<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the Com-
mission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or
Rule 14a-12
NORTHWESTERN STEEL AND WIRE COMPANY
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
NORTHWESTERN STEEL AND WIRE COMPANY
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
------------------------------------------------------------------------
(3) Filing party:
------------------------------------------------------------------------
(4) Date filed:
------------------------------------------------------------------------
<PAGE> 2
[LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 18, 1996
To the Shareholders of Northwestern Steel and Wire Company:
The Annual Meeting of Shareholders of Northwestern Steel and Wire Company
(the "Company") will be held on Thursday, January 18, 1996, at 10:00 a.m.,
Central Standard Time, at St. Mary's Parish Center, 600 Avenue B, Sterling,
Illinois 61081-3570, for the following purposes:
(1) To elect five Directors to hold office for two year terms.
(2) To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on December 8, 1995
as the record date for determining shareholders entitled to notice of, and to
vote at, the Annual Meeting.
By order of the Board of Directors
Edward G. Maris
Secretary
Sterling, Illinois
December 15, 1995
<PAGE> 3
[LOGO]
121 WALLACE STREET
STERLING, ILLINOIS 61081-0618
PROXY STATEMENT
The Annual Meeting of Shareholders (the "Annual Meeting") of Northwestern
Steel and Wire Company (the "Company") will be held at 10:00 a.m., Central
Standard Time, Thursday, January 18, 1996, at St. Mary's Parish Center, 600
Avenue B, Sterling, Illinois 61081-3570. The accompanying proxy is solicited by
the Board of Directors of the Company for use at the Annual Meeting and any
adjournments thereof.
GENERAL INFORMATION
VOTING SECURITIES
The Board of Directors has fixed the close of business on December 8, 1995
as the record date for determining shareholders entitled to notice of and to
vote at the Annual Meeting. As of the record date, the Company had outstanding
24,349,912 shares of Common Stock. Each of the outstanding shares of Common
Stock is entitled to one vote.
PROXIES
Robert N. Gurnitz and Edward G. Maris, named on the proxy card accompanying
this Proxy Statement, were selected by the Board of Directors of the Company to
serve as proxies. Messrs. Gurnitz and Maris are each executive officers of the
Company. Each executed and returned proxy will be voted in accordance with the
directions indicated thereon, or if no direction is indicated, in accordance
with the recommendations of the Board of Directors contained in this Proxy
Statement. Each shareholder giving a proxy has the power to revoke it at any
time before the shares it represents are voted. Revocation of a proxy is
effective upon receipt by the Secretary of the Company of either (i) an
instrument revoking the proxy, or (ii) a duly executed proxy bearing a later
date. Additionally, a stockholder may change or revoke a previously executed
proxy by voting in person at the Annual Meeting.
REQUIRED VOTE
A plurality of the votes cast in person or by proxy is required to elect
directors. The Articles of Incorporation provide that the shareholders of the
Company are not entitled to cumulate their votes.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the election inspectors appointed for the meeting and will determine whether or
not a quorum is present. The election inspectors will treat abstentions as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum but as unvoted for purposes of determining the approval of
any matter submitted to the stockholders for a vote. If a broker indicates on
the proxy that it does not have discretionary authority as to certain shares to
vote on a particular matter, those shares will not be considered as present and
entitled to vote with respect to that matter.
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report to Shareholders for the fiscal year ended July
31, 1995, containing financial and other information pertaining to the Company,
is being furnished to shareholders simultaneously with this Proxy Statement.
MAILING AND EXPENSES
This Proxy Statement and accompanying form of proxy were first released to
stockholders on or about December 15, 1995. Expenses incurred in the
solicitation of proxies will be borne by the Company.
<PAGE> 4
ELECTION OF DIRECTORS
The Company's Board of Directors consists of nine directors. The Bylaws of
the Company provide for the election of directors to staggered terms of two
years. Accordingly, five directors will be elected at the 1996 Annual Meeting
for a term of two years expiring at the 1997 Annual Meeting of Shareholders. All
of the nominees are presently serving as directors of the Company. The Board of
Directors recommends that the shareholders vote in favor of the election of the
nominees named in this Proxy Statement to serve as directors of the Company.
The four directors whose terms of office do not expire in 1996 will
continue to serve after the Annual Meeting until their terms of office expire in
1997 or their successors are elected. See "Other Directors" below.
If at the time of the Annual Meeting any of the nominees should be unable
or decline to serve, the persons named in the proxy will vote for such
substitute nominee or nominees as the Board of Directors recommends, or vote to
allow the vacancy created thereby to remain open until filled by the Board as
the Board recommends. The Board of Directors has no reason to believe that any
nominee will be unable or will decline to serve as a director if elected.
NOMINEES
The following persons, if elected at the Annual Meeting, will serve as
directors until the earlier of the 1997 Annual Meeting of the Company's
shareholders or until their successors are duly elected and qualified.
