Full opinion text
HINCKS, District Judge. Findings of Fact I. 1. The plaintiff Jane Perlman and the plaintiff-intervenor Harry Mernoff are citizens of the United States and of the State of New York. The other plaintiffs are all citizens of the United States and of the State of Illinois. The plaintiffs each own shares of the common stock of Newport Steel Corporation which they acquired prior to August 31, 1950. 2. The defendant Newport is a corporation duly organized and existing under the laws of the State of Indiana, and thus a citizen of that state. The other defendants are all citizens of the United States and of the State of Conneeticut and were such at and prior to the commencement of this action. 3. The amount in controversy exceeds $3,000, exclusive of interest and costs. 4. This action is not brought collusively to confer on the court jurisdiction it would not otherwise have. 5. The plaintiffs bring this action derivatively on behalf of Newport. 6. As of August 31,1950 Newport had issued 1,221,870.2 shares of its common stock of the par value of $1 per share. Of these, 100,000 shares were owned by an almost-wholly-owned subsidiary of Newport, the R Company, and 43,378 shares were treasury stock. The balance of 1,078,492.2 shares were outstanding in the hands of the stockholders of Newport. 7. On August 31, 1950 the following persons or corporations owned the following number of shares of the common stock of Newport: C. Russell Feldmann............. 0 Charlotte M. Feldmann.......... 2,000 Strong, Carlisle & Hammond Co... 261,000 Henney Motor Co., Inc........... -50,000 Carolyn F. Otto................. 7,300 Barbara Jane Feldmann.......... 7,800 Phyllis F. McKee................ 7,300 John F. Otto-.................... 2,200 Joseph V. McKee, Jr............. 2,525 Norman S. Feldmann............ 1,000 Raymond D. Feldmann........... 1,050 John C. Vega...........:....... 600 Josephine V. Vega............... 600 343,375 Strong, Carlisle & Hammond Co. is a corporation approximately 85% of the stock of which was owned by C. Russell Feldmann (hereinafter called “Feldmann”) and members of his family. Henney Motor Co., Inc. is a corporation the stock of which was owned 60% by Feldmann, and 10% each by his wife, Charlotte M. Feldmann, and by his three daughters. John F. Otto and the defendant Joseph V. McKee, Jr. are Feldmann’s sons-in-law. Defendants Carolyn Otto, Phyllis McKee and Barbara Jane Feldmann are Feldmann’s daughters. Norman S. Feldmann and Raymond D. Feldmann are Feldmann’s brothers. John C. Vega and Josephine V. Vega are Feldmann’s brother-in-law and sister-in-law, respectively. 8. The remaining 735,117 shares of Newport stock were owned by several thousand shareholders. Newport stock was traded over-the-counter in New York. Although it is impossible to determine the actual volume Of trading in the stock, it apparently enjoyed a broad, fair and active market. 9. The 343,375 shares owned by Feldmann, his family, the Strong, Carlisle & Hammond Co. and the Henney Motor Co. amounted to approximately 33% of the outstanding stock of Newport. If voted as a unit, under the conditions existing as of August 31, 1950, this amount of stock would have given the holder working control of Newport. 10. Since December, 1940 and until August 31, 1950 Feldmann was the president of Newport. In August, 1950 he was also the chairman of its board of directors. His salary was $75,000 a year. The other four members of Newport’s board of directors in August, 1950 were the defendant Joseph V. McKee, Jr., Feldmann’s son-in-law, Frank L. Taylor, A. F. Lorenzen and Daniel M. Sheaffer. II. Newport’s Facilities and Competitive Position 11. Prior to August 8,1946, Newport, then known as International Detrola Corporation, was in the business of manufacturing radios and phonographs, aircraft components, refrigerator units, radio cabinets and radio speakers. 12. In late 1949 Newport disposed of its subsidiaries the Rohr Aircraft Corp., the Universal Cooler Co. of Canada, Ltd. and the Aircraft Tool Division. These subsidiaries had accounted for substantial portions of the company’s sales and profits during 1948 and 1949. 13. In August, 1950, the principal business of Newport was the production of steel ingots and the manufacturing of hot rolled steel and sheet steel. Through its Caswell-Runyan Division Newport manufactured cabinets for radio and television sets; through its Universal Cooler Division it manufactured refrigerator compressors. It also had a blast furnace for the production of pig iron, located at Martins Ferry, Ohio. It also owned real estate in Detroit, Michigan. 14. The Caswell-Runyan (woodworking) Division as of August, 1950 consisted of a plant at Huntington, Indiana, which had about 500,000 square feet of floor space, many acres of land, and practically all new equipment, and a plant at Goshen, Indiana, consisting of 125.000 square feet of floor space. 15. Prior to August 31, 1950 Newport had planned to sell its Universal Cooler Division, and had made serious attempts to sell it. It was actually sold on October 31, 1950. 16. Prior to August, 1950 Newport’s property in Detroit had been unoccupied for two years. During August, 1950' Feldmann negotiated a lease of the property to the Government, at an annual rental of $165,000. The Government went into possession under the lease on August 14, 1950. The term of the lease was ten years and was to be extended from year to year for a period of five years unless terminated by the Government. The lease was renewed by the Government for another year on August 30, 1951. Under the lease, the Government had an option to buy the property from Newport for the price of $1,500,000, minus $191,000 of prepaid restoration charges. 17. Newport first entered the steel business in 1946. It then acquired for approximately $1,665,000 the assets of the Andrews Steel Co., located at Newport, Ky., directly across the Ohio River from Cincinnati, and at Wilder, Ky., about one mile south of Newport. The facilities acquired from Andrews consisted of about 200 acres of land, about 1.250.000 square feet of buildings with cranes and auxiliary equipment, together with seven open hearth furnaces, a blooming and bar mill, a sheet mill and facilities for fabricating culvert pipe, eaves troughs, down spouts, garage doors and roofing, and equipment for making galvanized, galvannealed and terne sheets. These facilities were and are used by Newport as part of one continuous operation: the open hearth furnaces make steel ingots, which are rolled into bar stock in the blooming and bar mill which in turn is rolled into sheets in the sheet mill. The normal product of the sheet mill is hot rolled, low carbon steel sheets. These sheets can be sold as such; or further processed by Newport into galvanized, galvannealed and long terne sheets; or fabricated by it into finished end products such as culvert pipes, eaves troughs, etc. The mill also produces sheets of silicon steel, a specialty steel used in electrical equipment, as well as an alloy steel which is used by aircraft manufacturers in building air frames. These facilities acquired from Andrews are known collectively as the “old facilities.” They have been in operation ever since their purchase. 18. On March 31, 1947, Newport acquired a blast furnace located at Martin’s Ferry, Ohio, at a cost of $175,000. Newport then rehabilitated the blast furnace at a cost of $800,000 and it was put into operation in June, 1947. It was taken out of operation in June, 1949, and put back into operation again in June, 1951. 