<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>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[X] 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 identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
- ------------------------------------
THE UNITED COMPANY SHAREHOLDER GROUP
REGARDING BIRMINGHAM STEEL CORPORATION
<PAGE> 3
Table of Contents
- --------------------------------------------------------------------------------
A. Executive Summary
B. Birmingham Steel's Current Situation
C. Background of Events
D. The Announced Restructuring Plan
E. The United Company Shareholder Group
F. The New Plan
G. Change of Control Implications
<PAGE> 4
- -------------------------------------------------------------------------------
EXECUTIVE SUMMARY
- -------------------------------------------------------------------------------
<PAGE> 5
EXECUTIVE SUMMARY
- -------------------------------------------------------------------------------
Introduction
- As shareholders of Birmingham Steel Corporation ("Birmingham" or
the "Company"), we have become dissatisfied with the Company's
performance in recent years
- We have formed The United Company 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
IMPORTANT DATES
- Birmingham has set October 7, 1999 as the record date for the
Group's solicitation of written consents
- Birmingham has set December 2, 1999 for its annual shareholder
meeting
- Shareholders of record as of October 19, 1999 are entitled to
vote
----------------------------------------------------
IN ORDER TO INSTALL MR. CORRENTI AS CEO, WE NEED YOU
TO VOTE FOR OUR DIRECTOR NOMINEES
----------------------------------------------------
- ---------------------------------------------------------------------------- 1
<PAGE> 6
EXECUTIVE SUMMARY
- -------------------------------------------------------------------------------
Birmingham Steel Stock Price Performance June 30, 1996 to Present
(Graph of Birmingham Steel Stock Performance from June 28, 1996 to
October 1, 1999)
12/2/96 - Completes acquisition of Atlantic Steel's Cartersville facility
3/7/97 - Announces promising results from start-up projects
3/21/97 - Issues profit warning for 3Q97 results due to unexpectedly high
start-up costs
9/26/97 - Invests $14.0 mm in Laclede Steel
4/15/98 - Announces 3Q99 loss of $4.1 mm amid $14.0 mm start-up costs,
primarily at Memphis
8/12/98 - Announces net loss of over $4 mm for 4Q98; Laclede announces
violations of loan covenants
11/30/98 - Laclede Steel files for bankruptcy
7/30/99 - The United Company Shareholder Group announces proxy contest;
intention to name John D. Correnti as CEO
8/18/99 - Announces strategic restructuring, including sale of the SBQ
division
- ---------------------------------------------------------------------------- 2
<PAGE> 7
EXECUTIVE SUMMARY
- -------------------------------------------------------------------------------
Destruction of Shareholder Value - Birmingham Steel
(Dollars in Millions)
<TABLE>
<CAPTION>
Market Value of Equity
- ----------------------
<S> <C>
June 30, 1996 $472.3
June 30, 1999 $126.0
</TABLE>
<TABLE>
<CAPTION>
Total Market Capitalization (including debt)
- --------------------------------------------
<S> <C>
June 30, 1996 $779.8
June 30, 1999 $657.5
</TABLE>
- ---------------------------------------------------------------------------- 3
<PAGE> 8
EXECUTIVE SUMMARY
- -------------------------------------------------------------------------------
Ineffective Current Management
"WE HAVE SELECTED A CORE GROUP OF WORLD-CLASS SUPPLIERS FROM OUR MEMPHIS
PROJECT. THESE VENDORS WERE CHOSEN BECAUSE OF THEIR COMMITMENTS TO QUALITY,
COST CONTROL AND THEIR ABILITY TO WORK ON AN AGGRESSIVE TIMETABLE"
- Robert A. Garvey, current CEO of Birmingham Steel, June 27, 1996
- Continued start-up costs at the Memphis facility
- Twenty-five months after commencement of Memphis initial
start-up in November 1997 and capital costs of over $220
million
- Cartersville rolling mill project, which cost the Company $150
million ($80 million over budget), is still generating losses and
additional start-up costs
- Estimated $26 million in start-up costs
- Total investment in Cartersville exceeds $275 million
- Fiscal 1997 investment in Pacific Coast Recycling - written off
after three years of operating losses
- September 1997 investment of $15 million in Laclede Steel Company -
written off after nine months
- November 1996 investment in Birmingham Southeast LLC - has never
returned a profit
- Since 1996, Birmingham has nearly doubled its Sales and
Administrative employees to 256
- ---------------------------------------------------------------------------- 4
<PAGE> 9
EXECUTIVE SUMMARY
- -------------------------------------------------------------------------------
Self-Serving Actions
- Despite owning less than 1% of the voting shares outstanding (a),
THE CURRENT MANAGEMENT AND BOARD OF DIRECTORS HAVe INCREASED THE
ALREADY LUCRATIVE GOLDEN PARACHUTES to most executive recipients by
50%
- Totaling $15.5 million, or more than $0.50 per common share, at
the expense of you and us, the remaining 99% shareholders
- As of September 30, 1999, Birmingham's outside Directors owned a
total of 75,309 voting shares (a) of your company - 0.25% of the
total shares outstanding
- The only purchase of common shares by the Directors over the last
two years was a total of 4,000 shares - token investments by two
new Directors
- In April 1999, the Directors abandoned the long standing practice
of receiving their retainer as 1,500 shares of common stock and
established a fixed retainer of $30,000 to be issued in shares
- In fiscal year 1999, the Directors awarded over 900,000 option
shares to current Management
- Mr. Garvey received 19% and the other four top managers
received 38%
- -------------------------------------------
(a) Excludes options and restricted shares.