<TABLE>
<CAPTION>
NAME AGE SERVED AS DIRECTOR SINCE
------------------------------------------ --- ------------------------
<S> <C> <C>
Warner C. Frazier (1)..................... 63 1995
James A. Kohlberg (2)..................... 38 1992
Christopher Lacovara (2)(3)(4)............ 31 1992
Albert G. Pastino (1)..................... 53 1995
George W. Peck IV......................... 63 1992
</TABLE>
- ---------------
(1) Member of Audit Committee
(2) Member of Executive Committee.
(3) Member of Pension Committee.
(4) Member of Compensation Committee.
Warner C. Frazier has been Chairman, President and Chief Executive Officer
of Simplicity Manufacturing, Inc., a manufacturer of outdoor power equipment
("Simplicity"), since 1988. He is also a Director of ABT Building Products
Corporation, a specialty building products manufacturer ("ABT"), and Rexworks,
Inc., a manufacturer of landfill compactors.
James A. Kohlberg has been a Principal of Kohlberg & Co., L.P. ("Kohlberg")
since 1987. Mr. Kohlberg is also a Director of ABT and Simplicity.
Christopher Lacovara has been an Associate of Kohlberg since 1988. From
1987 through 1988, Mr. Lacovara was an Associate at Lazard Freres & Co. Mr.
Lacovara is also a Director of Schrader Inc., a manufacturer of tire valves and
pressure control devices ("Schrader Inc.") and Scovill Fasteners, Inc., a
manufacturer of snaps and fasteners ("Scovill Fasteners, Inc.").
Albert G. Pastino joined Kohlberg in 1993, and currently serves as a
Principal. From 1989 to 1992, Mr. Pastino was Senior Vice President of Fortis
Private Capital, Inc., a private equity investment company. Mr. Pastino is a
former Senior Partner of Deloitte, Haskins & Sells. Mr. Pastino is also a
Director of Colorado Prime Corporation, a consumer food delivery service.
George W. Peck IV has been a Principal of Kohlberg since 1987. From 1963 to
1987, he was a Director and Vice President of Canny, Bowen Inc., an executive
recruiting firm. Mr. Peck is also a Director of
2
<PAGE> 5
ABC Rail Products Corporation, a manufacturer of replacement parts and original
equipment for the freight, railroad and transit industries ("ABC") and ABT.
OTHER DIRECTORS
The following persons will continue to serve as directors of the company
after the Annual Meeting until their terms of office expire in 1996 or until
their successors are elected and qualified.
<TABLE>
<CAPTION>
NAME AGE SERVED AS DIRECTOR SINCE
------------------------------------------ --- ------------------------
<S> <C> <C>
William F. Andrews (1)(4)................. 64 1994
Darius W. Gaskins, Jr. (3)(4)............. 56 1994
Robert N. Gurnitz (2)..................... 57 1991
Richard F. Williams (3)................... 54 1994
</TABLE>
- ---------------
(1) Member of Audit Committee
(2) Member of Executive Committee.
(3) Member of Pension Committee.
(4) Member of Compensation Committee.
William F. Andrews is Chairman of Schrader Inc. and Chairman of Scovill
Fasteners, Inc. From 1993 to 1995, Mr. Andrews was President and Chief Executive
Officer of Amdura Corporation. From 1990 to 1992, he was President and Chief
Executive Officer of UNR Industries, Inc., a diversified manufacturer of steel
products ("UNR"). Prior to 1990, Mr. Andrews was President of Massey Investment
Company and Chairman, President and Chief Executive Officer of Singer Sewing
Company, a distributor of audio/visual and small appliances ("Singer"). Mr.
Andrews is also a Director of Corrections Corporation of America,
Harley-Davidson, Inc., Johnson Controls, Inc., Katy Industries, MB
Communications, Navistar, Inc., Southern New England Telephone Company and UNR.
Darius W. Gaskins, Jr. has been a Partner of Carlisle, Fagan, Gaskins &
Wise, Inc., a management and economics consulting firm, since 1993, and a
Partner of High Street Associates, Inc., an investment partnership, since 1991.
From 1989 through 1991, Mr. Gaskins was Visiting Professor at the John F.
Kennedy School of Government at Harvard University. Mr. Gaskins is also the
former Chairman of the Interstate Commerce Commission and the former President
and Chief Executive Officer of the Burlington Northern Railroad. Mr. Gaskins is
also a Director of UNR and Leaseway Corporation.
Robert N. Gurnitz has been Chairman of the Board of the Company since 1994.
He has also been the Company's President and Chief Executive Officer since 1991.
From 1988 through 1990, Mr. Gurnitz was President and Chief Operating Officer of
Webcraft Technologies, Inc. From 1985 through 1988, Mr. Gurnitz was President of
Bethlehem Steel's Shape and Rail Products Division. Prior to that position, Mr.
Gurnitz spent 19 years with Rockwell International, where he headed a number of
their worldwide transportation components business.
Richard F. Williams retired as an Electrician from the Company in December,
1992 after more than 30 years of service. Currently, Mr. Williams manages OMNI
Investment Company.
