SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. 1)
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
LACLEDE STEEL COMPANY
(Name of Registrant as Specified in Its Charter)
not applicable
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|_| $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1),
or 14a-6(j)(2) or Item 22(a)(2) of Schedule 14A.
|_| $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
|_| Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactions applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|X| Fee paid previously with preliminary materials.
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|_| 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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LACLEDE STEEL COMPANY
One Metropolitan Square
St. Louis, Missouri 63102
NOTICE OF SPECIAL MEETING
August __, 1996
To the Stockholders:
By resolution of the Board of Directors, a special meeting of stockholders
of LACLEDE STEEL COMPANY (the "Company") will be held at the Metropolitan Square
Building, 40th Floor, 211 North Broadway, in the City of St. Louis, State of
Missouri, on ________, September __, 1996, at 9:00 a.m., Central Daylight Time,
for the purpose of considering and acting upon:
(1) Approving the amendment to the Certificate of Incorporation of the
Company to provide for a reduction of the par value per share of the
Common Stock from $13.33 per share to $0.01 per share;
(2) Approving the amendment to the Certificate of Incorporation of the
Company to provide for an increase in authorized Common Stock from
5,000,000 shares to 25,000,000 shares;
(3) Approving the recapitalization of the Company's Series A Preferred
Stock, no par value per share (the "Series A Preferred Stock"), such
that the Series A Preferred Stock owned by Ivaco Inc. ("Ivaco") and
certain members of management of the Company ("Management Purchasers")
is convertible into Common Stock at the option of the holder of such
Series A Preferred Stock; effective upon the amendment of the
Company's Certificate of Incorporation provided for in Item 1 and Item
2 and pursuant to Section 12 of the Company's Certificate of
Designation for Series A Preferred Stock filed with the Secretary of
State of the State of Delaware on July 30, 1996; and
(4) Approving the issuance and sale of up to 83,333 shares of Series A
Preferred Stock to Ivaco pursuant to Ivaco's standby commitment to
purchase shares of Series A Preferred Stock as part of the Company's
proposed Rights Offering.
None of the proposals will be implemented unless Item 1 and Item 2 are
approved. However, the implementation of Item 1 and Item 2 is not conditioned
upon the approval of Item 3 or Item 4. Accordingly, a vote against Item 1 or
Item 2 or an abstention with respect to Item 1 or Item 2 will generally have the
same effect as a vote against all of the Items, but a vote against Item 3 or
Item 4 will not affect the implementation of Item 1 and Item 2.
MICHAEL H. LANE
Secretary
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YOU ARE REQUESTED TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE,
WHETHER YOU PLAN TO ATTEND THE MEETING IN PERSON OR NOT. YOU MAY REVOKE YOUR
PROXY AT ANY TIME PRIOR TO THE MEETING, OR IF YOU DO ATTEND THE MEETING, YOU MAY
REVOKE YOUR PROXY AT THAT TIME, IF YOU WISH.
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LACLEDE STEEL COMPANY
One Metropolitan Square
St. Louis, Missouri 63102
PROXY STATEMENT
To the Stockholders of
LACLEDE STEEL COMPANY
The accompanying proxy is solicited by the Board of Directors of Laclede
Steel Company (the "Company") for use at a special meeting of stockholders of
the Company (the "Meeting") to be held at the Metropolitan Square Building, 40th
Floor, 211 North Broadway, St. Louis, Missouri 63102, on September __, 1996, at
9:00 a.m., Central Daylight Time, and at any adjournments or postponements
thereof. This proxy statement and accompanying proxy are first being sent or
given to stockholders of the Company on or about August __, 1996.
VOTING RIGHTS AND PROXIES
The close of business on August __, 1996 has been fixed as the record date
for determination of stockholders entitled to notice of and to vote at the
Meeting. As of the close of business on said record date, the only voting stock
of the Company outstanding consisted of 4,056,140 shares of Common Stock, $13.33
par value (the "Common Stock"). With respect to matters brought before the
Meeting, each stockholder will be entitled to one vote for each share held. The
stockholders will vote on the four proposals set forth herein at the Meeting.
Since the Meeting is a special meeting, no other matters may be submitted for
consideration at the Meeting.
A majority of the outstanding shares entitled to vote at the Meeting and
represented in person or by proxy will constitute a quorum. Approval of Item 1
and approval of Item 2 requires the affirmative vote of two-thirds of the
outstanding shares of Common Stock of the Company entitled to vote. Approval of
Item 3 and approval of Item 4 requires the affirmative vote of a majority of the
outstanding shares of Common Stock voted at the Meeting; however, Item 3 and
Item 4 are contingent upon stockholder approval of both Item 1 and Item 2.
Shares represented by proxies that are marked "abstain" (including broker
non-votes) with respect to any matter will be counted as shares present for
purposes of determining the presence of a quorum. The effect of voting shares to
"abstain" with respect to Item 1 and Item 2 is the same as if such shares were
voted against Item 1 and Item 2. Voting shares to "abstain" with respect to Item
3 and Item 4 has no effect on whether or not such item is approved. If no
instructions are indicated on the proxy card regarding how the stockholder wants
his or her shares voted on any particular Item(s), the shares represented by
such proxy card will be voted in favor of such Item(s).
Any stockholder executing the proxy hereby solicited has the power to
revoke the same at any time prior to the exercise of the authority conferred
thereby. Revocation may be made effective by giving written notice to the
Secretary of the Company at any time before the exercise of the proxy, by
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signing and delivering to the Secretary prior to the Meeting a later-dated
proxy, or by attending the Meeting and voting the shares of stock in person.
Attendance at the Meeting will not in and of itself revoke a previously signed
and returned proxy. Unless revoked, each proxy will be voted in the manner
indicated thereon.
The Company has retained Morrow & Co., Inc., to solicit proxies in the
enclosed form and will pay such firm a fee of approximately $7,500.00 plus
reasonable expenses for so acting. In addition, certain officers,
representatives, and regular employees of the Company may also contact
stockholders by mail, telephone, telegram, or personal interview. The expense of
proxy solicitation will be borne by the Company. Ivaco Inc., a Canadian
corporation ("Ivaco") and the owner of 2,018,650 shares of Common Stock (or
49.8% of the outstanding Common Stock), has indicated its intention to vote in
favor of each of the Items being presented to the stockholders at the Meeting,
except for Item 4 in respect of which it would abstain from voting.
BACKGROUND
General
During the second half of 1995 and the current fiscal year, the Company
has experienced operating losses due primarily to extreme weakness in sales
prices, especially tubular products. In addition, prior to the transition to
100% cast steel and the related shutdown of the Rod and Blooming Mills in the
second quarter of 1996, the Company experienced high production costs for steel
produced using the ingot process, which also contributed to operating losses.
Net sales for the Company decreased by less than one percent in the first half
of 1996 compared to the first half of 1995 but reflected a 13.6% decrease in
average selling prices for the Company's steel products which was offset by a
13.8% increase in steel shipments. The cost of products sold increased by 8.4%
in the first half of 1996 compared to the first half of 1995. The overall
decline in selling prices of the Company's products resulted in a significant
reduction in product margins and was the most significant reason for the
Company's operating losses of $3,045,000 in the first half of 1996. As a result
of these recent losses, the Company's liquidity and capital resources have been
reduced.
In early 1996, the Company began considering strategic alternatives
including equity infusions, asset sales and refinancing transactions. Under the
terms of its Loan and Security Agreement with Bank America Business Credit, Inc.
and certain other financial institutions (the "Loan Agreement"), the Company is
prohibited from incurring any additional indebtedness for borrowed money with
certain limited exceptions such as the incurrence of (i) trade payables and
contractual obligations to suppliers and customers in the ordinary course of
business and (ii) debt to finance the purchase of additional equipment and real
estate. As a consequence of the Company's operating results for the first six
months of 1996 and a reduction in credit availability based on the Company's
lower inventory levels, the Company was fully utilizing all amounts available
under the Loan Agreement at June 30, 1996. As of the date of this proxy
statement, the Company's operations continue to require full utilization of all
amounts available under the Loan Agreement. Considering the assets available for
collateral purposes, the Company does not believe that it would be able to
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negotiate acceptable terms with respect to any increase in the availability
under the Loan Agreement or obtain consent from such lenders with respect to the
incurrence of any significant amount of debt from others. Although, under
certain circumstances, the Company is permitted to incur debt subordinated to
the debt under the Loan Agreement on terms satisfactory in form and substance to
the lenders under the Loan Agreement, the Company does not believe that it would
be able to negotiate acceptable terms on subordinated debt. Furthermore,
restrictions contained in the Company's financing agreements related to its 1990
Solid Waste Disposal Revenue Bonds make it impractical to incur additional debt.
At the date of this proxy statement, the par value of the Common Stock is
$13.33 per share (as compared to the closing price of $[__] on the NASDAQ
National Market System on August [__], 1996) and, under applicable law, Common
Stock issued by the Company cannot be deemed fully paid and nonassessable unless
the Company receives consideration for the issuance thereof at least equal to
the par value. Accordingly, additional issuance of Common Stock was not possible
for the Company without prior stockholder approval reducing the par value of the
Common Stock. With only 943,860 shares of Common Stock authorized for issuance
but unissued and a per share trading price of approximately $[6.00] (based on
the average closing price of the Common Stock during June 1996) the Company did
not believe it could raise enough capital to meet its liquidity needs through
the sale of Common Stock. Even if stockholders were simultaneously to approve an
increase in the amount of authorized Common Stock, a public offering of Common
Stock was not considered as a viable option for the Company primarily because of
(i) the delays related to obtaining stockholder approval and proceeding with a
subsequent public offering and (ii) the uncertainty related to any attempt to
complete an underwritten public offering of Common Stock at an acceptable price
given the Company's recent operating results.
