Amendment to General Statement of Beneficial Ownership — Schedule 13D
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SC 13D/A Amendment to General Statement of Beneficial 16 66K
Ownership
2: EX-10 Material Contract 2 13K
3: EX-11 Statement re: Computation of Earnings Per Share 10 32K
4: EX-12 Statement re: Computation of Ratios 1 5K
EX-11 — Statement re: Computation of Earnings Per Share
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Exhibit 11
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
GREENWAY PARTNERS, L.P., )
GREENTREE PARTNERS, L.P., )
GREENHOUSE PARTNERS, L.P., )
GREENHUT, L.L.C., GREENBELT )
CORP., GREENSEA OFFSHORE, ) C.A. No.
L.P., GREENHUT OVERSEAS, ) ------------------
L.L.C., ALFRED D. KINGSLEY )
and GARY K. DUBERSTEIN, )
)
Plaintiffs, )
)
v. )
)
INLAND STEEL INDUSTRIES, INC., )
A. ROBERT ABBOUD, ROBERT J. )
DARNALL, JAMES A. HENDERSON, )
ROBERT B. McKERSIE, LEO F. )
MULLIN, JEAN-PIERRE ROSSO, )
JOSHUA I. SMITH, NANCY H. )
TEETERS and ARNOLD R. WEBER, )
)
Defendants. )
VERIFIED COMPLAINT
------------------
Plaintiffs Greenway Partners, L.P., Greentree Partners, L.P.,
Greenhouse Partners, L.P., Greenhut, L.L.C., Greenbelt Corp., Greensea Offshore,
L.P., Greenhut Overseas, L.L.C., Alfred D. Kingsley and Gary K. Duberstein
(collectively, "Greenway"), by their undersigned attorneys, allege upon
knowledge with respect to themselves and their own acts and upon information and
belief as to all other matters as follows:
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NATURE OF ACTION
----------------
1. This action for injunctive relief arises out of a "Dutch auction"
self-tender offer (the "Self-Tender Offer") scheduled to close at midnight on
Friday, August 14, 1998. Pursuant to this Self-Tender Offer, defendant Inland
Steel Industries, Inc. ("Inland Steel" or the "Company") seeks to wrongfully
coerce plaintiffs, who own approximately 9.7% of the Company's common stock,
into tendering their common stock to the Company. If plaintiffs do not tender
their shares at the lowest possible price provided for by the Dutch auction or
at the price to be determined by the Company and other shareholders as a result
of the Dutch auction, then solely as a result of the Company's consummation of
the Self-Tender Offer plaintiffs' ownership of common stock will rise above 10%
and the Company's Board of Directors could immediately declare plaintiffs to be
an "Adverse Person" under the Company's poison pill shareholder rights plan (the
"Poison Pill").
2. Unless the Court enjoins the Self-Tender Offer, plaintiffs
forever will be deprived of any opportunity to make a free, non-coerced choice
on the merits of the Self-Tender Offer, including whether to tender any shares,
and, if so, how many shares and at what price or prices. Instead, plaintiffs
will be forced to tender their shares at the lowest possible price provided for
by the Dutch auction or at the price to be determined by the Company and other
shareholders as a result of the Dutch auction. Plaintiffs will be forced to
tender at this price for reasons other than the merits of the Self-Tender Offer
i.e., to evade the threat unique to plaintiffs of being dragged across the 10%
Poison Pill threshold solely by the Company's purchase of its shares from other
stockholders pursuant to the Company's Self-Tender Offer.
3. The Company has refused to assure plaintiffs that the Company
will not contend that plaintiffs will have crossed the 10% Poison Pill threshold
by reason of the Company's Self-Tender Offer. When asked why the Company could
not provide this assurance, the Company's Chief Financial Officer stated: "We
don't see what's in it for us."
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4. No Delaware court ever has sanctioned the conduct that defendants
are engaged in here: the joint use of a Poison Pill and a Self-Tender Offer to
coerce shareholders to sell their shares to the Company.
PARTIES
-------
5. Plaintiffs (collectively referred to as "Greenway") own 4,783,300
shares of the Company's common stock, representing approximately 9.7% of the
outstanding shares of the Company's common stock. Plaintiffs have been investors
in the Company since 1995, have been shareholder activists seeking to enhance
the value of the Company for all shareholders, and have submitted shareholder
proposals in connection with the Company's 1997 and 1998 annual meetings.
6. Defendant Inland Steel is a corporation incorporated under the
laws of the State of Delaware and is engaged (through subsidiaries) in the
business of metals distribution and processing. As of the close of business on
July 17, 1998, there were 49,226,317 outstanding shares of Inland Steel common
stock.
