<PAGE> 1
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 (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 Rule 14a-11(c) or Rule 14a-12
Northwestern Steel and Wire Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
[COMPANY NAME]
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ ] $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 transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
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<PAGE> 2
Northwestern Logo
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Northwestern Steel and Wire Company, to be held on Thursday, January 16, 1997,
at 10:30 a.m. Central Standard Time at The Palmer House Hilton, Room PDR18 --
4th Floor, 17 E. Monroe Street, Chicago, Illinois.
The following Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the Meeting. During the Meeting we will also
report on the operations of the Company. Our 1996 Annual Report accompanies this
Proxy Statement.
It is important that your shares be represented at the Meeting regardless
of the size of your holdings. If you are unable to attend in person, we urge you
to participate by voting your shares by proxy. You may do so by filling out and
returning the enclosed proxy card.
If you arrive early, you are invited to have coffee and meet informally
with the Directors.
Sincerely,
Robert N. Gurnitz
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
Northwestern Logo
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 16, 1997
The Annual Meeting of Shareholders of Northwestern Steel and Wire Company
(the "Company") will be held on Thursday, January 16, 1997, at 10:30 a.m.
Central Standard Time at The Palmer House Hilton, Room PDR18 -- 4th Floor, 17 E.
Monroe Street, Chicago, Illinois, 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 6, 1996
as the record date for determining shareholders entitled to notice of, and to
vote, at the Annual Meeting and any adjournments thereof.
We encourage you at attend the Annual Meeting and vote your shares in
person. To be sure your shares are represented at the meeting, you are requested
to date, sign and return promptly the accompanying proxy in the enclosed
envelope provided. You may revoke your proxy at any time before it is actually
voted by notice in writing to the undersigned.
By order of the Board of Directors
Timothy J. Bondy
Secretary
Sterling, Illinois
December 16, 1996
<PAGE> 4
Northwestern Steel and Wire Company
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 10:30 a.m., Central
Standard Time, Thursday, January 16, 1997, at The Palmer House Hilton, Room
PDR18 -- 4th Floor, 17 E. Monroe Street, Chicago, Illinois. 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 6, 1996
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
24,458,152 shares of Common Stock. Each of the outstanding shares of Common
Stock is entitled to one vote.
PROXIES
Robert N. Gurnitz and Timothy J. Bondy, 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 Bondy 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 shareholder 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.
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 shareholders 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, 1996, containing financial and other information pertaining to the Company,
is being furnished to shareholders simultaneously with this Proxy Statement.
<PAGE> 5
MAILING AND EXPENSES
This Proxy Statement and accompanying form of proxy were first released to
shareholders on or about December 16, 1996. Expenses incurred in the
solicitation of proxies will be borne by the Company.
ELECTION OF DIRECTORS
The Company's Board of Directors consists of ten 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 this Annual Meeting for a
term of two years.
NOMINEES
The following persons, if elected at the Annual Meeting, will serve as
directors until the earlier of the Annual Meeting of the Company's shareholders
following fiscal 1998 or until their successors are duly elected and qualified.
<TABLE>
<CAPTION>
NAME AGE SERVED AS DIRECTOR SINCE
------------------------------------------ --- ------------------------
<S> <C> <C>
William F. Andrews(1)..................... 65 1994
Darius W. Gaskins, Jr.(3)(4).............. 57 1994
Thomas A. Gildehaus....................... 56 --
Robert N. Gurnitz(2)...................... 58 1991
Michael E. Lubbs.......................... 49 --
</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--Bridgeport International Inc.
("Schrader--Bridgeport"), a manufacturer of tire valves and pressure control
devices, and Chairman of Scovill Fasteners, Inc. ("Scovill"), a manufacturer of
fasteners. From 1993 to 1995, Mr. Andrews was Chairman and Chief Executive
Officer of Amdura Corporation, a manufacturer of hardware and industrial
equipment. 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. Mr. Andrews is also a Director
of Black Box Corporation, Corrections Corporation of America, Johnson Controls,
Inc., Katy Industries, Navistar, Inc. and Southern New England Telephone
Company.
Darius W. Gaskins, Jr. has been a Partner of Carlisle, Fagan, Gaskins &
Wise, Inc., a management consulting firm, since 1993, and a Partner of High
Street Associates, Inc., an investment partnership, since 1991. From 1994 to
1995, Mr. Gaskins was Chairman of Leaseway Transportation Corporation, a
distribution services provider. Mr. Gaskins is also a Director of Anacomp, Inc.,
a micrographics supplier, Sapient Corporation, a software company, and UNR.
