-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CaS1ozf0jfSjUb+mR+jUap07Lz5X8ziUnfPvBAF1C3Eb2Z91yq95P+yvyw71Y0J2 BilKK0R7wliaC5wqkwrzIA== 0000950131-99-001921.txt : 19990331 0000950131-99-001921.hdr.sgml : 19990331 ACCESSION NUMBER: 0000950131-99-001921 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RYERSON TULL INC /DE/ CENTRAL INDEX KEY: 0000790528 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 363425828 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-09117 FILM NUMBER: 99578725 BUSINESS ADDRESS: STREET 1: 2621 WEST 15TH PLACE CITY: CHICAGO STATE: IL ZIP: 60608 BUSINESS PHONE: 7737622121 MAIL ADDRESS: STREET 1: 2621 WEST 15TH PLACE CITY: CHICAGO STATE: IL ZIP: 60608 FORMER COMPANY: FORMER CONFORMED NAME: INLAND STEEL INDUSTRIES INC /DE/ DATE OF NAME CHANGE: 19920703 10-K405 1 FORM 10-K405 PART I ITEM 1. BUSINESS. Ryerson Tull, Inc. (the "Company"), a Delaware corporation, formerly Inland Steel Industries, Inc., is the sole stockholder of Joseph T. Ryerson & Son, Inc. ("Ryerson") and J.M. Tull Metals Company, Inc. ("Tull") (unless the context indicates otherwise, Ryerson Tull, Ryerson and Tull, together with their subsidiaries, are collectively referred to herein as the "Company"). The Company has a single business segment, which is comprised primarily of Ryerson and Tull, leading steel service, distribution and materials processing organizations. The Company also owns certain joint venture interests, which are not material, in certain foreign operations discussed below. On July 16, 1998, the Company disposed of Inland Steel Company ("ISC") to Ispat International, N.V. ("Ispat"). For more information on this transaction, see "--Corporate Restructuring--ISC/Ispat Transaction." After this transaction, the Company's primary business became metals distribution and processing. Operations The Company conducts its materials distribution operations in the United States through its operating subsidiaries, Ryerson and Tull; in Canada through Washington Specialty Metals; in Mexico through Ryerson de Mexico, S.A. de C.V.; in China through Shanghai Ryerson Limited; and in India through Tata Ryerson Limited and is organized into five business units along regional and product lines. The Company is the largest metals service center in the United States based on sales revenue, with 1998 sales of $2.8 billion. The Company has a current U.S. market share of approximately 10%, based on its analysis of data prepared by the Steel Service Center Institute ("SSCI"). The Company distributes and processes metals and other materials throughout the continental United States, and is among the largest purchasers of steel in the United States. Ryerson International In 1994, the Company formed Ryerson International, Inc. (formerly Inland International, Inc.) to conduct the Company's international operations, and it organized Ryerson International Trading, Inc. (formerly Inland International Trading, Inc.) to sell products and services of the Company and its affiliates and purchase materials for them abroad. In 1995, Ryerson International Trading, Inc. organized I.M.F. Steel International Limited, a Hong Kong company (in which it and a subsidiary of MacSteel Holdings (Pte.), Ltd. (South Africa) each holds a 50% interest), to engage in the worldwide purchase and sale of steel and related products. Ryerson de Mexico The Company owns a 50% interest in Ryerson de Mexico, S.A. de C.V., a joint venture with Altos Hornos de Mexico, S.A. de C.V., an integrated steel manufacturer in Mexico. Ryerson de Mexico, which was formed in 1994, is a general line metals service center and processor with 10 facilities in Mexico. The impact of Ryerson de Mexico's operations on the Company's results of operations has not been material. Shanghai Ryerson Limited The Company owns a 49% interest in Shanghai Ryerson Limited, a joint venture with Baoshan Iron and Steel Corporation, an integrated steel manufacturer in China. Shanghai Ryerson Limited, which was formed in 1996, is a metals service center and processor with a facility at Pudong, Shanghai, China. The impact of Shanghai Ryerson's operations on the Company's results of operations has not been material. Tata Ryerson Limited The Company owns a 50% interest in Tata Ryerson Limited, a joint venture with The Tata Iron & Steel Corporation, an integrated steel manufacturer in India. Tata Ryerson Limited, which was formed in 1997, is a metals service center and processor with facilities at Jamshedpur and Pune, India. The impact of Tata Ryerson's operations on the Company's results of operations has not been material. 1 Washington Specialty Metals On February 1, 1999, Ryerson purchased Washington Specialty Metals Corporation, a metals service center specializing in value-added stainless steel with facilities in the United States and Canada. Industry Overview Primary steel producers typically sell steel in the form of standard-sized coils, sheets, plate, structurals, bars and tubes, and generally sell in large volumes with long lead times for production and delivery. Other primary metals producers, such as producers of stainless steel and aluminum, also typically sell their products in large volumes with long lead times for production and delivery. However, many customers seek to purchase metals with customized specifications, including value-added processing, in smaller volumes, on shorter lead times and with more reliable delivery than primary metals producers are able to provide. Metals service centers act as intermediaries between primary metals producers and customers by purchasing metals in a variety of shapes and sizes from primary metals producers in large volumes, allowing metals service centers to take advantage of producer economies of scale resulting in lower costs of materials purchased, and engaging in a variety of distribution and value-added processing operations to meet the demands of specific customers. Because metals service centers purchase metals from a number of primary producers, they can maintain a consistent supply of various types of metal used by their customers. By purchasing products from metals service centers, customers may be able to lower their inventory levels, decrease the time between the placement of an order and receipt of materials and reduce internal expenses, thereby lowering their total cost of raw materials. The Company believes that the increased prevalence of just-in-time inventory needs of manufacturers and intermediate processors has made and will continue to make the value-added inventory, processing and delivery functions performed by metals service centers more important in the metals market. The industry is cyclical (with periods of strong demand and higher prices followed by periods of weaker demand and lower prices), principally due to the cyclical nature of the industries in which the largest consumers of metals operate. Any significant slowdown in one or more of those industries could have a material adverse effect on the demand for metals, resulting in lower prices for metals and reduced profitability for metals service centers, including the Company. Metals prices and metals service center profitability improve as metal-consuming industries recover from economic downturns. The industry is comprised of many companies, the majority of which have operations limited as to product line and size of inventory, with customers located in a specific geographic area. Based on SSCI data, the Company believes that the industry is comprised of between 750 and 1,000 service centers, operating out of approximately 2,000 locations and servicing approximately 300,000 customers. The industry is highly fragmented, consisting of a large number of small companies and a few relatively large companies. In general, competition is based on quality, service, price and geographic proximity. Based on the Company's analysis of SSCI data, the industry handled approximately 30 million tons or approximately 24.3% of the metals distributed in the United States in 1998. The industry is divided into three major groups: general line service centers, specialized service centers and processing centers, each of which targets different market segments. General line service centers handle a broad line of metals products and tend to concentrate on distribution rather than processing. General line service centers range in size from one location to a nationwide network of locations. For general line service centers, individual order size in terms of dollars and tons tends to be small relative to processing centers, while the total number of orders is typically very high. Specialized service centers focus their activities on a narrower range of product and service offerings than general line companies. Such service centers provide a narrower range of services to their customers and emphasize product expertise and lower operating costs, while maintaining a moderate level of investment in processing equipment. Processing centers typically process large quantities of steel purchased from primary producers for resale to large industrial customers, such as the automotive industry. Because orders are typically large, operation of a processing center requires a significant investment in processing equipment. 2 The Company competes with many other general line service centers, specialized service centers and processing centers on a regional and local basis, some of which may have greater financial resources and flexibility than the Company. The Company also competes to a lesser extent with primary steel producers. Primary steel producers typically sell to very large customers that require regular shipments of large volumes of steel. Although these large customers sometimes use metals service centers to supply a portion of their metals needs, metals service center customers typically are consumers of smaller volumes of metals than customers of primary steel producers. To the extent that some of the Company's competitors purchase a higher percentage of metals than the Company from foreign steelmakers, such competitors may benefit from favorable exchange rates or other economic or regulatory factors that may result in a competitive advantage. This competitive advantage may be offset somewhat by higher transportation costs associated with importing metals into the United States. Excess capacity of metals relative to demand in the industry since mid-1995 led to a weakening in prices. As a result, the Company has been reducing its prices since mid-1995 to remain competitive. Products and Services The Company carries a full line of carbon steel, stainless steel and aluminum, and a limited line of alloy steel, nickel, red metals and plastics. These materials are inventoried in a number of shapes, including coils, sheets, rounds, hexagons, square and flat bars, plates, structurals and tubing. The following table sets forth the Company's shipments (by percentage of sales revenue) for 1996, 1997 and 1998 for each of the Company's major product lines.
Percentage of Product Line Sales Revenue ------------ ---------------- 1996 1997 1998 ---- ---- ---- Carbon flat rolled...................................... 27% 27% 30% Stainless and aluminum.................................. 26 27 25 Bars, tubing and structurals............................ 22 20 20 Fabrication and carbon plate............................ 20 20 20 Other................................................... 5 6 5 --- --- --- Total............................................... 100% 100% 100% === === ===
More than one-half of the materials sold by the Company is processed. The Company uses techniques such as sawing, slitting, blanking, pickling, cutting to length, leveling, flame cutting, laser cutting, edge trimming, edge rolling, fabricating and grinding to process materials to specified thickness, length, width, shape and surface quality pursuant to specific customer orders. Among the most common processing techniques used by the Company are pickling, a chemical process using an acidic solution to remove surface oxide, commonly called "scale," from steel which develops after the steel is hot rolled; slitting, which is cutting coiled metals to specified widths along the length of the coil; leveling, which is flattening metals and cutting them to exact lengths; and edge rolling, a process which imparts round or smooth edges. Although the Company often uses third-party fabricators to outsource certain limited processes that the Company is not able to perform internally, outsourcing these processes does not affect a significant part of the Company's operations or constitute a significant part of the Company's operating costs and expenses. The plate burning and fabrication processes are particularly important to the Company. These processes require sophisticated and expensive processing equipment. As a result, rather than making investments in such equipment, manufacturers have increasingly outsourced these processes to metals service centers. The Company has flame or laser cutting capacity in 42 of its 69 facilities. The Company also provides services and technical advice to its customers as an integral part of providing products to its customers. The Company does not charge customers separately for such services or advice, but rather includes the costs of such services and advice in the price of products sold to such customers. 3 The Company's services include: just-in-time delivery, production of kits containing multiple products for ease of assembly by the customer, the provision of Company-owned materials to the customer and the placement of Company employees at a customer's site for inventory management, production and technical assistance. The Company also provides special stocking programs where products that would not otherwise be stocked by the Company are held in inventory to meet certain customers' needs. The foregoing services are designed to reduce customers' costs by minimizing their investment in inventory and improving their production efficiency. Customer Base The Company's customer base is diverse, numbering over 50,000. No customer accounted for more than 3% of the Company's sales in 1998, and the top ten customers accounted for approximately 9% of the Company's sales in 1998. The Company's customer base includes most metal-consuming industries, most of which are cyclical. The Company's shipments (by percentage of sales revenue) for 1996, 1997 and 1998 for each class of the Company's customers were as set forth in the table below.
Percentage of Class of Customer Sales Revenues ----------------- ---------------- 1996 1997 1998 ---- ---- ---- Machinery manufacturers................................. 38% 37% 35% Fabricated metals producers............................. 26 26 26 Transportation equipment producers...................... 10 9 10 Electrical machinery producers.......................... 8 8 10 Wholesale distributors.................................. 3 4 4 Construction-related purchasers......................... 4 5 4 Metals mills and foundries.............................. 3 3 2 Other................................................... 8 8 9 --- --- --- 100% 100% 100% === === ===
The Company's flat-rolled processing business unit, Ryerson Coil Processing, generally serves a customer base that differs from the Company's general line service center business. A large portion of Ryerson Coil Processing's customers have supply contracts typically at fixed prices and from three months to one year in duration. Ryerson Coil Processing has a small number of arrangements with large customers that extend beyond one year. Ryerson Coil Processing attempts to limit its financial exposure on these fixed-price sales arrangements by entering into fixed-price supply arrangements with one or more suppliers for comparable periods of time. Ryerson Coil Processing's customers often seek large quantities of carbon sheet product that have undergone one or more of the following processes: pickling, cutting to length, slitting, tension leveling, texturing or blanking. Many of Ryerson Coil Processing's approximately 600 customers are in the transportation, appliance, office furniture or cabinetry businesses. Suppliers In 1998, the Company purchased in excess of 3.0 million tons of materials from many suppliers throughout the world. The Company's top 25 suppliers accounted for approximately 50% of 1998 purchases in dollars. The Company purchases the majority of its inventories in the open market at prevailing market prices. However, occasionally the Company enters into long- term, fixed-price supply contracts to offset its long-term, fixed-price sales contracts in order to minimize its financial exposure. Because the Company uses many suppliers and because there is a substantial overlap of product offerings from these suppliers, the Company believes it will be able to meet its materials requirements for the foreseeable future. The Company works with and monitors its suppliers in order to obtain improvements in price, quality, service, delivery and performance. The Company believes it has good relationships with most of its suppliers. 4 Sales and Marketing Each of the Company's business units maintains its own sales and marketing force. In addition to its office sales staff, the Company markets and sells its products through the use of its field sales force that has extensive product and customer knowledge and through a comprehensive catalog of the Company's products. The Company's office and field sales staffs, which together consist of approximately 800 employees, include technical and metallurgical personnel. In addition, the Company's technically oriented marketing departments develop advertising materials and maintain product expertise for each of the various types of materials sold and industries serviced by the Company. Capital Expenditures In recent years the Company has made capital expenditures to maintain, improve and expand processing capabilities. Additions by the Company to property, plant and equipment, together with retirements for the five years ended December 31, 1998, excluding the initial purchase price of acquisitions, are set forth below. Net capital additions during such period aggregated $83.6 million.
Dollars in Millions --------------------------------- Retirements Net Capital Additions or Sales Additions --------- ----------- ----------- 1998.................................... $ 40.1 $ 30.2* $ 9.9 1997.................................... 41.3 12.0 29.3 1996.................................... 25.1 6.0 19.1 1995.................................... 20.7 4.7 16.0 1994.................................... 21.7 12.4 9.3
- -------- * Primarily, retirements were for the sale of property, plant & equipment of subsidiaries of Inland Engineered Materials Corporation. See "--Corporate Restructuring--Sale of Inland Engineered Materials Corporation." NOTE: The above does not include capital expenditures related to discontinued operations. The Company anticipates that capital expenditures, excluding acquisitions, will be in the range of $40 million to $50 million for 1999, which will be funded from cash generated by operations plus possible borrowing under the Company's credit facility. Employees As of December 31, 1998, the Company employed approximately 5,100 persons, of which approximately 2,475 were salaried employees and approximately 2,625 were hourly employees. Approximately 40% of the hourly employees were members of various unions, including the United Steelworkers and the Teamsters, and an additional approximately 30% of the hourly employees have voted for union certification in proceedings currently pending before the National Labor Relations Board. The Company's relationship with the various unions generally has been good, but occasional work stoppages have occurred. Over the last five years, work stoppages have occurred at one facility involving 45 employees and lasting three days. During 1999, contracts covering approximately 640 employees at 17 facilities will expire. During 2000, contracts covering approximately 120 employees at four facilities will expire. The current agreement with the United Steelworkers will expire on July 31, 1999, and agreements with the Teamsters expire on various dates during the period April 10, 1999 through November 15, 2003. While management does not expect any unresolvable issues to arise in connection with the renewal of any of these contracts, no assurances can be given that any of these contracts will be extended prior to their expiration. Effective January 1, 1998, the Company froze the benefits accrued under the Ryerson Tull Pension Plan, a defined benefit pension plan, for certain salaried employees and instituted a defined contribution plan. Salaried employees vested in their benefits accrued under the defined benefit plan at December 31, 1997 are entitled to 5 those benefits upon retirement. Certain transition rules have been established for those salaried employees meeting specified age and service requirements. Effective as of July 16, 1998 (the "Transfer Date"), the Inland Pension Plan (the "ISC Pension Plan"), in which the employees of both ISC and the Company participated, was transferred to ISC. The Company's remaining employees that formerly had participated in the ISC Pension Plan became participants in the Ryerson Tull Pension Plan. These employees were credited with the number of years of service credited to them under the Inland Pension Plan at the Transfer Date. As of the Transfer Date, benefits for those salaried employees whose benefits were transferred to the Ryerson Tull Pension Plan were frozen in the same manner as described above. Environmental, Health and Safety Matters The Company's operations are subject to many federal, state and local regulations relating to the protection of the environment and to workplace health and safety. In particular, the Company's operations are subject to extensive federal, state and local laws and regulations governing waste disposal, air and water emissions, the handling of hazardous substances, environmental protection, remediation, workplace exposure and other matters. The Company's management believes that the Company is presently in substantial compliance with all such laws and does not currently anticipate that the Company will be required to expend any substantial amounts in the foreseeable future in order to meet current environmental, workplace health or safety requirements. However, additional costs and liabilities may be incurred to comply with current and future requirements, which costs and liabilities could have a material adverse effect on the Company's results of operations or financial condition. Pursuant to the ISC/Ispat Merger Agreement (as defined below), the Company agreed to indemnify Ispat for expenditures relating to certain environmental liabilities subject in certain cases to losses exceeding certain minimum amounts, up to a maximum of $90 million in the aggregate. For more information on this indemnification, see "--Corporate Restructuring--ISC/Ispat Transaction." There are no known pending remedial actions or claims relating to environmental matters that are expected to have a material effect on the Company's financial position or results of operations. Some of the properties owned or leased by the Company, however, are located in industrial areas or have a history of heavy industrial use. These properties may potentially incur environmental liabilities in the future that could have a material adverse effect on the Company's financial condition or results of operations. Capital and operating expenses for pollution control projects were less than $500,000 per year for the past five years and are expected to remain at similar levels. Patents and Trademarks The Company owns several U.S. and foreign trademarks, service marks and copyrights. Certain of the trademarks are registered with the U.S. Patent and Trademark Office and, in certain circumstances, with the trademark offices of various foreign countries. The Company considers certain other information owned by it to be trade secrets. The Company protects its trade secrets by, among other things, entering into confidentiality agreements with its employees regarding such matters and implementing measures to restrict access to sensitive data and computer software source code on a need-to-know basis. The Company believes that these safeguards adequately protect its proprietary rights and vigorously defends these rights. While the Company considers all of its intellectual property rights as a whole to be important, the Company does not consider any single right to be essential to its operations as a whole. Corporate Restructuring During 1998 and the first quarter of 1999, the Company undertook a series of corporate restructuring actions as described in the following paragraphs. Prior to the transactions described below, the Company had two principal subsidiaries: (1) ISC and (2) a majority-owned subsidiary which also operated under the name "Ryerson Tull, Inc." ("Pre-merger Ryerson Tull") before the RT Merger (as defined below). 6 ISC/Ispat Transaction On July 16, 1998, ISC merged with a subsidiary of Ispat in the "ISC/Ispat Transaction" pursuant to an agreement and plan of merger dated as of May 27, 1998, as amended (the "ISC/Ispat Merger Agreement"), and ISC became a wholly owned subsidiary of Ispat. Pursuant to the merger, the Company received approximately $1.1 billion in cash in exchange for the outstanding common stock and preferred stock of ISC and in connection with the repayment of intercompany debt of ISC held by the Company. Pursuant to the ISC/Ispat Merger Agreement, the Company agreed to indemnify Ispat for losses, if they should arise, exceeding certain minimum amounts in connection with breaches of representations and warranties contained in the ISC/Ispat Merger Agreement and for expenditures and losses, if they should arise, relating to certain environmental liabilities exceeding, in most instances, minimum amounts. The maximum liability for which the Company can be responsible with respect to such obligations is $90 million in the aggregate. There are also certain other covenant commitments made by the Company contained in the ISC/Ispat Merger Agreement which are not subject to a maximum amount. In general, Ispat must make indemnification claims with respect to breaches of representations and warranties prior to March 31, 2000; however, claims relating to breaches of representations and warranties related to tax matters and certain organizational matters must be made within 90 days after the expiration of the applicable statute of limitations, and claims with respect to breaches of representations and warranties related to environmental matters must be made prior to July 16, 2003. Ispat has advised the Company of certain environmental expenses which Ispat has incurred, but they are below the minimum indemnification thresholds of the ISC/Ispat Merger Agreement and the Company has not made any indemnification payments to Ispat. The Company has purchased environmental insurance with coverage up to $90 million payable directly to Ispat and ISC. The insurance is expected to cover substantially the same environmental matters for which the Company has agreed to indemnify Ispat. As part of the ISC/Ispat Transaction, the ISC Pension Plan, in which employees of both ISC and the Company participated, was transferred to ISC. The Company's remaining employees that formerly had participated in the ISC Pension Plan became participants in Pre-merger Ryerson Tull's pension plan. The ISC Pension Plan has unfunded benefit liabilities on a termination basis, as determined by the Pension Benefit Guaranty Corporation, an agency of the U.S. government. As a condition to completing the ISC/Ispat Transaction, Ispat, ISC, Pre-merger Ryerson Tull and the Company entered into an agreement with the Pension Benefit Guaranty Corporation to provide certain financial commitments to reduce the underfunding of the ISC Pension Plan and to secure ISC Pension Plan unfunded benefit liabilities on a termination basis. These requirements include a Company guaranty of $50 million, for five years, of the obligations of Ispat and ISC to the Pension Benefit Guaranty Corporation in the event of a distress or involuntary termination of the ISC Pension Plan. The guaranty is included in the $90 million limit on the Company's indemnification obligations. The ISC/Ispat Merger Agreement prohibits the Company and its material subsidiaries from entering into or permitting the sale of all or substantially all the assets of the Company or any of its material subsidiaries, any acquisition of a majority of the capital stock of the Company or any of its material subsidiaries by any person, or any merger, consolidation, reorganization, spin-off, split-up, recapitalization or similar transaction involving the Company or any of its material subsidiaries, or paying or declaring any extraordinary dividend (other than the distribution by the Company of the proceeds of the ISC/Ispat Transaction) without the written consent of Ispat, except where, subject to certain conditions, the net worth of the Company or any successor to the Company after any such transaction would be equal to or greater than the net worth of the Company prior to such transaction. The Company has committed to use its reasonable efforts to ensure that any counterparty to any transaction referred to in the preceding sentence expressly assumes the Company's indemnification obligations under the ISC/Ispat Merger Agreement. The Company has agreed that, prior to July 16, 2003, it will not engage in the manufacture, processing, sale, marketing or distribution of steel products or any other business conducted by ISC as of the date of the ISC/Ispat Merger Agreement anywhere in the world that competes in any material respect with the business conducted by ISC as of the date of the ISC/Ispat Merger Agreement. The ISC/Ispat Merger Agreement does not, 7 however, restrict the Company's ability to own or conduct its other existing businesses, including the steel service, distribution and material processing businesses conducted by the Company, or from expanding such businesses, so long as no such expansion includes, directly or through the ownership of an equity interest in any person, any business engaged in steel manufacturing or steel manufacturing assets, except that the Company may acquire an interest in any business (the "Acquired Business") some or all of the operations of which would otherwise violate the foregoing provisions (the "Competing Operations"), so long as the annual revenues attributed to the Competing Operations do not exceed 20% of the annual revenues of the Acquired Business or, if they do, the acquiring entity divests itself of the Competing Operations as soon as practicable, but no later than 12 months after such acquisition. Sale of Inland Engineered Materials Corporation On November 17, 1998, the Company sold Inland Engineered Materials Corporation, a wholly owned subsidiary of the Company whose subsidiaries produced metal powders, powdered metal components and electrical device components, for approximately $29 million in cash. Purchase of Washington Specialty Metals On February 1, 1999, Pre-merger Ryerson Tull announced that it had completed the purchase of Washington Specialty Metals, an eight-location metals service center specializing in value-added stainless steel, for approximately $70 million in cash. Washington Specialty Metals, with 1998 sales of approximately $140 million, was an indirect wholly owned subsidiary of Bethlehem Steel Corporation. Merger of the Company and Pre-merger Ryerson Tull; Name Change On February 25, 1999, Pre-merger Ryerson Tull merged with RT Merger Sub, Inc., and became a wholly owned subsidiary of the Company, pursuant to an agreement and plan of merger dated as of October 27, 1998, and each share of Pre-merger Ryerson Tull Class A common stock was converted into 0.61 shares of Company Common Stock. Pre-merger Ryerson Tull then merged with Inland and Inland changed its name to "Ryerson Tull, Inc." These mergers are together referred to as the "RT Merger." ITEM 2. PROPERTIES. Joseph T. Ryerson & Son, Inc. Ryerson owns its regional business unit headquarters offices in Chicago (IL) and leases regional headquarters offices in West Chester (PA) and Tukwila (WA). Ryerson East's service centers are at Birmingham (AL), Buffalo (NY), Cambridge (MA), Carnegie (PA), Charlotte (NC) (two facilities), Chattanooga (TN), Cleveland (OH), Easton (PA), Fairless Hills (PA), Long Island City (NY) and Philadelphia (PA). Ryerson Central's service centers are at Chicago (IL), Cincinnati (OH), Dallas (TX), Des Moines (IA), Detroit (MI), Holland (MI), Houston (TX), Indianapolis (IN), Kansas City (MO), Milwaukee (WI), Omaha (NE), Plymouth (MN), St. Louis (MO), Tulsa (OK) and Wausau (WI). Ryerson West's service centers are at Commerce City (CO), Emeryville (CA), Phoenix (AZ), Portland (OR), Renton (WA), Spokane (WA), Salt Lake City (UT) and Vernon (CA). Ryerson Coil Processing's facilities are located in Chicago (IL) (two facilities), Knoxville (TN), Marshalltown (IA), Plymouth (MN) and New Hope (MN). All of Ryerson's operating facilities are held in fee with the exception of the facilities at Birmingham (AL) (long-term lease), Cambridge (MA) (short-term lease), one at Charlotte (NC) (long-term lease), one at Chicago (IL) (short- term lease), one at Easton (PA) (long-term lease), one at Fairless Hills (PA) (long-term lease), one at Holland (MI) (long-term lease), one at Long Island City (NY) (short-term lease), one at New Hope (MN) (short-term lease), a satellite facility at Omaha (NE) (short-term lease), a portion of the property at Portland (OR) (short-term lease), a portion of the property at St. Louis (MO) (long-term lease), one at Salt Lake City (UT) 8 (short-term lease), and one at Wausau (WI) (short-term lease). In addition, Ryerson holds in fee a former operating facility at Wallingford (CT). Ryerson's properties are adequate to serve its present and anticipated needs. J. M. Tull Metals Company, Inc. Tull maintains service centers at Baton Rouge (LA), Birmingham (AL), Charlotte (NC), Columbia (SC), Greensboro (NC), Greenville (SC), Jacksonville (FL), Miami (FL), New Orleans (LA), Pounding Mill (VA), Richmond (VA), Tampa (FL) and Norcross (GA), where its headquarters is located. All of these facilities are owned by Tull in fee, except for the Columbia facility, which is held under short-term lease. AFCO Metals, Inc., a wholly owned subsidiary of Tull, operates service centers at Fort Smith (AR), Jackson (MS), Little Rock (AR), Oklahoma City (OK), Shreveport (LA), West Memphis (AR) and Wichita (KS). AFCO's headquarters are located at Norcross (GA), where it leases space owned in fee by Tull. Each of AFCO's facilities is held in fee except the Wichita facility, which is held under a short-term lease. Tull's properties are adequate to serve its present and anticipated needs. Washington Specialty Metals Washington Specialty Metals leases its headquarters offices in Buffalo Grove (IL) and has leased facilities at Carol Stream (IL), Carrollton (TX), Lawrenceville (GA), Vaudreuil (Que.), Youngsville (NC), Tampa (FL), Jacksonville (FL) and Wheeling (IL). A facility at Brampton (Ont.) is held in fee. Washington Speciality Metals' properties are adequate to serve its present and anticipated needs. Ryerson de Mexico Ryerson de Mexico, S.A. de C.V., a joint venture in which the Company owns a 50% interest, owns ten general line metals service centers and processing centers in Mexico. Ryerson de Mexico's properties are adequate to serve its present and anticipated needs. Shanghai Ryerson Limited Shanghai Ryerson Limited, a joint venture company in which the Company owns a 49% interest, has a metals service center in Pudong, Shanghai, China. Shanghai Ryerson's properties are adequate to serve its present and anticipated needs. Tata Ryerson Limited Tata Ryerson Limited, a joint venture company in which the Company owns a 50% interest, has two metals service centers in India, at Jamshedpur and Pune. Tata Ryerson's properties are adequate to serve its present and anticipated needs. ITEM 3. LEGAL PROCEEDINGS. From time to time, the Company is named as a defendant in legal actions arising in the ordinary course of its business. The Company is a party to the following pending legal proceedings in addition to routine litigation incidental to its business. Management does not believe that the resolution of these claims will have a material adverse effect on the Company's financial condition or results of operations. On July 20, 1998, the Company commenced a tender offer to repurchase a portion of its outstanding shares. On August 5, 1998, Greenway Partners, L.P. and related parties ("Greenway") filed suit in the Delaware Chancery Court seeking to enjoin the Company from consummating the tender offer. Greenway alleged that given the number of shares of Common Stock that it owned, the size of the tender offer and the terms of the Company's rights agreement, Greenway was coerced into tendering its shares of Common Stock in the tender offer or risk being declared an "adverse person" by the Company's Board of Directors, triggering the separation of the rights under the Company's rights agreement. The court denied Greenway's request for a temporary 9 restraining order, and Greenway tendered all of its Common Stock into the offer. Greenway has reserved its rights to seek appropriate remedies, including rescission of the purchase of its approximately 2.9 million shares of Common Stock or damages. It is unclear what measure of damages the court would apply in the case. If Greenway is successful in its suit, the Company does not anticipate that other stockholders who participated in the tender offer will be entitled to rescission or damages. On September 23, 1998, the Company issued a press release stating that it had offered to acquire all of the outstanding publicly held shares of Pre- merger Ryerson Tull Class A common stock in a merger transaction, pursuant to which the Pre-merger Ryerson Tull stockholders (other than the Company and its subsidiaries) would receive 0.54 of a share of Common Stock for each share of Pre-merger Ryerson Tull Class A common stock (the "Proposal"). After the September 23, 1998 public announcement of the Proposal, three lawsuits were filed by certain Pre-merger Ryerson Tull stockholders in the Delaware Court of Chancery against the Company, Pre-merger Ryerson Tull and certain directors of the Company and Pre-merger Ryerson Tull. These lawsuits are purported class actions on behalf of all Pre-merger Ryerson Tull stockholders and allege that the Proposal was unfair and inadequate because, among other things, the intrinsic value of the Pre-merger Ryerson Tull Class A common stock was allegedly materially in excess of the Proposal's exchange ratio. The lawsuits also allege that the Company breached its duty of loyalty to Pre-merger Ryerson Tull stockholders by using its control of Pre-merger Ryerson Tull to seek to force Pre-merger Ryerson Tull stockholders to exchange their equity interest in Pre-merger Ryerson Tull for unfair consideration. The lawsuits sought to enjoin consummation of the Proposal or, in the alternative, request rescission and monetary damages. ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS. Not applicable. 10 EXECUTIVE OFFICERS OF REGISTRANT Officers are elected by the Board of Directors of the Company to serve for a period ending with the next succeeding annual meeting of the Board of Directors held immediately after the Annual Meeting of Stockholders. All executive officers of the Company, with the exception of Neil S. Novich, George A. Ranney, Jr. and Darell R. Zerbe, have been employed by the Company or an affiliate of the Company throughout the past five years. Set forth below are the executive officers of the Company as of March 1, 1999, and the age of each as of such date. Their principal occupations at present and during the past five years, including positions and offices held with the Company or a significant subsidiary or affiliate of the Company, are shown below.
Name, Age and Present Positions and Offices Held During the Past Five Position with Registrant Years ------------------------ ----------------------------------------------- Neil S. Novich, 44 Mr. Novich has been Chairman, President and Chief Chairman, President and Executive Officer and a director since February Chief Executive Officer 1999. He served as President, Chief Executive Officer, Chief Operating Officer and a director of Pre-merger Ryerson Tull from June 1994 to February 1999. He has been President of Ryerson and Chairman of Tull since June 1994. He served as Chairman of Ryerson from June 1994 to April 1995 and since June 1996. He was a Senior Vice President of the Company from January 1995 to May 1996 and served as a Vice President of the Company from June 1994 to January 1995. Prior to joining the Company in 1994, he led the Distribution and Logistics Practice at Bain & Company, an international management consulting firm. Jay M. Gratz, 46 Mr. Gratz has been Executive Vice President and Executive Vice President Chief Financial Officer of the Company since and Chief Financial February 1999. He was Vice President of Pre-merger Officer Ryerson Tull from May 1997 to February 1999 and Chief Financial Officer from April 1996 to February 1999. He was Vice President of the Company from May 1997 to December 1998 and Chief Financial Officer of the Company from May 1996 to December 1998. He was Vice President--Finance of the Company from May 1996 to April 1997, and of Pre-merger Ryerson Tull from September 1994 to April 1997. He was also Vice President and Principal Financial Officer of ISC from March 1993 to January 1995. Gary J. Niederpruem, 47 Mr. Niederpruem has been Executive Vice President Executive Vice President of the Company since February 1999. He was President of the Ryerson Central unit of Ryerson from April 1998 until February 1999. He was President of the Ryerson East unit of Ryerson from January 1993 to March 1998. Thomas S. Cygan, 54 Mr. Cygan has been President of the Ryerson West, President--Ryerson West a unit of Ryerson, since November 1994. He served as General Manager of Ryerson Central's Kansas City plant from May 1981 to November 1994. James M. Delaney, 41 Mr. Delaney has been President of the Ryerson President--Ryerson Central Central, a unit of Ryerson, since February 1999. He was Vice President and General Manager of the Ryerson Central Unit of Ryerson from April 1997 until January 1999. He was Vice President and General Manager of the Ryerson East unit of Ryerson from January 1993 until April 1997.
11
Timothy L. LaPerre, 52 Mr. LaPerre has been President of Ryerson President--Ryerson Coil Processing Coil Processing, a unit of Ryerson, since January 1993. He served as Vice President and General Manager of Ryerson Coil Processing from March 1990 to January 1993. Stephen E. Makarewicz, 52 Mr. Makarewicz has been President, Chief President--Tull Executive Officer and Chief Operating Officer of Tull since October 1994. Mr. Makarewicz was Vice President and General Manager of Ryerson Central's Chicago plant from April 1992 to October 1994. James J. Reinert, 49 Mr. Reinert has been President of the President--Ryerson East Ryerson East, a unit of Ryerson, since April 1998. He was Vice President and General Manager of Ryerson Central's Chicago plant from October 1994 until March 1998 and Vice President of Operations, Ryerson Central from 1992 until October 1994. William Korda, 51 Mr. Korda has been Vice President--Human Vice President--Human Resources of the Company since February Resources 1999. He served as Vice President--Human Resources of Pre-merger Ryerson Tull from October 1993 to February 1999. He served as Pre-merger Ryerson Tull's Manager of Human Resources from August 1992 to October 1993. Darell R. Zerbe, 56 Mr. Zerbe has been Vice President-- Vice President--Information Information Technology and Chief Technology Information Officer of the Company since February 1999. He served as Vice President--Information Technology and Chief Information Officer of Pre-merger Ryerson Tull from February 1996 to February 1999. He served as Senior Vice President, Management Information Systems, for Venture Stores, Inc. from 1988 to February 1996. Lily L. May, 49 Ms. May has been Controller of the Company Controller since February 1999. She was Controller of Pre-merger Ryerson Tull from May 1996 to February 1999. She was Vice President-- Finance and Purchasing and Controller of ISC from January 1995 through May 1996. Prior to that, she was Director of Purchases and Energy of the Inland Steel Flat Products Company division of ISC from November 1993 to January 1995. Terence R. Rogers, 39 Mr. Rogers has been Treasurer of the Treasurer Company since February 1999. He served as Treasurer of Pre-merger Ryerson Tull from September 1998 to February 1999 and as Director--Pension & Risk Management of the Company from December 1994 to September 1998. Prior to joining the Company, he was Director of Finance at Outboard Marine from 1991 to December 1994. George A. Ranney, Jr. 58 Mr. Ranney has been General Counsel of the General Counsel and Secretary Company since July 1995 and Secretary of the Company since February 1999. He was also Corporate Secretary of Pre-merger Ryerson Tull from January 1999 to February 1999. He served as President and Chief Executive Officer of the Company from November 1998 through February 1999; and Vice President from July 1995 through November 1998. He is also a partner of the law firm of Mayer, Brown & Platt, counsel to the Company. He has been a partner with such firm since 1986.
