SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant (X) Filed by a Party other than the Registrant [ ] Check
the appropriate box: [ ] Preliminary Proxy Statement (X) Definitive Proxy
Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant
to subsection 240.14a-11(c)
or subsection 240.14a-12
BIRMINGHAM STEEL CORPORATION
(Name of Registrant as Specified in Its Charter)
BIRMINGHAM STEEL CORPORATION
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
(X) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
( ) $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:
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: footnote 1
4) Proposed maximum aggregate value of transaction:
( ) 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:
- --------
footnote 1 Set forth the amount on which the filing fee is calculated and state
how it was determined.
BIRMINGHAM STEEL CORPORATION
September 13, 1996
Dear Stockholder:
You are invited to attend the Annual Meeting of Stockholders of your
Company, which will be held on Tuesday, October 15, 1996 at 10:00 A.M., local
time, at The Peabody Memphis, 149 Union Avenue, Memphis, Tennessee.
The formal notice of the meeting and the proxy statement appear on the
following pages and describe the matters to be acted upon. Time will be provided
during the meeting for discussion and you will have an opportunity to ask
questions about your Company.
Whether or not you plan to attend the meeting in person, it is
important that your shares be represented and voted. After reading the enclosed
notice of the meeting and proxy statement, please sign, date and return the
enclosed proxy at your earliest convenience. Return of the signed and dated
proxy card will not prevent you from voting in person at the meeting should you
later decide to do so.
Sincerely,
Robert A. Garvey
Chairman of the Board and
Chief Executive Officer
BIRMINGHAM STEEL CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held October 15, 1996
The Annual Meeting of Stockholders of Birmingham Steel Corporation (the
"Company") will be held at The Peabody Memphis, 149 Union Avenue, Memphis,
Tennessee on Tuesday, October 15, 1996, at 10:00 A.M., local time, for the
following purposes:
(1) To elect nine directors each to serve until the next Annual
Meeting of Stockholders and until his successor has been elected
and qualified;
(2) To approve the 1996 Director Stock Option Plan;
(3) To approve the 1997 Chief Executive Officer Incentive
Compensation Plan;
(4) To approve and ratify the selection of Ernst & Young LLP as the
independent auditors for the Company and its subsidiaries for the
fiscal year ending June 30, 1997; and
(5) To transact such other business as may properly be brought before
the meeting or any adjournment or postponement thereof.
Only stockholders of record at the close of business on August 29, 1996
are entitled to notice of and to vote at the meeting or any adjournments
thereof.
Please sign and date the enclosed proxy and return it promptly in the
enclosed reply envelope. If you are able to attend the meeting, you may, if you
wish, revoke the proxy and vote personally on all matters brought before the
meeting.
By Order of the Board of Directors,
Catherine W. Pecher
Vice President and Secretary
Birmingham, Alabama
September 13, 1996
BIRMINGHAM STEEL CORPORATION
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Birmingham Steel Corporation, a Delaware
corporation (the "Company"), to be voted at the Annual Meeting of Stockholders
to be held at the time and place and for the purposes set forth in the
accompanying Notice of Annual Meeting.
All proxies in the enclosed form that are properly executed and
received by the Company prior to or at the Annual Meeting and not revoked, will
be voted at the Annual Meeting or any adjournments thereof in accordance with
the instructions thereon, or, if no instructions are made, will be voted FOR
approval of proposals 1, 2, 3 and 4 set forth in the Notice of Annual Meeting.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of the Company, at or before the taking of the vote at the
Annual Meeting, a written notice of revocation bearing a later date than the
proxy, (ii) duly executing a subsequent proxy relating to the same shares and
delivering it to the Secretary of the Company before the Annual Meeting, or
(iii) attending the Annual Meeting and voting in person (although attendance at
the Annual Meeting will not in and of itself constitute a revocation of a
proxy). Any written notice revoking a proxy should be sent to Birmingham Steel
Corporation, 1000 Urban Center Drive, Suite 300, Birmingham, Alabama 35242,
Attention: Catherine W. Pecher, Secretary, or hand delivered to the Secretary at
or before the taking of the vote at the Annual Meeting. Abstentions and broker
non-votes will not be counted as votes either in favor of or against the matter
with respect to which the abstention or broker non-vote relates; however, with
respect to any proposal other than the election of directors, abstentions and
broker non-votes would have the effect of a vote against the proposal.
The mailing address of the principal executive offices of the Company
is 1000 Urban Center Drive, Suite 300, Birmingham, Alabama 35242. This Proxy
Statement and the accompanying Notice of Annual Meeting and Proxy Card are being
mailed to stockholders on or about September 13, 1996.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The record date for determination of stockholders entitled to receive
notice of and to vote at the Annual Meeting is August 29, 1996. At the close of
business on August 15, 1996, 28,618,682 shares of common stock, par value $.01
per share, of the Company (the "Common Stock") were outstanding and entitled to
vote at the Annual Meeting. Each share of Common Stock is entitled to one vote
with respect to each matter to be voted on at the Annual Meeting.
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock, as of August 15, 1996, by (i) persons
known to the Company to be the beneficial owners of more than 5% of the
Company's Common Stock, (ii) each of the Company's directors and nominees for
director, (iii) each executive officer included in the Summary Compensation
Table, and (iv) all directors and executive officers of the Company as a group.
Unless otherwise noted in the footnotes to the table, the persons named in the
table have sole voting and investment power with respect to all outstanding
shares of Common Stock shown as beneficially owned by them.
Name of
Beneficial Owner or Number of Shares
Number of Persons Beneficially Percent
in Group Owned of Class
The Prudential Insurance 2,860,155 (1) 10.0%
Company of America
Brinson Partners, Inc., et al 2,061,000 (2) 7.2%
American Express 1,472,100 (3) 5.1%
Company, et al
James A. Todd, Jr. 438,261 (4) 1.5%
Robert A. Garvey 85,539 (5) *
Thomas N. Tyrrell 59,797 (6) *
Paul H. Ekberg 27,870 (7) *
William R. Lucas, Jr. 23,168 (8) *
John M. Casey 20,138 (9) *
C. Stephen Clegg 15,555 (10) *
George A. Stinson 13,150 *
Reginald H. Jones 11,872 *
E. Mandell de Windt 9,202 *
E. Bradley Jones 9,000 *
Harry Holiday, Jr. 7,500 *
T. Evans Wyckoff 5,500 *
William J. Cabaniss, Jr. 4,616 *
Directors and executive 771,000 (11) 2.7%
officers as a group
(16 persons)
- --------------------
* Less than 1%.
(1) This information was taken from a Schedule 13G/A filed by The Prudential
Insurance Company of America on February 9, 1996 reflecting information as
of December 31, 1995. The amount shown includes sole voting power with
respect to 3,750 shares, shared voting power with respect to 2,851,005
shares, sole dispositive power with respect to 3,750 shares and shared
dispositive power with respect to 2,856,405 shares.
(2) This information was taken from a Schedule 13G/A filed by Brinson Partners,
Inc. and certain related parties, including Brinson Trust Company, Brinson
Holdings, Inc., SBC Holding (USA), Inc. and Swiss Bank Corporation, on
February 14, 1996 reflecting information as of December 31, 1995. The
amount shown represents shared voting and dispositive powers by the
reporting persons.
(3) This information was taken from a Schedule 13G filed by American Express
Company and American Express Financial Corporation on February 14, 1996
reflecting information as of December 31, 1995. The amount shown includes
shared voting power with respect to 472,100 shares and shared
dispositive power with respect to 1,472,100 shares by the reporting
persons.
(4) Includes 17,948 shares held in the Company's 401(k) Plan, 20,601 shares of
Restricted Stock issued under the 1995 Stock Accumulation Plan, and 45,824
shares owned jointly with Mr. Todd's spouse. Also includes 74,549 shares
owned by Mr. Todd's spouse.
(5) Includes 3,599 shares of Restricted Stock issued under the 1995 Stock
Accumulation Plan, 40,000 shares of Restricted Stock awarded under the
Management Incentive Plan and 869 shares held in the Company's 401(k) Plan.
(6) Includes 6,000 shares of Restricted Stock awarded under the Management
Incentive Plan, 5,377 shares of Restricted Stock issued under the 1995
Stock Accumulation Plan, 12,000 shares subject to stock options, and an
aggregate of 656 shares owned by two of Mr. Tyrrell's children.
(7) Includes 3,721 shares held in the Company's 401(k) Plan and 1,649 shares
of Restricted Stock issued under the 1995 Stock Accumulation Plan.
(8) Includes 6,000 shares of Restricted Stock awarded under the Management
Incentive Plan, 436 shares held in the Company's 401(k) Plan, and 1,232
shares of Restricted Stock issued under the 1995 Stock Accumulation Plan.
Also includes 500 shares owned by Mr. Lucas' spouse and 12,000 shares
subject to stock options.
(9) Includes 3,750 shares of Restricted Stock awarded under the Management
Incentive Plan, 12,000 shares subject to stock options, and 3,138 shares
issued under the 1995 Stock Accumulation Plan.
(10) Includes 9,550 shares held in the Frakes-Clegg Family 1984 Trust under the
trusteeship of Robert W. Neiman. Mr. Clegg and the trustee may be deemed
to share voting and investment powers with respect to these shares.
(11)Includes an aggregate of 58,000 shares subject to stock options held by
certain officers of the Company, an aggregate of 22,974 shares held in the
Company's 401(k) Plan, an aggregate of 63,250 shares of Restricted Stock
awarded under the Management Incentive Plan, and an aggregate of 40,643
shares of Restricted Stock issued under the 1995 Stock Accumulation Plan.
Each of the individuals included in the table above intends to vote in
favor of proposals 1, 2 , 3 and 4 set forth in the Notice of Annual Meeting, and
such individuals beneficially own approximately 2.7% of the Company's Common
Stock.
The Company is not aware of any arrangement, including any pledge of
securities of the Company, which at a subsequent date could result in a change
of control of the Company.
AGENDA ITEM ONE
ELECTION OF DIRECTORS
Nine directors are to be elected at the Annual Meeting, each to hold
office until the next Annual Meeting and until his successor has been duly
elected and qualified. Proxies received from stockholders, unless directed
otherwise, will be voted FOR the election of the following nominees: Robert A.
