<PAGE> 1
SCHEDULE 14A
(RULE 14A)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY RULE
14A-6(E)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
J&L SPECIALTY STEEL, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
J&L SPECIALTY STEEL, INC.
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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
J&L SPECIALTY STEEL, INC.
One PPG Place
P.O. Box 3373
Pittsburgh, Pennsylvania 15230-3373
NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
JUNE 10, 1997
TO THE SHAREHOLDERS OF J&L SPECIALTY STEEL, INC.:
The Annual Meeting of Shareholders of J&L Specialty Steel, Inc. will be
held at the Pittsburgh Hilton and Towers, 600 Commonwealth Place, Pittsburgh,
Pennsylvania 15222 at 10:00 a.m. on Tuesday, June 10, 1997. The following
matters will be presented to the shareholders for their consideration and vote:
1. The election of four directors.
2. The ratification of the appointment of independent auditors for the year
ending December 31, 1997.
3. Approval of the Amendment and Restatement of the 1993 Stock Incentive
Plan.
4. Other matters that may properly be brought before the shareholders at
the Annual Meeting.
The Board of Directors has fixed March 13, 1997 as the record date for
determining shareholders entitled to notice of and to vote at the Annual
Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE AND RETURN THE
ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE. IF YOU DO ATTEND THE
MEETING, YOU MAY THEN WITHDRAW YOUR PROXY AND VOTE IN PERSON.
By order of the Board of
Directors,
Kirk F. Vincent
Vice President-Finance and Law
Secretary
Dated: March 27, 1997
<PAGE> 3
J&L SPECIALTY STEEL, INC.
One PPG Place
P.O. Box 3373
Pittsburgh, Pennsylvania 15230-3373
PROXY STATEMENT
This proxy statement and the accompanying proxy card are being mailed on or
before March 27, 1997 to the shareholders of J&L Specialty Steel, Inc. (the
"Company") in connection with the solicitation by the Board of Directors of the
Company of proxies to be voted at the Annual Meeting and at any adjournments
thereof. The Annual Meeting is scheduled to be held on Tuesday, June 10, 1997,
at 10:00 a.m. at the Pittsburgh Hilton and Towers, 600 Commonwealth Place,
Pittsburgh, Pennsylvania 15222.
Only holders of Common Stock, $.01 par value, of the Company ("Common
Stock") of record as of March 13, 1997 will be entitled to vote at the Annual
Meeting or any adjournments thereof. No other class of common or preferred stock
has been issued by the Company. At the record date, there were 38,670,000 shares
of Common Stock outstanding. Each share is entitled to one vote on all matters
to be considered at the Annual Meeting. The presence, in person or by proxy, of
a majority of outstanding shares is necessary to constitute a quorum. You may
vote for all, some or none of the nominees for the Board of Directors. Only
affirmative votes are counted in the election of directors. The four nominees
receiving the highest number of votes cast at the Annual Meeting, a quorum being
present, will be elected as directors. Under the Company's Articles of
Incorporation, the shareholders do not have cumulative voting rights in the
election of directors. Under Pennsylvania law, the affirmative vote of a
majority of the votes cast at the Annual Meeting, a quorum being present, is
necessary for the ratification of the appointment of the independent auditors
and the approval of the amended and restated 1993 Stock Incentive Plan.
Abstentions and broker non-votes will have no effect on the vote concerning the
ratification of the appointment of the independent auditors and the approval of
the amended and restated 1993 Stock Incentive Plan.
In the event that at the date of the Annual Meeting any of the nominees for
director should for any reason not be available for election, the proxies hereby
solicited by the Board of Directors will be voted for the election of such
substituted nominees as shall be designated by the Board of Directors.
Please complete, sign and return the enclosed proxy card in the
postage-paid envelope whether or not you plan to attend the Annual Meeting. When
properly executed, the vote for your proxy will be cast in accordance with your
instructions. Where a choice is specified on the form of proxy, the shares will
be voted in accordance with the choice made therein. If no choice is made, the
shares will be voted in accordance with the recommendation of the Board of
Directors. Your vote is important and must reach our offices in time to be
properly counted. Please send it promptly. Your proxy may be revoked by
submission of a written notice to the Company's Secretary at any time before it
is voted at the meeting. You also have the power to change your vote in person
at the Annual Meeting.
<PAGE> 4
ELECTION OF DIRECTORS
Pursuant to the terms of the Company's Articles of Incorporation, the Board
of Directors is divided into three classes. Currently, four directors hold
office for a term expiring at the Annual Meeting of Shareholders to be held on
June 10, 1997, five directors hold office for a term expiring at the annual
meeting of shareholders to be held in 1998 and four directors hold office for a
term expiring at the annual meeting of shareholders to be held in 1999. The
members of each class hold office until their successors are duly elected and
qualified. At each annual meeting of shareholders of the Company, the successors
to the class of directors whose term expires at such meeting will be elected to
hold office for a term expiring at the annual meeting of shareholders held in
the third year following the year of their election.
Although the Articles of Incorporation permit a maximum number of fifteen
directors, the Company is proposing the election of only four directors at this
time, resulting in thirteen members on the Board of Directors. The Board of
Directors does not anticipate appointing any further new directors to fill the
remaining two vacancies during the next year.
Pursuant to the July 1995 labor agreement between the Company and the
United Steelworkers of America, such union may recommend an individual to the
Company's Chief Executive Officer for election as a director of the Company. If
the Chief Executive Officer finds this person acceptable, the labor agreement
provides that the Chief Executive Officer shall recommend such person for
nomination. Mr. Sheehan was so nominated and was elected in 1996 and is again
nominated for election to the Board of Directors in 1997 for a term expiring at
the annual meeting of shareholders in the year 2000.
The Articles of Incorporation further require that whenever there is a
"Significant Shareholder," not less than two directors shall be "Disinterested
Directors." Usinor Sacilor, a French corporation, currently owns a majority of
the Company's stock and is therefore a Significant Shareholder. The term
"Disinterested Director" means any director of the Company who is not (i)
directly or indirectly through one or more intermediaries in control of,
controlled by or under common control with a Significant Shareholder, or (ii) an
officer, director, employee or agent of a Significant Shareholder or its
affiliates. Messrs. de Ravel d'Esclapon and Sheehan are the only nominees for
director who are considered Disinterested Directors.
The names of the nominees for director and the directors whose terms will
continue after the Annual Meeting, their principal occupations, the periods in
which their terms expire and certain other information relating to each is set
forth below.
NOMINEES FOR DIRECTOR
THE BOARD OF DIRECTORS HAS NOMINATED PIERRE F. DE RAVEL D'ESCLAPON, ROBERT
HUDRY, MICHEL J. LONGCHAMPT AND JOHN J. SHEEHAN FOR TERMS EXPIRING AT THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD IN 2000, AND RECOMMENDS A VOTE FOR THEIR
ELECTION.
Pierre F. de Ravel d'Esclapon, age 51, has been a director of the Company
or its predecessor since June 1990. Mr. de Ravel d'Esclapon has been a partner
in the law firm of LeBoeuf, Lamb, Greene & MacRae since March 1993. Prior
thereto, he was a partner in the law firm of Donovan, Leisure, Newton & Irvine.
Robert Hudry, age 50, has been a director of the Company or its predecessor
since June 1990. Mr. Hudry has been Executive Vice President of Usinor Sacilor
since April 1995. From 1987 through March 1995, Mr. Hudry was Chief Financial
Officer of Usinor Sacilor. Mr. Hudry was also Chairman and Chief Executive
2
<PAGE> 5
Officer of Unimetal, a subsidiary of Usinor Sacilor which manufactures carbon
steel long products, from January 1989 through December 1992.
Michel J. Longchampt, age 62, has been a director of the Company or its
predecessor since June 1990. Since 1976, Mr. Longchampt has been the President
of Francosteel Company, a steel distribution company and an affiliate of Usinor
Sacilor. Mr. Longchampt is also a director of The France Growth Fund, a
closed-end mutual fund.
John J. Sheehan, age 70, has been a director of the Company since June
1996. Prior to his retirement in 1996, Mr. Sheehan had been Legislative Director
and Assistant to the President of the United Steelworkers of America.
CONTINUING DIRECTORS
TERMS EXPIRING AT THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD IN 1999
Philippe Choppin de Janvry, age 57, has been Chairman of the Board of
Directors of the Company or its predecessor since June 1990. Mr. Choppin de
Janvry has been the Chairman and Chief Executive Officer of Ugine s.a. ("Ugine")
and Corporate Vice President, stainless steel operations, of Usinor Sacilor, a
French corporation and the principal shareholder of Ugine, since 1987. Ugine was
a majority-owned subsidiary of Usinor Sacilor until December of 1995, when
Usinor Sacilor purchased the remaining outstanding shares of Ugine and merged
Ugine into Usinor Sacilor. Ugine continues to operate as a division of Usinor
Sacilor under the name Ugine. Ugine is the second largest stainless steel
manufacturer in the world.
Michael J. Hiemstra, age 50, has been a director of the Company since
October 1993. Mr. Hiemstra has been Vice President-Finance & Administration and
Chief Financial Officer of Parker Hannifin Corporation, a worldwide producer of
motion control components and systems, since 1987.
Francis Mer, age 57, has been a director of the Company or its predecessor
since June 1990. Mr. Mer has been the Chairman and Chief Executive Officer of
Usinor Sacilor since 1987. Usinor Sacilor is the third largest steel
manufacturer in the world.
Eugene A. Salvadore, age 48, has been a director of the Company since June
1996. Mr. Salvadore has been President and Chief Operating Officer of the
Company since July 1, 1995. From April 1993 through June 1995, Mr. Salvadore
served as Vice President-Operations. From June 1992 through April 1993, Mr.
Salvadore was General Manager-Operations of the Company. From January 1990 to
June 1992, he was Plant Manager of the Company's Detroit Plant.
TERMS EXPIRING AT THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD IN 1998
Jean Didier Dujardin, age 49, has been a director of the Company since
1995. Mr. Dujardin has been Chief Financial Officer of Ugine since December
1993. From 1987 until December 1993 Mr. Dujardin was Chief Financial Officer of
Ascometal, a wholly-owned subsidiary of Usinor Sacilor.
Claude F. Kronk, age 65, has been a director of the Company or its
predecessor since its inception in 1986. Mr. Kronk was appointed Vice Chairman
and Chief Executive Officer of the Company on August 1, 1995. From 1986 until
1995, he served as President and Chief Executive Officer. Mr. Kronk is also a
director of Cold Metal Products, Inc. and of the Triumph Group, Inc.
3
<PAGE> 6
Jennings R. Lambeth, age 76, has been a director of the Company or its
predecessor since October 1993. Mr. Lambeth, a business consultant, has been the
owner and President of JRL Associates since 1985.
Michel Le Page, age 52, has been a director of the Company since June 1996.
Mr. Le Page has been Vice President, Marketing Stainless Flat of Ugine since
1989.
Gerard Martel, age 56, has been a director of the Company since June 1996.
Mr. Martel has been Executive Vice President of Ugine since July 1996. From 1988
through June 1996, Mr. Martel was Chairman and Chief Executive Officer of La
Meusienne, a wholly-owned subsidiary of Usinor Sacilor.
BOARD OF DIRECTORS AND DIRECTOR COMMITTEES
The business and affairs of the Company are managed under the direction of
the Board of Directors as provided by the By-Laws of the Company and the laws of
the Commonwealth of Pennsylvania. Although directors other than the Vice
Chairman and Chief Executive Officer and the President and Chief Operating
Officer are not involved in the day-to-day operations of the business, the Board
of Directors is kept informed by meetings, reports and discussions with senior
operating management. The Board of Directors held four meetings in 1996. The
Audit Committee met three times, the Compensation Committee met once and the
Incentive-Based Compensation Committee met twice. Each director attended at
least 75% of the meetings of the Board of Directors and any committee of which
he is a member, with the exception of Mr. Mer.