19. The blast furnace has a rated capacity of 12,000 tons of pig iron per month. Its sole usefulness to Newport lies in the fact that it is capable of supplying 100% of the pig iron requirements of Newport’s seven open hearth furnaces. In periods of shortage of pig iron, Newport’s open hearth furnaces might not be able to operate without pig iron from the blast furnace. At any other time it would not be economically sound for Newport to operate the furnace. It is a marginal operation. 20. The open hearth furnaces have a rated capacity of about 34,400 tons of ingots per month and produce an average of 24,000 tons per month. The sheet mill has a rated capacity of 15,000 tons per month, but has exceeded that capacity. The average monthly production of the sheet mill was 11,906 tons in 1949 and 11,834 tons in 1950. The production of the sheet mill in the following months was: 1950 Tons January ............... 12,859 February .............. 8,750 March ................ 13,080 April ................. 11,815 May .................. 13,000 June .................. 11,189 July .................. 5,980 August................ 12,704 (Defendant’s Ex. 32) 21. The “old facilities” are capable only of high cost operation. 22. With respect to Newport’s “old facilities”: Newport’s mill price for hot rolled sheets, 18 gauge and heavier, was, in August, 1950, $ll-$27 per ton higher than the prices charged by certain other steel companies. In August, 1950, the prices charged by Newport for galvanized steel was $13 to $20 per ton higher than those charged by certain other steel producers. Newport’s prices in August, 1950 for electrical, motor, dynamo and transformer (silicon) steel were the same as those charged by other producers. 23. It is unlikely that Newport would be able. to sell hot-rolled, low- ' carbon steel sheets produced by its “old facilities” at a profit if the index of steel production fell to the level of mid-1949 (81%). However, it would probably be competitive with any other mill in the fields of alloy and silicon steel. No other mill in the Cincinnati area produces ■galvanized steel; the market for galvanized steel is local and Newport concentrates on the area within 100 miles of Cincinnati and to the south. Within that area- Newport has a freight advantage which might permit it to sell some or all of its galvanized steel at a profit, even if the index of steel production fell to the level of mid-1949. In August 1950 Newport’s profits from its “old facilities” .were,.accounted for as follows; app. 33.8% by sales of hot-rolled, low-carbon sheets; app. 14.6% by sales of coated sheets (galvanized, etc.); app. 21.5% by sales of alloy and silicon steel; app. 25.5% by sales of the fabricating departments, which make doors, etc.; and app. 3.2% by other items. Newport’s management believes that if a drop in demand for steel occurred, the profits of its “old facilities” could be maintained by shifting its production and sales away from low-carbon sheets. Yet it appears that in 1949, when Newport’s sales of steel were cut in half as a result of a drop in demand and the company suffered a loss for some months, no such shift was made. On the basis of the past history of these facilities, it is questionable whether they could be operated profitably if the index for steel production fell to 80% or lower. 24. Between 1948 and 1950, Newport acquired additional steel facilities, referred to as the “new facilities”, consisting of a melt shop containing one electric furnace, acquired from the War Assets Administration in the spring of 1948; two additional electric furnaces installed in the melt shop which were put in operation in March and May, 1950; an additional large building acquired from the War Assets Administration in the spring of 1948; and a reversing hot strip mill for the production of hot rolled steel ■strip, installed in said building in late 1948 and early 1949. These facilities, together with the pipe mill, referred to infra, were intended to be and are operated as a unit. They are adjacent to Newport’s old facilities in Wilder, Ky. The facilities acquired from the War Assets Administration were obtained at a price of $1,350,000. Feldmann had been informed that these facilities had cost the Government $7,000,000 to build during the war. The final cost to Newport of its “new facilities”, as they existed when completed, was $10,798,000. 25. Although Newport’s “new facilities” were originally scheduled for com.pletion in August, 1948, the actual completion was long delayed and they had never achieved their expected normal production by August 31, 1950. 26. The electric furnaces have a theoretical rated capacity of 24,300 tons of ingots per month; they were expected to have a normal monthly production of 22,000 tons per month. The last of the three furnaces was placed in production in May, 1950. Actual production during the four months starting in May was as follows: Month Tons of Ingots May, 1950 ............. 14,963 June, 1950 ............. 15,984 July, 1950 ............. 15,072 Aug., 1950 ............ 16,506 27. The theoretical rated capacity of the strip mill was 25,000 tons per month although it was capable of producing somewhat more. If all the normal 22,000 per month output of the electric furnaces were put into the strip mill, 18,700 tons of sheet and coil would be produced as the yield of the strip mill is 85%. Additional strip mill production might perhaps be obtained by converting ingots bought from other mills or furnished by customers. The strip mill first went into production in May, 1949 but until December, 1949 it never produced more than 5,500 tons per month. Its actual production from December on was as follows: Tons of Month Strips & Coils December, 1949......... 6,611 January, 1950......... 5,329 February, “ ......... 7,108 March, “ ......... 11,129 April, “ ......... 10,475 May, “ 9,140 June, “ 12,827 July, “ 7,967 August, “ ......... 16,314 During these months none of the strip mill’s production was obtained from ingots furnished by customers or purchased from other mills. 28. As of August, 1950 it was reasonable to assume that the new facilities-would soon attain their expected normal monthly production. 29. In contrast to open hearth furnaces which use pig iron as part of their “charge”, the raw material used in electric furnaces is scrap. Steel produced by electric furnaces is of better quality than steel produced by open hearth furnaces. 30. At the time that the “new facilities” were first contemplated, i. e., app. January, 1948, it was estimated that Newport’s scrap costs per ton would be at least five dollars higher than the “Big Six”. As of August, 1950, however, Newport was paying the same amount for scrap as the “Big Six”. ' 31. Newport’s reversing strip mill is a modern automatic mill, one of the first of its type, although similar mills have since been built by other steel companies. It compares favorably with the new strip mill of Crucible Steel Co.; which is a competitive mill. 32. At the- time that the “new facilities” were first contemplated it was estimated that Newport’s costs in operating them, aside from raw material costs, would be about five dollars per ton higher than the “Big Six” when the. facilities were operating a full normal production. As of August, 1950 Newport’s actual conversion costs were slightly higher than those of the “Big Six.” Unit costs tend to decrease as a steel mill approaches capacity production. 