<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material under Rule 14a-12
KENTUCKY ELECTRIC STEEL, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the 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 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
--------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
--------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
--------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
--------------------------------------------------------------------------------
(3) Filing party:
--------------------------------------------------------------------------------
(4) Date filed:
--------------------------------------------------------------------------------
<PAGE> 2
[KENTUCKY ELECTRIC STEEL, INC. LOGO]
KENTUCKY ELECTRIC STEEL, INC.
POST OFFICE BOX 3500
ASHLAND, KENTUCKY 41105-3500
(606) 929-1222
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD TUESDAY, FEBRUARY 6, 2001
To the Holders of the Common Stock of
Kentucky Electric Steel, Inc.
The Annual Meeting of Stockholders of Kentucky Electric Steel, Inc., a
Delaware corporation (the "Company"), will be held in Ballroom B, Ashland Plaza
Hotel, Ashland, Kentucky, on Tuesday, February 6, 2001 at 10:00 a.m. (EST), for
the following purposes:
1. To elect two members of the Board of Directors to hold office
until the 2004 Annual Meeting of Stockholders and until their
successors are elected and qualified;
2. To vote on a proposal to approve the 2001 Share Plan for
Non-Employee Directors;
3. To ratify the appointment of Arthur Andersen LLP as
independent public accountants for the fiscal year ending
September 29, 2001; and
4. To consider and act upon such other business as may properly
come before the meeting and any adjournment thereof.
The Company's Board of Directors has fixed the close of business on
December 8, 2000 as the record date for the determination of stockholders
entitled to receive notice of and to vote at the meeting and any adjournment
thereof.
By Order of the Board of Directors.
William J. Jessie, Secretary
December 28, 2000
Ashland, Kentucky
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO
ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF MAILED IN
THE UNITED STATES.
<PAGE> 3
[KENTUCKY ELECTRIC STEEL, INC. LOGO]
KENTUCKY ELECTRIC STEEL, INC.
POST OFFICE BOX 3500
ASHLAND, KENTUCKY 41105-3500
(606) 929-1222
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE
HELD ON TUESDAY, FEBRUARY 6, 2001
APPROXIMATE DATE OF MAILING: DECEMBER 28, 2000
GENERAL
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Kentucky Electric Steel, Inc., a
Delaware corporation (the "Company"), for use at the Annual Meeting of
Stockholders to be held on Tuesday, February 6, 2001, at 10:00 a.m. (EST) in
Ballroom B, Ashland Plaza Hotel, Ashland, Kentucky, and any adjournment thereof,
for the purposes set forth in the accompanying Notice of Annual Meeting of
Stockholders.
All proxies will be voted in accordance with the instructions contained
in the proxy. If no choice is specified, proxies will be voted in favor of the
election of the nominees for directors proposed by the Board of Directors in
Proposal I, in favor of the approval of the 2001 Share Plan for Non-Employee
Directors and in favor of the ratification of the appointment of Arthur Andersen
LLP as the Company's independent public accountants for the fiscal year ending
September 29, 2001, all as recommended by the Board of Directors. A stockholder
who executes a proxy may revoke it at any time before it is exercised by
delivering to the Company another proxy bearing a later date or by submitting
written notice of such revocation to the Secretary of the Company.
A copy of the Company's Annual Report to Stockholders for the fiscal
year ended September 30, 2000 accompanies this proxy statement.
A plurality of the votes cast is required for the election of
directors. Votes withheld from a nominee for election as a director are not
included in the tabulation of the voting results on the election of directors
and, therefore, do not affect the election of directors. Approval of the 2001
Share Plan for Non-Employee Directors and the ratification of the appointment of
Arthur Andersen LLP as the Company's independent public accountants require the
affirmative vote of a majority of the shares represented at the meeting and
entitled to vote on the proposals. Abstentions on these matters will be counted
for the purpose of determining the number of shares represented by proxy at the
meeting and voting upon such proposals, and shall therefore have the same effect
as if such shares were voted against such ratification or approval. Broker
"non-votes" will be treated as not represented at the meeting as to the
ratification of Arthur Andersen LLP or approval of the 2001 Share Plan for
Non-Employee Directors for purposes of determining the number of votes needed
for ratification or approval.
A broker "non-vote" occurs when a nominee holding shares for a
beneficial owner does not vote upon a particular proposal because the nominee
does not have discretionary voting power with respect to that proposal and has
not received instructions from the beneficial owner. Broker "non-votes" and the
shares as to which stockholders abstain are included for purposes of determining
whether a quorum of shares is present at a meeting.
<PAGE> 4
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The close of business on December 8, 2000 has been fixed as the record
date for the determination of stockholders entitled to notice of and to vote at
the Annual Meeting. Each outstanding share of the Company's common stock, $0.01
par value ("Common Stock"), is entitled to one vote. On December 8, 2000, there
were outstanding and entitled to vote 4,072,818 shares of Common Stock.
OWNERSHIP OF DIRECTORS, NOMINEE AND EXECUTIVE OFFICERS
The following table sets forth information regarding the amount of
Common Stock beneficially owned, as of December 8, 2000, by each director of the
Company, the nominees for election as directors of the Company, the executive
officers named in the Summary Compensation Table and all directors and executive
officers of the Company as a group:
<TABLE>
<CAPTION>
SHARES
NAME BENEFICIALLY OWNED(1) PERCENT(2)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Charles C. Hanebuth............................................. 254,032 (3) 6.0%
Clifford R. Borland............................................. 8,926 (4)
Carl E. Edwards, Jr. ........................................... 12,485 (4)
J. Marvin Quin II............................................... 21,223 (4)
David C. Struve................................................. 18,936 (4)
William J. Jessie............................................... 121,102 (5) 2.9%
Joseph E. Harrison.............................................. 91,019 (6) 2.2%
William H. Gerak................................................ 63,518 (7) 1.5%
Directors and Executive Officers as a Group (8 persons)......... 591,241 (8) 13.4%
</TABLE>
(1) Under rules of the Securities and Exchange Commission ("SEC"), persons
who have power to vote or dispose of securities, either alone or
jointly with others, are deemed to be the beneficial owners of such
securities.
(2) The shares subject to options were deemed outstanding for purposes of
this calculation.
(3) Includes 181,236 shares which Mr. Hanebuth had the right to acquire
upon the exercise of stock options exercisable on December 8, 2000 or
within 60 days thereafter. Excludes 203 shares owned separately by Mr.
Hanebuth's spouse and children; Mr. Hanebuth disclaims that he is the
beneficial owner of such shares.
(4) Shares beneficially owned do not exceed one percent of the outstanding
shares of Common Stock.
(5) Includes 57,802 shares which Mr. Jessie had the right to acquire upon
the exercise of stock options exercisable on December 8, 2000 or within
60 days thereafter.
