EXHIBIT 2
Pages 1 through 13 of the Company's Proxy Statement
dated April 10, 1998, relating to its annual meeting of
stockholders.
STEEL OF WEST VIRGINIA, INC.
17TH STREET AND 2ND AVENUE
HUNTINGTON, WEST VIRGINIA 25703
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 28, 1998
GENERAL INFORMATION
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Steel of West Virginia, Inc. (the "Company") to be used at the
Annual Meeting of Stockholders to be held at the Radisson Hotel Huntington, 1001
3rd Avenue, Huntington, West Virginia on Thursday, May 28, 1998, at 10:30 a.m.
and any adjournments thereof.
When the enclosed proxy is properly executed and returned, the shares of
Common Stock of the Company, par value $.01 per share (the "Common Stock"), it
represents will be voted at the meeting in accordance with any directions noted
thereon and, if no direction is indicated, the shares it represents will be
voted: (i) FOR the election of the nominees for Directors set forth below; (ii)
FOR the proposed amendment to the Company's Certificate of Incorporation to
authorize 5,000,000 additional shares of Common Stock; (iii) FOR the
ratification of the reappointment of Ernst & Young LLP as independent
accountants for the Company; and (iv) in the discretion of the holders of the
proxy with respect to any other business that may properly come before the
meeting. Any stockholder signing and delivering a proxy may revoke it at any
time before it is voted by delivering to the Secretary of the Company a written
revocation or a duly executed proxy bearing a date later than the date of the
proxy being revoked. Any stockholder attending the meeting in person may
withdraw his or her proxy and vote his or her shares.
The cost of this solicitation of proxies will be borne by the Company.
Solicitations will be made only by mail; provided, however, that officers and
regular employees of the Company may solicit proxies personally or by telephone
or telegram. Such persons will not be specially compensated for such services.
The Company may reimburse brokers, banks, custodians, nominees and fiduciaries
holding stock in their names or in the names of their nominees for their
reasonable charges and expenses in forwarding proxies and proxy material to the
beneficial owners of such stock.
The approximate mailing date of this Proxy Statement and the accompanying
proxy is April 10, 1998.
VOTING RIGHTS
Only stockholders of record at the close of business on April 3, 1998, will
be entitled to vote at the Annual Meeting of Stockholders. On that date, there
were 6,010,795 shares of Common Stock outstanding, the holders of which are
entitled to one vote per share on each matter to come before the meeting. Voting
rights are non-cumulative. A majority of the outstanding shares will constitute
a quorum at the meeting and abstentions and broker non-votes are counted for
purposes of determining the presence or absence of a quorum for the transaction
of business.
Directors are elected by plurality vote. The approval of the amendment to
the Company's Certificate of Incorporation will require the affirmative vote of
a majority of the outstanding Common Stock, and the ratification of the
reappointment of Ernst & Young LLP will require the affirmative vote of a
majority of the Common Stock voting on the proposal. Abstentions and broker
non-votes will not be counted in the election of directors or in determining
whether such ratification has been given.
1
PRINCIPAL STOCKHOLDERS
The following table sets forth as of March 25, 1998, the beneficial ownership
of Common Stock of each person known to the Company who owns more than 5% of the
issued and outstanding Common Stock.
