[LETTERHEAD OF STEEL OF WEST VIRGINIA, INC.]
May 19, 1995
Dear Stockholder:
It is our pleasure to invite you to the Annual Meeting of Stockholders of
Steel of West Virginia, Inc. to be held on Thursday, June 29, 1995 at 10:30 a.m.
at the Radisson Hotel Huntington, 1001 3rd Avenue, Huntington, West Virginia.
Whether or not you plan to attend, and regardless of the number of shares
you own, it is important that your shares be represented at the meeting. You are
accordingly urged to sign, date and return your proxy promptly in the enclosed
envelope, which requires no postage if mailed in the United States.
We sincerely hope you will be able to join us at the meeting. The officers
and directors of the Company look forward to seeing you at that time.
Sincerely,
ROBERT L. BUNTING, JR.
Chairman
<PAGE>
STEEL OF WEST VIRGINIA, INC.
17th Street and 2nd Avenue
Huntington, West Virginia 25703
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 29, 1995
The Annual Meeting of Stockholders of Steel of West Virginia, Inc. (the
"Company") will be held at the Radisson Hotel Huntington, 1001 3rd Avenue,
Huntington, West Virginia on Thursday, June 29, 1995, at 10:30 a.m. for the
following purposes:
1. To elect directors of the Company for the ensuing year.
2. To approve the Steel of West Virginia, Inc. 1995 Employee Stock Option
Plan, as set forth and described in the attached Proxy Statement.
3. To approve the Steel of West Virginia, Inc. 1995 Non-Employee Director
Stock Option Plan, as set forth in the attached Proxy Statement.
4. To approve the amendment of the Company's Certificate of Incorporation
to authorize 4,000,000 additional shares of Common Stock and to
eliminate all of the authorized non-voting common stock, as set forth
and described in the attached Proxy Statement.
5. To ratify the reappointment of Ernst & Young LLP as independent
accountants for the Company.
6. To transact such other business as may properly come before the
meeting and any adjournments thereof.
The Board of Directors has fixed the close of business on May 15, 1995 as
the record date for determination of stockholders entitled to notice and to vote
at the meeting and any adjournments thereof.
IF YOU ARE UNABLE TO BE PRESENT PERSONALLY, PLEASE SIGN AND DATE THE
ENCLOSED PROXY WHICH IS BEING SOLICITED BY THE BOARD OF DIRECTORS, AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
STEPHEN A. ALBERT
Secretary
May 19, 1995
<PAGE>
STEEL OF WEST VIRGINIA, INC.
17th Street and 2nd Avenue
Huntington, West Virginia 25703
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 29, 1995
GENERAL INFORMATION
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Steel of West Virginia, Inc. (the "Company") to be used at the
Annual Meeting of Stockholders to be held at the Radisson Hotel Huntington, 1001
3rd Avenue, Huntington, West Virginia on Thursday, June 29, 1995, at 10:30 a.m.
and any adjournments thereof.
When the enclosed proxy is properly executed and returned, the shares of
Common Stock of the Company, par value $.01 per share (the "Common Stock"), it
represents will be voted at the meeting in accordance with any directions noted
thereon and, if no direction is indicated, the shares it represents will be
voted: (i) FOR the election of the nominees for directors set forth below; (ii)
FOR the approval of the Steel of West Virginia, Inc. 1995 Employee Stock Option
Plan (the "Management Option Plan"); (iii) FOR the approval of the Steel of West
Virginia, Inc. 1995 Non-Employee Director Stock Option Plan (the "Director
Option Plan" and, together with the Management Option Plan, the "Option Plans");
(iv) FOR the proposed amendment of the Company's Certificate of Incorporation to
authorize 4,000,000 additional shares of Common Stock and to eliminate all of
the authorized non-voting common stock; (v) FOR the ratification of the
reappointment of Ernst & Young LLP as independent accountants for the Company;
and (vi) in the discretion of the holders of the proxy with respect to any other
business that may properly come before the meeting. Any stockholder signing and
delivering a proxy may revoke it at any time before it is voted by delivering to
the Secretary of the Company a written revocation or a duly executed proxy
bearing a date later than the date of the proxy being revoked. Any stockholder
attending the meeting in person may withdraw his or her proxy and vote his or
her shares.
The cost of this solicitation of proxies will be borne by the Company.
Solicitations will be made only by mail; provided, however, that officers and
regular employees of the Company may solicit proxies personally or by telephone
or telegram. Such persons will not be specially compensated for such services.
The Company may reimburse brokers, banks, custodians, nominees and fiduciaries
holding stock in their names or in the names of their nominees for their
reasonable charges and expenses in forwarding proxies and proxy material to the
beneficial owners of such stock.
The approximate mailing date of this Proxy Statement and the accompanying
proxy is May 19, 1995.
VOTING RIGHTS
Only stockholders of record at the close of business on May 15, 1995, will
be entitled to vote at the Annual Meeting of Stockholders. On that date, there
were 6,953,360 shares of Common Stock outstanding, the holders of which are
entitled to one vote per share on each matter to come before the meeting. Voting
rights are non-cumulative. A majority of the outstanding shares will constitute
a quorum at the meeting and abstentions and broker non-votes are counted for
purposes of determining the presence or absence of a quorum for the transaction
of business.
Directors are elected by plurality vote. The approval of the Option Plans,
the approval of the amendment of the Company's Certificate of Incorporation, and
the ratification of the reappointment of
<PAGE>
Ernst & Young LLP will require the affirmative vote of a majority of those
shares of Common Stock present or represented and entitled to vote on the
proposal. Abstentions and broker non-votes will not be counted in the election
of directors or in determining whether such approval or ratification has been
given.
PRINCIPAL STOCKHOLDERS
The following table sets forth as of May 15, 1995, the beneficial ownership
of Common Stock of each person known to the Company who owns more than 5% of the
issued and outstanding Common Stock.
