<PAGE> 1
SCHEDULE 14A (Amendment No. 1)
(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 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
ROUGE STEEL COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
ROUGE STEEL COMPANY
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) (4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a) (2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
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<PAGE> 2
ROUGE STEEL COMPANY
3001 MILLER ROAD
DEARBORN, MICHIGAN 48121
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 8, 1997
------------------
TO THE STOCKHOLDERS OF
ROUGE STEEL COMPANY:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Rouge Steel Company (the "Company") will be held at the
Gate 2 Training Center, Rouge Steel Company, Dearborn, Michigan 48121, on
Thursday, May 8, 1997 at 10:00 A.M. for the following purposes:
1. To elect two (2) members of the Board of Directors to serve
until the 2000 annual meeting of stockholders or until their
successors have been duly elected and shall have qualified;
2. To consider and act upon a proposal to (A) (i) amend Section 1
of Article Seventh of the Company's Restated Certificate of
Incorporation (the "Certificate") to change the required
number of directors of the Company from nine to not less than
six and not more than nine and (ii) amend the Certificate to
delete the provision contained in Section 5 of Article Seventh
requiring approval of 80% of the Board of Directors to amend
Sections 2.02, 2.03, 2.07, 2.14, 2.15 and 14.01 of the
Company's Amended and Restated By-Laws and (B) to amend and
restate the Certificate to delete the provision contained in
Article Ninth requiring 80% of the combined voting power of
the Company's outstanding common stock to amend Section 7 of
Article Fourth, Section 4 of Article Seventh and Article Ninth
of the Certificate;
3. To ratify the appointment of Price Waterhouse LLP as the
Company's independent public accountants for the fiscal year
ending December 31, 1997; and
4. To consider and act upon such other business as may properly
come before the Annual Meeting.
Only stockholders of record of each of the classes of the Company's
common stock at the close of business on March 14, 1997 will be entitled to vote
at the Annual Meeting.
PLEASE SIGN AND PROMPTLY MAIL THE ENCLOSED PROXY, WHETHER OR NOT YOU PLAN
TO ATTEND THE ANNUAL MEETING, IN ORDER THAT YOUR SHARES MAY BE VOTED FOR YOU. A
RETURN ENVELOPE IS PROVIDED FOR YOUR CONVENIENCE.
By Order of the Board of Directors,
MICHAEL A. WEISS
Secretary
Dated: April 8, 1997
<PAGE> 3
ROUGE STEEL COMPANY
3001 MILLER ROAD
DEARBORN, MICHIGAN 48121
------------------
ANNUAL MEETING OF STOCKHOLDERS
MAY 8, 1997
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PROXY STATEMENT
- --------------------------------------------------------------------------------
This Proxy Statement is being mailed to the stockholders of ROUGE STEEL
COMPANY (the "Company") on or about April 8, 1997 in connection with the
solicitation by the Board of Directors of the Company of proxies for use at the
1997 Annual Meeting of Stockholders of the Company (the "Meeting") to be held at
the Gate 2 Training Center, Rouge Steel Company, Dearborn, Michigan 48121, on
Thursday, May 8, 1997 at 10:00 A.M. The Meeting has been called for the
following purposes: (1) to elect two (2) Class III directors to serve as
directors until the 2000 annual meeting of stockholders; (2) to consider and act
upon a proposal to amend and restate the Restated Certificate of Incorporation
(the "Certificate") of the Company; (3) to ratify the appointment of Price
Waterhouse LLP as the Company's independent public accountants for the fiscal
year ending December 31, 1997; and (4) to consider and act upon such other
business as may properly come before the Meeting. The amendments to and
restatement of the Certificate would change the required number of board
members, permit a majority of the members of the Board of Directors to amend,
alter or repeal the Amended and Restated By-Laws of the Company (the "By-Laws")
and permit 66 2/3% of the combined voting power of the Company's outstanding
common stock to approve all amendments to the Certificate.
PROXIES AND VOTING RIGHTS
- --------------------------------------------------------------------------------
The voting securities of the Company outstanding on March 14, 1997
consisted of 14,356,117 shares of class A common stock, par value $0.01 per
share (the "Class A Common Stock"), each entitling the holder thereof to one
vote per share, and 7,562,400 shares of class B common stock, par value $0.01
per share (the "Class B Common Stock," and together with the Class A Common
Stock, the "Common Stock"), each entitling the holder thereof to 2.5 votes per
share. Only stockholders of record at the close of business on March 14, 1997
(the "Record Date") are entitled to notice of and to vote at the Meeting. There
was no other class of voting securities of the Company outstanding on the Record
Date. A majority of the voting interest of the outstanding shares of Common
Stock entitled to vote is required to be present in person or by proxy to
constitute a quorum and permit the Meeting to be held.
The enclosed proxy is being solicited by the Board of Directors of the
Company in order to provide every stockholder with an opportunity to vote on all
matters that properly come before the Meeting, whether or not the stockholder
attends in person. Shares cannot be voted at the Meeting unless the owner of
record is present to vote or is represented by a proxy. When the enclosed proxy
is properly signed, dated and returned, the shares represented by such proxy
will be voted by the persons named as proxies in accordance with the
stockholder's directions. Except as otherwise specified in the proxy, shares
will be voted for the proposal to amend and restate the Certificate, for the
election of the nominees for Class III director named herein, for the election
of Price Waterhouse LLP as independent accountants for 1997 and for any other
matter that may properly be brought before the Meeting in accordance with the
judgment of the person or persons voting the proxy. Any person who has signed
and returned a proxy may revoke it at any time before it is exercised by
submitting a subsequently executed proxy, by giving notice of revocation to the
Secretary of the Company or by voting in person at the Meeting. All classes of
Common Stock will vote together as a single class on all matters presented for
consideration at the Meeting. The amendment of the
<PAGE> 4
Certificate to change the required number of directors of the Company from nine
to not less than six and not more than nine and to delete the provision
contained in Section 5 of Article Seventh requiring approval of 80% of the Board
of Directors to amend certain provisions of the By-Laws requires the affirmative
vote of 66 2/3% of the combined voting power of the outstanding shares of Common
Stock of the Company. The amendment and restatement of the Certificate to delete
the provision contained in Article Ninth requiring 80% of the combined voting
power of the Company's outstanding Common Stock to amend certain provisions of
the Certificate requires the affirmative vote of the holders of 80% or more of
the combined voting power of the outstanding shares of Common Stock of the
Company. Directors are elected by a plurality, and independent accountants by a
majority, of the votes of the shares present in person or represented by proxy
and entitled to vote. Abstentions and broker non-votes will be counted as voting
those shares against the proposal to amend and restate the Certificate, however,
abstentions and broker non-votes will not be counted in determining the number
of shares voted for or against any nominee for director, the approval of the
selection of independent accountants or any other voting matter. They are,
however, counted in determining the presence of a quorum. Under the rules of the
New York Stock Exchange, Inc. ("NYSE"), brokers who hold shares in street name
for customers have the authority to vote on certain items when they have not
received instructions from beneficial owners. Brokers who do not receive
instructions will have authority to vote on all proposals described in this
Proxy Statement.
SECURITY OWNERSHIP
- --------------------------------------------------------------------------------
The following table sets forth, as of December 31, 1996, information
concerning ownership of the Common Stock outstanding by (i) each person known by
the Company to be the beneficial owner of more than five percent of the Common
Stock, (ii) each director and nominee for election as a director, (iii) each of
the five most highly compensated executive officers of the Company, and (iv) all
directors and executive officers of the Company as a group. Unless otherwise
indicated, (a) each stockholder has sole voting power and sole dispositive power
with respect to the indicated shares and (b) the address of each such person is
c/o Rouge Steel Company, 3001 Miller Road, P.O. Box 1699, Dearborn, Michigan
48121-1699.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK PERCENT OF
DIRECTORS, EXECUTIVE OFFICERS BENEFICIALLY TOTAL VOTING
AND 5% STOCKHOLDERS OWNED PERCENT(1) STOCK
----------------------------- ------------ ---------- ------------
<S> <C> <C> <C>
Carl L. Valdiserri(2)(3)(4)(9).......................... 7,384,264 33.7% 54.4%
Worthington Industries, Inc.(3)(5)...................... 5,999,600 27.4 19.9
1205 Dearborn Drive
Columbus, Ohio 43085
Pioneering Management Corporation(6).................... 2,099,800 9.6 6.3
60 State Street
Boston, Massachusetts 02109
Wellington Management Company(6)........................ 1,395,300 6.4 4.2
75 State Street
Boston, Massachusetts 02109
Louis D. Camino(4)(7)................................... 210,829 1.0 *
Gary P. Latendresse(4)(7)............................... 112,763 * *
Dennis T. Crosby(4)(7).................................. 30,318 * *
William E. Hornberger(4)(7)............................. 71,090 * *
Dominick C. Fanello..................................... 167 * *
John E. Lobbia(8)....................................... 7,125 * *
Peter J. Pestillo(10)................................... 5,000 * *
Clayton P. Shannon(8)................................... 7,125 * *
All Directors and Executive Officers as a Group (13
persons)(4)(7)(8)..................................... 7,953,322 36.2% 56.1%
</TABLE>
- -------------------------
* Less than one percent.
2
<PAGE> 5
(1) Based on 21,903,536 total outstanding shares of Common Stock on December
31, 1996.
(2) Mr. Valdiserri owns 7,140,400 shares of Class B Common Stock, which
constitute 94.4% of the issued and outstanding shares of Class B Common
Stock, and 243,864 shares of Class A Common Stock. Under the Certificate,
the Class A Common Stock and the Class B Common Stock are entitled to the
same rights and preferences, except with respect to voting power; the Class
A Common Stock is entitled to one vote per share and the Class B Common
Stock is entitled to 2.5 votes per share. Pursuant to the voting
arrangement contemplated in the Amended and Restated Stockholders Agreement
(as defined under "Certain Transactions -- The Amended and Restated
Stockholders Agreement"), Mr. Valdiserri may be deemed to be the beneficial
owner (as that term is defined in Rule 13d-3 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) of all shares of Common Stock
owned of record by Worthington Industries, Inc. ("Worthington"). Mr.
Valdiserri disclaims such beneficial ownership. See "Certain Transactions
-- The Amended and Restated Stockholders Agreement."
(3) The shares of Class B Common Stock are convertible into shares of Class A
Common Stock (i) at any time in the discretion of the holder of such shares
of Class B Common Stock or (ii) automatically upon the transfer of shares
of Class B Common Stock to other than certain permitted transferees. The
Certificate provides that upon death or permanent disability of Mr.
Valdiserri or voluntary retirement of Mr. Valdiserri as Chairman of the
Board of Directors of the Company, Mr. Valdiserri's shares of Class B
Common Stock will automatically be converted into an equal number of shares
of Class A Common Stock. The conversion rate is one share of Class A Common
Stock for each share of Class B Common Stock and is subject to adjustment
in certain circumstances. Accordingly, as adjusted to reflect the
conversion of such Class B Common Stock, Mr. Valdiserri owns beneficially
(as that term is defined in Rule 13d-3 under the Exchange Act) 7,384,264
shares of Class A Common Stock, representing approximately 34% of the
21,481,536 as adjusted shares of Class A Common Stock outstanding. However,
if Worthington's 422,000 shares of Class B Common Stock are converted to
Class A Common Stock, then, as adjusted to reflect such conversion, Mr.
Valdiserri owns beneficially (as that term is defined in Rule 13d-3 under
the Exchange Act) 7,384,264 shares of Class A Common Stock, representing
approximately 34% of the 21,903,536 as adjusted shares of Class A Common
Stock outstanding.
(4) The figures shown include shares of Class A Common Stock allocated to the
accounts of participants under the Rouge Steel Company Savings Plan for
Salaried Employees (the "Savings Plan"). Shares of Class A Common Stock
acquired by the Trustee, Putnam Fiduciary Trust Company, for purposes of
the Savings Plan are allocated to the accounts of participants as of the
end of each month. Participants are entitled to provide instructions as to
the voting of the shares allocated to their accounts. Shares credited to
the accounts of participants who do not provide voting instructions are
voted proportionately in the same manner as the Trustee votes the aggregate
of all shares of Common Stock with respect to which the Trustee has
received voting instructions from participants.
(5) In 1996, Worthington converted 878,000 shares of Class B Common Stock into
878,000 shares of Class A Common Stock. As a result, Worthington directly
owns 422,000 shares of Class B Common Stock, which constitute 6% of the
issued and outstanding shares of Class B Common Stock, and 5,577,600 shares
of Class A Common Stock, which constitute approximately 26% of the
21,481,536 shares of Class A Common Stock outstanding as adjusted to
reflect the automatic conversion of Mr. Valdiserri's shares of Class B
Common Stock into shares of Class A Common Stock upon his death, permanent
disability or voluntary retirement as Chairman of the Board of Directors of
the Company. Pursuant to the voting arrangement in the Amended and Restated
Stockholders Agreement, Worthington may be deemed to be the beneficial
owner (as that term is defined in Rule 13d-3 of the Exchange Act) of all
shares of Class B Common Stock owned of record by Mr. Valdiserri.
Worthington disclaims such beneficial ownership. See "Certain Transactions
-- The Amended and Restated Stockholders Agreement."
(6) The information shown is derived from information set forth in the latest
statements filed by Pioneering Management Corporation and Wellington
Management Company with the Securities and Exchange Commission with respect
to their ownership of Class A Common Stock.
(7) The shares indicated include 9,750, 6,750, 4,500 and 5,000 shares of Class
A Common Stock that may be acquired by Messrs. Camino, Latendresse, Crosby
and Hornberger, respectively, upon the exercise of stock options granted
under the Rouge Steel Company Stock Incentive Plan (the "Stock Incentive
Plan").
(8) The shares indicated include 2,875 and 2,375 shares of Class A Common Stock
that may be acquired by Messrs. Lobbia and Shannon, respectively, upon the
exercise of stock options granted under the Rouge Steel Company Outside
Director Equity Plan (the "ODEP").
(9) Mr. Valdiserri did not receive any stock options under the Stock Incentive
Plan in 1995 or 1996.
(10) Mr. Pestillo has requested that he be excluded from participation in the
ODEP and as a result he did not receive any stock options under the ODEP.
3
<PAGE> 6
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
- --------------------------------------------------------------------------------
ELECTION OF DIRECTORS
The Company's Certificate provides that the directors shall be divided into
three classes: Class I, Class II and Class III, each class to consist, as nearly
as may be possible, of one third of the whole number of the Board of Directors.
At each annual meeting, the directors elected to succeed those whose terms are
expiring shall be identified as being of the same class as the directors whom
they succeed and shall be elected for a term expiring at the time of the third
annual meeting of stockholders after their election or until their successors
are duly elected and qualified. A director elected to fill a vacancy is elected
to the same class as the director he or she succeeds and a director elected to
fill a newly created directorship holds office until the next election of the
class to which such director is elected.
Pursuant to the provisions of the Amended and Restated By-Laws of the
Company (the "By-Laws"), the number of directors constituting the board is not
less than six and not more than nine. However, pursuant to the Certificate, the
number of directors constituting the board is presently nine. As a result of
this inconsistency, one of the proposals in this Proxy Statement is to amend the
Certificate to conform to the provisions contained in the By-Laws.
