|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Plan Name
|
|
Number of Years
Credited Service
(#)
|
|
Present Value of
Accumulated Benefit
($)
|
|
Payments During
Last Fiscal Year
($)
|
|
William C. Griffiths
|
|
Restoration Plan(3)
|
|
|
4.32
|
|
|
325,137
|
|
|
|
|
|
|
Pension Plan(2)
|
|
|
4.32
|
|
|
72,651
|
|
|
|
|
George L. Wilson
|
|
Restoration Plan(3)
|
|
|
9.16
|
|
|
99,968
|
|
|
|
|
|
|
Pension Plan(2)
|
|
|
9.16
|
|
|
113,558
|
|
|
|
|
Brent L. Korb
|
|
SERP(1)
|
|
|
13.95
|
|
|
1,414,176
|
|
|
|
|
|
|
Pension Plan(2)
|
|
|
13.95
|
|
|
253,011
|
|
|
|
|
Kevin P. Delaney
|
|
SERP(1)
|
|
|
14.29
|
|
|
1,597,039
|
|
|
|
|
|
|
Pension Plan(2)
|
|
|
14.29
|
|
|
504,229
|
|
|
|
|
M. Dewayne Williams
|
|
Restoration Plan(3)
|
|
|
4.33
|
|
|
11,181
|
|
|
|
|
|
|
Pension Plan(2)
|
|
|
4.33
|
|
|
70,976
|
|
|
|
|
-
(1)
-
The
SERP provides retirement benefits for certain designated officers in addition to those provided under the Pension Plan. The purpose of the SERP is to supplement
those retirement benefits that a Participant may be entitled to receive as a salaried employee of the Company. The SERP pays a retirement benefit to eligible executives following retirement or
termination of employment. As noted above, the benefit formula under the SERP equals: 2.75 percent of final average earnings (defined as the highest 36 months of compensation during the
last 60 months preceding retirement or termination) multiplied by years of service (not in excess of 20 years), less the sum of (1) the executive's Pension Plan benefit, and
(2) one-half of the executive's Social Security benefit multiplied by a fraction (which shall not exceed one), the numerator of which is
47
Table of Contents
the
executive's number of years of service and the denominator of which is 20. The definition of "compensation" under the SERP includes W-2 wages modified by excluding reimbursements or other expense
allowances, fringe benefits (cash and noncash), moving expenses, deferred compensation, welfare benefits, performance shares, performance RSUs, restricted stock awards and stock options; and modified
further by including elective contributions under a Company cafeteria plan and the 401(k) Plan.
Vesting
in the SERP is based on five years of service. Early retirement under the SERP requires a participant to attain age 55 with five years of service. Mr. Delaney is currently eligible to
receive an early retirement benefit under the SERP. If a participant retires prior to age 65, the accrued benefit is reduced 5% for each year (and fractional year) that the participant's benefit
commencement precedes age 65.
Benefits
under the SERP are paid under the following options:
-
-
Single Life Annuity
-
-
50%, 75%, or 100% Joint & Survivor Annuity
-
-
10 Year Certain and Life
-
-
Single Lump Sum
The
SERP also pays a death benefit to the designated beneficiary if the participant has retired or terminated employment, but has not commenced payment. In addition, the SERP pays a disability
benefit. Should a participant with six months of service terminate due to disability prior to early retirement, the SERP will pay a disability benefit until age 65 equal to 50% of the sum of his
monthly earnings in effect at the date of his disability and the monthly equivalent of the average of his incentive awards for the prior three plan years, less the sum of (1) the participant's
Pension Plan benefit; (2) the participant's Social Security benefit; (3) the participant's benefit under the Company's group long-term disability insurance plan; (4) the
participant's benefit under an individual disability policy provided by the Company; and (5) the participant's benefit under the Company's wage continuation policy plan. Benefits payable from
the SERP are equal to the actuarial equivalent of the accrued benefit at date of distribution employing the actuarial equivalent definition from the Pension Plan. The Company has no policy for
granting additional service under the SERP. Mr. Griffiths is not participating in the SERP, and therefore participates in the Restoration Plan, described below.
-
(2)
-
The
Pension Plan was established to provide retirement income to the Company's non-union employees. It is an ERISA qualified pension plan. As discussed above, the
Pension Plan pays a retirement benefit to eligible participants depending on whether the participant is a Traditional Participant or a Cash Balance Participant. A Traditional Participant's Pension
Plan Benefit generally is equal to 1.5% of the Traditional Participant's average monthly compensation (that is, the participant's high 5 consecutive years of earnings out of the 10 years
preceding termination or retirement) times years and fractional years of benefit service earned prior to November 1, 1985 plus the sum of 1% of average monthly compensation up to Social
Security covered compensation and 1.5% of the Traditional Member's average monthly compensation in excess of Social Security covered compensation, the total of which is multiplied by years and
fractional years of benefit service from, on and after November 1, 1985. Compensation is defined as earned income excluding deferred compensation. Compensation is limited by the compensation
limits imposed under the Internal Revenue Code. For Cash Balance Participants, the Pension Plan pays the amount in the participant's account balance with interest at date of termination. The
contribution is generally 4% of Pension Plan compensation plus a guaranteed rate of interest. The Pension Plan pays a death benefit prior to retirement to the spouse, or to the estate, if no spouse.
The Pension Plan does not provide for a disability retirement. The Pension Plan requires 5 years of vesting service for
48
Table of Contents
Traditional
Participants and 3 years of vesting service for Cash Balance Participants. Early retirement under the Pension Plan requires a Traditional Participant to have attained age 55 with
5 years of service. Mr. Delaney is currently eligible to receive an early retirement benefit under the Pension Plan. Benefits commencing prior to age 65 are reduced
5
/
9
ths
of 1% for each of the first 60 months, and an additional
5
/
18
ths of 1% for each month in excess of 60 that benefits commence prior to age 65. The Company has no policy for
granting additional service under the Pension Plan. Mr. Delaney is a Traditional Participant, and Messrs. Griffiths, Wilson, Korb and Williams are Cash Balance Participants.