COMMITTEES OF THE BOARD OF DIRECTORS
AUDIT COMMITTEE. The directors have established an Audit Committee that
consists of Messrs. de Ravel d'Esclapon, Hiemstra and Lambeth. The Audit
Committee makes recommendations concerning the engagement of independent public
accountants, reviews with the independent public accountants the plans and
results of the audit engagement, approves professional services provided by the
independent public accountants, reviews the independence of the independent
public accountants, considers the range of audit and nonaudit fees and reviews
the adequacy of the Company's internal accounting controls.
COMPENSATION COMMITTEE. The directors have established a Compensation
Committee consisting of Messrs. Choppin de Janvry, de Ravel d'Esclapon, Dujardin
and Mer which makes recommendations with respect to salaries and bonuses payable
to the Company's executive officers.
INCENTIVE-BASED COMPENSATION COMMITTEE. The directors have established an
Incentive-Based Compensation Committee which consists of Messrs. Hiemstra and
Lambeth. The Incentive-Based Compensation Committee administers the Company's
1993 Stock Incentive Plan. Both members of this Committee are outside directors
and cannot participate in the 1993 Stock Incentive Plan.
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company or its affiliates is
paid an annual retainer of $7,500 and, in addition, $1,000 plus expenses for
each meeting of the Board of Directors such director attends. In addition, such
outside directors will be paid $300 ($500 for committee chairpersons), plus
expenses, for each committee meeting attended on a date which is not the date of
a Board meeting. Under the Company's 1993 Stock Incentive Plan, the Chairman of
the Board of Directors of the Company is eligible to receive nonstatutory stock
options.
4
<PAGE> 7
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers, and persons who own more than 10% of a registered
class of the Company's equity securities, to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Such
persons are required by Commission regulation to furnish the Company with copies
of all Section 16(a) forms they file. None of such persons failed to file any
required Section 16 reports on a timely basis in 1996. In making this
disclosure, the Company has relied solely on the written representations of its
directors and executive officers and copies of the reports that they have filed
with the Commission.
5
<PAGE> 8
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table shows the number of shares of Common Stock of the
Company reported to the Company as of February 14, 1997 to be beneficially owned
by (i) each person known by the Company to be the beneficial owner of more than
5% of the Company's Common Stock, (ii) each nominee for director and each
continuing director, (iii) the Vice Chairman and Chief Executive Officer and the
four other most highly compensated executive officers and (iv) all of such
persons and the other executive officers of the Company as a group:
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF COMMON STOCK(1)
-------------------------
NUMBER PERCENT
OF SHARES OF CLASS
---------- --------
<S> <C> <C>
PRINCIPAL SHAREHOLDERS
KeyCorp................................................................... 2,610,473 6.8%
127 Public Square
Cleveland, OH 44114-1306
Scudder, Stevens & Clark, Inc............................................. 3,617,000 9.4%
Two International Place
Boston, MA 02110-4103
Usinor Sacilor (successor by merger to Ugine)............................. 20,730,000 53.6%
Immeuble Pacific
13, cours Valmy
TSA 30003
F-92070 La Defense 7 Cedex France
NOMINEES, DIRECTORS AND NAMED EXECUTIVE OFFICERS
Philippe Choppin de Janvry................................................ 15,000(2) *
Pierre F. de Ravel d'Esclapon............................................. 1,000 *
Jean Didier Dujardin...................................................... 0 *
Michael J. Hiemstra(3).................................................... 500 *
Robert Hudry.............................................................. 0 *
Claude F. Kronk........................................................... 140,800(4) *
Jennings R. Lambeth(3).................................................... 1,500 *
Michel Le Page............................................................ 0 *
Michel J. Longchampt...................................................... 0
Gerard Martel............................................................. 0 *
Francis Mer............................................................... 0 *
Eugene A. Salvadore(3).................................................... 17,000(2) *
John J. Sheehan........................................................... 0 *
Geoffrey S. Gibson........................................................ 18,044(2) *
Kirk F. Vincent........................................................... 18,000(2) *
John A. Wallace........................................................... 8,000(5) *
All directors and executive officers as a group (twenty persons) including
those named above......................................................... 249,676(6) *
</TABLE>
- ---------
* Less than 1 percent of the outstanding shares.
(1) Each person has sole voting and investment power with respect to the shares
listed, unless otherwise indicated.
(2) Includes 15,000 shares which may be acquired within 60 days pursuant to
options exercisable under the Company's 1993 Stock Incentive Plan.
(3) All such shares are owned jointly by such person and his wife. Of the shares
held by Mr. Lambeth, 500 are held jointly with his wife.
(4) Includes 90,000 shares which Mr. Kronk has a right to acquire within 60 days
pursuant to options exercisable under the Company's 1993 Stock Incentive
Plan.
(5) Includes 7,000 shares which Mr. Wallace has a right to acquire within 60
days pursuant to options exercisable under the Company's 1993 Stock
Incentive Plan.
(6) Includes 184,832 shares which may be acquired within 60 days pursuant to
options exercisable under the Company's 1993 Stock Incentive Plan.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth, for calendar years 1994, 1995 and 1996, the
cash compensation paid to the Company's Vice Chairman and Chief Executive
Officer and to each of the four other most highly compensated executive officers
of the Company as of December 31, 1996, as well as certain other compensation
information relating to those years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
-------------------
ANNUAL COMPENSATION SECURITIES
-------------------------- OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) OPTIONS/SARS(#)(3) COMPENSATION(4)
------------------------ ---- -------- -------- --------------- ------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Claude F. Kronk 1996 $485,940 $238,888 $11,581 0 $63,817
Vice Chairman and 1995 467,256 533,000 10,301 50,000 62,379
Chief Executive 1994 445,000 475,000 9,842 0 60,665
Officer
Eugene A. Salvadore 1996 $210,000 $107,101 $ 3,334 0 $12,310
President and 1995 170,800 102,481 1,794 45,000 11,178
Chief Operating 1994 128,712 77,228 0 0 8,656
Officer
Kirk F. Vincent 1996 $180,720 $92,168 0 0 $10,772
Vice President- 1995 173,760 104,256 0 35,000 10,383
Finance and Law 1994 165,492 99,296 0 0 9,436
Geoffrey S. Gibson 1996 $160,200 $81,702 $ 4,016 0 $23,221
Vice President- 1995 154,080 92,448 3,406 35,000 22,578
Commercial 1994 140,076 84,046 3,198 0 17,883
John A. Wallace 1996 $124,140 $63,312 0 0 $16,697
Vice President- 1995 111,648 66,989 0 30,000 17,175
Operations 1994 106,332 63,800 0 0 16,145
</TABLE>
- ---------
(1) Represents amounts paid under the Company's Senior Management Incentive
Plan. Cash bonuses are paid following the end of each fiscal year, but
are included above in compensation for the year in which they were
earned.
(2) Represents payments made for reimbursement of taxes owed on certain
noncash benefits.
(3) Represents the number of shares of the Company's Common Stock for which
options were granted under the Company's 1993 Stock Incentive Plan, in
some cases in conjunction with alternative stock appreciation rights.
7
<PAGE> 10
(4) Consists of, in the case of all officers and all years, contributions
made by the Company under its defined contribution plan and, in all
cases, supplemental salary received pursuant to the Company's cafeteria
plan. For 1996, the amounts paid are as follows:
<TABLE>
<CAPTION>
DEFINED
CONTRIBUTION CAFETERIA
PLAN PLAN
------------ ---------
<S> <C> <C>
Claude F. Kronk...................................... $ 26,400 $37,417
Eugene A. Salvadore.................................. 7,375 4,935
Kirk F. Vincent...................................... 6,525 4,247
Geoffrey S. Gibson................................... 14,090 9,131
John A. Wallace...................................... 9,621 7,076
</TABLE>
OPTION VALUES. The table below sets forth, as to the persons named in the
Summary Compensation Table, information with respect to the number and value of
stock options and related alternative stock appreciation rights held as of
December 31, 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND 1996 YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
NUMBER OF UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
SECURITIES OPTIONS/SARS THE-MONEY OPTIONS/SARS
UNDERLYING AT 1996 YEAR-END(#)(1) AT 1996 YEAR-END($)(2)
OPTIONS/SARS VALUE ---------------------------- ----------------------------
EXERCISED(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Claude F. Kronk..... 0 $ 0 90,000 0 $ 0 $ 0
Eugene A.
Salvadore......... 0 0 15,000 75,000 0 0
Kirk F. Vincent..... 0 0 15,000 65,000 0 0
Geoffrey S.
Gibson............ 0 0 15,000 65,000 0 0
John A. Wallace..... 0 0 7,000 44,000 0 0
</TABLE>
- ---------
(1) All of the stock options are nonstatutory stock options granted under the
Company's 1993 Stock Incentive Plan. Alternative stock appreciation rights
were granted with certain of the options and are available in either stock
or cash at the discretion of the Incentive-Based Compensation Committee.
(2) The value of unexercised in-the-money stock options is the difference
between the aggregate fair market value of the shares covered by the stock
options and the aggregate exercise price. On December 31, 1996, none of the
stock options were in-the-money.
PENSION AND BENEFIT PLANS
DEFINED BENEFIT PLAN. The Company maintains a tax-qualified defined benefit
pension plan. Subject to certain maximum and minimum provisions, the plan
provides pension benefits to salaried employees based on the average of each
salaried employee's compensation over those 60 consecutive months of the
employee's participation in the plan which produced the highest average. The
benefit is calculated at the rate of 1.5% of this average compensation for each
of the employee's years of service and is reduced by 1.5% of the employee's
primary Social Security benefit for each of the employee's years of service (to
a maximum of 33 years).
8
<PAGE> 11
The plan covers all salaried employees who have completed one year of
service and who were employed by the Company on or before December 31, 1986. The
benefits under the plan became vested upon an employee's completion of five
years of service. The compensation used to calculate benefits received under the
plan is the total remuneration paid to the employee, including base salary,
incentive awards, certain bonuses, overtime pay and commissions.
Effective January 1, 1987, the Company adopted a tax-qualified defined
contribution pension plan to replace the defined benefit plan for salaried
employees. While the defined benefit plan has not been terminated, no additional
benefits have accrued after December 31, 1986. Effective January 1, 1993, the
defined benefit plan for salaried employees was merged with the defined benefit
plan maintained by the Company for hourly employees. Benefit levels for
participants in these plans were not affected by the merger of the plans.
EXECUTIVE BENEFIT PLAN. The Company also maintains an Executive Benefit
Plan which provides supplemental retirement benefits (payable no earlier than at
age 60) in addition to those payable under the Company's tax-qualified
retirement plans for certain executives selected for participation by the Board
of Directors. For participants who were in the plan prior to May 1, 1992, the
benefit is the greater of: (a) a monthly amount calculated at the rate of 1.5%
of the participant's average monthly compensation (including bonus), as defined
under the defined benefit retirement plan, except that compensation is measured
over 36 as opposed to 60 consecutive months, multiplied by years of service to a
maximum of 30, plus 3% of average monthly compensation (including bonus)
multiplied by years of service in excess of 30 or (b) a monthly amount
calculated at 45% of the participant's average monthly compensation (including
bonus), plus 3% of average monthly compensation (including bonus) for each year
of service after the later to occur of the participant's sixtieth birthday or
the participant's completion of ten years of service. Notwithstanding the
foregoing, Mr. Kronk has several additional rights pursuant to his employment
agreement, including the right to choose that the compensation for any of
calendar years 1992, 1993 or 1994 shall be substituted for the compensation for
any two other calendar years. Benefits under the plan vest after completion of
five years of participation in the plan and are reduced by (i) the employee's
primary Social Security benefit, (ii) the employee's benefits, expressed as a
joint and 50% survivor's annuity for married employees and as a single life
annuity for single employees, under the Company's other tax-qualified retirement
plans and (iii) in certain cases, any such benefits from plans of any prior
employers. For participants commencing participation in the plan on and after
May 1, 1992, the benefit calculation is the same as described above, except that
the monthly benefit is calculated at the rate of 1.5% of the participant's
average monthly compensation multiplied by years of the participant's credited
service; payments that begin after the participant reaches age 60 but prior to
age 65 are subject to a reduction by 1/24th of 1% for each month by which the
payment begins prior to age 65 (subject to a 2.5% maximum). As of December 31,
1996, fourteen current and former employees or their surviving spouses
participate in the Executive Benefit Plan, including Messrs. Kronk, Salvadore,
Vincent, Gibson and Wallace. All named executive officers are considered pre-May
1, 1992 participants with the exception of Mr. Wallace.
