<PAGE>
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-11(c) or Section 240.14a-12
NATIONAL STEEL CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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LOGO
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OSAMU SAWARAGI NATIONAL STEEL
Chairman of the Board and Chief Executive Officer CORPORATION
4100 Edison Lakes
Parkway
Mishawaka, IN 46545
Telephone: (219)
273-7000
Facsimile: (219)
273-7868
March 27, 1998
To All National Steel Corporation Stockholders:
It is a pleasure to invite you to our Annual Meeting of Stockholders which
will be held at the Westin River North Chicago, 320 N. Dearborn, Chicago,
Illinois on Monday, April 27, 1998 at 10:00 a.m. Central Daylight Time. Your
continued interest in our Company is appreciated, and I hope that as many of
you as possible will attend the Annual Meeting.
At the meeting you will be asked to elect nine directors to terms ending at
the next Annual Meeting of Stockholders and to ratify the appointment of Ernst
& Young LLP as National Steel's independent auditors for the fiscal year
ending December 31, 1998.
Regardless of the number of shares you own, it is important that they are
represented and voted at the meeting, whether or not you plan to attend.
Accordingly, you are requested to sign, date and mail the enclosed proxy at
your earliest convenience.
On behalf of the Board of Directors, thank you for your cooperation and
continued support.
Sincerely,
/s/ Osamu Sawaragi
-------------------------
Osamu Sawaragi
Chairman of the Board and
Chief Executive Officer
<PAGE>
LOGO
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NATIONAL STEEL CORPORATION
4100 EDISON LAKES PARKWAY
MISHAWAKA, INDIANA 46545
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
The 1998 Annual Meeting of Stockholders of National Steel Corporation (the
"Company") will be held at the Westin River North Chicago, 320 N. Dearborn,
Chicago, Illinois on Monday, April 27, 1998 at 10:00 a.m. Central Daylight
Time.
The Annual Meeting will be held for the following purposes:
1. To elect nine directors to serve until the next Annual Meeting of
Stockholders and until their successors have been duly elected and
qualified;
2. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 1998; and
3. To transact any other business that may properly come before the
meeting.
February 27, 1998 has been designated as the date of record for the
determination of stockholders entitled to receive notice of and to vote at the
Annual Meeting and any adjournments thereof.
By order of the Board of Directors,
/s/ David A. Pryzbylski
-----------------------------------------
David A. Pryzbylski
Senior Vice President, Administration and
Secretary
March 27, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE MARK, DATE
AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE
ENVELOPE WHICH HAS BEEN PROVIDED. YOU MAY REVOKE YOUR PROXY AT ANY TIME
BEFORE IT IS VOTED BY WRITTEN NOTICE TO SUCH EFFECT, BY SUBMITTING A
SUBSEQUENTLY DATED PROXY OR BY ATTENDING THE ANNUAL MEETING AND VOTING IN
PERSON.
<PAGE>
LOGO
PROXY STATEMENT
GENERAL INFORMATION FOR STOCKHOLDERS
This proxy statement is furnished in connection with the solicitation by the
Board of Directors of National Steel Corporation (the "Company") of proxies to
be voted at the Annual Meeting of Stockholders (the "Annual Meeting") to be
held on April 27, 1998 and at any and all adjournments of such Annual Meeting.
As of February 27, 1998, the record date for the Annual Meeting, there were
issued and outstanding 22,100,000 shares of Class A Common Stock, all of which
are owned by NKK U.S.A. Corporation, and 21,188,240 shares of Class B Common
Stock. Holders of Class A Common Stock are entitled to two votes per share
while holders of Class B Common Stock are entitled to one vote per share.
Except as otherwise required by law or the Company's Certificate of
Incorporation, the holders of the Class A Common Stock and the Class B Common
Stock vote together, without regard to class, on all matters upon which the
stockholders are entitled to vote. The Class A Common Stock and Class B Common
Stock are sometimes referred to collectively herein as the "Common Stock" of
the Company.
This Proxy Statement and form of proxy were initially mailed to stockholders
on or about March 27, 1998. In addition to solicitation by mail, the Company
will request security dealers, banks, fiduciaries and nominees to furnish
proxy materials to beneficial owners of the Class B Common Stock of whom they
have knowledge and will reimburse them for their expenses for doing so.
Additional solicitation may be made by letter, telephone or facsimile by
officers and employees of the Company. In addition, the annual report of the
Company for the fiscal year ended December 31, 1997, including financial
statements, has been mailed to each stockholder of record and provided to
security dealers, banks, fiduciaries and nominees for mailing to beneficial
owners at the Company's expense.
All duly executed proxies received by management prior to the Annual Meeting
will be voted in accordance with the choices specified by stockholders on
their proxies. If no choice is specified by a stockholder, the shares of such
stockholder will be voted FOR the election of the nine nominees for directors
listed in this Proxy Statement and FOR the ratification of the appointment of
Ernst & Young LLP as the independent auditors of the Company. Stockholders who
execute proxies may revoke them at any time before they are voted by filing
with the Company a written notice of revocation, by delivering a duly executed
proxy bearing a later date or by attending the Annual Meeting and voting in
person. Notice of revocation should be sent to the Secretary of the Company at
4100 Edison Lakes Parkway, Mishawaka, Indiana 46545.
It is the policy of the Company that proxies that identify the vote of
specific stockholders are kept confidential until the final vote is tabulated,
except in a contested proxy or consent solicitation or to meet applicable
legal requirements.
The Bylaws of the Company provide that, except as otherwise provided by law
or by the Certificate of Incorporation, the holders of a majority of the
voting power of the capital stock issued and outstanding and entitled to vote,
present in person or represented by proxy, but in no event less than one-third
of the shares entitled to vote at the meeting, shall constitute a quorum for
the transaction of business at the Annual Meeting. The Bylaws also provide
that (i) directors shall be elected by a plurality of the votes cast at the
Annual Meeting, and (ii) except as required by law, the Certificate of
Incorporation or the Bylaws, any other matter brought before the Annual
Meeting shall be decided by the vote of the holders of a majority of the
voting power of the capital stock represented and entitled to vote at the
Annual Meeting.
Votes cast at the Annual Meeting will be tabulated by the persons appointed
by the Company to act as inspectors of election for the Annual Meeting. The
inspectors of election will treat shares of voting stock represented by a
properly signed and returned proxy as present at the Annual Meeting for
purposes of
<PAGE>
determining a quorum, without regard to whether the proxy is marked as casting
a vote or abstaining. Likewise, the inspectors of election will treat shares
of voting stock represented by "broker non-votes" as present for purposes of
determining a quorum at the Annual Meeting. Broker non-votes as to particular
proposals, however, will be deemed shares not having voting power on such
proposals, will not be counted as votes for or against such proposals, and
will not be included in calculating the number of votes necessary for approval
of such proposals. "Broker non-votes" are proxies with respect to shares of
voting stock held in record name by brokers or nominees, as to which (i)
instructions have not been received from the beneficial owners or persons
entitled to vote, (ii) the broker or nominee does not have discretionary
voting power under applicable New York Stock Exchange rules or the instrument
under which it serves in such capacity, and (iii) the record holder has
indicated on the proxy card or otherwise notified the Company that it does not
have authority to vote such shares on that matter. As a result of the
foregoing, shares not voted, whether by abstention, broker non-votes or
otherwise, will have no effect on the election of directors. However,
abstentions as to other proposals will have the same effect as a vote against
the proposal.
The expense of this solicitation will be paid by the Company. Brokers and
certain other holders for beneficial owners will be reimbursed for out-of-
pocket expenses incurred in the solicitation of proxies from the beneficial
owners of shares held in their names. The Company has retained the services of
ChaseMellon Shareholder Services, L.L.C. to assist in the solicitation of
proxies for a fee not expected to exceed in the aggregate $2,500 plus
reasonable out-of-pocket expenses.