-
(3)
-
The
Restoration Plan was established to provide a retirement pay supplement for a select group of management or highly compensated employees so as to retain their
loyalty and to offer a further incentive to them to maintain and increase their standard of performance. The Restoration Plan pays a retirement benefit in the form of a lump sum to eligible employees
following retirement or termination of employment. If a participant terminates employment, an actuarial equivalent lump sum of the participant's Pension Plan benefit that would be payable if the
applicable limitation under section 401(a)(17) of the Code for each fiscal year of the Pension Plan commencing on or after November 1, 1994, was not limited (indexed for increases in the
cost of living), less the Participant's Pension Plan benefit. Early retirement under the Restoration Plan requires a participant to have attained age 55 with 5 Years of Service. Mr. Griffiths
is currently eligible to receive a retirement benefit under the Restoration Plan. None of the named executive officers is currently eligible to receive an early retirement benefit under the
Restoration Plan. The Restoration Plan requires 5 years of service for vesting purposes for Traditional Participants, and three years of service for Cash Balance Participants. In addition, the
Restoration Plan pays a death benefit to the designated beneficiary of a participant if the participant has retired or terminated employment, but has not commenced payment. The Restoration Plan does
not provide a disability benefit. The Company has no policy for granting additional service under the Restoration Plan.
Qualified Defined Contribution Plans
Salaried and Nonunion Employee 401(k) Plan
We have established the Salaried and Nonunion Employee 401(k) Plan (the "401(k) Plan"), a defined contribution plan intended to be a
tax-qualified plan under Section 401(a) of the Internal Revenue Code, for the benefit of substantially all of our salaried and nonunion hourly employees. An employee is eligible to participate
in the 401(k) Plan on the later of (i) the date the Company or an affiliate which employs the employee adopts the 401(k) Plan or (ii) the date the employee completes one hour of service
for the Company. Effective January 1, 2017, employees of the Company's cabinet components division became eligible to participate in the 401(k) Plan.
Participants
in the 401(k) Plan may contribute from 1% of compensation per payroll period up to a maximum percentage per payroll period to be determined by the administrative committee
of the Company's plans appointed by the Board of Directors (the "Benefits Committee"). Effective January 1, 2017, certain highly compensated employees became subject to a maximum payroll
contribution of 7% per payroll period. In addition, any new participants who do not affirmatively elect otherwise have 3% of their compensation per payroll period automatically contributed to the
401(k) Plan. To the extent permitted by the Benefits Committee, participants may also make after-tax contributions to the 401(k) Plan. Effective January 1, 2017, participants are also allowed
to make Roth contributions to the 401(k) Plan.
Effective
January 1, 2018, the Company makes matching contributions to each participant's account equal to 50% of the pre-tax contributions the participant makes to the 401(k)
Plan, up to 5% of the participant's eligible compensation. Prior to January 1, 2018, participants employed by the Company's cabinet components division received matching contributions equal to
35% of pre-tax
49
Table of Contents
contributions,
up to 5% of the participant's eligible compensation. The Company may, at its discretion, make profit-sharing contributions to the participants' accounts.
Participants
will always be 100% vested in their pre-tax and after-tax contributions to the 401(k) Plan. Company matching and profit-sharing contributions vest 20% per year and are 100%
vested after five years. In addition, a participant will be 100% vested in all amounts under the 401(k) Plan in the event of (i) disability prior to termination of employment,
(ii) retirement or (iii) death prior to termination of employment.
All
distributions from the 401(k) Plan will be made in a single lump sum payment.
Stock Purchase Plans
Employee Stock Purchase Plan
The Employee Stock Purchase Plan (the "Stock Purchase Plan") is designed to provide our eligible employees the opportunity to invest in our
Common Stock through voluntary payroll deductions. In addition, participating employees receive a percentage match from the Company, thereby encouraging employees to share in the Company's success and
to remain in its service. The Stock Purchase Plan is not intended to meet the requirements of Section 423 of the Internal Revenue Code.
The
Stock Purchase Plan is administered by Wells Fargo Shareowner Services (the "Bank"), who may be removed at management's election. On July 12, 2017, Wells Fargo Bank N.A.
announced that it had entered into an agreement to sell the Bank to Equiniti Group plc ("Equiniti Group"). In connection with the sale of the Bank and provided that the sale closes,
administration of the Stock Purchase Plan will be transferred to Equiniti Trust Company ("EQ"). Accordingly, following the closing of the sale,
EQ will serve as the transfer agent and registrar for Quanex Common Stock and as administrator of the Stock Purchase Plan.
Regular
full time employees of the Company or any of the Company's subsidiaries are eligible to participate in the Stock Purchase Plan. Participation in the Stock Purchase Plan is
voluntary.
Contributions to the Stock Purchase Plan consist of employees' payroll deductions and an amount from the Company equal to 15% of those
deductions. The Bank establishes an account under the Stock Purchase Plan as agent for each eligible employee electing to participate in the Stock Purchase Plan and credits the following sources of
cash to each employee's account for the purchase of full and fractional shares of Common Stock ("Plan Shares"):
-
-
such employee's payroll deductions;
-
-
such employee's 15% Company contribution;
-
-
cash dividends received from the Company on all shares in such employee's Stock Purchase Plan account at the time a dividend is paid; and
-
-
cash resulting from the sale of any (i) rights to purchase additional shares of the Company's stock or other securities of the Company,
or (ii) securities of any other issuer.
Participants
generally may not add shares of Common Stock held in their name to their accounts. All shares are held in the name of the Bank or its nominee as Plan Shares subject to the
terms and conditions of the Stock Purchase Plan.
50
Table of Contents
The Bank applies cash credited to each participant's account to the purchase of full and fractional Plan Shares and credits such Plan Shares to
such participants' accounts. The price at which the Bank is deemed to have acquired Plan Shares for accounts is the average price, excluding brokerage and other costs of purchase, of all Plan Shares
purchased by the Bank for all participants in the Stock Purchase Plan during the calendar month. The Bank purchases Plan Shares in negotiated transactions or on any securities exchange where the
Company's Common Stock is traded. The purchases are on terms as to price, delivery and other matters, and are executed through those brokers or dealers, as the Bank may determine.
The Bank holds the Plan Shares of all participants in its name or in the name of its nominee evidenced by as many or as few certificates as the
Bank determines. No certificates representing Plan Shares purchased for participants' accounts are issued to any participant unless the participant makes a request in writing or until the
participant's account is terminated and the participant makes the election described below under "
Termination and Withdrawal by Participants
."
Certificates are not issued for fewer than ten shares unless the participant's account is terminated.
