November 11, 1998
Dear Stockholder:
It is our pleasure to invite you to the Annual Meeting of Stockholders of
Webco Industries, Inc. to be held on Wednesday, December 2, 1998 at 3:00 p.m.
(Central Standard Time), at 9101 West 21st Street, Sand Springs, Oklahoma.
Whether or not you plan to attend, and regardless of the number of shares you
own, it is important that your shares be represented at the meeting. You are
accordingly urged to sign, date and return your proxy promptly in the enclosed
envelope, which requires no postage if mailed in the United States.
We sincerely hope you will be able to join us at the meeting. The officers and
directors of the Company look forward to seeing you at that time.
Sincerely,
F. William Weber
Chairman
<PAGE>
WEBCO INDUSTRIES, INC.
9101 West 21st Street
Sand Springs, Oklahoma 74063
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held December 2, 1998
Notice is hereby given that the Annual Meeting of Stockholders of Webco
Industries, Inc. (the "Company") will be held at 9101 West 21st Street, Sand
Springs, Oklahoma on Wednesday, December 2, 1998 at 3:00 p.m. (Central
Standard Time) for the following purposes:
1. to elect two directors of the Company;
2. to consider and act upon a proposal to confirm the appointment of
PricewaterhouseCoopers LLP as the independent certified public accountants of
the Company;
3. to consider and act upon a proposal to increase the number of shares
available for grant under the Company's 1994 Stock Incentive Plan by 300,000
shares; and
4. to transact such other business as may properly come before the meeting and
any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on October 31, 1998 as
the record date for determining stockholders entitled to notice of and to vote
at the meeting and any adjournments or postponements thereof.
IF YOU ARE UNABLE TO BE PRESENT PERSONALLY, PLEASE SIGN AND DATE THE ENCLOSED
PROXY WHICH IS BEING SOLICITED BY THE BOARD OF DIRECTORS, AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE.
By order of the Board of Directors,
MICHAEL P. HOWARD,
Assistant Secretary
November 11, 1998
<PAGE>
WEBCO INDUSTRIES, INC.
9101 West 21st Street
Sand Springs, Oklahoma 74063
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
December 2, 1998
This Proxy Statement is furnished to the stockholders of Webco
Industries, Inc. (the "Company"), in connection with the solicitation of
proxies by the Board of Directors for use at the Annual Meeting of
Stockholders of the Company to be held on Wednesday, December 2, 1998 at the
offices of the Company at 9101West 21st Street, Sand Springs, Oklahoma at 3:00
p.m. (central standard time), and any adjournments thereof. A copy of the
notice of meeting accompanies this Proxy Statement. It is anticipated that the
mailing of this Proxy Statement will commence on or about November 11, 1998.
Only stockholders of record at the close of business on October 31, 1998,
the record date for the meeting will be entitled to notice of and to vote at
the meeting. On the record date the Company had outstanding 7,169,000 shares
of common stock, par value $.01 per share (the "Common Stock"), which are the
only securities of the Company entitled to vote at the stockholders meeting.
Each share of Common Stock is entitled to vote one vote. Voting rights are non-
cumulative. A majority of the outstanding shares will constitute a quorum at
the meeting, and abstentions and broker non-votes are counted for purposes of
determining the presence or absence of a quorum for the transaction of
business.
All proxies received pursuant to this solicitation will be voted except as
to matters where authority to vote is specifically withheld. Where a choice
is specified as to a particular matter, proxies will be voted in accordance
with such specification. If no instructions are given, the persons named in
the proxy intend to vote FOR the election of the nominees for director listed
herein, FOR the ratification of the appointment of PricewaterhouseCoopers LLP
as independent certified public accountants of the Company for the current
year and FOR the increase in the number of shares available for grant under
the Company's 1994 Stock Incentive Plan. Directors are elected by plurality
vote (i.e., the nominee receiving the highest number of affirmative votes of
the shares voting for the board seat under consideration will be elected). The
ratification of the re-appointment of PricewaterhouseCoopers LLP and the
increase in the number of shares under the 1994 Stock Incentive Plan will
require the affirmative vote of a majority of the shares of Common Stock
voting on the proposal. Abstentions and broker non-votes will not be counted
as votes cast on any matter to which they relate.
The Board of Directors does not know of any other matter that is expected
to be presented for consideration at the meeting. However, if other matters
properly come before the meeting, the pers6ns named in the accompanying proxy
intend to vote thereon in accordance with their judgment.
Stockholders who execute proxies may revoke them by giving written notice
to the Secretary of the Company at any time before such proxies are voted.
Attendance at the meeting will not have the effect of revoking a proxy unless,
at any time prior to voting of the proxy, the stockholder so attending the
meeting notifies the Secretary of the Company, in writing, of his or her
withdrawal of the proxy.
The Company will bear the cost of the meeting and the cost of soliciting
proxies, including the cost of mailing the proxy material. In addition to
solicitation by mail, directors, officers, and regular employees of the
Company (who will not be specifically compensated for such services) may
solicit proxies by telephone or otherwise. Arrangements will be made with
brokerage houses and other custodians, nominees, and fiduciaries to forward
proxies and proxy material to their principals, and the Company will reimburse
them for their expenses.
<PAGE>
Security Holdings of Principal Stockholders, Directors and Executive Officers
The table below sets forth the beneficial ownership of the Common Stock
as of July 31, 1998 by (i) each person known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock, (ii) each
director, (iii) each of the executive officers of the Company, including the
executive officers named in the "Summary Compensation Table" below, and (iv)
all directors and executive officers of the Company as a group.
