<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
[Amendment No. ]
Filed by the Registrant:
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:
-------------------------------------------------------------------------
/ / 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 9, 2000
Notice is hereby given that the Annual Meeting of Shareholders of Lone
Star Technologies, Inc. ("Lone Star"), a Delaware corporation, will be held on
the 9th day of May, 2000, at 9:00 a.m., local time, on the 40th floor of the
Chase Tower, 2200 Ross Avenue, Dallas, Texas, for the following purposes:
(1) To elect five members to the Board of Directors of Lone Star;
(2) To vote upon approval of the Lone Star Employee Stock Purchase Plan;
(3) To vote upon approval of an amendment to the 1985 Long-Term Incentive
Plan of Lone Star; and
(4) To transact any other business as may properly come before the
meeting or any adjournment thereof.
The close of business on March 22, 2000 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 Lone Star, 15660 N. Dallas Parkway, Suite 500,
Dallas, Texas 75248 (telephone: 972/770-6401) 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 Lone Star 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
March 23, 2000
2
<PAGE>
LONE STAR TECHNOLOGIES, INC.
15660 N. Dallas Parkway, Suite 500
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
Lone Star for use at the Annual Meeting of Shareholders to be held on May 9,
2000, 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 Lone Star of such revocation in writing prior to or at the
Annual Meeting,
(b) delivering to Lone Star 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 Lone Star are located at 15660 N. Dallas
Parkway, Suite 500, Dallas, Texas 75248 (telephone: 972/770-6401). This Proxy
Statement and the enclosed proxy were mailed to shareholders on or about March
23, 2000.
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, FOR approval of the
Lone Star Employee Stock Purchase Plan and FOR approval of the amendment to the
1985 Long-Term Incentive Plan described herein.
OUTSTANDING SHARES AND VOTING RIGHTS
As of March 22, 2000, the record date for the determination of shareholders
entitled to vote at the Annual Meeting, there were 23,500,235 outstanding
shares of Lone Star Common Stock. This is the only class of stock of Lone Star
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 Lone Star 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 the total number of directors is increased or decreased, however,
the Board of Directors may adjust the number of directors in one or more
classes, and that adjustment may result in a director being
3
<PAGE>
elected or reelected to a term shorter than three years. If any director is
appointed by the Board of Directors between Annual Meetings to succeed a
director who has resigned, died or been removed, 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 2000 Annual Meeting, shareholders will be asked by Lone Star to reelect
Rhys J. Best and Frederick B. Hegi, Jr., to elect M. Joseph McHugh, who was
appointed a director by the Board of Lone Star in June of 1999, and to elect
two new nominees, Alfred M. Micallef and Jerry E. Ryan. To ensure that the
three classes of directors will be as nearly equal in number as possible, the
Board has nominated Messrs. Micallef and Ryan for election as directors at this
Annual Meeting to terms expiring at the 2002 Annual Meeting. Shareholders will
be asked by Lone Star to elect Mr. McHugh and reelect Messrs. Best and Hegi to
the Board of Directors for terms expiring at the 2003 Annual Meeting. After the
2000 Annual Meeting, three directors' terms will expire at the 2001 Annual
Meeting, two directors' terms will expire at the 2002 Annual Meeting and three
directors' terms will expire at the 2003 Annual Meeting. The recent experience
of the nominees is summarized below in the first table.
Dean P. Guerin, who has served as a director of Lone Star since 1989, is
retiring from the Board when his term expires at this 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, 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 2000 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.
4
<PAGE>
NOMINEES FOR DIRECTOR
<TABLE>
<CAPTION>
NAME (AGE) BUSINESS EXPERIENCE AND OTHER INFORMATION YEAR FIRST ELECTED
- ---------- ----------------------------------------- ------------------
<S> <C> <C>
RHYS J. BEST (53) 1997
Chairman of the Board, President and Chief Executive Officer of Lone
Star since January 1999; President and Chief Executive Officer of Lone
Star from July 1998 to December 1998; President and Chief Operating
Officer of Lone Star from 1997 to June 1998; President and Chief
Executive Officer of Lone Star Steel Company ("Steel"), a subsidiary of
Lone Star, from 1989 to 1997. His current term expires in 2000. (1)
FREDERICK B. HEGI, JR. (56) 1985
General Partner, Wingate Partners, L.P. and Wingate Management Co.,
L.P. (private investments) since 1987; Principal, Wingate Management
Co. II, L.P. (private investments) since 1994; President, Valley View
Capital Corporation (private investments) since 1982; Chairman, United
Stationers, Inc. (wholesale office products) since 1996; Chairman,
Loomis, Fargo & Co. (armored car services) since May 1999; Chairman,
President and Chief Executive Officer of Kevco, Inc. (wholesale
distributor of building products to manufactured housing and
recreational vehicles industries) since July 1999. Director: United
Stationers, Inc., Loomis, Fargo & Co. and Kevco, Inc. His current term
expires in 2000. (1,2,3)
M. JOSEPH MCHUGH (62) 1999
Acting Chief Financial Officer of Pillowtex Corporation (manufacturer
of bedding materials) since November 1999; retired from January 1999 to
October 1999; President and Chief Operating Officer of Triangle Pacific
Corp. (manufacturer of hardwood flooring and kitchen and bathroom
cabinets) from 1994 to December 1998. Director: Pillowtex Corporation
and Macklanburg-Duncan Co., Inc.
ALFRED M. MICALLEF (57)
President and Chief Executive Officer of JMK International, Inc.
(holding company of rubber and plastics manufacturing businesses)
during the past five years. Director: Cash America International, Inc.
JERRY E. RYAN (57)
Consultant to Fintube Technologies, Inc. (a subsidiary of Lone Star)
since January 2000; Chairman of the Board of the general partner of
Fintube Limited Partnership (manufacturer and marketer of finned tubes
used in a variety of heat recovery operations) from August 1999 to
January 2000; Chairman of the Board and Chief Executive Officer of the
general partner of Fintube Limited Partnership from 1995 to August
1999; Chairman of the Board, President and Chief Executive Officer of
the general partner of Fintube Limited Partnership from 1991 to 1995.
5
<PAGE>
CONTINUING DIRECTORS
CHARLES L. BLACKBURN (72) 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 2001. (2,3)
JAMES E. MCCORMICK (72) 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., Santa Fe Snyder Corp., TESCO
Corporation and Dallas National Bank. His current term expires in 2001.
(1,2,3)
THOMAS M. MERCER, JR. (56) 1995
Partner since 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. His current term
expires in 2001. (1,2,3)
</TABLE>
(1) Member of Corporate Governance Committee. Mr. Best is an exofficio
member of this committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
MEETINGS OF BOARD AND COMMITTEES. During 1999, there were nine meetings of the
Board of Directors and seven meetings of Board committees. All of the directors
attended more than 80 percent of the meetings of the Board of Directors and
committees of the Board on which they served. The standing committees of the
Board have the following principal functions: the Audit Committee assists the
Board in fulfilling its oversight responsibilities to ensure the integrity of
Lone Star's financial statements; the Compensation Committee reviews and
approves salaries and bonuses for officers and administers the 1985 Long-Term
Incentive Plan; and the Corporate Governance Committee provides general
corporate oversight, advises the Board regarding policies for corporate
governance and recommends director nominees to the Board. Shareholders wishing
to recommend candidates for consideration by the Corporate Governance Committee
should follow the procedure set forth under the heading "Shareholder Proposals
for the 2001 Annual Meeting."
COMPENSATION OF DIRECTORS. Each director of Lone Star who is not an officer of
Lone Star 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 Lone Star shares, or he may defer receipt under a phantom stock arrangement.
A director who is an employee of Lone Star or any of its subsidiaries receives
no compensation for serving as a director of Lone Star.
6
<PAGE>
Following each of the Annual Meetings in 1993, 1995 and 1997, each director
then in office who was not an employee of Lone Star or its subsidiaries
("non-executive director") received a stock option for 25,000 shares of Common
Stock of Lone Star and following the Annual Meeting in 1998 and each Annual
Meeting after that, each non-executive director receives a stock option for
12,500 shares of Common Stock, all under the terms of the 1985 Long-Term
Incentive Plan of Lone Star (subject to an overall limitation of 1,000,000
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. The
non-executive directors held options as of February 29, 2000 covering the
following number of shares of Common Stock: Mr. Blackburn, 75,000 shares; Mr.
Guerin, 56,250 shares; Mr. Hegi, 125,000 shares; Mr. McCormick, 68,250 shares;
Mr. McHugh, 9,375 shares; and Mr. Mercer, 75,000 shares.
