SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
Steel Dynamics, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
[STEEL DYNAMICS, INC. (TM) LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 29, 2003
To our Stockholders:
You are cordially invited to attend the Annual Meeting of Steel
Dynamics, Inc. The information for the meeting is as follows:
TIME.......................... 9:00 a.m., Fort Wayne time
Thursday, May 29, 2003
PLACE ........................ Grand Wayne Center
John Whistler Ballroom
120 West Jefferson Boulevard
Fort Wayne, Indiana 46802
ITEMS OF BUSINESS............. (1) To elect eleven (11) Directors for a one-year term.
(2) To approve Ernst & Young LLP as our independent auditors for the fiscal year ending December
31, 2003.
(3) To approve the Steel Dynamics, Inc. 2003 Executive Incentive Compensation Plan.
(4) To conduct other business properly raised before the meeting and any adjournment or
postponement of the meeting.
RECORD DATE................... You may vote if you were a stockholder of record on March 25, 2003.
2002 ANNUAL REPORT............ Our 2002 Annual Report to Stockholders, which is not a part of this proxy soliciting material, is
enclosed.
PROXY VOTING.................. You will be able to vote in one of four ways:
(1) Mark, sign, date and return your proxy card in the enclosed envelope.
(2) Call the toll-free telephone number on your proxy card and follow the instructions for
telephone voting.
(3) Visit the web site shown on your proxy card and follow the instructions for voting on the
Internet.
(4) Vote in person at the meeting.
You may always revoke your proxy before it is voted at the meeting by following the instructions in
the accompanying proxy statement.
/s/ KEITH E. BUSSE
KEITH E. BUSSE
President and Chief Executive Officer
April 24, 2003
TABLE OF CONTENTS
PAGE
Voting Information.......................................................................................... 1
Governance of the Company................................................................................... 4
PROPOSAL NO. 1 - ELECTION OF DIRECTORS...................................................................... 6
Information on Directors and Executive Officers............................................................. 8
Executive Compensation...................................................................................... 10
Equity Compensation Plan Information........................................................................ 11
Option Grants in Last Fiscal Year........................................................................... 11
Aggregated Option Exercises in 2002 and Fiscal Year-End Values.............................................. 12
PROPOSAL NO. 2 - RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS.................................... 13
PROPOSAL NO. 3 - APPROVAL OF 2003 EXECUTIVE INCENTIVE COMPENSATION PLAN..................................... 14
Report of the Compensation Committee on Executive Compensation.............................................. 20
Report of the Audit Committee............................................................................... 21
Stockholder Return Performance Graph........................................................................ 23
STEEL DYNAMICS, INC.
6714 POINTE INVERNESS WAY, SUITE 200
FORT WAYNE, IN 46804
TELEPHONE: (260) 459-3553
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 29, 2003
VOTING INFORMATION
PURPOSE. We are providing you with these proxy materials in connection
with the solicitation of proxies by our Board of Directors, to be voted at our
2003 Annual Meeting of stockholders and at any postponement or adjournment
thereof. We will hold the meeting on May 29, 2003, beginning at 9:00 a.m. Fort
Wayne time, in the John Whistler Ballroom of the Grand Wayne Center, 120 West
Jefferson Boulevard, Fort Wayne, Indiana 46802.
We started mailing this proxy statement and the enclosed proxy card
beginning on or about April 24, 2003. We are soliciting proxies from all of our
stockholders in order to give all stockholders an opportunity to vote on matters
to be presented at the meeting, even if they do not attend in person. In the
following pages of this proxy statement, you will find information on matters to
be voted on at the meeting or at any adjournment or postponement of the meeting.
This Notice of Annual Meeting and Proxy Statement, the proxy and our 2002 Annual
Report to Stockholders are also available on our internet site at
www.steeldynamics.com under the heading "Investor Info."
WHO CAN VOTE. You are entitled to notice of and to vote at the annual
meeting if you were a stockholder of record at the close of business on March
25, 2003. If your shares of common stock are registered in your name, you are
the stockholder of record. If your shares are held in the name of a broker,
custodian, bank, or other holder of record, that person is the stockholder of
record and you are considered the "beneficial" owner. If you are not present in
person at the annual meeting, your shares can be voted only if represented by a
valid proxy, as described below under "Voting of Shares."
SHARES OUTSTANDING. On March 25, 2003, there were 47,631,097 shares of
common stock outstanding. A list of stockholders entitled to vote at the meeting
is available at our corporate headquarters office and will also be available at
the meeting. Each share is entitled to one vote on each matter properly brought
before the meeting.
ANNUAL MEETING WEBCAST. We will be webcasting this year's annual
meeting. You may access the webcast at www.steeldynamics.com by selecting
"webcast." However, other than our proxy statement and form of proxy, no other
information on our website is to be considered a part of our proxy soliciting
materials.
VOTING OF SHARES. We realize that most of our stockholders will
probably not be able to attend the meeting in person. However, it is very
important that your shares be represented by proxy. This is because we can only
take action at the annual meeting, with respect to a particular matter, if on
the record date a quorum, or majority, of the total number of shares of common
stock outstanding and entitled to vote on that matter is present, in person or
by proxy. Therefore, we are asking for your proxy to authorize the persons named
in the proxy to be present and to vote your shares at the annual meeting in
accordance with your instructions.
For purposes of determining whether a quorum is present, shares voted
FOR, AGAINST or
1
ABSTAIN, as well as broker "non-votes" count as shares that are present,
although they will not count in determining total votes actually cast on a
particular matter. A broker non-vote on a particular proposal occurs if and when
a person holding shares for another beneficial owner, such as a broker,
custodian, bank, or other holder of record, does not vote on that proposal
because that person does not have discretionary voting power to vote on that
proposal and has not received instructions on how to vote from the beneficial
owner. In this regard, the New York Stock Exchange ("NYSE") has proposed new
regulations that, if adopted prior to our annual meeting, would prohibit brokers
or other nominees that are NYSE member organizations (which most brokers and
nominees are) from voting in favor of proposals relating to equity compensation
plans, such as Proposal No. 3, unless they receive specific instructions from
the beneficial owners of the shares on how to vote those shares.
This year, we are offering you three choices of how to vote by proxy:
- You may vote by mail in the traditional manner by marking,
signing, dating and returning your enclosed proxy card in the
envelope that we have enclosed.
- You may vote by telephone using the toll-free telephone number
and instructions shown on your proxy card.
- You may vote via the internet by using the web site
information and instructions listed on your proxy card.
We anticipate that telephone and internet voting will be available 24
hours a day, 7 days a week. Both methods will prompt you on how to proceed and
you will be able to confirm that your instructions have been properly received
and recorded. For both of these methods, you will also need a control number,
which is noted on your proxy card. The telephone and internet voting facilities
will close at 11:59 p.m. Eastern Time on May 28, 2003.
The method by which you vote will not limit your right to vote in
person at the meeting if you decide to attend the meeting.
If you are not the record owner and your shares are held in the name of
a broker, custodian, bank, or other holder of record, you will need to obtain,
and should receive in the ordinary course of business from that broker, bank or
other holder of record, a proxy, executed in your favor from that record holder,
authorizing you to vote those shares at the annual meeting.
If you properly fill in and sign your proxy card and mail it in the
enclosed, prepaid and addressed envelope, or if you submit your proxy
instructions by telephone or over the internet, your "proxy"--that is, the
persons named in your proxy card--will vote your shares as you have directed. If
you do not make specific choices, your proxy will vote your shares as
recommended by the Board of Directors as follows:
- FOR the election of all of the director nominees.
- FOR ratification of the appointment of Ernst & Young LLP as
independent auditors.
- FOR the approval of the 2003 Executive Incentive Compensation
Plan.
If any other matters are properly presented for consideration at the
annual meeting, including consideration of a motion to adjourn the meeting to
another time or place in order to solicit additional proxies in favor of the
recommendations of the Board of Directors, the persons named as proxies and
acting thereunder will have the discretion to vote on those matters according to
their best judgment to the same extent as the person granting the proxy. At the
date this proxy statement was printed, we did not anticipate that any other
matters would be raised at the annual meeting.
You may revoke your proxy at any time before it is voted at the meeting
in one of four ways:
- Notify our Corporate Secretary in writing before the meeting
that you wish to revoke your proxy.
- Submit another proxy with a later date.
- Vote by telephone or internet on a later date.
- Vote in person at the meeting.
REQUIRED VOTE. So long as a quorum is present, the affirmative vote of
a majority of the shares present, in person or by proxy, and entitled to vote at
the meeting is needed to elect directors, to ratify the appointment of Ernst &
Young LLP as independent auditors for the year 2003, to approve the 2003
Executive Incentive Compensation Plan, and on any other matters that may
properly come before the annual meeting.
ELECTRONIC ACCESS TO PROXY MATERIALS AND ANNUAL REPORTS. This proxy
statement and the 2002 Annual Report to Stockholders are available on our
website at www.steeldynamics.com under the heading "Investor Info." Stockholders
will be able to
2
elect to view future proxy statements and annual reports over the internet
instead of receiving paper copies in the mail.
If you are a stockholder of record, you can choose this option and save
us the cost of producing and mailing these documents by marking the appropriate
box on your proxy card or by following the instructions provided on the internet
if you choose to vote over the internet. You can also choose between paper
documents and electronic access by contacting our Investor Relations Department
in the manner described.
If you choose to view future proxy statements and annual reports over
the internet, you will still receive a proxy card in the mail next year with
instructions containing the internet address of those materials. Your choice
will then remain in effect until you contact our Investor Relations Department
in the manner described.
If you hold your Steel Dynamics stock through a broker, custodian,
bank, or other holder of record, please refer to the information provided by
that entity for instructions on how to elect to view future proxy statements and
annual reports over the internet. Similarly, if you hold your Steel Dynamics
stock through a broker, custodian, bank, or other holder of record and you elect
electronic access, you will receive an e-mail message next year containing the
internet address to use to access our proxy statement and annual report.
MULTIPLE STOCKHOLDERS SHARING THE SAME ADDRESS. Under rules adopted by
the SEC, we are permitted to deliver a single copy of our proxy statement and
annual report to stockholders sharing the same address. This process, called
householding, allows us to reduce the number of copies of these materials that
we must print and mail.
This year, we implemented householding for all stockholders who share
the same last name and address, where shares are held through the same nominee
(e.g., all accounts are at the same brokerage firm), so that they are receiving
only one copy of the proxy statement and annual report per address.
However, if any stockholder of record residing at such an address
wishes to receive a separate annual report or proxy statement in the future,
that person may contact our Investor Relations Department in the manner
described. If you are an eligible stockholder of record receiving multiple
copies of our annual report and proxy statement, you may also request
householding by contacting us in the same manner. If you hold your shares
through a broker, custodian, bank, or other holder of record, you can request
householding by contacting that broker, custodian, bank, or other holder of
record,.
COST OF PREPARING, MAILING AND SOLICITING PROXIES. We will pay all of
the costs of preparing, printing and mailing this proxy statement and of
soliciting these proxies. We will ask brokers, custodians, banks, or other
holders of record, to forward the proxy materials and our 2002 Annual Report to
the persons who were our beneficial owners on the record date. We will also
reimburse such brokers, custodians, banks and other holders of record for their
expenses incurred in sending proxies and proxy materials to our beneficial
owners.
In addition, proxies may be solicited on our behalf in person, by
telephone or otherwise, by our officers, directors and employees. We have also
engaged the firm of Georgeson & Co. to assist us in the distribution and
solicitation of proxies. We have agreed to pay Georgeson & Co. a fee of up to
$6,500 plus expenses for these services.
ANNUAL REPORT. We are including in this mailing a copy of our 2002
Annual Report to Stockholders, including our financial statements for the
required periods ended December 31, 2002. The 2002 Annual Report is not,
however, a part of this proxy statement.
VOTING RESULTS. We will publish the voting results on our website at
www.steeldynamics.com, at "Investor Info" following the annual meeting, as well
as in our Form 10-Q for the second quarter of 2003, which we will file with the
Securities and Exchange Commission ("SEC") in July 2003.
INVESTOR RELATIONS DEPARTMENT. You may contact our Investor Relations
Department in one of four ways:
- writing to Steel Dynamics, Inc., Investors Relations
Department, 6714 Pointe Inverness Way, Suite 200, Fort Wayne,
Indiana 46804;
- fax at 260-969-3590 to the attention of the Investors
Relations Department;
- e-mail to fred.warner@steeldynamics.com; or
- phone the Investors Relations Department at 260-969-3564.
3
GOVERNANCE OF THE COMPANY
Our business, property and affairs are managed by, or are under the
direction of our Board of Directors, pursuant to Indiana's Business Corporation
Law and our bylaws. Members of the Board are kept informed of our business and
of business and industry developments through discussions with the Chief
Executive Officer and other officers, by reviewing materials provided to them by
management or otherwise obtained, and through participation in meetings of the
Board and its committees.
During 2002, our Board of Directors consisted of 12 persons. Under our
bylaws, however, our Board of Directors may amend the bylaws to prescribe a
greater or lesser number of directors, and the Board has amended the bylaws to
provide that, for 2003, the Board will consist of eleven directors. At the
Annual Meeting, therefore, eleven directors will be elected, and each newly
elected director will serve for a one-year term until the 2004 Annual Meeting of
stockholders.
The Board has adopted a set of Corporate Governance Policies that
address the make-up and function of the Board and the various committees of the
Board. You can find a copy of these Corporate Governance Policies on our company
website, at www.steeldynamics.com, under "Investor Information--Corporate
Governance" or by writing to Steel Dynamics, Inc., Attention: "Investor
Relations," 6714 Pointe Inverness Way, Suite 200, Fort Wayne, Indiana 46804 and
requesting a copy. We will keep these policies and our governance practices
current, as may be required by the Sarbanes-Oxley Act of 2002 and any rule
changes prescribed by the SEC and by Nasdaq.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS. During 2002, the
Board of Directors had three committees: an Audit Committee, a Compensation
Committee and a Nominating Committee. For 2003, the Board of Directors also has
three ongoing committees, the Audit Committee, the Compensation Committee and a
reconstituted Corporate Governance and Nominating Committee. Our Audit Committee
consists of four persons and our Compensation Committee and Corporate Governance
and Nominating Committee each consist of three persons.
Each of our Board committees has adopted a charter that governs its
authority, responsibilities and operation. We have reviewed internally and with
the Board the provisions of the Sarbanes-Oxley Act of 2002, the rules and
proposed rules of the SEC, and the proposed Nasdaq listing standards regarding
corporate governance policies and processes. In anticipation of these various
rule changes, and in addition to the adoption of our Corporate Governance
Policies, we amended our Audit Committee Charter and adopted our Compensation
Committee Charter and our Corporate Governance and Nominating Committee Charter
to voluntarily implement certain of these new and proposed rules and standards.
We will further amend our policies, standards and charters, if and to the extent
necessary, once final rules have been adopted. The Audit Committee's Charter,
revised March 18, 2003, is attached to this Proxy Statement as Exhibit A. The
charters of the Compensation Committee and of the Corporate Governance and
Nominating Committee may be found on our company website, at
www.steeldynamics.com under "Investor Information--Corporate Governance" or by
writing to Steel Dynamics, Inc., Attention: "Investor Relations," 6714 Pointe
Inverness Way, Suite 200, Fort Wayne, Indiana 46804 and requesting copies.
Each of our three committee charters also require that each member of
each committee meet: (1) all applicable criteria defining "independence" that
may be prescribed from time to time by SEC, Nasdaq and tax rules, listing
standards and regulations, (2) the definition of a "non-employee director"
within the meaning of Rule 16b-3 promulgated by the SEC under the Securities
Exchange Act of 1934, and (3) the definition of an "outside director" within the
meaning of Section 162(m)(4)(C) of the Internal Revenue Code.