7. Defendants A. Robert Abboud, Robert J. Darnall, James A.
Henderson, Robert B. McKersie, Leo F. Mullin, Jean-Pierre Rosso, Joshua I.
Smith, Nancy H. Teeters and Arnold R. Weber are directors of the Company.
FACTUAL BACKGROUND
------------------
A. The Self-Tender Offer.
8. On July 20, 1998, Inland Steel commenced an offer (the
"Self-Tender Offer") to purchase up to 25,500,000 shares (approximately 51% of
all outstanding shares) of its common stock pursuant to a procedure commonly
referred to as a "Dutch auction." (A copy of the Offer to Purchase describing
the terms and conditions of the Self-Tender Offer is attached hereto as Exhibit
A.)
9. Pursuant to the Self-Tender Offer, the Company has committed to
purchase up to 25,500,000 shares at a single per share price not greater than
$34 nor less than $30 per share (the "Purchase Price"). The Company will select
the lowest price between $30 and $34 per share that will allow the Company to
purchase 25,500,000 shares. The Company will pay the Purchase Price for all
shares
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tendered at prices at or below the Purchase Price. If more than 25,500,000
shares are tendered at or below the Purchase Price, then the Company will
purchase all such shares on a pro-rated basis. For example, if 25,500,000 shares
are tendered at prices ranging from $30 to $32 per share and 10 million shares
are tendered at prices above $32 per share, then the Company will purchase
25,500,000 shares at a price of $32 per share.
10. Greenway also owns approximately 360,100 shares of Ryerson Tull,
Inc. ("Ryerson Tull"), an 87% owned subsidiary of the Company. According to the
Company's Offer to Purchase, Greenway may receive from the Company additional
shares of common stock in connection with Greenway's holdings of Ryerson Tull
shares on terms yet to be determined.
11. Because of the nature of a Dutch auction tender offer, each
stockholder seeking to tender shares in response to the Company's offer must (i)
specify the price (not greater than $34 nor less than $30 per share) at which
the stockholder is willing to have the Company purchase shares, or (ii) elect to
have its shares purchased at a price determined by the Dutch auction tender
process, which could result in all of such person's shares being purchased at
the minimum price of $30 per share. (A copy of the form to be submitted by
stockholders to the Company in order to participate in the Self-Tender Offer is
attached hereto as Exhibit B.)
12. The Company's Self-Tender Offer will close at midnight on
Friday, August 14, 1998, unless extended.
13. Because the Company will purchase approximately 51% of its
outstanding shares (assuming that 25,500,000 shares are validly tendered and not
withdrawn), the proportionate interest in the Company's outstanding common stock
held by stockholders who determine not to tender their shares necessarily will
increase. Thus, if Greenway does not tender any of its shares then Greenway'
proportionate interest in the Company's outstanding common stock will almost
double if other shareholders tender 25,500,000 shares.
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B. The Company's Poison Pill.
14. On November 25, 1997, the Company adopted its Poison Pill. All
stockholders hold one right per each share of the Company's common stock. (A
copy of the Company's news release and Form 8-A describing the Poison Pill, and
a copy of the Poison Pill itself, are attached hereto as Exhibit C.)
15. The rights will separate from the Company's shares of common
stock and will be distributed upon the occurrence of any of the following
triggering events (the "Triggering Events"):
(a) The acquisition by any "Acquiring Person" of 20% or more
of the shares of the Company's common stock; or
(b) A declaration by the Board of Directors of the Company
that a person who is the beneficial owner of 10% or more of the outstanding
common stock of the Company is an "Adverse Person" based on a determination that
(i) "such Beneficial Ownership by such Person is
intended to cause the Company to repurchase the shares of Common Stock
beneficially owned by such Person or to cause pressure on the Company to take
action or enter into a transaction or series of transactions intended to provide
such Person with short-term financial gain under circumstances where the Board
of Directors determines that the best long-term interests of the Company and its
stockholders would not be served by taking such action or entering into such
transaction or series of transactions at that time" or
(ii) "such Beneficial Ownership is causing or reasonably
likely to cause a material adverse impact (including, but not limited to,
impairment of relationships with customers or impairment of the Company's
ability to maintain its competitive position) on the business or prospects of
the Company to the detriment of the Company's stockholders."
