<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO.)
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [x]
Check the appropriate box:
<TABLE>
<S> <C> <C>
[x] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Birmingham Steel Corporation
----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
The United Company Shareholder Group
---------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) (1) and
0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identity the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
THE UNITED COMPANY SHAREHOLDER GROUP
1005 GLENWAY AVENUE
BRISTOL, VIRGINIA 24201
Dear Fellow Shareholders:
As shareholders of Birmingham Steel Corporation (the "Company"), we
have become dissatisfied over the Company's performance in recent years. We
along with other shareholders have formed a shareholder group (the "Group") to
nominate nine persons for election as directors of the Company. We have slated
John D. Correnti, former Chief Executive Officer of Nucor Corporation, to be the
Chief Executive Officer of the Company. In order to install Mr. Correnti as
Chief Executive Officer, we need you to vote for our director nominees.
The persons we have nominated for election as directors are: John D.
Correnti, James A. Todd, Jr., James W. McGlothlin, Donna M. Alvarado, Robert M.
Gerrity, Alvin R. Carpenter, Robert H. Spilman, Jerry E. Dempsey, and Steven R.
Berrard. Each of these nominees is committed to electing Mr. Correnti as Chief
Executive Officer. We believe Mr. Correnti possesses the managerial and
relationship skills necessary to improve the Company's financial and operational
performance and increase shareholder value. As apparent from the Company's
recent restructuring announcement, we believe that current management is
determined to continue managing the Company without regard to the best interests
of the shareholders.
To enable us to vote your shares for our director nominees, PLEASE
MARK, SIGN, DATE, AND RETURN THE ENCLOSED BLUE PROXY CARD IN THE ENVELOPE
PROVIDED. If you have already returned the proxy card sent to you by the
Company, you may revoke that proxy and vote for our nominees by marking,
signing, dating, and mailing a later dated BLUE proxy card.
Sincerely yours,
/s/ John D. Correnti
- --------------------------
John D. Correnti
/s/ James A. Todd, Jr.
- --------------------------
James A. Todd, Jr.
The United Company
By /s/ James W. McGlothlin
- --------------------------
James W. McGlothlin
Its President
<PAGE> 3
1999 ANNUAL MEETING OF STOCKHOLDERS
OF
BIRMINGHAM STEEL CORPORATION
PROXY STATEMENT OF THE UNITED COMPANY SHAREHOLDER GROUP
IN OPPOSITION TO THE BOARD OF DIRECTORS
OF BIRMINGHAM STEEL CORPORATION
GENERAL
This Proxy Statement and the accompanying BLUE proxy card are being
furnished in connection with the solicitation of proxies by a group of
shareholders composed of John D. Correnti, James A. Todd, Jr., The United
Company, and certain other shareholders named herein (the "Group") to be voted
at the Annual Meeting of the Stockholders of Birmingham Steel Corporation (the
"Company") to be held on ___________________, and at any adjournments,
postponements, or reschedulings thereof (the "Annual Meeting"). At the Annual
Meeting, nine directors of the Company will each be elected for a one-year term
or until the election and qualification of each of their successors. The Group
is soliciting your proxy in support of the election of the Group's nine
nominees named herein (the "Group Nominees") as directors of the Company.
This proxy statement and proxy card are first being mailed to the
stockholders of the Company on or about ________________. The principal office
of the lead shareholder of the Group is located at 1005 Glenway Avenue, Bristol,
Virginia 24201. The principal office of the Company is located at 1000 Urban
Center Drive, Birmingham, Alabama 35242.
IMPORTANT
At the Annual Meeting, the Group seeks to elect the Group Nominees as
the directors of the Company. THE GROUP URGES YOU TO MARK, SIGN, DATE AND RETURN
THE ENCLOSED BLUE PROXY CARD TO VOTE FOR THE ELECTION OF THE GROUP NOMINEES.
Your Proxy is important. No matter how many or how few shares you own, please
vote FOR the Group Nominees.
THE GROUP URGES YOU NOT TO SIGN ANY PROXY CARD SENT TO YOU BY THE
COMPANY (BIRMINGHAM STEEL CORPORATION). IF YOU HAVE ALREADY MAILED A PROXY CARD
SUPPLIED TO YOU BY THE COMPANY, YOU HAVE EVERY RIGHT TO CHANGE YOUR VOTE BY
SIGNING, DATING AND RETURNING THE ENCLOSED BLUE PROXY CARD IN THE ENCLOSED
ENVELOPE. ONLY YOUR LATEST DATED PROXY FOR THE ANNUAL MEETING WILL COUNT.
IF YOU HAVE ANY QUESTIONS OR HAVE ANY DIFFICULTY GRANTING PROXIES, YOU ARE
INVITED TO CONTACT CHASEMELLON TOLL-FREE AT (800) 636-8927.
<PAGE> 4
VOTING AND PROXY PROCEDURES
At the Annual Meeting, nine directors of the Company will each be
elected for a one-year term or until the election and qualification of their
successors. The Group is soliciting your proxy in support of the election of the
Group Nominees. See "ELECTION OF DIRECTORS".
The Company's Board of Directors has fixed the close of business on
______________, 1999 as the record date (the "Record Date") for determining the
stockholders of the Company entitled to vote at the Annual Meeting and any
adjournment thereof. According to the Company, as of the Record Date, the
Company had outstanding ______________ shares of common stock. Each share of
common stock is entitled to one vote with respect to each matter to be voted on
at the Annual Meeting. According to the Company's bylaws, directors shall be
elected by a plurality of the votes of the shares present in person or
represented by proxy at the Annual Meeting and entitled to vote on the election
of directors. Plurality means, in order to protect your right to select the CEO
of your choice, you must vote your shares.
Shares represented by the enclosed BLUE proxy card will be voted as
specified. If no specification is made, shares represented by the enclosed BLUE
proxy card will be voted for the election of the Group Nominees as directors of
the Company. An executed proxy may be revoked either by a later-dated proxy
concerning the same matters, by voting in person at the Annual Meeting, or by
giving notice of revocation in writing to the Group at c/o ChaseMellon, 450 West
33rd Street, 14th Floor, New York, New York 10001 Attn: Dan DeWeever.
The Group knows of no other business to be presented at the Annual
Meeting, but if other matters do properly come before the Annual Meeting, the
persons named in the enclosed Proxy will use their discretion to vote on such
matters in accordance with their best judgment.
If you own your shares in the name of a brokerage firm, bank nominee or
other institution, only they can vote your shares of common stock. Accordingly,
you should contact the person responsible for your account and give instructions
with respect to the granting of proxies.
REASONS FOR THIS SOLICITATION
INTRODUCTION
As stockholders of the Company, the Group has become dissatisfied over
the Company's performance in recent years. The Company's stock has
significantly under performed both the Standard & Poor's ("S & P") 500 Stock
Index and a Peer Group Index over the past two fiscal years, as shown by the
following graph. The Peer Group Index consists of Nucor Corporation, Oregon
Steel Mills, Inc., Quanex Corporation, Roanoke Electric Steel Corporation, and
Commercial Metals.
2
<PAGE> 5
TOTAL SHAREHOLDER RETURNS
(DIVIDENDS REINVESTED)
<TABLE>
<CAPTION>
ANNUAL RETURN PERCENTAGE
YEARS ENDING
COMPANY NAME/INDEX JUN98 JUN99
- ------------------------------------------------------------------------
<S> <C> <C> <C>
BIRMINGHAM STEEL CORP (18.257) (64.648)
S&P 500 INDEX 30.162 22.756
PEER GROUP (12.723) 0.129
INDEXED RETURNS
YEARS ENDING
BASE
PERIOD
COMPANY NAME/INDEX JUN97 JUN98 JUN99
- ------------------------------------------------------------------------
BIRMINGHAM STEEL CORP 100.000 81.743 28.898
NUCOR CORP 100.000 130.162 159.782
OREGON STEEL MILLS INC 100.000 87.277 87.390
</TABLE>
Additionally, the earnings of the Company have significantly decreased
over the same two year period as shown by the following chart.
