BIRMINGHAM STEEL CORPORATION
September 12, 1997
Dear Stockholder:
You are invited to attend the Annual Meeting of Stockholders of your
Company, which will be held on Tuesday, October 14, 1997, at 10:00 A.M., local
time, at The New York Palace, 455 Madison Avenue, New York, New York.
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
-------------------------
Robert A. Garvey
Chairman of the Board and
Chief Executive Officer
<PAGE>
BIRMINGHAM STEEL CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held October 14, 1997
The Annual Meeting of Stockholders of Birmingham Steel Corporation (the
"Company") will be held at The New York Palace, 455 Madison Avenue, New York,
New York, on Tuesday, October 14, 1997, at 10:00 A.M., local time, for the
following purposes:
(1) To elect ten directors, each to serve until the next Annual Meeting
of Stockholders and until his successor has been elected and qualified;
(2) To approve the 1997 Management Incentive Plan;
(3) 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, 1998; and
(4) 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, 1997
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
-----------------------
Catherine W. Pecher
Vice President and Secretary
Birmingham, Alabama
September 12, 1997
<PAGE>
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 and 3 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 subsequently dated 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 12, 1997.
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, 1997. At the close of
business on August 15, 1997, 29,679,298 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, 1997, 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 Number of
Owner or Number Shares Percent
of Persons Beneficially of Class
in Group Owned
================== ============ ========
The Prudential
Insurance
Company of America 2,876,059(1) 9.7%
Brinson Partners,
Inc., et al. 2,592,265(2) 8.7%
<PAGE>
Merrill Lynch & Co.,
Inc., et al. 1,840,098(3) 6.2%
Robert A. Garvey 112,677(4) *
William R. Lucas, Jr. 38,069(5) *
Jack R. Wheeler 32,718(6) *
Frederick J. Rocchio, Jr. 30,215(7) *
John M. Casey 29,000(8) *
C. Stephen Clegg 17,055(9) *
George A. Stinson 14,650 *
Reginald H. Jones 13,372 *
E. Mandell de Windt 10,702 *
E. Bradley Jones 10,500 *
Robert D. Kennedy 10,000 *
Harry Holiday, Jr. 9,000 *
T. Evans Wyckoff 7,281 *
William J. Cabaniss, Jr. 6,232 *
Directors and executive
officers of a group
(15 persons) 349,470(10) 1.2%
* Less than 1%
(footnotes appear on following page)
<PAGE>
(1) This information was taken from a Schedule 13G/A filed by The
Prudential Insurance Company of America on February 5, 1997 reflecting
information as of December 31, 1996. The amount shown includes sole
voting power with respect to 3,750 shares, shared voting power with
respect to 2,858,909 shares, sole dispositive power with respect to
3,750 shares, and shared dispositive power with respect to 2,872,309
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 13, 1997 reflecting information as of December
31, 1996. The amount shown represents shared voting and dispositive
powers by the reporting persons.
(3) This information was taken from a Schedule 13G filed by Merrill Lynch &
Co., Inc. and certain related affiliates including Merrill Lynch Asset
Management L.P., Merrill Lynch Capital Fund, Inc., Merrill Lynch Group,
Inc. and Princeton Services, Inc. on February 7, 1997 reflecting infor-
mation as of December 31, 1996. The amount shown represents shared
voting and dispositive powers by the reporting persons.
(4) Includes 13,238 shares of Restricted Stock issued under the 1995 Stock
Accumulation Plan, 32,000 shares of Restricted Stock awarded under the
1990 Management Incentive Plan, 1,701 shares held in the Company's
401(k) Plan, and 16,667 shares subject to stock options.
(5) Includes 4,000 shares of Restricted Stock awarded under the 1990
Management Incentive Plan, 1,454 shares held in the Company's 401(k)
Plan, and 2,742 shares of Restricted Stock issued under the 1995 Stock
Accumulation Plan. Also includes 500 shares owned by Mr. Lucas' spouse
and 24,000 shares subject to stock options.
(6) Includes 20,000 shares subject to stock options and 5,650 shares issued
under the 1995 Stock Accumulation Plan.
(7) Includes 4,500 shares of Restricted Stock awarded under the 1990
Management Incentive Plan and 24,000 shares subject to stock option.
(8) Includes 24,000 shares subject to stock options.
(9) Includes 9,555 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.
(10) Includes an aggregate of 108,667 shares subject to stock options held
by certain officers of the Company, an aggregate of 3,154 shares held
in the Company's 401(k) Plan, an aggregate of 48,500 shares of
Restricted Stock awarded under the 1990 Management Incentive Plan, and
an aggregate of 21,630 shares of Restricted Stock issued under the 1995
Stock Accumulation Plan.
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.
<PAGE>
AGENDA ITEM ONE
ELECTION OF DIRECTORS
Ten 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., T. Evans
Wyckoff, and Robert D. Kennedy. 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 re-election. 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.
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.
Name and Year First
Became Director/Business Experience Age
===============================================================================
Robert A. Garvey - 1996 59
Chairman of the Board and Chief Executive Officer of the Company since
January 5, 1996; President of North Star Steel Co. from 1984 to 1996.
<PAGE>
E. Mandell de Windt - 1985 76
Chairman of the Executive Committee of the Board
of Directors 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.
C. Stephen Clegg - 1985 46
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 - 1985 82
Retired; Attorney and of counsel to law firm of Thorp, Reed & Armstrong,
Washington, D.C., from 1981 to 1985; Retired; Chairman of the Board and Chief
Executive Officer of National Steel Corporation from 1965 to 1981; director of
Diamond Home Services and Midwest Spring Manufacturing Company.
E. Bradley Jones - 1988 69
Retired; Chairman of the Board and Chief Executive
Officer of 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., RPM, Inc. and
Consolidated Rail Corporation; Trustee, Fidelity Funds.
Harry Holiday, Jr. - 1991 74
Retired; Chairman of the Board and Chief Executive Officer of ARMCO, Inc. from
April 1982 to January 1986.
Reginald H. Jones - 1991 80
Retired; Chairman of the Board and Chief Executive Officer of General Electric
Company from December 1972 to April 1981; director of ASA Limited and M-T
Investors, Inc.
William J. Cabaniss, Jr. - 1993 59
President of Precision Grinding, Inc., a metal machining company serving metal
machining industries in the Southeast, since 1971; director of Protective Life
Corporation.
T. Evans Wyckoff - 1993 72
Formerly Chairman of the Board of Aero-Go, Inc., a company which manufactures
air cushion devices, from 1969 to 1993; President of Wyco Corporation, private
investment company, since 1983; and President of Arvee Orchards, Inc. since
1991.
Robert D. Kennedy - 1996 64
Retired; Chairman of the Board and Chief Executive
Officer of Union Carbide Corporation from 1985 to 1995; Director of Union
Carbide Corporation, Union Camp Corporation, Sun Company, Inc., UCAR
International, LionOre Mining International, Ltd. and K-Mart; Member of the
Advisory Board of The Blackstone Group and RFE Investment Partners.
The Board of Directors held twelve meetings, including two actions by
unanimous written consent, during the fiscal year ended June 30, 1997. During
fiscal 1997, each incumbent director attended at least 75% 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 1997.
<PAGE>
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 six meetings during fiscal 1997.
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 one meeting during fiscal
1997.
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 1997.
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 one meeting
during fiscal 1997.
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 all stock based and other benefit plans
(unless
<PAGE>
otherwise specified in plan documents) affecting officers direct and indirect
remuneration. The Compensation and Stock Option Committee held eight meetings
during fiscal 1997.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
ELECTION OF THE NOMINEES NAMED IN THIS PROXY STATEMENT.
Section 16(a) Beneficial Ownership Reporting
Compliance
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 1997 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, 1997, 1996 and 1995 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), (6) and (7) to the Summary
Compensation Table.
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long Term Compensation
--------------------------------------------- -------------------------
Awards
Other Annual Restricted Options/ All Other
Name and Salary Bonus Compensation Stock SARs Compensation
Principle Position Year ($) ($)(1) ($) ($)(2) (#) ($) (3)
- ---------------------- ----- ------- ------- ------------ ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert A. Garvey (4) 1997 371,506 240,005 143,005(5) 197,928 (7) 0 6,422
Chairman of the 1996 170,347 270,011 123,928(5) 951,916 (6) (7) 100,000 4,274
Board and Chief
Executive Officer
William R. Lucas, 1997 170,654 99,011 0 39,924 (7) 60,000 6,151
Jr. (8) 1996 166,270 0 0 177,171 (6) (7) 0 3,139
Executive Vice
President -
Administration and
General Counsel
John M. Casey (9) 1997 161,201 0 0 11,247 (7) 60,000 6,312
Executive Vice 1996 151,740 0 0 22,478 (7) 0 8,417
President - Finance 1995 111,942 56,009 0 134,325 (6) 0 318
and Chief Financial
Officer
Frederick J. Rocchio, 1997 161,896 77,005 0 43,993 (7) 60,000 5,941
Jr., (10) 1996 114,462 0 0 102,690 (6) 0 3,525
Executive Vice
President -
Development and
Technology
Jack R. Wheeler 1997 146,346 48,603 0 17,185 (7) 50,000 4,649
Vice President - 1996 134,903 0 0 20,128 (7) 0 5,916
Operations 1995 124,209 55,004 0 77,297 (7) 0 9,927
- ------------------------------
<FN>
(1) Represents cash incentive compensation accrued for the fiscal year (but
paid in the subsequent fiscal year). Does not include amounts foregone
in fiscal years 1997, 1996 and 1995 in connection with the receipt of
shares of Restricted Stock under the SAP, which is reflected in the
"Restricted Stock" column in the table above. See footnote (7) below.