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- ----------------------------------------- -------------------- ----------
FMR Corp. ............................... 921,100(1) 13.25
82 Devonshire Street
Boston, Massachusetts 02109
Neuberger & Berman....................... 804,100(2) 11.56
605 Third Avenue
New York, NY 10158
Robert L. Bunting, Jr. .................. 526,380 7.57
c/o Steel of West Virginia, Inc.
17th Street and 2nd Avenue
Huntington, West Virginia 25703
Mesirow Asset Management, Inc. .......... 394,600(3) 5.67
350 North Clark Street
Chicago, IL 60610
- ------------
(1) Fidelity Management & Research Company ("Fidelity"), 82 Devonshire Street,
Boston, Massachusetts 02109, a wholly-owned subsidiary of FMR Corp. and an
investment advisor registered under Section 203 of the Investment Advisors
Act of 1940, is the beneficial owner of 921,100 shares of Common Stock as a
result of acting as investment advisor to several investment companies
registered under Section 8 of the Investment Company Act of 1940. The
ownership of one investment company, Fidelity Low-Priced Stock Fund,
amounted to 600,000 shares of Common Stock outstanding. Fidelity Low-Priced
Stock Fund has its principal business office at 82 Devonshire Street,
Boston, Massachusetts 02109. Edward C. Johnson 3d, FMR Corp., through its
control of Fidelity, and the Funds each has sole power to dispose of the
697,900 shares owned by the Funds. Neither FMR Corp. nor Edward C. Johnson
3d, Chairman of FMR Corp., has the sole power to vote or direct the voting
of the shares owned directly by the Fidelity Funds, which power resides with
the Funds' Board of Trustees. Fidelity carries out the voting of the shares
under written guidelines established by the Funds' Board of Trustees.
Fidelity Management Trust Company, 82 Devonshire Street, Boston,
Massachusetts 02109, a wholly-owned subsidiary of FMR Corp. and a bank as
defined in Section 3(a)(6) of the Securities Exchange Act of 1934, is the
beneficial owner of 223,200 shares of Common Stock as a result of its
serving as investment manager of the institutional account(s). Edward C.
Johnson 3d and FMR Corp. through its control of Fidelity Management Trust
Company, has sole voting and dispositive power over 223,200 shares of Common
Stock owned by the institutional account(s) as reported above. Edward C.
Johnson 3d and Abigail P. Johnson each own 24.9% of the outstanding voting
common stock of FMR Corp. Mr. Johnson 3d is Chairman of FMR Corp. Various
Johnson family members and trusts for the benefit of Johnson family members
own FMR Corp. voting common stock. These Johnson family members, through
their ownership of voting common stock, form a controlling group with
respect to FMR Corp. The information set forth herein is based on a Schedule
13G dated February 13, 1995 filed by FMR Corp. with the Securities and
Exchange Commission.
(2) Neuberger & Berman ("Neuberger") has (i) sole voting power with respect to
492,100 shares of Common Stock, (ii) shared voting power with respect to
115,000 shares of Common Stock, and (iii) shared dispositive power with
respect to 804,100 shares of Common Stock. The information set
2
<PAGE>
forth herein is based on a Schedule 13G dated February 10, 1995 filed by
Neuberger with the Securities and Exchange Commission.
(3) Mesirow Asset Management, Inc. ("MAM"), an investment advisor registered
under Section 203 of the Investment Advisor Act of 1940, serves as
investment advisor to Skyline Fund Special Equities Portfolio, a
Massachusetts Business Trust; Mesirow Growth Fund, L.P., an Illinois limited
partnership; and certain client accounts over which MAM has discretion. MAM
has (i) shared voting power with respect to 394,600 shares of Common Stock,
and (ii) shared dispositive power with respect to 394,600 shares of Common
Stock. The information set forth herein is based on a Schedule 13G dated
February 13, 1995 filed by MAM with the Securities and Exchange Commission.
PROPOSAL 1. ELECTION OF DIRECTORS
At the Annual Meeting of Stockholders, the entire Board of Directors,
consisting of five members, is to be elected. In the absence of instructions to
the contrary, the shares of Common Stock represented by a proxy delivered to the
Board of Directors will be voted FOR the five nominees named below. Each nominee
named below is presently serving as a director of the Company and is anticipated
to be available for election and able to serve. However, if any such nominee
should decline or become unable to serve as a director for any reason, votes
will be cast instead for a substitute nominee designated by the Board of
Directors or, if none is so designated, will be cast according to the judgment
in such matters of the person or persons voting the proxy.
The tables below and the paragraphs that follow present certain information
concerning the nominees for director and the executive officers of the Company.
Each elected director will serve until the next Annual Meeting of Stockholders
and until his successor has been elected and qualified. Officers are elected by
and serve at the discretion of the Board of Directors. None of the Company's
directors or executive officers has any family relationship with any other
director or executive officer.
NOMINEES FOR DIRECTORS
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
YEARS BENEFICIALLY
POSITIONS WITH OWNED AS OF PERCENT
NAME AGE WITH COMPANY COMPANY MAY 15, 1995 OF CLASS
- ---------------------------- --- ---------------------------- ------- ------------ --------
<S> <C> <C> <C> <C> <C>
Robert L. Bunting, Jr. ..... 61 Chairman of the Board, Chief 12 526,380(2) 7.57
Executive Officer and
President
Stephen A. Albert........... 42 Secretary and Director 8 0 0
Albert W. Eastburn(1)....... 66 Director 2 2,500 *
Daniel N. Pickens(1)........ 45 Director 2 1,000 *
Paul E. Thompson(1)......... 64 Director 1 0 0
All directors and executive
officers as a group........................................... 554,660 7.98
</TABLE>
- ------------
* Less than one percent
(1) Member of the Compensation and Benefits Committee and the Audit Committee.
Mr. Thompson became a director of the Company in January, 1994. He filed a
Form 3 with the Securities and Exchange Commission in respect to becoming a
director on January 24, 1994.