ELECTION OF DIRECTORS
Nine directors are to be elected to hold office for terms expiring on the
date of the 1999 Annual Meeting of Stockholders and until their successors are
duly elected and qualified, or until their earlier resignation, retirement,
death or removal. The Board of Directors approved an increase in the number of
directors from eight to nine effective immediately prior to the date of the
1998 Annual Meeting of Stockholders. All of the nominees have been designated
by the Board of Directors. All of the nominees are members of the present
Board, except for Mr. Dunford and Mr. Hisashi Tanaka who are standing for
election for the first time and Mr. Yutaka Tanaka who was elected as a
director effective as of April 1, 1998. Each nominee has consented to being
named in the Proxy Statement as a nominee for director and has agreed to serve
as a director if elected. The proxies appointed by name in the enclosed proxy
form will vote as instructed by the stockholder for the election of the
nominees listed below. The proxies, however, reserve full discretion to cast
votes for any other person if any nominee shall be unable to serve, or for
good cause will not serve, except where authority is withheld by the
stockholder.
INFORMATION CONCERNING NOMINEES FOR DIRECTORS
Set forth below for each nominee is his name and age; the date on which he
first became a director of the Company; the names of other companies of which
he serves as a director; and his principal occupation during at least the last
five years.
CHARLES A. BOWSHER
Mr. Bowsher, age 66, has been a director of the Company since April 21,
1997. From 1981 to 1996, he served as Comptroller General of the United
States. Mr. Bowsher was associated with Arthur Andersen & Company from 1956 to
1967 and 1971 to 1981, and served as Assistant Secretary of the Navy for
Financial Management from 1967 to 1971. Mr. Bowsher also serves as a director
of American Express Bank, Ltd. and DeVry Inc. Mr. Bowsher is a member of the
Compensation Committee, Audit Committee and Nominating Committee.
EDSEL D. DUNFORD
Mr. Dunford, age 62, is standing for election as a director of the Company
for the first time. Mr. Dunford has held a variety of management and technical
positions with TRW, Inc., a manufacturer of products for the automotive, space
and defense and information systems industries. He served as President of TRW
from 1991 until his retirement in 1994. Mr. Dunford also serves as a director
of Thiokol Corporation, Cooper Tire & Rubber Company and Howmet International.
2
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FRANK J. LUCCHINO
Mr. Lucchino, age 59, has been a director of the Company since January 30,
1995. Since 1980 he has served as Controller of Allegheny County, Pennsylvania
and been a Partner with the law firm of Grogan, Graffam, McGinley & Lucchino,
PC. Mr. Lucchino serves by nomination of the President of the United States as
a member of the U.S. National Commission on Libraries and Information Science.
Mr. Lucchino is also a member of the Board of Trustees of the Carnegie, the
Carnegie Science Center, the Carnegie Library of Pittsburgh, and the Western
Pennsylvania Historical Society. Mr. Lucchino was nominated to serve on the
Board of Directors pursuant to a collective bargaining agreement with the
United Steelworkers of America. Mr. Lucchino is Chairman of the Audit
Committee.
BRUCE K. MACLAURY
Mr. MacLaury, age 66, has been a director of the Company since April 30,
1996. From 1977 to 1995, Mr. MacLaury served as President of The Brookings
Institution which is engaged in public policy research and education. Mr.
MacLaury also serves as a director of American Express Bank, Ltd., the St.
Paul Companies Inc. and the Vanguard Funds. Mr. MacLaury is Chairman of the
Compensation Committee and a member of the Nominating Committee.
KEIICHIRO SAKATA
Mr. Sakata, age 51, has been a director of the Company since December 9,
1996. He is currently Senior Legal Advisor of NKK Corporation ("NKK"), a
Japanese steel manufacturer and the parent company of NKK U.S.A. Corporation
(the holder of all of the outstanding shares of the Company's Class A Common
Stock). Mr. Sakata has served in various capacities with NKK since 1969. From
April 1990 to June 1993 he served as Manager, Legal Affairs and assumed his
present position of Senior Legal Advisor in July of 1993. Mr. Sakata is a
member of the Compensation Committee.
OSAMU SAWARAGI
Mr. Sawaragi, age 69, has been a Director of the Company since June 26,
1990. He was elected Chairman effective January 1, 1994 and Chief Executive
Officer on August 20, 1996. Prior thereto, he served NKK as a Director
beginning in 1984, Managing Director in 1986, Senior Managing Director in
1989, Executive Vice President from 1990 to 1994 and Senior Counsel from 1994
to 1996.
MINEO SHIMURA
Mr. Shimura, age 46, has been a director of the Company since April 21,
1997. Mr. Shimura has served as a senior executive for various U.S. affiliates
of NKK and presently holds the following positions with NKK affiliates:
President of NUF Corporation (a finance company), Executive Vice President of
NKK America, Inc. (a service company), Executive Vice President of NKK U.S.A.
Corporation (a holding company), President of NAF Corporation (a real estate
holding company), President of NKK Windsor Corporation (a finance company),
President of Galvatek America Corporation (a holding company) and President of
Galvatek Ontario Corporation (a holding company).
HISASHI TANAKA
Mr. Tanaka, age 50, is standing for election as a director of the Company
for the first time. Mr. Tanaka has served in various capacities with NKK since
1971. His most recent positions have been Senior Manager, Steelmaking
Technology & Fire-Brick Purchase from 1993 to 1994, Director, Steelmaking
Technology from 1994 to 1995, Director, Technical & Engineering Planning from
1995 to 1996 and General Manager, Steelmaking Technology from 1996 to the
present.
YUTAKA TANAKA
Mr. Tanaka, age 61, has been elected as a director and Vice Chairman of the
Company effective as of April 1, 1998. Prior to the effective date of his
election, he served as President of Adchemco Corporation, a manufacturer of
chemical products and a wholly owned subsidiary of NKK, a position which he
has held since June 1996. Prior thereto, he was employed in various capacities
by NKK, where he most recently served as Managing Director from June 1992 to
June 1996.
3
<PAGE>
THE BOARD OF DIRECTORS
The Board of Directors held 9 meetings during 1997.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has three standing committees: an Audit Committee, a
Compensation Committee and a Nominating Committee.
AUDIT COMMITTEE
The Audit Committee has been established to assist the Board of Directors in
fulfilling its oversight responsibility by monitoring and reviewing the
effectiveness of the Corporation's (i) financial reporting process, (ii)
system of internal controls over financial operations and (iii) audit process.
It has responsibility for recommending to the Board of Directors a firm of
independent certified public accountants to serve as auditors to be appointed
by the Board, subject to ratification by the stockholders at the Annual
Meeting. In addition, the Audit Committee approves the scope of, and fees
related to, the annual audit and reviews the results and recommendations of
the independent auditors upon completion of the annual audit. The Committee
also reviews the Company's compliance with its Code of Ethical Business
Conduct. The Audit Committee has the authority to meet and confer with the
Company's independent accountants, internal auditors, officers and employees
in connection with carrying out its responsibilities. The Audit Committee is
presently comprised of Mr. Lucchino, Chairman, and Mr. Bowsher. The Audit
Committee held 26 meetings in 1997.
COMPENSATION COMMITTEE
The duties of the Compensation Committee are to review and approve a
compensation philosophy and guidelines for the Company's executive officers
and directors. In addition, the Compensation Committee reviews and recommends
for approval by the Board of Directors base salaries, employment agreements,
stock option and stock appreciation right grants and any severance payments
for any of the Company's executive officers. The Committee also establishes,
administers, amends and terminates plans, policies and procedures regarding
incentive compensation and other performance based compensation arrangements;
reviews the executive officer succession program; and oversees compliance with
all Securities and Exchange Commission and other applicable laws and
regulations pertaining to the disclosure of compensation paid to executive
officers and directors. The Compensation Committee is presently comprised of
Mr. MacLaury, Chairman, and Messrs. Bowsher and Sakata. The Compensation
Committee held 4 meetings during 1997.