Name and Address Amount and Nature of
of Beneficial Owner Beneficial Ownership Percent of Class(6)
- ------------------- -------------------- -------------------
FMR Corp. 698,000 (1) 11.34
82 Devonshire Street
Boston, Massachusetts 02109
Robert L. Bunting, Jr. 475,267 (2) 7.72
62 North Calibougue
Hilton Head, South Carolina 29928
First Manhattan Co. 466,000 (3) 7.57
437 Madison Avenue
New York, New York 10022
Wachovia Corporation 345,000 (4) 5.60
301 North Main Street
Winston-Salem, NC 27150-3099
Corbin & Company 317,715 (5) 5.16
6300 Ridglea Place, Suite 1111
Fort Worth, Texas 76116
- ------------------------------
(1) Fidelity Management & Research Company ("Fidelity"), 82 Devonshire Street,
Boston, Massachusetts 02109, a wholly-owned subsidiary of FMR Corp. and an
investment adviser registered under Section 203 of the Investment Advisors
Act of 1940, is the beneficial owner of 698,000 shares of Common Stock as a
result of acting as investment advisor to various investment companies
registered under Section 8 of the Investment Company Act of 1940. The
ownership of one investment company, Fidelity Low-Priced Stock Fund,
amounted to 663,000 shares of Common Stock. Fidelity Low-Priced Stock Fund
has its principal business office at 82 Devonshire Street, Boston,
Massachusetts 02109. Edward C. Johnson 3d, FMR Corp., through its control of
Fidelity, and the funds each has sole power to dispose of the 698,000 shares
owned by the Funds. Neither FMR Corp. nor Edward C. Johnson 3d, Chairman of
FMR Corp., has the sole power to vote or direct the voting of the shares
owned directly by the funds, which power resides with the funds' Board of
Trustees. Fidelity carries out the voting of the shares under written
guidelines established by the funds' Board of Trustees. Members of the
Edward C. Johnson 3d family and trusts for their benefit are the predominant
owners of Class B shares of Common Stock of FMR Corp., representing
approximately 49% of the voting power of FMR Corp. Mr. Johnson 3d owns 12.0%
and Abigail P. Johnson owns 24.5% of the aggregate outstanding voting stock
of FMR Corp. Mr. Johnson 3d is chairman of FMR Corp. and Abigail P. Johnson
is a director of FMR Corp. The Johnson family group and all other Class B
shareholders have entered into a shareholders' voting agreement under which
all Class B shares will be voted in accordance with the majority vote of
Class B shares. Accordingly, through their ownership of voting Common Stock
and the execution of the shareholders' voting agreement, members of the
Johnson family may be deemed, under the Investment Company Act of 1940, to
form a controlling group with respect to FMR Corp. The information set forth
herein is based on a Schedule 13G dated February 14, 1998 filed by FMR Corp.
with the Securities and Exchange Commission.
2
(2) Of this amount, 231,710 shares are held in a trust for the benefit of Mr.
Bunting's wife, Nancy L. Bunting, and 235,557 shares are held in a trust
for the benefit of Mr. Bunting. Mr. and Mrs. Bunting are co-trustees of
each of said trusts. This amount includes 8,000 shares that Mr. Bunting has
the right to acquire through the exercise of options.
(3) Includes 100,600 shares owned by family members of general partners of
First Manhattan Co., as to which First Manhattan Co. disclaims dispositive
power as to 600 of such shares and beneficial ownership as to 100,000 of
such shares. The information set forth herein is based on a Schedule 13G
dated February 9, 1998 filed by First Manhattan Co. with the Securities and
Exchange Commission.
(4) Wachovia Corporation ("Wachovia"), a holding company, is the beneficial
owner of 345,000 shares of Common Stock held by Wachovia Bank, N.A., as
trustee. Wachovia has sole voting and dispositive power over such shares.
The information set forth herein is based on a Schedule 13G dated February
11, 1998 filed by Wachovia with the Securities and Exchange Commission,
which filing Wachovia states should not be deemed an admission of
beneficial ownership by Wachovia or Wachovia Bank, N.A.
(5) Corbin & Company is a registered Investment Advisor. All of Corbin &
Company's holdings are held on behalf of other persons who have the right
to receive or the power to direct the receipt of dividends from or the
proceeds from the sale of such securities but no single client account
relates to more than 5% of the outstanding Common Stock. The information
set forth herein is based on a Schedule 13G dated February 6, 1998, filed
by Corbin & Company with the Securities and Exchange Commission.
(6) Includes 145,500 shares deemed outstanding that may be acquired through the
exercise of options.
3
DIRECTORS
PROPOSAL 1. ELECTION OF DIRECTORS
At the Annual Meeting of Stockholders, the entire Board of Directors,
consisting of five members, is to be elected. In the absence of instructions to
the contrary, the shares of Common Stock represented by a proxy delivered to the
Board of Directors will be voted FOR the five nominees named below. Each
nominee named below is presently serving as a Director of the Company and is
anticipated to be available for election and able to serve. However, if any
such nominee should decline or become unable to serve as a Director for any
reason, votes will be cast instead for a substitute nominee designated by the
Board of Directors or, if none is so designated, will be cast according to the
judgment in such matters of the person or persons voting the proxy.
