<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
INLAND STEEL INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
[COMPANY NAME]
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
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(4) Date filed:
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<PAGE> 2
INLAND STEEL INDUSTRIES, INC.
ROBERT J. DARNALL
Chairman, President and
Chief Executive Officer
April 17, 1995
Dear Stockholder:
Please join us for the 1995 Annual Meeting of Stockholders on Wednesday,
May 24, 1995, at 10:30 a.m., Chicago time. The meeting will be at the First
Chicago Center, One First National Plaza, Chicago, Illinois.
At the meeting, I will present an overview of corporate developments, Earl
L. Mason, Senior Vice President and Chief Financial Officer, will report on our
progress in creating value for our stockholders, and Stephen J. Bowsher, Vice
President-Sales & Marketing of the Inland Steel Flat Products Company division
of Inland Steel Company, will discuss our progress in creating value for our
customers. In addition, stockholders will have an opportunity to ask questions
and make comments.
The attached notice of meeting and proxy statement describe the formal
business of the meeting. In addition to voting for directors and auditors for
the coming year, we will vote on an incentive stock plan for employees.
I hope you will come to the annual meeting -- both to learn more about the
Company and also to present your views. If, however, you are not able to attend,
it is still important for you to vote your stock. So please take a moment now to
complete and return the enclosed proxy card in the return envelope.
Cordially,
[SIG]
Chairman, President and
Chief Executive Officer
30 West Monroe Street, Chicago, Illinois 60603
<PAGE> 3
INLAND STEEL INDUSTRIES, INC.
30 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 24, 1995
To the Stockholders of INLAND STEEL INDUSTRIES, INC.:
The Annual Meeting of Stockholders of Inland Steel
Industries, Inc., a Delaware corporation, will be held at
the First Chicago Center, One First National Plaza, Chicago,
Illinois, on Wednesday, May 24, 1995, at 10:30 a.m., Chicago
time, for the following purposes:
1. To elect directors of the Company;
2. To consider and vote upon the Inland 1995 Incentive
Stock Plan;
3. To elect a firm of independent public accountants to
audit the accounts of the Company and its
subsidiaries for the year 1995; and
4. To transact any other business that may properly
come before the meeting.
The close of business on April 4, 1995 has been fixed
as the record date for determination of stockholders
entitled to notice of and to vote at the Annual Meeting.
A Proxy Statement with respect to the Annual Meeting
accompanies and forms a part of this Notice. The Annual
Report of the Company for the fiscal year ended December 31,
1994 was previously mailed to stockholders.
By order of the Board of
Directors,
DAVID B. ANDERSON, Secretary
April 17, 1995
Chicago, Illinois
Stockholders are cordially invited to attend this meeting.
Each stockholder, whether or not he or she expects to be
present in person at the Annual Meeting, is requested to
SIGN, DATE AND RETURN THE ENCLOSED PROXY in the accompanying
envelope as promptly as possible. A stockholder may revoke
his or her proxy at any time prior to voting.
<PAGE> 4
INLAND STEEL INDUSTRIES, INC.
30 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Directors of the
Company. Such solicitation is being made by mail commencing approximately April
17, 1995, and also may be made by directors, officers and regular employees of
the Company. The expense of such solicitation will be paid by the Company. In
addition, the Company has retained Kissel-Blake Inc. to assist in the
solicitation of proxies for a fee of $10,500 plus out-of-pocket expenses.
Brokers, banks and similar organizations will be reimbursed for out-of-pocket
and reasonable clerical expenses incurred in obtaining instructions from
beneficial owners.
A stockholder giving a proxy may revoke it at any time prior to the voting
of the proxy. Shares represented by an effective proxy given by a stockholder
will be voted as directed by the stockholder. The voting securities of the
Company outstanding on the record date (April 4, 1995), together with the vote
to which each share is entitled, consist of 44,676,446 shares of common stock
(one vote per share), 94,702 shares of Series A $2.40 Cumulative Convertible
Preferred Stock (one vote per share), 3,098,627 shares of Series E ESOP
Convertible Preferred Stock (1.25 votes per share), and 185,000 shares of Series
F Exchangeable Preferred Stock (30.604 votes per share). All such shares vote
together without regard to class on the matters expected to be voted upon at the
Annual Meeting.
Shares standing to the credit of a participant in the Shareholder
Investment Service for the automatic reinvestment of common stock dividends will
be voted only if and in the same manner as such participant shall vote his or
her shareholdings of record. In the event a participant is not a stockholder of
record, Harris Trust and Savings Bank, as custodian, will vote shares held for
his or her account only in accordance with his or her instructions. Shares
standing to the credit of a participant in the Inland Steel Industries Thrift
Plan will be voted as such participant directs, provided that any such direction
(or any revocation of a prior direction) must be received by Harris Trust and
Savings Bank, as Trustee under the Thrift Plan, by 5:00 p.m., Chicago time, on
May 23, 1995. Shares in the Thrift Plan as to which no direction is received by
such time will be voted in the same proportion as shares that have been timely
directed.
It is the policy of the Company that proxies, consents, ballots and voting
materials that identify the vote of specific stockholders are kept confidential
until the final vote is tabulated, except in a contested proxy or consent
solicitation or to meet applicable legal requirements. All such documents are
returned to the tabulator and are available to the
<PAGE> 5
inspectors of election to enable them to certify the results of the vote. Harris
Trust and Savings Bank acts as the tabulator, and one or more officers or
employees of the Harris Bank will serve as inspectors of election. Comments
written on or accompanying proxy cards will be provided to the Company without
indication of the vote of the stockholder except where the vote is included in
the comment or is necessary for an understanding of the comment.
ELECTION OF DIRECTORS
Proxies not limited to the contrary will be voted for the 10 nominees
listed below as directors of the Company for terms expiring on the date of the
Annual Meeting of the Company in 1996 and until their successors are duly
elected and qualified. Directors shall be elected by a plurality of the votes of
the shares present in person or by proxy at the Annual Meeting and entitled to
vote in the election, and the outcome of the election will therefore not be
affected by stockholders who abstain from voting or withhold authority to vote
in the election, or by broker non-votes. All such nominees are presently serving
as directors of the Company and of Inland Steel Company, a wholly owned
subsidiary of the Company. Mr. Raymond C. Tower, a director since 1986, is
retiring from the Board pursuant to the Company's retirement policy for
directors. Dr. Emerson Kampen, a director since 1988, will not be standing for
re-election because of continuing illness. The period of service as a director
shown for each nominee includes the period for which such nominee served as a
director of Inland Steel Company prior to the effective date (May 1, 1986) of
the plan of restructuring pursuant to which the Company became a holding company
for Inland Steel Company and its subsidiaries. The Board of Directors held seven
meetings during 1994. Dr. Kampen attended fewer than 75% of the combined total
number of meetings of the Board of Directors and committees on which he served
while contending with illness. All other incumbent directors attended at least
75% of the combined total number of meetings of the Board of Directors and
committees on which they served.
In conjunction with the six-year labor agreement finalized in July 1993
between Inland Steel Company and the United Steelworkers of America, the
Steelworkers were provided the ability, through 1999, to designate as a director
nominee an individual acceptable to the Board of Directors of the Company. Dr.
McKersie was so designated and was elected to the Board of Directors by
stockholders in 1994.
If any nominee should become unavailable for election (an event that is not
anticipated), proxies may be voted for the election of such other person or
persons as may be designated by the Board of Directors of the Company, unless
the Board has taken prior action to reduce its membership.
2
<PAGE> 6
INFORMATION CONCERNING NOMINEES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
A. ROBERT ABBOUD Director since 1974
Mr. Abboud, age 65, is President of A. Robert Abboud and Company, a
private investment firm established by him in 1984. From April 1988
[GRAPHIC until March 1991 Mr. Abboud was Chairman and Chief Executive Officer of
NO. 1] First City Bancorporation of Texas, Inc., a bank holding company, which
in November 1992 consented to an involuntary bankruptcy petition, is
operating under Chapter 11 of the U.S. Bankruptcy Code, and filed a plan
of reorganization with the bankruptcy court in January 1995, with
confirmation hearings scheduled for May 1995. He is Chairman of Inland's
Finance and Retirement Committee and a member of its Audit Committee.
Mr. Abboud is also a director of AAR Corp., Alberto-Culver Company,
First City Bancorporation of Texas, Inc., and Hartmarx Corporation.
JAMES W. COZAD Director since 1991
Mr. Cozad, age 68, was Chairman and Chief Executive Officer of Whitman
Corporation, a diversified producer of consumer and commercial products,
prior to his retirement in May 1992. He was elected to that position in
[GRAPHIC January 1990. Mr. Cozad previously had been employed, starting in 1969,
NO. 2] by Amoco Corporation, a producer and distributor of petroleum products,
natural gas and chemicals, was its Chief Financial Officer from 1976 and
in addition served as Vice Chairman from 1983 until joining Whitman.
He is a member of Inland's Compensation, Nominating and Executive
Committees. Mr. Cozad is also a director of Eli Lilly and Company, GATX
Corporation, Sears, Roebuck and Co., and Whitman Corporation.
ROBERT J. DARNALL Director since 1983
Mr. Darnall, age 57, is Chairman, President and Chief Executive Officer
[GRAPHIC of the Company, Chairman of Inland Steel Company, and Chairman of the
NO. 3] Executive Committee. He joined Inland Steel Company in 1962, served as
its President from 1984 until 1986 and was re-elected to that position
in 1987. Mr. Darnall was elected President and Chief Operating Officer
of the Company in 1986. He assumed his present position with the Company
in 1992. Mr. Darnall is also a director of Cummins Engine Company, Inc.
and Household International, Inc.
</TABLE>
3
<PAGE> 7
INFORMATION CONCERNING NOMINEES (CONTINUED)
- --------------------------------------------------------------------------------
JAMES A. HENDERSON Director since 1978
Mr. Henderson, age 60, is Chairman and Chief Executive Officer
of Cummins Engine Company, Inc., a manufacturer of diesel
engines. He joined that company in 1964, was elected Executive
[GRAPHIC Vice President in 1971, and was elected Executive Vice
NO.4] President and Chief Operating Officer in 1975. In 1977 he was
elected President and Chief Operating Officer, was elected
President and Chief Executive Officer in 1994, and assumed his
present position in 1995. He is Chairman of Inland's Audit
Committee and a member of Inland Steel Company's Partnership
Oversight Committee. Mr. Henderson is also a director of Cummins
Engine Company, Inc., Ameritech Corporation, and Rohm and Haas
Company.
ROBERT B. MCKERSIE Director since 1994
Dr. McKersie, age 65, is a professor at the Sloan School of
Management at Massachusetts Institute of Technology. Dr.
[GRAPHIC McKersie was also Deputy Dean at the Sloan School of Management
NO. 5] from 1991 to 1994. Prior to joining MIT in 1980, he served as
Dean of the New York State School of Industrial and Labor
Relations at Cornell University, and prior to that was on the
faculty of the Graduate School of Business at the University of
Chicago. He is a member of Inland's Audit Committee and Inland
Steel Company's Partnership Oversight Committee.
MAURICE S. NELSON, JR. Director since 1995
Mr. Nelson, age 57, is Executive Vice President of the Company
and President and Chief Executive Officer of Inland Steel
[GRAPHIC Company. He joined Inland Steel Company in 1991 as President of
NO. 6] the Inland Steel Flat Products Company division of Inland
Steel Company, and became Senior Vice President of the Company
and President and Chief Operating Officer of Inland Steel
Company in 1992. Mr. Nelson assumed his present positions in
January 1995. Mr. Nelson previously had been employed by
Aluminum Company of America, a producer and fabricator of
aluminum and aluminum products, where he was elected Vice
President-Sheet and Plate in 1985 and President-Sheet and Plate
in 1991. He is a member of Inland's Executive and Finance and
Retirement Committees.
