<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
</TABLE>
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))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
SCHUFF STEEL COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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
SCHUFF STEEL COMPANY
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 21, 1999
------------------------
To Our Stockholders:
The 1999 Annual Meeting of Stockholders of Schuff Steel Company will be
held at the Westin Harbor Island, 1590 Harbor Island Drive, San Diego,
California, on Monday, June 21, 1999, beginning at 9:00 a.m. local time. At the
meeting, stockholders will act on the following matters:
1. Election of six directors, each for a term of one year;
2. Adoption of the Schuff Steel Company 1999 Employee Stock Purchase
Plan;
3. Ratification of the appointment of Ernst & Young LLP as the Company's
independent auditors for fiscal 1999; and
4. Any other matters that properly come before the meeting.
Stockholders of record at the close of business on April 26, 1999 are
entitled to vote at the meeting or any postponement or adjournment thereof. We
have enclosed a copy of the Company's 1998 Annual Report to Stockholders, which
includes certified financial statements, and the Company's Proxy Statement.
IF YOU PLAN TO ATTEND:
Please note that space limitations make it necessary to limit attendance to
stockholders and one guest. Registration and seating will begin at 8:00 a.m.
Complimentary parking is available at the hotel. Stockholders holding stock in
brokerage accounts ("street name" holders) will need to bring a copy of a
brokerage statement reflecting stock ownership as of the record date. Cameras,
recording devices and other electronic devices will not be permitted at the
meeting.
YOUR VOTE IS IMPORTANT. IN ORDER TO ASSURE YOUR REPRESENTATION AT THE
MEETING, YOU ARE REQUESTED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS
PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
By Order of the Board of Directors
[ZylstraSig]
KENNETH F. ZYLSTRA
Vice President, Chief Financial
Officer,
Treasurer and Secretary
May 10, 1999
Phoenix, Arizona
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ABOUT THE MEETING
What is the purpose of the annual meeting?................ 1
Who is entitled to vote?.................................. 1
Who can attend the meeting?............................... 1
What constitutes a quorum?................................ 1
How do I vote?............................................ 2
What if I vote and then change my mind?................... 2
What are the Board's recommendations?..................... 2
What vote is required to approve each item?............... 2
How much did this proxy solicitation cost?................ 3
BOARD OF DIRECTORS
Election of Directors (Proposal No. 1).................... 3
How are non-employee directors compensated?............... 4
Are employees of the Company paid additional compensation
for service as a director?............................. 4
How often did the Board meet during fiscal 1998?.......... 4
What committees has the Board established?................ 5
EXECUTIVE OFFICERS AND COMPENSATION
The Executive Officers.................................... 6
Summary Compensation Table................................ 7
Options/SAR Grants in Last Fiscal Year.................... 8
Aggregated Option/SAR Exercises In Last Fiscal Year and
Fiscal Year-End Options/ SAR Values.................... 8
Employment Agreements..................................... 9
Change of Control Arrangements............................ 9
Report of the Compensation Committee on Executive
Compensation........................................... 10
STOCK PRICE PERFORMANCE GRAPH............................... 13
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE..... 13
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND
MANAGEMENT................................................ 14
CERTAIN TRANSACTIONS AND RELATIONSHIPS...................... 14
ADOPTION OF SCHUFF STEEL COMPANY 1999 EMPLOYEE STOCK
PURCHASE PLAN (PROPOSAL NO. 2)............................ 16
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS (PROPOSAL
NO. 3).................................................... 19
STOCKHOLDER PROPOSALS AND NOMINATIONS....................... 19
OTHER MATTERS............................................... 20
APPENDIX A: SCHUFF STEEL COMPANY 1999 EMPLOYEE STOCK
PURCHASE PLAN............................................. A-1 to A-7
</TABLE>
<PAGE> 4
[SCHUFF LOGO]
SCHUFF STEEL COMPANY
1841 WEST BUCHANAN STREET
PHOENIX, ARIZONA 85009
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement contains information related to the 1999 Annual
Meeting of Stockholders to be held on June 21, 1999 at 9:00 a.m. local time, at
the Westin Harbor Island, 1590 Harbor Island Drive, San Diego, California, or at
such other time and place to which the annual meeting may be adjourned or
postponed. THE ENCLOSED PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE
COMPANY. The proxy materials relating to the annual meeting are first being
mailed to stockholders entitled to vote at the meeting on or about May 10, 1999.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the Company's annual meeting, stockholders will act upon the matters
outlined in the accompanying notice of meeting, including the election of
directors, adoption of an employee stock purchase plan, and ratification of the
Company's independent auditors. In addition, the Company's management will
report on the performance of the Company during fiscal 1998 and respond to
questions from stockholders.
WHO IS ENTITLED TO VOTE?
Only stockholders of record at the close of business on the record date,
April 26, 1999, are entitled to receive notice of the annual meeting and to vote
the shares of common stock that they held on that date at the meeting, or any
postponement or adjournment of the meeting. Each outstanding share entitles its
holder to cast one vote on each matter to be voted upon.
WHO CAN ATTEND THE MEETING?
All stockholders as of the record date, or their duly appointed proxies,
may attend the meeting, and each may be accompanied by one guest. Registration
and seating will begin at 8:00 a.m. Cameras, recording devices and other
electronic devices will not be permitted at the meeting.
Please note that if you hold your shares in "street name" (that is, through
a broker or other nominee), you will need to bring a copy of a brokerage
statement reflecting your stock ownership as of the record date and check in at
the registration desk at the meeting.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum, permitting the Company to conduct its business at the
annual meeting. As of the record date, 7,027,173 shares of common stock of the
Company were outstanding. Proxies received but marked as abstentions and broker
non-votes will be included in the calculation of the number of shares considered
to be present at the meeting.
<PAGE> 5
HOW DO I VOTE?
You can vote on matters to come before the meeting in two ways:
1. You can attend the annual meeting and cast your vote in person; or
2. You can vote by completing, dating and signing the enclosed proxy
card and returning it in the enclosed postage-paid envelope. If you
do so, you will authorize the individuals named on the proxy card,
referred to as the proxies, to vote your shares according to your
instructions or, if you provide no instructions, according to the
recommendation of the Board of Directors.
WHAT IF I VOTE AND THEN CHANGE MY MIND?
You may revoke your proxy at any time before it is exercised by:
- filing with the Secretary of the Company a notice of revocation; or
- sending in another duly executed proxy bearing a later date; or
- attending the meeting and casting your vote in person.
Your last vote will be the vote that is counted.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the recommendations
of the Board of Directors. The Board's recommendations are set forth together
with a description of each item in this proxy statement. In summary, the Board
recommends a vote:
- for election of the nominated slate of directors (see page 3);
- for adoption of the Schuff Steel Company 1999 Employee Stock Purchase
Plan (see page 16); and
- for ratification of the appointment of Ernst & Young LLP as the
Company's independent auditors for fiscal 1999 (see page 19).
With respect to any other matter that properly comes before the meeting,
the proxy holders will vote as recommended by the Board of Directors or, if no
recommendation is given, in their own discretion.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
ELECTION OF DIRECTORS. The six nominees who receive the most votes will be
elected to the Board of Directors. A properly executed proxy marked "WITHHOLD
ALL" or "FOR ALL EXCEPT" with respect to the election of one or more directors
will not be voted with respect to the director or directors indicated, although
it will be counted for purposes of determining whether there is a quorum. A
"broker non-vote" (discussed below) will also have no effect on the outcome
since only a plurality of votes actually cast is required to elect a director.
OTHER ITEMS. For each other item, the affirmative vote of the holders of a
majority of the shares represented in person or by proxy and entitled to vote on
the item will be required for approval. A properly executed proxy marked
"ABSTAIN" with respect to any such matter will not be voted, although it will be
counted for purposes of determining whether there is a quorum. Accordingly, an
abstention will have the effect of a negative vote.
EFFECT OF BROKER NON-VOTES. If you hold your shares in "street name"
through a broker or other nominee, your broker or nominee may not be permitted
to exercise voting discretion with respect to some of the matters to be acted
upon, including the proposal to adopt the Schuff Steel 1999 Employee Stock
Purchase Plan. Thus, if you do not give your broker or nominee specific
instructions, your shares may not be voted on those matters and will not be
counted in determining the number of shares necessary for approval. Shares
represented by such "broker non-votes" will, however, be counted in determining
whether there is a quorum.
2
<PAGE> 6
HOW MUCH DID THIS PROXY SOLICITATION COST?
The Company has retained Corporate Investor Communications, Inc. to assist
in the solicitation of proxies from stockholders at an estimated fee of $1,000,
plus reasonable expenses. (Note that this fee does not include the costs of
printing the proxy statements.) Some of the officers and other employees of the
Company also may, but without compensation other than their regular
compensation, solicit proxies by further mailing or personal conversations, or
by telephone, facsimile or other electronic means. The Company will also, upon
request, reimburse brokers and other persons holding stock in their names, or in
the names of nominees, for their reasonable out-of-pocket expenses for
forwarding proxy materials to the beneficial owners of the common stock and to
obtain proxies.
BOARD OF DIRECTORS
This section gives biographical information about our directors and
describes their membership on Board committees, their attendance at meetings and
their compensation.
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
The Board of Directors proposes that each of the nominees described below
be elected to serve until the 2000 Annual Meeting of Stockholders or until his
successor shall have been duly elected and qualified or his resignation or
removal, whichever first occurs. All of the director nominees, except H. Wilson
Sundt, are currently serving as directors of the Company.
Each of the nominees has consented to serve a one-year term. If any of them
should become unavailable to serve as a director, the Board may designate a
substitute nominee. In that case, the persons named as proxies will vote for the
substitute nominee designated by the Board.
