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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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Yutaka Tanaka 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 31, 1999
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 Willard Inter-Continental Washington, 1401 Pennsylvania
Avenue N.W., Washington, D.C. on Monday, May 10, 1999 at 10:00 a.m. Eastern
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, 1999.
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/ Yutaka Tanaka
Yutaka Tanaka
Chairman of the Board and
Chief Executive Officer
<PAGE>
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NATIONAL STEEL CORPORATION
4100 Edison Lakes Parkway
Mishawaka, Indiana 46545
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
The 1999 Annual Meeting of Stockholders of National Steel Corporation (the
"Company") will be held at the Willard Inter-Continental Washington, 1401
Pennsylvania Avenue N.W., Washington, D.C. on Monday, May 10, 1999 at 10:00
a.m. Eastern 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, 1999; and
3. To transact any other business that may properly come before the
meeting.
March 19, 1999 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/ Ronald J. Werhnyak
Ronald J. Werhnyak
Vice President, General Counsel and
Secretary
March 31, 1999
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>
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 May 10, 1999 and at any and all adjournments of such Annual Meeting.
As of March 19, 1999, 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 19,248,540 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 31, 1999. 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, 1998 and the Company's 1998
Annual Report on Form 10-K have 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
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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 2000 Annual Meeting of Stockholders and until their successors are
duly elected and qualified, or until their earlier resignation, retirement,
death or removal. All of the nominees have been designated by the Board of
Directors and are members of the present Board. 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 67, has been a director of the Company since April 21,
1997. From 1981 to 1996, he served as Comptroller General of the United States
and head of the General Accounting Office. Mr. Bowsher was associated with
Arthur Andersen & Co. 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 and Audit
Committee.
Edsel D. Dunford
Mr. Dunford, age 63, has been a director of the Company since April 27,
1998. 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
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retirement in 1994. Mr. Dunford also serves as a director of Cordant
Technologies, Inc., Cooper Tire & Rubber Company and Howmet International. Mr.
Dunford is a member of the Audit Committee.
Mitsuoki Hino
Mr. Hino, age 51, has been a director of the Company since October 27, 1998.
Since 1971, Mr. Hino has served in various capacities with 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). His most recent positions have been Senior Manager,
Planning from 1992 to 1993, Director of Human Resources from 1993 to 1995 and
General Manager, Sales and Production Planning from 1995 to the present.
Frank J. Lucchino
Mr. Lucchino, age 60, 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 also serves as a director of Allegheny Teledyne Incorporated.
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
and 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 67, 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.
Mineo Shimura
Mr. Shimura, age 47, 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). Mr. Shimura is Chairman of
the Nominating Committee.
Hisashi Tanaka
Mr. Tanaka, age 51, has been a director of the Company since April 27, 1998.
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, General
Manager, Steelmaking Technology from 1996 to 1998 and General Manager
Technology Planning and Coordination from 1998 to the present.
Yutaka Tanaka
Mr. Tanaka, age 62, has been a director of the Company since April 1, 1998.
Mr. Tanaka was elected Vice Chairman of the Company in April 1998 and Chairman
of the Board and Chief Executive Officer in September 1998. Mr. Tanaka served
as President of Adchemco Corporation, a manufacturer of chemical products and
a
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wholly owned subsidiary of NKK, from June 1996 to March 1998. Prior thereto,
he was employed in various capacities by NKK, where he most recently served as
Managing Director from June 1992 to June 1996.
Sotaro Wakabayashi
Mr. Wakabayashi, age 49, has been a director of the Company since December
16, 1998. Mr. Wakabayashi has served in various capacities with NKK since
1974. His most recent positions have been Senior Manager, International Legal
Affairs from 1993 to 1994, Senior Counselor from 1994 to 1998 and Chief Senior
Counselor from 1998 to the present. Mr. Wakabayashi became a member of the
Compensation Committee in March 1999.
THE BOARD OF DIRECTORS
The Board of Directors held 9 meetings during 1998.
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 Company'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 Audit
Committee also reviews the Company's compliance with its Code of Ethical
Business Conduct. The 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, Mr. Bowsher and Mr. Dunford.
The Audit Committee held 19 meetings during 1998.