Garvey, E. Mandell de Windt, C. Stephen Clegg, George A. Stinson, E. Bradley
Jones, Harry Holiday, Jr., Reginald H. Jones, William J. Cabaniss, Jr. and T.
Evans Wyckoff. If any nominee is unable to stand for election, the persons named
in the proxy will vote the same for a substitute nominee. All of the nominees
are currently directors of the Company. The Company is not aware that any
nominee is or will be unable to stand for reelection. Directors shall be elected
by a plurality of the votes of the shares present in person or represented by
proxy at the meeting and entitled to vote on the election of directors.
James A. Todd, Jr. and Paul H. Ekberg retired from the Company after
fiscal year end and are not standing for reelection to the Board of Directors.
Thomas N. Tyrrell resigned from the Company in August 1996 and therefore is not
standing for reelection to the Board of Directors.
In August 1993, the Board of Directors approved a mandatory retirement
policy for its members, pursuant to which any person serving as a director of
the Company who attains age 75 shall retire from the Board of Directors upon the
expiration of his or her term of office at the next succeeding annual meeting of
stockholders; provided, however, that each incumbent director of the Company
serving at the date of adoption of the new policy will not be subject to
mandatory retirement, and may continue to serve as a director notwithstanding
the attainment of age 75.
Set forth below is the name, age, position with the Company, present
principal occupation or employment and five-year employment history of each of
the nominees for director of the Company.
<TABLE>
<CAPTION>
Name and Year First
Became Director Business Experience Age
<S> <C> <C>
Robert A. Garvey Chairman of the Board and Chief Executive Officer of the 58
1996 Company since January 5, 1996; President of North Star Steel
Co. from 1984 to 1996.
E. Mandell de Windt Chairman of the Executive Committee of the Board of Directors 75
1985 of the Company since July 1991; Chairman of the Board of the
Company from January 1985 to July 1991; Retired;
Chairman of the Board and Chief Executive
Officer of Eaton Corporation, a diversified
manufacturing concern, from 1969 to April 1986;
director of Dal-Tile International Inc.
C. Stephen Clegg President and Chief Executive Officer of Clegg Industries, Inc., 46
1985 a company that arranges business acquisitions and renders
management services to the acquired businesses,
since September 1988; Managing Director of AEA
Investors Inc., a private investment company,
for more than five years prior to September
1988; Chairman of the Board and Chief Executive
Officer of Globe Building Materials, Inc.,
Midwest Spring Manufacturing Company, and
Diamond Home Services; director of Ravens
Metals, Inc.
George A. Stinson Retired Attorney and of counsel to law firm of Thorp, Reed & 81
1985 Armstrong, Washington, D.C., from 1981 to 1985; Chairman of
National Steel Corporation from 1965 to 1981;
director of Diamond Home Services.
E. Bradley Jones Retired; Chairman of the Board and Chief Executive Officer of 68
1988 LTV Steel Company from June 1984 to December 1984;
Chairman and Chief Executive Officer of Republic
Steel Corporation (merged with The LTV
Corporation in June 1984) from July 1982 to June
1984; director of TRW Inc., ClevelandCliffs,
Inc., RPM, Inc. and Consolidated Rail
Corporation; Trustee, Fidelity Funds and First
Union Real Estate Equity and Mortgage
Investments.
Harry Holiday, Jr. Retired; Chairman of the Board and Chief Executive Officer of 73
1991 ARMCO, Inc. from April 1982 to January 1986.
Reginald H. Jones Retired; Chairman of the Board and Chief Executive Officer of 79
1991 General Electric Company from December 1972 to April 1981;
director of ASA Limited and CasTech Aluminum Group, Inc.
William J. Cabaniss, Jr. President of Precision Grinding, Inc., a metal machining 58
1993 company serving metal machining industries in the Southeast,
since 1971; director of Protective Life Corporation.
T. Evans Wyckoff Formerly Chairman of the Board of Aero-Go, Inc., a company 71
1993 which manufactures air cushion devices, from 1969 to 1993;
President of Wyco Corporation, a private
investment company, since 1983; and President of
Arvee Orchards, Inc. since 1991.
</TABLE>
The Board of Directors held thirteen meetings, including four actions
by unanimous written consent, during the fiscal year ended June 30, 1996. During
fiscal 1996 each incumbent director attended at least 80% of the aggregate
number of meetings of the Board and of committees of the Board on which he
served.
The Company has Audit, Executive, Nominating, Environmental Affairs &
Safety, Finance and Compensation and Stock Option Committees of the Board of
Directors.
Messrs. Clegg, Stinson, Cabaniss, Holiday and Wyckoff are members of
the Audit Committee. The principal functions of the Audit Committee are to make
recommendations to the Board as to the engagement of independent auditors, to
review the scope of the audit and audit fees, to discuss the results of the
audit with the independent auditors and determine what action, if any, is
required with respect to the Company's internal controls, and to make a general
review of developments and financial reporting and accounting. The Audit
Committee held four meetings during fiscal 1996.
Messrs. de Windt, Reginald Jones, Garvey and Clegg are members of the
Executive Committee. The Executive Committee exercises all the powers of the
Board of Directors during the intervals between meetings of the Board of
Directors, with certain limitations set forth in the Company's Bylaws. The
Executive Committee held eight meetings during fiscal 1996.
Messrs. de Windt, Clegg, Bradley Jones and Stinson are members of the
Nominating Committee. The Nominating Committee makes recommendations to the
Board of Directors respecting nominations for director prior to each annual
meeting of stockholders. The Nominating Committee held no meetings during fiscal
1996.
Messrs. Holiday, Cabaniss and Wyckoff are members of the Environmental
Affairs & Safety Committee. The Environmental Affairs & Safety Committee
monitors environmental and safety issues impacting the Company's operations and
reviews and evaluates environmental compliance and safety performances and
processes at the Company's facilities. The Environmental Affairs & Safety
Committee held two meetings during fiscal 1996.
Messrs. Reginald Jones, Garvey and Bradley Jones are members of the
Finance Committee. The Finance Committee reviews and makes recommendations with
respect to the Company's financial policies, including cash flow, borrowing and
dividend policy and the financial terms of acquisitions and dispositions.
Acting with the Executive Committee, it reviews and makes recommendations on
significant capital investment proposals. The Finance Committee held no meetings
during fiscal 1996.
Messrs. Bradley Jones, Reginald Jones, de Windt and Stinson are members
of the Compensation and Stock Option Committee. The Compensation and Stock
Option Committee reviews and approves employment agreements, annual salaries,
bonuses, profit participation and other compensation of employees of the Company
and its subsidiaries. This Committee also reviews the executive officers' and
employees' performances and administers and makes awards under the Company's
Stock Option Plan, the Management Incentive Plan and the Stock Accumulation
Plan. The Compensation and Stock Option Committee held six meetings during
fiscal 1996.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
ELECTION OF THE NOMINEES NAMED IN THIS PROXY STATEMENT.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, certain officers and persons who own more than 10% of the
outstanding Common Stock of the Company, to file with the Securities and
Exchange Commission reports of changes in ownership of the Common Stock of the
Company held by such persons. Officers, directors and greater than 10%
stockholders are also required to furnish the Company with copies of all forms
they file under this regulation. To the Company's knowledge, based solely on a
review of the copies of such reports furnished to the Company and
representations that no other reports were required, during fiscal 1996 all
Section 16(a) filing requirements applicable to its officers and directors were
satisfied.
EXECUTIVE COMPENSATION
The following table provides certain summary information for the fiscal
years ended June 30, 1996, 1995 and 1994 concerning compensation paid or accrued
by the Company to or on behalf of the Company's Chief Executive Officer and each
of the four other most highly compensated executive officers of the Company who
were serving as executive officers at the end of the last fiscal year
(hereinafter referred to as the "Named Executive Officers"). "Long-Term
Compensation" includes Restricted Stock awarded under the 1990 Management
Incentive Plan ("MIP") and Restricted Stock issued under the 1995 Stock
Accumulation Plan ("SAP"). See footnotes (2), (5) and (6) to the Summary
Compensation Table.
<TABLE>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term
Compensation
------------------------------
Awards
<CAPTION>
-----------------------------
Name Other All
and Annual Restricted Options/ Other
Principal Salary Bonus Compensation Stock SARs Compensation
Position Year ($) ($)(1) ($) ($)(2) (#) ($)(3)
- --------------------------------- -------- --------- ---------- ---------------- ------------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C><C> <C> <C>
Robert A. Garvey 1996 170,347 270,011 123,928(4) 951,916(5)(6) 100,000 4,274
Chairman of the Board and
Chief Executive Officer
(since January 5, 1996)
James A. Todd, Jr. 1996 368,113 75,000 - 84,128(6) 0 37,983
Chairman of the Board and 1995 410,342 330,015 - 312,750(6) 0 34,164
Chief Executive Officer 1994 421,746 375,000 - 0 0 27,838
(through January 5, 1996)
Thomas N. Tyrrell(7) 1996 271,133 0 - 17,497(6) 0 7,390
Executive Vice 1995 249,965 189,012 - 87,323(6) 0 8,860
President - Commercial 1994 149,916 100,000 - 382,380(5) 0 6,029
Paul H. Ekberg 1996 252,479 0 - 0 0 8,158
Vice Chairman of the Board - 1995 247,869 226,802 - 33,598(6) 0 12,658
Assistant to the Chairman 1994 227,526 150,000 - 0 0 8,438
William R. Lucas, Jr.(8) 1996 166,270 0 - 177,171(5)(6) 0 3,139
Executive Vice President -
Administration and
General Counsel
John M. Casey(9) 1996 151,740 0 - 22,478(6) 0 8,417
Executive Vice President - 1995 111,942 56,009 - 134,325(5) 0 318
Finance and Chief
Financial Officer
-----------------------
<FN>
(1) Represents cash incentive compensation accrued for the fiscal year (but
paid in the subsequent fiscal year). For fiscal 1996 and 1995, the
Named Executive Officers received shares of Restricted Stock in lieu of
a portion of their cash bonus, which is reflected in the "Restricted
Stock" column. See footnote (6) below.