33. The big steel mills, like those of the “Big Six”, are the principal competitors of Newport’s new steel facilities. In August, 1950 Newport charged the same base price for its hot rolled sheets produced by the new facilities as was charged by the lowest priced steel producers for the same product and Newport’s prices for extras were likewise the same. No other steel producer sold the same product at a lower price and some charged higher prices. However, most of Newport’s August production was committed to General Motors Corp. In December, 1949, Newport gave General Motors a continuing option effective until June, 1953 to purchase 10,000 tons of steel a month from the new facilities' at “Big Six” prices. The option was still in effect in August, 1950. - . 34. The market for hot rolled steel in coil and cut lengths in the area within 150 miles of Cincinnati is five to seven times Newport’s capacity production of that product. Within that area, as against the “Big Six”, Newport has the advantage of lower freight rates which, since steel prices are F. O. B. mill, might enable Newport, at a time when the index of steel production in the United States is 90-95%, to sell all the production of its new facilities, even if Newport’s prices were $4 or $5 per ton higher than the “Big Six.” 35. In March, 1950, Newport purchased a slightly used pipe mill from International Rolling Mills Products Corp. for $450,000. The pipe mill, which had not yet been placed in operation in August, 1950, was intended to use steel produced by the hot strip mill, and as of that date the cost of the pipe mill to Newport — and its book value — stood at $491,763.00. 36. At the time of purchase the future earnings of the pipe mill were estimated by a firm of management engineers to be $100,000 to $150,000 a month. It had a rated capacity of 3,000 tons per month, but Newport's general manager of its steel division, Mr. Riefkin, had estimated that it “should” produce 4,000 tons per month. In order to produce 4,000 tons of pipe, Newport would have to supply the pipe mill with 4,500 to 4,700 tons of coil from its strip mill. It was estimated that Newport would realize a profit of $30 per ton on sales of pipe at competitive prices. The mill did not actually go into production till March, 1951. III. “Feldmann Plan” Financing 37. In the 10-year period prior to August, 1950, the steel industry in the United States was, with the exception of a short period in 1949, in a boom condition. There was a scarcity of steel in 1946, 1947 and 1948 as well as during the summer of 1950; the market for steel was tight throughout the year 1950 and continues to be tight. In July and August, 1950, the demand for the steel produced by Newport far exceeded its then capacity. 38. Newport raised the money to purchase its “old facilities” from the Andrews Steel Co. by borrowing from banks. Shortly after acquiring these facilities Newport entered into contracts with seven of its customers pursuant to which Newport agreed to sell and the customers to purchase certain quantities of steel over a period of 36 months at a total contract price of $35,100,000 (except that Borg-Warner agreed to take its share of the steel over an 18-month period). The amount of steel committed represented 50% of Newport’s expected production. In consideration of this commitment, the customers advanced an aggregate of $3,510,000 to Newport. These advances were free of interest and were to be amortized against 10% of the price of the steel to be delivered. Part of the $3,510,000 thus obtained was used to pay off $2,000,000 of the bank loans and the rest was used for working capital. 39. In January, 1948 Newport, under the management of Feldmann, received advances of $5,000,000 from three customers, Packard Motor Car Co., Borg-Warner Corp. and Houdaille-Hershey, to be used in the purchase and installation of its “new facilities.” The advances were made under the terms of contracts which provided that Newport would ship and the customers would purchase specified quantities of steel from the “new facilities”, half during an 18-month period beginning August 1, 1948 and the balance during the following eighteen months. The steel was to be paid for at the average base price quoted by the “Big Six” steel companies and, in addition, the purchasers were to pay a premium of $20 per ton of steel shipped during the first 18 months. The contracts provided that Newport was to be obligated to repay the advances of $5,000,000 at the end of the first 18-month period and until then they were not to bear interest. The contracts further provided that the $20 per ton premium above “Big Six” prices on steel delivered during the first 18 months was to be credited against the amount of the advances, and the contract arrangements were such that, if Newport delivered the full amount called for during that period, the $5,000,000 in advances would be considered completely repaid. If Newport’s steel shipments should be interrupted by causes beyond its control for any period, the initial 18-month period for the repayment of the advances was to be correspondingly extended. However, with certain limitations, if Newport did not meet its contract commitments as to delivery schedules and quality of steel, the customers could refuse to accept any further steel and thus deprive Newport of its opportunity to have the advances can-celled through shipments of steel. There was no provision for an acceleration of the due date of the advances, which were made subject to Newport’s outstanding debentures. Furthermore, Newport, in case of an inability to make the required shipments from its “new facilities”, had the right to substitute steel produced by the “old facilities”, at least for a period of six months. 40. On December 6, 1948 Newport entered into a contract with General Motors Corp. under which General Motors agreed to and did advance to Newport $5,000,000 on terms similar to the Borg-Warner etc. contracts. 41. It is customary for costs to be high during the first year or year and a half of operation of a new type mill. In addition, in planning Newport’s new facilities, it was estimated that Newport’s costs would probably always be higher than those of the “Big Six”. 42. Due to difficulties in getting the strip mill into production, Newport was unable to make the deliveries called for in the loan contracts, and by early 1949 was hopelessly behind in deliveries. Out of the $10,000,000 borrowed, approximately $1,200,000 was earned by the $20 per ton fees on steel delivered, leaving a balance of $8,799,076.87 owing. Since Newport was in default under the contracts, the lenders were demanding their money. Feldmann negotiated a settlement of this indebtedness by payment of $4,399,538.50, together with an option to General Motors for 10,000 tons of steel per month until June, 1953. Newport raised the money to make this payment by the sale of Universal Cooler of Canada, Rohr Aircraft Corporation,. and its Aircraft Tool Division. 43. In March, 1950, as part of the same agreement by which it purchased its pipe mill for $450,000 from International Rolling Mills Corp., Newport granted International an option to buy from it, at its mill prices, substantial amounts of steel for a specified period of time. Under these options International thereafter purchased an aggregate of 28,833 tons of steel from Newport at its mill prices. 