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, Mr. Bowsher and Mr. Wakabayashi. The Compensation
Committee held 6 meetings during 1998.
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
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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. Shimura, Chairman and
Mr. MacLaury. The Nominating Committee held 3 meetings during 1998.
Attendance
All of the incumbent directors attended at least 75% of the Board and
committee meetings held in 1998 during the period they were members of the
Board or of a committee.
Compensation of Directors
Directors who are not employees of the Company or any of its subsidiaries
receive an annual fee of $30,000 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 chairman of each standing committee receives an
additional annual payment of $3,000. 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. These stock options vest in one-third annual increments commencing on
the first anniversary date of the initial grant. In June 1997 and February
1998, the Board of Directors authorized the conversion of certain outstanding
stock options which had previously been granted to directors under the
Directors Plan into cash only stock appreciation rights ("SARs"). In October
1999, the Board of Directors authorized the conversion of all remaining SARs
back into stock options. The stock options have the same exercise price,
exercise date and expiration date as the SARs which they replaced.
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 independent 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 1998.
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
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. motivating them to enhance stockholder value by attaining the Company's
short and long term performance objectives.
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 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 18 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. Tanaka's base
salary was increased from $400,000 to $500,000 in September 1998, when he was
appointed Chief Executive Officer. Mr. Sawaragi's base salary was not
increased during 1998, remaining at the $500,000 amount which was established
in August 1996 when he became Chief Executive Officer. The base salaries of
Mr. Tanaka and Mr. Sawaragi are below the median salary level for their
position, as disclosed in the compensation surveys reviewed by the Committee.
Annual Incentives
The 1998 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. Mr.
Tanaka's annual incentive target was increased from 45 to 50% of his base
salary when he was appointed Chief Executive Officer in September 1998. At the
time of his resignation on August 31, 1998, Mr. Sawaragi's annual incentive
target was 50% of his base salary.
The 1998 MICP provided that each executive officer could earn a percentage
of his target amount, ranging from 0 to 200%, depending upon the extent to
which the Company achieved the net income and other performance goals
established by the Committee. This percentage could also be adjusted by the
Committee, in its discretion, in the event of exceptional Company performance
or if other important business or strategic objectives were met. Based upon
these factors, the Compensation Committee set the 1998 MICP payout at 43% of
the target amount. The Committee also had the discretion to adjust this
percentage for particular executives in the event of exceptional individual
performance.
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In February 1999, Mr. Tanaka was paid an incentive bonus of $125,000 for
1998. The amount of this bonus slightly exceeded the 1998 MICP payout of 43%
of the target amount. The Committee determined that this bonus amount was
appropriate in view of Mr. Tanaka's outstanding performance and leadership
since becoming Chief Executive Officer in September 1998, particularly in
helping the Company react to the difficult environment for the steel industry
during the fourth quarter of 1998. At the time of his resignation on August
31, 1998, Mr. Sawaragi was paid an incentive bonus for 1998 in the amount of
$285,822. The amount of this bonus was calculated in accordance with the
requirements of Mr. Sawaragi's employment contract, and was equal to his
average incentive bonus during the preceding three year period, pro-rated to
reflect the part of the year completed prior to his resignation.
Long Term Incentives
The Company's long term incentive compensation awards for executive officers
are made pursuant to the 1993 National Steel Corporation Long Term Incentive
Plan ("Long Term Incentive Plan") and 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 certain stock options which were previously granted to
executives under the Long Term Incentive Plan into SARs. In October 1998, all
remaining SARs were converted back into stock options. The stock options have
the same exercise price, exercise date and expiration date as the SARs which
they replaced.
Effective as of February 9, 1998, the Committee and the Board of Directors
granted long term incentive awards in the form of nonstatutory stock options
under the Long Term Incentive Plan to certain of the Company's executive
officers. The amount of these awards was based primarily upon the median level
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. These stock options vest in one-third annual
increments commencing on the first anniversary date of the initial grant. 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. Upon his election as Vice Chairman of
the Company on April 1, 1998, Mr. Tanaka was awarded options to purchase
45,000 shares at an exercise price of $17.375 per share. No additional options
were awarded to Mr. Tanaka when he was appointed Chief Executive Officer. Mr.
