<PAGE>
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. 2)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_]Preliminary Proxy Statement
[_]Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X]Definitive Proxy Statement
[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BIRMINGHAM STEEL CORPORATION
-----------------------------------
(Name of Registrant as specified in its charter)
----------------
(Name of person(s) filing proxy statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X]No fee required.
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transactions:
(5) Total fee paid.
- --------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[LOGO]
October 18, 1999
Dear Fellow Stockholder:
You are invited to attend the Annual Meeting of Stockholders of your
Company, which will be held on Thursday, December 2, 1999 at 10:00 A.M., local
time, at The Peabody Orlando Hotel, 9801 International Drive, Orlando,
Florida.
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.
You may receive proxy solicitation materials from a dissident
stockholder group, headed by The United Company, which is seeking to take
control of your Company. Specifically, this dissident group has informed the
Company that it intends to proceed with a disruptive and costly proxy contest
in which it is soliciting proxies to vote your shares at the Annual Meeting,
and alternatively, to execute a written consent on your behalf in an effort to
have its own hand-picked slate of nominees elected to your Company's Board of
Directors. Your Board, eight of whose nine members are independent directors,
believes that the dissident group's proxy solicitation is not in the best
interests of the Company and its other stockholders and strongly urges you to
REJECT the dissident group's solicitation and NOT sign any of the dissident
group's BLUE proxy cards.
Whether or not you plan to attend the meeting in person, it is important
that your shares be represented and voted. We urge you to sign, date and
return the enclosed WHITE proxy card at your earliest convenience. Returning
the signed and dated WHITE proxy card will not prevent you from voting in
person at the meeting should you later decide to do so.
Thank you for your continued support.
Sincerely,
/s/ Robert A. Garvey
--------------------
Robert A. Garvey
Chairman of the Board and
Chief Executive Officer
<PAGE>
IMPORTANT
Your vote is important. Please take a moment to sign, date and promptly
mail your WHITE proxy card in the postage-paid envelope provided. If your
shares are registered in the name of a broker, only your broker can execute a
proxy and vote your shares and only after receiving your specific
instructions. Please contact the person responsible for your account and
direct him or her to execute a proxy on your behalf today. IF YOU HAVE
RECEIVED A BLUE PROXY CARD FROM THE DISSIDENT STOCKHOLDER GROUP, YOUR BOARD OF
DIRECTORS URGES YOU NOT TO SIGN OR RETURN ANY BLUE PROXY CARD SENT TO YOU. If
you have any questions or need assistance in voting your shares, please call
our proxy solicitor, Innisfree M&A Incorporated, toll free at 1-888-750-5834.
2
<PAGE>
BIRMINGHAM STEEL CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On December 2, 1999
The Annual Meeting of Stockholders of Birmingham Steel Corporation (the
"Company") will be held at The Peabody Orlando Hotel, 9801 International
Drive, Orlando, Florida, on Thursday, December 2, 1999 at 10:00 A.M., local
time, for the following purposes:
(1) To elect nine directors, each to serve until the next Annual
Meeting of Stockholders and until his successor has been elected
and qualified. The Board of Directors recommends a vote FOR the
election of the director nominees proposed for reelection by the
Company, as described in the Company's proxy statement.
(2) 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, 2000. The Board of Directors
recommends a vote FOR this proposal.
(3) To transact such other business as may, in accordance with the
Company's Bylaws, be properly brought before the meeting or any
adjournment or postponement thereof.
Only stockholders of record at the close of business on October 19, 1999
are entitled to notice of and to vote at the meeting or any adjournments or
postponements thereof.
Please sign and date the enclosed WHITE proxy card 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,
/s/ Catherine W. Pecher
-----------------------
Catherine W. Pecher
Vice President and Secretary
Birmingham, Alabama
October 18, 1999
<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 (1) at the 1999 Annual Meeting of
Stockholders to be held at the time and place set forth in the accompanying
Notice of Annual Meeting, and at any adjournment or postponement thereof (the
"Annual Meeting"), and (2) in opposition to the solicitation of proxies by The
United Group (as defined below) to remove the Company's entire Board of
Directors without cause through a consent process.
On August 23, 1999, The United Company, United Management Company, LLC,
United Opportunities Fund, LLC, The Summit Fund, LLC, UC Investment Trust,
Nicholas D. Street, James W. McGlothlin, Lois A. Clarke, James A. Todd, Jr.,
Mark A. Todd, John D. Correnti and Paul H. Ekberg (the foregoing corporations,
individuals and entities being collectively referred to herein as "The United
Group") filed a preliminary proxy statement with the Securities and Exchange
Commission (the "SEC"), stating that they intend to nominate, and solicit
proxies in support of, their own slate of directors to stand for election to
the Company's Board of Directors at the Annual Meeting. On September 17, 1999,
a member of The United Group requested that the Company set a record date for
a proposed consent solicitation. The Company's Board has set October 7, 1999
as the record date for The United Group's proposed consent solicitation.
Notwithstanding the fact that the Company has scheduled the Annual
Meeting for December 2, 1999, The United Group also proposes to take control
of your Company's Board of Directors by soliciting proxies from stockholders
of the Company to execute an action by written consent to remove the entire
Board of Directors without cause in advance of the Annual Meeting and to elect
The United Group's nominees (the "United Group Consent Proposals").
THE BOARD OF DIRECTORS UNANIMOUSLY OPPOSES THE UNITED GROUP PROXY
SOLICITATION AND URGES YOU NOT TO SIGN ANY BLUE CARD SENT TO YOU BY THE UNITED
GROUP.
The Board of Directors is soliciting votes FOR the election of each of
the director nominees proposed for reelection by the Company and is soliciting
revocations of any and all proxies granted to The United Group to remove the
entire Board of Directors without cause through a consent process. Please
refer to the section captioned "UNITED GROUP SOLICITATION" for a further
discussion of the Company's prior contacts with The United Group and the
Company's response to certain public statements made by The United Group with
respect to the Company.
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 WHITE proxy card
are first being mailed to stockholders on or about October 18, 1999.
VOTING AND REVOCABILITY OF PROXIES
1999 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 in accordance with the instructions thereon, or, if no
instructions are made, will be voted FOR approval of the election of each of
the director nominees proposed for reelection by the Company, as described in
this proxy statement, and FOR approval and ratification of the selection of
Ernst & Young LLP as the independent auditors for the Company and its
subsidiaries for the fiscal year ending June 30, 2000.
<PAGE>
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted. A stockholder may revoke any
proxy (whether such proxy was solicited by the Company or by The United Group)
at any time prior to its use by submitting to the Company or to The United
Group a written revocation or duly executed proxy bearing a later date.
Accordingly, any later-dated proxy would have the effect of revoking any
earlier-dated proxy, whether such proxy was delivered to the Company or The
United Group. Only your latest-dated proxy will count at the Annual Meeting.
Because only the latest-dated proxy will count at the Annual Meeting, a
stockholder is not able to give an effective proxy at the same time to both
the Company and The United Group. In addition, any stockholder who attends the
meeting in person may vote by ballot at the meeting, thereby canceling any
proxy previously given (although attendance at the Annual Meeting will not in
and of itself constitute a revocation of a proxy).
Delaware law and the Company's Bylaws require the presence of a quorum
at the Annual Meeting. The representation in person or by proxy of a majority
of the total outstanding shares of Common Stock entitled to vote will
constitute a quorum at the 1999 Annual Meeting. Shares represented by proxies
that are marked "abstain" will be counted as shares present for purposes of
determining the presence of a quorum on all matters. Proxies relating to
"street name" shares that are voted by brokers on some but not all of the
matters will be treated as shares present for purposes of determining the
presence of a quorum on all matters, but they will not be treated as shares
entitled to vote at the 1999 Annual Meeting on those matters as to which
authority to vote is withheld by the broker (the "Broker Non-Votes").
Directors of the Company are elected by a plurality vote. The nine
nominees receiving the highest vote totals will be elected as directors of the
Company. With respect to the election of directors, votes may be cast in favor
of nominees or withheld. Broker Non-Votes will not affect the outcome of the
election of directors. The affirmative vote of the holders of a majority of
the votes cast at the meeting by the stockholders entitled to vote thereon
will be required to approve and ratify the appointment of Ernst & Young LLP as
the independent auditors for the Company. Broker Non-Votes and abstentions are
not counted as votes cast for the appointment of Ernst & Young LLP as the
Company's independent auditors and, therefore, will not have any effect on the
outcome of such vote.
The Consent Procedure
Under Delaware law, the unrevoked consent of the holders of not less
than a majority of the shares of Common Stock outstanding and entitled to vote
on the Consent Record Date (as defined below) must be obtained, within the
time limits specified in the Company's By-laws, to adopt the United Group
Consent Proposals. Each share of Common Stock is entitled to one vote per
share. Since consents are required from the holders of record of a majority of
the shares of Common Stock outstanding on the Consent Record Date in order for
the United Group Consent Proposals to be adopted, a Broker Non-Vote will have
the same effect as a vote against such proposals.
YOU HAVE THE RIGHT TO REVOKE ANY PROXY YOU MAY HAVE PREVIOUSLY GIVEN TO
THE UNITED GROUP. TO DO SO, YOU NEED ONLY SIGN, DATE AND RETURN, IN THE
ENCLOSED POSTAGE-PAID ENVELOPE, THE WHITE PROXY CARD THAT ACCOMPANIES THIS
PROXY STATEMENT. IF YOU DO NOT INDICATE A SPECIFIC VOTE ON THE WHITE PROXY
CARD, THE PROXY CARD WILL BE USED IN ACCORDANCE WITH THE BOARD'S
RECOMMENDATION TO VOTE FOR THE DIRECTOR NOMINEES PROPOSED FOR REELECTION BY
THE COMPANY AND TO REVOKE ANY PRIOR PROXIES GIVEN TO THE UNITED GROUP.
The Company has retained Innisfree M&A Incorporated ("Innisfree") to
assist in communicating with stockholders in connection with this proxy
solicitation. If you have any questions about how to complete or submit your
WHITE proxy card or any other questions, Innisfree will be pleased to assist
you. You may call Innisfree toll-free at (888) 750-5834. Banks and brokers
should call collect at (212) 750-5833.
- 2 -
<PAGE>
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 October 19, 1999 (the "Annual
Meeting Record Date"). The record date for determination of stockholders
entitled to grant proxies to The United Group in connection with the United
Group Consent Proposals is October 7, 1999 (the "Consent Record Date"). At the
close of business on the Consent Record Date, 29,891,429 shares of common
stock, par value $.01 per share, of the Company (the "Common Stock") were
outstanding. Following the Annual Meeting Record Date, the Company will advise
stockholders by supplemental proxy material of the number of shares of Common
Stock outstanding on the Annual Meeting Record Date. 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 September 30, 1999, 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.
<TABLE>
<CAPTION>
Name of
Beneficial Owner or Number of Shares
Number of Persons Beneficially Percent
in Group Owned of Class
------------------- ---------------- --------
<S> <C> <C>
The Prudential Insurance Company of 2,928,991(1) 9.86%
America
The United Group 2,310,303(2) 7.80%
Robert A. Garvey 264,782(3) *
William R. Lucas, Jr. 101,328(4) *
Jack R. Wheeler 85,725(5) *
Kevin E. Walsh 44,749(6) *
Robert G. Wilson 32,756(7) *
C. Stephen Clegg 24,555(8)(9) *
E. Mandell de Windt 18,202(9) *
E. Bradley Jones 18,000(9) *
William J. Cabaniss, Jr. 14,032(9) *
Robert D. Kennedy 11,500 *
Brian F. Hill 11,039(10) *
Alfred C. DeCrane, Jr. 5,020(11) *
Richard de J. Osborne 5,000(11) *
John H. Roberts 0 *
Directors and executive 636,688(12) 2.12%
officers as a group
(14 persons)
</TABLE>
* Less than 1%
(footnotes appear on following page)
- 3 -
<PAGE>
(1) This information was taken from a Schedule 13G/A filed by The Prudential
Insurance Company of America on February 3, 1999 reflecting information
as of December 31, 1998, and represents shares over which it may have
direct or indirect voting and/or investment discretion and which are
held for its own benefit or for the benefit of its clients by its
separate accounts, externally managed accounts, registered investment
companies, subsidiaries and/or other affiliates.