Thomas A. Gildehaus has been President, Chief Executive Officer and a
Director of UNR since 1992. From 1982 to 1992, Mr. Gildehaus was an Executive
Vice President and Director of Deere & Company, an industrial and construction
equipment manufacturer. Mr. Gildehaus is also an advisory director of Bank of
America Illinois.
Robert N. Gurnitz has been Chairman of the Board of the Company since 1994.
He has also been the Company's Chief Executive Officer since 1991 and was
President from 1991 to 1996. 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 its worldwide transportation
components businesses.
2
<PAGE> 6
Michael E. Lubbs has been an electronics and instrumentation technician for
the Company since 1986.
Pursuant to an agreement between KNSW Acquisition Company, L.P. ("KNSW")
and the ESOP, 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 designee for this Annual Meeting of
Shareholders is Michael E. Lubbs.
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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES.
OTHER DIRECTORS
The following persons will continue to serve as directors of the Company
after the Annual Meeting until their terms of office expire at the Annual
meeting of Shareholders following fiscal 1997 or until their successors are
elected and qualified.
<TABLE>
<CAPTION>
NAME AGE SERVED AS DIRECTOR SINCE
------------------------------------------- --- ------------------------
<S> <C> <C>
Warner C. Frazier (1)...................... 64 1995
James A. Kohlberg (2)(4)................... 39 1992
Christopher Lacovara (2)(3)(4)............. 32 1992
Albert G. Pastino (1)...................... 54 1995
George W. Peck IV.......................... 64 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 and Chief Executive Officer of
Simplicity Manufacturing, Inc., a manufacturer of outdoor power equipment
("Simplicity"), since 1988 and was President of Simplicity from 1988 to 1996. 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 a Principal of Kohlberg since 1995 and an
associate from 1988 to 1994. Mr. Lacovara is also a Director of
Schrader-Bridgeport and Scovill.
Albert G. Pastino joined Kohlberg in 1993, and currently serves as
President of KoCo Capital, L.L.C. 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. Mr. Peck is
also a Director of ABC Rail Products Corporation, a manufacturer of replacement
parts and original equipment for the freight, railroad and transit industries
and ABT.
DIRECTOR MEETINGS AND COMMITTEES
The Board of Directors held five meetings during the fiscal year ended July
31, 1996. 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
3
<PAGE> 7
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 financial policies. 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 July 31, 1996, 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 1996.
DIRECTOR COMPENSATION
Pursuant to the Company's Director Stock Option Plan, directors who are not
employees of the Company or affiliates of KNSW, receive 2,500 Options on an
annual basis during their tenure as directors and are paid a quarterly fee of
$3,000. During the fiscal year ended July 31, 1996, Messrs. Andrews, Gaskins,
Frazier and Williams each received 2,500 options to purchase shares of Common
Stock at $7.25 per share.
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......................... 58 Chairman of the Board and Chief Executive
Officer
Richard D. Way............................ 55 President and Chief Operating Officer
Timothy J. Bondy.......................... 47 Vice President, Chief Financial Officer,
Secretary and Treasurer
Kenneth J. Burnett........................ 52 Vice President of Operations--Houston
William H. Hillpot........................ 44 Vice President--Wire Operations and
Materials Management
Andrew R. Moore........................... 43 Vice President--Human Resources
David C. Oberbillig....................... 52 Vice President, Sales--Wire Products
Division
Michael S. Venie.......................... 48 Vice President--Sales and Marketing
</TABLE>
Robert N. Gurnitz has been Chairman of the Board of the Company since 1994.
He has also been the Company's Chief Executive Officer since 1991 and was
President from 1991 to 1996. 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 its worldwide transportation
components businesses.
Richard D. Way has been President and Chief Operating Officer of the
Company since September 1996. He had been Senior Vice President--Sterling
Operations of the Company since July 1994 and 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.
Timothy J. Bondy has been Vice President, Chief Financial Officer,
Secretary and Treasurer since January 1996. From 1989 to 1995 Mr. Bondy was Vice
President--Finance and Chief Financial Officer of Dean Foods Company and was
Corporate Controller of Dean Foods Company in 1988.