(2) The value of the Restricted Stock awards shown in the table above
reflects the number of shares awarded during the year indicated
multiplied by the closing market price of the Company's unrestricted
common stock on the date of the award (net of any consideration paid by
the Named Executive Officer). The number and dollar value of all
Restricted Stock holdings of the Named Executive Officers with respect
to which the restrictions have not lapsed as of August 15, 1997,
calculated using the closing market price of the Company's unrestricted
common stock on June 30, 1997, were as follows: 49,562 shares
($768,211) by Mr. Garvey; 7,534 shares ($116,777) by Mr. Lucas; 6,878
shares ($106,609) by Mr. Rocchio, and 6,039 shares ($93,605) by Mr.
Wheeler. Dividends are paid on shares of Restricted Stock.
(3) The compensation reported represents Company contributions to the
401(k) Plan and premiums for 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, 1997:
Term and
Whole Life
Name 401(k) Plan Insurance
================ =========== ===========
Robert A. Garvey $4,215 $2,207
<PAGE>
William R. Lucas, Jr. 5,797 354
John M. Casey 5,829 483
Frederick J.Rocchio, Jr. 5,493 448
Jack R. Wheeler 3,731 918
(4) Mr. Garvey joined the Company in January 1996.
(5) Consists solely of amounts paid to reimburse Mr. Garvey for loss on
forfeiture of stock award from his previous employer during 1997 and
lost profit sharing benefits from his former employer during 1996.
(6) Includes the value of Restricted Stock award(s) granted under the MIP
on the date of such grant(s). Restricted Stock awards under the MIP are
made in the discretion of the Compensation and Stock Option Committee
of the Board of Directors and recipients pay only a nominal
consideration (par value) for the issuance of the Restricted Stock. No
Restricted Stock awards were made under the MIP in fiscal 1997 to the
Named Executive Officers. 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. Lucas' 1996 award (8,000
shares) was made on August 4, 1995, at a per share price of $19.75, and
vests in equal increments of one-fourth over four years; Mr. Casey's
1995 award (5,000 shares) was made on October 18, 1994 at a per share
price of $26.875, and vested in equal increments of one-fourth each
year until his resignation in July, 1997, at which time the remainder
of such shares were vested by the Compensation and Stock Option
Committee; Mr. Rocchio's 1996 award (6,000 shares) was made on October
16, 1995, at a per share price of $17.125, and vests in equal
increments of one-fourth over four years.
(7) Includes the value of Restricted Stock issued under the SAP in lieu of
cash compensation to which the Named Executive Officer would otherwise be
entitled on the date of such issuance. Each of the Named Executive Officers 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
include 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: 1997 -$148,554
and 1996 - $72,126; Mr. Lucas: 1997 - $30,026 and 1996 - $14,442; Mr. Casey:
1997 - $8,469, 1996 - $16,860, and 1995 - $26,557; Mr. Rocchio: 1997 - $32,995
and 1996 - $0; and Mr. Wheeler: 1997 - $12,923, 1996 - $15,096, and 1995 -
$54,996. Such amounts are not included in the "Salary" or "Bonus" columns in the
table above.
(8) Mr. Lucas joined the Company in July 1995.
(9) Mr. Casey joined the Company in October 1994 and resigned from the
Company in July 1997.
(10) Mr. Rocchio joined the Company in October 1995.
</FN>
</TABLE>
STOCK OPTION PLAN
The following table provides certain information concerning individual
grants of stock options under the Company's 1986 Stock Option Plan and the MIP
made during the fiscal year ended June 30, 1997, to each of the Named Executive
Officers:
<PAGE>
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential
Realizable Value at
Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants (1) for Option Term
------------------------------------------------------- -------------------------
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or Base
Options/SARs Employees Price Expiration
Name Granted (1) In Fiscal Year ($/Sh) Date 5% 10%
- -------------- --------------------------------------------------------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
William R. Lucas, Jr. 60,000 11% $16.625 2006 $627,322 $1,589,758
John M. Casey... 60,000 11% $16.625 2006 $627,322 $1,589,758
Frederick J. Rocchio, Jr.... 60,000 11% $16.625 2006 $627,322 $1,589,758
Jack R. Wheeler... 50,000 9% $16.625 2006 $522,769 $1,324,798
<FN>
(1) These options vest equally over a five year period beginning with the
grant date, July 1, 1996, and each anniversary date thereafter.
</FN>
</TABLE>
The following table provides certain information concerning each exercise
of stock options during the fiscal year ended June 30, 1997 by each of the Named
Executive Officers, and the fiscal year-end value of unexercised options held by
such persons, under the Company's 1986 Stock Option Plan and the MIP.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Options/SARs Options/SARs
Shares at FY-End (#) at FY-End ($)
Acquired
On Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable (1)
- ----------- -------- -------- ------------- ----------------
<PAGE>
Robert A.
Garvey.... 0 0 16,667/83,333 $-0-/-0-
William R.
Lucas, Jr.. 0 0 24,000/36,000 $-0-/-0-
John M.
Casey..... 0 0 24,000/36,000 $-0-/-0-
Frederick J.
Rocchio,Jr.. 0 0 24,000/36,000 $-0-/-0-
Jack R.
Wheeler... 0 0 20,000/30,000 $-0-/-0-
- ------
(1) The stock options were granted under the 1986 Stock Option Plan and the
MIP. The fair market value of the Common Stock at June 30, 1997 was
$15.50 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.
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 by
the Compensation and Stock Option Committee of the Board of Directors (the
"Committee"). 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 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
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.
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
Name of Individual Death Benefit Retirement Benefit
================== ============= ====================
Robert A. Garvey $2,362,500 $225,000
William R. Lucas, Jr. 0 0
John M. Casey 1,134,000 108,000
Frederick J. Rocchio, Jr. 0 0
Jack R. Wheeler 1,155,002 110,000
Effective July 1, 1997, the Security Plan was dissolved, and the present
value of each participant's benefits reflected above was contributed to the
Birmingham Steel Corporation Executive Retirement and Compensation Deferral
Plan, a non-qualified defined contribution plan.
EXECUTIVE SEVERANCE PLAN
The Company's Board of Directors has adopted the Birmingham Steel
Corporation Executive Severance Plan (the "Severance Plan"). Participation in
the Severance Plan is limited to a select number of key members of management of
the Company as designated by the Board of Directors, including the executive
officers named in the Summary Compensation Table, and is designed to reassure
participants in the event of a Change in Control (as defined below) of the
Company, so that they can continue to focus their time and energy on
business-related concerns rather than personal concerns. A Change in Control is
defined as (i) the acquisition by any person, entity or group of 15% or more of
the combined voting power of the Company's outstanding securities; (ii) a change
in the majority of the Board of Directors within a period of two consecutive
years or less unless the new Directors were elected or nominated by at least
two-thirds of the continuing Directors; or (iii) the consummation of a
transaction requiring stockholder approval for the acquisition of the Company by
an entity other than the Company or a subsidiary through the purchase of assets,
or by merger, or otherwise. A participant is entitled to benefits under the
Severance Plan if, within two years after a Change in Control, the participant's
employment is terminated by the Company Without Substantial Cause or is
voluntarily terminated by the participant for good reason ("Good Reason").
Termination "Without Substantial Cause" means a termination that is neither for
Substantial Cause or disability. "Substantial Cause" for purposes of the
Severance Plan shall mean: (i) a participant's felony conviction; (ii) the
participant's failure to contest prosecution for a felony; or (iii) a
participant's willful misconduct or dishonesty. "Good Reason" is defined as: (i)
the assignment to the participant of duties that are materially inconsistent
with the participant's position or a change in the
<PAGE>
participant's title or office without his or her consent; (ii) a reduction in
the participant's salary or the Company's failure to increase the participant's
salary by a specified percentage and by a specified date; (iii) a change in the
participant's principal work location to a location more than 25 miles from his
or her current principal work location; (iv) the Company's failure to maintain
any benefit or compensation plan (collectively, "Plans") in which the
participant was participating, a reduction of the participant's benefits under
the Plans, or the failure to provide the participant with any fringe benefits or
the same number of vacation days to which he or she was entitled prior to a
Change in Control; (v) the Company's failure to pay the participant any
compensation within seven days of its due date; (vi) the Company's failure to
require any successor to the Company to assume the obligations pursuant to the
Severance Plan; or (vii) any purported termination of the participant's
employment by the Company in a manner inconsistent with the Severance Plan.
The benefits provided under the Severance Plan following a Change in
Control include a lump sum payment upon covered terminations equal to 200% of a
participant's annual compensation ("Annual Compensation") for the year
immediately preceding his or her termination. Annual Compensation for purposes
of the Severance Plan means the total of all compensation, including wages,
salary, bonuses, and any other benefit of monetary value, whether in the form of
cash or otherwise, paid as consideration for the Participant's service to the
Company, except for amounts paid by the Company in connection with a
Participant's coverage under certain employee welfare benefit arrangements.
Benefits under the Severance Plan also include the maintenance by the Company of
all life insurance, accidental death and dismemberment insurance and medical,
dental and prescription drug plans in which the participant was entitled to
participate for up to one year after a participant's termination following a
Change in Control. The Severance Plan also requires the Company to provide
participants with a lump-sum payment equal to any accrued but unpaid salary,
bonuses, and other benefits.
<PAGE>
The Severance Plan is unfunded but contains provisions which allow for
the creation of a trust to help ensure the payment of benefits under the
Severance Plan.
DIRECTOR COMPENSATION
For fiscal 1997 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.
DIRECTOR STOCK OPTION PLAN
The Company's Board of Directors has adopted and the stockholders have
approved 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.
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
nine 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.