(2) This information was taken from a Schedule 13D filed by The United Group
on August 16, 1999 and includes additional information provided in
amendments thereto through the date of this Proxy Statement and in The
United Group's definitive proxy statement filed with the SEC. The amount
shown includes the following with respect to each member of The United
Group: (a) The United Company reported shared voting and dispositive
power with respect to 1,819,400 shares; (b) United Management Company
LLC reported shared voting and dispositive power with respect to 39,000
shares; (c) United Opportunities Fund, LLC reported shared voting and
dispositive power with respect to 1,635,300 shares; (d) The Summit Fund,
LLC reported shared voting and dispositive power with respect to 190,100
shares; (e) UC Investment Trust reported shared voting and dispositive
power with respect to 90,800 shares; (f) Nicholas D. Street reported
beneficial ownership of 1,969,200 shares; (g) James W. McGlothlin
reported beneficial ownership of 1,980,200 shares; (h) Lois A. Clarke
reported sole voting and dispositive power with respect to 3,600 shares;
(i) James A. Todd, Jr. reported sole voting and dispositive power with
respect to 119,054 shares and shared voting and dispositive power with
respect to 74,549 shares owned by his wife; (j) Mark A. Todd reported
sole voting and dispositive power with respect to 12,529 shares and
shared voting and dispositive power with respect to 94,220 shares; (k)
John D. Correnti reported beneficial ownership of 101,000 shares of
which 100,000 are pursuant to an option granted to Mr. Correnti by The
United Company; and (l) Paul H. Ekberg reported sole voting and
dispositive power with respect to 2,151 shares and shared voting and
dispositive power with respect to 9,000 shares owned by his wife.
(3) Includes 44,705 shares of Restricted Stock issued under the 1995 Stock
Accumulation Plan, 16,000 shares of Restricted Stock awarded under the
1990 Management Incentive Plan, 5,766 shares held in the Company's
401(k) Plan, and 125,001 shares subject to stock options exercisable
within 60 days.
(4) Includes 4,675 shares of Restricted Stock awarded under the 1990 and
1997 Management Incentive Plans, 2,645 shares held in the Company's
401(k) Plan, and 3,198 shares of Restricted Stock issued under the 1995
Stock Accumulation Plan. Also includes 500 shares owned by Mr. Lucas's
spouse and 79,200 shares subject to stock options exercisable within 60
days.
(5) Includes 1,910 shares of restricted stock issued under the 1995 Stock
Accumulation Plan, 2,805 shares of Restricted Stock awarded under the
1997 Management Incentive Plan, 85 shares held in the Company's 401(k)
Plan, and 68,000 shares subject to stock options exercisable within 60
days.
(6) Includes 6,000 shares of Restricted Stock awarded under the 1997
Management Incentive Plan, 2,749 shares of Restricted Stock issued under
the 1995 Stock Accumulation Plan, and 34,000 shares subject to stock
options exercisable within 60 days.
(7) Includes 935 shares of Restricted Stock awarded under the 1997
Management Incentive Plan, 335 shares under the 1995 Stock Accumulation
Plan, 4,749 shares held in the Company's 401(k) Plan, and 8,000 shares
subject to stock options exercisable within 60 days.
(8) 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.
(9) Includes 4,500 shares subject to stock options granted under the 1996
Director Stock Option Plan.
(10) Includes 8,000 shares of Restricted Stock awarded under the 1990
Management Incentive Plan and 3,039 shares awarded under the 1995 Stock
Accumulation Plan.
(11) Includes 1,500 shares subject to stock options granted under the 1996
Director Stock Option Plan.
(12) Includes an aggregate of (i) 314,201 shares subject to stock options
held by certain officers of the Company, (ii) an aggregate of 13,245
shares held in the Company's 401(k) Plan, (iii) an aggregate of 38,415
shares of Restricted Stock awarded under the 1990 and 1997 Management
Incentive Plans, (iv) an aggregate of 55,936 shares of Restricted Stock
issued under the 1995 Stock Accumulation Plan, and (v) an aggregate of
21,000 shares subject to options granted under the Company's 1996
Director Stock Option 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.
- 4 -
<PAGE>
THE UNITED GROUP SOLICITATION
Background
On July 29, 1999, The United Group filed a Schedule 13D with the SEC in
which The United Group stated its intention to nominate, and solicit proxies
in support of, its own slate of directors to stand for election to the Board
of Directors at the Company's 1999 Annual Meeting of Stockholders. The
Schedule 13D indicated that The United Group owned, as of the date of filing,
approximately 7.8% of the total outstanding shares of common stock of the
Company.
Shortly after the filing of the Schedule 13D, a representative of The
United Group contacted a representative of the Company to explore the
Company's willingness to meet. In view of the Company's interest in avoiding a
disruptive and costly proxy contest, a representative of the Company, with the
concurrence of the Board of Directors, contacted a representative of The
United Group to arrange a meeting to discuss whether the parties could
mutually agree upon an alternative to proceeding with a proxy contest. The
Company's representative informed The United Group's representative that,
while the Company would be willing to meet to discuss issues raised by The
United Group, the Company would not accept The United Group's demand that such
meeting be conditioned upon the Company accepting The United Group's request
that: (i) the Board of Directors be expanded to provide The United Group with
majority representation on the Board of Directors, despite the fact that it
owned only 7.8% of the Company's stock, and (ii) John D. Correnti be named
Chairman and Chief Executive Officer of the Company. Representatives of The
United Group and the Company met on August 2, 1999. At the meeting, the
parties discussed matters relating to the Company, its financial condition,
results of operations and management.
The initial meeting was among James McGlothlin of The United Group,
Stephen Clegg, a director of the Company, and legal counsel for the Company
and The United Group. Toward the end of the day, there was also a separate
meeting among Mr. McGlothlin, Birmingham Steel Chairman and Chief Executive
Officer Robert A. Garvey, and the Company's legal counsel, and a separate
meeting among Mr. Clegg, Mr. Correnti and legal counsel for The United Group.
Although no conclusions were reached at the meetings, the Company's
representatives were optimistic that further discussions and a better
understanding by The United Group of the Company and its strategic,
operational and financial accomplishments, opportunities and challenges, as
well as of the importance of enabling the Company's Board of Directors and
management to continue to focus their attention on the implementation of the
Company's business strategy and on enhancing the strength and success of its
operations, would help avoid a proxy contest.
Accordingly, on or about August 9, 1999, representatives of the Company
contacted representatives of The United Group to inform them of the Company's
willingness to engage in further discussions. The Company's representative
also noted that, in view of the fact that the advance notice deadline for
notifying the Company of proposed nominees was quickly approaching and the
Company still desired to continue discussions in hopes of reaching a solution
that would be acceptable to both parties, the Company would be willing to
enter into a moratorium agreement with The United Group whereby neither party
would file proxy solicitation materials prior to termination of the moratorium
agreement and the Company would agree to amend the advance notice requirement
in the Bylaws to permit The United Group to provide the Company with notice of
its nominees within a certain period of time after termination of the
moratorium agreement.
Despite the Company's efforts to avoid a disruptive and costly proxy
contest and to seek a negotiated solution, The United Group refused to
postpone taking further action in connection with the proxy contest and pursue
further discussions, unless the Company could provide assurance during the
course of these discussions that the Company would agree to the same pre-
conditions it had already declined to accept, namely to (i) provide The United
Group with majority representation on the Board, despite the fact that it
owned only 7.8% of the Company's stock, and (ii) name Mr. Correnti Chairman
and Chief Executive Officer of the Company. On August 13, 1999, The United
Group provided notice to the Company, pursuant to the Company's advance notice
Bylaw,
- 5 -
<PAGE>
of The United Group's nine nominees for election to the Board of Directors.
Subsequently, on August 23, 1999, The United Group filed a preliminary proxy
statement (the "Group Proxy Statement") with the SEC.
Separately, on September 17, 1999, the Company received a letter from
James A. Todd, Jr., a member of The United Group, indicating his intention to
seek to have stockholders act by written consent and requesting that a record
date be set for determining the stockholders entitled to act. On September 27,
1999, the Board of Directors set a record date for the solicitation of
consents of October 7, 1999. However, the record date for the Annual Meeting
remains October 19, 1999.
In addition to soliciting proxies to be voted at the Annual Meeting, The
United Group is soliciting proxies to take action by written consent for the
purpose of removing the entire Board of Directors of the Company without cause
in advance of the Annual Meeting. For the reasons set forth below, as well as
the fact that the Company has set a date of December 2, 1999 for the Annual
Meeting, the Company does not believe that the solicitation of proxies to take
action by written consent is in the best interests of the Company and its
stockholders. Accordingly, the Company urges stockholders not to sign any Blue
card which may be furnished to them--and if previously signed, to revoke any
proxy to act by written consent which may have been granted to The United
Group.
United Group's Non-Platform
The Group Proxy Statement criticizes the management and the directors of
the Company, but proposes no strategic, operational or financial approach
that, in the Company's judgment, is workable or otherwise likely to enhance
stockholder value. The United Group questions the Company's decision to pursue
the strategic restructuring and proposes to operate the SBQ division, rather
than divest it in the near term. This position reflects, in the Company's
judgment, a lack of understanding as to the strengths and weaknesses of the
Company and its businesses.
In particular, the problems of the SBQ division are not managerial in
nature, but rather relate directly to availability and allocation of
resources, as well as continued depressed SBQ market conditions. From a
managerial perspective, the Company is already committed to taking the
necessary steps to minimize the losses associated with the SBQ division prior
to the completion of the divestiture. From a resource perspective, for the SBQ
division to be successful, additional resources would be necessary. The
application of those resources to the SBQ division, rather than to the
Company's core mini-mill operations, would, in the Company's judgment, be a
costly and lengthy process (assuming lender approval could be obtained for
such expenditures) and, given the Company's limited financial resources, would
not be likely to result in the enhancement of stockholder value.
THE COMPANY'S STRATEGIC RESTRUCTURING
Unlike The United Group, the Company's management has developed and is
aggressively implementing well-thought-out and clearly articulated strategic,
operational and financial plans that have been approved by the Board of
Directors and are designed to enhance stockholder value. After a strategic
review process that had taken place over more than a year (a process initiated
well before The United Group's Schedule 13D filing), the Company on August 18,
1999 announced plans to pursue a strategic restructuring of the Company's
operations that would enable the Company to enhance profitability and focus on
its strong and profitable core mini-mill and scrap operations. In particular,
the Company intends to divest the Special Bar Quality ("SBQ") division and the
Company's 50% ownership interest in American Iron Reduction, LLC. The Company
also announced that it will explore its options with regard to its 50%
ownership interest in Pacific Coast Recycling, LLC.
The Company also announced that it had retained the investment banking
firm of Credit Suisse First Boston to serve as its financial advisor with
respect to the strategic restructuring and to seek a buyer or buyers for the
businesses to be divested. On August 27, 1999, the Company also retained the
investment banking firm of Banc of America Securities LLC to serve as co-
financial advisor with respect to the strategic restructuring.
- 6 -
<PAGE>
The Company's Board and management are committed to enhancing
stockholder value and believe that the successful implementation of this
strategic restructuring will greatly enhance the Company's ability to achieve
this overriding objective. While the Company believes that the strategic
restructuring will better position the Company to increase profitability and
enhance stockholder value, various factors are beyond the Company's control,
such as the condition of the steel industry, and, as such, there can be no
assurance that the strategic restructuring will result in increased
profitability and the enhancement of stockholder value.