The directors standing for election are:
DAVID A. SCHUFF, 68 DIRECTOR SINCE 1976
David A. Schuff has served as the Chairman of the Board of Directors since
the Company's inception and is a co-founder of the Company. Mr. Schuff served as
President and Chief Executive Officer of the Company from its founding in 1976
to 1995. Mr. Schuff has been involved in the steel fabrication and erection
business in a number of capacities since 1958. David A. Schuff is the father of
Scott A. Schuff.
SCOTT A. SCHUFF, 40 DIRECTOR SINCE 1976
Scott A. Schuff is the President and Chief Executive Officer of the Company
and a co-founder of the Company. Mr. Schuff has served in numerous capacities
with the Company since its founding in 1976, and has been the President and
Chief Executive Officer since 1995. Scott A. Schuff is the son of David A.
Schuff.
KENNETH F. ZYLSTRA, 57 DIRECTOR SINCE 1997
Kenneth F. Zylstra has served as Vice President and Chief Financial Officer
of the Company since 1983 and has been an officer of the Company since 1979.
Prior to 1979, Mr. Zylstra was associated with Ernst & Young (then Ernst &
Ernst). Mr. Zylstra received a B.B.A. Degree in Public Accounting from Loyola
University Chicago, and is a member of the American Institute of Certified
Public Accountants, the Illinois CPA Society and the Construction Financial
Management Association.
EDWARD M. CARSON, 69 DIRECTOR SINCE 1997
Edward M. Carson was the Chairman of the Board of Directors and Chief
Executive Officer of First Interstate Bancorp, a bank holding company, from 1990
through June 1995. Mr. Carson currently is a director of Wells Fargo & Co.,
Aztar Corporation, Castle & Cooke, Inc. and Terra Industries, Inc.
3
<PAGE> 7
DENNIS DeCONCINI, 61 DIRECTOR SINCE 1997
Dennis DeConcini is a former United States Senator for Arizona and
currently is a partner of Parry and Romani Associates, Inc., a consulting firm
based in Washington, D.C., and is a partner of DeConcini McDonald Yetwin & Lacy,
P.C., a law firm with offices in Tucson and Phoenix, Arizona, and in Washington,
D.C. Mr. DeConcini is a director of Saf T Lok Incorporated. Mr. DeConcini also
serves by appointment of the President of the United States on the Board of
Directors of the Federal Home Loan Mortgage Corporation (Freddie Mac), a
federally chartered mortgage finance corporation.
H. WILSON SUNDT, 66 NEW DIRECTOR NOMINEE
H. Wilson Sundt has served as the Chairman of the Board of Directors of The
Sundt Companies, Inc. since January 1999. Mr. Sundt was Chairman of the Board of
Directors and Chief Executive Officer of Sundt Corp., a privately held general
construction contracting firm, from 1976 to December 1998, and served as its
President from 1979 through 1983. Mr. Sundt also serves as a director of
Unisource Energy Corporation. Mr. Sundt has been active in the construction
industry since 1957.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ELECTION OF EACH
OF THE DIRECTOR NOMINEES.
HOW ARE NON-EMPLOYEE DIRECTORS COMPENSATED?
ANNUAL FEE: Each non-employee director receives a retainer based on an
annualized rate of $20,000. Non-employee directors may elect to receive all or
part of their retainer either in shares of the Company's common stock or cash.
MEETING FEES: Each non-employee director receives a fee of:
- $1,000 for attendance at each Board meeting; and
- $700 for attendance at each Board committee meeting not held at the
same time as a Board meeting.
OPTIONS. Under the 1998 Director Compensation Plan, each non-employee
director receives an automatic grant of 500 shares of common stock and a non
qualified option to purchase an additional 500 shares of common stock each year
as of the third business day following the public release of the Company's
fiscal year-end earnings information. For fiscal 1998, Messrs. Carson and
DeConcini received grants of stock and options to purchase stock under this
plan. These annual option grants immediately vest and become exercisable,
permitting the holder to purchase shares at their fair market value on the date
of grant, which was $10.125 in the case of options granted in 1998. Unless
earlier terminated, forfeited or surrendered pursuant to the plan, each option
granted will expire on the tenth anniversary date of the grant
EXPENSES: Each non-employee director is also reimbursed for reasonable
travel expenses incurred in connection with attendance at each Board and Board
committee meeting.
ARE EMPLOYEES OF THE COMPANY PAID ADDITIONAL COMPENSATION FOR SERVICE AS A
DIRECTOR?
No. We do, however, reimburse them for travel and other related expenses.
HOW OFTEN DID THE BOARD MEET DURING FISCAL 1998?
The Board of Directors met six times during fiscal 1998, three of which
were held by a telephone conference call. Attendance by directors at the
meetings of the Board and Board committees on which they served was 100%.
4
<PAGE> 8
WHAT COMMITTEES HAS THE BOARD ESTABLISHED?
The Board of Directors has standing Compensation and Audit Committees. The
Company does not maintain a standing nominating committee or other committee
performing similar functions. The function of nominating directors is carried
out by the entire Board of Directors. Our Bylaws, however, provide a procedure
for you to recommend candidates for director at an annual meeting. For more
information, see page 19 under "Stockholder Proposals and Nominations."
<TABLE>
<CAPTION>
NAME COMPENSATION COMMITTEE AUDIT COMMITTEE
- ---- ---------------------- ---------------
<S> <C> <C>
Dennis DeConcini................................... X X
Edward M. Carson................................... X X
</TABLE>
COMPENSATION COMMITTEE. The Compensation Committee of the Board of
Directors reviews all aspects of compensation of executive officers of the
Company and makes recommendations on such matters to the full Board of Directors
and administers the Company's 1997 Stock Option Plan. If approved at the annual
meeting, this committee will also administer the Company's 1999 Employee Stock
Purchase Plan. In fiscal 1998, the Compensation Committee met three times.
AUDIT COMMITTEE. The Audit Committee makes recommendations to the Board
concerning the selection and retention of outside auditors for the Company,
reviews the financial statements of the Company, oversees the establishment and
implementation of such systems of internal accounting and auditing control as it
deems appropriate and considers such other matters in relation to the external
audit of the financial affairs of the Company as may be necessary or appropriate
in order to facilitate accurate and timely financial reporting. The Audit
Committee also reviews certain proposals for major transactions. In fiscal 1998,
the Audit Committee met three times.
5
<PAGE> 9
EXECUTIVE OFFICERS AND COMPENSATION
This section contains biographies of all our executive officers and charts
that show the amount of compensation earned by our Chief Executive Officer and
by our four other most highly paid executive officers. It also contains the
report of the Compensation Committee explaining the compensation philosophy for
the Company's most highly paid officers.
THE EXECUTIVE OFFICERS
The following are biographies of the Company's current executive officers,
except for SCOTT A. SCHUFF, DAVID A. SCHUFF and KENNETH F. ZYLSTRA, whose
biographies are included at pages 3-4 under "Election of Directors (Proposal No.
1)."
<TABLE>
<S> <C>
GLEN S. DAVIS, 45.................... PRESIDENT OF ADDISON STEEL, INC. Addison Steel, Inc. was
acquired by the Company in June 1998. Mr. Davis entered into
an employment agreement with the Company in connection with
the acquisition. Mr. Davis has been President of Addison
Steel since July 1973.
SAIED MAHDAVI, 38.................... PRESIDENT OF QUINCY JOIST COMPANY. Quincy Joist Company was
acquired by the Company in June 1998. Mr. Mahdavi entered
into an employment agreement with the Company in connection
with the acquisition. Mr. Mahdavi has been President of
Quincy Joist since January 1990.
WAYNE HARRIS, 55..................... PRESIDENT OF SIX INDUSTRIES, INC. Six Industries, Inc. was
acquired by the Company in September 1998. Mr. Harris
entered into an employment agreement with the Company in
connection with the acquisition. Mr. Harris has been
President of Six Industries since May 1990.
TED ROSSIN, 54....................... PRESIDENT OF BANNISTER STEEL, INC. Bannister Steel, Inc.
was acquired by the Company in October 1998. Mr. Rossin
entered into an employment agreement in connection with the
acquisition. Mr. Rossin has been President of Bannister
Steel since June 1996. From January 1994 to June 1996, Mr.
Rossin was Vice President and General Manager of Bannister
Steel.
</TABLE>
6
<PAGE> 10
SUMMARY COMPENSATION TABLE
The table below sets forth information concerning the annual and long-term
compensation for services rendered in all capacities to the Company during the
three fiscal years ended December 31, 1998, of those persons who were, at
December 31, 1998, (i) the Chief Executive Officer of the Company and (ii) the
four other most highly compensated executive officers of the Company
(collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------- ----------------------- -------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) OPTIONS/ PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) ($) SARS ($) ($)(3)
- ------------------ ---- -------- -------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Scott A. Schuff............... 1998 $296,412 $186,850 $4,940 -- -- -- $2,259
President and Chief 1997 $260,010 $ 30,000 $5,334 -- -- -- --
Executive Officer 1996 $260,008 $ 22,000 $5,089 -- -- -- --
David A. Schuff............... 1998 $296,412 $ 30,000 $4,896 -- -- -- --
Chairman of the Board 1997 $296,412 $ 30,000 $4,861 -- -- -- --
of Directors 1996 $296,411 $ 22,825 $4,890 -- -- -- --
Kenneth F. Zylstra(4)......... 1998 $162,233 $ 46,713 $4,178 -- 50,000 -- $2,078
Vice President, Chief 1997 $123,193 $ 40,000 $4,212 -- 40,000 -- $1,593
Financial Officer, Treasurer 1996 $115,155 $ 51,025 $4,615 -- -- -- $1,218
and Secretary
Glen S. Davis(5).............. 1998 $154,230 $ 93,928 -- -- 20,000 -- --
President, Addison Steel,
Inc.