BIRMINGHAM STEEL CORPORATION
FISCAL YEAR 1998-1999 QUARTERLY EARNINGS PER SHARE
<TABLE>
<CAPTION>
Q1/'98 Q2/'98 Q3/'98 Q4/'98 Q1/'99 Q2/'99 Q3/'99
- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
24 cents 2 cents (14)cents 4 cents (7)cents (20)cents (53)cents
</TABLE>
Note: These earnings have been adjusted to exclude certain
extraordinary items. The earnings referenced are adjusted earnings used by
certain analysts who regularly follow the Company. The Company's fiscal year
begins on July 1 and ends on June 30, so fiscal years 1998 and 1999 began on
July 1, 1997 and July 1, 1998, respectively.
The Group believes that the directors and certain management of the
Company need to be replaced to maximize stockholder value, improve earnings, and
restore analysts' confidence in the Company. In order to remove any obstacle to
enhancing shareholder value, the Group intends to remove the Company's poison
pill.
3
<PAGE> 6
RECENT DEVELOPMENTS
Meetings with Company Representatives
Representatives of the Group met with representatives of the Company in
Washington, D.C. on August 2, 1999 (the "Meeting"). As a preamble to the meeting
the Group advised that its position was clearly stated in the Group's July 29,
1999 13D Filing - designation of John Correnti as Chairman and CEO and a
majority of the Board of Director seats. The Group further advised that unless
these issues were on the table, a meeting would not be productive. Present at
the Meeting on behalf of the Group were James W. McGlothlin and counsel for the
Group. The Company was represented by Stephen Clegg, a director of the Company
and representative of the Company's Board of Directors, and Peter Atkins,
counsel for the Company. The Group specified that it would not be useful to have
Mr. Garvey attend the meeting and this was agreed upon.
The meeting took place with Mr. McGlothlin proposing that (i) the Board
be expanded to 12 members - 7 designated by the Group and 5 designated by the
Company, and (ii) John D. Correnti be elected Chairman and Chief Executive
Officer, and (iii) a single proxy agreed to by the Group and the Company be
submitted for shareholder approval.
Mr. Clegg proposed that since Mr. Correnti was in Washington D.C. on
another matter that he meet with Mr. Correnti. Furthermore, Mr. Clegg requested
that Mr. McGlothlin meet with Mr. Garvey who was in another room at the meeting
site. These meetings were held and at the conclusion of these discussions Mr.
McGlothlin reiterated the Group's position to Mr. Clegg.
On or about August 9, 1999, Mr. Clegg notified Mr. McGlothlin that
the Company's Board of Directors was not receptive to the Group's proposal.
Accordingly, no further meetings or discussions have been held. Therefore,
the Group has proceeded to conduct this proxy solicitation.
Restructuring Announcement
On August 18, 1999, the Company announced a restructuring of its
operations, including the sale of its SBQ business which would precipitate a
substantial write-off in the Company's delayed earnings release for the fourth
quarter when even a modest write-off would most likely violate the Company's
loan documents if not approved by the applicable lender. The Group believes that
the announced restructuring is a desperate attempt to keep the current CEO in
office. The Group does not believe that the Company's current CEO has
demonstrated that he can manage the business of the Company in a profitable
manner or marshal the financial and business resources necessary to increase
the share price. The Group does not believe that with over $600 million in debt
the Company can spin off its SBQ business in a manner that will relieve the
Company of enough debt or provide sales proceeds adequate to result in a
substantial increase in the price of the Company's shares.
The Company's announcement of its proposed restructuring may
mask the results of the fourth quarter of 1999. The Group does not believe that
the performance of current management evidences an ability to manage a
restructuring that will restore the value of your stock in the Company. The
restructuring does not indicate that the current CEO will be any more sensitive
to the needs of the Company's customers, employees, suppliers and shareholders
than he has in the past. The restructuring will also do nothing to restore the
Company's credibility with the steel analysts.
4
<PAGE> 7
JOHN D. CORRENTI AS CHIEF EXECUTIVE OFFICER
The Group has slated John D. Correnti to become the Chief Executive
Officer of the Company. The Group believes Mr. Correnti is the preeminent steel
mini-mill operator in the world. Mr. Correnti possesses the managerial and
relationship skills necessary to improve the Company's financial and operational
performance and enhance shareholder value.
Mr. Correnti was President, Chief Executive Officer, and Vice Chairman
of Nucor Corporation, a mini mill manufacturer of steel products, from January
1996 to June 1999 and President and Chief Operating Officer from 1991 to 1996.
Mr. Correnti left Nucor in June, 1999. While Mr. Correnti served in an
executive capacity, Nucor's revenues increased from approximately $1.0 billion
in 1991 to $4.1 billion in 1998. Earnings increased during the same period to
nearly $300 million from approximately $75 million, and stockholder equity to
over $2.0 billion from approximately $1.1 billion. Nucor is recognized as the
premiere steel mini mill company in the world and is the second largest steel
producer in the USA. In 1998, Mr. Correnti was recognized by New Steel Magazine
as its Steel Maker of the Year. Mr. Correnti has over 30 years experience in
the steel industry. Prior to joining Nucor, he was associated with United
States Steel Corporation from 1969 to 1980 in various managerial capacities. He
is a graduate of Clarkson University with a degree in Civil Engineering. See
"ELECTION OF DIRECTORS" and "ADDITIONAL INFORMATION REGARDING GROUP NOMINEES".
GENERAL PERFORMANCE AND OPERATIONAL PROBLEMS OF THE COMPANY
Set forth below are some of the reasons the Group believes that
management's performance has been inadequate and why the Group is seeking your
votes in support of the Group's solicitation of proxies. The Group believes that
John Correnti has the management skills and managerial experience to promptly
address the operational problems of the Company and implement strategies to
return the Company's operations to profitability and to enhance shareholder
value.
Forecasting Problems
Customarily steel analysts talk with operating steel companies several
times during a reporting quarter to verify the validity of their estimates with
respect to the earnings the steel companies expect to report. These
conversations can be initiated by either party - analysts to confirm their
estimates and steel companies to report that operations may result in lowering
or raising the earnings they expect to announce. These conversations keep the
estimates from varying too widely and reduce the possibility that the steel
companies will announce negative earnings surprises. When a steel company's
earnings disappoint the market these conversations become more frequent in
subsequent quarters.
The Company has, over the past two years, repeatedly failed to meet
earnings expectations and has not been able to provide analysts with adequate
information to enable analysts to make accurate earnings estimates. The Company
has lost the confidence of the steel industry analysts. The following tables
show the estimates of one analyst during the most recent two fiscal years of
the
5
<PAGE> 8
Company compared to the Company's actual quarterly earnings for those two years.
These tables (I & II) show why the Company's credibility with the analysts has
deteriorated and the effect that this deterioration and the Company's recent
operating results have had on the price of the Company's shares, the target
price and the rating of the stock.
Table I shows that after starting the second quarter of fiscal year
1998 with a buy rating and a target of $21 a share, by the fourth quarter of
fiscal year 1998 the stock rating had been reduced to neutral and the target
price to $15 per share. The original earnings estimate for fiscal year 1998 was
69(cent) per share. However, the Company reported actual earnings of 16(cent)
per share for the 1998 fiscal year.
Steel analysts predict both earnings for the current fiscal year and
the subsequent fiscal year so that shareholders have a long term view of the
steel company's plans and prospects. Table I shows that during fiscal year 1998
the original earnings estimate for fiscal year 1999 was decreased from $1.35
per share to $1.06 per share. Table II shows that the earnings estimate for
fiscal year 1999 was further decreased during fiscal year 1999 to negative
90(cent) per share. The Company has yet to report actual earnings for the
fourth quarter of the 1999 fiscal year. During the 1999 fiscal year, the target
price of the Company's stock decreased from $12 per share to $5 per share.