Despite some of the worst steel industry conditions in many years, with
imports at record levels and resulting reductions in selling prices and
shipments for merchant and rebar products, the Company's core operations are
highly efficient and solidly profitable. However, the inherent value of the
Company's core operations has been masked for the last three years by
continuing challenges in its SBQ business--including the Memphis melt shop,
the Cleveland rolling and wire mills and the American Iron Reduction supply
commitment--which, largely because of actions, decisions and financial
commitments made prior to 1996 by Mr. James A. Todd, Jr., have required a
tremendous and continuing commitment of both management and financial
resources and have significantly impaired the Company's financial performance.
Mr. Todd, who prior to 1996 was the Company's Chairman and Chief Executive
Officer, is currently a leading member and nominee of The United Group. By
divesting these underperforming assets, the Company believes it will better
position stockholders to realize the full benefit of the Company's strong and
profitable core operations.
The Company's core mini-mills, which together provide industrial
customers a broad range of merchant and rebar products, include facilities in
Kankakee, Illinois; Joliet, Illinois; Birmingham, Alabama; Jackson,
Mississippi; Seattle, Washington; and Cartersville, Georgia. The Company's
core businesses also include its scrap operations in Jackson, Mississippi and
Vancouver, British Columbia, and the Port Everglades Steel sales and
distribution business in Ft. Lauderdale, Florida.
The strong financial performance of the Company's core mini-mill and
scrap operations (the "Core Operations"), as reported in the Company's
announcement on September 15, 1999 of its fourth-quarter and year-end
financial results for the fiscal year ended June 30, 1999, clearly indicates
the value inherent in its Core Operations.
In that announcement, the Company reported a net loss for the quarter
and year, which was primarily attributable to the results of operations of the
SBQ division and the Company's decision to divest the SBQ division and the
Company's 50% interest in American Iron Reduction, LLC and to write-off the
Company's 50% stake in its unprofitable Pacific Coast Recycling joint venture.
For the fourth quarter ended June 30, 1999, however, the Company's
earnings before interest, taxes, depreciation and amortization ("EBITDA") from
Core Operations was $26.5 million and operating income was $15.7 million.
Earnings per share, excluding start-up expenses associated with the
Cartersville facility, were $0.20.
For the fiscal year ended June 30, 1999, EBITDA from the Core Operations
was $106.9 million and operating income was $57.0 million. Earnings per share,
excluding start-up expenses associated with the Cartersville facility, were
$1.19.
In addition, reflecting immediately the financial benefits of the
strategic restructuring, on October 14, 1999 the Company reported net income
of $5,766,000 (or $0.19 per share) for the first quarter of fiscal year 2000.
Earnings per share, excluding start-up expenses associated with the
Cartersville facility, were $0.28. The Company further expects its
Cartersville facility, whose products are complementary to those produced at
Birmingham's other merchant and rebar mills, to be operating at a profit
during the fiscal quarter commencing January 1, 2000, and, in subsequent
years, to make an increasingly important contribution to the Company's future
success.
- 7 -
<PAGE>
It is also instructive to compare the results of operations for the
Kankakee, Birmingham, Seattle and Jackson facilities during the three fiscal
years since Mr. Garvey became Chief Executive Officer in January 1996 with the
results of operations for those plants during the preceding three-fiscal-year
period, during which Mr. Todd was Chief Executive Officer of the Company. The
Kankakee, Birmingham, Seattle and Jackson facilities were operated first by
Mr. Todd and then by Mr. Garvey during their respective periods as Chief
Executive Officer. In particular, during the latest three fiscal years under
the leadership of Mr. Garvey, the average annual return on sales and the
cumulative pre-tax earnings were 9.75% and $189.1 million, respectively, for
these operations, versus 6.76% and $111.2 million, respectively, for the
preceding three fiscal years under Mr. Todd for those same operations.
Moreover, Mr. Garvey and his management team achieved this considerably
stronger financial performance in a more difficult industry environment.
Initiatives by Current Management. The Company's improved results for
the most recent three-fiscal-year period reflect a number of initiatives
undertaken by Mr. Garvey and his management team. These initiatives include:
. Improving the product mix to include a greater percentage of
higher-margin merchant products. The percentage of merchant
products shipped increased to 36% from 26% during the three-year
period.
. Continuing to grow the Company's rebar business, while improving
the product mix. During the three-year period, average rebar
shipments increased 11%.
. Broadening the Company's customer base by increasing sales to
original equipment manufacturers ("OEM's"). Sales to OEM's have
improved profitability at the Seattle and Kankakee mills. For
example, the increase in OEM sales has enabled the Company's
Seattle plant to maintain a strong shipping level during fiscal
1999 despite increasing imports and the resulting decline in total
domestically-produced rebar shipments by the industry as a whole.
. Increasing operating efficiencies by reducing the man-hours
required to produce a ton of steel to an average of 1.05 man-hours
per ton during the last three fiscal years from an average of 1.22
during the preceding three fiscal years and better utilization of
the Company's assets. For example, system-wide utilization of
internally produced billets has increased and coordination of
production and marketing activities by the Joliet and Kankakee
facilities, as well as the Birmingham and Jackson facilities, has
been instituted.
Challenges Caused by the Todd Management Team. Challenges experienced by
the Company's SBQ division that have significantly undermined the Company's
overall financial performance over the past three years stem in large part
from what the Company believes were questionable strategic and operational
decisions, actions and financial commitments made prior to 1996 by Mr. Todd
and his senior management team (the "Todd Management Team") during the period
from 1991 to January 1996 when Mr. Todd served as Chairman of the Board and
Chief Executive Officer of the Company. Moreover, as a consequence of these
errors of omission and commission by the Todd Management Team, the Company is
burdened with high debt levels that, in the Company's judgment, effectively
prevent it from allocating the additional financial and operational resources
necessary to achieve profitable results in the SBQ division in a timely and
cost-effective manner.
Accordingly--although the SBQ division, with a strategic partner whose
business strategy and operational resources are compatible, can, in the
Company's judgment, be successful and realize its full potential--the Company
has determined that it is not in the best interest of its stockholders for the
Company to continue to allocate a major portion of its managerial and
financial resources to the SBQ division, and that it can best build
stockholder value by seeking to divest the SBQ division in order to maximize
the values inherent in the Core Operations.
- 8 -
<PAGE>
The errors of omission and commission by the Todd Management Team that
led to the problems and challenges of the SBQ division include, among others:
. Failure to Complete Appropriate Market Study: In making the
decision to invest in excess of $350 million in the SBQ business,
the Todd Management Team, in the judgment of the Company's current
management, failed to develop an appropriate analysis of the
optimal product mix for the SBQ business and the equipment
configuration needed to produce those products on a cost-effective
basis. As more fully described below, this, in turn, has resulted,
in the judgment of the Company's current management, in a number
of the challenges which the Company has faced during the past
three years and which have prevented the SBQ business from
achieving its overall objective of being a low-cost and profitable
producer and supplier of quality products.
. Sub-Optimal Furnace Size: The decision by the Todd Management Team
to build at Memphis a 150-ton furnace, rather than a 100-ton
furnace or smaller, reflected, in the judgment of the Company's
current management, poor judgment as to the optimal furnace size
for the production of SBQ products. While increased furnace size
is often associated with reduced costs, the smaller order sizes
and custom nature of SBQ products make a smaller furnace more
efficient. The reduced operating flexibility caused by the
purchase of a larger furnace has increased the SBQ division's
operating costs and lowered its profit margins.
. Inability to Direct Cast Billets: The failure of the Todd
Management Team to build at Memphis the capability to direct cast
billets has had the effect of significantly increasing the
production costs of lower-grade SBQ products. The rationale behind
this decision to rely solely on blooms was based on a desire to
produce only the highest-quality steel for the highest-quality
applications. The disadvantage of blooms, however, is that their
larger size increases conversion costs as blooms must be reduced
to billets prior to final reduction in a rolling mill. This makes
them a more expensive raw material in the production of products
which do not require bloom-quality steel. Given that only about
50% of the products made at Cleveland require bloom-quality steel,
the inability to direct cast billets has further significantly
undermined the ability of the SBQ division to be a low-cost
producer.
. Inadequate Evaluation of Equipment: In an ill-conceived effort to
reduce costs, the Todd Management Team elected to purchase used
buildings, used cranes and a used caster for Memphis, without, in
the judgment of the Company's current management, adequate
evaluation. While the Company in March of this year finally
achieved, albeit with considerable difficulty and only on a
temporary basis, monthly production of 50,000 tons, the Company is
now finding that the used equipment cannot sustain such production
volumes and must be modified. This is adding to costs and delaying
completion of the start-up phase at Memphis.
. Failure to Include Cut-to-Length Capabilities at
Cleveland: Despite the fact that a significant portion of the SBQ
bar product is sold in cut-to-length bars, the Company under the
Todd Management Team invested $126 million in a new bar mill which
was only capable of producing larger-sized coil products.
Investing in the equipment needed to produce cut-to-length bars
would have enabled the Company to broaden its product line by
offering cut-to-length products and thereby be in a position to
access other SBQ markets and applications. As a result of these
strategic errors, the Cleveland mills now require additional
capital to install the equipment necessary to be able to produce
products in the key cut-to-length category and are burdened with
excess capacity for high-end coiled products.
. Failure to Build Melt Shop When Needed: For the Cleveland facility
to be a low-cost producer, it was important to build a melt shop
and, thereby, assure a low-cost supply of billets.
- 9 -
<PAGE>
Yet, the Company under the Todd Management Team decided to defer
construction of a melt shop and instead build additional capacity at
Cleveland, thereby preventing the Company from achieving its low-
cost objective for several years. Moreover, in making the decision
to build a new bar mill at the Cleveland facility, the Company
became a direct competitor to its then primary supplier of billets
for the Cleveland facility. This caused the Company to lose that key
supplier of billets, which forced it, at a time when its billet
needs were doubling, to source more billets internationally at a
much higher cost. Without a melt shop of its own to supply billets
to Cleveland, the costs of production for the SBQ division increased
significantly.
. DRI Purchase Commitment: Based on an incorrect technical and
commercial assumption that the billets produced by the Memphis melt
shop for Cleveland needed to be composed of 50% direct reduced iron,
the Company under the Todd Management Team committed to enter into a
contract to purchase on a long-term basis from American Iron
Reduction 50% of American Iron Reduction's output of direct reduced
iron at a fixed formula price. Currently, however, market prices for
direct reduced iron are below the contract price. In addition, the
Company does not need all of the direct reduced iron which it may be
required to purchase. As a result, the Company's supply contract
with American Iron Reduction is currently placing the Memphis mill
and the SBQ division at a competitive disadvantage.
These errors of omission and commission by the Todd Management Team prior to
1996 have also caused the Company to increase significantly its total
outstanding indebtedness with its banks and other lending institutions and
have required the Company to renegotiate its debt agreements on two occasions
within the last twelve months. These renegotiations have led to increased
costs and have required that the Company secure its outstanding indebtedness
by pledging its assets as collateral.
Benefits of the Strategic Restructuring. By divesting its underperforming
assets as part of the strategic restructuring, the Company's current senior
management team will be able to focus their entire efforts on the Company's
Core Operations. The restructuring should also allow the Company to reduce its
debt and related interest expense and improve cash flow.
Given the high level of indebtedness at the Company, arising in large
part from capital spent on the SBQ division and the losses generated by this
division, there are still significant challenges facing the Company. The
Company, however, is committed to pursuing the strategic restructuring and to
addressing successfully these challenges.