Saied Mahdavi(5).............. 1998 $158,000 $ 80,682 -- -- 20,000 -- --
President, Quincy Joist Co.
</TABLE>
- ---------------
(1) Includes bonus amounts earned in the applicable fiscal year but paid or to
be paid in the following fiscal year. Excludes bonuses paid in the
applicable fiscal year but earned in the preceding fiscal year.
(2) The aggregate amount of perquisites and other personal benefits, securities
or property, given to each Named Executive Officer was less than either
$50,000 or 10% of the total annual salary and bonus for that executive
during each of these years.
(3) The amounts shown in this column represent the dollar value of contributions
made by the Company to the Company's 401(k) retirement savings plan for the
benefit of the Named Executive Officers.
(4) The amounts shown exclude $62,445 paid in 1997 to Mr. Zylstra pursuant to
the Company's Supplemental Retirement and Deferred Compensation Plan, which
was terminated in 1997.
(5) Amounts only include compensation earned after the Company's acquisition of
Addison Steel, Inc. and Quincy Joist Company.
7
<PAGE> 11
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning grants of stock
options to the Named Executive Officers during the fiscal year ended December
31, 1998. The Company does not maintain an option or other stock based plan that
provides for the grant of stock appreciation rights ("SARs").
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------ POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES PERCENT OF ANNUAL RATE OF STOCK
UNDERLYING TOTAL OPTIONS/ EXERCISE APPRECIATION FOR
OPTIONS/ SARS GRANTED PRICE OPTION TERM(1)
SARS TO EMPLOYEES (PER EXPIRATION --------------------
NAME GRANTED IN FISCAL YEAR SHARE) DATE 5% 10%
- ---- ---------- -------------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Scott A. Schuff(2)..... -- -- -- -- -- --
David A. Schuff(2)..... -- -- -- -- -- --
Kenneth F. Zylstra..... 50,000 10.18% $10.00 10/15/08 $375,531 $894,137
Glen S. Davis.......... 20,000 4.07% $14.50 06/04/08 $182,379 $462,185
Saied Mahdavi.......... 20,000 4.07% $14.50 06/04/08 $182,379 $462,185
</TABLE>
- ---------------
(1) In accordance with Securities and Exchange Commission rules, the figures in
the first row of the "5%" and "10%" columns of this table for Messrs.
Zylstra, Davis and Mahdavi assume compounded annual stock price appreciation
of 5% and 10%, respectively, based on a stock price of $13.75 per share on
October 15, 1998 and $14.50 per share on June 4, 1998, which was the fair
market value per share of the Common Stock on the respective date of grants.
(2) Neither Scott A. Schuff nor David A. Schuff participated in the Company's
1997 Stock Option Plan in 1998.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth information concerning the value of each
Named Executive Officer's unexercised options at December 31, 1998. None of the
Named Executive Officers exercised any stock options in 1998 and the Company
does not maintain an option or other stock based plan that provides for the
grant of SARs.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS/SARS AT IN-THE-MONEY OPTIONS/
ACQUIRED FISCAL YEAR-END SARS AT FISCAL YEAR-END(1)
ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Scott A. Schuff........ -- -- -- -- -- --
David A. Schuff........ -- -- -- -- -- --
Kenneth F. Zylstra..... -- -- 8,000 82,000 $4,000 $16,000
Glen S. Davis.......... -- -- -- 20,000 -- --
Saied Mahdavi.......... -- -- -- 20,000 -- --
</TABLE>
- ---------------
(1) Options are considered "in the money," if the fair market value of the
underlying securities exceeds the exercise price of the options. The
year-end values represent the difference between the fair market value of
the common stock subject to the options (the stock's closing price as
reported by the Nasdaq National Market was $5.50 on December 31, 1998) and
the exercise price of the options. Mr. Zylstra has 40,000 stock options
exercisable at $5.00 and 50,000 stock options exercisable at $10.00. Messrs.
Davis' and Mahdavi's stock options have an exercise price of $14.50.
8
<PAGE> 12
EMPLOYMENT AGREEMENTS
In connection with the Company's recent acquisition of Addison Steel, Inc.
and Quincy Joist Company, we have entered into employment agreements with Glen
S. Davis to serve as President of Addison Steel and Saied Mahdavi to serve as
President of Quincy Joist. The agreements provide for an initial five year term
extending through June 4, 2003 and successive one-year renewal terms, unless
earlier terminated. Each agreement includes restrictions and non-competition
covenants in effect during the term of the agreement and for a period of 12
months after termination of employment.
Messrs. Davis and Mahdavi each receive a minimum base salary of $300,000
per year, subject to adjustment by the Board of Directors based upon each
executive's performance and duties. Both employment agreements also incorporate
a value sharing bonus and incentive stock option plan designed to serve as a
retention device and an incentive for creating significant stockholder value. In
furtherance of these objectives, the Company pays Messrs. Davis and Mahdavi an
annual bonus equal to a percentage of the income before taxes (as calculated
under the agreements) of Addison Steel, in the case of Mr. Davis, and Quincy
Joist, in the case of Mr. Mahdavi, in each case subject to a minimum of
$100,000. Furthermore, the executives will receive incentive stock options if in
any year income before taxes (as calculated under the agreements) of Addison
Steel, in the case of Mr. Davis, and Quincy Joist, in the case of Mr. Mahdavi,
exceeds $5.5 million. Each executive also participates in incentive, health, and
other fringe benefit programs as enjoyed by other officers of the Company.
Under their employment agreements, Messrs. Davis and Mahdavi may receive
certain severance benefits if they are terminated without cause. Generally, the
severance benefits consist of their minimum base salary and minimum bonus over
the twelve month period following such termination or remainder of the term of
the agreement, whichever is less. Both executives are also subject to
termination for cause, death or disability.
Upon a change of control, as described in the agreements, Messrs. Davis and
Mahdavi are entitled to terminate their employment agreements. In that event,
Messrs. Davis and Mahdavi are entitled to receive severance pay equal to (1)
their minimum base salary, (2) the amount of any unpaid annual bonus earned, and
(3) any benefits due to them through the effective date of termination. Upon
termination due to a change of control, the executives are also no longer
subject to the non-competition provisions contained in their agreements.
There are no other employment or severance agreements between the Company
and any of the Named Executive Officers.
CHANGE OF CONTROL ARRANGEMENTS
If the Company sells all or substantially all of its assets, or merges with
or into another corporation, is not the surviving company, and the stock options
outstanding under the Company's 1997 Stock Option Plan are not assumed or
equivalent options are not substituted by the corporation, the Committee will
accelerate the vesting of the options and will give each optionee the
opportunity to exercise the options for at least 30 days, after which time the
options will expire. If the options are assumed or substituted by the successor
corporation, the Committee will make the appropriate adjustment to the number
and exercise price of the options to reflect the conversion or exchange.
9
<PAGE> 13
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The following Report of the Compensation Committee does not constitute
soliciting material and should not be deemed filed or incorporated by reference
into any other Company filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent the Company specifically incorporates
this Report.
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation for fiscal 1998.
WHAT IS THE COMPANY'S PHILOSOPHY OF EXECUTIVE OFFICER COMPENSATION?
The Company's compensation program for executive officers consists of three
key elements:
- a base salary,
- a performance-based annual bonus, and
- long-term incentives in the form of stock option grants.
The Compensation Committee believes that this three-part approach best serves
the interests of the Company and its stockholders. As described more fully
below, each element of the Company's executive compensation program has a
somewhat different purpose.
The three-part approach enables the Company to meet the requirements of the
competitive environment in which the Company operates while ensuring that
executive officers are compensated in a way that advances both the short- and
long-term interests of the stockholders. Under this approach, compensation for
these officers was ultimately based upon:
- the Committee's assessment of the executive officers' performance,
- the continuing demand for superior executive talent,
- the Company's overall performance, and
- the Company's future objectives and challenges.
The Company's philosophy is to pay base salaries to executives that reward
these executives for ongoing performance throughout the year and that enable the
Company to attract, motivate and retain highly qualified executives. The annual
bonus program is designed to reward executives for performance and is based
primarily on the Company's financial results. Stock option grants give
executives an opportunity to obtain equity in the Company and, because options
result in minimal or no rewards if the Company's stock price does not appreciate
but provide substantial rewards to executives if the Company's stock price
appreciates, also provide an incentive for outstanding performance in the long
term. The Board believes that this mix of short- and long-term compensation
components provides a balanced approach that enables the Company to attract and
retain experienced executives, rewards such executives for their individual and
collective contribution to the profitability of the Company, and ensures that
the incentives of the Company's executives are aligned with the best interests
of its stockholders.
The Board's decisions concerning the specific 1998 compensation elements
for individual executive officers, including the Chief Executive Officer, were
made within this broad framework and in light of each executive officer's level
of responsibility, performance, current salary and prior-year bonus and other
compensation awards. As noted below, in most cases the Board's specific
decisions involving 1998 executive officer compensation were ultimately based
upon the Board's judgment regarding the individual executive officer's
performance, potential future contributions, and whether each payment or award
would provide an appropriate reward and incentive for such officer to sustain
and enhance the Company's long-term performance.
10
<PAGE> 14
In addition to the foregoing, the base salary, annual bonus, incentive
stock options, and other related compensation for Messrs. Davis and Mahdavi was
primarily established through negotiations with the executives at the time the
Company acquired Addison Steel and Quincy Joist in fiscal 1998, and is set forth
in the executives' respective employment agreements with the Company as
described above. The levels of compensation for Messrs. Davis and Mahdavi
resulted from the Compensation Committee's consideration of various factors,
including the Committee's understanding of competitive compensation for
similarly situated executives in the Company's industry and the advice of the
compensation and benefits personnel at Ernst & Young LLP.