(6) Includes 55,467 shares which Mr. Harrison had the right to acquire upon
the exercise of stock options exercisable on December 8, 2000 or within
60 days thereafter.
(7) Includes 38,212 shares which Mr. Gerak had the right to acquire upon
the exercise of stock options exercisable on December 8, 2000 or within
60 days thereafter.
(8) Includes 332,717 shares subject to option as described in the foregoing
notes.
2
<PAGE> 5
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
On December 8, 2000, the following persons were known to the Company to
be the beneficial owners of more than five percent of the Common Stock:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
NAME AND ADDRESS OWNED PERCENT
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
State of Wisconsin Investment Board 500,000 (1) 12.3%
P.O. Box 7842
Madison, Wisconsin 53707
Franklin Resources, Inc. 437,500 (2) 10.7%
777 Mariners Island Boulevard
San Mateo, California 94404
NS Group, Inc. 400,000 (3) 9.8%
Ninth and Lowell Streets
Newport, Kentucky 41072
FMR Corp. 367,500 (4) 9.0%
82 Devonshire Street
Boston, Massachusetts 02109
Tontine Partners, L.P. 237,700 (5) 5.8%
200 Park Avenue
New York, New York 10166
</TABLE>
(1) Based on Amendment No. 6 to Schedule 13G filed with the SEC on February
2, 2000. The State of Wisconsin Investment Board has sole voting and
dispositive power as to 500,000 shares.
(2) Based on Amendment No. 2 to Schedule 13G filed with the SEC on January
25, 2000 by Franklin Resources, Inc., a Delaware corporation ("Franklin
Resources"), Charles B. Johnson, an individual, Rupert H. Johnson, Jr.,
an individual, and Franklin Advisory Services, LLC, a Delaware limited
liability company ("Franklin Advisory"). Franklin Resources is the
beneficial owner of 437,500 shares as a result of certain of its direct
and indirect subsidiaries acting as investment advisers to various
investment companies. Franklin Advisory reports having sole voting and
dispositive power as to 437,500 shares.
(3) NS Group, Inc., a Kentucky corporation ("NS Group"), obtained such
shares in connection with the initial public offering of shares of the
Company's Common Stock as partial consideration for the transfer of all
of the assets and liabilities of a subsidiary of NS Group to the
Company. Clifford R. Borland, a director of the Company, serves as
Chairman of NS Group. Mr. Borland disclaims beneficial ownership of the
shares owned by NS Group.
(4) Based on Schedule 13G filed with the SEC on February 11, 2000. FMR
Corp. reports sole dispositive power over 367,500 shares. Fidelity
Management & Research Company ("Fidelity"), a wholly-owned subsidiary
of FMR Corp., is the beneficial owner of 367,500 shares as a result of
acting as an investment adviser to various investment companies. The
ownership of one investment company, Fidelity Low-Priced Stock Fund,
amounted to 367,500 shares. Edward C. Johnson 3rd, Chairman of FMR
Corp., through its control of Fidelity, and the funds have sole power
to dispose of 367,500 shares. Voting power resides with the Board of
Trustees of the various funds.
(5) Based on Amendment No. 2 to Schedule 13G filed with the SEC on February
11, 2000 by Tontine Partners, L.P., a Delaware limited partnership
("TP"), Tontine Management, L.L.C., a Delaware limited liability
company ("TM"), Tontine Overseas Associates, L.L.C., a Delaware limited
liability company ("TOA") and Jeffrey L. Gendell, an individual. TOA
and Mr. Gendell have shared voting power and shared dispositive power
as to 237,700 shares.
3
<PAGE> 6
PROPOSAL I: ELECTION OF DIRECTORS
In accordance with the Bylaws of the Company, the Board of Directors
has fixed the number of directors at five directors, divided into three classes
of one, two and two directors, with the terms of office of each class ending in
successive years. The Board of Directors has nominated Carl E. Edwards, Jr. and
J. Marvin Quin II, whose current terms as directors expire at the 2001 Annual
Meeting, for election as directors to hold office until the 2004 Annual Meeting
of Stockholders, and until their successors are elected and qualified in the
class to which they are assigned or until their earlier death, resignation or
removal.
Shares represented by your proxy will be voted in accordance with your
direction as to the election as director of the person listed below as the
nominee. In the absence of direction, the shares represented by your proxy will
be voted FOR such election. In the event that the person listed as the nominee
becomes unavailable as a candidate for election, it is intended that the shares
represented by your proxy will be voted for a substitute nominee, but the Board
knows of no reason to anticipate that this will occur.
Certain information with respect to the nominee and each of the
continuing directors is set forth below, including any positions they hold with
the Company.
<TABLE>
<CAPTION>
POSITIONS OR OFFICES SERVED AS DIRECTOR
NAME AGE WITH THE COMPANY CONTINUOUSLY SINCE
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NOMINEE FOR TERM ENDING IN 2004
Carl E. Edwards, Jr. 59 None 1993
J. Marvin Quin II 53 None 1993
DIRECTORS WITH TERMS ENDING IN 2002
Clifford R. Borland 63 None 1993
David C. Struve 60 None 1993
DIRECTORS WITH TERMS ENDING IN 2003
Charles C. Hanebuth 56 President and Chief 1993
Executive Officer
</TABLE>
The following are brief summaries of the business experience of the
nominees for election as directors of the Company and the other directors whose
terms of office as directors will continue after the Annual Meeting, including,
where applicable, information as to the other directorships held by each of
them.
NOMINEES
CARL E. EDWARDS, JR. has been Executive Vice President, General Counsel
and Secretary of Lennox International Inc., a manufacturer of residential and
commercial air conditioning and heating equipment and industrial furnaces, since
February 1992. Prior thereto, Mr. Edwards was Vice President, General Counsel
and Secretary of ELCOR Corporation, a manufacturer of roofing and industrial
products.
J. MARVIN QUIN II has been Senior Vice President and Chief Financial
Officer of Ashland, Inc., a diversified corporation which produces and markets
petroleum products, chemicals and road construction services, since 1992. Prior
thereto, Mr. Quin was treasurer of Ashland, Inc.
The Board of Directors recommends a vote FOR the election of the
nominees for directors of the Company.
4
<PAGE> 7
CONTINUING DIRECTORS
CLIFFORD R. BORLAND has been Chairman of NS Group, a holding company
for steel mini-mill operations, since February 2000. From December, 1995 to
February, 2000 Mr. Borland was Chairman and Chief Executive Office of NS Group.
Prior thereto, Mr. Borland was President, Chief Executive Officer and a director
of NS Group.
CHARLES C. HANEBUTH has been President and Chief Executive Officer of
the Company since its formation in August 1993. From November 1990 to October 6,
1993, Mr. Hanebuth was President and Chief Operating Officer of Kentucky
Electric Steel Corporation, a wholly owned subsidiary of NS Group. Mr. Hanebuth
has 21 years management experience in the steel industry. Mr. Hanebuth is an
advisory director of Fifth Third Bank Ohio Valley and a director of Ashland
Hospital Corporation, which operates King's Daughters' Medical Center.