(2) As of June 30, 1996, the number and value of all Restricted Stock
holdings of the Named Executive Officers, with respect to which the
restrictions have not lapsed, were as follows: 43,599 shares
($719,384) by Mr. Garvey; 20,601 shares ($339,917) by Mr. Todd; 11,377
shares ($187,721) by Mr. Tyrrell; 1,649 shares ($27,209) by Mr. Ekberg;
9,232 shares ($152,328) by Mr. Lucas; and 6,888 shares ($113,562) by
Mr. Casey. Dividends are paid on shares of Restricted Stock.
(3) The compensation reported represents Company contributions to the
401(k) Plan and premiums for split dollar and other life insurance. The
following information is provided with respect to the specific
allocation of compensation shown in this column for the Named Executive
Officers for the fiscal year ended June 30, 1996:
Split Dollar Term and
Name 401(k) Life Whole Life
Plan Insurance Insurance
Robert A. Garvey $4,144 $ 0 $ 130
James A. Todd, Jr. 5,901 8,961 23,121
Thomas N. Tyrrell 5,287 0 2,103
Paul H. Ekberg 5,076 0 3,082
William R. Lucas, Jr. 2,785 0 354
John M. Casey 7,589 0 828
(4) Includes $123,928 to reimburse Mr. Garvey for lost profit sharing
benefits from his previous employer.
(5) Restricted Stock awards under the MIP are made in the discretion of the
Compensation Committee of the Board of Directors and recipients pay only
a nominal consideration (par value) for the issuance of the Restricted
Stock. Mr. Garvey's 1996 award (50,000 shares) was made on January 5,
1996 at a per share price of $17.125; 10,000 shares vested immediately
and 40,000 shares vest over a five year period with 8,000 shares vesting
on each anniversary. Mr. Tyrrell's 1994 award (12,000 shares) was made
on March 21, 1994 at a per share price of $31.875. Mr. Casey's 1995
award (5,000 shares) was made on October 18, 1994 at a per share price of
$26.875. Mr. Lucas' 1996 award (8,000 shares) was made on August 4, 1995
at a per share price of $19.75. Mr. Tyrrell's, Mr. Casey's and Mr.
Lucas' awards vest in equal increments of one-fourth over four years.
(6) The amounts shown for fiscal 1995 and 1996 include Restricted Stock
issued to the applicable officer under the SAP in lieu of cash
compensation to which he would otherwise be entitled. Each of the Named
Executive Officers (except Mr. Todd) is required to take 10% of his bonus
in shares of Restricted Stock under the terms of the SAP, and may elect
to take up to 20% of his base compensation and 50% of his cash bonus in
shares of Restricted Stock. Shares of Restricted Stock under the SAP are
issued at a 25% discount to the market, but the amounts shown represent
the full market value of the shares issued. The shares are restricted
from transfer for a period of three years from the date of issuance. The
amount of cash compensation from both salary and bonus foregone by the
Named Executive Officers by participating in the plan was as follows:
Mr. Garvey: 1996 - $72,126; Mr. Todd: 1996 - $63,101 and 1995 - $234,567;
Mr. Tyrrell: 1996 - $13,125 and 1995 - $65,516; Mr. Ekberg: 1996 - $0 and
1995 - $25,198; Mr. Lucas: 1996 - $14,442 and 1995 - $0; and Mr. Casey:
1996 - $16,860 and 1995 - $26,557.
(7) Mr. Tyrrell joined the Company in November 1993, and resigned from the
Company on August 26, 1996.
(8) Mr. Lucas joined the Company in July 1995.
(9) Mr. Casey joined the Company in October 1994.
</FN>
</TABLE>
Stock Option Plan
The following table provides certain information concerning individual
grants of stock options under the Company's Incentive Stock Option Plan made
during the fiscal year ended June 30, 1996, to each of the Named Executive
Officers:
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants (1) Option Term
% of Total
Number of Options
Securities Granted to
Underlying Employees Exercise or
Options in Fiscal Base Price Expiration
Name Granted (#) Year ($ Per Share) Date 5%($) 10%($)
- ------------------- ----------- ------------ -------------- ------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert A. Garvey 100,000 100% 17.125 1-5-06 1,076,982 2,729,284
James A. Todd, Jr. 0 -- -- -- -- --
Thomas N. Tyrell 0 -- -- -- -- --
Paul H. Ekberg 0 -- -- -- -- --
William R. Lucas, Jr. 0 -- -- -- -- --
John M. Casey 0 -- -- -- -- --
<FN>
(1) These options vest over a five year period with one-sixth vesting on the
first three anniversary dates and the remaining stock options vesting
one-fourth over the next two anniversary dates.
</FN>
</TABLE>
The following table provides certain information concerning each
exercise of stock options under the Company's 1986 Incentive Stock Option Plan
during the fiscal year ended June 30, 1996, by each of the Named Executive
Officers and the fiscal year-end value of unexercised options held by such
persons under the Company's 1986 Stock Option Plan.
<TABLE>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
<CAPTION>
Value of
Number of Unexercised
Unexercised in the Money
Shares Acquired Value Options at Fiscal Options at Fiscal
Name on Exercise (#) Realized ($) Year-End (#) Year-End ($)(1)
<S> <C> <C> <C> <C>
Robert A. Garvey -- -- 100,000 0
James A. Todd, Jr. -- -- 0 0
Thomas N. Tyrrell -- -- 0 0
Paul H. Ekberg -- -- 0 0
William R. Lucas, Jr. -- -- 0 0
John M. Casey -- -- 0 0
- --------------------
<FN>
(1) All of the stock options were granted under the 1986 Stock Option Plan.
The fair market value of the Common Stock at June 30, 1996 was $16.50
per share. The actual value, if any, an executive may realize will
depend upon the amount by which the market price of the Company's
Common Stock exceeds the exercise price when the options are exercised.
</FN>
</TABLE>
Management Security Plan
In July 1986, the Company adopted a Management Security Plan (the
"Security Plan") to provide certain benefits to a select group of management or
highly compensated employees who contribute materially to the business of the
Company. The Security Plan is administered as an unfunded defined benefit
pension plan. The Compensation and Stock Option Committee of the Board of
Directors (the "Committee") oversees the Security Plan.
Each participant enters into a Security Plan Agreement with the
Company, pursuant to which the participant is eligible for the payment of either
a death benefit, if the participant dies prior to normal retirement, or a
retirement benefit, if the participant remains as an employee until his or her
normal retirement date. The amount of the death benefit is computed with respect
to an amount specified by the participant in his or her Agreement, which may not
exceed 100% of the participant's annual compensation ("Covered Salary"). The
amount of the retirement benefit is also specified by the participant in his or
her Agreement with the Company. The death benefit is payable in an amount equal
to 100% of the participant's Covered Salary for 12 months, and 50% of the
Covered Salary thereafter. The amount of the death benefit is payable monthly
until the participant would have reached age 65 or for 20 years, whichever is
later. The retirement benefit is payable monthly over a period of 240 months (or
20 years). The degree to which each eligible employee participates in the
Security Plan is elective with the individual participant and is conditioned
upon such participant's foregoing cash compensation which would otherwise be
available to him or her. Although the Company is not obligated to do so, the
Company has purchased key man life insurance on the lives of the participants to
fund its obligations under the Security Plan.
Effective June 1, 1988, James A. Todd, Jr. agreed with the Company to
an alternative benefit arrangement in the form of split dollar ownership of the
life insurance policy held on his life. Upon death either before or after
retirement, Mr. Todd's designated beneficiary will receive his respective share
of life insurance proceeds in lieu of the monthly death benefit payments
described above. If death occurs after retirement, the retirement payments will
cease upon death. At June 30, 1996, Mr. Todd's ownership of the net death
benefit was $1,706,924.
The Committee has approved the establishment of a trust (the "MSP
Trust") to hold the assets set aside to pay future benefits granted to
participants in the Security Plan. In the event of a change in control of the
Company or such other event as the Committee may determine, the MSP Trust will
be endowed with paid up policies for each participant which will be distributed
to such participants.
The Company's expense under the Management Security Plan with respect
to all participants as a group (including 31 persons) for the fiscal year ended
June 30, 1996 was $811,689. The Company's expense with respect to the Named
Executive Officers for the fiscal year ended June 30, 1996 was as follows: Mr.
Garvey - $79,613; Mr. Todd - $112,925; Mr. Tyrrell - $29,918; Mr. Ekberg -
$104,362; Mr. Lucas - $0; and Mr. Casey - $13,822.
The following table indicates, with respect to each Named Executive
Officer who participates in the Security Plan, the current aggregate amount of
the death benefit and the amount of the annual retirement benefit under the
Security Plan:
Aggregate Annual
Death Retirement
Name of Individual Benefit Benefit
Robert A. Garvey $2,362,500 $225,000
James A. Todd, Jr. 1,706,924 225,576
Thomas N. Tyrrell 1,575,000 150,000
Paul H. Ekberg 1,575,000 150,000
William R. Lucas, Jr. 0 0
John M. Casey 1,134,000 108,000
Director Compensation
For fiscal 1996 and pursuant to the Company's Directors' Compensation
Plan, the Company awarded each non-employee director 1,500 shares of Company
Common Stock as his annual retainer fee and paid each non-employee director
$1,000 for each meeting of the Board of Directors or committee thereof ($1,500
to the Chairman of a committee) attended by such director, plus reasonable
travel expenses. Directors who are also employees of the Company are not
separately compensated for their services as a director.
Employment Agreements
On January 5, 1996, the Company entered into an Employment Agreement
with Robert A. Garvey, Chairman of the Board and Chief Executive Officer of the
Company. See "REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In September 1994, the Company loaned to Thomas N. Tyrrell, then Vice
Chairman of the Board and Chief Administrative Officer of the Company, the
principal amount of $62,975, the purpose of which was to assist Mr. Tyrrell in
his relocation to Birmingham, Alabama. The largest amount of indebtedness
outstanding during the fiscal year ended June 30, 1996 was $62,975. The note was
payable on or before thirty (30) days after the close of the sale of certain
property owned by Mr. Tyrrell in Russell Township, Ohio. The indebtedness did
not bear interest. The principal amount of the note was paid in full by Mr.
Tyrrell in June 1996.
On January 25, 1996, the Company loaned to Robert A. Garvey, Chairman
of the Board and Chief Executive Officer of the Company, the principal amount of
$500,000, the purpose of which was to advance money owed to Mr. Garvey by his
former employer so that he could acquire Company stock during an appropriate
"trading window." The note was payable on demand and bore interest at an annual
rate of 6.2%. The principal amount of the note plus interest was paid in full by
Mr. Garvey on June 28, 1996.