The tables below and the paragraphs that follow present certain information
concerning the nominees for Director and the executive officers of the Company.
Each elected Director will serve until the next Annual Meeting of Stockholders
and until his successor has been elected and qualified. Officers are elected by
and serve at the discretion of the Board of Directors. None of the Company's
Directors or executive officers has any family relationship with any other
Director or executive officer.
SHARES OF
COMMON STOCK
BENEFICIALLY
POSITION WITH YEARS WITH OWNED AS OF PERCENT
NAME COMPANY AGE COMPANY MARCH 25, 1998 OF CLASS (4)
- ---- ------------- --- --------- ---------------- ------------
Albert W. Eastburn (1) Chairman and 69 5 12,388(2) *
Director
Timothy R. Duke President, Chief 46 11 38,197(3) *
Executive Officer
and Director
Stephen A. Albert Director 45 11 6,000(2) *
Daniel N. Pickens (1) Director 48 5 9,621(2) *
Paul E. Thompson (1) Director 67 4 8,733(2) *
All Directors and 85,406 1.39
executive officers
as a group
- ---------------------------
* Less than one percent
(1) Member of the Compensation and Benefits Committee and the Audit Committee.
(2) This amount includes 6,000 shares that may be acquired by each of Messrs.
Albert, Eastburn, Pickens and Thompson through the exercise of options.
(3) This amount includes 17,700 shares that may be acquired through the
exercise of options.
(4) Includes 145,500 shares deemed outstanding that may be acquired through the
exercise of options.
4
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
SHARES OF
COMMON STOCK
BENEFICIALLY
POSITION AND OFFICES EXECUTIVE OWNED AS OF PERCENT
NAME WITH COMPANY AGE OFFICER SINCE MARCH 25, 1998 OF CLASS (2)
- ---- ------------------- --- ------------- ---------------- ------------
W. Bruce Groff, Jr. Vice President of 56 1998 1,270 *
Human Relations
Mark G. Meikle Vice President, 33 1996 9,197(1) *
Treasurer and Chief
Financial Officer
- -------------------------
* Less than one percent.
(1) This amount includes 7,800 shares that may be acquired through the exercise
of options.
(2) Includes 145,500 shares deemed outstanding that may be acquired through the
exercise of options.
BUSINESS EXPERIENCE OF NOMINEES AND EXECUTIVE OFFICERS
Albert W. Eastburn has been a Director of the Company since April 1993 and
Chairman of the Board since July 1997. Mr. Eastburn was President and Chief
Operating Officer of the Steel Group of Lukens, Inc., a leading specialized
manufacturer of steel plate and stainless steel products ("Lukens"), from
November 1988 until his retirement in 1991. Prior thereto, Mr. Eastburn held
various positions at Lukens, which he joined in 1955.
Timothy R. Duke has been President and Chief Executive Officer since July
1997; President and Chief Operating Officer from October 1996 to July 1997; a
Director since October 1996; Vice President, Treasurer and Chief Financial
Officer from March 1988 to October 1996; and Controller from June 1987 to March
1988. Mr. Duke was formerly the Manager-Operations Accounting at Joy
Manufacturing Company ("Joy"), and served in various positions at Joy from 1979
until he joined the Company. Mr. Duke is a certified public accountant and a
certified management accountant.
Stephen A. Albert has been a Director of the Company since December 1986.
Since January 1996, Mr. Albert has been a member of the law firm of Sierchio &
Albert, P.C., counsel to the Company. Prior thereto, Mr. Albert was, since
February 1989, special counsel to the law firm of Proskauer Rose LLP, counsel to
the Company until January 1996, and prior thereto, Mr. Albert was a member of
the law firms of Feit & Ahrens and Feit & Shor, which were counsel to the
Company until February 1989. Mr. Albert has been engaged in the practice of law
in New York City since 1977.
Daniel N. Pickens has been a Director of the Company since April 1993. Mr.
Pickens has been a Vice President in the investment banking firm of Janney
Montgomery Scott Inc. since July 1996. Prior thereto, Mr. Pickens was a First
Vice President in the Corporate Finance Department of Wheat First Securities,
Inc. ("Wheat First") and held various positions at Wheat First since 1981.