DAVID C. STRUVE has been Chairman of the Board and Chief Executive
Officer of Latite Roofing and Sheet Metal Company Inc., a commercial and
residential roofing company, since 1983.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company held four meetings during the
fiscal year ended September 30, 2000. During such fiscal year all of the
incumbent directors attended at least 75% of the aggregate meetings held by the
Board of Directors and all committees on which they serve. The standing
committees of the Board of Directors are the Audit Committee and the
Compensation Committee. The nominees for election as directors of the Company
are chosen by the full Board of Directors, and there is no standing committee
entrusted with this function.
AUDIT COMMITTEE. Messrs. Quin (Chairman), Edwards and Struve are
members of the Audit Committee. The Audit Committee oversees the Company's
financial reporting process on behalf of the Board of Directors. The Committee
is composed of three independent Directors and operates under a written charter,
attached as ANNEX A, adopted by the Board of Directors. Management has the
primary responsibility for the financial statements and the reporting process,
including the Company's systems of internal controls. In fulfilling its
oversight responsibilities, the Committee reviewed the audited financial
statements in the Annual Report on Form 10-K with management, including a
discussion of the quality and the acceptability of the Company's financial
reporting and controls.
The Committee reviewed with the independent auditors, who are
responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their
judgments as to the quality and the acceptability of the Company's financial
reporting and such other matters as are required to be discussed with the
Committee under generally accepted auditing standards (including SAS 61). In
addition, the Committee has discussed with the independent auditors the
auditors' independence from management and the Company, including the matters in
the auditors' written disclosures required by the Independence Standards Board.
The Committee also discussed with the Company's independent auditors
the overall scope and plans for their respective audits. The Committee meets
periodically with the independent auditors, with and without management present,
to discuss the results of their examinations, their evaluations of the Company's
internal controls, and the overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors that the audited financial
statements be included in the Annual Report on Form 10-K for the fiscal year
ended September 30, 2000 for filing with the SEC. The Audit Committee recommends
to
5
<PAGE> 8
the Board the appointment of the independent public accountants to serve as
auditors in examining the corporate accounts of the Company. The Audit Committee
met two times during the fiscal year ended September 30, 2000.
COMPENSATION COMMITTEE. Messrs. Struve (Chairman), Borland and Edwards
are members of the Compensation Committee. The functions of the Compensation
Committee are to review, discuss and advise management and make recommendations
to the Board of Directors regarding compensation and benefits for the executive
officers and highly compensated personnel of the Company. The Compensation
Committee also has oversight responsibilities for all broadly based compensation
and benefit programs of the Company. The Compensation Committee met three times
during the fiscal year ended September 30, 2000.
COMPENSATION OF DIRECTORS. Directors who are not employees of the
Company are paid an annual retainer of $16,000 and $1,000 for each meeting of
the Board of Directors attended in excess of four meetings per fiscal year,
along with expenses for attendance at meetings of the Board and Committees. In
addition, such outside Directors are paid $750 ($1,000 for Committee Chairmen)
for each Committee meeting attended. At least sixty percent (60%) of all such
fees are paid to such directors in the form of Common Stock subject to the terms
of the Kentucky Electric Steel, Inc. 1999 Share Plan for Non-Employee Directors.
Directors who are employees do not receive any compensation for service as
directors, but the Company pays their expenses for attendance at Board meetings.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following table presents summary information for the 1998, 1999 and
2000 fiscal years concerning compensation awarded or paid to, or earned by, the
Chief Executive Officer and each of the other executive officers whose salary
and bonus exceeded $100,000 for the fiscal year ended September 30, 2000 (the
"named executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation(1)
------------------- ----------------------
All Other
Name and LTIP Compen-
Principal Position Year Salary Bonus(2) Other(3) Options(4) Payouts sation(5)
------------------ ---- ------ -------- -------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Charles C. Hanebuth 2000 $270,360 $ -- $ 121,736 34,521 -- $129,398
President and Chief 1999 270,360 -- 28,597 34,521 -- 213,824
Executive Officer 1998 270,360 15,429 7,710 -- -- 115,869
William J. Jessie 2000 $132,720 $ -- $ 41,404 10,340 -- $ 44,323
Vice President, Secretary, 1999 132,720 -- 7,894 10,340 -- 82,714
Treasurer and Chief 1998 132,720 6,909 1,121 -- -- 34,797
Financial Officer
Joseph E. Harrison 2000 $126,384 $ -- $ 51,391 10,340 -- $ 54,411
Vice President, 1999 126,384 -- 11,018 10,340 -- 78,317
Sales and Marketing 1998 126,384 6,579 1,107 -- -- 55,989
William H. Gerak 2000 $113,556 $ -- $ 43,209 8,991 -- $ 45,772
Vice President, 1999 109,896 -- 9,236 8,991 -- 73,953
Administration 1998 109,896 5,721 962 -- -- 47,401
</TABLE>
(1) Stock options and restricted stock awards granted under the Company's
1993, 1994 and 1998 Employee Stock Option/Restricted Stock Plans
provide for acceleration of vesting of awards in the event of a change
of control of the Company, as defined in such plan.
(2) Amounts included under "Bonus" represent amounts paid or awarded under
the executive compensation plan described in the Compensation Committee
Report on Executive Compensation.
(3) Amounts represent reimbursement for tax liabilities incurred by the
named executive officers during fiscal 1998, 1999 and 2000 in
connection with certain insurance premium payments and forgiveness of
certain indebtedness.
(4) Information represents stock options awarded under the Company's 1993,
1994 and 1998 Employee Stock Option/Restricted Stock Plans.
(5) Amounts included as "All Other Compensation" for the named executive
officers consist of charges associated with the Company's salary
continuation program, imputed interest on loans made under the Key
Employee Stock/Loan Plan, the dollar value of premiums paid by the
Company in connection with life insurance and disability policies for
the benefit of the named executive officers, contributions to the
Company's Profit Sharing Plan on behalf of the named executive
officers, and charges in connection with certain disability insurance
premiums for Mr. Hanebuth. Charges associated with the salary
continuation program (including the associated loan forgiveness and
insurance premium payments) during fiscal 1998, 1999 and 2000,
respectively, were: $101,128, $201,184 and $119,760 for Mr. Hanebuth;
$30,002, $79,601 and $42,443 for Mr. Jessie; $51,302, $75,010 and
$52,596 for Mr. Harrison; and $43,284, $71,116 and $44,194 for Mr.
Gerak. Imputed interest under the Key Employee Stock/Loan Plan for
fiscal 1998, 1999 and 2000, respectively, was $4,018, $2,036 and $1,217
for Mr. Hanebuth; $1,715, $1,016 and $513 for Mr. Jessie; $1,715,
$1,016 and $513 for Mr. Harrison; and $1,491, $883 and $446 for Mr.
