-----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, IDte+Ysg5Q4/XOm72+8fnDJV33BiXKDSjVO6+wYUbVOlUuHKwFh94xuutOYeBZf1 uUkqZ69rhRlTfL7Cm0ltCA== 0000950131-02-001975.txt : 20020514 0000950131-02-001975.hdr.sgml : 20020514 ACCESSION NUMBER: 0000950131-02-001975 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020514 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09117 FILM NUMBER: 02646361 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-Q 1 d10q.txt FORM 10-Q First Quarter - 2002 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended March 31, 2002 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______ to ______ -------------------- Commission file number 1-9117 I.R.S. Employer Identification Number 36-3425828 RYERSON TULL, INC. (a Delaware Corporation) 2621 West 15th Place Chicago, Illinois 60608 Telephone: (773) 762-2121 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 24,808,036 shares of the Company's Common Stock ($1.00 par value per share) were outstanding as of May 8, 2002. PART I. FINANCIAL INFORMATION Item 1. Financial Statements RYERSON TULL, INC. AND SUBSIDIARY COMPANIES Consolidated Statement of Operations (Unaudited) ================================================================================
Dollars in Millions (except per share data) ------------------------------------------- Three Months Ended March 31 ---------------------- 2002 2001 -------- -------- NET SALES $ 516.9 $ 638.1 Cost of materials sold 410.6 501.8 -------- -------- GROSS PROFIT 106.3 136.3 Operating expenses 101.3 119.9 Depreciation 6.6 6.9 Goodwill amortization - 1.3 Gain on sale of assets - (1.3) -------- -------- OPERATING PROFIT (LOSS) (1.6) 9.5 Other revenue and expense, net (1.1) 0.1 Shares received on demutualization of an insurance company 5.1 - Interest and other expense on debt (3.1) (6.8) -------- -------- INCOME (LOSS) BEFORE INCOME TAXES (0.7) 2.8 PROVISION FOR INCOME TAXES 0.3 1.5 -------- -------- INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (1.0) 1.3 Cumulative effect of change in accounting principle, net of tax of $8.9 (82.2) - -------- -------- NET INCOME (LOSS) $ (83.2) $ 1.3 ======== ========
See notes to consolidated financial statements 1 RYERSON TULL, INC. AND SUBSIDIARY COMPANIES Consolidated Statement of Operations (Unaudited) ================================================================================
Dollars in Millions (except per share data) ------------------------------------------- Three Months Ended March 31 ------------------------ 2002 2001 -------- -------- EARNINGS PER SHARE OF COMMON STOCK - ------------------- Basic: Before cumulative effect of change in accounting principle $ (0.04) $ 0.05 Cumulative effect of change in accounting principle (3.32) - -------- ------- Net income (loss) $ (3.36) $ 0.05 ======== ======= Diluted: Before cumulative effect of change in accounting principle $ (0.04) $ 0.05 Cumulative effect of change in accounting principle (3.32) - -------- ------- Net income (loss) $ (3.36) $ 0.05 ======== ======= STATEMENT OF COMPREHENSIVE INCOME - --------------------------------- NET INCOME (LOSS) $ (83.2) $ 1.3 OTHER COMPREHENSIVE INCOME: Unrealized gain on investments 0.1 - Foreign currency translation adjustments - (1.4) -------- ------- COMPREHENSIVE INCOME (LOSS) $ (83.1) $ (0.1) ======== ======= OPERATING DATA - -------------- SHIPMENTS (Tons in Thousands) 669.8 770.5
See notes to consolidated financial statements 2 RYERSON TULL, INC. AND SUBSIDIARY COMPANIES Consolidated Statement of Cash Flows (Unaudited) ================================================================================
Dollars in Millions ----------------------------- Three Months Ended March 31 ----------------------------- 2002 2001 -------- --------- OPERATING ACTIVITIES Net (loss) income $ (83.2) $ 1.3 -------- --------- Adjustments to reconcile net income to net cash provided from operating activities: Depreciation and amortization 6.6 8.2 Deferred employee benefit cost 1.0 (2.2) Deferred income taxes (7.1) 0.8 Shares received from demutualization of insurance company (5.1) - Cumulative effect of change in accounting principle, net of tax 82.2 - Gain from sale of assets - (1.3) Change in assets and liabilities: Receivables (56.2) (34.1) Inventories 24.5 56.7 Other assets - (0.1) Accounts payable 37.5 39.4 Accrued liabilities 2.3 (15.7) Other deferred items (0.1) (0.8) -------- --------- Net adjustments 85.6 50.9 -------- --------- Net cash provided from operating activities 2.4 52.2 -------- --------- INVESTING ACTIVITIES Capital expenditures (1.8) (4.3) Proceeds from sales of assets 0.3 4.2 -------- --------- Net cash used for investing activities (1.5) (0.1) -------- --------- FINANCING ACTIVITIES Net change in short-term borrowing - (50.0) Dividends paid (1.3) (1.3) -------- --------- Net cash used for financing activities (1.3) (51.3) -------- --------- Net (decrease) increase in cash and cash equivalents (0.4) 0.8 Cash and cash equivalents - beginning of year 20.5 23.8 -------- --------- Cash and cash equivalents - end of period $ 20.1 $ 24.6 ======== ========= SUPPLEMENTAL DISCLOSURES Cash paid (received) during the period for: Interest $ 5.1 $ 12.2 Income taxes, net (1.0) (0.8)
See notes to consolidated financial statements 3 RYERSON TULL, INC. AND SUBSIDIARY COMPANIES Consolidated Balance Sheet ================================================================================
Dollars in Millions ------------------------------------ ASSETS March 31, 2002 December 31, 2001 - ------ -------------- ----------------- (unaudited) CURRENT ASSETS Cash and cash equivalents $ 20.1 $ 20.5 Short-term investments 6.5 - Receivables less provision for allowances, claims and doubtful accounts of $11.0 and $10.7, respectively 175.0 119.6 Inventories, net of LIFO reserve of $12.2 and $9.7, respectively 375.8 399.5 Deferred income taxes 25.3 0.7 ------- --------- Total current assets 602.7 540.3 INVESTMENTS AND ADVANCES 6.1 6.0 PROPERTY, PLANT AND EQUIPMENT Valued on basis of cost $597.1 $595.1 Less accumulated depreciation 352.6 244.5 345.4 249.7 ------ ------ DEFERRED INCOME TAXES 96.1 104.7 INTANGIBLE PENSION ASSET 8.4 8.4 EXCESS OF COST OVER NET ASSETS ACQUIRED - 91.1 OTHER ASSETS 9.7 9.7 ------- --------- Total Assets $ 967.5 $ 1,009.9 ======= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 132.2 $ 93.5 Accrued liabilities 52.5 50.2 --------- --------- Total current liabilities 184.7 143.7 LONG-TERM DEBT 100.6 100.6 DEFERRED EMPLOYEE BENEFITS AND OTHER 214.9 213.9 -------- --------- Total liabilities 500.2 458.2 COMMITMENTS & CONTINGENCIES - - STOCKHOLDERS' EQUITY (Schedule A) 467.3 551.7 --------- --------- Total Liabilities and Stockholders' Equity $ 967.5 $ 1,009.9 ========= =========
See notes to consolidated financial statements 4 RYERSON TULL, INC. AND SUBSIDIARY COMPANIES Notes to Consolidated Financial Statements (Unaudited) ================================================================================ NOTE 1/FINANCIAL STATEMENTS Results of operations for any interim period are not necessarily indicative of results of any other periods or for the year. The financial statements as of March 31, 2002 and for the three-month period ended March 31, 2002 and 2001 are unaudited, but in the opinion of management include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of results for such periods. These financial statements should be read in conjunction with the financial statements and related notes contained in the Annual Report on Form 10-K for the year ended December 31, 2001. NOTE 2/EARNINGS PER SHARE
Dollars and Shares In Millions (except per share data) ----------------------- Three Months Ended March 31 ----------------------- 2002 2001 ------- ------ Basic earnings (loss) per share - ------------------------------- Net income (loss) $ (1.0) $ 1.3 Less preferred stock dividends - - ------- ------ Income (loss) available to common stockholders (1.0) 1.3 Cumulative effect of change in accounting principle (82.2) - ------- ------ Net income (loss) available to common stockholders $ (83.2) $ 1.3 ======= ====== Average shares of common stock outstanding 24.8 24.8 ======= ====== Basic earnings (loss) per share Before cumulative effect of change in accounting principle $ (0.04) $ 0.05 Cumulative effect of change in accounting principle (3.32) - ------- ------ Net income (loss) $ (3.36) $ 0.05 ======= ====== Diluted earnings per share - -------------------------- Income (loss) available to stockholders $ (1.0) $ 1.3 Cumulative effect of change in accounting principle (82.2) - ------- ------ Net income (loss) available to stockholders $ (83.2) $ 1.3 ======= ====== Average shares of common stock outstanding 24.8 24.8 Dilutive effect of stock options .3 .2 ------- ------ Shares outstanding for diluted earnings per share calculation 25.1 25.0 ======= ====== Basic earnings (loss) per share Before cumulative effect of change in accounting principle $ (0.04) $ 0.05 Cumulative effect of change in accounting principle (3.32) - ------- ------ Net income (loss) $ (3.36) $ 0.05 ======= ======