Before joining Wheat First, Mr. Pickens practiced
5
as an attorney in Philadelphia, Pennsylvania.
Paul E. Thompson has been a Director of the Company since January 1994. From
1986 until his retirement in 1992, Mr. Thompson was a Sub-District Director,
District 23, of the United Steel Workers of America ("USWA"). Prior thereto,
Mr. Thompson was a Staff Representative, District 23, of the USWA.
W. Bruce Groff, Jr. has been the Vice President of Human Relations of the
Company since January 1998. Mr. Groff was the Director of Human Resources at
Cerro Metal Products from July, 1996, until joining the Company. Prior thereto,
Mr. Groff was the Director of Human Resources of Otis Elevator Company, North
American Operations for eight years and before that Mr. Groff held various
positions at Joy for 15 years, the last of which was Director of Labor
Relations.
Mark G. Meikle has been Vice President, Treasurer and Chief Financial Officer
of the Company since October 1996, Corporate Controller from February 1991 until
October 1996, and Assistant Controller from April 1989 to February 1991. Mr.
Meikle previously was employed by Ernst & Young working in both the audit and
tax departments. Mr. Meikle is a certified public accountant and a certified
management accountant.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During the year ended December 31, 1997, the Board of Directors held 13
meetings. During that period no Director attended fewer than 75% of the
aggregate of (i) the total number of meetings of the Board of Directors held
during the period for which he was a Director and (ii) the total number of
meetings held by all Committees of the Board of Directors on which he served
during the period that he served on such Committees.
The Company's Board of Directors has a Compensation and Benefits Committee
and an Audit Committee. The Board of Directors does not have a standing
nominating committee. The Compensation and Benefits Committee (the "Compensation
Committee") reviews employee compensation and benefits, and the Audit Committee
reviews the scope of the independent audit, the appropriateness of the
accounting policies, the adequacy of internal controls, the Company's year-end
financial statements and such other matters relating to the Company's financial
affairs as its members deem appropriate. During 1997, the Compensation and
Benefits Committee held two meetings and the Audit Committee held one meeting.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following summary compensation table sets forth individual compensation
information for the Chief Executive Officer and each of the Company's executive
officers whose aggregate compensation exceeded $100,000 during the year ended
December 31, 1997 (the "Named Executive Officers").
6
ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- --------------------------- ---- --------- ------------ ---------------
Robert L. Bunting, Jr. 1997 $121,875 $ 85,995(4) $413,821(5)
(former) Chief Executive Officer 1996 225,000 112,500 8,538(5)
and Director (1) 1995 225,000 150,750 9,958(5)
Timothy R. Duke, Chief 1997 $219,775 $158,760(4) $ 12,703(6)
Executive Officer, President 1996 153,327 78,400 6,058(6)
and Director (2) 1995 139,167 77,679 9,570(6)
Mark G. Meikle, Vice President, 1997 $101,667 $ 58,960(4) $ 4,978(7)
Treasurer and Chief 1996 80,676 1,869 3,111(7)
Financial Officer 1995 70,544 5,470 3,609(7)
Larry E. Gue, (former) Vice 1997 $120,000 $ 1,987 $ 6,630(8)
President of Human 1996 120,000 1,869 5,268(8)
Resources (3) 1995 120,000 35,470 6,403(8)
(1) Mr. Bunting retired from his positions as Chief Executive Officer and
Director as of July 11, 1997.
(2) Mr. Duke became the Chief Executive Officer of the Company on
July 11, 1997.
(3) Mr. Groff replaced Mr. Gue, as Vice President of Human Relations,
in January, 1998.
(4) Includes the following discretionary cash bonuses recognized in 1997 results
of operations but paid in January 1998; $85,995 to Robert L. Bunting, Jr.;
$158,760 to Timothy R. Duke; and $58,960 to Mark G. Meikle.