Gerak. The value of the benefit to the named individuals of the
premiums paid by the Company on behalf
7
<PAGE> 10
of named individuals pursuant to the Company's split dollar insurance
arrangements during fiscal 1998 and 1999 was $292 and $2,183 for Mr.
Hanebuth, $95 and $730 for Mr. Jessie, $77 and $989 for Mr. Harrison,
and $109 and $822 for Mr. Gerak. In fiscal year 1999, the split dollar
insurance program was discontinued in connection with certain changes
made to the salary continuation program. See "Other Compensation
Arrangements." The Company made the following contributions to the
Profit Sharing Plan in fiscal 1998: $1,754 on behalf of Mr. Hanebuth;
$1,526 on behalf of Mr. Jessie; $1,454 on behalf of Mr. Harrison; and
$1,264 on behalf of Mr. Gerak. No such contributions to the Profit
Sharing Plan were made by the Company on behalf of the named executive
officers in fiscal 1999 or 2000. The Company also pays certain
disability insurance premiums under policies covering the named
individuals. In the event the named individual becomes disabled, he
will be paid 60% (90% in the case of Mr. Hanebuth) of his current base
salary during the term of such disability up to age 65. The amount of
the premiums paid by the Company on behalf of the named individuals
pursuant to these insurance policies during fiscal 1998, 1999 and 2000,
respectively, were: $8,677, $8,421 and $8,421 for Mr. Hanebuth; $1,459,
$1,367 and $1,367 for Mr. Jessie; $1,441, $1,302 and $1,302 for Mr.
Harrison; and $1,253, $1,132 and $1,132 for Mr. Gerak.
The following tables present certain additional information concerning
stock options granted to the named executive officers during fiscal 2000. No
stock options were exercised by the named executive officers during fiscal 2000.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants Potential Realizable Value
-------------------------------------------------------------- at Assumed Annual Rates
of Stock Price Appreciation
for Option Term(1)
-------------------------
% of Total
Options
Granted to Exercise or
Options Employees in Base Price
Name Granted (#)(2) Fiscal Year (per share)(3) Expiration Date 5% 10%
---- -------------- ----------- -------------- --------------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Charles C. Hanebuth 34,521 37.9% $2.5313 1/31/10 $54,954 $139,265
William J. Jessie 10,340 11.3% $2.5313 1/31/10 $16,460 $41,714
Joseph E. Harrison 10,340 11.3% $2.5313 1/31/10 $16,460 $41,714
William H. Gerak 8,991 9.9% $2.5313 1/31/10 $14,313 $36,271
</TABLE>
(1) The amounts shown under these columns are the result of calculations at
5% and 10% rates over the ten year term of the options as required by
the Securities and Exchange Commission and are not intended to forecast
future appreciation of the stock price of the Company's Common Stock.
The actual value, if any, an executive officer may realize will depend
on the excess of the stock price over the exercise price on the date
the option is exercised.
(2) These options were granted as of January 31, 2000 in connection with
the Compensation Committee's review of compensation for fiscal 2000 and
one fourth of each option becomes exercisable each year beginning
January 31, 2001.
(3) The exercise price for these options is equal to the market price of
the Company's Common Stock on January 31, 2000.
8
<PAGE> 11
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options Options at
at September 30, 2000(#) September 30, 2000($) (1)
------------------------------- ------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Charles C. Hanebuth 172,605 69,042 $0 $0
William J. Jessie 55,217 20,680 0 0
Joseph E. Harrison 52,882 20,680 0 0
William H. Gerak 35,964 17,982 0 0
</TABLE>
(1) Based on the market value of the Company's Common Stock on September
30, 2000.
OTHER COMPENSATION ARRANGEMENTS
The Company entered into agreements with the named executive officers
effective June 7, 1994 (as thereafter amended, the "Employment Agreements"). The
Employment Agreements provide for continued employment of the respective officer
by the Company for a period of three years following a Change of Control (as
defined) on an equivalent basis to employment immediately before the Change of
Control. If (1) the employee terminates his employment for any reason other than
death or disability during the period from six months following a Change of
Control and ending 36 months following a Change of Control, (2) the Company
terminates the employee's employment during the period from the date of the
Change of Control and ending 36 months following a Change of Control ("Change of
Control Period"), or (3) the employee terminates his employment for Good Reason
(as defined) during the first six months of the Change of Control Period, the
Company shall pay the employee a single lump sum cash payment equal to $1.00
less than three times the employee's "Base Amount." The term Base Amount means
the employee's average annual compensation from the Company for the five
consecutive years preceding the Change of Control. The Employment Agreements
also provide that for a period of two years after the termination of the
employee's employment under such agreement, the employee will not engage in any
Competition Activity (as defined) and shall provide reasonable consulting
services to the Company. Pursuant to the Employment Agreements, each employee
has also agreed not to disclose Confidential Information (as defined) of the
Company.
The Board of Directors adopted an Executive Severance Plan effective
June 7, 1994 (as thereafter amended, the "Executive Severance Plan") for the
named executive officers. In consideration for certain non-competition and
confidentiality covenants and provided his employment is not terminated for
Cause (as defined), each named executive officer is entitled to be paid his
regular base salary at the time of severance from the Company for a period of 24
months (36 months for Mr. Hanebuth) following termination. In addition, the
executive would continue to receive certain employee benefits and would be
eligible to receive a pro rata share of any incentive bonus plan compensation
earned but not paid and he would receive an amount equal to the cash value of
all outstanding stock options, stock appreciation rights and restricted stock
held by such executive.
The Employment Agreements and the Executive Severance Plan also provide
that an employee will be reimbursed for any legal expenses incurred in
litigating his rights under the agreement or the severance plan.
The Compensation Committee approved a Key Employee Stock/Loan Plan in
February 1995, under which the Company may grant certain key employees rights to
apply to the Company for a loan. The
9
<PAGE> 12
proceeds of any such loan must be used to purchase Kentucky Electric Steel
Common Stock at that time, applied to previous stock purchases not made in
connection with the Stock/Loan Plan or be used to meet tax obligations on
restricted stock grants. The normal maximum amount which may be loaned to each
eligible key employee is a percentage of base salary determined by a formula
approved by the Compensation Committee. Such loans bear no interest and are
repayable by the key employee through continued service with the Company, with
the principal amount of the loan being forgiven at the rate of 20% for each year
of continuous service subsequent to the date of the making of the loan. The
outstanding balances of such loans are required to be repaid on any termination
of employment with the Company, except for termination due to disability, death
or retirement. No loans were made under the Key Employee Stock/Loan Plan in
fiscal 1998, 1999 or 2000.
