<PAGE>
First Quarter - 1998
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
-------------------------
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the period ended March 31, 1998
or
[_] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from __________ to __________
-------------------------
Commission file number 1-9117
I.R.S. Employer Identification Number 36-3425828
INLAND STEEL INDUSTRIES, INC.
(a Delaware Corporation)
30 West Monroe Street
Chicago, Illinois 60603
Telephone: (312) 346-0300
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 48,941,765 shares of the
Company's Common Stock ($1.00 par value) were outstanding as of May 4, 1998.
<PAGE>
PART I. FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Consolidated Statement of Operations (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Dollars in Millions
(except per share data)
-----------------------
Three Months Ended
March 31
------------------
1998 1997
---- ----
<S> <C> <C>
NET SALES $1,293.3 $1,207.3
-------- --------
OPERATING COSTS AND EXPENSES
Cost of goods sold 1,133.5 1,039.7
Selling, general and administrative expenses 58.4 55.7
Depreciation 41.9 39.1
-------- --------
Total 1,233.8 1,134.5
-------- --------
OPERATING PROFIT 59.5 72.8
General corporate expense, net of income items 5.6 1.3
Interest and other expense on debt 14.9 16.4
-------- --------
INCOME BEFORE INCOME TAXES 39.0 55.1
PROVISION FOR INCOME TAXES 15.1 21.7
-------- --------
INCOME BEFORE MINORITY INTEREST 23.9 33.4
MINORITY INTEREST IN RYERSON TULL, INC. 2.1 2.2
-------- --------
NET INCOME $ 21.8 $ 31.2
======== ========
EARNINGS PER SHARE OF COMMON STOCK
Basic $ .40 $ .59
======== ========
Diluted $ .38 $ .56
======== ========
</TABLE>
See notes to consolidated financial statements
-1-
<PAGE>
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Consolidated Statement of Cash Flows (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Dollars in Millions
-------------------
Three Months Ended
March 31
------------------
1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 21.8 $ 31.2
------ -------
Adjustments to reconcile net income to net cash
provided from operating activities:
Depreciation 42.0 39.3
Deferred employee benefit cost 3.9 3.3
Deferred income taxes 9.1 13.5
Change in: Receivables (46.4) (36.5)
Inventories (8.3) (29.4)
Accounts payable (31.0) (17.5)
Accrued salaries and wages (5.2) (7.5)
Other accrued liabilities 14.0 12.1
Other items 11.7 11.5
------ -------
Net adjustments (10.2) (11.2)
------ -------
Net cash provided from operating activities 11.6 20.0
------ -------
INVESTING ACTIVITIES
Acquisitions (Note 3) (7.7) (130.2)
Capital expenditures (22.7) (19.8)
Investments in and advances to joint ventures, net 20.0 2.2
Proceeds from sales of assets .1 4.1
------ -------
Net cash used for investing activities (10.3) (143.7)
------ -------
FINANCING ACTIVITIES
Long-term debt retired (17.1) (6.2)
Reduction of debt assumed in acquisitions - (22.6)
Short-term borrowing - 8.0
Dividends paid (2.5) (2.5)
Acquisition of treasury stock (5.5) (1.3)
------ -------
Net cash used for financing activities (25.1) (24.6)
------ -------
Net decrease in cash and cash equivalents (23.8) (148.3)
Cash and cash equivalents - beginning of year 97.0 238.0
------ -------
Cash and cash equivalents - end of period $ 73.2 $ 89.7
====== =======
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
Interest (net of amount capitalized) $ 17.1 $ 19.4
Income tax, net .8 .9
</TABLE>
See notes to consolidated financial statements
-2-
<PAGE>
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Consolidated Balance Sheet
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dollars in Millions
----------------------------------------
March 31, 1998 December 31, 1997
-------------------- ------------------
ASSETS (unaudited)
- ------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 73.2 $ 97.0
Receivables 573.1 523.3
Inventories - principally at LIFO
In process and finished products $ 570.8 $ 543.8
Raw materials and supplies 62.9 633.7 80.3 624.1
-------- --------
Deferred income taxes 30.6 30.7
-------- --------
Total current assets 1,310.6 1,275.1
INVESTMENTS AND ADVANCES 251.1 271.6
PROPERTY, PLANT AND EQUIPMENT
Valued on basis of cost 4,676.3 4,649.7
Less: Reserve for depreciation,
amortization and depletion 2,949.0 2,907.2
Allowance for terminated facilities 100.7 1,626.6 100.7 1,641.8
-------- --------
DEFERRED INCOME TAXES 222.6 231.4
PREPAID PENSION COST 77.1 77.4
OTHER ASSETS 142.9 149.2
-------- --------
Total Assets $3,630.9 $3,646.5
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable $ 325.3 $ 354.9
Accrued liabilities 206.9 197.3
Long-term debt due within one year 52.2 62.7
-------- --------
Total current liabilities 584.4 614.9
LONG-TERM DEBT 698.4 704.9
DEFERRED EMPLOYEE BENEFITS 1,279.8 1,275.6
OTHER CREDITS 65.0 65.4
-------- --------
Total liabilities 2,627.6 2,660.8
MINORITY INTEREST IN RYERSON TULL, INC. 59.7 57.5
COMMON STOCK REPURCHASE COMMITMENT 22.7 28.1
STOCKHOLDERS' EQUITY (Schedule A) 920.9 900.1
-------- --------
Total Liabilities, Minority Interest, Temporary
Equity, and Stockholders' Equity $3,630.9 $3,646.5
======== ========
</TABLE>
See notes to consolidated financial statements
-3-
<PAGE>
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Notes to Consolidated Financial Statements (Unaudited)
================================================================================
NOTE 1/FINANCIAL STATEMENTS
Results of operations for any interim period are not necessarily indicative of
results of any other periods or for the year. The financial statements as of
March 31, 1998 and for the three-month periods ended March 31, 1998 and 1997 are
unaudited, but in the opinion of management include all adjustments necessary
for a fair presentation of results for such periods. These financial statements
should be read in conjunction with the financial statements and related notes
contained in the Annual Report to Stockholders for the year ended December 31,
1997.
<TABLE>
<CAPTION>
NOTE 2/EARNINGS PER SHARE
Dollars and Shares
in Millions
(except per share data)
-----------------------
Three Months Ended
March 31
--------------
<S> <C> <C>
Basic earnings per share
- ------------------------
1998 1997
----- -----
Net income $21.8 $31.2
Less preferred stock dividends 2.3 2.3
----- -----
Income available to common stockholders $19.5 $28.9
===== =====
Average shares of common stock outstanding 49.0 48.9
===== =====
Basic earnings per share $ .40 $ .59
===== =====
Diluted earnings per share
- --------------------------
Income available to common stockholders $19.5 $28.9
Effect of dilutive securities
Series E leveraged preferred stock 2.2 2.2
Additional ESOP funding required on conversion of
Series E leveraged preferred stock, net of tax (2.1) (2.0)
----- -----
Income available to common stockholders and assumed
conversions $19.6 $29.1
===== =====
Average shares of common stock outstanding 49.0 48.9
Assumed conversion of Series E leverage preferred stock 3.0 3.0
Dilutive effect of stock options - -
----- -----
Shares outstanding for diluted earnings per share calculation 52.0 51.9
===== =====
Diluted earnings per share $ .38 $ .56
===== =====
</TABLE>
NOTE 3/ACQUISITIONS
During the 1998 first quarter a subsidiary of the Company acquired Brockway
Pressed Metals, Inc., a powder metallurgy company.