The tables below show the approximate total annual retirement benefits
payable to the named executive officers participating in the Executive Benefit
Plan before (i) reductions for primary Social Security payments, (ii) payments
under the defined benefit plan and the defined contribution plan and (iii) in
certain cases, any such benefits from plans of any prior employers. The actual
payments made to employees are reduced by primary Social Security benefits and
by amounts payable under the defined benefit plan and the defined
9
<PAGE> 12
contribution plan as described above. The first table shows estimated benefits
projected for plan participants who participated in the plan prior to May 1,
1992, while the second table shows estimated benefits projected for participants
joining the plan on or after May 1, 1992, in each case assuming retirement at
age 65.
PARTICIPANTS IN PLAN PRIOR TO MAY 1, 1992
<TABLE>
<CAPTION>
HIGHEST
THREE-YEAR YEARS OF SERVICE
AVERAGE --------------------------------------------------------------------------------
COMPENSATION(1) 10 15 20 25 30 35 40
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 45,000 $ 60,000 $ 60,000 $ 60,000 $ 60,000 $ 60,000 $ 75,000
200,000 90,000 120,000 120,000 120,000 120,000 120,000 150,000
300,000 135,000 180,000 180,000 180,000 180,000 180,000 225,000
400,000 180,000 240,000 240,000 240,000 240,000 240,000 300,000
500,000 225,000 300,000 300,000 300,000 300,000 300,000 375,000
600,000 270,000 360,000 360,000 360,000 360,000 360,000 450,000
700,000 315,000 420,000 420,000 420,000 420,000 420,000 525,000
800,000 360,000 480,000 480,000 480,000 480,000 480,000 600,000
900,000 405,000 540,000 540,000 540,000 540,000 540,000 675,000
1,000,000 450,000 600,000 600,000 600,000 600,000 600,000 750,000
1,100,000 495,000 660,000 660,000 660,000 660,000 660,000 825,000
</TABLE>
PARTICIPANTS IN PLAN ON OR AFTER MAY 1, 1992
<TABLE>
<CAPTION>
HIGHEST
THREE-YEAR YEARS OF SERVICE
AVERAGE -------------------------------------------------------------------------------
COMPENSATION(1) 10 15 20 25 30 35 40
------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$100,000 $15,000 $ 22,500 $ 30,000 $ 37,500 $ 45,000 $ 52,500 $ 60,000
200,000 30,000 45,000 60,000 75,000 90,000 105,000 120,000
300,000 45,000 67,500 90,000 112,500 135,000 157,000 180,000
400,000 60,000 90,000 120,000 150,000 180,000 210,000 240,000
500,000 75,000 112,500 150,000 187,500 225,000 262,500 300,000
</TABLE>
- ---------
(1) Highest three-year average compensation is the average compensation
("Salary" and "Bonus" in the Summary Compensation Table) for the highest
consecutive years of employment.
At the end of 1996, Messrs. Gibson, Kronk, Salvadore, Vincent and Wallace
had been credited with 30, 39, 18, 17 and 22 years of service, respectively,
under the Executive Benefit Plan. Should Messrs. Gibson, Salvadore, Vincent or
Wallace retire at age 60, their estimated annual benefits would be $237,077,
$280,748, $209,587 and $94,294, respectively, assuming an annual 4% increase in
their base salaries until such age and assuming receipt of the maximum possible
percentage of annual bonus in the relevant years. Mr. Salvadore's estimated
annual benefit, however, is based on the annual increases in his base salary
through June 30, 1998, as provided in his employment agreement, and assumes a 4%
annual increase in base salary thereafter. Mr. Kronk's current annual eligible
retirement benefits are $364,800 after taking into account a $3.3 million
advance payment made on December 31, 1992.
10
<PAGE> 13
EMPLOYMENT AGREEMENTS
Mr. Kronk is employed pursuant to an employment agreement with the Company
dated April 28, 1986, as amended. The employment agreement provides that it is
automatically extended for successive one-year terms, but may be terminated by
either party without cause upon 60 days notice during such automatic renewal
periods. Among other things, the employment agreement provides for Mr. Kronk's
participation in the Executive Benefit Plan maintained by the Company. Mr.
Kronk's 1996 base salary and annual bonus formula was determined by the Board of
Directors at their meeting on December 19, 1995.
Mr. Salvadore entered an agreement regarding his employment dated September
28, 1995. His employment agreement extends through June 30, 1998 and provides
for his employment at specific monthly base salary levels and participation in
the Executive Benefit Plan and the Senior Management Incentive Plan not below
his current level, which provides for a maximum annual bonus of 60% of his base
salary.
11
<PAGE> 14
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total return on
the Company's Common Stock against the cumulative total return of the Standard &
Poor's Composite-500 Stock Index and the Media General Financial Services
Industry Group 312-Iron and Steel Furnaces, Mills and Foundries (measured in
accordance with the rules of the Securities and Exchange Commission) for the
period November 30, 1993 to December 31, 1996(1). This graph assumes a $100
investment on December 15, 1993, and assumes a reinvestment of dividends. In
accordance with the rules of the Securities and Exchange Commission, this
presentation shall not be incorporated by reference into any of the Company's
Registration Statements under the Securities Act of 1933.
<TABLE>
<CAPTION>
Media
General Financial
Services Industry
J&L Group 312 - Iron
Measurement Period Specialty and Steel Furnaces, S&P 500
(Fiscal Year Covered) Steel, Inc. Mills and Foundries Index
<S> <C> <C> <C>
11/30/93 -- 100 100
12/15/93 100 -- --
12/31/93 116.07 113.33 101.21
12/31/94 143.25 109.35 102.55
12/31/95 139.3 107.35 141.09
12/31/96 86.65 102.25 173.48
</TABLE>
- ---------
(1) Indices are not available on a daily basis; therefore, the graph begins
on November 30, 1993 for such indices, although the Company began as a
public company on December 15, 1993 (indicated on the Performance
Graph). The December 15, 1993 date shown on the graph only relates to
the Company's stock, as the other indices are not computed on a daily
basis and the Company has no knowledge of what such indices would have
been on such date. The Company's performance is based on its December
15, 1993 initial offering price of $14.00 per share compared to its
close on December 31, 1996 at $11.375 per share.
REPORT ON EXECUTIVE COMPENSATION
The composition and principal duties of the Compensation Committee and the
Incentive-Based Compensation Committee are described earlier in this Proxy
Statement. The Incentive-Based Compensation
12
<PAGE> 15
Committee makes the compensation determinations with regard to stock options,
stock appreciation rights and other matters under the 1993 Stock Incentive Plan.
The Compensation Committee makes recommendations concerning most other executive
compensation decisions, which are then acted upon directly by the Board of
Directors. Therefore, this report is submitted over the names of the
Compensation Committee and, for purposes of long-term compensation only, the
Incentive-Based Compensation Committee.
The following is the executive officer compensation philosophy and
structure and the application of such philosophy regarding the compensation of
the Vice Chairman and Chief Executive Officer and the other executive officers
during 1996. The 1996 base salary and annual maximum possible bonus compensation
of the Vice Chairman and Chief Executive Officer was determined by the Board of
Directors in December 1995. In accordance with the rules of the Securities and
Exchange Commission, this report shall not be incorporated by reference into any
of the Company's Registration Statements under the Securities Act of 1933.
EXECUTIVE COMPENSATION PHILOSOPHY
The compensation policy of the Company is that a substantial portion of the
compensation of each executive officer must be contingent upon the performance
of the Company. The annual bonus structure ties a large portion of executive
compensation to the annual performance of the Company as reflected by the
Company's operating income and return on net operating assets. In addition, the
1993 Stock Incentive Plan, in which all of the executive officers participate,
ties executive compensation to the long-term performance of the Company as
reflected by the price of the Company's stock.
BASE SALARY
Base salaries are set at levels sufficient to retain talented and dedicated
executive officers. To accomplish this, the Company's general policy is to
compare its base salary levels with salaries of competitors and companies in
similar industries, as assessed through an informal survey. The group of
companies compared in the informal survey is not the same as the industry group
compared to the Company on the performance graph on page 12. The Company, in
determining base compensation of the executive officers, also considers, on a
subjective basis and without regard to any set formula, individual and
departmental performance evaluations, inflation and the amount of compensation
received in the previous year. The increase in executive base salaries in 1996
from 1995 was primarily based on inflation. Mr. Salvadore's compensation in 1996
was established by his employment agreement entered in 1995. The base salaries
of the executive officers are believed to be reasonable when compared to the
base salaries of executives employed by the Company's competitors and similar
industrial companies.
ANNUAL BONUS
Annual incentive bonus awards are paid to the executive officers in
accordance with the terms of the Senior Management Incentive Plan (the "SMI
Plan"). The SMI Plan places executive officer compensation directly "at risk"
based on the return on net operating assets of the Company. The maximum amount
of each executive officer's potential 1996 incentive bonus under the SMI Plan
was 60% of such executive's base salary, except for the Vice Chairman and Chief
Executive Officer whose maximum incentive bonus was approximately 114% of his
base salary.
13
<PAGE> 16
The Compensation Committee recommends to the Board of Directors which
executives should participate in the SMI Plan and at what participation level.
For 1996, participation level changes in the SMI Plan were determined directly
by the Board of Directors upon the recommendation of the Compensation Committee.
In determining the participation level of each executive officer, the
responsibilities of such officer and the ability of such officer to increase the
profitability of the Company are considered on a subjective basis. Different
participation levels provide for different bonuses as a percent of base salary.
Under the SMI Plan, the participant's exact bonus percentage within the range
set by his participation level is based on a mathematical calculation using the
Company's operating income and return on net operating assets for that year.
One-third of the potential bonus (for participants other than the Vice Chairman
and Chief Executive Officer) may be adjusted based on an evaluation of whether
subjectively determined annual corporate-wide goals and departmental goals were
met. In 1996, the named executive officers as a group earned 61% of the maximum
possible annual bonus under the SMI Plan.
LONG-TERM COMPENSATION: 1993 STOCK INCENTIVE PLAN
Long-term incentive compensation is provided to the executive officers
through the Company's 1993 Stock Incentive Plan. Pursuant to such plan, stock
options are granted by the Incentive-Based Compensation Committee based upon the
Committee's subjective judgment concerning the responsibilities of the
individual, the nature and value to the Company of his or her services, his or
her present and/or potential contribution to the success of the Company and any
other factors as such committee deems relevant. No grants under such plan were
made to the named executive officers in 1996. Grants under such plan were made
to the named executive officers in 1993 and 1995. All stock options were granted
at the fair market price of the Common Stock on the date of grant.
Stock options provide an effective incentive for the recipients of options
to create shareholder value over the long term since the options and stock
appreciation rights become more valuable as the price of the stock appreciates
over a number of years. The effectiveness of the stock options granted as
incentives to increase shareholder value was enhanced by spreading the vesting
of such options over a number of years.
COMPENSATION OF THE VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Mr. Kronk's 1996 base salary of $485,940 was determined at the December
1995 Board of Directors meeting based upon the factors discussed above and upon
his ability to sustain the profitability of the Company. The Company experienced
excellent profitability in the prior year, 1995. The excellent efficiency of the
Company in 1995 in terms of return on capital, man-hours per ton, profit per ton
and revenues per employee was also considered. Based on an informal survey,
consideration was also given to the total compensation of chief executive
officers at the Company's competitors and at comparable industrial companies.
Mr. Kronk is employed pursuant to an Employment Agreement dated April 28, 1986,
as amended, but his base salary and potential incentive compensation are
approved annually by the Board of Directors.
Mr. Kronk's annual bonus was based solely on the return on net operating
assets of the Company. The Board of Directors at its December 1995 meeting
determined that the maximum annual bonus for 1996 could amount to approximately
114% of Mr. Kronk's base salary. Mr. Kronk's return on asset goals and related
bonus percentages incorporate certain provisions of the SMI Plan concerning
definitions and the method of calculation of the bonus, but no subjective
criteria are used in determining Mr. Kronk's bonus. Mr. Kronk's
14
<PAGE> 17
actual annual bonus amounted to $238,888, 43% of his maximum possible annual
bonus in 1996. No stock options or other incentive compensation were awarded to
Mr. Kronk in 1996.
