<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 11, 1996
REGISTRATION NO. 333-3235
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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RYERSON TULL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 5051 36-3431962
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
2621 WEST 15TH PLACE
CHICAGO, ILLINOIS 60608
(312) 762-2121
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
GEORGE A. RANNEY, JR.
VICE PRESIDENT AND GENERAL COUNSEL
30 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
(312) 346-0300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
----------------
COPIES TO:
ROBERT E. CURLEY ROBERT H. CRAFT, JR.
MAYER, BROWN & PLATT SULLIVAN & CROMWELL
190 SOUTH LASALLE STREET 1701 PENNSYLVANIA AVENUE, N.W.
CHICAGO, ILLINOIS 60603 WASHINGTON, D.C. 20006
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE(1) OFFERING PRICE(1) FEE
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<S> <C> <C> <C> <C>
Debt Securities.............. $250,000,000 100% $250,000,000 $86,206.90(2)
</TABLE>
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(1) Estimated solely for purposes of determining the registration fee.
(2) Previously paid.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
RYERSON TULL, INC.
CROSS REFERENCE SHEET
(PURSUANT TO ITEM 501(B) OF REGULATION S-K)
<TABLE>
<CAPTION>
FORM S-1 ITEM NUMBER AND
CAPTIONS HEADING OR LOCATION IN PROSPECTUS
------------------------ ---------------------------------
<C> <S> <C>
1. Forepart of the Registration
Statement and Outside Front Facing Page; Cross Reference Sheet; Outside
Cover Page of Prospectus..... Front Cover Page of Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus.... Inside Front and Outside Back Cover Pages
of Prospectus
3. Summary Information and Risk Prospectus Summary; Risk Factors
Factors......................
4. Use of Proceeds............... Use of Proceeds
5. Determination of Offering Underwriting
Price........................
6. Dilution...................... *
7. Selling Security Holders...... *
8. Plan of Distribution.......... Risk Factors; Underwriting
9. Description of Securities to Description of Notes
be Registered................
10. Interest of Named Experts and Validity of the Notes
Counsel......................
11. Information with Respect to Prospectus Summary; Risk Factors; Use of
the Registrant............... Proceeds; Capitalization; Selected
Financial Data; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Business;
Management; Relationship with ISI;
Principal Stockholder; Ownership of ISI
Stock; Description of Notes; Index to
Financial Statements
12. Disclosure of Commission
Position on Indemnification
for Securities Act *
Liabilities..................
</TABLE>
- --------
* Not applicable.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 11, 1996
$250,000,000
RYERSON TULL, INC.
LOGO
$150,000,000 % NOTES DUE , 2001
$100,000,000 % NOTES DUE , 2006
-----------
Interest on the Notes is payable on and of each
year, commencing , 1996. Each series of the Notes may be redeemed
at any time at the option of Ryerson Tull, Inc. (the "Company"), in whole or in
part, at a redemption price equal to the greater of (i) 100% of the principal
amount to be redeemed or (ii) the sum of the present values of the remaining
scheduled payments of principal and interest on the Notes to be redeemed,
discounted to the date of redemption at the applicable discount rate as
described herein, plus in each case accrued and unpaid interest to the date of
redemption. The % Notes and the % Notes are unsecured obligations of the
Company and will rank pari passu with each other and with all other unsecured
and unsubordinated indebtedness of the Company. Each series of the Notes will
be represented by one or more global Notes registered in the name of the
nominee of The Depository Trust Company. Beneficial interests in the global
Notes will be shown on, and transfers thereof will be effected only through,
records maintained by The Depository Trust Company and its participants. Except
as described herein, Notes in definitive form will not be issued. The Notes
will be issued only in registered form in denominations of $1,000 and integral
multiples thereof.
As of March 31, 1996, after giving effect to the Common Stock Offerings by
the Company and the Offering and the application of the net proceeds therefrom,
the Company would have had no indebtedness outstanding that would rank senior
to the Notes and $50 million of indebtedness that would rank pari passu with
the Notes; however, the aggregate amount of indebtedness of or guaranteed by
the Company's subsidiaries to which the Notes would have been effectively
subordinated would have been approximately $23.1 million and $110.8 million,
respectively. The Indenture does not limit the ability of the Company to incur
additional unsecured indebtedness or the ability of the Company's subsidiaries
to incur additional indebtedness to which the Notes would be effectively
subordinated.
The Company is offering to the public 5,220,000 shares of its Class A Common
Stock pursuant to a separate prospectus. Consummation of the Offering is
contingent on the consummation of the Common Stock Offerings.
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE NOTES.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT(2) COMPANY(3)
----------------- ------------ -----------
<S> <C> <C> <C>
Per % Note............................... % % %
Total...................................... $ $ $
Per % Note............................... % % %
Total...................................... $ $ $
</TABLE>
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(1) Plus accrued interest, if any, from , 1996.
(2) The Company and Inland Steel Industries, Inc. have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
(3) Before deducting estimated expenses of $1,100,000 payable by the Company.
-----------
The Notes offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that the
Notes will be ready for delivery in book-entry form only through the facilities
of The Depository Trust Company in New York, New York, on or about , 1996,
against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO. CS FIRST BOSTON
-----------
The date of this Prospectus is , 1996.
<PAGE>
[PICTURES]
Page 2 Map of United States showing Ryerson Tull, Inc.'s
top facilities.
Caption: Ryerson Tull also owns 50% of Ryerson de
Mexico, a general line metals service center and
processor operating out of 18 facilities in Mexico.
Page 2 Photograph of warehouse interior, trucks loaded
bottom with metals and forklift.
Caption: Just-In-Time Deliveries
Ryerson Tull has a nationwide network of 52
facilities that place the Company within several
hundred miles of most of its customers. Information
technology integrates this network and generally
enables delivery of stock items to customers from
the most economical location within 24 hours.
Page 2A Photograph of computer screens illustrating
top electronic data interface for ordering products and
services.
Caption: Electonic Data Interfaces
All of Ryerson Tull's products and services can be
ordered by customers through EDI. Customers can
also transmit orders through other direct ordering
systems and can electronically transmit intricate
design specifications.
Page 2A Photograph of engineer viewing computer screen
Bottom Left illustration for part design.
Caption: Engineering and Cost Reduction Services
Ryerson Tull helps customers reduce their costs by
providing technical advice on part design.
Page 2A Photograph of metal rods and bars.
center Caption: Material Management Services
Ryerson Tull provides services such as material
selection and specification that help customers
find, purchase, inventory and take delivery of a
wide variety of industrial materials.
Page 2B Photograph of coil slitter in operation.
Top Left Caption: Material Processing Services
More than one-half of the material sold by Ryerson
Tull is processed. The Company uses techniques such
as sawing, slitting, pickling, cutting to length,
flame cutting, laser cutting, plate burning,
fabricating and grinding to process materials to
meet customer specifications.
Page 2B Photograph of Company employee marking parts for a
Top Right customer's inventory.
Caption: Outsourcing by Manufacturers
Ryerson Tull provides inventory management and
first stage processing and assembling for many
customers, allowing them to reduce capital and
respond more quickly to competition.
Page 2B Photograph of metals sawing process.
Bottom left
Bottom right Photograph of laser cutting process.
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
DURING THIS OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR
THE ACCOUNTS OF OTHERS IN THE NOTES PURSUANT TO EXEMPTIONS FROM RULES 10B-6,
10B-7 AND 10B-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information appearing elsewhere in this Prospectus. Unless otherwise
indicated, all information contained in this Prospectus assumes that the
offerings by the Company of an aggregate of 5,220,000 shares of its Class A
Common Stock, par value $1.00 per share (the "Class A Common Stock"), in the
United States and outside the United States (the "Common Stock Offerings"),
have been consummated and that the over-allotment options granted to the
Underwriters in connection with the Common Stock Offerings have not been
exercised. In addition, unless the context requires otherwise, (i) "Ryerson
Tull" or "Company" refers to Ryerson Tull, Inc. and its consolidated
subsidiaries, (ii) "ISI" refers to Inland Steel Industries, Inc. and its
consolidated subsidiaries and (iii) "Offering" refers to the offering of $150
million aggregate principal amount of the Company's % Notes due
, 2001 (the " % Notes") and $100 million aggregate principal amount of the
Company's % Notes due , 2006 (the " % Notes" and, together with
the % Notes, the "Notes"). The Class A Common Stock and the Company's Class
B Common Stock, par value $1.00 per share (the "Class B Common Stock"), are
sometimes collectively referred to in this Prospectus as the "Common Stock."
Unless otherwise noted, information set forth in this Prospectus assumes that
the recapitalization on June 10, 1996 (the "Recapitalization") pursuant to
which the two outstanding shares of the Company's common stock, par value $1.00
per share, were exchanged for 34,000,000 shares of Class B Common Stock was
effected on December 31, 1995.
THE COMPANY
The Company, through its wholly-owned operating subsidiaries, Joseph T.
Ryerson & Son, Inc. ("Ryerson") and J. M. Tull Metals Company, Inc. ("Tull"),
is a general line metals service center and processor of metals. The Company
believes that it is the largest metals service center in the United States
based on sales revenue, with 1995 sales of $2.5 billion and a current U.S.
market share of approximately 9%, more than twice the U.S. market share of its
nearest competitor, based on the Company's analysis of Steel Service Center
Institute (the "SSCI") data. The Company distributes and processes metals and
other materials throughout the continental United States and is among the
largest purchasers of steel in the United States. With 52 interconnected
facilities that place it within several hundred miles of most of its customers,
the Company is able to be responsive to specific customer requests and is
generally able to make deliveries of stock items within 24 hours of receipt of
a customer's order. Utilizing this network of facilities and the Company's
regionalized management systems, the Company believes it can be responsive to
individual customers while providing a broad range of products and services.
The Company also owns a 50% interest in Ryerson de Mexico, S.A. de C.V.
("Ryerson de Mexico"), a general line metals service center and processor with
18 facilities in Mexico.
Ryerson Tull was incorporated under the laws of the state of Delaware in
March 1986 as Inland Steel Services Holding, Inc., and its name was changed
from Inland Materials Distribution Group, Inc. to Ryerson Tull, Inc. in May
1996. Ryerson, the predecessor of the Company, was founded in 1842. The
Company's principal executive offices are located at 2621 West 15th Place,
Chicago, Illinois 60608, telephone number (312) 762-2121.
INDUSTRY OVERVIEW
The Company believes that the U.S. metals service center industry (the
"Industry") occupies a growing niche between primary producers of carbon, alloy
and stainless steels, aluminum and other metals and purchasers of those
products, including manufacturers and intermediate processors. Metals service
centers, including the Company, provide services not typically available from
primary producers, such as more reliable deliveries, smaller order sizes, the
convenience of dealing with a smaller number of suppliers, just-in-time
inventory management and customer-specific, value-added processing. The Company
believes that the role of metals service centers is expanding as a result of a
number of factors, including the increased outsourcing of inventory management
functions and
3
<PAGE>
metals processing operations by manufacturers and the lower cost and more
reliable service available from service centers as compared to primary
producers.
The Industry is cyclical (with periods of strong demand and higher prices
followed by periods of weaker demand and lower prices), principally due to the
cyclical nature of the industries in which the largest consumers of metals
operate. Any significant slowdown in one or more of those industries could have
a material adverse effect on the demand for metals, resulting in lower prices
for metals and reduced profitability for metals service centers, including the
Company. Metals prices and metals service center profitability improve as
metal-consuming industries experience recoveries following economic downturns.
OPERATIONS
The Company is organized along regional and product lines into five business
units: Ryerson East, Ryerson West, Ryerson Central, Tull/AFCO and Ryerson Coil
Processing. This structure enables the Company to centralize certain
administrative support services while maintaining local organizations that are
responsive to the needs of specific customers and markets.
Each of the Company's facilities maintains a wide variety of inventory that
varies depending on the facility's size and customer demand, including carbon,
alloy and stainless steels, aluminum, red metals (such as brass and copper),
nickel and plastics. The Company purchases inventories from a number of
producers, primarily domestic. The Company purchases the majority of its
inventories in the open market at prevailing market prices, although
occasionally the Company enters into long-term, fixed-price supply contracts in
order to minimize its financial exposure to long-term, fixed-price sales
contracts. Purchases are typically made in large lots and held in distribution
centers until sold, usually in smaller quantities. These materials are
inventoried in a number of shapes, including coils, sheets, rounds, hexagons,
square and flat bars, plate, structurals and tubing. The Company uses
techniques such as sawing, slitting, blanking, pickling, cutting to length,
levelling, flame cutting, laser cutting, edge trimming, edge rolling,
fabricating and grinding to process materials to specified thickness, length,
width, shape and surface quality pursuant to specific customer orders. More
than one-half of the material sold by the Company is processed. The Company's
services include special stocking programs, just-in-time delivery, inventory
management (which includes the placement of Company employees at customer
sites), kits ready for assembly, programs that provide customers at their
places of business with Company-owned material which can be used as needed by
the customer, technical advice on part design and material specification, and
early stage material processing and fabrication. The Company typically ships
inventory between its facilities and products to customers by Company trucks
and by common carrier.
BUSINESS STRATEGY
The Company's strategy is to expand its market leadership position as a
nationwide general line metals service center and processor of metals by
providing its customers with high quality products and services at competitive
prices. The Company believes that increasing its market share will be an
effective means of increasing its profitability. One of the Company's goals is
to enhance its competitive position through the aggressive pursuit of organic
growth, strategic acquisitions, ongoing unit cost reductions and increased
asset productivity, although there can be no assurance that the Company will
achieve this goal. As part of its overall business strategy, the Company has
made substantial investments in management information systems that link its
operations and enhance interactions between the Company and its customers and
suppliers. Based on its size, which leads to cost efficiencies, the trend
towards consolidation in the number of suppliers used by customers, strategic
plant locations, broad product and service offerings and management's
acquisition strategy, the Company believes that it is well positioned to take
advantage of the anticipated growth and consolidation in the Industry. See
"Business--Industry Overview."
4
<PAGE>
ORGANIC GROWTH
One of the Company's goals is to expand its market leadership position within
the Industry through competitive pricing, broad product and service offerings
and the use of technology to improve customer service. The Company's large
size, buying power and competitive cost structure enable it to negotiate
favorable prices for raw materials and to take advantage of producer economies
of scale resulting in lower costs of material purchased, allowing it to offer
its products and services at competitive prices. In addition, the Company's
broad product and service offerings provide customers one-stop shopping,
positioning the Company to capitalize on what it believes to be a continuing
trend towards consolidation in the number of suppliers used by customers. To
this end, the Company has initiated a national accounts program targeting
customers that purchase metal from a number of suppliers throughout the
country. The Company believes it can better serve these customers by providing
competitive pricing and superior delivery and quality. The Company's goal is to
differentiate itself from its competitors by providing materials and services
on a more timely basis and with fewer rejections than its competitors through
increased emphasis on quality control. The Company has received International
Standards Organization 9002 ("ISO 9002") certification for five facilities and
will seek certification for additional facilities in the future. ISO 9002 is a
series of international standards for quality management and assurance. The
Company believes that certain major customers seek suppliers with such
certification and that such certification helps differentiate it from its
competitors.
STRATEGIC ACQUISITIONS
The Company believes that the fragmented nature of the Industry, combined
with the Company's strong national reputation, nationwide operations, market
leadership position and experience in integrating facility operations, make the
Company well situated to become a strategic buyer of service center assets. The
Company will seek selective acquisitions of businesses that complement, or
strategically extend, the Company's existing businesses. Acquired companies can
be either integrated into the Company's network or, depending on the
circumstances, operated as stand-alone facilities. In either case, the Company
believes that such acquisitions could enable it to realize further economies of
scale (particularly in operating cost, asset utilization and purchasing
leverage) and could better utilize the Company's existing facilities and
systems capability. Although the Company from time to time discusses potential
acquisitions with other service center operators, the Company currently has no
understandings, agreements or commitments to make any acquisitions.
UNIT COST REDUCTIONS AND INCREASED PRODUCTIVITY
Another of the Company's goals is to decrease unit costs through initiatives
which include increasing volume, thereby taking advantage of economies of
scale, and increasing asset and employee productivity. The Company has made and
will continue to make investments in computer-based and automated systems that
track profitability by customer, product and cost of process, allowing the
Company to determine where changes can be made to reduce cost and increase
profitability. The Company intends to increase its emphasis on the use of
electronic links known as electronic data interfaces or "EDIs" with its
suppliers and customers to reduce the paperwork and administrative costs
associated with customer orders, shipment tracking, billing and remittance
processing. The Company continues to re-engineer its various work processes
through benchmarking analyses across its 52 facilities. Re-engineering enables
the Company to increase output without increasing its labor force by increasing
the efficiency with which work processes are performed.
COMPETITIVE STRENGTHS
The Company has a number of competitive strengths that it believes will
facilitate the implementation of the Company's strategy, including its market
leadership position and its management systems and practices.
5
<PAGE>
MARKET LEADERSHIP POSITION
ECONOMIES OF SCALE. Because of the Company's large size, its costs of
operations can be spread across a large base of sales, resulting in lower fixed
costs per ton sold. However, in times of decreasing sales, the Company's fixed
costs must be spread across a smaller base of sales resulting in higher fixed
costs per ton sold. The Company believes that available capacity at many of its
plants will allow it to achieve further economies of scale to the extent it
increases sales in the future. Of the Company's 52 facilities, six are
currently operating one shift, 31 are operating two shifts and 15 are operating
three shifts. In addition, the size of the Company's material purchases enables
its suppliers to realize economies of scale and thereby provide the Company
with competitive prices.
SCOPE OF PRODUCTS AND SERVICES. The Company's broad product and service
offerings provide customers one-stop shopping for most of their metals needs.
In addition, the Company believes that its 52 facilities located throughout the
continental United States, generally within one day's delivery time of almost
all U.S. manufacturing centers, position it to target national customers that
currently buy metals from a variety of suppliers in different locations. The
Company's ability to transfer inventory among facilities enables it to have
available specialized items at regional locations throughout its network and to
provide such inventory on a timely basis more profitably than if it were
required to maintain inventory of all products at each location.
RELATIONSHIPS WITH SUPPLIERS. The Company is among the largest purchasers of
steel in the United States and is also a significant purchaser of aluminum in
the United States. The Company buys from and has developed relationships with
many U.S. steel producers as well as other metal producers. The Company's
relationships with numerous metal producers provide it access to high quality
metals, timely delivery and new product and service ideas from many suppliers.
In addition, because the Company purchases large volumes of metals, it can
negotiate competitive prices from its suppliers. In part because of its buying
power, the Company has been able to secure product from primary manufacturers
during times of tight supply.
MANAGEMENT SYSTEMS AND PRACTICES
The Company's management information systems have allowed management to
develop an internal benchmarking system and to track profitability by customer,
product and cost of process. This detailed information enables management to
make continuous improvements such as reallocating slow-moving inventory to
different locations to increase inventory turns, improving purchasing,
targeting customers or changing suppliers as needed. The Company's 52
facilities provide it with a large base for testing, comparing and implementing
new management practices.
RELATIONSHIP WITH ISI
ISI beneficially owns all of the outstanding Class B Common Stock,
representing approximately 96.3% of the aggregate voting power of all of the
Company's Common Stock, and consequently controls the Company. ISI will retain
more than 50% of the voting control of the Company until the number of shares
of Class B Common Stock outstanding represents less than 50% of the total
number of shares of Class A Common Stock and Class B Common Stock outstanding,
at which time the outstanding Class B Common Stock will convert into an equal
number of shares of Class A Common Stock. ISI also owns Inland Steel Company
("ISC"), the sixth largest steel producer in the United States based upon the
number of tons shipped. The Company purchases steel from ISI and its
affiliates. The Company also purchases support functions from and has a tax
sharing arrangement with ISI. The Company intends to continue these
relationships after the Offering. Ryerson is the guarantor of an obligation of
the Inland Steel Industries Thrift Plan ESOP Trust (the "ESOP Trust"), and the
Company's employees participate in the employee benefit plans of ISI other than
the Inland Steel Industries Pension Plan (the "ISI Pension Plan"). Effective
April 30, 1996, that portion of the ISI Pension Plan covering the Company's
current and former employees was separated and became a new and separate plan
sponsored by the Company (the "Pension Plan"). See "Relationship with ISI."
6
<PAGE>
RATIONALE FOR THE OFFERING AND COMMON STOCK OFFERINGS
The Company and ISI consummated the Common Stock Offerings and are pursuing
the Offering to assist them in realizing the following strategic and financial
objectives that the managements of the Company and ISI have established for
their respective businesses. The Company has historically been dependent on
cash flow from operations, limited borrowings from third party lenders and
contributions from ISI to fund its growth. The Company believes that
consummation of the Common Stock Offerings and the Offering, which will
establish public trading markets for the Company's equity and debt securities,
should provide the Company with access to the public markets to raise
additional capital to fund its future growth. Consummation of the Offering and
the Common Stock Offerings will permit ISI to retire debt, which will reduce
ISI's interest expense and eliminate certain burdensome restrictive covenants.
As a result of the transactions described below, ISI will receive all of the
proceeds of the Common Stock Offerings and the Offering. Prior to the
consumation of the Common Stock Offerings, the Company will declare a dividend
payable in cash in an amount equal to the estimated net proceeds from the
Common Stock Offerings (estimated to be $84.4 million at an assumed initial
offering price of $17.50 per share, the mid-point of the offering range set
forth on the cover page of the Common Stock Offerings Prospectus), and a
dividend consisting of a $293.8 million note payable to ISI (the "Note
Payable") maturing five years from the date of issuance and bearing interest at
a specified prime rate. The Note Payable may be prepaid without penalty at the
option of the Company. The estimated net proceeds from the Common Stock
Offerings were used to pay the cash dividend to ISI and are not available to
the Company. All of the net proceeds from the Offering, together with a portion
of the Company's available cash and/or borrowings under credit facilities, will
be used to discharge the Note Payable to ISI. On May 20, 1996, the Company paid
to ISI a dividend in the amount of $75 million in cash (the "May 1996 Dividend"
and, together with the dividends declared in connection with the Common Stock
Offerings, the "Dividends").
ISI used $63.2 million of the proceeds from the May 1996 Dividend to repay
intercompany indebtedness owed by ISI to the Company arising out of a
corporate-wide cash management program. After the repayment of such
indebtedness, the Company ceased participation in such program and the
Company's cash will no longer be held in ISI's accounts. ISI has informed the
Company that ISI intends to use the remaining proceeds from the Dividends to
retire ISI and ISC indebtedness and for general corporate purposes. See "Use of
Proceeds."
In connection with the Common Stock Offerings, certain of the options to
purchase shares of ISI common stock and restricted shares of ISI common stock
held by the Company's employees will be converted into options to purchase
shares of Class A Common Stock and shares of restricted Class A Common Stock
having an aggregate value comparable to the value of their ISI options and
restricted stock. Employees, including employees of the Company who are also
employees of ISI, will also be eligible to receive future awards under the
Ryerson Tull 1996 Incentive Stock Plan. On June 10, 1996, the Company entered
into severance agreements with certain of its officers. In addition, the non-
employee Directors, including the non-employee Directors who are also Directors
of ISI, will receive fees from the Company for serving in their capacities as
Directors of the Company. See "Management--Directors' Compensation," "--
Employment and Change of Control Agreements" and "--Ryerson Tull 1996 Incentive
Stock Plan."
POTENTIAL DISTRIBUTION AND OTHER TRANSACTIONS
ISI beneficially owns all of the Class B Common Stock, representing
approximately 86.7% of the outstanding Common Stock of the Company. ISI has
advised the Company that, although it currently intends to hold such stock, it
may in the future distribute all or part of such stock (in the form of Class A
Common Stock) to ISI's stockholders (a "Spin-off") or may sell such stock (in
the form of Class A Common Stock) to third parties in one or more transactions.
The completion of any such transaction
7
<PAGE>
would be subject to a number of factors, including a determination by the Board
of Directors of ISI that the transaction would be in the best interests of its
stockholders and, in the case of a Spin-off, could be subject to the receipt of
a favorable ruling from the Internal Revenue Service (the "IRS") or an opinion
of counsel as to the tax-free nature of such transaction.
RISK FACTORS
Prospective purchasers of the Notes offered hereby should consider carefully
the information set forth under "Risk Factors," in addition to the other
information set forth in this Prospectus, before purchasing any of the Notes,
such as the risk factors set forth under the following headings: "Control by
Principal Stockholder," "Highly Competitive Industry," "Cyclical Nature of
Business," "Dividends to ISI and Resulting Indebtedness," "Labor Contracts;
Risk of Work Stoppage," "Potential for Interruption in Sources of Supply,"
"Volatile Price of Inventory," "Dependence On Computer-Based Systems,"
"Reliance On Acquisitions for Expansion," "Holding Company Structure; Reliance
On Dividends and Transfers from Subsidiaries," "Benefits of the Offering to the
Principal Stockholder," "Pension and Other Postretirement Benefits; Underfunded
Pension Plan," "Costs of Environmental Compliance," "Certain Relationships with
ISI" and "Absence of Public Market for the Notes."
THE OFFERING
Securities Offered.......... $150,000,000 aggregate principal amount of %
Notes due , 2001 (the " % Notes")
and $100,000,000 aggregate principal amount of
% Notes due , 2006 (the " %
Notes" and, together with the % Notes, the
"Notes").
Interest....................
Interest on the % Notes and the % Notes is
payable semiannually on and
of each year, commencing , 1996, at
an annual rate of % for the % Notes and
% for the % Notes.
Redemption..................
Each series of the Notes is subject to
redemption, in whole or in part, at the option of
the Company at any time at a redemption price
equal to the greater of (i) 100% of the principal
amount of the Notes to be redeemed or (ii) the
sum of the present values of the remaining
scheduled payments of principal and interest on
the Notes to be redeemed, discounted to the date
of redemption on a semiannual basis at the
Treasury Rate, plus basis points, in the case
of the % Notes, or basis points, in the
case of the % Notes, plus in each case accrued
interest to the date of redemption. The Notes are
not entitled to the benefit of any sinking fund.
Ranking.....................
The % Notes and the % Notes will be unsecured
obligations of the Company and will rank pari
passu with each other and with all other
unsecured and unsubordinated debt of the Company.
However, since all of the operations of the
Company are conducted through its subsidiaries,
all existing and future liabilities of its
subsidiaries will be effectively senior in right
of payment to the Notes. As of March 31, 1996,
the
8
<PAGE>
Company's subsidiaries had outstanding
indebtedness aggregating $23.1 million and
guaranteed indebtedness aggregating $110.8
million that would in effect rank ahead of the
Notes. The Company is largely dependent on cash
from its subsidiaries for the payment of
principal and interest on the Notes and other
indebtedness. As a result of certain financial
covenants contained in subsidiaries' obligations,
the availability of cash from its subsidiaries in
the form of dividends, distributions and loans
was limited to approximately $200 million at
March 31, 1996 ($125 million after giving effect
to the May 1996 Dividend). This amount is subject
to change based on the financial performance of
each subsidiary. See "Management's Discussion and
Analysis of Financial Condition and Results of
Operations--Liquidity and Financing."
Certain Restrictive
Covenants................... The Indenture under which each series of the
Notes is to be issued will contain covenants
regarding, among other things, the creation and
existence of additional secured indebtedness; the
declaration and payment of dividends and
distributions on the Company's capital stock; the
acquisition of the Company's capital stock by the
Company or its Subsidiaries; the acquisition or
retirement of any Debt of the Company which is
subordinate in right of payment to the Notes;
Sale and Leaseback Transactions; transactions
with certain Affiliates; and limitations on
mergers, consolidations and certain sales of
assets. See "Description of Notes."
Use of Proceeds.............
All of the net proceeds from the sale of the
Notes, together with a portion of the Company's
available cash and/or borrowings under credit
facilities, will be used to discharge the Note
Payable that was issued to ISI in the form of a
dividend in connection with the Common Stock
Offerings. See "Use of Proceeds."
9
<PAGE>
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- -----------
(IN MILLIONS, EXCEPT NUMBER OF EMPLOYEES AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net sales............... $1,655.9 $1,716.6 $1,893.3 $2,197.5 $2,450.1 $ 652.3 $625.3
Operating costs......... 1,639.7 1,689.5 1,836.9 2,099.4 2,301.4 610.2 588.7
-------- -------- -------- -------- -------- -------- ------
Operating profit........ 16.2 27.1 56.4 98.1 148.7 42.1 36.6
General corporate
expense, net of income
items.................. 10.6 8.4 7.4 6.9 0.7 0.4 (0.7)
Interest and other ex-
pense on debt(1)....... 17.1 12.8 10.9 2.9 2.6 0.7 0.6
-------- -------- -------- -------- -------- -------- ------
Income or (loss) before
income taxes........... (11.5) 5.9 38.1 88.3 145.4 41.0 36.7
Provision for income
taxes.................. 2.3Cr. 2.6 11.4 35.0 56.9 16.5 14.3
-------- -------- -------- -------- -------- -------- ------
Income or (loss) before
cumulative
effect of changes in
accounting
principles............. (9.2) 3.3 26.7 53.3 88.5 24.5 22.4
Cumulative effect of
changes in accounting
principles(2).......... -- (84.1) -- -- -- -- --
-------- -------- -------- -------- -------- -------- ------
Net income or
(loss)(1).............. $ (9.2) $ (80.8) $ 26.7 $ 53.3 $ 88.5 $ 24.5 $ 22.4
======== ======== ======== ======== ======== ======== ======
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,1996
-------------------------------------------------- ---------------------
AS
1991 1992 1993 1994 1995 ACTUAL ADJUSTED(3)
-------- -------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET (END OF
PERIOD):
Operating working capi-
tal(4)................. $ 320.9 $ 296.9 $ 363.5 $ 366.7 $ 373.0 $ 423.3 $423.3
Total assets............ 748.1 765.4 842.3 891.3 972.6 1,010.9 942.1
Long-term debt.......... 31.0 25.7 28.2 23.6 18.9 18.4 268.4
Stockholder's equi-
ty(5).................. 430.7 350.0 526.7 580.0 668.5 690.9 322.1
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Tons shipped............ 1.74 1.87 2.08 2.33 2.35 .63 .64
Number of employees at
period end............. 5,224 5,040 5,093 5,158 4,993 5,206 4,965
Capital expenditures.... $ 9.8 $ 9.3 $ 19.3 $ 20.4 $ 19.3 $ 3.0 $ 3.0
Ratio of earnings to
fixed charges(6)....... 0.5x 1.3x 3.3x 11.8x 19.2x 21.5x 21.4x
EBITDA(7)............... $ 25.3 $ 38.8 $ 69.6 $ 112.4 $ 169.8 $ 47.1 $ 42.9
</TABLE>
- --------
(1) Assuming the issuance of $250 million of Notes in the Offering and the
borrowing of $50 million under credit facilities at a weighted average
interest rate of 8.75% and the application of the net proceeds therefrom to
discharge the Note Payable, as if each had occurred on January 1, 1995, the
pro forma effect of these transactions would have been to increase interest
and other expense on debt by $27.3 million for the year ended December 31,
1995, and by $6.8 million for the three months ended March 31, 1995 and
1996. Pro forma net income giving effect to these transactions for the year
ended December 31, 1995 and the three months ended March 31, 1995 and 1996
would have been $71.9 million, $20.4 million and $18.3 million,
respectively.
(2) The cumulative effect on prior years' results of operations of adopting,
effective January 1, 1992, Financial Accounting Standards Board ("FASB")
Statement No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," was $72.3 million and of adopting FASB Statement No. 109,
"Accounting for Income Taxes," was $11.8 million.
(3) Adjusted to reflect (a) the payment of $453.2 million to ISI in
satisfaction of the Dividends, (b) the receipt of $84.4 million of net
proceeds from the Common Stock Offerings at an assumed initial offering
price of $17.50 per share (the mid-point of the offering range set forth on
the cover page
10
<PAGE>
of the Common Stock Offerings Prospectus) and the application of the
estimated net proceeds therefrom and (c) the sale of the Notes in the
Offering and the application of the estimated $243.8 million net proceeds
therefrom, together with a portion of the Company's available cash and/or
borrowings under credit facilities, to discharge the Note Payable.
(4) Includes trade receivables and inventories less trade accounts payable and
accrued current liabilities.
(5) During the year ended December 31, 1993, ISI made a $150 million capital
contribution to the Company.
(6) Earnings for the calculation of the ratio of earnings to fixed charges
consist of income before income taxes. Earnings are increased by fixed
charges and previously capitalized interest amortized during the period.
Fixed charges consist of total interest charges (including capitalized
interest), amortization of debt expense and an appropriate share of rental
expense. Giving effect to the Common Stock Offerings, the payment of the
Dividends and the issuance of $250 million of Notes in the Offering and
the borrowing of $50 million under credit facilities at a weighted average
interest rate of 8.75% and the application of the net proceeds therefrom,
as if each had occurred on January 1, 1995, the ratio of earnings to fixed
charges for the year ended December 31, 1995 and the three months ended
March 31, 1995 and 1996 would have been 4.3x, 4.9x and 4.5x, respectively.
(7) Earnings before interest, taxes, depreciation and amortization ("EBITDA")
for any relevant period presented above represents operating profit less
general corporate expense, net of income items, plus depreciation and
amortization of goodwill and other intangibles. While EBITDA should not be
construed as a substitute for operating income or a better indicator of
liquidity than cash flow from operating activities, which are determined
in accordance with generally accepted accounting principles, it is
included herein to provide additional information with respect to the
ability of the Company to meet its future debt service, capital
expenditure and working capital requirements. EBITDA is not necessarily a
measure of the Company's ability to fund its cash needs. See the Company's
Consolidated Financial Statements and the related notes thereto appearing
elsewhere in this Prospectus.
11
<PAGE>
RISK FACTORS
Prospective purchasers should carefully consider the following factors,
together with other information in this Prospectus, in evaluating an
investment in the Notes.
CONTROL BY PRINCIPAL STOCKHOLDER
ISI owns in the aggregate 34,000,000 shares of Class B Common Stock,
representing all of the outstanding shares of Class B Common Stock. Each share
of Class A Common Stock is entitled to one vote, while each share of Class B
Common Stock is entitled to four votes. Consequently, ISI controls
approximately 96.3% of the voting power of the Company and is able to elect
the entire Board of Directors, thereby controlling the management, policies
and conduct of the business of the Company, as well as matters submitted to a
vote of the Company's stockholders (other than matters that the Delaware
General Corporation Law ("Delaware GCL") entitles holders of Class A Common
Stock to vote on separately as a class), including decisions regarding the
acquisition or disposition of the Company's assets and future issuances of
securities of the Company. ISI will retain more than 50% of the voting control
of the Company until the number of shares of Class B Common Stock outstanding
represents less than 50% of the total number of shares of Class A Common Stock
and Class B Common Stock outstanding, at which time the outstanding Class B
Common Stock will convert into an equal number of shares of Class A Common
Stock. In addition, certain Directors and officers of the Company are also
Directors and officers of ISI. See "Relationship with ISI" and "Principal
Stockholder."
ISI has advised the Company that, although it currently intends to hold the
Class B Common Stock that it owns, it may in the future distribute all or part
of such stock (in the form of Class A Common Stock) to ISI's stockholders by
means of a Spin-off or may sell such stock (in the form of Class A Common
Stock) to third parties in one or more transactions. The completion of such a
transaction would be subject to a number of factors, including a determination
by the Board of Directors of ISI that the transaction would be in the best
interests of its stockholders and, in the case of a Spin-off, could be subject
to the receipt of a favorable ruling from the IRS or an opinion of counsel as
to the tax-free nature of such transaction.
HIGHLY COMPETITIVE INDUSTRY
The Company is engaged in a highly fragmented and competitive Industry. In
general, competition is based on quality, service, price and geographic
proximity. The Company competes with many other metals service centers on a
regional and local basis, some of which may have greater financial resources
and flexibility than the Company. To the extent that some of the Company's
competitors purchase a higher percentage of metals than the Company from
foreign steelmakers, such competitors may benefit from favorable exchange
rates or other economic or regulatory factors that may result in a competitive
advantage. This competitive advantage may be offset somewhat by higher
transportation costs associated with importing metals into the United States.
See "Business--Competition."
CYCLICAL NATURE OF BUSINESS
The Company's principal operations are cyclical due to its dependence on
customers in cyclical industries. During 1995, the Company shipped
approximately 38% of its product (by sales revenue) to machinery
manufacturers, 25% to metal producers and fabricators, 10% to transportation
equipment producers and 9% to electrical machinery producers, all of which
operate in cyclical industries. Any significant slowdown in any of these
industries could have a material adverse effect on the Company's results of
operations. See "Business--Customer Base."
12
<PAGE>
DIVIDENDS TO ISI AND RESULTING INDEBTEDNESS
Prior to the consummation of the Common Stock Offerings, the Company will
declare a dividend payable in cash in an amount equal to the estimated net
proceeds from the Common Stock Offerings (estimated to be $84.4 million at an
assumed initial offering price of $17.50 per share, the mid-point of the
offering range set forth on the cover page of the Common Stock Offerings
Prospectus), and a dividend consisting of the Note Payable. The net proceeds
from the Common Stock Offerings were used to pay the cash dividend to ISI
concurrent with the closing of the Common Stock Offerings and will not be
available to the Company. The Note Payable will be discharged from the net
proceeds of the Offering, together with a portion of the Company's available
cash and/or borrowings under credit facilities.
The payment of the Dividends to ISI and the associated indebtedness incurred
by the Company resulted in the Company having substantial indebtedness in
relation to its total invested capital. At March 31, 1996, on a pro forma
basis after giving effect to the Offering, the Common Stock Offerings and the
payment of the Dividends to ISI, the Company would have a ratio of long-term
debt to stockholders' equity of approximately 0.8 to 1. As a result, the
Company's ability to respond to changes in financial, business and economic
conditions may be limited. In addition, the Indenture governing the Notes will
contain covenants that may limit the Company's financial flexibility or
otherwise affect the conduct of the Company's future business. Although the
Company believes that the covenants will not materially impact the Company's
financial flexibility or future business, there can be no assurance that the
covenants will not have such an effect.
The Company has received a definitive commitment letter from its lead
commercial bank to provide a four year, $250 million revolving credit facility
(the "New Credit Facility"), subject to certain customary conditions. The New
Credit Facility is expected to contain customary restrictive covenants,
including, among other things, leverage, minimum net worth and fixed charge
coverage requirements, and limitations on restricted payments (including
dividends), the addition of subsidiary debt (except for debt of acquired
companies and up to $50 million of purchase money debt), new agreements that
limit upstreaming of cash from subsidiaries, transactions with affiliates, the
existence of liens, and mergers and sales of assets. In addition, the amount
of credit available under the New Credit Facility will be eliminated in the
event of a change of control (as defined) of ISI or the Company. Although the
Company believes that the covenants will not materially impact the Company's
financial flexibility or future business, such covenants may restrict the
Company's ability to raise capital for operating needs, capital expenditures
and acquisitions, and may result in the Company incurring greater costs of
capital than it would otherwise incur.
LABOR CONTRACTS; RISK OF WORK STOPPAGE
The Company has experienced only minor localized disruptions in operations
as a result of labor-related issues. A portion of the employees at ten of the
Company's 52 facilities are organized by the United Steelworkers of America
(the "United Steelworkers"), representing approximately 485 employees, and a
portion of the employees at ten facilities are organized by the International
Brotherhood of Teamsters, Chauffeurs, Warehousemen & Helpers (the
"Teamsters"), representing approximately 280 employees. The Company's labor
contracts expire on staggered dates. The next material labor contract to
expire is the contract with the United Steelworkers, relating to all United
Steelworkers-represented facilities and employees, which expires on July 31,
1996. During the next 12 months, labor contracts covering 652 employees at 15
facilities will expire. While management does not expect that work stoppages
will arise in connection with the renewal of labor agreements expiring in the
foreseeable future, no assurance can be given that work stoppages will not
occur. A widespread work stoppage could have a material adverse effect on the
Company's results of operations if it were to last for a significant period of
time. See "Business--Employees."
POTENTIAL FOR INTERRUPTION IN SOURCES OF SUPPLY
The Company purchases its principal inventory, such as carbon steel,
stainless steel, alloy steel, aluminum and a variety of other metals and
plastics, from a number of producers, primarily domestic.
13
<PAGE>
Any interruption or reduction in the supply of any of these materials may make
it difficult or impossible to satisfy customers' just-in-time delivery
requirements, which could have a material adverse effect on the Company's
results of operations.
VOLATILE PRICE OF INVENTORY
The domestic metals and plastics industries are cyclical due to significant
excess capacity in times of reduced demand in the United States, labor costs,
foreign and domestic competition and other factors which can result in
volatile pricing of such metals and plastics. Because the Company maintains
substantial inventories of steel, other metals and plastics in order to meet
the just-in-time delivery requirements of its customers, price decreases of
such raw materials usually require the Company to lower its selling prices,
resulting in lower profit margins or, in some cases, losses. In addition, the
Company occasionally enters into fixed-price supply contracts to purchase
materials. If the market price of raw materials were to decline below the
fixed price set in such contracts, the Company could be required to lower its
selling prices, resulting in lower margins or, in some cases, losses. Any
long-term price decreases of materials, in light of the Company's large
inventories and fixed-price supply contracts, may have a material adverse
effect on the Company's results of operations. Further, during periods of
rapid price decreases of such materials, the Company may be unable to lower
its prices quickly enough to remain price competitive, which could have a
material adverse effect on sales. Since mid-1995, the Company has gradually
reduced selling prices as a result of softness in Industry selling prices,
which has resulted in reduced gross margins. The Company's gross margin during
the three months ended March 31, 1996 was $232 per ton, compared to the
Company's gross margin per ton of $245 during 1995. There can be no assurance
that selling prices or gross margins will not decline further. See "Business--
Suppliers."
DEPENDENCE ON COMPUTER-BASED SYSTEMS
The Company depends to a significant degree on its computer-based systems in
the operation of its business and has taken customary precautions to protect
such systems. The destruction or the failure of any of such computer-based
systems for any significant period of time would have a material adverse
effect on the Company's results of operations. See "Business--Management
Information Systems."
RELIANCE ON ACQUISITIONS FOR EXPANSION
The Company seeks to pursue growth through acquisitions as well as through
joint ventures and expansions of its existing facilities. However, the Company
has not made any acquisitions since 1990 and there can be no assurance that
the Company will be able to negotiate and complete acquisitions, enter into
joint ventures or effectively expand its facilities in the future. Moreover,
the cost of acquisitions, joint ventures and expansions could adversely affect
the Company's results of operations, liquidity and financial stability as a
result of the incurrence of additional debt, start-up costs and
underutilization of new facilities during the start-up phase. Acquisitions and
joint ventures may result in unanticipated difficulties in integrating
acquired businesses with the Company's existing business and may absorb a
disproportionate amount of management time. Although the Company from time to
time discusses potential acquisitions with other service center operators, the
Company currently has no understandings, agreements or commitments to make any
acquisitions. In addition, while the Company has achieved profitable operation
of businesses acquired in the past, there can be no assurance that any future
acquisitions, if completed, would be profitable. See "Business--Business
Strategy--Strategic Acquisitions."
HOLDING COMPANY STRUCTURE; RELIANCE ON DIVIDENDS AND TRANSFERS FROM
SUBSIDIARIES
Ryerson Tull, Inc. is a holding company and has no direct business
operations. As such, Ryerson Tull, Inc. is dependent on dividends or other
intercompany transfers of funds from its subsidiaries to
14
<PAGE>
enable it to pay the principal of and interest on the Notes, and to meet its
other obligations. Certain debt instruments of Ryerson Tull, Inc.'s
subsidiaries and the ESOP Guarantee (as defined herein) permit the payment of
dividends and advances to Ryerson Tull, Inc. only if such subsidiaries are in
compliance with financial covenants contained in those instruments and such
guarantee. As a result of these covenants, the availability to the Company of
cash from its subsidiaries in the form of dividends, distributions and loans
was limited to approximately $200 million at March 31, 1996 ($125 million
after giving effect to the May 1996 Dividend). This amount is subject to
change based on the financial performance of each subsidiary. Claims of
creditors of Ryerson Tull, Inc.'s subsidiaries will generally have priority as
to the assets of such subsidiaries over Ryerson Tull, Inc. and the holders of
Ryerson Tull, Inc.'s indebtedness, including holders of the Notes. See
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations--Liquidity and Financing."
The Indenture will, among other things, restrict the amount of secured debt
that may be incurred by Ryerson Tull, Inc. and certain of its subsidiaries,
but will not restrict the amount of otherwise permissible debt that may be
incurred at the subsidiary level. See "Description of Notes--Covenants."
BENEFITS OF THE OFFERING TO THE PRINCIPAL STOCKHOLDER
All of the net proceeds of the Offering, together with a portion of the
Company's available cash and/or borrowings under credit facilities, will be
paid to ISI to discharge the Note Payable. See "Use of Proceeds" and
"Capitalization."
PENSION AND OTHER POSTRETIREMENT BENEFITS; UNDERFUNDED PENSION PLAN
Prior to April 30, 1996, certain employees of the Company were eligible to
participate in the ISI Pension Plan. Effective April 30, 1996, that portion of
the ISI Pension Plan covering the Company's current and former employees was
separated and became the Pension Plan, a new and separate plan sponsored by
the Company. If the Pension Plan had been in existence at the September 30,
1995 valuation date of the ISI Pension Plan, the projected benefit obligation
thereunder would have been $266 million and the share of the assets allocable
to the Pension Plan would have been $249 million, resulting in an underfunding
of $17 million for financial reporting purposes under Generally Accepted
Accounting Principles ("GAAP"). For purposes of calculating funding under the
Employee Retirement Income Security Act ("ERISA"), there will be no required
contribution in 1996 for the Pension Plan. However, regulations resulting from
recent federal legislation may accelerate future funding requirements. In
addition to pension benefits, the Company provides health care and life
insurance benefits to its eligible employees and retirees. The pension
benefits have been and will continue to be funded through a pension trust,
while health care and life insurance benefits are paid as incurred.
Under GAAP, the ISI Pension Plan, with $1.92 billion in assets, had unfunded
liabilities of $127 million at September 30, 1995. On an annualized basis,
individual yearly returns earned in the ISI Pension Plan have been volatile,
with the plan earning less than 1% in 1994, compared with over 20% in 1995.
The average annual return on the ISI Pension Plan over the last ten years has
been approximately 11%. ISI was required to record a $103 million additional
pension liability, offset by an intangible pension asset, on its year-end 1995
balance sheet. In May 1995, ISI contributed 3.9 million shares of its common
stock with an aggregate value of $100 million to the ISI Pension Plan. Most of
such shares continue to be held by the ISI Pension Plan and the Pension Plan
in amounts proportional to the assets in such plans. Under ERISA standards,
which take a longer term view than GAAP in determining the interest rate to
use in valuing liabilities, no contribution will be required in 1996 for the
ISI Pension Plan. See "--Certain Relationships With ISI."
Liabilities for health care and life insurance benefits are not funded. The
unfunded benefit liability reflected on the balance sheet of the Company as of
December 31, 1995 and March 31, 1996 was approximately $141.1 million and
$141.9 million (unaudited), respectively. The unfunded liability will continue
to grow as long as accrual-basis costs exceed cash benefit payments.
15
<PAGE>
COSTS OF ENVIRONMENTAL COMPLIANCE
The Company's facilities and operations are subject to numerous federal,
state and local requirements relating to the protection of the environment,
including requirements governing air emissions, wastewater discharges,
hazardous materials handling and waste disposal. The Company has made and will
continue to make expenditures to comply with such provisions. Although the
Company believes that its facilities are presently in substantial compliance
with environmental laws and regulations, future events or regulatory
requirements could require the Company to make additional expenditures. While
the Company does not currently anticipate that costs of future compliance will
have a material adverse effect on the Company's results of operations or
financial condition, the amount and timing of future environmental
expenditures are subject to significant uncertainties and could vary
substantially from those presently anticipated and could have a material
adverse effect on the Company's financial condition. See "--Certain
Relationships With ISI" and "Business--Environmental, Health and Safety
Matters."
CERTAIN RELATIONSHIPS WITH ISI
Ryerson is the guarantor of the ESOP Trust's obligation to repay the
principal amount of indebtedness incurred by the ESOP Trust, amounting to
$110.8 million as of March 31, 1996, plus interest. In addition, for purposes
of the ISI Pension Plan, the Company is a member of a "control group of
companies," which includes ISI and ISC, as determined by regulations
promulgated by the Pension Benefit Guaranty Corporation. The Company is also
part of ISI's consolidated group for tax purposes. As a result of these and
other relationships, under certain circumstances the Company could be jointly
and severally liable for certain of ISI's and ISC's ESOP Trust, pension,
environmental or tax liabilities.
ABSENCE OF PUBLIC MARKET FOR THE NOTES
The Notes are a new issue of securities for which there is currently no
market. If the Notes are traded after their initial issuance, they may trade
at a discount from their initial offering price, depending upon prevailing
interest rates, the market for similar securities and other factors. The
Underwriters have informed the Company that, subject to applicable laws and
regulations, they currently intend to make a market in the Notes. However, the
Underwriters are not obligated to do so, and any such market making may be
discontinued at any time without notice. Therefore, no assurance can be given
as to whether an active trading market will develop for the Notes or, if such
market develops, whether it will continue. The Company does not intend to
apply for listing of the Notes on any securities exchange or on the National
Association of Securities Dealers, Inc. automated quotation system. See
"Underwriting."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes offered hereby
are estimated to be approximately $243.8 million, after deducting estimated
underwriting discounts and commissions and expenses of the Offering payable by
the Company. All of the net proceeds of the Offering, together with a portion
of the Company's available cash and/or borrowings under credit facilities,
will be used to discharge the Note Payable that was declared as a dividend in
connection with the Common Stock Offerings.
16
<PAGE>
CAPITALIZATION
The following table sets forth the actual capitalization of the Company as
of March 31, 1996 and the capitalization of the Company as of such date (i) as
adjusted to give effect to the Recapitalization and the declaration of the
Dividends, (ii) as further adjusted to give effect to the Common Stock
Offerings and the application of the estimated net proceeds therefrom to pay
the cash dividend to ISI and (iii) as further adjusted to give effect to the
sale of the Notes in the Offering and the application of the estimated net
proceeds therefrom, together with borrowings under credit facilities of $50
million, to discharge the Note Payable as set forth under "Use of Proceeds."
This table should be read in conjunction with the Company's Consolidated
Financial Statements and the related notes thereto included elsewhere in this
Prospectus. See "Use of Proceeds."
<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------------------------------------------
AS ADJUSTED FOR
---------------------------------------------------
DIVIDENDS,
DIVIDENDS, RECAPITALIZATION,
RECAPITALIZATION COMMON
DIVIDENDS AND AND COMMON STOCK OFFERINGS
ACTUAL RECAPITALIZATION STOCK OFFERINGS AND OFFERING
------ ---------------- ---------------- -----------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
SHORT-TERM DEBT:
Short-term borrowings
under credit facility.. $ -- $ -- $ -- $ 50.0
Long-term debt due
within one year........ 4.7 4.7 4.7 4.7
------ ------ ------ ------
Total short-term debt.. $ 4.7 $ 4.7 $ 4.7 $ 54.7
====== ====== ====== ======
LONG-TERM DEBT:
% Notes due 2001...... $ -- $ -- $ -- $150.0
% Notes due 2006...... -- -- -- 100.0
Note Payable............ -- 293.8 293.8 --
Other................... 18.4 18.4 18.4 18.4
------ ------ ------ ------
Total long-term debt... 18.4 312.2 312.2 268.4
------ ------ ------ ------
STOCKHOLDERS' EQUITY:
Common Stock, $1.00 par
value, 3,000 shares
authorized, 1 share
issued actual; no
shares authorized as
adjusted............... -- -- -- --
Class A Common Stock,
$1.00 par value, no
shares authorized
actual; 100,000,000
shares authorized,
5,220,000 shares issued
and outstanding as
adjusted(1)............ -- -- 5.2 5.2
Class B Common Stock,
$1.00 par value, no
shares authorized
actual; 34,000,000
shares authorized,
34,000,000 shares
issued and outstanding
as adjusted............ -- 34.0 34.0 34.0
Preferred Stock, $1.00
par value, no shares
authorized actual;
16,000,000 shares
authorized, no shares
issued or outstanding
as adjusted............ -- -- -- --
Additional paid-in
capital................ 494.6 203.7 282.9 282.9
Earnings reinvested in
the business........... 196.3 -- -- --
------ ------ ------ ------
Total stockholders' eq-
uity.................. 690.9 237.7 322.1 322.1
------ ------ ------ ------
Total capitalization.. $709.3 $549.9 $634.3 $590.5
====== ====== ====== ======
</TABLE>
- --------
(1) Excludes an aggregate of 2,400,000 shares of Class A Common Stock that has
been reserved for issuance under the Incentive Stock Plan (as defined
herein) and the Directors' Compensation Plan (as defined herein),
including shares of Class A Common Stock to be issued in the form of
restricted stock and shares of Class A Common Stock reserved for issuance
upon exercise of options, in each case to be issued upon consummation of
the Common Stock Offerings as described below. Effective upon consummation
of the Common Stock Offerings, the outstanding shares of restricted ISI
common stock and options to purchase shares of ISI common stock held by
the Company's employees will be converted into shares of restricted Class
A Common Stock and options to purchase shares of Class A Common Stock,
provided that the Compensation Committee may determine that any employee
may receive restricted shares of Class A Common
17
<PAGE>
Stock or options to purchase shares of Class A Common Stock with respect to
less than all of his or her shares of restricted ISI common stock or
options to purchase ISI common stock. The number of shares of Class A
Common Stock that will be issued as restricted stock or subject to options
will vary depending on the relative value of a share of ISI common stock
and a share of Class A Common Stock at the applicable valuation date.
Assuming that as of the applicable valuation date the value of a share of
ISI common stock is $21.00 (the last reported sales price on the NYSE on
June 5, 1996), that the value of a share of Class A Common Stock is $17.50
(the mid-point of the offering range set forth on the cover page of the
Common Stock Offerings Prospectus), and that no shares of restricted ISI
common stock or options to purchase ISI common stock held by Company
officers who are also ISI officers will be converted into shares of
restricted Class A Common Stock or options to purchase shares of Class A
Common Stock, 35,940 shares of Class A Common Stock would be issued in the
form of restricted stock and 799,513 shares of Class A Common Stock would
be reserved for issuance upon exercise of options outstanding upon
consummation of the Common Stock Offerings. See "Management--Directors'
Compensation" and "--Ryerson Tull 1996 Incentive Stock Plan."
18
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data presents the consolidated results of
operations for the five years ended December 31, 1995 and the three-month
periods ended March 31, 1995 and 1996, and should be read in conjunction with
the Company's Consolidated Financial Statements and the related notes thereto
appearing elsewhere in this Prospectus. The summary for each of the years in
the three-year period ended December 31, 1995 has been derived from the
Company's Consolidated Financial Statements and related notes thereto
appearing elsewhere in this Prospectus, which have been audited by Price
Waterhouse LLP, the Company's independent accountants. The summary for each of
the years in the two-year period ended December 31, 1992 has been derived from
separate audited Consolidated Financial Statements of the Company.
The summary for the three-month periods ended March 31, 1995 and 1996 has
been derived from the Company's unaudited consolidated financial statements
appearing elsewhere in this Prospectus. The information for interim periods is
unaudited, but, in the opinion of the Company, reflects all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the results of operations and financial condition for such
periods. Results for interim periods should not be considered as indicative of
results for any other periods or for the year. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------- ----------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- ------ --------
(IN MILLIONS, EXCEPT NUMBER OF EMPLOYEES AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net sales............... $1,655.9 $1,716.6 $1,893.3 $2,197.5 $2,450.1 $652.3 $ 625.3
Operating costs......... 1,639.7 1,689.5 1,836.9 2,099.4 2,301.4 610.2 588.7
-------- -------- -------- -------- -------- ------ --------
Operating profit........ 16.2 27.1 56.4 98.1 148.7 42.1 36.6
General corporate
expense, net of income
items.................. 10.6 8.4 7.4 6.9 0.7 0.4 (0.7)
Interest expense and
other expense on debt.. 17.1 12.8 10.9 2.9 2.6 0.7 0.6
-------- -------- -------- -------- -------- ------ --------
Income or (loss) before
income taxes........... (11.5) 5.9 38.1 88.3 145.4 41.0 36.7
Provision for income
taxes.................. 2.3Cr. 2.6 11.4 35.0 56.9 16.5 14.3
-------- -------- -------- -------- -------- ------ --------
Income or (loss) before
cumulative effect of
changes in accounting
principles............. (9.2) 3.3 26.7 53.3 88.5 24.5 22.4
Cumulative effect of
changes in accounting
principles(1).......... -- (84.1) -- -- -- -- --
-------- -------- -------- -------- -------- ------ --------
Net income or (loss).... $ (9.2) $ (80.8) $ 26.7 $ 53.3 $ 88.5 $ 24.5 $ 22.4
======== ======== ======== ======== ======== ====== ========
BALANCE SHEET (END OF
PERIOD):
Operating working capi-
tal(2)................. $ 320.9 $ 296.9 $ 363.5 $ 366.7 $ 373.0 $425.9 $ 423.3
Total assets............ 748.1 765.4 842.3 891.3 972.6 924.0 1,010.9
Long-term debt.......... 31.0 25.7 28.2 23.6 18.9 23.0 18.4
Stockholder's equi-
ty(3).................. 430.7 350.0 526.7 580.0 668.5 604.5 690.9
OPERATING DATA:
Tons shipped............ 1.74 1.87 2.08 2.33 2.35 .63 .64
Number of employees at
period end............. 5,224 5,040 5,093 5,158 4,993 5,206 4,965
Capital Expenditures.... $ 9.8 $ 9.3 $ 19.3 $ 20.4 $ 19.3 $ 3.0 $ 3.0
Ratio of earnings to
fixed charges(4)....... 0.5x 1.3x 3.3x 11.8x 19.2x 21.5x 21.4x
EBITDA(5)............... $ 25.3 $ 38.8 $ 69.6 $ 112.4 $ 169.8 $ 47.1 $ 42.9
</TABLE>
- --------
(1) The cumulative effect on prior years' results of operations of adopting,
effective January 1, 1992, FASB Statement No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions" was $72.3 million and for
adopting FASB Statement No. 109, "Accounting for Income Taxes" was $11.8
million.
(2) Includes trade accounts receivable and inventories less trade accounts
payable and accrued current liabilities.
(3) During the year ended December 31, 1993, ISI made a $150 million capital
contribution to the Company.
19
<PAGE>
(4) Earnings for the calculation of the ratio of earnings to fixed charges
consist of income before taxes. Earnings are increased by fixed charges
and previously capitalized interest amortized during the period. Fixed
charges consist of total interest charges (including capitalized
interest), amortization of debt expense and an appropriate share of rental
expense.
(5) EBITDA for any relevant period presented above represents operating profit
less general corporate expense, net of income items, plus depreciation and
amortization of goodwill and other intangibles. While EBITDA should not be
construed as a substitute for operating income or a better indicator of
liquidity than cash flow from operating activities, which are determined
in accordance with generally accepted accounting principles, it is
included herein to provide additional information with respect to the
ability of the Company to meet its future debt service, capital
expenditure and working capital requirements. EBITDA is not necessarily a
measure of the Company's ability to fund its cash needs. See the Company's
Consolidated Financial Statements and the related notes thereto appearing
elsewhere in this Prospectus.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company's net sales increased 48% to $2.5 billion in 1995 from $1.7
billion in 1991. During that same period, operating profit increased to 6.1%
of sales, totalling $148.7 million in 1995, from 1% of sales, totalling $16.2
million in 1991, and the number of tons shipped by the Company increased 36%
while the number of the Company's employees declined 4.4%. The Company
attributes the increase in its net sales, operating profit and tons shipped
and the decrease in the number of its employees to an improved economic
environment, an increased emphasis on cost control and productivity
improvements and marketing and sales programs targeted at sales of products
with higher profit margins.
Beginning in 1990, the Company instituted a number of initiatives intended
to reduce costs and improve asset utilization. The Company reorganized its
operations into five business units along product and geographic lines,
providing each business unit with the flexibility to meet customer needs while
making each business unit fully accountable for its results of operations. The
Company upgraded, and intends to continue upgrading, its computer-based
inventory and management information systems to measure and improve
productivity for each of its facilities and each of its processes. See "--
Capital Expenditures and Investments in Joint Venture." Since the fourth
quarter of 1994, the number of the Company's employees has decreased 4%
(mostly through attrition), while daily shipment levels have increased 6%.
During the same period, the Company successfully integrated the operations of
under-performing facilities in Jersey City and Boston into existing plants in
Philadelphia and Wallingford, Connecticut. The Company has also updated its
inventory measurement system and made significant changes in compensation,
recruiting and career management processes to better align employee goals with
the Company's objectives. The Company believes that these initiatives have
contributed significantly to the decline in the Company's operating costs (as
a percentage of sales) since 1991.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain income
statement data of the Company expressed as a percentage of net sales.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------- --------------
1993 1994 1995 1995 1996
------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Net sales....................... 100.0% 100.0% 100.0% 100.0% 100.0%
Operating costs................. 97.0 95.5 93.9 93.5 94.1
------- ------- ------- ------ ------
Operating profit................ 3.0 4.5 6.1 6.5 5.9
General corporate expense, net
of income items................ 0.4 0.3 0.0 0.1 (0.1)
Interest expense and other
expense on debt................ 0.6 0.2 0.2 0.1 0.1
------- ------- ------- ------ ------
Income before income taxes...... 2.0 4.0 5.9 6.3 5.9
Provision for income taxes...... 0.6 1.6 2.3 2.5 2.3
------- ------- ------- ------ ------
Net income...................... 1.4% 2.4% 3.6% 3.8% 3.6%
======= ======= ======= ====== ======
</TABLE>
The breakdown of the Company's sales revenue by product line has not varied
significantly over the last three years. See "Business--Products and
Services." The Company's gross profit as a percentage of net sales for its
product lines are all within a relatively small range and the Company's gross
profit as a percentage of net sales for its product lines have not varied
significantly over the last three years.
21
<PAGE>
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31,
1995
NET SALES. Net sales decreased 4.1% to $625.3 million for the three months
ended March 31, 1996 ("First Quarter 1996") from $652.3 million for the three
months ended March 31, 1995 ("First Quarter 1995"). Tons shipped increased
1.8% in First Quarter 1996 from First Quarter 1995, while selling prices per
ton declined 5.9%. The demand for metals and the U.S. economy were not as
strong in First Quarter 1996 as in First Quarter 1995. According to the SSCI,
the number of tons of steel shipped in the U.S. market by the Industry
decreased 6.9% in First Quarter 1996 from the year earlier quarter. However,
the Company was able to increase its number of tons shipped by increasing its
market share in First Quarter 1996 from First Quarter 1995, based on the
Company's analysis of SSCI data. The relative weakness in demand in First
Quarter 1996 caused selling prices per ton to decline 5.9% to $979 in First
Quarter 1996 from $1,040 in First Quarter 1995. Although the Company cannot
predict Industry demand, SSCI anticipates that demand in 1996 will remain
sluggish, with modest improvement for the balance of the year. There can,
however, be no assurance as to the future level of demand.
OPERATING COSTS. Operating costs decreased 3.5% to $588.7 million in First
Quarter 1996 from $610.2 million in First Quarter 1995. The Company's
operating costs consist of material purchases and other operating costs.
Material purchases decreased 4.3% to $477.2 million in First Quarter 1996 from
$498.4 million in First Quarter 1995. Material purchases per ton decreased 6%
or $48 to $747 in First Quarter 1996 from $795 in First Quarter 1995 due to
falling prices as demand weakened.
Other operating costs decreased 0.3% to $111.5 million in First Quarter 1996
from $111.8 million in First Quarter 1995. These costs include such expenses
as plant and office employee-related costs (e.g., wages, salaries, benefits,
incentive pay), freight expenses, plant supplies and maintenance, systems
costs, depreciation and state and local taxes. Since tons shipped increased
1.8% in First Quarter 1996 from First Quarter 1995, the decline in operating
costs is attributable to a reduction in other operating costs per ton of $3 to
$175 in First Quarter 1996 from $178 in the year earlier quarter. The total
number of Company employees declined 4.6% to 4,965 at March 31, 1996 from
5,206 at March 31, 1995 as tons shipped increased over the same period.
OPERATING PROFIT. Operating profit decreased 13.1% to $36.6 million in First
Quarter 1996 from $42.1 million in First Quarter 1995 as lower demand resulted
in reduced selling prices and lower gross profit per ton, partly offset by
lower expenses. Since selling prices per ton declined $61 in First Quarter
1996 from First Quarter 1995 and material purchases per ton fell $48 over that
period, gross profit per ton decreased $13 to $232 in First Quarter 1996 from
$245 in First Quarter 1995.
GENERAL CORPORATE EXPENSE, NET OF INCOME ITEMS. General corporate expense,
which represents the charge from ISI for services rendered to the Company,
decreased slightly to $1.7 million in First Quarter 1996 from $1.8 million in
First Quarter 1995. Other revenue, principally interest income from
investments in short-term marketable securities and from intercompany loans to
ISI, increased to $2.4 million in First Quarter 1996 from $1.4 million in
First Quarter 1995, primarily due to increased cash flow generated in 1995.
INTEREST EXPENSE AND OTHER EXPENSE ON DEBT. Interest expense and other
expense on debt decreased slightly to $0.6 million in the First Quarter 1996
from $0.7 million in the First Quarter 1995 due to reduced debt levels.
INCOME BEFORE INCOME TAXES. Income before income taxes decreased to 5.9% of
net sales in the First Quarter 1996 from 6.3% in the First Quarter 1995 for
the reasons discussed above.
PROVISION FOR INCOME TAXES. Provision for income taxes decreased 13.3% to
$14.3 million in the First Quarter 1996 from $16.5 million in the First
Quarter 1995 due primarily to the decrease in taxable
22
<PAGE>
income and to a slight reduction in the effective tax rate, which decreased to
39.0% in the First Quarter 1996 from 40.2% in the First Quarter 1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
NET SALES. Net sales increased 11.5% to $2.5 billion in 1995 from $2.2
billion in 1994. Tons shipped rose 0.8% in 1995 from 1994, while selling
prices per ton increased 10.6% over the same period. Tons shipped increased
due to a slight improvement in demand, which according to the SSCI increased
by 1% in 1995 compared to 1994. Based on the Company's analysis of SSCI data,
the Company's market share remained relatively constant from 1994 to 1995. The
Company's selling prices per ton increased $100 to $1,044 in 1995 from $944 in
1994, primarily due to higher prices in the Industry.
OPERATING COSTS. Operating costs increased 9.6% to $2.3 billion in 1995 from
$2.1 billion in 1994. Material purchases increased 11.4% to $1.9 billion in
1995 from $1.7 billion in 1994. Material purchases per ton increased 10.4% or
$75 to $798 in 1995 from $723 in 1994, as a result of higher market prices.
Other operating costs increased 2.6% to $428 million in 1995 from $417
million in 1994 and increased 1.7% on a per ton basis to $182 in 1995 from
$179 in 1994. The increase in other operating costs is partly attributable to
the 0.8% increase in tons shipped in 1995 compared to 1994. The increase in
other operating costs on a per ton basis resulted from higher incentive pay
due to improved profits, recognition of costs associated with the Company's
closing of its facility located in New Jersey, higher spending for systems-
related activities and inflation. The Company's total number of employees
declined 3.2% to 4,993 at the end of 1995 from 5,158 at the end of 1994 as
tons shipped increased over the same period.
OPERATING PROFIT. Operating profit increased 51.6% to $148.7 million in 1995
from $98.1 million in 1994, primarily due to improved gross profit per ton and
a modest increase in the volume of tons shipped. Since selling prices per ton
increased by $100 in 1995 compared to 1994, and material purchases per ton
rose $75, gross profit per ton for the Company increased by $25 to $246 in
1995 from $221 in 1994.
GENERAL CORPORATE EXPENSE, NET OF INCOME ITEMS. General corporate expense
decreased slightly to $6.8 million in 1995 from $7.4 million in 1994 because
of continued cost reduction efforts at ISI. Other revenue, principally
interest income, increased to $6.1 million in 1995 from $0.5 million in 1994.
This improvement in interest income was primarily the result of increased
average balances on intercompany loans to ISI and short-term marketable
securities in 1995 compared to 1994.
INTEREST EXPENSE AND OTHER EXPENSE ON DEBT. Interest expense and other
expense on debt decreased 10.3% to $2.6 million in 1995 from $2.9 million in
1994, principally due to reduced debt levels.
INCOME BEFORE INCOME TAXES. Income before income taxes increased to 5.9% of
net sales in 1995 from 4.0% in 1994 for the reasons discussed above.
PROVISION FOR INCOME TAXES. Provision for income taxes increased 62.6% to
$56.9 million in 1995 from $35.0 million in 1994 due to the increase in
taxable income as the effective tax rate remained virtually unchanged at 39.1%
in 1995 compared to 39.6% in 1994.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
NET SALES. Net sales increased 16.1% to $2.2 billion in 1994 from $1.9
billion in 1993. Tons shipped increased 12.0% in 1994 from 1993, while selling
prices per ton increased 3.6% over the
23
<PAGE>
same period. Based on the Company's analysis of SSCI data, the increase in
tons shipped was due both to greater demand and a modest increase in the
Company's market share. The Company's selling prices per ton increased $33 to
$944 in 1994 from $911 in 1993.
OPERATING COSTS. Operating costs increased 14.3% to $2.1 billion in 1994
from $1.8 billion in 1993. Material purchases increased 17.2% to $1.7 billion
in 1994 from $1.4 billion in 1993. Material purchases per ton increased 4.6%
or $32 to $723 in 1994 from $691 in 1993.
Other operating costs increased 3.8% to $417 million in 1994 from $401
million in 1993. Since tons shipped rose 12.0% in 1994 compared to 1993, and
other operating costs increased only 3.8% over the same period, these costs on
a per ton basis declined $14 to $179 in 1994 from $193 in 1993. The Company's
total number of employees increased only 1.3% to 5,158 at the end of 1994 from
5,093 at the end of 1993, despite the significant increase in tons shipped in
1994 compared to 1993. This productivity improvement, along with other cost
reduction initiatives, contributed to the reduction in other operating costs
per ton.
OPERATING PROFIT. Operating profit increased by 73.9% to $98.1 million in
1994 from $56.4 million in 1993, primarily due to increased volume of tons
shipped and reduced other operating costs per ton. Since selling prices per
ton increased by $33 in 1994 compared to 1993, and material purchases per ton
rose $32, gross profit per ton for the Company increased by $1 to $221 in 1994
from $220 in 1993.
GENERAL CORPORATE EXPENSE, NET OF INCOME ITEMS. General corporate expense
was unchanged at $7.4 million. Other revenue, principally interest income, was
$0.5 million in 1994 compared to zero in 1993.
INTEREST EXPENSE AND OTHER EXPENSE ON DEBT. Interest expense and other
expense on debt decreased 73.4% to $2.9 million in 1994 from $10.9 million in
1993. Interest expense on intercompany loans from ISI was zero in 1994
compared to $7.7 million in 1993. This reduction resulted from the Company's
repayment late in 1993 of its loan balance due to ISI with funds received from
an ISI capital contribution.
INCOME BEFORE INCOME TAXES. Income before income taxes increased to 4.0% of
net sales in 1994 from 2.0% in 1993 for the reasons discussed above.
PROVISION FOR INCOME TAXES. Provision for income taxes increased to $35.0
million in 1994 from $11.4 million in 1993. This increase in 1994 income taxes
was primarily the result of improved pre-tax earnings. In addition, 1993
income taxes were reduced by credits of $3.2 million representing prior year
adjustments and a change in the statutory income tax rate. These credits
resulted in an effective tax rate of 29.9% in 1993 compared to 39.6% in 1994.
LIQUIDITY AND FINANCING
The Company has historically financed its operations and growth primarily
through net cash provided by operating activities, limited borrowings from
third parties and capital contributions from ISI. The Company believes that
the New Credit Facility, if entered into, should provide the Company with
access to an additional source of capital to fund its future growth. Net cash
provided from (used for) operating activities amounted to $(25.3) million,
$79.7 million and $84.4 million for the years ended December 31, 1993, 1994
and 1995, respectively, and $(24.3) million and $(20.3) million for the three
months ended March 31, 1995 and 1996, respectively. Cash flow from operating
activities in 1995 improved only $5 million over 1994 despite an increase of
$35 million of net income due to a $13 million pension contribution and
increased operating working capital levels in 1995. The $105 million
improvement in cash flow from operating activities in 1994 compared to 1993
resulted primarily from increased net income of $27 million and an increase in
operating working capital of $67 million in 1993
24
<PAGE>
compared to only a $3 million increase in 1994. The negative cash flow from
operating activities of $(24.3) million and $(20.3) million in the first
quarter of 1995 and 1996, respectively, reflects the seasonal build-up of
operating working capital as increases in receivables and inventories exceeded
the income reported for those quarters.
During 1995, the total committed credit facilities of the Company's
subsidiaries increased to $225 million. Ryerson increased its $100 million
unsecured revolving credit facility (the "Ryerson Credit Facility") to $200
million and negotiated an extension of its term to March 31, 2000. The $25
million unsecured revolving credit facility (the "Tull Credit Facility")
expires on December 15, 1997. There was no borrowing under either of these
facilities during 1995 or the first three months of 1996. The Ryerson Credit
Facility and the Tull Credit Facility each require compliance with various
financial covenants including minimum net worth and leverage ratio tests. The
covenants also limit the amount of cash (or equivalents) that each of Ryerson
and Tull and its subsidiaries can transfer to the Company or ISI in the form
of dividends and advances. As of December 31, 1995 and March 31, 1996, Ryerson
and Tull were each in compliance with all of the covenants under its
respective credit facility. The interest rates on borrowing under the Ryerson
Credit Facility and the Tull Credit Facility are, at the Company's option,
based on Eurodollar, certificates of deposit, or the greater of federal funds
or prime rate. At year-end, the highest rate option for borrowing under either
of these credit agreements was the applicable prime rate.
As of March 31, 1996, Ryerson was also the guarantor of $110.8 million of
the Inland Steel Industries Thrift Plan ESOP notes (the "ESOP Guarantee"). The
ESOP notes are payable in installments through July 2004. The ESOP Guarantee
requires compliance with various financial covenants including minimum net
worth and leverage ratio tests and also limits Ryerson's ability to advance
funds or make dividend payments to the Company.
At March 31, 1996, approximately $200 million in the aggregate would have
been available for payment of dividends and advances to the Company under the
covenants contained in the Tull Credit Facility, the Ryerson Credit Facility,
the ESOP Guarantee and other debt agreements of the Company. This availability
was reduced on May 20, 1996 after a $75 million dividend was paid from Ryerson
to the Company. At March 31, 1996, after adjusting for this dividend,
approximately $125 million in the aggregate would have been available for
payment of dividends and advances to the Company under these agreements.
With respect to Ryerson's ability to advance funds or make dividend payments
to the Company, the most restrictive covenants on March 31, 1996 were
contained in the ESOP Guarantee. Under these covenants, Ryerson's ability to
dividend or advance funds to the Company at any time is limited to $30 million
(i) plus 80% of net income (decreased by 100% of net losses) earned by Ryerson
since December 31, 1989, (ii) minus the dollar amount of dividends paid and
capital stock repurchased and the balance of any advances outstanding and
(iii) plus capital contributions to Ryerson and the proceeds from the issuance
of any capital stock or certain other investments during such period. At March
31, 1996, approximately $145 million was available for making advances and
paying dividends to the Company under the ESOP Guarantee. At March 31, 1996,
after adjusting for the dividend referred to above, Ryerson's ability to
advance funds or make further dividend payments to the Company would have been
$70 million.
With respect to Tull's ability to advance funds or pay dividends to the
Company, the Tull Credit Facility and its senior notes contained the most
restrictive covenants on March 31, 1996. Under the Tull Credit Facility,
Tull's ability to pay dividends is limited by minimum tangible net worth and
net income requirements. The required minimum tangible net worth increases by
40% of net income each quarter, but is not reduced in the event of a net loss.
Under the terms of the senior notes, advances outstanding can be no more than
15% of tangible net worth. At March 31, 1996, approximately $55 million was
available for making advances and paying dividends to the Company under Tull's
debt agreements. Other covenants which could restrict dividends or advances to
the Company include
25
<PAGE>
tangible net worth and leverage tests at Ryerson and cumulative earnings,
leverage and working capital tests at Tull.
The Company has received a definitive commitment letter from its lead
commercial bank with respect to the New Credit Facility. Borrowings under the
New Credit Facility will rank pari passu with the Notes. The commitment is
subject to certain conditions, including among other things, that the Ryerson
Credit Facility and the Tull Credit Facility be terminated. Management
estimates that the initial borrowing under the New Credit Facility will be up
to $50 million, with a remaining availability of $200 million or more.
The New Credit Facility is expected to contain customary restrictive
covenants, including, among other things, leverage, minimum net worth and
fixed charge coverage requirements, and limitations on restricted payments
(including dividends), the addition of subsidiary debt (except for debt of
acquired companies and up to $50 million of purchase money debt), new
agreements that limit upstreaming of cash from subsidiaries, transactions with
affiliates, the existence of liens, and mergers and sales of assets. In
addition, the amount of credit available under the New Credit Facility will be
eliminated in the event of a change of control (as defined) of ISI or the
Company. Although the Company believes that the covenants will not materially
impact the Company's financial flexibility or future business, such covenants
may restrict the Company's ability to raise capital for operating needs,
capital expenditures and acquisitions and may result in the Company incurring
greater costs of capital than it would otherwise incur. The New Credit
Facility will expire in June 2000.
The Indenture governing the Notes will contain covenants that may limit the
Company's financial flexibility and that may affect the Company's conduct of
future business, although the Company believes that the covenants will not
materially impact its financial flexibility or future business. Such covenants
include limitations or prohibitions with respect to (i) the incurrence of
certain secured indebtedness, (ii) certain sale and leaseback transactions,
(iii) the payment of dividends, the repurchase of capital stock and the
prepayment of subordinated debt, (iv) transactions with affiliates and (v)
mergers, consolidations and certain sales of assets. See "Description of the
Notes."
The Company believes that available borrowings under its credit facilities
and anticipated cash flow from operations will provide sufficient liquidity to
meet its scheduled debt retirements, fund its capital program and meet any
operating cash requirements that may arise for at least the next 12 months.
In 1993, ISI made a $150 million capital contribution to the Company.
Proceeds from this capital contribution, along with cash generated internally
over the three-year period ended December 31, 1995 (after subtracting
increased working capital requirements resulting from increased activity
levels and funding capital projects), were used to repay borrowings from ISI
and subsequently to lend funds to ISI. At December 31, 1992, the Company owed
$108 million to ISI. Between December 31, 1992 and March 31, 1996, the Company
advanced an aggregate of $162 million to ISI, leaving a balance owed to the
Company at March 31, 1996 of $54 million.
On May 20, 1996, Ryerson paid a dividend of $75 million in cash to the
Company. The Company used the proceeds of this dividend to pay the May 1996
Dividend to ISI on May 20, 1996. ISI used $63.2 million of the proceeds from
the May 1996 Dividend to repay intercompany indebtedness owed to the Company
arising out of a corporate-wide cash management program. Following the
repayment of such indebtedness, the Company ceased participation in such
program and the Company's cash will no longer be held in ISI's accounts. With
the May 20, 1996 dividend payments and repayment of intercompany indebtedness,
all outstanding indebtedness for borrowed money between ISI and the Company
(including the Company's subsidiaries) was discharged.
Prior to the consummation of the Common Stock Offerings the Company will
declare a dividend payable in cash in an amount equal to the estimated net
proceeds from the Common Stock Offerings
26
<PAGE>
(estimated to be $84.4 million at an assumed initial offering price of $17.50
per share, the mid-point of the offering range set forth on the cover page of
the Common Stock Offerings Prospectus), and a dividend consisting of the
$293.8 million Note Payable to ISI. The Note Payable will mature five years
from its date of issuance and will bear interest at a specified prime rate.
The Note Payable may be prepaid, without penalty, at the option of the
Company. The net proceeds of the Common Stock Offerings were used to pay the
cash dividend to ISI and are not available to the Company. All of the net
proceeds of the Offering, together with a portion of the Company's available
cash and/or borrowings under credit facilities, will be used to discharge the
Note Payable to ISI. See "Use of Proceeds."
CAPITAL EXPENDITURES AND INVESTMENTS IN JOINT VENTURE
Capital expenditures for 1993, 1994 and 1995 were $19.3 million, $20.4
million and $19.3 million, respectively. Capital expenditures were primarily
used for buildings, machinery and equipment. In 1996, the Company anticipates
making capital expenditures of approximately $45 million to upgrade and expand
facilities and equipment, including approximately $3 million to upgrade its
computer-based inventory and management information systems. No assurances can
be given, however, that anticipated capital spending will occur. The Company
expects that its depreciation and amortization expense in future periods will
increase due to its anticipated capital investments.
In addition to the $45 million of planned capital expenditures in 1996 to
update and expand facilities, the Company expects to invest approximately $15
million in a previously announced joint venture with Geneva Steel. The Geneva
Steel joint venture, if completed, will own or lease and operate a coil plate
processing facility in the Chicago area. No assurance can be given that the
joint venture will be completed.
Most of the Company's assets are in working capital. At year-end 1995, the
Company had $409 million in inventory measured at current or approximate
replacement cost versus a book value of $263 million, $244 million in accounts
receivable and $107 million in accounts payable. The Company turned inventory
4.2 times during 1995 and averaged 40 days' sales outstanding in receivables
during 1995, both better than industry averages according to information
provided by the SSCI. For 1994 and 1993, inventory turnover was 4.1 times and
3.8 times, respectively, and the number of days' sales outstanding averaged 39
days and 40 days, respectively. The Company utilizes sophisticated inventory
management and profitability systems to monitor whether all working capital
assets remain current and profitable and to make changes when appropriate.
SUBSEQUENT EVENT
Effective June 1, 1996, ISI transferred to the Company its 50% interest in
Ryerson de Mexico, a joint venture with Altos Hornos de Mexico, S.A. de C.V.,
an integrated steel mill operating in Mexico. Ryerson de Mexico, which was
formed in 1994, is a general line metals service center and processor with 18
facilities in Mexico. As of April 30, 1996, ISI's investment in Ryerson de
Mexico totalled approximately $18 million. The impact of Ryerson de Mexico on
the Company's results of operations has not been material.
27
<PAGE>
BUSINESS
GENERAL
The Company, through its wholly-owned operating subsidiaries Ryerson and
Tull, is a general line metals service center and processor of metals. The
Company believes that it is the largest metals service center in the United
States based on sales revenue, with 1995 sales of $2.5 billion and a current
U.S. market share of approximately 9%, more than twice the U.S. market share
of its nearest competitor, based on the Company's analysis of SSCI data. The
Company distributes and processes metals and other material throughout the
continental United States, and is among the largest purchasers of steel in the
United States. With 52 interconnected facilities that place it within several
hundred miles of most of its customers, the Company is able to be responsive
to specific customer requests and is generally able to make deliveries of
stock items within 24 hours of receipt of a customer's order. Utilizing this
network of facilities and the Company's regionalized management systems, the
Company believes it can be responsive to individual customers while providing
a broad range of products and services. The Company also owns a 50% interest
in Ryerson de Mexico, a general line metals service center and processer with
18 facilities in Mexico.
Ryerson, the predecessor of the Company, was founded in 1842 by Joseph T.
Ryerson. Between 1986 and 1990, the Company implemented a strategy of growth
through acquisitions, expanding its geographic coverage by purchasing five
service center companies with 26 facilities for approximately $210 million,
plus assumed debt of $63 million. The Company acquired Tull, AFCO Metals, Inc.
and Southern Metals Corporation in 1986, 1988 and 1989, respectively,
establishing the Company's presence in the southeastern United States. The
Company's acquisition in 1989 of Processed Metals, Inc. (doing business under
the "Keelor Steel" and "Select Steel" names) expanded the Company's processing
capability in the midwestern United States, adding facilities in Minneapolis,
Minnesota and Marshalltown, Iowa. In 1990, the Company acquired the Metra
division of Schnitzer Steel, Inc., with facilities in Portland, Oregon,
Phoenix, Arizona and Salt Lake City, Utah, expanding the Company's presence in
the western United States.
The Company is divided into five operating business units along regional and
product lines with the following operations and locations:
<TABLE>
<CAPTION>
BUSINESS UNIT DESCRIPTION LOCATIONS
------------- ----------- ---------
<C> <S> <C>
Ryerson East Primarily general line service Buffalo, NY
centers Charlotte, NC
with substantial processing Chattanooga, TN
capabilities Cleveland, OH
Philadelphia, PA
Pittsburgh, PA
Wallingford, CT
Ryerson West Primarily general line service Denver, CO
centers Los Angeles, CA
with substantial processing Phoenix, AZ
capabilities Portland, OR
Salt Lake City, UT
San Francisco, CA
Seattle, WA
Spokane, WA
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
BUSINESS UNIT DESCRIPTION LOCATIONS
- ------------- ----------- ---------
<S> <C> <C>
Ryerson Central Primarily general line service Chicago, IL
centers with substantial processing Cincinnati, OH
capabilities Dallas, TX
Des Moines, IA
Detroit, MI
Houston, TX
Indianapolis, IN
Kansas City, MO
Milwaukee, WI
Minneapolis, MN
Omaha, NE
St. Louis, MO
Tulsa, OK
Tull/AFCO General line service centers Atlanta, GA
with some processing capabilities Baton Rouge, LA
Birmingham, AL
Charlotte, NC
Columbia, SC
Fort Smith, AR
Greensboro, NC
Greenville, SC
Jackson, MS
Jacksonville, FL
Little Rock, AR
Miami, FL
New Orleans, LA
Oklahoma City, OK
Richmond, VA
Shreveport, LA
Tampa, FL
West Memphis, AR
Wichita, KS
Ryerson Coil Processors Chicago, IL (two
Processing facilities)
Marshalltown, IA
Minneapolis, MN (two
facilities)
</TABLE>
The Company also owns a 50% interest in Ryerson de Mexico, a general line
metals service center and processor with 18 facilities located in Mexico. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Subsequent Event."
INDUSTRY OVERVIEW
Primary steel producers typically sell steel in the form of standard-sized
coils, sheets, plate, structurals, bars and tubes and generally sell in large
volumes with long lead times for production and delivery. Other primary metal
producers, such as producers of stainless steel and aluminum, also typically
sell their products in large volumes with long lead times for production and
delivery. However, many customers seek to purchase metals with customized
specifications, including value-added processing, in smaller volumes, on
shorter lead times and with more reliable delivery than primary metal
producers are able to provide. Metal service centers act as intermediaries
between primary metal producers and customers by purchasing metals in a
variety of shapes and sizes from primary metal producers in large volumes,
allowing metal service centers to take advantage of producer economies of
scale resulting in lower costs of material purchased, and engaging in a
variety of distribution and value-added processing operations to meet the
demands of specific customers.
29
<PAGE>
Because metal service centers purchase metals from a number of primary
producers, they can maintain a consistent supply of various types of metal
used by their customers. Most importantly, however, metal service centers
generally have lower fixed costs than primary metal producers. By purchasing
products from metal service centers, customers may be able to lower their
inventory levels, decrease the time between the placement of an order and
receipt of materials and reduce internal expenses, thereby lowering their
total cost of raw materials. The Company believes that the increased
prevalence of just-in-time inventory needs of manufacturers and intermediate
processors has made and will continue to make the value-added inventory,
processing and delivery functions performed by metal service centers more
important in the metals market.
The Industry is cyclical (with periods of strong demand and higher prices
followed by periods of weaker demand and lower prices), principally due to the
cyclical nature of the industries in which the largest consumers of metals
operate. Any significant slowdown in one or more of those industries could
have a material adverse effect on the demand for metals, resulting in lower
prices for metals and reduced profitability for metals service centers,
including the Company. Metals prices and metals service center profitability
improve as metal-consuming industries experience recoveries following economic
downturns.
The Industry is comprised of many companies, the majority of which have
operations limited as to product line and size of inventory and with customers
located in a specific geographic area. Based on SSCI data, the Company
believes that the Industry is comprised of between 750 and 1,000 service
centers, operating out of approximately 2,000 locations and servicing
approximately 300,000 customers. The Industry is highly fragmented, consisting
of a large number of small companies and a few relatively large companies.
Based on the Company's analysis of SSCI data, the Industry handled
approximately 27 million tons or approximately 25% of the metals distributed
in the United States in 1995.
The Industry is divided into three major groups: general line service
centers, specialized service centers and processing centers, each of which
targets different market segments. General line service centers handle a broad
line of metal products and tend to concentrate on distribution rather than
processing. General line service centers range in size from one location to a
nationwide network of locations. For general line service centers, individual
order size in terms of dollars and tons tends to be small relative to
processing centers, while the total number of orders is typically very high.
Specialized service centers focus their activities on a narrower range of
product and service offerings than general line companies. Such service
centers provide a narrower range of services to their customers and emphasize
product expertise and lower operating costs, while maintaining a moderate
level of investment in processing equipment. Processing centers typically
process large quantities of steel purchased from primary producers for resale
to large industrial customers, such as the automotive industry. Because orders
are typically large, operation of a processing center requires a significant
investment in processing equipment.
Because of the difficulty of differentiating commodity-like products, many
service centers attempt to differentiate themselves through the use of
sophisticated information systems and unique processing services, which
facilitate the provision of enhanced services at reduced cost. To varying
degrees at all service centers, but particularly at the larger, more
sophisticated companies, elaborate computer-based systems are used to automate
tasks such as order entry, material tracking, work-order scheduling and
processing, inventory management, billing and accounts payable and receivable
tracking. Some companies are creating and enhancing EDIs between themselves
and their suppliers and customers. The introduction and development of these
systems have increased the quality of products and services provided by
service centers.
Management believes that, in recent years, there has been a trend towards
increased outsourcing by manufacturers of certain operations and the
production of component parts, with manufacturers
30
<PAGE>
concentrating on producing finished products. Many industrial companies have
been unwilling or unable to invest the significant amount of capital in the
space, technology and equipment necessary to store and process metals required
for their operations. By outsourcing certain operations, including inventory
management, processing, blanking and precision burning, many manufacturers are
able to accommodate shorter production runs and changeover times. This
increased flexibility allows them to better respond to competitive pressures.
Moreover, many manufacturers find it beneficial, from a cost and quality
standpoint, to outsource many of the component parts that are utilized in the
production of their products. At the same time, manufacturers have been
reducing the number of suppliers that they rely on in order to reduce the
administrative cost of dealing with multiple suppliers and to take advantage
of volume discounts.
Management believes that, in recent years, there has also been a trend in
the Industry towards consolidation, which the Company believes will continue
as long as the introduction of sophisticated operational and computer-based
systems continues to create economies of scale. Based on the Company's
analysis of SSCI data, the Industry has increased its share of metals
distributed in the United States from approximately 17% in 1980 to
approximately 25% in 1995. The Company believes that it is well positioned to
take advantage of acquisition opportunities that may arise from consolidation
in the Industry because of its capital resources, acquisition experience and
nationwide presence.
BUSINESS STRATEGY
The Company's strategy is to expand its market leadership position as a
nationwide general line metals service center and processor of metals by
providing its customers with high quality products and services at competitive
prices. The Company believes that increasing its market share will be an
effective means of increasing its profitability. One of the Company's goals is
to enhance its competitive position through the aggressive pursuit of organic
growth, strategic acquisitions, ongoing unit cost reductions and increased
asset productivity, although there can be no assurance that the Company will
achieve this goal. As part of its overall business strategy, the Company has
made substantial investments in management information systems that link its
operations and enhance interactions between the Company and its customers and
suppliers. Based on its size, which leads to cost efficiencies, the trend
towards consolidation in the number of suppliers used by customers, strategic
plant locations, broad product and service offerings and management's
acquisition strategy, the Company believes that it is well positioned to take
advantage of the anticipated growth and consolidation in the Industry. See "--
Industry Overview."
ORGANIC GROWTH
The Company believes that it can benefit from both the anticipated growth of
the Industry and the growth of its market share within the Industry.
The Company believes that the Industry occupies a growing niche between
primary producers of carbon, alloy and stainless steel, aluminum and other
metals and purchasers of those products, including manufacturers and
intermediate processors. Metals service centers, including the Company,
provide services not typically available from primary producers, such as more
reliable deliveries, smaller order sizes, the convenience of dealing with a
smaller number of suppliers, just-in-time inventory management and customer-
specific, value-added processing. The Company believes that the role of metals
service centers is expanding as a result of a number of factors, including the
increased outsourcing of inventory management functions and metals processing
operations by manufacturers and the lower cost and more reliable service
available from service centers as compared to primary producers.
One of the Company's goals is to expand its market leadership position
within the Industry through competitive pricing, broad product and service
offerings and the use of technology to improve customer service. The Company's
large size, buying power and competitive cost structure enable it to negotiate
31
<PAGE>
favorable prices for raw materials and to take advantage of producer economies
of scale resulting in lower costs of materials purchased, allowing it to offer
its products and services at competitive prices. In addition, the Company's
broad product and service offerings provide customers one-stop shopping,
positioning the Company to capitalize on what it believes to be a continuing
trend towards consolidation in the number of suppliers used by customers. To
this end, the Company has initiated a national accounts program targeting
customers that purchase metal from a number of suppliers throughout the
country. The Company believes it can better serve these customers by providing
competitive pricing and superior delivery and quality. One of the Company's
goals is to differentiate itself from its competitors by providing materials
and services on a more timely basis and with fewer rejections than its
competitors through increased emphasis on quality control. The Company has
received ISO 9002 certification for five facilities and will seek
certification for additional facilities in the future. ISO 9002 is a series of
international standards for quality management and assurance. The Company
believes that certain major customers seek suppliers with such certification
and that such certification helps differentiate it from its competitors.
STRATEGIC ACQUISITIONS
The Company believes that the fragmented nature of the Industry, combined
with the Company's strong national reputation, nationwide operations, market
leadership position and experience in integrating facility operations make the
Company well situated to become a strategic buyer of service center assets.
The Company will seek selective acquisitions of businesses that complement, or
strategically extend, the Company's existing businesses. Acquired companies
can be either integrated into the Company's network or, depending on the
circumstances, operated as stand-alone facilities. In either case, the Company
believes that such acquisitions could enable it to realize further economies
of scale (particularly in operating cost, asset utilization and purchasing
leverage) and could better utilize the Company's existing facilities and
systems capability. Although the Company from time to time discusses potential
acquisitions with other service center operators, the Company currently has no
understandings, agreements or commitments to make any acquisitions.
The Company believes that its ability to integrate acquired operations into
its existing facility operations will be critical to the ongoing success of
its acquisition strategy. Although the Company has not acquired any operations
since 1990, the Company believes that management's experience in successfully
integrating existing operations has provided it with experience relevant to
integrating acquired businesses. During 1994 and 1995, the Company closed two
low-profit facilities in Boston and Jersey City, integrating these operations
with plants in Wallingford, Connecticut and Philadelphia. These consolidations
resulted in a high level of customer retention, increased profitability, a
significantly lower cost and asset base and, the Company believes, a
comparable level of customer service. While the Company has achieved
profitable operations of businesses acquired in the past, there can be no
assurance that any future acquisitions, if completed, would be profitable.
UNIT COST REDUCTIONS AND INCREASED PRODUCTIVITY
Another of the Company's goals is to decrease unit costs through initiatives
which include increasing volume, thereby taking advantage of economies of
scale, and increasing asset and employee productivity. The Company has made
and will continue to make investments in computer-based and automated systems
that track profitability by customer, product and cost of process, allowing
the Company to determine where changes can be made to reduce cost and increase
profitability. The Company intends to increase its emphasis on the use of EDI
with its suppliers and customers to reduce the paperwork and administrative
costs associated with customer orders, shipment tracking, billing and
remittance processing. The Company continues to re-engineer its various work
processes through benchmarking analyses across its 52 facilities. Re-
engineering enables the Company to increase output without increasing its
labor force by increasing the efficiency with which work processes are
performed.
32
<PAGE>
Finally, the Company has continued to improve its inventory management
systems and processes. Management believes improved forecasting and aggressive
supplier management should increase asset productivity. Also, to the extent
that sales grow, the Company believes that it can improve inventory management
and reduce total inventory per dollar of sales. The Company has installed
computer-based systems to enable it to more accurately measure and control the
appropriate inventory level.
COMPETITIVE STRENGTHS
The Company has a number of competitive strengths that it believes will
facilitate the implementation of the Company's strategy, including its market
leadership position and its management systems and practices.
MARKET LEADERSHIP POSITION
With $2.5 billion of sales in 1995, the Company has a U.S. market share of
approximately 9%, more than twice the U.S. market share of the next largest
competitor, based on the Company's analysis of SSCI data. The Company sells
its products through 52 facilities located throughout the United States.
ECONOMIES OF SCALE. Because of the Company's large size, its costs of
operations can be spread across a large base of sales, resulting in lower
fixed costs per ton sold. However, in times of decreasing sales, the Company's
fixed costs must be spread across a smaller base of sales, resulting in higher
fixed costs per ton sold. The Company believes that available capacity at many
of its plants will allow it to achieve further economies of scale to the
extent it increases sales in the future. Of the Company's 52 facilities, six
are currently operating one shift, 31 are operating two shifts and 15 are
operating three shifts. In addition, the size of the Company's material
purchases enables its suppliers to realize economies of scale and thereby
provide the Company with competitive prices.
SCOPE OF PRODUCTS AND SERVICES. The Company's broad product and service
offerings provide customers one-stop shopping for most of their metals needs.
In addition, the Company believes that its 52 facilities located throughout
the continental United States, generally within one day's delivery time of
almost all U.S. manufacturing centers, position it to target national
customers that currently buy metals from a variety of suppliers in different
locations. The Company's ability to transfer inventory among facilities
enables it to have available specialized items at regional locations
throughout its network and to provide such inventory on a timely basis more
profitably than if it were required to maintain inventory of all products at
each location.
RELATIONSHIPS WITH SUPPLIERS. The Company is among the largest purchasers of
steel in the United States and is also a significant purchaser of aluminum in
the United States. The Company buys from and has developed relationships with
many U.S. steel producers as well as other metal producers. The Company's
relationships with numerous metal producers provide it access to high quality
metals, timely delivery and new product and service ideas from many suppliers.
In addition, because the Company purchases large volumes of metals, it can
negotiate competitive prices from its suppliers. In part because of its buying
power, the Company has been able to secure product from primary manufacturers
during times of tight supply.
DIVERSE CUSTOMER BASE. The Company's diverse customer base, consisting of
over 50,000 customers, reduces its exposure to the failure of a single
customer's business or a downturn in a particular industry. No customer
accounted for more than 2% of 1995 sales and the top ten customers accounted
for approximately 10% of 1995 sales. The Company sells to customers in most of
the metal-consuming industries, including machinery manufacturers, metal
producers and fabricators, transportation equipment producers and electrical
machinery producers.
33
<PAGE>
MANAGEMENT SYSTEMS AND PRACTICES
The Company's management information systems have allowed management to
develop an internal benchmarking system and to track profitability by
customer, product and cost of process. This detailed information enables
management to make adjustments such as reallocating slow-moving inventory to
different locations to increase inventory turns, improving purchasing,
targeting customers or changing suppliers as needed. The Company's 52
facilities provide it with a large base for testing, comparing and
implementing new management practices.
The Company has spent $40 million to maintain and improve its management
information systems over the last three years. The Company operates data
processing systems that, among other functions, are used to purchase, monitor
and allocate inventory throughout its interconnected production facilities.
The Company believes that this monitoring has enabled it to effectively manage
inventory costs and achieve improved turnover rates. These systems also
include computerized order entry, sales analysis, inventory and work-in-
process status, invoicing and payment, and are designed to improve
productivity for both the Company and its customers. The Company also uses
EDI, which offers customers a paperless process for shipment tracking,
billing, remittance processing and other routine matters.
PRODUCTS AND SERVICES
The Company carries a full line of carbon steel, stainless steel and
aluminum, and a limited line of alloy steel, nickel, red metals and plastics.
These materials are inventoried in a number of shapes, including coils,
sheets, rounds, hexagons, square and flat bars, plate, structurals and tubing.
The following table sets forth the Company's shipments (by sales revenue)
for 1993, 1994 and 1995 for each of the Company's product lines.
<TABLE>
<CAPTION>
PERCENTAGE OF
SALES REVENUE
----------------
PRODUCT LINE 1993 1994 1995
- ------------ ---- ---- ----
<S> <C> <C> <C>
Stainless and aluminum........................................ 23% 23% 27%
Carbon flat rolled............................................ 28 28 24
Bars, tubing and structurals.................................. 23 23 22
Fabrication and carbon plate.................................. 19 19 20
Other......................................................... 7 7 7
--- --- ---
Total....................................................... 100% 100% 100%
=== === ===
</TABLE>
More than one-half of the material sold by the Company is processed. The
Company uses techniques such as sawing, slitting, blanking, pickling, cutting
to length, levelling, flame cutting, laser cutting, edge trimming, edge
rolling, fabricating and grinding to process materials to specified thickness,
length, width, shape and surface quality pursuant to specific customer orders.
Among the most common processing techniques used by the Company are pickling,
a chemical process using an acidic solution to remove surface oxide, commonly
called "scale," from steel which develops after the steel is hot rolled;
slitting, which is cutting coiled metals to specified widths along the length
of the coil; levelling, which is flattening metals and cutting them to exact
lengths; and edge rolling, a process which imparts round or smooth edges.
Although the Company often uses third party fabricators to outsource certain
limited processes that the Company is not able to perform internally,
outsourcing these processes does not affect a significant part of the
Company's operations or constitute a significant part of the Company's
operating costs and expenses.
The plate burning and fabrication processes are particularly important to
the Company. These processes require sophisticated and expensive processing
equipment. As a result, rather than making
34
<PAGE>
investments in such equipment, manufacturers have increasingly outsourced
these processes to material service centers. The Company has flame and laser
cutting capacity in 41 of its 52 facilities.