44. The method of financing the acquisition and operation of steel facilities by obtaining advances from steel customers — the advances being given in consideration for steel commitments undertaken by the steel producer — was originated by Feldmann and to some extent has been adopted by other steel companies. It is known in the steel industry as the “Feldmann Plan.” IV. The Follansbee Merger Negotiations 45. The end product of Newport’s new steel facilities is known as hot rolled sheet or hot rolled coil. While this is a marketable commodity, it is often further processed by a so-called “cold rolling” process. A cold rolled sheet has a finer finish and a lighter gauge than a hot rolled sheet and is used principally for more difficult work. As of August, 1950, Newport had no cold rolling facilities. 46. In the summer of 1950, if such facilities could have been obtained at a price and under terms which were advantageous to Newport, it might have-been desirable for Newport, and Feldmann so understood, to install cold rolling-facilities in order to give Newport a more-fully integrated operation. The cost of installing ' cold rolling facilities would have been at least five to ten million dollars, which Newport did not have. 47. Newport commenced negotiations with Follansbee Steel Corporation in May, 1950, looking toward a merger of the two companies. Newport was interested in acquiring cold rolling' facilities with known costs, and without the delays and risks attendant upon building a new mill, if that could be on advantageous terms. Follansbee had such facilities, but would not consider an exchange basis less favorable to it than 1% shares of Newport for one share of Follansbee. Feldmann stated that a merger on the basis of 1% to one would not be in the best interests of Newport and all its stockholders, and took the position that a fair and proper exchange ratio • should be 1% to one; Ruttenberg, the broker promoting the deal, agreed that Feldmann’s position was a reasonable one, although he tried to influence Feldmann to consider the Follansbee suggestion by pointing out that Feldmann would personally profit substantially thereby. Follansbee never made a firm offer of merger on any basis and Follansbee’s Board of Directors decided on July 11, 1950 against a merger on a basis of iy2 to 1. On July 12, 1950, Follansbee and Newport mutually agreed to suspend the merger negotiations until October 31, 1950 since they were unable to agree on terms. In addition to the unfavorable merger terms suggested by Follansbee, Newport had serious operational objections to the merger, based upon the distance of the Follansbee mill from Newport and the incompatibility of its equipment. On July 28, 1950, Newport’s Board of Directors unanimously approved the suspension of the negotiations for an indefinite period. 48. The common stock of Follansbee was listed on the New York Stock Exchange. During May, June and July, 1950, while the merger negotiations between Follansbee and Newport were under way, the market price of Follansbee common stock was approximately $16 per share. 49. With the outbreak of the Korean war, there was a possibility that the Government might advance the money to Newport to put in cold rolling facilities on its own property and give Newport priorities to expedite the construction, as was done in World War II. V. The Sale of Stock to Wilport 50. During the late spring and early summer of 1950, when as above stated the steel market was tight, Feldmann began receiving numerous inquiries from persons interested in a possible purchase of his stock interest in Newport. One such inquiry, in June or July, 1950, was from a Mr. Barney Hokin, the president of International Rolling Mill Products Co., who asked if Feldmann would take $20 a share for his stock. Another such inquiry was from Mr. Ruttenberg, a broker, who on June 6, 1950, inquired as to whether Feldmann would accept $10 a share. 51. On August 8, 1950, Sidney Coe of Irving Trust Company called Feldmann on behalf of William J. Mericka and asked Feldmann if he would meet with Mericka, whom he described as a very substantial person, who had previously been substantially interested in Empire Steel Company. Mericka is president of William J. Mericka & Co., investment securities dealers in Cleveland, and chairman of the Executive Committee of the Bingham-Herbrand Corporation, which makes stampings and forgings. Bingham-Herbrand is an “end user” of steel, i. e., a company requiring steel for the manufacture of its products. Feldmann had not previously met Mericka but had heard the name of Mericka & Co. mentioned favorably many times. 52. On August 9, Feldmann and William Alfs, a Vice-President of Newport and Feldmann’s personal counsel, met with Mericka and Frank Cobourn in Detroit. Cobourn is a partner in a Toledo law firm and counsel for A. P. Parts Corp., an end user of steel. Mericka told Feldmann that he represented a group of end users of steel which might be interested in acquiring all of Feldmann’s holdings in Newport Steel. The group then consisted of Gibson Refrigerator Co., Mitchell Manufacturing Co., Prentiss-Wabers Co., A. P. Parts and Bingham-:Herbrand. Feldmann indicated that he might consider selling to such a group and said that he would not consider less than $22 per share. 53. The dominant motive of the purchasing group in seeking to purchase Feldmann’s controlling stock interest in Newport was to obtain a continuing source of steel supply. Feldmann knew during the negotiations that such was their motive. 54. On August 9, 1950 the price of Newport’s common stock was quoted in the over-the-counter market at 8%, bid 9 asked. Feldmann stated, however, that he thought the true value of the stock was much higher than that, and even higher than its book value of $17.03, because there were intrinsic values not reflected by the books and because of the improving future outlook for Newport. 55. Feldmann talked again with representatives of the purchasing group on August 10, August 14, and August 24, 1950. 56. During the course of these talks the parties discussed in some detail Newport’s business, including contractual agreements, earnings, the values of the divisions, and personnel. Feldmann recommended that, if he sold his stock, every officer should be kept in his present position since they were a fine operating organization. Feldmann stated that in his opinion the steel division was undervalued on the books to the extent of $6,000,000 or $7,000,000 and.the Detroit property by at least $1,000,000. He stated also that Caswell-Runyan was undervalued, since the fixed assets were on the books at only $600,000. 57. Among the subjects covered in the negotiations were the following: What could Newport manufacture that would be helpful to an end-product user such as the members of the purchasing group? What was the type of steel produced by Newport? What were the existing contractual commitments of Newport for the sale of steel? 'What steel would be available to the purchasing group when and if the existing commitments expired ? Feldmann furnished information on these points in response to questions by the representatives of the purchasing group. 58. During the course-of negotiations Feldmann stated that if he were to sell his stock, it would be to a group of the sort represented by Mericka and Cobourn, who, he stated, because they were end-users of steel, were likely to be customers for Newport’s steel when steel demand was low. It was Feldmann’s sincere belief that stock-ownership in end-users would lend stability to Newport. 