RELATIONSHIPS BETWEEN LONE STAR AND MR. RYAN. Jerry E. Ryan, a new nominee for
election as a director at this Annual Meeting, was Chairman of the Board and a
shareholder of the general partner of Fintube Limited Partnership when its
assets were acquired by a new subsidiary of Lone Star (Fintube Technologies,
Inc.) as of January 1, 2000. In connection with that acquisition, Mr. Ryan
received 95,644 shares of Lone Star Common Stock as partial consideration for
his ownership of Fintube Limited Partnership and became a consultant to Fintube
Technologies. Pursuant to the terms of the consulting agreement, Fintube
Technologies agreed to pay Mr. Ryan a base salary of $274,008 per year and an
annual bonus in an amount determined by Fintube Technologies and Lone Star
granted Mr. Ryan the option to purchase 30,000 shares of Lone Star Common Stock
pursuant to Lone Star's 1985 Long Term Incentive Plan. Unless otherwise
mutually agreed, the consulting agreement expires on December 31, 2002.
RETIREMENT POLICY FOR DIRECTORS. After the 1998 Annual Shareholders Meeting,
the Board of Directors adopted a retirement policy for directors: "A person is
not eligible for election as a director if he or she is seventy years of age or
older at the time of the election; provided, however, that this provision shall
not prevent the re-election at the 1999 Annual Shareholders Meeting of the
director whose term of office expires at that meeting." Pursuant to that
policy, Messrs. Blackburn and McCormick will not be nominated for re-election
at the 2001 Annual Meeting. Mr. Guerin is retiring from the Board when his term
expires at the 2000 Annual Meeting.
EXECUTIVE OFFICERS
All executive officers of Lone Star are elected annually by and serve at the
pleasure of the Board of Directors, or in the case of Mr. Dunn, at the pleasure
of the Board of Directors of Steel which he serves as Chief Executive Officer.
The following sets forth information concerning the current executive officers
of Lone Star. Information regarding Mr. Best, the Chief Executive Officer of
Lone Star, is provided above in the Directors' listing.
7
<PAGE>
NAME(AGE) BUSINESS EXPERIENCE AND OTHER INFORMATION
W. BYRON DUNN (46)
President and Chief Executive Officer of Steel since 1997 and Executive
Vice President - Sales and Marketing of Steel from 1991 to 1997.
ROBERT F. SPEARS (56)
Vice President, General Counsel and Secretary of Lone Star since 1996;
General Counsel of Financial Industries Corporation (life insurance
holding company), Austin, Texas, from 1991 to 1996.
CHARLES J. KESZLER (37)
Vice President-Finance and Treasurer of Lone Star since 1996; Director
of Taxes and Pension Investments of Steel from 1994 to 1996.
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows beneficial ownership of shares of Common Stock of Lone
Star by each director and nominee for director of Lone Star, each executive
officer of Lone Star named in the Summary Compensation Table in this Proxy
Statement and all directors, nominees and executive officers of Lone Star as a
group at February 29, 2000. Each beneficial owner has sole voting power and sole
investment power as to the shares listed opposite his name.
Name of Director,
Executive Officer or Group Number of Shares(1) Percent of Class(2)
- -------------------------- ------------------- -------------------
Rhys J. Best 168,168 *
Charles L. Blackburn 40,625 *
Dean P. Guerin 21,875 *
Frederick B. Hegi, Jr. 93,490 *
James E. McCormick 37,375 *
M. Joseph McHugh - *
Alfred M. Micallef - *
Thomas M. Mercer, Jr. 43,125 *
Jerry E. Ryan 95,644 *
W. Byron Dunn 76,506 *
Charles J. Keszler 38,250 *
Robert F. Spears 22,500 *
All directors, nominees and
executive officers as a group (12) 637,558(3) 2.66
- --------
*Less than 1%.
(1) Includes 152,500 shares for Mr. Best, 40,625 shares for Mr. Blackburn,
21,875 shares for Mr. Guerin, 90,625 shares for Mr. Hegi, 34,375 shares
for Mr. McCormick, 40,625 shares for Mr. Mercer, 70,000 shares for Mr.
Dunn, 36,250 shares for Mr. Keszler and 22,500 shares for Mr. Spears
which may be acquired within 60 days of February 29, 2000 pursuant to
options granted by Lone Star under its 1985 Long-Term Incentive Plan.
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<PAGE>
(2) Percentages are calculated on 23,945,860 shares, the number that would
have been outstanding if the stock options described in the prior
footnote had been exercised.
(3) Includes a total of 509,375 shares which may be acquired within 60 days
of February 29, 2000 pursuant to options held by all directors and
executive officers as a group.
Additional share ownership information regarding principal shareholders of Lone
Star who are neither executive officers nor directors is shown in the table
under the heading "Principal Shareholders" in this Proxy Statement.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation of each
person who served as the chief executive officer of Lone Star during 1999 or
was serving as an executive officer of Lone Star at the end of 1999 and
received salary and bonus exceeding $100,000 during 1999 (the "named executive
officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Comp Awards
Options (# of shares All Other
Name and Principal Position(1) Year Salary($) Bonus($) (2) of Lone Star Common Stock) Compensation($)(3)
- ------------------------------ ---- --------- ----------- --------------------------- ------------------
<S> <C> <C> <C> <C> <C>
Rhys J. Best, Chairman, 1999 330,000 - 100,000 5,000
President & Chief Executive 1998 320,000 225,000 40,000 4,800
Officer, Lone Star 1997 300,000 200,000 50,000 4,800
W. Byron Dunn 1999 242,500 - 50,000 5,000
President and Chief 1998 235,000 175,000 30,000 4,800
Executive Officer, Steel 1997 211,876 100,000 20,000 4,800
Charles J. Keszler 1999 154,667 - 30,000 5,000
Vice President - Finance 1998 150,000 50,000 15,000 4,800
and Treasurer, Lone Star 1997 125,000 15,000 15,000 4,238
Robert F. Spears 1999 180,250 - 30,000 -
Vice President, General 1998 167,500 50,000 15,000 -
Counsel and Secretary, 1997 155,000 10,000 15,000 -
Lone Star
</TABLE>
(1) Mr. Best served as President and Chief Executive Officer of Steel
during the first seven months of 1997 and President and Chief
Operating Officer of Lone Star from August 1, 1997 to June 30, 1998
and has served as President and Chief Executive Officer of Lone Star
since July 1, 1998 and Chairman of the Board of Lone Star since
January 1, 1999. Mr. Dunn served as Executive Vice President - Sales
and Marketing of Steel during the first seven months of 1997 and has
served as President and Chief Executive Officer of Steel since
August 1, 1997. Mr. Keszler has served as Vice President - Finance
and Treasurer of Lone Star since 1996. Mr. Spears has served as Vice
President, General Counsel and Secretary of Lone Star since 1996.
(2) Each bonus was paid in the year indicated in the table but related to
the previous year's performance.
(3) The compensation listed in the last column represents company
contributions to a 401(k) plan.
9
<PAGE>
CHANGE IN CONTROL ARRANGEMENTS
Lone Star's and Steel's Boards of Directors adopted in 1997 an Employment
Retention Policy that provides that each officer or key employee designated by
Lone Star's Board or Compensation Committee will receive a lump sum payment if
his or her employment is involuntarily terminated without "cause" or is
voluntarily terminated for "good reason" within two years after a "change in
control" of the employer. The lump sum payment for each officer or key employee
is an amount, as determined by Lone Star's Board or Compensation Committee, that
does not exceed 24 times the officer's average monthly compensation or 12 times
the key employee's average monthly compensation. The average monthly
compensation is based on the individual's salary and bonus for the 12 months
prior to termination or, if higher, the 12 months prior to the change in
control. As of December 31, 1999, the lump sum amount for each of seven officers
of Lone Star and Steel (including the four named executive officers) was 24
times his average monthly compensation, and the lump sum amount for each of five
other officers of Steel was 12 times his average monthly compensation.
Generally, a "change in control" of Steel would occur if Lone Star sells Steel's
stock or assets or if there is a "change in control" of Lone Star. A "change in
control" of Lone Star is defined, in general, as (i) a change in control
required to be reported under Regulation 14A of the Securities Exchange Act of
1934, (ii) more than 50 percent of Lone Star's stock becomes beneficially owned
by an entity, person or group, (iii) a majority of the Board ceases to be made
up of "qualified directors" during any 24 month period, (iv) any merger,
consolidation or sale of assets of Lone Star in which Lone Star's shareholders
do not continue to own more than 50 percent of the voting stock of the surviving
entity or (v) the approval by Lone Star's shareholders of Lone Star's
liquidation or dissolution. A "qualified director" is any individual who was a
director of Lone Star at the beginning of the 24 month period or was nominated
for election or was elected to the Board during that period by two-thirds of the
"qualified directors" still in office.
Certain officers and employees of Lone Star and Steel, including the named
executive officers, and the directors of Lone Star have stock options granted
under the 1985 Long-Term Incentive Plan. Stock options, which ordinarily are not
fully exercisable until four years after grant, may vest (become fully
exercisable) after a "change in control" (as defined in the Plan) of Lone Star
occurs. The definition of "change in control" of Lone Star in the Plan is the
same as the definition in the Employment Retention Policy, and the Plan provides
that options become fully exercisable if an optionee's employment is
involuntarily terminated without "cause" or is voluntarily terminated for "good
reason" within two years after a "change in control" of Lone Star occurs.