Amount and Nature
of Beneficial Percent
Name Position Ownership of Class
F. William Weber Chairman of the Board and Chief 2,054,861 (1) 28.7%
Executive Officer
Dana S. Weber Vice Chairman of the Board, 796,213 (3) 11.2
President, Chief Operating Officer
Kimberly A.W. Frank Assistant Secretary 391,070 (1) 5.5
Robert N. Pressly Vice President and General Manager- 415,000 (5) 5.8
QuikWater Division
Christopher L. Director and President of 415,000 (5) 5.8
Kowalski Phillips & Johnston, Inc.
Wellington Management 359,700 (4) 5.7
Company, LLP
Kenneth E. Case Director 7,500 (2) *
Neven C. Hulsey Director 9,000 (2) *
Frederick C. Ermel Director 16,000 (2) *
H. Lee Beard Chief Information Officer, 68,628 (2) 1.0
Vice President - Management
Systems
David E. Boyer Vice President - Sales & Marketing, 107,249 (2) 1.5
and Secretary
Michael P. Howard Chief Financial Officer, Vice 34,886 (2) *
President - Finance and Administration,
Treasurer and Assistant Secretary
Stuart D. Keeton Vice President and General Manager - 15,745 (2) *
Stainless Products Division
Thomas M. Lewis Vice President and General Manager - 86,555 (2) 1.2
Oil City Division
William F. Obermark Vice President and General Manager - 96,001 (2) 1.3
Southwest Tube Division
<PAGE>
Thomas M. Willey Vice President - 30,701 (2) *
Materials Management
All directors and executive 4,813,791 (3) 63.5
officers of the Company as a
group (fifteen persons)
* - Less than 1%
(1) F. William Weber, Martha A. Weber, Dana S. Weber and Kimberly A.W.
Frank (the "Weber Family") each hold his or her shares in a revocable living
trust. F. William Weber and Martha A. Weber are co-trustees of the trusts
established by each other. Certain members of the Weber Family (F. William
Weber, Martha A. Weber, Dana S. Weber and Kimberly A.W. Frank) may be deemed
to be a "group," as such term is used in Section 13(d) of the Securities
Exchange Act of 1934, as amended, and the rules promulgated thereunder, and to
share beneficial ownership of the shares owned by each other member of the
Weber Family. Each member of the Weber Family disclaims beneficial ownership
of the shares owned by each other member of the Weber Family, except Mr. and
Mrs. F. William Weber as to the shares owned by the other (shares shown in the
table for each member of the Weber Family do not include shares as to which
beneficial ownership is disclaimed as aforesaid). In addition, members of the
Weber Family disclaim beneficial ownership of certain shares included in those
shown for them in the table, as follows: Mr. and Mrs. F. William Weber
disclaim beneficial ownership of 262,648 shares held in an irrevocable trust,
of which they are the trustees, for the benefit of Ashley R. Weber; Dana S.
Weber disclaims beneficial ownership of 2,000 shares held in an irrevocable
trust, of which she is the trustee, for the benefit of the children of
Kimberly A.W. Frank; and Kimberly A.W. Frank disclaims beneficial ownership
of 1,000 shares held in an irrevocable trust, of which she is a co-trustee,
for the benefit of the child of Dana S. Weber. The address of each such
stockholder is c/o Webco Industries, Inc., 9101 West 21st Street, Sand
Springs, Oklahoma 74063.
(2) Includes shares of Common Stock that directors and executive officers had
the right to acquire on September 30, 1998 as follows: Dana S. Weber, 6,400;
Dr. Kenneth E. Case, 7,500; Neven C. Hulsey, 9,000; Frederick C. Ermel, 9,000;
H. Lee Beard, 11,200; David E. Boyer, 11,200; Michael P. Howard, 4,000; Stuart
D. Keeton, 11,200; Thomas M. Lewis, 11,200; William F. Obermark, 11,200; and
Thomas M. Willey, 11,200.
(3) See Footnotes (1) and (2) above.
(4) Wellington Management Company, LLP, ("WMC") is an investment adviser
registered with the Securities and Exchange Commission under Section 203 of
the Investment Advisers Act of 1940, as amended. As of June 30, 1998 WMC, in
its capacity as investment adviser, may be deemed to have beneficial ownership
of 359,700 shares of Common Stock of Webco Industries, Inc. that are owned by
numerous investment advisory clients, none of which is known to have such
interest with respect to more than five percent of the class. WMC is not the
owner of record of such shares and disclaims any pecuniary interest (as
defined in Rule 16a-1(a) of the Securities and Exchange Act of 1934) in such
shares. As of June 30, 1998, WMC had voting power and / or dispositive power
as follows:
Sole Voting Power: 0 shares
Shared Voting Power: 99,700 shares
Sole Dispositive Power: 0 shares
Shared Dispositive Power: 59,700 shares
The address of WMC is 75 State Street, Boston, Massachusetts 02109.
(5) The address of Robert N. Pressly and Christopher L. Kowalski is c/o
Webco Industries, Inc., 9101 West 21st Street, Sand Springs, Oklahoma
74063.
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors is presently composed of six members, four of
whose terms as directors continue past the date of the Annual Meeting. At the
Annual Meeting two directors are to be elected, and they are to hold office
for a three-year term and until their successor has been elected and
qualified. If the nominees should become unavailable for any reason, which is
not anticipated, the proxy will be voted for any substitute nominee who may be
selected by the Board of Directors prior to or at the meeting, or, if no
substitute is selected by the Board of Directors prior to or at the meeting,
for a motion to reduce the membership of the Board of Directors to the number
of remaining directors. The nominees for director will be elected by a
plurality of the votes cast (i.e. the nominee for the board seat being
considered receiving the highest number of affirmative votes of the shares
voting will be elected).
Nominees for Election at the Annual Meeting
Name Age Positions with Company Director
Since
Frederick C. Ermel 55 Director 1993
Dr. Kenneth E. Case 54 Director 1995
Directors Whose Terms Continue
Name Age Positions with Company Director
Since
F. William Weber 72 Chairman of the Board and Chief 1969
Executive Officer
Dana S. Weber 40 Vice Chairman of the Board, 1990
President and Chief Operating
Officer
Neven C. Hulsey 64 Director 1993
Christopher L. Kowalski 45 Director, President of Phillips & 1998
Johnston, Inc.