59. Feldmann made arrangements for Mericka to visit Newport and inspect the plant. Mericka did so on August 16 and returned again on August 22 with other members of the purchasing group, as well ás Mr. James H. Hill, a top flight .operating man in the steel industry. . Mericka, Hill and the rest were all much impressed by Newport’s steel facilities. . . • 60. During the negotiations, representatives of the accounting firm of Seidman & Seidman examined Newport’s financial records bn behalf of the purchasers. However, they did not audit the books. 61. During the negotiations, Feldmann instructed Newport’s general counsel William A. Alfs, Newport’s chief financial officer Harry E. Hamilton, and the manager of Newport’s steel division Carl M. Riefkin, to furnish to the purchasing group any facts or figures they might request. All information requested by the purchasing group was furnished, including' information respecting existing commitments, expiring dates and new production. At Feldmann’s request, Riefkin prepared an estimate of Newport’s uncommitted production for the balance of the year 1950, which was delivered to the purchasing group. 62. During the negotiations the representatives of the purchasing group stated that they intended to go forward with the policy, previously decided on by Feldmann and his associates, of causing Newport to sell off its divisions not engaged in the manufacture of steel. 63. On August 24 Feldmann went to Chicago for a meeting with Cobourn and Merieka. He first went to two banks in order to inquire about Frank Gibson, Charles Gibson and Gibson Refrigerator Co. on whom he received very favorable reports from both banks. Feldmann then went to the Ambassador East Hotel where Alfs, Cobourn and Merieka were waiting. Merieka said that he and Hill had both been very impressed by Newport. Merieka said also that in order to pay for the minimum number of shares that Feldmann was willing to sell, it would be necessary to expand the purchasing group. Feldmann asked who would be in the final group and Merieka stated that the group had not yet been finalized, but Maytag Washing Machine Co. and Hudson Motor Car Co. would undoubtedly be members, and that the group would be composed only of responsible companies who were end-users of steel. Merieka then offered $18 per share for approximately 400,000 shares on the basis of a short term option for half the stock and a 30 to 60 day option for the other half. Feldmann refused the offer. Cobourn then reported back to other members of the purchasing group while Merieka remained with Feldmann. Mericka, after talking with Cobourn on the telephone, offered Feldmann $20 per share. Feldmann accepted this offer. 64. Prior to the drawing up of an option agreement, the parties also reached an informal understanding as to the following matters: (a) if the purchasing group were to exercise only half of the option, it would then be entitled to one representative on the Newport Board of Directors; and (b) if the option were exercised in its entirety, Feldmann would then resign as an officer and director of the corporation, procure the resignation of his fellow directors and assist in the election as directors of the nominees of the purchasing group. The option was to be assignable. Feldmann did not believe it necessary to restrict Merieka in any way as to the identity of the assignee since he considered Merieka a responsible individual who would adhere to his stated intention of assigning the option to the purchasing group previously identified. Merieka told Feldmann that three of the purchasing group’s designees for the Newport Board of Directors would probably be Frank S. Gibson, Jr. (Vice President of Gibson Refrigerator Co.), Merieka and Cobourn, and that Gibson would probably succeed Feldmann as President and Chairman of the Board. 65. Alfs then wrote out the following option in longhand, which Feldmann signed: “August 24, 1950 “William Merieka: “For and in consideration of $100, receipt of which is acknowledged, I agree to sell to you 200,000 shares of Newport Steel Corporation for $4,000,000 — at any time on or before August 31, 1950. “If you exercise this option on or before Sept. 1, 1950, on the terms above set forth, I will give you at that time an option to buy an additional number of shares of Newport Steel Corporation, not less than 175,000 shares nor more than 200,-000 shares at $20. per share, until 12:00 noon E.S.T. Nov. 1, 1950. “If you exercise the option to buy the shares (minimum 175,000, maximum 200,000) on or before Nov. 1, 1950, I will deliver to you, at the time you exercise the option, the resignation of all of the members of the Board of Directors of Newport Steel Corpn. “(Signed) C. Russell Feldmann” 66. After August 24, 1950, and before August 31, 1950, Feldmann made private inquiry with respect to Cobourn, and was informed that Cobourn was a capable lawyer, of highest reputation. In that period, he met Bernard Mitchell, President of Mitchell Manufacturing Company who had previously been associated with the Gibson Refrigerator Company in Appollo Steel Company. 67. On August 29, 1950, the purchasing group organized a Delaware corporation known as Wilport Company (hereinafter referred to as “Wilport”), for the purpose of purchasing and holding the Newport stock covered by the option agreement. Mericka assigned the option to Wilport. Between August 24 and August 30, 1950, the purchasing group was expanded to comprise sixteen members, all of them end users of steel. The group members paid an aggregate of $8,200,000 to Wilport to enable it to exercise the option, and received in return stocks and notes of Wilport ratably according to their contributions. 68. On or before August 31, 1950, the Wilport stockholders informally agreed among each other that they were to have the privilege of buying steel from Newport in proportion to their respective investments in Wilport. They intended, if possible, to buy about 15,-000 to 20,000 tons of steel per month from Newport. 69. Mericka told Feldmann that he should be in Chicago on August 31, and should have his stock available, although there was no guarantee that the entire option would be exercised. On August 29 or 30 Alfs, who had been in frequent touch with Cobourn, told Feldmann that he and Cobourn had drafted a contract containing, among other things, a covenant which the purchasers insisted on, whereby Feldmann would agree not to compete in any business Newport was engaged in for five years. This provision was not envisioned by the option agreement, and Feldmann would not agree to inclusion of such a provision at first, but finally agreed to accept it as later modified. 70. On August 31, 1950 Feldmann went to Chicago, 111. and at that time Wilport exercised the option which Feldmann had given to Mericka on August 24 and which Mericka had thereafter assigned to Wilport. Feldmann delivered to the Continental Illinois Bank 398,927 shares of Newport stock and Continental delivered to Feldmann, unconditionally, checks for $7,978,540 in payment of the stock at $20 per share and the sale was completed. These 398,927 shares (approximately 37% of Newport’s stock) constituted a control block of Newport. At the time of the sale Feldmann executed the written agreement of sale previously drafted by Cobourn and Alfs. By the agreement, Feldmann warranted that Newport had given no steel commitments other than in the normal course of business, except certain commitments specially listed. The agreement contained no representation or warranty that the financial statements of Newport, which Feldmann had furnished to the purchasing group, were correct. 