<PAGE>
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:
[ ] 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 (S)240.14a-11(c) or (S)240.14a-12
GULF STATES STEEL, INC. OF ALABAMA
----------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] 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 vale 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>
GULF STATES STEEL, INC. OF ALABAMA
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 10, 1997
To the Stockholders of Gulf States Steel, Inc. of Alabama
NOTICE IS HEREBY GIVEN that the Annual Meeting of Gulf States Steel, Inc.
of Alabama, an Alabama corporation (the "Company"), will be held on Monday,
March 10, 1997 at the offices of Watermill Ventures, Ltd., 800 South Street,
Suite 355, Waltham, MA at 4:30 p.m. for the following purposes:
<TABLE>
<CAPTION>
<S> <C>
1. To elect eight (8) members to the Board of Directors to hold office
until the next annual meeting of Stockholders and until their
successors are duly elected and qualified.
2. To consider and act upon a proposal to ratify the appointment of
Ernst & Young LLP as the Company's independent auditors for the
fiscal year ending October 31, 1997.
3. To transact such other business as may be properly brought before the
Annual Meeting and any adjournments thereof.
</TABLE>
The Board of Directors has fixed the close of business on January 24, 1997
as the record date for the determination of Stockholders entitled to notice of
and to vote at the Annual Meeting and at any adjournments thereof.
All Stockholders are cordially invited to attend the Annual Meeting.
Whether you plan to attend the Annual Meeting or not, you are requested to
complete, sign, date and return the enclosed proxy card as soon as possible in
accordance with the instructions on the proxy card. A pre-addressed, postage
prepaid return envelope is enclosed for your convenience.
BY ORDER OF THE BOARD OF DIRECTORS
Dale S. Okonow
Secretary
January 24, 1997
<PAGE>
GULF STATES STEEL, INC. OF ALABAMA
174 SOUTH 26TH STREET
GADSDEN, ALABAMA 35904
(205) 543-6100
_______________
PROXY STATEMENT
_______________
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Gulf States Steel, Inc. of Alabama (the "Company"),
an Alabama corporation, of proxies, in the accompanying form, to be used at the
Annual Meeting of Stockholders to be held at the offices of Watermill Ventures,
Ltd., 800 South Street, Suite 355, Waltham, MA on Monday, March 10, 1997 at 4:30
p.m., and any adjournments thereof (the "Meeting").
Where the Stockholder specifies a choice on the proxy as to how his or
her shares are to be voted on a particular matter, the shares will be voted
accordingly. If no choice is specified, the shares will be voted FOR the
election of the nine (9) nominees for director named herein and FOR the
ratification of the appointment of Ernst & Young LLP as the Company's
independent public accountants for the fiscal year ending October 31, 1997. Any
proxy given pursuant to this solicitation may be revoked by the person giving it
at any time before its use by delivering to the Company a written notice of
revocation or a duly executed proxy bearing a later date. Any Stockholder who
has executed a proxy but is present at the Meeting, and who wishes to vote in
person, may do so by revoking his or her proxy as described in the preceding
sentence. Shares represented by valid proxies in the form enclosed, received in
time for use at the Meeting and not revoked at or prior to the Meeting, will be
voted at the Meeting. The presence, in person or by proxy, of the holders of a
majority of the outstanding shares of the Company's common stock, par value $.01
per share ("Common Stock"), is necessary to constitute a quorum at the Meeting.
The affirmative vote of a majority of the shares present or
represented and entitled to vote at the Meeting is required to approve each
proposal, including the election of directors.
The close of business on January 24, 1997 has been fixed as the record
date for determining the Stockholders entitled to notice of and to vote at the
Meeting. As of the close of business on January 24, 1997, the Company had
3,610,000 shares of Common Stock outstanding and entitled to vote. Holders of
Common Stock are entitled to one vote per share on all matters to be voted on by
Stockholders.
The cost of soliciting proxies, including expenses in connection with
preparing and mailing this Proxy Statement, will be borne by the Company.
Solicitation of proxies by mail may be supplemented by telephone, telegram,
telex and personal solicitation by the directors, officers or employees of the
Company. No additional compensation will be paid for such solicitation.
This Proxy Statement and the accompanying proxy are being mailed on or
about January 27, 1997 to all Stockholders entitled to notice of and to vote at
the Meeting.
The Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 1996 is being mailed to the Stockholders with this Proxy Statement,
but does not constitute a part hereof.
1
<PAGE>
SHARE OWNERSHIP
GSS Holding Corp. ("Holdings") owns 100% of the issued and outstanding
shares of common stock of the Company. The following table sets forth certain
information concerning the ownership of Holdings common stock as of January 15,
1997 by (i) each person who is known to the Company to own beneficially more
than 5% of the outstanding shares of any class of Holdings common stock, (ii)
each director and named executive officer of the Company and (iii) all executive
officers and directors of the Company as a group. To the knowledge of the
Company, each of such stockholder has sole voting and dispositive power as to
the shares beneficially owned unless otherwise noted.
