<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
RELIANCE STEEL & ALUMINUM CO.
- --------------------------------------------------------------------------------
(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 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE> 2
RELIANCE STEEL & ALUMINUM CO.
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 20, 1998
------------------------
To the Shareholders of
Reliance Steel & Aluminum Co.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the shareholders of
Reliance Steel & Aluminum Co. (the "Company") will be held on Wednesday, May 20,
1998, at 10:00 a.m., California time, at the Ritz Carlton Huntington Hotel, 1401
South Oak Knoll Avenue, Pasadena, California 91106, for the following purposes:
1. To elect four directors to serve for two years and until their
successors have been elected and qualified. The nominees for election to
the Board are Joe D. Crider, David H. Hannah, Gregg J. Mollins and William
I. Rumer.
2. To approve an increase in the number of authorized shares of Common
Stock to 100,000,000.
3. To consider the Directors Stock Option Plan.
4. To approve Ernst & Young LLP as the independent auditors of the
Company.
5. To transact such other business as may properly come before the
Annual Meeting or adjournments thereof.
Only holders of shares of record on the books of the Company at the close
of business on April 17, 1998 are entitled to notice of, and to vote at, the
Annual Meeting or any adjournment or adjournments thereof. Trading in the
Company's Common Stock will continue during the solicitation period.
A Proxy Statement and a proxy in card form are enclosed with this Notice.
All shareholders are requested to attend the Annual Meeting. However, whether or
not you plan to attend in person, you are requested to fill in, sign and mail
the enclosed proxy as promptly as possible in the enclosed envelope to which no
postage need be affixed if it is mailed in the United States. The giving of such
proxy will not affect your right to vote in person if you attend the Annual
Meeting.
By Order of the Board of Directors,
Yvette M. Schiotis
Secretary
Los Angeles, California
April 20, 1998
<PAGE> 3
RELIANCE STEEL & ALUMINUM CO.
2550 EAST 25TH STREET
LOS ANGELES, CALIFORNIA 90058
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 20, 1998
This statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Reliance Steel & Aluminum Co. ("Reliance" or the
"Company") for use at the Annual Meeting of its shareholders to be held at the
Ritz Carlton Huntington Hotel, 1401 South Oak Knoll Avenue, Pasadena, California
91106, on Wednesday, May 20, 1998 at 10:00 a.m., California time, or at any
adjournment thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting.
INFORMATION CONCERNING PROXY
The persons named as proxies were selected by the Board of Directors. The
shares of Common Stock represented by the proxies will be voted at the Annual
Meeting. The cost of solicitation of proxies will be borne by Reliance. The
Board of Directors will solicit proxies by mail. In addition to solicitation by
mail, certain officers and agents of the Company may solicit proxies by
telephone, telegraph and personal interview (the cost of which will be nominal).
It is anticipated that banks, brokerage houses and other custodians, nominees
and fiduciaries will be requested to forward soliciting material to beneficial
owners and to obtain authorizations for the execution of proxies. They will be
reimbursed by Reliance for their out-of-pocket expenses incurred in connection
therewith.
The only matters of business which Reliance's management intends to present
at the Annual Meeting are the election of four directors to serve for the
ensuing two years and until their successors are duly elected and qualified,
approval of an Amendment to the Company's Articles of Incorporation to increase
the number of authorized shares of Common Stock to 100,000,000, approval of the
Directors Stock Option Plan, and the approval of the Board's selection of Ernst
& Young LLP as the Company's independent auditors for 1998. If no contrary
instructions are indicated on the proxy, each proxy will be voted FOR the
election of the four nominees named herein as directors, FOR the increase in the
number of authorized shares, FOR the approval of the Directors Stock Option
Plan, and FOR the approval of Ernst & Young LLP. If other matters properly come
before the meeting, each proxy will be voted by the persons named therein in a
manner which they consider to be in the best interests of the Company.
Shareholders who execute proxies may revoke them at any time before they
are voted (i) by filing with the Secretary of Reliance either an instrument
revoking the proxy or a proxy bearing a later date, duly executed by the
shareholder, or (ii) by giving written notice to Reliance of the death or
incapacity of the shareholder who executed the proxy. In addition, the powers of
a proxy holder are suspended if the person executing the proxy is present at the
Annual Meeting and elects to vote in person.
An Annual Report with audited financial statements for the fiscal year
ended December 31, 1997 accompanied by a letter to the shareholders from the
Chairman of the Board and Chief Executive Officer, the President, and the
Executive Vice President and Chief Operating Officer is included herewith. Such
report and letter are not incorporated in, and are not a part of, this Proxy
Statement and do not constitute proxy-soliciting material. Reliance intends to
mail this Proxy Statement and accompanying material on or about April 20, 1998.
INFORMATION CONCERNING THE COMPANY'S SECURITIES
Shares of common stock, no par value (hereinafter sometimes called "shares"
or "Common Stock"), are the only voting securities of Reliance. As of February
28, 1998 a total of 18,842,708 shares were issued and
<PAGE> 4
outstanding, all of which may be voted at the Annual Meeting. Only holders of
shares of record on the books of the Company at the close of business on April
17, 1998 will be entitled to vote at the Annual Meeting.
In the election of directors, shareholders are entitled to cumulate their
votes for candidates whose names have been placed in nomination prior to the
voting, if a shareholder has given notice at the Annual Meeting prior to the
voting of his or her intention to cumulate votes. Cumulative voting entitles
every shareholder who is otherwise entitled to vote at an election of directors
to cumulate its votes, that is, to give any one candidate a number of votes
equal to the number of directors to be elected, multiplied by the number of
votes to which the shareholder's shares are normally entitled, or to distribute
those cumulated votes on the same principle among as many candidates as a
shareholder thinks fit. If any one shareholder gives notice of the intention to
cumulate votes, all shareholders may cumulate their votes for candidates. On all
matters other than election of directors, each share has one vote.
The affirmative vote of at least a plurality of the aggregate number of
votes represented by the shares present at the Annual Meeting in person or by
proxy is required to elect directors. That means that the four individuals
receiving the largest number of votes cast will be elected as directors, whether
or not they receive a majority of the votes cast. The affirmative vote of a
majority of the votes cast is required to approve the increased number of
authorized shares, to approve the Directors Stock Option Plan, and to approve
the independent auditors.
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<PAGE> 5
SECURITIES OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the certain information as of February 28,
1998, with respect to the beneficial ownership of the Company's Common Stock by
(i) each person known to the Company who owns beneficially or of record more
than five percent (5%) of the Common Stock of the Company, (ii) each director
and each executive officer named in the Summary Compensation Table and (iii) for
all directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OUTSTANDING
OF BENEFICIAL OWNER(1) OWNERSHIP(2) SHARES OWNED
---------------------- ----------------- -------------
<S> <C> <C>
William T. Gimbel..................................... 2,440,540(3) 12.95%
740 Chaucer
San Marino, CA 91108
Florence Neilan....................................... 2,798,727 14.85%
2888 Bayshore Dr., A-12
Newport Beach, CA 92663
Joe D. Crider......................................... 54,076(4) *
David H. Hannah....................................... 61,610(5) *
Douglas M. Hayes...................................... 1,500 *
2545 Roscomare Rd
Los Angeles, CA 90077
Robert Henigson....................................... 254,750 1.35%
P.O. Box 345
Deer Harbor, WA 98243
Karl H. Loring........................................ 19,723(6) *
4460 Wilshire Boulevard, #602
Los Angeles, CA 90010
Gregg J. Mollins...................................... 55,151(7) *
William I. Rumer...................................... 551,974(8) 2.93%
515 Ocean Avenue, #602 So.
Santa Monica, CA 90402
Leslie A. Waite....................................... 37,104 *
1640 Lombardy Road
Pasadena, CA 91106
Karla R. McDowell..................................... 10,229(9) *
Steven S. Weis........................................ 10,725(10) *
All directors and executive officers as a group (11
persons)............................................ 1,056,842(11) 5.59%
</TABLE>
- ---------------
* Less than 1%.
(1) Unless otherwise indicated, the address of each beneficial owner is 2550
East 25th Street, Los Angeles, California 90058.
(2) The Company has been advised that the named shareholders have the sole
power to vote and to dispose of the shares set forth after their names,
except as noted.
(3) Includes 15,000 shares held in Mr. Gimbel's I.R.A. Excludes 191,112 shares
owned by Mr. Gimbel's wife and 112,146 shares held by Mr. Gimbel's adult
children as to all of which he disclaims beneficial ownership. Also
excludes 20,670 shares with respect to which Mr. Gimbel has a vested right
and shared voting power pursuant to the Company's ESOP (as defined in
"Executive Compensation -- Employee Stock Ownership Plan").
(4) Includes 11,250 shares issuable upon the exercise of options held by Mr.
Crider, with an exercise price of $12.17 per share. Excludes 28,880 shares
with respect to which Mr. Crider has a vested right and shared voting power
pursuant to the Company's ESOP.
3
<PAGE> 6
(5) Includes 11,250 shares issuable upon the exercise of options held by Mr.