4
<PAGE> 8
INFORMATION CONCERNING NOMINEES (CONTINUED)
- --------------------------------------------------------------------------------
DONALD S. PERKINS Director since 1967
Mr. Perkins, age 68, was Chairman of Jewel Companies, Inc., a
diversified retailer, prior to his retirement in 1980. He is
[GRAPHIC Chairman of Inland's Nominating Committee and a member of its
NO. 7] Compensation and Executive Committees. Mr. Perkins is also a
director of Aon Corporation, AT&T Corp., Cummins Engine Company,
Inc., Illinois Power Company, Illinova Corporation, Kmart
Corporation (Chairman of the Board since January 1995), LaSalle
Street Fund Incorporated, the Putnam Funds, and Time Warner Inc.
JOSHUA I. SMITH Director since 1991
Mr. Smith, age 54, is Chairman and Chief Executive Officer of
The MAXIMA Corporation, an information management service
[GRAPHIC company established by him in 1978. He serves as a trustee or
NO. 8] director of a number of professional, educational, and business
boards and associations and was formerly Chairman of the
U. S. Commission on Minority Business Development. He is a
member of Inland's Compensation, Finance and Retirement, and
Nominating Committees. Mr. Smith is also a director of
Caterpillar, Inc. and Federal Express Corporation.
NANCY H. TEETERS Director since 1991
Ms. Teeters, age 64, was Vice President and Chief Economist of
[GRAPHIC IBM Corporation, a manufacturer of business machines, from 1984
NO. 9] until her retirement in 1990. She is a member of Inland's Audit
and Finance and Retirement Committees. Ms. Teeters is also a
director of a number of registered investment companies managed
by Prudential Securities Mutual Funds and advised by Prudential
Securities Mutual Funds, Wellington Management or Blackrock
Group.
ARNOLD R. WEBER Director since 1985
Dr. Weber, age 65, is Chancellor of Northwestern University. He
[GRAPHIC began his career in education in 1958 in the field of urban and
NO.10] labor economics, served as a professor at the University of
Chicago and Dean of the Graduate School of Industrial
Administration at Carnegie-Mellon University, was President of
the University of Colorado from 1980 until 1985, and was
President of Northwestern University from 1985 until he assumed
his present position in January 1995. He has served as an
economic advisor to four national administrations and as a
consultant to several governmental agencies. He is a member of
Inland's Compensation, Executive and Nominating Committees, as
well as Chairman of Inland Steel Company's Partnership Oversight
Committee. Dr. Weber is also a director of Aon Corporation,
Burlington Northern, Inc., Deere & Company, PepsiCo, Inc., and
Tribune Company.
5
<PAGE> 9
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company or any of its subsidiaries
receive an annual retainer of $30,000, 20% of which is paid in shares of common
stock of the Company pursuant to the Inland 1992 Stock Plan for Non-Employee
Directors. Such directors also receive $1,000 for each special meeting of the
Board of Directors of the Company and of Inland Steel Company attended by them,
except that if special meetings of both Boards are held on the same day, only
one meeting attendance fee is paid. In addition, each such director who serves
as a member of a standing committee of the Board of Directors is paid an
additional annual fee of $3,000 for service on each such committee on which he
or she serves, except that membership on the Compensation and Nominating
Committees is regarded as membership on only one committee for purposes of the
payment of such additional fee and that only one meeting attendance fee is paid
if standing committee meetings of both Boards are held on the same day. In
addition, such directors also receive $1,000 for each special committee meeting
attended that is not held in connection with a regular or special meeting of the
Board of Directors except that only one meeting attendance fee is paid if
special meetings of the same committees of both Boards are held on the same day
and that membership on the Compensation and Nominating Committees is regarded as
membership on only one committee for purposes of the payment of such additional
fee. No fees are paid for any meeting of the Executive Committee. Any such
director who is also the chairman of a standing committee of the Board of
Directors of the Company receives an additional annual retainer of $3,000 except
that a chairman of the same committee of both Boards receives only one fee. A
director may elect to defer payment of all or a portion of such fees until he or
she ceases to be a director of the Company. Interest on the cash portion of any
fees with respect to which payment is deferred is accrued at the prime rate in
effect from time to time at The First National Bank of Chicago. Amounts
equivalent to dividends that would have been paid on the stock portion of any
deferred fees are credited to the account of such director and converted into
additional deferred shares at market prices. The Company also pays the premiums
on a business accident insurance policy insuring each non-employee director for
amounts up to $500,000.
The Company provides retirement benefits to certain members of the Board of
Directors. Each director who serves on the Board as a non-employee director for
at least ten consecutive years, or for at least five consecutive years and
remains on the Board until age 70, and who is not eligible to receive benefits
under any Company pension plan, is eligible for retirement benefits. Benefit
payments begin at the later of the director's retirement or his or her attaining
age 65 and continue for the number of full years of service as a non-employee
director, up to a maximum of ten years. The amount of the annual benefit is
equal to the amount of the annual retainer paid for services as a member of the
Board in effect at the last Board meeting attended by such director. The
directors' retirement plan provides that in the case of any director who is 60
or older, the Company may purchase annuities (and provide a tax gross-up payment
to the director at the time of purchase) either prior to or at the time of
retirement to satisfy the Company's obligations
6
<PAGE> 10
under these plans for benefits payable at age 70. Any annuities purchased for a
director would be designed to provide an after-tax benefit equivalent to the
benefit provided under the plan.
COMMITTEES OF THE BOARD OF DIRECTORS
Among the standing committees of the Board of Directors, the Company has an
Audit Committee, a Compensation Committee and a Nominating Committee. The
members of these three committees, none of whom is an employee of the Company or
any of its subsidiaries, are identified above under "Election Of Directors."
The duties of the Audit Committee are to review the proposed scope of the
annual audit and the results and recommendations of the independent auditors on
completion of the annual audit; to review the financial review sections of the
Company's annual report to stockholders and annual report on Form 10-K; to
review the minutes of the quarterly audit review of the independent auditors and
each quarterly report on Form 10-Q; to nominate a firm of independent auditors
to be submitted to the stockholders for election at the annual meeting; to
approve all non-audit services to be performed by the independent auditors; to
approve the compensation of the independent auditors; to review the Company's
system of internal accounting controls and its system of internal operating
controls and the performance of its internal auditors; to monitor compliance by
management with the Company's Code of Business Conduct; and to review
registration statements prepared in connection with financings by the Company
and its subsidiaries. The Audit Committee held five meetings in 1994.
The duties of the Compensation Committee are to make recommendations to the
Board of Directors with respect to the salaries of the officers of the Company
and approve the salary of the president of each of the Company's major
subsidiaries; to administer the Inland Steel Industries, Inc. Annual Incentive
Plan, the Inland 1984 Incentive Stock Plan, the Inland 1988 Incentive Stock
Plan, the Inland 1992 Incentive Stock Plan, and, if approved by stockholders,
the Inland 1995 Incentive Stock Plan; and to make recommendations to the Board
of Directors with respect to the establishment or modification of executive
compensation plans and programs. The Compensation Committee held four meetings
in 1994.
The duties of the Nominating Committee are to prepare and maintain a list
of qualified candidates to fill vacancies on the Board of Directors and
recommend to the Board of Directors candidates to fill any such vacancies; to
recommend to the Board of Directors annually a slate of candidates for election
as directors by the stockholders at the annual meeting; and to recommend the
compensation to be paid to non-management directors for their services as
directors. The Nominating Committee held two meetings in 1994.
The Nominating Committee will consider qualified candidates recommended by
the stockholders for designation as nominees for election at the Annual Meeting
of Stockholders to be held in 1996 and subsequent years. In order for a
candidate recommended by a
7
<PAGE> 11
stockholder to be considered by the Nominating Committee for designation as a
nominee for election at the Annual Meeting of Stockholders to be held in 1996,
the name of such candidate, together with a written description of his or her
qualifications, must be received by the Secretary of the Company prior to
January 1, 1996. The By-laws of the Company provide a formal procedure,
including an advance notice requirement, for nominations by stockholders of
persons for election as directors at annual meetings of the Company.
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table presents, as of April 4, 1995, the equity securities
beneficially owned (as that term is defined by the Securities and Exchange
Commission) by all directors of the Company, the named executive officers of the
Company, and the directors and executive officers of the Company as a group, in
each case, except as indicated, with sole voting and investment power. Common
stock, in each case, includes preferred stock purchase rights distributed in
1987 to holders of common stock. The shares of Series E ESOP Preferred Stock
shown as beneficially owned by the executive officers are held for their
respective accounts in the Inland Steel Industries Thrift Plan and could be
converted upon retirement or other termination of employment into an equal
number of shares of common stock of the Company (subject to adjustment in
certain events). Excluded from the number of shares listed as beneficially owned
are allocated shares of 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
OF BENEFICIAL
AMOUNT AND NATURE OWNERSHIP OF
OF BENEFICIAL SERIES E ESOP
OWNERSHIP OF PREFERRED
COMMON STOCK(1) STOCK(2)
----------------- -----------------
<S> <C> <C>
Directors
A. Robert Abboud............................ 5,618 --
James W. Cozad.............................. 1,118 --
Robert J. Darnall........................... 166,025 1,508
James A. Henderson.......................... 1,618 --
Emerson Kampen.............................. 1,618 --
Robert B. McKersie.......................... 375 --
Maurice S. Nelson, Jr....................... 48,263 933
Donald S. Perkins........................... 3,118 --
Joshua I. Smith............................. 618 --
Nancy H. Teeters............................ 918 --
Raymond C. Tower............................ 1,318 --
Arnold R. Weber............................. 718 --
</TABLE>
8
<PAGE> 12
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
AMOUNT AND NATURE OWNERSHIP OF
OF BENEFICIAL SERIES E ESOP
OWNERSHIP OF PREFERRED
COMMON STOCK(1) STOCK(2)
----------------- -----------------
<S> <C> <C>
Named Executive Officers
Robert J. Darnall........................... 166,025 1,508
David B. Anderson........................... 84,583 1,439
W. Gordon Kay............................... 32,722 0
Earl L. Mason............................... 51,800 1,058
Maurice S. Nelson, Jr....................... 48,263 933
All Directors and Executive Officers as a
Group....................................... 605,767 10,150
</TABLE>
- ---------------
(1) Excludes shares of common stock into which Series E ESOP Convertible
Preferred Stock may be converted. No director or named executive officer
individually owns 1% or more of the outstanding common stock of the Company;
all directors and executive officers as a group own 1.36% of the outstanding
common stock of the Company. Includes 1,000 shares held by Emerson Kampen
jointly with his wife, 200 shares held by Robert B. McKersie jointly with
his wife, 290 shares held by Robert J. Darnall jointly with his wife, 7,763
shares held by Maurice S. Nelson, Jr. jointly with his wife, and 9,253
shares held by individual directors and officers jointly with other persons,
as a group; and shares which the following have the right to acquire under
options exercisable within 60 days after April 4, 1995: Robert J. Darnall,
115,667; David B. Anderson, 67,000; W. Gordon Kay, 24,500; Earl L. Mason,
44,000; Maurice S. Nelson, Jr., 22,500; and executive officers as a group,
422,309. Also includes 87,350 shares held under restricted stock awards and
100 shares held by the spouse of an executive officer, for which beneficial
ownership is disclaimed.