4
<PAGE> 8
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.
William H. Hillpot has been Vice President--Wire Operations and Materials
Management since 1996. From 1994 to 1996, he was Vice President--Materials
Management and Business Development and 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.
Andrew R. Moore has been Vice President--Human Resources since October
1996. Mr. Moore was previously the Manager of Employee Benefits for the Company
from November 1992 and Manager of Labor Relations and Employee Benefits from May
1990.
David C. Oberbillig has been Vice President, Sales--Wire Products Division
of the Company since 1987.
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.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table discloses, for the fiscal years
indicated, individual compensation information on the Company's Chief Executive
Officer and the next four most highly compensated executive officers (the "Named
Officers") in fiscal 1996.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
----------------------------------- COMPENSATION
FISCAL BONUS OTHER ANNUAL ---------------
NAME AND PRINCIPAL POSITION YEAR SALARY ($) ($)(1) COMPENSATION # OPTION AWARDS
- ------------------------------------------ ------ ---------- ------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Robert N. Gurnitz......................... 1996 380,747 0 30,155(2) 90,000
Chairman of the Board 1995 320,252 325,644 34,694(2) 25,000
and Chief Executive Officer 1994 289,997 0 32,619(2) 50,000
Richard D. Way(3)......................... 1996 207,497 0 6,025(4) 35,000
President and Chief 1995 169,498 85,696 17,738(4) 17,500
Operating Officer 1994 80,835 0 22,829(4) 45,000
Michael S. Venie(5)....................... 1996 141,250 0 9,297(6) 60,000
Vice President--Sales and Marketing
Kenneth J. Burnett........................ 1996 123,750 0 6,188(7) 12,000
Vice President of Operations-- 1995 111,972 75,413 15,241(7) 6,000
Houston 1994 105,430 0 25,272(7) 6,000
William H. Hillpot........................ 1996 119,750 0 3,593(8) 12,000
Vice President--Wire Operations 1995 107,747 68,557 12,824(8) 6,000
and Materials Management 1994 101,247 0 98,466(8) 5,000
</TABLE>
- ---------------
(1) All of the fiscal 1995 bonus was accrued in fiscal 1995 and paid in fiscal
1996.
(2) Includes reimbursement of moving expenses, retirement annuity, life
insurance, 401(k) contributions made by the Company and car allowance.
Moving expenses accounted for $5,682 of the amount shown in the fiscal year
ended July 31, 1994. Retirement annuity expenses accounted for $8,342 and
$15,000 of the amount shown for each of the fiscal years ended July 31, 1995
and 1994.
(3) Mr. Way was hired effective January 1, 1994 and he was named President and
Chief Operating Officer in September 1996.
(4) 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.
(5) Mr. Venie was hired effective September 1, 1995.
(6) Includes reimbursement of $5,184 in moving expenses and 401(k) contributions
made by the Company.
(7) Includes reimbursement of moving expenses and 401(k) contributions made by
the Company. Moving expenses accounted for $9,643 and $20,000 for fiscal
years ended July 31, 1995 and 1994, respectively.
(8) Includes 401(k) contributions made by the Company and reimbursements of
$9,592 and $95,428 in moving expenses in fiscal 1995 and 1994, respectively.
5
<PAGE> 9
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table discloses, for the Named Officers, information
regarding stock options and warrants granted during fiscal 1996 pursuant to the
Company's 1994 Long-Term Incentive Plan.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
INDIVIDUAL GRANTS RATES OF STOCK
------------------------------------------------------------------- PRICE APPRECIATION
NUMBER OF % OF TOTAL EXERCISE FOR OPTION TERM (2)
OPTIONS OPTIONS GRANTED FMV AT PRICE EXPIRATION -------------------
NAME GRANTED TO EMPLOYEES GRANT DATE (PER SHARE) DATE 5% 10%
- ------------------------- --------- --------------- ---------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert N. Gurnitz........ 90,000 26.5% 6.75 (1) 4/25/2006 $252,900 $838,800
Richard D. Way........... 35,000 10.3 6.75 (1) 4/25/2006 98,350 326,200
Michael S. Venie......... 40,000 11.7 9.625 9.625 9/1/2005 242,000 613,400
20,000 5.9 6.75 (1) 4/25/2006 56,200 186,400
William H. Hillpot....... 12,000 3.5 6.75 (1) 4/25/2006 33,720 111,840
Kenneth J. Burnett....... 12,000 3.5 6.75 (1) 4/25/2006 33,720 111,840
</TABLE>
- ---------------
(1) One-third of options have an exercise price of $7.42 per share and vest on
4/25/97; one-third have an exercise price of $8.17 per share and vest on
4/25/98; one-third have an exercise price of $8.98 per share and vest on
4/25/99. The average exercise price is $8.19.