<TABLE>
<CAPTION>
VOTING COMMON STOCK REDEEMABLE PREFERRED STOCK
------------------------- -----------------------------------------------------
SERIES A SERIES B
STOCKHOLDERS NUMBER OF SHARES PERCENT NUMBER OF SHARES PERCENT NUMBER OF SHARES PERCENT
------------ ---------------- ------- ---------------- -------- ---------------- -------
<S> <C> <C> <C> <C> <C> <C>
Gulf States Enterprises, L.L.C.(1)..... 552,843 58.2 0 0 1,200,000 100.0
c/o Watermill Ventures
800 South Street
Waltham, MA 02154
Steven E. Karol(2)..................... 552,843 58.2 0 0 1,200,000 100.0
c/o Watermill Ventures
800 South Street
Waltham, MA 02154
William S. Karol(3).................... 552,843 58.2 0 0 1,200,000 100.0
c/o Watermill Ventures
800 South Street
Waltham, MA 02154
Dale S. Okonow(4)...................... 552,843 58.2 0 0 1,200,000 100.0
c/o Watermill Ventures
800 South Street
Waltham, MA 02154
GSS Acquisition Limited Partnership.... 513,000 54.0 0 0 1,200,000 100.0
c/o Watermill Ventures
800 South Street
Waltham, MA 02154
Entities managed by Hancock
Venture Partners, Inc.(5)............ 302,157 31.8 800,000 100.0 0 0
One Financial Center, 44th Floor
Boston, MA 02111
Robert M. Wadsworth(6)................. 302,157 31.8 800,000 100.0 0 0
One Financial Center, 44th Floor
Boston, MA 02111
Capital Resource Lenders II, L.P (7)... 95,000 10.0 0 0 0 0
175 Portland Street, Suite 300
Boston, MA 02114
Alexander S. McGrath(7)................ 95,000 10.0 0 0 0 0
175 Portland Street, Suite 300
Boston, MA 02114
John D. Lefler(8)...................... 0 0 0 0 0 0
Jack R. Collins(9)..................... 0 0 0 0 0 0
James S. Henderson, Jr.(10)............ 0 0 0 0 0 0
Peter P. Pincura(11)................... 0 0 0 0 0 0
John W. Duncan(12)..................... 0 0 0 0 0 0
Maxwell T. Burford(13)................. 0 0 0 0 0 0
Robert W. Ackerman(14)................. 0 0 0 0 0 0
Howard H. Stevenson(15)................ 0 0 0 0 0 0
All officers and directors as a group
[13 people](16)....................... 950,000 100.0 800,000 100.0 1,200,000 100.00
- -----------------
</TABLE>
(1) Includes 513,000 shares of Holdings Common Stock and 1,200,000 shares of
Holdings Series B Redeemable Preferred Stock beneficially owned by GSS
Acquisition Limited Partnership ("GSSALP"), a Delaware limited
partnership formed by Watermill in connection with the Acquisition. Gulf
States Enterprises, L.L.C., a Delaware limited liability company
("Enterprises"), is the general partner of GSSALP.
(2) Includes 513,000 shares of Holdings Common Stock and 1,200,000 shares of
Holding Series B Redeemable Preferred Stock owned by GSSALP and 39,843
shares of Holdings Common Stock owned by Enterprises. The SEK Limited
Partnership (the "SEKLP") is a managing member of Enterprises. Steven E.
Karol and his wife are the trustees of the Steven E. Karol Revocable
Trust, which entity is the 10% general partner of SEKLP. The Steven E.
Karol 1995 Family Trust is the 90% limited partner of SEKLP. SEKLP is
also a
2
<PAGE>
managing memeber of GSS Investors, L.L.C., which is a 45.6% limited
partner of GSSALP. As a limited partner of GSSALP, GSS Investors, L.L.C.
has no voting or investment power over the shares of Holdings' capital
stock owned by GSSALP. Mr. Karol disclaims beneficial ownership of the
shares owned by GSSALP and Enterprises except to the extent of his
membership interests in Enterprises and GSS Investors, L.L.C.
(3) Includes 513,000 shares of Holdings Common Stock and 1,200,000 shares of
Holdings Series B Redeemable Preferred Stock owned by GSSALP and 39,843
shares of Holdings Common Stock owned by Enterprises. WK-KODA Limited
Partnership ("WK-KODA"), of which KODA Enterprises Group, Inc. ("KODA")
is the general partner and a 90% limited partner, is a managing member of
Enterprises. William S. Karol is a stockholder and director of KODA and a
direct and indirect limited partner of WK-KODA. KODA is also a managing
member of GSS Investors, L.L.C. Mr. Karol disclaims beneficial ownership
of the shares owned by GSSALP and Enterprises except to the extent of his
membership interests in Enterprises and GSS Investors, L.L.C. See
footnote (2) above.
(4) Includes 513,000 shares of Holdings Common Stock and 1,200,000 shares of
Holdings Series B Redeemable Preferred Stock owned by GSSALP and 39,843
shares of Holdings Common Stock owned by Enterprises. Dale S. Okonow is a
managing member of Enterprises. The DSO Family Trust is also a managing
member of Enterprises. Dale S. Okonow, together with his wife, is a
managing member, and the DSO Family Trust is a managing member, of GSS
Investors, L.L.C. Mr. Okonow disclaims beneficial ownership of the shares
owned by GSSALP and Enterprises except to the extent of his membership
interests in Enterprises and GSS Investors, L.L.C. See footnote (2)
above.
(5) Includes 287,049 shares of Holdings Common Stock and 760,000 shares of
Holdings Series A Redeemable Preferred Stock owned by Hancock Venture
Partners IV - Direct Fund L.P. ("HVP IV") and 15,108 shares of Holdings
Common Stock and 40,000 shares of Holdings Series A Redeemable Preferred
Stock owned by Falcon Ventures II L.P. ("Falcon"). The general partner of
HVP IV is Back Bay Partners XII L.P. ("Back Bay XII"), the general
partner of which is Hancock Venture Partners, Inc. ("HVP"). The general
partner of Falcon is Back Bay Partners XIII, L.P. ("Back Bay XIII"), the
general partner of which is also HVP.
