and judgment and the
recommendations of the chief executive officer.
The chief executive officer's salary, which is separately considered by the
Committee, has changed only once from 1990 to 1996 -- an annual increase of
$25,000 to $375,000, effective August 1, 1995. In determining his salary,
the Committee considered the businesses in which LST engages, including the
highly competitive nature of the steel and oil and gas industries, the
experience he brings to the position and his contributions to the performance
of LST and Steel.
In 1996, the only salary change from the previous year for any executive officer
was the increase of $37,500 per year in Mr. Best's salary to $300,000 as of May
1, 1996.
Annual bonus awards are evaluated by the Committee after the end of each
fiscal year. As discussed below, the Committee's decisions on bonuses are
largely subjective and do not entail precise assigning of relative weight to
any particular factor. The salary and bonus of each executive officer of LST
that exceeded $100,000 during 1996, including the chief executive officer,
are shown in the Summary Compensation Table included elsewhere in the Proxy
Statement.
LONG TERM COMPENSATION - STOCK OPTIONS
Long term incentive compensation, rather than reflecting a single year's
results, is intended to reward performance over the long term. It has been
LST's practice to structure this long term incentive compensation in the form
of options for its Common Stock granted under the 1985 Long-Term Incentive
Plan. These options have an exercise price equal to the market price of the
Common Stock on the date of grant and become exercisable in annual cumulative
installments of 25 percent each, so that the option is not fully exercisable
for four years. The options can become exercisable sooner only if a change
of control of LST (as defined in the Plan) occurs. Unexercised options
terminate if the optionee's employment ceases. LST's shareholders are voting
on the approval of amendments to the Plan at the 1997 Annual Meeting that
will change the provisions regarding the vesting and termination of options
upon the retirement or death of the optionee. Shareholders are also voting
on the approval of amendments to the Plan that are designed to preserve
LST's ability to take federal income tax deductions under Section 162(m) of
the Internal Revenue Code in connection with the exercise of options or stock
appreciation rights that may be granted in the future. See "Amendments to
1985 Long-Term Incentive Plan" elsewhere in the Proxy Statement.
The Committee administers the 1985 Long-Term Incentive Plan and is responsible
for awarding stock options to employees under the Plan, including executive
officers. Options create a strong link between executive compensation and
shareholder return and enable executives to develop a meaningful ownership
interest in LST. The gradual vesting of the options over a four-year period and
the executive's ability to benefit from increases in Common Stock values provide
the executive a continuing incentive to achieve results beneficial to the
shareholders and also align the executive's long term interests with those of
the shareholders.
9
<PAGE>
When options are granted to executive officers, the Committee evaluates the
individual's performance currently and relative to the future needs of LST and
its operating units and considers the chief executive officer's recommendations.
The size of awards is based in part on historical practices and the Committee's
subjective evaluation, as discussed further below. The LST chief executive
officer's option awards are made on a similar basis.
Options granted in 1996 to each executive officer of LST who received salary and
bonus exceeding $100,000 during 1996 are shown in the Option Grants Table
included elsewhere in the Proxy Statement.
* * * * *
To assist in making its decisions on compensation matters, the Committee members
communicate with the executive officers regularly at Board meetings, receive
operating information frequently throughout the year and are given the chief
executive officer's recommendations regarding compensation for other executive
officers.
The Committee's decisions are not based on a formulistic approach assigning
relative weights of various factors or quantitative comparisons with specific
competitors or competitor groups or other mathematical methods. All decisions
are made with the objective of retaining and compensating those officers who
have demonstrated to the satisfaction of the Committee the capacity to
contribute to the financial and competitive performance of LST, thereby
furthering the main objective of the compensation program -- increasing
shareholder value.
The foregoing report is submitted by the Compensation Committee, the members of
which are:
Dean P. Guerin, Chairman
Charles L. Blackburn
Frederick B. Hegi, Jr.
William C. McCord
James E. McCormick
Thomas M. Mercer, Jr.
10
<PAGE>
PERFORMANCE CHART
The following graph compares the yearly percentage change for the five-year
period from January 1, 1992 to January 1, 1997 in the cumulative total
returns on LST's Common Stock, the S&P 500 Composite Stock Index and the S&P
Oil Well Equipment & Services Index. The value of each investment was equal
to $100 on January 1, 1992:
CUMULATIVE TOTAL RETURN COMPARISON
FIVE-YEAR INDEX (1/1/92 = 100)
[The graph that appears here in the paper copy presents the data set forth
below in the table.]
<TABLE>
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
LST Common Stock $100.00 $106.67 $210.00 $190.00 $293.33 $453.33
S&P 500 Index $100.00 $104.34 $111.55 $110.03 $148.76 $177.53
S&P Oil Equipment Index $100.00 $ 94.82 $105.18 $ 93.16 $120.88 $172.15
</TABLE>
11
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth as of February 28, 1997, the number of shares
of LST Common Stock beneficially owned by each person known by LST to own
beneficially more than 5 percent of its outstanding Common Stock.
Percentages are based on 20,671,945 shares of Common Stock of LST which were
issued and outstanding on that date. The information below and elsewhere in
the Proxy Statement reporting share ownership of LST is believed to be
current based upon information made available to LST prior to the date of
this Proxy Statement.
<TABLE>
Name and Address Amount of Percent of Outstanding
of Beneficial Holder Beneficial Ownership (1) Common Stock
- -------------------- ----------------------- ----------------------
<S> <C> <C>
Alpine Capital, L.P. 5,106,972 (2) 24.70%
201 Main Street, Suite 3100
Fort Worth, TX 76102
Sasco Capital, Inc. 2,234,600 (3) 10.81%
Ten Sasco Hill Road
Fairfield, CT 06430
</TABLE>
(1) The holders listed in the table report that they have sole voting and
dipositive power as to their shares except for 1,072,100 shares over
which Sasco Capital, Inc. does not have voting power.