Tanaka's stock option award was below the median grant value of long term
incentive awards for his position, as disclosed in the compensation surveys
reviewed by the Committee. Mr. Sawaragi was not awarded any new stock options
during 1998.
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
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Committee's other compensation goals and objectives. In 1998, 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 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
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Executive Compensation
The following table sets forth separately, for the fiscal years indicated,
each component of compensation paid or awarded to, or earned by, each
individual who served as Chief Executive Officer of the Company during the
last fiscal year, 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.......... 1998 $333,336 $285,822 -- -- $298,077
Chairman of the Board
and 1997 500,004 450,000 -- 50,000 --
Chief Executive Officer
(4) 1996 183,714 150,000 -- 500 --
Yutaka Tanaka........... 1998 333,338 125,000 18,302 45,000 22,872
Chairman of the Board
and 1997 -- -- -- -- --
Chief Executive Officer
(5) 1996 -- -- -- -- --
John A. Maczuzak........ 1998 372,916 95,000 -- 45,000 28,729
President and 1997 347,909 275,000 12,115 40,000 34,863
Chief Operating Officer
(6) 1996 183,750 100,000 12,115 15,000 23,638
David L. Peterson....... 1998 234,996 40,730 6,860 30,000 22,634
Senior Vice President,
Business 1997 233,746 125,000 6,860 15,000 22,542
Development, Production
Planning 1996 215,830 72,000 6,860 15,000 22,517
and Technical Support
James H. Squires........ 1998 211,666 50,000 8,360 25,000 18,104
Senior Vice President
and 1997 180,000 125,000 -- 15,000 7,272
General Manager 1996 141,864 33,000 -- -- 6,066
Granite City Division
Robert G. Pheanis....... 1998 200,004 30,331 8,769 15,000 17,459
Vice President and 1997 200,004 100,000 8,769 15,000 18,429
General Manager 1996 196,671 57,000 8,769 15,000 17,042
Midwest Division
</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 except
for the grant of an option to Mr. Sawaragi to purchase 500 shares during
1996 which was made pursuant to the Directors Plan. In addition to the
stock options shown in the table above, in February 1998 each of the Named
Executive Officers (other than Mr. Tanaka) was granted SARs pursuant to
the Long Term Incentive Plan (and in the case of Mr. Sawaragi also
pursuant to the Directors Plan) in exchange for cancellation of an
identical number of non-statutory stock options previously granted to him.
The SARs had the same exercise price, exercise date and expiration date as
the stock options which they replaced. Also, in October 1998 each of the
Named Executive Officers (other than Mr. Tanaka) was granted non-statutory
stock options pursuant to the Long Term Incentive Plan (and in the case of
Mr. Sawaragi also pursuant to the Directors Plan) in exchange for
cancellation of all remaining SARs previously granted to him. The stock
options have the same exercise price, exercise date and expiration date as
the SARs which they replaced.
9
<PAGE>
(3) The amount shown for 1998 includes (a) the Company's contribution to the
National Steel Retirement Savings Program for Messrs. Maczuzak, Peterson,
Squires and Pheanis in the amounts of $6,400, $6,400, $7,485 and $6,500,
respectively; (b) the dollar value of life insurance premiums paid by the
Company on behalf of the Named Executive Officer for Messrs. Tanaka,
Peterson, Squires and Pheanis in the amounts of $22,872, $8,234, $10,619
and $10,959, respectively; (c) the Company's contribution to the
Executive Deferred Compensation Plan for Messrs. Maczuzak and Peterson in
the amounts of $22,329 and $8,000, respectively; and (d) payments to Mr.
Sawaragi in the amount of $298,077 pursuant to his employment contract
following his resignation as Chief Executive Officer on August 31, 1998.
(4) Mr. Sawaragi became an executive officer of the Company on August 20,
1996 and resigned effective as of August 31, 1998.
(5) Mr. Tanaka was appointed Vice Chairman of the Company on April 1, 1998
and Chairman and Chief Executive Officer on September 1, 1998.
(6) Mr. Maczuzak became an executive officer of the Company on May 1, 1996.
Stock Option/SAR Tables
The following table contains information relating to stock options and SARs
which were granted to the Named Executive Officers in 1998.