The current Class III directors are nominees for election this year for a
three-year term expiring at the 2000 annual meeting of stockholders. Both of the
nominees and all of the continuing Class I and Class II directors have
previously been elected by the stockholders, with the exception of Mr. Dominick
C. Fanello, who was appointed to fill the Class II vacancy created by the
resignation of Mr. Pete A. Klisares. Of the seven present directors, three are
current officers of the Company. The Nominating Committee may decide to seek a
third Class I director and a third Class III director, but the Company does not
anticipate that these directors will be selected prior to the Meeting. If any
nominee shall be unable to serve, proxies may be voted for another person
designated by the Board of Directors. Management has no reason to believe that
any of the nominees will be unable or unwilling to serve as a director, if
elected. Should any nominee not be a candidate at the time of the Meeting (a
situation which is not now anticipated), proxies may be voted in favor of the
remaining nominees and may also be voted for a substitute nominee selected by
the Board of Directors.
To be eligible for election as directors, persons nominated other than by
the Board of Directors must be nominated in accordance with the procedures set
forth in the By-Laws. Those procedures require that written notice of the
nomination be received by the Secretary 90 days prior to the date of the annual
meeting of stockholders which contains certain information regarding the person
or persons to be nominated and the stockholder giving such notice.
Unless authority is specifically withheld, proxies will be voted for the
election of the nominees named below to serve as directors of the Company until
the 2000 annual meeting of stockholders of the Company or until their successors
shall be duly elected and qualified. Directors shall be elected by a plurality
of the votes cast, in person or by proxy, at the Meeting.
Set forth below is information with respect to each nominee and each
continuing director.
4
<PAGE> 7
NOMINEES FOR CLASS III DIRECTORS -- TERMS EXPIRE IN 2000
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
FOR THE PAST FIVE YEARS FIRST YEAR
NAME AND AGE AND CURRENT PUBLIC DIRECTORSHIPS BECAME A DIRECTOR
- ---------------------------------- ---------------------------------------------- -----------------
<S> <C> <C>
Carl L. Valdiserri (60)........... Mr. Valdiserri has been Chairman and Chief 1989
Executive Officer of the Company since 1989.
From 1987 until 1989 he was an independent
consultant regarding the steel industry,
principally to The Chase Manhattan Bank, N.A.
From 1982 until 1987, Mr. Valdiserri was
Executive Vice President of Weirton Steel
Corporation. Mr. Valdiserri joined the Weirton
Division of National Steel Corporation in
1978. He was Chief Engineer in the Great Lakes
Division of National Steel Corporation from
1973 to 1978 and held various other
engineering positions from 1964 to 1972. He
began his career with Wheeling-Pittsburgh
Steel Corporation in 1958. Mr. Valdiserri has
38 years of experience in the steel
manufacturing industry. Mr. Valdiserri is also
a director of Champion Enterprises, Inc.
Clayton P. Shannon (62)........... Mr. Shannon was Senior Vice President, Finance 1990
and Chief Financial Officer at Calgon Carbon
Corporation until his retirement on October 1,
1995. Prior to joining Calgon Carbon in 1985,
Mr. Shannon served as Treasurer of National
Intergroup, Inc., the former parent company of
National Steel Corporation.
</TABLE>
CONTINUING CLASS I DIRECTORS -- TERMS EXPIRE IN 1998
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
FOR THE PAST FIVE YEARS FIRST YEAR
NAME AND AGE AND CURRENT PUBLIC DIRECTORSHIPS BECAME A DIRECTOR
- ---------------------------------- ---------------------------------------------- -----------------
<S> <C> <C>
Louis D. Camino (59).............. Mr. Camino has served as President and Chief 1990
Operating Officer of the Company since 1990.
Mr. Camino was Vice President of Operations
for Acme Steel Company from 1986 to 1990. Mr.
Camino began his career with Jones and
Laughlin Steel Corporation as a supervisor in
1960 and has 36 years of experience in the
steel manufacturing industry.
Peter J. Pestillo (59)............ Mr. Pestillo is Executive Vice President, 1990
Corporate Relations at Ford Motor Company. Mr.
Pestillo joined Ford in 1980 and his
responsibilities since that time have included
employee and labor relations and governmental
affairs. Mr. Pestillo represents Ford as a
director of Park Ridge Corporation, the parent
of Hertz Corporation.
</TABLE>
5
<PAGE> 8
CONTINUING CLASS II DIRECTORS -- TERMS TO EXPIRE IN 1999
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
FOR THE PAST FIVE YEARS FIRST YEAR
NAME AND AGE AND CURRENT PUBLIC DIRECTORSHIPS BECAME A DIRECTOR
- ---------------------------------- ---------------------------------------------- -----------------
<S> <C> <C>
Gary P. Latendresse (53).......... Mr. Latendresse has been Vice President and 1992
Chief Financial Officer of the Company since
1992. He was Vice President, Finance and
Controller from 1987 until 1992. Mr.
Latendresse has held various financial
positions with the Company and Ford Motor
Company for the past 28 years. Mr. Latendresse
has 28 years of experience in the steel
manufacturing industry. Mr. Latendresse is
also the Treasurer and Assistant Secretary of
the Company.
Dominick C. Fanello (75).......... Mr. Fanello was appointed to the Board on 1996
September 26, 1996 to fill the vacancy created
by Mr. Klisares' resignation. Mr. Fanello has
been a director of Shiloh Industries, Inc.
since 1992 and currently serves as Vice
Chairman. Mr. Fanello was the founder of
Shiloh Corporation in 1954 and has held
various executive positions with Shiloh
Corporation and Shiloh Industries, Inc. for
the past 43 years. Mr. Fanello resigned his
position as the Chief Executive Officer and
Chairman of the Board of Shiloh Industries,
Inc. in 1995 and 1996, respectively. Mr.
Fanello also serves as a director of Park
National Bank (Newark, Ohio).
John E. Lobbia (55)............... Mr. Lobbia has been Chairman and Chief 1990
Executive Officer at DTE Energy Company,
formerly known as Detroit Edison Company,
since January 1996. Mr. Lobbia served as
Chairman and Chief Executive Officer of
Detroit Edison Company from March 1994 to
January 1996, as Chairman, President and Chief
Executive Officer from 1990 to February 1994,
and as President and Chief Operating Officer
from 1988 to 1990. Mr. Lobbia has worked
directly with many of the Detroit area's
industrial concerns and has, during his
career, had extensive experience with steel
manufacturing customers at DTE Energy. Mr.
Lobbia has also been a director of NBD Bank,
N.A. since July 1988.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES.
6
<PAGE> 9
MEETINGS AND COMMITTEES
The Board of Directors met or took action by unanimous written consent on
seven occasions during the fiscal year ended December 31, 1996. There are five
committees of the Board of Directors: the Executive Committee, the Audit
Committee, the Compensation Committee, the Nominating Committee and the Employee
Indemnification Committee. The members of the Executive Committee are Carl L.
Valdiserri (Chairman), John E. Lobbia and Peter J. Pestillo. The Executive
Committee took action by unanimous written consent once during the fiscal year
ended December 31, 1996. The Executive Committee possesses and exercises all the
power and authority of the Board of Directors in the management and direction of
the business and affairs of the Company, except as limited by law. The members
of the Audit Committee are Clayton P. Shannon (Chairman), Dominick C. Fanello
and John E. Lobbia. The Audit Committee met on two occasions during the fiscal
year ended December 31, 1996. The Audit Committee annually recommends to the
Board of Directors independent public accountants to serve as auditors of the
Company's books, records and accounts, reviews the scope of the audits performed
by such auditors and the audit reports prepared by them and reviews related
party transactions and certain other matters. The members of the Compensation
Committee are John E. Lobbia (Chairman), Dominick C. Fanello and Peter J.
Pestillo. The Compensation Committee met or took action by unanimous written
consent on three occasions during the fiscal year ended December 31, 1996. The
Compensation Committee establishes general compensation policies and reviews and
determines salaries and incentive compensation for executive officers of the
Company. The members of the Nominating Committee are Carl L. Valdiserri
(Chairman), Peter J. Pestillo and Clayton P. Shannon. The Nominating Committee
took action by unanimous written consent on one occasion during the fiscal year
ended December 31, 1996. The Nominating Committee recommends nominees to the
Board of Directors of the Company. For information regarding the Nominating
Committee's consideration of nominees recommended by the Company's stockholders,
see "-- Election of Directors" above. The members of the Employee
Indemnification Committee are Carl L. Valdiserri (Chairman), Louis D. Camino and
Gary P. Latendresse. The Employee Indemnification Committee took action by
unanimous written consent on one occasion during the fiscal year ended December
31, 1996. The Employee Indemnification Committee determines whether to indemnify
employees of the Company (other than officers and directors of the Company)
against liabilities and claims arising out of employment with the Company.
On August 1, 1996, Messrs. Malenick and Klisares, President and Executive
Vice President of Worthington, respectively, resigned as members of the Board of
Directors. Prior to their resignations, Mr. Malenick was a member of the
Executive Committee, the Nominating Committee, and was chairman of the
Compensation Committee. Mr. Klisares was a member of the Audit Committee. See
"Certain Relationships and Related Transactions -- Worthington Industries, Inc."
COMPENSATION OF DIRECTORS
General. Directors of the Company who are employees of the Company do not
receive any compensation for being directors. Each director of the Company who
is not an employee of the Company is entitled to receive (i) an annual
director's fee of $15,000, payable in quarterly installments, (ii) $1,000 for
attendance at each meeting of the Board of Directors, (iii) $500 for attendance
at each meeting of a standing committee of which he is a member, but not the
chairman, that is held in conjunction with any annual, regular or special
meeting of the Board of Directors and $1,000 for attendance at each such
committee meeting that is not held in conjunction with any annual, regular or
special meeting of the Board of Directors, and (iv) $1,000 for chairing each
meeting of a standing committee of which he is the chairman that is held in
conjunction with any annual, regular or special meeting of the Board of
Directors and $1,500 for chairing each such committee meeting that is not held
in conjunction with any annual, regular or special meeting of the Board of
Directors. Mr. Pestillo and former directors Klisares and Malenick requested
that they not be paid any cash compensation based upon their status as
directors. Each director who is not an
7
<PAGE> 10
employee of the Company also is entitled to be reimbursed for expenses incurred
in connection with the business and affairs of the Company. Messrs. Pestillo,
Klisares and Malenick requested that they not be reimbursed for expenses
incurred by them while acting as directors.
Outside Director Equity Plan. The Company's Outside Director Equity Plan
("ODEP") provides for the granting of stock awards and stock options to Eligible
Directors. An "Eligible Director" is a member of the Board of Directors who is
not an employee of the Company or an affiliate of the Company (an "Outside
Director"), except that an Eligible Director who is an employee of an entity
that is an affiliate of the Company other than by virtue of the Company's
control of such entity may participate in the ODEP if such director is otherwise
an Outside Director and participated in no equity-based plan (other than the
ODEP) of the Company or any subsidiary thereof. The ODEP also provides, under
certain circumstances, that Eligible Directors may elect to receive all or a
portion of their retainer in the form of Class A Common Stock.
The ODEP provides for the issuance of up to 100,000 shares of Class A
Common Stock. The shares of Class A Common Stock available under the ODEP are
offered and issued directly by the Company. No fees or commissions are charged
by the Company in connection with stock awards and stock options under the ODEP.
Under the terms of the ODEP, as of the date of each annual meeting of the
Company's stockholders (each an "Annual Meeting"), each Eligible Director is
entitled to receive an option to purchase shares of Class A Common Stock,
pursuant to the formula set forth below, unless such director was elected,
appointed or otherwise becomes an Eligible Director during the 60-day period
prior to the Annual Meeting in any year, in which case such Eligible Director
will not receive any options with respect to that Annual Meeting. In addition,
each Eligible Director receiving options with respect to an Annual Meeting must
continue to serve as a director of the Company after such Annual Meeting. The
number of shares of Class A Common Stock subject to an option is based on income
before income taxes (as reported in the Company's Consolidated Statement of
Operations with certain adjustments) that meets certain targeted percentages of
sales for the Company's most recently completed calendar year ("Annual Return on
Sales") as follows:
<TABLE>
<CAPTION>
ANNUAL RETURN ON SALES NUMBER OF SHARES
- ---------------------- ----------------
<C> <C>
0 to 2.3% 0
2.3 to 4.6% 500
4.6 to 6.9% 1,000
6.9% and above 1,500
</TABLE>
On December 2, 1994, Mr. Pestillo requested that he be excluded from
participation in the ODEP until further notice. As of March 14, 1997, Mr.
Pestillo had not requested that the Company include him in the ODEP. Under the
ODEP, in 1996, Messrs. Klisares, Lobbia, Malenick and Shannon were each granted
options to purchase 1,500 shares of Class A Common Stock. Except for the options
described above, no options have been granted under the ODEP in 1996. On August
1, 1996, Messrs. Klisares and Malenick each forfeited their option to purchase
2,125 shares of Class A Common Stock that were not vested on the date of their
resignation from the Board of Directors.
Under the ODEP, 25% of the options granted are exercisable on the date the
options are granted and, assuming the director remains a member of the Board, an
additional 25% of the options become exercisable each succeeding December 31.
The exercise price may be paid, in whole or in part, (i) in cash, (ii) in whole
shares of Class A Common Stock, valued at their then Fair Market Value (as
defined in the ODEP), (iii) through the withholding of shares issuable upon
exercise of the option, or (iv) by a combination of such methods of payment. The
Company may enter into any arrangement permitted under applicable laws (but only
to the extent permitted under Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) to facilitate the "cashless" exercise of
any option.
8
<PAGE> 11
Generally, an option may be exercised by an Eligible Director during the
period that director remains a member of the Board of Directors and for a period
of five years following retirement. However, only those options exercisable at
the date of retirement may be exercised during the period following retirement
and in no event will the options be exercisable more than ten years after the
date of the grant. In the event of the death of an Eligible Director, the
options shall be exercisable only within 12 months succeeding the date of death.
However, only those options exercisable at the date of the Eligible Director's
death may be exercised during the period following death and in no event shall
the options be exercisable more than ten years after the date of grant. The
exercise price of each option is 100% of the Fair Market Value of the Class A
Common Stock subject to an option on the date the option is granted.
On the last day of the month immediately following each calendar quarter,
each Eligible Director is entitled to receive a stock award under the ODEP. The
number of shares of Class A Common Stock awarded to each Eligible Director is
based on income before income taxes (as reported in the Company's Consolidated
Statement of Operations with certain adjustments) that meets certain targeted
percentages of sales for the Company's most recently completed calendar quarter
("Quarterly Return on Sales") as follows:
<TABLE>
<CAPTION>
QUARTERLY RETURN ON SALES NUMBER OF SHARES
- ------------------------- ----------------
<C> <C>
0 to 2.3% 0
2.3 to 4.6% 83
4.6 to 6.9% 167
6.9% and above 250
</TABLE>
Under the ODEP, in 1996, Messrs. Lobbia and Shannon were each awarded 500
shares of Class A Common Stock, Mr. Fanello was awarded 167 shares of Class A
Common Stock and Messrs. Klisares and Malenick were each awarded 333 shares of
Class A Common Stock. The awards were made at 100% of the Fair Market Value of
the Class A Common Stock on the dates the shares were awarded.