The Compensation Committee continues to study the $1 million compensation
deduction cap under Section 162(m) of the Internal Revenue Code. For 1996, Mr.
Kronk's compensation did not result in his salary exceeding such $1 million cap;
therefore such statutory provision was of limited importance. The Compensation
Committee may decide whether to take the necessary steps to conform its
compensation to comply should such cap have a substantial impact in future
years.
As to all matters in the report:
Philippe Choppin de Janvry
Pierre F. de Ravel d'Esclapon
Jean Didier Dujardin
Francis Mer
As to long-term compensation matters only:
Michael J. Hiemstra
Jennings R. Lambeth
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH UGINE AND USINOR SACILOR
HISTORY OF OWNERSHIP OF COMPANY. In June 1990, the Company was acquired
(the "1990 Acquisition") by Ugine, the second largest stainless steel
manufacturer in the world. As a result of the initial public offering of Common
Stock of the Company in December 1993, Ugine sold certain of its shares in the
Company, but retained ownership of 53.6% of the issued and outstanding shares of
common stock of the Company. Usinor Sacilor, in turn, owned a majority of the
capital stock of Ugine until December 11, 1995 when it purchased all of the
remaining shares of Ugine and merged Ugine into Usinor Sacilor. Usinor Sacilor
thereby became owner of record of 53.6% of the shares of the Company. Ugine
continues to operate under the name Ugine although it is no longer a separately
incorporated subsidiary. Usinor Sacilor is the third largest steel producer in
the world.
RESEARCH AND TECHNOLOGY AGREEMENT. The Company entered into a Technology
Agreement dated as of October 1, 1993 with Ugine. The Technology Agreement has a
ten-year term and will provide the Company with a broad spectrum of patents,
know-how and future research and development services concerning the
manufacturing and processing of flat rolled stainless steel including, under
certain circumstances, any commercially viable thin strip casting technology
developed by Ugine. The Company made an initial $5 million cash payment to Ugine
for the transfer of rights to existing patents and know-how and for research and
development services provided during the first year of the Technology Agreement.
Ongoing annual fees to be paid to Ugine for research and development services
were $1 million in 1994, $3 million in 1995 and are $5 million in each year
thereafter for the term of the Technology Agreement. The Technology Agreement
provides for a substantial reduction in these fees, and in certain cases a
refund of part of these fees, if Ugine cannot transfer its thin strip casting
technology to the Company. Upon the merger of Ugine into Usinor Sacilor in
December 1995, Usinor Sacilor assumed the Technology Agreement.
15
<PAGE> 18
PURCHASES FROM AND SALES TO AFFILIATED COMPANIES. In the ordinary course of
its business, the Company purchases stainless steel from and sells stainless
steel to Ugine and certain affiliates of Usinor Sacilor. In 1996, the Company
made no material amount of purchases from Usinor Sacilor or its affiliates,
including Ugine. In 1996, there were no sales to Ugine but there were $48.5
million of sales to its related parties. Included in such sales, are sales to a
principal customer of the Company in which a Usinor Sacilor affiliate owns
almost 50% of the voting stock. The Company sold its products to this customer
prior to the 1990 Acquisition. The Company believes that the terms of such
purchases and sales are no less favorable than the Company could obtain in
transactions with unrelated parties purchasing or selling a similar volume of
products.
INSURANCE. The Company currently participates in some of the Usinor Sacilor
insurance programs for its United States subsidiaries. The Company is also
covered under certain other insurance policies maintained by Usinor Sacilor,
notably property insurance and a layer of umbrella (excess) insurance,
underwritten on Usinor Sacilor and its affiliates as a group. The Company
believes that the total premium it pays for its insurance coverage as described
above is no less favorable than that which it could otherwise obtain.
AFFILIATED DIRECTORS. In addition to directors Claude F. Kronk and Eugene
A. Salvadore, employees of the Company, Philippe Choppin de Janvry, Jean Didier
Dujardin, Robert Hudry, Michel Le Page, Michel J. Longchampt, Gerard Martel and
Francis Mer are directors of the Company and are also directors or executive
officers of Usinor Sacilor or its affiliates, including Ugine. See "Election of
Directors".
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Arthur Andersen LLP as independent
auditors to audit the financial statements of the Company and its subsidiaries
for 1997. Although the appointment of independent auditors is not required to be
submitted to a vote of the shareholders, the Board believes that the
shareholders should participate in this decision through the ratification
process. Unless otherwise directed, proxies will be voted for the ratification
of the appointment of Arthur Andersen LLP as the Company's independent auditors
for 1997. Representatives of Arthur Andersen LLP are expected to be present at
the meeting to respond to appropriate questions and will have an opportunity to
make a statement if they desire to do so. Arthur Anderson LLP has served as the
independent auditors of the Company since 1990.
PROPOSAL TO APPROVE THE AMENDED
AND RESTATED 1993 STOCK INCENTIVE PLAN
INTRODUCTION
The Company's 1993 Stock Incentive Plan (the "1993 Plan") was adopted by
the Board of Directors of the Company and shareholders of the Company in 1993.
The 1993 Plan provides for the issuance of up to 2,000,000 shares of Common
Stock pursuant to the exercise of options qualifying as incentive stock options
("ISOs") under the Internal Revenue Code of 1986, as amended (the "Code") or
nonqualified stock options. The 1993 Plan also provides for the issuance of
stock appreciation rights.
In order to more clearly align the interests of the executive officers with
the interests of the shareholders of the Company, increased ownership of the
Company's stock by these individuals is desired. Therefore, in March 1997, stock
ownership goals for executive officers were established by the Board of
Directors of the
16
<PAGE> 19
Company as follows: Chief Executive Officer--three times base salary; Chief
Operating Officer/Senior Vice Presidents--two times base salary; and other Vice
Presidents--one time base salary. To help meet such guidelines, effective March
4, 1997, the Board of Directors of the Company approved the amendment and
restatement of the 1993 Plan (the "Amended 1993 Plan"), subject to approval of
the Company's shareholders, to permit the issuance of restricted stock under
such plan to employees. The amendment did not increase the total number of
shares available for issuance under the Amended 1993 Plan, but it did extend the
expiration period in which to make future awards under such plan from October
25, 2003 to March 3, 2007. The amendment and restatement also changes certain
restrictions on any future amendments of the Amended 1993 Plan to reflect recent
changes in Federal securities laws. To date, 1,065,000 shares remain available
for awards or grants under the Amended 1993 Plan. Future awards of restricted
stock under the Amended 1993 Plan shall have such restrictions as imposed by the
Incentive-Based Compensation Committee and set forth in the related restricted
share agreement between the Company and the awardee.
SUMMARY OF AMENDED 1993 PLAN
The Amended 1993 Plan is summarized below, but the summary is qualified in
its entirety by the full text of the Amended 1993 Plan which is set forth as
Exhibit A to this Proxy Statement.
GENERAL. The purposes of the Amended 1993 Plan are to promote the long-term
success of the Company by creating a mutuality of interests between the 1993
Plan participants and the shareholders of the Company and to reward such plan
participants by providing an opportunity to acquire shares of the Company's
Common Stock. The eligible plan participants are the Chairman of the Board of
Directors and those employees of the Company or any subsidiary who share
responsibility for the management, growth or protection of the business of the
Company or any subsidiary. Under both the original and the Amended 1993 Plan,
2,000,000 shares of Common Stock have been reserved for issuance to employees of
ISOs, and for issuance to employees and the Chairman of the Board of Directors
of the Company of restricted stock and nonstatutory stock options.
The Amended 1993 Plan provides for alternative stock appreciation rights
with respect to both ISOs and nonstatutory stock options. Alternative stock
appreciation rights granted in conjunction with a nonstatutory stock option may
also be granted at any time during the term of the stock option.
In the event any outstanding stock option award terminates or expires for
any reason without having been exercised in full, the shares of Common Stock not
purchased under the stock option are again available for purposes of the Amended
1993 Plan, except that to the extent alternative stock appreciation rights
granted in conjunction with a stock option under the Amended 1993 Plan are
exercised and the related stock options surrendered, the number of shares
available for purposes of the Amended 1993 Plan shall be reduced by the number
of shares, if any, of Common Stock issued upon exercise of such alternative
stock appreciation rights. If any shares of Common Stock are forfeited to the
Company pursuant to the restrictions applicable to the restricted shares awarded
under the Amended 1993 Plan, the number of shares so forfeited shall again be
available for purposes of the Amended 1993 Plan. The Amended 1993 Plan also
contains antidilution provisions which provide, in certain events (e.g,
dividends, stock splits), for proportionate adjustments in the number of shares
of Common Stock which may be offered under the Amended 1993 Plan.
ADMINISTRATION AND ELIGIBILITY. The Amended 1993 Plan is administered by
the Incentive-Based Compensation Committee of the Board of Directors (see "Board
of Directors and Director Committees" above), which determines the individuals
to whom options are granted and restricted stock awarded, the terms and
conditions of such options and restricted shares. Neither of the current members
of the Incentive-Based Compensation Committee are eligible to participate in the
Amended 1993 Plan and each is a "disinterested
17
<PAGE> 20
person" under Rule 16(b)-3 of the Securities Exchange Act of 1934. The
Incentive-Based Compensation Committee also has full and final authority to
grant alternative stock appreciation rights with both ISOs and nonstatutory
stock options. Alternative stock appreciation rights generally give the grantee
the right to receive, as an alternative to the shares to be received upon
exercise of the option, equal in value to 100% of the excess of the fair market
value of the Common Stock on the date of exercise of the option over the option
price. The maximum number of shares as to which stock options may be granted and
as to which shares may be awarded pursuant to restricted share awards to any
individual is 15% of the aggregate number of shares which may be granted or
awarded under the Amended 1993 Plan.
In determining the eligibility for participation and the number of shares
covered by each grant or award, the Incentive-Based Compensation Committee
considers the position and responsibilities of the person being considered, the
nature and value of his or her services, his or her present and/or potential
contribution to the success of the Company and such other factors as the
Incentive-Based Compensation Committee may deem relevant. It is not possible to
estimate the number of eligible employees, as such determination is at the
discretion of the Incentive-Based Compensation Committee.
The Incentive-Based Compensation Committee also has the power to interpret
the Amended 1993 Plan and to prescribe such rules, regulations and procedures in
connection with the operations of the Amended 1993 Plan as it deems necessary
and advisable in its administration of the Amended 1993 Plan.
STOCK OPTIONS. Stock options granted under the Amended 1993 Plan may be
either ISOs intended to qualify under Section 422 of the Code or options not
intended to so qualify, referred to as "nonstatutory" stock options. The fair
market value (determined as of the time of the grant of an ISO) of the Common
Stock with respect to which ISOs are exercisable for the first time by a single
optionee during any calendar year under the Amended 1993 Plan and any other
stock option plan of the Company may not exceed $100,000.
The option price shall be determined by the Incentive-Based Compensation
Committee but shall not be less than 100% of the fair market value of the Common
Stock at the time of the grant. The option price may be paid in cash or shares
in accordance with regulations adopted by the Incentive-Based Compensation
Committee, valued at fair market value on the date of exercise of the stock
option. Fair market value for all purposes under the Amended 1993 Plan is the
mean between the highest and lowest sales prices per share of the Common Stock
as quoted in the NYSE-Composite Transactions listing in The Wall Street Journal
for a date.
Other terms and conditions of the stock options, including exercisability
and expiration, will be determined by the Incentive-Based Compensation Committee
at the time of grant, but no stock option may be exercised after the expiration
of ten years from the date of its grant. The Amended 1993 Plan also contains
provisions for the exercise and expiration of stock options upon the death,
disability, resignation, removal or termination of employment of an employee or
the Chairman.
The antidilution provisions contained in the Amended 1993 Plan also provide
in certain events (e.g., dividends, stock splits) for proportionate adjustments
in the number of shares covered by outstanding stock options and in the option
price of outstanding stock options.