12 Part II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS. The Common Stock of the Company is listed and traded on the New York Stock Exchange. As of March 15, 1999, the number of holders of record of Common Stock of the Company was 13,589. The remaining information called for by this Item 5 is set forth under the caption "Summary by Quarter" in the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1998, and is hereby incorporated by reference herein. ITEM 6. SELECTED FINANCIAL DATA. The information called for by this Item 6 with respect to each of the last five years of the Company is set forth under the caption "Five-Year Summary of Selected Financial Data and Operating Results-Continuing Operations" in the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1998, and is hereby incorporated by reference herein. ITEM 7. MANAGEMENT'S DISCUSSION OF OPERATIONS AND FINANCIAL CONDITION. The information called for by this Item 7 is set forth in "Management's Discussion of Operations and Financial Condition" section of the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1998, and is hereby incorporated by reference herein. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value. The Company has only limited involvement with derivative financial instruments and does not use them for speculative or trading purposes. Cash equivalents are highly liquid, short-term investments with maturities of three months or less that are an integral part of the Company's cash management portfolio. The carrying amount of cash equivalents approximates fair value because of the short maturity of those instruments. The estimated fair value of the Company's long-term debt and the portions thereof (excluding the Subordinated Voting Note) using quoted market prices of Company debt securities recently traded and market-based prices of similar securities for those securities not recently traded was $282 million at December 31, 1998 and $712 million at December 31, 1997, as compared with the carrying value of $257 million and $668 million at year-end 1998 and 1997, respectively. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The consolidated financial statements of the Company called for by this Item 8, together with the report thereon of the independent accountants dated February 17, 1999, are set forth under the captions "Report of Independent Accountants" and "Statement of Accounting and Financial Policies" as well as in all consolidated financial statements and schedules of the Company and the "Notes to Consolidated Financial Statements" in the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1998, and is incorporated by reference herein. The financial statement schedule listed under Item 14(a)2 of this Annual Report on Form 10-K, together with the report thereon of the independent accountants dated February 17, 1999, should be read in conjunction with the consolidated financial statements. Financial statement schedules not included in this Annual Report on Form 10-K have been omitted because they are not applicable or because the information called for is shown in the consolidated financial statements or notes thereto. Consolidated quarterly sales, earnings and per share Common Stock information for 1997 and 1998 are set forth under the caption "Summary by Quarter" in the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1998, and are hereby incorporated by reference herein. 13 ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information called for by this Item 10 with respect to directors of the Company is set forth under the caption "Election of Directors" in the Company's definitive Proxy Statement which was furnished to stockholders in connection with the Annual Meeting of Stockholders to be held on April 28, 1999, and is hereby incorporated by reference herein. The information called for with respect to executive officers of the Company is included in Part I of this Annual Report on Form 10-K under the caption "Executive Officers of Registrant." ITEM 11. EXECUTIVE COMPENSATION. The information called for by this Item 11 is set forth under the caption "Executive Compensation" in the Company's definitive Proxy Statement which was furnished to stockholders in connection with the Annual Meeting of Stockholders to be held on April 28, 1999, and is hereby incorporated by reference herein. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. (a) The information called for by this Item 12 with respect to security ownership of more than five percent of the Company's common stock is set forth under the caption "Additional Information Relating to Voting Securities" in the Company's definitive Proxy Statement which was furnished to stockholders in connection with the Annual Meeting of Stockholders scheduled to be held on April 28, 1999, and is hereby incorporated by reference herein. (b) The information called for by this Item 12 with respect to the security ownership of directors and of management is set forth under the caption "Security Ownership of Directors and Management" in the Company's definitive Proxy Statement, which was furnished to stockholders in connection with the Annual Meeting of Stockholders to be held on April 28, 1999, and is hereby incorporated by reference herein. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information called for by this Item 13 is set forth under the caption "Certain Relationships and Related Transactions" in the Company's definitive Proxy Statement which was furnished to stockholders in connection with the Annual Meeting of Stockholders to be held on April 28, 1999, and is hereby incorporated by reference herein. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) Documents Filed as a Part of This Report. 1. Consolidated Financial Statements of the Company. The consolidated financial statements listed below are set forth in the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1998, and are incorporated by reference in Item 8 of this Annual Report on Form 10-K. 14 Report of Independent Accountants dated February 17, 1999. Statement of Accounting and Financial Policies. Consolidated Statements of Income and Reinvested Earnings for the three years ended December 31, 1998. Consolidated Statement of Cash Flows for the three years ended December 31, 1998. Consolidated Balance Sheet at December 31, 1998 and 1997. Consolidated Statement of Comprehensive Income for the three years ended December 31, 1998. Schedule to Consolidated Financial Statements: Long-Term Debt. Notes to Consolidated Financial Statements. Report of Independent Accountants on Financial Statement Schedule dated February 17, 1999. (Included on page 16 of this Annual Report) Consent of Independent Accountants. (Included on page 16 of this Annual Report) Schedule II--Reserves for the three years ended December 31, 1998, 1997 and 1996. (Included on page 17 of this Annual Report) 2. Exhibits. The exhibits required to be filed by Item 601 of Regulation S- K are listed in the Exhibit Index which is attached hereto, and incorporated by reference herein. (b) Reports on Form 8-K. On October 1, 1998, the Company filed a Current Report on Form 8-K, announcing that its Board of Directors had approved an offer to acquire all of the publicly held shares of Pre-merger Ryerson Tull pursuant to which the stockholders of Pre-merger Ryerson Tull (other than the Company and its subsidiaries) would receive 0.54 shares of Common Stock for each whole share of Pre-merger Ryerson Tull Class A common stock held. 15 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors of Ryerson Tull, Inc. Our audits of the consolidated financial statements referred to in our report dated February 17, 1999 appearing on page 20 of the 1998 Annual Report to Stockholders of Ryerson Tull, Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a)2 of this Annual Report on Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. PricewaterhouseCoopers LLP Chicago, Illinois February 17, 1999 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statement on Form S-8 (No. 33-59783), Registration Statement on Form S-8 (No. 33-48770), Registration Statement on Form S-8 (No. 33-22902), Post-Effective Amendment No. 1 to Registration Statement on Form S-8 (No. 33-1329), Registration Statement on Form S-8 (No. 33-32504), Registration Statement on Form S-3 (No. 33-59161) and Registration Statement on Form S-3 (No. 33-62897) of Inland Steel Industries, Inc. (or, for registrations prior to 1986, Inland Steel Company) and Registration Statement on Form S-8 (No. 333-06977), Registration Statement on Form S-8 (No. 333- 06989) and Registration Statement on Form S-3 (No. 333-59009) of Ryerson Tull, Inc. of our report dated February 17, 1999 appearing on page 20 of the 1998 Annual Report to Stockholders of Ryerson Tull, Inc., which is incorporated by reference in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedule which appears above. PricewaterhouseCoopers LLP Chicago, Illinois March 30, 1999 16 RYERSON TULL, INC. AND SUBSIDIARY COMPANIES SCHEDULE II--RESERVES For the Years Ended December 31, 1998, 1997 and 1996 (Dollars in Millions)
Provisions for Allowances, Claims and Doubtful Accounts ------------------------------------------ Balance at Additions Deductions Balance at Beginning Charged from End of Years Ended December 31, of Year to Income Reserves Year ------------------------ ---------- --------- ---------- ---------- 1998................................ $23.5 $3.7 $ (3.1)(A) $ 6.9 (1.9)(B) (15.3)(C) 1997................................ $22.5 $7.1 $ (1.3)(A) $23.5 (4.8)(B) 1996................................ $29.9 $1.7 $ (2.5)(A) $22.5 (6.6)(B)
NOTES: (A) Bad debts written off during year. (B)Allowances granted during year. (C)To eliminate reserve from discontinued operations. 17 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Ryerson Tull, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. RYERSON TULL, INC. /s/ Neil S. Novich By:__________________________________ Neil S. Novich Chairman, President and Chief Executive Officer Date: March 30, 1999 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Ryerson Tull, Inc. and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Neil S. Novich Chairman, President and Chief March 30, 1999 _______________________________ Executive Officer and Director Neil S. Novich (Principal Executive Officer) /s/ Jay M. Gratz Executive Vice President and March 30, 1999 _______________________________ Chief Financial Officer Jay M. Gratz (Principal Financial Officer) /s/ Lily L. May Controller March 30, 1999 _______________________________ (Principal Accounting Officer) Lily L. May Jameson A. Baxter Director Richard G. Cline Director Gary L. Crittenden Director Gregory P. Josefowicz Director /s/ Jay M. Gratz James A. Henderson Director Jerry K. Pearlman Director Donald S. Perkins Director Jean-Pierre Rosso Director Ronald L. Thompson Director By: ------------------------ Jay M. Gratz Attorney-in-fact March 30, 1999
18 INDEX TO EXHIBITS
Exhibit Number Description ------- ----------- 2.1 Agreement and Plan of Merger, dated as of May 27, 1998 between Ispat International, N.V., Inland Steel Industries, Inc., Inland Merger Sub, Inc. and Inland Steel Company. (Filed as Exhibit 2.1 to Inland Steel Company's Current Report on Form 8-K filed on June 9, 1998 (File No. 1-2438), and incorporated by reference herein.) 2.2 Amendment to Agreement and Plan of Merger dated as of July 16, 1998 between Ispat International, N.V., Inland Steel Industries, Inc., Inland Merger Sub, Inc. and Inland Steel Company. (Filed as Exhibit 2.2 to the Company's Current Report on Form 8-K filed on July 20, 1998 (File No. 1-9117), and incorporated by reference herein.) 3.1 Copy of Certificate of Incorporation, as amended, of the Company. (Filed as Exhibit 3.(I) to the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 1-9117), and incorporated by reference herein.) 3.2 By-Laws, as amended................................................ 4.1 Certificate of Designations, Preferences and Rights of Series A $2.40 Cumulative Convertible Preferred Stock of the Company. (Filed as part of Exhibit B to the definitive Proxy Statement of Inland Steel Company dated March 21, 1986 that was furnished to stockholders in connection with the annual meeting held April 23, 1986 (File No. 1-2438), and incorporated by reference herein.) 4.2 Certificate of Designation, Preferences and Rights of Series D Junior Participating Preferred Stock of the Company. (Filed as Exhibit 4-D to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1987 (File No. 1-9117), and incorporated by reference herein.) 4.3 Rights Agreement, dated as of November 25, 1997, as amended and restated as of December 10, 1998, between the Company and Harris Trust and Savings Bank, as Rights Agent. (Filed as Exhibit 4-1 to the Company's amended Registration Statement on Form 8-A/A filed on January 15, 1999 (File No. 1-9117), and incorporated by reference herein.) 4.4 Indenture, dated as of July 1, 1996, between Pre-merger Ryerson Tull and The Bank of New York. (Filed as Exhibit 4.1 to Pre-merger Ryerson Tull's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 (File No. 1-11767), and incorporated by reference herein.) 4.5 First Supplemental Indenture, dated as of February 25, 1999, between the Company and The Bank of New York....................... 4.6 Specimen of 8 1/2% Notes due July 15, 2001......................... 4.7 Specimen of 9 1/8% Notes due July 15, 2006......................... [The registrant hereby agrees to provide a copy of any other agreement relating to long-term debt at the request of the Commission.] 10.1* Inland Steel Industries, Inc. Annual Incentive Plan, as amended. (Filed as Exhibit 10.A to the Company's Quarterly Report on Form 10- Q for the quarter ended September 30, 1995 (File No. 1-9117), and incorporated by reference herein.) 10.2* Ryerson Tull Annual Incentive Plan. (Filed as Exhibit 10.2 to Pre- merger Ryerson Tull's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 (File No. 1-11767), and incorporated by reference herein.) 10.3* Inland Steel Industries, Inc. Special Achievement Award Plan. (Filed as Exhibit 10-I to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1987 (File No. 1-9117), and incorporated by reference herein.) 10.4* Pre-merger Ryerson Tull 1996 Incentive Stock Plan, as amended. (Filed as Exhibit 10.D to the Company's Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 1-9117), and incorporated by reference herein.) 10.5* Inland 1995 Incentive Stock Plan, as amended. (Filed as Exhibit 10.E to the Company's Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 1-9117), and incorporated by reference herein.)
Exhibit Number Description ------- ----------- 10.6* Inland 1992 Incentive Stock Plan, as amended. (Filed as Exhibit 10.C to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 (File No. 1-9117), and incorporated by reference herein.) 10.7* Inland 1988 Incentive Stock Plan, as amended. (Filed as Exhibit 10.B to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 (File No. 1-9117), and incorporated by reference herein.) 10.8* Inland Steel Industries Non-Qualified Thrift Plan, as amended. (Filed as Exhibit 10.A to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 (File No. 1-9117), and incorporated by reference herein.) 10.9* Inland 1992 Stock Plan for Non-Employee Directors, as amended. (Filed as Exhibit 10.A to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 (File No. 1-9117), and incorporated by reference herein.) 10.10* Inland Steel Industries Supplemental Retirement Benefit Plan for Covered Employees, as amended. (Filed as Exhibit 10.B to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 (File No. 1-9117), and incorporated by reference herein.) 10.11* Inland Steel Industries Special Retirement Benefit Plan for Covered Employees, as amended. (Filed as Exhibit 10.C to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 (File No. 1-9117), and incorporated by reference herein.) 10.12* Pre-merger Ryerson Tull Supplemental Retirement Plan for Covered Employees, as amended. (Filed as Exhibit 10.1 to Pre-merger Ryerson Tull's Form 10-Q for the quarter ended September 30, 1997 (File No. 1-11767), and incorporated by reference herein.) 10.13* Pre-merger Ryerson Tull Nonqualified Savings Plan, effective January 1, 1998. (Filed as Exhibit 10.S.(2) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 1- 9117), and incorporated by reference herein.) 10.14* Inland Steel Industries Deferred Compensation Plan for Certain Employees, as amended. (Filed as Exhibit 10.J to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (File No. 1-9117), and incorporated by reference herein.) 10.15* Inland Steel Industries Deferred Compensation Plan for Directors, as amended. (Filed as Exhibit 10-L to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992 (File No. 1- 9117), and incorporated by reference herein.) 10.16* Inland Steel Industries Terminated Retirement Plan for Non-Employee Directors. (Filed as Exhibit 10.M to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 (File No. 1- 9117), and incorporated by reference herein.) 10.17* Inland Steel Industries, Inc. Deferred Phantom Stock Unit Plan for Non-Employee Directors. (Filed as Exhibit 10.N to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 (File No. 1-9117), and incorporated by reference herein.) 10.18* Outside Directors Accident Insurance Policy. (Filed as Exhibit 10-F to Inland Steel Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1983 (File No. 1-2438), and incorporated by reference herein.) 10.19* Ryerson Tull Directors' 1999 Stock Option Plan....................... 10.20* Ryerson Tull Directors' Compensation Plan, as amended................ 10.21* Form of Severance Agreement, dated January 28, 1998, between the Company and each of the four executive officers of the Company identified on the exhibit relating to terms and conditions of termination of employment following a change in control of the Company. (Filed as Exhibit 10.R to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 1- 9117), and incorporated by reference herein.) 10.22* Amendment dated October 27, 1998 to the Severance Agreement dated January 28, 1998 referred to in Exhibit 10.21 above between the Company and Robert J. Darnall........................................ 10.23* Amendment dated November 6, 1998 to the Severance Agreement dated January 28, 1998 referred to in Exhibit 10.21 above between the Company and Jay M. Gratz.............................................
Exhibit Number Description ------- ----------- 10.24* Amendment dated February 19, 1999 to the Severance Agreement dated January 28, 1998 referred to in Exhibit 10.21 above between the Company and George A. Ranney, Jr..................................... 10.25* Form of Change in Control Agreement between the Company and the parties listed on the schedule thereto............................... 10.26* Form of Change in Control Agreement between the Company and the party listed on the schedule thereto....................................... 10.27* Employment Agreement dated as of August 18, 1995 between the Company and George A. Ranney, Jr. (Filed as Exhibit 10.X to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 1-9117), and incorporated by reference herein.) 13 Information incorporated by reference from Annual Report to Stockholders for the fiscal year ended December 31, 1998............. 21 List of Certain Subsidiaries of the Registrant....................... 23 Consent of Independent Accountants appearing on page 16 of this Annual Report on Form 10-K. 24 Powers of Attorney................................................... 27 Financial Data Schedule..............................................
- -------- * Management contract or compensatory plan or arrangement required to be filed as an exhibit to the Company's Annual Report on Form 10-K. EX-3.2 2 BY-LAWS OF RYERSON-TULL INC., AS AMENDED EXHIBIT 3.2 ----------- BY-LAWS OF RYERSON TULL, INC. (AS AMENDED TO AND INCLUDING OCTOBER 20, 1998) ARTICLE I OFFICES Section 1. The registered office of the Corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II STOCKHOLDERS Section 1. Time and Place of Meetings. All meetings of the stockholders -------------------------- for the election of directors or for any other purpose shall be held at such time and place, within or without the State of Delaware, as shall be designated by the Board of Directors. Section 2. Annual Meetings; Nomination of Directors. An annual meeting ---------------------------------------- of stockholders shall be held for the purpose of electing Directors and for the transaction of only such other business as is properly brought before the meeting in accordance with these By-Laws. The date of the annual meeting shall be the fourth Wednesday of May each year or such other date as may be determined by the Board of Directors. To be properly brought before the meeting, business must be either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board, (b) otherwise properly brought before the meeting by or at the direction of the Board or (c) otherwise properly brought before the meeting by a stockholder. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than ninety days nor more than one hundred fifteen days prior to the meeting; provided, however, that in the event that less than one hundred five -------- ------- days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the fifteenth day following the day on which such notice of the date of the annual meeting was mailed or such -2- public disclosure was made, whichever first occurs. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of the stockholder proposing such business, (iii) the class and number of shares of the Corporation which are beneficially owned by the stockholder and (iv) any material interest of the stockholder in such business. Notwithstanding anything in the By-Laws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Article II, Section 2, provided, however, that nothing in this -------- ------- Article II, Section 2 shall be deemed to preclude discussion by any stockholder of any business properly brought before the annual meeting. The Chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Article II, Section 2, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Only persons who are nominated in accordance with the following procedures shall be eligible for election as Directors. Nominations of persons for election to the Board of the Corporation at the annual meeting may be made at a meeting of stockholders by or at the direction of the Board of Directors by any nominating committee or person appointed by the Board or by any stockholder of the Corporation entitled to vote for the election of Directors at the meeting who complies with the notice procedures set forth in this Article II, Section 2. Such nominations, other than those made by or at the direction of the Board, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than ninety days nor more than one hundred fifteen days prior to the meeting; provided, however, that in the event that less than one hundred five -------- ------- days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the fifteenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs. Such stockholder's notice to the Secretary shall set forth: (a) as to each person whom the stockholder proposes to nominate for election or re-election as a Director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of capital stock of the Corporation which are beneficially owned by the person and (iv) any other information relating to the person -3- that is required to be disclosed in solicitations for proxies for election of Directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended; and (b) as to the stockholder giving the notice, (i) the name and record address of such stockholder and (ii) the class and number of shares of capital stock of the Corporation which are beneficially owned by such stockholder. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as Director of the Corporation. No person shall be eligible for election as a Director of the Corporation unless nominated in accordance with the procedures set forth herein. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. Section 3. Special Meetings. Special meetings of the stockholders, for ---------------- any purpose or purposes, unless otherwise prescribed by law, may be called by the Chairman of the Board, Vice Chairman of the Board, the President or the Board of Directors and shall be called by the Secretary at the direction of the Chairman of the Board, Vice Chairman of the Board, the President or the Board of Directors. Section 4. Notice of Meetings. Written notice of each meeting of the ------------------ stockholders stating the place, date and time of the meeting shall, unless otherwise required by law, be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice of any special meeting of stockholders shall state the purpose or purposes for which the meeting is called. If mailed, such notice shall be deemed to be delivered to a stockholder when deposited in the United States mail in a sealed envelope addressed to the stockholder at his or her address as it appears on the records of the Corporation with postage thereon paid. Section 5. Quorum. A majority of the votes of the voting securities ------ entitled to vote, present in person or represented by proxy, shall constitute a quorum at a meeting of stockholders. If a quorum is not present or represented, the holders of the voting securities present in person or represented by proxy at the meeting and entitled to vote thereat shall have power, by the affirmative vote of the holders of a majority of the votes of such voting securities, to adjourn the meeting to another time and/or place, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting, at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned -4- meeting, a notice of the adjourned meeting shall be given to each holder of record entitled to vote at the meeting. Section 6. Voting. At all meetings of the stockholders, each holder of ------ record on the record date for the meeting shall be entitled to vote as set forth in the Corporation's Certificate of Incorporation (including any Certificates of Designations) or as otherwise required by law, in person or by proxy, the voting securities owned of record by such holder on the record date. In all matters other than the election of directors, the affirmative vote of a majority of the votes of the voting securities present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the holders, unless the question is one upon which, by express provision of law or of the Certificate of Incorporation, a different vote is required, in which case such express provision shall govern and control the decision of such question. Directors shall be elected by a plurality of the votes of the voting securities present in person or represented by proxy at the meeting and entitled to vote on the election of directors. ARTICLE III DIRECTORS Section 1. General Powers. The business and affairs of the Corporation -------------- shall be managed and controlled by or under the direction of a Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law or by the Certificate of Incorporation or by these By-Laws directed or required to be exercised or done by the stockholders. Section 2. Number, Qualification and Tenure. Prior to the first annual -------------------------------- meeting of stockholders, the Board of Directors shall consist of not fewer than three (3) Directors nor more than eighteen (18) Directors. Thereafter, the Board of Directors shall consist of not fewer than six (6) Directors nor more than twelve (12) Directors. Within the limits above specified, the number of Directors shall be determined from time to time by resolution of the Board of Directors. The Directors shall be elected at the annual meeting of the stockholders, except as provided in Section 3 of this Article, and each Director elected shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Directors need not be stockholders. Except as provided in Article III, Section 3 of these By-laws, the Directors shall designate from among their number a Chairman of the Board, who shall preside at all meetings of the stockholders and of the Board of Directors of the Corporation and who, if he or she is an employee of the Corporation, shall exercise all of the powers and duties conferred on the Chairman of the Board by the provisions of these By-Laws. If the person selected by the Directors as the Chairman of the -5- Board is not, or ceases to be, an employee of the Corporation, then, notwithstanding any other provision of these By-Laws to the contrary, he or she shall exercise only such powers and duties conferred on the Chairman of the Board by these By-Laws as the Directors shall determine by resolution duly adopted and any other powers and duties, including those of chief executive officer of the Corporation, shall be exercised by the President of the Corporation. Section 3. Vacancies. Vacancies and newly created directorships --------- resulting from any increase in the number of directors may be filled by a majority of the Directors then in office (even if less than a quorum), and each Director so chosen shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. If there are no Directors in office, then an election of Directors may be held in the manner provided by law. Immediately upon the Chairman of the Board's death, physical or mental incapacity, or other inability to act (other than due to absence for a brief and identifiable period), the Chairman of the committee responsible for recommending candidates to fill vacancies on the Board of Directors of the Corporation (the "Nominating Committee Chairman") shall assume the position of Chairman of the Board and responsibility for performing all functions, authorities and duties thereof, and shall serve in such capacity until his or her successor is duly elected and qualified pursuant to Article III, Section 2 and any other applicable provision of these By-laws or until his or her earlier resignation or removal. The Nominating Committee Chairman shall have sole discretion to determine, at any time and from time to time, whether the Chairman of the Board is physically or mentally incapacitated, otherwise unable to act, or absent for other than a brief and identifiable period and shall, immediately upon making such a determination or learning of the death of the Chairman of the Board, notify each member of the Board of Directors and each officer of the Corporation of the relevant facts and circumstances. Section 4. Place of Meetings. The Board of Directors may hold meetings, ----------------- whether regular or special, within or without the State of Delaware. Section 5. Regular Meetings. The Board of Directors shall hold a regular ---------------- meeting, to be known as the annual meeting, immediately following each annual meeting of the stockholders. Other regular meetings of the Board of Directors shall be held at such time and place as shall from time to time be determined by the Board. No notice of regular meetings need be given. Section 6. Special Meetings. Special meetings of the Board may be called ---------------- by the Chairman of the Board, the Vice Chairman of the Board, any five Directors or the President. Special meetings shall be called by the Secretary on the written request of any -6- Director. Notice of special meetings shall be given at least one day before any such meeting. Section 7. Quorum. At all meetings of the Board of Directors a majority ------ of the total number of Directors shall constitute a quorum for the transaction of business and the act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by law. If a quorum shall not be present at any meeting of the Board of Directors, the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 8. Organization. The Chairman of the Board, if elected, shall ------------ act as chairman at all meetings of the Board of Directors. If a Chairman of the Board is not elected or, if elected, is not present, the Vice Chairman of the Board, if any, or if the Vice Chairman of the Board is not present, the President or, in the absence of the President, a Director chosen by a majority of the Directors present, shall act as chairman at meetings of the Board of Directors. Section 9. Executive Committee. The Board of Directors, by resolution ------------------- adopted by a majority of the whole Board, may designate not fewer than four (4) and not more than nine (9) Directors to constitute an Executive Committee, to serve as such, unless the resolution designating the Executive Committee is sooner amended or rescinded by the Board of Directors, until the next annual meeting of the Board or until their respective successors are designated. The Board of Directors, by resolution adopted by a majority of the whole Board, may also designate additional Directors as alternate members of the Executive Committee (so long as the aggregate number of members of the Executive Committee does not exceed nine (9)) to serve as members of the Executive Committee in the place and stead of any regular member or members thereof who may be unable to attend a meeting or otherwise unavailable to act as a member of the Executive Committee. In the absence or disqualification of a member and all alternate members who may serve in the place and stead of such member, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another Director to act at the meeting in the place of any such absent or disqualified member. Except as expressly limited by the General Corporation Law of the State of Delaware or the Certificate of Incorporation, the Executive Committee shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation between the meetings of the Board of Directors, but subject always to the final control of the Board of Directors except where rights of third parties have intervened. The Executive Committee shall keep a record of its -7- acts and proceedings, which shall form a part of the records of the Corporation in the custody of the Secretary, and all actions of the Executive Committee shall be reported to the Board of Directors at the next meeting of the Board. Meetings of the Executive Committee may be called at any time by the Chairman of the Board, the Chairman of the Executive Committee or any two (2) members of the Executive Committee. A majority of the members of the Executive Committee shall constitute a quorum for the transaction of business and, except as expressly limited by this Section, the act of a majority of the members present at any meeting at which there is a quorum shall be the act of the Executive Committee. Except as expressly provided in this Section, the Executive Committee shall fix its own rules of procedure. Notice of Executive Committee meetings shall be given at least one day before such meetings. Section 10. Finance and Retirement Committee. The Board of Directors may, -------------------------------- annually, by resolution passed by a majority of the whole Board of Directors, designate not fewer than four (4) and not more than eleven (11) Directors to constitute a Finance and Retirement Committee. Such designation may be made either at the first meeting of the Board of Directors held after each annual meeting of the stockholders of the Corporation, or at any subsequent regular or special meeting of the Board of Directors. Vacancies in the Finance and Retirement Committee may be filled, or additional members of the Finance and Retirement Committee (so long as the aggregate number of the Finance and Retirement Committee does not exceed eleven (11)) may be designated, at any meeting of the Board of Directors. Each member of the Finance and Retirement Committee shall hold office until his or her successor shall have been duly elected, or until his or her death, or until he or she shall resign or shall have been removed. Any member of the Finance and Retirement Committee may be removed by the Board of Directors whenever in its judgment the best interests of the Corporation would be served thereby. The Finance and Retirement Committee, from time to time, shall consider the fiscal affairs of the Corporation and make recommendations with respect thereto to the Board of Directors and the Executive Committee. The Finance and Retirement Committee shall also administer and act with respect to pension or retirement plans and trusts of the Corporation and such other matters as shall from time to time be specified in resolutions passed by a majority of the whole Board of Directors, subject, however, to any conditions and provisions set forth in such resolutions. The Pension and Retirement Committee is designated as the Pension Plan Retirement Committee. The Finance and Retirement Committee shall meet at the call of the Chairman of the Board, the Vice Chairman of the Board, the Chairman of the Finance and Retirement Committee, or any two (2) members of the Finance and Retirement Committee. Three (3) members -8- of the Finance Committee shall constitute a quorum. The Finance and Retirement Committee shall keep a record of its acts and proceedings and all actions of the Finance Committee shall be reported to the Board of Directors at its next regular meeting, and the minute books of the Finance and Retirement Committee shall be open to the inspection of any Directors. Section 11. Other Committees. The Board of Directors, by resolution ---------------- adopted by a majority of the whole Board, may designate one or more other committees, each such committee to consist of one or more Directors. Except as expressly limited by the General Corporation Law of the State of Delaware or the Certificate of Incorporation, any such committee shall have and may exercise such powers as the Board of Directors may determine and specify in the resolution designating such committee. The Board of Directors, by resolution adopted by a majority of the whole Board, also may designate one or more additional Directors as alternate members of any such committee to replace any absent or disqualified member at any meeting of the committee, and at any time may change the membership of any committee or amend or rescind the resolution designating the committee. In the absence or disqualification of a member or alternate member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another Director to act at the meeting in the place of any such absent or disqualified member, provided that the Director so appointed meets any qualifications stated in the resolution designating the committee. Each committee shall keep a record of proceedings and report the same to the Board of Directors to such extent and in such form as the Board of Directors may require. Unless otherwise provided in the resolution designating a committee, a majority of all of the members of any such committee may select its Chairman, fix its rules or procedure, fix the time and place of its meetings and specify what notice of meetings, if any, shall be given. Section 12. Action without Meeting. Unless otherwise restricted by the ---------------------- Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. Section 13. Attendance by Telephone. Members of the Board of Directors, ----------------------- or of any committee, may participate in a meeting of the Board of Directors, or of such committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. -9- Section 14. Compensation. The Board of Directors shall have the authority ------------ to fix the compensation of Directors, which may include reimbursement of their expenses, if any, of attendance of each meeting of the Board of Directors or of a committee. Section 15. Honorary Directors. Any person who has at any time been chief ------------------ executive officer of the Corporation (or of Inland Steel Company prior to May 1, 1986), may, after retirement or resignation from the Board of Directors (or having retired or resigned from the Board of Directors of Inland Steel Company), be appointed by the Board of Directors as an Honorary Director for one or more year terms. Honorary Directors shall serve in an advisory capacity to the Board of Directors, shall have no vote and shall not be considered as Directors for the purposes of determining a quorum. Honorary Directors shall be reimbursed for their expenses in attending meetings of the Board of Directors. Any Honorary Director who is not at the time otherwise regularly employed by the Corporation or any subsidiary shall receive such fees (which may include reimbursement of expenses, if any) for attendance at each meeting of the Board of Directors as may be fixed from time to time by the Board of Directors, but shall not receive any other director's fees or any other compensation for his or her services. ARTICLE IV OFFICERS Section 1. Enumeration. The officers of the Corporation shall be chosen ----------- by the Board of Directors and shall be a President, a Secretary, a Treasurer, a General Counsel and a Controller. The Board of Directors may also elect a Chairman of the Board, a Vice Chairman, one or more Assistants to the Chairman, one or more Vice Presidents, one or more Assistant Secretaries and Assistant Treasurers and such other officers and agents as it shall deem appropriate. Any number of offices may be held by the same person. Section 2. Term of Office. The officers of the Corporation shall be -------------- elected at the annual meeting of the Board of Directors and shall hold office until their successors are elected and qualified. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors. Any vacancy occurring in any office of the Corporation required by this Article shall be filled by the Board of Directors, and any vacancy in any other office may be filled by the Board of Directors. Section 3. Chairman of the Board. Subject to the provisions of Article --------------------- III, Section 2 of these By-Laws, the Chairman of the Board, when elected, shall be the Chief Executive Officer of the Corporation and, as such, shall have general supervision, direction and control of the business and affairs of the Corporation, subject to the control of the Board of Directors, shall preside at meetings of stockholders and shall have such other functions, authority and -10- duties as customarily appertain to the office of the chief executive of a business corporation or as may be prescribed by the Board of Directors. Section 4. Vice Chairman of the Board. The Vice Chairman of the Board -------------------------- shall, in the case of absence of the Chairman of the Board for any brief and identifiable period, have and exercise the powers and duties of the Chairman of the Board. He or she shall have such other duties and powers as may be assigned to him by the Board of Directors, the Executive Committee or the Chairman of the Board. Section 5. President. During any period when there shall be a Chairman --------- of the Board, the President shall be the Chief Operating Officer of the Corporation and shall have such functions, authority and duties as may be prescribed by the Board of Directors or the Chairman of the Board. During any period when there shall not be a Chairman of the Board or Vice Chairman of the Board, the President shall be the Chief Executive Officer of the Corporation and, as such, shall have the functions, authority and duties provided for the office of Chairman of the Board. Section 6. Executive and Senior Vice Presidents. Each Executive Vice ------------------------------------ President shall have such duties and powers as may be assigned to him or her by the Board of Directors, the Executive Committee, the Chairman of the Board, the Vice Chairman of the Board, or the President. An Executive Vice President, designated by the Board of Directors, shall (in the event of absence, death or other inability to act of the President) have and exercise the powers and duties of the President. Each Senior Vice President shall have such duties and powers as may be assigned to him or her by the Board of Directors, the Executive Committee, the Chairman of the Board, the Vice Chairman of the Board or the President. Section 7. Vice Presidents. Each Vice President shall perform such --------------- duties and have such other powers as may from time to time be prescribed by the Board of Directors, the Chairman of the Board or the President or the Executive Committee. Section 8. Secretary. The Secretary shall keep a record of all --------- proceedings of the stockholders of the Corporation and of the Board of Directors, Finance Committee and Executive Committee, and shall perform like duties for any other standing committees when required. The Secretary shall give, or cause to be given, notice, if any, of all meetings of the stockholders and shall perform such other duties as may be prescribed by the Board of Directors, the Chairman of the Board, the President, or the Executive Committee. The Secretary shall have custody of the corporate seal of the Corporation and the Secretary, or in the absence of the Secretary any Assistant Secretary, shall have authority to affix the same to any instrument requiring it, and when so affixed it may be attested -11- by the signature of the Secretary or an Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the corporation and to attest such affixing of the seal. Section 9. Assistant Secretary. The Assistant Secretary, or if there be ------------------- more than one, the Assistant Secretaries in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election), shall, in the absence of the Secretary or in the event of the Secretary's inability or failure to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties as may from time to time be prescribed by the Board of Directors, the Chairman of the Board, the President or the Secretary. Section 10. Treasurer. The Treasurer shall have the custody of the --------- corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors or the Executive Committee. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, keeping proper records of such disbursements, and shall render to the Chairman of the Board, Vice Chairman of the Board, the Chairman of the Executive Committee, the Chairman of the Finance Committee, the President, the officer designated by the Board of Directors as Chief Financial Officer, if any, and the Board of Directors, the Executive Committee and the Finance Committee at their regular meetings or when the Board of Directors so requires, an account of all transactions as Treasurer and of the financial condition of the Corporation. The Treasurer shall perform such other duties as may from time to time be prescribed by the Board of Directors, the Chairman of the Board, the President or the Chief Financial Officer. Section 11. Assistant Treasurer. The Assistant Treasurer, or if there ------------------- shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election), shall, in the absence of the Treasurer or in the event of the Treasurer's inability or refusal to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as may from time to time be prescribed by the Board of Directors, the Chairman of the Board, the President or the Treasurer. Section 12. Assistant to the Chairman. The Assistant to the Chairman of ------------------------- the Board shall have and exercise such powers and duties as may be assigned to him or her by the Chairman of the Board. -12- Section 13. General Counsel. The General Counsel shall be responsible for --------------- the legal affairs of the Corporation and shall have such other duties as from time to time may be assigned to him or her by the Chairman of the Board, the Vice Chairman of the Board, the President, the Board of Directors or the Executive Committee. Section 14. Controller. The Controller shall be the chief accounting ---------- officer of the Corporation. He or she shall, when proper, approve all bills for purchases, payrolls, and similar instruments providing for disbursement of money by the Corporation, for payment by the Treasurer. He or she shall be in charge of and maintain books of account and accounting records of the Corporation. He or she shall perform such other acts as are usually performed by a Controller of a corporation. He or she shall render to the Chairman of the Board, the Vice Chairman of the Board, the Chairman of the Executive Committee, the Chairman of the Finance Committee, the President, the Chief Financial Officer, the Board of Directors, the Executive Committee and the Finance Committee, such reports as any thereof may require. Section 15. Other Officers. Any officer who is elected or appointed from -------------- time to time by the Board of Directors and whose duties are not specified in these By-Laws shall perform such duties and have such powers as may be prescribed from time to time by the Board of Directors, the Chairman of the Board, the Vice Chairman of the Board, the President or the Executive Committee. Section 16. Surety Bonds. The Board of Directors or Executive Committee ------------ may by resolution, require any officers of the Corporation to give bonds for the faithful discharge of their duties in such sums and with such sureties as the Board of Directors or Executive Committee shall determine, the expense of which shall be paid by the Corporation. ARTICLE V CERTIFICATES OF STOCK Section 1. Form. The shares of the Corporation shall be represented by ---- certificates; provided, however, that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of the Corporation's stock shall be uncertificated shares. Certificates of stock in the Corporation, if any, shall be signed by or in the name of the Corporation by the Chairman of the Board or the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Corporation. The signatures of the Chairman of the Board, the President or a Vice President and the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary may be facsimiles. In case any officer, transfer agent or registrar who has signed or whose facsimile -13- signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, the certificate may be issued by the Corporation with the same effect as if such officer, transfer agent or registrar were such officer, transfer agent or registrar at the date of its issue. Section 2. Transfer. Upon surrender to the Corporation or the transfer -------- agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction on its books. Section 3. Replacement. In case of the loss, destruction or theft of a ----------- certificate for any stock of the Corporation, a new certificate of stock or uncertificated shares in place of any certificate therefor issued by the Corporation may be issued upon satisfactory proof of such loss, destruction or theft and upon such terms as the Board of Directors may prescribe. The Board of Directors may in its discretion require the owner of the lost, destroyed or stolen certificate, or his or her legal representative, to give the Corporation a bond, in such sum and in such form and with such surety or sureties as it may direct, to indemnify the Corporation against any claim that may be made against it with respect to a certificate alleged to have been lost, destroyed or stolen. ARTICLE VI INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 1. Each person who was or is made a party or is threatened to be made a party to or is involved in or called as a witness in any action, suit or proceeding, whether civil, criminal, administrative or investigative, and any appeal therefrom (hereinafter, collectively a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is, was or had agreed to become a director of the Corporation or is, was or had agreed to become an officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, shall be indemnified and held harmless by the Corporation to the fullest extent permitted under the General Corporation Law of the State of Delaware (the "DGCL"), as the same now exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than the DGCL permitted the Corporation to -14- provide prior to such amendment), against all expenses, liabilities and losses (including attorneys' fees, judgments, fines, excise taxes or penalties pursuant to the Employee Retirement Income Security Act of 1974, as amended, and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith; provided, that except as explicitly provided herein, prior to a Change in Control, as defined herein, a person seeking indemnity in connection with a proceeding (or part thereof) initiated by such person against the Corporation or any director, officer, employee or agent of the Corporation shall not be entitled thereto unless the Corporation has joined in or consented to such proceeding (or part thereof). For purposes of this Article, a "Change in Control of the Corporation" shall be deemed to have occurred if (i) any "Person" (as is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes (except in a transaction approved in advance by the Board of Directors of the Corporation) the beneficial owner (as defined in Rule 13d-3 under such Act), directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation's then outstanding securities or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Corporation cease for any reason to constitute at least a majority thereof unless the election of each director who was not a director at the beginning of the period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period. Any indemnification under this Section 1 (unless ordered by a court) shall be paid by the Corporation unless within 60 days of such request for indemnification a determination is made (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such proceeding, (ii) if such quorum is not obtainable, or even if obtainable a quorum of disinterested directors so directs, by independent legal counsel (who may be the regular counsel of the Corporation) in a written opinion or (iii) by the stockholders, that indemnification of such person is not proper under the circumstances because such person has not met the necessary standard of conduct under Delaware law; provided, however, that following a Change in Control of the Corporation, with respect to all matters thereafter arising out of acts, omissions or events prior to the Change in Control of the Corporation concerning the rights of any person seeking indemnification under this Section 1, such determination shall be made by special independent counsel selected by such person and approved by the Corporation (which approval shall not be unreasonably withheld), which counsel has not otherwise performed services (other than in connection with similar matters) within the five years preceding its engagement to render such opinion for such person or for the Corporation or any affiliates (as such term is defined in Rule 405 under the Securities Act of 1933, as amended) -15- of the Corporation (whether or not they were affiliates when services were so performed) ("Independent Counsel"). Unless such person has theretofore selected Independent Counsel pursuant to this Section 1 and such Independent Counsel has been approved by the Corporation, legal counsel approved by a resolution or resolutions of the Board of Directors prior to a Change in Control of the Corporation shall be deemed to have been approved by the Corporation as required. Such Independent Counsel shall determine as promptly as practicable whether and to what extent such person would be permitted to be indemnified under applicable law and shall render its written opinion to the Corporation and such person to such effect. The Corporation agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such Independent Counsel against any and all expenses, claims, liabilities and damages arising out of or relating to this Article or its engagement pursuant hereto. Section 2. Expenses. Expenses, including attorneys' fees, incurred by a -------- person referred to in Section 1 of this Article in defending or otherwise being involved in a proceeding shall be paid by the Corporation in advance of the final disposition of such proceeding, including any appeal therefrom, upon receipt of an undertaking (the "Undertaking") by or on behalf of such person to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation. Section 3. Right of Claimant to Bring Suit. If a claim under Section 1 ------------------------------- hereof is not paid in full by the Corporation within 60 days after a written claim has been received by the Corporation or if expenses pursuant to Section 2 hereof have not been advanced within 10 days after a written request for such advancement accompanied by the Undertaking has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim or the advancement of expenses. (If the claimant is successful, in whole or in part, in such suit or any other suit to enforce a right for expenses or indemnification against the Corporation or any other party under any other agreement, such claimant shall also be entitled to be paid the reasonable expense of prosecuting such claim.) It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required Undertaking has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the DGCL for the Corporation to indemnify the claimant for the amount claimed. After a Change in Control, the burden of proving such defense shall be on the Corporation, and any determination by the Corporation (including its Board of Directors, independent legal counsel or its stockholders) that the claimant had not met the applicable standard of conduct required under the -16- DGCL shall not be a defense to the action nor create a presumption that claimant had not met such applicable standard of conduct. Section 4. Non-Exclusivity of Rights. The rights conferred on any person ------------------------- by this Article shall not be exclusive of any other right which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, By-Law, agreement, vote of stockholders or disinterested directors or otherwise. The Board of Directors shall have the authority, by resolution, to provide for such other indemnification of directors, officers, employees or agents as it shall deem appropriate. Section 5. Insurance. The Corporation may purchase and maintain --------- insurance to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expenses, liabilities or losses, whether or not the Corporation would have the power to indemnify such person against such expenses, liabilities or losses under the DGCL. Section 6. Enforceability. The provisions of this Article shall be -------------- applicable to all proceedings commenced after its adoption, whether such arise out of events, acts, omissions or circumstances which occurred or existed prior or subsequent to such adoption, and shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such person. This Article shall be deemed to grant each person who, at any time that this Article is in effect, serves or agrees to serve in any capacity which entitles him to indemnification hereunder rights against the Corporation to enforce the provisions of this Article, and any repeal or other modification of this Article or any repeal or modification of the DGCL or any other applicable law shall not limit any rights of indemnification then existing or arising out of events, acts, omissions, circumstances occurring or existing prior to such repeal or modification, including, without limitation, the right to indemnification for proceedings commenced after such repeal or modification to enforce this Article with regard to acts, omissions, events or circumstances occurring or existing prior to such repeal or modification. Section 7. Severability. If this Article or any portion hereof shall be ------------ invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each director and officer of the Corporation as to costs, charges and expenses (including attorneys' fees), judgments, fines and amounts paid in settlement with respect to any proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, to the full extent permitted by any applicable portion of this Article that shall not -17- have been invalidated and to the full extent permitted by applicable law. ARTICLE VII GENERAL PROVISIONS Section 1. Fiscal Year. The fiscal year of the Corporation shall be the ----------- calendar year. Section 2. Corporate Seal. The corporate seal shall be in such form as -------------- may be approved from time to time by the Board of Directors. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. Section 3. Waiver of Notice. Whenever any notice is required to be given ---------------- under law or the provisions of the Certificate of Incorporation or these By- Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. ARTICLE VIII AMENDMENTS These By-Laws may be altered, amended or repealed or new By-Laws may be adopted by the Board of Directors. The fact that the power to amend, alter, repeal or adopt the By-Laws has been conferred upon the Board of Directors shall not divest the stockholders of the same powers. EX-4.5 3 FIRST SUPPLEMENTAL INDENTURE DATED 2/25/1999 EXHIBIT 4.5 ----------- THIS FIRST SUPPLEMENTAL INDENTURE, dated as of February 25, 1999, is between RYERSON TULL, INC., a Delaware corporation formerly known as "Inland Steel Industries, Inc." (the "Successor Company"), and THE BANK OF NEW YORK, a New York banking corporation, as trustee (the "Trustee"). PRELIMINARY STATEMENT WHEREAS, Ryerson Tull, Inc. (the "Company") and the Trustee have entered into an Indenture, dated as of July 1, 1996 (the "Indenture"), providing for the issuance, from time to time, of Securities; WHEREAS, the Company, simultaneously with the execution and delivery of this Supplemental Indenture, has merged into the Successor Company, its parent, as the surviving corporation in the merger pursuant to a Certificate of Merger filed with the Secretary of State of the State of Delaware (the "Merger") on the date hereof, and the name of the surviving corporation has been changed in the Merger to "Ryerson Tull, Inc."; WHEREAS, pursuant to the Merger, the Successor Company has assumed all of the obligations of the Company, including the due and punctual payment of the principal of and any premium and interest on all the Securities and the performance or observance of every obligation in the Indenture to be performed by the Company; WHEREAS, Section 9.1 of the Indenture provides that, to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company contained in the Indenture and in the Securities, a supplemental indenture may be entered into without the consent of any Holders of Securities; WHEREAS, in accordance with the terms of Section 8.1 of the Indenture, the Successor Company and the Trustee desire to enter into this First Supplemental Indenture; and WHEREAS, all things necessary to make this First Supplemental Indenture a valid agreement of the Successor Company, in accordance with its terms, and a valid amendment of and supplement to the Indenture have been done. NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH: For and in consideration of the premises, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Securities or of series thereof, as follows: 1. The Successor Company expressly assumes the due and punctual payment of the principal of and any premium and interest on all the Securities and the performance or observance of every obligation in the Indenture on the part of the Company to be performed or observed. 2. The Successor Company shall succeed to, and be substituted for, and may exercise every right or power of, the Company under the Indenture with the same effect as if the Successor Company had been named as the Company in the Indenture. Capitalized terms used herein, but not otherwise defined herein, shall have the meanings given them in the Indenture. Except as specifically amended or supplemented by this First Supplemental Indenture, the Indenture shall remain and continue in full force and effect, and this First Supplemental Indenture shall form a part of the Indenture for all purposes. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the Successor Company and the Trustee have caused this First Supplemental Indenture to be duly executed by their respective officers thereunto duly authorized and the seal of the Successor Company and the Trustee duly attested to be hereunto affixed all as of the day and year first above written. RYERSON TULL, INC. (formerly known as "Inland Steel Industries, Inc.") By: /s/ Jay M. Gratz ------------------------------------------- [SEAL] Name: Jay M. Gratz Title: Vice President THE BANK OF NEW YORK, as Trustee By: /s/ Mary La Gumina ---------------------------------------------- [SEAL] Name: Mary La Gumina Title: Assistant Vice President EX-4.6 4 SPECIMEN OF 8 1/2% NOTES DUE JULY 15, 2001 EXHIBIT 4.6 ----------- Unless this Note is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Company (as defined below) or its agent for registration of transfer, exchange, or payment, and any Note issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. REGISTERED PRINCIPAL AMOUNT No.: 1 $150,000,000 CUSIP No.: 78375P AA5 RYERSON TULL, INC. 8 1/2% NOTE DUE JULY 15, 2001 RYERSON TULL, INC., a corporation duly organized and existing under the laws of the State of Delaware (hereinafter called the "Company," which term shall include any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & CO., or registered assigns, upon presentation, the principal sum of ONE HUNDRED FIFTY MILLION DOLLARS on July 15, 2001 and to pay interest on the outstanding principal amount thereon from July 3, 1996, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually in arrears on January 15 and July 15 in each year, commencing on January 15, 1997, at the rate of 8 1/2% per annum, until the entire principal hereof is paid or made available for payment. The interest so payable and punctually paid or duly provided for on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest which shall be January 1 or July 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not more than 15 days and not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. Payment of the principal of, and premium, if any, on, and interest on this Security will be made at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, City of New York, or elsewhere as provided in the Indenture, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that, unless this Security is in registered global form, at the option of the Company payment of interest on any Interest Payment Date may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register on the Regular Record Date. Each Security of this series is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of July 1, 1996 (herein called the "Indenture"), between the Company and The Bank of New York (herein called the "Trustee," which term includes any successor trustee under the Indenture with respect to the series of which this Security is a part), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the first page hereof, and such series is limited in aggregate principal amount to $150,000,000. Securities of this series will be subject to redemption, in whole or in part, at any time or from time to time, at the option of the Company on at least 30 days' prior notice by mail at a Redemption Price equal to the greater of (i) 100% of the principal amount of the Securities to be redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the Redemption Date on a semiannual basis (assuming a 360- day year consisting of twelve 30-day months) at the Treasury Rate (as defined herein) plus 50 basis points, plus accrued but unpaid interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the first page hereof, all as provided in the Indenture. On and after the Redemption Date, interest will cease to accrue on the Securities or portions of Securities called for redemption on such date. Securities of this series may be redeemed in part but only in integral multiples of $1,000. "Treasury Rate" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for such Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. "Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of this series of Securities that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Securities. "Independent Investment Banker" means one of the Reference Treasury Dealers appointed by the Trustee after consultation with the Company. "Comparable Treasury Price" means, with respect to any Redemption Date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day preceding such Redemption Date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, (A) the average of the Reference Treasury Dealer Quotations for such Redemption Date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the average of all such Quotations. "Reference Treasury Dealer" means Goldman, Sachs & Co. and CS First Boston Corporation, and their respective successors; provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer") the Company shall substitute therefor another Primary Treasury Dealer. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the third Business Day preceding such Redemption Date. Any notice to the Holders of such a redemption need not set forth the Redemption Price but need only set forth the calculation thereof as described in the third paragraph of this Security. The Redemption Price, calculated as aforesaid, shall be set forth in an Officers' Certificate delivered to the Trustee no later than two Business Days prior to the Redemption Date. In the event of redemption of this Security in part only, a new Security or Securities of this series and of like tenor for the unredeemed portion thereof will be issued in the name of the Holder hereof upon cancellation hereof. No sinking fund shall be established for the benefit of the Securities. The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Company on this Security and (b) certain restrictive covenants and the related defaults and Events of Default applicable to the Company, in each case, upon compliance by the Company with certain conditions set forth in the Indenture, which provisions apply to this Security. If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of, and the premium, if any, and accrued interest on, the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities of this series, the Holders of not less than 25% in principal amount of the Securities of this series at the time Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default, as Trustee, and offered the Trustee reasonable indemnity and the Trustee shall not have received from the Holders of a majority in principal amount of Securities of this series at the time Outstanding a direction inconsistent with such request, and the Trustee shall have failed to institute any such proceeding for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or any interest hereon on or after any respective due dates expressed herein. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities of each series of Securities then Outstanding affected thereby. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, premium, if any, on, and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any Place of Payment where the principal of, premium, if any, on, and interest on this Security are payable duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities of this series are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and none of the Company, the Trustee or any such agent shall be affected by notice to the contrary. No recourse under or upon any obligation, covenant or agreement contained in the Indenture or in this Security, or because of any indebtedness evidenced thereby, shall be had against any promoter, as such, or against any past, present or future stockholder, officer or trustee, as such, of the Company or of any successor, either directly or through the Company or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of this Security by the Holder thereof and as part of the consideration for the issue of the Securities of this series. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. THE INDENTURE AND THIS SERIES OF SECURITIES, INCLUDING THIS SECURITY, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PROVISIONS THEREOF. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused "CUSIP" numbers to be printed on the Securities of this series as a convenience to the Holders of such Securities. No representation is made as to the correctness or accuracy of such CUSIP numbers as printed on the Securities, and reliance may be placed only on the other identification numbers printed hereon. -5- Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed by the undersigned officer. RYERSON TULL, INC. By:_______________________ Neil S. Novich Chairman [SEAL] By:_______________________ Terence R. Rogers Treasurer Attest By:_________________________ George A. Ranney, Jr. Secretary Dated: March 16, 1999 TRUSTEE'S CERTIFICATE OF AUTHENTICATION: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. THE BANK OF NEW YORK, as Trustee By:________________________ Authorized Signatory -6- ASSIGNMENT FORM FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE ---------------------------------------------------- ---------------------------------------------------- . . . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . . (Please Print or Typewrite Name and Address including Zip Code of Assignee) . . . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . . the within Security of Ryerson Tull, Inc. and hereby does irrevocably constitute and appoint . . . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . Attorney to transfer said Security on the books of the within named Company with full power of substitution in the premises. Dated: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NOTICE: The signature to this assignment must correspond with the name as it appears on the first page of the within Security in every particular, without alteration or enlargement or any change whatever. Signature Guarantee: ---------------------------- -7- EX-4.7 5 SPECIMEN OF 9 1/8% NOTES DUE JULY 15, 2006 EXHIBIT 4.7 ----------- Unless this Note is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Company (as defined below) or its agent for registration of transfer, exchange, or payment, and any Note issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. REGISTERED PRINCIPAL AMOUNT No.: 1 $100,000,000 CUSIP No.: 78375P AB3 RYERSON TULL, INC. 9 1/8% NOTE DUE JULY 15, 2006 RYERSON TULL, INC., a corporation duly organized and existing under the laws of the State of Delaware (hereinafter called the "Company," which term shall include any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & CO., or registered assigns, upon presentation, the principal sum of ONE HUNDRED MILLION DOLLARS on July 15, 2006 and to pay interest on the outstanding principal amount thereon from July 3, 1996, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually in arrears on January 15 and July 15 in each year, commencing on January 15, 1997, at the rate of 9 1/8% per annum, until the entire principal hereof is paid or made available for payment. The interest so payable and punctually paid or duly provided for on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest which shall be January 1 or July 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not more than 15 days and not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. Payment of the principal of, and premium, if any, on, and interest on this Security will be made at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, City of New York, or elsewhere as provided in the Indenture, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that, unless this Security is in registered global form, at the option of the Company payment of interest on any Interest Payment Date may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register on the Regular Record Date. Each Security of this series is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of July 1, 1996 (herein called the "Indenture"), between the Company and The Bank of New York (herein called the "Trustee," which term includes any successor trustee under the Indenture with respect to the series of which this Security is a part), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the first page hereof, and such series is limited in aggregate principal amount to $100,000,000. Securities of this series will be subject to redemption, in whole or in part, at any time or from time to time, at the option of the Company on at least 30 days' prior notice by mail at a Redemption Price equal to the greater of (i) 100% of the principal amount of the Securities to be redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the Redemption Date on a semiannual basis (assuming a 360- day year consisting of twelve 30-day months) at the Treasury Rate (as defined herein) plus 62.5 basis points, plus accrued but unpaid interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the first page hereof, all as provided in the Indenture. On and after the Redemption Date, interest will cease to accrue on the Securities or portions of Securities called for redemption on such date. Securities of this series may be redeemed in part but only in integral multiples of $1,000. "Treasury Rate" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for such Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. "Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of this series of Securities that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Securities. "Independent Investment Banker" means one of the Reference Treasury Dealers appointed by the Trustee after consultation with the Company. -2- "Comparable Treasury Price" means, with respect to any Redemption Date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day preceding such Redemption Date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, (A) the average of the Reference Treasury Dealer Quotations for such Redemption Date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the average of all such Quotations. "Reference Treasury Dealer" means Goldman, Sachs & Co. and CS First Boston Corporation, and their respective successors; provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer") the Company shall substitute therefor another Primary Treasury Dealer. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the third Business Day preceding such Redemption Date. Any notice to the Holders of such a redemption need not set forth the Redemption Price but need only set forth the calculation thereof as described in the third paragraph of this Security. The Redemption Price, calculated as aforesaid, shall be set forth in an Officers' Certificate delivered to the Trustee no later than two Business Days prior to the Redemption Date. In the event of redemption of this Security in part only, a new Security or Securities of this series and of like tenor for the unredeemed portion thereof will be issued in the name of the Holder hereof upon cancellation hereof. No sinking fund shall be established for the benefit of the Securities. The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Company on this Security and (b) certain restrictive covenants and the related defaults and Events of Default applicable to the Company, in each case, upon compliance by the Company with certain conditions set forth in the Indenture, which provisions apply to this Security. If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of, and the premium, if any, and accrued interest on, the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. -3- As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities of this series, the Holders of not less than 25% in principal amount of the Securities of this series at the time Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default, as Trustee, and offered the Trustee reasonable indemnity and the Trustee shall not have received from the Holders of a majority in principal amount of Securities of this series at the time Outstanding a direction inconsistent with such request, and the Trustee shall have failed to institute any such proceeding for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or any interest hereon on or after any respective due dates expressed herein. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities of each series of Securities then Outstanding affected thereby. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, premium, if any, on, and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any Place of Payment where the principal of, premium, if any, on, and interest on this Security are payable duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. -4- The Securities of this series are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and none of the Company, the Trustee or any such agent shall be affected by notice to the contrary. No recourse under or upon any obligation, covenant or agreement contained in the Indenture or in this Security, or because of any indebtedness evidenced thereby, shall be had against any promoter, as such, or against any past, present or future stockholder, officer or trustee, as such, of the Company or of any successor, either directly or through the Company or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of this Security by the Holder thereof and as part of the consideration for the issue of the Securities of this series. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. THE INDENTURE AND THIS SERIES OF SECURITIES, INCLUDING THIS SECURITY, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PROVISIONS THEREOF. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused "CUSIP" numbers to be printed on the Securities of this series as a convenience to the Holders of such Securities. No representation is made as to the correctness or accuracy of such CUSIP numbers as printed on the Securities, and reliance may be placed only on the other identification numbers printed hereon. -5- Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed by the undersigned officer. RYERSON TULL, INC. By:_______________________ Neil S. Novich Chairman [SEAL] By:_______________________ Terence R. Rogers Treasurer Attest By:_________________________ George A. Ranney, Jr. Secretary Dated: March 16, 1999 TRUSTEE'S CERTIFICATE OF AUTHENTICATION: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. THE BANK OF NEW YORK, as Trustee By:________________________ Authorized Signatory -6- ASSIGNMENT FORM FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE ======================================== ======================================== ................................................................................ (Please Print or Typewrite Name and Address including Zip Code of Assignee) ................................................................................ the within Security of Ryerson Tull, Inc. and hereby does irrevocably constitute and appoint ........................................................................Attorney to transfer said Security on the books of the within named Company with full power of substitution in the premises. Dated: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NOTICE: The signature to this assignment must correspond with the name as it appears on the first page of the within Security in every particular, without alteration or enlargement or any change whatever. Signature Guarantee:____________________________ -7- EX-10.19 6 RYERSON TULL DIRECTORS' 1999 STOCK OPTION PLAN EXHIBIT 10.19 RYERSON TULL DIRECTORS' 1999 STOCK OPTION PLAN --------------------------------- 1. Purpose. Ryerson Tull, Inc. (the "Company") has established the ------- Ryerson Tull Directors' 1999 Stock Option Plan (the "Plan") to attract and retain as non-employee directors of the Company persons whose abilities, experience and judgment can contribute to the continued progress of the Company and its subsidiaries and to facilitate the directors' ability to acquire a proprietary interest in the Company. 2. Administration. The authority to manage and control the operation and -------------- administration of the Plan shall be vested in a the Nominating and Governance Committee of the Board of Directors of the Company (the "Board") (or such other committee of the Board which the Board may designate) which committee (the "Committee") shall have such authority as delegated to it from time to time by the Board. Subject to the limitations of the Plan and any limitations on authorities imposed on the Committee by the Board, the Committee shall have the sole and complete authority to: (a) interpret the Plan and to adopt, amend and rescind administrative guidelines and other rules and regulations relating to the Plan; (b) correct any defect or omission and reconcile any inconsistency in the Plan or in any award made hereunder; and (c) to make all other determinations and take all other actions necessary or advisable for the implementation and administration of the Plan. The Committee's determinations on matters within its control shall be conclusive and binding on the Company and all other persons. Notwithstanding the foregoing, no member of the Committee shall act with respect to the administration of the Plan in a manner inconsistent with the exempt status of the Plan under Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended ("Rule 16b-3") as then in effect. 3. Participation. Only Non-Employee Directors shall be eligible to ------------- participate in the Plan. As of any applicable date, a "Non-Employee Director" is a person who is serving as a director of the Company and who is not an employee of the Company or any affiliate of the Company as of that date. 4. Definition of Fair Market Value. The "Fair Market Value" of a share of ------------------------------- Common Stock of the Company ("Stock") on any date shall be equal to the average of the high and low prices of a share of Stock reported on the New York Stock Exchange Composite Transactions for the applicable date or, if there are no such reported trades for such date, for the last previous date for which trades were reported. 5. Shares Subject to the Plan. The shares of Stock which shall be -------------------------- available for distribution pursuant to the Plan shall be either authorized and unissued shares or treasury shares (including, in the discretion of the Company, shares purchased in the open market). The aggregate number of shares of Stock which are available for issuance under the Plan shall be 300,000; provided, however, that: (a) in the event of any merger, consolidation, reorganization, recapitalization, spinoff, stock dividend, stock split, reverse stock split, rights offering, exchange or other change in the corporate structure or capitalization of the Company affecting the Stock, the number and kind of shares of Stock available for awards under the Plan shall be equitably adjusted in such manner as the Committee shall determine in its sole judgment; (b) in determining what adjustment, if any, is appropriate pursuant to paragraph (a), the Committee may rely on the advice of such experts as it deems appropriate, including counsel, investment bankers and the accountants of the Company; (c) no fractional shares shall be granted or authorized pursuant to any adjustment pursuant to paragraph (a), although cash payments may be authorized in lieu of fractional shares that may otherwise result from such an equitable adjustment; and (d) in the event of the exercise or termination (by reason of forfeiture, expiration, cancellation, surrender or otherwise) of any award under the Plan, that number of shares of Stock that was subject to the award but not delivered shall again be available for awards under the Plan; provided, however, that shares which are surrendered in payment of the Option Price (as defined in subsection 6.3) upon the exercise of an Option (as defined in subsection 6.1) shall not again be available for issuance under the Plan. 6. Awards of Options. ----------------- 6.1 Definitions. The grant of an "Option" under this Section 6 entitles ----------- the Non-Employee Director to purchase shares of Stock at the Option Price, subject to the terms of this Section 6. Options granted under this Section 6 shall be non-qualified stock options which are not intended to be "incentive stock options" as that term is described in section 422(b) of the Internal Revenue Code of 1986, as amended. 6.2 Awards of Options. Each Non-Employee Director shall be awarded ----------------- Options under this Section 6 in accordance with the following: (a) As of the date of each regular annual meeting of the Company's stockholders (the "Annual Meeting"), each person who is a Non-Employee Director immediately after such Annual Meeting shall be awarded an Option having a Black-Scholes value equal to $20,000. 2 (b) Each individual who first becomes a Non-Employee Director after the date of the Annual Meeting shall be awarded, as of date the individual becomes a Non-Employee Director, an Option having a Black-Scholes value equal to $20,000 multiplied by a fraction the denominator of which is 12 and the numerator of which is the number of whole calendar months remaining until the date of the next Annual Meeting; provided, however, that if the individual becomes a Non-Employee Director prior to the 15th day of any calendar month, the month in which he becomes a Non-Employee Director shall be included in the numerator described in this sentence. For purposes of the Plan, the Black-Scholes value shall be determined in the sole discretion of the Board. 6.3 Option Price. The price at which shares of Stock may be purchased ------------ upon the exercise of an Option (the "Option Price") shall be equal to the greater of (a) the Fair Market Value of a share of Stock as of the date on which the Option is granted, or (b) the par value of a share of Stock on such date. 6.4 Exercise. Each Option granted to a Non-Employee Director under this -------- Section 6 shall be exercisable in whole or in part at such times as may be determined by the Committee at the time of grant; provided, however, that in no event shall an Option be exercisable prior to the day after the six-month anniversary of the date on which the Option was granted or on or after the ten- year anniversary of the date of grant. The full Option Price of each share of Stock purchased upon the exercise of any Option shall be paid at the time of such exercise and, as soon as practicable thereafter, a certificate representing the shares so purchased shall be delivered to the person entitled thereto. The Option Price shall be payable in cash or in shares of Stock (valued at Fair Market Value as of the day of exercise), cashless exercise as permitted under regulations promulgated by the Board of Governors of the Federal Reserve System (subject to any applicable restrictions necessary to comply with rules adopted by the Security and Exchange Commission), or in any combination thereof. 7. Miscellaneous. ------------- 7.1 Effective Date. The Plan shall be effective upon the approval of the -------------- Plan by the Board. 7.2 Transferability. Except as otherwise provided by the Committee, --------------- awards under the Plan are not transferable except as designated by a Non-Employee Director by will or by the laws of descent and distribution. To the extent that the Non-Employee Director who receives an award under the Plan has the right to exercise such award, the award may be exercised during the lifetime of the Non-Employee Director only by the Non-Employee Director. 7.3 Notices. Any notice or document required to be filed with the ------- Committee under the Plan will be properly filed if delivered or mailed by registered mail, postage prepaid, to the Committee, in care of the Company, at its principal executive offices. The Committee may, by 3 advance written notice to affected persons, revise such notice procedure from time to time. Any notice required under the Plan may be waived by the person entitled to notice. 