(2) A Schedule 13D, reporting that these shares were acquired for investment
purposes, was filed with the Securities and Exchange Commission jointly
by Alpine Capital, L.P., Robert W. Bruce, III, Algenpar, Inc.,
J. Taylor Crandall, Keystone, Inc., The Anne T. and Robert M. Bass
Foundation, Anne T. Bass, and Robert M. Bass. The Foundation is
reported to have sole voting and dispositive power as to an
additional 230,628 shares of Common Stock, with respect to which
Anne T. Bass and Robert M. Bass are reported to have shared voting
and dispositive power. The filing states that Mr. Crandall
and Mr. Bruce have shared voting and dispositive power as to the
Foundation's shares and, along with Algenpar, Inc., have shared voting
and dispositive power as to Alpine Capital, L.P.'s shares as well,
which together total 5,337,600 shares and represent approximately
25.82 percent of the outstanding Common Stock. Keystone, Inc. and
Robert M. Bass are reported to have sole voting and dispositive power
as to 570,700 more shares, which represent an additional 2.76 percent
of the outstanding Common Stock.
(3) A Schedule 13G filed by Sasco Capital, Inc. with the Securities and
Exchange Commission states that these shares were acquired in the
ordinary course of business and not for the purpose or the effect of
changing or influencing the control of LST.
AMENDMENTS TO 1985 LONG-TERM INCENTIVE PLAN
CURRENT PLAN
The 1985 Long-Term Incentive Plan (the "Plan"), originally adopted in 1985,
is a stock based incentive plan which authorizes the issuance of LST Common
Stock and certain cash payments under awards to key salaried employees
(including officers and directors who are employees) of LST and its
subsidiaries for (a) stock options designed to meet the requirements of
Section 422 of the Internal Revenue Code ("incentive stock options"), (b)
stock options which do not meet those requirements ("non-qualified stock
options"), (c) stock appreciation rights, either separately or in tandem with
the award of stock options, (d) restricted stock grants, (e) performance unit
grants and (f) stock in payment of incentive compensation earned under LST's
bonus program. The Plan also provides for awards of stock options to
non-executive directors of LST (directors of LST who are not employees
12
<PAGE>
of LST or of a subsidiary). There are currently six non-executive directors.
Subsequent to April 9, 1995, the tenth anniversary of the inception of the
Plan, incentive stock options cannot be granted pursuant to the Plan. The
aggregate number of shares that may be issued under the Plan cannot exceed
2,700,000 shares of Common Stock.
As of February 28, 1997, options to purchase an aggregate of 1,054,775 shares
of Common Stock were outstanding under the Plan, and 997,775 shares were
available for future grant. The market value of all shares of Common Stock
subject to outstanding options under the Plan was $16,612,706 (based on the
closing price of Common Stock on the Nasdaq Stock Market on that date).
John P. Harbin and Rhys J. Best held on that date options covering 165,000
shares and 127,500 shares of Common Stock, respectively. All current executive
officers of LST, as a group (four individuals), held options covering an
aggregate of 332,500 shares of Common Stock as of February 28, 1997. The
non-executive directors of LST held options as of that date covering the
following number of shares of Common Stock: Charles L. Blackburn, 50,000;
Dean P. Guerin, 75,000; Frederick B. Hegi, Jr., 75,000; William C. McCord,
75,000; James E. McCormick, 75,000; and Thomas M. Mercer, Jr., 25,000.
The following summary briefly describes the principal features of the current
Plan, before giving effect to the amendments that are being voted on by the
shareholders at the Annual Meeting and are described below under "Proposed
Amendments."
The Plan provides that the Board of Directors may establish a committee (the
"Committee") consisting of not less than two nor more than ten members of the
Board of Directors who are non-executive directors to administer the Plan and
grant awards thereunder. Currently, the Plan is administered by the
Compensation Committee, which is composed of six directors, Messrs.
Blackburn, Guerin, Hegi, McCord, McCormick and Mercer. See "Proposed
Amendments" for a description of the amendment to the Plan that requires
members of the Committee to be "outside directors" as defined under Section
162(m) of the Internal Revenue Code.
The Committee determines those key salaried employees (including officers) of
LST and its subsidiaries who are to be granted awards under the Plan and the
number of shares to be optioned to such participants. See "Proposed
Amendments" for a description of the amendment that places an annual limit on
the number of shares with respect to which options and stock appreciation
rights can be granted to any individual. Non-executive directors of LST
participate in the Plan, but only with respect to the award of stock options.
Following the Annual Meeting in 1993 and following each Annual Meeting every
second year after that, each non-executive director then in office
automatically receives a stock option for 25,000 shares of Common Stock of
LST under the terms of the Plan (subject to an overall limitation of 750,000
shares that may be issued for such options) with an exercise price at the
fair market value of the Common Stock on the date the options are granted.
See "Proposed Amendments" for the amendment to the Plan that defines fair
market value.
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The per share price at which shares of Common Stock may be purchased under an
employee's option is determined by the Committee at the time such option is
granted and may not be less than the per share fair market value of the
Common Stock on the date of grant.
No option is exercisable until at least one year from the date of grant. The
Committee may at the time of granting any option to an employee add
additional restrictions as it may deem advisable as to the time such option
or any part thereof may become exercisable. All options that have been
granted to employees under the Plan to date have, and all options granted to
non-executive directors since 1993 are required by the Plan to have, an
exercise price equal to the fair market value of the Common Stock on the date
of grant and a four-year vesting schedule consisting of cumulative
installments of 25 percent each on and after each anniversary date following the
date of grant.
The right to exercise any option terminates on the earliest of the following
dates:
(1) Ten years after the date the option is granted;
(2) Three months after the date the participant ceases to be employed by
LST or a subsidiary or ceases to be a non-executive director, unless
such cessation is by reason of death or unless death occurs during
such three months; or
(3) Nine months after the date of death.
If the optionee's employment or directorship ceases for any reason other than
death, the optionee is entitled within three months (or any later period
applicable under the following paragraph) following the date of such
cessation (but not beyond the original term of the option) to exercise the
option to the extent such option was exercisable on the date of such
cessation.
If an employee or non-executive director dies while an employee or a director
or within three months after cessation of such employment or directorship,
without having fully exercised an option, such option may be exercised within
nine months following such optionee's death (but not beyond the original term
of the option) by such optionee's estate or by a person who acquired the
right to exercise such option by will or the laws of descent, to the extent
such option was exercisable on the date of death.
Absence on approved leave is not considered a cessation of employment.
The Plan provides for the continuation of an option held by an employee if he
or she becomes a non-executive director and for the continuation of an
option held by a non-executive director if he or she becomes an employee.
All options will vest (become fully exercisable) if a change of control (as
defined in the Plan) of LST occurs.