Under the Company's salary continuation program, executive officers,
upon retirement at age 62, will be paid an amount not to exceed 60% of base
salary to age 85 (10 years certain). At age 85, Mr. Hanebuth would continue to
receive a benefit of 28% of his base salary until death. As of September 30,
2000, the salary continuation benefits reported for each named executive officer
have been vested at 75% by the Board of Directors. The amounts payable under
this program will be reduced by the amounts such individuals receive under
certain insurance policies previously transferred from the Company to employee
grantor trusts established by such individuals. The Company agreed to lend to
each of such individuals an amount equal to the federal and state income taxes
incurred by such individuals in connection with such transfer and entered into
Loan Forgiveness Agreements whereby the Company agreed to forgive those loaned
amounts over a nine year period provided such individual either remains employed
by the Company or complies with certain non-competition and confidentiality
agreements following employment. The largest principal amount outstanding for
each of the named individuals during the most recent fiscal year was: $213,862
for Mr. Hanebuth; $69,315 for Mr. Jessie; $101,470 for Mr. Harrison; and
$84,740 for Mr. Gerak. Interest on the loaned amounts is imputed at the
applicable federal rate set by the Internal Revenue Service. As of September
30, 2000, the amounts outstanding under the loans for each of these individuals
were: $190,099 for Mr. Hanebuth; $61,614 for Mr. Jessie; $90,196 for Mr.
Harrison; and $75,325 for Mr. Gerak.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation for fiscal 2000:
The Company's executive compensation program (the "Program") has been
designed to enable the Company to attract, motivate and retain senior management
by providing a competitive total compensation opportunity that emphasizes
variable, at-risk, performance-based compensation. The Program is comprised of
three basic elements: base salaries which are competitive in specific industry
segments within which the Company operates and which also reflect individual
performance; annual incentive opportunities which may be paid in cash and/or
awarded in restricted stock for the achievement of annual financial performance
goals established by the Compensation Committee; and long-term stock
based-incentive opportunities.
A discussion of each of the elements of the Program along with a
description of the significant decisions of the Compensation Committee with
regard to fiscal 2000 compensation is set forth below.
Annual total compensation for the executive officers consists of a base
salary and the potential for an annual bonus under the Executive Incentive
Compensation Plan (the "Incentive Compensation Plan"). National survey data for
all industries, data from industry segments within which the Company operates
10
<PAGE> 13
and evaluation of individual performance were utilized to determine fiscal 2000
base salaries for executive officers. The annual base salaries for the executive
officers other than the chief executive officer were determined through an
interactive review process between the Compensation Committee and Mr. Hanebuth
using the aforementioned criteria. Mr. Hanebuth's base salary was reviewed and
established by the Compensation Committee.
Under the Incentive Compensation Plan, officers may be awarded annual
incentive bonuses if the Company meets certain performance criteria. Annual
incentive bonuses for Mr. Hanebuth and other named executive officers are
based upon pre-tax return on equity targets which are established at the
beginning of the fiscal year. At specified levels of return, a participant is
eligible to receive an incentive bonus equal to a variable percentage of his
annual base salary, to a maximum of approximately 100% of annual base salary.
The fiscal 2000 equity targets and incentive percentage levels were reviewed
and approved by the Compensation Committee. Seventy-five percent of the
incentive bonus may be paid quarterly during the fiscal year for which bonus
payments are calculated, with the balance paid after determination of results
for the fiscal year. Any contribution made by the Company for Profit Sharing to
the Salaried Employees Profit Sharing and Flexible Compensation Plan on behalf
of any executive officer results in a corresponding reduction in incentive
compensation bonus payments to the executive officers.
The long-term incentive component of the chief executive officer and
the executive officers' 2000 compensation includes stock options. Stock options
are designed to align the long-term interests of the Company's executives and
its stockholders and assist in the retention of executives.
In January 2000, the Compensation Committee granted incentive stock
options to all of the executive officers, as well as certain other management
employees. The grants made to Mr. Hanebuth were consistent with prior option
awards made by the Company, which were determined with reference to national
survey data regarding stock option grants to chief executive officers. Other
executive officers received awards which were set at 65% of the level originally
established for Mr. Hanebuth.
All options were granted at the fair market value on the date of grant.
The Company will likely consider additional stock option grants to such
executives in fiscal 2001.
COMPENSATION COMMITTEE
David C. Struve (Chairman)
Clifford R. Borland
Carl E. Edwards, Jr.
11
<PAGE> 14
PERFORMANCE GRAPH
The following graph sets forth a comparison of the Company's cumulative
total stockholder return from September 30, 1995 through September 30, 2000 with
the cumulative total return for the same period of the Standard & Poor's 500
Index and the Standard & Poor's 500 Iron and Steel Index. The graph assumes a
$100 investment in the Company's Common Stock and each index and the
reinvestment of all dividends.
TOTAL SHAREHOLDER RETURNS
[GRAPH]
<TABLE>
<CAPTION>
INDEXED RETURNS
BASE YEARS ENDING
PERIOD
COMPANY / INDEX SEP95 SEP96 SEP97 SEP98 SEP99 SEP00
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
KENTUCKY ELECTRIC STEEL INC 100 76.71 76.71 42.47 36.99 19.18
S&P 500 INDEX 100 120.33 169.00 184.29 235.53 266.82
IRON & STEEL-500 100 98.63 114.67 83.53 91.33 55.20
</TABLE>
12
<PAGE> 15
PROPOSAL II: APPROVAL OF
2001 SHARE PLAN FOR NON-EMPLOYEE DIRECTORS
The Board of Directors has adopted the Kentucky Electric Steel, Inc.
2001 Share Plan for Non-Employee Directors (the "2001 Share Plan"), subject to
approval by the stockholders of the Company. The purposes of the 2001 Share Plan
are (1) to encourage non-employee directors to own shares of the Company's
Common Stock and thereby to align their interests more closely with the
interests of the other stockholders of the Company, (2) to encourage the highest
level of director performance by providing non-employee directors with a direct
interest in the Company's attainment of its financial goals, and (3) to provide
a financial incentive that will help attract and retain the most qualified
directors.
A copy of the 2001 Share Plan is attached as ANNEX B to this Proxy
Statement. The following summary of the terms of the 2001 Share Plan is
qualified in its entirety by reference thereto. Stockholders are urged to refer
to the 2001 Share Plan document and to read it carefully for a complete
statement of provisions summarized therein.
The 2001 Share Plan makes available up to 100,000 shares of Common
Stock for issuance to non-employee directors of the Company in the form of
restricted stock. As of December 28, 2000, there were four non-employee
directors eligible to participate in the 2001 Share Plan.