(6) Includes 287,049 shares of Holdings Common Stock and 760,000 shares of
Holdings Series A Redeemable Preferred Stock owned by HVP IV and 15,108
shares of Holdings Common Stock and 40,000 shares of Holdings Series A
Redeemable Preferred Stock owned by Falcon. Robert M. Wadsworth is a
general partner of Back Bay XII and Back Bay XIII and an officer of HVP.
Mr. Wadsworth disclaims beneficial ownership of the shares of capital
stock of Holdings owned by each of HVP IV and Falcon, except to the
extent of his interest as a general partner of Back Bay XII and Back Bay
XIII, the general partners of the foregoing, respectively. See footnote
(5).
(7) Includes 95,000 shares of Holdings Common Stock owned by Capital Resource
Lenders II, L.P. ("CRL"). Alexander S. McGrath is a partner and officer
of CRL. Mr. McGrath disclaims beneficial ownership of the shares of
capital stock owned by CRL, except to the extent of his interest as a
partner of CRL.
(8) John D. Lefler is a managing member of GSS Management, L.L.C. which is an
8.3% limited partner of GSSALP. As a limited partner of GSSALP, GSS
Management, L.L.C. has no voting or investment power over the shares of
Holdings' capital stock owned by GSSALP.
(9) Jack R. Collins is a managing member of GSS Management, L.L.C. See
footnote (8).
(10) James S. Henderson, Jr. is a managing member of GSS Management, L.L.C.
See footnote (8).
(11) Peter P. Pincura is a managing member of GSS Management, L.L.C. See
footnote (8).
(12) John W. Duncan is a managing member of GSS Management, L.L.C. See
footnote (8).
(13) Maxwell T Burford is a managing member of GSS Management, L.L.C. See
footnote (8).
(14) Robert W. Ackerman is a managing member of GSS Investors, L.L.C. See
footnote (2).
(15) The Stevenson Family Investment Limited Partnership is a managing member
of GSS Investors, L.L.C. See footnote (2).
(16) Includes 513,000 shares of Holdings Common Stock owned by GSSALP, 39,843
shares owned by Enterprises, 287,049 owned by HVP IV and 15,018 owned by
Falcon. Also includes 760,000 shares of Series A Redeemable Preferred
Stock owned by HVP IV, 40,000 shares of Series A Redeemable Preferred
Stock owned by Falcon and 1,200,000 shares of Series B Redeemable
Preferred Stock owned by GSSALP. See footnotes (1), (2), (3), (4), (5),
and (6).
3
<PAGE>
MANAGEMENT
DIRECTORS
The Company's By-Laws provide for the Company's business to be managed by
or under the direction of the Board of Directors. Under the Company's By-Laws,
the number of directors is fixed from time to time by the stockholders at their
annual meetings or at any special meeting called for that purpose, and directors
serve in office until the next annual meeting of Stockholders and until their
successors have been duly elected and qualified.
The number of Directors of the Company is currently fixed at ten members.
There two vacancies on the Board of Directors. Messrs. John D. Lefler, Robert W.
Ackerman, Dale S. Okonow, Steven E. Karol, William S. Karol, Howard H.
Stevenson, Robert M. Wadsworth, and Alexander S. McGrath, are nominated for
election at the Meeting to serve until the next annual meeting of Stockholders
and until their respective successors have been duly elected and qualified.
The names of the Company's current directors and certain information about
them are set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
John D. Lefler........ 51 President and Chief Executive Officer, Director
Robert W. Ackerman.... 58 Director
Dale S. Okonow........ 40 Vice President, Secretary and Director
Steven E. Karol....... 42 Chairman of the Board, Director
William S. Karol...... 40 Vice President and Director
Howard H. Stevenson... 55 Director
Robert M. Wadsworth... 36 Director
Alexander S. McGrath.. 35 Director
</TABLE>
John D. Lefler. Mr. Lefler has over 27 years of experience in the steel
industry and has been at the Company for more than 9 years. He has served as the
President and Chief Executive Officer of the Company since May 1993. From
November 1992 through April 1993, he was Executive Vice President and General
Manager-Sheet Products of the Company, and from November 1986 to November 1992,
Mr. Lefler served as Vice President-Manufacturing of the Company. Prior to
joining the Company in 1986, Mr. Lefler worked at USX for more than 18 years
serving in various management positions, including as Plant Manager-USX Gary
West Plant from 1984 to 1986. Mr. Lefler also serves as a Director of First
Alabama Bank and Sheffield Steel Corporation.
Robert W. Ackerman. Mr. Ackerman has been the President and Chief
Executive Officer and a Director of Sheffield Steel Corporation since 1992. From
1988 to 1992, Mr. Ackerman was the President and Chief Executive Officer of
Lincoln Pulp & Paper Co., Inc. From 1986 to 1988 Mr. Ackerman taught in the
Advanced Management Program at the Harvard University Graduate School of
Business Administration. Previously, Mr. Ackerman was President and Chief
Operating Officer of Premoid Corporation (a specialty paper manufacturer later
sold to James River Corporation) from 1978 to 1986, and Vice President-Finance
of Lincoln Pulp & Paper Co., Inc. from 1974 to 1978. Mr. Ackerman serves as a
Director of The Baupost Fund and Atlantic Investment Advisors, Inc. (a
subsidiary of Hambrecht & Quist).
Dale S. Okonow. Mr. Okonow has been a managing director of Watermill
Ventures, Ltd. since its inception. Mr. Okonow served as Vice President and
General Counsel of HMK, the parent company of Sheffield, from 1988 to 1990 and
has been a Senior Vice President and Chief Financial Officer of HMK since 1990.
He has served as Vice President-Finance and Secretary of Sheffield since 1988
and as a Director of Sheffield since 1990. Mr. Okonow has served as Executive
Vice President, Secretary and Director of Spectrum Enterprises Partners, L.L.C.
and Spectrum Management Company, Inc. since 1994, and as Vice President and
Secretary of Risk Management Solutions, Inc. since 1993. Prior to 1988, Mr.