DIRECTOR MEETINGS AND COMMITTEES
The Board of Directors held four meetings during the fiscal year ended July
31, 1995. The Board of Directors has established an Executive Committee, an
Audit Committee, a Compensation Committee and a Pension Committee. The Board
does not currently have a formal Nominating Committee but nominations will be
considered by the entire Board. The Executive Committee oversees the Company's
operations and reports to the Board of Directors. The Audit Committee oversees
actions taken by the Company's independent auditors, recommends the engagement
of auditors and reviews the Company's internal audits. The Compensation
Committee approves the compensation of executives of the Company, makes
recommendations to the Board of Directors with respect to standards for setting
compensation levels and administers the Company's incentive plans. The Pension
Committee administers the Company's pension plans. During the fiscal year
3
<PAGE> 6
July 31, 1995, the Compensation Committee and Audit Committee each met once, and
the Executive Committee and Pension Committee conferred on a number of occasions
informally.
Each director attended at least 75% of the aggregate number of the board
meetings and committee meetings, of which he was a member, held during fiscal
year 1995.
DIRECTOR COMPENSATION
Pursuant to the Company's Director Stock Option Plan, directors who are not
employees of the Company or affiliates of KNSW Acquisition Co., L.P., receive
2,500 Options on an annual basis during their tenure as directors. During the
fiscal year ended July 31, 1995, Messrs. Andrews, Gaskins, Frazier and Williams
each received 2,500 options to purchase shares of Common Stock at $7.13 per
share and were paid a quarterly fee of $3,000 for serving as members of the
Board of Directors.
MANAGEMENT
Set forth below is a table identifying the executive officers of the
Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------- --- -----------------------------------------
<S> <C> <C>
Robert N. Gurnitz........................ 57 Chairman of the Board, President,
Chief Executive Officer
Kenneth J. Burnett....................... 51 Vice President of Operations--Houston
William H. Hillpot....................... 43 Vice President--Materials Management and
Business Development
Edward G. Maris.......................... 59 Senior Vice President, Chief Financial
Officer, Secretary, Treasurer
John C. Meyer............................ 56 Vice President--Human Resources
David C. Oberbillig...................... 51 Vice President, Sales--Wire Products
Division
Michael S. Venie......................... 47 Vice President--Sales and Marketing
Richard D. Way........................... 54 Senior Vice President--Sterling
Operations
</TABLE>
Robert N. Gurnitz has been Chairman of the Board of the Company since 1994.
He has also been the Company's President and Chief Executive Officer since 1991.
From 1988 through 1990, Mr. Gurnitz was President and Chief Operating Officer of
Webcraft Technologies, Inc. From 1985 through 1988, Mr. Gurnitz was President of
Bethlehem Steel's Shape and Rail Products Division. Prior to that position, Mr.
Gurnitz spent 19 years with Rockwell International, where he headed a number of
their worldwide transportation components businesses.
Kenneth J. Burnett has been Vice President of Operations--Houston of the
Company since 1994. From 1990 through 1994, he was the Company's Vice President
of Operations--Steel Division. From 1985 through 1990, Mr. Burnett was Manager,
Engineering and Services.
William H. Hillpot has been Vice President--Materials Management and
Business Development of the Company since 1994. From 1993 through 1994, he was
the Company's Vice President--Business Development. From 1991 to 1992, he was
Vice President--Materials and Information Management of Armco Steel Company,
L.P. Prior to that time, Mr. Hillpot was Manager--Materials and Semi-Finished
Sales at Bethlehem Steel.
Edward G. Maris has been Senior Vice President and Chief Financial Officer
of the Company since 1990. He has also been the Company's Secretary and
Treasurer since 1987. From 1987 to 1990, Mr. Maris was the Company's Vice
President--Finance. From 1986 to 1987, Mr. Maris served as the Company's
Controller. Prior to joining the Company, Mr. Maris was associated with Titanium
Metals Corporation of America as
4
<PAGE> 7
Vice President--Finance, Secretary and Treasurer from 1980 through 1985. Prior
to that time he held finance positions with National Steel and U.S. Steel.
John C. Meyer has been Vice President--Human Resources of the Company since
1992. From 1989 through 1991, Mr. Meyer was Vice President--Human Resources of
Republic Engineered Steels. From 1986 through 1989, Mr. Meyer was General
Manager of Employee Relations for LTV Steel.
David C. Oberbillig has been Vice President, Sales--Wire Products Division
of the Company since 1987. From 1984 through 1987, Mr. Oberbillig was Manager of
Sales, Wire Products Division.
Michael S. Venie has been Vice President--Sales and Marketing since
September, 1995. From 1991 through 1995, Mr. Venie was Vice
President--Automotive Marketing of Kaiser Aluminum & Chemical Corporation
("Kaiser"). From 1986 through 1991, Mr. Venie was Vice President--Sales and
Marketing--Rod, Bar & Wire Division at Kaiser.
Richard D. Way has been Senior Vice President--Sterling Operations of the
Company since July, 1994. From January 1994 through July 1994, he was Vice
President of Operations--Steel Division. From 1990 through 1994, Mr. Way was
Senior Vice President--Manufacturing of Shieldalloy Metallurgical Corporation.