The Director Plan will be administered by the Company and the Compensation and
Stock Option Committee of the Board of Directors of the Company.
Under the Director Plan, on the date of
<PAGE>
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.
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.
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 January, 1997, the Company loaned to Mr. Garvey the principal amount
of $55,897.86, the purpose of which was to pay taxes on restricted stock which
vested in January, 1997. The note is payable on demand and bears interest at the
annual rate equal to the short-term applicable federal rate for January 1997,
which was 5.63%. This note will be paid in full from Mr. Garvey's incentive
compensation to be paid in September 1997.
In October 1996, the Company loaned to Mr. Casey the principal amount
of $6,658.34 and to Mr. Rocchio the principal amount of $7,841.82 for the
purpose of paying taxes on restricted stock which vested in October, 1996. These
notes are payable on demand and bear interest at an annual rate equal to the
short-term applicable federal rate for October 1996, which was 6.07%. Mr. Casey
repaid his note in July 1997 and Mr. Rocchio's note will be paid in full from
his incentive compensation to be paid in September 1997.
In August 1996, the Company loaned to Mr. Lucas the principal amount of
$11,203.50 for the purpose of paying taxes on restricted stock which vested in
August, 1996. This note is payable on demand and bear interest at an annual rate
equal to the short-term applicable federal rate for August 1996, which was
6.15%. Mr. Lucas' note will be paid in full from his incentive compensation to
be paid in September 1997.
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, 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
<PAGE>
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 1997, production and
supervisory incentives averaged 27% of total compensation, and executive
incentives averaged 22%. 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 the 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, Towers
Perrin 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.
<PAGE>
DISCRETIONARY CASH BONUS PLAN
The Company's Discretionary Cash Bonus Plan, which was established in
fiscal 1986, has ensured 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 if the Company achieves a minimum return
on capital as determined by the Committee ("the threshold return"). If the
threshold return is achieved, the amount of the bonus pool is 3.5% of pre-tax
earnings. The pool may be higher than 3.5% of pre-tax earnings if return on
capital exceeds the threshold return. The amount of the bonus pool is determined
according to a formula which corresponds with the Company's actual return on
capital for the fiscal year. The plan authorizes adjustment of the pre-tax
earnings used in this calculation to exclude the effects of interest expense and
a portion of pre-operating and startup losses associated with the commencement
of new operations.
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 using the performance goals established
by the Committee under the Chief Executive Officer Incentive Compensation Plan
(discussed below). 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 link directly 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.
<PAGE>
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 1997 will be paid by September 15, 1997, and
represent compensation earned for the fiscal year ended June 30, 1997.
LONG TERM INCENTIVE PLANS
The purpose of the Company's long-term incentive plans discussed below
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 1986 Stock Option Plan and the MIP, each of which were
approved by the Board of Directors and the stockholders of the Company, the
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 these plans. 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 1997, options were granted under the 1986 Stock Option Plan
and the MIP to four of the Named Executive Officers. During fiscal 1997, no
Named Executive Officers exercised stock options.
<PAGE>
The SAP, 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 this 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 SAP 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 fiscal 1997. 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
<PAGE>
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.
THE CHIEF EXECUTIVE OFFICER INCENTIVE COMPENSATION PLAN
The Board of Directors has adopted and the stockholders have approved
the Birmingham Steel Corporation Chief Executive Officer Incentive Compensation
Plan (the "CEO Plan"). The purpose of the CEO 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 CEO 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 CEO Plan was submitted to and approved by the stockholders in order to
qualify CEO 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 material terms under which the remuneration is to be
paid, including the performance goals, are disclosed to stockholders and
approved by a
<PAGE>
majority vote of the stockholders 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 CEO
Plan is intended to be qualified for the foregoing exemptive treatment.
Pursuant to the CEO 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.
SUMMARY
The Company's executive compensation program encourages executives to
increase profitability for stockholder value. The emphasis on incentive
compensation for executives is consistent with the pay-for-performance policy
applied throughout the Company. The Committee believes this approach provides
competitive compensation and is in the best interests of the stockholders.
The Board of Directors has adopted and recommended for submission to
the Company's stockholders for their approval the Birmingham Steel Corporation
1997 Management Incentive Plan (the "1997 Plan"). The 1997 Plan is intended to
be a continuation of the Company's incentive compensation program currently
provided by the Company's 1986 Stock Option Plan and the MIP. The primary
purposes for submitting the 1997 Plan for approval at the 1997 annual meeting of
stockholders are to provide sufficient shares for the grant of future awards to
officers and key employees of the Company and to comply with certain of the
provisions of Section 162(m) of the Code, in order that certain compensation
attributable to awards under the Company's management incentive program will
qualify as performance-based compensation and therefore not be subject to the
limitation on the deductibility of compensation set forth in Section 162(m) of
the Code.
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
<PAGE>
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 ("S&P") 500 Stock Index and
the S&P Steel Industry Group Index for the period of five years commencing on
July 1, 1992 and ending on June 30, 1997. The graph assumes that the value of
the investment in the Company's Common Stock and each index was $100 on July 1,
1992, and that all dividends were reinvested.
AGENDA ITEM TWO
APPROVAL OF 1997 MANAGEMENT INCENTIVE PLAN
On January 13, 1997, the Board of Directors of the Company approved the
adoption of the Birmingham Steel Corporation 1997 Management Incentive Plan (the
"1997 Plan"), and recommended that the 1997 Plan be submitted to stockholders
for their approval at the 1997 Annual Meeting. The purpose of the 1997 Plan is
to enable the Company, its subsidiaries and affiliates to attract and retain
employees who contribute to the Company's success and to enable such employees
to participate in the long-term success and growth of the Company. The 1997 Plan
provides for the award of incentive and non-qualified stock options, stock
appreciation rights, restrictive stock and performance awards.
The 1997 Plan is intended to be a continuation of the Company's
incentive compensation program currently provided by the Company's 1986 Stock
Option Plan and the MIP. The primary purposes for submitting the 1997 Plan for
approval at the 1997 Annual Meeting of stockholders are to provide sufficient
shares for the grant of future awards to officers and key employees of the
Company and to comply with certain of the provisions of Section 162(m) of the
Code, in order that
<PAGE>
certain compensation attributable to awards under the Company's management
incentive program will qualify as performance-based compensation and therefore
not be subject to the limitation on the deductibility of compensation set forth
in Section 162(m) of the Code.
The Board of Directors believes that the Company should have shares
available to grant awards to certain of its officers and key employees. The
Board of Directors believes that the Company and its stockholders significantly
benefit from having the Company's key management employees receive such awards,
and that the opportunity thus afforded these employees to acquire common stock
of the Company is an essential element of an effective management incentive
program. The Board of Directors also believes that stock based awards are very
valuable in attracting and retaining highly qualified management personnel and
in providing additional motivation to management to use their best efforts on
behalf of the Company and its stockholders.
A summary of the major provisions of the 1997 Plan is set forth below.
The summary is qualified in its entirety by reference to the 1997 Plan, which is
attached to this Proxy Statement as Exhibit "A".
ADMINISTRATION
The 1997 Plan will be administered by the Committee, which will consist
exclusively of individuals who qualify both as "disinterested persons" as
defined by Rule 16b-3(d)(3) under the Securities Exchange Act of 1934, and
"outside directors" as defined under Section 162(m) of the Internal Revenue Code
and the treasury regulations thereunder. The Committee shall have sole authority
to select the officers and other key employees to whom grants may be made under
the 1997 Plan, to determine the type of incentive awards to be granted to the
eligible employee, the number of shares of stock to be covered by each award,
and the terms and conditions of awards granted under the 1997 Plan.
SHARES RESERVED UNDER THE 1997 PLAN; LIMITATIONS
<PAGE>
The total number of shares of the Company's common stock authorized and
available for distribution under the 1997 Plan shall be 900,000 (subject to
appropriate adjustments to reflect changes in the capitalization of the
Company). Such shares may consist of authorized and unissued shares or treasury
shares. Shares subject to lapsed, forfeited or canceled awards will be available
for distribution under the 1997 Plan.
The maximum number of shares subject to awards which may be granted
under the 1997 Plan to any participant in any one year is 100,000 shares
(subject to appropriate adjustments to reflect changes in the capitalization of
the Company). The purpose of this limitation is to comply with certain of the
provisions of Section 162(m) of the Code so that the compensation attributable
to stock options granted under the 1997 Plan would qualify for the performance
based exclusion in Section 162(m) of the Code and therefore would not be subject
to the limit on the deductibility of compensation set forth in Section 162(m) of
the Code.
ELIGIBILITY
Persons eligible for participation in the 1997 Plan shall include
officers and other key employees of the Company, its subsidiaries or its
affiliates, but excluding any person who serves only as a director of the
Company.
STOCK BASED AWARDS
The 1997 Plan provides for the following types of incentive awards:
Stock Options. Stock options may be granted either alone or in
conjunction with other awards under the 1997 Plan. Stock options granted under
the 1997 Plan may be either incentive stock options (as defined under Section
422 of the Code) or non-qualified stock options. To the extent that any stock
option fails to qualify as an incentive stock option, it shall constitute a
non-qualified stock option.
The exercise price per share of stock purchaseable pursuant to exercise of
a stock option shall be not less than 100% of the fair market value of the stock
on the date of grant of the option (or, in the case of a ten percent
stockholder, 110%). The term of each stock option shall be fixed by the
Committee, but not stock option granted under the 1997 Plan shall be exercisable
more than ten (10) years after the date of grant (or, in the case of a ten
percent stockholder, five years).
Stock options will be exercisable at such time or times and subject to
such terms and conditions as determined by the Committee. The conditions may
include time of service, price of the Company's stock or any other criteria.