NOTE 4/COMPREHENSIVE INCOME
The Company adopted Financial Accounting Standards Board Statement No. 130,
"Reporting Comprehensive Income," in the first quarter of 1998. Due to the
immateriality of the one item covered by the Statement, the Company has elected,
as allowed by the Statement, to not apply provisions of the Statement.
- 4 -
<PAGE>
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Notes to Consolidated Financial Statements (Unaudited)
================================================================================
NOTE 5/COMMITMENTS
The total amount of firm commitments of the Company and its subsidiaries to
contractors and suppliers, primarily in connection with additions to property,
plant and equipment, increased to $39 million on March 31, 1998 from $35 million
on December 31, 1997.
NOTE 6/INLAND-ISPAT LETTER AGREEMENT
On March 17, 1998, the Company announced it had signed a binding letter
agreement with Ispat International N.V. ("Ispat") whereby Ispat will acquire
Inland Steel Company ("ISC") for a total transaction value of approximately
$1.43 billion. The agreement has been approved by the Boards of Directors of
both companies. As part of the transaction, Ispat will: i) pay $650 million in
cash for the common stock of ISC held by the Company; ii) pay $238.2 million for
the preferred stock of ISC held by the Company; iii) repay the intercompany debt
of ISC owed to the Company, which at December 31, 1997, was $230.7 million; and
iv) assume debt owed to third parties of approximately $307.9 million. The
Company intends to distribute a significant portion of the net proceeds from the
sale to its stockholders through stock repurchases, dividends or a combination
thereof. However, the Board of Directors has taken no action and has not yet
approved a plan as to the amounts or the range of amounts of the net proceeds to
be used for such purposes. The determination of whether to engage in stock
repurchases and/or to pay dividends and the amount of net proceeds to be used
for such purposes is within the discretion of the Board of Directors and, until
the Board of Directors has taken such action, there can be no assurances that
any stock repurchases and/or dividends will occur or as to the amount of net
proceeds that will be used for such purposes. The transaction is subject to a
definitive agreement, antitrust clearance, other closing conditions, and the
need to give the United Steelworkers of America ("USWA") the opportunity to make
an offer to purchase ISC. In early May, the Company was informed that the USWA
decided not to pursue its right to submit an offer for ISC. Following the sale,
the Company's primary business will be metals distribution, presently conducted
by Ryerson Tull, Inc. ("RT"). The Company is currently considering a plan to
combine with RT into one entity subsequent to the closing of the sale.
-5-
<PAGE>
Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS - Comparison of First Quarter 1998 to First Quarter 1997
- ------------------------------------------------------------------------------
For the first quarter of 1998 the Company reported consolidated net income of
$21.8 million as compared with net income of $31.2 million in the comparable
year-ago period. Decreased operating profit at the Steel Manufacturing segment
was the major factor for the decline.
Consolidated net sales increased 7 percent to $1.29 billion in the 1998 first
quarter due primarily to higher sales at the Materials Distribution segment.
Included in the 1998 quarter is a full quarter of net sales for Thypin Steel
Co., Inc., Cardinal Metals, Inc., and Omni Metals, Inc., which were acquired by
the Materials Distribution segment during 1997.
Net sales at the Materials Distribution segment of $734.8 million in the 1998
first quarter were 11 percent higher than the comparable year-earlier quarter
due in large part to the inclusion of full quarter results of the 1997
acquisitions. Volume, which increased 15 percent to 812,000 tons, was partially
offset by a 3 percent decrease in average selling price per ton. Operating
profit of $37.8 million in the 1998 first quarter was $2.8 million ahead of the
comparable 1997 quarter. The 1997 quarter included a one-time $2.0 million gain
on the sale of property in Jersey City, New Jersey.
The Steel Manufacturing segment's net sales of $606.1 million were virtually
unchanged from the 1997 first quarter as a 4 percent increase in the volume of
steel mill products shipped was offset by a comparable decrease in average
selling price per ton. As a result of the lower average selling price per ton,
operating profit declined to $21.8 million from $38.3 million reported for the
first three months of 1997. Operating profit in the 1998 first quarter was also
negatively impacted by the effects of a severe winter storm and scheduled
outages on several major facilities, partially offset by a $5 million property
tax reduction relating to prior years.
Liquidity and Financing
- -----------------------
At March 31, 1998, the Company's cash and cash equivalents were $73.2 million
as compared with $97.0 million at year-end 1997. There was no short-term
borrowing outstanding at either date.
- 6 -
<PAGE>
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
PART II. OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The exhibits required to be filed by Item 601 of
Regulation S-K are listed in the "Exhibit Index," which is attached
hereto and incorporated by reference herein.
(b) Reports on Form 8-K.
The Company did not file any Current Reports on Form 8-K during the
quarter ended March 31, 1998.
- 7 -
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INLAND STEEL INDUSTRIES, INC.
By James M. Hemphill
--------------------------
James M. Hemphill
Controller and
Principal Accounting Officer
Date: May 11, 1998
- 8 -
<PAGE>
Part I -- Schedule A
--------------------
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
SUMMARY OF STOCKHOLDERS' EQUITY
================================================================================
<TABLE>
<CAPTION>
Dollars in Millions
--------------------------------------------
March 31, 1998 December 31, 1997
--------------- -----------------
(unaudited)
STOCKHOLDERS' EQUITY
- ---------------------------
<S> <C> <C>
Series A preferred stock ($1 par value)
- 94,101 shares issued and outstanding as of
March 31, 1998 and December 31, 1997 $ .1 $ .1
Series E preferred stock ($1 par value)
- 2,979,232 shares and 3,014,548 shares
issued and outstanding as of March 31,
1998 and December 31, 1997, respectively 3.0 3.0
Common stock ($1 par value)
- 50,556,350 shares issued as of March 31, 1998
and December 31, 1997 50.6 50.6
Capital in excess of par value 1,037.6 1,039.8
Accumulated deficit
Balance beginning of year $(45.6) $(146.0)
Net income 21.8 119.3
Dividends
Series A preferred stock -
$.60 per share in 1998 and
$2.40 per share in 1997 (.1) (.2)
Series E preferred stock -
$3.523 per share in 1997 - (10.8)
Income tax benefit - Series E dividend - 1.9
Common stock -
$.05 per share in 1998 and
$.20 per share in 1997 (2.4) (26.3) (9.8) (45.6)
------ -------
Unearned compensation related to ESOP (67.3) (68.6)
Common stock repurchase commitment (22.7) (28.1)
Investment valuation allowance (7.0) (7.1)
Unearned restricted stock award compensation (.7) (.2)
Treasury stock, at cost
- 1,659,884 shares and 1,557,635
shares as of March 31, 1998 and
December 31, 1997, respectively (43.1) (40.5)
Cumulative translation adjustment (3.3) (3.3)
-------- --------
Total Stockholders' Equity $ 920.9 $ 900.1
======== ========
</TABLE>
-9-
<PAGE>
Part I -- Schedule B
--------------------
INLAND STEEL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Summary Financial Information for Business Segments (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Dollars in Millions
-------------------------------------
Three Months Ended
March 31
-------------------------------------
<S> <C> <C>
1998 1997
-------- --------
NET SALES
- ---------
Steel Manufacturing Operations $ 606.1 $ 606.6
Materials Distribution Operations 734.8 660.7
Eliminations and adjustments (47.6) (60.0)
-------- --------
Total Net Sales $1,293.3 $1,207.3
======== ========
OPERATING PROFIT
- ----------------
Steel Manufacturing Operations $ 21.8 $ 38.3
Materials Distribution Operations 37.8 35.0
Eliminations and adjustments (.1) (.5)
-------- --------
Total Operating Profit $ 59.5 $ 72.8
======== ========
</TABLE>
-10-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page No.