Other methods for raising capital include asset sales and other financing
transactions. In the second quarter of 1996, the Company entered into a
sale-leaseback transaction which increased cash flow by $4 million. With respect
to the potential sale of significant businesses or assets, however, the
Company's view, based on preliminary analysis of potential consideration to be
received, has been and continues to be that stockholder interests will be
maximized by the Company continuing to own such businesses and assets.
In June 1996, the Company commenced negotiations with Ivaco concerning the
possibility of Ivaco making an additional equity investment in the Company. One
of the principal benefits of the proposed private placement of equity securities
to Ivaco was the ability to consummate such transaction under a relatively short
time schedule when compared to the amount of time required to obtain stockholder
approval and consummate any subsequent public offering of the Company's equity
securities. During the last six months of 1996, the Company anticipates capital
expenditures of approximately $2.5 million and contributions to pension plans of
$9.4 million. Thus, the time schedule for any proposed transaction was an
important factor and, in the Company's view, the issuance of preferred stock
represented the best alternative for raising capital. During its negotiations
with Ivaco, the Company commenced negotiations with its principal lenders
concerning waivers of certain financial covenants contained in the Loan
Agreement.
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The Company and Ivaco entered into and consummated a Stock Purchase
Agreement (the "Ivaco Agreement") as of July 30, 1996, pursuant to which Ivaco
purchased 366,667 shares of Series A Preferred Stock, no par value (the "Series
A Preferred Stock"), at $15 per share, for an aggregate purchase price of
$5,500,005. In addition, as of the same date, the Company entered into and
consummated Management Purchase Agreements (the "Management Agreements") with
the Company's five executive officers (the "Management Purchasers") pursuant to
which the Management Purchasers purchased an aggregate of 50,000 shares of
Series A Preferred Stock from the Company at $15.00 per share for an aggregate
purchase price of $750,000. The funds received by the Company from Ivaco and the
Management Purchasers were used to improve the Company's working capital
position.
Simultaneously with the execution of the Ivaco Agreement and the
Management Agreements, the Company entered into an amendment to the Loan
Agreement which changed certain financial covenants thereby permitting the
Company to remain in compliance with the Loan Agreement and, subject to certain
limitations, permitted dividends to be paid on the Series A Preferred Stock. The
principal financial covenants amended relate to increasing the amount of 1996
operating losses permitted to be incurred and, for the remaining term of the
Loan Agreement, reducing the amount of consolidated net worth to be maintained
by the Company. Such amendments were required based upon the Company's operating
results during the first six months of 1996.
The effectiveness of each of the Ivaco Agreement, the Management
Agreements and the Loan Agreement amendment was conditioned upon the
effectiveness of each of the other agreements.
Although the Company could not at this time issue Common Stock or a
convertible preferred stock (for the reasons described above), it was determined
that the Company would seek stockholder approval to reduce the par value of the
Common Stock and to increase the number of shares of Common Stock authorized for
issuance and to make the Series A Preferred Stock convertible into Common Stock
if such stockholder approval was obtained. Since there could be no assurance
that stockholder approval would be obtained, Ivaco and the Management Purchasers
have the right to redeem the Series A Preferred Stock if stockholder approval is
not obtained. Stockholder approval would also be required under the rules of the
National Association of Securities Dealers, Inc. ("NASD") since the potential
issuance of Common Stock upon conversion of the Series A Preferred Stock would
exceed 20% of the outstanding shares of Common Stock and since certain of the
Series A Preferred Stock is held by the Company's management.
The Company and Ivaco agreed that, given the proposed investment being
made by Ivaco and the fact that Ivaco beneficially owns approximately 49.8% of
the outstanding shares of Common Stock, all other stockholders would be given
the opportunity to invest in the Series A Preferred Stock. This decision to
provide all other stockholders with the opportunity to purchase Series A
Preferred Stock was made primarily because the Company believes it is fair to
allow stockholders other than Ivaco to preserve their proportionate interest in
the Company and because it is a means of raising equity for the Company. In
addition, because of timing considerations, the Company was unable to offer
Series A Preferred Stock to all of its stockholders simultaneously but, by
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offering the same security to all of its stockholders at a later date, the
Company believed that it would be able to offer all of its stockholders the same
opportunity. To date, Ivaco has not exercised control over the Company's
operations. As noted below under "Terms of Ivaco Agreement," Ivaco has the right
to cause the Company to use its best efforts to cause the Board of Directors to
nominate four persons to serve on the Company's nine person Board of Directors
and to use its best efforts to cause the stockholders of the Company to elect
such directors. Even without this contractual provision, Ivaco has the ability
to elect at least four directors because of Ivaco's 49.8% ownership of the
Company's Common Stock and the cumulative voting rights of the Company's
stockholders related to the election of directors.
As noted above, it was determined to consummate the private placement of
Series A Preferred Stock to Ivaco and the Management Purchasers prior to
commencing any offering to all other stockholders because of the anticipated
delay involved in any public offering of securities and the Company's desire to
improve its working capital position prior to the completion of such offering.
Terms of Ivaco Agreement
Pursuant to the Ivaco Agreement, the Company agreed that as long as Ivaco,
or Ivaco together with any person with which Ivaco is acting in concert in
connection with its investment in the Company, is/are the beneficial owner(s) of
40% or greater of the outstanding shares of Common Stock, on a fully diluted
basis (the "Ownership Threshold"), Ivaco has the right to cause the Company to
use its best efforts to cause its Board of Directors to nominate four persons
designated by Ivaco to serve on the Company's nine person Board of Directors and
to use its best efforts to cause the stockholders of the Company to elect such
Directors, and the Company will not change the number of Directors on the Board
of Directors to a number higher than nine. This covenant is a confirmation of a
letter agreement reached with Ivaco in 1991 (the "1991 Agreement"), and restates
Ivaco's existing rights in a more formal contractual form.
The Company made certain other covenants pursuant to the Ivaco Agreement,
including, but not limited to, that (i) the Company will use its best efforts to
cause its stockholders to approve and authorize, as soon as possible and in any
event on or before September 30, 1996, the Proposals contained in Item 1, Item 2
and Item 3 of this proxy statement, (ii) the Company will prepare and file a
registration statement (the "Registration Statement") with the Securities and
Exchange Commission (the "Commission") with respect to a rights offering to all
of the Company stockholders (the "Rights Offering"), entitling all such
stockholders to subscribe, up to their pro rata share (excluding the right of
Ivaco to subscribe for the amount of Series A Preferred Stock purchased by Ivaco
under the Ivaco Agreement), for up to an aggregate of 647,369 shares of the
Company's Series A Preferred Stock, (iii) the Company will use its best efforts
to list the Series A Preferred Stock on the NASDAQ National Market System, if
eligible, or if not eligible, then on the NASDAQ Small Cap Market, if eligible,
and (iv) the Company will pay all actual out-of-pocket expenses incurred by
Ivaco in connection with the negotiation and execution of the Ivaco Agreement
and the purchase of the Series A Preferred Stock; provided, however, that the
Company's obligation will be limited to $50,000.
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Standby Agreement
Pursuant to the Ivaco Agreement, Ivaco agreed to execute a form of Standby
Agreement (the "Standby Agreement") immediately prior to the effectiveness of
the Registration Statement with respect to the purchase of up to 83,333 shares
of Series A Preferred Stock from the Company for an aggregate purchase price of
$1,249,995, or $15.00 per share, under certain conditions. For information with
respect to the terms of the Standby Agreement, see Item 4.
Registration Rights Agreement
The recent sale of shares of Series A Preferred Stock to Ivaco and the
Management Purchasers was not registered with the Commission or with any state's
securities commission. Accordingly, to provide Ivaco and the Management
Purchasers with the ability to sell the Series A Preferred Stock (and any shares
of Common Stock issued upon conversion thereof) owned by them absent an
exemption from the registration requirements under the Securities Act of 1933,
as amended, the Company, Ivaco and the Management Purchasers entered into a
Registration Rights Agreement (the "Registration Rights Agreement") pursuant to
which the Company agreed to provide three demand registration rights to Ivaco
for such shares (and any shares of Common Stock issued upon conversion thereof)
(collectively, the "Registrable Securities") and incidental registration rights
to Ivaco and the Management Purchasers.
In connection with the Registration Rights Agreement, the Company has
agreed to indemnify the holders of Registrable Securities against all losses,
claims, damages, liabilities or expenses to the extent such losses arise out of,
or are based upon, any untrue statement or alleged untrue statement of any
material fact contained in any registration statement.
Employment Agreement Amendments
In connection with the purchase of shares of Series A Preferred Stock by
Ivaco and the Management Purchasers, as of July 30, 1996, the Company and each
of the Management Purchasers entered into amendments to existing Employment
Agreements (as defined below) to eliminate previously existing provisions
regarding payments to be made to the Management Purchasers upon a change of
control. The other terms of such Employment Agreements were not changed.