Hannah, with an exercise price of $12.17 per share. All of the shares are
owned jointly with Mr. Hannah's wife. Excludes 7,709 shares with respect to
which Mr. Hannah has a vested right and shared voting power pursuant to the
Company's ESOP.
(6) These shares are held by Mr. Loring as Trustee of The Loring Family Trust.
(7) Includes 11,250 shares issuable upon the exercise of options held by Mr.
Mollins, with an exercise price of $12.17 per share. Excludes 2,612 shares
with respect to which Mr. Mollins has a vested right and shared voting
power pursuant to the Company's ESOP.
(8) These shares are held by Mr. Rumer as Trustee of the Rumer Family Trust.
Excludes 763,843 shares held by Mr. Rumer's adult children as to which he
disclaims beneficial ownership.
(9) Includes 5,625 shares issuable upon the exercise of options held by Ms.
McDowell, with an exercise price of $12.17 per share. Excludes 357 shares
with respect to which Ms. McDowell has a vested right and shared voting
power pursuant to the Company's ESOP.
(10) Includes 7,500 shares issuable upon the exercise of options held by Mr.
Weis, with an exercise price of $12.17 per share.
(11) See notes 4, 5, 7, 8, 9 and 10.
ELECTION OF DIRECTORS
The Bylaws of the Company provide that the Board of Directors shall be
divided into two classes, as nearly equal in number as possible, and that one
class shall be elected each year and serve for a two-year term. The terms of
only four of the incumbent directors expire as of the date of the Annual
Meeting. The nominees of the Board of Directors for election at the Annual
Meeting as directors of the Company are Joe D. Crider, David H. Hannah, Gregg J.
Mollins and William I. Rumer. The term of office for each director elected at
the Annual Meeting will be two years, until the second following Annual Meeting
of Shareholders and until their successors are duly elected and qualified.
In the absence of any direction to the contrary, the proxies will be voted
FOR the above-named nominees. In voting the proxies for election of directors,
the persons named as proxies have the right to cumulate the votes for directors
covered by the proxies (unless otherwise instructed) and may do so if such
action is deemed desirable.
The nominees for the office of director expiring in 1998 were elected to
their present term of office by vote of the shareholders of the Company at the
Annual Meeting of Shareholders held in May 1996, except for Mr. Mollins, who was
appointed to the Board of Directors during 1997. Although it is not contemplated
that any nominee will decline or be unable to serve as a director, in the event
that, at the date of the Annual Meeting or any adjournment thereof, any nominee
declines or is unable to serve, the proxies will be voted for such other person
for director as the Board of Directors may select or, if no other person is so
selected, as the persons named in the proxies may, in their discretion, select.
CERTAIN INFORMATION WITH RESPECT TO EACH NOMINEE IS SET FORTH IN
"MANAGEMENT" BELOW. THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE ELECTION OF EACH NOMINEE AS A DIRECTOR OF THE COMPANY.
AMENDMENT OF RESTATED ARTICLES OF INCORPORATION
The Restated Articles of Incorporation of the Company authorize the Company
to issue up to 20,000,000 shares of common stock and up to 5,000,000 shares of
preferred stock. As of February 28, 1998, there were a total of 18,842,708
shares of common stock issued and outstanding and an additional 1,052,750 shares
reserved for issuance under the Company's 1994 Incentive and Non-Qualified Stock
Option Plan. With so few authorized shares remaining available to be issued by
the Company, the Company does not have much flexibility to grant shares to
existing or potential employees or to use stock for the purpose of acquiring
another
4
<PAGE> 7
company. Nor would the Company be able to declare a stock split or dividend for
the benefit of its shareholders.
Accordingly, the Board of Directors believes that it is in the best
interest of the Company and its shareholders to amend the Restated Articles of
Incorporation to increase the number of authorized shares from 20,000,000 to
100,000,000 shares of Common Stock. The Board of Directors has approved the
following resolution and Certificate of Amendment to the Restated Articles of
Incorporation which is attached hereto as Appendix "A".
WHEREAS, the Board of Directors and the Shareholders of Reliance Steel
& Aluminum Co. (the "Company") believe it is in the best interest of the
Company and its Shareholders that the Company be authorized to issue up to
100,000,000 shares of Common Stock.
NOW, THEREFORE, BE IT RESOLVED that Article III of the Restated
Articles of Incorporation of the Company be and hereby is amended and
restated to read as follows:
"This corporation is authorized to issue two classes of shares,
designated "Common Stock" and "Preferred Stock", respectively. The
number of authorized shares of Common Stock is 100,000,000, and the
number of authorized shares of Preferred Stock is 5,000,000. Shares of
Preferred Stock may be issued from time to time in one or more series.
The Board of Directors is authorized to fix the number of shares of each
series of Preferred Stock and to determine the designation of each
series. The Board of Directors is also authorized to determine or alter
the rights, preferences, privileges and restrictions granted to or
imposed upon any wholly unissued series and, within the limits and
restrictions stated in any resolution or resolutions of the Board of
Directors originally fixing the number of shares constituting any
series, to increase or decrease (but not below the number then
outstanding) the number of shares of any series subsequent to the issue
of shares of that series."
RESOLVED, FURTHER, that the President and Secretary of this Company
are hereby authorized and directed to file the Certificate of Amendment to
Restated Articles of Incorporation of the Company set forth in Appendix "A"
hereto.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE AMENDMENT
OF THE RESTATED ARTICLES OF INCORPORATION AS SET FORTH IN THE ABOVE RESOLUTION
AND CERTIFICATE OF AMENDMENT.
DIRECTORS STOCK OPTION PLAN
Shareholders of many corporations believe that directors and officers
should have a meaningful investment in the companies that they manage and
believe that directors would then be more likely to represent the viewpoint of
other shareholders. The New York Stock Exchange, on which the Company's stock is
listed, has encouraged the broadening of share ownership through stock option
and employee stock purchase plans and has endorsed director and officer share
ownership. The Company currently has in place its Incentive and Non-Qualified
Stock Option Plan which benefits officers and key employees of the Company, but
has no similar plan for non-employee directors. The Board of Directors has
adopted a Directors Stock Option Plan for the benefit of non-employee directors
in the form attached hereto as Appendix "B". Subject to approval by the
shareholders, this Directors Stock Option Plan will grant all current
non-employee directors options to acquire 5,000 shares of the Company's Common
Stock at an exercise price equal to the closing price of the Company's Common
Stock on the date that the Directors Stock Option Plan was approved by the Board
of Directors and provides for similar grants of stock options to newly appointed
or elected directors of the Company with an exercise price equal to the closing
price of the Company's Common Stock on the date of the election or appointment,
as such closing prices are reported on the New York Stock Exchange Composite
Tape. Each director is entitled to options to acquire an additional 5,000 shares
of the Company's Common Stock on the fifth anniversary of the date of the prior
grant of options to such director if that director continues to serve as a
director of the Company during such five-year period.
5
<PAGE> 8
The options would all be non-qualified stock options. None of the stock
options would be exercisable until one year after the date of the grant. In each
of the following four years, 25% of the options would become exercisable on a
cumulative basis. The options would expire five years from the date of the
grant. The directors would be required to exercise their stock options, if at
all, during a period of time when they were not in possession of any material
non-public information. The Company intends to register the options and the
shares issuable upon exercise of the options. The Directors Stock Option Plan
expires December 31, 2008.
The Board of Directors has reserved 200,000 shares of the Company's Common
Stock for issuance under the Directors Stock Option Plan, subject to shareholder
approval of both the plan and the increase in the number of authorized shares of
the Company's Common Stock. No stock options will vest until the Directors Stock
Option Plan has been approved by the shareholders of the Company. The vote of a
majority of the shareholders present and voting (or voting by proxy) at the
annual meeting is required for such approval.
The Board of Directors has approved the following resolutions and
recommends that the shareholders approve the resolutions and the Directors Stock
Option Plan set forth in Appendix "B":
WHEREAS, the Board of Directors and the Shareholders believe it to be
in the best interest of the Company to adopt a Directors Stock Option Plan,
granting to non-employee directors of the Company non-qualified options to
purchase the Company's Common Stock, which the Board of Directors and
Shareholders believe to be of significant benefit or value to the earnings
and growth of the Company;
WHEREAS, the Board of Directors and Shareholders have reviewed the
form of Directors Stock Option Plan (the "Plan") attached hereto as
Appendix "B";
NOW, THEREFORE, IT IS HEREBY RESOLVED, that the Plan attached as
Appendix "B" is hereby approved, ratified, confirmed and adopted by and on
behalf of the Company;
RESOLVED, FURTHER, that 200,000 shares of the Company's Common Stock
are hereby reserved for issuance under the Plan, and, upon exercise of any
options granted under the Plan, such shares shall be validly issued, fully
paid, and nonassessable;
RESOLVED, FURTHER, that the officers of the Company are authorized and
directed to prepare or have prepared, execute on behalf of the Company and
file or have filed a Registration Statement covering the shares to be
issued in accordance with the Plan, or appropriate forms or notices
required to comply with exemptions from applicable registration or
qualification requirements, under any federal or state securities laws, as
counsel to the Company may advise to be appropriate or desirable;
RESOLVED, FURTHER, that the officers and directors of the Company are
hereby authorized and directed, on behalf of the Company, to execute and
file any instruments and do any other acts required of them to fulfill,
carry out and perform the above resolutions, or the Plan approved hereby,
and to allow the issuance of shares of Common Stock in accordance
therewith;
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE DIRECTORS
STOCK OPTION PLAN.