On January 26, 1996, the Company loaned to Mr. Garvey the principal
amount of $53,951.14, the purpose of which was to pay taxes owed on stock
awarded to Mr. Garvey upon his acceptance of employment with the Company. The
note is payable on demand and bears interest at an annual rate equal to the
short-term applicable federal rate for January 1996, which was 5.5%. On February
9, 1996, the Company loaned to Mr. Garvey the principal amount of $92,284.08,
the purpose of which was to pay taxes on restricted stock awarded to Mr. Garvey
on which an election was made. This note is also payable on demand and bears
interest at the annual rate equal to the short-term applicable federal rate for
February 1996, which was 5.32%. Both of these notes will be paid in full from
Mr. Garvey's incentive compensation to be paid in August 1996.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the following Report of
Compensation Committee on Executive Compensation and the Stockholder Return
Performance Graph shall not be incorporated by reference into any such filings.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Introduction
The Compensation and Stock Option Committee (the "Committee") of the
Board of Directors is comprised of four non-employee directors. The Committee
generally is responsible for the compensation and benefit plans for all
employees and is directly accountable for evaluating and approving compensation
and benefit plans, and payments and awards under those plans, for the Company's
senior executives, including the Chief Executive Officer and the other Named
Executive Officers. The Committee represents the stockholders' interests by
ensuring an appropriate link exists between the Company's strategic goals,
business performance, stockholder returns, and the executive compensation plans.
Compensation Philosophy
The Company's compensation philosophy is to provide competitive wages
and salaries with the opportunity to earn above average compensation through
performance-based incentives. The Committee believes that incentive compensation
provides the best means of motivating and rewarding performance while providing
necessary controls on cost. This philosophy is reflected in the Company's use of
incentive compensation at virtually every level of the organization, not just in
the executive ranks. In the case of production and supervisory employees, weekly
incentives may be earned for exceeding base production levels. Executives may
earn incentives based on Company profitability. In fiscal 1996, production and
supervisory incentives averaged 25% of total compensation, and executive
incentives averaged 13%. These percentages vary from year to year based on
performance.
Compensation Policy
The Company's executive compensation program is designed to achieve the
following objectives:
1. To attract, retain, motivate, and reward executives who have the
skills and experience necessary to conceive and implement a
successful business strategy.
2. To recognize the individual contributions of the executives to
stockholder value, as reflected in the profitability of the
Company.
3. To align the interests of the executives with those of
stockholders by linking a significant portion of executive
compensation to the value of the Company's Common Stock through
the award of stock incentives.
To accomplish these objectives, the Company has established an
executive compensation program consisting of base salary, an annual cash
incentive based on Company profitability, and long-term compensation plans which
include stock options, stock appreciation rights, restricted stock, and deferred
compensation. The Company's policies with respect to each element of the
executive compensation program are discussed below.
Base Salaries
To provide competitive base salaries while recognizing individual
performance, the Company, with the approval of the Committee, establishes and
maintains base salary ranges for salaried personnel. The competitiveness of the
salary ranges is reviewed annually with the assistance of an independent
consultant and through participation in salary surveys. The surveys used include
nationally publicized data from a number of sources, including ECS Top
Management Report, Ernst & Young LLP Executive Compensation Report, TPF&C Cash
Data Bank and The Conference Board Publication. The survey group is comprised of
a broad base of manufacturers in many different industries, including the steel
industry. Within this framework, executive salaries are determined based on
individual performance, level of responsibility and experience. The salary of
the Chief Executive Officer is evaluated solely by the Committee. Salaries for
the other Named Executive Officers are recommended by the Chief Executive
Officer and reviewed and approved by the Committee.
The salaries of the Named Executive Officers are listed in the Summary
Compensation Table.
Discretionary Cash Bonus Plan
The Company's Discretionary Cash Bonus Plan, which was established in
fiscal 1986, has insured that a portion of the total compensation of the
executive officers is at risk with respect to the profitability of the Company.
Under the plan, a bonus pool is created which is equal to 3.5% of
earnings. The plan authorizes adjustment of the pre-tax earnings used in this
calculation to exclude the effects of unusual, non-recurring, or extraordinary
events. The Committee determined that after fiscal year 1996 there will be no
adjustment for unusual items that are within management's control without the
Committee's approval. In addition, a specific rate for return on capital will be
established which must be achieved before incentive compensation will be paid.
Once the bonus pool is established, individual bonuses are determined based on
individual performances. The Committee determines the bonus to be awarded to the
Chief Executive Officer. Awards for all other key management, including the
other Executive Officers, are recommended by the Chief Executive Officer and
reviewed and approved by the Committee.
The purpose of the cash bonus plan is to directly link a significant
portion of executive compensation to Company profitability. Under the plan,
executives and other key employees can earn annual cash incentives based upon
Company profitability. The plan is intended to motivate executives to increase
profitability and to reward them with respect to the Company's success. In
keeping with the Company's compensation philosophy and the incentive plans in
which the Company's other employees participate, the cash bonus plan provides
executives the opportunity to earn significant bonuses, contingent upon
profitable results.
The allocations of bonus amounts among executive officers, while based
on individual performance, are determined on a subjective basis. The Committee
does not consider on a formal basis particular performance measures, but rather
evaluates the overall performance of the individual officer giving due
consideration to the Company's performance for the fiscal year.
Bonus awards for fiscal 1996 were paid in August 1996, and represent
compensation earned for the fiscal year ended June 30, 1996. None of the Named
Executive Officers received bonuses for the fiscal year 1996, except for the
Chief Executive Officer who received a guaranteed bonus of $300,000 pursuant to
his employment contract and the retired Chief Executive Officer who received a
bonus of $75,000.
Long Term Incentive Plans
The purpose of the long-term incentive plans is to promote the
Company's continued success by providing financial incentives to executives and
other key employees to increase the value of the Company, as reflected in the
price of its stock. By providing the opportunity to acquire a significant
proprietary interest in the Company, the plans align the interests of the
executives with those of the stockholders.
Under the 1990 Management Incentive Plan, which was approved by the
Board of Directors in July 1990 and by the stockholders in October 1990, the
Compensation Committee is authorized to make awards of stock options, stock
appreciation rights, restricted stock, and other stock related incentives. The
Committee has the sole authority to select the officers and other key employees
to whom awards may be made under the plan. Since the value of stock options and
other stock awards is determined by the price of the Company's Common Stock, the
Committee believes these awards benefit stockholders by linking a significant
portion of executive compensation to the performance of the Company's stock. In
addition, these awards enable the Company to attract and retain key employees
and provide a competitive compensation opportunity.
In fiscal 1996, long-term incentive awards were made to two of the
Named Executive Officers; both awards were made as a component of their
employment package. During fiscal 1996, no Named Executive Officers exercised
stock options.
The 1995 Stock Accumulation Plan which was approved by the Board of
Directors in August 1995 and by the Company's stockholders in October 1995,
provides for the issuance of Restricted Stock in lieu of the payment of cash
compensation to officers and other key employees selected to participate in the
plan. Under the plan, those employees who are under the age of 62 and who
participate currently in the discretionary cash bonus plan must accept
Restricted Stock in lieu of 10% of their annual cash bonus. In addition,
employees who participate in the cash bonus plan may elect to receive Restricted
Stock in lieu of cash of up to a maximum of 50% of their annual cash bonus and
up to 20% of their base compensation. Eligible employees who are not
participants in the discretionary cash bonus plan may elect to receive
Restricted Stock in lieu of cash of up to 10% of their incentive compensation
under an incentive compensation plan of the Company and up to 10% of their base
compensation. The extent of participation in the Stock Accumulation Plan by the
Named Executive Officers is reported in the Summary Compensation Table.
Chief Executive Officer Compensation
In determining the compensation of the Chief Executive Officer, the
Committee is guided by the Company's compensation philosophy, Company
performance and competitive practices. Robert A. Garvey, the Company's Chairman
of the Board and Chief Executive Officer, is employed under the terms of an
Employment Agreement providing for a base salary of $450,000 and certain other
benefits. The term of the Agreement is five years, expiring January 5, 2001.
Generally, Mr. Garvey is entitled under the Agreement to a cash bonus in the
amount of not less than $300,000 for each of the 1996 and 1997 fiscal years. In
the event of termination without cause, Mr. Garvey would be entitled to (i)
exercise all outstanding options which are exercisable or would become
exercisable within one year after termination of employment, (ii) continue
participation in the Company's pension and welfare benefit plans until the first
anniversary of termination of employment, and (iii) receive payment in cash of
$2,250,000 less the amount of base salary paid prior to termination. In the
event of termination of employment in connection with a change in control of the
Company as defined under the Agreement, Mr. Garvey would be entitled to the same
benefits and payments as described for a termination without cause. In the event
of termination due to death or disability, Mr. Garvey would be entitled to the
one-year acceleration of vesting described above with respect to stock options
and continued participation in the Company's pension and welfare benefit plans
for a period of one year.
Summary
The Company's executive compensation program encourages executives to
increase profitability and stockholder value. The emphasis on incentive
compensation for executives is consistent with the pay-forperformance policy
applied throughout the Company. The Committee believes this approach provides
competitive compensation and is in the best interests of the stockholders.
The Committee is proposing a plan to preserve the Company's tax
deduction for incentive compensation paid to the Company's Chief Executive
Officer. The Omnibus Budget Reconciliation Act of 1993 denies a publicly held
corporation a deduction for federal income tax purposes for compensation in
excess of $1 million per year paid to any of the top five executives of the
corporation. This compensation is subject to certain exceptions. The Plan is
intended to qualify under one of these exceptions that requires that the bonus
be payable as the result of the attainment of one or more pre-established
performance goals. The Plan is proposed for adoption by the Company's
stockholders for fiscal year 1997.
SUBMITTED BY THE COMPENSATION AND STOCK OPTION
COMMITTEE OF THE BOARD OF DIRECTORS:
E. Bradley Jones, Chairman Reginald H. Jones
George A. Stinson E. Mandell de Windt
STOCKHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in the
cumulative total stockholder return on the Company's Common Stock against the
cumulative total return of the Standard & Poor's 500 Stock Index and the
Standard & Poor's Steel Industry Group Index for the period of five years
commencing on July 1, 1991 and ending on June 30, 1996. The graph assumes that
the value of the investment in the Company's Common Stock and each index was
$100 on July 1, 1991, and that all dividends were reinvested.