16. Following the occurrence of any Triggering Event, each right not
owned by an Acquiring Person or an Adverse Person entitles its holder to
purchase, at the right's then current exercise price, shares of the Company's
common stock having a value of twice the right's then current exercise price
(the "Flip-In Provision"). If any person has become an Acquiring Person or an
Adverse Person
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and the Company subsequently is involved in certain transactions after which the
Company ceases to exist, then each right will entitle its owner to purchase, at
the right's then current exercise price, shares of common stock of the acquiring
company having a value of twice the right's then current exercise price (the
"Flip-Over Provision").
17. In sum, the Company's Poison Pill has a subjective and objective
trigger. Once a shareholder acquires 10% of the Company's outstanding common
stock, the Board of Directors can pull the subjective trigger and determine that
such person is a Adverse Person and trigger the flip-in poison of the Company's
Poison Pill. Any shareholder who acquires (or seeks to acquire pursuant to a
tender offer) 20% or more of the Company's outstanding common stock immediately
becomes, without any required Board action, an "Acquiring Person" and triggers
the flip-in poison of the Company's Poison Pill.
18. Because Greenway currently owns 9.7% of the Company's
outstanding common stock, additional purchases of common stock by Greenway will
take it over the 10% Poison Pill threshold and would place Greenway in immediate
jeopardy that the Board could, at any time, declare Greenway to be an Adverse
Person under the Poison Pill and thus trigger the flip-in poison of the
Company's Poison Pill. Greenway always has been careful not to take any step
that would cause Greenway's ownership of the Company's stock to cross the 10%
Poison Pill threshold because Greenway knows full well the consequences of the
flip-in poison of the Company's Poison Pill.
C. The Company Refuses Plaintiffs'
Request For Clarification.
19. Promptly after learning of the Self-Tender Offer, Greenway asked
the Company for assurance that any increase in the proportionate share of the
outstanding common stock held by Greenway solely as a result of the consummation
of the Company's Self-Tender Offer, and not as a result of any additional
purchases of common stock by Greenway, would not place Greenway in a position in
which the Company's Board of Directors could declare Greenway to be an Adverse
Person because Greenway then would own more than 10% of the outstanding common
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stock of the Company. This information, which is not contained in the Company's
Offer to Purchase, is absolutely vital to any decision by Greenway with respect
to whether or not to tender shares and, if so, how many shares and at what price
or prices. Without an assurance of this type, Greenway has no realistic choice
but to tender its shares at the lowest possible price provided for by the Dutch
auction or at the price to be determined by the Company and other shareholders
as a result of the Dutch auction.
20. On July 29, 1998, and after the Company failed to respond to
oral requests made over the course of several days for this information,
Greenway sent a letter to the Company stating, in part, as follows:
Under Sections 1(b) and 11(a)(ii)(B) of the Company's November
25, 1997 Rights Agreement, the Board of Directors of the Company may
declare a stockholder to be an "Adverse Person" if, among other
things, the Board determines that the stockholder is "the Beneficial
Owner of a number of shares of Common Stock which the Board of
Directors of the Company determines to be substantial (which number
of shares shall in no event represent less than 10% of the
outstanding shares of Common Stock)."
The Greenway Group beneficially owns 4,783,300 shares of
Common Stock, representing approximately 9.7% of the outstanding
shares of Common Stock. Given all of the variables involved in the
Company's "Dutch" auction tender, including choice of price, number
of shares tendered and tax considerations (by the Greenway Group and
all other stockholders), the Greenway Group may become the
beneficial owner of in excess of 10% of the outstanding shares of
Common Stock as a result of the consummation of the Offer. According
to the Offer, the Greenway Group also may receive from the Company
additional shares of Common Stock in respect of our holdings of
shares of Ryerson Tull on terms yet to be determined.
Please confirm by counter-signing this letter and returning it
by August 3, 1998 that, notwithstanding the consummation of the
transactions contemplated by the Offer or a subsequent transaction
by the Company involving Ryerson Tull, the Greenway Group will not
become "the Beneficial Owner of a number of shares of Common Stock
which the Board of Directors of the Company determines to be
substantial" or be declared an "Adverse Person" so long as the
Greenway Group does not acquire beneficial ownership of any shares
of Common Stock in excess of the 4,783,300 shares of Common Stock
beneficially owned by the Greenway Group plus such shares of Common
Stock which may be received in respect of any shares of Ryerson Tull
that may be owned by the Greenway Group.
(A copy of the letter is attached hereto as Exhibit D.)