(2) Each named executive officer individually owns and all executive officers as
a group collectively own less than 1% of the Series E ESOP Preferred Stock
of the Company.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, officers and certain stockholders to file with the Securities and
Exchange Commission an initial statement of beneficial ownership and certain
statements of changes in beneficial ownership of equity securities of the
Company. To the Company's knowledge, based on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
executive officers, directors and greater than 10% beneficial owners were
complied with.
9
<PAGE> 13
ADDITIONAL INFORMATION RELATING TO VOTING SECURITIES
The following table sets forth, as of December 31, 1994, the only holders
known to the Company to own beneficially more than 5% of its common stock,
Series E ESOP Preferred Stock, and Series F Exchangeable Preferred Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES OWNED CLASS
- ------------------------------------------------------------- ------------ ----------
<S> <C> <C>
Common Stock
Bankmont Financial Corp.................................... 3,680,619(1) 7.73
111 West Monroe Street
Chicago, IL 60603
Brinson Partners, Inc...................................... 3,535,200(2) 7.94
209 South LaSalle Street
Chicago, IL 60604
Capital Growth Management Limited Partnership.............. 2,621,000(3) 5.88
One International Place
Boston, MA 02110
FMR Corp. ................................................. 2,902,969(4) 6.52
82 Devonshire Street
Boston, MA 02109
Norwest Corporation........................................ 4,230,634(5) 9.50
Norwest Center Sixth and Marquette
Minneapolis, MN 55479
Series E ESOP Preferred Stock
Bankmont Financial Corp.................................... 3,035,274(1) 100
Series F Exchangeable Preferred Stock
NS Finance III, Inc........................................ 185,000(6) 100
c/o Nippon Steel U.S.A., Inc.
10 East 50th Street, 29th Floor
New York, NY 10022
</TABLE>
- ---------------
(1) Bankmont Financial Corp. (which is a wholly owned subsidiary of the Bank of
Montreal), filing on behalf of itself and its subsidiaries (including Harris
Bankcorp, Inc., Harris Trust and Savings Bank, and Harris Investment
Management, Inc.), reported aggregate sole voting power as to 3,680,619
shares of common stock and sole dispositive power as to 3,679,569 shares of
common stock (including both 3,035,274 shares issuable upon conversion of
the Series E ESOP Preferred Stock and 635,196 shares of common stock held by
Harris Trust and Savings Bank as Trustee of the employee stock ownership
plan contained within the Inland Steel Industries Thrift Plan) and shared
dispositive power as to 1,050 shares of common stock, expressly denying
beneficial ownership of all shares held in the Thrift Plan. As of December
31, 1994, the outstanding shares of Series E ESOP Preferred Stock
represented approximately 7.16% of the voting power of the Company's
outstanding voting securities.
10
<PAGE> 14
(2) Brinson Partners, Inc., on behalf of itself and its wholly owned subsidiary,
Brinson Trust Company, reported aggregate sole voting power and sole
dispositive power as to 3,535,200 shares of common stock. Brinson Partners,
Inc. is a wholly owned subsidiary of Brinson Holdings, Inc.
(3) Capital Growth Management Limited Partnership reported sole voting power and
shared dispositive power as to 2,621,000 shares of common stock.
(4) FMR Corp., on behalf of itself, Edward C. Johnson 3rd, Fidelity Management &
Research Company, and the Fidelity Magellan Fund reported aggregate sole
voting power as to 10,930 shares of common stock and sole dispositive power
as to 2,902,969 shares.
(5) Norwest Corporation on behalf of itself and Norwest Colorado, Inc., Norwest
Bank Colorado, National Association, and certain other subsidiaries,
reported aggregate sole voting power as to 3,915,250 shares of common stock,
shared voting power as to 40,272 shares, sole dispositive power as to
4,205,604 shares, and shared dispositive power as to 6,516 shares.
(6) NS Finance III, Inc., is an indirect wholly owned subsidiary of Nippon Steel
Corporation ("NSC"). NS Finance III, Inc. has agreed that it will be deemed
to be present for quorum purposes at all stockholder meetings. As of
December 31, 1994, the outstanding shares of Series F Exchangeable Preferred
Stock represented approximately 10.45% of the voting power of the Company's
outstanding voting securities. In addition, as of December 31, 1994, NS
Finance III, Inc. owned 352,400 shares, or approximately .79% of the
outstanding shares of common stock of the Company. See "Certain
Relationships and Related Transactions" below.
Certain persons were also known to the Company to be the beneficial owners
of more than 5% of the outstanding shares of Series A $2.40 Cumulative
Convertible Preferred Stock. Such persons vote together with the holders of the
common stock, the Series E ESOP Preferred Stock, and the Series F Exchangeable
Preferred Stock as a single class on each matter being submitted to
stockholders, and none of the owners of the Series A Preferred Stock owns shares
of Series A Preferred Stock having more than 1% of the combined voting power of
the Company's outstanding voting securities.
On March 22, 1995, the Board of Directors of the Company approved the
contribution to the Inland Steel Industries Pension Trust of a maximum of $100
million of common stock of the Company, not to exceed 4.4 million shares. If
such contribution were not made, the Pension Plan would be expected to have a
funding requirement related to 1995 of approximately $25 million under the
pension reform legislation contained in the recently passed General Agreement on
Tariffs and Trade. The contribution of common stock to the Pension Trust is
intended to address this funding requirement and to provide for future funding.
The conclusion of the transaction is dependent on the satisfactory structuring
and documentation of the terms of the stock issuance with the trustee of the
Pension Trust and others. It is anticipated that such trustee or an independent
investment manager would
11
<PAGE> 15
retain sole dispositive and voting power of shares of common stock contributed
by the Company. Because the shares were not contributed to the Pension Trust
prior to the record date for the 1995 Annual Meeting of Stockholders, they will
not be entitled to be voted at such meeting. Based on current market values of
the Company's common stock, the Company expects that the shares contributed to
the Pension Trust will represent eight to nine percent of the total shares of
the currently outstanding common stock of the Company. Such percentage will vary
depending on the market value of contributed shares on their valuation date,
although such percentage will remain below 10% of the currently outstanding
common stock. It is anticipated that the contribution transaction will be
concluded during the second quarter of 1995.
The Board of Directors of the Company also approved, on March 22, 1995, the
repurchase of up to the full amount of the Company's Series F Exchangeable
Preferred Stock which was sold to a subsidiary of Nippon Steel Corporation in
1989. Such sale transaction is described below under "Certain Relationships and
Related Transactions." The Series F Exchangeable Preferred Stock is currently
required to be redeemed by the Company in stages in December 1996 and December
1999 at a total cost of $185 million. The early repurchase of the Series F
Exchangeable Preferred Stock will permit Nippon Steel Corporation or its
subsidiary to repay certain loans related to its acquisition of these shares.
Because Nippon Steel Corporation or its subsidiary will incur a prepayment
premium in repaying such loans early, the Company has agreed to pay an
additional amount of up to approximately $10 million in connection with the
repurchase of the full amount of the Series F Exchangeable Preferred Stock (and
would pay a reduced amount upon repurchase of less than the full amount of the
stock). The consummation of the Series F Exchangeable Preferred Stock repurchase
transaction is dependent on the preparation of documentation acceptable to the
Company and Nippon Steel Corporation. It is currently anticipated that the
repurchase transaction will also be concluded during the second quarter of 1995.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1994 subsidiaries of the Company maintained credit facilities with
banking groups that include Harris Trust and Savings Bank, which is a beneficial
owner of more than 5% of certain classes of the Company's securities, as
described above. There were borrowings under one such facility for eight days in
1994, peaking at $19 million. In 1994, subsidiaries of the Company incurred
approximately $106,000 in fees and interest payable to Harris Trust and Savings
Bank in connection with such facilities.
Brinson Partners, Inc., also an owner of more than 5% of certain classes of
the Company's securities, as described above, has provided investment management
services to the Company's pension plan trust. The pension trust incurred
approximately $623,000 in investment management fees payable to Brinson
Partners, Inc., in 1994.
12
<PAGE> 16
During 1989, the Company and NSC, through its indirect wholly owned
subsidiary NS Finance, Inc., each purchased in the open market approximately
$15,000,000 of the other company's common stock. The Company purchased 2,500,000
shares of NSC common stock, representing .04% of the then outstanding shares of
NSC. NS Finance, Inc. later transferred ownership of its Company common stock to
NS Finance III, Inc., also an indirect wholly owned subsidiary of NSC. On
December 18, 1989, the Company sold 185,000 shares of its Series F Exchangeable
Preferred Stock to NS Finance III, Inc., for $1,000 per share. The Company paid
NSC approximately $17,538,000 in dividends on such preferred stock in 1994. NSC,
on behalf of itself and its affiliates, has agreed not to acquire additional
shares of the Company's stock prior to the redemption of the Series F
Exchangeable Preferred Stock or to transfer such Preferred Stock without the
Company's approval. Such Preferred Stock is exchangeable at the Company's
option, with the consent of NS Finance III, Inc., for $185,000,000 principal
amount of 10.23% Subordinated Voting Notes. So long as NS Finance III, Inc. and
certain transferees beneficially own at least 100,000 shares of such Preferred
Stock or $100,000,000 aggregate principal amount of such Subordinated Voting
Notes, the Company has agreed to nominate a mutually agreeable individual as
NSC's designee for election to the Board of Directors. No such individual is
being nominated by the Company at this time. In connection with such sale, the
Company agreed to repurchase $185,000,000 of its common stock. At year-end 1994,
a total of approximately $147,000,000 had been spent to buy back approximately
4,700,000 shares of common stock. The Company suspended open-market stock
purchases in December 1990. Until the repurchase is completed, the Company has
agreed to maintain cash, certain securities, a surety bond or letter of credit,
or some combination thereof, currently equal to $19,000,000, in order to meet
its remaining repurchase obligation. As described above, the Company intends to
repurchase from NS Finance III, Inc. some or all of the Series F Exchangeable
Preferred Stock in the second quarter of 1995.
The Company and NSC or their respective affiliates previously had entered
into a number of agreements related primarily to certain joint ventures and
certain technical projects concerning the Company's steel manufacturing
operations, and additional transactions have been and may be entered into in the
future upon terms to be determined through negotiation between the parties. The
following is a summary of arrangements and transactions between the Company and
NSC or their affiliates in effect since at least the beginning of 1994 or
presently proposed.
JOINT VENTURES
In July 1987, the Company and NSC entered into a joint venture for a
cold-rolling facility to be constructed near New Carlisle, Indiana. I/N Tek, the
general partnership formed for this joint venture, is 60% owned by a wholly
owned subsidiary of Inland Steel Company ("ISC") and 40% owned by an indirect
wholly owned subsidiary of NSC. The facility was completed in April 1990 at a
cost of approximately $525,000,000. Funds for the project were provided by
capital contributions by the two partners ($111,600,000 by ISC's subsidiary and
$74,400,000 by NSC's subsidiary) and by third-party financing. The
13
<PAGE> 17
partners made subordinated loans to the partnership for capital projects in the
aggregate amount of approximately $1,280,000 (in proportion to their respective
partnership interests) in 1994. The partnership made payments to the partners in
1994 in proportion to their partnership interests of approximately $2,644,000 in
connection with subordinated loans the partners had previously made to the
partnership. Further subordinated loans of approximately $7,500,000 are expected
to be made by the partners in 1995 for capital projects. I/N Tek made equity
distributions in 1994 totalling approximately $33,358,000 to the partners in
proportion to their partnership interests. ISC generally has exclusive rights to
the production capacity of the facility and an obligation to use the facility
for its production of cold-rolled steel through a tolling arrangement with I/N
Tek. I/N Tek charged ISC approximately $131,109,000 in tolling fees during 1994.