- ---------------------------------------------------------------------------- 5
<PAGE> 10
EXECUTIVE SUMMARY
- -------------------------------------------------------------------------------
Self-Serving Actions (cont'd)
- - The preponderance of options were issued at $4.75 per share - the usual
five year vesting was circumvented by vesting at slight increases in the
share closing price on the New York Stock Exchange for 30 consecutive days
- The shares vest in increments of twenty percent
- The first 20% vest at $5.75 per share
- The second 20% at $7.00 per share
- The third 20% at $8.50 per share
- The fourth 20% at $10.25 per share
- And the remaining 20% vest at $12.25 per share
- THE GROUP BELIEVES THE EFFECT OF THE PROXY CONTEST HAS CAUSED THE
VESTING OF 40% OF THE OPTIONS
ON SEPTEMBER 2, 1999, AFTER BIRMINGHAM WAS IN DEFAULT ON ITS DEBT AGREEMENTS
AND SHAREHOLDERS' EQUITY HAD BEEN ALMOST 50%, THE DIRECTORS VOTED TO INCREASE
THE GOLDEN PARACHUTES BY APPROXIMATELY 50%
- ---------------------------------------------------------------------------- 6
<PAGE> 11
EXECUTIVE SUMMARY
- -------------------------------------------------------------------------------
Consistent Failure to Meet Wall Street Analysts' Expectations
WE BELIEVE CURRENT MANAGEMENT HAS LOST THE CONFIDENCE OF THE INVESTMENT
COMMUNITY BY CONSISTENTLY MISSING ANALYSTS' EARNINGS ESTIMATES
(Graph comparing First Call Consensus EPS estimates to Actual EPS Reported by
Birmingham Steel for the period from December 31, 1995 to June 30, 1999)
- ---------------------------------------------------------------------------- 7
<PAGE> 12
EXECUTIVE SUMMARY
- -------------------------------------------------------------------------------
Announced Restructuring Plan
BIRMINGHAM'S RESTRUCTURING PLAN, ANNOUNCED ON AUGUST 18, 1999,
IS DEFICIENT IN A NUMBER OF AREAS
STRATEGY
- - Sale of the "SBQ business" and after-tax provision of $173.2 million for
expected loss on sale
IMPLICATION
- - Current management incapable of fixing business
- Therefore must sell at any price
- Selling during cyclical low and after poor recent performance
- Expected proceeds less than half the over $600 million invested to date
- - Losses until sale must still be funded
- - Exiting DRI purchase agreements likely to increase losses
- - Properly managed, the SBQ assets have significant potential to refinance
the Company
- ---------------------------------------------------------------------------- 8
<PAGE> 13
EXECUTIVE SUMMARY
- -------------------------------------------------------------------------------
Restructuring Plan - Analyst Comments
BIRMINGHAM'S RESTRUCTURING ANNOUNCEMENT HAS BEEN MET
WITH DISFAVOR BY SOME MEMBERS OF THE INVESTMENT COMMUNITY
- - "We view the restructuring plan that Birmingham Steel announced last night
as a disappointment..."
- - "We believe the current market value is likely less than half of the
approximately $650 million that has been invested in them to-date due to
the fact that the steel market is at a cyclical low and that the recent
performance at the three assets has been poor."
- - "This [the sale of the SBQ business and DRI facility] would leave the
company with an enterprise value of about $525 million and EBITDA of less
than $100 million, implying that the company is fairly valued at the
current share price [$8.00]."
- - "WE BELIEVE THAT THE BETTER SITUATION FOR SHAREHOLDERS WOULD BE FOR CURRENT
OR NEW MANAGEMENT TO COMPLETE THE START-UP OF THE ASSETS AND AWAIT THE
CYCLICAL RECOVERY OF THE MARKET BEFORE MAKING A RESTRUCTURING DECISION."
- Scott Morrison
Donaldson, Lufkin & Jenrette Equity Research, August 19, 1999
- ---------------------------------
Note: Permission to use these quotations was sought and granted.
- ---------------------------------------------------------------------------- 9
<PAGE> 14
EXECUTIVE SUMMARY
- -------------------------------------------------------------------------------
Summary of the New Plan
- Provide effective management leadership
- Operate core facilities at or above nameplate capacity
- Re-establish customer relationships and confidence
- Fix the Memphis melt shop and operations at Cartersville
- Repair the balance sheet
- GROW, NOT SHRINK, THE COMPANY
- ---------------------------------------------------------------------------- 10
<PAGE> 15
- -------------------------------------------------------------------------------
BIRMINGHAM STEEL'S CURRENT SITUATION
- -------------------------------------------------------------------------------
<PAGE> 16
BIRMINGHAM STEEL'S CURRENT SITUATION
- -------------------------------------------------------------------------------
Relative Stock Price Performance June 30, 1996 to Present
(Graph of Relative Stock Price Performance between Birmingham Steel, S&P 400,
and Mini-Mill Composite from June 30, 1996 to November 4, 1999)
(a) Mini-mill composite includes Co-Steel, Commercial Metals, IPSCO, Keystone
Consolidated, Nucor Corp., Northwestern Steel and Wire, Quanex Corp., Oregon
Steel, Roanoke Electric Steel Corp., Schnitzer Steel, Steel Dynamics and Texas
Industries
- ---------------------------------------------------------------------------- 12
<PAGE> 17
BIRMINGHAM STEEL'S CURRENT SITUATION
- -------------------------------------------------------------------------------
Financial Performance of Comparable Companies
<TABLE>
<CAPTION>
Average Annual Shareholder Return (a)
- ------------------------------------
%
-----
<S> <C>
Roanoke 28.4
IPSCO 15.3
TXI 10.5
Quanex 1.6
CMC - 1.9
Nucor - 2.8
Timken - 2.9
Steel Dynamics - 4.5(c)
Oregon - 6.0
Co-Steel - 8.8
Schnitzer -13.0
Keystone -16.8
Birmingham -19.6
NWSW -49.3
<CAPTION>
Average Annual Return on Equity (b)
- -----------------------------------
%
----
<S> <C>
Keystone 18.9
TXI 17.1
Roanoke 17.0
Nucor 15.6
Timken 14.8
CMC 12.4
IPSCO 12.1
Quanex 9.5
Steel Dynamics 8.3(c)
Schnitzer 8.2
Oregon 4.8
Co-Steel 2.5
NWSW 0.7
Birmingham -20.5
</TABLE>
- ------------
(a) Source: Fact Set. Represents the average annual shareholder return through
dividends and stock price appreciation over the last three years ended
October 1, 1999.