71. Among the 398,927 shares of Newport, which Feldmann sold and delivered to Wilport, were the 343,375 shares owned or controlled, directly and/or indirectly, by Feldmann and members of his family. The balance was made up by the shares of numerous friends and associates of Feldmann. 72. In addition to Feldmann himself and his family, all of Newport’s directors participated in the stock sale to Wilport by selling the following numbers of shares at $20 per share: J. V. McKee, Jr............. 2,525 shares D. M. Sheaffer............. 5,000 “ F. L. Taylor................ 2,600 “ A. F. Lorenzen............. 1,010 “ 73. In the selling of the 398,927 shares of Newport to Wilport, Feldmann acted for himself and as agent of the owners of said shares, including defendants Charlotte M. Feldmann, Joseph Y. McKee, Jr., Phyllis McKee, Carolyn Otto and Barbara Jane Feldmann. 74. After the consummation of the sale Feldmann convened a special meeting of Newport’s board of directors. Three of Feldmann’s co-directors, namely, McKee, Lorenzen and Sheaffer (who resided, respectively, in Connecticut, in Miami, Fla., and in Philadelphia, Pa.) were present. Feldmann had with him the signed resignation of Newport’s fifth director, Taylor. Immediately prior to the meeting Feldmann was for the first time informed of the identity of the full slate of directors proposed by Wilport, namely Frank Gibson, Mericka, Cobourn, Paxton and Mitchell. Feldmann knew that Paxton was a member of a well known, reputable, Chicago law firm and general counsel to Gibson Refrigerator Co.; Alfs had previously spoken favorably of him. After the meeting was convened the directors of Newport successively resigned and, as each vacancy arose, the Board elected successively as new directors Frank Gibson, Paxton, Cobourn, Mericka and Mitchell; Feldmann voted for each of the directors except Mitchell. 75. Each of the new directors of Newport was a director of Wilport. 76. At the aforesaid meeting of Newport’s board of directors on August 31, 1950, Feldmann also resigned in his capacity of chairman of the board and president of Newport. Alfs resigned as vice-president and general manager of Newport and Hamilton resigned as secretary of Newport. Newport’s new board of directors then elected the following: Gibson, chairman of the board of directors and president of Newport; Mericka, vice-president; Paxton, secretary and counsel; and Hamilton, assistant secretary. Some time after August 31, Mitchell was elected vice-president of Newport. Feldmann and Alfs were the only two officers of Newport who served prior to August 31, 1950 who are no longer officers of Newport. 77. At no time did Feldmann or any defendant intend or attempt to work any harm to Newport or to its other stockholders through joint or several action amongst themselves or in concert with the members of the Wilport group. 78. Neither Feldmann nor any other defendant, whether in fiduciary capacity or otherwise, failed to use all reasonable care in connection with the sale of their stock in preventing harm to Newport and other stockholders. VI. Wilport’s Need for Immediate Control of Newport 79. As of August, 1950, all steel orders accepted by Newport, other than long-term contractual commitments, were expected to be filled in the normal course by December 31, 1950. The only long-term contractual steel commitment of Newport, scheduled to extend beyond December 31, 1950, was its contract with General Motors Corporation, dated December 12, 1949, under which General Motors had an option to buy up to 10,000 tons of steel per month until June 30, 1953. 80. As of August 24, 1950 Riefkin, the general manager of the steel division, estimated that Newport would have available, over and above the amounts already committed, 4,830 tons of strip and 6,900 tons of ingots from its November production and 6,000 tons of strip and 9,800 tons of ingots in December. 81. During July and August, 1950 it would have been possible for Newport to commit all of its open production to customers in the ordinary course of trade for a period extending into 1951 at the mill prices prevailing at the time of delivery. Considering the past history of Newport’s business and the condition of the steel market as of then, it is not unreasonable to assume that Newport might have been able in July and August, 1950, to make long range contractual commitments for substantial portions of its expected production during the next year or two. 82. As of August, 1950 Newport did not normally accept orders more than ninety days in advance of delivery. 83. During the eight months preceding August 31, 1950, six members of the purchasing group (Grand Sheet Metal Products Co., Acklin Stamping Co., Prentiss-Wabers Products Co., Webster Chicago Corporation, A. P. Parts Corp. and Motorola Inc.) had been steel customers of Newport. In no one of these months had these firms been able to buy an aggregate of more than 500 tons of steel from Newport although all customers of Newport during that period had tried to buy larger amounts of steel. 84. It was important to the purchasers of- Feldmann’s stock, in order to make available to themselves as soon as possible the maximum amount of steel from Newport, to obtain the immediate resignation of the officers and directors of Newport; otherwise it would have been legally possible for the old management to make commitments to others. It was desirable for the purchasers to obtain the substitution of their own nominees as directors so that they could immediately determine Newport’s sales policy, control commitments for Newport’s steel and determine the prices and terms of sale without the expense and delay of holding a special stockholders’ meeting to fill the vacancies on the board. 85. Feldmann made no effort to obtain for the other stockholders of Newport a price for their stock similar to that which he received and which he made available to certain of his personal friends, relatives, associates and to officers and directors of Newport, nor did he make any misrepresentations either to other stockholders or to others in connection with his sale. VII. The Effect of the Sale on Newport 86. During the summer of 1950 and thereafter, to the knowledge of Feldmann various steel producing companies other than Newport received from end-users of steel large advances of the “Feldmann Plan” type in return for agreements to sell steel to them. Thus Jones & Laughlin Steel Corp. borrowed $28,-000,000 from General Motors Corp. in June of 1950; Republic Steel Co. borrowed $40,000,000 from General Motors Corp.; Pittsburgh Steel Corp. borrowed $8,000,000 from Chrysler Corp. and $2,-000,000 from Packard Motor Car Co. 87. Whether or not, in August, 1950, Newport’s position was such that it could have entered into “Feldmann Plan” type transactions to procure funds and financing for the further expansion and integration of its steel facilities and whether such expansion would have been desirable for Newport, the evidence does not show. 88. During the summer of 1950, Feldmann made no effort to explore the possibility of obtaining from end-users of steel funds or advances of the “Feldmann Plan” type in return for an undertaking by Newport to sell its uncommitted excess production of steel. 