Similarly, while the Company is confident of its ability to realize the
benefits of the strategic restructuring, the level of benefits to be realized
could be affected by a number of factors including, without limitation, (a)
the Company's ability (i) to obtain any consents and approvals which may be
required from its creditors to consummate the sale of the SBQ business, (ii)
to find a strategic buyer or buyers willing to acquire the SBQ division and
the other non-core operations to be divested at prices that fairly value such
assets and (iii) to operate the Company as planned in light of the highly
leveraged nature of the Company, and (b) changes in the conditions of the
steel industry in the United States. In addition, the Company's description of
its restructuring and any benefits anticipated to be derived therefrom contain
forward-looking statements that are subject to the limitations described under
the caption "FORWARD-LOOKING STATEMENTS," at page 29 below.
- 10 -
<PAGE>
OTHER IMPORTANT CONSIDERATIONS
There are a number of additional factors which the Board of Directors
believes make the efforts of The United Group with respect to the Company
unwise at this time. These are described below.
Experienced Management Team
The Company's current senior management consists of highly qualified
individuals who have extensive hands-on knowledge of every aspect of the
Company and its strategic, operational and financial opportunities and
challenges. The Company's senior management team is led by Robert A. Garvey, a
seasoned executive with 43 years of steel industry experience and with a
strong engineering background. The senior management team was significantly
strengthened over the past year with the addition of Brian F. Hill as Chief
Operating Officer and Kevin E. Walsh as Chief Financial Officer. Mr. Hill was
Executive Vice President at North Star Steel, with responsibility for
operations at four bar and rod mill plants, during North Star's primary growth
period, and had a total of 31 years with Cargill Inc., including 15 years as a
senior executive at North Star and other steel-related operations at Cargill.
Mr. Walsh was a highly accomplished financial and operational executive with
Johnson & Johnson worldwide for nearly twenty years and more recently has
successfully assisted organizations, including the Company, in highly
leveraged situations. The Company's current senior management, moreover, is
not the team that established the SBQ division and that made the pre-1996
decisions and took the pre-1996 actions that, in the Company's view, largely
caused the Company's subsequent strategic, operational and financial problems.
The team led by Mr. Garvey is, however, committed to addressing
comprehensively those problems, in part through the continued implementation
of the Company's strategic restructuring as described above.
It should also be noted that, in the view of Company's Board of
Directors, Mr. Correnti, who is a member of The United Group, and who has been
designated as The United Group's candidate to succeed Mr. Garvey as Chairman
and Chief Executive Officer of the Company should The United Group gain
control of the Company, is not the right person to lead the Company, and that
a change in the Company's management at this time would not be in the best
interest of the Company and its stockholders.
Independent and Qualified Board of Directors
Other than Mr. Garvey, the Board consists entirely of independent
outside directors. Each director is either a current or former senior
executive of a well-established manufacturing operation. In addition, seven of
the directors have direct experience in the metal or steel industry.
Potential Adverse Impact of Solicitation on Existing Arrangements
Under certain material agreements to which the Company is a party, a
change in a majority of the Company's Board of Directors as a result of a
contested proxy or consent solicitation, as are being waged by The United
Group, would give rise, among other things, to the acceleration of the
Company's debt obligations and might, as a result, have a material adverse
effect on the Company, its financial condition and its operations.
The Company has outstanding senior note obligations pursuant to a Note
Purchase Agreement, dated as of September 15, 1995, totaling $150,000,000, and
a Note Purchase Agreement, dated as of September 1, 1993, totaling
$130,000,000 (collectively, the "Note Purchase Agreements"). Pursuant to the
terms of the Note Purchase Agreements, in the event that The United Group (or
any other person or group) acquires the power (including by the acquisition of
proxies) to elect, appoint or cause the election or appointment of at least a
majority of the members of the Board of Directors of the Company, the Company
will be required to make an irrevocable offer to all of the senior noteholders
to prepay the senior notes. In the event that the offer is accepted by the
senior noteholders in accordance with the terms of the respective Note
Purchase Agreement, the Company will be obligated to pay 100% of the face
amount of the senior notes ($280,000,000), plus accrued but unpaid interest,
together with a make-whole amount of approximately $9.1 million.
- 11 -
<PAGE>
Pursuant to the terms of the $300,000,000 Revolving Credit Agreement,
date as of March 17, 1997, by and among the Company and several financial
institutions, an event of default shall be deemed to have occurred if during
any twelve-month period, a majority of the Board of Directors of the Company
is no longer composed of individuals (i) who were members of the Board of
Directors on the first date of such period, (ii) whose election or nomination
to the Board of Directors was approved by individuals referred to in clause
(i) above at a point in time at which such persons constituted a majority of
the Board, or (iii) whose election or nomination to the Board of Directors was
approved by individuals referred to in clause (i) and (ii) above at a point in
time at which such persons constituted a majority of the Board. Upon the
occurrence of such an event of default, the lenders may declare the full
amount of the principal and interest outstanding under the Revolving Credit
Agreement to be immediately due and payable. As of September 30, 1999, the
Company had approximately $217,000,000 in borrowings outstanding under the
Revolving Credit Agreement.
As is described in further detail under the caption "EXECUTIVE
COMPENSATION," a change in a majority of the Board of Directors of the Company
will trigger the vesting of certain rights and benefits of the executive
officers of the Company and may subsequently require the Company to make
certain payments.
These payments and benefits include:
. the vesting of currently unvested amounts credited to each
executive officer under the Executive Retirement Plan and
Compensation Deferral Plan (the "ERP/CDP"); as of September 30,
1999, Robert A. Garvey, Brian F. Hill, Kevin E. Walsh, William R.
Lucas, Jr., Jack R. Wheeler and Robert G. Wilson would become
vested in additional amounts under the ERP/CDP of $915,200, $0,
$0, $19,800, $259,200 and $170,900, respectively;
. a payment in the event of a termination of an executive officer's
employment under circumstances that entitle the executive officer
to severance benefits under the Company's Severance Plan, or in
the case of Mr. Hill, under his employment agreement as those
severance benefits would be greater; as of September 30, 1999,
Messrs. Garvey, Walsh, Lucas, Wheeler and Wilson would become
entitled under the Severance Plan and Mr. Hill would become
entitled under his employment agreement to receive cash payments
of approximately $2,613,600, $1,360,500, $1,191,000, $959,400,
$514,400 and $2,223,000, respectively;
. the lapsing of restrictions on restricted shares of Common Stock;
as of September 30, 1999, the following number of restricted
shares of Common Stock held by Messrs. Garvey, Hill, Walsh, Lucas,
Wheeler and Wilson, respectively, would vest: 60,705, 11,039,
8,749, 7,873, 4,715 and 1,270; and
. the vesting of currently unvested options to acquire shares of
Common Stock; as of September 30, 1999, options to acquire the
following number of shares of Common Stock held by Messrs. Garvey,
Hill, Walsh, Lucas, Wheeler and Wilson, respectively, would become
immediately exercisable: 199,999, 100,000, 76,000, 64,800, 57,000
and 5,000.
CERTAIN LITIGATION
On October 14, 1999, the United Company, John Correnti and James Todd
filed a complaint against the Company in the Circuit Court of Jefferson
County, Alabama (the "Court"), requesting that the Court grant a temporary
restraining order and preliminary injunction requiring that the Company
provide them with five business days notice of the terms and conditions of any
transaction the Company plans to enter into prior to the Annual Meeting that
may legally or financially bind the Company to sell the SBQ division. In
response to The United Group's request which was made without the Company
having an opportunity to appear before the Court and present its arguments,
the Court issued a temporary restraining order, effective for a period of 10
days, and scheduled a hearing on the motion for a preliminary injunction on
October 22, 1999. The Company believes that this lawsuit is without merit and
intends to seek to have the temporary restraining order lifted at the October
22nd hearing.
- 12 -
<PAGE>
AGENDA ITEM ONE
ELECTION OF DIRECTORS
Nine directors are to be elected at the Annual Meeting, each to hold
office until the next Annual Meeting and until his successor has been duly
elected and qualified. Proxies received from stockholders, unless directed
otherwise, will be voted FOR the election of the following nominees: Robert A.
Garvey, E. Mandell de Windt, William J. Cabaniss, Jr., C. Stephen Clegg,
Alfred C. DeCrane, Jr., E. Bradley Jones, Robert D. Kennedy, Richard de J.
Osborne and John H. Roberts. If any nominee is unable to stand for election,
the persons named in the proxy may 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 Annual 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 Company's nominees for director of the Company.
<TABLE>
<CAPTION>
Name and Year First
Became Director Business Experience
------------------- -------------------
<S> <C>
Robert A. Garvey Chairman of the Board and Chief Executive Officer of the Company
since 1996; President
1996 of North Star Steel Co. from 1984 to 1996.
(Age 61)
E. Mandell de Windt Chairman of the Executive Committee of the Board of Directors of
the Company since
1985 1991; Chairman of the Board of the Company from 1985 to 1991;
(Age 78) Chairman of the Board and Chief Executive Officer of Eaton
Corporation, a diversified manufacturing concern, from 1969 to
1986.
C. Stephen Clegg Chairman of the Board and Chief Executive Officer of Diamond Home
Services, Inc., a
1985 contractor of installed home improvement products, since 1993 and
(Age 49) Midwest Spring Manufacturing Company, a manufacturer of specialty
springs, wireforms and metal stamping products since 1989; director
of RVM Industries, Inc.
E. Bradley Jones Chairman of the Board and Chief Executive Officer of LTV Steel
Company from June
1988 1984 to December 1984; Chairman and Chief Executive Officer of
(Age 71) Republic Steel Corporation (merged with The LTV Corporation in
1984) from 1982 to 1984; director of TRW Inc., RPM, Inc. and CSX
Corporation; Trustee of Fidelity Funds and The Cleveland Clinic
Foundation.
William J. Cabaniss, Jr. Chairman of the Board and Chief Executive Officer of Precision
Grinding, Inc., a metal
1993 processing company serving metal machining industries in the
(Age 61) Southeast, since 1971; director of Protective Life Corporation.
Richard de J. Osborne Chairman of the Board and Chief Executive Officer of ASARCO
Incorporated, a leading
1998 producer of nonferrous metals from 1995 to 1998; director of ASARCO
(Age 65) Incorporated, Southern Peru Copper Corporation, Schering-Plough
Corporation, The BFGoodrich Company, The Tinker Foundation and
NACCO Industries, Inc.
Alfred C. DeCrane, Jr. Chairman of the Board from 1987 to 1996 and Chief Executive Officer
from 1993 to 1996
1998 of Texaco, Inc., an explorer, producer and marketer of oil and
(Age 68) natural gas; director of CIGNA Corporation, Bestfoods, Corn
Products International, Inc. and The Harris Corporation.
</TABLE>
- 13 -
<PAGE>
<TABLE>
<CAPTION>
Name and Year
First
Became Director Business Experience
--------------- -------------------
<S> <C>
Robert D. Kennedy Chairman and Chief Executive Officer of Union Carbide Corporation,
one of the world's
1999 largest manufacturers of chemicals and plastics, from 1986 to 1995;
(Age 67) director of Union Carbide Corporation, International Paper Company,
Sunoco, Inc., UCAR International, Inc., Kmart and Lionore Mining
Int'l; member of the Advisory Board of The Blackstone Group and RFE
Investment Partners.
John H. Roberts Chairman, President and Chief Executive Officer of J.H. Roberts
Industries, a leading
1999 manufacturer and distributor of carbon steel tubing and chrome
(Age 67) plated steel bars, from 1982 to 1998; director of J.H. Roberts
Industries, Atlas Electric Devices Company and Nelson Steel
Company.
</TABLE>
The Board of Directors held sixteen (16) meetings, including six (6)
actions by unanimous written consent, during the fiscal year ended June 30,
1999. During fiscal 1999, each director attended at least 90% 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.
The members of the Audit Committee are Messrs. Clegg, Cabaniss, Kennedy
and Roberts. 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 (4) meetings during fiscal 1999.
The members of the Executive Committee are Messrs. de Windt, Garvey,
Osborne and Clegg. The Executive Committee exercises all the powers of the
Board of Directors during the intervals between meetings of the Board of
Directors, subject to certain limitations set forth in the Company's Bylaws.