The Company performs a number of services that generate value for its
customers, including just-in-time delivery, production of kits containing
multiple products for ease of assembly by the customer, the provision of
Company-owned material to the customer and the placement of Company employees
at the customer's site for inventory management, production and technical
assistance. The Company also provides special stocking programs where products
that would not otherwise be stocked by the Company are held in inventory to
meet certain customers' needs. The foregoing services are designed to reduce
customers' costs by minimizing their investment in inventory and improving
their production efficiency.
In addition, the Company provides customers with technical advice on part
design and material specification and early stage material processing and
fabrication. Early stage material processing and fabrication by the Company
can benefit customers that cannot economically perform such processes at their
own plants. Technical advice and early stage processing functions are intended
to reduce a customer's material cost and ultimately its finished product cost.
All of the Company's products and services can be ordered through EDI, a
sophisticated electronic network that connects the Company's plants, as well
as certain of the Company's vendors and customers. Orders can also be
transmitted through direct ordering systems. Intricate design specifications
for particular jobs also can be electronically transmitted. Order entry
through scheduling, processing and shipping are monitored by the Company's
computer system and bar coding is available to aid in, and reduce the cost of,
tracking material at customer sites.
CUSTOMER BASE
The Company's customer base is diverse, numbering over 50,000. No customer
accounted for more than 2% of the Company's sales in 1995 and the top ten
customers accounted for approximately 10% of the Company's sales in 1995. The
Company's customer base includes most metal-consuming industries, most of
which are cyclical. The Company's shipments (by sales revenue) for 1993, 1994
and 1995 for each class of the Company's customers were as set forth in the
table below.
<TABLE>
<CAPTION>
PERCENTAGE OF
SALES REVENUE
----------------
CLASS OF CUSTOMER 1993 1994 1995
- ----------------- ---- ---- ----
<S> <C> <C> <C>
Machinery manufacturers....................................... 35% 36% 38%
Metal producers and fabricators............................... 25 25 25
Transportation equipment producers............................ 9 10 10
Electrical machinery producers................................ 10 9 9
Wholesale distributors........................................ 4 3 3
Construction-related purchasers............................... 5 4 3
Metal mills and foundries..................................... 3 3 3
Other......................................................... 9 10 9
--- --- ---
Total....................................................... 100% 100% 100%
=== === ===
</TABLE>
The Company believes it is particularly well suited to service regional or
national customers that value the Company's nationwide network of facilities,
broad product and service offerings, technical expertise and emphasis on
customer service. The Company believes that many of these customers value the
technical capability and single sourcing of most or all of their multiple
product needs that the Company is able to provide.
The Company's flat rolled processing business unit, Ryerson Coil Processing
("Ryerson Coil"), generally serves a customer base that differs from the
Company's general line service center business.
35
<PAGE>
A large portion of Ryerson Coil's customers have long-term supply contracts
with Ryerson Coil. These contracts are typically at fixed prices and are
generally from three months to one year in duration, although Ryerson Coil has
a small number of arrangements with large customers that extend beyond one
year. Ryerson Coil attempts to limit its financial exposure on these fixed-
price sales arrangements by entering into fixed-price supply arrangements with
one or more suppliers for comparable periods of time. Ryerson Coil's customers
often seek large quantities of carbon sheet product that have undergone one or
more of the following processes: pickling, cutting to length, slitting,
tension levelling, texturing or blanking. Many of Ryerson Coil's approximately
625 customers are in the transportation, appliance, office furniture or
cabinetry businesses.
SUPPLIERS
In 1995, the Company purchased in excess of 2.3 million tons of material
from many suppliers, including approximately 400,000 tons from ISC, a wholly-
owned subsidiary of ISI. The Company expects to continue purchasing
significant amounts of steel from ISC in the future, although there can be no
assurance that such purchases will continue. See "Relationship with ISI--
Supply Arrangements." Excluding ISC, the Company's top 25 suppliers accounted
for approximately 50% of 1995 purchases.
The Company purchases the majority of its inventories in the open market at
prevailing market prices. However, occasionally the Company enters into long-
term, fixed-price supply contracts to offset its long-term, fixed-price sales
contracts in order to minimize its financial exposure.
Because the Company uses many suppliers and because there is a substantial
overlap of product offerings from these suppliers, the Company believes it
will be able to meet its materials requirements for the foreseeable future.
The Company works with and monitors its suppliers in order to obtain
improvements in price, quality, service, delivery and performance. The Company
believes it has good relationships with most of its suppliers.
SALES AND MARKETING
Each of the Company's business units maintains its own sales and marketing
force. In addition to its office sales staff, the Company markets and sells
its products through the use of its field sales force that has extensive
product and customer knowledge and through a comprehensive catalog of the
Company's products. The Company's office and field sales staffs, which
together consist of 725 employees, include technical and metallurgical
personnel. In addition, the Company's technically-oriented marketing
department develops advertising materials and maintains product expertise for
each of the various types of materials sold and industries serviced by the
Company.
During 1995, the Company began a number of sales and marketing programs
which it believes will enhance its ability to grow. As part of this effort,
the Company appointed a national sales director to market its products and
services to customers with a national presence. These customers typically
place orders from each of their plants with local suppliers, resulting in
national customers having multiple suppliers for similar products. The Company
believes that it can better serve these customers by providing competitive
pricing and superior delivery and quality. The Company believes that no
competitor of the Company currently has as broad a national coverage as the
Company.
In addition, the Company recently began a sales territory market analysis to
improve sales force productivity. One of the primary goals of the analysis is
to determine what products can be sold to metal-consuming manufacturers and
processors with whom the Company currently does little or no business.
DISTRIBUTION
The Company has a nationwide distribution network and management information
systems that generally enable delivery of a customer's order from the most
economic plant location within 24 hours.
36
<PAGE>
The Company's management information systems create an integrated network of
plants and distribution facilities that has contributed to a reduction in
inventory levels and lower overall product delivery costs while improving
customer service. The Company typically ships inventory between its facilities
and products to customers by Company trucks and by common carrier.
MANAGEMENT INFORMATION SYSTEMS
The Company operates data processing systems that, among other functions,
are used to purchase, monitor and allocate inventory throughout its production
facilities. The Company believes that this monitoring enables it to
effectively manage inventory costs and achieve improved turnover rates. These
systems also include computerized order entry, sales analysis, inventory
status, work-in-process status, invoicing and payment. The systems are
designed to improve productivity for both the Company and its customers. The
Company also uses EDI, which has the advantage of offering customers with EDI
capability a paperless process for shipment tracking, customer billing,
remittance processing and other routine matters. In addition, an activity-
based costing system is available to help the Company measure profitability
and facilitate changes in process when needed.
PROPERTIES
The Company's headquarters are located in Chicago, Illinois. Of the
Company's 52 facilities, 45 are owned, five are leased and two are owned in
part and leased in part. Additionally, two of the five regional offices are
leased. Most leases have initial terms of more than one year and include
options to renew. While some of the Company's leases expire in the near term,
the Company does not believe that it will have difficulty either renewing such
leases or finding alternative sites. The Company's facilities are capable of
being utilized at higher capacities, if necessary. The Company believes that
its facilities are adequate for the purposes for which they are presently
used.
EMPLOYEES
As of March 31, 1996, the Company employed 4,965 persons. Of these
employees, 2,327 were salaried employees and 2,638 were hourly employees.
Approximately 40% of the hourly employees were members of various unions,
including the United Steelworkers and the Teamsters. The Company's
relationship with the various unions generally has been good, but occasional
work stoppages have occurred. Over the last five years, work stoppages have
occurred at two facilities (approximately 4% of the total), have involved an
average of 46 employees and have lasted an average of eight days. During the
next 12 months, labor contracts covering 652 employees at 15 facilities will
expire. The current agreement with the United Steelworkers will expire on July
31, 1996, and agreements with the Teamsters expire on various dates during the
period beginning June 30, 1996 and ending May 15, 1999. Excluding these
agreements with the United Steelworkers and the Teamsters, one contract
covering 27 employees is due to expire in 1996, and four contracts covering 83
employees are due to expire in 1997. While the Company's management does not
expect any unresolvable issues to arise in connection with the renewal of any
of these contracts, no assurances can be given that any of these contracts
will be extended prior to their expiration.
Prior to April 30, 1996, certain of the Company's employees were eligible to
participate in the ISI Pension Plan, a noncontributory defined benefit pension
plan. Effective April 30, 1996, that portion of the ISI Pension Plan covering
the Company's current and former employees was separated and became the
Pension Plan. See "Management--Pension Benefits" and "Relationship with ISI."
Almost all employees are covered by Company-provided life insurance and a
health benefits plan which provides broad health coverage for employees and
their families. Premiums for this health coverage are shared between the
Company and its employees. The Company believes that its salary and benefits
structure is competitive in the Industry.
37
<PAGE>
COMPETITION
The Company is engaged in a highly fragmented and competitive Industry. In
general, competition is based on quality, service, price and geographic
proximity. Based on SSCI data, the Company believes that the Industry is
comprised of between 750 and 1,000 service centers, operating out of
approximately 2,000 locations. The Company competes with many other general
line service centers, specialized service centers and processing centers on a
regional and local basis, some of which may have greater financial resources
and flexibility than the Company. The Company also competes to a lesser extent
with primary steel producers. Primary steel producers typically sell to very
large customers that require regular shipments of large volumes of steel.
Although these large customers sometimes use metals service centers to supply
a portion of their metals needs, metals service center customers (including
the Company's customers) typically are consumers of smaller volumes of metals
than customers of primary steel producers. To the extent that some of the
Company's competitors purchase a higher percentage of metals than the Company
from foreign steelmakers, such competitors may benefit from favorable exchange
rates or other economic or regulatory factors that may result in a competitive
advantage. This competitive advantage may be offset somewhat by higher
transportation costs associated with importing metals into the United States.
Industry demand, in general, has weakened since mid-1995. As a result, the
Company has been reducing its prices since mid-1995 to remain competitive.
The Company believes that it is well positioned in the Industry because of
its large number of locations, highly trained technical sales force,
sophisticated computer systems, modern equipment, broad-based inventory and
the economies of scale provided by its highly interconnected network of
facilities. In addition, the Company believes that it is strong in processing
materials, particularly in cutting materials to length, slitting, sawing,
plate burning and fabrication. Based upon Industry data, the Company believes
that it is the largest general line metals service center in the United States
based on sales revenues.
The Company intends to differentiate itself from the competition based on
improved service and quality through investments in systems, equipment,
product and service offerings and by attaining a low-cost position compared to
many of its competitors. The Company believes that it has initiatives in place
that will produce results in these areas and that it is well positioned
operationally and financially to make advantageous capital investments and
acquisitions.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
The Company's operations are subject to many federal, state and local
regulations relating to the protection of the environment and to workplace
health and safety. In particular, the Company's operations are subject to
extensive federal, state and local laws and regulations governing waste
disposal, air and water emissions, the handling of hazardous substances,
environmental protection, remediation, workplace exposure and other matters.
The Company's management believes that the Company is presently in substantial
compliance with all such laws and does not currently anticipate that the
Company will be required to expend any substantial amounts in the foreseeable
future in order to meet current environmental, workplace health or safety
requirements. However, additional costs and liabilities may be incurred to
comply with current and future requirements, which costs and liabilities could
have a material adverse effect on the Company's results of operations or
financial condition.
There are no known pending remedial actions or claims relating to
environmental matters that are expected to have a material effect on the
Company's financial position or results of operations. Some of the properties
owned or leased by the Company, however, are located in industrial areas or
have a history of heavy industrial use. These properties may potentially incur
environmental liabilities in the future that could have a material adverse
effect on the Company's financial condition or results of operations.
38
<PAGE>
RYERSON DE MEXICO
The Company also owns a 50% interest in Ryerson de Mexico, a joint venture
with Altos Hornos de Mexico, S.A. de C.V., an integrated steel mill operating
in Mexico. Ryerson de Mexico, which was formed in 1994, is a general line
metals service center and processor with 18 facilities in Mexico. As of April
30, 1996, the Company's investment in Ryerson de Mexico totalled approximately
$18 million. The impact of Ryerson de Mexico on the Company's results of
operations has not been material.
PATENTS AND TRADEMARKS
The Company owns several U.S. patents and U.S. and foreign trademarks,
service marks and copyrights. Certain of the trademarks are registered with
the U.S. Patent and Trademark Office and, in certain circumstances, with the
trademark offices of various foreign countries. The Company's patents expire
over various periods of time beginning in 2011. The Company believes that the
expiration of its patents will not materially adversely affect its business.
The Company considers certain other information owned by it to be trade
secrets. The Company protects its trade secrets by, among other things,
entering into confidentiality agreements with employees regarding such matters
and implementing measures to restrict access to sensitive data and computer
software source code on a need-to-know basis. The Company believes that these
safeguards adequately protect its proprietary rights and the Company
vigorously defends these rights.
The Company's operating subsidiaries own or have obtained licenses for
various trademarks, service marks, trade names, copyrights, inventions, know-
how, trade secrets, confidential information and other intellectual property
that are necessary for the conduct of its businesses (collectively,
"Intellectual Property"). Neither the Company nor its operating subsidiaries
is aware of any claim (or of any facts that would reasonably be expected to
result in any such claim) or challenge by any third party that would
significantly limit the rights of the Company or its operating subsidiaries
with respect to any such Intellectual Property or to challenge the validity or
scope of any such Intellectual Property. The Company has no pending claim
against a third party with respect to the infringement by such third party to
any such Intellectual Property that, if determined adversely to the Company,
would individually or in the aggregate have a material adverse effect on the
Company's financial condition or results of operations. While the Company
considers all of its intellectual property rights as a whole to be important,
the Company does not consider any single right to be essential to its
operations as a whole.
LEGAL PROCEEDINGS
From time to time the Company is named as a defendant in legal actions
arising in the ordinary course of its business. The Company is not a party to
any pending legal proceedings other than routine litigation incidental to its
business. Management does not believe that the resolution of these claims will
have a material adverse effect on the Company's financial condition or results
of operations.
39
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The Company's Directors and executive officers and their ages as of June 10,
1996 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert J. Darnall............... 58 Chairman and Director
President, Chief Executive Officer and
Neil S. Novich.................. 41 Director
Jay M. Gratz.................... 44 Vice President, Finance and Chief Financial
Officer
Stephen E. Makarewicz........... 49 President, Tull
Carl G. Lusted.................. 60 President, Ryerson Central
Gary J. Niederpruem............. 44 President, Ryerson East
Thomas S. Cygan................. 51 President, Ryerson West
Timothy L. LaPerre.............. 50 President, Ryerson Coil
William Korda................... 48 Vice President, Human Resources
Darell R. Zerbe................. 53 Vice President, Information Technology
Lily L. May..................... 46 Controller
Vicki L. Avril.................. 41 Treasurer
Charles B. Salowitz............. 47 Secretary
James A. Henderson.............. 61 Director
Donald S. Perkins............... 69 Director
Jean-Pierre Rosso............... 55 Director
</TABLE>
Robert J. Darnall has been Chairman of the Company and Chairman and Chief
Executive Officer of Ryerson since April 1995. He formerly was Chairman of the
Company from November 1990 to June 1994. He has been President, Chief
Executive Officer and a Director of ISI since April 1986 and became Chairman
of ISI in 1992. He is also Chairman, President and Chief Executive Officer of
ISC and has been a Director of ISC since 1983. He joined ISC in 1962, has
served as its Chairman since 1992, as its Chief Executive Officer from 1992 to
1995 and since April 1996 and as its President from 1984 to 1986, 1987 to 1992
and since April 1996. Mr. Darnall is also a Director of Cummins Engine
Company, Inc. and Household International, Inc. Although Mr. Darnall devotes a
substantial portion of his time to the Company, most of his time is devoted to
ISI and its other subsidiaries.
Neil S. Novich has been President, Chief Executive Officer and Chief
Operating Officer of the Company, President of Ryerson and Chairman of Tull
since June 1994. Mr. Novich was also appointed a Director of the Company in
June 1994. He served as Chairman of Ryerson from June 1994 to April 1995. He
was a Senior Vice President of ISI from January 1995 to May 1996 and served as
a Vice President of ISI from June 1994 to January 1995. Prior to joining ISI
in 1994, he led the Distribution and Logistics Practice at Bain & Company
("Bain"), an international management consulting firm, from 1987 and was
employed by Bain beginning in 1981.
Jay M. Gratz has been Vice President, Finance of the Company since September
1994 and Vice President, Finance and Chief Financial Officer of ISI since May
1996. He was Vice President, Finance of ISC from March 1993 to September 1994
and Vice President, Finance of the Inland Steel Flat Products Company division
of ISC from November 1991 to March 1993. Mr. Gratz also served as General
Manager of Financial Planning and Analysis of ISI from December 1989 to
November 1990 and Manager of Financial Planning and Analysis of ISI from July
1986 to December 1989. Mr. Gratz joined ISC in August 1975.
Stephen E. Makarewicz has been President, Chief Executive Officer and Chief
Operating Officer of Tull since October 1994. Mr. Makarewicz was Vice
President and General Manager of Ryerson Chicago from April 1992 to October
1994, Vice President and General Manager of Tull from June 1990
40
<PAGE>
to April 1992 and District Manager for Tull's Charlotte facility from June
1988 to June 1990. Mr. Makarewicz originally joined Tull in September 1983.
Carl G. Lusted has been President of the Ryerson Central division of Ryerson
since August 1990. Mr. Lusted was Vice President and General Manager of Tull
from August 1984 to August 1990, Vice President, Merchandising of Tull from
January 1983 until August 1984, Vice President, Marketing of Tull from
September 1979 to January 1983 and Corporate Secretary of Tull from April 1979
to September 1979. Mr. Lusted originally joined Tull in January 1968.
Gary J. Niederpruem has been President of Ryerson East since January 1993.
He served as General Manager of Ryerson's Buffalo location from August 1985 to
January 1993 and General Order Manager of Ryerson's Minneapolis location from
November 1980 to August 1985. Mr. Niederpruem joined Ryerson in May 1973.
Thomas S. Cygan has been President of Ryerson West since November 1994. He
served as General Manager of Ryerson's Kansas City location from May 1981 to
November 1994. He also served as Inside Sales Manager for Ryerson-Detroit from
August 1976 to May 1981 and Inside Sales Manager for Ryerson's Machinery
Division from January 1973 to August 1976. Mr. Cygan joined Ryerson in
February 1966.
Timothy L. LaPerre has been President of Ryerson Coil since January 1993. He
served as Vice President and General Manager of Ryerson Coil from March 1990
to January 1993. He also served as Executive Vice President and General
Manager of Keelor Steel from March 1987 to March 1990. Mr. LaPerre originally
joined Keelor in April 1972.
William Korda has been Vice President of Human Resources of the Company
since October 1993. He served as the Company's Manager of Human Resources from
August 1992 to October 1993 and as Manager of Benefits and Salary
Administration for the Company from January 1991 to August 1992. He also
served as a Human Resources Manager for Ryerson from January 1986 to January
1991, Manager of Human Resources Development of ISC from April 1985 to January
1986 and Personnel Manager of ISC from September 1982 to April 1985. Mr. Korda
joined ISC in June 1969.
Darell R. Zerbe has been Vice President, Information Technology and Chief
Information Officer of the Company since February 1996. He served as Senior
Vice President, Management Information Systems, for Venture Stores, Inc. from
1988 to February 1996. Mr. Zerbe has also been employed by PepsiCo., Inc., Dr.
Pepper, Inc., Baxter International, Inc. and Procter & Gamble Co.
Lily L. May has been Controller of the Company since May 1996. She was Vice
President, Finance and Purchasing, and Controller of ISC from January 1995
through May 1996. Prior to that, she was Director of Purchases and Energy of
the Inland Steel Flat Products Company division of ISC from November 1993 to
January 1995. She also served as Director of Internal Auditing of ISI from
February 1992 to November 1993, Director of Corporate Accounting of ISI from
February 1991 to February 1992 and Manager of Pension Investment's of ISI from
September 1990 to February 1991. Ms. May joined ISC in December 1973.
Vicki L. Avril has been Treasurer of the Company since February 1994. She
has also been Treasurer of Ryerson and Tull since February 1994 and of ISI and
ISC since January 1994 and Director-Corporate Planning of ISI since January
1995. In addition, she was Director of Pension Investments and Administration
of ISI from June 1991 to January 1995, Assistant Treasurer of ISI from May
1993 to January 1994 and Manager of Distribution Business Development-
Corporate Planning and Development from February 1990 to June 1991. Ms. Avril
joined ISC in September 1976. Although Ms. Avril devotes a substantial portion
of her time to the Company, most of her time is devoted to ISI and its other
subsidiaries.
41
<PAGE>
Charles B. Salowitz has been Secretary of the Company since April 1996.
Since September 1995 he has been Secretary of ISI and ISC. He has also been
Associate General Counsel of ISI since January 1995. He was an Assistant
General Counsel of ISI from July 1989 and Assistant Secretary from July 1989
to September 1995. Mr. Salowitz joined ISC in September 1983. Although Mr.
Salowitz devotes a substantial portion of his time to the Company, most of his
time is devoted to ISI and its other subsidiaries.
James A. Henderson has been a Director of the Company since May 1996. Mr.
Henderson is Chairman and Chief Executive Officer of Cummins Engine Company,
Inc. ("Cummins Engine"), a manufacturer of diesel engines. He joined Cummins
Engine in 1964, was elected Executive Vice President in 1971, and was elected
Executive Vice President and Chief Operating Officer in 1975. In 1977, he was
elected President and Chief Operating Officer of Cummins Engine, was elected
President and Chief Executive Officer in 1994 and assumed his present position
in 1995. Mr. Henderson is also a Director of ISI, ISC, Cummins Engine,
Ameritech Corporation and Rohm and Haas Company.
Donald S. Perkins has been a Director of the Company since May 1996. Mr.
Perkins was Chairman of Jewel Companies, Inc., a diversified retailer, prior
to his retirement in 1980. Mr. Perkins is also a Director of ISI, ISC, Aon
Corporation, Lucent Technologies Inc., Cummins Engine, Illinova Corporation,
LaSalle Street Fund Incorporated, the Putnam Funds, Springs Industries, Inc.
and Time Warner Inc.
Jean-Pierre Rosso has been a Director of the Company since May 1996. Mr.
Rosso is Chairman, President and Chief Executive Officer of Case Corporation,
a worldwide designer, manufacturer and distributor of farm and construction
machinery, and was President and Chief Executive Officer of that company from
April 1994 to March 1996. Prior to joining Case Corporation, he was President
of the Home and Building Control Division of Honeywell Inc., a producer of
advanced technology products, from 1991 to 1994 and President of Honeywell
Europe from 1987 until 1991. He is also a Director of ISI, ISC, Case
Corporation, ADC Telecommunications Inc. and the Principal Financial Group.
The Certificate of Incorporation requires that after the date 60 days after
the consummation of the Common Stock Offerings, when any shares of Class A
Common Stock are outstanding, at least one-third of the members of the Board
of Directors be Independent Directors (as defined in the Certificate of
Incorporation), except under specific limited circumstances. The Certificate
of Incorporation also requires that the Board of Directors be divided into
three classes with the Independent Directors allocated as evenly as possible
among the classes. Within 60 days of the consummation of the Common Stock
Offerings, the Company intends to increase the number of Directors to a total
of eight, including three Independent Directors, and to appoint the three
Independent Directors. Mr. Rosso serves in the class of Directors whose term
expires at the annual meeting of stockholders in 1997. Messrs. Henderson and
Novich serve in the class of Directors whose terms expire at the annual
meeting of stockholders in 1998. Messrs. Darnall and Perkins serve in the
class of Directors whose terms expire at the annual meeting of stockholders in
1999. Upon the expiration of the term of each class of Directors, the
Directors comprising such class will be elected for a three-year term at the
annual meeting of stockholders in the year in which such term expires. All
officers serve at the discretion of the Board of Directors.
DIRECTORS' COMPENSATION
Prior to the consummation of the Common Stock Offerings, the Directors were
not compensated for their services in such capacity. Pursuant to the terms of
the Directors' Compensation Plan, each Director who is not an employee of the
Company or any of its subsidiaries or affiliates, will receive an annual
retainer of $40,000, which will be paid 50% in shares of Class A Common Stock
and 50% in cash, provided that a Director may elect to receive all or any
portion of the cash portion of such retainer
42
<PAGE>
in shares of Class A Common Stock. Such Directors will also receive $1,000 for
each special meeting of the Board of Directors, and for each special committee
meeting not held in conjunction with a regular or special meeting of the Board
of Directors, attended by them. No fees will be paid for any meeting of the
Executive Committee and membership on the Compensation and Nominating
Committees is regarded as membership on only one committee for purposes of
payment of fees for special meetings. Each Director who serves as chairman of
a standing committee of the Board of Directors will receive an additional
annual retainer of $4,000. Pursuant to the terms of the Directors'
Compensation Plan, each such Director may also elect, prior to January 1 of
each year, to defer payment of all or any portion of the retainer and fees to
which he or she would otherwise become entitled during such year as a Director
of the Company. If a Director becomes a Director during a calendar year, the
deferral election may be made within 30 days after he or she becomes a
Director and will be effective for the remainder of that year subsequent to
the election. Deferred amounts will be distributed in a lump sum or
installments in cash or shares of Class A Common Stock, all as elected by the
Director at the time of the deferral. Interest on cash deferrals will be
credited at the prime rate in effect from time to time at The First National
Bank of Chicago (or its successor). Stock deferrals will be credited with
dividends paid on shares of Class A Common Stock from time to time. A total of
100,000 shares of Class A Common Stock has been reserved for issuance under
the Directors' Compensation Plan, subject to adjustment for certain corporate
transactions affecting the number or type of outstanding shares. The
Directors' Compensation Plan has been approved by ISI as the sole stockholder
of the Company. The Company also pays the premiums on a business accident
insurance policy insuring each non-employee Director for amounts up to
$500,000.
EXECUTIVE COMPENSATION
The following table presents the compensation for 1995 paid to the chief
executive officer and the four other most highly compensated executive
officers of the Company (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------ -------------------------
SECURITIES
RESTRICTED UNDERLYING
NAME AND OTHER ANNUAL STOCK STOCK ALL OTHER
PRINCIPAL POSITION SALARY BONUS COMPENSATION AWARDS(1) OPTIONS (#)(4) COMPENSATION(2)
------------------ -------- -------- ------------ ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Darnall(3).... $192,778 $143,908 $ 0 $47,291 8,370 $ 9,430
Chairman and Director
Neil S. Novich.......... 387,113 400,400 0 84,750 14,000 18,788
President, Chief
Executive Officer and
Director
Jay M. Gratz............ 173,752 109,200 0 28,250 4,000 8,696
Vice President, Finance
and Chief Financial
Officer
Carl G. Lusted.......... 223,384 206,250 0 39,550 7,000 11,181
President,
Ryerson Central
Stephen E. Makarewicz... 167,504 125,500 13,333(5) 33,900 6,000 2,533
President, Tull
</TABLE>
- --------
(1) Awards consist of restricted ISI common stock and are valued at the
aggregate market value as of the date of grant, based on the closing
market price of ISI's common stock on such date. Dividends are paid on
such shares to the extent paid on the ISI common stock. The vesting
43
<PAGE>
schedule for the restricted stock awards made in 1995 to the executives
identified in the table provides that all shares will vest at the end of a
three-year period beginning May 24, 1995. However, vesting may be
accelerated at the discretion of ISI's Compensation Committee in the event
of exceptional individual performance and/or significant progress by ISI or
the appropriate business unit in meeting its operating and financial
objectives. The number and value of the aggregate restricted stock holdings
at December 31, 1995, based on the closing market price of the ISI common
stock on December 29, 1995, were: Mr. Darnall, 6,696 shares/$168,237;
Mr. Novich, 10,800 shares/$271,350; Mr. Gratz, 5,000 shares/$125,625; Mr.
Lusted, 5,800 shares/$145,725; and Mr. Makarewicz, 4,700 shares/$118,088.
Effective upon consummation of the Common Stock Offerings, the outstanding
shares of restricted ISI common stock held by the Company's employees will
be converted into shares of restricted Class A Common Stock, provided that
the Compensation Committee may determine that any employee may receive
restricted Class A Common Stock with respect to less than all of his or her
restricted ISI common stock. See "--Ryerson Tull 1996 Incentive Stock
Plan."
(2) Amounts represent the value of vested and unvested employer contributions
and allocations to the Inland Steel Industries Thrift Plan and the Inland
Steel Industries Non-Qualified Thrift Plan (the "Non-Qualified Thrift
Plan") (or, in the case of Mr. Makarewicz, the J. M. Tull Metals Company,
Inc. Employees' Profit Sharing Plan).
(3) Amounts shown for Mr. Darnall represent 27.9% of Mr. Darnall's total
compensation for 1995. Such percentage is based on the ratio of the
Company's operating assets to ISI's consolidated operating assets and was
used to determine the percentage of ISI's overhead expenses allocable to
the Company for 1995. All of Mr. Darnall's 1995 compensation was paid by
ISI.
(4) All options are for ISI common stock. Effective upon consummation of the
Common Stock Offerings, the options for ISI common stock held by the
Company's officers and employees will be converted into options for Class
A Common Stock, provided that the Compensation Committee may determine
that any employee may receive options to purchase shares of Class A Common
Stock for less than all of his or her options to purchase ISI common
stock. See "--Ryerson Tull 1996 Incentive Stock Plan."
(5) Represents reimbursement of relocation expenses and related tax gross-up.
EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS
ISI entered into an agreement with Mr. Novich, dated April 8, 1994,
providing that he would serve as Vice President of ISI, Chief Operating
Officer of the Company and President of Ryerson. Pursuant to the agreement,
Mr. Novich received a base annualized salary for calendar year 1994 of
$330,000 and an award of $112,900 under the Inland Steel Industries, Inc.
Annual Incentive Plan (the "AIP"). In 1994, under the agreement, Mr. Novich
received a restricted stock award of 5,000 shares of ISI common stock and a
grant of options to purchase 20,000 shares of ISI common stock, each of which
vests over a three-year period. ISI also reimbursed Mr. Novich for moving
expenses from West Newton Hill, Massachusetts to the Chicago area, including
the amount by which the purchase price, plus the cost of capital improvements,
as defined by the IRS, of Mr. Novich's home in West Newton Hill exceeded the
sales price of such home and an amount sufficient to pay all taxes on the
reimbursement such that he would have no after tax cost or loss. This
reimbursement totaled $94,034. In addition, Mr. Novich was paid a bonus of
$100,000 upon signing the agreement.
ISI also entered into a severance agreement with Mr. Novich, dated April 8,
1994, providing that, in the event of termination of his employment for any
reason other than malfeasance or voluntary termination prior to the third
anniversary of his employment with the Company, the Company will pay the
present value of (i) his monthly base salary in effect at the time of such
termination times the number of months remaining in the 36-month period, plus
(ii) 1/12th of the average annual award paid to him under the AIP or a
successor plan times the number of months remaining in the 36-month period. In
addition, all of his restricted stock will become fully vested, all options
will become fully
44
<PAGE>
exercisable and ISI will continue life insurance, disability insurance and
dental and health care coverage for Mr. Novich and his immediate family until
the third anniversary of his date of hire upon terms consistent with such
coverages for active employees until such date.
ISI entered into an agreement with Mr. Lusted, dated June 27, 1990,
providing that upon Mr. Lusted reaching age 62 or at any other mutually
agreeable time, ISI will reimburse Mr. Lusted for his reasonable moving
expenses from the Chicago area to the Atlanta area, or to any other mutually
agreeable location. In connection with such a relocation, ISI has agreed to
pay Mr. Lusted the amount, if any, by which the lesser of Mr. Lusted's
purchase price or the appraised value of his home in the Chicago area exceeds
the net sales price of such home.
On March 27, 1996, ISI entered into agreements (the "ISI Agreements") with
each of the Named Executive Officers, the present terms of which expire on
December 31, 1996, but are automatically extended for additional one-year
periods thereafter unless ISI gives prior notice that it does not wish to
extend such agreements for another year or unless a change in control (as
defined below) of ISI or certain other limited events occur. ISI has not given
notice of non-renewal. For purposes of the ISI Agreements, a change in control
will generally be deemed to have occurred if: (i) with certain limited
exceptions, any person becomes the beneficial owner of 40% or more of the
combined voting power of ISI's then outstanding securities; (ii) during any
two-year period, the majority of the membership of the ISI Board of Directors
changes without the approval of two-thirds of the Directors who either were
Directors at the beginning of the period or whose election was previously so
approved; (iii) the ISI stockholders approve a merger or consolidation of ISI
with another company in which ISI's voting securities, in combination with
voting securities held by any trustee or fiduciary under any ISI employee
benefit plan, do not continue to represent at least 60% of the combined voting
power of the voting securities of the surviving entity (excepting certain
recapitalizations of ISI); (iv) the ISI stockholders approve a plan of
complete liquidation of ISI or an agreement for the sale or disposition by ISI
of all or substantially all of its assets; or (v) there occurs with respect to
a Related Company (defined below) a sale or disposition of securities
representing 50% or more of the combined voting power of the Related Company's
securities, or a merger or consolidation of a Related Company with another
company in which a majority-owned direct or indirect subsidiary of ISI does
not own at least 50% of the combined voting power of the voting securities of
the surviving entity or a sale or disposition of all or substantially all of
the assets of a Related Company to a person other than a majority-owned direct
or indirect subsidiary of ISI. A "Related Company" is a covered employee's
employer (or any direct or indirect parent company of such employer, or
subsidiary of such employer that is a significant subsidiary (within the
meaning of Rule 405 of the Securities Act) of ISI). A change in control of ISI
shall not be deemed to have occurred with respect to any employee, however, if
the sale or other transaction includes or involves a sale to the public or a
distribution to the stockholders of ISI of more than 50% of the voting
securities of the employee's employer or a direct or indirect parent of his or
her employer and the employee's employer (or a direct or indirect parent of
the employee's employer) agrees to become a successor to ISI under the
employee's ISI Agreement.
The ISI Agreements provide that if a covered executive's employment is
terminated within two years after a change in control of ISI either (i) by ISI
other than for "cause" or other than as a consequence of death, disability or
retirement (all as defined in such agreements), or (ii) by such executive for
"good reason," generally relating to a diminution of responsibilities,
compensation or benefits or significant relocation of his or her principal
office, the executive will receive: (i) a lump-sum payment equal to two times
the sum of (a) the executive's current annual base salary plus (b) the
executive's average incentive bonus paid for the five years preceding
termination of employment; (ii) an amount in cash in lieu of any allocations,
unpaid awards or rights under ISI's annual or other incentive compensation
plans; (iii) an amount in cash equal to the value of outstanding stock options
granted under ISI's stock option plans at specified prices; (iv) an amount in
cash equal to the value of shares of common stock awarded or issuable as
performance and/or restricted shares under ISI's incentive stock plans; (v)
life, disability, accident and health insurance as provided in ISI's insurance
45
<PAGE>
programs and financial advisory and outplacement services for a period of 24
months after termination of employment; (vi) an amount in cash in lieu of two
years of additional accrued benefits under ISI's pension plan and (vii) legal
fees and expenses incurred as a result of such termination. In addition to the
foregoing, Mr. Novich's severance agreement provides that payments thereunder
will not limit or reduce any benefits that he may be entitled to receive
pursuant to his employment agreement (discussed above) and that his benefits
under the severance agreement are reduced by benefits he receives under his
employment agreement. Each ISI Agreement contains an excise tax "gross-up"
provision pursuant to which the executive will be paid an additional amount
upon the imposition of any excise tax. While this provision will preserve the
benefits receivable under the agreement for the executive, ISI will not be
entitled to a federal income tax deduction for a portion of the severance
payments provided thereunder.
The ISI Agreements provide benefits in the event the employee is terminated
by ISI for reasons other than cause within 12 months after the occurrence of a
"potential change in control" of ISI if a change in control of ISI or certain
other limited events occur within 6 months after his or her termination. A
"potential change in control" shall be deemed to have occurred for purposes of
the agreements if (i) ISI enters into an agreement, the consummation of which
would result in the occurrence of a change in control of ISI, (ii) any person
(including ISI) publicly announces an intention to take or to consider taking
actions which, if consummated, would constitute a change in control, (iii)
with certain limited exceptions, any person who is or becomes the owner of
securities of ISI representing 9.5% or more of the combined voting power of
ISI's then outstanding securities increases such person's beneficial ownership
of such securities by 5% or more over the percentage so owned on the date of
the agreement, or (iv) the Board of Directors of ISI adopts a resolution that
a potential change in control of ISI has occurred for purposes of the ISI
Agreements. The Common Stock Offerings did not, and the Company and ISI
anticipate that a Spin-off will not, constitute a change in control or
potential change in control for purposes of the ISI Agreements with respect to
employees of the Company. In the event of a Spin-off, employees of the Company
will no longer be entitled to benefits under the ISI Agreements.
On June 10, 1996, the Company entered into agreements (the "Company
Agreements") with each of the Named Executive Officers which provide benefits
substantially similar to those provided under the ISI Agreements in the event
that the executive's employment with the Company is terminated following a
change in control of the Company (defined to include events with respect to
the Company similar to those which constitute a change in control under the
ISI Agreements with respect to ISI). In addition, Mr. Novich's agreement
provides that payments under the agreement will not limit or reduce any
benefits that he may be entitled to receive pursuant to his severance
agreement dated April 8, 1994. To the extent that an executive becomes
entitled to benefits under a Company Agreement and an ISI Agreement upon a
change of control, benefits payable under the ISI Agreement will be reduced by
the amount of benefits payable under the Company Agreement. Other than as set
forth in the preceding sentence, in no event shall an executive be entitled to
benefits under both an ISI Agreement and a Company Agreement on account of the
same events constituting a change in control. The Common Stock Offerings did
not, and the Company and ISI anticipate that a Spin-off will not, constitute a
change in control for purposes of the Company Agreements.
PENSION BENEFITS
Prior to April 30, 1996, certain employees of the Company were eligible to
participate in the ISI Pension Plan. Effective April 30, 1996, that portion of
the ISI Pension Plan covering the Company's current and former employees was
separated and became the Pension Plan. Employees covered by the Pension Plan
will be credited with the number of years of service credited to them under
the ISI Pension Plan as of the separation date. The following table shows the
maximum annual pension benefits payable on a straight life annuity basis to
employees in various earnings classifications upon retirement at age 65. All
benefit amounts shown in such table are subject to offset based upon Social
46
<PAGE>
Security earnings. Pension benefits are provided to eligible salaried
employees of Tull under a separate benefit schedule of the Pension Plan, as
discussed below.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE
ANNUAL
EARNINGS FOR
HE APPLICABLET
YEAR-OF- ANNUAL PENSION BENEFITS FOR YEARS OF SERVICE SHOWN
SERVICE --------------------------------------------------------------
PERIOD 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- -------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 200,000.............. $ 17,000 $ 34,000 $ 51,000 $ 68,000 $ 85,000 $102,000 $119,000
400,000.............. 34,000 68,000 102,000 136,000 170,000 204,000 238,000
600,000.............. 51,000 102,000 153,000 204,000 255,000 306,000 357,000
800,000.............. 68,000 136,000 204,000 272,000 340,000 408,000 476,000
1,000,000.............. 85,000 170,000 255,000 340,000 425,000 510,000 595,000
1,200,000.............. 102,000 204,000 306,000 408,000 510,000 612,000 714,000
1,400,000.............. 119,000 238,000 357,000 476,000 595,000 714,000 833,000
1,600,000.............. 136,000 272,000 408,000 544,000 680,000 816,000 952,000
</TABLE>
As of April 1, 1996, the Named Executive Officers were credited with the
following years of service under the appropriate plan: Robert J. Darnall--33
years; Neil S. Novich--1 year; Jay M. Gratz--20 years; Carl G. Lusted--28
years; and Stephen E. Makarewicz--12 years.
Pensions are provided under the Pension Plan to eligible employees
(including employees who are Directors or officers) who, at retirement, have
met certain service or service and age requirements. In general for salaried
employees, benefits are based on years of service and individual earnings for
the highest consecutive 36-month period of earnings during the last ten 12-
month periods of service prior to retirement. For this purpose, earnings
generally consist of salary compensation plus bonus compensation as reported
in the Summary Compensation Table.
The Company has established the Ryerson Tull, Inc. Supplemental Retirement
Plan for Covered Employees (the "Supplemental Plan"), which provides
supplemental pension benefits to employees of the Company and its affiliates
who participate in the Pension Plan and whose benefits under that plan are
limited by the provisions of Sections 415 and 401(a)(17) of the Internal
Revenue Code of 1986, as amended (the "Code"). Generally, the amount of the
benefit provided is equal to the difference between the benefit that would
have been payable under the Pension Plan had the applicable Code limitations
not applied and the benefit actually paid under the Pension Plan. The
Supplemental Plan is non-contributory and benefits payable under the
Supplemental Plan are paid from the general assets of the Company. Benefits
under the Supplemental Plan are generally paid at the same time and in the
same form as the corresponding benefits under the Pension Plan; provided
however, the Supplemental Plan provides that, for any officer or employee with
at least five years of service, with annual compensation in excess of $150,000
and who is age 55 or older, the Company may elect to satisfy its obligations
for benefits payable upon retirement at age 65 by (i) the purchase of an
annuity contract either prior to or at the time of retirement (and a tax
gross-up payment to the officer or employee at the time of purchase) or (ii)
the payment of a lump sum amount at the time of retirement. Prior to
establishing the Supplemental Plan, certain employees of the Company
participated in the Inland Steel Industries Supplemental Retirement Plan for
Covered Employees and the Inland Steel Industries Special Retirement Benefit
Plan for Covered Employees (collectively, the "ISI Supplemental Plans"). The
ISI Supplemental Plans provided benefits similar to the Supplemental Plan. The
Company has assumed ISI's liabilities under the ISI Supplemental Plans with
respect to current and former employees of the Company.
All accrued benefits under the Pension Plan vest, and all benefits accrued
under the Supplemental Plan will become fully and irrevocably vested and
distributable to participants as provided by the terms of such plans then in
effect, in the event of a change in control (as defined in those plans) of the
47
<PAGE>
Company. Any surplus assets under the Pension Plan are to be used to provide
additional benefits in the event of a termination, merger or consolidation of
the Pension Plan, or a transfer of assets to another plan, within three years
of such a change in control, and limitations have been placed on amendments to
the Pension Plan within such three-year period. The Common Stock Offerings did
not, and the Company and ISI anticipate that a Spin-off will not, constitute a
change in control under the Pension Plan or the Supplemental Plan.
Pension benefits are provided to eligible salaried employees of Tull under a
separate benefit schedule of the Pension Plan. The maximum annual pension
benefits payable under such schedule are approximately 3% higher than those
shown in the above table for comparable earnings and service. Stephen E.
Makarewicz is the only executive officer of the Company covered by the Tull
benefit schedule and he is credited with 10 years of service under the Tull
benefit schedule under the Pension Plan.
INLAND STEEL INDUSTRIES NONQUALIFIED THRIFT PLAN
The Company also participates in the Nonqualified Thrift Plan, which
provides supplemental benefits to employees of ISI and its affiliates who are
eligible to participate in the Inland Steel Industries Thrift Plan (the "ISI
Thrift Plan") and whose salary reduction contributions to the ISI Thrift Plan
are limited by the Code provision which generally restricts the amount of
compensation that can be taken into account under the ISI Thrift Plan. Under
the Nonqualified Thrift Plan, eligible employees can elect to defer, on a pre-
tax basis, between 1% and 10% of their salary. ISI will match 100% of the
deferral, up to 5% of the participant's salary. All amounts contributed
pursuant to the Nonqualified Thrift Plan are credited to a bookkeeping account
and are credited with hypothetical earnings at the rate of interest earned by
the assets in the Stable Value Fixed Income Fund (as defined) under the ISI
Thrift Plan. Upon termination of a participant's employment, all amounts
credited to his account under the Nonqualified Thrift Plan will be paid in a
lump sum from the general assets of ISI within 60 days after the first
anniversary of his termination of employment. If a participant terminates
employment prior to completing five years of service with ISI (other than on
account of certain limited events), he will not be entitled to any of the ISI
contributions relating to the two-year period prior to the termination of
employment. Special payment rules may apply if the participant terminates
employment on account of disability or retirement. Interim distributions may
be permitted on account of hardship. All benefits under the Nonqualified
Thrift Plan become fully vested upon a change in control (as defined) of ISI.
The Common Stock Offerings did not, and the Company and ISI anticipate that a
Spin-off will not, constitute a change in control for purposes of the
Nonqualified Thrift Plan.
INDIVIDUAL OPTION GRANTS IN 1995
The following table presents information with respect to (i) individual
grants of options for ISI's common stock that were made during 1995 under the
ISI Incentive Plan to the Named Executive Officers and (ii) the grant date
present value of such options.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED(1) FISCAL YEAR ($/SHARE)(2) DATE VALUE(3)
- ---- ---------- ------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Robert J. Darnall....... 30,000 6.4% $28.50 May 23, 2005 $376,200
Neil S. Novich.......... 14,000 3.0 28.50 May 23, 2005 175,560
Jay M. Gratz............ 4,000 0.8 28.50 May 23, 2005 50,160
Carl G. Lusted.......... 7,000 1.5 28.50 May 23, 2005 87,780
Stephen E. Makarewicz... 6,000 1.3 28.50 May 23, 2005 75,240
</TABLE>
- --------
(1) All options are for ISI common stock and were granted on May 24, 1995.
They became exercisable with respect to 50% of the shares on May 24, 1996
and will be fully exercisable after
48
<PAGE>
May 24, 1997. Options granted in 1995 to each of these executives are
transferable, with the advance written consent of ISI's Compensation
Committee of the Board of Directors, to (i) a spouse or descendants, (ii)
to a trust for the benefit of the optionee, his spouse or descendants or
(iii) as a charitable contribution. See "--Employment and Change in Control
Agreements" for provisions relating to payout of options upon a change in
control of ISI or the Company. Effective upon consummation of the Common
Stock Offerings, the options for ISI common stock held by the Company's
officers and employees will be substituted with options for Class A Common
Stock in accordance with the methodology described in Section 424 of the
Code and regulations thereunder, provided that the Compensation Committee
may determine that any employee may receive Substitute Options with respect
to less than all of his or her options on ISI common stock. See "--Ryerson
Tull 1996 Incentive Stock Plan."
(2) The exercise price is equal to the average of the high and low price of
ISI's common stock on the NYSE Composite Transactions on the date of
grant. The exercise price may be paid by delivery of already-owned shares
and an optionee may elect to have ISI withhold shares of ISI common stock
(or accept already-owned shares) to satisfy tax withholding obligations
with respect to option exercises or payments.
(3) In accordance with Commission rules, the Black-Scholes option pricing
model was chosen to estimate the grant date present value of the options
granted during 1995. Use of this model should not be construed as an
endorsement of the model's accuracy at valuing options. The following
assumptions were made for purposes of calculating the present value of the
options as of the grant date: the option term is ten years, the volatility
of ISI's common stock is 35.215% (calculated using daily stock prices for
the one-year period prior to the grant date), the ten-year risk-free
interest rate is 6.63%, the annualized dividend rate is $0.20 per share
and a reduction of approximately 20.16% reflects the probability of (i)
forfeiture due to termination prior to vesting and (ii) a shortened option
term due to termination of employment prior to the option expiration date.
The value of the options granted in 1995 depends upon the actual
performance of ISI's common stock during the applicable period; the actual
value, if any, that an optionee will realize upon exercise of an option
will depend on the excess of the market value of ISI's common stock over
the exercise price on the date the option is exercised.
AGGREGATED OPTION EXERCISES IN 1995 AND YEAR-END OPTION/SAR VALUES
The following table presents the number of securities underlying the
option/SAR holdings of the Named Executive Officers at the end of 1995 and the
value of such holdings. No options for shares of ISI common stock or SARs were
exercised by the Named Executive Officers during 1995.
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS/SARS AT
OPTIONS/SARS AT FISCAL FISCAL YEAR-END(1)
YEAR-END (EXERCISABLE/ (EXERCISABLE/
UNEXERCISABLE) UNEXERCISABLE)
---------------------- ------------------
<S> <C> <C>
Robert J. Darnall..................... 125,667/58,333 $101,250/$0
Neil S. Novich........................ 17,000/31,000 0/0
Jay M.Gratz........................... 15,467/8,333 0/0
Carl G. Lusted........................ 18,300/14,500 0/0
Stephen E. Makarewicz................. 13,750/7,750 0/0
</TABLE>
- --------
(1) All such options are for ISI common stock; value is based on the closing
price of ISI's common stock on the NYSE Composite Transactions on December
29, 1995.
RYERSON TULL 1996 INCENTIVE STOCK PLAN
The Company has adopted, and ISI has approved, the Incentive Stock Plan.
Long-term incentive compensation grants may be made by the Compensation
Committee under the Incentive Stock Plan.
49
<PAGE>
These grants and awards may consist of stock options (both incentive and
nonqualified), stock appreciation rights, restricted stock awards and
performance awards, or combinations thereof. Stock options and stock
appreciation rights may be granted at not less than 100% of the fair market
value of the Class A Common Stock on the date of grant and are generally
exercisable for a period not exceeding ten years. Restricted stock awards,
consisting of shares of Class A Common Stock, are contingent on continuing
employment with the Company for specified periods, and performance awards,
payable in shares of Class A Common Stock or cash, are contingent on the
achievement over specified periods of such performance objectives as shall be
established by the Compensation Committee. Restricted stock awards may also be
contingent upon the achievement of performance measures. Grants and awards
made by the Compensation Committee under the Plan are intended to provide
executive officers not only with additional incentives for outstanding
individual performance but also with the opportunity to acquire an ownership
stake in the Company, thereby more closely aligning their interests with those
of the stockholders. Upon a change in control (as defined below) of the
Company, with certain exceptions: (i) the value of all outstanding stock
options, stock appreciation rights and restricted stock awards (whether or not
then fully exercisable or vested) will be cashed out at specified prices as of
the date of the change in control, except that (a) any stock options or stock
appreciation rights outstanding for less than six months will not be cashed
out until six months after the applicable date of grant and (b) the
Compensation Committee may provide for immediate vesting instead of cashing
out of restricted stock awards and (ii) all outstanding performance awards
will be cashed out in the amounts and manner determined by the Compensation
Committee.
For purposes of the Incentive Stock Plan, a change in control of the Company
shall generally be defined in the same manner as under the Company Agreements.
The Common Stock Offerings did not, and the Company and ISI anticipate that a
Spin-off will not, constitute a change in control of the Company for purposes
of the Incentive Stock Plan.
Generally, a participant who is granted a stock option will not be subject
to federal income tax at the time of grant and the Company will not be
entitled to a tax deduction by reason of such grant. Upon exercise of a
nonqualified option, generally the difference between the option price and the
fair market value of the Class A Common Stock on the date of exercise will be
considered ordinary income to the participant and generally the Company will
be entitled to a corresponding tax deduction.
Upon exercise of an incentive stock option, no taxable income will be
recognized by the participant and the Company is not entitled to a tax
deduction by reason of such exercise. However, if Class A Common Stock
purchased pursuant to the exercise of an incentive stock option is sold within
two years from the date of grant or within one year after the transfer of such
Class A Common Stock to the participant, then the difference, with certain
adjustments, between the fair market value of the Class A Common Stock at the
date of exercise and the option price will be considered ordinary income to
the participant and generally the Company will be entitled to a corresponding
tax deduction. If the participant disposes of the Class A Common Stock after
such holding periods, any gain or loss upon such disposition will be treated
as a capital gain or loss and the Company will not be entitled to a deduction.
The maximum number of shares of Class A Common Stock reserved for issuance
under the Incentive Stock Plan is 2,300,000, subject to adjustment as provided
in the Incentive Stock Plan to reflect certain corporate transactions
affecting the number or type of outstanding shares.
NEW PLAN BENEFITS
It is currently estimated that approximately 100 Company employees will be
eligible to participate in the Incentive Stock Plan. No determinations have
been made concerning the issuance of awards under the Incentive Stock Plan,
other than the issuances of shares of restricted Class A Common Stock and
options to purchase shares of Class A Common Stock in exchange for certain
outstanding restricted shares of ISI common stock and options to purchase ISI
common stock, as described below.
50
<PAGE>
Effective upon consummation of the Common Stock Offerings, shares of
restricted stock under the Incentive Stock Plan will be substituted for
outstanding shares of restricted stock that were granted to employees of the
Company under the Inland 1995 Incentive Stock Plan and prior ISI plans
(collectively, the "ISI Incentive Plans"). Generally, the number of restricted
shares of Class A Common Stock to be substituted shall bear the same ratio to
the number of restricted shares of ISI common stock held by the employee as
the average value (defined below) of a share of ISI common stock bears to the
average value of a share of Class A Common Stock. Average value with respect
to a share of ISI common stock or Class A Common Stock means the average
closing price of such stock for the first ten trading days following the
consummation of the Common Stock Offerings. Similarly, options granted under
the Incentive Stock Plan ("Substitute Options") will be substituted for
outstanding options granted to employees of the Company under the ISI
Incentive Plans, with the number of shares of Common Stock that will be
subject to the Substitute Options and the exercise price thereof determined in
accordance with Section 424 of the Code and regulations thereunder. The
Compensation Committee may determine, however, that any employee may receive
restricted shares of Class A Common Stock or Substitute Options with respect
to less than all of his or her outstanding restricted stock or options under
the ISI Incentive Plans.
The following table sets forth the number of shares of restricted Class A
Common Stock and the number of shares of Class A Common Stock subject to
options to be substituted for restricted shares of ISI common stock and
options to purchase ISI common stock (assuming that as of the applicable
valuation date the value of a share of ISI common stock is $21.00 (the last
reported sales price on the NYSE on June 5, 1996), that the value of a share
of Class A Common Stock is $17.50 (the mid-point of the offering range set
forth on the cover page of the Common Stock Offerings prospectus)) and that no
shares of ISI common stock or options to purchase shares of ISI common stock
held by Company officers who are also ISI officers will be converted into
shares of restricted Class A Common Stock or options to purchase shares of
Class A Common Stock for (i) the Named Executive Officers, (ii) the Company's
executive officers, as a group, and (iii) all employees, including all current
officers who are not executive officers of the Company, as a group.
RYERSON TULL 1996 INCENTIVE STOCK PLAN
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
NAME AND POSITION OF RESTRICTED STOCK(1) SUBJECT TO OPTIONS(1)
----------------- ---------------------- ---------------------
<S> <C> <C>
Robert J. Darnall.................. 0 0
Chairman and Director
Neil S. Novich..................... 12,690 108,000
President, Chief Executive Officer
and Director
Jay M. Gratz....................... 0 0
Vice President, Finance and Chief
Financial Officer
Carl G. Lusted..................... 3,360 64,560
President, Ryerson Central
Stephen E. Makarewicz.............. 2,640 47,400
President, Tull
Executive Group.................... 29,040 384,330
Non-Executive Officer Employee
Group............................. 6,900 415,183
</TABLE>
- --------
(1) Assumes that no shares of restricted ISI common stock or options to
purchase shares of ISI common stock held by Company officers who are also
ISI officers will be converted into shares of restricted Class A Common
Stock or options to purchase shares of Class A Common Stock.
RELATIONSHIP WITH ISI
DIVIDENDS
Prior to the consummation of the Common Stock Offerings, the Company will
declare a dividend payable in cash to ISI in the amount equal to the estimated
net proceeds from the Common Stock
51
<PAGE>
Offerings (estimated to be $84.4 million at an assumed initial offering price
of $17.50 per share, the mid-point of the offering range set forth on the
cover page of the Common Stock Offerings Prospectus) and a dividend consisting
of the Note Payable. The net proceeds of the Common Stock Offerings were used
to pay the cash dividend and are not available to the Company. The net
proceeds of the Offering, together with a portion of the Company's available
cash and/or borrowings under credit facilities, will be used to discharge the
Note Payable. On May 20, 1996, the Company also paid the May 1996 Dividend.
SHARED MANAGEMENT
Mr. Darnall, Chairman of the Board and a Director, Mr. Gratz, Vice
President, Finance and Chief Financial Officer, Ms. Avril, Treasurer, and Mr.
Salowitz, Secretary, are also executive officers of ISI. The Company and ISI
also have four common Directors. The Company expects that such arrangements
will continue for the foreseeable future. Until May 1996, Mr. Novich,
President, Chief Executive Officer and a Director, was also an executive
officer of ISI. See "Management--Executive Officers and Directors."
POTENTIAL DISTRIBUTION AND OTHER TRANSACTIONS
The Company is controlled by ISI, which beneficially owns all of the
outstanding Class B Common Stock, representing approximately 96.3% of the
aggregate voting power of all of the Company's outstanding Common Stock (95.8%
if the over-allotment options granted to the Underwriters in the Common Stock
Offerings are exercised in full). ISI has advised the Company that, although
it currently intends to hold such stock, it may in the future distribute all
or a part of such stock (in the form of Class A Common Stock) to ISI's
stockholders by means of a Spin-off or may sell such stock (in the form of
Class A Common Stock) to third parties in one or more transactions, although
it has no commitments or understandings to do any of the foregoing. The
completion of any such transaction would be subject to a number of factors,
including a determination by the Board of Directors of ISI that such a
transaction would be in the best interest of its stockholders, and in the case
of a Spin-off, could be subject to the receipt of a favorable ruling from the
IRS or an opinion of counsel as to the tax-free nature of such transaction.
SUPPLY ARRANGEMENTS
During 1995, the Company purchased approximately 400,000 tons of steel
having a value of $177 million from ISC, a wholly-owned subsidiary of ISI.
Purchases of steel from ISC amounted to $174 million in 1993 and $184 million
in 1994. The terms of these arrangements were negotiated between the Company
and ISC and are similar to other large supply arrangements the Company has
with other suppliers. The Company expects to continue purchasing significant
amounts of material from ISC, although there can be no assurances that such
purchases will continue. All future transactions, if any, will continue to be
on an arm's length basis. ISC also buys material from the Company, which
purchases amounted to approximately $11 million in each of 1993 and 1994 and
approximately $12 million in 1995, and may continue to buy material from the
Company in the future.
SUPPORT SERVICES; INDEMNIFICATION AND CORPORATE SEPARATENESS
Concurrent with the consummation of the Common Stock Offerings, the Company
and ISI entered into a corporate separation agreement (the "Corporate
Separation Agreement") relating to, among other things, the provision of
support services by ISI to the Company, participation in a joint marketing
program, indemnification by and between the Company and ISI, and procedures
intended to maintain separation between the Company and ISI.
In the past, ISI has provided certain support services to the Company in the
following areas: finance (including tax administration, cash management,
pension and employee benefit plan
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administration, auditing and corporate communications), legal (including
public affairs and corporate secretary), human resources and information
technology, as well as senior management services. Charges by ISI to the
Company for these services amounted to $7.4 million in each of 1993 and 1994
and $6.8 million in 1995. The Corporate Separation Agreement provides that ISI
will continue to provide these services to the Company for a period of five
years, cancellable by either party upon 60 days written notice to the other
party or immediately by mutual consent of the parties. The Corporate
Separation Agreement provides that, consistent with past practice, specific
distinguishable costs incurred by ISI in providing services to the Company
will be charged to the Company and that other support costs will be allocated
to the Company based on the percentage of ISI consolidated operating assets
attributable to the Company. The percentage of ISI consolidated assets
attributable to the Company is expected to fluctuate from one period to
another. During 1995, such percentage was 27.9%.
The Corporate Separation Agreement provides that the Company and ISI and its
subsidiaries will cooperate in joint marketing efforts currently referred to
as the "red diamond program." The red diamond program involves a team approach
to maximizing customer satisfaction by involving personnel from both the
Company and ISI with various areas of expertise to provide an integrated
solution to a customer's needs. The obligations of the Company and ISI to
cooperate in the joint marketing efforts will continue for a period of five
years, cancellable by either party upon 60 days written notice to the other
party or immediately by mutual consent of the parties.
The Corporate Separation Agreement also provides that the Company on the one
hand, and ISI and its other subsidiaries on the other, will indemnify each
other for losses, claims and damages that they may suffer or for which they
may become liable, including those relating to tax, environmental, ERISA and
pension liabilities, that arise out of the relationship of the parties prior
to the Common Stock Offerings or as a result of ISI's control of the Company.
Provisions intended to maintain the existence of the Company and ISI as
separate corporate entities also are included in the Corporate Separation
Agreement. Such provisions provide that, among other things: other than the
Company's Chairman, no more than one-half of the Company's executive officers
will be officers or employees of ISI or any of its other subsidiaries; the
Company and ISI each will maintain its assets separate from those of the other
and the other's subsidiaries; the Company and ISI each will account for and
manage its liabilities separately from those of the other and the other's
subsidiaries; the Company will maintain offices separate from the offices of
ISI and ISI's other subsidiaries; and, other than the ESOP Guarantee, neither
the Company nor ISI will pledge its assets for the benefit of, or grant
guarantees or otherwise hold out its credit as being available to satisfy the
obligations of, the other or any of the other's subsidiaries. These provisions
automatically terminate at any time that the number of outstanding shares of
Class B Common Stock represents less than 50% of the total number of
outstanding shares of Class A Common Stock and Class B Common Stock.
TAX SHARING ARRANGEMENTS
The Company and ISI are parties to a tax-sharing agreement under which
current and deferred federal income tax provisions are determined for each
company in the ISI group on a stand-alone basis. Any current tax liability for
any member of the ISI group, including the Company, is paid to ISI. If the
Company is unable to use all of its allocated tax attributes (net operating
loss and tax credit carryforwards) in a given year but other companies in the
consolidated group are able to utilize them, then ISI will pay the Company for
the use of such tax attributes. The agreement also contains state tax sharing
arrangements, similar to the arrangements described above with respect to
federal taxes for those states in which the consolidated group is charged
state taxes on a unitary or combined basis.
CROSS-LICENSE AGREEMENT
On , 1996, the Company and ISI entered into a cross-license
agreement (the "Cross-License Agreement") pursuant to which the Company
licensed on a royalty-free basis its "Ryerson"
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name and know-how for use by ISI and its affiliates outside North America and
pursuant to which ISI licensed on a royalty-free basis its "red diamond"
trademark for use by the Company. Pursuant to the Cross-License Agreement, the
Company and ISI are each required to reimburse the other for the reasonable
costs incurred by the other in providing its respective licensed property. The
Cross-License Agreement terminates automatically at any time that the number
of outstanding shares of Class B Common Stock represents less than 50% of the
total number of outstanding shares of Class A Common Stock and Class B Common
Stock. The Cross-License Agreement may also be terminated by either party upon
60 days written notice to the other party or immediately by mutual consent of
Ryerson Tull and ISI. The Cross-License Agreement provides that following
termination of the agreement, the Company and ISI each has a right to a
license (which may be exclusive) of any part of the other's property that is
then the subject of the agreement for a transition period of up to two years
at a fair market value license fee and upon such other terms as may be
mutually agreed upon by the Company and ISI. Upon a failure to mutually agree
upon a license fee and other terms, provision is made for determination by a
qualified independent expert.
GUARANTOR ARRANGEMENT
Ryerson is the guarantor of the ESOP Trust's obligation to repay principal
amounting to $110.8 million as of March 31, 1996 plus accrued interest. The
notes are payable in installments through July 2004 and bear interest rates
ranging from 7.96% to 8.80%. Ryerson could be required to make payments
pursuant to the guarantee after a failure by ISI to provide funds to cover any
deficiency in the ESOP Trust. There have been no deficiencies in the ESOP
Trust.
PENSIONS
Prior to April 30, 1996, certain Company employees were eligible to
participate in the ISI Pension Plan. In 1995, ISI elected to change the
measurement date for pension plan assets and liabilities from December 31 to
September 30 in order to provide for more timely information and to achieve
administrative efficiencies in the collection of data. The change in the
measurement date had no effect on 1995 pension expense and had an immaterial
impact on the 1995 funded status. At September 30, 1995, the market value of
the ISI Pension Plan assets totaled $1.92 billion. The ISI Pension Plan's
accumulated benefit obligation as of such date was $1.96 billion and the
projected benefit obligation as of such date was $2.05 billion. For financial
reporting purposes, the funded status of the ISI Pension Plan has appeared
very volatile over the past several years. This volatility is due to
significant fluctuations in the interest rate on high-grade fixed-income
obligations that must be used for valuing pension liabilities. This rate
increased from 7.25% in 1993, a twenty year low, to 8.8% in 1994 and decreased
to 7.75% in 1995. ISI was required to record a $102.6 million additional
pension liability, offset by an intangible pension asset, on its year-end 1995
balance sheet. In 1995, ISI contributed 3.9 million shares of its common stock
with an estimated aggregate value of $100 million to the ISI Pension Plan.
This contribution, ISI's first since 1984, strengthened the plan's funded
status. In 1995, the Company paid $13.1 million to ISI for its share of this
contribution.
Effective April 30, 1996, that portion of the ISI Pension Plan covering the
Company's current and former employees was separated and became the Pension
Plan. The Pension Plan assumed the liabilities of the ISI Pension Plan
attributed to current and former Company employees and a corresponding
percentage of the assets. If the Pension Plan had been in existence at the
September 30, 1995 valuation date of the ISI Pension Plan, the Company's
projected benefit obligation would have been $266 million and the Company's
share of the Pension Plan assets would have been $249 million, resulting in an
under-funding of $17 million for financial reporting purposes. However, under
ERISA funding guidelines, which take a longer term view in determining the
interest rate to use in valuing liabilities, no contribution will be required
for the ISI Pension Plan or the Pension Plan in 1996. The separation will not
have a material impact on the financial statements of the Company.
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<PAGE>
PRINCIPAL STOCKHOLDER
ISI owns 100% of the Class B Common Stock and, accordingly, owns Common
Stock representing approximately 86.7% of the economic interest in the Company
(85% if the Underwriters' over-allotment options in the Common Stock Offerings
are exercised in full) and representing approximately 96.3% of the combined
voting power of the Company's outstanding Common Stock (or 95.8% if such
Underwriters over-allotment options in the Common Stock Offerings are
exercised in full). Under certain circumstances, the Class B Common Stock
converts to Class A Common Stock, including upon transfer by ISI of Class A
Common Stock to a non-affiliate. The address of ISI is 30 West Monroe Street,
Chicago, Illinois 60603.
OWNERSHIP OF ISI STOCK
The following table presents, as of June 5, 1996, the ISI equity securities
beneficially owned (as that term is defined by the Commission) by all
Directors of the Company, the Named Executive Officers and the Directors and
executive officers as a group, in each case, except as indicated, with sole
voting and investment power. ISI common stock, in each case, includes ISI
preferred stock purchase rights distributed in 1987 to holders of ISI common
stock. The shares of ISI Series E ESOP Convertible Preferred Stock (the "ISI
Series E ESOP Preferred Stock") shown as beneficially owned by the executive
officers are held for their respective accounts in the ISI Thrift Plan and
could be converted upon retirement or other termination of employment into an
equal number of shares of ISI common stock (subject to adjustment in certain
events). Excluded from the number of shares of ISI Series E ESOP Preferred
Stock listed as beneficially owned are allocated shares of ISI Series E ESOP
Preferred Stock that the ESOP Trustee is required to vote or dispose of in the
manner and proportion in which allocated shares are directed to be voted or
disposed of.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
AMOUNT AND NATURE OF OF BENEFICIAL
BENEFICIAL OWNERSHIP OWNERSHIP OF ISI SERIES E
OF ISI COMMON STOCK(1) ESOP PREFERRED STOCK(2)
---------------------- -------------------------
<S> <C> <C>
Robert J. Darnall............ 230,106 1,796
Neil S. Novich............... 51,899 340
Jay M. Gratz................. 29,200 1,089
Carl G. Lusted............... 34,968 1,253
Stephen E. Makarewicz........ 22,699 435
James A. Henderson........... 1,985 0
Donald S. Perkins............ 3,485 0
Jean-Pierre Rosso............ 500 0
All Directors and Executive
Officers as a Group
(16 persons)................ 494,949 11,411
</TABLE>
- --------
(1) Excludes shares of ISI common stock into which ISI Series E ESOP Preferred
Stock may be converted. No Director or Named Executive Officer
individually owns 1% or more of the outstanding ISI common stock; all
Directors and executive officers as a group own 1.0% of the outstanding
ISI common stock. Includes shares held jointly with other persons, as
follows--Mr. Darnall-290 and all Directors and executive officers as a
group-1,281; shares which the following have the right to acquire under
options exercisable within 60 days of May 1, 1996--Mr. Darnall-169,000,
Mr. Novich-41,000, Mr. Gratz-21,800, Mr. Lusted-29,300, Mr. Makarewicz-
18,500, and all Directors and executive officers as a group-377,035; and
shares of ISI common stock held under restricted stock awards as follows--
Mr. Darnall-12,000, Mr. Novich-10,800, Mr. Gratz-4,400, Mr. Lusted-2,800,
Mr. Makarewicz-2,200, and all Directors and executive officers as a group-
44,600. Also includes 250 shares of ISI common stock held by the spouse of
an executive officer, for which beneficial ownership is disclaimed.
(2) Each Director and Named Executive Officer individually owns, and all
Directors and executive officers as a group collectively own, less than 1%
of the ISI Series E ESOP Preferred Stock.
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DESCRIPTION OF NOTES
GENERAL
The Notes are to be issued under an indenture dated as of ,
1996 (the "Indenture") between the Company and The Bank of New York, as
trustee (the "Trustee").
The terms of the Notes include those stated in the Indenture and those made
part of the Indenture by the Trust Indenture Act of 1939, as amended. The
following is a summary of the material provisions of the Indenture, a copy of
which has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part. Wherever particular sections, articles or defined terms
of the Indenture are referred to herein, such sections, articles or defined
terms shall be as specified in the Indenture. Capitalized terms not otherwise
defined below or elsewhere in this Prospectus shall have the respective
meanings given such terms in the Indenture.
The % Notes and the % Notes are unsecured obligations of the Company
and will rank pari passu with each other and with all other unsecured and
unsubordinated indebtedness of the Company, including borrowings under the New
Credit Facility. As of March 31, 1996, the Company had no indebtedness
outstanding that would rank ahead of the Notes. As of such date, however, the
Company's subsidiaries had outstanding indebtedness aggregating $23.1 million,
and had guaranteed indebtedness aggregating $110.8 million, that would in
effect rank ahead of the Notes. The Indenture does not limit the aggregate
principal amount of securities that can be issued thereunder and provides that
debt securities may be issued thereunder from time to time in one or more
series.
The % Notes and the % Notes will bear interest at the rates per annum
shown on the cover page of this Prospectus, payable semiannually on
and of each year (each an "Interest Payment Date")
from , 1996 (or from the most recent Interest Payment Date to
which interest has been paid or provided for) to the Holders listed in the
Security Register at the close of business on the preceding or
, as the case may be, next preceding such Interest Payment Date
(each, a "Regular Record Date"). Interest shall be computed on the basis of a
360-day year comprised of twelve 30-day months. The Notes will be issued in
fully registered form, without coupons, in denominations of $1,000 and
integral multiples thereof. Principal and interest will be payable at the
office or agency of the Company in the Borough of Manhattan, City of New York,
and the principal office of the Trustee in the City of . In
addition, with respect to the Notes of either series, unless the Notes of such
series are in registered global form, payment of interest may, at the option
of the Company, be made by check mailed to the address of the holder as it
appears in the Security Register on the Regular Record Date. No service charge
will be made for any registration, transfer or exchange of Notes, but the
Company may require payment of a sum sufficient to cover any tax or other
government charge payable in connection with certain transfers or exchanges.
If any Interest Payment Date or Stated Maturity falls on a day that is not a
Business Day, the required payment shall be made on the next Business Day as
if it were made on the date such payment was due, and no interest shall accrue
on the amount so payable for the period from and after such Interest Payment
Date or Stated Maturity, as the case may be. "Business Day" means each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in the place of payment are authorized or obligated by law or
executive order to close.
BOOK-ENTRY SYSTEM
The % Notes and the % Notes will be issued in the form of one or more
fully registered global notes (collectively, the "Global Notes"), which will
be deposited with, or on behalf of, The Depository Trust Company, New York,
New York (the "Depositary") and registered in the name of the Depositary's
nominee. Except as set forth below, the Global Notes of either series may be
transferred, in whole and not in part, only to the Depositary or another
nominee of the Depositary.
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The Depositary has advised the Company as follows: the Depositary is a
limited-purpose trust company organized under the laws of the State of New
York, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The Depositary was
created to hold securities of institutions that have accounts with the
Depositary ("participants") and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's participants include securities brokers and dealers (including
the Underwriters), banks, trust companies, clearing corporations and certain
other organizations, some of whom (and/or their representatives) own the
Depositary. Access to the Depositary's book-entry system is also available to
others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly. The Depositary agrees with and represents to its participants that
it will administer its book-entry system in accordance with its rules and
bylaws and requirements of law.
Upon the issuance of the Global Notes, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts
of the Notes represented by such Global Notes to the accounts of participants.
The accounts to be credited shall be designated by the Underwriters. Ownership
of beneficial interests in the Global Notes will be limited to participants or
persons that may hold interests through participants. Ownership of interests
in the Global Notes will be shown on, and the transfer of those ownership
interests will be effected only through, records maintained by the Depositary
(with respect to participants' interests) and such participants (with respect
to the owners of beneficial interest in the Global Notes through such
participants). The laws of some jurisdictions may require that certain
purchasers of securities take physical delivery of such securities in
definitive form. Such limits and laws may impair the ability to transfer
beneficial interests in the Global Notes.
So long as the Depositary, or its nominee, is the registered holder and
owner of the Global Notes, the Depositary or such nominee, as the case may be,
will be considered the sole owner and holder thereof for all purposes of such
Notes and under the Indenture. Except as set forth below, owners of beneficial
interests in the Global Notes will not be entitled to have the Notes
represented by such Global Notes registered in their names, will not receive
or be entitled to receive physical delivery of certificated Notes in
definitive form and will not be considered to be the owners or holders of any
Notes under the Indenture. Accordingly, each person owning a beneficial
interest in the Global Notes must rely on the procedures of the Depositary
and, if such person is not a participant, on the procedures of the participant
through which such person owns its interest, to exercise any rights of a
holder of Notes under the Indenture or the Global Notes. The Company
understands that under existing industry practice, in the event the Company
requests any action of holders of Notes or an owner of a beneficial interest
in the Global Notes desires to take any action that the Depositary, as the
holder of the Global Notes, is entitled to take, the Depositary would
authorize the participants to take such action, and that the participants
would authorize beneficial owners owning through such participants to take
such action or would otherwise act upon the instructions of beneficial owners
owning through them.
Payment of principal of and interest on Notes represented by the Global
Notes registered in the name of or held by the Depositary or its nominee will
be made to the Depositary or its nominee, as the case may be, as the
registered owner and holder of the Global Notes.
The Company expects that the Depositary, upon receipt of any payment of
principal or interest in respect of the Global Notes of either series, will
credit immediately participants' accounts with payment in amounts
proportionate to their respective beneficial interests in the principal amount
of the Global Notes of such series as shown on the records of the Depositary.
The Company also expects that payments by participants to owners of beneficial
interests in the Global Notes held through such
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<PAGE>
participants will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers
in bearer form or registered in "street name," and will be the responsibility
of such participants. None of the Company, the Trustee or any agent of the
Company or the Trustee will have any responsibility or liability for any
aspect of the records relating to, or payments made on account of, beneficial
ownership interests in the Global Notes or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests or for
any other aspect of the relationship between the Depositary and its
participants or the relationship between such participants and the owners of
beneficial interests in the Global Notes owning through such participants.
Unless and until they are exchanged in whole or in part for certificated
Notes in definitive form, the Global Notes may not be transferred except as a
whole by the Depositary to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary or another nominee of such Depositary.
The Notes represented by the Global Notes are exchangeable for certificated
Notes in definitive registered form in denominations of $1,000 and in any
greater amount that is an integral multiple thereof if (i) the Depositary
notifies the Company that it is unwilling or unable to continue as Depositary
for the Global Notes or if at any time the Depositary ceases to be a clearing
agency registered under the Exchange Act, (ii) the Company in its discretion
at any time determines not to have all of the Notes represented by the Global
Notes and notifies the Trustee thereof or (iii) an Event of Default with
respect to the Notes has occurred and is continuing. Any Notes that are
exchangeable pursuant to the preceding sentence are exchangeable for
certificated Notes issuable in authorized denominations and registered in such
names as the Depositary shall direct. Subject to the foregoing, the Global
Notes of either series are not exchangeable except for the Global Note or
Global Notes of the same series and the same aggregate denominations to be
registered in the name of the Depositary or its nominee.
REDEMPTION
Each series of Notes will be subject to redemption, in whole or in part, at
any time or from time to time, at the option of the Company on at least 30
days' prior notice by mail at a redemption price equal to the greater of (i)
100% of the principal amount of the Notes to be redeemed or (ii) the sum of
the present values of the remaining scheduled payments of principal and
interest thereon discounted to the date of redemption on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury
Rate plus basis points in the case of the % Notes, or basis points in
the case of the % Notes, plus in each case accrued but unpaid interest to
the date of redemption. On and after the date of redemption, interest will
cease to accrue on the Notes or portions of Notes called for redemption on
such date. The % Notes and the % Notes may be redeemed in part but only
in integral multiples of $1,000.
"Treasury Rate" means, with respect to any redemption date and with respect
to either series of Notes, the rate per annum equal to the semiannual
equivalent yield to maturity of the Comparable Treasury Issue, assuming a
price for such Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price for such redemption
date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable
to the remaining term of the Notes of the relevant series that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of such Notes. "Independent Investment Banker"
means one of the Reference Treasury Dealers appointed by the Trustee after
consultation with the Company.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of
58
<PAGE>
its principal amount) on the third business day preceding such redemption
date, as set forth in the daily statistical release (or any successor release)
published by the Federal Reserve Bank of New York and designated "Composite
3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release
(or any successor release) is not published or does not contain such prices on
such business day, (A) the average of the Reference Treasury Dealer Quotations
for such redemption date, after excluding the highest and lowest such
Reference Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than
three such Reference Treasury Dealer Quotations, the average of all such
Quotations.
"Reference Treasury Dealer" means Goldman, Sachs & Co. and CS First Boston
Corporation, and their respective successors; provided, however, that if any
of the foregoing shall cease to be a primary U.S. Government securities dealer
in New York City (a "Primary Treasury Dealer") the Company shall substitute
therefor another Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third business day preceding such redemption date.
Any notice to the Holders of the % Notes or the % Notes of such a
redemption need not set forth the redemption price of such Notes but need only
set forth the calculation thereof as described in the first paragraph of this
section entitled "Redemption." The redemption price, calculated as aforesaid,
shall be set forth in an Officers' Certificate delivered to the Trustee no
later than two business days prior to the redemption date.
No sinking fund shall be established for the benefit of the % Notes or
the % Notes.
CERTAIN COVENANTS OF THE COMPANY
Unless otherwise specified below, all accounting terms used herein are to be
interpreted, all accounting determinations under the Indenture are to be made,
and all financial statements required thereunder are to be prepared (except
for changes concurred in by the Company's independent public accountants) in
accordance with generally accepted accounting principles applied on a basis
consistent with the audited consolidated financial statements of the Company
as of December 31, 1995; provided that, if the Company or any Restricted
Subsidiary has adopted since such date or adopts at any time after the date of
the Indenture a change in accounting principles from those used in preparing
such consolidated financial statements that affects in any material respect
the computation of or compliance with any of the covenants contained in the
Indenture, then, unless the Indenture shall have been amended to modify the
covenants in the Indenture to take account of such change in accounting
principles, the Company shall continue to compute all financial restrictions
and ratios contained in such covenants based on accounting principles in
effect prior to the adoption of such change.
LIMITATION ON SECURED DEBT
The Company may not, nor may it permit any Restricted Subsidiary to, Incur
any Debt secured by a Lien on any (i) Principal Property or any part thereof,
(ii) Capital Stock of a Restricted Subsidiary now owned or hereafter acquired
by the Company or by any Restricted Subsidiary or (iii) Debt of a Restricted
Subsidiary owed to the Company or to any Restricted Subsidiary, without in any
such case under clause (i), (ii) or (iii) effectively providing that the Notes
are secured equally and ratably with (or, at the Company's option, prior to)
such secured Debt and any other Debt required to be so secured, unless the
aggregate amount of all such secured Debt outstanding at such time, plus all
Attributable Debt of the Company and its Restricted Subsidiaries with respect
to Sale and Leaseback Transactions involving Principal Properties outstanding
at such time (with the exception of such transactions that are excluded as
described under "Limitation on Sale and Leaseback Transactions" below), would
not exceed 10% of Consolidated Net Tangible Assets.
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The restriction in the foregoing paragraph shall not apply to, and there
will be excluded from Debt in any computation under such restriction, (i) Debt
secured by a Lien in favor of the Company or a Restricted Subsidiary, (ii)
Debt secured by a Lien in favor of governmental bodies to secure progress or
advance payments or payments pursuant to contracts or statute, (iii) Debt
secured by a Lien on property, Capital Stock or Debt existing at the time of
acquisition thereof (including acquisition through merger, consolidation or
otherwise) and not Incurred in anticipation thereof, (iv) Debt Incurred or
Guaranteed to finance the acquisition of property, Capital Stock or Debt, or
to finance construction on, or improvement or expansion of, property, which
Debt is incurred within 180 days of such acquisition or completion of
construction, improvement or expansion, and is secured solely by a Lien on the
property, Capital Stock or Debt acquired, constructed, improved or expanded,
(v) Debt consisting of industrial revenue or pollution control bonds or
similar financing secured solely by a Lien on the property the subject
thereof, (vi) secured Debt outstanding on the date of the Indenture or (vii)
any extension, renewal, refunding or replacement of any Debt referred to in
clauses (iii), (iv) and (vi) above.
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS
Neither the Company nor any Restricted Subsidiary may enter into any Sale
and Leaseback Transaction involving any Principal Property or any part thereof
after the date of original issuance of the Notes unless the aggregate amount
of all Attributable Debt of the Company and its Restricted Subsidiaries with
respect to such transactions outstanding at such time, plus all secured Debt
outstanding at such time to which the restriction described under "Limitation
on Secured Debt" above applies, would not exceed 10% of Consolidated Net
Tangible Assets.
The restriction in the foregoing paragraph shall not apply to, and there
shall be excluded from Attributable Debt in any computation under such
restriction, any Sale and Leaseback Transaction if (i) the lease is for a
period of not in excess of three years, including renewal rights, (ii) the
lease secures or relates to industrial revenue or pollution control bonds or
similar financing, (iii) the transaction is between the Company and a
Restricted Subsidiary or between Restricted Subsidiaries, or (iv) the Company
or such Restricted Subsidiary, within 270 days after the sale is completed,
applies an amount equal to the greater of (a) the net proceeds of the sale of
the Principal Property or part thereof leased or (b) the fair market value of
the Principal Property or part thereof leased either to (1) the retirement (or
open market purchase) of Notes, other Funded Debt of the Company ranking on a
parity with or senior to the Notes or Funded Debt of a Restricted Subsidiary
or (2) the purchase by the Company or any Restricted Subsidiary of other
property, plant or equipment related to the business of the Company or any
Restricted Subsidiary having a value at least equal to the value of the
Principal Property or part thereof leased.
LIMITATIONS ON RESTRICTED PAYMENTS
The Company may not, nor will it permit any Restricted Subsidiary to,
directly or indirectly (i) declare or pay any dividend or make any
distribution on account of the Company's Capital Stock (other than dividends
or distributions payable in Capital Stock (other than Disqualified Stock) of
the Company or dividends or distributions payable to the Company or any
Wholly-Owned Restricted Subsidiary of the Company), (ii) purchase, redeem or
otherwise acquire or retire for value any Capital Stock of the Company other
than any such Capital Stock owned by the Company or any Wholly-Owned
Restricted Subsidiary of the Company or (iii) redeem, defease (including, but
not limited to, legal or covenant defeasance), repurchase, retire or otherwise
acquire or retire for value prior to any scheduled maturity, repayment or
sinking fund payment, Debt of the Company (other than the Notes) that is
subordinate in right of payment to the Notes (all such payments and other
actions set forth in clauses (i), (ii) and (iii) above being collectively
referred to as "Restricted Payments"), unless, at the time of such Restricted
Payment:
(a) no Event of Default or event that with the passing of time or the
giving of notice, or both, would constitute an Event of Default shall have
occurred and be continuing or would occur as a consequence thereof; and
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(b) upon giving effect to such Restricted Payment on a pro forma basis
(the value of any such payment, if other than cash, being determined by the
Board of Directors of the Company and evidenced by a resolution set forth
in an Officers' Certificate delivered to the Trustee) the Consolidated Net
Worth of the Company would exceed:
(I) if the long-term unsecured Debt of the Company is not rated
Investment Grade by each of Moody's and S&P, the sum of (x)
$250,000,000 and (y) an amount equal to the greater of zero and 50% of
cumulative Consolidated Net Income of the Company since June 30, 1996;
or
(II) if the long-term unsecured Debt of the Company is rated
Investment Grade by each of Moody's and S&P, the amount produced
pursuant to clause (I) above as of the last day of the most recent
fiscal quarter prior to the date on which such debt became so rated by
each of Moody's and S&P.
The foregoing covenant will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture, (ii) the redemption, repurchase, retirement or other acquisition of
any Capital Stock of the Company in exchange for, or out of the proceeds of,
the substantially concurrent sale (other than to a Restricted Subsidiary of
the Company) of other Capital Stock of the Company (other than any
Disqualified Stock), (iii) the repurchase, redemption or other acquisition or
retirement for value of any Capital Stock of the Company held by any member of
the Company's (or any of its Restricted Subsidiaries') management or any
Director of the Company pursuant to any management equity subscription
agreement, stock option agreement or other employee benefit plan or program,
(iv) payments not exceeding $15 million in the aggregate in any twelve month
period with respect to dividends on any series of preferred stock of the
Company (other than Disqualified Stock) issued after the date of the
Indenture, (v) any redemption by the Company of any series of preferred stock
of the Company or Debt of the Company which is convertible into common stock
of the Company if at the time of such redemption the Company has an
underwriting commitment on customary terms from a nationally recognized
broker-dealer to purchase all shares of such series of preferred stock or
convertible Debt (or shares of common stock into which such preferred stock or
convertible Debt is convertible) which are not converted as of the redemption
date and (vi) any Restricted Payment made in connection with any merger,
consolidation or sale permitted under the caption "Limitation on Mergers,
Consolidations and Certain Sales of Assets" below, provided that in the case
of any transaction under clause (iii) or (iv) above, no Event of Default or
event that with the passing of time or the giving of notice, or both, would
constitute an Event of Default shall have occurred and be continuing
immediately after such transaction.
LIMITATION ON TRANSACTIONS WITH AFFILIATES
The Company will not, nor will it permit any Restricted Subsidiary to, sell,
lease, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make any contract,
agreement, understanding, loan, advance or guarantee with or for the benefit
of, any Affiliate unless (i) such transaction or series of transactions is on
terms that are no less favorable to the Company or such Restricted Subsidiary,
as the case may be, than would be available in a comparable transaction with
an unrelated third party and (ii) the Company delivers to the Trustee, except
with respect to the purchase or sale of products from or to ISI or any of its
Affiliates, (a) with respect to a transaction or series of transactions
involving aggregate payments in excess of 1% of Consolidated Net Tangible
Assets, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such transaction complies with clause (i) above
and has been approved by a majority of the independent members of the Board of
Directors, and (b) with respect to a transaction or series of transactions
involving aggregate payments equal to or greater than 4% of Consolidated Net
Tangible Assets, the Company receives a written opinion from a nationally
recognized expert that such transaction or series of transactions is fair to
the Company from a financial point of view, provided
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that (i) employment agreements, (ii) transactions between or among the Company
and its Restricted
Subsidiaries or between or among its Restricted Subsidiaries, (iii)
transactions permitted by the covenant described above under the caption
"Limitations on Restricted Payments" and (iv) arrangements with Affiliates in
effect as of the date of the Indenture, including any renewal, restructuring,
amendment, refinancing or modification of any such arrangement which does not
materially adversely affect the interests of the holders of the Notes in the
reasonable judgment of the Company, in each case, will not be subject to this
covenant.
LIMITATION ON MERGERS, CONSOLIDATIONS AND CERTAIN SALES OF ASSETS
The Company may not, in a single transaction or a series of related
transactions, consolidate with or merge with or into any other Person or sell,
assign, convey, transfer or lease or otherwise dispose of all or substantially
all of its properties and assets to any Person or group of affiliated Persons,
or permit any of its Restricted Subsidiaries to enter into any such
transaction or transactions and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless (i)
in a transaction in which the Company does not survive or in which the Company
sells, leases or otherwise disposes of all or substantially all of its assets,
the successor entity to the Company is organized under the laws of the United
States of America or any State thereof or the District of Columbia and shall
expressly assume, by a supplemental indenture executed and delivered to the
Trustee in form satisfactory to the Trustee, all of the Company's obligations
under the Indenture and the Notes, (ii) immediately before and after giving
effect to such transaction and treating any Debt that becomes an obligation of
the Company or a Restricted Subsidiary as a result of such transaction as
having been Incurred by the Company or such Restricted Subsidiary at the time
of the transaction, no Event of Default or event that with the passing of time
or the giving of notice, or both, would constitute an Event of Default shall
have occurred and be continuing and (iii) the Company or the successor entity
to the Company shall have secured each series of Notes as required by the
provisions of the Indenture under "Limitation on Secured Debt" described above
if, as a result of any such transaction, property or assets of the Company or
any Restricted Subsidiary would become subject to a Lien prohibited by said
covenant.
Although there is a developing body of case law interpreting the phrase
"substantially all," as used in Section 909 of the New York Business
Corporation Law, there is no precise established definition of the phrase as
used in indentures under applicable New York law. Accordingly, the
circumstances under which a holder of Notes would be able to prove a violation
of the foregoing covenant as a result of a sale, conveyance, transfer or lease
or other disposition of less than all of the assets of the Company and its
Restricted Subsidiaries to another Person are uncertain.
PROVISION OF FINANCIAL INFORMATION
So long as any of the Notes of a series are outstanding, the Company shall
file with the Commission, and shall provide the Trustee, and upon written
request, Holders of such Notes and prospective holders of such Notes with
copies of, the annual reports, quarterly reports and other information,
documents and reports that are or would be required to be filed with the
Commission pursuant to Sections 13(a) or 15(d) of the Exchange Act, without
cost to the Trustee, such Holders or such prospective holders. In the event
the Company is not permitted to file such documents with the Commission, the
Company shall file such documents with the Trustee and, upon written request,
provide Holders of such Notes and prospective holders of such Notes copies
thereof, without cost to such Holders or prospective holders.
DEFEASANCE AND COVENANT DEFEASANCE
DEFEASANCE AND DISCHARGE
The Indenture provides that under certain conditions, at the Company's
option, the Company will be discharged from all its obligations with respect
to either series of the Notes (except for certain
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obligations to exchange or register the transfer of Notes, to replace stolen,
lost or mutilated Notes, to maintain paying agencies and to hold moneys for
payment in trust) upon the deposit in trust for the benefit of the Holders of
such Notes of money or U.S. Government Obligations, or both, which, through
the payment of principal and interest in respect thereof in accordance with
their terms, will provide money in an amount sufficient to pay the principal
of and interest on such series of Notes on the dates such payments are due in
accordance with the terms of the Indenture and such Notes. Such defeasance or
discharge may occur only if, among other things, the Company has delivered to
the Trustee an Opinion of Counsel to the effect that the Company has received
from, or there has been published by, the IRS a ruling, or there has been a
change in tax law, in either case to the effect that Holders of such series of
Notes will not recognize gain or loss for federal income tax purposes as a
result of such deposit, defeasance and discharge and will be subject to
federal income tax on the same amount, in the same manner and at the same
times as would have been the case if such deposit, defeasance and discharge
were not to occur.
DEFEASANCE OF CERTAIN COVENANTS
The Indenture provides that under certain conditions, at the Company's
option, the Company may, with respect to either series of the Notes, omit to
comply with the covenants described in "Certain Covenants of the Company"
described above. The Company, in order to exercise such option, will be
required to deposit, in trust for the benefit of the Holders of such series of
Notes, money or U.S. Government Obligations, or both, which, through the
payment of principal and interest in respect thereof in accordance with their
terms, will provide money in an amount sufficient to pay the principal of and
interest on such Notes on the dates such payments are due in accordance with
the terms of the Indenture and such Notes. The Company will also be required,
among other things, to deliver to the Trustee an Opinion of Counsel to the
effect that Holders of such Notes will not recognize gain or loss for federal
income tax purposes as a result of such deposit and defeasance of certain
obligations and will be subject to federal income tax on the same amount, in
the same manner and at the same times as would have been the case if such
deposit and defeasance were not to occur. In the event the Company exercised
this option with respect to a series of the Notes and such Notes were declared
due and payable because of the occurrence of any Event of Default, the amount
of money and U.S. Government Obligations so deposited in trust would be
sufficient to pay the principal of and interest on such Notes at the time such
payments would have been due but may not be sufficient to pay amounts due on
such Notes upon any acceleration resulting from such Event of Default. In such
case, the Company would remain liable for such payments.
GOVERNING LAW
The Indenture will be governed by the laws of the State of New York.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with any specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Asset Disposition" by the Company or any of its Restricted Subsidiaries
means any sale, lease, conveyance, transfer or other disposition (including,
without limitation, by way of a merger,
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consolidation, spin-off, sale of Capital Stock or otherwise) of (i) the shares
of Capital Stock of a Restricted Subsidiary of the Company (other than
directors' qualifying shares), (ii) substantially all of the assets
representing a division or line of the business of the Company or any of its
Restricted Subsidiaries or (iii) other assets of the Company or any of its
Restricted Subsidiaries outside of the ordinary course of business (each
referred to for the purposes of this definition as a "disposition"), in each
case by the Company or any of its Restricted Subsidiaries (other than a
disposition by such a Restricted Subsidiary to the Company or by the Company
to a Restricted Subsidiary or by a Restricted Subsidiary to another Restricted
Subsidiary).
"Attributable Debt" means, with respect to a lease in a Sale and Leaseback
Transaction, the total net amount of rent required to be paid during the
remaining primary term of such lease, discounted at a rate per annum equal to
the interest rate implicit in such lease, calculated in accordance with
generally accepted accounting practices. The net amount of rent required to be
paid under any such lease for any such period shall be the aggregate amount of
rent payable by the lessee with respect to such period after excluding amounts
required to be paid on account of maintenance, repairs, insurance, taxes,
assessments, utility, operating and labor costs and similar charges.
"Capital Lease Obligations" of any Person means the obligations to pay rent
or other amounts under a lease of (or other Debt arrangements conveying the
right to use) real or personal property of such Person that are required to be
classified and accounted for as a capital lease or a liability on the face of
a balance sheet of such Person in accordance with generally accepted
accounting principles, and the amount of such obligations shall be the
capitalized amount thereof in accordance with generally accepted accounting
principles and the stated maturity thereof shall be the date of the last
payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of
a penalty.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock or
other equity participation, including partnership interests, whether general
or limited, of such Person.
"Consolidated Net Income" of the Company means for any period the
consolidated net income (or loss) of the Company and its Restricted
Subsidiaries for such period determined on a consolidated basis in accordance
with generally accepted accounting principles, provided that there shall be
excluded therefrom (i) the net income (or loss) of any Person acquired by the
Company or a Restricted Subsidiary in a pooling-of-interests transaction for
any period prior to the date of such transaction, (ii) the net income (but not
net loss) of any Restricted Subsidiary which is subject to restrictions which
prevent the payment of dividends or the making of distributions to the Company
to the extent of such restrictions, (iii) the net income (or loss) of any
Person that is not a Restricted Subsidiary except to the extent of the amount
of dividends or other distributions actually paid to the Company by such
Person during such period, (iv) gains or losses on Asset Dispositions by the
Company or its Restricted Subsidiaries and (v) all extraordinary gains and
extraordinary losses.
"Consolidated Net Tangible Assets" means the aggregate amount of assets of
the Company and its Restricted Subsidiaries after deducting (i) all current
liabilities other than commercial paper, short-term bank debt and current
maturities of long-term debt and (ii) all goodwill and other intangibles.
"Consolidated Net Worth" means the consolidated stockholders' equity of the
Company and its Restricted Subsidiaries, less amounts attributable to
Disqualified Stock.
"Debt" means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person and whether or
not contingent, (i) every obligation of such Person for money borrowed, (ii)
every obligation of such Person evidenced by bonds, debentures, notes or other
similar instruments, including obligations Incurred in connection with the
acquisition of property, assets or businesses, (iii) every reimbursement
obligation of such Person with respect to letters of
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credit, bankers' acceptances or similar facilities issued for the account of
such Person, (iv) every obligation of such Person issued or assumed as the
deferred purchase price of property or services (but excluding trade accounts
payable or accrued liabilities arising in the ordinary course of business that
are not overdue by more than 90 days or that are being contested in good
faith), (v) every Capital Lease Obligation of such Person, (vi) the maximum
fixed redemption or repurchase price of Disqualified Stock of such Person,
(vii) every obligation of such Person under interest rate swap or similar
agreements, or foreign currency or commodity hedge, exchange or similar
agreements of such Person, (viii) the Attributable Debt with respect to any
Sale and Leaseback Transaction to which such Person is a party and (ix) every
obligation of the type referred to in clauses (i) through (viii) of another
Person and all dividends of another Person the payment of which, in either
case, such Person has Guaranteed or is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable in cash, pursuant to a sinking fund obligation or otherwise, or is
redeemable in cash at the option of the holder thereof, in whole or in part,
on or prior to the date on which the Notes mature; provided, however, that
Disqualified Stock shall not include any Capital Stock held by or issued in
connection with any employee benefit plan or program in which employees or
Directors of the Company or any subsidiary of the Company participate.
"Funded Debt" means (i) all Debt having a maturity of more than 12 months
from the date as of which the determination is made or having a maturity of 12
months or less but by its terms being renewable or extendible beyond 12 months
from such date at the option of any obligor thereon and (ii) Capital Lease
Obligations payable more than 12 months from such date (such Capital Lease
Obligations to be included as Funded Debt at the amount so capitalized at the
date of such computation and to be included for the purposes of the definition
of Consolidated Net Tangible Assets both as an asset and as Funded Debt at the
amount so capitalized).
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person guaranteeing any Debt of any other Person (the "primary obligor")
in any manner, whether directly or indirectly, and including, without
limitation, any obligation of such Person, directly or indirectly (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Debt or to purchase (or to advance or supply funds for the purchase of)
any interest in or security for the payment of such Debt, (ii) to purchase
property, securities or services for the purpose of assuring the holder of
such Debt of the payment of such Debt or (iii) to maintain working capital,
equity capital or other financial statement condition or liquidity of the
primary obligor so as to enable the primary obligor to pay such Debt (and
"Guaranteed" and "Guaranteeing" shall have meanings correlative to the
foregoing); provided, however, that a Guarantee by any Person shall not
include endorsements by such Person for collection or deposit, in either case,
in the ordinary course of business; and provided, further, that the term
"Guarantee" shall not include contracts made in the ordinary course of
business of the Company and its Restricted Subsidiaries for the purchase of
utilities, services and raw materials that require payment to be made to the
provider of utilities, services or raw materials regardless of whether
delivery is ever made of such utilities, services or raw materials so long as
the quantities of utilities, services or raw materials purchased under each
such contract do not exceed the Company's or its contracting Restricted
Subsidiary's reasonably anticipated consumption thereof on the date of the
contract. The amount of a Guarantee shall be equal to the amount of the
obligation covered thereby.
"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Debt or other
obligation or the recording, as required pursuant to generally accepted
accounting principles or otherwise, of any such Debt or other obligation on
the balance sheet of any such Person (and "Incurrence," "Incurred,"
"Incurrable" and "Incurring" shall have meanings correlative to the
foregoing); provided, however, that a change in generally accepted accounting
principles that results
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in an obligation of such Person that exists at such time becoming Debt shall
not be deemed an Incurrence of such Debt, and "Incur" means with respect to
any Lien, to create, incur or assume such Lien on any asset or property (and
"Incurrence," "Incurred," "Incurrable" and "Incurring" shall have meanings
correlative to the foregoing).
"Investment Grade" means Baa3 or better in the case of a rating from Moody's
and BBB- or better in the case of a rating from S&P.
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority or
other security agreement, or any equivalent of any of the foregoing under the
laws of any applicable jurisdiction, on or with respect to such property or
assets (including, without limitation, any conditional sale or other title
retention agreement having substantially the same economic effect as any of
the foregoing); provided, however, that Lien shall not include a Permitted
Lien.
"Moody's" means Moody's Investors Service, Inc. or any successor thereto.
"Permitted Liens" means (i) deposits, liens or pledges of personal property
to enable the Company or a Restricted Subsidiary to exercise any privilege or
license, or to secure payments of worker's compensation, unemployment
insurance or social security obligations, or to secure the performance of
contracts or leases to which the Company or a Restricted Subsidiary is a
party, or to secure public or statutory obligations of the Company or a
Restricted Subsidiary, or other similar
deposits, liens, or pledges of personal property made in the ordinary course
of business, (ii) mechanics', workmen's, repairmen's or carriers' liens, or
other similar liens arising in the ordinary course of business, or deposits,
liens or pledges of personal property to obtain the release of any such liens,
(iii) liens for taxes, assessments and other governmental charges not
delinquent or the payment of which is being contested by the Company or a
Restricted Subsidiary in good faith and (iv) bankers' liens and rights of
setoff arising in the ordinary course of business of the Company or any
Restricted Subsidiary under common law or by statute.
"Principal Property" means any facility owned by the Company or any
Subsidiary the gross book value of which (including related land,
improvements, machinery and equipment so owned, without deduction of any
depreciation reserves) on the date as of which the determination is being made
exceeds 2% of Consolidated Net Tangible Assets.
"Restricted Subsidiary" means any Subsidiary which owns a Principal Property
and any other Subsidiary designated as a Restricted Subsidiary by the Board of
Directors of the Company.
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw
Hill Companies, Inc., or any successor thereto.