5 NOTE 3/RESTRUCTURING CHARGE In the fourth quarter of 2001, the Company recorded a restructuring charge of $19.4 million as a result of workforce reductions and plant consolidation. As part of the restructuring, certain facilities in Detroit and Holland, Michigan will be closed and the Company plans to consolidate two facilities into one location in Chicago. Included in the charge is severance for 178 employees. As of March 31, 2002, 98 employees have been separated from the Company as a result of the restructuring initiative. Details of the restructuring charge are as follows:
Restructuring Balance at (In millions) Charge Utilized March 31, 2002 - --------------------------------------------------------------------------------- Write-down of long-lived assets $ 10.3 $ 10.3 $ - Employee costs 6.4 4.7 1.7 Tenancy costs and other 2.7 - 2.7 - --------------------------------------------------------------------------------- $ 19.4 $ 15.0 $ 4.4
It is expected that the restructuring actions will be completed by year-end 2002. In the second quarter of 2000, the Company recorded a restructuring charge of $23.3 million. The charge is the result of realigning geographic divisions to improve responsiveness to local markets, exiting non-core businesses and centralizing administrative services to achieve economies of scale. Included in the charge is severance for 319 employees. There are no employees remaining to be separated from the Company as a result of that restructuring initiative. The balance related to employee costs at March 31, 2002 will be paid through mid-2002 pursuant to severance agreements with certain former employees. Details of the 2000 restructuring charge are as follows:
Restructuring Balance at (In millions) Charge Utilized March 31, 2002 - --------------------------------------------------------------------------------- Write-down of long-lived assets $ 9.3 $ 9.3 $ - Employee costs 7.4 7.3 0.1 Tenancy costs and other 6.6 2.3 4.3 - --------------------------------------------------------------------------------- $ 23.3 $ 18.9 $ 4.4
The restructuring actions were completed by December 31, 2000. 6 NOTE 4/TRADE RECEIVABLES SECURITIZATION On March 29, 2001, the Company and certain of its subsidiaries completed arrangements for a $250 million 364-day trade receivables securitization facility with a group of financial institutions. The Company formed a special-purpose, wholly-owned, bankruptcy-remote subsidiary (Ryerson Tull Receivables LLC) for the sole purpose of buying receivables of certain subsidiaries of the Company and selling an undivided interest in all eligible trade accounts receivable to certain commercial paper conduits. This securitization facility includes substantially all of the Company's accounts receivable. On March 15, 2002, the facility was renewed for a 364-day period ending March 14, 2003, reducing the facility from $250 million to $200 million, and modifying certain termination events and covenants including, among other things, eliminating the termination of the facility if the Company fails to maintain specified debt ratings on its long-term unsecured debt. Fundings under the facility are limited to the lesser of a funding base, comprised of eligible receivables, and $200 million. Sales of accounts receivable are reflected as a reduction of "receivables less provisions for allowances, claims and doubtful accounts" in the Consolidated Balance Sheet and the proceeds received are included in cash flows from operating activities in the Consolidated Statement of Cash Flows. Proceeds from the sales of receivables are less than the face amount of accounts receivable sold by an amount equal to a discount on sale that approximates the conduits' financing cost of issuing their own commercial paper, which is backed by their ownership interests in the accounts receivable sold by the special purpose subsidiary, plus an agreed-upon margin. These costs, totaling $1.1 million in the first quarter of 2002, are charged to "other revenue and expense, net" in the Consolidated Statement of Operations. Generally, the facility provides that as payments are collected from the sold accounts receivable, the special purpose subsidiary may elect to have the commercial paper conduits reinvest the proceeds in interests in new accounts receivable. The commercial paper conduits, in addition to their rights to collect payments from that portion of the interests in the accounts receivable owned by them, also have rights to collect payments from that portion of the ownership interest in the accounts receivable that is owned by the special purpose subsidiary. In calculating the fair market value of the Company's retained interest in the receivables, the book value of the receivables represented the best estimate of the fair market value due to the current nature of these receivables. The amended facility, which expires March 14, 2003, requires the Company to comply with various affirmative and negative covenants and certain financial covenants, including covenants on net worth and the Company's debt-to-capital ratio. The Company was in compliance with these covenants at March 31, 2002. The amended facility requires early amortization if the special-purpose subsidiary does not maintain a minimum equity requirement. Additionally, the facility terminates on the occurrence and failure to cure certain events, including, among other things, any failure of the special-purpose subsidiary to maintain certain ratios related to the collectability of the receivables and failure of the Company to meet the debt-to-capital ratio and net worth covenants. The table below summarizes certain cash flows from and paid to securitization trusts ($ in millions):
Three Months Ended March 31, 2002 ------------------ Proceeds from collections reinvested $201
7 NOTE 5/GOODWILL AND OTHER INTANGIBLE ASSETS On January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). The Company estimated the fair value of its reporting units using a present value method that discounted future cash flows. The cash flow estimates incorporate assumptions on future cash flow growth, terminal values and discount rates. Any such valuation is sensitive to these assumptions. Because the fair value of each reporting unit was below its carrying value (including goodwill), application of SFAS 142 required the Company to complete the second step of the goodwill impairment test and compare the implied fair value of each reporting unit's goodwill with the carrying value of that goodwill. As a result, the Company recorded an impairment charge of $91.1 million ($82.2 million after tax) to write-off the entire goodwill amount as a cumulative effect of a change in accounting principle. The Financial Accounting Standards Board also issued Statement of Accounting Standards No. 141 ("SFAS 141"), "Business Combinations," which requires all business combinations after June 30, 2001 to be accounted for under the purchase method. As a result of adopting SFAS 142 and SFAS 141, the accounting policy for excess of cost over net assets acquired is as follows, effective January 1, 2002: Excess of Cost Over Net Assets Acquired: The Company recognizes the excess of the cost of an acquired entity over the net amount assigned to assets acquired and liabilities assumed as goodwill. Goodwill is tested for impairment on an annual basis and between annual tests in certain circumstances. Impairment loss is recognized whenever the implied fair value of goodwill is less than its carrying value. Prior to January 1, 2002, goodwill was amortized over a 25-year period. Beginning January 1, 2002, goodwill is no longer amortized. 8 The following table presents a comparison of first quarter 2002 results to first quarter 2001 adjusted to exclude goodwill amortization expense:
In Millions (except per share data) -------------------------- Three Months Ended March 31 -------------------------- 2002 2001 -------- -------- Income (loss) before cumulative effect of change in accounting principle $ (1.0) $ 1.3 Cumulative effect of change in accounting principle (82.2) - -------- -------- Reported net income (loss) (83.2) 1.3 Addback: goodwill amortization, net of tax - 1.1 --------- -------- Adjusted net income (loss) $ (83.2) $ 2.4 ========= ======== Basic earnings (loss) per share: Reported net income (loss) $ (3.36) $ 0.05 Addback: goodwill amortization, net of tax - 0.04 -------- -------- Adjusted net income (loss) $ (3.36) $ 0.09 ======== ======== Diluted earnings (loss) per share: Reported net income (loss) $ (3.36) $ 0.05 Addback: goodwill amortization, net of tax - 0.04 -------- -------- Adjusted net income (loss) $ (3.36) $ 0.09 ======== ========
NOTE 6/SHORT-TERM INVESTMENTS The Company's accounting policy for short-term investments is as follows: Short-term Investments: The carrying amounts reported in the consolidated balance sheets for marketable debt and equity securities are based on quoted market prices and approximate fair value. Investment securities classified as available-for-sale are reported at fair value based on current market quotes with unrealized gains and losses, net of any tax effect, recorded as a separate component of comprehensive income in stockholders' equity until realized. Gains and losses on investment securities sold are determined based on the specific identification method and are included in "other revenue and expense, net." No securities are held for speculative or trading purposes. NOTE 7/ISC/ISPAT TRANSACTION 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 9 contained in the ISC/Ispat Merger Agreement which are not subject to a maximum amount. In general, Ispat must have made 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. On May 29, 2001, the Company entered into a settlement agreement with Ispat that settled certain claims by each party for breaches of representations and warranties and other matters contained in the ISC/Ispat Merger Agreement, excluding claims with respect to breaches of representations and warranties related to environmental matters and expenditures and losses relating to environmental liabilities. The Company paid $7.5 million to Ispat in connection with the settlement agreement, which amount applies against the $90 million cap described above. The Company has purchased environmental insurance payable directly to Ispat and ISC with coverage up to $90 million covering claims made during the term of the policy for certain environmental matters. The policy has an initial term of five years, and can be renewed at the Company's option for up to an additional three years upon payment of an additional premium. Ispat has notified the Company of certain environmental matters and of certain environmental expenses that Ispat has incurred. Based on the current status of these matters and except for matters which are immaterial to the Company, the Company is unable to determine whether any such environmental matters and expenses will result in indemnification payments to Ispat. 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 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. In July 2001, the Company provided a $50 million letter of credit to the PBGC. The guaranty is included in the $90 million limit on the Company's indemnification obligations. 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - Comparison of First Quarter 2002 to First Quarter 2001 - ------------------------------------------------------------------------------ For the first quarter of 2002, the Company reported a consolidated net loss of $83.2 million, or $3.36 per diluted share, as compared with net income of $1.3 million, or 5 cents per diluted share, in the year-ago quarter. Included in the first quarter 2002 results is an after tax charge of $82.2 million, or $3.32 per share, from the Company's adoption of Financial Accounting Standards Board Statement No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets." SFAS 142 requires an annual assessment of goodwill impairment by applying a fair-value-based test. As a result of this assessment, the Company wrote off the entire goodwill amount as of January 1, 2002 as a cumulative effect of change in accounting principle. Excluding the goodwill charge, the Company had a loss per share of 4 cents in the first quarter of 2002. Sales for the first quarter of 2002 decreased 19 percent to $516.9 million from the same period a year ago, reflecting a continuation of the depressed market in the second half of 2001. Volume decreased 13 percent while average selling price decreased 7 percent from the same period a year ago. Gross profit per ton declined to $159 in the first quarter of 2002 from $177 in the year-ago quarter largely due to the decline in average selling price. Gross profit margin decreased from 21.4% a year ago to 20.6% in the current quarter. Despite the 13% decline in volume, expenses (defined as operating expenses plus depreciation) decreased to $161 per ton in the first quarter of 2002 from $165 per ton a year ago, reflecting an improved cost structure. The net result of the above is an operating loss of $2 per ton this quarter versus an operating profit of $12 per ton a year ago. For the quarter, the Company reported an operating loss of $1.6 million, a decrease of $11.1 million from an operating profit of $9.5 million in the year ago period. SFAS 142 discontinues amortization of goodwill. As a result, no goodwill amortization expense was recognized in the first quarter of 2002, while the year ago period included a $1.3 million charge. In the first quarter of 2002, the Company recorded a $5.1 million pretax gain for the receipt of shares as a result of the demutualization of one of its insurance carriers, Prudential. This gain represents a portion of the total of $6.3 million of shares received. The remaining shares are attributable to participants of the life insurance plan and therefore the liability has been recorded as a benefit payable. The shares were initially recorded at their fair market value and are accounted for as Available-for-Sale per Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Included in the first quarter 2001 results was a pretax gain of $1.3 million on the sale of a facility in Minneapolis, Minnesota. Liquidity and Financing - ----------------------- The Company had cash and cash equivalents at March 31, 2002 of $20.1 million, compared to $20.5 million at December 31, 2001. At March 31, 2002, the Company had $90 million outstanding fundings under its trade receivables securitization facility, no short-term funded borrowing under its revolving 11 credit facility and $63 million of letters of credit issued under the credit facility. At March 31, 2002, the Company had total short-term funding sources available of $155 million comprised of $83 million from the trade receivables securitization facility and $72 million from the revolving credit facility, compared to 2001 year-end availability of $116 million. The Company has a committed bank revolving credit facility of $175 million that extends until July 19, 2004. The facility is secured by inventory. The revolving credit agreement contains covenants that, among other things, restrict the payment of dividends, the amount of capital stock repurchases, the creation of certain kinds of secured indebtedness and of certain kinds of subsidiary debt, take or pay contracts, transactions with affiliates, mergers and consolidations, and sales of assets. The facility also contains certain financial covenants, including covenants regarding net worth and the Company's debt-to-capital ratio, with which the Company is in compliance at March 31, 2002. At March 31, 2002, $40 million of the $175 million revolving credit facility was not available for borrowing. Of that $40 million, $15 million will become available if the Company meets certain financial ratios and the remainder will become available upon consent of all the lenders. Letters of credit issued under the facility reduce the amount available for borrowing. At March 31, 2002, the Company had $63 million of letters of credit outstanding, primarily related to the PBGC guaranty discussed below, and no short-term borrowings under the credit facility. Therefore, the Company has $72 million available under its credit facility. When availability of funds under the credit facility is less than $25 million, the Company is limited to a maximum payment of $10 million in dividends in any calendar year and $3 million in stock purchases in any twelve-month period. As a condition of completing the ISC/Ispat Transaction, Ispat, ISC and the Company entered into an agreement with the Pension Benefit Guaranty Corporation ("PBGC") to