HOW DO WE DETERMINE BASE SALARY FOR MESSRS. SCHUFF, SCHUFF, AND ZYLSTRA?
The Board typically establishes each executive's base salary at a level
that is designed to reflect that executive's position and responsibility within
the Company, to attract and retain highly qualified executives and to be
competitive with similarly situated executives at steel services companies of
similar size and revenue levels. The Board also takes into account, among other
things, the individual executive's experience and performance during the past
year.
HOW ARE ANNUAL BONUSES DETERMINED FOR MESSRS. SCHUFF, SCHUFF, AND ZYLSTRA?
Bonuses typically are paid based upon the Board's judgment regarding the
significance of the individual executive officer's contributions during a given
year and the overall financial performance of the Company. The Company's bonus
plan generally makes such bonuses substantially contingent upon the Company's
achievement of certain objective performance goals related to revenue and net
income, although the plan does not preclude discretionary bonuses based upon
other factors, such as individual achievement.
HOW IS COMPENSATION USED TO FOCUS MANAGEMENT ON LONG-TERM VALUE CREATION?
In February 1997, the Company adopted the Schuff Steel Company 1997 Stock
Option Plan to provide key employees selected by the Board an opportunity to
obtain an equity stake in the Company. Stock options are primarily designed to
provide such employees with strong incentives for superior long-term
performance. The exercisability of options is therefore conditioned upon the
employee's continued employment by the Company for periods of time specified by
the Board when these options are granted. Unexercised options are forfeited if
the employee leaves the Company prior to the time such options vest or, if
vested upon termination, if the employee fails to exercise them prior to the end
of a stated period following termination. In making option awards, the Board
reviews the level of awards granted to executives at other comparable companies,
the awards granted to other employees within the Company and the individual
employee's specific position at the Company and role in helping the Company to
achieve its goals. No options were granted to David A. Schuff, the Chairman of
the Board of Directors, or Scott A. Schuff, the Company's President and Chief
Executive Officer, in 1998 due to the substantial equity interests in the
Company already held by them. See "Security Ownership of Principal Stockholders
and Management."
DO EXECUTIVES RECEIVE ANY OTHER BENEFITS?
Certain executives also participate in various other benefit plans,
including medical plans and a 401(k) plan, which are generally available to all
employees of the Company.
HOW IS THE COMPANY'S CHIEF EXECUTIVE OFFICER COMPENSATED?
In 1998, the President, Chief Executive Officer and co-founder of the
Company, Scott A. Schuff, received a base salary of $296,412 and a bonus of
$186,850. Mr. Schuff's salary and bonus were determined based on his
extraordinary contributions to the Company, the historical operating performance
of the Company, the relation between Mr. Schuff's contributions and the
Company's growth, and Mr. Schuff's continuing contributions in his role as
President and Chief Executive Officer. The Board believes that the success of
the Company continues to depend to a great extent upon the efforts of Mr.
Schuff.
11
<PAGE> 15
HOW IS THE COMPANY ADDRESSING INTERNAL REVENUE CODE LIMITS ON DEDUCTIBILITY OF
COMPENSATION?
Section 162(m) of the Internal Revenue Code, adopted as part of the Revenue
Reconciliation Act of 1993, generally limits to $1 million the deduction that
can be claimed by any publicly-held corporation for compensation paid to any
"covered employee" in any taxable year beginning after December 31, 1993. The
term "covered employee" for this purpose is defined generally as the chief
executive officer and the four other highest-paid employees of the corporation.
In 1998, the Company did not pay compensation to any executive that was subject
to Section 162(m).
Edward M. Carson
Dennis DeConcini
As Members of the Compensation
Committee
12
<PAGE> 16
STOCK PRICE PERFORMANCE GRAPH
The following graph illustrates a comparison of the cumulative total
stockholder return (change in stock price plus reinvested dividends) of (i) the
Company's common stock, (ii) the Standard & Poor's Small Cap 600 Stock Index
("S&P 600") and (iii) a peer group index selected by the Company (the "Peer
Group"), from July 7, 1997 (the date of the Company's initial public offering)
through December 31, 1998 (the end of the Company's fiscal year). The Peer Group
was selected by the Company on an industry basis and includes:
- - Ameron International Corporation
- - Granite Construction Incorporated
- - Northwest Pipe Company
- - Meadow Valley Corporation
- - Chicago Bridge & Iron Company N.V.
- - Foster Wheeler Corporation
- - Fletcher Challenge Limited
- - Pitt-Des Moines, Inc.
- - Fluor Corporation
- - Gulf Island Fabrication, Inc.
- - Stone & Webster Incorporated
- - Jacobs Engineering Group Inc.
- - Simpson Manufacturing Co., Inc.
The graph assumes that $100 was invested on July 7, 1997 in the Company's Common
Stock and in each of the comparison indices, and assumes that all dividends paid
were reinvested. The comparisons in the graph are required by the Securities and
Exchange Commission and are not intended to forecast or be indicative of
possible future performance of the Company's common stock.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
SCHUFF STEEL COMPANY, THE S&P 600 AND THE PEER GROUP
<TABLE>
<CAPTION>
SCHUFF STEEL CO S&P 600 PEER GROUP
--------------- ------- ----------
<S> <C> <C> <C>
'7/97' 100.00 100.00 100.00
'12/97' 135.94 112.57 80.29
'12/98' 68.75 110.21 101.10
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of its common stock,
to file reports of ownership and changes in ownership with the Securities and
Exchange Commission ("SEC"). Officers, directors and greater than 10%
stockholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file. Based solely upon a review of the copies
of such forms furnished to the Company, or written representations that no Forms
5 were required, the Company believes that during the Company's preceding fiscal
year all Section 16(a) filing requirements applicable to its officers, directors
and greater than 10% beneficial owners were complied with, except that (1) Ted
Rossin, President of recently-acquired Bannister Steel, Inc., failed to file one
Form 4 on a timely basis to report the disposition of 2,000 shares of common
stock and (2) Messrs. Davis, Harris and Mahdavi each inadvertently failed to
timely report on a Form 4 certain grants of stock options.
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<PAGE> 17
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth, as of March 31, 1999, the number and
percentage of outstanding shares of common stock beneficially owned by each
person known by the Company to beneficially own more than 5% of such stock, by
each director and Named Executive Officer of the Company and by all directors
and executive officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER(1)(2) BENEFICIALLY OWNED PERCENTAGE OWNED
- ------------------------------------------ ------------------ ----------------
<S> <C> <C>
David A. Schuff and Nancy A. Schuff(3).............. 2,553,000 36.3%
Scott A. Schuff(4).................................. 2,462,200 35.0%
Kenneth F. Zylstra(5)............................... 26,000 *
Glen S. Davis....................................... 15,000 *
Saied Mahdavi....................................... -- --
Dennis DeConcini.................................... 10,851 *
Edward M. Carson.................................... 10,202 *
H. Wilson Sundt..................................... -- --
All directors and executive officers as a group (10
persons)(6)....................................... 5,079,232 72.3%
</TABLE>
- ---------------
* Represents less than 1% of the Company's outstanding common stock.
(1) This information regarding beneficial ownership of the Company's common
stock by certain beneficial owners and management of the Company is as of
March 31, 1999. A person is deemed to be the beneficial owner of securities
that can be acquired within 60 days from the date set forth above through
the exercise of any option, warrant, or right. Shares of common stock
subject to options, warrants, or rights that are currently exercisable or
exercisable within 60 days are deemed outstanding for the purpose of
computing the percentage of the person holding such options, warrants, or
rights, but are not deemed outstanding for computing the percentage of any
other person. The amounts and percentages are based upon 7,027,173 shares of
common stock outstanding as of March 31, 1999. The persons named in the
table, to the Company's knowledge, have sole voting and sole dispositive
power with respect to all shares of common stock shown as beneficially owned
by them, subject to community property laws where applicable and the
information contained in the footnotes hereunder.
(2) The address of each of the listed stockholders is 1841 West Buchanan Street,
Phoenix, Arizona 85009.
(3) 2,053,000 of these shares are owned by the Schuff Family Trust Under Trust
Agreement dated June 28, 1983, as amended, and 500,000 of these shares are
owned by the Schuff Irrevocable Trust Under Trust Agreement Dated December
31, 1996. David A. Schuff and Nancy A. Schuff, husband and wife, are co-
trustees of each of the trusts and exercise voting and investment power over
such shares.
(4) 2,262,000 of these shares are owned by the Scott A. Schuff Family Trust
Under Trust Agreement dated March 12, 1992, as amended, and 200,000 of these
shares are owned by the Scott A. Schuff Irrevocable Trust Under Trust
Agreement dated December 31, 1996, as amended. Scott A. Schuff is the
trustee of each of these trusts and exercises voting and investment power
over such shares.
(5) The total for Mr. Zylstra includes 26,000 shares subject to unexercised
options which are exercisable on March 31, 1999, or within 60 days
thereafter.
(6) The total for all directors and officers as a group includes 43,000 shares
subject to unexercised options which are exercisable on March 31, 1999 or
within 60 days thereafter.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
Since its inception, the Company has maintained business relationships and
engaged in certain transactions with the affiliated companies and parties
described below. Since the closing of its initial public offering in July 1997,
all transactions between the Company and its affiliated entities, executive
officers, directors, or significant stockholders are approved by a majority of
the non-employee directors of the Company
14
<PAGE> 18
and the Company believes these transactions are on terms that will be no less
favorable to the Company than the Company could obtain from non-affiliated
parties.