- ------- ----------- ----------
<S> <C> <C>
2. Copy of Letter Agreement between Inland Steel Industries,
Inc. and Ispat International N.V. ("Ispat") for the
acquisition of Inland Steel Company by Ispat, dated
March 16, 1998. (Filed as Exhibit 2. to Inland Steel
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, and incorporated by reference
herein.) --
3.(i) Copy of Certificate of Incorporation, as amended, of
the Company. (Filed as Exhibit 3.(i) to the Company's
Annual Report on Form 10-K for the fiscal year ended --
December 31, 1995, and incorporated by reference herein.)
3.(ii) Copy of By-laws, as amended, of the Company. (Filed as
Exhibit 3.(ii) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1997, and
incorporated by reference herein.) --
10.AA* Copy of Inland Steel Industries Thrift Plan ESOP Trust,
as amended and restated effective as of January 1, 1998...
27 Financial Data Schedule...................................
</TABLE>
- ----------------------
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit to the Company's Quarterly Report on Form 10-Q
- i -
<PAGE>
EXHIBIT 10.AA
INLAND STEEL INDUSTRIES THRIFT PLAN ESOP TRUST
----------------------------------------------
(As Amended and Restated Effective as of January 1, 1998)
THIS AGREEMENT made and entered into this 1st day of January, 1998, by and
among Inland Steel Industries, Inc., a Delaware corporation ("Inland" or the
"Company"), LaSalle National Bank, a national banking association, as Trustee
(the "ESOP Trustee"); and any Affiliates (as defined in paragraph I-2) of the
Company that are or hereafter become parties hereto in accordance with the
provisions of paragraph I-2 (which Affiliates and the Company are sometimes
referred to below collectively as the "Employers" and individually as an
"Employer");
WITNESSETH THAT:
---------------
WHEREAS, the Company has maintained the Inland Steel Industries Thrift Plan
(the "Inland Plan") for the benefit of its eligible employees and those of any
its Affiliates which, with its consent, adopts the Inland Plan, which plan is
described in section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), and, since 1989, has included, as a separate part thereof, a
component which is intended to qualify as an employee stock ownership plan
within the meaning of section 4975(e)(7) of the Code (the "ESOP");
WHEREAS, the ESOP was and is designed to invest primarily in shares of
convertible preferred stock of Inland $1.00 par value, issued pursuant to the
Certificate of Designations, Preferences and Rights of Series E ESOP Convertible
Preferred Stock of the Company (the "Convertible Preferred Stock") and common
stock of the Company, $1.00 par value (the "Common Stock") into which
Convertible Preferred Stock may be converted or which the ESOP Trustee may
otherwise acquire, both of which qualify as "employer securities" within the
<PAGE>
meaning of Code Section 409(1) and "qualifying employer securities" within the
meaning of Section 407(d)(5) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") (which Common Stock and Convertible Preferred Stock
will be referred to as "Company Stock");
WHEREAS, by agreement dated July 1, 1989, the Company entered into a Trust
Agreement (the "ESOP Trust Agreement") with Harris Trust and Savings Bank which
established a trust (the "ESOP Trust") which forms a part of the Inland Plan and
holds shares of Company Stock acquired with the proceeds of one or more exempt
loans (within the meaning of section 4975 (d)(3) of the Code and section
408(b)(3) of ERISA (an "ESOP Loan"), and the portion of the assets of the Inland
Plan which are invested from time to time in the Inland Steel Industries Stock
Fund;
WHEREAS, effective July 1, 1996, the Company appointed LaSalle National
Bank as successor trustee of the ESOP Trust, LaSalle National Bank accepted such
appointment, and the ESOP Trust Agreement was amended by the First Amendment
thereof; and
WHEREAS, effective January 1, 1998, a portion of the Inland Plan was
transferred (within the meaning of section 414(1) of the Code) to a new plan
established by Ryerson Tull, Inc. ("Ryerson Tull"), an Affiliate of the Company,
which plan is known as the "Ryerson Tull Savings Plan" (the "RT Plan"), and it
is intended that the portion of the assets of the RT Plan consisting of ESOP
accounts transferred from the Inland Plan and amounts that, immediately prior to
such transfer, were invested in the Inland Steel Industries Stock Fund, shall
continue to be held and invested under this ESOP Trust, subject to the terms and
conditions of this ESOP Trust Agreement;
2
<PAGE>
NOW, THEREFORE, pursuant to the amending authority reserved to the Company
by the provisions of paragraph VII-I of the ESOP Trust Agreement, IT IS AGREED,
by and among the parties hereto, that the ESOP Trust Agreement is amended,
entirely restated and continued, effective as of the day first above written
(the "Effective Date"), by substituting therefore this Trust Agreement, and that
the ESOP Trust hereby evidenced shall, on and after the Effective Date,
implement and form a part of the Inland Plan and the RT Plan and each other plan
qualified under section 401 (a) of the Code of which this ESOP Trust may
hereafter be designated to form a part (which plans are sometimes referred to
below collectively as the "Plans" and individually as a "Plan").
IT IS FURTHER AGREED as follows:
ARTICLE I
---------
Name and Parties
----------------
I-1. Name. This Trust Agreement and ESOP Trust hereby evidenced shall
continue to be known as the "Inland Steel Industries Thrift Plan ESOP Trust."
I-2. Parties. On the Effective Date, the parties to this ESOP Trust
Agreement are the ESOP Trustee, the Company, Ryerson Tull, and the Affiliates of
the Company that have heretofore adopted the Inland Plan with the Company's
consent and, thereby, have automatically become a party to this ESOP Trust
Agreement. Any other Affiliate that hereafter adopts the Inland Plan with the
Company's consent shall automatically become a party to this Trust Agreement by
providing to the ESOP Trustee a certified copy of the documents by which such
3
<PAGE>
adoption and consent are evidenced. With the consent of the Company, this ESOP
Trust may become a funding medium for a portion of the assets of any other
defined contribution plan or plans that are maintained by an Affiliate and are
intended to be qualified under section 401(a) of the Code, and such Affiliate
shall become a party hereto by filing with the Company and the ESOP Trustee a
certified copy of the resolutions of the Board of Directors of the Affiliate and
the Company, respectively, authorizing such action. The term "Affiliate" means
any corporation, trade or business during any period that it is, together with
the Company, a member of a controlled group of corporations, or a group of
trades or businesses under common control within the meaning of section 414(b)
or (c) of the Code, respectively, and any other corporation, trade or business
during any period designated by Company.