(Graph filed under Form SE)
AGENDA ITEM TWO
PROPOSAL TO APPROVE 1996 DIRECTOR STOCK OPTION PLAN
On June 11, 1996, the Board of Directors adopted and recommended for
submission to stockholders for their approval the Birmingham Steel Corporation
Director Stock Option Plan (the "Director Plan"). The purpose of the Director
Plan is to provide stock based compensation to eligible directors of the Company
in order to encourage the highest level of director performance and to promote
long-term stockholder value. The Director Plan will provide such directors with
a proprietary interest in the Company's success and progress through annual
grants of options to purchase shares of the Company's common stock.
The primary features of the Director Plan are summarized below. The
summary is qualified in its entirety by reference to the specific provisions of
the Director Plan, the full text of which is set forth as Exhibit A to this
Proxy Statement.
Plan Summary and Other Information
Participation in the Director Plan is limited to Company directors who
are not employees of the Company or any of its subsidiaries. There are currently
eight directors eligible to participate in the Director Plan. An aggregate of
100,000 shares of the Company's $.01 par value common stock is reserved for
issuance under the Director Plan. Shares of common stock issuable under the
Director Plan may be authorized and unissued shares or shares held in treasury.
Under the Director Plan, on the date of each annual meeting of the
Company's stockholders, each non-employee director will be granted, without the
necessity of action by the Compensation and Stock Option Committee, a
non-qualified stock option to purchase 1,500 shares of the Company's common
stock at a purchase price equal to the fair market value per share of the common
stock on such grant date. On August 15, 1996, the market value of the Company's
common stock was $15.50 per share.
Each option granted under the Director Plan is exercisable for a period
of ten (10) years beginning on the date of its grant. Except in the event of the
death or disability of the director or in the event of a Change of Control or a
Potential Change of Control (as defined in the Director Plan), an option may not
be exercised during the first year after grant. In the event of termination of
service of a director by reason of disability or death, any options held by such
director under the Director Plan shall be immediately exercisable and may be
exercised until the earlier of the expiration of the stated term of the option
or the first anniversary of the death or disability of such director, as the
case may be. In the event of termination of service of a director by reason of
retirement, any options held by such director may thereafter be exercised (to
the extent then exercisable) until the earlier of the expiration of the stated
term of the option or the third anniversary of the effective date of the
director's retirement. If a director who has retired dies while any option is
still outstanding, the option may be exercised by the former director's legal
representative until the earlier of the expiration of the stated term of the
option or the first anniversary of the death of the former director.
The option exercise price is payable (i) in cash or check; (ii) in
unrestricted shares of common stock of the Company based on the fair market
value of the Company's common stock on the date the option is exercised, or
(iii) by such other instrument as may be acceptable to the Compensation and
Stock Option Committee.
Amendment or Termination of the Director Plan
The Board of Directors may suspend or terminate the Director Plan or
any portion thereof at any time, and the Board of Directors may amend the
Director Plan at any time as it deems to be in the best interest of the Company;
provided, however, that without the approval of the stockholders, no such
amendment, alteration or discontinuation shall be made (i) if such stockholder
approval is necessary to comply with any legal, tax or regulatory requirement,
including any approval requirement which is a prerequisite for exemptive relief
from Section 16(b) of the Securities and Exchange Act of 1934, as amended or
(ii) to increase the maximum number of shares subject to the Director
Plan, increase the maximum number of shares issuable to any participant under
the Director Plan or change the definition of persons eligible to receive
awards under the Director Plan. The Board of Directors is further limited
from making any amendment, alteration or discontinuation of the Director Plan
that would impair the rights of a director with respect to options awarded,
without such director's consent. The Director Plan may not be amended more than
once every six months unless such amendment is necessary to comply with changes
in the Internal Revenue Code of 1986, as amended (the "Code"), or the Employee
Retirement Income Security Act of 1974, as amended, or rules promulgated
thereunder.
Transferability
During the optionee's lifetime, options are exercisable only by the
optionee. Options granted under the Director Plan may only be transferred by
will or by the laws of descent and distribution except that the Compensation and
Stock Option Committee has the discretionary authority to grant options which
would be transferable to members of an optionee's immediate family, including
trusts for the benefit of such family members and partnerships in which such
family members are the only partners.
Administration
The Director Plan will be administered by the Compensation and Stock
Option Committee of the Board of Directors of the Company.
Adjustment of Shares
In the event of a merger, reorganization, consolidation,
recapitalization, dividend payable in common stock of the Company or other
change in corporate structure affecting the Company's common stock, the Director
Plan provides that a substitution or adjustment will be made in the aggregate
number of shares reserved for issuance under the Director Plan and in the number
and option price of shares subject to outstanding options granted under the
Director Plan as may be determined to be appropriate by the Compensation and
Stock Option Committee.
Change of Control
Upon the occurrence of a Change of Control or a Potential Change of
Control (as defined in the Director Plan), all unexercised stock options shall
become fully vested and immediately exercisable. In addition, after an actual or
potential Change of Control, a participant shall, to the extent determined by
the Compensation and Stock Option Committee, receive in cash from the Company
with respect to previous options awarded under the Director Plan the following
amount for such awards: (i) the excess of the Change of Control Price (as
defined below) over the exercise price of the award, multiplied by (ii) the
number of shares of the common stock subject to the award. The "Change of
Control Price" means the highest price per share paid in any transaction
reported on the New York Stock Exchange, or paid or offered in any transaction
related to a potential or actual Change of Control of the Company, at any time
during the preceding 60 day period as determined by the Compensation and Stock
Option Committee.
New Plan Benefits
No options have been granted under the Director Plan. The table below
sets forth the benefits from the grant of options for 1996 had the Director Plan
been in effect during such period.
NEW PLAN BENEFITS
1996 DIRECTOR STOCK OPTION PLAN
Number of Shares
Name and Position(1) Dollar Value ($) Underlying Options
Current Directors who are not
executive officers, as a group Not Determinable 12,000(2)
- --------------------
(1) Only non-employee directors of the Company will receive benefits under the
Director Plan.
(2) If the Director Plan is approved by the stockholders, each non-employee
director will receive an annual award of non-qualified stock options to
purchase 1,500 shares of the Company's common stock beginning October 15,
1996, the date of the Annual Meeting.
Certain Federal Income Tax Consequences
All options granted or to be granted under the Director Plan are
intended to be non-qualified options not entitled to special tax treatment under
Section 422 of the Code.
A participant in the Director Plan will recognize taxable income upon
the grant of a non-qualified stock option only if such option has a readily
ascertainable fair market value as of the date of the grant. In such a case, the
recipient will recognize taxable ordinary income in an amount equal to the
excess of the fair market value of the option as of such date over the price, if
any, paid for such option. No income would then be recognized on the exercise of
the option, and when the shares obtained through the exercise of the option are
disposed of in a taxable transaction, the resulting gain or loss would be
capital gain or loss (assuming the shares are a capital asset in the hands of
the optionee). However, under the applicable Treasury Regulations, the
non-qualified stock options issued under the Director Plan will not have a
readily ascertainable fair market value unless at the time such options are
granted similar options of the Company are actively traded on an established
market. The Company presently has no such actively traded options.
Upon the exercise of a non-qualified option not having a readily
ascertainable fair market value, the optionee recognizes ordinary income in an
amount equal to the excess of the fair market value of the shares on the date of
exercise over the option exercise price for those shares. The Company generally
is permitted a deduction equal to the amount of ordinary income the optionee is
required to recognize as a result of the exercise of a non-qualified stock
option. The Company is not entitled to an income tax deduction with respect to
the grant of a non-qualified stock option or the sale of stock acquired pursuant
thereto.
The Director Plan permits the Compensation and Stock Option Committee
to allow an optionee to pay the purchase price for shares acquired pursuant to
an exercise of a non-qualified option by transferring to the Company other
shares of the Company's common stock owned by the optionee. If an optionee
exchanges previously acquired common stock pursuant to the exercise of a
non-qualified stock option, the Internal Revenue Service has ruled that the
optionee will not be taxed on the unrealized appreciation of the shares
surrendered in the exchange. In other words, the optionee is not taxed on the
difference between his or her cost basis for the old shares and their fair
market value on the date of the exchange, even though the previously acquired
shares are valued at the current market price for purposes of paying all or part
of the option price.
General. The Director Plan is not qualified under Section 401(a) of
the Code and is not subject to the provisions of the Employee Retirement Income
Security Act of 1974.
The preceding discussion is based upon federal tax laws and regulations
in effect on the date of this Proxy Statement, which are subject to change, and
upon an interpretation of the statutory provisions of the Code, its legislative
history and related income tax regulations. Furthermore, the foregoing is only a
general discussion of the federal income tax consequences of the Director Plan
and does not purport to be a complete description of all federal income tax
aspects of the Director Plan. Option holders may also be subject to state and
local taxes in connection with the grant or exercise of options granted under
the Director Plan and the sale or other disposition of shares acquired upon
exercise of the options. Each individual receiving a grant of options should
consult with his or her personal tax advisor regarding federal, state and local
consequences of participating in the Director Plan.
Vote Required and Board of Director Recommendation
The affirmative vote of a majority of the votes present or represented
by proxy and entitled to vote at the annual meeting of stockholders, at which a
quorum representing a majority of all outstanding shares of common stock the
Company is present and voting, either in person or by proxy, is required for
approval of this proposal. Abstentions will each be counted as present for
purposes of determining the presence of a quorum, but will have the same effect
as a negative vote on this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS
VOTE FOR THE APPROVAL OF THE DIRECTOR PLAN.
AGENDA ITEM THREE
PROPOSAL TO APPROVE THE 1997 CHIEF EXECUTIVE OFFICER
INCENTIVE COMPENSATION PLAN
On August 19, 1996, the Board of Directors adopted and recommended for
submission to stockholders for their approval the Birmingham Steel Corporation
Chief Executive Officer Compensation Incentive Plan (the "Plan"). The purpose of
the Plan is to provide supplementary annual cash compensation to the Company's
Chief Executive Officer in order to motivate and retain the Company's Chief
Executive Officer and to assist the Company in reaching its financial and
strategic objectives. The Plan is intended to be qualified under Section 162(m)
of the Internal Revenue Code of 1986, as amended (the "Code") and the
regulations promulgated thereunder, and the Plan is being submitted to
stockholders for approval in order to qualify Plan compensation for exclusion
from "applicable employee remuneration" as defined in Section 162(m).