provide certain financial commitments to reduce the underfunding of the ISC Pension Plan on a termination basis. These obligations include a guaranty of $50 million to the PBGC in the event of a distress or involuntary termination of the ISC Pension Plan (now the Ispat Inland, Inc. Pension Plan). The agreement also required the Company to provide collateral for its guarantee in the event of a downgrade of the Company's unsecured debt rating below specified levels. On May 1, 2001, Moody's Investors Services reduced its rating on such unsecured debt to below the specified levels and in July 2001, the Company provided a letter of credit in the amount of $50 million to the PBGC under the revolving credit facility discussed above. The guaranty is included in the $90 million limit on the Company's indemnification obligations. The Company has a 364-day trade receivables securitization facility, in connection with which the Company formed a special-purpose, wholly-owned, bankruptcy-remote subsidiary for the sole purpose of buying receivables of certain subsidiaries of the Company and selling an undivided interest in all eligible receivables to certain commercial paper conduits. The facility, which was scheduled to expire March 28, 2002, was renewed on March 15, 2002 for a 364-day period ending March 14, 2003. The facility was amended to reduce maximum availability from $250 million to $200 million and to modify certain termination events and covenants including, among other things, eliminating the termination of the facility if the Company fails to maintain specified debt rating on its long-term unsecured debt. Fundings under the renewed facility are limited to the lesser of a funding base, comprised of eligible receivables, and $200 million. The availability of funds under this facility is based on the level of the Company's receivables, which would have allowed $83 million of additional funding at March 31, 2002. The amended facility requires the Company to comply with various affirmative and negative covenants and certain financial covenants, including covenants on net worth and the Company's debt-to-capital ratio. The Company was in compliance with these covenants at March 31, 2002. The amended 12 facility requires early amortization if the special-purpose subsidiary does not maintain a minimum equity requirement. Additionally, the facility terminates on the occurrence and failure to cure certain events, including, among other things, any failure of the special-purpose subsidiary to maintain certain ratios related to the collectability of the receivables and to meet the debt-to-capital ratio and net worth covenants. This subsidiary is part of the Company's consolidated financial statements. At March 31, 2002, $100 million of the Company's 9-1/8% Notes due July 15, 2006 remain outstanding. The indenture under which the Notes were issued in 1996 contains covenants limiting, among other things, the creation of certain types of secured indebtedness, sale and leaseback transactions, the repurchase of capital stock, transactions with affiliates and mergers, consolidations and certain sales of assets. In addition, the Notes restrict the payment of dividends, although to a lesser extent than the facilities described above. The Notes also include a cross-default provision in the event of a default in the revolving credit facility. ISC/Ispat Transaction - --------------------- 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 have made 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. On May 29, 2001, the Company entered into a settlement agreement with Ispat that settled certain claims by each party for breaches of representations and warranties and other matters contained in the ISC/Ispat Merger Agreement, excluding claims with respect to breaches of representations and warranties related to environmental matters and expenditures and losses relating to environmental liabilities. The Company paid $7.5 million to Ispat in connection with the settlement agreement, which amount applies against the $90 million cap described above. The Company has purchased environmental insurance payable directly to Ispat and ISC with coverage up to $90 million covering claims made during the term of the policy for certain environmental matters. The policy has an initial term of five years, and can be renewed at the Company's option for up to an additional three years upon payment of an additional premium. Ispat has notified the Company of certain environmental matters and of certain environmental expenses that Ispat has incurred. Based on the current status of these matters and except for matters which are immaterial to the Company, the Company is unable to determine whether any such environmental matters and expenses will result in indemnification payments to Ispat. 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 Ryerson Tull's pension plan. The ISC Pension Plan has unfunded benefit liabilities on a termination 13 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. In July 2001, the Company provided a $50 million letter of credit to the PBGC. The guaranty is included in the $90 million limit on the Company's indemnification obligations. 14 PART II. OTHER INFORMATION -------------------------- Item 6. Exhibits and Report on Form 8-K (a) Exhibits. The exhibits required to be filed by Item 601 of Regulation S-K are listed in the "Exhibit Index," which is attached hereto and incorporated by reference herein. (b) Reports on Form 8-K. No reports on Form 8-K were filed during the first quarter of 2002. 15 SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RYERSON TULL, INC. By: /s/ Lily L. May ------------------------ Lily L. May Controller and Chief Accounting Officer Date: May 14, 2002 16 Part I -- Schedule A RYERSON TULL, INC. AND SUBSIDIARY COMPANIES SUMMARY OF STOCKHOLDERS' EQUITY ================================================================================
Dollars in Millions ------------------- March 31, 2002 December 31, 2001 -------------------------- ---------------------- (unaudited) STOCKHOLDERS' EQUITY - -------------------- Series A preferred stock ($1 par value) - 80,230 shares issued and outstanding as of March 31, 2002 and December 31, 2001 $ 0.1 $ 0.1 Common stock ($1 par value) - 50,556,350 shares issued as of March 31, 2002 and December 31, 2001 50.6 50.6 Capital in excess of par value 861.9 862.5 Retained earnings Balance beginning of year $ 441.4 $ 506.8 Net income (83.2) (60.2) Dividends Series A preferred stock - $0.60 per share in 2002 and $2.40 per share in 2001 - (0.2) Common Stock - $ .05 per share in 2002 and $ .20 per share in 2001 (1.3) 356.9 (5.0) 441.4 ------- ------- Restricted stock awards (0.3) (0.1) Treasury stock, at cost - 25,749,433 as of March 31, 2002 and 25,767,918 as of December 31, 2001 (752.8) (753.6) Accumulated other comprehensive income (49.1) (49.2) -------- -------- Total Stockholders' Equity $ 467.3 $ 551.7 ======== ========
17 EXHIBIT INDEX Exhibit Number Description ------ ----------- 3.1 Copy of Certificate of Incorporation, as amended, of Ryerson Tull. (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. (Filed as Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 1-9117), and incorporated by reference herein.) 4.1 Certificate of Designations, Preferences and Rights of Series A $2.40 Cumulative Convertible Preferred Stock of Ryerson Tull. (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 Ryerson Tull. (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 September 22, 1999, between Ryerson Tull 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-2 filed on October 6, 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 Ryerson Tull and The Bank of New York. (Filed as Exhibit 4.5 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-9117), and incorporated by reference herein.) 4.6 Specimen of 9 1/8% Notes due July 15, 2006. (Filed as Exhibit 4.7 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-9117), and incorporated by reference herein.) [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* Ryerson Tull Annual Incentive Plan, as amended (Filed as Exhibit 10.1 to Company's Annual Report on Form 10-K for the year ended December 31, 2001 (File No. 1-11767), and incorporated by reference herein.) 10.2* Ryerson Tull 1999 Incentive Stock Plan, as amended (Filed as Exhibit 10.2 to Company's Annual Report on Form 10-K for the year ended December 31, 2001 (File No. 1-11767), and incorporated by reference herein.) 