The Bank will vote each participant's Plan Shares as instructed by the participant on a form to be furnished by and returned to the Bank at
least five days (or such shorter period as the law may require) before the meeting at which the Plan Shares are to be voted. The Bank will not vote Plan Shares for which no instructions are received.
Except as otherwise described herein, participants cannot sell, pledge, or otherwise assign or transfer their accounts, any interest in their
accounts or any cash or Plan Shares credited to their accounts. Any attempt to do so will be void.
Subject
to the restrictions set forth below under "
Restrictions on Resale
," each participant may request that the Bank
sell:
-
-
all or part of such participant's Plan Shares at any time, if the participant is employed by the Company or in connection with a division or
subsidiary of the Company immediately before the Company sells or otherwise disposes of that division or subsidiary and after such sale or other disposition the participant is no longer employed by
the Company or its subsidiary; and
-
-
all or any part of such participant's Plan Shares at any time after they have been held in the participant's account for at least six months.
If
a participant elects to sell all of his or her Plan Shares, such participant will be deemed to have terminated participation in the Stock Purchase Plan.
Participants may terminate their participation in the Stock Purchase Plan at any time by giving proper notice. Upon receipt of such notice,
unless the participant has made a contrary election in written response to the Bank's notice relating to such participant's account, the Bank will send the participant a certificate or certificates
representing the full Plan Shares accumulated in the participant's account and a check for the net proceeds of any fractional share in the participant's account. After the participant's withdrawal,
the sale by the participant of any shares of Common Stock issued to the
51
Table of Contents
participant
upon such withdrawal is subject to the restrictions below under "
Restrictions on Resale
." If a participant elects to terminate his or her
participation in the Stock Purchase Plan, he or she may rejoin the Stock Purchase Plan at any time with respect to future offering periods.
The Company's officers, directors and affiliates (as defined by the relevant securities laws) are subject to certain restrictions on resale that
apply to sales by (i) the Bank on their behalf of shares of Common Stock pursuant to the Stock Purchase Plan and (ii) the participant, after he or she withdraws from the Stock Purchase
Plan, of shares of Common Stock issued to the participant upon his or her withdrawal from the Stock Purchase Plan.
Nonqualified Defined Benefit and Other Nonqualified Deferred Compensation Plans
The Company's directors, executive officers, key management and highly compensated employees are eligible to participate in certain non-tax
qualified plans described below.
2008 Omnibus Incentive Plan, as amended
The Company recognizes the importance of aligning the interests of its directors, officers, and employees with those of its stockholders. This
alignment of interests is reflected in the Omnibus Plan, which provides those persons who have substantial responsibility for the management and growth of the Company and its affiliates with
additional performance incentives and an opportunity to obtain or increase their proprietary interest in the Company, thereby encouraging them to continue in their employment or affiliation with the
Company and its affiliates.
The
Omnibus Plan provides for the granting of stock options, stock appreciation rights (SARs), restricted stock, restricted stock units, performance share awards, performance unit
awards, annual incentive awards, other stock-based awards and cash-based awards. Certain awards under the Omnibus Plan may be paid in cash or in Common Stock. Eligibility will be determined by the
Compensation Committee, which has exclusive authority to select the officer and employee participants to whom awards may be granted, and may determine the type, size and terms of each award. The
Compensation Committee will also make all determinations that it decides are necessary or desirable in the interpretation and administration of the Omnibus Plan.
Deferred Compensation Plan
The Company maintains the Quanex Building Products Corporation Deferred Compensation Plan (the "Deferred Compensation Plan"), a plan not
intended to be qualified under section 401(a) of the Internal Revenue Code, which allows certain highly compensated management personnel and directors to defer all or a portion of their
directors' fees, certain compensation under the Omnibus Plan and compensation under the Management Incentive Plan (the "MIP").
None
of the named executive officers maintained a deferred compensation plan account balance during the fiscal year ended October 31, 2017, and, therefore, there were no related
contributions, earnings or withdrawals during fiscal 2017.
The individuals who are eligible to participate in the Deferred Compensation Plan are all participants in the Omnibus Plan or the MIP, and all
of the Company's directors, subject to additional eligibility requirements for participation in the Deferred Compensation Plan as the Compensation Committee may determine from time to time.
52
Table of Contents
A participant may elect, during the designated election periods, (1) the percentage of his bonus awarded under the MIP (an "Incentive
Bonus") earned during the applicable year to be deferred under the Deferred Compensation Plan; (2) the percentage of his compensation earned under the Omnibus Plan during the applicable year
("Omnibus Compensation") to be deferred under the Deferred Compensation Plan; (3) the percentage of his director fees earned during the applicable year to be deferred under the Deferred
Compensation Plan; (4) the percentage to be deferred in the form of deemed shares of Common Stock or other investment funds provided under the Deferred Compensation Plan; (5) the length
of the period for deferral; and (6) the form of payment at the end of the period for deferral (either a lump sum, or quarterly or annual installment payments over a period of time of not less
than three nor more than 20 years). All elections made are irrevocable once they are made for a given plan year, except for the election as to how the distribution is to be made or as otherwise
permitted under applicable Internal Revenue Service guidance. That election can be changed if the change is made at least 12 months prior to the end of the deferral period, is not effective for
at least 12 months and the scheduled payment is no earlier than five years after the date on which the payment would have otherwise have been made or commenced. If the election of the form of
distribution is changed and an event causing distribution occurs within one year, the change in election will be ineffective and the original election will remain in effect.
The
deferrals in the form of deemed shares of Common Stock elected by all participants in any plan year will not be allowed to exceed 3% of the shares of Common Stock outstanding on the
first day of the plan year.
Previously, if a participant elected to defer a portion of his Incentive Bonus, Omnibus Compensation or director fees under the Deferred
Compensation Plan in the form of deemed shares of the Company's Common Stock for a period of three full years or more, the Company provided a matching award of additional deemed shares of Common Stock
equal to 20% of the amount deferred, excluding deferrals of long-term incentives, in the form of deemed shares of our Common Stock. The Company suspended its matching award effective April 1,
2009.