No stock option granted under the Amended 1993 Plan is transferable other
than by Will or by the laws of descent and distribution, and a stock option may
be exercised during an optionee's lifetime only by the
18
<PAGE> 21
optionee. Each grant of a stock option must be confirmed by a stock option
agreement between the Company and the optionee which sets forth the terms of the
stock option.
STOCK APPRECIATION RIGHTS. Alternative stock appreciation rights ("SARs")
may be granted together with all or part of any stock option granted under the
Amended 1993 Plan. An SAR granted in tandem with an ISO may only be granted at
the time the ISO is granted, but an SAR may be granted at any time during the
term of a nonstatutory stock option. An SAR granted with a stock option shall
only be exercisable to the extent the stock option is exercisable and will be
canceled when the stock option is canceled.
SARs will be subject to such terms and conditions as the Incentive-Based
Compensation Committee imposes. An SAR will entitle the holder upon exercise to
receive Common Stock from the Company having an aggregate value equal to the
excess of the fair market value, at the time of exercise of the SAR, of one
share of Common Stock over the exercise price per share specified in the grant
of the SAR, multiplied by the number of shares of Common Stock covered by such
SAR. The committee has the authority to pay an SAR in cash, or part in cash and
part in shares.
RESTRICTED SHARES. Restricted share awards are subject to such restrictions
(including restrictions on the right of the awardee to sell, assign, transfer or
encumber the shares awarded while such shares are subject to restrictions) as
the Incentive-Based Compensation Committee may impose thereon and are subject to
forfeiture to the extent events (which may, in the discretion of such committee,
include termination of employment and/or failure to achieve any
performance-based goals or events) specified by such committee occur or do not
occur prior to the time the restrictions lapse.
Each restricted share award must be confirmed by a restricted share
agreement between the Company and the awardee, which sets forth the number of
restricted shares awarded, the restrictions imposed thereon, the duration of
such restrictions, the events which would cause a forfeiture of the restricted
shares and such other terms and conditions as the Incentive-Based Compensation
Committee in its discretion deems appropriate.
Following a restricted share award and prior to the lapse of the applicable
restrictions, share certificates representing the restricted shares are held by
the Company in escrow. From the date a restricted share award is effective,
however, the awardee is a shareholder with respect to all the shares represented
by the share certificates for the restricted shares and has all the rights of a
shareholder with respect to the restricted shares, including the right to vote
the restricted shares and to receive all dividends and other distributions paid
with respect to the restricted shares, subject only to any restrictions imposed
by the Incentive-Based Compensation Committee.
ADDITIONAL RIGHTS IN CERTAIN EVENTS. The Amended 1993 Plan provides
additional rights to grantees upon the occurrence of certain events which could
involve a change in control of the Company by means of a tender offer, proxy
challenge, merger, consolidation, share exchange, sale of assets or otherwise.
Upon the occurrence of such specified events which could involve a change in
control of the Company, the Amended 1993 Plan provides for, except in certain
circumstances, (i) the acceleration of the exercise date of stock options so
that they become immediately and fully exercisable, (ii) the extension of the
expiration date of stock options in certain cases upon the termination of
employment of a grantee within one year after any such event occurs, and (iii)
all restrictions with respect to restricted share awards shall lapse.
19
<PAGE> 22
AMENDMENT. The Board of Directors may alter or amend the Amended 1993 Plan
at any time, except that, without approval of the shareholders of the Company,
no alteration or amendment may (i) increase the total number of shares which may
be issued under the Amended 1993 Plan, (ii) increase the maximum number of
shares subject to a stock option or restricted share award that may be granted
to any one grantee under the Amended 1993 Plan, or (iii) make any changes in the
class of employees eligible to be granted incentive stock options or restricted
share awards under the Amended 1993 Plan. In addition, no alteration or
amendment of the Amended 1993 Plan may, without the written consent of the
holder of a stock option, SAR or restricted share previously granted or awarded
under the Amended 1993 Plan, adversely affect the rights of such holder with
respect thereto.
TERMINATION OF AMENDED 1993 PLAN. The Board of Directors may terminate the
Amended 1993 Plan at any time, but termination of the Amended 1993 Plan would
not terminate any outstanding stock options granted under the Amended 1993 Plan
or cause a revocation or forfeiture of any restricted share award under the
Amended 1993 Plan. The Amended 1993 Plan will continue in effect until such
termination by the Board of Directors; no stock option or SAR may be granted
under the Amended 1993 Plan, however, subsequent to March 3, 2007.
MISCELLANEOUS. If any grantee who has been granted stock options under the
Amended 1993 Plan engages in operation or management of a business, whether as
owner, partner, officer, director, employee or otherwise and whether during or
after termination of employment, which is in competition with the Company or any
of its subsidiaries, the Incentive-Based Compensation Committee may in its
discretion immediately terminate all stock options held by such person.
FEDERAL INCOME TAX TREATMENT OF OPTIONS AND SARS. Generally, taxable income
is not recognized by the ISO optionee and a deduction is not allowed to the
Company either at the time of grant or at the time of exercise of an ISO except
that the excess of the fair market value at the time of exercise of Common Stock
acquired on exercise of ISOs over the option price may be subject to the
alternative minimum tax. If Common Stock acquired on exercise of ISOs is held
for at least two years after the date of grant and for one year after
acquisition of the Common Stock by the optionee upon exercise, then any gain or
loss on subsequent disposition of the Common Stock will be treated for federal
income tax purposes as long-term capital gain or loss. Generally, if the
foregoing holding period requirements are not met, gain recognized on
disposition of the Common Stock acquired upon exercise of an ISO is taxable as
ordinary compensation income to the optionee to the extent of the excess, if
any, of the fair market value of the Common Stock acquired on the exercise date
over the option price, and the Company will become entitled to a deduction in
the same amount. Any further gain to the optionee will be taxed as short-term or
long-term capital gain, depending on the holding period.
A nonstatutory stock option granted under the Amended 1993 Plan will not
result in any taxable income to the optionee or deduction to the Company at the
time it is granted. Unlike an ISO, the holder of a nonstatutory stock option
will be deemed to have received compensation, taxable as ordinary income, at the
time of exercise of the option in an amount equal to the difference between the
fair market value of the Common Stock at the time of exercise and the option
price; the Company will at the same time become entitled to a tax deduction of a
like amount. If the Common Stock acquired is later sold or exchanged, the
difference between the sale price and the fair market value of the stock on the
date of exercise of the option is taxable as long-term or short-term capital
gain or loss, depending on the sale price and the holding period. Under proposed
regulations, special rules apply in determining the compensation income
recognized upon such a disposition if the option price of the ISO is paid in
shares of Common Stock.
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An optionee does not recognize any taxable income for Federal income tax
purposes upon receipt of SARs. Upon the exercise of SARs, the fair market value
of the shares received, and any cash received in lieu of shares, generally are
treated as compensation received in the year of exercise.
FEDERAL INCOME TAX TREATMENT OF RESTRICTED STOCK AWARDS. If an individual
receiving a restricted stock award under the Amended 1993 Plan timely files with
the Internal Revenue Service a written election pursuant to Section 83(b) of the
Code with respect to the shares that are the subject of the award, assuming no
payment for the shares is required by the terms of the award, he or she will
recognize ordinary income at the time the award is made in an amount equal to
the then fair market value of the shares (determined without regard to any
restriction other than a restriction which by its terms will never lapse). In
the absence of such election, the recipient of the award will recognize ordinary
income upon the lapse of the restrictions on transfer and the vesting of the
shares in an amount equal to the then fair market value of the shares as to
which the restrictions have lapsed. The Company generally will be entitled to a
deduction for compensation paid, in the same amount and at the same time as such
amount is treated as compensation to the recipient.
OTHER TAX MATTERS. The acceleration of the exercise date of a stock option
or the exercise of a stock option or SAR or the lapse of restrictions on
restricted shares following the occurrence of certain specified events noted
above, which could involve a change in control in certain circumstances may
result in (i) a 20% Federal excise tax (in addition to Federal income tax) to
the optionee and (ii) the loss of a compensation deduction explained above which
would otherwise be allowable to the Company.
STOCKHOLDER VOTE REQUIRED; BOARD RECOMMENDATION
The affirmative vote of a majority of the shares present and voting at the
Annual Meeting is required to approve the Amended 1993 Plan. The Board of
Directors recommends a vote for approval of the amended 1993 Plan.
OTHER MATTERS
The Company knows of no other matters to be presented for action at the
Annual Meeting. However, if any other matters should properly come before the
meeting, it is intended that votes will be cast pursuant to the proxy in
accordance with the best judgment of the persons acting as proxies.
The Company will pay the expense in connection with the printing,
assembling and mailing of the notice of meeting, this proxy statement and the
accompanying form of proxy to the holders of Common Stock of the Company. In
addition to the use of the mails, proxies may be solicited by directors,
officers or employees of the Company personally or by telephone, telex or
facsimile. The Company may request persons holding stock in their names, or in
the names of their nominees, to send proxy material to and obtain proxies from
their principals, and will reimburse such persons for their reasonable expenses
in so doing.
ANNUAL REPORT
Consolidated financial statements of the Company are included in its Annual
Report to Shareholders for fiscal year 1996, which is being mailed with this
Proxy Statement. Financial statements are also on file with the Securities and
Exchange Commission, Washington, D.C. and the New York Stock Exchange.
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<PAGE> 24
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the annual meeting of
shareholders to be held in May or June of 1998 must be received by the Secretary
of the Company at the address of its executive offices no later than November
27, 1997 for inclusion in the proxy statement for that meeting. Any such
proposal must comply with Rule 14a-8 and Regulation 14A of the rules of the
Securities and Exchange Commission.
The By-Laws of the Company provide that notice of any shareholder
nominations for election of directors must be received by the Secretary of the
Company at least 120 days prior to the anniversary date of the immediately
preceding annual meeting or, with respect to a special meeting of shareholders,
prior to the tenth day following the date notice of such meeting is first given
to the shareholders. All shareholder nominations for election of directors to be
elected at the 1998 annual meeting must therefore be submitted to the Secretary
of the Company at the address of its executive offices prior to February 11,
1998, together with certain information regarding the nominee and certain
information regarding the nominating shareholder. Any shareholder may obtain a
copy of the applicable By-Laws from the Secretary of the Company upon written
request.
By order of the Board of Directors,
Kirk F. Vincent
Vice President-Finance and Law
Secretary
March 27, 1997
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<PAGE> 25
Exhibit A
J&L SPECIALTY STEEL, INC.
1993 STOCK INCENTIVE PLAN
(AMENDED AND RESTATED EFFECTIVE JUNE 10, 1997)
The purposes of the 1993 Stock Incentive Plan (the "Plan") are to promote
the long-term success of J&L Specialty Steel, Inc. (the "Corporation") and its
Subsidiaries by creating long-term mutuality of interests between Plan
participants and stockholders of the Corporation, and to reward such persons by
providing an opportunity to acquire shares of the Common Stock, par value $.01
per share, of the Corporation (the "Common Stock").
SECTION 1
ADMINISTRATION
The Plan shall be administered by a Committee (the "Committee") appointed
by the Board of Directors of the Corporation (the "Board") and consisting of not
less than two members of the Board, each of whom at the time of appointment to
the Committee and at all times during service as a member of the Committee shall
be a "disinterested person" as then defined under Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), or any successor
Rule.
The Committee shall interpret the Plan and prescribe such rules,
regulations and procedures in connection with the operations of the Plan as it
shall deem to be necessary and advisable for the administration of the Plan
consistent with purposes of the Plan.
The Committee shall keep records of action taken. A majority of the
Committee shall constitute a quorum at any meeting, and the acts of a majority
of the members present at any meeting at which a quorum is present, or acts
approved in writing by all the members of the Committee, shall be the acts of
the Committee.