10.3* Ryerson Tull 1996 Incentive Stock Plan, as amended. (Filed as Exhibit 10.D to Company's Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 1-11767), and incorporated by reference herein.) 10.4* Ryerson Tull 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.) 10.5* Ryerson Tull 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.) 10.6* Ryerson Tull Supplemental Retirement Plan for Covered Employees, as amended (Filed as Exhibit 10.6 to Company's Annual Report on Form 10-K for the year ended December 31, 2001 (File No. 1-11767), and incorporated by reference herein.) 10.7* Ryerson Tull Nonqualified Savings Plan, as amended (Filed as Exhibit 10.7 to Company's Annual Report on Form 10-K for the year ended December 31, 2001 (File No. 1-11767), and incorporated by reference herein.) 10.8* Outside Directors Accident Insurance Policy, with endorsement (Filed as Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 (File No. 1-9117), and incorporated by reference herein.) - --------------- * Management contract or compensatory plan or arrangement required to be filed as an exhibit to the Company's Annual Report on Form 10-K. 18 Exhibit Number Description ------ ----------- 10.9* Ryerson Tull Directors' 1999 Stock Option Plan. (Filed as Exhibit 10.19 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-9117), and incorporated by reference herein.) 10.10* Ryerson Tull Directors' Compensation Plan, as amended. (Filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000 (File No. 1-9117), and incorporated by reference herein.) 10.11* Severance Agreement, dated January 28, 1998, between the Company and Jay. M. Gratz................................................ 10.12* Amendment dated November 6, 1998 to the Severance Agreement dated January 28, 1998 referred to in Exhibit 10.11 above between the Company and Jay M. Gratz. (Filed as Exhibit 10.23 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-9117), and incorporated by reference herein.) 10.13* Amendment dated June 30, 2000 to the Severance Agreement dated January 28, 1998 referred to in Exhibit 10.11 between the Company and Jay M. Gratz. (Filed as Exhibit 10.14 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 (File No. 1-9117), and incorporated by reference herein.) 10.14* Form of Change in Control Agreement dated March 11, 2001 between the Company and the parties listed on the schedule thereto....... 10.15 Schedule to Form of Change in Control Agreement dated March 11, 2001 as referred to in Exhibit 10.14............................. 10.16* Form of Change in Control Agreement dated March 11, 2001 between the Company and the parties listed on the schedule thereto....... 10.17* Schedule to Form of Change in Control Agreement dated March 11, 2001 as referred to in Exhibit 10.16............................. 10.18* Employment Agreement dated September 1, 1999 between the Company and Jay M. Gratz. (Filed as Exhibit 10.22 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 (File No. 1-9117), and incorporated by reference herein.) 10.19* Employment Agreement dated September 1, 1999 between the Company and Gary J. Niederpruem. (Filed as Exhibit 10.23 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 (File No. 1-9117), and incorporated by reference herein.) 10.20* Employment Agreement dated December 1, 1999 between the Company and Neil S. Novich. (Filed as Exhibit 10.19 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 1-9117), and incorporated by reference herein.) 10.21* Confidentiality and Non-Competition Agreement dated June 1, 2000 between the Company and Stephen E. Makarewicz.................... 10.22* Employment Agreement dated as of May 29, 2000 between the Company and Thomas S. Cygan. (Filed as Exhibit 10.25 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 (File No. 1-9117), and incorporated by reference herein.) - ----------------- * Management contract or compensatory plan or arrangement required to be filed as an exhibit to the Company's Annual Report on Form 10-K. 19 EX-10.11 3 dex1011.txt SEVERANCE AGREEMENT EXHIBIT 10.11 January 28, 1998 Jay M. Gratz 180 East Pearson, #6003 Chicago, Illinois 60611 Dear Mr. Gratz: Inland Steel Industries, Inc. ("ISI") considers it essential to the best interests of its stockholders to foster the continuous employment of key management personnel of ISI and its subsidiaries (collectively, the "Company"). In this connection, the Board of Directors of ISI (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 ISI 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, ISI 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 ISI 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, 1998; provided, however, that commencing on January 1, 1999 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, ISI 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 ISI, this Agreement shall terminate on the date on which ISI 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 ISI in substantially the same proportions as their ownership of voting securities of ISI, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of voting securities of ISI (not including in the voting securities beneficially owned by such person any voting securities acquired directly from ISI or its affiliates) representing 40% or more of the combined voting power of ISI'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 ISI 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 ISI'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 ISI approve a merger or consolidation of ISI with any other corporation, other than a merger or consolidation which would result in the voting securities of ISI outstanding immediately prior thereto continuing to represent (either Page 3 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 ISI or such surviving entity outstanding immediately after such merger or consolidation, or a merger or consolidation effected to implement a recapitalization of ISI (or similar transaction) in which no person acquires more than 50% of the combined voting power of ISI's then outstanding voting securities; (D) the holders of voting securities of ISI approve a plan of complete liquidation of ISI or an agreement for the sale or disposition by ISI of all or substantially all of ISI'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 ISI (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 Page 4 (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 ISI or by a majority owned direct or indirect subsidiary of ISI; or (z) the sale or disposition of all or substantially all the assets of a Related Company to a person other than ISI or a majority owned direct or indirect subsidiary of ISI. 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 ISI 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 ISI 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) ISI 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 ISI) 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 ISI in substantially the same proportions as their ownership of voting securities of ISI, who is or becomes the beneficial owner, directly or indirectly, of voting securities of ISI representing 9.5% or more of the combined voting power of ISI'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. Page 5 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, ISI 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 ISI and you are not employed by ISI 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 Page 6 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. (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 Page 7 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 Inland Annual Incentive Plan (the "Annual Incentive Plan"), Inland Special Achievement Award Plan, Inland 1986 Employee Stock Purchase Plan, Inland 1995 Incentive Stock Plan, Inland Steel Industries Supplemental Retirement Benefit Plan for Covered Employees (the "Supplemental Plan"), Inland Steel Industries Special Retirement Benefit Plan for Covered Employees (the "Special Benefit Plan"), Inland Steel Industries Nonqualified Thrift Plan (the "Nonqualified Thrift Plan"), Inland Steel Industries Pension Plan (the "Pension Plan") and Inland Steel Industries Thrift Plan (the "Thrift Plan") or any substitute 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 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 Page 8 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 ISI 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 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 Page 9 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, Special Benefit Plan, Annual Incentive Plan, Thrift Plan and Nonqualified Thrift