The members of each committee, and the chair of each committee, are
appointed annually by the Board.
The Board of Directors held 12 regularly scheduled and special meetings
during 2002, and all directors attended at least 75% of the meetings of the
Board of Directors and of the various committees on which they served during
2002.
THE AUDIT COMMITTEE. The Audit Committee met six times during 2002.
The Audit Committee is responsible for the oversight and monitoring of
the quality and integrity of our financial statements, our compliance with
applicable legal and regulatory requirements, the
4
qualification and independence of our independent auditors, and of the
performance both of our independent auditors and the development of our internal
audit function. In addition, the Audit Committee is directly responsible for the
appointment, compensation, retention and oversight of the independent auditor,
as well as for the establishment of procedures for the receipt, retention and
treatment of complaints, if any, regarding accounting, internal accounting
controls or auditing matters.
The current members of the Audit Committee are Joseph D. Ruffolo, Paul
B. Edgerley, Dr. Jurgen Kolb and James E. Kelley. Messrs. Ruffolo and Edgerley
serve as Co-Chairs of the Audit Committee. In addition, our Board has determined
that all members of our Audit Committee, by virtue of their extensive careers,
experience and training in business and finance, meet the criteria of an "audit
committee financial expert," established by the SEC pursuant to the
Sarbanes-Oxley Act of 2002.
THE COMPENSATION COMMITTEE. The Compensation Committee met two times
during 2002, and all members attended each of the meetings. The current members
of the Compensation Committee are Richard J. Freeland, Joseph R. Ruffolo and
James E. Kelley.
The Compensation Committee reviews, makes recommendations to the Board
of Directors concerning salaries, incentive and other compensation paid to
executive officers and to certain senior financial officers, as well as
compensation paid to non-employee directors. The Compensation Committee also
reviews and approves all stock option and other equity-based compensation plans
and awards and has either been designated to act or is otherwise empowered to
act as the administrator or administrative "committee" under each of our stock
option and other performance-based compensation plans.
THE CORPORATE GOVERNANCE AND NOMINATING COMMITTEE. The current members
of the Corporate Governance and Nominating Committee are Dr. Jurgen Kolb,
Richard J. Freeland and Naoki Hidaka.
COMPENSATION COMMITTEE AND BOARD INTERLOCKS AND INSIDER PARTICIPATION.
Effective in 2003, all of the current members of the three person Compensation
Committee meet all applicable "independence" requirements established by the
Sarbanes-Oxley Act of 2002 and as set forth in the proposed Nasdaq Listing
Standards. During 2002, however, Daniel M. Rifkin, who is the President and
Chief Operating Officer of OmniSource Corporation, the supplier of most of the
steel scrap we use in the production of new steel, was a member and chair of the
previous four person Compensation Committee, and John C. Bates, who is the
President and Chief Executive Officer of Heidtman Steel Products, Inc., our
largest steel customer, was also a member of that committee. During prior years,
however, including 2002, the full Board of Directors considered and approved all
compensation matters, and during 2002, the entire Board as well as all six of
the independent directors, unanimously approved all 2002 compensation decisions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Section 16(a)
of the Securities Exchange Act of 1934 requires our directors and executive
officers to file with the SEC initial reports of beneficial ownership of our
common stock and other equity securities, as well as reports of changes in
beneficial ownership. SEC regulations also require us to identify in this proxy
statement any person subject to this requirement who failed to file any such
report on a timely basis. These individuals are required to provide us with a
copy of their required Section 16(a) reports as and when they are filed. Based
on our records and other information, we believe that all Securities and
Exchange Commission filing requirements applicable to our directors and
executive officers with respect to 2002 were met.
STOCKHOLDER PROPOSALS FOR 2004. Any stockholder satisfying the
requirements of the Securities and Exchange Commission's Rule 14a-8 and wishing
to submit a proposal to be included in the Proxy Statement for the 2004 Annual
Meeting of stockholders must submit the proposal in writing to our Corporate
Secretary, at 6714 Pointe Inverness Way, Suite 200, Fort Wayne, Indiana 46804,
on or before November 30, 2003.
In addition, under our bylaws, any stockholder who has not submitted a
timely proposal for inclusion in next year's proxy statement but still wishes to
make a proposal at next year's annual meeting must deliver written notice to our
Corporate Secretary no later than 60 days nor more than 90 days prior to the
first anniversary of the record date for this year's annual meeting. Therefore,
for our 2004 Annual Meeting, if such a proposal is not delivered prior to
January 25, 2004, it may not be presented at the meeting at all. If a proposal
is made after December 26, 2003 and prior to January 25, 2004, we will retain
the discretion to vote proxies we receive with respect to any such proposals, so
long as we include in our next year's proxy statement advice on the nature of
any such proposal and how we intend to
5
exercise our voting discretion, and so long as the proponent does not provide us
with a written statement within the time frame determined under Securities and
Exchange Commission Rule 14a-4(c)(1) that the proponent intends to deliver his
own proxy statement and form of proxy with respect to that proposal. You may
obtain a copy of the full text of the bylaw provision by writing to our Investor
Relations Department at 6714 Pointe Inverness Way, Suite 200, Fort Wayne,
Indiana 46804.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Our stockholders will elect 11 directors at the 2003 Annual Meeting.
The individuals listed below have been recommended for nomination by the
Corporate Governance and Nominating Committee and have been nominated by the
Board of Directors. Each director, if elected, will serve until our 2004 Annual
Meeting of Stockholders, until a qualified successor director has been elected,
or until he resigns or is removed by the Board.
We will vote your shares as you specify on the enclosed proxy card, or
by telephone or internet. If you do not specify how you want your shares voted,
we will vote them FOR the election of all of the nominees listed below. If
unforeseen circumstances (such as death or disability) make it necessary for us
to substitute another person for any of the nominees, we will vote your shares
FOR that other person. We do not anticipate that any nominee will be unable to
serve. Following the meeting, the Board of Directors may, however, increase the
size of the Board and fill any resulting vacancy or vacancies until the 2004
Annual Meeting of stockholders.
If you wish your shares voted for some but not all of the nominees, or
if you wish to withhold your vote from some but not all of the nominees, you may
so indicate on the proxy card or by telephone or the internet when you vote your
proxy.
Following is the age, principal occupation during the past five years,
and certain other information for each of the 11 director nominees.
DIRECTOR NOMINEES.
KEITH E. BUSSE, AGE 60
DIRECTOR SINCE 1993
President, Chief Executive Officer and a director, and President and
Chief Executive Officer and a director of Iron Dynamics, Inc., our
wholly-owned subsidiary. Prior to 1993, for a period of twenty-one
years, Mr. Busse worked for Nucor Corporation, where he last held the
office of Vice President. Mr. Busse is a director of Tower Financial
Corporation, a publicly held bank holding company.
MARK D. MILLETT, AGE 43
DIRECTOR SINCE 1993
Vice President and General Manager of our Flat Roll Division and a
director, and Vice President and a director of our Iron Dynamics
subsidiary. Prior to 1993, Mr. Millett worked for Nucor Corporation,
which he joined in 1982.
RICHARD P. TEETS, JR., AGE 48
DIRECTOR SINCE 1993
Vice President and General Manager of our Structural and Rail Division
and a director. Prior to 1993, Mr. Teets worked for Nucor Corporation,
which he joined in 1987.
JOHN C. BATES, AGE 59
DIRECTOR SINCE 1994
Mr. Bates is the President and Chief Executive Officer and a director
of Heidtman Steel Products, Inc. (steel service center), which he
joined in 1963, and for which he has served as its President and Chief
Executive Officer and a director since 1969. Heidtman Steel is our
largest customer for our manufactured steel products.
PAUL B. EDGERLEY, AGE 47
DIRECTOR SINCE 2002
FORMER DIRECTOR (1994-1999)
Mr. Edgerley has been Managing Director of Bain Capital, Inc. (venture
capital) since May 1993 and, from 1990 to 1993, a general partner of
Bain Venture Capital. He is also a director of Sealy Corporation,
Anthony Crane Rental LP Walco International, Inc. and Unisource
Worldwide. Mr. Edgerley is a member of and Co-chair of our Audit
Committee.
RICHARD J. FREELAND, AGE 66
DIRECTOR SINCE 2000
For more than twenty-five years, Mr. Freeland has been the President
and Chief Executive Officer of Pizza Hut of Fort Wayne, Inc. and six
6
affiliated companies that own and operate approximately 41 Pizza Hut
franchised restaurants in Indiana and Ohio. Mr. Freeland is a member of
our Compensation Committee and of our Corporate Governance and
Nominating Committee.
NAOKI HIDAKA, AGE 48
DIRECTOR SINCE 2002
Mr. Hidaka is Senior Vice President and General Manager of the Chicago
office and General Manager of the Rolled Steel and Ferrous Raw
Materials Division of Sumitomo Corporation of America. Prior to that,
from June 1998 to March 2001, Mr. Hidaka was Vice President and Chief
Financial Officer of Auburn Steel Company, Inc., and from March 1998 to
May 1998, Deputy General Manager of Steel Business Planning and
Investment, and from May 1995 to February 1998 was Manager, Plate
Export with Sumitomo Corporation of Japan. Mr. Hidaka is a member of
our Corporate Governance and Nominating Committee.
JAMES E. KELLEY, AGE 84
DIRECTOR SINCE 2000
For more than twenty years, Mr. Kelley has been the Chairman of Kelley
Automotive, Inc. and various affiliated companies that own and operate
approximately 18 franchised auto dealerships in Indiana and Georgia. In
addition, Mr. Kelley is the owner of Jim Kelley Leasing and Kelley
Cars, Inc., fleet automobile and truck leasing companies; Midwest Auto
Parts, a wholesale supplier of car and truck parts; and Kelley Grain
Co. and Trans Oil Ltd., a seed and grain enterprise operating in the
Republic of Moldova. Mr. Kelley is also a member of our Audit Committee
and Compensation Committee.
DR. JURGEN KOLB, AGE 60
DIRECTOR SINCE 1996
Dr. Kolb was a member of the executive board of Salzgitter, AG, a
German Steelmaker, and from 1986 to 2001, served as its Director of
Sales, before retiring in 2001. Dr. Kolb is also a director of our Iron
Dynamics subsidiary. Dr. Kolb is a member of our Audit Committee and of
our Corporate Governance and Nominating Committee.
DANIEL M. RIFKIN, AGE 48
DIRECTOR SINCE 2002
Mr. Rifkin has been the President and Chief Operating Officer of
OmniSource Corporation (scrap metal recycling) since 1997 and a
director since 1985. OmniSource is our principal supplier of steel
scrap.
JOSEPH D. RUFFOLO, AGE 61
DIRECTOR SINCE 1999
Mr. Ruffolo has been a principal in Ruffolo Benson LLC, a business and
financial consulting firm, since 1994. Prior to that, Mr. Ruffolo was
the President and Chief Executive Officer of North American Van Lines,
Inc. Mr. Ruffolo is a director of Tower Financial Corporation, a
publicly held bank holding company. Mr. Ruffolo is also a member and
co-chair of our Audit Committee and a member of our Compensation
Committee.
THE BOARD RECOMMENDS A VOTE FOR THE PROPOSED ELECTION
OF ALL OF THE DIRECTORS DESCRIBED IN THIS PROXY STATEMENT.
7
INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS. The following
table shows how much Steel Dynamics, Inc common stock the directors, director
nominees, the Named Executive Officers, and all directors, nominees and
executive officers as a group beneficially owned as of March 25, 2003. The Named
Executive Officers include the Chief Executive Officer and the four next most
highly compensated executive officers based upon compensation earned during
2002.
---------------------------------------------------------------------------------------------------------------
BENEFICIAL OWNERSHIP AS
OF MARCH 25, 2003
-------------------------------------------
CURRENT BENEFICIAL SHARES SUBJECT PERCENT
NAME HOLDINGS TO OPTIONS+ TOTAL OWNED*
---------------------------------------------------------------------------------------------------------------
NAMED EXECUTIVE OFFICERS
Keith E. Busse(1)...................... 846,875 60,305 907,180 1.8%
Mark D. Millett(2)..................... 1,090,584 45,231 1,135,815 2.3%
Richard P. Teets, Jr.(3)............... 1,155,931 45,231 1,201,162 2.4%
Tracy L. Shellabarger(4)............... 300,833 45,231 346,064 0.7%
John W. Nolan(5)....................... 37,451 33,925 71,376 0.1%
OTHER DIRECTORS OR NOMINEES
John C. Bates(6)....................... 2,990,117 7,542 2,997,659 6.0%
Paul B. Edgerley(7).................... 2,067,207 2,017 2,069,224 4.1%
Richard J. Freeland(8)................. 2,000 7,542 9,542 -%
Naoki Hidaka(9)........................ 924,197 3,468 927,665 1.8%
James E. Kelley(10).................... 7,229 7,542 14,771 -%
Dr. Jurgen Kolb(11).................... - 7,542 7,542 -%
Daniel M. Rifkin(12) 657,427 1,171 658,598 1.3%
Joseph D. Ruffolo(13).................. 4,000 7,542 11,542 -%
-------------------------------------------------------------------------------------------------------------
DIRECTORS AND EXECUTIVE
OFFICERS AS A GROUP
(13 PERSONS) 10,083,851 274,289 10,358,140 20.6%
-------------------------------------------------------------------------------------------------------------
+ Represents currently exercisable options and options exercisable
within 60 days.
* Assumes exercise of all stock options (for 2,605,702 shares)
currently exercisable or exercisable within 60 days, with a
corresponding increase in the number of outstanding shares from
47,631,097 on the record date to 50,236,799.
(1) President and Chief Executive Officer and a director, and
President and Chief Executive Officer and a director of Iron
Dynamics, Inc., our wholly-owned subsidiary. Includes 30,677
shares, of which 20,451 are not yet vested, received during 2003
pursuant to our Amended and Restated Officer and Manager Cash and
Stock Bonus Plan.
(2) Vice President and General Manager of our Flat Roll Division and a
director, and Vice President and a director of Iron Dynamics,
Inc., our wholly-owned subsidiary. Includes 20,677 shares, of
which 13,785 are not yet vested, received during 2003 pursuant to
our Amended and Restated Officer and Manager Cash and Stock Bonus
Plan.
(3) Vice President and General Manager of our Structural and Rail
Division and a director. Includes 20,677 shares, of which 13,785
are not yet vested, received during 2003 pursuant to our Amended
and Restated Officer and Manager Cash and Stock Bonus Plan. Also
includes 8,000 shares of common stock owned by Mr. Teets' spouse,
with respect to which Mr. Teets disclaims beneficial ownership.
8
(4) Vice President of Finance and Chief Financial Officer and Vice
President and Chief Financial Officer of our Iron Dynamics
subsidiary. Includes 18,045 shares, of which 12,030 are not yet
vested, received during 2003 pursuant to our Amended and Restated
Officer and Manager Cash and Stock Bonus Plan. Also includes
84,800 shares of common stock held by Mr. Shellabarger in trust
for Mr. Shellabarger's minor children, with respect to which Mr.
Shellabarger disclaims beneficial ownership.
(5) Vice President of Marketing. Includes 8,459 shares, of which 5,639
are not yet vested, received during 2003 pursuant to our Amended
and Restated Officer and Manager Cash and Stock Bonus Plan.
(6) Director. Consists of all shares of common stock held of record by
Centaur, Inc. and Heidtman Steel Products, Inc., of which Mr.
Bates is the President and Chief Executive Officer. Shares in
option column represent stock options, currently exercisable or
exercisable within 60 days, issued to Mr. Bates pursuant to our
stockholder approved Non-Employee Director Stock Option Plan.
