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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
THE LTV CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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<PAGE> 2
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NOTICE AND PROXY STATEMENT The LTV Corporation
ANNUAL MEETING OF STOCKHOLDERS 200 Public Square
LTV LOGO THE LTV CORPORATION Cleveland, Ohio 44114-2308
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, APRIL 24, 1997
- --------------------------------------------------------------------------------
The Annual Meeting of Stockholders of The LTV Corporation will be held on
Thursday, April 24, 1997 at nine o'clock a.m., Delaware Time, in the Gold
Ballroom of the Hotel DuPont at Eleventh and Market Streets, Wilmington,
Delaware 19801 for the following purposes:
1. To elect four directors;
2. To consider and vote on a proposal to approve an amended and restated
Management Incentive Program;
3. To ratify the selection of Ernst & Young LLP as the Company's
independent auditors for 1997; and
4. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
Enclosed herewith is a Proxy Statement setting forth certain additional
information.
Only stockholders of record at the close of business on February 28, 1997
will be entitled to notice of and to vote at the meeting. The meeting is
scheduled to adjourn at ten o'clock a.m.
Stockholders who do not expect to be present at the meeting are requested
to sign and date the enclosed proxy and return it promptly in the self-addressed
envelope enclosed for that purpose. No postage is required if mailed in the
United States. Any person giving a proxy has the power to revoke it at any time
before it is exercised, and stockholders who are present at the meeting may
withdraw their proxies and vote in person. Revocation may be effected in the
manner provided on page 1 of the Proxy Statement. Stockholders are also
requested to indicate by checking the appropriate box on the proxy if they
intend to attend the meeting in person.
By Order of the Board of
Directors
Glenn J. Moran
Senior Vice President,
General Counsel and Secretary
March 10, 1997
<PAGE> 3
[LTV LOGO] The LTV Corporation
THE LTV CORPORATION 200 Public Square
March 10, 1997 Cleveland, Ohio 44114-2308
PROXY STATEMENT
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This Proxy Statement is furnished to stockholders of The LTV Corporation
(the "Company") in connection with the solicitation, by order of the Board of
Directors, of proxies for use at the Annual Meeting of Stockholders of the
Company to be held on Thursday, April 24, 1997 (the "1997 Annual Meeting") at
the time and place and for the purposes set forth in the accompanying notice of
the meeting.
The accompanying proxy is solicited on behalf of the Board of Directors of
the Company and is revocable at any time before it is exercised. A proxy may be
revoked by written notice of revocation or by a later proxy, in either case
delivered to ChaseMellon Shareholder Services. Attendance at the 1997 Annual
Meeting will not automatically revoke a proxy, but a stockholder in attendance
may request a ballot and vote in person, thereby revoking a prior granted proxy.
The Company has adopted a confidential voting policy which provides that
votes of all stockholders of the Company shall be held in confidence from the
Company and its officers, directors and employees except (i) as may be required
by law or to assert or defend claims for or against the Company, (ii) in the
case of a contested proxy solicitation, or (iii) in the case of stockholder
communications written on the returned proxy material. As part of the policy,
the Company employs the transfer agent for the Company's Common Stock (or
another third party) as an independent tabulator to receive and tabulate the
proxies and as independent inspectors of election.
All outstanding shares of the Company's common stock, par value $0.50
("Common Stock") and Series B Convertible Preferred Stock ("Series B Preferred
Stock"), represented by properly executed and unrevoked proxies received in the
accompanying form in time for the 1997 Annual Meeting will be voted. A
stockholder may, with respect to the election of directors, (i) vote for the
election of all nominees named herein as directors, (ii) withhold authority to
vote for all such director nominees or (iii) vote for the election of all such
director nominees other than any nominee with respect to whom the stockholder
withholds authority to vote by so indicating in the appropriate space on the
proxy. Withholding authority to vote for a director nominee will not prevent
such director nominee from being elected. A stockholder may, with respect to
each other matter specified in the notice of the meeting, (i) vote "FOR" the
matter, (ii) vote "AGAINST" the matter or (iii) "ABSTAIN" from voting on the
matter. A vote to abstain from voting on a matter has the legal effect of a vote
against such matter. Shares will be voted as instructed in the accompanying
proxy on each matter submitted to stockholders. If no instructions are given,
the shares will be voted for the election of all nominees named herein as
directors, for approval of the Management Incentive Program and for ratification
of the selection of independent auditors.
A proxy submitted by a stockholder may indicate that all or a portion of
the shares represented by such proxy are not being voted by such stockholder
with respect to a particular matter. This may occur, for example, when a broker
is not permitted to vote stock held in street name on certain matters in the
absence of instructions from the beneficial owner of the stock. The shares
subject to any such proxy which are not being voted with respect to a particular
matter (the "non-voted shares") will be treated as shares not present and
entitled to vote on such matter, although such shares may be considered present
and entitled to vote for other purposes and will count for purposes of
determining the presence of a quorum. Shares voted to abstain as to a particular
matter
1
<PAGE> 4
will not be considered non-voted shares. Approval of each matter specified in
the notice of the meeting requires the affirmative vote of a majority, or in the
case of the election of directors a plurality, of the votes attributable to all
shares present in person or by proxy at the meeting and entitled to vote on such
matter. Accordingly, non-voted shares with respect to such matters will not
affect the determination of whether such matters are approved or the outcome of
the election of directors.
The Company will bear the cost of the solicitation. In addition to
solicitation by mail, the Company will request banks, brokers and other
custodian nominees and fiduciaries to supply proxy material to the beneficial
owners of Common Stock of whom they have knowledge, and will reimburse them for
their expenses in so doing; and certain directors, officers and other employees
of the Company, not specially employed for the purpose, may solicit proxies,
without additional remuneration therefor, by personal interview, mail, telephone
or telegraph. The Company has retained Morrow & Co. to aid in the solicitation
of proxies for a fee of $9,500, plus out-of-pocket expenses.
Only holders of the Company's Common Stock and Series B Preferred Stock of
record at the close of business on February 28, 1997 will be entitled to vote at
the meeting. Each issued and outstanding share of Common Stock is entitled to
one vote upon each matter to be voted on at the 1997 Annual Meeting. Each issued
and outstanding share of Series B Preferred Stock will be entitled to 5.85138
votes upon each matter to be voted upon at such meeting. All such stock will
vote as a single class upon each matter proposed by the Company for
consideration. As of February 28, 1997, there were issued and outstanding
105,296,445 shares of Common Stock and 500,000 shares of Series B Preferred
Stock.
BUSINESS AGENDA
In addition to the matters relating to the election of directors which is
set forth immediately below, the proposal to approve the Management Incentive
Program is set forth beginning at page 22. The proposal to ratify the selection
of the Company's independent auditors is set forth beginning at page 26.
2
<PAGE> 5
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation as amended provides for
three classes of directors of as nearly equal size as possible and further
provides that the total number of directors (which is currently set at fourteen)
shall be determined by resolution adopted by the affirmative vote of a majority
of the entire Board of Directors, except that the total number of directors
shall be not less than three nor more than fifteen. The Restated Certificate
further provides that the term of each class of directors is three years. The
term of each class expires in rotation. In the case of any director who is an
officer or employee of the Company, such director's term will expire at the end
of the second month following such director's retirement or resignation from his
position as an officer or employee. No person is eligible to be elected a
director if such person is 70 years old or older at the time of election.
Accordingly, Mr. Evans, age 71, whose term as a director expires at the 1997
Annual Meeting, is not standing for re-election. In connection with Mr. Evans'
retirement, the Board of Directors determined not to fill the vacancy and to
reduce the size of the Board from fourteen to thirteen, effective as of the date
of the 1997 Annual Meeting.