NSC has the right to purchase up to 400,000 tons of cold-rolled steel from ISC
in each year at market-based negotiated prices, including steel processed by I/N
Tek. During 1994, NSC, through NS Sales, Inc., an indirect wholly owned
subsidiary of NSC, made purchases from ISC of cold-rolled steel, including I/N
Tek products, totalling approximately $172,800,000. The joint venture will
terminate on December 31, 2009, unless otherwise terminated or extended pursuant
to the provisions of the joint venture agreement. I/N Tek and its partners have
entered into various technology, management, administrative services and
commercial agreements with respect to the project, which agreements will
terminate upon termination of the joint venture. Pursuant to such agreements,
I/N Tek paid to NSC approximately $1,962,000 in 1994 and expects to pay to NSC
approximately $500,000 annually for certain personnel support services through
the term of the partnership. I/N Tek also paid ISC approximately $1,242,000 in
1994 for various administrative and personnel support services and $3,696,000
for certain production supplies. In addition to the transactions described
above, during 1994 I/N Tek made purchases from Company subsidiaries of
approximately $2,479,000.
In September 1989, the Company and NSC entered into a joint venture for a
400,000-ton electrogalvanizing line and 500,000-ton hot-dip galvanizing line
adjacent to the I/N Tek venture. I/N Kote, the general partnership formed for
this joint venture, is 50% owned by subsidiaries of each of ISC and NSC. The
electrogalvanizing line began start-up operations in September 1991 and the
hot-dip galvanizing line began start-up operations in November 1991. The project
cost approximately $554,000,000. Permanent financing for the project, as well as
for capitalized interest and a portion of the working capital, was provided by
third-party long-term financing, by capital contributions by the two partners of
$60,000,000 each and by subordinated partner loans of $30,000,000 each. The
partners made subordinated loans to the partnership for capital projects in the
aggregate amount of approximately $4,390,000 (in proportion to their respective
partnership interests) in 1994. Further subordinated loans of approximately
$2,600,000 are expected to be made by the partners (in proportion to their
respective partnership interests) in 1995 for capital projects. Additional
equity contributions of $14,033,000 were made in 1994 by the partners in
proportion to their partnership interests. Such equity contributions were used
to partially fund a price adjustment payment made by the partnership to ISC in
1994, as described below. ISC and NSC have each guaranteed the share of project
indebtedness
14
<PAGE> 18
attributable to their respective subsidiaries. I/N Kote had approximately
$485,000,000 outstanding under its long-term financing agreement at December 31,
1994. The joint venture will terminate on December 31, 2007, unless otherwise
terminated or extended pursuant to provisions of the joint venture agreement.
I/N Kote is required to buy all of its cold-rolled steel from ISC, which is
required to furnish such cold-rolled steel at a price that results in an annual
return on equity to the partners of I/N Kote, depending upon operating levels,
of up to 10% after operating and financing costs; this price is subject to
upward price adjustments if I/N Kote's operating rate falls below a certain
level or if ISC's return on sales is less than I/N Kote's return on sales, and
downward price adjustments, to the extent of previously recorded upward
return-on-sales adjustments, if I/N Kote's return on sales is less than ISC's.
Prices of cold-rolled steel sold by ISC to I/N Kote are determined pursuant to
the terms of the joint venture agreement and are based, in part, on operating
costs of I/N Kote. In 1994, the prices at which ISC sold cold-rolled sheet steel
to I/N Kote exceeded production costs, but were less than the market prices for
cold-rolled steel products. During 1994, adjustments of $5,071,000 and
$21,093,000 were paid by the partnership to ISC based on I/N Kote's operating
rate in 1992, and on the relative levels of return on sales of I/N Kote and ISC
during 1993, respectively. Such amounts were funded by equity and capital
contributions from the partners in proportion to their respective partnership
interests. During 1995, an adjustment payment of $5,954,000 was made by ISC to
the partnership based on the relative levels of return on sales of I/N Kote and
ISC during 1994. A further payment by ISC of approximately $12,800,000 with
respect to 1995 production is anticipated to be made to the partnership during
1996. ISC acts as sales agent for I/N Kote's products in North America, and NSC
has agreed to certain limitations on its shipment of similar products into the
U.S. and Canada. ISC incurred costs of approximately $38,772,000 to I/N Kote for
certain tolling services and scrap purchases in 1994. I/N Kote and its partners
also have entered into various technology, management, administrative services
and other agreements with respect to the project. All of these agreements will
terminate upon termination of the joint venture. I/N Kote paid ISC approximately
$275,647,000 for cold-rolled sheet steel during 1994. I/N Kote paid
approximately $1,371,000 to NSC in 1994 for engineering services and technology
transfers. I/N Kote anticipates paying NSC approximately $1,200,000 annually for
such services through the term of the partnership. I/N Kote made payments of
approximately $6,318,000 to ISC in 1994 in connection with various
administrative, engineering and sales services provided to I/N Kote by ISC. In
addition to the transactions described above, Company subsidiaries made
purchases of approximately $1,196,000 from I/N Kote in 1994 and during the year
I/N Kote made purchases from Company subsidiaries of approximately $117,747. I/N
Kote paid I/N Tek approximately $8,849,000 in 1994 for shared utilities,
maintenance material and services.
In the event of certain changes in control of either the Company or NSC, or
if the Company makes or permits certain dispositions of specified portions of
ISC's business or interests in ISC, the other party has the right to purchase
the first party's interests in these ventures or to require the first party to
buy its interests, in each case at fair market value.
15
<PAGE> 19
OTHER AGREEMENTS
Commencing in 1981, the Company and NSC have entered into various
agreements pursuant to which NSC has provided technical services and licenses
with respect to specific Company research and engineering projects. Pursuant to
certain of such agreements, ISC paid approximately $1,816,000 for technical
services and engineering services provided to ISC by NSC in 1994 and for related
administrative costs, and anticipates paying at least $1,890,000 in 1995 for
such NSC services (and related costs) to be provided under such agreements. ISC
also purchased approximately $41,027,000 of steel slabs from NSC in 1994 and
anticipates purchases of approximately $77,455,000 of steel slabs in 1995 at
prices which approximate market prices.
16
<PAGE> 20
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table presents the compensation for fiscal 1992, 1993 and
1994 paid by the Company or its subsidiaries to the chief executive officer and
the four other most highly compensated executive officers of the Company.
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
------------------------
Annual Compensation Securities
---------------------------------- Restricted Underlying
Name and Principal Other Annual Stock Stock All Other
Position Year Salary Bonus Compensation Awards(1) Options(#) Compensation(2)
- -------------------------- ---- -------- -------- ------------ ----------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert J. Darnall 1994 $602,389 $363,000 $ 0 $ 185,250 30,000 $ 30,122
Chairman, President 1993 548,522 0 0 267,000 40,000 27,431
and Chief Executive 1992 471,812 0 0 0 30,000 26,088
Officer
David B. Anderson 1994 307,833 148,500 0 74,100 12,000 15,398
Vice President- 1993 299,208 0 0 89,000 18,000 14,956
Corporate Development, 1992 299,208 0 0 0 15,000 17,349
General Counsel and
Secretary
W. Gordon Kay 1994 347,120 225,800 0 123,500 0(4) 17,408
Vice Chairman 1993 316,589 127,000 332,114(3) 144,625 25,000 418,540
1992 302,627 66,000 0 0 20,000 15,764
Earl L. Mason 1994 346,581 167,300 0 86,450 14,000 17,336
Senior Vice President 1993 317,740 0 0 111,250 18,000 15,895
and Chief Financial 1992 309,166 0 130,116(5) 0 15,000 16,744
Officer
Maurice S. Nelson, Jr. 1994 505,148 267,700 0 247,000 20,000 25,272
Executive Vice President 1993 448,589 0 210,519(3) 222,500 25,000 282,237
1992 344,009 0 4,218 0 20,000 14,943
</TABLE>
- ---------------
(1) Awards consist of restricted common stock and are valued at the aggregate
market value as of the date of grant, based on the closing market price of
the Company's common stock on such date. Dividends are paid on such shares
to the extent paid on the Company's common stock. The vesting schedule for
the restricted stock awards made in 1993 and 1994 to the executives
identified in the table provides that all shares will vest at the end of
three-year periods beginning April 1, 1993 and May 25, 1994, respectively.
However, vesting may be accelerated at the discretion of the Compensation
Committee in the event of exceptional individual performance and (or)
significant progress by the Company 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, 1994, based on the
closing market price of the Company's common stock
17
<PAGE> 21
on December 30, 1994, were: Mr. Darnall, 18,000 shares/$632,250; Mr.
Anderson, 6,400 shares/$224,800; Mr. Kay, 10,500 shares/$368,813; Mr. Mason,
7,800 shares/ $273,975; and Mr. Nelson, 18,000 shares/$632,250.
(2) Amounts for 1994 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.
(3) Includes primarily tax gross-up payments in connection with the purchase of
annuities or with establishment of a letter of credit for funding
nonqualified retirement benefits, as follows: Mr. Kay, $320,825; and Mr.
Nelson, $200,595.
(4) Mr. Kay did not receive an option grant in 1994 due to his anticipated
retirement.
(5) Includes primarily $81,944 related to Company-paid relocation expenses and a
related $41,291 tax payment.
INDIVIDUAL OPTION GRANTS IN 1994
The following table presents information with respect to (a) individual
grants of options that were made during the last fiscal year to the named
executive officers and (b) the grant date present value of such options.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------------
OPTIONS GRANTED
AS A PERCENT
NUMBER OF PERCENT OF OF SHARES OF
SECURITIES TOTAL OPTIONS COMMON STOCK
UNDERLYING GRANTED TO OUTSTANDING
OPTIONS EMPLOYEES IN AT FISCAL EXERCISE EXPIRATION GRANT DATE
NAME GRANTED(1) FISCAL YEAR YEAR-END(2) PRICE(3) DATE PRESENT VALUE(4)
- ----------------------------- ---------- ------------- --------------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Darnall............ 30,000 6.5% 0.07% $30.875 5/24/2004 $439,800
David B. Anderson............ 12,000 2.6 0.03 30.875 5/24/2004 175,920
Earl L. Mason................ 14,000 3.0 0.03 30.875 5/24/2004 205,240
Maurice S. Nelson, Jr........ 20,000 4.3 0.04 30.875 5/24/2004 293,200
</TABLE>
- ---------------
(1) All options are for common stock and were granted on May 25, 1994. They
become exercisable with respect to 50% of the shares after May 25, 1995, and
are fully exercisable after May 25, 1996. See "Change in Control of the
Company" for option provisions regarding any change in control of the
Company. Mr. Kay, who retired on February 1, 1995, did not receive an option
grant in 1994 due to his anticipated retirement.
(2) The percentage is based on 44,550,228 shares of common stock outstanding at
December 31, 1994.
(3) The exercise price is equal to the average of the high and low price of the
Company's common stock on the New York Stock Exchange 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 the Company withhold
shares of stock (or accept already-
18
<PAGE> 22
owned shares) to satisfy tax withholding obligations with respect to option
exercises or payments.
(4) In accordance with Securities and Exchange Commission rules, the
Black-Scholes option pricing model was chosen to estimate the grant date
present value of the options granted during 1994. The Company's 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 10 years, the volatility of Company common stock is 32.28%
(calculated using daily stock prices for the one-year period prior to the
grant date), the ten-year risk-free interest rate is 7.18%, the dividend
rate is 0%, and a reduction of approximately 21.73% 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 1994 depends upon the actual
performance of the Company'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 the Company's stock
over the exercise price on the date the option is exercised.