FEDERAL INCOME TAX CONSEQUENCES UNDER THE PLAN
A non-employee director who receives a non-qualified stock option does not
recognize taxable income on the date of grant of the option, but generally
recognizes ordinary income upon the exercise of the option in an amount equal to
the excess of the fair market value of the Common Stock received on the date of
exercise over the exercise price. However, if the non-employee director is
subject to restrictions on resale with respect to the Common Stock under Section
16(b) of the Securities Exchange Act of 1934, as amended, the Participant
generally recognizes ordinary income on the date the six-month restriction
lapses in an amount equal to the excess of the fair market value of the Common
Stock on the date of lapse over the exercise price. A Participant may elect,
within 30 days of the date of exercise with respect to which the recognition of
income is delayed due to the Section 16(b) restrictions, to recognize ordinary
income as of the date of exercise in an amount equal to the excess of the fair
market value of the Common Stock on the date of exercise over the exercise
price.
6
<PAGE> 9
The basis and holding period of the non-employee director in the shares of
Common Stock received upon exercise of the option depend on the method of
payment of the exercise price. If the non-employee director pays the exercise
price solely in cash, the basis of such shares is equal to the fair market value
of the Common Stock on the date the non-employee director recognizes ordinary
income. Upon a subsequent disposition of those shares, the non-employee director
recognizes capital gain or loss based on the difference between the sales price
and the non-employee director's basis in the shares. Gain or loss is short-term
or long-term depending on how long the shares have been held by the non-employee
director. The holding period commences as of the date the non-employee director
recognizes ordinary income.
If the non-employee director pays the exercise price, in full or in part,
with shares of previously-acquired Common Stock, no gain or loss generally is
recognized with respect to the disposition of the previously-acquired shares.
The shares received upon exercise of the option are divided into two components
for basis and holding period purposes. First, shares of Common Stock received by
the non-employee director equal in number to the previously-acquired shares have
the same basis and holding period as such previously-acquired shares. Second,
the remaining shares have a basis equal to the fair market value of those shares
as of the date the non-employee director recognizes ordinary income. The holding
period for the second component of shares commences as of the date the
non-employee director recognizes ordinary income.
The Company generally is entitled to a deduction (for its taxable year
which includes the non-employee director's taxable year of income recognition)
in an amount equal to the amount of ordinary income recognized by the
non-employee director with respect to the option.
7
<PAGE> 10
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the directors
and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Joe D. Crider(1)........... 68 Chairman of the Board; Chief Executive Officer;
Director
David H. Hannah(1)......... 46 President; Director
Karla R. McDowell.......... 32 Vice President; Controller
Gregg J. Mollins(1)........ 43 Executive Vice President; Chief Operating
Officer; Director
William K. Sales, Jr....... 40 Vice President, Non-Ferrous Operations
Steven S. Weis............. 55 Senior Vice President; Chief Financial Officer
Douglas M. Hayes(2)........ 53 Director
Robert Henigson(2)(3)(4)... 72 Director
Karl H. Loring(2)(3)(4).... 74 Director
William I. Rumer(1)(4)..... 71 Director
Leslie A. Waite(2)(3)(4)... 52 Director
</TABLE>
- ---------------
(1) Term of office as a director expiring in 1998.
(2) Term of office as a director expiring in 1999.
(3) Member of the Audit Committee.
(4) Member of the Compensation and Stock Option Committee.
Nominees for Directors to be Elected in 1998 With Terms Ending in 2000
JOE D. CRIDER became the Chairman of the Board of the Company in February
1997 and has been the Chief Executive Officer of the Company since May 1994. Mr.
Crider was President of the Company until November 1995. Before becoming the
Chief Executive Officer, Mr. Crider had been President and Chief Operating
Officer and a director since 1987. Prior to being named as the President and
Chief Operating Officer, Mr. Crider had been Executive Vice President and Chief
Operating Officer since 1975. Mr. Crider is also a director of American Steel,
L.L.C.
DAVID H. HANNAH became the President of the Company in November 1995. Prior
thereto, he was Executive Vice President and Chief Financial Officer from 1992
to 1995, Vice President and Chief Financial Officer from 1990 to 1992 and Vice
President and Division Manager of the Los Angeles Reliance Steel Company
division of the Company from July 1, 1989 to June 30, 1990. From January 1, 1987
to July 1, 1989, Mr. Hannah was Vice President and Chief Financial Officer of
the Company and, from 1981 to 1987, was Chief Financial Officer. Mr. Hannah
became a director of the Company in 1992. Mr. Hannah also serves as a director
of American Steel, L.L.C. For eight years before joining the Company in 1981,
Mr. Hannah, a certified public accountant, was employed by Ernst & Whinney in
various professional staff positions.
GREGG J. MOLLINS was appointed a director of the Company in September 1997
and became Executive Vice President and Chief Operating Officer in November
1995. Mr. Mollins was Vice President and Chief Operating Officer from 1994 to
1995 and Vice President from 1992 to 1994. Prior to that time he had been with
the Company for six years as Division Manager of the Santa Clara division. For
ten years before joining the Company in 1986, Mr. Mollins was employed by
certain of the Company's competitors in various sales and sales management
positions.
WILLIAM I. RUMER has been a director of the Company since 1957. Mr. Rumer
retired from Allied Aerospace where he was an aerospace engineer from 1961 to
1985. Mr. Rumer is a member of the Compensation and Stock Option Committee.
8
<PAGE> 11
Directors Whose Terms Continue Until 1999
DOUGLAS M. HAYES became a director of the Company in September 1997. Mr.
Hayes retired from Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"),
where he was Managing Director of Investment Banking from 1986 to May 1997,
after which he established his own investment banking firm, Hayes Capital
Corporation, located in Los Angeles, California. DLJ was an underwriter in the
1997 public equity offering of the Company and was also the underwriter in the
Company's initial public offering in 1994. Mr. Hayes is also a director of
Alliance Imaging, Inc., a public company, the securities of which are traded
over the counter, where he serves on the Audit Committee and the Compensation
Committee.
ROBERT HENIGSON has been a director of the Company since 1964. Mr. Henigson
is a retired attorney, having been a partner of Lawler, Felix & Hall (the
predecessor to Arter & Hadden LLP, the Company's counsel) prior to his
retirement in 1986. Mr. Henigson is a member of the Audit Committee and the
Compensation and Stock Option Committee. Mr. Henigson is also a director of
Scope Industries, a public company listed on the American Stock Exchange.
KARL H. LORING has been a director of the Company since 1984. Mr. Loring is
retired, but continues to provide tax consulting services from time to time.
From 1983 to January 1992, Mr. Loring was an officer of Knapp Communications
Corporation, a publishing company. For more than five years prior to his
retirement in 1983, he was a tax partner for Ernst & Whinney. Mr. Loring is a
member of the Audit Committee and the Compensation and Stock Option Committee.
Mr. Loring serves as Chairman of the Audit Committee.
LESLIE A. WAITE has been a director of the Company since 1977. Mr. Waite is
an investment advisor and has been a principal of Waite & Associates since its
formation in 1978. Mr. Waite is a member of the Audit Committee and the
Compensation and Stock Option Committee. Mr. Waite serves as Chairman of the
Compensation and Stock Option Committee.
Executive Officers
In addition to Messrs. Crider, Hannah and Mollins, the following are
executive officers of the Company.
KARLA R. MCDOWELL became Vice President and Controller of the Company in
1995. Ms. McDowell was Corporate Controller of the Company from 1992 to 1995.
For four years prior to joining the Company, Ms. McDowell, a certified public
accountant, was employed by Ernst & Young in various professional staff
positions.
WILLIAM K. SALES, JR. joined the Company as Vice President, Non-Ferrous
Operations in September 1997. From 1981 to 1997, Mr. Sales served in various
sales and management positions with Kaiser Aluminum & Chemical Corp., a supplier
of the Company.
STEVEN S. WEIS became Senior Vice President and Chief Financial Officer of
the Company in May 1997. He joined the Company initially as Chief Financial
Officer in November 1995. Prior to joining the Company, Mr. Weis served as Vice
President and Chief Financial Officer of Rubbercraft Corporation, a manufacturer
of custom molded rubber parts, in Gardena, California from May 1995 to October
1995. Prior to that, Mr. Weis was Executive Vice President and Chief Financial
Officer of Community Psychiatric Centers, a chain of psychiatric and long-term
critical care hospitals, headquartered in Laguna Hills, California from December
1991 to December 1994. From July 1989 to November 1991, Mr. Weis was the
President of the CFO Group, a financial consulting practice in Northridge,
California. Mr. Weis, a certified public accountant, was employed by Ernst &
Whinney as an audit partner and regional director prior to that time.