Stock options may be exercised in whole or in part at any time by
giving written notice of exercise to the Company and tendering payment in full
for the shares. Payment may be made in cash or, if permitted by the Committee,
by surrender of shares of stock of the Company owned by the optionee. While
stock options are generally non-transferable other than by will or by the laws
of descent and distribution, non-qualified stock options may be transferable, in
the discretion of the Committee, to family members or trusts or partnerships in
which family members are the only partners.
In the event of termination of an optionee's employment with the
Company (or any subsidiary or affiliate), by reason of death or disability,
options which were otherwise exercisable at the date of termination of
employment may be exercised thereafter by the estate or legal representative of
the optionee or the optionee generally for a period of one (1) year from the
date of termination of employment or until the expiration of the stated term of
the option, whichever period is shorter. In the event of termination of
employment by reason of retirement, options which were otherwise exercisable at
the date of termination generally may be exercised for a period of one (1) year
from the date of termination of employment or expiration of the stated term of
the option, whichever period is shorter. If employment is terminated for reasons
other than death, disability, or retirement, any option which was otherwise
exercisable on the date of termination of employment may be exercised for a
period of
<PAGE>
three (3) months from the date of termination or the balance of the stated term
of the option, whichever is shorter, so long as termination of employment was
without cause.
With respect to incentive stock options, the aggregate fair market
value of stock subject to option (determined at the time of grant) with respect
to which incentive stock options are first exercisable by an optionee during any
calendar year under all stock option plans of the Company and its subsidiaries
shall not exceed $100,000.
Stock Appreciation Rights. Stock Appreciation Rights ("SARs") may be
granted in conjunction with incentive or non-qualified stock options granted
under the 1997 Plan, or may be granted alone. SARs granted in conjunction with
stock options shall be exercisable only at such time or times and to the extent
that the stock options to which they relate shall be exercisable. Upon the
exercise of an SAR, an optionee shall be entitled to receive an amount in cash
or shares of common stock equal in value to the excess of the fair market value
of one share of stock over the exercise price per share specified in the related
option or SAR, multiplied by the number of shares in respect of which the SAR
shall have been exercised. The Committee shall have the right to determine the
form of payment.
While SARs are generally non-transferable, other than by will or by the
laws of descent and distribution, and are generally exercisable during the
participant's lifetime only by the participant, SARs may be transferable to the
extent the underlying stock option is transferable.
Restricted Stock. Shares of Common Stock may be issued either alone or
in addition to other awards granted under the 1997 Plan subject to such
conditions as may be determined by the Committee ("Restricted Stock"). The
Committee may condition the grant of Restricted Stock upon the attainment of
specified performance goals or such other criteria as the Committee may
determine in its discretion. The Committee shall determine the time or times at
which grants of Restricted Stock will be made, the number of shares to be
<PAGE>
awarded, the recipients of the award, and the price, if any, to be paid for
the shares.
Stock certificates representing Restricted Stock granted to an employee
will be registered in the employee's name but will be held by the Company on
behalf of the employee until all restrictions attaching to the shares have
lapsed, and the participant shall deliver a stock power endorsed in blank to the
Company relating to the stock covered by the award. However, the employee will
have the right to vote the shares and receive dividends on such shares.
Subject to additional provisions which may be set by the Committee, all
Restricted Stock awards shall provide that the recipient shall not be permitted
to sell, transfer, pledge or assign shares of Restricted Stock awarded under the
1997 Plan during the applicable restriction period.
Upon termination of employment for any reason during the period while
restrictions still attach to the Restricted Stock, all shares still subject to
restrictions shall be forfeited by the participant and the participant shall
only receive the amount, if any, paid by the participant for the forfeited
shares. As shares are released from restrictions, a certificate will be
delivered to the participant for that number of released shares. In no event
shall restrictions, including risk of forfeiture, attach to the Restricted Stock
for a term exceeding ten years from the date of the award.
The Committee may, in its discretion, accelerate or waive any
restrictions attaching to Restricted Stock in whole or in part based upon
performance or such other factors as the Committee may determine, including
special hardship circumstances.
Performance Awards. The 1997 Plan authorizes the grant of performance
awards to employees payable in either stock or cash or a combination thereof, in
the sole discretion of the Committee ("Performance Award"). Generally, the
Committee will establish achievement objectives for an employee to whom a
Performance Award has been granted. The Committee shall determine to whom the
award
<PAGE>
will be made, the length of the performance period, conditions and terms of
performance goals and the manner of payment of the Performance Award. Generally,
the period during which achievement objectives must be attained will not be less
than one year nor more than five years. If at the end of the performance period
the specified objectives have been attained, the employee will be deemed to have
fully earned the Performance Award. If such objectives have not been fully
attained, the employee may be deemed to have earned a portion of the Performance
Award and be eligible to receive a portion of the total award, as determined by
the Committee. If the Committee in its discretion sets a required minimal level
of achievement which is not attained during the performance period, the employee
is entitled to no portion of the Performance Award. An employee granted a
Performance Award who terminates employment by reason of death, disability or
retirement before the end of the performance period will be entitled to receive
a portion of any earned Performance Award. Termination of employment for any
other reason will result in a forfeiture of all rights to the Performance Award.
Unless otherwise determined by the Committee, Performance Awards are intended to
qualify as performance-based compensation for purposes of Section 162(m) of the
Internal Revenue Code and the treasury regulations thereunder.
LOAN PROVISIONS
With the consent of the Committee, the Company may make or arrange for
a loan to an employee with respect to the exercise of any stock option granted
under the 1997 Plan or with respect to the payment of any purchase price
required in respect of any Restricted Stock award. The Committee shall have full
authority to determine the amount, terms and conditions of any such loan,
including interest rates, payment schedules and default provisions.
AMENDMENTS
The Board at any time may amend, alter or discontinue the 1997 Plan,
but no such amendment, alteration or discontinuation shall be made which would
impair rights previously
<PAGE>
granted to any participant in the 1997 Plan without his or her consent, or
which, without the approval of the Company's stockholders would (1) increase the
total number of shares reserved to the 1997 Plan, (2) decrease the exercise
price of any option to less than 100% of the fair market value of the Company's
shares on the date of grant, (3) change the class of participants eligible to
participate in the 1997 Plan, or (4) extend the maximum term of a stock option
granted under the 1997 Plan.
The Committee may amend the terms of any award or option previously
granted under the 1997 Plan, but no such amendment shall impair the rights of
any holder without his or her consent.
PROVISION RELATING TO A CHANGE OF CONTROL
In the event of a Change of Control or a Potential Change of Control
(as defined in the 1997 Plan), any SARs and any stock options awarded under the
1997 Plan which were not previously exercisable and vested shall immediately
fully vest and shall become exercisable as of the date of such Change of Control
or Potential Change of Control or six months after the date of the award of the
SAR or stock option, whichever is later, and the restrictions and deferral
limitations applicable to any Restricted Stock award made under the 1997 Plan
shall lapse and such shares shall be deemed fully vested, except that the
Restricted Stock may not be sold or transferred until the expiration of six
months from the date of grant of the Restricted Stock. The value of all
outstanding stock options, SARs, Restricted Stock or Performance Awards shall,
to the extent determined by the Committee, be cashed out on the basis of the
"Change of Control Price" as of the date of the Change of Control or Potential
Change of Control, unless another date is determined by the Committee. Then
Change of Control of Control Price shall mean the highest price per share paid
in any transaction reported on the New York Stock Exchange composite tape with
respect to the Company's shares, or paid or offered in any transaction relating
to the potential or actual Change of Control at any time during the preceding 60
days, as determined by the Committee, except that in
<PAGE>
the case of incentive stock options and SARs granted in conjunction with
incentive stock options, such price shall be based only on transactions reported
for the date on which the Committee decides to cash out such options.
CHANGES AFFECTING COMPANY'S CAPITAL
In the event of certain changes in the Company's capital structure,
including any merger, reorganization, consolidation, recapitalization or stock
dividend, the Board of Directors will have the power to adjust the number and
kinds of shares covered by outstanding awards and to make other adjustments in
awards under the 1997 Plan as it deems appropriate.
EFFECTIVE DATE OF PLAN; TERM
The 1997 Plan became effective as of the date it was adopted by the
Company's Board of Directors, subject to approval by a majority vote of the
Company's stockholders within 12 months after its adoption, and any awards
granted prior to such approval shall be subject to such approval. No award under
the 1997 Plan may be granted on or after the tenth anniversary of the date of
stockholder approval of the 1997 Plan.
DISCUSSION OF FEDERAL INCOME TAX CONSEQUENCES
The following statements are based on current interpretations of
existing Federal income tax laws. The law is technical and complex and the
statements represent only a general summary of some of the applicable
provisions.
Stock Options. There are no Federal income tax consequences either to
the optionee or to the Company upon the grant of a stock option. On exercise of
an incentive stock option, the optionee will not recognize any income and the
Company will not be entitled to a deduction for regular tax purposes, although
such exercise may give rise to liability for the optionee under the alternative
minimum tax provisions of the Code. Generally, if the optionee disposes of
shares acquired upon exercise of an incentive stock option within two years of
the date of grant or one year of
<PAGE>
the date of exercise, the optionee will recognize compensation income and the
Company will be entitled to a deduction for tax purposes in the amount equal to
the excess of the fair market value of the shares on the date of exercise over
the option exercise price (or the gain on sale, if less). Otherwise, the Company
will not be entitled to any deduction for tax purposes upon disposition of such
shares, and the entire gain or loss for the optionee will be treated as a
capital gain or loss. On exercise of a non-qualified stock option, the amount by
which the fair market value of the shares on the date of exercise exceeds the
option exercise price will be taxable to the optionee as compensation income and
will be deductible for tax purposes by the Company. The disposition of shares
acquired upon exercise of a non-qualified stock option will generally result in
a capital gain or loss for the optionee, but will have no further tax
consequences for the Company.