Okonow was an associate with the law firm of Proskauer Rose Goetz & Mendelsohn
in New York City.
Steven E. Karol. Mr. Karol has been a managing director of Watermill
Ventures, Ltd. since its inception. He has served as a Director of Sheffield
since 1981 and Chairman of its Board of Directors since 1983. Mr. Karol is also
President and Chief Executive Officer and Chairman of the Board of HMK. Mr.
Karol is the brother of William S. Karol.
4
<PAGE>
William S. Karol. Mr. Karol has been managing director of Watermill
Ventures, Ltd. since its inception. Mr. Karol has also served as the President
and Chief Executive Officer of KODA Enterprises Group, Inc. since 1989. Mr.
Karol is the brother of Steven E. Karol.
Howard H. Stevenson. Dr. Stevenson has been a director of Sheffield since
1993. Since 1982, Dr. Stevenson has been Sarofim-Rock Professor of Business
Administration at the Harvard University Graduate School of Business
Administration. He was also a Senior Associate Dean and Director of Financial
and Information Systems for Harvard Business School from 1991 to 1994. Dr.
Stevenson has served as Treasurer and Vice Chairman of The Baupost Group since
1982 and as Chairman of The Baupost Fund since 1993. Dr. Stevenson also sits on
the boards of Camp Dresser & McKee, Landmark Communications, Terry Hinge and
Hardware, African Communications Group, and is a General Partner of Claflin
Capital VII.
Robert M. Wadsworth. Mr. Wadsworth is a General Partner of several
funds managed by Hancock Venture Partners, a position he has held since December
1988. He joined Hancock Venture Partners in July 1986. From September 1982 to
September 1984, Mr. Wadsworth was an associate at Booz, Allen and Hamilton, Inc.
He is currently a Director of several private companies.
Alexander S. McGrath. Mr. McGrath is a Partner of Capital Resource
Partners, a private capital partnership investing mezzanine debt in private
middle market companies. Mr. McGrath joined Capital Resource Partners in 1988
and is a director of Cirrus Technologies, Inc., Phoenix Distributors, Inc., Rite
Industries, Inc. and Small Business Loan Services, Inc.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has an Audit Committee comprised of Dale S. Okonow, Chairman,
Robert W. Ackerman and Jack R. Collins (Senior Vice President and Chief
Financial Officer of the Company). The Committee was formed in November 1995 and
during 1996 held two meetings with Ernst & Young LLP, the Company's independent
auditors, in attendance.
The Board established the Audit Committee to review, in consultation with
the Company's independent auditors, the Company's financial statements, public
filings with the Securities and Exchange Commission, accounting systems,
policies and procedures, and system of internal controls. The Audit Committee
also will recommend to the Board the engagement of the Company's independent
auditors and review other matters relating to the relationship of the Company
with its auditors.
COMPENSATION OF DIRECTORS
Dr. Stevenson and Mr. Ackerman are entitled to receive an annual retainer
of $8,000, payable quarterly, and a meeting fee of $3,000 for each meeting of
the Board of Directors attended. The Company reimburses ordinary and necessary
out-of-pocket expenses incurred by any Director in connection with his or her
services. In addition, Directors of the Company are eligible to receive non-
qualified stock options under the Holdings' 1995 Employee, Director and
Consultant Stock Option Plan. Mr. Lefler has been granted an option to purchase
12,000 shares of the common stock of Holdings at an exercise price of $.01 per
share, which option expires in 2006. No other Director has been granted any
stock options for services as a Director of the Company.
5
<PAGE>
EXECUTIVE OFFICERS
The names of, and certain information regarding, executive officers of the
Company who are not also directors, are set forth below. The executive officers
serve at the pleasure of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Jack R. Collins.......... 64 Senior Vice President, Chief Financial Officer
and Treasurer
John W. Duncan........... 50 Vice President and General Manager - Flat
Rolled Products
Maxwell T. Burford....... 54 Vice President - Human Resources
James S. Henderson, Jr... 54 Vice President - Sales
Joe P. Magee............. 54 Vice President and General Manager -
Steelmaking
Peter P. Pincura, Jr..... 60 Vice President - Technology and Services
</TABLE>
Jack R. Collins. Mr. Collins has over 39 years of experience in the steel
industry. He has served as Vice President and Chief Financial Officer of the
Company since 1986, and as Senior Vice President and Chief Financial Officer
since May 1993. From 1976 to 1985, he served as District Controller of the plant
and held various other management positions at the plant from 1957 to 1976.
John W. Duncan. Mr. Duncan has over 24 years of experience in the steel
industry, all of which has been with the Company or the mill's previous owners.
He was appointed Vice President and General Manager - Flat Rolled Products in
November 1996. He served as Vice President and General Manager -Plate Products
from November 1992 to November 1996. From November 1991 to November 1992, he was
Director of Personnel of the Company. From April 1986 to November 1991, Mr.
Duncan served as Superintendent of the Company's cold strip mill.
Maxwell T. Burford. Mr. Burford has over 29 years of experience in
Industrial Relations, all of which has been with the Company or the mill's
previous owners. He was appointed Vice President - Human Resources in October,
1996. Previously, Mr. Burford had served in several positions of increasing
responsibility, most recently as Manager of Labor Relations from 1986 to 1996.
James S. Henderson, Jr. Mr. Henderson has over 30 years of experience in
sales, marketing and operational management for steel-making and steel
processing companies. He has served as Vice President - Sales of the Company
since October 1992. From June 1984 through July 1992, he was Executive Vice
President of Consolidated Systems, Inc., a steel producer in Columbia, South
Carolina. Prior to that time, he worked for approximately 20 years at USX in
various sales and marketing capacities.