(b) Source: Fact Set. Represents the average annual return on equity for the
last three fiscal years. Includes all fiscal years ended as of June 30,
1999. Birmingham Steel average reflects FY 1999 net loss of $224.2mm and
post restructuring stockholders' equity of $230.7mm, as reported in the
company's September 15, 1999 14A filings.
(c) Steel Dynamics calculated from November 30, 1996.
- ---------------------------------------------------------------------------- 13
<PAGE> 18
BIRMINGHAM STEEL'S CURRENT SITUATION
- -------------------------------------------------------------------------------
The Debt Reported
CURRENT MANAGEMENT RECENTLY ANNOUNCED THAT THEY REDUCED TOTAL DEBT BY
$89 MILLION DURING FOURTH QUARTER 1999 . . . BUT A CLOSER LOOK REVEALS:
<TABLE>
<S> <C>
$ 610 million March 31, 1999 reported total debt per Company 10-Q
$ (67 million) 4Q99 reclassification of debt as a leveraged lease at Cartersville
$ (14 million) Inventory liquidation
$ (8 million) Actual debt reduction from 4Q99 operating cash flows
-------------
$ 522 million Reported total debt at June 30, 1999
ADDING BACK:
$ 67 million Debt reclassification mentioned above
$ 85 million Debt previously reclassified as a leveraged lease at Memphis and a tax lease at Cartersville
$ 29 million Incremental Revolver Debt since June 30, 1999
-------------
$ 703 MILLION TOTAL DEBT OBLIGATIONS AT SEPTEMBER 30, 1999(A)
=============
</TABLE>
- ---------------------------
(a) Does not include $178.9 million debt default of AIR in which the Company
has "50% ownership interest."
- ---------------------------------------------------------------------------- 14
<PAGE> 19
BIRMINGHAM STEEL'S CURRENT SITUATION
- -------------------------------------------------------------------------------
Report Summary Financial Data
(Dollars in Millions)
MR. TODD'S LAST FISCAL YEAR AS CEO OF BIRMINGHAM WAS 1995 . . . UNDER
MR. TODD'S LEADERSHIP, BIRMINGHAM'S INCOME FROM CONTINUING OPERATIONS WAS
$36.9 MILLION COMPARED TO $3.3 MILLION IN 1999 UNDER MR. GARVEY
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
-----------------------------------------------
1995 1996 1997 1998 1999
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Net Sales $574.6 $564.3 $667.7 $836.9 $ 709.9
Pre-tax Income from Cont. Operations $ 61.5 $ (1.9) $ 32.7 $ 42.9 $ 18.1
Provision for Income Taxes (Benefit) 24.6 (0.7) 12.9 15.0 14.8
------ ------ ------ ------ -------
INCOME (LOSS) FROM CONT. OPERATIONS $ 36.9 $ (1.3) $ 19.8 $ 27.9 $ 3.3
Income (Loss) from Discont. Operations $ 13.7 $ (0.9) $ (5.4) $(26.3) $(227.5)
NET (LOSS) INCOME $ 50.6 $ (2.2) $ 14.4 $ 1.6 $(224.2)
------ ------ ------ ------ -------
</TABLE>
- ---------------------------------------
Source: Birmingham Steel Annual Report.
- ---------------------------------------------------------------------------- 15
<PAGE> 20
BIRMINGHAM STEEL'S CURRENT SITUATION
- -------------------------------------------------------------------------------
Poor Operating Supervision and Inadequate Leadership
"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."(A)
The Memphis Facility
- - Began operations at the $220 million melt shop in November 1997
- Originally announced that mill would operate at 800,000 tpy by June
1998
- Forecast pushed back several times
- - Forty-five percent operating capacity not reached until March 1999
- Sixteen months after start-up
- - The Group believes the problem at Memphis is lack of leadership, repeated
management turnover and poorly trained personnel and supervisors
Quarterly Pre-Operating/Start-up Costs(b)
(U.S. Dollars in millions)