Considerations of the Board of Directors
In approving the terms of the sale of Series A Preferred Stock to Ivaco
and the Management Purchasers, the Board of Directors considered such factors as
the alternatives available to the Company for raising capital, the Company's
long and short term loan obligations, the market price of the Company's Common
Stock, the business prospects for the Company and the general conditions of the
market place. At a board meeting in July 1996 (the "July Board Meeting"), the
Board of Directors reviewed the business prospects for the Company for the
remainder of 1996 and, specifically, the need for additional capital resources
as a consequence of the Company's operating results for the first six months of
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1996, debt incurred in recent years to finance capital expenditures and pension
funding requirements. The Board also reviewed with management of the Company the
status of the Company's negotiations with its lenders and the Company's ability
to obtain amendments to the Loan Agreement.
Under the terms of the Loan Agreement, the Company is prohibited from
incurring any additional indebtedness for borrowed money with certain limited
exceptions. As a consequence of the Company's operating results for the first
six months of 1996 and a reduction in credit availability based on the Company's
lower inventory levels, the Company was fully utilizing all amounts available
under the Loan Agreement at June 30, 1996. As of the date of this proxy
statement, the Company's operations continue to require full utilization of all
amounts available under the Loan Agreement. Based upon its 1996 operating
results to date and considering the assets available for collateral purposes,
the Company did not believe that it would be able to negotiate acceptable terms
with respect to any increase in the availability under the Loan Agreement or
obtain consent from its lenders with respect to the incurrence of any
significant amount of debt from others. Although, under certain circumstances,
the Company is permitted to incur debt subordinated to the debt under the Loan
Agreement on terms satisfactory in form and substance to the lenders under the
Loan Agreement, the Company does not believe that it would be able to negotiate
acceptable terms on subordinated debt.
As of the date of this proxy statement, the par value of the Common Stock
is $13.33 per share (as compared to the closing price of $[__] on the NASDAQ
National Market System on August [__], 1996) and, under applicable law, Common
Stock issued by the Company cannot be deemed fully paid and nonassessable unless
the Company receives consideration for the issuance thereof at least equal to
the par value. Accordingly, additional issuance of Common Stock was not possible
for the Company without prior stockholder approval reducing the par value of the
Common Stock. With only 943,860 shares of Common Stock authorized for issuance
but unissued and a per share trading price of approximately $6.00 (based on the
average closing price of the Common Stock during June 1996) the Company did not
believe it could raise enough capital to meet its liquidity needs through the
sale of Common Stock. Even if stockholders were simultaneously to approve an
increase in the amount of authorized Common Stock, a public offering of Common
Stock was not considered as a viable option for the Company primarily because of
(i) the delays related to obtaining stockholder approval and proceeding with a
subsequent public offering and (ii) the uncertainty related to any attempt to
complete an underwritten public offering of Common Stock at an acceptable price
given the Company's recent operating results.
Accordingly, the Company's Board of Directors determined that the best
source of financing at this time is the issuance of convertible preferred stock.
It was determined that the Company would seek stockholder approval to reduce the
par value of the Common Stock and to increase the number of shares of Common
Stock authorized for issuance and to make the Series A Preferred Stock
convertible into Common Stock if such stockholder approval was obtained. Since
there could be no assurance that stockholder approval would be obtained, Ivaco
has the right to redeem the Series A Preferred Stock if stockholder approval is
not obtained. Stockholder approval would also be required under the rules of the
NASD since the potential issuance of Common Stock upon conversion of the Series
A Preferred Stock would exceed 20% of the outstanding shares of Common Stock and
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since certain of the Series A Preferred Stock is held by management of the
Company.
The Company and Ivaco agreed that, given the proposed investment being
made by Ivaco and the fact that Ivaco beneficially owns approximately 49.8% of
the outstanding shares of Common Stock, all other stockholders would be given
the opportunity to invest in the Series A Preferred Stock. This decision to
provide all other stockholders with the opportunity to purchase Series A
Preferred Stock was made primarily because the Company believes it is fair to
allow stockholders other than Ivaco to preserve their proportionate interest in
the Company and because it is a means of raising equity for the Company. In
addition, because of timing considerations, the Company was unable to offer
Series A Preferred Stock to all of its stockholders simultaneously but, by
offering the same security to all of its stockholders at a later date, the
Company believed that it would be able to offer all of its stockholders the same
opportunity.
At the July Board Meeting, the Board of Directors reviewed the terms of
the Company's proposed rights offering of preferred stock convertible into
Common Stock and the terms of similar rights offerings completed by other
companies within the past few years. The Company believes that a rights offering
of preferred stock convertible into Common Stock is attractive because the
conversion feature would allow the Company to pay a lower dividend rate than
would be available without any conversion feature and because the discounted
conversion price described below would make the offering more attractive for
potential investors and therefore maximize the net proceeds obtainable from any
rights offering. In addition, while any issue of preferred stock would probably
not be eligible for listing on any organized trading market, upon conversion
into Common Stock, holders of such security would most likely be able to
transfer the Common Stock because it is currently traded on the NASDAQ/National
Market System. Accordingly, the Board of Directors determined that it would be
advantageous for the Company to be able to offer preferred stock convertible
into Common Stock.
The increase in authorized Common Stock from 5,000,000 to 25,000,000
shares will allow the Company (i) to recapitalize the Series A Preferred Stock
previously sold to Ivaco and the Management Purchasers, thereby eliminating such
stockholders' redemption rights in connection with such shares, and (ii) to
authorize sufficient shares of Common Stock to be able to offer to all other
stockholders of the Company preferred stock with identical terms and conditions
to the Series A Preferred Stock sold to Ivaco and the Management Purchasers.
The Board of Directors of the Company has determined to raise additional
equity to meet the Company's liquidity needs through the issuance and sale of
Series A Preferred Stock to the existing stockholders of the Company.
Accordingly, if the stockholders approve the proposals set forth in Items 1
through 3, the Company will commence the Rights Offering pursuant to which
holders of its Common Stock, other than Ivaco, will receive, without charge, one
(1) transferable subscription right (each, a "Right") for every four (4) shares
of Common Stock held, with each such Right entitling the holder thereof to
subscribe for and to purchase one share of the Series A Preferred Stock for a
price of $15.00 per share. The Company will distribute 137,996 Rights to Ivaco
instead of its proportionate amount. Ivaco's pro rata portion, based on the
number of shares of Common Stock outstanding on the date hereof, would have been
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504,663 Rights; however, the Company is issuing 137,996 Rights to Ivaco in
connection with the Rights Offering, which, when added to the 366,667 shares of
Series A Preferred Stock sold to Ivaco as set forth above, is equal to its pro
rata portion, based on the number of shares of Common Stock outstanding on the
date hereof, of Series A Preferred Stock. Such shares will have the same terms
as the Series A Preferred Stock issued to Ivaco and the Management Purchasers,
including the right to convert the Series A Preferred Stock into Common Stock.
The conversion price will be equal to 80% of the average closing price for the
Common Stock for the ten trading days prior to the Meeting. See Item 3. The
proceeds of the Rights Offering will be used by the Company to improve working
capital and for general corporate purposes.
As noted above, as a condition to Ivaco purchasing the Series A Preferred
Stock, the Company agreed to use its best efforts to prepare and file a
registration statement with the Commission with respect to the Rights Offering,
entitling all of the Company's stockholders to subscribe for Series A Preferred
Stock following the Recapitalization (as hereinafter defined) of Series A
Preferred Stock. Such a registration statement was filed with the Commission on
__________, 1996.
Stockholders who, in connection with the Rights Offering, do not exercise
their rights in full will suffer a dilution of their voting rights as a result
of the conversion into Common Stock of any of the Series A Preferred Stock
offered thereby. Holders of Common Stock who exercise their rights will
preserve, and through the oversubscription privilege may increase, their
proportionate interest in the equity ownership and, if converted, voting power
of the Company. The conversion into Common Stock of all of the shares of Series
A Preferred Stock offered in the Rights Offering would increase the number of
shares of Common Stock outstanding (assuming a Common Stock price of $___ per
share for the ten trading days prior to the Meeting) to ___________ shares (or a
__% increase). The Company has been advised that it is Ivaco's present intention
not to purchase any more shares of Series A Preferred Stock than it is required
to purchase pursuant to the Standby Agreement; provided, however, Ivaco reserves
the right to purchase additional shares of Series A Preferred Stock in order to
maintain its existing equity interest in the Company on a fully diluted basis.
As noted above, pursuant to the 1991 Agreement, four directors serve on
the Board as designees of Ivaco (the "Ivaco Board Designees"). To date, however,
Ivaco has not exercised control over the Company's operations and generally has
not contacted Ivaco Board Designees with respect to their determinations as
directors. In connection with their review of the transactions proposed in this
proxy statement, Ivaco did not contact any of the Ivaco Board Designees.
Nevertheless, all resolutions adopted by the Board of Directors in connection
with this proxy statement were first approved by a vote of Directors other than
the Ivaco Board Designees and then by the entire Board of Directors.
If Item 1, Item 2 and Item 3 are approved by the stockholders of the
Company, then stockholders will receive a prospectus regarding the Rights
Offering subject to the related registration statement being declared effective
by the Securities and Exchange Commission. THIS PROXY STATEMENT SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SERIES A
9
<PAGE>
Preliminary Copy -- Subject To Change
PREFERRED STOCK, WHICH OFFER AND SALE SHALL ONLY BE MADE BY MEANS OF A
PROSPECTUS.