Plan (or, if and to the extent applicable, the Ryerson Tull Pension Plan (the "RT Pension Plan"), the Ryerson Tull Inc. Supplemental Retirement Benefit Plan for Covered Employees (the "RT Supplemental Plan") and the Ryerson Tull Nonqualified Savings Plan (the "RT Nonqualified 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 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 Page 10 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 and the Inland Special Achievement Award Plan, the Company shall pay to you a lump sum amount equal to the sum of (x) any incentive compensation 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 ISI ("ISI Shares") issuable upon exercise of outstanding stock options ("Options") granted to you under ISI's stock option plans (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 March 27, 1996, the closing price of ISI'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, 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 ISI 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 ISI described in Subsection 2(i)(C) in which the consideration per share of ISI'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 ISI's common stock paid by any holder of any of the securities representing 40% or more of the combined voting power of ISI 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 ISI (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 Page 11 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 Inland 1995 Incentive 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 1995 Incentive Stock Plan 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 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 Page 12 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 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), (D) and (E) 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). Page 13 (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 immediately prior to the Notice of Termination, (2) financial advisory services similar to those provided currently to executives of the Company by Ayco Corporation, 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 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, Supplemental Plan or Special Benefit Plan (and, if and to the extent applicable, the RT Pension Plan and the RT 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, Supplemental Plan or Special Benefit 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, the Supplemental Plan and the Special Benefit 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 14 (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 Thrift Plan, Supplemental Plan, Special Benefit Plan, Nonqualified Thrift Plan and any other plan or agreement relating to retirement benefits. 5. Successors; Binding Agreement. (i) ISI 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 ISI to expressly assume and agree to perform this Agreement in the same manner and to the same extent that ISI or the Company would be required to perform it if no such succession had taken place. Failure of ISI 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 ISI assumes and agrees to perform this Agreement, by operation of law or otherwise, the term "ISI", 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 ISI, 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 Page 15 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 ISI 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 ISI the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely, INLAND STEEL INDUSTRIES, INC. By /s/ H. William Howard --------------------------------- H. William Howard Vice President Agreed to this 20 day ---- of March , 1998. --------------- /s/ Jay M. Gratz (Signature) - ----------------------------- EX-10.14 4 dex1014.txt FORM OF CHANGE IN CONTROL AGREEMENT Exhibit 10.14 March 11, 2002 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, although no such change is now contemplated. 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 Page 2 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; provided, however, that if you become entitled to benefits under this Agreement and an agreement with Inland Steel Industries, Inc. ("ISI") on account of a change in control of ISI or any of its subsidiaries, (other than benefits payable under an agreement with ISI on account of events occurring prior to the date of this Agreement and which you are receiving as of the date of this Agreement) including RTI and its subsidiaries, the benefits provided under your agreement with ISI will be reduced by the amount of benefits payable to you pursuant to this Agreement on account of such change in control. In no event shall you be entitled to benefits under an agreement with ISI and this Agreement on account of the same events constituting a change in control, except as provided in the preceding sentence. 1. Term of Agreement. This Agreement shall commence on the date hereof ----------------- and shall continue in effect through December 31,2002; provided, however, that commencing on January 1, 2003 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 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: Page 3 (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 securities under an employee benefit plan of the Company, (y) an underwriter temporarily holding securities pursuant to an offering of such securities, or (z) a corporation owned, directly or indirectly, by the stockholders of RTI in substantially the same proportions as their ownership of stock of RTI, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of RTI (not including in the securities beneficially owned by such person any securities acquired directly from RTI or its affiliates) representing 20% or more of the combined voting power of RTI's then outstanding 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 stockholders 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) there occurs 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 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 securities; (D) the stockholders 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 Page 4 (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 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 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 ISI or by a majority owned direct or indirect subsidiary of RTI; or Page 5 (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 in clause (E). Notwithstanding any other provision of this Agreement, a merger or consolidation of RTI with and into ISI (regardless of whether or not RTI is the surviving entity) shall not be considered a change in control of the Company or potential change in control of the Company for purposes of this Agreement. 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 securities under an employee benefit plan of the Company, (y) an underwriter temporarily holding securities pursuant to an offering of such securities, or (z) a corporation owned, directly or indirectly, by the stockholders of RTI in substantially the same proportions as their ownership of stock of RTI, who is or becomes the beneficial owner, directly or indirectly, of securities of RTI representing 9.5% or more of the combined voting power of RTI's then outstanding 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 Page 6 (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. Page 7 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. (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 Page 8 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 compensation under any deferred compensation Page 9 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, Inc. Annual Performance Improvement Incentive Plan (the "Annual Incentive Plan"), Ryerson Tull 1996 Incentive Stock Plan (the "Incentive Stock Plan"), Ryerson Tull Supplemental Retirement Benefit 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 (including substitute plans adopted by the Company in replacement of plans previously sponsored by ISI), 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 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 Page 10 (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 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 Page 11 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 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: Page 12 (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 greater of (I) your target award under the Annual Incentive Plan or similar successor plan for the year in which the Date of Termination occurs, or (II) 