The Executive Committee held two (2) meetings during fiscal 1999.
Messrs. de Windt, Clegg, Jones and DeCrane 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 two (2) meetings during fiscal
1999.
Messrs. Kennedy, Cabaniss, DeCrane and Roberts 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, safety
performances, and processes at the Company's facilities. The Environmental
Affairs & Safety Committee held two (2) meetings during fiscal 1999.
Messrs. Osborne, Garvey, Cabaniss and 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 four (4)
meetings during fiscal 1999.
Messrs. Jones, Osborne, de Windt and DeCrane 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 otherwise specified in plan documents) affecting
officers' direct
- 14 -
<PAGE>
and indirect remuneration. The Compensation and Stock Option Committee held
six (6) meetings, including one (1) action by written consent, during fiscal
1999.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
ELECTION OF THE NOMINEES NAMED IN THIS PROXY STATEMENT ON THE COMPANY'S WHITE
PROXY CARD.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") 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
SEC reports of changes in ownership of the Common Stock of the Company held by
such persons. Such 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 1999, 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, 1999, 1998 and 1997 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 both the 1990
and 1997 Management Incentive Plans ("1990 MIP" and "1997 MIP") and Restricted
Stock issued under the 1995 Stock Accumulation Plan ("SAP"). See footnotes
(2), (6) and (8) to the Summary Compensation Table. Under applicable SEC
rules, Brian F. Hill, Chief Operating Officer, who joined the Company in June
1999, is not a Named Executive Officer for the last fiscal year.
- 15 -
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Other Annual Restricted Options/ All Other
Name and Salary Bonus Compensation Stock SARS Compensation
Principal Position Year ($) ($) (1) ($) ($) (2) (#) ($)(3)
------------------ ---- ------- ------- ------------ ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert A. Garvey 1999 367,967(4) -0- -0- 122,658(6) 175,000 64,956
Chairman of the 1998 367,968(4) -0- -0- 122,665(6) 50,000 88,431
Board and Chief 1997 371,506 240,005 143,005(5) 197,928(6) -0- 6,422
Executive Officer
Kevin E. Walsh (7) 1999 235,819(4) 67,500(4) -0- 102,944(6)(8) 110,000 18,225
Executive Vice 1998 -- -- -- -- -- --
President - Chief 1997 -- -- -- -- -- --
Financial Officer
William R. Lucas Jr. 1999 229,687 43,772 -0- 57,894(6)(8) 72,000 32,488
Managing Director - 1998 214,856 27,004 -0- 4,007(6) 12,000 42,019
Southern Region 1997 170,654 99,011 -0- 39,924(6) 60,000 6,151
Jack R. Wheeler 1999 180,609(4) 42,391 -0- 39,539(6)(8) 70,000 31,675
Managing Director - 1998 164,133(4) 16,202(4) -0- 2,409(6) 5,000 33,093
Northern Region 1997 146,346 48,603 -0- 17,185(6) 50,000 4,649
Robert G. Wilson 1999 166,262(4) -0- -0- 8,999(8) 2,000 11,504
Vice President - 1998 160,407(4) 5,401(4) -0- 799(6) 3,000 11,248
Business Development 1997 162,523 31,504 -0- 4,631(6) 8,000 6,230
</TABLE>
- --------
(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 1999, 1998 and 1997 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 (6) 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 the Record Date,
calculated using the closing market price of the Company's unrestricted
common stock on June 30, 1999, were as follows: 61,089 shares ($259,628)
by Mr. Garvey; 9,381 shares ($39,869) by Mr. Walsh; 7,393 shares
($31,420) by Mr. Lucas; 4,048 shares ($17,204) by Mr. Wheeler; and 1,353
shares ($5,750) by Mr. Wilson. Dividends are paid on shares of
Restricted Stock.
(3) The compensation reported represents Company contributions to the 401(k)
Plan, premiums for life insurance and contributions to the Birmingham
Steel Corporation Executive Retirement and Compensation Deferral Plan
(the "ERP/CDP"). 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, 1999:
<TABLE>
<CAPTION>
Term and Whole
Name 401(k) Plan Life Insurance ERP/CDP
---- ----------- -------------- -------
<S> <C> <C> <C>
Robert A. Garvey $5,364 $9,954 $49,638
Kevin E. Walsh 0 6,479 11,746
William R. Lucas, Jr. 2,418 4,232 25,838
Jack R. Wheeler 5,257 6,705 19,713
Robert G. Wilson 5,087 6,417 0
</TABLE>
(4) Includes amounts deferred by Named Executive Officers pursuant to the
ERP/CDP.
- 16 -
<PAGE>
(5) Consists solely of amounts paid to reimburse Mr. Garvey for loss on
forfeiture of stock award from his previous employer during 1997.
(6) 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: 1999 -
$91,992, 1998 - $91,992 and 1997 - $148,554; Mr. Walsh: 1999 - $13,065;
Mr. Lucas: 1999 - $4,864, 1998 - $2,996 and 1997 - $30,026; Mr. Wheeler:
1999 - $4,710, 1998 - $1,798 and 1997 - $12,923; and Mr. Wilson: 1999 -
$-0-, 1998 - $599 and 1997 - $3,497. Such amounts are not included in
the "Salary" or "Bonus" columns in the table above.
(7) Mr. Walsh joined the Company in July 1998.
(8) Includes the value of Restricted Stock award(s) granted under the 1990
and 1997 MIP on the date of such grant(s). Restricted Stock awards under
the 1990 and 1997 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. Mr. Walsh's award (8,000 shares) was made on August
10, 1998, at a per share price of $9.625, and vests in equal increments
of one-fourth over four years. Mr. Lucas's award (4,675 shares) was made
on August 10, 1998, at a per share price of $9.625, and vests at the end
of two years. Mr. Wheeler's award (2,805 shares) was made on August 10,
1998, at a per share price of $9.625, and vests at the end of two years.
Mr. Wilson's award (935 shares) was made on August 10, 1998, at a per
share price of $9.625, and vests at the end of two years.
- 17 -
<PAGE>
Stock Option Plan
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides certain information concerning individual
grants of stock options under the 1990 MIP and the 1997 MIP made during the
fiscal year ended June 30, 1999, to each of the Named Executive Officers:
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants for Option Term
---------------------------------------------- ---------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise or
Options Employees In Base Price Expiration
Name Granted(#) Fiscal Year ($/Sh) Date 5%($) 10%($)
---- ---------- ------------ ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Garvey 75,000(1) 19% 9.625 08/10/08 453,983 1,150,483
100,000(2) 4.75 01/18/09 290,864 737,106
Kevin E. Walsh 50,000(1) 12% 9.625 08/10/08 302,056 766,989
60,000(2) 4.75 01/18/09 174,518 442,264
William R. Lucas, Jr. 12,000(1) 8% 9.625 08/10/08 72,637 184,077
60,000(2) 4.75 01/18/09 174,518 442,264
Jack R. Wheeler 10,000(1) 8% 9.625 08/10/08 60,531 153,398
60,000(2) 4.75 01/18/09 174,518 442,264
Robert G. Wilson 2,000(1) -- 9.625 08/10/08 12,106 30,680
</TABLE>
- --------
(1) These options vest equally over a five year period beginning with the
first anniversary from the grant date and every anniversary thereafter.
(2) These options vest equally over a five year period beginning with the
first anniversary from the grant date and every anniversary thereafter
but the vesting can be accelerated if certain stock prices are achieved
and maintained for a 30-day period.
- 18 -
<PAGE>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
The following table provides certain information concerning each
exercise of stock options during the fiscal year ended June 30, 1999 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, the
1990 MIP and the 1997 MIP.
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name On Exercise Realized ($) Unexercisable Unexercisable(1)
- ---- --------------- ------------ --------------- ----------------
<S> <C> <C> <C> <C>
Robert A. Garvey 0 0 115,001/229,999 $0/$0
Kevin E. Walsh 0 0 24,000/86,000 $0/$0
William R.
Lucas, Jr. 0 0 76,800/67,200 $0/$0
Jack R. Wheeler 0 0 67,000/58,000 $0/$0
Robert G. Wilson 0 0 7,400/5,600 $0/$0
</TABLE>
- --------
(1) The stock options were granted under the 1990 MIP and the 1997 MIP. The
closing price of the Common Stock at June 30, 1999 was $4.25 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.
Executive Retirement and Compensation Deferral Plan
The ERP/CDP is a non-qualified deferred compensation plan pursuant to
which the Named Executive Officers may defer compensation in amounts between
2% to 20% of bi-weekly base pay and 5% to 50% of bonus pay, which amounts are
deemed to be credited to their accounts under the Plan. The retirement
components for the ERP participants consist of ongoing Company contributions
equal to 10% of eligible compensation, which contributions are deemed to be
credited at the end of each quarter and are fully vested. Benefits under the
ERP/CDP are unfunded and are payable from the Company's general assets. The
amounts deferred by participants and amounts credited by the Company, as well
as amounts credited under the predecessor Management Security Plan ("MSP"),
including any special opening balances authorized by the Compensation and
Stock Option Committee, are deemed to be invested based upon the investment
directions suggested by the participants, subject to the Administrative
Committee's approval of such. CDP accounts are deemed to be credited with
bonus interest of 4% for those employed at the end of each plan year, which
interest becomes 100% vested after completion of five years of participation
in the ERP/CDP, except full vesting occurs in the event of a Change in Control
(as defined below) or the participant's death, disability, attainment of the
normal retirement age of sixty-five, or attainment of age sixty and completion
of fifteen years of service. Upon normal retirement, benefits are paid based
upon the method of distribution previously selected by the participant. A lump
sum of the vested balance is paid upon other termination of employment. Upon
death, all account balances plus twice the participant's annual base pay rate
are paid to the participant's designated beneficiary.
A Change in Control is generally 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
- 19 -
<PAGE>
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, by merger, or otherwise.
Pursuant to the terms of the ERP/CDP, had a Change in Control occurred
on September 30, 1999, Robert A. Garvey, Kevin E. Walsh, William R. Lucas,
Jr., Jack R. Wheeler and Robert G. Wilson would have become vested in
additional amounts under the ERP/CDP of approximately $915,200, $0, $19,800,
$259,200 and $170,900, respectively.
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 generally 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, 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 (as defined below) or is voluntarily terminated by
the participant for Good Reason (as defined below). "Substantial Cause" for
purposes of the Severance Plan shall mean: (i) a participant's felony
conviction (or failure to contest prosecution for a felony); or (ii) a
participant's willful misconduct or dishonesty, in each case that is
materially harmful to the business or reputation of the Company. "Good Reason"
is defined as: (i) the assignment to the participant of duties that are
materially inconsistent with the participant's position immediately prior to
the Change in Control or a change in the participant's title or office from
that in effect immediately prior to the Change in Control without his or her
consent; (ii) a reduction in the participant's salary as in effect immediately
prior to the Change in Control 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 principal work location immediately prior to the
Change in Control; (iv) the Company's failure to maintain any benefit or
compensation plan (collectively, "Plans") in which the participant was
participating immediately prior to the Change in Control, a reduction of the
participant's benefits under the Plans, or the failure to provide the
participant with the same number of vacation days to which he or she was
entitled prior to the Change in Control; (v) the Company's failure to pay the
participant any compensation within seven days of its due date; (vi) failure
of 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.
Severance payments and benefits under the Severance Plan include (i) a
lump sum payment equal to two or three times (as applicable) the sum of the
participant's annual salary and target bonus and (ii) continued participation
in Company welfare benefit plans for a number of years equal to the multiple
applicable to the participant as described in clause (i). The multiple
applicable to Messrs. Garvey, Walsh, Lucas and Wheeler is three and the
multiple applicable to Mr. Wilson is two.