It is intended that the proposed amendment to the Company's Certificate of
Incorporation will be filed with the Delaware Secretary of State immediately
following stockholder approval.
OPINION OF FINANCIAL ADVISOR
The Company has received an opinion from Stifel, Nicolaus & Company,
Incorporated ("Stifel), its financial advisor, that, as of the date of such
opinion and subject to the assumptions, factors and limitations set forth in
such opinion, the terms of the Rights Offering are fair from a financial point
of view to the stockholders of the Company. Stifel's written opinion was
addressed directly to the Company's Board of Directors solely for its use and
specifically states that such opinion is not a recommendation to the Company's
stockholders or investors. Stifel was not requested to and did not make any
recommendation to the Board as to the form or amount of consideration to be
offered to the Company for the Series A Preferred Stock to be issued and sold in
the Rights Offering, which was determined by arm's-length negotiations between
the Company and Ivaco. For discussion as to the negotiations between the Company
and Ivaco and the role of the Ivaco Board Designees, see "BACKGROUND - General
and - Considerations of the Board of Directors."
CONSEQUENCES IF THE PROPOSALS ARE NOT APPROVED
If the proposals set forth in Item 1 through Item 3 are not approved, the
outstanding Series A Preferred Stock provides by its terms that the dividend
rate will increase from 6% to 8% per annum for all periods from and after
January 1, 1997, (although as described below, the Company may not be permitted
to pay the dividend under Delaware law unless it returns to profitability) and
the Series A Preferred Stock will become immediately redeemable at the option of
the holder at $15 per share plus accrued and unpaid dividends thereon upon 30
days prior notice to the Company. Any redemption of Series A Preferred Stock
would have a material adverse effect on the Company. In addition, pursuant to
the specific terms of the amendment to the Loan Agreement entered into in July
1996, the failure of the stockholders to approve the proposals set forth in
Items 1 through Item 3 would constitute an event of default under the Loan
Agreement which would give the Company's principal lenders the right to
terminate the Loan Agreement and declare all amounts outstanding thereunder due
and payable. The termination of the Loan Agreement would have a material adverse
effect on the Company.
If any material amount of Series A Preferred Stock is redeemed or an event
of default is declared under the Loan Agreement, the Company may have to seek
alternative financing. There can be no assurance that the Company would be able
to obtain alternative financing or obtain alternative financing on acceptable
terms and conditions. Even if alternative financing was obtained, it is probable
that it would have materially less favorable terms, in which case the Company's
earnings and the market price of the Common Stock could be materially adversely
affected.
10
<PAGE>
Preliminary Copy -- Subject To Change
None of the proposals will be implemented unless Item 1 and Item 2 are
approved. However, the implementation of Item 1 and Item 2 is not conditioned
upon the approval of Item 3 or Item 4. Accordingly, a vote against Item 1 or
Item 2 or an abstention with respect to Item 1 or Item 2 will generally have the
same effect as a vote against all of the Items, but a vote against Item 3 or
Item 4 will not affect the implementation of Item 1 and Item 2.
ITEM 1. ADOPTION OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO
REDUCE THE PAR VALUE OF THE COMMON STOCK OF THE COMPANY TO $0.01 PER
SHARE
Item 1 is the proposal that the stockholders authorize an amendment to the
Company's Certificate of Incorporation which would reduce the par value of each
share of Common Stock from $13.33 per share to $0.01 per share.
The Board of Directors has authorized this proposal and recommends it to
stockholders for their approval.
There are several advantages to the decrease in par value of the Common
Stock. The present par value of the Company's Common Stock is atypical of the
current trend among modern public corporations whose common stock normally has
nominal if any par value. This puts the Company at a disadvantage when raising
capital because under Delaware law, a corporation may not issue shares of Common
Stock at a price below the par value per share. Currently, the Company may not
issue shares of Common Stock for consideration less than $13.33 per share,
although at present the market price of the Company's Common Stock is materially
lower. As a result, unless the par value of its Common Stock is reduced the
Company is prevented from raising equity capital from the sale of its Common
Stock. Except in connection with the Rights Offering, the Company does not have
any present intention to issue additional shares of Common Stock or securities
convertible or exchangeable into Common Stock.
A reduction in par value to $0.01 per share would give the Board of
Directors the ability to issue shares of Common Stock for whatever consideration
(equal to or in excess of the revised par value per share) the Board of
Directors determines is reasonable. A reduction in par value also will give the
Board of Directors greater flexibility to declare dividends. For example, the
par value of issued shares is a component of capital under Delaware law and a
corporation organized under Delaware law may declare dividends out of surplus
or, in the event there is no surplus, out of its net profits for the fiscal year
in which the dividend is declared or the preceding fiscal year. Under Delaware
law, surplus is defined as net assets less capital. The proposed change in par
value will allow the Board of Directors to reduce its capital by an amount equal
to the number of outstanding shares of Common Stock multiplied by the reduction
in par value of such shares. The Board of Directors has voted to do so
contingent upon approval of the reduction in par value by the stockholders.
Based upon the shares of Common Stock issued and outstanding on the date of this
proxy statement, reducing the par value from $13.33 to $0.01 would allow the
Board of Directors to transfer approximately $54,027,784 from capital to
surplus, thereby increasing the ability of the Company to pay dividends on any
preferred stock or the Common Stock assuming that the Company's net assets
exceed its capital. The Company has no present plan to pay dividends on its
11
<PAGE>
Preliminary Copy -- Subject To Change
Common Stock for the foreseeable future. Restoration of dividends on the shares
of the Company's Common Stock will depend on various factors, including an
improvement in business conditions, sustained profitability and compliance with
restrictions contained in the Company's financial agreements.
If the par value per share of the Company's Common Stock is not reduced,
the Company would be unable to (i) effect the recapitalization of the Series A
Preferred Stock into convertible preferred stock or (ii) offer its Series A
Preferred Stock to all stockholders of the Company pursuant to the Rights
Offering. If the stockholders do not approve the reduction in par value by
October 31, 1996, the dividend on the Series A Preferred Stock would increase
from 6% to 8% per annum and all of such stock would become immediately
redeemable at the option of the holder at $15.00 per share plus accrued and
unpaid dividends thereon. If redemption were to occur it would have a materially
adverse effect on the Company. In addition, it would constitute an event of
default under the Loan Agreement which would give the Company's principal
lenders the right to terminate the Loan Agreement and declare all amounts
outstanding thereunder due and payable. The termination of the Loan Agreement
would have a materially adverse effect on the Company.
The Company's proposal to reduce the par value of the Common Stock will
not, in the opinion of the Company, negatively affect the rights of existing
stockholders of the Company. Since reduction in the par value of the Company's
Common Stock would place the Company in the same situation as most other
similarly situated corporations, a reduction in par value of the Common Stock is
not expected to affect the market price of the Common Stock.
The holders of Common Stock do not have preemptive rights to purchase any
shares of authorized capital stock of the Company. The Board of Directors may
approve the issuance of authorized but unissued shares without further
stockholder approval, although, as noted above, the Company does not have any
present intention to do so.
The no par value characteristic of the preferred stock would remain
unchanged in all respects upon the adoption of this proposal by the stockholders
although the Company is seeking to increase the authorized shares of Common
Stock to 25 million shares in Item 2, as described below.
For the proposed change to the first paragraph of Article IV of the
Company's Certificate of Incorporation, see Exhibit A hereto.
Pursuant to Article X of the Company's Certificate of Incorporation, an
affirmative vote of two-thirds of the outstanding stock of the Company entitled
to vote thereon is required to approve the proposed amendment to reduce the par
value of Common Stock to $0.01 per share.
Item 1 will be voted upon by the stockholders of the Company separately
from the other items. However, the implementation of each of the other items is
conditioned upon approval of Item 1 by the stockholders of the Company.
Accordingly, a vote against or an abstention from voting on Item 1 will
generally have the same effect as a vote against all the items.
12
<PAGE>
Preliminary Copy -- Subject To Change
The Board of Directors recommends a vote "FOR" the proposed amendment to
the Certificate of Incorporation to reduce the par value of the Common Stock to
$0.01 per share.
ITEM 2. ADOPTION OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO
INCREASE THE AUTHORIZED COMMON STOCK OF THE COMPANY TO 25,000,000
SHARES
Item 2 is the proposal that the stockholders authorize an amendment to the
Company's Certificate of Incorporation which would increase the authorized
Common Stock from 5,000,000 shares to 25,000,000 shares. The Board of Directors
has authorized this proposal and recommends it to stockholders for their
approval.
As of the date of this proxy statement, there were 4,056,140 shares of
Common Stock issued and outstanding. This leaves a balance of 943,860 authorized
shares available for future use as of such date.
The Board of Directors has authorized and recommends to stockholders for
their approval this proposal because it would allow (if Item 1 is also approved)
(i) for the Recapitalization of the Series A Preferred Stock into convertible
preferred stock and (ii) the Company to offer its Series A Preferred Stock to
all stockholders of the Company pursuant to the Rights Offering which would
commence as soon as possible after stockholder approval is obtained.
The additional shares of authorized but unissued Common Stock may also be
utilized for a variety of proper corporate purposes, including raising
additional capital, corporate acquisitions, or stock distributions, none of
which are contemplated at this time. Except in connection with the Rights
Offering, the Company has no present intention to issue additional shares of
Common Stock or securities convertible or exchangeable into Common Stock.