(2) Of this amount, 233,710 shares are held in a trust for the benefit of Mr.
Bunting's wife, Nancy L. Bunting, and 237,577 shares are held in a trust for
the benefit of Mr. Bunting. Mr. and Mrs. Bunting are co-trustees of each of
said trusts. These shares were transferred to the trusts by Mr. Bunting in
December 1994. Mr. Bunting filed a Form 4, and each of the trusts filed a
Form 3, with the Securities and Exchange Commission in respect of such
transfers on April 26, 1995.
3
<PAGE>
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
POSITIONS AND OFFICES EXECUTIVE OWNED AS OF PERCENT
NAME WITH THE COMPANY AGE OFFICER SINCE MAY 15, 1995 OF CLASS
- --------------------------- -------------------------- --- ------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Timothy R. Duke............ Vice President, Treasurer 43 1988 17,140 *
and Chief Financial
Officer
Larry E. Gue............... Vice President of Human 53 1988 7,140 *
Relations
T. Elton North............. President, Marshall Steel, 47 1993 500 *
Inc.
</TABLE>
- ------------
* Less than 1%
BUSINESS EXPERIENCE OF NOMINEES AND EXECUTIVE OFFICERS
Robert L. Bunting, Jr. has been Chairman of the Company, SWVA, Inc. ("SWVA")
and Marshall Steel, Inc. ("Marshall"), the Company's wholly-owned subsidiaries,
since April 1993, President, Chief Executive Officer and a director of the
Company since December 1986 and President, Chief Executive Officer and a
director of SWVA since its organization in 1982. Mr. Bunting was Works Manager
of the Company's mini-mill before it was owned by SWVA. Before becoming
President of the mini-mill, Mr. Bunting held various positions in the steel
industry over a period of 27 years. Mr. Bunting received a bachelor of
metallurgical engineering from Cornell University in 1955.
Stephen A. Albert has been a director of the Company since December 1986.
Since February 1989, Mr. Albert has been special counsel to the law firm of
Proskauer Rose Goetz & Mendelsohn LLP, counsel to the Company. Prior thereto,
Mr. Albert was a member of the law firms of Feit & Ahrens and Feit & Shor, which
were counsel to the Company until January 1989. Mr. Albert has been engaged in
the practice of law in New York City since 1977.
Albert W. Eastburn has been a director of the Company since April 1993. Mr.
Eastburn was President and Chief Operating Officer of the Steel Group of Lukens,
Inc., a leading specialized manufacturer of steel plate and stainless steel
products ("Lukens"), from November 1988 until his retirement in 1991. Prior
thereto, Mr. Eastburn held various positions at Lukens, which he joined as
methods engineer in 1955.
Daniel N. Pickens has been a director of the Company since April 1993. Mr.
Pickens has been a Senior Vice President in the Corporate Finance Department of
Wheat First Securities, Inc. ("Wheat First") since 1989. Prior thereto, Mr.
Pickens held various positions at Wheat First, which he joined in 1981. Before
joining Wheat First, Mr. Pickens practiced as an attorney in Philadelphia,
Pennsylvania.
Paul E. Thompson has been a director since January 1994. From 1986 until his
retirement in 1992, Mr. Thompson was a Sub-District Director, District 23, of
the United Steel Workers of America ("USWA"). Prior thereto, Mr. Thompson was a
Staff Representative, District 23, of the USWA.
Timothy R. Duke has been Vice President, Treasurer and Chief Financial
Officer of the Company since March 1988 and was the Controller from June 1987
until March 1988. Mr. Duke was formerly the Manager--Operations Accounting at
Joy Manufacturing Company, and served in various other positions at Joy
Manufacturing Company from 1979 until he joined the Company. Mr. Duke is a
certified public accountant, a certified management accountant and has more than
20 years of experience in private industry. He received a bachelor of science
degree in business from Pennsylvania State University and a masters of business
administration from Duquesne University.
4
<PAGE>
Larry E. Gue has been Vice President of Human Relations of SWVA, Inc. since
March 1988 and had been Manager of Personnel and Public Relations of SWVA since
its organization in 1982. Mr. Gue began working at the Company's mini-mill in
1971 as part of the maintenance team. At that time, Mr. Gue was actively
involved in, and later became a leader of, the United Steel Workers of America
(Local 37), the union which represents the Company's work force.
T. Elton North has been President of Marshall since its organization in
April 1993. From June 1992 until April 1993, Mr. North was Division Manager for
the Memphis, Tennessee division of Marshall Steel Inc., a wholly-owned
subsidiary of Marshall Steel Ltd., a Canadian steel company. This division was
sold to the Company. Mr. North served as branch manager of Marshall Steel Ltd.,
from June 1991 to June 1992. Prior thereto, Mr. North served as marketing
manager of Marshall Steel Ltd. for approximately six years.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During the year ended December 31, 1994, the Board of Directors held seven
meetings. During that period no director attended fewer than 75% of the
aggregate of (i) the total number of meetings of the Board of Directors held
during the period for which he was a director and (ii) the total number of
meetings held by all Committees of the Board of Directors on which he served
during the period that he served on such Committees.
The Company's Board of Directors has a Compensation and Benefits Committee
(the "Compensation Committee") and an Audit Committee, both of which are
comprised of directors who are not officers or employees of the Company. The
Board of Directors does not have a standing nominating committee. The
Compensation and Benefits Committee reviews employee compensation and benefits,
and the Audit Committee reviews the scope of the independent audit, the
appropriateness of the accounting policies, the adequacy of internal controls,
the Company's year-end financial statements and such other matters relating to
the Company's financial affairs as its members deem appropriate. During 1994,
the Compensation Committee held eight meetings and the Audit Committee held one
meeting.