<TABLE>
<CAPTION>
<S> <C>
1Q98 $ 2.2
2Q98 $ 6.5
3Q98 $12.8
4Q98 $ 9.0
1Q99 $ 9.5
2Q99 $ 7.3
3Q99 $14.8
</TABLE>
- -------------------------------------
(a) Michelle Applebaum, Salomon Smith Barney Equity Research, November 20,
1997. Permission to use this quotation was neither sought nor granted.
(b) Source: Company public filings
- ---------------------------------------------------------------------------- 16
<PAGE> 21
BIRMINGHAM STEEL'S CURRENT SITUATION
- -------------------------------------------------------------------------------
Management of Start-Up Operations
AMERICAN STEEL & WIRE ("AS&W")
- SBQ business purchased in November 1993
- Despite its inefficient facilities, AS&W was profitable until the
quarter ended June 1996, contributing $13.7 million in profits in
fiscal 1995
- Has lost money ever since
- Birmingham planned to build a world-class bar mill at AS&W's facilities
in Cleveland, OH and supply it with high quality billets from a new EAF
melt shop in Memphis, TN
- The start-up problems at Memphis, however, have plagued the
Cleveland facility, preventing it from achieving stable operations
(i.e., lost customers, late deliveries, poor yields, outsourcing
higher-priced billets from third parties)
- The Birmingham SBQ business remains unprofitable
- Current Birmingham management recently took a $173.2 million charge for
expected losses on its intended sale of the SBQ business
- We expect the loss on sale to be even greater
- The cost of exiting purchase commitments related to this unit's 50%
owned DRI facility is likely to further the loss on sale of the SBQ
business
- ---------------------------------------------------------------------------- 17
<PAGE> 22
BIRMINGHAM STEEL'S CURRENT SITUATION
- -------------------------------------------------------------------------------
Management of Start-Up Operations (con't)
BIRMINGHAM SOUTHEAST LLC
- Eighty-five percent owned joint venture formed in December 1996 to
produce merchant and rebar products
- The Company contributed its profitable Jackson, MS mill, paid $43
million in cash for its partner's marginally profitable
Cartersville, GA facilities, and assumed $44 million in liabilities
related to those facilities
- Birmingham Southeast assumed management of Cartersville and closed the
12" rolling mill
- Began $18 million melt shop upgrade and a planned $70 million
installation of mid-section rolling mill at Cartersville
- Cartersville rolling mill originally planned as $70 million investment
to start-up in 1998
- Did not start until March 1999 at total cost of approximately $150
million
- All electrical controls must be replaced before reaching design
capacity
- This approximately $255 million total investment is STILL IN THE
START-UP MODE
- Current management estimates additional six to nine months before
mill fully operational
- Combined operating and start-up costs of $14.2 million during
Fiscal 1998 and 1999
- Expects $12 million in additional start-up expenses in Fiscal 2000
- ---------------------------------------------------------------------------- 18
<PAGE> 23
BIRMINGHAM STEEL'S CURRENT SITUATION
- -------------------------------------------------------------------------------
Management of Other Investments
LACLEDE STEEL COMPANY
- Purchased 25% stake and voting control from IVACO for $15 million in
September 1997
- At the time, Laclede had unfunded pension and OPEB liabilities of
over $130 million, long- term debt of $107 million and
shareholders' equity of just $17 million
- From September 1997 to June 1998, Birmingham recognized $2.7 million in
losses from this investment
- Less than a year after the original purchase, Birmingham wrote off its
remaining $12.3 million investment in Laclede
PACIFIC COAST RECYCLING ("PCR")
- Joint venture with Mitsui & Co. Ltd, purchased a Long Beach, CA export
scrap operation during Fiscal 1997
- Operation has never been profitable
- Burdened by obligations under an operating lease that requires PCR
to pay approximately $3.8 million per year through 2019
- Birmingham wrote off its $19.3 million investment in PCR
- Less than three years after its initial investment
- ---------------------------------------------------------------------------- 19
<PAGE> 24
- -------------------------------------------------------------------------------
BACKGROUND OF EVENTS
- -------------------------------------------------------------------------------
<PAGE> 25
BACKGROUND OF EVENTS
- -------------------------------------------------------------------------------
Sequence of Events Leading to the Restructuring Program
- At an April 21, 1999 conference call and during a speech on May 6-7,
Mr. Garvey declared that Memphis was at "Breakeven level", "No further
start-up cost" necessary
- On or about July 9, 1999, Birmingham participated in a bid for the
bankrupt SBQ assets of Qualitech
- On July 27, 1999, Birmingham amended the Revolver Credit Agreement (the
"Third Amendment") with BankAmerica ("BA"), as agent, the other lenders
(including BA) and the swing-line lender
- The Third Amendment was required when Birmingham advised lenders
that it "may not be able to make certain certifications" with
respect to interest coverage ratios in its agreements with its $280
million Senior Note Holders, its $300 million Revolver and letters
of credit underlying its Capital Lease and Industrial Revenue Bonds
- The Credit Agreement lenders agreed to suspend the Default
Provisions until September 30, 1999 in return for an increase in
fees and interest charges as of the date of the Third Amendment
- The July 27, 1999 Third Amendment was not publicly disclosed until
a SEC 8-K filing on September 29, 1999
- ---------------------------------------------------------------------------- 21
<PAGE> 26
BACKGROUND OF EVENTS
- -------------------------------------------------------------------------------
Sequence of Events Leading to the Restructuring Program (cont'd)
- On August 18, 1999, Birmingham announced a Restructuring Program - sale
of the SBQ business and its 50% ownership interest in American Iron
Reduction ("AIR")
- On September 15, 1999, Birmingham announced the fourth quarter of
fiscal year 1999 Operating Results and the financial consequences of
its restructuring program
- On September 28, 1999, the Credit Agreement was amended for the fourth
time (the "Fourth Amendment")
- The Fourth Amendment was disclosed in a SEC 8-K filing on September
30, 1999 in which the lenders agreed to forebear "their Rights and
Remedies" under certain Default Provisions in return for additional
valuable consideration
- The lenders also required a weekly cash forecast from the Company
- BIRMINGHAM'S PRESS RELEASE ON SEPTEMBER 29, 1999 FAILED TO MENTION
THAT IT WAS IN DEFAULT OF ITS DEBT COVENANTS WITH RESPECT TO
INTEREST COVERAGE, MINIMUM NET WORTH AND FAILURE TO FILE ITS ANNUAL
REPORT WITHIN 90 DAYS AFTER THE END OF THE FISCAL YEAR
- ---------------------------------------------------------------------------- 22
<PAGE> 27
BACKGROUND OF EVENTS
- -------------------------------------------------------------------------------
Sequence of Events Leading to the Restructuring Program (cont'd)
- The concession granted to the lenders in the Third and Fourth
Amendments were consolidated in a Fifth Amendment dated October 12,
1999 and extended to all creditors
- Further increased fees and interest rates and extended coverage to
the Private Placement Note Holders
- Collateralized the Debt Holder with the remaining unencumbered
assets of the Company
- Additionally, the Fifth Amendment requires that Birmingham:
- Submit a monthly financial plan to the lenders,
- Hold a quarterly financial conference with the lenders,
- Limit capital expenditures,
- Maintain minimum net worth of $188 million, and
- Report separate financial statements on both the Company's
Continuing Operations and its Consolidated Operations
- ---------------------------------------------------------------------------- 23
<PAGE> 28
BACKGROUND OF EVENTS
- -------------------------------------------------------------------------------
Sequence of Events Leading to the Restructuring Program (cont'd)
CURRENT CONDITION OF BIRMINGHAM
- Birmingham's current condition was the consequence of the disastrous
results of the SBQ business in the fourth quarter of fiscal year 1999