(5) Consists of (i) $383,644 paid to Mr. Bunting pursuant to the Non-Competition
Agreement described herein under "Agreements Regarding Termination of
Employment," (ii) $21,443 paid to Mr. Bunting pursuant to his supplemental
executive retirement plan, which paid the amount that he would have received
under the Company's tax qualified retirement plan if the Internal Revenue
Code limits did not apply; and (iii) $7,281, $6,081 and $7,500 contributed
to a defined contribution plan and $1,453, $2,457, and $2,458 of costs for
group-term life insurance coverage provided by the Company for 1997, 1996
and 1995, respectively.
(6) Consists of $7,500, $5,676 and $6,708 contributed to a defined contribution
plan, $593, $382, and $186 costs for group-term life insurance coverage
provided by the Company and $4,610, $0 and $2,676 paid in connection with
the Company's scholarship program, which is available to all employees to
which the Company pays a portion of the cost of post-high school education
for employees' dependents, for 1997, 1996 and 1995, respectively.
(7) Consists of $4,921, $3,076 and $3,583 contributed to a defined contribution
plan and $26, $35 and $57 of costs for group-term life insurance coverage
provided by the Company for 1997, 1996 and 1995, respectively.
(8) Consists of $6,000, $4,865 and $6,000 contributed to a defined contribution
plan and $630, $403 and $403 of costs for group-term life insurance
coverage provided by the Company for 1997, 1996 and 1995, respectively.
7
The following tables present certain additional information concerning stock
options granted to the Named Executive Officers in 1997.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
- -----------------------------------------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE
OPTIONS VALUE AT ASSUMED
GRANTED TO EXERCISE ANNUAL RATES OF
EMPLOYEES OR BASE STATED STOCK PRICE
OPTIONS IN FISCAL PRICE(PER EXPIRATION APPRECIATION FOR
NAME GRANTED(#)(1) YEAR SHARE)(2) DATE OPTION TERM(3)
- ---- ------------- ----------- ---------- --------- --------------------
5% 10%
---------- ---------
Robert L. Bunting, Jr. 12,300(4) 17.2 $9.00 5/15/07 $180,319 $287,123
Timothy R. Duke 11,700 16.4 $9.00 5/15/07 171,523 273,117
Mark G. Meikle 4,800 6.7 $9.00 5/15/07 70,368 112,048
Larry E. Gue 3,600 5.0 $9.00 5/15/07 52,776 84,036
- --------------------------
(1) These options were granted as of May 15, 1997 in connection with the
Company's 1995 Employee Stock Option Plan, and each option becomes
exercisable on May 15, 1998.
(2) The exercise price for these options is equal to the market price of the
Company's Common Stock on May 15, 1997.
(3) The amounts shown under these columns are the result of calculations at
5% and 10% rates over the ten year term of the options as required by the
Securities and Exchange Commission and are not intended to forecast future
appreciation of the stock price of the Company's Common Stock. The actual
value, if any, an executive officer may realize will depend on the excess of
the stock price over the exercise price on the date the option is exercised.
(4) These options expired on July 11, 1997, upon Mr. Bunting's retirement.
AGGREGATED FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money
at December 31, 1997 Options at December 31, 1997
------------------------------ ----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---------------------- ------------ --------------- ------------- -------------
Robert L. Bunting, Jr. 8,000 0 --- $ ---
Timothy R. Duke 6,000 11,700 --- 1,462
Mark G. Meikle 3,000 4,800 --- 600
Larry Gue 3,000 3,600 --- 450
AGREEMENTS REGARDING TERMINATION OF EMPLOYMENT
The Company entered into Change of Control Severance Agreements with Mr. Duke
and Mr. Meikle, dated July 9, 1997 and July 7, 1997, respectively, which provide
that upon a "change of control," Mr. Duke or Mr. Meikle will be entitled to
receive an amount equal to the greater of (i) 125% of his annual base salary for
the year in which such severance of employment occurs, and (ii) 125% of his
annual base salary for the year preceding the
8
year in which such severance of employment occurs, payable at Mr. Duke's or Mr.