5
<PAGE>
EXECUTIVE COMPENSATION
The following summary compensation table sets forth the compensation earned
for services rendered by the Company's Chief Executive Officer and each of the
Company's executive officers whose aggregate compensation exceeded $100,000
during the years ended December 31, 1992, 1993 and 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ALL
OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- ---------------------------------------------- ---- -------- -------- -------
<S> <C> <C> <C> <C>
Robert L. Bunting, Jr., President, 1992 $225,000 $199,551 $12,686(2)
Chief Executive Officer and Director 1993 225,000 4,947 13,707(2)
1994 225,000 121,537(1) 9,957(2)
Timothy R. Duke, Vice President, 1992 $128,190 $ 68,807 $ 6,143(3)
Treasurer and Chief Financial Officer 1993 128,190 4,947 6,143(3)
1994 132,228 69,375(1) 6,143(3)
Larry E. Gue, Vice President of Human 1992 $120,000 $ 68,807 $ 6,403(4)
Relations 1993 120,000 4,947 6,403(4)
1994 120,000 67,126(1) 6,403(4)
T. Elton North, President 1992 $ n/a $ n/a $ n/a
Marshall Steel, Inc. 1993 54,808 12,600 3,247(5)
1994 75,000 47,099(1) 9,690(5)
</TABLE>
- ------------
(1) Does not include the following discretionary bonuses recognized in 1994
results of operations but paid in January 1995; $150,750 to Robert L.
Bunting, Jr.; $75,000 to Timothy R. Duke; $30,000 to Larry E. Gue; and
$42,000 to T. Elton North.
(2) Consists of $11,111, $11,250 and $7,500 contributions to a defined
contribution plan and $1,575, $2,457 and $2,457 of costs of group-term life
insurance coverage provided by the Company for 1992, 1993 and 1994
respectively.
(3) Consists of a $6,000 contribution to a defined contribution plan and $143 of
costs of group-term life insurance coverage provided by the Company.
(4) Consists of a $6,000 contribution to a defined contribution plan and $403 of
costs of group-term life insurance coverage provided by the Company.
(5) Consists of $2,188 and $3,750 contributions to a defined contribution plan,
$1,020 and $5,850 for personal use of a company vehicle, and $40 and $90 of
costs of group-term life insurance coverage provided by the Company for 1993
and 1994, respectively.
The Company entered into a five-year employment agreement with Mr. Bunting
on January 1, 1992. Mr. Bunting's base salary is $225,000 per year, subject to
increase each year by the Board of Directors, which may also, in its discretion,
pay bonuses to Mr. Bunting and other employees. Mr. Bunting's employment
agreement contains a non-competition restriction for a period of one year
following termination of the agreement. The agreement provides that the Company
will purchase Mr. Bunting's and his family's shares of Common Stock of the
Company upon his death, but only out of the proceeds of a $7 million key man
life insurance policy covering Mr. Bunting which the Company has purchased and
of which the Company is the beneficiary. The employment agreement also provides
that Mr. Bunting will participate in the Company's retirement plan.
DIRECTORS' COMPENSATION
The only directors who are compensated for services as a director are Albert
W. Eastburn, Daniel N. Pickens, and Paul E. Thompson, each of whom receives an
annual retainer in the amount of
6
<PAGE>
$6,000 plus $1,000 for each committee on which he serves. In addition, each such
director receives a fee of $1,000 for each meeting of the Board of Directors,
the Compensation Committee and the Audit Committee that he attends. Under this
arrangement, during 1994 Messrs. Eastburn, Pickens and Thompson received
$21,500, $21,000 and $15,500 respectively.
COMPENSATION COMMITTEE REPORT
COMPENSATION POLICIES
The Compensation Committee of the Board of Directors is comprised of
directors who are not officers or employees of the Company. The Compensation
Committee is responsible for reviewing and making recommendations to the Board
of Directors regarding the compensation and benefits of the Company's
management. The Committee's philosophy is that the Company's goals are more
likely to be achieved if management is encouraged to work together as a team and
if final compensation is tied to the Company's and the individual's performance
during the year, based on such Company factors as the change in operating income
from the prior years, the Company's achievement of budgeted earnings objectives,
and the Company's results of operations in light of economic conditions in the
industry and the general economy, and such personal factors as the individual's
supervision of or performance in his or her particular business unit, and his or
her supervision of significant corporate projects. In the past, this philosophy
has been implemented through the use of discretionary bonuses in which each
person included in the bonus award, including the Company's Chief Executive
Officer, received the same fixed percentage of salary as a bonus. Beginning with
1995, incentive compensation will be awarded to management personnel to the
extent that the Company achieves certain corporate goals, and/or the particular
individual achieves certain personal goals.
Assuming that the stockholders approve the Management Option Plan, stock
option grants will be awarded on a discretionary, case by case basis, after
consideration of an individual's position, contribution to the Company, length
of service with the Company, number of options held, and other compensation.
The Company has not yet formulated a policy with respect to qualifying
compensation paid to executive officers for deductibility under Section 162(m)
of the Internal Revenue Code of 1986, as amended (the provision was enacted as
part of "OBRA '93" for compensation exceeding $1,000,000 in a taxable year paid
to an executive officer, effective January 1, 1994).
FISCAL 1994 COMPENSATION
In 1994, the base compensation of the Company's Chief Executive Officer,
Robert L. Bunting, Jr., was $225,000, as established pursuant to the employment
agreement between the Company and Mr. Bunting described above under "Executive
Compensation". With respect to 1994, discretionary bonuses were awarded to
management personnel, including the Company's Chief Executive Officer, as
described above under "Executive Compensation", based on the Company having
achieved a certain level of operating income. These discretionary bonuses, when
added to base salaries, were determined by the Compensation Committee to be in
accord with the Company's philosophy described above.
