SCHEDULE 14A
(RULE 14A-101)
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
Filed by the Registrant {X}
Filed by a Party other than the Registrant {_}
Check the appropriate box:
{X} Preliminary Proxy Statement
{_} Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
{_} Definitive Proxy Statement
{_} Definitive Additional Materials
{_} Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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:
PRELIMINARY PROXY MATERIAL - SUBJECT TO COMPLETION
BIRMINGHAM STEEL
CORPORATION
October _, 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,
Robert A. Garvey
Chairman of the Board and
Chief Executive Officer
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.
PRELIMINARY PROXY MATERIAL - SUBJECT TO COMPLETION
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,
Catherine W. Pecher
---------------------------------------
Catherine W. Pecher
Vice President and Secretary
Birmingham, Alabama
October _, 1999
PRELIMINARY PROXY MATERIAL - SUBJECT TO COMPLETION
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.
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.
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.
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
___________, 1999.
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 Annual Meeting Record Date,
_________ shares of common stock, par value $.01 per share, of the Company
(the "Common Stock") were outstanding. At the close of business on the
Consent Record Date, 29,891,429 shares of Common Stock were outstanding.
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 the Annual Meeting
Record Date, by (i) persons known to the Company to be the beneficial
owners of more than 5% of the Company's Common Stock, (ii) each of the
Company's directors and nominees for director, (iii) each executive officer
included in the Summary Compensation Table, and (iv) all directors and
executive officers of the Company as a group. Unless otherwise noted in the
footnotes to the table, the persons named in the table have sole voting and
investment power with respect to all outstanding shares of Common Stock
shown as beneficially owned by them.
NAME OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF
OR NUMBER OF PERSONS IN GROUP BENEFICIALLY OWNED CLASS
- ------------------------------ -------------------- ---------------
The Prudential Insurance 2,928,991(1) 9.86%
Company of America
The United Group 2,309,303(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 officers as a 636,688(12) 2.00%
group (14 persons)
* Less than 1%
(footnotes appear on following 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 preliminary 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 100,000 shares
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.
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, 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 designed or 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
prospective, 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.
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 __, 1999 the Company reported net
income of $_______ (or $____ per share) for the first quarter of fiscal
year 2000. 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.
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:
o 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.
o Continuing to grow the Company's rebar business, while
improving the product mix. During the three-year period,
average rebar shipments increased 11%.
o 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.
o 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 MR. TODD AND HIS PRIOR MANAGEMENT.
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.
Moreover, as a consequence of these errors of omission and commission by
prior management, 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.
The errors of omission and commission by Mr. Todd and his
senior management that led to the problems and challenges of the SBQ
division include, among others:
o Failure to Complete Appropriate Market Study: In making the
decision to invest in excess of $350 million in the SBQ
business, Mr. Todd and his prior management, 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.
o Sub-Optimal Furnace Size: The decision by prior management
under Mr. Todd 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.
o Inability to Direct Cast Billets: The failure of prior
management under Mr. Todd 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.
o Inadequate Evaluation of Equipment: In an ill-conceived effort
to reduce costs, the previous management under Mr. Todd 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.
o 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 prior
management headed by Mr. Todd 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.
o 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.
Yet, the Company under Mr. Todd's prior management 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.
o 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 Mr. Todd's prior management
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 Mr. Todd and his senior
management 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 ___ below.
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 solicitation, as is being waged by The United
Group, will give rise, among other things, to the acceleration of the
Company's debt obligations and may, 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 note holders to prepay the senior
notes. In the event that the offer is accepted by the senior note holders
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.
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:
o 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
$1,675,613, $42,294, $38,367, $112,423, $1,105,667 and
$683,047, respectively;
o 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;
o 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
o 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.
AGENDA ITEM ONE
ELECTION OF DIRECTORS
Nine directors are to be elected at the Annual Meeting, each to
hold office until the next Annual Meeting and until his successor has been
duly elected and qualified. Proxies received from stockholders, unless
directed otherwise, will be voted FOR the election of the following
nominees: Robert A. Garvey, E. Mandell de Windt, C. Stephen Clegg, E.
Bradley Jones, Robert D. Kennedy, William J. Cabaniss, Jr., John H.
Roberts, Richard de J. Osborne and Alfred C. DeCrane, Jr. 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.
NAME AND YEAR FIRST
BECAME DIRECTOR BUSINESS EXPERIENCE
- ------------------------- ------------------------------------------
Robert A. Garvey Chairman of the Board and Chief Executive
1996 Officer of the Company since 1996;
(Age 61) President of North Star Steel Co. from 1984
to 1996.