See "Proposed Amendments" for a description of the amendments to the Plan
that will change the provisions regarding the vesting and termination of
options upon the retirement or death of the
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optionee.
The Committee may in its discretion grant to employees rights entitling the
grantee to receive cash or shares of Common Stock having a fair market value
equal to the appreciation in market value of a stated number of shares of
Common Stock from the date of grant to the date of exercise, or, in the case
of rights granted in tandem with or by reference to an option granted prior
to the grant of such rights, from the date of grant of such related option to
the date of exercise. The Committee may at the time of granting any stock
appreciation right add certain additional conditions and limitations to that
right.
Stock appreciation rights may be granted in tandem with or by reference to a
related option (in which event the grantee may elect to exercise either the
option or the appreciation rights, but not both, as to any of the same shares
subject to the option and the rights) or appreciation rights may be granted
independently of any option. Appreciation rights granted in tandem with or
by reference to a related option are exercisable only to the extent that the
related option is exercisable and the fair market value of the Common Stock
exceeds the per share option price of such option.
Upon exercise of a stock appreciation right, the grantee is paid the excess
of the then fair market value of the number of shares of Common Stock to
which the appreciation right relates over the fair market value of such
number of shares at the date of grant of the appreciation right or of the
related option, as the case may be. Such excess will be paid in cash or in
shares of Common Stock having a fair market value equal to such excess, or in
any combination thereof.
Termination of the right to exercise any stock appreciation right is the same
as described above with respect to options.
The Committee may in its discretion award to any employee shares of Common
Stock. Such awards may be contingent on the participant's continuing
employment for a period to be specified in the award, which may not be less
than one nor more than ten years from the date of award, and/or on any other
contingencies, additional terms and conditions as the Committee in its sole
discretion may deem appropriate.
The Committee may in its discretion grant to any employee awards consisting
of performance units which have a monetary value which may or may not be
equivalent to shares of Common Stock. The vesting of performance units are,
and their value may be, contingent on the achievement over a period of not
less than two nor more than ten years of such individual, corporate,
division, subsidiary, group or other objectives as are established by the
Committee.
To date, LST has only utilized the Plan to grant stock options.
The Plan will terminate on April 9, 2005. Awards then outstanding will not
be affected by such termination.
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LST's Board of Directors may amend, supplement or suspend the Plan, but it
cannot (a) impair any awards already made or (b) without the approval of the
shareholders, (i) increase the number of shares of Common Stock which may be
issued under the Plan, (ii) materially modify the requirements as to
eligibility for participation in the Plan, (iii) materially increase the
benefits accruing to participants or non-executive directors under the Plan
or (iv) provide for the grant of options to purchase Common Stock at less
than the fair market value per share thereof on the date of grant. The
provisions of the Plan which govern non-executive directors' options cannot
be amended more than once every six months, other than to comport with
changes in the Internal Revenue Code and the Employee Retirement Income
Security Act of 1974.
For federal income tax purposes, the recipient of a non-qualified stock
option under the Plan will not realize income upon the grant of the option
but will realize ordinary income on the date the option is exercised in the
amount of the difference between the fair market value of the stock on the
exercise date and the exercise price. Subject to Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code") (see "Proposed
Amendments" below), the amount of ordinary income realized by the optionee
upon exercise of the option will be deductible in computing the taxable
income of LST. The option holder will have a basis in the stock acquired
equal to the fair market value of the stock at the date of exercise. Any
gain or loss realized upon the subsequent sale of stock acquired on the
exercise of the option will be a short-term or long-term capital gain or loss
depending on the optionee's holding period. This brief description of the
federal income tax treatment of non-qualified stock options applies to the
current Plan and the Plan as amended by the proposed amendments described
below.
PROPOSED AMENDMENTS
On March 26, 1997, the Board of Directors adopted, subject to shareholder
approval at this Annual Meeting, amendments to the Plan that (1) provide for
immediate vesting of options upon Retirement (as defined in the amendments)
or death of an option holder and provide for a period of six months after
Retirement (but not beyond the original term of the option) for an option
holder to exercise options, (2) place a limit of 100,000 on the aggregate
number of shares with respect to which options and stock appreciation rights
may be granted under the Plan to any individual in any calendar year, (3)
provide that the members of the Committee shall be "outside directors" under
Section 162(m) of the Code and (4) define "fair market value" for determining
the exercise price for an option on the date of grant.
The amendments provide that options will vest (become fully exercisable) upon
the Retirement of the holder of the options. Retirement is defined as
retirement from employment with LST or a subsidiary or cessation of service
as a director of LST (i) at or after age 55 but prior to age 65 and with the
approval of the Committee or (ii) at or after age 65. In determining whether
to approve the retirement of an optionee prior to age 65, the Committee may
consider any information provided by the optionee, including whether the
optionee intends to work for a competitor of LST and its subsidiaries. The
amendments to the Plan also provide that the option holder will have six
months after Retirement (but not beyond the option's original term) to
exercise his or her options.
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If the optionee's employment or directorship ceases for any reason other than
the optionee's Retirement or death, his or her option will not vest, and the
optionee will have three months after the date his or her employment ceases
(but not beyond the option's original term) to exercise the option to the
extent it was exercisable on the date of such cessation. If the optionee
dies (i) while employed by LST or a subsidiary, (ii) while a director, (iii)
within three months after cessation of such employment or directorship for
any reason other than Retirement or death or (iv) within six months after
Retirement, the option he or she holds will vest, and the option may be
exercised within nine months after the optionee's death by the optionee's
estate or heirs (but not beyond the option's original term).
The amendments also place an annual limit on the number of shares with
respect to which options and stock appreciation rights can be granted to any
individual and require the members of the Committee to be "outside
directors". Those amendments are technical changes that are required in
order to preserve the ability of LST to take compensation expense deductions
for federal income tax purposes in connection with the exercise of options or
rights granted under the Plan in the future. Under Section 162(m) of the
Code, a publicly held corporation is not permitted to take a federal income
tax deduction for compensation recognized by the chief executive officer or
one of the four highest compensated officers other than the chief executive
officer (each, a "Covered Employee") of the corporation in any year in excess
of $1,000,000 unless such compensation meets the performance based and
shareholder approval requirements of Section 162(m).