Joe P. Magee. Mr. Magee has over 30 years of experience at the mill. He
has served as Vice President and General Manager - Steelmaking of the Company
since October 1992. From January 1986 to October 1992, he was the plant's Melt
Shop Superintendent. Prior to that time, he held various operating and
management positions at the plant during its ownership by LTV and Republic.
Peter P. Pincura. Mr. Pincura has over 30 years of experience in steel-
making operations. He has served as Vice President - Technology and Services of
the Company since May 1993. From November 1992 through April 1993, he was
Manager - Engineering of the Company. From April 1989 to November 1992, Mr.
Pincura served as Vice President - Technical Services of the Company. He served
as the Company's Director of Technology from October 1987 through March 1989.
From 1986 to 1987, Mr. Pincura served as Chief Engineer at North Star Steel in
Monroe, Michigan, and held various management positions at USX from 1958 to
1980.
6
<PAGE>
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal year ended October 31, 1996,
individual compensation information for the Chief Executive Officer of the
Company, and each of the four other most highly compensated executive officers
of the Company who were serving as executive officers at the end of fiscal 1996
(the "named executive officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------
FISCAL OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION
- --------------------------- ------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
John D. Lefler 1996 $270,000 $ -- $243,056(a) $12,150(c)
President and Chief Executive Officer 1995 175,110 6,750 95,000(b) 9,620(c)
1994 80,220 100,000 164,780(b) 3,533(c)
Jack R. Collins 1996 148,203 15,000 17,299(h) 9,666(d)
Senior Vice President and 1995 141,829 28,479 69,708(h) 9,471(d)
Chief Financial Officer 1994 128,790 19,641 7,602(d)
James S. Henderson, Jr. 1996 130,811 -- 13,375(h) 6,701(e)
Vice President--Sales 1995 125,616 3,185 60,728(h) 6,522(e)
1994 118,459 18,966 32,362(e)
Peter P. Pincura 1996 128,507 -- 17,494(h) 7,332(f)
Vice President-- 1995 122,947 3,128 64,568(h) 7,154(f)
Technology and Services 1994 112,070 26,030 4,215(f)
John W. Duncan 1996 103,292 8,475 13,814(h) 4,703(g)
Vice President--Flat Rolled Products 1995 97,034 2,461 55,525(h) 4,551(g)
1994 93,882 -- 14,346(h) 4,007(g)
</TABLE>
(a) Represents amounts received by Mr. Lefler under a "special profit sharing"
agreement whereby Mr. Lefler received a contractual percentage of the
Company's October 31, 1995 pre-tax profits. This amount includes $149,460 of
bonus payments relating to pre-tax profits earned by the previous owners. No
amounts will be due under this agreement based on the fiscal 1996 financial
results.
(b) Represents amounts received by Mr. Lefler as consulting fees, in lieu of
salary, pursuant to a consulting agreement between Mr. Lefler and the
Brenlin Corporation.
(c) Consists of the Company's matching contribution to its 401(k) plan in the
amount of $10,800, $8,270 and $3,008, insurance premiums paid by the Company
with respect to term life insurance for the benefit of the named executive
officer in the amount of $1,350, $1,350 and $525, for the years 1996, 1995
and 1994 respectively.
(d) Consists of the Company's matching contribution to its 401(k) plan in the
amount of $5,714, $5,519 and $4,689, insurance premiums paid by the Company
with respect to term life insurance for the benefit of the named executive
officer in the amount of $3,952, $3,952 and $2,913, for the years 1996, 1995
and 1994 respectively.
(e) Consists of the Company's matching contribution to its 401(k) plan in the
amount of $5,232, $5,053 and $4,454, insurance premiums paid by the Company
with respect to term life insurance for the benefit of the named executive
officer in the amount of $1,469, $1,469 and $1,129 for the years 1996, 1995
and 1994 respectively. Also in 1994, includes $26,779 of relocation expense.
(f) Consists of the Company's matching contribution to its 401(k) plan in the
amount of $5,140, $4,962 and $4,215 in 1996, 1995 and 1994, respectively,
insurance premiums paid by the Company with respect to term life insurance
for the benefit of the named executive officer in the amount of $2,192 in
1996 and 1995.
(g) Consists of the Company's matching contribution to its 401(k) plan in the
amount of $4,056, $3,904 and
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$3,466, insurance premiums paid by the Company with respect to term life
insurance for the benefit of the named executive officer in the amount of
$647, $647 and $541 for the years 1996, 1995 and 1994 respectively.
(h) Amounts paid to these executive officers under the provisions of the
Company's profit sharing and gain sharing plans.
PROFIT-SHARING PLAN
In connection with its collective bargaining agreement with the USWA,
the Company has established a profit-sharing plan for its salaried employees
whereby the Company contributes 9.75% of income before taxes, extraordinary
items and certain other defined adjustments. Profit sharing payments were not
made in fiscal 1991, 1992 or 1993, which were loss years, and were not required
in fiscal 1994 under the collective bargaining agreement. Profit sharing
obligations resumed on November 1, 1994 and, for the fiscal years ended October
31, 1995 and 1996 aggregated approximately $4,836,000 and $76,012, respectively,
for its salaried employees.
1995 HOLDINGS STOCK OPTION PLAN
Holdings' Board of Directors adopted the Holdings' 1995 Employee,
Director and Consultant Stock Option Plan (the "Holdings Stock Option Plan").