I-3. Company as Agent of Employers. Each Employer, other than the Company,
who is or shall become a party to this Trust Agreement, hereby irrevocably gives
and grants to the Company full and exclusive power and authority to exercise all
of the powers conferred upon it by the terms of this Agreement and to take or
refrain from taking any and all action which such Employer might otherwise take
or refrain from taking with respect to this agreement, including sole and
exclusive power to exercise, enforce or waive any rights whatsoever which such
Employer might otherwise have with respect to the ESOP Trust Fund, and each such
Employer, by becoming a party to this Trust Agreement, irrevocably appoints the
Company as its Agent for such purposes. The ESOP Trustee shall have no
obligation to account to any such Employer or to follow the instructions of or
otherwise deal with any such Employer, the intention being that the ESOP Trustee
shall deal solely with the Company as if the ESOP Trustee and the Company were
the only parties to this Agreement.
4
<PAGE>
ARTICLE II
----------
Management and Control of the
Plan and Trust Assets
---------------------------
II-1. Establishment of Trust. The Employers have established with the ESOP
Trustee this ESOP Trust for the purpose of receiving and holding all assets
contributed or transferred in connection with or pursuant to the ESOP Fund or
the Inland Steel Industries Stock Fund (each as described in paragraph II-3),
and all increments thereto, proceeds thereof, and the income and other
investment gains therefrom for the benefit of their respective eligible
employees. It is specifically understood by the parties hereto that the ESOP
Trustee's appointment and duties hereunder are, and in all events shall be,
construed as limited to serving with respect only to this ESOP Trust and the
assets held hereunder.
II-2. Plan Administration. Each Plan will be administered as provided
therein, and the ESOP Trustee shall not be responsible for the administration of
any Plan or any other duties except as provided in this Trust Agreement. The
Committee acting under the terms of each Plan (the "Committee"), or the Plan
Administrator appointed by the relevant Committee (the "Plan Administrator"),
shall be responsible for administration of each Plan.
II-3. The ESOP Trust. The ESOP Trust Fund as at any date shall consist of
all property of every kind then held by the ESOP Trustee. The ESOP Trustee shall
hold the ESOP Trust Fund as a commingled fund or commingled funds in which each
Plan shall be deemed to have a proportionate interest in each fund in which it
participates as more fully set forth below.
5
<PAGE>
(a) The ESOP Trust shall consist of the ESOP Fund, a fund to be invested
primarily in Convertible Preferred Stock (and Common Stock, whether
issued upon the conversion of Convertible Preferred Stock or otherwise
acquired by the Trustee for the ESOP Fund), and the Inland Steel
Industries Stock Fund, a fund to be invested in Common Stock.
(b) Separate "Subaccounts" shall be established and maintained with
respect to each Plan, which Subaccounts shall reflect the interest of
each Plan in the ESOP Trust Fund and its respective interest in each
of the ESOP Fund and the Inland Steel Industries Stock Fund. The
Committee acting under the Inland Plan (the "Inland Plan Committee")
shall designate that portion of the ESOP Trust Fund which is
attributable to each Plan participating herein as of the Effective
Date. Thereafter, contributions to and payments from the ESOP Trust
Fund with respect to each Plan shall be credited or debited to the
appropriate Plan Subaccount, and each Subaccount shall be debited and
credited with a proportionate share of the investment gains and losses
and the income and expenses of the ESOP Fund and the Inland Steel
Industries Stock Fund in which it participates. Each Plan Subaccount
shall be charged with Trust Fund expenses in accordance with
provisions of Article IV.
6
<PAGE>
(c) Company Stock held in the ESOP Fund shall be valued in accordance with
the requirements of Treasury Regulation Section 54.4975-11(d)(5). If
such Company Stock is not readily tradeable on an established
securities market (within the meaning of Code Sections 401(a)(28)(C)
and 409(1)(1)), then any valuation of such Company Stock shall be
based upon an appraisal, which need not be made more frequently than
annually by an independent appraiser which satisfies the requirements
of Code Section 401(a)(28)(C).
(d) The ESOP Fund shall contain individual ESOP Accounts reflecting the
interest of each participant in each Plan ("Participant") in the ESOP
Fund ("Individual ESOP Account"). The ESOP Fund shall also contain,
solely with respect to the Inland Plan, an ESOP Suspense Account to
which shares of Company Stock purchased with the proceeds of an ESOP
Loan are credited until released upon the payments of such ESOP Loan
("ESOP Suspense Account"), and an ESOP Holding Account to which shares
of Company Stock released from the ESOP Suspense Account are credited
until they are subsequently allocated to the Participants' Individual
ESOP Accounts ("ESOP Holding Account") under the Inland Plan. The
Inland Steel Industries Stock Fund shall contain individual accounts
reflecting the interest of each Participant in the Inland Steel
Industries Stock Fund
7
<PAGE>
(referred to collectively with the Individual ESOP Accounts as
"Accounts").
ARTICLE III
-----------
Powers and Duties of
ESOP Trustee
--------------------
III-1. Powers and Duties of ESOP Trustee As Directed. Pursuant to
directions provided by the Committee acting under the Inland Plan (the "Inland
Plan Committee"), the ESOP Trustee shall have the following powers, rights, and
duties with respect to the ESOP Trust in addition to those provided elsewhere in
this Trust Agreement or by law:
(a) To receive, hold and apply all contributions paid to it under
each Plan; provided, however, that the ESOP Trustee shall have no
duty to require any contributions to be made to it or to
determine that the contributions received by it comply with the
provisions of that Plan.
(b) To acquire and hold qualifying employer securities and qualifying
employer real property, as such investments are defined in ERISA
Section 407(d) and Code Section 4975(e)(8).
(c) To accept, with its reasonable consent, from any trustee acting
under any other trust agreement evidencing a trust forming a part
of any Plan such assets as the Inland Plan Committee may direct
in writing.
(d) Notwithstanding any other provisions of this Trust Agreement, to
invest in and withdraw from any "common trust fund" designated by
the Inland
8
<PAGE>
Plan Committee, which is established and maintained in accordance with
Code Section 584, such portion of the ESOP Trust as the Inland Plan
Committee shall direct.
(e) Subject to the provisions of paragraphs III-4 and III-5, to acquire,
hold, manage, operate, sell, contract to sell, grant options with
respect to, convey, exchange, transfer, abandon, lease, manage, and
otherwise deal with respect to assets of the ESOP Trust.
(f) Subject to the provisions of paragraph III-6, to borrow from anyone
such amount or amounts of money as the Inland Plan Committee shall
consider necessary to carry out the purpose of this ESOP Trust and for
that purpose to mortgage or pledge all or any part of the ESOP Trust
(other than that portion invested in common trust funds pursuant to
subparagraph III-1(d)), as directed by the Inland Plan Committee.
(g) To retain in cash any portion of the ESOP Trust deemed appropriate by
the Inland Plan Committee and to invest such cash in accordance with
paragraph III-3, including any deposit, security, or obligation of the
banking department of the bank acting as ESOP Trustee.
(h) To make payments from the ESOP Trust, as directed by the Inland Plan
Committee, which directions are proper on their face, without
inquiring as to whether a payee is entitled to the payment or as to
whether a payment is
9
<PAGE>
proper and without obligation to search for or ascertain the
whereabouts of any payee or distributee of benefits from the ESOP
Trust.
(i) To compromise, contest, arbitrate, settle, or abandon claims and
demands in favor of or against the ESOP Trust.
(j) To begin, maintain, defend, compromise, or settle any litigation or
administrative proceedings or other actions in connection with the
ESOP Trust.