NOMINATING COMMITTEE
The Nominating Committee has the authority to develop candidate
specifications for Board membership and to make recommendations as to
candidates for election to the Board of Directors and as to candidates to fill
vacancies on the Board of Directors. The Nominating Committee will consider
nominees for election to the Board of Directors recommended by stockholders of
the Company. Suggestions for candidates, accompanied by biographical material
and material regarding the candidate's qualifications to serve as a director,
should be sent to the Secretary of the Company. The Nominating Committee is
also responsible for reviewing the qualifications of the candidate nominated
to serve as a director by the United Steelworkers of America pursuant to their
collective bargaining agreement with the Company. The Nominating Committee is
presently comprised of Mr. Yoshiharu Onuma, Chairman, Mr. Bowsher and Mr.
MacLaury. Mr. Onuma will cease to be a member of this committee effective as
of April 27, 1998 when his current term as a director will expire. The
Nominating Committee held 4 meetings during 1997.
ATTENDANCE
All of the incumbent directors attended at least 75% of the Board and
committee meetings held in 1997 during the period they were members of the
Board or of a committee.
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COMPENSATION OF DIRECTORS
Directors who are not employees of the Company or any of its subsidiaries
receive an annual fee of $27,000 plus a fee of $1,000 for attendance at each
meeting of the Board of Directors and at each meeting of a committee of the
Board of Directors. The meeting fee for the Chairman of the Board and
committee Chairmen is $1,300 (provided that they are not employees of the
Company). All directors are reimbursed for expenses incurred in attending
Board and committee meetings. In addition, any non-employee director who, at
the request of the Chairman of the Board, performs special services or
assignments on behalf of the Board, receives compensation of $1,000 per day
plus reasonable out-of-pocket expenses. Each non-employee director also
receives, upon his initial election to the Board of Directors, a stock option
grant of 2,500 shares of Class B Common Stock at the then market price
pursuant to the terms of the 1993 National Steel Corporation Non-Employee
Directors Stock Option Plan ("Directors Plan"). An additional stock option
grant of 500 shares of Class B Common Stock is granted to each non-employee
director pursuant to the Directors Plan at each anniversary of Board service.
Under the terms originally applicable to these grants, these stock options
would have vested completely three years from the initial grant date or upon
disability, death or retirement of the director, whichever is earliest.
However, in February 1998, the Board of Directors authorized an amendment of
this vesting schedule so that all options previously granted under the
Directors Plan will now vest in one-third annual increments commencing on the
first anniversary date of the initial grant. In addition, in June 1997 and
February 1998, the Board of Directors authorized the conversion of all
outstanding stock options which were previously granted to directors under the
Directors Plan and which were exercisable prior to January 31, 1999 into cash
only stock appreciation rights ("SARs"). This action was taken in order to
prevent the dilution of the equity interests of existing stockholders of the
Company, while at the same time preserving the link between the director's
compensation and the performance of the Company's Class B Common Stock share
price. The new SARs have the same exercise price, exercise date and expiration
date as the stock options which they replaced. Under the terms of the SAR,
upon exercise, the director receives a cash payment equal to the excess of the
value of the Company's Class B Common Stock on the date of exercise over the
exercise price of the SAR.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors (the "Committee")
reviews and approves the philosophy and guidelines for compensation programs
and develops recommendations for the Board of Directors regarding compensation
levels for the Company's executive officers and directors. The Committee also
administers the Company's annual Management Incentive Compensation Plan
("MICP"). The Committee is composed exclusively of directors who are not
eligible to participate in any of management's compensation programs. The
Committee presents the following report on compensation for the Company's
executive officers for 1997.
OVERVIEW AND PHILOSOPHY
The Committee has adopted a written statement of executive compensation
purposes, guiding principles and objectives which guide its evaluation and
determination of executive compensation programs. This statement was developed
by the Committee with the assistance of an independent compensation consulting
firm familiar with compensation policies within the industry and at other
major corporations. The statement provides that the purposes of executive
compensation are to:
. attract, motivate and retain outstanding team members;
. align their success with the Company's stockholders; thereby
. motivating them to enhance stockholder value by attaining the Company's
short and long term performance objectives.
5
<PAGE>
COMPONENTS OF EXECUTIVE OFFICER COMPENSATION
Individual executive officer compensation includes base salary, annual
incentive bonus and long term incentive compensation. With the assistance of
an independent consulting firm, the Committee determines the median amount of
base salary, annual incentive bonus and long term incentive compensation which
are appropriate for each executive officer position. These median amounts are
based upon compensation practices for comparable positions, as disclosed in
certain compensation surveys reviewed by the Committee, including surveys of
companies in the steel industry and surveys of general industrial companies.
In making its determination of median compensation amounts, the Committee
focuses on the salary, annual incentive bonus and long term incentive
compensation disclosed in these surveys for companies of comparable size and
scope of operations, including the five largest public integrated steel
companies with which the Company competes. However, since duties,
responsibilities and experience of an executive officer may differ from survey
norms in both content and scope, adjustments are made by the Committee, in its
judgment, for those factors. Therefore, compensation paid to some executive
officers may be lower, while compensation paid to other executive officers may
be higher, than median levels. All of the companies included in the Company's
peer group shown in the Performance Graph on page 17 of this Proxy Statement,
and many of the companies included in the Standard & Poor's Composite 500
stock index, participate in the surveys reviewed by the Committee.
BASE SALARY
An increase in base salary for an executive officer is based on individual
performance, business performance and the median base salary amount for such
position, as disclosed in compensation surveys reviewed by the Committee. The
Committee does not rely on any specific formula nor does it assign specific
weights to the factors used in determining base salaries. Mr. Sawaragi's base
salary was not increased during 1997, remaining at the $500,000 amount which
was established in August of 1996 when he became Chief Executive Officer. Mr.
Sawaragi's base salary continues to be below the median salary level for his
position, as disclosed in the compensation surveys reviewed by the Committee.
ANNUAL INCENTIVES
The 1997 MICP approved by the Compensation Committee establishes the basis
for determining the amount of annual incentive bonus paid to each executive
officer. Under the MICP, each executive officer is given an annual incentive
target, equal to a percentage of base salary. This target is based upon the
median annual incentive compensation amount for such position, as disclosed in
compensation surveys reviewed by the Committee. The annual incentive target
may be adjusted by the Committee in its discretion, based upon its evaluation
of a particular executive officer's responsibilities and performance. The 1997
MICP provides that each executive officer can earn a percentage of this target
amount, ranging from 0 to 170%, depending upon the extent to which the Company
achieves the net income and operational goals established by the Committee.
This percentage may also be adjusted by the Committee, in its discretion, in
the event of exceptional individual or Company performance or if other
important business or strategic objectives are met. In February 1998, Mr.
Sawaragi was paid an incentive bonus of $450,000 for 1997. The amount of this
bonus exceeded the percentage of Mr. Sawaragi's target amount which would have
been payable under the MICP based solely on the Company's actual net income
for 1997. The Committee determined, however, that this higher bonus amount was
appropriate in view of (a) Mr. Sawaragi's performance and leadership regarding
business and strategic objectives since becoming Chief Executive Officer of
the Company, (b) the Company's record earnings during 1997, and (c) the fact
that Mr. Sawaragi's base salary during 1997 was less than the median level
disclosed in the salary surveys reviewed by the Committee.