Furthermore, the market price of the Company's shares fell to $3.88 in the
second quarter of the 1999 fiscal year.
On July 29, 1999, the Group filed a Schedule 13D with the United States
Securities and Exchange Commission The Schedule 13D expressed the Group's
intention to replace the current CEO of the Company with Mr. Correnti. After the
13D was filed, the analyst issued a Buy recommendation on the stock and revised
the target price from $5 per share to $15 per share.
<TABLE>
<CAPTION>
TABLE I
FISCAL YEAR 1998 - ACTUAL EARNINGS PER SHARE ("A") AND
FORECAST EARNINGS ("E") PER SHARE FROM ANALYST
DATE OF CURRENT FIRST SECOND THIRD FOURTH FISCAL FISCAL RATING TARGET
ANALYST STOCK QUARTER QUARTER QUARTER QUARTER YEAR 1998 YEAR 1999 PRICE
RELEASE PRICE PER
SHARE
($)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
*22(cents)E 2(cents)E 10(cents)E 32(cents)E 69(cents)E $1.35E OutPer $21
11/13/97 15.56 24(cents)A 2(cents)E 10(cents)E 32(cents)E 69(cents)E $1.35E Buy $21
1/14/98 16.50 24(cents)A 2(cents)A 10(cents)E 32(cents)E 69(cents)E $1.35E OutPer $21
1/27/98 15.88 24(cents)A 2(cents)A 10(cents)E 35(cents)E 72(cents)E $1.35E OutPer $21
2/21/98 17.18 24(cents)A 2(cents)A 10(cents)E 35(cents)E 72(cents)E $1.35E OutPer $21
(1)
3/10/98 17.62 24(cents)A 2(cents)A -4(cents)E 26(cents)E 48(cents)E $1.35E OutPer $21
</TABLE>
6
<PAGE> 9
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4/16/98 17.00 24(cents)A 2(cents)A -14(cents)A 5(cents)E 17(cents)E $1.12E Neutral $15
7/21/98 11.50 24(cents)A 2(cents)A -14(cents)A 5(cents)E 17(cents)E $1.06E Neutral $15
7/30/98 9.62 24(cents)A 2(cents)A -14(cents)A 2(cents)E 15(cents)E $1.06E Neutral $12
(2)
8/12/98 9.56 24(cents)A 2(cents)A -14(cents)A 4(cents)A (3) 16(cents)A $1.06E Neutral $12
</TABLE>
* Represents consensus estimate. The analyst whose estimates are used
throughout the remainder of this table had not begun to follow the
Company at this time.
(1) Stock repurchase program announced.
(2) Write off of Laclede Steel Company investment announced.
(3) The Company reported net earnings of 16(cents)per share rather than
4(cents)per share as shown in the Table due to the write off of Laclede
Steel Company and other items.
TABLE II
FISCAL YEAR 1999 - ACTUAL EARNINGS PER SHARE ("A") AND
FORECAST EARNINGS ("E") PER SHARE FROM ANALYST
<TABLE>
<CAPTION>
DATE OF CURRENT FIRST SECOND THIRD FOURTH FISCAL FISCAL RATING TARGET
ANALYST STOCK QUARTER QUARTER QUARTER QUARTER YEAR 1999 YEAR 2000 PRICE
RELEASE PRICE PER
SHARE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/12/98 $9.56 20(cents)E 19(cents)E 28(cents)E 39(cents)E $1.06E $1.50E Neutral $12
9/9/98 $6.56 10(cents)E 15(cents)E 22(cents)E 34(cents)E 81(cents)E $1.40E Neutral $ 7
10/23/98 $5.68 -7(cents)A -3(cents)E 5(cents)E 15(cents)E 10(cents)E $1.20E Neutral $ 5
12/21/98 (1) $3.88 -7(cents)A -3(cents)E 5(cents)E 15(cents)E 10(cents)E $1.20E Neutral $ 5
1/21/99 (2) $4.62 -7(cents)A -20(cents)A 5(cents)E 15(cents)E -7(cents)E $1.20E Neutral $ 5
2/16/99 $4.25 -7(cents)A -20(cents)A -10(cents)E -2(cents)E -39(cents)E 75(cents)E Neutral $ 5
4/22/99 (3) $6.06 -7(cents)A -20(cents)A -53(cents)A -10(cents)E -90(cents)E 75(cents)E Neutral $ 5
8/2/99 (4) $7.50 -7(cents)A -20(cents)A -53(cents)A -10(cents)E -90(cents)E 75(cents)E Buy $15
</TABLE>
(1) Press release announcing departure of two Executive Vice Presidents.
(2) In the second quarter, the Company reported 17(cents) loss after
electrode settlement payment of $1.4 million.
(3) Report of third quarter start up expense of $20.6 million or
$.45/share, including $12.4 million write down of Memphis Billet Plant.
(4) Filing of Schedule 13D by Group indicating proxy contest intent.
7
<PAGE> 10
Start-up and Other Operational Problems
The major operational problem that has plagued the Company over the past
two years is start-up costs in certain new operations. In this regard one of the
steel analysts has commented as follows with respect to certain of the Company's
start-up operations, "while start-up risk is a fact of life in the steel
industry, most of the Company's spending is on proven technology. Consequently
production problems are not likely to be major." This puts start-ups into
perspective, but the Group believes because of inattention, poor supervision and
inadequate leadership, start-ups have been a major problem for the Company.
Start up costs have crippled the Company financially. The current CEO
reported at a Steel CEO Conference that start-up costs for the Memphis and
Cartersville facilities for the first 3 quarters of fiscal year 1999 were $62
million (approximately $2/share). Aggregate start-up costs for fiscal year 1998
and fiscal year 1999 exceed $135 million (approximately $4/share).
One of the principal strengths of John Correnti is in building mills
with cutting edge technology on time and with expected start-up results. This
has been the greatest advantage of Nucor in the mini mill industry. Mr. Correnti
is a communicator and motivator with employees, steel analysts, shareholders,
customers and suppliers. The Group believes that his qualifications will help
increase revenues, decrease operating costs, and thereby increase earnings and
market value.
The Memphis mill shop started up in November 1997. The original
announcement by the Company was that the mill would be operating at a rate of
800,000 tons by June 1998. The forecast slipped to August or September of 1998
and resulted in August of 1998 in a pledge by the CEO to spend a day each week
at Memphis supervising the operation. The Company recently reported that the
Memphis operations finally reached 75% operating capacity in March 1999, 16
months after start-up.
As a precursor to the Memphis facility, the Company entered the
specialty bar quality ("SBQ") business with the purchase of American Steel and
Wire ("AS&W") in Cleveland, Ohio in November of 1993. AS&W had an inefficient
rod mill at Cleveland, and an antiquated mill at Joliet, Illinois and purchased
high quality billets at high prices around the world. Even with these
disadvantages, AS&W was profitable and contributed $20.8 million in operating
earnings to the Company in fiscal year 1995. AS&W was also profitable for the
first 3 quarters of fiscal year 1996 and went to a loss position in the fourth
quarter of fiscal year 1996 and has lost money since. The Company planned to
build a world class bar mill at Cleveland that would extend the mill's position
in the high quality, critical SBQ automotive product line. Sumitomo agreed to
act as technical advisor on the construction and start up of the new rolling
mill at the Cleveland site as well as a new electric furnace melt shop to be
constructed in Memphis, Tennessee. The Cleveland rolling mill would add to the
Company's market share in the high priced automotive products market and the
Memphis facility would supply Cleveland with an economical source of high
quality billets.
The SBQ business now includes the Cleveland and Memphis operations and
the 50% interest in the Convent, Louisiana direct reduced iron ("DRI") plant.