BOARD OF DIRECTORS
Members of the Board of Directors of the Company who are not employees are
paid $4,500 per quarter, plus $1,000 for each Board or committee meeting
attended. In addition, the Chairmen of the Audit Committee and the Compensation
and Stock Option Committee are paid an additional $500 per quarter. All
directors are reimbursed for expenses incurred in connection with Board or
committee meetings. If the Directors Stock Option Plan is approved by the
shareholders, non-employee directors will be entitled to
9
<PAGE> 12
receive options to acquire the Company's Common Stock in accordance with that
plan. (See Directors Stock Option Plan discussion on page 5.) During 1997, the
Board of Directors met twelve times. No person attended fewer than 75% of the
aggregate of the total number of Board meetings and the total number of
committee meetings held by the committees on which he served.
The Board of Directors has authorized two standing committees: the Audit
Committee and the Compensation and Stock Option Committee, but has no standing
Nominating Committee at the present time. Nominations for the Board of Directors
are made and considered by the Board of Directors acting as a whole.
The Audit Committee confers formally with the Company's independent
auditors, as well as with members of the Company's management and those
employees performing internal accounting functions, to inquire as to the manner
in which the respective responsibilities of these groups and individuals are
being discharged. Reports of the Audit Committee's findings are made to the
Board of Directors. The Audit Committee makes recommendations to the Board of
Directors with respect to the scope of the audit conducted by the independent
auditors of the Company and the related fees, the accounting principles being
applied by the Company in financial reporting, and the adequacy of internal
controls and financial accounting procedures. In 1997, the Audit Committee met
three times.
The Compensation and Stock Option Committee annually reviews the
compensation of officers of the Company and recommends to the Board of Directors
changes in that compensation, as well as administering the Company's stock
option plans and its Supplemental Executive Retirement Plan. The Committee has
the authority to designate officers, directors or key employees eligible to
participate in the plans, to prescribe the terms of any award of stock options,
to interpret the plans, and to make all other determinations for administering
the plans. In 1997, the Compensation and Stock Option Committee met two times.
COMPENSATION AND STOCK OPTION COMMITTEE REPORT
THE COMMITTEE
The four-member Compensation and Stock Option Committee of the Board of
Directors (the "Compensation and Stock Option Committee" or the "Committee"),
which is composed entirely of independent, non-employee directors, makes
recommendations to the Board of Directors regarding compensation of the
Company's officers. The following report submitted by the Compensation and Stock
Option Committee addresses the Company's compensation policies for 1997
applicable to the Company's executive officers, including the executive officers
named in the Summary Compensation Table and the Stock Option Plan and
Supplemental Executive Retirement Plan (the "SERP").
PRINCIPLES AND PROGRAMS
The Company's executive compensation program is a pay for performance
program. It is designed to:
- motivate executives to enhance shareholder value with compensation plans
that are tied to Company performance; and
- target executive compensation at a level to ensure the Company's ability
to attract and retain superior executives.
CASH SALARIES AND INCENTIVE COMPENSATION PROGRAMS
To meet the above objectives, the program has both cash and equity elements
which consist of base salary, an annual cash (and stock) incentive bonus and
stock options. In determining executive compensation, the Compensation and Stock
Option Committee evaluates both the total compensation package and its
individual elements. As part of its review, the Committee considers compensation
data publicly available with respect to the Company's key competitors. When
competitive data is used, the Committee gives primary consideration to the
companies in its peer group.
Generally, the base compensation is set in the mid-range for comparable
companies, and the cash and stock incentive bonus is used to compensate
employees for their performance. It is expected that total compensation will
vary annually based on Company and individual performance and individual
contributions to the Company and its performance. The Compensation and Stock
Option Committee and the management
10
<PAGE> 13
of the Company believe that compensation should be based both on short-term and
long-term measurements and be directly tied to Company performance. The
Compensation and Stock Option Committee applied the same standards to Mr. Crider
as Chief Executive Officer of the Company as to other officers, except that,
commencing with payments made in 1996, the Committee determined to reduce the
portion of Mr. Crider's total compensation that is allocated to base salary, in
exchange for additional vacation time.
Under the Company's Key-Man Incentive Plan, the cash portion of the annual
bonus is designed to provide a short-term (one-year) incentive to officers based
on an evaluation of their individual contribution to Company financial
performance for the year. Officers and division managers are eligible for
incentive payments. Incentive awards are made after the prior fiscal year's
results are known. Generally, the aggregate of all awards made as an annual
bonus may not exceed that amount which is equal to 20% of the amount by which
the Company's net income for that year exceeds the rate of return on a one-year
Treasury bill multiplied by the Company's net worth at the beginning of the
year. No awards are made unless the Company's net income for that year exceeds
the average rate of return on a one-year Treasury bill (considered as a
risk-free rate of return) multiplied by the Company's net worth. Upon
recommendation of the Compensation and Stock Option Committee, the Board
approves all officer incentive payments. Officers of the subsidiaries are not
currently eligible to participate in the Key-Man Incentive Plan, but are
eligible to participate in other plans that this Committee does not administer.
The formula used to distribute the Incentive Pool among the key personnel
is reviewed annually to reflect better the individuals' respective contributions
to the operational profitability of the Company. The Company's officers are
awarded points based on their individual performance, as determined appropriate
by the Committee. Participating Division Managers are ranked according to four
criteria (size of the division, measured in sales dollars; profitability of the
division, in dollars; pretax return on sales percentage; and pretax return on
division assets percentage) and awarded points based on their rankings. The
Incentive Pool is then allocated to all participants based on their respective
number of points.
The maximum incentive bonus for division managers and officers who are also
division managers is 40% of base compensation. The maximum incentive bonus for
the Company's officers ranges from 40% to 100% of base compensation. This
incentive compensation bonus is payable 75% in cash and 25% in the Company's
Common Stock, which is restricted for two years and is considered a long-term
incentive. For 1997, the officers with Corporate responsibilities of the Company
had the option of having this incentive compensation bonus payable 100% in cash.
With respect to stock options that may be granted, the Compensation and
Stock Option Committee has its scope and authority defined for it by the Stock
Option Plan which it administers. The Committee has complete authority to
interpret the Plan and make all decisions with respect to how it functions. The
Committee recommends to whom and in what number, and with what terms and
conditions, options should be granted but the Board must authorize the issuance
of the options.
The Committee recommended to the Board in 1997 that an aggregate of 82,500
options be issued to key employees, none of which were issued to named executive
officers, which recommendations were approved and options granted by the Board
in January 1997 and September 1997.
Typically, the Committee receives recommendations from the executive
officers of the Company as to who should receive options and in what amounts and
then the Committee meets to review and discuss those recommendations. In making
its recommendations to the Board, the Committee considers the position of the
intended optionee, his or her importance to the Company's activities, the number
of options already granted to that individual and the option price or prices at
which those earlier granted options are exercisable, the total number of options
to be recommended for granting and the relative number of such recommended
option grants among the various individuals then under consideration for option
grants.
The Committee generally does not consider the number of options granted by
other unrelated companies to their respective employees, nor has it ever sought
such information.
Robert Henigson Karl H. Loring William I. Rumer Leslie A. Waite
11
<PAGE> 14
EXECUTIVE COMPENSATION
The following table summarizes certain information concerning the
compensation paid by the Company during fiscal years 1995, 1996 and 1997 to its
chief executive officer and each of the other four most highly compensated
executive officers whose aggregate salary and bonus exceeded $100,000 for
services rendered in all capacities to the Company during fiscal 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------
SECURITIES
ANNUAL COMPENSATION RESTRICTED UNDERLYING
NAME AND -------------------------------- STOCK OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) OTHER AWARDS SARS(#) COMPENSATION(4)
------------------ ---- -------- -------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Joe D. Crider, 1997 $262,500 $267,969 $6,755
Chairman of the Board 1996 250,000 255,383 $235,935(2) 22,500 8,350
and Chief Executive 1995 315,000 276,638 6,975
Officer
David H. Hannah, 1997 $288,750 $294,766 $343,508(3) $7,029
President 1996 275,000 280,904 22,500 6,651
1995 215,000 165,904 6,650
Gregg J. Mollins, 1997 $210,000 $214,375 $343,508(3) $6,208
Executive Vice 1996 200,000 154,341 22,500 6,658
President and Chief 1995 160,000 127,363 5,843
Operating Officer
Steven S. Weis, 1997 $175,000 $134,896 $1,910
Senior Vice President 1996 160,000 123,508 15,000 2,631
and Chief Financial 1995 23,431 15,438
Officer
Karla R. McDowell, 1997 $ 89,250 $ 68,797 $ 65,945(3) $4,413
Vice President and 1996 85,000 44,271 11,250 3,254
Controller 1995 68,000 35,417 2,333
</TABLE>
- ---------------
(1) The amounts shown were paid under the Company's Key-Man Incentive Plan and
also include Christmas gifts. Under the Company's Key-Man Incentive Plan,
25% of the bonus was paid in Common Stock of the Company in 1996 and 1995.