Pursuant to the terms of the Company's collective bargaining agreements,
the United Steelworkers of America ("USWA") has the right to select a nominee
for one seat on the Board of Directors, and the Company is obligated, if the
nominee is reasonably satisfactory to the Company, to use its best efforts to
secure the election of such nominee. Pursuant to such right, Edgar L. Ball
continues as a director of the Company.
Further, pursuant to an agreement with Sumitomo Metal Industries, Ltd.
("Sumitomo"), Sumitomo has the right to designate or approve the nomination of
one person (who, if such person is not a current or former employee of Sumitomo
or any of its subsidiaries, must be reasonably acceptable to the Company) for
election as a director of the Company so long as Sumitomo holds 5 percent or
more of the then outstanding shares of Common Stock (assuming conversion of its
convertible securities) and at least one share of Series B Preferred Stock. See
"Security Ownership of Directors, Management and Principal Stockholders."
Sumitomo's director selection right has not been exercised. In the event such
right is exercised in the future, the total number of directors will be
increased by one. In the event that the Company's Board of Directors is expanded
to exceed fifteen directors, Sumitomo will have the right to designate or
approve the nomination of two persons for election as directors to the Board of
Directors.
In addition, under the Certificate of Designations of the Series B
Preferred Stock, if the Company does not pay dividends for six or more
consecutive quarters on its Series B Preferred Stock, the Company's Board of
Directors will be increased by two members and holders of the Series B Preferred
Stock will be entitled, voting separately as a single class, to elect two
directors of the Company.
At the present time it is intended that shares represented by the enclosed
proxy will be voted for the re-election of Mr. David H. Hoag, Dr. Paul G. Stern,
Mr. Stephen B. Timbers and Mrs. Farah M. Walters as Directors of the Third Class
for a three-year term expiring at the 2000 annual election, unless contrary
instructions are received.
All of the nominees named are currently members of the Board of Directors.
All incumbent directors attended during the last fiscal year more than 75
percent of the total number of meetings of the Board and committees on which
they served (held during the periods that they served). In the event that any
nominee should become unavailable for reasons not now known, the Board has
elected not to fill the vacancy and to reduce the number of directors.
The affirmative vote of a plurality of the votes attributable to all shares
entitled to vote, voting together as a single class, is required to elect the
nominees as Directors.
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<PAGE> 6
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES FOR DIRECTORS.
- --------------------------------------------------------------------------------
INFORMATION ABOUT DIRECTORS AND NOMINEES FOR DIRECTORS
The names of the directors whose terms of office will continue after the
1997 Annual Meeting and the nominees, their principal occupations during at
least the past five years, other directorships held, and certain other
information are set forth below. Mr. John C. Evans whose term expires at the
1997 Annual Meeting has, as indicated above, reached mandatory retirement age
and is not standing for re-election. Ages shown are as of March 1, 1997.
- --------------------------------------------------------------------------------
Directors of the Third Class Nominated for Election at the 1997 Meeting for
Terms Expiring in 2000
<TABLE>
<S> <C>
DAVID H. HOAG David H. Hoag, age 57, became Chairman of the Board of the Company in
PHOTO June 1991 and President and Chief Executive Officer of the Company in
February 1991. He has been a director of the Company since June 1986.
He also is the Chairman of the Board and Chief Executive Officer of
LTV Steel Company, Inc. He also is a director of The Chubb Corporation
(insurance), The Lubrizol Corporation (chemical manufacturing) and
Karrington Health, Inc. He also serves as Chairman of the Board of
Trustees of Allegheny College. Chairman of the Company's Executive
Committee.
PAUL G. STERN Dr. Paul G. Stern, age 58, became a director of the Company in June
PHOTO 1993. He is a partner of Thayer Capital Partners. He was Chief
Executive Officer of Northern Telecom Ltd. from April 1989 to March
1993 and its Chairman of the Board from April 1990 to July 1993. He
also is a director of Whirlpool Corporation and Dow Chemical Company.
Chairman of the Company's Pension and Investment Committee and member
of the Company's Executive and Audit Committees.
STEPHEN B. TIMBERS Stephen B. Timbers, age 52, became a director of the Company in June
PHOTO 1993. He is President, Chief Executive Officer and Chief Investment
Officer of Zurich Kemper Investments, Inc. From 1992 to 1996 he was
President, Chief Operating Officer, and a director of Kemper
Corporation. Prior thereto, since 1987, he served as Chief Investment
Officer of Kemper Financial Services and, from 1991 to 1993, of Kemper
Corporation. He also is a Trustee of the Kemper Mutual Funds and
Closed-End Funds and a director of KI Mutual Insurance Company.
Chairman of the Company's Compensation and Organization Committee and
member of the Company's Executive and Pension and Investment
Committees.
FARAH M. WALTERS Farah M. Walters, age 52, became a director of the Company in June
PHOTO 1993. She is President and Chief Executive Officer of University
Hospitals Health System, Inc. and University Hospitals of Cleveland.
Prior thereto, beginning in March 1991 until January 1992, she served
as Senior Executive Vice President of University Hospitals Health
System, Inc. and Executive Director of University Hospitals of
Cleveland. She also is a director of Kerr-McGee Corporation (oil and
gas) and KeyCorp (banking). Member of the Company's Audit and Pension
and Investment Committees.
</TABLE>
4
<PAGE> 7
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Directors of the First Class -- Terms Expire in 1998
<TABLE>
<S> <C>
COLIN C. BLAYDON Dr. Colin C. Blaydon, age 56, was elected a director of the Company in
PHOTO September 1988. Dr. Blaydon is Dean Emeritus and Buchanan Professor of
Management of the Amos Tuck School of Business Administration at
Dartmouth College. Dr. Blaydon is also a Senior Advisor of Putnam,
Hayes & Bartlett, Inc., a professional consulting firm, and a director
of Tom's of Maine (consumer products) and Chairman of the Board of ITP
Systems (systems integration). He is also a director of Valley Forge
Dental, Inc. and Mercantile Trust NA, a Trustee of the Public Utility
Policy Institute and a Trustee of the Lowell Whiteman School. Member
of the Company's Audit and Board Affairs Committees.
WILLIAM H. BRICKER William H. Bricker, age 65, was elected a director of the Company in
PHOTO March 1982. He was from July 1976 to May 1987 the Chief Executive
Officer and from November 1979 to May 1987 the Chairman of the Board
of Diamond Shamrock Corporation, now known as Maxus Energy Corporation
(coal, chemicals and oil and gas). He is Chairman of the Board and
Chief Executive Officer of D.S. Energy Services, Inc. (business
consultants and international oil and gas), Trust Manager of American
Industrial Properties REIT and President of Bear Creek Angus Ranch,
Inc. Mr. Bricker also is a director of Montana Floral Corporation.
Member of the Company's Capital and Technology and Compensation and
Organization Committees.
M. THOMAS MOORE M. Thomas Moore, age 62, became a director of the Company in June
PHOTO 1993. Mr. Moore has been Chairman of the Board of Cleveland-Cliffs Inc
(iron ore) since May 10, 1988 and its Chief Executive Officer since
January 1, 1987, and, prior thereto, he served as its President. He
also is a director of KeyCorp (banking) and Capitol American Financial
Corporation. Mr. Moore is also a director of the American Iron and
Steel Institute, the American Iron Ore Association, and the National
Mining Association. Chairman of the Company's Board Affairs Committee
and member of the Company's Executive and Capital and Technology
Committees.