With the new rolling mill and a refurbished rod mill, the Cleveland operation
has an annual capacity of 1.1 million tons of SBQ
8
<PAGE> 11
products. As a result of the start-up problems at the Memphis plant, the
billets that are supposed to be produced in Memphis have not been available for
the Cleveland operation, and the Company has been unable to conduct a stable
operation at its Cleveland facility. As a result, the SBQ business has not been
profitable. One analyst's report on the Company's 1999 fiscal year fourth
quarter performance states that start-up costs continue to cripple the Memphis
facility.
In December of 1996 the Company and IVACO, Inc. (Montreal, Canada)
formed a joint venture, Birmingham Southeast LLC, 85% owned by the Company and
15% by IVACO. The Company paid IVACO $43 million in cash and stock and
contributed the Mississippi mill to the joint venture. IVACO contributed its
Cartersville, Georgia facilities, which were at best marginally profitable. By
contrast, the Company's Mississippi mill had operating earnings in fiscal year
1995 of $12.9 million. Subsequent to the formation of the joint venture the
Company assumed management of Cartersville and shut down the facility's 12"
rolling mill. Planning then began to purchase and install a mid section rolling
mill at Cartersville and a melt shop upgrade ($18 million) was begun. The
renovated and highly efficient Mississippi mill was converted to all merchant
products and ran during a bull market in merchant and rebar products, at a low
and generally uneconomic production rate. Assuming a retail value of at least
$100 million for the Mississippi mill (book value is not known) the Group
estimates that the Company has caused to be invested in the joint venture: $100
million (Mississippi mill contribution); $18 million (Cartersville melt shop
upgrade); $43 million (cash and stock); and $150 million (mid section rolling
mill), for a total of $311 million. Because Cartersville is still in a start-up
mode, there are likely to be more expenses in the future. The Cartersville and
Mississippi mills together have reported an operating loss of $8.7 million
during the period January 1997 through September 1998 in what many believe to be
one of the best rebar merchant product markets in years.
The Cartersville mill, which is designed to manufacture mid-section
structural steel products was announced to start-up in calender year 1998 then
slipped to January and finally started up in March of 1999. The Cartersville mid
section mill was originally reported to be a $70 million project. A slight
revision was later made to $85 million and the latest analyst report reviewed by
the Group estimated a total investment of $150 million to complete the project.
In addition it has been reported that the electrical controls installed at
Cartersville must be replaced before the mill can become a viable operation (it
is not known if this cost is included in the $150 million estimate). The Group
estimates that the capital costs and the melt shop and mid section mill start up
costs at Cartersville have decreased the Company's cash by approximately $200
million.
Cartersville last changed management in July 1999 and during the start
up process at Memphis numerous management changes have occurred. The Group
believes that the instability in management plus the lack of profitability has
adversely affected morale.
In September 1997, the Company purchased from IVACO, Inc. approximately
25% of the outstanding shares of Laclede Steel Company for $14,953,000. At the
time of the investment purchase in Laclede Steel, Laclede's most recent Form 10K
indicated that Laclede had unfunded pension and health insurance liabilities
totaling more than $130 million, long term debt of approximately $107 million
and shareholders equity of only $17 million. For the period from September 24,
1997 through June 30, 1998, the Company recognized $2,715,000 in losses on its
investment in Laclede under the equity method of accounting. In June 1998 (less
than a year after
9
<PAGE> 12
the investment purchase), the Company determined that the remaining amount of
its investment in Laclede was impaired and, accordingly, recorded a $12,383,000
write off.
In fiscal year 1997, the Company and Mitsui & Co., Ltd. formed a joint
venture, Pacific Coast Recycling, LLC to purchase a bankrupt scrap export
operation in Long Beach, California. The operation has apparently never been
profitable and is burdened by a lease with the port of Long Beach that requires
significant monthly payments and has over 15 more years remaining.
The Company has sold assets including former steel mill sites in
valuable commercial locations at Emeryville, California and Seattle,
Washington. The Company has also received substantial electrode price
settlements generated from Justice Department settlements with international
electrode suppliers. These transactions have provided over $30 million in
additional cash that has been spent by the Company.
CERTAIN EFFECTS OF A CHANGE IN CONTROL OF THE BOARD OF DIRECTORS
The Company is a party to several agreements whereby, under certain
conditions, a change in a majority of the Company's Board of Directors would
affect the Company's obligations under such agreements. In each case, if the
current Board of Directors nominates the slate proposed by the Group or a
compromise slate agreed to by the Group and the current Board of Directors, and
that slate is elected, no change of control results, and the change in control
provisions of the following agreements would not be invoked. Therefore, the
Company's current Board of Directors has the ability to avoid the expense and
disruption that would result from a change in control by agreeing to name John
Correnti as Chairman and Chief Executive Officer and proposing a Board of
Director slate satisfactory to the Group.
The Company has adopted an Executive Retirement and Compensation
Deferral Plan (the "Deferral Plan") pursuant to which the Company has made
certain contributions to the retirement accounts of certain executive officers.
Pursuant to the Deferral Plan, the executive officers may not be fully vested in
all contributions made by the Company on their behalf. However, upon a "change
in control" of the Company, the participants in the Deferral Plan will become
fully vested in all contributions made by the Company on their behalf. A "change
of control" includes a change in the majority of the Board of Directors during
any period of two consecutive years, unless the new directors are elected or
nominated by at least two-thirds of the existing directors.
The Company has also adopted an Executive Severance Plan (the
"Severance Plan"). Participation in the Severance Plan is limited to a select
number of key members of management of the Company as designated by the Board of
Directors. The Severance Plan provides certain benefits and protections to key
members of management upon a change in control of the Company. A "change in
control" includes a change in the majority of the Board of Directors within a
period of two
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<PAGE> 13
consecutive years or less unless the new directors were elected or nominated by
at least two-thirds of the continuing directors. A participant is entitled to
benefits under the Severance Plan if, within two years after a "change in
control", the participant's employment is terminated by the Company "without
substantial cause" or is voluntarily terminated by the participant for "good
reason." The benefits provided under the Severance Plan following a change in
control include a lump sum payment upon covered terminations equal to 200% of a
participant's annual compensation for the year immediately preceding his or her
termination. Annual compensation for purposes of the Severance Plan means the
total of all compensation, including wages, salary, bonuses, and any other
benefit of monetary value, whether in the form of cash or otherwise, paid as
consideration for the participant's service to the Company, except for amounts
paid by the Company in connection with a participant's coverage under certain
employee welfare benefit arrangements. Benefits under the Severance Plan also
include the maintenance by the Company of all life insurance, accidental death
and dismemberment insurance, and medical, dental and prescription drug plans in
which the participant was entitled to participate for up to one year after the
participant's termination following a change in control. The Severance Plan also
requires the Company to provide participants with a lump-sum payment equal to
any accrued but unpaid salary, bonuses, and other benefits.
While the Group cannot easily gauge the costs under the Deferral Plan
and the Severance Plan which would result from a change in control of the Board
of Directors, the Group believes the magnitude of such costs could be
significant.
Pursuant to a Note Purchase Agreement dated September 1995, the Company
is the obligor under a set of senior notes totaling $150,000,000. Additionally,
pursuant to a Note Purchase Agreement dated December, 1993, the Company is
obligor under an additional $130,000,000 senior note. Both Note Purchase
Agreements contain provisions requiring the Company to make to the holder of the
senior notes, a written offer to prepay the senior notes upon a "change in
control" of the Company. The holder of the senior notes may then either accept
or reject the Company's offer to prepay the senior notes. A change in control
under the senior notes includes any acquisition by any person or group of the
power to elect, appoint or cause the election or appointment of at least a
majority of the members of the Board of Directors (other than the normal
acquisition of proxies by the current Board of Directors), through beneficial
ownership of the Company's stock or otherwise.