LONG TERM INCENTIVES
The Company's long term incentive compensation awards for executive officers
are designed to link executive compensation to the performance of the
Company's Class B Common Stock share price. These awards also provide a
retention incentive for participants. Through June of 1997, the only type of
long term incentive awards granted by the Company to executive officers and
other key employees were stock options. However, in June 1997 and February
1998, the Board of Directors authorized the conversion of all outstanding
stock options
6
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which were previously granted to executives under the Long Term Incentive Plan
and which were exercisable prior to January 31, 1999 into SARs. This action
was taken in order to prevent the dilution of the equity interests of existing
stockholders of the Company, while at the same time preserving the link
between the executive's compensation and the performance of the Company's
Class B Common Stock share price. The new SARs have the same exercise price,
exercise date and expiration date as the stock options which they replaced.
Under the terms of the SAR, upon exercise, the executive receives a cash
payment equal to the excess of the value of the Company's Class B Common Stock
on the date of exercise over the exercise price of the SAR.
Effective as of January 21, 1997, the Committee and the Board of Directors
granted long term incentive awards in the form of nonstatutory stock options
under the Company's Long Term Incentive Plan to certain of the Company's
executive officers. The amount of these awards was based primarily upon the
median grant value of the long term incentive award for each executive officer
position, as disclosed in compensation surveys reviewed by the Committee. The
Committee also took into account its evaluation of the particular officer's
responsibilities and performance. Under the terms originally applicable to
these grants, these stock options would have vested completely three years
from the date the grants were awarded. However, in February 1998, the
Committee authorized an amendment of this vesting schedule so that these
options now vest in one-third annual increments commencing on the first
anniversary date of the initial grant. This revised vesting schedule is more
consistent with the vesting schedules of options granted by other companies
and is expected to provide a better incentive for executives to maximize
shareholder value, and thus further align their interest with that of the
shareholders of the Company. The exercise price for all options was equal to
the market price of the Company's Class B Common Stock on the date of the
grant. Thus, these awards reward executives only to the extent that the
Company's Class B Common Stock share price increases over that market price.
On January 21, 1997, Mr. Sawaragi was awarded options to purchase 50,000
shares at an exercise price of $9.375 per share, which award was below the
median grant value of long term incentive awards for his position, as
disclosed in compensation surveys reviewed by the Committee. In addition, in
June 1997, Mr. Sawaragi was granted 3,000 SARs in replacement of 3,000 stock
options which had previously been granted to him under the Directors Plan.
This transaction is further discussed under the caption "Compensation of
Directors" and in footnote (2) of the table captioned "Option/SAR Grants in
1997".
BENEFITS
The Company's executive officers also participate in pension, perquisite,
deferred compensation and other executive benefit programs. These programs are
designed to be within competitive standards as defined by the practices of
other major corporations.
TAX TREATMENT
One factor which the Committee considers in establishing its compensation
policies is the expected tax treatment to the Company and its executive
officers of the various forms of compensation. Among other things, the
Committee considers the limitations imposed by Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), on the corporate deduction for
compensation paid to executive officers. The deductibility of certain types of
compensation may depend upon factors which are beyond the Committee's control,
such as the timing of the executive officer's exercise of stock options or
SARs and changes in law. Consequently, the Committee may not, in all cases,
limit executive compensation to that amount which is deductible under Section
162(m) of the Code. The Committee will, however, consider methods of
preserving the deductibility of compensation benefits to the extent that it is
reasonably practicable and to the extent that it is consistent with the
Committee's other compensation goals and objectives. In 1997, the Company was
not affected by the limitations imposed by Section 162(m) of the Code.
The Committee believes the Company's executive compensation policies and
programs serve the interests of the stockholders and the Company. As the
Company moves forward in its efforts to create stockholder value in the years
ahead, the Committee will continue to review, monitor and evaluate the
Company's policies and
7
<PAGE>
programs regarding executive compensation. The Committee intends to insure
that these compensation policies and programs continue to support the
Company's strategy, continue to be competitive in the marketplace to attract,
retain and motivate the talent needed to succeed, and appropriately reward the
creation of value on behalf of the Company's stockholders.
Compensation Committee
Bruce K. MacLaury, Chairman
Charles A. Bowsher
Keiichiro Sakata
EXECUTIVE COMPENSATION
The following table sets forth separately, for the fiscal years indicated,
each component of compensation paid or awarded to, or earned by, the Chief
Executive Officer of the Company and each of the other four most highly
compensated executive officers who were serving as executive officers at the
end of the last fiscal year (collectively referred to herein as the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------ ------------
SECURITIES
UNDERLYING
OTHER ANNUAL OPTIONS/ ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION SARS COMPENSATION
POSITION YEAR ($) ($) ($)(1) (#)(2) ($)(3)
- ------------------ ---- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Osamu Sawaragi.......... 1997 $500,004 $450,000 -- 50,000 --
Chairman of the Board
and 1996 183,714 150,000 -- 500 --
Chief Executive Officer
(4) 1995 -- -- -- 500 --
John A. Maczuzak........ 1997 347,909 275,000 12,115 40,000 $34,863
President and 1996 183,750 100,000 12,115 15,000 23,638
Chief Operating Officer
(5) 1995 -- -- -- -- --
David A. Pryzbylski..... 1997 255,000 180,000 6,201 30,000 22,510
Senior Vice President, 1996 249,167 80,000 6,164 20,000 24,151
Administration and 1995 185,004 155,000 15,034 15,000 13,389
Secretary
George D. Lukes, Jr..... 1997 233,746 170,000 7,252 20,000 23,280
Senior Vice President, 1996 214,977 72,000 7,252 20,000 23,822
Quality Assurance,
Technology 1995 160,008 140,000 18,422 10,000 13,706
and Production Planning
David L. Peterson....... 1997 233,746 125,000 6,860 15,000 22,542
Group Vice President, 1996 215,830 72,000 6,860 15,000 22,517
Regional Operations 1995 170,004 125,000 11,000 10,000 13,201
</TABLE>
- --------
(1) The amount shown represents amounts paid to the Named Executive Officer
for reimbursement of taxes.
(2) All grants shown were made pursuant to the Long Term Incentive Plan for
executive officers except for the grants shown for Mr. Sawaragi for 1995
and 1996 which were made pursuant to the Directors Plan. In addition to
the stock options shown in the table above, during 1997, each of the Named
Executive Officers was granted SARs pursuant to the Long Term Incentive
Plan (in the case of Mr. Sawaragi pursuant to the Directors Plan) in
exchange for the cancellation of an identical number of stock options
previously granted to him. The SARs have the same exercise price and
expiration date as the stock options which they replaced.
8
<PAGE>
(3) The amount shown for 1997 includes (a) the Company's contribution to the
National Steel Retirement Savings Program for Messrs. Maczuzak,
Pryzbylski, Lukes and Peterson in the amounts of $8,000, $7,838, $7,695
and $7,695 respectively; (b) the dollar value of life insurance premiums
paid by the Company on behalf of Messrs. Maczuzak, Pryzbylski, Lukes and
Peterson in the amounts of $14,988, $7,672, $8,972 and $8,234,
respectively; and (c) the Company's contribution to the Executive Deferred
Compensation Plan for Messrs. Maczuzak, Pryzbylski, Lukes and Peterson in
the amounts of $11,875, $7,000, $6,613 and $6,613, respectively.
(4) Mr. Sawaragi became an executive officer of the Company on August 20,
1996.
(5) Mr. Maczuzak became an executive officer of the Company on May 1, 1996.
STOCK OPTION/SAR TABLES
The following table contains information relating to stock options and SARs
which were granted to the Named Executive Officers in 1997.