HAROLD A. POLING Harold A. Poling, age 71, became a director of the Company in Novem-
PHOTO ber 1993. Mr. Poling, now retired, was Chairman and Chief Executive
Officer of Ford Motor Company from March 1, 1990 to October 1993. He
is also a director of Shell Oil Company, Kellogg Company, Karrington
Health, Inc. and Flint Ink Corp. and a member of the International
Board of VIAG AG (conglomerate) and the International Advisory Council
of The Broken Hill Proprietary Company Limited (Australian
multinational minerals company). He is also a member of the PGA Tour
Tournament Policy Board. Chairman of the Company's Audit Committee and
member of the Company's Executive and Board Affairs Committees.
VINCENT A. SARNI Vincent A. Sarni, age 68, became a director of the Company in June
PHOTO 1993. Mr. Sarni, now retired, was Chairman of the Board and Chief
Executive Officer of PPG Industries, Inc. from November 1984 until
September 1993. He is also a director of PPG Industries, Inc., PNC
Bank Corp. and Hershey Foods Corporation. Chairman of the Company's
Capital and Technology Committee and member of the Company's Executive
and Compensation and Organization Committees.
</TABLE>
5
<PAGE> 8
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Directors of the Second Class -- Terms Expire in 1999
<TABLE>
<S> <C>
EDGAR L. BALL Edgar L. Ball, age 70, became a director of the Company in April 1994.
PHOTO He served as International Secretary-Treasurer of the USWA from March
1990 to March 1994. He also has been Chairman of both the Nonferrous
Industry Conference of the USWA and National Nonferrous Coordinating
Bargaining Committee, was a director of the Southern Labor Institute
and has served as Chairman of the USWA Leadership Development and
Labor-Management Participation Task Forces. Member of the Company's
Audit and Capital and Technology Committees.
JOHN E. JACOB John E. Jacob, age 62, became a director of the Company in June 1993.
PHOTO Mr. Jacob has been Executive Vice President and Chief Communications
Officer for Anheuser-Busch Companies, Inc. since June 1994. Prior
thereto, he had been President and Chief Executive Officer of the
National Urban League Inc. since January 1982. He also is a director
of Coca-Cola Enterprises, Inc. and Anheuser-Busch Companies, Inc.
Member of the Company's Capital and Technology and Compensation and
Organization Committees.
EDWARD C. JOULLIAN Edward C. Joullian III, age 67, became a director of the Company in
III PHOTO October 1976. For more than the past five years, he has been Chairman
of the Board and Chief Executive Officer of Mustang Fuel Corporation
(energy development and services). He also is a director of American
Fidelity Companies (insurance) and its subsidiaries and Fleming
Companies, Inc. (food distribution). He also is a trustee of The
Colonial Williamsburg Foundation, Williamsburg, Virginia. Member of
the Company's Capital and Technology and Compensation and Organization
Committees.
SAMUEL K. SKINNER Samuel K. Skinner, age 58, became a director of the Company in June
PHOTO 1993. He has been President and a director of Commonwealth Edison
Company since February 1, 1993. Prior thereto, he served as Chief of
Staff to the President of the United States. Prior to his White House
service, Mr. Skinner served as U.S. Secretary of Transportation for
nearly three years. Prior to February 1989, he practiced law as a
Senior Partner in the Chicago law firm of Sidley & Austin, where he
served on the firm's executive committee. He is also a director of
ANTEC Corporation (supplier to communications industry) and Union
Pacific Resources Group Inc. (oil and gas exploration and production)
and a member of the International Advisory Council of The Broken Hill
Proprietary Company Limited (Australian multinational minerals
company). Member of the Company's Board Affairs and Pension and
Investment Committees.
</TABLE>
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COMMITTEES OF THE BOARD OF DIRECTORS
The Company has standing Audit, Board Affairs, Capital and Technology,
Compensation and Organization, Pension and Investment and Executive Committees
of the Board of Directors. The members of these Committees have been identified
above. The Board of Directors met sixteen times in 1996.
The Audit Committee recommends the selection of independent auditors to the
Board of Directors; reviews the plan of the audits to be performed by the
independent auditors and internal audit department, together with their audit
reports and any recommendations made by them; reviews the results of the audit
for the prior fiscal year with the independent auditors, reviews annual
financial statements before they are published, reviews the independence of the
independent auditors, reviews the reporting assignment of the internal audit
function, and reviews the Company's significant accounting policies, internal
controls and financial reporting practices. The Audit Committee also reviews the
Company's business conduct policies and reviews issues related to environmental,
safety, health and workers' compensation matters. The Audit Committee met four
times in 1996.
The Board Affairs Committee recommends to the full Board nominees for
election to the Board of Directors. The Board Affairs Committee also recommends
to the full Board all matters relating to Board composition, terms, ethics,
procedures, compensation and benefits and committee structures and assignments,
and, in conjunction therewith, reviews periodically the Board's written
corporate governance and committee guidelines. The Committee also reviews and
recommends to the full Board, Board compensation and benefits, monitors the
effectiveness of the Board as a whole and reviews the annual proxy statement
before publication. The Board Affairs Committee met four times in 1996.
The Capital and Technology Committee, established in March 1996, reviews
the annual capital expenditure budget, reviews and recommends to the full Board
capital expenditures and reviews and recommends to the full Board new business
ventures and new and emerging technologies relating to the steel industry. The
Capital and Technology Committee met four times in 1996.
The Compensation and Organization Committee determines the annual salary,
bonus and other benefits of the officers of the Company and certain officers of
its subsidiary, LTV Steel Company, Inc., and establishes and reviews, as
appropriate, executive compensation policies and performance standards under
compensation programs for such officers. The Compensation and Organization
Committee also recommends new employee benefit plans and changes to those plans
to the Board of Directors, grants stock related incentives and administers all
of the Company's employee benefit plans. The Compensation and Organization
Committee also recommends to the Board of Directors candidates for election as
corporate officers, reviews and monitors matters related to management
development and succession including the evaluation of the Chief Executive
Officer, reviews and approves the service of certain officers with respect to
other entities, and reviews the annual proxy statement before publication. The
Compensation and Organization Committee met six times in 1996.
The Pension and Investment Committee sets funding and investment policies
for the pension plans and employee welfare benefit plans of the Company and its
subsidiaries, monitors compliance by the Company with the terms of the Company's
settlement agreement with the Pension Benefit Guaranty Corporation, and
appoints, monitors and terminates investment managers. The Pension and
Investment Committee met three times in 1996.
The Executive Committee is empowered to exercise all of the authority of
the Board of Directors, except that it does not have the power to rescind any
action previously taken by the Board of Directors or to take certain actions
enumerated in the Company's By-Laws (such as amend the Certificate of
Incorporation or adopt an agreement of merger or consolidation). The Executive
Committee meets as necessary and did not meet in 1996.
7
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DIRECTOR COMPENSATION
Mr. Hoag receives no compensation for his service as a director. Currently,
directors who are not employees of the Company receive fees in accordance with
the following schedule.
<TABLE>
<S> <C> <C>
Annual retainer
For Board service..................................... $40,000 (half in Common Stock)
For service as chairman of a committee................ $ 2,500
Attendance fees
Board meetings (per meeting).......................... $ 1,000
Committee meetings (per meeting)...................... $ 1,000
</TABLE>
The Company reset the overall level of its compensation for non-employee
directors in 1995 after its Board Affairs Committee reviewed the level of
director compensation at other integrated flat rolled steel companies and at
selected industrial companies similar in size to the Company. Annual
compensation was reset at a level which was deemed to be competitive with the
average level of director compensation at the comparison companies.