Prior thereto, Mr. Way held senior operating positions with Bethlehem Steel and
Rouge Steel.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table discloses, for the fiscal years
indicated, individual compensation information on the five most highly
compensated executive officers (the "Named Officers") in fiscal 1995 who were
serving as executive officers at the end of fiscal 1995.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------------
AWARDS PAY-OUTS
ANNUAL COMPENSATION -------- --------
----------------------------------- OPTIONS/ LTIP
FISCAL BONUS OTHER ANNUAL SARS PAY-OUTS
NAME AND PRINCIPAL POSITION YEAR SALARY ($) ($)(1) COMPENSATION (#)(2) ($)(3)
- --------------------------------------- ------ ---------- ------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Robert N. Gurnitz...................... 1995 320,252 325,644 34,694(4) 25,000 0
Chairman of the Board, 1994 289,997 0 32,619(4) 50,000 0
President and Chief Executive Officer 1993 273,332 344,109 39,372(4) 375,000 580,000
Richard D. Way (5)..................... 1995 169,498 85,696 17,738(6) 17,500 0
Senior Vice President-- 1994 80,835 0 22,829(6) 45,000 0
Sterling Operations 1993 0 0 0 0 0
John C. Meyer.......................... 1995 131,248 75,413 10,435(7) 6,000 0
Vice President-- 1994 130,000 0 13,421(7) 5,000 0
Human Resources 1993 130,000 79,595 53,871(7) 20,000 200,000
Edward G. Maris........................ 1995 130,000 75,413 5,200(8) 5,000 0
Senior Vice President, 1994 130,000 0 5,200(8) 5,000 0
Chief Financial Officer, Secretary,
Treasurer 1993 130,000 79,595 2,600(8) 15,000 439,496
Kenneth J. Burnett..................... 1995 111,972 75,413 15,241(9) 6,000 0
Vice President of Operations-- 1994 105,430 0 25,272(9) 6,000 0
Houston 1993 105,111 79,595 2,603(8) 75,000 0
</TABLE>
- ---------------
(1) All of the fiscal 1995 bonus was accrued in fiscal 1995 and paid in fiscal
1996. All of the fiscal 1993 bonus was accrued in fiscal 1993 and paid in
fiscal 1994.
(2) The closing price of the Common Stock on July 31, 1995 was $10.00. The
number and fair market value of the Common Stock held by each of the Named
Officers on July 31, 1995 was: Mr. Gurnitz 109,091 shares, $1,090,910; Mr.
Way 0 shares, $0; Mr. Meyer 33,649 shares, $336,490; Mr. Maris 78,505
shares, $785,050; and Mr. Burnett 3,750 shares, $37,500.
(3) Represents the value of cash and stock distributed on a deferred basis under
the Northwestern Steel and Wire Company Stock Appreciation Rights Plan.
5
<PAGE> 8
(4) Includes reimbursement of moving expenses, retirement annuity, life
insurance, 401(k) contributions made by the Company and car allowance.
Moving expenses accounted for $0, $5,682, and $12,564 of the amount shown
for the three fiscal years ended July 31, 1995, 1994 and 1993, respectively.
Retirement annuity expenses accounted for $8,342, $15,000 and $15,000 of the
amount shown for each of the fiscal years ended July 31, 1995, 1994 and
1993, respectively.
(5) Mr. Way was hired effective January 1, 1994.
(6) Includes reimbursement of moving expenses and 401(k) contributions made by
the Company. Moving expenses accounted for $11,806 and $20,000 for fiscal
years ended July 31, 1995 and 1994, respectively.
(7) Includes reimbursement of moving expenses and 401(k) contributions made by
the Company. Moving expenses accounted for $5,866, $8,871 and $51,273 of the
amount shown for fiscal years ended July 31, 1995, 1994 and 1993,
respectively.
(8) Entire amount represents 401(k) contributions made by the Company.
(9) Includes reimbursement of moving expenses and 401(k) contributions made by
years ended July 31, 1995 and 1994, respectively.
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
The following table discloses, for the Named Officers, information
regarding stock options and warrants granted during fiscal 1995 pursuant to the
Company's 1994 Long-Term Incentive Plan.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
INDIVIDUAL GRANTS STOCK PRICE
------------------------------------------------------------ APPRECIATION FOR
NUMBER OF % OF TOTAL OPTIONS EXERCISE OR OPTION TERM (2)
OPTIONS GRANTED TO EMPLOYEES BASE PRICE EXPIRATION --------------------
NAME GRANTED (1) IN FISCAL YEARS (PER SHARE) DATE 5% 10%
- ---------------------- ----------- -------------------- ----------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Robert N. Gurnitz..... 25,000 20.0% 6.00 4/25/2005 $ 94,250 $239,000
Richard D. Way........ 17,500 14.0 6.00 4/25/2005 65,975 167,300
John C. Meyer......... 6,000 4.8 6.00 4/25/2005 22,620 57,360
Edward G. Maris....... 5,000 4.0 6.00 4/25/2005 18,850 47,800
Kenneth J. Burnett.... 6,000 4.8 6.00 4/25/2005 22,620 57,360
</TABLE>
- ---------------
(1) One-third of each option grant becomes exercisable on each of April 25,
1996, April 25, 1997 and April 25, 1998.