AGGREGATED OPTION EXERCISES IN 1994 AND YEAR-END OPTION/SAR VALUES
The following table presents the number of shares of common stock
underlying options and SARs exercised by named executive officers during 1994,
the aggregate dollar value realized upon each such exercise, the number of
securities underlying the option/SAR holdings of the named executive officers at
the end of 1994, and the value of such holdings.
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
NUMBER OF NUMBER OF SECURITIES OPTIONS/SARS AT
SHARES UNDERLYING UNEXERCISED FISCAL
UNDERLYING OPTIONS/SARS AT FISCAL YEAR-END(1)
OPTIONS/SARS VALUE YEAR-END (EXERCISABLE/ (EXERCISABLE/
NAME EXERCISED REALIZED UNEXERCISABLE) UNEXERCISABLE)
- ------------------------ ------------ -------- ---------------------- -----------------
<S> <C> <C> <C> <C>
Robert J. Darnall....... 11,000 $109,313 80,667/73,333 $636,128/$523,747
David B. Anderson....... 0 0 52,000/32,000 404,438/234,125
W. Gordon Kay........... 35,000 587,864 12,000/27,500 6,875/251,667
Earl L. Mason........... 0 0 28,000/34,000 329,500/242,625
Maurice S. Nelson,
Jr.................... 22,500 374,896 0/47,500 0/336,667
</TABLE>
- ---------------
(1) All such options are for common stock of the Company; value is based on the
closing price of Company common stock on the New York Stock Exchange
Composite Transactions on December 30, 1994.
PENSION BENEFITS
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
19
<PAGE> 23
65. All benefit amounts shown in such table are subject to offset based upon
Social Security earnings.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE ANNUAL
EARNINGS FOR
THE APPLICABLE ANNUAL PENSION BENEFITS FOR YEARS OF SERVICE SHOWN
YEAR-OF-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 4, 1995, the executive officers named in the table under the
heading "Summary Compensation Table," other than Mr. Kay, were credited with the
following years of service under the plan: Robert J. Darnall -- 32 years; David
B. Anderson -- 12 years; Earl L. Mason -- 3 years; and Maurice S. Nelson, Jr. --
3 years. Mr. Kay retired on February 1, 1995 with three years of service under
the plan.
Pensions are provided by the Company and certain of its subsidiaries and
affiliates under a non-contributory 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.
Certain pension benefits in excess of limitations imposed by the Internal
Revenue Code will be paid by the Company pursuant to unfunded non-contributory
supplemental retirement plans. For any officer or employee with at least five
years of service (including in the case of Maurice S. Nelson, Jr., service with
his prior employer), annual compensation in excess of $150,000, and age 55 or
older, these plans permit the Company to satisfy its obligations for benefits
payable upon retirement at age 65 by (a) purchase of annuities 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 (b) the payment of a lump-sum amount at
the time of retirement. The Company also established individual letters of
credit naming certain executive officers or employees, including W. Gordon Kay,
as beneficiaries to provide lump-sum payments at retirement to satisfy Company
obligations pursuant to such supplemental retirement plans. Mr. Kay's letter of
credit was terminated upon his retirement.
20
<PAGE> 24
All accrued benefits under the pension plan vest, and all benefits accrued
under the supplemental retirement plans 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 of the Company. Any surplus assets
under the plan are to be used to provide additional benefits in the event of a
termination, merger or consolidation of the 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 plan within such three-year period.
Pension benefits are provided to eligible salaried employees of J. M. Tull
Metals Company, Inc. under a separate benefit schedule of the Inland Steel
Industries Pension Plan. The maximum annual pension benefits payable under such
schedule are approximately three percent higher than those shown in the above
table for comparable earnings and service. Prior to becoming covered by the
Company's benefit schedule on January 1, 1992, W. Gordon Kay was covered by the
Tull benefit schedule and, when he retired, was credited with 32 years of
service under that schedule.
The Company has an Agreement with Mr. Nelson under which he will receive
supplemental pension benefits under the highest of whichever of three separate
formulas applies. If his employment is terminated for any reason after five or
more years of service with the Company, he will receive the excess, if any, of
the amounts he would receive under the Company's pension plans if he were
credited under those plans with his 21 years of service and his earnings with
his prior employer over the sum of his actual benefits under the Company's
pension plans plus those received by him under his prior employer's pension
plans. If his employment is terminated at any time for any reason other than his
voluntary resignation, he will receive the excess, if any, of 50% of the amounts
he would receive under the Company's pension plans if he were credited under
those plans with his years of service and earnings with his prior employer over
his actual benefits under the Company's plans. If he retires as an employee of
the Company on or after age 62, he will receive the excess, if any, of 50% of
his "average monthly earnings" (as defined in the Company's plans) over amounts
received by him under his prior employer's and the Company's pensions plans.
CHANGE IN CONTROL OF THE COMPANY
Upon the occurrence of an event constituting a change in control 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 are not cashed out
until six months after the applicable date of grant and (b) the Compensation
Committee of the Board of Directors 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. In this connection, a "change in control of the Company"
shall generally be deemed to occur if (i) any person becomes the owner of 40% or
more of the combined voting power of the
21
<PAGE> 25
Company's voting securities (30% or more in the case of the Inland 1988
Incentive Stock Plan); (ii) during any two-year period the majority of the
membership of the Company's Board 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 Company's stockholders approve a
merger or consolidation with another company in which the Company's voting
securities do not continue to represent at least 80% of the combined voting
power of the voting securities of the surviving entity (excepting certain
recapitalizations of the Company); or (iv) the Company's stockholders approve a
liquidation, sale or disposition of all or substantially all of the Company's
assets.
The Company has entered into agreements with the named executive officers,
the present terms of which expire on December 31, 1995, but are automatically
extended for additional one-year periods thereafter unless the Company gives
prior notice that it does not wish to extend such agreements for another year.
The Company has not given such notice. These agreements provide that if such
executive's employment is terminated within two years after a change in control
of the Company either (i) by the Company 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 reasons relating to a diminution of
responsibilities, compensation or benefits or relocation requiring a change in
residence or a significant increase in travel, he will receive: (a) a lump-sum
payment equal to two times the sum of (1) his current annual base salary plus
(2) his average incentive bonus paid in the two years preceding termination of
employment; (b) an amount in cash in lieu of any allocations, unpaid awards or
rights under the Company's annual or other incentive compensation plans; (c) an
amount in cash equal to the value of outstanding stock options granted under the
Company's stock option plans; (d) an amount in cash equal to the value of shares
of common stock awarded or issuable as performance and/or restricted shares
under the Company's incentive stock plans; (e) life, disability, accident and
health insurance as provided in the Company's insurance programs for a period of
24 months after termination of employment; and (f) an amount in cash in lieu of
two years of additional accrued benefits under the Company pension plan. The
severance agreements contain 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
severance agreements for the executives, the Company will not be entitled to a
federal income tax deduction for a portion of the severance payment.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS REGARDING EXECUTIVE COMPENSATION
The Company's executive compensation programs are designed to attract and
retain outstanding individuals as officers and key employees and to reward such
individuals based on their personal performance and contributions and on the
financial performance of the Company and its business units. Such programs
consist of three elements -- base salary compensation, short-term incentive
compensation, and long-term incentive compensa-
22
<PAGE> 26
tion -- and are administered by the Compensation Committee of the Board of
Directors. The Compensation Committee consists of six directors, none of whom is
or has been an employee of the Company or any of its subsidiaries. The Committee
currently employs and periodically meets with outside compensation consultants
for assistance regarding the Company's executive compensation programs.
Total compensation opportunities are intended to be competitive with those
offered by manufacturing companies of comparable size, with particular attention
paid to the compensation practices of steel manufacturing companies, including
those in the S&P Steel Index (see "Comparison of Five-Year and Three-Year
Cumulative Total Return" below), and other metals companies. In recent years, as
a result of economic difficulties in the steel industry in general and for the
Company specifically, the Compensation Committee has been concerned about the
retention of talented executive and management personnel. The Committee has
addressed this concern by paying particular attention to base salary
compensation and by the limited but important use of restricted stock.
Base salary compensation of executive officers is reviewed annually by the
Compensation Committee, and recommendations of the Committee in that regard are
acted upon by the Board of Directors. Base salaries are targeted at the 50th
percentile of comparable positions in the comparison group of companies
described in the immediately preceding paragraph. Such base compensation
generally represents approximately one-half of the total target compensation
opportunity for executive officers of the Company. The other one-half of such
target compensation, consisting of short-term and long-term incentive
compensation in accordance with the factors described below, is variable and
fluctuates significantly from year to year as a result of the highly cyclical
condition of the steel industry. Mr. Darnall's base salary, which had last been
increased in 1992, was increased to $610,000 in February 1994 in recognition of
his leadership of the Company during a difficult economic period, his management
skill in achieving significantly improved results in financial performance and
other important performance areas, and his innovativeness, especially in
connection with the Company's relationship with the United Steelworkers of
America.
Short-term incentive compensation is payable to officers and other key
employees under the Inland Steel Industries, Inc. Annual Incentive Plan. This
Plan, which is administered by the Compensation Committee, provides for cash
awards based on a specified percentage of a participant's salary earnings and
the extent to which corporate and (or) business unit performance standards are
achieved for the year. In 1994, all major corporate units of the Company
achieved the target levels of return on operating assets established for such
units. The award payments to Messrs. Darnall, Mason and Anderson were computed
based upon the 1994 return on operating assets achieved by the corporate units
of the Company, weighted with respect to the relative asset value of each such
unit. Mr. Nelson's award payment was computed based upon the 1994 return on
operating assets achieved by Inland Steel Company, of which he is president and
chief executive officer. As the Chairman of Inland Materials Distribution Group,
Inc., the award payment to Mr. Kay was computed based upon the 1994 return on
operating assets achieved by the Materials
23
<PAGE> 27
Distribution corporate units, weighted with respect to the relative asset values
of each such unit.
Long-term incentive compensation grants and awards may be made by the
Compensation Committee under the Inland 1992 Incentive Stock Plan and, subject
to stockholder approval, the Inland 1995 Incentive Stock Plan, as described
under the caption "Proposed Inland 1995 Incentive Stock Plan," below. These
grants and awards consist of stock options, 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 Company's 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 common stock, are contingent on continuing
employment with the Company for specified periods, and performance awards,
payable in shares of 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 an opportunity to acquire an ownership stake in the Company and
thereby more closely align their interests with those of the stockholders.
Options to purchase a total of 76,000 shares of common stock, restricted
stock awards totaling 23,200 shares of common stock and performance awards
totaling 16,000 shares of common stock were granted to named executive officers
by the Compensation Committee in 1994, including options to purchase 30,000
shares and a restricted stock award of 6,000 shares to Mr. Darnall. The
Compensation Committee considered the amount and terms of prior awards of
options when deciding on option awards for 1994. Such grants of options and
restricted stock, including those made to Mr. Darnall, were targeted at the 50th
percentile of comparable positions based on a compensation analysis for officer
positions of the Company, a comparative company survey of compensation practices
at 26 industrial companies (including two companies in the S&P Steel Index) with
median sales revenues of $2.7 billion and a summary of executive compensation
issues prepared by the Company's outside executive compensation consultants.