- Birmingham was in default on its $280 million Senior Notes, $300
million Revolver, and letters of credit underlying its Capital
Lease and Industrial Revenue Bonds
- Its balance sheet was dramatically affected with approximately 50%
of shareholders' equity eliminated
- Lenders effectively assumed control of the Company
LENDERS & COMPANY PLAN
- As discussed in Mr. Garvey's interview with American Metal Market, his
intention is to finalize the sale of the SBQ business prior to the
December 2, 1999 Annual Shareholder Meeting
- Disregard potential effect of violating the newly established net worth
requirement of $188 million (e.g., cash proceeds may not exceed book
value of the SBQ assets)
- Disregard effect of the disposal of the 50% interest in AIR and the DRI
off-take agreement
- Cash proceeds from sale
- Need for additional reduction in shareholders' equity
- Long-term future of the Company
- In the future, substantially all of Birmingham's cash will be
controlled by its lenders
- ---------------------------------------------------------------------------- 24
<PAGE> 29
BACKGROUND OF EVENTS
- -------------------------------------------------------------------------------
A New Approach
The United Group's Plan
- Complete Consent Action before December 2, 1999 and have the ability to
change management prior to Annual Shareholder Meeting
- Try once again to appeal to current Directors to nominate a
compromise Board to circumvent Default Provisions of debt
agreements
- If the Group fails to obtain proxies for Consent Action, the Group
intends to replace current Directors at the Annual Shareholder Meeting
- If a binding agreement to sell the SBQ business has not been executed,
present to lenders a plan to fix Memphis, including
- Marketing plan based on 1,100,000 tons of quality production from
Memphis
- $10 million additional expenditures needed to complete
equipment modifications not followed in construction phase
- "Look-a-like" facilities at Republic Technologies International
in Canton, Ohio and Qualitech routinely produce quality billets
- ---------------------------------------------------------------------------- 25
<PAGE> 30
BACKGROUND OF EVENTS
- -------------------------------------------------------------------------------
A New Approach (cont'd)
- SBQ program includes
- 80,000 tons of high-quality products per month with Memphis billets
- Move up quality and selling price triangle in product marketing
- Finalize preliminary requirements discussions with SBQ consumers
- Utilize 500,000 tons per year of DRI to supply capacity production at
Memphis at reduced cost penalty
- Restore corporate and personal relationships with rebar fabricators,
service centers and SBQ customers and the consumers of SBQ "Life &
Limb" quality products
- DO NOT COMPETE IN REBAR FABRICATION WITH CUSTOMERS
- Exit the export scrap Joint Venture
THE UNITED COMPANY SHAREHOLDER GROUP PROMISES TO TAKE RESPONSIBILITY
FOR ALL MANAGEMENT DECISIONS
- ---------------------------------------------------------------------------- 26
<PAGE> 31
BACKGROUND OF EVENTS
- -------------------------------------------------------------------------------
Sequence of Events Leading to the SBQ Business
DECISION TO BUILD BAR MILL BEFORE MELT SHOP
- All original billet suppliers were qualified for customer
application
- If melt shop built first - extended period to qualify billets for
the highest quality products
- Seamless transition from purchased billets to Memphis billets
- Cleveland had well established, highly educated and dedicated work
force proficient in strict process control standards
- Production from the original bar mill was considered to be of
highest quality in North America
- Production from new bar mill would be equal to the best in the
world - strategic goal
- ---------------------------------------------------------------------------- 27
<PAGE> 32
BACKGROUND OF EVENTS
- -------------------------------------------------------------------------------
Sequence of Events Leading to the SBQ Business (cont'd)
MEMPHIS START-UP
- November 1, 1997
- First calendar quarter of 1998, instructions were given to
discontinue outside billet purchases a Substantial settlement was
paid to one supplier for cancellation
- By the quarter ending September 30, 1998, Memphis billet production
was qualified for critical cold heading quality applications
- Quality declined when current Memphis manager was employed
- High turnover of personnel accelerated
- Decline of maintenance
- Unreliable production schedules and billet deliveries
- Quality standards were degraded
- Out of specification billets (chemistry) resulted in
substantial write-offs
- Seams and pipe (unheard of in quality melting operations)
caused customer rejection of Cleveland production
- High claim costs due to customer rejects
- Reputation as a quality producer was lost and now Cleveland
delegated to low quality producer when utilizing Memphis and
Cartersville billets
- Domestic coiled rod and bar market for bloom cast / rolled billets
estimated to be approximately four million tons
- ---------------------------------------------------------------------------- 28
<PAGE> 33
BACKGROUND OF EVENTS
- -------------------------------------------------------------------------------
SBQ Quality Pyramid
Diagram of SBQ Quality Pyramid - Selling Price Range $300 per ton to $610 per
ton
Valve Spring, Bearing Q, Tire Cord
Music SP Wire, Alloy Chain, CHQ, CFQ, Cold Rolling Q
Fine Wire Q
Continuous Welding Wire, Special Quality
Stick Electrode
Industrial Quality
Upholstery Spring and Mechanical Spring
Mesh, Nail Wire
Birmingham Currently Mired in Bottom Three Levels of Quality Pyramid
- ---------------------------------------------------------------------------- 29
<PAGE> 34
BACKGROUND OF EVENTS
- -------------------------------------------------------------------------------
A New Approach
THE UNITED GROUP'S POSITION
- If the current Directors do not sign a binding agreement to sell the
SBQ business prior to their removal, the Group plans to
- Restore operations of the SBQ business
- Fix Memphis
- Move up the quality pyramid at Cleveland
- If the sale of the SBQ business is finalized, the Group will
- Utilize all legal avenues to block a contract sale of the SBQ
assets prior to conclusion of proxy contest
- Streamline the existing organization structure
- Initiate a formal cost reduction program
- Fix Cartersville
- Develop a comprehensive marketing plan
THE UNITED COMPANY SHAREHOLDER GROUP PROMISES TO TAKE RESPONSIBILITY
FOR ALL MANAGEMENT DECICISONS
- ---------------------------------------------------------------------------- 30
<PAGE> 35
- -------------------------------------------------------------------------------
THE ANNOUNCED RESTRUCTURING PLAN
- -------------------------------------------------------------------------------
<PAGE> 36
THE ANNOUNCED RESTRUCTURING PLAN
- --------------------------------------------------------------------------------
Sale of the SBQ Business
We strongly believe that now is not the time to sell this business
Recent Poor Performance
- Current management has failed to tell you what price they expect to
receive for the SBQ business in their distressed condition or how the
disposal of the following obligations will affect price
- $75 million Leveraged Lease at Memphis
- $42.2 million of Industrial Revenue Bonds and other debt
associated with the SBQ business
- Birmingham reported an $85.3 million pre-tax operating loss in fiscal
year 1999 on the SBQ business, including $44.4 million in losses in the
last two quarters - a $274,000 loss per calendar day
- The SBQ business lost approximately $21 million in the first
quarter of fiscal year 2000
- The SBQ business has been unprofitable every year since 1996 under
the direction of current management
- Current management claims as much as $100 million in capital expenditures
would be necessary to make the SBQ business commercially competitive
- ----------------------------------------------------------------------------- 32
<PAGE> 37
THE ANNOUNCED RESTRUCTURING PLAN
- --------------------------------------------------------------------------------
Sale of the SBQ Business (cont'd)
Market Timing
- Current management is attempting to sell the SBQ business in what Mr.