(7) Director. Mr. Edgerley beneficially owns 67,207 of these shares.
The balance of 2,000,000 shares are owned by Brookside Capital
Partners Fund, L.P. over which Mr. Edgerley may be deemed to share
voting or dispositive power. Mr. Edgerley disclaims beneficial
ownership of such shares except to the extent of his pecuniary
interest therein. Shares in option column represent stock options,
currently exercisable or exercisable within 60 days, issued to Mr.
Edgerley pursuant to our stockholder approved Non-Employee
Director Stock Option Plan.
(8) Director. Shares in option column represent stock options,
currently exercisable or exercisable within 60 days, issued to Mr.
Freeland pursuant to our stockholder approved Non-Employee
Director Stock Option Plan.
(9) Director. Consists of all shares held of record by Sumitomo
Corporation of America that Mr. Hidaka may be deemed to
beneficially own due to his relationship with that entity. Mr.
Hidaka, however, disclaims beneficial ownership of these shares.
Shares in option column represent stock options, currently
exercisable or exercisable within 60 days, issued to Mr. Hidaka
pursuant to our stockholder approved Non-Employee Director Stock
Option Plan.
(10) Director. Shares in option column represent stock options,
currently exercisable or exercisable within 60 days, issued to Mr.
Kelley pursuant to our stockholder approved Non-Employee Director
Stock Option Plan.
(11) Director. Shares in option column represent stock options,
currently exercisable or exercisable within 60 days, issued to Dr.
Kolb pursuant to our stockholder approved Non-Employee Director
Stock Option Plan.
(12) Director. Includes 181,925 shares of common stock held by Mr.
Rifkin as trustee under trusts for his minor children, with
respect to which Mr. Rifkin disclaims beneficial ownership. Shares
in option column represent stock options, currently exercisable or
exercisable within 60 days, issued to Mr. Rifkin pursuant to our
stockholder approved Non-Employee Director Stock Option Plan.
(13) Director. Includes 1,000 shares held in Mr. Ruffolo's retirement
plan. Also includes 1,000 shares held by Mr. Ruffolo's spouse,
with respect to which he disclaims beneficial ownership. Shares in
option column represent stock options, currently exercisable or
exercisable within 60 days, issued to Mr. Ruffolo pursuant to our
stockholder approved Non-Employee Director Stock Option Plan.
OTHER PRINCIPAL STOCKHOLDERS. Set forth in the following table is
information, as of December 31, 2002, about persons we know to be beneficial
owners of more than five percent of our issued and outstanding common stock.
Under SEC rules, a beneficial owner is a person who has or shares voting or
investment power for the shares or had the right to obtain beneficial ownership
within 60 days after the foregoing date.
NAME AND ADDRESS AMOUNT OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
Salzgitter Stahl GmbH 3,053,615 6.1%
38223 Salzgitter
Germany
Heidtman Steel Products, Inc. 2,997,659 6.0%
Centaur, Inc.
640 Lavoy Road
Erie, MI 48133
9
EXECUTIVE COMPENSATION
The following tables set forth certain information with respect to the
salaries, bonuses and other compensation we paid for services rendered in 2002,
2001 and 2000, options granted during 2002, options exercised during 2002 and
option values as of December 31, 2002, for our Chief Executive Officer and our
four other most highly compensated executive officers. The amounts shown include
compensation for services rendered in all capacities.
SUMMARY COMPENSATION TABLE
--------------------------------------------------------------------------------------------------------------------------
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------------------------------------------------------------------------------------------
OTHER RESTRICTED
ANNUAL STOCK SECURITIES ALL OTHER
NAME AND FISCAL SALARY(1) BONUS(2) COMPENSATION AWARDS(3) UNDERLYING COMPENSATION(5)
PRINCIPAL POSITION YEAR ($) ($) ($) ($) OPTIONS(4) ($)
--------------------------------------------------------------------------------------------------------------------------
Keith E. Busse 2002 408,000 816,000 426,388 10,751 39,414
President and Chief 2001 400,000 - 20,894 13,415 8,021
Executive Officer 2000 375,000 752,219 201,153 16,051 24,528
---------------------------------------------------------------------------------------------------------------------
Mark D. Millett 2002 275,000 550,000 287,250 8,064 29,144
Vice President 2001 270,000 - 13,929 10,062 3,672
2000 250,000 502,293 134,102 12,038 19,631
---------------------------------------------------------------------------------------------------------------------
Richard P. Teets, Jr. 2002 275,000 550,000 287,250 8,064 29,132
Vice President 2001 270,000 - 13,929 10,062 3,581
2000 250,000 502,293 134,102 12,038 19,909
---------------------------------------------------------------------------------------------------------------------
Tracy L. Shellabarger 2002 240,000 480,000 250,777 8,064 29,144
Vice President and 2001 235,000 - 12,256 10,062 3,476
Chief Financial Officer 2000 220,000 442,310 118,010 12,038 19,954
---------------------------------------------------------------------------------------------------------------------
John W. Nolan 2002 150,000 225,000 117,575 6,048 28,094
Vice President 2001 145,000 - 5,766 7,547 3,190
2000 138,000 209,361 55,518 9,029 19,488
---------------------------------------------------------------------------------------------------------------------
1 Represents Base Salary compensation.
2 Represents cash portion of a performance-based bonus payable under our
Amended and Restated Officer and Manager Cash and Stock Bonus Plan
3 Represents dollar value of the stock portion of a performance-based bonus
payable under our Amended and Restated Officer and Manager Cash and Stock
Bonus Plan. One-third of the common stock issued during any year for which a
stock bonus is payable under the Plan vests and becomes non-forfeitable
immediately upon issuance, another third vests and becomes non-forfeitable
one year after issuance, and the balance of one-third vests and becomes
non-forfeitable two years after issuance.
4 Represents the number of shares covered by options granted under our
stockholder approved Amended and Restated 1996 Incentive Stock Option Plan,
all of which are either currently exercisable or exercisable within 60 days.
5 Principally represents our matching contributions under our Retirement
Savings Plan, contributions under our Profit Sharing Plan, and life
insurance premiums.
10
EQUITY COMPENSATION PLAN INFORMATION
We have four compensation plans, approved by stockholders, under which
our equity securities are authorized for issuance to employees or directors in
exchange for goods or services: The 1994 Incentive Stock Option Plan; The
Amended and Restated 1996 Incentive Stock Option Plan; The Amended and Restated
Officer and Manager Cash and Stock Bonus Plan (which, if stockholders approve
Proposal No. 3, our new 2003 Executive Incentive Compensation Plan, will be
terminated and replaced by the new Plan); and The Non-Employee Director Stock
Option Plan.
The following table summarizes information about our equity
compensation plans at December 31, 2002:
----------------------------------------------------------------------------------------------------------------------
(c)
NUMBER OF SECURITIES
(a) (b) REMAINING AVAILABLE FOR
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
BE ISSUED UPON EXERCISE OF EXERCISE PRICE OF EQUITY COMPENSATION
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, PLANS (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (a)
----------------------------------------------------------------------------------------------------------------------
Equity compensation plans 2,802,384 $12.54 3,219,770
approved by security holders
----------------------------------------------------------------------------------------------------------------------
Equity compensation plans
not approved by security
holders -- -- --
----------------------------------------------------------------------------------------------------------------------
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-------------------------------------------------------------------------------------------------------------------
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
FOR OPTION TERM(2)
-------------------------------------------------------------------------------------------------------------------
SECURITIES
UNDERLYING % OF TOTAL OPTIONS EXERCISE OR
OPTIONS GRANTED GRANTED TO EMPLOYEES BASE PRICE EXPIRATION
NAME (# OF SHARES)(1) IN 2002 ($/SH) DATE 5% ($) 10% ($)
-------------------------------------------------------------------------------------------------------------------
Keith E. Busse 4,510 0.78% 17.74 5/21/2007 22,105 48,845
6,241 1.08% 12.82 11/21/2007 22,105 48,847
-----------------------------------------------------------------------------------------------------------------
Mark D. Millett 3,383 0.59% 17.74 5/21/2007 16,581 36,639
4,681 0.81% 12.82 11/21/2007 16,580 36,637
-----------------------------------------------------------------------------------------------------------------
Richard P. Teets, Jr. 3,383 0.59% 17.74 5/21/2007 16,581 36,639
4,681 0.81% 12.82 11/21/2007 16,580 36,637
-----------------------------------------------------------------------------------------------------------------
Tracy L. Shellabarger 3,383 0.59% 17.74 5/21/2007 16,581 36,639
4,681 0.81% 12.82 11/21/2007 16,580 36,637
-----------------------------------------------------------------------------------------------------------------
John W. Nolan 2,537 0.44% 17.74 5/21/2007 12,434 27,477
3,511 0.61% 12.82 11/21/2007 12,436 27,480
-----------------------------------------------------------------------------------------------------------------
1 The exercise price of each option is 100% of the fair market value of our
common stock on the date the option was granted. All of the foregoing options
were issued under the terms of our Amended and Restated 1996 Incentive Stock
Option Plan. These options are for a term of five years from the date of
grant and become exercisable six months after the date of grant.
2 The dollar amounts in these columns are the result of calculations at the 5%
and 10% appreciation rates prescribed by the Securities and Exchange
Commission, and, therefore, are not intended to forecast potential future
appreciation, if any, in the price of our common stock. Potential realizable
value assumes that the common stock appreciates at the rate shown (compounded
annually) from the grant date until the option expiration date. No gain to
the optionees is possible without an increase in the price of our common
stock over the exercise price of each option.
11
AGGREGATED OPTION EXERCISES IN 2002 AND FISCAL YEAR-END VALUES
The following table gives information for options exercised by each of
the named executive officers during 2002 and the value of the "in-the-money"
options held by those executive officers at year-end. Options are in-the-money
if the market value of the shares covered thereby is greater than the option
exercise price.
--------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR-END OPTIONS AT FISCAL YEAR-END(2)
(#) ($)
--------------------------------------------------------------------------------------------------------------
SHARES
ACQUIRED ON VALUE
EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
--------------------------------------------------------------------------------------------------------------
Keith E. Busse - - 54,064 6,241 46,163 -
--------------------------------------------------------------------------------------------------------------
Mark D. Millett - - 40,550 4,681 34,622 -
--------------------------------------------------------------------------------------------------------------
Richard P. Teets, Jr. - - 40,550 4,681 34,622 -
--------------------------------------------------------------------------------------------------------------
Tracy L. Shellabarger - - 40,550 4,681 34,622 -
--------------------------------------------------------------------------------------------------------------
John W. Nolan - - 30,414 3,511 25,969 -
--------------------------------------------------------------------------------------------------------------
1 Market value of the underlying shares on the date of exercise, if any, less
the option exercise price.
2 Market value of shares at December 31, 2002 covered by all in-the-money
options, less the option exercise price.
DIRECTOR COMPENSATION. Our Non-Employee Directors receive attendance
fees of $3,000 per Board meeting and $1,500 per committee meeting. They are also
reimbursed for expenses incurred in attending meetings. During 2002, average
director fees for the year were approximately $31,300 per director. In addition,
each Non-Employee Director participates in our stockholder approved Non-Employee
Director Stock Option Plan, under which each such director on May 21 and
November 21 of each year (each such date defined as a "Grant Date") is
automatically granted a nonstatutory stock option, exercisable within five years
from the date of grant, to purchase shares of our common stock equal to the
number of whole shares, rounded up or down, calculated by dividing a grant
value, currently set at $15,000, by the fair market value of our common stock on
each such Grant Date.
The purchase price of stock covered by an option granted pursuant to
the Director Plan is 100% of the fair market value of such shares on the day the
option is granted. Options are not exercisable until they become vested, and
full vesting in an optionee will occur six months after each Grant Date. If an
optionee ceases to be a director, for whatever reason, no further grants of
options are to be made to that optionee. If an optionee ceases to be a director
for any reason other than death, any portion of an option that is then vested
but has not been exercised may be exercised at any time prior to its scheduled
expiration date.
The Director Plan is administered by the Compensation Committee, with
power and authority to construe provisions of the Director Plan, to determine
all questions thereunder, to accelerate the vesting or exercise of an option,
and to adopt and amend such rules and regulations as it may deem desirable. The
Director Plan is intended to comply in all respects with the provisions of Rule
16b-3 under the Securities Exchange Act of 1934 and Section 162 (m)(4)(C) of the
Internal Revenue Code.
EMPLOYMENT AGREEMENTS. We have employment agreements with Keith E.
Busse, our Chief Executive Officer, Mark D. Millett, Vice President and General
Manager of our Flat Roll Division, Richard P. Teets, Jr., Vice President and
General Manager of our Structural and Rail Division, and Tracy L. Shellabarger,
Vice President of Finance and Chief Financial Officer. Each of these employment
agreements has an "evergreen" feature, consisting of an initial two year term
that is automatically extended annually for an additional year unless, no less
than 90 days prior to year-end, either party gives written notice to the other
of an intention not to renew.
12
If, without cause, any of these officers' employment is either
terminated within the two year term or is not extended for the contemplated
additional rolling one year period, that officer is entitled to receive a lump
sum severance payment, in lieu of any and all claims under the remaining term of
his employment agreement, in cash, equal to two years of his then existing Base
Salary, together with a pro rata annual bonus payment under our Amended and
Restated Officer and Manager Cash and Stock Bonus Plan, when calculated, to the
date of termination or non-extension (for that year). If the termination or
non-extension is for cause, then such officer would not be entitled to receive
any severance or bonus payment. If the officer voluntarily terminates his
employment, he would not be entitled to any severance payment but would be
entitled to receive a pro rata annual bonus payment to the date of termination
or non-extension. If employment is terminated due to disability or death, we
will continue paying that officer or his estate, as the case may be, the
prescribed Base Salary during the remainder of the two year term, except that in
the case of disability such payments will be reduced to the extent of any
benefits paid by workers' compensation or under any state disability benefit
program or under any other disability policy maintained by us.
Under their employment agreements, each of these officers is paid a
Base Salary, which is reflected in the "Salary" column in the Summary
Compensation Table in this proxy statement, in addition to which each such
officer has been entitled, through 2002, to participate in our Amended and
Restated Officer and Manager Cash and Stock Bonus Plan, our Amended and Restated
1996 Incentive Stock Option Plan, our Profit Sharing Plan and our Retirement
Savings Plan. If stockholders approve Proposal No. 3, our new 2003 Executive
Incentive Compensation Plan will supersede and replace the Amended and Restated
Officer and Manager Cash and Stock Bonus Plan, and each of these officers will
be entitled to participate in the new plan in lieu of the former plan.
All Named Executive Officers receive major medical and long-term
disability benefits. Messrs. Busse, Millett, Teets and Shellabarger receive term
life insurance equal to twice their Base Salaries and Mr. Nolan receives term
life insurance equal to his Base Salary.
PROPOSAL NO. 2
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
In accordance with the provisions of the Sarbanes-Oxley Act of 2002,
the Audit Committee has appointed Ernst & Young LLP as our independent auditors
to conduct our annual audit for the year 2003, and, although not legally
required but in accordance with established policy, we are submitting this
appointment to stockholders for ratification. In the event the appointment is
not ratified by a majority of votes cast, in person or by proxy, we anticipate
that no change in auditors would be made for the current year because of the
difficulty and expense of making any change so long after the beginning of the
current year. However, any such vote would be considered in connection with the
auditors' appointment for 2004.
Ernst & Young LLP conducted our annual audit for 2002, and we believe
that representatives of Ernst & Young LLP will be present at the meeting, will
make themselves available at the meeting to respond to appropriate questions
from stockholders, and, if the representatives desire, will have an opportunity
to make a statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE APPOINTMENT OF
ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR 2003.