21. Greenway received no written response from the Company to its
letter. Rather, late in the afternoon, on Monday, August 3, 1998, the Company's
Chief Financial Officer, J.M. Gratz, called plaintiffs Alfred D. Kingsley and
Gary
7
K. Duberstein. Mr. Gratz refused to provide any assurance with respect to
whether Greenway would be deemed a 10% shareholder for purposes of the Company's
Poison Pill solely as a result of any increase in Greenway's proportionate
ownership of the Company's common stock following the consummation of the
Self-Tender Offer. When pressed why the Company would not provide such
clarification so that Greenway could make a decision with respect to the
outstanding Self-Tender Offer on an informed basis and without wrongful
coercion, Gratz replied: "We don't see what's in it for us."
IRREPARABLE HARM
----------------
22. Absent temporary, preliminary and permanent injunctive relief,
Greenway will suffer irreparable harm. Greenway will be forced to tender all of
its shares at the lowest price provided for in the Self-Tender Offer. Greenway
forever will be deprived of any opportunity to make a free, non-coerced choice
on the merits of the Self-Tender Offer, including whether to tender any shares,
and, if so, how many shares and at what price or prices.
CLAIM FOR RELIEF
----------------
23. Plaintiff incorporates by reference each of the allegations set
forth above as if set forth in full herein.
24. Each of the Company's directors owes the Company's shareholders,
including Greenway, fiduciary duties to, among other things, manage the affairs
of the corporation with due care and with loyalty and in good faith and to
disclose fully and fairly all material information relevant to the Company's
Self-Tender Offer, and not to engage in wrongful coercion.
25. As alleged in detail above, defendants have breached their
fiduciary duties owed to plaintiffs by, inter alia:
(a) Wrongfully and inequitably coercing Greenway into tendering
its shares into the Self-Tender Offer at the lowest possible
price provided for by the Dutch auction or at the price to be
determined by the Company and other shareholders as a result
of the Dutch auction, not for reasons related to the merits of
the Self-Tender
8
Offer but rather to avoid being deemed by the Company to have
triggered the 10% threshold of the Company's Poison Pill and
thereby allowing the Company to declare plaintiffs an Adverse
Person under the terms of the Company's Poison Pill;
(b) Implementing a scheme to drag plaintiffs, involuntarily, over
the 10% threshold of the Company's Poison Pill, solely as a
result of actions taken by the Company, so that the Board of
Directors can at any time declare Greenway to be an "Adverse
Person" and thus trigger a release of the flip-in poison of
the Company's Poison Pill; and
(c) Failing to disclose in the Self-Tender Offer or in response to
Greenway's inquiries whether or not an increase in Greenway's
ownership of the Company's common stock above 10%, solely as a
result of the Company's consummation of the Company's
Self-Tender Offer, will be deemed by the Company to trigger
the 10% threshold of the Company's Poison Pill.
26. Plaintiffs have no adequate remedy at law.
WHEREFORE, plaintiffs respectfully demand judgment against
defendants as follows:
(a) Temporarily, preliminarily and permanently enjoining the Company
and the individual defendants, their agents and employees, and anyone acting on
their behalf, from taking any steps to purchase shares or otherwise consummate
the Self-Tender Offer, unless the Company agrees that plaintiffs will not be
deemed to be an "Adverse Person" so long as Greenway does not acquire beneficial
ownership of any shares of the common stock of the Company in excess of the
4,783,300 shares of common stock already beneficially owned by Greenway or
additional shares of common stock of the Company that may be received in
connection with any shares of Ryerson Tull owned by Greenway;
(b) Temporarily, preliminarily and permanently enjoining the Company
and the individual defendants, their agents, employees and anyone acting on
their
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behalf, from taking any steps to purchase shares or otherwise consummate the
Self-Tender Offer unless and until full, accurate and complete disclosure is
made concerning whether or not any increase in the proportionate ownership of
the outstanding common shares by plaintiffs as a result of the consummation of
the Self-Tender Offer will be deemed by the Company to trigger the 10% threshold
in the Company's Poison Pill;
(c) Awarding attorneys' fees and other costs; and
(d) Granting such other and further relief as the Court deems just
and appropriate.
MORRIS, NICHOLS, ARSHT & TUNNELL
-------------------------------
A. Gilchrist Sparks, III
Alan J. Stone
Jessica Zeldin
P.O. Box 1347
1201 North Market Street
Wilmington, DE 19899
(302) 658-9200
Attorneys for Plaintiffs
OF COUNSEL:
Joseph Allerhand
Stephen A. Radin
WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, NY 10153
(212) 310-8000
August 5, 1998
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Dates Referenced Herein and Documents Incorporated by Reference
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