The Holdings Stock Option Plan provides for the grant of incentive stock options
to key employees of Holdings and its subsidiaries (including the Company) and
non-qualified stock options to key employees, directors and consultants of
Holdings and its subsidiaries (including the Company). All of Holdings' Non-
voting Common Stock, par value $.01 per share, representing 5% of the Common
Stock of Holdings on a fully diluted basis, has been reserved for issuance under
the Holdings Stock Option Plan upon the exercise of options. As of October 31,
1996, options to purchase an aggregate of 38,600 shares had been granted to
senior management of the Company. The Holdings Stock Option Plan will be
administered by the Board of Directors of Holdings.
Options granted pursuant to the Holdings Stock Option Plan become
immediately exercisable upon the occurrence of a Change in Control. The purchase
price for shares as to which an option is exercised may be payable, among other
things, by delivery of a personal, interest bearing recourse note. At the
election of an employee, the Company is required to repurchase, in any fiscal
year, up to 20% of the options granted to such employee (or 20% of the shares
acquired pursuant to the exercise of options), up to an aggregate of 60% of the
options and or the shares.
The following table sets forth information concerning grants of stock
options to purchase Common Stock of Holdings granted in fiscal 1996 to each of
the Named Executive Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------------------------------
NUMBER OF SECURITIES % OF TOTAL OPTION
UNDERLYING OPTIONS GRANTED TO EMPLOYEES EXERCISE EXPIRATION
NAME GRANTED IN FISCAL YEAR PRICE DATE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John D. Lefler 12,000 29.2% $.01 2006
Jack R. Collins 5,000 12.2 .01 2006
James S. Henderson, Jr. 4,000 9.8 .01 2006
Peter P. Pincura 4,000 9.8 .01 2006
John W. Duncan 4,000 9.8 .01 2006
</TABLE>
There were no stock options exercised during fiscal 1996 and 2,400
options were canceled. At October 31, 1996, 11,400 shares were available for
grant. No options under the plan were exercisable at October 31, 1996 as the
options vest 40% on April 20, 1997 and 20% per annum for the following three
years.
EMPLOYMENT CONTRACTS
In connection with the Acquisition, the Company assumed the employment
obligations of John D. Lefler, President and Chief Executive Officer and Jack R.
Collins, Senior Vice President and Chief Financial Officer. These contracts
provide for, among other things, base compensation, bonus, profit sharing and
gain sharing payments. Mr. Lefler's and Mr. Collins' base compensation is
$270,000 and $134,424 respectively. Both of these agreements expire on October
31, 1997.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MANAGEMENT AGREEMENTS
Spectrum Management Agreement. In connection with the acquisition by the
Company of substantially all of the assets of the predecessor Gulf States Steel,
Inc. of Alabama (the "Acquisition"), the Company entered into a Management
Consulting Services Agreement (the "Spectrum Management Agreement") with
Spectrum Management Company, Inc. ("Spectrum"), an affiliate of Watermill and
the Company. Pursuant to the Spectrum Management Agreement, Spectrum provides
management and business consulting services to the Company and its subsidiaries
including, without limitation, establishment and supervision of relationships
with principal financial institutions; coordination of the audit and outside
financial reporting process; development and coordination of a strategic
planning process; oversight of the annual business planning cycle including
review and approval; federal and state tax planning and compliance; corporate
development services and limited legal services including contract
administration. The Company expects that Spectrum will have direct involvement
and responsibility for such matters on a daily basis.
As compensation for the management and business consulting services
provided to it by Spectrum, the Company is obligated to pay to Spectrum an
annual fee of $1 million, payable monthly. In addition to the foregoing
compensation, the Company is obligated to reimburse Spectrum for the cost of all
travel and related expenses incurred by Spectrum in performing its services
under the Spectrum Management Agreement. In the event that Holdings has
insufficient funds to pay any accrued and unpaid interest on the Holdings Notes
which such payment becomes due, Spectrum will pay such amount from moneys
received as management fee payments under the Spectrum Management Agreement, pro
rata with Hancock Venture Partners from moneys received as management fee
payments under the Hancock Management Agreement (as defined). Although the
Company believes the terms of the Spectrum Management Agreement are favorable,
there can be no assurance that they are as favorable as the Company might have
obtained from unaffiliated parties.
Hancock Management Agreement. In connection with the Acquisition, the
Company entered into a Management Consulting Services Agreement (the "Hancock
Management Agreement") with Hancock Venture Partners, an affiliate of the
Company. Pursuant to the Hancock Management Agreement, Hancock Venture Partners
provides certain management and business consulting services to the Company and
its subsidiaries in the areas of finance, marketing and corporate development.
The Company expects to utilize Hancock's services with respect to specific
issues on a case by case basis and not on a daily basis.
As compensation for the management and business consulting services
provided to it by Hancock Venture Partners, the Company is obligated to pay
Hancock Venture Partners an annual fee of $250,000, payable monthly. In addition
to the foregoing compensation, the Company is obligated to reimburse Hancock
Venture Partners for the cost of all travel and related expenses incurred by
Hancock Venture Partners in performing its services under the Hancock Management
Agreement. In the event that Holdings has insufficient funds to pay any accrued
and unpaid interest on the Holdings Notes when such payment becomes due, Hancock
Venture Partners will pay such amount from moneys received as management fee
payments under the Hancock Management Agreement, pro rata with Spectrum.
Although the Company believes the terms of the Hancock Management Agreement are
favorable, there can be no assurance that they are as favorable as the Company
might have obtained from unaffiliated parties.