COMPENSATION COMMITTEE
Albert W. Eastburn
Daniel N. Pickens
Paul E. Thompson
7
<PAGE>
PERFORMANCE GRAPH
Below is a graph comparing the cumulative total stockholder return on the
Company's Common Stock for the last five years with the cumulative total return
of companies included in the S&P 500 Stock Index and an index of peer companies
selected by the Company. The graph assumes (i) investment of $100 on December
31, 1989 in the Company's Common Stock, the S&P 500 Index and common stock of
the peer group and (ii) the reinvestment of all dividends. The peer group
consists of Commercial Metals Co., Lukens, Inc., New Jersey Steel Corp., Nucor
Corp. and Roanoke Electric Steel Corp.
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
---- ---- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
PEER GROUP................................................. 100 93.8 117.3 124.3 105.9 105.4
SWVA....................................................... 100 84.0 72.0 264.0 408.0 352.0
S & P...................................................... 100 96.7 126.1 135.7 149.4 151.3
</TABLE>
PROPOSAL 2. APPROVAL OF STEEL OF WEST VIRGINIA, INC.
1995 EMPLOYEE STOCK OPTION PLAN.
PROPOSAL 3. APPROVAL OF STEEL OF WEST VIRGINIA, INC.
1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN.
On March 16, 1995, the Board of Directors adopted, subject to stockholder
approval, the Management Option Plan and the Director Option Plan, which provide
that options to acquire shares of the Company's Common Stock ("Options") may be
granted to officers, key employees and directors of the Company or its
designated subsidiaries. The Board of Directors believes that Options provide
performance incentives and assist the Company in attracting, motivating and
retaining employees and non-employee directors to the benefit of the Company and
its stockholders, and recommends approval of the Management Option Plan and the
Director Option Plan by the stockholders. In the absence of instructions to the
contrary, the shares of Common Stock represented by a proxy delivered to the
Board of Directors will be voted FOR the approval of the Management Option Plan
and FOR the approval of the Director Option Plan.
8
<PAGE>
MANAGEMENT OPTION PLAN
PURPOSES OF THE PLAN
The purposes of the Management Option Plan are to enable the Company to
attract, retain, and motivate certain key employees who are important to the
success and growth of the business of the Company and designated subsidiaries
and to create a long-term mutuality of interest between such employees and the
stockholders of the Company by granting Options.
SHARES SUBJECT TO OPTIONS
The Plan authorizes the issuance of up to 430,000 shares of Common Stock
upon the exercise of Incentive Stock Options ("ISOs") and Non-Qualified Stock
Options ("NQSOs") granted to officers and key employees of the Company. Key
employees are those active officers or other valuable employees of the Company
that are selected by the Compensation Committee to participate in the Plan. In
general, if Options are for any reason cancelled, or expire or terminate
unexercised, the shares covered by such Options will again be available for the
grant of Options. No Options may be granted after five years from the Effective
Date of the Management Option Plan.
TERMS OF OPTIONS
In the case of ISOs, the exercise price of an Option may not be less than
100% of the Fair Market Value (as defined in the Management Option Plan) of a
share of Common Stock at the time of grant (or 110% of such Fair Market Value if
the grantee owns more than 10% of the shares of Common Stock outstanding at the
time of grant (a "Ten Percent Shareholder")). NQSOs issued pursuant to the
Management Option Plan will be exercisable at such price as may be fixed by the
Compensation Committee. Shares purchased pursuant to the exercise of Options may
be paid for at the time of exercise as follows: (i) in cash or by check, bank
draft or money order payable to the order of the Company; (ii) if the Common
Stock is traded on a national securities exchange, through the delivery of
instructions to a broker to deliver the purchase price; or (iii) on other terms
acceptable to the Compensation Committee (which may include payment by the
transfer of shares owned by the participant for at least six months or the
surrender of Options).
Options granted under the Management Option Plan are subject to restrictions
on transfer and exercise. If the stockholders approve the Management Option
Plan, each Option granted thereunder will be exercisable on and after the first
anniversary of the date of grant. No Option granted under the Management Option
Plan may be exercised prior to that time, subject to acceleration in the event
of a Change of Control of the Company (as defined in the Management Option Plan)
and subject to the authority of the Compensation Committee to permit earlier
exercise in its sole discretion. Furthermore, no Option may be exercisable after
the expiration of ten years from the date of its grant (or five years, in the
case of ISOs granted to a Ten Percent Shareholder). No Option may be
transferred, assigned, pledged or hypothecated in any way except by will or
under applicable laws of descent and distribution.
Options that were exercisable upon a participant's termination of employment
other than for Cause (as defined in the Management Option Plan) remain
exercisable following such termination until expiration of the Option; Options
that were exercisable upon a participant's termination of employment for Cause
terminate immediately. Except as otherwise determined by the Compensation
Committee, Options that were not exercisable at the time of a participant's
termination of employment by the Company shall automatically be canceled upon
such termination. The Compensation Committee has the discretion under the
Management Option Plan to impose in a participant's Option Agreement such other
conditions, limitations and restrictions as it determines are appropriate in its
sole discretion, including any waivers of rights which a participant may have.
9
<PAGE>
The Management Option Plan provides for the Committee to have the right to
make appropriate adjustments in the number and kind of securities receivable
upon the exercise of Options in the event of a stock split, stock dividend,
merger, consolidation, reorganization, spinoff, partial or complete liquidation
or other similar changes in the capital structure or other corporate
transactions. The Management Option Plan also gives the Compensation Committee
the option to terminate all outstanding Options effective upon the consummation
of a merger or consolidation in which the Company is not the surviving entity or
of any other transaction that results in the acquisition of substantially all of
the Company's outstanding Common Stock by a single person or entity or by a
group of persons and/or entities acting in concert, or upon the consummation of
the sale or transfer or all of the Company's assets (any such event an
"Acquisition Event"), subject to the right of participants to exercise all
outstanding Options prior to the effective date of the Acquisition Event.