Stock Appreciation Rights. The grant of an SAR generally does not
result in income to the grantee or in a deduction for the Company. Upon the
exercise of an SAR, the grantee will recognize ordinary income and the Company
will be entitled to a tax deduction measured by the fair market value of the
shares plus any cash received.
Restricted Stock. The grant of restricted stock generally does not
result in income to the grantee or in a deduction for the Company, assuming the
shares transferred are subject to restrictions which constitute a "substantial
risk of forfeiture" and the grantee does not make a special tax election. If
there are no such restrictions and no special tax election, the grantee would
recognize compensation income upon receipt of the shares. Dividends paid to the
grantee while the stock is subject to such restrictions, absent a special tax
election, would be treated as compensation for Federal income tax purposes. At
the time the restrictions lapse, the grantee would recognize compensation income
for the difference between the fair market value and the price paid, if any, and
the Company would be entitled to a tax deduction of an equal amount.
<PAGE>
Performance Awards. The grant of performance award generally does not
result in income to the grantee or in a deduction for the Company. Upon the
receipt of cash or shares of common stock under a performance unit, the grantee
will recognize compensation income and the Company will be entitled to a tax
deduction measured by the fair market value of the shares plus any cash received
by the grantee.
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 1997 MANAGEMENT INCENTIVE PLAN.
AGENDA ITEM THREE
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, 1998. 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 1998 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
13, 1998.
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.
<PAGE>
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, 1997.
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 12, 1997
BIRMINGHAM STEEL CORPORATION
This Proxy is solicited on behalf of the Board of Directors for use at
the 1997 Annual Meeting of Stockholders to be held on October 14, 1997. 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 14, 1997, at
10:00 a.m. local time at The New York Palace, 455 Madison Avenue, New York, New
York, 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; and Robert D. Kennedy.
( ) FOR all nominees listed above (except as indicated to the contrary
below) ( )
<PAGE>
WITHHOLD AUTHORITY
(2) To approve the 1997 Management Incentive
Plan, attached as Exhibit "A" to the Proxy
Statement.
( ) FOR ( ) AGAINST ( ) ABSTAIN
(3) 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, 1998.
( ) FOR ( ) AGAINST ( ) ABSTAIN
(4) 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) AND (3).
The undersigned revokes any prior proxies to vote the shares covered by this
proxy.
Signature
Signature
Date: , 1997
(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 stockholder. If no
direction is made, it will be voted FOR
<PAGE>
Proposals 1, 2 and 3 and as the proxies deem advisable on such other matters as
may come before the meeting.
EXHIBIT A
BIRMINGHAM STEEL CORPORATION
1997 MANAGEMENT INCENTIVE PLAN
SECTION 1. GENERAL PURPOSE OF PLAN:
DEFINITIONS.
The name of this plan is the Birmingham Steel Corporation 1997
Management Incentive Plan (the "Plan"). The purpose of the Plan is to enable
Birmingham Steel Corporation (the "Company") and its Subsidiaries and Affiliates
to attract and retain employees who contribute to the Company's success by their
ability, ingenuity and industry, and to enable such employees to participate in
the long-term success and growth of the Company through an equity interest in
the Company.
For purposes of the Plan, the following terms shall be defined as set
forth below:
a. "Affiliate" means any corporation (other than a Subsidiary),
partnership, joint venture or any other entity in which the Company owns,
directly or indirectly, at least a 10 percent beneficial ownership interest.
b. "Board" means the Board of Directors of the Company.
c. "Cause" means a felony conviction of a participant or the failure of a
participant to contest prosecution for a felony, or a participant's willful
misconduct or dishonesty which is harmful to the business or reputation of the
Company or any Subsidiary or Affiliate.
d. "Code" means the Internal Revenue Code of 1986, as amended, or any
successor thereto.
e. "Committee" means a committee of the Board appointed for the purpose of
administering the Plan, which committee shall consist exclusively of
Disinterested Persons.
f. "Commission" means the Securities and Exchange Commission.
g. "Company" means Birmingham Steel Corporation, a corporation organized
under the laws of the State of Delaware (or any successor corporation).
h. "Disability" means total and permanent disability as determined under
the Company's long term disability program.
i. "Disinterested Person" shall mean a member of the Company's Board who
satisfies the requirements for being (i) a "disinterested person" within the
meaning set forth in Rule 16b-3(b)(3) as promulgated by the Commission under the
Exchange Act, or any successor definition adopted by the Commission, and (ii) an
"outside director" within the meaning set forth in Section 162(m) of the Code
and the treasury regulations promulgated thereunder, as amended from time to
time.
j. "Early Retirement" means retirement from active employment with the
Company, any Subsidiary and any Affiliate on or after the date on which a
participant reaches the age of fifty-five (55) but before the date on which the
participant reaches the age of sixty-five (65).
k. "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any successor thereto.
l. "Fair Market Value" means, as of any given date, the closing price of
the Stock on such date (or if no transactions were reported on such date on the
next preceding date on which transactions were so reported) on the New York
Stock Exchange Composite Tape or if the Stock is not on such date listed on the
New York Stock Exchange, in the principal market in which such Stock is traded
on such date.
<PAGE>
m. "Incentive Stock Option" means any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.
n. "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
o. "Normal Retirement" means retirement from active employment with the
Company, any Subsidiary, and any Affiliate on or after the date on which a
participant reaches the age of sixty-five (65).
p. "Performance Award" means an award of shares of Stock or cash to the
executives pursuant to Section 8 contingent upon achieving certain performance
goals.
q. "Plan" means this 1997 Management Incentive Plan.
r. "Restricted Stock" means an award of shares of Stock that are subject to
restrictions under Section 7 hereof.
s. "Retirement" means Normal or Early Retirement.
t. "Stock" means the Common Stock of the Company.
u. "Stock Appreciation Right" means a right granted under Section 6 hereof,
which entitles the holder to receive a cash payment or an award of Stock in an
amount equal to the difference between (i) the Fair Market Value of the Stock
covered by such right at the date the right is granted, unless otherwise
determined by the Committee pursuant to Section 6 and (ii) the Fair Market Value
of the Stock covered by such right at the date the right is exercised multiplied
by the number of shares covered by the right.
v. "Stock Option" means any option to purchase shares of Stock granted to
employees pursuant to Section 5.
<PAGE>
w. "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
x. "Ten Percent Shareholder" means a person who owns (after taking into
account the attribution rules of Code Section 424(b)) more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by the Committee which shall at all
times consist of not less than three Disinterested Persons.
The Committee shall have the power and authority to grant to eligible
employees, pursuant to the terms of the Plan: (i) Stock Options; (ii) Stock
Appreciation Rights; (iii) Restricted Stock; or (iv) Performance Awards.
In particular, the Committee shall have the authority:
(i) to select the officers and other key employees of the Company, its
Subsidiaries, and its Affiliates to whom Stock Options, Stock
Appreciation Rights, Restricted Stock, or Performance Awards or a
combination of the foregoing from time to time will be granted
hereunder;
(ii) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted
Stock, or Performance Awards or a combination of the foregoing, are to
be granted hereunder;
(iii) to determine the number of shares of Stock to be covered by each
such award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder including, but not
limited to, any restriction on any Stock Option or other award and/or
the shares of Stock relating thereto based on performance and/or such
other factors as the Committee may determine, in its sole discretion,
and any vesting features based on performance and/or such other factors
as the Committee may determine, in its sole discretion;
(v) to determine whether, to what extent and under what circumstances
Stock and other amounts payable with respect to an award under this
Plan shall be deferred either automatically or at the election of a
participant, including providing for and determining the amount (if
any) of deemed earnings on any deferred amount during any deferral
period.
Subject to Section 10, the Committee shall have the authority to adopt,
alter and repeal such administrative rules, guidelines and practices governing
the Plan as it shall, from time to time, deem advisable; to interpret the terms
and provisions of the Plan and any award issued under the Plan (and any
agreements relating thereto); and to otherwise supervise the administration of
the Plan.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations, and other decisions under or with respect to
the Plan or any award hereunder shall be within the sole discretion of the
Committee, may be made at any time, and shall be final, conclusive, and binding
upon all persons, including the Company, any employee, any holder or beneficiary
of any award granted hereunder and any shareholder.
SECTION 3. STOCK SUBJECT TO PLAN.
The total number of shares of Stock reserved and available for
distribution under the Plan shall be 900,000 (subject to appropriate adjustments
to reflect changes in the capitalization of the Company). Such shares may
consist, in whole or in part, of authorized and unissued shares or treasury
shares.
<PAGE>
The maximum number of shares subject to awards which may be granted
under the Plan to any individual in any one year is 100,000 (subject to
appropriate adjustments to reflect changes in the capitalization of the
Company).
If any shares of Stock that have been subject to Stock Options cease to
be subject to Stock Options, or if any shares subject to any Restricted Stock
award granted hereunder are forfeited or such award is otherwise terminated,
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, stock dividend, or other change in corporate structure
affecting the Stock, a substitution or adjustment shall be made in the aggregate
number of shares reserved for issuance under the Plan, in the number and option
price of shares subject to outstanding Stock Options granted under the Plan and
in the number of shares subject to Restricted Stock awards 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. Such adjusted option price shall also be used to determine
the amount payable by the Company upon the exercise of any Stock Appreciation
Right associated with any Stock Option.
SECTION 4. ELIGIBILITY.