In arriving at overall director compensation, the Board Affairs Committee
considered and rejected a number of benefits found at other companies (such as
pension benefits and legacy insurance) and concluded that director compensation
should be comprised solely of cash and Common Stock grants. Accordingly,
effective January 1, 1996, the annual retainer was increased from $30,000 to
$40,000 and, effective July 1, 1996, half of the Company's $40,000 annual
retainer was made payable in the form of Common Stock. The primary objective of
the Company in converting part of the annual retainer to Common Stock was to
further align the financial interests of its directors with those of the
Company's stockholders. The Company also continued its pre-existing non-employee
director stock option plan whereunder non-employee directors who own at least
1,000 shares of the Company's Common Stock receive an annual grant of options to
purchase 1,000 shares of Common Stock.
Further, the Company has a Non-Employee Directors' Equity Compensation Plan
whereunder non-employee directors may elect to take the remainder of their
annual retainer and other fees in the form of Common Stock of the Company. The
Company also has a Non-Employee Directors Deferred Compensation Plan which
permits non-employee directors to defer receipt of their fees and provides eight
notional investment options for such fees, including a notional investment in
the Company's Common Stock payable in cash.
8
<PAGE> 11
SECURITY OWNERSHIP OF DIRECTORS, MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the ownership
as of December 31, 1996 of each class of the Company's equity securities by (i)
each of the directors, (ii) the five executives named in the summary
compensation table below and (iii) all current directors and officers of the
Company as a group. The table also sets forth separately such individual's
interest in notional Common Stock derivative securities whose unit value is
derived from the market value of a share of the Company's Common Stock. The
value of such securities is paid out in cash. All securities shown have been
acquired since June 1, 1993. No persons are known by management to be beneficial
owners of more than 5% of any class of the Company's equity securities, except
as noted below. All such holders have sole voting and investment powers unless
otherwise indicated.
<TABLE>
<CAPTION>
INTEREST IN
NUMBER BENEFICIALLY OWNED NOTIONAL
% OF CLASS COMMON
--------------------------- ----------------------- STOCK
SHARES OF SERIES A SHARES OF SERIES A DERIVATIVE
NAME COMMON STOCK WARRANTS COMMON STOCK WARRANTS SECURITIES(G)
- ---------------------------------------- ------------ -------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C>
DIRECTORS
David H. Hoag........................... 290,175(c)(d)(e) 158 (a) (a) 790
Edgar L. Ball........................... 375 0 (a) 0 0
Dr. Colin C. Blaydon.................... 4,375(e) 0 (a) 0 0
William H. Bricker...................... 533(c) 29 (a) (a) 0
John C. Evans........................... 4,423(c)(e) 11 (a) (a) 0
John E. Jacob........................... 4,377(e) 0 (a) 0 1,208
Edward C. Joullian III.................. 8,712(b)(c)(e) 50 (a) (a) 0
M. Thomas Moore......................... 7,622(e)(f) 0 (a) 0 0
Harold A. Poling........................ 4,375(e) 0 (a) 0 0
Vincent A. Sarni........................ 4,375(e) 0 (a) 0 0
Samuel K. Skinner....................... 4,375(e) 0 (a) 0 0
Dr. Paul G. Stern....................... 4,375(e) 0 (a) 0 0
Stephen B. Timbers...................... 11,917(e) 0 (a) 0 0
Farah M. Walters........................ 4,375(e) 0 (a) 0 1,403
FOUR OTHER OFFICERS NAMED IN
SUMMARY COMPENSATION TABLE
J. Peter Kelly.......................... 87,148(d)(e) 0 (a) 0 850
Arthur W. Huge.......................... 49,435(d)(e) 0 (a) 0 597
Glenn J. Moran.......................... 29,335(d)(e) 0 (a) 0 544
James F. Haeck.......................... 31,499(d)(e) 0 (a) 0 573
All current directors and executive 553,156(c)(d)(e)
officers (22 including above)......... 248 (a) (a) 7,390
</TABLE>
- ---------------
(a) Less than 1% of class.
(b) Mr. Joullian has a beneficial interest in 3,000 shares of Common Stock and
23 Series A Warrants owned by Joullian & Co., a limited partnership.
(c) Includes shares of Company Common Stock issuable upon exercise of the Series
A Warrants. Each Series A Warrant is exercisable for 0.5582 of a share of
Common Stock.
(d) Includes shares of Company Common Stock in the following amounts which are
subject to conditions of forfeiture and restrictions on sale, transfer or
other disposition: Mr. Hoag -- 68,600 shares; Mr. Kelly -- 11,700 shares;
Mr. Huge -- 5,500 shares; Mr. Moran -- 4,650 shares; Mr. Haeck -- 5,500
shares and All Current Directors and Executive Officers as a
Group -- 104,123 shares. Also, the amounts shown for Messrs. Ball, Blaydon,
Jacob, Moore, Poling, Sarni, Skinner and Stern and Mrs. Walters include 375
notional shares payable in Common Stock. Such notional shares have no voting
rights.
(e) Includes shares of Common Stock in the following amounts which are not now
owned but which could be acquired by exercise of stock options: Each
non-employee Director (except Messrs. Ball and Bricker) -- 3,000 shares; Mr.
Hoag -- 201,999 shares; Mr. Kelly -- 69,500 shares; Mr. Huge -- 39,168
shares; Mr. Moran -- 22,749 shares; Mr. Haeck -- 23,695 shares and All
Current Directors and Executive Officers as a Group -- 440,334 shares.
9
<PAGE> 12
(f) Excludes 842,253 shares of Company Common Stock owned by Cleveland-Cliffs
Inc, for which Mr. Moore serves as Chairman and Chief Executive Officer.
(g) These derivative securities are notional (or phantom) investments in Common
Stock that are denominated and payable in cash. Accordingly, these
derivative securities have no voting rights.
Sumitomo and its affiliates own 100% of the Company's Series B Preferred
Stock (500,000 shares) and 3,328,220 shares of the Company's Common Stock.
Sumitomo and its affiliates, through conversion of its Series B Preferred Stock
and convertible notes, together with its existing shares of the Company's Common
Stock, could acquire up to 11,382,113 shares or approximately 10% of the
Company's Common Stock. The address of Sumitomo's U.S. affiliate is c/o Sumitomo
Metal USA Corporation, 8750 West Bryn Mawr Avenue, Suite 1000, Chicago, Illinois
60631.
In February 1997, Vanguard Windsor Fund, Inc. ("Vanguard") and Wellington
Management Company ("WMC") shared beneficial ownership of 7,302,600 shares of
Common Stock or approximately 6.9% of the outstanding Common Stock as of such
date. Vanguard and WMC reported that Vanguard had sole voting authority and that
Vanguard and WMC shared dispositive authority as to all such shares. Address: 75
State Street, 19th Floor, Boston, Massachusetts 02109.