Executive Officers who are not Directors
Name Age Positions with Company Officer
Since
H. Lee Beard 56 Chief Information Officer and Vice 1987
President - Management Systems
David E. Boyer 38 Vice President - Sales and 1992
Marketing, and Secretary
Michael P. Howard 34 Chief Financial Officer, 1997
Vice President -
Finance and Administration,
and Treasurer
Stuart D. Keeton 40 Vice President and General Manager- 1995
Stainless Products Division
Thomas M. Lewis 63 Vice President and General Manager- 1984
Oil City Division
Robert N. Pressly 62 Vice President and General Manager- 1998
QuikWater Division
William F. Obermark 57 Vice President and General Manager- 1984
Southwest Tube Division
Thomas M. Willey 55 Vice President - Materials 1995
Management
<PAGE>
Frederick C. Ermel has been a director of the Company since November
1993. Mr. Ermel's term as a director of the Company expires in February 1999.
Mr. Ermel has been a private investor and the founder, President, and sole
stockholder of Carreden Group, Inc., an investment banking firm and registered
broker-dealer, since September 1990. From March 1986 to September 1990, Mr.
Ermel was a Managing Director of Paine Weber, Inc., a brokerage and investment
banking firm.
Dr. Kenneth E. Case has been a director of the Company since July 1995,
when he was designated by the Board of Directors to fill a vacancy on the
Board. Dr. Case's term as a director of the Company expires in February 1999.
Dr. Case has been a Regents Professor of Industrial Engineering and Management
at Oklahoma State University since August 1975. He is a licensed professional
engineer and was named the Outstanding Engineer in Oklahoma in 1987. His
specialties include quality and reliability engineering, economic analysis and
production planning and control. Dr. Case was a Senior Examiner on the Malcolm
Baldrige National Quality Award from 1988 to 1990, and on the Panel of Judges
from 1991 to 1993. He is a member of the National Academy of Engineering,
considered among the highest professional distinctions accorded an engineer,
and a Fellow of the Institute of Industrial Engineers and the American Society
for Quality Control. Dr. Case has also been project director on over twenty
sponsored research projects and has published over 90 articles and co-authored
three books.
F. William Weber is Chairman of the Board and Chief Executive Officer of
the Company, positions he has held with the Company or its predecessors since
founding the Company in 1969. Mr. Weber's term as a director of the Company
expires in December 1999. Mr. Weber also serves on the Advisory Board of Selco
Industries Corporation, Inc., a privately-held manufacturer of promotional
timepieces, and is Chairman of the Board of Custom Containers International
("C-CAM"), a company owned by the Weber Family which manufactures intermodal
tank containers, and Diversified Plastics, Inc. ("Diversified"), a company
owned by F. William Weber which primarily manufactures plastic access panels
and performs some packaging services. Mr. Weber is not actively involved in
the day-to-day operations of C-CAM or Diversified.
Dana S. Weber became President of the Company in June 1995, and is also
Vice Chairman of the Board and Chief Operating Officer, positions she has held
since June 1990. Ms. Weber was the acting Chief Financial Officer of the
Company from August 1994 to July 1995. Ms. Weber's term as a director of the
Company expires in December 1999. Ms. Weber served as Chief Financial Officer
and Treasurer of the Company from 1986 to June 1990. Ms. Weber has been with
the Company or its predecessors in various positions since 1977. Ms. Weber
also serves on the Board of C-CAM and has not been actively involved in the
day-to-day operations of C-CAM since March 1, 1994. Ms. Weber is the daughter
of F. William Weber.
Neven C. Hulsey has been a director of the Company since December 1993,
and his term will expire in December 2000. In January 1997, Mr. Hulsey became
an Associate of Eaglestone Capital, a Director of Baron Industries, and a
Director and Chairman of the Board of the Earle M. Jorgensen Company
("Jorgensen"), the largest independent distributor of metal products in the
United States. From May 1990 until January 1997, Mr. Hulsey was a director
and President and Chief Executive Officer of Jorgensen as well as the Earle M.
Jorgensen Holding Company, Inc., the parent of Jorgensen. From 1984 to May
1990, Mr. Hulsey was Chairman of the Board, President, and Chief Executive
Officer, of Kilsby-Roberts Holding Co., a predecessor of Jorgensen. Jorgensen
is one of the largest customers of the Company. Mr. Hulsey is a director of
International House of Pancakes, Inc., and has been since August 1987. In
September 1997, he became an Advisor of the University of Pacific's Business
Advisory Board. As of November 1996, Mr. Hulsey completed a five-year term as
a Regent of the University of the Pacific, as well as a Director of the Steel
& Aluminum Industry and the National Association of Aluminum Distributors.
Christopher L. Kowalski joined the Company and was elected to fill a
vacancy on the board of directors effective with the closing of the merger
between the Company and Phillips & Johnston, Inc. on June 29, 1998. Mr.
Kowalski was a 50% owner of P&J prior to the merger. Mr. Kowalski joined P&J
in 1975 and has served as its president since 1986. Prior to his employment
with P&J, Mr. Kowalski worked for Central Steel & Wire, Inc.
<PAGE>
H. Lee Beard is Vice President of Management Systems and has been with
the Company since November 1987. Mr. Beard has been in the specialty tubing
industry since 1979. Mr. Beard was the Chief Executive Officer of C-CAM from
April 1989 to January 1990.
David E. Boyer is Vice President of Sales and Marketing and has held that
position since July 1992. Mr. Boyer became Secretary of the Company in
November 1993. Mr. Boyer previously served as General Manager-Stainless
Division from June 1991 to July 1992; as Product Manager, Stainless Products,
from February 1989 to June 1991; and in various other positions with the
Company since 1984.