The Company is the borrower under a $300,000,000 Revolving Credit
Agreement dated as of March 17, 1997 between the Company and various financial
institutions. A "change in control" of the Company constitutes an event of
default under the Credit Agreement. A "change in control" under the Credit
Agreement includes a change in the majority of the Board of Directors during any
twelve month period (other than by action of the existing Board of Directors).
The Group intends to seek discussions with the financial institutions concerning
the possibility of waiving this event of default if the Group is successful in
this proxy solicitation.
Again, in each of the above cases, if the current Board of Directors
nominates the slate proposed by the Group or a compromise slate agreed to by the
Group and the current Board of Directors, and that slate is elected, no change
of control results, and the change in control provisions
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<PAGE> 14
of the above agreements would not be invoked. Therefore, the Company's current
Board of Directors has the ability to avoid the expense and disruption that
would result from a change in control by agreeing to name John Correnti as
Chairman and Chief Executive Officer and proposing a Board of Directors slate
satisfactory to the Group.
ELECTION OF DIRECTORS
The Company's bylaws provide that the Board of Directors be comprised
of at least three and not more than fifteen members, as determined by the Board
of Directors. According to publicly available information, the Company currently
has nine Directors, all of whose terms will expire at the Annual Meeting. The
Group has nominated the Group Nominees to fill the nine director positions which
will expire at the Annual Meeting. The Group Nominees are listed below and have
furnished the following information concerning their principal occupations and
certain other matters. Each Group Nominee, if elected, would hold office until
the 2000 Annual Meeting of Stockholders or until his or her successor has been
elected and qualified. Each of the Group Nominees has consented to serve as a
director if elected. Although the Group has no reason to believe that any of the
Group Nominees will be unable to serve as Directors, if any one or more of the
Group Nominees are not available for election, the proxies will be voted for the
election of such other nominees as may be proposed by the Group.
THE GROUP NOMINEES
The Group Nominees are as follows:
1. JOHN D. CORRENTI, age 52, is currently self employed as a
consultant. Mr. Correnti served in various capacities at Nucor Corporation, a
manufacturer of steel products, from 1980 until June 1999, including most
recently as Vice Chairman of the Board of Directors, President and Chief
Executive Officer. Mr. Correnti currently serves on the Board of Directors of
Harnischfeger Industries and Navistar International Corporation. Mr. Correnti's
business address is 6833 Aronomink Drive, Charlotte, North Carolina 28210.
2. JAMES A. TODD, JR., age 71, is retired. Mr. Todd was the
Chief Executive Officer and Chairman of the Board of Directors of the Company
from 1991 until January 1996. He served as an employee and Director of the
Company from January 1996 until retiring in August 1996 and as a consultant to
the Chairman of the Board from August 1996 until December 1996. In 1993, Mr.
Todd was recognized by New Steel Magazine as its Steelmaker of the Year. Mr.
Todd is a director of Kinross Gold Corporation.
3. JAMES W. MCGLOTHLIN, age 59, has been President, Chief
Executive Officer, and Chairman of the Board of Directors of The United Company,
since 1987. The United Company is primarily engaged in the business of financial
services and also invests in or has operations in oil and gas, real estate and
golf development, cogeneration, and construction supply and distribution. Mr.
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<PAGE> 15
McGlothlin serves on the Board of Directors of CSX Corporation. Mr. McGlothlin's
business address is 1005 Glenway Avenue, Bristol, Virginia 24203.
4. DONNA M. ALVARADO, age 50, has been President of Aguila
International, an international business development consulting firm, since
1994. Ms. Alvarado was President and Chief Executive Officer of Quest
International, a non-profit organization engaged worldwide in developing,
publishing and marketing training products for public and private education
systems, from 1989 to 1994. Ms. Alvarado is a director of Harnischfeger
Industries and Park National Bank. Ms. Alvarado's business address is 91
Jefferson Avenue, Columbus, Ohio 43215.
5. ROBERT M. GERRITY, age 61, has been self-employed as a
consultant since 1995. Mr. Gerrity was Vice Chairman and a member of the Board
of Directors of New Holland N.V., an agricultural and industrial equipment
manufacturing company, from 1991 to 1995. From 1987 to 1991, Mr. Gerrity served
as the President and Chief Executive Officer of Ford New Holland Inc., an
agricultural and industrial equipment manufacturing company subsequently
consolidated into New Holland N.V. Prior thereto, Mr. Gerrity served in various
management capacities at Ford Motor Company, including President of Ford of
Brazil. Mr. Gerrity is currently a director of Standard Motor Products and
Harnischfeger Industries. He also served as a director of Rubbermaid Inc. from
1992 to 1998. Mr. Gerrity's business address is 114 Division Street, Bellaire,
Michigan 49615.
6. ALVIN R. CARPENTER, age 57, has been President and CEO of CSX
Transportation, Inc., a railroad transportation company and a wholly-owned
subsidiary of CSX Corporation, since 1991. Mr. Carpenter has also been Vice
Chairman of CSX Corporation since July, 1999. Mr. Carpenter served as Executive
Vice President of Sales and Marketing at CSX Transportation from 1989 to 1991.
Mr. Carpenter's business address is 50 North Laura Street, Jacksonville, Florida
32202.
7. ROBERT H. SPILMAN, age 71, is sole-proprietor of Spilman
Properties, an investment company. Mr. Spilman served in various capacities at
Bassett Furniture Industries, Inc., a manufacturer and retail seller of home
furniture, from 1957 until 1997, including as Chief Executive Officer and
Chairman of the Board of Directors. Mr. Spilman currently serves as director of
The Pittston Company and Dominion Resources. Mr. Spilman's business address is
3559 Fairystone Park Highway, Bassett, Virginia 24055.
8. JERRY E. DEMPSEY, age 66, is retired. Mr. Dempsey was Chief
Executive Officer and Chairman of the Board of Directors of PPG Industries,
Inc., a manufacturer of protective and decorative coatings, fiberglass products,
and specialty chemicals, from 1993 until 1997. Mr. Dempsey was President and
Chief Executive Officer of Chemical Waste Management and Senior Vice President
of WMX Technologies, from 1985 until 1993. Mr. Dempsey is a director of Eastman
Chemical Company and Navistar International Corporation.
9. STEVEN R. BERRARD, age 45, has been President and Co-Chief
Executive Officer of AutoNation, Inc., an automotive retailer, since 1997.
AutoNation, Inc. also operates an automotive rental business which includes
Alamo Rent-A-Car, National Car Rental Systems, Inc., and Car Temps USA. Prior to
joining AutoNation, Mr. Berrard served as President and Chief Executive
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<PAGE> 16
Officer of the Blockbuster Entertainment Group, a division of Viacom Inc. From
1988 until 1992, Mr. Berrard served as Senior Vice President and Chief Executive
Officer of Blockbuster Entertainment Corp. and also served as Vice Chairman of
Blockbuster Entertainment Corp. from 1990 until 1996. Mr. Berrard currently
serves as a director of Gerald Stevens, Inc. and Florida Panthers Holdings, Inc.
Mr. Berrard's business address is 110 South 6th Street, 29th Floor, Fort
Lauderdale, Florida 33301.
THE GROUP STRONGLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF THE GROUP NOMINEES.
ADDITIONAL INFORMATION REGARDING GROUP NOMINEES
Correnti Consulting and Employment Agreement
On August __, 1999, Mr. Correnti entered into a Consulting Agreement
with The United Company, the lead shareholder of the Group, whereby Mr. Correnti
has agreed to serve as a consultant to the Group until December 31, 1999,
subject to agreed upon extensions. Earlier termination of the Consulting
Agreement may occur (a) by the United Company if the proxy solicitation is
abandoned prior to the Annual Meeting, (b) by Mr. Correnti if the Company's
Board of Directors does not adopt the Employment Agreement (discussed below) by
December 31, 1999, or (c) automatically if the Group Nominees are not elected to
a majority of the Board of Directors at the Annual Meeting. Pursuant to the
Consulting Agreement, the United Company pays Mr. Correnti a monthly fee of
$50,000 for his consulting services and reimburses him for all out of pocket
expenses related thereto.