OPTION/SAR GRANTS IN 1997
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES PERCENT OF TOTAL OPTIONS EXERCISE OR BASE
UNDERLYING OPTIONS GRANTED TO EMPLOYEES IN PRICE EXPIRATION GRANT DATE PRESENT
NAME GRANTED (#)(1)(2) FISCAL YEAR ($/SHARE)(3) DATE VALUE ($)(4)
---- ------------------ ------------------------ ---------------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
Osamu Sawaragi 50,000 17.9% $ 9.375 1/21/07 $204,296
John A. Maczuzak 40,000 14.3% 9.375 1/21/07 163,437
David A. Pryzbylski 30,000 10.7% 9.375 1/21/07 122,578
George D. Lukes, Jr. 20,000 7.1% 9.375 1/21/07 81,719
David L. Peterson 15,000 5.4% 9.375 1/21/07 61,289
</TABLE>
- --------
(1) These grants represent nonstatutory stock options to purchase shares of
the Company's Class B Common Stock which were granted under the Company's
Long Term Incentive Plan. When originally granted, the options could be
exercised after three years but no more than ten years from the date of
grant. On February 9, 1998, the Committee modified the vesting provisions
so that these options become exercisable in annual one third increments
commencing one year from the date of the initial grant. The options can
be exercised only while the optionee is in the employ of the Company;
however, in the event that termination of employment is by reason of
retirement, permanent disability or death, the options may be exercised
in whole or in part within 24 months of the date of any such occurrence,
to the extent they have vested as described in the Long Term Incentive
Plan. In the event of a change in control, as defined in the Long Term
Incentive Plan, all options become immediately exercisable unless
provided otherwise at the time of grant of such options.
(2) In addition to the stock options shown in the table above, during 1997,
each of the Named Executive Officers was granted SARs pursuant to the
Long Term Incentive Plan (in the case of Mr. Sawaragi pursuant to the
Directors Plan) in exchange for cancellation of an identical number of
nonstatutory stock options previously granted to the executive officer.
The new SARs have the same exercise price, exercise date and expiration
date as the stock options which they replaced. Under the terms of the
SAR, upon exercise, the executive receives a cash payment equal to the
excess of the value of the Company's Class B Common Stock on the date of
exercise over the exercise price of the SAR. The SARs can be exercised
only while the executive is in the employ of the Company; however, in the
event that termination of employment is by reason of retirement,
permanent disability or death, the SARs may be exercised in whole or in
part within 24 months of the date of any such occurrence, to the extent
they have vested as described in the Long Term Incentive Plan. In the
event of a change in control, as defined in the Long Term Incentive Plan,
all SARs become immediately exercisable unless provided otherwise at the
time of grant of such SARs.
9
<PAGE>
(3) The exercise price for these stock option grants was equal to the fair
market value of the Class B Common Stock on the grant date.
(4) The grant date present value was determined using the Black-Scholes
valuation methodology. The Company does not advocate or necessarily agree
that the Black-Scholes model can properly determine the value of an
option or SAR. The actual value, if any, a Named Executive Officer may
realize will depend on the excess of the stock price over the exercise
price on the date the option or SAR is exercised so that there is no
assurance the value realized by an individual will be at or near the
value estimated by the Black-Scholes model. The following assumptions
were made when applying the Black-Scholes valuation methodology to these
grants: (a) expected volatility: 0.414; (b) expected dividend yield:
2.87%; (c) expected risk free rate of return: 6.66%; (d) expected timing
of exercise: 10 years; and (e) Black-Scholes ratio: 0.4356.
The following table sets forth certain information concerning options to
purchase the Company's Class B Common Stock and SARs which were exercised by
the Named Executive Officers during 1997 and the value of unexercised options
and SARs held by the Named Executive Officers as of December 31, 1997.
AGGREGATED OPTION/SAR EXERCISES IN 1997 AND DECEMBER 31, 1997 OPTION/SAR
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS AT
AT DECEMBER 31, 1997 (#) DECEMBER 31, 1997 ($)
------------------------------- ----------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE (#)(1) REALIZED($) EXERCISABLE(2) UNEXERCISABLE(3) EXERCISABLE UNEXERCISABLE(4)
- ---- ------------------ ----------- -------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Osamu Sawaragi.......... 0 $ 0 3,000 51,000 0 $109,969
John A. Maczuzak........ 0 0 0 55,000 0 87,600
David A. Pryzbylski..... 30,000 148,898 0 65,000 0 65,700
George D. Lukes, Jr..... 5,000 33,750 25,000 50,000 0 43,800
David L. Peterson....... 0 0 30,000 40,000 0 32,850
</TABLE>
- --------
(1) All exercises were of SARs.
(2) All exercisable instruments are SARs.
(3) Includes both stock options and SARs in the following amounts: for Mr.
Sawaragi 51,000 stock options and 0 SARs; for Mr. Maczuzak 55,000 stock
options and 0 SARs; for Mr. Pryzbylski 50,000 stock options and 15,000
SARs; for Mr. Lukes 40,000 stock options and 10,000 SARs; and for Mr.
Peterson 30,000 stock options and 10,000 SARs;
(4) All unexercisable in-the-money instruments were stock options. There were
no in-the-money SARs at December 31, 1997 because the exercise prices for
all outstanding SARs exceeded the market price of the Company's Class B
Common Stock of $11.563 as of December 31, 1997.
PENSION PLANS
The following table shows the annual benefits payable under the Company's
qualified defined benefit retirement plan along with the non-qualified
retirement plans, which provide for the payment of retirement benefits in
excess of certain maximum limitations imposed by the Internal Revenue Code, to
eligible employees in various earnings groups and with various periods of
service. Benefits shown are computed at the plan's normal retirement age of 65
based on a straight life annuity.
10
<PAGE>
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE ANNUAL ELIGIBLE COMPENSATION -----------------------------------------------------
PRECEDING RETIREMENT 10 15 20 25 30 35
- ------------------------------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 100,000............... $ 13,500 $ 20,000 $ 27,000 $ 33,500 $ 40,500 $ 47,000
150,000............... 20,500 31,000 41,000 51,500 61,500 72,000
200,000............... 28,000 42,000 56,000 70,000 84,000 98,000
250,000............... 35,500 53,000 71,000 88,500 106,500 124,000
300,000............... 43,000 64,500 86,000 107,500 129,000 150,500
350,000............... 50,500 75,500 101,000 126,000 151,500 176,500
400,000............... 58,000 87,000 116,000 145,000 174,000 203,000
450,000............... 65,500 98,000 131,000 163,500 196,500 229,000
500,000............... 73,000 109,500 146,000 182,500 219,000 255,500
600,000............... 88,000 132,000 176,000 220,000 264,000 308,000
700,000............... 103,000 154,500 206,000 257,500 309,000 360,500
800,000............... 118,000 177,000 236,000 295,000 354,000 413,000
900,000............... 133,000 199,500 266,000 332,500 399,000 465,500
1,000,000............... 148,000 222,000 296,000 370,000 444,000 518,000
1,100,000............... 163,000 244,500 326,000 407,500 489,000 570,500
1,200,000............... 178,000 267,000 356,000 445,000 534,000 623,000
1,300,000............... 193,000 289,500 386,000 482,500 579,000 675,500
</TABLE>
Eligible compensation covered by the Company's retirement plans includes the
eligible employee's base salary, before reduction for any salary deferral
agreements, and MICP awards paid for the sixty highest consecutive months
during the last ten years of employment. Benefits paid under the Company's
plans are not subject to reduction for social security payments received by
the Company's executive officers.
MICP awards are shown in the bonus column of the Summary Compensation Table
in the year in which they were earned. Eligible compensation under the
retirement plans includes the bonus in the year in which the payment was made
and, as such, MICP awards earned in a particular year are included in the
following year as eligible compensation under the retirement plans.
The table below shows for each of the Named Executive Officers (a) the years
of service under the retirement plans as of December 31, 1997, and (b) the
amount of eligible compensation under the retirement plans for 1997:
<TABLE>
<CAPTION>
YEARS OF ELIGIBLE
NAME SERVICE COMPENSATION
---- -------- ------------
<S> <C> <C>
Osamu Sawaragi...................................... 1.33 $650,004
John A. Maczuzak.................................... 1.67 447,909
David A. Pryzbylski(1).............................. 3.58 335,000
George D. Lukes, Jr.(1)............................. 3.58 305,746
David L. Peterson (1)............................... 3.58 305,746
</TABLE>
- --------
(1) Pursuant to the terms of their respective employment agreements, Mr.