An Eligible Director may irrevocably elect (the "Equity Election"), six
months prior to each April 30, July 31, October 31 and January 31 (each such
date, a "Retainer Payment Date"), to receive all or a portion of the amounts
paid by the Company to such Eligible Director as an annual retainer for services
to be rendered as a member of the Board of Directors during any fiscal year of
the Company, in the form of Class A Common Stock. If the retainer of an Eligible
Director is increased subsequent to the Equity Election, such election shall
apply to the amount of such increase. On the applicable Retainer Payment Date,
the Eligible Director will receive a number of shares of Class A Common Stock
equal to (i) the portion of the retainer specified in the Equity Election
divided by (ii) the Director Purchase Price. "Director Purchase Price" means
100% of the Fair Market Value of one share of Class A Common Stock as of the
Retainer Payment Date.
An optionee may make payment of the option price for a nonqualified option
by delivering shares of Class A Common Stock to the Company or electing to have
shares issuable upon exercise withheld by the Company. In the event that payment
of the option price is made by delivering shares to the Company, the optionee
generally will not recognize any gain with respect to the exchanged shares, and
special rules will apply in determining the basis of the new shares received. In
addition, the fair market value of the additional shares received by the
optionee will be taxable as ordinary income. The optionee's holding period in
the exchanged shares received will include his or her holding period in the
shares delivered in exchange therefor. In the event that shares issuable upon
exercise are withheld by the Company in payment of the option price, the fair
market value of the additional shares received by the optionee will be taxable
as ordinary income.
The Company's Board of Directors or the Compensation Committee of the
Company's Board of Directors (the "Compensation Committee") may terminate,
suspend, modify or amend the ODEP at any time, provided that such amendment does
not impair the rights of an optionee or recipient with
9
<PAGE> 12
respect to any stock award or stock option previously granted under the ODEP and
that stockholder approval is required to the extent necessary to comply with
applicable provisions of Section 16 of the Exchange Act (or Rule 16b-3
thereunder) or any other requirement of applicable law or regulation.
Notwithstanding the foregoing, the provisions of the ODEP with respect to
eligibility for participation or the timing or amounts of grants of stock awards
or stock options may not be amended more than once every six months (other than
to comport with changes in the Internal Revenue Code of 1986, as amended (the
"Code"), or the Employee Retirement Income Security Act of 1974, as amended).
10
<PAGE> 13
EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
The following table sets forth, for the fiscal years ended December 31,
1996, 1995 and 1994, each component of compensation paid or awarded to, or
earned by, the Chief Executive Officer (the "CEO") of the Company and each of
the four most highly compensated executive officers who were serving as
executive officers at the end of the last fiscal year, other than the CEO
(collectively referred to as the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION NUMBER OF
-------------------------------------- SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION OPTIONS COMPENSATION(2)
------------------ ---- ------ -------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Carl L. Valdiserri.... 1996 $275,000(3) $116,000 -- -- $11,202
Chairman and Chief 1995 270,833 260,000 -- -- 18,087
Executive Officer 1994 250,000 225,000 -- -- 14,307
Louis D. Camino....... 1996 235,000(3) 83,000 -- 6,000 11,317
President and Chief 1995 233,333 265,000 -- 9,000 17,537
Operating Officer 1994 215,000 203,000 -- -- 14,262
Gary P. Latendresse... 1996 165,000(3) 62,000 -- 6,000 8,283
Vice President and 1995 162,500 192,000 -- 5,000 15,886
Chief Financial
Officer 1994 150,000 148,000 -- -- 11,535
Dennis T. Crosby...... 1996 140,000(3) 28,200 -- 3,000 7,024
Vice President, 1995 139,167 82,500 -- 4,000 15,492
Engineering and 1994 130,000 62,700 -- -- 9,997
Technology
William E.
Hornberger.......... 1996 130,000 37,000 -- 4,000 6,524
Vice President, 1995 130,000 118,000 -- 4,000 14,457
Employee Relations 1994 115,000 96,000 -- -- 7,406
and Public Affairs
</TABLE>
- -------------------------
(1) Amounts awarded pursuant to the Company's Incentive Compensation Plan.
(2) All Other Compensation consists of employer contributions to the Company's
Savings Plan for Salaried Employees and life insurance premiums paid by the
Company on behalf of the Named Executive Officers.
(3) No salary adjustments were granted in 1996 to the Named Executive Officers.
The apparent increases to the salaries of Messrs. Valdiserri, Camino,
Latendresse and Crosby are the result of the annualized effect of increases
granted in 1995.
11
<PAGE> 14
INDIVIDUAL OPTION GRANTS IN 1996
The Company adopted a stock incentive plan (the "Stock Incentive Plan") in
1994 under which key employees can be granted stock options, stock appreciation
rights, restricted stock and performance share awards. The following table sets
forth information with respect to all stock options granted by the Company to
the Named Executive Officers during 1996 under the Stock Incentive Plan.
OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
Percent of
Number of Total Options
Securities Granted to
Underlying Employees Exercise or
Options in Fiscal Base Price Expiration Grant Date
Executive Granted(1) Year Per Share Date(2) Value(3)
--------- ---------- ------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Carl L. Valdiserri.............. 0 0.0% $ -- -- $ --
Louis D. Camino................. 6,000 5.8 23.750 01/01/06 62,471
Gary P. Latendresse............. 6,000 5.8 23.750 01/01/06 62,471
Dennis T. Crosby................ 3,000 2.9 23.750 01/01/06 31,235
William E. Hornberger........... 4,000 3.9 23.750 01/01/06 41,647
</TABLE>
- -------------------------
(1) Includes options which qualify as incentive stock options under Section 422
of the Code and options which do not so qualify.
(2) Outstanding options expire ten years after the date of grant, if not earlier
due to death, retirement, disability or termination of employment.
(3) Based on the Black-Scholes option pricing model using the following
assumptions: (a) 7-year option term; (b) 5.49% risk-free interest rate; (c)
32.7359% volatility; and (d) 0.5053% dividend yield. Actual gain, if any, is
dependent upon the actual performance of the shares of Class A Common Stock
underlying these options and there is no assurance that the amounts shown in
this column will be achieved.
AGGREGATED OPTION EXERCISES IN 1996 AND YEAR-END OPTION VALUES
No option held by Named Executive Officers was exercised during 1996. The
following table sets forth information with respect to each Named Executive
Officer's holdings of unexercised stock options at December 31, 1996.
OPTION EXERCISES IN 1996
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END
ACQUIRED ON VALUE ---------------------------- ----------------------------
EXECUTIVE EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Carl L. Valdiserri..... 0 $0 0 0 $0 $0
Louis D. Camino........ 0 0 9,750 5,250 0 0
Gary P. Latendresse.... 0 0 6,750 4,250 0 0
Dennis T. Crosby....... 0 0 4,500 2,500 0 0
William E.
Hornberger........... 0 0 5,000 3,000 0 0
</TABLE>
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee has the responsibility to review and determine
compensation and benefits for all officers of the Company. It is also
responsible for the determination of executive compensation programs and the
award of incentive payments and stock options under those programs. In addition,
the Compensation Committee reviews compensation and benefit programs applying to
all non-represented salaried employees and represented hourly and salaried
employees.
12
<PAGE> 15
The Compensation Committee consists of three directors, none of whom is or has
been an employee of the Company or is eligible to participate in the Company's
executive compensation programs other than the ODEP.
Philosophy. The Compensation Committee's policies on executive compensation
are designed to attract, retain and motivate executives by providing competitive
levels of compensation that integrate the Company's annual and long-term
performance goals, reward strong corporate performance, recognize individual
initiative and achievements, and enhance stockholder value.
The Compensation Committee reviews, among other things, survey data
provided by independent, nationally recognized compensation consulting firms for
both the steel industry and general industry. In particular, the Compensation
Committee considers compensation data with respect to a peer group of steel
producers with annual revenues of up to $1.5 billion and a peer group comprised
of the members of the common stock peer group. See "-- Common Stock Performance"
on page 15. In determining the common stock peer group for the Common Stock
Performance graph, the Compensation Committee approved management's selection of
companies with comparable products, markets, customers or revenues. The two
compensation peer groups provide the Compensation Committee with competitive
data on companies of comparable size and markets.
The Compensation Committee targets total cash compensation at levels
generally comparable to the compensation peer groups. Executive compensation is
weighted heavily toward programs contingent upon the Company's financial
performance. The Compensation Committee also believes that stock ownership by
employees and stock-based compensation programs are beneficial in aligning the
interests of employees and stockholders.
Components of Executive Officer Compensation. Executive officer
compensation includes base salary, quarterly incentive cash compensation,
long-term stock-based compensation and a broad-based benefits program.
The base salaries of executive officers are targeted below the median of
the compensation peer groups of companies, subject to variation by individual
executive based on individual performance. Incentive cash compensation provides
a performance-sensitive compensation opportunity for the Company's executives
above the median of the peer groups. It is the Compensation Committee's intent
to set base compensation at levels so that when the Company performs well, the
incentive compensation payments would put Company officers above the median
level of cash compensation being paid to officers of the compensation peer
groups. Conversely, when the Company performs poorly, total cash compensation
would fall below the median compensation level.
No base salary adjustments were granted to the Named Executive Officers in
1996. The apparent increases to the base salaries of certain Named Executive
Officers are the result of the annualized effect of increases granted in 1995.
Incentive cash compensation is based upon measured financial results of the
Company. Under the Company's Incentive Compensation Plan (the "Incentive
Compensation Plan"), the amount set aside for awards each quarter is a
percentage of the Company's income before income taxes (as reported in the
Company's Consolidated Statement of Operations with certain adjustments). In the
aggregate, the Named Executive Officers experienced a 67.7% reduction in the
amount of incentive compensation received in 1996 when compared to 1995. In
determining the 1996 incentive compensation awards, the Compensation Committee
considered the Company's 1996 financial performance (income), specific business
performance and the individual executive's contribution to the same.
The Company adopted the Stock Incentive Plan in 1994 to link executive
compensation to the Company's Class A Common Stock share price and to increase
long-term retention of key employees. In 1996, the Compensation Committee
approved the grant of stock options under the Stock Incentive Plan to the Named
Executive Officers and other key managers of the Company. The
13
<PAGE> 16
awards were targeted at or about the middle of the range of long-term incentive
compensation paid to executive officers in the compensation peer groups as
determined by the Compensation Committee's review of survey data. At Mr.
Valdiserri's request, due to his significant equity holdings in the Company, the
Compensation Committee did not grant any options to Mr. Valdiserri.
The executive officers participate in a broad-based benefits program
including a pension plan, health care coverage, life insurance, disability
benefits and a tax-deferred savings plan.
Performance of the CEO. The Compensation Committee's review of the
compensation of the Chief Executive Officer, Carl L. Valdiserri, considered data
presented by the Company's compensation consultants regarding the base salary,
total cash compensation and total direct compensation of chief executive
officers of the compensation peer groups and in the general industry. The data
indicate that the base salary of Mr. Valdiserri is below the median of the chief
executive officers of the compensation peer groups and general industry.
Consistent with the Company's philosophy that the CEO's total compensation
should be heavily dependent upon the Company's financial performance, a
significant portion of Mr. Valdiserri's total compensation is targeted to
incentive compensation. For 1996, Mr. Valdiserri's incentive compensation
dropped 55.4% from the 1995 level which was limited by the Compensation
Committee at Mr. Valdiserri's request due to his significant equity holdings in
the Company.
Deductibility of Compensation. Effective January 1, 1994, the Internal
Revenue Service, under Section 162(m) of the Code, will generally deny the
deduction of compensation paid to certain executives to the extent such
compensation exceeds $1 million, subject to an exception for compensation that
meets certain "performance-based" requirements. Whether the Section 162(m)
limitation with respect to an executive will be exceeded and whether the
Company's deductions for compensation paid in excess of the $1 million cap will
be denied will depend upon the resolution of various factual and legal issues
that cannot be resolved at this time. As to options granted under the Stock
Incentive Plan, the Company intends to comply with the "performance-based"
requirements so that compensation attributable to such options will not be
subject to any deductibility restriction. As to other compensation, it is not
expected that compensation to executives of the Company will exceed the Section
162(m) limitation in the foreseeable future (and no officer of the Company
received compensation in 1996 which resulted, under Section 162(m), in the
non-deductibility of such compensation to the Company). If, however, any
compensation does exceed the Section 162(m) limitation, the Company will attempt
to structure any such compensation in a manner to cause such compensation to be
exempt from the Section 162(m) limitation.
COMPENSATION COMMITTEE
John E. Lobbia, Chairman
Dominick C. Fanello
Peter J. Pestillo
14
<PAGE> 17
COMMON STOCK PERFORMANCE
The following graph compares the cumulative return from investing $100 at
March 31, 1994, in the Company's Class A Common Stock, the S&P 500 index of
companies, the S&P Steel Index and a peer group of integrated steel companies
selected by management and comprised of Inland Steel Industries, National Steel
Corporation, AK Steel Holding Corporation, Weirton Steel Corporation and WHX
Corporation, with dividends assumed to be reinvested when received. The
Company's Class A Common Stock began trading on the NYSE on March 29, 1994.
PERFORMANCE COMPARISON
<TABLE>
<CAPTION>
MEASUREMENT PERIOD ROUGE S & P 500 PEER GROUP S & P STEEL BASE
(FISCAL YEAR COVERED) STEEL INDEX (MARCH 31)
<S> <C> <C> <C> <C> <C>
MAR 31 100.00 100.00 100.00 100.00 100.00
JUN 30 125.00 100.43 112.88 103.72 100.00
SEP 30 136.63 105.34 131.30 114.38 100.00
DEC 31 134.30 105.32 113.99 98.00 100.00
MAR 31 113.95 115.54 99.58 93.94 100.00
JUN 30 108.47 126.54 102.01 94.14 100.00
SEP 30 108.56 136.61 93.17 81.27 100.00
DEC 31 111.04 144.83 97.03 90.86 100.00
MAR 31 103.58 152.60 104.62 92.84 100.00
JUN 30 100.79 159.44 91.36 81.76 100.00
SEP 30 102.11 164.37 92.29 80.28 100.00
DEC 31 98.73 178.06 91.37 91.01 100.00
</TABLE>
<TABLE>
<CAPTION>
1994 1995 1996
------------------------------------- ------------------------------------- ----------------------------
MARCH 31 JUNE 30 SEPT 30 DEC 31 MARCH 31 JUNE 30 SEPT 30 DEC 31 MARCH 31 JUNE 30 SEPT 30
-------- ------- ------- ------ -------- ------- ------- ------ -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Rouge Steel.......... 100.00 125.00 136.63 134.30 113.95 108.47 108.56 111.04 103.58 100.79 102.11
S&P 500.............. 100.00 100.43 105.34 105.32 115.54 126.54 136.61 144.83 152.60 159.44 164.37
Peer Group........... 100.00 112.88 131.30 113.99 99.58 102.01 93.17 97.03 104.62 91.36 92.29
S&P Steel Index...... 100.00 103.72 114.38 98.00 93.94 94.14 81.27 90.86 92.84 81.76 80.28
<CAPTION>
1996
------
DEC 31
------
<S> <C>
Rouge Steel.......... 98.73
S&P 500.............. 178.06
Peer Group........... 91.37
S&P Steel Index...... 91.01
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1996, Carl L. Valdiserri, Chairman and
Chief Executive Officer of the Company, attended Compensation Committee meetings
to present management recommendations and answer questions with respect to
executive compensation. No other member of the Board of Directors who is also an
officer or employee of the Company participated in any such meetings. On August
1, 1996, Mr. Malenick, a member of the Compensation Committee and the president
and a director at Worthington, resigned from the Board of Directors of the
Company. For a discussion of certain transactions between the Company and
Worthington, see "Certain Relationships and Related Transactions -- Worthington
Industries, Inc."