7.4 Agreement With the Company. At the time of an award to a -------------------------- Non-Employee Director under the Plan, the Committee may require a Non-Employee Director to enter into an agreement with the Company in a form specified by the Committee, agreeing to the terms and conditions of the Plan and to such additional terms and conditions, not inconsistent with the Plan, as the Committee may, in its sole discretion, prescribe. 7.5 Director and Shareholder Status. The Plan will not give any person ------------------------------- the right to continue as a director of the Company, or any right or claim to any benefits under the Plan unless such right or claim to any benefits has specifically accrued under the terms of the Plan. Participation in the Plan and any right to benefits under the Plan shall not create any rights in a director (or any other person) as a stockholder of the Company until shares of Stock are registered in the name of the director (or such other person). 7.6 Evidence. Evidence required of anyone under the Plan may be by -------- certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties. 7.7 Gender and Number. Where the context admits, words in one gender ----------------- shall include the other gender, words in the singular shall include the plural and the plural shall include the singular. 7.8 Nonassignment. Neither a Non-Employee Director's nor any other ------------- person's rights to awards under the Plan are subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by creditors of the Non-Employee Director (or such other person). 8. Amendment and Termination. While the Company expects and intends to ------------------------- continue the Plan, the Board reserves the right to, at any time and in any way, amend, suspend or terminate the Plan; provided, however, that no amendment, suspension or termination shall: (a) be made without stockholder approval to the extent such approval is required by law, agreement or the rules of any exchange or automated quotation system upon which the Stock is listed or quoted; (b) materially alter or impair the rights of a Non-Employee Director under the Plan without the consent of the Non-Employee Director with respect to rights already accrued hereunder; or (c) make any change that would disqualify the Plan, any award under the plan, any transaction with respect to any award under the Plan or any other plan of the Company intended to be so qualified from the exemption provided by Rule 16b-3. 4 EX-10.20 7 RYERSON TULL DIRECTORS' COMP. PLAN, AS AMENDED EXHIBIT 10.20 RYERSON TULL DIRECTORS' COMPENSATION PLAN ---------------------------- (AS AMENDED THROUGH AND INCLUDING NOVEMBER, 1998) SECTION 1 --------- General ------- 1.1 Purpose and Effective Date. The Ryerson Tull Directors' Compensation -------------------------- Plan (the "Plan") has been established by Ryerson Tull, Inc. (the "Company") to provide an alternative method of compensating those directors of the Company who do not otherwise receive compensation as employees of the Company or its affiliates in order to aid the Company in attracting and retaining as directors persons whose abilities, experience and judgment can contribute to the continued progress of the Company and to facilitate the directors' ability to acquire a proprietary interest in the Company. The Plan shall be effective upon the consummation of the initial public offering of Class A Common Stock, $1.00 par value per share, of the Company ("Stock"), which date shall be the "Effective Date" of the Plan as set forth herein. 1.2 Participation. Only Non-Employee Directors of the Company shall be ------------- eligible to participate in the Plan. As of any applicable date, a "Non-Employee Director" is a person who is serving as a director of the Company who is not an employee of the Company or any affiliate of the Company as of that date. 1.3 Administration. The authority to manage and control the operation and -------------- administration of the Plan shall be vested in a committee of the Board of Directors of the Company (the "Board") which committee (the "Committee") shall have such authorities as delegated to it from time to time by the Board. Subject to the limitations of the Plan and any limitations on authorities imposed on the Committee by the Board, the Committee shall have the sole and complete authority to: (a) interpret the Plan and to adopt, amend and rescind administrative guidelines and other rules and regulations relating to the Plan; (b) correct any defect or omission and reconcile any inconsistency in the Plan or in any payment made hereunder; and (c) to make all other determinations and take all other actions necessary or advisable for the implementation and administration of the Plan. The Committee's determinations on matters within its control shall be conclusive and binding on the Company and all other persons. Notwithstanding the foregoing, no member of the Committee shall act with respect to the administration of the Plan in a manner inconsistent with the exempt status of the Plan under Rule 16b- 3 promulgated under the Securities Exchange Act of 1934, as amended ("Rule 16b- 3") as then in effect. 1.4 Shares Subject to the Plan. The shares of Stock which shall be -------------------------- available for distribution pursuant to the Plan shall be either authorized and unissued shares or treasury shares (including, in the discretion of the Company, shares purchased in the open market). The number of shares of Stock to be distributed pursuant to Non-Employee Directors' elections to receive shares of Stock in lieu of Cash Retainers (as described in subsection 2.1) shall be determined in accordance with Section 2. The number of shares of Stock to be distributed pursuant to Non-Employee Directors' Deferral Elections (as described in Section 3) shall be determined in accordance with Section 3. The aggregate number of shares of Stock which are available for issuance under the Plan shall be 100,000; provided, however, that: (a) in the event of any merger, consolidation, reorganization, recapitalization, spinoff, stock dividend, stock split, reverse stock split, rights offering, exchange or other change in the corporate structure or capitalization of the Company affecting the Stock, the number and kind of shares of Stock available for awards under the Plan shall be equitably adjusted in such manner as the Committee shall determine in its sole judgment; (b) in determining what adjustment, if any, is appropriate pursuant to paragraph (a), the Committee may rely on the advice of such experts as it deems appropriate, including counsel, investment bankers and the accountants of the Company; and (c) no fractional shares shall be granted or authorized pursuant to any adjustment pursuant to paragraph (a), -2- although cash payments may be authorized in lieu of fractional shares that may otherwise result from such an equitable adjustment. Except to the extent otherwise determined by the Committee, any shares of Stock issued pursuant to subsection 2.1 that terminate without vesting, shall become available for future awards of Stock under the Plan. 1.5 Compliance with Applicable Laws. Notwithstanding any other provision ------------------------------- of the Plan, the Company shall have no obligation to deliver any shares of Stock under the Plan unless such delivery would comply with all applicable laws and the applicable requirements of any securities exchange or similar entity. Prior to the delivery of any shares of Stock under the Plan, the Company may require a written statement that the recipient is acquiring the shares for investment and not for the purpose or with the intention of distributing the shares. If the redistribution of shares is restricted pursuant to this subsection 1.5, the certificates representing such shares may bear a legend referring to such restrictions. 1.6 Director and Shareholder Status. The Plan will not give any person ------------------------------- the right to continue as a director of the Company, or any right or claim to any benefits under the Plan unless such right or claim to any benefits has specifically accrued under the terms of the Plan. Participation in the Plan and any right to accrued benefits shall not create any rights in a director (or any other person) as a shareholder of the Company until shares of Stock are registered in the name of the director (or such other person). 1.7 Definition of Fair Market Value. The "Fair Market Value" of a share ------------------------------- of Stock on any date shall be equal to the average of the high and low prices of a share of Stock reported on the New York Stock Exchange Composite Transactions for the applicable date or, if there are no such reported trades for such date, for the last previous date for which trades were reported. 1.8 Source of Payments. Except for Stock actually delivered pursuant to ------------------ the Plan, the Plan constitutes only an unfunded, unsecured promise of the Company to make payments or awards to directors (or other persons) or deliver Stock in the future in accordance with the terms of the Plan. 1.9 Nonassignment. Neither a director's nor any other person's rights to ------------- payments or awards under the Plan are subject -3- in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by creditors of the director. 1.10. Elections. Any notice or document required to be filed with the --------- Committee under the Plan will be properly filed if delivered or mailed by registered mail, postage prepaid, to the Committee, in care of the Company, at the Company's principal executive offices. The Committee may, by advance written notice to affected persons, revise such notice procedure from time to time. Any notice required under the Plan may be waived by the person entitled thereto. SECTION 2 --------- Payment of Retainer; Election to Receive Stock in Lieu of Retainer ------------------------------------ 2.1 Payment of Retainer. Subject to the terms and conditions of the ------------------- Plan, for each Award Year (as defined below), each individual who is a Non-Employee Director during such Award Year shall be paid a retainer in an amount determined from time to time by the Board (the "Retainer") in accordance with and subject to the following: (a) For each Award Year, a "Cash Retainer" shall be payable to each individual who is a Non-Employee Director during such Award Year, subject to the following: (i) The amount of the Cash Retainer payable to a Non-Employee Director for any Award Year shall be one-half of the Retainer for the Award Year and shall be paid in quarterly installments on the last day of each Fiscal Quarter (as defined below), beginning with the last day of the Fiscal Quarter in which the first day of the Award Year occurs and ending with the earlier of (A) the last day of the Fiscal Quarter in which the Non- Employee Director's service as a Non-Employee Director terminates for any reason, or (B) the last day of the first Fiscal Quarter ending after the last day of the Award Year. (ii) The amount of each quarterly installment of the Cash Retainer for an Award Year payable to a Non-Employee Director shall be equal to the -4- product of (A) the Cash Retainer, multiplied by (B) a fraction, the numerator of which is the number of months, or any portion thereof, during such Fiscal Quarter during which the individual served as a Non-Employee Director, and the denominator of which is twelve. (b) For each Award Year, a "Stock Retainer" shall be pay able to each individual who is a Non-Employee Director during such Award Year, subject to the following: (i) The amount of the Stock Retainer payable to a Non-Employee Director for an Award Year shall be equal to the product of (A) one-half of the Retainer for the Award Year, multiplied by (B) a fraction, the numerator of which is the number of months or any portion thereof remaining in the Award Year as of the Issue Date (as defined below) and denominator of which is 12. (ii) The Stock Retainer payable to a Non-Employee Director for any Award Year shall be paid as of the Issue Date in the form of shares of Class A Common Stock of the Company having a Fair Market Value (determined as of the Issue Date) equal to the amount of the Stock Retainer payable to the Non-Employee Director for the Award Year, which shares shall be subject to forfeiture and transfer restrictions until earned as described in this paragraph (b) ("Restricted Stock"). (iii) The shares of Restricted Stock awarded to a Non-Employee Director for an Award Year pursuant to this paragraph (b) shall be earned by him or her and the restrictions on such shares shall lapse in quarterly installments on the last day of each Fiscal Quarter, beginning with the last day of the Fiscal Quarter in which the first day of the Award Year occurs and ending with the earlier of (A) the last day of the Fiscal Quarter in which the Non-Employee Director's service as a Non- Employee Director terminates for any reason, or (B) the last day of the first Fiscal Quarter ending after the last day of the Award Year. Any shares of Restricted Stock which are not earned by a Non- -5- Employee Director as of the last day of the Fiscal Quarter in which his or her service as a Non-Employee Director terminates shall be forfeited. (iv) The number of shares of Restricted Stock for any Award Year which are earned by a Non-Employee Director for any Fiscal Quarter shall be equal to the product of (A) the total number of shares of Restricted Stock awarded to him or her for the Award Year, multiplied by (B) a fraction, the numerator of which is the number of months, or any portion thereof, during such Fiscal Quarter during which the individual served as a Non-Employee Director, and the denominator of which is twelve. In the event that this subparagraph (iv) results in a fractional share of Restricted Stock being earned as of the last day of a Fiscal Quarter, the Fair Market Value of any such fractional share shall be paid in cash as soon as practicable after the last day of the Fiscal Quarter. For purposes of the Plan: (1) The term "Fiscal Quarter" shall mean each calendar quarter ending after the regular annual meeting of shareholders of the Company (an "Annual Meeting") occurring in 1997. (2) The term "Award Year" shall mean the 12-consecutive-month period commencing as of the first day of the first calendar month following the date of the Annual Meeting occurring in 1997 and each 12- consecutive-month period commencing as of the first day of the first calendar month following each Annual Meeting thereafter. (3) The term "Issue Date" shall mean (A) in the case of an individual who was a Non-Employee as of the first day of the Award Year, the first day of the Award Year, or (B) in the case of an individual who becomes a Non-Employee Director during the Award Year but after the first day thereof, the first day of the month coincident with or next following the date on which such individual first becomes a Non- Employee Director. -6- Notwithstanding the foregoing, the Board, in its sole discretion, may determine that an Award Year of less than 12 months is appropriate, in which case, the amount of the Retainer for such Award Year and the period over which such Retainer is paid or earned shall be equitably adjusted as determined by the Board. 2.2 Election to Receive Stock. Subject to the terms and conditions of the ------------------------- Plan, each Non-Employee Director may elect to forego receipt of all or any portion of the Cash Retainer otherwise payable to him or her following the Effective Date and instead to receive whole shares of Stock of equivalent value to the Retainer so foregone (determined in accordance with subsection 2.4). A Non-Employee Director's election under this subsection 2.2 to have all or any portion of his or her Cash Retainer paid in shares of Stock shall be valid only if it is in writing, signed by the Non-Employee Director, and filed with the Committee in accordance with uniform and nondiscriminatory rules adopted by the Committee. 2.3 Revocation of Election to Receive Stock. Once effective, a Non- --------------------------------------- Employee Director's election pursuant to subsection 2.2 to receive Stock in lieu of his or her Cash Retainer shall remain in effect for successive calendar years until it is revised or revoked. Any such revision or revocation shall be in writing, signed by the Non-Employee Director and filed with the Committee and shall be effective for the calendar year next following the date on which it is received by the Committee, or such later date specified in such notice. 2.4 Equivalent Amount of Stock. The number of whole shares of Stock to be -------------------------- distributed to any Non-Employee Director by reason of his or her election pursuant to subsection 2.2 to receive Stock in lieu of his or her Cash Retainer shall be equal to: (a) the dollar amount of the Cash Retainer which the Non-Employee Director has elected to have paid to him or her in shares of Stock; DIVIDED BY (b) the Fair Market Value of a share of Stock as of the date on which such Cash Retainer (or portion thereof) would otherwise have been payable to the Non-Employee Director. The Fair Market Value of any fractional share shall be paid to the Non-Employee Director in cash. -7- SECTION 3 --------- Deferral Elections ------------------ 3.1 Deferrals. Subject to the terms and conditions of the Plan, each Non- --------- Employee Director may elect to defer the receipt of all or any portion of the Retainer and Eligible Fees (as defined below) otherwise payable to or, in the case of the Stock Retainer, earned by him or her, for periods on or after the Effective Date. A Non-Employee Director may elect the deferral described in the preceding sentence by filing a written "Deferral Election" with the Committee in accordance with uniform and non-discriminatory rules adopted by the Committee. A Non-Employee Director's Deferral Election shall specify the portion of his or her Retainer and Eligible Fees (including any portion of his or her Stock Retainer or any portion of his or her Cash Retainer that he or she has elected to receive in Stock pursuant to subsection 2.2) to be deferred and the future date as of which distribution of the deferred amounts is to be made in accordance with the terms and conditions of the Plan (the "Distribution Date"). If no Distribution Date is specified in a Non-Employee Director's Deferral Election, the Distribution Date shall be deemed to be the first business day in January of the year following the date on which the Non-Employee Director ceases to be a director of the Company for any reason. A Non-Employee Director's Deferral Election shall be effective with respect to the portion of his or her Retainer and Eligible Fees otherwise payable to or, in the case of the Stock Retainer, earned by him or her for services rendered after the last day of the calendar year in which such election is filed with the Committee; provided, however, that: (a) a Deferral Election which is filed within 30 days of the date on which a director first becomes a Non-Employee Director shall be effective with respect to all Eligible Fees and Retainer otherwise payable to or, in the case of the Stock Retainer, earned by him or her after the date of the Deferral Election; and (b) by notice filed with the Committee in accordance with uniform and nondiscriminatory rules established by it, a Non-Employee Director may terminate or modify any Deferral Election as to his or her Retainer and Eligible Fees payable to or, with respect to the Stock Retainer, earned by him or her for services rendered after the last day of the calendar year in which such notice is filed with the Committee; provided, however, -8- that no modification may be made to the Distribution Date unless the Non-Employee Director shall file such notice with the Committee at least one year prior to the Distribution Date. Notwithstanding the provisions of paragraph (b) next above, the Committee may, in its sole discretion, after considering all of the pertinent facts and circumstances, approve a change to the Distribution Date which is requested by a Non-Employee Director less than one year prior thereto. For purposes of the Plan, the term "Eligible Fees" means the meeting fees, committee fees and committee chair fees (and does not include any portion of the Retainer) that would otherwise be payable to the Non-Employee Director by the Company as established, from time to time, by the Board or any committee thereof. 3.2 Crediting and Adjustment of Deferred Amounts. The amount of any -------------------------------------------- Retainer and Eligible Fees deferred pursuant to subsection 3.1 ("Deferred Compensation") shall be credited to a bookkeeping account maintained by the Company in the name of the Non-Employee Director (the "Deferred Compensation Account"), which account shall consist of two subaccounts, the "Company Stock Subaccount" and the "Cash Subaccount." The amount, if any, of the Stock Retainer or the Cash Retainer that the Non-Employee Director has elected to receive in Stock pursuant to subsection 2.2 and with respect to which he or she has filed a Deferral Election pursuant to subsection 3.1 shall be credited to his or her Company Stock Subaccount. Any other Deferred Compensation shall be credited to his or her Cash Subaccount. A Non-Employee Director's Deferred Compensation Account shall be adjusted as follows: (a) As of the first day of each calendar quarter (which dates are referred to herein as "Accounting Dates"), the Non-Employee Director's Cash Subaccount shall be adjusted as follows: (i) first, the amount of any distributions made since the last ----- preceding Accounting Date and attributable to the Cash Subaccount shall be charged to the Cash Subaccount; (ii) next, the balance of the Cash Subaccount after adjustment in ---- accordance with subparagraph (i) next above shall be credited with interest since the last preceding Accounting Date computed at the prime rate as reported by The First National -9- Bank of Chicago (or its successor) for such date or, if such date is not a business day, for the next preceding business day; (iii) finally, after adjustment in accordance with the foregoing ------- provisions of this paragraph (a), the Cash Subaccount shall be credited with the portion of the Deferred Compensation otherwise payable to the Non-Employee Director since the last preceding Accounting Date which is to be credited to the Cash Subaccount. (b) The Non-Employee Director's Company Stock Subaccount shall be adjusted as follows: (i) as of any date on or after the Effective Date on which any portion of a Non-Employee Director's Retainer would have been payable to the Non-Employee Director in Stock but for his or her Deferral Election, the Company Stock Subaccount shall be credited with a number of "Stock Units" equal to the number of shares of Stock (including any fractional shares) to which he or she would have been entitled pursuant to Section 2; (ii) as of the date on which shares of Stock are distributed to the Non-Employee Director in accordance with subsection 3.3 below, an equal number of Stock Units will be subtracted from the Company Stock Subaccount; and (iii) as of the record date for any dividend paid on Stock, the Company Stock Subaccount shall be credited with that number of additional Stock Units which is equal to the number obtained by multiplying the number of Stock Units then credited to the Company Stock Subaccount by the amount of the cash dividend or the fair market value (as determined by the Board) of any dividend in kind payable on a share of Stock, and dividing that product by the then Fair Market Value of a share of Stock. In the event of any merger, consolidation, reorganization, recapitalization, spinoff, stock split, reverse stock split, rights offering, exchange or other change in the corporate structure or capitalization of the -10- Company affecting the Stock, each Non-Employee Director's Company Stock Subaccount shall be equitably adjusted in such manner as the Committee shall determine in its sole judgment. 3.3 Payment of Deferred Compensation Account. Except as otherwise ---------------------------------------- provided in this subsection 3.3 or subsection 3.4, the balances credited to the Cash Subaccount and Company Stock Subaccount of a Non-Employee Director's Deferred Compensation Account shall each be payable to the Non-Employee Director in a lump sum or quarterly installments (over a period not exceeding ten years) as elected by the Non-Employee Director in his or her Deferral Election; provided, however, that if no distribution form was elected by the Non-Employee Director in his or her Deferral Election, payment shall be made in a lump sum. Installment distributions shall commence as of the first day of the first calendar quarter after the Distribution Date and shall continue as of the first day of each calendar quarter thereafter for the applicable period. Notwithstanding the foregoing, a Non-Employee Director, by filing a notice with the Committee at least one year prior to the Distribution Date, may elect to change the number of payments to a single payment or to any number of quarterly payments not in excess of forty. Each installment payment shall include a cash portion, if applicable, and a Stock portion, if applicable, as follows: (a) The cash portion to be paid as of any date determined under the foregoing provisions of this Section 3.3 and charged to the Cash Subaccount shall be equal to the balance of the Cash Subaccount multiplied by a fraction, the numerator of which is one and the denominator of which is the number of remaining payments to be made, including such payment. (b) The Stock portion to be paid as of any date determined under the foregoing provisions of this Section 3.3 and charged to the Company Stock Subaccount shall be distributed in whole shares of Stock, the number of shares of which shall be determined by rounding to the next lower integer the product obtained by multiplying the number of Stock Units then credited to the Non-Employee Director's Company Stock Subaccount by a fraction, the numerator of which is one and the denominator of which is the number of remaining payments to be made, including such payment. The Fair Market Value of any fractional share of Stock remaining after all installment Stock distributions have been made to the Non-Employee -11- Director pursuant to this paragraph (b) shall be paid to the Non- Employee Director in cash. Notwithstanding the foregoing, the Committee, in its sole discretion, may distribute all balances in any Deferred Compensation Account to a Non-Employee Director (or former Non-Employee Director) in a lump sum as of any date. 3.4 Payments in the Event of Death. If a Non-Employee Director dies ------------------------------ before payment of his or her Deferred Compensation Account commences, all amounts then credited to his or her Deferred Compensation Account shall be distributed to his or her Beneficiary (as described below), as soon as practicable after his or her death, in a lump sum. If a Non-Employee Director dies after payment of his or her Deferred Compensation Account has commenced but before the entire balance of such account has been distributed, the remaining balance thereof shall be distributed to his or her Beneficiary, as soon as practicable after his or her death, in a lump sum. Any amounts in the Cash Subaccount shall be distributed in cash and any amounts in the Stock Subaccount shall be distributed in whole shares of Stock determined in accordance with paragraph 3.3(b), and the Fair Market Value of any fractional share of Stock shall be distributed in cash. For purposes of the Plan, the Non-Employee Director's "Beneficiary" is the person or persons the Non-Employee Director designates, which designation shall be in writing, signed by the Non-Employee Director and filed with the Committee prior to the Non-Employee Director's death. A Beneficiary designation shall be effective when filed with the Committee in accordance with the preceding sentence. If more than one Beneficiary has been designated, the balance in the Non-Employee Director's Deferred Compensation Account shall be distributed to each such Beneficiary per capita (with cash distributed in lieu of any fractional share of Stock). In the absence of a Beneficiary designation or if no Beneficiary survives the Non- Employee Director, the Beneficiary shall be the Non-Employee Director's estate. SECTION 3A ---------- Stock Grants for Special Independent Committee ---------------------------------------------- Each member of the Special Independent Committee appointed by the Board of Directors on May 27,1998 shall be awarded 1,000 shares of stock and the chairman of that committee shall be awarded 2,000 shares of stock, to be paid upon the earlier of -12- completion of the proposed merger of the Company with Inland Steel Industries, Inc. or abandonment of the merger. SECTION 4 --------- Amendment and Termination ------------------------- While the Company expects and intends to continue the Plan, the Board reserves the right to, at any time and in any way, amend, suspend or terminate the Plan; provided, however, that no amendment, suspension or termination shall: (a) be made without shareholder approval to the extent such approval is required by law, agreement or the rules of any exchange or automated quotation system upon which the Stock is listed or quoted; (b) except as provided in subsection 3.3 (relating to lump sum payments of amounts held in a Non-Employee Director's Deferred Compensation Account) or this Section 4, materially alter or impair the rights of a Non-Employee Director under the Plan without the consent of the Non- Employee Director with respect to rights already accrued hereunder; or (c) make any change that would disqualify the Plan or any other plan of the Company intended to be so qualified from the exemption provided by Rule 16b-3 under the Securities Exchange Act of 1934, as amended. -13- EX-10.22 8 AMENDMENT TO SEVERANCE AGREEMENT (R. DARNALL) EXHIBIT 10.22 October 27, 1998 Mr. Robert J. Darnall 1500 North Lake Shore Drive Unit 20-C Chicago, IL 60610 Dear Bob: This letter constitutes an amendment of the agreement dated January 28, 1998 between you and Inland Steel Industries, Inc. (the "Company") relating to a change in control of the Company (the "Agreement"). The sale of Inland Steel Company to Ispat International constituted a "Change in Control" within the meaning of the Agreement. Under the terms of the Agreement, you would become entitled to certain compensation in accordance with Section 4 thereof if your employment were to be terminated within two years of the Change in Control either by the Company other than for "Cause" or by you for "Good Reason". You and the Company have agreed that upon a termination of your employment with the Company, you will be entitled to all of the payments and benefits provided under the Agreement upon a termination for "Good Reason," subject to the following: (i) In lieu of the severance benefit to which you would otherwise be entitled under subparagraph 4(iii)(B) of the Agreement, you shall be entitled to a lump sum payment of $720,000. (ii) You may elect at any time prior to your termination of employment that, in lieu of the cash payment to which you would otherwise be entitled under subparagraph 4(iii)(D) of the Agreement, all or any portion of your stock options shall continue to be exercisable in accordance with their terms. (iii) The life, disability and accident insurance benefits and financial consulting benefits to which you are entitled under paragraph 4(iv) shall continue in effect until you attain age 65. The health insurance benefits to which you would otherwise be entitled under paragraph 4(iv) shall be provided to you and your wife until each of you are eligible for Medicare coverage; provided, however, that until each of you are entitled to Medicare, such health insurance shall be secondary to the health insurance provided by any future employer. Upon attainment of age 65, you will be entitled to retiree health and life insurance coverage under such terms and conditions as would be applicable to employees retiring from the Company in 1998 prior to the date hereof. You acknowledge that the amount to which you will be entitled upon termination of your employment under the Agreement as amended by this letter is less than the amount to which you would be entitled under the Agreement if your employment were involuntarily terminated by the Company immediately prior to the date hereof, that the foregoing commitments of the Company constitute the sole and adequate consideration therefor, and that the payments under the Agreement as amended by this letter are in lieu of any other severance benefits payable to or on your account by reason of your termination of employment with the Company. You have agreed that for the two-year period commencing on the date of your termination of employment, you will not be employed by or provide consulting or other services to any of A.M. Castle & Co., Friedman Industries Incorporated, Huntco Inc., Olympic Steel, Inc., Reliance Steel & Aluminum Co. or Steel Technologies Inc. or any similar steel distribution company or to any successor thereto. In consideration for your agreement to refrain from providing such services, the Company has agreed to pay you $720,000 no later than five business days after the date on which your employment terminates. You agree that money damages would not be adequate to compensate the Company should you breach the foregoing agreement, and you agree, therefore, that the Company shall be entitled to enjoin you from providing any such services in the event of any actual or threatened breach by you. Except as modified above, all other provisions of the Agreement shall continue in full force and effect. If the foregoing properly reflects our understanding, please sign the enclosed copy of this letter and return it to my attention. Very truly yours, /s/ George A. Ranney, Jr. George A. Ranney, Jr. Vice President and General Counsel Agreed to this 27th day of October, 1998 /s/ Robert J. Darnall - ------------------------------ Robert J. Darnall EX-10.23 9 AMENDMENT TO SEVERANCE AGREEMENT (J.M. GRATZ) EXHIBIT 10.23 November 6, 1998 Mr. Jay M. Gratz 1242 N. Astor Chicago, IL 60610 Dear Jay: This letter constitutes an amendment of the agreement dated January 28, 1998 between you and Inland Steel Industries, Inc. ("Industries") relating to a change in control of Industries (the "Agreement"). The sale of Inland Steel Company to Ispat International (the "ISC Sale") constituted a "Change in Control" within the meaning of the Agreement. Under the terms of the Agreement, you would become entitled to certain compensation in accordance with Section 4 thereof if your employment were to be terminated within two years of the Change in Control either by Industries other than for "Cause" or by you for "Good Reason". You and Industries have agreed that you will continue in the employ of Industries as its Vice President and Chief Financial Officer through November 30, 1998 and, thereafter, will be employed by Ryerson Tull, Inc. ("RT"). You will be entitled to a change in control agreement from RT and have agreed that you will not be entitled to severance benefits under paragraph 4(iii)(B) of the Agreement upon your termination of employment with Industries or RT. The Compensation Committee of Industries' Board of Directors has agreed that you shall be entitled to cash in lieu of shares issuable upon exercise of options awarded to you prior to the Change in Control at the Change in Control Price defined in subparagraph 4(iii)(D) of the Agreement at any time on or before the third anniversary of this letter (but not beyond the original term of any such option). Upon your termination of employment with RT for any reason, you shall be entitled to life, disability, accident and health insurance benefits and other employee fringe benefits to the same extent as an employee who retires from Industries on a Rule of 65 retirement on the date hereof. J.M. Gratz Page 2 In order to induce you to continue in the employ of RT and to assure RT of your continued service through at least the second anniversary of the date of this letter, you will be entitled to a lump sum payment described in the following provisions of this paragraph on the earlier of January 1, 2001 or the date on which your employment with RT is terminated for any reason (such earlier date being the "Determination Date"). In consideration thereof, you agree that, in the event of your termination of employment with RT, you will consult with RT for a reasonable per diem payment (i) with respect to matters relating to or arising out of the ISC Sale for a period of two years from the date thereof, and (ii) with respect to all other matters relating to Industries for a period of two years from the date of the Merger. Such lump sum shall be in lieu of (i) the payment, if any, to which you would otherwise be entitled under paragraph 4(v) of the Agreement and (ii) all retirement benefits accrued by you under all non-tax-qualified defined benefit pension plans maintained by Industries or RT, including Industries' and RT's Supplemental Retirement Benefit Plans for Covered Employees and Industries's Special Retirement Benefit Plan for Covered Employees (collectively, the "Non-Qualified Plans"). Such lump sum payment shall be equal to the excess of (x) the actuarial equivalent of the retirement pension which you would have accrued as of the Determination Date under Industries' and RT's tax-qualified and non-tax-qualified defined benefit pension plans assuming no change in the pension formula in effect on the date hereof, but calculated as if you were Rule of 65 eligible and had accumulated (after the Determination Date) an additional thirty-six months of age and service credit at the higher of the rate of your average compensation during the twelve months ended July 16, 1998 or the rate of average compensation used to calculate your benefits under such plans immediately preceding the Determination Date, over (y) the actuarial equivalent of the retirement pension, which you have accrued on the Determination Date under the tax qualified defined benefit pension plans maintained by Industries and RT. Assume, for example, that your employment with RT were to terminate on September 1, 2000 and that you were then age 48, and had accrued 25 years of service. The actuarial equivalent of the aggregate annual retirement pension to which you would then be entitled under all tax-qualified and non-tax-qualified ISI and RT defined benefit pension plans would first be calculated as if you were then age 51 with 28 years of service and were eligible for Rule of 65 (and disregarding any change in the pension formula after the date hereof). That amount would be reduced by the actuarial equivalent of the annual retirement pension which you in fact accrued through September 1, 2000 under the ISI and RT tax-qualified defined benefit pension plans on the basis of your 25 actual years of service and your actual age 48 and taking into account any applicable amendments to the pension formula. J.M. Gratz Page 3 Actuarial equivalence of the deemed amount or actual amount of a retirement pension shall be determined in each instance taking into account any early retirement subsidy associated therewith, shall be calculated assuming payment as a straight life annuity commencing at age 65 or any earlier date, but in no event earlier than the second anniversary of the Determination Date, whichever annuity yields a greater benefit, and shall be determined on the basis of an interest rate of 5.1% (the rate used for such purposes on the date hereof) life only payment form, UP84 Mortality Table and on the basis of such other assumptions as may be utilized under the RT tax-qualified pension plan for purposes of determining lump sum payments under that plan as of the Determination Date. You have agreed that, for the two-year period commencing on the date hereof, you will not be employed by or provide consulting or other services to any of A.M. Castle & Co., Friedman Industries, Incorporated, Huntco Inc., Olympic Steel, Inc., Reliance Steel & Aluminum Co. or Steel Technologies Inc. or to any successor thereto. In consideration for your agreement to refrain from providing such services, the Industries has agreed to pay you $150,000 no later than five business days after the date hereof. You agree that money damages would not be adequate to compensate the Industries should you breach the foregoing agreement, and you agree, therefore, that the Industries shall be entitled to enjoin you from providing any such services in the event of any actual or threatened breach by you. The foregoing benefits shall be in lieu of the severance benefits and all other benefits to which you would otherwise be entitled under Section 4 of the Agreement; provided, however, that you shall continue to be entitled to the benefits of subparagraph 4(iii)(F) through 4(iii)(I) of the Agreement (relating to legal costs and excise taxes). You shall not be entitled to any benefits under the Agreement with respect to any change in control of the Industries or RT occurring after the date of this letter. Except as modified above, all other provisions of this Agreement shall continue in full force and effect. If the foregoing properly reflects our understanding, please sign the enclosed copy of this letter and return it to my attention. Very truly yours, /s/ Robert J. Darnall Robert J. Darnall Chairman Agreed to this 6th day of November 1998 /s/ Jay M. Gratz - ------------------------- Jay M. Gratz EX-10.24 10 AMENDMENT TO SEVERANCE AGREEMENT (G. RANNEY) EXHIBIT 10.24 February 19, 1999 Mr. George A. Ranney, Jr. 18202 West Casey Road Grayslake, IL 60030 Dear George: This letter constitutes an amendment of the agreement dated January 28, 1998 between you and Inland Steel Industries, Inc. (the "Company") relating to a change in control of the Company (the "Agreement"). The sale of Inland Steel Company to Ispat International constituted a "Change in Control" within the meaning of the Agreement. Under the terms of the Agreement, you would become entitled to certain compensation in accordance with Section 4 thereof if your employment were to be terminated within two years of the Change in Control either by the Company other than for "Cause" or by you for "Good Reason". You and the Company have agreed that, upon any termination of your employment with the Company after the date hereof, you shall be entitled to all of the payments and benefits provided under the Agreement upon a termination for "Good Reason," subject to the following: (i) In lieu of the severance benefit to which you would otherwise be entitled under subparagraph 4(iii)(B) of the Agreement, you shall be entitled to a lump sum payment of $260,000. (ii) You may elect at any time prior to your termination of employment that, in lieu of the cash payment to which you would otherwise be entitled under subparagraph 4(iii)(D) of the Agreement with respect to stock options granted prior to such Change in Control, all or a portion of such stock options shall continue to be exercisable in accordance with their terms. For purposes of all of your outstanding stock options, your termination of employment shall be treated as an early retirement with consent of the Compensation Committee of the Company's Board of Directors. (iii) Your termination of employment shall be treated as a termination by the Company without cause for purposes of crediting pension service as if you were continuously employed by the Company from February 26, 1973 in accordance with your August 18, 1995 letter agreement regarding your reemployment by the Company. The payment to which you become entitled under paragraph 4(v) of the Agreement shall be determined after application of such service. The Company acknowledges that you are not entitled to a pension benefit if you ceased to be a partner with Mayer, Brown & Platt as of the date hereof and, accordingly, that your pension from the Company will not be reduced by any pension which you might subsequently be entitled to from Mayer, Brown & Platt if you continue as a partner in that firm. You acknowledge that the amount to which you will be entitled upon termination of your employment under the Agreement as amended by this letter is less than the amount to which you would be entitled under the Agreement if your employment were involuntarily terminated by the Company immediately prior to the date hereof, that the foregoing commitments of the Company constitute the sole and adequate consideration therefor, and that the payments under the Agreement as amended by this letter are in lieu of any other severance benefits payable to or on your account by reason of your termination of employment with the Company. You have agreed that for the two-year period commencing on the date of your termination of employment, you will not be employed by or provide consulting or other services to any of A.M. Castle & Co., Friedman Industries, Incorporated, Huntco Inc., Olympic Steel, Inc., Reliance Steel & Aluminum Co. or Steel Technologies Inc., or to any successor thereto. Such restriction shall not restrict the services which a law firm with which you are affiliated provides to any such entity provided that you do not participate in the provision of such services. In consideration for your agreement to refrain from providing such services, the Company has agreed to pay you $400,000 no later than April 1, 1999. You agree that money damages would not be adequate to compensate the Company should you breach the foregoing agreement, and you agree, therefore, that the Company shall be entitled to enjoin you from providing any such services in the event of any actual or threatened breach by you. Except as modified above, all other provisions of this Agreement shall continue in full force and effect. If the foregoing properly reflects our understanding, please sign the enclosed copy of this letter and return it to my attention. Very truly yours, /s/ Vicki L. Avril Vicki L. Avril Vice President Finance and Chief Financial Officer Agreed to this 19th day of February, 1999 /s/ George A. Ranney, Jr. - ----------------------------- George A. Ranney, Jr. EX-10.25 11 FORM OF CHANGE IN CONTROL AGREEMENT EXHIBIT 10.25 Dear: Ryerson Tull, Inc.