AUDIT AND NON-AUDIT FEES. The following table presents fees for
professional audit services rendered by Ernst & Young LLP for the audit of our
annual financial statements for the years ended December 31, 2002 and December
31, 2001, as well as fees billed for other services rendered by Ernst & Young
LLP during those periods.
2002 2001
---- ----
Audit Fees $412,000 $184,000
Audit-Related Fees 48,000 46,000
Tax Fees 351,000 38,000
All Other Fees - -
-------- --------
$811,000 $268,000
======== ========
13
Fees for audit services include fees associated with the annual audit,
review of the Company's quarterly reports on Form 10-Q, comfort letter
procedures, preparing consents, and assistance with review of documents filed
with the SEC. Audit-related fees principally include accounting consultations
and audits of benefit plans.
There were no other services performed during 2002 and 2001.
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE
NON-AUDIT SERVICES OF INDEPENDENT AUDITOR. Consistent with SEC policies
regarding auditor independence, effective May 6, 2003, the Audit Committee must
pre-approve all audit and permissible non-audit services provided by our
independent auditors. On March 18, 2003, our Audit Committee adopted the Steel
Dynamics, Inc. Audit and Non-Audit Services Pre-Approval Policy, which covers
all services to be performed by our independent auditors. The policy
contemplates a general pre-approval for all audit, audit-related, tax and all
other services that are permissible, with a general pre-approval period of
twelve months from the date of each pre-approval. Any other proposed services
that are to be performed by our independent auditors, not covered by or
exceeding the pre-approved levels or amounts, must be specifically approved in
advance.
Prior to engagement, the Audit Committee will pre-approve the following
categories of services. These fees are budgeted, and the Audit Committee
requires the independent auditors and management to report actual fees versus
the budget periodically throughout the year, by category of service.
1. AUDIT services include the annual financial statement audit
(including required quarterly reviews), subsidiary audits, and
other work required to be performed by the independent
auditors to be able to form an opinion on our Consolidated
Financial Statements. Such work includes, but is not limited
to, comfort letters, statutory audits or financial audits for
subsidiaries or affiliates, and services associated with SEC
registration statements, periodic reports and other documents
filed with the SEC or other documents issued in connection
with securities offerings.
2. AUDIT-RELATED services are for services that are reasonably
related to the performance of the audit or review of our
financial statements or that are traditionally performed by
the independent auditor. Such services typically include but
are not limited to financial audits of employee benefit plans,
due diligence services pertaining to potential business
acquisitions or dispositions, accounting consultations related
to accounting, financial reporting or disclosure matters not
classified as "audit services," and assistance with
understanding and implementing new accounting and financial
reporting guidance.
3. TAX services include all services performed by the independent
auditors' tax personnel, except those services specifically
related to the financial statements, and includes fees in the
area of tax compliance, tax planning and tax advice.
4. ALL OTHER FEES are those associated with services that the
Audit Committee believes are routine and recurring services
which would not impair the independence of the auditor and are
consistent with SEC rules on auditor independence.
Applicable SEC rules and the Audit Committee's pre-approval policy
permits the delegation of pre-approval authority for services not covered by the
Audit Committee's general pre-approval to either of the Co-Chairs of the Audit
Committee.
PROPOSAL NO. 3
APPROVAL OF 2003 EXECUTIVE INCENTIVE COMPENSATION PLAN
BACKGROUND OF NEED FOR A NEW PLAN. Our Board of Directors has approved
the Steel Dynamics, Inc. 2003 Executive Incentive Compensation Plan (the "New
Plan"), which is designed to replace our Amended and Restated (1996) Officer and
Manager Cash and Stock Bonus Plan (the "Old Plan"). Both the Old Plan and the
New Plan are performance-based, predicated on defined profitability criteria.
14
Our Old Plan, which was originally adopted in 1996 and was amended and
restated in 2000, on both occasions with stockholder approval, covered both
executive officers and non-executive managerial employees and was based upon the
concept of a single consolidated bonus pool, funded by a defined contribution
(originally 5% in 1996, later amended to 6% and then 8%) based on "Adjusted
Pre-Tax Net Income" in excess of 10% of "Stockholders Equity." There was a
stated maximum allowable bonus, expressed as a multiple of "base salary"
(between one and two times base salary in cash and between 50% and 100% of base
salary in restricted stock, depending on the person's job function and
responsibility). A total of 450,000 shares of our common stock were originally
authorized for issuance as stock bonus awards under the Old Plan. Of that
number, only 224,835 shares were issued, in the aggregate, of which 95,902
shares have not yet fully vested, for all years through 2002. Participants under
the Old Plan included not only the Company's five "Named Executive Officers,"
but also certain other executive officers and various corporate level and
operating managers.
The Old Plan has worked well, and the basis of the performance measure,
specifically Adjusted Pre-Tax Net Income, has appropriately resulted in
incentive compensation awards that have been objectively determinable and that
have, historically, borne a direct relationship with the Company's operating
results. Thus, for example, while the five highest paid executive officers
received aggregate cash bonus awards of $2.6 million and stock bonus awards of
$1.3 million as a result of 2002's record earnings, the same five individuals
received no cash or stock bonuses for 2001 and aggregate cash bonus awards of
$2.4 million and stock bonus awards of $643,000 for 2000.
However, whereas from 1996 through 2001, the Company consisted
primarily of a single revenue-producing operating unit, the Butler, Indiana Flat
Rolled mini-mill, Steel Dynamics now consists of the Butler facility, the
Columbia City, Indiana Structural and Rail mini-mill, the Pittsboro, Indiana Bar
Products facility, and the New Millennium Building Systems operations, all of
which are expected to become contributors to future Adjusted Pre-Tax Net Income.
Therefore, in keeping with the Company's emphasis on performance-based incentive
compensation, the Compensation Committee and the Board determined that it is now
appropriate to better differentiate the bases upon which future incentive
compensation should be predicated, distinguishing between (a) employees
exercising executive authority and those persons executing primarily managerial
authority (and who the Company believes should now be disengaged from the Old
Plan and compensated, instead, at the non-executive operating level, where
management is better able to assess and properly recognize their contribution),
(b) executive employees, whose principal responsibilities are corporate and
company-wide and executive employees whose responsibilities are split between
those at the corporate level and those primarily at the divisional or operating
unit level, and (c) employees whose principal responsibilities are mostly
divisional.
Accordingly, the Compensation Committee and the Board concluded that
the Old Plan should be replaced by the 2003 Executive Incentive Compensation
Plan (the "New Plan"), which the Board approved on February 13, 2003, under
which the incentive compensation measures, while continuing to be
performance-based and objective as before, are broader and more keenly link a
participant's bonus with the nature of that participant's activities that help
produce the profits upon which the bonuses are based.
WHY STOCKHOLDER APPROVAL IS BEING REQUESTED. Under Section 162(m) of
the Internal Revenue Code, a company may not deduct for tax purposes
compensation over $1,000,000 paid to its chief executive officer and its four
other most highly compensated executive officers, unless the compensation is
"performance-based." Compensation is considered "performance-based" if it will
be paid only if the executive officer meets one or more objective performance
goals, which may be goals articulated for the company as a whole or for a
particular business unit. The performance goals must also be in writing and be
set by a compensation committee consisting of two or more members, all of whom
must be outside directors as defined by the Code. The performance goals must be
set before it can be known whether or not the executive officer will meet the
goals. The material terms of the performance goals must also be disclosed to and
approved by stockholders before the compensation is paid.
The Company believes that the criteria described in the New Plan as the
basis for awarding incentive compensation meet all of the foregoing requirements
and, if approved by stockholders, will render compensation paid under the New
Plan fully deductible. In the event that stockholders do not approve,
compensation paid to the named executive officers in excess of $1,000,000 each
may not be deductible under Section 162(m) of the Code.
15
SUMMARY OF HOW THE NEW PLAN WORKS.
The following summary description of the Steel Dynamics, Inc. 2003
Executive Incentive Compensation Plan is qualified in its entirety by reference
to the full text of the New Plan, which is attached to this Proxy Statement as
Exhibit B.
EFFECTIVE DATE AND TERM OF THE NEW PLAN.
The New Plan is effective January 1, 2003 and will terminate, unless
extended or earlier terminated by the Board, on February 28, 2008.
If the New Plan is approved by stockholders, the Old Plan will
terminate, subject only to the remaining rights of holders of shares of Company
common stock issued under the Old Plan that have not yet vested.
WHO IS COVERED UNDER THE NEW PLAN?
The New Plan identifies two broad categories of covered executive
employees eligible for incentive compensation under the New Plan: corporate
level executive employees and operating level or divisional executive employees.
Each of these categories in turn consists of two groups, for Plan purposes,
according to a participant's level of responsibility.
The two groups of corporate level executive employees are "Corporate
Executive Officers," initially consisting of the Company's President and Chief
Executive Officer and the Company's Chief Financial Officer, and "Corporate
Officers," initially consisting of the Company's Vice President of Sales and
Marketing. The two groups of operating level or divisional categories of covered
executive employees are "Divisional Executive Officers," including the Vice
President and General Manager of the Company's Flat Roll Division and the
Company's Vice President and General Manager of the Structural and Rail
Division, and "Divisional Officers," initially including the general manager of
the Company's Bar Products Division and the President of the Company's New
Millennium Building Systems Division. In addition, the Compensation Committee
may make changes, within prescribed time limits, to any of the foregoing
categories of covered executive employees, including the addition of executive
employees, moving employees into other categories, or changing the categories
themselves.
HOW IS INCENTIVE COMPENSATION DETERMINED UNDER THE NEW PLAN?
There are two measures of incentive compensation under the New Plan,
and they are applicable to either one or both of the two categories of covered
executive employees. Both are performance-based.
The first measure is calculated at the corporate level and is based
upon company-wide "Adjusted Pre-Tax Net Income," defined as consolidated net
income, before taxes, extraordinary items and bonuses payable to participants
under the New Plan, with adjustments for certain start-up expenses associated
with significant capital expenditures. For any year under the New Plan, a "Bonus
Pool" is identified, if any, by multiplying consolidated Adjusted Pre-Tax Net
Income, minus an amount equal to 10% of "Average Stockholders Equity," by a
percentage amount determined annually by the Compensation Committee. That amount
is currently set at 5 1/2%, but the Committee may vary that range between a low
of 5% and a maximum of 6 1/2%. The resulting Bonus Pool is then allocated among
the eligible executive employees in accordance with each "Participant's Bonus
Pool Percentage," derived for any participant by a fraction, the numerator of
which is equal to the "Participant's Adjusted Base Salary," as defined in the
New Plan, and the denominator of which is equal to the sum of all of the
Participants' Adjusted Base Salaries.
Corporate Executive Officers and certain other Corporate Officers, as
identified in the New Plan, participate solely in this Bonus Pool, with 100% of
their incentive compensation derived, if at all, through their participation in
this company-wide Bonus Pool. On the other hand, Divisional Executive Officers
and certain other Divisional Officers identified in the New Plan, derive only
part of their incentive compensation through this company-wide Bonus Pool and
also derive part of their incentive compensation based upon operating level or
divisional performance. Currently, Divisional Executive Officers will derive
half of their incentive compensation through participation in the company-wide
Bonus Pool and half of their incentive compensation through a bonus formula
based upon their divisional performance. The other Divisional Officers currently
will derive 25% of their incentive compensation through participation in the
company-wide Bonus Pool and 75% of their incentive compensation through their
divisional bonus formula.
16
The Compensation Committee has the authority to vary these allocation
percentages, both with respect to Divisional Executive Officers and Divisional
Officers, within a range of not less than 40% nor more than 60%, in the case of
Divisional Executive Officers, and within a range of not less than 65% nor more
than 85% in the case of other Divisional Officers.
The second broad category of incentive compensation is predicated on
divisional performance and is based upon a return on assets analysis. Unlike
Corporate Executive Officers and other Corporate Officers, who participate only
in the company-wide Bonus Pool, Divisional Executive Officers and other
Divisional Officers participate partly in the Bonus Pool and partly in a
divisional performance bonus outside of the Bonus Pool.
Each year, the Compensation Committee will set a minimum return on
assets target percentage, by division (the "Minimum ROA Target"), currently set
at 5% and able to be varied by the Committee between a minimum of 4% and a
maximum of 6%, below which no divisional cash or stock bonus may be paid. The
Committee will also set a maximum return on assets target (the "Maximum ROA
Target"), currently set at 30% and which the Committee may vary between a
minimum of 25% and a maximum of 35%, at which level a Divisional Executive
Officer or Divisional Officer will be entitled to receive his "Maximum
Divisional Cash Bonus" or "Maximum Divisional Stock Bonus," as defined under the
New Plan. Once these preliminary calculations have been made, the division's
performance is measured by calculating that division's "Divisional Return on
Assets," using a percentage derived by dividing the sum of (a) the division's
net income for the year, (b) the amount of certain corporate expenses allocated
to that division, and (c) the amount of incentive bonus compensation expenses
associated with the New Plan, by the division's "Average Divisional ROA Assets"
(further defined as the sum of the total divisional assets employed by that
division at the end of each month during the year and during the last month of
the prior year, with certain adjustments, and dividing the resulting amount by
the number of months of the year, plus one.
The calculation of a divisional participant's entitlement to any
incentive compensation based on divisional performance may be illustrated by
using an example of a Divisional Executive Officer whose current incentive
compensation is based 50% on the company-wide Bonus Pool and 50% on divisional
performance, as follows: he would receive a divisional bonus, if any, in an
amount equal to that percentage of his Maximum 50% Divisional Cash Bonus for the
year, derived by (a) dividing the number of whole number increments between the
applicable Minimum ROA Target for the year and the applicable Maximum ROA Target
for that year into one hundred (100), and (b) multiplying the result by the
number of whole number increments, expressed as a percentage, between the
applicable Minimum ROA Target and the actual Divisional Return on Assets for
that year. In this example, if the Divisional Executive Officer's Maximum
Divisional Cash Bonus for the year were assumed to be $400,000 and the actual
Divisional Return on Assets for the year were assumed to be 22%, the Divisional
Executive Officer would be entitled to receive 68% of his Maximum Divisional
Cash Bonus of $400,000 for the year (the 22% Divisional Return on Assets being
17 increments above the Minimum ROA Target of 5%, divided by the 25 whole number
increments between the Minimum ROA Target and the Maximum ROA Target).
WHAT IS THE MAXIMUM THAT AN EXECUTIVE CAN EARN IN INCENTIVE COMPENSATION UNDER
THE NEW PLAN?
Corporate Executive Officers. A Corporate Executive Officer, such as
the Company's President and Chief Executive Officer or Chief Financial Officer,
may earn a cash bonus in an amount equal to the product of (a) his Bonus Pool
Percentage and (b) the applicable Bonus Pool for the year, but not in excess of
two and one-half (2 1/2) times his Base Salary (which is established annually by
the Compensation Committee at the beginning of the year and approved by the
Board).
The Corporate Executive Officer may also be entitled to receive a stock
bonus, if there are unallocated amounts still remaining in the Bonus Pool after
payment of all applicable cash bonuses. Any such stock bonus would be
distributed in the form of restricted stock, which fully vests over a two-year
period, having, at the time of issuance, a fair market value equal to the
product of (a) the Corporate Executive Officer's Bonus Pool Percentage and (b)
the Bonus Pool (after payment of the cash bonuses). The amount of the stock
bonus, if any, however, may not exceed the Corporate Executive Officer's Base
Salary.
Corporate Officers. A Corporate Officer's cash and stock bonus is
calculated in the same manner as that of the Corporate Executive Officers,
except that the maximum cash bonus for a Corporate Officer may not exceed one
and one-half (1 1/2) times the Corporate Officer's Base Salary, and the maximum
17
stock bonus for the Corporate Officer may not exceed 75% of the Corporate
Officer's Base Salary.