Pryzbylski, Mr. Lukes and Mr. Peterson will receive credit for 14.67, 26
and 23 years, respectively, of service with a previous employer for the
purpose of determining their pension benefit from the Company. The
benefits of Mr. Pryzbylski, Mr. Lukes and Mr. Peterson under the Company's
qualified defined benefit retirement plan and non-qualified retirement
plans will be reduced by the amount of their pension benefits from the
previous employer. See discussion below under the caption "Employment
Contracts".
11
<PAGE>
EMPLOYMENT CONTRACTS
The Company has entered into employment contracts (the "Contracts") with
certain executives, including the Named Executive Officers identified below.
Set forth below is a summary of certain terms of the Contracts applicable to
such Named Executive Officers.
Mr. Sawaragi's Contract provides for (i) non-competition for a period of two
years subsequent to termination of employment by Mr. Sawaragi without "good
reason"; and (ii) other post termination covenants including non-disclosure,
non-solicitation of employees, cooperation during a transition period, and
release of employment claims. Mr. Sawaragi's Contract has a term ending
October 5, 1998 (his 70th birthday) and provides that (i) his annual base
salary under the Contract shall be equal to the base salary in effect on the
date of the Contract, subject to adjustment from time to time and (ii) his
annual target incentive compensation opportunity shall be equal to 50% of base
salary. The Contract further provides that any reduction in Mr. Sawaragi's
then current base salary or target incentive opportunity constitutes "good
reason" for termination of the Contract by Mr. Sawaragi.
Mr. Sawaragi's Contract provides for certain payments and benefits upon
termination of his employment. If Mr. Sawaragi's employment terminates due to
death or disability, he will receive a payment equal to the average incentive
compensation paid to him in the three preceding years, or, if greater, his
target incentive compensation percentage amount, in each case pro-rated to
reflect the part of the year completed before termination. If his employment
is terminated by the Company without "cause" or by Mr. Sawaragi for "good
reason", he would be entitled to special termination benefits consisting of:
(i) a severance payment equal to 50% of his annual base salary; (ii) a pro-
rata incentive compensation payment for the year of termination; (iii)
continued stock option vesting and exercisability for a five year period; and
(iv) a two year continuation of health care and certain other employee
benefits on the same basis as if Mr. Sawaragi had remained an employee for
such period. During the benefit continuation period, Company provided employee
benefits would be secondary to any benefits provided under an NKK sponsored
benefit plan, or any Japanese government benefit plan or other available
benefit plan. If Mr. Sawaragi is age 69 at the time of a qualifying
termination, the benefit continuation period is reduced to one year. If
termination occurs on or after age 70, there is no benefit continuation
period. After expiration of his Contract term, Mr. Sawaragi would be entitled
to the special termination benefits described above in the event he terminates
his employment with or without "good reason", or if the Company terminates his
employment without "cause". The Contract also provides that the Company will
reimburse Mr. Sawaragi for expenses incurred in seeking in good faith to
enforce his Contract.
The Contracts with Messrs. Maczuzak, Pryzbylski and Peterson also provide
for non-competition for a period of two years subsequent to termination of
employment by them without "good reason". The Contracts with Messrs. Maczuzak,
Pryzbylski, Lukes and Peterson also provide other post termination covenants
including non-disclosure, non-solicitation of employees, cooperation during a
transition period, and release of employment claims. The Contracts with
Messrs. Maczuzak, Pryzbylski, Lukes and Peterson have an initial term ending
July 1, 1998, and are subject to automatic month-to-month extensions unless
either party elects not to extend the term. Prior to the date Messrs.
Maczuzak, Pryzbylski, Lukes or Peterson reaches age 65, an election by the
Company not to extend the term will automatically result in a termination of
employment without "cause". The Contracts with Messrs. Maczuzak, Pryzbylski,
Lukes and Peterson provide that (i) the executive's annual base salary under
his Contract shall be equal to the base salary in effect on the date of the
Contract, subject to adjustment from time to time and (ii) his annual target
incentive compensation opportunity shall be equal to 40% of his base salary.
The Contract further provides that any reduction in the executive's then
current base salary or target incentive opportunity constitutes "good reason"
for termination of the Contract by the executive.
The Contracts for Messrs. Pryzbylski, Lukes and Peterson also provide that,
for purposes of determining their pension benefit with the Company, they will
receive credit for their years of service with their previous employer, and
their pension benefits from the Company will be reduced by their pension
benefits from their previous employer. The Company has also agreed to provide
Messrs. Pryzbylski, Lukes and Peterson with retiree health care under certain
circumstances.
12
<PAGE>
The Contracts with Messrs. Maczuzak, Pryzbylski, Lukes and Peterson provide
for certain payments and benefits upon termination of employment. If
employment terminates for any reason on or after age 65, or due to death or
disability, the executive will receive a payment equal to the average
incentive compensation paid to the executive in the three preceding years or,
if greater, the executive's target incentive compensation percentage amount,
in each case pro-rated to reflect the part of the year completed before
termination. If employment is terminated by the Company without "cause" or by
the executive for "good reason" before the executive reaches age 64, the
executive would be entitled to special termination benefits consisting of: (i)
a severance payment equal to two times the executive's annual base salary, a
pro-rata incentive compensation payment for the year of termination, plus, if
such termination follows a change of control, an additional amount equal to
two times the average incentive compensation paid to the executive in the
three preceding years or, if greater, the executive's target incentive
compensation percentage amount; (ii) continued stock option vesting and
exercisability for a two year period; (iii) outplacement services; and (iv) a
two year continuation of health care and certain other employee benefits on
the same basis as if the executive had remained an employee for such period.
During the benefit continuation period, Company provided health care benefits
would be secondary to any health care benefits provided under another employer
provided plan. If a qualifying termination occurs after the executive reaches
age 64, the two year severance and two year benefit continuation period are
reduced to one year and if a qualifying termination occurs after the executive
reaches age 65, there is no severance payment and no benefit continuation
period.
The Contracts with Messrs. Maczuzak, Pryzbylski, Lukes and Peterson also
provide that, in the event of a change of control, the benefits provided under
the various Company plans and programs may not be less favorable than those
provided at any time during the 120 day period immediately preceding the
change of control. If a termination by the Company without "cause" or by the
executive for "good reason" follows a change of control, a lump sum cash
payment equal to the actuarially equivalent value of non-qualified unfunded
retirement benefits will be paid to the executive. If payments under the
Contracts following a change in control are subject to excise tax, the Company
will make a "gross-up" payment sufficient to ensure that the net after-tax
amount retained by the executive (taking into account all taxes, including
those on the gross-up payment) is the same as would have been the case had
such excise tax not applied. The Contracts also provide that the Company will
reimburse the executive for expenses incurred in seeking in good faith to
enforce his Contract.
13
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth the number of shares of the Company's Class B
Common Stock and the number of shares of common stock of NKK Corporation
beneficially owned by each of the Company's directors, nominees for director
and Named Executive Officers and by the Company's directors and executive
officers as a group as of March 1, 1998 in the case of the Company's Class B
Common Stock and as of December 31, 1997 in the case of NKK Corporation common
stock. None of the Company's directors, nominees for director or Named
Executive Officers beneficially owned any shares of the Company's Class A
Common Stock. Except as otherwise indicated, each director, nominee for
director or Named Executive Officer had sole voting and investment power with
respect to any shares beneficially owned.