"Sale and Leaseback Transaction" means an arrangement with any lender or
investor or to which any lender or investor is a party providing for the
leasing by such Person of any property or asset of such Person that has been
or is being sold or transferred by such Person more than 180 days after the
acquisition thereof or the completion of construction or commencement of
operation thereof to such lender or investor or to any person to whom funds
have been or are to be advanced by such lender or investor on the security of
such property or asset. The stated maturity of such arrangement shall be the
date of the last payment of rent or any other amount due under such
arrangement prior to the first date on which such arrangement may be
terminated by the lessee without payment of a penalty.
"Subsidiary" of any Person means (i) a corporation more than 50% of the
outstanding Voting Stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person or by such Person
and one or more Subsidiaries thereof or (ii) any other Person (other
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than a corporation) in which such Person, or one or more other Subsidiaries of
such Person or such Person and one or more other Subsidiaries thereof,
directly or indirectly, has at least a majority ownership and power to direct
the policies, management and affairs thereof.
"U.S. Government Obligation" means (x) any security that is (i) a direct
obligation of the United States of America for the payment of which the full
faith and credit of the United States of America is pledged or (ii) an
obligation of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation of the United
States of America, that, in either case (i) or (ii), is not callable or
redeemable at the option of the issuer thereof, and (y) any depositary receipt
issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as
custodian with respect to any U.S. Government Obligation that is specified in
clause (x) above and held by such bank for the account of the holder of such
depositary receipt, or for the account of the holder of such depositary
receipt, or with respect to any specific payment of principal of or interest
on any U.S. Government Obligation that is so specified and held, provided that
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depositary receipt
from any amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal or interest evidenced by such
depositary receipt.
"Voting Stock" means Capital Stock which ordinarily has voting power for the
election of directors (or persons performing similar functions), whether at
all times or only so long as no senior class of securities has such voting
power by reason of any contingency.
"Wholly-Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock of which (other
than directors' qualifying shares) shall at the time be owned by such Person
or by one or more Wholly-Owned Restricted Subsidiaries of such Person or by
such Person and one or more Wholly-Owned Restricted Subsidiaries of such
Person.
EVENTS OF DEFAULT
The following will be Events of Default with respect to either series of
Notes under the Indenture: (i) failure to pay any interest on any Note of such
series when due, continued for 30 days, (ii) failure to pay principal of (or
premium, if any, on) any Note of such series when due, (iii) failure to
perform or comply with the provisions described under "Limitation on Mergers,
Consolidations and Certain Sales of Assets", (iv) failure to perform, or
breach of, any other covenant or warranty of the Company in the Indenture,
continued for 60 days after written notice as provided in the Indenture, (v) a
default or defaults under any bonds, debentures, notes or other evidences of,
or obligations constituting, Debt of the Company or any Restricted Subsidiary
(other than the Notes of such series) or under any mortgages, indentures,
instruments or agreements under which there may be issued or existing or by
which there may be secured or evidenced any Debt of the Company or any
Restricted Subsidiary, in any such case with a principal or similar amount
then outstanding, individually or in the aggregate, in excess of $25,000,000,
whether such Debt now exists or is hereafter created, which default or
defaults constitute a failure to pay any portion of the principal or similar
amount of such Debt when due and payable or which would enable the holder
thereof to cause such Debt to become due and payable prior to the date on
which it would otherwise have become due and payable, (vi) the rendering of a
final judgment or judgments (not subject to appeal) against the Company or any
of its Restricted Subsidiaries individually or in the aggregate, in excess of
$25,000,000, which remains unstayed, undischarged or unbonded for a period of
60 days thereafter and (vii) certain events of bankruptcy, insolvency or
reorganization affecting the Company or any Restricted Subsidiary.
If an Event of Default (other than an Event of Default of the type described
in clause (vii) above) shall occur and be continuing with respect to either
series of Notes, either the Trustee or the Holders of at least 25% in
aggregate principal amount of the outstanding Notes of such series may
accelerate
67
<PAGE>
the maturity of all Notes of such series, and if an Event of Default of the
type described in clause (vii) above shall occur, the principal, premium, if
any and accrued interest on the Notes of such series then Outstanding shall
become immediately due and payable; provided, however, that after such
acceleration, but before a judgment or decree based on acceleration, the
Holders of a majority in aggregate principal amount of outstanding % Notes
or % Notes, as the case may be, may, under certain circumstances, rescind
and annul such acceleration if all Events of Default with respect to such
series of Notes, other than the non-payment of accelerated principal of the
Notes of such series, have been cured or waived as provided in the Indenture.
For information as to waiver of defaults, see "Modification and Waiver."
No Holder of any Note of either series will have any right to institute any
proceeding with respect to the Indenture or for any remedy thereunder, unless
such Holder shall have previously given the Trustee written notice of a
continuing Event of Default with respect to such series of Notes and unless
also the Holders of at least 25% in aggregate principal amount of the
outstanding Notes of such series shall have made written request, and offered
reasonable indemnity, to the Trustee to institute such proceeding as Trustee,
and the Trustee shall not have received from the Holders of a majority in
aggregate principal amount of the outstanding Notes of such series a direction
inconsistent with such request and shall have failed to institute such
proceeding within 60 days. However, such limitations do not apply to a suit
instituted by a Holder of a Note for enforcement of payment of the principal,
premium, if any, or interest on such Note on or after the respective due dates
expressed in such Note.
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture with respect to either series
of Notes may be made by the Company and the Trustee with the consent of the
Holders of a majority in aggregate principal amount of the outstanding Notes
of such series; provided, however, that no such modification or amendment may,
without the consent of the Holder of each outstanding Note of a series
affected thereby, (i) change the Stated Maturity of the principal of, or any
installment of interest on, any Note of such series, (ii) reduce the principal
amount, premium, if any, or interest on, any Note of such series, (iii) change
the place or currency of payment of principal, premium, if any, or interest on
any Note of such series, (iv) impair the right to institute suit for the
enforcement of any payment on or with respect to any Note of such series, (v)
reduce the above-stated percentage of outstanding Notes of such series
necessary to modify or amend the Indenture, (vi) reduce the percentage of
aggregate principal amount of outstanding Notes of such series necessary for
waiver of compliance with certain provisions of the Indenture or for waiver of
certain defaults, or (vii) modify any provisions of the Indenture relating to
the modification and amendment of the Indenture or the waiver of past defaults
or covenants, except as otherwise specified, in a manner adverse to the
Holders of such series of Notes.
The Holders of a majority in aggregate principal amount of the outstanding
Notes of either series may waive compliance by the Company with certain
restrictive provisions of the Indenture with respect to such series. The
Holders of a majority in aggregate principal amount of the outstanding Notes
of either series may waive any past default with respect to such series under
the Indenture, except a default in the payment of principal, premium, if any,
or interest.
CONCERNING THE TRUSTEE
The Bank of New York is the Trustee with respect to both series of Notes
under the Indenture. The Trustee has been invited to participate in the New
Credit Facility. In addition, the Trustee performs banking services for ISI
and its subsidiaries, other than the Company, in the ordinary course of their
businesses.
68
<PAGE>
VALIDITY OF THE NOTES
The validity of the Notes being offered hereby and certain other legal
matters will be passed upon for the Company by Mayer, Brown & Platt, Chicago,
Illinois. Certain legal matters will be passed upon for the Underwriters by
Sullivan & Cromwell, New York, New York. George A. Ranney, Jr., Vice President
and General Counsel of ISI, is a partner in the law firm of Mayer, Brown &
Platt. As of June 1, 1996, Mr. Ranney owned 7,300 shares of ISI's common stock
and also held options to purchase 48,000 shares of ISI's common stock, of
which none are currently exercisable.
EXPERTS
The consolidated financial statements as of December 31, 1994 and 1995, and
for each of the three years in the period ended December 31, 1995 included in
this Prospectus and the financial statement schedules in the registration
statement have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts
in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Commission a registration statement on Form
S-1 (the "Registration Statement") under the Securities Act with respect to
the Notes offered hereby. For the purposes hereof, the term "Registration
Statement" means the original Registration Statement and any and all
amendments thereto. This Prospectus does not contain all of the information
set forth in the Registration Statement and the exhibits and schedules
thereto. For further information with respect to the Company and such Notes,
reference is hereby made to the Registration Statement, exhibits and
schedules, which may be inspected and copied at the public reference
facilities maintained by the Commission at its principal office at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at
certain regional offices of the Commission located at Citicorp Center, 500
West Madison Street, Chicago, Illinois 60661 and at Seven World Trade Center,
New York, New York 10048. Copies of the Registration Statement can be obtained
at prescribed rates from the Public Reference Section of the Commission at its
principal office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549.
69
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
OF RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C>
Report of Independent Accountants......................................... F-2
Consolidated Statements of Operations and Reinvested Earnings for the
three years ended December 31, 1995 and (unaudited) for the three months
ended March 31, 1995 and 1996............................................ F-3
Consolidated Statement of Cash Flows for the three years ended December
31, 1995 and (unaudited) for the three months ended March 31, 1995 and
1996..................................................................... F-4
Consolidated Balance Sheet at December 31, 1994 and 1995 and (unaudited)
March 31, 1996........................................................... F-5
Statement of Accounting and Financial Policies............................ F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of Ryerson Tull, Inc.
In our opinion, the consolidated financial statements listed in the index
appearing on page F-1 present fairly, in all material respects, the financial
position of Ryerson Tull, Inc. (formerly Inland Materials Distribution Group,
Inc.) (a wholly-owned subsidiary of Inland Steel Industries, Inc.) and
Subsidiary Companies at December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
Chicago, Illinois
February 19, 1996
F-2
<PAGE>
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS AND REINVESTED EARNINGS
DOLLARS IN MILLIONS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------- -------------
1993 1994 1995 1995 1996
-------- -------- -------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
Net sales............................ $1,893.3 $2,197.5 $2,450.1 $652.3 $625.3
-------- -------- -------- ------ ------
Operating costs and expenses:
Cost of goods sold (excluding
depreciation)..................... 1,663.8 1,927.7 2,118.1 563.5 541.6
Selling, general and administrative
expenses.......................... 144.4 142.1 153.2 39.1 39.5
Depreciation and amortization...... 20.6 21.2 21.8 5.4 5.6
State, local and miscellaneous
taxes............................. 8.1 8.4 8.3 2.2 2.0
-------- -------- -------- ------ ------
Total............................ 1,836.9 2,099.4 2,301.4 610.2 588.7
-------- -------- -------- ------ ------
Operating profit..................... 56.4 98.1 148.7 42.1 36.6
Other expense:
General corporate expense, net of
income items...................... 7.4 6.9 .7 .4 (.7)
Interest and other expense on
debt.............................. 10.9 2.9 2.6 .7 .6
-------- -------- -------- ------ ------
Income before income taxes........... 38.1 88.3 145.4 41.0 36.7
Provision for income taxes (Note 7).. 11.4 35.0 56.9 16.5 14.3
-------- -------- -------- ------ ------
Net income........................... $ 26.7 $ 53.3 $ 88.5 $ 24.5 $ 22.4
======== ======== ======== ====== ======
CONSOLIDATED STATEMENT OF REINVESTED EARNINGS
Balance at beginning of year......... $ 5.4 $ 32.1 $ 85.4 $ 85.4 $173.9
Net income for the year.............. 26.7 53.3 88.5 24.5 22.4
-------- -------- -------- ------ ------
Reinvested earnings at end of year... $ 32.1 $ 85.4 $ 173.9 $109.9 $196.3
======== ======== ======== ====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
CONSOLIDATED STATEMENT OF CASH FLOWS
DOLLARS IN MILLIONS
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH
--------------------------------------------
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------- --------------
1993 1994 1995 1995 1996
-------- -------- -------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income...................... $ 26.7 $ 53.3 $ 88.5 $ 24.5 $ 22.4
-------- -------- -------- ------ ------
Adjustments to reconcile net in-
come to net cash provided from
(used for) operating activi-
ties:
Depreciation and
amortization................. 20.6 21.2 21.8 5.4 5.6
Net gain on sales of assets... (.1) (.5) (.2) -- --
Deferred employee benefit
cost......................... 3.9 3.9 (14.4) (1.1) .9
Deferred income taxes......... (8.3) .7 .5 1.1 1.7
Change in:
Receivables.................. (22.8) (31.1) (16.7) (63.7) (30.8)
Inventories.................. (18.2) 5.7 10.4 (12.0) (34.5)
Other assets................. -- (1.6) (2.3) (.6) (.6)
Accounts payable............. (31.5) 22.6 (7.0) 13.0 21.4
Payables to related
companies................... 1.7 5.8 (.4) 13.8 .9
Accrued liabilities.......... 2.7 (.3) 4.2 (4.7) (7.3)
-------- -------- -------- ------ ------
Net adjustments............. (52.0) 26.4 (4.1) (48.8) (42.7)
-------- -------- -------- ------ ------
Net cash provided from (used
for) operating activities.. (25.3) 79.7 84.4 (24.3) (20.3)
-------- -------- -------- ------ ------
INVESTING ACTIVITIES
Capital expenditures............ (19.3) (20.4) (19.3) (3.0) (3.0)
Proceeds from sales of assets... .9 5.8 1.9 .3 1.2
-------- -------- -------- ------ ------
Net cash used for investing
activities................. (18.4) (14.6) (17.4) (2.7) (1.8)
-------- -------- -------- ------ ------
FINANCING ACTIVITIES
Long-term debt issued........... 7.5 -- -- -- --
Long-term debt retired.......... (5.3) (4.9) (4.7) (.6) (.5)
Capital contribution from Inland
Steel Industries............... 150.0 -- -- -- --
Change in notes to and from re-
lated companies................ (79.0) (87.2) (11.2) 41.9 14.4
-------- -------- -------- ------ ------
Net cash provided from (used
for) financing activities.. 73.2 (92.1) (15.9) 41.3 13.9
-------- -------- -------- ------ ------
Net increase (decrease) in cash
and cash equivalents........... 29.5 (27.0) 51.1 14.3 (8.2)
Cash and cash equivalents--be-
ginning of period............ -- 29.5 2.5 2.5 53.6
-------- -------- -------- ------ ------
Cash and cash equivalents--end
of period.................... $ 29.5 $ 2.5 $ 53.6 $ 16.8 $ 45.4
======== ======== ======== ====== ======
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
Interest, net of amount capi-
talized...................... $ 11.3 $ 2.9 $ 3.0 $ .8 $ .6
Income taxes, net............. 22.6 30.5 56.4 9.4 12.5
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
CONSOLIDATED BALANCE SHEET
DOLLARS IN MILLIONS
<TABLE>
<CAPTION>
PRO FORMA
AT DECEMBER 31, AT MARCH 31,
--------------- AT MARCH 31, 1996
1994 1995 1996 (NOTE 10)
------- ------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........... $ 2.5 $ 53.6 $ 45.4 $ 24.8
Receivables less provision for
allowances, claims and doubtful
accounts of $6.3, $6.4 and $6.7
(unaudited) respectively........... 227.1 243.8 274.6 274.6
Inventories (Note 2)................ 273.2 262.8 297.3 297.3
Notes receivable from related
companies.......................... 57.6 68.8 54.4 --
Deferred income taxes (Note 7)...... 13.0 15.6 13.0 13.0
------- ------- -------- -------
Total current assets............. 573.4 644.6 684.7 609.7
------- ------- -------- -------
Property, plant and equipment, at
cost:
Buildings, machinery and equipment.. 433.9 448.2 448.8 448.8
Land and land improvements.......... 27.7 28.0 28.0 28.0
------- ------- -------- -------
461.6 476.2 476.8 476.8
Less accumulated depreciation....... 209.1 226.5 230.6 230.6
------- ------- -------- -------
252.5 249.7 246.2 246.2
------- ------- -------- -------
Prepaid pension costs (Note 6)....... 12.2 27.3 27.8 27.8
Excess of cost over net assets
acquired, net of accumulated
amortization........................ 25.0 23.6 23.3 23.3
Deferred income taxes (Note 7)....... 26.6 23.5 24.4 24.4
Other assets......................... 1.6 3.9 4.5 4.5
------- ------- -------- -------
Total assets..................... $891.3 $972.6 $1,010.9 $ 935.9
======= ======= ======== =======
LIABILITIES
Current liabilities:
Accounts payable.................... $ 99.8 $ 92.8 $ 114.2 $ 114.2
Dividend payable.................... 84.4
Payables to related companies....... 14.8 14.4 15.3 15.3
Accrued liabilities:
Salaries and wages................. 17.6 20.0 13.2 13.2
Taxes other than federal income
taxes............................. 7.4 8.9 8.9 8.9
Other.............................. 3.3 3.6 3.1 3.1
Long-term debt due within one year.. 4.7 4.7 4.7 4.7
------- ------- -------- -------
Total current liabilities........ 147.6 144.4 159.4 243.8
------- ------- -------- -------
Long-term debt (Note 4).............. 23.6 18.9 18.4 18.4
Note payable to related company...... 293.8
Deferred employee benefits and other
liabilities (Note 6)................ 140.1 140.8 142.2 142.2
------- ------- -------- -------
Total liabilities................ 311.3 304.1 320.0 698.2
------- ------- -------- -------
STOCKHOLDER'S EQUITY
Common stock, par value $1.00; 3,000
shares authorized; one share
issued.............................. -- -- -- --
Additional paid-in capital (Note 8).. 494.6 494.6 494.6 237.7
Earnings reinvested in the business.. 85.4 173.9 196.3 --
------- ------- -------- -------
Total stockholder's equity....... 580.0 668.5 690.9 237.7
------- ------- -------- -------
Total liabilities and
stockholder's equity............ $891.3 $972.6 $1,010.9 $ 935.9
======= ======= ======== =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
STATEMENT OF ACCOUNTING AND FINANCIAL POLICIES
The following briefly describes the Company's principal accounting and
financial policies.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Joseph T. Ryerson & Son, Inc., and J. M. Tull Metals Company, Inc., which are
wholly-owned subsidiaries of the Company. The accounts of J. M. Tull Metals
Company, Inc. are consolidated with its wholly-owned subsidiary, AFCO Metals,
Inc.
INVENTORY VALUATION
Inventories are valued at cost which is not in excess of market. Cost is
determined principally by the last-in, first-out (LIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is depreciated, for financial reporting
purposes, using the straight-line method over the estimated useful lives of
the assets. Expenditures for normal repair and maintenance are charged against
income in the period incurred.
EXCESS OF COST OVER NET ASSETS ACQUIRED
The excess of cost over fair value of net assets of businesses acquired
(goodwill) is amortized on the straight-line method over a 25-year period.
Accumulated amortization of goodwill totaled $8.8 million at December 31,
1994, $10.2 million at December 31, 1995 and (unaudited) $10.5 million at
March 31, 1996.
BENEFITS FOR RETIRED EMPLOYEES
Effective April 30, 1996, that portion of the Inland Steel Industries
Pension Plan (the "Industries Pension Plan") covering the Company's current
and former employees was separated and became the Ryerson Tull Pension Plan
(the "Ryerson Tull Pension Plan"). Pension benefits are provided by the
Company to substantially all employees under such trusteed noncontributory
plan. Life insurance and certain medical benefits are provided for
substantially all retired employees.
The estimated costs of pension, medical, and life insurance benefits are
determined annually by consulting actuaries. The cost of these benefits for
retirees is accrued during their term of employment (see Note 6). Pensions are
funded in accordance with ERISA requirements in a trust established under the
Industries Pension Plan and Ryerson Tull Pension Plan. Costs for retired
employee medical benefits are funded when claims are submitted.
CASH EQUIVALENTS
Cash equivalents are highly liquid, short-term investments with maturities
of three months or less.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and related notes to financial statements. Changes in such
estimates may affect amounts reported in future periods.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
In 1995, the Company adopted Financial Accounting Standards Board ("FASB")
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." Adoption of this Statement had no
material impact on the results of operations or financial position of the
Company.
F-6
<PAGE>
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1/FINANCIAL STATEMENTS
Results of operations for any interim period are not necessarily indicative
of results for any other periods or for the year. The financial statements as
of March 31, 1996 and for the three-month periods ended March 31, 1995 and
1996 are unaudited, but in the opinion of management include all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of results for such periods.
NOTE 2/INVENTORIES
The Company's inventories consist principally of finished steel, nonferrous
metals and industrial plastic products for sale at service center locations.
The difference between LIFO values and approximate replacement costs for the
LIFO inventories was $132.6 million at December 31, 1994 and $146.4 million at
December 31, 1995 and (unaudited) $145.1 million at March 31, 1996.
During 1994 and 1995, various inventory quantities were reduced, resulting
in liquidations of LIFO inventory quantities carried at costs prevailing in
prior years that were different from current year costs. The effect on cost of
goods sold of LIFO liquidations in 1993, 1994 and 1995 was not material.
NOTE 3/BORROWING ARRANGEMENTS
At December 31, 1995 and March 31, 1996, the Company's subsidiaries had
available two unused credit facilities totalling $225 million. Each facility,
as well as the Inland Steel Industries Thrift Plan ESOP notes guarantee (the
"ESOP Guarantee") and certain other debt agreements, requires compliance with
various financial covenants including minimum net worth and leverage ratio
tests. The covenants also limit the amount of cash that the subsidiaries can
transfer to the Company in the form of dividends and other advances to $180
million at year-end 1995 and (unaudited) $200 million at March 31, 1996.
A $200 million unsecured credit agreement between Joseph T. Ryerson & Son,
Inc. and a group of banks provides a revolving credit facility to March 31,
2000.
J. M. Tull Metals Company, Inc. has a $25 million unsecured revolving credit
agreement with other banks, which extends to December 15, 1997 (the "Tull
Credit Facility").
With respect to Joseph T. Ryerson & Son, Inc.'s ability to advance funds or
make dividend payments to the Company, the most restrictive covenants on March
31, 1996 were contained in the ESOP Guarantee. Under these covenants, Joseph
T. Ryerson & Son, Inc.'s ability to dividend or advance funds to the Company
at any time is limited to $30 million (i) plus 80% of net income (decreased by
100% of net losses) earned by Joseph T. Ryerson & Son, Inc. since December 31,
1989, (ii) minus the dollar amount of dividends paid and capital stock
repurchased and the balance of any advances outstanding and (iii) plus capital
contributions to Joseph T. Ryerson & Son, Inc. and the proceeds from the
issuance of any capital stock or certain other investments during such period.
At December 31, 1995, approximately $128 million was available for making
advances and paying dividends to the Company under the ESOP Guarantee. At
March 31, 1996 such limitation was approximately $145 million (unaudited).
With respect to J.M. Tull Metals Company, Inc.'s ability to advance funds or
pay dividends to the Company, the Tull Credit Facility and its senior notes
contained the most restrictive covenants on March 31, 1996. Under the Tull
Credit Facility, J.M. Tull Metals Company, Inc.'s ability to pay dividends is
limited by minimum tangible net worth and net income requirements. The
required minimum tangible net worth increases by 40% of net income each
quarter, but is not reduced in the event of a net loss.
F-7
<PAGE>
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Under the terms of the senior notes, advances outstanding can be no more than
15% of tangible net worth. At December 31, 1995, approximately $52 million was
available for making advances and paying dividends to the Company under J.M.
Tull Metals Company, Inc.'s debt agreements. At March 31, 1996, such
limitation was approximately $55 million (unaudited). Other covenants which
could restrict dividends or advances to the Company include tangible net worth
and leverage tests at Joseph T. Ryerson & Son, Inc. and cumulative earnings,
leverage and working capital tests at J.M. Tull Metals Company, Inc.
NOTE 4/LONG-TERM DEBT
The Company's long-term debt is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------- MARCH 31,
1994 1995 1996
------ ------ -----------
(UNAUDITED)
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Joseph T. Ryerson & Son, Inc.
Industrial Revenue Bond, floating interest rate set
weekly based on 13-week Treasury bills, due
November 1, 2007.................................. $ 7.0 $ 7.0 $ 7.0
Other long-term debt, 10.25%, due through November
30, 1997.......................................... 1.8 1.6 1.6
J. M. Tull Metals Company, Inc.
Senior Notes, 9.43%, due through July 29, 1997..... 10.7 7.1 7.1
Term note ("Tull Term Note"), LIBOR plus 62.5 basis
points per annum, due through August 17, 1998..... 7.1 6.8 6.8
Industrial Revenue Bonds, interest rates ranging
from 6.5% to 65% of the prime rate, due through
January 1, 1997................................... 1.4 .9 .5
Other.............................................. .3 .2 .1
------ ------ -----
28.3 23.6 23.1
Less maturities due within one year................ 4.7 4.7 4.7
------ ------ -----
Long-term debt................................... $23.6 $18.9 $18.4
====== ====== =====
</TABLE>
At year-end 1995, maturities of long-term debt are: $4.7 million in 1996,
$5.6 million in 1997, $6.3 million in 1998, and $7.0 million in 2007.
Under the provisions of certain loan agreements, the Company's subsidiaries
are required to maintain specified amounts of working capital and net worth
and meet leverage tests, as outlined in the agreements, and are restricted as
to loans or dividends that may be paid to the Company.
Property with a net recorded carrying value of approximately $13.5 million
at December 31, 1995 is pledged as collateral on the industrial revenue bonds
and mortgage loans.
NOTE 5/DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value.
DERIVATIVES
The Company has only limited involvement with derivative financial
instruments and does not use them for speculative or trading purposes. The
Company has entered into an interest rate swap agreement to reduce the effects
of changes in interest rates on the Tull Term Note. At December 31, 1995, the
Company had outstanding an interest rate swap agreement with a bank having a
notional
F-8
<PAGE>
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
principal amount equal to the outstanding principal of the Tull Term Note.
This agreement effectively changes the Company's interest rate exposure on the
Tull Term Note from LIBOR plus 0.625% (a floating rate) to a fixed rate of
5.925%. This interest rate swap matures on August 17, 1998. Gains and losses
associated with this hedging transaction will be reported as part of the
interest expense of the Tull Term Note. The Company is exposed to potential
credit loss in the event of nonperformance by the bank; however, the Company
does not anticipate such nonperformance. This interest rate swap has not had a
material impact on the results of operations or financial position of the
Company.
CASH AND CASH EQUIVALENTS
The carrying amount of cash equivalents approximates fair value because of
the short maturity of those instruments.
LONG-TERM DEBT
The estimated fair value of the Company's long-term debt (including current
portions thereof) using quoted market prices of Company debt securities
recently traded and market-based prices of similar securities for those
securities not recently traded was $27.4 million at December 31, 1994 and
$23.6 million at December 31, 1995, as compared with the carrying value of
$28.3 million and $23.6 million included in the balance sheet at year-end 1994
and 1995, respectively.
NOTE 6/RETIREMENT BENEFITS
In 1995, the measurement date for pensions and benefits other than pensions
was changed from December 31 to September 30 in order to provide for more
timely information and to achieve administrative efficiencies in the
collection of data. The change in the measurement date had no effect on 1995
expense and had an immaterial impact on the 1995 funded status of the pension
plan.
PENSIONS
The Industries Pension Plan covers certain employees, retirees and their
beneficiaries of Industries and its subsidiaries, including the Company. The
Industries Pension Plan is a noncontributory defined benefit plan that
provides benefits based on final pay and years of service for all salaried
employees and certain wage employees, and years of service and a fixed rate
(in most instances based on frozen pay level or on job class) for all other
wage employees, including employees under collective bargaining agreements.
Because the fair value of pension plan assets pertains to all participants in
the Industries Pension Plan, no separate determination of the fair value of
such assets is made solely with respect to the Company.
The actuarial present value of benefits for service rendered to date and the
fair value of plan assets available for benefits for the Industries
consolidated group were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1994 1995
------------ -------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Fair value of plan assets....................... $1,652 $1,919
Actuarial present value of benefits for service
rendered to date:
Accumulated Benefit Obligation based on
compensation to date......................... 1,641 1,956
Additional benefits based on estimated future
compensation levels.......................... 98 90
------ ------
Projected Benefit Obligation.................. 1,739 2,046
------ ------
Plan asset shortfall to Projected Benefit
Obligation..................................... $ (87) $ (127)
====== ======
</TABLE>
F-9
<PAGE>
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At September 30, 1995, Industries Pension Plan assets included 3.9 million
shares of Industries common stock with a fair value of $88 million. From May
1995, when the stock was contributed to the Industries Pension Plan, to
September 30, 1995, the pension fund received $.2 million of dividends on
these shares.
In 1995, Inland Steel Industries, Inc. ("Industries") recorded an additional
minimum pension liability of $102.6 million representing the excess of the
unfunded Accumulated Benefit Obligation over previously accrued pension costs.
A corresponding intangible asset was recorded as an offset to this additional
liability as prescribed. Neither was required in 1994.
The calculation of benefit obligations was based on a discount (settlement)
rate of 8.8% in 1994 and 7.75% in 1995; a rate of compensation increase of
5.0% in 1994 and 4.0% in 1995; and a rate of return on plan assets of 9.5% in
both 1994 and 1995.
The Company recorded a pension charge of $.1 million in 1993 and $1.8
million in 1994, and a credit of $2.3 million in 1995. In 1995, the Company
paid $13.1 million to Industries for its share of a contribution to the
Industries Plan trust.
The cost of other industry welfare and retirement funds, for bargaining unit
employees, was $2.9 million in 1993, $2.6 million in 1994 and $3.3 million in
1995.
Effective April 30, 1996, the Ryerson Tull portion of the Industries Pension
Plan was separated and became the Ryerson Tull Pension Plan. The Ryerson Tull
Pension Plan assumed the liabilities of the Industries Pension Plan attributed
to active and retired Ryerson Tull employees and a corresponding percentage of
the assets. If the Ryerson Tull Pension Plan had been in existence at the
September 30, 1995 valuation date of the Industries Pension Plan, the Ryerson
Tull's projected benefit obligation would have been $266 million (unaudited)
and Ryerson Tull's share of the Pension Plan assets would have been $249
million (unaudited), resulting in an under-funding of $17 million (unaudited)
for financial reporting purposes. There is no ERISA-required funding for
either the Industries Pension Plan or the Ryerson Tull Pension Plan in 1996,
nor will there be funding as a result of the separation. The separation will
not have a material impact on the financial statements of Ryerson Tull.
Benefits Other Than Pensions
Substantially all of the Company's employees are covered under
postretirement life insurance and medical benefit plans that involve
deductible and co-insurance requirements. The postretirement life insurance
benefit formula used in the determination of postretirement benefit cost is
primarily based on applicable annual earnings at retirement for salaried
employees and specific amounts for hourly employees. The Company does not
prefund any of these postretirement benefits.
The amount of net periodic postretirement benefit cost for 1993, 1994 and
1995 is composed of the following:
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Service cost..................................... $ 3.2 $ 2.7 $ 2.2
Interest cost.................................... 8.0 7.3 8.4
Net amortization and deferral.................... (1.9) (2.0) (3.4)
------- ------- -------
Total net periodic postretirement benefit
cost.......................................... $ 9.3 $ 8.0 $ 7.2
======= ======= =======
</TABLE>
F-10
<PAGE>
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth components of the accumulated postretirement
benefit obligation:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1994 1995
------------ -------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Accumulated postretirement benefit obligation
attributable to:
Retirees...................................... $ 44.4 $ 59.5
Fully eligible plan participants.............. 15.9 17.6
Other active plan participants................ 24.9 28.2
------ ------
Accumulated postretirement benefit
obligation................................... 85.2 105.3
Unrecognized net gain........................... 33.7 16.7
Unrecognized prior service credit............... 20.3 18.9
------ ------
Accrued postretirement benefit obligation....... $139.2 140.9
======
Expense net of benefits provided, October
through December 1995.......................... .2
------
Accrued postretirement benefit obligation at
December 31, 1995.............................. $141.1
======
</TABLE>
Any net gain or loss in excess of 10% of the accumulated postretirement
benefit obligation is amortized over the remaining service period of active
plan participants.
The assumptions used to determine the plan's accumulated postretirement
obligation are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1994 1995
------------ -------------
<S> <C> <C>
Discount Rate..................................... 8.8% 7.75%
Rate of Compensation increase..................... 5.0% 4.0%
Medical cost trend rate........................... 6%-5% 4.5%
Year ultimate rate reached........................ 1996 1996
</TABLE>
A one percentage point increase in the assumed health care cost trend rates
for each future year increases annual periodic postretirement benefit cost and
the accumulated postretirement benefit obligation as of September 30, 1995 by
$2.7 million and $12.2 million, respectively.
NOTE 7/TAXES ON INCOME
The Company participates in a tax-sharing agreement under which current and
deferred federal income tax provisions are determined for each company in the
Industries group on a stand-alone basis. Any current liability is paid to
Industries. If the Company is unable to use all of its allocated tax
attributes (net operating loss and tax credit carryforwards) in a given year
but other companies in the consolidated group are able to utilize them, then
the Company will be paid by Industries for the use of its attributes. Net
operating loss ("NOL") and tax credit carryforwards are allocated to each
company in accordance with applicable tax regulations as if a company were to
leave the consolidated group. Companies with taxable losses record current
income tax credits not to exceed current income tax charges recorded by
profitable companies. If Industries uses NOL carryforwards, the Company will
use the appropriate portion of that year's carryforward previously allocated
to it, if any.
F-11
<PAGE>
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A state tax sharing arrangement, similar to the arrangement described above
with respect to federal taxes, also exists with Industries for those states in
which the consolidated group is charged state taxes on a unitary or combined
basis.
The elements of the provision for income taxes for the periods indicated
below are as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------- -------------
1993 1994 1995 1995 1996
-------- -------- -------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current income taxes:
Federal...................... $17.3 $30.4 $49.7 $12.7 $10.9
State and local.............. 2.6 3.9 6.7 2.7 1.7
-------- -------- -------- ------ ------
19.9 34.3 56.4 15.4 12.6
Deferred income taxes.......... 8.5Cr. .7 .5 1.1 1.7
-------- -------- -------- ------ ------
Total provision for income tax-
es............................ $11.4 $35.0 $56.9 $16.5 $14.3
======== ======== ======== ====== ======
</TABLE>
- --------
Cr. = Credit
In accordance with FASB Statement No. 109, the Company adjusted its deferred
tax assets and liabilities for the effect of the change in the corporate
federal income tax rate from 34 percent to 35 percent, effective January 1,
1993. A credit to income of $.6 million, which includes the effect of the rate
change on deferred tax asset and liability balances as of January 1, 1993 as
well as the effect on 1993 tax benefits recorded by the Company prior to the
enactment date of August 10, 1993, was recorded in the third quarter of 1993.
The components of the deferred income tax assets and liabilities arising
under FASB Statement No. 109 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1995
---------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Deferred tax assets (excluding postretirement
benefits other than pensions):
Net operating loss and tax credit
carryforwards.................................. $15.1 $ 16.2
Other deductible temporary differences.......... 29.0 27.9
---------- -----------
44.1 44.1
---------- -----------
Deferred tax liabilities:
Fixed asset basis difference.................... 39.7 37.2
Other taxable temporary differences............. 14.0 17.2
---------- -----------
53.7 54.4
---------- -----------
Net deferred tax liability (excluding
postretirement benefits other than pensions)..... (9.6) (10.3)
FASB Statement No. 106 impact (post retirement
benefits other than pensions).................... 49.2 49.4
---------- -----------
Net deferred tax asset............................ $39.6 $ 39.1
========== ===========
</TABLE>
F-12
<PAGE>
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
For tax purposes, the Company had available, at December 31, 1995,
approximately $43 million of NOL carryforwards available for regular federal
income tax purposes, expiring as follows: $8 million in 2005, $21 million in
2006, $7 million in 2007, $6 million in 2008 and $1 million in 2009.
Additionally, in conjunction with the Alternative Minimum Tax ("AMT") rules,
the Company had available AMT credit carryforwards for tax purposes of
approximately $1.1 million, which may be used indefinitely to reduce regular
federal income taxes.
The Company believes that it is more likely than not that all of the NOL
carryforwards will be utilized prior to their expiration. This belief is based
upon the factors discussed below.
The NOL carryforwards and existing deductible temporary differences
(excluding those relating to FASB Statement No. 106) are offset by existing
taxable temporary differences reversing within the carryforward period.
Furthermore, any such recorded tax benefits which would not be so offset are
expected to be realized by continuing to achieve future profitable operations.
Subsequent to the adoption of FASB Statement No. 109, the Company adopted
FASB Statement No. 106 and recognized the entire transition obligation at
January 1, 1992 as a cumulative effect charge in 1992. At December 31, 1995,
the deferred tax asset related to the Company's FASB Statement No. 106
obligation was $49.4 million. To the extent that future annual charges under
FASB Statement No. 106 continue to exceed deductible amounts, this deferred
tax asset will continue to grow. Thereafter, even if the Company should have a
tax loss in any year in which the deductible amount would exceed the financial
statement expense, the tax law provides for a 15-year carryforward period of
that loss. Because of the extremely long period that is available to realize
these future tax benefits, a valuation allowance for this deferred tax asset
is not necessary.
Total income taxes reflected in the Consolidated Statement of Operations
differ from the amounts computed by applying the federal tax rate as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Federal income tax provision computed at
statutory tax rate
of 35%...................................... $13.4 $30.9 $50.9
Additional taxes or credits from:
State and local income taxes, net of
federal income tax effect............... 1.7 2.5 4.5
Change in federal statutory rate......... .6Cr. -- --
All other, net........................... 3.1Cr. 1.6 1.5
-------- -------- --------
Total income tax provision............. $11.4 $35.0 $56.9
======== ======== ========
</TABLE>
- --------
Cr. = Credit
F-13
<PAGE>
RYERSON TULL, INC. AND SUBSIDIARY COMPANIES
(A WHOLLY-OWNED SUBSIDIARY OF INLAND STEEL INDUSTRIES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8/RELATED PARTY TRANSACTIONS
The Company sells products to and purchases products from related companies
at prevailing market prices. These transactions were as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------- -------------
1993 1994 1995 1995 1996
-------- -------- -------- ------ ------
(DOLLARS IN MILLIONS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net product sales................... $ 10.7 $ 10.7 $ 15.7 $ 3.4 $ 5.2
Net product purchases............... $174.2 $184.1 $176.6 $44.5 $57.7
</TABLE>
Administrative expenses covering management, financial and legal services
provided to the Company were charged to the Company by Industries. Such
charges totaled $7.4 million in 1993 and 1994 and $6.8 million in 1995.
Cash management activities are performed by Industries and cash is
periodically transferred to Industries. Funds transferred to Industries are
supported by interest-bearing notes receivable. Interest, at prevailing prime
market rates, is charged on all intercompany loans within the Industries
consolidated group. There was $7.7 million of net intercompany interest
expense in 1993, no net intercompany interest expense in 1994 and $3.9 million
of net intercompany interest income in 1995.
In December 1993, Industries made a capital contribution of $150 million to
the Company. The capital contribution has been recorded as "additional paid-in
capital."
NOTE 9/COMMITMENTS AND CONTINGENCIES
The Company has noncancellable operating leases for which future minimum
rental commitments are estimated to total $38.3 million, including
approximately $8.6 million in 1996, $8.0 million in 1997, $7.0 million in
1998, $6.1 million in 1999, $4.8 million in 2000 and $3.8 million thereafter.
Rental expense under operating leases totaled $16.8 million in 1993 and
$15.9 million in 1994 and 1995.
Ryerson is the guarantor of $115.2 million at year-end 1995 and $110.8
million at March 31, 1996 (unaudited) of the Inland Steel Industries Thrift
Plan ESOP notes. The notes are payable in installments through July 2004.
There are various claims and pending actions against the Company. The amount
of liability, if any, for these claims and actions at December 31, 1995 is not
determinable but, in the opinion of management, such liability, if any, will
not have a materially adverse effect on the Company's financial position or
results of operations.
NOTE 10/PRO FORMA BALANCE SHEET (UNAUDITED)
On May 20, 1996, the Company paid to Industries a cash dividend in the
amount of $75 million. Industries used a portion of the proceeds from this
dividend to repay the amount owed to the Company under an intercompany note.
Prior to the consummation of the initial public offering of Class A Common
Stock in June 1996, the Company will declare a dividend payable in cash in an
amount equal to the estimated net proceeds of the common stock offering
(estimated to be $84.4 million) (based on an initial public offering price of
$17.50 per share, the mid-point of the estimated offering price range of the
common stock) and a dividend consisting of a $293.8 million note payable to
Industries maturing five years from its date of issuance and bearing interest
at a specified prime rate. The pro forma balance sheet as of March 31, 1996
gives effect to the above transactions as if they had occurred on March 31,
1996.
F-14
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the Underwriters named below, and each
of such Underwriters has severally agreed to purchase, the principal amount of
the Notes set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT % AMOUNT %
NOTES DUE NOTES DUE
UNDERWRITER 2001 2006
----------- ------------ ------------
<S> <C> <C>
Goldman, Sachs & Co................................
CS First Boston Corporation........................
------------ ------------
Total............................................ $150,000,000 $100,000,000
============ ============
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Notes, if any are
taken.
The Underwriters propose to offer the Notes in part directly to the public
at the initial public offering price set forth on the cover page of this
Prospectus and in part to certain securities dealers at such price less a
concession of . % and . % of the principal amount of the % Notes and the
% Notes, respectively. The Underwriters may allow, and such dealers may
reallow, a concession not to exceed . % and . % of the principal amount of
the % Notes and the % Notes, respectively, to certain brokers and dealers.
After the Notes are released for sale to the public, the offering price and
other selling terms may from time to time be varied by the representatives.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the Underwriters that the Underwriters intend
to make a market in the Notes but are not obligated to do so and may
discontinue market making at any time without notice. No assurance can be
given as to the liquidity of the trading market for the Notes.
The Company and ISI have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act.
ISI has agreed to pay Goldman, Sachs & Co. a fee for financial advisory
services rendered to ISI.
U-1
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DE-
SCRIBED IN THIS PROSPECTUS OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITA-
TION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 12
Use of Proceeds.......................................................... 16
Capitalization........................................................... 17
Selected Financial Data.................................................. 19
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 21
Business................................................................. 28
Management............................................................... 40
Relationship with ISI.................................................... 51
Principal Stockholder.................................................... 55
Ownership of ISI Stock................................................... 55
Description of Notes..................................................... 56
Validity of the Notes.................................................... 69
Experts.................................................................. 69
Additional Information................................................... 69
Index to Consolidated Financial Statements............................... F-1
Underwriting............................................................. U-1
</TABLE>
THROUGH AND INCLUDING , 1996 (THE 40TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE NOTES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$250,000,000
RYERSON TULL, INC.
$150,000,000
% NOTES DUE 2001
$100,000,000
% NOTES DUE 2006
------------
LOGO
------------
GOLDMAN, SACHS & CO.
CS FIRST BOSTON
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION(S)
The following are the estimated expenses in connection with the distribution
of the securities being registered:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee.............. $ 89,210
NASD Filing Fee.................................................. 25,500
Printing and Engraving Expenses.................................. 300,000
Accounting Fees and Expenses..................................... 75,000
Attorneys' Fees and Expenses..................................... 250,000
Trustees Fees.................................................... 15,000
Blue Sky Fees and Expenses (including attorneys' fees)........... 24,000
Miscellaneous.................................................... 324,290
----------
Total.......................................................... $1,100,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) The Delaware GCL (Section 145) (i) gives Delaware corporations broad
power to indemnify their present and former directors, officers, employees and
agents and those of affiliated corporations against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with the defense of any
lawsuit or proceeding to which they are made parties by reason of being or
having been such directors, officers, employees or agents if such person acted
in good faith and in a manner he or she reasonably believed to be in and not
opposed to the best interests of the corporation; (ii) gives corporations
power to indemnify any person who was or is a party or is threatened to be
made a party to a lawsuit or proceeding by or in the right of the corporation
by reason of the fact that such person is or was a director, officer, employee
or agent of the corporation or an affiliated corporation against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
the defense or settlement of such action if such person acted in good faith
and in a manner he or she reasonably believed to be in and not opposed to the
best interests of the corporation and except that no indemnification may be
made in respect of any action as to which such person shall have been adjudged
to be liable to the corporation unless only to the extent that a court
determines upon application that such person is fairly and reasonably entitled
to indemnity for such expenses which such court deems proper; (iii) gives a
director, officer, employee or agent who successfully defends an action the
right to be so indemnified for expenses (including attorneys' fees) actually
and reasonably incurred by such director, officer, employee or agent; and (iv)
authorizes the Registrant to buy directors' and officers' liability insurance.
Such indemnification is not exclusive of any other rights to which those
indemnified may be entitled under any by-laws, agreement, vote of stockholders
or disinterested directors or otherwise.
(b) Pursuant to Article XI of the Registrant's Certificate of Incorporation,
Article VI of the By-Laws of the Registrant provides for indemnification of
directors, officers, employees and agents to the fullest extent not prohibited
by law.
(c) Reference is made to Section 8 of the Underwriting Agreement (the form
of which is included as Exhibit 1.1 to this Registration Statement) for
provisions regarding the indemnification under certain circumstances of the
Registrant, its directors and certain of its officers by the Underwriters.
(d) In accordance with Section 102(b)(7) of the Delaware GCL, the
Registrant's Certificate of Incorporation provides that directors shall not be
liable for monetary damages for breaches of their fiduciary duty as directors
except to the extent such exemption from liability or limitation thereof is
not permitted under the Delaware GCL as the same exists or may be amended.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
None.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS:
A list of the exhibits included as part of this Registration Statement is
set forth in the Exhibit Index which immediately precedes such exhibits and is
incorporated herein by reference.
(b) FINANCIAL STATEMENT SCHEDULES:
SCHEDULE I--CONDENSED FINANCIAL INFORMATION
Statements of Operations for the Years Ended December 31, 1993, 1994
and 1995
Statements of Cash Flows for the Years Ended December 31, 1993, 1994
and 1995
Balance Sheets at December 31, 1994 and 1995
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referred to in Item 14, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS AMENDED REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
CHICAGO, STATE OF ILLINOIS, ON JUNE 11, 1996.
Ryerson Tull, Inc.
/s/ Robert J. Darnall
By___________________________________
ROBERT J. DARNALL CHAIRMAN AND
DIRECTOR
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDED REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON JUNE 11, 1996.
NAME TITLE
* Chairman and Director
_____________________________________
ROBERT J. DARNALL
* President, Chief Executive Officer and
_____________________________________ Director
NEIL S. NOVICH
* Vice President, Finance, and Chief
_____________________________________ Financial Officer (Principal
JAY M. GRATZ Financial Officer)
* Controller (Principal Accounting
_____________________________________ Officer)
LILY L. MAY
* Director
_____________________________________
JAMES A. HENDERSON
* Director
_____________________________________
DONALD S. PERKINS
* Director
_____________________________________
JEAN-PIERRE ROSSO
/s/ Charles B. Salowitz
*By__________________________________
ATTORNEY-IN-FACT
II-3
<PAGE>
RYERSON TULL, INC.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
Equity in income of subsidiaries.................... $32.1 $53.3 $86.5
Intercompany interest expense....................... 8.3 .1 .1
----- ----- -----
Income before income taxes.......................... 23.8 53.2 86.4
Provision for income taxes.......................... 2.9Cr. .1Cr. 2.1Cr.
----- ----- -----
Net income.......................................... $26.7 $53.3 $88.5
===== ===== =====
</TABLE>
- --------
Cr. = Credit
<PAGE>
RYERSON TULL, INC.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1993 1994 1995
------ ----- -----
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income.............................................. $ 26.7 $53.3 $88.5
Adjustments to reconcile net income to net cash provided
from (used for) operating activities:
Equity in undistributed earnings of subsidiaries...... (32.1) (53.3) (86.5)
Deferred income taxes................................. (2.0) 2.0 (.1)
------ ----- -----
Net adjustments..................................... (34.1) (51.3) (86.6)
------ ----- -----
Net cash provided from (used for) operating
activities......................................... (7.4) 2.0 1.9
------ ----- -----
FINANCING ACTIVITIES:
Change in notes to and from related companies........... (142.6) (2.0) (1.9)
Capital contribution from Inland Steel Industries,
Inc.................................................... 150.0 -- --
------ ----- -----
Net cash provided from (used for) financing
activities........................................... 7.4 (2.0) (1.9)
------ ----- -----
Net increase in cash and cash equivalents............... -- -- --
Cash and cash equivalents--Beginning of year............ -- -- --
------ ----- -----
Cash and cash equivalents--End of year.................. $ -- $ -- $ --
====== ===== =====
</TABLE>
<PAGE>
RYERSON TULL, INC.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY)
BALANCE SHEETS
AT DECEMBER 31, 1994 AND 1995
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1994 1995
------ ------
<S> <C> <C>
ASSETS
Current Assets:
Cash.......................................................... $ -- $ --
Notes receivable from related companies....................... -- 1.9
------ ------
Total current assets........................................ -- 1.9
Investment in subsidiary companies.............................. 571.0 657.5
Deferred income taxes........................................... 9.0 9.1
------ ------
Total assets................................................ $580.0 $668.5
====== ======
STOCKHOLDER'S EQUITY
Common Stock, $1.00 par; 3,000 shares authorized; 1 share is-
sued........................................................... $ -- $ --
Additional paid-in capital...................................... 494.6 494.6
Earnings reinvested in business................................. 85.4 173.9
------ ------
Total stockholder's equity.................................. $580.0 $668.5
====== ======
</TABLE>
<PAGE>
RYERSON TULL, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PROVISION FOR ALLOWANCES
CLAIMS AND DOUBTFUL ACCOUNTS
-------------------------------------
BALANCE AT ADDITIONS DEDUCTIONS BALANCE OF
BEGINNING CHARGED TO FROM END OF
YEARS ENDED DECEMBER 31, OF YEAR INCOME RESERVES(A) YEAR
- ------------------------ ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
1993.......................... $5.4 $2.0 $1.9 $5.5
1994.......................... $5.5 $1.4 $ .6 $6.3
1995.......................... $6.3 $1.2 $1.1 $6.4
</TABLE>
- --------
(A) Bad debts written off during year.
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER EXHIBIT PAGE
------ ------- ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement..........................
3.1 Restated Certificate of Incorporation of the
Registrant.............................................
3.2 By-Laws of the Registrant...............................
4.1 Form of Indenture.......................................
4.2 Form of % Note due 2001...............................
4.3 Form of % Note due 2006...............................
4.4 Indenture, dated as of December 15, 1992, between Inland
Steel Industries, Inc. and Harris Trust and Savings
Bank (Filed as Exhibit 4-G to Inland Steel Industries,
Inc.'s Annual Report on Form 10-K for the fiscal year
ended December 31, 1992, and incorporated by reference
herein.)
4.5 Form of Note payable from the Company to Inland Steel
Industries, Inc........................................
Note: No long-term debt instruments issued by the Company
exceed 10% of the consolidated total assets of the
Company and its subsidiaries. In accordance with
paragraph 4(iii) of Item 601 of Regulation S-K, the
Company will furnish to the Commission upon request
copies of long-term debt instruments and related
agreements
5 Opinion of Mayer, Brown & Platt.........................
10.1 Form of Registration Rights Agreement between the
Registrant and Inland Steel Industries, Inc............
10.2 Employment Agreement dated as of April 8, 1994 between
Inland Steel Industries, Inc. and Neil S. Novich (Filed
as Exhibit 10.N.(8) to Inland Steel Industries, Inc.'s
Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 and incorporated by reference
herein.)
10.3 Severance Agreement dated as of April 8, 1994 between
Inland Steel Industries, Inc. and Neil S. Novich (Filed
as Exhibit 10.N.(9) to Inland Steel Industries, Inc.'s
Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, and incorporated by reference
herein.)
10.4 Employment Agreement between Inland Steel Industries,
Inc. and Carl G. Lusted, dated June 27, 1990...........
10.5 Form of Change in Control Agreements dated as of March
27, 1996, between Inland Steel Industries, Inc. and the
parties listed on the Schedule thereto.................
10.6 Change in Control Agreement dated as of March 27, 1996
between Inland Steel Industries, Inc. and Neil S.
Novich.................................................
10.7 Form of Change in Control Agreements dated as of June
10, 1996 between the Registrant and the parties listed
on the Schedule thereto................................
10.8 Change in Control Agreement dated as of June 10, 1996
between the Registrant and Neil S. Novich..............
10.9 Ryerson Tull Directors' Compensation Plan...............
10.10 Ryerson Tull, Inc. Supplemental Retirement Plan for
Covered Employees......................................
10.11 Ryerson Tull 1996 Incentive Stock Plan..................
10.12 Form of Corporate Separation Agreement between the
Registrant and Inland Steel Industries, Inc. ..........
10.13 Form of Cross-License Agreement between the Registrant
and Inland Steel Industries, Inc.......................
10.14 Form of Tax Sharing Agreement between the Registrant and
Inland Steel Industries, Inc...........................
10.15 ESOP Guarantee Agreement between Joseph T. Ryerson and
Son, Inc. and the Purchasers named therein, dated
August 15, 1990........................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER EXHIBIT PAGE
------ ------- ------------
<C> <S> <C>
10.16 Copy of Inland Steel Industries, Inc. Non-Qualified
Thrift Plan, as amended. (Filed as Exhibit 10.D to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995, and incorporated by reference
herein.)
10.17 Inland Steel Industries, Inc. Supplemental Retirement
Plan for Covered Employees, as amended (Filed as
Exhibit 10.I to Inland Steel Industries, Inc.'s Annual
Report on Form 10-K for the fiscal year ended December
31, 1993, and incorporated by reference herein.)
10.18 Inland Steel Industries, Inc. Special Retirement Plan
for Covered Employees (Filed as Exhibit 10.J to Inland
Steel Industries, Inc.'s Annual Report on Form 10-K for
the fiscal year ended December 31, 1993, and
incorporated by reference herein.)
10.19 Inland 1995 Incentive Stock Plan (Filed as Exhibit A to
Inland Steel Industries, Inc.'s definitive Proxy
Statement dated April 17, 1995 and was furnished to
stockholders in connection with the annual meeting held
May 24, 1995, and incorporated by reference herein.)
10.20 Inland Steel Industries, Inc. Annual Incentive Plan
(Filed as Exhibit 10.A to Inland Steel Industries,
Inc.,'s Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995, and incorporated by reference
herein.)
10.21 Inland Steel Industries, Inc. Special Achievement Award
Plan (Filed as Exhibit 10.I to Inland Steel Industries,
Inc.'s Annual Report on Form 10-K for the fiscal year
ended December 31, 1987, and incorporated by reference
herein.)
10.22 Inland 1984 Incentive Stock Plan (Filed as Exhibit 10.A.
to Inland Steel Industries, Inc.'s Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995, and
incorporated by reference herein.)
10.23 Inland 1988 Incentive Stock Plan (Filed as Exhibit 10.B.
to Inland Steel Industries, Inc.'s Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995, and
incorporated by reference herein.)
10.24 Inland 1992 Incentive Stock Plan as amended (Filed as
Exhibit 10.C. to Inland Steel Industries, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995, and incorporated by reference herein.)
10.25 Inland Steel Industries, Inc. Deferred Compensation Plan
for Certain Employees (Filed as Exhibit 10.J to Inland
Steel Industries, Inc.'s Annual Report on Form 10-K for
the fiscal year ended December 31, 1994, and
incorporated by reference herein.)
12 Statement re: Computation of Ratio of Earnings to Fixed
Charges................................................ *
21 Subsidiaries of the Registrant.......................... *
23.1 Consent of Price Waterhouse LLP.........................
23.2 Consent of Mayer, Brown & Platt is contained in their
Opinion filed as Exhibit 5 to this Registration
Statement
24 Powers of Attorney......................................
25 Statement of Eligibility of Trustee.....................
27 Financial Data Schedule................................. *
</TABLE>
- --------
*Previously filed
<PAGE>
RYERSON TULL, INC.
$150,000 __% NOTES DUE __________, 2001
$100,000 __% NOTES DUE __________, 2006
UNDERWRITING AGREEMENT
----------------------
June ___, 1996
Goldman, Sachs & Co.,
CS First Boston Corporation,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Ryerson Tull, Inc. (the "Company"), a Delaware corporation and the wholly
owned subsidiary of Inland Steel Industries, Inc., a Delaware corporation
("ISI"), proposes, subject to the terms and conditions stated herein, to issue
and sell to the Underwriters named in Schedule I hereto (the "Underwriters") an
aggregate of $150,000,000 principal amount of the Company's __% Notes due
_______ __, 2001 (the "___% Notes") and an aggregate of $100,000,000 principal
amount of the Company's __% Notes due ________ __, 2006 (the ___% Notes and,
together with the ___% Notes, the "Securities.").
1. Each of the Company and ISI, jointly and severally, represents and
warrants to, and agrees with, each of the Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-3235) (the
"Initial Registration Statement") in respect of the Securities has been
filed with the Securities and Exchange Commission (the "Commission"); the
Initial Registration Statement and any post-effective amendment thereto,
each in the form heretofore delivered to you, have been declared effective
by the Commission in such form; other than a registration statement, if
any, increasing the size of the offering (a "Rule 462(b) Registration
Statement"), filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended (the "Act"), no other document with respect to the Initial
Registration Statement has heretofore been filed with the Commission; and
no stop order suspending the effectiveness of the Initial Registration
Statement, any post-effective amendment thereto or the Rule 462(b)
Registration Statement, if any, has been issued and no proceeding for that
purpose has been initiated or threatened by the Commission (any preliminary
prospectus included in the Initial Registration Statement or filed with the
Commission pursuant to Rule 424(a) of the rules and regulations of the
Commission under the Act, is hereinafter called a "Preliminary Prospectus";
the various parts of the Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, including all exhibits thereto but
excluding Form T-1 and including the information contained in the form of
final prospectus filed with the Commission pursuant to Rule 424(b) under
the Act in accordance with Section 5(a) hereof and deemed by virtue of Rule
430A under the Act to be part of the Initial Registration Statement at the
time it was declared effective, each as amended at the time such part of
the registration statement became effective or such part of the Rule 462(b)
Registration Statement, if any, became or hereafter becomes effective, are
hereinafter collectively called the "Registration Statement"; and such
final prospectus,
1
<PAGE>
in the form first filed pursuant to Rule 424(b) under the Act, is
hereinafter called the "Prospectus").
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"), and the rules and regulations
of the Commission thereunder, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company or ISI by an Underwriter
through Goldman, Sachs & Co. expressly for use therein;
(c) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects, to the requirements of
the Act and the Trust Indenture Act and the rules and regulations of the
Commission thereunder and do not and will not, as of the applicable
effective date as to the Registration Statement and any amendment thereto
and as of the applicable filing date as to the Prospectus and any amendment
or supplement thereto, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company or ISI by an Underwriter through Goldman, Sachs &
Co. expressly for use therein;
(d) Neither the Company nor any of its subsidiaries has sustained since
the date of the latest audited financial statements included in the
Prospectus any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus; and, since
the respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the capital
stock or increase in long-term debt issued or guaranteed by the Company or
any of its subsidiaries or any material adverse change, or any development
involving a prospective material adverse change, in or affecting the
general affairs, management, financial position, stockholders' equity or
results of operations of the Company and its subsidiaries, taken as a
whole, otherwise than as set forth or contemplated in the Prospectus;
(e) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own its properties and conduct its
business as described in the Prospectus, and has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties or conducts any business so as to require such qualification, or
is subject to no material liability or disability by reason of the failure
to be so qualified in any such jurisdiction; and each subsidiary of the
Company has been duly incorporated and is validly existing as a corporation
in good standing under the laws of its jurisdiction of incorporation and is
duly qualified as a foreign corporation for the transaction of business and
in good standing under the laws of each other jurisdiction in which it owns
or leases properties, or conducts any business, so as to require such
qualification or is subject to no liability or disability by reason of
failure to be so qualified in any such jurisdiction, which liability or
disability is material to the Company and its subsidiaries taken as a
whole;
(f) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued, and are fully paid and
non-assessable; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable and (except for directors' qualifying
shares) are owned directly or indirectly by the
2
<PAGE>
Company, free and clear of all liens, encumbrances, equities or claims;
(g) The Securities have been duly authorized and, when issued and
delivered pursuant to this Agreement, will have been duly executed,
authenticated, issued and delivered and will constitute valid and legally
binding obligations of the Company entitled to the benefits provided by the
Indenture to be dated as of ................, 1996 (the "Indenture")
between the Company and ............, as Trustee (the "Trustee"), under
which they are to be issued, which will be substantially in the form filed
as an exhibit to the Registration Statement; the Indenture has been duly
authorized and duly qualified under the Trust Indenture Act and, when
executed and delivered by the Company and the Trustee, will constitute a
valid and legally binding instrument, enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles; and the
Securities and the Indenture will conform to the descriptions thereof in
the Prospectus;
(h) The issue and sale of the Securities by the Company hereunder, the
compliance by the Company with all of the provisions of the Securities and
the Indenture, the compliance by the Company and ISI with all the
provisions of this Agreement and the consummation of the transactions
contemplated herein and in the Indenture will not conflict with or result
in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which ISI, the Company or any
of their respective subsidiaries is a party or by which ISI, the Company or
any of their respective subsidiaries is bound or to which any of the
property or assets of ISI, the Company or any of their respective
subsidiaries is subject, nor will such action result in any violation of
the provisions of the certificate of incorporation or by-laws of ISI, the
Company's restated certificate of incorporation (the "Restated Certificate
of Incorporation"), or the amended by-laws of the Company (the "Amended By-
Laws") or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over ISI, the Company or
any of their respective subsidiaries or any of their properties; and no
consent, approval, authorization, order, registration or qualification of
or with any such court or governmental agency or body is required for the
issue and sale of the Securities or the consummation by the Company or ISI
of the transactions contemplated by this Agreement or the Indenture, except
the registration under the Act of the Securities, such as have been
obtained under the Trust Indenture Act and such consents, approvals,
authorizations, registrations or qualifications as may be required under
state securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Underwriters;
(i) The Company is not in violation of its Restated Certificate of
Incorporation or Amended By-Laws, none of its subsidiaries is in violation
of its certificate of incorporation or by-laws and neither the Company nor
any of its subsidiaries is in default in the performance or observance of
any material obligation, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or
instrument to which it is a party or by which it or any of its properties
may be bound;
(j) The statements set forth in the Prospectus under the caption
"Description of Notes," insofar as they purport to constitute a summary of
the terms of the Securities, and under the captions "Relationship with ISI"
and Underwriting," insofar as they purport to describe the provisions of
the laws and documents referred to therein, are accurate and complete in
all material respects;
(k) There are no legal or governmental proceedings pending to which the
Company or any of its subsidiaries is a party or of which any property of
the Company or any of its subsidiaries is the subject, other than as set
forth in the Prospectus, and other than litigation incident to the kind
3
<PAGE>
of business conducted by the Company and its subsidiaries which will not
individually or in the aggregate have a material adverse effect on the
financial position, stockholders' equity or results of operations of the
Company and its subsidiaries taken as a whole; and, to the best of the
Company's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others; and
(l) Price Waterhouse LLP, who have certified certain financial statements
of the Company and its subsidiaries, are independent public accountants as
required by the Act and the rules and regulations of the Commission
thereunder.
2. Subject to the terms and conditions herein set forth, the Company
agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company (i)
the principal amount of ___% Notes set forth opposite the name of such
Underwriter in Schedule I hereto at a purchase price of ___% of the principal
amount thereof, plus accrued interest, if any, from ________, 1996 to the Time
of Delivery (as defined below) hereunder and (ii) the principal amount of ___%
Notes set forth opposite the name of such Underwriter in Schedule I hereto at a
purchase price of ___% of the principal amount thereof, plus accrued interest,
if any, from ________, 1996 to the Time of Delivery hereunder.
3. Upon the authorization by you of the release of the Securities, the
several Underwriters propose to offer the Securities for sale upon the terms and
conditions set forth in the Prospectus.
4. (a) The Securities to be purchased by each Underwriter hereunder will be
represented by one or more definitive global Securities in book-entry form which
will be deposited by or on behalf of the Company with The Depository Trust
Company ("DTC") or its designated custodian. The Company will deliver the
Securities to Goldman, Sachs & Co., for the account of each Underwriter, against
payment by or on behalf of such Underwriter of the purchase price therefor by
wire transfer, payable to the order of the Company in Federal (same day) funds,
by causing DTC to credit the Securities to the account of Goldman, Sachs & Co.
at DTC. The Company will cause the certificates representing the Securities to
be made available to Goldman, Sachs & Co. for checking at least twenty-four
hours prior to the Time of Delivery at the office of DTC or its designated
custodian (the "Designated Office"). The time and date of such delivery and
payment shall be 9:30 a.m., New York City time, on June ___, 1996 or such other
time and date as Goldman, Sachs & Co. and the Company may agree upon in writing.
Such time and date are herein called the "Time of Delivery".
(b) The documents to be delivered at the Time of Delivery by or on behalf of
the parties hereto pursuant to Section 7 hereof, including the cross-receipt for
the Securities and any additional documents requested by the Underwriters
pursuant to Section 7(j) hereof, will be delivered at the offices of Mayer,
Brown & Platt, 190 South LaSalle Street, Chicago, Illinois 60603 (the "Closing
Location"), and the Securities will be delivered at the Designated Office, all
at the Time of Delivery. A meeting will be held at the Closing Location at 2:00
p.m., New York City time, on the New York Business Day next preceding the Time
of Delivery, at which meeting the final drafts of the documents to be delivered
pursuant to the preceding sentence will be available for review by the parties
hereto. For the purposes of this Section 4, "New York Business Day" shall mean
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in New York are generally authorized or obligated by law or
executive order to close.
5. The Company and ISI, jointly and severally, agree with each of the
Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file such
Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus which shall be disapproved by you
4
<PAGE>
promptly after reasonable notice thereof; to advise you, promptly after it
receives notice thereof, of the time when any amendment to the Registration
Statement has been filed or becomes effective or any supplement to the
Prospectus or any amended Prospectus has been filed and to furnish you with
copies thereof; to advise you, promptly after it receives notice thereof,
of the issuance by the Commission of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or
prospectus, of the suspension of the qualification of the Securities for
offering or sale in any jurisdiction, of the initiation or threatening of
any proceeding for any such purpose, or of any request by the Commission
for the amending or supplementing of the Registration Statement or
Prospectus or for additional information; and, in the event of the issuance
of any stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such qualification,
promptly to use its best efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to use its best efforts to qualify the
Securities for offering and sale under the securities laws of such
jurisdictions as you may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such jurisdictions
for as long as may be necessary to complete the distribution of the
Securities, provided that in connection therewith the Company shall not be
required to qualify as a foreign corporation or to file a general consent
to service of process in any jurisdiction, and, provided further, that the
cost of maintaining such qualification on or after a date nine months from
the date hereof shall be borne by the Underwriters requesting the same;
(c) Prior to 12:00 p.m., New York City time, on the New York Business Day
next succeeding the date of this Agreement and from time to time, to
furnish the Underwriters with copies of the Prospectus in New York City in
such quantities as you may reasonably request, and, if the delivery of a
prospectus is required at any time prior to the expiration of nine months
after the time of issue of the Prospectus in connection with the offering
or sale of the Securities and if at such time any event shall have occurred
as a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light
of the circumstances under which they were made when such Prospectus is
delivered, not misleading, or, if for any other reason it shall be
necessary during such same period to amend or supplement the Prospectus in
order to comply with the Act or the Trust Indenture Act, to notify you and
upon your request to prepare and furnish without charge to each Underwriter
and to any dealer in securities as many copies as you may from time to time
reasonably request of an amended Prospectus or a supplement to the
Prospectus which will correct such statement or omission or effect such
compliance; and in case any Underwriter is required to deliver a prospectus
in connection with sales of any of the Securities at any time nine months
or more after the time of issue of the Prospectus, upon your request but at
the expense of such Underwriter, to prepare and deliver to such Underwriter
as many copies as you may request of an amended or supplemented Prospectus
complying with Section 10(a)(3) of the Act;
(d) To make generally available to the securityholders of the Company as
soon as practicable, but in any event not later than eighteen months after
the effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earning statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Act and the
rules and regulations thereunder (including, at the option of the Company,
Rule 158);
(e) During the period beginning from the date hereof and continuing to
and including the date 180 days after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder any securities of the Company that are substantially similar to
the Securities;
(f) To furnish to the holders of the Securities as soon as practicable
after the end of each
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fiscal year an annual report (including a balance sheet and statements of
income, stockholders' equity and cash flows of the Company and its
consolidated subsidiaries certified by independent public accountants); and
to furnish to the holders of the Securities all other documents specified
in Section(s) _______ of the Indenture, all in the manner so specified;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to
deliver to you as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any
national securities exchange on which the Securities or any class of
securities of the Company is listed;
(h) To use the net proceeds received by the Company from the sale of the
Securities pursuant to this Agreement in the manner specified in the
Prospectus under the caption "Use of Proceeds";
(i) If the Company elects to rely upon Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance
with Rule 462(b) by 10:00 p.m., Washington, D.C. time, on the date of this
Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Act; and
(j) ISI has not taken and will not take, directly or indirectly, any
action which is designed to or which has constituted or which might
reasonably be expected to cause or result in stabilization or manipulation
of the price of any security of the Company to facilitate the sale or
resale of the Securities.
6. The Company covenants and agrees with the several Underwriters that the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Company's counsel and accountants in connection with the
registration of the Securities under the Act and all other expenses in
connection with the preparation, printing and filing of the Registration
Statement, any Preliminary Prospectus and the Prospectus and amendments and
supplements thereto and the mailing and delivering of copies thereof to the
Underwriters and dealers (except as provided in Section 5(c) hereof); (ii) the
cost of producing this Agreement, the Indenture, the Blue Sky and Legal
Investment Memoranda, closing documents (including compilations thereof) and any
other documents in connection with the offering, purchase, sale and delivery of
the Securities; (iii) all expenses in connection with the qualification of the
Securities for offering and sale under state securities laws as provided in
Section 5 (b) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky and legal investment surveys; (iv) any fees charged by securities
rating services for rating the Securities; (v) the filing fees incident to any
required review by the National Association of Securities Dealers, Inc. of the
terms of the sale of the Securities; (vi) the cost of preparing the Securities;
(vii) the fees and expenses of the Trustee and any agent of the Trustee and the
fees and disbursements of counsel for the Trustee in connection with the
Indenture and the Securities; and (viii) all other costs and expenses incident
to the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section. It is understood, however, that,
except as provided in this Section, and Sections 8 and 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
their counsel, transfer taxes on resale of any of the Securities by them, and
any advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder shall be subject, in
their discretion, to the condition that all representations and warranties and
other statements of the Company and ISI herein are, at and as of the Time of
Delivery, true and correct, the condition that the Company and ISI each shall
have performed all of its obligations hereunder theretofore to be performed, and
the following additional conditions:
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(a) The Prospectus shall have been filed with the Commission pursuant to
Rule 424(b) within the applicable time period prescribed for such filing by
the rules and regulations under the Act and in accordance with Section 5
(a) hereof; if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have become effective by 10:00 p.m.,
Washington, D.C. time, on the date of this Agreement; no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) Sullivan & Cromwell, counsel for the Underwriters, shall have
furnished to you such opinion or opinions (a draft of each such opinion is
attached as Annex II(a) hereto), dated the Time of Delivery, with respect
to the validity of the Securities, the Registration Statement, the
Prospectus, and other related matters as you may reasonably request, and
such counsel shall have received such papers and information as they may
reasonably request to enable them to pass upon such matters;
(c) George Ranney, Jr., Vice President and General Counsel of ISI, shall
have furnished to you his written opinion (a draft of each such opinion is
attached as Annex II(b) hereto), dated the Time of Delivery, in form and
substance satisfactory to you, to the effect that:
(i) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued and are fully paid and
non-assessable;
(ii) The Company has been duly qualified as a foreign corporation for
the transaction of business and is in good standing under the laws of
each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, or is subject
to no material liability or disability by reason of failure to be so
qualified in any such jurisdiction (such counsel being entitled to rely
in respect of the opinion in this clause upon opinions of local counsel,
and in respect of matters of fact upon certificates of officers of the
Company and certificates of governmental agencies, provided that such
counsel shall state that they believe that both you and they are
justified in relying upon such opinions and certificates);
(iii) Each subsidiary of the Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation; and all of the issued shares of capital
stock of each such subsidiary have been duly and validly authorized and
issued, are fully paid and non-assessable, and (except for directors'
qualifying shares and except as otherwise set forth in the Prospectus)
are owned directly or indirectly by the Company, free and clear of all
liens, encumbrances, equities or claims (such counsel being entitled to
rely in respect of the opinion in this clause upon opinions of local
counsel, and in respect of matters of fact upon certificates of officers
of the Company or its subsidiaries and certificates of governmental
agencies, provided that such counsel shall state that they believe that
both you and they are justified in relying upon such opinions and
certificates);
(iv) To the best of such counsel's knowledge, there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any
of its subsidiaries is the subject, other than as set forth in the
Prospectus, and other than litigation incident to the kind of business
conducted by the Company and its subsidiaries which will not
individually or in the aggregate have a material adverse effect on the
financial position, stockholders' equity or results of operations of the
Company and its subsidiaries; and, to the best of such counsel's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by
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others;
(v) This Agreement has been duly authorized, executed and delivered by
each of the Company and ISI;
(vi) The Securities have been duly authorized, executed,
authenticated, issued and delivered and constitute valid and legally
binding obligations of the Company entitled to the benefits provided by
the Indenture, subject, as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles (whether considered in a proceeding at law or in equity); and
the Securities and the Indenture conform to the descriptions thereof in
the Prospectus;
(vii) The Indenture has been duly authorized, executed and delivered
by the parties thereto and constitutes a valid and legally binding
instrument, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to
general equity principles (whether considered in a proceeding at law or
in equity); and the Indenture has been duly qualified under the Trust
Indenture Act;
(viii) The issue and sale of the Securities by the Company, the
compliance by the Company with all of the provisions of the Securities
and the Indenture, and the compliance by the Company and ISI with all of
the provisions of this Agreement and the consummation of the
transactions contemplated herein and in the Indenture will not conflict
with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument known to
such counsel to which ISI, the Company or any of their respective
subsidiaries is a party or by which ISI, the Company or any of their
respective subsidiaries is bound or to which any of the property or
assets of ISI, the Company or any of their respective subsidiaries is
subject, nor will such action result in any violation of the provisions
of the certificate of incorporation or by-laws of ISI, Restated
Certificate of Incorporation or Amended By-Laws of the Company or any
statute or any order, rule or regulation known to such counsel of any
court or governmental agency or body having jurisdiction over ISI, the
Company or any of their respective subsidiaries or any of their
properties; and
(ix) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body
is required for the issue and sale of the Securities or the consummation
by the Company or ISI of the transactions contemplated by this Agreement
or the Indenture, except such as have been obtained under the Act and
the Trust Indenture Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Underwriters.
In rendering such opinion, such counsel may state that he expresses no opinion
as to the laws of any jurisdiction outside the United States.
(d) Mayer, Brown & Platt, special counsel for the Company, shall have
furnished to you their written opinion (a draft of each such opinion is
attached as Annex II(c) hereto), dated the Time of Delivery, in form and
substance satisfactory to you, to the effect that:
(i) Each of the Company and ISI has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
State of Delaware, with corporate power and authority to own its
properties and conduct its business as described in the Prospectus;
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<PAGE>
(ii) This Agreement has been duly authorized, executed and delivered
by each of the Company and ISI;
(iii) The Registration Statement and the Prospectus and any further
amendments and supplements thereto made by the Company prior to the Time
of Delivery comply as to form in all material respects with the
requirements of the Act and the rules and regulations thereunder; no
facts have come to the attention of such counsel which lead them to
believe that, as of the effective date of the Registration Statement,
either the Registration Statement or the Prospectus (or, as of its date,
any further amendment or supplement thereto made by the Company prior to
the Time of Delivery) (other than the financial statements and related
schedules and other financial data contained in any such documents, as
to which such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or that, as of its date, the Prospectus or any
further amendment or supplement thereto made by the Company prior to the
Time of Delivery (other than the financial statements and related
schedules and other financial data contained in any such documents, as
to which such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or that, as of
the Time of Delivery, either the Registration Statement or the
Prospectus (or any such further amendment or supplement thereto)
contains an untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein not misleading;
and
(iv) Such counsel does not know of any contracts or other documents of
a character required to be filed as an exhibit to the Registration
Statement or required to be incorporated by reference in the Prospectus
or required to be described in the Registration Statement or the
Prospectus which are not filed or incorporated by reference or described
as required;
In rendering such opinion, such counsel may state that they express no opinion
as to the laws of any jurisdiction outside the United States.
(e) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m., New York City time, on the effective date of
any post-effective amendment to the Registration Statement filed subsequent
to the date of this Agreement and also at the Time of Delivery, Price
Waterhouse LLP shall have furnished to you a letter or letters, dated the
respective dates of delivery thereof, in form and substance satisfactory to
you, to the effect set forth in Annex I hereto (the executed copy of the
letter delivered prior to the execution of this Agreement is attached as
Annex I(a) hereto, and a draft of the form of letter to be delivered on the
effective date of any post-effective amendment to the Registration
Statement and as of each Time of Delivery, is attached as Annex I(b)
hereto);
(f)(i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus,
and (ii) since the respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital stock or
increase in long-term debt issued or guaranteed by the Company or any of
its subsidiaries as determined in accordance with generally accepted
accounting principles or any change, or any development involving a
prospective change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of the
Company and its subsidiaries taken as a whole, otherwise than as set forth
or contemplated in the Prospectus, the effect of which, in any such
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<PAGE>
case described in Clause (i) or (ii), is in your judgment so material and
adverse as to make it impracticable or inadvisable to proceed with the
public offering or the delivery of the Securities on the terms and in the
manner contemplated in the Prospectus;
(g) On or after the date hereof (i) no downgrading shall have occurred in
the rating accorded ISI's or Inland Steel Company's debt securities by any
"nationally recognized statistical rating organization", as that term is
defined by the Commission for purposes of Rule 436(g)(2) under the Act, and
(ii) no such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of
any of ISI's or Inland Steel Company's debt securities;
(h) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange; (ii) a suspension or material
limitation in trading in the Company's or ISI's securities on the New York
Stock Exchange; (iii) a general moratorium on commercial banking activities
declared by either Federal or New York State authorities; or (iv) the
outbreak or escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war, if the
effect of any events specified in clauses (i) through (iv) in your judgment
makes it impracticable or inadvisable to proceed with the public offering
or the delivery of the Securities on the terms and in the manner
contemplated in the Prospectus; or (v) the occurrence of any material
adverse change in the existing financial, political or economic conditions
in the United States or elsewhere which, in your judgment, would materially
and adversely affect the financial markets or the market for the Securities
and other debt securities;
(i) The Company shall have furnished or caused to be furnished to you a
or prior to the Time of Delivery written confirmation from each of Moody's
Investors Service, Inc. and Standard & Poor's Ratings Service, a division
of The McGraw Hill Companies, Inc., in form and substance satisfactory to
you, that the __% Notes and the __% Notes have received ratings of ___ and
___; and
(j) The Company shall have furnished or caused to be furnished to you at
the Time of Delivery certificates of officers of the Company satisfactory
to you as to the accuracy of the representations and warranties of the
Company herein at and as of the Time of Delivery, as to the performance by
the Company of all of its obligations hereunder to be performed at or prior
to the Time of Delivery, as to the matters set forth in subsections (a) and
(f) of this Section and as to such other matters as you may reasonably
request.
8. (a) The Company and ISI, jointly and severally, will indemnify and hold
harmless each Underwriter against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse each Underwriter for
any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that neither the Company nor ISI shall
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary Prospectus,
the Registration Statement or the Prospectus or any such amendment or supplement
in reliance upon and in conformity with written information furnished to the
Company or ISI by any Underwriter through Goldman, Sachs & Co. expressly for use
therein; and provided, further, that neither the Company nor ISI shall be liable
to any Underwriter under the indemnity agreement in this subsection
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(a) with respect to any Preliminary Prospectus, or with respect to any
Prospectus that has been amended or supplemented to reflect an event subsequent
to the effective date of the Registration Statement, to the extent that any such
loss, claim, damage or liability of such Underwriter results from the fact that
such Underwriter (i) sold Securities to a person to whom there was not sent or
given, at or prior to the written confirmation of such sale, a copy of the
Prospectus (excluding documents incorporated by reference) as then amended or
supplemented (excluding documents incorporated by reference) and (ii) a
prospectus relating to such Securities was required to be delivered by such
Underwriter under the Act in connection with such sale, if the Company has
previously furnished copies thereof to such Underwriter.
(b) Each Underwriter will indemnify and hold harmless the Company and ISI
against any losses, claims, damages or liabilities to which the Company or ISI
may become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through Goldman, Sachs
& Co. expressly for use therein; and will reimburse the Company or ISI for any
legal or other expenses reasonably incurred by the Company or ISI in connection
with investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or (b)
above of notice of the commencement of any action, such indemnified party shall,
if a claim in respect thereof is to be made against the indemnifying party under
such subsection, notify the indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party shall not relieve
it from any liability which it may have to any indemnified party otherwise than
under such subsection. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnifying party), and, after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal expenses of other counsel
or any other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written consent of the
indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act, by or on behalf of any indemnified
party.
(d) If the indemnification provided for in this Section 8 is unavailable to or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages or liabilities (or actions in
respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and ISI on the one hand and the Underwriters on the other from
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the offering of the Securities. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under subsection (c) above,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company and ISI on the
one hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations, including, but not limited to, failure to give notice required
under subsection (c) above. The relative benefits received by the Company and
ISI on the one hand and the Underwriters on the other shall be deemed to be in
the same proportion as the total net proceeds from the offering of the
Securities purchased under this Agreement (before deducting expenses) received
by the Company bear to the total underwriting discounts and commissions received
by the Underwriters with respect to the Securities purchased under this
Agreement, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company and ISI on the one hand or the Underwriters on the other
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. ISI, the Company
and the Underwriters agree that it would not be just and equitable if
contributions pursuant to this subsection (d) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this subsection
(d), no Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) The obligations of the Company and ISI under this Section 8 shall be in
addition to any liability which the Company or ISI may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls
any Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company and ISI
(including any person who, with his or her consent, is named in the Registration
Statement as about to become a director of the Company) and to each person, if
any, who controls the Company or ISI within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Securities which it has agreed to purchase hereunder, you may in your discretion
arrange for you or another party or other parties to purchase such Securities on
the terms contained herein. If within thirty-six hours after such default by
any Underwriter you do not arrange for the purchase of such Securities, then the
Company shall be entitled to a further period of thirty-six hours within which
to procure another party or other parties satisfactory to you to purchase such
Securities on such terms. In the event that, within the respective prescribed
periods, you notify the Company that you have so arranged for the purchase of
such Securities or the Company notifies you that it has so arranged for the
purchase of such Securities, you or the Company shall have the right to postpone
the Time of Delivery for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the
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Prospectus, or in any other documents or arrangements, and the Company agrees to
file promptly any amendments to the Registration Statement or the Prospectus
which in your opinion may thereby be made necessary. The term "Underwriter" as
used in this Agreement shall include any person substituted under this Section
with like effect as if such person had originally been a party to this Agreement
with respect to such Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Underwriter or Underwriters by the non-defaulting
Underwriters or other persons and the Company as provided in subsection (a)
above, the aggregate principal amount of such Securities which remains
unpurchased does not exceed one-eleventh of the aggregate principal amount of
all the Securities, then the Company shall have the right to require each non-
defaulting Underwriter to purchase the principal amount of Securities which such
Underwriter agreed to purchase hereunder and, in addition, to require each non-
defaulting Underwriter to purchase its pro rata share (based on the principal
amount of Securities which such Underwriter agreed to purchase hereunder) of the
Securities of such defaulting Underwriter or Underwriters for which such
arrangements have not been made; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Underwriter or Underwriters by the non-defaulting
Underwriters or other persons and the Company as provided in subsection (a)
above, the aggregate principal amount of Securities which remains unpurchased
exceeds one-eleventh of the aggregate principal amount of all the Securities, or
if the Company shall not exercise the right described in subsection (b) above to
require non-defaulting Underwriters to purchase Securities of a defaulting
Underwriter or Underwriters, then this Agreement shall thereupon terminate,
without liability on the part of any non-defaulting Underwriter or the Company,
except for the expenses to be borne by the Company and any Underwriters as
provided in Section 6 hereof and the indemnity and contribution agreements in
Section 8 hereof; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of ISI, the Company and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or ISI or the
Company, or any officer or director or controlling person of ISI or the Company,
and shall survive delivery of and payment for the Securities.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither ISI nor the Company shall then be under any liability to any Underwriter
except as provided in Sections 6 and 8 hereof; but, if for any other reason, any
Securities are not delivered by or on behalf of the Company as provided herein,
the Company will reimburse the Underwriters through you for all out-of-pocket
expenses approved in writing by you, including fees and disbursements of
counsel, reasonably incurred by the Underwriters in making preparations for the
purchase, sale and delivery of the Securities not so delivered, but the Company
shall then be under no further liability to any Underwriter in respect of
Securities not so delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you.
All statements, requests, notices, and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you in care of Goldman, Sachs & Co., 85 Broad Street,
New York, New York 10004, Attention: Registration Department; and if to the
Company shall be delivered or sent by mail, telex or facsimile transmission to
the address of the Company set forth in the Registration Statement, Attention:
Secretary; provided, however, that any notice to an Underwriter pursuant to
Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile
13
<PAGE>
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire, or telex constituting such Questionnaire, which address will be
supplied to the Company by you upon request. Any such statements, requests,
notices or agreements shall take effect at the time of receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company, ISI and, to the extent provided in Sections 8
and 10 hereof, the officers and directors of the Company, ISI and each person
who controls the Company, ISI or any Underwriter, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser of
any of the Securities from any Underwriter shall be deemed a successor or assign
by reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without regard to conflicts of laws
principles.
16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
14
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us six counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Underwriters and the Company.
It is understood that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth in a form of Agreement among
Underwriters, the form of which shall be submitted to the Company for
examination, upon request, but without warranty on your part as to the authority
of the signers thereof.
Very truly yours,
Ryerson Tull, Inc.
By: .....................................
Name:
Title:
Inland Steel Industries, Inc.
By: ......................................
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
CS First Boston Corporation
By: ..................................
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
15
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I
Principal
Amount of
___% Notes
to be
Underwriter Purchased
----------- ----------
<S> <C>
Goldman, Sachs & Co.......................................... $
CS First Boston Corporation..................................
Total..................................................... $
Principal
Amount of
___% Notes
to be
Underwriter Purchased
----------- ----------
Goldman, Sachs & Co.......................................... $
CS First Boston Corporation..................................
Total..................................................... $
</TABLE>
16
<PAGE>
ANNEX I
Pursuant to Section 7(e) of the Underwriting Agreement, the accountants shall
furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to the
Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules (and, if applicable, financial
forecasts and/or pro forma financial information) examined by them and
included in the Prospectus or the Registration Statement comply as to form
in all material respects with the applicable accounting requirements of the
Act and the related published rules and regulations thereunder; and, if
applicable, they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited consolidated interim financial statements, selected financial
data, pro forma financial information, financial forecasts and/or condensed
financial statements derived from audited financial statements of the
Company for the periods specified in such letter, as indicated in their
reports thereon, copies of which have been separately furnished to
Underwriters;
(iii) They have made a review in accordance with standards established
by the American Institute of Certified Public Accountants of the unaudited
condensed consolidated statements of income, consolidated balance sheets
and consolidated statements of cash flows included in the Prospectus as
indicated in their reports thereon copies of which have been separately
furnished to the Underwriters and on the basis of specified procedures
including inquiries of officials of the Company who have responsibility for
financial and accounting matters regarding whether the unaudited condensed
consolidated financial statements referred to in paragraph (vi)(A)(i) below
comply as to form in all material respects with the applicable accounting
requirements of the Act and the related published rules and regulations,
nothing came to their attention that cause them to believe that the
unaudited condensed consolidated financial statements do not comply as to
form in all material respects with the applicable accounting requirements
of the Act and the related published rules and regulations;
(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company
for the five most recent fiscal years included in the Prospectus agrees
with the corresponding amounts (after restatements where applicable) in the
audited consolidated financial statements for such five fiscal years which
were included or incorporated by reference in the Company's Annual Reports
on Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus under selected
captions with the disclosure requirements of Regulation S-K and on the
basis of limited procedures specified in such letter nothing came to their
attention as a result of the foregoing procedures that caused them to
believe that this information does not conform in all material respects
with the disclosure requirements of Items 301, 302, 402 and 503(d),
respectively, of Regulation
S-K;
(vi) On the basis of limited procedures, not constituting an examination
in accordance with
<PAGE>
generally accepted auditing standards, consisting of a reading of the
unaudited financial statements and other information referred to below, a
reading of the latest available interim financial statements of the Company
and its subsidiaries, inspection of the minute books of the Company and its
subsidiaries since the date of the latest audited financial statements
included in the Prospectus, inquiries of officials of the Company and its
subsidiaries responsible for financial and accounting matters and such
other inquiries and procedures as may be specified in such letter, nothing
came to their attention that caused them to believe that:
(A) (i) the unaudited consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the related published
rules and regulations, or (ii) any material modifications should be made
to the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus for them to be in conformity with generally
accepted accounting principles;
(B) any other unaudited income statement data and balance sheet items
included in the Prospectus do not agree with the corresponding items in
the unaudited consolidated financial statements from which such data and
items were derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial statements
included in the Prospectus;
(C) the unaudited financial statements which were not included in the
Prospectus but from which were derived any unaudited condensed financial
statements referred to in Clause (A) and any unaudited income statement
data and balance sheet items included in the Prospectus and referred to
in Clause (B) were not determined on a basis substantially consistent
with the basis for the audited consolidated financial statements
included in the Prospectus;
(D) any unaudited pro forma consolidated condensed financial
statements included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the Act
and the published rules and regulations thereunder or the pro forma
adjustments have not been properly applied to the historical amounts in
the compilation of those statements;
(E) as of a specified date not more than five days prior to the date
of such letter, there have been any changes in the consolidated capital
stock (other than issuances of capital stock upon exercise of options
and stock appreciation rights, upon earn-outs of performance shares and
upon conversions of convertible securities, in each case which were
outstanding on the date of the latest financial statements included in
the Prospectus) or any increase in the consolidated long-term debt of
the Company and its subsidiaries, or any decreases in consolidated net
current assets or stockholders' equity or other items specified by the
Underwriters, or any increases in any items specified by the
Underwriters, in each case as compared with amounts shown in the latest
balance sheet included in the Prospectus, except in each case for
changes, increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter; and
(F) for the period from the date of the latest financial statements
included in the Prospectus to the specified date referred to in Clause
(E) there were any decreases in consolidated net revenues or operating
profit or the total or per share amounts of consolidated net income or
other items specified by the Underwriters, or any increases in any items
specified by the Underwriters, in each case as compared with the
comparable period of the preceding year and with any other period of
corresponding length specified by the Underwriters, except in each case
for decreases or increases which the Prospectus discloses
2
<PAGE>
have occurred or may occur or which are described in such letter; and
(vii) In addition to the examination referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of minute
books, inquiries and other procedures referred to in paragraphs (iii) and
(vi) above, they have carried out certain specified procedures, not
constituting an examination in accordance with generally accepted auditing
standards, with respect to certain amounts, percentages and financial
information specified by the Underwriters, which are derived from the
general accounting records of the Company and its subsidiaries, which
appear in the Prospectus, or in Part II of, or in exhibits and schedules
to, the Registration Statement specified by the Underwriters, and have
compared certain of such amounts, percentages and financial information
with the accounting records of the Company and its subsidiaries and have
found them to be in agreement.
3
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
-------------------------------------
OF
--
RYERSON TULL, INC.
------------------
The undersigned, a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware, as amended (the
"Corporation"), DOES HEREBY CERTIFY as follows:
1. The present name of the Corporation is Ryerson Tull, Inc. The name
under which the Corporation was originally incorporated was Inland Steel
Services Holding, Inc. The Certificate of Incorporation of the Corporation was
originally filed in the Office of the Secretary of State of the State of
Delaware on March 19, 1986.
2. On June 10, 1996, in the manner prescribed by Sections 242 and 245 of
the General Corporation Law of the State of Delaware, as amended, this Restated
Certificate of Incorporation (the "Restated Certificate of Incorporation"),
which amends and restates the Certificate of Incorporation of the Corporation,
was proposed by a resolution unanimously adopted by the Board of Directors and
was adopted by the sole stockholder of the Corporation.
3. The text of the Certificate of Incorporation of the Corporation as
amended and restated herein shall, at the effective time of this Restated
Certificate of Incorporation, read as follows:
ARTICLE I. NAME.
The name of the Corporation (hereinafter the "Corporation") is:
RYERSON TULL, INC.
ARTICLE II. REGISTERED OFFICE AND AGENT.
The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of the registered agent of the Corporation at that address is The
Corporation Trust Company.
<PAGE>
ARTICLE III. NATURE OF BUSINESS; PURPOSE.
The nature of the business or purpose to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of Delaware, as
amended (the "General Corporation Law of Delaware").
ARTICLE IV. CAPITAL STOCK.
Section 1. Authorized Capital Stock. The total number of shares of all
classes of stock which the Corporation shall have authority to issue is
150,000,000, of which 100,000,000 shares are Class A Common Stock, $1.00 par
value per share (the "Class A Common Stock"), 34,000,000 shares are Class B
Common Stock, $1.00 par value per share (the "Class B Common Stock"), and
16,000,000 shares are Preferred Stock, $1.00 par value per share (the "Preferred
Stock"). The shares of stock of the Corporation may be issued from time to time
for such consideration as may be fixed from time to time by the Board of
Directors.
Section 2. Common Stock. The holders of shares of Class A Common Stock
and Class B Common Stock shall have the following respective rights:
(a) Voting.
(i) The holders of shares of Class A Common Stock shall be entitled
to one vote per share and the holders of shares of Class B Common Stock shall be
entitled to four votes per share on all matters to be voted upon by stockholders
of the Corporation.
(ii) Except as provided by law or by this Restated Certificate of
Incorporation, neither the holders of shares of Class A Common Stock nor the
holders of shares of Class B Common Stock shall be entitled to vote as a
separate class on any matter to be voted upon by stockholders of the
Corporation.
(iii) Neither the holders of shares of Class A Common Stock nor the
holders of shares of Class B Common Stock shall have cumulative voting rights.
(b) Dividends and Distributions.
(i) The holders of Class A Common Stock and the holders of Class B
Common Stock shall be entitled to dividends if, as and when declared by the
Board of Directors.
-2-
<PAGE>
(ii) The amount of any dividend or distribution of cash, stock of the
Corporation or other property of the Corporation to be paid per share of Class A
Common Stock shall equal the amount of such dividend or distribution to be paid
per share of Class B Common Stock, and the amount of any such dividend or
distribution to be paid per share of Class B Common Stock shall equal the amount
of such dividend or distribution to be paid per share of Class A Common Stock,
except as otherwise provided in this Section 2(b) of Article IV. No dividend,
distribution, subdivision, combination or reclassification of the Class A Common
Stock shall occur unless a like dividend, distribution, subdivision, combination
or reclassification is made with respect to the Class B Common Stock, and no
dividend, distribution, subdivision, combination or reclassification of the
Class B Common Stock shall occur unless a like dividend, distribution,
subdivision, combination or reclassification is made with respect to the Class A
Common Stock. The limitation on dividends, distributions, subdivisions,
combinations and reclassification set forth in this Section 2(b) of Article IV
shall apply at any time during which shares of both Class A Common Stock and
Class B Common Stock are outstanding.
(iii) The Corporation may not pay a dividend or make a distribution
of Class A Common Stock or any security exercisable for or convertible into
Class A Common Stock ("Class A Common Stock Equivalents") on or to shares of any
class of the Corporation's capital stock other than Class A Common Stock. If
the Corporation shall pay a dividend or make a distribution of Class A Common
Stock or Class A Common Stock Equivalents, the Corporation shall simultaneously
pay a dividend or make a distribution of Class B Common Stock or securities
exercisable for or convertible into Class B Common Stock ("Class B Common Stock
Equivalents") on or to shares of Class B Common Stock, and the number of shares
of Class B Common Stock issued or covered by Class B Common Stock Equivalents
issued on each share of Class B Common Stock pursuant to such dividend or
distribution shall equal the number of shares of Class A Common Stock issued or
covered by Class A Common Stock Equivalents issued on each share of Class A
Common Stock pursuant to such dividend or distribution.
(iv) The Corporation may not pay a dividend or make a distribution of
Class B Common Stock or Class B Common Stock Equivalents on or to shares of any
class of the Corporation's capital stock other than Class B Common Stock. If
the Corporation shall pay a dividend or make a distribution of Class B Common
Stock or Class B Common Stock Equivalents, the Corporation shall simultaneously
pay a dividend or make a distribution of Class A Common Stock or corresponding
Class A Common Stock Equivalents on or to shares of Class A Common Stock, and
the number of shares of Class A Common Stock issued or
-3-
<PAGE>
covered by Class A Common Stock Equivalents issued on each share of Class A
Common Stock pursuant to the dividend or distribution shall equal the number of
shares of Class B Common Stock issued or covered by Class B Common Stock
Equivalents issued on each share of Class B Common Stock pursuant to the
dividend or distribution.
(c) Liquidation. On dissolution and liquidation of the Corporation,
whether voluntary or involuntary, after paying or setting aside for the holders
of all shares of Preferred Stock then outstanding the full preferential amounts
to which they are entitled pursuant to the terms thereof, the holders of shares
of Class A Common Stock and Class B Common Stock shall be entitled to receive,
pro rata, any remaining assets of the Corporation. The Board of Directors may
distribute in kind to the holders of the shares of Class A Common Stock and
Class B Common Stock such remaining assets of the Corporation or may sell,
transfer or otherwise dispose of all or any part of such remaining assets to any
other corporation, trust or entity and receive payment therefor in cash, stock
or obligations of such other corporation, trust or entity or any combination
thereof, and may sell all or any part of the consideration so received, and may
distribute the consideration received or any balance or proceeds thereof to
holders of the shares of Class A Common Stock and Class B Common Stock in
accordance with Section 2(b) of this Article IV. The voluntary sale,
conveyance, lease, exchange or transfer of all or substantially all the property
or assets of the Corporation (unless in connection therewith the dissolution or
liquidation of the Corporation is specifically approved), or the merger or
consolidation of the Corporation into or with any other corporation, or the
merger of any other corporation into the Corporation, or any purchase or
redemption of shares of stock of the Corporation of any class, shall not be
deemed to be a dissolution or liquidation of the Corporation for the purpose of
this Section 2(c) of Article IV.
(d) Conversion.
(i) A holder of shares of Class B Common Stock shall have the right
at any time to convert, at the option of, and without payment to the Corporation
by, the stockholder, any share or shares of Class B Common Stock into an equal
number of shares of Class A Common Stock. The holder shall exercise this right
by the surrender of the certificate representing each share of Class B Common
Stock to be converted to Class A Common Stock to the Corporation at its
principal office or to such agent as the Board of Directors may designate.
Written notice of the holder's election to convert the shares of Class B Common
Stock and, if requested by the Corporation, an instrument of transfer
satisfactory to the Corporation duly executed by the holder or the holder's duly
authorized attorney shall accompany the
-4-
<PAGE>
surrendered certificate. As promptly as practicable after the holder's
surrender of the certificate for conversion as provided above, the Corporation
shall deliver or cause to be delivered to the holder of the shares of Class B
Common Stock represented by the surrendered certificate a certificate or
certificates representing the number of shares of Class A Common Stock issuable
upon such conversion issued in the name of the holder, or such other name or
names as the holder may direct, and, if a surrendered certificate includes
shares of Class B Common Stock not being converted, a certificate or
certificates representing the number of shares of Class B Common Stock not being
converted. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of the surrender of the certificate or
certificates representing shares of Class B Common Stock unless the transfer
books of the Corporation are closed on such date in which case such conversion
shall be deemed to have been made immediately prior to the close of business on
the first day thereafter on which the transfer books are open. At that time,
all rights of such holder arising from ownership of the converted shares of
Class B Common Stock shall cease, and the person or persons in whose name or
names the certificate or certificates of Class A Common Stock are to be issued
shall be treated for all purposes as having become the record holder or holders
of such shares of Class A Common Stock.
(ii) Each share of Class B Common Stock shall immediately and
automatically convert into one share of Class A Common Stock, without payment to
the Corporation, upon the direct or indirect occurrence of any of the following:
(w) the Corporation shall consolidate with, or merge with and into, any other
corporation, partnership, association, joint venture, joint-stock company,
trust, or unincorporated organization (each a "Person"); (x) any Person shall
consolidate with the Corporation, or merge with and into the Corporation and the
Corporation shall be the continuing or surviving corporation of such merger and,
in connection with such merger, all or part of the Class A Common Stock and
Class B Common Stock shall be changed into or exchanged for stock or other
securities of any other Person (or the Corporation) or cash or any other
property; (y) the Corporation shall sell or otherwise transfer, in one or more
related transactions, assets or earning power aggregating 50 percent or more of
the assets or earning power of the Corporation to any individual or individuals
or any Person or Persons; or (z) the number of shares of Class B Common Stock
outstanding shall represent less than 50 percent of the sum of the number of
outstanding shares of Class B Common Stock and Class A Common Stock.
(iii) Any share of Class B Common Stock shall immediately and
automatically convert into one share of Class A Common Stock upon transfer of
such share by the holder thereof to
-5-
<PAGE>
any individual or Person other than an individual or Person owning 100% of such
holder's capital stock or a wholly-owned direct or indirect subsidiary of such
holder.
(iv) The Corporation shall at all times reserve and keep available,
solely for the purpose of issuance upon conversion of outstanding shares of
Class B Common Stock, such number of authorized but unissued shares of Class A
Common Stock as will be sufficient to permit the conversion of all outstanding
shares of Class B Common Stock.
(v) The holders of shares of Class A Common Stock shall not have any
conversion rights whatsoever with respect to such shares of Class A Common
Stock.
(e) Redemption. Neither the Class A Common Stock nor the Class B
Common Stock shall be subject to redemption by the Corporation.
(f) Restrictions on Issuance of Class B Common Stock. The
Corporation may not issue any shares of Class B Common Stock after the date of
the initial issuance of the shares of Class B Common Stock other than in the
form of a dividend or distribution pursuant to a stock dividend or division or
split-up of the shares of Class B Common Stock, and then only in respect of the
issued shares of Class B Common Stock in accordance with Section 2(b) of this
Article IV or as otherwise provided in this Restated Certificate of
Incorporation, or upon exercise or conversion of a Class B Common Stock
Equivalent.