Divisional Executive Officers. As currently constituted, a Divisional
Executive Officer can derive half of his cash and stock bonus from the
company-wide Bonus Pool, in the manner previously described. These amounts are
calculated in the same manner as those of Corporate Executive Officers, except
that the Divisional Executive Officer's maximum cash bonus may not exceed an
amount equal to half of his Base Salary multiplied by two and one-half (2 1/2).
Similarly, his stock bonus based on the company-wide Bonus Pool is also limited
to a maximum of 50% of his Base Salary.
The remaining half of a Divisional Executive Officer's maximum
incentive compensation is based on divisional performance but may not exceed
half of his Base Salary multiplied by two and one-half (2 1/2), in cash, and
half of his Base Salary in shares of the Company's restricted stock.
Divisional Officers. Divisional Officer's incentive compensation is
calculated in the same manner and is subject to the same limitations as the
maximum incentive compensation payable to Divisional Executive Officers, except
that the portion of his incentive compensation that is based on the Bonus Pool
is only 25%, not 50%. The maximum incentive compensation from both sources,
however, may not exceed one and one-half (1 1/2) times his Base Salary, in cash,
and 75% of his Base Salary, in the Company's restricted stock.
The following table illustrates the minimum and maximum amounts that
are payable to Corporate Executive Officers, Corporate Officers, Divisional
Executive Officers and Divisional Officers, in both cash and in shares of
Company restricted stock, under the New Plan.
ILLUSTRATIVE CHART
(MINIMUM/MAXIMUM BONUS POSSIBILITIES EXPRESSED AS A PERCENTAGE OF BASE PAY)
----------------------------------------------------------------------------------------------------------------------
CASH BONUS STOCK BONUS
----------------------------------------------------------------------------------------------------------------------
COMPANY-WIDE DIVISIONAL ROA COMPANY-WIDE BONUS DIVISIONAL ROA
BONUS POOL* PERFORMANCE* POOL* PERFORMANCE*
----------------------------------------------------------------------------------------------------------------------
(1)Corporate Executive Officer 0% to 250% N/A 0% to 100% N/A
-----------------------------------------------------------------------------------------------------------------
(2)Divisional Executive Officer 0% to 125% 0% to 125% 0% to 50% 0% to 50%
-----------------------------------------------------------------------------------------------------------------
(3)Corporate Officer 0% to 150% N/A 0% to 75% N/A
-----------------------------------------------------------------------------------------------------------------
(4)Divisional Officer 0% to 37.5% 0% to 112.5% 0% to 18.75% 0% to 56.25%
-----------------------------------------------------------------------------------------------------------------
* Bonus percentages expressed as a percentage of annual base salary.
(1) Corporate Executive Officers' bonus compensation is based 100% on
consolidated financial results.
(2) Divisional Executive Officers' bonus compensation is 50% based on
consolidated financial results and 50% based on divisional financial
results.
(3) Corporate Officers' bonus compensation is 100% based on consolidated
financial results.
(4) Divisional Officers' bonus compensation is 25% based on consolidated
financial results and 75% based on divisional financial results.
HOW MANY SHARES OF COMPANY STOCK MAY BE ISSUED UNDER THE NEW PLAN?
A maximum of 750,000 shares has been allocated for issuance over the
next five years as stock bonuses, if earned, to covered executives. However,
approximately 225,165 shares previously authorized (of the original 450,000
shares) under the Old Plan remain unissued. Therefore, the net additional
increase in shares authorized for issuance under the New Plan amounts to only
524,835 additional shares over the following five years. A participant under the
New Plan may not elect to take Company shares in lieu of a cash bonus and may
only receive shares if the aggregate bonus payments earned for a particular year
exceed the maximum allowable cash bonus.
Upon termination of a participant's employment for any reason other
than retirement, all shares of restricted stock of that participant which were
not vested at the time of termination are required to be forfeited and returned
to the Company, although the Committee may exercise its discretion and waive the
forfeiture. Stock that is restricted and forfeitable under the New Plan, because
it has not yet vested, is not permitted to be transferred, assigned, sold,
pledged or otherwise disposed of in any manner, nor subject to levy, attachment
or other legal process. Subject to these limitations, however, and as long as
18
forfeiture has not occurred, a participant is treated as the owner of restricted
stock, with full dividend and voting rights.
The total number of shares authorized for issuance under the New Plan
is also subject to adjustment in the event of any stock dividends, stock splits,
combinations or exchanges of shares, recapitalizations or other changes in our
capital structure, as well as any other corporate transactions or events having
an effect similar to any of the foregoing. If any such event were to occur, the
aggregate number of shares reserved for issuance under the New Plan would be
automatically adjusted to equitably reflect the effect of such changes.
WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES UNDER THE NEW PLAN?
Under present federal income tax laws, participants will realize
ordinary income equal to the amount received in the year of receipt. If the
award is paid as a cash payment, the Company will receive a deduction for the
amount constituting ordinary income to the participant, providing that the New
Plan meets the performance-based compensation standards of Code Section 162(m)
and provided that stockholders have approved the New Plan. If the value of the
award is delivered in shares of the Company's restricted stock, participants
will realize ordinary income related to the restricted stock at the time that
the restrictions lapse and the shares become nonforfeitable. The Company will at
such time receive a corresponding tax deduction.
The affirmative vote of the holders of a majority of our shares of
common stock represented at the meeting and entitled to vote on this matter will
be necessary for approval of the Steel Dynamics, Inc. 2003 Executive Incentive
Compensation Plan.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE
STEEL DYNAMICS, INC. 2003 EXECUTIVE INCENTIVE COMPENSATION PLAN.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF OUR
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORTS AND
THE PERFORMANCE GRAPH ON PAGE 23 SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY
SUCH FILINGS, NOR SHALL THEY BE DEEMED TO BE SOLICITING MATERIAL OR DEEMED FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
19
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
Our executive compensation philosophy is based upon the following
principles:
- Base salaries should be competitive with the level of salaries
paid to officers in comparable companies with comparable
responsibilities.
- Variable compensation, both in the form of cash and stock
bonus awards, should be directly related to the financial
results produced during the year.
- Long-term compensation, in the form of stock options, directly
links officers' rewards to stock price appreciation.
The Compensation Committee establishes the salaries and other
compensation of the Company's executive officers, including its President and
Chief Executive Officer and the other executive officers named in the Summary
Compensation Table. The current members of the Compensation Committee, for 2003
consist of three members of the Board of Directors, all of whom meet (a) all
criteria for "independence" prescribed by SEC, Nasdaq and tax rules, listing
standards and regulations applicable to the Compensation Committee (b) the
definition of a "non-employee director" within the meaning of Rule 16b-3
promulgated by the SEC under the Exchange Act, and (c) the definition of an
"outside director" within the meaning of Section 162(m)(4)(C) of the Internal
Revenue Code. During 2002, however, the Compensation Committee consisted of four
non-employee directors, two of whom did not meet all of the foregoing standards.
All recommendations by the Compensation Committee during 2002, were considered
by the full Board of Directors and were approved not only by the full Board of
Directors but by all six members of the Board of Directors who met the foregoing
three criteria. Our executive compensation programs consist of three principal
elements: base salary, a cash and stock bonus incentive compensation component,
and stock options.
BASE SALARY. The Compensation Committee recommends a base salary for
executive officers, including the president and chief executive officer, based
upon a comparative review of companies within the steel manufacturing peer
group, both mini-mills and integrated mills, as well as a review of other
companies believed to be representative and comparable in terms of size and the
nature of its operations. The Compensation Committee has traditionally
established base salary at somewhat under the level of the prevailing base
salaries of the peer group and comparable other company executives, primarily
because of the Company's philosophy to align total executive officer pay with
the financial results of the Company's operations. This is consistent with the
Company's philosophy and culture that guides its compensation for all of its
employees, which emphasizes a strong element of incentive compensation based on
operating results. During 2002 and in prior years, the Company's base salary
level for its executive officers was significantly below the median for its peer
and comparable groups.
INCENTIVE BONUS. The Compensation Committee believes that incentive
compensation should be geared toward rewarding excellent financial performance
results, and executive officers ought to be rewarded for producing Company
profits. Accordingly, since 1996, the Company has provided this incentive
compensation to its executives through a performance-based bonus formula that
pays bonuses, in cash and in stock, based upon profits over and above a stated
threshold amount.
The annual incentive bonus is determined under our Amended and Restated
Officer and Manager Cash and Stock Bonus Plan, originally adopted in 1996 and
amended, restated and approved by stockholders in 2000. This Plan creates a
bonus pool based on various levels of adjusted pre-tax net income, less an
amount equal to 10% of average stockholders equity, as defined, and then
allocates that bonus pool among the participants in accordance with their
respective base salaries. Under the existing Plan, certain executives can earn
up to twice their respective base salaries in cash bonus payments and up to the
amount of their base salaries in shares of stock issued at fair market value on
the date of the award.
STOCK OPTION PLAN. The Compensation Committee believes that the
long-term incentive benefits of stock ownership, through the acquisition of
stock options and through stock bonus awards, if applicable, aligns management's
long-term interests with those of stockholders in general. The Company also
evidences that philosophy by including the named executive officers in the same
incentive stock option plan that is applicable to all Company employees.
20
In October 1996, and as amended pursuant to stockholder approval at our
2001 Annual Meeting, our Board of Directors adopted and the stockholders
approved the 1996 Incentive Stock Option Plan, which covers all of our full-time
employees (approximately 676 employees at December 31, 2002), including
officers, managers, supervisors, professional staff, and hourly employees.
Under the 1996 Plan, we award automatic semi-annual stock options to
all such employees, in different dollar equivalent amounts, by position
category, based upon the fair market value of our common stock on each
semi-annual grant date, with an exercise price equal to the same fair market
value on the grant date. Options issued under the Plan become exercisable six
months after the date of grant and must be exercised no later than five years
thereafter.
OTHER COMPENSATION.
PROFIT SHARING PLAN. We have established a Profit Sharing Plan for
eligible employees, including the named executive officers, which is a
"qualified plan" for federal income tax purposes. Under the Profit Sharing Plan,
we annually allocate to Profit Sharing Plan participants (the "profit sharing
pool") an amount equal to 5% of our pre-tax profits. The profit sharing pool is
used to fund the Profit Sharing Plan, as well as a separate cash profit sharing
bonus that is paid to employees in March of the following year. The amount
allocated to our Chief Executive Officer, for 2002 pursuant to the Profit
Sharing Plan was $26,634.
RETIREMENT SAVINGS PLAN. We have also established a Retirement Savings
Plan for eligible employees, which is also a "qualified plan" for federal income
tax purposes. Generally, employees may contribute on a pre-tax basis up to 8% of
their eligible compensation, and we match employee contributions in an amount
based upon our return on assets, with a minimum match of 5% and a maximum match
of 50%, subject to certain applicable tax law limitations. The amount we
contributed in respect to our Chief Executive Officer, Keith E. Busse, for 2002
pursuant to the Retirement Savings Plan was $550.
CHIEF EXECUTIVE OFFICER COMPENSATION. The Company compensates its chief
executive officer, just like its other executive officers, by a combination of
three principal elements: base salary, incentive compensation awarded under its
Amended and Restated Officer and Manager Cash and Stock Bonus Plan, and stock
option awards granted twice annually in pre-described amounts, pursuant to the
Company's Amended and Restated 1996 Incentive Stock Option Plan. During 2002,
the Company's chief executive officer, Keith E. Busse was paid a base salary of
$408,000, received a cash bonus of $816,000 and a stock bonus equal to $426,388.
In addition, Mr. Busse was granted options for 4,510 shares of common stock, at
an exercise price of $17.74, in May 2002 and was granted an option for 6,241
shares of common stock, at an exercise price of $12.82 in November 2002, all
under the 1996 Plan.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors is comprised of four
directors, all of whom meet all applicable SEC and Nasdaq standards for
"independence." Current members of the Audit Committee are Joseph D. Ruffolo,
Paul B. Edgerley, Dr. Jurgen Kolb and James E. Kelley. Messrs. Ruffolo and
Edgerley serve as Co-Chairs of the Audit Committee.
The Audit Committee operates under a written charter adopted by the
Board of Directors, which was reviewed and revised in March 2003. A copy of the
revised Audit Committee Charter is attached as Exhibit A to this proxy
statement.
Among its many functions, the Audit Committee reviews the Company's
financial reporting process on behalf of the Board of Directors. Management,
however, has the primary responsibility for the financial statements and the
reporting process, including the Company's system of internal controls.
In this context, the Audit Committee met and held discussions with
management and with the independent auditors six times during the year to
consider the overall quality of the Company's financial reporting and disclosure
controls, the Company's critical accounting policies and the general
objectivity, thoroughness and fairness of its financial reporting process,
including the Company's system of internal controls. The Audit Committee
discussed these matters with the Company's independent auditors and with
appropriate Company financial personnel, and also discussed with the
21
Company's executive management and independent auditors the process used for
certifications by the Company's Chief Executive Officer and Chief Financial
Officer, as required by the SEC and by the provisions of the Sarbanes-Oxley Act
of 2002 for certain of the Company's filings with the SEC. The Audit Committee
met privately with the independent auditors, who in any event have unrestricted
access to the Audit Committee.
The Audit Committee has reviewed and discussed with management and with
the independent auditors the audited financial statements. The Audit Committee
received from has discussed with Ernst & Young LLP the written disclosure and
the letter required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), relating to Ernst & Young LLP's independence
from the Company. The Audit Committee also discussed with Ernst & Young LLP
matters required to be discussed by the Statement on Auditing Standards No. 61
(Communication with Audit Committees) of the Auditing Standards Board of the
American Institute of Certified Public Accountants to the extent applicable. The
Audit Committee has also considered whether the independent auditors' provision
of non-audit services to the Company is compatible with the auditors'
independence, and the Audit Committee has concluded that the independent
auditors are in fact independent from the Company and its management.
The Audit Committee has discussed significant accounting policies
applied by the Company in its financial statements, as well as alternative
treatments if applicable. Management represented to the Audit Committee that the
Company's consolidated financial statements were prepared in accordance with
generally accepted accounting principles, and the Committee has reviewed and
discussed the consolidated financial statements with management and the
independent auditors.
The independent auditors audited the annual financial statements
prepared by management, expressed an opinion as to whether those financial
statements fairly present the financial position, results of operations and cash
flows of the Company in conformity with generally accepted accounting
principles, and discussed with the Audit Committee any issues they felt should
be raised with the Audit Committee.
Based on these reviews and discussions, the Audit Committee recommended
to the Board of Directors that the audited financial statements be included in
Steel Dynamics, Inc.'s Annual Report on Form 10-K for the year ended December
31, 2002.
The Audit Committee:
Joseph D. Ruffolo, Co-Chair
Paul B. Edgerley, Co-Chair
James E. Kelley, Member
Dr. Jurgen Kolb, Member
22
STOCKHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total stockholder
return on our common stock with the cumulative total return of companies on the
NASDAQ Stock Market - US Index and the Standard & Poor's Iron and Steel Index
for the limited period of November 22, 1996 (the first day of trading on NASDAQ
National Market System following our initial public offering of our common
stock) and the last trading day prior to December 31, 2002, and assumes the
reinvestment of dividends (of which there were none).
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG STEEL DYNAMICS, INC., THE NASDAQ STOCK MARKET(U.S.) INDEX
AND THE S & P STEEL INDEX
[LINE GRAPH CHART]
Cumulative Total Return
------------------------------------------------------------------
12/96 12/97 12/98 12/99 12/00 12/01
STEEL DYNAMICS, INC. 100.00 83.66 61.44 83.34 57.52 60.71
NASDAQ STOCK MARKET (U.S.) 100.00 150.67 260.18 681.69 761.95 363.66
S & P IRON & STEEL 100.00 90.83 80.10 76.38 52.86 42.68
* $100 invested on 12/31/97 in stock or index-including reinvestment of
dividends. Fiscal year ending December 31, 2002.