("RTI") considers it essential to the best interests of its stockholders to foster the continuous employment of key management personnel of RTI and its subsidiaries (collectively, the "Company"). In this connection, the Board of Directors of RTI (the "Board") recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of RTI and its stockholders. The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Company. In order to induce you to remain in the employ of the Company and in consideration of your agreement set forth in Subsection 2(ii) hereof, RTI agrees that you shall receive the severance benefits set forth in this letter agreement ("Agreement") in the event your employment with the Company is terminated subsequent to a "change in control of the Company" (as defined in Section 2 hereof) or in connection with a "potential change in control of the Company" (as defined in Section 2 hereof) under the circumstances described below. This Agreement shall constitute an amendment and restatement of and shall supersede any prior agreement entered into between you and RTI with respect to these matters. In the event that you receive severance benefits hereunder, such benefits shall be in lieu of, and you shall not be entitled to receive, any benefits or payments under any other severance plan, policy or agreement of or with the Company. In addition, if you are or become entitled to benefits from the Company pursuant to another agreement providing for benefits on account of a change in control or the law of a jurisdiction other than the United States or any state or territory thereof as a result of an event for which benefits are payable to you pursuant this Agreement, the benefits paid to you pursuant to this Agreement shall be reduced by the amount paid to you pursuant to such other agreement or law. 1. Term of Agreement. This Agreement shall commence on the date hereof ----------------- and shall continue in effect through December 31, 1999; provided, however, that commencing on January 1, 2000 and each January 1 thereafter, the term of this Agreement shall automatically be extended for Page 2 one additional year unless, during the preceding year but not later than June 30 of such preceding year, RTI shall have given notice that it does not wish to extend this Agreement. Notwithstanding the preceding sentence: (i) if your employer is a direct or indirect subsidiary of RTI, this Agreement shall terminate on the date on which RTI ceases to own, directly or indirectly, at least 80 percent of your employer for any reason which does not constitute a change in control of the Company, and (ii) if a change in control of the Company or a potential change in control of the Company shall have occurred during the original or extended term of this Agreement, this Agreement shall continue in effect for a period of twenty-four (24) months beyond the month in which such change in control or potential change in control of the Company occurred unless earlier terminated under clause (i) next above. 2. Change in Control; Potential Change in Control. (i) No benefits shall ---------------------------------------------- be payable hereunder unless there shall have been a potential change in control or a change in control of the Company, as set forth below. For purposes of this Agreement, a "change in control of the Company" shall be deemed to have occurred if: (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than (w) the Company, (x) a trustee or other fiduciary holding voting securities under an employee benefit plan of the Company, (y) an underwriter temporarily holding voting securities pursuant to an offering of such securities, or (z) a corporation owned, directly or indirectly, by the securityholders of RTI in substantially the same proportions as their ownership of voting securities of RTI, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of voting securities of RTI (not including in the voting securities beneficially owned by such person any voting securities acquired directly from RTI or its affiliates) representing 40% or more of the combined voting power of RTI's then outstanding voting securities; (B) during any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with RTI to effect a transaction described in clauses (A), (C) or (D) of this Subsection 2(i)) whose election by the Board or nomination for election by RTI's securityholders was approved by a vote of at least two- thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved ("Continuing Directors"), cease for any reason to constitute a majority thereof; Page 3 (C) the holders of voting securities of RTI approve a merger or consolidation of RTI with any other corporation, other than a merger or consolidation which would result in the voting securities of RTI outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding voting securities under an employee benefit plan of the Company, at least 60% of the combined voting power of the voting securities of RTI or such surviving entity outstanding immediately after such merger or consolidation, or a merger or consolidation effected to implement a recapitalization of RTI (or similar transaction) in which no person acquires more than 50% of the combined voting power of RTI's then outstanding voting securities; (D) the holders of voting securities of RTI approve a plan of complete liquidation of RTI or an agreement for the sale or disposition by RTI of all or substantially all of RTI's assets; or (E) there occurs: (x) a sale or disposition, directly or indirectly, other than to a person described in subclause (w), (x) or (z) of clause (A) of this Subsection 2(i), of voting securities of your employer, any direct or indirect parent company of your employer or any company that is a subsidiary of your employer and is also a significant subsidiary (as defined below) of RTI (your employer and such a parent or subsidiary being a "Related Company"), representing 50% or more of the combined voting power of the securities of such Related Company then outstanding; (y) a merger or consolidation of a Related Company with any other corporation, other than: (1) a merger or consolidation which would result in the voting securities of the Related Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding voting securities under an employee benefit plan of the Company, at least 60% of the combined voting power of the voting securities of the Related Company or such surviving entity outstanding immediately after such merger or consolidation; (2) a merger or consolidation effected to implement a recapitalization of the Related Company (or similar transaction) in which no Page 4 person acquires more than 50% of the combined voting power of the Related Company's then outstanding voting securities; or (3) a merger or consolidation which would result in 50% or more of the combined voting power of the surviving company being beneficially owned by RTI or by a majority owned direct or indirect subsidiary of RTI; or (z) the sale or disposition of all or substantially all the assets of a Related Company to a person other than RTI or a majority owned direct or indirect subsidiary of RTI. Notwithstanding any other provision of this Agreement, no change in control of the Company shall be deemed to have occurred under this Subsection 2(i) if (I) such transaction includes or involves a sale to the public or a distribution to the stockholders of RTI of more than 50% of the voting securities of your employer or a direct or indirect parent of your employer, and (II) your employer or a direct or indirect parent of your employer agrees to become a successor to RTI under this Agreement or you are covered by an agreement providing for benefits upon a change in control of your employer following an event described clause (E). For purposes of this Agreement, the term "significant subsidiary" has the meaning given to such term under Rule 405 of the Securities Act of 1933, as amended. (ii) For purposes of this Agreement, a "potential change in control of the Company" shall be deemed to have occurred if: (A) RTI enters into an agreement, the consummation of which would result in the occurrence of a change in control of the Company; (B) any person (including RTI) publicly announces an intention to take or to consider taking actions which if consummated would constitute a change in control of the Company; (C) any person, other than (w) the Company, (x) a trustee or other fiduciary holding voting securities under an employee benefit plan of the Company, (y) an underwriter temporarily holding voting securities pursuant to an offering of such securities, or (z) a corporation owned, directly or indirectly, by the securityholders of RTI in substantially the same proportions as their ownership of voting securities of RTI, who is or becomes the beneficial owner, directly or indirectly, of voting securities of RTI representing 9.5% or more of the combined voting power of RTI's then outstanding voting securities, increases his beneficial Page 5 ownership of such securities by 5% or more over the percentage so owned by such person on the date hereof; or (D) the Board adopts a resolution to the effect that, for purposes of this Agreement, a potential change in control of the Company has occurred. You agree that, subject to the terms and conditions of this Agreement, in the event of a potential change in control of the Company, you will remain in the employ of the Company until the earliest of (i) a date which is six (6) months from the occurrence of such potential change in control of the Company, (ii) the termination by you of your employment by reason of Disability or Retirement, as defined in Subsection 3(i), or (iii) the occurrence of a change in control of the Company. If your employment is terminated by the Company without Cause (as defined in Subsection 3(ii) below) coincident with or prior to a change in control of the Company and within twelve (12) months after the occurrence of a potential change in control of the Company and a change in control of the Company occurs within six (6) months after such termination, you shall be entitled to the compensation and benefits hereunder as if your termination of employment without Cause followed a change in control of the Company; provided, however, that no benefits shall be payable under this sentence if prior to the change in control of the Company, RTI ceased to own, directly or indirectly, at least 80% of the voting securities of your employer. (iii) The foregoing to the contrary notwithstanding, a change in control of the Company shall not be deemed to have occurred with respect to you if: (A) the event first giving rise to the potential change in control of the Company involves a publicly announced transaction or publicly announced proposed transaction which at the time of the announcement has not been previously approved by the Board and you are "part of a purchasing group" (as defined below) proposing the transaction; (B) you are part of a purchasing group which consummates the change in control transaction; or (C) the change in control of the Company would otherwise occur under Subsection 2(i)(D) due to the sale of a significant subsidiary, which significant subsidiary constitutes all or substantially all of the assets of RTI and you are not employed by RTI or the significant subsidiary which is the subject of the transaction. For purposes of this Agreement, you shall be deemed "part of a purchasing group" if you are an equity participant or have agreed to become an equity participant in the purchasing company or group (except for (A) passive ownership of less than 1% of the stock of the purchasing company or Page 6 (B) ownership of equity participation in the purchasing company or group which is otherwise not deemed to be significant, as determined prior to the change in control of the Company by a majority of the non-employee Continuing Directors). 3. Termination Following Change in Control. If a change in control of the --------------------------------------- Company, as defined in Section 2 hereof, shall have occurred, you shall be entitled to the benefits provided in Subsection 4(iii) hereof upon the subsequent termination of your employment during the term of this Agreement unless such termination is (A) because of your death, Disability or Retirement, (B) by the Company for Cause, or (C) by you other than for Good Reason. (i) Disability; Retirement. If, as a result of your incapacity due to ---------------------- physical or mental illness, you shall have been absent from the full-time performance of your duties with the Company for six (6) consecutive months, and within thirty (30) days after written notice of termination is given you shall not have returned to the full-time performance of your duties, your employment may be terminated for "Disability". Termination by the Company or you of your employment based on "Retirement" shall mean termination on or after your normal retirement age in accordance with the Company's retirement policy generally applicable to its salaried employees or in accordance with any retirement arrangement established with your consent with respect to you. (ii) Cause. Termination by the Company of your employment for "Cause" ----- shall mean termination upon (A) the willful and continued failure by you to substantially perform your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination by you for Good Reason as defined in Subsections 3(iv) and 3(iii), respectively) after a written demand for substantial performance is delivered to you by the Board, which demand specifically identifies the manner in which the Board believes that you have not substantially performed your duties, or (B) the willful engaging by you in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise. For purposes of this Subsection 3(ii), no act, or failure to act, on your part shall be deemed "willful" unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Company. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in clauses (A) or (B) of the first sentence of this Subsection 3(ii) and specifying the particulars thereof in detail. Page 7 (iii) Good Reason. You shall be entitled to terminate your employment for ----------- Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without your express written consent, the occurrence after a change in control of the Company of any of the following circumstances unless, in the case of paragraphs (A), (E), (F), (G) or (H), such circumstances are fully corrected prior to the Date of Termination specified in the Notice of Termination, as defined in Subsections 3(v) and 3(iv), respectively, given in respect thereof: (A) the assignment to you of any duties inconsistent with your status as an executive officer of the Company or a substantial adverse alteration in the nature or status of your responsibilities from those in effect immediately prior to the change in control of the Company other than any such alteration primarily attributable to the fact that the Company may no longer be a public company; (B) a reduction by the Company in your annual base salary as in effect on the date hereof or as the same may be increased from time to time; (C) the Company's requiring that your principal place of business be at an office located more than 50 miles from where your principal place of business is located immediately prior to the change in control of the Company, except for required travel on the Company's business to an extent substantially consistent with your business travel obligations immediately prior to the change in control of the Company; (D) the failure by the Company, without your consent, to pay to you any portion of your current compensation, or to pay to you any portion of an installment of deferred compensation under any deferred compensation program of the Company, within seven (7) days of the date such compensation is due; (E) the failure by the Company to continue in effect any compensation plan in which you participate immediately prior to the change in control of the Company which is material to your total compensation, including but not limited to the Ryerson Tull Annual Incentive Plan (the "Annual Incentive Plan"), Ryerson Tull 1995 Incentive Stock Plan and Ryerson Tull 1999 Incentive Stock Plan (collectively, the "Incentive Stock Plans"), Ryerson Tull Supplemental Retirement Plan for Covered Employees (the "Supplemental Plan"), Ryerson Tull Nonqualified Savings Plan (the "Nonqualified Savings Plan"), Ryerson Tull Pension Plan (the "Pension Plan") and Ryerson Tull Savings Plan (the "Savings Plan") or any substitute or alternative plans adopted prior to the change in control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue your participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms Page 8 of the amount of benefits provided and the level of your participation relative to other participants, as existed at the time of the change in control; (F) the failure by the Company to continue to provide you with benefits substantially similar to those enjoyed by you under any of the Company's pension, life insurance, medical, health and accident, flexible spending or disability plans or programs in which you were participating at the time of the change in control of the Company, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive you of any material fringe benefit enjoyed by you at the time of the change in control of the Company, or the failure by the Company to provide you with the number of paid vacation days to which you are entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect at the time of the change in control of the Company; (G) the failure of RTI to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 5 hereof; or (H) any purported termination of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Subsection 3(iv) below (and, if applicable, the requirements of Subsection 3(ii) above); for purposes of this Agreement, no such purported termination shall be effective. Your right to terminate your employment pursuant to this Section 3 shall not be affected by your incapacity due to physical or mental illness. Your continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder. (iv) Notice of Termination. Any purported termination of your employment --------------------- by the Company or by you shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. (v) Date of Termination, Etc. "Date of Termination" shall mean (A) if ------------------------- your employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such thirty (30) day period), and (B) if your employment is terminated pursuant to Subsection 3(ii) or 3(iii) above or for any other reason (other than Disability), the date specified in the Notice of Termination (which, in Page 9 the case of a termination pursuant to Subsection 3(ii) above shall not be less than thirty (30) days, and in the case of a termination pursuant to Subsection 3(iii) above shall not be less than fifteen (15) nor more than sixty (60) days, respectively, from the date such Notice of Termination is given); provided that if within fifteen (15) days after any Notice of Termination is given, or, if later, prior to the Date of Termination (as determined without regard to this proviso), the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding arbitration award, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected) but shall be deemed to be within the twenty four (24) month period following a change in control of the Company; provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company will continue to pay you your full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue you as a participant in all compensation, benefit and insurance plans and programs in which you were participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this Subsection 3(v). Amounts paid under this Subsection 3(v) are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement. 4. Compensation Upon Termination or During Disability. Following a change -------------------------------------------------- in control of the Company, as defined by Subsection 2(i), upon termination of your employment or during a period of Disability you shall be entitled to the following benefits: (i) During any period that you fail to perform your full-time duties with the Company as a result of incapacity due to physical or mental illness, you shall continue to receive your base salary at the rate in effect at the commencement of any such period, together with all compensation payable to you under the Pension Plan, Supplemental Plan, Annual Incentive Plan, Savings Plan and Nonqualified Savings Plan during such period, until this Agreement is terminated pursuant to Subsection 3(i) hereof. Thereafter, in the event your employment shall be terminated, your benefits shall be determined under the Company's retirement, insurance and other compensation plans and programs then in effect in accordance with the terms of such plans and programs. (ii) If your employment shall be terminated by the Company for Cause or by you other than for Good Reason, Disability, death or Retirement, the Company shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts to which you are entitled under any compensation plan of the Company at the time Page 10 such payments are due, and the Company shall have no further obligations to you under this Agreement. (iii) If your employment by the Company shall be terminated (a) by the Company other than for Cause, Retirement or Disability, or (b) by you for Good Reason, then you shall be entitled to the compensation and benefits provided below: (A) The Company shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts to which you are entitled under any compensation plan or program of the Company, at the time such payments are due, except as otherwise provided below. (B) In lieu of any further salary payments to you for periods subsequent to the Date of Termination, the Company shall pay as severance pay to you a lump sum severance payment (together with the payments provided in paragraphs C, D and E below, the "Severance Payments") equal to three times the sum of (x) your annual base salary in effect immediately prior to the occurrence of the circumstance giving rise to the Notice of Termination given in respect thereof, and (y) the average annual amount of the Award paid to you pursuant to the Annual Incentive Plan or similar successor plan with respect to the five years immediately preceding that in which the Date of Termination occurs, such average annual amount being calculated by aggregating all such Awards paid with respect to such five years and dividing such aggregate amount by the number of years for which such an Award was actually paid to you. (C) Notwithstanding any provision of the Annual Incentive Plan, the Company shall pay to you a lump sum amount equal to the sum of (x) any incentive compensation under the Annual Incentive Plan which has been allocated or awarded to you for a completed fiscal year or other measuring period preceding the Date of Termination but has not yet been paid, and (y) a pro rata portion to the Date of Termination for the current fiscal year or other measuring period of the amount equal to the Target Award percentage applicable to you under the Annual Incentive Plan or similar successor plan on the Date of Termination times your annual base salary then in effect. (D) In lieu of shares of common stock of RTI ("RTI Shares") issuable upon exercise of outstanding stock options granted to you under RTI's stock option plans (including outstanding options previously granted to you under the Ryerson Tull 1996 Incentive Stock Plan (the "RT 1996 Stock Plan"), collectively, ("Options")) (which Options shall be cancelled upon the making of the payment referred to below), you shall receive an amount in cash equal to the product of (i) the excess of (x) in the case of incentive stock options (as Page 11 defined in section 422A of the Internal Revenue Code of 1986, as amended (the "Code")) ("ISOs"), granted after the date of this Agreement (without regard to any renewal hereof), the closing price of RTI's shares as reported on the New York Stock Exchange Composite Transactions on or nearest the Date of Termination, or in the case of all other Options (other than ISOs granted prior to the date of this Agreement (without regard to any renewal hereof)), the Change in Control Price (as defined below), over (y) the per share exercise price of each Option then held by you (whether or not then fully exercisable), times (ii) the number of RTI Shares covered by each such Option. For purposes of this Agreement, the "Change in Control Price" means: (1) with respect to a merger or consolidation of RTI described in Subsection 2(i)(C) in which the consideration per share of RTI's common stock to be paid for the acquisition of shares of common stock specified in the agreement of merger or consolidation is all in cash, the highest such consideration per share; (2) with respect to a change in control of the Company by reason of an acquisition of voting securities described in Subsection 2(i)(A), the highest price per share for any share of RTI's common stock paid by any holder of any of the securities representing 40% or more of the combined voting power of RTI giving rise to the change in control of the Company; and (3) with respect to a change in control of the Company by reason of a merger or consolidation of RTI (other than a merger or consolidation described in Clause (1) next above), stockholder approval of an agreement or plan described in Subsection 2(i)(D), a change in the composition of the Board described in Subsection 2(i)(B) or a change in control of the Company pursuant to Subsection 2(i)(E) (relating to mergers, consolidations and sales of securities or assets of a Related Company), the highest price per share of common stock reported on the New York Stock Exchange Composite Transactions (or, if such shares are not traded on the New York Stock Exchange, such other principal market on which such shares are traded) during the sixty (60) day period ending on the date the change in control of the Company occurs. (E) To the extent not otherwise vested in accordance with the terms and conditions of the Incentive Stock Plans or the RT 1996 Stock Plan, you shall be fully vested in any restricted shares issued thereunder and be fully vested in any performance shares that you would have earned under the Incentive Stock Plans or the RT 1996 Stock Plan, as applicable, for the calendar year in which the change in control of the Company occurs had the applicable performance targets for such calendar year been satisfied with respect to such shares. (F) The Company shall also pay to you all legal fees and expenses incurred by you as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the Page 12 extent attributable to the application of Section 4999 of the Code to any payment or benefit provided hereunder). Such payments shall be made at the later of the times specified in paragraph (J) below, or within five (5) days after your request for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. (G) In the event that you become entitled to any payments provided for hereinabove (the "Contract Payments"), if the Contract Payments or other portion of the Total Payments (as defined below) will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code, the Company shall pay to you, no later than the fifth day following the Date of Termination, an additional amount (the "Gross-Up Payment") such that the net amount retained by you, after deduction of any Excise Tax on the Contract Payments and such other Total Payments and any federal and state and local income and other payroll taxes and Excise Tax upon the payment provided for by this paragraph (G), shall be equal to the Contract Payments and such other Total Payments. (H) For purposes of determining whether any of the payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) any other payments or benefits received or to be received by you in connection with a change in control of the Company or your termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person whose actions result in a change in control or any person affiliated with the Company or such person) payable pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person whose actions result in a change in control or any person affiliated with the Company or such person (together with the Contract Payments, the "Total Payments"), shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code and all "excess parachute payments" within the meaning of Section 280G(b)(l) of the Code shall be treated as subject to the Excise Tax unless in the opinion of tax counsel selected by ISI's independent auditors and reasonably acceptable to you, such other payments or benefits (in whole or in part) do not constitute parachute payments, including by reason of Section 280G(b)(4)(A) of the Code or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4)(B) of the Code in excess of the base amount allocable to such reasonable compensation within the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax, (ii) the amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (A) the amount of the Total Payments or (B) the amount of excess parachute payments within the meaning of Section 280G(b)(l) of the Code (after applying clause (i) above), and (iii) the value of any noncash benefits or any deferred payment or benefit shall be determined by ISI's independent auditors in accordance with the principles Page 13 of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, you shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of your residence on the Date of Termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (I) In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of your employment, you shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined the portion of the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and federal and state and local income tax imposed on the Gross-Up Payment being repaid by you if such repayment results in a reduction in Excise Tax and/or a federal and state and local income tax deduction) plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time of the termination of your employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional gross-up payment in respect of such excess (plus any interest payable with respect to such excess) at the time that the amount of such excess is finally determined. (J) The payments provided for in paragraphs (B), (C) and (D) above, shall be made not later than the fifth day following the Date of Termination, provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to you on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to you payable on the fifth day after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). (iv) If your employment shall be terminated (A) by the Company other than for Cause, Retirement or Disability or (B) by you for Good Reason, then for a thirty six (36) month period after such termination, the Company shall arrange to provide you with: (1) life, disability, accident and health insurance benefits substantially similar to those which you are receiving Page 14 immediately prior to the Notice of Termination, and (2) outplacement services. Benefits otherwise receivable by you pursuant to this Subsection 4(iv) shall be reduced to the extent comparable benefits are actually received by you during the thirty six (36) month period following your termination, and any such benefits actually received by you shall be reported to the Company. Any rights that you have to continuation of life, disability, accident or health coverage under applicable state or federal law shall be in addition to those provided under this Agreement. (v) If your employment shall be terminated (A) by the Company other than for Cause, Retirement or Disability or (B) by you for Good Reason, then in addition to the retirement benefits to which you are entitled under the Pension Plan and Supplemental Plan or any successor plans thereto, the Company shall pay you in cash at the time and in the manner provided in paragraph (J) of Subsection 4(iii), a lump sum equal to the excess of (x) the actuarial equivalent of the retirement pension (taking into account any early retirement subsidy associated therewith and determined as a straight life annuity commencing at age sixty-five (65) or any earlier date, but in no event earlier than the second anniversary of the Date of Termination whichever annuity yields a greater benefit) which you would have accrued under the terms of the Pension Plan and Supplemental Plan (without regard to any amendments to any such plans made subsequent to a change in control of the Company and on or prior to the Date of Termination, which amendment adversely affects in any manner the computation of retirement benefits thereunder), determined as if you were fully vested thereunder and had accumulated (after the Date of Termination) thirty six (36) additional months of age and service credit thereunder at the higher of the rate of average compensation during the twelve (12) months prior to the change in control of the Company or the rate of average compensation used to calculate your benefits under such plans immediately preceding the Date of Termination, over (y) the actuarial equivalent of the retirement pension (taking into account any early retirement subsidy associated therewith and determined as a straight life annuity commencing at age sixty-five (65) or any earlier date, but in no event earlier than the Date of Termination whichever annuity yields a greater benefit) which you had then accrued pursuant to the provisions of the Pension Plan and the Supplemental Plan. For purposes of this Subsection 4(v), "actuarial equivalent" shall be determined using the same assumptions utilized under the Pension Plan for purposes of determining alternative forms of benefits immediately prior to the change in control of the Company. (vi) You shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by you to the Company, or otherwise, except as provided in Subsection 4(iv). Page 15 (vii) In addition to all other amounts payable to you under this Section 4, you shall be entitled to receive all benefits payable to you under the Pension Plan, the Savings Plan, Supplemental Plan and Nonqualified Savings Plan and any other plan or agreement relating to retirement benefits. 5. Successors; Binding Agreement. (i) RTI will require any successor ----------------------------- (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of RTI to expressly assume and agree to perform this Agreement in the same manner and to the same extent that RTI or the Company would be required to perform it if no such succession had taken place. Failure of RTI to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the same amount and on the same terms as you would be entitled to hereunder if you terminate your employment for Good Reason following a change in control of the Company, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. In the event a successor of RTI assumes and agrees to perform this Agreement, by operation of law or otherwise, the term "RTI", as used in this Agreement, shall mean such successor and the term "Company" shall mean, collectively, such successor and the affiliates of such successor. (ii) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. 6. Notice. For the purpose of this Agreement, notices and all other ------ communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notice to the Company shall be directed to the attention of the Board with a copy to the Secretary of RTI, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 7. Miscellaneous. No provision of this Agreement may be modified, waived ------------- or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition Page 16 or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Illinois. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. The obligations of RTI and the Company under Section 4 shall survive the expiration of the term of this Agreement. 8. Validity. The invalidity or unenforceability of any provision of this -------- Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 9. Counterparts. This Agreement may be executed in several counterparts, ------------ each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 10. Settlement of Disputes; Arbitration. All claims by you for benefits ----------------------------------- under this Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to you in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board shall afford a reasonable opportunity to you for a review of the decision denying a claim and shall further allow you to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that your claim has been denied. Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Chicago, Illinois, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to RTI the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely, RYERSON TULL, INC. Page 17 By _______________________________ Its _____________________________ Vice President Agreed to this ________ day of ________________________, 1999. __________________________________ (Signature) Schedule to form of Change in Control Agreement between Ryerson Tull, Inc. and the following parties: Jay M. Gratz Gary J. Niederpruem Neil S. Novich EX-10.26 12 FORM OF CHANGE IN CONTROL AGREEMENT (S. MAKAREWICZ) EXHIBIT 10.26 Dear: Ryerson Tull, Inc. ("RTI") considers it essential to the best interests of its stockholders to foster the continuous employment of key management personnel of RTI and its subsidiaries (collectively, the "Company"). In this connection, the Board of Directors of RTI (the "Board") recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of RTI and its stockholders. The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Company. In order to induce you to remain in the employ of the Company and in consideration of your agreement set forth in Subsection 2(ii) hereof, RTI agrees that you shall receive the severance benefits set forth in this letter agreement ("Agreement") in the event your employment with the Company is terminated subsequent to a "change in control of the Company" (as defined in Section 2 hereof) or in connection with a "potential change in control of the Company" (as defined in Section 2 hereof) under the circumstances described below. This Agreement shall constitute an amendment and restatement of and shall supersede any prior agreement entered into between you and RTI with respect to these matters. In the event that you receive severance benefits hereunder, such benefits shall be in lieu of, and you shall not be entitled to receive, any benefits or payments under any other severance plan, policy or agreement of or with the Company. In addition, if you are or become entitled to benefits from the Company pursuant to another agreement providing for benefits on account of a change in control or the law of a jurisdiction other than the United States or any state or territory thereof as a result of an event for which benefits are payable to you pursuant this Agreement, the benefits paid to you pursuant to this Agreement shall be reduced by the amount paid to you pursuant to such other agreement or law. 1. Term of Agreement. This Agreement shall commence on the date hereof ----------------- and shall continue in effect through December 31, 1999; provided, however, that commencing on January 1, 2000 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, during the preceding year but not later than June 30 of such preceding year, RTI shall have given notice that it does not wish to extend this Agreement. Notwithstanding Page 2 the preceding sentence: (i) if your employer is a direct or indirect subsidiary of RTI, this Agreement shall terminate on the date on which RTI ceases to own, directly or indirectly, at least 80 percent of your employer for any reason which does not constitute a change in control of the Company, and (ii) if a change in control of the Company or a potential change in control of the Company shall have occurred during the original or extended term of this Agreement, this Agreement shall continue in effect for a period of twenty-four (24) months beyond the month in which such change in control or potential change in control of the Company occurred unless earlier terminated under clause (i) next above. 2. Change in Control; Potential Change in Control. (i) No benefits shall ---------------------------------------------- be payable hereunder unless there shall have been a potential change in control or a change in control of the Company, as set forth below. For purposes of this Agreement, a "change in control of the Company" shall be deemed to have occurred if: (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than (w) the Company, (x) a trustee or other fiduciary holding voting securities under an employee benefit plan of the Company, (y) an underwriter temporarily holding voting securities pursuant to an offering of such securities, or (z) a corporation owned, directly or indirectly, by the securityholders of RTI in substantially the same proportions as their ownership of voting securities of RTI, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of voting securities of RTI (not including in the voting securities beneficially owned by such person any voting securities acquired directly from RTI or its affiliates) representing 40% or more of the combined voting power of RTI's then outstanding voting securities; (B) during any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with RTI to effect a transaction described in clauses (A), (C) or (D) of this Subsection 2(i)) whose election by the Board or nomination for election by RTI's securityholders was approved by a vote of at least two- thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved ("Continuing Directors"), cease for any reason to constitute a majority thereof; (C) the holders of voting securities of RTI approve a merger or consolidation of RTI with any other corporation, other than a merger or consolidation which would result in the voting securities of RTI outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding voting securities under an employee benefit plan of the Company, at least 60% of the combined voting power of the voting securities of RTI or such surviving entity outstanding Page 3 immediately after such merger or consolidation, or a merger or consolidation effected to implement a recapitalization of RTI (or similar transaction) in which no person acquires more than 50% of the combined voting power of RTI's then outstanding voting securities; (D) the holders of voting securities of RTI approve a plan of complete liquidation of RTI or an agreement for the sale or disposition by RTI of all or substantially all of RTI's assets; or (E) there occurs: (x) a sale or disposition, directly or indirectly, other than to a person described in subclause (w), (x) or (z) of clause (A) of this Subsection 2(i), of voting securities of your employer, any direct or indirect parent company of your employer or any company that is a subsidiary of your employer and is also a significant subsidiary (as defined below) of RTI (your employer and such a parent or subsidiary being a "Related Company"), representing 50% or more of the combined voting power of the securities of such Related Company then outstanding; (y) a merger or consolidation of a Related Company with any other corporation, other than: (1) a merger or consolidation which would result in the voting securities of the Related Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding voting securities under an employee benefit plan of the Company, at least 60% of the combined voting power of the voting securities of the Related Company or such surviving entity outstanding immediately after such merger or consolidation; (2) a merger or consolidation effected to implement a recapitalization of the Related Company (or similar transaction) in which no person acquires more than 50% of the combined voting power of the Related Company's then outstanding voting securities; or (3) a merger or consolidation which would result in 50% or more of the combined voting power of the surviving company being beneficially owned by RTI or by a majority owned direct or indirect subsidiary of RTI; or (z) the sale or disposition of all or substantially all the assets of a Related Company to a person other than RTI or a majority owned direct or indirect subsidiary of RTI. Page 4 Notwithstanding any other provision of this Agreement, no change in control of the Company shall be deemed to have occurred under this Subsection 2(i) if (I) such transaction includes or involves a sale to the public or a distribution to the stockholders of RTI of more than 50% of the voting securities of your employer or a direct or indirect parent of your employer, and (II) your employer or a direct or indirect parent of your employer agrees to become a successor to RTI under this Agreement or you are covered by an agreement providing for benefits upon a change in control of your employer following an event described clause (E). For purposes of this Agreement, the term "significant subsidiary" has the meaning given to such term under Rule 405 of the Securities Act of 1933, as amended. (ii) For purposes of this Agreement, a "potential change in control of the Company" shall be deemed to have occurred if: (A) RTI enters into an agreement, the consummation of which would result in the occurrence of a change in control of the Company; (B) any person (including RTI) publicly announces an intention to take or to consider taking actions which if consummated would constitute a change in control of the Company; (C) any person, other than (w) the Company, (x) a trustee or other fiduciary holding voting securities under an employee benefit plan of the Company, (y) an underwriter temporarily holding voting securities pursuant to an offering of such securities, or (z) a corporation owned, directly or indirectly, by the securityholders of RTI in substantially the same proportions as their ownership of voting securities of RTI, who is or becomes the beneficial owner, directly or indirectly, of voting securities of RTI representing 9.5% or more of the combined voting power of RTI's then outstanding voting securities, increases his beneficial ownership of such securities by 5% or more over the percentage so owned by such person on the date hereof; or (D) the Board adopts a resolution to the effect that, for purposes of this Agreement, a potential change in control of the Company has occurred. You agree that, subject to the terms and conditions of this Agreement, in the event of a potential change in control of the Company, you will remain in the employ of the Company until the earliest of (i) a date which is six (6) months from the occurrence of such potential change in control of the Company, (ii) the termination by you of your employment by reason of Disability or Retirement, as defined in Subsection 3(i), or (iii) the occurrence of a change in control of the Company. If your employment is terminated by the Company without Cause (as defined in Subsection 3(ii) below) coincident with or prior to a change in control of the Company and within twelve (12) months after the occurrence of a potential change in control of the Company and a change in control of the Company occurs within six (6) months after such termination, you shall be entitled to the compensation and benefits hereunder as if your termination of employment without Cause followed Page 5 a change in control of the Company; provided, however, that no benefits shall be payable under this sentence if prior to the change in control of the Company, RTI ceased to own, directly or indirectly, at least 80% of the voting securities of your employer. (iii) The foregoing to the contrary notwithstanding, a change in control of the Company shall not be deemed to have occurred with respect to you if: (A) the event first giving rise to the potential change in control of the Company involves a publicly announced transaction or publicly announced proposed transaction which at the time of the announcement has not been previously approved by the Board and you are "part of a purchasing group" (as defined below) proposing the transaction; (B) you are part of a purchasing group which consummates the change in control transaction; or (C) the change in control of the Company would otherwise occur under Subsection 2(i)(D) due to the sale of a significant subsidiary, which significant subsidiary constitutes all or substantially all of the assets of RTI and you are not employed by RTI or the significant subsidiary which is the subject of the transaction. For purposes of this Agreement, you shall be deemed "part of a purchasing group" if you are an equity participant or have agreed to become an equity participant in the purchasing company or group (except for (A) passive ownership of less than 1% of the stock of the purchasing company or (B) ownership of equity participation in the purchasing company or group which is otherwise not deemed to be significant, as determined prior to the change in control of the Company by a majority of the non-employee Continuing Directors). 