Meikle's option in a lump sum or bi-monthly during the 12 months following such
severance. A "change of control" is defined in the agreement to have occurred
if (i) the Company or SWVA, Inc., a wholly-owned subsidiary of the Company
("SWVA"), is a party to a merger or combination under the terms of which any
person or group (as that term is defined in Rule 13d-5 under the Securities and
Exchange Act of 1934, as amended) owns 20% or more of the shares in the
resulting company, or (ii) at least 50% in fair market value of the Company's or
SWVA's assets are sold, or (iii) at least 20% in voting power in election of
directors of the Company's or SWVA's capital stock is acquired by any one person
or group as that term is used in Rule 13d-5, or (iv) the individuals comprising
the Board of Directors of the Company on the date of the agreement cease to
comprise a majority of the Board of Directors of the Company or SWVA.
In connection with Mr. Bunting's retirement from the positions of Chairman
and Chief Executive Officer the Company and Mr. Bunting entered into a Non-
Competition Agreement effective as of July 11, 1997. The Non-Competition
Agreement provides that Mr. Bunting will not engage in any activities that are
competitive with the Company during the 18 month period following the effective
date of that Agreement. Pursuant to said Agreement Mr. Bunting received a lump-
sum payment of 383,644.
DIRECTORS' COMPENSATION
Pursuant to the 1995 Non-Employee Director's Stock Option Plan (the
"Directors' Plan"), which is administered by the Compensation Committee, on
April 1 of each year each Director (currently Messrs. Albert, Eastburn, Pickens
and Thompson) who is not an active employee of the Company receives a grant of
options to purchase 2,000 shares of Common Stock. All such options are
exercisable at the fair market value (determined in accordance with the
provisions of the Directors' Plan) at the date of grant, commencing on the first
anniversary of that date, and expire ten years after that date. The Directors'
Plan authorizes the issuance of up to 70,000 shares of Common Stock upon the
exercise of non-qualified stock options granted to non-employee Directors of the
Company.
The non-employee Directors (other than Mr. Albert) also receive cash
compensation for services as a Director, consisting of an annual retainer in the
amount of $6,000, a fee of $1,000 for each committee on which he serves, and a
fee of $1,000 for each meeting of the Board of Directors, the Compensation
Committee and the Audit Committee that he attends, of which $11,000 of the
compensation payable for a given year is paid in cash, and the balance of such
compensation is paid by an award of shares of the Company's Common Stock. The
award is paid on December 15 of each year, with the number of shares to be
awarded determined by dividing the Director's compensation for the year, less
$11,000, by the fair market value of the Common Stock on that date, with the
Director receiving cash in lieu of fractional shares. In 1997, the non-employee
Directors as a group received for their services as Directors cash compensation
of $33,000 and 4,026 shares of Common Stock.
As of March 24, 1998, all Directors who are not active employees of the
Company have been granted options for an aggregate of 32,000 shares (8,000
shares each), of which options to acquire 24,000 shares have vested, and options
to acquire 6,000 shares will vest on April 1, 1999. Of the vested options, one-
third have an exercise price of $11 5/8 per share, one-third have an exercise
price of $9 per share, and one-third have an exercise price of $8 per share. The
exercise price of the unvested options is $10 1/4 per share. All of the options
are for a period of ten years from the date of grant.
On March 24, 1998, the closing sale price for the Common Stock on the NASDAQ
Stock Market, Inc. $10 1/2.
COMPENSATION COMMITTEE REPORT
COMPENSATION POLICIES
The Compensation Committee of the Board of Directors is comprised of
Directors who are not active employees of the Company. The Compensation
Committee is responsible for reviewing and making
9
recommendations to the Board of Directors regarding the compensation and
benefits of the Company's management. The Committee's philosophy is that the
Company's goals are more likely to be achieved if management is encouraged to
work together as a team and if final compensation is tied to the Company's and
the individual's performance during the year, so that incentive compensation is
awarded to management personnel, including the Company's Chief Executive
Officer, to the extent that the Company achieves certain corporate goals, and
the particular individual achieves certain personal goals. These goals include
such Company factors as the change in operating income from the prior year, the
Company's achievement of budgeted earnings objectives, and the Company's results
of operations in light of economic conditions in the industry and the general
economy, and such personal factors as the individual's supervision of or
performance in his or her particular business unit, and his or her supervision
of significant corporate projects. Stock options are granted so as to more
directly align the long-term financial interests of the Company's management and
stockholders.