Copyright (C) 2002, Standard & Poor's, a division of The McGraw-Hill Companies,
Inc. All rights reserved.
www.researchdatagroup.com/S&P.htm
23
OTHER MATTERS
We do not intend to bring any other matters before the Annual Meeting,
nor are we aware of any other matters that are to be properly presented to the
Annual Meeting by others. In the event that other matters do properly come
before the Annual Meeting or any adjournments thereof, it is the intention of
the persons named in the Proxy to vote such Proxy in accordance with their best
judgment on such matters.
By Order of the Board of Directors
/s/Keith E. Busse
Keith E. Busse
President and Chief Executive Officer
Fort Wayne, Indiana
April 24, 2003
24
EXHIBIT A
AUDIT COMMITTEE CHARTER
The Board of Directors (the "Board") of Steel Dynamics, Inc. (the
"Company") has invested the Board's Audit Committee with certain direct
authority and with the authority to assist the Board in fulfilling certain of
its financial oversight responsibilities. This Audit Committee Charter sets
forth the purposes of the Audit Committee and the governing principles by which
it is to conduct its activities.
I. AUDIT COMMITTEE PURPOSES.
The Audit Committee is appointed by the Board to assist the Board in
monitoring:
A. The quality and integrity of the Company's financial
statements;
B. The independent auditor's qualifications and independence;
C. The performance of the Company's independent auditors;
D. The soundness and performance of the Company's systems and
internal controls regarding financial and accounting compliance, as well as
the soundness and performance of the Company's internal audit function; and
E. The Company's compliance with legal and regulatory
requirements.
In addition to its regular reporting functions to the Board, the Audit
Committee shall be directly responsible for:
F. The appointment, subject to stockholder ratification, if
required, and the compensation, retention and oversight of the Company's
independent auditors (including resolution of any disagreements between
management and the auditor regarding financial reporting);
G. The establishment of procedures for the receipt, retention and
treatment of complaints regarding accounting, internal accounting controls or
auditing matters, including procedures for the confidential anonymous submission
by employees of concerns regarding questionable accounting or auditing matters;
and
H. The preparation of the report required by the rules of the
Securities and Exchange Commission (the "SEC") to be included in the Company's
annual proxy statement.
The independent auditor shall report directly to the Audit Committee.
While the function of the Audit Committee is oversight, the Company's
management is responsible for the preparation, presentation and integrity of the
Company's financial statements and its overall financial reporting process. In
addition, management, with the assistance of the internal auditing department,
is responsible for maintaining appropriate accounting and financial reporting
principles and policies and internal controls and procedures designed to assure
compliance with accounting standards and applicable laws and regulations. The
outside auditors are responsible for planning and carrying out a proper audit of
the Company's annual financial statements, reviews of the Company's quarterly
financial statements prior to the filing of each quarterly report on Form 10-Q,
and other procedures that are part of their engagement.
Steel Dynamics, Inc. Audit Committee Charter
(Revised March 18, 2003)
In fulfilling their responsibilities hereunder, the Company recognizes
that members of the Audit Committee are not full-time employees of the Company
and are not, and do not represent themselves to be, accountants or auditors by
profession or experts in the fields of accounting or auditing. As such, it is
not the duty or responsibility of the Audit Committee or its members to conduct
"field work" or other types of auditing or accounting reviews or procedures or
to set auditor independence standards; and each member of the Audit Committee
shall be entitled to rely on (1) the integrity of those professional persons and
organization, both within and outside the Company, from whom or from which it
receives information, (2) the accuracy of the financial and other information
provided to the Audit Committee by such persons or organizations, absent actual
knowledge to the contrary (which, if it occurs, shall be promptly reported to
the Board), and (3) representations made by management as to any information
technology, internal audit and other non-audit services provided to the Company
by the independent auditors.
II. AUDIT COMMITTEE COMPOSITION.
A. The Board shall appoint the members of the Audit Committee, on
the recommendation of the Company's Governance and Nominating Committee. Members
shall serve a one year term or until their successors have been appointed by the
Board.
B. The Audit Committee shall consist of not less than three (3)
nor more than five (5) persons, none of whom (i) shall be, or during the five
prior years shall have been an officer or employee of the Company or any of its
subsidiaries, or, other than in his or her capacity as a Board member or a
member of any Board committee, an affiliate of the Company or any subsidiary, or
(ii) shall have any other material relationship, directly or as a partner,
shareholder or officer of an organization that has a relationship, with the
Company or with management which, in the opinion of the Board, would interfere
with the exercise of independent judgment in carrying out the responsibilities
of a director and Audit Committee member, and each of whom (iii) shall meet (x)
all criteria for "independence" that may be prescribed from time to time by SEC,
Nasdaq and tax rules, listing standards and regulations applicable to audit
committees, as such rules and requirements are interpreted from time to time by
the Board in the exercise of its business judgment, (y) the definition of a
"non-employee director" within the meaning of Rule 16b-3 promulgated by the SEC
under the Securities Exchange Act of 1934, and (z) the definition of an "outside
director" within the meaning of Section 162(m)(4)(C) of the Internal Revenue
Code.
C. Committee members must be financially literate, must possess a
basic understanding of finance and accounting, and must be able to read and
understand financial statements. The Board shall designate at least one member
of the Audit Committee but may also determine that additional or all members of
the Audit Committee qualify as an "audit committee financial expert," as defined
by applicable SEC and Nasdaq rules. The Audit Committee shall appoint a
Chairperson and may appoint a Co-Chairperson.
D. Audit Committee members shall not simultaneously serve on the
audit committees of more than one other public company.
E. Members of the Audit Committee shall not receive any
consulting, advisory or other compensatory fee from the Company or any
subsidiary, other than in the member's capacity as a member of the Board or any
Board committee.
III. AUDIT COMMITTEE MEETINGS.
A. The Audit Committee shall meet as often as it determines to be
necessary and appropriate, but not less frequently than quarterly.
Steel Dynamics, Inc. Audit Committee Charter 2
(Revised March 18, 2003)
B. The Audit Committee shall periodically meet with management,
with internal audit personnel and with the Company's independent auditors, in
executive sessions, and may from time to time request any officer or employee of
the Company or the Company's outside counsel, other advisors or the independent
auditors to attend a meeting of the Audit Committee or to meet with any members
of or consultants to the Audit Committee.
C. Members of the Audit Committee may participate in any meeting
by means of a conference call or similar communications equipment by means of
which all persons participating in the meeting can hear and speak to each other.
IV. AUDIT COMMITTEE AUTHORITY AND RESPONSIBILITIES.
A. AUDIT COMMITTEE AUTHORITY.
(1) The Audit Committee shall have the ultimate authority
and responsibility to appoint, evaluate, determine whether to retain
and, where appropriate, replace the independent auditors, subject to
stockholder ratification, if required.
(2) The Audit Committee shall be responsible for the
establishment and approval of all audit engagement fees. compensation
and terms, and shall pre-approve all auditing services or the method of
determining additional auditing services fees not covered by the
original terms of engagement, as well as all permitted non-audit
services, including the fees and terms thereof, to be performed for the
Company by its independent auditor (subject only to the de minimis
exceptions for non-audit services described in Section 10A(i)(1)(B) of
the Securities Exchange Act of 1934), which are approved by the Audit
Committee prior to the completion of the audit.
(3) The Audit Committee may from time to time delegate
certain authority to subcommittees consisting of one or more members
when appropriate, which may include the Chairperson or Co-Chairperson
of the Audit Committee, including the authority to grant pre-approvals
of audit and permitted non-audit services, provided decisions of such
subcommittee to grant pre-approvals shall be presented to the full
Audit Committee at its next scheduled meeting and shall be noted in the
minutes of the Audit Committee.
(4) The Audit Committee shall have the authority, to the
extent it deems necessary or appropriate, to retain independent legal,
accounting or other advisors to assist the Audit Committee in the
discharge of its responsibilities.
(5) The Board shall provide the Audit Committee with
appropriate funding, as determined or requested by the Audit Committee
from time to time, for payment of compensation to any persons employed
by or rendering services to the Audit Committee or to the Board,
including the independent auditors.
(6) The Audit Committee shall make regular reports to the
Board, which shall include an annual review of the Audit Committee's
own performance.
(7) The Audit Committee shall review and reassess the
adequacy of this Audit Committee Charter annually and recommend any
proposed changes to the Board for approval.
B. AUDIT COMMITTEE RESPONSIBILITIES. The Audit Committee shall
have the following duties and responsibilities, it being understood that this
itemization is only by way of illustration and not by way of limitation:
Steel Dynamics, Inc. Audit Committee Charter 3
(Revised March 18, 2003)
(1) Financial Statement and Disclosure Matters.
(a) Review and discuss with management and the
independent auditor the annual audited financial statements,
including disclosures made in Management's Discussion and
Analysis, and recommend to the Board whether the audited
financial statements as presented are acceptable for inclusion
in the Company's Form 10-K.
(b) Review and discuss with management and the
independent auditor the Company's quarterly financial
statements prior to the filing of its Form 10-Q, including the
results of the independent auditor's review of the quarterly
financial statements.
(c) Discuss with management and the independent
auditor significant financial reporting issues and judgments
made in connection with the preparation of the Company's
financial statements, including any significant changes in the
Company's selection or application of accounting principles,
any major issues as to the adequacy of the Company's internal
controls, and any special steps adopted in light of any
material control deficiencies.
(d) Review and discuss quarterly reports from
the independent auditors concerning:
(i) All critical accounting policies
and practices.
(ii) Any alternative treatments of
financial information within generally accepted
accounting principles that have been discussed with
management, ramifications of the use of such
alternative disclosures and treatments, and the
treatment preferred by the independent auditor.
(iii) Other material written
communications between the independent auditor and
management, such as any management letter or schedule
of unadjusted differences.
(e) Discuss with management the Company's
earnings press releases, including the use of "pro forma" or
"adjusted" non-GAAP information, as well as financial
information and earnings guidance provided to analysts and
rating agencies. Such discussion may be done generally
(consisting of discussing the types of information to be
disclosed and the types of presentations to be made).
(f) Discuss with management and the independent
auditor the effect of regulatory and accounting initiatives as
well as off-balance sheet structures on the Company's
financial statements.
(g) Discuss with management the Company's major
financial risk exposures and the steps management has taken to
monitor and control such exposures, including the Company's
risk assessment and risk management policies.
(h) Discuss with the independent auditor the
matters required to be discussed by Statement on Auditing
Standards No. 61 relating to the conduct of the audit,
including any difficulties encountered in the course of the
audit work, any restrictions on the scope of activities or
access to requested information, and any significant
disagreements with management.
Steel Dynamics, Inc. Audit Committee Charter 4
(Revised March 18, 2003)
(i) Review disclosures made to the Audit
Committee by the Company's Chief Executive Officer and Chief
Financial Officer during their certification process for the
Form 10-K and Form 10-Q about any significant deficiencies in
the design or operation of internal controls or material
weaknesses therein and any fraud or possible fraud involving
management or other employees who have a significant role in
the Company's internal controls.
(2) Oversight of the Company's Relationship with the
Independent Auditor.
(a) Review and evaluate the lead partner of the
independent auditor team.
(b) Obtain and review a report from the
independent auditor at least annually regarding
(i) The independent auditor's internal
quality-control procedures,
(ii) Any material issues raised by the
most recent internal quality-control review, or peer
review, of the firm, or by any inquiry or
investigation by governmental or professional
authorities within the preceding five years
respecting one or more independent audits carried out
by the firm,
(iii) Any steps taken to deal with any
such issues, and
(iv) All relationships between the
independent auditor and the Company.
(c) Evaluate the qualifications, performance and
independence of the independent auditor, including
consideration of whether the auditor's quality controls are
adequate and the provision of permitted non-audit services is
compatible with maintaining the auditor's independence, taking
into account the opinions of management and the Company's
internal auditors. The Audit Committee shall present its
conclusions periodically to the Board with respect to the
independence of the auditor.
(d) Ensure the rotation of the audit partners as
required by law, and consider whether, in order to assure
continuing auditor independence, it is appropriate to adopt a
policy of rotating the independent auditing firm on a regular
basis.
(e) Recommend to the Board policies for the
Company's hiring of employees or former employees of the
independent auditor who participated in any capacity in the
Company's audit.
(f) Discuss with the national office of the
independent auditor issues on which they were consulted by the
Company's audit team and on any other matters concerning audit
quality and consistency that the Audit Committee deems
appropriate.
(g) Meet with the independent auditor prior to
the audit to discuss the planning and staffing of the audit.
Steel Dynamics, Inc. Audit Committee Charter 5
(Revised March 18, 2003)
(3) Oversight of the Company's Internal Audit Function.
(a) Review the appointment and replacement of
the senior internal auditing executive.
(b) Review the significant reports to management
prepared by the internal auditing department, together with
management's responses.
(c) Discuss with the independent auditor and
management the internal audit department responsibilities,
budget and staffing and any recommended changes in the planned
scope of the internal audit.
(4) Compliance Oversight.
(a) Obtain from the independent auditor
assurances that Section 10A(b) of the Securities Exchange Act
of 1934 has not been implicated.
(b) Obtain reports or assurances from
management, the Company's senior internal auditing executive
and the independent auditor that the Company and its
subsidiaries and any foreign affiliated entities are in
conformity with applicable legal requirements.
(c) Review reports and disclosures of insider
and affiliated party transactions.
(d) Advise the Board with respect to the
Company's policies and procedures regarding compliance with
applicable laws and regulations and codes of ethics.
(e) Establish procedures for the receipt,
retention and treatment of complaints received by the Company
regarding accounting, internal accounting controls or auditing
matters.
(f) Establish procedures for the confidential,
anonymous submission by employees of concerns regarding
questionable business, financial, accounting or auditing
matters.
(g) Discuss with management and the independent
auditor any correspondence with regulators or governmental
agencies and any published reports which raise material issues
regarding the Company's financial statements or accounting
policies.
(h) Discuss with the Company's legal counsel any
matters that may have a material impact on the financial
statements or the Company's compliance policies.
Steel Dynamics, Inc. Audit Committee Charter 6
(Revised March 18, 2003)
EXHIBIT B
STEEL DYNAMICS, INC.
2003 EXECUTIVE INCENTIVE COMPENSATION PLAN
1. PURPOSE. The purpose of the Steel Dynamics, Inc. 2003
Executive Incentive Compensation Plan (the "Plan") is to provide annual
performance-based incentive compensation to executives, based on the financial
performance criteria described in this Plan.
This Plan supersedes and replaces the Steel Dynamics, Inc. Amended and
Restated Officer and Manager Cash and Stock Bonus Plan (the "Old Plan"),
originally adopted, with stockholder approval, October 28, 1996 and amended,
with stockholder approval, effective January 1, 2000, except that all Stock
bonus awards previously made under the Old Plan and not yet fully vested shall
continue to be governed by the terms of the Old Plan.
Under the Old Plan, 450,000 shares of Stock were authorized for
issuance; and, from inception of the Old Plan to date, a total of 224,835 shares
were issued, of which 95,902 shares have not yet vested. Accordingly, the
balance of 225,165 shares, together with any additional vesting forfeitures,
remaining unissued under the Old Plan will be available for issuance under this
Plan, as part of and not in addition to the total number of shares authorized
under Section 3.1 of this Plan.