However, the holders of Common Stock do not have preemptive rights to purchase
any shares of authorized capital stock of the Company. The Board of Directors
may approve the issuance of authorized but unissued shares without further
stockholder approval.
The no par value characteristic of the preferred stock would remain
unchanged in all respects upon the adoption of this proposal by the
stockholders.
Pursuant to Article X of the Company's Certificate of Incorporation, an
affirmative vote of two-thirds of the outstanding stock of the Company entitled
to vote thereon is required to approve the proposed amendment to increase the
authorized Common Stock to 25,000,000 shares.
In the event that Item 2 is not approved by the stockholders prior to
October 31, 1996, the outstanding Series A Preferred Stock provides by its terms
that the dividend rate will increase from 6% to 8% per annum for all periods
from and after January 1, 1997, and the Series A Preferred Stock will become
13
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Preliminary Copy -- Subject To Change
immediately redeemable at the option of the holder at $15.00 per share plus
accrued and unpaid dividends thereon upon 30 days prior notice to the Company.
Any redemption of Series A Preferred Stock would have a material adverse effect
on the Company. In addition, it would constitute an event of default under the
Loan Agreement which would give the Company's principal lenders the right to
terminate the Loan Agreement and declare all amounts outstanding thereunder due
and payable. The termination of the Loan Agreement would have a materially
adverse effect on the Company.
Item 2 will be voted upon by the stockholders of the Company separately
from the other items. However, the implementation of each of the other items is
conditioned upon approval of Item 2 by the stockholders of the Company.
Accordingly, a vote against or an abstention from voting on Item 2 will
generally have the same effect as a vote against all the items.
For the proposed change to the first paragraph of Article IV of the
Company's Certificate of Incorporation, see Exhibit A hereto.
The Board of Directors recommends a vote "FOR" the proposed amendment to
the Certificate of Incorporation to increase the authorized Common Stock to
25,000,000 shares.
ITEM 3. APPROVAL OF RECAPITALIZATION OF SERIES A PREFERRED STOCK
SUCH THAT OUTSTANDING SERIES A PREFERRED STOCK IS CONVERTIBLE
PURSUANT TO SECTION 12 OF THE COMPANY'S CERTIFICATE OF DESIGNATION
OF THE SERIES A PREFERRED STOCK.
Item 3 is the proposal that the stockholders approve the recapitalization
of the Series A Preferred Stock, such that the Series A Preferred Stock owned by
Ivaco and the Management Purchasers, pursuant to Section 12 of the Company's
Certificate of Designation for Series A Preferred Stock filed with the Secretary
of State of the State of Delaware on July 30, 1996 ("Certificate of
Designation"), would be convertible into Common Stock at the option of the
holder of such Series A Preferred Stock (the "Recapitalization"). If approved by
stockholders, Item 3 would be effective upon the amendment of the Company's
Certificate of Incorporation provided for in Item 1 and Item 2.
Conversion Rights of Series A Preferred Stock.
Upon the approval of Item 1, Item 2 and Item 3 by the stockholders of the
Company, each share of Series A Preferred Stock will pursuant to its terms
become convertible, at the option of the holders thereof, into the number of
shares of Common Stock equal to $15.00 (the purchase price of a share of Series
A Preferred Stock) divided by a conversion price (the "Conversion Price") equal
to 80% of the average closing price of the Common Stock on the NASDAQ National
Market System for the ten trading days prior to the date of the Meeting. As an
example, based on the average closing price for the Common Stock for the ten
trading days prior to the date of this proxy statement (which was $_____ per
share), each share of Series A Preferred Stock would be convertible into ____
shares of Common Stock and the Conversion Price would be $_____. Any fractional
14
<PAGE>
Preliminary Copy -- Subject To Change
shares of Common Stock resulting from such conversion would be paid in cash in
an amount equal to the current market price per shares multiplied by such
fractional interest.
The Conversion Price is subject to adjustment if the Company (i) pays a
dividend or makes a distribution on its Common Stock, in shares of Common Stock,
(ii) subdivides its outstanding Common Stock into a greater number of shares,
(iii) combines, consolidates or reclassifies its outstanding Common Stock into a
smaller number of shares, or (iv) issues by reclassification of its Common Stock
any shares of its capital stock. The Conversion Price shall be adjusted so that
the holder of Series A Preferred Stock thereafter exchanged will be entitled to
receive, upon exchange thereof, the number of shares of capital stock of the
Company which he would have been entitled to receive immediately prior to such
action if the Series A Preferred Stock had been exchanged at such time. If the
Company (i) issues or sells Common Stock, (ii) grants, issues or sells rights,
options or warrants to purchase Common Stock or securities convertible into
Common Stock, or (iii) grants, issues or sells stock or securities convertible
or exchangeable into Common Stock, for an aggregate price per share (including
the total amount received and receivable by the Company as consideration for the
issue or sale of such securities) which is less than the Conversion Price or the
current market price, the Conversion Price shall be reduced to the lower of two
formula prices based upon the number of securities issued and the consideration
received; provided, however, that no adjustment to the Conversion Price shall be
made for three years following the date of the Meeting unless such adjustment
would require an increase or decrease of at least 1% in the Conversion Price
then in effect. The Company may decrease the Conversion Price by an amount from
time to time for a period of at least 20 days as long as the decrease is
irrevocable during such period.
Consequences of Failure to Approve Item 3
If the requisite holders of shares of Common Stock of the Company do not
approve and authorize Item 1, Item 2 and Item 3 on or before October 31, 1996,
then (i) the per annum dividend rate of the Series A Preferred Stock shall
automatically be increased by 2% to 8% per annum, or to $1.20 from $0.90 per
share per annum, from January 1, 1997 and for each quarterly dividend period
thereafter and (ii) each holder of shares of Series A Preferred Stock would have
the right to have the Company redeem any or all of its shares of Series A
Preferred Stock at $15.00 per share plus accrued and unpaid dividends thereon
upon 30 days prior notice to the Company. Any redemption of Series A Preferred
Stock would have a material adverse effect on the Company. In addition, it would
constitute an event of default under the Loan Agreement which would give the
Company's principal lenders the right to terminate the Loan Agreement and
declare all amounts outstanding thereunder due and payable. The termination of
the Loan Agreement would have a materially adverse effect on the Company. The
willingness of the Company's lenders to enter into the Loan Agreement amendment
was conditioned upon the consummation of the Ivaco Agreement and the Management
Agreements pursuant to which Ivaco and the Management Purchasers acquired Series
A Preferred Stock and the Company received approximately $6,250,000 in gross
proceeds.
15
<PAGE>
Preliminary Copy -- Subject To Change
Other Terms of Series A Preferred Stock
General. The Board of Directors has the authority to issue Preferred Stock
in one or more series, having rights and preferences as the Board may determine.
Pursuant to its authority, the Board of Directors authorized the issuance of an
aggregate of 416,667 shares of Series A Preferred Stock to Ivaco and the
management of the Company on July 30, 1996. See "Background - General."
Rank. The Series A Preferred Stock, with respect to dividend rights and
rights upon liquidation, dissolution or winding up of the Company, ranks senior
to the Common Stock and to all other classes and series of equity securities of
the Company. No other classes or series of equity securities of the Company
subsequently issued shall rank senior to or on a parity with the Series A
Preferred Stock as to dividend rights and rights upon liquidation, dissolution
or winding up of the Company without prior approval of holders representing 2/3
of the outstanding shares of Series A Preferred Stock. The Series A Preferred
Stock shall be junior to indebtedness of the Company issued from time to time,
including debentures.
Dividends. Holders of shares of Series A Preferred Stock are entitled to
receive, if, when and as declared by the Board of Directors of the Company out
of assets of the Company legally available for payment, cumulative cash
dividends, payable quarterly, at the rate of 6% per annum, or $0.90 per share
per annum (subject to increase to 8% per annum or $1.20 per share, if
stockholders approval of Items 1, 2 and 3 is not obtained by October 31, 1996),
from the date of issuance and for each quarterly dividend period thereafter.
Dividends on the Series A Preferred Stock are payable quarterly in arrears to
holders of record on the last day of March, June, September and December of each
year to be paid on the ___ day thereafter; provided, however, that the first
dividend will be payable on or before January __, 1997, prorated from the date
of issuance. Each such dividend is payable to holders of record as they appear
on the books of the Company. Dividends on the Series A Preferred Stock are
cumulative and accrue on a daily basis from the date of original issuance of the
shares.
Liquidation Rights. In the event of any liquidation, dissolution or
winding-up of the Company, the holders of the shares of the Series A Preferred
Stock shall be entitled to receive out of the assets of the Company available
for distribution to stockholders, before any distribution of assets is made to
holders of Common Stock or any other stock of the Company ranking junior to the
Series A Preferred Stock as to liquidation, dissolution or winding-up of the
Company, distributions in an amount equal to $15.00 per share, plus an amount
equal to the accrued and unpaid dividends thereon.
Optional Redemption. After September 15, 2005, the Company may require
holders to redeem any or all of their shares of Series A Preferred Stock, at a
cash redemption price per share of $15.00, plus accrued and unpaid dividends
subject to certain conditions thereon, subject to the Common Stock having a
Current Average Closing Price equal to at least 200% of the Conversion Price.
