<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [x]
Filed by party other than the registrant [ ]
Check the appropriate box:
[x] Preliminary proxy statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6 (e) (2))
[ ] 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:
- --------------------------------------------------------------------------------
<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 amend and restate the
Restated Certificate of Incorporation (the "Certificate") of the
Company to delete (i) 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 and 14.01 of the Company's
Amended and Restated By-Laws and (ii) 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: March 26, 1997
<PAGE> 3
ROUGE STEEL COMPANY
3001 MILLER ROAD
DEARBORN, MICHIGAN 48121
---------
ANNUAL MEETING OF STOCKHOLDERS
MAY 8, 1997
---------
PROXY STATEMENT
---------
This Proxy Statement is being mailed to the stockholders of
ROUGE STEEL COMPANY (the "Company") on or about March 26, 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
amendment and restatement of the Certificate would permit a majority of the
members of the Board of Directors to amend, alter or repeal the By-Laws and
would permit a majority of the combined voting power of the Company's
outstanding common stock to approve substantially all amendments to the
Certificate. As a result, Carl L. Valdiserri, the Company's Chairman and Chief
Executive Officer and majority stockholder, could effectively control amendments
to the Certificate and the Amended and Restated By-Laws (the "By-Laws").
PROXIES AND VOTING RIGHTS
The voting securities of the Company outstanding on March 7, 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.
<PAGE> 4
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 and restatement 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 auditors 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.
Pursuant to the terms of the Amended and Restated Stockholders
Agreement dated November 14, 1996, by and among the Company, Worthington
Industries, Inc. ("Worthington") and Carl L. Valdiserri, Worthington and Mr.
Valdiserri agreed to vote all of their outstanding shares of Common Stock,
representing approximately 74.8% of the combined voting power of the outstanding
Common Stock, in favor of the proposal to amend and restate the Certificate.
2
<PAGE> 5
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 PERCENT OF
DIRECTORS, EXECUTIVE OFFICERS AND 5% STOCK BENEFICIALLY TOTAL VOTING
STOCKHOLDERS OWNED PERCENT(1) STOCK
--------------------------------------------- ---------------------- --------- ------------------
<S> <C> <C> <C>
Carl L. Valdiserri(2)(3)(4)(9) . . . . . . 7,384,264 33.7% 54.9%
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) . . . . . 1,926,600 8.8 5.8
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.
(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. Accordingly, Mr.
Valdiserri has the power to elect the entire Board of Directors of the
Company and if the proposal to amend and restate the Certificate is
approved, Mr. Valdiserri will have effective control over all amendments to
the Certificate and By-Laws. Pursuant to the voting arrangement
3
<PAGE> 6
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 . 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) Effective August 1, 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 constitutes
approximately 26% of the 21,481,536 as adjusted shares of Class A Common
Stock outstanding. 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 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
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.
4
<PAGE> 7
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 nine. 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 and contain 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.
5
<PAGE> 8
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 Executive 1989
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 and 1990
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>
6
<PAGE> 9
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 Operating 1990
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 (58) . . . . . . Mr. Pestillo is Executive Vice President, Corporate 1990
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>
7
<PAGE> 10
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>
1992
Gary P. Latendresse (53) . . . . . Mr. Latendresse has been Vice President and 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.
1996
Dominick C. Fanello (75) . . . . . Mr. Fanello was appointed to the Board on
September 26, 1996 to fill the vacancy created by Mr.
Klisares' resignation. Mr. Fanello has been a director
of Shiloh 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 for the
past 43 years. Mr. Fanello resigned his position as
the Chief Executive Officer and Chairman of the Board
of Shiloh in 1995 and 1996, respectively. Mr. Fanello
also serves as a director of Park National Bank
(Newark, Ohio).
1990
John E. Lobbia (55) . . . . . . . Mr. Lobbia has been Chairman and Chief Executive
Officer at DTE Energy, 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>
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE ELECTION OF EACH OF THE NOMINEES.
8
<PAGE> 11
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 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.
9
<PAGE> 12
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 Numbers of Shares
---------------------- -----------------
<S> <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 7, 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) pursuant to an irrevocable election
(applicable to all exercises thereafter) six months in advance of such exercise
to satisfy the exercise price 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.
10
<PAGE> 13
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 next 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.
Shares of Class A Common Stock received pursuant to the exercise of
options granted under the ODEP are not transferable until six months have
elapsed from the date of the grant of such options. 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. Shares of Class A Common Stock received pursuant to stock awards granted
under the ODEP are not transferable until six months have elapsed from the date
of the grant of such award. The number of shares of Class A Common Stock
awarded are 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
------------------------- ----------------
<S> <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
11
<PAGE> 14
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 Board of Directors 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 respect to any stock award or stock option
previously granted under the ODEP and that stockholder approval is required to
the extent that such stockholder approval is 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).
12
<PAGE> 15
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.
13
<PAGE> 16
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 the Named Executive Officers during 1996 under the Stock
Incentive Plan.
OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
PERCENT
OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE OR
OPTIONS IN FISCAL BASE PRICE EXPIRATION GRANT
EXECUTIVE GRANTED(1) YEAR PER SHARE DATE (2) DATE 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 UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES 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>
14
<PAGE> 17
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Company's Board of Directors (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. 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 17. 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 market.