Under the Deferred Compensation Plan, an account is established for each participant, which the Company maintains. The account reflects the
amount of the obligation to the participant at any given time (comprising the amount of compensation deferred for the participant under the Deferred Compensation Plan, the Company match, if any, and
the amount of income credited on each of these amounts). If the participant elects his deferral to be in the form of deemed shares of our Common Stock, the number of shares credited to his account as
Common Stock will be the number of shares of our Common Stock that could have been purchased with the dollar amount deferred, without taking into account any brokerage fees, taxes or other expenses
that might be incurred in such a transaction, based upon the closing quotation on the NYSE on the date the amount would have been paid had it not been deferred. In addition to the option to hold the
account as deemed shares of Common Stock, the participant may choose from a variety of investment choices.
When dividends or other distributions are declared and paid on the Company's Common Stock, those dividends and other distributions will be
accrued in a participant's account based upon the shares of Common Stock deemed credited to the participant's account. Such amounts
credited to a participant's account will vest at the same time the underlying deemed shares of Common Stock vest
53
Table of Contents
and
will be subject to the same forfeiture restrictions. The dividends or other distributions, whether stock, property, cash or other rights, are credited to the account as additional deemed shares of
the Company's Common Stock. For this purpose, all dividends and distributions not in the form of deemed shares of the Company's Common Stock or cash are valued at the fair market value as determined
by the Compensation Committee.
At any time during a period commencing three years prior to the earliest time a participant could retire under the Pension Plan and ending on
the participant's normal retirement date as established under the Pension Plan, the participant is allowed to elect a retirement date under the Pension Plan and may elect to have all deemed shares of
Common Stock in his account converted to cash and deemed to be invested in the participant's selected investment options. At any time which is at least three years after deemed Common Stock is
credited to a participant's account, the participant is allowed to elect to have such deemed Common Stock converted to cash and deemed to be invested in the participant's selected investment options.
All deferrals of the Incentive Bonus, Omnibus Compensation and director fees are 100% vested at all times, except in the event of forfeiture as
described below. Company matching contributions and dividends are 100% vested after the earliest of (i) three years after the applicable deemed share of Common Stock is credited to the
participant's account, (ii) the participant's death, (iii) the participant's termination of employment due to disability or (iv) the participant's retirement.
If
the Compensation Committee finds that the participant was discharged by the Company for fraud, embezzlement, theft, commission of a felony, proven dishonesty in the course of his
employment by the Company that damaged the Company, for disclosing its trade secrets, or for competing directly or
indirectly with the Company at any time during the first two years following his termination of employment, the entire amount credited to his account, exclusive of the total deferrals of the
participant, will be forfeited. Notwithstanding the foregoing, such forfeitures will not apply to a participant discharged during the plan year in which a change of control occurs.
Upon a distribution or withdrawal, the balance of all amounts deemed invested in investment funds and the number of deemed shares of Common
Stock credited to the participant and required to be distributed is distributed in cash, whether the distribution or withdrawal is in a lump sum or in installments. The value per deemed share of
common stock will be calculated based on the closing quotation for the Company's Common Stock on the NYSE. Distributions are made with respect to a participant's interest in the Deferred Compensation
Plan upon the expiration of the term of deferral as was previously elected by the participant or upon the participant's earlier death or disability. A withdrawal may be made by the participant prior
to an event causing distribution, in an amount needed to satisfy an emergency or in certain unforeseeable events of hardship beyond the control of the participant, as approved by the Compensation
Committee.
The
Deferred Compensation Plan is administered in a manner that is intended to comply with Section 409A of the Internal Revenue Code.
54
Table of Contents
COMMON STOCK OWNERSHIP
The following table sets forth, as of the Record Date, the number and percentage of beneficial ownership of shares of Common Stock, Restricted
Stock Units, shares of Phantom Common Stock credited under the Deferred Compensation Plan, and the amount of shares obtainable upon conversion of options exercisable (or exercisable within
60 days) for each current director and nominee for director of the Company, the executive officers named in the Summary Compensation Table on page 37 of this Proxy Statement, and all
officers and directors as a group. Each of the directors and executive officers has sole voting and investment authority with respect to the securities listed by their name below. Unless otherwise
indicated, the directors and current executive officers have not pledged as security any of the shares beneficially owned by them.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
Owned of Record
|
|
Restricted
Stock
Units
|
|
Phantom
Common Stock
Credited Under
DC Plan
|
|
Common Stock
Underlying
Exercisable
Options(1)
|
|
Total
|
|
Percent
|
|
William C. Griffiths
|
|
|
186,350
|
|
|
5,954
|
|
|
0
|
|
|
401,764
|
|
|
594,068
|
|
|
1.69
|
%
|
George L. Wilson
|
|
|
36,686
|
|
|
0
|
|
|
0
|
|
|
76,400
|
|
|
113,086
|
|
|
*
|
|
Brent L. Korb
|
|
|
102,805
|
|
|
0
|
|
|
0
|
|
|
403,366
|
|
|
506,171
|
|
|
1.44
|
%
|
Kevin P. Delaney
|
|
|
109,127
|
|
|
0
|
|
|
0
|
|
|
203,333
|
|
|
312,460
|
|
|
*
|
|
M. Dewayne Williams
|
|
|
12,672
|
|
|
0
|
|
|
0
|
|
|
17,700
|
|
|
30,372
|
|
|
*
|
|
Robert R. Buck
|
|
|
0
|
|
|
16,545
|
|
|
20,839
|
|
|
20,876
|
|
|
58,260
|
|
|
*
|
|
Susan F. Davis
|
|
|
25,182
|
|
|
23,956
|
|
|
20,940
|
|
|
46,308
|
|
|
116,386
|
|
|
*
|
|
LeRoy D. Nosbaum
|
|
|
2,500
|
|
|
19,656
|
|
|
0
|
|
|
35,398
|
|
|
57,554
|
|
|
*
|
|
Joseph D. Rupp
|
|
|
0
|
|
|
23,956
|
|
|
0
|
|
|
56,308
|
|
|
80,264
|
|
|
*
|
|
Curtis M. Stevens
|
|
|
0
|
|
|
19,656
|
|
|
14,438
|
|
|
35,398
|
|
|
69,492
|
|
|
*
|
|
All Officers and Directors as a group(2)
|
|
|
485,332
|
|
|
109,723
|
|
|
56,217
|
|
|
1,307,950
|
|
|
1,959,222
|
|
|
5.59
|
%
|
-
*
-
Less
than 1.0%
-
(1)
-
Includes
options exercisable within 60 days.