The term "Current Average Closing Price" shall mean the average closing price
for 20 consecutive trading days prior to the date of notice of redemption. As
stated above, if stockholder approval of Items 1, 2 and 3 is not obtained by
October 31, 1996, the holders of the Series A Preferred Stock have the right to
redeem any or all of the Series A Preferred Stock at $15.00 per share plus
accrued and unpaid dividends thereon upon 30 days prior notice to the Company.
There is no sinking fund.
16
<PAGE>
Preliminary Copy -- Subject To Change
Lack of Voting Rights. The holders of the Series A Preferred Stock shall
not, except as otherwise required by law or as set forth below, have any right
or power to vote on any matter or in any proceeding or to be represented on any
matter or in any proceeding or to be represented at, or to receive notice of,
any meeting of stockholders. The holders of Series A Preferred Stock would only
be entitled to vote if the Company intended to (i) amend, alter or repeal any of
the preferences or rights of the holders of the Series A Preferred Stock so as
to adversely affect such preferences and rights, or (ii) issue any shares of
capital stock ranking senior to or on a parity with the Series A Preferred Stock
with respect to the payment of dividends and the distribution of assets upon the
liquidation, dissolution or winding-up of the Company. Such events would require
the vote of 2/3 of the shares of Series A Preferred Stock outstanding and each
holder of the Series A Preferred Stock shall be entitled to one vote for each
share standing in his name on the transfer books of the Company as of the record
date fixed for such purpose, on any matter as to which they shall be entitled to
vote.
Preemptive Rights. The holders of shares of Series A Preferred Stock do
not have any preemptive right to acquire any unissued shares of any stock of the
Company, now or hereafter authorized, or any other securities of the Company.
Other
An affirmative vote of the majority of the outstanding Common Stock voted
at the Meeting on Item 3 is required to approve Item 3.
The Board of Directors recommends a vote "FOR" ITEM 3.
ITEM 4. APPROVAL OF THE IVACO STANDBY COMMITMENT TO PURCHASE SERIES
A PREFERRED STOCK
Item 4 is the proposal that the stockholders approve the standby
commitment of Ivaco to purchase up to 83,333 shares of Series A Preferred Stock.
If Item 4 is not approved by the stockholders, Ivaco will not be required to
purchase any shares of Series A Preferred Stock pursuant to the Standby
Agreement.
The Standby Agreement provides that if the number of shares of Series A
Preferred Stock subscribed for in the Rights Offering is less than 316,667,
Ivaco would purchase and the Company would sell at the price of $15.00 per share
(the same price being offered to stockholders pursuant to the Rights Offering),
a number of shares of Series A Preferred Stock equal to the difference, if
positive, between (i) 316,667 and (ii) the number of shares of Series A
Preferred Stock subscribed for in the Rights Offering; provided, however, that
the number of shares of Series A Preferred Stock which Ivaco will be required to
subscribe for will not exceed the difference between (a) 83,333 and (b) the
number of shares of Series A Preferred Stock subscribed for by Ivaco in the
Rights Offering. Ivaco would have no obligation to purchase additional shares of
Series A Preferred Stock if 316,667 or more shares of Series A Preferred Stock
are purchased in the Rights Offering. The Company has been advised that it is
17
<PAGE>
Ivaco's present intention not to purchase any more shares of Series A Preferred
Stock than it is required to purchase pursuant to the Standby Agreement;
provided, however, Ivaco reserves the right to purchase additional shares of
Series A Preferred Stock in order to maintain its existing equity interest in
the Company on a fully diluted basis.
The Standby Agreement provides that the Company will indemnify Ivaco
against any and all losses, claims, damages and liabilities, joint or several,
to which Ivaco may become subject, insofar as such losses, claims, damages or
liabilities arise out of or are based on any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus, the
Registration Statement or the prospectus or any amendment or supplement thereto,
or the omission or alleged omission to state in such document a material fact
required to be stated in it or necessary to make the statements in it not
misleading.
The Board of Directors has authorized and recommends to stockholders for
their approval the proposed Standby Agreement with Ivaco because the Board of
Directors believes that the Standby Agreement will assist the Company in
achieving its objective to maximize proceeds from any Rights Offering. The
Standby Agreement does not in any respect limit the right of any stockholder to
purchase such stockholder's pro rata share of the Series A Preferred Stock.
While the Company has agreed to use its best efforts to effect the Rights
Offering if stockholder approval of Items 1, 2, 3 and 4 is obtained, there can
be no assurance that the Rights Offering will be commenced or that any shares of
Series A Preferred Stock will be sold pursuant thereto (other than 83,333 shares
which Ivaco would be required to purchase pursuant to the terms and subject to
the conditions of the Standby Agreement).
An affirmative vote of the majority of the outstanding Common Stock voted
at the Meeting on Item 4 is required to approve Item 4.
Ivaco has advised the Company that it will abstain from voting on Item 4.
The Board of Directors recommends a vote "FOR" ITEM 4.
18
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Preliminary Copy -- Subject To Change
BENEFICIAL OWNERSHIP OF THE COMPANY'S COMMON STOCK
The following information is furnished with respect to each person known
by management of the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock of the Company, each director of the Company, each
executive officer of the Company and all directors and executive officers as a
group. The information is furnished as of August 5, 1996.
<TABLE>
<CAPTION>
Common Stock Series A Preferred Stock
------------------------------- -------------------------------
Amount and Amount and
Nature of Percent Nature of Percent
Name and Address of Beneficial of Beneficial of
Beneficial Owner Ownership (1) Class Ownership (1) Class
- ------------------------------------------------------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Ivaco Inc. (2) .......................................... 2,018,650 (3) 49.77% 366,667 88.00%
Place Mercantile
770 rue Sherbrooke ouest
Montreal, Quebec,
Canada H3A 1G1
Donald F. Gunning ....................................... 150 *
A. William Hager ........................................ 500 *
J. W. Hebenstreit ....................................... 10,000 * 21,667 5.20%
E. Lawrence Keyes, ...................................... 150 *
Jr Michael H. Lane ...................................... 10,600 * 5,000 1.20%
John B. McKinney ........................................ 40,000 * 13,333 3.20%
H. Bruce Nethington ..................................... 1,000 * 5,000 1.20%
Robert H. Quenon ........................................ 300 *
Lawrence K. Roos ........................................ 3,000 *
Larry J. Schnurbusch .................................... 7,730 * 5,000 1.20%
Edwin J. Spiegel, Jr. ................................... 350 *
Lester Varn, Jr. ........................................ 300 *
George H. Walker III .................................... 2,000 (4) *
All 13 Directors and Executive Officers as a Group ...... 76,080 1.88% 50,000 12.00%
- ----------
<FN>
* Represents less than one percent of the outstanding Common Stock.
(1) Beneficial ownership of shares, as determined in accordance with applicable Securities and Exchange Commission rules, includes
shares as to which a person directly or indirectly has or shares voting power and/or investment power. Unless otherwise
indicated, each holder has sole voting and investment power over the shares reported.
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Preliminary Copy -- Subject To Change
(2) Ivaco has the sole power to vote or direct the voting of and to dispose of or direct the disposition of all shares of Common
Stock of the Company which it beneficially owns. In the Ivaco Agreement, the Company granted Ivaco the right to cause the
Company to (i) use its best efforts to cause the Board of Directors to nominate four persons designated by Ivaco to serve on
the Company's Board of Directors (ii) to use its best efforts to cause the stockholders of the Company to elect such
Directors, and (iii) not increase the size of the Board of Directors to greater than nine, in each case, so long as Ivaco, or
Ivaco together with any person with which Ivaco is acting in concert in connection with its investment in the Company, is the
beneficial owner of 40% or greater of the outstanding shares of Common Stock on a fully diluted basis.
(3) Based upon Schedule 13D forms dated August 6, 1996 filed by Ivaco.
(4) Includes 1,000 shares of Common Stock owned by Mr. Walker's wife. Mr. Walker disclaims beneficial ownership of such shares.
</TABLE>
EXECUTIVE OFFICERS
The following persons are the executive officers of the Company:
John B. McKinney (age 63) has served as President and Chief Executive
Officer of the Company since 1983.
Michael H. Lane (age 53) has served as Vice President -- Finance,
Treasurer and Secretary of the Company since 1983.
J. William Hebenstreit (age 50) has served as Vice President -- Operations
of the Company since 1983.
Larry J. Schnurbusch (age 49) has served as Vice President --
Administration since April 1993. Prior to that time, Mr. Schnurbusch served as
Director of Corporate Administration.
H. Bruce Nethington (age 54) has served as Vice President -- Human
Resources since April 1993. From January 1, 1990 to April 12, 1993, Mr.
Nethington served as Director -- Industrial Relations. Prior to that time, he
served as Director -- Human Resources.
All of the executive officers of the Company were elected for terms
expiring at the Directors meeting immediately following the annual meeting of
stockholders in 1996 or until their successors have been duly elected and
qualified, or until earlier removed by action of the Board of Directors.
EXECUTIVE COMPENSATION
The following table presents summary information concerning compensation
for services rendered to the Company during each of the last three fiscal years
by those persons who at December 31, 1995 were the Chief Executive Officer and
the other executive officers.