10
<PAGE> 13
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following Summary Compensation Table sets forth the cash compensation
and other components of the compensation of David H. Hoag, the Chairman and
Chief Executive Officer of the Company, and the other four most highly
compensated executive officers of the Company in 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- -------------------------------------
AWARDS PAYOUTS
------------------------- -------
NUMBER OF
RESTRICTED SECURITIES ALL OTHER
STOCK UNDERLYING LTIP COMPEN-
SALARY BONUS AWARD(S) OPTIONS PAYOUTS SATION(2)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) GRANTED ($) ($)
- ------------------------------- ---- ------- ------- ---------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
David H. Hoag 1996 600,000 316,000 0 61,000 0 224,461
Chairman and Chief 1995 587,500 340,000 0 70,000 0 48,740
Executive Officer 1994 550,000 360,000 1,189,825 43,000 0 43,285
J. Peter Kelly 1996 390,417 216,000 0 19,500 0 151,293
President and Chief 1995 343,750 201,000 109,200 19,500 0 111,122
Operating Officer 1994 312,500 200,000 73,613 19,500 0 92,307
LTV Steel
Arthur W. Huge 1996 296,000 184,000 0 9,170 0 99,434
Senior Vice President 1995 241,000 135,000 0 9,170 0 50,781
& Chief Financial Officer 1994 232,500 155,000 103,813 9,170 0 46,913
Glenn J. Moran 1996 225,333 113,000 0 7,750 0 65,657
Senior Vice President, 1995 221,000 115,000 0 7,750 0 48,258
General Counsel 1994 215,004 135,000 87,769 7,750 0 44,084
and Secretary
James F. Haeck 1996 227,333 121,000 0 7,750 0 71,304
Senior Vice President- 1995 209,167 125,000 0 7,750 0 51,784
Commercial 1994 169,650 125,000 103,813 9,170 0 35,314
</TABLE>
- ---------------
(1) The number of shares and year-end value of restricted Common Stock awards
held as of December 31, 1996 were as follows: Mr. Hoag -- 68,600 shares and
$814,625; Mr. Kelly -- 11,700 shares and $138,938; Mr. Huge -- 5,500 shares
and $65,313; Mr. Moran -- 4,650 shares and $55,219 and Mr. Haeck -- 5,500
shares and $65,313. Dividends are payable on restricted stock awards to the
same extent and in the same manner as all other shares of Common Stock. All
restricted stock awards granted under the Company's Management Incentive
Program vest on the fifth anniversary of the date of grant.
(2) Consists of supplemental salary under the Design Your Benefits Program,
accruals under defined contribution pension plans, matching employer
contributions of cash to the Capital Accumulation Plan and service
recognition payments in the following respective amounts for 1996: Mr.
Hoag -- $35,550, $168,971, $7,940 and $12,000; Mr. Kelly -- $20,239,
$115,854, $7,940 and $7,260; Mr. Huge -- $14,161, $77,333, $7,940 and $0;
Mr. Moran -- $9,934, $48,169, $7,554 and $0; and Mr. Haeck -- $9,150,
$50,288, $7,466 and $4,400.
11
<PAGE> 14
The following table sets forth certain information concerning options to
purchase Company Common Stock granted in 1996 to the five individuals named in
the Summary Compensation Table.
<TABLE>
OPTION GRANTS IN 1996
POTENTIAL REALIZABLE VALUE AT ASSUMED
<CAPTION> ANNUAL RATES OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM (3)
--------------------------------------------------------- --------------------------------------
% OF
TOTAL
OPTIONS
NUMBER OF GRANTED
SECURITIES TO
UNDERLYING EMPLOYEES EXERCISE OR
OPTIONS IN FISCAL BASE PRICE EXPIRATION
NAME GRANTED YEAR(1) ($/SHARE)(2) DATE 0%($) 5%($) 10%($)
-------- ----------- --------- ------------ ---------- ---- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
David H. Hoag 61,000 20% 12.21 11/01/06 0 261,263 857,172
J. Peter Kelly 19,500 6% 12.21 11/01/06 0 83,519 274,014
Arthur W. Huge 9,170 3% 12.21 11/01/06 0 39,275 128,857
Glenn J. Moran 7,750 2% 12.21 11/01/06 0 33,193 108,903
James F. Haeck 7,750 2% 12.21 11/01/06 0 33,193 108,903
All Common Stock
Holders (4) 105,290,464 -- -- -- 0 670,489,675 1,699,072,218
</TABLE>
- ------------
(1) A total of 310,680 options were granted to employees in 1996. With respect
to each grant, one-third of the options becomes exercisable on November 1,
1997, one-third on November 1, 1998 and one-third on November 1, 1999,
unless the vesting schedule is accelerated to become fully exercisable upon
death, retirement, disability or a change in control as defined in the
Management Incentive Program. Each optionee must demonstrate the ownership
of a specified number of "qualifying shares" of Company Common Stock in
order to participate in future option awards. Each option is exercisable
with a payment of cash, stock or both for a period of 10 years and vests
immediately in the event of death, disability or retirement or in the event
certain change of control events occur. If shares are used to exercise an
option, the Compensation and Organization Committee of the Board of
Directors may grant a replacement option on the shares so used.
(2) The exercise price was based on an historical average trading price over a
thirty-day trading period prior to the award as provided in the Management
Incentive Program. On the date of such grants, the closing price of a share
of Common Stock as reported on the New York Stock Exchange was $10.125 a
share.
(3) The dollar amounts under these columns are the result of theoretical
calculations at 5% and 10% rates set by the Securities and Exchange
Commission, and therefore are not intended to forecast possible future
appreciation, if any, in the Company's stock price.
(4) The potential realizable value for all stockholders is based on 105,290,464
shares of Common Stock outstanding at December 31, 1996.
12
<PAGE> 15
The following table sets forth certain information concerning the exercise
in 1996 of options to purchase Company Common Stock by the individuals named in
the Summary Compensation Table and the unexercised options to purchase Company
Common Stock held by such individuals at December 31, 1996.
AGGREGATED OPTION EXERCISES IN 1996 AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE OPTIONS GRANTED AT YEAR END AT YEAR END ($)(1)
EXERCISE REALIZED ----------------------------- -----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David H. Hoag 0 0 201,999 122,001 0 0
J. Peter Kelly 0 0 69,500 39,000 0 0
Arthur W. Huge 0 0 39,168 18,342 0 0
Glenn J. Moran 0 0 22,749 15,501 0 0
James F. Haeck 0 0 23,695 15,975 0 0
</TABLE>
- ------------
(1) The value is calculated based on the aggregate amount of the excess of
$11.875 (the closing price of a share of the Company's Common Stock as
reported on the New York Stock Exchange Composite Transactions report for
December 31, 1996) over the relevant exercise price.
RETIREMENT BENEFIT PLANS
Restated Executive Benefit Plan
In January 1996, the Company replaced the Executive Benefit Plan (the
"Benefit Plan"), a defined benefit plan, with the Restated Executive Benefit
Plan (the "Restated Plan"), a defined contribution plan. The Restated Plan is
designed to provide a fixed annual contribution (expressed as a percentage of
covered compensation) to a participant which, together with projected investment
returns, will be sufficient to provide an annual retirement benefit at age 65
equal to the difference between (i) 55% of projected final average three year
compensation (salary plus annual incentive award) and (ii) the aggregate benefit
provided under all other retirement plans maintained by the Company. Such
benefit is prorated to the extent that years of service total less than 30.
Participants will invest such contributions in notional investment options.
Eighteen executives of the Company and its subsidiaries (including Messrs.
Kelly, Huge, Moran and Haeck) currently are included in the Restated Plan. Mr.
Hoag will not be a participant in the Restated Plan.
With regard to participants who were also in the predecessor Benefit Plan
(which includes Messrs. Kelly, Huge and Moran), annual contributions will be
increased, if necessary, at retirement to provide a retirement benefit
equivalent to the defined benefit to which these participants would have been
entitled had the provisions of the predecessor Benefit Plan remained in effect.
These participants (along with Mr. Hoag) would also be provided the survivor and
disability benefits included in the predecessor Benefit Plan.