Based on the transition rules adopted by the Internal Revenue Service, any
amount of income that a Covered Employee may recognize upon the exercise at
any time of options granted under the Plan prior to the date of the 1997
Annual Meeting of Shareholders will be exempt from the $1,000,000 limit. The
Plan is now required to have a limit on the number of shares that can be the
subject of grants to any individual in order to exempt income attributable to
exercises of options or stock appreciation rights granted to a Covered
Employee after the date of the 1997 Annual Meeting.
Currently, each member of the Committee qualifies as an "outside director"
under Section 162(m). To ensure that the Committee will continue to meet the
requirements of that Code section, the Board believes the Plan should
expressly require that the Committee members be "outside directors." An
individual will qualify as an "outside director" if he or she is not a
current employee of LST, is not a former employee who receives compensation
for prior services (other than benefits under a tax qualified retirement
plan), has not been an officer of LST and does not receive remuneration from
LST, either directly or indirectly, in any capacity other than as a director.
Although no employee of LST and its subsidiaries currently receives annual
compensation approaching $1,000,000, it is possible that a Covered Employee's
compensation might exceed $1,000,000 sometime in the future through a
combination of salary, bonus and option exercises. Therefore, LST's Board of
Directors believes it is prudent to adopt these amendments in order to
continue the Plan's exemption from the limitation on deductions of Section
162(m) for options or stock appreciation rights that may be granted in the
future.
The Board also adopted an amendment to the Plan that defines "fair market
value" for determining
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an option's exercise price as "the average of the high and low prices per
share of the Common Stock on the principal United States securities exchange
on which the Common Stock is listed or, if not so listed, on the National
Association of Securities Dealers Automated Quotations System or any
successor system then in use, on the date of grant or, if there are no sales
on such date, on the next succeeding day on which there are sales."
If the amendments to the Plan are approved by the shareholders, all
outstanding options will be deemed amended as necessary to reflect those
amendments.
These amendments to the Plan will be approved at the Annual Meeting if the
holders of a majority of shares of Common Stock present in person or by proxy
and entitled to vote at the meeting vote in favor of the amendments. The
Board of Directors recommends that shareholders vote FOR the approval of the
amendments.
OTHER MATTERS
The Annual Meeting has been called for the purposes set forth in the Notice
of Annual Meeting to which this Proxy Statement is appended. It is not
anticipated that matters other than the election of Directors and the
approval of the amendments to the Plan as described in the Notice and this
Proxy Statement will be brought before the meeting for action. If any other
matters do properly come before the meeting, it is intended that votes
thereon will be cast for all shares represented by unrevoked proxies
solicited hereby which are received prior to the voting thereon in accordance
with the best judgment of any of the persons authorized to vote as proxies.
ACCOUNTANTS
On the recommendation of its Audit Committee, the Board of Directors has
reappointed Arthur Andersen LLP as independent public accountants of LST and
its subsidiaries for the fiscal year ending December 31, 1997. Arthur
Andersen LLP served as independent public accountants for LST for the
preceding year. A representative of Arthur Andersen LLP will attend the
Annual Meeting, will have an opportunity to make a statement on behalf of
Arthur Andersen LLP, and will be available to respond to appropriate
questions.
COST AND METHOD OF PROXY SOLICITATION
The cost of this proxy solicitation will be paid by LST. In addition, LST
will reimburse brokers and other custodians, nominees, and fiduciaries for
their expenses in sending proxies and proxy materials to their principals.
Officers and other regular employees of LST and, if necessary, its
subsidiaries may request by telephone, telegram, or in person the return of
proxies. Those officers and other regular employees of LST or subsidiaries
will not receive additional compensation in connection with any solicitation
of proxies.
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ANNUAL REPORT AND FORM 10-K
The Annual Report to Shareholders of LST for the year ended December 31,
1996, including the Annual Report on Form 10-K for the same period (without
exhibits), has been mailed to shareholders of record as of March 25, 1997. A
COPY OF THE ANNUAL REPORT ON FORM 10-K HAS BEEN FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION AND WILL BE FURNISHED (WITHOUT EXHIBITS) WITHOUT CHARGE
TO SHAREHOLDERS UPON WRITTEN REQUEST TO LONE STAR TECHNOLOGIES, INC., P.O.
BOX 803546, DALLAS, TEXAS 75380-3546, ATTN: CHARLES J. KESZLER, CORPORATE
RELATIONS.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Shareholder proposals for consideration at the 1998 Annual Meeting of
Shareholders must be received no later than December 5, 1997, at LST's
principal executive office, 5501 LBJ Freeway, Suite 1200, Dallas, Texas
75240, directed to the attention of the Secretary.
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Appendix to, not part of, the Proxy Statement
LONE STAR TECHNOLOGIES, INC. 1985 LONG-TERM INCENTIVE PLAN
(AS AMENDED BY THE BOARD OF DIRECTORS THROUGH MARCH 26, 1997)
SECTION 1. PURPOSE. The purpose of the Lone Star Technologies, Inc. 1985
Long-Term Incentive Plan ("Plan") is to attract and retain able and
experienced directors for Lone Star Technologies, Inc. ("Company") from
outside the ranks of the employees of the Company and its subsidiaries and to
attract and retain key salaried employees for the Company and its
subsidiaries, to provide an incentive for such directors and employees to
exert maximum efforts for the Company's success and to reward such efforts by
enabling the directors and employees to participate in such success through
the ownership and performance of shares of the Company's Common Stock
("Common Stock") and, in the case of employees, also through monetary rewards.
SECTION 2. ADMINISTRATION. The Board of Directors of the Company ("Board of
Directors") may establish a Committee ("Committee") consisting of not less
than two nor more than ten members of the Board of Directors who are
non-executive directors (a person who is a director of the Company but not an
employee of the Company or any of its subsidiaries, is a "non-executive
director" as that term is used under the Plan), notwithstanding that
non-executive directors are eligible to participate under the Plan or have
received options, to administer the Plan and to award under the Plan to key
salaried employees of the Company and its subsidiaries options (along with
options granted to non-executive directors under the Plan, "Options"), stock
appreciation rights, restricted stock grants, and performance units grants
(together with Options granted to non-executive directors under the Plan,
collectively referred to herein as "awards", and individually as "award").