EMPLOYEE BENEFIT PLANS
Pension Plan. The table below sets forth the estimated annual retirement
benefits (contributory and noncontributory) payable on a straight life annuity
basis to all eligible salaried employees, including employees who are officers,
who meet the credited service requirement for retirement at
15
<PAGE> 18
age 65. Normal retirement benefits are not subject to deduction for Social
Security benefits or other similar offset amounts.
The formula used to determine contributory retirement benefits under the
pension plan considers (i) the participant's final average pay, which is defined
as the highest average monthly salary of any five consecutive December 31 dates
of the last ten years that the participant is making contributions and (ii) the
participant's contributory service. Average monthly salary is the base monthly
salary prior to giving effect to any salary reduction pursuant to the Company's
tax-efficient savings plan, and does not include bonuses or any other forms of
supplemental compensation. Salary in excess of the limit set in Section
401(a)(17) of the Code is disregarded. The formula used to calculate
noncontributory benefits considers the participant's non-contributory service
and a flat benefit rate associated with that level of service.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
CREDITED YEARS OF SERVICE
AVERAGE YEARLY -------------------------------------------------------------------------
COMPENSATION 5 10 15 20 25 30 35
-------------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
$100,000................. $ 8,500 $17,000 $26,000 $34,500 $43,000 $52,000 $60,500
125,000................. 10,500 22,000 33,000 44,000 55,000 66,000 77,000
150,000................. 13,000 26,500 40,000 53,500 66,500 80,000 93,500
175,000 - 325,000....... 13,000 26,500 40,000 53,500 66,500 80,000 93,500
</TABLE>
At December 31, 1996, the CEO and each of the Named Executive Officers,
other than Mr. Crosby, had seven credited years of service under the pension
plan, and Mr. Crosby had 7.4 credited years of service under the pension plan.
Profit Sharing Plans for Hourly and Salaried Employees. Under the Profit
Sharing Plan for Hourly Employees and the Profit Sharing Plan for Salaried
Employees, the Company is obligated to make payments to eligible employees, with
respect to each calendar quarter, of a portion of income before income taxes (as
reported in the Company's Consolidated Statement of Operations with certain
adjustments) that meets certain targeted percentages of sales. The Company paid
$4.2 million under these plans with respect to 1996.
Savings Plan for Salaried Employees. Under the Rouge Steel Company Savings
Plan for Salaried Employees, eligible salaried employees may make voluntary
pre-tax contributions not to exceed 15% of the employee's base salary and
after-tax contributions not to exceed 10% of the employee's base salary. Among
the investment alternatives available to employees since February 1995 is the
investment of all or a portion of their accounts in Class A Common Stock. The
Company is obligated to match the employee's contributions up to 10% of the
employee's base salary. The Company matches employee contributions in an amount
ranging from 0% to 100% (depending on the Company's level of income before
income taxes as a percentage of sales (as used in the profit sharing plans)
during an applicable quarter) of the employee's pre- and after-tax contributions
during the applicable month. Since February 1995, the Company's matching
contributions have been made in Class A Common Stock.
Incentive Compensation Plan. Under the Rouge Steel Company Incentive
Compensation Plan, the officers and certain other salaried employees of the
Company are eligible to receive quarterly incentive compensation payments for
contributing to the success of the Company. Upon the recommendation of the Chief
Executive Officer of the Company, at the end of each quarter, the Compensation
Committee will determine the maximum total amount of all such awards to be made
for the quarter, will act on the recommendation made by the Chief Executive
Officer regarding officer awards, and will determine the Chief Executive
Officer's award. The amount set aside each quarter is a percentage of the
Company's income before income taxes (as reported in the Company's Consolidated
Statement of Operations with certain adjustments).
16
<PAGE> 19
Stock Incentive Plan. Under the Stock Incentive Plan, a maximum of 400,000
shares of Class A Common Stock have been authorized for the granting of
qualified incentive stock options ("ISOs"), nonqualified stock options ("NQSOs"
and, together with ISOs, "Options"), stock appreciation rights ("SARs"),
restricted stock awards ("RSAs") and performance share awards ("PSAs"). The
shares of Class A Common Stock available under the Stock Incentive Plan will be
offered and issued directly by the Company. No fees or commissions will be
charged by the Company in connection with the awards. In no event may any
employee receive Options, SARs, RSAs, PSAs or any combination thereof for more
than 50,000 shares of Class A Common Stock over the life of the Stock Incentive
Plan. As of December 31, 1996, Options totalling 196,075 shares were outstanding
pursuant to the Stock Incentive Plan. The purposes of the Stock Incentive Plan
are to align the interests of certain officers and employees of the Company with
those of stockholders by rewarding long-term growth and profitability of the
Company and to attract and retain individuals of experience and ability. All
officers and employee-directors and certain other employees of the Company or
its subsidiaries are eligible to participate under the Stock Incentive Plan, as
deemed appropriate by the Compensation Committee.
EMPLOYMENT CONTRACTS
The Company does not have employment contracts with its executive officers.
Certain salaried employees of the Company, including the Named Executive
Officers, are eligible to participate in the Company's Salaried Income Security
Plan (the "SISP"). Under the SISP, eligible salaried employees are entitled to
receive basic and supplemental benefits in the event of certain terminations of
employment with the Company. In the event of such a termination, eligible
salaried employees who have at least one full year of service are entitled to
receive up to 12 months of base salary paid over up to 22 months depending on
years of service at termination. Upon exhaustion of basic benefits under the
SISP, eligible employees with more than 15 years of service are entitled to
receive supplemental benefits equal to 50% of base salary plus 1% for each full
year of service over 15 years. These supplemental benefits continue until
reemployment, refusal to accept work, retirement or death. For purposes of basic
and supplemental benefits under the SISP, base salary is the highest base salary
received during the 12 months immediately preceding termination.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------------------------
RELATED PARTY TRANSACTIONS
The Company believes that the transactions discussed below, as well as the
terms of any future transactions and agreements (including renewals of any
existing agreements) between the Company and its affiliates, are and will be at
least as favorable to the Company as could be obtained from unaffiliated
parties. The Board of Directors of the Company will be advised in advance of any
such proposed transaction or agreement and will utilize such procedures in
evaluating the terms and provisions of such proposed transaction or agreement as
are appropriate in light of the fiduciary duties of the directors under Delaware
General Corporation Law. In addition, the Company has established an Audit
Committee, which consists of three independent directors. One of the
responsibilities of the Audit Committee is to review related party transactions.
See "Proposal No. 1 -- Election of Directors -- Meetings and Committees."
THE AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
On November 14, 1996, the Company, Carl L. Valdiserri and Worthington
entered into an amended and restated stockholders agreement (the "Amended and
Restated Stockholders Agreement").
Under the Amended and Restated Stockholders Agreement, Worthington, Carl L.
Valdiserri and the Company agreed that (i) without the prior written consent of
a majority of Disinterested
17
<PAGE> 20
Directors (as defined in the Company's Certificate), Worthington will not
acquire or agree to acquire, directly or indirectly, any shares of Common Stock
if, immediately after any such acquisition, the aggregate percentage of the
total number of issued and outstanding shares of Common Stock ("Equity
Holdings") held by Worthington and its affiliates would exceed 35%, except as a
result of a recapitalization of the Company; (ii) during each twelve month
period following November 14, 1996 (each such twelve month period, a "Restricted
Period"), Mr. Valdiserri and his permitted transferees will not, with certain
exceptions, transfer, offer to transfer or agree to transfer more than 18% of
the Equity Holdings of Mr. Valdiserri and such permitted transferees during such
Restricted Period unless Mr. Valdiserri gives Worthington 30 days' prior written
notice; and (iii) (1) if and so long as Worthington owns at least 18% or 9% of
the Company's outstanding Common Stock on a fully diluted basis, Mr. Valdiserri
will vote his Common Stock in favor of two directors or one director,
respectively, designated by Worthington and (2) if and as long as Mr. Valdiserri
holds 27%, 18% or 9% of the Company's outstanding Common Stock on a fully
diluted basis, Worthington will vote its shares of Common Stock in favor of
three directors, two directors or one director, respectively, designated by Mr.
Valdiserri. In 1996, Worthington converted 878,000 shares of Class B Common
Stock into 878,000 shares of Class A Common Stock. Messrs. Malenick and
Klisares, Worthington's designees on the Board of Directors, resigned their
positions as directors of the Company and Worthington has notified the Company
that it will not appoint designees to fill the resulting vacancies as long as
any of the DECS (as defined herein) remain outstanding. Worthington has retained
the right to appoint two designees as members of the Board of Directors after
such time, which would be subject to the voting arrangements described above,
and has retained a 19.9% voting interest in the Company on all matters.
Under the Amended and Restated Stockholders Agreement, Mr. Valdiserri,
Worthington and/or their permitted transferees collectively have four demand
registration rights in certain circumstances with respect to their shares of
Class A Common Stock. The demand registration rights described above are
exercisable at any time. In addition, Mr. Valdiserri, Worthington and/or their
permitted transferees have unlimited demand registration rights on Forms S-2 and
S-3. Mr. Valdiserri, Worthington and/or their permitted transferees also have
unlimited piggyback registration rights. The Company has agreed to pay any
expenses (except all applicable underwriting discounts and commissions) incurred
in connection with a registration requested under the Amended and Restated
Stockholders Agreement, except that, with respect to the demand registration
rights, reimbursement is required only where the expected purchase price of the
registrable securities exceeds $5 million and, in the case of registration
rights on Form S-2 or S-3, only holders of 5% or more of the Company's Common
Stock shall be reimbursed.
The Amended and Restated Stockholders Agreement terminates (a) upon the
consent of each of the parties; (b) upon the sale of all or substantially all of
the assets of the Company and the distribution of the proceeds thereof to the
stockholders at such time; (c) as to any share of Common Stock, when such share
is transferred other than to permitted transferees; (d) as to any party, when
such party ceases to hold any Common Stock (or any legal or beneficial interest
therein); or (e) on February 28, 2004, provided that certain expense and
indemnification provisions survive.
WORTHINGTON INDUSTRIES, INC.
The DECS. Pursuant to the terms of the 7 1/4% Exchangeable Notes due March
1, 2000 (the "Debt Exchangeable for Common Stock" or "DECS") of Worthington,
Worthington may deliver to the holders of the DECS shares of Class A Common
Stock, cash or a combination of cash and shares of Class A Common Stock. The
Company has registered 5,999,600 shares of Class A Common Stock related to the
DECS. The Company will not receive any of the proceeds from the sale of the DECS
or delivery thereunder of shares of Class A Common Stock.
Board Resignations and Class B Common Stock Conversion. Effective August 1,
1996, Messrs. Malenick and Klisares, the President and Executive Vice President
of Worthington,
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<PAGE> 21
respectively, resigned as directors of the Company. Worthington has informed the
Company that it will not designate successors to fill the vacancies created by
such resignations as long as any of the DECS remain outstanding and such seats
are otherwise filled; however, it has, subject to the terms of the Amended and
Restated Stockholders Agreement, reserved the right to designate nominees at
such time as the DECS are no longer outstanding. In addition, in 1996
Worthington converted 878,000 shares of Class B Common Stock into 878,000 shares
of Class A Common Stock which resulted in its owning 5,577,600 shares of Class A
Common Stock and 422,000 shares of Class B Common Stock collectively
representing 27.4% of the Company's Common Stock and a voting interest of 19.9%.
Worthington Steel Purchase Agreement. In connection with the Acquisition,
the Company entered into a steel purchase contract (the "Worthington Agreement")
with Worthington. The Worthington Agreement terminates on December 31, 2003. The
purchase price of the products supplied under the Worthington Agreement is set
at a slight discount from the competitive market price for the same products
with comparable quality and terms and the contract is subject to the Company's
ability to deliver products on a timely basis which meet Worthington's
specifications and are of acceptable quality. The Company and Worthington have
agreed to this pricing arrangement to reflect Worthington's volume of purchases,
product mix and certain other accommodations made by Worthington with respect to
the Company's production scheduling requirements. Pursuant to the Worthington
Agreement, the Company had sales to Worthington of approximately $159.0 million
during 1996.
Worthington Joint Ventures and Processing Arrangement. The Company has
entered into a joint venture with Worthington with respect to Spartan Steel
Coating, L.L.C. ("Spartan Steel"), which is constructing a cold rolled hot
dipped galvanizing facility that will coat light gauge steel products to make
them corrosion resistant. The Company expects to invest approximately $43
million in the Spartan Steel facility which is expected to be placed into
service in mid-1998. The Company has also reached an agreement in principle to
purchase for $6.5 million an 11% interest in TWB Company ("TWB"), an existing
facility that produces laser welded blanks. TWB is presently structured as a
joint venture between Worthington and Thyssen Stahl of Germany. The Company's
participation in TWB is subject to the negotiation and execution of definitive
documentation. In addition, the Company has negotiated a steel supply and toll
coating agreement with Worthington with respect to Worthington's hot rolled hot
dipped galvanizing line which is being constructed near Delta, Ohio.
DOEPKEN KEEVICAN & WEISS PROFESSIONAL CORPORATION
Michael A. Weiss, the Secretary of the Company, is a director and a
stockholder of the law firm of Doepken Keevican & Weiss Professional Corporation
(DK&W), which firm has represented the Company since the Acquisition. DK&W is
representing the Company on certain legal matters. During 1996, the Company paid
an aggregate of approximately $1.0 million to DK&W for legal services and
related costs and expenses.
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<PAGE> 22
PROPOSAL NO. 2 -- RESTATED CERTIFICATE OF INCORPORATION
- --------------------------------------------------------------------------------
The Board of Directors of the Company has approved the amendment and
restatement of the Certificate to change the required number of directors of the
Company and to delete certain super-majority voting provisions presently
contained therein. The amendment of Section 1 of Article Seventh of the
Certificate would change the required number of directors of the Company from
nine to not less than six and not more than nine. This amendment is intended to
conform the provisions contained in the Certificate to the provisions currently
contained in Section 2.02 of the By-Laws which were amended by a unanimous vote
of the entire board on September 27, 1996. In addition, the amendments to the
Certificate would delete the provision contained in Section 5 of Article Seventh
requiring approval of 80% of the Board of Directors to approve any amendment,
alteration or repeal of, or the adoption of any provision inconsistent with the
following Sections of the By-Laws:
"SECTION 2.02 Number and Term of Office. Subject to the requirements
of the laws of the State of Delaware and of the [Certificate] and except as
otherwise provided in any resolution or resolutions adopted by the Board of
Directors pursuant to the provisions of the [Certificate] relating to the
rights of the holders of any class or series of stock having a preference
over the Common Stock as to dividends or upon liquidation, the number of
directors shall be not less than six and not more than nine. Each of the
directors of the [Company] shall hold office until his successor shall be
elected and shall qualify, or until his death or until he shall resign or
shall have been removed in the manner hereinafter provided.