Garvey has called "the worst industry conditions in over forty years,"
thus negatively impacting valuation
- Furthermore, the sale of Qualitech, a bankrupt SBQ asset, is competing
for market attention and price and is therefore likely to reduce the
price realized for Birmingham's SBQ business
- The American Iron Reduction operation is not presently operable
Conclusion
- A sale in the current negative environment will make permanent the damage
already done to shareholder value by the mismanagement of the SBQ
business
- ----------------------------------------------------------------------------- 33
<PAGE> 38
THE ANNOUNCED RESTRUCTURING PLAN
- --------------------------------------------------------------------------------
Impact of SBQ Sale
(Dollars in Millions)
A STUDY CONDUCTED FOR THE UNITED SHAREHOLDER GROUP ESTIMATES THE
IMPACT ON THE VALUE OF THE SBQ ASSETS OF SELLING NOW VERSUS LATER
<TABLE>
<CAPTION>
SELL SBQ NOW SELL SBQ LATER
BEST WORST BEST WORST
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Estimated Gross Proceeds $ 165.0 $ 75.0 $ 690.0 $ 528.0
Less: Leveraged Lease 74.0 74.0 74.0 74.0
Less: Transaction Costs 8.0 8.0 8.0 8.0
Less: IRBs and other associated debt 42.2 42.2 42.2 42.2
-------- -------- -------- --------
Net Proceeds $ 40.8 $ (49.2) $ 565.8 $ 403.8
Total Other Liabilities 586.8 586.8 586.8 586.8
-------- -------- -------- --------
Liabilities Post SBQ Sale $ 546.0 $ 636.0 $ 21.0 $ 183.0
Estimated Value of Remaining Assets 565.0 565.0 565.0 565.0
-------- -------- -------- --------
IMPLIED MARKET VALUE $ 19.0 NM $ 544.0 $ 382.0
</TABLE>
- ----------------------------------------------------------------------------- 34
<PAGE> 39
THE ANNOUNCED RESTRUCTURING PLAN
- --------------------------------------------------------------------------------
Restore SBQ Operations
DELAYING THE SALE OF THE SBQ BUSINESS HOLDS GREAT POTENTIAL FOR
RECOVERING SHAREHOLDER VALUE
- Weak SBQ market conditions have the potential to improve over the next 12
to 18 months
- Recent industry consolidation (Bartech/Republic/USS Kobe)
- Possible Qualitech sale removes competing asset from the selling process
- Provides future management team with more time to restore the operation
of the SBQ business and thereby increase the market value of the SBQ
assets so that a sale of such assets would bring an acceptable price
- Could enable a complete refinancing of Birmingham's debt
- The Group needs to solve the problems at the Memphis facility so that
"either it will become a substantial contribution to the Company's
profitability or can be sold at a price that will provide the Company a
fair value"
- ----------------------------------------------------------------------------- 35
<PAGE> 40
THE ANNOUNCED RESTRUCTURING PLAN
- -------------------------------------------------------------------------------
American Iron Reduction
- As of June 30, 1999, Birmingham's DRI purchase commitment was 6,726,000
tons at pass through costs plus debt retirement costs
- As of June 30, 1999, DRI spot market price is $30 per ton less than AIR's
pass through
- At the current price, tonnage commitment implies a penalty of over
$200 million
- Debt retirement cost of approximately $4 million per quarter
starting in fourth quarter of fiscal year 2000 - total of $147
million
- Total obligations of DRI purchase commitment are approximately $350
million
- AIR is currently in default on $178.9 million of long-term project
finance debt
- Birmingham's Senior Noteholders have restricted the Company from making
payments to AIR in excess of the amounts presently required
- Additionally, Birmingham may be required to obtain approval of its
Senior Noteholders to enter into an agreement to terminate or
settle any of its obligations relating to AIR
- Failing to extinguish DRI commitment means Birmingham will retain
obligation and must either use DRI in conventional mills at substantial
operating and cost penalty or sell DRI on spot market and absorb losses
- The financial implication of AIR is not included in the current write
down of the SBQ business; therefore, further deterioration of
shareholders' equity is likely
Given these factors, how can current management expect to receive favorable
terms, or even find a savior, in order to exit AIR?