(k) Subject to the provisions of paragraph III-5, to have all rights of an
individual owner, including the power to give proxies, to join in or
oppose (alone or jointly with others) voting trusts, mergers,
consolidations, foreclosures, reorganizations, recapitalization, or
liquidations, and (subject to the applicable provisions of the Plans
with respect to the conversion of Convertible Preferred Stock) to
exercise or sell stock subscriptions or conversion rights.
(l) To retain any funds or property subject to any dispute or to decline
to make payment or delivery thereof until final adjudication is made
by a court of competent jurisdiction.
III-2. Discretionary Powers and Duties of Trustee. The ESOP Trustee is
authorized and empowered in its sole discretion:
10
<PAGE>
(a) To establish accounts in the commercial department of LaSalle National
Bank and in such other banks and financial institutions for the
payment of benefits or other amounts under each Plan.
(b) To hold securities or other property in the name of the ESOP Trustee
or its nominee or nominees, or in such other form as it determines
best, with or without disclosing the trust relationship, provided the
records of the ESOP Trustee shall indicate the actual ownership of
such securities or other property.
(c) To deposit securities with a clearing corporation as defined in
Article 8 of the Illinois Uniform Commercial Code; to hold the
certificates representing securities, including those in bearer form,
in bulk form with and to merge such certificates into certificates of
the same class of the same issuer which constitute assets of other
accounts or owners, without certification as to the ownership
attached; and to utilize a book-entry system for the transfer or
pledge of securities held by the ESOP Trustee or by a clearing
corporation, provided that the records of the ESOP Trustee shall
indicate the actual ownership of the securities and other property of
the ESOP Trust.
(d) To participate in and use the Federal Book-entry Account System, a
service provided by the Federal Reserve Bank for its member banks for
deposit of Treasury securities.
11
<PAGE>
(e) To furnish to the Company an annual written account for the period
ending each December 31 and accounts for such other periods as may be
required by any Employer or Committee for the relevant Plan within
thirty (30) days of the close of any such period, showing the net
worth of the relevant Plan's interest in the ESOP Trust at the end of
the period, all investments, receipts, disbursements, and other
transactions made by the ESOP Trustee during the accounting period,
and such other information as the ESOP Trustee may possess which any
Employer requires in order to comply with the reporting requirements
of the Code or ERISA, and any such account shall be conclusive on all
persons unless an exception thereto is filed with the ESOP Trustee
within sixty (60) days of the receipt of the account; to keep and
maintain records necessary to comply with the requirements of this
subparagraph and with the requirements of any applicable law including
the valuation requirements set forth in subparagraph II-3(c); and to
permit the Employers and the Committee for each Plan, and such persons
as either may designate, access during reasonable business hours to
all accounts and records maintained by the ESOP Trustee in connection
with the administration of the ESOP Trust, for purposes of inspection
and audit. If, during the term of this Trust Agreement, the United
States Department of Labor issues regulations under ERISA regarding
the valuation of securities or other assets for purposes of the
reports required
12
<PAGE>
by ERISA, the ESOP Trustee shall comply with such regulations for
purposes of the accounts described by this subparagraph.
(f) To pay any estate, inheritance, income, or other tax, charge, or
assessment required by law to be withheld from any benefit, and to
require before making any payment such release or other document from
any taxing authority and such indemnity from the intended payee as the
ESOP Trustee shall deem necessary for its protection.
(g) To employ such agents, financial advisers, attorneys, actuaries,
accountants and other experts (including any such person who may be
retained by any Employer, the Committee for any Plan, or any Plan) as
are reasonably necessary in managing and protecting the ESOP Trust.
(h) Notwithstanding subparagraph III-1, to begin, maintain, defend,
compromise, or settle any litigation, or administrative proceedings or
other actions in connection with the ESOP Trust.
III-3. Short-Term Investments. Notwithstanding any other provision of this
Trust Agreement, the Inland Plan Committee may, but need not, direct the ESOP
Trustee to aggregate cash balances held by it for any Plan from time to time and
to invest such cash balances in short-term cash equivalents in accordance with
investment guidelines provided by the Inland Plan Committee. It is expressly
agreed that any Short-Term Investments may be purchased by the ESOP Trustee,
notwithstanding that an affiliate of the ESOP Trustee has underwritten,
privately
13
<PAGE>
placed or made a market for, any such Short-Term Investments, or may in the
future underwrite, privately place or make a market in any such Short-Term
Investments.
III-4. Exercise of Duties of Trustee. Subject to the provisions of Article
V, the ESOP Trustee shall discharge its duties hereunder solely in the interest
of participants, their beneficiaries, and other persons entitled to benefits
under each Plan, and with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an enterprise of like
character and with like aims.
III-5. Voting or Tendering Company Stock. Each Participant (or, in the
event of his death, his beneficiary) is, for purposes of this paragraph III-5,
hereby designated a "named fiduciary," within the meaning of ERISA Section
403(a)(1), with respect to the shares of Company Stock allocated to his Accounts
in the ESOP Fund and the Inland Steel Industries Stock Fund and with respect to
his "proportionate share" (as determined in subparagraphs (a) and (b) below) of
shares of Company Stock held in the ESOP Suspense Account and the ESOP Holding
Account and, for purposes of voting rights, shares of Company Stock held in the
Accounts of Participants for which the ESOP Trustee has not received voting
instructions ("non-voted Company Stock").
(a) Voting Rights. Each Participant (or beneficiary) shall have the
right to instruct the ESOP Trustee in writing as to the manner in
which to cast the votes attributable to all shares of Company
Stock (of whatever class) allocated to his Accounts in the ESOP
Fund and Inland Steel Industries
14
<PAGE>
Stock Fund. Each Participant (or beneficiary) shall also be deemed to
have instructed the ESOP Trustee to vote, in accordance with his vote
on shares of Company Stock allocated to his Accounts in the ESOP Fund
and Inland Steel Industries Stock Fund, his "proportionate share" (as
determined in the last sentence of this subparagraph III-5(a)) of the
votes attributable to all shares of non-voted Company Stock (of
whatever class) and all shares of Company Stock (of whatever class)
held in the ESOP Suspense Account and ESOP Holding Account. The
Company shall use its best efforts to timely distribute or cause to
be distributed to each Participant (or beneficiary) the information
distributed to stockholders of the Company in connection with any
such stockholders' meeting, together with a form requesting
confidential instructions to the ESOP Trustee on how such votes
attributable to shares of Company Stock shall be cast on each such
matter. Upon timely receipt of such instructions, the ESOP Trustee
shall, on each such matter, to the extent consistent with the ESOP
Trustee's fiduciary obligations under ERISA, cast as directed the
appropriate number of votes attributable to shares (including
fractional shares) of Company Stock. The instructions received by the
ESOP Trustee from individual Participants (or beneficiaries) shall be
held by the ESOP Trustee in strict confidence and shall not be
divulged or released to any person, including employees, officers and
directors of the Company or
15
<PAGE>
any Employer; provided, however, that, to the extent necessary for the
operation of the Plan, such instructions may be relayed by the ESOP
Trustee to a recordkeeper, auditor or other person providing services
to the Plan if such person (i) is not an Employer or any employee,
officer or director thereof, and (ii) agrees not to divulge such
directions to any other person, including employees, officers and
directors of an Employer. The "proportionate share" of any individual
of the votes attributable to all shares of non-voted Company Stock and
all shares of Company Stock held in the ESOP Suspense Account and the
ESOP Holding Account shall be a fraction, the numerator of which shall
be the number of votes attributable to shares of Company Stock which
are held in such individual's Accounts for which he provides
instructions to the ESOP Trustee and the denominator of which shall be
the number of votes attributable to all shares of Company Stock held
in the Inland Steel Industries Stock Fund and the ESOP Fund for which
instructions are provided to the ESOP Trustee.