For 1997, 100% of the bonus paid to the noted individuals under the Key-Man
Incentive Plan was paid in cash.
(2) The 1996 amount represents the difference between the exercise price and
fair market value at date of exercise of non-qualified stock options for
Reliance Common Stock which was issued upon exercise.
(3) The 1997 amount represents the difference between the exercise price and
fair market value at date of exercise of non-qualified stock options. See
"Aggregated Options/SAR Exercises in Last Fiscal Year and FY-End Option/SAR
Values".
(4) Amounts represent allocations to the accounts of each of the named executive
officers of contributions made to the Company's ESOP and, in 1997 and 1996,
the amount which represents the Company's matching contribution to its
401(k) savings plan.
During the fiscal year ended December 31, 1996, non-qualified stock options
for 93,750 shares of the Company's Common Stock were granted to the executive
officers named in the previous table. No stock options were granted by the
Company to the executive officers named in the previous table during the fiscal
years ended December 31, 1997 or 1995.
12
<PAGE> 15
The following table sets forth information for the executive officers named
above with regard to the aggregate stock options exercised during the year ended
December 31, 1997, and the stock options held as of December 31, 1997.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
SHARES ACQUIRED VALUE FY-END(#) AT FY-END($)(1)
NAME ON EXERCISE(#) REALIZED($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Joe D. Crider............ -0- -0- 11,250/11,250 $197,775/$197,775
David H. Hannah.......... 15,750 $343,508 11,250/11,250 $197,775/$197,775
Gregg J. Mollins......... 15,750 $343,508 11,250/11,250 $197,775/$197,775
Steven S. Weis........... -0- -0- 7,500/ 7,500 $131,850/$131,850
Karla R. McDowell........ 3,150 $ 65,945 5,625/ 5,625 $ 98,888/$ 98,888
</TABLE>
- ---------------
(1) The value of the shares as of December 31, 1997 was based on the closing
price on the New York Stock Exchange for that date or at the date of
exercise.
STOCK OPTION PLAN
In 1989, the Company adopted a Non-Qualified Stock Option Plan (the "1989
Plan"), which allowed the Company to grant options to officers, directors and
key employees to purchase up to 630,000 shares of the Company's Common Stock at
a price at least equal to the fair market value of the stock at the date of the
grant. No options were exercisable until one year after the date of the grant;
in each of the following four years, 25% of the options became exercisable on a
cumulative basis. The options expired five years from the date of the grant. The
1989 Plan expired, by its terms, on December 31, 1993.
In 1997, 81,775 options were exercised at a price of $7.19 per share, with
34,650 of those options exercised by named executive officers of the Company. In
1996, options to acquire 56,110 shares of Common Stock were exercised at a price
of $7.19 per share, with 15,750 of those shares exercised by named executive
officers of the Company. In 1995, options to acquire 17,250 shares of Common
Stock were exercised at prices ranging from $6.03 to $7.19 per share. At
December 31, 1997, all options outstanding under the 1989 Plan had been
exercised or expired under the terms of the plan. There are no shares available
for future grants under the 1989 Plan.
In 1994, the Board of Directors of the Company adopted an Incentive and
Non-Qualified Stock Option Plan (the "1994 Plan"), which was approved by the
shareholders in May 1994. There were 1,125,000 shares of Common Stock reserved
for issuance under the 1994 Plan. The 1994 Plan provides for granting of stock
options that may be either "Incentive Stock Options" within the meaning of
Section 422A of the Internal Revenue Code of 1986 (the "Code") or "Non-Qualified
Stock Options" which do not satisfy the provisions of Section 422A of the Code.
Incentive Stock Options are required to be issued at an option exercise price
per share equal to the fair market value of a share of Common Stock on the date
of grant, except that the exercise price of options granted to any employee who
owns (or, under pertinent Code provisions, is deemed to own) more than 10% of
the outstanding Common Stock must equal at least 110% of fair market value on
the date of grant. Non-Qualified Stock Options must be issued at an option
exercise price equal to at least fair market value on the date of grant.
Exercise of a stock option will be subject to terms and conditions established
by the Committee and set forth in the instrument evidencing the stock option.
Stock options may be exercised with either cash or shares of the Company's
Common Stock or other form of payment authorized by the Committee. Stock options
may not be granted more than ten years from the date of the 1994 Plan and expire
five years from the date of the grant. No options were granted in 1995. In
January 1996, options to purchase 332,250 shares of the Company's Common Stock
at $12.17 per share were granted to employees of the Company, 93,750 of which
were granted to named executive officers of the Company. During 1997, options to
purchase 28,500 shares of the Company's Common Stock were issued in January at
$12.67 per share and
13
<PAGE> 16
options to purchase 54,000 shares of the Company's Common Stock were issued in
September at $29.25 per share. None of these options were issued to named
executive officers of the Company. No options under the 1994 Plan were
exercisable during 1996. In 1997, options to acquire 16,375 shares of the
Company's Common Stock were exercised at a price of $12.17 per share, none of
which were exercised by named executive officers.
PENSION PLAN
As of January 1, 1965, the Company adopted a noncontributory defined
benefit retirement plan to cover salaried and certain hourly employees of the
Company. Benefits were determined by the "traditional unit credit" method which
considers the participant's eligible compensation in each year of employment,
rather than by final compensation and years of service. On July 5, 1996,
benefits under the pension plan were frozen. In February 1997, the Board
approved the termination of the pension plan. Thus, all participants under the
plan who were not receiving an annuity at that time were offered a lump sum
distribution, an annuity, or a tax free roll-over into the Company's 401(k) Plan
or an I.R.A., during 1997.
The lump sum distribution for each of the executive officers named above
was as follows:
<TABLE>
<CAPTION>
LUMP SUM
NAME DISTRIBUTION(2)
---- ---------------
<S> <C>
Joe D. Crider.................................. $435,017
David H. Hannah................................ $ 59,577
Gregg J. Mollins............................... $ 26,964
Steven S. Weis................................. $ --(1)
Karla R. McDowell.............................. $ 2,796
</TABLE>
- ---------------
(1) Mr. Weis was not eligible for the above pension plan due to his length of
service at the time the pension plan was frozen.
(2) These amounts were included under the Company sponsored retirement plans for
calculation of net benefits payable under the Company's Supplemental
Executive Retirement Plan.
401(K) SAVINGS PLAN
In July 1996, the Company adopted a 401(k) Savings Plan. Non-union
employees were eligible to participate in this plan after six months of service;
however, at the date of adoption, all active non-union employees were eligible
for immediate participation. Under this plan, employees could contribute
amounts, not to exceed the maximum amounts established by the Internal Revenue
Service, and the Company would then contribute an amount to the plan on behalf
of the participant, based on a maximum percentage of the employee's
compensation, which was 6% in 1997 and 1996. The specified matching percentage,
which was 50% in 1997 and 1996, and the maximum amount of the employee's
compensation subject to the Company's match were determined at the discretion of
the Company's Board of Directors on an annual basis. The Company contribution
vested at a rate of 25% per year, commencing one year after the employee entered
the plan except existing employees as of July 1996, who vested based on prior
service. The Company contributions to this plan for the years ended December 31,
1997 and 1996 were $742,000 and $342,000, respectively. The Company's
subsidiaries maintained 401(k) retirement plans or profit sharing plans, which
covered substantially all of the respective subsidiary's employees who met
minimum service requirements. Contributions to these plans were funded annually
and were determined at the discretion of each subsidiary's Board of Directors.
As of April 1, 1998, the Company combined substantially all of the existing
401(k) and profit sharing plans of the Company and its subsidiaries into one
master 401(k) and profit sharing plan. This master plan will continue to allow
each subsidiary's annual matching percentage and maximum compensation limit to
be determined independently at the discretion of the respective Board of
Directors. Participation will continue in accordance with each subsidiary's
previous plan. Eligible employees may participate after three months of service,
and the Company contribution vests at 25% per year, commencing one year after
the employee enters the plan.
14
<PAGE> 17
The Company also participates in various multi-employer pension plans
covering certain employees not covered under the Company's benefit plans
pursuant to agreements between the Company and collective bargaining units who
are members of such plans.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Also in 1996, the Company adopted a Supplemental Executive Retirement Plan
("SERP"), which provides post-retirement benefits to key officers of the
Company. Under the SERP, benefit payments equal 50% of the average of the
participant's highest five years of the last ten years of total cash
compensation, less benefits from other Company sponsored retirement plans,
including the Pension Plan, 401(k) Plan and ESOP Plan. The Company contributions
were $644,000 and $575,000 for this plan for the years ended December 31, 1997
and 1996, respectively, based on calculations made by the Company's actuaries.