SECTION 2
ELIGIBILITY
Those employees of the Corporation or any Subsidiary (including, but not
limited to, covered employees as defined in Section 162(m)(3) of the Internal
Revenue Code of 1986 (the "Code"), or any successor provision) who share
responsibility the management, growth or protection of the business of the
Corporation or any Subsidiary (the "Employees") shall be eligible to be granted
incentive stock options, nonstatutory stock options(with or without alternative
stock appreciation rights) and to receive restricted share awards as described
herein. The Chairman of the Board of Directors of the Corporation (the
"Chairman") shall be eligible to be granted nonstatutory stock options(with or
without alternative stock appreciation rights) and to receive restricted share
awards as described herein. The Employees and the Chairman hereinafter are
collectively referred to as "Eligible Persons". For the purposes of the Plan,
the term "Subsidiary" means any corporation in an unbroken chain of corporations
beginning with the Corporation, if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing at least fifty percent
(50%) or more of the total combined voting power of all classes of stock in one
of the other corporations in the chain.
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Subject to the provisions of the Plan, the Committee shall have full and
final authority, in its discretion, to grant stock options (with or without
alternative stock appreciation rights) and to award restricted shares as
described herein and to determine the Eligible Persons to whom any such grant or
award shall be made and the number of shares to be covered thereby. In
determining the eligibility of any Eligible Person, as well as in determining
the number of shares covered by each grant of a stock option or award of
restricted shares and whether alternative stock appreciation rights shall be
granted in conjunction with a stock option, the Committee shall consider the
position and the responsibilities of the Eligible Person being considered, the
nature and value to the Corporation or a Subsidiary of his or her services, his
or her present and/or potential contribution to the success of the Corporation
or a Subsidiary and such other factors as the Committee may deem relevant.
SECTION 3
SHARES AVAILABLE UNDER THE PLAN
The aggregate number of shares of the Common Stock which may be issued and
as to which grants of stock options or awards of restricted stock may be made
under the Plan is 2,000,000 shares, subject to adjustment and substitution as
set forth in Section 7. If any stock option granted under the Plan is canceled
by mutual consent or terminates or expires for any reason without having been
exercised in full, the number of shares subject thereto shall again be available
for purposes of the Plan, except that to the extent that alternative stock
appreciation rights granted in conjunction with a stock option under the Plan
are exercised and the related stock option surrendered the number of shares
available for purposes of the Plan shall be reduced by the number of shares, if
any, of Common Stock issued upon exercise of such alternative stock appreciation
rights. If any shares of Common Stock are forfeited to the Corporation pursuant
to the restrictions applicable to restricted shares awarded under the Plan, the
number of shares so forfeited shall again be available for purposes of the Plan.
The shares which may be issued under the Plan may be either authorized but
unissued shares or treasury shares or partly each.
SECTION 4
GRANT OF STOCK OPTIONS AND ALTERNATIVE STOCK
APPRECIATION RIGHTS AND AWARDS OF RESTRICTED SHARES
The Committee shall have authority, in its discretion, (a) to grant
"incentive stock options" pursuant to Section 422 of the Code, (b) to grant
"nonstatutory stock options" (i.e., stock options which do not qualify under
Sections 422 or 423 of the Code) or to grant both types of stock options (but
not in tandem) and (c) to award restricted shares. The Committee also shall have
the authority, in its discretion, to grant alternative stock appreciation rights
in conjunction with incentive stock options or nonstatutory stock options with
the effect provided in Section 5(D). Alternative stock appreciation rights
granted in conjunction with an incentive stock option may only be granted at the
time the incentive stock option is granted. Alternative stock appreciation
rights granted in conjunction with a nonstatutory stock option may be granted
either at the time the stock option is granted or at any time thereafter during
the term of the stock option.
During the duration of the Plan, the maximum aggregate number of shares as
to which stock options may be granted and as to which restricted shares may be
awarded under the Plan to any Eligible Person is fifteen
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percent (15%) of the aggregate number of shares which may be issued under the
Plan, subject to adjustment and substitution as set forth in Section 7. For the
purposes of this limitation, any adjustment or substitution made pursuant to
Section 7 with respect to the maximum number of shares set forth in the
preceding sentence shall also be made with respect to shares already issued
under the Plan through awards of restricted shares, or upon the exercise of
stock options, shares subject to previously outstanding stock options which have
been canceled or have terminated or expired without the exercise of such stock
options (or any related alternative stock appreciation rights), and shares which
would have been issued under the Plan on the exercise of stock options but for
the previous exercise of related alternative stock appreciation rights in lieu
of the exercise of such stock options.
Notwithstanding any other provision contained in the Plan or in any
agreement referred to in Section 5(H), or an amendment thereto, but subject to
the possible exercise of the Committee's discretion contemplated in the last
sentence of this Section 4, the aggregate fair market value, determined as
provided in Section 5(I) on the date of grant, of the shares with respect to
which incentive stock options are exercisable for the first time by an Employee
during any calendar year under all plans of the corporation employing such
Employee, any parent or subsidiary corporation of such corporation and any
predecessor corporation of any such corporation shall not exceed $100,000. If
the date on which one or more of such incentive stock options could first be
exercised would be accelerated pursuant to any provision of the Plan or any
stock option agreement, and the acceleration of such exercise date would result
in a violation of the limitation set forth in the preceding sentence, then,
notwithstanding any such provision, but subject to the provisions of the next
succeeding sentence, the exercise dates of such incentive stock options shall be
accelerated only to the date or dates, if any, that do not result in a violation
of such limitation and, in such event, the exercise dates of the incentive stock
options with the lowest option prices shall be accelerated to the earliest such
dates. The Committee may, in its discretion, authorize the acceleration of the
exercise date of one or more incentive stock options even if such acceleration
would violate the $100,000 limitation set forth in the first sentence of this
paragraph and even if such incentive stock options are thereby converted in
whole or in part to nonstatutory stock options.
SECTION 5
TERMS AND CONDITIONS OF STOCK OPTIONS AND
ALTERNATIVE STOCK APPRECIATION RIGHTS
Stock options and alternative stock appreciation rights granted under the
Plan shall be subject to the following terms and conditions:
(A) The purchase price at which each stock option may be exercised
(the "option price") shall be one hundred percent (100%) of the fair market
value per share of the Common Stock covered by the stock option on the date
of grant, except that in the case of an incentive stock option granted to
an Employee who, immediately prior to such grant, owns stock possessing
more than ten percent (10%) of the total combined voting power of all
classes of stock of the Corporation or any Subsidiary (a "Ten Percent
Employee"), the option price shall be one hundred ten percent (110%) of
such fair market value on the date of grant. For purposes of this Section
5(A), the fair market value of the Common Stock shall be determined as
provided in Section 5(I). For purposes of this Section 5(A), an individual
(i) shall be considered as owning not only shares of stock owned
individually but also all shares of stock that are at
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the time owned, directly or indirectly, by or for the spouse, ancestors,
lineal descendants and brothers and sisters (whether by the whole or half
blood) of such individual and (ii) shall be considered as owning
proportionately any shares owned, directly or indirectly, by or for any
corporation, partnership, estate or trust in which such individual is a
stockholder, partner or beneficiary.
(B) The option price for each stock option shall be payable in cash in
United States dollars (including check, bank draft or money order);
provided, however, that in lieu of cash the person exercising the stock
option may (if authorized by the Committee at the time of grant in the case
of an incentive stock option, or at any time in the case of a nonstatutory
stock option) pay the option price in whole or in part by delivering to the
Corporation shares of the Common Stock having a fair market value on the
date of exercise of the stock option, determined as provided in Section
5(I), equal to the option price for the shares being purchased, except that
(i) any portion of the option price representing a fraction of a share
shall in any event be paid in cash and (ii) no shares of the Common Stock
which have been held for less than six months may be delivered in payment
of the option price of a stock option. If authorized by the Committee, in
its discretion, the person exercising a stock option and paying the option
price in whole or in part with shares may, in lieu of delivering
certificates, certify ownership of shares. Delivery of shares, if
authorized, may also be accomplished through the effective transfer to the
Corporation of shares held by a broker or other agent. The Corporation will
also cooperate with any person exercising a stock option who participates
in a cashless exercise program of a broker or other agent under which all
or part of the shares received upon exercise of the stock option are sold
through the broker or other agent or under which the broker or other agent
makes a loan to such person. Notwithstanding the foregoing, unless the
Committee, in its discretion, shall otherwise determine at the time of
grant in the case of an incentive stock option, or at any time in the case
of a nonstatutory stock option, the exercise of the stock option shall not
be deemed to occur and no shares of Common Stock will be issued by the
Corporation upon exercise of a stock option until the Corporation has
received payment of the option price in full. The date of exercise of a
stock option shall be determined under procedures established by the
Committee, and as of the date of exercise the person exercising the stock
option shall be considered for all purposes to be the owner of the shares
with respect to which the stock option has been exercised. Payment of the
option price with shares shall not increase the number of shares of the
Common Stock which may be issued under the Plan as provided in Section 3.
(C) Each stock option shall be exercisable at such time or times as
the Committee, in its discretion, shall determine, except that no stock
option shall be exercisable after the expiration of ten years (five years
in the case of an incentive stock option granted to a Ten Percent Employee)
from the date of grant. A stock option to the extent exercisable at any
time may be exercised in whole or in part.
(D) Alternative stock appreciation rights granted in conjunction with
a stock option shall entitle the person exercising the alternative stock
appreciation rights to surrender the related stock option, or any portion
thereof, and to receive from the Corporation in exchange therefor that
number of shares of the Common Stock having an aggregate fair market value
on the date of exercise of the alternative stock appreciation rights equal
to the excess of the fair market value of one share of the Common Stock on
such date of exercise over the option price per share times the number of
shares covered by the related stock option, or portion thereof, which is
surrendered. Alternative stock appreciation rights shall be exercisable to
the extent that the related stock option is exercisable and only by the
same person who is entitled to exercise the related stock option; provided,
however, that alternative stock appreciation rights
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granted in conjunction with an incentive stock option shall not be
exercisable unless the then fair market value of the Common Stock exceeds
the option price of the shares subject to the incentive stock option. Cash
shall be paid in lieu of any fractional shares. The Committee shall have
the authority, in its discretion, to determine that the obligation of the
Corporation shall be paid in cash or part in cash and part in shares,
except that the Corporation shall not pay to any person who is subject to
the provisions of Section 16(b) of the 1934 Act at the time of exercise of
alternative stock appreciation rights any portion of the obligation of the
Corporation in cash (except cash in lieu of a fractional share) unless and
until six months have elapsed from the date of grant of the alternative
stock appreciation rights. The date of exercise of alternative stock
appreciation rights shall be determined under procedures established by the
Committee, and payment under this Section 5(D) shall be made by the
Corporation as soon as practicable after the date of exercise. To the
extent that a stock option as to which alternative stock appreciation
rights have been granted is exercised, canceled, terminates or expires, the
alternative stock appreciation rights shall be canceled. For the purposes
of this Section 5(D), the fair market value of the Common Stock shall be
determined as provided in Section 5(I).
(E) Unless otherwise determined, in its discretion, by the Committee,
(i) no stock option shall be transferable by the grantee otherwise than by
Will, or if the grantee dies intestate, by the laws of descent and
distribution of the state of domicile of the grantee at the time of death
and (ii) all stock options shall be exercisable during the lifetime of the
grantee only by the grantee.