(2) Amounts reflect certain assumed rates of appreciation set forth in the
Securities and Exchange Commission's executive compensation disclosure
rules. Actual gains, if any, on stock option exercises depend on future
performance of the Common Stock and overall market conditions. Fair market
value per share on the date of grant was $6.00 per share.
OPTION EXERCISES AND FISCAL YEAR END VALUES FOR THE FISCAL YEAR ENDED JULY 31,
1995(1)
The following table shows information regarding the exercise of stock
options during fiscal 1995 by the Named Officers and the number and value of any
unexercised stock options held by them as of July 31, 1995:
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS/SARS
SHARES VALUE OPTIONS/SARS AT AT
ACQUIRED ON REALIZED FY-END (#) FY-END ($)
NAME EXERCISE (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------------------- ------------ -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Robert N. Gurnitz................ 0 0 316,667/133,333 $1,816,667/583,333
Richard D. Way................... 0 0 17,500/45,000 4,375/77,813
Edward G. Maris.................. 0 0 13,667/11,333 73,667/41,333
John C. Meyer.................... 15,000 71,250 2,667/13,333 7,667/51,333
Kenneth J. Burnett............... 0 0 62,000/25,000 362,000/118,000
</TABLE>
- ---------------
(1) The closing price of the Common Stock on July 31, 1995 was $10.00.
6
<PAGE> 9
EMPLOYMENT AGREEMENTS
The Company has entered into an amended and restated employment agreement
(the "Gurnitz Agreement") with Robert N. Gurnitz on the terms set out therein.
The Gurnitz Agreement establishes an annual base salary of not less
than $305,000 per year plus an annual target bonus of not less than $195,700 per
year. The amount of the bonus actually earned each year, if any, will be based
on the Company's performance. The Gurnitz Agreement provides for the
establishment of a nonqualified supplemental executive retirement plan which
provides the additional benefits which would have been payable to Mr. Gurnitz
under the Northwestern Steel and Wire Company's Pension Plan B and 401(k) Salary
Deferral Plan if not for the limits imposed by the Internal Revenue Code
(subject to certain limitations set out in the Internal Revenue Code and the
plans themselves) and credits Mr. Gurnitz with an additional 1.5 years of
service (reflective of his prior industrial service) up to age 65 for each year
of service, beginning July 22, 1994. In addition, the Gurnitz Agreement requires
the Company to continue to purchase a standard disability income policy for Mr.
Gurnitz and to continue to pay Mr. Gurnitz in cash such amounts as are required
to pay the annual premiums on a life insurance policy on the life of Mr. Gurnitz
in the amount of $1,000,000 and to continue to provide for certain other fringe
benefits commensurate with Mr. Gurnitz's position as Chairman, President and
Chief Executive Officer of the Company. The Gurnitz Agreement further provides
that in the event Mr. Gurnitz's employment is terminated by the Company other
than for cause or disability, or by Mr. Gurnitz for good reason (as such terms
are defined in the Gurnitz Agreement), Mr. Gurnitz will be entitled to receive a
single lump sum cash payment and to continue to participate in the employee
benefit arrangements of the Company as are in effect at the time of his
termination. The lump sum payment would equal the sum of (i) Mr. Gurnitz's
annual base salary as then in effect and (ii) Mr. Gurnitz's annual target bonus
as then in effect, and his participation in Company benefit arrangements would
continue through the first anniversary of the date of his termination. If Mr.
Gurnitz's employment is terminated by the Company for any reason or by Mr.
Gurnitz for good cause, in either case within two years of a change in control
(as defined in the Gurnitz Agreement), Mr. Gurnitz will be entitled to receive a
single lump sum cash payment equal to twice the aggregate of Mr. Gurnitz's
annual base salary and target bonus as then in effect. The Gurnitz Agreement
also provides that Mr. Gurnitz is subject to a two year covenant not to compete
upon termination of Mr. Gurnitz's employment unless such termination is by the
Company without cause or within two years of a change in control or by the
resignation of Mr. Gurnitz with good reason.
The Company entered into an employment arrangement (the "Meyer
Arrangement") with John C. Meyer on an at will basis commencing on February 10,
1992 at an annual base salary of $130,000 per year. The Meyer Arrangement
provides that, in the event the Company terminates Mr. Meyer's employment other
than for cause or disability, Mr. Meyer will continue to receive his base salary
and benefits for a period of 12 months following such termination.