The estimated present value of annual benefits payable by the SERP, net of
amounts received under other Company sponsored retirement plans, at the normal
retirement age of 65 for each of the executive officers named above is as
follows:
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFITS
NAME PAYABLE UPON RETIREMENT
---- -------------------------
<S> <C>
Joe D. Crider.......................... $ 59,892
David H. Hannah........................ $172,656
Gregg J. Mollins....................... $113,340
Steven S. Weis......................... $122,052
Karla R. McDowell...................... $ 17,100
</TABLE>
INCENTIVE PLAN
The Company has maintained a Key-Man Incentive Plan for division managers
and officers since 1965, with subsequent amendments. The Incentive Plan was most
recently modified in January 1998, to reflect the current conditions of the
Company and the industry, and to allocate the incentive bonus pool in accordance
with the contributions of the eligible personnel. The initial incentive bonus
pool is calculated to equal 20% of the amount by which the Company's net income
for that year exceeds the rate of return on a one-year Treasury bill multiplied
by the Company's net worth at the beginning of the year. That pool is then
adjusted by additional calculations, including the accrual of the calculated
incentives. The Company's officers and division managers are eligible to
participate in the pool and are ranked according to certain criteria, and
awarded points based on their rankings. The incentive compensation bonus is
payable 75% in cash and 25% in the Company's Common Stock, except that, for
1997, the Company's officers with Corporate responsibilities had the option of
having this bonus paid 100% in cash. Officers of the subsidiaries are not
currently eligible to participate under the Key-Man Incentive Plan. See
"Compensation and Stock Option Committee Report".
The Company also maintains a bonus plan for division managers that allows
them to participate in pre-tax income from their respective divisions if that
income exceeds an amount equal to a 15% return on division assets. This bonus
plan has been in effect for many years. In 1997, 17 out of 20 division managers
received bonuses under this plan. In addition, most divisions have informal
incentive compensation arrangements for other employees, which are proposed by
division managers and approved from time to time by executive officers of the
Company. The Company's subsidiaries have separate incentive bonus plans
structured in the same manner to provide bonuses to certain of the officers and
managers of these subsidiaries, based upon the earnings of the respective
subsidiary.
EMPLOYEE STOCK OWNERSHIP PLAN
In 1974, the Company adopted an Employee Stock Ownership Plan ("ESOP") that
was approved by the Internal Revenue Service as a qualified plan and that allows
eligible employees to acquire stock in the Company. Bank of America is the
trustee of the ESOP. All non-union employees, including officers, are eligible
to participate in the ESOP as of January 1 after one and one-half years of
service with the Company. An employee who is eligible to participate is fully
vested in the shares of the Company's Common Stock
15
<PAGE> 18
allocated to his/her ESOP account. Allocation is based on the participant's
compensation each year, including bonuses, as compared to the total compensation
of all participants, subject to the maximum amounts established by the Internal
Revenue Service. Each year, the Company contributes to the ESOP an amount
determined by the Board of Directors, but no less than that amount necessary to
cover the obligations of the ESOP, including any trustee's fees. The Company's
cash contributions were $800,000 in 1997 and $600,000 in both 1996 and 1995. The
cash contributions are then used to purchase shares of the Company's Common
Stock on the open market. The shares are retained by the ESOP until a
participant retires or otherwise terminates his/her employment with the Company.
Employees of the subsidiaries are not eligible to participate under the
Company's ESOP.
16
<PAGE> 19
PERFORMANCE GRAPHS
The following graph compares the performance of the Company's Common Stock
with that of the S&P 500, the Russell 2000 and a peer group selected by the
Company for the period from September 16, 1994, the effective date of the
initial public offering of the Company's Common Stock at an offering price of
$9.67 per share as adjusted for the 3:2 stock split in June 1997, through
December 31, 1997. The comparison of total return assumes that a fixed
investment of $100 was invested on September 16, 1994 in the Company's Common
Stock and assumes the reinvestment of dividends. Since there is no
nationally-recognized industry index consisting of metals service center
companies to be used as a peer group index, the Company constructed its own peer
group. The peer group consists of Steel Technologies Inc., Olympic Steel Inc.,
and Gibraltar Steel Corporation, all of which have securities listed for trading
on NASDAQ; A. M. Castle & Co., which has securities listed for trading on the
American Stock Exchange; and Huntco, Inc. and Ryerson Tull, Inc. which have
securities listed for trading on the New York Stock Exchange, as of December 31,
1997. The returns of each member of the peer group are weighted according to
that member's stock market capitalization as of the period measured. Although
the performance of the Company's Common Stock has been better than the
performance of the securities of those companies in the peer group, the stock
price performance shown on the graph below is not necessarily indicative of
future price performance.
COMPARISON OF 39 MONTH CUMULATIVE TOTAL RETURN*
AMONG RELIANCE STEEL & ALUMINUM CO., THE S&P 500 INDEX, THE RUSSELL 2000 INDEX
AND A PEER GROUP
<TABLE>
<CAPTION>
Reliance Steel
& Aluminum Co. Peer Group S&P 500 Russell 2000
-------------- ---------- ------- ------------
<S> <C> <C> <C> <C>
9/94 100 100 100 100
12/94 87 87(1) 98(2) 98
12/95 144 94 131 118
12/96 246 131 166 146
12/97 316 118(3) 220 179
</TABLE>
- ---------------
* $100 invested on September 16, 1994 in stock or index -- including
reinvestment of dividends. Fiscal year ending December 31.
(1) The 12/94 calculation as shown in the 1995 Proxy Statement inadvertently did
not include information about some of the companies in the peer group. This
calculation (previously 84) is now correct.
(2) Standard & Poors changed the S&P 500 index on July 1, 1996. This caused the
12/94 index amount to change from 97 to 98.
(3) The Peer Group was adjusted to include Ryerson Tull, Inc. in 1997.
17
<PAGE> 20
CERTAIN TRANSACTIONS
In addition to a provision authorizing the indemnification of directors,
the Company's Restated Articles of Incorporation include a provision which
limits or eliminates the personal liability of directors for monetary damages to
the Company or its shareholders for the breach of fiduciary duty as a director
in accordance with California corporate law. This provision does not limit or
eliminate the liability of a director for the following: (i) for acts or
omissions that involve intentional misconduct or a knowing and culpable
violation of law; (ii) for acts or omissions that a director believes to be
contrary to the best interests of the corporation or its shareholders, or that
involve the absence of good faith on the part of the director; (iii) for any
transaction from which a director derived an improper personal benefit; (iv) for
acts or omissions that show a reckless disregard of the director's duty to the
corporation or its shareholders in circumstances in which the director was
aware, or should have been aware, in the ordinary course of performing a
director's duties, of a risk of serious injury to the corporation or its
shareholders; (v) for acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the
corporation or its shareholders; (vi) for transactions between the corporation
and a director, or between corporations having interrelated directors; and (vii)
for improper distributions and stock dividends, loans and guaranties. The
provisions of the Indemnification Agreements described below will be available
to directors in the event of claims made against a director for certain types of
liability which are not eliminated in the Restated Articles of Incorporation.
The Company's Bylaws require the Company to indemnify officers, directors,
employees and agents to the fullest extent permissible by California
Corporations Code Section 317 against expenses, judgments, fines, settlements or
other amounts actually and reasonably incurred by that person as a result of
being made or threatened to be made a party to a proceeding. The Company has
entered into indemnification agreements (such contracts are hereinafter referred
to as the "Indemnification Agreements") with all of its present directors and
all of its officers, to indemnify these persons against certain liabilities. The
form of these Indemnification Agreements was approved by the Board of Directors
and shareholders of the Company in March 1988, and the shareholders also
authorized the Board of Directors to enter into Indemnification Agreements with
all existing and future directors at the time they are so elected and to
determine, from time to time, whether similar Indemnification Agreements should
be entered into with other individual officers who are not directors. The
Indemnification Agreements provide for indemnification in cases where
indemnification might not otherwise be available in the absence of the
Indemnification Agreements under the Company's Restated Articles of
Incorporation.
Each Indemnification Agreement provides that the Company will indemnify the
indemnitee and hold him harmless, to the fullest extent permitted by law, from
all amounts which he pays or is obligated to pay as a result of claims against
him arising out of his service to the Company, including derivative claims by or
in the right of the Company. The Company has agreed to indemnify against the
amounts of all damages, judgments, sums paid in settlement (if approved by the
Company, which approval will not be unreasonably withheld), counsel fees, costs
of proceedings or appeals, and fines and penalties (other than fines and
penalties for which indemnification is not permitted by applicable law) within
the scope of the indemnification.
In addition, the Company has purchased directors and officers liability
insurance for the benefit of its directors and officers.
COMPLIANCE WITH SECTION 16(a)
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that the officers and directors of the Company and any person who directly or
indirectly is the beneficial owner of more than 10% of the Company's Common
Stock must file reports of beneficial ownership and any changes in such
ownership. The three forms used for reports are: the Form 3, which is an initial
statement of beneficial ownership of such securities; the Form 4, which reports
changes in beneficial ownership, generally occurring in the previous month; and
the Form 5, which is an annual statement to report changes that have not
previously been reported. Each of these forms must be filed at specified times.
18
<PAGE> 21
Based solely on the Company's review of such forms and written
representations made by certain of such reporting persons, the Company believes
that during the year ended December 31, 1997, all such persons have complied
with the requirements of Section 16(a).