(b) Rights on Tender or Exchange Offer. Each Participant (or beneficiary)
shall have the right to instruct the ESOP Trustee in writing as to the
manner in which to tender all shares of Company Stock (of whatever
class) allocated to his Accounts in the ESOP Fund and the Inland Steel
Industries Stock Fund. Each Participant (or beneficiary) shall also be
deemed to
16
<PAGE>
have instructed the ESOP Trustee as to the manner in which to respond
to a tender or exchange offer, in accordance with his instructions
given or deemed to have been given with respect to shares of Company
Stock allocated to his Accounts in the ESOP Fund and the Inland Steel
Industries Stock Fund, with respect to his "proportionate share" (as
determined in the last sentence of this subparagraph III-5(b)) of all
shares of Company Stock (of whatever class) held in the ESOP Suspense
Account and the ESOP Holding Account. The Company shall use its best
efforts to timely distribute or cause to be distributed to each such
Participant (or beneficiary) the information distributed to
stockholders of the Company in connection with any such tender or
exchange offer, together with a form requesting confidential
instructions to the ESOP Trustee on how to respond to such tender or
exchange offer on behalf of the Participant (or beneficiary). Upon
timely receipt of such instructions, the ESOP Trustee shall, to the
extent consistent with the ESOP Trustee's fiduciary obligations under
ERISA, respond to such tender or exchange offer as instructed with
respect to such shares of Company Stock. If, and to the extent that,
the ESOP Trustee shall not have received timely instructions from any
individual given a right to instruct the ESOP Trustee with respect to
certain shares by the first sentence of this subparagraph III-5(b),
such individual shall be deemed to have timely instructed the ESOP
17
<PAGE>
Trustee not to tender or exchange such shares of Company Stock. The
instructions received by the ESOP Trustee from individual Participants
(or beneficiaries) shall be held by the ESOP Trustee in strict
confidence and shall not be divulged or released to any person,
including employees, officers and directors of an Employer; provided,
however, that, to the extent necessary for the operation of the Plan,
such instructions may be relayed by the ESOP Trustee to a
recordkeeper, auditor or other person providing services to the Plan
if such person (i) is not an Employer or any employee, officer or
director thereof, and (ii) agrees not to divulge such instructions to
any other person, including employees, officers and directors of an
Employer. The "proportionate share" of any individual of all shares of
Company Stock held in the ESOP Suspense Account and the ESOP Holding
Account shall be a fraction, the numerator of which shall be the
number of votes attributable to shares of Company Stock which are held
in such individual's Accounts and the denominator of which shall be
the number of votes attributable to all shares of Company Stock held
in the Inland Steel Industries Stock Fund and the ESOP Fund (other
than in the ESOP Suspense Account and the ESOP Holding Account).
III-6. Loans to the ESOP Trust with Respect to the Inland Plan. It is
specifically contemplated that the ESOP component of the Inland Plan will
continue to operate pursuant to a leveraged employee stock ownership plan, that
the ESOP Trustee shall, pursuant to directions
18
<PAGE>
from the Company consented to by the ESOP Trustee, incur indebtedness for the
purpose of acquiring Company Stock for the Inland Plan, and that the purchase of
Company Stock with the proceeds of such indebtedness shall be pursuant to
directions from the Company consented to by the ESOP Trustee. Any refinancing of
indebtedness incurred for the purpose of acquiring Company Stock for the Inland
Plan shall be at the direction of the Company. Such ESOP Loan shall meet all of
the requirements necessary to constitute an "exempt loan" within the meaning of
Treasury Regulation Section 54.4975-7(b)(1)(iii) and shall be used primarily for
the benefit of the Participants and their beneficiaries of the Inland Plan. The
proceeds of such ESOP Loan shall be used, within a reasonable time after the
ESOP Loan is obtained, only to purchase Company Stock or to repay such ESOP Loan
or a prior ESOP Loan. Unless otherwise directed by the Company or the Inland
Plan Committee, the ESOP Trustee shall use dividends on any Company Stock in the
Inland Plan acquired with the proceeds of an ESOP Loan to make payments of
principal or interest on such ESOP Loan. Such ESOP Loan shall provide for no
more than a reasonable rate of interest. The period to maturity under the ESOP
Loan must be definitely determinable at all times. The ESOP Loan may not be
payable at the demand of any person, except in the case of a default. The only
assets of the ESOP Trust that may be given as collateral for the ESOP Loan are
shares of Company Stock under the Inland Plan acquired with the proceeds of the
ESOP Loan and shares of Company Stock under the Inland Plan that were used as
collateral on prior ESOP loans repaid with the proceeds of the current ESOP Loan
(and shares of Common Stock into which such shares may be converted). Only
Company Stock held in unallocated status in the ESOP Suspense Account under the
Inland Plan may be collateral for
19
<PAGE>
an ESOP Loan. At the direction of the Inland Plan Committee, shares of Company
Stock shall be released from the ESOP Suspense Account under the Inland Plan to
the ESOP Holding Account under the Inland Plan and then allocated to
Participants' Individual ESOP Accounts under the Inland Plan at an annual rate
which, in accordance with the terms of the Inland Plan, is geared to the rate of
total repayment (principal plus interest) of the ESOP Loan or the rate of
principal repayment of the ESOP Loan, provided that in either case all
applicable requirements of the applicable regulations shall be satisfied. No
person entitled to payment under an ESOP Loan shall be entitled to payment from
the ESOP Trust other than from collateral for the ESOP Loan, Employer
contributions made under the Inland Plan for the purpose of satisfying the ESOP
Loan obligation, earnings (including dividends) attributable to such collateral
and such Employer contributions, and such other assets, if any, as to which
recourse may be permitted under Code Section 4975. Payments of principal and
interest on any such ESOP Loan shall be made by the ESOP Trustee (as directed by
the Inland Plan Committee) only in accordance with the provisions of the Inland
Plan. In the event of a default under the ESOP Loan, the value of ESOP Trust
assets transferred to the lender shall not exceed the amount of the default,
provided further that if the lender is a "party in interest," within the meaning
of ERISA Section 3(14), a transfer of assets upon default shall be made only if,
and to the extent of, the failure to meet the ESOP Loan's payment schedule. The
ESOP Trustee shall make such determinations as are necessary to ensure that the
purchase price of Company Stock acquired with the proceeds of such ESOP Loan is
not in excess of "adequate consideration" (as defined in ERISA Section 3(18)).
20
<PAGE>
ARTICLE IV
----------
Compensation, Expenses, and Indemnity
-------------------------------------
IV-1. Compensation. Unless paid by an Employer, the ESOP Trustee's
reasonable compensation, as may be agreed upon from time to time by the ESOP
Trustee and the Company, shall be paid from the assets of the ESOP Trust.