PENSION PLAN
The Company maintains a pension plan for all eligible employees. A
participant who retires on or after turning 65 and has completed at least five
years of service will qualify for an annual pension equal to 1.1% of the
participant's average earnings for each year of service not in excess of 30
years and 1.2% of the participant's final average earnings for each year of
service in excess of 30 years. Final average earnings are based on total
compensation (exclusive of certain cost-of-living adjustments) during the
participant's highest five consecutive years in the participant's last 15 years
of service. A deferred vested pension benefit normally commencing at age 65 is
provided for any employee who does not qualify for retirement under the plan but
has completed at least five years of service.
Years of service for purposes of the plan with respect to the officers
named in the Summary Compensation Table are as follows: Mr. Gurnitz, 4 years;
Mr. Way, 1 year; Mr. Meyer, 3 years; Mr. Maris, 9 years; and Mr. Burnett, 32
years.
7
<PAGE> 10
The following table shows the projected annual pension benefits payable,
under the pension plan at the normal retirement age of 65:
ANNUAL NORMAL PENSION BENEFITS FOR YEARS OF SERVICE SHOWN (1)
<TABLE>
<CAPTION>
AVERAGE ANNUAL
PENSION EARNINGS 5 YEARS 10 YEARS 20 YEARS 30 YEARS 40 YEARS 50 YEARS
- ------------------------------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 50,000..................... $ 2,750 $ 5,500 $ 11,000 $ 16,500 $ 22,500 $ 28,500
100,000..................... 5,500 11,000 22,000 33,000 45,000 57,000
150,000..................... 8,250 16,500 33,000 49,500 67,500 85,500
200,000..................... 8,250 16,500 33,000 49,500 67,500 85,500
250,000..................... 8,250 16,500 33,000 49,500 67,500 85,500
300,000..................... 8,250 16,500 33,000 49,500 67,500 85,500
350,000..................... 8,250 16,500 33,000 49,500 67,500 85,500
400,000..................... 8,250 16,500 33,000 49,500 67,500 85,500
</TABLE>
- ---------------
(1) Normal pension benefits are formula based and are not subject to a social
security offset. With exceptions not applicable to any of the officers named
in the above compensation table, Sections 401(a)(17) and 415 of the Internal
Revenue Code limit the annual pension earnings that can be considered under
the plan to $150,000 and the annual benefits to $118,800 for retirement
after December 31, 1993.
RULE 16(B) COMPLIANCE
The Company's executive officers, directors and 10% stockholders are
required under the Securities Exchange Act of 1934, as amended, to file reports
of ownership with the Securities and Exchange Commission. Copies of these
reports must also be furnished to the Company. Based solely upon a review of
copies of such reports, or written representations that no reports were
required, the Company believes that during fiscal 1995, all filing requirements
applicable to its executive officers, directors and 10% stockholders were
complied with by such persons, except as follows: Warner C. Frazier and Albert
G. Pastino each filed a Form 3 within ten (10) days following the month in which
they were elected as directors of the Company and in which Mr. Frazier was
granted options in connection with his service as a director; however, these
Form 3s should have been filed within ten (10) days following their election as
directors of the Company; Richard F. Williams failed to timely file a Form 4 to
report one transaction; and John C. Meyer failed to timely file a Form 4 to
report two transactions. Each of the above-listed forms was subsequently filed.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
This Report outlines the Company's management compensation philosophy and
reviews the compensation decisions made in fiscal 1995 regarding Mr. Gurnitz and
the other Named Officers.
MANAGEMENT COMPENSATION PHILOSOPHY
To advance the interests of its shareholders, the Company has based its
management compensation decision on three principles:
First, base salaries should be sufficient to attract and retain qualified
management talent, without exceeding competitive practices at similar
companies in the steelmaking and related industries.
Second, annual incentive programs should provide opportunity for
significant increases in compensation, based on meeting or exceeding
pre-determined performance targets.
Third, a substantial portion of total compensation opportunity should
reflect performance on behalf of the Company's shareholders, as measured by
increases in the Company's stock price.
8
<PAGE> 11
CRITERIA USED FOR MAKING COMPENSATION DECISIONS IN FISCAL 1995
This section describes the criteria used by the Compensation Committee
regarding compensation decisions affecting Mr. Gurnitz and the Named Officers.
Base Salary
In April 1995, an independent compensation consulting firm conducted a
study of competitive compensation levels for the Company's key executives.
Following this study, the Compensation Committee approved salary midpoints for
each executive position, which were based on the executive positions' size
adjusted median competitive base salaries. The Compensation Committee then
approved adjustments for selected executives. As part of these actions, the
Compensation Committee increased Mr. Gurnitz's annual salary from $305,000
to $361,000, which reduced the gap between it and the salary midpoint, and thus
brought it closer to size adjusted median competitive practice for the industry.