OPTION/SAR GRANTS IN 1998
<TABLE>
<CAPTION>
Number of
Securities Percent of Total Options Exercise or Base
Underlying Options Granted To Employees in Price Expiration Grant Date Present
Name Granted (#)(1)(2) Fiscal Year ($/Share)(3) Date Value ($)(4)
---- ------------------ ------------------------ ---------------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
Osamu Sawaragi 0 -- -- -- --
Yutaka Tanaka 45,000 10.5% $17.375 4/01/08 $374,600(5)
John A. Maczuzak 45,000 10.5 14.375 2/09/08 304,802(6)
David L. Peterson 20,000 4.7 14.375 2/09/08 135,468(6)
10,000 2.3 9.75 8/01/08 48,177(7)
James H. Squires 25,000 5.8 14.375 2/09/08 169,334(6)
Robert G. Pheanis 15,000 3.5 14.375 2/09/08 101,601(6)
</TABLE>
- --------
(1) These grants represent nonstatutory stock options to purchase shares of
the Company's Class B Common Stock which were granted under the Long Term
Incentive Plan. The 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, in February
1998, each of the Named Executive Officers (other than Mr. Tanaka) was
granted SARs pursuant to the Long Term Incentive Plan (and in the case of
Mr. Sawaragi also pursuant to the Directors Plan) in exchange for the
cancellation of an identical number of non-statutory stock options
previously granted to him. The SARs had the same exercise price, exercise
date and expiration date as the stock options which they replaced. Also,
in October 1998, each of the Named Executive Officers (other than Mr.
Tanaka) was granted non-statutory stock options in exchange for the
cancellation of all remaining SARs previously granted to him. The stock
options have the same exercise price, exercise date and expiration date
as the SARs which they replaced.
(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.
10
<PAGE>
(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.
(5) The following assumptions were made when applying the Black-Scholes
valuation methodology to this grant: (a) expected volatility: 0.4810;
(b) expected dividend yield: 2.72%; (c) expected risk free rate of
return: 6.25%; (d) expected timing of exercise: 10 years; and (e) Black-
Scholes ratio: 0.47910507.
(6) The following assumptions were made when applying the Black-Scholes
valuation methodology to this grant: (a) expected volatility: 0.4678;
(b) expected dividend yield: 2.72%; (c) expected risk free rate of
return: 6.25%; (d) expected timing of exercise: 10 years; and (e) Black-
Scholes ratio: 0.47119159.
(7) The following assumptions were made when applying the Black-Scholes
valuation methodology to this grant: (a) expected volatility: 0.5066;
(b) expected dividend yield: 2.72%; (c) expected risk free rate of
return: 6.25%; (d) expected timing of exercise: 10 years; and (e) Black-
Scholes ratio: 0.4941251.
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 1998 and the value of unexercised options
and SARs held by the Named Executive Officers as of December 31, 1998.
AGGREGATED OPTION/SAR EXERCISES IN 1998 AND
DECEMBER 31, 1998 OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs In-the-Money Options/SARs
at December 31, 1998 at December 31, 1998
(#)(2) ($)(3)
------------------------- -------------------------
Shares Acquired Value
Name on Exercise (#)(1) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Osamu Sawaragi.......... 0 $ 0 20,501 33,499 0 0
Yutaka Tanaka........... 0 0 0 45,000 0 0
John A. Maczuzak........ 0 0 23,333 76,667 0 0
David L. Peterson....... 55,000 395,625 0 45,000 0 0
James H. Squires........ 5,000 50,315 0 35,000 0 0
Robert G. Pheanis....... 40,000 256,895 0 20,000 0 0
</TABLE>
- --------
(1) All exercises were of SARs.
(2) All unexercised instruments are stock options.
(3) There were no in-the-money stock options at December 31, 1998 because the
exercise prices of all unexercised stock options exceeded the market price
of the Company's Class B Common Stock of $7.125 per share on December 31,
1998.
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.