Each member of the Committee shall be an "outside director" under Section
162(m) of the Internal Revenue Code of 1986, as amended. The members of the
Committee shall be appointed from time to time by and serve at the pleasure
of the Board of Directors. The Committee shall have the power where
consistent with the general purpose and intent of the Plan to adopt rules and
regulations and prescribe forms for use in connection with the Plan. The
Committee shall have the authority to interpret the Plan, and determine all
questions arising under the Plan and any agreement made pursuant to the Plan.
Any interpretation, decision, or determination made by the Committee shall
be conclusive. A majority of the Committee shall constitute a quorum and an
act of the majority of the members present at any meeting at which a quorum
is present shall be the act of the Committee. Any decision reduced to
writing and signed by a majority of the members of the Committee shall be
fully as effective as if it had been made by a majority vote at a duly held
meeting. In the absence of a Committee, all authority of the Committee under
the Plan shall be vested in and exercisable by the Board of Directors.
Notwithstanding the foregoing, the Committee shall have no power or authority
under this section of the Plan to alter or modify any explicit provisions in
the Plan.
<PAGE>
SECTION 3. SHARES SUBJECT TO THE PLAN. The aggregate number of shares of
stock which may be issued under the Plan shall not exceed two million seven
hundred thousand (2,700,000) shares of Common Stock. Either authorized and
unissued shares or treasury shares may be delivered pursuant to the Plan. If
any Option or restricted stock grant lapses, is canceled, is forfeited or is
otherwise terminated, as to any shares, such shares shall again become
available under the Plan. If, however, any Option or portion thereof is
surrendered in exchange for shares issued pursuant to the exercise of a stock
appreciation right or in exchange for the retention of restricted stock
granted in tandem with an Option, any excess of the number of shares covered
by the Option or portion thereof so surrendered over the number of shares so
issued or retained in exchange shall not again be made available under the
Plan.
SECTION 4. PARTICIPATION IN THE PLAN. The Committee shall determine from
time to time those key salaried employees (including officers and directors
who are employees) of the Company and its subsidiaries who are to be granted
awards hereunder (such individuals are referred to herein as "participants").
In making its determination, the Committee may consider such factors as in
its discretion it considers appropriate. Participants may be granted more
than one award. Participation in the Plan by a participant or a
non-executive director shall not confer upon any participant or upon any
non-executive director any right with respect to continuation of such
participant's employment by the Company or a subsidiary, or seat on the Board
of Directors, as the case may be, nor interfere with the right of the Company
or such subsidiary to terminate at any time employment of any participant.
An award shall not confer any rights as a stockholder upon the holder
thereof, except only as to shares actually issued pursuant to the Plan.
SECTION 5. OPTIONS. The Committee shall determine from time to time those
participants who are to be granted Options and the number of shares to be
optioned to such participants. The aggregate number of shares with respect
to which Options and stock appreciation rights can be granted under Sections
5 and 9 of the Plan to any one individual during any calendar year shall not
exceed 100,000, subject to adjustment pursuant to Section 14 hereof. Any
Option to participants may, in the discretion of the Committee and subject to
the limitation of this Section 5, be either an incentive stock Option or
non-qualified stock Option. An "incentive stock Option" shall mean a stock
Option meeting the requirements for an incentive stock Option under the
provisions of Section 422 (or any provision substituted therefor) of the
Internal Revenue Code of 1986, as amended (the "Code"), at the time of grant
of such Option, and notwithstanding any other provision of the Plan, an
Option intended to be an incentive stock Option must be granted by the tenth
anniversary date of the approval of the Plan by Northwest Industries, Inc.
and shall be subject to such additional or more restrictive terms and
conditions as the Committee shall determine may be necessary to meet such
requirements or deem reasonable and consistent with the purposes of incentive
stock
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Options. The fair market value of the shares of Common Stock for which a
participant is granted an incentive stock Option under the Plan prior to
January 1, 1987 (determined on the date such Option is granted) shall not
exceed in any calendar year the excess of (i) the sum of (a) $100,000 and (b)
the unused limit carryover of such participant to such calendar year over
(ii) the fair market value of all other shares for which the participant was
granted incentive stock Options in such calendar year (such fair market value
to be determined as of the date each such Option was granted) under all plans
of the Company or any parent or subsidiary of the Company. For purposes of
this Section 5 the unused limit carryover of a participant to any calendar
year shall be the carryover determined under the following sentence reduced
by the amount of such carryover which was used in prior calendar years, and
for this purpose Options granted to the participant in any calendar year
shall be treated as first reducing the $100,000 limitation and then as
reducing the unused limit carryovers to such year in the order of the
calendar years in which the carryover arose. The carryover shall be an
amount determined for each calendar year after 1980 equal to one-half of the
excess of (x) $100,00 over (y) the aggregate fair market value (determined as
of the time the Option is granted) of the shares for which the optionee was
granted incentive stock Options in such calendar year under all plans of the
Company and any parent or subsidiary corporation of the Company, and such
carryover shall be a carryover to each of the three succeeding calendar
years. A "non-qualified stock Option" shall mean a stock Option which is not
an incentive stock Option. The Options awarded to non-executive directors of
the Company must be non-qualified stock Options.
SECTION 6. OPTION PRICE. The per share price at which shares of Common
Stock may be purchased by a participant under an Option shall be determined
by the Committee at the time such Option is granted. The price at which
shares of Common Stock may be purchased under an Option granted to a
participant shall not be less than, and in the case of an Option granted to a
non-executive director shall be equal to, the per share fair market value of
the Common Stock on the date of grant of such Option. The fair market value
shall mean the average of the high and low prices per share of the Common
Stock on the principal United States securities exchange on which the Common
Stock is listed or, if not so listed, on the National Association of
Securities Dealers Automated Quotations System or any successor system then
in use, on the date of grant or, if there are no sales on such date, on the
next succeeding day on which there are sales. No shares shall be issued upon
exercise of an Option until the Company receives full payment therefor
together with (a) payment in cash equal to the amount of any state and
federal taxes required to be withheld at the time of such issuance or (b) if
no such taxes are required to be withheld at the time of such issuance, an
agreement by the party exercising the Option to pay to the Company the amount
of state or federal taxes thereafter required to be withheld in respect of
such issuance. Payment of the Option price shall be (i) in cash, (ii) in the
discretion of the Committee by the transfer and delivery to the Company of
shares of Common Stock having a fair market value on the date of exercise of
such Option at least equal to the Option price or (iii) in the discretion of
the
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Committee, any combination of (i) and (ii).