Section 3. Preferred Stock. The Board of Directors is authorized, subject
to the limitations prescribed by the General Corporation Law of Delaware and by
the provisions of this Article IV, to adopt, from time to time, a resolution or
resolutions providing for the issuance of shares of Preferred Stock in one or
more series, to establish the number of shares in each such series, and to
determine the designations and the powers, preferences and relative,
participating, optional and other special rights and the qualifications,
limitations and restrictions of the shares of each series. The authority of the
Board of Directors with respect to each such series includes determination of
the following, which may vary as between the different series of Preferred
Stock:
(a) The number of shares in the series and the distinguishing
designation of that series;
(b) Whether shares of that series shall have full, special,
conditional, limited or no voting rights, except to the extent otherwise
provided by the General Corporation Law of Delaware;
-6-
<PAGE>
(c) Whether shares of that series shall be convertible into or
exchangeable for other securities of the Corporation at the option of the
Corporation or at the option of the holder or holders thereof or upon the
happening of a specified event or events, and the terms and conditions of the
conversion or exchange, including provision for adjustment of the conversion or
exchange rate in circumstances determined by the Board of Directors;
(d) Whether or not shares of that series shall be redeemable at the
option of the Corporation or at the option of the holder or holders thereof or
upon the happening of a specified event or events, and the terms and conditions
of redemption, including the date or dates upon or after which such shares shall
be redeemable and the amount per share payable in case of redemption, which
amount may vary under different conditions or at different redemption dates;
(e) Any requirement as to a sinking fund for the shares of that
series;
(f) The dividend rate (or method of determining such rate), if any, on
shares of that series, any conditions upon which such dividends shall be paid,
the date or dates upon which such dividends shall be payable, the manner of
calculating any dividends, the extent, if any, to which dividends thereon shall
be cumulative, and the relative rights of preference, if any, of payment of any
dividends;
(g) The right or rights of shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation and the rights of priority of that series relative to the Class A
Common Stock, the Class B Common Stock and any other series of Preferred Stock
on the distribution of assets on dissolution; and
(h) Any other relative rights, preferences and limitations of that
series that are permitted by law and not inconsistent with the provisions of
this Article IV or any resolution adopted by the Board of Directors pursuant
hereto.
A. DESIGNATION, PREFERENCES AND RIGHTS OF SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK
Unless otherwise indicated, any reference in this Article IV, Section 3A to
"Section", "Subsection", "paragraph", "subparagraph" or "clause" shall refer to
a Section, Subsection, paragraph, subparagraph or clause of this Article IV,
Section 3A.
Section 1. Designation and Amount. There shall be a series of Preferred
Stock of the Corporation which shall be designated
-7-
<PAGE>
as "Series A Junior Participating Preferred Stock," par value $1.00 per share
(hereinafter called "Series A Preferred Stock"), and the number of shares
constituting such series shall be 1,340,000. Such number of shares may be
increased or decreased by resolution of the Board of Directors and by the filing
of a certificate pursuant to the provisions of the General Corporation Law of
the State of Delaware stating that such increase or reduction has been so
authorized; provided, however, that no decrease shall reduce the number of
shares of Series A Preferred Stock to a number less than that of the shares then
outstanding plus the number of shares of Series A Preferred Stock issuable upon
exercise of outstanding rights, options or warrants or upon conversion of
outstanding securities issued by the Corporation.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock ranking prior and superior to the shares of
Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash to holders of record on the last business
day of March, June, September and December in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the
provision for adjustment hereinafter set forth, 100 times the aggregate per
share amount of all cash dividends, and 100 times the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions other than a
dividend payable in shares of Class A Common Stock (hereinafter defined) or a
subdivision of the outstanding shares of Class A Common Stock (by
reclassification or otherwise), declared on the Class A Common Stock, par value
$1.00 per share, of the Corporation (the "Class A Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock. In the event the Corporation
shall at any time following June 13, 1996 (i) declare any dividend on Class A
Common Stock payable in shares of Class A Common Stock, (ii) subdivide the
outstanding Class A Common Stock or (iii) combine the outstanding Class A Common
Stock into a smaller number of shares, then in each such case the amount to
which holders of shares of Series A Preferred Stock were entitled immediately
prior to such event under clause (b) of the preceding sentence shall be adjusted
by multiplying each such amount by a fraction the numerator of which is the
number of
-8-
<PAGE>
shares of Class A Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Class A Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series
A Preferred Stock as provided in paragraph (A) above at the time it declares a
dividend or distribution on the Class A Common Stock (other than a dividend
payable in shares of Class A Common Stock).
(C) No dividend or distribution (other than a dividend payable in shares of
Class A Common Stock) shall be paid or payable to the holders of shares of Class
A Common Stock unless, prior thereto, all accrued but unpaid dividends to the
date of such dividend or distribution shall have been paid to the holders of
shares of Series A Preferred Stock.
(D) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series A Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 30 days prior to the date fixed
for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each one
one-hundredth of a share of Series A Preferred Stock shall entitle the holder
thereof to one vote on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time following June
13, 1996 (i) declare any dividend on Class A Common Stock payable in
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shares of Class A Common Stock, (ii) subdivide the outstanding Class A Common
Stock or (iii) combine the outstanding Class A Common Stock into a smaller
number of shares, then in each such case the number of votes per share to which
holders of shares of Series A Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction the
numerator of which is the number of shares of Class A Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Class A Common Stock that were outstanding immediately prior to such
event.
(B) Except as otherwise provided herein or by law, the holders of shares of
Series A Preferred Stock and the holders of shares of Class A Common Stock and
any other capital stock of the Corporation having general voting rights shall
vote together as one class on all matters submitted to a vote of stockholders of
the Corporation.
(C) (i) Whenever, at any time or times, dividends payable on any share or
shares of Series A Preferred Stock shall be in arrears in an amount equal
to at least six full quarterly dividends (whether or not declared and
whether or not consecutive), the holders of record of the outstanding
Series A Preferred Stock together with the holders of any other Preferred
Stock, on which the dividends payable on any share or shares of such
Preferred Stock shall be in arrears in an amount equal to at least six full
quarterly dividends (whether or not declared and whether or not
consecutive), shall have the exclusive right, voting separately as a single
class, to elect two directors of the Corporation at a special meeting of
stockholders of the Corporation or at the Corporation's next annual meeting
of stockholders, and at each subsequent annual meeting of stockholders, as
provided below. At elections for such directors, the holders of shares of
Series A Preferred Stock shall be entitled to cast one vote for each one
one-hundredth of a share of Series A Preferred Stock held.
(ii) Upon the vesting of such right of the holders of the Preferred
Stock, the maximum authorized number of members of the Board of Directors
shall automatically be increased by two and the two vacancies so created
shall be filled by vote of the holders of the outstanding Preferred Stock
as hereinafter set forth. A special meeting of the stockholders of the
Corporation then entitled to vote shall be called by the Chairman or the
President or the Secretary of the Corporation, if requested in writing by
the holders of record of not less than 10% of the Preferred Stock then
outstanding. At such special meeting, or, if no such special meeting shall
have been called, then at the next annual meeting of stockholders of the
Corporation, the
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holders of the shares of the Preferred Stock shall elect, voting as above
provided, two directors of the Corporation to fill the aforesaid vacancies
created by the automatic increase in the number of members of the Board of
Directors. At any and all such meetings for such election, the holders of
a majority of the outstanding shares of the Preferred Stock shall be
necessary to constitute a quorum for such election, whether present in
person or by proxy, and such two directors shall be elected by the vote of
at least a plurality of shares held by such stockholders present or
represented at the meeting. Any director elected by holders of shares of
the Preferred Stock pursuant to this Section may be removed at any annual
or special meeting, by vote of a majority of the stockholders voting as a
class who elected such director, with or without cause. In case any
vacancy shall occur among the directors elected by the holders of the
Preferred Stock pursuant to this Section, such vacancy may be filled by the
remaining director so elected, or his successor then in office, and the
director so elected to fill such vacancy shall serve until the next meeting
of stockholders for the election of directors. After the holders of the
Preferred Stock shall have exercised their right to elect Directors in any
default period and during the continuance of such period, the number of
Directors shall not be further increased or decreased except by vote of the
holders of Preferred Stock as herein provided or pursuant to the rights of
any equity securities ranking senior to or pari passu with the Series A
Preferred Stock.
(iii) The right of the holders of the Preferred Stock, voting
separately as a class, to elect two members of the Board of Directors of
the Corporation as aforesaid shall continue until, and only until, such
time as all arrears in dividends (whether or not declared) on the Preferred
Stock shall have been paid or declared and set apart for payment, at which
time such right shall terminate, except as herein or by law expressly
provided, subject to revesting in the event of each and every subsequent
default of the character above-mentioned. Upon any termination of the
right of the holders of the shares of the Preferred Stock as a class to
vote for directors as herein provided, the term of office of all directors
then in office elected by the holders of Preferred Stock pursuant to this
Section shall terminate immediately. Whenever the term of office of the
directors elected by the holders of the Preferred Stock pursuant to this
Section shall terminate and the special voting powers vested in the holders
of the Preferred Stock pursuant to this Section shall have expired, the
maximum number of members of the Board of Directors of the Corporation
shall be such number as may be provided for in the By-laws of the
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Corporation, irrespective of any increase made pursuant to the provisions
of this Section.
(D) Except as set forth herein, holders of Series A Preferred Stock shall
have no special voting rights and their consent shall not be required (except to
the extent they are entitled to vote with holders of Class A Common Stock as set
forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
1. Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(a) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(b) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except dividends paid ratably on the Series A Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(c) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of any stock
of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred Stock; or
(d) purchase or otherwise acquire for consideration any shares of
Series A Preferred Stock, except in accordance with a purchase offer made
in writing or by publication (as determined by the Board of Directors) to
all holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative
rights and preferences of the respective
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series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
2. The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up.
1. Upon any voluntary liquidation, dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock unless, prior thereto, the holders
of shares of Series A Preferred Stock shall have received $1.00 per share, plus
an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment (the "Series A Liquidation
Preference"). Following the payment of the full amount of the Series A
Liquidation Preference, no additional distributions shall be made to the holders
of shares of Series A Preferred Stock unless, prior thereto, the holders of
shares of Class A Common Stock shall have received an amount per share (the
"Common Adjustment") equal to the quotient obtained by dividing (i) the Series A
Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in
subparagraph C below to reflect such events as stock splits, stock dividends and
recapitalizations with respect to the Class A Common Stock) (such number in
clause (ii), the "Adjustment Number"). Following the payment of the full amount
of the Series A Liquidation Preference and the Common Adjustment in respect of
all outstanding shares of Series A Preferred Stock and Class A Common Stock,
respectively, holders of Series A Preferred Stock and holders of shares of Class
A Common Stock shall receive their ratable and proportionate share of the
remaining assets to be distributed in the ratio, on a per share basis, of the
Adjustment Number to 1 with respect to such Preferred Stock and Class A Common
Stock, on a per share basis, respectively.
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2. In the event, however, that there are not sufficient assets available
to permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other series of Preferred Stock, if any, which
rank on a parity with the Series A Preferred Stock, then such remaining assets
shall be distributed ratably to the holders of such parity shares in proportion
to their respective liquidation preferences.
3. In the event the Corporation shall at any time following June 13, 1996
(i) declare any dividend on Class A Common Stock payable in shares of Class A
Common Stock, (ii) subdivide the outstanding Class A Common Stock or (iii)
combine the outstanding Class A Common Stock into a smaller number of shares,
then in each such case the Adjustment Number in effect immediately prior to such
event shall be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Class A Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Class A Common Stock that were outstanding immediately prior to such
event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Class A Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case the shares
of Series A Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Class A Common Stock is changed or
exchanged. In the event the Corporation shall at any time (i) declare any
dividend on Class A Common Stock payable in shares of Class A Common Stock, (ii)
subdivide the outstanding Class A Common Stock or (iii) combine the outstanding
Class A Common Stock into a smaller number of shares, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Preferred Stock shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of shares of
Class A Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Class A Common Stock that were
outstanding immediately prior to such event.
Section 8. Redemption. The shares of a Series A Preferred Stock shall not
be redeemable by the Corporation. The preceding sentence shall not limit the
ability of the Corporation to purchase or otherwise deal in such shares of stock
to the extent permitted by law.
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Section 9. Ranking. The Series A Preferred Stock shall rank junior to all
other series of the Corporation's preferred stock (whether with or without par
value) as to the payment of dividends and the distribution of assets, unless the
terms of any such series shall provide otherwise.
Section 10. Amendment. The Certificate of Incorporation of the Corporation
shall not be amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series A Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of a majority
or more of the outstanding shares of Series A Preferred Stock, voting separately
as a class.
Section 11. Fractional Shares. Series A Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
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Section 4. Preemptive Rights. No holder of shares of Class A Common
Stock, Class B Common Stock or Preferred Stock of the Corporation shall, by
reason of such holding, have any preemptive right to purchase or to subscribe to
purchase any additional shares of stock of the Corporation or securities
convertible into or carrying a right to subscribe for or acquire capital stock
of the Corporation.
ARTICLE V. DIRECTORS.
Section 1. Number of Directors; Quorum. The number of Directors of the
Corporation shall be fixed from time to time by the vote of a majority of the
entire Board of Directors, but such number shall in no case be less than three.
Any such determination made by the Board of Directors shall continue in effect
unless and until changed by the Board of Directors, but no such change shall
affect the term of any Director then in office. A majority of the entire Board
of Directors shall constitute a quorum for the transaction of business.
Section 2. Classification of Directors. The Directors shall be divided
into three classes, designated Class I, Class II and Class III. Each class
shall consist, as nearly as may be possible, of one-third of the total number of
Directors constituting the entire Board of Directors. At each annual meeting of
stockholders, successors to the class of Directors whose term expires at that
annual meeting shall be elected for a three-year term. If the authorized number
of Directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of Directors in each class
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as nearly equal as possible. Any Director of any class elected to fill a
vacancy resulting from an increase in such class or otherwise shall hold office
for a term that shall coincide with the remaining term of the class into which
such Director is elected, but in no case will a decrease in the number of
Directors shorten the term of any incumbent Director.
Section 3. Term of Office; Vacancy; Election; Removal from Office. A
Director shall hold office until the annual meeting for the year in which his or
her term expires and until his or her successor shall be elected and shall
qualify, subject, however, to prior death, resignation or removal from office.
Any vacancy on the Board of Directors or newly created directorship resulting
from an increase in the number of Directors shall be filled only by a majority
of the Directors then in office (even if less than a quorum). Elections of
Directors need not be by written ballot unless the By-laws of the Corporation
shall so provide. Any Director may be removed only for cause by the affirmative
vote of the holders of not less than 80% of the voting power represented by all
the shares of stock of the Corporation outstanding and entitled to vote for the
election of Directors, given at a duly called annual or special meeting of
stockholders.
ARTICLE VI. INDEPENDENT DIRECTORS.
Section 1. Independent Directors. Except as provided in the last sentence
of this Section 1 of Article VI, beginning 60 days after the date of first
issuance of any shares of Class A Common Stock, at all times thereafter when any
shares of Class A Common Stock are outstanding, at least one-third of the
Directors of the Corporation shall be comprised of individuals who are not, and
who have not within the previous twelve months been: (x) officers or employees
of the Corporation; (y) officers, directors or employees of Inland Steel
Industries, Inc. or any other subsidiaries or affiliates of Inland Steel
Industries, Inc.; or (z) owners of more than five percent of the outstanding
common stock of Inland Steel Industries, Inc. or of any of the other
subsidiaries or affiliates of Inland Steel Industries, Inc. Each Director
meeting the requirements of the foregoing sentence is referred to herein as an
"Independent Director." At all times when the Corporation's Board of Directors
is divided into two or more classes of Directors, the Independent Directors
shall be allocated among the classes of Directors so that the each class shall
include, as nearly as may be possible, an equal number of Independent Directors.
In the event that a vacancy occurs in a position held by an Independent
Director, the Corporation shall have six months to fill such vacancy with
another Independent Director or otherwise comply with the requirements of this
Section 1 of Article VI.
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Section 2. Vote for Bankruptcy Proceedings. When any shares of Class A
Common Stock are outstanding, the Corporation shall not, without the affirmative
vote of a majority of the Board of Directors, including the affirmative vote of
at least two-thirds of the Independent Directors: (t) make an assignment for
the benefit of creditors; (u) file a petition in bankruptcy; (v) petition or
apply to any tribunal for the appointment of a custodian, receiver or any
trustee for it or for a substantial part of its property; (w) commence any
proceeding under any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute or other similar
law of any jurisdiction, whether now or hereafter in effect or any other
proceeding to be adjudicated a bankrupt or insolvent; (x) consent to, or
acquiesce in, the filing of any such petition, application, proceeding or
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the Corporation
or any substantial part of its property; (y) admit in writing its inability to
pay its debts generally as they become due, unless, in the reasonable opinion of
its counsel, it is required to do so by applicable law; or (z) authorize any of
the foregoing to be done or taken on behalf of the Corporation; provided
however, that if there shall not be an Independent Director or Independent
Directors then in office and acting, a vote upon any matter set forth in this
Section 2 of Article VI shall not be taken unless and until the requisite number
of Independent Directors shall have been elected.
Section 3. Vote for Merger or Consolidation. When any shares of Class A
Common Stock are outstanding, the Corporation shall not, without the affirmative
vote of a majority of the Board of Directors, including the affirmative vote of
at least two-thirds of the Independent Directors, merge with and into, or
consolidate with, any other Person, unless the surviving entity is not
affiliated with Inland Steel Industries, Inc. or has charter provisions
comparable to this Article VI and Article XII, to the extent that the provisions
of Article XII apply to this Article VI; provided however, that if there shall
not be an Independent Director or Independent Directors then in office and
acting, a vote upon any matter set forth in this Section 3 of Article VI shall
not be taken unless and until the requisite number of Independent Directors
shall have been elected.
Section 4. Review of Certain Transactions. When any shares of Class A
Common Stock are outstanding, at the first regular meeting of the Board of
Directors following the end of a calendar quarter, the Independent Directors
shall review any transaction entered into by and between the Corporation (or any
subsidiary) and Inland Steel Industries, Inc. (or any of its affiliates, other
than the Corporation or a subsidiary of the Corporation) during the immediately
preceding calendar quarter where the
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amount involved exceeds $25 million, other than transactions arising out of
written agreements entered into prior to the issuance of any shares of Class A
Common Stock, to determine whether such transactions were on a basis at least as
favorable as that which could have been obtained from an unaffiliated third
party. The Independent Directors shall report the findings of any such review
to the Board of Directors at the next meeting of the Board of Directors which
shall take such action as it deems appropriate.
Section 5. Termination of this Article. The provisions of this Article VI
shall terminate automatically when the number of shares of Class B Common Stock
outstanding shall represent less than 50 percent of the sum of the number of
outstanding shares of Class B Common Stock and Class A Common Stock.
ARTICLE VII STOCKHOLDER ACTION AND MEETINGS.
Section 1. Stockholder Action. Any action required or permitted to be
taken by the stockholders of the Corporation, whether voting as a single class
or otherwise, must be taken at a duly called annual or special meeting of such
holders and may not be taken by a consent in writing by any such holders, except
that the Board of Directors at any time may by resolution provide that the
holders of Preferred Stock, or any series thereof, may take any action required
or permitted to be taken by such holders by consent in writing without a
meeting.
Section 2. Meetings of Stockholders; Books and Records. Meetings of
stockholders may be held within or without the State of Delaware, as the By-laws
of the Corporation may provide. The books of the Corporation may be kept
(subject to any provision contained in the General Corporation Law of Delaware)
outside the State of Delaware at such place or places as may be designated from
time to time by the Board of Directors or in the By-laws of the Corporation.
Section 3. Special Stockholder Meetings. Except as otherwise required by
law, special meetings of the stockholders of the Corporation may be called only
by: (w) the Board of Directors pursuant to a resolution approved by the
affirmative vote of a majority of the Directors then in office; (x) the Chairman
of the Board; (y) the Vice Chairman of the Board if one is elected; or (z) the
President. Only those matters set forth in the notice of the special meeting
may be considered or acted upon at such special meeting, except as otherwise
provided by law.
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ARTICLE VIII. BY-LAWS.
Both the Board of Directors and the stockholders shall have the power to
adopt, amend or repeal the By-laws of the Corporation. Any repeal or amendment
of the By-laws by the stockholders shall require the affirmative vote of the
holders of not less than 80% of the voting power represented by all the shares
of stock of the Corporation outstanding and entitled to be cast on the matter.
ARTICLE IX. SALE OF ASSETS.
The Board of Directors is authorized to sell, assign, transfer, convey and
otherwise dispose of a part of the property, assets and effects of the
Corporation, less than the whole or substantially the whole thereof, on such
terms and conditions as the Board of Directors shall deem advisable, without the
assent of the stockholders; and also to sell, assign, transfer, convey and
otherwise dispose of the whole, or substantially the whole, of the property,
assets, effects, franchises and goodwill of the Corporation on such terms and
conditions as the Board of Directors shall deem advisable but only with the
assent of the holders of not less than two-thirds of the voting power
represented by all the shares of stock of the Corporation outstanding and
entitled to be cast on the matter, but in any event not less than the amount
required by law.
ARTICLE X. DIRECTOR LIABILITY.
No Director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a Director, except (i) for any breach of a Director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the General Corporation Law of Delaware, or (iv) for
any transaction from which a Director derived an improper personal benefit. If
the General Corporation Law of Delaware is amended to authorize corporate action
further eliminating or limiting the personal liability of Directors, then by
virtue of this Article X the liability of a Director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the General Corporation
Law of Delaware, as so amended. No amendment to or repeal of the General
Corporation Law of Delaware or this Article X that further limits the acts or
omissions for which elimination of liability is permitted shall affect the
liability of a Director for any act or omission which occurs prior to the
effective date of such amendment or repeal.
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ARTICLE XI. INDEMNIFICATION.
The Corporation may indemnify, in accordance with and to the full extent
now or hereafter permitted by law, any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including, without limitation, an action by or in the right of the
Corporation), by reason of such person acting as a director, officer, employee
or agent of, or acting in any other capacity for, on behalf of, or at the
request of, the Corporation, against any liability or expense actually and
reasonably incurred by such person in respect thereof.
ARTICLE XII. AMENDMENT.
The Corporation reserves the right to repeal, alter, change, amend or
restate this Restated Certificate of Incorporation in the manner prescribed
herein or now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation. No repeal,
alteration, change or amendment of this Restated Certificate of Incorporation
(other than in connection with the issuance of Preferred Stock in accordance
with Article IV of this Restated Certificate of Incorporation) shall be made
unless the same is first approved by the Board of Directors of the Corporation
pursuant to a resolution adopted by the Directors then in office in accordance
with the By-laws and applicable law and thereafter approved by the stockholders
in accordance with the By-laws, this Restated Certificate of Incorporation and
applicable law; provided that, the provisions set forth in Article V, Sections
2, 3 and 4 of Article VI, Article VII, Article VIII and this Article
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XII may not be repealed, altered, changed or amended in any respect, nor may any
provision be adopted which is inconsistent with such Sections or Articles,
unless such action is approved by the affirmative vote of the holders of not
less than 80% of the voting power represented by all the shares of stock of the
Corporation outstanding and entitled to be cast on the matter.
ARTICLE XIII. RESTATEMENT.
The Restated Certificate of Incorporation of the Corporation, as so amended
and restated herein, shall constitute a restatement of, and shall supersede, the
Certificate of Incorporation of the Corporation as previously filed with the
Secretary of State of the State of Delaware.
ARTICLE XIV. EXISTENCE.
The Corporation is to have perpetual existence.
IN WITNESS WHEREOF, the Corporation has caused this Restated Certificate of
Incorporation to be signed as of the 10th day of June, 1996, by its Chairman and
attested by its Secretary.
/s/ Robert J. Darnall
(Corporate Seal) ------------------------------
Robert J. Darnall
Chairman
ATTEST:
/s/ Charles B. Salowitz
- ------------------------------
Charles B. Salowitz
Secretary
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BY-LAWS
OF
RYERSON TULL, INC.
(AS AMENDED TO AND INCLUDING JUNE 10, 1996)
ARTICLE I
OFFICES
Section 1. The registered office of the Corporation shall be in the City
of Wilmington, County of New Castle, State of Delaware. The Corporation may
also have offices at such other places both within and without the State of
Delaware as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
STOCKHOLDERS
Section 1. Time and Place of Meetings. All meetings of the stockholders
for the election of Directors or for any other purpose shall be held at such
time and place, within or without the State of Delaware, as shall be designated
by the Board of Directors.
Section 2. Annual Meetings; Nomination of Directors. An annual meeting of
stockholders shall be held for the purpose of electing Directors and for the
transaction of only such other business as is properly brought before the
meeting in accordance with these By-laws. The date of the annual meeting shall
be such date as may be determined by the Board of Directors.
To be properly brought before the meeting, business must be either (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board, (b) otherwise properly brought before the meeting by
or at the direction of the Board or (c) otherwise properly brought before the
meeting by a stockholder. In addition to any other applicable requirements, for
business to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Corporate
Secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than ninety days prior to the meeting; provided, however,
that if less than one hundred five days' notice or prior public disclosure of
the date of a meeting is given or made to stockholders, such stockholder's
notice shall also be deemed to be timely as to such meeting if so delivered or
received not less than ninety days prior to the day and month during that year
which is the same as the day and month of the prior year's annual meeting.
<PAGE>
A stockholder's notice to the Corporate Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and record address of the stockholder proposing such business, (iii) the class
and number of shares of the Corporation which are beneficially owned by the
stockholder and (iv) any material interest of the stockholder in such business.
Notwithstanding anything in the By-laws to the contrary, no business shall
be conducted at the annual meeting except in accordance with the procedures set
forth in this Article II, Section 2, provided, however, that nothing in this
Article II, Section 2 shall be deemed to preclude discussion by any stockholder
of any business properly brought before the annual meeting.
The Chairman of an annual meeting shall, if the facts warrant, in his or
her sole discretion, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the provisions of this
Article II, Section 2, and if he or she should so determine, he or she shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted.
Only persons who are nominated in accordance with the following procedures
shall be eligible for election as Directors. Nominations of persons for
election to the Board of the Corporation at the annual meeting may be made at a
meeting of stockholders by or at the direction of the Board of Directors by any
nominating committee or person appointed by the Board or by any stockholder of
the Corporation entitled to vote for the election of Directors at the meeting
who complies with the notice procedures set forth in this Article II, Section 2.
Such nominations, other than those made by or at the direction of the Board,
shall be made pursuant to timely notice in writing to the Corporate Secretary of
the Corporation. To be timely, a stockholder's notice shall be delivered to or
mailed and received at the principal executive offices of the Corporation not
less than ninety days prior to the meeting; provided, however, that in the event
that less than one hundred five days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder
to be timely must be so received not later than the close of business on the
fifteenth day following the day on which such notice of the date of the meeting
was mailed or such public disclosure was made, whichever first occurs. Such
stockholder's notice to the Corporate Secretary shall set forth: (a) as to each
person whom the stockholder proposes to nominate for election or re-election as
a Director, (i) the name, age, business address and residence address of the
person, (ii) the principal occupation or employment of the person, (iii) the
class and number of shares of
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capital stock of the Corporation which are beneficially owned by the person,
(iv) such person's signed consent to serve as a Director of the Corporation if
elected and (v) any other information relating to the person that is required to
be disclosed in solicitations for proxies for election of Directors pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended; and (b) as
to the stockholder giving the notice, (i) the name and record address of such
stockholder and (ii) the class and number of shares of capital stock of the
Corporation which are beneficially owned by such stockholder. The Corporation
may require any proposed nominee to furnish such other information as may
reasonably be required by the Corporation to determine the eligibility of such
proposed nominee to serve as Director of the Corporation. No person shall be
eligible for election as a Director of the Corporation unless nominated in
accordance with the procedures set forth herein.
The Chairman of the meeting shall, if the facts warrant, in his or her sole
discretion, determine and declare to the meeting that a nomination was not made
in accordance with the foregoing procedure, and if he or she should so
determine, he or she shall so declare to the meeting and the defective
nomination shall be disregarded.
Section 3. Special Meetings. Except as otherwise required by law, special
meetings of the stockholders of the Corporation may be called only by (i) the
Board of Directors pursuant to a resolution approved by the affirmative vote of
a majority of the Directors then in office, (ii) the Chairman of the Board,
(iii) the Vice Chairman of the Board if one is elected or (iv) the President.
Only those matters set forth in the notice of the special meeting may be
considered or acted upon at such special meeting, except as otherwise provided
by law.
Section 4. Notice of Meetings. Written notice of each meeting of the
stockholders stating the place, date and time of the meeting shall, unless
otherwise required by law, be given not less than ten nor more than sixty days
before the date of the meeting to each stockholder entitled to vote at such
meeting. The notice of any special meeting of stockholders shall state the
purpose or purposes for which the meeting is called. If mailed, such notice
shall be deemed to be delivered to a stockholder when deposited in the United
States mail in a sealed envelope addressed to the stockholder at his or her
address as it appears on the records of the Corporation with postage thereon
paid.
Section 5. Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum for the transaction of business at any meeting
of the stockholders, except as otherwise provided by law, by the Corporation's
Restated
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Certificate of Incorporation, as the same now exists or may hereafter be amended
(the "Certificate of Incorporation"), or by these By-laws. If a quorum is not
present or represented, the holders of the stock present in person or
represented by proxy at the meeting and entitled to vote thereat shall have
power, by the affirmative vote of the holders of a majority of such stock, to
adjourn the meeting to another time and/or place, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting, at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the original
meeting. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 6. Voting. At all meetings of the stockholders, each holder of
record on the record date for the meeting shall be entitled to vote as set forth
in the Certificate of Incorporation (including any Certificates of Designations)
or as otherwise required by law, in person or by proxy, the shares of voting
stock owned of record by such stockholder on the record date. When a quorum is
present or represented at any meeting, the vote of the holders of a majority of
the stock voted on such matter in person or by proxy shall decide any question
brought before such meeting, unless the question is one upon which, by express
provision of law or of the Certificate of Incorporation, a different vote is
required, in which case such express provision shall govern and control the
decision of such question, and except that Directors shall be elected by a
plurality of the votes of the stock present in person or represented by proxy
and entitled to vote on the election of Directors. If the Certificate of
Incorporation provides for more or less than one vote for any share of stock, on
any matter, every reference in the Certificate of Incorporation or these By-laws
to a majority or other proportion of stock shall refer to such majority or other
proportion of the votes of such stock.
ARTICLE III
DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed and controlled by or under the direction of a Board of
Directors, which may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by law or by the Certificate of Incorporation
or by these By-laws directed or required to be exercised or done by the
stockholders.
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Section 2. Number of Directors. The number of Directors of the
Corporation shall be fixed from time to time by the vote of a majority of the
entire Board of Directors, but such number shall in no case be less than three.
Any such determination made by the Board of Directors shall continue in effect
unless and until changed by the Board of Directors, but no such change shall
affect the term of any Director then in office.
Section 3. Classification of Directors. The Directors shall be divided
into three classes, designated Class I, Class II and Class III. Each class
shall consist, as nearly as may be possible, of one-third of the total number of
Directors constituting the entire Board of Directors. At each annual meeting of
stockholders, successors to the class of Directors whose term expires at that
annual meeting shall be elected for a three-year term. If the authorized number
of Directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of Directors in each class as nearly equal
as possible. Any Director of any class elected to fill a vacancy resulting from
an increase in such class or otherwise shall hold office for a term that shall
coincide with the remaining term of the class into which such Director is
elected, but in no case will a decrease in the number of Directors shorten the
term of any incumbent Director.
Section 4. Qualification; Term of Office; Election; Removal from Office.
Directors need not be residents of Delaware or stockholders of the Corporation.
A Director shall hold office until the annual meeting for the year in which his
or her term expires and until his or her successor shall be elected and shall
qualify, subject, however, to earlier death, resignation or removal from office.
Elections of Directors need not be by written ballot. Any Director may be
removed only for cause by the affirmative vote of the holders of not less than
80% of the voting power represented by all the shares of stock of the
Corporation outstanding and entitled to vote for the election of Directors,
given at a duly called annual or special meeting of stockholders.
Section 5. Vacancies. All vacancies and newly created directorships
resulting from any increase in the number of Directors shall be filled only by a
majority of the Directors then in office (even if less than a quorum), and each
Director so chosen shall hold office until his or her successor is elected and
qualified or until his or her earlier resignation or removal. If there are no
Directors in office, then an election of Directors may be held in the manner
provided by law. Any Director elected to fill a vacancy resulting from an
increase in the number of Directors or otherwise shall hold office for a term
that shall coincide with the remaining term of the class into which such
Director is elected.
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Section 6. Place of Meetings. The Board of Directors may hold meetings,
whether regular or special, within or without the State of Delaware.
Section 7. Regular Meetings. The Board of Directors shall hold a regular
meeting, to be known as the annual meeting, immediately following each annual
meeting of the stockholders. Other regular meetings of the Board of Directors
shall be held at such time and place as shall from time to time be determined by
the Board. No notice of regular meetings need be given.
Section 8. Special Meetings. Special meetings of the Board may be called
by the Chairman of the Board, the Vice Chairman of the Board, a majority of the
Directors or the President and Chief Executive Officer. Special meetings shall
be called by the Corporate Secretary on the written request of a majority of the
Board of Directors. Notice of special meetings shall be given at least one day
before any such meeting. Such notice may be given by telephone, by facsimile or
other electronic means, by messenger or by mail and, if given by messenger or
mail shall be deemed delivered when presented to the messenger or deposited in
the United States mail in a sealed envelope addressed to the Director with
postage thereon paid.
Section 9. Quorum. At all meetings of the Board of Directors a majority
of the total number of Directors shall constitute a quorum for the transaction
of business and the act of a majority of the Directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by law, the Certificate of Incorporation
or these By-laws. If a quorum shall not be present at any meeting of the Board
of Directors, the Directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 10. Organization. Except as provided in Article III, Section 5
of these By-laws, the Directors shall designate from among their number a
Chairman of the Board, who shall preside at all meetings of the stockholders and
of the Board of Directors of the Corporation and who, if he or she is an
employee of the Corporation, shall exercise all of the powers and duties
conferred on the Chairman of the Board by the provisions of these By-laws. If a
Chairman of the Board is not elected or, if elected, is not present, the Vice
Chairman of the Board, if any, or if the Vice Chairman of the Board is not
present, the President and Chief Executive Officer or, in the absence of the
President and Chief Executive Officer, a Director chosen by a majority of the
Directors present, shall act as chairman at meetings of the Board of Directors.
If the person selected by the Directors as the Chairman of the Board is not, or
ceases to be, an employee of the
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Corporation, then, notwithstanding any other provision of these By-laws to the
contrary, he or she shall exercise only such powers and duties conferred on the
Chairman of the Board by these By-laws as the Directors shall determine by
resolution duly adopted and any other powers and duties, including those of
chief executive officer of the Corporation, shall be exercised by the President
and Chief Executive Officer of the Corporation.
Immediately upon the Chairman of the Board's death, physical or mental
incapacity, or other inability to act (other than due to absence for a brief and
identifiable period), the Chairman of the committee responsible for recommending
candidates to fill vacancies on the Board of Directors of the Corporation (the
"Nominating Committee Chairman") shall assume the position of Chairman of the
Board and responsibility for performing all functions, authorities and duties
thereof, and shall serve in such capacity until his or her successor is duly
elected and qualified pursuant to Article III, Section 4 and any other
applicable provision of these By-laws or until his or her earlier death,
resignation or removal. The Nominating Committee Chairman shall have sole
discretion to determine, at any time and from time to time, whether the Chairman
of the Board is physically or mentally incapacitated, otherwise unable to act,
or absent for other than a brief and identifiable period and shall, immediately
upon making such a determination or learning of the death of the Chairman of the
Board, notify each member of the Board of Directors and each officer of the
Corporation of the relevant facts and circumstances.
Section 11. Committees. The Board of Directors, by resolution adopted by
a majority of the whole Board, may designate one or more committees, each such
committee to consist of one or more Directors. Except as expressly limited by
the General Corporation Law of the State of Delaware or the Certificate of
Incorporation, any such committee shall have and may exercise such powers as the
Board of Directors may determine and specify in the resolution designating such
committee. The Board of Directors, by resolution adopted by a majority of the
whole Board, also may designate one or more additional Directors as alternate
members of any such committee to replace any absent or disqualified member at
any meeting of the committee, and at any time may change the membership of any
committee or amend or rescind the resolution designating the committee. In the
absence or disqualification of a member or alternate member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not such member or members constitute a quorum, may
unanimously appoint another Director to act at the meeting in the place of any
such absent or disqualified member, provided that the Director so appointed
meets any qualifications stated in the resolution designating the committee.
Each committee shall keep a record of proceedings and report the same to the
Board of Directors to such extent and in such form as the Board of Directors may
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require. Unless otherwise provided in the resolution designating a committee, a
majority of all of the members of any such committee may select its Chairman,
fix its rules or procedures, fix the time and place of its meetings and specify
what notice of meetings, if any, shall be given.
Section 12. Action without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
Section 13. Attendance by Telephone. Members of the Board of Directors,
or of any committee, may participate in a meeting of the Board of Directors, or
of such committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
Section 14. Compensation. The Board of Directors shall have the authority
to fix the compensation of Directors, which may include reimbursement of their
expenses, if any, of attendance of each meeting of the Board of Directors or of
a committee.
ARTICLE IV
OFFICERS
Section 1. Enumeration. The officers of the Corporation shall be chosen
by the Board of Directors and shall be a President and Chief Executive Officer,
a Corporate Secretary, a Treasurer and a Controller. The Board of Directors may
also elect a Chairman of the Board, a Vice Chairman, one or more Assistants to
the Chairman, one or more Vice Presidents, a General Counsel, one or more
Assistant Corporate Secretaries and Assistant Treasurers and such other officers
and agents as it shall deem appropriate. Any number of offices may be held by
the same person.
Section 2. Term of Office. The officers of the Corporation shall be
elected at the annual meeting of the Board of Directors and shall hold office
until their successors are elected and qualified, or until their earlier death,
resignation or removal from office. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors. Any
vacancy occurring in any office of the Corporation required by this Article IV
shall be filled by the Board of Directors, and any vacancy in any other office
may be filled by the Board of Directors.
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Section 3. Chairman of the Board. Subject to the provisions of Article
III, Section 10 of these By-laws, the Chairman of the Board, when elected, shall
preside at all meetings of the stockholders and of the Board of Directors and
shall have such other functions, authority and duties as may be prescribed by
the Board of Directors.
Section 4. Vice Chairman of the Board. The Vice Chairman of the Board
shall, in the case of absence of the Chairman of the Board for any brief and
identifiable period, have and exercise the powers and duties of the Chairman of
the Board. He or she shall have such other duties and powers as may be assigned
to him by the Board of Directors or the Chairman of the Board.
Section 5. President and Chief Executive Officer. The President and Chief
Executive Officer shall be the chief executive officer of the Corporation and,
as such, shall have general supervision, direction and control of the business
and affairs of the Corporation, subject to the control of the Board of
Directors, and such other duties as customarily appertain to the office of the
chief executive of a business corporation or as may be prescribed by the Board
of Directors or the Chairman of the Board.
Section 6. Executive and Senior Vice Presidents. Each Executive Vice
President shall have such duties and powers as may be assigned to him or her by
the Board of Directors, the Chairman of the Board, the Vice Chairman of the
Board or the President and Chief Executive Officer. An Executive Vice
President, designated by the Board of Directors, shall (in the event of absence,
death or other inability to act of the President and Chief Executive Officer)
have and exercise the powers and duties of the President and Chief Executive
Officer.
Each Senior Vice President shall have such duties and powers as may be
assigned to him or her by the Board of Directors, the Chairman of the Board, the
Vice Chairman of the Board or the President and Chief Executive Officer.
Section 7. Vice Presidents. Each Vice President shall perform such duties
and have such other powers as may from time to time be prescribed by the Board
of Directors, the Chairman of the Board, the Vice Chairman of the Board or the
President and Chief Executive Officer.
Section 8. Corporate Secretary. The Corporate Secretary shall keep a
record of all proceedings of the stockholders of the Corporation and of the
Board of Directors, and shall perform like duties for any committee when
required. The Corporate Secretary shall give, or cause to be given, notice, if
any, of all meetings of the stockholders and shall perform such other duties as
may be prescribed by the Board of Directors, the Chairman of the Board,
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the Vice Chairman of the Board or the President and Chief Executive Officer.
The Corporate Secretary shall have custody of the corporate seal of the
Corporation and the Corporate Secretary, or in the absence of the Corporate
Secretary any Assistant Corporate Secretary, shall have authority to affix the
same to any instrument requiring it, and when so affixed it may be attested by
the signature of the Corporate Secretary or an Assistant Corporate Secretary.
The Board of Directors may give general authority to any other officer to affix
the seal of the Corporation and to attest such affixing of the seal.
Section 9. Assistant Corporate Secretary. The Assistant Corporate
Secretary, or if there be more than one, the Assistant Secretaries in the order
determined by the Board of Directors (or if there be no such determination, then
in the order of their election), shall, in the absence of the Corporate
Secretary or in the event of the Corporate Secretary's inability or failure to
act, perform the duties and exercise the powers of the Corporate Secretary and
shall perform such other duties as may from time to time be prescribed by the
Board of Directors, the Chairman of the Board, the Vice Chairman of the Board,
the President and Chief Executive Officer or the Corporate Secretary.
Section 10. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, keeping proper records of such disbursements,
and shall render to the Chairman of the Board, Vice Chairman of the Board, the
Chairman of any committee, the President and Chief Executive Officer, the
officer designated by the Board of Directors as Chief Financial Officer, if any,
and the Board of Directors and any committee at their regular meetings or when
the Board of Directors so requires, an account of all transactions as Treasurer
and of the financial condition of the Corporation. The Treasurer shall perform
such other duties as may from time to time be prescribed by the Board of
Directors, the Chairman of the Board, the Vice Chairman of the Board, the
President and Chief Executive Officer or the Chief Financial Officer.
Section 11. Assistant Treasurer. The Assistant Treasurer, or if there
shall be more than one, the Assistant Treasurers in the order determined by the
Board of Directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the Treasurer or in the event of the
Treasurer's inability, failure or refusal to act, perform the duties and
exercise the powers of the Treasurer and shall perform such other duties and
have such other powers as may from time to time be
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prescribed by the Board of Directors, the Chairman of the Board, the Vice
Chairman of the Board, the President and Chief Executive Officer or the
Treasurer.
Section 12. Assistant to the Chairman. The Assistant to the Chairman of
the Board shall have and exercise such powers and duties as may be assigned to
him or her by the Chairman of the Board.
Section 13. General Counsel. The General Counsel, if there be one, shall
be responsible for the legal affairs of the Corporation and shall have such
other duties as from time to time may be assigned to him or her by the Chairman
of the Board, the Vice Chairman of the Board, the President and Chief Executive
Officer or the Board of Directors.
Section 14. Controller. The Controller shall be the chief accounting
officer of the Corporation. He or she shall, when proper, approve all bills for
purchases, payrolls, and similar instruments providing for disbursement of money
by the Corporation, for payment by the Treasurer. He or she shall be in charge
of and maintain books of account and accounting records of the Corporation. He
or she shall perform such other acts as are usually performed by a Controller of
a corporation. He or she shall render to the Chairman of the Board, the Vice
Chairman of the Board, the Chairman of any committee, the President and Chief
Executive Officer, the Chief Financial Officer, the Board of Directors and any
committee, such reports as any thereof may require.
Section 15. Other Officers. Any officer who is elected or appointed from
time to time by the Board of Directors and whose duties are not specified in
these By-laws shall perform such duties and have such powers as may be
prescribed from time to time by the Board of Directors, the Chairman of the
Board, the Vice Chairman of the Board or the President and Chief Executive
Officer.
Section 16. Surety Bonds. The Board of Directors may by resolution,
require any officers of the Corporation to give bonds for the faithful discharge
of their duties in such sums and with such sureties as the Board of Directors
shall determine, the expense of which shall be paid by the Corporation.
ARTICLE V
CERTIFICATES OF STOCK
Section 1. Form. The shares of the Corporation shall be represented by
certificates; provided, however, that the Board of Directors may provide by
resolution or resolutions that some or all of any or all classes or series of
the Corporation's stock shall be
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uncertificated shares. Certificates of stock in the Corporation, if any, shall
be signed by or in the name of the Corporation by the Chairman of the Board, the
President and Chief Executive Officer or a Vice President and by the Treasurer,
an Assistant Treasurer, the Corporate Secretary or an Assistant Corporate
Secretary of the Corporation. The signatures of the Chairman of the Board, the
President and Chief Executive Officer or a Vice President and the Treasurer, an
Assistant Treasurer, the Corporate Secretary or an Assistant Corporate Secretary
may be facsimiles. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, the certificate may be issued by the Corporation with the
same effect as if such officer, transfer agent or registrar were such officer,
transfer agent or registrar at the date of its issue.
Section 2. Transfer. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction on its books.
Section 3. Replacement. In case of the loss, destruction or theft of a
certificate for any stock of the Corporation, a new certificate of stock or
uncertificated shares in place of any certificate therefor issued by the
Corporation may be issued upon satisfactory proof of such loss, destruction or
theft and upon such terms as the Board of Directors may prescribe. The Board of
Directors may in its discretion require the owner of the lost, destroyed or
stolen certificate, or his or her legal representative, to give the Corporation
a bond, in such sum and in such form and with such surety or sureties as it may
direct, to indemnify the Corporation against any claim that may be made against
it with respect to a certificate alleged to have been lost, destroyed or stolen.
ARTICLE VI
INDEMNIFICATION
Section 1. Each person who was or is made a party or is threatened to be
made a party to or is involved in or called as a witness in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, and any appeal therefrom (hereinafter,
collectively a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is, was or had agreed to become a
Director, officer, employee or agent of the
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Corporation or is or was serving at the request of the Corporation as a
Director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, shall be indemnified and held harmless by the
Corporation to the fullest extent permitted under the General Corporation Law of
the State of Delaware (the "DGCL"), as the same now exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
the DGCL permitted the Corporation to provide prior to such amendment), against
all expenses (including attorneys' fees), liabilities and losses, judgments,
fines, excise taxes or penalties pursuant to the Employee Retirement Income
Security Act of 1974, as amended, and amounts paid or to be paid in settlement,
reasonably incurred or suffered by such person in connection therewith; provided
that, except as explicitly provided herein, prior to a Change in Control, as
defined herein, a person seeking indemnity in connection with a proceeding (or
part thereof) initiated by such person against the Corporation or any Director,
officer, employee or agent of the Corporation shall not be entitled thereto
unless the Corporation has joined in or consented to such proceeding (or part
thereof). For purposes of this Article, a "Change in Control of the
Corporation" shall be deemed to have occurred if, after June 10, 1996, (i) any
"Person" (as is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended) becomes (except in a transaction approved in advance by the
Board of Directors of the Corporation) the beneficial owner (as defined in Rule
13d-3 under such Act), directly or indirectly, of securities of the Corporation
representing 20% or more of the combined voting power of the Corporation's then
outstanding securities or (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Corporation cease for any reason to constitute at least a
majority thereof unless the election of each Director who was not a Director at
the beginning of the period was approved by a vote of at least two-thirds of the
Directors then still in office who were Directors at the beginning of the
period.
Any indemnification under this Section 1 (unless ordered by a court) shall
be paid by the Corporation unless within 60 days of such request for
indemnification a determination is made (i) by the Board of Directors by a
majority vote of a quorum consisting of Directors who were not parties to such
proceeding, (ii) if such quorum is not obtainable, or even if obtainable a
quorum of disinterested Directors so directs, by independent legal counsel (who
may be the regular counsel of the Corporation) in a written opinion or (iii) by
the stockholders, that indemnification of such person is not proper under the
circumstances because such person has not met the necessary standard of conduct
under Delaware law; provided, however, that following a Change in Control of the
Corporation, with respect to all matters thereafter arising out of
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acts, omissions or events prior to the Change in Control of the Corporation
concerning the rights of any person seeking indemnification under this Section
1, such determination shall be made by special independent counsel selected by
such person and approved by the Corporation (which approval shall not be
unreasonably withheld), which counsel has not otherwise performedservices (other
than in connection with similar matters) within the five years preceding its
engagement to render such opinion for such person or for the Corporation or any
affiliates (as such term is defined in Rule 405 under the Securities Act of
1933, as amended) of the Corporation (whether or not they were affiliates when
services were so performed) ("Independent Counsel"). Unless such person has
theretofore selected Independent Counsel pursuant to this Section 1 and such
Independent Counsel has been approved by the Corporation, legal counsel approved
by a resolution or resolutions of the Board of Directors prior to a Change in
Control of the Corporation shall be deemed to have been approved by the
Corporation as required. Such Independent Counsel shall determine as promptly
as practicable whether and to what extent such person would be permitted to be
indemnified under applicable law and shall render its written opinion to the
Corporation and such person to such effect. The Corporation agrees to pay the
reasonable fees of the Independent Counsel referred to above and to fully
indemnify such Independent Counsel against any and all expenses, claims,
liabilities and damages arising out of or relating to this Article or its
engagement pursuant hereto.
Section 2. Expenses. Expenses, including attorneys' fees, incurred by a
person referred to in Section 1 of this Article in defending or otherwise being
involved in a proceeding shall be paid by the Corporation in advance of the
final disposition of such proceeding, including any appeal therefrom, upon
receipt of an undertaking (the "Undertaking") by or on behalf of such person to
repay such amount if it shall ultimately be determined that he or she is not
entitled to be indemnified by the Corporation.
Section 3. Right of Claimant to Bring Suit. If a claim under Section 1
hereof is not paid in full by the Corporation within 60 days after a written
claim has been received by the Corporation or if expenses pursuant to Section 2
hereof have not been advanced within 10 days after a written request for such
advancement accompanied by the Undertaking has been received by the Corporation,
the claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim or the advancement of expenses. (If the
claimant is successful, in whole or in part, in such suit or any other suit to
enforce a right for expenses or indemnification against the Corporation or any
other party under any other agreement, such claimant shall also be entitled to
be paid the reasonable expense of prosecuting such claim.) It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in
-14-
<PAGE>
defending any proceeding in advance of its final disposition where the required
Undertaking has been tendered to the Corporation) that the claimant has not met
the standards of conduct which make it permissible under the DGCL for the
Corporation to indemnify the claimant for the amount claimed. After a Change in
Control, the burden of proving such defense shall be on the Corporation, and any
determination by the Corporation (including its Board of Directors, independent
legal counsel or its stockholders) that the claimant had not met the applicable
standard of conduct required under the DGCL shall not be a defense to the action
nor create a presumption that claimant had not met such applicable standard of
conduct.
Section 4. Non-Exclusivity of Rights. The rights conferred on any person
by this Article shall not be exclusive of any other right which such person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, By-laws, agreement, vote of stockholders or disinterested
Directors or otherwise. The Board of Directors shall have the authority, by
resolution, to provide for such other indemnification of Directors, officers,
employees or agents as it shall deem appropriate.
Section 5. Insurance. The Corporation may purchase and maintain insurance
to protect itself and any Director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expenses, liabilities or losses, whether or not the
Corporation would have the power to indemnify such person against such expenses,
liabilities or losses under the DGCL.
Section 6. Enforceability. The provisions of this Article shall be
applicable to all proceedings commenced after its adoption, whether such arise
out of events, acts, omissions or circumstances which occurred or existed prior
or subsequent to such adoption, and shall continue as to a person who has ceased
to be a Director, officer or employee and shall inure to the benefit of the
heirs, executors and administrators of such person. This Article shall be
deemed to grant each person who, at any time that this Article is in effect,
serves or agrees to serve in any capacity which entitles him or her to
indemnification hereunder rights against the Corporation to enforce the
provisions of this Article, and any repeal or other modification of this Article
or any repeal or modification of the DGCL or any other applicable law shall not
limit any rights of indemnification then existing or arising out of events,
acts, omissions, or circumstances occurring or existing prior to such repeal or
modification, including, without limitation, the right to indemnification for
proceedings commenced after such repeal or modification to enforce this Article
with regard to acts, omissions, events or circumstances occurring or existing
prior to such repeal or modification.
-15-
<PAGE>
Section 7. Severability. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Director, officer and employee of
the Corporation as to costs, charges and expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement with respect to any proceeding,
whether civil, criminal, administrative or investigative, including an action by
or in the right of the Corporation, to the full extent permitted by any
applicable portion of this Article that shall not have been invalidated and to
the full extent permitted by applicable law.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Fiscal Year. The fiscal year of the Corporation shall be the
calendar year.
Section 2. Corporate Seal. The corporate seal shall be in such form as
may be approved from time to time by the Board of Directors. The seal may be
used by causing it or a facsimile thereof to be impressed or affixed or in any
other manner reproduced.
Section 3. Waiver of Notice. Whenever any notice is required to be given
under law or the provisions of the Certificate of Incorporation or these By-
laws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent to notice.
ARTICLE VIII
AMENDMENTS
Both the Board of Directors and the stockholders shall have the power to
alter, amend or repeal these By-laws. Any repeal or change of these By-laws by
the stockholders shall require the affirmative vote of the holders of not less
than 80% of the votes entitled to be cast on the matter.
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<PAGE>
===========================================
RYERSON TULL, INC.
TO
THE BANK OF NEW YORK
Trustee
_________
INDENTURE
Dated as of ____________, 1996
Debt Securities
===========================================
<PAGE>
Ryerson Tull, Inc.
Certain Sections of this Indenture relating to
Sections 3.10 through 3.18, inclusive, of the
Trust Indenture Act of 1939, as amended:
<TABLE>
<CAPTION>
Provision of Trust
Indenture Act of 1939,
as amended Indenture Section
<S> <C>
(S) 310(a)(1) ................................... 6.9
(a)(2) ................................... 6.9
(a)(3) ................................... Not Applicable
(a)(4) ................................... Not Applicable
(b) ................................... 6.8, 6.10
(c) ................................... Not Applicable
(S) 311(a) ................................... 6.13
(b) ................................... 6.13
(c) ................................... Not Applicable
(S) 312(a) ................................... 7.1, 7.2(a)
(b) ................................... 7.2(b)
(c) ................................... 7.2(c)
(S) 313(a) ................................... 7.3(a)
(b) ................................... 7.3(a)
(c) ................................... 7.3(a)
(d) ................................... 7.3(b)
(S) 314(a) ................................... 7.4
(a)(4) ................................... 1.1, 10.4
(b) ................................... Not Applicable
(c)(1) ................................... 1.2
(c)(2) ................................... 1.2
(c)(3) ................................... Not Applicable
(d) ................................... Not Applicable
(e) ................................... 1.2
(S) 315(a) ................................... 6.1
(b) ................................... 6.2
(c) ................................... 6.1
(d) ................................... 6.1
(e) ................................... 5.14
(S) 316(a) ................................... 1.1
(a)(1)(A) ................................... 5.2, 5.12
(a)(1)(B) ................................... 5.13
(a)(2) ................................... Not Applicable
(b) ................................... 5.8
(c) ................................... 1.4(c)
(S) 317(a)(1) ................................... 5.3
(a)(2) ................................... 5.4
(b) ................................... 10.3
(S) 318(a) ................................... 1.7
- ---------------------------
</TABLE>
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
RECITALS OF THE COMPANY.................................................... 1
ARTICLE I
Definitions and Other Provisions
of General Application
Section 1.1 Definitions.............................................. 1
Act........................................................... 2
Affiliate..................................................... 2
Asset Disposition............................................. 2
Attributable Debt............................................. 2
Authenticating Agent.......................................... 3
Board of Directors............................................ 3
Board Resolution.............................................. 3
Book-Entry Security........................................... 3
Business Day.................................................. 3
Capital Lease Obligations..................................... 3
Capital Stock................................................. 3
Commission.................................................... 3
Company....................................................... 4
Company Request" or "Company Order............................ 4
Consolidated Net Income....................................... 4
Consolidated Net Tangible Assets.............................. 4
Consolidated Net Worth........................................ 4
Corporate Trust Office........................................ 4
corporation................................................... 4
Debt.......................................................... 4
Defaulted Interest............................................ 5
Depository.................................................... 5
Disqualified Stock............................................ 5
Event of Default.............................................. 5
- ------------------------
NOTE: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
ii
<PAGE>
Funded Debt................................................. 5
Guarantee................................................... 5
Holder...................................................... 6
Incur....................................................... 6
Indenture................................................... 6
interest.................................................... 6
Interest Payment Date....................................... 7
Investment Grade............................................ 7
Lien........................................................ 7
Maturity.................................................... 7
Moody's..................................................... 7
Officers' Certificate....................................... 7
Opinion of Counsel.......................................... 7
Original Issue Discount Security............................ 7
Outstanding................................................. 7
Paying Agent................................................ 8
Permitted Liens............................................. 8
Person...................................................... 9
Place of Payment............................................ 9
Predecessor Security........................................ 9
Principal Property.......................................... 9
Redemption Date............................................. 9
Redemption Price............................................ 9
Regular Record Date......................................... 9
Restricted Subsidiary....................................... 10
S&P......................................................... 10
Sale and Leaseback Transaction.............................. 10
Securities.................................................. 10
Security Register" and "Security Registrar.................. 10
Special Record Date......................................... 10
Stated Maturity............................................. 10
Subsidiary.................................................. 10
Trust Indenture Act......................................... 10
Trustee..................................................... 11
U.S. Government Obligation.................................. 11
Vice President.............................................. 11
Voting Stock................................................ 11
- ------------------------
NOTE: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
iii
<PAGE>
Wholly-Owned Restricted Subsidiary............................ 11
Section 1.2 Compliance Certificates and Opinions.................... 11
Section 1.3 Form of Documents Delivered to Trustee.................. 12
Section 1.4 Acts of Holders; Record Dates........................... 13
Section 1.5 Notices, Etc. to Trustee and Company.................... 14
Section 1.6 Notice to Holders; Waiver............................... 14
Section 1.7 Conflict with Trust Indenture Act....................... 15
Section 1.8 Effect of Headings and Table of Contents................ 15
Section 1.9 Successors and Assigns.................................. 15
Section 1.10 Separability Clause..................................... 15
Section 1.11 Benefits of Indenture................................... 15
Section 1.12 Governing Law........................................... 15
Section 1.13 Legal Holidays.......................................... 15
ARTICLE II
Security Forms
Section 2.1 Forms Generally......................................... 16
Section 2.2 Form of Trustee's Certificate of Authentication......... 16
ARTICLE III
The Securities
Section 3.1 Amount Unlimited; Issuable in Series.................... 17
Section 3.2 Denominations........................................... 19
Section 3.3 Execution, Authentication, Delivery and Dating.......... 19
Section 3.4 Temporary Securities.................................... 21
Section 3.5 Registration, Registration of Transfer and Exchange..... 22
Section 3.6 Mutilated, Destroyed, Lost and Stolen Securities........ 23
Section 3.7 Payment of Interest; Interest Rights Preserved.......... 24
Section 3.8 Persons Deemed Owners................................... 25
Section 3.9 Cancellation............................................ 25
Section 3.10 Computation of Interest................................. 26
Section 3.11 CUSIP Numbers........................................... 26
- ------------------------
NOTE: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
iv
<PAGE>
ARTICLE IV
Satisfaction and Discharge
Section 4.1 Satisfaction and Discharge of Indenture................ 26
Section 4.2 Application of Trust Money............................. 27
ARTICLE V
Remedies
Section 5.1 Events of Default...................................... 28
Section 5.2 Acceleration of Maturity; Rescission and Annulment..... 30
Section 5.3 Collection of Indebtedness and Suits for Enforcement
by Trustee........................................... 31
Section 5.4 Trustee May File Proofs of Claim....................... 31
Section 5.5 Trustee May Enforce Claims Without Possession of
Securities........................................... 32
Section 5.6 Application of Money Collected......................... 32
Section 5.7 Limitation on Suits.................................... 33
Section 5.8 Unconditional Right of Holders to Receive Principal,
Premium and Interest................................. 33
Section 5.9 Restoration of Rights and Remedies..................... 33
Section 5.10 Rights and Remedies Cumulative......................... 34
Section 5.11 Delay or Omission Not Waiver........................... 34
Section 5.12 Control by Holders..................................... 34
Section 5.13 Waiver of Past Defaults................................ 34
Section 5.14 Undertaking for Costs.................................. 35
Section 5.15 Waiver of Stay or Extension Laws....................... 35
ARTICLE VI
The Trustee
Section 6.1 Certain Duties and Responsibilities.................... 36
Section 6.2 Notice of Defaults..................................... 36
Section 6.3 Certain Rights of Trustee.............................. 36
Section 6.4 Not Responsible for Recitals or Issuance of Securities. 37
- ------------------------
NOTE: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
v
<PAGE>
Section 6.5 May Hold Securities.................................... 38
Section 6.6 Money Held in Trust.................................... 38
Section 6.7 Compensation and Reimbursement......................... 38
Section 6.8 Disqualification; Conflicting Interests................ 39
Section 6.9 Corporate Trustee Required; Eligibility................ 39
Section 6.10 Resignation and Removal; Appointment of Successor...... 39
Section 6.11 Acceptance of Appointment by Successor................. 41
Section 6.12 Merger, Conversion, Consolidation or Succession
to Business.......................................... 42
Section 6.13 Preferential Collection of Claims Against Company...... 42
Section 6.14 Appointment of Authenticating Agent.................... 43
Section 6.15 Trustee's Application for Instructions from the
Company.............................................. 45
ARTICLE VII
Holders' Lists and Reports
by Trustee and Company
Section 7.1 Company to Furnish Trustee Names and Addresses
of Holders........................................... 45
Section 7.2 Preservation of Information; Communications to
Holders.............................................. 45
Section 7.3 Reports by Trustee..................................... 46
Section 7.4 Reports by Company..................................... 46
ARTICLE VIII
Consolidation, Merger, Conveyance,
Transfer or Lease
Section 8.1 Company May Consolidate, Etc. Only on Certain Terms.... 47
Section 8.2 Successor Substituted.................................. 48
ARTICLE IX
Supplemental Indentures
Section 9.1 Supplemental Indentures Without Consent of Holders..... 48
Section 9.2 Supplemental Indentures with Consent of Holders........ 49
Section 9.3 Execution of Supplemental Indentures................... 51
- ------------------------
NOTE: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
vi
<PAGE>
Section 9.4 Effect of Supplemental Indentures...................... 51
Section 9.5 Conformity with Trust Indenture Act.................... 51
Section 9.6 Reference in Securities to Supplemental Indentures..... 51
ARTICLE X
Covenants
Section 10.1 Payment of Principal, Premium and Interest............. 52
Section 10.2 Maintenance of Office or Agency........................ 52
Section 10.3 Money for Securities Payments to Be Held in Trust...... 52
Section 10.4 Statement by Officers as to Default.................... 53
Section 10.5 Existence.............................................. 54
Section 10.6 Restrictions on Secured Debt........................... 54
Section 10.7 Limitation on Sales and Leasebacks..................... 55
Section 10.8 Limitations on Restricted Payments..................... 56
Section 10.9 Limitations on Transactions with Affiliates............ 57
Section 10.10 Waiver of Certain Covenants............................ 58
Section 10.11 Provision of Financial Information..................... 58
Section 10.12 Calculation of Original Issue Discount................. 58
Section 10.13 Appointments to Fill Vacancies in Trustee's Office..... 58
ARTICLE XI
Redemption of Securities
Section 11.1 Applicability of Article............................... 59
Section 11.2 Election to Redeem; Notice to Trustee.................. 59
Section 11.3 Selection by Trustee of Securities to Be Redeemed...... 59
Section 11.4 Notice of Redemption................................... 60
Section 11.5 Deposit of Redemption Price............................ 61
Section 11.6 Securities Payable on Redemption Date.................. 61
Section 11.7 Securities Redeemed in Part............................ 61
- ------------------------
NOTE: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
vii
<PAGE>
ARTICLE XII
Sinking Funds
Section 12.1 Applicability of Article............................... 62
Section 12.2 Satisfaction of Sinking Fund Payments with Securities.. 62
Section 12.3 Redemption of Securities for Sinking Fund.............. 62
ARTICLE XIII
Defeasance and Covenant Defeasance
Section 13.1 Applicability of Article; Company's Option
to Effect Defeasance or Covenant Defeasance.......... 63
Section 13.2 Defeasance and Discharge............................... 63
Section 13.3 Covenant Defeasance.................................... 64
Section 13.4 Conditions to Defeasance or Covenant Defeasance........ 64
Section 13.5 Deposited Money and U.S. Government Obligations
to be Held in Trust; Other Miscellaneous Provision... 66
Section 13.6 Reinstatement.......................................... 66
- ------------------------
NOTE: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
viii
<PAGE>
INDENTURE, dated as of _____________, 1996 between Ryerson Tull, Inc.,
a corporation duly organized and existing under the laws of the State of
Delaware (herein called the "Company"), having its principal office at 2621 West
15th Place, Chicago, Illinois 60608, and The Bank of New York, a New York
banking corporation, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness (herein called the
"Securities"), to be issued in one or more series as in this Indenture provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities or of series thereof, as
follows:
ARTICLE I
Definitions and Other Provisions
of General Application
Section 1.1 Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) Unless otherwise specified herein, all accounting terms used in
this Indenture are to be interpreted, all accounting determinations under
this Indenture are to be made, and all financial statements required
hereunder are to be prepared (except for
1
<PAGE>
changes concurred in by the Company's independent public accountants) in
accordance with generally accepted accounting principles applied on a basis
consistent with the audited consolidated financial statements of the
Company as of December 31, 1995; provided that, if the Company or any
Restricted Subsidiary has adopted since such date or adopts at any time
after the date of this Indenture a change in accounting principles from
those used in preparing such consolidated financial statements that affects
in any material respect the computation of or compliance with any of the
covenants contained in this Indenture, then, unless this Indenture shall
have been amended to modify the covenants in this Indenture to take account
of such change in accounting principles, the Company shall continue to
compute all financial restrictions and ratios contained in such covenants
based on accounting principles in effect prior to the adoption of such
change; and
(4) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Act," when used with respect to any Holder, has the meaning specified
in Section 1.4.
"Affiliate" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with any specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Disposition" by the Company or any of its Restricted
Subsidiaries means any sale, lease, conveyance, transfer or other disposition
(including, without limitation, by way of a merger, consolidation, spin-off,
sale of Capital Stock or otherwise) of (i) the shares of Capital Stock of a
Restricted Subsidiary of the Company (other than directors' qualifying shares),
(ii) substantially all of the assets representing a division or line of the
business of the Company or any of its Restricted Subsidiaries or (iii) other
assets of the Company or any of its Restricted Subsidiaries outside of the
ordinary course of business (each referred to for the purposes of this
definition as a "disposition"), in each case by the Company or any of its
Restricted Subsidiaries (other than a disposition by such a Restricted
Subsidiary to the Company or by the Company to a Restricted Subsidiary or by a
Restricted Subsidiary to another Restricted Subsidiary).
"Attributable Debt" means, with respect to a lease in a Sale and
Leaseback Transaction, the total net amount of rent required to be paid during
the remaining primary term of such lease, discounted at a rate per annum equal
to the interest rate implicit in such lease, calculated in accordance with
generally accepted accounting practices. The net amount of rent
2
<PAGE>
required to be paid under any such lease for any such period shall be the
aggregate amount of rent payable by the lessee with respect to such period after
excluding amounts required to be paid on account of maintenance, repairs,
insurance, taxes, assessments, utility, operating and labor costs and similar
charges.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 6.14 to act on behalf of the Trustee to authenticate
Securities of one or more series.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Book-Entry Security" means a Security issued to the Depository or its
nominee, and registered in the name of such Depository or nominee.
"Business Day," when used with respect to any Place of Payment, means
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in that Place of Payment are authorized or obligated by law
or executive order to close.
"Capital Lease Obligations" of any Person means the obligations to pay
rent or other amounts under a lease of (or other Debt arrangements conveying the
right to use) real or personal property of such Person that are required to be
classified and accounted for as a capital lease or a liability on the face of a
balance sheet of such Person in accordance with generally accepted accounting
principles, and the amount of such obligations shall be the capitalized amount
thereof in accordance with generally accepted accounting principles and the
stated maturity thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock or
other equity participation, including partnership interests, whether general or
limited, of such Person.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, as
amended, or, if at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned to it under
the Trust Indenture Act, then the body performing such duties at such time.
3
<PAGE>
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its President or
a Vice President, and by its Treasurer, an Assistant Treasurer, its Controller,
its Secretary or an Assistant Secretary, and delivered to the Trustee.
"Consolidated Net Income" of the Company means for any period the
consolidated net income (or loss) of the Company and its Restricted Subsidiaries
for such period determined on a consolidated basis in accordance with generally
accepted accounting principles, provided that there shall be excluded therefrom
(i) the net income (or loss) of any Person acquired by the Company or a
Restricted Subsidiary in a pooling-of-interests transaction for any period prior
to the date of such transaction, (ii) the net income (but not net loss) of any
Restricted Subsidiary which is subject to restrictions which prevent the payment
of dividends or the making of distributions to the Company to the extent of such
restrictions, (iii) the net income (or loss) of any Person that is not a
Restricted Subsidiary except to the extent of the amount of dividends or other
distributions actually paid to the Company by such Person during such period,
(iv) gains or losses on Asset Dispositions by the Company or its Restricted
Subsidiaries and (v) all extraordinary gains and extraordinary losses.
"Consolidated Net Tangible Assets" means the aggregate amount of
assets of the Company and its Restricted Subsidiaries after deducting (i) all
current liabilities other than commercial paper, short-term bank debt and
current maturities of long-term debt and (ii) all goodwill and other
intangibles.
"Consolidated Net Worth" means the consolidated stockholders' equity
of the Company and its Restricted Subsidiaries, less amounts attributable to
Disqualified Stock.
"Corporate Trust Office" means the principal office of the Trustee in
New York, at which at any particular time its corporate trust business shall be
administered, which currently is located at 101 Barclay Street, 21 West, New
York, New York 10286.
"corporation" means a corporation, association, company, joint-stock
company or business trust.
"Debt" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent, (i) every obligation of such Person for money borrowed, (ii)
every obligation of such Person evidenced by bonds, debentures, notes or other
similar instruments, including obligations Incurred in connection with the
acquisition of property, assets or businesses, (iii) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar
4
<PAGE>
facilities issued for the account of such Person, (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business that are not overdue by more than 90 days or that
are being contested in good faith), (v) every Capital Lease Obligation of such
Person, (vi) the maximum fixed redemption or repurchase price of Disqualified
Stock of such Person, (vii) every obligation of such Person under interest rate
swap or similar agreements, or foreign currency or commodity hedge, exchange or
similar agreements of such Person, (viii) the Attributable Debt with respect to
any Sale and Leaseback Transaction to which such Person is a party and (ix)
every obligation of the type referred to in clauses (i) through (viii) of
another Person and all dividends of another Person the payment of which, in
either case, such Person has Guaranteed or is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Depository" means, with respect to the Securities of any series
issuable or issued in whole or in part in the form of one or more Book-Entry
Securities, the Person designated as Depository for such series by the Company
pursuant to Section 3.1, initially The Depository Trust Company, its nominees
and their respective successors, which Person shall be a clearing agency
registered under the Securities Exchange Act of 1934, as amended.
"Disqualified Stock" means, with respect to Securities of any series,
any Capital Stock that, by its terms (or by the terms of any security into which
it is convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable in cash, pursuant to a sinking fund
obligation or otherwise, or is redeemable in cash at the option of the holder
thereof, in whole or in part, on or prior to the date on which the Securities of
such series mature; provided, however, that Disqualified Stock shall not include
any Capital Stock held by or issued in connection with an employee benefit plan
or program in which employees or directors of the Company or any Subsidiary of
the Company participate.
"Event of Default" has the meaning specified in Section 5.1.
"Funded Debt" means (i) all Debt having a maturity of more than 12
months from the date as of which the determination is made or having a maturity
of 12 months or less but by its terms being renewable or extendible beyond 12
months from such date at the option of any obligor thereon and (ii) Capital
Lease Obligations payable more than 12 months from such date (such Capital Lease
Obligations to be included as Funded Debt at the amount so capitalized at the
date of such computation and to be included for the purposes of the definition
of Consolidated Net Tangible Assets both as an asset and as Funded Debt at the
amount so capitalized).
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person guaranteeing any Debt of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, and including,
without limitation, any obligation of such Person, directly or indirectly (i) to
purchase or pay (or advance or supply funds for the purchase or
5
<PAGE>
payment of) such Debt or to purchase (or to advance or supply funds for the
purchase of) any interest in or security for the payment of such Debt, (ii) to
purchase property, securities or services for the purpose of assuring the holder
of such Debt of the payment of such Debt or (iii) to maintain working capital,
equity capital or other financial statement condition or liquidity of the
primary obligor so as to enable the primary obligor to pay such Debt (and
"Guaranteed" and "Guaranteeing" shall have meanings correlative to the
foregoing); provided, however, that a Guarantee by any Person shall not include
endorsements by such Person for collection or deposit, in either case, in the
ordinary course of business; and provided, further, that the term "Guarantee"
shall not include contracts made in the ordinary course of business of the
Company and its Restricted Subsidiaries for the purchase of utilities, services
and raw materials that require payment to be made to the provider of utilities,
services or raw materials regardless of whether delivery is ever made of such
utilities, services or raw materials so long as the quantities of utilities,
services or raw materials purchased under each such contract do not exceed the
Company's or its contracting Restricted Subsidiary's reasonably anticipated
consumption thereof on the date of the contract. The amount of a Guarantee shall
be equal to the amount of the obligation covered thereby.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Incur" means, with respect to any Debt or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Debt or other obligation
or the recording, as required pursuant to generally accepted accounting
principles or otherwise, of any such Debt or other obligation on the balance
sheet of any such Person (and "Incurrence," "Incurred," "Incurrable" and
"Incurring" shall have meanings correlative to the foregoing); provided,
however, that a change in generally accepted accounting principles that results
in an obligation of such Person that exists at such time becoming Debt shall not
be deemed an Incurrence of such Debt, and "Incur" means with respect to any
Lien, to create, incur or assume such Lien on any asset or property (and
"Incurrence," "Incurred," "Incurrable" and "Incurring" shall have meanings
correlative to the foregoing).
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument, and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively. The term "Indenture" shall also include the terms of particular
series of Securities established as contemplated by Section 3.1.
"interest," when used with respect to an Original Issue Discount
Security which by its terms bears interest only after Maturity, means interest
payable after Maturity.
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"Interest Payment Date," when used with respect to any Security, means
the Stated Maturity of an installment of interest on such Security.
"Investment Grade" means Baa3 or better in the case of a rating from
Moody's and BBB- or better in the case of a rating from S&P.
"Lien" means, with respect to any property or assets, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority or
other security agreement, or any equivalent of any of the foregoing under the
laws of any applicable jurisdiction, on or with respect to such property or
assets (including, without limitation, any conditional sale or other title
retention agreement having substantially the same economic effect as any of the
foregoing); provided, however, that Lien shall not include a Permitted Lien.
"Maturity," when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Moody's" mean Moody's Investors Service, Inc. or any successor
thereto.
"Officers' Certificate" means a certificate signed on behalf of the
Company by its Chairman of the Board, its President or a Vice President, and by
its Treasurer, an Assistant Treasurer, its Controller, its Secretary or an
Assistant Secretary, and delivered to the Trustee. One of the officers signing
an Officers' Certificate given pursuant to Section 10.4 shall be the principal
executive, financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be an
employee of the Company, and who shall be reasonably acceptable to the Trustee.
"Original Issue Discount Security" means any Security which provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the Maturity thereof pursuant to Section 5.2.
"Outstanding," when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
(other than the
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Company) in trust or set aside and segregated in trust by the Company (if
the Company shall act as its own Paying Agent) for the Holders of such
Securities; provided, however, that, if such Securities are to be redeemed,
notice of such redemption has been duly given pursuant to this Indenture or
provision therefor satisfactory to the Trustee has been made;
(iii) Securities as to which defeasance has been effected pursuant to
Section 13.2; and
(iv) Securities which have been paid pursuant to Section 3.6 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given, made or taken any
request, demand, authorization, direction, notice, consent, waiver or other
action hereunder as of any date, (i) the principal amount of an Original Issue
Discount Security that shall be deemed to be Outstanding shall be the amount of
the principal thereof that would be due and payable as of the date of such
determination upon acceleration of the Maturity thereof pursuant to Section 5.2,
(ii) if, as of such date, the principal amount payable at the Stated Maturity of
a Security is not determinable, the principal amount of such Security which
shall be deemed to be Outstanding shall be the amount as specified or determined
as contemplated by Section 3.1, (iii) the principal amount of a Security
denominated in one or more foreign currencies or currency units shall be the
U.S. dollar equivalent, determined in the manner provided as contemplated by
Section 3.1 on the date of original issuance of such Security, of the principal
amount (or, in the case of a Security described in clause (i) or (ii) above, the
U.S. dollar equivalent on the date of original issuance of such Security of the
amount determined as provided in (i) or (ii) above) of such Security and (iv)
Securities owned by the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor shall be disregarded and
deemed not to be Outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent, waiver or other action, only Securities which the
Trustee actually knows to be so owned shall be so disregarded. Securities so
owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Securities and that the pledgee is not the
Company or any other obligor upon the Securities or any Affiliate of the Company
or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or any premium or interest on any Securities on behalf of the
Company.
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"Permitted Liens" means (i) deposits, liens or pledges of personal
property to enable the Company or a Restricted Subsidiary to exercise any
privilege or license, or to secure payments of worker's compensation,
unemployment insurance or social security obligations, or to secure the
performance of contracts or leases to which the Company or a Restricted
Subsidiary is a party, or to secure public or statutory obligations of the
Company or a Restricted Subsidiary, or other similar deposits, liens, or pledges
of personal property made in the ordinary course of business, (ii) mechanics',
workmen's, repairmen's or carriers' liens, or other similar liens arising in the
ordinary course of business, or deposits, liens or pledges of personal property
to obtain the release of any such liens, (iii) liens for taxes, assessments and
other governmental charges not delinquent or the payment of which is being
contested by the Company or a Restricted Subsidiary in good faith and (iv)
bankers' liens and rights of setoff arising in the ordinary course of business
of the Company or any Restricted Subsidiary under common law or by statute.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Place of Payment," when used with respect to the Securities of any
series, means the place or places where the principal of and any premium and
interest on the Securities of that series are payable as specified as
contemplated by Section 3.1.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 3.6 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Principal Property" means any facility owned by the Company or any
Subsidiary the gross book value of which (including related land, improvements,
machinery and equipment so owned, without deduction of any depreciation
reserves) on the date as of which the determination is being made exceeds 2% of
Consolidated Net Tangible Assets.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
Date on the Securities of any series means the date specified for that purpose
as contemplated by Section 3.1.
"Restricted Payment" has the meaning specified in Section 10.8.
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"Restricted Subsidiary" means any Subsidiary of the Company which owns
a Principal Property and any other Subsidiary designated as a Restricted
Subsidiary by the Board of Directors.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw Hill Companies, Inc., or any successor thereto.
"Sale and Leaseback Transaction" means an arrangement with any lender
or investor or to which any lender or investor is a party providing for the
leasing by such Person of any property or asset of such Person that has been or
is being sold or transferred by such Person more than 180 days after the
acquisition thereof or the completion of construction or commencement of
operation thereof to such lender or investor or to any person to whom funds have
been or are to be advanced by such lender or investor on the security of such
property or asset. The stated maturity of such arrangement shall be the date of
the last payment of rent or any other amount due under such arrangement prior to
the first date on which such arrangement may be terminated by the lessee without
payment of a penalty.
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and delivered
under this Indenture.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.5.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 3.7.
"Stated Maturity," when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security as the fixed date on which the principal of such Security or
such installment of principal or interest is due and payable.
"Subsidiary" of any Person means (i) a corporation more than 50% of
the outstanding Voting Stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof or (ii) any other Person (other than a
corporation) in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, has at least a majority ownership and power to direct the policies,
management and affairs thereof.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided, however,
that if the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
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"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder, and
if at any time there is more than one such Person, "Trustee" as used with
respect to the Securities of any series shall mean the Trustee with respect to
Securities of that series.
"U.S. Government Obligation" means (x) any security that is (i) a
direct obligation of the United States of America for the payment of which the
full faith and credit of the United States of America is pledged or (ii) an
obligation of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation of the United
States of America, that, in either case (i) or (ii), is not callable or
redeemable at the option of the issuer thereof, and (y) any depositary receipt
issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as
custodian with respect to any U.S. Government Obligation that is specified in
clause (x) above and held by such bank for the account of the holder of such
depositary receipt, or for the account of the holder of such depositary receipt,
or with respect to any specific payment of principal of or interest on any U.S.
Government Obligation that is so specified and held, provided that (except as
required by law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depositary receipt from any amount received
by the custodian in respect of the U.S. Government Obligation or the specific
payment of principal or interest evidenced by such depositary receipt.
"Vice President," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president."
"Voting Stock" means Capital Stock which ordinarily has voting power
for the election of directors (or persons performing similar functions), whether
at all times or only so long as no senior class of securities has such voting
power by reason of any contingency.
"Wholly-Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock of which (other
than directors' qualifying shares) shall at the time be owned by such Person or
by one or more Wholly-Owned Restricted Subsidiaries of such Person or by such
Person and one or more Wholly-Owned Restricted Subsidiaries of such Person.
Section 1.2 Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of
an Officers' Certificate, if to be given by an officer of the
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Company, or an Opinion of Counsel, if to be given by counsel, and shall comply
with the requirements of the Trust Indenture Act and any other requirements set
forth in this Indenture. In the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or request, however,
no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 1.3 Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by,
or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one
such Person, or that they be so certified or covered by only one document,
but one such Person may certify or give an opinion with respect to some
matters and one or more other such Persons as to other matters, and any
such Person may certify or give an opinion as to such matters in one or
several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or
opinion of, or representations by, counsel, unless such officer knows, or
in the exercise of reasonable care should know, that the certificate or
opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate or
Opinion of Counsel may be based, insofar as it relates to factual matters,
upon a certificate or opinion of, or representations by, an officer or
officers of the Company stating that the information with respect to such
factual matters is in the possession of the Company, unless such counsel
knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
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Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be
consolidated and form one instrument.
Section 1.4 Acts of Holders; Record Dates.
-----------------------------
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by this Indenture to
be given or taken by Holders may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed by such Holders in
person or by agent duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Trustee and, where it is
hereby expressly required, to the Company. Such instrument or instruments
(and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument
or instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 6.1) conclusive in favor of the Trustee
and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the
execution thereof. Where such execution is by a signer acting in a
capacity other than his individual capacity, such certificate or affidavit
shall also constitute sufficient proof of his authority. The fact and date
of the execution of any such instrument or writing, or the authority of the
Person executing the same, may also be proved in any other manner which the
Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of
determining the Holders of Securities of any series entitled to give, make
or take any request, demand, authorization, direction, notice, consent,
waiver or other action, or to vote on any action, authorized or permitted
to be given or taken by Holders of Securities of such series. If not set
by the Company prior to the first solicitation of a Holder of Securities of
such series made by any Person in respect of any such action, or, in the
case of any such vote, prior to such vote, the record date for any such
action or vote shall be the 30th day (or, if later, the date of the most
recent list of Holders required to be provided pursuant to Section 7.1)
prior to such first solicitation or vote, as the case may be. With regard
to any record date for action to be taken by the Holders of one or more
series of Securities, only the Holders of Securities of such series on such
date (or their duly designated proxies) shall be entitled to give or take,
or vote on, the relevant action.
(d) The ownership of Securities shall be proved by the Security
Register.
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(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued
upon the registration of transfer thereof or in exchange therefor or in
lieu thereof in respect of anything done, omitted or suffered to be done by
the Trustee or the Company in reliance thereon, whether or not notation of
such action is made upon such Security.
Section 1.5 Notices, Etc. to Trustee and Company.
------------------------------------
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, Attention: Corporate
Trust Administration, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this instrument, Attention: Corporate Secretary or at
any other address previously furnished in writing to the Trustee by the
Company.
Section 1.6 Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any event,
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each
Holder affected by such event, at his address as it appears in the Security
Register, not later than the latest date (if any), and not earlier than the
earliest date (if any), prescribed for the giving of such notice. In any
case where notice to Holders is given by mail, neither the failure to mail
such notice, nor any defect in any notice so mailed, to any particular
Holder shall affect the sufficiency of such notice with respect to other
Holders. Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed
with the Trustee, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made as shall be satisfactory to
the Trustee shall constitute a sufficient notification for every purpose
hereunder.
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Section 1.7 Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be
a part of and govern this Indenture, the latter provision shall control.
If any provision of this Indenture modifies or excludes any provision of
the Trust Indenture Act that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or to
be excluded, as the case may be.
Section 1.8 Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.
Section 1.9 Successors and Assigns.
All covenants and agreements in this Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.
Section 1.10 Separability Clause.
In case any provision in this Indenture or in the Securities shall
be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
Section 1.11 Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder and the Holders, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
Section 1.12 Governing Law.
This Indenture and the Securities shall be governed by and
construed in accordance with the laws of the State of New York without
giving effect to the conflict of laws provisions thereof.
Section 1.13 Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or
Stated Maturity of any Security shall not be a Business Day at any Place of
Payment, then (notwithstanding any other provision of this Indenture or of
the Securities (other than a provision of the Securities of any series
which specifically states that such provision shall apply in lieu of this
Section)) payment of interest or principal (and premium, if any) need not
be made at such Place of
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Payment on such date, but may be made on the next succeeding Business Day
at such Place of Payment with the same force and effect as if made on the
Interest Payment Date or Redemption Date, or at the Stated Maturity;
provided, however, that no interest shall accrue for the period from and
after such Interest Payment Date, Redemption Date or Stated Maturity, as
the case may be.
ARTICLE II
Security Forms
Section 2.1 Forms Generally.
The Securities of each series shall be substantially in the form
as shall be established by or pursuant to a Board Resolution or in one or
more indentures supplemental hereto, in each case with such appropriate
insertions, omissions, substitutions and other variations as are required
or permitted by this Indenture, and may have such letters, numbers or other
marks of identification and such legends or endorsements placed thereon as
may be required to comply with the rules of any securities exchange or
Depository therefor or as may, consistently herewith, be determined by the
officers executing such Securities, as evidenced by their execution of the
Securities. If the form of Securities of any series is established by
action taken pursuant to a Board Resolution, a copy of an appropriate
record of such action shall be certified by the Secretary or an Assistant
Secretary of the Company and delivered to the Trustee at or prior to the
delivery of the Company Order contemplated by Section 3.3 for the
authentication and delivery of such Securities.
The definitive Securities shall be printed, lithographed or
engraved on steel engraved borders or may be produced in any other manner,
all as determined by the officers executing such Securities, as evidenced
by their execution of such Securities.
Section 2.2 Form of Trustee's Certificate of Authentication.
The Trustee's certificates of authentication shall be in
substantially the following form:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
The Bank of New York,
As Trustee
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By:________________________________
Authorized Signatory
ARTICLE III
The Securities
Section 3.1 Amount Unlimited; Issuable in Series.
------------------------------------
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution and, subject to Section 3.3,
set forth, or determined in the manner provided, in an Officers' Certificate, or
established in one or more indentures supplemental hereto, prior to the issuance
of Securities of any series;
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from Securities of any other
series);
(2) any limit upon the aggregate principal amount of the Securities
of the series which may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Section 3.4, 3.5, 3.6, 9.6 or 11.7 and except for any
Securities which, pursuant to Section 3.3, are deemed never to have been
authenticated and delivered hereunder);
(3) the Person to whom any interest on a Security of the series shall
be payable, if other than the Person in whose name that Security (or one or
more Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest;
(4) the date or dates on which the principal of the Securities of the
series is payable;
(5) the rate or rates at which the Securities of the series shall
bear interest, if any, or the method of calculating such rate or rates of
interest, the date or dates from which such interest shall accrue, the
Interest Payment Dates on which any such interest shall be payable and the
Regular Record Date for any interest payable on any Interest Payment Date;
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(6) the place or places where the principal of and any premium and
interest on Securities of the series shall be payable;
(7) the period or periods within which, the price or prices at which
and the terms and conditions upon which Securities of the series may be
redeemed, in whole or in part, at the option of the Company and, if other
than by a Board Resolution, the manner in which any election by the Company
to redeem the Securities shall be evidenced;
(8) the obligation, if any, of the Company to redeem, purchase or
repay Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of a Holder thereof and the period or periods
within which, the price or prices at which and the terms and conditions
upon which Securities of the series shall be redeemed, purchased or repaid,
in whole or in part, pursuant to such obligation;
(9) if other than denominations of $1,000 or any integral multiple
thereof, the denominations in which Securities of the series shall be
issuable;
(10) the currency, currencies or currency units in which payment of
the principal of and any premium and interest on any Securities of the
series shall be payable if other than the currency of the United States of
America and the manner of determining the equivalent thereof in the
currency of the United States of America for purposes of the definition of
"Outstanding" in Section 1.1;
(11) if the amount of payments of principal of or any premium or
interest on any Securities of the series may be determined with reference
to an index or formula, the manner in which such amounts shall be
determined;
(12) if the principal of or any premium or interest on any Securities
of the series is to be payable, at the election of the Company or a Holder
thereof, in one or more currencies or currency units other than that or
those in which the Securities are stated to be payable, the currency,
currencies or currency units in which payment of the principal of and any
premium and interest on Securities of such series as to which such election
is made shall be payable, and the periods within which and the terms and
conditions upon which such election is to be made;
(13) the application, if any, of Section 13.2 or 13.3 or both to the
Securities of any series and, if other than by a Board Resolution, the
manner in which any election by the Company to defease such Securities
shall be evidenced;
(14) if the principal amount payable at the Stated Maturity of any
Securities of the series will not be determinable as of any one or more
dates prior to the Stated Maturity, the amount which shall be deemed to be
the principal amount of such Securities as of any such date for any purpose
thereunder or hereunder, including the
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principal amount thereof which shall be due an payable upon any Maturity
other than the Stated Maturity or which shall be deemed to be Outstanding
as of any date prior to the Stated Maturity (or, in any such case, the
manner in which such amount deemed to be the principal amount shall be
determined);
(15) whether the Securities of the series shall be issued in whole or
in part in the form of one or more Book-Entry Securities and, in such case,
the Depository with respect to such Book-Entry Security or Securities and
the circumstances under which any Book-Entry Security may be registered for
transfer or exchange, or authenticated and delivered, in the name of a
Person other than such Depository or its nominee, if other than as set
forth in Section 3.5;
(16) if other than the principal amount thereof, the portion of the
principal amount of Securities of the series which shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to Section
5.2;
(17) any deletions from, modifications of or additions to the Events
of Default set forth in Section 5.1 or covenants of the Company set forth
in Article X pertaining to the Securities of the series and any change in
the right of the Trustee or the requisite Holders of such Securities to
declare the principal amount thereof due and payable pursuant to Section
5.2; and
(18) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture, except as permitted by
Section 9.1(5)).
All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided in or pursuant
to the Board Resolution referred to above and (subject to Section 3.3) set
forth, or determined in the manner provided, in the Officers' Certificate
referred to above or in any such indenture supplemental hereto.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
Section 3.2 Denominations.
The Securities of each series shall be issuable in registered form
without coupons in such denominations as shall be specified as contemplated by
Section 3.1. In the absence of any such provisions with respect to the
Securities of any series, the Securities of such series shall be issuable in
denominations of $1,000 and any integral multiple thereof.
Section 3.3 Execution, Authentication, Delivery and Dating.
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The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its President or one of its Vice Presidents, under its
corporate seal reproduced thereon attested by its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on the Securities
may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with the Company Order shall authenticate and make available for delivery such
Securities. If the form or terms of the Securities of the series have been
established in or pursuant to one or more Board Resolutions as permitted by
Sections 2.1 and 3.1, in authenticating such Securities, and accepting the
additional responsibilities under this Indenture in relation to such Securities,
the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be
fully protected in relying upon, an Opinion of Counsel stating:
(a) if the form of such Securities has been established by or pursuant to
Board Resolution as permitted by Section 2.1, that such form has been
established in conformity with the provisions of this Indenture;
(b) if the terms of such Securities have been established by or pursuant
to Board Resolution as permitted by Section 3.1, that such terms have been
established in conformity with the provisions of this Indenture;
(c) that such Securities, when authenticated and delivered by the Trustee
and issued by the Company in the manner and subject to any conditions specified
in such Opinion of Counsel, will constitute valid and legally binding
obligations of the Company enforceable in accordance with their terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles; and
(d) that all laws and requirements in respect of the execution and
delivery by the Company of such Securities have been complied with.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
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Notwithstanding the provisions of Section 3.1 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 3.1 or the Company Order and Opinion of Counsel
otherwise required pursuant to such preceding paragraph at or prior to the time
of authentication of each Security of such series if such documents are
delivered at or prior to the authentication upon original issuance of the first
Security of such series to be issued.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and made available for delivery hereunder.
Notwithstanding the foregoing, if any Security shall have been authenticated and
made available for delivery hereunder but never issued and sold by the Company,
and the Company shall deliver such Security to the Trustee for cancellation as
provided in Section 3.9, for all purposes of this Indenture such Security shall
be deemed never to have been authenticated and made available for delivery
hereunder and shall never be entitled to the benefits of this Indenture.
Section 3.4 Temporary Securities.
--------------------
Pending the preparation of definitive Securities of any series, the
Company may execute, and upon Company Order the Trustee shall authenticate and
made available for delivery, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Securities in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Company will
cause definitive Securities of that series to be prepared without unreasonable
delay. After the preparation of definitive Securities of such series, the
temporary Securities of such series shall be exchangeable for definitive
Securities of such series upon surrender of the temporary Securities of such
series at the office or agency of the Company in a Place of Payment for that
series, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Securities of any series the Company shall execute and the
Trustee shall authenticate and make available for delivery in exchange therefor
one or more definitive Securities of the same series, of any authorized
denominations and of a like aggregate principal amount and tenor. Until so
exchanged the temporary Securities of any series shall in all respects be
entitled to the same benefits under this Indenture as definitive Securities of
such series and tenor.
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Section 3.5 Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency of the Company in a Place of Payment being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is
hereby appointed "Security Registrar" for the purpose of registering Securities
and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security of any
series at the office or agency in a Place of Payment for that series as
designated pursuant to Section 10.2, the Company shall execute, and the Trustee
shall authenticate and make available for delivery, in the name of the
designated transferee or transferees, one or more new Securities of the same
series, of any authorized denominations and of a like aggregate principal amount
and tenor.
At the option of the Holder, Securities of any series may be exchanged
for other Securities of the same series, of any authorized denominations and of
a like aggregate principal amount and tenor, upon surrender of the Securities to
be exchanged at such office or agency. Whenever any Securities are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and make available for delivery, the Securities which the Holder
making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 3.4, 9.6 or 11.7 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange Securities of any series during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption of
Securities of that series selected for
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redemption under Section 11.3 and ending at the close of business on the day of
such mailing or (ii) to register the transfer of or exchange any Security so
selected for redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part.
Notwithstanding the foregoing, any Book-Entry Security shall be
exchangeable in whole or in part pursuant to this Section 3.5 for Securities
registered in the name of Persons other than the Depository for such Security or
its nominee only if (i) such Depository notifies the Company that it is
unwilling or unable to continue as Depository for such Book-Entry Security or if
at any time such Depository cease s to be a clearing agency registered under the
Securities Exchange Act of 1934, as amended, (ii) the Company executes and
delivers to the Trustee a Company Order that such Book-Entry Security shall be
so exchangeable, (iii) there shall have occurred and be continuing an Event of
Default with respect to the Securities or (iv) there shall exist such
circumstances, if any, in addition to or in lieu of the foregoing as have been
specified for this purpose as contemplated by Section 3.1. Any Book-Entry
Security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for Securities registered in such names as such Depository shall
direct.
Notwithstanding any other provision in this Indenture, a Book-Entry
Security may not be transferred except as a whole by the Depository with respect
to such Book-Entry Security to a nominee of such Depository or by a nominee of
such Depository to such Depository or another nominee of such Depository.
Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Book-entry Security or any
portion thereof, whether pursuant to this Section, Section 3.4, 3.6, 9.6 or 11.7
or otherwise, shall be authenticated and delivered in the form of, and shall be,
a Book-entry Security, unless such Security is registered in the name of a
Person other than the Depositary for such Book-entry Security or a nominee
thereof.
Section 3.6 Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and make available for delivery
in exchange therefor a new Security of the same series and of like tenor and
principal amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and make
available for delivery, in lieu of any such destroyed, lost or stolen Security,
a new Security of the same series and of like tenor and principal amount and
bearing a number not contemporaneously outstanding.
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In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment by the Holder of such mutilated, destroyed, lost or
stolen Security of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of that series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
Section 3.7 Payment of Interest; Interest Rights Preserved.
Except as otherwise provided as contemplated by Section 3.1 with
respect to any series of Securities, interest on any Security which is payable,
and is punctually paid or duly provided for, on any Interest Payment Date shall
be paid to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest.
Any interest on any Security of any series which is payable, but is
not punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities of such series (or their
respective Predecessor Securities) are registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security of such series and the date of the proposed payment, and
at the same time the Company shall irrevocably deposit with the Trustee an
amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory
to the Trustee for such deposit prior to the date of the proposed payment,
such money when deposited to be held in trust for the
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benefit of the Persons entitled to such Defaulted Interest as in this
Clause provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be given to each Holder of Securities
of such series in the manner set forth in Section 1.6, not less than 10
days prior to such Special Record Date. Notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons in whose names
the Securities of such series (or their respective Predecessor Securities)
are registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Securities of any series in any other lawful manner not inconsistent with
the requirements of any securities exchange on which such Securities may be
listed, and upon such notice as may be required by such exchange, if, after
notice given by the Company to the Trustee of the proposed payment pursuant
to this Clause, such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
Section 3.8 Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and any premium
and (subject to Section 3.7) any interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
Section 3.9 Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly cancelled by it. The Company may at any time deliver to
the Trustee for cancellation any Securities previously
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authenticated and delivered hereunder which the Company may have acquired in any
manner whatsoever, and may deliver to the Trustee (or to any other Person for
delivery to the Trustee) for cancellation any Securities previously
authenticated hereunder which the Company has not issued and sold, and all
Securities so delivered shall be promptly cancelled by the Trustee. No
Securities shall be authenticated in lieu of or in exchange for any Securities
cancelled as provided in this Section, except as expressly permitted by this
Indenture. All cancelled Securities held by the Trustee shall be destroyed and
a certificate of destruction delivered by the Trustee to the Company, unless the
Company otherwise directs the Trustee by a Company Order.
Section 3.10 Computation of Interest.
Except as otherwise specified as contemplated by Section 3.1 for
Securities of any series, interest on the Securities of each series shall be
computed on the basis of a 360-day year of twelve 30-day months.
Section 3.11 CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided, however, that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers.
ARTICLE IV
Satisfaction and Discharge
Section 4.1 Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further
effect (except as to any surviving rights of registration of transfer or
exchange of Securities herein expressly provided for), and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 3.6 and (ii) Securities
for whose payment money has theretofore been
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deposited in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust, as provided
in Section 10.3) have been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within
one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (i), (ii) or (iii) above, has deposited or
caused to be deposited with the Trustee as trust funds in trust for the
purpose an amount sufficient to pay and discharge the entire indebtedness
on such Securities not theretofore delivered to the Trustee for
cancellation, for principal and any premium and interest to the date of
such deposit (in the case of Securities which have become due and payable)
or to the Stated Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.7, the obligations of
the Trustee to any Authenticating Agent under Section 6.14 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 4.2 and the last
paragraph of Section 10.3 shall survive.
Section 4.2 Application of Trust Money.
Subject to provisions of the last paragraph of Section 10.3, all money
deposited with the Trustee pursuant to Section 4.1 shall be held in trust and
applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and any premium and
interest for whose payment such money has been deposited with the Trustee.
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ARTICLE V
Remedies
Section 5.1 Events of Default.
"Event of Default," wherever used herein with respect to Securities of
any series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Security of that
series when it becomes due and payable, and continuance of such default for
a period of 30 days; or
(2) default in the payment of the principal of (or premium, if any,
on) any Security of that series at its Maturity; or
(3) failure to perform or comply with the provisions set forth under
Section 8.1; or
(4) default in the deposit of any sinking fund or other payment
required pursuant to the terms of a Security of that series as established
pursuant to Section 3.1(8), when and as due by the terms of a Security of
that series; or
(5) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with or which has expressly been included
in this Indenture solely for the benefit of series of Securities other than
that series, provided that for purposes of this clause (5) any covenant or
agreement on the part of the Company contained in this Indenture which is
not limited to a series of Securities shall be in respect of all series of
Securities), and continuance of such default or breach for a period of 60
days after there has been given, by registered or certified mail, to the
Company by the Trustee or to the Company and the Trustee by the Holder or
Holders of at least 10% in principal amount of the Outstanding Securities
of that series a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder; or
(6) a default or defaults under any bonds, debentures, notes or other
evidences of, or obligations constituting, Debt of the Company or any
Restricted Subsidiary (other than Securities of that series) or under any
mortgages, indentures, instruments (including
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this Indenture) or agreements under which there may be issued or existing
or by which there may be secured or evidenced any Debt of the Company or
any Restricted Subsidiary, in any such case with a principal or similar
amount then outstanding, individually or in the aggregate, in excess of
$25,000,000, whether such Debt exists as of the date of this Indenture or
is thereafter created, which default or defaults constitute a failure to
pay any portion of the principal or similar amount of such Debt when due
and payable or which would enable the holder thereof to cause such Debt to
become due and payable prior to the date on which it would otherwise have
become due and payable; or
(7) the rendering of a final judgment or judgments (not subject to
appeal) against the Company or any of its Restricted Subsidiaries
individually or in the aggregate, in excess of $25,000,000, which remains
unstayed, undischarged or unbonded for a period of 60 days thereafter; or
(8) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company or any Restricted
Subsidiary in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other similar
law or (B) a decree or order adjudging the Company or any Restricted
Subsidiary a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition of
or in respect of the Company or any Restricted Subsidiary under any
applicable Federal or State law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of
the Company or any Restricted Subsidiary or of any substantial part of its
property, or ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order for relief or any such other decree
or order unstayed and in effect for a period of 60 consecutive days; or
(9) the commencement by the Company or any Restricted Subsidiary of a
voluntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or of any other
case or proceeding to be adjudicated a bankrupt or insolvent, or the
consent by it to the entry of a decree or order for relief in respect of
the Company or any Restricted Subsidiary in an involuntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the filing by it
of a petition or answer or consent seeking reorganization or relief under
any applicable Federal or State law, or the consent by it to the filing of
such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or any Restricted Subsidiary or of any substantial
part of its property, or the making by it of an assignment for the benefit
of creditors, or the admission by it in writing of its inability to pay its
debts generally as they become due,
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or the taking of corporate action by the Company or any Restricted
Subsidiary in furtherance of any such action; or
(10) any event which constitutes an "Event of Default" under the
terms governing Securities of that series established as provided in
Section 3.1.