Annual Incentive Program
In December 1994, the Compensation Committee approved the fiscal 1995
incentive program for Mr. Gurnitz and other key executives (including the Named
Officers). Target awards ranged from 20% of base salary midpoint to 50% of base
salary midpoint (for Mr. Gurnitz). Awards were calculated by formula, based
exclusively on the Company's adjusted operating income performance as compared
to the Company's business plan. The chart below summarizes the payout formula:
<TABLE>
<CAPTION>
% OF ADJUSTED OPERATING % OF TARGET AWARD
PLAN ACHIEVED EARNED
--------------------------------------------------- -----------------
<S> <C>
85%........................................ 0%
100%........................................ 100%
125%........................................ 150%
150%........................................ 200%
</TABLE>
In fiscal 1995, the Company achieved 130.8% of its adjusted operating
income plan. As a result, Mr. Gurnitz earned an annual incentive award for
fiscal 1995 of $325,644 or 161.6% of his target award, based on the formula
outlined above.
Long-Term Incentive Program
In an effort to further increase the alignment of interests between key
employees and shareholders, the 1994 Long-Term Incentive Plan was approved at
the Annual Meeting of Shareholders on January 20, 1994. On April 25, 1995,
25,000 stock options were awarded to Mr. Gurnitz and an aggregate of 34,500
stock options were awarded to the other Named Officers. All of these options
were granted at an exercise price of $6.00 per share which was determined to be
the fair market value of the Common Stock on the date of the grant. In
determining the size of the grants to Mr. Gurnitz and the other Named Officers,
the Compensation Committee considered median competitive practice and each
executive's contribution to the Company's financial performance, as well as the
motivational impact of the award on each individual's future efforts to increase
shareholder value. In addition, in the case of Mr. Gurnitz's grant, the
Compensation Committee provided an award below median competitive practices in
order to make more options available to other grantees.
Compensation Committee Members as of July 31, 1995
William F. Andrews(1) Darius W. Gaskins, Jr. Christopher Lacovara
- ---------------
(1) Chairman of Compensation Committee
9
<PAGE> 12
PERFORMANCE GRAPH
The following graph compares the cumulative total return on $100 invested
on June 11, 1993 (the first day of public trading of the Common Stock) in the
Common Stock of the Company, the S&P 400 Index and the S&P Steel Index. The
return of the Standard & Poor's indices is calculated assuming reinvestment of
dividends during the period presented. The Company has not paid any dividends.
The stock price performance on the graph below is not necessarily indicative of
future price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG NORTHWESTERN
STEEL AND WIRE COMPANY, S&P 400 INDEX AND S&P STEEL INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD NORTHWESTERN S&P STEEL S&P 400 IN-
(FISCAL YEAR COVERED) STEEL INDEX DEX
<S> <C> <C> <C>
6/11/93 100 100 100
7/30/93 103.30 87.48 97.60
7/29/94 115.30 121.63 105.31
7/31/95 125.00 101.58 135.35
</TABLE>
10
<PAGE> 13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The table below sets forth certain information regarding beneficial
ownership of Common Stock as of December 1, 1995, by each person or entity known
to the Company who owns of record or beneficially five percent or more of the
Common Stock, by each named executive officer and director nominee and all
executive officers and director nominees as a group.
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF OF
SHARES OF OUTSTANDING
NAME COMMON STOCK COMMON STOCK
------------ ------------
<S> <C> <C>
KNSW Acquisition Company, L.P. (1)............................... 8,687,000 35.6%
United National Bank, as Trustee (2)............................. 3,998,587 16.4
William F. Andrews (3)........................................... 5,200 *
Kenneth J. Burnett (3)........................................... 63,750 *
Warner C. Frazier (3)............................................ 2,500 *
Darius W. Gaskins, Jr. (3)....................................... 20,000 *
Robert N. Gurnitz (3)............................................ 463,258 2.0
James A. Kohlberg (4)............................................ 8,687,000 35.6
Jerome Kohlberg, Jr. (4)......................................... 8,687,000 35.6
Christopher Lacovara............................................. -- *
Edward G. Maris (3).............................................. 96,415 *
John C. Meyer (3)................................................ 38,316 *
W. Dexter Paine III (4).......................................... 8,687,000 35.6
Albert G. Pastino................................................ -- *
George W. Peck IV (4)............................................ 8,687,000 35.6
Richard D. Way (3)............................................... 25,000 *
Richard F. Williams (3).......................................... 13,652 *
All executive officers and director nominees as a group (16
persons) (4)................................................... 9,480,200 38.8
</TABLE>
- ---------------
* Less than 1%.
(1) KNSW Acquisition Company, L.P. ("KNSW") owns directly 8,687,000 shares of
Common Stock. Kohlberg Associates, L.P., a Delaware limited partnership
("Associates"), is the general partner of KNSW. Kohlberg & Kohlberg, George
W. Peck IV and W. Dexter Paine III are the general partners of Associates.
Jerome Kohlberg, Jr. and James A. Kohlberg are general partners of Kohlberg
& Kohlberg. KNSW has agreed to use its reasonable best efforts to cause at
least one designee of the ESOP to be nominated to the Board of Directors.
Messrs. Kohlberg, Kohlberg, Peck and Paine may be deemed to share voting and
dispositive power as to all shares of Common Stock owned by KNSW. Messrs.