SECTION 2.03 Nominations for the Election of Directors. Subject to the
rights of the holders of any class or series of stock having a preference
over the Common Stock as to dividends or upon liquidation and otherwise
subject to the rights of stockholders under the General Corporation Law of
the State of Delaware, nominations for the election of directors shall be
made by the Board or by any stockholder entitled to vote for the election
of directors at a meeting but only if such stockholder complies with the
requirements set forth in the following two sentences. Written notice of
the nomination by such stockholder shall be given, either by personal
delivery or by United States mail, postage prepaid, to the Secretary of the
[Company] not later than (i) with respect to an election to be held at an
annual meeting of stockholders, on the date designated in Section 1.01
hereof, 90 days in advance of such meeting and (ii) with respect to an
election to be held at a special meeting of stockholders for the election
of directors, the close of business on the tenth day following the date on
which notice of such meeting shall first be given to stockholders. Each
such notice shall set forth: (a) the name and address of the stockholder
who shall make such recommendation and of the person or persons to be
nominated; (b) a representation that the stockholder is a holder of record
of stock of the [Company] entitled to vote at such meeting; (c) a
description of all arrangements or understandings between the stockholder
and each nominee and any other person or persons (naming such person or
persons) pursuant to which the nomination or nominations are recommended by
the stockholder; (d) such other information regarding each recommended
person proposed by such stockholder as would have been required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had each such person been nominated, or
intended to be nominated, by the Board of Directors; and (e) the consent in
writing of each such person to serve as a director of the [Company] if so
elected. The chairman of the meeting may refuse to acknowledge the
nomination of any person not nominated in compliance with the foregoing
procedure.
SECTION 2.07 Vacancies, etc. Subject to the rights of the holders of
any class or series of stock having a preference over the Common Stock as
to dividends or upon liquidation, in case of any increase in the number of
directors, the additional director or directors, and, in case of any
vacancy in the Board due to death, resignation, disqualification, removal
or any other cause, the successor to fill the vacancy shall be elected by a
majority of the directors then in
20
<PAGE> 23
office, though less than a quorum, or by a sole remaining director. When
one or more directors shall resign from the Board, effective at a future
date, a majority of the directors then in office, including those who shall
have so resigned, shall have the power to fill such vacancy or vacancies,
the vote thereon to take effect when such resignation or resignations shall
become effective.
SECTION 2.14 Removal of Directors. A Director may be removed with
cause, at any time, by the affirmative vote of stockholders of record of
the [Company] holding of record a majority of the shares then entitled to
vote at an election of Directors. In the case of the removal of a Director
for cause, "Cause" is hereby defined as the willful and continuous failure
substantially to perform one's duties to the [Company] or the willful
engaging in gross misconduct materially and demonstrably injurious to the
[Company].
SECTION 2.15 Qualification of Directors. It shall be a qualification
for membership on the Board of Directors that a director not be a member of
the board of directors or an officer or employee of a competitor (or any
affiliate of such competitor) of the [Company] or of a 5% or more
stockholder (or affiliate of such 5% or more stockholder) of a competitor
of the [Company]; provided, however, that this Section shall not apply to
Worthington Industries, Incorporated and its affiliates.
SECTION 14.01 Amendments. These By-Laws, as they shall be at any time,
may be amended or repealed by the Board."
Finally, the amendment would delete the provision contained in Article Ninth of
the Certificate requiring the affirmative vote of the holders of 80% or more of
the combined voting power of the outstanding shares of Common Stock, voting
together as a single class, to amend, alter or repeal, or adopt any provision
that would be inconsistent with the following sections of the Certificate: (i)
Section 7 of Article Fourth which states that the affirmative vote of the
holders of at least 80% of the combined voting power of the outstanding shares
of Common Stock is required to approve certain business combinations; (ii)
Section 4 of Article Seventh which states, among other things, that the
affirmative vote of 75% of the Board of Directors is required to elect the first
successor to Carl L. Valdiserri as Chief Executive Officer and Chairman of the
Company; and (iii) Article Ninth which states that the affirmative vote of
66 2/3% of the outstanding shares of Common Stock is required to amend the
Certificate. The foregoing is a summary of the provisions proposed to be amended
in the Certificate.
The full text of such sections is set forth in the proposed restated
Certificate (the "Restated Certificate") which is annexed hereto as Appendix A.
The super-majority provisions contained in Section 5 of Article Seventh and
Article Ninth of the Certificate and the super-majority provisions in the
By-Laws were added during the negotiation of the recapitalization of the Company
prior to its initial public offering in April 1994. At that time, Worthington,
the Company, Carl L. Valdiserri and certain financial institutions agreed to
adopt provisions in the Certificate pursuant to which Worthington, as a
substantial stockholder of the Company, would have the ability to veto
amendments to the Certificate through its substantial stockholdings and to
certain provisions of the By-Laws through its representation on the Board of
Directors. However, in 1996, Worthington decreased its voting interest in the
Company to 19.9% by converting 878,000 shares of its Class B Common Stock to
878,000 shares of Class A Common Stock and relinquished its two positions on the
Company's Board of Directors and in connection therewith, agreed to vote for the
approval of the restatement of the Certificate thereby relinquishing its veto
rights over amendments and alterations to the Certificate and By-Laws. While the
Company does not presently have any intention to attempt to modify or amend any
of the provisions contained in the Certificate or the By-Laws that are presently
subject to the 80% voting thresholds described above, the Board of Directors
believes it is in the best interest of the Company and its stockholders to
remove the 80% voting thresholds presently required to be met to approve
alterations and amendments to the Company's Certificate and certain provisions
of the By-Laws.
21
<PAGE> 24
The proposed amendments and the restatement of the Certificate will not
alter the rights of the Company's stockholders to vote on future amendments or
prevent them from voting against any additional proposed changes to the
Certificate or By-Laws. However, the Restated Certificate would permit a
majority of the members of the Board of Directors to amend, alter or repeal the
By-Laws and would permit 66 2/3% of the combined voting power of the Company's
outstanding common stock to approve all amendments to the Restated Certificate.
The amendment of (i) Section 1 of Article Seventh of the Certificate to
change the required number of directors of the Company from nine to not less
than six and not more than nine and (ii) Section 5 of Article Seventh requiring
approval of 80% of the Board of Directors to amend certain provisions of the
By-Laws requires the affirmative vote of 66 2/3% of the combined voting power of
the outstanding shares of Common Stock of the Company. The amendment and
restatement of the Certificate to delete the provision contained in Article
Ninth requiring 80% of the combined voting power of the Company's outstanding
Common Stock to amend certain provisions of the Certificate requires the
affirmative vote of the holders of 80% or more of the combined voting power of
the outstanding Common Stock. Therefore, abstentions and broker non-votes will
have the same effect as votes against the proposed amendments. Pursuant to the
terms of the Amended and Restated Stockholders Agreement dated November 14,
1996, by and among the Company, Worthington and Carl L. Valdiserri, Worthington
and Mr. Valdiserri agreed to vote all of their outstanding shares of Common
Stock in favor of each proposed amendment contained in the Restated Certificate.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ADOPTION OF PROPOSAL NO. 2.
PROPOSAL NO. 3 -- INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
The accounting firm of Price Waterhouse LLP has been selected as the
independent public accountants for the Company for the fiscal year ending
December 31, 1997. Although the selection of accountants does not require
ratification by the stockholders, the Board of Directors has directed that the
appointment of Price Waterhouse LLP be submitted to stockholders for
ratification due to the significance of the appointment by the Company. If the
stockholders do not ratify the appointment of Price Waterhouse LLP, the Board of
Directors will consider the appointment of other certified public accountants. A
representative of Price Waterhouse LLP, which served as the Company's
independent public accountants for the fiscal year ended December 31, 1996, is
expected to be present at the Meeting and, if he or she so desires, will have
the opportunity to make a statement, and in any event will be available to
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ADOPTION OF PROPOSAL NO. 3.
HOLDING COMPANY REORGANIZATION
- --------------------------------------------------------------------------------
During the first half of 1997, the Company intends to adopt a holding
company organizational structure (the "Reorganization"). Upon consummation of
the Reorganization, the Company, as an operating subsidiary, will be held as a
direct wholly-owned subsidiary of a holding company, a Delaware corporation. The
holding company organizational structure would be implemented following approval
by the Board of Directors without stockholder approval pursuant to Section
251(g) of the General Corporation Law of the State of Delaware. In connection
with the Reorganization, each issued and outstanding share of the Company's
Class A Common Stock and Class B Common Stock would be converted into and
exchanged for a share of class A common stock or class B common stock,
respectively, of the holding company (on a share-for-share basis) having the
same designations, rights, powers, preferences, qualifications, limitations and
restrictions as the shares of Class A Common Stock or Class B Common Stock of
the Company being converted. In addition, the certificate of incorporation of
the operating subsidiary will be amended to provide that any action to
22
<PAGE> 25
be taken by the operating subsidiary that would require the approval of its
stockholders will also require the approval of the stockholders of the holding
company.
SOLICITATION STATEMENT
- --------------------------------------------------------------------------------
All expenses in connection with the solicitation of proxies will be borne
by the Company. In addition to the use of the mails, solicitations may be made
by regular employees of the Company, by telephone, telegraph or personal
contact, without additional compensation. The Company will, upon request,
reimburse brokerage houses and persons holding shares of Common Stock in the
names of their nominees for their reasonable expenses in sending solicitation
materials to their principals.
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
In order to be considered for inclusion in the proxy materials to be
distributed in connection with the next Annual Meeting of stockholders of the
Company, stockholder proposals for such meeting must be submitted to the Company
no later than December 9, 1997.
OTHER MATTERS
- --------------------------------------------------------------------------------
So far as now known, there is no business other than that described above
to be presented for action by the stockholders at the Meeting, but it is
intended that the proxies will be voted upon any other matters and proposals
that may legally come before the Meeting or any adjournment thereof, in
accordance with the discretion of the persons named therein.
23
<PAGE> 26
ANNUAL REPORT
- --------------------------------------------------------------------------------
All stockholders of record as of March 14, 1997 have been sent, or are
concurrently herewith being sent, a copy of the Company's Annual Report to
Shareholders for the fiscal year ended December 31, 1996. Such report contains
certified consolidated financial statements of the Company and its subsidiaries
for the fiscal year ended December 31, 1996. THE COMPANY WILL FURNISH, WITHOUT
CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1996 (WITHOUT EXHIBITS) (AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION) TO STOCKHOLDERS OF RECORD ON THE RECORD DATE WHO MAKE WRITTEN
REQUEST THEREFOR TO INVESTOR RELATIONS, ROUGE STEEL COMPANY, 3001 MILLER ROAD,
P.O. BOX 1699, DEARBORN, MICHIGAN 48121-1699.
By Order of the Company,
MICHAEL A. WEISS
Secretary
Dated: April 8, 1997
24
<PAGE> 27
PROPOSED CERTIFICATE APPENDIX A
RESTATED
CERTIFICATE OF INCORPORATION
OF
ROUGE STEEL COMPANY
- --------------------------------------------------------------------------------
ROUGE STEEL COMPANY (the "Corporation") a corporation originally
incorporated under the same name on December 10, 1981 and organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation adopted a resolution
proposing and declaring advisable that the Certificate of Incorporation of the
Corporation be amended and restated to read in its entirety as set forth in
paragraph FOURTH of this Restated Certificate of Incorporation.
SECOND: That at the Company's annual meeting of stockholders, the
stockholders of the Corporation approved the adoption of this Restated
Certificate of Incorporation.
THIRD: That this Restated Certificate of Incorporation was duly adopted in
accordance with the provisions of Sections 242, and 245 of the General
Corporation Law of the State of Delaware.
FOURTH: That the Certificate of Incorporation of the Corporation, as
heretofore amended and supplemented and as further amended hereby, reads in its
entirety as follows:
ARTICLE FIRST
- --------------------------------------------------------------------------------
The name of the Corporation is:
ROUGE STEEL COMPANY
ARTICLE SECOND
- --------------------------------------------------------------------------------
The registered office of the Corporation shall be located at 1209 Orange
Street, in the City of Wilmington, County of New Castle, State of Delaware. The
name of its registered agent in charge thereof is The Corporation Trust Company,
1209 Orange Street, in the City of Wilmington, County of New Castle, State of
Delaware.
ARTICLE THIRD
- --------------------------------------------------------------------------------
The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE FOURTH
- --------------------------------------------------------------------------------
SECTION 1. The total authorized capital stock of the Corporation is
96,690,400 shares, consisting of 8,000,000 shares of Preferred Stock, $.01 par
value per share ("Preferred Stock"), and 88,690,400 shares of Common Stock, of
which 80,000,000 shares shall be Class A Common Stock, $.01 par value per share
("Class A Common Stock"), and 8,690,400 shares shall be Class B Common Stock,
$.01 par value per share ("Class B Common Stock").
SECTION 2. The Board of Directors is authorized, subject to any limitations
prescribed by law, to provide for the issuance of shares of Preferred Stock in
series, and by filing a certificate pursuant to the applicable law of the State
of Delaware, to establish from time to time the number of shares to
A-1
<PAGE> 28
be included in each such series, and to fix the designation, powers, preferences
and rights of the shares of each such series and any qualifications, limitations
or restrictions thereof.
SECTION 3. The Class A Common Stock and the Class B Common Stock shall be
identical in all respects and shall have equal rights and privileges, except as
otherwise provided in this Article FOURTH.
SECTION 4. Subject to the express terms of any outstanding series of
Preferred Stock, dividends may be paid in cash or otherwise upon the Class A
Common Stock and the Class B Common Stock out of the assets of the Corporation
in the relationship and upon the terms provided for below with respect to each
such class:
(1) DIVIDENDS ON CLASS A COMMON STOCK.
Dividends on Class A Common Stock may be declared and paid in cash or
shares of Class A Common Stock only to the extent of the assets of the
Corporation legally available therefor reduced by an amount equal to the
paid in surplus attributable to the Class B Common Stock. Dividends
declared and paid with respect to shares of Class A Common Stock and any
adjustments to surplus resulting from either (i) the repurchase or issuance
of any shares of Class A Common Stock or (ii) any other reason deemed
appropriate by the Board of Directors shall be subtracted from or added to
the amounts available for the payment of dividends on Class A Common Stock.
Subject to the foregoing, the declaration and payment of dividends on the
Class A Common Stock, and the amount thereof, shall at all times be solely
in the discretion of the Board of Directors of the Corporation.
(2) DIVIDENDS ON CLASS B COMMON STOCK.
Dividends on the Class B Common Stock may be declared and paid in cash or
shares of Class A Common Stock only to the extent of the assets of the
Corporation legally available therefor reduced by an amount equal to the
paid in surplus attributable to the Class A Common Stock and only to the
extent a dividend (equal to the per share dividend declared and paid to the
holders of Class B Common Stock) is declared and paid on the Class A Common
Stock. Dividends declared and paid with respect to shares of Class B Common
Stock and any adjustments to surplus resulting from either (i) the
repurchase of any shares of Class B Common Stock or (ii) any other reason
deemed appropriate by the Board of Directors shall be subtracted from or
added to the amounts available for the payment of dividends on Class B
Common Stock. Subject to the foregoing, the declaration and payment of
dividends on the Class B Common Stock, and the amount thereof, shall at all
times be solely in the discretion of the Board of Directors of the
Corporation.