OPTIONS
The following table shows the options that were granted under the 1985 Long-Term
Incentive Plan in 1999 to the named executive officers. Each option has an
exercise price equal to the fair market value of Lone Star'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.
10
<PAGE>
OPTION GRANTS TABLE
<TABLE>
<CAPTION>
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 1999 Price ($/Sh) Date 5% ($) 10% ($)
- ---- ----------- ------- ------------ ---- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Rhys J. Best 100,000 28.37 13.00 2/22/2009 817,563 2,071,865
W. Byron Dunn 50,000 14.18 13.00 2/22/2009 408,782 1,035,932
Charles J. Keszler 30,000 8.51 13.00 2/22/2009 245,269 621,559
Robert F. Spears 30,000 8.51 13.00 2/22/2009 245,269 621,559
</TABLE>
The following table reflects exercises of options by the named executive
officers during 1999 and unexercised options held by them at the end of 1999.
AGGREGATED OPTION EXERCISES IN 1999
AND 12/31/99 OPTION VALUES
<TABLE>
<CAPTION>
Number of Shares
of Common Stock Value of
Underlying In-The-Money
Shares Options at 12/31/99 Options at 12/31/99
Acquired on Value Exercisable/ Exercisable/
Name Exercise Realized($) Unexercisable(#) Unexercisable($)*
- ---- -------- ----------- ---------------- -----------------
<S> <C> <C> <C> <C>
Rhys J. Best 7,500 54,000 101,250 / 158,750 1,643,046/ 1,722,578
W. Byron Dunn - - 42,500 / 85,000 594,181/ 850,469
Charles J. Keszler - - 18,750 / 51,250 186,563/ 539,375
Robert F. Spears - - 7,500 / 48,750 31,641/ 498,281
</TABLE>
*The value is calculated based on the excess, if any, of $27.50 (the closing
price of a share of Lone Star Common Stock on the New York Stock Exchange on
December 31, 1999) over the relevant exercise price.
No options were repriced in 1999.
COMPENSATION COMMITTEE REPORT
Lone Star is engaged in business as a manufacturer and supplier of oilfield and
other industrial metal products through Steel, Lone Star's principal operating
company in 1999. 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, Lone Star's
executive compensation program consists of current salary, bonus opportunity and
a longer term incentive.
11
<PAGE>
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 Lone Star. 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 by the Committee based on its own analysis
and judgment and the recommendations of the chief executive officer.
The chief executive officer's salary is separately considered by the Committee.
In determining his salary, the Committee considered the businesses in which Lone
Star 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 Lone Star and Steel.
During 1999, the salaries of the named executive officers were increased as
follows: $10,000 per year in Mr. Dunn's salary to $245,000; $7,000 per year in
Mr. Keszler's salary to $157,000; and $7,000 per year in Mr. Spears' salary to
$182,000.
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 Lone Star
that exceeded $100,000 during 1999, including the chief executive officer, are
shown in the Summary Compensation Table in this 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 Lone
Star'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 fair market value 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 upon the optionee's death
or "retirement" (as defined in the Plan) or if an optionee's employment is
involuntarily terminated without "cause" or is voluntarily terminated for "good
reason" within two years after a "change in control" of Lone Star occurs.
Unexercised options terminate 36 months after the optionee's "retirement,"
termination of employment after a "change in control," or death or three months
after any other cessation of employment.
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 Lone Star. 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
12
<PAGE>
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.
When options are granted to executive officers, the Committee evaluates the
individual's performance currently and relative to the future needs of Lone Star
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 Lone Star
chief executive officer's option awards are made on a similar basis.
Options granted in 1999 to each executive officer of Lone Star who received
salary and bonus exceeding $100,000 during 1999 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 Lone Star, 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:
Charles L. Blackburn, Chairman
Dean P. Guerin
Frederick B. Hegi, Jr.
James E. McCormick
Thomas M. Mercer, Jr.
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<PAGE>
PERFORMANCE CHART
The following graph compares the yearly percentage change for the five-year
period from January 1, 1995 to January 1, 2000 in the cumulative total returns
on Lone Star'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, 1995:
CUMULATIVE TOTAL RETURN COMPARISON
FIVE-YEAR INDEX (1/1/95 = 100)
[The graph that appears here in the paper copy presents
the data set forth below in the table.]
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Lone Star Common Stock $100.00 $157.14 $242.86 $405.36 $144.64 $392.86
S&P 500 Index $100.00 $134.16 $161.34 $211.37 $267.81 $320.03
S&P Oil Equipment Index $100.00 $132.78 $184.80 $280.92 $144.67 $215.13
</TABLE>
14
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth as of February 29, 2000, the number of shares of
Lone Star Common Stock beneficially owned by each person known by Lone Star to
own beneficially more than five percent of its outstanding Common Stock.
Percentages are based on 23,436,485 shares of Common Stock of Lone Star which
were issued and outstanding on that date. The information below and elsewhere in
the Proxy Statement reporting share ownership of Lone Star is believed to be
current based upon information made available to Lone Star prior to the date of
this Proxy Statement.
<TABLE>
<CAPTION>
Name and Address Amount of Percent of Outstanding
of Beneficial Holder Beneficial Ownership Common Stock
- -------------------- -------------------- ------------
<S> <C> <C>
Alpine Capital, L.P. 8,965,172(1)(2) 38.253%
201 Main Street, Suite 3100
Fort Worth, TX 76102
Keystone, Inc. 2,279,600(2)(3) 9.727%
201 Main Street, Suite 3100
Fort Worth, Texas 76102
</TABLE>
(1) Alpine Capital, L.P. reports that it has sole voting and dispositive
power as to these shares.
(2) Based on the most recent amendment to a Schedule 13D and subsequent
Form 4 filings. The 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 100,000 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
9,065,172 shares and represent approximately 38.679 percent of the
outstanding Common Stock.
(3) Keystone, Inc. and Robert M. Bass are reported to have sole voting and
dispositive power as to these shares.
ADOPTION OF EMPLOYEE STOCK PURCHASE PLAN
On March 21, 2000, the Board of Directors of Lone Star authorized the adoption
of the Lone Star Technologies, Inc. Employee Stock Purchase Plan (the "Purchase
Plan"), and directed that it be submitted to the shareholders of Lone Star for
approval. If the shareholders approve the Purchase Plan at the Annual Meeting,
the Purchase Plan will become effective as of July 1, 2000.
The purpose of the Purchase Plan is to provide a method for eligible employees
of Lone Star and its participating subsidiaries to acquire a proprietary
interest in Lone Star through the regular and systematic purchase of shares of
common stock from Lone Star, at a price below fair market value, by means of
voluntary payroll deductions. The Purchase Plan is designed to encourage
employee stock ownership and thereby increase employees' personal interest in
Lone Star's continued success and progress. A total of 200,000 shares of Lone
Star Common Stock have been authorized for issuance under the Purchase Plan.
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<PAGE>
A copy of the Purchase Plan, as approved by the Board, is attached to this proxy
statement as Exhibit A, and the material terms of such plan are summarized
below.
DESCRIPTION OF THE PURCHASE PLAN
Each full-time employee of Lone Star or its participating subsidiaries who has
completed at least 12 months of continuous service in the employ of Lone Star or
such subsidiaries is eligible to participate in the Purchase Plan. For this
purpose, a full-time employee is one whose customary employment is for more than
20 hours per week and for more than five months in any calendar year. As of
February 29, 2000, approximately 1,500 persons were eligible to participate in
the Purchase Plan. The market value of the 200,000 shares of Lone Star Common
Stock authorized for issuance under the Purchase Plan was $7.5 million (based on
the closing price of Common Stock on the New York Stock Exchange on February 29,
2000). Commencing July 1, 2000, each eligible employee who elects to participate
in the Purchase Plan on any January 1, April 1, July 1, or October 1, and who
executes and delivers to his or her employer a payroll deduction authorization
form (the AForm@) at least 15 calendar days prior to such date, becomes a
participant in the Purchase Plan as of such date and remains a participant until
his or her participation is terminated. Participants may elect to contribute to
the Purchase Plan during any calendar quarter, through regular payroll
deductions, not more than 5% nor less than 1% of such participant's quarterly
compensation, as determined in accordance with the provisions of the Purchase
Plan.
The right of a participating employee to purchase shares of common stock under
the Purchase Plan is referred to as an "option." Each participant for whom a
Form is in effect under the Purchase Plan will be granted an option on the first
day of each calendar quarter. On the last business day of each calendar quarter,
each participant will be deemed automatically to have exercised the option
granted to him or her on the first day of that quarter, and Lone Star will apply
all the funds accumulated in such participant's account during that quarter to
the purchase from Lone Star of the largest possible number of shares of common
stock. The purchase price of a share of common stock purchased upon the exercise
of an option under the Purchase Plan is the lower of 90% of the Fair Market
Value per share on the date of grant of the option or 90% of the Fair Market
Value per share on the date on which the option is exercised; provided that the
Compensation Committee of the Board of Directors may establish from time to time
such other percentages, which shall be less than 100% but not less than 85%, of
Fair Market Value for this purpose. "Fair Market Value" is defined as the
closing sale price of the common stock of Lone Star on the date in question as
reported on the New York Stock Exchange or other principal stock exchange or
stock market on which the common stock may from time to time be traded. Any
unexercised option will be void as of the last day of the quarter in which the
option was granted.