3. Termination Following Change in Control. If a change in control of the --------------------------------------- Company, as defined in Section 2 hereof, shall have occurred, you shall be entitled to the benefits provided in Subsection 4(iii) hereof upon the subsequent termination of your employment during the term of this Agreement unless such termination is (A) because of your death, Disability or Retirement, (B) by the Company for Cause, or (C) by you other than for Good Reason. (i) Disability; Retirement. If, as a result of your incapacity due to ---------------------- physical or mental illness, you shall have been absent from the full-time performance of your duties with the Company for six (6) consecutive months, and within thirty (30) days after written notice of termination is given you shall not have returned to the full-time performance of your duties, your employment may be terminated for "Disability". Termination by the Company or you of your employment based on "Retirement" shall mean termination on or after your normal retirement age in accordance with the Company's retirement policy generally applicable to its salaried employees or in accordance with any retirement arrangement established with your consent with respect to you. Page 6 (ii) Cause. Termination by the Company of your employment for "Cause" ----- shall mean termination upon (A) the willful and continued failure by you to substantially perform your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination by you for Good Reason as defined in Subsections 3(iv) and 3(iii), respectively) after a written demand for substantial performance is delivered to you by the Board, which demand specifically identifies the manner in which the Board believes that you have not substantially performed your duties, or (B) the willful engaging by you in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise. For purposes of this Subsection 3(ii), no act, or failure to act, on your part shall be deemed "willful" unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Company. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in clauses (A) or (B) of the first sentence of this Subsection 3(ii) and specifying the particulars thereof in detail. (iii) Good Reason. You shall be entitled to terminate your employment for ----------- Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without your express written consent, the occurrence after a change in control of the Company of any of the following circumstances unless, in the case of paragraphs (A), (E), (F), (G) or (H), such circumstances are fully corrected prior to the Date of Termination specified in the Notice of Termination, as defined in Subsections 3(v) and 3(iv), respectively, given in respect thereof: (A) the assignment to you of any duties inconsistent with your status as an executive officer of the Company or a substantial adverse alteration in the nature or status of your responsibilities from those in effect immediately prior to the change in control of the Company other than any such alteration primarily attributable to the fact that the Company may no longer be a public company; (B) a reduction by the Company in your annual base salary as in effect on the date hereof or as the same may be increased from time to time; (C) the Company's requiring that your principal place of business be at an office located more than 50 miles from where your principal place of business is located immediately prior to the change in control of the Company, except for required travel on the Company's business to an extent substantially consistent with your business travel obligations immediately prior to the change in control of the Company; (D) the failure by the Company, without your consent, to pay to you any portion of your current compensation, or to pay to you any portion of an installment of deferred Page 7 compensation under any deferred compensation program of the Company, within seven (7) days of the date such compensation is due; (E) the failure by the Company to continue in effect any compensation plan in which you participate immediately prior to the change in control of the Company which is material to your total compensation, including but not limited to the Ryerson Tull Annual Incentive Plan (the "Annual Incentive Plan"), Ryerson Tull 1995 Incentive Stock Plan and Ryerson Tull 1999 Incentive Stock Plan (collectively, the "Incentive Stock Plans"), Ryerson Tull Supplemental Retirement Plan for Covered Employees (the "Supplemental Plan"), Ryerson Tull Nonqualified Savings Plan (the "Nonqualified Savings Plan"), Ryerson Tull Pension Plan (the "Pension Plan") the Ryerson Tull Savings Plan or the J.M. Tull Metals Company, Inc. Employees' Profit Sharing Plan (either, the "Savings Plan") or any substitute or alternative plans adopted prior to the change in control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue your participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as existed at the time of the change in control; (F) the failure by the Company to continue to provide you with benefits sustantially similar to those enjoyed by you under any of the Company's pension, life insurance, medical, health and accident, flexible spending or disability plans or programs in which you were participating at the time of the change in control of the Company, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive you of any material fringe benefit enjoyed by you at the time of the change in control of the Company, or the failure by the Company to provide you with the number of paid vacation days to which you are entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect at the time of the change in control of the Company; (G) the failure of RTI to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 5 hereof; or (H) any purported termination of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Subsection 3(iv) below (and, if applicable, the requirements of Subsection 3(ii) above); for purposes of this Agreement, no such purported termination shall be effective. Your right to terminate your employment pursuant to this Section 3 shall not be affected by your incapacity due to physical or mental illness. Your continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder. Page 8 (iv) Notice of Termination. Any purported termination of your employment --------------------- by the Company or by you shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. (v) Date of Termination, Etc. "Date of Termination" shall mean (A) if your ------------------------ employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such thirty (30) day period), and (B) if your employment is terminated pursuant to Subsection 3(ii) or 3(iii) above or for any other reason (other than Disability), the date specified in the Notice of Termination (which, in the case of a termination pursuant to Subsection 3(ii) above shall not be less than thirty (30) days, and in the case of a termination pursuant to Subsection 3(iii) above shall not be less than fifteen (15) nor more than sixty (60) days, respectively, from the date such Notice of Termination is given); provided that if within fifteen (15) days after any Notice of Termination is given, or, if later, prior to the Date of Termination (as determined without regard to this proviso), the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding arbitration award, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected) but shall be deemed to be within the twenty four (24) month period following a change in control of the Company; provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company will continue to pay you your full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue you as a participant in all compensation, benefit and insurance plans and programs in which you were participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this Subsection 3(v). Amounts paid under this Subsection 3(v) are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement. 4. Compensation Upon Termination or During Disability. Following a change -------------------------------------------------- in control of the Company, as defined by Subsection 2(i), upon termination of your employment or during a period of Disability you shall be entitled to the following benefits: (i) During any period that you fail to perform your full-time duties with the Company as a result of incapacity due to physical or mental illness, you shall continue to receive your base salary at the rate in effect at the commencement of any such period, together with all compensation payable to you under the Pension Plan, Supplemental Plan, Annual Incentive Plan, Savings Plan and Nonqualified Savings Plan during such period, until this Agreement is terminated pursuant to Page 9 Subsection 3(i) hereof. Thereafter, in the event your employment shall be terminated, your benefits shall be determined under the Company's retirement, insurance and other compensation plans and programs then in effect in accordance with the terms of such plans and programs. (ii) If your employment shall be terminated by the Company for Cause or by you other than for Good Reason, Disability, death or Retirement, the Company shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts to which you are entitled under any compensation plan of the Company at the time such payments are due, and the Company shall have no further obligations to you under this Agreement. (iii) If your employment by the Company shall be terminated (a) by the Company other than for Cause, Retirement or Disability, or (b) by you for Good Reason, then you shall be entitled to the compensation and benefits provided below: (A) The Company shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts to which you are entitled under any compensation plan or program of the Company, at the time such payments are due, except as otherwise provided below. (B) In lieu of any further salary payments to you for periods subsequent to the Date of Termination, the Company shall pay as severance pay to you a lump sum severance payment (together with the payments provided in paragraphs C, D and E below, the "Severance Payments") equal to two times the sum of (x) your annual base salary in effect immediately prior to the occurrence of the circumstance giving rise to the Notice of Termination given in respect thereof, and (y) the average annual amount of the Award paid to you pursuant to the Annual Incentive Plan or similar successor plan with respect to the five years immediately preceding that in which the Date of Termination occurs, such average annual amount being calculated by aggregating all such Awards paid with respect to such five years and dividing such aggregate amount by the number of years for which such an Award was actually paid to you. (C) Notwithstanding any provision of the Annual Incentive Plan, the Company shall pay to you a lump sum amount equal to the sum of (x) any incentive compensation under the Annual Incentive Plan which has been allocated or awarded to you for a completed fiscal year or other measuring period preceding the Date of Termination but has not yet been paid, and (y) a pro rata portion to the Date of Termination for the current fiscal year or other measuring period of the amount equal to the Target Award percentage applicable to you under the Annual Incentive Plan or similar successor plan on the Date of Termination times your annual base salary then in effect. (D) In lieu of shares of common stock of RTI ("RTI Shares") issuable upon exercise of outstanding stock options granted to you under RTI's stock option plans (including Page 10 outstanding options previously granted to you under the Ryerson Tull 1996 Incentive Stock Plan (the "RT 1996 Stock Plan"), collectively, ("Options")) (which Options shall be cancelled upon the making of the payment referred to below), you shall receive an amount in cash equal to the product of (i) the excess of (x) in the case of incentive stock options (as defined in section 422A of the Internal Revenue Code of 1986, as amended (the "Code")) ("ISOs"), granted after the date of this Agreement (without regard to any renewal hereof), the closing price of RTI's shares as reported on the New York Stock Exchange Composite Transactions on or nearest the Date of Termination, or in the case of all other Options (other than ISOs granted prior to the date of this Agreement (without regard to any renewal hereof)), the Change in Control Price (as defined below), over (y) the per share exercise price of each Option then held by you (whether or not then fully exercisable), times (ii) the number of RTI Shares covered by each such Option. For purposes of this Agreement, the "Change in Control Price" means: (1) with respect to a merger or consolidation of RTI described in Subsection 2(i)(C) in which the consideration per share of RTI's common stock to be paid for the acquisition of shares of common stock specified in the agreement of merger or consolidation is all in cash, the highest such consideration per share; (2) with respect to a change in control of the Company by reason of an acquisition of voting securities described in Subsection 2(i)(A), the highest price per share for any share of RTI's common stock paid by any holder of any of the securities representing 40% or more of the combined voting power of RTI giving rise to the change in control of the Company; and (3) with respect to a change in control of the Company by reason of a merger or consolidation of RTI (other than a merger or consolidation described in Clause (1) next above), stockholder approval of an agreement or plan described in Subsection 2(i)(D), a change in the composition of the Board described in Subsection 2(i)(B) or a change in control of the Company pursuant to Subsection 2(i)(E) (relating to mergers, consolidations and sales of securities or assets of a Related Company), the highest price per share of common stock reported on the New York Stock Exchange Composite Transactions (or, if such shares are not traded on the New York Stock Exchange, such other principal market on which such shares are traded) during the sixty (60) day period ending on the date the change in control of the Company occurs. (E) To the extent not otherwise vested in accordance with the terms and conditions of the Incentive Stock Plans or the RT 1996 Stock Plan, you shall be fully vested in any restricted shares issued thereunder and be fully vested in any performance shares that you would have earned under the Incentive Stock Plans or the RT 1996 Stock Plan, as applicable, for the calendar year in which the change in control of the Company occurs had the applicable performance targets for such calendar year been satisfied with respect to such shares. (F) The Company shall also pay to you all legal fees and expenses incurred by you as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the Page 11 extent attributable to the application of Section 4999 of the Code to any payment or benefit provided hereunder). Such payments shall be made at the later of the times specified in paragraph (J) below, or within five (5) days after your request for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. (G) In the event that you become entitled to any payments provided for hereinabove (the "Contract Payments"), if the Contract Payments or other portion of the Total Payments (as defined below) will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code, the Company shall pay to you, no later than the fifth day following the Date of Termination, an additional amount (the "Gross-Up Payment") such that the net amount retained by you, after deduction of any Excise Tax on the Contract Payments and such other Total Payments and any federal and state and local income and other payroll taxes and Excise Tax upon the payment provided for by this paragraph (G), shall be equal to the Contract Payments and such other Total Payments. (H) For purposes of determining whether any of the payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) any other payments or benefits received or to be received by you in connection with a change in control of the Company or your termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person whose actions result in a change in control or any person affiliated with the Company or such person) payable pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person whose actions result in a change in control or any person affiliated with the Company or such person (together with the Contract Payments, the "Total Payments"), shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code and all "excess parachute payments" within the meaning of Section 280G(b)(l) of the Code shall be treated as subject to the Excise Tax unless in the opinion of tax counsel selected by RTI's independent auditors and reasonably acceptable to you, such other payments or benefits (in whole or in part) do not constitute parachute payments, including by reason of Section 280G(b)(4)(A) of the Code or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4)(B) of the Code in excess of the base amount allocable to such reasonable compensation within the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax, (ii) the amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (A) the amount of the Total Payments or (B) the amount of excess parachute payments within the meaning of Section 280G(b)(l) of the Code (after applying clause (i) above), and (iii) the value of any noncash benefits or any deferred payment or benefit shall be determined by RTI's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, you shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of your residence on the Date of Page 12 Termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (I) In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of your employment, you shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined the portion of the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and federal and state and local income tax imposed on the Gross-Up Payment being repaid by you if such repayment results in a reduction in Excise Tax and/or a federal and state and local income tax deduction) plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time of the termination of your employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional gross-up payment in respect of such excess (plus any interest payable with respect to such excess) at the time that the amount of such excess is finally determined. (J) The payments provided for in paragraphs (B), (C) and (D) above, shall be made not later than the fifth day following the Date of Termination, provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to you on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to you payable on the fifth day after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). (iv) If your employment shall be terminated (A) by the Company other than for Cause, Retirement or Disability or (B) by you for Good Reason, then for a twenty-four (24) month period after such termination, the Company shall arrange to provide you with: (1) life, disability, accident and health insurance benefits substantially similar to those which you are receiving immediately prior to the Notice of Termination, (2) financial advisory services similar to those provided currently to executives of the Company, if any, and (3) outplacement services. Benefits otherwise receivable by you pursuant to this Subsection 4(iv) shall be reduced to the extent comparable benefits are actually received by you during the twenty-four (24) month period following your termination, and any such benefits actually received by you shall be reported to the Company. Any rights that you have to continuation of life, disability, accident or health coverage under applicable state or federal law shall be in addition to those provided under this Agreement. Page 13 (v) If your employment shall be terminated (A) by the Company other than for Cause, Retirement or Disability or (B) by you for Good Reason, then in addition to the retirement benefits to which you are entitled under the Pension Plan and Supplemental Plan or any successor plans thereto, the Company shall pay you in cash at the time and in the manner provided in paragraph (J) of Subsection 4(iii), a lump sum equal to the excess of (x) the actuarial equivalent of the retirement pension (taking into account any early retirement subsidy associated therewith and determined as a straight life annuity commencing at age sixty-five (65) or any earlier date, but in no event earlier than the second anniversary of the Date of Termination whichever annuity yields a greater benefit) which you would have accrued under the terms of the Pension Plan and Supplemental Plan (without regard to any amendments to any such plans made subsequent to a change in control of the Company and on or prior to the Date of Termination, which amendment adversely affects in any manner the computation of retirement benefits thereunder), determined as if you were fully vested thereunder and had accumulated (after the Date of Termination) twenty- four (24) additional months of age and service credit thereunder at the higher of the rate of average compensation during the twelve (12) months prior to the change in control of the Company or the rate of average compensation used to calculate your benefits under such plans immediately preceding the Date of Termination, over (y) the actuarial equivalent of the retirement pension (taking into account any early retirement subsidy associated therewith and determined as a straight life annuity commencing at age sixty-five (65) or any earlier date, but in no event earlier than the Date of Termination whichever annuity yields a greater benefit) which you had then accrued pursuant to the provisions of the Pension Plan and the Supplemental Plan. For purposes of this Subsection 4(v), "actuarial equivalent" shall be determined using the same assumptions utilized under the Pension Plan for purposes of determining alternative forms of benefits immediately prior to the change in control of the Company. (vi) You shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by you to the Company, or otherwise, except as provided in Subsection 4(iv). (vii) In addition to all other amounts payable to you under this Section 4, you shall be entitled to receive all benefits payable to you under the Pension Plan, the Savings Plan, Supplemental Plan and Nonqualified Savings Plan and any other plan or agreement relating to retirement benefits. 5. Successors; Binding Agreement. (i) RTI will require any successor ----------------------------- (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of RTI to expressly assume and agree to perform this Agreement in the same manner and to the same extent that RTI or the Company would be required to perform it if no such succession had taken place. Failure of RTI to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the same amount and on the same terms as you would be Page 14 entitled to hereunder if you terminate your employment for Good Reason following a change in control of the Company, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. In the event a successor of RTI assumes and agrees to perform this Agreement, by operation of law or otherwise, the term "RTI", as used in this Agreement, shall mean such successor and the term "Company" shall mean, collectively, such successor and the affiliates of such successor. (ii) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. 6. Notice. For the purpose of this Agreement, notices and all other ------ communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notice to the Company shall be directed to the attention of the Board with a copy to the Secretary of RTI, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 7. Miscellaneous. No provision of this Agreement may be modified, waived ------------- or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Illinois. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. The obligations of RTI and the Company under Section 4 shall survive the expiration of the term of this Agreement. 8. Validity. The invalidity or unenforceability of any provision of this -------- Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 9. Counterparts. This Agreement may be executed in several counterparts, ------------ each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. Page 15 10. Settlement of Disputes; Arbitration. All claims by you for benefits ----------------------------------- under this Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to you in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board shall afford a reasonable opportunity to you for a review of the decision denying a claim and shall further allow you to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that your claim has been denied. Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Chicago, Illinois, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to RTI the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely, RYERSON TULL, INC. By_________________________________ Its________________________________ Vice President Agreed to this __________ day of _______________________, 1999. ______________________________ (Signature) Schedule to form of Change in Control Agreement between Ryerson Tull, Inc. and the following party: Stephen E. Makarewicz EX-13 13 ANNUAL REPORT TO SHAREHOLDERS EXHIBIT 13 FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA AND OPERATING RESULTS --CONTINUING OPERATIONS
Dollars in millions, except per share and per ton data 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------ SUMMARY OF EARNINGS Net sales $2,782.7 $2,804.0 $2,407.9 $2,464.0 $2,211.1 Gross profit 625.8 626.0 564.2 580.5 523.0 Operating profit 96.0(1) 133.1(2) 110.7 134.7 93.7 Income before income taxes 83.0(1) 119.5(2) 128.5 125.8 80.4 Income from continuing operations 47.7(1) 64.5(2) 78.1 77.7 53.5 Earnings per share-- basic 1.03(1) 1.13(2) 1.42 1.24 0.58 Earnings per share-- diluted 0.99(1) 1.08(2) 1.34 1.18 0.54 FINANCIAL POSITION AT YEAR-END Inventory-- current value(3) $ 571.6 $1,013.1 $ 900.6 $ 867.0 $ 810.5 Working capital 572.0 660.2 691.0 618.1 516.7 Property, plant and equipment 293.6 1,641.8 1,637.0 1,600.4 1,610.3 Total assets 1,343.9 3,646.5 3,541.6 3,558.3 3,353.4 Long-term debt 257.0 704.9 773.2 784.5 705.9 Stockholders' equity 563.6 900.1 789.0 748.6 509.2 Financial Ratios Inventory turnover-- current value(3) 3.8 4.0 4.2 4.6 4.2 Operating asset turnover 2.5 2.8 2.8 2.8 2.7 Operating profit on operating assets (OP/OA) 8.6% 13.1% 13.0% 15.4% 11.3% Return on ending stockholders' equity 8.5 7.2 9.9 10.4 10.5 VOLUME AND PER TON DATA Tons shipped (000) 3,108 3,020 2,514 2,347 2,327 Average selling price per ton $ 895 $ 928 $ 958 $ 1,050 $ 950 Gross profit per ton 201 207 224 247 225 Expenses per ton(4) 172 169 180 190 185 Operating profit per ton(5) 29 38 44 57 40 PROFIT MARGINS Gross profit as a percent of sales 22.5% 22.3% 23.4% 23.6% 23.7% Expenses as a percent of sales(4) 19.0 17.6 18.8 18.1 19.5 Operating profit as a percent of sales(5) 3.5 4.7 4.6 5.5 4.2 OTHER DATA Average number of employees 5,266 5,442 5,038 5,245 5,313 Tons shipped per average employee 590 555 499 447 438 Capital expenditures $ 40.1 $ 41.3 $ 25.1 $ 20.7 $ 21.7 Cash flow provided by (used for) operating activities (50.1) 59.2 55.1 130.2 108.6 Dividends per common share 0.20 0.20 0.20 0.20 -- Redeemable preferred stock -- -- -- -- 185.0
Data in the "Financial Position at Year-end" section for the years 1997 through 1994 include amounts related to discontinued operations. (1) Includes a $5.9 million pretax gain on the sale of assets. Before this gain, operating profit was $90.1 million, income before taxes was $77.1 million, income from continuing operations was $44.0 million, and basic and diluted earnings per share were $0.94 and $0.90, respectively. (2) Includes an $8.9 million pretax pension curtailment gain and an $8.9 million pretax gain on the sale of assets. Before these gains, operating profit was $115.3 million, income before taxes was $101.7 million, income from continuing operations was $55.0 million, and basic and diluted earnings per share were $0.94 and $0.90, respectively. (3) Current value of inventory consists of book value of inventory plus LIFO reserve. (4) Expenses are defined as operating expenses plus depreciation and amortization. (5) Operating profit is defined as gross profit minus expenses. MANAGEMENT'S DISCUSSION OF OPERATIONS AND FINANCIAL CONDITION
Figures in millions, except per share data 1998 1997 1996 - -------------------------------------------------------------- --------------------- RESULTS OF OPERATIONS Net sales from continuing operations $2,782.7 $2,804.0 $2,407.9 Operating profit from continuing operations 96.0 133.1 110.7 Income from continuing operations 47.7 64.5 78.1 Income (loss) from discontinued operations 13.8 54.8 (17.9) Gain on sale of discontinued operations 510.8 -- -- Extraordinary loss on early retirement of debt (21.4) -- (14.5) Net income 550.9 119.3 45.7 Income per common share from continuing operations -- diluted $ 0.99 $ 1.08 $ 1.34 Net income per common share -- diluted 13.04 2.13 0.72 Average shares outstanding -- diluted 41.7 51.9 51.8
The Company's operations changed substantially in 1998 as a result of the disposition of the Company's steel manufacturing segment. After that transaction, the Company's primary business became metals distribution and processing, conducted through its majority-owned subsidiary, Ryerson Tull, Inc. ("RT"). On February 25, 1999, RT became a wholly owned subsidiary of the Company by converting each share of RT Class A common stock into 0.61 share of Company common stock, and then the Company and RT merged. Upon consummation of the merger, the Company changed its name from Inland Steel Industries, Inc. to Ryerson Tull, Inc. All references to RT in this financial review refer to the pre-merger majority-owned subsidiary of the Company. On July 16, 1998, Ispat International N.V. ("Ispat") acquired Inland Steel Company ("ISC"), the Company's wholly owned subsidiary that constituted the steel manufacturing and related operations segment of the Company's consolidated operations, pursuant to an agreement and plan of merger dated May 27, 1998, as amended as of July 16, 1998, among the Company, ISC, Ispat and Inland Merger Sub, Inc. (an Ispat subsidiary). Pursuant to the merger, the Company received $1.1 billion in cash in exchange for the outstanding common stock and preferred stock of ISC and repayment of intercompany debt of ISC held by the Company. The Company recorded a $510.8 million after-tax gain from this transaction. The results of operations of ISC as well as the gain from the disposition have been excluded from the results of continuing operations and reported separately on the statement of operations. The Company reported income from continuing operations of $47.7 million, or $0.99 per diluted share, in 1998, $64.5 million, or $1.08 per diluted share, in 1997, and $78.1 million, or $1.34 per diluted share, in 1996. The 1998 income from continuing operations included $3.7 million, or $0.09 per diluted share, related to the gain from the sale of Inland Engineered Materials Corporation, a subsidiary of the Company. The 1997 income from continuing operations included $9.5 million, or $0.18 per diluted share, related to gains from asset sales and a pension curtailment gain at RT, while the 1996 result included income of $19.5 million, or $0.38 per diluted share, from the issuance of RT common stock. Net sales from continuing operations were $2.8 billion in 1998 and 1997. In 1997, net sales increased 16 percent from 1996 sales of $2.4 billion, primarily due to acquisitions completed during 1997 by RT. The Company undertook a recapitalization program in 1996 which included an initial public offering of approximately 13 percent of its interest in RT. The issuance of RT Class A common stock to unaffiliated third parties resulted in the creation of a minority interest and the recognition of a $31.4 million pretax gain by the Company. Also included in the 1996 recapitalization program were a $250 million public issuance of debt at RT ("RT Notes") and the tender for the Company's 12 3/4% Notes and ISC's Series T 12% First Mortgage Bonds. As a result of the early redemption of a majority of the Industries Notes and ISC Series T Bonds, as well as the early redemption of ISC's Pollution Control Project No. 9 Bonds associated with their refinancing, the Company recognized an extraordinary after-tax loss of $23.3 million in 1996, of which $14.5 million related to continuing operations. MANAGEMENT'S DISCUSSION OF OPERATIONS AND FINANCIAL CONDITION (CONT.) COMPARISON OF 1998 WITH 1997 -- CONTINUING OPERATIONS ------------------------------------------------------------------------------ Net Sales Net sales of $2.78 billion in 1998 declined 0.8 percent from $2.80 billion in 1997. The primary reason for the decrease in the Company's net sales was lower average selling prices. The effect of a 2.9 percent increase in tons shipped -- to 3.11 million tons from 3.02 million tons -- was more than offset by a 3.6 percent decrease in the average selling price per ton to $895 from $928. Demand also softened during the year due to weakness in the manufacturing sector of the U.S. economy. Market share for RT was 10.1 percent in 1998 compared with 10.2 percent in 1997, based on data from the Steel Service Center Institute. ------------------------------------------------------------------------------ Gross Gross profit -- the difference between net sales and the cost of Profit materials sold -- decreased slightly in 1998 to $625.8 million from $626.0 million in 1997. While gross profit as a percent of sales was relatively stable from year to year, the lower metal prices negatively impacted gross profits in 1998. On a per ton basis, gross profit declined to $201 in 1998 versus $207 in 1997. ------------------------------------------------------------------------------ Expenses Expenses -- which consist of operating expenses and depreciation and amortization -- increased 4.9 percent in 1998 to $535.7 million from $510.7 million in 1997. The increase is primarily due to a 2.9 percent increase in shipments and an increase in depreciation and amortization expense. Expenses on a per ton basis increased to $172 in 1998 from $169 per ton in 1997. Average number of employees decreased 3.2 percent from 1997 to 1998, and tons shipped per employee, a key measure of productivity, increased from 555 tons to 590 tons. ------------------------------------------------------------------------------ Operating Operating profit of $96.0 million in 1998 decreased $37.1 Profit million, or 27.9 percent, from $133.1 million in 1997. Operating profit in 1998 benefitted from a $5.9 million gain on the sale of Inland Engineered Materials. In 1997, operating profit benefitted from $17.8 million in unusual gains. Excluding gains in both periods, operating income of $90.1 million in 1998 decreased 21.9 percent from $115.3 million in 1997, due to lower gross profit and higher expenses. ------------------------------------------------------------------------------ Interest Interest and other expense on debt decreased to $33.6 million for and Other 1998 from $40.3 million in the prior year. The decrease is Expense primarily attributable to the early retirement of the Company's on Debt 10.23% subordinated voting note and ESOP notes during 1998. ------------------------------------------------------------------------------ Provision Income taxes decreased to $30.6 million in 1998 from $46.6 for Income million in 1997 due to the decrease in taxable income. The Taxes effective tax rate in 1998 was 36.9 percent compared with 39.0 percent in the prior year. COMPARISON OF 1997 WITH 1998 - CONTINUING OPERATIONS - -------------------------------------------------------------------------------- Net sales increased 16.5 percent in 1997 to $2.80 billion from $2.41 billion in 1996. Approximately three-fourths of the sales gain was attributable to the acquisitions of Thypin Steel, Cardinal Metals and Omni Metals in 1997. Shipments of 3.02 million tons in 1997 rose 20.1 percent from 2.51 million tons in 1996. Average selling price per ton declined 3.1 percent to $928 in 1997 from $958 in 1996 due to a continued excess supply of metals relative to metals demand. Market share increased to 10.2 percent in 1997 from 9.1 percent in 1996. - -------------------------------------------------------------------------------- Gross profit of $626.0 million in 1997 increased 11 percent from $564.2 million in 1996. Gross profit as a percent of sales declined to 22.3 percent during 1997 from 23.4 percent in 1996, as average selling price per ton decreased 3.1 percent and material cost per ton decreased 1.6 percent. - -------------------------------------------------------------------------------- Expenses increased 12.6 percent in 1997 to $510.7 million from $453.5 million in 1996, due in part to a higher level of shipments. However, expenses increased less than tons shipped and, as a result, expenses per ton declined to $169 in 1997 from $180 in 1996. The improvement in expenses per ton was due to continuing strong focus on cost control. Tons shipped per employee increased 11.2 percent in 1997 to 555 tons from 499 tons in the prior year. - -------------------------------------------------------------------------------- For 1997, operating profit of $133.1 million increased $22.4 million, or 20.2 percent, from the prior year. Operating profit in 1997 benefited from an $8.9 million gain on the sale of real estate in Boston, Massachusetts, and Jersey City, New Jersey, and an $8.9 million pension curtailment gain. The pension curtailment gain resulted from freezing benefits for certain salaried employees under a defined benefit plan and implementing a defined contribution plan effective January 1, 1998. Excluding these gains, operating profit of $115.3 million in 1997 was 4.2 percent higher than $110.7 million in 1996. The increase in operating profit was due to strong volume gains and reduced expenses per ton, partly offset by weaker gross margins. - -------------------------------------------------------------------------------- Interest and other expense on debt decreased to $40.3 million in 1997 from $46.4 million in 1996. The decrease is due to the Company's 1996 recapitalization program. - -------------------------------------------------------------------------------- Income taxes decreased 1.7 percent to $46.6 million in 1997 from $47.4 million in 1996 due to a decrease in taxable income. MANAGEMENT'S DISCUSSION OF OPERATIONS AND FINANCIAL CONDITION (CONT.) LIQUIDITY AND FINANCING The Company finished 1998 with cash and cash equivalents of $52.5 million, compared with $97.0 million at year-end 1997. There was no short-term bank borrowing at either year-end. For 1998, net cash used for operating activities amounted to $50.1 million, compared to cash provided by operating activities of $59.2 million for 1997. As discussed previously, on July 16, 1998, Ispat acquired ISC for $1.1 billion in cash. Proceeds from the sale of ISC and available cash were used to repurchase $794.5 million of Company common stock through a Dutch auction self-tender offer, to repurchase $35.1 million of the Company's common stock in the open market, to retire the Company's Subordinated Voting Note for $116.7 million (including principal, interest, and premium), and to redeem the Company's Series E ESOP preferred stock and repay the ESOP notes for a total cost of $187 million. The Company recorded an extraordinary after-tax loss of $21.4 million from the early retirement of debt. During the fourth quarter of 1998, the Company sold its Inland Engineered Materials Corporation subsidiary for $28.8 million, which resulted in a pretax gain of $5.9 million. This operating unit no longer fit the Company's strategic focus once ISC was sold. RT ended the year with a committed bank revolving credit facility of $250 million that extends until September 5, 2002. There were no borrowings under this facility in 1998. Covenants in the revolving credit facility limited the amount of cash that RT could transfer to the Company in the form of dividends and advances to approximately $94 million at year-end 1998. This amount is subject to change based on the financial performance of RT. Additionally, a covenant in the revolving credit facility restricts the amount of additional debt, including additional borrowings under the credit lines, that RT can incur to $139 million as of December 31, 1998. In the fourth quarter of 1998, the committed banks waived certain provisions of the credit agreement to facilitate the merger of RT with the Company. The indenture under which the $250 million of RT Notes were issued contains covenants limiting, among other things, the creation of secured indebtedness, sale and leaseback transactions, the repurchase of capital stock, transactions with affiliates and mergers, consolidations and certain sale of assets. In addition, the RT Notes restrict the payment of dividends, although to a lesser extent than the bank revolving credit facility described above. During 1998, the Company utilized substantially all of its net operating loss carryforwards for regular federal income tax purposes to minimize the tax liability resulting from the gain on the sale of ISC. The Company also utilized a portion of its Alternative Minimum Tax credit carryforwards and ended the year with $41 million of these credits remaining. These credits can be carried forward indefinitely. The Company believes that its present cash position and the cash flow anticipated from operations, augmented by the revolving credit facility, will provide sufficient liquidity to fund the acquisition of Washington Specialty Metals Corporation, the Company's acquisition and capital programs, and meet any operating cash requirements that may arise for at least the next two years.