IV-2. Expenses. Unless paid by an Employer, the ESOP Trustee's reasonable
and properly documented costs, charges, and expenses incurred in connection with
the administration, management, investment, and protection of the ESOP Trust
shall be paid from the ESOP Trust. In addition, the Trustee is authorized to pay
from the Trust Fund, at the direction of the Inland Plan Committee, all
reasonable investment advisor fees, legal fees, accounting fees, and other
reasonable administrative costs and expenses of a Plan and the ESOP Trust,
including expenses of Plan and Trust administration incurred by the Employers,
to the extent that they are not paid directly by the Employers. To the extent
that any of the foregoing fees and expenses are paid directly by an Employer,
the ESOP Trustee shall reimburse the Employer from the ESOP Trust Fund to the
extent directed by the Inland Plan Committee. Any payment made pursuant to this
paragraph IV-2 shall be charged against the ESOP Trust Fund generally, except
that expenses which are directly attributable to one or more Plans shall be
charged to the applicable Plan Subaccount, and expenses which are not properly
chargeable proportionately between the ESOP Fund and the Inland Steel Industries
Stock Fund shall be charged to the applicable fund in such proportions as the
Inland Plan Committee shall designate in writing.
21
<PAGE>
IV-3. Taxes. Unless paid by an Employer, all taxes and assessments imposed
on the ESOP Trust or any asset or income thereof shall be paid by the ESOP
Trustee from the ESOP Trust, provided, however, that the Company or the Inland
Plan Committee shall have the right to direct the ESOP Trustee to contest any
such tax or assessment imposed on the ESOP Trust or any asset or income thereof.
IV-4. Indemnity. Each Employer shall indemnify the ESOP Trustee and hold
it harmless from any liability or expense (including reasonable attorneys' fees)
arising out of any matter relating to the ESOP Trustee's duties and activities
pursuant to this Trust Agreement for the relevant Plan as to which the ESOP
Trustee has not been grossly negligent or acted in bad faith or engaged in
willful misconduct. This Indemnity shall survive this Trust Agreement; provided,
however, that any matter for which the ESOP Trustee may be indemnified must
occur prior to the time when the provisions of this Trust Agreement are no
longer in effect pursuant to Paragraph VII-3.
ARTICLE V
---------
No Reversion to Company
-----------------------
V-1. Exclusive Benefit of Participants. No part of the corpus or income of
the ESOP Trust shall revert to any Employer or be used for, or diverted to,
purposes other than for the exclusive benefit of Participants and other persons
entitled to benefits under the Plans.
V-2. Return of Contributions in Certain Cases. Notwithstanding paragraph V-
1, and subject to the availability of such amounts in the ESOP Trust:
22
<PAGE>
(a) Employer contributions under a Plan for any plan year are conditioned
upon qualification of the Plan under Code Section 401(a) (and in the
case of an ESOP component, Code Section 4975(e)(7)) and, if the Plan
does not so qualify, the ESOP Trustee shall, upon written request of
the Employer, return to the Employer the amount of any contributions,
reduced by the amount of any losses thereon, as soon as possible, but,
in any event, within one calendar year after the date that initial
qualification of that Plan is denied;
(b) each Employer's contributions under a Plan are conditioned upon the
deductibility of such contributions under Code Section 404, and, in
the event any such deduction is disallowed, the ESOP Trustee shall,
upon written request of that Employer, return to the Employer the
amount of the contribution (to the extent disallowed), reduced by the
amount of any losses thereon, as soon as possible, but, in any event,
within one year after the date the deduction is disallowed; and
(c) if a contribution or any portion thereof is made to a Plan by an
Employer by a mistake of fact, the ESOP Trustee shall, upon written
request of the Employer, return to the Employer the amount of such
contributions, reduced by the amount of any losses thereon, as soon as
possible, but, in any event, within one year after the date of payment
to the ESOP Trustee.
23
<PAGE>
ARTICLE VI
----------
Change of ESOP Trustee
----------------------
VI-1. Resignation. The ESOP Trustee may resign at any time by giving at
least sixty (60) days' advance written notice to the Company and the Committee
(with a copy to the Committee acting under each other Plan), which notice may be
waived by the written consent of the Company and the Inland Plan Committee.
VI-2. Removal of ESOP Trustee and Appointment of Successor ESOP Trustee.
The Company, by action of the Inland Plan Committee may remove the ESOP Trustee
by giving sixty (60) days' advance written notice to the ESOP Trustee, which
notice may be waived by the written consent of the ESOP Trustee, subject to
providing the ESOP Trustee with satisfactory written evidence of the appointment
of a successor trustee and of the successor trustee's acceptance of the
trusteeship.
VI-3. Duties of Resigning or Removed ESOP Trustee. If the ESOP Trustee
resigns or is removed, it shall promptly transfer and deliver the assets of the
ESOP Trust to the successor trustee, after reserving such reasonable amount as
it shall deem necessary to provide for its reasonable fees and expenses and any
reasonable sums chargeable against the ESOP Trust for which it may be liable.
Within one hundred (100) days of the effective date of removal or resignation,
the resigning or removed ESOP Trustee shall furnish to the Company, the
Committees, and the successor trustee an account of its administration of the
ESOP Trust from the date of its last annual account. Any such account shall be
conclusive on all persons unless an exception thereto is filed with the ESOP
Trustee within sixty (60) days of the receipt of the
24
<PAGE>
account. Any successor ESOP trustee shall succeed to all the right, title and
estate vested in its predecessor without the signing of any further documents,
but any resigning or removed ESOP Trustee shall execute all documents and do all
acts necessary to vest title of record in the ESOP Trust in any successor
trustee. Each successor ESOP Trustee shall have all the powers, rights and
duties conferred on it by this Trust Agreement as if originally named ESOP
Trustee.
ARTICLE VII
-----------
Amendment and Termination
-------------------------
VII-1. Amendment. The Company reserves the right to amend this Trust
Agreement at any time, by action of the Inland Plan Committee, except that no
amendment shall change the rights, duties, and liabilities of the ESOP Trustee
without its consent. No amendment shall be effective or bind the ESOP Trustee
until delivered to the ESOP Trustee in writing.
VII-2. Termination. This Agreement and the ESOP Trust hereby evidenced may
be terminated by the Company at any time upon written notice delivered to the
ESOP Trustee; provided that all provisions of the ESOP Trust nevertheless shall
continue in effect until the assets of the ESOP Trust have been transferred to
another trustee appointed by the Inland Plan Committee or have been distributed
or applied by the ESOP Trustee in accordance with the provisions of the Plans
and applicable law, as directed by the Inland Plan Committee. Unless sooner
terminated, the Agreement created hereunder shall terminate when there are no
funds remaining in the hands of the ESOP Trustee hereunder.
25
<PAGE>
VII-3. Termination of Employer's Participation in Plan. If a Plan, as
applied to any Employer or all Employers, is terminated, all of the provisions
of the ESOP Trust evidenced by this Trust Agreement nevertheless shall continue
in effect until the assets of that Plan held pursuant to the ESOP Trust which
are allocable to the employees and former employees of that Employer or all
Employers, as the case may be, have been distributed or applied by the ESOP
Trustee in accordance with the provisions of the applicable Plan or Plans, as
directed by the applicable Committee.