No participant may purchase shares under the Purchase Plan at a rate that
exceeds $25,000 in Fair Market Value (determined at the time an option is
granted) for each calendar year. In addition, no participant may be granted an
option under the Purchase Plan if such participant would, immediately after such
grant, own stock (including the stock purchasable under the option) possessing
5% or more of the total combined voting power or value of all classes of stock
of Lone Star or any parent or subsidiary corporation of Lone Star.
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<PAGE>
A participant may change his or her payroll deduction amount by delivering a new
Form to his or her employer at least 15 calendar days before the beginning of
the next calendar quarter for which the change is to be effective. A participant
may also terminate his or her payroll deduction authorization by providing
written notice to his or her employer at least 20 calendar days prior to the
date of termination. Upon termination of a participants employment for any
reason, such person ceases to be a participant entitled to receive options under
the Purchase Plan and any option held by him or her that has not become
exercisable on the date of termination is deemed canceled. A participant may
also voluntarily cancel an option by delivering written notice to his or her
employer at least 20 calendar days prior to the options exercise date. A
participant who cancels an option will be deemed to have terminated his or her
payroll deduction authorization. Upon any termination of a participants payroll
deduction authorization or any termination of a participants employment, the
balance in such participant's withholding account is returned to the
participant. After an employee's participation in the Purchase Plan has been
terminated, such employee may re-enroll as of the beginning of any calendar
quarter in which he or she is an eligible employee.
Shares of common stock purchased under the Purchase Plan will be held in custody
by a custodian for the account of the participants who purchased such shares.
The custodian will establish and maintain book entry stock accounts for the
participants for this purpose, and each participant will be credited in his or
her stock account with the number of shares acquired by such participant under
the Purchase Plan as of the date such shares are issued. A participant will have
none of the rights of a shareholder of Lone Star with respect to shares of
common stock purchased by such participant under the Purchase Plan unless and
until certificates representing such shares have been issued. Lone Star will
cause the custodian to deliver to each participant for whom shares of common
stock are being held in custody by the custodian all dividends and distributions
in respect of the whole shares of common stock being held for such participant
and all notices, proxy statements and other communications to Lone Stars
shareholders.
A participant may elect to withdraw at any time (without withdrawing from
participation in the Purchase Plan for payroll deduction purposes) all or any
portion of the whole shares of common stock that are held in his or her stock
account by giving appropriate notice to the custodian. A participant may also
sell all or any portion of the whole shares of common stock held in his or her
stock account on the New York Stock Exchange or other principal stock exchange
or stock market on which the common stock may from time to time be traded by
giving appropriate notice to the custodian. Upon receipt of such notice of sale,
the custodian will arrange for the sale of such participants whole shares as
soon as administratively practicable. The proceeds of such sale, less any
associated commissions and required withholding for taxes, will be paid by the
custodian to the participant as soon as practicable after the sale.
No interest is payable on amounts held in withholding accounts, and the proceeds
received by Lone Star upon exercise of options under the Purchase Plan
constitute general funds of Lone Star. An option granted under the Purchase Plan
is not transferable and is exercisable only by the participant to whom it is
granted.
The Purchase Plan will be administered by the Compensation Committee of the
Board of Directors. Fees and expenses incurred in connection with the
administration of the Purchase Plan will be paid
17
<PAGE>
by Lone Star. Any costs associated with the sale of shares purchased by a
participant under the Purchase Plan will be paid by the participant.
The Board of Directors may amend or terminate the Purchase Plan at any time
without shareholder approval; provided, however, that shareholder approval is
required for any amendment that would (i) increase the total number of shares of
common stock issuable under the Purchase Plan (other than pursuant to certain
provisions of the Purchase Plan relating to stock splits, stock dividends,
mergers and other changes in the common stock) or (ii) modify the corporations
or class of corporations whose employees are eligible to receive options under
the Purchase Plan. No amendment of the Purchase Plan will adversely affect the
rights of a participant thereunder, except with the consent of such participant.
Subject to the Boards right to terminate the Purchase Plan, the Purchase Plan
will terminate when all shares of common stock authorized under the Purchase
Plan have been purchased. Upon termination, the balance in each participants
account and any whole shares of common stock held by the custodian for such
participant will be returned to such participant.
FEDERAL INCOME TAX CONSEQUENCES
The following summary relates to U.S. Federal income tax consequences only and
applies to United States citizens and foreign persons who are United States
residents. In addition to the income tax consequences described below, the
acquisition, ownership or disposition of an option or shares acquired upon the
exercise of an option under the Purchase Plan may have tax consequences under
U.S. Federal estate tax laws and various state laws that may be applicable to
certain participants in the Purchase Plan.
The Purchase Plan is designed to qualify as an "employee stock purchase plan"
under Section 423 of the Internal Revenue Code of 1986, as amended (the "Code").
Amounts deducted from the income of a participating employee under the Purchase
Plan will be included in such employee's income for the year in which such
amounts would otherwise have been paid to the employee, and will be deductible
by Lone Star. The employee will not recognize additional taxable income either
(i) at the time options are granted pursuant to the Purchase Plan, which is the
first day of the quarter in which the employee elects to participate in the
Purchase Plan, or (ii) at the time options are exercised under the Purchase
Plan, which is the last day of the quarter in which the option was granted, and
no further deduction is allowed to Lone Star at either time. The employee's
basis in shares purchased under the Purchase Plan will equal the amount paid for
such shares. The employees holding period for shares purchased pursuant to the
exercise of an option under the Purchase Plan will begin on the date such option
is exercised.
An employee who purchases shares pursuant to an option under the Purchase Plan
and disposes of such shares more than two years after the option was granted and
more than one year after the option was exercised, or who dies at any time while
holding the shares, will recognize ordinary income at the time of disposition or
death in an amount equal to the lesser of (i) the excess, if any, of the fair
market value of the shares at the time of the disposition or death over the
amount paid for the shares, or (ii) the excess, if any, of the fair market value
of the shares at the time the option was granted over the purchase price of such
shares determined as if the option was exercised on the date of grant. Lone Star
will not be entitled to a deduction in respect of any amount of ordinary income
18
<PAGE>
so recognized by the employee. The employee's basis in the shares disposed of
will be increased by the amount of ordinary income recognized. Any additional
gain recognized by the employee on the disposition will be a capital gain.
An employee who purchases shares pursuant to an option under the Purchase Plan
and disposes of such shares less than two years after the option was granted or
less than one year after the option was exercised will recognize ordinary income
at the time of disposition in an amount equal to the excess of the fair market
value of the shares on the date of exercise of the option over the amount paid
for such shares or, if less, the gain on disposition. Lone Star will be entitled
to a deduction equal to the amount of ordinary income recognized by the
employee. Any additional gain recognized by the employee on the disposition will
be a capital gain.
If the amount realized by the employee on the disposition of shares purchased
under the Purchase Plan (assuming the shares are sold in an arms-length
transaction) is less than the employees basis in such shares, no ordinary
income will be recognized by the employee and the amount by which such basis
exceeds the amount received for such shares will be a capital loss.
The Purchase Plan is not subject to the provisions of the Employee Retirement
Income Security Act of 1974 and is not qualified under Section 401(a) of the
Code.
APPROVAL OF PURCHASE PLAN
The Purchase 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 Purchase Plan. The Board of Directors
recommends that shareholders vote FOR the approval of the Purchase Plan.
AMENDMENT TO 1985 LONG-TERM INCENTIVE PLAN
CURRENT PLAN
The 1985 Long-Term Incentive Plan (the "Plan") is a stock based incentive plan
which authorizes the issuance of Lone Star Common Stock and certain cash
payments under awards to key salaried employees (including officers and
directors who are employees) of Lone Star 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 Lone Star's bonus program. The Plan also provides for
awards of stock options to non-executive directors of Lone Star (directors of
Lone Star who are not employees of Lone Star or of a subsidiary). 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 3,700,000 shares of
Common Stock.
19
<PAGE>
As of February 29, 2000, options to purchase an aggregate of 1,807,000 shares
of Common Stock were outstanding under the Plan and 691,650 shares were
available for future grant. The market value of all shares of Common Stock
subject to outstanding options under the Plan was $67,762,500 (based on the
closing price of Common Stock on the New York Stock Exchange on February 29,
2000). The current executive officers of Lone Star held options as of
February 29, 2000 covering the following numbers of shares of Common Stock:
Rhys J. Best, 360,000; W. Byron Dunn, 177,500; Charles J. Keszler, 100,000;
and Robert F. Spears, 86,250. The non-executive directors of Lone Star held
options as of that date covering the following numbers of shares of Common
Stock: Charles L. Blackburn, 75,000; Dean P. Guerin, 56,250; Frederick B.
Hegi, Jr., 125,000; James E. McCormick, 68,750; M. Joseph McHugh, 9,375; and
Thomas M. Mercer, Jr., 75,000.