ADMINISTRATION
The Management Option Plan will be administered by the Compensation
Committee, which is comprised of non-employee directors who are not eligible to
receive options thereunder. The Compensation Committee may make such rules and
regulations and establish such processes for administration of the Management
Option Plan as it deems appropriate. The Management Option Plan provides that it
may be amended by the Compensation Committee at any time, and from time to time,
except that the rights of a participant with respect to Options granted prior to
such amendment may not be materially impaired without the consent of such
participant, and that no amendment may be made which materially increases the
aggregate number of shares of Common Stock that may be issued under the
Management Option Plan, decrease the minimum option price for any Option, or
extend the maximum option period under the Management Option Plan, without
stockholder approval.
FEDERAL INCOME TAX CONSEQUENCES
The rules concerning the Federal income tax consequences with respect to the
Options are quite technical. Moreover, the applicable statutory provisions are
subject to change, as are their interpretations and applications, which may vary
in individual circumstances. Therefore, the following discussion of tax
consequences is designed to provide a general understanding as of the date
hereof. In addition, the following discussion does not set forth any state or
local tax consequences that may be applicable.
INCENTIVE STOCK OPTIONS
In general, a participant will not realize taxable income upon either the
grant or the exercise of an ISO and the Company will not realize an income tax
deduction at either such time. If the participant does not sell the Common Stock
received pursuant to the exercise of the ISO within either (i) two years after
the date of the grant of the ISO or (ii) one year after the date of exercise, a
subsequent sale of the Common Stock will result in long-term capital gain or
loss to the participant and will not result in a tax deduction to the Company.
If the participant disposes of the Common Stock acquired upon exercise of
the ISO within either of the above mentioned time periods, the participant will
generally realize as ordinary income an amount equal to the lesser of (i) the
fair market value of the Common Stock on the date of exercise over the Option
exercise price, or (ii) the amount realized upon disposition over the Option
exercise price. In such event, the Company generally will be entitled to an
income tax deduction equal to the amount recognized by the participant as
ordinary income. Any gain in excess of such amount realized by the participant
as ordinary income would be taxed as short-term or long-term capital gain
(depending on the applicable holding period).
In addition, please note that: (i) officers and directors of the Company
subject to Section 16(b) of the Securities Exchange Act of 1934 may be subject
to special rules regarding the income tax
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consequences concerning their ISOs; (ii) any entitlement to a tax deduction on
the part of the Company is subject to the applicable federal tax rules
(including, without limitation, Internal Revenue Code Section 162(m) regarding
the $1,000,000 limitation on deductible compensation); (iii) the exercise of an
ISO may have implications in the computation of alternative minimum taxable
income; and (iv) in the event that the exercisability of an Option is
accelerated because of a change in control, payments relating to the Option,
either alone or together with certain other payments, may constitute parachute
payments under Internal Revenue Code Section 280G, which excess amounts may be
subject to excise taxes.
NONQUALIFIED STOCK OPTIONS
A participant will realize no taxable income upon the grant of a NQSO and
the Company will not receive a deduction at the time of such grant unless the
Option has a readily ascertainable fair market value (as determined under
applicable tax law) at the time of grant. Upon exercise of a NQSO the
participant generally will realize ordinary income in an amount equal to the
excess of the fair market value of the Common Stock on the date of exercise over
the exercise price. Upon a subsequent sale of the Common Stock by the
participant, the participant will recognize short-term or long-term capital gain
or loss depending upon his or her holding period for the Common Stock. The
Company will generally be allowed a deduction equal to the amount recognized by
the participant as ordinary income.
In addition, please note that: (i) any officers and directors of the Company
subject to Section 16(b) of the Securities Exchange Act of 1934 may be subject
to special tax rules regarding the income tax consequences concerning their
NQSOs; (ii) any entitlement to a tax deduction on the part of the Company is
subject to the applicable tax rules (including, without limitation, Internal
Revenue Code Section 162(m) regarding the $1,000,000 limitation on deductible
compensation); (iii) the exercise of a NQSO has no effect on the compensation of
alternative minimum taxable income, and (iv) in the event that the
exercisability of an Option is accelerated because of a change in control,
payments relating to the Option, either alone or together with certain other
payments, may constitute parachute payments under Internal Revenue Code Section
280G, which excess amounts may be subject to excise taxes.
DIRECTOR OPTION PLAN
PURPOSES OF THE PLAN
The purposes of the Director Option Plan are to enable the Company to
attract, retain, and motivate the non-employee directors of the Company and to
create a long-term mutuality of interest between such non-employee directors and
the stockholders of the Company by granting Options.
SHARES SUBJECT TO OPTIONS
The Plan authorizes the issuance of up to 70,000 shares of Common Stock upon
the exercise of NQSOs granted to non-employee directors of the Company. A
non-employee director is a director who is not an active employee of the Company
and/or a designated subsidiary, including any director who is an officer of the
Company but who is receiving no compensation as an employee from the Company or
any designated subsidiary. In general, if Options are for any reason cancelled,
or expire or terminate unexercised, the shares covered by such Options will
again be available for the grant of Options. No Options may be granted after
five years from the Effective Date of the Director Option Plan.
GRANT AND TERMS OF OPTIONS
On the Effective Date of the Director Option Plan and on each anniversary
thereof commencing as of April 1, 1996, each non-employee director of the
Company will be granted options to purchase 2,000
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shares of Common Stock. The exercise price for the Options will be one hundred
percent (100%) of the Fair Market Value (as defined in the Director Option Plan)
of the Common Stock at the time of the grant of the Options.
If the stockholders approve the Director Option Plan, each Option granted
thereunder will be exercisable on and after the first anniversary of the date of
grant. Shares purchased pursuant to the exercise of Options will be paid for at
the time of exercise as follows: (i) in cash; (ii) by delivery of unencumbered
shares of Common Stock held for at least six months; or (iii) a combination of
cash and unencumbered shares of Common Stock.