FISCAL 1997 COMPENSATION
In 1997, the base compensation of the Company's Chief Executive Officer,
Timothy R. Duke, was $225,000, which was the base compensation earned by the
preceding Chief Executive Officer and the base compensation deemed by the
Compensation Committee to be appropriate for the position. Discretionary
bonuses awarded to management personnel for 1997 were paid in 1998, as described
under "Executive Compensation." In May 1997 the Compensation Committee granted
options for a total of 79,500 shares of Common Stock, including options granted
to the Named Executive Officers (as set forth herein under "Option Grants in
Last Fiscal Year"), at an exercise price of $9.00 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Albert W. Eastburn, a member of the Compensation Committee, was elected the
Chairman of the Company as of July 11, 1997. The compensation received by Mr.
Eastburn for serving as a Director of the Company is non-discretionary, as
described above under "Directors' Compensation." Mr. Eastburn receives no
additional compensation for serving as Chairman.
COMPENSATION COMMITTEE
Albert W. Eastburn
Daniel N. Pickens
Paul E. Thompson
10
PERFORMANCE GRAPH
Below is a graph comparing the cumulative total stockholder return on the
Company's Common Stock for the last five years with the cumulative total return
of companies included in the S&P 500 Stock Index and an index of peer companies
selected by the Company. The graph assumes (i) investment of $100 on December
31, 1992 in the Company's Common Stock, the S&P 500 Index and common stock of
the peer group and (ii) the reinvestment of all dividends. The peer group
consists of Commercial Metals Co., Lukens, Inc., New Jersey Steel Corp., Nucor
Corp. and Roanoke Electric Steel Corp.
[PERFORMANCE GRAPH APPEARS HERE]
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- -------
PEER GROUP 100.00% 130.32% 134.99% 138.98% 125.11% 118.49%
SWVA 100.00% 154.55% 133.33% 112.12% 90.91% 110.61%
S&P 500 100.00% 107.06% 105.41% 141.36% 170.01% 222.72%
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Company's Directors, executive officers and beneficial owners of
more than 10% of the Company's Common Stock 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. Form 5's
to report the receipt of stock option grants to Messrs. Stephen Albert, Albert
Eastburn, Timothy Duke, Daniel Pickens, Paul Thompson, Mark Meikle, Larry Gue
and Robert L. Bunting under the Company's 1995 Employee Stock Option Plan and
the Directors' Plan, and to report the receipt of Common Stock by Messrs.
Eastburn, Pickens and Thompson pursuant to the Directors' Plan, all of which
Forms have been filed, were not initially filed on a timely basis. Mr. T. Elton
North, the former President of Marshal Steel, Inc. (a wholly-owned subsidiary of
the Company), did not file a Form 5 with regard to stock options granted to him
in May 1997, which options expired upon his leaving the Company in December
1997.
11
CERTAIN TRANSACTIONS
The law firm of Sierchio & Albert, P.C., of which Stephen Albert, a Director
of the Company, is a member, has served as general counsel to the Company since
January 1996. In 1997, the Company paid legal fees totalling $123,000 to
Sierchio & Albert, P.C. for general representation of the Company.
PROPOSAL 2. AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO
AUTHORIZE 5,000,000 ADDITIONAL SHARES OF COMMON STOCK
The Board of Directors of the Company has approved, subject to stockholder
approval, an amendment to Article FOURTH of the Company's Certificate of
Incorporation to increase the authorized shares of Common Stock from 12,000,000
to 17,000,000. The full text of the proposed amendment is as follows:
"FOURTH: The total number of shares of capital stock that the Corporation
shall have authority to issue is seventeen million (17,000,000) shares of
Common Stock, par value $.01 per share."