Michael P. Howard joined the Company as Chief Financial Officer and Vice
President of Finance and Administration in January, 1997. Prior to joining
the Company, Mr. Howard was Vice President of Finance and Administration and
Chief Financial Officer for Multimedia Games Inc. from January 1996 to January
From May 1985 to January 1996 Mr. Howard was with the international
accounting firm of Coopers & Lybrand LLP, where he worked in the Business
Assurance Group and served as the audit manager on the Company's audit during
four years of that period.
Stuart D. Keeton has been Vice President and General Manager of Stainless
Products since November 1995. Mr. Keeton had previously been General Manager-
Stainless from July 1992 to November 1995, and has been with the Company in
various positions since December 1980.
Thomas M. Lewis has been Vice President and General Manager of Oil City
Division since November 1995. Mr. Lewis was previously Vice President of
Operations and has held similar positions with the Company since 1982.
Robert N. Pressly joined the Company in June 1998 as Vice President and
General Manager of the QuikWater Division. Prior to joining the Company, Mr.
Pressly was Chief Operating Officer of Phillips & Johnston, Inc., of which he
owned 50% of the outstanding stock. Prior to joining P&J in 1987, Mr. Pressly
served as the Vice President - Sales and Marketing of Webco, a position he had
held since 1971. Prior to his employment with Webco, Mr. Pressly was a
Regional Sales Manger for Lone Star Steel
William F. Obermark has been Vice President and General Manager of
Southwest Tube Division since November 1995. Mr. Obermark previously was Vice
President of Engineering, a position he had held with the Company since June
1984. Mr. Obermark has been with the Company in various positions since 1980,
and has been in the specialty tubing industry since 1969.
Thomas M. Willey has been Vice President of Materials Management since
March 1995. Mr. Willey has been with the Company in various purchasing and
materials acquisition and management positions since May 1980.
The Company's Amended and Restated Certificate of Incorporation provides
that the Board of Directors shall be divided into three classes as nearly
equal in number as possible and that one class shall be elected each year and
serve for a three-year term. Executive officers hold office until their
successors are chosen and qualified, subject to earlier removal by the Board
of Directors.
Meetings of Board of Directors
During the fiscal year ended July 31, 1998, the Board of Directors held
four meetings. During that period no Director attended fewer than 100% of the
aggregate of (i) the total number of meetings of the Board of Directors held
during the period for which he or she was a director, and (ii) the total
number of meetings held by all Committees of the Board of Directors on which
he served during the period that he served on such Committees.
<PAGE>
Board Committees Meetings and Membership
The Company has an Audit Committee of the Board of Directors, whose
members are Dr. Kenneth E. Case, Frederick C. Ermel and Neven C. Hulsey, and a
Compensation Committee whose members are F. William Weber, Dr. Kenneth E.
Case, Frederick C. Ermel and Neven C. Hulsey.
The Audit Committee meets with management and the Company's independent
accountants to determine the adequacy of internal controls and other financial
matters. The Compensation Committee reviews general policy matters relating
to compensation and benefits of employees and officers of the Company and
administers the Company's 1994 Stock Incentive Plan. The Audit Committee held
two meetings in fiscal 1998, and the Compensation Committee held three
meetings in fiscal 1998.
Directors' Compensation
Pursuant to the Company's 1994 Stock Incentive Plan (the "Plan"), each
director who is not an employee of the Company receives an initial grant
(either on the date the Plan was adopted or on the date such person first
becomes a director) of options to purchase 3,000 shares of Common Stock.
Thereafter, each outside director, on January 1 of each year, will receive
options to purchase 1,500 shares of Common Stock. All such options will be
exercisable at the fair market value at date of grant, commencing six months
after the date of grant. In fiscal 1998, each of Messrs. Case, Ermel and
Hulsey received options to purchase 1,500 shares of Common Stock at a price
of $7.00 per share. Outside directors who are not members of the Compensation
Committee are also eligible for discretionary grants under the Plan. In
addition, directors of the Company who are not employees receive directors'
fees of $10,000 per year and $1,500 for each Board meeting or committee
meeting attended in person ($2,000 if such director is the Chairman of the
Board or the committee) and $500 (or $1,000, for the Chairman) for each
meeting attended by telephone. Outside directors also receive reimbursement of
all out-of-pocket expenses related to meetings attended. Officers of the
Company who serve as directors do not receive compensation for their services
as directors other than the compensation they receive as officers of the
Company.
RATIFICATION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has appointed PricewaterhouseCoopers LLP as the
Company's independent certified public accountants, to audit the books and
records of the Company for fiscal year 1999.
Representatives of PricewaterhouseCoopers LLP are expected to be
available at the Annual Meeting to respond to appropriate questions and will
be given the opportunity to make a statement if they desire to do so.
THE BOARD OF DIRECTORS RECOMMEND THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF PRICEWATERHOUSECOOPERS LLP.
APPROVAL OF INCREASE IN NUMBER OF SHARES AVAILABLE UNDER THE
1994 STOCK INCENTIVE PLAN
The Company's 1994 Stock Incentive Plan (the "Plan") was adopted by the Board
of Directors and approved by the shareholders in January 1994. Prior to the
proposed increase, a total of 550,000 shares of Common Stock were reserved for
issuance under the Plan. In March 1998, the Board of Directors approved an
increase to 850,000 in the number of shares of Common Stock reserved for
issuance under the Plan, subject however to an approval of the increase by the
stockholders of the Company.
The Board of Directors believes that the increase in the number of shares
available under the Plan is in the best interests of the Company. An adequate
reserve of shares is important to the Company in order to enable the Company
to compete successfully with other companies to attract and retain valuable
employees.