Officers and other key employees of the Company, its Subsidiaries or
its Affiliates (but excluding members of the Committee and any person who serves
only as a director) who are responsible for or contribute to the management,
growth and/or profitability of the business of the Company, its Subsidiaries, or
its Affiliates, are eligible to be granted Stock Options, Stock Appreciation
Rights, Restricted Stock or Performance Awards. The optionees and participants
under the Plan shall be selected from time to time by the Committee, in its sole
discretion, from among those eligible, and the Committee shall determine, in its
sole discretion, the number of shares covered by each award or grant.
<PAGE>
SECTION 5. STOCK OPTIONS.
Stock Options may be granted either alone or in addition to other
awards granted under the Plan. Any Stock Option granted under the Plan shall be
in such form as the Committee may from time to time approve, and the provisions
of Stock Option awards need not be the same with respect to each optionee.
The Stock Options granted under the Plan may be of two types: (i) Incentive
Stock Options and (ii) Non-Qualified Stock Options.
The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock Options, or both types of Stock Options (in
each case with or without Stock Appreciation Rights) except that Incentive Stock
Options shall not be granted to employees of an Affiliate. To the extent that
any Stock Option does not qualify as an Incentive Stock Option, it shall
constitute a separate Non-Qualified Stock Option.
Except as provided in Section 5(j) hereof, no term of this Plan
relating to Incentive Stock Options shall be interpreted, amended or altered,
nor shall any discretion or authority granted under the Plan be so exercised, so
as to disqualify either the Plan or any Incentive Stock Option under Section 422
of the Code. Notwithstanding the foregoing, in the event an optionee voluntarily
disqualifies an option as an Incentive Stock Option within the meaning of
Section 422 of the Code, the Committee may, but shall not be obligated to, make
such additional grants, awards or bonuses as the Committee shall deem
appropriate, to reflect the tax savings to the Company which results from such
disqualification.
Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(a) Option Price. The option price per share of Stock purchasable under a
Stock Option shall be determined by the Committee at the time of grant
but shall not be less than 100% of the Fair Market Value of the Stock
on the date of the grant of the Stock Option; provided, however, if the
Option is an Incentive Stock Option granted to a Ten Percent Share-
holder, the option price for each share of Stock subject to such
Incentive Stock Option shall be no less than one hundred ten percent
(110%) of the Fair Market Value of a share of Stock on the date such
Incentive Stock Option is granted.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, provided that no Stock Option which is granted to a Ten
Percent Shareholder shall be exercisable more than five (5) years after
the date such Stock Option is granted and that no Stock Option which is
granted to an optionee that is not a Ten Percent Shareholder shall be
exercisable more than ten (10) years after the date such Stock Option
is granted.
(c) Exercisability. Subject to paragraph (j) of this Section 5 with
respect to Incentive Stock Options, Stock Options shall be exercisable
at such time or times and subject to such terms and conditions,
including, without limitation, vesting conditions tied to Stock price
or other criteria, as shall be determined by the Committee at grant. If
the Committee provides, in its discretion, that any Stock Option is
exercisable only in installments, the Committee may waive such
installment exercise provision at any time in whole or in part based on
performance and/or such other factors as the Committee may determine in
its sole discretion.
(d) Method of Exercise. Stock 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. As determined by the Committee, in its sole discretion, at
or after grant, payment in
<PAGE>
full or in part may also be made in the form of unrestricted Stock
owned by the optionee or, in the case of the exercise of a
Non-Qualified Stock Option, Restricted Stock subject to an award
hereunder may be used for payment (based, in each case, on the Fair
Market Value of the Stock on the date the option is exercised, as
determined by the Committee). If payment of the option exercise price
of a Non-Qualified Stock Option is made in whole or in part with shares
of Restricted Stock the shares received upon the exercise of such Stock
Option shall be restricted or deferred, as the case may be, in
accordance with the original term of the Restricted Stock award in
question, except that the Committee may direct that such restrictions
or deferral provisions shall apply only to the number of such shares
equal to the number of shares of Restricted Stock surrendered upon the
exercise of such option. No shares of unrestricted Stock shall be
issued until full payment therefor has been made. An optionee shall
have the rights to dividends or other rights of a stockholder with
respect to shares subject to the option when the optionee has given
written notice of exercise and has paid in full for such shares.
(e) Non-transferability of Options. Except as otherwise set forth in
this Section 5(e), no Stock Option shall be transferable by the
Optionee otherwise than by will or by the laws of descent and
distribution. All Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee. The Committee shall have the
discretionary authority, however, to grant Non-Qualified Stock Options
which would be transferable to members of an optionee's immediate
family (which shall include, for purposes of this section, spouses and
children and grandchildren, whether natural or adopted), and to trusts
for the benefit of such family members and partnerships in which such
family members are the only partners. For purposes of paragraphs (f),
(g), (h) and (i) of this Section 5, a transferred
<PAGE>
option may be exercised by the transferee only to the extent that the
optionee would have been entitled had the option not been transferred.
(f) Termination of Employment by Reason of Death. Unless otherwise
determined by the Committee, if any optionee's employment with the
Company, any Subsidiary, and any Affiliate terminates by reason of
death, the Stock Option may thereafter be immediately exercised, to the
extent then exercisable (or on such accelerated basis as the Committee
shall determine at or after grant), by the legal representative of the
estate or by the legatee of the optionee under the will of the
optionee, for a period of one (1) year from the date of such death or
until the expiration of the stated term of such Stock Option, whichever
period is the shorter.
(g) Termination of Employment by Reason of Disability. Unless otherwise
determined by the Committee, if any optionee's employment with the
Company, and Subsidiary and any Affiliate terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be
exercised, to the extent it was exercisable at the time of termination
due to Disability (or on such accelerated basis as the Committee shall
determine at or after grant), but may not be exercised after one (1)
year from the date of such termination of employment or the expiration
of the stated term of such Stock Option, whichever period is the
shorter; provided, however, that, if the optionee dies within such
one-year period, any unexercised Stock Option held by such optionee
shall thereafter be exercisable to the extent to which it was
exercisable at the time of death for a period of twelve months from the
date of such death or for the stated term of such Stock Option,
whichever period is the shorter. In the event of termination of
employment by reason of Disability, if an Incentive Stock Option is
exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, such Stock Option will
<PAGE>
thereafter be treated as a Non-Qualified
Stock Option.
(h) Termination of Employment by Reason of Retirement. Unless otherwise
determined by the Committee, if any optionee's employment with the
Company, any Subsidiary and any Affiliate terminates by reason of
Normal or Early Retirement, any Stock Option held by such optionee may
thereafter be exercised to the extent it was exercisable at the time of
such Retirement (or on such accelerated basis as the Committee shall
determine at or after grant), but may not be exercised after one (1)
year from the date of such termination of employment or the expiration
of the stated term of such Stock Option, whichever period is the
shorter; provided, however, that if the optionee dies within such
one-year period any unexercised Stock Option held by such optionee
shall thereafter be exercisable, to the extent to which it was
exercisable at the time of death, for a period of twelve months from
the date of such death or for the stated term of the Stock Option,
whichever period is the shorter. In the event of termination of
employment by reason of Retirement, if an Incentive Stock Option is
exercised after the exercise periods that apply for purposes of Section
422 of the Code, such Stock Option will thereafter be treated as a
Non-Qualified Stock Option.
(i) Other Termination of Employment. Unless otherwise determined by the
Committee, if an optionee's employment with the Company, any Subsidiary
and any Affiliate terminates for any reason other than death,
Disability or Retirement, the Stock Option shall thereupon terminate,
except that such Stock Option may be exercised for the lesser of three
months from the date of termination or the balance of such Stock
Option's term if the optionee's employment with the Company, and
Subsidiary and any Affiliate is involuntarily terminated by the
optionee's employer without Cause.
(j) Limit on Value of Incentive Stock Option First Exercisable
Annually. The
<PAGE>
aggregate Fair Market Value (determined at the time of grant) of the
Stock for which Incentive Stock Options are exercisable for the first
time by an optionee during any calendar year under the Plan (and/or any
other stock option plans of the Company, any Subsidiary and any
Affiliate) shall not exceed $100,000.
SECTION 6. STOCK APPRECIATION RIGHTS.
(a) Grant and Exercise When Granted in Conjunction With Stock Options.
Stock Appreciation Rights may be granted in conjunction with all or part of any
Stock Option granted under the Plan and may contain terms and conditions
different from those of the related Stock Option, except as otherwise provided
below. In the case of a Non-Qualified Stock Option, such rights may be granted
either at or after the time of the grant of such Non-Qualified Stock Option. In
the case of an Incentive Stock Option, such rights may be granted only at the
time of the grant of such Incentive Stock Option.
A Stock Appreciation Right or applicable portion hereof granted with
respect to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option, except that,
unless otherwise provided by the Committee at the time of grant, a Stock
Appreciation Right granted with respect to less than the full number of shares
covered by a related Stock Option shall only be reduced if and to the extent
that the number of shares covered by the exercise or termination of the related
Stock Option exceeds the number of shares not covered by the Stock Appreciation
Right.
A Stock Appreciation Right may be exercised by an optionee, in
accordance with paragraph (c) of this Section 6, by surrendering the applicable
portion of the related Stock Option. Upon such exercise and surrender, the
optionee shall be entitled to receive an amount determined in the manner
prescribed in paragraph (c) of this Section 6. Stock Options which have been so
surrendered, in whole or in part, shall no longer be exercisable to the extent
the related Stock Appreciation Rights have been exercised.
<PAGE>
(b) Grant and Exercise When Granted Alone. Stock Appreciation Rights may be
granted at the discretion of the Committee in a manner not related to an award
of a Stock Option. The Stock Appreciation Right, granted under Section 6(b),
shall be exercisable in accordance with Section 6(c) over a period not to exceed
ten years. Any Stock Appreciation Right which is outstanding on the last day of
the exercisable period shall be automatically exercised on such date for cash or
Common Stock, as determined by the Committee, without any action by the holder.