<TABLE>
<CAPTION>
CLASS B COMMON STOCK OF
NKK CORPORATION STOCK COMPANY
--------------------------------- -----------------------------
NUMBER OF SHARES PERCENT OF NUMBER OF SHARES PERCENT OF
NAME BENEFICIALLY OWNED (1) CLASS BENEFICIALLY OWNED CLASS
---- ---------------------- ---------- ------------------ ----------
<S> <C> <C> <C> <C>
Charles A. Bowsher...... 0 0 0 0
Edsel D. Dunford........ 0 0 0 0
Frank J. Lucchino....... 0 0 100 *
Bruce K. MacLaury....... 0 0 0 0
Yoshinosuke Noma........ 19,000 * 0 0
Yoshiharu Onuma......... 11,371 * 0 0
Keiichiro Sakata........ 4,470 * 0 0
Mineo Shimura........... 5,000 * 0 0
Hisashi Tanaka.......... 5,919 * 0 0
Yutaka Tanaka........... 37,104 * 0 0
Osamu Sawaragi.......... 93,040 * 0 0
John A. Maczuzak........ 0 0 2,658(2)(3) *
David A. Pryzbylski..... 0 0 2,000(4) *
George D. Lukes, Jr..... 0 0 700 *
David L. Peterson....... 0 0 1,000 *
All directors and
executive officers as a
group (21 persons)..... 175,904 * 8,458(2) *
</TABLE>
- --------
* Less than 1% of the outstanding shares on March 1, 1998 in the case of the
Company's Class B Common Stock and on December 31, 1997 in the case of NKK
Corporation common stock.
(1) NKK Corporation stock can be voted in units of 1,000 shares only, and
units of less than 1,000 shares have no voting power. In addition, Messrs.
Onuma, Sakata and Hisashi Tanaka have no voting power with respect to
1,371, 3,430 and 919 shares of NKK Corporation stock, respectively, owned
by them which are held by the trustee of NKK Corporation's employee stock
ownership program.
(2) Includes 158 shares held by the trustee of the Company's Salaried
Employees Retirement Savings Program as of December 31, 1997.
(3) Includes 2,500 shares owned by Mr. Maczuzak's spouse.
(4) Includes 1,500 shares owned by Mr. Pryzbylski's spouse.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors and persons who owned greater
than 10% of a class of the Company's equity securities to file with the
Securities and Exchange Commission an initial statement of beneficial
ownership and certain statements of changes in beneficial ownership of equity
securities of the Company. Based solely upon a review of the copies of the
forms furnished to the Company, or written representations from certain
reporting persons that Forms 5 were not required, the Company believes that
all Section 16(a) filing requirements with respect to its executive officers
and directors were met during 1997.
14
<PAGE>
ADDITIONAL INFORMATION RELATING TO VOTING SECURITIES
The following table sets forth the only holders known to the Company to
beneficially own more than 5% of the Company's Class A Common Stock or Class B
Common Stock as of March 1, 1998, unless otherwise indicated.
<TABLE>
<CAPTION>
PERCENT OF TOTAL
NAME AND ADDRESS OF NUMBER OF SHARES CLASS OF PERCENT OF CLASS COMMON STOCK
BENEFICIAL OWNER BENEFICIALLY OWNED COMMON STOCK OUTSTANDING OUTSTANDING
- ------------------- ------------------ ------------ ---------------- ----------------
<S> <C> <C> <C> <C>
NKK U.S.A. Corporation. 22,100,000(1) Class A 100% 51.05%
1013 Centre Road
Wilmington, Delaware
19805-1297
Donald Smith & Co.,
Inc................... 3,906,900(2) Class B 18.44% 9.03%
East 80, Rte. 4
Paramus, New Jersey
07652
Morgan Stanley, Dean
Witter, Discover
& Co.................. 2,499,139(3) Class B 11.79% 5.77%
1585 Broadway
New York, New York
10036
Crabbe Huson Group,
Inc................... 2,046,100(4) Class B 9.66% 4.73%
121 SW Morrison, Suite
1400
Portland, Oregon 97204
Pioneering Management
Corporation........... 1,542,400(5) Class B 7.28% 3.56%
60 State Street
Boston, Massachusetts
02109
</TABLE>
- --------
(1) NKK has sole voting and investment power with respect to all shares of
Class A Common Stock. As reported in a Schedule 13D dated February 13,
1995 filed with the Securities and Exchange Commission, NKK had sole
voting and investment power with respect to 22,100,000 shares of Class B
Common Stock listed as beneficially owned as a result of its ownership of
Class A Common Stock convertible into an equal number of shares of Class B
Common Stock.
(2) According to a Schedule 13G dated February 2, 1998 filed with the
Securities and Exchange Commission, Donald Smith & Co., Inc. reported that
it had sole voting power and sole dispositive power with respect to
3,906,900 shares.
(3) According to a Schedule 13G dated February 11, 1998 filed with the
Securities and Exchange Commission, Morgan Stanley, Dean Witter, Discover
& Co. (together with its wholly owned subsidiary, Miller, Anderson &
Sherrerd, LLP) reported that it had shared voting power with respect to
2,230,239 shares and shared dispositive power with respect to 2,499,139
shares.
(4) According to a Schedule 13G dated February 2, 1998 filed with the
Securities and Exchange Commission, Crabbe Huson Group, Inc. reported that
it had shared voting power and shared dispositive power with respect to
2,046,100 shares owned by approximately 62 of its clients.
(5) According to a Schedule 13G dated November 21, 1997 filed with the
Securities and Exchange Commission, Pioneering Management Corporation
reported that it had sole voting power and sole dispositive power with
respect to 1,542,400 shares.
15
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company had borrowings outstanding with an NKK affiliate, related to the
rebuild of the No. 5 coke oven battery at the Great Lakes Division, totaling
$161.9 million as of December 31, 1996. During 1997, the Company sold this
coke oven battery and, in connection with that sale, repaid all outstanding
borrowings owed to the NKK affiliate.
Effective May 1, 1995, the Company entered into an Agreement for the
Transfer of Employees with NKK, which supersedes a prior arrangement. The
Agreement was unanimously approved by all directors of the Company who were
not then, and never have been, employees of NKK. Pursuant to the terms of this
Agreement, technical and business advice is provided through NKK employees who
are transferred to the employ of the Company. The Agreement further provides
that the initial term can be extended from year to year after expiration of
the initial term, if approved by NKK and a majority of the directors of the
Company who were not then, and never have been, employees of NKK. The
Agreement has been extended through the calendar year 1998 in accordance with
this provision. Pursuant to the terms of the Agreement, the Company is
obligated to reimburse NKK for the costs and expenses incurred by NKK in
connection with the transfer of these employees, subject to an agreed upon
cap. The cap was $11.7 million during the initial term and $7 million during
each of 1997 and 1998. The Company expensed $5.4 million and $4.2 million
under this Agreement, and for various other engineering services provide by
NKK, during 1997 and 1996, respectively.
In April 1997, the Company purchased the shares of ProCoil Corporation owned
by NKK for a purchase price of $70,000. ProCoil is a joint venture between the
Company and Marubeni Corporation, located in Canton, Michigan, which blanks,
slits and cuts steel coils to desired lengths to service automotive market
customers. Following the purchase of NKK's shares, the Company owns a 56%
equity interest in ProCoil, and Marubeni Corporation owns the remaining 44%.
During 1997, the Company purchased approximately $4.3 million of finished
coated steel produced by NKK, with such purchases being made from trading
companies in arms length transactions.