Kohlberg, Kohlberg, Peck and Paine disclaim beneficial ownership with
respect to such shares. The address for KNSW is c/o Kohlberg & Co., 111
Radio Circle, Mt. Kisco, NY 10549.
(2) United National Bank is the trustee of the ESOP. The address for United
National Bank is 1501 Market St., Wheeling, WV 25003.
(3) Includes shares issuable pursuant to options which may be exercised within
60 days after December 1, 1995.
(4) Represents the 8,687,000 shares of Common Stock owned by KNSW. See Note 1.
11
<PAGE> 14
CERTAIN TRANSACTIONS
In August 1992, the Company sold to KNSW 8,687,000 shares of Common Stock
at $4.00 per share (the "1992 Investment"), which represented at such time
approximately 52% of the outstanding Common Stock, giving KNSW effective voting
control of the Company and control of the Board of Directors. As a result of the
Company's initial public offering of Common Stock in June 1993, KNSW's interest
has been diluted to approximately 35.6%. KNSW is an affiliate of Kohlberg. At
the time of the 1992 Investment, the Company and Kohlberg entered into a fee
agreement (the "Fee Agreement") pursuant to which Kohlberg was reimbursed for
certain costs in connection with placing the investment and agreed to provide
such advisory and management services to the Company and its subsidiaries as the
Board of Directors reasonably requests. Deferred at the time of the 1992
Investment, a fee of $2.0 million related to the 1992 Investment was paid by the
Company to Kohlberg on August 12, 1993. In addition, beginning on August 12,
1992, in consideration for ongoing advisory and management services, the Company
pays Kohlberg a fee of $43,435 per fiscal quarter at the beginning of each
quarter. The Fee Agreement provides that Kohlberg, but not the Company, may
terminate the Fee Agreement at any time. The Fee Agreement will terminate
automatically on the earlier of the end of the fiscal year in which KNSW's
percentage interest in the outstanding Common Stock is less than 25% and the
tenth anniversary of the Fee Agreement. The Fee Agreement provides that, without
the consent of a majority of the Company's directors not nominated by affiliates
of Kohlberg, Kohlberg will not be paid any other fees by the Company. The Fee
Agreement also provides that the Company will indemnify Kohlberg and its
affiliates and their respective partners, officers, directors, stockholders,
agents and employees against any third party claims arising from the Fee
Agreement and the services provided thereunder, the 1992 Investment or their
equity interest in the Company.
Pursuant to the terms of the ESOP, the Company is obligated to pay certain
fees and expenses of the ESOP, which for the year ended July 31, 1995
aggregated $24,743.
KNSW has agreed to use its reasonable best efforts to cause at least one
designee of the ESOP to be nominated for election to the Board of Directors for
so long as the ESOP holds 5% or more of the outstanding Common Stock on a
fully-diluted basis. The current designee is Richard F. Williams whose term of
office continues until the 1996 Annual Meeting of Shareholders.
SHAREHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
Proposals of Shareholders intended to be presented by such Shareholders at
next year's Annual Meeting must be received by the Company at its principal
office no later than September 17, 1996 and must satisfy the conditions
established by the Securities and Exchange Commission for shareholder proposals
to be included in the Company's proxy statement for that meeting.
By Order of the Board of Directors
Edward G. Maris
Secretary
Sterling, Illinois
December 15, 1995
12
<PAGE> 15
NORTHWESTERN STEEL AND WIRE COMPANY
121 WALLACE STREET
P.O. BOX 618
STERLING, ILLINOIS 61081-0618
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder of shares of Common Stock (the "Common Stock") of
Northwestern Steel and Wire Company (the "Company") hereby appoints Robert N.
Gurnitz and Edward G. Maris, or either of them with full power of substitution,
as proxies to vote all of the shares of Common Stock of the Company held of
record by the undersigned as of December 8, 1995, at the 1995 Annual Meeting of
Shareholders of the Company to be held on Thursday, January 18, 1996 at 10:00
a.m., Central Standard Time, at St. Mary's Parish Center, 600 Avenue B,
Sterling, Illinois 61081-3570, and at any adjournments thereof upon the
following matters.
1. ELECTION OF DIRECTORS
FOR all nominees listed below / / WITHHOLD AUTHORITY to vote for
all nominees listed below / /
Warner C. Frazier, James A. Kohlberg, Christopher Lacovora, Albert
G. Pastino, and George W. Peck IV
/ / For all nominees except ________________________________________.
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments
thereof.
PLEASE SIGN ON REVERSE SIDE
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED "FOR" THE ABOVE ITEMS and in accordance with the determination of the
Board of Directors as to other matters.
Please date and sign exactly as your name appears below. When shares are
held by joint owners, both owners should sign. When signing as executor,
administrator, trustee, guardian, attorney-in-fact or other fiduciary, please
give title as such. When signing as corporation, please sign in full corporate
name by President or other authorized officer. If you sign for a partnership,
please sign in partnership name by an authorized person. If you receive more
than one proxy card, please sign and return all cards received.
Dated: __________________, 1995 Signature _________________________________
Signature _________________________________
(if held jointly)
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE.