<PAGE>
THE BOARD OF DIRECTORS RECOMMEND THAT THE STOCKHOLDERS VOTE "FOR" THE PROPOSED
AMENDMENT TO THE 1994 STOCK INCENTIVE PLAN.
A summary of the principal terms of the Plan is attached hereto as Appendix A.
As of July 31, 1998, options to purchase 514,500 shares of Common Stock were
outstanding under the Plan, of which options to purchase an aggregate of
239,500 shares of Common Stock had been granted to 11 officers and directors
of the Company as a group. See "Executive Compensation and Other Information
- - Stock Options" for additional information regarding options granted under
the Plan.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Executive Compensation
The following table sets forth the cash compensation paid or accrued by
the Company for services rendered during fiscal 1998 to the Company's Chief
Executive Officer and the only other executive officers of the Company whose
compensation exceeded $100,000 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
Annual Compensation
Other Annual
Name and Principal Position Year Salary Bonus Compensation
F. William Weber 1996 $ 377,722 $ - $ 48,440 (1)
Chairman of the Board and Chief 1997 445,661 - -
Executive Officer 1998 425,433 57,000 (5) -
Dana S. Weber 1995 $ 205,784 $ - $ 947 (2)
Vice Chairman of the Board, 1996 218,930 - 1,342 (2)
President and Chief 1997 252,518 20,000 9,600 (3)
Operating Officer
David E. Boyer 1996 $ 90,455 $ - $ -
Vice President - Sales and 1997 90,744 - -
Marketing, Treasurer 1998 106,942 - 20,000 (3)
Michael P. Howard 1996 $ - $ - $ -
Vice President - Finance & 1997 52,821 - -
Admin., -Treasurer and 1998 116,650 (4) - 9,000 (3)
Chief Financial Officer
(1) In 1996 the Company reimbursed Mr. Weber, on an after tax basis, for
the cost of certain life insurance policies. The policies are now owned by Mr.
Weber's children (or trusts established by them), who are also the
beneficiaries. In 1997, the policy cost was incorporated into Mr. Weber's
salary.
(2) Represents the aggregate amount paid by the Company for life insurance
policies.
(3) Represents amounts paid by the Company for the person's benefit in
respect of deferred compensation plans maintained for certain of the Company's
executives.
(4) Includes $8,400 subsequently repaid to the Company as interest on
outstanding advances totaling $147,000, due January 31, 2001.
(5) $125,000 of such bonus to Mr. Weber was paid pursuant to an arrangement
whereby the bonus was based on a multiple of a measured increase in the market
value of the Company's Common Stock. See "Report of the Compensation
Committee".
<PAGE>
Employment Agreements and Termination of Employment Arrangements
Each of F. William Weber and Dana S. Weber is employed pursuant to an
agreement which terminates December 31,1999. The agreements provide for a base
salary of $422,706 for Mr. Weber and $225,000 for Ms. Weber, subject to such
increases as may be approved by the Compensation Committee, and the use of an
automobile. Mr. Weber will also receive reimbursement annually for the cost of
certain life insurance policies, and the Company will pay the cost of life
insurance policies for Ms. Weber, as described in the footnotes to the Summary
Compensation Table above. Upon the occurrence of a "change in control," each
of Mr. Weber and Ms. Weber will be entitled to receive an amount equal to
three times the sum of his or her base salary plus the highest bonus paid to
him or her in the prior three years (plus such amount as is necessary so that
such payment is received net of any special or excise taxes), payable at such
person's option in either a lump-sum or over three years with interest. A
"change in control" is generally defined in the agreements to have occurred if
(i) the Company consummates a merger in which the Company is not the surviving
corporation or in which shares of Common Stock are converted into other
property, other than a merger in which the holders of the Common Stock
immediately prior to such merger have substantially the same proportionate
ownership of Common Stock of the corporation surviving such merger, (ii) the
Company sells, leases, exchanges, or transfers (in one or a series of related
transactions) all or substantially all of its assets, (iii) the Company's
stockholders approve a liquidation or dissolution of the Company, (iv) any
person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended), other than the Company or any employee
benefit plan sponsored by the Company, becomes the beneficial owner of either
(A) 51% of the Common Stock or (B) a greater percentage of the Common Stock
that is held by the Weber Family, or (v) at any time during two consecutive
years, individuals who, at the beginning of such period, constituted the Board
of Directors cease to constitute at least a majority thereof, unless the
election or nomination of each new director during such two-year period was
approved by at least two-thirds of the directors then in office who were
directors at the beginning of such two-year period.
Stock Options
The following table summarizes individual grants of options made during fiscal
year 1998 to each of the Named Executive Officers:
<TABLE>
Individual Option Grants in Last Fiscal Year
<CAPTION>
Number of % of Total Potential Realized
Securities Options Value at Assumed
Underlying Granted to Annual Rate of Stock
Options Employees Exercise Vesting Expiration Price Appreciation
Name Granted in Fiscal Year Price Date for Option Term
5% 10%
<S> <C> <C> <C> <C> <C> <C> <C>
F. William Weber - - - - - - -
Dana S. Weber - - - - - - -
David E. Boyer 6,000 3.2 7.25 5 12-01-07 23,983 59,071
Michael P. Howard 6,000 3.2 7.25 5 12-01-07 23,983 59,071
</TABLE>
<PAGE>
The following table shows the number of shares of Common Stock
represented by outstanding stock options held by the Named Executive Officers
as of July 31, 1998. Also reported are the values for "in the money" options
which represent positive spread between the exercise price of any such
existing stock options and the fiscal year-end price of the Common Stock.