RISK MANAGEMENT SOLUTIONS, INC. INSURANCE SERVICES AGREEMENT
In connection with the Acquisition, the Company entered into an Insurance
Services Agreement (the "Insurance Agreement") with Risk Management Solutions,
Inc. ("Risk Management"), an affiliate of Watermill and the Company, setting
forth the insurance services that Risk Management will provide to the Company
and each of its subsidiaries. The Insurance Agreement is terminable by either
party thereto upon 180 days' prior written notice to the other party. Pursuant
to the Insurance Agreement, Risk Management provides insurance services to the
Company and its subsidiaries, including, without limitation: procuring and
maintaining property and casualty insurance coverage; maintaining accounting
records for all administered insurance programs; reviewing and recommending
alternative financing methods for insurance coverages; identifying and
evaluating risk exposures; reviewing claims and expenses; budgeting for
insurance expenses; and preparing and filing proof of loss statements for
insured claims. As compensation for the insurance services provided to the
Company and its subsidiaries, the Company is obligated to pay to Risk Management
a fee equal to 15% of the total annual cost of the Company's insurance program,
payable monthly. In addition to the foregoing compensation, the Company is
obligated to reimburse Risk Management for the cost of all travel,
entertainment, telephone, and other expenses incurred by Risk Management in
performing its services under the Insurance Agreement. Although the Company
believes the terms of the Insurance Agreement are favorable, there can be no
assurance that they are as favorable as the Company might have obtained from
unaffiliated parties.
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INDEBTEDNESS OF MANAGEMENT
In connection with the Acquisition, GSS Management LLC purchased a 6.67%
limited partnership interest in GSS Acquisition for $1,000,000. GSS Management
LLC financed its purchase from funds raised from its members (the "LLC Members")
which include, among others, John D. Lefler (who invested an amount of $400,000)
and Jack R. Collins (who invested an amount of $100,000), both of whom are
executive officers of the Company. To finance their investment in GSS Management
LLC, the LLC Members borrowed an aggregate of $750,000 from the Company on or
prior to the closing of the Acquisition, such indebtedness being evidenced by a
promissory note of each LLC Member bearing interest at a rate of 6.5% per annum,
and becoming due on April 15, 2015 or on such earlier date upon the occurrence
of certain events as stated in each such promissory note, including upon
termination of employment for cause. Interest accrued on these Notes
approximated $75,000 at October 31, 1996. To secure the indebtedness evidenced
by the promissory note, the LLC Members have pledged their interest in GSS
Management LLC to the Company.
TAX SHARING AGREEMENT
Holdings is the common parent of an "affiliated group" of corporations
(as defined in the Internal Revenue Code of 1986, as amended (the "Code")),
which includes the Company and its subsidiary. Pursuant to an Income Tax
Expense Allocation Policy and Tax Sharing Agreement among Holdings and the
Company and Alabama Structural Beam Acquisition Corp., its subsidiary (the "Tax
Sharing Agreement"), the determination/allocation of income tax expense (current
and deferred) among members of the affiliated group or subgroup shall, for
purposes of the separate financial statements of the affiliated group or
subgroup (or any member of the affiliated group or subgroup), be determined on a
separate company basis as if the member computed its tax expense on a separate
basis and, since the affiliated group has adopted the provisions of SFAS 109,
(i) deferred taxes are allocated/recognized on a separate company basis for all
affiliated group members that have temporary differences at the end of the
relevant period, (ii) income tax expense (current and deferred) is
allocated/recognized on a separate company basis for all affiliated group
members irrespective of the fact that the affiliated group has no current or
deferred tax expense and (iii) the determination/allocation of current and
deferred income tax expense on a separate company basis is determined based on
the principles of SFAS 109.
Pursuant to the Tax Sharing Agreement, the affiliated group has elected
to allocate the consolidated federal income tax liability of the affiliated
group among the group's members such that each member will pay to Holdings the
amount of its separately computed current tax expense as determined on a
separate company basis, and the payment of such current tax expense will be
determined irrespective of the fact that the affiliated group has no current tax
expense, but after such income tax expense (current and deferred) has been
allocated/recognized on a separate company basis for all affiliated group
members irrespective of the fact that the affiliated group has no current or
deferred tax expense.
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ELECTION OF DIRECTORS
(NOTICE ITEM 1)
Under the Company's By-Laws, the number of directors is fixed from time
to time by the stockholders at their annual meeting, or at any special meeting
called for that purpose, and directors serve in office until the next annual
meeting of Stockholders and until their successors have been elected and
qualified.
The number of Directors of the Company is currently fixed at ten members.
There are two vacancies on the Board of Directors. Messrs. John D. Lefler,
Robert W. Ackerman, Dale S. Okonow, Steven E. Karol, William S. Karol, Howard H.
Stevenson, Robert M. Wadsworth, and Alexander S. McGrath, are nominated for
election at the Meeting to serve until the next annual meeting of Stockholders
and until their respective successors have been duly elected and qualified.
Unless authority to vote for any of the nominees named above is withheld,
the shares represented by the enclosed proxy will be voted FOR the election as
directors of such nominees. In the event that any nominee shall become unable or
unwilling to serve, the shares represented by the enclosed proxy will be voted
for the election of such other person as the Board of Directors may recommend in
his place. The Board has no reason to believe that any nominee will be unable or
unwilling to serve.
A plurality of the votes cast by the shares entitled to vote in the
Meeting at which a quorum is present when the vote is taken is required to elect
each nominee as a director.
THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF JOHN D. LEFLER, ROBERT
W. ACKERMAN, DALE S. OKONOW, STEVEN E. KAROL, WILLIAM S. KAROL, HOWARD H.
STEVENSON, ROBERT M. WADSWORTH, AND ALEXANDER S. MCGRATH, AS DIRECTORS, AND
PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A
STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
INDEPENDENT AUDITORS
(NOTICE ITEM 2)
The Board of Directors has appointed Ernst & Young LLP, independent
auditors, to audit the consolidated financial statements of the Company for the
fiscal year ending October 31, 1997. The Board proposes that the Stockholders
ratify this appointment. Ernst & Young LLP audited the Company's consolidated
financial statements for the fiscal year ended October 31, 1996. The Company
expects that representatives of Ernst & Young LLP will be present at the
Meeting, with the opportunity to make a statement if they so desire, and will be
available to respond to appropriate questions.