Section 5.2 Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified
in Section 5.1(8) or (9)) with respect to Securities of any series at the
time Outstanding occurs and is continuing, either the Trustee or the Holder
or Holders of at least 25% in aggregate principal amount of the Outstanding
Securities of that series may declare the principal amount (or, if any of
the Securities of that series are Original Issue Discount Securities, such
portion of the principal amount of such Securities as may be specified in
the terms thereof) of all of the Outstanding Securities of that series to
be due and payable immediately, by a notice in writing to the Company (and
to the Trustee if given by Holders), and upon any such declaration such
principal amount (or specified amount) shall become immediately due and
payable. If an Event of Default specified in Section 5.1(8) or (9) with
respect to Securities of any series of any time outstanding occurs and is
continuing, the principal amount (or, if any of the Securities of that
series are Original Issue Discount Securities, such portion of the
principal amount of such Securities as may be specified in the terms
thereof) of all of the Outstanding Securities of that series shall become
immediately due and payable without any declaration or other act on the
part of the Trustee or any Holders of that series.
At any time after such a declaration of acceleration with respect
to Securities of any series has been made and before a judgment or decree
for payment of the money due has been obtained by the Trustee as
hereinafter in this Article provided, the Holders of a majority in
principal amount of the Outstanding Securities of that series, by written
notice to the Company and the Trustee, may rescind and annul such
declaration and its consequences if
(1) the Company has paid or irrevocably deposited with the Trustee a
sum sufficient to pay
(A) all overdue interest on all Securities of that series,
(B) the principal of (and premium, if any, on) any Securities of
that series which have become due otherwise than by such declaration
of acceleration and any interest thereon at the rate or rates
prescribed therefor in such Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate or rates prescribed
therefor in such Securities, and
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(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default with respect to Securities of that series,
other than the non-payment of the principal of Securities of that series
which have become due solely by such declaration of acceleration, have been
cured or waived as provided in Section 5.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Section 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or premium,
if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and any premium and interest and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal and premium and on any overdue interest, at the rate or rates
prescribed therefor in such Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
Section 5.4 Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the
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Trust Indenture Act in order to have claims of the Holders and the Trustee
allowed in any such proceeding. In particular, the Trustee shall be authorized
to collect and receive any moneys or other property payable or deliverable on
any such claims and to distribute the same; and any custodian, receiver,
assignee, trustee, liquidator, sequestrator or other similar official in any
such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 6.7.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
Section 5.5 Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
Section 5.6 Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or any premium
or interest, upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
6.7; and
SECOND: To the payment of the amounts then due and unpaid for
principal of and any premium and interest on the Securities in respect of
which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due
and payable on such Securities for principal and any premium and interest,
respectively.
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Section 5.7 Limitation on Suits.
No Holder of any Security of any series shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless:
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities of that
series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
Section 5.8 Unconditional Right of Holders to Receive Principal, Premium and
Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of and any premium and (subject to Section 3.7)
any interest on such Security on the Stated Maturity or Maturities expressed in
such Security (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
Section 5.9 Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any
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reason, or has been determined adversely to the Trustee or to such Holder, then
and in every such case, subject to any determination in such proceeding, the
Company, the Trustee and the Holders shall be restored severally and
respectively to their former positions hereunder and thereafter all rights and
remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
Section 5.10 Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 3.6, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
Section 5.11 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Securities
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
Section 5.12 Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities of any series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Securities of such series, provided that:
(1) such direction shall not be in conflict with any rule of law or
with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
Section 5.13 Waiver of Past Defaults.
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The Holders of not less than a majority in principal amount of
the Outstanding Securities of any series may on behalf of the Holders of
all the Securities of such series waive any past default hereunder with
respect to such series and its consequences, except a default
(1) in the payment of the principal of or any premium or interest on
any Security of such series, or
(2) in respect of a covenant or provision hereof which under Article
IX cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
Section 5.14 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Act; provided that neither this Section nor the Trust Indenture Act
shall be deemed to authorize any court to require such an undertaking or to make
such an assessment in any suit instituted by the Company or the Trustee.
Section 5.15 Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
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ARTICLE VI
The Trustee
Section 6.1 Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
Section 6.2 Notice of Defaults.
If a default occurs hereunder with respect to Securities of any
series, the Trustee shall give the Holders of Securities of such series notice
of such default as and to the extent provided by the Trust Indenture Act;
provided, however, that in the case of any default of the character specified in
Section 5.1(5) with respect to Securities of such series, no such notice to
Holders shall be given until at least 30 days after the occurrence thereof. For
the purpose of this Section, the term "default" means any event which is, or
after notice or lapse of time or both would become, an Event of Default with
respect to Securities of such series.
Section 6.3 Certain Rights of Trustee.
Subject to the provisions of Section 6.1:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action
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hereunder, the Trustee (unless other evidence be herein specifically prescribed)
may, in the absence of bad faith on its part, rely upon an Officers'
Certificate;
(d) the Trustee may consult with counsel of its selection and the
written advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder; and
(h) the Trustee shall not be liable for any action taken, suffered,
or omitted to be taken by it in good faith and reasonably believed by it to be
authorized or within the discretion or rights or powers conferred upon it by
this Indenture.
Section 6.4 Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee or any Authenticating Agent assumes no
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or of the Securities. The
Trustee or any Authenticating Agent shall not be accountable for the use or
application by the Company of Securities or the proceeds thereof.
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Section 6.5 May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
6.8 and 6.13, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Security
Registrar or such other agent.
Section 6.6 Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
Section 6.7 Compensation and Reimbursement.
The Company agrees:
(1) to pay to the Trustee from time to time such compensation as
shall be agreed to in writing between the Company and the Trustee for all
services rendered by it hereunder (which compensation shall not be limited
by any provision of law in regard to the compensation of a trustee of an
express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(3) to indemnify the Trustee for, and to hold it harmless against,
any and all loss, damage, liability or expense, including taxes (other than
taxes based on the income of the Trustee), incurred without negligence or
bad faith on its part, arising out of or in connection with the acceptance
or administration of the trust or trusts hereunder, including the costs and
expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder.
The Trustee shall have a lien prior to the Securities as to all
property and funds held by it hereunder for any amount owing it or any
predecessor Trustee pursuant to this Section 6.7, except with respect to funds
held in trust for the benefit of the Holders of particular Securities.
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When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 5.1(8) or Section 5.1(9), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or State bankruptcy, insolvency or
other similar law.
The provisions of this Section shall survive the termination of this
Indenture.
Section 6.8 Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act, and this Indenture. To the extent
permitted by such Act, the Trustee shall not be deemed to have a conflicting
interest by virtue of being a trustee under this Indenture with respect to
Securities of more than one series.
Section 6.9 Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000 and its Corporate
Trust Office in the Borough of Manhattan, The City of New York or in The City of
Chicago, Illinois. If such Person publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section and to the extent
permitted by the Trust Indenture Act, the combined capital and surplus of such
Person shall be deemed to be its combined capital and surplus as set forth in
its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section, it
shall resign immediately in the manner and with the effect hereinafter specified
in this Article.
Section 6.10 Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 6.11.
(b) The Trustee may resign at any time with respect to the Securities
of one or more series by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 6.11 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities of such series.
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(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal amount
of the Outstanding Securities of such series, delivered to the Trustee and to
the Company. If the instrument of acceptance by a successor Trustee required by
Section 6.11 shall not have been delivered to the Trustee within 30 days after
such Act of such Holders, the removed Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee with respect
to the Securities of such series.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.8 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, unless the Trustee's duty to
resign is stayed in accordance with the provisions of Section 310(b) of the
Trust Indenture Act, or
(2) the Trustee shall cease to be eligible under Section 6.9 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee with respect to all Securities, or (ii) subject to Section 5.14, any
Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or Trustees. If the
instrument of acceptance by a successor Trustee required by Section 6.11 shall
not have been delivered to the Trustee within 30 days after such removal of the
Trustee described in clauses (i) and (ii) of the immediately preceding sentence,
the removed Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, with
respect to the Securities of one or more series, the Company, by a Board
Resolution, shall promptly appoint a successor Trustee or Trustees with respect
to the Securities of that or those series (it being understood that any such
successor Trustee may be appointed with respect to the Securities of one or more
or all of such series and that at any time there shall be only one Trustee with
respect to the Securities of any particular series) and shall comply with the
applicable requirements of Section 6.11. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee with respect to the Securities of any series shall be
appointed by
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Act of the Holders of a majority in principal amount of the Outstanding
Securities of such series delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment in accordance with the applicable requirements of Section 6.11,
become the successor Trustee with respect to the Securities of such series and
to that extent supersede the successor Trustee appointed by the Company. If no
successor Trustee with respect to the Securities of any series shall have been
so appointed by the Company or the Holders and accepted appointment in the
manner required by Section 6.11, any Holder who has been a bona fide Holder of a
Security of such series for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Trustee with respect to the Securities of such
series.
(f) The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and each
appointment of a successor Trustee with respect to the Securities of any series
to all Holders of Securities of such series in the manner provided in Section
1.6. Each notice shall include the name of the successor Trustee with respect to
the Securities of such series and the address of its Corporate Trust Office.
Section 6.11 Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee and
(3) shall add to or change any of the provisions of this Indenture as
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shall be necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustees of the
same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee; and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates; but, on request of the Company or any successor Trustee, such
retiring Trustee shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder with
respect to the Securities of that or those series to which the appointment of
such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts referred
to in paragraphs (a) and (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
Section 6.12 Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
Section 6.13 Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
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Section 6.14 Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents with respect
to one or more series of Securities which shall be authorized to act on behalf
of the Trustee to authenticate Securities of such series issued upon original
issue and upon exchange, registration of transfer or partial redemption thereof
or pursuant to Section 3.6, and Securities so authenticated shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation organized and
doing business under the laws of the United States of America, any State thereof
or the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
an Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice
of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give notice of such
appointment in the manner provided in Section 1.6 to all Holders of Securities
of the series with respect to which such Authenticating Agent will serve. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
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hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
If an appointment with respect to one or more series is made pursuant
to this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
The Bank of New York,
As Trustee
By:___________________________
As Authenticating Agent
By:___________________________
Authorized Signatory
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Section 6.15 Trustee's Application for Instructions from the Company.
Any application by the Trustee for written instructions from the
Company may, at the option of the Trustee, set forth in writing any action
proposed to be taken or omitted by the Trustee under this Indenture and the date
on and/or after which such action shall be taken or such omission shall be
effective. The Trustee shall not be liable for any action taken by, or omission
of, the Trustee in accordance with a proposal included in such application on or
after the date specified in such application (which date shall not be less than
three Business Days after the date any officer of the Company actually receives
such application, unless any such officer shall have consented in writing to any
earlier date) unless prior to taking any such action (or the effective date in
the case of an omission), the Trustee shall have received written instructions
in response to such application specifying the action to be taken or omitted.
ARTICLE VII
Holders' Lists and Reports
by Trustee and Company
Section 7.1 Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee:
(a) semi-annually, not later than 15 days after the Regular Record
Date for interest for each series of Securities, a list, in such form as the
Trustee may reasonably require, of the names and addresses of the Holders of
Securities of such series as of such Record Date, or if there is no Regular
Record Date for interest for such series of Securities, semi-annually, upon such
dates as are set forth in the Board Resolution or supplemental indenture
authorizing such series; and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
Section 7.2 Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its
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capacity as Security Registrar. The Trustee may destroy any list furnished to
it as provided in Section 7.1 upon receipt of a new list so furnished.
(b) The rights of the Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and privileges of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
Section 7.3 Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
If required by Section 313(a) of the Trust Indenture Act, the Trustee shall,
within 60 days after each February 1 following the date of this Indenture
deliver to Holders a brief report, dated as of such February 1, which complies
with the provisions of such Section 313(a).
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which any Securities are listed, with the Commission and with the Company. The
Company will promptly notify the Trustee when any Securities are listed on any
stock exchange.
Section 7.4 Reports by Company.
(a) The Company covenants and agrees to file with the Commission and
provide the Trustee and Holders of Securities such information, documents and
other reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe) as may be
required pursuant to the Trust Indenture Act at the times and in the manner
provided pursuant to such Act; provided that any such information, documents or
reports required to be filed with the Commission pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended, shall be filed with the
Trustee within 15 days after the same is so required to be filed with the
Commission.
(b) The Company covenants and agrees to file with the Trustee and the
Commission, in accordance with the rules and regulations prescribed from time to
time by the Commission, such additional information, documents and reports, if
any, with respect to compliance by the Company with the conditions and covenants
provided for in this Indenture as may be required from time to time by such
rules and regulations.
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(c) The Company covenants and agrees to transmit by mail to all
Holders, as the names and addresses of such Holders appear upon the register of
the Company, within 30 days after the filing thereof with the Trustee, such
summaries of information, documents and reports required to be filed by the
Company, if any, pursuant to subsections (a) and (b) of this Section 7.4 as may
be required by rules and regulations prescribed from time to time by the
Commission.
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
ARTICLE VIII
Consolidation, Merger, Conveyance,
Transfer or Lease
Section 8.1 Company May Consolidate, Etc. Only on Certain Terms.
The Company shall not, in a single transaction or a series of related
transactions, consolidate with or merge with or into any other Person or sell,
assign, convey, transfer or lease or otherwise dispose of all or substantially
all of its properties and assets to any Person or group of Affiliated Persons,
or permit any of its Restricted Subsidiaries to enter into any such transaction
or transactions, and the Company shall not permit any Person to consolidate with
or merge into the Company or convey, transfer or lease its properties and assets
substantially as an entirety to the Company, unless:
(1) in a transaction in which the Company does not survive or in
which the Company sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of its assets, the successor entity to
the Company shall be organized and validly existing under the laws of the
United States of America, any State thereof or the District of Columbia and
shall expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee in form satisfactory to the Trustee, the due and
punctual payment of the principal of and any premium and interest on all
the Securities and the performance or observance of every obligation of
this Indenture on the part of the Company to be performed or observed;
(2) immediately before and after giving effect to such transaction
and treating any Debt that becomes an obligation of the Company or a
Restricted Subsidiary as a result of such transaction as having been
incurred by the Company or such Restricted Subsidiary at the time of such
transaction, no Event of Default or event that with the
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passing of time or the giving of notice, or both, would constitute an Event
of Default shall have occurred and be continuing;
(3) if, as a result of any such transaction, properties or assets of
the Company or any Restricted Subsidiary would become subject to a Lien
prohibited by Section 10.6, the Company or such successor entity to the
Company, as the case may be, shall take such steps as shall be necessary
effectively to secure the Securities as required by such Section 10.6; and
(4) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer or lease and, if a supplemental indenture is required
in connection with such transaction, such supplemental indenture comply
with this Article and that all conditions precedent herein provided for
relating to such transaction have been complied with.
Section 8.2 Successor Substituted.
Upon any consolidation of the Company with, or merger of the
Company into, any other Person or any sale, assignment, conveyance,
transfer or lease of substantially all the properties and assets of the
Company in accordance with Section 8.1, the successor Person formed by such
consolidation or into which the Company is merged or to which such sale,
assignment, conveyance, transfer or lease is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company
under this Indenture with the same effect as if such successor Person had
been named as the Company herein; and thereafter, except in the case of a
lease, the predecessor Person shall be relieved of all obligations and
covenants under this Indenture and the Securities.
ARTICLE IX
Supplemental Indentures
Section 9.1 Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized
by a Board Resolution, and the Trustee, at any time and from time to time,
may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Securities; or
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(2) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be
for the benefit of less than all series of Securities, stating that such
covenants are expressly being included solely for the benefit of such
series) or to surrender any right or power herein conferred upon the
Company; or
(3) to add any additional Events of Default for the benefit of the
Holders of all or any series of Securities (and if such additional Events
of Default are to be for the benefit of less than all series of Securities,
stating that such additional Events of Default are expressly being included
solely for the benefit of such series); or
(4) to add to or change any of the provisions of this Indenture to
such extent as shall be necessary to permit or facilitate the issuance of
Securities in bearer form, registrable or not registrable as to principal,
and with or without interest coupons, or to permit or facilitate the
issuance of Securities in uncertificated form; or
(5) to add to, change or eliminate any of the provisions of this
Indenture in respect of one or more series of Securities, provided, that
any such addition, change or elimination (i) shall neither (A) apply to any
Security of any series created prior to the execution of such supplemental
indenture and entitled to the benefit of such provision nor (B) modify the
rights of the Holder of any such Security with respect to such provision or
(ii) shall become effective only when there is no such Security
Outstanding; or
(6) to secure the Securities pursuant to the requirements of Section
10.6 or otherwise; or
(7) to establish the form or terms of Securities of any series as
permitted by Sections 2.1 and 3.1; or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or
more series and to add to or change any of the provisions of this Indenture
as shall be necessary to provide for or facilitate the administration of
the trusts hereunder by more than one Trustee, pursuant to the requirements
of Section 6.11(b); or
(9) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture, provided that such action pursuant to this clause (9)
shall not adversely affect the interests of the Holders of Securities of
any series.
Section 9.2 Supplemental Indentures with Consent of Holders.
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With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities of each series affected by
such supplemental indenture, by Act of said Holders delivered to the
Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders of Securities of such
series under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding
Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Security, or
(2) reduce the principal amount thereof or the rate of interest
thereon or the rate of accretion of any Original Issue Discount Security or
any premium payable upon the redemption thereof, or reduce the amount of
the principal of an Original Issue Discount Security that would be due and
payable upon a declaration of acceleration of the Maturity thereof pursuant
to Section 5.2, or
(3) change any Place of Payment where, or the coin or currency in
which, any Security or any premium or interest thereon is payable, or
(4) impair the right to institute suit for the enforcement of any
such payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date), or
(5) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required
for any waiver (of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided for in this
Indenture, or
(6) modify any of the provisions of this Section, Section 5.8,
Section 5.13 or Section 10.11, except to increase any such percentage or to
provide that certain other provisions of this Indenture cannot be modified
or waived without the consent of the Holder of each Outstanding Security
affected thereby; provided, however, that this clause shall not be deemed
to require the consent of any Holder with respect to changes in the
references to "the Trustee" and concomitant changes in this Section and
Section 10.11, or the deletion of this proviso, in accordance with the
requirements of Sections 6.11(b) and 9.1(8), or
(7) modify any provision of this Indenture relating to the
modification and amendment of this Indenture or the waiver of past defaults
or covenants, except as otherwise specified in this Indenture, in a manner
adverse to the Holders thereof.
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A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Section 9.3 Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 6.1) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Section 9.4 Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
Section 9.5 Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
Section 9.6 Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article may, and shall
if required by the Trustee, bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities of any series so modified as to conform, in the
opinion of the Trustee and the Company, to any such supplemental indenture may
be prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.
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ARTICLE X
Covenants
Section 10.1 Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of and any premium
and interest on the Securities of that series in accordance with the terms of
the Securities and this Indenture.
Section 10.2 Maintenance of Office or Agency.
The Company will maintain in each Place of Payment for any series of
Securities an office or agency where Securities of that series may be presented
or surrendered for payment, where Securities of that series may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Company in respect of the Securities of that series and this Indenture
may be served. The Company will give prompt written notice to the Trustee of
the location, and any change in the location, of such office or agency. If at
any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities of one or more series may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, that no such designation or rescission
shall in any manner relieve the Company of its obligation to maintain an office
or agency in each Place of Payment for Securities of any series for such
purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such
other office or agency.
Section 10.3 Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of the
principal of or any premium or interest on any of the Securities of that series,
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum sufficient to pay the principal and any premium and interest so becoming due
until such sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or failure so to
act.
Whenever the Company shall have one or more Paying Agents for any
series of Securities, it will, prior to each due date of the principal of or any
premium or interest on any Securities of that series, deposit with a Paying
Agent a sum sufficient to pay such amount, such
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sum to be held as provided by the Trust Indenture Act, and (unless such Paying
Agent is the Trustee) the Company will promptly notify the Trustee of its action
or failure so to act.
The Company will cause each Paying Agent for any series of Securities
other than the Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will (i) comply with the provisions of
the Trust Indenture Act applicable to it as a Paying Agent and (ii) during the
continuance of any default by the Company (or any other obligor upon the
Securities of that series) in the making of any payment in respect of the
Securities of that series, and upon the written request of the Trustee,
forthwith pay to the Trustee all sums held in trust by such Paying Agent for
payment in respect of the Securities of that series.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or any premium or
interest on any Security of any series and remaining unclaimed for two years
after such principal, premium or interest has become due and payable shall be
paid to the Company on Company Request, or (if then held by the Company) shall
be discharged from such trust; and the Holder of such Security shall thereafter,
as an unsecured general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in New York, New York,
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to the
Company.
Section 10.4 Statement by Officers as to Default.
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company shall
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be in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
Section 10.5 Existence.
Subject to Article VIII, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
Section 10.6 Restrictions on Secured Debt.
The Company will not, nor will it permit any Restricted Subsidiary to,
Incur any Debt secured by a Lien on any (i) Principal Property or any part
thereof, (ii) Capital Stock of a Restricted Subsidiary now owned or hereafter
acquired by the Company or by any Restricted Subsidiary or (iii) Debt of a
Restricted Subsidiary owed to the Company or to any Restricted Subsidiary,
without in any such case under clause (i), (ii) or (iii) effectively providing
concurrently with such Incurrence that the Outstanding Securities of any series
to which this Section 10.6 applies (pursuant to Section 3.1) (together with, if
the Company shall so determine, any other Debt of the Company or such Restricted
Subsidiary then existing or thereafter created which is not subordinated to the
Securities) are secured equally and ratably with (or, at the Company's option,
prior to) such secured Debt and any other Debt required to be so secured, unless
the aggregate amount of all such secured Debt outstanding at such time, plus all
Attributable Debt of the Company and its Restricted Subsidiaries with respect to
Sale and Leaseback Transactions involving Principal Properties outstanding at
such time (with the exception of such transactions that are excluded as
described pursuant to clauses (1) to (4) of Section 10.7), would not exceed 10%
of Consolidated Net Tangible Assets; provided, however, that this Section 10.6
shall not apply to, and there shall be excluded from Debt in any computation
under this Section 10.6:
(1) Debt secured by a Lien in favor of the Company or a Restricted
Subsidiary;
(2) Debt secured by a Lien in favor of governmental bodies to secure
progress or advance payments or payments pursuant to contracts or statute;
(3) Debt secured by a Lien on property, Capital Stock or Debt
existing at the time of acquisition thereof (including acquisition through
merger, consolidation or otherwise) and not Incurred in anticipation
thereof;
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(4) Debt Incurred or Guaranteed to finance the acquisition of property,
Capital Stock or Debt, or to finance construction on, or improvement or
expansion of, property, which Debt is Incurred within 180 days of such
acquisition or completion of construction, improvement or expansion, and is
secured solely by a Lien on the property, Capital Stock or Debt acquired,
constructed, improved or expanded;
(5) Debt consisting of industrial revenue or pollution control bonds
or similar financing secured solely by a Lien on the property the subject
thereof;
(6) secured Debt outstanding on the date of the Indenture; or
(7) any extension, renewal, refunding or replacement of any Debt
referred to in clauses (3), (4) and (6) of this Section 10.6.
Section 10.7 Limitation on Sales and Leasebacks.
Neither the Company nor any Restricted Subsidiary shall enter
into any Sale and Leaseback Transaction involving any Principal Property or
any part thereof unless the aggregate amount of all Attributable Debt of
the Company and its Restricted Subsidiaries with respect to such
transactions outstanding at such time, plus all secured Debt outstanding at
such time to which the restriction described in Section 10.6 applies, would
not exceed 10% of Consolidated Net Tangible Assets; provided, however, that
this Section 10.7 shall not apply to, and there shall be excluded from in
any computation under Section 10.6 or this Section 10.7 of Attributable
Debt with respect to, any Sale and Leaseback Transaction if:
(1) the lease is for a period of not in excess of three years,
including renewal rights;
(2) the lease secures or relates to industrial revenue or pollution
control bonds or similar financing;
(3) the transaction is between the Company and a Restricted
Subsidiary or between Restricted Subsidiaries; or
(4) the Company or such Restricted Subsidiary, within 270 days after
the sale is completed, applies an amount equal to the greater of (i) the
net proceeds of the sale of the Principal Property or part thereof leased
pursuant to such arrangement or (ii) the fair market value of the Principal
Property or part thereof leased at the time of entering into such
arrangement (as determined by the President and Chief Executive Officer or
the Treasurer) either to (a) the retirement (or open market purchase) of
Securities, other Funded Debt of the Company ranking on a parity with or
senior to Securities or Funded Debt of a Restricted Subsidiary or (b) the
purchase by the Company or any Restricted Subsidiary of other property,
plant or equipment related to the business of the Company
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or any Restricted Subsidiary having a value at least equal to the value of
the Principal Property or part thereof leased.
Section 10.8 Limitations on Restricted Payments.
The Company will not, nor will it permit any Restricted
Subsidiary to, directly or indirectly (i) declare or pay any dividend or
make any distribution on account of the Company's Capital Stock (other than
dividends or distributions payable in Capital Stock (other than
Disqualified Stock) of the Company or dividends or distributions payable to
the Company or any Wholly-Owned Restricted Subsidiary of the Company), (ii)
purchase, redeem or otherwise acquire or retire for value any Capital Stock
of the Company other than any such Capital Stock owned by the Company or
any Wholly-Owned Restricted Subsidiary of the Company or (iii) redeem,
defease (including, but not limited to, legal or covenant defeasance),
repurchase, retire or otherwise acquire or retire for value prior to any
scheduled maturity, repayment or sinking fund payment, Debt of the Company
(other than the Securities of that series) that is subordinate in right of
payment to Securities (all such payments and other actions set forth in
clauses (i), (ii) and (iii) above being collectively referred to as
"Restricted Payments"), unless, at the time of such Restricted Payment:
(a) no Event of Default or event that with the passing of time or the
giving of notice, or both, would constitute an Event of Default shall have
occurred and be continuing or would occur as a consequence thereof; and
(b) upon giving effect to such Restricted Payment on a pro forma
basis (the value of any such payment, if other than cash, being determined
by the Board of Directors and evidenced by a resolution set forth in an
Officers' Certificate delivered to the Trustee) the Consolidated Net Worth
of the Company would exceed:
(I) if the long-term unsecured Debt of the Company is not rated
Investment Grade by each of Moody's and S&P, the sum of (x)
$250,000,000 and (y) an amount equal to the greater of zero and 50% of
cumulative Consolidated Net Income of the Company since June 30, 1996;
or
(II) if the long-term unsecured Debt of the Company is rated
Investment Grade by each of Moody's and S&P, the amount determined
pursuant to Section 10.8(b)(I) as of the last day of the most recent
fiscal quarter prior to the date on which such debt became so rated by
each of Moody's and S&P.
The foregoing restrictions in this Section 10.8 will not prohibit (i)
the payment of any dividend within 60 days after the date of declaration
thereof, if at said date of declaration such payment would have complied with
the provisions of this Indenture, (ii) the redemption, repurchase, retirement or
other acquisition of any Capital Stock of the Company in exchange for, or out of
the proceeds of, the substantially concurrent sale (other than to a Restricted
Subsidiary of the Company) of
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other Capital Stock of the Company (other than any Disqualified Stock), (iii)
the repurchase, redemption or other acquisition or retirement for value of any
Capital Stock of the Company held by any member of the Company's (or any of its
Restricted Subsidiaries') management or any director of the Company pursuant to
any management equity subscription agreement, stock option agreement or other
employee benefit plan or program, (iv) payments not exceeding $15,000,000 in the
aggregate in any twelve month period with respect to dividends on any series of
preferred stock of the Company (other than Disqualified Stock) issued after the
date of this Indenture, (v) any redemption by the Company of any series of
preferred stock of the Company or Debt of the Company which is convertible into
common stock of the Company if at the time of such redemption the Company has an
underwriting commitment on customary terms from a nationally recognized broker-
dealer to purchase all shares of such series of preferred stock or convertible
Debt (or shares of common stock into which such preferred stock or convertible
Debt is convertible) which are not converted as of the redemption date and (vi)
any Restricted Payment made in connection with any merger, consolidation or sale
permitted under Article VIII, provided that in the case of any transaction under
clause (iii) or (iv) above, no Event of Default or event that with the passing
of time or the giving of notice, or both, would constitute an Event of Default
shall have occurred and be continuing immediately after such transaction.
Section 10.9 Limitations on Transactions with Affiliates.
The Company will not, nor will it permit any Restricted Subsidiary to,
sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from, or enter into or make any contract,
agreement, understanding, loan, advance or guarantee with or for the benefit of,
any Affiliate unless (i) such transaction or series of transactions is on terms
that are no less favorable to the Company or such Restricted Subsidiary, as the
case may be, than would be available in a comparable transaction with an
unrelated third party and (ii) the Company delivers to the Trustee, except with
respect to the purchase or sale of products from or to Inland Steel Industries,
Inc. or any of its Affiliates, (a) with respect to a transaction or series of
transactions involving aggregate payments in excess of 1% of Consolidated Net
Tangible Assets, a Board Resolution set forth in an Officers' Certificate
certifying that such transaction complies with clause (i) above and has been
approved by a majority of the independent members of the Board of Directors, and
(b) with respect to a transaction or series of transactions involving aggregate
payments equal to or greater than 4% of Consolidated Net Tangible Assets, the
Company receives a written opinion from a nationally recognized expert that such
transaction or series of transactions is fair to the Company from a financial
point of view, provided that (i) employment agreements, (ii) transactions
between or among the Company and its Restricted Subsidiaries or between or among
its Restricted Subsidiaries, (iii) transactions permitted by Section 10.8 and
(iv) arrangements with Affiliates in effect as of the date of this Indenture,
including any renewal, restructuring, amendment, refinancing or modification of
any such arrangement which does not materially adversely affect the interests of
the Holders of Securities in the reasonable judgment of the Company, in each
case, will not be subject to this Section 10.9.
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Section 10.10 Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Sections 10.6 to 10.9, inclusive, with
respect to the Securities of any series if before the time for such compliance
the Holders of at least a majority in principal amount of the Outstanding
Securities of such series shall, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such term,
provision or condition, but no such waiver shall extend to or affect such term,
provision or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee in respect of any such term, provision or condition shall remain in
full force and effect.
Section 10.11 Provision of Financial Information.
Whether or not the Company is required to be subject to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934, as amended, or any successor
provision thereto, the Company shall file with the Commission the annual
reports, quarterly reports and other documents which the Company would have been
required to file with the Commission pursuant to such Section 13(a) or 15(d) or
any successor provision thereto if the Company were so required, such documents
to be filed with the Commission on or prior to the respective dates (the
"Required Filing Dates") by which the Company would have been required so to
file such documents if the Company were so required. The Company shall also in
any event (a)(1) promptly upon written request transmit by mail to all Holders
of Outstanding Securities, as their names and addresses appear in the Security
Register, and to any prospective holder, without cost to such holders, and (ii)
within 15 days of each Required Filing Date, file with the Trustee copies of the
annual reports, quarterly reports and other documents which the Company would
have been required to file with the Commission pursuant to Section 13(a) or
15(d) of the Exchange Act or any successor provisions thereto if the Company
were required to be subject to such Sections and (b) if filing such documents by
the Company with the Commission is not permitted under the Exchange Act, (i)
promptly upon written request supply copies of such documents to any Holder and
prospective holder and (ii) file copies of such documents with the Trustee.
Section 10.12 Calculation of Original Issue Discount.
The Company shall file with the Trustee promptly at the end of each
calendar year a written notice specifying the amount of original issue discount
(including daily rates and accrual periods) accrued on Outstanding Securities as
of the end of such year.
Section 10.13 Appointments to Fill Vacancies in Trustee's Office.
The Company, whenever necessary to avoid or fill a vacancy in the
office of the Trustee, will appoint, in the manner provided in Section 6.10, a
Trustee, so that there shall at all times be a Trustee hereunder.
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ARTICLE XI
Redemption of Securities
Section 11.1 Applicability of Article.
Securities of any series which are redeemable before their Stated
Maturity shall be redeemable in accordance with their terms and (except as
otherwise specified as contemplated by Section 3.1 for Securities of any series)
in accordance with this Article.
Section 11.2 Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be
evidenced by a Board Resolution or in another manner specified as contemplated
by Section 3.1 for such Securities. In case of any redemption at the election
of the Company, the Company shall, at least 60 days prior to the Redemption Date
fixed by the Company (unless a shorter notice shall be satisfactory to the
Trustee), notify the Trustee of such Redemption Date, of the principal amount of
Securities of such series to be redeemed and, if applicable, of the tenor of the
Securities to be redeemed. In the case of any redemption of Securities prior to
the expiration of any restriction on such redemption provided in the terms of
such Securities or elsewhere in this Indenture, the Company shall furnish the
Trustee with an Officers' Certificate evidencing compliance with such
restriction.
Section 11.3 Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities of any series are to be redeemed
(unless all of the Securities of such series and of a specified tenor are to be
redeemed), the particular Securities to be redeemed shall be selected not more
than 60 days prior to the Redemption Date by the Trustee, from the Outstanding
Securities of such series not previously called for redemption, by such method
as the Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions (equal to the minimum authorized
denomination for Securities of that series or any integral multiple thereof) of
the principal amount of Securities of such series of a denomination larger than
the minimum authorized denomination for Securities of that series. If less than
all of the Securities of such series and of a specified tenor are to be
redeemed, the particular Securities to be redeemed shall be selected not more
than 60 days prior to the Redemption Date by the Trustee, from the Outstanding
Securities of such series and specified tenor not previously called for
redemption in accordance with the preceding sentence.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed.
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The provisions of the two preceding paragraphs shall not apply with
respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
Section 11.4 Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall identify the Securities to be redeemed
(including, subject to Section 3.11, the CUSIP number) and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities of any series are to
be redeemed, the identification (and, in the case of partial redemption of
any Securities, the principal amounts) of the particular Securities to be
redeemed and, if less than all the Outstanding Securities of any series
consisting of a single Security are to be redeemed, the principal amount of
the particular Security to be redeemed,
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and, if applicable, that
interest thereon will cease to accrue on and after said date,
(5) the place or places where such Securities are to be surrendered
for payment of the Redemption Price, and
(6) that the redemption is for a sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
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Section 11.5 Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 10.3) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on, all the Securities
which are to be redeemed on that date.
Section 11.6 Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; provided, however, that, unless otherwise specified as
contemplated by Section 3.1, installments of interest whose Stated Maturity is
on or prior to the Redemption Date shall be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates according to their terms and the
provisions of Section 3.7.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and any premium shall, until
paid, bear interest from the Redemption Date at the rate prescribed therefor in
the Security.
Section 11.7 Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered
at a Place of Payment therefor (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and make available for delivery to the Holder of such
Security without service charge, a new Security or Securities of the same series
and of like tenor, of any authorized denomination as requested by such Holder,
in aggregate principal amount equal to and in exchange for the unredeemed
portion of the principal of the Security so surrendered. If a Book-Entry
Security is so surrendered, such new Security so issued shall be a new Book-
Entry Security.
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ARTICLE XII
Sinking Funds
Section 12.1 Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund
for the retirement of Securities of a series except as otherwise specified as
contemplated by Section 3.1 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series is herein referred to as a "mandatory sinking
fund payment," and any payment in excess of such minimum amount provided for by
the terms of Securities of any series is herein referred to as an "optional
sinking fund payment." If provided for by the terms of Securities of any series,
the cash amount of any sinking fund payment may be subject to reduction as
provided in Section 12.2. Each sinking fund payment shall be applied to the
redemption of Securities of any series as provided for by the terms of
Securities of such series.
Section 12.2 Satisfaction of Sinking Fund Payments with Securities.
The Company (1) may deliver Outstanding Securities of a series (other
than any previously called for redemption) and (2) may apply as a credit
Securities of a series which have been redeemed either at the election of the
Company pursuant to the terms of such Securities or through the application of
permitted optional sinking fund payments pursuant to the terms of such
Securities, in each case in satisfaction of all or any part of any sinking fund
payment with respect to the Securities of such series required to be made
pursuant to the terms of such Securities as provided for by the terms of such
series; provided that such Securities have not been previously so credited.
Such Securities shall be received and credited for such purpose by the Trustee
at the Redemption Price specified in such Securities for redemption through
operation of the sinking fund and the amount of such sinking fund payment shall
be reduced accordingly.
Section 12.3 Redemption of Securities for Sinking Fund.
Not less than 60 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment for
that series pursuant to the terms of that series, the portion thereof, if any,
which is to be satisfied by payment of cash and the portion thereof, if any,
which is to be satisfied by delivering and crediting Securities of that series
pursuant to Section 12.2 and will also deliver to the Trustee any Securities to
be so delivered. Not less than 45 days before each such sinking fund payment
date the Trustee shall select the Securities to be redeemed upon such sinking
fund payment date in the manner specified in Section 11.3 and cause notice of
the redemption thereof to be given in the name of and at the
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expense of the Company in the manner provided in Section 11.4. Such notice
having been duly given, the redemption of such Securities shall be made upon the
terms and in the manner stated in Sections 11.6 and 11.7.
ARTICLE XIII
Defeasance and Covenant Defeasance
Section 13.1 Applicability of Article; Company's Option to Effect Defeasance
or Covenant Defeasance.
If pursuant to Section 3.1 provision is made for either or both of (a)
defeasance of the Securities of a series under Section 13.2 or (b) covenant
defeasance of the Securities of a series under Section 13.3, then the provisions
of such Section or Sections, as the case may be, together with the other
provisions of this Article XIII, shall be applicable to the Securities of such
series, and the Company may at its option by Board Resolution or in another
manner specified as contemplated by Section 3.1 for such Securities, at any
time, with respect to the Securities of such series, elect to have either
Section 13.2 (if applicable) or Section 13.3 (if applicable) be applied to the
Outstanding Securities of such series upon compliance with the conditions set
forth below in this Article XIII.
Section 13.2 Defeasance and Discharge.
Upon the Company's exercise of the above option (if any) applicable to
this Section, the Company shall be deemed to have been discharged from its
obligations with respect to the Outstanding Securities of such series as
provided in this Section on and after the date the conditions precedent set
forth below are satisfied (hereinafter, "defeasance"). For this purpose, such
defeasance means that the Company shall be deemed to have paid and discharged
the entire indebtedness represented by the Outstanding Securities of such series
and to have satisfied all its other obligations under such Securities and this
Indenture insofar as such Securities are concerned (and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging the
same), except for the following which shall survive until otherwise terminated
or discharged thereunder: (A) the rights of Holders of Outstanding Securities
of such series to receive, solely from the trust fund described in Section 13.4
as more fully set forth in such Section, payments of the principal of (and
premium and interest, if any, on) such Securities when such payments are due,
(B) the Company's obligations with respect to such Securities under Sections
3.4, 3.5, 3.6, 10.2 and 10.3 and such obligations as shall be ancillary thereto,
(C) the rights, powers, trusts, duties, immunities and other provisions in
respect of the Trustee hereunder and (D) this Article XIII. Subject to
compliance with this Article XIII, the Company may exercise its option under
this Section 13.2 notwithstanding the prior exercise of its option under Section
13.3 with respect to the Securities of such series.
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Section 13.3 Covenant Defeasance.
Upon the Company's exercise of the above option applicable to this
Section, the Company shall be released from its obligations under Sections 8.1,
10.6, 10.7, 10.8 and 10.9 (and any covenant applicable to such Securities that
are determined pursuant to Section 3.1 to be subject to this provision) and the
occurrence of an event specified in Section 5.1(3) and (5) (with respect to any
of Sections 8.1, 10.6, 10.7, 10.8 or 10.9) (and any other Event of Default
applicable to such Securities that are determined pursuant to Section 3.1 to be
subject to this provision) shall not be deemed to be an Event of Default with
respect to the Outstanding Securities of such series on and after the date the
conditions set forth below are satisfied (hereinafter, "covenant defeasance").
For this purpose, such covenant defeasance means that, with respect to the
Outstanding Securities of such series, the Company may omit to comply with and
shall have no liability in respect of any term, condition or limitation set
forth in any such Section or clause whether directly or indirectly by reason of
any reference elsewhere herein to any such Section or clause or by reason of any
reference in any such Section or clause to any other provision herein or in any
other document, but the remainder of this Indenture and such Securities shall be
unaffected thereby.
Section 13.4 Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions precedent to application of
Section 13.2 or Section 13.3 to the Outstanding Securities of such series, as
the case may be:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 6.9 who shall agree to comply with the provisions of this
Article XIII applicable to it) as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Securities, (A)
money in an amount, or (B) U.S. Government Obligations which through the
scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one day before the
due date of any payment, money in an amount, or (C) a combination thereof,
sufficient, without reinvestment, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and which shall be
applied by the Trustee (or other qualifying trustee) to pay and discharge,
the principal of (and premium and interest, if any on) the Outstanding
Securities of such series on the Stated Maturity of such principal, or
premium and interest, if any. Before such a deposit the Company may make
arrangements satisfactory to the Trustee for the redemption of Securities
at a future date or dates in accordance with Article XI, which shall be
given effect in applying the foregoing.
(2) No Event of Default or event which with notice or lapse of time
or both would become an Event of Default with respect to the Securities of
such series shall have
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occurred and be continuing (A) on the date of such deposit or (B) insofar
as subsections 5.1(8) and 5.1(9) are concerned, at any time during the
period ending on the 90th day after the date of such deposit (it being
understood that the condition in this condition shall not be deemed
satisfied until the expiration of such period).
(3) Such defeasance or covenant defeasance shall not (A) cause the
Trustee for the Securities of such series to have a conflicting interest
for purposes of the Trust Indenture Act with respect to any securities of
the Company or (B) result in the trust arising from such deposit to
constitute, unless it is qualified as, a regulated investment company under
the Investment Company Act of 1940, as amended.
(4) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or
any other agreement or instrument to which the Company is a party or by
which it is bound.
(5) In the case of an election under Section 13.2 with respect to any
series of Securities, the Company shall have delivered to the Trustee an
Opinion of Counsel stating that (x) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling, or (y) since
the date of this Indenture there has been a change in the applicable
Federal income tax law, in either case to the effect that, and based
thereon such opinion shall confirm that, the Holders of the Outstanding
Securities of such series will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit, defeasance and
discharge to be effected with respect to such Securities and will be
subject to Federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such deposit, defeasance
and discharge were not to occur.
(6) In the case of an election under Section 13.3 with respect to any
series of Securities, the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that the Holders of the Outstanding
Securities of such series will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit and covenant
defeasance to be effected with respect to such Securities and will be
subject to Federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such deposit and covenant
defeasance were not to occur.
(7) Such defeasance or covenant defeasance shall be effected in
compliance with any additional terms, conditions or limitations which may
be imposed on the Company in connection therewith pursuant to Section 3.1.
(8) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the defeasance under Section 13.2
or the covenant defeasance under Section 13.3 (as the case may be) have
been complied with.
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Section 13.5 Deposited Money and U.S. Government Obligations to be Held in
Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 10.3, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee (or other qualifying trustee -- collectively, for purposes of
this Section 13.5, the "Trustee") pursuant to Section 13.4 in respect of the
Outstanding Securities of such series shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent (but not
including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities, of all sums due and to become due
thereon in respect of principal (and premium, if any) and interest, but such
money need not be segregated from other funds except to the extent required by
law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the money or U.S. Government
Obligations deposited pursuant to Section 13.4 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of Outstanding Securities.
Anything herein to the contrary notwithstanding, the Trustee shall
deliver or pay to the Company from time to time upon Company Request any money
or U.S. Government Obligations held by it as provided in Section 13.4 which, in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, are in
excess of the amount thereof which would then be required to be deposited to
effect an equivalent defeasance or covenant defeasance, as the case may be, with
respect to such Securities.
Section 13.6 Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with this Article XIII with respect to any Securities by reason of
any order or judgment or any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, then the Company's
obligations under this Indenture and the Securities of such series shall be
revived and reinstated as though no deposit had occurred pursuant to this
Article XIII until such time as the Trustee or Paying Agent is permitted to
apply all such money held in trust pursuant to Section 13.5 with respect to such
Securities in accordance with this Article XIII; provided, however, that if the
Company makes any payment of principal of (and premium, if any) or interest on
any such Security following the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Securities to receive
such payment from the money held by the Trustee or the Paying Agent.
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This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
---------------------
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
RYERSON TULL, INC.
By___________________________
Name:
Title:
Attest:
____________________________
THE BANK OF NEW YORK, as Trustee
By___________________________
Attest:
____________________________
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STATE OF _________ )
) ss.:
COUNTY OF ________ )
On the ___ day of _________, ____, before me personally came
___________________, to me known, who, being by me duly sworn, did depose and
say that he is the _________________________________________________ of Ryerson
Tull, Inc., one of the corporations described in and which executed the
foregoing instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
authority of the Board of Directors of said corporation, and that he signed his
name thereto by like authority.
____________________________________
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ____ day of __________, ____, before me personally came
_________________, to me known, who, being by me duly sworn, did depose and say
that he is ________________ of The Bank of New York one of the corporations
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
____________________________________
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[FORM OF ___% NOTE DUE 2001]
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Company (as defined below)
or its agent for registration of transfer, exchange, or payment, and any Note
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
REGISTERED PRINCIPAL AMOUNT
No.: 1 $150,000,000
CUSIP No.: 783755 AA9
RYERSON TULL, INC.
____% NOTE DUE 2001
RYERSON TULL, INC., a corporation duly organized and existing under
the laws of the State of Delaware (hereinafter called the "Company," which term
shall include any successor Person under the Indenture hereinafter referred to),
for value received, hereby promises to pay to CEDE & CO., or registered assigns,
upon presentation, the principal sum of ONE HUNDRED FIFTY MILLION DOLLARS on
___________, 2001 and to pay interest on the outstanding principal amount
thereon from ____________, 1996, or from the most recent Interest Payment Date
to which interest has been paid or duly provided for, semi-annually in arrears
on ___________ and ___________ in each year, commencing on ___________, 1996, at
the rate of ___% per annum, until the entire principal hereof is paid or made
available for payment. The interest so payable, and punctually paid or duly
provided for on any Interest Payment Date will, as provided in the Indenture, be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest which shall be the __________ or __________ (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for shall forthwith
cease to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities of this series not more than 15
days and not less than 10 days prior to such Special Record Date, or may be paid
at any time in
<PAGE>
any other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in the Indenture. Payment
of the principal of, and premium, if any, on, and interest on this Security will
be made at the office or agency of the Company maintained for that purpose in
the Borough of Manhattan, City of New York, or elsewhere as provided in the
Indenture, in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company payment of interest may be
made by (i) check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register or (ii) transfer to an account of
the Person entitled thereto located inside the United States.
Each Security of this series is one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of _________, 1996
(herein called the "Indenture"), between the Company and The Bank of New York
(herein called the "Trustee," which term includes any successor trustee under
the Indenture with respect to the series of which this Security is a part), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee and the Holders of the
Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the first page hereof, limited in aggregate principal amount to $150,000,000.
Securities of this series will be subject to redemption, in whole or
in part, at any time or from time to time, at the option of the Company on at
least 30 days' prior notice by mail at a redemption price equal to the greater
of (i) 100% of the principal amount of the Securities to be redeemed or (ii) the
sum of the present values of the remaining scheduled payments of principal and
interest thereon discounted to the date of redemption on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury
Rate plus ___ basis points, plus accrued but unpaid interest to the date of
Redemption. On and after the Redemption Date, interest will cease to accrue on
the Securities or portions of Securities called for redemption on such date.
Securities may be redeemed in part but only in integral multiples of $1,000.
"Treasury Rate" means, with respect to any redemption date, the rate
per annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for such Comparable Treasury Issue (expressed
as a percentage of its
-2-
<PAGE>
principal amount) equal to the Comparable Treasury Price for such redemption
date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Securities that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of the Securities. "Independent Investment Banker" means one of the Reference
Treasury Dealers appointed by the Trustee after consultation with the Company.
"Comparable Treasury Price" means, with respect to any Redemption
Date, (i) the average of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) on the
third Business Day preceding such Redemption Date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such Business Day, (A) the average
of the Reference Treasury Dealer Quotations for such Redemption Date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(B) if the Trustee obtains fewer than three such Reference Treasury Dealer
Quotations, the average of all such Quotations.
"Reference Treasury Dealer" means Goldman, Sachs & Co. and CS First
Boston Corporation, and their respective successors; provided, however, that if
any of the foregoing shall cease to be a primary U.S. Government securities
dealer in New York City (a "Primary Treasury Dealer") the Company shall
substitute therefor another Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third Business Day preceding such Redemption Date.
Any notice to the Holders of such a redemption need not set forth the
redemption price but need only set forth the calculation thereof as described in
the third paragraph of this Note. The redemption price, calculated as
aforesaid, shall be set forth in an Officers' Certificate delivered to the
Trustee no later than two Business Days prior to the Redemption Date.
-3-
<PAGE>
In the event of redemption of this Security in part only, a new
Security or Securities for the unredeemed portion thereof will be issued in the
name of the Holder hereof upon cancelation hereof.
No sinking fund shall be established for the benefit of the
Securities.
The Indenture contains provisions for defeasance at any time of (a)
the entire indebtedness of the Company on this Security and (b) certain
restrictive covenants and the related defaults and Events of Default applicable
to the Company, in each case, upon compliance by the Company with certain
conditions set forth in the Indenture, which provisions apply to this Security.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of, and the premium, if any, and accrued
interest on, the Securities of this series may be declared due and payable in
the manner and with the effect provided in the Indenture.
As provided in and subject to the provisions of the Indenture, unless
the principal of all of the Securities of this series at the time Outstanding
shall already have become due and payable, the Holder of this Security shall not
have the right to institute any proceeding with respect to the Indenture or for
the appointment of a receiver or trustee or for any other remedy thereunder,
unless such Holder shall have previously given the Trustee written notice of a
continuing Event of Default with respect to the Securities of this series, the
Holders of not less than 25% in principal amount of the Securities of this
series at the time Outstanding shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default, as Trustee, and
offered the Trustee reasonable indemnity and the Trustee shall not have received
from the Holders of a majority in principal amount of Securities of this series
at the time Outstanding a direction inconsistent with such request, and the
Trustee shall have failed to institute any such proceeding for 60 days after
receipt of such notice, request and offer of indemnity. The foregoing shall not
apply to any suit instituted by the Holder of this Security for the enforcement
of any payment of principal hereof or any interest hereon or after any
respective due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series of Securities then Outstanding affected
thereby. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain
-4-
<PAGE>
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of, premium, if any, on, and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any Place of Payment where the principal of,
premium, if any, on, and interest on this Security are payable duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof.
As provided in the Indenture and subject to certain limitations therein set
forth, Securities of this series are exchangeable for a like aggregate principal
amount of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
-5-
<PAGE>
No recourse under or upon any obligation, covenant or agreement
contained in the Indenture or in this Security, or because of any indebtedness
evidenced thereby, shall be had against any promoter, as such, or against any
past, present or future stockholder, officer or trustee, as such, of the Company
or of any successor, either directly or through the Company or any successor,
under any rule of law, statute or constitutional provision or by the enforcement
of any assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of this Security
by the Holder thereof and as part of the consideration for the issue of the
Securities of this series.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
-6-
<PAGE>
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee by manual signature, this Security shall not be
entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the undersigned officer.
RYERSON TULL, INC.
By:_______________________
Robert J. Darnall
Chairman
Attest
By:_________________________
Charles B. Salowitz
Secretary
Dated: ____________, 1996
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
BY:________________________
Authorized Signatory
-7-
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
=======================================
=======================================
................................................................................
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
................................................................................
the within Security of Ryerson Tull, Inc. and hereby does irrevocably constitute
and appoint
....................................................................... Attorney
to transfer said Security on the books of the within named Company with full
power of substitution in the premises.
Dated: ...... ..............
..............
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
-8-
<PAGE>
[FORM OF ___% NOTE DUE 2006]
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Company (as defined below)
or its agent for registration of transfer, exchange, or payment, and any Note
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
REGISTERED PRINCIPAL AMOUNT
No.: 1 $100,000,000
CUSIP No.: 783755 AB7
RYERSON TULL, INC.
____% NOTE DUE 2006
RYERSON TULL, INC., a corporation duly organized and existing under
the laws of the State of Delaware (hereinafter called the "Company," which term
shall include any successor Person under the Indenture hereinafter referred to),
for value received, hereby promises to pay to CEDE & CO., or registered assigns,
upon presentation, the principal sum of ONE HUNDRED MILLION DOLLARS on
___________, 2006 and to pay interest on the outstanding principal amount
thereon from ____________, 1996, or from the most recent Interest Payment Date
to which interest has been paid or duly provided for, semi-annually in arrears
on ___________ and ___________ in each year, commencing on ___________, 1996, at
the rate of ___% per annum, until the entire principal hereof is paid or made
available for payment. The interest so payable, and punctually paid or duly
provided for on any Interest Payment Date will, as provided in the Indenture, be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest which shall be the __________ or __________ (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for shall forthwith
cease to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities of this series not more than 15
days and not less than 10 days prior to such Special Record Date, or may be paid
at any time in
<PAGE>
any other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in the Indenture. Payment
of the principal of, and premium, if any, on, and interest on this Security will
be made at the office or agency of the Company maintained for that purpose in
the Borough of Manhattan, City of New York, or elsewhere as provided in the
Indenture, in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company payment of interest may be
made by (i) check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register or (ii) transfer to an account of
the Person entitled thereto located inside the United States.
Each Security of this series is one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of _________, 1996
(herein called the "Indenture"), between the Company and The Bank of New York
(herein called the "Trustee," which term includes any successor trustee under
the Indenture with respect to the series of which this Security is a part), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee and the Holders of the
Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the first page hereof, limited in aggregate principal amount to $100,000,000.
Securities of this series will be subject to redemption, in whole or
in part, at any time or from time to time, at the option of the Company on at
least 30 days' prior notice by mail at a redemption price equal to the greater
of (i) 100% of the principal amount of the Securities to be redeemed or (ii) the
sum of the present values of the remaining scheduled payments of principal and
interest thereon discounted to the date of redemption on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury
Rate plus ___ basis points, plus accrued but unpaid interest to the date of
Redemption. On and after the Redemption Date, interest will cease to accrue on
the Securities or portions of Securities called for redemption on such date.
Securities may be redeemed in part but only in integral multiples of $1,000.
"Treasury Rate" means, with respect to any redemption date, the rate
per annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for such Comparable Treasury Issue (expressed
as a percentage of its
-2-
<PAGE>
principal amount) equal to the Comparable Treasury Price for such redemption
date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Securities that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of the Securities. "Independent Investment Banker" means one of the Reference
Treasury Dealers appointed by the Trustee after consultation with the Company.
"Comparable Treasury Price" means, with respect to any Redemption
Date, (i) the average of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) on the
third Business Day preceding such Redemption Date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such Business Day, (A) the average
of the Reference Treasury Dealer Quotations for such Redemption Date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(B) if the Trustee obtains fewer than three such Reference Treasury Dealer
Quotations, the average of all such Quotations.
"Reference Treasury Dealer" means Goldman, Sachs & Co. and CS First
Boston Corporation, and their respective successors; provided, however, that if
any of the foregoing shall cease to be a primary U.S. Government securities
dealer in New York City (a "Primary Treasury Dealer") the Company shall
substitute therefor another Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third Business Day preceding such Redemption Date.
Any notice to the Holders of such a redemption need not set forth the
redemption price but need only set forth the calculation thereof as described in
the third paragraph of this Note. The redemption price, calculated as
aforesaid, shall be set forth in an Officers' Certificate delivered to the
Trustee no later than two Business Days prior to the Redemption Date.
-3-
<PAGE>
In the event of redemption of this Security in part only, a new
Security or Securities for the unredeemed portion thereof will be issued in the
name of the Holder hereof upon cancelation hereof.
No sinking fund shall be established for the benefit of the
Securities.
The Indenture contains provisions for defeasance at any time of (a)
the entire indebtedness of the Company on this Security and (b) certain
restrictive covenants and the related defaults and Events of Default applicable
to the Company, in each case, upon compliance by the Company with certain
conditions set forth in the Indenture, which provisions apply to this Security.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of, and the premium, if any, and accrued
interest on, the Securities of this series may be declared due and payable in
the manner and with the effect provided in the Indenture.
As provided in and subject to the provisions of the Indenture, unless
the principal of all of the Securities of this series at the time Outstanding
shall already have become due and payable, the Holder of this Security shall not
have the right to institute any proceeding with respect to the Indenture or for
the appointment of a receiver or trustee or for any other remedy thereunder,
unless such Holder shall have previously given the Trustee written notice of a
continuing Event of Default with respect to the Securities of this series, the
Holders of not less than 25% in principal amount of the Securities of this
series at the time Outstanding shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default, as Trustee, and
offered the Trustee reasonable indemnity and the Trustee shall not have received
from the Holders of a majority in principal amount of Securities of this series
at the time Outstanding a direction inconsistent with such request, and the
Trustee shall have failed to institute any such proceeding for 60 days after
receipt of such notice, request and offer of indemnity. The foregoing shall not
apply to any suit instituted by the Holder of this Security for the enforcement
of any payment of principal hereof or any interest hereon or after any
respective due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series of Securities then Outstanding affected
thereby. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain
-4-
<PAGE>
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of, premium, if any, on, and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any Place of Payment where the principal of,
premium, if any, on, and interest on this Security are payable duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof.
As provided in the Indenture and subject to certain limitations therein set
forth, Securities of this series are exchangeable for a like aggregate principal
amount of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
-5-
<PAGE>
No recourse under or upon any obligation, covenant or agreement
contained in the Indenture or in this Security, or because of any indebtedness
evidenced thereby, shall be had against any promoter, as such, or against any
past, present or future stockholder, officer or trustee, as such, of the Company
or of any successor, either directly or through the Company or any successor,
under any rule of law, statute or constitutional provision or by the enforcement
of any assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of this Security
by the Holder thereof and as part of the consideration for the issue of the
Securities of this series.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
-6-
<PAGE>
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee by manual signature, this Security shall not be
entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the undersigned officer.
RYERSON TULL, INC.
By:_______________________
Robert J. Darnall
Chairman
Attest
By:_________________________
Charles B. Salowitz
Secretary
Dated: ____________, 1996
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
BY:________________________
Authorized Signatory
-7-
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
=======================================
=======================================
................................................................................
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
................................................................................
the within Security of Ryerson Tull, Inc. and hereby does irrevocably constitute
and appoint
....................................................................... Attorney
to transfer said Security on the books of the within named Company with full
power of substitution in the premises.
Dated: ...... ..............
..............
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
-8-
<PAGE>
RYERSON TULL, INC.
------------------
PROMISSORY NOTE
$293,800,000 June __, 1996
The undersigned, Ryerson Tull, Inc., a Delaware corporation (the
"Company"), for value received, promises to pay to the order of Inland Steel
Industries, Inc., a Delaware corporation ("ISI"), at its office in Chicago,
Illinois on June __, 2001, the principal sum of Two Hundred Ninety Three Million
Eight Hundred Thousand Dollars ($293,800,000), together with interest from the
date hereof to maturity at the Prime Rate from time to time in effect on the
principal amount remaining from time to time unpaid. Interest shall be payable
semi-annually on the first day of each June and December, commencing December 1,
1996, and at maturity. This Note shall bear interest at the rate per annum
equal to 1% in excess of the Prime Rate from time to time in effect (but in no
event less than 1% in excess of the Prime Rate in effect at maturity) from
maturity until paid, which interest after maturity shall be payable on demand.
The "Prime Rate," for purposes of this Note, shall be a rate per annum then most
recently publicly announced by Morgan Guaranty Trust Company of New York in New
York City as its Prime Rate. Interest shall be computed on the basis of a year
consisting of 365, or when appropriate 366, days.
This Note may be prepaid, in whole or in part, at any time; provided,
however, that partial prepayments shall be in a minimum amount of $5,000,000 or
any larger multiple of $1,000,000 and shall include accrued interest thereon to
the date of such prepayment.
If (i) there is a default in the payment when due of any principal or
interest on this Note, and such default shall continue for 10 days after notice
from ISI to the Company, or (ii) the Company becomes insolvent or admits in
writing its inability to pay its debts as they mature or applies for, consents
to or acquiesces in the appointment of a trustee or receiver for it or any of
its property, or any bankruptcy, reorganization, debt arrangement or other
proceeding under any bankruptcy or insolvency law shall be instituted by or
against the Company, and if instituted against it shall be consented to or
acquiesced in by it or shall not be dismissed within a period of sixty (60)
days, then and in either such event ISI may, at its option and without demand or
notice of any kind, declare this Note to be due and payable, whereupon the
unpaid principal of and accrued interest on this Note shall become immediately
due and payable and ISI may exercise all rights and remedies available to it
under applicable law. The Company agrees to pay all fees and expenses
(including attorneys' fees and expenses) incurred by ISI in connection with any
such default and any enforcement proceedings resulting therefrom.
This Note evidences a portion of the proceeds of a dividend declared by the
Company on June __, 1996 and payable to ISI on the date hereof.
This Note shall be governed by the laws of the State of Illinois.
RYERSON TULL, INC.
By: ________________________________
Its: _______________________________
Address: 2621 West 15th Place
Chicago, Illinois 60608
<PAGE>
EXHIBIT 5
---------
June __, 1996
Ryerson Tull, Inc.
2621 West 15th Place
Chicago, Illinois 60608
Re: $250,000,000 of Debt Securities
Ladies and Gentlemen:
We have acted as counsel to Ryerson Tull, Inc., a Delaware corporation
(the "Company"), in connection with the corporate proceedings (the "Corporate
Proceedings") taken and to be taken relating to the public offering of
$250,000,000 of Debt Securities (the "Debt Securities"). The Debt Securities
are to be issued under an Indenture to be entered into between the Company and
The Bank of New York, as Trustee (the "Indenture"). We have also participated
in the preparation and filing with the Securities and Exchange Commission under
the Securities Act of 1933 of a registration statement on Form S-1 (the
"Registration Statement") relating to the Debt Securities. In this connection,
we have examined such corporate and other records, instruments, certificates and
documents as we considered necessary to enable us to express this opinion.
Based on the foregoing, it is our opinion that, upon completion of the
Corporate Proceedings, the Debt Securities will have been duly authorized for
issuance and, when the Indenture has been duly executed and delivered by the
parties thereto and when the Debt Securities are duly executed, authenticated,
issued and delivered, the Debt Securities will constitute valid and legally
binding obligations of the Company entitled to the benefits of the Indenture,
subject to bankruptcy, insolvency, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors' rights and to
general equity principles (whether considered in a proceeding at law or in
equity).
We consent to the filing of this opinion as an exhibit to the Registration
Statement relating to the Debt Securities and to the reference to us under the
caption "Validity of the Notes" therein.
Very truly yours,
MAYER, BROWN & PLATT
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
Ryerson Tull, Inc., a Delaware corporation ("the Company"), and Inland
Steel Industries, Inc., a Delaware corporation ("ISI"), in consideration of the
mutual covenants and agreements set forth herein, and other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the parties hereto agree as follows:
Section 1. Registration Rights.
--------- -------------------
(a) ISI shall have the right to make two requests (each of which must be
in writing) in any twelve month period to register, under the Securities Act of
1933, as amended prior hereto or subsequently (the "Securities Act"), the shares
of the Class A Common Stock of the Company received by ISI upon any conversion
of Class B Common Stock of the Company and any such shares distributed thereon
(the "Subject Stock"), and the Company shall use its best efforts to cause such
shares to be registered under the Securities Act as soon as reasonably
practicable upon receiving such a request, subject to the terms of this
Agreement. Notwithstanding the foregoing, the Company shall not be required to
comply with any such request unless such request (as contrasted with the number
of shares of Subject Stock actually sold in the offering) requests registration
of the lesser (the "Minimum Registrable Amount") of (i) 1,000,000 shares of
Subject Stock (which number shall be adjusted proportionately in the event of
any reverse stock split, stock split or other distribution by the Company of its
Class A Common Stock to all holders of Class A Common Stock), (ii) Subject Stock
having a market value of at least $25 million (based on the average closing
price of the Company's Class A Common Stock during the 20 trading days preceding
the date of the request) or (iii) any shares of Subject Stock representing ISI's
remaining ownership of such stock, if less than (i) or (ii). A pledgee of
Subject Stock
<PAGE>
may, with the consent of ISI, request registration of Subject Stock under this
Section 1(a); provided, however, that such registration (i) shall count as a
request for registration by ISI for purposes of the first sentence of this
Section 1(a) and (ii) be subject in all respects to the provisions of this
Agreement except for those set forth in the prior sentence providing for a
Minimum Registrable Amount. Upon receiving such a request, the Company shall
prepare and file, on Form S-3 if permitted or otherwise on such appropriate
form, a registration statement under the Securities Act to effect such
registration.
Notwithstanding the foregoing, the Company (i) shall not be obligated to
file more than one registration statement during any four-month period, (ii)
shall not be obligated to cause any special audit to be undertaken in connection
with any such registration and (iii) shall be entitled to postpone the filing or
the effectiveness of any registration statement otherwise required to be
prepared and filed by the Company, or to suspend its other obligations under
this Agreement, including its obligations to maintain the effectiveness of such
registration statement, if (A) the Company is, at such time, conducting or
determines to conduct an underwritten public offering of Class A Common Stock
(or securities convertible into Class A Common Stock) and is advised in writing
by its managing underwriter or underwriters that the price, timing or
distribution of Class A Common Stock to be offered in such offering would in its
or their reasonable opinion be materially adversely affected by the registration
so requested or commenced, (B) the Company reasonably determines that the
registration and distribution of shares of Class A Common Stock would materially
interfere with any pending or imminent financing, acquisition, corporate
reorganization or other material transaction involving the Company or any of its
subsidiaries or (C) the Company reasonably determines that it is precluded,
either due to circumstances beyond its control or because it is unable or
unwilling for valid corporate purposes to make any disclosures which would be
required to be made therein, from filing any such registration statement or any
amendment thereto or supplementing any prospectus included therein. In the event
that the filing of such registration statement is postponed, ISI shall have the
right to withdraw the request for registration by giving written notice to the
Company within 15 days after receipt of the notice of postponement (and, in the
event of such withdrawal, such
-2-
<PAGE>
request shall be ignored for purposes of determining the number of registrations
to which ISI is entitled pursuant to this paragraph (a)). The Company agrees
that it will terminate any such postponement as promptly as reasonably
practicable and will promptly notify ISI of such termination. In making any such
determination to initiate or terminate a postponement, the Company shall not be
required to consult with or obtain the consent of ISI, and any such
determination shall be the Company's responsibility alone, and ISI shall not be
responsible or have any liability therefor.
(b) If the Company proposes to register any of its Class A Common Stock
under the Securities Act (other than pursuant to paragraph (a) hereof, and other
than (i) securities to be issued pursuant to a stock option or other employee or
director benefit or similar plan or (ii) securities proposed to be issued in
exchange for securities or assets of, or in connection with a merger or
consolidation with, another corporation), the Company shall, as promptly as
practicable, give written notice of the Company's intention to effect such
registration. If, within 15 days after receipt of such notice, ISI submits a
written request to the Company specifying the amount of Subject Stock that it
proposes to sell, the Company shall use its best efforts to include the shares
specified in ISI's request in such registration statement and the Company shall
keep each such registration statement in effect and maintain compliance with
federal and state law and regulation as set forth in clause (c) below.
Notwithstanding the foregoing, if the offering of the Company's Class A Common
Stock pursuant to such registration statement is to be made by or through
underwriters, the Company shall not be required to include the Subject Stock
therein if, but only to the extent that, the underwriter managing the offering
advises the Company in writing that it reasonably believes that such inclusion
would create a substantial possibility of adversely affecting the price, timing
or distribution of the Class A Common Stock to be offered by the Company.
(c) In connection with any offering of shares of the Subject Stock
registered pursuant to this Agreement, the Company shall (i) furnish ISI such
number of copies of any prospectus (including any preliminary prospectus) as it
may reasonably request in order to effect the offering and sale of the Subject
-3-
<PAGE>
Stock to be offered and sold, but only while the Company shall be required under
the provisions hereof to cause the registration statement to remain effective;
(ii) take such reasonable action as shall be necessary to qualify the Subject
Stock covered by such registration statement under such blue sky or other state
securities laws for offer and sale as ISI shall reasonably request; provided,
however, that the Company shall not be obligated to qualify as a foreign
corporation to do business under the laws of any jurisdiction in which it shall
not then be qualified or to file any general consent to service of process in
any jurisdiction in which such a consent has not been previously filed; (iii) at
least 5 days before filing any registration statement or any amendment or
supplement thereto, furnish to ISI and its counsel copies of such documents,
which documents will be subject to the reasonable review of ISI and such
counsel, such review to be conducted with reasonable promptness; and (iv) make
available, upon reasonable notice and during business hours, to ISI and any
attorney, accountant or other agent retained by ISI (collectively, the
"Inspectors"), for inspection by such Inspectors, all financial and other
records, pertinent corporate documents, agreements and properties of the Company
as shall be reasonably requested by ISI or such Inspectors. In connection with
any offering of the Subject Stock registered pursuant to this Agreement, the
Company shall (x) furnish to the underwriter unlegended certificates
representing ownership of the Class A Common Stock being sold in such
denominations as requested and (y) instruct any transfer agent and registrar of
the Class A Common Stock to release any stop transfer orders with respect to
such Class A Common Stock. Upon any registration statement becoming effective
pursuant to this Agreement under Rule 415 of the Securities Act, the Company
shall use its best efforts, subject to the terms of this Agreement, to keep such
registration statement effective for a period not to exceed 180 days (or such
shorter period that will terminate when all Subject Stock covered by such
registration statement has been sold or such registration statement has been
withdrawn).
(d) ISI shall pay all out-of-pocket expenses incurred by ISI in connection
with any registration statement subject to Section 1(a) of this Agreement,
including, without limitation, all underwriting discounts and commissions
related to shares of the Subject Stock being sold by ISI and the fees and
disbursements of its counsel and accountants, the filing fees
-4-
<PAGE>
paid to the Securities and Exchange Commission (the "Commission") and state
securities authorities with respect to the Subject Stock, attorney's fees in
connection with the filings made with the state securities authorities, the
printing fees in connection with such offering and filing fees and related
attorney's fees regarding the review conducted of the underwriting arrangements
by the National Association of Securities Dealers. The Company shall pay all
other expenses in connection with any registration statement subject to Section
1(a) of this Agreement. In the case of the registration of Class A Common Stock
under Section 1(b) of this Agreement, each of the Company and ISI shall be
exclusively responsible for the fees and expenses of its own respective counsel
and accountants. All other expenses of an offering under Section 1(b) shall be
allocated between the Company and ISI on a proportional basis according to the
number of shares included by each in the offering.
(e) In the case of any offering registered pursuant to this Agreement, the
Company agrees to indemnify and hold ISI and each person who controls ISI within
the meaning of Section 15 of the Securities Act and the directors and officers
of ISI harmless against any and all losses, claims, damages or liabilities
(including reasonable legal fees and other reasonable expenses incurred in the
investigation and defense thereof) to which they or any of them may become
subject under the Securities Act or any other statute or common law or
otherwise, insofar as any such losses, claims, damages, liabilities or actions
shall arise out of or shall be based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the registration statement
relating to the sale of such Subject Stock, or the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading or (ii) any untrue statement or alleged untrue statement of
a material fact contained in the prospectus (as amended or supplemented if the
Company shall have filed with the Commission any amendment thereof or supplement
thereto), or the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however, that the
indemnification agreement contained in this paragraph (e) shall not apply to
such losses, claims, damages, liabilities or actions which shall arise out of or
shall
-5-
<PAGE>
be based upon any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, which (x) shall have been made in reliance upon
and in conformity with information furnished in writing to the Company by ISI or
any underwriter for ISI, as the case may be, specifically for use in connection
with the preparation of the registration statement or prospectus contained in
the registration statement or any such amendment thereof or supplement thereto
or (y) contained in any preliminary prospectus (or any prospectus), which untrue
statement or omission or alleged untrue statement or omission was corrected in
the prospectus (or in a supplement thereto) if ISI or an underwriter sold the
Subject Stock to the person alleging such loss, liability, claim, damage or
expense without sending or giving, at or prior to the final written confirmation
of such sale, a copy of the prospectus (or of the prospectus as amended or
supplemented) if the Company had previously complied with the request of ISI or
such underwriter for copies thereof.
(f) In the case of each offering registered pursuant to this Agreement,
ISI shall agree, in the same manner and to the same extent as set forth in
paragraph (e) of this Agreement, severally to indemnify and hold harmless the
Company and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act, and the directors and officers of the Company,
with respect to any statement in or omission from such registration statement or
prospectus contained in such registration statement (as amended or as
supplemented, if amended or supplemented as aforesaid), if such statement or
omission shall have been made in reliance upon and in conformity with
information furnished in writing to the Company by ISI or such underwriter, as
the case may be, specifically for use in connection with the preparation of such
registration statement or prospectus contained in such registration statement or
any such amendment thereof or supplement thereto.
(g) Each party indemnified under paragraph (e) or (f) of this Agreement
shall, promptly after receipt of notice of the commencement of any action
against such indemnified party in respect of which indemnity may be sought
hereunder, notify the indemnifying party in writing of the commencement thereof.
The omission of any indemnified party to so notify an indemnifying party of any
such action shall not relieve the indemnifying party from any liability in
respect of such action which it may have to
-6-
<PAGE>
such indemnified party on account of the indemnity agreement contained in
paragraph (e) or (f) of this Agreement, unless (and only to the extent) the
indemnifying party was prejudiced by such omission, and in no event shall
relieve the indemnifying party from any other liability which it may have to
such indemnified party. In case any such action shall be brought against any
indemnified party and it shall notify an indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it may desire, jointly with any other indemnifying party
similarly notified, to assume the defense thereof with counsel selected by it
serving as counsel for all indemnified parties, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under paragraph (e) or (f) of this Agreement for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation (unless such
indemnified party reasonably objects to such assumption on the grounds that
counsel selected by the indemnifying party faces a conflict of interest in also
representing the indemnified party, in which event the indemnified party shall
be reimbursed by the indemnifying party for the reasonable expenses incurred in
connection with retaining separate legal counsel).
(h) To the extent a party is prohibited by law from performing the
indemnity provided by this Agreement, it shall, in lieu thereof, contribute to
such losses, claims, damages or liabilities to the maximum extent permitted by
law and the above provisions to the extent applicable to such contribution shall
be followed.
Section 2. Limitations on Registration Rights.
--------- ----------------------------------
(a) TERMINATION OF REGISTRATION RIGHTS. The right of ISI to request the
registration of the Subject Stock under this Agreement shall continue until
counsel to the Company, which shall be reasonably acceptable to ISI, delivers an
opinion to the Company that public distribution of all remaining shares of the
Subject Stock in one transaction shall not require registration under the
Securities Act.
-7-
<PAGE>
(b) RULE 144. With a view to making available to ISI the benefits of
certain rules and regulations of the Commission which may permit the sale of
Class A Common Stock to the public without registration, the Company agrees,
after such time as a public market exists for the Class A Common Stock, to :
(i) make and keep public information available as those terms are
understood and defined in Rule 144;
(ii) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and
(iii) furnish to ISI forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144,
and of the Exchange Act, a copy of the most recent annual or quarterly
report of the Company filed with the Commission, if any, and such other
reports and documents of the Company and other information in the
possession of or reasonably obtainable by the Company as ISI may reasonably
request in availing itself of any rule or regulation of the Commission
allowing it to sell securities without registration under the Securities
Act.
(c) RULE 415. ISI may require that the registration statement filed under
Section 1(a) be filed pursuant to Rule 415 under the Securities Act, provided,
however, the Company shall not be required to file a registration statement
pursuant to Rule 415 if the Company is not eligible to file the registration
statement on Form S-3 or any form adopted in place thereof.
(d) RESTRICTIONS ON PUBLIC SALE. ISI agrees not to effect any public sale
or distribution of any Subject Stock, or any securities convertible into or
exchangeable or exercisable for such securities (including a sale pursuant to
Rule 144 under the Act), during the 14 days prior to, and during the 90-day
period beginning on, the effective date of a registration statement filed by the
Company during the period that ISI may request registration of Subject Stock
pursuant to Section 1(a) of this Agreement (except as part of such
registration), if and to the extent requested in writing (with reasonable prior
notice) by the Company in the case of a non-underwritten public offering or by
-8-
<PAGE>
the Company or the managing underwriter or underwriters in the case of an
underwritten public offering.
(e) CESSATION OF SALES FOR MAJOR TRANSACTIONS AND MATERIAL INFORMATION.
ISI agrees that, upon receipt of notice from the Company of any determination
specified in clause (iii)(A), (b) or (C) of the second paragraph of Section
1(a), ISI will immediately discontinue dispositions pursuant to any registration
statement filed pursuant to this Agreement. In the event the Company shall give
any such notice, the 180-day period mentioned in Section 1(c) shall be extended
by the number of days during the period from and including the date of the
giving of such notice pursuant to this clause of Section 2 to and including the
date when ISI receives notice from the Company that ISI may resume dispositions
of Subject Stock pursuant to such registration statement.
(f) ISI'S DUTY TO REPORT. In respect of a registration pursuant to this
Agreement, ISI shall advise the Company immediately if ISI knows or becomes
aware of any matter which ISI believes may result in the inclusion in a
prospectus contained in such registration statement of an untrue statement of a
material fact or the omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading, and shall promptly
notify the Company and assist the Company in preparation and filing with the
Commission of any such amendments or supplements to said registration statement
that may be necessary or appropriate to permit the prospectus included therein
to be used under the Securities Act during the period during which the
prospectus must be delivered in connection with the offering and sale of Subject
Stock.
(g) ISI'S DUTY TO COOPERATE. The Company may require ISI to furnish to
the Company such information regarding the distribution of Subject Stock and
such other information relating to ISI and its ownership of Subject Stock as the
Company may from time to time reasonably request and ISI agrees to furnish the
Company with such information and to cooperate with the Company as necessary to
enable the Company to comply with the provisions of this Agreement.
(h) CESSATION OF SALES WHEN PROSPECTUS IS MISLEADING. Upon receipt of any
notice from the Company of the happening of any event as a result of
which the prospectus included in such
-9-
<PAGE>
registration statement (as then in effect) contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, ISI will immediately discontinue
disposition of the Subject Stock until ISI receives copies of the supplemented
or amended prospectus contemplated by subsection (c) of Section 1 or until it is
advised in writing (the "Advice") by the Company that the use of the prospectus
may be resumed, and has received copies of any additional or supplemental
filings which are incorporated by reference in the prospectus. If so directed by
the Company, ISI will, or will request the managing underwriter or agent, if
any, to, deliver to the Company all copies (other than permanent file copies
then in ISI's possession) of the prospectus covering such Subject Stock current
at the time of receipt of such notice. In the event the Company shall give any
such notice, the 180-day time period mentioned in subsection (c) of Section 1
shall be extended by the number of days during the period from and including the
date of the giving of such notice to and including the date when ISI shall have
received the copies of the supplemented or amended prospectus contemplated by
subsection (c) of Section 1 hereof or the Advice.
(i) UNDERWRITING ARRANGEMENTS. ISI may not participate in any underwritten
registration under Section 1(b) or demand an underwritten registration under
Section 1(a) unless ISI agrees to execute an underwriting agreement with such
underwriter provided, however, that such underwriting agreement must be
reasonably satisfactory to ISI and must be in customary form. In the case of an
underwritten offering registered pursuant to the terms of this Agreement, the
Company agrees, at the request of ISI, to execute an underwriting agreement with
such underwriters, provided, however, that such underwriting agreement must be
reasonably satisfactory to the Company and must be in customary form.
Section 3. Specific Performance.
--------- --------------------
Each of the parties hereto recognizes and acknowledges that a breach by it
of any covenants or agreements contained in this Agreement will cause the other
party to sustain damages for which it would not have an adequate remedy at law
for money damages, and therefore each of the parties hereto agrees that in the
event
- 10-
<PAGE>
of any such breach the aggrieved party shall be entitled to the remedy of the
specific performance of such covenants and agreements and injunctive and other
equitable relief in addition to any other remedy to which it may be entitled, at
law or in equity.
Section 4. Notices.
--------- -------
All notices or other communications under this Agreement shall be in
writing and shall be deemed to be duly given when (a) delivered in person, (b)
deposited in the United States mail or private express mail, postage prepaid, or
(c) sent by facsimile (with a machine confirmation of receipt) addressed as
follows:
If to ISI, to: Inland Steel Industries, Inc.
30 West Monroe Street
Chicago, Illinois 60603
Facsimile: 312-899-3921
Attention: Vice President and
General Counsel
If to the Company, to: Ryerson Tull, Inc.
2621 West 15th Place
Chicago, Illinois 60608
Facsimile: 312-899-3214
Attention: Corporate Secretary
Any party may, by notice to the other party, change the address to which such
notices are to be given.
Section 5. Severability.
--------- ------------
Whenever possible, each provision of this Agreement will be interpreted in
such a manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be prohibited by or invalid under
applicable law, such prohibition or invalidity shall only apply to such
provision, without invalidating the remainder of this Agreement.
Section 6. Assignment.
--------- ----------
This Agreement and all of the provisions hereof shall be binding upon and
inure to the benefit of the parties hereto and
-11-
<PAGE>
their respective successors and assigns; provided, however, that in the case of
multiple assignees, in order for any assignee to exercise any rights under this
Agreement, all assignees must agree among themselves, in a manner reasonably
acceptable to the Company, to exercise their rights under this Agreement in a
manner that will not increase the Company's burdens under this Agreement.
Section 7. Governing Law.
--------- -------------
This Agreement and the legal relations among the parties hereto shall be
governed by and construed in accordance with the laws of the State of Illinois,
without regard to its conflicts of law doctrine.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of June __, 1996.
Ryerson Tull, Inc.
By:
__________________________
Title:
____________________
Inland Steel Industries, Inc.
By:
__________________________
Title:
____________________
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<PAGE>
[LETTERHEAD OF INLAND STEEL INDUSTRIES]
June 27, 1990
Mr. Carl G. Lusted
Vice President
J. M. Tull Metals Company, Inc.
4400 Peachtree Industrial Blvd.
P.O. Box 4725
Norcross, Georgia 30091
Dear Carl:
In return for your willingness to move from Atlanta to the Chicago area in
order to assume the responsibilities of President of Ryerson Central, Inland
Steel Industries, Inc. ("Inland") agrees as follows:
(1) Sale of your Atlanta home: Inland will pay to you the amount, if any,
by which the purchase price ($230,000.00) of your Atlanta home exceeds the net
sales price (i.e., gross sales price less real estate brokerage commissions and
incidental costs of sale) of such home.
(2) Move from Chicago area: If upon your attainment of the age of 62 or
at such other time as may be mutually acceptable to you and Inland, you desire
to move from the Chicago area, Inland will reimburse you for the reasonable
costs of moving you and your family from the Chicago area to the Atlanta area or
to any other location that is agreed to by both you and Inland.
(3) Sale of Chicago home: In connection with your move from the Chicago
area as set forth in paragraph (2) above, Inland will pay to you the amount, if
any, by which the purchase price of your Chicago home (or the "appraised value"
of your Chicago home at the time you purchase the same, if such appraised value
is less than the purchase price) exceeds the net sales price (i.e., gross sales
price less real estate brokerage commissions and incidental costs of sale) of
such home. "Appraised value"
<PAGE>
Mr. Carl G. Lusted
Page Two
June 27, 1990
means the fair market value of your Chicago home as determined by such appraisal
firm or other organization providing residential real estate appraisal services
as may be acceptable to both you and Inland.
Please acknowledge receipt of this letter by signing and returning the
enclosed copy thereof to me.
Very truly yours,
INLAND STEEL INDUSTRIES, INC.
By /s/ Judd R. Cool
-------------------------
Judd R. Cool
Vice President-
Human Resources
JOSEPH T. RYERSON & SON, INC.
By /s/ W. Gordon Kay
-------------------------
W. Gordon Kay
President
Receipt acknowledged this 29 day of
June, 1990.
/s/ Carl G. Lusted
- -------------------------
Carl G. Lusted
<PAGE>
Copy of Form of Severance Agreement
dated March 27, 1996
between
Inland Steel Industries, Inc.
and each of:
Robert J. Darnall
Jay M. Gratz
Carl G. Lusted
Stephen E. Makarewicz
<PAGE>
Inland Steel Industries, Inc.
30 West Monroe Street
Chicago, Illinois 60603
March 27, 1996
Dear :
Inland Steel Industries, Inc. ("ISI") considers it essential to the
best interests of its stockholders to foster the continuous employment
of key management personnel of a and its subsidiaries (collectively,
the "Company"). In this connection, the Board of Directors of ISI (the
"Board") recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that
such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of
management personnel to the detriment of ISI and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of
members of the Company's management, including yourself, to their
assigned duties without distraction in the face of potentially
disturbing circumstances arising from the possibility of a change in
control of the Company, although no such change is now contemplated. In
order to induce you to remain in the employ of the Company and in
consideration of your agreement set forth in Subsection 2(ii) hereof,
ISI agrees that you shall receive the severance benefits set forth in
this letter agreement ("Agreement") in the event your employment with
the Company is terminated subsequent to a "change in control of the
Company" (as defined in Section 2 hereof) under the circumstances
described below. This Agreement shall constitute an amendment and
restatement of and shall supersede the agreement entered into between
you and ISI with respect to these matters dated FIELD (date). In the
event that you receive severance benefits hereunder, such benefits shall
be in lieu of, and you shall not be entitled to receive, any benefits or
payments under any other severance plan, policy or agreement of or with
the Company. In addition, if you are or become entitled
<PAGE>
Page 3
to benefits from the Company pursuant to another agreement providing for
benefits on account of a change in control or the law of a jurisdiction
other than the United States or any state or territory thereof as a
result of an event for which benefits are payable to you pursuant this
Agreement, the benefits paid to you pursuant to this Agreement shall be
reduced by the amount paid to you pursuant to such other agreement or
law.
1. Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 1996; provided,
however, that commencing on January 1, 1997 and each January 1
thereafter, the term of this Agreement shall automatically be extended
for one additional year unless, during the preceding year but not later
than June 30 of such preceding year, ISI shall have given notice that it
does not wish to extend this Agreement. Notwithstanding the preceding
sentence: (i) if your employer is a direct or indirect subsidiary of
ISI, this Agreement shall terminate on the date of which ISI ceases to
own, directly or indirectly, at least 80 percent of your employer for
any reason which does not constitute a change in control of the Company;
and (ii) if a change in control of the Company or a potential change in
control of the Company shall have occurred during the original or
extended term of this Agreement, this Agreement shall continue in effect
for a period of twenty-four (24) months beyond the month in which such
change in control of potential change in control of the Company occurred
unless earlier terminated under clause (i) next above.
2. Change in Control; Potential Change in Control. (i) No
benefits shall be payable hereunder unless there shall have been a
potential change in control or a change in control of the Company, as
set forth below. For purposes of this Agreement, a "change in control
of the Company" shall be deemed to have occurred if (A) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), other than (w) the
Company, (x) a trustee or other fiduciary holding voting securities
under an employee benefit plan of the Company, (y) an underwriter
temporarily holding voting securities pursuant to an offering of such
securities, or (z) a corporation owned, directly or indirectly, by the
securityholders of ISI in substantially the same proportions as their
ownership of voting securities of ISI, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of voting securities of ISI (not including in the voting
securities beneficially owned by such person any voting securities
acquired directly from ISI or its affiliates) representing 40% or more
of the combined voting power of ISI's then outstanding voting
securities; (B) during any period of two consecutive years (not
including any period prior to the execution of this Agreement),
individuals who
at the beginning of such period constitute the Board and any new
director (other than a director designated by a person who has entered
into an agreement with ISI to effect a transaction described in clauses
(A), (C) or (D) of this Subsection)
<PAGE>
Page 4
whose election by the Board or nomination for election by ISI's
securityholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved ("Continuing Directors"), cease for any reason to
constitute a majority thereof; (C) the holders of voting securities of
ISI approve a merger or consolidation of ISI with any other corporation,
other than a merger or consolidation which would result in the voting
securities of ISI outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity), in combination with the
ownership of any trustee or other fiduciary holding voting securities
under an employee benefit plan of the Company, at least 60% of the
combined voting power of the voting securities of ISI or such surviving
entity outstanding immediately after such merger or consolidation, or a
merger or consolidation effected to implement a recapitalization of ISI
(or similar transaction) in which no person acquires more than 50% of
the combined voting power of ISI's then outstanding voting securities;
(D) the holders of voting securities of ISI approve a plan of complete
liquidation of ISI or an agreement for the sale or disposition by ISI of
all or substantially all of ISI's assets; or (E) there occurs (x) a sale
or disposition, directly or indirectly, other than to a person described
in subclause (w), (x) or (z) of clause (A) of this Subsection, of voting
securities of your employer, any direct or indirect parent company of
your employer or any company that is a subsidiary of your employer and
is also a significant subsidiary (as defined below) of ISI (your
employer and such a parent or subsidiary being a "Related Company"),
representing 50% or more of the combined voting power of the securities
of such Related Company then outstanding, (y) a merger or consolidation
of a Related Company with any other corporation, other than a merger or
consolidation which would result in 50% or more of the combined voting
power of the surviving company being beneficially owned by ISI or by a
majority owned direct or indirect subsidiary of ISI, or (z) the sale or
disposition of all or substantially all the assets of a Related Company
to a person other than ISI or a majority owned direct or indirect
subsidiary of ISI; provided, however, that no change in control of the
Company shall be deemed to have occurred under this Section 2(i) if (I)
such transaction includes or involves a sale to the public or a
distribution to the stockholders of ISI of more than 50% of the voting
securities of your employer or a direct or indirect parent of your
employer, and (II) your employer or a direct or indirect parent of your
employer agrees to become a successor to ISI under this Agreement or you
are covered by an agreement providing for benefits upon a change in
control of your employer following an event described clause (E). For
purposes of this Agreement, the term "significant subsidiary" has the
meaning given to such term under Rule 405 of the Securities Act of 1933,
as amended.
<PAGE>
Page 5
(ii) For purposes of this Agreement, a "potential change in
control of the Company" shall be deemed to have occurred if (A) ISI
enters into an agreement, the consummation of which would result in the
occurrence of a change in control of the Company, (B) any person
(including ISI) publicly announces an intention to take or to consider
taking actions which if consummated would constitute a change in control
of the Company; (C) any person, other than (w) the Company, (x) a
trustee or other fiduciary holding voting securities under an employee
benefit plan of the Company, (y) an underwriter temporarily holding
voting securities pursuant to an offering of such securities, or (z) a
corporation owned, directly or indirectly, by the securityholders of ISI
in substantially the same proportions as their ownership of voting
securities of ISI, who is or becomes the beneficial owner, directly or
indirectly, of voting securities of ISI representing 9.5% or more of the
combined voting power of ISI's then outstanding voting securities,
increases his beneficial ownership of such securities by 5% or more over
the percentage so owned by such person on the date hereof; or (D) the
Board adopts a resolution to the effect that, for purposes of this
Agreement, a potential change in control of the Company has occurred.
You agree that, subject to the terms and conditions of this
Agreement, in the event of a potential change in control of the Company,
you will remain in the employ of the Company until the earliest of (i) a
date which is six (6) months from the occurrence of such potential
change in control of the Company, (ii) the termination by you of your
employment by reason of Disability or Retirement, as defined in
Subsection 3(i), or (iii) the occurrence of a change in control of the
Company. If your employment is terminated by the Company without Cause
(as defined in Subsection 3(ii) below) within twelve (12) months after
the occurrence of a potential change in control of the Company and a
change in control of the Company occurs within six (6) months after such
termination, you shall be entitled to the compensation and benefits
hereunder as if your termination of employment without Cause followed a
change in control of the Company; provided, however, that no benefits
shall be payable under this sentence if prior to the change in control
of the Company, ISI ceased to own, directly or indirectly, at least 80%
of the voting securities of your employer.
(iii) The foregoing to the contrary notwithstanding, a change in
control of the Company shall not be deemed to have occurred with respect
to you if (A) the event first giving rise to the potential change in
control of the Company involves a publicly announced transaction or
publicly announced proposed transaction which at the time of the
announcement has not been previously approved by the Board and (B) you
are "part of a purchasing group" proposing the transaction. A change in
control of the Company shall also not be deemed to have occurred with
respect to you if you are part of a purchasing group which consummates
the change in control transaction. You shall be
<PAGE>
Page 6
deemed "part of a purchasing group" for purposes of the two preceding
sentences if you are an equity participant or have agreed to become an
equity participant in the purchasing company or group (except for (A)
passive ownership of less than 1% of the stock of the purchasing company
or (B) ownership of equity participation in the purchasing company or
group which is otherwise not deemed to be significant, as determined
prior to the change in control of the Company by a majority of the non-
employee Continuing Directors).
3. Termination Following Change in Control. If a change in
control of the Company, as defined in Section 2 hereof, shall have
occurred, you shall be entitled to the benefits provided in Subsection
4(iii) hereof upon the subsequent termination of your employment during
the term of this Agreement unless such termination is (A) because of
your death, Disability or Retirement, (B) by the Company for Cause, or
(C) by you other than for Good Reason.
(i) Disability; Retirement. If, as a result of your incapacity
due to physical or mental illness, you shall have been absent from the
full-time performance of your duties with the Company for six (6)
consecutive months, and within thirty (30) days after written notice of
termination is given you shall not have returned to the full-time
performance of your duties, your employment may be terminated for
"Disability". Termination by the Company or you of your employment
based on "Retirement" shall mean termination on or after your normal
retirement age in accordance with the Company's retirement policy
generally applicable to its salaried employees or in accordance with any
retirement arrangement established with your consent with respect to
you.
(ii) Cause. Termination by the Company of your employment for
"Cause" shall mean termination upon (A) the willful and continued
failure by you to substantially perform your duties with the Company
(other than any such failure resulting from your incapacity due to
physical or mental illness or any such actual or anticipated failure
after the issuance of a Notice of Termination by you for Good Reason as
defined in Subsections 3(iv) and 3(iii), respectively) after a written
demand for substantial performance is delivered to you by the Board,
which demand specifically identifies the manner in which the Board
believes that you have not substantially performed your duties, or (B)
the willful engaging by you in conduct which is demonstrably and
materially injurious to the Company, monetarily or otherwise. For
purposes of this Subsection, no act, or failure to act, on your part
shall be deemed "willful" unless done, or omitted to be done, by you not
in good faith and without reasonable belief that your action or omission
was in the best interest of the Company. Notwithstanding the foregoing,
you shall not be deemed to have been terminated for Cause unless and
until there shall have been
<PAGE>
Page 7
delivered to you a copy of a resolution duly adopted by the affirmative
vote of not less than three-quarters (3/4) of the entire membership of
the Board at a meeting of the Board called and held for such purpose
(after reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that in the
good faith opinion of the Board you were guilty of conduct set forth
above in clauses (A) or (B) of the first sentence of this Subsection and
specifying the particulars thereof in detail.
(iii) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean, without your express written consent, the occurrence
after a change in control of the Company of any of the following
circumstances unless, in the case of paragraphs (A), (E), (F), (G) or
(H), such circumstances are fully corrected prior to the Date of
Termination specified in the Notice of Termination, as defined in
Subsections 3(v) and 3(iv), respectively, given in respect thereof:
(A) the assignment to you of any duties inconsistent with
your status as an executive officer of the Company or a substantial
adverse alteration in the nature or status of your responsibilities
from those in effect immediately prior to the change in control of
the Company other than any such alteration primarily attributable
to the fact that the Company may no longer be a public company;
(B) a reduction by the Company in your annual base salary as
in effect on the date hereof or as the same may be increased from
time to time;
(C) the Company's requiring that your principal place of
business be at an office located more than 50 miles from where your
principal place of business is located immediately prior to the
change in control of the Company, except for required travel on the
Company's business to an extent substantially consistent with your
business travel obligations immediately prior to the change in
control of the Company;
(D) the failure by the Company, without your consent, to pay
to you any portion of your current compensation, or to pay to you
any portion of an installment of deferred compensation under any
deferred compensation program of the Company, within seven (7) days
of the date such compensation is due;
(E) the failure by the Company to continue in effect any
compensation plan in which you participate immediately prior to the
change in control of the Company which is material to your total
compensation, including but not limited
<PAGE>
Page 8
to the Inland Annual Incentive Plan (the "Annual Incentive Plan"),
Inland Special Achievement Award Plan, Inland 1986 Employee Stock
Purchase Plan, Inland 1995 Incentive Stock Plan, Inland Steel
Industries Supplemental Retirement Benefit Plan for Covered
Employees (the "Supplemental Plan"), Inland Steel Industries
Special Retirement Benefit Plan for Covered Employees (the "Special
Benefit Plan"), Inland Steel Industries Nonqualified Thrift Plan
(the "Nonqualified Thrift Plan"), Inland Steel Industries Pension
Plan (the "Pension Plan") and Inland Steel Industries Thrift Plan
(the "Thrift Plan") or any substitute plans adopted prior to the
change in control, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect
to such plan, or the failure by the Company to continue your
participation therein (or in such substitute or alternative plan)
on a basis not materially less favorable, both in terms of the
amount of benefits provided and the level of your participation
relative to other participants, as existed at the time of the
change in control;
(F) the failure by the Company to continue to provide you
with benefits substantially similar to those enjoyed by you under
any of the Company's pension, life insurance, medical, health and
accident, flexible spending or disability plans or programs in
which you were participating at the time of the change in control
of the Company, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits or
deprive you of any material fringe benefit enjoyed by you at the
time of the change in control of the Company, or the failure by the
Company to provide you with the number of paid vacation days to
which you are entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation policy in
effect at the time of the change in control of the Company;
(G) the failure of ISI to obtain a satisfactory agreement
from any successor to assume and agree to perform this Agreement,
as contemplated in Section 5 hereof; or
(H) any purported termination of your employment which is
not effected pursuant to a Notice of Termination satisfying the
requirements of Subsection (iv) below (and, if applicable, the
requirements of Subsection (ii) above); for purposes of this
Agreement, no such purported termination shall be effective.
Your right to terminate your employment pursuant to this Subsection
shall not be affected by your incapacity due to physical or mental
illness. Your continued employment
<PAGE>
Page 9
shall not constitute consent to, or a waiver of rights with respect to,
any circumstance constituting Good Reason hereunder.
(iv) Notice of Termination. Any purported termination of your
employment by the Company or by you shall be communicated by written
Notice of Termination to the other party hereto in accordance with
Section 6 hereof. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a
basis for termination of your employment under the provision so
indicated.
(v) Date of Termination, Etc. "Date of Termination" shall mean
(A) if your employment is terminated for Disability, thirty (30) days
after Notice of Termination is given (provided that you shall not have
returned to the full-time performance of your duties during such thirty
(30) day period), and (B) if your employment is terminated pursuant to
Subsection (ii) or (iii) above or for any other reason (other than
Disability), the date specified in the Notice of Termination (which, in
the case of a termination pursuant to Subsection (ii) above shall not be
less than thirty (30) days, and in the case of a termination pursuant to
Subsection (iii) above shall not be less than fifteen (15) nor more than
sixty (60) days, respectively, from the date such Notice of Termination
is given); provided that if within fifteen (15) days after any Notice of
Termination is given, or, if later, prior to the Date of Termination (as
determined without regard to this proviso), the party receiving such
Notice of Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date on
which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction (which is
not appealable or with respect to which the time for appeal therefrom
has expired and no appeal has been perfected) but shall be deemed to be
within the twenty four (24) month period following a change in control
of the Company; provided further that the Date of Termination shall be
extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such
dispute with reasonable diligence. Notwithstanding the pendency of any
such dispute, the Company will continue to pay you your full
compensation in effect when the notice giving rise to the dispute was
given (including, but not limited to, base salary) and continue you as a
participant in all compensation, benefit and insurance plans and
programs in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in
accordance with this Subsection. Amounts paid under this Subsection are
in addition to all other amounts due under this Agreement and shall not
be offset against or reduce any other amounts due under this Agreement.
<PAGE>
Page 10
4. Compensation Upon Termination or During Disability. Following
a change in control of the Company, as defined by Subsection 2(i), upon
termination of your employment or during a period of Disability you
shall be entitled to the following benefits:
(i) During any period that you fail to perform your full-time
duties with the Company as a result of incapacity due to physical or
mental illness, you shall continue to receive your base salary at the
rate in effect at the commencement of any such period, together with all
compensation payable to you under the Pension Plan, Supplemental Plan,
Special Benefit Plan, Annual Incentive Plan, Thrift Plan and
Nonqualified Thrift Plan during such period, until this Agreement is
terminated pursuant to Section 3(i) hereof. Thereafter, in the event
your employment shall be terminated, your benefits shall be determined
under the Company's retirement, insurance and other compensation plans
and programs then in effect in accordance with the terms of such plans
and programs.
(ii) If your employment shall be terminated by the Company for
Cause or by you other than for Good Reason, Disability, death or
Retirement, the Company shall pay you your full base salary through the
Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are entitled
under any compensation plan of the Company at the time such payments are
due, and the Company shall have no further obligations to you under this
Agreement.