-
(2)
-
Includes
10,109 shares and 11,099 stock options held by Scott Zuehlke, the Company's Vice PresidentInvestor Relations and Treasurer.
Section 16(a) Beneficial Ownership Reporting Compliance
Under SEC rules, the Company's directors, executive officers and beneficial owners of more than 10% of the Company's equity securities are
required to file certain reports of their ownership, and changes in that ownership, with the SEC. Based solely on its review of copies of these reports and representations of such reporting persons,
the Company believes that all such SEC filing requirements were satisfied during the fiscal year ended October 31, 2017.
55
Table of Contents
CORPORATE GOVERNANCE
The following sections of this Proxy Statement provide an overview of the Company's corporate governance structure, including our Board
leadership structure, certain responsibilities and activities of the Board and its Committees and independence and other criteria we use in selecting Director nominees. We also discuss how our
stockholders and other stakeholders can communicate with the Board of Directors.
Ongoing Governance InitiativeBoard Declassification
The Company takes good corporate governance extremely seriously and is committed to evolving to meetand
exceedcorporate governance best practices. To this end, following a careful review of the Company's practices, the Board adopted a number of governance reforms in 2015 and 2016, including
a phased declassification of the Board to be achieved over three years. Director nominees at the 2017 Annual Meeting were nominated for terms of only one year, and the same is true for director
nominees at the upcoming 2018 Annual Meeting. All
future director terms will also be for terms of only one year. As a result, the Board will be fully declassified beginning with the Company's Annual Meeting to be held in 2019.
Corporate Governance Guidelines
The following corporate governance guidelines have been adopted by the Board of Directors as the framework within which directors and management
can effectively pursue the Company's objectives of adding to stockholder value. These guidelines reflect the practices and principles by which the Company operates. The Board periodically reviews and
may update these guidelines and other corporate governance matters.
Corporate Governance Guidelines
The Board
-
1.
-
The
business of Quanex Building Products Corporation (the "Company") shall be managed by a Board of Directors (the "Board") who shall exercise all the powers of the
Company not reserved to the shareholders by statute, the Certificate of Incorporation or the By-Laws of the Company.
-
2.
-
The
Chief Executive Officer shall be a member of the Board.
-
3.
-
The
size of the Board, the classification of directors, the term of office, and the process for filling vacancies shall be in accordance with the Company's
Certificate of Incorporation and By-Laws.
-
4.
-
In
its discretion from time to time and as vacancies may occur, the Board may choose to employ a leadership structure consisting of either (a) a joint Chairman
of the Board and Chief Executive Officer with an independent Lead Director, or (b) a non-executive Chairman of the Board, who shall serve in the role of Lead Director, with a separate Chief
Executive Officer.
Board Committees
-
5.
-
The
Board shall at all times maintain an Audit Committee, a Nominating & Corporate Governance Committee, an Executive Committee, and a Compensation &
Management Development Committee, which shall operate in accordance with applicable laws, their respective Charters as adopted and amended from time to time by the Board, and the applicable rules of
the Securities and Exchange Commission and the New York Stock Exchange.
56
Table of Contents
-
6.
-
The
membership of the Audit Committee, the Compensation & Management Development Committee, and the Nominating & Corporate Governance Committee shall
meet the independence requirements of applicable laws, the New York Stock Exchange, and if deemed appropriate from time to time, meet the definition of "non-employee director" under Rule 16b-3
under the Securities Exchange Act of 1934, and "outside director" for purposes of Section 162(m) of the Internal Revenue Code of 1986.
-
7.
-
The
Board may establish such other committees as it deems appropriate and delegate to such committees such authority permitted by applicable law and the Company's
By-Laws as the Board sees fit.
Board Procedure
-
8.
-
At
each regular meeting of the Board, the Board shall meet in executive session, where non-management directors meet without management participation.
-
9.
-
The
Board, in executive session, shall conduct an annual review of the performance of the Chief Executive Officer, taking into account the views and recommendations
of the Chairman of the Compensation & Management Development Committee as set forth in the Committee's Charter.
-
10.
-
The
Board shall review policies and procedures developed by the Company and reviewed and approved by the Compensation & Management Development Committee,
regarding succession to the position of Chief Executive Officer and positions of other corporate officers and key executives in the event of emergency or retirement.
-
11.
-
The
Board shall conduct an annual Self-Assessment to determine whether it and its committees are functioning effectively. The full Board shall discuss the evaluation
to determine what, if any, action could improve Board and Board committee performance.
Board Resources
-
12.
-
The
Board shall establish methods by which interested parties may communicate directly with the Chairpersons of each Committee or with non-employee directors of the
Board as a group and cause such methods to be published.
-
13.
-
The
Company shall provide each director with complete access to the management of the Company, subject to reasonable notice to the Company and reasonable efforts to
avoid disruption to the Company's management, business and operations.
-
14.
-
The
Board and Board committees, to the extent set forth in the applicable committee Charter, have the right to consult and retain independent legal and other
advisors at the expense of the Company.
-
15.
-
The
Board or the Company shall establish, or identify and provide access to, appropriate orientation programs, sessions or materials for newly-appointed directors of
the Company for their benefit either prior to or within a reasonable period of time after their nomination or election as a director.
-
16.
-
The
Board or the Company shall encourage directors to periodically pursue or obtain appropriate programs, sessions or materials as to the responsibilities of
directors of publicly-traded companies.
57
Table of Contents
Director Qualifications
-
17.
-
A
majority of the members of the Board must qualify as independent directors in accordance with the applicable rules of the New York Stock Exchange.
-
18.
-
No
person shall be nominated by the Board to serve as a director after he or she has passed his or her 72nd birthday, unless the Nominating and Governance
Committee has voted, on an annual basis, to waive the mandatory retirement age for such director.
-
19.
-
Directors
shall promptly report changes in their business or professional affiliations or responsibilities, including retirement, to the Chairman of the Board and
the Chairman of the Nominating & Corporate Governance Committee.
-
20.
-
A
director shall offer to resign from the Board if the Nominating & Corporate Governance Committee concludes that the director (a) no longer meets the
Company's requirements for service on the Board, or (b) has experienced a substantial reduction in responsibilities in full time employment. A director shall also offer to resign from the Board
if the director has retired, been terminated, or has otherwise separated from an employer. In an uncontested election, any director who receives a greater number of against and/or withheld votes than
votes for election must tender his or her resignation to the Board promptly following certification of the shareholder vote. Upon such tendered resignation, the Nominating & Corporate
Governance Committee will have forty-five (45) days following certification of the shareholder vote to consider the resignation and recommend to the Board whether or not to accept such
resignation. Following the recommendation of the Nominating & Corporate Governance Committee, the Board must decide within ninety (90) days of certification of the shareholder vote
whether or not to accept the tendered resignation.