E. Mandell de Windt Chairman of the Executive Committee of the
1985 Board of Directors of the Company since
(Age 78) 1991; Chairman of the Board of the Company
from 1985 to 1991; 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
1985 Officer of Diamond Home Services, Inc., a
(Age 49) contractor of installed home improvement
products, since 1993 and 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
1988 Officer of LTV Steel Company from June
(Age 71) 1984 to December 1984; Chairman and Chief
Executive Officer of 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
1993 Officer of Precision Grinding, Inc., a
(Age 61) metal processing company serving metal
machining industries in the Southeast, since
1971; director of Protective Life Corporation.
Richard de J. Osborne Chairman of the Board and Chief Executive
1998 Officer of ASARCO Incorporated, a leading
(Age 65) producer of nonferrous metals from 1995
to 1998; director of ASARCO 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
1998 and Chief Executive Officer from 1993
(Age 68) to 1996 of Texaco, Inc., an explorer, producer
and marketer of oil and natural gas; director
of CIGNA Corporation, Bestfoods, Corn Products
International, Inc. and The Harris
Corporation.
Robert D. Kennedy Chairman and Chief Executive Officer of
1999 Union Carbide Corporation, one of the world's
(Age 67) largest manufacturers of chemicals and
plastics, from 1986 to 1995; 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
1999 Officer of J.H. Roberts Industries, a leading
(Age 67) manufacturer and distributor of carbon steel
tubing and chrome plated steel bars, from 1982
to 1998; director of J.H. Roberts Industries,
Atlas Electric Devices Company and Nelson
Steel Company.
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 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.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
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 Board 1998 367,968(4) -0- -0- 122,665(6) 50,000 88,431
and Chief Executive 1997 371,506 240,005 143,005(5) 197,928(6) -0- 6,422
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:
Term and Whole
Life
Name 401(k) Plan Insurance ERP/CDP
---- ----------- --------- -------
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
(4) Includes amounts deferred by Named Executive Officers pursuant to the
ERP/CDP.
(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 $9.625, and vests at the end of two years.
STOCK OPTION PLAN
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides certain information concerning
individual grants of stock options under the 1990 MIP and the 1997 MIP made
during the fiscal year ended June 30, 1999, to each of the Named Executive
Officers:
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Price
Appreciation
Individual Grants for Option Term
------------------------------------------------- ------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise or
Options Employees In Base Price Expiration
Name Granted (#) Fiscal Year ($/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.
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 Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options
Options at FY-End ($)
at FY-End (#)
Shares Acquired On Value Exercisable/ Exercisable/
Name Exercise Realized ($) 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, 0 0 76,800/67,200 $0/$0
Jr.
Jack R. Wheeler 0 0 67,000/58,000 $0/$0
Robert G. Wilson 0 0 7,400/5,600 $0/$0
- ---------------
(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.
</TABLE>
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 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.
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.
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 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.
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.
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.
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
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.
[Performance Graph]
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
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 ___________, 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
____________, 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, are expected to aggregate
approximately $4,000,000, 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").
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 _, 1999
By Order of the Board of Directors,
Catherine W. Pecher
--------------------------
Catherine W. Pecher
Vice President and Secretary
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 __ and __ of this
Proxy Statement. The principal business address of Mr. Robert A. Garvey is
that of the Company. The name, business and address of the other director -
participants' organization 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
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.
Name Principal Occupation
---- --------------------
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
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
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:
Name Principal Occupation Address
---- -------------------- -------
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
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.
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 September 3, 1999,
CSFB had a net long position of 14,200 shares of Company Common Stock and
as of September 8, 1999, BAS held a net long position of 264,224 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 __ and __
of this Proxy Statement. The number of shares of Common Stock held by the
other participants is set forth below:
Name Share Ownership
---- ---------------
Raymond J. Lepp 28,328
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
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.
NUMBER OF
SHARES OF
COMMON STOCK
PURCHASED
NAME (OR SOLD) FOOTNOTE DATE
- -------------------------------- ------------- - ------------ ---------------
DIRECTORS
- ---------
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
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
Brian F. Hill 8,000 (6) 06/21/99
100,000 (1) 06/21/99
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
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
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
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
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
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
FOOTNOTES:
(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.
PRELIMINARY PROXY MATERIAL - SUBJECT TO COMPLETION
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.
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. Mandell de Windt; C. Stephen Clegg; E.
Bradley Jones; Robert D. Kennedy; William J. Cabaniss, Jr.; John H.
Roberts; Richard de J. Osborne; and Alfred C.
DeCrane, Jr.
( ) FOR all nominees listed above (except as indicated to the
contrary below)
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( ) WITHHOLD 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.
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.
The undersigned revokes any prior proxies with respect to the shares
covered by this Proxy.
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Signature
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Signature
Date: , 1999
(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.