The Company leases some of its fabrication and office facilities from 19th
Avenue/Buchanan Limited Partnership, an Arizona limited partnership (the "Schuff
Partnership"). The general and limited partners of the Schuff Partnership are
David A. Schuff, Scott A. Schuff, and certain of their family members. David A.
Schuff is a co-founder and the Chairman of the Board of Directors of the
Company, and Scott A. Schuff is a Director and the President and Chief Executive
Officer of the Company. David A. Schuff and Scott A. Schuff presently are the
beneficial owners of approximately 71.3% of the issued and outstanding common
stock of the Company. See "Security Ownership of Principal Stockholders and
Management."
In March 1997, the Company entered into a new lease agreement with the
Schuff Partnership with respect to its primary fabrication facilities. These
facilities include approximately 400,000 square feet of shop space under roof
situated on approximately 26 acres. This new lease agreement was based upon a
third party appraisal of the property and an assumed annual rate of return of
10%, which took into account the location and use of the property, potential
tenants, comparable returns on similar properties and other relevant factors.
The Company's annual rent payments are $414,000 for 1998, $556,000 for 1999,
$601,000 for 2000, and $605,000 for each year thereafter, subject to increase in
2002 and every five years thereafter based on a Consumer Price Index formula,
which represents an annual rent per square foot of improved space for 1998,
1999, 2000 and 2001 of $1.04, $1.39, $1.50 and $1.51, respectively. The
agreement enables the Company to extend the lease term to 20 years. The Company
also is obligated under the lease to reimburse the Schuff Partnership an
additional amount equal to any taxes incurred by it in connection with the lease
payments, and is obligated to pay insurance and maintenance expenses. The term
of this lease expires on February 28, 2017.
In March 1997, the Company also entered into a lease agreement with the
Schuff Partnership with respect to the then recently acquired B&K Steel
Fabrications, Inc. property, consisting of approximately 145,000 square feet of
covered fabrication, office, engineering and detailing facilities on
approximately 23 acres. Based upon the same methodology described above, the
Company entered into a lease with substantially similar terms for the property
and equipment with annual rent payments of approximately $340,000 over 20 years,
subject to increase every five years based on a Consumer Price Index formula,
representing an annual rent per square foot of improved space of approximately
$2.34. The rent was based upon a recent appraisal of the underlying property.
The Company also is obligated to reimburse the Schuff Partnership for taxes
incurred by it in connection with the lease payments. The term of the lease
expires on February 28, 2017.
Effective May 1, 1997, the Schuff Partnership leased to the Company
approximately 22,000 square feet of additional office facilities adjacent to the
Company's existing principal office and shop facilities. Based upon the same
methodology described above, the Company entered into a lease with substantially
similar terms for the property with annual rent payments of $135,000 over 20
years, subject to increase every five years based on a Consumer Price Index
formula, representing an annual rent per square foot of improved space of
approximately $6.14. The rent was based upon the purchase price of the property,
which was determined by arm's-length negotiation with an unrelated seller. The
Company is also obligated to reimburse the Schuff Partnership for taxes incurred
by it in connection with the lease and is obligated to pay insurance and
maintenance costs. This lease expires on April 30, 2017.
In 1989, the Schuff Partnership borrowed $5,000,000 from a commercial bank
in connection with its refinancing of the property on which the Company's
principal facilities are located . The Schuff Partnership in turn loaned
$4,249,062 to the Company and the Company delivered to the Schuff Partnership a
subordinated promissory note in that amount (the "Subordinated Loan"). The
outstanding principal balance of the Subordinated Loan was paid off by the
Company in June 1998 using proceeds from the private placement of its 10 1/2%
Senior Notes.
15
<PAGE> 19
ADOPTION OF
SCHUFF STEEL COMPANY 1999 EMPLOYEE STOCK PURCHASE PLAN
(PROPOSAL NO. 2)
The Board of Directors has adopted the Schuff Steel Company 1999 Employee
Stock Purchase Plan, subject to approval by the stockholders of the Company. We
have summarized below the key provisions of the plan. Because it is a summary,
it may not contain all the information that is important to you. Before you
decide how to vote, you should review the full text of the plan, which we have
included as Appendix A.
WHAT IS THE PURPOSE OF THE PLAN?
The Board of Directors believes that the plan will encourage broader stock
ownership by employees of the Company and thereby provide an incentive for
non-executive employees to contribute to the profitability and success of the
Company. In particular, the Board intends that the plan will offer a convenient
means for such employees who might not otherwise own the Company's common stock
to purchase and hold such stock, and that the discounted sale feature of the
plan provides a meaningful inducement to participate.
The Board believes that employees' continuing economic interest, as
stockholders, in the performance and success of the Company will enhance the
entrepreneurial spirit of the Company, which can greatly contribute to the
long-term growth and profitability of the Company.
WHO IS ELIGIBLE TO PARTICIPATE IN THE PLAN?
Any employee of the Company will be eligible to participate in the plan,
except those employees who work less than 20 hours per week or five months per
year, and any other employee who owns five percent or more of the Company's
outstanding common stock. Approximately 1,300 employees of the Company are
currently eligible to participate in the plan.
WHAT IS THE MAXIMUM NUMBER OF SHARES?
The maximum number of shares of common stock that may be purchased under
the plan is 200,000, subject to appropriate adjustment in the case of any
extraordinary dividend or other distribution, recapitalization, forward or
reverse split, reorganization, merger, consolidation, spin-off, combination,
repurchase, share exchange, or other similar corporate transaction or event
affecting the common stock. Shares of common stock purchased from the Company
will be either authorized but unissued shares or treasury shares.
WHEN AND HOW CAN AN EMPLOYEE ENROLL?
An eligible employee may enroll for any six-month offering period,
commencing January 1 and July 1 of each year, by filing an enrollment form with
the Company before the offering period begins. After initial enrollment in the
plan, the employee will be automatically reenrolled in the plan for subsequent
offering periods unless he or she files a notice of withdrawal before the
offering period begins, terminates employment, or otherwise becomes ineligible
to participate.
HOW DOES THE PLAN WORK?
Upon enrollment in the plan, the employee must elect a rate at which he or
she will make payroll contributions to purchase common stock. An employee
generally may elect to make contributions in an amount not less than one percent
nor more than ten percent of such employee's earnings (or such higher or lower
rates as the Board may specify), although an employee's contributions will be
adjusted downward or refunded to the extent necessary to ensure that he or she
will not purchase during any offering period common stock that has a fair market
value, as of the beginning of the offering period, in excess of $12,500
(representing an annual limitation of $25,000). All employee contributions will
be made by means of direct payroll deduction. The contribution rate elected by a
participant will continue in effect until modified by the participant.
16
<PAGE> 20
An employee's contributions will be credited to the employee's account
maintained by the Company. The Company will offer employees the opportunity to
purchase common stock at a price equal to the lesser of 85% of the fair market
value of common stock at the beginning of a six-month offering period or 85% of
the fair market value of common stock at the end of the offering period.
Under either method, shares of the Company's common stock will be purchased
on a given purchase date in the aggregate for all accounts under the plan.
Shares of common stock purchased will be credited to the accounts maintained by
the custodian for each participant based upon the average cost of all shares
purchased. No interest will be credited on payroll contributions pending
investment in common stock. Dividends paid on common stock credited to
participants' accounts will be automatically reinvested in additional shares
through purchases directly from the Company.
On April 26, 1999, the last reported sale price of the Company's common
stock on the Nasdaq National Market was $5.1562 per share.
WHAT ARE THE RESTRICTIONS ON THE COMMON STOCK?
Participants will have the exclusive right to vote or direct the voting of
shares of common stock credited to their accounts, and will be permitted to
withdraw, transfer, or sell their shares without restriction. Participants'
rights under the plan are nontransferable except pursuant to the laws of descent
and distribution.
HOW IS THE PLAN ADMINISTERED?
The plan will be administered by the Board of Directors, although the Board
may delegate some or all of its administrative duties to a Board committee or a
committee of employees. The Board or committee will have authority to interpret
the plan, construe terms, adopt rules and regulations, prescribe forms, and make
all determinations under the plan. If a participant is a member of a committee
administering the plan, such person may not decide any matter relating to his or
her participation in the plan.
HOW IS ENROLLMENT IN THE PLAN TERMINATED?
A participant's enrollment in the plan may be terminated at any time,
effective for payroll periods or offering periods beginning after the filing of
a notice of termination of enrollment. Enrollment will also terminate upon
termination of a participant's employment by the Company or any of its
subsidiaries. Upon termination of enrollment, cash amounts resulting from
previous payroll contributions will be repaid to the participant. The custodian
will continue to hold common stock for the account of such a participant until
the participant sells or withdraws the common stock, but in no event more than
one year after the participant ceases to be employed by the Company or any of
its subsidiaries. A participant may eliminate contributions for future payroll
periods without terminating enrollment. In that case, previous payroll
contributions held in the participant's cash account will be used to purchase
common stock at the next purchase date.
WHO PAYS TO ADMINISTER THE PLAN?
The Company will pay costs and expenses to administer the plan and to
maintain accounts, and will pay brokerage fees and commissions for purchases.
The Company will not pay brokerage fees and expenses relating to sales by
participants, and participants may be charged reasonable fees by the custodian
for withdrawing share certificates and other specified services. The custodian
will be responsible for furnishing account statements to participants.
CAN THE PLAN BE AMENDED OR TERMINATED?
The Board of Directors may amend or terminate the plan without further
stockholder approval, except stockholder approval must be obtained within one
year after the effectiveness of such action if required by law or regulation or
under the rules of any automated quotation system (such as the Nasdaq National
Market) or securities exchange on which the common stock is then quoted or
listed, or if stockholder approval is necessary for the plan to continue to meet
the requirements of Section 423 of the Internal Revenue Code of 1986. The
17
<PAGE> 21
plan will continue until terminated by action of the Board, although as noted
above the number of shares authorized under the plan is limited.
WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN?
Rights to purchase shares under the plan are intended to constitute
"options" issued pursuant to an "employee stock purchase plan" within the
meaning of Section 423 of the Internal Revenue Code of 1986 (the "Code"). As a
result,
- No taxable income results to the participants upon the grant of a right
to purchase or upon the purchase of shares for his or her account under
the plan (although the amount of a participant's payroll contributions
under the plan will be taxable as ordinary income to the participant).
- If the participant disposes of shares less than two years after the first
day of an offering period with respect to which he or she purchased the
shares, the participant will realize ordinary income in an amount equal
to the fair market value of the shares on the date of purchase minus the
amount of the participant's payroll deductions used to purchase the
shares.
- If the participant holds the shares for at least two years after the
first day of an offering period with respect to which he or she purchased
the shares, then at the time the participant disposes of the shares he or
she will realize ordinary income in an amount equal to the lesser of (i)
the fair market value of the shares on the first day of the offering
period minus the amount of the participant's payroll deductions used to
purchase the shares, and (ii) the fair market value of the shares on the
date of disposition minus the amount of the participant's payroll
deductions used to purchase the shares.
- In addition, the participant will realize a long-term or short-term
capital gain or loss, as the case may be, in an amount equal to the
difference between the amount realized upon any sale of the common stock
and the participant's basis in the common stock (i.e., the purchase price
plus the amount, if any, taxed to the participant as ordinary income, as
described in the second and third bullets point above).
- If the statutory holding period described in the second and third bullets
point above is satisfied, the Company is not entitled to a deduction for
federal income tax purposes with respect to any discount in the sale
price of common stock applicable to such participant. If the statutory
holding period is not satisfied, the Company generally should be entitled
to a tax deduction in an amount equal to the amount taxed to the
participant as ordinary income.
The foregoing is only a general description of the application of federal
income tax laws to the plan. The summary does not address the effects of other
federal taxes or taxes imposed under state, local, or foreign tax laws. Because
of the complexities of the tax laws, participants are encouraged to consult a
tax advisor as to their individual circumstances.
WHAT ARE THE NEW PLAN BENEFITS?
The Company cannot now determine the number of shares to be purchased in
the future under the plan by the Named Executive Officers, all current executive
officers as a group, or all other employees as a group.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE SCHUFF
STEEL COMPANY 1999 EMPLOYEE STOCK PURCHASE PLAN.
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<PAGE> 22
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
(PROPOSAL NO. 3)
The Board of Directors, upon the recommendation of its Audit Committee, has
selected Ernst & Young LLP as the Company's independent auditors for the fiscal
year ending December 31, 1999, and has further directed that management submit
the selection of independent auditors for ratification by stockholders at the
annual meeting. Ernst & Young LLP began auditing the Company's financial
statements with the then fiscal year ended June 30, 1985.
Representatives of Ernst & Young LLP are expected to be present at the
annual meeting, will have the opportunity to make a statement if they wish to do
so and will be available to respond to appropriate questions.
Stockholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Ernst & Young LLP
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the election, the Audit Committee and the Board
of Directors will reconsider whether or not to retain that firm. Even if the
selection is ratified, the Audit Committee and the Board of Directors in their
discretion may direct the appointment of different independent auditors at any
time during the year if they determine that such an appointment would be in the
best interests of the Company and its stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF THE
SELECTION OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR 1999.
STOCKHOLDER PROPOSALS AND NOMINATIONS
Stockholder proposals for the 2000 Annual Meeting must be received at the
principal executive offices of the Company by January 11, 2000, to be considered
for inclusion in the Company's proxy materials relating to such meeting.
Under our Bylaws, if you wish to nominate directors or bring other business
before the stockholders at the 2000 Annual Meeting of Stockholders:
- You must be a stockholder of record at the time of giving notice and be
entitled to vote at the meeting of stockholders to which the notice
relates.
- You must notify the Secretary in writing no later than February 22, 2000,
which is 120 days prior to the anniversary date of this annual meeting.
- Your notice must contain the specific information required in our Bylaws.
A nomination or other proposal will be disregarded if it does not comply with
the above procedure and any additional requirements set forth in our Bylaws.
Please note that these requirements relate only to the matters you wish to bring
before your fellow stockholders at an annual meeting. They are separate from the
SEC's requirements to have your proposal included in our proxy statement.
19
<PAGE> 23
OTHER MATTERS
As of the date of this proxy statement, the Board of Directors does not
intend to present at the annual meeting any matters other than those described
herein and does not presently know of any matters that will be presented by
other parties. If any other matter is properly brought before the meeting for
action by stockholders, proxies in the enclosed form returned to the Company
will be voted in accordance with the recommendation of the Board of Directors
or, in the absence of such a recommendation, in accordance with the judgment of
the proxy holder.
SCHUFF STEEL COMPANY
[SchuffSig]
Scott A. Schuff
President and Chief Executive Officer
May 10, 1999
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<PAGE> 24
APPENDIX A
SCHUFF STEEL COMPANY
1999 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of this 1999 Employee Stock Purchase Plan (the
"Plan") is to encourage stock ownership by employees of Schuff Steel Company
(the "Company") and its Subsidiaries and thereby provide employees with an
incentive to contribute to the profitability and success of the Company. The
Plan is intended to qualify as an "employee stock purchase Plan" under Section
423 of the Code and will be maintained for the exclusive benefit of eligible
employees of the Company and its Subsidiaries.
2. Definitions. For purposes of the Plan, in addition to the terms
defined in Section 1, terms are defined as set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Cash Account" means the account maintained on behalf of the
Participant by the Company for the purpose of holding cash contributions
pending investment in Stock.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Custodian" means Smith Barney or the successor thereto as may be
appointed by the Board.
(e) "Earnings" means a Participant's salary or wages for services
performed for the Company and its Subsidiaries and received by a
Participant for services rendered during an Offering Period.
(f) "Fair Market Value" means the closing price of the Stock on the
relevant date as reported on NASDAQ (or any national securities exchange or
quotation system on which the Stock is then listed), or if there were no
sales on that date the closing price on the next preceding date for which a
closing price was reported.
(g) "Offering Period" means the period beginning January 1, 1999 and
ending June 30, 1999, and every six month period thereafter, with the
second Offering Period to begin on July 1, 1999 and ending December 31,
1999.
(h) "Participant" means an employee of the Company or a Subsidiary who
is participating in the Plan.
(i) "Purchase Right" means a Participant's option to purchase shares
which is deemed to be outstanding during a Offering Period. A Purchase
Right represents an "option" as such term is used under Section 423 of the
Code.
(j) "Stock" means the common stock of the Company.
(k) "Stock Account" means the account maintained on behalf of the
Participant by the Custodian for the purpose of holding Stock acquired upon
investment under the Plan.
(l) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns
stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain as set forth
in Code Section 424(f).
3. Administration.
(a) Board Administration. The Plan will be administered by the Board.
The Board may delegate its administrative duties and authority (other than
its authority to amend the Plan) to any Board committee or to any officers
or employees or committee thereof as the Board may designate (in which case
references to the Board will be deemed to mean the administrator to which
such duties and authority have been delegated). The Board will have full
authority to adopt, amend, suspend, waive, and rescind such rules and
regulations and appoint such agents as it may deem necessary or advisable
to administer the Plan, to correct any defect or supply any omission or
reconcile any inconsistency in the Plan and to
<PAGE> 25
construe and interpret the Plan and rules and regulations thereunder, to
furnish to the Custodian such information as the Custodian may require, and
to make all other decisions and determinations under the Plan (including
determinations relating to eligibility). No person acting in connection
with the administration of the Plan will, in that capacity, participate in
deciding any matter relating to his or her participation in the Plan.
(b) The Custodian. The Custodian will act as custodian under the
Plan, and will perform such duties as are set forth in the Plan and in any
agreement between the Company and the Custodian. The Custodian will
establish and maintain, as agent for Participants Stock Accounts, and any
other subaccounts as may be necessary or desirable for the administration
of the Plan.
(c) Waivers. The Board may waive or modify any requirement that a
notice or election be made or filed under the Plan a specified period in
advance in an individual case or by adopting a rule or regulation under the
Plan, without amending the Plan.
(d) Other Administrative Provisions. The Company will furnish
information from its records as directed by the Board, and such records,
including a Participant's Earnings, will be conclusive on all persons
unless determined by the Board to be incorrect. Each Participant and other
person claiming benefits under the Plan must furnish to the Company in
writing an up-to-date mailing address and any other information as the
Board or Custodian may reasonably request. Any communication, statement, or
notice mailed with postage prepaid to any such Participant or other person
at the last mailing address filed with the Company will be deemed
sufficiently given when mailed and will be binding upon the named
recipient. The Plan will be administered on a reasonable and
nondiscriminatory basis and uniform rules will apply to all persons
similarly situated. All Participants will have equal rights and privileges
(subject to the terms of the Plan) with respect to Purchase Right
outstanding during any given Offering Period.
4. Stock Subject to Plan. Subject to adjustment as provided below, the
total number of shares of Stock reserved and available for issuance or which may
be otherwise acquired upon exercise of Purchase Rights under the Plan will be
200,000. Any shares of Stock delivered by the Company under the Plan may
consist, in whole or in part, of authorized and unissued shares or treasury
shares. The number and kind of such shares of Stock subject to the Plan will be
proportionately adjusted, as determined by the Board, in the event of any
extraordinary dividend or other distribution, recapitalization, forward or
reverse split, reorganization, merger, consolidation, spin-off, combination,
repurchase, or share exchange, or other similar corporate transaction or event
affecting the Stock.