(iii) If your employment by the Company shall be terminated (a) by
the Company other than for Cause, Retirement or Disability or (b) by you
for Good Reason, then you shall be entitled to the compensation and
benefits provided below:
(A) the Company shall pay you your full base salary through
the Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are
entitled under any compensation plan or program of the Company, at
the time such payments are due, except as otherwise provided below.
(B) in lieu of any further salary payments to you for
periods subsequent to the Date of Termination, the Company shall
pay as severance pay to you a lump sum severance payment (together
with the payments provided in paragraphs C, D and E below, the
"Severance Payments") equal to two times the sum of (x) your annual
base salary in effect immediately prior to the occurrence of the
circumstance giving rise to the Notice of Termination given in
respect thereof, and (y) the average annual amount of the Award
paid to you pursuant
<PAGE>
Page 11
to the Annual Incentive Plan or similar successor plan with respect
to the five years immediately preceding that in which the Date of
Termination occurs, such average annual amount being calculated by
aggregating all such Awards paid with respect to such five years
and dividing such aggregate amount by the number of years for which
such an Award was actually paid to you.
(C) notwithstanding any provision of the Annual Incentive
Plan and the Inland Special Achievement Award Plan, the Company
shall pay to you a lump sum amount equal to the sum of (x) any
incentive compensation which has been allocated or awarded to you
for a completed fiscal year or other measuring period preceding the
Date of Termination but has not yet been paid, and (y) a pro rata
portion to the Date of Termination for the current fiscal year or
other measuring period of the amount equal to the Target Award
percentage applicable to you under the Annual Incentive Plan or
similar successor plan on the Date of Termination times your annual
base salary then in effect.
(D) in lieu of shares of common stock of ISI ("ISI Shares")
issuable upon exercise of outstanding options ("Options"), if any,
granted to you under ISI's stock option plans (which Options shall
be cancelled upon the making of the payment referred to below), you
shall receive an amount in cash equal to the product of (i) the
excess of (x) in the case of incentive stock options (as defined in
section 422A of the Internal Revenue Code of 1986, as amended (the
"Code")) ("ISOs")), granted after the date hereof, the closing
price of ISI's shares as reported on the New York Stock Exchange
Composite Transactions on or nearest the Date of Termination, or,
in the case of all other options, the Change in Control Price (as
defined below), over (y) the per share exercise price of each
Option held by you (whether or not then fully exercisable), times
(ii) the number of ISI Shares covered by each such option. For
purposes of this Agreement, the "Change in Control Price" means:
(1) with respect to a merger or consolidation of ISI described in
Section 2(i)(C) in which the consideration per share of ISI's
common stock to be paid for the acquisition of shares of common
stock specified in the agreement of merger or consolidation is all
in cash, the highest such consideration per share; (2) with respect
to a change in control of the Company by reason of an acquisition
of voting securities described in Section 2(i)(A), the highest
price per share for any share of ISI's common stock paid by any
holder of any of the securities representing 40% or more of the
combined voting power of ISI giving rise to the change in control
of the Company; and (3) with respect to a change in control of the
Company by reason of a merger or consolidation of ISI (other than a
merger or consolidation described in Clause (1) next above),
stockholder approval of an agreement or plan described in
<PAGE>
Page 12
Section 2(i)(D), a change in the composition of the Board described
in Section 2(i)(B) or a change in control of the Company pursuant
to Section 2(i)(E) (relating to mergers, consolidations and sales
of securities or assets of a Related Company), the highest price
per share of common stock reported on the New York Stock Exchange
Composite Transactions (or, if such shares are not traded on the
New York Stock Exchange, such other principal market on which such
shares are traded) during the sixty (60) day period ending on the
date the change in control of the Company occurs.
(E) in lieu of ISI Shares awarded or issuable to you as
performance and/or restricted shares, if any, pursuant to the
Inland 1995 Incentive Stock Plan, the Inland 1992 Incentive Stock
Plan, the Inland 1988 Incentive Stock Plan, the Inland 1984
Incentive Stock Plan or similar successor plan (which ISI Shares
shall be cancelled upon the making of the payment referred to
below), you shall receive an amount in cash equal to the product of
(i) the Change in Control Price, times (ii) the total of the number
of restricted shares awarded to you and then outstanding pursuant
to the Inland 1995 Incentive Stock Plan, the Inland 1992 Incentive
Stock Plan, the Inland 1988 Incentive Stock Plan, the Inland 1984
Incentive Stock Plan and/or any similar successor plan, plus a
number of performance shares equal to the total number of
performance shares paid or payable to you with respect to the two
immediately preceding performance periods under any performance
award or awards made pursuant to the Inland 1995 Incentive Stock
Plan, the Inland 1992 Incentive Stock Plan and/or any similar
successor plan.
(F) the Company shall also pay to you all legal fees and
expenses incurred by you as a result of such termination (including
all such fees and expenses, if any, incurred in contesting or
disputing any such termination or in seeking to obtain or enforce
any right or benefit provided by this Agreement or in connection
with any tax audit or proceeding to the extent attributable to the
application of Section 4999 of the Code to any payment or benefit
provided hereunder). Such payments shall be made at the later of
the times specified in paragraph (J) below, or within five (5) days
after your request for payment accompanied with such evidence of
fees and expenses incurred as the Company reasonably may require.
(G) in the event that you become entitled to any payments
provided for hereinabove (the "Contract Payments"), if the Contract
Payments or other portion of the Total Payments (as defined below)
will be subject to the tax (the "Excise Tax") imposed by Section
4999 of the Code, the Company shall pay to
<PAGE>
Page 13
you, no later than the fifth day following the Date of Termination,
an additional amount (the "Gross-Up Payment") such that the net
amount retained by you, after deduction of any Excise Tax on the
Contract Payments and such other Total Payments and any federal and
state and local income and other payroll taxes and Excise Tax upon
the payment provided for by this subsection, shall be equal to the
Contract Payments and such other Total Payments.
(H) for purposes of determining whether any of the payments
will be subject to the Excise Tax and the amount of such Excise
Tax, (i) any other payments or benefits received or to be received
by you in connection with a change in control of the Company or
your termination of employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the
Company, any person whose actions result in a change in control or
any person affiliated with the Company or such person) payable
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any person whose actions
result in a change in control or any person affiliated with the
Company or such person (together with the Contract Payments, the
"Total Payments"), shall be treated as "parachute payments" within
the meaning of Section 280G(b)(2) of the Code and all "excess
parachute payments" within the meaning of Section 280G(b)(l) of the
Code shall be treated as subject to the Excise Tax unless in the
opinion of tax counsel selected by ISI's independent auditors and
reasonably acceptable to you, such other payments or benefits (in
whole or in part) do not constitute parachute payments, including
by reason of Section 280G(b)(4)(A) of the Code or such excess
parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of
Section 280G(b)(4)(B) of the Code in excess of the base amount
allocable to such reasonable compensation within the meaning of
Section 280G(b)(3) of the Code, or are otherwise not subject to the
Excise Tax, (ii) the amount of the Total Payments which shall be
treated as subject to the Excise Tax shall be equal to the lesser
of (A) the amount of the Total Payments or (B) the amount of excess
parachute payments within the meaning of Section 280G(b)(l) of the
Code (after applying clause (i) above), and (iii) the value of any
noncash benefits or any deferred payment or benefit shall be
determined by ISI's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code. For purposes
of determining the amount of the Gross-Up Payment, you shall be
deemed to pay federal income taxes at the highest marginal rate of
federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of your
residence
<PAGE>
Page 14
on the Date of Termination, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state
and local taxes.
(I) in the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder
at the time of termination of your employment, you shall repay to
the Company at the time that the amount of such reduction in Excise
Tax is finally determined the portion of the Gross-Up Payment
attributable to such reduction (plus the portion of the Gross-Up
Payment attributable to the Excise Tax and federal and state and
local income tax imposed on the Gross-Up Payment being repaid by
you if such repayment results in a reduction in Excise Tax and/or a
federal and state and local income tax deduction) plus interest on
the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the
time of the termination of your employment (including by reason of
any payment the existence or amount of which cannot be determined
at the time of the Gross-Up Payment), the Company shall make
an additional gross-up payment in respect of such excess (plus any
interest payable with respect to such excess) at the time that the
amount of such excess is finally determined.
(J) the payments provided for in paragraphs (B), (C), (D) and
(E) above, shall be made not later than the fifth day following the
Date of Termination, provided, however, that if the amounts of such
payments cannot be finally determined on or before such day, the
Company shall pay to you on such day an estimate, as determined in
good faith by the Company, of the minimum amount of such payments
and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code)
as soon as the amount thereof can be determined but in no event
later than the thirtieth day after the Date of Termination. In the
event that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall
constitute a loan by the Company to you payable on the fifth day
after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).
(iv) If your employment shall be terminated (A) by the Company
other than for Cause, Retirement or Disability or (B) by you for Good
Reason, then for a twenty-four (24) month period after such termination,
the Company shall arrange to provide you with: (1) life, disability,
accident and health insurance benefits substantially similar to those
which you are receiving immediately prior to the Notice of Termination,
(2) financial advisory services similar to those provided currently to
executives of the
<PAGE>
Page 15
Company by Ayco Corporation, and (3) outplacement services. Benefits
otherwise receivable by you pursuant to this Subsection 4(iv) shall be
reduced to the extent comparable benefits are actually received by you
during the twenty-four (24) month period following your termination, and
any such benefits actually received by you shall be reported to the
Company. Any rights that you have to continuation of life, disability,
accident or health coverage under applicable state or federal law shall
be in addition to those provided under this Agreement.
(v) If your employment shall be terminated (A) by the Company
other than for Cause, Retirement or Disability or (B) by you for Good
Reason, then in addition to the retirement benefits to which you are
entitled under the Pension Plan, Supplemental Plan or Special Benefit
Plan or any successor plans thereto, the Company shall pay you in cash
at the time and in the manner provided in paragraph (J) of Subsection
4(iii), a lump sum equal to the excess of (x) the actuarial equivalent
of the retirement pension (taking into account any early retirement
subsidy associated therewith and determined as a straight life annuity
commencing at age sixty-five (65) or any earlier date, but in no event
earlier than the second anniversary of the Date of Termination whichever
annuity yields a greater benefit) which you would have accrued under the
terms of the Pension Plan, Supplemental Plan or Special Benefit Plan
(without regard to any amendments to any such plans made subsequent to a
change in control of the Company and on or prior to the Date of
Termination, which amendment adversely affects in any manner the
computation of retirement benefits thereunder), determined as if you
were fully vested thereunder and had accumulated (after the Date of
Termination) twenty-four (24) additional months of age and service
credit thereunder at the higher of the rate of average compensation
during the twelve (12) months prior to the change in control of the
Company or the rate of average compensation used to calculate your
benefits under such plans immediately preceding the Date of Termination,
over (y) the actuarial equivalent of the retirement pension (taking into
account any early retirement subsidy associated therewith and determined
as a straight life annuity commencing at age sixty-five (65) or any
earlier date, but in no event earlier than the Date of Termination
whichever annuity yields a greater benefit) which you had then accrued
pursuant to the provisions of the Pension Plan. For purposes of this
Subsection, "actuarial equivalent" shall be determined using the same
assumptions utilized under the Pension Plan for purposes of determining
alternative forms of benefits immediately prior to the change in control
of the Company.
(vi) You shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for
in this Section 4 be reduced by any compensation earned by you as the
result of employment by another employer, by retirement benefits,
<PAGE>
Page 16
by offset against any amount claimed to be owed by you to the Company,
or otherwise, except as provided in Section 4(iv).
(vii) In addition to all other amounts payable to you under this
Section 4, you shall be entitled to receive all benefits payable to you
under the Pension Plan, the Thrift Plan, Supplemental Plan, Special
Benefit Plan, Nonqualified Thrift Plan and any other plan or agreement
relating to retirement benefits.
5. Successors; Binding Agreement. (i) ISI will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
and/or assets of ISI to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that ISI or the
Company would be required to perform it if no such succession had taken
place. Failure of ISI to obtain such assumption and agreement prior to
the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle you to compensation from the Company in the
same amount and on the same terms as you would be entitled to hereunder
if you terminate your employment for Good Reason following a change in
control of the Company, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall
be deemed the Date of Termination. In the event a successor of ISI
assumes and agrees to perform this Agreement, by operation of law or
otherwise, the term "ISI", as used in this Agreement, shall mean such
successor and the term "Company" shall mean, collectively, such
successor and the affiliates of such successor.
(ii) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
If you should die while any amount would still be payable to you
hereunder if you had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to your devisee, legatee or other designee or, if there
is no such designee, to your estate.
6. Notice. For the purpose of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by
United States registered mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth on the first
page of this Agreement, provided that all notice to the Company shall be
directed to the attention of the Board with a copy to the Secretary of
ISI, or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.
<PAGE>
Page 17
7. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you and such officer as may be
specifically designated by the Board. No waiver by either party hereto
at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party
which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of Illinois. All references to
sections of the Exchange Act or the Code shall be deemed also to refer
to any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state or local law. The obligations of ISI and the Company
under Section 4 shall survive the expiration of the term of this
Agreement.
8. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, which shall remain in full force and
effect.
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
10. Settlement of Disputes; Arbitration. All claims by you for
benefits under this Agreement shall be directed to and determined by the
Board and shall be in writing. Any denial by the Board of a claim for
benefits under this Agreement shall be delivered to you in writing and
shall set forth the specific reasons for the denial and the specific
provisions of this Agreement relied upon. The Board shall afford a
reasonable opportunity to you for a review of the decision denying a
claim and shall further allow you to appeal to the Board a decision of
the Board within sixty (60) days after notification by the Board that
your claim has been denied. Any further dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively
by arbitration in Chicago, Illinois, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction;
provided, however, that you shall be entitled to seek specific
performance of your right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in
connection with this Agreement.
<PAGE>
Page 18
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to ISI the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
INLAND STEEL INDUSTRIES, INC.
By /s/ Judd R. Cool
______________________________
Judd R. Cool
Vice President-Human Resources
Agreed to this ________ day
of ________________________, 1996.
____________________________
(Signature)
<PAGE>
Inland Steel Industries, Inc.
30 West Monroe Street
Chicago, Illinois 60603
March 27, 1996
Neil S. Novich
431 Washington Avenue
Wilmette, Illinois 60091
Dear Mr. Novich:
Inland Steel Industries, Inc. ("ISI") considers it essential to the
best interests of its stockholders to foster the continuous employment
of key management personnel of a and its subsidiaries (collectively,
the "Company"). In this connection, the Board of Directors of ISI (the
"Board") recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that
such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of
management personnel to the detriment of ISI and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of
members of the Company's management, including yourself, to their
assigned duties without distraction in the face of potentially
disturbing circumstances arising from the possibility of a change in
control of the Company, although no such change is now contemplated. In
order to induce you to remain in the employ of the Company and in
consideration of your agreement set forth in Subsection 2(ii) hereof,
ISI agrees that you shall receive the severance benefits set forth in
this letter agreement ("Agreement") in the event your employment with
the Company is terminated subsequent to a "change in control of the
Company" (as defined in Section 2 hereof) under the circumstances
described below. This Agreement shall constitute an amendment and
restatement of and shall supersede the agreement entered into between
you and ISI with respect to these matters dated January 24, 1996. In the
event that you receive severance benefits hereunder, such benefits shall
be in lieu of, and you shall not be entitled to receive, any benefits or
payments under any other severance plan, policy or agreement (except
your employment agreement contained in letters dated April 8, 1994 [your
"Employment Agreement"]) of or with the Company. In addition, if you are
or become entitled
<PAGE>
Page 3
to benefits from the Company pursuant to another agreement providing for
benefits on account of a change in control or the law of a jurisdiction
other than the United States or any state or territory thereof as a
result of an event for which benefits are payable to you pursuant this
Agreement, the benefits paid to you pursuant to this Agreement shall be
reduced by the amount paid to you pursuant to such other agreement or
law.
1. Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 1996; provided,
however, that commencing on January 1, 1997 and each January 1
thereafter, the term of this Agreement shall automatically be extended
for one additional year unless, during the preceding year but not later
than June 30 of such preceding year, ISI shall have given notice that it
does not wish to extend this Agreement. Notwithstanding the preceding
sentence: (i) if your employer is a direct or indirect subsidiary of
ISI, this Agreement shall terminate on the date of which ISI ceases to
own, directly or indirectly, at least 80 percent of your employer for
any reason which does not constitute a change in control of the Company;
and (ii) if a change in control of the Company or a potential change in
control of the Company shall have occurred during the original or
extended term of this Agreement, this Agreement shall continue in effect
for a period of twenty-four (24) months beyond the month in which such
change in control of potential change in control of the Company occurred
unless earlier terminated under clause (i) next above.
2. Change in Control; Potential Change in Control. (i) No
benefits shall be payable hereunder unless there shall have been a
potential change in control or a change in control of the Company, as
set forth below. For purposes of this Agreement, a "change in control
of the Company" shall be deemed to have occurred if (A) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), other than (w) the
Company, (x) a trustee or other fiduciary holding voting securities
under an employee benefit plan of the Company, (y) an underwriter
temporarily holding voting securities pursuant to an offering of such
securities, or (z) a corporation owned, directly or indirectly, by the
securityholders of ISI in substantially the same proportions as their
ownership of voting securities of ISI, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of voting securities of ISI (not including in the voting
securities beneficially owned by such person any voting securities
acquired directly from ISI or its affiliates) representing 40% or more
of the combined voting power of ISI's then outstanding voting
securities; (B) during any period of two consecutive years (not
including any period prior to the execution of this Agreement),
individuals who
at the beginning of such period constitute the Board and any new
director (other than a director designated by a person who has entered
into an agreement with ISI to effect a transaction described in clauses
(A), (C) or (D) of this Subsection)
<PAGE>
Page 4
whose election by the Board or nomination for election by ISI's
securityholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved ("Continuing Directors"), cease for any reason to
constitute a majority thereof; (C) the holders of voting securities of
ISI approve a merger or consolidation of ISI with any other corporation,
other than a merger or consolidation which would result in the voting
securities of ISI outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity), in combination with the
ownership of any trustee or other fiduciary holding voting securities
under an employee benefit plan of the Company, at least 60% of the
combined voting power of the voting securities of ISI or such surviving
entity outstanding immediately after such merger or consolidation, or a
merger or consolidation effected to implement a recapitalization of ISI
(or similar transaction) in which no person acquires more than 50% of
the combined voting power of ISI's then outstanding voting securities;
(D) the holders of voting securities of ISI approve a plan of complete
liquidation of ISI or an agreement for the sale or disposition by ISI of
all or substantially all of ISI's assets; or (E) there occurs (x) a sale
or disposition, directly or indirectly, other than to a person described
in subclause (w), (x) or (z) of clause (A) of this Subsection, of voting
securities of your employer, any direct or indirect parent company of
your employer or any company that is a subsidiary of your employer and
is also a significant subsidiary (as defined below) of ISI (your
employer and such a parent or subsidiary being a "Related Company"),
representing 50% or more of the combined voting power of the securities
of such Related Company then outstanding, (y) a merger or consolidation
of a Related Company with any other corporation, other than a merger or
consolidation which would result in 50% or more of the combined voting
power of the surviving company being beneficially owned by ISI or by a
majority owned direct or indirect subsidiary of ISI, or (z) the sale or
disposition of all or substantially all the assets of a Related Company
to a person other than ISI or a majority owned direct or indirect
subsidiary of ISI; provided, however, that no change in control of the
Company shall be deemed to have occurred under this Section 2(i) if (I)
such transaction includes or involves a sale to the public or a
distribution to the stockholders of ISI of more than 50% of the voting
securities of your employer or a direct or indirect parent of your
employer, and (II) your employer or a direct or indirect parent of your
employer agrees to become a successor to ISI under this Agreement or you
are covered by an agreement providing for benefits upon a change in
control of your employer following an event described clause (E). For
purposes of this Agreement, the term "significant subsidiary" has the
meaning given to such term under Rule 405 of the Securities Act of 1933,
as amended.
<PAGE>
Page 5
(ii) For purposes of this Agreement, a "potential change in
control of the Company" shall be deemed to have occurred if (A) ISI
enters into an agreement, the consummation of which would result in the
occurrence of a change in control of the Company, (B) any person
(including ISI) publicly announces an intention to take or to consider
taking actions which if consummated would constitute a change in control
of the Company; (C) any person, other than (w) the Company, (x) a
trustee or other fiduciary holding voting securities under an employee
benefit plan of the Company, (y) an underwriter temporarily holding
voting securities pursuant to an offering of such securities, or (z) a
corporation owned, directly or indirectly, by the securityholders of ISI
in substantially the same proportions as their ownership of voting
securities of ISI, who is or becomes the beneficial owner, directly or
indirectly, of voting securities of ISI representing 9.5% or more of the
combined voting power of ISI's then outstanding voting securities,
increases his beneficial ownership of such securities by 5% or more over
the percentage so owned by such person on the date hereof; or (D) the
Board adopts a resolution to the effect that, for purposes of this
Agreement, a potential change in control of the Company has occurred.
You agree that, subject to the terms and conditions of this
Agreement, in the event of a potential change in control of the Company,
you will remain in the employ of the Company until the earliest of (i) a
date which is six (6) months from the occurrence of such potential
change in control of the Company, (ii) the termination by you of your
employment by reason of Disability or Retirement, as defined in
Subsection 3(i), or (iii) the occurrence of a change in control of the
Company. If your employment is terminated by the Company without Cause
(as defined in Subsection 3(ii) below) within twelve (12) months after
the occurrence of a potential change in control of the Company and a
change in control of the Company occurs within six (6) months after such
termination, you shall be entitled to the compensation and benefits
hereunder as if your termination of employment without Cause followed a
change in control of the Company; provided, however, that no benefits
shall be payable under this sentence if prior to the change in control
of the Company, ISI ceased to own, directly or indirectly, at least 80%
of the voting securities of your employer.
(iii) The foregoing to the contrary notwithstanding, a change in
control of the Company shall not be deemed to have occurred with respect
to you if (A) the event first giving rise to the potential change in
control of the Company involves a publicly announced transaction or
publicly announced proposed transaction which at the time of the
announcement has not been previously approved by the Board and (B) you
are "part of a purchasing group" proposing the transaction. A change in
control of the Company shall also not be deemed to have occurred with
respect to you if you are part of a purchasing group which consummates
the change in control transaction. You shall be
<PAGE>
Page 6
deemed "part of a purchasing group" for purposes of the two preceding
sentences if you are an equity participant or have agreed to become an
equity participant in the purchasing company or group (except for (A)
passive ownership of less than 1% of the stock of the purchasing company
or (B) ownership of equity participation in the purchasing company or
group which is otherwise not deemed to be significant, as determined
prior to the change in control of the Company by a majority of the non-
employee Continuing Directors).
3. Termination Following Change in Control. If a change in
control of the Company, as defined in Section 2 hereof, shall have
occurred, you shall be entitled to the benefits provided in Subsection
4(iii) hereof upon the subsequent termination of your employment during
the term of this Agreement unless such termination is (A) because of
your death, Disability or Retirement, (B) by the Company for Cause, or
(C) by you other than for Good Reason; provided, however, that nothing
contained in this Section 3 shall limit or reduce in any way such
benefits, if any, as you may be entitled to receive under provisions of
your Employment Agreement during the term thereof.
(i) Disability; Retirement. If, as a result of your incapacity
due to physical or mental illness, you shall have been absent from the
full-time performance of your duties with the Company for six (6)
consecutive months, and within thirty (30) days after written notice of
termination is given you shall not have returned to the full-time
performance of your duties, your employment may be terminated for
"Disability". Termination by the Company or you of your employment
based on "Retirement" shall mean termination on or after your normal
retirement age in accordance with the Company's retirement policy
generally applicable to its salaried employees or in accordance with any
retirement arrangement established with your consent with respect to
you.
(ii) Cause. Termination by the Company of your employment for
"Cause" shall mean termination upon (A) the willful and continued
failure by you to substantially perform your duties with the Company
(other than any such failure resulting from your incapacity due to
physical or mental illness or any such actual or anticipated failure
after the issuance of a Notice of Termination by you for Good Reason as
defined in Subsections 3(iv) and 3(iii), respectively) after a written
demand for substantial performance is delivered to you by the Board,
which demand specifically identifies the manner in which the Board
believes that you have not substantially performed your duties, or (B)
the willful engaging by you in conduct which is demonstrably and
materially injurious to the Company, monetarily or otherwise. For
purposes of this Subsection, no act, or failure to act, on your part
shall be deemed "willful" unless done, or omitted to be done, by you not
in good faith and without reasonable belief that your action or omission
was in the best interest of the Company. Notwithstanding the foregoing,
you shall not be deemed to have been terminated for Cause unless and
until there shall have been
<PAGE>
Page 7
delivered to you a copy of a resolution duly adopted by the affirmative
vote of not less than three-quarters (3/4) of the entire membership of
the Board at a meeting of the Board called and held for such purpose
(after reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that in the
good faith opinion of the Board you were guilty of conduct set forth
above in clauses (A) or (B) of the first sentence of this Subsection and
specifying the particulars thereof in detail.
(iii) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean, without your express written consent, the occurrence
after a change in control of the Company of any of the following
circumstances unless, in the case of paragraphs (A), (E), (F), (G) or
(H), such circumstances are fully corrected prior to the Date of
Termination specified in the Notice of Termination, as defined in
Subsections 3(v) and 3(iv), respectively, given in respect thereof:
(A) the assignment to you of any duties inconsistent with
your status as an executive officer of the Company or a substantial
adverse alteration in the nature or status of your responsibilities
from those in effect immediately prior to the change in control of
the Company other than any such alteration primarily attributable
to the fact that the Company may no longer be a public company;
(B) a reduction by the Company in your annual base salary as
in effect on the date hereof or as the same may be increased from
time to time;
(C) the Company's requiring that your principal place of
business be at an office located more than 50 miles from where your
principal place of business is located immediately prior to the
change in control of the Company, except for required travel on the
Company's business to an extent substantially consistent with your
business travel obligations immediately prior to the change in
control of the Company;
(D) the failure by the Company, without your consent, to pay
to you any portion of your current compensation, or to pay to you
any portion of an installment of deferred compensation under any
deferred compensation program of the Company, within seven (7) days
of the date such compensation is due;
(E) the failure by the Company to continue in effect any
compensation plan in which you participate immediately prior to the
change in control of the Company which is material to your total
compensation, including but not limited
<PAGE>
Page 8
to the Inland Annual Incentive Plan (the "Annual Incentive Plan"),
Inland Special Achievement Award Plan, Inland 1986 Employee Stock
Purchase Plan, Inland 1995 Incentive Stock Plan, Inland Steel
Industries Supplemental Retirement Benefit Plan for Covered
Employees (the "Supplemental Plan"), Inland Steel Industries
Special Retirement Benefit Plan for Covered Employees (the "Special
Benefit Plan"), Inland Steel Industries Nonqualified Thrift Plan
(the "Nonqualified Thrift Plan"), Inland Steel Industries Pension
Plan (the "Pension Plan") and Inland Steel Industries Thrift Plan
(the "Thrift Plan") or any substitute plans adopted prior to the
change in control, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect
to such plan, or the failure by the Company to continue your
participation therein (or in such substitute or alternative plan)
on a basis not materially less favorable, both in terms of the
amount of benefits provided and the level of your participation
relative to other participants, as existed at the time of the
change in control;
(F) the failure by the Company to continue to provide you
with benefits substantially similar to those enjoyed by you under
any of the Company's pension, life insurance, medical, health and
accident, flexible spending or disability plans or programs in
which you were participating at the time of the change in control
of the Company, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits or
deprive you of any material fringe benefit enjoyed by you at the
time of the change in control of the Company, or the failure by the
Company to provide you with the number of paid vacation days to
which you are entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation policy in
effect at the time of the change in control of the Company;
(G) the failure of ISI to obtain a satisfactory agreement
from any successor to assume and agree to perform this Agreement,
as contemplated in Section 5 hereof; or
(H) any purported termination of your employment which is
not effected pursuant to a Notice of Termination satisfying the
requirements of Subsection (iv) below (and, if applicable, the
requirements of Subsection (ii) above); for purposes of this
Agreement, no such purported termination shall be effective.
Your right to terminate your employment pursuant to this Subsection
shall not be affected by your incapacity due to physical or mental
illness. Your continued employment
<PAGE>
Page 9
shall not constitute consent to, or a waiver of rights with respect to,
any circumstance constituting Good Reason hereunder.
(iv) Notice of Termination. Any purported termination of your
employment by the Company or by you shall be communicated by written
Notice of Termination to the other party hereto in accordance with
Section 6 hereof. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a
basis for termination of your employment under the provision so
indicated.
(v) Date of Termination, Etc. "Date of Termination" shall mean
(A) if your employment is terminated for Disability, thirty (30) days
after Notice of Termination is given (provided that you shall not have
returned to the full-time performance of your duties during such thirty
(30) day period), and (B) if your employment is terminated pursuant to
Subsection (ii) or (iii) above or for any other reason (other than
Disability), the date specified in the Notice of Termination (which, in
the case of a termination pursuant to Subsection (ii) above shall not be
less than thirty (30) days, and in the case of a termination pursuant to
Subsection (iii) above shall not be less than fifteen (15) nor more than
sixty (60) days, respectively, from the date such Notice of Termination
is given); provided that if within fifteen (15) days after any Notice of
Termination is given, or, if later, prior to the Date of Termination (as
determined without regard to this proviso), the party receiving such
Notice of Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date on
which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction (which is
not appealable or with respect to which the time for appeal therefrom
has expired and no appeal has been perfected) but shall be deemed to be
within the twenty four (24) month period following a change in control
of the Company; provided further that the Date of Termination shall be
extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such
dispute with reasonable diligence. Notwithstanding the pendency of any
such dispute, the Company will continue to pay you your full
compensation in effect when the notice giving rise to the dispute was
given (including, but not limited to, base salary) and continue you as a
participant in all compensation, benefit and insurance plans and
programs in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in
accordance with this Subsection. Amounts paid under this Subsection are
in addition to all other amounts due under this Agreement and shall not
be offset against or reduce any other amounts due under this Agreement.
<PAGE>
Page 10
4. Compensation Upon Termination or During Disability. Following
a change in control of the Company, as defined by Subsection 2(i), upon
termination of your employment or during a period of Disability you
shall be entitled to the following benefits minus the amount, if any,
paid to you as a result therefor for comparable benefits pursuant to
your Employment Agreement during the term thereof:
(i) During any period that you fail to perform your full-time
duties with the Company as a result of incapacity due to physical or
mental illness, you shall continue to receive your base salary at the
rate in effect at the commencement of any such period, together with all
compensation payable to you under the Pension Plan, Supplemental Plan,
Special Benefit Plan, Annual Incentive Plan, Thrift Plan and
Nonqualified Thrift Plan during such period, until this Agreement is
terminated pursuant to Section 3(i) hereof. Thereafter, in the event
your employment shall be terminated, your benefits shall be determined
under the Company's retirement, insurance and other compensation plans
and programs then in effect in accordance with the terms of such plans
and programs.
(ii) If your employment shall be terminated by the Company for
Cause or by you other than for Good Reason, Disability, death or
Retirement, the Company shall pay you your full base salary through the
Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are entitled
under any compensation plan of the Company at the time such payments are
due, and the Company shall have no further obligations to you under this
Agreement.
(iii) If your employment by the Company shall be terminated (a) by
the Company other than for Cause, Retirement or Disability or (b) by you
for Good Reason, then you shall be entitled to the compensation and
benefits provided below:
(A) the Company shall pay you your full base salary through
the Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are
entitled under any compensation plan or program of the Company, at
the time such payments are due, except as otherwise provided below.
(B) in lieu of any further salary payments to you for
periods subsequent to the Date of Termination, the Company shall
pay as severance pay to you a lump sum severance payment (together
with the payments provided in paragraphs C, D and E below, the
"Severance Payments") equal to two times the sum of (x) your annual
base salary in effect immediately prior to the occurrence of the
circumstance giving rise to the Notice of Termination given in
respect thereof, and (y) the average annual amount of the Award
paid to you pursuant
<PAGE>
Page 11
to the Annual Incentive Plan or similar successor plan with respect
to the five years immediately preceding that in which the Date of
Termination occurs, such average annual amount being calculated by
aggregating all such Awards paid with respect to such five years
and dividing such aggregate amount by the number of years for which
such an Award was actually paid to you.
(C) notwithstanding any provision of the Annual Incentive
Plan and the Inland Special Achievement Award Plan, the Company
shall pay to you a lump sum amount equal to the sum of (x) any
incentive compensation which has been allocated or awarded to you
for a completed fiscal year or other measuring period preceding the
Date of Termination but has not yet been paid, and (y) a pro rata
portion to the Date of Termination for the current fiscal year or
other measuring period of the amount equal to the Target Award
percentage applicable to you under the Annual Incentive Plan or
similar successor plan on the Date of Termination times your annual
base salary then in effect.
(D) in lieu of shares of common stock of ISI ("ISI Shares")
issuable upon exercise of outstanding options ("Options"), if any,
granted to you under ISI's stock option plans (which Options shall
be cancelled upon the making of the payment referred to below), you
shall receive an amount in cash equal to the product of (i) the
excess of (x) in the case of incentive stock options (as defined in
section 422A of the Internal Revenue Code of 1986, as amended (the
"Code")) ("ISOs")), granted after the date hereof, the closing
price of ISI's shares as reported on the New York Stock Exchange on
or nearest the Date of Termination, or, in the case of all other
options, the Change in Control Price (as defined below), over (y)
the per share exercise price of each Option held by you (whether or
not then fully exercisable), times (ii) the number of ISI Shares
covered by each such option. For purposes of this Agreement, the
"Change in Control Price" means: (1) with respect to a merger or
consolidation of ISI described in Section 2(i)(C) in which the
consideration per share of ISI's common stock to be paid for the
acquisition of shares of common stock specified in the agreement of
merger or consolidation is all in cash, the highest such
consideration per share; (2) with respect to a change in control of
the Company by reason of an acquisition of voting securities
described in Section 2(i)(A), the highest price per share for any
share of ISI's common stock paid by any holder of any of the
securities representing 40% or more of the combined voting power of
ISI giving rise to the change in control of the Company; and (3)
with respect to a change in control of the Company by reason of a
merger or consolidation of ISI (other than a merger or
consolidation described in Clause (1) next above), stockholder
approval of an agreement or plan described in
<PAGE>
Page 12
Section 2(i)(D), a change in the composition of the Board described
in Section 2(i)(B) or a change in control of the Company pursuant
to Section 2(i)(E) (relating to mergers, consolidations and sales
of securities or assets of a Related Company), the highest price
per share of common stock reported on the New York Stock Exchange
Composite Transactions (or, if such shares are not traded on the
New York Stock Exchange, such other principal market on which such
shares are traded) during the sixty (60) day period ending on the
date the change in control of the Company occurs.
(E) in lieu of ISI Shares awarded or issuable to you as
performance and/or restricted shares, if any, pursuant to the
Inland 1995 Incentive Stock Plan, the Inland 1992 Incentive Stock
Plan, the Inland 1988 Incentive Stock Plan, the Inland 1984
Incentive Stock Plan or similar successor plan (which ISI Shares
shall be cancelled upon the making of the payment referred to
below), you shall receive an amount in cash equal to the product of
(i) the Change in Control Price, times (ii) the total of the number
of restricted shares awarded to you and then outstanding pursuant
to the Inland 1995 Incentive Stock Plan, the Inland 1992 Incentive
Stock Plan, the Inland 1988 Incentive Stock Plan, the Inland 1984
Incentive Stock Plan and/or any similar successor plan, plus a
number of performance shares equal to the total number of
performance shares paid or payable to you with respect to the two
immediately preceding performance periods under any performance
award or awards made pursuant to the Inland 1995 Incentive Stock
Plan, the Inland 1992 Incentive Stock Plan and/or any similar
successor plan.
(F) the Company shall also pay to you all legal fees and
expenses incurred by you as a result of such termination (including
all such fees and expenses, if any, incurred in contesting or
disputing any such termination or in seeking to obtain or enforce
any right or benefit provided by this Agreement or in connection
with any tax audit or proceeding to the extent attributable to the
application of Section 4999 of the Code to any payment or benefit
provided hereunder). Such payments shall be made at the later of
the times specified in paragraph (J) below, or within five (5) days
after your request for payment accompanied with such evidence of
fees and expenses incurred as the Company reasonably may require.
(G) in the event that you become entitled to any payments
provided for hereinabove (the "Contract Payments"), if the Contract
Payments or other portion of the Total Payments (as defined below)
will be subject to the tax (the "Excise Tax") imposed by Section
4999 of the Code, the Company shall pay to
<PAGE>
Page 13
you, no later than the fifth day following the Date of Termination,
an additional amount (the "Gross-Up Payment") such that the net
amount retained by you, after deduction of any Excise Tax on the
Contract Payments and such other Total Payments and any federal and
state and local income and other payroll taxes and Excise Tax upon
the payment provided for by this subsection, shall be equal to the
Contract Payments and such other Total Payments.
(H) for purposes of determining whether any of the payments
will be subject to the Excise Tax and the amount of such Excise
Tax, (i) any other payments or benefits received or to be received
by you in connection with a change in control of the Company or
your termination of employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the
Company, any person whose actions result in a change in control or
any person affiliated with the Company or such person) payable
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any person whose actions
result in a change in control or any person affiliated with the
Company or such person (together with the Contract Payments, the
"Total Payments"), shall be treated as "parachute payments" within
the meaning of Section 280G(b)(2) of the Code and all "excess
parachute payments" within the meaning of Section 280G(b)(l) of the
Code shall be treated as subject to the Excise Tax unless in the
opinion of tax counsel selected by ISI's independent auditors and
reasonably acceptable to you, such other payments or benefits (in
whole or in part) do not constitute parachute payments, including
by reason of Section 280G(b)(4)(A) of the Code or such excess
parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of
Section 280G(b)(4)(B) of the Code in excess of the base amount
allocable to such reasonable compensation within the meaning of
Section 280G(b)(3) of the Code, or are otherwise not subject to the
Excise Tax, (ii) the amount of the Total Payments which shall be
treated as subject to the Excise Tax shall be equal to the lesser
of (A) the amount of the Total Payments or (B) the amount of excess
parachute payments within the meaning of Section 280G(b)(l) of the
Code (after applying clause (i) above), and (iii) the value of any
noncash benefits or any deferred payment or benefit shall be
determined by ISI's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code. For purposes
of determining the amount of the Gross-Up Payment, you shall be
deemed to pay federal income taxes at the highest marginal rate of
federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of your
residence
<PAGE>
Page 14
on the Date of Termination, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state
and local taxes.
(I) in the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder
at the time of termination of your employment, you shall repay to
the Company at the time that the amount of such reduction in Excise
Tax is finally determined the portion of the Gross-Up Payment
attributable to such reduction (plus the portion of the Gross-Up
Payment attributable to the Excise Tax and federal and state and
local income tax imposed on the Gross-Up Payment being repaid by
you if such repayment results in a reduction in Excise Tax and/or a
federal and state and local income tax deduction) plus interest on
the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the
time of the termination of your employment (including by reason of
any payment the existence or amount of which cannot be determined
at the time of the Gross-Up Payment), the Company shall make
an additional gross-up payment in respect of such excess (plus any
interest payable with respect to such excess) at the time that the
amount of such excess is finally determined.
(J) the payments provided for in paragraphs (B), (C), (D) and
(E) above, shall be made not later than the fifth day following the
Date of Termination, provided, however, that if the amounts of such
payments cannot be finally determined on or before such day, the
Company shall pay to you on such day an estimate, as determined in
good faith by the Company, of the minimum amount of such payments
and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code)
as soon as the amount thereof can be determined but in no event
later than the thirtieth day after the Date of Termination. In the
event that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall
constitute a loan by the Company to you payable on the fifth day
after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).
(iv) If your employment shall be terminated (A) by the Company
other than for Cause, Retirement or Disability or (B) by you for Good
Reason, then for a twenty-four (24) month period after such termination,
the Company shall arrange to provide you with: (1) life, disability,
accident and health insurance benefits substantially similar to those
which you are receiving immediately prior to the Notice of Termination,
(2) financial advisory services similar to those provided currently to
executives of the
<PAGE>
Page 15
Company by Ayco Corporation, and (3) outplacement services. Benefits
otherwise receivable by you pursuant to this Subsection 4(iv) shall be
reduced to the extent comparable benefits are actually received by you
during the twenty-four (24) month period following your termination, and
any such benefits actually received by you shall be reported to the
Company. Any rights that you have to continuation of life, disability,
accident or health coverage under applicable state or federal law shall
be in addition to those provided under this Agreement.
(v) If your employment shall be terminated (A) by the Company
other than for Cause, Retirement or Disability or (B) by you for Good
Reason, then in addition to the retirement benefits to which you are
entitled under the Pension Plan, Supplemental Plan or Special Benefit
Plan or any successor plans thereto, the Company shall pay you in cash
at the time and in the manner provided in paragraph (J) of Subsection
4(iii), a lump sum equal to the excess of (x) the actuarial equivalent
of the retirement pension (taking into account any early retirement
subsidy associated therewith and determined as a straight life annuity
commencing at age sixty-five (65) or any earlier date, but in no event
earlier than the second anniversary of the Date of Termination whichever
annuity yields a greater benefit) which you would have accrued under the
terms of the Pension Plan, Supplemental Plan or Special Benefit Plan
(without regard to any amendments to any such plans made subsequent to a
change in control of the Company and on or prior to the Date of
Termination, which amendment adversely affects in any manner the
computation of retirement benefits thereunder), determined as if you
were fully vested thereunder and had accumulated (after the Date of
Termination) twenty-four (24) additional months of age and service
credit thereunder at the higher of the rate of average compensation
during the twelve (12) months prior to the change in control of the
Company or the rate of average compensation used to calculate your
benefits under such plans immediately preceding the Date of Termination,
over (y) the actuarial equivalent of the retirement pension (taking into
account any early retirement subsidy associated therewith and determined
as a straight life annuity commencing at age sixty-five (65) or any
earlier date, but in no event earlier than the Date of Termination
whichever annuity yields a greater benefit) which you had then accrued
pursuant to the provisions of the Pension Plan. For purposes of this
Subsection, "actuarial equivalent" shall be determined using the same
assumptions utilized under the Pension Plan for purposes of determining
alternative forms of benefits immediately prior to the change in control
of the Company.
(vi) You shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for
in this Section 4 be reduced by any compensation earned by you as the
result of employment by another employer, by retirement benefits,
<PAGE>
Page 16
by offset against any amount claimed to be owed by you to the Company,
or otherwise, except as provided in Section 4(iv).
(vii) In addition to all other amounts payable to you under this
Section 4, you shall be entitled to receive all benefits payable to you
under the Pension Plan, the Thrift Plan, Supplemental Plan, Special
Benefit Plan, Nonqualified Thrift Plan and any other plan or agreement
relating to retirement benefits.
5. Successors; Binding Agreement. (i) ISI will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
and/or assets of ISI to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that ISI or the
Company would be required to perform it if no such succession had taken
place. Failure of ISI to obtain such assumption and agreement prior to
the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle you to compensation from the Company in the
same amount and on the same terms as you would be entitled to hereunder
if you terminate your employment for Good Reason following a change in
control of the Company, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall
be deemed the Date of Termination. In the event a successor of ISI
assumes and agrees to perform this Agreement, by operation of law or
otherwise, the term "ISI", as used in this Agreement, shall mean such
successor and the term "Company" shall mean, collectively, such
successor and the affiliates of such successor.
(ii) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
If you should die while any amount would still be payable to you
hereunder if you had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to your devisee, legatee or other designee or, if there
is no such designee, to your estate.
6. Notice. For the purpose of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by
United States registered mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth on the first
page of this Agreement, provided that all notice to the Company shall be
directed to the attention of the Board with a copy to the Secretary of
ISI, or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.
<PAGE>
Page 17
7. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you and such officer as may be
specifically designated by the Board. No waiver by either party hereto
at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party
which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of Illinois. All references to
sections of the Exchange Act or the Code shall be deemed also to refer
to any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state or local law. The obligations of ISI and the Company
under Section 4 shall survive the expiration of the term of this
Agreement.
8. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, which shall remain in full force and
effect.
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
10. Settlement of Disputes; Arbitration. All claims by you for
benefits under this Agreement shall be directed to and determined by the
Board and shall be in writing. Any denial by the Board of a claim for
benefits under this Agreement shall be delivered to you in writing and
shall set forth the specific reasons for the denial and the specific
provisions of this Agreement relied upon. The Board shall afford a
reasonable opportunity to you for a review of the decision denying a
claim and shall further allow you to appeal to the Board a decision of
the Board within sixty (60) days after notification by the Board that
your claim has been denied. Any further dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively
by arbitration in Chicago, Illinois, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction;
provided, however, that you shall be entitled to seek specific
performance of your right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in
connection with this Agreement.
<PAGE>
Page 18
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to ISI the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
INLAND STEEL INDUSTRIES, INC.
By /s/ Judd R. Cool
------------------------------
Judd R. Cool
Vice President-Human Resources
Agreed to this 27th day
of March, 1996.
/s/ Neil S. Novich
----------------------------
(Signature)
<PAGE>
Copy of Form of Severance Agreement
dated June 10, 1996
between
Ryerson Tull, Inc.
and each of:
Robert J. Darnall
Jay M. Gratz
Carl G. Lusted
Stephen E. Makarewicz
<PAGE>
June 10, 1996
FIELD(1)
Dear FIELD (2):
Ryerson Tull, Inc. ("RTI") considers it essential to the best interests of
its stockholders to foster the continuous employment of key management personnel
of RTI and its affiliates (collectively, the "Company"). In this connection, the
Board of Directors of RTI (the "Board") recognizes that, as is the case with
many publicly held corporations, the possibility of a change in control may
exist and that such possibility, and the uncertainty and questions which it may
raise among management, may result in the departure or distraction of management
personnel to the detriment of RTI and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Company, although no such change is
now contemplated. In order to induce you to remain in the employ of the Company
and in consideration of your agreement set forth in Subsection 2 (ii) hereof,
RTI agrees that you shall receive the severance benefits set forth in this
letter agreement ("Agreement") in the event your employment with the Company is
terminated subsequent to a "change in control of the Company" (as defined in
Section 2 hereof) under the circumstances described below. In the event that you
receive severance benefits hereunder, such benefits shall be in lieu of, and you
shall not be entitled to receive, any benefits or payments under any other
severance plan, policy or agreement of or with the Company. In addition, if you
are or become entitled to benefits from the Company pursuant to another
agreement providing for benefits on account of a change in control or the law of
a jurisdiction other than the United States or any state or territory thereof as
a result of an event for which benefits are payable to you pursuant this
Agreement, the benefits paid to you pursuant to this Agreement shall
<PAGE>
be reduced by the amount paid to you pursuant to such other agreement or law;
provided, however, that if you become entitled to benefits under this Agreement
and an agreement with Inland Steel Industries, Inc. ("ISI") on account of a
change in control of ISI or any of its subsidiaries, including RTI and its
subsidiaries, the benefits provided under your agreement with ISI will be
reduced by the amount of benefits payable to you pursuant to this Agreement on
account of such change in control. In no event shall you be entitled to benefits
under an agreement with ISI and this Agreement on account of the same events
constituting a change in control, except as provided in the preceeding sentence.
1. Term of Agreement. This Agreement shall commence on the date hereof
and shall continue in effect through December 31, 1996; provided, however, that
commencing on January 1, 1997 and each January 1 thereafter, the term of this
Agreement shall automatically be extended for one additional year unless, during
the preceding year but not later than June 30 of such preceding year, RTI shall
have given notice that it does not wish to extend this Agreement.
Notwithstanding the preceding sentence, (i) if your employer is a direct or
indirect subsidiary of RTI, this Agreement shall terminate on the date on which
RTI ceases to own, directly or indirectly, at least 80 percent of your employer
for any reason which does not constitute a change in control of the Company, and
(ii) if a change in control of the Company or a potential change in control of
the Company shall have occurred during the original or extended term of this
Agreement, this Agreement shall continue in effect for a period of twenty-four
(24) months beyond the month in which such change in control or potential change
in control of the Company occurred unless earlier terminated under clause (i) of
this Section 1.
2. Change in Control; Potential Change in Control. (i) No benefits shall
be payable hereunder unless there shall have been a potential change in control
or a change in control of the Company, as set forth below. For purposes of this
Agreement, a "change in control of the Company" shall be deemed to have occurred
if (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than
(w) the Company, (x) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company, (y) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (z) a corporation
owned, directly or indirectly, by the stockholders of RTI in substantially the
same proportions as their ownership of stock of RTI, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of RTI (not including in the securities
beneficially owned by such person any securities acquired directly from RTI or
its affiliates) representing 40% or more of the combined voting power of RTI's
then outstanding securities; (B) during any period of two consecutive years (not
including any period prior 60 days after the date of this Agreement),
individuals who at the beginning of such
Page 2
<PAGE>
period constitute the Board and any new director (other than a director
designated by a person who has entered into an agreement with RTI to effect a
transaction described in clauses (A), (C) or (D) of this Subsection) whose
election by the Board or nomination for election by RTI's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved ("Continuing
Directors"), cease for any reason to constitute a majority thereof; (C) the
stockholders of RTI approve a merger or consolidation of RTI with any other
corporation, other than a merger or consolidation which would result in the
voting securities of RTI outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity), in combination with the ownership of any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company, at least 60% of the combined voting power of the voting securities
of RTI or such surviving entity outstanding immediately after such merger or
consolidation, or a merger or consolidation effected to implement a
recapitalization of RTI (or similar transaction) in which no person acquires
more than 50% of the combined voting power of RTI's then outstanding securities;
(D) the stockholders of RTI approve a plan of complete liquidation of RTI or an
agreement for the sale or disposition by RTI of all or substantially all of
RTI's assets; or (E) there occurs (x) a sale or disposition, directly or
indirectly, other than to a person described in subclause (w), (x) or (z) of
clause (A) of this Subsection, of securities of your employer, any direct or
indirect parent company of your employer or any company that is a subsidiary of
your employer and is also a significant subsidiary (as defined below) of RTI
(your employer and such a parent or subsidiary being a "Related Company"),
representing 50% or more of the combined voting power of the securities of such
Related Company then outstanding, (y) a merger or consolidation of a Related
Company with any other corporation, other than a merger or consolidation which
would result in 50% or more of the combined voting power of the surviving
company being beneficially owned by RTI or by a majority owned direct or
indirect subsidiary of RTI, or (z) the sale or disposition of all or
substantially all the assets of a Related Company to a person other than RTI or
a majority owned direct or indirect subsidiary of RTI; provided, however, that
no change in control of the Company shall be deemed to have occurred under this
Section 2(ii) if (I) such transaction includes or involves a sale to the public
or a distribution to the stockholders of RTI of more than 50% of the voting
securities of your employer or a direct or indirect parent of your employer, and
(II) your employer or a direct or indirect parent of your employer agrees to
become a successor to RTI under this Agreement or you are covered by an
agreement providing for benefits upon a change in control of your employer
following an event described in clause (E). For purposes of this Agreement, the
term "significant subsidiary" has the meaning given to such term under Rule 405
of the Securities Act of 1933, as amended.
Page 3
<PAGE>
(ii) For purposes of this Agreement, a "potential change in control of the
Company" shall be deemed to have occurred if (A) RTI enters into an agreement,
the consummation of which would result in the occurrence of a change in control
of the Company, (B) any person (including RTI) publicly announces an intention
to take or to consider taking actions which if consummated would constitute a
change in control of the Company; (C) any person, other than (w) the Company,
(x) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company, (y) an underwriter temporarily holding securities pursuant
to an offering of such securities, or (z) a corporation owned, directly or
indirectly, by the stockholders of RTI in substantially the same proportions as
their ownership of stock of RTI, who is or becomes the beneficial owner,
directly or indirectly, of securities of RTI representing 9.5% or more of the
combined voting power of RTI's then outstanding securities, increases his
beneficial ownership of such securities by 5% or more over the percentage so
owned by such person on the date hereof; or (D) the Board adopts a resolution to
the effect that, for purposes of this Agreement, a potential change in control
of the Company has occurred.
You agree that, subject to the terms and conditions of this Agreement, in
the event of a potential change in control of the Company, you will remain in
the employ of the Company until the earliest of (i) a date which is six (6)
months from the occurrence of such potential change in control of the Company,
(ii) the termination by you of your employment by reason of Disability or
Retirement, as defined in Subsection 3(i), or (iii) the occurrence of a change
in control of the Company. If your employment is terminated by the Company
without Cause (as defined in Subsection 3(ii) below) within twelve (12) months
after the occurrence of a potential change in control of the Company and a
change in control of the Company occurs within six (6) months after such
termination, you shall be entitled to the compensation and benefits hereunder as
if your termination of employment without Cause followed a change in control of
the Company; provided, however, that no benefits shall be payable under this
sentence if prior to the change in control of the Company, RTI ceased to own,
directly or indirectly, at least 80% of your employer.
(iii) The foregoing to the contrary notwithstanding, a change in control of
the Company shall not be deemed to have occurred with respect to you if (A) the
event first giving rise to the potential change in control of the Company
involves a publicly announced transaction or publicly announced proposed
transaction which at the time of the announcement has not been previously
approved by the Board and (B) you are "part of a purchasing group" proposing the
transaction. A change in control of the Company shall also not be deemed to have
occurred with respect to you if you are part of a purchasing group which
consummates the change in control transaction. You shall be
Page 4
<PAGE>
deemed "part of a purchasing group" for purposes of the two preceding sentences
if you are an equity participant or have agreed to become an equity participant
in the purchasing company or group (except for (A) passive ownership of less
than 1% of the stock of the purchasing company or (B) ownership of equity
participation in the purchasing company or group which is otherwise not deemed
to be significant, as determined prior to the change in control of the Company
by a majority of the non-employee Continuing Directors).
3. Termination Following Change in Control. If a change in control of
the Company, as defined in Section 2 hereof, shall have occurred, you shall be
entitled to the benefits provided in Subsection 4(iii) hereof upon the
subsequent termination of your employment during the term of this Agreement
unless such termination is (A) because of your death, Disability or Retirement,
(B) by the Company for Cause, or (C) by you other than for Good Reason.
(i) Disability; Retirement. If, as a result of your incapacity due to
physical or mental illness, you shall have been absent from the full-time
performance of your duties with the Company for six (6) consecutive months, and
within thirty (30) days after written notice of termination is given you shall
not have returned to the full-time performance of your duties, your employment
may be terminated for "Disability". Termination by the Company or you of your
employment based on "Retirement" shall mean termination on or after your normal
retirement age in accordance with the Company's retirement policy generally
applicable to its salaried employees or in accordance with any retirement
arrangement established with your consent with respect to you.
(ii) Cause. Termination by the Company of your employment for "Cause"
shall mean termination upon (A) the willful and continued failure by you to
substantially perform your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness or any such
actual or anticipated failure after the issuance of a Notice of Termination by
you for Good Reason as defined in Subsections 3(iv) and 3(iii), respectively)
after a written demand for substantial performance is delivered to you by the
Board, which demand specifically identifies the manner in which the Board
believes that you have not substantially performed your duties, or (B) the
willful engaging by you in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise. For purposes of this
Subsection, no act, or failure to act, on your part shall be deemed "willful"
unless done, or omitted to be done, by you not in good faith and without
reasonable belief that your action or omission was in the best interest of the
Company. Notwithstanding the foregoing, you shall not be deemed to have been
terminated for Cause unless and until there shall have been
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delivered to you a copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after reasonable notice
to you and an opportunity for you, together with your counsel, to be heard
before the Board), finding that in the good faith opinion of the Board you were
guilty of conduct set forth above in clauses (A) or (B) of the first sentence of
this Subsection and specifying the particulars thereof in detail.
(iii) Good Reason. You shall be entitled to terminate your employment for
Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without
your express written consent, the occurrence after a change in control of the
Company of any of the following circumstances unless, in the case of paragraphs
(A), (E), (F), (G) or (H), such circumstances are fully corrected prior to the
Date of Termination specified in the Notice of Termination, as defined in
Subsections 3(v) and 3(iv), respectively, given in respect thereof:
(A) a substantial adverse alteration in the nature or status of your
responsibilities from those in effect immediately prior to the change in
control of the Company other than any such alteration primarily
attributable to the fact that the Company may no longer be a public
company;
(B) a reduction by the Company in your annual base salary as in
effect on the date hereof or as the same may be increased from time to
time;
(C) the Company's requiring that your principal place of business be
at an office located more than 50 miles from where your principal place of
business is located immediately prior to the change in control of the
Company, except for required travel on the Company's business to an extent
substantially consistent with your business travel obligations immediately
prior to the change in control of the Company;
(D) the failure by the Company, without your consent, to pay to you
any portion of your current compensation, or to pay to you any portion of
an installment of deferred compensation under any deferred compensation
program of the Company, within seven (7) days of the date such compensation
is due;
(E) the failure by the Company to continue in effect any compensation
plan in which you participate immediately prior to the change in control of
the Company which is material to your total compensation, including but not
limited to the Inland Steel Industries Annual Incentive Plan (the "Annual
Incentive
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Plan"), Inland Special Achievement Award Plan, Inland 1986 Employee Stock
Purchase Plan, Ryerson Tull 1996 Incentive Stock Plan (the "Incentive
Plan'), Ryerson Tull Supplemental Retirement Benefit Plan for Covered
Employees (the "Supplemental Plan"), Inland Steel Industries Nonqualified
Thrift Plan (the "Nonqualified Thrift Plan"), Ryerson Tull Pension Plan
(the "Pension Plan") and Inland Steel Industries Thrift Plan (the "Thrift
Plan") or any substitute or alternative plans adopted prior to the change
in control (including substitute plans adopted by the Company in
replacement of plans previously sponsored by Inland Steel Industries,
Inc.), unless an equitable arrangement (embodied in an ongoing substitute
or alternative plan) has been made with respect to such plan, or the
failure by the Company to continue your participation therein (or in such
substitute or alternative plan) on a basis not materially less favorable,
both in terms of the amount of benefits provided and the level of your
participation relative to other participants, as existed at the time of the
change in control;
(F) the failure by the Company to continue to provide you with
benefits substantially similar to those enjoyed by you under any of the
Company's pension, life insurance, medical, health and accident, flexible
spending or disability plans or programs in which you were participating at
the time of the change in control of the Company, the taking of any action
by the Company which would directly or indirectly materially reduce any of
such benefits or deprive you of any material fringe benefit enjoyed by you
at the time of the change in control of the Company, or the failure by the
Company to provide you with the number of paid vacation days to which you
are entitled on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in effect at the time
of the change in control of the Company;
(G) the failure of RTI to obtain a satisfactory agreement from any
successor to assume and agree to perform this Agreement, as contemplated in
Section 5 hereof; or
(H) any purported termination of your employment which is not
effected pursuant to a Notice of Termination satisfying the requirements of
Subsection (iv) below (and, if applicable, the requirements of Subsection
(ii) above); for purposes of this Agreement, no such purported termination
shall be effective.
Your right to terminate your employment pursuant to this Subsection shall not be
affected by your incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder.
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(iv) Notice of Termination. Any purported termination of your employment
by the Company or by you shall be communicated by written Notice of Termination
to the other party hereto in accordance with Section 6 hereof. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision so
indicated.
(v) Date of Termination, Etc. "Date of Termination" shall mean (A) if
your employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the full-time
performance of your duties during such thirty (30) day period), and (B) if your
employment is terminated pursuant to Subsection (ii) or (iii) above or for any
other reason (other than Disability), the date specified in the Notice of
Termination (which, in the case of a termination pursuant to Subsection (ii)
above shall not be less than thirty (30) days, and in the case of a termination
pursuant to Subsection (iii) above shall not be less than fifteen (15) nor more
than sixty (60) days, respectively, from the date such Notice of Termination is
given); provided that if within fifteen (15) days after any Notice of
Termination is given, or, if later, prior to the Date of Termination (as
determined without regard to this proviso), the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, by a
binding arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected) but
shall be deemed to be within the twenty four (24) month period following a
change in control of the Company; provided further that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute, the
Company will continue to pay you your full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, base
salary) and continue you as a participant in all compensation, benefit and
insurance plans and programs in which you were participating when the notice
giving rise to the dispute was given, until the dispute is finally resolved in
accordance with this Subsection. Amounts paid under this Subsection are in
addition to all other amounts due under this Agreement and shall not be offset
against or reduce any other amounts due under this Agreement.
4. Compensation Upon Termination or During Disability. Following a change
in control of the Company, as defined by Subsection 2(i), upon termination of
your
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employment or during a period of Disability you shall be entitled to the
following benefits:
(i) During any period that you fail to perform your full-time duties with
the Company as a result of incapacity due to physical or mental illness, you
shall continue to receive your base salary at the rate in effect at the
commencement of any such period, together with all compensation payable to you
under the Pension Plan, Supplemental Plan, Annual Incentive Plan, Thrift Plan
and Nonqualified Thrift Plan during such period, until this Agreement is
terminated pursuant to Section 3(i) hereof. Thereafter, in the event your
employment shall be terminated, your benefits shall be determined under the
Company's retirement, insurance and other compensation plans and programs then
in effect in accordance with the terms of such plans and programs.
(ii) If your employment shall be terminated by the Company for Cause or by
you other than for Good Reason, Disability, death or Retirement, the Company
shall pay you your full base salary through the Date of Termination at the rate
in effect at the time Notice of Termination is given, plus all other amounts to
which you are entitled under any compensation plan or program of the Company at
the time such payments are due, and the Company shall have no further
obligations to you under this Agreement.
(iii) If your employment by the Company shall be terminated (a) by the
Company other than for Cause, Retirement or Disability or (b) by you for Good
Reason, then you shall be entitled to the compensation and benefits provided
below:
(A) the Company shall pay you your full base salary through the Date
of Termination at the rate in effect at the time Notice of Termination is
given, plus all other amounts to which you are entitled under any
compensation plan of the Company, at the time such payments are due, except
as otherwise provided below.
(B) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as severance
pay to you a lump sum severance payment (together with the payments
provided in paragraphs C and D below, the "Severance Payments") equal to
the sum of (x) your annual base salary in effect immediately prior to the
occurrence of the circumstance giving rise to the Notice of Termination
given in respect thereof, and (y) the average annual amount of the Award
paid to you pursuant to the Annual Incentive Plan or similar successor plan
with respect to the five years immediately preceding that in which the Date
of Termination occurs, such average annual amount being calculated by
aggregating all such Awards paid
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with respect to such five years and dividing such aggregate amount by the
number of years for which such an Award was actually paid to you.
(C) notwithstanding any provision of the Annual Incentive Plan and
the Inland Special Achievement Award Plan, the Company shall pay to you a
lump sum amount equal to the sum of (x) any incentive compensation which
has been allocated or awarded to you for a completed fiscal year or other
measuring period preceding the Date of Termination but has not yet been
paid, and (y) a pro rata portion to the Date of Termination for the current
fiscal year or other measuring period of the amount equal to the Target
Award percentage applicable to you under the Annual Incentive Plan or
similar successor plan on the Date of Termination times your annual base
salary then in effect.
(D) in lieu of shares of common stock of RTI ("RTI Shares") issuable
upon exercise of outstanding options ("Options"), if any, granted to you
under RTI's stock option plans (which Options shall be cancelled upon the
making of the payment referred to below), you shall receive an amount in
cash equal to the product of (i) the excess of (x) in the case of incentive
stock options (as defined in section 422A of the Internal Revenue Code of
1986, as amended (the "Code")) ("ISOs")), granted after the date hereof,
the closing price of RTI's shares as reported on the New York Stock
Exchange Composite Transactions on or next preceding the Date of
Termination, in the case of all other options, the Change in Control Price
(as defined below), over (y) the per share exercise price of each Option
held by you (whether or not then fully exercisable), times (ii) the number
of RTI Shares covered by each such option. For purposes of this Agreement,
the "Change in Control Price" means (1) with respect to a merger or
consolidation of RTI described in Section 2(i)(C) in which the
consideration per share of RTI's common stock to be paid for the
acquisition of shares of common stock specified in the agreement of merger
or consolidation is all in cash, the highest such consideration per share,
(2) with respect to a change in control of the Company by reason of an
acquisition of securities described in Section 2(i)(A), the highest price
per share for any share of RTI's common stock paid by any holder of any of
the securities representing 40% or more of the combined voting power of RTI
giving rise to the change in control of the Company, and (3) with respect
to a change in control of the Company by reason of a merger or
consolidation of RTI (other than a merger or consolidation described in
Clause (1) next above), stockholder approval of an agreement or plan
described in Section 2(i)(D), a change in the composition of the Board
described in Section 2(i)(B) or a change in control of the Company pursuant
to Section 2(i)(E) (relating to mergers, consolidations and sales of
securities or
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assets of a Related Company), the highest price per share of common stock
reported on the New York Stock Exchange Composite Transactions (or, if such
shares are not traded on the New York Stock Exchange, such other principal
market on which such shares are traded) during the sixty (60) day period
ending on the date the change in control of the Company occurs.
(E) the Company shall also pay to you all legal fees and expenses
incurred by you as a result of such termination (including all such fees
and expenses, if any, incurred in contesting or disputing any such
termination or in seeking to obtain or enforce any right or benefit
provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of Section 4999 of
the Code to any payment or benefit provided hereunder). Such payments shall
be made at the later of the times specified in paragraph (F) below, or
within five (5) days after your request for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may
require.
(F) the payments provided for in paragraphs (B), (C) and (D) above,
shall be made not later than the fifth day following the Date of
Termination, provided, however, that if the amounts of such payments cannot
be finally determined on or before such day, the Company shall pay to you
on such day an estimate, as determined in good faith by the Company, of the
minimum amount of such payments and shall pay the remainder of such
payments (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined
but in no event later than the thirtieth day after the Date of Termination.
In the event that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall constitute a
loan by the Company to you payable on the fifth day after demand by the
Company (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code).
(iv) If your employment shall be terminated (A) by the Company other than
for Cause, Retirement or Disability or (B) by you for Good Reason, then for a
twelve (12) month period after such termination, the Company shall arrange to
provide you with: (1) life, disability, accident and health insurance benefits
substantially similar to those which you are receiving immediately prior to the
Notice of Termination, and (2) outplacement services. Benefits otherwise
receivable by you pursuant to this Subsection 4 (iv) shall be reduced to the
extent comparable benefits are actually received by you during the twelve (12)
month period following your termination, and any such benefits actually received
by you shall be reported to the Company. Any rights that you have to
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continuation of health coverage under applicable state or federal law shall be
in addition to those provided under this Agreement.
(v) If your employment shall be terminated (A) by the Company other than
for Cause, Retirement or Disability or (B) by you for Good Reason, then in
addition to the retirement benefits to which you are entitled under the Pension
Plan or Supplemental Plan or any successor plans thereto, the Company shall pay
you in cash at the time and in the manner provided in paragraph (J) of
Subsection 4(iii), a lump sum equal to the excess of (x) the actuarial
equivalent of the retirement pension (taking into account any early retirement
subsidy associated therewith and determined as a straight life annuity
commencing at age sixty-five (65) or any earlier date, but in no event earlier
than the second anniversary of the Date of Termination whichever annuity yields
a greater benefit) which you would have accrued under the terms of the Pension
Plan or Supplemental Plan (without regard to any amendments to any such plans
made subsequent to a change in control of the Company and on or prior to the
Date of Termination, which amendment adversely affects in any manner the
computation of retirement benefits thereunder), determined as if you were fully
vested thereunder and had accumulated (after the Date of Termination) twelve
(12) additional months of age and service credit thereunder at the higher of the
rate of average compensation during the twelve (12) months prior to the change
in control of the Company or the rate of average compensation used to calculate
your benefits under such plans immediately preceding the Date of Termination,
over (y) the actuarial equivalent of the retirement pension (taking into account
any early retirement subsidy associated therewith and determined as a straight
life annuity commencing at age sixty-five (65) or any earlier date, but in no
event earlier than the Date of Termination whichever annuity yields a greater
benefit) which you had then accrued pursuant to the provisions of the Pension
Plan. For purposes of this Subsection, "actuarial equivalent" shall be
determined using the same assumptions utilized under the Pension Plan for
purposes of determining alternative forms of benefits immediately prior to the
change in control of the Company.
(vi) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for in this Section 4 be
reduced by any compensation earned by you as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by you to the Company, or otherwise, except as provided in Section 4(iv).
(vii) Notwithstanding the provisions of Subsection (iii) hereof, if in the
unqualified opinion of tax counsel selected by RTI's independent auditors and
acceptable to you:
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(A) any payments or benefits received or to be received by you,
whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any person whose actions result
in a change in control of RTI or any person affiliated with RTI or such
person, constitute "parachute payments" (such payments or benefits being
hereinafter referred to as the "Parachute Payments") within the meaning of
Section 280G(b)(2) of the Code, and
(B) the aggregate present value of the Parachute Payments reduced by
any excise tax imposed under Section 4999 of the Code (or any similar tax
that may hereafter be imposed) (the "Excise Tax") and by any federal, state
or local income or any other excise taxes payable by you with respect to
such Parachute Payments would be less than 3 times your "base amount," as
defined in Section 280G(b)(3) of the Code, reduced by any federal, state or
local income taxes payable by you with respect to an amount equal to 2.99
times your base amount, then, in lieu of that portion of the Parachute
Payments to which you would otherwise be entitled under Subsection (iii)
hereof, RTI shall pay to you under this Subsection, no later than the time
specified in Subsection (iii)(F) hereof, a lump sum amount such that the
aggregate present value of the Parachute Payments is equal to 2.99 times
your base amount. For purposes of the preceding paragraph, your base
amount, the present value of the Parachute Payments, the amount of the
Excise Tax, the amount of any federal, state or local income taxes payable
by you and all other appropriate matters shall be determined by RTI's
independent auditors in accordance with the provisions of Section 280G of
the Code or other relevant provisions of the Code and based upon an
unqualified opinion of tax counsel selected by such auditors and acceptable
to you.
(viii) In addition to all other amounts payable to you under this Section
4, you shall be entitled to receive all benefits payable to you under the
Pension Plan, the Thrift Plan, Supplemental Plan, Nonqualified Thrift Plan (or
any substitute or alternative plan or plans) and any other plan or agreement
relating to retirement benefits.
5. Successors; Binding Agreement. (i) RTI will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of RTI to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that RTI or the Company would be required to perform it if no such
succession had taken place. Failure of RTI to obtain such assumption and
agreement prior to the effectiveness of any such succession shall
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be a breach of this Agreement and shall entitle you to compensation from the
Company in the same amount and on the same terms as you would be entitled to
hereunder if you terminate your employment for Good Reason following a change in
control of the Company, except that for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed the Date
of Termination. In the event a successor of RTI assumes and agrees to perform
this Agreement, by operation of law or otherwise, the term "RTI", as used in
this Agreement, shall mean such successor and the term "Company" shall mean,
collectively, such successor and the affiliates of such successor.
(ii) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or, if there
is no such designee, to your estate.
6. Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notice to the Company shall be directed to the attention of the Board
with a copy to the Secretary of RTI, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
7. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by you and such officer as may be specifically designated by
the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Illinois. All references to sections of the Exchange
Act or the Code shall be deemed also to refer to any successor provisions to
such sections. Any payments provided for hereunder shall be paid net of any
applicable withholding
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required under federal, state or local law. The obligations of RTI and the
Company under Section 4 shall survive the expiration of the term of this
Agreement.
8. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
10. Settlement of Disputes; Arbitration. All claims by you for benefits
under this Agreement shall be directed to and determined by the Board and shall
be in writing. Any denial by the Board of a claim for benefits under this
Agreement shall be delivered to you in writing and shall set forth the specific
reasons for the denial and the specific provisions of this Agreement relied
upon. The Board shall afford a reasonable opportunity to you for a review of the
decision denying a claim and shall further allow you to appeal to the Board a
decision of the Board within sixty (60) days after notification by the Board
that your claim has been denied. Any further dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration in Chicago, Illinois, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to RTI the enclosed copy of this letter which will then
constitute our agreement on this subject.
Sincerely,
RYERSON TULL, INC.
By: ______________________________________________
Its: Vice President - Human Resources
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Agreed to this ________ day
of ________________________, 1996.
________________________________________ (Signature)
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June 10, 1996
Neil S. Novich
431 Washington Avenue
Wilmette, Illinois 60091
Dear Mr. Novich:
Ryerson Tull, Inc. ("RTI") considers it essential to the best interests of
its stockholders to foster the continuous employment of key management personnel
of RTI and its affiliates (collectively, the "Company"). In this connection, the
Board of Directors of RTI (the "Board") recognizes that, as is the case with
many publicly held corporations, the possibility of a change in control may
exist and that such possibility, and the uncertainty and questions which it may
raise among management, may result in the departure or distraction of management
personnel to the detriment of RTI and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Company, although no such change is
now contemplated. In order to induce you to remain in the employ of the Company
and in consideration of your agreement set forth in Subsection 2 (ii) hereof,
RTI agrees that you shall receive the severance benefits set forth in this
letter agreement ("Agreement") in the event your employment with the Company is
terminated subsequent to a "change in control of the Company" (as defined in
Section 2 hereof) under the circumstances described below. In the event that you
receive severance benefits hereunder, such benefits shall be in lieu of, and you
shall not be entitled to receive, any benefits or payments under any other
severance plan, policy or agreement (except your employment agreement contained
in letters dated April 8, 1994 [your "Employment Agreement"]) of or with the
Company. In addition, if you are or become entitled to benefits from the Company
pursuant to another agreement providing for benefits on account of a change in
control or the law of a jurisdiction other than the United States or any state
or territory thereof as a result of an event for which benefits are payable to
you pursuant this Agreement, the benefits paid to you pursuant to this Agreement
shall
<PAGE>
be reduced by the amount paid to you pursuant to such other agreement or law;
provided, however, that if you become entitled to benefits under this Agreement
and an agreement with Inland Steel Industries, Inc. ("ISI") on account of a
change in control of ISI or any of its subsidiaries, including RTI and its
subsidiaries, the benefits provided under your agreement with ISI will be
reduced by the amount of benefits payable to you pursuant to this Agreement on
account of such change in control. In no event shall you be entitled to benefits
under an agreement with ISI and this Agreement on account of the same events
constituting a change in control, except as provided in the proceeding sentence.
1. Term of Agreement. This Agreement shall commence on the date hereof
and shall continue in effect through December 31, 1996; provided, however, that
commencing on January 1, 1997 and each January 1 thereafter, the term of this
Agreement shall automatically be extended for one additional year unless, during
the preceding year but not later than June 30 of such preceding year, RTI shall
have given notice that it does not wish to extend this Agreement.
Notwithstanding the preceding sentence, (i) if your employer is a direct or
indirect subsidiary of RTI, this Agreement shall terminate on the date on which
RTI ceases to own, directly or indirectly, at least 80 percent of your employer
for any reason which does not constitute a change in control of the Company, and
(ii) if a change in control of the Company or a potential change in control of
the Company shall have occurred during the original or extended term of this
Agreement, this Agreement shall continue in effect for a period of twenty-four
(24) months beyond the month in which such change in control or potential change
in control of the Company occurred unless earlier terminated under clause (i) of
this Section 1.
2. Change in Control; Potential Change in Control. (i) No benefits shall
be payable hereunder unless there shall have been a potential change in control
or a change in control of the Company, as set forth below. For purposes of this
Agreement, a "change in control of the Company" shall be deemed to have occurred
if (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than
(w) the Company, (x) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company, (y) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (z) a corporation
owned, directly or indirectly, by the stockholders of RTI in substantially the
same proportions as their ownership of stock of RTI, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of RTI (not including in the securities
beneficially owned by such person any securities acquired directly from RTI or
its affiliates) representing 40% or more of the combined voting power of RTI's
then outstanding securities; (B) during any period of two consecutive years (not
including any period prior 60 days after the date of this Agreement),
individuals who at the beginning of such
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period constitute the Board and any new director (other than a director
designated by a person who has entered into an agreement with RTI to effect a
transaction described in clauses (A), (C) or (D) of this Subsection) whose
election by the Board or nomination for election by RTI's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved ("Continuing
Directors"), cease for any reason to constitute a majority thereof; (C) the
stockholders of RTI approve a merger or consolidation of RTI with any other
corporation, other than a merger or consolidation which would result in the
voting securities of RTI outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity), in combination with the ownership of any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company, at least 60% of the combined voting power of the voting securities
of RTI or such surviving entity outstanding immediately after such merger or
consolidation, or a merger or consolidation effected to implement a
recapitalization of RTI (or similar transaction) in which no person acquires
more than 50% of the combined voting power of RTI's then outstanding securities;
(D) the stockholders of RTI approve a plan of complete liquidation of RTI or an
agreement for the sale or disposition by RTI of all or substantially all of
RTI's assets; or (E) there occurs (x) a sale or disposition, directly or
indirectly, other than to a person described in subclause (w), (x) or (z) of
clause (A) of this Subsection, of securities of your employer, any direct or
indirect parent company of your employer or any company that is a subsidiary of
your employer and is also a significant subsidiary (as defined below) of RTI
(your employer and such a parent or subsidiary being a "Related Company"),
representing 50% or more of the combined voting power of the securities of such
Related Company then outstanding, (y) a merger or consolidation of a Related
Company with any other corporation, other than a merger or consolidation which
would result in 50% or more of the combined voting power of the surviving
company being beneficially owned by RTI or by a majority owned direct or
indirect subsidiary of RTI, or (z) the sale or disposition of all or
substantially all the assets of a Related Company to a person other than RTI or
a majority owned direct or indirect subsidiary of RTI; provided, however, that
no change in control of the Company shall be deemed to have occurred under this
Section 2(ii) if (I) such transaction includes or involves a sale to the public
or a distribution to the stockholders of RTI of more than 50% of the voting
securities of your employer or a direct or indirect parent of your employer, and
(II) your employer or a direct or indirect parent of your employer agrees to
become a successor to RTI under this Agreement or you are covered by an
agreement providing for benefits upon a change in control of your employer
following an event described in clause (E). For purposes of this Agreement, the
term "significant subsidiary" has the meaning given to such term under Rule 405
of the Securities Act of 1933, as amended.
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(ii) For purposes of this Agreement, a "potential change in control of the
Company" shall be deemed to have occurred if (A) RTI enters into an agreement,
the consummation of which would result in the occurrence of a change in control
of the Company, (B) any person (including RTI) publicly announces an intention
to take or to consider taking actions which if consummated would constitute a
change in control of the Company; (C) any person, other than (w) the Company,
(x) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company, (y) an underwriter temporarily holding securities pursuant
to an offering of such securities, or (z) a corporation owned, directly or
indirectly, by the stockholders of RTI in substantially the same proportions as
their ownership of stock of RTI, who is or becomes the beneficial owner,
directly or indirectly, of securities of RTI representing 9.5% or more of the
combined voting power of RTI's then outstanding securities, increases his
beneficial ownership of such securities by 5% or more over the percentage so
owned by such person on the date hereof; or (D) the Board adopts a resolution to
the effect that, for purposes of this Agreement, a potential change in control
of the Company has occurred.
You agree that, subject to the terms and conditions of this Agreement, in
the event of a potential change in control of the Company, you will remain in
the employ of the Company until the earliest of (i) a date which is six (6)
months from the occurrence of such potential change in control of the Company,
(ii) the termination by you of your employment by reason of Disability or
Retirement, as defined in Subsection 3(i), or (iii) the occurrence of a change
in control of the Company. If your employment is terminated by the Company
without Cause (as defined in Subsection 3(ii) below) within twelve (12) months
after the occurrence of a potential change in control of the Company and a
change in control of the Company occurs within six (6) months after such
termination, you shall be entitled to the compensation and benefits hereunder as
if your termination of employment without Cause followed a change in control of
the Company; provided, however, that no benefits shall be payable under this
sentence if prior to the change in control of the Company, RTI ceased to own,
directly or indirectly, at least 80% of your employer.
(iii) The foregoing to the contrary notwithstanding, a change in control of
the Company shall not be deemed to have occurred with respect to you if (A) the
event first giving rise to the potential change in control of the Company
involves a publicly announced transaction or publicly announced proposed
transaction which at the time of the announcement has not been previously
approved by the Board and (B) you are "part of a purchasing group" proposing the
transaction. A change in control of the Company shall also not be deemed to have
occurred with respect to you if you are part of a purchasing group which
consummates the change in control transaction. You shall be
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deemed "part of a purchasing group" for purposes of the two preceding sentences
if you are an equity participant or have agreed to become an equity participant
in the purchasing company or group (except for (A) passive ownership of less
than 1% of the stock of the purchasing company or (B) ownership of equity
participation in the purchasing company or group which is otherwise not deemed
to be significant, as determined prior to the change in control of the Company
by a majority of the non-employee Continuing Directors).
3. Termination Following Change in Control. If a change in control of
the Company, as defined in Section 2 hereof, shall have occurred, you shall be
entitled to the benefits provided in Subsection 4(iii) hereof upon the
subsequent termination of your employment during the term of this Agreement
unless such termination is (A) because of your death, Disability or Retirement,
(B) by the Company for Cause, or (C) by you other than for Good Reason;
provided, however, that nothing contained in this Section 3 shall limit or
reduce in any way such benefits, if any, as you may be entitled to receive under
provisions of your Employment Agreement during the term thereof.
(i) Disability; Retirement. If, as a result of your incapacity due to
physical or mental illness, you shall have been absent from the full-time
performance of your duties with the Company for six (6) consecutive months, and
within thirty (30) days after written notice of termination is given you shall
not have returned to the full-time performance of your duties, your employment
may be terminated for "Disability". Termination by the Company or you of your
employment based on "Retirement" shall mean termination on or after your normal
retirement age in accordance with the Company's retirement policy generally
applicable to its salaried employees or in accordance with any retirement
arrangement established with your consent with respect to you.
(ii) Cause. Termination by the Company of your employment for "Cause"
shall mean termination upon (A) the willful and continued failure by you to
substantially perform your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness or any such
actual or anticipated failure after the issuance of a Notice of Termination by
you for Good Reason as defined in Subsections 3(iv) and 3(iii), respectively)
after a written demand for substantial performance is delivered to you by the
Board, which demand specifically identifies the manner in which the Board
believes that you have not substantially performed your duties, or (B) the
willful engaging by you in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise. For purposes of this
Subsection, no act, or failure to act, on your part shall be deemed "willful"
unless done, or omitted to be done, by you not in good faith and without
reasonable belief that your action or omission was in the best interest of the
Company. Notwithstanding the foregoing, you shall not be deemed to have been
terminated for Cause unless and until there shall have been
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delivered to you a copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after reasonable notice
to you and an opportunity for you, together with your counsel, to be heard
before the Board), finding that in the good faith opinion of the Board you were
guilty of conduct set forth above in clauses (A) or (B) of the first sentence of
this Subsection and specifying the particulars thereof in detail.
(iii) Good Reason. You shall be entitled to terminate your employment for
Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without
your express written consent, the occurrence after a change in control of the
Company of any of the following circumstances unless, in the case of paragraphs
(A), (E), (F), (G) or (H), such circumstances are fully corrected prior to the
Date of Termination specified in the Notice of Termination, as defined in
Subsections 3(v) and 3(iv), respectively, given in respect thereof:
(A) the assignment to you of any duties inconsistent with your status
as an executive officer of the Company or a substantial adverse alteration
in the nature or status of your responsibilities from those in effect
immediately prior to the change in control of the Company other than any
such alteration primarily attributable to the fact that the Company may no
longer be a public company;
(B) a reduction by the Company in your annual base salary as in
effect on the date hereof or as the same may be increased from time to
time;
(C) the Company's requiring that your principal place of business be
at an office located more than 50 miles from where your principal place of
business is located immediately prior to the change in control of the
Company, except for required travel on the Company's business to an extent
substantially consistent with your business travel obligations immediately
prior to the change in control of the Company;
(D) the failure by the Company, without your consent, to pay to you
any portion of your current compensation, or to pay to you any portion of
an installment of deferred compensation under any deferred compensation
program of the Company, within seven (7) days of the date such compensation
is due;
(E) the failure by the Company to continue in effect any compensation
plan in which you participate immediately prior to the change in control of
the Company which is material to your total compensation, including but not
limited to the Inland Steel Industries Annual Incentive Plan (the "Annual
Incentive
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Plan"), Inland Special Achievement Award Plan, Inland 1986 Employee Stock
Purchase Plan, Ryerson Tull 1996 Incentive Stock Plan (the "Incentive
Plan'), Ryerson Tull Supplemental Retirement Benefit Plan for Covered
Employees (the "Supplemental Plan"), Inland Steel Industries Nonqualified
Thrift Plan (the "Nonqualified Thrift Plan"), Ryerson Tull Pension Plan
(the "Pension Plan") and Inland Steel Industries Thrift Plan (the "Thrift
Plan") or any substitute or alternative plans adopted prior to the change
in control (including substitute plans adopted by the Company in
replacement of plans previously sponsored by Inland Steel Industries,
Inc.), unless an equitable arrangement (embodied in an ongoing substitute
or alternative plan) has been made with respect to such plan, or the
failure by the Company to continue your participation therein (or in such
substitute or alternative plan) on a basis not materially less favorable,
both in terms of the amount of benefits provided and the level of your
participation relative to other participants, as existed at the time of the
change in control;
(F) the failure by the Company to continue to provide you with
benefits substantially similar to those enjoyed by you under any of the
Company's pension, life insurance, medical, health and accident, flexible
spending or disability plans or programs in which you were participating at
the time of the change in control of the Company, the taking of any action
by the Company which would directly or indirectly materially reduce any of
such benefits or deprive you of any material fringe benefit enjoyed by you
at the time of the change in control of the Company, or the failure by the
Company to provide you with the number of paid vacation days to which you
are entitled on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in effect at the time
of the change in control of the Company;
(G) the failure of RTI to obtain a satisfactory agreement from any
successor to assume and agree to perform this Agreement, as contemplated in
Section 5 hereof; or
(H) any purported termination of your employment which is not
effected pursuant to a Notice of Termination satisfying the requirements of
Subsection (iv) below (and, if applicable, the requirements of Subsection
(ii) above); for purposes of this Agreement, no such purported termination
shall be effective.
Your right to terminate your employment pursuant to this Subsection shall not be
affected by your incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder.
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(iv) Notice of Termination. Any purported termination of your employment
by the Company or by you shall be communicated by written Notice of Termination
to the other party hereto in accordance with Section 6 hereof. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision so
indicated.
(v) Date of Termination, Etc. "Date of Termination" shall mean (A) if
your employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the full-time
performance of your duties during such thirty (30) day period), and (B) if your
employment is terminated pursuant to Subsection (ii) or (iii) above or for any
other reason (other than Disability), the date specified in the Notice of
Termination (which, in the case of a termination pursuant to Subsection (ii)
above shall not be less than thirty (30) days, and in the case of a termination
pursuant to Subsection (iii) above shall not be less than fifteen (15) nor more
than sixty (60) days, respectively, from the date such Notice of Termination is
given); provided that if within fifteen (15) days after any Notice of
Termination is given, or, if later, prior to the Date of Termination (as
determined without regard to this proviso), the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, by a
binding arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected) but
shall be deemed to be within the twenty four (24) month period following a
change in control of the Company; provided further that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute, the
Company will continue to pay you your full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, base
salary) and continue you as a participant in all compensation, benefit and
insurance plans and programs in which you were participating when the notice
giving rise to the dispute was given, until the dispute is finally resolved in
accordance with this Subsection. Amounts paid under this Subsection are in
addition to all other amounts due under this Agreement and shall not be offset
against or reduce any other amounts due under this Agreement.
4. Compensation Upon Termination or During Disability. Following a change
in control of the Company, as defined by Subsection 2(i), upon termination of
your
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employment or during a period of Disability you shall be entitled to the
following benefits minus the amount, if any, paid to you as a result thereof for
comparable benefits pursuant to your Employment Agreement during the term
thereof:
(i) During any period that you fail to perform your full-time duties with
the Company as a result of incapacity due to physical or mental illness, you
shall continue to receive your base salary at the rate in effect at the
commencement of any such period, together with all compensation payable to you
under the Pension Plan, Supplemental Plan, Annual Incentive Plan, Thrift Plan
and Nonqualified Thrift Plan during such period, until this Agreement is
terminated pursuant to Section 3(i) hereof. Thereafter, in the event your
employment shall be terminated, your benefits shall be determined under the
Company's retirement, insurance and other compensation plans and programs then
in effect in accordance with the terms of such plans and programs.
(ii) If your employment shall be terminated by the Company for Cause or by
you other than for Good Reason, Disability, death or Retirement, the Company
shall pay you your full base salary through the Date of Termination at the rate
in effect at the time Notice of Termination is given, plus all other amounts to
which you are entitled under any compensation plan or program of the Company at
the time such payments are due, and the Company shall have no further
obligations to you under this Agreement.
(iii) If your employment by the Company shall be terminated (a) by the
Company other than for Cause, Retirement or Disability or (b) by you for Good
Reason, then you shall be entitled to the compensation and benefits provided
below:
(A) the Company shall pay you your full base salary through the Date
of Termination at the rate in effect at the time Notice of Termination is
given, plus all other amounts to which you are entitled under any
compensation plan or program of the Company, at the time such payments are
due, except as otherwise provided below.
(B) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as severance
pay to you a lump sum severance payment (together with the payments
provided in paragraphs C, D and E below, the "Severance Payments") equal to
two times the sum of (x) your annual base salary in effect immediately
prior to the occurrence of the circumstance giving rise to the Notice of
Termination given in respect thereof, and (y) the average annual amount of
the Award paid to you pursuant to the Annual Incentive Plan or similar
successor plan with respect to the five years immediately preceding that in
which the Date of Termination occurs, such average annual amount being
calculated by aggregating all such Awards paid
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with respect to such five years and dividing such aggregate amount by the
number of years for which such an Award was actually paid to you.
(C) notwithstanding any provision of the Annual Incentive Plan and
the Inland Special Achievement Award Plan, the Company shall pay to you a
lump sum amount equal to the sum of (x) any incentive compensation which
has been allocated or awarded to you for a completed fiscal year or other
measuring period preceding the Date of Termination but has not yet been
paid, and (y) a pro rata portion to the Date of Termination for the current
fiscal year or other measuring period of the amount equal to the Target
Award percentage applicable to you under the Annual Incentive Plan or
similar successor plan on the Date of Termination times your annual base
salary then in effect.
(D) in lieu of shares of common stock of RTI ("RTI Shares") issuable
upon exercise of outstanding options ("Options"), if any, granted to you
under RTI's stock option plans (which Options shall be cancelled upon the
making of the payment referred to below), you shall receive an amount in
cash equal to the product of (i) the excess of (x) in the case of incentive
stock options (as defined in section 422A of the Internal Revenue Code of
1986, as amended (the "Code")) ("ISOs")), granted after the date hereof,
the closing price of RTI's shares as reported on the New York Stock
Exchange Composite Transactions on or next preceding the Date of
Termination, in the case of all other options, the Change in Control Price
(as defined below), over (y) the per share exercise price of each Option
held by you (whether or not then fully exercisable), times (ii) the number
of RTI Shares covered by each such option. For purposes of this Agreement,
the "Change in Control Price" means (1) with respect to a merger or
consolidation of RTI described in Section 2(i)(C) in which the
consideration per share of RTI's common stock to be paid for the
acquisition of shares of common stock specified in the agreement of merger
or consolidation is all in cash, the highest such consideration per share,
(2) with respect to a change in control of the Company by reason of an
acquisition of securities described in Section 2(i)(A), the highest price
per share for any share of RTI's common stock paid by any holder of any of
the securities representing 40% or more of the combined voting power of RTI
giving rise to the change in control of the Company, and (3) with respect
to a change in control of the Company by reason of a merger or
consolidation of RTI (other than a merger or consolidation described in
Clause (1) next above), stockholder approval of an agreement or plan
described in Section 2(i)(D), a change in the composition of the Board
described in Section 2(i)(B) or a change in control of the Company pursuant
to Section 2(i)(E) (relating to mergers, consolidations and sales of
securities or
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assets of a Related Company), the highest price per share of common stock
reported on the New York Stock Exchange Composite Transactions (or, if such
shares are not traded on the New York Stock Exchange, such other principal
market on which such shares are traded) during the sixty (60) day period
ending on the date the change in control of the Company occurs.
(E) in lieu of RTI Shares awarded or issuable to you as performance
and/or restricted shares, if any, pursuant to the Incentive Plan or similar
successor plan or plans (which RTI Shares shall be cancelled upon the
making of the payment referred to below), you shall receive an amount in
cash equal to the product of (i) the Change in Control Price, times (ii)
the total of the number of restricted shares awarded to you and then
outstanding pursuant to the Incentive Plan and/or any similar successor
plan(s), plus a number of performance shares equal to the total number of
performance shares paid or payable to you with respect to the two
immediately preceding performance periods under any performance award or
awards made pursuant to the Incentive Plan, and/or any similar successor
plan(s).
(F) the Company shall also pay to you all legal fees and expenses
incurred by you as a result of such termination (including all such fees
and expenses, if any, incurred in contesting or disputing any such
termination or in seeking to obtain or enforce any right or benefit
provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of Section 4999 of
the Code to any payment or benefit provided hereunder). Such payments shall
be made at the later of the times specified in paragraph (J) below, or
within five (5) days after your request for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may
require.
(G) in the event that you become entitled to any payments provided
for hereinabove (the "Contract Payments"), if the Contract Payments or
other portion of the Total Payments (as defined below) will be subject to
the tax (the "Excise Tax") imposed by Section 4999 of the Code, the Company
shall pay to you, no later than the fifth day following the Date of
Termination, an additional amount (the "Gross-Up Payment") such that the
net amount retained by you, after deduction of any Excise Tax on the
Contract Payments and such other Total Payments and any federal and state
and local income and other payroll taxes and Excise Tax upon the payment
provided for by this subsection, shall be equal to the Contract Payments
and such other Total Payments.
(H) for purposes of determining whether any of the payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) any other
payments or benefits received or to be received by you in connection with a
change in control of the Company or your termination of employment (whether
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any person whose actions result in a change in
control or any person affiliated with the Company or such person) payable
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any person whose actions result in a change in
control or any person affiliated with the Company or such person (together
with the Contract Payments, the "Total Payments"), shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of the Code
and all "excess parachute payments" within the meaning of Section
280G(b)(1) of the Code shall be treated as subject to the Excise Tax unless
in the opinion of tax counsel selected by RTI's independent auditors and
reasonably acceptable to you, such other payments or benefits (in whole or
in part) do not constitute parachute payments, including by reason of
Section 280G(b)(4)(A) of the Code or such excess parachute payments (in
whole or in part) represent reasonable compensation for services actually
rendered within the meaning of Section 280G(b)(4)(B) of the Code in excess
of the base amount allocable to such reasonable compensation within the
meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to
the Excise Tax, (ii) the amount of the Total Payments which shall be
treated as subject to the Excise Tax shall be equal to the lesser of (A)
the amount of the Total Payments or (B) the amount of excess parachute
payments within the meaning of Section 280G(b)(1) of the Code (after
applying clause (i) above), and (iii) the value of any non-cash benefits or
any deferred payment or benefit shall be determined by RTI's independent
auditors in accordance with the principles of Sections 280G(d)(3) and (4)
of the Code. For purposes of determining the amount of the Gross-Up
Payment, you shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of your
residence on the Date of Termination, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state
and local taxes.
(I) in the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder at the time of
termination of your employment, you shall repay to the Company at the time
that the amount of such reduction in Excise Tax is finally determined the
portion of the Gross-Up Payment attributable to such reduction (plus the
portion of the Gross-Up Payment attributable to the Excise Tax and federal
and state and local income tax imposed on the Gross-Up Payment being repaid
by you if such repayment results in a reduction in Excise Tax and/or a
federal and state and local income tax deduction) plus interest on the
amount of such repayment at the rate provided in Section 1274(b)(2)(B) of
the Code. In the event that the Excise Tax is determined to exceed the
amount taken into account hereunder at the time of the termination of your
employment (including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional gross-up payment in respect of such excess
(plus any interest payable with respect to such excess) at the time that
the amount of such excess is finally determined.
(J) the payments provided for in paragraphs (B), (C), (D) and (E)
above, shall be made not later than the fifth day following the Date of
Termination, provided, however, that if the amounts of such payments cannot
be finally determined on or before such day, the Company shall pay to you
on such day an estimate, as determined in good faith by the Company, of the
minimum amount of such payments and shall pay the remainder of such
payments (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined
but in no event later than the thirtieth day after the Date of Termination.
In the event that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall constitute a
loan by the Company to you payable on the fifth day after demand by the
Company (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code).
(iv) If your employment shall be terminated (A) by the Company other than
for Cause, Retirement or Disability or (B) by you for Good Reason, then for a
twenty-four (24) month period after such termination, the Company shall arrange
to provide you with: (1) life, disability, accident and health insurance
benefits substantially similar to those which you are receiving immediately
prior to the Notice of Termination, (2) financial advisory services similar to
those provided currently to executives of the Company by Ayco Corporation and
(3) outplacement services. Benefits otherwise receivable by you pursuant to this
Subsection 4 (iv) shall be reduced to the extent comparable benefits are
actually received by you during the twenty-four (24) month period following your
termination, and any such benefits actually received by you shall be reported to
the Company. Any rights that you have to
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continuation of life, disability, accident or health coverage under applicable
state or federal law shall be in addition to those provided under this
Agreement.
(v) If your employment shall be terminated (A) by the Company other than
for Cause, Retirement or Disability or (B) by you for Good Reason, then in
addition to the retirement benefits to which you are entitled under the Pension
Plan or Supplemental Plan or any successor plans thereto, the Company shall pay
you in cash at the time and in the manner provided in paragraph (J) of
Subsection 4(iii), a lump sum equal to the excess of (x) the actuarial
equivalent of the retirement pension (taking into account any early retirement
subsidy associated therewith and determined as a straight life annuity
commencing at age sixty-five (65) or any earlier date, but in no event earlier
than the second anniversary of the Date of Termination whichever annuity yields
a greater benefit) which you would have accrued under the terms of the Pension
Plan or Supplemental Plan (without regard to any amendments to any such plans
made subsequent to a change in control of the Company and on or prior to the
Date of Termination, which amendment adversely affects in any manner the
computation of retirement benefits thereunder), determined as if you were fully
vested thereunder and had accumulated (after the Date of Termination) twenty-
four (24) additional months of age and service credit thereunder at the higher
of the rate of average compensation during the twelve (12) months prior to the
change in control of the Company or the rate of average compensation used to
calculate your benefits under such plans immediately preceding the Date of
Termination, over (y) the actuarial equivalent of the retirement pension (taking
into account any early retirement subsidy associated therewith and determined as
a straight life annuity commencing at age sixty-five (65) or any earlier date,
but in no event earlier than the Date of Termination whichever annuity yields a
greater benefit) which you had then accrued pursuant to the provisions of the
Pension Plan. For purposes of this Subsection, "actuarial equivalent" shall be
determined using the same assumptions utilized under the Pension Plan for
purposes of determining alternative forms of benefits immediately prior to the
change in control of the Company.
(vi) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for in this Section 4 be
reduced by any compensation earned by you as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by you to the Company, or otherwise, except as provided in Section 4(iv).
Page 12
<PAGE>
(vii) In addition to all other amounts payable to you under this Section
4, you shall be entitled to receive all benefits payable to you under the
Pension Plan, the Thrift Plan, Supplemental Plan, Nonqualified Thrift Plan (or
any substitute or alternative plan or plans) and any other plan or agreement
relating to retirement benefits.
5. Successors; Binding Agreement. (i) RTI will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of RTI to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that RTI or the Company would be required to perform it if no such
succession had taken place. Failure of RTI to obtain such assumption and
agreement prior to the effectiveness of any such succession shall
Page 13
<PAGE>
be a breach of this Agreement and shall entitle you to compensation from the
Company in the same amount and on the same terms as you would be entitled to
hereunder if you terminate your employment for Good Reason following a change in
control of the Company, except that for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed the Date
of Termination. In the event a successor of RTI assumes and agrees to perform
this Agreement, by operation of law or otherwise, the term "RTI", as used in
this Agreement, shall mean such successor and the term "Company" shall mean,
collectively, such successor and the affiliates of such successor.
(ii) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or, if there
is no such designee, to your estate.
6. Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notice to the Company shall be directed to the attention of the Board
with a copy to the Secretary of RTI, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
7. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by you and such officer as may be specifically designated by
the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Illinois. All references to sections of the Exchange
Act or the Code shall be deemed also to refer to any successor provisions to
such sections. Any payments provided for hereunder shall be paid net of any
applicable withholding
Page 14
<PAGE>
required under federal, state or local law. The obligations of the RTI and the
Company under Section 4 shall survive the expiration of the term of this
Agreement.
8. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
10. Settlement of Disputes; Arbitration. All claims by you for benefits
under this Agreement shall be directed to and determined by the Board and shall
be in writing. Any denial by the Board of a claim for benefits under this
Agreement shall be delivered to you in writing and shall set forth the specific
reasons for the denial and the specific provisions of this Agreement relied
upon. The Board shall afford a reasonable opportunity to you for a review of the
decision denying a claim and shall further allow you to appeal to the Board a
decision of the Board within sixty (60) days after notification by the Board
that your claim has been denied. Any further dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration in Chicago, Illinois, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to RTI the enclosed copy of this letter which will then
constitute our agreement on this subject.
Sincerely,
RYERSON TULL, INC.
By: /s/ William Korda
------------------------------------------
Its: Vice President - Human Resources
Page 15
<PAGE>
Agreed to this 10th day
of June, 1996.
/s/ Neil S. Novich (Signature)
-----------------------------------
Page 16
<PAGE>
RYERSON TULL
DIRECTORS' COMPENSATION PLAN
----------------------------
SECTION 1
---------
General
-------
1.1. Purpose and Effective Date. The Ryerson Tull Directors' Compensation
Plan (the "Plan") has been established by Ryerson Tull, Inc. (the "Company") to
provide an alternative method of compensating those directors of the Company who
do not otherwise receive compensation as employees of the Company or its
affiliates in order to aid the Company in attracting and retaining as directors
persons whose abilities, experience and judgment can contribute to the continued
progress of the Company and to facilitate the directors' ability to acquire a
proprietary interest in the Company. The Plan shall be effective upon the
consummation of the initial public offering of Class A Common Stock, $1.00 par
value per share, of the Company ("Stock"), which date shall be the "Effective
Date" of the Plan as set forth herein.