In the event that ratification of the appointment of Ernst & Young LLP as
the independent auditors for the Company is not obtained at the Meeting, the
Board of Directors will reconsider its appointment.
The affirmative vote of a majority of the shares represented at the
Meeting at which a quorum is present and entitled to vote is required to ratify
the appointment of the independent public accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE THE RATIFICATION OF
THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS, AND PROXIES
SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A STOCKHOLDER HAS
INDICATED OTHERWISE ON THE PROXY.
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<PAGE>
OTHER MATTERS
(NOTICE ITEM 3)
The Board of Directors knows of no other business which will be presented
to the Meeting. If any other business is properly brought before the Meeting, it
is intended that proxies in the enclosed form will be voted in respect thereof
in accordance with the judgment of the persons voting the proxies.
STOCKHOLDER PROPOSALS
To be considered for presentation at the next Annual Meeting of
Stockholders to be held in 1998, Stockholder proposals must be received, marked
for the attention of: Dale S. Okonow, Secretary, Gulf States Steel, Inc. of
Alabama, 174 South 26th Street, Gadsden, Alabama 35904, not later than November
10, 1997, subject to the provisions of rule 14a-8 under the Securities and
Exchange Act of 1934.
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, YOU ARE URGED TO
FILL OUT, SIGN, DATE AND RETURN THE ENCLOSED PROXY AT YOUR EARLIEST CONVENIENCE.
By order of the Board of Directors:
Dale S. Okonow
Secretary
January 26, 1996
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED OCTOBER
31, 1996 (OTHER THAN EXHIBITS THERETO) FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, WHICH PROVIDES ADDITIONAL INFORMATION ABOUT THE COMPANY, IS
AVAILABLE TO BENEFICIAL OWNERS OF THE COMPANY'S COMMON STOCK WITHOUT CHARGE UPON
WRITTEN REQUEST TO DALE S. OKONOW, VICE PRESIDENT AND SECRETARY OF GULF STATES
STEEL, INC. OF ALABAMA, 174 SOUTH 26/TH/ STREET, GADSDEN, ALABAMA 35904.
12
<PAGE>
GULF STATES STEEL, INC. OF ALABAMA
174 SOUTH 26TH STREET
GADSDEN, ALABAMA 35904
THIS PROXY IS BEING SOLICITED BY GULF STATES STEEL, INC. OF ALABAMA'S
BOARD OF DIRECTORS
THE UNDERSIGNED, REVOKING ANY PREVIOUS PROXIES RELATING TO THESE SHARES, HEREBY
ACKNOWLEDGES RECEIPT OF THE NOTICE AND PROXY STATEMENT DATED JANUARY 24, 1997 IN
CONNECTION WITH THE ANNUAL MEETING TO BE HELD AT 4:30 P.M. ON MONDAY, MARCH 10,
1997 AT THE OFFICES OF WATERMILL VENTURES, LTD., 800 SOUTH STREET, SUITE 355,
WALTHAM, MA AND HEREBY APPOINTS DALE S. OKONOW AND STEVEN E. KAROL, AND EACH OF
THEM (WITH FULL POWER TO ACT ALONE), THE ATTORNEYS AND PROXIES OF THE
UNDERSIGNED, WITH POWER OF SUBSTITUTION TO EACH, TO VOTE ALL SHARES OF THE
COMMON STOCK OF GULF STATES STEEL, INC. OF ALABAMA REGISTERED IN THE NAME
PROVIDED HEREIN WHICH THE UNDERSIGNED IS ENTITLED TO VOTE AT THE 1997 ANNUAL
MEETING OF STOCKHOLDERS, AND AT ANY ADJOURNMENTS THEREOF, WITH ALL THE POWERS
THE UNDERSIGNED WOULD HAVE IF PERSONALLY PRESENT. WITHOUT LIMITING THE GENERAL
AUTHORIZATION HEREBY GIVEN, SAID PROXIES ARE, AND EACH OF THEM IS, INSTRUCTED TO
VOTE OR ACT AS FOLLOWS ON THE PROPOSALS SET FORTH IN SAID PROXY.
THIS PROXY WHEN EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO
DIRECTION IS MADE THIS PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR
PROPOSAL 2.
IN THEIR DISCRETION THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
ELECTION OF DIRECTORS (OR IF ANY NOMINEE IS NOT AVAILABLE FOR ELECTION, SUCH
SUBSTITUTE AS THE BOARD OF DIRECTORS MAY DESIGNATE)
NOMINEES: JOHN D. LEFLER, ROBERT W. ACKERMAN, DALE S. OKONOW, STEVEN E. KAROL,
WILLIAM S. KAROL, HOWARD H. STEVENSON, ROBERT M. WADSWORTH, AND
ALEXANDER S. MCGRATH
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE.
_______
The Board of Directors recommends a vote FOR Proposals 1 and 2.
1. Election of Directors (See reverse). FOR ____ WITHHELD ____
____ For all nominees except as
noted above.
2. Proposal to Ratify the Appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending October 31, 1997.
_____ FOR _____ AGAINST _____ ABSTAIN
Please sign exactly as name(s) appears hereon. Joint
owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please
give full title as such.
Signature:_________________________ Date____________
Signature:_________________________ Date____________