(F) Subject to the provisions of Section 4 in the case of incentive
stock options, unless the Committee, in its discretion, shall otherwise
determine:
(i) If a grantee ceases to be the Chairman for any reason other
than resignation, removal for cause or death, any then outstanding
nonstatutory stock option held by such grantee shall be exercisable by
the grantee (but only to the extent exercisable by the grantee
immediately prior to ceasing to be the Chairman) at any time prior to
the expiration date of such nonstatutory stock option or within one year
after the date the grantee ceases to be the Chairman, whichever is the
shorter period;
(ii) If during his or her term of office as the Chairman a grantee
resigns from the Board or is removed from office for cause, any then
outstanding nonstatutory stock option held by the grantee which is not
exercisable by the grantee immediately prior to resignation or removal
shall terminate as of the date of resignation or removal, and any then
outstanding nonstatutory stock option held by the grantee which is
exercisable by the grantee immediately prior to resignation or removal
shall be exercisable by the grantee at any time prior to the expiration
date of such stock option or within ninety (90) days after the date of
resignation or removal, whichever is the shorter period;
(iii) If the employment of a grantee who is not disabled within the
meaning of Section 422(c)(6) of the Code (a "Disabled Grantee") is
voluntarily terminated with the consent of the Corporation or a
Subsidiary or a grantee retires under any retirement plan of the
Corporation or a Subsidiary, any then outstanding incentive stock option
held by such grantee shall be exercisable by the grantee (but only to
the extent exercisable by the grantee immediately prior to the
termination of employment) at any time prior to the expiration date of
such incentive stock option or within three months after the date of
termination of employment, whichever is the shorter period;
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(iv) If the employment of a grantee who is not a Disabled Grantee
is voluntarily terminated with the consent of the Corporation or a
Subsidiary or a grantee retires under any retirement plan of the
Corporation or a Subsidiary, any then outstanding nonstatutory stock
option held by such grantee shall be exercisable by the grantee (but
only to the extent exercisable by the grantee immediately prior to the
termination of employment) at any time prior to the expiration date of
such nonstatutory stock option or within one year after the date of
termination of employment, whichever is the shorter period;
(v) If the employment of a grantee who is a Disabled Grantee is
voluntarily terminated with the consent of the Corporation or a
Subsidiary, any then outstanding stock option held by such grantee shall
be exercisable by the grantee in full (whether or not so exercisable by
the grantee immediately prior to the termination of employment) by the
grantee at any time prior to the expiration date of such stock option or
within one year after the date of termination of employment, whichever
is the shorter period;
(vi) Following the death of a grantee during employment or during
service as the Chairman, any outstanding stock option held by the
grantee at the time of death shall be exercisable in full (whether or
not so exercisable by the grantee immediately prior to the death of the
grantee) by the person entitled to do so under the Will of the grantee,
or, if the grantee shall fail to make testamentary disposition of the
stock option or shall die intestate, by the legal representative of the
grantee at any time prior to the expiration date of such stock option or
within one year after the date of death, whichever is the shorter
period;
(vii) Following the death of a grantee after termination of
employment or after ceasing to be the Chairman and during a period when
a stock option is exercisable, any outstanding stock option held by the
grantee at the time of death shall be exercisable by such person
entitled to do so under the Will of the grantee or by such legal
representative (but only to the extent the stock option was exercisable
by the grantee immediately prior to the death of the grantee) at any
time prior to the expiration date of such stock option or within one
year after the date of death, whichever is the shorter period; and
(viii) Unless the exercise period of a stock option following
termination of employment has been extended as provided in Section 8(C),
if the employment of a grantee terminates for any reason other than
voluntary termination with the consent of the Corporation or a
Subsidiary, retirement under any retirement plan of the Corporation or a
Subsidiary or death, all outstanding stock options held by the grantee
at the time of such termination of employment shall automatically
terminate.
Whether termination of employment is a voluntary termination with the consent of
the Corporation or a Subsidiary and whether a grantee is a Disabled Grantee
shall be determined in each case, in its discretion, by the Committee and any
such determination by the Committee shall be final and binding.
(G) If a grantee of a stock option engages in the operation or
management of a business (whether as owner, partner, officer, director,
employee or otherwise and whether during or after termination of employment
or service as the Chairman) which is in competition with the Corporation or
any of its Subsidiaries, the Committee, in its discretion, may immediately
terminate all outstanding stock options held by the grantee; provided,
however, that this sentence shall not apply if the exercise period of a
stock
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<PAGE> 31
option following termination of employment has been extended as provided in
Section 8(C). Whether a grantee has engaged in the operation or management
of a business which is in competition with the Corporation or any of its
Subsidiaries shall be determined in each case, in its discretion, by the
Committee, and any such determination by the Committee shall be final and
binding.
(H) All stock options and alternative stock appreciation rights shall
be confirmed by an agreement, or an amendment thereto, which shall be
executed on behalf of the Corporation by the Chief Executive Officer (if
other than the President), the President or any Vice President and by the
grantee. The agreement confirming a stock option shall specify whether the
stock option is an incentive stock option or a nonstatutory stock option.
The provisions of such agreements, or amendments thereto, need not be
identical.
(I) Fair market value of the Common Stock shall be the mean between
the following prices, as applicable, for the date as of which fair market
value is to be determined as quoted in The Wall Street Journal (or in such
other reliable publication as the Committee, in its discretion, may
determine to rely upon): (i) if the Common Stock is listed on the New York
Stock Exchange, the highest and lowest sales prices per share of the Common
Stock as quoted in the NYSE-Composite Transactions listing for such date,
(ii) if the Common Stock is not listed on such exchange, the highest and
lowest sales prices per share of Common Stock for such date on (or on any
composite index including) the principal United States securities exchange
registered under the 1934 Act on which the Common Stock is listed or (iii)
if the Common Stock is not listed on any such exchange, the highest and
lowest sales prices per share of the Common Stock for such date on the
National Association of Securities Dealers Automated Quotations System or
any successor system then in use ("NASDAQ"). If there are no such sale
price quotations for the date as of which fair market value is to be
determined but there are such sale price quotations within a reasonable
period both before and after such date, then fair market value shall be
determined by taking a weighted average of the means between the highest
and lowest sales prices per share of the Common Stock as so quoted on the
nearest date before and the nearest date after the date as of which fair
market value is to be determined. The average should be weighted inversely
by the respective numbers of trading between the selling dates and the date
as of which fair market value is to be determined. If there are no such
sale price quotations on or within a reasonable period both before and
after the date as of which fair market value is to be determined, then fair
market value of the Common Stock shall be the mean between the bona fide
bid and asked prices per share of Common Stock as so quoted for such date
on NASDAQ, or if none, the weighted average of the means between such bona
fide bid and asked prices on the nearest trading date before and the
nearest trading date after the date as of which fair market value is to be
determined, if both such dates are within a reasonable period. The average
is to be determined in the manner described above in this Section 5(I). If
the fair market value of the Common Stock cannot be determined on any basis
previously set forth in this Section 5(I) for the date as of which fair
market value is to be determined, the Committee shall in good faith
determine the fair market value of the Common Stock on such date. Fair
market value shall be determined without regard to any restriction other
than a restriction which, by its terms, will never lapse.
(J) The obligation of the Corporation to issue shares of the Common
Stock under the Plan shall be subject to (i) the effectiveness of a
registration statement under the Securities Act of 1933, as amended, with
respect to such shares, if deemed necessary or appropriate by counsel for
the Corporation, (ii) the condition that the shares shall have been listed
(or authorized for listing upon official notice of issuance)
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upon each stock exchange, if any, on which the Common Stock may then be
listed and (iii) all other applicable laws, regulations, rules and orders
which may then be in effect.
(K) Notwithstanding any other provision of this Section 5 or any other
provision of the Plan or any agreement referred to in Section 5(H) or an
amendment thereto, if the J&L Specialty Steel, Inc. Capital Accumulation
Plan or any similar or successor plan with respect to the Corporation or
its Subsidiaries provides for hardship withdrawals under Treasury
Regulation sec.1.401(k)l(d)(2)(iii)(B), any grantee who has made such a
hardship withdrawal shall be prohibited, for a period of twelve (12) months
following such hardship withdrawal, from exercising any stock option under
the Plan in such a manner and to the extent that the exercise of such stock
option would result in an elective contribution or an employee contribution
to an employer plan within the meaning of Treasury Regulation sec.1.401(k)-
l(d)(2)(iii)(B)(3) or any successor regulation thereto.
Subject to the foregoing provisions of this Section 5 and the other
provisions of the Plan, stock options and alternative stock appreciation rights
granted under the Plan shall be subject to such restrictions and other terms and
conditions, if any, as shall be determined, in its discretion, by the Committee
and set forth in the agreement referred to in Section 5(H), or an amendment
thereto.
SECTION 6
TERMS AND CONDITIONS OF RESTRICTED SHARE AWARDS
Restricted share awards shall be evidenced by a written agreement in a form
prescribed by the Committee, in its discretion, which shall set forth the number
of shares of Common Stock awarded, the restrictions imposed thereon (including,
without limitation, restrictions on the right of the grantee to sell, assign,
transfer or encumber such shares while such shares are subject to other
restrictions imposed under this Section 6), the duration of such restrictions,
events (which may, in the discretion of the Committee, include performance-based
events) the occurrence of which would cause a forfeiture of the restricted
shares and such other terms and conditions as the Committee in its discretion
deems appropriate. Restricted share awards shall be effective only upon
execution of the applicable restricted share agreement on behalf of the
Corporation by the Chairman or the Chief Executive Officer and by the grantee.
The provisions of such agreements need not be identical. Awards of restricted
shares shall be effective on the date determined, in its discretion, by the
Committee.
Following a restricted share award and prior to the lapse or termination of
the applicable restrictions, the share certificates representing the restricted
shares shall be held by the Corporation in escrow together with related stock
powers in blank signed by the grantee. Except as provided in Section 7, the
Committee, in its discretion, may determine that dividends and other
distributions on the shares held in escrow shall not be paid to the grantee
until the lapse or termination of the applicable restrictions. Unless otherwise
provided, in its discretion, by the Committee, any such dividends or other
distributions shall not bear interest. Upon the lapse or termination of the
applicable restrictions (and not before such time), the share certificates
representing the restricted shares and unpaid dividends, if any, shall be
delivered to the awardee. From the date a restricted share award is effective,
the grantee shall be a shareholder with respect to all the shares represented by
the share certificates for the restricted shares and shall have all the rights
of a shareholder with respect to the restricted shares, including the right to
vote the restricted shares and to receive all dividends and other
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distributions paid with respect to the restricted shares, subject only to the
preceding provisions of this paragraph and the other restrictions imposed by the
Committee.
SECTION 7
ADJUSTMENT AND SUBSTITUTION OF SHARES
If a dividend or other distribution shall be declared upon the Common Stock
payable in shares of the Common Stock, the number of shares of the Common Stock
subject to any outstanding stock options, the number of shares of the Common
Stock which may be issued under the Plan but are not subject to outstanding
stock options and the maximum number of shares as to which stock options may be
granted and as to which restricted shares may be awarded to any Eligible Person
under Section 7, on the date fixed for determining the shareholders entitled to
receive such stock dividend or distribution, shall be adjusted by adding thereto
the number of shares of the Common Stock which would have been distributable
thereon if such shares had been outstanding on such date.
If the outstanding shares of the Common Stock shall be changed into or
exchangeable for a different number or kind of shares of stock or other
securities of the Corporation or another corporation, whether through
reorganization, reclassification, recapitalization, stock split-up, combination
of shares, merger or consolidation, then there shall be substituted for each
share of the Common Stock subject to any then outstanding stock option, and for
each share of the Common Stock which may be issued under the Plan but which is
not then subject to any outstanding stock option, the number and kind of shares
of stock or other securities into which each outstanding share of the Common
Stock shall be so changed or for which each such share shall be exchangeable.
Unless otherwise determined by the Committee, in its discretion, any such stock
or securities, as well as any cash or other property, into or for which any
restricted shares held in escrow shall be changed or exchangeable in any
transaction, shall also be held by the Corporation in escrow and shall be
subject to the same restrictions as are applicable to the restricted shares in
respect of which such stock, securities, cash or other property was issued or
distributed.
In case of any adjustment or substitution as provided for in this Section
7, the aggregate option price for all shares subject to each then outstanding
stock option prior to such adjustment or substitution shall be the aggregate
option price for all shares of stock or other securities (including any
fraction) to which such shares shall have been adjusted or which shall have been
substituted for such shares. Any new option price per share shall be carried to
at least three decimal places with the last decimal place rounded upwards to the
nearest whole number.
If the outstanding shares of the Common Stock shall be changed in value by
reason of any spin-off, split-off or split-up, or dividend in partial
liquidation, dividend in property other than cash or extraordinary distribution
to holders of the Common Stock, (i) the Committee shall make any adjustments to
any then outstanding stock option which it determines are equitably required to
prevent dilution or enlargement of the rights of grantees which would otherwise
result from any such transaction and (ii) unless otherwise determined by the
Committee, in its discretion, any stock, securities, cash or other property
distributed with respect to any restricted shares held in escrow or for which
any restricted shares held in escrow shall be exchanged in any such transaction
shall also be held by the Corporation in escrow and shall be subject to the same
restrictions as are applicable to the restricted shares in respect of which such
stock, securities, cash or other property was distributed or exchanged.