5. Enrollment and Contributions.
(a) Eligibility. An employee of the Company or a Subsidiary may be
enrolled in the Plan for any Offering Period if such employee is employed
by the Company or a Subsidiary on the first day of the Offering Period,
unless one of the following applies to the employee:
(i) such person is customarily employed by the Company or a
Subsidiary for 20 hours or less a week or for not more than
five months in any calendar year; or
(ii) such person would, immediately upon enrollment, be deemed to
own, for purposes of Section 423(b)(3) of the Code, an
aggregate of five percent or more of the total combined
voting power or value of all outstanding shares of all
classes of the Company or any Subsidiary.
The Company will notify an employee of the date as of which he or she is
eligible to enroll in the Plan, and will make available to each eligible
employee the necessary enrollment forms. Notwithstanding the above, any
individual who is employed by the Company or a Subsidiary and who is a
nonresident alien shall not be eligible to participate in the Plan if the
laws of the country in which the employee resides makes the offer of the
Purchase Right or the delivery of Stock under the Plan impractical.
Additionally, the offer of the Purchase Right and the delivery of Stock
under the Plan shall only be effective for any individual who is employed
by the Company or a Subsidiary and who is a nonresident alien only after
the Company has complied with the applicable laws of the country in which
the employee resides.
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(b) Initial Enrollment. An employee who is eligible under Section
5(a) (or who will become eligible on or before a given Offering Period)
may, after receiving current information about the Plan, initially enroll
in the Plan by executing and filing with the Company's Human Resources
Department a properly completed enrollment form, including the employee's
election as to the rate of payroll contributions for the Offering Period.
To be effective for any Offering Period, such enrollment form must be filed
at least two weeks preceding such Offering Period.
(c) Automatic Re-enrollment for Subsequent Offering Periods. A
Participant whose enrollment in, and payroll contributions under, the Plan
continues throughout a Offering Period will automatically be re-enrolled in
the Plan for the next Offering Period unless (i) the Participant terminates
enrollment before the next Offering Period in accordance with Section 7(a),
or (ii) the Participant is ineligible to participate under Section 5(a).
The initial rate of payroll contributions for a Participant who is
automatically re-enrolled for a Offering Period will be the same as the
rate of payroll contribution in effect at the end of the preceding Offering
Period, unless the Participant files a new enrollment form designating a
different rate of payroll contributions and such new enrollment form is
received no later than two weeks prior to the beginning of the next
Offering Period.
(d) Payroll Contributions. A Participant will make contributions
under the Plan by means of payroll deductions from each payroll period
which ends during the Offering Period, at the rate elected by the
Participant in his or her enrollment form in effect for that Offering
Period (except that such rate may be changed during the Offering Period to
the extent permitted below). The rate of payroll contributions elected by a
Participant may not be less than one percent (1%) nor more than ten percent
(10%) of the Participant's Earnings for each payroll period, and only whole
percentages may be elected; provided, however, that the Board may specify a
lower minimum rate and higher maximum rate, subject to Section 8(c).
Notwithstanding the above, a Participant's payroll contributions will be
adjusted downward by the Company as necessary to ensure that the limit on
the amount of Stock purchased with respect to a Offering Period set forth
in Section 6(a)(iii) is not exceeded. A Participant may elect to increase,
decrease, or discontinue payroll contributions for a future Offering Period
by filing a new enrollment form designating a different rate of payroll
contributions, which form must be received at least 2 weeks prior to the
beginning of an Offering Period to be effective for that Offering Period.
In addition, a Participant may elect to discontinue payroll contributions
during an Offering Period by filing a new enrollment form, such change to
be effective for the next payroll after the Participant's new enrollment
form is received.
(e) Crediting Payroll Contributions to Cash Accounts. All payroll
contributions by a Participant under the Plan will be credited to a Cash
Account maintained by the Company on behalf of the Participant. The Company
will credit payroll contributions to each Participant's Cash Account as
soon as practicable after the contributions are withheld from the
Participant's Earnings.
(f) No Interest on Cash Accounts. No interest will be credited or
paid on cash balances in Participant's Cash Accounts pending investment in
Stock.
6. Purchases of Stock
(a) Purchase Rights. Enrollment in the Plan for any Offering Period
by a Participant will constitute a grant by the Company of a Purchase Right
to such Participant for such Offering Period. Each Purchase Right will be
subject to the following terms:
(i) The Purchase prices at which Stock will be purchased under a
Purchase Right will be as specified in Section 6(c).
(ii) Except as limited in (iii) below, the number of shares of
Stock that may be purchased upon exercise of the Purchase
Right for a Offering Period will equal the number of shares
(including fractional shares) that can be purchased at the
purchase price specified in Section 6(c) with the aggregate
amount credited to the Participant's Cash Account as of the
last day of an Offering Period.
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<PAGE> 27
(iii) The number of shares of Stock subject to a Participant's
Purchase Right for any Offering Period will not exceed the
number derived by dividing $12,500 by 100% of the Fair Market
Value of one share of Stock on the first day of the Offering
Period for the Offering Period.
(iv) The Purchase Right will be automatically exercised on the last
day of the Offering Period.
(v) Payments by a Participant for Stock purchased under a Purchase
Right will be made only through payroll deduction in
accordance with Section 5(d) and (e).
(vi) The Purchase Right will expire on the earlier of the last day
of the Offering Period or the date on which the Participant's
enrollment in the Plan terminates.
(b) Purchase of Stock. At or as promptly as practicable after the
last day of an Offering Period, amounts credited to each Participant's Cash
Account as of such date will be applied by the Company to the purchase of
shares of Stock, in accordance with the terms of the Plan. Shares of Stock
will be purchased from the Company. Shares sold by the Company may be
authorized but unissued shares or treasury shares, as permitted under
Section 4. The Company will aggregate the amounts in all Cash Accounts when
purchasing Stock, and shares purchased will be allocated to each
Participant's Stock Account in proportion to the cash amounts withdrawn
from such Participant's Cash Account. Upon completion of purchases in
respect of an Offering Period (which will be completed in not more than 15
calendar days after the last day of an Offering Period), all shares of
Stock so purchased for a Participant will be credited to the Participant's
Stock Account.
(c) Purchase Price. The purchase price of each share of Stock
purchased in respect of an Offering Period will equal 85% of the lesser of
(i) the Fair Market Value of a share of Stock on the first day of an
Offering Period or (ii) the Fair Market Value of a share of Stock on the
last day of an Offering Period.
(d) Dividend Reinvestment; Other Distributions. Cash dividends on any
Stock credited to a Participant's Stock Account will be automatically
reinvested in additional shares of Stock; such amounts will not be
available in the form of cash to Participants. The Company will aggregate
all purchase of Stock in connection with dividend reinvestment for a given
dividend payment date. Purchases of Stock for purposes of dividend
reinvestment will be made as promptly as practicable (but not more than 15
calendar days) after a dividend payment date. The purchases will be made
directly from the Company at 100% of the Fair Market Value of a share of
Stock on the dividend payment date. Any shares of Stock distributed as a
dividend or distribution in respect of shares of Stock or in connection
with a split of the Stock credited to a Participant's Stock Account will be
credited to such Account.
(e) Withdrawals and Transfers. Shares of Stock may be withdrawn from
a Participant's Stock Account, in which case one or more certificates for
whole shares may be issued in the name of, and delivered to, the
Participant, with such Participant receiving cash in lieu of fractional
shares based on the Fair Market Value of a share of Stock on the day
preceding the date of withdrawal. Alternatively, whole shares of Stock may
be withdrawn from a Participant's Stock Account by means of a transfer to a
broker-dealer or financial institution that maintains an account for the
Participant, together with the transfer of cash in lieu of fractional
shares based on the Fair Market Value of a share of Stock on the day
preceding the date of withdrawal. Participants may not designate any other
person to receive shares of Stock withdrawn or transferred under the Plan.
A Participant seeking to withdraw or transfer shares of Stock must give
instructions to the Custodian in such manner and form as may be prescribed
by the Custodian, which instructions will be acted upon as promptly as
practicable. Withdrawals and transfers will be subject to any fees imposed
in accordance with Section 8(a).
(f) Excess Account Balances. If any amounts remain in a Cash Account
following the date on which the Company purchases Stock in respect of an
Offering Period as a result of the limitation set forth in Section
6(a)(iii), such amounts will be returned to the Participant as promptly as
practicable.
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<PAGE> 28
7. Termination and Distributions.
(a) Termination of Enrollment. A Participant's enrollment in the Plan
will terminate upon (i) the beginning of any payroll period or Offering
Period that begins after he or she files a written notice of termination of
enrollment with the Company, provided that such Participant will continue
to be deemed to be enrolled with respect to any completed Offering Period
for which purchases have not been completed, (ii) such time as the
Participant becomes ineligible to participate under Section 5(a) of the
Plan, or (iii) the termination of the Participant's employment by the
Company and its Subsidiaries. An employee whose enrollment in the Plan
terminates may again enroll in the Plan as of any subsequent Offering
Period that is at least 90 days after such termination of enrollment if he
or she satisfies the eligibility requirements of Section 5(a) as of such
Offering Period. A Participant's election to discontinue payroll
contributions will not constitute a termination of enrollment.
(b) Distribution. As soon as practicable after a Participant's
enrollment in the Plan terminates, amounts in the Participant's Cash
Account which resulted from payroll contributions will be repaid to the
Participant. The Custodian will continue to maintain the Participant's
Stock Account for the Participant until the earlier of such time as the
Participant directs the sale of all Stock in the Account, withdraws, or
transfers all Stock in the Account, or one year after the Participant
ceases to be employed by the Company and its Subsidiaries. If a
Participant's termination of enrollment results from his or her death, all
amounts payable will be paid to his or her estate.