(2) Potential realizable value is presented net of the option exercise price but
before any federal or state income taxes associated with exercise. These
amounts reflect certain assumed rates of appreciation set forth in the
Securities and Exchange Commission's executive compensation disclosure
rules. Actual gains, if any, on stock option exercises depend on future
performance of the Common Stock and overall market conditions.
OPTION EXERCISES AND FISCAL YEAR END VALUES FOR THE FISCAL YEAR ENDING JULY 31,
1996(1)
The following table shows information regarding the exercise of stock
options during fiscal 1996 by the Named Officers and the number and value of any
unexercised stock options held by them as of July 31, 1996:
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
SHARES VALUE OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED ON REALIZED FY-END (#) FY-END ($)
NAME EXERCISE (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------- ------------ -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Robert N. Gurnitz.............. 0 0 379,166/160,834 $379,688/42,188
Richard D. Way................. 0 0 33,333/64,167 0/0
Michael S. Venie............... 0 0 0/60,000 0/0
William H. Hillpot............. 0 0 50,333/22,667 50,625/5,625
Kenneth J. Burnett............. 0 0 73,500/25,500 75,938/8,438
</TABLE>
- ---------------
(1) The closing price of the Common Stock on July 31, 1996 was $5.125.
EMPLOYMENT AGREEMENTS
The Company has entered into an amended and restated employment agreement
(the "Gurnitz Agreement") with Robert N. Gurnitz effective July 22, 1994 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
6
<PAGE> 10
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 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.
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, 5 years;
Mr. Way, 2 years; Mr. Venie, 1 year; Mr. Hillpot, 3 years; and Mr. Burnett, 33
years.
The following table shows the projected annual pension benefits payable,
under the pension plan at the normal retirement age of 65:
<TABLE>
<CAPTION>
ANNUAL NORMAL PENSION BENEFITS FOR YEARS OF SERVICE SHOWN (1)
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.
7
<PAGE> 11
RULE 16(B) COMPLIANCE
The Company's executive officers, directors and 10% shareholders 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 except as set forth below, during fiscal
1996, all filing requirements applicable to its executive officers, directors
and 10% shareholders were complied with by such persons.
During fiscal 1996, the Company believed that its executive officers and
directors were in compliance with applicable filing requirements; however, while
conducting a review of previous filings following the end of fiscal 1996 it came
to the Company's attention that the following filings were not made in a timely
manner: a Form 3 upon Mr. Venie becoming an executive officer in September 1995
which should have included the reporting of an option grant on such date; a Form
3 with respect to Thomas M. Vercillo in March 1996; Form 5's to report option
grants in 1995 to Messrs. Burnett, Gurnitz, Hillpot, Oberbillig and Way and John
C. Meyer (formerly an executive officer of the Company); a Form 3 filed with
respect to Mr. Burnett in 1993 failed to report certain shares held through the
ESOP; and a Form 5 to report one option grant in 1995 and Form 4's to report the
sale of 10,000 shares in each of January 1996 and February 1996 with respect to
Edward G. Maris, formerly an executive officer of the Company. Each of the
above-listed reports was subsequently filed or amended.
REPORT OF COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
This Report outlines the Company's management compensation philosophy and
reviews the compensation decisions made in fiscal 1996 regarding Mr. Gurnitz and
the other named executives.
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 practice 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 increased shareholder value, as measured by increases in the
Company's stock price.
CRITERIA USED FOR MAKING COMPENSATION DECISIONS IN FISCAL 1996
This section describes the criteria used by the Compensation Committee
regarding compensation decisions affecting Mr. Gurnitz and the named executives.
Base Salary
In April 1996, based on an independent compensation consulting firm's study
of competitive compensation levels for the Company's key executives, 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 effective May 1996. As part of these actions, the Compensation
Committee increased Mr. Gurnitz's annual salary from $361,000 to $425,000, which
reduced the gap between it and the salary midpoint, and thus brought it closer
to size adjusted median competitive practice for the industry.