Grants to named executive officers in 1994 were approximately 66% stock options,
20% restricted stock awards and 14% performance awards. These grants were
intended to provide incentives to improve stockholder value, to encourage
executive retention in a highly cyclical industry and to remain competitive in
executive recruitment. The restrictions on the restricted stock awards will
lapse, and the shares vest, at the end of the three-year period beginning May
25, 1994. However, vesting may be accelerated at the discretion of the
Compensation Committee in the event of exceptional individual performance and
(or) significant progress by the Company or the respective business unit in
meeting its operating and financial objectives. Performance awards were made to
two named executive officers in 1994, one of which was paid in February 1995
based upon the degree of achievement of the applicable 1994 business plan,
development of a strategic plan, officer succession planning and interna-
24
<PAGE> 28
tional development, and one of which is payable based on success in achieving,
during three periods extending to December 31, 1996, safety, cost control,
revenue growth and customer satisfaction performance criteria.
The Compensation Committee established a Stock Ownership Guidelines Program
in January 1994 for approximately 260 executive officers and key employees. The
Program is designed to align the interest of the Company's executive officers
and key employees with those of Company stockholders to create value for
stockholders. The Program establishes stock ownership goals to be met by such
officers and key employees by December 31, 1998. Stock ownership goals are
satisfied by Company stock held by executives and their families, Company stock
held in the Inland Steel Industries Thrift Plan, and stock options, based on the
difference between the market price and the exercise price.
Mr. Darnall meets frequently with the Compensation Committee and with the
non-management directors. These meetings include an annual review, by all of the
outside directors, of his financial, operating, and organization goals for the
Company for the year and an evaluation of his performance as it relates to the
Company's achievement of the previous year's goals. The results of that
evaluation are an important element in compensation decisions made by the
Committee and the Board of Directors, both with respect to Mr. Darnall and with
respect to the other executive officers of the Company.
The Compensation Committee desires to maximize the ability of the Company
to deduct compensation expenses for federal income tax purposes. Therefore, the
Committee has examined the Company's compensation policy in light of amendments
to the Internal Revenue Code enacted in 1993 that could limit the deductibility
of compensation of the chief executive officer and the four other most highly
compensated officers of the Company. These amendments to the Code allow
compensation paid pursuant to plans that are approved by stockholders and that
meet certain other requirements, including establishing objective performance
goals, to continue to be deductible. Therefore, the Compensation Committee has
recommended, and the Board of Directors has adopted, subject to stockholder
approval, the Inland 1995 Incentive Stock Plan in a form designed to satisfy
these requirements. See "Proposed Inland 1995 Incentive Stock Plan" below.
<TABLE>
<S> <C>
Raymond C. Tower, Chairman Donald S. Perkins
James W. Cozad Joshua I. Smith
Emerson Kampen Arnold R. Weber
</TABLE>
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<PAGE> 29
COMPARISON OF FIVE-YEAR AND THREE-YEAR CUMULATIVE TOTAL RETURN
The following charts compare the Company's cumulative total stockholder
return on its common stock for the five-year period and the three-year period
ended December 31, 1994, with the cumulative total return of the Standard &
Poor's 500 Composite Stock Price Index (the "S&P 500 Index") and the Standard &
Poor's Steel Index (the "S&P Steel Index"), both of which indices include the
Company. These comparisons assume the investment of $100 on December 31, 1989
and 1991, respectively, and the reinvestment of dividends. In addition to the
Company, the S&P Steel Index includes Armco, Inc., Bethlehem Steel Corporation,
Nucor Corp., the U.S. Steel Group of USX Corporation, and Worthington
Industries.
FIVE YEAR
[GRAPHIC NO. 11]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) INLAND S&P 500 S&P STEEL
<S> <C> <C> <C>
1989 100.00 100.00 100.00
1990 76.97 96.84 84.10
1991 67.71 126.03 103.25
1992 70.84 135.33 135.00
1993 103.72 148.51 177.48
1994 109.98 150.01 172.56
</TABLE>
In late 1991, the Company announced a three-year turnaround strategy to
improve performance by increasing revenues, reducing costs and enhancing asset
utilization. While the Company's total return lagged the indices in 1992, the
key elements of the Company's turnaround strategy have now been implemented and
total return for 1993 and 1994 significantly exceeded both indices. At year end
1994 the Company's three-year performance exceeded the total return for the S&P
500 Index and nearly matched the Steel Index.
26
<PAGE> 30
THREE YEAR
[GRAPHIC NO. 12]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) INLAND S&P 500 S&P STEEL
<S> <C> <C> <C>
Q4 91 100.00 100.00 100.00
Q1 92 104.62 97.48 100.70
Q2 92 120.23 99.34 111.03
Q3 92 85.55 102.45 96.64
Q4 92 104.62 107.57 130.83
Q1 93 101.73 112.24 150.25
Q2 93 132.95 112.74 155.08
Q3 93 130.06 115.61 151.90
Q4 93 153.18 118.24 172.06
Q1 94 139.31 113.75 170.57
Q2 94 161.27 114.19 176.90
Q3 94 182.08 119.71 195.31
Q4 94 162.43 119.63 167.34
</TABLE>
PROPOSED INLAND 1995 INCENTIVE STOCK PLAN
The Company has used stock option plans and other stock plans as an
integral part of its executive incentive program for many years. Most recently,
stock-based grants and awards have been made under the Inland 1992 Incentive
Stock Plan (the "1992 Plan"). As of April 4, 1995, grants and other awards for
2,003,384 shares of common stock of the Company had been made under the 1992
Plan, including awards for 1,565,025 shares that remained outstanding as of that
date, and 285,988 shares remained available for future grants and awards under
such plan.
The Board of Directors has determined that a new stock plan is needed in
order to maintain a competitive executive incentive program and thereby more
effectively attract and retain and furnish incentives to outstanding individuals
as officers and key employees of the Company and its subsidiaries. Accordingly,
the Board of Directors has adopted, and is submitting to the stockholders for
their approval, the Inland 1995 Incentive Stock Plan (the "Plan"). The Plan
provides that the maximum number of shares of common stock which may be issued
pursuant to all grants thereunder may not exceed two million, plus the number of
shares that remain unissued under the 1992 Plan, including shares that remain
unissued because of the lapse of presently outstanding grants. Shares issued
under the Plan may be authorized and unissued shares of common stock, treasury
common stock, or any combination thereof. The Plan will become effective
immediately upon approval by the stockholders and will continue in effect until
terminated by the Board of Directors. If
27
<PAGE> 31
the Plan is approved by stockholders, the 1992 Plan will be discontinued, except
as to outstanding grants. The summary of the Plan which follows is qualified in
its entirety by reference to the complete text of the Plan as set forth as
Exhibit A hereto.
GENERAL DESCRIPTION
Participants in the Plan shall consist of such officers and other key
employees of the Company and its subsidiaries as the Compensation Committee of
the Board of Directors (the "Committee") may select from time to time. The
Committee identified approximately 200 to 300 participants annually to
participate in the 1992 Plan, and expects that comparable numbers of
participants will participate in the Plan. In the discretion of the Committee,
participants in the Plan may receive stock options, stock appreciation rights,
restricted stock awards or performance awards, either singly or in combination.
The form and amount of any grant or award, whether measured by shares of common
stock or otherwise, as well as the time and conditions of exercise or vesting
and any acceleration of the time of exercise or vesting, are subject to the
discretion of the Committee, provided that no more than 700,000 shares may be
issued pursuant to restricted stock awards and performance awards under the
Plan. Except to the extent otherwise determined by the Committee, any shares
subject to a grant or award which terminates 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) or which are settled in cash (to the extent so settled),
or in the case of a restricted stock award without vesting, shall again be
available for future grants under the Plan.
Recent changes in the Internal Revenue Code of 1986, as amended (the
"Code") place limitations on the deductibility, for Federal income tax purposes,
of annual compensation paid to certain executive officers generally designated
as the five most highly compensated officers of the Company on the last day of
the year (the "Named Executive Officers"). In order to permit certain grants and
awards under the Plan to be deductible for Federal income tax purposes, the Plan
limits, except in the case of grants and awards which by their terms are not
intended to comply with such Code limitations, the maximum number of shares that
may be granted or awarded under the Plan in any fiscal year of the Company to
any participant under the Plan to 300,000 and the maximum aggregate cash payout
that may be made under the Plan in any fiscal year of the Company to a Named
Executive Officer to $1 million.
The Committee has general authority to administer the Plan, including the
authority to select participants, determine the form and amount of awards and
amend such awards or accelerate the time of exercise or vesting thereof. The
Board of Directors may amend the Plan in any respect, or terminate the Plan at
any time, provided that no amendment may be made without stockholder approval
that would increase the maximum number of shares available for issuance pursuant
to grants under the Plan and no amendment or termination may impair the rights
of a participant under any grant previously made under the Plan without the
consent of such participant, unless required by law.
28
<PAGE> 32
The maximum number of shares issuable under the Plan and the number, class
and/or price of shares or other consideration subject to any outstanding stock
option, stock appreciation right, restricted stock award or performance award
may be appropriately adjusted by the Committee in the event of any change in
corporate capitalization, such as a stock split, 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), and any reorganization or partial or complete
liquidation of the Company or its subsidiaries. The Plan also provides that in
the event of a Change in Control (as defined in the Plan), with certain
exceptions, (i) all outstanding stock options, stock appreciation rights, and
restricted stock awards shall automatically become fully exercisable and vested
and shall be cashed out on the basis of a Change in Control Price (as defined in
the Plan) and (ii) all outstanding performance awards shall be cashed out in
such manner and in such amount or amounts as determined by the Committee at the
time such awards are made.
A participant may elect to have the Company withhold shares of common stock
(or to accept already-owned shares) to satisfy tax withholding obligations with
respect to exercises or payments under the Plan. Except as otherwise 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.
No grants or awards have been made under the Plan.
STOCK OPTIONS
Options to purchase shares of common stock, including incentive stock
options within the meaning of Section 422 of the Code may be granted under the
Plan. The Committee will determine the number of shares subject to each stock
option and the manner and time of exercise. No option, however, shall be
exercisable less than six months or more than ten years after the date of grant.
The per share option price shall not be less than 100% of the fair market value
of a share of common stock at the date of grant. Upon exercise, the option price
may be paid in cash, in shares of common stock of the Company having a fair
market value equal to the option price, or in a combination thereof. The
Committee may also allow the "cashless" exercise of options, subject to
applicable rules and regulations, and the exercise of options by any other means
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 of such option. The Plan sets forth conditions for the exercise of
options under certain circumstances upon termination of employment by reason of
death, incapacity, retirement or otherwise. The agreement or instrument
evidencing the grant of an option may contain such other terms, provisions and
conditions not inconsistent with the Plan as the Committee may determine.
29
<PAGE> 33
STOCK APPRECIATION RIGHTS
Stock appreciation rights may be granted in tandem with a related stock
option or may be granted independently of a related stock option. Rights granted
in tandem with a related stock option shall be exercisable to the extent that
the related stock option is exercisable, provided that, except in certain
limited circumstances, no such rights shall be exercisable prior to the
expiration of six months from the date of grant. The Committee will determine
the manner and time of exercise of rights granted independently of a stock
option, but no such right shall be exercisable less than six months or more than
ten years after the date of grant. In the case of rights granted in tandem with
a related stock option, the grantee may elect to exercise either the stock
option or the rights (but not both) as to any of the same shares subject to the
stock option and the rights. The Plan sets forth conditions for the exercise of
stock appreciation rights under certain conditions upon termination of
employment by reason of death, incapacity, retirement or otherwise. 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 the Committee may determine.
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 amount 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 grantee 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.
RESTRICTED STOCK AWARDS
Restricted stock awards consisting of shares of common stock of the Company
may be made under the Plan. 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 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 deems appropriate, which may include performance
measures. 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. If all conditions to which such award is subject have been
satisfied, the holder shall be entitled to such shares free of all restrictions.