SECTION 7. EXERCISE OF OPTIONS. No Option shall be exercisable until at
least one year from the date of grant of such Option, and the Committee may
at the time of granting any Option to a participant add such additional
restrictions as it shall deem advisable as to the time within which such
Option or any part thereof may become exercisable. The right of a
participant or a non-executive director to exercise in whole or in part any
Option shall not be affected by any outstanding stock Option previously
granted to that person, except that each incentive stock Option granted to a
participant under the Plan prior to January 1, 1987 (for the purposes of this
Section 7 hereinafter referred to as the "new incentive Option") shall not be
exercisable while there is outstanding any new incentive Option which was
granted to such participant before the granting of such later new incentive
Option, to purchase stock in the Company (or any parent or subsidiary of the
Company or a predecessor of any such companies). For purposes of the
preceding sentence, an incentive stock Option shall be considered to be
outstanding until it (i) is exercised in full, (ii) expires by reason of the
exercise of a stock appreciation right associated with such incentive stock
Option, or (iii) lapses, whichever occurs first. In order to exercise an
Option, a participant or non-executive director shall give written notice to
the Secretary of the Company at the Company's main office in Dallas, Texas.
SECTION 8. NON-EXECUTIVE DIRECTORS STOCK OPTIONS. Non-executive directors
shall not be eligible to participate in the Plan beyond the granting of
Options; further, not more than 750,000 shares of Common Stock may be issued
under Options awarded to non-executive directors. Because an Option awarded
to an individual before becoming a non-executive director, under Section
10(e) of the Plan, could remain in effect under the circumstances therein
described when that individual changes status from an employee to a
non-executive director, only shares of Common Stock issued upon exercise of
Options which, when granted, were granted to individuals who were at the time
non-executive directors shall be deemed "issued under Options awarded to
non-executive directors", and shares issued to non-executive directors under
Options granted when they were participants shall not count towards the
750,000 share limitation provided in this Section above. Outstanding Options
in effect immediately prior to the Company's annual shareholders meeting in
1993 to non-executive directors shall remain in effect according to their
terms and as the same may be amended as contemplated under Section 18 hereof.
Beginning with the year 1993, and every second year (i.e., every other year)
thereafter, on the first business day after the Company's annual shareholders
meeting each such year, each non-executive director in office at such time
shall receive automatically, by virtue of this Plan, the award and grant of
an Option for 25,000 shares of Common Stock. All Options awarded to
non-executive directors shall be non-qualified stock Options, and each such
Option granted pursuant to the terms of the foregoing sentence shall become
exercisable for up to 25% of the total number of shares of Common Stock into
which the Option may be exercised on and
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after the first anniversary of the date of the award, for up to 25% more
(i.e. in total 50%) of those total shares on and after the second
anniversary, for up to 25% more (i.e. in total 75%) of those total shares on
and after the third anniversary and for up to 100% of those total shares
(i.e. all the shares into which the Option may be exercised) on and after the
fourth anniversary of the date of the Option award (each such Option to the
extent exercisable may be exercised in full or in part at any time for the
shares under the Option), at all times subject to the terms of Section 10
regarding the continued right to exercise under certain circumstances.
SECTION 9. STOCK APPRECIATION RIGHTS. The Committee may in its discretion
grant to any participant or participants rights entitling the grantee to
receive cash or shares of Common Stock having a fair market value equal to
the appreciation in market value of a stated number of shares of Common Stock
from the date of grant to the date of exercise, or, in the case of rights
granted in tandem with or by reference to an Option granted prior to the
grant of such rights, from the date of grant of such related Option to the
date of exercise. Stock appreciation rights may be granted in tandem with or
by reference to a related Option, in which event the grantee may elect to
exercise either the Option or the rights, but not both, as to any of the same
shares subject to the Option and the rights, or the rights may be granted
independently of any Option. Rights granted in tandem with or by reference to
a related Option shall be exercisable to the extent, and only the extent,
that the related Option is exercisable and the then fair market value of the
Common Stock exceeds the per share Option price of such Option. Rights
granted independently of an Option shall be exercisable in whole or in such
installments and at such times as may be determined by the Committee. No
stock appreciation right shall be exercisable prior to the expiration of one
year following the date the right is granted. The Committee may at the time
of granting any stock appreciation right add such additional conditions and
limitations to such stock appreciation right as it shall deem advisable,
including, but not limited to, the time within and extent to which such stock
appreciation right shall be exercisable and the maximum amount of
appreciation to be recognized with regard to such stock appreciation right.
Upon exercise of a stock appreciation right, the grantee shall be paid the
excess of the then fair market value of the number of shares of Common Stock
to which the right relates over the fair market value of such number of
shares at the date of grant of the right or of the related Option, as the
case may be. Such excess shall be paid in cash or in shares of Common Stock
having a fair market value equal to such excess, or in any such combination
thereof, as may be provided in the grant of such right (which may permit the
grantee to elect between cash and Common Stock or to elect a combination
thereof), or, if no such provision is made in the grant, as the Committee
shall determine upon exercise of the right. If the participant will receive
Common Stock upon the exercise of a stock appreciation right, then the
Company shall be entitled to settle its obligation, arising out of the
exercise of a stock appreciation right, to deliver any fractional shares in
any manner the Committee, in its discretion, shall deem appropriate,
including but not limited to, (a) the payment of cash in lieu of such
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fractional share or (b) by rounding the number of shares to be delivered up
to the next full share and requiring a cash payment by the participant for
such additional fractional share. In order to exercise any stock
appreciation right, a participant shall give written notice to the Secretary
of the Company at the Company's main office in Dallas, Texas.
SECTION 10. TERMINATION OF OPTIONS AND STOCK APPRECIATION RIGHTS, AND CHANGE
OF STATUS.
(a) A participant's right to exercise any Option or stock appreciation right
and right of a non-executive director to exercise any Option (Options and
stock appreciation rights collectively referred to in subparts (a) through
(d) only of this section as "Option") shall terminate on the earliest of the
following dates:
(1) Ten years after the date the Option is granted.