In the event any payment or benefit received by a participant is deemed
to be a "parachute payment" under the Internal Revenue Code, the payments and
benefits payable under the Severance Plan will be reduced so that they will
not be subject to the excise taxes imposed by the Internal Revenue Code, but
only if reducing the payments and benefits will result in a greater after-tax
benefit to the participant.
- 20 -
<PAGE>
Pursuant to the terms of the Severance Plan, had a Change in Control
occurred on September 30, 1999, Robert A. Garvey, Kevin E. Walsh, William R.
Lucas, Jr., Jack R. Wheeler and Robert G. Wilson would have been entitled to
receive the payments under the Severance Plan of $2,613,600, $1,360,500,
$1,191,000, $959,400 and $514,400, respectively.
Director Compensation
For fiscal 1999 and pursuant to the Company's Directors' Compensation
Plan (the "1996 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.
In April 1999, the Board of Directors adopted a new Director
Compensation Plan to replace the 1996 Plan pursuant to which non-employee
directors will receive the number of shares of Company Common Stock having a
market value of $30,000 in lieu of the annual retainer of 1,500 shares. Non-
employee directors will continue to receive a fee for each Board or committee
meeting attended by such director as determined by the Board of Directors from
time to time, which currently is $1,000 for Board or committee members and
$1,500 for the Chairman of a committee.
A non-employee director is permitted to defer receipt of his or her
annual retainer award and/or meeting fees during the term of his or her
directorship pursuant to a Deferred Compensation Plan adopted by the Board of
Directors in April 1999 and effective July 1, 1999. Upon a Change in Control
(as defined in the Director Stock Option Plan, below) all deferred accounts
will be paid out to the directors.
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 eight directors eligible to participate in the Director Plan. An
aggregate of 100,000 shares of Common Stock is reserved for issuance under the
Director Plan.
Under the Director Plan, on the date of each annual meeting of the
Company's stockholders, each non-employee director will be granted a non-
qualified stock option to purchase 1,500 shares of 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 vests on the first
anniversary of the date of grant and remains exercisable for a period of ten
(10) years beginning on the date of its 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.
- 21 -
<PAGE>
Unless the Board of Directors or the Compensation and Stock Option
Committee determines otherwise, all stock options vest and become exercisable
upon a Change in Control. A Change in Control is generally defined as (i) the
acquisition by any person, entity, or group of 20% 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; (iii) the occurrence of any transaction or event
relating to the Company required to be described pursuant to the requirements
of Regulation 14A of the Exchange Act; or (iv) the occurrence of a transaction
requiring stockholder approval for the acquisition of the Company by an entity
other than the Company or a subsidiary through the purchase of assets, by
merger, or otherwise.
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."
On May 11, 1999, the Company entered into an Employment Agreement with
Brian F. Hill, as amended, pursuant to which Mr. Hill serves as Chief
Operating Officer of the Company. The employment agreement has a five-year
term and provides for a base salary of $300,000. Mr. Hill is also entitled to
receive a cash bonus of $538,000 no later than the earliest of December 21,
1999, a termination without Cause, resignation for good reason, appointment of
a new chief executive officer or ten business days prior to the next meeting
of stockholders if there is a proxy contest (whether or not such contest is
successful). This cash bonus must be repaid if Mr. Hill's employment is
terminated by the Company for cause or if he resigns without good reason (as
defined in his employment agreement) prior to June 21, 2000, provided,
however, there is no repayment obligation following a change in control or
appointment of a new chief executive officer. In the event of termination of
Mr. Hill's employment by the Company without cause, Mr. Hill would (i) be
entitled to receive the greater of (A) his base salary and the target bonuses
for which he would have been eligible until June 21, 2004 or (B) the amount,
if any, payable to Mr. Hill pursuant to the Severance Plan, (ii) be entitled
to continue participation in the Company's welfare benefit plans until June
21, 2004, or until comparable welfare benefits are available from a subsequent
employer, and (iii) become 100% vested with respect to restricted stock and
stock options granted pursuant to his employment agreement. In the event of
termination of Mr. Hill's employment by Mr. Hill for good reason prior to June
21, 2001, Mr. Hill would be entitled to receive the greater of (i) his base
salary and the target bonuses for which he would have been eligible for a
period of 24 months following such termination or (ii) the amount, if any,
payable to Mr. Hill pursuant to the Severance Plan. In addition, Mr. Hill
would become 100% vested with respect to restricted stock and stock options
granted pursuant to his employment agreement. Mr. Hill's employment agreement
also provides that he will not, while employed and for a period of 24 months
after a termination of employment (12 months in the case of a termination by
the Company without cause), compete with the Company. However, after a change
in control, in the event of either a termination without cause or a
resignation for good reason, the covenant not to compete will be void. Upon a
change in control, the definitions of cause and good reason in the employment
agreement are the same as the definitions of cause and good reason set forth
in the Severance Plan. For purposes of the employment agreement, the
definition of change in control is the same as the definition of change in
control set forth in the Severance Plan.
As of September 20, 1999, the Company entered into an Employment
Agreement with Kevin E. Walsh, pursuant to which Mr. Walsh serves as Executive
Vice President and Chief Financial Officer of the Company. The employment
agreement has a five-year term and provides for a base salary of $275,000. Mr.
Walsh is also eligible to receive an annual cash bonus during the term of the
employment agreement at 50% of base salary for achievement of 100% of target
goals. In the event of termination of Mr. Walsh's employment by the Company
without cause, Mr. Walsh would (i) be entitled to receive the greater of (A)
his base salary and the target bonuses for which he would have been eligible
for a period of 36 months following such termination or (B) the amount, if
any, payable to Mr. Walsh pursuant to the Severance Plan and (ii) be entitled
to continued participation in the
- 22 -
<PAGE>
Company's welfare benefit plans for a period of 36 months following such
termination, or until comparable welfare benefits are available from a
subsequent employer. In the event of termination of Mr. Walsh's employment by
Mr. Walsh for good reason prior to September 20, 2001, Mr. Walsh would be
entitled to receive the greater of (i) his base salary and target bonuses for
which he would have been eligible for a period of 36 months following such
termination or (ii) the amount, if any, payable to Mr. Walsh pursuant to the
Severance Plan. Upon a change in control, the definitions of cause and good
reason in the employment agreement are the same as the definitions of cause
and good reason set forth in the Severance Plan. For purposes of the
employment agreement, the definition of change in control is the same as the
definition of change in control set forth in the Severance Plan.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Introduction
The Compensation and Stock Option Committee (the "Committee") of the
Board of Directors is comprised of four non-employee directors. The Committee
generally is responsible for the compensation and benefit plans for all
employees and is directly accountable for evaluating and approving
compensation and benefit plans, and payments and awards under those plans, for
the Company's senior executives, including the Chief Executive Officer and the
other Named Executive Officers. The Committee represents the stockholders'
interests by ensuring an appropriate link exists between the Company's
strategic goals, business performance, stockholder returns, and the executive
compensation plans.
Compensation Philosophy
The Company's compensation philosophy is to provide competitive wages
and salaries with the opportunity to earn above-average compensation through
performance-based incentives. The Committee believes that incentive
compensation provides the best means of motivating and rewarding performance
while providing necessary controls on cost. This philosophy is reflected in
the Company's use of incentive compensation at virtually every level of the
organization, not just in the executive ranks. In the case of production and
supervisory employees, weekly incentives may be earned for exceeding base
production levels. Executives may earn incentives based on Company or business
unit profitability. In fiscal 1999, production and supervisory incentives
averaged 27% of total compensation, and executive incentives averaged 12%.
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.
- 23 -
<PAGE>
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 by the
Committee in consultation with the Board of Directors. 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.
Management and Sales Incentive Bonus Plan
Effective November 1, 1998, the Company's Management and Sales Incentive
Bonus Plan replaced the predecessor Discretionary Bonus Plan. This plan is
formula-based and provides participants with an annual bonus award for the
achievement of specified business unit and corporation financial goals. The
goals for each participant are the applicable pre-tax income targets in the
annual business plan. Each eligible position has been assigned a "target"
bonus percentage. The target represents a percent of base salary and the bonus
is earned only after accomplishing the financial goals for the fiscal year.
The changes to the bonus plan were designed to place a greater emphasis on
individual and divisional performance and to achieve the financial goals of
the Company. Under this plan, the participants have a clearer understanding of
what is required to earn a bonus and have incentive to focus their attention
on profitability.
Under the Discretionary Cash Bonus Plan, which was in place prior to
November 1, 1998, a portion of the total compensation of the executive
officers was at risk with respect to the profitability of the Company. A bonus
pool was created if the Company achieved a minimum return on capital as
determined by the Committee ("the threshold return"). If the threshold return
was achieved, the amount of the bonus pool was 2.5% of pre-tax earnings. The
pool may have been higher than 2.5% of pre-tax earnings if return on capital
exceeded the threshold return. The amount of the bonus pool was determined
according to a formula which corresponded with the Company's actual return on
capital for the fiscal year. The plan authorized 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. Individual bonuses were determined based on
individual performances. The Committee determined that no bonus would be
awarded to the Chief Executive Officer based on 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, were 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.
Bonus awards for fiscal 1999 were paid by September 1, 1999 and
represented compensation earned for the fiscal year ended June 30, 1999.
- 24 -
<PAGE>
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 1990 MIP and the 1997 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.
The 1997 MIP was submitted to and approved by the Company's stockholders
at the 1997 annual meeting. The 1997 MIP is intended to be a continuation of
the Company's incentive compensation program currently provided by the
Company's 1990 MIP. The primary purposes for the 1997 MIP were 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 Internal Revenue Code of 1986, as amended (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.
In fiscal 1999, options were granted under the 1990 MIP and the 1997 MIP
to five (5) of the Named Executive Officers. During fiscal 1999, no Named
Executive Officers exercised stock options.
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 employment agreement is five years, expiring
January 5, 2001. In the event of termination without cause, Mr. Garvey would
be entitled to (i) exercise all outstanding options that are then exercisable
and that would have become exercisable within one year after termination of
employment, and (ii) receive payment of the higher of (A) $2,250,000 less the
amount of base salary paid prior to termination or (B) the amount, if any,
payable to Mr. Garvey pursuant to the Severance Plan. Following any
termination of employment, Mr. Garvey is entitled to receive continued medical
coverage by the Company until age 65 at which time such Company provided
medical coverage would become secondary to Medicare.
- 25 -
<PAGE>
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 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 majority vote of the stockholders in a separate
stockholder 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 (i) the 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, selling, general and administrative costs 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. No compensation was paid under the CEO
Plan for the fiscal year ended June 30, 1999.
Summary
The Company's executive compensation program encourages executives to
increase profitability and stockholder value. The emphasis on incentive
compensation for executives is consistent with the pay-for-performance policy
applied throughout the Company. The Committee believes this approach provides
competitive compensation and is in the best interests of the stockholders.
SUBMITTED BY THE COMPENSATION AND STOCK OPTION COMMITTEE OF
THE BOARD OF DIRECTORS:
E. Bradley Jones, Chairman
Richard de J. Osborne
Alfred C. DeCrane
E. Mandell de Windt
- 26 -
<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, 1994 and ending on June 30, 1999. The graph assumes that the value
of the investment in the Company's Common Stock and each index was $100 on July
1, 1994, and that all dividends were reinvested.