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 a lump sum under the Plan at least 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 ("Options") granted to you under RTI's stock option plans (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 Page 13 stock options (as defined in section 422A of the Internal Revenue Code of 1986, as amended (the "Code")) ("ISOs")), granted after June 10, 1996, the closing price of RTI's shares as reported on the New York Stock Exchange Composite Transactions on or nearest the Date of Termination, in the case of all other Options, 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 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. In the event ISI shares are substituted for RTI Shares under the Options, references to RTI Shares as used shall be deemed to refer to shares of ISI common stock that are substituted for RTI Shares thereunder. (E) To the extent not otherwise vested in accordance with the terms and conditions of the Incentive 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 Plan for the calendar year in which the change in control of the Company occurs had the Page 14 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 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 Page 15 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 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 Page 16 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), (D) and (E) 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 immediately prior to the Notice of Termination, (2) financial advisory services similar to those provided currently to executives of the Company, 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 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 or 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 Page 17 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 or 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. 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, Nonqualified Savings Plan (or any substitute or alternative plan or plans) 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 Pae 18 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 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 Page 19 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 the 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 nforceability 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. Page 20 Sincerely, RYERSON TULL, INC. By: _______________________________________ Its: Vice President - Human Resources Agreed to this ____________ day of ____________________________________, 2002. ________________________________________ (Signature) EX-10.15 5 dex1015.txt SCHEDULE TO FORM OF CHANGE IN CONTROL Exhibit 10.15 Schedule to Form of Change in Control Agreement between Ryerson Tull, Inc. and the following parties: Neil S. Novich Jay M. Gratz Gary J. Niederpruem EX-10.16 6 dex1016.txt FORM OF CHANGE IN CONTROL AGREEMENT Exhibit 10.16 May 11, 2002 Name Address City/State/Zip 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, 2000; provided, however, that commencing on January 1, 2001 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 Page 2 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. 3. 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 security holders 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 20% 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 security holders 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) there occurs 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; Page 3 (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. 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 Page 4 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 security holders 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 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 Page 5 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. (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 Page 6 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 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 Page 7 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 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 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 Page 8 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 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. Page 9 (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 greater of (I) your target award under the Annual Incentive Plan or similar successor plan for the year in which the Date of Termination occurs, or (II) 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 under that plan at least 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 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 Page 10 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 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 Page 11 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 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 Page 12 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. (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 Page 13 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 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 Page 14 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. By __________________________________ Vice President - Human Resources Agreed to this ____________ day of ______________________, 2002 _______________________________ (Signature) EX-10.17 7 dex1017.txt SCHEDULE TO FORM OF CHANGE IN CONTROL AGREEMENT Exhibit 10.17 Schedule to Form of Change in Control Agreement between Ryerson Tull, Inc. and the following parties: Stephen E. Makarewicz Thomas S. Cygan EX-10.21 8 dex1021.txt CONFIDENTIALITY AGREEMENT EXHIBIT 10.21 CONFIDENTIALITY AND NON-COMPETITION AGREEMENT --------------------------------------------- THIS AGREEMENT, by and between Ryerson Tull, Inc. (the "Company") and Stephen E. Makarewicz (the "Executive") effective as of June 1, 2000 (the "Effective Date"); WITNESSETH THAT: WHEREAS, the Company has appointed Executive to the position of President Ryerson Tull South, and Executive has served as same since October 1994; and WHEREAS, in connection with such appointment, the Company and Executive desire to enter into this Agreement; NOW, THEREFORE, in consideration of the Executive's appointment as President Ryerson Tull South, and for other good and valuable consideration the receipt of which is hereby acknowledged, it is agreed by the Executive and Company as follows: 1. Confidential Information. Except as may be required by the lawful order ------------------------ of a court or agency of competent jurisdiction, or except to the extent that the Executive has express authorization from the Company, the Executive agrees to keep secret and confidential indefinitely all non-public information concerning the Company or any affiliate of the Company which was acquired by or disclosed to the Executive during the course of his employment with the Company or its affiliates, including but not limited to customer lists, price lists, customer services requirements, costs of providing services, supplier information, and other data of or pertaining to the Company or to any affiliate of the Company which are not a matter of public knowledge, and not to disclose the same, either directly or indirectly, to any other person, firm or business entity or to use it in any way. 2. Nonsolicitation. While the Executive is employed by the Company and its --------------- affiliates and for a period of two years after the date the Executive terminates employment with the Company and its affiliates for any reason, the Executive covenants and agrees that he will not, whether for himself or for any other person, business, partnership, association, firm, company or corporation, directly or indirectly, call upon, solicit, divert or take away or attempt to solicit, divert or take away, any of the customers or employees of the Company or its affiliates in existence from time to time during his employment with the Company and its affiliates. 