20
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<TABLE>
Summary Compensation Table
<CAPTION>
Annual Compensation
--------------------------------------------------------------------
Other Annual All Other
Name and Bonus Compensation Compensation
Principal Position Year Salary($) ($)(1) ($)(2) ($)(3)
- -------------------------------------------------------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
John B. McKinney ............................................. 1995 $ 364,500 $ -- $ 562,528 $ 36,848
President and Chief Executive Officer 1994 339,372 277,020 168,431 44,076
1993 309,246 198,600 121,958 29,519
J. W. Hebenstreit ............................................ 1995 $ 243,504 $ -- $ 312,005 $ 12,915
Vice President - Operations 1994 226,629 138,797 66,185 24,125
1993 206,502 99,450 81,164 15,761
Michael H. Lane .............................................. 1995 $ 243,504 $ -- $ 339,222 $ 14,964
Vice President - Finance, Treasurer and Secretary 1994 226,629 138,797 129,254 26,293
1993 206,502 99,450 83,595 17,167
Larry J. Schnurbusch ......................................... 1995 $ 178,008 $ -- $ 125,771 $ 6,943
Vice President - Administration 1994 165,813 94,700 48,408 15,044
1993 140,134 60,374 -- 7,743
H. Bruce Nethington .......................................... 1995 $ 167,508 $ -- $ 145,307 $ 8,921
Vice President - Human Resources 1994 156,024 89,114 45,703 17,347
1993 117,789 51,323 -- 7,228
- ----------
<FN>
(1) The amounts represent annual bonuses earned under the Company's Discretionary Incentive Compensation Plan. No bonuses were
earned under the Plan for 1995.
(2) Amounts reported as Other Annual Compensation consist primarily of income tax payments related to Company contributions to the
Key Employee Retirement Plan. Such contributions represent taxable income to Plan participants and, under the terms of the Plan,
the Company is obligated to reimburse participants for the payment of such taxes. Certain perquisites which the executive
officers received in 1993, 1994 and 1995, the aggregate amount of which did not exceed the lesser of $50,000 or 10% of any such
officer's salary and bonus, are not included in Other Annual Compensation.
(3) The amounts shown for 1995 represent life insurance premiums paid by the Company on behalf of the executive officers.
</TABLE>
21
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Preliminary Copy -- Subject To Change
The Company did not grant any stock appreciation rights or stock options
in 1995. The following table presents certain information concerning stock
appreciation rights exercised by the Company's executive officers during 1995:
<TABLE>
AGGREGATED SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END SAR VALUES
<CAPTION>
Number Value of
of Unexercised
Unexercised In-the Money
SARs at SARs at Fiscal
Fiscal Year-End(#) Year-End($)(2)
-------------------- --------------------
Number of Shares
Underlying Value Exercisable/ Exercisable/
Name SARs Exercised(#) Realized($)(1) Unexercisable Unexercisable
- -------------------------------------------- -------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
John B. McKinney.......................... -- -- 7,500/ -- -- / --
J. W. Hebenstreit......................... -- -- 2,000/ -- -- / --
Michael H. Lane........................... -- -- 2,000/ -- -- / --
Larry J. Schnurbusch...................... -- -- 9,900/ -- -- / --
H. Bruce Nethington....................... -- -- 1,500/ -- -- / --
- ----------
<FN>
(1) Cash payments received equal to the number of shares subject to the SAR times the difference between the closing price of the
Common Stock on the last trading day preceding the date of exercise and the base price. The base price equals the closing price
of the Common Stock on the last trading day preceding the date of grant.
(2) Based on the closing price of the Common Stock on December 31, 1995.
</TABLE>
BENEFIT PLANS
The Company maintains the Laclede Salaried Employees' Pension Plan (the
"Pension Plan"), a defined benefit plan which provides a monthly pension to
salaried employees of the Company (excluding employees covered by a collective
bargaining agreement) who retire or terminate with vested rights in accordance
with the provisions of the Pension Plan. Benefits are based upon years of
credited service and covered compensation, offset by the participant's Primary
Insurance Amount under the Federal Social Security Act. The Company also
maintains the Key Employee Retirement Plan (the "Supplement Plan"), the purpose
of which is to provide additional retirement income to certain key employees of
the Company, including certain of the executive officers. Under the Supplement
Plan, as amended, the eligible employees are guaranteed that the total amount
received by them each year during retirement from the Pension Plan, Federal
Social Security and the Supplement Plan will be equal to 60% of the average of
their highest aggregate three consecutive calendar year salary and bonus during
their last 10 years of employment with the Company ("Salary Level"), assuming
retirement at age 60. The Plan was amended in May 1995 to provide for retirement
benefits equal to 70% of the applicable Salary Level, assuming retirement at age
60. If the employee retires prior to age 60, the applicable percentage of the
Salary Level will be reduced 2.5% for each year of retirement age below age 60.
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The estimated aggregate annual benefits payable pursuant to the Pension
Plan, the Supplement Plan and Federal Social Security at various assumed salary
levels and retirement ages are summarized as follows:
Estimated Annual Retirement
Benefit at the Respective Ages Listed
--------------------------------------------------
Salary Level* 50 53 56 60
- ---------------------------- --------- --------- --------- -----------
$175,000................... $ 91,875 $ 101,063 $ 110,250 $ 122,500
$225,000................... $ 118,125 $ 129,938 $ 141,750 $ 157,500
$275,000................... $ 144,375 $ 158,813 $ 173,250 $ 192,500
$325,000................... $ 170,625 $ 187,688 $ 204,750 $ 227,500
$375,000................... $ 196,875 $ 216,563 $ 236,250 $ 262,500
$425,000................... $ 223,125 $ 245,438 $ 267,750 $ 297,500
$475,000................... $ 249,375 $ 274,313 $ 299,250 $ 332,500
$525,000................... $ 275,625 $ 303,188 $ 330,750 $ 367,500
$575,000................... $ 301,875 $ 332,063 $ 362,250 $ 402,500
$625,000................... $ 328,125 $ 360,938 $ 393,750 $ 437,500
$675,000................... $ 354,375 $ 389,813 $ 425,250 $ 472,500
- ---------------
* Salary level assumes the average of the highest aggregate three consecutive
calendar year earnings for eligible executive officers during the last ten
years of their employment.
Messrs. McKinney, Hebenstreit, Lane, Schnurbusch and Nethington have
accumulated [39, 28, 23, 27 and 28] credited years of service, respectively. The
current compensation level for each of the eligible executive officers in the
Supplement Plan is: Mr. McKinney, $547,243; Mr. Hebenstreit, $326,193; Mr. Lane,
$326,193; Mr. Schnurbusch, $221,627; and Mr. Nethington, $193,919.
The Company also maintains the Laclede Steel Company Salaried Employees'
Profit Sharing Plan (the "Profit Sharing Plan") for the purposes of encouraging
eligible employees to develop initiative and productivity and providing the
employees with additional retirement benefits. The Profit Sharing Plan is
intended to qualify as a cash deferred compensation arrangement under Section
401(k) of the Internal Revenue Code. Salaried employees of the Company are
eligible to participate in the Profit Sharing Plan.
EMPLOYMENT CONTRACTS
Messrs. McKinney, Hebenstreit, Lane, Schnurbusch and Nethington each has
an employment agreement with the Company (the "Employment Agreements").
Effective October 17, 1994, Mr. McKinney's Employment Agreement provides for a
23
<PAGE>
Preliminary Copy -- Subject To Change
minimum salary of $364,500 for his services as President and Chief Executive
Officer, while the Employment Agreements of Messrs. Hebenstreit and Lane provide
for a minimum salary of $243,500 for their services, respectively, as Vice
President -- Operations and Vice President -- Finance, Treasurer and Secretary.
Also effective October 17, 1994, Mr. Schnurbusch's Employment Agreement provides
for a minimum salary of $178,000 for his services as Vice President --
Administration and Mr. Nethington's Employment Agreement provides for a minimum
salary of $167,500 for his services as Vice President -- Human Resources. The
Employment Agreements continue through August 2, 1999. The Employment Agreements
were amended as of July 30, 1996 in connection with the purchase by Ivaco and
the Management Purchasers of certain shares of Series A Preferred Stock to
eliminate previously existing payments to the Management Purchasers in the event
of a change of control of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors administers the
Company's executive compensation program, which has been developed and
implemented by management under the supervision of the Committee to seek to
enhance the profitability and long-term viability of the Company. The executive
compensation program combines an annual salary with various incentive
opportunities designed to align the financial interests of the Company's
executive officers with those of its stockholders. The Committee has
consistently maintained the Company's philosophy that the compensation of
executive officers should be directly and materially linked to the Company's
operating performance, taking into account conditions in the steel industry and
the economy as a whole, as well as individual performance. The executive
incentive compensation plan was originally adopted in 1981, and its basic
structure is based on the recommendations of an independent management
consulting firm.
To achieve the result recommended by the independent study, as well as to
recognize that executives do not have a significant opportunity to benefit from
increases in the value of Company stock, executive compensation is weighted
towards bonuses paid on the basis of the Company's financial performance.
Historically, in years in which the Company has had above average success in
relation to the steel industry, the executive officers have been awarded higher
bonuses. In less profitable years, executive officers' pay has been negatively
impacted. In 1995, for example, because the Company did not achieve the
financial performance goals, no incentive compensation awards were made to
executive officers.