[GRAPH SHOWING COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN FOR THE YEAR
ENDED 1999 APPEARS HERE]
1994 1995 1996 1997 1998 1999
- -------------------------------------------------------------------------------
Birmingham Steel Corporation $100 $69 $64 $61 $50 $18
- -------------------------------------------------------------------------------
S & P 500 $100 $126 $159 $214 $279 $342
- -------------------------------------------------------------------------------
S & P Steel Group $100 $91 $79 $89 $82 $78
- -------------------------------------------------------------------------------
- 27 -
<PAGE>
AGENDA ITEM TWO
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, 2000. 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 the holders of a majority of the votes cast at
the Annual Meeting by the stockholders entitled to vote on the matter will 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 ON THE COMPANY'S WHITE PROXY CARD.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
The Company's Bylaws require that notice of nominations to the Board of
Directors proposed by stockholders be received by the Secretary of the
Company, along with certain other specified material, at least 60 days prior
to the first anniversary of the preceding year's annual meeting of
stockholders. Accordingly, notice of proposed nominees to the Board of
Directors must be received by the Secretary of the Company no later than
October 3, 2000. Any stockholder who wishes to nominate a candidate for
election to the Board should obtain a copy of the relevant section of the
Bylaws from the Secretary of the Company.
Proposals of stockholders intended to be presented pursuant to Rule 14a-
8 under the Exchange Act at the 2000 annual meeting must be received by the
Secretary of the Company no later than June 20, 2000 in order to be considered
for inclusion in the 2000 proxy statement. In order for proposals of
shareholders made outside of Rule 14a-8 to be considered "timely" within the
meaning of Rule 14a-4(c) under the Exchange Act, such proposals must be
received by the Secretary of the Company no later than October 3, 2000.
METHOD AND COST OF PROXY SOLICITATION
Proxies may be solicited, without additional compensation, by directors,
officers or employees of the Company by mail, e-mail, the Internet, telephone,
facsimile, telegram, in person or otherwise. The Company will bear the cost of
the solicitation of proxies, including the preparation, printing and mailing
of the proxy materials. In addition, the Company will request banks, brokers
and other custodians, nominees and fiduciaries to forward proxy material to
the beneficial owners of the Company's stock and obtain their voting
instructions. The Company will reimburse those firms for their expenses in
accordance with the rules of the SEC and New York Stock Exchange. In addition,
the Company has retained Innisfree to assist in the solicitation of proxies
for a fee of $250,000 plus out of pocket expenses. Innisfree will employ
approximately 75 people to solicit the Company's stockholders.
Expenses related to the solicitation of stockholders, in excess of those
normally spent for an annual meeting and exclusive of litigation expenses and
certain financial advisory fees payable to the Company's financial advisors
which are described in Appendix A, are expected to aggregate approximately
$1,500,000, of which approximately $500,000 has been spent to date. Appendix A
sets forth certain information relating to the Company's directors, nominees,
officers and other employees of the Company and third parties who will be
soliciting proxies on the Company's behalf ("Participants").
- 28 -
<PAGE>
FORWARD-LOOKING STATEMENTS
Statements made by the Company in this Proxy Statement that are not
strictly historical facts are "forward-looking" statements that are based on
current expectations about the markets in which the Company does business and
assumptions made by management. Such statements should be considered as subject
to risks and uncertainties that exist in the Company's operations and business
environment and could render actual outcomes and results materially different
than predicted. For a description of some of the factors and uncertainties
which could cause actual results to differ, reference is made to the section
entitled "Risk Factors That May Affect Future Operating Results" in the
Company's Annual Report on Form 10-K for the year ended June 30, 1999.
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 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, 1999.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WHETHER OR NOT YOU
EXPECT TO ATTEND THE MEETING IN PERSON WE URGE YOU TO EXECUTE AND RETURN THE
ENCLOSED WHITE PROXY CARD IN THE REPLY ENVELOPE PROVIDED.
October 18, 1999 By Order of the Board of
Directors,
/s/ Catherine W. Pecher
-----------------------
Catherine W. Pecher
Vice President and Secretary
- 29 -
<PAGE>
APPENDIX A
INFORMATION CONCERNING THE DIRECTORS AND CERTAIN EXECUTIVE OFFICERS OF THE
COMPANY AND CERTAIN EMPLOYEES OF THE COMPANY AND OTHER PARTICIPANTS WHO MAY
ALSO SOLICIT PROXIES
The following table sets forth the name, principal business address and
the present office or other principal occupation or employment, and the name,
principal business and the address of any corporation or other organization in
which such employment is carried on, of the directors and certain executive
officers of the Company and certain employees and other representatives of the
Company who may also solicit proxies from stockholders of the Company. Unless
otherwise indicated, the principal occupation refers to such person's position
with the Company and the business address is Birmingham Steel Corporation,
Suite 300, 1000 Urban Center Drive, Birmingham, Alabama 35242-2516.
Directors
The principal occupations of the Company's directors who are deemed
participants in the solicitation are set forth on pages 13 and 14 of this
Proxy Statement. The principal business address of Mr. Robert A. Garvey is
that of the Company. The names, businesses and addresses of the other
director-participants' organizations of employment are as follows:
Name Address
---- -------
William J. Cabaniss, Jr. P.O. Box 19925
Birmingham, AL 35219
C. Stephen Clegg 500 North Western Avenue
Ste. 212
Lake Forest, IL 60045
Alfred C. DeCrane, Jr. Two Greenwich Plaza
Suite 300
P.O. Box 1247
Greenwich, CT 06836
E. Mandell de Windt Bald Peake Colony Club
Rt. 109
Melvin Village, NH 03850
E. Bradley Jones 30195 Chagrin Boulevard
Suite 104W
Pepper Pike, OH 44124
Robert D. Kennedy 39 Old Ridgebury Road
Section J-4
Danbury, CT 06817
Richard de J. Osborne 180 Maiden Lane
New York, NY 10038
John H. Roberts 2166 Drury Lane
Northfield, IL 60093
A-1
<PAGE>
Executive Officers and Management
The principal occupation of the Company's executive officers and certain
other members of management and employees who are deemed participants in the
solicitation are set forth below. Except as otherwise specified below, the
principal business address of each of such persons is that of the Company.
<TABLE>
<CAPTION>
Name Principal Occupation
---- --------------------
<S> <C>
Robert A. Garvey Chairman of the Board of Directors & Chief Executive Officer
Brian F. Hill Chief Operating Officer
Kevin E. Walsh Executive Vice President--Chief Financial Officer
Raymond J. Lepp Managing Director--Western Region
William R. Lucas, Jr. Managing Director--Southern Region
Jack R. Wheeler Managing Director--Northern Region
J. Daniel Garrett Vice President--Finance & Control
Philip L. Oakes Vice President--Human Resources
Catherine W. Pecher Vice President--Administration & Corporate Secretary
W. Joel White Vice President--Information Technology
Robert G. Wilson Vice President--Business Development
Charles E. Richardson III General Counsel
</TABLE>
Credit Suisse First Boston Corporation and Banc of America Securities LLC
Certain employees of Credit Suisse First Boston Corporation ("CSFB") and
Banc of America Securities LLC ("BAS"), the Company's financial advisors, may
also assist the Company in the solicitation of proxies, including by
communicating in person, by telephone, or otherwise with a limited number of
institutions, brokers, or other persons who are stockholders of the Company.
Neither CSFB nor BAS will receive any separate fee for such solicitation
activities. Neither CSFB nor BAS admit that it or any of its directors,
officers, employees or affiliates are a "participant," as defined in Schedule
14A promulgated under the Securities Exchange Act of 1934 by the Securities
and Exchange Commission, or that such Schedule 14A requires the disclosure of
certain information concerning CSFB or BAS.
Information with respect to the employees of CSFB who may assist in the
solicitation of proxies is set forth below. None of the individuals named
below owns any shares of Company Common Stock or has engaged in any
transaction involving Company Common Stock during the past two years. The
principal business address of each of the persons listed below is Eleven
Madison Avenue, New York, New York 10010.
Name Principal Occupation
---- --------------------
Peter R. Matt Managing Director
William C. Sharpstone Managing Director
Murari S. Rajan Director
A-2
<PAGE>
Information with respect to the employees of BAS who may assist in the
solicitation of proxies is set forth below. None of the individuals named
below owns any shares of Company Common Stock or has engaged in any
transaction involving Company Common Stock during the past two years. The
principal business address of BAS is Banc of America Securities LLC, 9 West
57th Street, New York, New York 10019; the principal address of each of the
persons listed below is c/o Banc of America Securities LLC at the indicated
address:
<TABLE>
<CAPTION>
Name Principal Occupation Address
---- -------------------- -------
<S> <C> <C>
Gidon Y. Cohen Managing Director 231 South LaSalle Street, 7th Floor
Chicago, Illinois 60697
Shawn B. Welch Managing Director 600 Peachtree Street, NE, 9th Floor
Atlanta, Georgia 30308
Sumner T. Farren Associate 231 South LaSalle Street, 7th Floor
Chicago, Illinois 60697
</TABLE>
The Company has retained CSFB and BAS to act as its financial advisors
in connection with the Company's consideration, review and implementation of
financial and/or strategic alternatives.
Pursuant to the terms of CSFB's engagement, the Company has agreed to
pay CSFB an aggregate financial advisory fee of up to $1.5 million. In the
event that CSFB's engagement is terminated prior to December 31, 1999, the
Company has agreed to pay CSFB an aggregate financial advisory fee of no less
than (i) $1.5 million if the current directors and/or nominees selected by a
majority of the current directors cease to constitute a majority of the
Company's Board of Directors or (ii) an amount to be mutually agreed upon by
the Company and CSFB if a majority change in the Company's Board of Directors
described in clause (i) above has not occurred. In the event that CSFB's
engagement is terminated after December 31, 1999, the Company has agreed to
pay CSFB an amount to be agreed upon between the Company and CSFB. In the case
of an acquisition or sale of the Company or a substantial amount of its
assets, the Company has agreed to pay CSFB a transaction fee equal to between
0.70% and 1.25% of the aggregate consideration, including liabilities assumed,
payable in the transaction. Any financial advisory fee paid to CSFB will, to
the extent previously paid, be credited against the transaction fee payable to
CSFB. The Company also has agreed to reimburse CSFB for CSFB's out-of-pocket
expenses, including fees and expenses of CSFB's legal counsel, if any, and any
other advisor retained by CSFB, resulting from or arising out of its
engagement and to indemnify CSFB and related parties against certain
liabilities, including liabilities under the federal securities laws, arising
out of CSFB's engagement.
In addition, CSFB and its affiliates have, in the past, provided
financial services to the Company for which services CSFB and its affiliates
have received customary compensation.
Pursuant to the terms of BAS's engagement, the Company has paid, or
agreed to pay, the following fees: (i) BAS has received a retention fee in an
amount equal to $200,000; (ii) a fee equal to $1 million will be payable in
the event that, among other things, an offer or proposal to acquire the
Company, including without limitation, the commencement of a tender offer or
proxy contest (an "Acquisition Attempt") is withdrawn or does not result
within nine months from the first public disclosure of such Acquisition
Attempt in any of: an acquisition of 50% or more of the Company's voting
securities by any person; a change in a majority of the members of the Board
of Directors of the Company; or the replacement of the Company's present Chief
Executive Officer; and (iii) a fee equal to $1 million payable if, during the
period of BAS's engagement or within 2 years thereafter, one or a series of
transactions is consummated whereby, directly or indirectly, all or a
substantial portion of a business, the assets (or the right to all or any
substantial portion of the revenues or income) or the voting securities of the
Company are transferred to, acquired by or combined with any person, provided
that in no event will a payment be made under both clause (ii) and this clause
(iii). In the event the Company effects a recapitalization or other
transaction or distribution with respect to its capital stock, an additional
fee is to be mutually agreed upon by BAS and the Company.
A-3
<PAGE>
BAS has also been engaged by the Company in connection with the possible
amendment of the terms of outstanding debt securities of the Company, in which
capacity it has received and will receive customary compensation. BAS has
provided certain investment banking services to the Company from time to time
for which BAS has received customary compensation. Pursuant to these
engagements of BAS, the Company has also agreed to reimburse BAS for certain
reasonable out-of-pocket expenses (including the reasonable fees and
disbursements of legal counsel) and to indemnify BAS and certain related
parties from and against certain liabilities, including liabilities under the
federal securities laws, arising out of its engagement.