-
21.
-
No
director shall serve as a director, officer or employee of a competitor of the Company.
-
22.
-
Non-employee
directors shall not serve in a paid consulting role for the Company.
-
23.
-
Directors
shall advise the Chairman of the Board and the Chairman of the Nominating & Corporate Governance Committee promptly upon accepting any other public
company directorship or any assignment to the audit committee or compensation committee of the board of directors of any public company of which such director is a member.
-
24.
-
Non-employee
directors shall serve on the board of no more than three other public companies.
-
25.
-
A
director who is also an officer of the Company shall not continue serving on the Board upon separation of employment with the Company, except in special instances
to facilitate a transition of management.
-
26.
-
The
Nominating & Corporate Governance Committee shall be responsible for establishing additional qualifications for directors and shall evaluate prospective
nominees against the following standards and qualifications, and any additional qualifications it deems appropriate:
-
a.
-
The
ability of the prospective nominee to represent the interests of the shareholders of the Company;
-
b.
-
The
prospective nominee's standards of integrity, commitment and independence of thought and judgment;
-
c.
-
Whether
the prospective nominee would meet the Company's criteria for independence as required by the New York Stock Exchange;
-
d.
-
The
prospective nominee's ability to dedicate sufficient time, energy and attention to the diligent performance of his or her duties, including the prospective
nominee's service on
58
Table of Contents
Director Responsibilities
-
27.
-
Directors
should exercise their business judgment to act in what they reasonably believe to be in the best interests of the Company in a manner consistent with their
fiduciary duties.
-
28.
-
Directors
are expected to attend all Board meetings and meetings of committees to which they are assigned, and at a minimum, 75 percent of such meetings each
year.
-
29.
-
Directors
are expected to prepare for all meetings of the Board or committees to which they are assigned by reviewing the materials that are sent to all directors in
advance of meetings.
-
30.
-
Non-employee
directors are expected to own, beneficially or otherwise, common shares or common share equivalents of the Company's Common Stock valued at no less than
$220,000, which shares or share equivalents may be accumulated over the first five years of service.
Director Compensation
-
31.
-
The
Nominating & Corporate Governance Committee shall review and recommend for Board approval the form and amount of non-employee director compensation,
including cash, equity-based awards and other director compensation.
-
32.
-
In
determining non-employee director compensation, the Nominating & Corporate Governance Committee, may consult with appropriate advisers to determine levels
of director compensation similar to the compensation of directors of similar companies.
-
33.
-
Non-employee
directors shall be paid in equity, equity equivalents and/or cash for their services, with a deferral option.
-
34.
-
Unless
and until a recommendation is made by the Nominating & Corporate Governance Committee and approval of the Board, the amount of cash compensation for
non-employee directors is as follows: Retainer$55,000/year paid quarterly; Committee Member Retainer Fees$9,000/year paid quarterly for membership on the Audit Committee and
$7,500/year paid quarterly for membership on the Compensation or Governance Committees; Committee chair fees$15,000/year paid quarterly for Audit Committee and $10,000/year paid quarterly
for Compensation and Governance Committees; Lead Director fee of $20,000/year paid quarterly; and reimbursement for all travel and living expenses associated with meeting attendance.
-
35.
-
Unless
and until a recommendation is made by the Nominating & Corporate Governance Committee and approval of the Board, on the date on which a non-employee
director is first elected or appointed as a director, such director will be granted an annual restricted stock unit award that is pro-rated for the time to be served during the current fiscal year
from the director's date of election or appointment. These grants will immediately vest, and will be settled and paid upon the earlier of the director's separation from service or a change in control
of the Company. This pro-rated restricted stock unit award, as well as the first restricted stock unit award granted to such newly appointed or elected director as set forth in paragraph 36 of
these Guidelines, will not be eligible for any form of deferral or other payment timing election.
59
Table of Contents
-
36.
-
Unless
and until a recommendation is made by the Nominating & Corporate Governance Committee and approval of the Board, on the first business day of each
fiscal year, non-employee directors shall receive an annual restricted stock unit award of $80,000 in equivalent value. The restricted stock unit award vests immediately upon issuance. If the
non-employee director meets the director stock ownership guidelines (in shares and share equivalents), payment of the award will be deferred automatically to the director's separation from service
(or, if earlier, a change in control of the company), unless an election is made by the director to settle and pay the award on an earlier permitted specified date, and such election is made prior to
the last day of the deferral election period applicable to the award under Section 409A of the Internal Revenue Code. If the non-employee director has not met the applicable stock ownership
guidelines, then payment of the award will automatically be deferred until the director's separation from service, and no election for an earlier payment date will be allowed. For purposes of this
paragraph, the determination of whether a director meets the stock ownership guidelines will be made as of December 31
st
of the calendar year immediately preceding the
calendar year in which the applicable restricted stock unit award is granted. The restricted stock unit awards to be granted on November 1, 2015, will immediately vest, and will be paid upon
the earlier of the director's separation from service or a change in control of the Company, and no election for an earlier payment date will be allowed for any director, regardless of stock
ownership. For restricted stock units awarded in calendar 2016 and thereafter, the director will have an election for a deferred compensation arrangement under which directors may elect the timing of
the payment in compliance with applicable regulations.
-
37.
-
Unless
and until a recommendation is made by the Nominating & Corporate Governance Committee and approval of the Board, non-employee directors shall not
receive any remuneration from the Company other than as set forth in this Director Compensation section of the Corporate Governance Guidelines.
Role of Lead Director
-
38.
-
The
Lead Director shall preside at each executive session.
-
39.
-
The
Lead Director shall be a member of the Executive Committee and shall have the following responsibilities:
-
a.
-
Chairing
the Board in the absence of the Chairman;
-
b.
-
Acting
as liaison between the Board and the Chairman, as requested by the Board;
-
c.
-
In
concert with the Chairman, setting the agenda for board meetings, based on input from directors and the annual meeting plans;
-
d.