In evaluating the performance and setting the annual compensation for 1995
of the Company's Chief Executive Officer, as well as the other executive
officers, the Committee considered productivity gains which contributed to
improving financial performance during the course of 1994, as well as the
continued progress of the Company's restructuring program. The Committee
continues to believe that senior management of the Company is dedicated to
achieving improvements in long-term financial performance and that the
compensation programs the Committee has implemented and administered are
contributing to the achievement of this goal.
Compensation for each of the executive officers is comprised of a base
salary and both annual and, to a lesser extent, long-term incentive
compensation. Based on the Committee's review in 1994 of an independent
24
<PAGE>
Preliminary Copy -- Subject To Change
compensation survey, the Committee believes the salary and incentive
compensation established for each of the executive officers is competitive with
that paid to senior managers with comparable qualifications, experience and
responsibilities. The survey used to review compensation included 231
manufacturing companies in 13 manufacturing subcategories, including steel.
The annual salary level for each executive officer, including the Chief
Executive Officer, is reviewed and approved by the Committee in each fiscal
year. In its 1994 review, the Committee compared the Company's executive
salaries with those of survey companies with sales volume similar to the
Company's. Salary increases are also based on the Committee's judgments as to
the past and expected future contributions of the individual senior executives,
including perception of performance and level of responsibility assumed. The
Committee's performance judgments are subjective and are not based on specific
criteria. Because the salaries of Mr. McKinney and the other executive officers
were reviewed and adjusted in late 1994, the Committee determined that salaries
for 1995 would remain at the same level.
Annual incentive compensation for executive officers is closely tied to
the Company's success in achieving specific financial and non-financial
performance goals as determined each year by the Committee. After the end of
each year and completion of the audit of the Company's financial statements for
that year, the Committee approves payment from the annual incentive fund under
the Company's Discretionary Incentive Compensation Plan. The Committee then
reviews with the Chief Executive Officer management's recommendation for any
awards from the incentive fund to the executive officers and determines the
amount of the specific award, if any, to each executive officer. The Committee
takes into account not only the Company's financial performance, but also
strategic goals and other criteria that are essential components of evaluating
management performance. Company performance is measured by earnings before
income taxes as a percent of sales (as adjusted for items which are not
considered to reflect current operating results, if applicable). The specific
strategic goals are not included herein because the Committee believes they
represent confidential business information, the disclosure of which could
adversely affect the Company. Because the Company did not meet the financial
performance goals for 1995, no bonuses were awarded to Mr. McKinney or the other
executive officers for 1995.
Cash bonus awards under the Discretionary Incentive Compensation Plan have
represented the primary means of incentive compensation for executive officers
in recent years. The Company does not maintain a stock option plan and its Stock
Bonus Plan has not been in effect since 1991. In addition, although the
Company's Stock Appreciation Rights Plan has been in place since 1989, few stock
appreciation rights are currently available for grant under the Plan and none
were granted in 1993, 1994 or 1995.
The Board approved the executive officer compensation recommended by the
Committee for 1995.
25
<PAGE>
Preliminary Copy -- Subject To Change
As part of the Omnibus Budget Reconciliation Act passed by Congress in
1993, a limit was created for the deductibility of compensation paid to
executive officers. The Company's Key Employee Retirement Plan (the "Supplement
Plan"), first put into place by the Board prior to the adoption of Section
162(m), requires payments which may be includable in determining compensation
for the purposes of Section 162(m). The Supplement Plan is amended from time to
time in order to ensure that total pension benefits of the Company's key
employees are consistent with retirement benefits in the industry. Should the
Supplement Plan cause compensation of any key employee, calculated pursuant to
Section 162(m), to exceed the deductible limit, the Board of Directors intends
to honor the Company's contractual obligations to fund such Plan. The Board does
not expect any such non-deductible amount to have any material effect on taxes
owed by the Company.
COMPENSATION COMMITTEE
Edwin J. Spiegel, Jr., Chairman
Donald F. Gunning
George H. Walker III
The foregoing Compensation Committee Report shall not be deemed
incorporated by reference by any general statement of incorporation by reference
in any filing made under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, and shall not otherwise be deemed
filed under such Acts.
The Compensation Committee was comprised of the following members during
1995: Edwin J. Spiegel, Jr., Chairman, Donald F. Gunning and George H. Walker
III. No member of the Compensation Committee is a current or former officer or
employee of the Company or any of its subsidiaries.
COMPARISON OF CUMULATIVE TOTAL RETURN
The following graph compares the cumulative total stockholder return on
the Company's Common Stock, based on the market price of the Common Stock and
assuming reinvestment of dividends, with the cumulative total return of
companies on the Russell 2000 Index and Standard & Poor's Steel Index. The
indices are included for comparison purposes only and do not necessarily reflect
management's opinion that such indices are appropriate measures of the relative
performance of the Company's Common Stock. The graph is not intended to forecast
or be indicative of the future performance of the Company's Common Stock.
The performance graph shall not be deemed incorporated by reference by any
general statement of incorporation by reference in any filing made under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, and shall not otherwise be deemed filed under such Acts.
[PERFORMANCE GRAPH]
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
Russell 2000 100 144 167 196 189 239
S & P Steel Index 100 121 156 204 196 180
Laclede Steel Company 100 108 203 183 123 94
Assumes $100 invested on December 31, 1990 in Laclede Steel Company Common
Stock, the Russell 2000 Index and the Standard & Poor's Steel Index.
STOCKHOLDER PROPOSALS
If stockholder proposals are to be considered for inclusion in the
Company's proxy statement for a forthcoming annual meeting of the Company's
stockholders, such proposals must be submitted on a timely basis and the
proposals and proponents thereof otherwise must meet the requirements
established by the Commission for stockholder proposals. Proposals for the 1997
annual stockholders' meeting will not be deemed to be timely submitted unless
they are received by the Company at its principal executive office no later than
December 6, 1996. Such stockholder proposals, together with any supporting
statements, should be directed to the Secretary of the Company.
DISSENTER'S RIGHTS
The stockholders of the Company have no Dissenter's Rights of Appraisal
under Section 262 of the Delaware General Corporation Law or under the Company's
Certificate of Incorporation with regard to the items set forth in the Proxy
Statement.
27
<PAGE>
Preliminary Copy -- Subject To Change
GENERAL
No business other than as above specified will be presented at the
Meeting.
By order of the Board of Directors.
MICHAEL H. LANE
Secretary
August __, 1996
28
<PAGE>
EXHIBIT A
PROPOSED AMENDMENT TO THE ARTICLES OF INCORPORATION
RESOLVED, that the first paragraph of ARTICLE IV of the Company's
Certificate of Incorporation, as heretofore amended, shall be deleted in its
entirety and the following paragraph substituted in lieu thereof:
"ARTICLE IV
The total number of shares of capital stock which the Corporation shall
have authority to issue is Twenty Seven Million (27,000,000), of which
Twenty Five Million (25,000,000) shares shall be Common Stock of the par
value of One Cent ($0.01) each and of which Two Million (2,000,000) shares
shall be Preferred Stock without par value."
<PAGE>
ANNEX A
FORM OF PROXY
PROXY
LACLEDE STEEL COMPANY
SPECIAL MEETING OF STOCKHOLDERS SEPTEMBER __, 1996
This proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints John B. McKinney and Michael H. Lane,
and each of them, with full power to act alone, the true and lawful
attorneys-in-fact and proxies of the undersigned, with full power of
substitution and revocation, to vote all shares of common stock of Laclede Steel
Company, a Delaware corporation, which the undersigned is entitled to vote at
the Special Meeting of Stockholders of the Company to be held at the
Metropolitan Square Building, 40th Floor, 211 North Broadway, St. Louis,
Missouri, on __________________ , September __, 1996, at 9:00 a.m., Central
Daylight Time, and at any adjournments thereof, with all powers the undersigned
would possess if personally present.
ITEM 1. Approving the amendment to the Certificate of Incorporation of the
Company to provide for a reduction of the par value per share of the
Common Stock from $13.33 per share to $0.01 per share;
/ / FOR / / AGAINST / / ABSTAIN
ITEM 2. Approving the amendment to the Certificate of Incorporation of the
Company to provide for an increase in authorized Common Stock from
5,000,000 shares to 25,000,000 shares;
/ / FOR / / AGAINST / / ABSTAIN
ITEM 3. Approving the recapitalization of the Company's Series A Preferred
Stock, no par value per share (the "Series A Preferred Stock") into
convertible preferred stock, effective upon the amendment of the
Company's Certificate of Incorporation provided for in Item 1 and
Item 2; and
/ / FOR / / AGAINST / / ABSTAIN
ITEM 4. Approving the issuance and sale of up to 83,333 shares of Series A
Preferred Stock to Ivaco Inc. ("Ivaco") pursuant to Ivaco's standby
commitment to purchase shares of Series A Preferred Stock in the
Company's proposed Rights Offering.
/ / FOR / / AGAINST / / ABSTAIN
THIS PROXY WILL BE VOTED AS DIRECTED HEREIN BY THE UNDERSIGNED
STOCKHOLDERS. IF NO DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED "FOR"
PROPOSALS 1,2,3 AND 4.
--------------------------------------------------
IF YOU PLAN TO ATTEND THE SPECIAL MEETING OF STOCKHOLDERS, PLEASE
CHECK THIS BOX / /
Signature __________________ Date __________, 1996
Signature __________________ Date __________, 1996
Please sign name or names exactly as
printed hereon. If signing as a
representative, please include capacity.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