Under the Consulting Agreement, The United Company has granted Mr.
Correnti an option to purchase from affiliates of the United Company 100,000
shares of the Company's common stock at an exercise price of $4.88, the price of
the Company's shares at the close of business on July 15, 1999. The options are
currently exercisable and the exercise term extends until the earlier to occur
of (i) six months after the Annual Meeting, or (ii) June 30, 2000. The United
Company has agreed to finance the exercise of the options by Mr. Correnti.
Under the Consulting Agreement, the United Company has agreed to
indemnify Mr. Correnti from liability resulting from the proxy solicitation.
The Consulting Agreement contains a form of employment agreement (the
"Employment Agreement") which will be presented to the Board of Directors for
approval if the Group's proxy solicitation is successful. Under the Employment
Agreement, Mr. Correnti will become Chairman of the Board and Chief executive
Officer of the Company for a term of five years, subject to annual renewals. Mr.
Correnti will be paid a base salary of $600,000 per year and a bonus equal to 1%
of earnings before interest, taxes, depreciation, and amortization.
Pursuant to the Employment Agreement, Mr. Correnti will be granted
100,000 shares of the Company's common stock (the "Stock Award). Mr. Correnti
becomes vested in one-third of the Stock Award at the end of each of his first
three years of service so that at the end of his third year
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<PAGE> 17
of service (the "Third Anniversary") he is completely vested in the full amount
of the Stock Award. Notwithstanding the foregoing, if prior to the Third
Anniversary, Mr. Correnti's employment is terminated (i) without cause by the
Company, (ii) for good reason by Mr. Correnti, (iii) after a change in control
of the Company, or (iv) as a result of his death or disability, Mr. Correnti
will receive the full amount of the Stock Award.
Pursuant to the Employment Agreement, Mr. Correnti will receive a
total of 1,000,000 Stock Options or if there are not adequate authorized shares
available or for other reasons the Company is unable to issue such options,
phantom stock options (the "Options") vesting in increments of 200,000 shares
per year over a period of five years beginning on Mr. Correnti's date of
employment. All unvested Options will vest upon termination of Mr. Correnti's
employment other than termination for cause. The strike price for the Options
will be $4.88, the price of the Company's shares at the close of business on
July 15, 1999. The Options will expire ten years from the grant date.
Pursuant to the Employment Agreement, if Mr. Correnti's employment is
terminated (i) by the Company without cause, (ii) by Mr. Correnti for good
reason, or (iii) as a result of a change in control of the Company, Mr. Correnti
will receive a severance payment equal to three times (a) Mr. Correnti's
currently effective annual base compensation plus (b) the average of bonuses
received by Mr. Correnti for the three prior fiscal years.
Todd Retirement Arrangements and Interested Transaction
Mr. Todd retired from the Company in August 1996 under the provisions
of the Company's Management Security Plan providing for annual retirement
payments for twenty years and a split dollar life insurance policy. Subsequent
to Mr. Todd's retirement, the Company amended and restated the Management
Security Plan to constitute the Company's Executive Retirement and Compensation
Deferral Plan (as amended and restated, the "Security Plan"). Pursuant to the
Security Plan, Mr. Todd received approximately $236,440 in retirement benefits
in 1998 and for the current calendar year has received approximately $140,113
through August 13, 1999.
Mr. Todd is a director and shareholder of EMSOURCE, Inc. ("Emsource"),
an environmental remediation company. On December 23, 1997, the Company and
Emsource entered into an Agreement of Sale whereby the Company conveyed to
Emsource a parcel of land formerly occupied by Norfolk Steel Corporation (the
"Site"). Pursuant to the Agreement of Sale, a trust fund was established to fund
the remediation and long term monitoring of the Site. Emsource received a fee of
approximately $72,500 for its remediation services. Under the Agreement of Sale,
the Company held a mortgage on the Site of up to $390,000 (the "Mortgage"). On
December 4, 1998, Emsource sold a portion of the Site to a third party and
Emsource distributed a portion of the sales proceeds to the Company in
satisfaction of the Mortgage.
COMMON STOCK OWNERSHIP OF GROUP NOMINEES
Messrs. Correnti, Todd, and McGlothlin are the only Group Nominees who
beneficially own common stock of the Company. See "BENEFICIAL STOCK OWNERSHIP OF
GROUP."
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<PAGE> 18
INFORMATION CONCERNING THE GROUP
MEMBERS OF THE GROUP
The Group is comprised of the following entities and individuals:
<TABLE>
<CAPTION>
Name Business Address
---- -----------------
<S> <C>
1. The United Company 1005 Glenway Avenue
Bristol, Virginia 24201
2. United Management Company, LLC 1005 Glenway Avenue
Bristol, Virginia 24201
3. United Opportunities Fund, LLC, 1005 Glenway Avenue
Bristol, Virginia 24201
4. The Summit Fund, LLC 1005 Glenway Avenue
Bristol, Virginia 24201
5. UC Investment Trust 1005 Glenway Avenue
Bristol, Virginia 24201
6. Nicholas D. Street 1005 Glenway Avenue
Bristol, Virginia 24201
7. James W. McGlothlin 1005 Glenway Avenue
Bristol, Virginia 24201
8. Lois A. Clarke 1005 Glenway Avenue
Bristol, Virginia 24201
9. James A. Todd, Jr. 2005 Garden Place
Birmingham, Alabama 35223
10. Mark A. Todd 1445 Ross Avenue, Suite 3200
Dallas, Texas 75202
11. John D. Correnti 6833 Aronomink Drive
Charlotte, North Carolina 28210
12. Paul Ekberg 3349 Hermitage Road
Birmingham, Alabama 35223
</TABLE>
United Entities
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<PAGE> 19
Nicholas D. Street and James W. McGlothlin directly or indirectly
control the following entities (collectively, the "United Entities"):
1. The United Company
Mr. Street and Mr. McGlothlin wholly own The United Company, a
Virginia corporation ("United Company"), with each of them owning fifty percent
(50%) of the outstanding common stock of United Company.
United Company is primarily engaged in the business of
financial services and also invests in or has operations in oil and gas, real
estate and golf development, cogeneration, and construction supply and
distribution. Mr. Street is vice president, secretary, and a director of United
Company. Mr. McGlothlin is president, chief executive officer, treasurer, and
chairman of the board of directors of United Company. Lois A. Clarke is
executive vice president and chief financial officer of United Company. Wayne L.
Bell is executive vice president and general counsel and Ted G. Wood is
president of operations.
2. United Management Company, LLC
Mr. Street and Mr. McGlothlin are the controlling owners of
United Management Company, LLC, a Delaware limited liability company
("Management Company"), with each of them owning a forty-seven and one-half
percent (47.5%) ownership interest in Management Company. Management Company's
principal business is investing in securities and managing investments for third
parties. Management Company is managed by a Board of Managers consisting of
Messrs. Street, McGlothlin, Bell, Wood and Ms. Clarke. Executive officers of
Management Company are as follows: (a) Ms. Clarke - president, (b) Mr. Street -
secretary and treasurer, (c) Jimmy D. Viers - executive vice president, (d)
Ronald E. Oliver - executive vice president and assistant treasurer, and (e)
Steven Layfield - vice president and secretary.
3. United Opportunities Fund, LLC and The Summit Fund, LLC
Messrs. Street and McGlothlin indirectly control the United
Opportunities Fund, LLC, a Delaware limited liability company ("UO Fund"), and
The Summit Fund, LLC, a Delaware limited liability company ("Summit Fund"), by
virtue of their direct control of United Company, the principal owner of the UO
Fund and Summit Fund, and by their direct control of Management Company, the
managing member of both UO Fund and Summit Fund. UO Fund and Summit Fund are
privately held investment funds. United Company owns approximately seventy-six
percent (76%) of UO Fund and ninety-nine percent (99%) of Summit Fund.