3. Noncompetition. While the Executive is employed by the Company and its -------------- affiliates, and for a period of two years after the date the Executive terminates employment with the Company and its affiliates, the Executive covenants and agrees that he will not, directly or indirectly, engage in, assist, perform services for, plan for, establish or open, or have any financial interest (other than (i) ownership of 1% or less of the outstanding stock of any corporation listed on the New York or American Stock Exchange or included in the National Association of Securities Dealers Automated Quotation System or (ii) ownership of securities in any entity affiliated with the Company) in any person, firm, corporation, or business entity (whether as an employee, officer, director or consultant) that engages in an activity in any state in which the Company or its affiliates is conducting or has reasonable expectations of commencing business activities at the date of the Executive's termination of employment, which is the same as, similar to, or competitive with the metals service center, processing and distribution business of the Company and its affiliates. 4. Rights and Payments Upon Termination. The Executive's right to ------------------------------------ benefits and payments, if any, for periods after the date on which his employment with the Company terminates for any reason (his "Termination Date") shall be determined in accordance with this Section 4: (A) Termination by the Company for Reasons Other Than Cause; Termination -------------------------------------------------------------------- by the Executive for Good Reason. If the Executive's termination by -------------------------------- the Company occurs for any reason other than Cause or is a result of the Executive's termination of employment for Good Reason (and is not on account of the Executive's death, disability, or voluntary resignation, the mutual agreement of the parties or any other reason), then the Executive shall receive from the Company for the period commencing on his Termination Date and ending on the earliest of (i) the twenty-fourth month after the Executive's Termination Date; (ii) the date on which the Executive violates the provisions of Sections 1, 2 or 3 of this Agreement; or (iii) the date of the Executive's death, the Salary, bonus and benefits in effect as of his Termination Date. The biweekly salary amounts will continue as described above. Benefits that will continue will include medical, dental, basic life insurance, any optional life insurance and any optional accidental death and dismemberment insurance. Bonus shall mean two payments of the average annual amount of the award paid to the Executive pursuant to the annual incentive plan or successor plan with respect to the three years immediately preceding that in which the Termination Date occurs. 2 Base salary payments to the Executive during the aforementioned twenty-four month period shall not preclude the Executive's eligibility for payments under the Company's severance plan. Twenty-four months of additional age and service credit will be provided to the Executive's RT Pension and the RT Supplemental Plan using the methodology described in the Executive's Change in Control Agreement except that any lump sum payment will be made twenty-four months after the Executive's Termination Date and only if the Executive has not violated the Confidentiality, Nonsolicitation and Noncompetition provisions of this Agreement. (B) Termination By Company for Cause. If the Executive's termination is a -------------------------------- result of the Company's termination of the Executive's employment on account of Cause, then, except as agreed in writing between the Executive and the Company, the Executive shall have no right to future payments or benefits under this Agreement (and the Company shall have no obligation to make any such future payments or provide any such future benefits) for periods after the Executive's Termination Date. (C) Termination for Death or Disability. If the Executive's termination is ----------------------------------- caused by the Executive's death or permanent disability, then the Executive (or in the event of his death, his estate) shall be entitled to continuing payments of his Salary for the period commencing on his Termination Date and ending on the earlier of (i) the last day of the calendar month in which his Termination Date occurs or (ii) the date on which the Executive violates the provisions of Sections 4, 5 or 6 of this Agreement. (D) Termination for Voluntary Resignation, Mutual Agreement or Other ---------------------------------------------------------------- Reasons. If the Executive's termination occurs on account of his ------- voluntary resignation, mutual agreement of the parties, or any reason other than those specified in Paragraphs (A) or (B) above then, except as agreed in writing between the Executive and the Company, the Executive shall have no right to future payments or benefits under this Agreement (and the Company shall have no obligation to make any such future payments or provide any such future benefits) for periods after the Executive's Termination Date. The 3 Executive's termination of employment for Good Reason shall not be treated as a voluntary resignation for purposes of this Agreement. (E) Definitions. For purposes of this Agreement: ----------- (i) The term "Cause" shall mean: (a) the continuous performance of his duties (under this Agreement) in a manner that is inconsistent with past, acceptable performance over a normal business cycle; or in a way that has a demonstrable negative impact on the results of the business unit as determined by the Executive Vice President. The Executive Vice President must provide a notice of unsatisfactory performance and a reasonable corrective action period. The Chairman and CEO must review and approve the action; or (b) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its affiliates, monetarily or otherwise, as determined by the Executive Vice President; or (c) conduct by the Executive that involves theft, fraud or dishonesty; or (d) the Executive's violation of the provisions of Sections 1, 2 or 3 hereof. (ii) The term "Good Reason" means (a) the assignment to the Executive duties which are materially inconsistent with his duties as President Ryerson Tull South of the Company, including, without limitation, a material diminution or reduction in his title, office or responsibilities or a reduction in his rate of Salary, or (b) the relocation of the Executive to a location that is not within the greater Norcross, Georgia, metropolitan area. Notwithstanding any other provision of this Agreement, the Executive shall automatically cease to be an employee of the Company and its affiliates as of his Termination Date and, to the extent permitted by applicable law, any and all monies that the Executive owes to the 4 Company shall be repaid before any post-termination payments are made pursuant to the Executive pursuant to this Agreement. 5. Remedies. The Executive acknowledges that the Company would be -------- irreparably injured by a violation of Sections 1, 2 or 3, and he agrees that the Company, in addition to other remedies available to it for such breach or threatened breach, shall be entitled to a preliminary injunction, temporary restraining order or other equivalent relief, restraining Executive from any actual or threatened breach of any such paragraph. If a bond is required to be posted in order for the Company to secure an injunction or other equitable remedy, the parties agree that the bond need not be more than a nominal sum. 6. Severability and Entire Agreement. The invalidity or unenforceability of --------------------------------- any provision of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, and this Agreement will be construed as if such invalid or unenforceable provision were omitted (but only to the extent that such provision cannot be appropriately reformed or modified). The Agreement is intended to be the entire agreement between the parties regarding the subject matter hereof and shall supersede any prior agreements to the contrary. 7. Applicable Law. The provisions of this Agreement shall be construed in -------------- accordance with the laws of the State of Georgia. 8. Successors. This Agreement shall be binding upon, and operate for the ---------- benefit of the Company and its successors nd assigns. 9. Acknowledgment by Executive. The Executive acknowledges that he has read --------------------------- this Agreement, understands the undertakings and restrictions it contains, and intends to be fully bound by its terms. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. RYERSON TULL, INC. Dated: 6/1/00 /s/ William Korda ---------- ---------------------------------------- William Korda Vice President Human Resources Dated: 7/4/00 /s/ Stephen E. Makarewicz ---------- ---------------------------------------- Stephen E. Makarewicz President Ryerson Tull South 5 -----END PRIVACY-ENHANCED MESSAGE-----