VII-4. Withdrawal from Trust by Employer. Each Employer shall have the
right to withdraw as a party to the Trust at any time with respect to one or
more of its Plans upon furnishing written notice to the Inland Plan Committee,
the ESOP Trustee, and the Company of its determination to withdraw from the ESOP
Trust with respect to such Plan or Plans. In the event of withdrawal of any such
Employer with respect to such Plan or Plans or in the event of its election to
terminate or to fund separately the benefits provided under any of its own
Plans, the Company shall cause a valuation to be made of the share of the ESOP
Trust Fund which is held for the benefit of persons having an interest therein
under such Plan attributable to such Employer. The ESOP Trustee shall thereupon
segregate and dispose of such share in accordance with written directions from
the Company. Withdrawal from a Plan and the ESOP Trust by an Employer shall not
affect the continued operation of any Plan and Trust with respect to the Company
and other Employers.
VII-5. Disqualification of Plan. If any adopting Employer receives notice
that a Plan is no longer qualified under the provisions of Section 401 of the
Internal Revenue Code or the
26
<PAGE>
corresponding provisions of any future Federal Revenue Act, the Company shall
immediately cause a valuation to be made of the share of the ESOP Trust Fund
which is held for the benefits of the persons having an interest therein under
such Plan. The ESOP Trustee shall thereupon segregate, withdraw from the ESOP
Trust Fund, and dispose of such share in accordance with the written direction
of the Inland Plan Committee. The Inland Plan Committee may direct the ESOP
Trustee to dispose of such share to itself, as trustee of a separate trust, the
terms and conditions of which shall be substantially identical with those of
this ESOP Trust, except that the Company, the ESOP Trustee and such Employer, if
any, shall be the only parties thereto.
VII-6. Trustee Reserves. If the Agreement is terminated for any reason, the
ESOP Trustee may reserve from the ESOP Trust Fund such reasonable amounts as it
deems necessary to provide for payment of any expenses or taxes which it
reasonably believes to be then or thereafter chargeable against the ESOP Trust
Fund.
VII-7. Continuation of Powers. From the date of the termination of the
Trust Agreement until the final distribution of the Trust Fund, the ESOP Trustee
shall continue to have all the powers provided under the Trust Agreement that
are necessary and expedient for the orderly liquidation and distribution of the
ESOP Trust Fund.
ARTICLE VIII
------------
Miscellaneous
-------------
VIII-1. Notice. Any notice to any Employer or any Committee, required or
permitted under this Trust Agreement shall be made in accordance with the latest
instructions of
27
<PAGE>
the Secretary of the Company or the Plan Administrator of the relevant Plan
given to the ESOP Trustee for that purpose. Any notice to the ESOP Trustee
required or permitted under this Trust Agreement shall be made in accordance
with the latest instructions of the ESOP Trustee given to the Secretary of the
Company or the Plan Administrator of the relevant Plan.
VIII-2. Waiver of Notice. Any notice required under this Trust Agreement
may be waived in writing by the person entitled thereto. No such waiver shall be
construed as being a general waiver to the matters concerned except if so
specifically stated.
VIII-3. Counterparts. This Trust Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
VIII-4. Governing Laws. This Trust Agreement shall be construed and
administered in accordance with the internal substantive laws (and not any
conflict of law provisions) of the State of Illinois, to the extent that such
laws are not preempted by ERISA or other laws of the United States of America.
VIII-5. Successors. The provisions of this Trust Agreement shall be binding
on the ESOP Trustee, each of the Employers, the Committees, and their respective
successors, and on the participants, their beneficiaries, all other persons
entitled to benefits under the Plans, and their respective heirs and legal
representatives.
VIII-6. Successors to Employer. If, with the consent of the Company, a
successor to any Employer or a purchaser of all or substantially all of an
Employer's assets elects to continue the Plan, such successor or purchaser shall
be substituted for that Employer under this Trust Agreement.
28
<PAGE>
VIII-7. Article and Paragraph Headings. The article and paragraph titles of
this Trust Agreement are inserted for convenience of reference. They constitute
no part of this Trust Agreement and are not to be considered in the construction
hereof.
VIII-8. Gender and Number. Where the context admits, words in any gender
shall include any other gender; words in the singular shall include the plural;
and words in the plural shall include the singular.
VIII-9. Evidence. Evidence required of anyone under this Trust Agreement
may be presented by the proper party by certificate, affidavits, document, or
other instrument which the person acting in reliance thereon considers pertinent
and reliable. All requisitions, orders, requests, and instructions of a
Committee shall be in writing signed by a chairman elected by the Committee or a
majority of the Committee. All actions required to be taken by an Employer shall
be in writing signed by an officer or other employee of the Employer designated
by the Board of Directors of the Employer. The Secretary of the Company shall
certify to the Trustee the person or persons who are, from time to time the
members of each Committee and the Board of Directors of each Employer and shall
provide the ESOP Trustee with a specimen signature of each such designee. The
ESOP Trustee may rely on the latest certificate without further inquiry or
verification.
VIII-10. Qualification of ESOP Trust and Plan. Until it is advised to the
contrary, the ESOP Trustee may assume that the Plan is qualified under Code
Section 401(a) (and, in the case of the ESOP component, Code Section 4975(e)(7))
and that the ESOP Trust is entitled to
29
<PAGE>
exemption from federal income tax under Code Section 501(a) and implements and
forms a part of the Plan.
VIII-11. Severability. In case any provision of this Trust Agreement is
held invalid or illegal for any reason, such invalidity or illegality shall not
affect the remaining provisions of this Trust Agreement, and this instrument
shall be construed and enforced as if such invalid or illegal provisions had
never been incorporated herein.
VIII-12. Notice to Participants. Except as otherwise agreed, for notices
required by ERISA, upon request in writing from the ESOP Trustee, and upon the
Company's consent which shall not be unreasonably withheld, the Company shall
use its best efforts to mail or
[Text continued on next page]
30
<PAGE>
otherwise deliver to Plan Participants or beneficiaries copies of such form of
communications or materials as may be provided to the Company from the ESOP
Trustee from time to time.
IN WITNESS WHEREOF, the Company and the ESOP Trustee have caused this Trust
Agreement to be signed by their duly authorized officers the day and year first
above written.
31
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED STATEMENT OF OPERATIONS, THE CONSOLIDATED BALANCE SHEET, AND
THE SUMMARY OF STOCKHOLDERS' EQUITY CONTAINED IN THE QUARTERLY REPORT ON FORM
10-Q TO WHICH THIS EXHIBIT IS ATTACHED AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 73,200
<SECURITIES> 0
<RECEIVABLES> 597,000
<ALLOWANCES> 23,900
<INVENTORY> 633,700
<CURRENT-ASSETS> 1,310,600
<PP&E> 4,676,300
<DEPRECIATION> 3,049,700
<TOTAL-ASSETS> 3,630,900
<CURRENT-LIABILITIES> 584,400
<BONDS> 698,400
0
3,100
<COMMON> 50,600
<OTHER-SE> 867,200
<TOTAL-LIABILITY-AND-EQUITY> 3,630,900
<SALES> 1,292,800
<TOTAL-REVENUES> 1,293,300
<CGS> 1,175,000
<TOTAL-COSTS> 1,175,400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,900
<INCOME-PRETAX> 39,000
<INCOME-TAX> 15,100
<INCOME-CONTINUING> 23,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,800
<EPS-PRIMARY> .40
<EPS-DILUTED> .38
</TABLE>