Management Company owns one percent (1%) of both UO Fund and Summit Fund in its
managing member capacity.
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<PAGE> 20
4. UC Investment Trust
UC Investment Trust, an Ohio business trust ("UCI Trust"),
operates the UC Investment Fund, a publicly traded mutual fund ("UCI Fund").
Messrs. Street and McGlothlin indirectly control the investment decisions of UCI
Fund and consequently, UCI Trust, by virtue of their direct ownership control of
Management Company, the investment manager of UCI Fund. Mr. McGlothlin and Ms.
Clarke also serve as Chairman and President of the UCI Trust, respectively.
Individual Members of the Group
Messrs. McGlothlin and Street, and Ms. Clarke are principally employed
by United Company and its affiliates in the capacities listed above. Mr.
McGlothlin is also a Group Nominee. See "GROUP NOMINEES" for a profile of Mr.
McGlothlin.
James A. Todd, Jr. is an individual member of the Group as well as a
Group Nominee. See "GROUP NOMINEES" for a profile of Mr. James Todd.
John D. Correnti is an individual member of the Group as well as a
Group Nominee. See "GROUP NOMINEES" for a profile of Mr. Correnti.
Mark A. Todd is principally employed as a shareholder in the law firm
of Jenkens & Gilchrist, P.C.
Paul Ekberg is not presently employed. Mr. Ekberg served in various
capacities at the Company from July 1991 to July 1996, including the positions
of President, Chief Operating Officer, Vice Chairman of the Board of Directors,
and Director.
BENEFICIAL STOCK OWNERSHIP OF THE GROUP
As of the close of business on August 20, 1999, the Group beneficially
owned in the aggregate 2,309,303 shares of the Company's common stock,
constituting approximately 7.8% of the total outstanding shares (based upon the
number of shares reported to be outstanding in the Company's Form 10Q for the
fiscal quarter ended March 31, 1999). The Group intends to vote such shares for
the election of the Group Nominees.
In aggregate, Mr. Street may be deemed the beneficial owner of
1,969,200 shares, constituting approximately 6.6% of the total outstanding
shares.
In aggregate, Mr. McGlothlin may be deemed the beneficial owner of
1,980,200 shares, constituting approximately 6.7% of the total outstanding
shares.
The basis upon which beneficial ownership for Mr. Street and Mr.
McGlothlin is calculated is set forth as follows:
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<PAGE> 21
(1) Street and McGlothlin, by reason of their control of the
United Entities, share with each other voting and disposition powers of the
shares owned by the following members of the United Entities and may be deemed
beneficial owners of such shares:
<TABLE>
<CAPTION>
% of Total
Entity Number of Shares Shares Outstanding
------ ---------------- ------------------
<S> <C> <C>
UO Fund 1,635,300 5.5%
Summit Fund 190,100 0.6%
UCI Trust 90,800 0.3%
</TABLE>
Because of their record ownership, each of the United Entities members
listed in the above table may be deemed to share beneficial ownership of the
shares with Messrs. Street and McGlothlin.
(2) Management Company is the beneficial owner of 39,000 shares
which are held in certain individual discretionary investment accounts managed
by Management Company. Management Company has sole voting and disposition power
over the shares held in these discretionary investment accounts. By virtue of
their control of Management Company, Messrs. Street and McGlothlin share with
each other voting and disposition powers over these 39,000 shares and may be
deemed beneficial owners of such shares, which constitute 0.1% of the total
shares outstanding.
(3) Mr. Street is the direct beneficial owner of 10,000 shares.
Mr. Street has sole voting and disposition power for these 10,000 shares. Mr.
Street may be deemed to beneficially own 2,000 shares owned directly by his
wife, Fay H. Street, and 2,000 shares owned directly by his minor daughter,
Lauren Street. Such shares together constitute less than one tenth of one
percent of the outstanding shares. Mr. McGlothlin may be deemed the beneficial
owner of 25,000 shares owned directly by his wife, Frances McGlothlin, which
constitute less than one tenth of one percent of the total shares outstanding.
Ms. Clarke is either the direct or indirect beneficial owner of 3,600
shares, which constitute less than one tenth of one percent of the outstanding
shares. Ms. Clarke has the sole power to vote and dispose of these shares.
Mr. James Todd may be deemed the beneficial owner of 193,603 shares,
which constitute 0.7% of the outstanding shares. Mr. James Todd directly owns
119,054 shares and has sole voting and disposition power over these shares. Mr.
James Todd may be deemed to beneficially own and share voting and disposition
power as to 74,549 shares owned directly by his wife, Mary Margaret Todd.
Mr. Mark Todd is the beneficial owner of 106,749 shares, which
constitutes 0.4% of the outstanding shares. Mr. Mark Todd has sole voting and
disposition power as to 12,529 shares. As
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<PAGE> 22
a trustee of certain trusts benefitting the Todd family (the "Todd Trusts"), Mr.
Mark Todd shares voting and disposition power as to 93,475 shares with Jennifer
Todd Reed, the joint trustee of the Todd Trusts. Mr. Mark Todd's beneficial
ownership also includes 745 shares owned by his three minor children, Courtney
C. Todd, Hunter B. Todd, and Hayley A. Todd.
Mr. Correnti may be deemed the beneficial owner of 100,000 shares.
Under the Consulting Agreement, United Company has agreed to grant Mr.
Correnti an option to purchase from United Company 100,000 of the shares owned
by the United Entities at an exercise price of $4.88.
Mr. Ekberg may be deemed the beneficial owner of 11,151 shares, which
constitutes less than one tenth of one percent of the total shares outstanding.
Mr. Ekberg directly owns 2,151 shares and has sole voting and disposition power
over these shares. Mr. Ekberg may be deemed to beneficially own and share voting
and disposition power as to 9,000 shares owned directly by his wife, Nancy
Ekberg.
All transactions in securities of the Company engaged in by any member
of the Group or any Group Nominee during the past two years are summarized on
Schedule I.
The powers of disposition and voting of Management Company with respect
to shares owned beneficially by it on behalf of its discretionary account
clients are held pursuant to written Investment Management Agreements (the
"Discretionary Account Agreements") with such clients. Under the terms of the
Discretionary Account Agreements, Management Company is granted the sole power
to vote and actively trade securities held in the discretionary investment
accounts. The disposition power of Management Company, with respect to shares
owned beneficially by it through its management of the UCI Fund, is held
pursuant to a written Advisory Agreement (the "UCI Advisory Agreement") between
Management Company and UCI Trust. Under the terms of the UCI Advisory Agreement,
Management Company has the sole power to trade securities held by the UCI Fund.
The UCI Advisory Agreement was originally executed by United Investment
Corporation ("UI Corporation"). UI Corporation was reorganized into Management
Company in 1998 and Management Company succeeded to the rights and obligations
of UI Corporation under the UCI Advisory Agreement.
SOLICITATION OF PROXIES
The Group may solicit proxies by mail, courier service, advertisement,
telephone, telecopier, global computer networks (including the Internet), and in
person. The Group has entered into an agreement with ChaseMellon Consulting
Services, L.L.C. ("ChaseMellon") pursuant to which ChaseMellon has agreed to
assist the Group with its solicitation of proxies. ChaseMellon is to receive a
base retainer fee of $40,000, plus reimbursement for its reasonable
out-of-pocket expenses. In addition a success fee of $35,000 will be payable to
ChaseMellon if John D. Correnti is named Chief Executive Officer of the Company.
It is anticipated that ChaseMellon will make available approximately 12
persons in connection with its efforts on behalf of the Group. In addition to
the solicitation of proxies from retail investors,
20
<PAGE> 23
brokers, banks, nominees and other institutional holders, such persons will,
among other activities, provide consultation pertaining to the planning and
organization of the proxy solicitation. The Group has also agreed to indemnify
ChaseMellon against certain liabilities and expenses relating to the proxy
solicitation.