SECTION 5. The holders of Class A Common Stock and Class B Common Stock
shall vote together, with any other class or series of capital stock of the
Corporation entitled to vote therewith, as a single class on all matters;
provided, however, that, in addition to any other vote required, (i) any
amendment, alteration or repeal of any of the provisions of this Certificate of
Incorporation which adversely affects the rights, powers or privileges of the
Class A Common Stock shall be subject to approval by both (A) the holders of a
majority of the shares of Class A Common Stock and Class B Common Stock then
outstanding, voting together, with any other class or series of capital stock of
the Corporation entitled to vote therewith, as a single class based upon their
respective voting rights, and (B) the holders of a majority of the shares of
Class A Common Stock then outstanding, voting separately as a class; (ii) the
holders of Class B Common Stock voting separately as a class shall be entitled
to approve by the vote of a majority of the shares of Class B Common Stock then
outstanding any amendment, alteration or repeal of any of the provisions of this
Certificate of Incorporation which adversely affects the rights, powers or
privileges of the Class B Common Stock; (iii) any increase in the number of
authorized shares of Class B Common Stock shall be subject to approval by both
(A) the holders of a majority of the shares of Class A Common Stock and Class B
Common Stock then outstanding, voting together, with any other class or series
A-2
<PAGE> 29
of capital stock of the Corporation entitled to vote therewith, as a single
class based upon their respective voting rights, and (B) the holders of a
majority of the shares of Class B Common Stock then outstanding, voting
separately as a class. Holders of Class A Common Stock or Class B Common Stock
may not act by written consent in lieu of a meeting. Subject to adjustment
pursuant to Section 10 of this Article Fourth, each holder of Class A Common
Stock shall be entitled to one vote, in person or by proxy, for each share of
Class A Common Stock outstanding in his name on the stock transfer books of the
Corporation and each holder of Class B Common Stock shall be entitled to 2.5
votes, in person or by proxy, for each share of Class B Common Stock outstanding
in his name on the stock transfer books of the Corporation.
SECTION 6. The affirmative vote of the holders of at least 66 2/3 percent
of the combined voting power of the then outstanding shares of stock of all
classes and series of the Corporation entitled to vote generally in the election
of directors ("Voting Stock"), voting together as a single class, shall be
required to approve, adopt or authorize any of the following actions:
(i) a merger or consolidation of the Corporation with or into another
person or entity;
(ii) any sale, lease, exchange, mortgage, pledge, transfer, dividend or
distribution or other disposition (in one transaction or a series of
transactions) to or with any entity or person of all or substantially all the
assets of the Corporation or of any Subsidiary (as defined in Section 7);
(iii) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation;
(iv) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or consolidation
of the Corporation with any of its Subsidiaries, or any other transaction, that
in any such case has the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class or series of stock or
of securities convertible into stock of the Corporation or any Subsidiary that
is directly or indirectly beneficially owned by any person or entity;
(v) any series or combination of transactions directly or indirectly having
the same effect as any of the foregoing; or
(vi) any agreement, contract or other arrangement providing directly or
indirectly for any of the foregoing.
SECTION 7. Notwithstanding any other provisions of these Articles of
Incorporation, the vote of stockholders of the Corporation required to approve
any Business Combination (as hereinafter defined) shall be as set forth in this
Section 7.
(i) In addition to any affirmative vote required by law or by this
Certificate of Incorporation or any resolution or resolutions of the Board of
Directors adopted pursuant to Article Seventh of this Certificate of
Incorporation, and except as otherwise expressly provided in clause (iii) of
this Section 7:
(a) any merger or consolidation of the Corporation with (1) any
Interested Stockholder or (2) any other entity (whether or not itself an
Interested Stockholder) that is, or after such merger or consolidation
would be, an Affiliate or Associate of an Interested Stockholder; or
(b) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of any Interested
Stockholder or any Affiliate or Associate of any Interested Stockholder; or
(c) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries, or any other
transaction (whether or not with or into or otherwise involving any
Interested Stockholder), that in any such case has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding shares
of any class or series of stock or securities convertible into stock of the
Corporation or any Subsidiary that is directly or indirectly
A-3
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beneficially owned by any Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder; or
(d) any series or combination of transactions directly or indirectly
having the same effect as any of the foregoing; or
(e) any agreement, contract or other arrangement providing directly or
indirectly for any of the foregoing;
shall not be consummated without the affirmative vote of the holders of at least
80 percent of the combined voting power of the then outstanding Voting Stock (as
defined above in Section 6), voting together as a single class. Such affirmative
vote shall be required notwithstanding the fact that no vote may be required, or
that a lesser percentage may be specified, by law or by this Certificate of
Incorporation or any resolution or resolutions of the Board of Directors adopted
pursuant to Article Seventh of this Certificate of Incorporation or in any
agreement with any national securities exchange or otherwise.
(ii) The term "Business Combination" as used in this Section 7 shall mean
any transaction that is referred to in any one or more of paragraphs (a) through
(e) of clause (i) of this Section 7.
(iii) The provisions of clause (i) of this Section 7 shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such affirmative vote as is required by law and any other
provision of this Certificate of Incorporation and any resolution or resolutions
of the Board of Directors adopted pursuant to Article Seventh of this
Certificate of Incorporation, if all the conditions specified in either of the
following paragraphs (a) or (b) are met:
(a) such Business Combination shall have been approved by a majority
of the Disinterested Directors; or
(b) all of the six conditions specified in the following clauses (1)
through (6) shall have been met:
(1) the transaction constituting the Business Combination shall
provide for a consideration to be received by holders of Common Stock in
exchange for all their shares of Common Stock, and the aggregate amount
of the cash and the Fair Market Value as of the date of the consummation
of the Business Combination of any consideration other than cash to be
received per share by holders of Common Stock in such Business
Combination shall be at least equal to the higher of the following:
(A) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid in order to acquire any shares of Common Stock beneficially
owned by the Interested Stockholder that were acquired (I) within the
two-year period immediately prior to the Announcement Date or (II) in
the transaction in which it became an Interested Stockholder,
whichever is higher; and
(B) the Fair Market Value per share of Common Stock on the
Announcement Date or on the Determination Date, whichever is higher;
and
(2) the transaction constituting the Business Combination shall
provide for a consideration to be received by holders of any class or
series of outstanding Voting Stock other than Common Stock in exchange
for all their shares of such Voting Stock, and the aggregate amount of
the cash and the Fair Market Value as of the date of the consummation of
the Business Combination of any consideration other than cash to be
received per share by holders of shares of such Voting Stock in such
Business Combination shall be at least equal to the highest of the
following (it being intended that the requirements of this paragraph (b)
(2) shall be required to be met with respect to every class and series
of
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such outstanding Voting Stock, whether or not the Interested Stockholder
beneficially owns any shares of a particular class or series of Voting
Stock):
(A) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid in order to acquire any share of such class or series of Voting
Stock beneficially owned by the Interested Stockholder that were
acquired (I) within the two-year period immediately prior to the
Announcement Date or (II) in the transaction in which it became an
Interested Stockholder, whichever is higher;
(B) (if applicable) the highest preferential amount per share to
which the holders of shares of such class or series of Voting Stock
are entitled in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation; and
(C) the Fair Market Value per share of such class or series of
Voting Stock on the Announcement Date or on the Determination Date,
whichever is higher; and
(3) the consideration to be received by holders of a particular
class or series of outstanding Voting Stock (including Common Stock)
shall be in cash or in the same form as was previously paid in order to
acquire shares of such class or series of Voting Stock that are
beneficially owned by the Interested Stockholder, and if the Interested
Stockholder beneficially owns shares of any class or series of Voting
Stock that were acquired with varying forms of consideration, the form
of consideration to be received by holders of such class or series of
Voting Stock shall be either cash or the form used to acquire the
largest number of shares of such class or series of Voting Stock
beneficially owned by it; provided, however, that this clause (3) shall
not apply to (A) any shares of Common Stock acquired by Worthington
Industries, Incorporated ("Worthington") or its Affiliates prior to the
effective date of this Restated Certificate of Incorporation or (B) any
shares of Common Stock purchased by Worthington or its Affiliates that
would result in Worthington and its Affiliates owning an aggregate of
not more than 35% of the total number (determined on a fully-diluted
basis) of the issued and outstanding shares of Common Stock of the
Corporation; and
(4) after such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business Combination:
(A) within the two years prior to the Announcement Date except
as approved by a majority of the Disinterested Directors, there shall
have been no failure to declare and pay at the regular dates therefor
the full amount of any dividends (whether or not cumulative) payable
on the outstanding Preferred Stock or class or series of stock having
a preference over the Common Stock as to dividends or upon
liquidation;
(B) within the two years prior to the Announcement Date there
shall have been (I) no reduction in the annual rate of dividends paid
on the Common Stock (except as necessary to reflect any subdivision
of the Common Stock), except as approved by a majority of the
Disinterested Directors, and (II) an increase in such annual rate of
dividends (as necessary to prevent any such reduction) in the event
of any reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction that has
the effect of reducing the number of outstanding shares of the Common
Stock, unless the failure so to increase such annual rate is approved
by a majority of the Disinterested Directors; and
(C) such Interested Stockholder shall not have become the
beneficial owner of any additional shares of Voting Stock except as
part of the transaction that resulted in such Interested Stockholder
becoming an Interested Stockholder; provided, however, that this
subclause (C) shall not apply to (I) any shares of Common Stock
acquired by Worthington or its Affiliates prior to the effective date
of this Restated Certificate of
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Incorporation or (II) any shares of Common Stock purchased by
Worthington or its Affiliates that would result in Worthington and
its Affiliates owning an aggregate of not more than 35% of the total
number (determined on a fully-diluted basis) of the issued and
outstanding shares of Common Stock of the Corporation; and
(5) after such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the
benefit, directly or indirectly (except proportionately as a stockholder
and except in the ordinary course of business or as part of a
supplier/customer relationship), of any loans, advances, guarantees,
pledges or other financial assistance or any tax credits or other tax
advantages provided by the Corporation, whether in anticipation of or in
connection with such Business Combination or otherwise; and
(6) a proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations thereunder
(or any subsequent provisions replacing such Act, rules or regulations)
shall be mailed to public stockholders of the Corporation at least 30
days prior to the consummation of such Business Combination (whether or
not such proxy or information statement is required to be mailed
pursuant to such Act or subsequent provisions).
(iv) For purposes of this Section 7:
(a) A "person" shall mean any individual, firm, corporation,
partnership, trust or other entity.
(b) "Interested Stockholder" shall mean any person (other than the
Corporation or any Subsidiary) who or that:
(1) is the beneficial owner, directly or indirectly, of twenty
percent or more of the combined voting power of the then outstanding
Voting Stock; or
(2) is an Affiliate of the Corporation and at any time within the
two-year period immediately prior to the date in question was the
beneficial owner, directly or indirectly, of twenty percent or more of
the combined voting power of the then outstanding Voting Stock; or
(3) is an assignee of or has otherwise succeeded to the beneficial
ownership of any shares of Voting Stock that were at any time within the
two-year period immediately prior to the date in question beneficially
owned by an Interested Stockholder, if such assignment or succession
shall have occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning of the
Securities Act of 1933.
(c) A person shall be a "beneficial owner" of any Voting Stock:
(1) that such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; or
(2) that such person or any of its Affiliates or Associates has (A)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement, arrangement
or understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise, or (B) the right to vote or
to direct the vote pursuant to any agreement, arrangement or
understanding; or
(3) that is beneficially owned, directly or indirectly, by any
other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purposes of acquiring, holding, voting or disposing of any shares of
Voting Stock, but excluding any such agreement, arrangement or
understanding existing on
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the effective date of this Restated Certificate of Incorporation and as
to which the Corporation is a party.
(d) For the purposes of determining whether a person is an Interested
Stockholder pursuant to paragraph (b) of this clause (iv), the number of
shares of Voting Stock deemed to be outstanding shall include all shares
deemed owned by such person through application of paragraph (c) of this
clause (iv) but shall not include any other shares of Voting Stock that may
be issuable to other persons upon exercise of conversion rights, exchange
rights, warrants or options, or otherwise.
(e) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on January 1, 1994.
(f) "Subsidiary" shall mean any corporation a majority of whose
outstanding stock having ordinary voting power in the election of directors
is owned by the Corporation, by a Subsidiary or by the Corporation and one
of more Subsidiaries; provided, however, that for the purposes of the
definition of Interested Stockholder set forth in paragraph (b) of this
clause (iv), the term "Subsidiary" shall mean only a corporation of which a
majority of each class of equity security is owned by the Corporation, by a
Subsidiary or by the Corporation and one or more Subsidiaries.
(g) "Disinterested Director" means any member of the Board of
Directors of the Corporation who (1) is unaffiliated with, and not a
nominee of, the Interested Stockholder proposing to engage in the Business
Combination, and any successor of a Disinterested Director who is
unaffiliated with, and not a nominee of, such Interested Stockholder and is
recommended to succeed a Disinterested Director by a majority of
Disinterested Directors then on the Board of Directors and (2) is not an
employee of the Corporation.
(h) "Fair Market Value" means: (1) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date
in question of a share of such stock on the New York Stock Exchange
Composite Tape, or, if such stock is not quoted on the Composite Tape, on
the New York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States national securities exchange
registered under the Securities Exchange Act of 1934 on which such stock is
listed, or, if such stock is not listed on any such exchange, the highest
closing sale price or bid quotation with respect to a share of such stock
during the 30-day period immediately preceding the date in question on the
National Association of Securities Dealers, Inc. Automated Quotations
System or any system then in use, or, if no such prices or quotations are
available, the fair market value on the date in question of a share of such
stock as determined by a majority of the Disinterested Directors in good
faith; and (2) in the case of property other than cash or stock, the fair
market value of such property on the date in question as determined by a
majority of the Disinterested Directors in good faith.
(i) "Announcement Date" means the date of first public announcement of
the proposal of the Business Combination.
(j) "Determination Date" means the date on which the Interested
Stockholder became an Interested Stockholder.
(v) A majority of the Disinterested Directors of the Corporation shall have
the power and duty to determine, on the basis of information known to them after
reasonable inquiry, all facts necessary to determine compliance with this
Section 7, including, without limitation, (a) whether a person is an Interested
Stockholder, (b) the number of shares of Voting Stock beneficially owned by any
person, (c) whether a person is an Affiliate or Associate of another person and
(d) whether the requirements of clause (iii) of this Section 7 have been met
with respect to any Business
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Combination; and the good faith determination of a majority of the Disinterested
Directors on such matters shall be conclusive and binding for all purposes of
this Section 7.
SECTION 8. CONVERSION OF CLASS B COMMON STOCK.
(i) All or any of the shares of Class B Common Stock may be converted, at
any time or from time to time in the discretion of the holders thereof into
fully paid and nonassessable shares of Class A Common Stock in accordance with
the Conversion Rate (as defined below).