Predecessor Plan
Under the predecessor Benefit Plan, the maximum retirement benefit was 50%
of final average compensation after 15 years of participation or upon attaining
normal retirement age, whichever should first occur, after offsetting for
amounts payable under all other existing retirement benefits. For participants
whose employment terminated prior to normal retirement age and prior to 15 years
of participation, benefits accrued at the rate of 3 1/3% of final average
compensation per year of participation (prorated for each calendar month during
which the participant participated for at least one day). Final average
compensation was a participant's average annual compensation (base salary plus
awards under the Annual Incentive Program) for the 36 consecutive months which
yielded the highest average compensation while a participant. Retirement
benefits were payable at the later of a participant's termination of employment
or normal retirement age or before normal
13
<PAGE> 16
retirement age with approval of the Board of Directors of the Company. Normal
retirement age under the Benefit Plan was age 62 for individuals becoming
participants as of or after January 1, 1985 and age 60 for those who became
participants prior to January 1, 1985.
The disability benefit provided in the predecessor Benefit Plan was equal
to 100% of final average compensation for one year and 50% thereafter and a
survivor benefit payable to a participant's spouse (until death) and,
subsequently, to the participant's children collectively (until the last child
reached age 21). The survivor's benefit for active and disabled participants was
25% of final average compensation. Similar survivors of retired participants
would have received in the aggregate a benefit of 50% of the relevant
participant's pension. Furthermore, survivors of former participants who died
while still employed by the Company would have received a benefit of 50% of the
pension accrued while an active participant.
Six executive officers of the Company and its subsidiaries (including
Messrs. Hoag, Kelly, Huge and Moran) are participants in the predecessor Benefit
Plan. The Company closed the Benefit Plan to new participants at year end 1993.
As of December 31, 1996, the annualized compensation of Messrs. Hoag, Kelly,
Huge and Moran covered by the Benefit Plan was approximately $990,000, $676,500,
$489,600 and $371,200, respectively. As of December 31, 1996, Messrs. Hoag,
Kelly, Huge and Moran were credited with 13, 7, 4 and 4 years of participation,
respectively. The following table shows the estimated annual benefits payable
upon retirement under the Benefit Plan for employees in the classifications
specified.
<TABLE>
<CAPTION>
AGE/YEARS ANNUAL COVERED COMPENSATION--THREE-YEAR AVERAGE
OF ---------------------------------------------------------------------------
PARTICIPATION $300,000 $450,000 $600,000 $750,000 $1,000,000 $1,120,000
- ------------- -------- -------- -------- -------- -------- ----------
ESTIMATED ANNUAL BENEFIT
<S> <C> <C> <C> <C> <C> <C>
Age 59 5
years $ 50,000 $ 75,000 $100,000 $125,000 $166,667 $186,667
10 years $100,000 $150,000 $200,000 $250,000 $333,333 $373,333
15 years $150,000 $225,000 $300,000 $375,000 $500,000 $560,000
Age 60/62 5
years $150,000 $225,000 $300,000 $375,000 $500,000 $560,000
10 years $150,000 $225,000 $300,000 $375,000 $500,000 $560,000
15 years $150,000 $225,000 $300,000 $375,000 $500,000 $560,000
</TABLE>
- ------------
Note: Benefits will be reduced by Social Security benefits and retirement and
disability benefits payable under other Company plans. For those
individuals who became participants after December 31, 1984, benefits are
also reduced to the extent benefits are payable by retirement plans of
former employers.
Other Prior Retirement Plans
Officers included in the Summary Compensation Table, except for Mr. Huge,
were also covered by defined benefit plans at LTV and its steel subsidiary,
which have been frozen. Assuming retirement at age 65, the aggregate annual
benefit payable to Messrs. Hoag, Kelly, Moran and Haeck under these frozen
defined benefit retirement plans will be approximately $107,890, $75,450,
$35,970 and $14,520, respectively.
With respect to Messrs. Kelly, Moran and Haeck, their annual retirement
benefits under the frozen defined benefit plans described in the immediately
preceding paragraph are taken into account in calculating the annual
contribution under the Restated Plan and are taken into account as offsets to
any additional amount otherwise payable to them under the predecessor Benefit
Plan. In Mr. Huge's case, his annual retirement benefit at his prior employer is
offset against any additional amount payable under the predecessor Benefit Plan.
14
<PAGE> 17
In Mr. Hoag's case, the above-described annual benefit of $107,890 is in
addition to the accrued annual retirement benefit of $500,000 payable under
annuities purchased for Mr. Hoag under a prior employment contract, and annual
payments of $54,000 under two additional annuities previously purchased by the
Company pursuant to the above-described Benefit Plan. Accordingly, the aggregate
defined benefit pension amount payable to Mr. Hoag under all of the above at
retirement at age 60 or later would be $661,890 annually. In addition, Mr. Hoag
resumed participation, following the expiration of his employment contract, in
the Company's broad-based defined contribution plan effective February 1, 1996,
and those contributions for 1996 are included in the amounts shown in the
Summary Compensation Table.
Executive Severance Pay Program
In January 1996, the Company adopted an Executive Severance Plan (the
"Severance Plan") which provides severance benefits for certain key executives
(including the executive officers named in the Summary Compensation Table) if
the executive's employment is involuntarily terminated for reasons other than
cause, or as the result of a change in control of the Company. The Severance
Plan provides for the following to be included in calculating the severance
benefit: (i) base salary and (ii) bonus award, if any, payable under the
Company's Annual Incentive Plan using a combination of actual corporate and
target individual performance criteria for that year. During the period for
which severance benefits are paid, the executive will continue to participate in
the Company's life and health insurance and retirement plans.
The maximum period during which plan benefits will be paid ranges from 6 to
24 months depending upon the participant's position level. The benefit (as
defined above) payable under the Severance Plan to the executives named in the
Summary Compensation Table is as follows: Mr. Hoag -- 24 months; Mr. Kelly -- 18
months; Mr. Huge -- 12 months; Mr. Moran -- 12 months and Mr. Haeck -- 12
months. The severance payments would be offset by compensation earned by such
executives from other employers. Members of senior management, including the
five officers named in the Summary Compensation Table, will be required to enter
into a non-compete agreement with the Company and release the Company from all
employment-related liabilities as a condition to receiving payments under the
Severance Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Contracts and Certain Commercial Relationships
For a five year period extending through January 1996, the Company had in
place an employment agreement with Mr. Hoag which provided for employment during
such period at an annual salary of at least $550,000, his continued
participation in the Company's existing executive compensation plans and the
purchase by the Company of five annuities, all of which have been purchased,
providing an aggregate annual retirement benefit of $500,000 beginning at age
60. For a description of additional retirement benefits payable to Mr. Hoag, see
"Other Retirement Plans." The agreement also provided for substantial severance
benefits.
In the ordinary course of business, the Company and its subsidiaries have
engaged in transactions with other corporations, whose directors or officers are
members of the Board of Directors of the Company. All such transactions,
including those described in the next paragraph and under "Compensation
Committee Interlocks and Insider Participation," were conducted on an arm's
length basis and on terms competitive with those generally available in the
marketplace at the time.
The Company paid $29.7 million for technical assistance and other fees,
steel mill product and interest and dividends on notes and preferred stock and
sold $22.4 million of steel product to Sumitomo and its affiliates in 1996.
Subsidiaries of the Company and of Sumitomo also are partners in two
electro-galvanizing line joint ventures and a steel mini-mill joint venture. The
Company paid an aggregate of $116.4 million in processing fees to the
electro-galvanizing partnerships in 1996, and
15
<PAGE> 18
such partnerships paid an aggregate of $5.2 million in rent and related fees to
the Company in 1996. Additionally, such partnerships paid the Company and
Sumitomo an aggregate of $12.2 million and $8.8 million, respectively, in
dividends. Sumitomo and its affiliates are a significant stockholder of the
Company. See "Security Ownership of Directors, Management and Principal
Stockholders."