DEBT RATINGS AT YEAR-END 1998 1997 - ------------------------------------------------------- Ryerson Tull Notes Moody's Baa3 Ba1 Standard & Poor's BBB BB
The ratio of the Company's long-term debt to total capitalization was 29 percent at December 31, 1998. CAPITAL EXPENDITURES AND ACQUISITIONS Capital expenditures during 1998 totaled $40.1 million, compared to $41.3 million in 1997. Capital expenditures were primarily for buildings, machinery and equipment. The Company anticipates capital expenditures, excluding acquisitions, to be in the range of $40 million to $50 million in 1999, which will continue to expand the Company's processing capacity. On February 1, 1999, RT purchased all of the outstanding stock of Washington Specialty Metals Corporation, an eight-location metals service center specializing in value-added stainless steel, for approximately $70 million in cash. PENSIONS Effective April 30, 1996, that portion of the Inland Pension Plan covering RT's current and former employees was separated and became the Ryerson Tull Pension Plan, a defined benefit pension plan. Due to this separation, RT's benefit obligation was re-measured using plan data and actuarial assumptions as of April 30, 1996. An amount of assets proportional to the liabilities assumed by the Ryerson Tull Pension Plan was allocated to this new Plan. As a result, RT recognized a $25.4 million decrease in its prepaid pension cost, a $16.5 million reduction in reinvested earnings and an $8.9 million deferred tax asset increase in 1996. Effective January 1, 1998, RT froze the benefits accrued under the Ryerson Tull Pension Plan for certain salaried employees and instituted a defined contribution plan. Salaried employees vested in their benefits accrued under the defined benefit plan at December 31, 1997, are entitled to those benefits upon retirement. Certain transition rules have been established for those salaried employees meeting specified age and service requirements. The change in pension plan for salaried employees resulted in a one-time pretax curtailment gain of $8.9 million that was recognized in 1997. Effective July 16, 1998 (the "Transfer Date"), the Inland Pension Plan (the "ISC Pension Plan"), in which the employees of both ISC and the Company participated, was transferred to ISC. The Company's remaining employees that formerly had participated in the ISC Pension Plan became participants in the RT Pension Plan. These employees were credited with the number of years of service credited to them under the Inland Pension Plan at the Transfer Date. As of the Transfer Date, benefits for those salaried employees whose benefits were transferred to the RT Pension Plan were frozen in the same manner as described above. The Pension Plan currently meets the minimum funding requirements of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The Company's current policy is to continue to fund the plan in the future to at least meet these minimum funding standards. Although RT was not required to make any pension plan contributions during 1998, the Company elected to make a voluntary cash contribution of $6.0 million to enhance the RT Pension Plan's funded status. In 1998, the Company recorded an additional minimum pension liability of $56.8 million, representing the excess of the unfunded accumulated benefit obligation over previously accrued pension costs. As prescribed by Financial Accounting Standard No. 87, an intangible asset, to the extent of unrecognized prior service cost, of $4.5 million was recorded as a partial offset. The remaining difference of $52.3 million, net of income tax and minority interest, was recorded as a $26.9 million direct charge to equity. ISC SALE CONTINGENCIES Pursuant to the ISC/Ispat Merger Agreement, the Company agreed to indemnify Ispat for losses, if they should arise, exceeding certain minimum amounts in connection with breaches of representations and warranties contained in the ISC/Ispat Merger Agreement and for expenditures and losses, if they should arise, relating to certain environmental liabilities exceeding, in most instances, minimum amounts. The maximum liability for which the Company can be responsible with respect to such obligations is $90 million in the aggregate. There are also certain other covenant commitments made by the Company contained in the ISC/Ispat Merger Agreement which are not subject to a maximum amount. In general, Ispat must make indemnification claims with respect to breaches of representations and warranties prior to March 31, 2000. However, claims relating to breaches of representations and warranties related to tax matters and certain organizational matters must be made within 90 days after the expiration of the applicable statute of limitations, and claims with respect to breaches of representations and warranties related to environmental matters must be made prior to July 16, 2003. The Company has purchased environmental insurance with coverage up to $90 million payable directly to Ispat and ISC. The insurance is expected to cover substantially the same environmental matters for which the Company has agreed to indemnify Ispat. As part of the ISC/Ispat transaction, the ISC Pension Plan, in which employees of both ISC and the Company participated, was transferred to ISC. The ISC Pension Plan has unfunded benefit liabilities on a termination basis, as determined by the Pension Benefit Guaranty Corporation ("PBGC"), an agency of the U.S. government. As a condition to completing the ISC/Ispat transaction, Ispat, ISC, RT and the Company entered into an agreement with the PBGC to provide certain financial commitments to reduce the underfunding of the ISC Pension Plan and to secure ISC Pension Plan unfunded benefit liabilities on a termination basis. These requirements include a RT guaranty of $50 million, for five years, of the obligations of Ispat and ISC to the PBGC in the event of a distress or involuntary termination of the ISC Pension Plan. The guaranty is included in the $90 million limit on the Company's indemnification obligations. YEAR 2000 THE COMPANY'S STATE OF READINESS The Company began planning to address Year 2000 issues in 1996. As part of this process, the Company established a Year 2000 panel with representatives from all business units. This panel has monitored the progress of the Company's Year 2000 compliance and met regularly throughout 1998. In 1999, Year 2000 activities will be related to contingency planning. Therefore, the Company executive staff and the business unit presidents will now serve as the monitoring and advisory board for Year 2000 matters. This will ensure that the top management of the Company is actively involved in the issue and is directing the final stages of preparation. During 1998, Company personnel and outside consultants identified and corrected problems that may have interfered with Year 2000 readiness. The primary focus was on the Company's internal computer systems. An assessment of the majority of the Company's hardware, software and procedures was completed in 1997. This assessment identified 40 major systems areas. These were further broken down into upgrade units. Each of the units with the exception of two systems identified below was corrected to be Year 2000 compliant, tested and installed. All unit testing was completed by the end of 1998. The Company is conducting integrated testing during the first quarter of 1999. The Company has also performed an assessment of microprocessors embedded in its equipment, distribution facilities and corporate offices. Based on vendor representations and internal testing, the Company believes that it has no Year 2000 compliance issues in this area. The Company addressed all Year 2000 issues which are critical to its operations, with two exceptions - payroll and accounts receivable. Both operations are handled through software packages and the Company expects to have complete Year 2000 software releases installed and tested by the end of the first quarter of 1999. The Company has identified a number of suppliers whose Year 2000 compliance may be critical to the Company. These suppliers include metal suppliers, outside processing facilities and contract carriers. The Company intends to survey these suppliers as to their Year 2000 compliance. The Company will use the results of these surveys to aid in contingency planning. THE COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES The Company has estimated that expenses incurred through the end of 1998 totaled approximately $5.5 million. Currently, it is expected that the Company will spend an additional $1.0 million to bring its systems into Year 2000 compliance. This estimate is based on information currently available and may need to be increased as more information becomes available and as compliance implementation and contingency planning proceed. THE RISKS OF THE COMPANY'S YEAR 2000 ISSUES Although the Company believes it is unlikely, it is possible the Company could experience an adverse impact that could be material to the results of operations or the financial position of the Company as a result of potential failure by major customers or suppliers, or a delay or oversight in the Company's effort, to address Year 2000 issues. In addition, if the suppliers of necessary telecommunications, energy and transportation needs fail to provide their services, such failure could also have an adverse impact on the results of operations or financial position of the Company. THE COMPANY'S CONTINGENCY PLANS The Company expects to establish contingency plans, in the event all systems and critical suppliers have not been made Year 2000 compliant, during 1999. FINANCIAL RESPONSIBILITY - -------------------------------------------------------------------------------- Senior management is responsible for the integrity and objectivity of the financial data reported by Ryerson Tull, Inc. and its subsidiary companies. The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, and in management's judgment reflect fairly the consolidated financial position, cash flows and results of operations of Ryerson Tull and its subsidiary companies. The Company maintains systems of internal accounting controls and procedures to provide reasonable assurance of the safeguarding and accountability of Company assets, and to ensure that its financial records provide a reliable basis for the preparation of financial statements and other data. Internal accounting control is maintained through: . The ongoing activities of corporate staff, line officers and accounting management to monitor the adequacy of internal accounting control systems throughout the Company . The selection and proper training of qualified personnel . The appropriate separation of duties in organizational arrangements . The establishment and communication of accounting and business policies together with detailed procedures for their implementation . The use of an intensive ongoing program of internal auditing . The use of a detailed budgeting system to ensure that expenditures are properly approved and charged Stockholders annually elect a firm of independent accountants to audit the annual financial statements (their current report appears below). The principal role of the Audit Committee of the Board of Directors (consisting entirely of non-management Directors) is to review the conclusions reached by management in its evaluation of internal accounting controls, approve the scope of audit programs and evaluate audit results of both independent accountants and internal auditors. Both groups have unrestricted access to the Audit Committee, without the presence of management. REPORT OF INDEPENDENT ACCOUNTANTS - -------------------------------------------------------------------------------- PRICEWATERHOUSECOOPERS LLP To the Board of Directors and Stockholders of Ryerson Tull, Inc. In our opinion, the consolidated financial statements on pages 21 through 35 present fairly, in all material respects, the financial position of Ryerson Tull, Inc. (formerly Inland Steel Industries, Inc.) and subsidiary companies at December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Chicago, Illinois February 17, 1999, except as to Note 1, which is as of February 25, 1999 PricewaterhouseCoopers LLP CONSOLIDATED STATEMENTS OF OPERATIONS AND REINVESTED EARNINGS
YEAR ENDED DECEMBER 31 DOLLARS IN MILLIONS, EXCEPT PER SHARE DATE 1998 1997 1996 - -------------------------------------------------------------------------------------------------------------- Net sales $ 2,782.7 $ 2,804.0 $ 2,407.9 Cost of materials sold 2,156.9 2,178.0 1,843.7 Gross profit 625.8 626.0 564.2 Operating expenses 502.5 483.0 430.3 Depreciation and amortization 33.2 27.7 23.2 Pension curtailment gain -- (8.9) -- Gain on sale of assets (5.9) (8.9) -- ------------------------------------- Operating profit 96.0 133.1 110.7 Other expenses: Other revenue and expense, including interest income 20.6 26.7 32.8 Interest and other expense on debt (33.6) (40.3) (46.4) Gain from issuance of subsidiary stock (Note 1) -- -- 31.4 ------------------------------------- Income before income taxes, minority interest, discontinued operations and extraordinary loss 83.0 119.5 128.5 Provision for income taxes (Note 12) 30.6 46.6 47.4 ------------------------------------- Income before minority interest, discontinued operations and extraordinary loss 52.4 72.9 81.1 Minority interest in RT (Note 1) 4.7 8.4 3.0 ------------------------------------- Income from continuing operations 47.7 64.5 78.1 Discontinued operations -- Inland Steel Company Income (loss) from operations (net of taxes of $7.9, $33.7, and $8.3 cr. respectively) 13.8 54.8 (17.9) Gain on sale (net of taxes of $76.9) 510.8 -- -- ------------------------------------- Income before extraordinary loss 572.3 119.3 60.2 Extraordinary loss on early retirement of debt (net of tax of $7.1 cr and $8.8 cr., respectively) (21.4) -- (14.5) Net income 550.9 119.3 45.7 Dividend requirements for preferred stock (net of tax benefits related to leveraged ESOP shares) 6.9 9.1 9.1 ------------------------------------- Net income applicable to common stock $ 544.0 $ 110.2 $ 36.6 ===================================== Per share of common stock Basic: Income from continuing operations $ 1.03 $ 1.13 $ 1.42 Inland Steel Company -- discontinued operations 0.35 1.12 (0.37) -- gain on sale 12.95 -- -- Extraordinary loss on early retirement of debt (0.54) -- (0.30) ------------------------------------- Basic earnings per share $ 13.79 $ 2.25 $ 0.75 ===================================== Diluted: Income from continuing operations $ 0.99 $ 1.08 $ 1.34 Inland Steel Company -- discontinued operations 0.33 1.05 (0.34) -- gain on sale 12.23 -- -- Extraordinary loss on early retirement of debt (0.51) -- (0.28) ------------------------------------- Diluted earnings per share $ 13.04 $ 2.13 $ 0.72 ===================================== Accumulated deficit at beginning of year $ (45.6) $ (146.0) $ (172.8) Net income for the year 550.9 119.3 45.7 Dividends declared Common ($0.02 per share) (7.2) (9.8) (9.8) Preferred (Note 7) (6.9) (9.1) (9.1) ------------------------------------- Retained earnings (accumulated deficit) at end of year $ 491.2 $ (45.6) $ (146.0) =====================================
See Notes to Consolidated Financial Statements on pages 26-35. Ryerson Tull, Inc. Subsidary Companies CONSOLIDATED STATEMENT OF CASH FLOWS
Dollars in millions Year ended December 31 Increase (decrease) in cash 1998 1997 1996 - ------------------------------------------------------------------------------------------- ----------------------- OPERATING ACTIVITIES Net income $ 550.9 $ 119.3 $ 45.7 ------------------------------------------ Adjustments to reconcile net income to net cash provided by (used for) operating activities: Loss (income) from discontinued operations (13.8) (54.8) 17.9 Depreciation and amortization 33.2 27.7 23.2 Deferred income taxes 2.8 3.9 8.2 Deferred employee benefit cost 0.4 (11.3) 6.1 Stock issued for coverage of employee benefit plans 39.4 21.8 22.6 Gain from sale of ISC, net of taxes (510.8) -- -- Gain from sale of assets (5.9) (8.9) -- Gain from issuance of subsidiary stock -- -- (31.4) Change in: Receivables 21.7 (12.0) 8.1 Inventories (77.5) (33.8) (50.2) Accounts payable (13.7) 10.2 8.4 Accrued salaries and wages (2.8) 2.6 0.3 Other accrued liabilities (75.6) (9.0) 3.8 Other items 1.6 3.5 (7.6) ------------------------------------------ Net adjustments (601.0) (60.1) 9.4 ------------------------------------------ Net cash provided by (used for) operating activities (50.1) 59.2 55.1 ------------------------------------------ INVESTING ACTIVITIES Capital expenditures (40.1) (41.3) (25.1) Acquisitions (Note 13) (7.7) (139.9) -- Investments in and advances to joint ventures, net (4.2) (8.1) (5.2) Proceeds from sales of assets 919.8 18.2 2.0 ------------------------------------------ Net cash provided by (used for) investing activities 867.8 (171.1) (28.3) ------------------------------------------ FINANCING ACTIVITIES Issuance of subsidiary stock -- -- 77.1 Long-term debt issued -- -- 242.7 Long-term debt retired (202.8) (17.3) (246.7) Reduction of debt assumed in acquisitions -- (25.3) -- Redemption of Series E Preferred Stock (81.7) -- -- Dividends paid (17.5) (20.8) (21.0) Acquisition of treasury stock (839.6) (6.7) (3.7) ------------------------------------------ Net cash provided by (used for) financing activities (1,141.6) (70.1) 48.4 ------------------------------------------ Cash provided by (used for) discontinued operations 279.4 41.0 (104.6) ------------------------------------------ Net decrease in cash and cash equivalents (44.5) (141.0) (29.4) Cash and cash equivalents--beginning of year 97.0 238.0 267.4 ------------------------------------------ Cash and cash equivalents--end of year $ 52.5 $ 97.0 $ 238.0 ========================================== SUPPLEMENTAL DISCLOSURES Cash paid during the period for: Interest $ 32.8 $ 39.3 $ 36.6 Income taxes, net 63.4 27.5 8.6 ------------------------------------------
See Notes to Consolidated Financial Statements on pages 26-35. CONSOLIDATED BALANCE SHEET
At December 31 Dollars in millions 1998 1997 - ----------------------------------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 52.5 $ 97.0 Receivables less provision for allowances, claims and doubtful accounts of $6.9 and $23.5, respectively 284.5 523.3 Inventories (Note 2) 500.4 624.1 Deferred income taxes (Note 12) 5.6 30.7 ----------------------------------- Total current assets 843.0 1,275.1 Investments and advances 34.9 271.6 Property, plant and equipment, at cost, less accumulated depreciation (see details page 24) 293.6 1,641.8 Deferred income taxes (Note 12) 76.9 231.4 Prepaid pension cost -- 77.4 Intangible pension asset (Note 11) 4.5 -- Excess of cost over net assets acquired 78.2 82.3 Deferred charges and other assets 12.8 66.9 ----------------------------------- Total assets $ 1,343.9 $ 3,646.5 =================================== LIABILITIES Current liabilities: Accounts payable $ 152.5 $ 354.9 Accrued liabilities: Salaries, wages and commissions 22.9 79.1 Taxes 53.7 84.0 Interest on debt 10.2 17.1 Other accrued liabilities 31.7 17.1 Long-term debt due within one year (Note 4) -- 62.7 ----------------------------------- Total current liabilities 271.0 614.9 Long-term debt (see details page 24 and Note 4) 257.0 704.9 Deferred employee benefits (Note 11) 193.6 1 ,275.6 Other liabilities -- 65.4 ----------------------------------- Total liabilities 721.6 2,660.8 ----------------------------------- Minority interest in RT 58.7 57.5 Common stock repurchase commitment (Note 5) -- 28.1 STOCKHOLDERS' EQUITY Preferred stock, $1.00 par value, 15,000,000 shares authorized for all series, aggregate liquidation value of $3.4 in 1998 and $150.6 in 1997 (Notes 6 and 7) 0.1 3.1 Common stock, $1.00 par value; authorized -- 100,000,000 shares; issued -- 50,556,350 shares (Notes 7 through 9) 50.6 50.6 Capital in excess of par value (Note 7) 897.2 1,032.5 Retained earnings (accumulated deficit) 491.2 (45.6) Unearned compensation -- (68.6) Common stock repurchase commitment (Note 5) -- (28.1) Treasury stock at cost -- Common stock of 28,799,249 shares in 1998 and 1,557,635 shares in 1997 (845.3) (40.5) Accumulated other comprehensive income (Note 7) (30.2) (3.3) ----------------------------------- Total stockholders' equity 563.6 900.1 ----------------------------------- Total liabilities, minority interest, temporary equity, and stockholders' equity $ 1,343.9 $ 3,646.5 ===================================
See Notes to Consolidated Financial Statements on pages 26-35. 23 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended December 31 Dollars in millions 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------- Net income $ 550.9 $ 119.3 $ 45.7 -------------------------------------------------------- Other comprehensive income: Foreign currency translation adjustments -- -- (0.7) Minimum pension liability adjustment, net of tax of $18.3 (26.9) -- -- -------------------------------------------------------- Comprehensive income $ 524.0 $ 119.3 $ 45.0 --------------------------------------------------------
SCHEDULES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31 Dollars in millions 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------- PROPERTY, PLANT AND EQUIPMENT Land, land improvements and mineral properties $ 28.8 $ 156.5 Buildings, machinery and equipment 549.3 4,311.3 Transportation equipment 5.4 144.9 Property under capital leases -- primarily machinery and equipment 0.3 37.0 -------------------------------- Total 583.8 4,649.7 Less: Accumulated depreciation 289.9 2,871.5 Accumulated depreciation -- capital leases 0.3 35.7 Accumulated for retirements and terminated facilities -- 100.7 -------------------------------- Net property, plant and equipment $ 293.6 $ 1,641.8 ================================ LONG-TERM DEBT Inland Steel Industries, Inc. Guaranteed ESOP notes, 8.43% and 8.80%, due through July 2, 2004 $ -- $ 85.9 Subordinated Voting Note, 10.23%, due December 17, 1999 -- 100.0 -------------------------------- Total Inland Steel Industries, Inc. -- 185.9 -------------------------------- Inland Steel Company -- 262.0 -------------------------------- Ryerson Tull, Inc. Notes, 8.50%, due July 15, 2001 150.0 150.0 Notes, 9.125%, due July 15, 2006 100.0 100.0 Joseph T. Ryerson & Son, Inc. Obligation for Industrial Revenue Bond with floating rate, set weekly based on 13-week Treasury bills, due November 1, 2007 7.0 7.0 -------------------------------- Total long-term debt $ 257.0 $ 704.9 --------------------------------
See Notes to Consolidated Financial Statements on pages 26-35. 24 SUMMARY BY QUARTER (UNAUDITED)
Dollars in millions, except per 1997 1998 share data 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q - ------------------------------------------------------------------------------------------------------------------------------------ Net sales $ 664.2 $ 733.6 $ 719.5 $ 686.7 $ 740.8 $ 724.9 $ 688.5 $ 628.5 Gross profit 151.7 161.4 154.5 158.4 167.3 166.7 152.4 139.4 Income from continuing operations before taxes 31.9 35.6 22.4 29.6 30.4 29.1 18.6 4.9 Net income 31.2 40.1 30.3 17.7 21.8 28.4 489.7 11.0 ---------------------------------------------------------------------------------------------- Earnings per share: Basic $ 0.59 $ 0.77 $ 0.57 $ 0.31 $ 0.40 $ 0.53 $ 12.72 $ 0.47 Diluted 0.56 0.73 0.54 0.30 0.38 0.51 12.02 0.46 ---------------------------------------------------------------------------------------------- Common stock prices: High $ 21 $ 27 1/2 $ 27 3/8 $ 22 1/16 $ 29 1/2 $ 30 1/2 $ 29 3/4 $ 22 Low 18 1/8 18 1/8 20 15 7/8 17 1/16 26 17 7/8 14 1/8 Close 19 1/2 26 1/8 21 7/8 17 1/8 27 5/8 28 3/16 21 3/4 16 7/8 ---------------------------------------------------------------------------------------------- Common stock dividend per share $ 0.05 $ 0.05 $ 0.05 $ 0.05 $ 0.05 $ 0.05 $ 0.05 $ 0.05 ----------------------------------------------------------------------------------------------
STATEMENT OF ACCOUNTING AND FINANCIAL POLICIES ACCOUNTING FOR EQUITY INVESTMENTS The Company's investments in less than majority-owned companies and joint ventures are accounted for under the equity method. PER SHARE RESULTS Basic per share results are based on the weighted average number of common shares outstanding and take into account the dividend requirements of preferred stock, net of tax benefits related to leveraged Employee Stock Ownership Plan ("ESOP") shares. Diluted per share results reflect the dilutive effect of outstanding stock options, the further dilutive effect of the assumed conversion into common stock of the outstanding shares of convertible preferred stock, and the elimination of the related preferred stock dividends. Also reflected in diluted earnings per common share is an adjustment for the additional ESOP contribution, net of tax benefits, that would be necessary to meet debt service requirements that would arise upon conversion of the leveraged Series E ESOP Convertible Preferred Stock ("Series E Preferred Stock"), due to the excess of the preferred dividend over the common dividend. (See Note 6 for additional information regarding the ESOP.) INVENTORY VALUATION Inventories are valued at cost, which is not in excess of market. Cost is determined by the last-in, first-out ("LIFO") method. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is depreciated, for financial reporting purposes, using the straight-line method over the estimated useful lives of the assets. Expenditures for normal repairs and maintenance are charged against income in the period incurred. EXCESS OF COST OVER NET ASSETS ACQUIRED The excess of cost over the fair value of net assets of businesses acquired is being amortized over 25-year periods. CASH EQUIVALENTS Cash equivalents reflected in the financial statements are highly liquid, short-term investments with maturities of three months or less that are an integral part of the Company's cash management portfolio. STOCK-BASED COMPENSATION Financial Accounting Standards Board ("FASB") Statement No. 123, "Accounting for Stock-Based Compensation," encourages but does not require companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the amount an employee must pay to acquire the stock. Compensation cost for stock appreciation rights and performance equity units is recorded annually based on the quoted market price of the Company's stock at the end of the period. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes to financial statements. Changes in such estimates may affect amounts reported in future periods. RECLASSIFICATION Certain items previously reported in specific financial statement captions on the Consolidated Statement of Operations have been reclassified to conform with the 1998 presentation. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: REORGANIZATION AND RECAPITALIZATION On February 25, 1999, RT became a wholly owned subsidiary of the Company by converting each share of RT Class A common stock into 0.61 share of Company common stock, and then the Company and RT merged. Upon consummation of the merger, the Company changed its name from Inland Steel Industries, Inc. to Ryerson Tull, Inc. All references to RT in these financial statements refer to the pre-merger, majority-owned subsidiary of the Company. The merger will be accounted for as a purchase for financial reporting purposes. Under the purchase method of accounting, the assets and liabilities of RT as they relate to the minority interest will be recorded at their fair values at the effective time of the merger, with the difference between such fair value and the value of the consideration paid in the merger, if any, allocated to goodwill. On July 16, 1998, Ispat International N.V. ("Ispat") acquired Inland Steel Company ("ISC"), the Company's wholly owned subsidiary that constituted the steel manufacturing and related operations segment of the Company's consolidated operations, pursuant to an agreement and plan of merger dated May 27, 1998, as amended July 16, 1998 (the "Merger Agreement"), among the Company, ISC, Ispat and Inland Merger Sub, Inc. (an Ispat subsidiary). Pursuant to the merger, the Company received $1.1 billion in cash in exchange for the outstanding common stock and preferred stock of ISC and repayment of intercompany debt of ISC held by the Company. The results of operations of ISC have been segregated from the results of continuing operations and reported as a separate item on the statement of operations. The 1997 balance sheet includes the assets and liabilities of ISC. The Company's primary business is currently metals distribution and processing. ISC's revenues, including intercompany sales, were $1,310.0 million through July 16, 1998, the date of the ISC/Ispat Transaction, $2,467.5 million in 1997 and $2,397.3 million in 1996. Summarized balance sheet information for ISC for 1997 which is included in the consolidated information for that year was as follows: current assets, $450.4 million; total assets, $2,333.1 million; current liabilities, $657.8 million and total liabilities, $2,093.4 million. Subsequent to the completion of the ISC/Ispat Transaction, the Company undertook a Dutch auction self-tender program that resulted in its repurchase of approximately 26.5 million shares at $30 per share. An additional 1.8 million common shares were repurchased in the open market for approximately $35 million following the completion of the self-tender program. During the third quarter of 1998, the Company elected to prepay its Subordinated Voting Note (Note 5) held by an affiliate of Nippon Steel Corporation ("NSC"). The Company recognized an after-tax loss on the prepayment of the debt of $11.2 million. During the fourth quarter of 1998, the Company redeemed all remaining outstanding shares of its Series E Preferred Stock (Note 6). The ESOP Trust repaid all existing notes, upon which the Company recognized an after-tax loss of $10.2 million. In the 1996 second quarter, the Company undertook a recapitalization that involved the Company and both its ISC and RT subsidiaries. As part of the restructuring, RT, formerly known as Inland Materials Distribution Group, Inc. ("IMDG"), exchanged existing shares of IMDG common stock, all of which were owned by the Company, for 34.0 million shares of new-issue RT Class B common stock, $1.00 par value per share. RT also sold 5.2 million shares of new-issue Class A common stock, $1.00 par value per share, in a public offering, the net proceeds of which approximated $77.1 million. The Company recognized a pretax gain of $31.4 million, $19.5 million after tax, on the sale of the RT Class A common stock. The Company's ownership of RT approximated 87 percent in all three years. NOTE 2: INVENTORIES Inventories were classified on December 31 as follows: Dollars in millions 1998 1997 - ------------------------------------------------------------------ In process and finished products: Materials Distribution Operations $ 500.0 $ 422.9 Steel Manufacturing Operations -- 120.9 ------------------------ 500.0 543.8 ------------------------ Raw materials and supplies: Iron ore -- 39.7 Scrap and other raw materials -- 23.7 Supplies 0.4 16.9 ------------------------ 0.4 80.3 ------------------------ Total $ 500.4 $ 624.1 ======================== Replacement costs for the LIFO inventories exceeded LIFO values by approximately $71 million and $389 million on December 31 of 1998 and 1997, respectively. NOTE 3: BORROWING ARRANGEMENTS On December 31, 1998, RT had available an unused credit facility totaling $250 million. The facility, which extends to September 2002, requires compliance with various financial covenants including minimum net worth and leverage ratios. With the recapitalization that occurred in 1996, the ability of RT and its subsidiaries to transfer cash to the Company became more tightly restricted. Covenants in the RT credit facility limited the amount of cash that RT could transfer to the Company in the form of dividends and advances to approximately $94 million at year-end 1998. Additionally, a covenant in the revolving credit facility restricted the amount of additional debt, including additional borrowings under the credit lines, that RT could incur, to $139 million as of December 31, 1998. In the fourth quarter of 1998, the committed banks waived certain provisions of the credit agreement to facilitate the merger of RT with the Company. 26 NOTE 4: LONG-TERM DEBT In July 1996, RT sold $150 million of its 8.5 percent Notes due July 15, 2001, and $100 million of 9.125 percent Notes due July 15, 2006, in a public offering. The indenture under which the Notes were issued contains covenants limiting, among other things, the creation of secured indebtedness, sale and leaseback transactions, the repurchase of capital stock, transactions with affiliates, and mergers, consolidations and certain sales of assets. Under the provisions of certain loan agreements, RT's subsidiaries are required to maintain specified amounts of working capital and net worth and to meet leverage tests, as outlined in the agreements, and RT is restricted as to loans or dividends that it may pay to the Company. At December 31, 1998, approximately $94 million was available for RT to make loans or pay dividends to the Company under these loan agreements. Maturities of long-term debt due within five years are $150 million in 2001. See Note 13 regarding commitments and contingencies for other scheduled payments. The outstanding borrowing of the Company's ESOP was recorded as a liability of the Company because the Company had committed to make payment (dividends and supplemental contributions) to the ESOP Trust sufficient to service the ESOP Notes. The ESOP Notes were guaranteed by Joseph T. Ryerson & Son, Inc., a subsidiary of the Company. The above guarantee terminated with the repayment of the ESOP Notes (Note 1). NOTE 5: SUBORDINATED VOTING NOTE In December 1989, the Company sold 185,000 shares of the Company's Series F Exchangeable Preferred Stock, $1.00 par value per share ("Series F Preferred Stock"), for $185 million to NS Finance III Inc., an indirect, wholly owned subsidiary of Nippon Steel Corporation ("NSC"). The preferred stock was exchanged in the third quarter of 1995 for the Company's 10.23% Subordinated Voting Note. The preferred stock entitled the holder to 30.604 votes per share and the Subordinated Voting Note entitled the holder to 30.604 votes per $1,000 of principal amount outstanding. In connection with the sale of the Series F Preferred Stock, the Company agreed to repurchase $185 million of the Company's common stock, of which $157 million (amounting to 5.1 million shares) had been repurchased as of December 31, 1997. The amount representing the remaining repurchase commitment of $28 million as of year-end 1997 was classified as temporary equity with a corresponding reduction of stockholders' equity. In 1996, the Company repaid $85 million of the note on the scheduled repayment date. During the third quarter of 1998, the Company prepaid the remaining $100 million of principal, which prepayment resulted in an after-tax extraordinary loss associated with the early retirement of this debt (Note 1). With the third quarter 1998 repayment, the repurchase commitment of the Company was eliminated. NOTE 6: EMPLOYEE STOCK OWNERSHIP PLAN The Company sponsored a 401(k) plan through which eligible salaried employees could defer a portion of their salary. Through December 31, 1998, the Company matched the first five percent of each eligible participant's salary contributed, subject to certain IRS limitations. In July 1989, the Board of Directors amended this plan to include a leveraged ESOP. The ESOP Trust purchased 3.1 million newly issued shares of Series E Preferred Stock from the Company with the proceeds of loans totaling $150 million. As a result, effective January 1, 1990, the Company's matching contribution in the 401(k) plan was in shares of Series E Preferred Stock provided principally by the Company's ESOP, supplemented as needed by newly issued shares. The Company accounted for its ESOP in accordance with American Institute of Certified Public Accountants Statement of Position 76-3. The Company made semiannual contributions to the ESOP equal to the ESOP Trust's debt service less dividends on leveraged shares (shares purchased by the ESOP Trust in July 1989) received by the ESOP Trust. All dividends received by the ESOP Trust were used to pay debt service. Dividends on Series E Preferred Stock were recorded as declared as reductions to retained earnings, net of applicable tax benefits on unallocated shares. Dividends on allocated leveraged shares were replaced with additional ESOP shares. Dividends on unallocated leveraged shares served to reduce interest expense recognized by the Company. Effective January 1, 1998, salaried employees at RT no longer participated in the above-described plan. On that date, RT established a new savings plan to which RT employees' account balances, including ESOP shares, were transferred. The employer matching contribution in the savings plan is made in cash, and such participants no longer receive ESOP shares, except for dividend replacement shares which continued to be allocated to their accounts consistent with plan provisions. Compensation expense recognized at RT was not materially impacted as a result of the change in savings plans. Upon completion of the ISC/Ispat Transaction, ISC salaried employees no longer participated in the ESOP. The Company redeemed 1.1 million shares of Series E Preferred Stock held in the 401(k) plan accounts of ISC employees prior to the transfer of account balances to a savings plan sponsored by Ispat. With ISC and RT employees no longer participating, there were very few participants remaining in this plan. During the fourth quarter of 1998, the Company requested that the plan trustee repay all existing Notes of the ESOP Trust. The Company redeemed all outstanding Series E Preferred Stock. The Trust used the proceeds of unallocated shares and additional contributions from the Company to repay the Notes. The Company was required to recognize an extraordinary loss during the fourth quarter as a result of the early retirement of this debt (Note 1). At December 31, 1998, the Company's 401(k) plan merged with RT's savings plan. 27 In 1998, the ESOP Trust received $5.2 million in dividends and $8.2 million in contributions, and in both 1997 and 1996 received $10.6 million in dividends and $8.1 million in contributions from the Company to make required schedule principal and interest payments. As principal and interest payments were made, ESOP shares were made available for allocation based on the proportion of current payments to the total of current plus future payments. As shares were allocated, the Company recorded compensation expense equal to the original stated value of the shares of Series E preferred stock allocated to the participants during the period. Compensation expense related to the ESOP recognized by the Company totaled $3.3 million in 1998, $8.4 million in 1997, and $9.1 million in 1996. Interest expense was recognized as it was incurred by the ESOP Trust. Interest expense incurred by the ESOP Trust totaled $6.6 million, $8.6 million, and $9.3 million in 1998, 1997 and 1996, respectively. NOTE: 7 CAPITAL STOCK AND ACCUMULATED OTHER COMPREHENSIVE INCOME On December 31, 1998, 2,664,760 shares of common stock remained reserved for issuance under the Company's various employee stock plans and upon conversion of shares of preferred stock. The Series A $2.40 Cumulative Convertible Preferred Stock, $1.00 par value per share ("Series A Preferred Stock"), is convertible into common stock at the rate of one share of common stock for each share of Series A Preferred Stock and is redeemable, at the Company's option, at $44 per share plus any accrued and unpaid dividends. Each such share is entitled to one vote and generally votes together with holders of common stocks as one class. Shares of Series E Preferred Stock, $1.00 par value per share, entitled the holder to cumulative annual dividends of $3.523 per share, payable semiannually, and to 1.25 votes per share. Shares of Series E Preferred Stock were convertible into the Company's common stock on a one-for-one basis. During the fourth quarter of 1998, all outstanding shares of Series E Preferred Stock were redeemed. The following table details changes in capital accounts:
Preferred Stock Preferred Stock Common Stock Treasury Stock Series A Series E - ---------------------------------------------------------------------------------------------------------------------------------- Shares Dollars Shares Dollars Shares Dollars Shares Dollars Shares in thousands and dollars in millions - ---------------------------------------------------------------------------------------------------------------------------------- Balance at January 1, 1996 50,556 $ 50.6 (1,815) $ (51.1) 94 $ 0.1 3,199 $ 3.1 Acquisition of treasury stock -- -- (164) (3.7) -- -- -- -- Issued under employee benefit plan -- -- 401 12.5 -- -- 67 0.1 Redemption of Series E Preferred Stock -- -- -- -- -- -- (105) (0.1) Foreign currency translation -- -- -- -- -- -- -- -- Other changes -- -- (70) (1.9) -- -- -- -- ----------------------------------------------------------------------------------- Balance at December 31, 1996 50,556 50.6 (1,648) (44.2) 94 0.1 3,081 3.1 Acquisition of treasury stock -- -- (299) (6.7) -- -- -- -- Issued under employee benefit plans -- -- 415 11.0 -- -- 58 -- Redemption of Series E Preferred Stock -- -- -- -- -- -- (124) (0.1) Other changes -- -- (26) (0.6) -- -- -- -- ----------------------------------------------------------------------------------- Balance at December 31, 1997 50,556 50.6 (1,558) (40.5) 94 0.1 3,015 3.0 Tender offer buy-back -- -- (26,485) (797.7) -- -- -- -- Acquisition of treasury stock -- -- (2,089) (41.9) -- -- -- -- Issued under employee benefit plans -- -- 1,395 36.7 -- -- 10 -- Redemption of Series E Preferred -- -- -- -- -- -- (3,025) (3.0) Conversion of Series A Preferred Stock -- -- 12 0.3 (12) -- -- -- Minimum pension liability (net of tax of $18.3) -- -- -- -- -- -- -- -- Other changes -- -- (74) (2.2) (4) -- -- -- ----------------------------------------------------------------------------------- Balance at December 31, 1998 50,556 $ 50.6 (28,799) $ (845.3) 78 $ 0.1 -- $ -- =================================================================================== Capital in Excess Accumulated Other of Par Value Comprehensive Income -------------------------------------------------- Dollars Foreign Minimum Currency Pension Translation Liability -------------------------------------------------- Balance at January 1, 1996 $ 1,045.7 $ (2.6) $ -- Acquisition of treasury stock -- -- -- Issued under employee benefit plan (1.6) -- -- Redemption of Series E Preferred Stock (5.0) -- -- Foreign currency translation -- (0.7) -- Other changes 1.1 -- -- -------------------------------------------------- Balance at December 31, 1996 1,040.2 (3.3) -- Acquisition of treasury stock -- -- -- Issued under employee benefit plans -- -- -- Redemption of Series E Preferred Stock (6.0) -- -- Other changes (1.7) -- -- -------------------------------------------------- Balance at December 31, 1997 1,032.5 (3.3) -- Tender offer buy-back -- -- -- Acquisition of treasury stock -- -- -- Issued under employee benefit plans (2.5) -- -- Redemption of Series E Preferred (144.0) -- -- Conversion of Series A Preferred Stock (0.4) -- -- Minimum pension liability (net of tax of $18.3) -- -- (26.9) Other changes 11.6 -- -- -------------------------------------------------- Balance at December 31, 1998 $ 897.2 $ (3.3) $ (26.9) ==================================================