Section 162(m) of the Code provides generally that no deduction will be
allowed to a publicly held corporation for "applicable employee remuneration"
with respect to a "covered employee" (which includes the chief executive officer
of the corporation) to the extent that the amount of such remuneration for the
taxable year with respect to such employee exceeds $1 million. The term
"applicable employee remuneration" does not include remuneration payable solely
on account of the attainment of one or more performance goals, but only if (i)
the performance goals are determined by a compensation committee of the board of
directors of the taxpayer corporation which is comprised solely of two or more
outside directors, (ii) the materials terms under which the remuneration is to
be paid, including the performance goals, are disclosed to shareholders and
approved by a majority vote of the shareholders in a separate shareholder vote
before the payment of such remuneration, and (iii) before any payment of such
remuneration, the compensation committee certifies that the performance goals
and any other material terms were in fact satisfied. Compensation paid pursuant
to the Plan is intended to be qualified for the foregoing exemptive treatment.
The primary features of the Plan are summarized below. The summary is
qualified in its entirety by reference to the specific provisions of the Plan,
the full text of which is set forth as Exhibit B to this Proxy Statement.
Plan Summary and Other Information.
Participation in the Plan is limited to the Company's Chief Executive
Officer. There is currently one Chief Executive Officer of the Company, Rober
A. Garvey.
Pursuant to the Plan, no later than 75 days after the end of the
Company's fiscal year for which an award is granted (the "Plan Year"), the Chief
Executive Officer is entitled to receive a cash bonus award ("Award") based upon
the accomplishment of specific performance goals established by the Committee
appointed by the Board of Directors (which shall be the Compensation and Stock
Option Committee) (the "Committee") to administer the Plan. Not later than 90
days after the beginning of each Plan Year, the Committee shall establish the
(i) performance goals for the Plan Year, (ii) the maximum cash value of the
Award to be paid to the participant with respect to the Plan Year if all
performance goals and other terms for such Plan Year are satisfied (the "Target
Award") and (iii) the method for computing the actual cash amount earned for a
Plan Year by the participant if and to the extent that such goals are satisfied.
The Target Award to be paid to the participant in a Plan Year may not, however,
exceed 200% of the participant's total cash compensation for the given Plan
Year. The Committee shall establish the objective performance goals based on the
following criteria: pre-tax earnings, stock price, return on average capital and
safety. Based on the level of achievement of the pre-established performance
goals, the cash amount earned for a Plan Year by the participant shall be
determined by the Committee for the Plan Year. The participant shall not receive
any Award when the minimum performance goals set by the Committee are not
achieved.
Administration
The Plan shall be administered by the Committee which shall at all
times consist of two or more members of the Board of Directors who are deemed to
be "outside directors" within the meaning set forth in Section 162(m) of the
Code and the regulations promulgated thereunder. The Committee is authorized to
establish performance goals under the Plan, to determine the time when Awards
will be granted under the Plan, and to determine whether the objectives and
conditions for earning Awards have been met. The Committee does not, however,
have the discretion to increase the amount of compensation payable with respect
to a specific Award or to adjust such performance goals after the date which is
90 days from the beginning of the Plan Year.
Vesting
A participant shall be entitled to receive full payment of an Award
under the Plan if the participant's employment with the Company continues for
the entire Plan Year. In the event of death, disability or retirement of the
participant during a Plan Year, the Committee will determine on a pro rata basis
the amount of the partial Award (if any) to be paid to the participant for such
Plan Year. If during a Plan Year the participant's employment with the Company
terminates by reason of resignation or discharge, the Committee will determine
on a pro rata basis the amount of partial Award (if any) to be paid to the
participant for such Plan Year.
Amendment or Modification of the Plan
The Committee may at any time terminate, suspend, modify or amend the
Plan; provided, however, that no such modification, amendment, suspension, or
termination may, without the consent of the participant, reduce the right of the
participant to receive an Award under the Plan to which he or she is otherwise
entitled. In addition, no amendment of the Plan may be made without stockholder
approval which would change the criteria upon which Awards may be based or which
would increase the maximum amount which can be paid to the participant under the
Plan.
Non-Transferability
Awards under the Plan may not be subject to any anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or charge, voluntary
or involuntary. A participant in the Plan may designate one or more
beneficiaries to receive any amount that is payable in the event of the
participant's death.
Vote Required and Board of Director Recommendation
The affirmative vote of a majority of the votes present or represented
by proxy and entitled to vote at the annual meeting of stockholders, at which a
quorum representing a majority of all outstanding shares of common stock the
Company is present and voting, either in person or by proxy, is required for
approval of this proposal. Abstentions will each be counted as present for
purposes of determining the presence of a quorum, but will have the same effect
as a negative vote on this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS
VOTE FOR THE APPROVAL OF THE PLAN.
AGENDA ITEM FOUR
APPROVAL AND RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors of the Company has, subject to approval and
ratification by the stockholders, selected Ernst & Young LLP as independent
auditors for the Company for the fiscal year ending June 30, 1997. The Company
has been informed that neither Ernst & Young LLP nor any of its partners has any
direct or indirect financial interest in the Company or any of its subsidiaries,
or has had any connection with the Company or any of its subsidiaries in the
capacity of promoter, underwriter, voting trustee, director, officer or
employee.
A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting. Such representative will have the opportunity to make a
statement if he desires to do so and will be available to respond to appropriate
questions.
The affirmative vote of a majority of shares present in person or
represented by proxy at the Annual Meeting and entitled to vote on the matter
shall be required to approve the selection of Ernst & Young LLP as independent
auditors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
THE APPROVAL AND RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS THE
COMPANY'S INDEPENDENT AUDITORS.
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Any proposal by stockholders of the Company intended to be presented at
the Company's next Annual Meeting of Stockholders must be received in proper
form by the Company at its principal office for inclusion in the Company's Proxy
Statement and form of proxy relating to such Annual Meeting, no later than May
16, 1997.
GENERAL
The Board of Directors of the Company is not aware of any matters other
than the aforementioned matters that will be presented for consideration at the
Annual Meeting. If other matters properly come before the Annual Meeting, it is
the intention of the persons named in the enclosed proxy to vote thereon in
accordance with their best judgment.
The cost of preparing, printing and mailing this Proxy Statement and of
the solicitation of proxies by the Company will be borne by the Company.
Solicitation will be made by mail and, in addition, may be made by directors,
officers and employees of the Company personally, or by telephone or telegram.
The Company will request brokers, custodians, nominees and other like parties to
forward copies of proxy materials to beneficial owners of stock and will
reimburse such parties for their reasonable and customary charges or expenses in
this connection.
The Company will provide to any stockholder of record, without charge,
upon written request to its Corporate Secretary, a copy of the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1996.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE,
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE
URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY IN THE REPLY ENVELOPE
PROVIDED.
By Order of the Board of Directors,
Catherine W. Pecher
Vice President and Secretary
September 13, 1996
EXHIBIT A
BIRMINGHAM STEEL CORPORATION
DIRECTOR STOCK OPTION PLAN
Section 1. Purpose of the Plan.
The purpose of the Birmingham Steel Corporation Director Stock
Option Plan (the "Plan") is to provide stock based compensation to non-employee
directors of Birmingham Steel Corporation (the "Company") in order to encourage
the highest level of director performance and to promote long-term shareholder
value by providing such directors with a proprietary interest in the Company's
success and progress through grants of options ("Options") to purchase shares of
the Company's common stock ("Common Stock").
Section 2. Certain Definitions.
(a) "Board" means the Board of Directors of the Company.
(b) "Change of Control" has the meaning set forth in Section
7(b) hereof.
(c) "Change of Control Price" shall have the meaning set forth in
Section 7(d) hereof.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the Compensation and Stock Option
Committee of the Board.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means Birmingham Steel Corporation, a Delaware
corporation, and any successors to such corporation.
(h) "Disability" means a permanent and total disability as
determined under procedures established by the Committee for purposes of the
Plan. The determination of Disability for purposes of this Plan shall not be
construed to be an admission of disability for any other purpose.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means, as of any given date, the closing
price of the Common Stock on the New York Stock Exchange Composite Tape or, if
not listed on such exchange, any other national exchange on which the Common
Stock is listed or on NASDAQ. If there is no regular public trading market for
such stock, the Fair Market Value of the Common Stock shall be determined by the
Committee in good faith.
(k) "Non-Employee Director" means each member of the Board who is
not an employee of the Company or any of its subsidiaries at the date of each
grant or award.
(l) "Options" means options to purchase shares of Common Stock
granted pursuant to Section 6 of the Plan.
(m) "Plan" means the Birmingham Steel Corporation Director Stock
Option Plan.
(n) "Potential Change of Control" has the meaning set forth in
Section 7(c) hereof.
(o) "Rule 16b-3" means Rule 16b-3, as currently in effect or as
hereinafter amended or modified, promulgated under the Exchange Act.
Section 3. Administration of the Plan.
The Plan shall be administered by the Committee of the Board of
Directors of the Company. Grants of Options to purchase Common Stock under the
Plan shall be made automatically as provided in Section 6 hereof. However, the
Committee shall have full authority to interpret the Plan, to promulgate such
rules and regulations with respect to the Plan as it deems desirable, and to
make all other determinations necessary or appropriate for the administration of
the Plan, and such determinations shall be final and binding upon all persons
having an interest in the Plan.
Section 4. Common Stock Subject to the Plan.
The total number of shares of Common Stock reserved and available
for distribution under the Plan shall be 100,000. Such shares may consist, in
whole or in part, of authorized and unissued shares or treasury shares. If any
shares of Common Stock that have been optioned cease to be subject to option,
such shares shall again be available for distribution in connection with future
awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, Common Stock dividend, or other change in corporate structure
affecting the Common Stock, a substitution or adjustment shall be made in the
aggregate number of shares reserved for issuance under the Plan and in the
number and option price of shares subject to outstanding Stock Options granted
under the Plan as may be determined to be appropriate by the Committee, in its
sole discretion, provided that the number of shares subject to any award shall
always be a whole number.