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<PAGE> 34
No adjustment or substitution provided for in this Section 7 shall require
the Corporation to issue or sell a fraction of a share or other security.
Accordingly, all fractional shares or other securities which result from any
such adjustment or substitution shall be eliminated and not carried forward to
any subsequent adjustment or substitution. Owners of restricted shares held in
escrow shall be treated in the same manner as owners of Common Stock not held in
escrow with respect to fractional shares created by an adjustment or
substitution of shares, except that, unless otherwise determined by the
Committee, in its discretion, any cash or other property paid in lieu of a
fractional share shall be subject to restrictions similar to those applicable to
the restricted shares exchanged therefor.
If any adjustment or substitution provided for in this Section 7 requires
the approval of stockholders in order to enable the Corporation to grant
incentive stock options, then no such adjustment or substitution shall be made
without the required stockholder approval. Notwithstanding the foregoing, in the
case of incentive stock options, if the effect of any such adjustment or
substitution would be to cause the stock option to fail to continue to qualify
as an incentive stock option or to cause a modification, extension or renewal of
such stock option within the meaning of Section 424 of the Code, the Committee
may elect that such adjustment or substitution not be made but rather shall use
reasonable efforts to effect such other adjustment of each then outstanding
stock option as the Committee, in its discretion, shall deem equitable and which
will not result in any disqualification, modification, extension or renewal
(within the meaning of Section 424 of the Code) of the incentive stock option.
Except as provided in this Section 7, a grantee shall have no rights by
reason of any issue by the Corporation of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.
SECTION 8
ADDITIONAL RIGHTS IN CERTAIN EVENTS
(A) DEFINITIONS.
For purposes of this Section 8, the following terms shall have the
following meanings:
(1) The term "Person" shall be used as that term is used in Sections 13(d)
and 14(d) of the 1934 Act as in effect on the effective date of the Plan.
(2) Beneficial Ownership shall be determined as provided in Rule 13d-3
under the 1934 Act as in effect on the effective date of the Plan.
(3) "Voting Shares" shall mean all securities of a company entitling the
holders thereof to vote in an annual election of Directors (without
consideration of the rights of any class of stock other than the Common Stock to
elect Directors by a separate class vote); and a specified percentage of "Voting
Power" of a company shall mean such number of the Voting Shares as shall enable
the holders thereof to cast such percentage of all the votes which could be cast
in an annual election of directors (without consideration of the rights of any
class of stock other than the Common Stock to elect Directors by a separate
class vote).
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<PAGE> 35
(4) "Tender Offer" shall mean a tender offer or exchange offer to acquire
securities of the Corporation (other than such an offer made by the Corporation
or any Subsidiary), whether or not such offer is approved or opposed by the
Board.
(5) "Section 8 Event" shall mean the date upon which any of the following
events occurs:
(a) The Corporation acquires actual knowledge that any Person other
than the Corporation, a Subsidiary or any employee benefit plan(s)
sponsored by the Corporation or a Subsidiary has acquired the Beneficial
Ownership, directly or indirectly, of securities of the Corporation
entitling such Person to 20% or more of the Voting Power of the
Corporation;
(b) A Tender Offer is made to acquire securities of the Corporation
entitling the holders thereof to 20% or more of the Voting Power of the
Corporation; or
(c) A solicitation subject to Rule 14a-11 under the 1934 Act (or any
successor Rule) relating to the election or removal of 50% or more of the
members of any class of the Board shall be made by any person other than
the Corporation; or
(d) The stockholders of the Corporation shall approve a merger,
consolidation, share exchange, division or sale or other disposition of
assets of the Corporation as a result of which the stockholders of the
Corporation immediately prior to such transaction shall not hold, directly
or indirectly, immediately following such transaction a majority of the
Voting Power of (i) in the case of a merger or consolidation, the surviving
or resulting corporation, (ii) in the case of a share exchange, the
acquiring corporation or (iii) in the case of a division or a sale or other
disposition of assets, each surviving, resulting or acquiring corporation
which, immediately following the transaction, holds more than 10% of the
consolidated assets of the Corporation immediately prior to the
transaction; provided, however, that (i) if securities beneficially owned
by a grantee are included in determining the Beneficial Ownership of a
Person referred to in paragraph 5(a), (ii) a grantee is required to be
named pursuant to Item 2 of the Schedule 14D-1 (or any similar successor
filing requirement) required to be filed by the bidder making a Tender
Offer referred to in paragraph 5(b) or (iii) if a grantee is a
"participant" as defined in Instruction 3 to Item 4 of Schedule 14A under
the 1934 Act (or any successor Rule) in a solicitation (other than a
solicitation by the Corporation) referred to in paragraph 5(c), then no
Section 8 Event with respect to such grantee shall be deemed to have
occurred by reason of such event.
(B) ACCELERATION OF THE EXERCISE DATE OF STOCK OPTIONS.
Subject to the provisions of Section 4 in the case of incentive stock
options, unless the agreement referred to in Section 5(H), or an amendment
thereto, shall otherwise provide, notwithstanding any other provision contained
in the Plan, in case any "Section 8 Event" occurs all outstanding stock options
(other than those held by a person referred to in the proviso to Section
8(A)(5)) shall become immediately and fully exercisable whether or not otherwise
exercisable by their terms.
(C) EXTENSION OF THE EXPIRATION DATE OF STOCK OPTIONS.
Subject to the provisions of Section 4 in the case of incentive stock
options, unless the agreement referred to in Section 5(H), or an amendment
thereto, shall otherwise provide, notwithstanding any other provision contained
in the Plan, all stock options held by a grantee (other than a grantee referred
to in the proviso to
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<PAGE> 36
Section 8(A)(5)) whose employment with the Corporation or a Subsidiary
terminates within one year of any Section 8 Event for any reason other than
voluntary termination with the consent of the Corporation or a Subsidiary,
retirement under any retirement plan of the Corporation or a Subsidiary or death
shall be exercisable for a period of ninety (90) days from the date of such
termination of employment, but in no event after the expiration date of the
stock option.
(D) LAPSE OF RESTRICTIONS ON RESTRICTED SHARE AWARDS.
Unless the agreement referred to in Section 6, or an amendment thereto,
shall otherwise provide, notwithstanding any other provision contained in the
Plan, if any Section 8 Event occurs prior to the scheduled lapse of all
restrictions applicable to restricted share awards under the Plan, all such
restrictions shall lapse upon the occurrence of any such Section 8 Event
regardless of the scheduled lapse of such restrictions.
SECTION 9
EFFECT OF THE PLAN ON THE RIGHTS OF EMPLOYEES AND EMPLOYER
Neither the adoption of the Plan nor any action of the Board or the
Committee pursuant to the Plan shall be deemed to give any Eligible Person any
right to be granted a stock option (with or without alternative stock
appreciation rights) or to be awarded restricted shares under the Plan. Nothing
in the Plan, in any stock option or alternative stock appreciation rights
granted under the Plan in any restricted share award under the Plan or in any
agreement providing for any of the foregoing shall (i) confer any right to any
Eligible Person to continue in the employ of the Corporation or any Subsidiary
or service of the Corporation, or (ii) interfere in any way with the rights of
the Corporation or any Subsidiary to terminate the employment of any Employee at
any time or (iii) interfere in any way with the rights of the shareholders of
the Corporation or the Board to elect or remove the Chairman.
SECTION 10
WITHHOLDING
To the extent required by applicable Federal, state, local or foreign law,
the person exercising the stock option or alternative stock appreciation right
shall make arrangements satisfactory to the Corporation, in its discretion, for
the satisfaction of any withholding tax obligations that arise in connection
with the Plan. The Corporation shall not be required to issue any Common Stock
or make any cash payment under the Plan until such obligations are satisfied.
SECTION 11
AMENDMENT OR TERMINATION
The right to alter and amend the Plan at any time and from time to time and
the right to revoke or terminate the Plan are hereby specifically reserved to
the Board; provided that no such alteration or amendment of the Plan shall,
without stockholder approval, (i) increase the number of shares which may be
issued under the Plan as set forth in Section 3, (ii) make any changes in the
class of employees eligible to receive incentive stock options under the Plan,
(iii) increase the maximum number of shares subject to a stock
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<PAGE> 37
option or stock options that may be granted and as to which restricted shares
may be awarded to any Eligible Person under Section 4 of the Plan or (iv) be
made if shareholder approval of the amendment is at the time required to qualify
for exemption from Section 16(b) of the 1934 Act or any stock exchange on which
the Common Stock may be listed. No alteration, amendment, revocation or
termination of the Plan shall, without the written consent of the holder of a
stock option or alternative stock appreciation rights or restricted shares
theretofore granted or awarded under the Plan, adversely affect the rights of
such holder with respect thereto.
SECTION 12
EFFECTIVE DATE AND DURATION OF PLAN
The effective date and date of adoption of the Plan shall be October 26,
1993 and the effective date of the amendment and restatement of the Plan adopted
by the Board on March 4, 1997 shall be effective June 10, 1997, provided that
such amendment and restatement is approved by a majority of the votes cast at a
meeting of the shareholders of the Corporation, duly called, convened and held.
No stock option or alternative stock appreciation rights may be granted and no
restricted shares may be awarded under the Plan subsequent to March 3, 2007.
ATTEST:
By
- ------------------------------------------------------
Secretary
J&L SPECIALTY STEEL, INC.
By
- ------------------------------------------------------
C.F. Kronk
Vice Chairman and
Chief Executive Officer
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<PAGE> 38
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THIS PROXY WHEN
PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1, 2 AND 3.
Please mark
your vote as [ X ]
indicated in
this example
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS Nominees: for Term Expiring at the Annual Meeting of
Shareholders in 2000:
FOR all nominees WITHHOLD PIERRE F. DE RAVEL D'ESCLAPON, ROBERT HUDRY,
listed to the right AUTHORITY MICHEL J. LONGCHAMPT AND JOHN J. SHEEHAN
(except as to vote for all
noted to the nominees listed (INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
contrary) to the right INDIVIDUAL NOMINEE OR NOMINEES, WRITE THAT NOMINEE'S
NAME IN THE SPACE PROVIDED BELOW.)
[ ] [ ]
---------------------------------------------------
---------------------------------------------------
</TABLE>
2. RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. APPROVAL OF AMENDMENT AND RESTATEMENT OF 1993 STOCK INCENTIVE PLAN.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON ANY OTHER BUSINESS
THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT
THEREOF. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS
TO BE PRESENTED AT THE MEETING.
Please sign exactly as your name(s) appear(s) to the left. If shares are held
jointly, each holder should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give your full title as such.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
Signature(s) Signature(s) Date: , 1997
------------------ --------------- --------
<PAGE> 39
J&L SPECIALTY STEEL, INC.
ONE PPG PLACE
18TH FLOOR
BOX 3373
PITTSBURGH, PA 15230-3373
SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS, JUNE 10, 1997, 10:00 A.M.
Claude F. Kronk and Kirk F. Vincent, and each of them acting individually,
are hereby appointed as proxies with full power of substitution, to vote the
shares of the shareholder(s) named on the reverse side hereof at the Annual
Meeting of Shareholders of J&L Specialty Steel, Inc. to be held at The
Pittsburgh Hilton and Towers, 600 Commonwealth Place, Pittsburgh, Pennsylvania,
on June 10, 1997 at 10:00 A.M., and at any adjournment thereof, as directed
hereon, and in his discretion to vote and act upon any other matters as may
properly come before the Annual Meeting.
The undersigned shareholder hereby also revokes all previous proxies for
the Annual Meeting, acknowledges receipt of the Annual Report to shareholders
and the Notice of Annual Meeting and Proxy Statement, dated March 27, 1997 and
hereby ratifies all that the said proxies may do by virtue hereof.
(Continued, on Reverse Side)
FOLD AND DETACH HERE