Options granted under the Director Option Plan are subject to restrictions
on transfer and exercise. No Option granted under the Director Option Plan may
be exercised prior to the time period for exercisability, subject to
acceleration in the event of a Change of Control of the Company (as defined in
the Director Option Plan). No Option may be transferred, assigned, pledged or
hypothecated in any way except by will or under applicable laws of descent and
distribution.
Options that were exercisable upon a participant's termination of
directorship for any reason other than for Cause (as defined in the Director
Option Plan) remain exercisable following such termination until expiration of
the Option; Options that were exercisable upon a participant's termination of
directorship for Cause terminate immediately. Options that were not exercisable
at the time of a participant's termination of directorship will automatically be
canceled upon such termination.
The Director Option Plan provides that appropriate adjustments will be made
in the number and kind of securities receivable upon the exercise of Options in
the event of a stock split, stock dividend, merger, consolidation or
reorganization. The Director Option Plan also provides that all outstanding
Options will terminate effective upon the consummation of a merger,
consolidation, liquidation or dissolution in which the Company is not the
surviving entity, subject to the right of participants to exercise all
outstanding Options prior to the effective date of the merger, consolidation,
liquidation or dissolution.
ADMINISTRATION
The Director Option Plan will be administered by the Compensation Committee.
The Compensation Committee may make such rules and regulations and establish
such processes for administration of the Director Option Plan as it deems
appropriate subject to the provisions of the Director Option Plan. The Director
Option Plan provides that it may be amended by the Compensation Committee at any
time, and from time to time, to effect (i) amendments necessary or desirable in
order that the Director Option Plan and the Options granted thereunder conform
to all applicable laws, and (ii) any other amendments deemed appropriate,
provided that no such amendment would cause the non-employee directors to cease
to be "disinterested directors" (as defined in Rule 16b-3) with regard to the
Director Option Plan or any other stock option or equity plan of the Company.
Notwithstanding the foregoing, no amendment may be made which materially
increases the aggregate number of shares of Common Stock that may be issued
under the Director Option Plan, decrease the minimum option price for any
Option, extend the maximum option period under the Director Option Plan, or
change the eligibility requirements for participation in the Director Option
Plan, without stockholder approval (unless such stockholder approval is no
longer required as a condition of compliance with the requirements of Rule
16b-3). The Director Option Plan may be amended or terminated at any time by the
stockholders of the Company.
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FEDERAL INCOME TAX CONSEQUENCES
The rules concerning the Federal income tax consequences with respect to the
Options are quite technical. Moreover, the applicable statutory provisions are
subject to change, as are their interpretations and applications, which may vary
in individual circumstances. Therefore, the following discussion of tax
consequences is designed to provide a general understanding as of the date
hereof.
NONQUALIFIED STOCK OPTIONS
A participant will realize no taxable income upon the grant of a NQSO and
the Company will not receive a deduction at the time of such grant unless the
Option has a readily ascertainable fair market value (as determined under
applicable tax law) at the time of grant. Upon exercise of a NQSO the
participant generally will realize ordinary income in an amount equal to the
excess of the fair market value of the Common Stock on the date of exercise over
the exercise price. Upon a subsequent sale of the Common Stock by the
participant, the participant will recognize short-term or long-term capital gain
or loss depending upon his or her holding period for the Common Stock. The
Company will generally be allowed a deduction equal to the amount recognized by
the participant as ordinary income.
In addition, please note that directors of the Company subject to Section
16(b) of the Securities Exchange Act of 1934 may be subject to special tax rules
regarding the income tax consequences concerning their NQSOs.
NEW PLAN BENEFITS
As of April 1, 1995, Options to acquire 78,000 shares of Common Stock
authorized under the Option Plans have been granted, subject to stockholder
approval, as follows: Robert L. Bunting, Jr. has been granted ISOs for 8,000
shares; Timothy R. Duke has been granted ISOs for 6,000 shares; Larry Gue has
been granted ISOs for 3,000 shares; T. Elton North has been granted ISOs for
3,000 shares; all executive officers as a group have been granted ISOs for an
aggregate of 20,000 shares; all directors who are not executive officers of the
Company have been granted NQSOs for an aggregate of 8,000 shares (2,000 shares
each); and all other employees of the Company have been granted ISOs for an
aggregate of 50,000 shares. All of these Options will vest on April 1, 1996, are
for a term of ten years and have an exercise price of $11 5/8 per share.
On May 1, 1995, the closing sale price for the Common Stock on the National
Association of Securities Dealers National Market was $11 3/4.
PROPOSAL 4. AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO
AUTHORIZE 4,000,000 ADDITIONAL SHARES OF COMMON STOCK AND TO
ELIMINATE ALL OF THE AUTHORIZED NON-VOTING SHARES OF COMMON STOCK
The Certificate of Incorporation of the Company currently authorizes the
issuance of up to 8,000,000 shares of Common Stock (6,953,360 shares of which
are currently outstanding), and 500,000 shares of non-voting common stock (none
of which are currently outstanding). The Board of Directors of the Company is
proposing to amend the Certificate of Incorporation of the Company, to increase
the number of authorized shares of Common Stock from 8,000,000 to 12,000,000 and
to eliminate all of the authorized non-voting common stock. The Board of
Directors has adopted and recommends that the stockholders approve the following
resolution:
"RESOLVED, that ARTICLE FOURTH of the Certificate of Incorporation of the
Company is hereby amended in its entirety to read as follows:
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(a) 'FOURTH: The total number of shares of capital stock that the
Corporation shall have authority to issue is twelve million (12,000,000)
shares of Common Stock, par value $.01 per share.' "
In addition to the 6,953,360 shares of Common Stock outstanding, an
additional 500,000 shares are reserved for issuance in connection with Options
granted or available for grant under the Company's Option Plans (assuming the
stockholders approve the Option Plans.) The additional authorized shares that
would be available for issuance, if the proposed amendment to the Certificate of
Incorporation is approved, may be issued for any proper corporate purpose at any
time without further stockholder approval (subject, however, to applicable
statutes or the rules of the National Association of Securities Dealers National
Market which require stockholder approval for the issuance of shares in certain
circumstances). The Board of Directors believes it is desirable to give the
Company this flexibility in considering such matters as raising additional
capital, acquisitions, or other corporate purposes. The authorization of such
shares will enable the Company to act promptly and without additional expense if
appropriate circumstances arise which require the issuance of such shares. The
Company has no current agreements, commitments, plans or intentions to issue any
additional shares, other than in connection with the Option Plans. Holders of
Common Stock are not entitled to preemptive rights, and to the extent that any
additional shares of Common Stock or securities convertible into Common Stock
may be issued other than on a pro rata basis to current stockholders, the
current ownership portion of current stockholders may be diluted. Depending upon
the circumstances in which such additional shares of Common Stock are issued,
the overall effects of such issuance may be to render more difficult or to
discourage a merger, tender offer, proxy content, or the assumption of control
by a holder of a large block of Common Stock and the removal of incumbent
management. Management of the Company is not aware of any possible takeover
attempts at this time.