1.2. Participation. Only Non-Employee Directors of the Company shall be
eligible to participate in the Plan. As of any applicable date, a "Non-Employee
Director" is a person who is serving as a director of the Company who is not an
employee of the Company or any affiliate of the Company as of that date.
1.3. Administration. The authority to manage and control the operation
and administration of the Plan shall be vested in a committee of the Board of
Directors of the Company (the "Board") which committee (the "Committee") shall
have such authorities as delegated to it from time to time by the Board.
Subject to the limitations of the Plan and any limitations on authorities
imposed on the Committee by the Board, the Committee shall have the sole and
complete authority to:
(a) interpret the Plan and to adopt, amend and rescind administrative
guidelines and other rules and regulations relating to the Plan;
<PAGE>
(b) correct any defect or omission and reconcile any inconsistency in the
Plan or in any payment made hereunder; and
(c) to make all other determinations and take all other actions necessary
or advisable for the implementation and administration of the Plan.
The Committee's determinations on matters within its control shall be conclusive
and binding on the Company and all other persons. Notwithstanding the foregoing,
no member of the Committee shall act with respect to the administration of the
Plan in a manner inconsistent with the exempt status of the Plan under Rule 16b-
3 promulgated under the Securities Exchange Act of 1934, as amended ("Rule 16b-
3") as then in effect.
1.4. Shares Subject to the Plan. The shares of Stock which shall be
available for distribution pursuant to the Plan shall be either authorized and
unissued shares or treasury shares (including, in the discretion of the Company,
shares purchased in the open market). The number of shares of Stock to be
distributed pursuant to Non-Employee Directors' elections to receive shares of
Stock in lieu of Cash Retainers (as described in subsection 2.1) shall be
determined in accordance with Section 2. The number of shares of Stock to be
distributed pursuant to Non-Employee Directors' Deferral Elections (as described
in Section 3) shall be determined in accordance with Section 3. The aggregate
number of shares of Stock which are available for issuance under the Plan shall
be 100,000; provided, however, that:
(a) in the event of any merger, consolidation, reorganization,
recapitalization, spinoff, stock dividend, stock split, reverse stock
split, rights offering, exchange or other change in the corporate
structure or capitalization of the Company affecting the Stock, the
number and kind of shares of Stock available for awards under the
Plan shall be equitably adjusted in such manner as the Committee
shall determine in its sole judgment;
(b) in determining what adjustment, if any, is appropriate pursuant to
paragraph (a), the Committee may rely on
<PAGE>
the advice of such experts as it deems appropriate, including
counsel, investment bankers and the accountants of the Company; and
(c) no fractional shares shall be granted or authorized pursuant to any
adjustment pursuant to paragraph (a), although cash payments may be
authorized in lieu of fractional shares that may otherwise result
from such an equitable adjustment.
1.5. Compliance with Applicable Laws. Notwithstanding any other provision
of the Plan, the Company shall have no obligation to deliver any shares of Stock
under the Plan unless such delivery would comply with all applicable laws and
the applicable requirements of any securities exchange or similar entity. Prior
to the delivery of any shares of Stock under the Plan, the Company may require a
written statement that the recipient is acquiring the shares for investment and
not for the purpose or with the intention of distributing the shares. If the
redistribution of shares is restricted pursuant to this subsection 1.5, the
certificates representing such shares may bear a legend referring to such
restrictions.
1.6. Director and Shareholder Status. The Plan will not give any person
the right to continue as a director of the Company, or any right or claim to any
benefits under the Plan unless such right or claim to any benefits has
specifically accrued under the terms of the Plan. Participation in the Plan and
any right to accrued benefits shall not create any rights in a director (or any
other person) as a shareholder of the Company until shares of Stock are
registered in the name of the director (or such other person).
1.7. Definition of Fair Market Value. The "Fair Market Value" of a share
of Stock on any date shall be equal to the average of the high and low prices of
a share of Stock reported on the New York Stock Exchange Composite Transactions
for the applicable date or, if there are no such reported trades for such date,
for the last previous date for which trades were reported.
1.8. Source of Payments. Except for Stock actually delivered pursuant to
the Plan, the Plan constitutes only an unfunded, unsecured promise of the
Company to make payments or
<PAGE>
awards to directors (or other persons) or deliver Stock in the future in
accordance with the terms of the Plan.
1.9. Nonassignment. Neither a director's nor any other person's rights to
payments or awards under the Plan are subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment or
garnishment by creditors of the director.
1.10. Elections. Any notice or document required to be filed with the
Committee under the Plan will be properly filed if delivered or mailed by
registered mail, postage prepaid, to the Committee, in care of the Company, at
the Company's principal executive offices. The Committee may, by advance
written notice to affected persons, revise such notice procedure from time to
time. Any notice required under the Plan may be waived by the person entitled
thereto.
SECTION 2
---------
Payment of Retainer; Election
to Receive Stock in Lieu of Retainer
------------------------------------
2.1. Payment of Retainer. Subject to the terms and conditions of the Plan,
for each year, beginning with the year in which the Effective Date occurs, each
individual who is a Non-Employee Director shall be paid a retainer (the
"Retainer") in accordance with and subject to the following:
(a) for each Fiscal Quarter (as defined below), a "Cash Retainer" shall
be paid to any individual who is a Non-Employee Director on the last
day of such quarter, which Cash Retainer shall be equal to an annual
amount of $20,000 (or one-half of the total retainer (other than any
committee chair fees) specified by the Board from time to time),
payable as of the last day of the applicable Fiscal Quarter in
increments of $5,000, pro rated in bi-monthly increments to reflect
any portion of such Fiscal Quarter during which the individual did
not serve as a Non-Employee Director; and
<PAGE>
(b) as of the date of each Annual Meeting of the Company's stockholders
(the "Annual Meeting"), a "Stock Retainer" shall be paid to each Non-
Employee Director who was a Non-Employee Director immediately prior
to such Annual Meeting, which Stock Retainer shall be payable in that
number of shares of Stock equal to $20,000 (or one-half of the total
retainer (other than committee chair fees) specified by the Board
from time to time) divided by the Fair Market Value of a share of
Stock as of the date of Annual Meeting, pro rated in monthly
increments to reflect any portion of the period commencing with the
Annual Meeting held immediately prior to the Annual Meeting at which
the Stock Retainer is to be paid and ending on the date of the Annual
Meeting for which the Stock Retainer is to be paid during which the
individual did not serve as a Non-Employee Director.
In the event paragraph (b) results in a fractional share, the Fair Market Value
of any such fractional share shall be paid in cash as soon as practicable after
the date of the Annual Meeting but shall be treated for the following provisions
of the Plan as part of the Cash Retainer. For purposes of the Plan, the term
"Fiscal Quarter" shall mean the three-consecutive-month period commencing on the
first day of the month next following the Annual Meeting and each succeeding
three-consecutive month period.
2.2. Election to Receive Stock. Subject to the terms and conditions of the
Plan, each Non-Employee Director may elect to forego receipt of all or any
portion of the Cash Retainer otherwise payable to him or her following the
Effective Date and instead to receive whole shares of Stock of equivalent value
to the Retainer so foregone (determined in accordance with subsection 2.4). A
Non-Employee Director's election under this subsection 2.2 to have all or any
portion of his or her Cash Retainer paid in shares of Stock shall be valid only
if it is in writing, signed by the Non-Employee Director, and filed with the
Committee in accordance with uniform and nondiscriminatory rules adopted by the
Committee.
2.3. Revocation of Election to Receive Stock. Once effective, a Non-
Employee Director's election pursuant to subsection 2.2 to receive Stock in lieu
of his or her Cash
<PAGE>
Retainer shall remain in effect for successive calendar years until it is
revised or revoked. Any such revision or revocation shall be in writing, signed
by the Non-Employee Director and filed with the Committee and shall be effective
for the calendar year next following the date on which it is received by the
Committee, or such later date specified in such notice.
2.4. Equivalent Amount of Stock. The number of whole shares of Stock to be
distributed to any Non-Employee Director by reason of his or her election
pursuant to subsection 2.2 to receive Stock in lieu of his or her Cash Retainer
shall be equal to:
(a) the dollar amount of the Cash Retainer which the Non-Employee
Director has elected to have paid to him or her in shares of Stock;
DIVIDED BY
(b) the Fair Market Value of a share of Stock as of the date on which
such Cash Retainer (or portion thereof) would otherwise have been
payable to the Non-Employee Director.
The Fair Market Value of any fractional share shall be paid to the Non-Employee
Director in cash.
SECTION 3
---------
Deferral Elections
------------------
3.1. Deferrals. Subject to the terms and conditions of the Plan, each Non-
Employee Director may elect to defer the receipt of all or any portion of the
Retainer and Eligible Fees (as defined below) otherwise payable to him or her
for periods on or after the Effective Date. A Non-Employee Director may elect
the deferral described in the preceding sentence by filing a written "Deferral
Election" with the Committee in accordance with uniform and nondiscriminatory
rules adopted by the Committee. A Non-Employee Director's Deferral Election
shall specify the portion of his or her Retainer and Eligible Fees (including
any portion of his or her Stock Retainer or any portion of his or her Cash
Retainer that he or she has elected to receive in Stock pursuant
<PAGE>
to subsection 2.2) to be deferred and the future date as of which distribution
of the deferred amounts is to be made in accordance with the terms and
conditions of the Plan (the "Distribution Date"). If no Distribution Date is
specified in a Non-Employee Director's Deferral Election, the Distribution Date
shall be deemed to be the first business day in January of the year following
the date on which the Non-Employee Director ceases to be a director of the
Company for any reason. A Non-Employee Director's Deferral Election shall be
effective with respect to the portion of his or her Retainer and Eligible Fees
otherwise payable to him or her for services rendered after the last day of the
calendar year in which such election is filed with the Committee; provided,
however, that:
(a) a Deferral Election which is filed within 30 days of the date on
which a director first becomes a Non-Employee Director shall be
effective with respect to all Eligible Fees and Retainer otherwise
payable to him or her after the date of the Deferral Election; and
(b) by notice filed with the Committee in accordance with uniform and
nondiscriminatory rules established by it, a Non-Employee Director
may terminate or modify any Deferral Election as to his or her
Retainer and Eligible Fees payable for services rendered after the
last day of the calendar year in which such notice is filed with the
Committee; provided, however, that no modification may be made to the
Distribution Date unless the Non-Employee Director shall file such
notice with the Committee at least one year prior to the Distribution
Date.
Notwithstanding the provisions of paragraph (b) next above, the Committee may,
in its sole discretion, after considering all of the pertinent facts and
circumstances, approve a change to the Distribution Date which is requested by a
Non-Employee Director less than one year prior thereto. For purposes of the
Plan, the term "Eligible Fees" means the meeting fees, committee fees and
committee chair fees (and does not include any portion of the Retainer) that
would otherwise be payable to the Non-Employee Director by the Company as
established, from time to time, by the Board or any committee thereof.
<PAGE>
3.2. Crediting and Adjustment of Deferred Amounts. The amount of any
Retainer and Eligible Fees deferred pursuant to subsection 3.1 ("Deferred
Compensation") shall be credited to a bookkeeping account maintained by the
Company in the name of the Non-Employee Director (the "Deferred Compensation
Account"), which account shall consist of two subaccounts, the "Company Stock
Subaccount" and the "Cash Subaccount." The amount, if any, of the Stock Retainer
or the Cash Retainer that the Non-Employee Director has elected to receive in
Stock pursuant to subsection 2.2 and with respect to which he or she has filed a
Deferral Election pursuant to subsection 3.1 shall be credited to his or her
Company Stock Subaccount. Any other Deferred Compensation shall be credited to
his or her Cash Subaccount. A Non-Employee Director's Deferred Compensation
Account shall be adjusted as follows:
(a) As of the first day of each calendar quarter (which dates are
referred to herein as "Accounting Dates"), the Non-Employee
Director's Cash Subaccount shall be adjusted as follows:
(i) first, the amount of any distributions made since the last
preceding Accounting Date and attributable to the Cash
Subaccount shall be charged to the Cash Subaccount;
(ii) next, the balance of the Cash Subaccount after adjustment in
accordance with subparagraph (i) next above shall be credited
with interest since the last preceding Accounting Date
computed at the prime rate as reported by The First National
Bank of Chicago (or its successor) for such date or, if such
date is not a business day, for the next preceding business
day;
(iii) finally, after adjustment in accordance with the foregoing
provisions of this paragraph (a), the Cash Subaccount shall be
credited with the portion of the Deferred Compensation
otherwise payable to the Non-Employee Director since the last
preceding Accounting Date which is to be credited to the Cash
Subaccount.
<PAGE>
(b) The Non-Employee Director's Company Stock Subaccount shall be
adjusted as follows:
(i) as of any date on or after the Effective Date on which any
portion of a Non-Employee Director's Retainer would have been
payable to the Non-Employee Director in Stock but for his or
her Deferral Election, the Company Stock Subaccount shall be
credited with a number of "Stock Units" equal to the number of
shares of Stock (including any fractional shares) to which he
or she would have been entitled pursuant to Section 2;
(ii) as of the date on which shares of Stock are distributed to the
Non-Employee Director in accordance with subsection 3.3 below,
an equal number of Stock Units will be subtracted from the
Company Stock Subaccount; and
(iii) as of the record date for any dividend paid on Stock, the
Company Stock Subaccount shall be credited with that number of
additional Stock Units which is equal to the number obtained
by multiplying the number of Stock Units then credited to the
Company Stock Subaccount by the amount of the cash dividend or
the fair market value (as determined by the Board) of any
dividend in kind payable on a share of Stock, and dividing
that product by the then Fair Market Value of a share of
Stock.
In the event of any merger, consolidation, reorganization,
recapitalization, spinoff, stock split, reverse stock split, rights
offering, exchange or other change in the corporate structure or
capitalization of the Company affecting the Stock, each Non-Employee
Director's Company Stock Subaccount shall be equitably adjusted in
such manner as the Committee shall determine in its sole judgment.
3.3. Payment of Deferred Compensation Account. Except as otherwise
provided in this subsection 3.3 or subsection 3.4, the balances credited to the
Cash Subaccount and Company Stock
<PAGE>
Subaccount of a Non-Employee Director's Deferred Compensation Account shall each
be payable to the Non-Employee Director in a lump sum or quarterly installments
(over a period not exceeding ten years) as elected by the Non-Employee Director
in his or her Deferral Election; provided, however, that if no distribution form
was elected by the Non-Employee Director in his or her Deferral Election,
payment shall be made in a lump sum. Installment distributions shall commence as
of the first day of the first calendar quarter after the Distribution Date and
shall continue as of the first day of each calendar quarter thereafter for the
applicable period. Notwithstanding the foregoing, a Non-Employee Director, by
filing a notice with the Committee at least one year prior to the Distribution
Date, may elect to change the number of payments to a single payment or to any
number of quarterly payments not in excess of forty. Each installment payment
shall include a cash portion, if applicable, and a Stock portion, if applicable,
as follows:
(a) The cash portion to be paid as of any date determined under the
foregoing provisions of this Section 3.3 and charged to the Cash
Subaccount shall be equal to the balance of the Cash Subaccount
multiplied by a fraction, the numerator of which is one and the
denominator of which is the number of remaining payments to be made,
including such payment.
(b) The Stock portion to be paid as of any date determined under the
foregoing provisions of this Section 3.3 and charged to the Company
Stock Subaccount shall be distributed in whole shares of Stock, the
number of shares of which shall be determined by rounding to the next
lower integer the product obtained by multiplying the number of Stock
Units then credited to the Non-Employee Director's Company Stock
Subaccount by a fraction, the numerator of which is one and the
denominator of which is the number of remaining payments to be made,
including such payment. The Fair Market Value of any fractional share
of Stock remaining after all installment Stock distributions have
been made to the Non-Employee Director pursuant to this paragraph (b)
shall be paid to the Non-Employee Director in cash.
<PAGE>
Notwithstanding the foregoing, the Committee, in its sole discretion, may
distribute all balances in any Deferred Compensation Account to a Non-Employee
Director (or former Non-Employee Director) in a lump sum as of any date.
3.4. Payments in the Event of Death. If a Non-Employee Director dies
before payment of his or her Deferred Compensation Account commences, all
amounts then credited to his or her Deferred Compensation Account shall be
distributed to his or her Beneficiary (as described below), as soon as
practicable after his or her death, in a lump sum. If a Non-Employee Director
dies after payment of his or her Deferred Compensation Account has commenced but
before the entire balance of such account has been distributed, the remaining
balance thereof shall be distributed to his or her Beneficiary, as soon as
practicable after his or her death, in a lump sum. Any amounts in the Cash
Subaccount shall be distributed in cash and any amounts in the Stock Subaccount
shall be distributed in whole shares of Stock determined in accordance with
paragraph 3.3(b), and the Fair Market Value of any fractional share of Stock
shall be distributed in cash. For purposes of the Plan, the Non-Employee
Director's "Beneficiary" is the person or persons the Non-Employee Director
designates, which designation shall be in writing, signed by the Non-Employee
Director and filed with the Committee prior to the Non-Employee Director's
death. A Beneficiary designation shall be effective when filed with the
Committee in accordance with the preceding sentence. If more than one
Beneficiary has been designated, the balance in the Non-Employee Director's
Deferred Compensation Account shall be distributed to each such Beneficiary per
capita (with cash distributed in lieu of any fractional share of Stock). In the
absence of a Beneficiary designation or if no Beneficiary survives the Non-
Employee Director, the Beneficiary shall be the Non-Employee Director's estate.
SECTION 4
---------
Amendment and Termination
-------------------------
While the Company expects and intends to continue the Plan, the Board
reserves the right to, at any time and in any way, amend, suspend or terminate
the Plan; provided, however, that no amendment, suspension or termination shall:
<PAGE>
(a) be made without shareholder approval to the extent such approval is
required by law, agreement or the rules of any exchange or automated
quotation system upon which the Stock is listed or quoted;
(b) except as provided in subsection 3.3 (relating to lump sum payments
of amounts held in a Non-Employee Director's Deferred Compensation
Account) or this Section 4, materially alter or impair the rights of
a Non-Employee Director under the Plan without the consent of the
Non-Employee Director with respect to rights already accrued
hereunder; or
(c) make any change that would disqualify the Plan or any other plan of
the Company intended to be so qualified from the exemption provided
by Rule 16b-3 under the Securities Exchange Act of 1934, as amended.
<PAGE>
RYERSON TULL
SUPPLEMENTAL RETIREMENT PLAN
Article 1
1.1 Purpose.
--------
It is the intention of Ryerson Tull, Inc. (the "Company") to maintain
appropriate levels of retirement benefits for individuals who are entitled to
benefits under the Ryerson Tull Pension Plan, including any supplements thereto
(collectively, the "Pension Plan"). Accordingly, the Company hereby establishes
the Ryerson Tull Supplemental Retirement Plan (the "Plan") to provide
benefits to eligible persons in a manner so as to maintain the level of total
retirement benefits which, but for the limitations on benefits required by
Section 415 and 401(a)(17) of the Internal Revenue Code of 1986, as amended (the
"Code"), would otherwise be payable to such persons under the Pension Plan. The
Plan shall maintain such total retirement benefit levels by means of
supplemental unfunded payments made by the Employers (as defined in Section 1.3)
to the individuals eligible for such payments as more fully described in
Articles 3 and 4. The Plan is intended to be an "excess benefit plan" described
in Section 3(36) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"); provided, however, that, to the extent, if any, that the Plan
provides benefits which cannot be provided by an excess benefit plan, the Plan
shall constitute an unfunded plan maintained primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees.
1.2 Effective Date.
---------------
The Plan is effective as of April 30, 1996 (the "Effective Date").
1.3 Employers. The Company and any of its affiliates which, with the
consent of the Company, adopt the Plan are referred to collectively herein as
the "Employers" and individually as an "Employer".
1.4 Source of Benefit Payments; Funding Not Required.
--------------------------------------------------
The amount of any benefit payable under the Plan to any Participant (as
defined in Section 3.1) (or Beneficiary (as defined in Section 3.2)) shall be
paid from the general revenues
<PAGE>
of the Employer that employed such Participant; provided, however, that if
a Participant has been employed by more than one Employer, the
portion of his Plan benefits payable by any such Employer shall be in proportion
to the benefit he accrued under the Pension Plan for his period of service
with the applicable Employer. An Employer's obligation under the Plan shall
be reduced to the extent that any amounts due under the Plan are paid from one
or more trusts, the assets of which are subject to the claims of general
creditors of the Employers; provided, however, that nothing in the Plan shall
require the Company or any Employer to establish any trust to provide benefits
under the Plan. None of the individuals entitled to benefits under the Plan
will have any claim on, or any beneficial ownership interest in, any assets of
any Employer, and any rights of such individuals under the Plan will constitute
unsecured contractual rights only.
1.5 Definitions.
-----------
Unless the context clearly requires otherwise, any word, term or phrase
used in the Plan will have the same meaning as is assigned to it under the terms
of the Pension Plan.
ARTICLE 2
2.1 Retirement Committee.
---------------------
The Company hereby delegates authority to administer the Plan to the
Pension Plan Retirement Committee (the "Committee") as established under the
Pension Plan. Any action by the Committee shall be evidenced by a written
document, certified by the Secretary of the Committee. References to the
Company's authority, right, or power to act contained in any notice, disclosure,
or communication which is made with a view toward effectuating the purposes of
the Plan shall be construed to include such actions by the Committee on the
Company's behalf and such actions by others to whom the Committee has delegated
its authority.
2.2 Authority of Committee.
-----------------------
The Committee shall have authority to control and manage the operation and
administration of the Plan, including the authority and discretion to construe
and interpret the Plan, decide all questions of eligibility for and the amount,
manner and time of payment of Supplemental Retirement Benefits (as defined in
Section 3.1) hereunder and such other rights and powers necessary or convenient
to the carrying out of its functions hereunder. The authority and
responsibilities of the
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<PAGE>
Committee shall be coextensive with its authority and responsibilities under the
Pension Plan.
ARTICLE 3
3.1 Participation.
--------------
Each employee or former employee of an Employer who, on or after the
Effective Date, is entitled to an accrued benefit under the Pension Plan the
amount of which is limited by reason of the application of the limitations
imposed by Code Sections 415 or 401(a)(17), as amended from time to time, and
the regulations and rulings thereunder or the terms of the Pension Plan
implementing those limitations (the "Code Limitations") shall be a "Participant"
in the Plan and shall be entitled to receive the benefits (the "Supplemental
Retirement Benefits"), if any, determined in accordance with Article 4 hereof.
Any individual who had an accrued benefit under the Inland Steel Industries
Supplemental Retirement Benefit Plan for Covered Employees and the Inland Steel
Industries Special Retirement Benefit Plan for Covered Employees Plan
(collectively, the "ISI Supplemental Plans") which was assumed by the Company
effective as of the Effective Date shall also be a Participant in the Plan,
subject to the terms and conditions thereof, regardless of whether such
individual would otherwise be a Participant under the foregoing provisions of
this Section 3.1.
3.2 Beneficiary.
------------
The spouse or other person entitled to a benefit under the Pension
Plan upon the death of a Participant hereunder shall, upon the death of the
Participant, be a "Beneficiary" under the Plan entitled to receive the
Supplemental Retirement Benefit, if any, determined in accordance with Article 4
hereof.
3.3 Restricted Participation.
-------------------------
Notwithstanding any other provision of the Plan to the contrary, if
the Committee determines that participation by one or more Participants (or
payment of benefits to any Beneficiary) shall cause the Plan as applied to any
Employer to be subject to Part 2, 3 or 4 of Title I of ERISA, the entire
interest of such Participant or Beneficiary under the Plan shall, in the
discretion of the Committee, be immediately paid to such Participant or
Beneficiary, as applicable, by the applicable Employer, or shall otherwise be
segregated from the Plan, and such Participant(s) or Beneficiary(ies) shall
cease to have any interest under the Plan.
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<PAGE>
ARTICLE 4
4.1 Amount of Supplemental Retirement Benefit.
------------------------------------------
The amount of the Supplemental Retirement Benefit which a Participant
or Beneficiary shall be entitled to receive and the Employers shall be obligated
to pay under the Plan as of any date shall be equal to the greater of the amount
determined under paragraph (a) or (b) below:
(a) the excess, if any, of the amount described in subparagraph (i) of
this Section 4.1 over the amount described in paragraph (ii) of this
Section 4.1:
(i) The amount of the benefit (expressed in the same form and
commencing at the same time as that of the benefit that the
Participant is actually receiving under the Pension Plan) that the
Participant would have been entitled to receive as of that date under
the Pension Plan, determined without regard to the Code Limitations.
(ii) The amount of benefit which the Participant or Beneficiary
actually receives under the Pension Plan as of that date (determined
with regard to the Code Limitations applicable under the Pension
Plan).
OR
(b) The aggregate amount of the benefit accrued by the Participant or
Beneficiary, as applicable, as of the Effective Date under the provisions
of the ISI Supplemental Plans.
It is the intent of this Section 4.1 that the Supplemental Retirement Benefit
described above shall be determined at all times in a manner consistent with
then current Code Limitations. Accordingly, the determinations made pursuant to
this Section 4.1 shall be based upon adjustments employed in determining the
amount of the benefit described above, and shall be subject to adjustments which
reflect the Code Limitations with respect to the computation of benefits under
the Pension Plan. No Supplemental Retirement Benefit shall be payable to any
Participant or Beneficiary unless, at the time of the Participant's termination
of employment with the Employers and their affiliates, the Participant has been
credited with at least five Years of Vesting Service under the Pension Plan;
provided, however, that, in the event of a Change in Control (as defined in
Section 5.3), all benefits accrued under the Plan as of the date such Change
in
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<PAGE>
Control shall become fully and irrevocably vested and shall become distributable
to Participants (and Beneficiaries) at such time and in such manner pursuant to
the provisions of the Plan as in effect on the day immediately preceding the
date of such Change in Control.
4.2 Payment of Supplemental Retirement Benefit.
-------------------------------------------
(a) Except as otherwise provided herein, the Supplemental Retirement
Benefit which a Participant or Beneficiary is eligible to receive shall be
paid by the Employers at the same time, in the same form and subject to
substantially the same conditions, as is the benefit paid to such
Participant or Beneficiary under the Pension Plan.
(b) To the extent provided by Section 4.4, the Employers may purchase
an annuity with respect to any portion of a Participant's or Beneficiary's
Supplemental Retirement Benefit in full satisfaction thereof. The
Employers shall be obligated to purchase an annuity to the extent provided
by Section 4.4(h).
(c) The Employers may, in their sole discretion, distribute the
Supplemental Retirement Benefit of any Participant described in Section
4.4(a) in a lump sum at the time of the Participant's termination of
employment.
(d) Notwithstanding any other provision of this Plan, a Participant
who, as of the Effective Date, was a Participant in and had an accrued
benefit under the ISI Supplemental Plans (or any Beneficiary of such a
Participant) shall not be entitled to any portion of his Supplemental
Retirement Benefit which is attributable to benefits accrued under the ISI
Supplemental Plans unless such Participant (or Beneficiary, if applicable)
agrees that his right to benefits supplemental to those of the Pension Plan
is limited to his rights under this Plan and that he shall have no claim
under or against the ISI Supplemental Plans or against Inland Steel
Industries, Inc. or any of its affiliates for any benefits accrued under
the ISI Supplemental Plans.
(e) Notwithstanding any other provision of the Plan to the contrary,
if a Participant's or Beneficiary's
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<PAGE>
Supplemental Retirement Benefit is paid in a lump sum, such payment shall
be in complete satisfaction of all amounts otherwise payable to such
Participant or Beneficiary under the Plan and neither the Participant nor
Beneficiary shall have any further rights to benefits under the Plan (other
than benefits based on additional accruals of benefits (other than
increases described in Section 4.3) under the Pension Plan). Any optional
form of benefit payable under the Plan, including a lump sum, shall be the
actuarial equivalent of the benefit otherwise payable to the Participant or
Beneficiary, determined by applying the appropriate interest rate and other
actuarial assumptions then set forth in the Pension Plan.
4.3 Pension Plan Increase.
----------------------
In the event the Pension Plan is amended to increase the benefit
payable to participants or beneficiaries then receiving benefits under the
Pension Plan, benefits payable under the Plan shall be adjusted or commenced
accordingly for Participants or Beneficiaries; provided that no such adjustment
shall be made if the Participant or Beneficiary received a single sum
distribution under the Plan; and provided, further, that no such adjustment
shall be made with respect to any portion of a Participant's or Beneficiary's
Supplemental Retirement Benefit for which an annuity has been purchased pursuant
to Section 4.4.
4.4 Purchase of Annuities.
----------------------
The Employers shall not be obligated to purchase an annuity for any
Participant or for any portion of a Participant's Supplemental Retirement
Benefit, notwithstanding the purchase of an annuity with respect to any other
Participant or any other portion of the Participant's Supplemental Retirement
Benefit. The purchase of annuities under the Plan shall be governed by the
following:
(a) The purchase of annuities under this Section 4.4 shall be limited
to Supplemental Retirement Benefits payable to Participants who meet all of
the following requirements:
(i) completion of at least five years of Vesting Service under
the Pension Plan;
(ii) annual compensation in excess of $150,000; and
(iii) attainment of age 55.
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<PAGE>
(b) Any annuity purchased with respect to any Participant's
Supplemental Retirement Benefit shall be issued to and distributed to such
Participant, who shall be the sole owner of such annuity and shall contain
such terms not inconsistent with this Section 4.4 as the Committee shall
determine in its sole discretion.
(c) Annuity payments to a Participant under any annuity purchased
pursuant to this Section 4.4 shall commence as of the date on which the
Participant attains age 65 or the first day of the month thereafter;
provided, however, that any such annuity may provide that, in the event of
the Participant's death prior to attainment of age 65, benefits payable to
any Beneficiary may commence as of any earlier date provided by the terms
of the annuity.
(d) The monthly benefit amount to be provided by any annuity purchased
pursuant to this Section 4.4 shall be such amount as the Committee, in its
sole discretion, determines would provide, on an after-tax basis, an amount
equal to the amount estimated to be the after-tax benefit to the
Participant of monthly benefits payable by the Employers under Section 4.2,
commencing at the Participant's age 65. Such determination shall be made
by the Committee, in its sole discretion, based upon such rates and factors
as the Committee, in its sole discretion, deems appropriate. No change in
annuity benefits shall be required by reason of any subsequent change in
such rates and factors; provided, however, that in determining the amount
of any subsequent annuity purchased under this Section 4.4, the Committee
may, in its sole discretion, take into account any change in such rates and
factors and the benefits payable under any annuity previously purchased
under this Section 4.4. Notwithstanding the foregoing, with the consent of
the Participant, the Committee may substitute any form of fixed or variable
annuity in lieu of the annuity otherwise provided by this paragraph (d),
provided that such substitution does not result in a change in the cost of
the annuity or the commencement date of the annuity payments.
(e) The Company shall make a tax gross-up payment to any Participant
for whom an annuity is purchased under this Section 4.4 in such amount as
the Committee shall determine, in its sole discretion, would be necessary
to make such Participant whole for federal, state and local income taxes
attributable to the receipt of the annuity and the gross-up payment, based
upon such tax rates as the Committee shall determine in its sole
discretion.
(f) To the extent that the Company has purchased an annuity under this
Section 4.4 with respect to any portion
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<PAGE>
of a Participant's Supplemental Retirement Benefit, such annuity and the
tax gross-up payment under paragraph (e) above shall be in full
satisfaction of all obligations of the Employers to the Participant or his
Beneficiary attributable to such portion of the Participant's Supplemental
Retirement Benefit.
(g) A purchase of an annuity under this Section 4.4 shall have no
effect on the monthly benefits payable to the Participant under Sections
4.1 and 4.3 prior to the Participant's attainment of age 65. In the event
of the Participant's death prior to attainment of age 65, the benefit
payable to any Beneficiary of the Participant shall be determined solely on
the basis of the monthly benefits which would otherwise have been payable
to the Participant under the Plan prior to attainment of age 65 and taking
into account the amount payable to the Beneficiary under the Pension Plan.
(h) If an annuity has not been purchased in accordance with the
foregoing provisions of this Section 4.4 with respect to any portion of the
Supplemental Retirement Benefit payable after attainment of age 65 to a
Participant who meets all of the requirements of paragraph (a) above then,
except for any portion payable in the form of a lump sum in accordance with
Section 4.2, upon such Participant's termination of employment with the
Employers and their affiliates, the Company shall, as soon as practicable
thereafter, purchase an annuity for such portion in accordance with
paragraphs (b) through (g) above.
ARTICLE 5
5.1 Amendment to Conform with Law.
------------------------------
The Company may make such changes in, additions to, and substitutions
in the provisions of the Plan, to take effect retroactively or otherwise, as
deemed necessary or advisable for the purpose of conforming the Plan to any
present or future law relating to plans of this or a similar nature, and to the
administrative regulations and rulings promulgated thereunder.
5.2 Other Amendments and Termination.
---------------------------------
The Company may amend or terminate the Plan at any time, without the
consent of any Participant or Beneficiary; provided, however, that:
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<PAGE>
(a) the provisions of Section 5.3 may not be amended after the date
of a Change in Control without the written consent of a majority in both
number and interest of the Participants in the Plan, other than those
Participants who are both (i) not employed by the Company and its
affiliates (collectively "RTI") as of the date of the Change in Control,
and (ii) not receiving nor could have commenced receiving benefits under
the Pension Plan as of the date of the Change in Control, both immediately
prior to the Change in Control and at the date of such amendment; and
(b) the Plan shall not be amended or terminated so as to reduce or
cancel the benefits which have accrued to a Participant or Beneficiary
prior to the later of the date of adoption of the amendment or termination
or the effective date thereof, and in the event of such amendment or
termination, any such accrued benefit hereunder shall not be reduced or
cancelled.
Notwithstanding the provisions of paragraph (b) next above, in the event the
Pension Plan is terminated or curtailed with the result that pension payments
to retired employees and survivor and contingent annuity payments to
beneficiaries are discontinued or reduced the Supplemental Retirement Plan
Benefit then being paid or in the future payable pursuant to the Plan shall
similarly be discontinued or reduced in the same ratio as payments under the
Pension Plan are discontinued or reduced.
5.3 Manner and Form of Amendment or Termination.
--------------------------------------------
Any amendment or termination of the Plan by the Company shall be made
only by action of the Board of Directors of the Company or any officer of the
Company duly authorized by the Board of Directors. Certification of any
amendment or termination of the Plan shall be furnished to the Committee by the
Company.
5.4 Notice of Amendment or Termination.
-----------------------------------
The Committee shall notify Participants or Beneficiaries who are
affected by any amendment or termination of the Plan within a reasonable time
thereof.
5.5 Change in Control. For purposes of this Section 5.5, a "Change in
Control" shall be deemed to have occurred if:
(a) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
other than (i) the Company and its affiliated (collectively referred to
herein as "RTI"), (ii) a trustee or other fiduciary holding securities
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<PAGE>
under an employee benefit plan of RTI, (ii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of stock
of the Company, is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company (not including in the securities beneficially owned by such person
any securities acquired directly from RTI) representing 40% or more of the
combined voting power of the Company's then outstanding securities;
(b) during any period of two consecutive years individuals who at the
beginning of such period constitute the Board of Directors of the Company
and any new director (other than a director designated by a person who has
entered into an agreement with the Company to effect a transaction
described in paragraphs (a), (c) or (d) of this Section 5.3, whose election
by the Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for
any reason to constitute a majority thereof;
(c) the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than (i) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan of RTI,
at least 60% of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such merger
or consolidation, or (ii) a merger or consolidation effected to implement
a recapitalization of the Company (or similar transaction) in which no
person acquires more than 50% of the combined voting power of the Company's
then outstanding securities; or
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets.
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<PAGE>
A Change in Control shall also be deemed to occur with respect to any
Participant or Beneficiary for purposes of the Plan if there occurs:
(1) a sale or disposition, directly or indirectly, other than to
a person described in clause (i), (ii) or (iii) of paragraph (a) next
above, of securities of the Participant's employer, any direct or
indirect parent company of the Participant's employer or any company
that is a subsidiary of the Participant's employer and is also a
significant subsidiary (as defined below) of the Company (the
Participant's employer and such a parent or subsidiary being a "Related
Company"), representing 50% or more of the combined voting power of the
securities of such Related Company then outstanding;
(2) a merger or consolidation of a Related Company with any other
corporation, other than a merger or consolidation which would result in
50% or more of the combined voting power of the surviving company being
beneficially owned by a majority owned direct or indirect subsidiary of
the Company; or
(3) the sale or disposition of all or substantially all the assets
of a Related Company to a person other than a majority owned direct or
indirect subsidiary of the Company.
Notwithstanding the foregoing, no Change in Control shall be deemed to
have occurred with respect to a Participant for purposes of the Plan if
(I) such transaction includes or involves a sale to the public or a distribution
to the stockholders of the Company of more than 50% of the voting securities of
the Participant's employer or a direct or indirect parent of the Participant's
employer, and (II) the Participant's employer or a direct or indirect parent of
the Participant's employer agrees to become a successor to the Company under an
individual agreement between the Company and the Participant or the Participant
is covered by an agreement providing for benefits upon a change in control of
his or her employer following an event described clauses (2), (2) or (3) next
above. For purposes of the Plan, the term "significant subsidiary" has the
meaning given to such term under Rule 405 of the Securities Act of 1933, as
amended.
ARTICLE 6
6.1 No Right to Employment.
-----------------------
Neither the creation of the Plan nor anything contained herein shall
be construed as giving any Participant hereunder or
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<PAGE>
other employees of the Employers any right to remain in the employ of the
Employers or any affiliate thereof.
6.2 Successors and Assigns.
-----------------------
All rights and obligations of this Plan shall inure to, and be binding
upon the successors and assigns of the Company.
6.3 Inalienability.
---------------
Except so far as may be contrary to the laws of any state having
jurisdiction in the premises, a Participant or Beneficiary shall have no right
to assign, transfer, hypothecate, encumber, commute or anticipate his interest
in any payments under the Plan and such payments shall not in any way be subject
to any claim against any Participant or Beneficiary.
6.4 Incompetency.
-------------
If any Participant or Beneficiary is, in the opinion of the Committee,
legally incapable of giving a valid receipt and discharge for any payment, the
Committee may, at its option, direct that such payment or any party thereof be
made to such person or persons who in the opinion of the Committee are caring
for and supporting such Participant or Beneficiary, unless it has received due
notice of claim from a duly appointed guardian or conservator of the estate of
the Participant or Beneficiary. A payment so made will be a complete discharge
of the obligations under this Plan to the extent of and as to that payment, and
neither the Committee nor the Employers will have any obligation regarding the
application of the payment.
6.5 Controlling Law.
----------------
To the extent not preempted by the laws of the United States of
America, the laws of the State of Illinois shall be the controlling state law in
all matters relating to the Plan.
6.6 Severability.
-------------
If any provisions of the Plan shall be held illegal or invalid for any
reason, the illegality or invalidity shall not affect the remaining parts of the
Plan, but the Plan shall be construed and enforced as if the illegal and invalid
provisions never had been included herein.
6.7 Limitations on Provisions.
--------------------------
The provisions of the Plan and any Supplemental Retirement Benefits
shall be limited as described herein. Any benefit payable under the Pension
Plan shall be paid solely in
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<PAGE>
accordance with the terms and provisions of the Pension Plan, as appropriate,
and nothing in the Plan shall operate or be construed in any way to modify,
amend, or affect the terms and provisions of the Pension Plan.
6.8 Gender and Number.
------------------
Whenever the context requires or permits, the gender and number of
words shall be interchangeable.
ARTICLE 7
7.1 Application for Benefits and Review Procedures.
-----------------------------------------------
The Claims Procedure set forth in the Pension Plan shall apply to any
claim for benefits under the Plan. The "Plan Administrator" for purposes of
applying such Claims Procedure to this Plan shall be the Committee.
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<PAGE>
RYERSON TULL 1996 INCENTIVE STOCK PLAN
1. PURPOSE.
The purpose of the Ryerson Tull 1996 Incentive Stock Plan (the "Plan") is
to attract and retain outstanding individuals as officers and key employees of
Ryerson Tull, Inc. (the "Company") and its subsidiaries, and to furnish
incentives to such individuals through rewards based upon the ownership and
performance of the Common Stock (as defined in Section 3). To this end, the
Committee hereinafter designated may grant stock options, stock appreciation
rights, restricted stock awards, and performance awards, or combinations
thereof, to officers and other key employees of the Company and its
subsidiaries, on the terms and subject to the conditions set forth in this Plan.
2. PARTICIPANTS.
Participants in the Plan shall consist of such officers and other key
employees of the Company and its subsidiaries as the Committee in its sole
discretion may select from time to time to receive stock options, stock
appreciation rights, restricted stock awards or performance awards, either
singly or in combination, as the Committee may determine in its sole discretion.
Individuals who receive awards of Substitute Options and Substitute Restricted
Stock pursuant to Section 14 shall also be Participants in the Plan. Any
director of the Company or any of its subsidiaries who is not also an employee
of the Company or any of its subsidiaries shall not be eligible to receive stock
options, stock appreciation rights, restricted stock awards or performance
awards under the Plan. As used in the Plan, the term "subsidiary" means (a) any
corporation of which the Company owns or controls, directly or indirectly, 50%
or more of the outstanding shares of capital stock entitled to vote for the
election of directors or (b) any partnership, joint venture, or other business
entity in respect of which the Company, directly or indirectly, has comparable
ownership or control.
3. SHARES RESERVED UNDER THE PLAN.
Subject to adjustment pursuant to the provisions of Section 11 of the Plan,
the maximum number of shares of Class A Common
<PAGE>
Stock, $1.00 par value per share, of the Company ("Common Stock") which may be
issued pursuant to grants or awards made under the Plan shall not exceed
2,300,000. No more than 800,000 shares of Common Stock shall be issued pursuant
to restricted stock awards and performance awards under the Plan.
The following restrictions shall apply to all grants and awards under the
Plan other than grants and awards which by their terms are not intended to
comply with the "Performance-Based Exception" (defined below in this Section 3):
(a) the maximum aggregate number of shares of Common Stock that may be
granted or awarded under the Plan to any participant under the Plan during any
three year period shall be 1,500,000; and
(b) the maximum aggregate cash payout with respect to grants or awards
under the Plan in any fiscal year of the Company to any Named Executive Officer
(defined below in this Section 3) shall be $1,000,000.
For purposes of the Plan, "Named Executive Officer" shall mean a
participant who is one of the group of "covered employees" as defined in the
regulations promulgated under section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code") or any successor statute, and "Performance-Based
Exception" shall mean the performance-based exception from the deductibility
limitations as set forth in Section 162(m) of the Code.
Except to the extent otherwise determined by the Committee, any shares of
Common Stock subject to grants or awards under the Plan that terminate by
expiration, cancellation or otherwise without the issuance of such shares
(including shares underlying a stock appreciation right exercised for stock, to
the extent that such underlying shares are not issued), that are settled in cash
(to the extent so settled), or, in the case of restricted stock awards, that
terminate without vesting, shall become available for future grants and awards
under the Plan. Shares of Common Stock to be issued pursuant to grants or awards
under the Plan may be authorized and unissued shares of Common Stock, treasury
Common Stock, or any combination thereof.
4. ADMINISTRATION OF THE PLAN.
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<PAGE>
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board"). To the
extent necessary to comply with the exemption provided by rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or any
successor rule ("Rule 16b-3"), no member of the Committee shall be eligible to
receive any grant, or shall have been eligible to receive any grant for at least
one year prior to becoming a member, under the Plan or any other discretionary
stock option, stock appreciation rights or other stock plan of the Company or
any affiliate of the Company, other than the Ryerson Tull Directors'
Compensation Plan. Subject to the provisions of the Plan, the Committee shall
have authority (i) to determine which employees of the Company and its
subsidiaries shall be eligible for participation in the Plan; (ii) to select
employees to receive grants under the Plan; (iii) to determine the form of
grant, whether as a stock option, stock appreciation right, restricted stock
award, performance award or a combination thereof, the number of shares of
Common Stock or units subject to the grant, the time and conditions of exercise
or vesting, the fair market value of the Common Stock for purposes of the Plan,
and all other terms and conditions of any grant and to amend such awards or
accelerate the time of exercise or vesting thereof; and (iv) to prescribe the
form of agreement, certificate or other instrument evidencing the grant. The
Committee shall also have authority to interpret the Plan and to establish,
amend and rescind rules and regulations for the administration of the Plan, and
all such interpretations, rules and regulations shall be conclusive and binding
on all persons.
5. EFFECTIVE DATE OF PLAN.
The Plan shall be effective upon approval by the stockholder(s) of the
Company.
6. STOCK OPTIONS.
(a) GRANTS. Subject to the terms of the Plan, options to purchase shares
of Common Stock, including "incentive stock options" within the meaning of
Section 422 of the Code, may be granted from time to time to such officers and
other key employees of the Company and its subsidiaries as may be selected by
the Committee. Each grant of an option under the Plan may designate whether the
option is intended to be an incentive stock
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<PAGE>
option or a "nonqualified" stock option. Any option not so designated shall be
deemed to be a "nonqualified" stock option.
(b) TERMS OF OPTIONS. An option shall be exercisable in whole or in such
installments and at such times as may be determined by the Committee in its sole
discretion, provided that no option shall be exercisable less than six months or
more than ten years after the date of grant (except in the case of death or
physical or mental incapacity). The per share option price shall not be less
than the greater of par value or 100% of the fair market value of a share of
Common Stock on the date the option is granted. Upon exercise, the option price
may be paid in cash, in shares of Common Stock having a fair market value equal
to the option price which have been owned by the Participant for at least 6
months prior thereto, or in a combination thereof. The Committee may also allow
the cashless exercise of options by holders thereof, as permitted under
regulations promulgated by the Board of Governors of the Federal Reserve System,
subject to any applicable restrictions necessary to comply with rules adopted by
the Securities and Exchange Commission, and the exercise of options by holders
thereof by any other means that the Committee determines to be consistent with
the Plan's purpose and applicable law, including loans, with or without
interest, made by the Company to the holder thereof.
(c) RESTRICTIONS RELATING TO INCENTIVE STOCK OPTIONS. To the extent
required by the Code, the aggregate fair market value (determined as of the time
the option is granted) of the Common Stock with respect to which incentive stock
options are exercisable for the first time by an employee during any calendar
year (under the Plan or any other plan of the Company or any of its
subsidiaries) shall not exceed $100,000.
(d) TERMINATION OF EMPLOYMENT. If an optionee ceases to be employed by
the Company or any of its subsidiaries by reason of (i) death, (ii) physical or
mental incapacity, (iii) retirement on or after the normal retirement date
provided for in and pursuant to any pension plan of the Company or any
subsidiary of the Company in effect at the time of such retirement, or (iv)
early retirement (with the consent of the Committee) provided for in and
pursuant to any such pension plan, any option held by such optionee may be
exercised, with respect to all or any part of the Common Stock as to which such
option was not theretofore
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exercised (whether or not such option was otherwise then exercisable), for such
period from and after the date of such cessation of employment (not extending,
however, beyond the date of expiration of such option) as the Committee may
determine at the time of the grant or at any time thereafter. If an optionee
ceases to be employed by the Company and any of its subsidiaries for any reason
other than a reason set forth in the immediately preceding sentence, any option
granted to such optionee may be exercised for a period ending on the 30th day
following the date of such cessation of employment or the date of expiration of
such option, whichever first occurs, but only with respect to that number of
shares of Common Stock for which such option was exercisable immediately prior
to the date of cessation of employment, except as otherwise determined by the
Committee at the time of grant or any time thereafter.
(e) ADDITIONAL TERMS AND CONDITIONS. The agreement or instrument
evidencing the grant of a stock option may contain such other terms, provisions
and conditions not inconsistent with the Plan as may be determined by the
Committee in its sole discretion.
7. STOCK APPRECIATION RIGHTS.
(a) GRANTS. Subject to the terms of the Plan, rights entitling the
grantee to receive cash or shares of Common Stock having a fair market value
equal to the appreciation in market value of a stated number of shares of such
Common Stock from the date of the grant to the date of exercise, or, in the case
of rights granted in tandem with or by reference to a stock option granted prior
to the grant of such rights, from the date of grant of such related stock option
to the date of exercise, may be granted from time to time to such officers and
other key employees of the Company and its subsidiaries as may be selected by
the Committee.
(b) TERMS OF GRANT. Such rights may be granted in tandem with or by
reference to a related stock option, in which event the grantee may elect to
exercise either the stock option or the right, but not both, as to the shares
subject to the stock option and the right, or the right may be granted
independently of a stock option. Rights granted in tandem with or by reference
to a related stock option shall be exercisable to the extent, and only
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to the extent, that the related option is exercisable, provided that no such
right (except in the case of death or physical or mental incapacity) shall be
exercisable prior to the expiration of six months following the date the right
is granted. Rights granted independently of a stock option shall be exercisable
in whole or in such installments and at such times as may be determined by the
Committee, provided that no right (except in the case of death or physical or
mental incapacity) shall be exercisable less than six months or more than ten
years after the date of grant. Further, in the event that any employee to whom
rights are granted independently of a stock option ceases to be an employee of
the Company and its subsidiaries, such rights shall be exercisable only to the
extent and upon the conditions that stock options are exercisable in accordance
with the provisions of paragraph (d) of Section 6 of the Plan. The Committee may
at the time of the grant or at any time thereafter impose such additional terms
and conditions on the exercise of stock appreciation rights as it deems
necessary or desirable for any reason, including for compliance with Section
16(a) or Section 16(b) of the Exchange Act and the rules and regulations
thereunder.
(c) PAYMENT ON EXERCISE. Upon exercise of a stock appreciation right, the
holder shall be paid the excess of the then fair market value of the number of
shares of Common Stock to which the right relates over the fair market value of
such number of shares at the date of grant of the right or of the related stock
option, as the case may be. Such excess shall be paid in cash or in shares of
Common Stock having a fair market value equal to such excess, or in such
combination thereof, as may be provided in the grant of such right (which may
permit the holder to elect between cash and Common Stock or to elect a
combination thereof), or, if no such provision is made in the grant, as the
Committee shall determine upon exercise of the right, provided, in any event,
that the holder shall be paid cash in lieu of any fractional share of Common
Stock to which such holder would otherwise be entitled.
(d) ADDITIONAL TERMS AND CONDITIONS. The agreement or instrument
evidencing the grant of stock appreciation rights may contain such other terms,
provisions and conditions not inconsistent with the Plan as may be determined by
the Committee in its sole discretion.
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8. RESTRICTED STOCK AWARDS.
Subject to the terms of the Plan, restricted stock awards consisting of
shares of Common Stock may be made from time to time to such officers and other
key employees of the Company and its subsidiaries as may be selected by the
Committee, provided that any such employee (except an employee whose terms of
employment include the granting of a restricted stock award) shall have been
employed by the Company or any of its subsidiaries for at least six months. Such
awards shall be contingent on the employee's continuing employment with the
Company or its subsidiaries for a period to be specified in the award, which
(except in the case of death or physical or mental incapacity) shall not be less
than six months or more than ten years from the date of award, and shall be
subject to such additional terms and conditions as the Committee in its sole
discretion deems appropriate, including, but not by way of limitation,
restrictions on the sale or other disposition of such shares during the
restriction period. Except as otherwise determined by the Committee at the time
of the award, the holder of a restricted stock award shall have the right to
vote the restricted shares and to receive dividends thereon, unless and until
such shares are forfeited.
9. PERFORMANCE AWARDS
(a) AWARDS. Performance awards consisting of (i) shares of Common Stock,
(ii) monetary units or (iii) units which are expressed in terms of shares of
Common Stock may be made from time to time to such officers and other key
employees of the Company and its subsidiaries as may be selected by the
Committee. Subject to the provisions of Section 12 below, such awards shall be
contingent on the achievement over a period of not less than six months or more
than ten years of such corporate, division, subsidiary, group or other measures
and goals as shall be established by the Committee. Subject to the provisions of
Section 12 below, such measures and goals may be revised by the Committee at any
time from time to time during the performance period. Except as may otherwise be
determined by the Committee at the time of the award or at any time thereafter,
a performance award shall terminate if the grantee of the award does not remain
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continuously in the employ of the Company or its subsidiaries at all times
during the applicable performance period.
(b) RIGHTS WITH RESPECT TO SHARES AND SHARE UNITS. If a performance award
consists of shares of Common Stock or units which are expressed in terms of
shares of such Common Stock, amounts equal to dividends otherwise payable on a
like number of shares may, if the award so provides, be converted into
additional such shares (to the extent that shares are then available for
issuance under the Plan) or credited as additional units and paid to the
participant if and when, and to the extent that, payment is made pursuant to
such award.
(c) PAYMENT. Payment of a performance award following the end of the
performance period, if such award consists of monetary units or units expressed
in terms of shares of Common Stock, may be made in cash, shares of Common Stock,
or a combination thereof, as determined by the Committee. Any payment made in
Common Stock shall be based on the fair market value of such stock on the
payment date.
10. PERFORMANCE MEASURES APPLICABLE TO AWARDS TO NAMED EXECUTIVE OFFICERS
Unless and until the Committee proposes for stockholder vote a change in
the general performance measures set forth in this Section 10, the attainment of
which may determine the degree of payout or vesting with respect to awards under
the Plan which are designed to qualify for the Performance-Based Exception, the
performance measure(s) to be used for purposes of such awards shall be chosen
from among the following alternatives: safety (including total injury frequency,
lost workday rates or cases, medical treatment cases and fatalities); quality
control (including critical product characteristics and defects); cost control
(including cost as a percentage of sales); capital structure (including debt and
equity levels, debt-to-equity ratios, and debt-to total-capitalization ratios);
inventory turnover; customer performance or satisfaction; revenue growth; net
income; conformity to cash flow plans; return on investment; and operating
profit to operating assets.
The Committee shall have the discretion to establish performance goals
based upon the foregoing performance measures
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and to adjust such goals and the methodology used to measure the determination
of the degree of attainment of such goals; provided, however, that awards under
the Plan that are intended to qualify for the Performance-Based Exception and
that are issued to or held by Named Executive Officers may not be adjusted in a
manner that increases such award. The Committee shall retain the discretion to
adjust such awards in a manner that does not increase such awards. Furthermore,
the Committee shall not make any adjustment to awards under the Plan issued to
or held by Named Executive Officers that are intended to comply with the
Performance-Based Exception if the result of such adjustment would be the
disqualification of such award under the Performance-Based Exception.
In the event that applicable laws change to permit the Committee greater
discretion to amend or replace the foregoing performance measures applicable to
awards to Named Executive Officers without obtaining stockholder approval of
such changes, the Committee shall have sole discretion to make such changes
without obtaining such approval. In addition, in the event that the Committee
determines that it is advisable to grant awards under the Plan to Named
Executive Officers that may not qualify for the Performance-Based Exception, the
Committee may make such grants upon any performance measures it deems
appropriate with the understanding that they may not satisfy the requirements of
Section 162(m) of the Code.
11. ADJUSTMENTS FOR CHANGES IN CAPITALIZATION, ETC.
Subject to the provisions of Section 12 herein, in the event of any change
in corporate capitalization, such as a stock split, reverse stock split, stock
dividend, or a corporate transaction, such as a merger, consolidation, or
separation, including a spin-off, or other distribution of stock or property of
the Company or its subsidiaries (other than normal cash dividends), any
reorganization (whether or not such reorganization comes within the definition
of such term in Code Section 368) or any partial or complete liquidation of the
Company or its subsidiaries, such adjustment shall be made in the number and
class of shares which may be delivered under Section 3 (including the number of
shares referred to in the last sentence of the first paragraph of Section 3 and
in subparagraph (a) of the second paragraph of Section 3), and in the number and
class of and/or price of shares
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subject to outstanding grants or awards under the Plan, as may be determined to
be appropriate and equitable by the Committee, in its sole discretion, to
prevent dilution or enlargement of rights; provided, however, that the number of
shares subject to any grants or awards under the Plan shall always be a whole
number.
12. EFFECT OF CHANGE IN CONTROL.
(a) ACCELERATION OF BENEFITS. Subject to the following sentence, in the
event of a "Change in Control" as defined in paragraph (b) of this Section 12,
(i) the value of all outstanding stock options, stock appreciation rights and
restricted stock awards (whether or not then fully exercisable or vested) shall
be cashed out on the basis of the "Change in Control Price" (as defined in
paragraph (c) of this Section 12) as of the date the Change in Control occurs,
provided, however, that any stock options or stock appreciation rights
outstanding for less than six months shall not be cashed out until six months
after the respective date of grant, and provided, further, that the Committee
may provide for the immediate vesting instead of the cashing out of restricted
stock awards in such circumstances as it deems appropriate; and (ii) all
outstanding performance awards shall be cashed out in such manner and in such
amount or amounts as determined by the Committee in its sole discretion. In the
event of a transaction which is intended to be accounted for through the
pooling-of-interest accounting method, (i) in lieu of cashing out all or any
portion of the outstanding stock options, stock appreciation rights, restricted
stock awards and performance awards, the Committee, in its discretion, may cause
such grants or awards to vest, and may limit payment to shares of Common Stock,
and (ii) the Committee, in its discretion, may extend the exercise period for
stock options and stock appreciation rights, but not beyond the earlier of (A)
30 days after the end of the pooling period or (B) the original term of the
stock option or stock appreciation right.
(b) CHANGE IN CONTROL. For purposes of this Section 12, a Change in
Control means the happening of any of the following:
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than (w) the Company and its affiliates
(collectively referred to herein
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as "RTI"), (x) a trustee or other fiduciary holding securities under an
employee benefit plan of RTI, (y) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (z) a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company (not including in the securities beneficially owned by such person
any securities acquired directly from the Company or its affiliates)
representing 40% or more of the combined voting power of the Company's then
outstanding securities;
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board and any new director
(other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in clauses
(i), (ii) or (iv) of this Subsection) whose election by the Board or
nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved cease for any reason to
constitute a majority thereof;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity), in combination with the ownership of
any trustee or other fiduciary holding securities under an employee benefit
plan of RTI, at least 60% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation, or a merger or consolidation effected
to implement a recapitalization of the Company (or similar transaction) in
which no person acquires more than 50% of the combined voting power of the
Company's then outstanding securities; or
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(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets.
A Change in Control shall also be deemed to occur with respect to any
Participant for purposes of the Plan if there occurs:
(1) a sale or disposition, directly or indirectly, other than to a
person described in subclause (w), (x) or (z) of clause (i) next above, of
securities of the Participant's employer, any direct or indirect parent
company of the Participant's employer or any company that is a subsidiary
of the Participant's employer and is also a significant subsidiary (as
defined below) of the Company (the Participant's employer and such a parent
or subsidiary being a "Related Company"), representing 50% or more of the
combined voting power of the securities of such Related Company then
outstanding;
(2) a merger or consolidation of a Related Company with any other
corporation, other than a merger or consolidation which would result in 50%
or more of the combined voting power of the surviving company being
beneficially owned by a majority owned direct or indirect subsidiary of the
Company; or
(3) the sale or disposition of all or substantially all the assets of
a Related Company to a person other than a majority owned direct or
indirect subsidiary of the Company.
Notwithstanding the foregoing, no Change in Control shall be deemed to have
occurred with respect to a Participant for purposes of the Plan if (I) such
transaction includes or involves a sale to the public or a distribution to the
stockholders of the Company of more than 50% of the voting securities of the
Participant's employer or a direct or indirect parent of the Participant's
employer, and (II) the Participant's employer or a direct or indirect parent of
the Participant's employer agrees to become a successor to the Company under an
individual agreement between the Company and the Participant or the Participant
is covered by an agreement providing for benefits upon a change in
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control of his or her employer following an event described clauses (1), (2) or
(3) next above. For purposes of the Plan, the term "significant subsidiary" has
the meaning given to such term under Rule 405 of the Securities Act of 1933, as
amended.
(c) CHANGE IN CONTROL PRICE. For purposes of this Section 12, Change in
Control Price means:
(i) with respect to a Change in Control by reason of a merger or
consolidation of the Company described in paragraph (b)(iii) of this
Section 12 in which the consideration per share of Common Stock to be paid
for the acquisition of shares of Common Stock specified in the agreement of
merger or consolidation is all in cash, the highest such consideration per
share;
(ii) with respect to a Change in Control by reason of an acquisition
of securities described in paragraph (b)(i) of this Section 12, the highest
price per share for any share of the Common Stock paid by any holder of any
of the securities representing 40% or more of the combined voting power of
the Company giving rise to the Change in Control; and
(iii) with respect to a Change in Control by reason of a merger or
consolidation of the Company (other than a merger or consolidation
described in paragraph (b)(iii) of this Section or a change in the
composition of the Board of Directors described in paragraph (b)(ii) of
this Section 12, the highest price per share of Common Stock reported on
the Composite Transactions (or, if such shares are not traded on the New
York Stock Exchange, such other principal market on which such shares are
traded) during the sixty-day period ending on the date the Change in
Control occurs, except that, in the case of incentive stock options and
stock appreciation rights relating to incentive stock options, the holder
may not receive an amount in excess of the maximum amount that will enable
such option to continue to qualify as an incentive stock option.
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13. AMENDMENT AND TERMINATION OF PLAN.
The Plan may be amended by the Board in any respect, provided that, without
stockholder approval, no amendment (other than pursuant to Section 11 of the
Plan) shall increase the maximum number of shares available for issuance under
the Plan if such action would result in awards under the Plan no longer being
exempt under Rule 16b-3 as then in effect. In addition, no amendment may impair
the rights of a participant under any stock option, stock appreciation right,
restricted stock award or performance award previously granted under the Plan
without the consent of such participant, unless required by law. The Plan may
also be terminated at any time by the Board. No further grants may be made under
the Plan after termination, but termination shall not affect the rights of any
participant under, or the authority of the Committee with respect to, any grants
or awards made prior to termination.
14. GRANT OF SUBSTITUTE AWARDS
(a) SUBSTITUTE OPTIONS. In lieu of outstanding options to purchase Inland
Steel Industries, Inc. ("ISI") common stock ("ISI Options") granted pursuant to
the Inland 1995 Incentive Stock Plan, the Inland 1992 Incentive Stock Plan, the
Inland 1988 Incentive Stock Plan or the Inland 1984 Incentive Stock Plan
(collectively, the "ISI Incentive Plans") to officers and employees of ISI and
its subsidiaries who are or who become officers or employees of the Company or
any of its subsidiaries on or after the closing date of the initial public
offering of Common Stock and prior to the date on which the Company and its
subsidiaries cease to be treated as a single employer with ISI under section
414(b) or (c) of the Code ("Transferred Employees"), such Transferred Employees
shall receive a grant of "Substitute Stock Options" under the Plan; provided
that the Committee, in its sole discretion, may award Substitute Stock Options
to any Transferred Employee with respect to less than all (including none) of
his or her outstanding options under the ISI Incentive Plans, in which case the
outstanding ISI Options for which no Substitute Stock Options have been granted
will remain outstanding. The number of shares of Common Stock subject to any
Substitute Stock Option shall bear the same ratio to the number of shares of ISI
common stock subject to the corresponding ISI Option as the Average Value (as
defined below) of a share of ISI
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common stock bears to the Average Value of a share of Common Stock. The per
share option price of Common Stock subject to the Substitute Stock Option shall
be equal to the amount which bears the same ratio to the Average Value of a
share of Common Stock as the per share option price of ISI common stock under
the ISI Option bears to the Average Value of a share of ISI common stock. Other
than the option price and number of shares, the Substitute Stock Options shall
be subject to the same terms and conditions as the ISI Options. The term
"Average Value" means the average closing price of Common Stock or ISI common
stock, as applicable, as reported, in the case of Common Stock, on the New York
Stock Exchange Composite Transactions (the "Composite Transactions") (or, if
such shares are not traded on the New York Stock Exchange, such other principal
market on which such shares are traded) for the first ten trading days after the
date of the substitution.
(b) SUBSTITUTE RESTRICTED STOCK. In lieu of outstanding shares of
restricted ISI common stock ("ISI Restricted Stock") granted pursuant to the ISI
Incentive Plans to Transferred Employees, such Transferred Employees shall
receive a grant of "Substitute Restricted Stock" under the Plan; provided that
the Committee, in its sole discretion, may award Substitute Restricted Stock to
any Transferred Employee with respect to less than all (including none) of his
or her outstanding restricted stock under the ISI Incentive Plans, in which case
the outstanding ISI Restricted Stock for which no Substitute Restricted Stock
has been granted will remain outstanding. The number of shares of Substitute
Restricted Stock shall bear the same ratio to the number of shares of ISI
Restricted Stock as the Average Value of a share of ISI common stock bears to
the Average Value of a share of Common Stock. Other than the number of shares,
the Substitute Restricted Stock shall be subject to the same terms and
conditions as the ISI Restricted Stock.
15. MISCELLANEOUS.
(a) NO RIGHT TO A GRANT. Neither the adoption of the Plan nor any action
of the Board or of the Committee shall be deemed to give any employee any right
to be selected as a participant or to be granted a stock option, stock
appreciation right, restricted stock award or performance award.
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(b) RIGHTS AS STOCKHOLDERS. No person shall have any rights as a
stockholder of the Company with respect to any shares covered by a stock option,
stock appreciation right, or performance award until the date of the issuance of
a stock certificate to such person pursuant to such stock option, right or
award.
(c) EMPLOYMENT. Nothing contained in this Plan shall be deemed to confer
upon any employee any right of continued employment with the Company or any of
its subsidiaries or to limit or diminish in any way the right of the Company or
any such subsidiary to terminate his or her employment at any time with or
without cause.
(d) TAXES. The Company shall be entitled to deduct from any payment under
the Plan the amount of any tax required by law to be withheld with respect to
such payment or may require any participant to pay such amount to the Company
prior to and as a condition of making such payment. In addition, the Committee
may, in its discretion and subject to such rules as it may adopt from time to
time, permit a participant to elect to have the Company withhold from any
payment under the Plan (or to have the Company accept from the participant), for
tax withholding purposes, shares of Common Stock, valued at their fair market
value, but in no event shall the fair market value of the number of shares so
withheld (or accepted) exceed the amount necessary to meet the maximum Federal,
state and local marginal tax rates then in effect that are applicable to the
participant and to the particular transaction.
(e) NONTRANSFERABILITY. Except as permitted by the Committee, no stock
option, stock appreciation right, restricted stock award or performance award
shall be transferable except by will or the laws of descent and distribution,
and, during the holder's lifetime, stock options and stock appreciation rights
shall be exercisable only by, and shares subject to restricted stock awards and
payments pursuant to performance awards shall be delivered or made only to, such
holder or such holder's duly appointed legal representative.
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CORPORATE SEPARATION AGREEMENT
THIS CORPORATE SEPARATION AGREEMENT, dated June __, 1996, is by and among
Inland Steel Industries, Inc., a Delaware corporation ("Inland"), and Ryerson
Tull, Inc., a Delaware corporation ("Ryerson Tull"). Capitalized terms used
herein and not otherwise defined shall have the respective meanings assigned to
them in Article I hereof.
WHEREAS, the Board of Directors of Inland has determined that it is in the
best interests of Inland and its stockholders for Ryerson Tull to issue and sell
in an initial public offering up to 15% of the common stock of Ryerson Tull; and
WHEREAS, it is appropriate and desirable to set forth certain agreements
governing the relationship between Inland and Ryerson Tull and their respective
Subsidiaries following such initial public offering.
NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS
For the purpose of this Agreement the following terms shall have the
following meanings:
"Action" means any demand, action, suit, countersuit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority or any
arbitration or mediation tribunal.
"Affiliate" of any Person means a Person that Controls, is Controlled by,
or is under common Control with such Person.
"Agreement" means this Corporate Separation Agreement, as it may be
amended, modified or supplemented from time to time.
"Allocated Amount" has the meaning set forth in Section 3.2.
"Class A Common Stock" means the Class A Common Stock, $1.00 par value, of
Ryerson Tull.
"Class B Common Stock" means the Class B Common Stock, $1.00 par value, of
Ryerson Tull.
"Closing Date" means the first time at which any shares of Ryerson Common
Stock are sold to the Underwriters pursuant to the IPO in accordance with the
terms of the Underwriting Agreement.
"Control" means the possession, directly or indirectly, by any Person of
the power to direct or cause the direction of the management and policies of
another Person, whether through ownership of voting securities or other
interests, by contract or otherwise.
<PAGE>
"Cross-License Agreement" means the Cross-License Agreement dated the date
hereof between Inland and Ryerson Tull, as it may be amended, modified or
supplemented from time to time.
"Environmental Law" means any federal, state, local, foreign or
international statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, common law (including tort and environmental
nuisance law), legal doctrine, order, judgment, decree, injunction, requirement
or agreement with any Governmental Authority, now or hereafter in effect
relating to health, safety, pollution or the environment (including ambient air,
surface water, groundwater, land surface or subsurface strata) or to emissions,
discharges, releases or threatened releases of any substance currently or at any
time hereafter listed, defined, designated or classified as hazardous, toxic,
waste, radioactive or dangerous, or otherwise regulated, under any of the
foregoing, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of any such substances,
including the Comprehensive Environmental Response, Compensation and Liability
Act, the Superfund Amendments and Reauthorization Act and the Resource
Conservation and Recovery Act and comparable provisions in state, local, foreign
or international law.
"Environmental Liabilities" means all Liabilities relating to, arising out
of or resulting from any Environmental Law or contract or agreement (or
provision thereof) relating to environmental, health or safety matters
(including all removal, remediation or cleanup costs, investigatory costs,
governmental response costs, natural resources damages, property damages,
personal injury damages, costs of compliance with any settlement, judgment or
other determination of Liability and indemnity, contribution or similar
obligations) and all costs and expenses (including allocated costs of in-house
counsel and other personnel), interest, fines, penalties or other monetary
sanctions in connection therewith.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESOP Guarantee" means the Guaranty and Contingent Purchase Agreement dated
as of August 15, 1990 between Joseph T. Ryerson & Son, Inc., a Subsidiary of
Ryerson Tull, and the note purchasers named therein relating to $146,913,151
original aggregate principal amount of Guaranteed ESOP Notes issued by the
Inland Steel Industries Thrift Plan ESOP Trust.
"Governmental Authority" means any federal, state, local, foreign or
international court, government, department, commission, board, bureau, agency,
official or other regulatory, administrative or governmental authority.
"Group" means either the Inland Group or the Ryerson Tull Group, as the
context requires.
"Indemnifying Party" has the meaning set forth in Section 4.5(a).
"Indemnitee" means an Inland Indemnitee or a Ryerson Tull Indemnitee, as
the case may be.
"Information" means information, whether or not patentable or
copyrightable, in written, oral, electronic or other tangible or intangible
form, stored in any medium, including studies, reports, records, books,
contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings,
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blueprints, diagrams, models, prototypes, samples, flow charts, data, computer
data, disks, diskettes, tapes, computer programs or other software, marketing
plans, customer names, communications by or to attorneys (including attorney-
client privileged communications), memoranda and other materials prepared by
attorneys or under their direction (including attorney work product), and other
technical, financial, employee or business information or data.
"Inland" has the meaning set forth in the opening paragraph.
"Inland Group" means Inland and each Person (other than any member of the
Ryerson Tull Group) that is an Affiliate of Inland as of the Tull Closing Date
and at any time thereafter.
"Inland Indemnitees" has the meaning set forth in Section 4.1.
"Insurance Proceeds" means those monies: (a) received by an insured from an
insurance carrier; or (b) paid by an insurance carrier on behalf of the insured;
in any such case net of any applicable premium adjustments (including reserves
and retrospectively rated premium adjustments) and net of any costs or expenses
(including allocated costs of in-house counsel and other personnel) incurred in
the collection thereof.
"IPO" means the initial public offering by Ryerson Tull of shares of its
Class A Common Stock pursuant to the Registration Statement on Form S-1, as
amended (No. 333-3229), originally filed by Ryerson with the Securities and
Exchange Commission on May 7, 1996.
"Joint Marketing Period" means the period commencing on the date hereof and
ending June 30, 2001; provided, however, that the Joint Marketing Period may be
terminated at any time by the mutual consent of Inland and Ryerson Tull or by
either party upon sixty (60) days prior written notice to the other.
"Liabilities" means any and all losses, claims, charges, debts, demands,
actions, causes of action, suits, damages, obligations, payments, costs and
expenses, whether absolute or contingent, matured or unmatured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising, and
including those arising under any law, rule, regulation, Action, threatened or
contemplated Action (including the costs and expenses of demands, assessments,
judgments, settlements and compromises relating thereto and attorneys' fees and
any and all costs and expenses (including allocated costs of in-house counsel
and other personnel), whatsoever reasonably incurred in investigating, preparing
or defending against any such Actions or threatened or contemplated Actions),
order or consent decree of any Governmental Authority or any award of any
arbitrator or mediator of any kind, and those arising under any contract,
commitment or undertaking, including those arising under this Agreement whether
or not recorded or reflected or required to be recorded or reflected on the
books and records or financial statements of any Person.
"Operating Asset Ratio" means the ratio, determined by Inland in good faith
from time to time, of the consolidated operating assets of Ryerson to the total
consolidated operating assets of Inland.
"Person" means an individual, a general or limited partnership, a
corporation, a trust, a joint venture, an unincorporated organization, a limited
liability entity, any other entity and any Governmental Authority.
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"Ryerson Tull" has the meaning set forth in the opening paragraph.
"Ryerson Tull Group" means Ryerson Tull, each Subsidiary of Ryerson Tull
and each other Person that is controlled directly or indirectly by Ryerson Tull
as of the Closing Date and at any time thereafter.
"Ryerson Tull Indemnitees" has the meaning set forth in Section 4.2.
"Services" has the meaning set forth in Section 3.1.
"Services Period" means the period commencing on the date hereof and ending
June 30, 2001; provided, however, that the Services Period may be terminated at
any time by the mutual consent of Inland and Ryerson Tull or by either party
upon sixty (60) days prior written notice to the other.
"Subsidiary" of any Person means any corporation or other organization,
whether incorporated or unincorporated, of which securities or interests having
by the terms thereof ordinary voting power to elect at least a majority of the
board of directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or Controlled
by such Person or by any one or more of its Subsidiaries or by such Person and
one or more of its Subsidiaries; provided, however that no Person that is not
directly or indirectly wholly owned by any other Person shall be a Subsidiary of
such other Person unless such other Person Controls, or has the right, power or
ability to Control, that Person.
"Tax Sharing Agreement" means the Tax Sharing Agreement, dated as of the
date hereof by and between Inland and Ryerson Tull, as it may be amended,
modified or supplemented from time to time.
"Taxes" means income, gross receipts, franchise, sales, use, rental,
turnover, business, occupation, excise, value-added, tangible and intangible
personal property and stamp taxes, levies, assessments, imposts, duties, charges
or withholdings of any nature, together with any and all penalties, additions to
tax, fines or interest thereon imposed upon any member of the Inland Group or
the Ryerson Tull Group by any federal, state or local government, political
subdivision or taxing authority in the United States or its possessions, by any
government or taxing authority of or in a foreign country or by any
international authority.
"Third Party Claim" has the meaning set forth in Section 4.5(a).
"Underwriters" means the managing underwriters for the IPO.
"Underwriting Agreement" means the underwriting agreement among Ryerson
Tull and the Underwriters with respect to the IPO.
ARTICLE II
SEPARATE CORPORATE EXISTENCE
2.1. CORPORATE SEPARATION. For so long as the number of shares of Class B
Common Stock outstanding shall represent not less than 50 percent of the sum of
the number of outstanding shares of Class
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B Common Stock and the number of outstanding shares of Class A Common Stock,
each of Ryerson Tull and Inland shall observe the applicable legal requirements
for its recognition as a corporation separate and apart from each member of the
other's Group. Without limiting the generality of the foregoing, Ryerson and
Inland shall each take such actions during such period as shall be reasonably
required in order that:
(a) Any transaction between any member of the Ryerson Tull Group and
any member of the Inland Group will be the type of transaction which would
be entered into by a prudent Person in the position of such member of the
Ryerson Tull Group with a member of the Inland Group, and will be on terms
that are at least as favorable (but no more favorable) as may be obtained
from a Person that is not a member of the Inland Group.
(b) Ryerson Tull shall observe all corporate formalities, including,
without limitation, (i) the maintenance of corporate records, books of
account and stationery for each member of the Ryerson Tull Group separate
from those of every member of the Inland Group and (ii) the holding of
regular meetings of its board of directors and stockholders.
(c) Ryerson Tull shall have its own executive officers who shall not
be officers or employees of Inland or any other member of the Inland Group,
provided that Ryerson Tull's Chairman of the Board, its Chief Executive
Officer and up to one-half of the remaining executive officers of Ryerson
Tull may be officers or employees of Inland or another member of the Inland
Group.
(d) Ryerson Tull and Inland shall each maintain the assets of each
member of its Group separate from those of the members of the other's
Group.
(e) Except as contemplated by the Tax Sharing Agreement, Ryerson Tull
and Inland shall each account for and manage the liabilities of each member
of its Group separately from those of the other and members of the other's
Group, including payment of all payroll and administrative expenses and
related taxes from its own assets; provided that any member of the Inland
Group may incur and pay expenses on behalf of any member of the Ryerson
Tull Group as contemplated hereunder, which expenses will be reimbursed as
provided herein.
(f) Ryerson Tull and Inland each shall (i) maintain financial records
separate and apart from the other, (ii) prepare, not less than quarterly,
consolidated financial statements, and (iii) prepare annual consolidated
audited financial statements (consisting of, at least, a balance sheet and
statements of income and cash flows).
(g) Ryerson Tull will conduct its business at offices separate from
the offices of members of the Inland Group, which offices of Ryerson Tull
may consist of office space shared with a member of the Inland Group, a
portion of which is allocated solely to Ryerson Tull; provided that where
common facilities are used, the allocation of costs are in accordance with
paragraph (a) of this Section 2.1.
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(h) Other than the ESOP Guarantee, no member of the Ryerson Tull Group
nor any member of the Inland Group shall pledge its assets for the benefit
of, or grant guarantees or otherwise hold out its credit as being available
to satisfy the obligations of, any member of the other's Group.
ARTICLE III
SUPPORT SERVICES
3.1. SERVICES TO BE RENDERED. Inland shall render to members of the
Ryerson Tull Group from time to time during the Services Period, upon request of
Ryerson Tull, routine and ordinary services consistent with past practice and
which Inland can provide with its staff, facilities and resources (the
"Services"), including, but not limited to the following:
(a) accounting and auditing services;
(b) bonding requirements;
(c) computer systems (including physical computers, applications,
electronic mail and support);
(d) pension and employee benefit plan administration, including
management, sales and purchases of pensions assets, Internal Revenue
Service and Pension Benefit Guaranty Corporation reporting, and funding and
reporting calculations;
(e) financial and cash management, debt administration and management
of banking relationships;
(f) government relations;
(g) insurance and related risk management;
(h) investor and public relations;
(i) services of the Inland law department, including the corporate
secretary functions;
(j) tax administration (including Federal income, state income, local
income and property tax preparation, filing and contesting returns and
valuations);
(k) human resources;
(l) information technology;
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(m) office space at 30 West Monroe Street, Chicago, Illinois 60603;
and
(n) senior management support services.
3.2. COMPENSATION. For the Services rendered by Inland to members of the
Ryerson Tull Group pursuant to this Article III, Ryerson Tull shall pay to
Inland a fee (the "Allocated Amount") equal to (i) the specific distinguishable
costs incurred by Inland in providing the Services, such as directly related
out-of-pocket expenses including, without limitation, tax payments, legal fees
and lease payments, and (ii) a proration (based on the Operating Asset Ratio) of
all corporate administrative expenses incurred by Inland and not otherwise
charged under the foregoing clause (i). The Allocated Amounts are intended to
allow Inland only to recover its costs and expenses without realizing any
profit. The Allocated Amounts will be invoiced at the end of each month during
the Services Period, and Ryerson Tull shall pay to Inland such invoiced amounts
within 30 days of receipt of the invoice. If Ryerson Tull is restricted at any
time from making payment of the Allocated Amounts due to restrictions in its
financing arrangements, or otherwise, the amounts then due hereunder shall
accrue interest at the prime rate of Ryerson Tull's lead commercial bank.
3.3. JOINT MARKETING EFFORTS. Ryerson Tull and Inland agree during the
Joint Marketing Period to cooperate in the joint marketing efforts known as the
"red diamond program" which is intended to maximize the satisfaction of
customers of Ryerson Tull and/or Inland. Neither Ryerson Tull nor Inland is
entitled to fees or to be reimbursed for any expenses in connection with the
joint marketing efforts contemplated by this Section 3.3.
3.4. PREVENTION OF PERFORMANCE. Neither Ryerson Tull nor Inland shall be
determined to be in violation of this Agreement if it is prevented from
performing any of its obligations hereunder for any reason beyond its reasonable
control, including without limitation, acts of God, nature, or public enemy,
strikes, or limitations of law, regulations or rules of the Federal or of any
state or local government or of any agency thereof.
3.5. NO WARRANTIES. By agreeing to provide the Services as an
accommodation to members of the Ryerson Tull Group and to participate in the
joint marketing efforts contemplated by Section 3.3, neither Ryerson Tull nor
Inland is making any representations or warranties as to the quality,
suitability or adequacy of the Services or such joint marketing efforts for any
purpose or use. In providing the Services and participating in the joint
marketing efforts contemplated by Section 3.3, neither Ryerson Tull nor Inland
shall be obligated to (i) hire any additional employees; (ii) maintain the
employment of any specific current employee; or (iii) purchase, lease or license
any additional equipment, software or facility.
3.6. INDEPENDENT CONTRACTOR. It is expressly agreed that Ryerson Tull and
Inland are at all times each acting and performing hereunder as an independent
contractor and not as agent for the other, and that no act of commission or
omission of either party hereto shall be construed to make or render the other
party its principal, agent, joint venturer or associate, except to the extent
specified herein. Neither Ryerson Tull nor Inland assumes any responsibility
under this Article other than to render the Services called for under this
Article or the joint marketing efforts contemplated by Section 3.3 in good faith
and shall have no liability to the other except for gross negligence or wilful
misconduct. Ryerson Tull's and Inland's sole remedy on account of
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the failure of the other to render the Services or participate in joint
marketing efforts as contemplated by Section 3.3 as and when required hereunder
shall be to procure such services elsewhere.
ARTICLE IV
INDEMNIFICATION
4.1. INDEMNIFICATION BY RYERSON TULL. Ryerson Tull shall indemnify, defend
and hold harmless Inland, each other member of the Inland Group and each of
their respective directors, officers, employees and agents, and each of the
heirs, executors, successors and assigns of any of the foregoing (collectively,
the "Inland Indemnitees"), from and against any and all Liabilities of the
Inland Indemnitees relating to, arising out of or resulting from:
(a) the business or operations of any member of the Ryerson Tull Group
prior to the Closing Date including, without limitation, Liabilities
for Taxes, Environmental Liabilities and Liabilities under ERISA and
employee benefit plans; or
(b) the Control of Ryerson Tull by Inland.
4.2. INDEMNIFICATION BY INLAND. Inland shall indemnify, defend and hold
harmless Ryerson Tull, each other member of the Ryerson Tull Group and each of
their respective directors, officers, employees and agents, and each of the
heirs, executors, successors and assigns of any of the foregoing (collectively,
the "Ryerson Tull Indemnitees"), from and against any and all Liabilities of the
Ryerson Tull Indemnitees relating to, arising out of or resulting from:
(a) the business or operations of any member of the Inland Group prior to
the Closing Date including, without limitation, Liabilities for Taxes,
Environmental Liabilities and Liabilities under ERISA and employee
benefit plans; or
(b) the Control of Ryerson Tull by Inland.
4.3. LIMITATION. No Indemnitee shall be entitled to indemnification under
Section 4.1 or 4.2 from and against any Liability relating to, arising out of or
resulting from its own or any Affiliate's negligence or wilful misconduct;
provided that if a Liability relates to, arises out of or results from the
negligence of both a member of the Inland Group and a member of the Ryerson Tull
Group, then the responsibility of each such Person shall be shared in proportion
to their relative degrees of negligence.
4.4. INSURANCE PROCEEDS. The parties intend that any Liability subject to
indemnification or reimbursement pursuant to this Article IV will be net of
Insurance Proceeds that actually reduce the amount of the Liability.
4.5. THIRD PARTY CLAIMS. (a) If an Indemnitee shall receive notice or
otherwise learn of the assertion by a Person (including any Governmental
Authority) who is not a member of the Inland Group or the Ryerson Tull Group of
any claim or of the commencement by any such Person of any Action (collectively,
a
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"Third Party Claim") with respect to which the other party (the "Indemnifying
Party") may be obligated to provide indemnification to such Indemnitee pursuant
to Section 4.1 or 4.2, such Indemnitee shall give such Indemnifying Party
written notice thereof within 20 days after becoming aware of such Third Party
Claim. Any such notice shall describe the Third Party Claim in reasonable
detail. Notwithstanding the foregoing, the failure of any Indemnitee or other
Person to give notice as provided in this Section 4.5(a) shall not relieve the
related Indemnifying Party of its obligations under this Article IV, except to
the extent that such Indemnifying Party is actually prejudiced by such failure
to give notice.
(b) An Indemnifying Party may elect to defend (and, unless the Indemnifying
Party has specified any reservations or exceptions, to seek to settle or
compromise), at such Indemnifying Party's own expense and by such Indemnifying
Party's own counsel, any Third Party Claim. Within 30 days after the receipt of
notice from an Indemnitee in accordance with Section 4.5(a) (or sooner, if the
nature of such Third Party Claim so requires), the Indemnifying Party shall
notify the Indemnitee of its election as to whether the Indemnifying Party will
assume responsibility for defending such Third Party Claim, which election
shall specify any reservations or exceptions. After notice from an Indemnifying
Party to an Indemnitee of its election to assume the defense of a Third Party
Claim, such Indemnitee shall have the right to employ separate counsel and to
participate in (but not control) the defense, compromise, or settlement thereof,
but the fees and expenses of such counsel shall be the expense of such
Indemnitee except as set forth in the next sentence. In the event that the
Indemnifying Party has elected to assume the defense of the Third Party Claim
but has specified, and continues to assert, any reservations or exceptions in
such notice, then, in any such case, the reasonable fees and expenses of one
separate counsel for all Indemnitees shall be borne by the Indemnifying Party.
(c) If an Indemnifying Party elects not to assume responsibility for
defending a Third Party Claim, or fails to notify an Indemnitee of its election
as provided in Section 4.5(b), such Indemnitee may defend such Third Party Claim
at the cost and expense (including allocated costs of in-house counsel and other
personnel) of the Indemnifying Party.
(d) Unless the Indemnifying Party has failed to assume the defense of the
Third Party Claim in accordance with the terms of this Agreement, no Indemnitee
may settle or compromise any Third Party Claim without the consent of the
Indemnifying Party.
(e) No Indemnifying Party shall consent to entry of any judgment or enter
into any settlement of the Third Party Claim without the consent of the
Indemnitee if the effect thereof is to permit any injunction, declaratory
judgment, other order or other nonmonetary relief to be entered, directly or
indirectly, against any Indemnitee.
4.6. ADDITIONAL MATTERS. (a) Any claim on account of a Liability which
does not result from a Third Party Claim shall be asserted by written notice
given by the Indemnitee to the related Indemnifying Party. Such Indemnifying
Party shall have a period of 30 days after the receipt of such notice within
which to respond thereto. If such Indemnifying Party does not respond within
such 30-day period, such Indemnifying Party shall be deemed to have refused to
accept responsibility to make payment. If such Indemnifying Party does not
respond within such 30-day period or rejects such claim in whole or in part,
such Indemnitee shall be free to pursue such remedies as may be available to
such party as contemplated by this Agreement.
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(b) In the event of payment by or on behalf of any Indemnifying Party to
any Indemnitee in connection with any Third Party Claim, such Indemnifying Party
shall be subrogated to and shall stand in the place of such Indemnitee as to any
events or circumstances in respect of which such Indemnitee may have any right,
defense or claim relating to such Third Party Claim against any claimant or
plaintiff asserting such Third Party Claim or against any other person. Such
Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner,
and at the cost and expense (including allocated costs of in-house counsel and
other personnel) of such Indemnifying Party, in prosecuting any subrogated
right, defense or claim.
(c) In the event of an Action in which the Indemnifying Party is not a
named defendant, if either the Indemnified Party or Indemnifying Party shall so
request, the parties shall endeavor to substitute the Indemnifying Party for the
named defendant, if at all practicable. If such substitution or addition cannot
be achieved for any reason or is not requested, the named defendant shall allow
the Indemnifying Party to manage the Action as set forth in this Section. The
Indemnifying Party shall fully indemnify the named defendant against all costs
of defending the Action (including court costs, sanctions imposed by a court,
attorneys' fees, experts' fees and all other external expenses, and the
allocated costs of in-house counsel and other personnel), the costs of any
judgment or settlement, and the cost of any interest or penalties relating to
any judgment or settlement.
4.7. REMEDIES CUMULATIVE. The remedies provided in this Article IV shall
be cumulative and shall not preclude assertion by any Indemnitee of any other
rights or the seeking of any and all other remedies against any Indemnifying
Party.
ARTICLE V
CONFIDENTIALITY
5.1. CONFIDENTIAL INFORMATION. Subject to Section 5.2, each of Inland or
Ryerson Tull, on behalf of itself and each member of its respective Group,
agrees to hold, and to cause its respective directors, officers, employees,
agents, accountants, counsel and other advisors and representatives to hold, in
strict confidence, with at least the same degree of care that applies to
Inland's confidential and proprietary information pursuant to policies in effect
as of the Closing Date, all Information concerning each such other Group that is
either in its possession (including Information in its possession prior to the
date hereof or the Closing Date) or furnished by any such other Group or its
respective directors, officers, employees, agents, accountants, counsel and
other advisors and representatives at any time pursuant to this Agreement or
otherwise, and shall not use any such Information other than for such purposes
as shall be expressly permitted hereunder or thereunder, except, in each case,
to the extent that such Information has been (i) in the public domain through no
fault of such party or any member of such Group or any of their respective
directors, officers, employees, agents, accountants, counsel and other advisors
and representatives, (ii) later lawfully acquired from other sources by such
party (or any member of such party's Group) which sources are not themselves
bound by a confidentiality obligation), or (iii) independently generated without
reference to any proprietary or confidential Information of the other party.
5.2. PROTECTIVE ARRANGEMENTS. In the event that any party or any member of
its Group either determines on the advice of its counsel that it is required to
disclose any Information pursuant to applicable law or receives any demand under
lawful process or from any Governmental Authority to disclose or provide
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Information of any other party (or any member of any other party's Group) that
is subject to the confidentiality provisions hereof, such party shall notify the
other party prior to disclosing or providing such Information and shall
cooperate at the expense of the requesting party in seeking any reasonable
protective arrangements requested by such other party. Subject to the foregoing,
the Person that received such request may thereafter disclose or provide
Information to the extent required by such law (as so advised by counsel) or by
lawful process or such Governmental Authority.
ARTICLE VI
MISCELLANEOUS
6.1. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party.
6.2. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
previous agreements, negotiations, discussions, writings, understandings,
commitments and conversations with respect to such subject matter.
6.3. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
6.4. ASSIGNABILITY. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that no party hereto may assign its respective rights or
delegate its respective obligations under this Agreement without the express
prior written consent of the other party hereto.
6.5. NOTICES. All notices or other communications under this Agreement
shall be in writing and shall be deemed to be duly given when (a) delivered in
person, (b) deposited in the United States mail or private express mail, postage
prepaid, or (c) sent by facsimile (with a machine confirmation of receipt)
addressed as follows:
If to Inland, to: Inland Steel Industries, Inc.
30 West Monroe Street
Chicago, Illinois 60603
Facsimile: (312) 899-3921
Attention: Vice President and General Counsel
If to Ryerson Tull, to: Ryerson Tull, Inc.
2621 West 15th Place
Chicago, Illinois 60608
Facsimile: (312) 899-3214
Attention: Corporate Secretary
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Any party may, by notice to the other party, change the address to which such
notices are to be given.
6.6. SEVERABILITY. If any provision of this Agreement or the application
thereof to any Person or circumstance is determined by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions
hereof or thereof, or the application of such provision to Persons or
circumstances or in jurisdictions other than those as to which it has been held
invalid or unenforceable, shall remain in full force and effect and shall in no
way be affected, impaired or invalidated thereby, so long as the economic or
legal substance of the transactions contemplated hereby or thereby, as the case
may be, is not affected in any manner adverse to any party. Upon such
determination, the parties shall negotiate in good faith in an effort to agree
upon such a suitable and equitable provision to effect the original intent of
the parties.
6.7. AMENDMENTS. No provisions of this Agreement shall be deemed waived,
amended, supplemented or modified by any party, unless such waiver, amendment,
supplement or modification is in writing and signed by the authorized
representative of the party against whom it is sought to enforce such waiver,
amendment, supplement or modification.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives.
INLAND STEEL INDUSTRIES, INC.
By: ____________________________
Name: ____________________________
Title: ____________________________
RYERSON TULL, INC.
By: ____________________________
Name: ____________________________
Title: ____________________________
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CROSS-LICENSE AGREEMENT
This Agreement ("Agreement") is entered into this ___ day of June, 1996, by
and between INLAND STEEL INDUSTRIES, INC., a Delaware corporation ("ISI"), and
RYERSON TULL, INC., a Delaware corporation ("Ryerson Tull").
WHEREAS, ISI is the owner of all right, title and interest in and to the
property listed on Schedule 1 hereto (the "Designated ISI Intellectual
Property") together with the goodwill associated therewith;
WHEREAS, Ryerson Tull is the owner of all right, title and interest in and
to the property and know-how listed on Schedule 2 hereto (the "Designated
Ryerson Tull Intellectual Property") together with the goodwill associated
therewith;
WHEREAS, ISI is desirous of obtaining a license to use the Designated
Ryerson Tull Intellectual Property; and
WHEREAS, Ryerson Tull is desirous of obtaining a license to use the
Designated ISI Intellectual Property;
NOW, THEREFORE, it is hereby agreed as follows:
1. Definitions.
-----------
1.1 "Licensed Intellectual Property" means, collectively, the Designated
ISI Intellectual Property and the Designated Ryerson Tull Intellectual Property.
1.2 "Respective Licensed Intellectual Property" means the specific
Licensed Intellectual Property (either the Designated ISI Intellectual Property
or the Designated Ryerson Tull Intellectual Property) granted to each party
hereunder.
1.3 Given the cross-licensing provided by this Agreement, "Licensee" means
the party which receives a license from the other party for any given Licensed
Intellectual Property.
1.4 Given the cross-licensing provided by this Agreement, "Licensor" means
the party which grants a license to the other party for any given Licensed
Intellectual Property.
2. Cross-License Grants.
--------------------
2.1 ISI hereby grants to Ryerson Tull for itself and for the benefit of
its subsidiaries, and Ryerson Tull hereby accepts in each such capacity, a
royalty-free license to use the Designated ISI Intellectual Property in
association with its distribution business operations throughout the world.
<PAGE>
2.2 Ryerson Tull hereby grants to ISI for itself and its subsidiaries
(other than Ryerson Tull and its subsidiaries), and ISI hereby accepts in each
such capacity, a royalty-free license to use the Designated Ryerson Tull
Intellectual Property in association with its business operations throughout the
world other than in North America.
2.3 Each Licensor shall provide such assistance in transferring the
Licensed Intellectual Property as is reasonably requested by the Licensee in
order to obtain the full benefit of the Licensed Intellectual Property.
3. Term.
----
The licenses granted under this Agreement with respect to the Licensed
Intellectual Property shall, unless sooner terminated as provided elsewhere in
this Agreement, terminate automatically, and with no further action on the part
of either party, when the number of outstanding shares of Class B Common Stock,
$1.00 par value ("Class B Common Stock"), of Ryerson Tull outstanding represents
less than 50% of the sum of the number of outstanding shares of Class A Common
Stock, $1.00 par value, and such outstanding shares of Class B Common Stock of
Ryerson Tull.
4. Quality Control.
---------------
4.1 Each Licensee agrees that the goods and services sold by such Licensee
under its Respective Licensed Intellectual Property shall at least be
commensurate with the nature and quality of comparable goods and services
presently offered by such Licensee, which nature and quality each Licensor deems
satisfactory.
4.2 Each Licensee agrees to provide to Licensor, at such times as Licensor
may reasonably request, specimens of the products to which such Licensee applies
its Respective Licensed Intellectual Property, samples of product labels,
packaging, advertisements, promotional materials, and any other materials which
Licensor may request which demonstrate the manner in which Licensee uses its
Respective Licensed Intellectual Property.
4.3 Each Licensor may conduct reasonable inspections during reasonable
business hours of the Licensee's facilities for the purpose of ensuring that the
quality of the goods and services are in compliance with the terms of this
Agreement. The Licensor shall supply the Licensee with ten (10) days advance
written notice regarding any such inspection.
5. Compliance.
----------
The parties agree that the goods sold and services provided under this
Agreement shall comply with all federal, state and local laws and regulations
pertaining to such products and services.
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<PAGE>
6. Royalty; Reimbursement.
----------------------
6.1 The licenses granted herein shall be royalty-free.
6.2 Each Licensee shall promptly reimburse the Licensor for reasonable
expenses incurred by the Licensor (including out-of-pocket expenses and the
mutually agreeable expense allocation of employees, based upon salary, benefits
and other personnel costs) in connection with the provision of any Licensed
Intellectual Property.
7. Ownership.
---------
Each Licensee agrees that this Agreement is personal and does not give it
the right to assign the rights granted herein, or any right, title, or ownership
interest in its Respective Licensed Intellectual Property without the written
consent of the other party; provided, however, that (i) Ryerson Tull as Licensee
shall have the right to permit any of its subsidiaries and affiliates to use the
Designated ISI Intellectual Property in accordance with this Agreement, and (ii)
ISI as Licensee shall have the right to permit any of its subsidiaries,
affiliates and joint ventures (other than Ryerson Tull and its subsidiaries and
affiliates) to use the Ryerson Tull Designated Intellectual Property in
accordance with this Agreement. Each Licensee further agrees that it will not
challenge the validity of this Agreement or of any of the Licensor's Licensed
Intellectual Property, whether registered or not. Each Licensee further agrees
to cooperate with the Licensor and tender all documents necessary to assist the
Licensor in obtaining or maintaining state or federal registrations of
Licensor's Respective Licensed Intellectual Property.
8. Assignment.
----------
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns; provided, however,
that no party hereto may assign its respective rights or delegate its respective
obligations under this Agreement without the express prior written consent of
the other party hereto.
9. Termination.
-----------
9.1 This Agreement may be terminated at any time by the mutual consent of
ISI and Ryerson Tull or by either party upon sixty (60) days' prior written
notice to the other party.
9.2 Unless otherwise agreed to in writing by the parties, upon termination
of this Agreement, the parties will immediately discontinue all use of their
Respective Licensed Intellectual Property and shall return to the other party
all inventory of packaging, labels, materials and the like displaying such
Licensed Intellectual Property.
-3-
<PAGE>
9.3 Following termination of this Agreement, each Licensor shall have the
right to a license (which may be exclusive) of any part of the other's Licensed
Intellectual Property for a transition period of up to two (2) years at a fair
market value license fee and upon such other terms as may be mutually agreed
upon by Licensor and Licensee. If Licensor and Licensee are unable to agree
upon such terms, the fair market value license fee and other terms shall be
determined by a qualified, independent expert selected by the accounting firm(s)
regularly employed by Licensor and Licensee.
10. Notices.
-------
10.1 Each Licensee agrees to notify the Licensor of any and all complaints
from customers, consumers, or any state or government agency with regard to the
goods and services offered under its Respective Licensed Intellectual Property,
to keep accurate records with regard thereto and to furnish copies of such
records to the other party upon request. Each Licensee also agrees to notify
the Licensor of any and all lawsuits brought which involve its Respective
Licensed Intellectual Property.
10.2 Each Licensee agrees to promptly notify the Licensor of any use of
names, package designs, labels or configurations that may come to its attention
which are similar to its Respective Licensed Intellectual Property.
10.3 All notices or other communications under this Agreement shall be in
writing and shall be deemed to be duly given when (a) delivered in person, (b)
deposited in the United States mail or private express mail, postage prepaid, or
(c) sent by facsimile (with a machine confirmation of receipt) addressed as
follows:
If to ISI, to: Inland Steel Industries, Inc.
30 West Monroe Street
Chicago, Illinois 60603
Facsimile: 312-899-3921
Attention: Vice President and General Counsel
If to Ryerson Tull, to: Ryerson Tull, Inc.
2621 West 15th Place
Chicago, Illinois 60608
Facsimile: 312-899-3214
Attention: Corporate Secretary
Any party may, by notice to the other party, change the address to which such
notices are to be given.
11. Governing Law.
-------------
This Agreement shall be construed in accordance with and governed by the
laws of the State of Illinois.
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<PAGE>
12. Complete Agreement.
------------------
This Agreement constitutes the complete agreement between the parties with
respect to the subject matter hereof and supersedes any and all previous
agreements, oral or written, that may have been made between the parties or
acquired by the parties. This Agreement may be amended only in writing by an
agreement executed by the parties hereto.
13. Severability.
------------
If any provision of this Agreement or the application thereof to any Person
or circumstance is determined by a court of competent jurisdiction to be
invalid, void or unenforceable, the remaining provisions hereof or thereof, or
the application of such provisions hereof or thereof, or the application of such
provision to Persons or circumstances or in jurisdictions other than those as to
which it has been held invalid or unenforceable, shall remain in full force and
effect and shall in no way be affected, impaired or invalidated thereby, so long
as the economic or legal substance of the transactions contemplated hereby or
thereby, as the case may be, is not affected in any manner adverse to any party.
Upon such determination, the parties shall negotiate in good faith in an effort
to agree upon such a suitable and equitable provision to effect the original
intent of the parties.