-
Ensuring
that independent directors have adequate opportunity to meet in executive session without management present, and setting the agenda for, and moderating, all
such sessions;
-
e.
-
Communicating
to the Chief Executive Officer, as appropriate, the results of executive sessions among independent directors;
-
f.
-
Ensuring
that the Board has adequate resources, including full, timely and relevant information, to support its decision making requirements;
-
g.
-
Organizing
the Board's evaluation of the Chairman and providing the Chairman with feedback related thereto;
60
Table of Contents
-
h.
-
Working
with the Chairman to ensure proper Committee structure and membership, including the assignment of members and Committee chairs, and appropriate succession
planning related to members and Committee chairs;
-
i.
-
Notifying
the Chairman of the retention of outside advisors and consultants who report directly to the Board;
-
j.
-
Participating
in one-on-one discussions with individual directors, as requested by the Nominating & Corporate Governance Committee;
-
k.
-
Leading
the Board self-assessment process, in conjunction with the Nominating & Corporate Governance Committee;
-
l.
-
Working
with the Chairman to form Special Committees of the Board, as necessary;
-
m.
-
Carrying
out other duties as requested by the Board or the Nominating & Corporate Governance Committee.
Officer Responsibilities
-
40.
-
The
Chief Executive Officer shall serve on the board of no more than one other public company.
-
41.
-
Other
executive officers shall serve on the board of no more than one other public company.
-
42.
-
The
Chief Executive Officer is expected to own, beneficially or otherwise, common shares or common share equivalents of the Company's Common Stock of at least 400%
of the value of his/her base salary within three years of serving in said role. Senior officers are expected to own, beneficially or otherwise, common shares or common share equivalents of the
Company's Common Stock of at least 200% of their base salary and officers 100% of their base salary under the same terms.
Incentive Recoupment
-
43.
-
To
the extent permitted by law, and as determined by the Board in its judgment, the Company may require reimbursement of a portion of any performance-based bonus,
whether settled in cash or stock, granted to any executive where (a) the performance bonus payment was predicated upon the achievement of certain financial results that were subsequently the
subject of a material restatement; and (b) a lower payment would have been made to the executive(s) based upon the restated financial results. In each such instance, the Company will, to the
extent practicable, seek to recover the amount by which the individual performance bonus for the relevant period exceeded the lower payment that would have been made based on the restated financial
results. In addition, following any accounting restatement that the Company is required to prepare due to its material noncompliance, as a result of misconduct, with any financial reporting
requirement under applicable securities laws, the Company will seek to recover any compensation received by the Chief Executive Officer and Chief Financial Officer to the extent such reimbursement is
required under Section 304 of the Sarbanes-Oxley Act of 2002. No reimbursement shall be required if a material restatement was caused by or resulted from any change in accounting policy or
rules.
Hedging Prohibition
-
44.
-
Because
the Company believes it is improper and inappropriate for Company employees and directors to engage in short-term or speculative transactions involving
Company securities, and in order to ensure that all associates bear the full risks of ownership of Company securities, all
61
Table of Contents
Amendment and Waiver
-
45.
-
The
Quanex Corporate Governance Guidelines may be amended, modified, or waived by the Board and waivers of these Guidelines may also be granted by the
Nominating & Corporate Governance Committee, subject to the disclosure and other provisions of the Securities Exchange Act of 1934, the rules promulgated thereunder and the applicable rules of
the New York Stock Exchange.
-
46.
-
The
Board shall perform any other activities required by applicable law, rules or regulations, including the rules of the Securities and Exchange Commission and any
exchange or market on which the Company's capital stock is traded, and perform other activities that are consistent with these Guidelines, the Company's certificate of incorporation and bylaws, and
governing laws, as the Board deems necessary or appropriate.
-
47.
-
Nothing
contained in these Guidelines is intended to expand applicable standards of liability under statutory or regulatory requirements for the directors or
executive officers of the Company. The purposes and responsibilities outlined in these Guidelines are meant to serve as guidelines rather than as inflexible rules and the Board may adopt such
additional procedures and standards as it deems necessary or advisable from time to time to fulfill its responsibilities or comply with applicable laws, rules or regulations. In addition, the Board
may amend any procedures or standards set forth in these Guidelines as it deems necessary from time to time to comply with applicable laws, rules or regulations. These Guidelines, and any amendments
thereto, shall be displayed on the Company's web site and a printed copy of such shall be made available to any shareholder of the Company who requests it.
Communications with the Company
Quanex invites inquiries to the Company and its Board of Directors. Interested persons may contact the appropriate individual or department by
choosing one of the options below.
General
For Investor Relations matters or to obtain a printed copy of the Company Code of Ethics, Corporate Governance Guidelines or charters for the
Audit, Compensation & Management Development, and Nominating & Corporate Governance Committees of the Board of Directors, send a request to the Company's principal address below or by
email to inquiry@quanex.com. This material may also be obtained from the Company website at
www.quanex.com
in the "
Investor
Relations
" section. The Company has also adopted a Code of Business Conduct & Ethics for Senior Financial Executives that applies to the Company's principal executive
officer, principal financial officer, principal accounting
62
Table of Contents
officer
or controller and persons performing similar functions. This Code can be obtained without charge in the same manner as the other material described in this paragraph.
The
Company's required Securities Exchange Act filings such as annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and
amendments to those reports are available free of charge through the Company's website, as soon as reasonably practicable after they have been filed with or furnished to the Securities and Exchange
Commission ("SEC") pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the "1934 Act" or the "Exchange Act"). Forms 3, 4 and 5 filed with respect to equity
securities under Section 16(a) of the 1934 Act are also available on the Company's website. All of these materials are located in the "
Investor
Relations
" section of the Company's website at
www.quanex.com
. They can also be obtained free of charge upon request to the
Company's principal address or telephone number below, or by email to inquiry@quanex.com.
Persons wishing to communicate to the Company's Board of Directors or a specified individual director may do so by sending communications in
care of the Chairman of the Board of Directors at the Company's principal address below, or by sending an email to chairman@quanex.com. The Chairman reviews all such messages received. If the
communication is from a stockholder about a matter of stockholder interest and is addressed to a specified individual director(s), the Chairman will forward the communication as soon as practicable to
such specified director(s). However, because other appropriate avenues of communication exist for matters that are not of stockholder interest, such as general business complaints or employee
grievances, communications that do not relate to matters of stockholder interest may not be forwarded to specified Board members or the Board as whole. The Chairman or his delegate has the right, but
not the obligation, to forward such other communications to appropriate channels within the Company.