(2) Three months after the date the participant shall cease to be employed
by the Company or a subsidiary, or, if a non-executive director, the
non-executive director shall cease to be a director of the Company,
unless such cessation of employment or as a director is by reason of
the participant's or non-executive director's Retirement or death or
unless death occurs within such three months. "Retirement" means
retirement from employment with the Company or a subsidiary or
cessation of service as a director of the Company (i) at or after age
55 but prior to age 65 and with the approval of the Committee or (ii)
at or after age 65. Any participant who retires from employment at or
after age 55 but prior to age 65 shall inform the Committee in writing
as to whether such participant intends to be employed by, or otherwise
provide services to, any competitor of the Company or a subsidiary and
shall provide the Committee with any other information that it may
reasonably request. The Committee may consider the information
provided by the participant and any other available information in
determining whether to approve the participant's retirement. The
determination of the Committee as to an individual's Retirement prior
to age 65 shall be conclusive on all parties.
(3) Six months after the date of a participant's or non-executive
director's Retirement, unless the participant or non-executive
director dies during that six-month period.
(4) Nine months after the date of a participant's or non-executive
director's death.
(b) If a participant's employment by the Company or a subsidiary or
directorship, in the case of a non-executive director, ceases for any reason
other than Retirement or death
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without the participant or non-executive director having fully exercised the
Option, the participant or non-executive director shall be entitled within
three months (or any later period applicable under paragraph (c)) following
the date of such cessation (but not more than ten years from the date such
Option was granted) to exercise the Option to the full extent such Option was
exercisable on the date of such cessation. In the case of a participant's or
non-executive director's Retirement without the participant or non-executive
director having fully exercised the Option, the Option shall become fully
exercisable for up to 100% of the unexercised shares under the Option, and
the participant or non-executive director shall be entitled within six months
(or any later period applicable under paragraph (c)) following the date of
Retirement (but not more than ten years from the date such Option was
granted) to exercise the Option to the full extent such Option is exercisable.
(c) If a participant or non-executive director dies while employed by the
Company or a subsidiary, or while a director in the case of a non-executive
director, or within three months after cessation of such employment or
directorship or within six months after Retirement, without having fully
exercised his Option, such Option shall become fully exercisable for up to
100% of the unexercised shares under the Option, and the Option may be
exercised within nine months following such participant's or non-executive
director's death (but not more than ten years from the date such Option was
granted) by participant's or non-executive director's estate or by a person
who acquired the right to exercise such Option by will or the laws of
descent, to the full extent such Option is exercisable.
(d) Absence of an employee on approved leave shall not be considered a
cessation of employment.
(e) Whenever, and each time that, a person ceases to be either an employee
of the Company or a subsidiary or a non-executive director of the Company, so
long as such person immediately changes status and becomes, without any
interruption in service, an employee of the Company or a subsidiary or a
non-executive director of the Company, as the case may be, so that the
person's service remains continuous and only the capacity as an employee or
non-executive director in which it is rendered changes, any Option
theretofore granted to such person, as to which the right of exercise has not
expired by the passage of time, shall remain in effect according to the terms
of the Plan and any agreement covering the Option, except that the Option,
notwithstanding any other terms in the Plan or in any Option agreement (other
than provisions of any incentive stock Options referred to at the end of this
sentence), shall be governed as to the termination of the right of exercise,
after such a change in status has occurred, under subparts (a) through (d) of
this section in accordance with the person's then, and when such person's
continuous service finally does end, the most recent status of such person as
an employee or non-executive director, as the case may be, subject to
provisions in the agreement relating to any Option which is an incentive
stock Option limiting the ability to exercise the Option as an incentive
stock Option in such circumstances.
7
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SECTION 11. RESTRICTED STOCK GRANTS. The Committee may in its discretion
grant to any participant or participants shares of Common Stock. Such grants
may be contingent on the grantee's continuing employment with the Company or
its subsidiaries for a period to be specified in the award, which shall not
be less than one or more than ten years from the date of award, and/or any
such other contingencies, additional terms and conditions as the Committee in
its sole discretion deems appropriate, including, but not by way of
limitation, restrictions on the sale or other disposition of such shares
during the restriction period. The Committee may in its sole discretion at
the time of the award or at any time thereafter provide for the early vesting
of such award in the event of termination of employment by retirement, death,
incapacity, or otherwise prior to the end of the restriction period. The
holder of a restricted stock award shall have the right to vote the
restricted shares and to receive dividends thereon, unless and until such
shares are forfeited.
SECTION 12. PERFORMANCE UNITS GRANTS. The Committee may in its discretion
grant to any participant or participants awards consisting of units which
have a monetary value which may or may not be equivalent to shares of Common
Stock. The vesting of units shall be, and their value may be, contingent on
the achievement over a period of not less than two (2) or more than ten (10)
years of such individual, corporate, division, subsidiary, group or other
objectives as shall be established by the Committee. Such objectives shall
be established by the Committee prior to the beginning of the performance
period, but may be revised by the Committee from time to time during the
performance period, to take into account significant unforeseen events or
changes in circumstances. Except as may otherwise be determined by the
Committee at the time of the award or at any time thereafter, a performance
award shall terminate if the holder of the award does not remain continuously
in the employ of the Company and its subsidiaries at all times during the
applicable performance period. Following the end of the performance period,
the holder of a performance award shall be entitled to receive payment of an
amount, not exceeding the maximum value of the performance award established
by the Committee, based on the level of achievement of the objectives for the
performance period as determined by the Committee. Payment may be made in
cash, shares of Common Stock, or a combination thereof, as determined by the
Committee. Any payment to be made in Common Stock shall be based on the fair
market value of such stock on the payment date. Incentive compensation
awards earned under the Corporate Improvement Incentive Program of the
Company as adopted on October 9, 1990, may be paid in whole or in part in
Common Stock authorized under this Plan in accordance with the provisions of
the two prior sentences.
SECTION 13. TRANSFERABILITY. Awards hereunder are not transferable except
by will or the laws of descent. Options and stock appreciation rights may be
exercised during the lifetime of the participant or non-executive director
only by the participant or non-executive director and after the death of such
person, only as provided in Section 10.