<TABLE>
Aggregated Option Exercises in 1998
and Fiscal Year-End Option Values
<CAPTION>
Number of Securities Value of Unexercised
Number of Underlying Unexercised Options at In-the-Money
Securities Underlying Options at Fiscal Options at Fiscal
Options Year-End ($ ) Year-End( #)
Value
Name Exercised(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
F. William Weber - - - - $ - $ -
Dana S. Weber - - 6,400 25,600 6,900 27,500
David E. Boyer - - 11,200 14,800 14,900 15,500
Michael P. Howard - - 4,000 22,000 10,300 44,400
Report of the Compensation Committee
The Compensation Committee (the "Committee") of the Board of Directors is
comprised of Directors who are not officers or employees of the Company, and
the Chief Executive Officer. The Committee is responsible for reviewing and
making recommendations to the Board of Directors regarding the compensation
and benefits of the Company's management personnel.
As discussed under "Employment Agreements and Termination of Employment
Arrangements," the Company entered into employment agreements with F. William
Weber, the Company's Chief Executive Officer, and Dana S Weber, the Company's
Chief Operating Officer. Because salary of Mr. Weber during fiscal 1998 has
been solely pursuant to his employment agreement and the Committee authorized
no discretionary increase in salary, the Committee has not formulated specific
policies concerning compensation of the Chief Executive Officer. Based upon
its review of the relationship between the salaries of Chief Executive
Officers and Chief Operating Officers in comparable companies, the
Compensation Committee has established a salary policy for the Chief Operating
Officer whereby the base salary for that position is approximately 60% of the
base salary of the Chief Executive Officer.
While decisions regarding salary levels for management personnel, other
than the Chief Executive Officer and Chief Operating Officer, are determined
by the Chief Executive Officer and the Chief Operating Officer (subject to
review by the Committee), the Committee has established general policies
designed to enable the Company to reward qualified management personnel and to
provide longer term incentives. The Committee's philosophy is that the
Company's goals are more likely to be achieved if final compensation is tied
to the Company's performance during the year, and that long term stock options
are longer term incentives that are closely aligned with shareholder return.
In fiscal 1998, 225,000 new options were granted to 284 employees and
management personnel, as authorized by the Compensation Committee. The
specific number of options granted was commensurate with the degree of
responsibility of the grantee's position and the length of the grantee's
employment. No options have been granted to the Chief Executive Officer.
The Committee has approved supplemental compensation plans for the Chief
Executive Officer, Chief Operating Officer and other senior management
personnel.
In order to incent the CEO and COO to operate the Company such that long-
term shareholder value is maximized, the Committee awards an annual bonus to
<PAGE>
the CEO and COO that is equal to the increase in the market value of the
Company's Common Stock at a measurement date over an established bonus base
stock price times a multiple established by the Committee. The measurement
date has been established as two weeks after the Company's fourth fiscal
quarter earnings release and the bonus base stock price is typically the
market value of the Company's Common Stock on the date the bonus multiple is
set by the Committee. Upon payment of a bonus under the plan, the bonus base
stock price changes to the stock price upon which the payment was made.
Reductions in the bonus base stock price are not made during the measurement
period for subsequent decreases in stock price. In 1997, the Committee
established a bonus for the CEO on the above terms with a bonus multiple of
50,000 and a bonus base stock price of $5.75. In 1998, $125,000 was paid to
the CEO as a bonus on the 1997 multiple and the bonus base stock price was
increased to $8.25. In 1998, the Committee established an additional bonus
for the CEO and an initial bonus for the COO with multiples of 16,000 and
10,000, respectively, each having a bonus base stock price of $7.25. No bonus
was paid on any of the multiples based on the market price of the Company's
stock two weeks after the 1998 fourth fiscal quarter earnings release and
there was no change to the bonus base stock price of any of the awards.
The Committee has approved a bonus compensation plan for the senior
staff, including the CEO and COO, that is intended to reward participants for
attaining budgetary goals that are established by the Company and approved by
the Committee. The plan is designed to pay a target bonus if such budgetary
goals are attained and increases or decreases the bonus amount at an
accelerated rate if such budgetary goals are exceeded or under-achieved,
respectively. In certain circumstances, the Company deposits all or part of
any such bonuses to a deferred compensation plan maintained by the Company for
the benefit of certain of the Company's executives.
MEMBERS OF COMPENSATION COMMITTEE
F. William Weber
Dr. Kenneth E. Case
Frederick C. Ermel
Neven C. Hulsey
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
The Compensation Committee of the Company's Board of Directors is
comprised of Messrs. Weber, Ermel, Hulsey and Case. Mr. Weber is the Chairman
of the Board and Chief Executive Officer of the Company. There are no
compensation committee interlocks. See "Certain Relationships and Related
Transactions."
<PAGE>
Stock Price Performance Graph
The following graph compares on a cumulative basis the percentage change,
since the Company's initial public offering in February 1994, in the total
shareholder return on the Company's Common Stock, with (a) the total return or
the AMEX Market Value Index, which is being used as the required broad entity
market index, and (b) the total return for a selected peer group index (the
"Peer Group"). The Peer Group consists of Huntco Inc., Maverick Tube
Corporation, Quanex Corporation, Steel Technologies, Inc. Lone Star
Technologies, and Synalloy Corporation. This represents a change from the peer
group identified in the prior year by the deletion of Consolidated Stainless,
Inc. as a result of its bankruptcy during 1998. The Company believes the
amended peer group better reflects companies related to the Company's
industry. The graph assumes (i) investment of $l00 on February 8, 1994 in the
Company's Common Stock, the AMEX Market Value Index and the common stock of
the Peer Group, and (ii) the reinvestment of all dividends.
Webco Industries,Inc. Peer Group American Stock Exhcange
2/08/94 100.00 100.00 100.00
7/29/94 95.31 90.79 88.12
7/31/95 40.63 94.78 106.87
7/31/96 35.94 96.40 109.38
7/31/97 42.97 174.46 130.00
7/31/98 48.83 102.43 141.89
Compliance with Section l6(a) of the Securities Exchange Act of 1934
Under the securities laws of the United States, the Company's directors,
executive officers, and any persons holding more than 10 percent of the Common
Stock are required to report their ownership of Common Stock and any changes
in that ownership, on a timely basis, to the Securities and Exchange
Commission. Based on material provided to the Company, all such required
reports were filed on a timely basis in fiscal 1998, except that as a result
of an oversight as to reporting the grant of a derivative security to Mr. F.