The following summary briefly describes the principal features of the current
Plan, before giving effect to the amendment that is being voted on by the
shareholders at the Annual Meeting and is described below under "Proposed
Amendment."
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 "outside directors" as defined under Section
162(m) of the Internal Revenue Code to administer the Plan and grant awards
thereunder. Currently, the Plan is administered by the Compensation
Committee, which is composed of five directors, Messrs. Blackburn, Guerin,
Hegi, McCormick and Mercer.
The Committee determines those key salaried employees (including officers) of
Lone Star and its subsidiaries who are to be granted awards under the Plan
and the number of shares to be optioned to such participants. The Plan has an
annual limit of 200,000 on the number of shares with respect to which options
and stock appreciation rights can be granted to any individual. Non-executive
directors of Lone Star participate in the Plan, but only with respect to the
award of stock options.
Following each of the Annual Meetings in 1993, 1995 and 1997, each
non-executive director then in office received a stock option for 25,000
shares of Common Stock of Lone Star and following the Annual Meeting in 1998
and each Annual Meeting after that, each non-executive director receives a
stock option for 12,500 shares of Common Stock, all under the terms of the
Plan (subject to an overall limitation of 1,000,000 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. The Compensation Committee
has the authority to grant, in its discretion, to a new non-executive
director upon his or her election a stock option for up to 12,500 shares.
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
20
<PAGE>
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 (subject to the special rules governing a "change in control"):
(1) Ten years after the date the option is granted;
(2) Three months after the date the optionee shall cease to be a
director of Lone Star or an employee of Lone Star or a
subsidiary of Lone Star, unless such cessation of directorship
or employment is by reason of the optionee's "retirement" or
death or unless death occurs within such three months;
(3) 36 months after the date of the optionee's "retirement",
unless the optionee dies during that 36-month period; or
(4) 36 months after the date of the optionee's death.
Options will vest (become fully exercisable) upon the "retirement" of the
holder of the options. "Retirement" is defined as retirement from employment
with Lone Star or a subsidiary or cessation of service as a director of Lone
Star (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 Lone Star and its subsidiaries. The option holder
will have 36 months after "retirement" (but not beyond the option's original
term) to exercise his or her options. 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 Lone Star 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 36 months after
"retirement", the option he or she holds will vest, and the option may be
exercised within 36 months after the optionee's death by the optionee's
estate or heirs (but not beyond the option's original term).
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.
A participant's options and other awards will fully vest if his or her
employment is involuntarily terminated without "cause" or is voluntarily
terminated for "good reason" within two years after a "change in control" of
Lone Star occurs, a non-executive director's options will fully vest if he or
21
<PAGE>
she is removed or not reelected as a director of Lone Star without "cause"
within two years after a "change in control" of Lone Star occurs and the
vesting of a participant's options and other awards will accelerate under the
Plan if his or her employer ceases to be a subsidiary of Lone Star. A
participant or non-executive director referred to in the preceding sentence
will have 36 months after termination of his or her employment or
directorship or the change in control of a subsidiary (but not beyond the
original term of the option) to exercise his or her options. All outstanding
options and awards under the Plan will vest if (i) Lone Star's shareholders
vote on a merger or other transaction in which they would not receive any
voting common stock of Lone Star's successor or (ii) a "change in control" of
Lone Star occurs and it is the first step in an attempt to acquire all of the
stock or assets of Lone Star and the contemplated second step is a merger or
other transaction described in (i).
The Plan defines a "change in control" of Lone Star, in general, as (i) a
change in control required to be reported under Regulation 14A of the
Securities Exchange Act of 1934, (ii) more than 50 percent of Lone Star's
stock becomes beneficially owned by an entity, person or group, (iii) a
majority of the Board ceases to be made up of "qualified directors" during
any 24 month period, (iv) any merger, consolidation or sale of assets of Lone
Star in which Lone Star's shareholders do not continue to own more than 50
percent of the voting stock of the surviving entity or (v) the approval by
Lone Star's shareholders of Lone Star's liquidation or dissolution. A
"qualified director" is any individual who was a director of Lone Star at the
beginning of the 24 month period or was nominated for election or was elected
to the Board during that period by two-thirds of the "qualified directors"
still in office.
"Cause" for termination of a participant's employment means his or her
illegal conduct or gross misconduct that in either case is willful and
results in material damage to the employer's business or reputation or his or
her willful failure or refusal to perform his or her duties or obligations to
the employer or to comply in all material respects with the lawful directives
of the employer's Chief Executive Officer or Board of Directors, provided
that the employee has received written notice from the employer stating the
nature of such failure or refusal and has reasonable opportunity to correct
the stated deficiency.
"Cause" for termination of a non-executive's directorship means his or her
illegal conduct or gross misconduct that in either case is willful and
results in material damage to Lone Star's business or reputation or his or
her willful failure or refusal to perform his or her duties or obligations to
Lone Star.
"Good Reason" with respect to the voluntary termination of a participant's
employment means the occurrence, after a "change in control", of (i) any
adverse change in his or her status, position, authority or responsibilities,
(ii) a reduction of his or her compensation, or (iii) any material change in
his or her employment location.
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
22
<PAGE>
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.
The Plan will terminate on April 9, 2005. Awards then outstanding will not be
affected by such termination.
Lone Star'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.
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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 excess, if any, of the fair market value of the stock on the
exercise date over the exercise price. Subject to Section 162(m) of the
Internal Revenue Code, the amount of ordinary income realized by the optionee
upon exercise of the option will be deductible in computing the taxable
income of Lone Star. 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. The vesting of options may be
accelerated pursuant to the terms of the Plan. That acceleration may be
determined to be, in whole or in part, a "parachute payment" as defined by
the Internal Revenue Code if it arises in connection with a change in control
of Lone Star, and, in that event, option holders will be subject to a special
excise tax of 20 percent on the "excess parachute payment" as defined by the
Code. In addition, Lone Star will not be allowed a deduction for any "excess
parachute payment". 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. This summary does
not purport to be complete and reference is made to the applicable provisions
of the Code.
PROPOSED AMENDMENT
On March 21, 2000, the Board of Directors adopted, subject to shareholder
approval at this Annual Meeting, an amendment to the Plan that would permit
any holder of non-qualified stock options to transfer options by gift to a
family member or a trust, foundation, partnership, corporation or other
entity controlled by the optionee or his or her family members.
If an option is transferred as permitted by the amendment, all references in
the Plan to an optionee will continue to mean the original holder of the
option except that the transferee of the option will be entitled to exercise
the option and be issued shares of Lone Star Common Stock upon that exercise
on the same terms and conditions as the original holder could have exercised
the option and been issued such stock. For example, if the original holder of
the option dies, the option will fully vest and the transferee will have 36
months after the date of the original holder's death (but not beyond the
option's original term) to exercise the option. If the amendment is approved
at this Annual Meeting, all non-qualified stock options outstanding at that
time and all non-qualified stock options granted thereafter will be
transferable in accordance with that amendment.
This amendment 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 amendment. The Board
of Directors recommends that shareholders vote FOR the approval of the
amendment.
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 Employee Stock Purchase Plan and the amendment to the
Long-
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Term Incentive 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 Lone
Star and its subsidiaries for the fiscal year ending December 31, 2000.
Arthur Andersen LLP served as independent public accountants for Lone Star
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 Lone Star. In addition,
Lone Star 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 Lone Star and, if
necessary, its subsidiaries may request by telephone, telegram, or in person
the return of proxies. Those officers and other regular employees of Lone
Star or subsidiaries will not receive additional compensation in connection
with any solicitation of proxies.
ANNUAL REPORT AND FORM 10-K
The Annual Report to Shareholders of Lone Star for the year ended December
31, 1999, including the Annual Report on Form 10-K for the same period
(without exhibits), has been mailed to shareholders of record as of March 22,
2000. 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 2001 ANNUAL MEETING
Shareholder proposals for consideration at the 2001 Annual Meeting of
Shareholders must be received no later than December 1, 2000, at Lone Star's
principal executive office, 15660 N. Dallas Parkway, Suite 500, Dallas, Texas
75248, directed to the attention of the Secretary.
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EXHIBIT A
LONE STAR TECHNOLOGIES, INC.
EMPLOYEE STOCK PURCHASE PLAN
Section 1. PURPOSE. It is the purpose of the Plan to promote the
interests of the Company and its stockholders by providing a method by which
eligible employees may use voluntary payroll deductions to purchase shares of
Common Stock at a discount, thereby affording them the opportunity to invest in
the Company at a preferential price, and to acquire a proprietary interest in
the Company and an increased personal interest in its continued success and
progress. The Plan is intended to qualify as an "employee stock purchase plan"
within the meaning of Section 423 of the Code and shall be construed
accordingly.
Section 2. DEFINITIONS. As used herein the following terms have the
following meanings:
(a) "Affiliate" means any corporation that is a parent
corporation of the Company within the meaning of Section 424(e) of the
Code or a subsidiary corporation of the Company within the meaning of
Section 424(f) of the Code, and that has been designated by the
Committee as an Affiliate for purposes of the Plan.