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SECTION 14. EFFECT OF CERTAIN TRANSACTIONS. If a record date for a stock
split, stock dividend, reverse stock split, combination of stock,
recapitalization, reclassification, or similar event occurs with respect to
Common Stock, or if any other change occurs in the number or kind of shares
of Common Stock which in the opinion of the Board of Directors requires such
an adjustment, the Board of Directors shall adjust in an equitable manner the
terms of each then outstanding award hereunder and the maximum number of
shares as to which awards may be granted under the Plan. If the Company is
merged with or into or consolidated with one or more corporations, each then
outstanding award shall be equitably adjusted by the Board of Directors and
assumed by the surviving corporation.
SECTION 15. ACCELERATION OF OPTIONS.
(a) Notwithstanding any provisions otherwise in the Plan or in any Option
agreements evidencing Options granted under this Plan, each outstanding
Option shall become exercisable for up to 100% of the unexercised shares
under the Option if any entity, person or Group (herein "Group" shall mean
persons who act in concert as described in Sections 13(d)(3) and/or 14(d)(2)
of the Securities Exchange Act of 1934, as amended), other than the Company
or a subsidiary of the Company, acquires shares of the Company in a
transaction, or series of transactions, that results in such entity, person
or Group directly or indirectly owning, beneficially, fifty percent (50%) or
more of the outstanding shares of Common Stock of the Company (or, if other
stock other than Common Stock should become outstanding that also votes for
directors generally like the Common Stock, that results in such entity,
person or Group directly or indirectly owning, beneficially, shares of Common
Stock and/or any such other stock having 50% or more of the total voting
power for directors generally of all outstanding Common Stock and other such
stock of the Company), or if any such entity, person or Group acquires
substantially all of the assets of the Company.
(b) In such event, no such Option shall be exercised more than 10 years
after the date of the grant thereof, or after the right of exercise has
lapsed, expired or terminated as provided in Section 10 or otherwise under
the Plan.
SECTION 16. AMENDMENT AND TERMINATION OF THE PLAN. The Plan shall terminate
on the twentieth anniversary of the date of approval of the Plan by Northwest
Industries, Inc., and no award shall be granted hereunder after such
termination. Termination of the Plan shall not affect any outstanding
awards. The Committee shall have the power where consistent with the general
purpose and intent of the Plan to modify the requirements of the Plan to
conform with applicable law or to meet special circumstances not anticipated
or covered in the Plan, and the Company, by its Board of Directors, reserves
the right at any time to modify, amend, supplement, or suspend the Plan,
except neither the Committee nor the Company may (a) impair any awards
already made, or (b) without the approval of the
9
<PAGE>
stockholders of the Company (other than of the stockholders of stock not
entitled to vote on the matter requiring approval), except as contemplated by
Section 14, (i) increase the number of shares of Common Stock which may be
issued under the Plan, (ii) materially modify the requirements as to
eligibility for participation in the Plan, (iii) materially increase the
benefits accruing to participants or non-executive directors under the Plan
or (iv) have the effect of providing for the grant of Options to purchase
Common Stock at less than the fair market value per share thereof on the
applicable date of grant of the Options. Notwithstanding any other provision
of this Section 16, the provisions of the Plan applicable to non-executive
directors which govern (A) the number of shares of Common Stock covered by
each Option award to a non-executive director of the Company, (B) the
exercise price per share of Common Stock under each such Option, (C) when and
under what circumstances each such Option will be granted and (D) the period
within which each such Option may be exercised, shall not be amended, except
as contemplated by Section 14, more than once every six months, other than to
comport with changes in the Code or the rules promulgated thereunder, and the
Employee Retirement Income Security Act of 1974, as amended, or the rules
promulgated thereunder.
SECTION 17. DELIVERY OF SHARES. Each award hereunder is further subject to
the condition that if, at any time, the Board of Directors shall in its sole
discretion determine that the listing, registration, or qualification of the
shares of Common Stock covered by such award upon any securities exchange or
under any state or federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of or
in connection with the purchase or delivery of shares of Common Stock
thereunder, the delivery of all shares of Common Stock pursuant to exercise
of the Option or stock appreciation right may be withheld or may be made
subject to such conditions as the Committee may deem appropriate unless and
until such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to the
Board of Directors.
SECTION 18. EFFECTIVE DATE. The Plan shall become effective upon the
distribution of the Company's Common Stock to the shareholders of Northwest
Industries, Inc.
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PROXY LONE STAR TECHNOLOGIES, INC. PROXY
5501 LBJ FREEWAY, SUITE 1200
DALLAS, TEXAS 75240
ANNUAL MEETING MAY 8, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
This proxy, when properly executed, will be voted in the manner directed
by the undersigned shareholder. IF NO DIRECTION IS MADE AS TO THE NOMINEES
FOR ELECTION, THIS PROXY WILL BE VOTED FOR THE NOMINEES NAMED. IF NO
DIRECTION IS MADE AS TO PROPOSAL 2, THIS PROXY WILL BE VOTED FOR PROPOSAL 2.
The undersigned having received the notice and accompanying Proxy
Statement for said meeting, hereby appoints as Proxies John P. Harbin,
Robert F. Spears and Charles J. Keszler, or any one of them, with power of
substitution in each, to vote at the annual meeting or any adjournments
thereof all the shares of Lone Star Technologies, Inc. which the undersigned
may be entitled to vote. The above Proxies are, and each of them is, hereby
instructed to vote as shown on the reverse side of this card.
PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE>
/X/ Please mark your
votes as in this
example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR BOTH NOMINEES LISTED
AND FOR PROPOSAL 2.
WITHHOLD Nominees are:
FOR AUTHORITY Frederick B. Hegi, Jr.,
BOTH TO for a term expiring
NOMINEES VOTE 2000; and William C. McCord,
for a term expiring 2000.
1. Election
of Directors / / / /
To withhold authority to vote for only one nominee,
name that nominee below:
- -------------------------------------------
FOR AGAINST ABSTAIN
2. Proposal to approve amendments to the 1985
Long-Term Incentive Plan of Lone Star / / / / / /
Technologies, Inc.
3. In their discretion, upon other business as
may properly come before the meeting or any
adjournment(s) thereof.
SIGNATURE(S) DATE
----------------------------- ----------------
SIGNATURE(S) DATE
----------------------------- ----------------
(SIGNATURE IF HELD JOINTLY)
This proxy must be dated and signed EXACTLY as shown hereon. Executors,
administrators, trustees, etc., should give full title as such. If a
corporation, please sign full corporate name as duly authorized officer.