Section 5. Participation.
Each Non-Employee Director shall be eligible to participate in
the Plan.
Section 6. Non-Qualified Stock Options.
(a) General. Options granted to Non-Employee Directors under the
Plan shall be options which are not intended to be "incentive stock options"
within the meaning of Section 422 of the Code.
(b) Annual Grant of Options. Options covering 1,500 shares of
common stock of the Company shall be granted to each Non-Employee Director
automatically on the date of the annual meeting of the Company's stockholders
each year.
(c) Terms of Options. Options granted under the Plan shall be
evidenced by a written agreement in such form as the Committee shall from time
to time approve, which agreements shall comply with and be subject to the
following terms and conditions:
(i) Option Price. The option price per share of Common Stock
purchasable under an Option shall be 100% of the Fair Market
Value of the Common Stock on the date of the grant of the Option.
(ii) Option Term. Each Option shall be exercisable for a
term of ten (10) years from the date such Option is granted
(subject to prior termination as hereinafter provided).
(iii) Exercisability. Except as provided in Sections 7 and
8, Options shall not become first exercisable by their terms
until the expiration of one (1) year from the date of the grant
of the Option.
(iv) Method of Exercise. Options may be exercised in whole
or in part at any time during the option period by giving written
notice of exercise to the Company specifying the number of shares
to be purchased, accompanied by payment in full of the purchase
price, in cash, by check or such other instrument as may be
acceptable to the Committee. Payment in full or in part may also
be made in the form of unrestricted Common Stock already owned by
the optionee (based on the Fair Market Value of the Common Stock
on the date the Option is exercised). No shares of Common Stock
shall be issued until full payment therefor has been made. An
optionee shall have the right to dividends or other rights of a
stockholder with respect to shares subject to an Option for which
the optionee has given written notice of exercise and has paid in
full for such shares.
(v) Non-transferability of Options; Exception. Except as
otherwise set forth in this Section 6(v), no Option shall be
transferable by the optionee otherwise than by will or by the
laws of descent and distribution, and all Options shall be
exercisable, during the optionee's lifetime, only by the
optionee. The Committee shall have the discretionary authority,
however, to grant Options which would be transferable to members
of an optionee's immediate family, including trusts for the
benefit of such family members and partnerships in which such
family members are the only partners. For purposes of Section 8,
a transferred Option may be exercised by the transferee only to
the extent that the optionee would have been entitled had the
option not been transferred.
Section 7. Change of Control.
The following acceleration and valuation provisions shall apply
in the event of a "Change of Control" or "Potential Change of Control," as
defined in this Section 7:
(a) In the event of a "Change of Control," as defined in Section
7(b) below, unless otherwise determined by the Committee or the Board in writing
at or after the grant of awards hereunder, but prior to the occurrence of such
Change of Control, or, if and to the extent so determined by the Committee or
the Board in writing at or after the grant of awards hereunder (subject to any
right of approval expressly reserved by the Committee or the Board at the time
of such determination) in the event of a "Potential Change of Control," as
defined in Section 7(c) below:
(i) any Options awarded under the Plan not previously
exercisable and vested shall become fully exercisable and vested;
(ii) the value of all outstanding Options shall, to the
extent determined by the Committee or after grant, be cashed out
on the basis of the "Change of Control Price" (as defined in
Section 7(d) below) as of the date the Change of Control occurs
or Potential Change of Control is determined to have occurred, or
such other date as the Committee may determine prior to the
Change of Control or Potential Change of Control.
(b) For purposes of Section 7(a) above, a "Change of Control"
means the happening of any of the following:
(i) when any "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act (other than the Company or
any Company employee benefit plan, including its trustee), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the
Company representing twenty percent (20%) or more of the
combined voting power of the Company's then outstanding
securities;
(ii) the occurrence of any transaction or event relating to
the Company required to be described pursuant to the requirements
of Item 6(e) of Schedule 14A of Regulation 14A of the Securities
and Exchange Commission under the Exchange Act;
(iii) when, during any period of two (2) consecutive years
during the existence of the Plan, the individuals who, at the
beginning of such period, constitute the Board cease, for any
reason other than death, to constitute at least a majority
thereof, unless each director who was not a director at the
beginning of such period was elected by, or on the recommendation
of, at least two-thirds (2/3) of the directors at the beginning
of such period; or
(iv) the occurrence of a transaction requiring stockholder
approval for the acquisition of the Company by an entity other
than the Company or a subsidiary of the Company through purchase
of assets, or by merger, or otherwise.
(c) For purposes of Section 7(a) above, a "Potential Change of
Control" means the happening of any of the following:
(i) the entering into an agreement by the Company, the
consummation of which would result in a Change of Control of the
Company as defined in Section 7(b) above; or
(ii) the acquisition of beneficial ownership directly or
indirectly, by any entity, person or group (other than the
Company, a subsidiary of the Company, or any Company employee
benefit plan, including its trustee) of securities of the Company
representing five percent (5%) or more of the combined voting
power of the Company's outstanding securities and the adoption by
the Board of Directors of a resolution to the effect that a
Potential Change of Control of the Company has occurred for
purposes of this Plan.
(d) For purposes of this Section 7, "Change of Control Price"
means the highest price per share paid in any transaction reported on the New
York Stock Exchange, or paid or offered in any transaction related to a
potential or actual Change of Control of the Company at any time during the
preceding sixty (60) day period as determined by the Committee, except that, in
the case of Options, such price shall be based only on transactions reported for
the date on which the Committee decides to cash out such Options.
Section 8. Termination of Directorship.
(a) Termination by Reason of Disability or Death. Upon the
termination of a Non-Employee Director by reason of Disability or death, any
Options held by such optionee shall be immediately exercisable, notwithstanding
the provisions of Section 6 hereof, and may thereafter be exercised by the
optionee or, in the case of death, by the legal representative of the estate or
by the legatee of the optionee under the will of the optionee, until the earlier
of (i) the expiration of the stated term of such Options or (ii) the first
anniversary of the death or Disability of the optionee, as the case may be.
(b) Termination by Reason of Retirement. If an optionee's status
as a Non-Employee Director with the Company terminates by reason of retirement,
any Options held by such optionee may thereafter be exercised, to the extent
exercisable under the provisions of Section 6 hereof, until the earlier of (i)
the expiration of the stated term of the Options or (ii) the third anniversary
of the effective date of such optionee's retirement. If the retired optionee
dies while any Options are still outstanding, such Options may be exercised by
the legal representative of the estate or by the legatee of the optionee under
the will of the optionee, until the earlier of (i) the expiration of the stated
term of the Options or (ii) the first anniversary of the death of the optionee.
(c) Other Termination. Upon the termination of a Non-Employee
Director with the Company for any reason other than Disability, death or
retirement, any Options held by such optionee shall terminate as of the
effective date of such Non-Employee Director's termination.
Section 9. Termination or Amendment of the Plan.
The Board may suspend or terminate the Plan or any portion
thereof at any time, and the Board may amend the Plan from time to time as may
be deemed to be in the best interests of the Company; provided, however, that no
such amendment, alteration or discontinuation shall be made (a) that would
impair the rights of a Non-Employee Director with respect to Options theretofore
awarded, without such person's consent, or (b) without the approval of the
stockholders (i) if such approval is necessary to comply with any legal, tax or
regulatory requirement, including any approval requirement which is a
prerequisite for exemptive relief from Section 16(b) of the Exchange Act; or
(ii) to increase the maximum number of shares subject to this Plan, increase the
maximum number of shares issuable to any Non-Employee Director under this Plan,
or change the definition of persons eligible to receive awards under this Plan,
or (c) if the Plan has been amended within the preceding six (6) months, unless
such amendment is necessary to comply with changes in the Internal Revenue Code
of 1986, as amended, or the Employee Retirement Income Security Act of 1974, as
amended, or rules promulgated thereunder.
Section 10. Section 16.
It is intended that the Plan and any grants made to a person
subject to Section 16 of the Exchange Act meet all of the requirements of Rule
16b-3. If any provision of the Plan or any award hereunder would disqualify the
Plan or such award, or would otherwise not comply with Rule 16b-3, such
provision or award shall be construed or deemed amended to conform to Rule
16b-3.
Section 11. General Provisions.
(a) No Right of Continued Service. Nothing in the Plan shall be
deemed to create any obligation on the part of the Board to nominate any Non-
Employee Director for reelection by the Company's stockholders.
(b) Payment of Taxes. An optionee shall, no later than the date
as of which the value of any portion of the Option first becomes includable in
the optionee's gross income for federal income tax purposes, make arrangements
satisfactory to the Committee regarding payment of any federal, state, local or
FICA taxes of any kind required by law to be withheld with respect to the
Option.
(c) Shares. The shares of Common Stock issued upon the exercise
of Options under the Plan may be either authorized but unissued shares or shares
which have been or may be reacquired by the Company, as determined from time to
time by the Board.
(d) Governing Law. The Plan and all actions taken thereunder
shall be governed by and construed in accordance with the laws of the State of
Delaware (other than its law respecting choice of law). The Plan shall be
construed to comply with all applicable law, and to avoid liability to the
Company or a Non-Employee Director, including, without limitation, liability
under Section 16(b) of the Exchange Act.
(e) Effective Date of Plan. The Plan shall be effective on the
date it is approved by a majority vote of the holders of the Company's Common
Stock.
(f) Term of Plan. No Option shall be granted pursuant to the Plan
on or after the tenth anniversary of the effective date of the Plan, but awards
granted prior to such date may extend beyond that date.
(g) Headings. The headings contained in this Plan are for
reference purposes only and shall not affect the meaning or interpretation of
this Plan.
(h) Severability. If any provision of this Plan shall for any
reason be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereby, and this Plan
shall be construed as if such invalid or unenforceable provision were omitted.
(i) Successors and Assigns. This Plan shall inure to the benefit
of and be binding upon each successor and assign of the Company. All obligations
imposed upon a Non-Employee Director, and all rights granted to the Company
hereunder, shall be binding upon the Non-Employee Director's heirs, legal
representatives and successors.
EXHIBIT B
BIRMINGHAM STEEL CORPORATION
CHIEF EXECUTIVE OFFICER INCENTIVE COMPENSATION PLAN
Section 1. Purpose of the Plan. The purpose of the Birmingham Steel
Corporation Chief Executive Officer Incentive Compensation Plan (the "Plan") is
to provide supplementary annual cash compensation to the Company's Chief
Executive Officer, in order to motivate and retain the Company's Chief Executive
Officer and to assist the Company in reaching its financial and strategic
objectives.