11
<PAGE>
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Average Annual Years of Service
Eligible Compensation -----------------------------------------------------------------------
Preceding Retirement 10 15 20 25 30 35 40 45
- --------------------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 100,000.............. $ 13,500 $ 20,000 $ 27,000 $ 33,500 $ 40,000 $ 47,000 $ 53,000 $ 58,500
150,000.............. 20,500 30,500 41,000 51,000 61,500 71,500 81,000 91,500
200,000.............. 28,000 41,500 55,500 69,500 83,500 97,500 111,000 125,000
250,000.............. 35,500 53,000 70,500 88,500 106,000 123,500 141,000 159,000
300,000.............. 43,000 64,000 86,500 107,000 128,500 150,000 171,000 192,500
350,000.............. 50,500 75,500 100,500 126,000 151,000 176,000 201,000 226,500
400,000.............. 58,000 85,500 115,500 144,500 173,500 202,500 231,000 260,000
450,000.............. 65,500 98,000 130,500 163,500 196,000 228,500 261,000 294,000
500,000.............. 73,000 109,000 145,500 182,000 218,500 255,000 291,000 327,500
600,000.............. 88,000 131,500 175,500 219,500 263,500 307,500 351,000 395,000
700,000.............. 103,000 154,000 205,500 257,000 308,500 360,000 411,000 462,500
800,000.............. 118,000 176,500 235,500 294,500 353,500 412,500 471,000 530,000
900,000.............. 133,000 199,000 265,500 332,000 398,500 465,000 531,000 597,500
1,000,000.............. 148,000 221,500 295,500 369,500 443,500 517,500 591,000 665,000
1,100,000.............. 163,000 244,000 325,500 407,000 488,500 570,000 651,000 732,500
1,200,000.............. 178,000 266,500 355,500 444,500 533,500 622,500 711,000 800,000
1,300,000.............. 193,000 289,500 385,500 482,000 578,500 675,000 771,000 867,500
</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, 1998, and (b) the
amount of eligible compensation under the retirement plans for 1998:
<TABLE>
<CAPTION>
Years of Eligible
Name Service Compensation
---- -------- ------------
<S> <C> <C>
Osamu Sawaragi (1).................................. 2.00 $1,069,157
Yutaka Tanaka....................................... 0.75 333,338
John A. Maczuzak.................................... 2.67 647,916
David L. Peterson (2)............................... 4.58 359,996
James H. Squires.................................... 42.33 340,578
Robert G. Pheanis................................... 4.58 300,004
</TABLE>
- --------
(1) Mr. Sawaragi ceased to be an employee of the Company on August 31, 1998
and will not receive benefits under the Company's retirement plans.
(2) Pursuant to the terms of his employment agreement, Mr. Peterson will
receive credit for 23 years of service with a previous employer for the
purpose of determining his pension benefit from the Company. The benefits
of Mr. Peterson under the Company's qualified defined benefit retirement
plan and non-qualified retirement plans will be reduced by the amount of
his pension benefits from the previous employer. See discussion below
under the caption "Employment Contracts".
12
<PAGE>
Employment Contracts
The Company has entered into employment contracts ("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.
The Contracts with Mr. Sawaragi and Mr. Tanaka (together, the "Chief
Executive Officer Contracts") provide for (i) non-competition for a period of
two years subsequent to termination of employment by the executive 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 had a term
which was to expire on October 5, 1998, and the term of the Contract with Mr.
Tanaka expires on August 31, 2001. Each Chief Executive Officer Contract
provides that (i) the annual base salary of the executive 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) the executive's annual target
incentive compensation opportunity shall be equal to at least 50% of base
salary. The Chief Executive Officer Contracts further provide 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 Chief Executive Officer Contracts provide for certain payments and
benefits upon termination of the executive's employment. If the executive'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 the executive 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 he 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 the executive 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, the executive
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 Chief Executive Officer
Contracts also provide that the Company will reimburse the executive for
expenses incurred in seeking in good faith to enforce his Contract. Mr.
Sawaragi terminated his employment with the Company for "good reason"
effective as of August 31, 1998, and received the payments and benefits called
for by his Contract.