Under the terms of the 2001 Share Plan, promptly following each board
or committee meeting during a fiscal quarter commencing on or after January 1,
2001, the Company will issue to each non-employee director the number of shares
of Common Stock (rounded to the nearest whole number) obtained by dividing the
"applicable portion" of the non-employee director's fees by the fair market
value of one share of Common Stock on the date of the applicable board or
committee meeting. The term "applicable portion" means 60% of the fees payable
with respect to the applicable meeting for each non-employee director, or such
higher percentage that any individual non-employee director elects for himself
in writing prior to the fiscal quarter during which the meeting occurs. The
Company will not issue fractional shares under the 2001 Share Plan.
Rights to the issuance of shares of Common Stock may not be assigned,
pledged, hypothecated or otherwise transferred by a non-employee director or any
other person, voluntarily or involuntarily, other than by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order.
AMENDMENT TO 2001 SHARE PLAN
The Board may, at any time, terminate, and, from time to time, amend or
modify the 2001 Share Plan; provided, however, that any such amendment must be
approved by the stockholders of the Company if required by applicable statutory
or regulatory requirements or if the Company determines that stockholder
approval is otherwise necessary or desirable.
REQUIRED VOTE FOR APPROVAL
The Board of Directors recommends a vote FOR approval of the adoption
of the 2001 Share Plan. The affirmative vote of a majority of the shares of
Common Stock present or represented by proxy at the meeting will constitute
approval of the adoption of the 2001 Share Plan.
13
<PAGE> 16
PROPOSAL III: RATIFICATION OF
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon the recommendation of its Audit Committee,
has determined to appoint Arthur Andersen LLP as the Company's independent
public accountants for the fiscal year ending September 29, 2001. A resolution
will be presented at the meeting to ratify the appointment of Arthur Andersen
LLP. If the stockholders do not ratify the selection of Arthur Andersen LLP, the
selection of independent public accountants will be reconsidered by the Board.
The Company has been advised that a representative of Arthur Andersen
LLP will be present at the meeting with an opportunity to make a statement if
such representative desires and will be available to respond to questions of the
stockholders.
The Board of Directors recommends a vote FOR ratification of the
appointment of Arthur Andersen LLP as the Company's independent public
accountants for the fiscal year ending September 29, 2001.
COMPLIANCE WITH SECTION 16(a)
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's officers and directors, and persons who own more than ten percent of
the Company's outstanding stock, file reports of ownership and changes in
ownership with the Securities and Exchange Commission. For fiscal 2000, to the
knowledge of the Company, all Section 16(a) filing requirements applicable to
its officers and directors with respect to the most recent fiscal year were
complied with except that the fiscal year ended Form 5, Annual Statement of
Beneficial Ownership of Securities for each executive officer of the Company,
each of which reflected one transaction, was filed on November 30, 2000, instead
of November 14, 2000, as required by Section 16(a).
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 2002 Annual
Meeting of Stockholders scheduled to be held on February 5, 2002, must be
received by the Company by August 30, 2001, for inclusion in the Company's Proxy
Statement and proxy relating to that meeting. Upon receipt of any such proposal,
the Company will determine whether or not to include such proposal in the Proxy
Statement and proxy in accordance with regulations governing the solicitation of
proxies.
The Company's Bylaws also set forth certain advance notice or
information requirements and time limitations on any director nomination or any
new business which a stockholder wishes to propose for consideration at an
annual or special meeting of stockholders. In order for a stockholder to
nominate a candidate for director or bring a proposal before a stockholder
meeting, the Bylaws generally require that notice be given to the Company not
less than 60 days nor more than 90 days before the meeting; provided that if
less than 70 days' notice or prior public disclosure of the date of the meeting
is given or made to stockholders, then the stockholder must give such notice to
the Company within 10 days after notice of the stockholder meeting is mailed or
other public disclosure of the meeting is made. Accordingly, in order to
nominate a candidate for director or bring a proposal before the 2002 Annual
Meeting, the Company must receive notice from the stockholder between November
7, 2001 and December 7, 2001. The notice must contain certain information
relating to the nominee for director or new business proposal. The Board of
Directors of the Company may reject any nomination or new business proposal not
timely made or supported by insufficient information. In addition, the time
limits discussed in this paragraph also apply in determining whether notice is
timely for purposes of rules adopted by the Securities and Exchange Commission
relating to the exercise of discretionary voting authority. If the date for the
2002 Annual
14
<PAGE> 17
Meeting is delayed or advanced by more than 30 calendar days, the Company will
inform stockholders of such change, and the new dates referred to in this
section, in accordance with the rules governing the solicitation of proxies.
These requirements are separate from the rules of the Securities and Exchange
Commission which provide for the inclusion of proposals of stockholders in the
Company's Proxy Statement.
MISCELLANEOUS
The Company will bear the cost of solicitation of proxies. Proxies will
be solicited by mail. They may also be solicited by officers and regular
employees of the Company personally or by telephone, but such persons will not
be specifically compensated for such services. Brokerage houses, custodians,
nominees and fiduciaries will be requested to forward the soliciting material to
the beneficial owners of stock held of record by such persons and will be
reimbursed for their reasonable expenses incurred in connection therewith.
Management knows of no business to be brought before the Annual Meeting
of Stockholders other than that set forth herein. However, if any other matters
properly come before the meeting, it is the intention of the persons named in
the proxy to vote such proxy in accordance with their judgment on such matters.
Even if you plan to attend the meeting in person, please execute, date and
return the enclosed proxy promptly. Should you attend the meeting, you may
revoke the proxy by delivering to the Company another proxy bearing a later date
or by submitting written notice of such revocation to the Secretary of the
Company. A postage-paid, return-addressed envelope is enclosed for your
convenience. Your cooperation in giving this your prompt attention will be
appreciated.
By Order of the Board of Directors,
WILLIAM J. JESSIE, Secretary
December 28, 2000
Ashland, Kentucky
15
<PAGE> 18
ANNEX A
KENTUCKY ELECTRIC STEEL, INC.
AUDIT COMMITTEE CHARTER
I. PURPOSE
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing: the
financial reports and other financial information; the Company's Systems of
internal controls regarding finance, accounting, legal compliance and ethics
that management and the Board have established; and the Company's auditing,
accounting and financial reporting processes generally. Consistent with this
function, the Audit Committee should encourage continuous improvement of, and
should foster adherence to, the company's policies, procedures and practices at
all levels. The Audit Committee's primary duties and responsibilities are to:
- Serve as an independent and objective party to monitor the
Company's financial reporting process and internal control system.
- Review and appraise the audit efforts of the Company's independent
auditors.
- Provide an open avenue of communication among the independent
auditors, financial and senior management, and the Board of
Directors.
The Audit Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in Section IV of this Charter.
II. COMPOSITION
The Audit Committee shall be comprised solely of three independent,
non-employee directors who are not, and in the past three years have not been,
active Officers or employees of the Company. All members of the Audit Committee
shall be able to read and understand fundamental financial statements, including
the Company's balance sheet, income statement and cash flow statement or shall
become able to do so within a reasonable period of time after his or her
appointment to the Audit Committee. Additionally, at least one member of the
Audit Committee shall have had past employment experience in finance or
accounting or a professional certification in accounting or comparable
experience or background which results in that individual possessing financial
sophistication.