(c) Terms and Conditions. Stock Appreciation Rights shall be subject to such
terms and conditions, not inconsistent with the provisions of the Plan, as shall
be determined from time to time by the Committee, including the following:
(i) Stock Appreciation Rights granted pursuant to Section 6(a) shall be
exercisable only at such time or times and to the extent that the Stock Options
to which the Stock Appreciation Rights relate shall be exercisable in accordance
with the provisions of Section 5 and this Section 6 of the Plan.
(ii) Upon the exercise of a Stock Appreciation Right granted
pursuant to Section 6(a), an optionee shall be entitled to receive an
amount in cash or shares of Stock equal in value to the excess of the
Fair Market Value of one share of Stock over the option price per share
specified in the related Stock Option multiplied by the number of
shares in respect of which the Stock Appreciation Right shall have been
exercised, with the Committee having the right to determine the form of
payment. Upon the exercise of a Stock Appreciation Right granted
pursuant to Section 6(b), the holder shall be entitled to receive an
amount in cash or shares of Stock equal in value to the excess of the
Fair Market Value of one share of Stock over the Fair Market Value of
one share of Stock at the date the Stock Appreciation Right was granted
multiplied by the number of shares in respect of which the Stock
Appreciation Right shall have been exercised, with the Committee having
the
<PAGE>
right to determine the form of payment.
(iii) Stock Appreciation Rights shall be transferable only
when and to the extent that any underlying Stock Option would be
transferable under paragraph (e) of Section 5 of the Plan. Otherwise,
Stock Appreciation Rights shall not be transferable by the holder other
than by will or the laws of descent and distribution. Except as set
forth above, all Stock Appreciation Rights shall be exercisable, during
the holder's lifetime, only by the holder.
(iv) Upon the exercise of a Stock Appreciation Right granted
pursuant to Section 6(a), the Stock Option, or part thereof to which
such Stock Appreciation Right is related, shall be deemed to have been
exercised for the purpose of the limitation set forth in Section 3 of
the Plan on the number of shares of Stock to be issued under the Plan.
(v) A Stock Appreciation Right granted in connection with an
Incentive Stock Option pursuant to Section 6(a) may be exercised only
if and when the market price of the Stock subject to the Incentive
Stock Option exceeds the exercise price of such Stock Option.
(vi) In its sole discretion, the Committee may provide, at the
time of grant of a Stock Appreciation Right under this Section 6, that
such Stock Appreciation Right can be exercised only in the event of a
"Change of Control" and/or a "Potential Change of Control" (as defined
in Section 12 below).
(vii) The Committee, in its sole discretion, may also provide
that in the event of a "Change of Control" and/or a "Potential Change
of Control" (as defined in Section 12 below) the amount to be paid upon
the exercise of a Stock Appreciation Right shall be based on the
"Change of Control Price" (as defined in Section 12 below).
(viii) Any exercise by a participant of all or a portion of a
<PAGE>
Stock Appreciation Right for cash, may only be made during the period
beginning on the third business day following the date of the Company's
release of its quarterly or annual summary statements of sales and
earnings to the public and ending on the twelfth business day following
such date; provided, however, that the foregoing shall not apply to any
exercise by a participant of a Stock Appreciation Right for cash where
the date of exercise is automatic or fixed in advance under the Plan
and is outside the control of the participant.
SECTION 7. RESTRICTED STOCK.
(a) Administration. Shares of Restricted Stock may be issued either
alone or in addition to other awards granted under the Plan. The Committee shall
determine the officers and key employees of the Company and its Subsidiaries and
Affiliates to whom, and the time or times at which, grants of Restricted Stock
will be made, the number of shares to be awarded, the price, if any, to be paid
by the recipient of Restricted Stock (subject to Section 7(b) hereof), the time
or times within which such awards may be subject to forfeiture, and all other
conditions of the awards. However, in no event shall any restriction, including
risk of forfeiture, attach to the Restricted Stock for a term to exceed ten
years from the date such Stock was granted. The Committee may also condition the
grant of Restricted Stock upon the attainment of specified performance goals, or
such other criteria as the Committee may determine, in its sole discretion. The
provisions of Restricted Stock awards need not be the same with respect to each
recipient.
(b) Awards and Certificates. The prospective recipient of an award of
shares of Restricted Stock shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
(a "Restricted Stock Award Agreement") and has delivered a fully executed copy
thereof to the Company, and has otherwise complied with the then applicable
terms and conditions.
(i) Awards of Restricted Stock must
<PAGE>
be accepted within a period of 60 days (or such shorter period as the
Committee may specify) after the award date by executing a Restricted
Stock Award Agreement and paying whatever price, if
any, is required.
(ii) Each participant who is awarded Restricted Stock shall be
issued a stock certificate in respect of such shares of Restricted
Stock.
Such certificate shall be registered in the name of the participant,
and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such award, substantially in
the following form:
"The transferability of this certificate and the
shares of stock represented hereby are subject to the terms
and conditions (including forfeiture) of the Birmingham Steel
Corporation 1997 Management Incentive Plan and a Restricted
Stock Agreement entered into between the registered owner and
Birmingham Steel Corporation. Copies of such Plan and
Agreement are on file in the offices of Birmingham Steel
Corporation, 1000 Urban Center Drive, Suite 300, Birmingham,
Alabama 35242-2516."
(iii) The Committee shall require that the stock certificates
evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as a condition of any
Restricted Stock award, the participant shall have delivered a stock
power, endorsed in blank, relating to the Stock covered by such award.
(c) Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to this Section 7 shall be subject to the following restrictions and
conditions:
(i) Subject to the provisions of this Plan and Restricted Stock Award
Agreements, during the period established by the Committee in which the
Restricted
<PAGE>
Stock is subject to forfeiture (the "Restriction Period"), the
participant shall not be permitted to sell, transfer, pledge or assign
shares of Restricted Stock awarded under the Plan. Within these limits, the
Committee may, in its sole discretion, provide for the lapse of such
restrictions in installments and may accelerate or waive such restrictions in
whole or in part based on performance and/or such other factors as the Committee
may determine, in its sole discretion.
(ii) Except as provided in paragraph (c)(i) of this Section 7, the
participant shall have, with respect to the shares of Restricted Stock, all of
the rights of a stockholder of the Company, including the right to receive any
dividends.
Dividends paid in cash with respect to shares of Restricted Stock shall not
be subject to any restrictions or subject to forfeiture. Dividends paid in stock
of the Company or stock received in connection with a stock split with respect
to Restricted Stock shall be subject to the same restrictions as on such
Restricted Stock. Certificates for shares of unrestricted Stock shall be
delivered to the participant promptly after, and only after, the period of
forfeiture shall expire without forfeiture in respect of such shares of
Restricted Stock.
(iii) Subject to the provisions of the Restricted Stock Award Agreement and
this Section 7, upon termination of employment for any reason during the
Restriction Period, all shares still subject to restriction shall be forfeited
by the participant, and the participant shall only receive the amount, if any,
paid by the participant for such forfeited Restricted Stock.
(iv) In the event of special hardship circumstances of a participant whose
employment is involuntarily terminated (other than for Cause), the Committee
may, in its sole discretion, waive in whole or in part any or all
<PAGE>
remaining restrictions with respect to such participant's shares of
Restricted Stock.
SECTION 8. PERFORMANCE AWARDS.
(a) Administration. Shares of Common Stock or a payment in cash may be
distributed under the Plan upon the attainment of achievement objectives to an
employee as a Performance Award. The Committee shall determine the officers and
key employees of the Company and its Subsidiaries and Affiliates to whom the
Performance Award is granted, the terms and conditions of the achievement
objectives, the term of the performance period and the level and form of the
payment of the Performance Award.
(b) Achievement Objectives. The Committee, at its sole discretion may
establish, under this Section 8, achievement objectives either in terms of
Company-wide objectives or in terms of objectives that are related to the
specific performance of the employee or the division, subsidiary, department or
function within the Company in which the employee is employed. A minimum level
of acceptance, at the discretion of the Committee, may be established.
If at the end of the performance period the specified objectives have
been attained, the employee is deemed to have fully earned the Performance
Award. If such achievement objectives have not been attained, the employee is
deemed to have partly earned the Performance Award and becomes eligible to
receive a portion of the total award, as determined by the Committee. If a
required minimum level of achievement has not been met, the employee is entitled
to no portion of the Performance Award. Subject to Section 8(d) below, the
Company may adjust the payment of awards or the achievement objectives if events
occur or circumstances arise which would cause a particular payment or set of
achievement objectives to be inappropriate as a measure of performance.
(c) Terms and Conditions. An employee to whom a Performance Award has been
granted is given achievement objectives to be reached over a specified period,
referred to herein as
<PAGE>
the "performance period". Generally this period shall be not less than 1 year
but in no case shall the period exceed 5 years.
An employee granted a Performance Award pursuant to this Section 8 who
by reason of death, disability or retirement terminates employment before the
end of the performance period is entitled to receive a portion of any earned
Performance Award.
An employee who terminates employment for any other reason forfeits all
rights under the Performance Award.