8. General.
(a) Costs. Costs and expenses incurred in the administration of the
Plan and maintenance of Accounts will be paid by the Company, to the extent
provided in this Section 8(a). Any brokerage fees and commissions for the
purchase of Stock under the Plan (including Stock purchased upon
reinvestment of dividends and distributions) will be paid by the Company,
but any brokerage fees and commissions for the sale of Stock under the Plan
by a Participant will be borne by such Participant. The rate at which such
fees and commissions will be charged to Participants will be determined by
the Custodian or any broker-dealer used by the Custodian (including an
affiliate of the Custodian), and communicated from time to time to
Participants. In addition, the Custodian may impose or pass through a
reasonable fee for the withdrawal of Stock in the form of stock
certificates (as permitted under Section 6(e)), and reasonable fees for
other services unrelated to the purchase of Stock under the Plan, to the
extent approved in writing by the Company and communicated to Participants.
(b) Statements to Participants. The Participant's statement will
reflect payroll contributions, purchases, sales, and withdrawals and
transfers of shares of Stock and other Plan transactions by appropriate
adjustments to the Participant's Accounts. The Custodian will, not less
frequently than semi-annually, provide or cause to be provided a written
statement to the Participant showing the transactions in his or her Stock
Account and the date thereof, the number of shares of Stock credited or
sold, the aggregate purchase price paid or sales price received, the
purchase or sales price per share, the brokerage fees and commissions paid
(if any), the total shares held for the Participant's Stock Account
(computed to at least three decimal places), and such other information as
agreed to by the Custodian and the Company.
(c) Compliance with Section 423. It is the intent of the Company that
this Plan comply in all respects with applicable requirements of Section
423 of the Code and regulations thereunder. Accordingly, if any provision
of this Plan does not comply with such requirements, such provision will be
construed or deemed amended to the extent necessary to conform to such
requirements.
9. General Provisions.
(a) Compliance With Legal and Other Requirements. The Plan, the
granting and exercising of Purchase Rights hereunder, and the other
obligations of the Company and the Custodian under the Plan will be subject
to all applicable federal and state laws, rules, and regulations, and to
such approvals by any regulatory or governmental agency as may be required.
The Company may, in its discretion, postpone the issuance or delivery of
Stock upon exercise of Purchase Rights until completion of such
registration or qualification of such Stock or other required action under
any federal or state law, rule, or regulation, or
A-5
<PAGE> 29
the laws of any country in which employees of the Company and a Subsidiary
who are nonresident aliens and who are eligible to participate reside, or
other required action with respect to any automated quotation system or
stock exchange upon which the Stock or other Company securities are
designated or listed, or compliance with any other contractual obligation
of the Company, as the Company may consider appropriate, and may require
any Participant to make such representations and furnish such information
as it may consider appropriate in connection with the issuance or delivery
of Stock in compliance with applicable laws, rules, and regulations,
designation or listing requirements, or other contractual obligations.
(b) Limits on Encumbering Rights. No right or interest of a
Participant under the Plan, including any Purchase Right, may be pledged,
encumbered, or hypothecated to or in favor of any party, subject to any
lien, obligation, or liability of such Participant, or otherwise assigned,
transferred, or disposed of except pursuant to the laws of descent or
distribution, and any right of a Participant under the Plan will be
exercisable during the Participant's lifetime only by the Participant.
(c) No Right to Continued Employment. Neither the Plan nor any action
taken hereunder, including the grant of a Purchase Right, will be construed
as giving any employee the right to be retained in the employ of the
Company or any of its Subsidiaries, nor will it interfere in any way with
the right of the Company or any of its Subsidiaries to terminate any
employee's employment at any time.
(d) Taxes. The Company or any Subsidiary is authorized to withhold
from any payment to be made to a Participant, including any payroll and
other payments not related to the Plan, amounts of withholding and other
taxes due in connection with any transaction under the Plan, and a
Participant's enrollment in the Plan will be deemed to constitute his or
her consent to such withholding. In addition, Participants may be required
to advise the Company of sales and other dispositions of Stock acquired
under the plan in order to permit the Company to comply with tax laws and
to claim any tax deductions to which the Company may be entitled with
respect to the Plan. (This provision and other Plan provisions do not set
forth an explanation of the tax consequences to Participants under the
Plan. A brief summary of the tax consequences will be included in
disclosure documents to be separately furnished to Participants.)
(e) Changes to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan without the consent of shareholders or
Participants, except that any such action will be subject to the approval
of the Company's shareholders within one year after such Board action if
such shareholder approval is required by any federal or state law or
regulation or the rules of any automated quotation system or stock exchange
on which the Stock may then be quoted or listed, or if such shareholder
approval is necessary in order for the Plan to continue to meet the
requirements of Section 423 of the Code, and the Board may otherwise, in
its discretion, determine to submit other such actions to shareholders for
approval; provided, however, that, without the consent of an affected
Participant, no amendment, alteration, suspension, discontinuation, or
termination of the Plan may materially and adversely affect the rights of
such Participant with respect to outstanding Purchase Rights relating to
any Offering Period that has been completed prior to such Board action. The
foregoing notwithstanding, upon termination of the Plan the Board may elect
to terminate all outstanding Purchase Rights at such time as the Board may
designate; in the event of such termination of any Purchase Right prior to
its exercise, all amounts contributed to the Plan which remain in a
Participant's Cash Account will be returned to the Participant (without
interest) as promptly as practicable.
(f) No Rights to Participate; No Shareholder Rights. No Participant
or employee will have any claim to participate in the Plan with respect to
Offering Periods that have not commenced, and the Company will have no
obligation to continue the Plan. No Purchase Right will confer on any
Participant any of the rights of a shareholder of the Company unless and
until Stock is duly issued or transferred and delivered to the Participant
(or credited to the Participant's Stock Account).
(g) Fractional Shares. Unless otherwise determined by the Board,
purchases of Stock under the Plan executed by the Custodian may result in
the crediting of fractional shares of Stock to the Participant's Stock
Account. Such fractional shares will be computed to at least three decimal
places.
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<PAGE> 30
Fractional shares will not, however, be issued by the Company, and
certificates representing fractional shares will not be delivered to
Participants under any circumstances.
(h) Plan Year. The Plan will operate on a plan year that ends
December 31 in each year.
(i) Governing Law. The validity, construction, and effect of the Plan
and any rules and regulations relating to the Plan will be determined in
accordance with the laws of the State of Arizona, without giving effect to
principles of conflicts of laws, and applicable federal law.
(j) Effective Date. The Plan will become effective on January 1,
1999, subject to the Plan being approved by shareholders of the Company, at
a meeting thereof, by a vote sufficient to meet the requirements of Section
423(b)(2) of the Code. If the Plan is not approved in accordance with
Section 423(b)(2) of the Code, each Participant's Purchase Right shall be
void and amounts credited to the Participant's Cash Account shall be
promptly returned to the Participant.
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<PAGE> 31
SCHUFF STEEL COMPANY
ANNUAL MEETING OF STOCKHOLDERS -- JUNE 21, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Scott A. Schuff and Kenneth F. Zylstra,
and each of them, proxies, with full power of substitution, acting unanimously
and voting or if only one is present and voting then that one, to vote the
shares of stock of Schuff Steel Company which the undersigned is entitled to
vote, at the Annual Meeting of Stockholders to be held at the Westin Harbor
Island, 1590 Harbor Drive, San Diego, California, on Monday June 21, 1999, at
9:00 a.m. local time, and at any adjournment thereof, with all the powers the
undersigned would possess if present.
IF YOU RETURN YOUR PROPERLY EXECUTED PROXY, WE WILL VOTE YOUR SHARES AS
YOU DIRECT. IF YOU DO NOT SPECIFY ON YOUR PROXY CARD HOW YOU WANT TO VOTE YOUR
SHARES, WE WILL VOTE THEM FOR PROPOSALS 1, 2, AND 3 AND IN THE DISCRETION OF THE
PROXIES ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENTS THEREOF.
Please mark, sign and date the reverse side and
return the proxy card promptly using the enclosed envelope.
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<PAGE> 32
SCHUFF STEEL COMPANY
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
FOR ALL
EXCEPT
FOR WITHHOLD NOMINEES
ALL ALL CROSSED OUT
1. ELECTION OF DIRECTORS: / / / / / /
INSTRUCTION: TO WITHHOLD
AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THAT NOMINEE'S
NAME AT RIGHT.
NOMINEES:
David A. Schuff
Scott A. Schuff
Kenneth F. Zylstra
Edward M. Carson
Dennis DeConcini
H. Wilson Sundt
FOR AGAINST ABSTAIN
2. APPROVAL OF SCHUFF STEEL COMPANY / / / / / /
1999 EMPLOYEE STOCK PURCHASE PLAN
Address Change? Mark Box / / Indicate change to the right.
FOR AGAINST ABSTAIN
3. RATIFICATION OF SELECTION OF ERNST / / / / / /
& YOUNG LLP AS INDEPENDENT AUDITORS
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON ALL OTHER
MATTERS THAT PROPERLY MAY BE PRESENTED AT THE MEETING.
The undersigned hereby revokes any proxy or proxies
heretofore given to vote such shares at said meeting or at
any adjournment thereof.
Please sign exactly as name appears hereon. When signing as
attorney, executor, administrator, trustee or guardian,
please give your full title as such. If more than one
trustee, all should sign. If shares are held jointly, both
owners must sign.
____________________________________________________________
Signature
____________________________________________________________
Signature (if held jointly)
Date:_______________________________________________, 1999
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