The Contracts with Mr. Maczuzak, Mr. Peterson and Mr. Pheanis (together, the
"Other Executive Contracts") also provide for non-competition subsequent to
termination of employment by the executive without "good reason" for a period
of two years, in the case of Mr. Maczuzak and Mr. Peterson, and one year in
the case of Mr Pheanis. The Other Executive Contracts also provide other post
termination covenants including non-disclosure, non-solicitation of employees,
cooperation during a transition period and release of employment claims. The
Other Executive Contracts have an initial term ending July 1, 1998, in the
case of Mr. Maczuzak and Mr. Peterson and June 1, 1999 in the case of Mr.
Pheanis, and are subject to automatic month-to-month extensions unless either
party elects not to extend the term. Prior to the date Mr. Maczuzak or Mr.
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
Other Executive Contracts 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 at least 40% of
his base salary in the case of Mr. Maczuzak and Mr. Peterson and 35% in the
case of Mr. Pheanis. The Contracts with Mr. Maczuzak and Mr. Peterson further
provide 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.
13
<PAGE>
The Contract with Mr. Peterson also provides that, for purposes of
determining his pension benefits with the Company, he will receive credit for
his years of service with his previous employer, and his pension benefits from
the Company will be reduced by his pension benefits from his previous
employer. The Company has also agreed to provide Mr. Peterson with retiree
health care under certain circumstances.
The Other Executive Contracts provide for certain payments and benefits upon
termination of employment. In the case of Mr. Maczuzak and Mr. Peterson, 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, Mr.
Maczuzak and Mr. Peterson 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 Mr.
Maczuzak or Mr. Peterson reaches age 64, the two year severance and two year
benefit continuation periods 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.
In the case of Mr. Pheanis, if 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 employment is
terminated by the Company without "cause" or by the executive for any reason
other than death or disability, Mr. Pheanis would be entitled to special
termination benefits consisting of: (i) a severance payment equal to one 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 one 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)
immediate stock option vesting and exercisability for a two year period; and
(iii) a two year continuation of life insurance and financial and tax planning
benefits.
Mr. Pheanis's Contract also provides that if Mr. Pheanis terminates his
employment after September 30, 1998 or if his employment is terminated by the
Company at any time without "cause", in each case prior to Mr. Pheanis having
at least five years of service for vesting purposes under the Company's
retirement program, Mr. Pheanis will be provided with the retirement benefits
which he would have been entitled to receive had he completed five years of
service for vesting purposes under the plan.
The Other Executive Contracts 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 Other Executive Contracts
also provide that the Company will reimburse the executive for expenses
incurred in seeking in good faith to enforce his Contract.
14
<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 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, 1999 in the case of the Company's Class B Common Stock
and as of December 31, 1998 in the case of NKK 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>
NKK Corporation Stock Class B Common Stock of Company
--------------------------------- ---------------------------------
Number of Shares Percent of Number of Shares Percent of
Name Beneficially Owned (1) Class Beneficially Owned (2) Class
---- ---------------------- ---------- ---------------------- ----------
<S> <C> <C> <C> <C>
Charles A. Bowsher...... 0 0 1,833 *
Edsel D. Dunford........ 0 0 5,833 *
Mitsuoki Hino........... 5,398 * 0 0
Frank J. Lucchino....... 0 0 3,601 *
Bruce K. MacLaury....... 0 0 3,001 *
Mineo Shimura........... 11,000 * 1,833 *
Hisashi Tanaka.......... 1,093 * 833 *
Yutaka Tanaka........... 37,104 * 15,000 *
Sotaro Wakabayashi...... 9,711 * 0 0
Osamu Sawaragi.......... 93,040 * 37,168 *
John A. Maczuzak........ 0 0 58,764(3)(4) *
David L. Peterson....... 0 0 17,666(5) *
James H. Squires........ 0 0 13,333 *
Robert G. Pheanis....... 0 0 5,000 *
All directors and
executive officers as a
group ( 23 persons).... 157,346 * 228,770(3) 1.14%
</TABLE>
- --------
* Less than 1% of the outstanding shares on March 1, 1999 in the case of the
Company's Class B Common Stock and on December 31, 1998 in the case of NKK
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.