28 NOTE 8: STOCK OPTION PLANS The Company has adopted the disclosure-only provisions of FASB Statement No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation cost has been recognized for the stock option plans. Had compensation cost for the option plans been determined based on the fair value at the grant date for awards in 1998, 1997 and 1996, consistent with the provisions of FASB Statement No. 123, the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below: Dollars in millions except per share data 1998 1997 1996 - ----------------------------------------------------------------------------- Net income--as reported $ 550.9 $ 119.3 $ 45.7 Net income--pro forma 547.0 116.0 42.4 Earnings per share--as reported $ 13.79 $ 2.25 $ 0.75 Earnings per share--pro forma 13.69 2.18 0.68 The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 1998: dividend yield of 1.00%; expected volatility of 34.17%; risk-free interest rate of 5.34% and expected term of five years. At RT for 1998, the following weighted-average assumptions were used: dividend yield of 0%; expected volatility of 31.93%; risk-free interest rate of 5.70% and expected term of seven years. In July 1996, after the initial public offering of RT common stock, the Compensation Committee of the Board of Directors of RT authorized the substitution of RT common stock options for Company common stock options. As the exercise price of substituted options exceeded the then current market price of RT stock and all other terms of the options remained unchanged, there was no material increase in value to the employees resulting from the substitution and no material increase in cost to RT. 1,041,949 of RT stock options were substituted for 855,494 Company stock options. Options substituted retain their originally granted vesting schedules. During 1998 and 1997, RT granted options to employees. 87 percent of the compensation cost for these options, had they been determined on the fair value at the grant date consistent with the provisions of FASB Statement No. 123, is included in the above pro forma numbers. Options granted under each of the plans become exercisable in not less than one year. Currently, except for options granted to two executives in the third quarter of 1998, which become exercisable over two years, options become exercisable over a three-year period with one-third becoming fully exercisable at the end of each year. All Company options granted prior to the ISC/Ispat Transaction (Note 1) that were at that time not exercisable became vested at the effective time of the transaction. COMPANY PLAN The Inland 1995 Incentive Stock Plan, approved by stockholders on May 24, 1995, provides for the issuance, pursuant to options and other awards, of 2.0 million shares of common stock to officers and other key employees. Options remain outstanding and exercisable under the Inland 1992 and 1988 Incentive Stock Plans; however, no further options may be granted under these plans. Under the various plans, the per share option exercise price may not be less than 100 percent of the fair market value per share on the date of grant. During 1998, options were granted to five executives under the 1995 Plan and a total of 997,839 shares were available for future grants under the Plan as of December 31, 1998. The following summarizes the status of options under the plans for the periods indicated: Weighted Option Exercise Average Number of Price or Range Exercise Shares Per Share Price ----------- --------------- -------- Options (granted and unexercised at December 31, 1995 (1,615,826 exercisable) 2,374,590 $ 15.31-39.75 $ 29.73 Granted 1,416,900 22.69-24.69 24.57 Exercised (1,800) 15.31-26.13 20.12 Forfeited (136,200) 21.38-33.75 26.09 Expired (94,050) 21.38-39.75 33.34 Substituted by RT (855,494) 21.38-39.75 27.76 ------------------------------------------- Options (granted and unexercised) at December 31, 1996 (1,610,246 exercisable) 2,703,946 21.38-39.75 27.72 Granted 34,300 24.38 24.38 Exercised (17,400) 21.38-26.13 21.78 Forfeited (97,500) 22.69-39.75 27.46 Expired (38,110) 25.50-39.75 32.65 ------------------------------------------- Options (granted and unexercised) at December 31, 1997 (1,978,823 exercisable) 2,585,236 21.38-39.75 27.72 Granted 205,000 18.16-19.22 18.83 Exercised (1,214,950) 19.22-28.50 24.26 Forfeited (9,700) 24.69-33.75 26.49 Expired (210,104) 25.50-39.75 35.53 ------------------------------------------- Options (granted and unexercised) at December 31, 1998 (1,280,482 exercisable) 1,355,482 18.16-39.75 28.14 ------------------------------------------- The weighted-average fair value of options granted during 1998 was $6.75. The following table summarizes information about fixed-price stock options outstanding at December 31, 1998:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE --------------------------------------------------------------------------------------------------------- NUMBER WEIGHTED-AVERAGE WEIGHTED-AVERAGE NUMBER WEIGHTED-AVERAGE OF SHARES REMAINING EXERCISE PRICE OF SHARES EXERCISE PRICE RANGE OF EXERCISE PRICES CONTRACTUAL LIFE - ------------------------------------------------------------------------------------------------------------------------------------ $39.75 97,800 1 year $39.75 97,800 $39.75 21.38 to 33.75 101,867 2 years 33.67 101,867 33.67 25.50 94,213 3 years 25.50 94,213 25.50 26.13 179,919 4 years 26.13 179,919 26.13 30.88 274,900 5 years 30.88 274,900 30.88 28.50 261,851 6 years 28.50 261,851 28.50 22.69 to 24.69 227,704 7 years 24.30 227,704 24.30 24.38 12,228 8 years 24.38 12,228 24.38 19.22 30,000 9 years 19.22 30,000 19.22 18.16 75,000 10 years 18.16 -- N/A
Stock appreciation rights ("SARs") may also be granted with respect to shares subject to outstanding options. No SAR has been granted since 1990. SAR compensation expense recorded by the Company was not material for any of the three years. The 1995 Plan also provides, as did the 1992 and 1988 Plans, for the granting of restricted stock and performance awards to officers and other key employees. During the first half of 1998, 10 restricted stock awards totaling 30,000 shares were granted. At the effective time of the ISC/Ispat Transaction, 55,000 shares of restricted stock awards, which represented all unvested restricted stock awards and included the 1998 awards, vested. In addition, 276,760 performance shares vested while 9,020 performance shares were forfeited. During 1997, 139 performance awards were granted covering 571,560 shares of stock and the equivalent of an additional 294,440 shares of stock payable in either stock or cash. None of these performance awards were paid in 1997, and 285,780 shares were forfeited when performance goals were not achieved. Also during 1997, no restricted stock awards were granted; however, 59,500 shares of previously granted restricted stock awards vested while 5,600 shares of restricted stock were forfeited, and 6,618 shares were issued to recipients of performance awards previously granted while no shares were forfeited. During 1996, restricted stock awards totaling 16,100 shares were granted to 11 executives, and no performance awards were granted. Also during 1996, 82,200 shares of previously granted restricted stock awards vested while 28,300 shares of restricted stock awards were forfeited, 31,424 shares of restricted stock were substituted by RT restricted stock, and 4,941 shares (including dividend- equivalent shares) were issued to recipients of performance awards previously granted while 28,079 shares (including dividend-equivalent shares) subject to performance awards were forfeited. Until July 31, 1998, the Company also sponsored an employee stock purchase plan under which employees could utilize payroll deductions to purchase stock at the end of six-month periods at a price equal to 90 percent of the fair market value price on the last day of the period. In 1998, 1997 and 1996, employees received stock with a total value that was approximately $60,000, $100,000 and $120,000, respectively, greater than the price paid for the stock issued. During the third quarter of 1998, the Company elected to terminate the employee stock purchase plan. RT PLAN The RT 1996 Incentive Stock Plan provides for the issuance, pursuant to options and other awards, of 2.3 million shares of RT common stock to officers and other key employees. Under this plan, the per share option exercise price may not be less than 100 percent of the fair market value per share on the date of grant. A total of 487,748 shares were available for future grants under that Plan as of December 31, 1998. The following summarizes the status of RT options under the plan for the periods indicated:
Weighted Option Exercise Average Number of Price or Range Exercise Shares Per Share Price --------- --------------- -------- Substituted for Company options 1,041,949 $ 17.55-32.63 $ 22.79 Forfeited (8,768) 20.26-25.34 21.50 Options (granted and unexercised) at December 31, 1996 (511,359 exercisable) 1,033,181 17.55-32.63 22.80 Granted 324,500 14.06-15.75 14.10 Expired (4,625) 25.50 25.50 Forfeited (20,971) 14.06-32.63 23.15 -------------------------------- Options (granted and unexercised) at December 31, 1997 (713,514 exercisable) 1,332,085 14.06-32.63 20.67 Granted 421,500 13.38-19.56 13.79 Exercised (31,469) 14.06-20.93 17.86 Expired (20,881) 30.99 30.99 Forfeited (48,015) 13.38-32.63 20.98 ------------------------------------------------------- Options (granted and unexercised) at December 31, 1998 (920,176 exercisable) 1,653,220 13.38-32.63 18.83 -------------------------------------------------------
The weighted-average fair value of options granted during 1998 was $6.48. The following table summarizes information about RT fixed-price stock options outstanding at December 31, 1998:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE --------------------------------------------------------------------------------------------------------- NUMBER WEIGHTED-AVERAGE WEIGHTED-AVERAGE NUMBER WEIGHTED-AVERAGE OF SHARES REMAINING EXERCISE PRICE OF SHARES EXERCISE PRICE RANGE OF EXERCISE PRICES CONTRACTUAL LIFE - ------------------------------------------------------------------------------------------------------------------------------------ $32.63 42,139 1 year $ 32.63 42,139 $32.63 17.55 to 27.70 59,796 2 years 25.53 59,796 25.53 20.93 45,306 3 years 20.93 45,306 20.93 21.44 82,418 4 years 21.44 82,418 21.44 25.34 to 29.55 140,060 5 years 26.08 140,060 26.08 23.39 135,304 6 years 23.39 135,304 23.39 20.26 426,087 7 years 20.26 295,808 20.26 14.06 296,610 8 years 14.06 116,045 14.06 13.38 to 19.56 425,500 9 years 13.83 3,300 15.30
The Plan provides that SARs may be granted with substantially the same terms as the Company Plan. In 1998, SARs were granted with respect to 90,000 shares payable in cash, except under limited circumstances, at the rate of one SAR for each share subject to option. The Plan provides for the granting of restricted stock and performance awards to officers and other key employees. During 1998, restricted stock awards totaling 31,750 shares were granted to 46 key employees. Performance awards totaling 91,800 shares were granted while shares totaling 81,911 were forfeited when performance thresholds were not met. Also during 1998, 13,267 shares of previously granted restricted stock awards vested while 2,500 shares of restricted stock were forfeited. During 1997, restricted stock awards totaling 5,500 shares were granted to three executives and 94 performance awards totaling 90,900 shares were granted. Performance shares totaling 63,885 were forfeited when performance thresholds were not met. Also during 1997, 23,050 shares of previously granted restricted stock awards vested while 1,218 shares of restricted stock were forfeited. During 1996, 31,424 shares of previously granted ISI restricted stock were substituted by 38,273 shares of RT stock. Also during 1996, restricted stock awards totaling 18,354 were granted to 10 executives and no performance awards were granted. Upon completion of the merger of the Company and RT, each RT option and restricted stock share was substituted by 0.61 share of Company options and restricted stock. In addition, the exercise price of each option was adjusted by dividing the pre-merger exercise price per share of each RT option by 0.61. RT employees participated in the Company employee stock purchase plan in which employees had the opportunity to purchase stock at the end of each six- month period at a price equal to 90 percent of the fair market value price on the last day of the period. In 1998, 1997 and 1996, RT employees received Company stock with a total value that was approximately $15,000, $20,000 and $30,000, respectively, greater than the price paid for the stock issued. NOTE 9: STOCKHOLDER RIGHTS PLAN Pursuant to a stockholder rights plan, on November 25, 1997, the Company's Board of Directors declared a dividend distribution, payable to stockholders of record on December 17, 1997, of one preferred stock purchase right (a "Right") for each outstanding share of the Company's common stock. The Rights will expire December 17, 2007, and will become exercisable only if a person or group becomes the beneficial owner of 20 percent or more of the common stock (a "20 percent holder"), commences a tender or exchange offer which would result in the offeror beneficially owning 20 percent or more of the common stock, or is determined by the Board to beneficially own at least 10 percent of the common stock and either intends to cause the Company to take certain actions not in the best long-term interests of the Company and its stockholders or is reasonably likely, through such beneficial ownership, to cause a material adverse impact on the business or prospects of the Company and its stockholders (an "Adverse Person"). Each Right will entitle stockholders to buy one newly issued unit of one one-hundredth of a share of Series D Junior Participating Preferred Stock at an exercise price of $80, subject to certain antidilution adjustments. The Company (with the concurrence of the independent continuing directors) will generally be entitled to redeem the Rights at $0.01 per Right at any time prior to 15 days after a public announcement of the existence of a 20 percent holder. If a person or group accumulates 20 percent or more of the common stock (except pursuant to an offer for all outstanding shares of common stock which the independent continuing directors determine to be fair to and otherwise in the best interests of the Company and its stockholders) or the Board determines that a person or group is an Adverse Person, each Right (other than Rights held by such 20 percent holder and certain related parties which become void) will represent the right to purchase, at the exercise price, common stock (or, in certain circumstances, a combination of securities and/or assets) having a current market value equal to twice the exercise price. In addition, if, following the public announcement of the existence of a 20 percent holder, the Company is acquired in a merger or other business combination transaction, except a merger or other business combination transaction that takes place after the consummation of an offer for all outstanding shares of common stock that the independent continuing directors have determined to be fair, or a sale of 50 percent or more of the Company's assets or earning power is made to a third party, each Right (unless previously voided) will represent the right to purchase, at the exercise price, common stock of the acquiring entity having a value of twice the exercise price at the time. The Board of Directors has the option at any time after a person or group becomes a 20 percent holder or an Adverse Person, to exchange all or part of the Rights (other than Rights held by such 20 percent holder or Adverse Person) for shares of the Company's common stock provided that the Company may not make such an exchange after any person becomes the beneficial owner of 50 percent or more of the Company's outstanding common stock. NOTE 10: DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value. DERIVATIVES The Company has only limited involvement with derivative financial instruments and does not use them for speculative or trading purposes. CASH AND CASH EQUIVALENTS The carrying amount of cash equivalents approximates fair value because of the short maturity of those instruments. LONG-TERM DEBT The estimated fair value of the Company's long-term debt and the current portions thereof (excluding the Subordinated Voting Note) using quoted market prices of Company debt securities recently traded and market-based prices of similar securities for those securities not recently traded was $282 million at December 31, 1998, and $712 million at December 31, 1997, as compared with the carrying value of $257 million and $668 million at year-end 1998 and 1997, respectively. NOTE 11: RETIREMENT BENEFITS Prior to January 1, 1998, the Company's non-contributory defined benefit pension plans covered substantially all Company employees, retirees and their beneficiaries. Benefits provided participants of the plans were based on final pay and years of service for all salaried employees and certain wage employees, and years of service and a fixed rate for all other wage employees, including members of the United Steelworkers of America. Effective April 30, 1996, that portion of the Company's Plan covering RT's current and former employees was separated and became the Ryerson Tull Pension Plan, a new and separate plan sponsored by RT, which covers certain employees, retirees and their beneficiaries of RT and its subsidiaries. The Ryerson Tull Pension Plan is a noncontributory defined benefit plan that provides benefits based on pay and years of service for salaried employees, and years of service and a fixed rate or a rate determined by job grade for all wage employees, including employees under collective bargaining agreements. Effective January 1, 1998, RT froze the benefits accrued under its defined benefit pension plan for certain salaried employees and instituted a defined contribution plan. For 1998, expense recognized for such plan was $4.6 million. Salaried employees vested in their benefits accrued under the defined benefit plan at December 31, 1997, are entitled to those benefits upon retirement. Certain transition rules have been established for those salaried employees meeting specified age and service requirements. The change in the pension plan for salaried employees resulted in a one-time pretax curtailment gain of $8.9 million in 1997. As part of the ISC/Ispat transaction, the Inland Steel Industries Pension Plan (the "ISC Pension Plan"), in which employees of both ISC and the Company participated, was transferred to ISC. The Company's remaining employees that formerly had participated in the ISC Pension Plan became participants in RT's pension plan. The tables included below provide reconciliations of benefit obligations and fair value of plan assets of the RT plans as well as the funded status and components of net periodic benefit costs for each period related to each plan. The assumptions used to determine the information below related to pension benefits and other postretirement benefits, primarily retired health care, was as follows: 1998 1997 - -------------------------------------------------------------------------------- Discount rate for calculating obligations 6.75% 7.50% Discount rate for calculating net periodic benefit cost 7.50 8.00 Expected rate of return on plan assets 9.50 9.50 Rate of compensation increase 4.00 4.00
The data in the following tables pertain to continuing operations only. YEAR ENDED SEPTEMBER 30 ------------------------ ------------------------ PENSION BENEFITS OTHER BENEFITS DOLLARS IN MILLIONS 1998 1997 1998 1997 - -------------------------------------------------------------------------------------------------------------- Change in Benefit Obligation Benefit obligation at beginning of year $ 283 $ 252 $ 104 $ 106 Service cost 4 6 2 3 Interest cost 21 20 8 8 Plan amendments -- -- -- (12) Actuarial (gain)/loss 38 44 (5) 4 Business combination 10 -- 1 -- Curtailment -- (20) -- -- Benefits paid (20) (19) (5) (5) - -------------------------------------------------------------------------------------------------------------- Benefit obligation at end of year $ 336 $ 283 $ 105 $ 104 - -------------------------------------------------------------------------------------------------------------- Accumulated benefit obligation at end of year $ 324 $ 274 N/A N/A ============================================================================================================== Change in Plan Assets Plan assets at fair value at beginning of year $ 293 $ 251 -- -- Actual return on plan assets (2) 54 -- -- Employer contribution 6 7 -- -- Business combination 9 -- -- -- Benefits paid (20) (19) -- -- - -------------------------------------------------------------------------------------------------------------- Plan assets at fair value at end of year $ 286 $ 293 -- -- ============================================================================================================== Reconciliation of Prepaid (Accrued) and Total Amount Recognized Funded status $ (50) $ 10 $(105) $(104) Unrecognized net (gain)/loss 64 1 (18) (14) Unrecognized prior service cost 5 5 (24) (28) ----------------------------------------------------------- Prepaid (accrued) benefit cost at September 30 19 16 (147) (146) Change in account, October-December -- (1) 1 (1) - -------------------------------------------------------------------------------------------------------------- Net amount recognized at December 31 $ 19 $ 15 $(146) $(147) ============================================================================================================== Amounts Recognized in Statement of Financial Position Consist of: Prepaid (accrued) benefit cost $ -- $ 15 $(146) $(147) Accrued benefit liability (38) -- -- -- Intangible asset 5 -- -- -- Accumulated other comprehensive income 52 -- -- -- - -------------------------------------------------------------------------------------------------------------- Net amount recognized $ 19 $ 15 $(146) $(147) ==============================================================================================================
For measurement purposes, the annual rate of increase in the per capita cost of covered health care benefits was 4.5 percent, the level at which it is expected to remain.
Pension Benefits Other Benefits ---------------- -------------- Dollars in millions 1998 1997 1998 1997 - --------------------------------------------------------------------- Components of Net Periodic Benefit Cost Service cost $ 4 $ 6 $ 2 $ 3 Interest cost 21 20 8 8 Expected return on assets (24) (22) -- -- Amortization return on assets 1 1 (3) (1) Recognized actuarial (gain)/loss -- -- -- (2) Amortization of transition asset -- (3) -- -- ------------------------------- Net periodic benefit cost $ 2 $ 2 $ 7 $ 8 ===============================
The assumed health care cost trend rate has an effect on the amounts reported for the health care plans. A one-percentage-point change in the assumed health care cost trend rate would have the following effects:
Dollars in thousands 1% increase 1% decrease - -------------------------------------------------------------------------------- Effect on service cost plus interest cost $ 251 $ (211) Effect on postretirement benefit obligation 3,265 (2,738)
NOTE 12: INCOME TAXES The elements of the provisions for income taxes related to continuing operations for each of the three years indicated below were as follows:
Year ended December 31 ------ Dollars in millions 1998 1997 1996 - ----------------------------------------------------------------- Current income taxes: Federal $ 8.6 $36.8 $25.5 State and foreign 5.7 5.9 4.8 ----------------------- 14.3 42.7 30.3 Deferred income taxes 16.3 3.9 17.1 ----------------------- Total tax expense $30.6 $46.6 $47.4 =======================
The components of the deferred income tax assets and liabilities arising under FASB Statement No. 109 were as follows:
Year ended December 31 ---------- Dollars in millions 1998 1997 - ------------------------------------------------------------------------------- Deferred tax assets (excluding post- retirement benefits other than pensions): Net operating loss and tax credit carryforwards $ 46 $ 315 Restructuring and termination reserves -- 28 Other deductible temporary differences 36 52 Less valuation allowances -- (3) ------------------------- 82 392 ------------------------- Deferred tax liabilities: Fixed asset basis difference 43 499 Other taxable temporary differences 11 82 ------------------------- 54 581 ------------------------- Net deferred asset (liability) (excluding post- retirement benefits other than pensions) 28 (189) FASB Statement No. 106 impact (post- retirement benefits other than pensions) 55 451 ------------------------- Net deferred tax asset $ 83 $ 262 =========================
For tax purposes, the Company had available, at December 31, 1998, net operating loss ("NOL") carryforwards for regular federal income tax purposes of approximately $11 million, which will expire as follows: $6 million in the year 2011 and $5 million in the year 2012. The $11 million in regular NOL carryforwards was acquired with RT's purchase of Thypin Steel Co., Inc. in 1997. The Company also had investment tax credit and other general business credit carryforwards for tax purposes of approximately $1 million, which will expire during the years 2004 through 2006. Additionally, in conjunction with the Alternative Minimum Tax ("AMT") rules, the Company had available AMT credit carryforwards for tax purposes of approximately $41 million, which may be used indefinitely to reduce regular federal income taxes. The Company believes that it is more likely than not that all of its deferred tax assets will be realized. Subsequent to the adoption of FASB Statement No. 109, the Company adopted FASB Statement No. 106 and recognized the entire transition obligation at January 1, 1992, as a cumulative effect charge in 1992. At December 31, 1998, the deferred tax asset related to the Company's FASB Statement No. 106 obligation was $55 million. To the extent that future annual charges under FASB Statement No. 106 continue to exceed deductible amounts, this deferred tax asset will continue to grow. Thereafter, even if the Company should have a tax loss in any year in which the deductible amount would exceed the financial statement expense, the tax law provides for a 20-year carryforward period of that loss. Because of the extremely long period that is available to realize these future tax benefits, a valuation allowance for this deferred tax asset is not necessary. Income taxes on continuing operations differ from the amounts computed by applying the federal tax rate as follows:
Year ended December 31 -------- Dollars in millions 1998 1997 1996 - ------------------------------------------------------------------------------- Federal income tax expense computed at statutory tax rate of 35% $29.0 $41.8 $45.0 Additional taxes or credits from: State and local income taxes, net of federal income tax effect 4.0 4.1 4.1 All other, net (2.4) 0.7 (1.7) -------------------------------- Total income tax provision $30.6 $46.6 $47.4 ================================
NOTE 13: ACQUISITIONS During 1997, the Company acquired Thypin Steel Co., Inc., Omni Metals, Inc. and the assets of Cardinal Metals, Inc. for an aggregate of $139.9 million in cash plus assumption of debt. The acquisitions have been accounted for by the purchase method of accounting and the purchase price has been allocated to assets acquired and liabilities assumed. Results of operations since acquisition for each company are included in the consolidated results. The pro forma effect for 1997 and 1996 had these acquisitions occurred at the beginning of each such year is not material. During the first quarter of 1998, the Company acquired Brockway Pressed Metals, Inc., a powder metallurgy company for $7.7 million. During the fourth quarter of 1998, Brockway was sold as part of the sale of Inland Engineered Materials Corporation. NOTE 14: EARNINGS PER SHARE BASIC EARNINGS PER SHARE
Dollars and shares in millions, --------- except per share data 1998 1997 1996 - -------------------------------------------------------------------------------- Income from continuing operations before discontinued operations and extraordinary items $ 47.7 $ 64.5 $ 78.1 ------------------------ Less preferred stock dividends 6.9 9.1 9.1 Income from continuing operations available to common stockholders 40.8 55.4 69.0 Discontinued operations 13.8 54.8 (17.9) Gain on sale of discontinued operations 510.8 -- -- Extraordinary loss on early retirement of debt (21.4) -- (14.5) ------------------------ Net income available to common stockholders $544.0 $110.2 $ 36.6 ======================== Average shares of common stock outstanding 39.4 48.9 48.8 ======================== Basic earnings per share From continuing operations $ 1.03 $ 1.13 $ 1.42 Discontinued operations 0.35 1.12 (0.37) Gain on sale of discontinued operations 12.95 -- -- Extraordinary loss on early retirement of debt (0.54) -- (0.30) -------------------------- Basic earnings per share $13.79 $ 2.25 $ 0.75 ==========================
DILUTED EARNINGS PER SHARE
Dollars and shares in millions, ---------- except per share data 1998 1997 1996 - -------------------------------------------------------------------------------- Income from continuing operations available to common stockholders $ 40.8 $ 55.4 $ 69.0 Effective of dilutive securities Series E leveraged preferred stock 6.3 8.7 8.5 Additional ESOP funding required on conversion of Series E leveraged preferred stock, net of tax (5.9) (8.1) (7.9) ------------------------ Income available to common stockholders and assumed conversions before discontinued operations and extraordinary items 41.2 56.0 69.6 Discontinued operations 13.8 54.8 (17.9) Gain on sale of discontinued operations 510.8 -- -- Extraordinary loss on early retirement of debt (21.4) -- (14.5) ------------------------ Net income available to common stockholders and assumed conversions $544.4 $110.8 $ 37.2 ======================== Average shares of common stock outstanding 39.4 48.9 48.8 Assumed conversion of Series E leveraged preferred stock 2.2 3.0 3.0 Dilutive effect of stock options 0.1 -- -- ------------------------ Shares outstanding for diluted earnings per share calculation 41.7 51.9 51.8 ======================== Diluted earnings per share From continuing operations $ 0.99 $ 1.08 $ 1.34 Discontinued operations 0.33 1.05 (0.34) Gain on sale of discontinued operations 12.23 -- -- Extraordinary loss on early retirement of debt (0.51) -- (0.28) ------------------------ Diluted earnings per share $13.04 $ 2.13 $ 0.72 ========================
NOTE 15: COMMITMENTS AND CONTINGENCIES Pursuant to the ISC/Ispat Merger Agreement, the Company agreed to indemnify Ispat for losses, if they should arise, exceeding certain minimum amounts in connection with breaches of representations and warranties contained in the ISC/Ispat Merger Agreement and for expenditures and losses, if they should arise, relating to certain environmental liabilities exceeding, in most instances, minimum amounts. The maximum liability for which the Company can be responsible with respect to such obligations is $90 million in the aggregate. There are also certain other covenant commitments made by the Company contained in the ISC/Ispat Merger Agreement which are not subject to a maximum amount. In general, Ispat must make indemnification claims with respect to breaches of representations and warranties prior to March 31, 2000; however, claims relating to breaches of representations and warranties related to tax matters and certain organizational matters must be made within 90 days after the expiration of the applicable statute of limitations, and claims with respect to breaches of representations and warranties related to environmental matters must be made prior to July 16, 2003. Ispat has advised the Company of certain environmental expenses, which Ispat has incurred, but they are below the minimum indemnification thresholds of the ISC/Ispat Merger Agreement and the Company has not made any indemnification payments to Ispat. The Company has purchased environmental insurance with coverage up to $90 million payable directly to Ispat and ISC. The insurance is expected to cover substantially the same environmental matters for which the Company has agreed to indemnify Ispat. As part of the ISC/Ispat transaction, the ISC Pension Plan, in which employees of both ISC and the Company participated, was transferred to ISC. The Company's remaining employees that formerly had participated in the ISC Pension Plan became participants in Ryerson Tull's pension plan. The ISC Pension Plan has unfunded benefit liabilities on a termination basis, as determined by the Pension Benefit Guaranty Corporation ("PBGC"), an agency of the U.S. government. As a condition to completing the ISC/Ispat transaction, Ispat, ISC, RT and the Company entered into an agreement with the PBGC to provide certain financial commitments to reduce the underfunding of the ISC Pension Plan and to secure ISC Pension Plan unfunded benefit liabilities on a termination basis. These requirements include a RT guaranty of $50 million, for five years, of the obligations of Ispat and ISC to the PBGC in the event of a distress or involuntary termination of the ISC Pension Plan. The guaranty is included in the $90 million limit on the Company's indemnification obligations. The Company has noncancelable operating leases for which future minimum rental commitments are estimated to total $79.3 million, including approximately $15.9 million in 1999, $13.3 million in 2000, $9.7 million in 2001, $5.4 million in 2002, $4.3 million in 2003 and $30.7 million thereafter. Rental expense under operating leases totaled $20.7 million in 1998, $19.3 million in 1997 and $15.7 million in 1996. There are various claims and pending actions against the Company. The amount of liability, if any, for these claims and actions at December 31, 1998 is not determinable but, in the opinion of management, such liability, if any, will not have a materially adverse effect on the Company's financial position or results of operations. 35 EX-21 14 SUBSIDIARIES OF THE COMPANY EXHIBIT 21 SUBSIDIARIES OF RYERSON TULL, INC. ---------------------------------- The subsidiaries of Ryerson Tull, Inc. (other than certain subsidiaries which, considered in the aggregate as a single subsidiary, do not constitute a significant subsidiary), one of which is incorporated in the State of Delaware and one of which is incorporated in the State of Georgia, as noted below, and each of which is wholly owned by Ryerson Tull, Inc., are as follows: Joseph T. Ryerson & Son, Inc. (a Delaware corporation) J. M. Tull Metals Company, Inc. (a Georgia corporation) EX-24 15 POWER OF ATTORNEY EXHIBIT 24 RYERSON TULL, INC. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director and(or) officer of Ryerson Tull, Inc., a Delaware corporation, do hereby nominate, constitute and appoint Jay M. Gratz, Neil S. Novich, Terence R. Rogers, and George A. Ranney, Jr., or any one or more of them, my true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which said attorneys and agents, or any of them, may deem necessary or advisable to enable said Ryerson Tull, Inc. to comply with the Securities Exchange Act of 1934, as amended, and any requirements of the Securities and Exchange Commission in respect thereof, in connection with the preparation and filing of the Annual Report on Form 10-K of said Ryerson Tull, Inc. for the fiscal year ended December 31, 1998, including specifically, but without limitation thereof, full power and authority to sign my name as a director and(or) officer of said Ryerson Tull, Inc. to said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and confirming all that said attorneys and agents, or any of them, shall do or cause to be done by virtue thereof. IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of March, --- 1999. /s Jameson A. Baxter ---------------------------------------- Jameson A. Baxter RYERSON TULL, INC. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director and(or) officer of Ryerson Tull, Inc., a Delaware corporation, do hereby nominate, constitute and appoint Jay M. Gratz, Neil S. Novich, Terence R. Rogers, and George A. Ranney, Jr., or any one or more of them, my true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which said attorneys and agents, or any of them, may deem necessary or advisable to enable said Ryerson Tull, Inc. to comply with the Securities Exchange Act of 1934, as amended, and any requirements of the Securities and Exchange Commission in respect thereof, in connection with the preparation and filing of the Annual Report on Form 10-K of said Ryerson Tull, Inc. for the fiscal year ended December 31, 1998, including specifically, but without limitation thereof, full power and authority to sign my name as a director and(or) officer of said Ryerson Tull, Inc. to said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and confirming all that said attorneys and agents, or any of them, shall do or cause to be done by virtue thereof. IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of March, --- 1999. /s/ R.G. Cline ----------------------------------------- R.G. Cline RYERSON TULL, INC. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director and(or) officer of Ryerson Tull, Inc., a Delaware corporation, do hereby nominate, constitute and appoint Jay M. Gratz, Neil S. Novich, Terence R. Rogers, and George A. Ranney, Jr., or any one or more of them, my true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which said attorneys and agents, or any of them, may deem necessary or advisable to enable said Ryerson Tull, Inc. to comply with the Securities Exchange Act of 1934, as amended, and any requirements of the Securities and Exchange Commission in respect thereof, in connection with the preparation and filing of the Annual Report on Form 10-K of said Ryerson Tull, Inc. for the fiscal year ended December 31, 1998, including specifically, but without limitation thereof, full power and authority to sign my name as a director and(or) officer of said Ryerson Tull, Inc. to said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and confirming all that said attorneys and agents, or any of them, shall do or cause to be done by virtue thereof. IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of March, --- 1999. /s/ Ronald L. Thompson ---------------------------------------- Ronald L. Thompson RYERSON TULL, INC. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director and(or) officer of Ryerson Tull, Inc., a Delaware corporation, do hereby nominate, constitute and appoint Jay M. Gratz, Neil S. Novich, Terence R. Rogers, and George A. Ranney, Jr., or any one or more of them, my true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which said attorneys and agents, or any of them, may deem necessary or advisable to enable said Ryerson Tull, Inc. to comply with the Securities Exchange Act of 1934, as amended, and any requirements of the Securities and Exchange Commission in respect thereof, in connection with the preparation and filing of the Annual Report on Form 10-K of said Ryerson Tull, Inc. for the fiscal year ended December 31, 1998, including specifically, but without limitation thereof, full power and authority to sign my name as a director and(or) officer of said Ryerson Tull, Inc. to said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and confirming all that said attorneys and agents, or any of them, shall do or cause to be done by virtue thereof. IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of March, --- 1999. /s/ Jean-Pierre Rosso ---------------------------------------- Jean-Pierre Rosso RYERSON TULL, INC. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director and(or) officer of Ryerson Tull, Inc., a Delaware corporation, do hereby nominate, constitute and appoint Jay M. Gratz, Neil S. Novich, Terence R. Rogers, and George A. Ranney, Jr., or any one or more of them, my true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which said attorneys and agents, or any of them, may deem necessary or advisable to enable said Ryerson Tull, Inc. to comply with the Securities Exchange Act of 1934, as amended, and any requirements of the Securities and Exchange Commission in respect thereof, in connection with the preparation and filing of the Annual Report on Form 10-K of said Ryerson Tull, Inc. for the fiscal year ended December 31, 1998, including specifically, but without limitation thereof, full power and authority to sign my name as a director and(or) officer of said Ryerson Tull, Inc. to said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and confirming all that said attorneys and agents, or any of them, shall do or cause to be done by virtue thereof. IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of March, --- 1999. /s/ Donald S. Perkins ---------------------------------------- Donald S. Perkins RYERSON TULL, INC. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director and(or) officer of Ryerson Tull, Inc., a Delaware corporation, do hereby nominate, constitute and appoint Jay M. Gratz, Neil S. Novich, Terence R. Rogers, and George A. Ranney, Jr., or any one or more of them, my true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which said attorneys and agents, or any of them, may deem necessary or advisable to enable said Ryerson Tull, Inc. to comply with the Securities Exchange Act of 1934, as amended, and any requirements of the Securities and Exchange Commission in respect thereof, in connection with the preparation and filing of the Annual Report on Form 10-K of said Ryerson Tull, Inc. for the fiscal year ended December 31, 1998, including specifically, but without limitation thereof, full power and authority to sign my name as a director and(or) officer of said Ryerson Tull, Inc. to said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and confirming all that said attorneys and agents, or any of them, shall do or cause to be done by virtue thereof. IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of March, --- 1999. /s/ Jerry K. Pearlman ---------------------------------------- Jerry K. Pearlman RYERSON TULL, INC. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director and(or) officer of Ryerson Tull, Inc., a Delaware corporation, do hereby nominate, constitute and appoint Jay M. Gratz, Neil S. Novich, Terence R. Rogers, and George A. Ranney, Jr., or any one or more of them, my true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which said attorneys and agents, or any of them, may deem necessary or advisable to enable said Ryerson Tull, Inc. to comply with the Securities Exchange Act of 1934, as amended, and any requirements of the Securities and Exchange Commission in respect thereof, in connection with the preparation and filing of the Annual Report on Form 10-K of said Ryerson Tull, Inc. for the fiscal year ended December 31, 1998, including specifically, but without limitation thereof, full power and authority to sign my name as a director and(or) officer of said Ryerson Tull, Inc. to said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and confirming all that said attorneys and agents, or any of them, shall do or cause to be done by virtue thereof. IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of March, --- 1999. /s/ Neil S. Novich ---------------------------------------- Neil S. Novich RYERSON TULL, INC. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director and(or) officer of Ryerson Tull, Inc., a Delaware corporation, do hereby nominate, constitute and appoint Jay M. Gratz, Neil S. Novich, Terence R. Rogers, and George A. Ranney, Jr., or any one or more of them, my true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which said attorneys and agents, or any of them, may deem necessary or advisable to enable said Ryerson Tull, Inc. to comply with the Securities Exchange Act of 1934, as amended, and any requirements of the Securities and Exchange Commission in respect thereof, in connection with the preparation and filing of the Annual Report on Form 10-K of said Ryerson Tull, Inc. for the fiscal year ended December 31, 1998, including specifically, but without limitation thereof, full power and authority to sign my name as a director and(or) officer of said Ryerson Tull, Inc. to said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and confirming all that said attorneys and agents, or any of them, shall do or cause to be done by virtue thereof. IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of March, --- 1999. /s/ Gregory P. Josefowicz -------------------------------------- Gregory P. Josefowicz RYERSON TULL, INC. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director and(or) officer of Ryerson Tull, Inc., a Delaware corporation, do hereby nominate, constitute and appoint Jay M. Gratz, Neil S. Novich, Terence R. Rogers, and George A. Ranney, Jr., or any one or more of them, my true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which said attorneys and agents, or any of them, may deem necessary or advisable to enable said Ryerson Tull, Inc. to comply with the Securities Exchange Act of 1934, as amended, and any requirements of the Securities and Exchange Commission in respect thereof, in connection with the preparation and filing of the Annual Report on Form 10-K of said Ryerson Tull, Inc. for the fiscal year ended December 31, 1998, including specifically, but without limitation thereof, full power and authority to sign my name as a director and(or) officer of said Ryerson Tull, Inc. to said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and confirming all that said attorneys and agents, or any of them, shall do or cause to be done by virtue thereof. IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of March, --- 1999. /s/ Gary L. Crittenden ---------------------------------------- Gary L. Crittenden RYERSON TULL, INC. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, as a director and(or) officer of Ryerson Tull, Inc., a Delaware corporation, do hereby nominate, constitute and appoint Jay M. Gratz, Neil S. Novich, Terence R. Rogers, and George A. Ranney, Jr., or any one or more of them, my true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which said attorneys and agents, or any of them, may deem necessary or advisable to enable said Ryerson Tull, Inc. to comply with the Securities Exchange Act of 1934, as amended, and any requirements of the Securities and Exchange Commission in respect thereof, in connection with the preparation and filing of the Annual Report on Form 10-K of said Ryerson Tull, Inc. for the fiscal year ended December 31, 1998, including specifically, but without limitation thereof, full power and authority to sign my name as a director and(or) officer of said Ryerson Tull, Inc. to said Annual Report on Form 10-K and any amendment thereto, hereby ratifying and confirming all that said attorneys and agents, or any of them, shall do or cause to be done by virtue thereof. IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of March, --- 1999. /s/ James A. Henderson ---------------------------------------- James A. Henderson EX-27 16 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENT OF OPERATIONS, THE CONSOLIDATED BALANCE SHEET, AND THE SUMMARY OF STOCKHOLDERS' EQUITY CONTAINED IN THE QUARTERLY REPORT ON FORM 10-Q TO WHICH THIS EXHIBIT IS ATTACHED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL SCHEDULES. 1,000 YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 52,500 0 291,400 6,900 500,400 843,000 583,800 290,200 1,343,900 271,000 257,000 0 100 50,600 512,900 1,343,900 2,782,700 2,782,700 2,478,100 2,478,100 0 0 33,600 83,000 30,600 52,400 13,800 489,400 0 550,900 13.79 13.04
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