The members of the Audit Committee shall be elected by the Board at the
annual organizational meeting of the Board and shall serve until their
successors shall be duly elected and qualified. The Chairman of the Audit
Committee will be elected by the full Board of Directors.
III. MEETINGS
The Committee shall meet at least two times annually, or more
frequently as circumstances dictate. As part of its job to foster open
communication, the Committee should meet at least annually with management and
the independent auditors in separate executive sessions to discuss any matters
that the Committee or each of these groups believe should be discussed
privately.
<PAGE> 19
IV. RESPONSIBILITIES AND DUTIES
In meeting its responsibilities, the Audit Committee is expected to:
1. Review and update the Committee's charter annually or more
frequently if circumstances dictate.
2. Recommend to the Board the independent auditor to be used,
approve the services and compensation of the independent
auditor (including estimated consulting services to be
performed and fees associated therewith), and review and
approve the discharge of the independent auditor. In
performing these duties, the Audit Committee will confirm to
the selected independent auditor its ultimate accountability
to the Board and the Audit Committee, who are serving as
representatives of the shareholders of the Company.
3. Review annually the independence of the independent auditor.
Without limiting the generality of the foregoing, the
Committee shall:
a. Ensure the receipt of a formal written statement from
the independent auditor delineating relationships
between the independent auditor and the Company,
consistent with Independence Standards board Standard
No. l.
b. Engage in a dialogue with the independent auditor
with respect to any disclosed relationships or
services that may impact the objectivity of the
independent auditors. Committee approval is required
for such consulting services exceeding $40,000.
c. Take appropriate action to ensure the independence of
the independent auditors.
4. Evaluate Company processes for management's identification of
significant financial risks or exposures, and assess the steps
management has taken to mitigate such risks.
5. Consider, in consultation with management, the risk
assessments, scopes and audit plans of the independent
auditor.
6. Consider and review with independent auditor:
a. The adequacy of the Company's financial reporting
processes for both internal and external reporting.
b. The adequacy of the Company's internal controls,
including computerized information system controls
and security.
c. Any significant findings and recommendations of the
independent auditor and management's responses
thereto.
2
<PAGE> 20
7. Review with management and the independent auditor at the
completion of the annual examination:
a. The Company's annual financial statements and related
footnotes, and if deemed appropriate after such
review, recommend to the Board that the financial
statements be included in the Annual Report on Form
10-K.
b. Any significant changes in accounting policies or
procedures.
c. The independent auditor's audit of the financial
statements and its report thereon.
d. Any significant changes required in the independent
auditor's audit plan.
e. Any difficulties or disputes with management
encountered during the course of the audit, including
restrictions on scope.
f. Other matters related to the conduct of the audit
which are to be communicated to the Committee under
generally accepted auditing standards.
g. The independent auditor's Management Letter and
management's response thereto.
8. Review with management and the independent auditors each
Quarterly Report on Form 10-Q prior to its filing or, if
earlier, prior to the release of earnings. The Chairman of the
Committee may represent the entire Committee for purposes of
this review.
9. Review with management, legal counsel, and independent
auditors any legal and regulatory matters that may have a
material impact on the financial statements, and related
Company compliance policies, and programs and reports received
from regulators.
10. Report Committee actions to the Board with such
recommendations as the Committee may deem appropriate.
11. Conduct or authorize investigations into any matters within
the Committee's scope of responsibilities. The Committee shall
be empowered to retain independent counsel, accountants, or
others to assist it in the conduct of any investigation.
12. Perform such other functions as assigned by law or the Board.
13. Perform such additional functions as the Committee may deem
necessary to fulfill its charter, including, but not limited
to:
a. Review use of consultants, as defined under the
Foreign Corrupt Practices Act.
b. Review the adequacy of the Company's senior
accounting and financial personnel.
3
<PAGE> 21
ANNEX B
KENTUCKY ELECTRIC STEEL, INC.
2001 SHARE PLAN FOR NON-EMPLOYEE DIRECTORS
I. NAME AND PURPOSE OF PLAN
1.1 Establishment. This plan created in accordance with the terms
hereof shall be known as the "Kentucky Electric Steel, Inc. 2001 Share Plan for
Non-Employee Directors" (the "Plan").
1.2 Purposes. The purposes of this Plan are to encourage the
Non-Employee Directors of Kentucky Electric Steel, Inc. (the "Company") to own
shares of the Company's stock and thereby to align their interests more closely
with the interests of the other shareholders of the Company, to encourage the
highest level of director performance by providing the Non-Employee Directors
with a direct interest in the Company's attainment of its financial goals, and
to provide a financial incentive that will help attract and retain the most
qualified directors.
II. DEFINITIONS
2.1 Definitions. The following terms shall have the meanings set forth
below:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Non-Employee Director" shall mean an individual duly
elected or chosen as a member of the Board who is not an employee of the
Company.
(c) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(d) "Fair Market Value" means the average of the highest sale
price and the lowest sale price of a Share on the date the value of a Share is
to be determined, as reported on the NASDAQ System, and published in the Wall
Street Journal, or if no sale is reported for such date, then on the next
preceding date for which a sale is reported or, if the Shares are no longer
traded on the NASDAQ System, the determination of such value shall be made by
the Board.
(e) "Fees" shall mean the amount of the fees to be paid to
each Non-Employee Director for services as a director (including all meetings of
the full Board and all committee meetings) for each fiscal quarter, as
determined by the Board from time to time.
(f) "Shares" shall mean the common stock, par value $.01 per
share, of the Company.
2.2 Gender and Number. Except when otherwise indicated by the context,
the masculine gender shall also include the feminine gender, and the definition
of any term herein in the singular shall also include the plural.
<PAGE> 22
III. STOCK SUBJECT TO THE PLAN
A total of 100,000 Shares are authorized for issuance under this Plan
in accordance with the provisions of this Plan. This authorization may be
increased from time to time by approval of the Board and by the shareholders of
the Company.
IV. PARTICIPATION
Each Non-Employee Director of the Company may receive Shares pursuant
to this Plan on the terms and conditions set forth herein. Each Non-Employee
Director shall, if required by the Board, enter in an agreement with the
Company, in such form as the Board shall determine and which is consistent with
the provisions of this Plan. In the event of any inconsistency between the
provisions of this Plan and any such agreement entered into hereunder, the
provisions of this Plan shall govern.