Hino, Hisashi Tanaka and Wakabayashi have no voting power with respect to
5,398, 1,093 and 4,511 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 shares which the individual has the right to acquire through the
exercise of stock options which are exercisable within 60 days of March 1,
1999 in the following amounts: for Mr. Bowsher 1,833 shares; for
Mr.Dunford 833 shares; for Mr. Lucchino 3,501 shares; for Mr. MacLaury
3,001 shares; for Mr. Shimura 1,833 shares; for Mr. Hisashi Tanaka 833
shares; for Mr. Yutaka Tanaka 15,000 shares; for Mr. Sawaragi 37,168
shares; for Mr. Maczuzak 51,666 shares; for Mr. Peterson 16,666 shares;
for Mr. Squires 13,333 shares; for Mr. Pheanis 5,000 shares; and for all
directors and executive officers as a group 196,801 shares.
(3) Includes shares held by the trustee of the Company's Salaried Employees
Retirement Savings Program as of December 31, 1998 in the following
amounts: for Mr. Maczuzak 3,598 shares and for all directors and executive
officers as a group 9,369 shares.
(4) Includes 3,500 shares owned by Mr. Maczuzak's spouse.
(5) Includes 1,000 shares owned by a trust, the beneficiary and trustee of
which is Mr. Peterson's spouse.
15
<PAGE>
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, except that a Form 4 was not filed for William E.
McDonough, Treasurer, to report two exercises of cash only stock appreciation
rights during 1998. Those transactions have been subsequently reported on a
Form 5.
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, 1999, unless otherwise indicated. The information
contained in this table is based upon the statements filed with the Securities
and Exchange Commission pursuant to Sections 13(d) and 13(g) of the Securities
Exchange Act of 1934.
<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 100.00% 52.89%
1013 Centre Road
Wilmington, Delaware
19805-1297
Donald Smith & Co.,
Inc. ................. 4,233,100(2) Class B 21.50% 10.13%
East 80, Rte. 4
Paramus, New Jersey
07652
Dimensional Fund
Advisors Inc. ........ 1,135,175(3) Class B 5.77% 2.72%
1299 Ocean Avenue
11th Floor
Santa Monica,
California 90401
</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 3, 1999 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
4,233,100 shares.
(3) According to a Schedule 13G dated February 11, 1999 filed with the
Securities and Exchange Commission, Dimensional Fund Advisors Inc.
reported that it had sole voting power and sole dispositive power with
respect to 1,135,175 shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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
16
<PAGE>
never have been, employees of NKK. The Agreement has been extended through the
calendar year 1999 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 $7 million during 1998 and 1999.
The Company expensed $6.0 million under this Agreement during 1998. In
addition, the Company paid approximately $0.9 million to NKK for various other
engineering services provided by NKK during 1998.
On October 23, 1998, the Company entered into a Turnkey Engineering and
Construction Contract with NKK Steel Engineering, Inc. ("NKK SE"), a
subsidiary of NKK. The Agreement was unanimously approved by all directors of
the Company who were not then, and never have been, employees of NKK. Pursuant
to this agreement, NKK SE will design, engineer, construct and install a
continuous galvanizing facility at the Company's Great Lakes Division in
Ecorse, Michigan. The purchase price payable by the Company to NKK SE for the
facility is approximately $139.7 million. During 1998, $15.2 million was paid
to NKK SE relating to this contract, and $6.6 million was included in accounts
payable, net of a $1.6 million retention, as of December 31, 1998.
During 1998, the Company paid cash dividends of $0.28 per share on both the
Class A Common Stock owned by NKK USA Corporation and on its Class B Common
Stock. Aggregate dividends paid to NKK USA Corporation during 1998 were
approximately $6.2 million.
COMPARISON OF TOTAL RETURN
The chart below compares the Company's total stockholder return on its Class
B Common Stock for the period beginning December 31, 1993 and ending December
31, 1998, with the cumulative return of (i) the Standard & Poor's Composite
500 stock index (ii) a peer group consisting of the U.S. Steel Group of USX
Corporation, Bethlehem Steel Corporation, and Inland Steel Industries, Inc.
(now known as Ryerson Tull, Inc.) ("Original Peer Group") and (iii) a peer
group consisting of the U.S. Steel Group of USX Corporation, Bethlehem Steel
Corporation, LTV Corporation and AK Steel Holding Corporation ("New Peer
Group"). The Company has excluded Inland Steel Industries, Inc. from the New
Peer Group because it sold its steelmaking subsidiary, Inland Steel Co., to
Ispat International N.V. in 1998. LTV Corporation and AK Steel Holding
Corporation have been included in the New Peer Group so that it now includes
the four largest domestic integrated steel producers with which the Company
competes.