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.
15
<PAGE> 18
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 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 rules governing the
Section 162(m) limitation so that compensation attributable to such options
will not be subject to limitation under such rules. 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
16
<PAGE> 19
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
(graphics)
THE NUMBERS FOR THE NEW GRAPH:
<TABLE>
<CAPTION>
1994 1995
--------------------------------- --------------------------------------
MARCH 31 JUNE 30 SEPT 30 DEC 31 MARCH 31 JUNE 30 SEPT 30 DEC 31
-------- ------- ------- ------ -------- ------- ------- ------
<S> <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
S&P 500 100.00 100.43 105.34 105.32 115.54 126.54 136.61 144.83
Peer Group 100.00 112.88 131.30 113.99 99.58 102.01 93.17 97.03
S&P Steel Index 100.00 103.72 114.38 98.00 93.94 94.14 81.27 90.86
<CAPTION>
1996
---------------------------------
MARCH 31 JUNE 30 SEPT 30 DEC 31
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Rouge Steel 103.58 100.79 102.11 98.73
S&P 500 152.60 159.44 164.37 178.06
Peer Group 104.62 91.36 92.29 91.37
S&P Steel Index 92.84 81.76 80.28 91.01
</TABLE>
17
<PAGE> 20
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."
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 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
18
<PAGE> 21
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).
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
19
<PAGE> 22
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 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.
Effective August 1, 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.
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<PAGE> 23
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, 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 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> 24
PROPOSAL NO. 2 - RESTATED CERTIFICATE OF INCORPORATION
The Board of Directors of the Company has approved the amendment and
restatement of the Certificate to delete certain super-majority voting
provisions presently contained therein. 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 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.
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<PAGE> 25
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 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;
provided, however, that a vote of 80% of the Board shall be
required to amend, alter or repeal, or to adopt any provision
inconsistent with Sections 2.02, 2.03, 2.07, 2.14, 2.15 and
14.01 of these By-Laws, as they shall be at any time."
In addition, 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 66 2/3% 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 in the Certificate subject to the 80% stockholder vote described
above. The full text of such sections is set forth in the proposed restated
Certificate (the "Restated Certificate") which is annexed hereto as Appendix A.
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<PAGE> 26
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 their substantial stockholdings and to
certain provisions of the By-Laws through their representation on the Board of
Directors. However, effective August 1, 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 their
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 (other than the 80% Board of Directors approval
requirement contained in Section 14.01 of 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. The Board of Directors believes that such amendments would
increase the Company's flexibility to deal with possible takeover attempts by
third parties.
The amendment and restatement of the Certificate and By-Laws
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 a majority of the combined voting power of the
Company's outstanding common stock to approve substantially all amendments to
the Restated Certificate. As a result, Carl L. Valdiserri, the Company's
Chairman and Chief Executive Officer and majority stockholder could effectively
control amendments and alterations to the Restated Certificate and By-Laws.
The amendment and restatement of the Certificate, which will
in turn permit the Board of Directors to remove the 80% voting threshold
contained in Section 14.01 of the By-Laws, will require 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 proposal. 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, representing
approximately 74.8% of the combined voting power of the Common Stock, for the
proposal to amend and restate the Certificate.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ADOPTION OF PROPOSAL 2.
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<PAGE> 27
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, the Board of Directors has directed that the appointment of Price
Waterhouse LLP be submitted to stockholders for ratification due to the
significance of their appointment by the Company. If 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.
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<PAGE> 28
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 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 shareholder 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 would be converted into and exchanged for a
share of class A common stock 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 of the Company being converted. In addition, the certificate of
incorporation of the operating subsidiary will be amended to provide that any
action to 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 November 26, 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.
26
<PAGE> 29
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 subsidiary
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: March 26, 1997
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<PAGE> 30
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.
<PAGE> 31
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 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.
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<PAGE> 32
(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 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
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<PAGE> 33
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
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<PAGE> 34
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 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:
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<PAGE> 35
(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
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
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<PAGE> 36
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;
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<PAGE> 37
(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 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
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<PAGE> 38
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,
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<PAGE> 39
arrangement or understanding existing on 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
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<PAGE> 40
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
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.
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<PAGE> 41
(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 pledgor
retains beneficial
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<PAGE> 42
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
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<PAGE> 43
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, (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
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<PAGE> 44
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 Class
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<PAGE> 45
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
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<PAGE> 46
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.
(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.
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<PAGE> 47
(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.
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
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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
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(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 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.
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(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
The Corporation is to have perpetual existence.
ARTICLE SIXTH
The private property of the stockholders shall not be subject to the
payment of corporate debts to any extent whatever.
ARTICLE SEVENTH
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 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
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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.
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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.
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
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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
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
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.
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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
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ROUGE STEEL COMPANY
3001 MILLER ROAD
DEARBORN, MICHIGAN 48121
_______________
PROXY
_______________
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.
<TABLE>
<S> <C> <C>
FOR all nominees WITHHOLD Withhold for the following nominee(s)
with exceptions listed AUTHORITY only (To withhold authority to vote
FOR ALL NOMINEES for any nominee, write that nominee's
name in the space below.)
[ ] [ ]
</TABLE>
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> 56
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 acknowlege(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.