In December 1997, the Company redeemed all of the Series A Preferred Stock
owned by NKK U.S.A. Corporation ("NKK U.S.A.") for a price of $36.7 million
plus accrued dividends of approximately $0.6 million. During 1997, cash
dividends of approximately $4.0 million were paid on the Series A Preferred
Stock by the Company to NKK U.S.A. As a result of this redemption, NKK U.S.A.
will no longer have any obligation to Avatex Corporation relating to a "put"
agreement entered into in 1990 at the time the Series A Preferred Stock was
issued. The lapse of this "put" with respect to the Company's dividend and
redemption obligations resulted in imputed income to NKK U.S.A. In the first
quarter of 1998, the Company made a payment of approximately $1.4 million to
NKK U.S.A. for taxes related to this imputed income in accordance with this
"put" agreement.
COMPARISON OF TOTAL RETURN
The chart below compares the Company's total stockholder return on its Class
B Common Stock for the period beginning March 23, 1993, the date of the
initial public offering of the Company's Class B Common Stock, and ending
December 31, 1997, with the cumulative return of the Standard & Poor's
Composite 500 stock index and a peer group consisting of the U.S. Steel Group
of USX Corporation, Bethlehem Steel Corporation, and Inland Steel Industries,
Inc. These comparisons assume an investment of $100 on March 23, 1993 in Class
B Common Stock of the Company, the Standard & Poor's Composite 500 stock index
and the peer group. Cumulative total returns are calculated assuming
reinvestment of dividends, and the peer group index is weighted to reflect the
market capitalization of the index members. The peer group companies are
direct business competitors of the Company and were selected based on
similarities in product offerings, customers and markets served and the extent
of the trading history of the Company's stock.
The comparisons in this graph are required by the Securities and Exchange
Commission and are not intended to forecast or be indicative of possible
future performance of the Company's stock.
16
<PAGE>
TOTAL RETURN TO STOCKHOLDERS
NATIONAL STEEL CORPORATION: 3/23/93-12/31/97
<TABLE>
<CAPTION>
[PERFORMANCE GRAPH APPEARS HERE]
COMPANY/INDEX 3/23/93 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
------------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
National Steel 100 85.71 105.35 91.96 66.07 82.58
S&P 500 100 106.16 107.56 147.98 181.96 242.67
Peer Group 100 115.00 103.71 84.09 73.73 72.43
</TABLE>
17
<PAGE>
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
On February 19, 1998, the Board of Directors appointed Ernst & Young LLP to
serve as independent auditors for the Company for the fiscal year ending
December 31, 1998, subject to ratification of such appointment at the 1998
Annual Meeting of Stockholders.
Ratification of the appointment requires the favorable vote of a majority of
the voting power of the outstanding shares of Common Stock present at the
meeting and constituting a quorum. If the stockholders do not ratify this
appointment, the selection of the independent auditors will be reconsidered by
the Board of Directors.
Representatives of Ernst & Young LLP will be present at the Annual Meeting
and will be given an opportunity to make a statement if they desire to do so.
They will also be available to respond to appropriate questions.
The Board of Directors unanimously recommends a vote FOR the appointment of
Ernst & Young LLP as auditors.
PROPOSALS OF STOCKHOLDERS
In order to be considered for inclusion in the Company's proxy statement and
proxy for the Annual Meeting of Stockholders to be held in 1999, proposals of
stockholders pursuant to Securities and Exchange Commission Rule 14a-8
intended to be presented at the 1999 Annual Meeting must be received in
writing by the Secretary of the Company no later than November 27, 1998 and
otherwise meet the requirements of that rule.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
Annual Meeting other than those set forth in the Notice of Annual Meeting.
However, if any other matters do come before the Annual Meeting, it is
intended that the holders of proxies will vote thereon in their discretion.
By order of the Board of Directors,
/s/ David A. Pryzbylski
----------------------
David A. Pryzbylski
Senior Vice President,
Administration and
Secretary
March 27, 1998
Mishawaka, Indiana
18
<PAGE>
PROXY
NATIONAL STEEL CORPORATION
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints John A. Maczuzak and David A. Pryzbylski
the proxies, each with power to act alone and with power of substitution, and
hereby authorizes them to represent and vote, all the shares of Class B Common
Stock of National Steel Corporation which the undersigned is entitled to vote at
the Annual Meeting to be held April 27, 1998 or any adjournment thereof as
designated herein and, in their discretion, upon such other matters as may
properly come before the meeting.
(Continued, and to be marked, dated and signed, on the other side)
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
<PAGE>
Please mark
your vote as
indicated in
this example [X]
1. ELECTION OF DIRECTORS NOMINEES: Charles A. Bowsher
FOR WITHHOLD Edsel D. Dunford
all nominees AUTHORITY Frank J. Lucchino
listed to the right to vote for all Dr. Bruce K. MacLaury
(except as marked nominees listed Keiichiro Sakata
to the contrary) to the right Osamu Sawaragi
Mineo Shimura
[_] [_] Hisashi Tanaka
Yutaka Tanaka
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below:
- --------------------------------------------------------------------------------
2. Ratification of the appointment of Ernst & Young LLP as the Company's
independent auditors for 1998.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Please sign exactly as name appears.
When shares are held by joint tenants,
both should sign. When signing as
attorney, executor, administrator,
trustee, or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by President
or other authorized officer. If a
partnership, please sign in partnership
name by authorized person.
Date: , 1998
-----------------------------
-----------------------------------------
(Signature)
-----------------------------------------
(Signature if held jointly)
PLEASE SIGN, DATE, AND RETURN THE PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
ADMISSION TICKET
Annual Meeting
of
National Steel Corporation Stockholders
Monday, April 27, 1998
10:00 a.m.
Westin River North Chicago
320 N. Dearborn
Chicago, Illinois
Agenda
. Election of Directors
. Ratification of the appointment of independent auditors
. Discussion on matters of current interest
. Question and Answer Session
<PAGE>
PROXY
FIDELITY MANAGEMENT TRUST COMPANY
If I sign and return this proxy to you, you are instructed to cause all
National Steel Corporation Common Stock in my National Steel Retirement Savings
Plan or National Steel Represented Employee Retirement Savings Plan Account to
be voted at the Annual Meeting of Shareholders of National Steel Corporation to
be held on April 27, 1998, and any adjournment thereof, as follows:
As indicated by me on the reverse side, but, if I make no indication as to a
particular matter, then unless otherwise indicated, as recommended by management
on such matters, and, on such other matters as may properly come before the
meeting. The Trustee will keep the vote completely confidential.
If the Trustee does not receive a properly executed proxy by April 22, 1998, the
Trustee shall vote the shares represented by this proxy in the same proportion
as it votes those shares for which it does receive a properly executed proxy.
(OVER)
(Please sign on reverse side)
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
<PAGE>
Please mark
your vote as
indicated in
this example [X]
1. ELECTION OF DIRECTORS NOMINEES: Charles A. Bowsher
FOR WITHHOLD Edsel D. Dunford
all nominees AUTHORITY Frank J. Lucchino
listed to the right to vote for all Dr. Bruce K. MacLaury
(except as marked nominees listed Keiichiro Sakata
to the contrary) to the right Osamu Sawaragi
Mineo Shimura
[_] [_] Hisashi Tanaka
Yutaka Tanaka
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below:
- --------------------------------------------------------------------------------
2. Ratification of the appointment of Ernst & Young LLP as the Company's
independent auditors for 1998.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Please sign exactly as name appears.
When shares are held by joint tenants,
both should sign. When signing as
attorney, executor, administrator,
trustee, or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by President
or other authorized officer. If a
partnership, please sign in partnership
name by authorized person.
Date: , 1998
-----------------------------
-----------------------------------------
(Signature)
-----------------------------------------
(Signature if held jointly)
PLEASE SIGN, DATE, AND RETURN THE PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
ADMISSION TICKET
Annual Meeting
of
National Steel Corporation Stockholders
Monday, April 27, 1998
10:00 a.m.
Westin River North Chicago
320 N. Dearborn
Chicago, Illinois
Agenda
. Election of Directors
. Ratification of the appointment of independent auditors
. Discussion on matters of current interest
. Question and Answer Session