V. STOCK ISSUANCES
Promptly following each Board meeting or meeting of a committee of the
Board during a fiscal quarter commencing on or after January 1, 2001, the
Company shall issue to each Non-Employee Director the number of Shares (rounded
to the nearest whole number) obtained by dividing the "Applicable Portion" of
such Non-Employee Director's Fees by the Fair Market Value of a Share on the
date of the applicable Board or committee meeting. No fractional Share shall be
issued by the Company under this Plan. The "Applicable Portion" shall be 60% of
the Fees payable with respect to the applicable meeting for each Non-Employee
Director, or such higher percentage that any individual Non-Employee Director
elects for himself, such election to be filed in writing with the Chief
Financial Officer of the Company prior to the first day of the fiscal quarter
during which the applicable meeting occurs.
VI. GENERAL PROVISIONS
6.1 Non-transferability. No rights to the issuance of Shares pursuant
to this Plan shall be assigned, pledged, hypothecated or otherwise transferred
by a Non-Employee Director or any other person, voluntarily or involuntarily,
other than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order.
6.2 Investment Representations; Restricted Stock. The Company may
require any Non-Employee Director to whom Shares are to be issued pursuant to
this Plan, as a condition of receiving such Shares, to given written assurances
in substance and form satisfactory to the Company and its counsel to the effect
that such person is acquiring the Shares for his own account for investment and
not with any present intention of selling or otherwise distributing the same,
that the Shares issued pursuant to this Plan have not been registered pursuant
to any applicable securities law and can only be transferred upon compliance
with such laws, and to such other effects as the Company deems necessary or
appropriate in order to comply with federal and applicable state securities
laws. The Shares issued pursuant to this Plan will bear an appropriate legend.
6.3 Compliance with Laws. (a) Each issuance of Shares pursuant to this
Plan shall be subject to the requirement that, if at any time counsel to the
Company shall determine that the listing, registration or qualification of the
Shares upon any securities exchange or under any state or federal law, or the
consent or approval of any governmental or regulatory body, is necessary as a
condition of, or in connection with, the issuance of Shares thereunder, such
Shares may not be issued unless such listing, registration, qualification,
consent or approval shall have been effected or obtained on conditions
acceptable to the Board.
2
<PAGE> 23
(b) This Plan and the issuance of Shares pursuant to this Plan are
intended to comply with Rule 16b-3 promulgated under the Exchange Act; and the
Board shall interpret and administer the provisions of this Plan in a manner
consistent therewith.
(c) The issuance of Shares and the payment of cash pursuant to this
Plan shall be subject to all applicable laws, rules and regulations.
VII. PLAN AMENDMENT AND TERMINATION
The Board may at any time terminate, and from time to time amend or
modify this Plan; provided, however, that no amendment or modification may
become effective without approval of the amendment or modification by the
shareholders if shareholder approval is required to enable this Plan to satisfy
any applicable statutory or regulatory requirements, or if the Company, on the
advice of counsel, determines that shareholder approval is otherwise necessary
or desirable.
VIII. MISCELLANEOUS
8.1 Retention as Director. Nothing contained in this Plan shall
interfere with or limit in any way the right of the shareholders or the
Directors of the Company to remove any Director from the Board pursuant to the
bylaws of the Company, nor confer upon any Director any right to continue in the
service of the Company.
8.2 Relationship to Other Plans. The adoption of this Plan shall not
affect any other compensation plan in effect for the Company. Furthermore, this
Plan shall not preclude the Company from establishing any other form of
incentive or other compensation arrangement for Directors of the Company.
8.3 Plan Binding on Successors. This Plan shall be binding upon the
successors and assigns of the Company.
8.4 Governing Law. The provisions of this Plan shall be governed by and
construed in accordance with the laws of the State of Delaware.
8.5 Headings. Headings are given to the sections of this Plan solely as
a convenience to facilitate reference. Such headings, numberings and
paragraphing shall not in any case be deemed in any way material or relevant to
the construction of this Plan or any provisions thereof.
IX. EFFECTIVE DATE
The effective date of this Plan shall be the date of its approval by
the shareholders of the Company.
3
<PAGE> 24
[X] PLEASE MARK VOTES ----
AS IN THIS EXAMPLE |
|
|
<TABLE>
<S><C>
---------------------------------------
KENTUCKY ELECTRIC STEEL, INC. 1. Election of Directors
--------------------------------------- With-
For hold
Mark box at right if you plan to attend (01) CARL E. EDWARDS [ ] [ ]
the Meeting of Stockholders. [ ]
Mark box at right if an address change (02) J. MARVIN QUIN, II [ ] [ ]
or comment has been noted on the
reverse side of this card. [ ]
CONTROL NUMBER: (to elect the above nominees as Directors)
RECORD DATE SHARES:
For Against Abstain
2. Approve the 2001 Share Plan for
Non-Employee Directors. [ ] [ ] [ ]
3. Ratify the appointment of Arthur
Anderson LLP, as independent public
accountants for fiscal 2001. [ ] [ ] [ ]
4. In their discretion on any other
matter that may properly come before
the meeting or any adjournment
thereof.
-------------------
Please be sure to sign and date this Proxy. Date
---------------------------------------------------------------
----------Stockholder sign here-----------Co-owner sign here---
DETACH CARD DETACH CARD
</TABLE>
KENTUCKY ELECTRIC STEEL, INC.
Dear Shareholder,
Please take note of the important information enclosed with this Proxy Ballot.
There are a number of issues related to the management and operation of your
Company that require your immediate attention and approval. These are discussed
in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to
vote your shares.
Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope.
Your vote must be received prior to the Annual Meeting of Shareholders,
February 6, 2001.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Kentucky Electric Steel, Inc.
<PAGE> 25
KENTUCKY ELECTRIC STEEL, INC.
ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 6, 2001
The undersigned hereby appoints William J. Jessie and William H. Gerak, or
either of them, with full power to act alone, the true and lawful
attorneys-in-fact and proxies of the undersigned, with full power of
substitution and revocation, to vote all shares of common stock of Kentucky
Electric Steel, Inc., a Delaware corporation which the undersigned is entitled
to vote at the Annual Meeting of Stockholders of the Company to be held at the
Ashland Plaza Hotel, Ashland, Kentucky on Tuesday, February 6, 2001 at 10:00
a.m., Eastern Standard Time, and at any adjournments thereof, with all powers
the undersigned would possess if personally present.
THIS PROXY WILL BE VOTED AS DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDERS. IF
NO DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1,2 AND 3.
<TABLE>
<S><C>
------------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
PLEASE DATE THIS PROXY AND SIGN NAME OR NAMES EXACTLY AS PRINTED HEREON. WHERE THERE
IS MORE THAN ONE OWNER, EACH MUST SIGN. WHEN SIGNING IN FIDUCIARY OR REPRESENTATIVE
CAPACITY, PLEASE GIVE FULL TITLE AS SUCH.
------------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
-------------------------------------- ---------------------------------------
-------------------------------------- ---------------------------------------
-------------------------------------- ---------------------------------------
</TABLE>