William Weber during 1997 and the reporting of the subsequent payment pursuant
to such grant during 1998, Mr. Weber was delinquent in the reporting of one
transaction during each of 1997 and 1998. The appropriate reports have been
filed to reflect the aforementioned transactions.
<PAGE>
Certain Transactions
C-CAM
The Company paid C-CAM $412,000 in fiscal 1998 pursuant to a contract
with C-CAM for certain fabrication activities at market rates and terms for
such activities. In addition, the Company had a receivable balance at July 31,
1998 of $500,000 for amounts paid on behalf of C-CAM.
Diversified Plastics. Inc.
The Company purchases certain specialty packaging and shipping material
from Diversified Plastics, Inc., an entity owned by F. William Weber. Payments
made by the Company totaled $238,000 in fiscal 1998
Advances to Affiliates
Mr. F. William Weber, Chairman of the Board and Chief Executive Officer,
had an outstanding advance during fiscal 1998 and at July 31, 1998 of
$1,200,000. The advance is subject to a three-year note from Mr. Weber,
collateralized by certain assets having a current market value at least double
the highest outstanding balance advanced pursuant to the note. The note bears
interest at the prevailing rate under the Company's Loan Agreement which is
payable at maturity of the note on August 15, 1999.
Loan to Officer
During 1998, the Company advanced $147,000 to Mr. Michael P. Howard. The
advance is subject to a three-year note collateralized by certain assets.
Interest at 5.7% is paid currently ($8,400 during fiscal 1998). The note is
due on January 31, 2001.
Earle M. Jorgensen Co.
Mr. Neven C. Hulsey, a director of the Company, is Chairman of the Board
of Earle M. Jorgensen Co., the largest independent distributor of metal
products in the United States and one of the larger customers of the Company.
Annual sales to this company and its subsidiaries were approximately
$5,281,000 in fiscal 1998 with outstanding receivable balances of
approximately $694,000 at July 31, 1998.
STOCKHOLDER PROPOSALS
It is contemplated that the Company's 1999 Annual Meeting of Stockholders
will be held on or about December 1, 1999. Stockholders of the Company wishing
to include proposals in the proxy material in relation to the Annual Meeting
of Stockholders to be held in 1999 must submit the same in writing so as to be
received at the executive offices of the Company on or before July 1, 1999.
Such proposals must also meet the other requirements of the rules of the
Securities and Exchange Commission relating to stockholders' proposals.
By Order of the Board of Directors,
MICHAEL P. HOWARD
Assistant Secretary
November 11, 1998
<PAGE>
APPENDIX A
SUMMARY DESCRIPTION OF THE 1994 STOCK INCENTIVE PLAN
General
The Plan is intended to encourage and enable selected management (including
directors) and other key employees of and consultants to, the Company to
acquire a proprietary interest in the Company through the ownership of Common
Stock. Such ownership will provide such persons with a more direct stake in
the future welfare of the Company and encourage them to remain with the
Company or a parent or subsidiary of the Company. It is also expected that
the Plan will encourage qualified persons to seek and accept employment or
other association with the Company or a parent or subsidiary of the Company.
The Plan was adopted by the Board of Directors and stockholders of the Company
on January 19, 1994, and initially reserved for issuance 550,000 shares of
Common Stock. An amendment to increase the number of shares available under
the Plan to 850,000 was approved by the Board of Directors on March 5, 1998,
subject to stockholder approval at the Company's next annual meeting of
stockholders. The Plan is not qualified under Section 401(a) of the Internal
Revenue Code of 1986 (the "Code"), and is not subject to the provisions of the
Employee Retirement Income Security Act of 1974.
The summary of the Plan set out herein is qualified in its entirety by
reference to the Plan, a copy of which is available upon request by any
stockholder of the Company.
Shares Subject to the Plan
The securities to be offered under the Plan are authorized but unissued or
reacquired shares of Common Stock. The number of shares originally authorized
to be issued under the Plan, subject to adjustment as described below, was not
to exceed 550,000 shares. On March 5, 1998, the Board of Directors approved
an increase in the number of shares subject to the Plan to 850,000 shares,
subject to stockholder approval.
Any shares subject to a Plan Award which for any reason terminates, expires,
or is forfeited without the delivery to the holder of the Plan Award of shares
of Common Stock or other consideration may again be subject to a new Plan
Award, except that shares subject to a restricted stock award that are
forfeited after the holder thereof has received dividends or other benefits of
ownership (excluding voting rights) shall not thereafter be available for
grant pursuant to the Plan. If an option or related stock appreciation right
is exercised for shares of Common Stock, the shares covered by such option
shall not thereafter be available for grant pursuant to the Plan. Any shares
of Common Stock that are used by a recipient as full or partial payment of
withholding or other taxes or of the purchase price of shares of Common Stock
acquired on the exercise of an option shall be counted against the limit and
shall not thereafter be available for Plan Awards, except that such shares
shall be available for Plan Awards to persons who are not Insiders.
In the event of any change (through recapitalization, merger, stock dividend
or otherwise) in the character or amount of Common Stock subject to the Plan
appropriate adjustment will be made to the number or kind of shares which may
be acquired under the Plan (and to the exercise price of any outstanding Plan
Awards).
Eligibility and Participation
Plan Awards may be granted to management (including directors) and other key
employees who are employed by, and consultants to, the Company or a parent or
subsidiary of the Company. Nothing contained in the Plan or any agreement
under the Plan will confer on a Participant, or any person claiming rights by
or through a Participant, any rights as a stockholder of the Company unless
and until certificates for shares of Common Stock are issued to any such
individual.