2. EFFECTIVE DATE AND TERM OF PLAN. The Effective Date of the
Plan is January 1, 2003, subject to stockholder approval. The Plan shall
terminate on February 28, 2008, unless extended, subject to stockholder
approval, or earlier terminated by the Board.
3. SHARES OF STOCK SUBJECT TO THE PLAN.
3.1. The total number of shares of Stock of the Company
reserved and available for issuance and distribution pursuant to the
Plan shall not exceed, in the aggregate, 750,000 shares of the
authorized Stock of the Company, including the 225,165 or more unused
shares held over from the Old Plan, subject to adjustment as described
below.
3.2. Stock which may be issued under the Plan may be
either authorized but unissued shares or shares of issued Stock held in
the Company's treasury, or both, at the discretion of the Committee.
Whenever any Stock is forfeited under the Plan, the shares forfeited
shall revert to authorized but unissued shares and may again be
reissued hereunder.
3.3. In the event of any stock dividend, stock split,
combination or exchange of shares, recapitalization or other change in
the capital structure of the Company, corporate separation or division
(including, but not limited to, split-up, split-off, spin-off or
distribution to Company stockholders, other than a normal cash
dividend), sale by the Company of all or a substantial portion of its
assets, rights offering, merger, consolidation, reorganization or
partial or complete liquidation, or any other corporate transaction or
event having an effect similar to any of the foregoing, the aggregate
number of shares reserved for issuance under the Plan, as the Committee
shall deem necessary or appropriate to reflect equitably the effects of
such changes, shall be appropriately adjusted, or new shares shall be
issued, as determined by the Committee in its discretion.
4. DEFINITIONS. As used in this Plan, the following terms shall
have the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Adjusted Pre-Tax Net Income" means, for any Year,
consolidated net income of the Company, before taxes, extraordinary
items and bonuses payable to Participants under this Plan, as
determined by the Company; provided, however, that, to the extent
reasonably determinable, the effect upon Adjusted Pre-Tax Net Income of
any start-up expenses associated with significant capital expenditures,
for a period not to exceed twelve (12) months following start-up, shall
be excluded from and not taken into account in determining such
Adjusted Pre-Tax Net Income.
2003 Executive Incentive Compensation Plan
"Average Divisional ROA Assets" for a division means the sum
of the dollar amounts of total divisional assets employed by that
division at the end of each month during the Year and during the last
month of the prior year, adjusted by subtracting (a) the book value of
assets classified as construction-in-progress, (b) the book value of
assets placed in service during the Year, and (c) fifty percent (50%)
of the book value of assets placed in service during the prior year,
and dividing the resulting amount by the number of months of the Year
plus one.
"Base Salary" means, with respect to a Participant, the
regular annual salary approved as "base salary" by the Committee and
paid during a Year for services rendered, excluding any cash or stock
bonus payments (whether paid under this Plan or otherwise) or severance
pay.
"Board" means the Board of Directors of the Company.
"Bonus Pool" means, for any Year, an amount determined by
multiplying Adjusted Pre-Tax Net Income, minus an amount equal to ten
percent (10%) of "Average Stockholders Equity," as determined by the
Company, by a percentage amount, determined annually by the Committee
no later than ninety (90) days after the commencement of the Year for
which incentive compensation hereunder may be paid, that shall be no
less than five percent (5%) nor more than six and one-half percent (6
1/2%).
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Committee" means a committee of the Board, as contemplated by
Section 6.
"Company" means Steel Dynamics, Inc., an Indiana corporation,
and its subsidiaries.
"Corporate Executive Officer" means those persons whose
primary responsibilities are company-wide, consisting initially of (a)
the Company's President and Chief Executive Officer, (b) the Company's
Chief Financial Officer, and (c) such other persons, if any, who may be
from time to time designated as a Corporate Executive Officer by the
Committee, for purposes of this Plan, no later than ninety (90) days
after the commencement of the Year for which incentive compensation
hereunder may be paid. Unless changed by the Committee within the
foregoing period, with respect to any Year, an officer's designation
for Plan purposes, once made, shall continue from year to year.
"Corporate Officer" means those persons whose primary
responsibilities are company-wide, consisting initially of (a) the
Company's Vice President of Sales and Marketing and (b) such other
persons, if any, who may be from time to time designated as a Corporate
Officer by the Committee, for purposes of this Plan, no later than
ninety (90) days after the commencement of the Year for which incentive
compensation hereunder may be paid. Unless changed by the Committee
within the foregoing period, with respect to any Year, an officer's
designation for Plan purposes, once made, shall continue from year to
year.
"Divisional Executive Officer" means those persons who have
both company-wide and direct divisional responsibilities, consisting
initially of (a) the Vice President and General Manager of the
Company's Butler, Indiana Flat Rolled Division, (b) the Vice President
and General Manager of the Company's Columbia City, Indiana Structural
and Rail Division, and (c) such other persons, if any, who may be from
time to time designated as a Divisional Executive Officer by the
Committee, for purposes of this Plan, no later than ninety (90) days
after the commencement of the Year for which incentive compensation
hereunder may be paid. Unless changed by the Committee within the
foregoing period, with respect to any Year, an officer's designation
for Plan purposes, once made, shall continue from year to year.
"Divisional Officer" means those persons who have both
company-wide and direct divisional responsibilities, consisting
initially of (a) the general manager of the Company's Pittsboro,
Indiana Bar Products Division, (b) the president of the Company's New
Millennium Building Systems subsidiary, and (c) such other persons, if
any, who may be from time to time designated as a Divisional Officer by
the Committee, for purposes of this Plan, no later than ninety (90)
days after the commencement of the Year
2003 Executive Incentive Compensation Plan 2
for which incentive compensation hereunder may be paid. Unless changed
by the Committee within the foregoing period, with respect to any Year,
an officer's designation for Plan purposes, once made, shall continue
from year to year.
"Divisional Return on Assets" for a division means a
percentage established by adding (a) the division's net income for the
Year, as determined for corporate consolidation purposes, (b) the
amount of certain corporate expenses allocated to that division, and
(c) the amount of incentive bonus compensation expenses associated with
this Plan, and then dividing that sum by the Average Divisional ROA
Assets.
"Effective Date" has the meaning assigned to such term in
Section 2.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"Fair Market Value" means, as of any date, the value of the
Stock determined as follows: if the Stock is listed on any established
stock exchange or a national market system, including without
limitation the NASDAQ National Market of the National Association of
Securities Dealers, Inc. Automated Quotation (NASDAQ) System, the Fair
Market Value of a share of Stock shall be the closing sales price for
such Stock (or the closing bid, if no sales were reported) as quoted on
such system or exchange (or the exchange with the greatest volume of
trading in the Stock) on the last market trading date prior to the date
of determination, as reported by Dow Jones, in the Wall Street Journal
or by such other source as the Committee deems reliable.
"Maximum ROA Target" means a Return on Assets percentage, by
division, established by the Committee, which shall be no less than
twenty-five percent (25%) nor more than thirty-five percent (35%).
"Minimum ROA Target" means a Return on Assets percentage, by
division, established by the Committee, which shall be no less than
four percent (4%) nor more than six percent (6%).
"Participant" means those Corporate Executive Officers,
Divisional Executive Officers, Corporate Officers and Divisional
Officers who, either as defined hereunder or by Committee designation,
are designated or selected from time to time to be Participants under
this Plan.
"Participant's Adjusted Base Salary", as applied within the
Bonus Pool component of this Plan, (a) for purposes of either or both
of the cash portions of the bonuses described in Sections 5.1 and 5.2,
means (i) with respect to any Corporate Executive Officer, two and
one-half (2 1/2) times his Base Salary, (ii) with respect to a
Divisional Executive Officer, half of his Base Salary multiplied by two
and one-half (2 1/2), (iii) with respect to any Corporate Officer, one
and one-half (1 1/2) times his Base Salary, and (iv) with respect to
any Divisional Officer twenty-five percent (25%) of his Base Salary
multiplied by one and one-half (1 1/2); and (b) for purposes of the
stock portions of the bonuses described in Sections 5.1 and 5.2, means
(i) with respect to any Corporate Executive Officer, his Base Salary,
(ii) with respect to a Divisional Executive Officer fifty percent (50%)
of this Base Salary, (iii) with respect to any Corporate Officer,
seventy-five percent (75%) of his Base Salary, and (iv) with respect to
any Divisional Officer eighteen and three-quarters percent (18.75%) of
his Base Salary.
"Participant's Bonus Pool Percentage" means, in any Year with
respect to a Participant, a fraction, the numerator of which is equal
to the Participant's Adjusted Base Salary and the denominator of which
is equal to the sum of all of the Participants' Adjusted Base Salaries.
"Plan" means the Steel Dynamics, Inc. 2003 Executive Incentive
Compensation Plan, or as it may be further amended from time to time.
"Remaining Bonus Pool" means the excess of the Bonus Pool over
the sum of the aggregate cash bonus amounts payable pursuant to
Sections 5.1.1.1 and 5.1.2.1.
"Restricted Stock" means Stock issued pursuant to the Plan
that is not yet vested as contemplated by Section 8.
2003 Executive Incentive Compensation Plan 3
"Retirement" means voluntary retirement by a Participant who
is at least 60 years old.
"Stock" means the $0.01 par value common stock of the Company.
"Vested Shares" has the meaning assigned to such term in
Section 8.
"Year" means the Company's fiscal year, for which incentive
compensation may be payable hereunder.
5. PAYMENT OF INCENTIVE COMPENSATION. Subject to the terms,
conditions and limitations set forth in this Plan, each Year Participants who
are Corporate Executive Officers or Corporate Officers may be entitled to
receive a cash and a stock bonus under Section 5.1; and Participants who are
Divisional Executive Officers or Divisional Officers may be entitled to receive
a cash and a stock bonus under both Sections 5.1 and 5.2.
5.1. INCENTIVE COMPENSATION FOR CORPORATE EXECUTIVE
OFFICERS AND CORPORATE OFFICERS. Each Participant who is a Corporate
Executive Officer or a Corporate Officer may be entitled to receive,
each Year, incentive compensation based upon a performance-based
consolidated Bonus Pool determined in the manner described in Sections
5.1.1 and 5.1.2.
5.1.1. CORPORATE EXECUTIVE OFFICERS.
5.1.1.1. CASH BONUS. Each Participant who is
a Corporate Executive Officer shall receive a cash
bonus in an amount, if any, equal to the product of
(i) the Participant's Bonus Pool Percentage and (ii)
the Bonus Pool; provided, however, that the cash
bonus shall not exceed two and one-half (2 1/2) times
the Corporate Executive Officer's Base Salary.
5.1.1.2. STOCK BONUS. Each Participant who
is a Corporate Executive Officer shall also be
entitled to receive a stock bonus if there are
unallocated amounts remaining in the Remaining Bonus
Pool. Any such amounts shall be distributed in the
form of Restricted Stock as follows: that number of
shares of Restricted Stock having, at the time of
issuance, a Fair Market Value equal to the product of
(i) the Participant's Bonus Pool Percentage and (ii)
the Remaining Bonus Pool; provided, however, that the
aggregate Fair Market Value of the Restricted Stock
so issued shall not exceed the Corporate Executive
Officer's Base Salary.
5.1.2. CORPORATE OFFICERS.
5.1.2.1 CASH BONUS. Each Participant who is
a Corporate Officer shall receive a cash bonus in an
amount, if any, equal to the product of (i) the
Participant's Bonus Pool Percentage and (ii) the
Bonus Pool; provided, however, that the cash bonus
shall not exceed one and one-half (1 1/2) times the
Corporate Officer's Base Salary.
5.1.2.2 STOCK BONUS. Each Participant who is
a Corporate Officer shall be entitled to receive a
stock bonus if there are unallocated amounts
remaining in the Remaining Bonus Pool. Any such
amounts shall be distributed in the form of
Restricted Stock as follows: that number of shares of
Restricted Stock having, at the time of issuance, a
Fair Market Value equal to the product of (i) the
Participant's Bonus Pool Percentage and (ii) the
Remaining Bonus Pool; provided, however, that the
aggregate Fair Market Value of the Restricted Stock
so issued shall not exceed seventy-five percent (75%)
of the Corporate Officer's Base Salary.
5.2. INCENTIVE COMPENSATION FOR DIVISIONAL EXECUTIVE
OFFICERS AND DIVISIONAL OFFICERS. Each Participant who is a Divisional
Executive Officer or a Divisional Officer may be entitled to receive,
each Year, a cash and a stock bonus, in part, based on a Company-wide
performance-based bonus pool
2003 Executive Incentive Compensation Plan 4
determined in the manner described in Section 5.2.1 and, in part,
based on divisional performance, determined in the manner described in
Section 5.2.2.
5.2.1. DIVISIONAL EXECUTIVE OFFICERS.
5.2.1.1. INCENTIVE COMPENSATION BASED ON THE
CONSOLIDATED BONUS POOL.
(a) CASH BONUS. Each Participant who
is a Divisional Executive Officer shall
receive a cash bonus in an amount, if any,
equal to the product of (i) the
Participant's Bonus Pool Percentage and (ii)
the Bonus Pool; provided, however, that the
cash bonus shall not exceed two and one-half
(2 1/2) times his Base Salary multiplied by
fifty percent (50%), or a total of 125% of
his Base Salary.
(b) STOCK BONUS. Each Participant
who is a Divisional Executive Officer shall
receive a stock bonus if there are
unallocated amounts remaining in the
Remaining Bonus Pool. Any such amounts shall
be distributed in the form of Restricted
Stock as follows: that number of shares of
Restricted Stock having, at the time of
issuance, a Fair Market Value equal to the
product of (i) the Participant's Bonus Pool
Percentage and (ii) the Remaining Bonus
Pool; provided, however, that the aggregate
Fair Market Value of the Restricted Stock so
issued shall not exceed fifty percent (50%)
of his Base Salary.
5.2.1.2. INCENTIVE COMPENSATION BASED ON
DIVISIONAL PERFORMANCE. No later than ninety days
after the commencement of the Year for which
incentive compensation may be paid, the Committee
shall make two preliminary determinations: (a) a
threshold return on assets percentage (the "Minimum
ROA Target," as defined) for each separate division,
which must be achieved by each such division before
any cash or stock bonus may be paid under this
Section 5.2 in respect of that division, and (b) a
maximum return on assets percentage (the "Maximum ROA
Target," as defined) at which level the Divisional
Executive Officer or Divisional Officer will be
entitled to receive the Divisional Executive
Officer's Maximum Divisional Cash Bonus, as defined
in Section 5.2.1.1(a), the Divisional Executive
Officer's Maximum Divisional Stock Bonus, as defined
in Section 5.2.1.1(b), the Divisional Officer's
Maximum Divisional Cash Bonus, as defined in Section
5.2.1.2(a), or the Divisional Officer's Maximum
Divisional Stock Bonus, as defined in Section
5.2.1.2(b).
(a) CASH BONUS. Each Participant who
is a Divisional Executive Officer shall
receive, for a particular Year, a cash
bonus, if any, in an amount equal to that
percentage of the Divisional Executive
Officer's Maximum Divisional Cash Bonus for
that Year, established by linear
interpolation and derived by (a) dividing
the number of whole number increments
between the applicable Minimum ROA Target
for that Year and the applicable Maximum ROA
Target for that Year into one hundred (100),
and (b) multiplying the result by the number
of whole number increments, expressed as a
percentage, between the applicable Minimum
ROA Target and the actual Divisional Return
on Assets for that Year (rounded down from
.4 and up from .5). For purposes of this
Section 5.2.1.2(a), the term "Divisional
Executive Officer's Maximum Divisional Cash
Bonus" means an amount, payable in cash,
equal to two and one-half times his Base
Salary multiplied by fifty percent (50%), or
a total of one hundred twenty-five percent
(125%) of his Base Salary.