8
<PAGE> 12
Annual Incentive Program
In December 1995, the Compensation Committee approved the fiscal 1996
incentive program for Mr. Gurnitz and other key executives (including the named
executives). 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. In fiscal 1996, the Company achieved less than
85% of its adjusted operating income plan. As a result, Mr. Gurnitz and the
other named executives earned no annual incentive award for fiscal 1996.
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, 1996,
90,000 stock options were awarded to Mr. Gurnitz and an aggregate of 79,000
stock options were awarded to the other Named Officers. The fair market value of
the Common Stock on the date of the grant was $6.75 per share. The options vest
in one-third increments on each of the three anniversary dates of the award, at
prices of $7.42, $8.17. and $8.98 per share, respectively. In determining the
size of the grants to Mr. Gurnitz and the other named executives, 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.
Compensation Committee Members as of July 31, 1996
James A. Kohlberg(1) Darius W. Gaskins, Jr. Christopher Lacovara
- ---------------
(1) Chairman of Compensation Committee
9
<PAGE> 13
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
7/31/96 64.06 80.76 156.09
</TABLE>
10
<PAGE> 14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The table below sets forth certain information regarding beneficial
ownership of Common Stock as of December 1, 1996, 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 Officer, director and director nominee and all
executive officers, directors 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 34.6%
United National Bank, as Trustee (2)............................... 3,781,179 15.1
William F. Andrews (3)............................................. 13,020 *
Kenneth J. Burnett (4)............................................. 84,369 *
Warner C. Frazier (3).............................................. 5,000 *
Darius W. Gaskins, Jr. (3)......................................... 22,500 *
Thomas A. Gildehaus................................................ 10,000 *
Robert N. Gurnitz (3).............................................. 525,757 2.1
William H. Hillpot (3)............................................. 55,333 *
James A. Kohlberg (5).............................................. 8,687,000 34.6
Jerome Kohlberg, Jr. (5)........................................... 8,687,000 34.6
Christopher Lacovara............................................... -- *
Michael E. Lubbs (6)............................................... 6,948 *
W. Dexter Paine III (5)............................................ 8,687,000 34.6
Albert G. Pastino.................................................. -- *
George W. Peck IV (5).............................................. 8,687,000 34.6
Michael S. Venie (3)............................................... 8,000 *
Richard D. Way (3)................................................. 40,833 *
Richard F. Williams (4)............................................ 14,424 *
All executive officers, directors and nominees as a group (19
persons) (5)..................................................... 9,492,672 37.9
</TABLE>
- ---------------
* Less than 1%.
(1) 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, 1996.
(4) Includes shares issuable pursuant to options which may be exercised within
60 days after December 1, 1996 and ownership interest in the ESOP.
(5) Includes the 8,687,000 shares of Common Stock owned by KNSW. See Note 1.
(6) Includes ownership interest in the ESOP.
11
<PAGE> 15
CERTAIN TRANSACTIONS
In August 1992, the Company underwent a reorganization which included the
sale of 8,687,000 shares of Common Stock to KNSW (the "1992 Investment"), which
represented at such time approximately 52% of the outstanding Common Stock. 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 agreed to provide such advisory and management services to the Company
and its subsidiaries as the Board of Directors reasonably requests in
consideration for which 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. Fees may not be
increased through July 31, 2000. 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, 1996 aggregated
$74,608.
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 15, 1997 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
Timothy J. Bondy
Secretary
Sterling, Illinois
December 16, 1996
12
<PAGE> 16
NORTHWESTERN STEEL AND WIRE COMPANY
121 WALLACE STREET
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 Timothy J. Bondy, 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 6, 1996, at the Annual Meeting of
Shareholders of the Company to be held on Thursday, January 16, 1997 at 10:30
a.m., Central Standard Time, at The Palmer House Hilton, Room PDR18 - 4th Floor,
17 E. Monroe Street, Chicago Illinois 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 [ ]
William F. Andrews, Darius W. Gaskins, Jr., Robert N. Gurnitz,
Thomas A. Gildehaus, Michael E. Lubbs
[ ] 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 for a corporation, please sign the full
corporate name by the 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: __ , 199_ Signature __
Signature __
(if
held
jointly)
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE.