PERFORMANCE AWARDS
Performance awards consisting of shares of common stock of the Company,
monetary units, or units which are expressed in terms of shares of common stock
of the Company may also be made under the Plan. Subject to the following
paragraph, such awards shall be contingent on the achievement over a period of
not less than six months or more than ten
30
<PAGE> 34
years of such corporate, division, subsidiary, group or other objectives as
shall be established by the Committee. Subject to the following paragraph, such
objectives may be revised by the Committee from time to time during the
performance period to take into account significant unforeseen events or changes
in circumstances. Except as may otherwise be determined by the Committee, a
performance award shall terminate if the holder of the award does not remain
continuously in the employ of the Company or its subsidiaries at all times
during the applicable performance period. If a performance award consists of
shares of common stock or units which are expressed in terms of shares of 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 or
credited as additional units and paid to the participant on payment of the
award.
In order to permit performance awards to Named Executive Officers to be
deductible by the Company for Federal income tax purposes, the Code and related
regulations require performance measures for such awards to be specified in the
Plan and approved by stockholders. The performance measures established in the
Plan for such purposes are: safety (including total injury frequency, lost
workday rates or cases, medical treatment cases and fatalities), quality control
(including critical product characteristics, yield and defects), capital
structure (including debt and equity levels, debt-to equity ratios, and
debt-to-total-capitalization ratios), cost control (including cost as a
percentage of sales), inventory turnover, customer performance or satisfaction,
revenue growth, net income, conformity to cash flow plans, return on investment,
and the ratio of operating profit to operating assets.
The Committee has discretion to establish performance goals and to adjust
the goals and methods used to measure attainment of the goals. However, with
respect to awards which are intended to be exempt from the deduction limitation,
the Committee may not adjust awards in a manner that increases such award
(downward adjustments are permitted) or make any other change that could cause
such awards to become non-deductible under the regulations discussed above. The
Committee has discretion to amend or replace performance measures applicable to
the Named Executive Officers in the event applicable regulations change and to
grant awards to Named Executive Officers that would not be deductible under the
regulations based upon any performance measures it deems appropriate.
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.
FEDERAL TAX CONSEQUENCES
The Company has been advised that an employee who has been granted an
incentive stock option will not realize taxable income and the Company will not
be entitled to a deduction at the time of the grant or exercise of such option.
If the employee makes no
31
<PAGE> 35
disposition of shares acquired pursuant to an incentive stock option within two
years from the date of grant of such option, or within one year of the transfer
of the shares to such employee, any gain or loss realized on a subsequent
disposition of such shares will be treated as a long-term capital gain or loss.
Under such circumstances, the Company will not be entitled to any deduction for
Federal income tax purposes. If the foregoing holding period requirements are
not satisfied, the employee will generally realize ordinary income at the time
of disposition in an amount equal to the lesser of (i) the excess of the fair
market value of the shares on the date of exercise over the option price or (ii)
the excess of the amount realized upon disposition of the shares, if any, over
the option price, and the Company will be entitled to a corresponding deduction.
An employee will not realize taxable income at the time of the grant of an
option which does not qualify as an incentive stock option. Upon exercise,
however, of such non-qualified stock option, the employee will realize ordinary
income in an amount measured by the excess, if any, of the fair market value of
the shares on the date of exercise over the option price, and the Company will
be entitled to a corresponding deduction. Upon a subsequent disposition of such
shares, the employee will realize short-term or long-term capital gain or loss
with the basis for computing such gain or loss equal to the option price plus
the amount of ordinary income realized upon exercise.
An employee will not realize taxable income at the time of the grant of a
stock appreciation right. Upon exercise, however, such employee will realize
ordinary income measured by the difference between the fair market value of the
common stock of the Company on the applicable date of grant and the fair market
value of such stock on the date of exercise. The Company will be entitled to a
corresponding deduction in the year of exercise.
An employee who has been granted a restricted stock award will not realize
taxable income at the time of grant, and the Company will not be entitled to a
deduction at that time, assuming that the restrictions constitute a substantial
risk of forfeiture for Federal income tax purposes. Upon the vesting of shares
subject to an award, the holder will realize ordinary income in an amount equal
to the fair market value of the shares at such time, and the Company will be
entitled to a corresponding deduction unless the holder is one of the Named
Executive Officers and applicable provisions of the Code regarding deductibility
are not satisfied. Dividends paid to the holder during the restriction period
will also be compensation income to the employee and deductible as such by the
Company. The holder of a restricted stock award may elect to be taxed at the
time of grant of the award on the then fair market value of the shares, in which
case (i) the Company will be entitled to a deduction at the same time and in the
same amount, (ii) dividends paid to such holder during the restriction period
will be taxable as dividends to such holder and not deductible by the Company,
and (iii) there will be no further tax consequences when the restrictions lapse.
If an employee who has made such an election subsequently forfeits the shares,
he will not be entitled to any deduction or loss. The Company, however, will be
required to include as ordinary income the lesser of the fair market value of
the forfeited shares or the amount of the deduction originally claimed with
respect to the shares.
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<PAGE> 36
The Company has also been advised that an employee who has been granted a
performance award will not realize taxable income at the time of grant, and the
Company will not be entitled to a deduction at that time. The employee will have
compensation income at the time of payment, and the Company will have a
corresponding deduction unless the holder is one of the Named Executive Officers
and applicable provisions of the Code regarding deductibility are not satisfied.
Any acceleration of the payment of grants and awards under the Plan in the
event of a change in control of the Company may cause part or all of the
consideration involved to be treated as an "excess parachute payment" under the
Code, which may subject the participant to a 20% excise tax and which may not be
deductible by the Company. A deduction otherwise available to the Company for
any year with respect to compensation payable to a Named Executive Officer may
be denied to the extent that it exceeds $1 million. For these purposes,
restricted stock grants and performance awards under the Plan may under certain
circumstances qualify for, and it is anticipated that grants of options and
stock appreciation rights will generally qualify for, an exception to that
limitation for eligible performance-based compensation.
OTHER INFORMATION
Approval of the Plan will require the affirmative vote of the holders of
shares of the Company representing more than 50% of the voting power of shares
represented in person or by proxy and entitled to vote at the Annual Meeting,
with the result that shares which abstain from voting would count as votes
against the Plan and broker non-votes would have no effect on the outcome.
Proxies not limited to the contrary will be voted for approval of the Plan. The
closing price of the Company's common stock reported on the New York Stock
Exchange Composite Transactions for April 4, 1995 was $26 1/4.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
INLAND 1995 INCENTIVE STOCK PLAN.
ELECTION OF AUDITORS
Proxies not limited to the contrary will be voted for the election of Price
Waterhouse LLP to audit the accounts of the Company and its subsidiaries for the
year 1995. Any proxy indicating a contrary choice will be voted in accordance
with that choice. Price Waterhouse LLP has audited the accounts of the Company
since January 1, 1918.
Representatives of Price Waterhouse LLP will be present at the Annual
Meeting and will be given the opportunity to make a statement if they desire to
do so. They will also be available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
ELECTION OF PRICE WATERHOUSE LLP AS AUDITORS.
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PROPOSALS OF STOCKHOLDERS
Proposals of stockholders must be received in writing by the Secretary of
the Company no later than December 19, 1995 in order to be considered for
inclusion in the Company's proxy statement and form of proxy relating to the
Annual Meeting of Stockholders to be held in 1996. Proposals not included in a
proxy statement for an annual meeting must comply with an advance notice
procedure set forth in the By-laws of the Company in order to be properly
brought before that annual meeting of stockholders.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
Annual Meeting other than those set forth in the Notice of the Annual Meeting.
However, if any other matters do come before the meeting, it is intended that
the holders of the proxies will vote thereon in their discretion.
By order of the Board of Directors,
DAVID B. ANDERSON, Secretary
April 17, 1995
Chicago, Illinois
- --------------------------------------------------------------------------------
Each stockholder, whether or not he or she expects to be present in person at
the Annual Meeting, is requested to SIGN, DATE AND RETURN THE ENCLOSED PROXY in
the accompanying envelope as promptly as possible. A stockholder may revoke his
or her proxy at any time prior to voting.
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<PAGE> 38
EXHIBIT A
INLAND 1995 INCENTIVE STOCK PLAN
1. PURPOSE.
The purpose of the Inland 1995 Incentive Stock Plan (the "Plan") is to
attract and retain outstanding individuals as officers and key employees of
Inland Steel Industries, 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 of the Company. 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.
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 common stock, $1.00 par value per share, of the
Company which may be issued pursuant to grants or awards made under the Plan
shall not exceed 2,000,000, plus such number of shares as shall have been
authorized for issuance pursuant to the Inland 1992 Incentive Stock Plan
(heretofore approved by stockholders) that shall not have been or be issued
pursuant to such plan. No more than 700,000 shares (including those which have
not been or are not issued pursuant to the Inland 1992 Incentive Stock Plan)
shall be issued pursuant to restricted stock awards and performance awards under
the Plan.
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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 that may be granted or awarded
under the Plan in any fiscal year of the Company to any participant under
the Plan shall be three hundred thousand (300,000); 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 one million dollars
($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 Internal Revenue Code Section 162(m) or any
successor statute ("Section 162(m)"), and "Performance-Based Exception" shall
mean the performance-based exception from the deductibility limitations as each
is set forth in Section 162(m).
Except to the extent otherwise determined by the Committee, any shares
subject to grant or award 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.
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company. To the extent necessary
to comply with rules and regulations issued under the Securities Exchange Act of
1934, 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 incentive stock plan for employees of the Company
or any subsidiary of the Company. 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 or units
subject to the grant, the time and conditions of exercise or vesting, the fair
market value of the common stock of the Company 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
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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 submitted to the stockholders of the Company for approval
at the annual meeting to be held on May 24, 1995, or any adjournment thereof,
and, if approved by the stockholders, shall be deemed to have become effective
on the date of such approval.
6. STOCK OPTIONS.
(A) GRANTS. Subject to the terms of the Plan, options to purchase shares
of common stock of the Company, including "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (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 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. 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 of the Company on the date the option is granted. Upon
exercise, the option price may be paid in cash, in shares of common stock of the
Company having a fair market value equal to the option price (provided that such
shares have been held for at least six months prior to their tender to pay the
option price), 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 of the Company 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
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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 of the Company as to which such option was not
theretofore 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 at 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 of the Company 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 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 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
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provisions of paragraph (d) of Section 6 of the Plan. The Committee may at the
time of 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 Securities Exchange Act of 1934, as amended, 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 of the Company 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.
8. RESTRICTED STOCK AWARDS.
Subject to the terms of the Plan, restricted stock awards consisting of
shares of common stock of the Company 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 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 of
the Company, (ii) monetary units or (iii) units which are expressed in terms of
shares of common stock of the Company 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.
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Subject to the provisions of Section 10 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
10 below, such measures and goals may be revised by the Committee at any time
and 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
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 of the Company 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 of the Company, 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, yield 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 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
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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).