As of March 25, 1998, there were 6,010,795 shares of Common Stock
outstanding, and options to purchase an aggregate of 145,500 shares of Common
Stock were outstanding under the 1995 Employee Stock Option Plan and the
Directors' Plan (the "Option Plans") (a total of 500,000 shares are reserved for
issuance under the Option Plans). The additional shares of Common Stock that
would be available for issuance if the proposed amendment to the Certificate of
Incorporation is approved may be issued for any proper corporate purpose at any
time without further stockholder approval (subject, however, to applicable
statutes or the rules of the NASDAQ National Market which require stockholder
approval for the issuance of shares in certain circumstances). The Board of
Directors believes it is desirable to give the Company this flexibility in
considering such matters as raising additional capital, acquisitions, or other
corporate purposes, including any future issuance of shares in connection with
the Company's Shareholders' Rights Plan. The authorization of such shares will
enable the Company to act promptly and without additional expense if appropriate
circumstances arise which require the issuance of such shares. The Company has
no current agreements, commitments, plans or intentions to issue any additional
shares. Holders of Common Stock are not entitled to preemptive rights, and to
the extent that any additional shares of Common Stock or securities convertible
into Common Stock may be issued other than on a pro rata basis to current
stockholders, the current ownership portion of current stockholders may be
diluted. Depending upon the circumstances in which such additional shares of
Common Stock are issued, the overall effects of such issuance may be to render
more difficult or to discourage a merger, tender offer, proxy contest, or the
assumption of control by a holder of a large block of Common Stock and the
removal of incumbent management. For example, such shares could be used to
create voting or other impediments or to discourage persons seeking to gain
control of the Company, and such shares could be privately placed with
purchasers favorable to the Board of Directors in opposing such action. The
issuance of new shares also could be used to dilute the stock ownership of a
person or entity seeking to obtain control of the Company should the Board of
Directors consider an action of such entity or person not to be in the best
interests of the stockholders and the Company. Management of the Company is not
aware of any takeover attempts at this time.
In the absence of instructions to the contrary, the shares of Common Stock
requested by a proxy delivered to the Board of Directors will be voted FOR the
approval of the amendment to the Company's Certificate of Incorporation to
authorize 5,000,000 additional shares of Common Stock.
ACCOUNTANTS
PROPOSAL 3. SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors recommends the ratification by the stockholders of the
reappointment by the Board of Directors of Ernst & Young LLP as the Company's
independent accountants for the fiscal year ending December 31, 1998. In the
absence of instructions to the contrary, the shares of Common Stock represented
by a proxy delivered to the Board of Directors will be voted FOR the
ratification of the reappointment of Ernst & Young LLP.
12
A representative of Ernst & Young LLP is expected to be present at the Annual
Meeting and will be available to respond to appropriate questions and make such
statements as he or she may desire.
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINEES
FOR 1999 ANNUAL MEETING
It is contemplated that the Company's 1999 Annual Meeting of Stockholders
will be held on or about May 27, 1999. Stockholders of the Company who intend
to submit proposals or submit nominees for the election of Directors at the next
Annual Meeting of Stockholders must submit such proposals to the Company no
later than December 10, 1998. Stockholder proposals should be submitted to
Steel of West Virginia, Inc., P.O. Box 2547, Huntington, West Virginia 25726,
Attention: Mark G. Meikle, Vice President, Treasurer and Chief Financial
Officer.
ANNUAL REPORT
The Company's Annual Report for the year ended December 31, 1997, including
financial statements, is being mailed together with this Proxy Statement to the
Company's stockholders of record at the close of business on April 3, 1998. THE
COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS SOLICITED BY
THIS PROXY STATEMENT A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
YEAR ENDED DECEMBER 31, 1997, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
A WRITTEN REQUEST FOR A COPY OF SUCH ANNUAL REPORT ON FORM 10-K SHOULD BE
DIRECTED TO STEEL OF WEST VIRGINIA, INC., P.O. BOX 2547, HUNTINGTON, WEST
VIRGINIA 25726, ATTENTION: MARK G. MEIKLE, VICE PRESIDENT, TREASURER AND CHIEF
FINANCIAL OFFICER.
OTHER BUSINESS
The Board of Directors does not know of any other business to be presented to
the meeting and does not intend to bring any other matters before the meeting.
However, if any other matters properly come before the meeting or any
adjournments thereof, it is intended that the persons named in the accompanying
proxy will vote thereon according to their best judgment in the interests of the
Company.
By Order of the Board of Directors
Stephen A. Albert
Secretary
APRIL 10, 1998
STOCKHOLDERS ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT
IN THE ENCLOSED SELF-ADDRESSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES. YOUR PROMPT RESPONSE WILL BE HELPFUL, AND YOUR COOPERATION
WILL BE APPRECIATED.
13