(ii) Upon the death or permanent disability (as defined in the manner set
forth below) of Carl L. Valdiserri or if Carl L. Valdiserri voluntarily ceases
to be employed as the Chairman of the Board of Directors of the Corporation, all
shares of Class B Common Stock owned by any holder of shares of Class B Common
Stock who has consented in writing to the conversion of such shares of Class B
Common Stock pursuant to this Section 8(ii) shall be converted automatically
into fully paid and nonassessable shares of Class A Common Stock in accordance
with the Conversion Rate.
(iii) Upon the Transfer (as defined below) of any shares of Class B Common
Stock, such shares of Class B Common Stock shall be converted automatically into
fully paid and nonassessable shares of Class A Common Stock in accordance with
the Conversion Rate.
(iv) For purposes of this Section 8:
(a) "Conversion Rate" shall mean the number of shares of Class A
Common Stock into which each share of Class B Common Stock shall be
converted pursuant to this Section 8 determined as follows: Each share of
Class B Common Stock shall be converted into one share of Class A Common
Stock.
(b) "Designated Transferee" means: (1) (A) members of Carl L.
Valdiserri's immediate family (including parents, siblings, spouse and
children, whether by birth or by adoption); (B) any one or more charitable
or other trusts which are established in connection with the estate
planning of Carl L. Valdiserri or in connection with Carl L. Valdiserri's
estate, in each case where the beneficiaries of such trusts are the
beneficiaries of Carl L. Valdiserri's estate; (C) any one or more trusts
for the sole benefit of Carl L. Valdiserri or one or more of the persons
referred to in clause (A) of this definition; (D) any corporation all of
whose issued and outstanding voting capital stock is held legally and
beneficially and of record by Carl L. Valdiserri; provided that in each
case (i) Carl L. Valdiserri retains sole voting power with respect to the
Class B Common Stock held by any person or entity referred to in clause (1)
(A), (B), (C) or (D) of this definition and (ii) the person or entity
referred to in clause (1) (A), (B), (C) or (D) of this definition consents
to the conversion of any Class B Common Stock held by them pursuant to and
upon the occurrence of the events defined in Section 8 (ii) of this
Article; and (2) any Affiliate of Worthington.
(c) "Affiliate" shall mean, as to any person, any other person that
directly or indirectly controls, or is under common control with, or is
controlled by, such person, and if such person is an individual, any member
of the immediate family (including parents, siblings, spouse and children,
whether by birth or by adoption) of such individual and any trust whose
principal beneficiary is such individual or one or more members of such
immediate family and any person who is controlled by any such member or
trust. As used in this definition, "control" (including, with its
correlative meanings, "controlled by" and "under common control with")
shall mean possession, directly or indirectly, of power to direct or cause
the direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise).
(d) "Transfer" shall mean the conveyance, sale, lease, assignment,
granting of any lien on or other transfer or disposition of any share of
capital stock of the Corporation (or any legal or beneficial interest
therein), in each case other than to a Designated Transferee; provided,
however, that a pledge of capital stock shall not be deemed a "Transfer"
hereunder if the
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pledgor retains beneficial ownership of the stock and Carl L. Valdiserri
retains sole voting power with respect to the stock, but any Transfer by
the pledgee shall be deemed a Transfer within the meaning of this Section
8. Any shares of capital stock of the Corporation held by a Designated
Transferee that ceases to meet the definition of Designated Transferee set
forth in paragraph (b) above shall be deemed to be the subject of a
Transfer within the meaning of this Section 8 on the date such stockholder
ceases to meet the definition of Designated Transferee.
(e) A determination of permanent disability of Carl L. Valdiserri
shall be established upon (1) any final judicial determination of the
permanent disability or incapacity of Carl L. Valdiserri, (2) the delivery
to the Corporation of a certificate of a qualified medical doctor, selected
by the Board of Directors of the Corporation for such purpose, to the
effect that Carl L. Valdiserri is unable to perform such duties of his
office because of a permanent physical or mental incapacity or (3) any
failure by Carl L. Valdiserri to make himself reasonably available for an
examination by such medical doctor.
(v) No fraction of a share of Class A Common Stock shall be issued in
connection with the conversion of shares of Class B Common Stock into Class A
Common Stock, but in lieu thereof, each holder of Class B Common Stock who would
otherwise be entitled to a fractional interest of a share of Class A Common
Stock shall receive a cash payment (without interest) (the "Fractional Payment")
equal to the product of (A) the fraction of a share of Class A Common Stock to
which such holder would otherwise have been entitled and (B) the Average Market
Price Per Share of the Class A Common Stock on the Conversion Date (as defined
below).
(vi) No adjustments in respect of dividends shall be made upon the
conversion of any shares of Class B Common Stock; provided, however, that if the
Conversion Date with respect to Class B Common Stock shall be subsequent to the
record date for the payment of a dividend or other distribution thereon or with
respect thereto but prior to the payment or distribution thereof, the registered
holders of such shares at the close of business on such record date shall be
entitled to receive the dividend or other distribution payable on such shares on
the date set for payment of such dividend or other distribution notwithstanding
the conversion of such shares or the Corporation's default in payment of the
dividend or distribution due on such date.
(vii) At such time or times as any holder of Class B Common Stock exercises
the right to cause all or any of the shares of Class B Common Stock to be
converted into Class A Common Stock in accordance with clause (i) of this
Section 8, such holder shall give notice of such conversion to the Corporation,
Attention: Secretary, by mailing by first-class mail a notice of such conversion
(the "Conversion Notice"), not less than ten (10) nor more than thirty (30) days
prior to the date fixed for such conversion (the "Conversion Date").
(viii) Before any holder of Class B Common Stock shall be entitled to
receive certificates representing such shares of Class A Common Stock upon
conversion of shares of Class B Common Stock as provided in this Section 8, such
holder shall surrender to the Corporation certificates for such shares of Class
B Common Stock, duly endorsed to the Corporation or in blank or accompanied by
proper instruments of transfer to the Corporation or in blank, unless the
Corporation shall waive such requirement. The Corporation will, as soon as
practicable after such surrender of certificates representing such shares of
Class B Common Stock issue and deliver at the office of the transfer agent
representing the Class A Common Stock to Carl L. Valdiserri or Worthington or
any Designated Transferee, or to their nominee or nominees, certificates
representing the number of shares of Class A Common Stock to which Carl L.
Valdiserri or Worthington or any Designated Transferee shall be entitled as
aforesaid.
(ix) From and after any applicable Conversion Date or any automatic
conversion described above, all rights of a holder of shares of Class B Common
Stock which were converted into shares of Class A Common Stock shall cease
except for (a) the right to receive certificates representing shares of Class A
Common Stock as contemplated by clauses (i), (ii) and (iii) of this Section 8,
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(b) the right to receive any Fractional Payment as contemplated by clause (v) of
this Section 8 and (c) the right to dividends as provided in clause (vi) of this
Section 8.
(x) At such time as any Conversion Notice is delivered with respect to any
shares of Class B Common Stock, or at the time of the Conversion Date, if
earlier, the Corporation shall have reserved and kept available, solely for the
purpose of issuance upon conversion of the outstanding shares of Class B Common
Stock, such number of shares of Class A Common Stock as shall be issuable upon
the automatic conversion of the number of shares of Class B Common Stock
provided for in clause (ii) or (iii) of this Section 8 or to be specified in the
applicable Conversion Notice, provided, that nothing contained herein shall be
construed to preclude the Corporation from satisfying its obligations in respect
of the conversion of the outstanding shares of Class B Common Stock, by delivery
of purchased shares of Class A Common Stock which are held in the treasury of
the Corporation.
(xi) The Conversion Rate shall be subject to adjustment from time to time
as follows:
(a) In case the Corporation shall (1) pay a dividend or make a
distribution on its Class A Common Stock that is paid or made (A) in other
shares of stock of the Corporation or (B) in rights to purchase stock or
other securities if such rights are not separable from the Class A Common
Stock except upon the occurrence of a contingency, (2) subdivide its
outstanding shares of Class A Common Stock into a greater number of shares
or (3) combine its outstanding shares of Class A Common Stock into a
smaller number of shares, then in each such case the Conversion Rate in
effect immediately prior thereto shall be adjusted retroactively so that
the holder of any shares of Class B Common Stock thereafter surrendered for
conversion shall be entitled to receive the number of shares of Class A
Common Stock of the Corporation and other shares and rights to purchase
stock or other securities (or, in the event of the redemption of any such
shares or rights, any cash, property or securities paid in respect of such
redemption) which such holder would have owned or have been entitled to
receive after the happening of any of the events described above had such
shares of Class B Common Stock been converted immediately prior to the
happening of such event. An adjustment made pursuant to this subparagraph
(a) shall become effective immediately after the record date in the case of
a dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision or combination.
(b) In case the Corporation shall issue rights or warrants to all
holders of its Class A Common Stock entitling them (for a period expiring
within 45 days after the date fixed for determination mentioned below) to
subscribe for or purchase shares of Class A Common Stock at a price per
share less than the current market price per share (determined as provided
below) of the Class A Common Stock on the date fixed for the determination
of stockholders entitled to receive such rights or warrants, then the
Conversion Rate in effect at the opening of business on the day following
the date fixed for such determination shall be increased by multiplying
such Conversion Rate by a fraction of which the numerator shall be the
number of shares of Class A Common Stock outstanding at the close of
business on the date fixed for such determination plus the number of shares
of Class A Common Stock so offered for subscription or purchase and the
denominator shall be the number of shares of Class A Common Stock
outstanding at the close of business on the date fixed for such
determination plus the number of shares of Class A Common Stock that the
aggregate of the offering price of the total number of shares of Class A
Common Stock so offered for subscription or purchase would purchase at such
current market price, such increase to become effective immediately after
the opening of business on the day following the date fixed for such
determination; provided, however, in the event that all the shares of Class
A Common Stock offered for subscription or purchase are not delivered upon
the exercise of such rights or warrants, upon the expiration of such rights
or warrants the Conversion Rate shall be readjusted to the Conversion Rate
that would have been in effect had the numerator and the denominator of the
foregoing fraction and the resulting adjustment been made based upon the
number of shares of
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Class A Common Stock actually delivered upon the exercise of such rights or
warrants, rather than upon the number of shares of Class A Common Stock
offered for subscription or purchase. For the purposes of this subparagraph
(b), the number of shares of Class A Common Stock at any time outstanding
shall not include shares held in the treasury of the Corporation.
(c) In case the Corporation shall, by dividend or otherwise,
distribute to all holders of its Class A Common Stock evidences of its
indebtedness, cash (excluding ordinary cash dividends paid out of retained
earnings of the Corporation), other assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to in
subparagraphs (a) and (b) above), then in each such case the Conversion
Rate shall be adjusted retroactively so that the same shall equal the rate
determined by multiplying the Conversion Rate in effect immediately prior
to the close of business on the date fixed for the determination of
stockholders entitled to receive such distribution by a fraction of which
the numerator shall be the current market price per share (determined as
provided below) of the Class A Common Stock on the date fixed for such
determination and the denominator shall be such current market price per
share of the Class A Common Stock less the amount of cash and the then fair
market value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a resolution of the Board of
Directors) of the portion of the assets, rights or evidences of
indebtedness so distributed applicable to one share of Class A Common
Stock, such adjustment to become effective immediately prior to the opening
of business on the day following the date fixed for the determination of
stockholders entitled to receive such distribution.
(d) For the purpose of any computation under subparagraphs (b) and
(c), the current market price per share of Class A Common Stock on any date
shall be deemed to be the average of the daily closing prices for the 20
consecutive trading days commencing with the 30th trading day before the
day in question. The closing price for each day shall be the reported last
sales price regular way or, in case no such reported sale takes place on
such day, the average of the reported closing bid and asked prices regular
way, in either case on the New York Stock Exchange or, if the Class A
Common Stock is not listed or admitted to trading on such Exchange, on the
principal national securities exchange on which the Class A Common Stock is
listed or admitted to trading (based on the aggregate dollar value of all
securities listed or admitted to trading) or, if not listed or admitted to
trading on any national securities exchange, in the NASDAQ National Market
System or, if the Class A Common Stock is not listed or admitted to trading
on any national securities exchange or quoted in the NASDAQ National Market
System, the average of the closing bid and asked prices in the over-the-
counter market as furnished by any New York Stock Exchange member firm
selected from time to time by the Corporation for that purpose, or, if such
prices are not available, the fair market value set by, or in a manner
established by, the Board of Directors of the Corporation in good faith.
"Trading day" shall mean a day on which the national securities exchange or
the NASDAQ National Market System used to determine the closing price is
open for the transaction of business or the reporting of trades or, if the
closing price is not so determined, a day on which the New York Stock
Exchange is open for the transaction of business.
(e) No adjustment in the Conversion Rate shall be required unless such
adjustment would require an increase or decrease of at least one percent
(1%) in such rate; provided, however, that the Corporation may make any
such adjustment at its election; and provided further, however, that any
adjustments which by reason of this subparagraph (e) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this clause (xi) shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case may
be.
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(f) Whenever the Conversion Rate is adjusted as provided in any
provision of this clause (xi):
(1) the Corporation shall compute the adjusted Conversion Rate in
accordance with this clause (xi) and shall prepare a certificate signed
by the principal financial officer of the Corporation setting forth the
adjusted Conversion Rate and showing in reasonable detail the facts upon
which such adjustment is based, and such certificate shall forthwith be
filed with the transfer agent for the Class B Common Stock; and
(2) a notice stating that the Conversion Rate has been adjusted and
setting forth the adjusted conversion rate shall forthwith be required,
and as soon as practicable after it is required, such notice shall be
mailed by the Corporation to each holder of record of Class B Common
Stock at such holder's address as it shall appear upon the stock
transfer books of the Corporation.
(g) In the event that at any time, as a result of any adjustment made
pursuant to this clause (xi), the holder of any shares of Class B Common
Stock thereafter surrendered for conversion shall become entitled to
receive any shares of the Corporation other than shares of Class A Common
Stock or to receive any other securities, the number of such other shares
or securities so receivable upon conversion of any share of Class B Common
Stock shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions contained in
this clause (xi) with respect to the Class A Common Stock.
(xii) In case of any reclassification of the Class A Common Stock, any
consolidation of the Corporation with, or merger of the Corporation into, any
other person, any merger of another person into the Corporation (other than a
merger that does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Class A Common Stock), any sale or
transfer of all or substantially all of the assets of the Corporation or any
compulsory share exchange, pursuant to which share exchange the Class A Common
Stock is converted into other securities, cash or other property, then lawful
provision shall be made as part of the terms of such transaction whereby the
holder of each share of Class B Common Stock then outstanding shall have the
right thereafter, during the period such share shall be convertible, to convert
such share only into the kind and amount of securities, cash and other property
receivable upon such reclassification, consolidation, merger, sale, transfer or
share exchange by a holder of the number of shares of Class A Common Stock of
the Corporation into which such share of Class B Common Stock might have been
converted immediately prior to such reclassification, consolidation, merger,
sale, transfer or share exchange. The Corporation, the person formed by such
consolidation or resulting from such merger or that acquires such assets or that
acquires the Corporation's shares, as the case may be, shall make provisions in
its certificate or articles of incorporation or other constituent document to
establish such right. Such certificate or articles of incorporation or other
constituent document shall provide for adjustments which, for events subsequent
to the effective date of such certificate or articles of incorporation or other
constituent document, shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 8. The above provisions shall similarly
apply to successive reclassifications, consolidations, mergers, sales, transfers
or share exchanges.