Banks, brokers, custodians, nominees and fiduciaries, and other
custodians, will be requested to forward solicitation materials to the
beneficial owners of the common stock. The Group will reimburse such
institutions for their reasonable out-of-pocket expenses incurred in forwarding
these materials to the beneficial owners.
The entire cost of the Group's solicitation will be borne by the Group.
The Group estimates that its total expenditures relating to the solicitation of
proxies will be approximately $_____________, plus the fees payable to
ChaseMellon and additional expenditures if there is litigation. To date, the
Group has incurred cash expenditures of $_________________. The Group plans to
seek reimbursement for such expenses from the Company.
ADDITIONAL INFORMATION
The Group has prepared portions of this Proxy Statement based on
publicly available information on the Company and assumes no responsibility for
the accuracy or completeness of any such information contained herein. The Group
has also prepared this Proxy Statement without the benefit of reviewing the
Company's proxy statement. As of the date of this Proxy Statement, the Company
has not filed its proxy statement with the United States Securities and Exchange
Commission.
Information regarding the Company's director nominees, management, and
five percent stockholders will be contained in the Company's proxy statement.
Also included in the Company's proxy statement is the date by which stockholder
proposals intended to be submitted at the Company's next annual meeting must be
received by the Company for inclusion in the Company's proxy statement.
August ____, 1999
21
<PAGE> 24
SCHEDULE I
TRANSACTIONS IN COMMON STOCK DURING PAST TWO YEARS
<TABLE>
<CAPTION>
UO Fund
Trade Type of # of Shares
Date Transaction
---- ----------- -----------
<S> <C> <C> <C>
07/30/98 Purchase 5,500
07/31/98 Purchase 100
08/05/98 Purchase 15,000
08/06/98 Purchase 7,000
08/10/98 Purchase 23,900
08/11/98 Purchase 10,000
08/13/98 Purchase 6,000
08/14/98 Purchase 15,000
08/17/98 Purchase 10,000
08/21/98 Purchase 9,000
08/26/98 Purchase 10,000
08/27/98 Purchase 15,000
09/03/98 Purchase 80,000
09/04/98 Purchase 50,000
09/08/98 Purchase 50,000
09/09/98 Purchase 30,000
09/10/98 Purchase 50,000
09/11/98 Purchase 80,000
09/18/98 Purchase 20,000
09/24/98 Purchase 20,000
09/25/98 Purchase 80,000
</TABLE>
22
<PAGE> 25
<TABLE>
<S> <C> <C> <C>
09/28/98 Purchase 10,000
10/01/98 Purchase 15,000
10/05/98 Purchase 40,000
06/07/99 Purchase 10,000
06/08/99 Purchase 58,500
06/10/99 Purchase 93,900
07/19/99 Purchase 97,000
07/20/99 Purchase 41,000
07/20/99 Sale 1,000
07/21/99 Purchase 96,500
07/22/99 Purchase 102,600
07/23/99 Purchase 95,000
07/26/99 Purchase 99,000
07/27/99 Purchase 167,500
07/28/99 Purchase 117,800
08/03/99 Purchase 3,000
08/04/99 Purchase 3,000
Management
Company (1)
07/30/98 Purchase 500
08/11/98 Purchase 1,500
08/25/98 Purchase 2,500
08/27/98 Purchase 500
09/04/98 Purchase 1,000
09/08/98 Purchase 2,000
</TABLE>
23
<PAGE> 26
<TABLE>
<S> <C> <C> <C>
06/09/99 Purchase 7,500
06/10/99 Purchase 10,000
06/11/99 Purchase 5,000
07/26/99 Purchase 2,000
07/28/99 Purchase 6,000
UCI Trust
06/14/99 Purchase 55,000
06/16/99 Purchase 35,800
The Summit Fund
LLC
08/26/98 Purchase 25,000
09/01/98 Purchase 1,900
09/02/98 Purchase 13,200
09/03/98 Purchase 30,000
09/04/98 Purchase 15,000
09/09/98 Purchase 10,000
10/02/98 Purchase 15,000
Nicholas D. Street
09/02/98 Purchase 10,000
09/02/98 Purchase 2,000(2)
09/03/98 Purchase 2,000(3)
James W.
McGlothlin
</TABLE>
24
<PAGE> 27
<TABLE>
<S> <C> <C> <C>
07/19/99 Purchase 25,000(4)
Lois A. Clarke
08/11/98 Purchase 2,000
James A. Todd
1/10/97 Sale 13,300
1/13/97 Sale 17,700
1/14/97 Sale 6,500
1/15/97 Sale 9,200
1/16/97 Sale 25,300
1/17/97 Sale 19,400
1/21/97 Sale 2,132
1/22/97 Sale 8,500
8/28/97 Sale 80,272
05/27/98 Sale 7,650
Paul Ekberg
01/21/98 Sale 2,000
03/23/98 Sale 3,744
04/17/98 Sale 7,500
12/28/98 Sale 4,649
07/21/99 Purchase 10,000(5)
</TABLE>
(1) Represents shares purchased by Management Company on behalf of
discretionary account clients.
25
<PAGE> 28
(2) Represents 2,000 shares purchased by Mr. Street's minor child, Lauren
Street. Mr. Street may be deemed to beneficially own the 2,000 shares
purchased by his minor child.
(3) Represents 2,000 shares purchased by Mr. Street's wife, Fay H. Street.
Mr. Street may be deemed to beneficially own the 2,000 shares purchased
by his wife.
(4) Represents 25,000 shares purchased by Mr. McGlothlin's wife, Frances
McGlothlin. Mr. McGlothlin may be deemed to beneficially own the 25,000
shares purchased by his wife.
(5) Includes 9,000 shares purchased by Mr. Ekberg's wife, Nancy Ekberg.
Ekberg may be deemed to beneficially own the 9,000 shares purchased by
his wife.
26
<PAGE> 29
PROXY SOLICITED BY THE UNITED
COMPANY SHAREHOLDER GROUP
BIRMINGHAM STEEL CORPORATION
1999 ANNUAL MEETING
This Proxy is solicited on behalf of the United Company Shareholder
Group for use at the 1999 Annual Meeting of Stockholders to be held on
___________ (the "Annual Meeting"). The undersigned hereby appoints John D.
Correnti and James A. Todd, Jr., and each of them, attorneys and proxies with
full power of substitution, to vote in the name of and as proxy for the
undersigned at the Annual Meeting, and at any adjournment thereof, according to
the number of votes that the undersigned would be entitled to cast if personally
present on the following matters.
(1) To elect the following nominees as directors to serve until the next
Annual Meeting of Stockholders and until their successors are elected and
qualified: John D. Correnti; James A. Todd, Jr.; James W. McGlothlin; Donna M.
Alvarado; Robert M. Gerrity; Alvin R. Carpenter; Robert H. Spilman; Jerry E.
Dempsey; and Steven R. Berrard.
[ ] FOR ALL NOMINEES LISTED ABOVE (except as indicated to the
contrary below)
_________________________________________________________
[ ] WITHHOLD AUTHORITY to vote for all nominees listed above:
(2) To consider and take action upon such other matters as may properly
come before the meeting or adjournments or postponements thereof.
PROPERLY EXECUTED PROXIES WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED. IF NO SUCH DIRECTIONS ARE GIVEN, SUCH PROXIES WILL BE VOTED FOR ALL
NOMINEES REFERRED TO IN PARAGRAPH (1) AND ON SUCH OTHER MATTERS AS MAY COME
BEFORE THE ANNUAL MEETING AS THE PROXIES DEEM ADVISABLE.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENVELOPE
PROVIDED BY__________.
The undersigned revokes any prior proxies to vote the shares covered by this
Proxy.
____________________________
Signature
____________________________
Signature
Date: ________________, 1999
NOTE: Please sign exactly as name appears above. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