<PAGE>
Awards under the Plan
The Plan permits the granting of any or all of the following type of awards:
(i) stock options, including incentive stock options ("ISOs") and non-
qualified stock options ("NQSOs"); (ii) stock appreciation rights ("SARs");
and (iii) restricted stock. Generally, awards are granted under the Plan for
no consideration other than prior and future services. Awards granted under
the Plan, in the discretion of the Committee, may be granted alone or in
addition to, in tandem with or in substitution for, any other award under the
Plan.
Stock Options and SARS. The Board of Directors or a committee of the Board
designated for such purpose (the "Committee") is authorized to grant to
Participants (i) stock options, including ISOs and NQSOs, which entitle the
Participant to purchase shares of Common Stock, and (ii) SARs, which entitle
the Participant to receive the excess of the fair market value of a share of
Common Stock on the date of exercise over the grant price of the SAR. The
purchase price per share of Common Stock subject to a stock option and the
grant price of an SAR is determined by the Committee but may not be less than
the fair market value of the underlying Common Stock on the date of grant. The
term of each stock option or SAR is fixed by the Committee, except that no
stock option may be exercised after 10 years from the date of grant and, in
the case of an ISO granted to a 10% or more stockholder, such ISO may not be
exercised more than five years from the date of grant. The term of any SAR
granted in tandem with any stock option is generally limited to the term of
the related stock option. Stock options and SARs are exercisable in whole or
in part at such time or times as determined by the Committee. Stock options
may be exercised by payment of the purchase price by the Participant in cash,
stock, other outstanding awards held by the Participant, or as the Committee
determines. Payment by the Company of a Participant's rights under an SAR may
be made in cash, shares of Common Stock or other property, or any combination
thereof, as the Committee determines.
Restricted Stock. The Committee may award shares of restricted stock under
the Plan consisting of shares which may not be disposed of by Participants
until certain restrictions established by the Committee lapse. Generally, such
restrictions will prohibit the transfer of the shares for a period of not less
than one year if the grant is conditioned upon achievement of performance
objectives and three years in other cases. A Participant receiving restricted
stock will have all of the rights of a stockholder of the Company, including
the right to vote the shares and the right to receive any dividends unless the
Committee otherwise determines. Upon termination of employment during the
restriction period, restricted stock will be forfeited subject to such
exceptions, if any, as are authorized by the Committee.
Limitations on Awards
Awards granted under the Plan generally may not be pledged or otherwise
encumbered and generally are not transferable except by will or by the laws of
descent and distribution. Each award is exercisable during the Participant's
lifetime only by the Participant or, if permitted under applicable laws, by
the Participant's guardian or legal representative.
Administration of the Plan
The Plan is administered by the Committee. The Committee is authorized to
designate Participants, determine the types and number of awards to be
granted, set the terms, conditions and provisions of awards, cancel or suspend
awards, prescribe forms of award agreements, interpret the Plan, establish,
amend and rescind rules and regulations relating to the Plan and make all
other determinations which may be necessary or advisable for the
administration of the Plan. Any action of the Committee with respect to the
Plan shall be final, conclusive and binding on Participants and any persons
claiming any right under the Plan from or through Participants.
<PAGE>
Amendment and Termination of the Plan
The Plan may be amended, altered, suspended, discontinued or terminated by the
Board without further stockholder approval, unless such approval of an
amendment or alteration is required by law or regulation or under the rules of
the American Stock Exchange (or other stock exchange or automated quotation
system on which the Common Stock is then listed or quoted). Subject to the
terms of the Plan, no amendment or termination of the Plan may materially and
adversely affect the right of a Participant under any award granted under the
Plan. Unless earlier terminated by the Board, the Plan will terminate when no
shares remain reserved and available for issuance, and the Company has no
further obligation with respect to any award granted under the Plan. In the
event of a change of control of the Company as defined in the Plan,
outstanding awards under the Plan, regardless of any limitations or
restrictions, generally will become fully exercisable and freed of all
restrictions.
Federal Income Tax Effects
The Company believes that under current law the following are the federal
income tax consequences generally arising with respect to awards granted under
the Plan.
The grant of a stock option or an SAR will create no tax consequences for the
Participant or the Company. A Participant will have no taxable income upon
exercising an ISO (except that the alternative minimum tax may apply), and the
Company will receive no deduction at that time. Upon exercising a NQSO or
SAR, the Participant must generally recognize ordinary income equal to the
difference between the exercise price and the fair market value of the
underlying Common Stock on the date of exercise, and the Company will be
entitled to a deduction for the amount recognized as ordinary income by the
Participant. The treatment to a Participant of the disposition of shares
acquired upon the exercise of a stock option or SAR depends on how long the
shares have been held after the acquisition and on whether such shares are
acquired by exercising an ISO or by exercising a NQSO. In the case of ISOs,
any sale or exchange of shares acquired more than two years after the date of
grant of the ISO and more than one year after the date of exercise of the ISO
will be treated as long-term gain or loss.
With respect to the settlement of SARs in cash or in Common Stock or other
property that is either not restricted as to transferability or not subject to
a substantial risk or forfeiture, the Participant must generally recognize
ordinary income equal to the cash or fair market value of the shares or other
property received, and the Company is entitled to a deduction in a
corresponding amount.
With respect to restricted stock awards, the Participant will generally not
have a taxable event at the time the restricted stock is awarded but will
recognize ordinary income equal to the fair market value of the shares or
other property received at the time the shares or other property become either
transferable or not subject to a substantial risk of forfeiture, whichever
occurs earlier. The Company will be entitled to a deduction for the same
amount. In certain circumstances, a Participant may elect to be taxed at the
time of receipt of a restricted stock award rather than upon the lapse of
restrictions on transferability or the substantial risk of forfeiture.
<PAGE>
</TABLE>