(b) STOCK BONUS. Each Participant
who is a Divisional Executive Officer shall
receive, for a particular Year, a stock
bonus, if any, in an amount equal to that
percentage of the Divisional Executive
Officer's Maximum Divisional Stock Bonus for
that Year, established by linear
interpolation and
2003 Executive Incentive Compensation Plan 5
derived by (a) dividing the number of whole
number increments between the applicable
Minimum ROA Target for that Year and the
applicable Maximum ROA Target for that Year
into one hundred (100), and (b) multiplying
the result by the number of whole number
increments, expressed as a percentage,
between the applicable Minimum ROA Target
and the actual Divisional Return on Assets
for that Year (rounded down from .4 and up
from .5). For purposes of this Section
5.2.1.2(b), the term "Divisional Executive
Officer's Maximum Divisional Stock Bonus"
means an amount, payable in shares of
Restricted Stock, having, at the time of
issuance, a Fair Market Value equal to fifty
percent (50%) of his Base Salary.
5.2.2. DIVISIONAL OFFICERS.
5.2.2.1. INCENTIVE COMPENSATION BASED ON THE
CONSOLIDATED BONUS POOL.
(a) CASH BONUS. Each Participant who
is a Divisional Officer shall receive a cash
bonus in an amount, if any, equal to the
product of (i) the Participant's Bonus Pool
Percentage and (ii) the Bonus Pool;
provided, however, that the cash bonus shall
not exceed one and one-half times (1 1/2)
times his Base Salary multiplied by
twenty-five percent (25%), or a total of
thirty-seven and one-half percent (37.5%) of
his Base Salary.
(b) STOCK BONUS. Each Participant
who is a Divisional Officer shall also be
entitled to receive a stock bonus if there
are unallocated amounts remaining in the
Remaining Bonus Pool. Any such amounts shall
be distributed in the form of Restricted
Stock as follows: that number of shares of
Restricted Stock having, at the time of
issuance, a Fair Market Value equal to the
product of (i) the Participant's Bonus Pool
Percentage and (ii) the Remaining Bonus
Pool; provided, however, that the aggregate
Fair Market Value of the Restricted Stock so
issued shall not exceed seventy-five percent
(75%) of his Base Salary multiplied by
twenty-five percent (25%), or a total of
eighteen and three-quarters percent (18.75%)
of his Base Salary.
5.2.2.2. INCENTIVE COMPENSATION BASED ON
DIVISIONAL PERFORMANCE.
(a) CASH BONUS. Each Participant who
is a Divisional Officer shall receive, for a
particular Year, a cash bonus, if any, in an
amount equal to that percentage of the
Divisional Officer's Maximum Divisional Cash
Bonus for that Year, established by linear
interpolation and derived by (a) dividing
the number of whole number increments
between the applicable Minimum ROA Target
for that Year and the applicable Maximum ROA
Target for that Year into one hundred (100),
and (b) multiplying the result by the number
of whole number increments, expressed as a
percentage, between the applicable Minimum
ROA Target and the actual Divisional Return
on Assets for that Year (rounded down from
.4 and up from .5). For purposes of this
Section 5.2.2.2(a), the term "Divisional
Officer's Maximum Divisional Cash Bonus"
means an amount, payable in cash, equal to
one and one-half (1 1/2) times his Base
Salary multiplied by seventy-five percent
(75%), or a total of one hundred twelve and
one-half percent (112.5%) of his Base
Salary.
(b) STOCK BONUS. Each Participant
who is a Divisional Officer shall receive,
for a particular Year, a stock bonus, if
any, in an amount equal to that percentage
of the Divisional Officer's Maximum
Divisional Stock Bonus for that Year,
established by linear interpolation and
derived by (a) dividing the number of whole
number increments between the applicable
Minimum ROA Target for that Year and the
applicable Maximum ROA Target for that Year
into
2003 Executive Incentive Compensation Plan 6
one hundred (100), and (b) multiplying the
result by the number of whole number
increments, expressed as a percentage,
between the applicable Minimum ROA Target
and the actual Divisional Return on Assets
for that Year (rounded down from .4 and up
from .5). For purposes of this Section
5.2.2.2(b), the term "Divisional Officer's
Maximum Divisional Stock Bonus" means an
amount, payable in shares of Restricted
Stock, having, at the time of issuance, a
Fair Market Value equal to seventy-five
percent (75%) of his Base Salary multiplied
by seventy-five percent (75%), or a total of
fifty-six and one-quarter percent (56.25%)
of his Base Salary.
6. ADMINISTRATION.
6.1. The Plan shall be administered by the Compensation
Committee of the Board of Directors (the "Committee"), unless the Board
otherwise provides. The Committee shall in all events and at all times
consist of not less than three members of the Board, each of whom shall
(a) meet the definition of "independence" prescribed from time to time
by applicable SEC rules and as required under the applicable listing
standards prescribed by Nasdaq or by such other national securities
exchange on which the Company's Stock is listed, (b) be a "non-employee
director," as such term is defined in Rule 16b-3 promulgated under
Section 16 of the Exchange Act or any successor provision, and (c) be
an "outside director," as that term is used in Section 162(m) of the
Code and the regulations promulgated thereunder. In the absence of the
appointment or functioning of a Committee, however, the Board members
who meet all of the foregoing three criteria shall together constitute
and function as the Committee.
6.2. The Committee shall administer the Plan so as to
comply at all times with Rule 16b-3 of the Exchange Act, and Section
162(m) of the Code and any other qualifying laws or rules, including
applicable independence rules, that may be applicable from time to
time. To the extent that any provision hereof is found not to be in
compliance with any such rule or requirement, the Committee shall have
the full power and authority to effect such changes or amendments,
without the necessity of any further approval by stockholders. Subject
to the foregoing, the Board may from time to time increase the size of
the Committee, appoint additional members, remove members (with or
without cause), substitute new members, and fill vacancies (however
caused). A majority of the members of the Committee shall constitute a
quorum, and the actions of a majority of the members of the Committee
at a meeting at which a quorum is present shall be the actions of the
Committee.
6.3. The Committee shall have the exclusive power,
authority and discretion to adopt, alter and repeal such administrative
rules, guidelines and practices governing the Plan as it shall from
time to time deem advisable and to interpret the terms and provisions
of the Plan. The Committee's interpretation of the Plan shall be final,
binding and conclusive on all parties.
6.4. The Committee shall have the authority and discretion
to: (a) annually determine the Bonus Pool, within the limitations
described in Section 4; (b) annually designate those persons who shall
be classified as Corporate Officers, Corporate Executive Officers,
Divisional Officers, or Divisional Executive Officers; (c) annually
establish the Minimum ROA Target and the Maximum ROA Target; (d)
annually determine, notwithstanding the percentage multiplier specified
in Section 4 used to calculate a Divisional Executive Officer's Maximum
Divisional Cash Bonus or a Divisional Executive Officer's Maximum
Divisional Stock Bonus, what that multiplier shall be, within a range
of not less than forty percent (40%) nor more than sixty percent (60%),
together with any necessary conforming or reciprocal adjustments to the
related percentage multipliers; and (e) annually determine,
notwithstanding the percentage multiplier specified in Section 4 used
to calculate a Divisional Cash Bonus or a Divisional Officer's Maximum
Divisional Stock Bonus, what that multiplier shall be, within a range
of not less than sixty-five percent (65%) nor more than eighty-five
percent (85%), together with any necessary conforming or reciprocal
adjustments to the related percentage multipliers.
The Committee's exercise of its authority and discretion
hereunder shall in no event be exercised to increase the incentive
compensation payable to any Participant subject to Section 162(m) of
the Code in excess of the amount determined by the performance measures
applicable to that Participant.
2003 Executive Incentive Compensation Plan 7
6.5. The Committee may employ such legal counsel,
consultants and agents as it may deem desirable for the administration
of the Plan and may rely upon any opinion received from any such
counsel or consultant and any computation received from any such
consultant or agent. Expenses incurred by the Committee in engaging
such counsel, consultant or agent shall be paid by the Company.
6.6. The Committee shall have the right, in its sole
discretion, to waive the forfeiture provisions found in Section 8
below.
7. AMENDMENT AND TERMINATION. The Board may at any time or from
time to time amend this Plan in whole or in part; provided, however, that any
amendment that must be approved by the Company's stockholders in order to comply
with applicable law or with the rules of any national securities exchange or
market upon which the Company's Stock is traded or quoted or to satisfy the
requirements for "performance-based compensation" within the meaning of Section
162(m) of the Code shall not be effective unless and until such approval has
been obtained. Presentation of this Plan or any amendment hereof for stockholder
approval shall not be deemed to limit the Company's authority to offer similar
or dissimilar benefits in plans that do not require stockholder approval or in
plans for which stockholder approval is not sought. The Board may also terminate
this Plan at any time.
8. FORFEITURE AND VESTING OF RESTRICTED STOCK. Restricted Stock
issued to a Participant shall vest and become nonforfeitable as follows:
one-third (1/3) of the Restricted Stock shall vest immediately upon issuance, an
additional one-third (1/3) will vest one year later, and the balance will vest
on the second anniversary of the initial issuance date. Upon termination of the
Participant's employment for any reason other than Retirement, all shares of
Restricted Stock of the Participant which are not Vested Shares at the time of
termination of employment shall be forfeited and returned to the Company, and
the Participant shall no longer be the owner of or have any interest whatsoever
in the forfeitable Restricted Stock.
9. RESTRICTION ON TRANSFER OF RESTRICTED STOCK. Restricted Stock
that is forfeitable under the terms of this Plan may not be transferred,
assigned, sold, pledged, hypothecated, or otherwise disposed of in any manner
and shall not be subject to levy, attachment, or other legal process.
10. CERTIFICATES. Restricted Stock issued under this Plan shall be
registered in the name of each Participant. Stock certificates so issued shall
be held by the Company. Stock certificates shall bear such restrictive legends
as the Committee may prescribe.
Subject to all the terms, conditions, and limitations of this Plan,
including provisions concerning forfeiture and restrictions on transfer, the
Participant shall be the owner of the Restricted Stock with full dividend and
voting rights. Upon the request of a Participant, separate stock certificates
shall be issued and delivered to the Participant with respect to Vested Shares.
11. GENERAL PROVISIONS.
11.1. NO GUARANTEE OF EMPLOYMENT. The adoption of the Plan
shall not confer upon any Participant any right to continued employment
with the Company nor shall it interfere in any way with the right of
the Company to terminate its relationship with any Participant at any
time.
11.2. PARTICIPANT TITLES FOR PLAN PURPOSES ONLY. The use of
"Executive" or "Officer," alone or in combination anywhere in this
Plan, are for purposes solely of establishing different categories of
benefits provided by this Plan. Such designations are not intended to
confer nor shall they be deemed to confer any status as an officer of
the Company, nor shall any such designations be deemed to differentiate
the duties, titles or responsibilities of any existing or future
officer of the Company.
11.3. WITHHOLDING OF TAXES. No later than the date as of
which an amount first becomes includible in the gross income of a
Participant for federal income tax purposes with respect to any
Restricted Stock under the Plan, the Participant shall pay to the
Company or make arrangements satisfactory to the Committee regarding
the payment of any federal state or local taxes of any kind required by
law to be withheld with respect to such amount. The obligations of the
Company under the Plan shall be
2003 Executive Incentive Compensation Plan 8
conditioned on such payment or arrangements and the Company, to the
extent permitted by law, shall have the right to deduct any such taxes
from any payment of any kind otherwise due to the Participant.
11.4. EXPENSES. The expenses of administering the Plan
shall be borne by the Company.
11.5. FRACTIONAL SHARES. No fractional shares of Stock
shall be issued, and the Committee shall determine, in its discretion,
whether cash shall be given in lieu of fractional shares or whether
such fractional shares shall be eliminated by rounding up.
11.6. GOVERNING LAW. To the extent not governed by federal
law, the Plan shall be construed in accordance with and governed by the
laws of the State of Indiana.
2003 Executive Incentive Compensation Plan 9
[STEEL DYNAMICS LOGO]
C/O EQUISERVE TRUST COMPANY, N.A.
P.O. BOX 43023
PROVIDENCE, RI 02940-3023
ATTN: TAMMIE MARSHALL
VOTE BY INTERNET - WWW.PROXYVOTE.COM
Use the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before the
cut-off date or meeting date. Have your proxy card in hand when you access the
web site. You will be prompted to enter your 12-digit Control Number which is
located below to obtain your records and to create an electronic voting
instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59
P.M. Eastern Time the day before the cut-off date or meeting date. Have your
proxy card in hand when you call. You will be prompted to enter your 12-digit
Control Number which is located below and then follow the simple instructions
the Vote Voice provides you.
VOTE BY MAIL
Mark, sign, and date your proxy card and return it in the postage-paid envelope
we have provided or return it to STEEL DYNAMICS, INC., c/o ADP, 51 Mercedes Way,
Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
STDYN1
KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
--------------------------------------------------------------------------------
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
STEEL DYNAMICS, INC.
NOTE: THE BOARD OF DIRECTORS RECOMMENDS A
VOTE "FOR" ALL OF THE FOLLOWING ITEMS.
1. ELECTION OF DIRECTORS:
01) KEITH E. BUSSE 07) NAOKI HIDAKA
02) MARK D. MILLETT 08) JAMES E. KELLEY
03) RICHARD P. TEETS, JR. 09) DR. JURGEN KOLB
04) JOHN C. BATES 10) DANIEL M. RIFKIN
05) PAUL B. EDGERLEY 11) JOSEPH D. RUFFOLO
06) RICHARD J. FREELAND
FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
[ ] [ ] [ ]
To withhold authority to vote, mark "For All Except" and write the nominee's
number on the line below.
--------------------------------------------------
FOR AGAINST ABSTAIN
VOTE ON PROPOSALS
2. APPROVAL OF APPOINTMENT OF ERNST & YOUNG LLP AS AUDITORS FOR THE YEAR 2003. [ ] [ ] [ ]
3. APPROVAL OF THE STEEL DYNAMICS, INC. 2003 EXECUTIVE INCENTIVE COMPENSATION PLAN. [ ] [ ] [ ]
4. TO GIVE PROXIES DISCRETION TO VOTE ON ANY OTHER MATTERS THAT MAY PROPERLY COME
BEFORE THE MEETING.
NOTE: Unless otherwise directed, the proxies will vote "FOR" all of the
foregoing items.
Please be sure to sign and date this Proxy.
Mark box at right if an address change or comment has been [ ]
noted on the reverse side of this card.
YES NO
HOUSEHOLDING ELECTION - Please indicate if you
consent to receive certain future investor
communications in a single package per household [ ] [ ]
---------------------------------- ---------
Signature [PLEASE SIGN WITHIN BOX] Date
---------------------------------- ---------
Signature (Joint Owners) Date
--------------------------------------------------------------------------------
PROXY
STEEL DYNAMICS, INC.
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
STEEL DYNAMICS, INC.'S ANNUAL STOCKHOLDERS MEETING
Keith E. Busse or Tracy L. Shellabarger are appointed proxies, with power of
substitution, to vote all of the undersigned's shares held of record March 25,
2003, at STEEL DYNAMICS, INC.'s May 29, 2003 Annual Meeting of Stockholders at
9:00 A.M. EST in the John Whistler Ballroom of the Grand Wayne Center, 120 West
Jefferson Boulevard, Fort Wayne, Indiana (or at any adjournment thereof) on all
matters set forth in SDI's Year 2003 Proxy Statement, as set forth on the
reverse side.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
Please sign exactly as your name appears on the books of the Company. Joint
owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
ADDRESS CHANGES/COMMENTS:
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(If you noted any Address Changes/Comments above, please
mark corresponding box on the reverse side.)