Section 2. Certain Definitions.
(a) "Award" means a cash bonus award payable to the
Participant under the Plan.
(b) "Award Schedule" means the schedule prepared by the
Committee for each Plan Year establishing, among other things, the performance
goals for a given Plan Year for the Participant and the Target Award for the
Participant.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Committee" means the committee appointed by the Board to
administer the Plan, which at all times shall consist of two or more members of
the Board who are deemed to be "outside directors" within the meaning set forth
in Section 162(m) of the Code and the regulations thereunder.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means Birmingham Steel Corporation, a Delaware
corporation, and any successors to such corporation.
(h) "Disability" means a permanent and total disability
as determined under procedures established by the Committee for purposes of
the Plan. The determination of Disability for purposes of the Plan shall
not be construed to be an admission of disability for any other purpose.
(i) "Final Award" means the actual cash amount earned for a
Plan Year by the Participant, as determined by the Committee at the end of such
Plan Year in accordance with Section 6 hereof; provided, however, that the value
of a Final Award shall not exceed the stated value of Target Award.
(j) "Participant" means the Company's Chief Executive
Officer.
(k) "Plan Year" means the fiscal year of the Company for
which an Award is granted.
(l) "Target Award" means the maximum cash value of the Award
to be paid to the Participant with respect to a given Plan Year if all
performance goals and other terms for such Plan Year are satisfied; provided,
however, that the Target Award shall not exceed two hundred percent (200%) of
the Participant's total cash compensation for the given Plan Year.
Section 3. Administration. The Plan shall be administered by the
Committee. The Committee shall have all the powers vested in it by the terms of
this Plan, such powers to include authority (within the limitations described
herein) to establish performance goals under the Plan, to determine the time
when Awards will be granted, and to determine whether the objectives and
conditions for earning Awards have been met. Subject to the
limitations set forth in Section 162(m) of the Code, the Committee shall have
full power and authority to administer and interpret the Plan and to adopt such
rules, regulations, agreements, guidelines and instruments for the
administration of the Plan as the Committee deems necessary or advisable. The
Committee's interpretations of the Plan, and all actions taken and
determinations made by the Committee pursuant to the powers vested in it
hereunder, shall be conclusive and binding on all parties concerned, including
the Company and its stockholders. Notwithstanding any other provisions of this
Plan, the Committee shall not have the discretion to increase the amount of
compensation payable with respect to a specific Award or to adjust such
performance goals after the date which is ninety (90) days following the
beginning of the Plan Year.
Section 4. Eligibility and Participation. Participation in the
Plan shall be limited to the Company's Chief Executive Officer.
Section 5. Award Determination.
(a) Awards granted to the Participant shall be based upon the
accomplishment of specific performance goals. Not later than ninety (90) days
after the beginning of each Plan Year, the Committee shall establish in writing
(i) the performance goals for the Plan Year, (ii) the Target Award for the Plan
Year and (iii) the method for computing the amount of the Final Award if and to
the extent that such goals are satisfied, all of which shall be set forth on an
Award Schedule for that Plan Year.
(b) The Committee shall establish objective performance
goals based on the following: pre-tax earnings, stock price, return on average
capital and safety.
(c) Within sixty (60) days of the end of the Plan Year, the
Committee shall certify in writing the extent to which the performance goals and
any other material terms were satisfied. Based on the level of achievement of
the pre-established performance goals, Final Awards (i.e., the amount of cash)
shall be determined by the Committee for the Plan Year.
(d) Participant shall not receive any payout when the
minimum performance goals are not achieved.
Section 6. Payment of Final Awards.
(a) Subject to the provisions of Section 7 hereof, the payment
of cash with respect to a Final Award shall be made as soon as practicable
following the end of the Plan Year, but in no event later than seventy-five (75)
days after the end of the Plan Year.
(b) The Participant shall have no interest whatsoever in any
specific asset of the Company as a result of the grant of an Award hereunder or
the satisfaction of performance goals with respect thereto. To the extent that
the Participant acquires a right to receive payments under the Plan, such right
shall be equivalent to that of an unsecured general creditor of the Company.
Section 7. Vesting; Termination of Employment.
(a) If the Participant's employment with the Company continues
for the entire Plan Year, the Participant shall be entitled to receive full
payment of the Final Award amount determined under Section 5 for the Plan Year
in accordance with the terms of the Plan.
(b) In the event of the death, Disability or retirement of the
Participant during a Plan Year, the Committee (in its sole discretion) will
determine on a pro rata basis the amount of the partial Award (if any) to be
paid to the Participant (or to his personal representative) for such Plan Year.
Payments will be made in accordance with the terms of the Plan.
(c) If during a Plan Year, the Participant's employment with
the Company terminates by reason of resignation or discharge, the Committee (in
its sole discretion) will determine on a pro rata basis the amount of partial
Award (if any) to be paid to the Participant for such Plan Year. Payments will
be made in accordance with the terms of the Plan.
(d) The Participant may designate, in writing and on such form
as the Company may prescribe, one or more beneficiaries to receive any amount
that is payable in the event of Participant's death. In the event of
Participant's death, any Award that is payable to the Participant shall be paid
to his beneficiary or, in the event that no beneficiary has been designated, to
his estate.
Section 8. Rights of Participant. Nothing in the Plan shall interfere
with or limit in any way the right of the Company to terminate the Participant's
employment at any time, nor confer upon the Participant any right to continue in
the employment of the Company.
Section 9. Amendment or Modification. The Committee, in its sole
discretion, without notice, at any time and from time to time, may modify or
amend, in whole or in part, any or all of the provisions of the Plan, or suspend
or terminate it entirely; provided, however, that no such modification,
amendment, suspension, or termination may, without the consent of the
Participant, reduce the right of the Participant to receive an Award hereunder
to which he is otherwise entitled; and, provided further, that unless the
stockholders of the Company shall have first approved thereof, no amendment of
the Plan shall be effective which would change the criteria upon which Awards
may be based or which would increase the maximum amount which can be paid to the
Participant under the Plan.
Section 10. Section 162(m) of the Code. It is intended that the Plan
and any Awards granted hereunder meet all of the requirements of Section 162(m)
of the Code and the regulations thereunder. Unless otherwise determined by the
Committee, if any provision of the Plan or any Award hereunder would disqualify
the Plan or such Award, or would otherwise not comply with Section 162(m) of the
Code, such provision or Award shall be construed or deemed amended to conform to
Section 162(m) of the Code.
Section 11. Miscellaneous.
(a) The Plan shall be governed by and construed in accordance
with the laws of the State of Delaware.
(b) The Company shall have the right to deduct from all
payments under the Plan any federal, state or local taxes required by law to be
withheld with respect to such payments.
(c) In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
(d) All costs of implementing and administering the Plan
shall be borne by the Company.
(e) All obligations of the Company under the Plan shall be
binding upon and inure to the benefit of any successor to the Company, whether
the existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
(f) Nothing contained in the Plan and no action taken pursuant
thereto shall create or be construed to create a trust of any kind, or a
fiduciary relationship between the Company or a subsidiary or any other person.
(g) No Award under the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
charge, either voluntary or involuntary, and any attempt to so alienate,
anticipate, sell, transfer, assign, pledge, encumber or charge the same shall be
null and void. No such amount shall be liable for or subject to the debts,
contracts, liabilities, engagements, or torts of Participant or any person to
whom such benefits or funds are or may be payable.
BIRMINGHAM STEEL CORPORATION
This Proxy is solicited on behalf of the Board of Directors for use at the 1996
Annual Meeting of Stockholders to be held on October 15, 1996.
The undersigned hereby appoints Robert A. Garvey and Catherine W.
Pecher, and each of them, attorneys and proxies with full power of substitution,
to vote in the name of and as proxy for the undersigned at the Annual Meeting of
Stockholders of Birmingham Steel Corporation to be held on Tuesday, October 15,
1996 at 10:00 a.m. local time at The Peabody Memphis, 149 Union Avenue, Memphis,
Tennessee and at any adjournment thereof, according to the number of votes that
the undersigned would be entitled to cast if personally present.
(1) To elect the following nominees as directors to serve until the next
Annual Meeting of Stockholders and until their successors are elected
and qualified:
Robert A. Garvey; E. Mandell de Windt; C. Stephen Clegg; George A. Stinson;
E. Bradley Jones; Harry Holiday, Jr.; Reginald H. Jones; William J. Cabaniss,
Jr.; T. Evans Wyckoff
( ) FOR all nominees listed above ( ) WITHHOLD AUTHORITY
(except as indicated to the to vote for all nominees
contrary below)
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(2) To approve the 1996 Director Stock Option Plan, attached as Exhibit "A"
to the Proxy Statement.
( ) FOR ( ) AGAINST ( ) ABSTAIN
(3) To approve the 1997 Chief Executive Officer Incentive Compensation Plan,
attached as Exhibit "B" to the Proxy Statement..
( ) FOR ( ) AGAINST ( ) ABSTAIN
(4) To approve and ratify the selection of Ernst & Young LLP as the
independent auditors for the Company and its subsidiaries for the fiscal
year ending June 30, 1997.
( ) FOR ( ) AGAINST ( ) ABSTAIN
(5) To consider and take action upon such other matters as may properly
come before the meeting or adjournments or postponements thereof.
PROPERLY EXECUTED PROXIES WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED. IF NO SUCH DIRECTIONS ARE GIVEN, SUCH PROXIES WILL
BE VOTED FOR ALL NOMINEES REFERRED TO IN PARAGRAPH (1) AND FOR THE
PROPOSITIONS REFERRED TO IN PARAGRAPHS (2), (3) AND (4).
The undersigned revokes any prior proxies to vote the shares covered by this
proxy.
Signature
Signature
Date: , 1996
(This Proxy should be marked, dated and signed by the stockholder(s) exactly
as his or her name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property, both should sign.)
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY. This Proxy, when
properly executed, will be voted in accordance with the directions given by the
undersigned stockholder. If no direction is made, it will be voted FOR
Proposals 1, 2, 3 and 4 and as the proxies deem advisable on such other matters
as may come before the meeting.