14. Amendments.
----------
No provisions of this Agreement shall be deemed waived, amended,
supplemented or modified by any party, unless such waiver, amendment, supplement
or modification is in writing and signed by the authorized representative of the
party against whom it is sought to enforce such waiver, amendment, supplement or
modification.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives.
INLAND STEEL INDUSTRIES, INC.
By:
--------------------------------
Its:
----------------------------
RYERSON TULL, INC.
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<PAGE>
By:
--------------------------------
Its:
----------------------------
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<PAGE>
SCHEDULE 1
Designated ISI Intellectual Property
------------------------------------
The red diamond logo of Inland Steel Industries, Inc.
<PAGE>
SCHEDULE 2
Designated Ryerson Tull Intellectual Property
---------------------------------------------
The name "Ryerson".
Know-how of Ryerson Tull, Inc., including technical assistance and
consultation regarding data processing systems, logistics, inventory and
material management, engineering and cost reduction services, material
processing and assembling and network integration.
<PAGE>
TAX SHARING AGREEMENT
This TAX SHARING AGREEMENT is made and entered into as of this ______ day
of _________, 1996 by and among INLAND STEEL INDUSTRIES, INC. ("ISI") and
RYERSON TULL, INC. ("Ryerson Tull").
RECITALS:
--------
A. The Board of Directors of ISI has determined that it is in the
best interests of ISI and its stockholders for Ryerson Tull to issue and
sell in an initial public offering up to 15% of the common stock of Ryerson
Tull.
B. ISI and Ryerson Tull wish to provide for the proper treatment of
tax liability incurred by ISI and affiliates of ISI other than Ryerson
Tull, on one hand, and Ryerson Tull and its operating subsidiaries on the
other hand .
WITNESSETH:
----------
NOW, THEREFORE, for and in consideration of the foregoing recitals and the
mutual covenants set forth herein, the parties agree as follows:
1. Federal Income Taxes.
1.1. ISI and Ryerson Tull acknowledge that Financial Accounting Standards
Board statement on Accounting for Income Taxes ("FAS 109") governs the
requirements to account for and allocate current and deferred federal income tax
expense for a group that files a consolidated income tax return. Historically,
ISI has administered compliance with FAS 109 among ISI, Ryerson Tull, Inland
Steel Company, Joseph T. Ryerson & Son, Inc., J. M. Tull Metals Co., Inc., AFCO
Metals, Inc. Inland Steel Administrative Services Company, and Magnetics
International, Inc. (the "Consolidated Group").
1.2. Regular and Alternative Minimum Tax. ISI and Ryerson Tull agree to
follow the following procedures in connection with the determination and
allocation of regular and alternative minimum federal income tax liability.
1.2.1. Each member of the Consolidated Group, as such group is now or
hereafter constituted, shall determine its own regular income tax liability
based on its separate company taxable income. If the Consolidated Group
uses net operating loss ("NOL") carry forwards, each member will use the
appropriate portion of that year's carry forward previously allocated to
such member, if any.
1.2.2. If some members of the Consolidated Group have a regular
taxable income for the year but one or other members of the Consolidated
Group have a regular tax loss, the loss company(ies) will record an income
tax credit not to exceed the positive tax charges recorded by the
profitable members.
1.2.3. Each member of the Consolidated Group will determine its own
tentative minimum tax and alternative minimum tax ("AMT").
-1-
<PAGE>
1.2.4. If the Consolidated Group has an AMT liability for the year,
the consolidated AMT will be allocated to appropriate members of the
Consolidated Group based upon the analyis required in Paragraph 1.2.3.
1.2.5. Any consolidated NOL carry forwards or AMT credit carry
forwards generated during the year will be allocated to appropriate members
in the Consolidated Group.
1.2.6. If the Consolidated Group uses AMT credit carry forwards, each
member will use the appropriate portion of that year's carry forward
previously allocated to it, if any.
1.2.7. Each member will record as its current tax provision its
separate company regular income tax liability and its allocated AMT
liability as determined in accordance with Paragraphs 1.2.1. through 1.2.6.
1.3. Deferred Income Taxes.
Each member of the Consolidated Group will record the difference between
(1) its cumulative temporary differences at the end of the year multiplied by
the statutory tax rate and (2) its cumulative temporary differences at the
beginning of the current year multiplied by the statutory tax rate. Each member
of the Consolidated Group will also record the tax effects of increases or
decreases in NOL carry forwards and AMT credit carry forwards allocated to it in
accordance with the provisions of Paragraph 1.2.7 and increases or decreases in
other tax credit carry forwards allocated to it, if any. For purposes of this
Agreement, the term "temporary differences" shall have the meaning assigned to
such term in FAS 109.
1.4. Payment.
Each member of the Consolidated Group will pay its current provision for
the year to, or receive cash if its current provision is a credit from, ISI. If
the Consolidated Group is able to use carry forwards from a prior year that were
allocated to a specific member of the Consolidated Group, but such member was
not individually able to do so, then ISI will pay such member for the use of
such member's attributes. For purposes of this Agreement, each member's
"current provision" shall be the amount recorded as its "current provision" in
its applicable statement of operations contained within its financial
statements.
2. State and Local Income Taxes.
The following provisions shall govern the determination and allocation of
state and local income taxes for states that have unitary or combined tax laws
and for states where the liability is based solely on the results of the
individual company regardless of applicable consolidation principles.
2.1. Separate Company States. The current income tax liability for each
member of the state consolidated group will be determined on a stand-alone basis
in accordance with applicable state laws. No deferred taxes will be provided
for because they have been deemed to be immaterial in the states involved.
-2-
<PAGE>
2.2. Unitary or Combined Tax Laws (other than Indiana).
Each member of a state group will pay a charge to ISI in lieu of State
income tax in those years when such member has State Taxable income and ISI
incurs a unitary or combined State income tax liability. Such charge in lieu of
State income tax is to be determined based upon the proportion that each such
member's State taxable income bears to total taxable income for the appropriate
state group as a whole. For example, the quotient of the member's unitary or
combined state taxable income divided by the total sum of unitary or combined
taxable income times the state income tax liability equals the applicable charge
in lieu of state income tax.
2.3 Indiana Income Taxes.
Current and deferred Indiana income taxes will be provided for by each
member of the Indiana consolidated group which has a nexus in Indiana. The
method for determining and allocating Indiana state income taxes will be the
same methodology used to determine federal income taxes and will include the
determination of a current liability based on the consolidated apportionment
factors and the determination of a net deferred liability or asset based on
temporary differences and allocated tax attributes.
3. Adjustments
Audit adjustments and refunds will be charged or paid to Ryerson Tull in
accordance with the calculation of tax liability set forth in this Agreement.
4. Notices.
Any notice to be given hereunder by either party hereto to the other may be
transmitted by facsimile (with a machine confirmation of receipt), may be
personally delivered or may be deposited in the United States mail, registered
or certified, postage prepaid and return receipt requested, addressed to the
party for whom intended as follows:
To Ryerson Tull: Ryerson Tull, Inc.
2621 West 15th Place
Chicago, IL 60608
Attention: Vice President-Finance
Fax Number: (312) 762-0179
To ISI: Inland Steel Industries, Inc.
30 W. Monroe Street
Chicago, IL 60603
Attention: Director-Taxes
Fax Number: (312) 899-3544
Either party may change its address at any time by notifying the other, in
writing, of such change. Service of any such notice shall be deemed complete at
the time of delivery.
-3-
<PAGE>
5. Governing Law.
This Agreement has been delivered in, and shall in all respects be governed
by, and construed in accordance with, the laws of the State of Illinois
applicable to agreements made and to be performed entirely within such State,
including all matters of construction, validity and performance.
6. Severability.
Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
INLAND STEEL INDUSTRIES, INC. RYERSON TULL, INC.
By: By:
------------------------- -------------------------
Name: Name:
----------------------- -----------------------
Title: Title:
---------------------- ----------------------
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<PAGE>
==============================================================================
GUARANTY AND CONTINGENT PURCHASE AGREEMENT
OF
JOSEPH T. RYERSON & SON, INC.
Dated as of August 15, 1990
Re:
$50,400,400 8.03% Guaranteed ESOP Notes,
Series A, Due July 2, 1997
$34,464,151 8.51% Guaranteed ESOP Notes,
Series B, Due July 2, 2000
and
$62,048,600 8.88% Guaranteed ESOP Notes,
Series C, Due July 2, 2004
of
the Inland Steel Industries
Thrift Plan ESOP Trust
==============================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION HEADING Page
<S> <C> <C>
PARTIES.................................................... 1
RECITALS................................................... 1
1. GUARANTEED INDEBTEDNESS................................. 2
1.1. Guaranty.......................................... 2
1.2. Seniority of Obligations.......................... 3
2. LIABILITY ABSOLUTE AND UNCONDITIONAL.................... 3
2.1. Unconditional Guaranty............................ 3
2.2. Recovery of Guaranteed Indebtedness............... 4
2.3. Liability of Issuer............................... 4
2.4. Waiver............................................ 4
2.5. Notice of Transfer................................ 5
3. REPRESENTATIONS AND WARRANTIES.......................... 5
4. OBLIGATION OF COMPANY TO PURCHASE NOTES................. 5
4.1. Put Event; Required Purchase...................... 5
4.2. Continuing Obligation............................. 7
5. EXCHANGE OF NOTES....................................... 7
6. COMPANY COVENANTS....................................... 7
6.1. Corporate Existence, etc.......................... 7
6.2. Insurance......................................... 8
6.3. Taxes, Claims for Labor and Materials,
Compliance with Laws............................. 8
6.4. Maintenance, etc.................................. 8
6.5. Nature of Business................................ 8
6.6. Consolidated Tangible Net Worth................... 8
6.7. Limitation on Funded Debt......................... 8
6.8. Limitation on Liens............................... 9
6.9. Dividends, Stock Purchases........................ 11
6.10. Limitation on Sale and Leasebacks................. 12
6.11. Mergers, Consolidations and Sales of Assets....... 12
6.12. Repurchase of Notes............................... 14
6.13. Transactions with Affiliates...................... 14
6.14. Termination of Pension Plans...................... 14
6.15 ERISA Covenants................................... 14
6.16. Reports and Rights of Inspection.................. 15
6.17. Tax Exempt Status of Plan and Trust............... 17
6.18. Contributions to the Issuer....................... 17
6.19. Indemnity......................................... 17
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C> <C>
7. INTERPRETATION OF AGREEMENT; DEFINITIONS....................... 18
7.1. Definitions.............................................. 18
7.2. Directly or Indirectly................................... 24
7.3. Accounting Principles.................................... 24
8. MISCELLANEOUS.................................................. 24
8.1. Governing Law............................................ 24
8.2. Notices.................................................. 24
8.3. Successors and Assigns................................... 25
8.4. Survival of Covenants and Representations; Survival
of Indemnification...................................... 25
8.5. Severability........................ .................... 25
8.6. (a) Amendments and Modifications........................ 25
(b) Solicitation of Noteholders......................... 26
8.7. Reproduction of Documents................................ 26
8.8. Expenses, Stamp Tax Indemnity............................ 26
8.9. Confidentiality.......................................... 27
8.10. Captions................................................. 27
8.11. Counterparts............................................. 27
SIGNATURE PAGE.................................................... 28
</TABLE>
ATTACHMENTS TO GUARANTY AND CONTINGENT PURCHASE AGREEMENT:
Schedule I
Exhibit A -- Funded Debt
-ii-
<PAGE>
JOSEPH T. RYERSON & SON, INC.
30 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
GUARANTY AND CONTINGENT PURCHASE AGREEMENT
Re:
$50,400,400 8.03% Guaranteed ESOP Notes,
Series A, Due July 2, 1997,
$34,464,151 8.51% Guaranteed ESOP Notes,
Series B, Due July 2, 2000
and
$62,048,600 8.88% Guaranteed ESOP Notes,
Series C, Due July 2, 2004
of
the Inland Steel Industries
Thrift Plan ESOP Trust
GUARANTY AND CONTINGENT PURCHASE AGREEMENT dated as of August 15, 1990
(the "Agreement") between Joseph T. Ryerson & Son, Inc., a Delaware corporation
(the "Company"), and the Purchaser named in Schedule I attached hereto which is
a signatory to this Agreement.
RECITALS
A. Inland Steel Industries, Inc., a Delaware corporation ("Inland"), has
established the Inland Steel Industries Thrift Plan (the "Plan") and the Inland
Steel Industries Thrift Plan ESOP Trust (the "Issuer") which implements and
forms part of the Plan for the benefit of certain employees of Inland and
certain of its Subsidiaries, including the Company.
B. The Issuer has heretofore purchased 3,086,800 shares of Series E ESOP
Convertible Preferred Stock of Inland (the "Series E ESOP Stock") pursuant to
the Stock Purchase Agreement dated as of July 7, 1989 (the "Preferred Stock
Purchase Agreement") between the Issuer and Inland and the Issuer now proposes
to refinance one of the loans incurred to purchase said Series E ESOP Stock, and
to provide the funds required therefor, the Issuer proposes to issue its 8.03%
Guaranteed ESOP Notes, Series A, Due July 2, 1997 (the "Series A Notes") in an
aggregate principal amount equal to $50,400,400, its 8.51% Guaranteed ESOP
Notes, Series B, Due July 2, 2000 (the "Series B Notes") in an aggregate
principal amount equal to $34,464,151 and its 8.88% Guaranteed ESOP Notes,
Series C, Due July 2, 2004 (the "Series C Notes") in an aggregate principal
amount equal to $62,048,600, in each such case pursuant to the separate Note
Agreements dated as of August 15, 1990 (the "Note Agreements") between the
Issuer and the institutional investors named therein, respectively. The Series A
Notes, the Series B Notes and the Series C
<PAGE>
Notes are hereinafter referred to collectively as the "Notes" and the
institutional investors which are parties to the Note Agreements are hereinafter
referred to individually as a "Purchaser" and hereinafter collectively referred
to as the "Purchasers". Words and phrases not otherwise defined herein shall
have the meanings assigned thereto in the Note Agreements.
C. The Purchasers have required as a condition to their respective
purchases of the Notes that the Company execute this Agreement and guarantee
payment of the Notes as herein provided and the Company, by reason of its
interest in the Issuer and employees of the Company and in consideration of the
$70,000,000 capital contribution made by Inland on the Closing Date to the
Company and the reduction of interest rate and the substantial tax benefits
resulting from the refinancing of the Inland Steel Industries Note and in order
to induce the Purchasers to purchase the Notes, is willing so to do.
NOW, THEREFORE, in consideration of the premises and the above-described
benefits to the Company and its shareholder and for the purpose of inducing the
purchase and acceptance of the Notes by all who shall at any time become holders
of the Notes, and in order to strengthen the financial condition of the
Affiliated Group, directly and indirectly, as a result of the enhanced ability
of the Affiliated Group to obtain and provide financial, accounting, consulting
and administrative assistance and services to the Company and each other entity
in the Affiliated Group, and in order to provide retirement benefits to the
employees of the Company and its Subsidiaries and in further consideration of
the sum of One Dollar ($1.00) paid to the Company by the Purchasers, the receipt
and sufficiency of which is hereby acknowledged, the Company hereby covenants
and agrees as follows:
SECTION ONE. GUARANTEED INDEBTEDNESS.
1.1. Guaranty. The Company hereby absolutely and unconditionally guarantees
to the Purchasers and each other holder or holders from time to time of the
Notes
(a) the full and prompt payment of the principal of all of the Notes and
of the interest thereon (including without limitation interest accruing or
becoming due and payable after the commencement of any proceeding described in
(S)6.1(m), (n) or (o) of the Note Agreements) at the rate therein stipulated
(as the same may be adjusted from time to time in accordance with (S)1.4 and
(S)1.5 of the Note Agreements), and the premium, if any, when and as the same
shall become due and payable, whether by lapse of time, upon redemption or
prepayment, by acceleration or declaration, or otherwise; and
(b) the full and prompt performance of and payment when due of any and all
other indebtedness, indemnities, covenants, obligations and liabilities of the
Issuer under the Note Agreements;
(the Notes, including the principal, interest and premium, if any, due thereon,
and all other indebtedness, indemnities, covenants, obligations and liabilities
of the Issuer under the Note Agreements are sometimes hereinafter collectively
referred to as the "Guaranteed Indebtedness"). The Company further agrees, to
the extent permitted by law, to pay to the holder or holders of the Notes all
reasonable costs and expenses incurred in the
-2-
<PAGE>
enforcement of any of the terms of this Agreement upon any default hereunder,
including reasonable compensation to such holder's or holders' attorneys for all
services rendered in connection therewith.
1.2. Seniority of Obligations. The obligations of the Company pursuant to
this Agreement will rank pari passu with the senior unsecured debt of the
Company.
SECTION TWO. LIABILITY ABSOLUTE AND UNCONDITIONAL.
2.1. Unconditional Guaranty. This Agreement, and every part hereof, shall
be binding upon the Company, its successors and assigns, and shall inure to the
benefit of the Purchasers and the holder or holders of the Notes so long as any
of the Guaranteed Indebtedness remains unpaid. This Agreement shall remain in
full force and effect irrespective of any obligations of the Issuer on the Notes
or under the Note Agreements or the Preferred Stock Purchase Agreement or of the
power or authority or the lack of power or authority of the Issuer to issue the
Notes or to execute and deliver the Note Agreements or the Preferred Stock
Purchase Agreement and irrespective of the validity, regularity or
enforceability of any of the Notes, the Note Agreements or the Preferred Stock
Purchase Agreement or of any defense whatsoever that the Issuer may or might
have to the payment of the Notes (principal, interest and premium, if any) or
other Guaranteed Indebtedness or that the Issuer may or might have to the
performance or observance of any of the provisions or conditions of the Note
Agreements or the Preferred Stock Purchase Agreement or the existence or
continuance of the Issuer as a legal entity; nor shall said obligations be
discharged or impaired by any acts, failures or omissions on the part of the
Purchasers or any other holder or holders of the Notes which might otherwise
have the effect of releasing the Company, including but not limited to the
following acts, failures or omissions:
(a) any failure to present the Notes for payment or to demand payment
thereof, or to give the Company notice of dishonor for nonpayment of the Notes
when and as the same may become due and payable, or notice of any failure on
the part of the Issuer to do any act or thing or to perform or keep any
covenant or agreement by it to be done, kept or performed under the terms of
the Notes or of the Note Agreements or the Preferred Stock Purchase Agreement;
(b) the acceptance of any security or other guaranty, the advance of
additional money to the Issuer, any renewal or extension of the obligation, or
any part thereof, evidenced by the Notes, either indefinitely or for any
period of time, or any amendments, consents, waivers or modifications of the
Notes or of the Note Agreements or the Preferred Stock Purchase Agreement or
of the obligations of the Issuer thereon, or in connection therewith, or any
sale, release, substitution or exchange of any security for the Guaranteed
Indebtedness; or
(c) any action taken under the Note Agreements in the exercise of any
right or power thereby conferred or any failure or omission on the part of the
Purchasers or any other holder or holders of the Notes to first enforce any
right or security given under the Note Agreements or any failure or omission
on the part of the Purchasers or any holder or holders of the Notes to first
enforce any right against the Issuer;
-3-
<PAGE>
provided that the specific enumeration of the above-mentioned acts, failures or
omissions shall not be deemed to exclude any other acts, failures or omissions,
though not specifically mentioned above, it being the purpose and intent of this
Section that the obligation of the Company shall be absolute and unconditional
to the extent herein specified and shall not be discharged, impaired or varied
except by the payment of the principal, interest and premium, if any, on the
Notes and all other Guaranteed Indebtedness in accordance with the terms of the
Note Agreements, and then only to the extent of such payments. Without limiting
any of the other terms or provisions hereof, it is understood and agreed that in
order to hold the Company liable hereunder, there shall be no obligation on the
part of the Purchasers or any other holder or holders of the Notes to resort in
any manner or form to payment from the Issuer or from any other Person, or their
properties or estates. This Agreement constitutes a guarantee of payment and not
a guarantee of collectibility. All rights of the holders of the Notes may be
transferred or assigned at any time or from time to time and shall be considered
to be transferred or assigned at any time or from time to time upon the transfer
of any Note whether with or without the consent of or notice to the Company or
the Issuer.
2.2. Recovery of Guaranteed Indebtedness. In the event that any payment on
account of the Guaranteed Indebtedness is ever recovered from the holder of any
Note upon the insolvency, bankruptcy or reorganization of the Issuer, this
Agreement shall apply to, guarantee and cover the amount so recovered all as
though such payment had never been made whether or not this Agreement shall
purport to be discontinued, terminated or released. If an Event of Default shall
exist and the acceleration of the Notes shall at any time be prevented by reason
of the pendency of a case or proceedings relating to the Issuer or the Plan
under bankruptcy or insolvency law for purposes of this Agreement and the
obligations of the Company hereunder, the Notes shall be deemed to have been
accelerated with the same effect as if the Notes had been accelerated in
accordance with the terms of the Note Agreements upon the request of the
requisite percentage of the Notes required to accelerate the indebtedness
evidenced by the Notes pursuant to (S)6.3 of the Note Agreements.
2.3. Liability of Issuer. The Company acknowledges that each Purchaser has,
at the request of the Company, limited its recourse and right of recovery as
against the lssuer to certain specified assets and sources as set forth in
(S)9.10 and (S)9.11 of the Note Agreements. The Company acknowledges that such
limitations shall not and are not intended to in any manner affect, limit or
impair the liability of the Company for the Guaranteed Indebtedness under this
Agreement and that such liability is and is intended to be for the full amount
of the Guaranteed Indebtedness irrespective of, and without regard to, such
limitations or of the value, worth or collectibility of the sources to which
recovery is thereby limited and that such limitations shall in no manner affect,
alter, impair or reduce the liability of the Company hereunder.
2.4. Waiver. All diligence in collection or protection, and all
presentment, demand, protest and/or notice, as to any and everyone, whether or
not the Issuer or the Company, or others, of dishonor and of default and of non-
payment and of the creation and existence of any and all of the Guaranteed
Indebtedness and of any security and collateral therefor, and of the acceptance
of this Agreement and indulgence hereunder, are hereby expressly waived;
provided that nothing in this (S)2.4 shall waive any grace period or other
notice requirement specifically set forth in this Agreement or the Note
Agreements. The payment by the Company of any amount pursuant to this Agreement
shall not in any way entitle the Company to any right, title or interest
(whether by way of subrogation or
-4-
<PAGE>
otherwise) in and to any of the Guaranteed Indebtedness or any proceeds thereof
or any security therefor unless and until the full amount owing to the holders
of the Notes on the Guaranteed Indebtedness has been fully paid. No act of
commission or omission of any kind or at any time upon the part of any holder of
the Notes in respect to any matter whatsoever shall in any way affect or impair
this Agreement.
2.5. Notice of Transfer. Concurrently with the surrender of any Note in
connection with the transfer of such Note, the holder of such Note shall notify
the Company of such transfer. The Person in whose name any Note shall be
registered shall be deemed and treated as the owner and holder thereof for all
purposes of this Agreement. Payment of or on account of the principal, premium
if any, and interest on any Note shall be made to or upon the written order of
such holder and the Company shall be entitled to presume conclusively that the
original or any subsequent institutional holder who shall have requested that
the provisions of (S)2.6 of the Note Agreements apply to its Notes remains the
holder of such Notes until (a) the Company shall have received written notice of
the transfer of such Notes signed by the transferor which shall set forth the
name and address of the transferee, or (b) such Notes shall have been presented
to the Issuer (with notice to the Company as herein provided) as evidence of the
transfer pursuant to (S)9.1 of the Note Agreements.
SECTION THREE. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants that all representations set forth in
the form of Closing Certificate of the Company attached to the Note Agreements
as Exhibit D are true and correct on the date hereof and will be true and
correct on the Closing Date.
SECTION FOUR. OBLIGATION OF COMPANY TO PURCHASE NOTES.
4.1. Put Event; Required Purchase. (a) In the event that a Class 1 Put
Event Date shall occur, the Company will give a Company Notice regarding such
fact on the Business Day next following such Class 1 Put Event Date to all
holders of the Notes. Such Company Notice shall (i) describe the facts and
circumstances of the Class 1 Put Event in reasonable detail, including without
limitation the date of such Class 1 Put Event Date, (ii) describe the
Indebtedness of the Company then outstanding, (iii) refer to this (S)4.1 and
refer to the right of the holders of the Notes to require the Company to
purchase their Notes on the terms and conditions provided for herein upon the
occurrence of a Class 1 Put Event and refer to the right of the Required Holders
to require the Company to purchase all outstanding Notes on the terms and
conditions provided for herein upon the occurrence of a Class 1 Put Event, and
(iv) contain an offer by the Company to purchase all of the outstanding Notes of
each holder thereof or all of the outstanding Notes, as the case may be,
together with accrued interest to the date of purchase and a premium equal to
the Make-Whole Premium Amount. Each holder of the Notes shall have the right to
accept such offer and require purchase of all, but not less than all, of the
Notes held by such holder by written notice (a "Single Holder's Notice") to the
Company given within 180 days following receipt of such Company Notice. The
Required Holders shall have the right to accept such offer and require purchase
of all, but not less than all, of the outstanding Notes by written notice (a
"Required Holders' Notice") to the Company given within 180 days following
receipt of such Company Notice. On the date designated in such Single Holder's
Notice or Required Holders' Notice (both of which shall be not later than 210
days
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after the date of such Class 1 Put Event Date), the Company shall purchase all
Notes held by such holder, in the case of a Single Holder's Notice, or all
outstanding Notes, in the case of a Required Holders' Notice, for a purchase
price equal to the outstanding principal amount thereof together with accrued
interest thereon to the date of purchase and a premium equal to the Make-Whole
Premium Amount. If the holder of any Note gives a Single Holder's Notice
accepting any offer to purchase such holder's Notes pursuant hereto, or if the
Required Holders give a Required Holders' Notice accepting any offer to purchase
all of the outstanding Notes pursuant hereto, the Company shall, within 1
Business Day of receipt of such notice, give written notice thereof to all other
holders of the Notes.
(b) In the event that a Class 2 Put Event Date shall occur, the Company
will give a Company Notice regarding such fact not more than 5 Business Days
after such Class 2 Put Event Date to all holders of the Notes. Such Company
Notice shall (i) describe the facts and circumstances of the Class 2 Put Event
in reasonable detail, including without limitation the date of such Class 2 Put
Event Date, (ii) describe the Indebtedness of the Company then outstanding,
(iii) refer to this (S)4.1 and the right of the Required Holders to require the
Company to purchase all outstanding Notes on the terms and conditions provided
for herein upon the occurrence of a Class 2 Put Event, and (iv) contain an offer
by the Company to purchase all of the outstanding Notes together with accrued
interest to the date of purchase and a premium equal to the Make-Whole Premium
Amount. The Required Holders shall have the right to accept such offer and
require purchase of all, but not less than all, of the outstanding Notes in full
by Required Holders' Notice to the Company given within 180 days following
receipt of such Company Notice. On the date designated in such Required Holders'
Notice (which shall be not later than 210 days after the date of such Class 2
Put Event Date), the Company shall purchase all Notes for a purchase price equal
to the outstanding principal amount thereof together with accrued interest
thereon to the date of purchase and a premium equal to the Make-Whole Premium
Amount. If the Required Holders give a written notice accepting any offer to
purchase all outstanding Notes pursuant hereto, the Company shall, within 1
Business Day of receipt of such notice, give written notice thereof to all other
holders of the Notes.
Notwithstanding anything in the foregoing to the contrary, if such Class 2
Put Event Date occurs as a result of an Event of Default under (S)6.1(m), (n) or
(o) of the Note Agreements with respect to the Company, then the Company shall
purchase any Notes pursuant hereto for a purchase price equal to the outstanding
principal amount thereof together with accrued interest thereon to the date of
purchase with, however, no Make-Whole Premium Amount being applicable thereto.
(c) In the event the Company fails to give any Company Notice required in
paragraph (a) or (b) above, each holder of Notes shall nonetheless have the
right as and to the extent provided by the terms of (S)4.1(a) to require the
Company to purchase such holder's Notes for a purchase price equal to the
outstanding principal amount thereof together with accrued interest thereon to
the date of purchase and a premium equal to the Make-Whole Premium Amount and
each holder of Notes shall nonetheless have the right as and to the extent
provided by the terms of (S)4.1(a) or (S)4.1(b), as applicable, to participate
as one of the Required Holders and to thereby require the Company to purchase
all outstanding Notes for a purchase price equal to the outstanding principal
amount thereof together with accrued interest thereon to the date of purchase
and, if applicable, a premium equal to the Make-Whole Premium Amount. Notice of
any required purchase pursuant to this (S)4.1(c) shall be delivered by any
holder of Notes which was entitled to but did not receive such Company Notice to
the Company not more than 210 days after an
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investment officer of such holder has actual knowledge of such Class 1 Put Event
or Class 2 Put Event, as the case may be. On the date (the "Delayed Purchase
Date") designated in such holder's notice, the Company shall purchase all Notes
held by such holder for a purchase price equal to the outstanding principal
amount thereof together with accrued interest thereon to the date of purchase
and, if applicable, a premium equal to the Make-Whole Premium Amount. If the
holder of any Note gives any notice pursuant to this (S)4.1(c), the Company
shall give a Company Notice within 1 Business Day of receipt of such notice and
identify the Delayed Purchase Date to all holders of the Notes and each of such
holders shall then and thereupon have the rights with respect to the purchase of
its Notes as set forth in (S)4.1(a) or (S)4.1(b), as the case may be; provided
only that any date for purchase of such holder's Notes shall be not earlier than
the Delayed Purchase Date, if such holder otherwise has a right to require
purchase of its Notes by the terms of (S)4.1(a) or (S)4.1(b), as applicable.
4.2. Continuing Obligation. The obligation of the Company to give the
notices specified in (S)4.1 shall remain in effect so long as any Notes remain
outstanding. If a Class 1 Put Event Date or a Class 2 Put Event Date shall have
occurred and subsequent to such Class 1 Put Event Date or Class 2 Put Event
Date, the Event of Default giving rise to such Class 1 Put Event or such Class 2
Put Event shall have been waived or cured and thereafter a Class 1 Put Event or
a Class 2 Put Event shall occur, then a new Class 1 Put Event Date or Class 2
Put Event Date, as the case may be, shall occur under this Agreement.
SECTION FIVE. EXCHANGE OF NOTES.
The Company covenants and agrees that in the event for any reason
whatsoever the Issuer (acting at the direction of the Company) elects to
effectuate an exchange of Taxable Notes for the Notes of the Issuer pursuant to
(S)2.3 of the Note Agreements, the Company shall, at its sole expense, deliver
such Taxable Notes to such holder and otherwise satisfy the terms and conditions
of (S)2.3(b) of the Note Agreements in connection therewith or, if it is unable
to so satisfy the requirements of said (S)2.3(b), then and in such event, the
Company shall cause the Issuer to prepay the Notes, together with interest
accrued thereon to the date of prepayment and the Make-Whole Premium Amount upon
the terms and conditions set forth in said (S)2.3(b).
SECTION SIX. COMPANY COVENANTS.
From and after the Closing Date and continuing so long as any amount
remains unpaid on any Note:
6.1. Corporate Existence, etc. The Company will preserve and keep in force
and effect, and will cause each Restricted Subsidiary to preserve and keep in
force and effect, its corporate existence and all licenses and permits necessary
to the proper conduct of its business, provided that the foregoing shall not
prevent any transaction permitted by (S)6.11 or the organization, maintenance
and dissolution from time to time of Subsidiaries of the Company or any
Subsidiary so long as at the time of such organization, maintenance or
dissolution and after giving effect thereto (i) no Default or Event of Default
shall have occurred and be continuing and (ii) the Company would be permitted to
incur at least $1.00 of additional Funded Debt under (S)6.7(a)(3).
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6.2. Insurance. The Company will maintain, and will cause each Restricted
Subsidiary to maintain, insurance coverage by financially sound and reputable
insurers in such forms and amounts and against such risks as are customary for
corporations of established reputation engaged in the same or a similar business
and owning and operating similar properties.
6.3. Taxes, Claims for Labor and Materials, Compliance with Laws. The
Company will promptly pay and discharge, and will cause each Restricted
Subsidiary promptly to pay and discharge, all lawful taxes, assessments and
governmental charges or levies imposed upon the Company or such Restricted
Subsidiary, respectively, or upon or in respect of all or any part of the
property or business of the Company or such Restricted Subsidiary, all trade
accounts payable in accordance with usual and customary business terms, and all
claims for work, labor or materials, which if unpaid might become a lien or
charge upon any property of the Company or such Restricted Subsidiary; provided
the Company or such Restricted Subsidiary shall not be required to pay any such
tax, assessment, charge, levy, account payable or claim if (i) the validity,
applicability or amount thereof is being contested in good faith by appropriate
actions or proceedings which will prevent the forfeiture or sale of any property
of the Company or such Restricted Subsidiary or any material interference with
the use thereof by the Company or such Restricted Subsidiary, and (ii) the
Company or such Restricted Subsidiary shall set aside on its books, reserves
deemed by it to be adequate with respect thereto. The Company will promptly
comply and will cause each Subsidiary to comply with all laws, ordinances or
governmental rules and regulations to which it is subject including, without
limitation, the Occupational Safety and Health Act of 1970, ERISA and all laws,
ordinances, governmental rules and regulations relating to environmental
protection in all applicable jurisdictions, the violation of which would
materially and adversely affect the properties, business, prospects, profits or
condition of the Company and its Subsidiaries or would result in any material
lien or charge upon any property of the Company or any Subsidiary.
6.4. Maintenance, etc. The Company will maintain, preserve and keep, and
will cause each Restricted Subsidiary to maintain, preserve and keep, its
properties which are used or useful in the conduct of its business (whether
owned in fee or a leasehold interest) in good repair and working order and from
time to time will make all necessary repairs, replacements, renewals and
additions thereto.
6.5. Nature of Business. Neither the Company nor any Restricted Subsidiary
will engage in any business if, as a result, the general nature of the business,
taken on a consolidated basis, which would then be engaged in by the Company and
its Restricted Subsidiaries would be substantially changed from the general
nature of the business engaged in by the Company and its Restricted Subsidiaries
on the date of this Agreement.
6.6. Consolidated Tangible Net Worth. The Company will have as of the end
of each fiscal quarter Consolidated Tangible Net Worth in an amount not less
than $375,000,000.
6.7. Limitations on Funded Debt.
(a) The Company will not and will not permit any Restricted Subsidiary to
create, assume or incur or in any manner be or become liable in respect of any
Funded Debt, except:
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(1) the Notes;
(2) Funded Debt of the Company outstanding as of the Closing Date and
described on Exhibit A attached hereto;
(3) Funded Debt of the Company and its Restricted Subsidiaries, provided
that at the time of issuance thereof and after giving effect thereto and to
the application of the proceeds thereof (i) Consolidated Funded Debt shall not
exceed 50% of Consolidated Net Tangible Assets and (ii) in the case of Funded
Debt of any Restricted Subsidiary, the sum of (A) Attributable Debt of the
Company and its Restricted Subsidiaries, plus (B) Secured Debt (other than
Secured Debt resulting from liens permitted under (S)6.8(a), (f) and (g)),
plus (C) Funded Debt of Restricted Subsidiaries, shall not exceed 15% of
Consolidated Net Tangible Assets; and
(4) Funded Debt issued or incurred for the purpose of extending, renewing
or refunding Funded Debt, provided that the principal amount of Funded Debt
extended, renewed or refinanced shall not exceed the outstanding principal
amount of such Funded Debt at such time.
(b) Any corporation which becomes a Restricted Subsidiary after the date
hereof shall for all purposes of this (S)6.T be deemed to have created, assumed
or incurred at the time it becomes a Restricted Subsidiary all Funded Debt of
such corporation existing immediately after it becomes a Restricted Subsidiary.
6.8. Limitation on Liens. The Company will not, and will not permit any
Restricted Subsidiary to, create or incur, or suffer to be incurred or to exist,
any mortgage, pledge, security interest, encumbrance, lien or charge of any kind
on its or their property or assets, whether now owned or hereafter acquired, or
upon any income or profits therefrom, or transfer any property for the purpose
of subjecting the same to the payment of obligations in priority to the payment
of its or their general creditors, or acquire or agree to acquire, or permit any
Restricted Subsidiary to acquire, any property or assets upon conditional sales
agreements or other title retention devices, except:
(a) liens for taxes and assessments or governmental charges or levies and
liens securing claims or demands of mechanics and materialmen, provided that
payment thereof is not at the time required by (S)6.3;
(b) liens of or resulting from any judgment or award, the time for the
appeal or petition for rehearing of which shall not have expired, or in
respect of which the Company or a Restricted Subsidiary shall at any time in
good faith be prosecuting an appeal or proceeding for a review and in respect
of which a stay of execution pending such appeal or proceeding for review
shall have been secured;
(c) liens, charges, encumbrances and priority claims incidental to the
conduct of business or the ownership of properties and assets (including
warehousemen's and attorneys' liens and statutory landlords' liens) and
deposits, pledges or liens to secure the performance of bids, tenders or trade
contracts, or to secure statutory obligations, surety or appeal bonds or other
liens of like general nature incurred in the ordinary course of business and
not in connection with the borrowing of money, provided in each case, the
obligation secured is not overdue or, if overdue, is being contested in good
faith by appropriate actions or proceedings;
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(d) minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and other
similar purposes, or zoning or other restrictions as to the use of real
properties, which are necessary for the conduct of the activities of the
Company and its Restricted Subsidiaries or which customarily exist on
properties of corporations engaged in similar activities and similarly
situated and which do not in any event materially impair their use in the
operation of the business of the Company and its Restricted Subsidiaries;
(e) mortgages, liens or security interests securing Indebtedness of a
Restricted Subsidiary to the Company or to another Restricted Subsidiary;
(f) mortgages, conditional sale contracts, security interests or other
arrangements for the retention of title (including Capitalized Leases)
existing as of the Closing Date, securing Funded Debt of the Company
outstanding on the Closing Date and described on Exhibit A attached hereto;
(g) mortgages, conditional sale contracts, security interests or other
arrangements for the retention of title (including Capitalized Leases)
incurred after the date hereof given to secure the payment of the purchase
price incurred in connection with the acquisition of fixed assets useful and
intended to be used in carrying on the business of the Company or a Restricted
Subsidiary, including liens existing on such fixed assets at the time of
acquisition thereof or at the time of acquisition by the Company or a
Restricted Subsidiary of any business entity then owning such fixed assets
(whether by merger or consolidation or purchase of stock or assets), whether
or not such existing liens were given to secure the payment of the purchase
price of the fixed assets to which they attach so long as they were not
incurred, extended or renewed in contemplation of such acquisition, provided
that (i) the lien or charge shall attach solely to the property acquired or
purchased, (ii) at the time of acquisition of such fixed assets, the aggregate
amount remaining unpaid on all Indebtedness secured by liens on such fixed
assets whether or not assumed by the Company or a Restricted Subsidiary shall
not exceed an amount equal to the lesser of the total purchase price or fair
market value at the time of acquisition of such fixed assets (as determined in
good faith by the Board of Directors of the Company), and (iii) all such
Indebtedness shall have been incurred within the applicable limitations
provided in (S)6.7;
(h) liens, not otherwise permitted by the preceding clauses (a) through
(g), inclusive, securing Indebtedness of the Company or any Restricted
Subsidiary, provided that the sum of (i) Attributable Debt of the Company and
its Restricted Subsidiaries, plus (ii) Secured Debt (other than Secured Debt
resulting from liens permitted under clauses (a), (f) and (g) above), plus
(iii) Funded Debt of Restricted Subsidiaries existing at the time such lien
attaches, does not exceed 15% of Consolidated Net Tangible Assets; and
(i) mortgages, liens, security interests or other encumbrances arising out
of the extension, renewal or refunding of Funded Debt secured as permitted by
any of the foregoing clauses of this (S)6.8, provided that such Funded Debt
meets the requirements of (S)6.7(a)(4) and is not secured by assets of greater
value than the assets that secured such extended, renewed or refunded debt of
the Company or any Restricted Subsidiary.
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In case any property is subjected to a lien in violation of this (S)6.8,
the Company will make or cause to be made provision whereby the Notes will be
secured equally and ratably with all other obligations secured thereby, and in
any case, the Notes shall have the benefit, to the full extent that, and with
such priority as, the holders may be entitled thereto under applicable law, of
an equitable lien on such property securing the Notes. Such violation of this
(S)6.8 shall constitute an Event of Default hereunder, whether or not any such
provision is made pursuant to this (S)6.8.
6.9. Dividends, Stock Purchases. The Company will not except as hereinafter
provided:
(a) declare or pay any dividends, either in cash or property, on any
shares of its capital stock of any class (except dividends or other
distributions payable solely in shares of capital stock of the Company);
(b) directly or indirectly, or through any Subsidiary, purchase, redeem or
retire any shares of its capital stock of any class or any warrants, rights or
options to purchase or acquire any shares of its capital stock;
(c) make any other payment or distribution, either directly or indirectly
or through any Subsidiary, in respect of its capital stock;
(d) make any investment in or advance to any Unrestricted Subsidiary; or
(e) make any Restricted Investments;
(such declarations or payments of dividends, purchases, redemptions or
retirements of capital stock and warrants, rights or options, investments,
advances, Restricted Investments and all such other distributions being herein
collectively called "Restricted Payments") unless at the time of such Restricted
Payment and after giving effect thereto (i) no Default or Event of Default shall
have occurred and be continuing, (ii) the Company would be permitted to incur at
least $1.00 of additional Funded Debt under the provisions of (S)6.7(a)(3) and
(iii) the aggregate amount of Restricted Payments made during the period from
and after December 31, 1989 to and including the date of the making of the
Restricted Payment in question would not exceed the sum of (A) $30,000,000 plus
(B) 80% of Consolidated Net Income for such period, computed on a cumulative
basis for said entire period (or if such Consolidated Net Income is a deficit
figure, then minus 100% of such deficit) plus (C) the net cash proceeds received
by the Company and its Restricted Subsidiaries from the issuance or sale on or
after December 31, 1989 (other than to the Company or a Restricted Subsidiary)
of any capital stock of the Company and of any convertible indebtedness which
has been converted into capital stock (other than an amount up to $70,000,000
which the Company is scheduled to receive from Inland Steel Industries, Inc. as
a capital contribution) plus (D) any net return of capital from investments in
or advances to Unrestricted Subsidiaries or Restricted Investments.
The Company will not declare any dividend which constitutes a Restricted
Payment payable more than 60 days after the date of declaration thereof.
For the purposes of this (S)6.9 the amount of any Restricted Payment
declared, paid or distributed in property of the Company shall be deemed to be
the greater of the book value or fair market value (as determined in good faith
by the Board of
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Directors of the Company) of such property at the time of the making of the
Restricted Payment in question.
6.10. Limitation on Sale and Leasebacks. The Company will not, and will
not permit any Restricted Subsidiary to, enter into any arrangement with any
Person (not including the Company or any Restricted Subsidiary) or to which any
such Person is a party, providing for the leasing by the Company or a Restricted
Subsidiary for a period, including renewals, in excess of three years of any
asset which has been or is to be sold or transferred more than 180 days after
the acquisition of or the completion of construction and commencement of full
operation thereof, by the Company or any Restricted Subsidiary to such Person
(herein referred to as a "sale and leaseback transaction") unless either:
(a) the Attributable Debt with respect to such sale and leaseback
transaction plus the sum (without duplication) of (i) Attributable Debt
existing at the time of such transaction, plus (ii) Secured Debt (other than
Secured Debt resulting from liens permitted under (S)6.8(a), (f) and (g)),
plus (iii) Funded Debt of any Restricted Subsidiary then outstanding does not
exceed 15% of Consolidated Net Tangible Assets, or
(b) the proceeds of the sale of the assets to be leased are at least equal
to their fair market value and the proceeds are applied within 360 days of
receipt thereof to the purchase or acquisition (or, in the case of real
property, the construction) of assets to be used in the business of the
Company and its Restricted Subsidiaries or to the retirement of Funded Debt of
the Company and its Restricted Subsidiaries.
6.11. Mergers, Consolidations and Sales of Assets.
(a) The Company will not, and will not permit any Restricted Subsidiary
to, (i) consolidate with or be a party to a merger with any other corporation or
(ii) (except in the ordinary course of business) sell, lease or otherwise
dispose of all or any substantial part (as defined in paragraph (d) of this
(S)6.11) of the assets of the Company and its Restricted Subsidiaries, provided,
however, that:
(1) any Restricted Subsidiary may merge or consolidate with or into the
Company or any Restricted Subsidiary or sell, lease or otherwise dispose of
all or any substantial part of its assets to the Company or another Restricted
Subsidiary so long as (i) in any merger or consolidation or sale of assets
involving the Company, the Company shall be the surviving or continuing
corporation or the purchaser of such assets and (ii) at the time of such
consolidation or merger or sale of assets and after giving effect thereto no
Default or Event of Default shall have occurred and be continuing; and
(2) the Company may consolidate or merge with any other corporation or
sell, lease or otherwise dispose of all or any substantial part of its assets
to any other corporation if (i) such surviving or acquiring entity (if not the
Company) is a U.S. corporation, (ii) such surviving or acquiring entity (if
not the Company) expressly assumes all obligations of the Company under this
Agreement by written instrument reasonably satisfactory in form and substance
to the holders of 66-2/3% of the outstanding principal amount of the Notes,
(iii) at the time of such consolidation or merger or sale of assets and after
giving effect thereto no Default
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or Event of Default shall have occurred and be continuing, and (iv) after giving
effect to such consolidation or merger or sale of assets the Company would be
permitted to incur at least $1.00 of additional Funded Debt under the provisions
of (S)6.7(a)(3).
(b) The Company will not permit any Restricted Subsidiary to issue or sell
any shares of stock of any class (including as "stock" for the purposes of this
(S)6.11, any warrants, rights or options to purchase or otherwise acquire stock
or other Securities exchangeable for or convertible into stock) of such
Restricted Subsidiary to any Person other than the Company or a Wholly-owned
Restricted Subsidiary, except for the purpose of qualifying directors, or except
in satisfaction of the validly pre-existing preemptive rights of minority
shareholders in connection with the simultaneous issuance of stock to the
Company and/or a Restricted Subsidiary whereby the Company and/or such
Restricted Subsidiary maintain their same proportionate interest in such
Restricted Subsidiary.
(c) The Company will not sell, transfer or otherwise dispose of any shares
of stock in any Restricted Subsidiary (except to qualify directors) or any
Indebtedness of any Restricted Subsidiary, and will not permit any Restricted
Subsidiary to sell, transfer or otherwise dispose of (except to the Company or a
Wholly-owned Restricted Subsidiary) any shares of stock or any Indebtedness of
any other Restricted Subsidiary, unless:
(1) simultaneously with such sale, transfer, or disposition, all shares of
stock and all Indebtedness of such Restricted Subsidiary at the time owned by
the Company and by every other Subsidiary shall be sold, transferred or
disposed of as an entirety;
(2) the Board of Directors of the Company shall have determined, as
evidenced by a resolution thereof, that the retention of such stock and
Indebtedness is no longer in the best interests of the Company;
(3) such stock and Indebtedness is sold, transferred or otherwise disposed
of to a Person, for a cash consideration and on terms reasonably deemed by the
Board of Directors to be adequate and satisfactory;
(4) the Restricted Subsidiary being disposed of shall not have any
continuing investment in the Company or any other Subsidiary not being
simultaneously disposed of; and
(5) such sale or other disposition does not involve a substantial part (as
hereinafter defined) of the assets of the Company and its Restricted
Subsidiaries.
(d) As used in this (S)6.11, a sale, lease or other disposition of assets
shall be deemed to be a "substantial part" of the assets of the Company and its
Restricted Subsidiaries only if the book value of such assets, when added to the
book value of all other assets sold, leased or otherwise disposed of by the
Company and its Restricted Subsidiaries (other than in the ordinary course of
business) during the immediately preceding four fiscal quarters of the Company
exceeds 10% of the Consolidated Net Tangible Assets of the Company and its
Restricted Subsidiaries determined as of the end of the immediately preceding
fiscal quarter of the Company; provided, however, that any such sale, lease or
other disposition of assets shall not be included in the computation of a
substantial part of such assets if the proceeds from such sale, lease or other
disposition of assets shall be applied within 180 days of the receipt thereof
(i) to acquire assets for use in the business of the Company or its Restricted
Subsidiaries, or (ii) to reduce Funded Debt of the Company or its Restricted
Subsidiaries.
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(e) Nothing in this (S)6.11 shall prohibit or otherwise restrict the
Company from making any Restricted Payment otherwise permitted under (S)6.9.
6.12. Repurchase of Notes. Except as provided in (S)2.3 of the Note
Agreements or (S)5 hereof, neither the Company nor any Restricted Subsidiary or
Affiliate, directly or indirectly, may repurchase or make any offer to
repurchase any Notes unless the offer has been made to repurchase Notes, pro
rata, from all holders of the Notes at the same time and upon the same terms. In
case the Company repurchases any Notes, such Notes shall thereafter be cancelled
and no Notes shall be issued in substitution therefor.
6.13. Transactions with Affiliates. The Company will not, and will not
permit any Restricted Subsidiary to, enter into or be a party to any transaction
or arrangement with any Affiliate (including, without limitation, the purchase
from, sale to or exchange of property with, or the rendering of any service by
or for, any Affiliate), except in the ordinary course of and pursuant to the
reasonable requirements of the Company's or such Restricted Subsidiary's
business and upon fair and reasonable terms no less favorable to the Company or
such Restricted Subsidiary than would obtain in a comparable arm's-length
transaction with a Person other than an Affiliate.
6.14. Termination of Pension Plans. The Company will not and will not
permit any Subsidiary or Affiliate to permit any employee benefit plan
maintained by it to be terminated in a manner which could result in the
imposition of a lien on any property of the Company or any Subsidiary pursuant
to Section 4068 of ERISA in an aggregate amount exceeding one percent of
Consolidated Tangible Net Worth.
6.15. ERISA Covenants.
(a) Maintenance of Plan and Compliance. The Company will at all times (i)
cause the Plan to remain qualified under Section 401(a) of the Code, (ii) cause
the Issuer to remain exempt from Federal taxes under Section 501(a) of the Code
and (iii) maintain the status of the Plan as a qualified employee stock
ownership plan which complies with the requirements of Section 4975(e)(7) of the
Code and the rules and regulations promulgated thereunder. At all times the
Company will, and will cause the Issuer and the Plan to, comply in all material
respects with all requirements of the Code, ERISA and any other law, rule or
regulation applicable to the Issuer or the Plan. In addition, the Company will
comply with any conditions imposed by the Internal Revenue Service to obtain a
favorable determination letter regarding the Plan and the Trust Agreement,
including any changes in the Plan or the Trust Agreement that may be required
for the issuance of such determination letter; provided, however, that the
Company may contest any such conditions which it believes are unreasonable and
upon the conclusion of such contest need only comply with such conditions to the
extent upheld in such contest so long as (i) such contest is conducted in good
faith by appropriate actions or proceedings and (ii) the Company shall set aside
on its books, reserves deemed by it to be adequate with respect thereto.
(b) Amendments of the Plan. The Company will not agree to any amendment of
the Plan or the Trust Agreement which could materially and adversely affect the
rights of the holders of the Notes hereunder or under the Note Agreements or the
Notes.
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(c) Determination Letters. The Company will, within the remedial amendment
period provided for in Section 401(b) of the Code or, if earlier, within 90 days
after the Internal Revenue Service issues procedures for obtaining favorable
determination letters for employee stock ownership plans with respect to the
provisions of the Tax Reform Act of 1986 and other applicable laws, apply for
and use all reasonable efforts to obtain a determination letter from the
Internal Revenue Service to the effect that the Plan and the Issuer meet the
requirements for qualification under Sections 401(a) and 4975(e)(7) of the Code
and that the Issuer meets the requirements for tax exemption under Section
501(a) of the Code.
6.16. Reports and Rights of Inspection. The Company will keep, and will
cause each Subsidiary to keep, proper books of record and account in which full
and correct entries will be made of all dealings or transactions of or in
relation to the business and affairs of the Company or such Subsidiary, in
accordance with generally accepted principles of accounting consistently
maintained (except for changes disclosed in the financial statements furnished
to you pursuant to this (S)6.16 and concurred in by the independent public
accountants referred to in (S)6.16(b) hereof), and will furnish to you so long
as you are the holder of any Note and to each other institutional holder of the
then outstanding Notes (in duplicate if so specified below or otherwise
requested):
(a) Quarterly Statements. As soon as available and in any event within 60
days after the end of each quarterly fiscal period (except the last) of each
fiscal year, duplicate copies of:
(1) consolidated and consolidating balance sheets of the Company and
its Restricted Subsidiaries as of the close of such quarter setting forth
in comparative form the consolidated figures for the end of the preceding
fiscal year,
(2) consolidated and consolidating statements of income and retained
earnings of the Company and its Restricted Subsidiaries for the portion of
the fiscal year ending with such quarter, setting forth in comparative form
the consolidated figures for the corresponding period of the preceding
fiscal year, and
(3) consolidated and consolidating statements of cash flows of the
Company and its Restricted Subsidiaries for the portion of the fiscal year
ending with such quarter, setting forth in comparative form the
consolidated figures for the corresponding period of the preceding fiscal
year,
all in reasonable detail and certified as complete and correct, by a
Responsible Financial Officer (in the event that the Company has no Restricted
Subsidiary which is a Significant Subsidiary, the consolidating financial
statements described in subparagraphs (1), (2) and (3) above shall not be
required);
(b) Annual Statements. As soon as available and in any event within 100
days after the close of each fiscal year of the Company, duplicate copies of:
(1) consolidated and consolidating balance sheets of the Company and
its Restricted Subsidiaries as of the close of such fiscal year, and
(2) consolidated and consolidating statements of income and
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retained earnings and cash flows of the Company and its Restricted
Subsidiaries for such fiscal year,
in each case setting forth in comparative form the consolidated figures for
the preceding fiscal year, all in reasonable detail and accompanied by a
report thereon of a firm of independent public accountants of recognized
national standing selected by the Company to the effect that the consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles and present fairly, in all material respects, the
financial condition of the Company and its Restricted Subsidiaries and that
the examination of such accountants in connection with such financial
statements has been made in accordance with generally accepted auditing
standards and accordingly includes such tests of the accounting records and
such other auditing procedures as were considered necessary to provide a
reasonable basis for the opinion expressed in the report (in the event that
the Company has no Restricted Subsidiary which is a Significant Subsidiary,
the consolidating financial statements described in subparagraphs (1) and (2)
above shall not be required);
(c) Form 5500. Not more than 15 days after the filing thereof, a copy of
the annual Federal return/report (Form 5500) for the Plan and any other annual
financial statements prepared for the Issuer;
(d) Audit Reports. Promptly upon receipt thereof, one copy of each interim
or special audit made by independent accountants of the books of the Company
or any Restricted Subsidiary; provided, however, that such special or interim
audit shall not be required if it occurs as the result of the sale or purchase
of assets the aggregate purchase amount of which shall be less than 10% of the
Company's total sales for the immediately preceding fiscal year;
(e) SEC and Other Reports. Promptly upon their becoming available, one
copy of each financial statement, report, notice or proxy statement, if any,
required by any securities exchange, the Securities and Exchange Commission or
other governmental agency to be sent by the Company to stockholders generally
and of any regular or periodic report, and any registration statement or
prospectus filed by the Company or any Subsidiary with any securities exchange
or the Securities and Exchange Commission or any successor agency, and copies
of any orders in any proceedings to which the Company or any of its
Subsidiaries is a party, issued by any governmental agency, Federal or state,
having jurisdiction over the Company or any of its Subsidiaries;
(f) Requested Information. With reasonable promptness, such other data and
information as you or any such institutional holder may reasonably request;
(g) Officer's Certificates. Within the periods provided in paragraphs (a)
and (b) above, a certificate of a Responsible Financial Officer stating that
such officer has reviewed the provisions of this Agreement and setting forth:
(i) the information and computations (in sufficient detail) required in order
to establish whether the Company was in compliance with the requirements of
(S)6.6 through (S)6.11, inclusive, at the end of the period covered by the
financial statements then being furnished, and (ii) whether there existed as
of the date of such financial statements and whether, to the best of such
officer's knowledge, there exists on the date of the certificate or existed at
any time during the period covered by such
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financial statements any Default or Event of Default and, if any such
condition or event exists on the date of the certificate, specifying the
nature and period of existence thereof and the action the Company is taking
and proposes to take with respect thereto;
(h) Accountants' Certificates. Within the period provided in paragraph (b)
above, a certificate of the accountants who render an opinion with respect to
such financial statements, stating that they have reviewed this Agreement and
stating further whether, in making their audit, such accountants have become
aware of any Default or Event of Default under any of the terms or provisions
of this Agreement insofar as any such terms or provisions pertain to or
involve accounting matters or determinations, and if any such condition or
event then exists, specifying the nature and period of existence thereof;
(i) Trust Agreement, Plan. Not more than 125 days after the close of each
fiscal year of the Company, a copy of any amendment or modification to the
Trust Agreement or the Plan made during such fiscal year; and
(j) Copies of Determination Letters. As soon as available and in any event
within twenty days after receipt thereof, a copy of (i) the determination
letter received from the Internal Revenue Service in accordance with the
requirements of (S)6.15(c) and (ii) each other determination letter received
from the Internal Revenue Service with respect to the Plan or the Issuer.
Without limiting the foregoing, the Company will permit you, so long as you are
the holder of any Note, and each institutional holder of the then outstanding
Notes (or such Persons as either you or such holder may designate), to visit and
inspect, under the Company's guidance, any of the properties of the Company or
any Subsidiary, to examine all their books of account, records, reports and
other papers, to make copies and extracts therefrom, and to discuss their
respective affairs, finances and accounts with their respective officers,
employees, and independent public accountants (and by this provision the Company
authorizes said accountants to discuss with you the finances and affairs of the
Company and its Subsidiaries) all at such reasonable times and as often as may
be reasonably requested. The Company shall not be required to pay or reimburse
you or any such holder for expenses which you or any such holder may incur in
connection with any such visitation or inspection unless a Default or Event of
Default shall have occurred and be continuing.
6.17. Tax Exempt Status of Plan and Trust. The Company will at all times
cause the Plan and the Trust to maintain their status as tax exempt entities
under Section 501(a) of the Code.
6.18. Contributions to the Issuer. The Company covenants that it will make
contributions to the Issuer in amounts sufficient, together with other funds
available to the Issuer, to enable the Issuer to make payments of principal,
premium, if any, and interest on the Notes when due.
6.19. Indemnity. The Company agrees to indemnify and hold harmless the
holders of the Notes and their respective successors, assigns, agents, officers,
directors and employees (hereinafter collectively referred to as the
"indemnified parties") against any loss, liability, claim, damage or expense
(including, but not limited to, the reasonable cost of investigating and
defending against any such claim and reasonable counsel fees in
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connection therewith) to which any indemnified party may become subject
(including for this purpose any subpoena duces tecum, subpoena for deposition or
other similar writ served upon any indemnified party in connection with any
action brought by shareholders of the Company or prospective Plan participants
and involving the Company or such indemnified party) (i) under any statute, rule
or regulation (including without limitation the Federal or state securities
laws) or under the common law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon the
creation of the Issuer or the Plan by Inland or the purposes for which the Plan
or the Issuer were established by Inland or the Series E ESOP Stock was sold to
the Issuer by Inland, or (ii) in the event that the holder of a Note reasonably
determines that an exchange of Taxable Notes for the Notes pursuant to (S)2.3(a)
of the Note Agreement and (S)5 of this Agreement results in a taxable exchange
for Federal income tax purposes to the holder of such Notes; provided, however,
that no indemnified party shall be entitled to indemnification under this
(S)6.19 for any loss, liability, claim, damage or expense arising out of the
gross negligence or wilful misconduct of such indemnified party. The indemnity
provided to the holder of a Note by the Company under (S)6.19(ii) above shall
equal the sum of (a) an amount representing the time value of money (on a
present value basis) related to such holder's payment of federal income tax on
any gain recognized by such holder on the exchange of Taxable Notes for the
Notes for the period commencing on the date such holder shall have paid such tax
and ending on the date such tax would have otherwise been payable on the final
maturity of the Notes (using a factor of 10.10% per annum in the case of Taxable
Notes to be exchanged for Series A Notes, 10.71% per annum in the case of
Taxable Notes to be exchanged for Series B Notes and 11.17% per annum in the
case of Taxable Notes to be exchanged for Series C Notes) plus (b) an amount
representing the time value of money for the period commencing ten days after
the holder shall have given notice to the Company of its intention to pay, but
in no event earlier than the date the holder shall have paid, such tax referred
to in (a) above and ending on the date payment hereunder is received by such
holder (using a factor of 10.10% per annum in the case of Taxable Notes to be
exchanged for Series A Notes, 10.71%, per annum in the case of Taxable Notes to
be exchanged for Series B Notes and 11.17% per annum in the case of Taxable
Notes to be exchanged for Series C Notes).
SECTION SEVEN. INTERPRETATION OF AGREEMENT; DEFINITIONS.
7.1. Definitions. Unless the context otherwise requires, the terms
hereinafter set forth when used herein shall have the following meanings and the
following definitions shall be equally applicable to both the singular and
plural forms of any of the terms herein defined:
"Affiliate" shall mean any Person (other than a Restricted Subsidiary)
which directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Company. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of Voting Stock, by contract or otherwise.
"Affiliated Group" shall mean the corporations, trades or businesses which
are, along with the Company, members of the same control group of trades or
businesses, as described in (S)414(b) and (S)414(c), respectively, of the Code,
or (S)4001 of ERISA.
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"Attributable Debt" shall mean, in connection with any sale and leaseback
transaction occurring subsequent to the date hereof, the lesser of (i) the
present value, discounted according to generally accepted accounting principles
at the debt rate implicit in the related lease, of the obligation of a lessee
for rental payments during the remaining term of any lease (including any period
for which such lease has been extended or may, at the option of the lessor, be
extended), and (ii) the fair market value of the assets subject to such sale and
leaseback transaction.
"Board of Directors" means either the Board of Directors of the Company or
any committee of such Board duly authorized to act on its behalf.
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which Federally chartered banks are required by law to close.
"Capitalized Lease" shall mean any lease the obligation for Rentals with
respect to which is required to be capitalized on a balance sheet of the lessee
in accordance with generally accepted accounting principles.
"Capitalized Rentals" shall mean as of the date of any determination the
amount at which the aggregate Rentals due and to become due under all
Capitalized Leases under which the Company or any Restricted Subsidiary is a
lessee would be reflected as a liability on a consolidated balance sheet of the
Company and its Restricted Subsidiaries.
"Class 1 Put Event" shall be deemed to occur in the event that an Event of
Default shall have occurred or be continuing under any of (S)6.1(a) through (e),
inclusive, of the Note Agreements.
"Class 1 Put Event Date" shall mean the first date upon which a Class 1 Put
Event shall have occurred.
"Class 2 Put Event" shall be deemed to occur when an Event of Default shall
have occurred or be continuing under any of (S)6.1(f) through (o), inclusive, of
the Note Agreements.
"Class 2 Put Event Date" shall mean the first date upon which a Class 2 Put
Event shall have occurred.
"Closing Date" shall have the meaning ascribed thereto in (S)1.2 of the
Note Agreements.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning set forth in the Preamble.
"Company Notice" shall mean any written notice from the Company to the
holders of the Notes notifying such holders of the occurrence of a Class 1 Put
Event or a Class 2 Put Event, as the case may be, and the right of such holders
to require the Company to purchase the Notes of such holder, in any case
pursuant to (S)4.1(a) or (b).
"Consolidated Current Liabilities" shall mean such liabilities of the
Company and its Restricted Subsidiaries on a consolidated basis as shall be
determined in accordance with generally accepted accounting principles to
constitute current liabilities.
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"Consolidated Net Tangible Assets" shall mean as of the date of any
determination thereof the total amount of all assets (stating inventories at
current values) of the Company and its Restricted Subsidiaries (less
depreciation, depletion and other properly deductible valuation reserves) after
deducting (i) all items which in accordance with generally accepted accounting
principles would be included on the liability side of a consolidated balance
sheet, except capital stock (less treasury stock), surplus and retained
earnings, deferred taxes, deferred employee compensation and benefits, Minority
Interests and Funded Debt, (ii) any write-up of fixed assets after the date
hereof, (iii) Restricted Investments (valued at the book value thereof), and
(iv) all Intangible Assets.
"Consolidated Tangible Net Worth" shall mean, as of the date of any
determination thereof, the aggregate amount of the capital stock (less treasury
stock), surplus and retained earnings of the Company and its Restricted
Subsidiaries after deducting Minority Interests to the extent included in the
capital stock accounts of the Company less all Intangible Assets, all as
determined on a consolidated basis by the Company and its Restricted
Subsidiaries.
"Current Debt" shall mean, as of the date of any determination thereof, (i)
all Indebtedness for money borrowed other than Funded Debt and (ii) Guaranties
of Current Debt of others.
"Default" shall mean any event or condition the occurrence of which would,
with the lapse of time or the giving of notice, or both, constitute an Event of
Default as defined in (S)6.1 of the Note Agreements.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, including all regulations from time to time promulgated thereunder.
"Event of Default" shall have the meaning ascribed thereto in (S)6.1 of the
Note Agreements.
"Funded Debt" of any Person shall mean (i) all Indebtedness for borrowed
money or which has been incurred in connection with the acquisition of assets in
each case having a final maturity of more than one year from the date of origin
thereof (or which is renewable or extendible at the option of the obligor for a
period or periods more than one year from the date of origin), including all
payments in respect thereof that are required to be made within one year from
the date of any determination of Funded Debt, whether or not included in
Consolidated Current Liabilities, (ii) all Capitalized Rentals, and (iii) all
Guaranties of Funded Debt of others. "Consolidated" when used as a prefix to any
Funded Debt shall mean the aggregate amount of all such Funded Debt of the
Company and its Restricted Subsidiaries on a consolidated basis eliminating
intercompany items.
"Guaranteed Indebtedness" shall have the meaning set forth in (S)1.1.
"Guaranties" by any Person shall mean any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Indebtedness
or other obligation of any other Person and, without limiting the generality of
the foregoing, any obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation (whether arising by virtue
of partnership arrangements, by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for the purpose of
assuring
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in any other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part), provided that the term Guaranties shall not include
endorsements for collection or deposit in the ordinary course of business. For
the purposes of all computations made under this Agreement, a Guaranty in
respect of any Indebtedness for borrowed money shall be deemed to be
Indebtedness equal to the principal amount of such Indebtedness for borrowed
money which has been Guaranteed, and a Guaranty in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness equal
to the maximum aggregate amount of such obligation, liability or dividend. The
term "Guaranty" when used as a verb shall have a corresponding meaning.
"Indebtedness" of any Person shall mean at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person for Capitalized Rentals
under Capitalized Leases, (v) all Indebtedness of others secured by a lien on
any asset of such Person, whether or not such Indebtedness is assumed by such
Person, (vi) all contingent or non-contingent obligations of such Person to make
loans or advances to any other Person or to reimburse any other Person in
respect of amounts paid or to be paid under a letter of credit or similar
instrument in connection with Indebtedness described in clauses (i) through (v)
above, and (vii) all Indebtedness of others Guaranteed by such Person.
"Intangible Assets" shall mean as of the date of any determination thereof,
the total amount of all of the following assets of the Company and its
Restricted Subsidiaries: good will, patents, trade names, trade marks,
copyrights, franchises, experimental expense, organization expense, unamortized
debt discount and expense, deferred assets other than prepaid insurance and
prepaid taxes, the excess of cost of shares acquired over book value of related
assets and such other assets as are properly classified as "intangible assets"
in accordance with generally accepted accounting principles.
"Issuer" shall have the meaning set forth in Recital A.
"Make-Whole Premium Amount" shall have the meaning set forth in (S)8.1 of
the Note Agreements.
"Minority Interests" shall mean any shares of stock of any class of a
Restricted Subsidiary (other than directors' qualifying shares as required by
law) that are not owned by the Company and/or one or more of its Restricted
Subsidiaries. Minority Interests shall be valued by valuing Minority Interests
constituting preferred stock at the voluntary or involuntary liquidating value
of such preferred stock, whichever is greater, and by valuing Minority Interests
constituting common stock at the book value of capital and surplus applicable
thereto adjusted, if necessary, to reflect any changes from the book value of
such common stock required by the foregoing method of valuing Minority Interests
in preferred stock.
"Notes" shall have the meaning set forth in Recital B.
"Note Agreements" shall have the meaning set forth in Recital B.
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"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, and a government or agency or political subdivision
thereof.
"Plan" shall have the meaning set forth in Recital A.
"Preferred Stock Purchase Agreement" shall have the meaning set forth in
Recital B.
"Purchasers" shall have the meaning set forth in Recital B.
"Rentals" shall mean and include all fixed rents (including as such all
payments which the lessee is obligated to make to the lessor on termination of
the lease or surrender of the property) payable by the Company or a Restricted
Subsidiary, as lessee or sublessee under a lease of real or personal property,
but shall be exclusive of any amounts required to be paid by the Company or a
Restricted Subsidiary (whether or not designated as rents or additional rents)
on account of maintenance, repairs, insurance, taxes and similar charges. Fixed
rents under any so-called "percentage leases" shall be computed solely on the
basis of the minimum rents, if any, required to be paid by the lessee regardless
of sales volume or gross revenues.
"Required Holders" shall mean the holders of 25% of the aggregate
outstanding principal amount of the Notes.
"Responsible Financial Officer" shall mean the President, any Vice
President, the Treasurer or any Assistant Treasurer of the Company or if the
Company does not have any such officer, then any officer possessing
substantially similar authority to any of the foregoing.
"Restricted Investments" shall mean all investments, made in cash or by
delivery of property, by the Company and its Restricted Subsidiaries in any
Person, whether by acquisition of stock, Indebtedness or other obligation or
Securities or by loan, advance, or capital contribution or otherwise or upon the
designation after the date hereof of any Subsidiary as an Unrestricted
Subsidiary, all investments in such Subsidiary, except for the following:
(a) investments, loans and advances by the Company and its Restricted
Subsidiaries in and to Restricted Subsidiaries, including any investment in
a corporation which, after giving effect to such investment, will become a
Restricted Subsidiary;
(b) investments in commercial paper maturing in 270 days or less from
the date of issuance which, at the time of acquisition by the Company or any
Restricted Subsidiary, is accorded one of the two highest rating
classifications by Standard & Poor's Corporation, Moody's Investors
Service, Inc. or other nationally recognized credit rating agency of similar
standing;
(c) investments in direct obligations of, or guaranteed by, the United
States of America, or any agency thereof, maturing in three years or less
from the date of acquisition thereof;
(d) investments in certificates of deposit or bankers' acceptances
maturing within one year from the date of origin, issued by a bank or trust
company
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organized under the laws of the United States or any state thereof, Canada,
England, France, Germany, Switzerland or Japan, having capital, surplus and
undivided profits aggregating at least $100,000,000;
(e) loans or advances in the usual and ordinary course of business
incidental to carrying on the business of the Company or any Restricted
Subsidiary;
(f) investments in property to be used in the ordinary course of
business of the Company and its Restricted Subsidiaries;
(g) investments in or advances to Inland Steel Industries, Inc.,
provided that the aggregate amount of such investments and advances shall
not exceed an amount equal to 15% of Consolidated Net Tangible Assets;
(h) investments in municipal securities, maturing in three years or
less from the date of acquisition thereof, which are accorded one of the
two highest rating classifications by Standard & Poor's Corporation,
Moody's Investors Service, Inc. or other nationally recognized credit
rating agency of similar standing;
(i) investments in money market preferred stock of any corporation
organized under the laws of any state of the United States which, at the
time of acquisition by the Company or any Restricted Subsidiary, is rated
not lower than "A-2" by Moody's Investors Services, Inc., "A" by Standard &
Poor's Corporation or an equivalent rating by any other nationally
recognized credit rating agency of similar standing and which mature, or at
the option of the holder can be put, within twelve months or less from the
date of acquisition thereof;
(j) investments in money market funds which mature within 12 months or
less from the date of acquisition and are administered by reputable broker-
dealers of national reputation having capital, surplus and undivided profits
aggregating at least $250,000,000; provided, however, that the Company and
its Restricted Subsidiaries may have investments in the Dreyfus Cash
Management Fund, Fidelity Institutional Cash Money Market Fund, Fidelity
Institutional Cash Tax-Exempt Fund, Goldman, Sachs/ILA Government Fund,
Merrill Lynch Institutuional Fund or the Pierpont Money Market Fund
irrespective of whether such funds meet the foregoing requirements;
(k) investments not otherwise permitted hereunder existing as of the
date hereof; and
(l) other investments, loans and advances (in addition to those
permitted by the foregoing clauses (a) through (k), inclusive, of this
definition), provided that the aggregate amount of all such other investments,
loans and advances at any time owned by the Company and its Restricted
Subsidiaries shall not exceed $10,000,000.
In valuing any investments, loans and advances for the purpose of applying
the limitations set forth in this definition, such investments, loans and
advances shall be taken at the original cost thereof, without allowance for any
subsequent write-offs or appreciation or depreciation therein, but less any
amount repaid or recovered on account of capital or principal.
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For purposes of this definition, at any time when a corporation becomes a
Restricted Subsidiary, all investments of such corporation at such time shall be
deemed to have been made by such corporation, as a Restricted Subsidiary, at
such time.
"Restricted Subsidiary" shall mean any Subsidiary which is not an
Unrestricted Subsidiary.
"Sale and leaseback transaction" shall have the meaning specified in
(S)6.10.
"Secured Debt" shall mean all Indebtedness for borrowed money which is
secured by a lien or other interest on any of the property or assets of the
Company or its Restricted Subsidiaries but shall in no event include Capitalized
Leases, pollution control bond financings, or industrial revenue bond
financings.
"Security" shall have the same meaning as in Section 2(1) of the Securities
Act of 1933, as amended.
"Series E ESOP Stock" shall have the meaning set forth in Recital B.
"Significant Subsidiary" shall have the meaning ascribed to such term as
set forth in Rule 405 of Regulation C of the Securities Act of 1933.
"Subsidiary" of any Person shall mean any corporation of which more than
50% of the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether
or not at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned by such Person, by such
Person and one or more other Subsidiaries of such Person, or by one or more
other Subsidiaries of such Person.
"Trust Agreement" shall mean the Inland Steel Industries Thrift Plan ESOP
Trust Agreement dated as of July 7, 1989, between Inland Steel Industries, Inc.
and the Trustee, as trustee.
"Trustee" shall mean Harris Trust and Savings Bank, an Illinois banking
corporation, as trustee of the trust created pursuant to the Trust Agreement,
and any successor trustee under the Trust Agreement.
"Unrestricted Subsidiary" shall mean any Subsidiary which is designated by
the Board of Directors of the Company, by notice in writing to the holders of
the Notes, to be an Unrestricted Subsidiary, provided, that (a) at the time of
such designation and after giving effect thereto no Default or Event of Default
shall have occurred and be continuing, (b) at the time of such designation the
Subsidiary so designated does not own, either directly or indirectly, any Funded
Debt or capital stock of any Restricted Subsidiary and (c) immediately after
such designation the Company could incur at least $1.00 of additional Funded
Debt under the provisions of (S)6.7(a)(3) hereof.
"Voting Stock" shall mean Securities of any class or classes, the holders
of which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar functions).
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"Wholly-owned" when used in connection with any Subsidiary shall mean a
Subsidiary of which all of the issued and outstanding shares of stock (except
shares required as directors' qualifying shares) and all Indebtedness for
borrowed money shall be owned by the Company and/or one or more of its Wholly-
owned Subsidiaries.
7.2. Directly or Indirectly. Where any provision in this Agreement refers
to action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether the action in question is
taken directly or indirectly by such Person.
7.3. Accounting Principles. Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with generally
accepted accounting principles as in effect on the date of such determination,
to the extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.
SECTION EIGHT. MISCELLANEOUS.
8.1. Governing Law. This Agreement shall be governed by and construed in
accordance with Illinois law and Federal law to the extent applicable.
8.2. Notices. All notices and communications under this Agreement shall be
given in writing delivered personally or sent by nationally recognized overnight
courier (with charges prepaid), addressed as follows:
If to any Purchaser To its address for notices as
or any other Note holder: provided in the Note Agreements
If to the Company: Joseph T. Ryerson & Son, Inc.
30 West Monroe Street
Chicago, IL 60603
Attention: Treasurer
with a copy to: Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
Attention: Susan B. Resko
or to such other address as any such person may designate to the other Persons
named above by notice given in accordance with this Section.
8.3. Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns and shall inure to the benefit of the
Purchasers and to the benefit of the Purchasers' successors and assigns,
including each successive holder or holders of any Guaranteed Indebtedness. The
guaranty hereunder of the indemnifications provided in (S)1.4 and (S)1.5 of the
Note Agreements which constitute a part of the Guaranteed Indebtedness shall
survive the payment of the Notes and the termination of this Agreement and the
Note Agreements and shall not terminate with respect to any period until the
collection of Federal income tax for such period is barred by the statute of
limitations (after taking into account all extensions and suspensions thereof)
applicable to the holder of the Notes seeking indemnification.
-25-
<PAGE>
8.4. Survival of Covenants and Representations; Survival of
Indemnification. All covenants, representations and warranties made by the
Company herein and all representations and warranties made by the Company in any
certificates delivered pursuant hereto, whether or not in connection with the
Closing Date, shall be made as of the respective dates on which the same are
given but shall survive the closing and the delivery of this Agreement to the
extent that any such representation or warranty is untrue in any material
respect as of the date given or made. The indemnifications provided in (S)6.19
hereof are made as of their respective dates but shall survive the payment of
the Notes, the exchange of Taxable Notes for any Note and the termination of
this Agreement and shall not terminate with respect to any period until the
collection of Federal income tax for such period is barred by the statute of
limitations (after taking into account all extensions and suspensions thereof)
applicable to the holder of the Notes or Taxable Notes seeking indemnification.
8.5. Severability. Should any part of this Agreement for any reason be
declared invalid by a court of competent jurisdiction, such decision shall not
affect the validity of any remaining portion hereof, which remaining portion
shall remain in force and effect as if this Agreement had been executed with the
invalid portion thereof eliminated and it is hereby declared the intention of
the parties hereto that they would have executed the remaining portion of this
Agreement without including therein any such part, parts, or portion which may,
for any reason, be hereafter declared invalid.
8.6. (a) Amendments and Modifications. This Agreement may only be amended
and/or modified by an instrument in writing signed by the Company and by the
holder or holders of at least 66-2/3% in aggregate principal amount of the Notes
then outstanding; provided that without the written consent of the holders of
all the Notes then outstanding, no such waiver, modification, alteration or
amendment shall be effective which will reduce the scope of the guaranty set
forth in this Agreement or amend the requirements of (S)1.1, (S)2, (S)4 (or the
related definitions contained in (S)7.1), (S)5 or (S)6.13 hereof or amend this
(S)8.6. No such amendment or modification shall extend to or affect any
obligation not expressly amended or modified or impair any right consequent
thereon.
(b) Solicitation of Noteholders. The Company will not solicit, request or
negotiate for or with respect to any proposed waiver or amendment of any of the
provisions of this Agreement, the Note Agreements or the Notes unless each
holder of the Notes (irrespective of the amount of Notes then owned by it) shall
be informed thereof by the Company and shall be afforded the opportunity of
considering the same for a period of not less than 10 Business Days and shall be
supplied by the Company with a brief statement regarding the reasons for any
such proposed waiver or amendment, a copy of the proposed waiver or amendment
and such other information regarding such amendment or waiver as any holder of
the Notes shall reasonably request to enable it to make an informed decision
with respect thereto. Executed or true and correct copies of any waiver or
amendment effected pursuant to the provisions of this (S)8.6 shall be delivered
by the Company to each holder of outstanding Notes within 30 days following the
date on which the same shall have been executed and delivered by the holder or
holders of the requisite percentage of outstanding Notes. The Company will not,
directly or indirectly, pay or cause to be paid any remuneration, whether by way
of supplemental or additional interest, fee or otherwise, to any holder of the
Notes as consideration for or as an inducement to the entering into by any
holder of the Notes of any waiver or amendment of any of the terms and
provisions of this Agreement, the Note Agreements, or the Notes, unless such
remuneration is concurrently offered, on the same terms, ratably to the holders
of all of the Notes then outstanding.
-26-
<PAGE>
8.7. Reproduction of Documents. This Agreement, the Note Agreements and all
documents relating hereto, including without limitation (a) consents, waivers
and modifications which may hereafter be executed, (b) documents received by the
Purchasers at the closing of the purchase of the Notes (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to the Purchasers, may be reproduced by the
Purchasers by any photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process, and the Purchasers may destroy any
original document so reproduced. The Company agrees and stipulates that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by the Purchasers in the
regular course of business) and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
8.8. Expenses, Stamp Tax Indemnity. Whether or not the transactions herein
contemplated shall be consummated, the Company agrees to pay directly all of
your out-of-pocket expenses in connection with the preparation, execution and
delivery of this Agreement and the Note Agreements and the transactions
contemplated hereby, including but not limited to the reasonable charges and
disbursements of Chapman and Cutler, your special counsel, duplicating and
printing costs, charges for shipping the Notes, adequately insured to you at
your home office or at such other place as you may designate, the expenses
(including any charges and disbursements of your special counsel) of any
exchange of Notes for Taxable Notes under (S)5 hereof and (S)2.3 of the Note
Agreements and so long as you hold any of the Notes, all such expenses relating
to any amendment, waivers or consents pursuant to the provisions hereof or the
Note Agreements, including without limitation any amendments, waivers or
consents resulting from any work-out, restructuring or similar proceedings
relating to the performance by the Issuer of its obligations under the Note
Agreements and the Notes or the performance by the Company of its obligations
under this Agreement. The Company also agrees that it will pay and save you
harmless against any and all liability with respect to stamp and other taxes, if
any, which may be payable or which may be determined to be payable in connection
with the execution and delivery of the Note Agreements or the Notes, whether or
not any Notes are then outstanding. The Company agrees to protect and indemnify
you against any liability for any and all brokerage fees and commissions payable
or claimed to be payable to any Person in connection with the transactions
contemplated by the Note Agreements. The Company agrees to pay the cost of
obtaining a private placement number for the Notes and authorizes the submission
of this Agreement and the Note Agreements to Standard & Poor's for the purpose
of obtaining such number.
8.9. Confidentiality. Each holder of a Note agrees to keep confidential any
information delivered by the Company pursuant to this Agreement and any
information obtained by any holder based upon a review of the books and records
of the Company or any Subsidiary of the Company; provided, however, that nothing
in this (S)8.9 shall prevent any holder of a Note from disclosing such
information (i) to any other holder of Notes, (ii) to a prospective transferee,
broker or transfer agent in connection with any contemplated transfer of any of
the Notes by a holder which is permitted by (S)9.1 of the Note Agreements, (iii)
to its employees, agents, attorneys and accountants, (iv) as may be required or
appropriate in any report, statement or testimony submitted to any municipal,
state or Federal regulatory body having or claiming to have jurisdiction over
such holder or to the National Association of Insurance Commissioners or similar
organizations or their successors, (v) as may be required or appropriate in
response to any summons or
-27-
<PAGE>
subpoena or in connection with any litigation, (vi) as has become generally
available to the public other than as a result of the violation of this (S)8.9,
(vii) to any holder of any security or securities having a value in excess of
$5,000,000 issued by the holder of a Note or to any rating agency which rates
such security or investments of such holder, or (viii) to the extent such holder
believes it necessary in order to protect its investment in the Notes or to the
extent it believes it appropriate in order to comply with any law, order,
regulation or ruling applicable to it.
8.10. Captions. The descriptive headings of the various Sections or parts
of this Agreement are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.
8.11. Counterparts. This Agreement may be executed in any number of
counterparts, each executed counterpart constituting an original but all
together only one Agreement.
-28-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed as
of the day and year first above written.
JOSEPH T. RYERSON & SON, INC.
By /s/ J. E. Littus
------------------------------------
Its
--------------------------------
Accepted as of August 15, 1990.
AETNA LIFE INSURANCE COMPANY
By /s/ E. L. Small
------------------------------------
Its Senior Investment Officer
--------------------------------
ALLSTATE LIFE INSURANCE COMPANY
By
------------------------------------
By /s/ Gay W. Frielley
------------------------------------
Its Authorized Signatory
--------------------------------
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By /s/ Bruce E. Gaudette
------------------------------------
Its Vice President
--------------------------------
PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY
By /s/ Jon C. Heiny
------------------------------------
Its Assistant Counsel
--------------------------------
By /s/ Donald D. Brattebo
------------------------------------
Its Director - Securities Investment
--------------------------------
-29-
<PAGE>
PRINCIPAL NATIONAL LIFE INSURANCE
COMPANY
By /s/ Jon C. Heiny
------------------------------------
Its Assistant Counsel
--------------------------------
By /s/ Donald D. Brattebo
------------------------------------
Its Director - Securities Investment
--------------------------------
N.B.D. BANK, N.A.
By /s/ J. Wells
------------------------------------
Its First Vice President
--------------------------------
THE GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY
By /s/ A. R. Purchase
------------------------------------
Its Vice President, Public Bonds
--------------------------------
By /s/ T. L. Maltarich
------------------------------------
Its Manager, Public Bonds
--------------------------------
AMERICAN UNITED LIFE INSURANCE
COMPANY
By /s/ G. David Sapp
------------------------------------
Its Vice President Securities
--------------------------------
THE NORTHERN TRUST COMPANY
By /s/ A. R. Bundrage
------------------------------------
Its Second Vice President
--------------------------------
-30-
<PAGE>
MANUFACTURERS NATIONAL BANK OF
DETROIT
By /s/ Timothy V. Talbert
----------------------------------------------
Its Vice President and Senior Account Officer
-----------------------------------------
PAN-AMERICAN LIFE INSURANCE
COMPANY
By /s/ Luis Ingles, Jr., C.F.A.
----------------------------------------------
Its Vice President, Securities
------------------------------------------
SAFECO LIFE INSURANCE COMPANY
By /s/ Ronald Spaulding
----------------------------------------------
Its Vice President
------------------------------------------
TRUST COMPANY BANK
By /s/ Jane Thomson
----------------------------------------------
Its Assistant Vice President
------------------------------------------
THE FRANKLIN LIFE INSURANCE
COMPANY
By /s/ Robert G. Spencer
----------------------------------------------
Its Vice President & Treasurer
------------------------------------------
By /s/ Elizabeth E. Arthur
----------------------------------------------
Its Assistant Secretary
------------------------------------------
BERKSHIRE LIFE INSURANCE COMPANY
By /s/ David F. O'Clair
----------------------------------------------
Its Vice President - Securities
------------------------------------------
-31-
<PAGE>
SCHEDULE I
Aetna Life Insurance Company
Hartford, Connecticut 06156
Allstate Life Insurance Company
Northbrook, Illinois 60062
Massachusetts Mutual Life
Insurance Company
Springfield, Massachusetts 01111
Principal Mutual Life
Insurance Company
Des Moines, Iowa 50392
Principal National Life
Insurance Company
Des Moines, Iowa 50392
NBD Bank, N.A.
Detroit, Michigan 48226
Great-West Life & Annuity
Insurance Company
Englewood, Colorado 80111
American United Life Insurance Company
Indianapolis, Indiana 46204
The Northern Trust Company
Chicago, Illinois 60675
Manufacturers National Bank of Detroit
Detroit, Michigan 48243
Pan-American Life Insurance Company
New Orleans, Louisiana 70130
Safeco Life Insurance Company
Seattle, Washington 98185
Trust Company Bank
Atlanta, Georgia 30302
The Franklin Life Insurance Company
Springfield, Illinois 62713
Berkshire Life Insurance Company
Pittsfield, Massachusetts 01201
<PAGE>
Joseph T. Ryerson & Son. Inc.
----------------------------
Funded Debt
-----------
as of September 20, 1990
------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Long-term Debt as of Sept. 20, 1990 $ 5,006,467
Plus: Amount due within one year 1,977,215
-----------
Total Long-term Debt (Note 1) $ 6,983,682
Guaranties of Funded Debt 146.913.151
-----------
Total Funded Debt $153.896.833
===========
</TABLE>
EXHIBIT A
(to Guaranty Agreement)
<PAGE>
Joseph T. Ryerson & Son, Inc.
----------------------------
Long-Term Debt
As of September 20, 1990
------------------------
<TABLE>
<CAPTION>
Note 1 - Long-term Debt
- -----------------------
The Company's long-term debt is comprised of the following:
<S> <C>
Industrial Revenue Bonds:
Houston Plant at 60% of prime rate up to 11%;
due in quarterly installments through
January 1, 1994 $ 2,060,000
Tulsa plant at 85.56% of prime rate up to 11%;
due in quarterly installments through
June 30, 1993 1,050,000
Loopco Leveling Line at 70% of prime rate with
8.4% minimum; due in monthly installments through
August 15, 1992, Marquette Bank 172,500
Tension Level Line at 75% of reference rate
(currently 9.2243%); due in monthly installments
through August 1, 1992 375,000
Mortgages at 9% and ll%; due in monthly installments
through October 1, 1993 718,101
Mortgage at 10.25%; Keelor, MN; due in monthly
installments through November 1, 1997 2,269,640
Mortgage at 9%; Keelor, Iowa; due in monthly
installments through October 1, 1992 338,441
----------
6,983,682
Less amounts due within one year (1,977,215)
----------
Long-term debt at September 20, 1990 $ 5,007,467
==========
</TABLE>
A-2
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated February 19, 1996,
relating to the financial statements of Ryerson Tull, Inc. (formerly Inland
Materials Distribution Group, Inc.), which appears in such Prospectus. We also
consent to the application of such report to the Financial Statement Schedules
for the three years ended December 31, 1995 listed under Item 16(b) of this
Registration Statement when such schedules are read in conjunction with the
financial statements referred to in our report. The audits referred to in such
report also included these schedules. We also consent to the references to us
under the headings "Experts" and "Selected Financial Data" in such Prospectus.
However, it should be noted that Price Waterhouse LLP has not prepared or
certified such "Selected Financial Data."
PRICE WATERHOUSE LLP
Chicago, Illinois
June 10, 1996
<PAGE>
RYERSON TULL, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and (or) officer of Ryerson Tull, Inc., a Delaware corporation (the
"Corporation"), do hereby nominate, constitute and appoint Vicki L. Avril,
George A. Ranney, Jr. and Charles B. Salowitz, or any one or more of them, my
true and lawful attorneys-in-fact and agents to do any and all acts and things
and to execute any and all instruments which said attorneys-in-fact and agents,
or any of them, may deem necessary or advisable to enable the Corporation to
comply with the Securities Act of 1933, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
registration under said Act of all or any portion of Senior Notes, in the
principal amount not to exceed $300,000,000, including specifically, but without
limitation thereof, full power and authority to sign my name as a director and
(or) officer of said Corporation to a registration statement on Form S-1, or
such other form for the registration of securities as the Securities and
Exchange Commission may require with respect to the aforesaid Senior Notes and
to any amendment or amendments (including, without limitation, post-effective
amendments) or supplements to said registration statement or statements and to
the prospectus or prospectuses relating thereto, and to certify on my behalf
that, to the best of my knowledge and belief, the Corporation meets all of the
requirements for filing on Form S-1; hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, shall do or cause to be done
by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 7th day of May,
1996.
/s/ Robert J. Darnall
-------------------------------
Robert J. Darnall
<PAGE>
RYERSON TULL, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and (or) officer of Ryerson Tull, Inc., a Delaware corporation (the
"Corporation"), do hereby nominate, constitute and appoint Vicki L. Avril,
George A. Ranney, Jr. and Charles B. Salowitz, or any one or more of them, my
true and lawful attorneys-in-fact and agents to do any and all acts and things
and to execute any and all instruments which said attorneys-in-fact and agents,
or any of them, may deem necessary or advisable to enable the Corporation to
comply with the Securities Act of 1933, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
registration under said Act of all or any portion of Senior Notes, in the
principal amount not to exceed $300,000,000, including specifically, but without
limitation thereof, full power and authority to sign my name as a director and
(or) officer of said Corporation to a registration statement on Form S-1, or
such other form for the registration of securities as the Securities and
Exchange Commission may require with respect to the aforesaid Senior Notes and
to any amendment or amendments (including, without limitation, post-effective
amendments) or supplements to said registration statement or statements and to
the prospectus or prospectuses relating thereto, and to certify on my behalf
that, to the best of my knowledge and belief, the Corporation meets all of the
requirements for filing on Form S-1; hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, shall do or cause to be done
by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 7th day of
May, 1996.
/s/ Jay M. Gratz
-------------------------------
Jay M. Gratz
<PAGE>
RYERSON TULL, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and (or) officer of Ryerson Tull, Inc., a Delaware corporation (the
"Corporation"), do hereby nominate, constitute and appoint Vicki L. Avril,
George A. Ranney, Jr. and Charles B. Salowitz, or any one or more of them, my
true and lawful attorneys-in-fact and agents to do any and all acts and things
and to execute any and all instruments which said attorneys-in-fact and agents,
or any of them, may deem necessary or advisable to enable the Corporation to
comply with the Securities Act of 1933, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
registration under said Act of all or any portion of Senior Notes, in the
principal amount not to exceed $300,000,000, including specifically, but without
limitation thereof, full power and authority to sign my name as a director and
(or) officer of said Corporation to a registration statement on Form S-1, or
such other form for the registration of securities as the Securities and
Exchange Commission may require with respect to the aforesaid Senior Notes and
to any amendment or amendments (including, without limitation, post-effective
amendments) or supplements to said registration statement or statements and to
the prospectus or prospectuses relating thereto, and to certify on my behalf
that, to the best of my knowledge and belief, the Corporation meets all of the
requirements for filing on Form S-1; hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, shall do or cause to be done
by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 7th day of
May, 1996.
/s/ Neil S. Novich
-------------------------------
Neil S. Novich
<PAGE>
RYERSON TULL, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and (or) officer of Ryerson Tull, Inc., a Delaware corporation (the
"Corporation"), do hereby nominate, constitute and appoint Vicki L. Avril,
George A. Ranney, Jr. and Charles B. Salowitz, or any one or more of them, my
true and lawful attorneys-in-fact and agents to do any and all acts and things
and to execute any and all instruments which said attorneys-in-fact and agents,
or any of them, may deem necessary or advisable to enable the Corporation to
comply with the Securities Act of 1933, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
registration under said Act of all or any portion of Senior Notes, in the
principal amount not to exceed $300,000,000, including specifically, but without
limitation thereof, full power and authority to sign my name as a director and
(or) officer of said Corporation to a registration statement on Form S-1, or
such other form for the registration of securities as the Securities and
Exchange Commission may require with respect to the aforesaid Senior Notes and
to any amendment or amendments (including, without limitation, post-effective
amendments) or supplements to said registration statement or statements and to
the prospectus or prospectuses relating thereto, and to certify on my behalf
that, to the best of my knowledge and belief, the Corporation meets all of the
requirements for filing on Form S-1; hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, shall do or cause to be done
by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 22nd day of
May, 1996.
/s/ Lily L. May
-------------------------------
Lily L. May
<PAGE>
RYERSON TULL, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and (or) officer of Ryerson Tull, Inc., a Delaware corporation (the
"Corporation"), do hereby nominate, constitute and appoint Vicki L. Avril,
George A. Ranney, Jr. and Charles B. Salowitz, or any one or more of them, my
true and lawful attorneys-in-fact and agents to do any and all acts and things
and to execute any and all instruments which said attorneys-in-fact and agents,
or any of them, may deem necessary or advisable to enable the Corporation to
comply with the Securities Act of 1933, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
registration under said Act of all or any portion of Senior Notes, in the
principal amount not to exceed $300,000,000, including specifically, but without
limitation thereof, full power and authority to sign my name as a director and
(or) officer of said Corporation to a registration statement on Form S-1, or
such other form for the registration of securities as the Securities and
Exchange Commission may require with respect to the aforesaid Senior Notes and
to any amendment or amendments (including, without limitation, post-effective
amendments) or supplements to said registration statement or statements and to
the prospectus or prospectuses relating thereto, and to certify on my behalf
that, to the best of my knowledge and belief, the Corporation meets all of the
requirements for filing on Form S-1; hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, shall do or cause to be done
by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of
June, 1996.
/s/ Jean-Pierre Rosso
-------------------------------
Jean-Pierre Rosso
<PAGE>
RYERSON TULL, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director
and (or) officer of Ryerson Tull, Inc., a Delaware corporation (the
"Corporation"), do hereby nominate, constitute and appoint Vicki L. Avril,
George A. Ranney, Jr. and Charles B. Salowitz, or any one or more of them, my
true and lawful attorneys-in-fact and agents to do any and all acts and things
and to execute any and all instruments which said attorneys-in-fact and agents,
or any of them, may deem necessary or advisable to enable the Corporation to
comply with the Securities Act of 1933, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
registration under said Act of all or any portion of Senior Notes, in the
principal amount not to exceed $300,000,000, including specifically, but without
limitation thereof, full power and authority to sign my name as a director and
(or) officer of said Corporation to a registration statement on Form S-1, or
such other form for the registration of securities as the Securities and
Exchange Commission may require with respect to the aforesaid senior notes and
to any amendment or amendments (including, without limitation, post-effective
amendments) or supplements to said registration statement or statements and to
the prospectus or prospectus relating thereto, and to certify on my behalf
that, to the best of my knowledge and belief, the Corporation meets all of the
requirements for filing on Form S-1; hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, shall do or cause to be done
by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of June,
1996.
/s/ Donald S. Perkins
-------------------------------
Donald S. Perkins
<PAGE>
RYERSON TULL, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director and
(or) officer of Ryerson Tull, Inc., a Delaware corporation (the "Corporation"),
do hereby nominate, constitute and appoint Vicki L. Avril, George A. Ranney, Jr.
and Charles B. Salowitz, or any one or more of them, my true and lawful
attorneys-in-fact and agents to do any and all acts and things and to execute
any and all instruments which said attorneys-in-fact and agents, or any of them,
may deem necessary or advisable to enable the Corporation to comply with the
Securities Act of 1933, as amended, and any requirements of the Securities and
Exchange Commission in respect thereof, in connection with the registration
under said Act of all or any Portion of Senior Notes, in the principal amount
not to exceed $300,000,000, including specifically, but without limitation
thereof, full power and authority to sign my name as a director and (or) officer
of said Corporation to a registration statement on Form S-1, or such other form
for the registration of securities as the Securities and Exchange Commission may
require with respect to the aforesaid Senior Notes and to any amendment or
amendments (including, without limitation, post-effective amendments) or
supplements to said registration statement or statements and to the prospectus
or prospectuses relating thereto, and to certify on my behalf that, to the best
of my knowledge and belief, the Corporation meets all of the requirements for
filing on Form S-1; hereby ratifying and confirming all that said attorneys-in-
fact and agents, or any of them, shall do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of June,
1996.
/s/ James A. Henderson
-------------------------------------
James A. Henderson
<PAGE>
CONFORMED COPY
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
----------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
Jacqueline McSwiggan
48 Wall Street
New York, N.Y. 10286
(212) 495-1784
(Name, address and telephone number of agent for service)
----------------------
RYERSON TULL, INC.
(Exact name of obligor as specified in its charter)
Delaware 36-3431962
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
2621 West 15th Place
Chicago, Illinois 60608
(Address of principal executive offices) (Zip code)
______________________
Debt Securities
(Title of the indenture securities)
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<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT
IS SUBJECT.
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Name Address
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Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE 7A-
29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT").
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 7th day of June, 1996.
THE BANK OF NEW YORK
By: /S/ROBERT F. MCINTYRE
---------------------------
Name: ROBERT F. MCINTYRE
Title: VICE PRESIDENT
-4-
<PAGE>
Exhibit 7
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Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1995, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin..................... $ 4,500,312
Interest-bearing balances............. 643,938
Securities:
Held-to-maturity securities........... 806,221
Available-for-sale securities......... 2,036,768
Federal funds sold and securities
purchased under agreements to resell
in domestic offices of the bank:
Federal funds sold...................... 4,166,720
Securities purchased under agreements
to resell............................. 50,413
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................27,068,535
LESS: Allowance for loan and
lease losses ..............520,024
LESS: Allocated transfer risk
reserve......................1,000
Loans and leases, net of unearned
income and allowance, and reserve 26,547,511
Assets held in trading accounts......... 758,462
Premises and fixed assets (including
capitalized leases)................... 615,330
Other real estate owned................. 63,769
Investments in unconsolidated
subsidiaries and associated
companies............................. 223,174
Customers' liability to this bank on
acceptances outstanding............... 900,795
Intangible assets....................... 212,220
Other assets............................ 1,186,274
-----------
Total assets............................ $42,711,907
===========
LIABILITIES
Deposits:
In domestic offices................... $21,248,127
Noninterest-bearing .......9,172,079
Interest-bearing .........12,076,048
In foreign offices, Edge and
Agreement subsidiaries, and IBFs...... 9,535,088
Noninterest-bearing ..........64,417
Interest-bearing ......... 9,470,671
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased............... 2,095,668
Securities sold under agreements
to repurchase....................... 69,212
Demand notes issued to the U.S.
Treasury.............................. 107,340
Trading liabilities..................... 615,718
Other borrowed money:
With original maturity of one year
or less............................. 1,638,744
With original maturity of more than
one year............................ 120,863
Bank's liability on acceptances exe-
cuted and outstanding................. 909,527
Subordinated notes and debentures....... 1,047,860
Other liabilities....................... 1,836,573
-----------
Total liabilities....................... 39,224,720
-----------
EQUITY CAPITAL
Common stock............................ 942,284
Surplus................................. 525,666
Undivided profits and capital
reserves.............................. 1,995,316
Net unrealized holding gains
(losses) on available-for-sale
securities............................ 29,668
Cumulative foreign currency transla-
tion adjustments...................... ( 5,747)
-----------
Total equity capital.................... 3,487,187
-----------
Total liabilities and equity
capital .............................. $42,711,907
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the above-
named bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot )
Thomas A. Renyi ) Directors
Alan R. Griffith )
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