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP has acted as the Company's independent auditors for more
than forty years. The Board of Directors has selected Ernst & Young LLP to serve
in that capacity again for 1998. A representative of Ernst & Young LLP will be
present at the Annual Meeting, will have an opportunity to make a statement if
he or she desires to do so, and will be available to respond to appropriate
questions. At the Annual Meeting, the shareholders will be asked to ratify and
approve this selection. THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THE SELECTION OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
OTHER MATTERS
While management has no reason to believe that any other business will be
presented at the Annual Meeting, if any other matters should properly come
before the Annual Meeting, the proxies will be voted as to such matters in
accordance with the best judgment of the proxy holders.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Shareholder proposals intended to be presented at the 1999 Annual Meeting
and included in the Company's proxy materials relating to such meeting must be
received not later than December 20, 1998. Such proposals must be addressed to
the Secretary of the Company.
The Company will furnish without charge to any shareholder, upon written
request directed to the Secretary of the Company at its address appearing at the
top of the first page of this Proxy Statement, a copy of its most recent Annual
Report on Form 10-K filed with the Securities and Exchange Commission.
By Order of the Board of Directors,
Yvette M. Schiotis
Secretary
Los Angeles, California
April 20, 1998
19
<PAGE> 22
APPENDIX A
CERTIFICATE OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
RELIANCE STEEL & ALUMINUM CO.
David H. Hannah and Yvette M. Schiotis hereby certify that:
1. They are the President and Secretary, respectively, of Reliance
Steel & Aluminum Co., a California corporation (the "Corporation").
2. Article III of the Restated Articles of Incorporation of the
Corporation is hereby amended to read as follows:
ARTICLE III
The corporation is authorized to issue two classes of shares,
designated respectively "Common Stock" and "Preferred Stock". The number
of authorized shares of Common Stock is 100,000,000, and the number of
authorized shares of Preferred Stock is 5,000,000. Shares of Preferred
Stock may be issued from time to time in one or more series. The Board
of Directors is authorized to fix the number of shares of each series of
Preferred Stock and to determine the designation of each series. The
Board of Directors is also authorized to determine or alter the rights,
preferences, privileges and restrictions granted to or imposed upon any
wholly unissued series and, within the limits and restrictions stated in
any resolution or resolutions of the Board of Directors originally
fixing the number of shares constituting any series, to increase or
decrease (but not below the number then outstanding) the number of
shares of any series subsequent to the issue of shares of that series.
3. The foregoing Amendment has been duly approved by the Board of
Directors of the Corporation at a meeting held January 21, 1998, pursuant
to Section 902 of the California Corporations Code.
4. The foregoing Amendment has been approved by the required vote of
the shareholders of the corporation in accordance with Section 902 of the
California Corporations Code; the total number of outstanding shares of the
single class of shares entitled to vote is 18,842,708; and the number of
shares voting in favor of the foregoing amendment and this Certificate
exceeded the vote required, such required vote being a majority of the
outstanding common shares.
The undersigned further each declare under penalty of perjury under the
laws of the State of California that the matters set forth in this Certificate
are true and correct to his or her own knowledge.
Executed at Los Angeles, California, on May , 1998.
--------------------------------------
David H. Hannah
President
--------------------------------------
Yvette M. Schiotis
Secretary
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<PAGE> 23
APPENDIX B
RELIANCE STEEL & ALUMINUM CO.
DIRECTORS STOCK OPTION PLAN
1. PURPOSE. The purpose of this Reliance Steel & Aluminum Co. Directors
Stock Option Plan (the "Plan") is (a) to advance the interests of Reliance Steel
& Aluminum Co. (the "Company") and its shareholders by offering to non-employee
directors of the Company the opportunity to acquire or increase their equity
interests in the Company, thereby achieving a greater commonality of interest
between shareholders and directors, and (b) to enhance the Company's ability to
retain and attract highly qualified non-employee directors by providing an
additional incentive to such non-employee directors to continue to serve as
members of the Company's Board of Directors.
2. DEFINITIONS. For purposes of the Plan:
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" means Reliance Steel & Aluminum Co., a California
corporation.
"DIRECTOR" means any person who is a member of the Board.
"EFFECTIVE DATE" means the date that the Plan has been approved by
both the Board and the shareholders of the Company.
"NON-EMPLOYEE DIRECTOR" means any Director who is not an employee of
the Company or any of its subsidiaries or affiliates and is deemed to be a
"non-employee director" of the Company under Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended.
"OPTION" means an option granted under the Plan to purchase shares of
Stock. An "Option" shall be a non-statutory or non-qualified option under
the Code.
"OPTIONEE" means the Participant to whom that particular Option is
granted.
"PARTICIPANT" means a person to whom an Option is granted under this
Plan.
"PLAN" means this Reliance Steel & Aluminum Co. Directors Stock Option
Plan.
"STOCK" means the Common Stock of the Company. Unless the context
expressly indicates otherwise, "shares" means shares of Stock.
3. SHARES SUBJECT TO PLAN. Subject to adjustments as provided in Sections 7
and 8 hereof, the aggregate number of shares of Stock as to which Options may be
granted under the Plan shall not exceed 200,000 shares. If an Option granted
hereunder shall expire, terminate or be canceled for any reason without having
been fully exercised then the shares covered by the unexercised portion of such
Option shall be available for purposes of the Plan.
4. ELIGIBILITY. All Non-Employee Directors shall be eligible to become a
Participant and shall be granted Options in accordance with the Plan.
5. GRANT OF OPTIONS. Upon the Effective Date of the Plan, each Non-Employee
Director shall be entitled to and shall be granted an Option to acquire 5,000
shares of Stock. If any new Director is appointed or elected to the Board at any
time after the Effective Date, and that new Director is a Non-Employee Director,
such Non-Employee Director shall be entitled to and shall be granted as of the
date of election or appointment an Option to acquire 5,000 shares of Stock. Each
Non-Employee Director who continues to be a Non-Employee Director of the Company
for a period of five years after a grant of an Option, shall be entitled to and
shall be granted as of the fifth anniversary after the grant of the most recent
prior Option an Option to acquire 5,000 shares of Stock; provided that such
Non-Employee Director has been a Non-Employee Director of the Company for the
five years immediately preceding the date of grant. This provision shall be
self-executing and shall not require any action of the Board to effectuate the
grants.
B-1
<PAGE> 24
6. TERMS OF THE OPTIONS. The Options shall be evidenced by written Stock
Option Agreements signed by the Participant and, on behalf of the Company, by an
officer. Each Option shall be subject to the following terms and conditions:
a. PRICE. The price per share at which each Option granted under the
Plan may be exercised (the "Option Price") shall be one hundred percent
(100%) of the fair market value of a share at the time that the Option is
granted.
For purposes of the Plan, the fair market value of a share on a given
date shall be: (a) if the Stock is traded on one or more securities
exchanges, the closing sale price of a share on such date on the principal
exchange on which the shares are traded or, if no shares were traded on
such date, then the next preceding trading day (not more than ten) on which
trading occurred; or (b) if the Stock is not traded on a securities
exchange but is quoted on Nasdaq or a successor interdealer quotation
system, the mean between the high and low sale price (if a National Market
System security) or the mean between the representative bid and asked
prices (in all other cases) on such date as reported by Nasdaq or such
successor quotation system or, if no shares were traded or quoted on such
date, then the next preceding day (not more than ten) on which trading or
such quotations occurred; or (c) if the Stock is otherwise traded in the
over-the-counter market, the mean between the high and low bid quotations
on such date; or, if there are no bid quotations on such date, then the
next preceding trading day (not more than ten) on which such quotations
occurred; or (d) if the Stock is not publicly traded on a securities
exchange or traded or quoted in the over-the-counter market or, if traded
or quoted, there are no transactions or quotations within the last ten
trading days or trading has been halted for extraordinary reasons, the fair
market value shall be determined in good faith by the Board, but not
including the Non-Employee Director affected thereby, based on the price
that the Board reasonably believes the Company could obtain in an arm's
length transaction and with reference to the rules and principles of
valuation set forth in Section 20.2031-2 of the Treasury Regulations
(concerning the valuation of stocks and bonds for purposes of Code Section
2031).
b. OPTION PERIOD. An Option granted under the Plan shall terminate,
and the right of the Optionee (or the Optionee's estate, personal
representative, or beneficiary) to purchase shares upon exercise of the
Option shall expire on the date which is five years from the date of grant
(the "Termination Date").
c. EXERCISE OF OPTIONS. No Option may be exercised, in whole or in
part, for a period of one year after the date of the granting of such
Option. An Option shall be exercisable during the second year from its date
of grant, to the extent of all or any part of one-fourth of the optioned
shares; during the third year from its date it shall be exercisable to the
extent of all or any part of one-half of the optioned shares, less the
number of shares as may have been acquired under the Option during the
second year; during the fourth year from its date it shall be exercisable
to the extent of all or any part of three-fourths of the optioned shares,
less the number of shares as may have been acquired under the Option during
the second and third years; and during the remainder of the term of the
Option it shall be exercisable, in whole or in part, for the full number of
optioned shares, less the number as may have been acquired under the Option
during the second, third and fourth years. If the Optionee ceases to be a
Non-Employee Director of the Company for any reason before all or any part
of the Option becomes exercisable, the Option shall terminate and remain
unexercisable as to any part that has not previously become exercisable.
d. MANNER AND CONDITIONS OF EXERCISE. To exercise an Option or any
portion thereof, the Participant or other person then entitled to exercise
such Option or portion thereof shall deliver to the Secretary of the
Company a notice in writing signed by the Participant or such other person
stating that such Option or portion is exercised, specifying the number of
shares to be acquired upon exercise and complying with all applicable rules
established by the Committee, together with the following:
(i) Full payment (in cash or bank cashiers' check) for the shares
with respect to which such Option or portion is being exercised; or
(ii) Shares of Stock owned by the Participant, duly endorsed for
transfer to the Company, with a fair market value (as determinable under
Section 6a of the Plan) on the date of exercise equal to
B-2
<PAGE> 25
the aggregate purchase price of the shares with respect to which such
Option or portion is being exercised; or
(iii) Any combination of the consideration provided in the
foregoing subsections (i) and (ii).