89. Feldmann never inquired from Mericka or Cobourn or any other member of the purchasing group whether it would be possible to obtain from the purchasing group an advance to Newport of the “Feldmann Plan” type in return for a commitment by Newport to sell steel to them. 90. In August, 1950, the state of the steel market was such that a loan to Newport on favorable terms would have constituted a cloak to conceal an unethical gray market transaction if conditioned on a commitment of output from existing facilities as distinguished from new facilities to be financed by the loan. 91. Since the Wilport group were end-users of steel who intended to divert some of Newport’s steel production to themselves, Feldmann’s sale of a control block of Newport stock to Wilport might have been expected to result in a management less willing to make a commitment of output of facilities existing as of August, 1950 in return for customer loans. The mere fact that Newport’s new directors and officers might have interests as end-users would not constitute incentive to stifle desirable expansion financed by commitments wpon new facilities. 92. None of the members of the Wilport group was located within 150 miles of Newport’s plant; some were as far away as 750 miles. 93. Since the Wilport nominees took over the management of Newport on August 31, 1950, substantial improvements have been made in Newport’s property and the corporation has enjoyed continued prosperity. Although the Wilport stockholders have purchased substantial quantities of steel from Newport, no sales were made at less than Newport’s quoted mill prices. There is no evidence of any sort that Newport has suffered from mismanagement or inefficient management since August 31, 1950, or that it has suffered or is likely hereafter to suffer any harm whatever at the hands of its new management, or that its new management has in any way failed to do anything which should have been done for the good of the corporation. VIII. Value 94. Between August 28 and August 30, 1950, Feldmann purchased for his family members and for Mary Hayward (his secretary) and Nora E. Hertzfeld (daughter-of Newport’s counsel William A, Alfs) a total of 14,800 shares of Newport at prices ranging from $9.69 to $12 per share. Feldmann purchased most of these shares from three close friends of his. Feldmann?s said family members as well as Mary Hayward and Nora E. Hertzfeld promptly resold these 14,800 shares to Wilport at $20 per share, as part of the 398,927 block sold by Feldmann. Their total profit on these 14,800 shares was $132,070. 95. One or two days before August 31,1950, Mericka, at Feldmann’s request, bought 1,000 shares of Newport for the account of Riefkin, the manager of Newport’s steel division, at approximately $11 per share. These shares were then sold for Riefkin’s account by Feldmann to Wilport as part of the block delivered by him at $20 per share. Riefkin received a profit of slightly over $9,000 from this transaction, without any investment on his part. 96. On August 24,1950 Newport stock was quoted on the over-the-counter market at 8% bid, 9% asked. On August 31, 1950 the quotations were 10% bid and 11% asked. Between August 28 and August 30, 1950 relatives, friends and associates of Feldmann purchased at least 3,000 shares of Newport stock in the market. 97. During the nine months preceding August 31, 1950, transactions involving substantial amounts of Newport stock included the following: (a) In December, 1949, Newport sold the assets of its subsidiary, Rohr Aircraft Corporation, for $5,600,000. The buyer was a corporation organized by F. H. Rohr and J. E. Rheim, former directors of Newport, and their associates. The purchaser obtained and exercised an option to deliver 100,000 shares of Newport stock in lieu of $500,000 of the purchase price, i. e., at the rate of $5 per share. At that time, the book value of the shares of Newport was approximately $16.60 a share, only slightly less than their book value as of August 31, 1950, which was $17.03 a share. (b) In December, 1949, Newport purchased from the manager of its Universal Cooler division 8,505 shares of Newport stock for a price of $50,000, amounting to $5.88 a share. (c) On February 14, 1950, as of October 31, 1949, Newport sold the assets of its aircraft tool division in consideration of $500,000 cash and 10,000 shares of Newport stock which Newport took in at their then approximate market price of $7.50 a share. 98. Between August 28 and August 30, 1950, Feldmann purchased, for members of his family and friends, 2.000 shares of Newport stock from A. H. Sarver at $10 a share; 3.000 shares of Newport stock from F. S. McNeal at $10 a share; 7,800 shares of Newport stock from F. L. Taylor at $12 a share. Sarvei*, McNeal and Taylor were friends of Feldmann; Taylor was also a director of Newport. At their request Feldmann fixed the prices paid them for their shares as the fair prices thereof. 99. The book value of Newport stock on August 31, 1950 was $17.03 per share. 100. The book value of the plant, property and equipment of Newport’s various divisions was, as of August 31, 1950: Net Book Division Value Rolling Mill Division Newport, Kentucky......... $ 723,931 Wilders, Ky. — Old Facilities 441,955 Wilders, Ky. — New Facilities 10,315,894 Pipe Mill ................. 491,763 Martins. Ferry, Ohio....... 819,186 $12,792,729 Refrigeration Division Marion, Ohio (Universal Cooler) .................$ 1,138,767 Radio Division Detroit, Michigan.......... 367,630 Huntington, Indiana (Caswell-Runyan) ........... 489,891 Goshen, Indiana (Caswell-Runyan) ................ 190,642 $ 1,048,163 $14,979,659 These figures, it should be noted, are exclusive of inventories. 101. In 1951 the Manufacturers Appraisal Co. appraised Newport’s steel facilities in order to determine their “cost of reproduction” and “sound value” as of May 31, 1951. In arriving at the “cost of reproduction” the company attempted to determine what it would cost to erect or purchase facilities or machines identical to those currently owned by Newport. Where identical machines were not then available the company took the price of the most nearly comparable machine of those then on the market. “Sound value” was determined in the case of each machine or facility by applying a percentage of depreciation. The percentage of depreciation was in almost all cases determined by a field appraiser employed by Manufacturers’ Appraisal Co. who based his determination on what he believed to be the actual depreciation. It was the opinion of Manufacturers’ Appraisal Co. that the reproduction cost and “sound value”, respectively, of Newport’s steel facilities as of May 31, 1951 were: Cost of "Sound Reproduction Value” Sheet Mill — Newport (Old Facilities) ............. $14,359,366 $ 8,576,510 Steel Plant — Wilder (Old Facilities) ............. 21,454,195 12,429,604 Wilder Section (New Facilities) ............ 18,861,024 15,686,344 Blast Furnace (Martin’s Ferry) ........... 4,833,132 3,290,804 Total .................. $59,507,717 $39,983,262 The cost of reproduction of these facilities as of August 31, 1950 was approximately 5% less than on May 31, 1951. The “sound value” of Newport’s steel facilities on August 31, 1950 was approximately $37,000,000. The Detroit Plant 102. In the nine months ending July 31, 1950 Newport had lost $63,933 on the Detroit property. 