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 stock split, 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, and in the number and class of and/or price of shares 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
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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 30
days after the end of the pooling period or 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) the Company is merged
into or consolidated with another corporation, or the stockholders of the
Company approve a definitive agreement to sell or otherwise dispose of all or
substantially all of its assets or adopt a plan of liquidation, provided,
however, that a Change in Control shall not be deemed to have occurred by reason
of a transaction, or a substantially concurrent or otherwise related series of
transactions, upon the completion of which the beneficial ownership of a
majority of the voting power of the Company, the surviving corporation, or a
corporation directly or indirectly controlling the Company or the surviving
corporation, as the case may be, is held by the same persons (as defined below)
(in substantially the same proportion) as held the beneficial ownership of the
voting power of the Company immediately prior to the transaction or the
substantially concurrent or otherwise related series of transactions, except
that upon the completion thereof, employees or employee benefit plans of the
Company may be a new holder of such beneficial ownership; (ii) the "beneficial
ownership" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) of securities representing 40% or more of the
combined voting power of the Company is acquired by any "person" as defined in
Sections 13(d) and 14(d) of the Exchange Act (other than any trustee or other
fiduciary holding securities under an employee benefit or other similar stock
plan of the Company); or (iii) at any time during any period of two consecutive
years, individuals who at the beginning of such period were members of the Board
of Directors of the Company cease for any reason to constitute at least a
majority thereof (unless the election, or the nomination for election by the
Company's stockholders, of each new director was approved by a vote of at least
two-thirds of the directors still in office at the time of such election or
nomination who were directors at the beginning of such period).
(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)(i) of this
Section 12 in which the consideration per share of the Company'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; (ii) with respect to a Change in Control by reason of an acquisition of
securities described in paragraph (b)(ii) of this Section 12, the highest price
per share for any share of the Company's 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
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described in paragraph (c)(i) of this Section 12), stockholder approval of an
agreement or plan described in paragraph (b)(i) of this Section 12 or a change
in the composition of the Board of Directors described in paragraph (b)(iii) of
this Section 12, the highest price per share of common stock reported on the New
York Stock Exchange Composite Tape (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.
13. AMENDMENT AND TERMINATION OF PLAN.
The Plan may be amended by the Board of Directors of the Company 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. 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 of Directors. 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. PRIOR PLAN.
Upon the effectiveness of this Plan, no further grants shall be made under
the Inland 1992 Incentive Stock Plan. The discontinuance of the Inland 1992
Incentive Stock Plan shall not affect the rights of any participant under, or
the authority of the Committee (therein referred to) with respect to, any grants
or awards made thereunder prior to such discontinuance.
15. MISCELLANEOUS.
(A) NO RIGHT TO A GRANT. Neither the adoption of the Plan nor any action
of the Board of Directors 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.
(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
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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, cash or shares of common stock of the Company, 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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NOTICE OF
ANNUAL MEETING
OF STOCKHOLDERS
AND PROXY STATEMENT
---------------------------------------------------------
INLAND STEEL INDUSTRIES, INC.
1995
<PAGE> 49
GRAPHICS APPENDIX LIST
Page where
Graphic Appears Description of Graphic or Cross-Reference
- --------------- -----------------------------------------
Pages 3, 4 and 5 Graphics Nos. 1 through 10 are photographs of each
nominee for election as director of the Company.
Pages 26 and 27 Graphics Nos. 11 and 12 are stock performance
graphs comparing the cumulative total stockholder
return on the Company's common stock for the
five-year period and the three-year period ended
December 31, 1994, with the cumulative total return
of the Standard & Poor's 500 Composite Stock
Price Index and the Standard & Poor's Steel Index,
both of which indices include the Company. The
comparisons assume the investment of $100 on
December 31, 1989 and 1991, respectively, and the
reinvestment of dividends. Data points in each
graph as presented in the EDGAR version follow the
placeholder in the Proxy Statement. In addition to
the Company, the S&P Steel Index includes Armco,
Inc., Bethlehem Steel, Nucor Corp., the U.S. Steel
Group of USX Corporation, and Worthington
Industries.
<PAGE> 50
DEAR STOCKHOLDER:
Enclosed are your Proxy and Proxy Statement for the 1995 Annual Meeting of
Stockholders of Inland Steel Industries, Inc. Voting with respect to any common
stock held by you of record in certificate form, any common stock credited to
your account under the Shareholder Investment Service, and any Series A $2.40
Cumulative Convertible Preferred Stock held by you of record is consolidated on
the enclosed Proxy.
If, in addition to being a stockholder of the Company on April 4, 1995, you
are a participant in the Company's Thrift Plan, you also will receive
Confidential Voting Directions and Instructions to Thrift Plan Participants from
the Company. You are requested to sign, date and return the Confidential Voting
Directions in the postage-paid envelope provided with such Directions.
PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE, WHETHER OR NOT YOU DECIDE TO ATTEND THE MEETING, TO
ENSURE THAT YOUR VOTE IS REPRESENTED.
<PAGE> 51
INSTRUCTIONS TO THRIFT PLAN PARTICIPANTS
Please date and sign your name (exactly as it appears on the accompanying
Confidential Voting Directions) in the space provided and return the
Confidential Voting Directions in the enclosed postage-paid envelope to direct
Harris Trust and Savings Bank, as Trustee of the Employee Stock Ownership Plan
contained within the Thrift Plan, to vote your shares in the Plan.
All shares of both the Company's common stock and its Series E ESOP
Convertible Preferred Stock allocated to your Thrift Plan accounts, whether
vested or unvested, will be voted by Harris Trust and Savings Bank, Chicago,
Illinois, as the Trustee, according to your directions. IF THE CONFIDENTIAL
VOTING DIRECTIONS ARE RETURNED SIGNED WITH NO VOTING DIRECTIONS MARKED, YOU WILL
BE DEEMED TO HAVE DIRECTED THE TRUSTEE TO VOTE ALL SHARES ALLOCATED TO YOUR
ACCOUNTS IN THE MANNER SPECIFIED IN BOLDFACE TYPE ON THE FRONT OF THE
CONFIDENTIAL VOTING DIRECTIONS. THE TRUSTEE SHALL VOTE ALL SHARES ALLOCATED TO
PARTICIPANTS' ACCOUNTS FOR WHICH PROPERLY COMPLETED CONFIDENTIAL VOTING
DIRECTIONS ARE NOT RECEIVED PRIOR TO 5:00 P.M., CHICAGO TIME, ON MAY 23, 1995
AND ALL UNALLOCATED SHARES HELD IN THE THRIFT PLAN IN THE SAME PROPORTION AS THE
SHARES WITH RESPECT TO WHICH PROPERLY COMPLETED CONFIDENTIAL VOTING DIRECTIONS
HAVE BEEN TIMELY RECEIVED FROM PARTICIPANTS IN THE PLAN.
PLEASE DATE, SIGN AND RETURN THE CONFIDENTIAL VOTING DIRECTIONS PROMPTLY,
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, SO THAT YOUR SHARES WILL
BE VOTED IN THE MANNER YOU DESIRE. YOU MAY REVOKE YOUR VOTING DIRECTIONS AT ANY
TIME PRIOR TO 5:00 P.M., CHICAGO TIME, ON MAY 23, 1995.
If, in addition to being a Participant in the Thrift Plan, you were a
stockholder of the Company on April 4, 1995, you will receive a separate Proxy
and Proxy Statement from the Company. You are requested to sign, date and return
that Proxy in the postage-paid envelope provided. Legal requirements provide for
the separate solicitation of Participants in the Plan who are also stockholders
of the Company.
<PAGE> 52
INLAND STEEL INDUSTRIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert J. Darnall, David B. Anderson and
Charles B. Salowitz, and each of them, as attorneys and proxies (with full power
of substitution in each) to vote all common stock of the Company that the
undersigned is entitled to vote (including any common stock credited to the
account of the undersigned under the Company's Shareholder Investment Service)
and all Series A $2.40 Cumulative Convertible Preferred Stock that the
undersigned is entitled to vote at the Annual Meeting of Stockholders of the
Company to be held May 24, 1995 and at any adjournment thereof. UNLESS
OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS,
FOR APPROVAL OF THE INLAND 1995 INCENTIVE STOCK PLAN, FOR THE ELECTION OF PRICE
WATERHOUSE LLP AS AUDITORS, AND AT THE DISCRETION OF THE PROXIES ON ANY AND ALL
OTHER MATTERS THAT MAY PROPERLY COME BEFORE SUCH ANNUAL MEETING OR ANY
ADJOURNMENT THEREOF.
(PLEASE COMPLETE ON OTHER SIDE)
INLAND STEEL INDUSTRIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
<TABLE>
<S><C>
1. ELECTION OF DIRECTORS. For All 3. THE ELECTION OF
A. Robert Abboud, James For Withheld Except ____________________ PRICE WATERHOUSE For Against Abstain
W. Cozad, Robert J. Darnall, / / / / / / Nominee Exception LLP AS AUDITORS / / / / / /
James A. Henderson, Robert B. FOR THE YEAR 1995.
McKersie, Maurice S. Nelson,
Jr., Donald S. Perkins, Joshua
I. Smith, Nancy H. Teeters and
Arnold R. Weber.
2. APPROVAL OF THE INLAND 1995 For Against Abstain 4. IN THE DISCRETION OF THE
INCENTIVE STOCK PLAN. / / / / / / PROXIES, TO VOTE UPON ANY
AND ALL OTHER MATTERS WHICH
MAY PROPERLY COME BEFORE
SUCH ANNUAL MEETING OR ANY
ADJOURNMENT THEREOF.
___________________________
Signature
___________________________
Signature (if held jointly)
Dated:________________,1995
PLEASE DATE, SIGN, AND
RETURN PROMPTLY.
</TABLE>
<PAGE> 53
INLAND STEEL INDUSTRIES, INC.
CONFIDENTIAL VOTING DIRECTIONS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
As a Participant in the Inland Steel Industries Thrift Plan, I hereby direct
Harris Trust and Savings Bank, as Trustee of the Employee Stock Ownership Plan
contained within the Thrift Plan, to vote all shares of common stock and all
shares of Series E ESOP Convertible Preferred Stock of Inland Steel Industries,
Inc. that are credited to my accounts in the Plan as of April 4, 1995 at the
Annual Meeting of Stockholders of the Company to be held May 24, 1995 and at
any adjournment thereof. UNLESS OTHERWISE SPECIFIED, ALL SHARES ALLOCATED TO
THE UNDERSIGNED'S THRIFT PLAN ACCOUNTS WILL BE VOTED FOR THE ELECTION OF
DIRECTORS, FOR APPROVAL OF THE INLAND 1995 INCENTIVE STOCK PLAN, FOR THE
ELECTION OF PRICE WATERHOUSE LLP AS AUDITORS, AND AT THE DISCRETION OF THE
TRUSTEE OR ITS PROXIES UPON ANY AND ALL OTHER MATTERS THAT MAY PROPERLY COME
BEFORE SUCH ANNUAL MEETING OR ANY ADJOURNMENT THEREOF.
(PLEASE COMPLETE ON OTHER SIDE)
INLAND STEEL INDUSTRIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
<TABLE>
<S><C>
1. ELECTION OF DIRECTORS For All 3. THE ELECTION OF
A. Robert Abboud, James W. Cozad, For Withheld Except __________________ PRICE WATERHOUSE LLP For Against Abstain
Robert J. Darnall, James A. / / / / / / Nominee Exception AS AUDITORS FOR THE / / / / / /
Henderson, Robert B. McKersie, YEAR 1995.
Maurice S. Nelson, Jr., Donald
S. Perkins, Joshua I. Smith,
Nancy H. Teeters and Arnold R. 4. IN THE DISCRETION OF THE PROXIES, TO
Weber. VOTE UPON ANY AND ALL OTHER MATTERS
WHICH MAY PROPERLY COME BEFORE SUCH
2. APPROVAL OF THE INLAND 1995 For Against Abstain ANNUAL MEETING OR ANY ADJOURNMENT
INCENTIVE STOCK PLAN. / / / / / / THEREOF.
___________________________________
Signature
Dated:____________________________, 1995
PLEASE DATE, SIGN, AND RETURN PROMPTLY.
</TABLE>