(d) Section 162(m) Provisions. Unless otherwise determined by the
Committee, achievement objectives established for the top five most highly
compensated officers of the Company shall be pre-established objective
performance goals within the meaning of Section 162(m) of the Code and treasury
regulations promulgated thereunder. Furthermore, unless otherwise determined by
the Committee, once the Committee has established one or more achievement
objectives with respect to a Performance Award granted to one of the top five
most highly compensated officers of the Company which were, when granted,
intended to be pre-established objective performance goals within the meaning of
Section 162(m) of the Code and the treasury regulations thereunder, the
Committee shall not waive or alter the targets after the earlier of (i) the
expiration of twenty-five percent (25%) of the performance period or (ii) the
date on which the outcome under the objectives is substantially certain. Unless
otherwise determined by the Committee, if any provision of the Plan or any
Performance Award granted to an individual who is one of the top five most
highly compensated officers of the Company hereunder would disqualify the
Performance Award with respect to such individual, or would otherwise not comply
with Section 162(m) of the Code, such provision or Performance Award shall be
construed or deemed amended to conform to Section 162(m) of the Code.
SECTION 9. LOAN PROVISIONS.
With the consent of the Committee, the Company may make, or arrange for, a
loan or
<PAGE>
loans to an employee with respect to the exercise of any Stock Option granted
under the Plan and/or with respect to the payment of the purchase price, if any,
of any Restricted Stock awarded hereunder. The Committee shall have full
authority to decide whether to make a loan or loans hereunder and to determine
the amount, term and provisions of any such loan or loans, including the
interest rate to be charged in respect of any such loan or loans, whether the
loan or loans are to be with or without recourse against the borrower, the terms
on which the loan is to be repaid and the conditions, if any, under which the
loan or loans may be forgiven.
SECTION 10. AMENDMENTS AND TERMINATION.
The Board may amend, alter, or discontinue the Plan as it shall deem
advisable or to conform to any change in any applicable law or regulation
applicable thereto (including, without limitation, applicable federal securities
laws and regulations and applicable federal income tax laws and regulations);
provided, however, that no amendment, alteration, or discontinuation shall be
made which would impair the right of an optionee or participant under a Stock
Option, Stock Appreciation Right, Restricted Stock, or Performance Award
theretofore granted, without the optionee's or participant's consent, or which
without the approval of the stockholders would:
(a) except as expressly provided in this Plan, increase the total number of
shares reserved for the purpose of the Plan;
(b) decrease the option price of any Stock Option to less than 100% of the
Fair Market Value on the date of the granting of the option;
(c) change the participants or class of participants eligible to
participate in the Plan; or
(d) extend the maximum option period under paragraph (b) of Section 5 of
the Plan.
<PAGE>
The Committee may amend the terms of any award or option theretofore
granted, prospectively or retroactively, but no such amendment shall impair the
rights of any holder without his or her consent. The Committee may also
substitute new Stock Options for previously granted Stock Options including
options granted under other plans applicable to the participant and previously
granted Stock Options having higher option prices.
SECTION 11. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing set forth herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or payment in lieu of or with respect to awards
hereunder; provided, however, that the existence of such trusts or other
arrangements shall be consistent with the unfunded status of the Plan.
SECTION 12. 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 12:
(a) In the event of a "Change of Control" as defined in paragraph (b)
of this Section 12, unless otherwise determined by the Committee or the Board in
writing at or after grant, 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 grant (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 paragraph (c) of this Section 12:
(i) any Stock Appreciation Rights and any Stock Options awarded
<PAGE>
under the Plan, if not previously exercisable and vested shall become fully
exercisable and vested;
(ii) the restrictions and deferral limitations applicable to any Restricted
Stock award under the Plan shall lapse and such shares and awards shall be
deemed fully vested; and
(iii) the value of all outstanding Stock Options, Stock Appreciation
Rights, Restricted Stock or Performance Awards shall, to the extent determined
by the Committee at or after grant, be cashed out on the basis of the "Change of
Control Price" (as defined in paragraph (d) of this Section 12) 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. In the sole discretion of the
Committee, such settlements may be in cash, in stock, or other consideration as
shall be necessary to effect the desired accounting treatment for the
transaction resulting from the "Change of Control."
(b) For purpose of paragraph (a) of this Section 12, a "Change of Control"
means the happening of any of the following:
(i) when any "person", as such term is used in Section 13(d) and 14(d) of
the Exchange Act (other than the Company or a Subsidiary 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 20 percent or more of the combined voting
power of the Company's then outstanding securities;
<PAGE>
(ii) when, during any period of two 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
of the directors at the beginning of such period; or
(iii) the occurrence of a transaction requiring stockholder approval for
the acquisition of the Company by an entity other than the Company or a
Subsidiary through purchase of assets, or by merger, or otherwise.
(c) For purposes of paragraph (a) of this Section 12, 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 paragraph
(b) of this Section 12; or
(ii) the acquisition of beneficial ownership, directly or indirectly, by
any entity, person or group (other than the Company or a Subsidiary or any
Company employee benefit plan (including its trustee)) of securities of the
Company representing 5 percent 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 12, "Change of Control Price" means the
highest price per share paid in any transaction
<PAGE>
reported on the New York Stock Exchange Composite Tape, 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 Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, such price shall be
based only on transactions reported for the date on which the Committee decides
to cash out such options.
SECTION 13. GENERAL PROVISIONS.
(a) All certificates for shares of Stock delivered under the Plan shall
be subject to such stock transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations and other requirements of the
Commission, any stock exchange upon which the Stock is then listed, and any
applicable Federal or state securities law, and the Committee may cause a legend
or legends to be put on any such certificates to make appropriate reference to
such restrictions.
(b) Nothing set forth in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases. The adoption of the
Plan shall not confer upon any employee of the Company, any Subsidiary or any
Affiliate, any right to continued employment with the Company, a Subsidiary or
an Affiliate, as the case may be, nor shall it interfere in any way with the
right of the Company, a Subsidiary or an Affiliate to terminate the employment
of any of its employees at any time.
(c) No employee shall have any rights as a shareholder of the Company
as a result of the grant of a Stock Option to him or to her under this Plan or
his or her exercise of such Stock Option pending the actual issuance of Stock
subject to such Stock Option to such employee.
(d) Each participant shall, no later than the date as of which the value of
an
<PAGE>
award first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of, any Federal, state, or local
taxes of any kind required by law to be withheld with respect to the award. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements and the Company (and, where applicable, its Subsidiaries and
Affiliates), shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to the participant.
Subject to applicable laws and regulations regarding transactions in Company
Stock by persons who are deemed insiders, a participant may elect to have the
withholding tax obligations or, in the case of all awards hereunder except Stock
Options which have related Stock Appreciation Rights, if the Committee so
determines, any additional tax obligation with respect to any awards hereunder
satisfied by (a) having the Company withhold shares of Stock otherwise
deliverable to the participant with respect to the award or (b) delivering to
the Company shares of unrestricted Stock.
(e) At the time of grant or purchase, the Committee may provide in
connection with any grant or purchase made under this Plan that the shares of
Stock received as a result of such grant or purchase shall be subject to a right
of first refusal, pursuant to which the participant shall be required to offer
the Company any shares that the participant wishes to sell, with the price being
the then Fair Market Value of the Stock, subject to provisions of Section 13
hereof and to such other terms and conditions as the Committee may specify at
the time of grant.
(f) No member of the Board or the Committee, nor any officer or
employee of the Company acting on behalf of the Board or the Committee, shall be
personally liable for any action, determination, or interpretation taken or made
in good faith with respect to the Plan, and all members of the Board or the
Committee and each and any officer or employee of the Company acting on their
behalf shall, to the extent permitted by law, be fully indemnified and protected
by the Company in
<PAGE>
respect of any such action, determination or interpretation.
(g) If any provision of the Plan or any agreement representing an award
granted hereunder is or becomes or is deemed to be invalid, illegal, or
unenforceable in any jurisdiction or as to any person or award, or would
disqualify the Plan or any award granted hereunder under any law deemed
applicable by the Committee, such provision shall be construed or deemed amended
to conform to the applicable laws, or if it cannot be construed or deemed
amended without, in the determination of the Committee, materially altering the
intent of the Plan or the award, such provision shall be stricken as to such
jurisdiction, person or award and the remainder of the Plan and any such award
shall remain in full force and effect.
(h) Each award under the Plan shall be subject to the requirement that,
if at any time the Committee shall determine that (a) the listing, registration
or qualification of the shares of Stock subject or related thereto upon any
securities exchange or under any state or federal law, or (b) the consent or
approval of any government regulatory authority, or (c) an agreement by the
recipient of an award with respect to the disposition of shares of Stock, is
necessary or desirable as a condition of, or in connection with, the granting of
such award or the issue or purchase of shares of Stock thereunder, such award
may not be consummated in whole or in part unless such listing, registration,
qualification, consent, approval or agreement shall have been effected or
obtained free of any conditions not acceptable to the Committee. A participant
shall agree, as a condition of receiving any award under the Plan, to execute
any documents, make any representations, agree to restrictions on stock
transferability and take any actions which in the opinion of legal counsel to
the Company is required by any applicable law, ruling or regulation.
(i) Nothing in the Plan shall affect the right or power of the Company or
its stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the
<PAGE>
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of stock or of options, warrants or rights to purchase
stock or of bonds, debentures, preferred or prior preference stocks whose rights
are superior to or affect the Stock or the rights thereof or which are
convertible into or exchangeable for Stock, or the dissolution or liquidation of
the Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
(j) Headings are given to the sections and subsections of the Plan
solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
SECTION 14. EFFECTIVE DATE OF PLAN.
The effective date of this Plan shall be the date it is adopted by the
Board; provided that the shareholders of the Company shall approve the Plan
within twelve (12) months after the date of adoption; and, provided further,
that any awards granted under this Plan before the date of such shareholder
approval shall be granted subject to such approval.
SECTION 15. TERM OF PLAN.
No Stock Option, Stock Appreciation Right, Restricted Stock or
Performance Award shall be granted pursuant to the Plan on or after the tenth
anniversary of the date of stockholder approval, but awards theretofore granted
may extend beyond that date.
<PAGE>