Bank of America, N.A., an affiliate of BAS, is the Administrative Agent
and lender under a Credit Agreement with the Company dated as of March 17,
1997, as amended, and in such capacities has received and will receive
customary compensation.
CSFB and BAS each engage in a full range of investment banking,
securities trading, market-making and brokerage services for institutional and
individual clients. In the normal course of their businesses, CSFB and BAS may
trade securities of the Company for their own account and the account of their
respective customers and, accordingly, may at any time hold a long or short
position in such securities. As of October 12, 1999, CSFB had a net short
position of 100 shares of Company Common Stock and as of October 13, 1999, BAS
held a net long position of 264,022 shares of Company Common Stock.
Information Regarding Ownership of the Company's Securities by Participants
None of the participants owns any of the Company's securities of record
but not beneficially. The number of shares of Common Stock held by directors
and the named executive officers is set forth on pages 3 and 4 of this Proxy
Statement. The number of shares of Common Stock held by the other participants
is set forth below:
<TABLE>
<CAPTION>
Name Share Ownership
---- ---------------
<S> <C>
Raymond J. Lepp 29,860
J. Daniel Garrett 22,733
Philip L. Oakes 20,189
Catherine W. Pecher 29,450
W. Joel White 35,985
Charles E. Richardson III 2,793
</TABLE>
A-4
<PAGE>
Information Regarding Transactions in the Company's Securities by Participants
The following table sets forth purchases and sales of the Company's
equity securities by the participants listed below during the past two years.
Unless otherwise indicated, all transactions are in the public market.
<TABLE>
<CAPTION>
Number of
Shares of
Common Stock
Purchased
Name (or Sold) Footnote Date
---- ------------ -------- --------
Directors
---------
<S> <C> <C> <C>
William J. Cabaniss, Jr. 1,500 (9) 10/14/97
1,500 (1) 10/14/97
28.73 (8) 11/04/97
28.47 (8) 02/03/98
30.94 (8) 05/05/98
84.82 (8) 08/25/98
1,500 (9) 10/13/98
1,500 (1) 10/13/98
47.15 (8) 11/04/98
54.16 (8) 02/08/99
37.02 (8) 05/10/99
30.38 (8) 08/09/99
C. Stephen Clegg 1,500 (9) 10/14/97
1,500 (1) 10/14/97
1,500 (9) 10/13/98
1,500 (1) 10/13/98
Alfred C. DeCrane, Jr. 2,000 (4) 08/25/98
1,500 (9) 10/13/98
1,500 (1) 10/13/98
5.17 (8) 11/03/98
8.60 (8) 02/08/98
5.878 (8) 05/10/99
E. Mandell de Windt 1,500 (9) 10/14/97
1,500 (1) 10/14/97
1,500 (9) 10/13/98
1,500 (1) 10/13/98
E. Bradley Jones 1,500 (9) 10/14/97
1,500 (1) 10/14/97
1,500 (9) 10/13/98
1,500 (1) 10/13/98
Robert D. Kennedy 1,500 (9) 10/14/97
Richard de J. Osborne 1,000 (4) 08/04/98
1,000 (4) 09/01/98
1,500 (1) 10/13/98
1,500 (9) 10/13/98
John H. Roberts None
</TABLE>
A-5
<PAGE>
<TABLE>
<CAPTION>
Number of
Shares of
Common Stock
Purchased
Name (or Sold) Footnote Date
---- ------------ -------- --------
<S> <C> <C> <C>
Officers
Robert A. Garvey 567 (7) 10/31/97
617 (7) 11/30/97
599 (7) 12/31/97
944 (3) 12/31/97
854 (7) 01/31/98
537 (7) 02/28/98
577 (7) 03/31/98
589 (7) 04/30/98
674 (7) 05/31/98
763 (7) 06/30/98
1,356 (7) 07/31/98
1,373 (7) 08/31/98
1,188 (7) 09/30/98
1,820 (7) 10/31/98
1,935 (7) 11/30/98
75,000 (1) 08/10/98
3,053 (3) 12/31/98
3,380 (7) 12/31/98
100,000 (1) 01/18/99
2,126 (7) 01/31/99
2,287 (7) 02/28/99
2,396 (7) 03/31/99
1,540 (7) 04/30/99
1,841 (7) 05/28/99
2,288 (7) 06/30/99
1,728 (7) 07/30/99
1,290 (7) 08/31/99
1,238 (7) 09/30/99
Brian F. Hill 8,000 (6) 06/21/99
100,000 (1) 06/21/99
3,039 (7) 08/31/99
Kevin E. Walsh 8,000 (6) 08/10/98
50,000 (1) 08/10/98
204 (7) 08/31/98
172 (7) 09/30/98
256 (7) 10/31/98
273 (7) 11/30/98
476 (7) 12/31/98
60,000 (1) 01/18/99
1,368 (7) 08/31/99
Raymond J. Lepp 3,117 (6) 08/10/98
4,000 (1) 08/10/98
277 (7) 08/10/98
313 (3) 12/31/98
40,000 (1) 01/18/99
1,532 (7) 08/31/99
</TABLE>
A-6
<PAGE>
<TABLE>
<CAPTION>
Number of
Shares of
Common Stock
Purchased
Name (or Sold) Footnote Date
---- ------------ -------- --------
<S> <C> <C> <C>
William R. Lucas, Jr. 948 (3) 12/31/97
1 (7) 06/30/98
4,675 (6) 08/10/98
12,000 (1) 08/10/98
415 (7) 08/10/98
255 (3) 12/31/98
60,000 (1) 01/18/99
887 (7) 08/31/99
Jack R. Wheeler 1 (7) 06/30/98
2,805 (6) 08/10/98
10,000 (1) 08/10/98
249 (7) 08/10/98
1 (7) 10/31/98
84 (3) 12/31/98
60,000 (1) 01/18/99
859 (7) 08/31/99
J. Daniel Garrett 1,558 (6) 08/10/98
3,000 (1) 08/10/98
138 (7) 08/10/98
84 (3) 12/31/98
25,000 (1) 01/18/99
Philip L. Oakes 1,558 (6) 08/10/98
3,000 (1) 08/10/98
138 (7) 08/10/98
84 (3) 12/31/98
25,000 (1) 01/18/99
Catherine W. Pecher 1,247 (6) 08/10/98
2,000 (1) 08/10/98
110 (7) 08/10/98
2,000 (4) 10/00/98
84 (3) 12/31/98
25,000 (1) 01/18/99
W. Joel White 79 (7) 10/31/97
86 (7) 11/30/97
83 (7) 12/31/97
119 (7) 01/31/98
75 (7) 02/28/98
80 (7) 03/31/98
83 (7) 04/30/98
94 (7) 05/31/98
106 (7) 06/30/98
378 (7) 07/31/98
88 (7) 08/10/98
499 (6) 08/10/98
2,000 (1) 08/10/98
382 (7) 08/31/98
332 (7) 09/30/98
507 (7) 10/31/98
</TABLE>
A-7
<PAGE>
<TABLE>
<CAPTION>
Number of
Shares of
Common Stock
Purchased
Name (or Sold) Footnote Date
---- ------------ -------- --------
<S> <C> <C> <C>
W. Joel White (continued) 539 (7) 11/30/98
7,568 (3) 12/31/98
943 (7) 01/18/99
25,000 (1) 01/31/99
445 (7) 02/28/99
478 (7) 03/31/99
522 (7) 04/30/99
349 (7) 05/28/99
417 (7) 06/30/99
519 (7) 06/30/99
Robert G. Wilson 526 (3) 12/31/97
16,500 (2) 05/01/98
16,500 (5) 05/01/98
935 (6) 08/10/98
2,000 (1) 08/10/98
83 (7) 08/10/98
1,036 (3) 12/31/98
Charles E. Richardson III 208 (6) 08/10/98
3,000 (1) 08/10/98
84 (3) 12/31/98
1,000 (4) 05/19/99
</TABLE>
- --------
(1) Stock option award.
(2) Acquisition pursuant to the exercise of stock options.
(3) Purchased through the Company's 401(k) plan.
(4) Open market purchase.
(5) Open market sale.
(6) Award of restricted shares pursuant to the 1990 or 1997 MIP.
(7) Award of restricted shares pursuant to the SAP.
(8) Dividend reinvestment.
(9) Award of restricted shares pursuant to the Director Compensation Plan.
Miscellaneous Information Concerning Participants
Except as described in this Appendix A or in the Proxy Statement, none
of the participants nor any of their respective affiliates or associates
(together, the "Participant Affiliates"), (i) directly or indirectly
beneficially owns any shares of Common Stock of the Company or any securities
of any subsidiary of the Company or (ii) has had any relationship with the
Company in any capacity other than as a stockholder, employee, officer and
director. Furthermore, except as described in this Appendix A or in the Proxy
Statement, no Participant Affiliate is either a party to any transaction or
series of transactions since July 1, 1998, or has knowledge of any currently
proposed transaction or series of transactions, (i) to which the Company or
any of its subsidiaries was or is to be a party, (ii) in which the amount
involved exceeds $60,000, and (iii) in which any Participant Affiliate had, or
will have, a direct or indirect material interest.
Except for the employment agreements described in the Proxy Statement,
no Participant Affiliate has entered into any agreement or understanding with
any person respecting any future employment by the Company or its affiliates
or any future transactions to which the Company or any of its affiliates will
or may be a party. Except as described in this Appendix A or in the Proxy
Statement, there are no contracts, arrangements or understandings by any
Participant Affiliate within the past year with any person with respect to the
Company's securities.
A-8
<PAGE>
PROXY
BIRMINGHAM STEEL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS (i) FOR USE
AT THE 1999 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON DECEMBER 2, 1999
AND (ii) TO REVOKE ANY PROXIES FURNISHED TO THE UNITED GROUP IN CONNECTION
WITH ITS SOLICITATION TO REMOVE THE ENTIRE BOARD OF DIRECTORS OF BIRMINGHAM
STEEL CORPORATION (THE "COMPANY") WITHOUT CAUSE THROUGH A CONSENT PROCESS.
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 Thursday, December 2,
1999 at 10:00 a.m. local time at The Peabody Orlando Hotel, 9801 International
Drive, Orlando, Florida, and at any adjournment or postponement thereof,
according to the number of votes that the undersigned would be entitled to cast
if personally present. Unless indicated to the contrary, the undersigned hereby
revokes any and all proxies which the undersigned may have given to The United
Group in its solicitation to remove the entire Board of Directors of the Company
without cause through a consent process.
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 PROPOSAL (1) AND FOR THE PROPOSAL REFERRED TO IN
PROPOSAL (2), AND WILL CONSTITUTE A REVOCATION IN CONNECTION WITH PROPOSAL 3.
<PAGE>
[X] Please mark your votes
as in this example
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2
- --------------------------------------------------------------------------------
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. Mandel de Windt; William J. Cabaniss, Jr.;
C. Stephen Clegg; Alfred C. DeCrane, Jr.; E. Bradley Jones; Robert D.
Kennedy; Richard de J. Osborne; and John H. Roberts.
FOR all nominees listed above (except as WITHHOLD [ ]
indicated to the contrary below) [ ] AUTHORITY
_______________________________________________
2. 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, 2000.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO "REVOKE" ON PROPOSAL 3
- --------------------------------------------------------------------------------
3. To revoke any and all prior proxies to remove the entire Board of Directors
without cause through a consent process.
REVOKE [ ] WITHHOLD AUTHORITY [ ]
TO REVOKE
4. To consider and take action upon such other matters as may properly come
before the meeting or any adjournments or postponements thereof.
The undersigned revokes any prior proxies with respect to the shares
covered by this Proxy.
Date: ________________________________________________________, 1999
____________________________________________________________________
Signature
____________________________________________________________________
Signature
____________________________________________________________________
Title(s)
(This Proxy should be 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 SIGN, DATE AND RETURN THIS PROXY
PROMPTLY.