(b) "Board of Directors" means the Board of Directors of the
Company.
(c) "Code" means the United States Internal Revenue Code of
1986, as from time to time amended.
(d) "Committee" means the Committee described in Section 4
hereof.
(e) "Common Stock" means the $1.00 par value Common Stock of
the Company.
(f) "Company" means Lone Star Technologies, Inc.
(g) "Compensation" means the regular base salary and hourly
wages payable to an employee for services rendered to the Company or an
Affiliate as an employee (prior to reduction for any elective deferrals
within the meaning of Section 402(g) of the Code or any salary
reduction amount elected for the purchase of benefits pursuant to a
cafeteria plan within the meaning of Section 125 of the Code),
excluding bonuses, overtime pay, allowances, reimbursements,
commissions, profit sharing or deferred compensation payments and all
other extraordinary remuneration.
(h) "Compensation Exchange Rate" means the New York foreign
currency exchange rate as reported in THE WALL STREET JOURNAL.
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(i) "Custodian" means the entity designated by the Committee
to assist it with the administration of the Plan relating to the
custody of certificates for shares of Common Stock purchased under the
Plan.
(j) "Eligible Employee" means any employee of the Company or
an Affiliate who is eligible to participate in the Plan pursuant to
Section 5 hereof.
(k) "Enrollment Date" means the first day of any Plan Period.
(l) "Fair Market Value" means the closing sales price of the
Common Stock on the date in question (or, if there was no reported sale
on such date, on the last preceding day on which any reported sale
occurred) on the New York Stock Exchange or other principal stock
exchange or stock market on which the Common Stock may from time to
time be traded.
(m) "Option" means any option to purchase shares of Common
Stock granted by the Company pursuant to the provisions of the Plan.
(n) "Participant" means an Eligible Employee who has become a
Participant in the Plan pursuant to Section 6 hereof, and for whom a
payroll deduction authorization form is in effect under the Plan or a
stock account is being maintained pursuant to the Plan.
(o) "Plan" means this Lone Star Technologies, Inc. Employee
Stock Purchase Plan.
(p) "Plan Period" means each of the following periods,
commencing July 1, 2000: (i) the period beginning on January 1 and
ending on the following March 31; (ii) the period beginning on April 1
and ending on the following June 30; (iii) the period beginning on July
1 and ending on the following September 30; and (iv) the period
beginning on October 1 and ending on the following December 31.
Section 3. NUMBER OF SHARES. The aggregate number of shares of Common
Stock sold pursuant to the exercise of Options granted under the Plan shall not
exceed 200,000 shares. The maximum number of shares of Common Stock available
for sale under the Plan is subject to adjustment as provided in Section 14
hereof. The Common Stock to be delivered upon exercise of Options shall consist
of authorized but unissued shares of Common Stock or shares of Common Stock
previously issued and reacquired by the Company.
Section 4. ADMINISTRATION OF THE PLAN. The Plan shall be administered
by the Committee, which shall consist of three or more members of the Board of
Directors. Each member of the Committee shall be appointed by and shall serve at
the pleasure of the Board of Directors. The Board of Directors shall have the
sole continuing authority to appoint members of the Committee both in
substitution for members previously appointed and to fill vacancies however
caused. The following provisions shall apply to the administration of the Plan
by the Committee:
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(a) The Committee shall designate one of its members as
Chairperson and shall hold meetings at such times and places as it may
determine. Each member of the Committee shall be notified in writing of
the time and place of any meeting of the Committee at least two days
prior to such meeting, provided that such notice may be waived by a
Committee member. A majority of the members of the Committee shall
constitute a quorum and any action taken by a majority of the members
of the Committee present at any duly called meeting at which a quorum
is present (or action unanimously approved in writing) shall constitute
action by the Committee.
(b) The Committee may appoint a Secretary (who need not be a
member of the Committee) who shall keep minutes of its meetings. The
Committee may make such rules and regulations for the conduct of its
business as it may determine.
(c) The Committee shall have full authority subject to the
express provisions of the Plan to interpret the Plan, to provide,
modify and rescind rules and regulations relating to the Plan
(including rules and regulations relating to the withdrawal or sale of
shares of Common Stock held in the stock accounts of Participants under
the Plan) and to make all other determinations and perform such actions
as the Committee deems necessary or advisable to administer the Plan.
(d) No member of the Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or
any Option granted hereunder.
Section 5. ELIGIBLE EMPLOYEES. Each employee of the Company or an
Affiliate who is employed by the Company or an Affiliate on the date his or her
participation in the Plan is to become effective shall be eligible to
participate in the Plan; provided, however, that:
(a) An employee shall not be granted an Option if such
employee would, immediately after grant of the Option, own stock
possessing 5% or more of the total combined voting power or value of
all classes of stock of the Company or any parent or subsidiary
corporation of the Company (within the meaning of Section 424(e) and
(f) of the Code). For purposes of determining stock ownership under
this paragraph, the rules of Section 424(d) of the Code shall apply,
and stock which the employee may purchase under any outstanding options
shall be treated as stock owned by the employee; and
(b) No employee shall be granted an Option under the Plan
which would permit such employee's rights to purchase shares of stock
under all employee stock purchase plans (within the meaning of Section
423(b) of the Code) of the Company and its parent and subsidiary
corporations (within the meaning of Section 424(e) and (f) of the Code)
to accrue (within the meaning of Section 423(b)(8) of the Code) at a
rate which exceeds U.S. $25,000 of fair market value of such stock
(determined at the time such Option is granted) for each calendar year
in which such Option is outstanding at any time.
For purposes of this Section 5, the term "employee" shall not include (i) an
employee who has been employed by the Company or an Affiliate less than 12
months prior to an Enrollment Date, (ii) an
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employee whose customary employment is 20 hours or less per week or (iii) an
employee whose customary employment is for not more than five months in any
calendar year.
Section 6. METHOD OF PARTICIPATION. Each person who will be an Eligible
Employee on any Enrollment Date may elect to participate in the Plan by
executing and delivering to his or her employer, at least 15 calendar days prior
to such Enrollment Date, a payroll deduction authorization form as provided in
this Section. Such Eligible Employee shall thereby become a Participant on such
Enrollment Date and shall remain a Participant entitled to receive Options under
the Plan until (i) such Eligible Employee has terminated his or her payroll
deduction authorization pursuant to Section 11 hereof or (ii) such Eligible
Employee's participation in the Plan is terminated as provided in Section 12
hereof.
The payroll deduction authorization form executed by an Eligible
Employee shall request withholding, by means of substantially equal payroll
deductions over the applicable Plan Period, of an amount which shall be not less
than 1% or more than 5% of such Eligible Employee's Compensation for such Plan
Period (or such other percentages as the Committee may establish from time to
time before an Enrollment Date for any purchases of Common Stock to occur during
Plan Periods commencing on or after such Enrollment Date). A payroll deduction
authorization form executed by a Participant shall remain in effect for such
Participant until (i) changed as provided below in this Section, (ii) terminated
as provided in Section 11 hereof or (iii) such Participant's participation in
the Plan is terminated as provided in Section 12 hereof. A Participant may
change the withholding rate of his or her payroll deduction authorization within
the limits specified in the first sentence of this paragraph by delivering a new
payroll deduction authorization form to his or her employer at least 15 calendar
days prior to the next Enrollment Date for which the change is to be effective.
A Participant may not change the withholding rate of his or her payroll
deduction authorization with respect to a Plan Period at any time after the
deadline set forth in the immediately preceding sentence. All amounts withheld
in accordance with a Participant's payroll deduction authorization shall be
credited to a book entry withholding account for such Participant. No interest
shall be payable on withholding accounts.
Section 7. GRANT OF OPTIONS. Each Participant for whom a payroll
deduction authorization form is in effect under the Plan shall be granted an
Option on the first day of each Plan Period to purchase shares of Common Stock.
Each Option shall be exercisable on the last business day of the Plan Period for
the number of shares of Common Stock to be determined by dividing (a) the
balance in the Participant's withholding account on the last business day of the
Plan Period by (b) the purchase price per share of the Common Stock as
determined under Section 8 hereof. The Company shall reduce, on a substantially
proportionate basis, the number of shares of Common Stock receivable by each
Participant upon exercise of an Option in any Plan Period in the event that the
total number of shares of Common Stock then available for sale under the Plan is
less than the total number of shares with respect to which all Participants
exercise Options in such Plan Period.
Section 8. OPTION PRICE. The purchase price per share of Common Stock
under each Option shall equal the lesser of (a) 90% of the Fair Market Value per
share of Common Stock on the date of grant of the Option and (b) 90% of the Fair
Market Value per share of Common Stock on the date on which the Option is
exercised (or, with respect to clauses (a) and (b) above, such other
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percentages, which shall be less than 100% but not less than 85%, of such Fair
Market Value as the Committee may establish from time to time before an
Enrollment Date for all purchases of Common Stock to occur during Plan Periods
commencing on or after such Enrollment Date).