As
noted in the Corporate Governance Guidelines, the Lead Director shall preside at each executive session of non-management directors. Any stockholder wishing to send communications to
such presiding director, or non-management directors as a group, may do so by sending them in the care of Lead Director, Quanex Building Products Corporation Board of Directors, at the Company's
principal executive offices.
Alert Line
Persons who have concerns or complaints regarding questionable accounting, internal accounting controls or auditing matters may submit them to
the Senior Vice PresidentFinance and Chief Financial Officer at the Company's principal address or by contacting the Company's Alert Line by calling (888) 475-0633 or visiting
https://
quanex.alertline.com
.
Such
communications will be kept confidential to the fullest extent possible. If the individual is not satisfied with the response, he or she may contact the Audit Committee of the Board
of Directors of the Company by sending a communication in care of the Audit Committee Chairman at the Company's principal address below. If concerns or complaints require confidentiality, then this
confidentiality will be protected, subject to applicable laws.
Employees, officers and directors who suspect or know of violations of the Company Code of Business Conduct and Ethics, or illegal or unethical
business or workplace conduct by employees, officers or directors have an obligation to report it. If the individuals to whom such information is
63
Table of Contents
conveyed
are not responsive, or if there is reason to believe that reporting to such individuals is inappropriate in particular cases, then the employee, officer or director may contact the Chief
Compliance Officer, Chief Financial Officer, Vice President of Internal Audit, or any corporate officer in person, by telephone, by letter to the Company's principal address, or online as set forth
below. Quanex also encourages persons who are not affiliated with the Company to report any suspected illegal or unethical behavior.
1)
By Letter
2)
By Telephone
3)
Via Internet
Such
communications will be kept confidential to the fullest extent possible. If the individual is not satisfied with the response, he or she may contact the Nominating &
Corporate Governance Committee of the Board of Directors of the Company. If concerns or complaints require confidentiality, then this confidentiality will be protected, subject to applicable laws.
64
Table of Contents
STRUCTURE AND COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board consists of six directors. All directors other than Mr. Griffiths are independent in accordance with the independence
requirements set forth in the listing standards of the New York Stock Exchange. The Company's independent directors sit on all of the three primary committees. Therefore the Audit,
Compensation & Management Development, and Nominating & Corporate Governance Committees are all comprised solely of independent directors. In addition, the Board selects a separate
independent Lead Director. Currently, Mr. Rupp serves as the independent Lead Director.
The
Board believes that its leadership structure is best for the Company at the current time. The Board believes that a number of advantages are gained by combining the positions of
Chairman and Chief Executive Officer along with an appropriately empowered Lead Director. By vesting chairmanship duties in the Chief Executive Officer, the Board is effectively providing a leadership
role to the director who is most familiar with the Company's business and industry, most capable of effectively identifying
strategic priorities, and most effective at leading the strategic discussions that will drive the Company's future. By allowing the Chief Executive Officer to lead meetings and discussions, the Board
ensures that its focus remains on those items that are most important to the business and its strategic direction, while allowing independent directors to provide advice and oversight based on their
own valuable experience and expertise. It also allows for a more effective flow of information between the Board and management, improving efficiency and reducing confusion about the Company's
strategic and operational directions. Further, combining the roles provides for strong and stable leadership vested in a single person, thereby avoiding confusion and providing appropriate
accountability for the Company's leader. The Board and the Lead Director ensure this accountability by providing oversight of the Chairman and CEO, both directly by the Lead Director through personal
conversations with the Chairman and CEO, and also by the Board through its annual CEO performance reviews and periodic director performance reviews.
The
Company's independent directors meet in regularly scheduled executive sessions at each of the Company's regular Board meetings, without management present and with the Lead Director
presiding. The Lead Director is actively engaged in facilitating communication with the individual directors and the CEO, and provides guidance and counsel to the CEO on behalf of the independent
directors.
In
addition, the Lead Director is responsible for chairing the Board in the absence of the Chairman; acting as liaison between the Board and the Chairman; assisting the Chairman in
setting the agenda for Board meetings; ensuring that there are adequate opportunities for executive sessions of the directors and communicating the results of all such sessions; participating in
one-on-one discussions with individual directors as requested by the Governance Committee; and working with the Chairman to form Special Committees of the Board, if necessary.
During
fiscal 2017, the Board of Directors met eight times, and the independent directors met five times in executive session with the Lead Director presiding. In addition, the Audit
Committee met five times, the Compensation & Management Development Committee met three times, and the Nominating & Corporate Governance Committee met twice. The Executive Committee did
not meet. All directors attended more than 75% of the combined number of Board meetings and meetings of committees of which they are members. The Company's Board of Directors holds a meeting
immediately following each year's annual meeting of stockholders. Therefore, members of the Company's Board of Directors generally attend the Company's annual meetings of stockholders. All Board
members attended the 2017 stockholders' meeting, with Ms. Davis attending telephonically.
Audit Committee
The members of the Audit Committee are Messrs. Buck, Nosbaum, and Stevens (Chairman), each of whom satisfies the independence
requirements of the New York Stock Exchange and the 1934 Act
65
Table of Contents
and
meets the definitions of "non-employee director" under Rule 16b-3 of the 1934 Act and "outside director" under Section 162(m) of the Internal Revenue Code of 1986. In addition, all
members of the Audit Committee have been designated "audit committee financial experts" within the meaning of Item 407(d)(5) of Regulation S-K.
The
Audit Committee's responsibilities to the Board are detailed in the written Audit Committee Charter adopted by the Company's Board of Directors, which is posted on the Company's
website at
www.quanex.com
and incorporated in this Proxy Statement by reference. The Audit Committee's primary functions include monitoring the
integrity of the Company's financial reporting process, reviewing the Company's system of internal financial and disclosure controls and the performance of the Company's internal audit function,
oversight of the Company's annual independent audit and its public accountant's qualifications and independence, and reviewing compliance with applicable laws and regulations which may represent
material financial exposure to the Company. Interested Stockholders may also obtain a copy of the Audit Committee Charter, free of charge, by contacting the Company at the address or phone number
listed in the section entitled "
Communications with the Company
".