No such exercise shall be effective unless and until a proper notice
and payment have been delivered as provided above. No fractional shares
shall be issued under the Plan.
In the event that an Option or portion thereof shall be exercised
pursuant to this Section of the Plan by any person or persons other than
the Participant, appropriate proof of the right of such person or persons
to exercise the Option or portion thereof shall be delivered to the
Company.
The Board may require, as a condition to the exercise of an Option,
such representations and covenants as it, in its absolute discretion, deems
necessary to effect compliance with the Securities Act of 1933, as amended,
any state securities laws or rules and regulations thereunder.
The Participant, as a condition to exercising an Option, shall also
make any arrangements determined by the Board to be necessary or
appropriate to satisfy any federal and state withholding tax obligation
resulting from the exercise of an Option or from the termination or partial
termination of any restriction applicable to any share acquired on exercise
of an Option, including the retention of shares by the Company or the
delivery of shares to the Company equal in amount to all or a portion of
the withholding tax obligation pursuant to such arrangements as may be
established by the Board. Any shares retained by or delivered to the
Company under this Section shall be valued at the date of exercise in the
same manner as provided hereunder.
To ensure that such exercise and any resales are made in compliance
with the Securities Act of 1933, as amended, and the Articles of
Incorporation and Bylaws of the Company, as amended or restated, the
Company may imprint an appropriate legend on certificates representing
shares acquired on the exercise of an Option and issue appropriate
stop-transfer orders to its transfer agents. Any stock certificate
evidencing shares of Stock issued pursuant to the exercise of an Option
shall bear such other legends as the Board, in the exercise of its absolute
discretion, shall require.
e. NONTRANSFERABILITY. During the lifetime of a Participant, his or
her Option shall be exercisable only by the Participant, and no Option
shall be transferable other than by Will or the laws of descent and
distribution. No interest of any Participant under the Plan or in any
Option shall be subject to attachment, execution, garnishment,
sequestration, the laws of bankruptcy or any other legal or equitable
process.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event of any change in
the Stock by reason of any stock dividend, recapitalization, split-up,
combination or exchange of shares, or by reason of any similar change affecting
the Stock (but not the issuance of additional shares, securities convertible
into shares or options or rights to acquire shares of Stock or the Company's
repurchase of shares), the number and class of shares which thereafter may be
acquired on exercise of Options under this Plan and the number and class of
shares subject to outstanding Options and the exercise price of each such share
shall be appropriately adjusted consistent with such change in such manner as
the Board may deem equitable to prevent substantial dilution or enlargement of
the rights granted to, or available for, Participants. Any such adjustment shall
be final and binding on each Participant.
8. MERGER, CONSOLIDATION, ETC. In its absolute discretion, and on such
terms and conditions as it deems appropriate, the Board may provide by the terms
of any Option that such Option cannot be exercised after the merger or
consolidation of the Company with or into another corporation, the acquisition
by another corporation or person of all or substantially all of the Company's
assets or the liquidation or dissolution of the Company; and, if the Board so
provides, it may, in its absolute discretion and on such terms and conditions as
it deems appropriate, also provide, either by the terms of such Option or by a
resolution adopted prior to the occurrence of such merger, consolidation,
acquisition, liquidation or dissolution, that, for some period of time prior to
such event, such Option shall become exercisable as to all shares covered
thereby, notwithstanding anything to the contrary in the Plan or any installment
provisions of such Option.
B-3
<PAGE> 26
9. NO RIGHTS AS A SHAREHOLDER. No Participant shall have any rights or
privileges as a shareholder with respect to any shares subject to Options prior
to the date of issuance to him or her of a certificate for such shares upon
exercise of an Option.
10. NO RIGHT TO CONTINUE AS DIRECTOR. Neither the Plan nor any Option
granted under the Plan shall confer upon any Participant or any other person any
right to continue to be a Director of the Company.
11. COMPLIANCE WITH LAWS AND REGULATIONS. The Plan, the grant and exercise
of Options under the Plan and the obligation of the Company to sell and deliver
shares upon exercise of Options shall be subject to all applicable federal and
state laws, rules and regulations and to any approvals by any government or
regulatory agency as may be required. The Company shall not be required to issue
or deliver any certificate for shares of Stock either (a) prior to (i) the
listing of such shares on any stock exchange on which the Stock may then be
listed or inclusion on any interdealer quotation system on which the Stock may
be quoted, and (ii) the completion of any registration or qualification of such
shares which is required under any federal or state law, or any ruling or
regulation of any government body, and which the Company shall, in its sole
discretion, determine to be necessary or advisable, or (b) until exemptions from
such registration and qualification requirements are established to the
reasonable satisfaction of the Company and its counsel.
12. APPROVAL BY SHAREHOLDERS. The Plan will be submitted for the approval
by holders of a majority of the shares of stock voting thereon within twelve
months after the Board's adoption of the Plan. No Options shall be exercisable
prior to the time when the Plan is approved by shareholders and, if such
approval is not obtained by the end of the twelve-month period, all Options
previously granted shall thereupon be canceled.
13. AMENDMENT AND DISCONTINUANCE. The Board may from time to time amend,
suspend or discontinue the Plan; provided that, without approval of the holders
of a majority of the shares of stock voting thereon, no action of the Board
shall (a) increase the number of shares reserved for Options pursuant to Section
3 of this Plan, (b) permit the grant of any Option at a price less than that
determined in accordance with Section 6 of this Plan, or (c) permit the grant of
Options which expire beyond the periods provided for in Section 6 of the Plan.
Without the written consent of a Participant, no such amendment, suspension or
discontinuance of the Plan shall alter or impair any Option previously granted
to such Participant pursuant to this Plan.
14. TERM. Unless terminated earlier pursuant to the Plan, the Plan shall
expire on, and no further Options shall be granted pursuant to the Plan on or
after December 31, 2008.
B-4
<PAGE> 27
[LOGO]
RELIANCE STEEL & ALUMINUM CO.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR ANNUAL MEETING OF SHAREHOLDERS ON MAY 20, 1998
The undersigned hereby constitutes and appoints Joe D. Crider and David H.
Hannah, and each of them, his true and lawful agents and proxies with full
power of substitution in each, to represent the undersigned at the Annual
Meeting of Shareholders of RELIANCE STEEL & ALUMINUM CO. to be held at 10:00
a.m. on Wednesday, May 20, 1998 at the Ritz Carlton Huntington Hotel, 1401
South Oak Knoll Avenue, Pasadena, California 91106, and at any adjournments
thereof, on all matters coming before said meeting.
1. Election of Directors, Nominees:
Joe D. Crider, David H. Hannah,
Gregg J. Mollins, William I. Rumer (change of address/comments)
2. Approval to increase the number of authorized -----------------------------
shares of Common Stock to 100,000,000. -----------------------------
-----------------------------
3. Approval of the Directors Stock Option Plan. -----------------------------
4. Approval of Ernst & Young LLP as
independent auditors.
5. In their discretion on such other matters as
may properly come before the meeting.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES,
SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE BOARD OF DIRECTORS
RECOMMEND VOTING FOR ALL NOMINEES IN ITEM 1 AND FOR ITEMS 2, 3, 4 AND 5. THE
PROXY COMMITTEE CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
-------------
SEE REVERSE
SIDE
-------------
FOLD AND DETACH HERE
<PAGE> 28
PLEASE MARK YOUR
[X] VOTES AS IN THIS
EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
ALL NOMINEES LISTED IN ITEM 1, AND FOR ITEMS 2, 3, 4 AND 5.
FOR WITHHELD
1. [ ] [ ]
For, except vote withheld from the
following nominee(s):
FOR AGAINST ABSTAIN
2. Approval of increase in [ ] [ ] [ ]
authorized number of shares.
3. Approval of Directors [ ] [ ] [ ]
Stock Option Plan.
4. Approval of Ernst & Young LLP [ ] [ ] [ ]
as independent auditors.
5. In their discretion on such [ ] [ ] [ ]
other matters as may properly
come before the meeting.
Change of Address [ ]
on Reverse Side.
SIGNATURE(S)__________________________________________ DATE__________
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