(xiii) The Corporation shall at all times reserve and keep available, out
of its authorized and unissued stock, solely for the purpose of effecting the
conversion of the Class B Common Stock, such number of shares of its Class A
Common Stock free of preemptive rights as shall from time to time be sufficient
to effect the conversion of all shares of Class B Common Stock from time to time
outstanding. The Corporation shall from time to time, in accordance with the
laws of the State of Delaware, increase the authorized number of shares of Class
A Common Stock if at any time the number of shares of Class A Common Stock not
outstanding shall not be sufficient to permit the conversion of all the then
outstanding shares of Class B Common Stock.
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<PAGE> 39
If any shares of Class A Common Stock required to be reserved for purposes
of conversion of the Class B Common Stock hereunder require registration with or
approval of any governmental authority under any Federal or State law before
such shares may be issued upon conversion, the Corporation will in good faith
and as expeditiously as possible endeavor to cause such shares to be duly
registered or approved, as the case may be. If the Class A Common Stock is
listed on the New York Stock Exchange or any other national securities exchange,
the Corporation will, if permitted by the rules of such exchange, list and keep
listed on such exchange, upon official notice of issuance, all shares of Class A
Common Stock issuable upon conversion of the Class B Common Stock.
The Corporation will pay any and all issue or other taxes that may be
payable in respect of any issue or delivery of shares of Class A Common Stock on
conversion of the Class B Common Stock. The Corporation shall not, however, be
required to pay any tax that may be payable in respect of any transfer involved
in the issue or delivery of Class A Common Stock (or other securities or assets)
in a name other than that in which the shares of Class B Common Stock so
converted were registered, and no such issue or delivery shall be made unless
and until the person requesting such issue has paid to the Corporation the
amount of such tax or has established, to the satisfaction of the Corporation,
that such tax has been paid.
Before taking any action that would cause an adjustment reducing the
Conversion Rate, the Corporation will take any corporate action that may, in the
opinion of its counsel, be necessary in order that the Corporation may validly
and legally issue fully paid and nonassessable shares of Class A Common Stock at
the Conversion Rate as so adjusted.
(xiv) In case:
(a) the Corporation shall (1) declare any dividend (or any other
distribution) on its Class A Common Stock, other than (A) a dividend
payable in shares of Class A Common Stock or (B) a dividend payable in cash
out of its retained earnings other than any special or nonrecurring or
other extraordinary dividend or (2) declare or authorize a redemption or
repurchase of in excess of ten percent (10%) of the then outstanding shares
of Class A Common Stock; or
(b) the Corporation shall authorize the granting to the holders of
Class A Common Stock of rights or warrants to subscribe for or purchase any
shares of stock of any class or of any other rights or warrants (other than
any rights specified in paragraph (a)(1)(B) of clause (xi) of this Section
8; or
(c) of any reclassification of Class A Common Stock (other than a
subdivision or combination of the outstanding Class A Common Stock, or a
change in par value, or from par value to no par value, or from no par
value to par value), or of any consolidation or merger to which the
Corporation is a party and for which approval of any stockholders of the
Corporation shall be required, or of the sale or transfer of all or
substantially all of the assets of the Corporation or of any compulsory
share exchange whereby the Class A Common Stock is converted into other
securities, cash or other property; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation;
then the Corporation shall cause to be filed with the transfer agent for the
Class B Common Stock, and shall cause to be mailed to each holder of record of
the outstanding Class B Common Stock, at such holder's address as it shall
appear upon the stock transfer books of the Corporation, at least 15 days prior
to the applicable record date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of such dividend,
distribution, redemption or granting of rights or warrants or, if a record is
not to be taken, the date as of which the holders of Class A Common Stock of
record to be entitled to such dividend, distribution, redemption, rights or
warrants are to be determined, or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up is expected to become effective, and the date as of which it is
expected that holders of Class A Common Stock of record shall be entitled
A-13
<PAGE> 40
to exchange their shares of Class A Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding up (but neither
the failure so to mail such notice nor any defect therein or in the mailing
thereof shall affect the validity of the corporate action required to be
specified in such notice).
SECTION 9. In the event of the liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, after there shall have been
paid or set apart for the holders of Preferred Stock the full preferential
amounts to which they are entitled, the holders of Class A Common Stock and
Class B Common Stock shall be entitled to receive the assets of the Corporation
remaining for distribution to its stockholders, ratably in proportion to the
number of shares held by them, respectively, together with any other stockholder
entitled to participate in such liquidation, dissolution or winding up on a
parity with the Class A Common Stock and the Class B Common Stock.
SECTION 10. SUBDIVISION OR COMBINATION.
(1) If the Corporation shall in any manner subdivide (by stock split
or otherwise) or combine (by reverse stock split or otherwise) the
outstanding shares of the Class A Common Stock or Class B Common Stock, or
pay a stock dividend in shares of any class to holders of that class, the
per share voting rights specified in Section 5 of this Article Fourth of
Class B Common Stock relative to Class A Common Stock shall be
appropriately adjusted so as to avoid any dilution in the aggregate voting
rights of any class. Distribution by the Corporation of shares of any class
of its common stock as a dividend on any other class of its common stock
shall not require an adjustment pursuant to this Section 10.
(2) The determination of any adjustment required under this Section 10
shall be made by the Corporation's Board of Directors; any such
determination shall be binding and conclusive upon all holders of shares of
all classes of the Corporation's common stock. Following any such
determination, the Secretary of the Corporation shall maintain a record of
any such adjustment.
SECTION 11. Any Preferred Stock, Class A Common Stock or Class B Common
Stock, authorized hereunder or under any amendment hereof, in the discretion of
the Board of Directors, may be issued, except as herein otherwise provided, in
payment for property or services, or as bonuses to employees of the Corporation
or employees of subsidiary companies, or for other assets or securities
including cash, necessary or desirable, in the judgment of the Board of
Directors, to be purchased or acquired from time to time for the Corporation, or
for any other lawful purpose of the Corporation.
SECTION 12. If it seems desirable so to do, the Board of Directors may from
time to time issue scrip for fractional shares of stock. Such scrip shall not
confer upon the holder any right to dividends or any voting or other rights of a
stockholder of the Corporation, but the Corporation shall from time to time,
within such time as the Board of Directors may determine or without limit of
time if the Board of Directors so determines, issue one or more whole shares of
stock upon the surrender of scrip for fractional shares aggregating the number
of whole shares issuable in respect of the scrip so surrendered, provided that
the scrip so surrendered shall be properly endorsed for transfer if in
registered form.
ARTICLE FIFTH
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The Corporation is to have perpetual existence.
ARTICLE SIXTH
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The private property of the stockholders shall not be subject to the
payment of corporate debts to any extent whatever.
A-14
<PAGE> 41
ARTICLE SEVENTH
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SECTION 1. Except as otherwise fixed pursuant to the provisions of Article
Fourth hereof relating to the rights of the holders of any class or series of
stock having a preference over the Common Stock as to dividends or upon
liquidation, the number of Directors of the Corporation shall be not less than
six and not more than nine. Subject to the rights of the holders of any class or
series of stock having a preference over the Common Stock as to dividends or
upon liquidation, in case of any vacancy in the Board of Directors, the
remaining Directors, by affirmative vote of a majority thereof, may, and the
stockholders shall not be entitled to, elect a successor to hold office for the
unexpired portion of the term of the Director whose place is vacant and until
his successor shall be duly elected and qualified.
SECTION 2. The Directors, other than those who may be elected by the
holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation, shall be divided into three classes:
Class I, Class II and Class III. Within the limits specified in this Article
Seventh and the By-Laws of the Corporation, the number of directors in each
class shall be determined by resolution of the Board of Directors; provided,
however, that the number of Directorships shall be apportioned among the classes
so as to maintain the classes as nearly equal in number as possible. The terms
of office of the classes of Directors shall expire at the times of the annual
meetings of the stockholders as follows: Class I at the annual meeting held in
1994, Class II at the annual meeting held in 1995 and Class III at the annual
meeting held in 1996, or thereafter in each case when their respective
successors are elected and qualified. At each subsequent annual meeting, the
Directors chosen to succeed those whose terms are expiring shall be identified
as being of the same class as the Directors whom they succeed, and shall be
elected for a term expiring at the time of the third succeeding annual meeting
of stockholders, or thereafter in each case when their respective successors are
elected and qualified. No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.
SECTION 3. No Director shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a Director,
except for liability (i) for any breach of the Director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174, or any successor provision thereto, of the Delaware General
Corporation Law, or (iv) for any transaction from which the Director derived an
improper personal benefit. If the Delaware General Corporation Law is amended to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a Director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.
SECTION 4. If Carl L. Valdiserri voluntarily ceases to be employed as Chief
Executive Officer of the Corporation and voluntarily elects not to remain as
Chairman of the Board of Directors of the Corporation, then the first and only
the first successor to Carl L. Valdiserri as Chief Executive Officer and
Chairman of the Board shall be chosen by a vote of 75% of the entire Board of
Directors, but excluding Carl L. Valdiserri and his designees on the Board of
Directors. If Carl L. Valdiserri continues to be Chairman of the Board of
Directors of the Corporation, (i) the first and only the first successor to Carl
L. Valdiserri as the Chief Executive Officer of the Corporation shall be chosen
by a vote of 75% of the entire Board of Directors, including Carl L. Valdiserri
and his designees on the Board of Directors; and (ii) the first and only the
first successor to Carl L. Valdiserri as Chairman of the Board shall be chosen
by a vote of 75% of the entire Board of Directors, including Carl L. Valdiserri
and his designees on the Board of Directors.
A-15
<PAGE> 42
SECTION 5. In furtherance, and not in limitation of the powers conferred by
law, the Board of Directors is expressly authorized:
(a) To make, alter, amend and repeal the By-Laws of the Corporation.
(b) To remove at any time any officer elected or appointed by the
Board of Directors. Any other officer or employee of the Corporation may be
removed at any time by a vote of the Board of Directors, or by any
committee or superior officer upon whom such power of removal may be
conferred by the By-Laws or by the vote of the Board of Directors.
(c) From time to time to fix and to vary the sum to be reserved over
and above its capital stock paid in before declaring any dividends; to
direct and determine the use and disposition of any surplus or net profits
over and above the capital stock paid in; to fix the time of declaring and
paying any dividend, and, unless otherwise provided in this Certificate or
in the By-Laws, to determine the amount of any dividend. All sums reserved
as working capital or otherwise may be applied from time to time to the
acquisition or purchase of its bonds or other obligations or shares of its
own capital stock or other property to such extent and in such manner and
upon such terms as the Board of Directors shall deem expedient and neither
the stocks, bonds, or other property so acquired shall be regarded as
accumulated profits for the purpose of declaring or paying dividends unless
otherwise determined by the Board of Directors, but shares of such capital
stock so purchased or acquired may be resold, unless such shares shall have
been retired for the purpose of decreasing the Corporation's capital stock
as provided by law.
(d) From time to time to determine whether and to what extent, and at
what time and places and under what conditions and regulations the accounts
and books of the Corporation (other than the stock ledger), or any of them,
shall be open to the inspection of the stockholders; and no stockholder
shall have any right to inspect any account or book or document of
Corporation, except as conferred by statute or authorized by the Board of
Directors or by a resolution of the stockholders.
(e) The Corporation may by its By-Laws confer upon the Directors
powers and authorities additional to the foregoing and to those expressly
conferred upon them by statute.
ARTICLE EIGHTH
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Both the stockholders and the Directors of the Corporation may hold their
meetings and the Corporation may have an office or offices in such place or
places outside of the State of Delaware as the By-Laws may provide, and the
Corporation may keep its books outside of the State of Delaware except as
otherwise provided by law.
ARTICLE NINTH
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In addition to any requirement of law and any other provision of this
Certificate of Incorporation or any resolution or resolutions of the Board of
Directors adopted pursuant to Article Seventh of this Certificate of
Incorporation (and notwithstanding the fact that a lesser percentage may be
specified by law, this Certificate of Incorporation or any such resolution or
resolutions), the affirmative vote of the holders of 66 2/3 percent or more of
the combined voting power of the then outstanding shares of Voting Stock, voting
together as a single class, shall be required to amend, alter or repeal this
Certificate of Incorporation. Subject to the foregoing provisions of this
Article Ninth, the Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner, now or hereafter prescribed by statute, and all rights conferred on
stockholders herein are granted subject to this reservation.
A-16
<PAGE> 43
IN WITNESS WHEREOF, Rouge Steel Company has caused this Certificate to be
signed and attested by its duly authorized officers, this day of
, 1997.
By:
------------------------------------
Name: Gary P. Latendresse
Title: Vice President and
Chief Financial Officer
ATTEST:
- ---------------------------------------------------
Secretary
A-17
<PAGE> 44
PROXY ROUGE STEEL COMPANY
3001 MILLER ROAD
DEARBORN, MICHIGAN 48121
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ROUGE STEEL
COMPANY.
Phyllis J. Holmes and Michael C. Tuomey and each of them, with full power of
substitution, are hereby appointed the proxies of, and authorized to represent,
the undersigned and to vote all of the shares of common stock of Rouge Steel
Company entitled to be voted by the undersigned as of March 14, 1997 as directed
below and, in their discretion, on all other matters which may properly come
before the Annual Meeting of Stockholders (the "Meeting") to be held at the Gate
2 Training Center, Rouge Steel Company, Dearborn, Michigan 48121, on Thursday,
May 8, 1997 at 10:00 a.m. and at any adjournment thereof as if the undersigned
were present and voting at the Meeting.
Whether or not you expect to attend the Meeting, you are urged to execute and
return this proxy, which you may revoke at any time prior to its use.
IF NO CONTRARY DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS RETURNED,
SUCH SHARES WILL BE VOTED FOR ALL ITEMS.
Item 1 -- Election of the following nominees for Class III Directors: Carl L.
Valdiserri and Clayton P. Shannon.
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY
with exceptions listed FOR ALL NOMINEES
Withhold for the following nominee(s) only (To withhold authority to vote
for any nominee, write that nominee's name in the space below.)
Item 2 -- Amendment and restatement of the Certificate of Incorporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Item 3 -- Ratification of appointment of Price Waterhouse LLP as independent
public accountants for the year ending December 31, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE> 45
Please date and sign this proxy exactly as your name appears on the reverse side
of this proxy and return it promptly in the postage-paid return envelope. When
shares are held by joint tenants, both should sign. If a corporation, please
sign the full corporate name by an authorized officer. If a partnership, please
sign the partnership name by an authorized person.
The undersigned hereby acknowledge(s) receipt of Rouge Steel Company's Annual
Report to Shareholders and of the notice of the Annual Meeting of Stockholders
and Proxy Statement relating to the Meeting.
Date: , 1997
-------------------
- ----------------------------------------
Signature
- ----------------------------------------
Signature
PLEASE MARK, SIGN AND DATE THIS PROXY PROMPTLY AND MAIL IT IN THE ENCLOSED
ENVELOPE. TO BE VALID, THIS PROXY MUST BE SIGNED AND DATED.