- ----------------------------------------------------------------------------- 36
<PAGE> 41
- --------------------------------------------------------------------------------
THE UNITED COMPANY SHAREHOLDER GROUP
- --------------------------------------------------------------------------------
<PAGE> 42
THE UNITED COMPANY SHAREHOLDER GROUP
- --------------------------------------------------------------------------------
Proposed Chief Executive Officer
MR. CORRENTI IS RECOGNIZED AS A COMMUNICATOR AND MOTIVATOR WITH EMPLOYEES,
STEEL ANALYSTS, SHAREHOLDERS, CUSTOMERS AND SUPPLIERS
JOHN D. CORRENTI
- The Group has slated John D. Correnti to become the Chief Executive
Officer of the Company
- Mr.Correnti served as President, Chief Executive Officer, and Vice
Chairman of Nucor Corporation from January 1996 to June 1999 and as
President and Chief Operating Officer from 1991 to 1996
- Nucor is recognized as the premiere steel mini-mill company in the
world and is the second largest steel producer in the United
States
- While Mr. Correnti served in an executive capacity, Nucor's revenues
increased from approximately $1.5 billion in 1991 to $4.1 billion in 1998
- Earnings increased during the same period to nearly $300 million
from approximately $75 million and stockholders' equity increased
to over $2.0 billion from approximately $1.1 billion
- 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
- ----------------------------------------------------------------------------- 38
<PAGE> 43
THE UNITED COMPANY SHAREHOLDER GROUP
- --------------------------------------------------------------------------------
Successful Start-ups Under John Correnti
One of the principal strengths of John Correnti is in building cutting edge
technology mills, on time and with expected start-up results.
(Geographical diagram of Nucor start-ups during John Correnti's tenure:
Norfolk, NE; Crawfordsville, IN; Brigham City - Plymouth, UT; Hickman, AR;
Blytheville, AR; Jewett, TX; Berkeley, SC; Darlington - Florence, SC.)
- ----------------------------------------------------------------------------- 39
<PAGE> 44
THE UNITED COMPANY SHAREHOLDER GROUP
- --------------------------------------------------------------------------------
Creating Shareholder Value - John Correnti at Nucor Corp.
(U.S. Dollars in Millions)
(Chart of Increase in Market Value of Equity and Total Market Capitalization of
Nucor Corp. from December 31, 1991 to December 31, 1998)
<TABLE>
<CAPTION>
Market Value of Equity
- ----------------------
<S> <C>
December 31, 1991 $1,933.1
December 31, 1998 $3,774.4
</TABLE>
<TABLE>
<CAPTION>
Total Market Capitalization (including debt)
- --------------------------------------------
<S> <C>
December 31, 1991 $2,131.9
December 31, 1998 $4,272.3
</TABLE>
- ----------------------------------------------------------------------------- 40
<PAGE> 45
THE UNITED COMPANY SHAREHOLDER GROUP
- --------------------------------------------------------------------------------
Profile of Director Nominees
<TABLE>
<CAPTION>
NAME AGE BACKGROUND
<S> <C> <C>
John D. Correnti 52 Served at Nucor Corporation from 1980 until June
1999, including most recently as Vice Chairman of
the Board of Directors, President and Chief
Executive Officer. Currently serves on the Board
of Directors of Harnischfeger Industries and
Navistar International Corporation.
James A. Todd, Jr. 71 Currently retired, Mr. Todd was the Chief
Executive Officer and Chairman of the Board of
Directors of the Company from 1991 until January
1996. 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, was recognized by as its Steelmaker of the
Year. Director of Kinross Gold Corporation.
James W. McGlothlin 59 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. Serves
on the Board of Directors of CSX Corporation.
Donna M. Alvarado 50 President of Aguila International, an
international business development consulting
firm, since 1994. 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. Director of Harnischfeger
Industries and Park National Bank.
Robert M. Gerrity 61 Self-employed as a consultant since 1995. 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, 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, served in
various management capacities at Ford Motor
Company, including President of Ford of Brazil.
Currently a director of Standard Motor Products
and Harnischfeger Industries. Also served as a
director of Rubbermaid Inc. from 1992 to 1998.
</TABLE>
- ----------------------------------------------------------------------------- 41
<PAGE> 46
THE UNITED COMPANY SHAREHOLDER GROUP
- --------------------------------------------------------------------------------
Profile of Director Nominees (cont'd)
<TABLE>
<CAPTION>
Name Age Background
<S> <C> <C>
Alvin R. Carpenter 57 President and CEO of CSX Transportation, Inc., a
railroad transportation company and a wholly-owned
subsidiary of CSX Corporation, since 1991. Vice
Chairman of CSX Corporation since July, 1999.
Served as Executive Vice President of Sales and
Marketing at CSX Transportation from 1989 to 1991.
Robert H. Spilman 71 Sole-proprietor of Spilman Properties, an
investment company. 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.
Currently serves as director of The Pittston
Company and Dominion Resources.
Jerry E. Dempsey 66 Currently 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. Was
President and Chief Executive Officer of Chemical
Waste Management and Senior Vice President of WMX
Technologies, from 1985 until 1993. Director of
Eastman Chemical Company and Navistar
International Corporation.
Steven R. Berrard 45 Managing Partner of New River Capital Partners, a
private equity firm with an investment strategy
focused on branded specialty retail, e-commerce
and education. From January 1997 to September 1999
was Co-Chief Executive Officer of AutoNation,
Inc., the world's largest automotive retailer and
a leading provider of vehicle rental services.
Prior to joining AutoNation, was President and
Chief Executive Officer of the Blockbuster
Entertainment Group, a division of Viacom, Inc.,
one of the world's largest entertainment
companies. Served as Vice Chairman, President and
Chief Operating Officer of Blockbuster
Entertainment Corporation until its merger with
Viacom in 1994. Served as President and Chief
Executive Officer and a Director of Spelling
Entertainment Group, Inc. from 1993 to 1996 and as
a Director of Viacom from 1994 to 1996. Currently
serves as a Director of Gerald Stevens, Inc., Boca
Resorts, Inc. and AutoNation.