Compensation Committee Interlocks and Insider Participation
The current members of the Compensation and Organization Committee are
Messrs. Timbers, Bricker, Jacob, Joullian and Sarni. None of such directors has
ever been an employee of the Company.
Mr. Moore, a member of the Compensation and Organization Committee from
January 1, 1996 through April 24, 1996, is the Chairman and Chief Executive
Officer of Cleveland-Cliffs Inc, which was paid $40.5 million in fees and costs
by the Company in 1996 for iron ore purchases, iron ore mining management and
transportation services. The Company also received $250,000 in cash royalties
from Cleveland-Cliffs Inc. Additionally, the Company paid $14.1 million in 1996
into a joint venture with subsidiaries of Cleveland-Cliffs Inc and Lurgi AG
relating to the production of direct reduced iron briquettes. The Company's
total investment in the joint venture is expected to cost approximately $70
million.
16
<PAGE> 19
COMPENSATION AND ORGANIZATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Introduction
The Compensation and Organization Committee of the Board of Directors has
the responsibility to review and approve compensation and benefit actions for
all officers of the Company. In addition, the Committee reviews compensation and
benefit programs applying to all non-union represented salaried employees. The
Committee meets with an independent executive compensation consultant and
obtains survey data on competitive pay and benefit practices.
Steel producers operate in a highly competitive and cyclical market
environment. Business cycles can have wide variations in intensity and duration.
The investments needed to maintain a leadership position are significant and
require an extended period of time to see a satisfactory profit return. The
Committee considers these conditions in administering the senior management
compensation program.
The Committee compares performance, compensation levels and compensation
programs of the Company with other integrated carbon flat roll steel companies
(a peer group consisting of AK Steel, Bethlehem, Inland, National and USX-U.S.
Steel Group -- those companies in the Performance Graph which are closer in size
to the Company -- the "Compensation Comparison Group"). The Committee also
reviews compensation practices of a broader group of steel companies, which
includes the other steel companies included in the Performance Graph, as well as
comparably sized companies in general industry.
During 1996, the Committee and management, assisted by the independent
consultant, conducted a comprehensive review of the Company's executive
compensation philosophy, guiding principles, and programs. The study strongly
confirmed that the primary objective of the program is and will continue to be
to support management's overall goal of creating value for LTV stockholders. The
study also showed that the Company's current programs support this objective.
Several key changes were recommended to the program, designed to further
enhance the linkages between pay and performance and between management goals
and stockholder value. First, in addition to continuing to grant stock options,
the program adds a performance share component whereby vesting of stock grants
will be conditioned upon achieving specified performance results over a four
year cycle. Second, stock ownership requirements which are a condition to future
participation in long-term incentive awards have been significantly increased.
Third, in order to further encourage and assist management to increase stock
ownership, a new management stock acquisition program was added. The Amended
Management Incentive Program (AMIP), for which stockholder approval is being
requested as part of this proxy statement, outlines the proposed changes to the
program. If stockholder approval for the AMIP is received, the proposed changes
will be implemented during 1997.
Overview of LTV Senior Management Compensation Program
The Company's senior management compensation program is designed to link
executive compensation to corporate performance, thereby enhancing the Company's
sustainable value to stockholders by rewarding superior performance and by
requiring management to have a significant personal ownership interest in the
Company.
Salary level is determined based on an unweighted consideration of the
responsibilities of the position, experience of the incumbent, individual and
Company performance and competitive salary levels of the Compensation Comparison
Group.
The Annual Incentive Program rewards individuals for:
- Success in meeting specific corporate objectives.
- Successful individual performance.
17
<PAGE> 20
The Long-Term Incentive Program closely aligns the interests of management
and the stockholders by having Company executives obtain and maintain a
significant personal equity stake in the Company. In its entirety, the senior
management compensation program is expected to enable the Company to create
stockholder value and to attract and retain outstanding individuals.
The Committee emphasizes total direct compensation consisting of salary,
annual incentive and long-term incentive, rather than a single element. Salaries
are targeted in the middle range of the Compensation Comparison Group. Annual
incentive "targets" were increased from the middle of the Compensation
Comparison Group in 1994 to 5 to 10 percentage points above the middle range of
such group in 1995. As part of this change, target performance objectives were
made more difficult, increasing the risk that payments would be at less than
target levels. This practice was continued in 1996.
Long-term incentives for 1996 continued to be targeted at the middle range
of the Compensation Comparison Group consistent with the three-year, fixed grant
levels established in 1994. Actual total direct compensation is a function of
the Company's performance against its objectives, changes in the fair market
value of the Company's Common Stock and individual performance.
The mix of salary, annual incentive and long-term incentive will vary based
on management level and on competitive market practices. For positions with
major corporate impact, including those executive officers named in the
Company's Summary Compensation Table ("Named Executives"), between 50% and 60%
of target total direct compensation is delivered through annual and long-term
incentives (with the balance in salary). For positions with lesser impact,
salary represents a higher proportion of total direct compensation.
Additionally, all salaried employees, including each Named Executive, are
eligible to participate in the LTV Capital Accumulation Plan and Supplemental
Management Retirement Plan which include a provision to match a specified
portion of the employee's contributions. Matching contributions made to the
accounts of Named Executives in 1996, which are invested in shares of the
Company's Common Stock or invested notionally in Common Stock, are included in
the accompanying Stock Ownership Table.
Salary
Salaries for officers are administered in a fashion similar to all other
non-union LTV employees. Salary adjustments are determined by evaluating the
responsibilities of the position, the competitive salary for the position (using
as a target the middle range of salaries of comparable positions in the
Compensation Comparison Group), the experience of the incumbent, the performance
of the incumbent and the performance of the Company.
Annual Incentive Opportunity
Under the Annual Incentive Program, weighted objectives (using specific
performance measurements) are established in advance each year by the Committee.
Incentive awards are determined by measuring actual performance against these
objectives. Objectives are based on a combination of corporate and individual
performance criteria for most plan participants. For senior executive officers,
including the Named Executives, Annual Incentive Program awards are made on the
basis of individual and corporate performance.
The Committee, working with senior management, is responsible for measuring
the attainment of all corporate and individual objectives for corporate
officers. Members of senior management are responsible for measuring the
attainment of individual goals for all other participants. The Committee has the
responsibility to review and approve all awards prior to payment. Based on
position impact and competitive pay opportunities, target annual incentive
opportunities range from 40% to 65% of salary. Actual individual awards often
vary above and below target levels. The Committee has the discretion to make
these awards in either cash or stock.
18
<PAGE> 21
For 1996, the Committee established financial objectives and other focus
objectives (which will change from year to year). The Committee placed its
primary emphasis upon RONA (return on net assets) relative to an internal
standard and adjusted earnings relative to an industry peer group that includes
the companies shown on the performance graph. The weight of these two measures
comprise 70% of the total, each providing 35%. The remaining 30% weight was
allocated equally to various internal factors including customer satisfaction
(including product quality), cost reduction, business process redesign,
international business development, inventory management, and enhanced product
mix. The Committee reviewed senior management's performance against these
objectives, considered the market environment in which the Company operated for
the year, and used its judgment and discretion in determining the awards.