PROPOSAL 5. SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors recommends the ratification by the stockholders of
the reappointment by the Board of Directors of Ernst & Young LLP as the
Company's independent accountants for the fiscal year ending December 31, 1995.
In the absence of instructions to the contrary, the shares of Common Stock
represented by a proxy delivered to the Board of Directors will be voted FOR the
ratification of the reappointment of Ernst & Young LLP. A representative of
Ernst & Young LLP is expected to be present at the Annual Meeting and will be
available to respond to appropriate questions and make such statements as he or
she may desire.
STOCKHOLDER PROPOSALS
It is contemplated that the Company's 1996 Annual Meeting of Stockholders
will be held on or about May 15, 1996. Stockholders of the Company who intend to
submit proposals at the next Annual Meeting of Stockholders must submit such
proposals to the Company no later than January 22, 1996. Stockholder proposals
should be submitted to Steel of West Virginia, Inc., P.O. Box 2547, Huntington,
West Virginia 25726, Attention: Timothy R. Duke, Vice President, Treasurer and
Chief Financial Officer.
ANNUAL REPORT
The Company's Annual Report for the year ended December 31, 1994, including
financial statements, is being mailed together with this Proxy Statement to the
Company's stockholders of record at the close of business on May 15, 1995. THE
COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS SOLICITED BY
THIS PROXY STATEMENT A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
YEAR ENDED
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DECEMBER 31, 1994, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. A WRITTEN
REQUEST FOR A COPY OF SUCH ANNUAL REPORT ON FORM 10-K SHOULD BE DIRECTED TO
STEEL OF WEST VIRGINIA, INC., P.O. BOX 2547, HUNTINGTON, WEST VIRGINIA 25726,
ATTENTION: TIMOTHY R. DUKE, VICE PRESIDENT, TREASURER AND CHIEF FINANCIAL
OFFICER.
OTHER BUSINESS
The Board of Directors does not know of any other business to be presented
to the meeting and does not intend to bring any other matters before the
meeting. However, if any other matters properly come before the meeting or any
adjournments thereof, it is intended that the persons named in the accompanying
proxy will vote thereon according to their best judgment in the interests of the
Company.
By Order of the Board of Directors
STEPHEN A. ALBERT
Secretary
May 19, 1995
STOCKHOLDERS ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT
IN THE ENCLOSED SELF-ADDRESSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES. YOUR PROMPT RESPONSE WILL BE HELPFUL, AND YOUR COOPERATION WILL
BE APPRECIATED.
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STEEL OF WEST VIRGINIA, INC.
17th Street and 2nd Avenue
Huntington, West Virginia 25703
PROXY
Solicited by the Board of Directors
for the Annual Meeting of Stockholders on
June 29, 1995
The undersigned hereby appoints Robert L. Bunting, Jr. and Stephen A. Albert or
either of them, with full power of substitution, as proxies and hereby
authorizes them to represent and to vote, as designated below, all shares of
Common Stock of Steel of West Virginia, Inc. held of record by the undersigned
at the close of business on May 15, 1995 at the Annual Meeting of Stockholders
to be held on June 29, 1995 and any adjournments thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2, 3, 4 and 5.
<TABLE><CAPTION>
The Board of Directors recommends a vote FOR each of the proposals below.
<S> <C> <C>
1. ELECTION OF DIRECTORS / / FOR all nominees listed (except / / WITHHOLD AUTHORITY to vote
as marked to the contrary below) for all nominees listed below
Robert L. Bunting, Jr., Albert W. Eastburn, Daniel N. Pickens, Paul E. Thompson, Stephen A. Albert
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike a line through the nominee's
name in the list above.)
2. PROPOSAL TO APPROVE THE STEEL OF WEST VIRGINIA, INC. 1995 EMPLOYEE STOCK OPTION PLAN.
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO APPROVE THE STEEL OF WEST VIRGINIA, INC. 1995 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN.
/ / FOR / / AGAINST / / ABSTAIN
4. PROPOSAL TO APPROVE THE AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO AUTHORIZE 4,000,000
ADDITIONAL SHARES OF COMMON STOCK AND TO ELIMINATE ALL OF THE AUTHORIZED NON-VOTING COMMON STOCK.
5. PROPOSAL TO RATIFY THE REAPPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT ACCOUNTANTS.
/ / FOR / / AGAINST / / ABSTAIN
6. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON ANY OTHER BUSINESS THAT MAY PROPERLY COME
BEFORE THE MEETING AND ANY ADJOURNMENTS THEREOF.
</TABLE>
<PAGE>
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THIS PROXY. WHEN SHARES ARE HELD BY
JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE, OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY THE PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AN
AUTHORIZED PERSON.
PLEASE RETURN IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
_______________________________
Signature
_______________________________
Signature if held jointly