</TABLE>
- ----------------------------------------------------------------------------- 42
<PAGE> 47
- --------------------------------------------------------------------------------
THE NEW PLAN
- --------------------------------------------------------------------------------
<PAGE> 48
THE NEW PLAN
- --------------------------------------------------------------------------------
Plan Outline
General
Our goal: To make Birmingham Steel one of the lowest-cost, highest-quality steel
producers in rebar, merchant products and SBQ
- Provide effective management and leadership
- Attempt to complete proxy contest without triggering the "change in
control" provisions associated with the Company's outstanding debt
securities
- Implement the best "Nucor-style" and "Birmingham-style" attitudes,
philosophies and cultures
- Select individuals that share this operating philosophy and culture
- ----------------------------------------------------------------------------- 44
<PAGE> 49
THE NEW PLAN
- --------------------------------------------------------------------------------
Plan Outline (cont'd)
OPERATING PLAN
- Initiate organized cost reduction program
- Operate core facilities at or above nameplate capacity
- Any potential pressure on selling price is more than compensated
with improved cost position
- Re-establish relationships with service center and rebar fabricator
customer bases
- Service centers account for over half of merchant bar sales, yet
they have been largely ignored by current management
- SBQ Business:
- Re-establish customer confidence with automotive and other OEMs
- Improve qualification performance
- Rebuild AS&W sales, marketing and quality control groups
- Focus efforts on fixing the Memphis melt shop-- tremendous upside
potential
- Install competent, permanent management team
- Reduce employee turnover and improve employee training
- Once Cleveland is properly supplied with Memphis billets, it
should be one of the lowest-cost SBQ producers in the United
States
-- Non-union facility
-- World-class equipment
- ----------------------------------------------------------------------------- 45
<PAGE> 50
THE NEW PLAN
- --------------------------------------------------------------------------------
Plan Outline (cont'd)
OPERATING PLAN (CONT'D)
- May take at least 18 months to implement
- Memphis not just an SBQ asset but a corporate asset that can
support other types of mills
- Fix Operations at Cartersville
- Provide leadership
- Replace electrical control system using a reputable vendor
- Reduce down-time through adequate preventative and predictive
maintenance
- Reorganize sales and marketing program
- Take advantage of location in the heart of the Southeast construction
market and improve relationships with steel service centers
- ----------------------------------------------------------------------------- 46
<PAGE> 51
THE NEW PLAN
- --------------------------------------------------------------------------------
Plan Outline (cont'd)
STRATEGIC PLAN
- First priority is to fix Birmingham's balance sheet
- Secondly, attempt to become a leader in the consolidation of the steel
industry
- OUR GOAL IS TO GROW, NOT SHRINK, THE COMPANY
FINANCIAL PLAN
- Improve cash flows through better operational performance and customer
satisfaction
- Recapitalize the Company when the capital markets allow a reasonable
opportunity
- Evaluate asset sales only when fair values can be obtained
- ----------------------------------------------------------------------------- 47
<PAGE> 52
- --------------------------------------------------------------------------------
CHANGE OF CONTROL IMPLICATIONS
- --------------------------------------------------------------------------------
<PAGE> 53
CHANGE OF CONTROL IMPLICATIONS
- --------------------------------------------------------------------------------
Cash Effects Upon a Change of Control (a)
(Dollars in Millions)
The current Board of Directors can spare the Company the expense and
exposure of a change of control by agreeing to nominate a compromise
slate of Directors(b)
- This change of control is what we are trying to avoid
Possible Defaults()
<TABLE>
<S> <C>
$216.0 Revolver balance - placed into default upon change of control
280.0 Senior Notes - potentially "put" back to Birmingham upon change of control
75.0 Leverage Lease at Memphis
42.2 Solid Waste Disposal Revenue Bonds and certain other obligations
9.1 Make-whole provision on Notes
------
$622.3 POTENTIAL LIABILITY (c)
======
</TABLE>
In addition, all Company options outstanding immediately vest
- ------------------
(a) Source: Company Proxy filed September 22, 1999.
(b) Assumes the nominated compromise slate is elected by the Company
shareholders.
(c) The Cartersville Leverage Lease may also be subject to default.
- ----------------------------------------------------------------------------- 49
<PAGE> 54
CHANGE OF CONTROL IMPLICATIONS
- --------------------------------------------------------------------------------
Cash Effects Upon a Change of Control (cont'd)
$15.5 MILLION EXECUTIVE SEVERANCE PAYMENTS
- Amounts increased by approximately 50% as of the September 2, 1999
Restatement of the Executive Severance Plan
- Change of control provision that would have allowed a new Board nominated
by the previous Board to escape this payment was revised in the September
2, 1999 Restatement and now excludes the nomination of "a Director whose
initial assumption of office is in connection with an actual or
threatened contest, including but not limited to a proxy or consent
solicitation, relating to the election of Directors of the Company or a
settlement of such contest or consent solicitation"
- ----------------------------------------------------------------------------- 50
<PAGE> 55
CHANGE OF CONTROL IMPLICATIONS
- --------------------------------------------------------------------------------
Debt Clauses
BANK CREDIT AGREEMENT
- A "change in control" includes a change in the majority of the Board of
Directors during any twelve month period (other than action by existing
Board of Directors)
- Constitutes an event of default
- Waivable upon agreement of a majority (determined by dollar value held)
of the bank lenders
SENIOR NOTES
- A "change in control" 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
- Requires the Company to make to the note holders a written offer to
prepay the senior notes
- ----------------------------------------------------------------------------- 51
<PAGE> 56
THE UNITED COMPANY SHAREHOLDER GROUP
- --------------------------------------------------------------------------------
Forward-Looking Statements
- The U.S. securities laws provide a "safe harbor" for certain
forward-looking statements. This presentation contains forward-looking
statements, including statements concerning the business, future
financial position, results of operations, business strategy, estimated
cost savings and other benefits of the Group's proposed management of
Birmingham. Forward-looking statements involve risks and uncertainties
that could cause actual results to differ materially from those
projected. Readers are cautioned not to put undue reliance on
forward-looking statements. The Group disclaims any intent or obligation
to update such forward-looking statements.
- ----------------------------------------------------------------------------- 52