Section 9. EXERCISE OF OPTIONS. A Participant who holds an Option on
the last business day of a Plan Period shall be deemed automatically to have
exercised such Option on such day. Upon such exercise, the Company shall apply
the entire balance of the Participant's withholding account to the purchase of
the maximum number of shares of Common Stock as determined under Section 7
hereof. For purposes of this Section 9, the balance in the withholding account
of a Participant whose salary or wages are not computed in United States dollars
shall be converted into United States dollars in accordance with the
Compensation Exchange Rate for the last business day of the Plan Period.
A Participant shall possess none of the rights and privileges of a
stockholder of the Company with respect to shares of Common Stock purchased by
such Participant under the Plan unless and until certificates representing such
shares have been issued. The cash proceeds received by the Company upon exercise
of an Option shall constitute general funds of the Company. Any unexercised
Option shall expire and become null and void as of the end of the Plan Period in
which such Option was granted.
Section 10. ISSUANCE, CUSTODY, WITHDRAWAL AND SALE OF SHARES. The
Company shall issue and deliver to the Custodian certificates representing
shares of Common Stock purchased by Participants under the Plan as soon as
reasonably practicable after such shares are purchased; provided, however, that
the obligation of the Company to issue and deliver shares of Common Stock shall
be postponed for such period of time as may be necessary to register or qualify
the purchased shares under the Securities Act of 1933 and any applicable foreign
or state securities laws. The shares delivered to the Custodian shall be held by
it for the accounts of the Participants who purchased such shares. The Custodian
shall establish and maintain book entry stock accounts for the Participants for
this purpose, and each Participant shall be credited in his or her stock account
with the number of shares acquired by such Participant under the Plan as of the
date such shares are issued. As set forth below in this Section, any Participant
may elect to receive a certificate for the whole shares of Common Stock held in
his or her stock account at any time after such shares are delivered to the
Custodian. Until such certificates are delivered to the Participant, the
Participant will not be permitted to transfer ownership of the shares held in
his or her stock account except as set forth below in this Section or in Section
12 hereof.
The Company shall deliver or cause the Custodian to deliver to each
Participant for whom shares of Common Stock are being held in custody by the
Custodian all dividends and distributions in respect of the whole shares of
Common Stock being held for such Participant and all notices, proxy statements
and other communications to the Company=s stockholders in accordance with
applicable law and the rules and regulations of the Securities and Exchange
Commission.
Subject to the provisions of Section 16 hereof, a Participant may elect
to withdraw at any time (without withdrawing from participation in the Plan for
purposes of Section 6 hereof) all or any portion of the whole shares of Common
Stock that are held in his or her stock account by giving
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notice to the Custodian in the manner approved by the Committee. Upon receipt
of such notice, the Custodian will arrange for the delivery of such whole
shares to the Participant as soon as administratively practicable.
Subject to the provisions of Section 16 hereof, a Participant may sell
all or any portion of the whole shares of Common Stock held in his or her stock
account on the New York Stock Exchange or other principal stock exchange or
stock market on which the Common Stock may from time to time be traded by giving
notice to the Custodian in the manner approved by the Committee. Upon receipt of
such notice, the Custodian will arrange for the sale of such Participant=s whole
shares as soon as administratively practicable. The proceeds of such sale, less
any associated commissions and required withholding for taxes, shall be paid by
the Custodian to the Participant as soon as practicable after the sale.
Section 11. CANCELLATION OF OPTIONS AND TERMINATION OF PAYROLL
DEDUCTION AUTHORIZATIONS. A Participant who holds an Option under the Plan may
cancel such Option by written notice delivered to his or her employer at least
20 calendar days prior to the date of exercise of the Option. Any Participant
who cancels an Option pursuant to the provisions of the immediately preceding
sentence shall be deemed to have terminated his or her payroll deduction
authorization effective at the end of the Plan Period for which such Option was
granted or at such earlier time as is administratively practicable for his or
her employer. Upon such cancellation, the balance in the Participant's
withholding account shall be returned to such Participant promptly following the
end of such Plan Period or at such earlier time as is administratively
practicable for his or her employer. Partial cancellation of an Option shall not
be permitted.
A Participant may terminate his or her payroll deduction authorization
as of any date by written notice delivered to his or her employer at least 20
calendar days prior to such date. Any Participant who voluntarily terminates his
or her payroll deduction authorization effective as of a date during a Plan
Period shall be deemed to have canceled his or her Option for such Plan Period.
Upon termination by a Participant of his or her payroll deduction authorization,
the balance in the Participant=s withholding account shall be returned to such
Participant promptly following the end of the Plan Period in which such
termination became effective or at such earlier time as is administratively
practicable for his or her employer. Partial termination of a payroll deduction
authorization shall not be permitted.
A Participant who cancels or is deemed to have canceled an Option
pursuant to this Section 11 may re-enroll in the Plan as of any subsequent
Enrollment Date on which he or she is an Eligible Employee in accordance with
the procedure set forth in Section 6 hereof.
Section 12. TERMINATION OF EMPLOYMENT. Upon the termination of a
Participant's employment with the Company or an Affiliate for any reason, (a)
such person shall cease to be a Participant, (b) any Option held by such
Participant under the Plan on the date of such termination of employment and
which has not become exercisable on such date shall be deemed canceled, (c) the
balance in such Participant's withholding account shall be returned, and the
whole shares of Common Stock held in such Participant=s stock account shall be
delivered, to such Participant (or, in the event of the Participant's death, to
the executor or administrator of his or her estate) and (d) he
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or she shall have no further rights under the Plan, except for his or her
right to receive the proceeds of any sale of shares of Common Stock that was
made by such person pursuant to Section 10 hereof prior to the termination of
his or her employment.
All Participants shall have the same rights and privileges under the
Plan. Notwithstanding the foregoing, nothing in the Plan shall confer upon any
Participant any right to continue in the employ of the Company or an Affiliate
or in any way interfere with the right of the Company or an Affiliate to
terminate the employment of the Participant at any time, with or without cause.
Transfers of employment among the Company and its Affiliates and approved leaves
of absence not exceeding 90 days shall not be considered terminations of
employment for purposes of the Plan.
Section 13. TRANSFERABILITY. An Option granted under the Plan shall not
be transferable by the Participant and shall be exercisable only by the
Participant.
Section 14. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. In the event the
Company shall effect a split of the Common Stock or declare a dividend payable
in Common Stock, or in the event the outstanding Common Stock shall be combined
into a smaller number of shares, the maximum number of shares available for sale
under the Plan shall be increased or decreased proportionately, and the purchase
price per share of Common Stock of all outstanding Options shall be adjusted,
for purposes of making the determination required by Section 8 hereof, in a
manner deemed appropriate by the Committee.
In the event of a reclassification of Common Stock not covered by the
foregoing, or in the event of a liquidation or reorganization of the Company,
including a merger, consolidation or sale of assets, the Board of Directors
shall make such adjustments, if any, as it may deem appropriate in the number,
purchase price and kind of shares that are covered by Options theretofore
granted under the Plan or that are otherwise subject to the Plan. The provisions
of this Section shall only be applicable if, and only to the extent that, the
application thereof does not conflict with any valid governmental statute,
regulation or rule.
Section 15. AMENDMENT AND TERMINATION OF THE PLAN. The Board of
Directors may from time to time alter or amend the Plan but may not without the
approval of the stockholders of the Company make any alteration or amendment
thereof which operates to (a) increase the total number of shares of Common
Stock that may be sold pursuant to the exercise of Options granted under the
Plan (other than as provided in Section 14 hereof) or (b) modify the
corporations or class of corporations whose employees will be eligible to
receive Options under the Plan. No amendment of the Plan shall adversely affect
the rights of a Participant thereunder, except with the consent of such
Participant.
Subject to the right of the Board of Directors to terminate the Plan
prior thereto, the Plan shall terminate when all of the Common Stock reserved
for purposes of the Plan has been purchased. No Options may be granted after
termination of the Plan. The Board of Directors may elect to terminate all
outstanding Options in connection with any termination by it of the Plan. Upon
termination of the Plan, the balance in each Participant=s withholding account
and any whole
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shares of Common Stock being held in custody by the Custodian for such
Participant shall be delivered to such Participant.
Section 16. REQUIREMENTS OF LAW. The granting of Options, the sale of
shares of Common Stock upon the exercise of Options and the withdrawal and sale
of shares of Common Stock pursuant to the provisions of Section 10 hereof shall
be subject to all applicable laws, rules and regulations and to such approvals
by governmental agencies as may be required. In connection therewith, the
Committee may impose such restrictions or limitations as may be desirable to
ensure compliance with such laws, rules or regulations or to obtain such
approvals.
Section 17. WITHHOLDING OF TAXES. The Committee may make such
provisions as it may deem appropriate for the withholding of any taxes which it
determines is required in connection with the purchase or sale of Common Stock
under the Plan.
Section 18. COSTS. All costs and expenses incurred in administering the
Plan shall be paid by the Company. Any brokerage fees or commissions for the
sale of shares of Common Stock purchased under the Plan shall be paid by the
Participant.