103. Under the lease entered into between Newport and the Government in August, 1950, which provided for an annual rental of $165,000, the net annual income to Newport after deduction of property taxes and insurance but not income taxes, would be $132,600. 104. If the Government, on August 31, 1950, had exercised its option to purchase the property for $1,500,000, minus $191,000 of prepaid restoration charges, the net proceeds to Newport would have been $1,073,658, after deduction of capital gains tax at the rate of 25%. Universal Cooler Division 105. The earnings, before taxes, of Newport’s Universal Cooler Division in its business years 1948 and 1949 and in the ten months ending August 31, 1950 were: Years Amounts 1948 ................. ($643,261.02) Loss 1949 ................. 37,295.92 1950 (10 months ending Ang. 31, 1950).. 112,767.11 106. Newport’s Universal Cooler Division plant, property, equipment plus inventory had a book value as of August 31, 1950 of $2,718,051. Prior to August 31, 1950, Newport planned to sell this Division, and had made serious attempts to sell it. On October 31,1950 Newport’s new management sold the Universal Cooler Division for slightly more than its then book value. If the additions to book value between August 31, 1950 and October 31, 1950 were deducted from the sales price, Newport received for the Universal Cooler Division slightly more than its book value as of August 31,1950. Caswell-Runyan Division 107. The earnings, before taxes, of Newport’s Caswell-Runyan division in its business years 1948 and 1949 and in the ten months ending August 31, 1950, were: Years Amounts 1948 ........................$195,180.21 1949 ........................ 124,421.09 1950 (ten months ending Aug. 31) ................. 580,342.88 The earnings, before taxes, of Newport’s Caswell-Runyan division in each of the first ten months of its business year 1950 were: November 1949 $ 91,298.33 December 1949 34,233.97 January 1950 31,973.68 February 1950 9,267.74 March 1950 12,214.56 (loss) April 1950 31,434.52 May 1950 88,688.13 June 1950 92,088.09 July 1950 . 10,890.76 August 1950 196,793.23 108. There was no substantial change in the operators, facilities, or market position of this division between January 1, 1948 and August 31, 1950. The Steel Division 109. Considering the condition of business generally, and the impact of the Korean war (beginning on June 25, 1950), it was reasonable to estimate in August, 1950 that the steel industry would produce at or above capacity for a minimum of two years, and probably for a longer period. 110. The earnings, before taxes, of Newport’s rolling mill division in its business years 1948 and 1949 and in the ten months ending August 31, 1950, were: Earnings before Year Taxes 1948 ...................... $1,907,925.17 1949 ...................... 510,402.05 1950 (ten months ending Au- gust 31) ........... 271,846.59 111. The monthly sales and earnings before taxes of the rolling mill division November, 1948 through August, 1950, were: Profit before Month Net Sales Taxes November, 1948 . $3,377,475.42 $415,069.60 December ..... . 3,359,970.91 351,111.37 January, 1949.. . 3,785,863.62 339,401.93 February ..... . 3.312,710.27 319,368.51 March ........ . 3,069,271.24 292,807.67 April .......... . 2,323,597.29 121,865.99 May ........... . 1,785,394.83 81,918.64 (loss) June .......... . 1,662,869.73 304,418.45. (loss) July .......... . 1,419,692.75 330,305.04 (loss) August ........ . 1,839,328.6ft 241,181.33 (loss) September .... . 1,284,191. 129,683. (loss) October ....... 2,813. 241,716. (loss) November .... . 1,191,356. 266,024. (loss) December .... . 2,122,654. 205,274. (loss) January, 1950. . 2,675,391. 21,775. February ..... . 1,991,305. 119,018. (loss) March ........ . 2,355,235. 95,179. (loss) April .......... . 2,573,105. 145,473. May ........... . 2,976,165. 131,180. June .......... . 3,530,782. 353,885. July .......... . 2,005,383. 20,653. August ........ . 3,724,732. 284,375. The division was completely shut down in October, 1949, by a strike, and partially shut down in July, 1949 and July, 1950 for employee vacations. 112. The earnings, before deduction of general expenses and taxes, of the “old steel facilities” of Newport’s rolling mill division were: In April, 1950........ $189,407 In May, 1950......... 244,047 In June, 1950......... 408,520 In August, 1950....... 331,559 The average monthly earnings during these four months were $293,383. 113. The production of the “old facilities” of carbon, silicon, alloy and coated sheets remained on approximately the same level throughout April, May, June and August, 1950. July, 1950, was a vacation month and the “old facilities” were shut down for two weeks during the month. As between June and August, 1950, production was higher in August in the case of each of the type of sheets produced by the “old facilities.” Production of the open hearth furnaces also was slightly higher in August. 114. The earnings, before deduction of general expenses and taxes, of the “new steel facilities” of Newport’s rolling mill division were: June, 1950 ........ $ 67,794.00 August, 1950 ...... 111,991.00 115. If the electric furnaces which comprise part of the “new facilities” were to produce their “normal” monthly production of 22,000 tons and all of this production were utilized in the strip mill, Newport would then have 18,700 tons of hot strip and coil to sell. If this amount were sold at the price of $80 per ton in effect on August 31, 1950 the total sales would be $1,496,000. In producing this amount of strip and coil Newport would probably incur costs in the amount of $1,334,273, leaving a monthly profit of $161,727. 116. Up to August 31, 1950 $491,763 had been spent on the pipe mill. 117. Although it had been estimated that the pipe mill would earn between $100,000 and $150,000 per month when operating at a normal rate, there is no evidence as to when normal production might have been expected as of August. 31, 1950. 118. Although there is evidence that Newport’s steel facilities might be improved or its capacity expanded by changes in or additions to the facilities, any extra values which may attach to its capital stock because of these possibilities are' so speculative in nature as to be beyond reasonable possibility of computation. 119. From September 15, 1947 to August 31, 1950 Newport paid no dividends on its stock. 120. The 398,927 shares of Newport stock sold to Wilport as of August 31, 1950, had a fair value as a control block of $20 per share. What value the block would have had if shorn of its appurtenant power to control distribution of the corporate product, the evidence does not show. IX Ratification 121. Under date of September 14, 1950, Newport sent a letter to its stockholders, signed by Frank S. Gibson, its president, to inform the stockholders of recent developments. This letter contained the following statements: “On August 31,. 1950, Wilport Company purchased approximately 400,000 shares of common stock of Newport Steel Corporation. Included among the shares purchased were shares owned or controlled by Mr. C. Russell Feldmann and members of his family. Wilport is a corporation owned by a diversified group of manufacturing companies, all of whom use steel in their own manufacturing operations, and all of whom have indicated their intention to remain or become customers of Newport Steel Corporation and to purchase steel from it at