The comparisons in this graph assume an investment of $100 on December 31,
1993 in Class B Common Stock of the Company, the Standard & Poor's Composite
500 stock index, the Original Peer Group and the New Peer Group. Cumulative
total returns are calculated assuming reinvestment of dividends, and the peer
group indexes are weighted to reflect the market capitalization of the index
members. These comparisons 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.
17
<PAGE>
TOTAL RETURN TO STOCKHOLDERS
NATIONAL STEEL CORPORATION: 12/31/93-12/31/98
[GRAPH OF NATIONAL STEEL APPEARS]
<TABLE>
<CAPTION>
Company/Index 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
National Steel 100 122.92 107.29 77.08 96.35 61.11
S&P 500 100 101.32 139.40 171.40 228.59 293.91
Original Peer Group 100 90.19 73.12 64.11 62.99 53.50
New Peer Group 100 89.36 77.76 72.37 69.43 61.15
</TABLE>
18
<PAGE>
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
On March 17, 1999, the Board of Directors appointed Ernst & Young LLP to
serve as independent auditors for the Company for the fiscal year ending
December 31, 1999, subject to ratification of such appointment at the 1999
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 2000, proposals of
stockholders pursuant to Securities and Exchange Commission Rule 14a-8
intended to be presented at the 2000 Annual Meeting must be received in
writing by the Secretary of the Company no later than December 2, 1999 and
otherwise meet the requirements of that rule.
Written notice of shareholder proposals submitted outside the process of
Rule 14a-8 for consideration at the 2000 Annual Meeting must be received by
the Company on or before February 15, 2000 in order to be considered timely
for purposes of Rule 14a-4. The persons designated in the Company's proxy
statement shall be granted discretionary authority to vote with respect to any
shareholder proposal of which the Company does not receive timely notice.
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/ Ronald J. Werhnyak
Ronald J. Werhnyak
Vice President, General Counsel and
Secretary
March 31, 1999
Mishawaka, Indiana
19
<PAGE>
PROXY
NATIONAL STEEL CORPORATION
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints John A. Maczuzak and Ronald J. Werhnyak 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 May 10, 1999 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 votes as
indicated in
this example [X]
1. ELECTION OF DIRECTORS NOMINEES: Charles A. Bowsher
FOR WITHHOLD Frank J. Lucchino
all nominees AUTHORITY Hisashi Tanaka
listed to the right to vote for all Edsel D. Dunford
(except as marked nominees listed Bruce K. MacLaury
to the contrary) to the right Yutaka Tanaka
Mitsuoki Hino
[_] [_] Mineo Shimura
Sotaro Wakabayashi
(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 1999.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
FOR AGAINST ABSTAIN
[_] [_] [_]
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.
Dated: , 1999
-------------------------------
--------------------------------------------
(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, May 10, 1999
10:00 a.m.
Willard Inter-Continental Washington
1401 Pennsylvania Avenue N.W.
Washington, D.C.
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 May 10, 1999, 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 May 5, 1999 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.
(Please sign on reverse side)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
Please mark
your votes as
indicated in
this example [X]
1. ELECTION OF DIRECTORS NOMINEES:
FOR WITHHOLD Charles A. Bowsher
all nominees AUTHORITY Frank J. Lucchino
listed to the right to vote for all Hisashi Tanaka
(except as marked nominees listed Edsel D. Dunford
to the contrary) to the right Bruce K. MacLaury
Yutaka Tanaka
[_] [_] Mitsuoki Hino
Mineo Shimura
Sotaro Wakabayashi
(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 1999.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
FOR AGAINST ABSTAIN
[_] [_] [_]
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.
Dated: ,1999
----------------------------------
----------------------------------------------
(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, May 10, 1999
10:00 a.m.
Willard Inter-Continental Washington
1401 Pennsylvania Avenue N.W.
Washington, D.C.
Agenda
.Election of Directors
.Ratification of the appointment of independent auditors
.Discussion on matters of current interest
.Question and Answer Session