Section 19. EFFECTIVE DATE OF THE PLAN. The Plan shall become
effective as of July 1, 2000, provided the Plan is approved at the 2000
annual meeting of stockholders of the Company as follows: (a) by the
affirmative vote of a majority of the shares of Common Stock present in
person or represented by proxy at the meeting and entitled to vote on the
approval of the Plan, as required by Delaware law; and (b) by a majority of
the votes cast at the meeting at which a quorum representing a majority of
all outstanding Common Stock is, either in person or by proxy, present and
voting on the Plan, as required by the regulations promulgated under Section
423 of the Code. If the Plan is not so approved, the Plan shall terminate.
Section 20. QUALIFICATION OF PLAN. All Eligible Employees shall have
equal rights and privileges with respect to the Plan so that the Plan qualifies
as an "employee stock purchase plan" within the meaning of Section 423 of the
Code (or any successor provision of the Code) and related regulations. Any
provision of the Plan that is inconsistent with Section 423 of the Code (or any
successor provision of the Code) shall without further act or amendment by the
Company be reformed to comply with the requirements of Section 423 of the Code
(or such successor provision). This Section 20 shall take precedence over all
other provisions of the Plan.
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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 21, 2000)
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
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authority under this section of the Plan to alter or modify any explicit
provisions in the Plan.
SECTION 3. SHARES SUBJECT TO THE PLAN. The aggregate number of shares of stock
which may be issued under the Plan shall not exceed three million seven
hundred thousand (3,700,000) 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 200,000, 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
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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 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) $100,000
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
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<PAGE>
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 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 1,000,000 shares of Common Stock may be issued
under Options awarded to non-executive directors. 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". Shares issued to
non-executive directors under Options granted when they were participants
shall not count towards the 1,000,000 share limitation provided in this
Section. 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 continuing with
the years 1995 and 1997, and ending with the year 1997, 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. Beginning with the year 1998, and every year thereafter, on the
first
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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
12,500 shares of Common Stock. Whenever a new non-executive director is
elected, he or she may be granted Options, at the discretion of the Committee,
for any number of shares of Common Stock not to exceed 12,500. All Options
awarded to non-executive directors shall be non-qualified stock Options, and
each such Option granted pursuant to the terms of the three foregoing
sentences 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 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
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<PAGE>
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 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.
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(3) 36 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) 36 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 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 36 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 36 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 36 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
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<PAGE>
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.
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
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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, provided, however, that non-qualified stock
Options may be transferred as a gift by a participant or non-executive
director to that participant's or non-executive director's family member. For
purposes of this Section, "family member" includes any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse or sibling,
including adoptive relationships, a trust in which these persons have one
hundred percent of the beneficial interest, a foundation in which these
persons (or the participant or non-executive director) control the management
of assets, and any other entity in which these persons (or the participant or
non-executive director) own one hundred percent of the voting interests. With
respect to any Option transferred to a family member, all references in this
Plan to a participant or non-executive director shall continue to mean the
original holder of the Option except that the family member transferee shall
be entitled to exercise the Option and be issued shares upon such exercise
upon the same terms and conditions as such original holder, including without
limitation the right to exercise the Option during the applicable period of
time following the original holder's cessation or termination of employment,
Retirement or death. Except as set forth in the preceding provisions of this
Section 13, 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.
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.
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SECTION 15. CHANGE IN CONTROL.
Notwithstanding any other provision in this Plan:
(a)(i) If a participant's employment by the Company or a subsidiary is
involuntarily terminated without Cause or is voluntarily terminated with Good
Reason within two years after the occurrence of a Change in Control of the
Company, or (ii) if a participant's employer ceases to be a subsidiary of the
Company and that participant does not immediately thereafter become an
employee of the Company or another subsidiary:
(A) each Option (including any stock appreciation rights) held by that
participant shall become fully exercisable for up to 100% of the
unexercised shares under the Option and that participant shall be
entitled within 36 months (or any later period applicable under paragraph
(c) of Section 10) following the date of the termination of his
employment or the date on which his employer ceases to be a subsidiary
(but not more than ten years from the date the Option was granted) to
exercise the Option to the full extent the Option is exercisable;
(B) the restrictions applicable to any restricted stock awarded to
that participant shall lapse and such restricted stock shall become fully
vested and transferable to the full extent of the original grant; and
(C) any performance units awarded to that participant shall be
considered to be earned and payable in full.
(b) If a non-executive director of the Company is removed from the Board of
Directors of the Company without Cause or he ceases to be a director of the
Company as a result of a failure to be reelected or to be nominated for
reelection without Cause, in either event within two years after a Change in
Control of the Company, each Option held by that non-executive director shall
become fully exercisable for up to 100% of the unexercised shares under the
Option and that non-executive director shall be entitled within 36 months (or
any later period applicable under paragraph (c) of Section 10) following the
date of the termination of his directorship (but not more than ten years from
the date the Option was granted) to exercise the Option to the full extent the
Option is exercisable.
(c) (i) On the record date for the determination of shareholders of the
Company to vote on a merger, consolidation, sale of assets or other
transaction in which the Company's shareholders would not receive any voting
common stock of the proposed successor to the Company or (ii) upon the
occurrence of a Change in Control that is the
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first step in an attempt to acquire all of the stock or assets of the Company
and the contemplated second step is a transaction described in clause (i):
(A) each outstanding Option shall become fully exercisable for up to
100% of the unexercised shares under the Option;
(B) the restrictions applicable to each outstanding share of
restricted stock shall lapse and such restricted stock shall become fully
vested and transferable to the full extent of the original grant; and
(C) each outstanding performance unit shall be considered to be earned
and payable in full.
(d) "Cause" for termination of a participant's employment means his illegal
conduct or gross misconduct that in either case is willful and results in
material damage to his employer's business or reputation or his willful failure
or refusal to perform his duties or obligations to his employer or to comply in
all material respects with the lawful directives of his employer's Chief
Executive Officer or Board of Directors, provided that the participant has
received written notice from his employer stating the nature of such failure or
refusal and has reasonable opportunity to correct the stated deficiency.
(e) "Cause" for termination of a non-executive director's directorship means
his illegal conduct or gross misconduct that in either case is willful and
results in material damage to the Company's business or reputation or his
willful failure or refusal to perform his duties or obligations to the Company.
(f) "Change in Control" means with respect to the Company any of the
following:
(i) any event affecting the Company that would be required to be
reported by a reporting company as a change in control pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act");
(ii) any "person" (as that term is used in Section 13(d) of the
Exchange Act) becomes the "beneficial owner" (as defined by Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing more than 50% of either the then outstanding
shares of the Company's Common Stock or the combined voting power of the
Company's then outstanding securities;
(iii) at any time during any twenty-four month period, the individuals
who were serving on the Board of Directors of the Company at the
beginning of that period or who were nominated for election or were
elected to that Board during that
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period by a vote of at least two-thirds of such individuals still in
office shall cease to constitute a majority of that Board;
(iv) any merger or consolidation of the Company with any other
corporation or any sale of all or substantially all of the assets of the
Company, other than a merger, consolidation or sale that results in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent more than 50% of the combined voting power of the
voting securities of the Company or the surviving entity or any parent
thereof outstanding immediately thereafter; or
(v) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company.
(g) "Good Reason" with respect to the voluntary termination of a
participant's employment means the occurrence, after a Change in Control, of
(i) any adverse change in his status, position, authority or responsibilities,
(ii) a reduction in his compensation, or (iii) any material change in his
employment location.
(h) This Section 15, as amended, shall apply to all Options, stock
appreciation rights, restricted stock and performance units awarded on or
after February 19, 1998 and shall also apply to each Option granted prior to
that date if the optionee elects to have this Section 15, as amended, apply to
his Options and gives written notice of that election to the Secretary of the
Company no later than July 31, 1998.
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 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
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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.
13
<PAGE>
PROXY LONE STAR TECHNOLOGIES, INC. PROXY
15660 N. DALLAS PARKWAY, SUITE 500
DALLAS, TEXAS 75248
ANNUAL MEETING MAY 9, 2000
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 OR 3, THIS PROXY WILL BE VOTED FOR THE
PROPOSAL(S) AS TO WHICH NO DIRECTION IS MADE.
The undersigned having received the notice and accompanying Proxy
Statement for said meeting, hereby appoints as Proxies Rhys J. Best, 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 ALL NOMINEES LISTED AND FOR
PROPOSALS 2 AND 3.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
WITHHOLD Nominees are:
FOR AUTHORITY Alfred M. Micallef and Jerry E. Ryan for terms
ALL TO expiring 2002 and Rhys J. Best, Frederick B.
NOMINEES VOTE Hegi, Jr. and M. Joseph McHugh for terms
1. Election of Directors / / / / expiring 2003.
To withhold authority to vote for any nominee(s),
name the nominee(s) below:
- --------------------------------------------
FOR AGAINST ABSTAIN
2. Proposal to approve the Employee Stock Purchase Plan. / / / / / /
3. Proposal to approve an amendment to the 1985 Long Term / / / / / /
Incentive Plan.
4. 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)
</TABLE>
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.