Long-Term Incentive Opportunity
In order to facilitate the acquisition of an equity stake by its
executives, the Company designed its long-term incentive compensation program as
a combination stock ownership and stock compensation program. Long-term
incentive target levels are set based upon position impact and the middle range
of competitive practice. Actual long-term incentive grants also reflect
individual performance.
For 1996, long-term incentive awards were based primarily on stock option
grants, the terms of which appear in the accompanying tables. In 1994, the
Company implemented a three-year program of stock option and restricted stock
awards, which generally consists of annual stock option grants and front-loaded
restricted stock awards. The stock option grants in 1996 (the third year in the
three-year program) reflect a continuation of this program for all participants.
As the 1994 proxy statement indicated, Messrs. Hoag and Kelly did not receive a
full front-loaded restricted stock award in 1994 and were to be considered for
additional awards in 1995 and 1996. Consistent with last year's practice, Mr.
Hoag did not receive any additional restricted stock awards in 1996, but instead
received a commensurably larger stock option grant. Mr. Kelly received only
stock options in 1996, as his 1995 restricted stock award constituted his final
restricted stock award under the three-year program.
The Committee believes that long-term incentive grants to management should
be made in the form of equity securities in order to more closely align
management's interest with that of the stockholders.
1996 Corporate Performance and CEO Compensation
While the performance of the Company and the CEO in 1996 would have
supported an increase, Mr. Hoag's salary was held constant in 1996 at $600,000.
This salary level is in the middle range of salaries of comparable positions in
the Compensation Comparison Group.
Under the Annual Incentive Program, Mr. Hoag's target award is 65% of base
salary. Mr. Hoag's Annual Incentive Program award of $316,000 is based upon 1996
performance against the goals discussed earlier under the section titled "Annual
Incentive Opportunity."
In 1996, a stock option for 61,000 shares was granted to Mr. Hoag under the
long-term incentive program, which represents the target value established in
1994 required to position the CEO's long-term incentive at the middle range of
competitive practice. The Committee believes that the grant, in conjunction with
prior grants and existing stock ownership, places Mr. Hoag's interests in direct
alignment with the Company's stockholders.
Mr. Hoag's 1991 employment contract expired on January 31, 1996. Mr. Hoag
and the Committee agreed not to extend the contract. Mr. Hoag's employment
contract stipulated the terms of accrual for his retirement benefit during the
term of the contract. As a consequence, Mr. Hoag did not fully participate in
the Company's existing retirement program. Because of the expiration of the
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<PAGE> 22
contract, the Committee decided to recommence Mr. Hoag's full participation in
the LTV Steel Retirement Plan effective February 1, 1996.
Policy Regarding Section 162(m)
The Committee's policy is that, effective for awards made after 1995,
executive compensation should be provided in such a manner as to comply with the
rules governing the deductibility of executive compensation under Section 162(m)
of the Internal Revenue Code.
Conclusion
The Committee believes the compensation program was prudently administered
during 1996 and that the overall design and objectives of the program are
consistent with the long-term interests of the Company and its stockholders.
THE COMPENSATION AND ORGANIZATION COMMITTEE
<TABLE>
<S> <C>
STEPHEN B. TIMBERS--CHAIRMAN
WILLIAM H. BRICKER
JOHN E. JACOB
EDWARD C. JOULLIAN III
VINCENT A. SARNI
</TABLE>
20
<PAGE> 23
PERFORMANCE GRAPH
The following graph compares the total stockholder return on the Company's
Common Stock with the cumulative total return on the Standard & Poor's 500 Stock
Index ("S&P Index") and a Company-constructed peer group of publicly traded
integrated steelmakers consisting of Bethlehem Steel Corporation, Inland Steel
Industries, Inc., National Steel Corporation, Weirton Steel Corporation,
Wheeling-Pittsburgh, USX Corporation-Steel Group and Armco Inc./AK Steel Holding
Corporation (the "Peer Group"). Armco Inc., in a recapitalization, transferred
its carbon steel business to a wholly-owned subsidiary of AK Steel Holding
Corporation at the end of March 1994. Accordingly, the index includes Armco Inc.
for that period in the performance graph prior to the divestiture and AK Steel
Holding Corporation for the period thereafter.
The period shown consists of the date that the Company's Common Stock,
which was initially issued in connection with the Company's reorganization on
June 28, 1993, was registered under Section 12 of the Securities Exchange Act of
1934, as amended, through the end of the Company's last fiscal year. The graph
assumes the investment of $100 in the Company's Common Stock, the S&P Index and
the Peer Group on June 29, 1993 with immediate reinvestment of all dividends.
The Peer Group total return has been weighted for market capitalization based on
information contained in the public filings of members of the Peer Group.
LTV COMMON STOCK PERFORMANCE
LTV VS. TOTAL RETURNS OF S&P 500 AND PEER GROUP
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) S&P 500 LTV PEER GROUP
<S> <C> <C> <C>
JUN-93 100.000 100.000 100.00
DEC-93 104.943 101.575 102.13
DEC-94 106.373 103.937 95.92
DEC-95 146.203 86.614 79.73
DEC-96 179.668 74.892 72.18
</TABLE>
PEER GROUP: MARKET WEIGHTED INDEX COMPRISED OF ARMCO/AK STEEL, BETHELEHEM STEEL,
INLAND, NATIONAL STEEL, WEIRTON, WHEELING-PITTSBURGH AND USX-STEEL GROUP.
CLOSING PRICE ON JUNE 29, 1993=$100
21
<PAGE> 24
- --------------------------------------------------------------------------------
PROPOSAL TO APPROVE THE COMPANY'S MANAGEMENT INCENTIVE PROGRAM (AMENDED AND
RESTATED)
The following summary description of the AMIP and the summary of principal
changes from the original plan are qualified in their entirety by reference to
the full text of the AMIP, which is attached to this Proxy Statement as Exhibit
A.
The Board of Directors has adopted, subject to stockholder approval, an
amended and restated version of The LTV Corporation Management Incentive Program
(the "MIP"), originally approved by stockholders in 1994. The MIP limits
eligibility to key executives of the Company, as selected by the committee
administering the MIP (see below). The purpose of the amended and restated MIP
(the "AMIP") is to increase the linkage between executive compensation and
corporate performance, both short-term and long-term, and strengthen the
alignment of management goals and stockholder value. By meeting these
objectives, the AMIP reinforces the mutuality of management's interests with
those of other stockholders. Accordingly, the Board of Directors recommends that
stockholders approve the AMIP.
The AMIP has three components, each of which will be utilized in meeting
these objectives: a Long-Term Incentive Program, which provides for stock
options and for awards which require the attainment of performance goals
measured over extended periods of time and which condition grants on the
ownership of minimum amounts of Company stock; a new Stock Acquisition Program,
which provides the opportunity to purchase shares of Common Stock with matching
grants of Common Stock from the Company; and an Annual Incentive Program, which
provides for awards based on the attainment of predetermined annual strategic,
financial, and operational performance standards. The AMIP will be administered
by the Compensation and Organization Committee of the Board. The Committee has
adopted (see the Stock Acquisition Program discussion below) or will adopt award
programs under each of these three components which are designed to work in
coordination with each other.
First, the Committee anticipates that under the Long-Term Incentive
Program, annual grants of stock options and performance shares will be made. The
Committee currently anticipates that for senior executives the mix between
option shares and performance shares, based on value, will be 70% stock option
shares and 30% performance shares. Other participants will receive only stock
options. Each performance share award will specify, as determined by the
Committee, the performance goals that are to be achieved over a four year
measuring period, and each award will specify in respect of the specified
performance goals a minimum acceptable level of achievement below which no
payment will be made. In addition, a formula will be established for determining
the amount of any payment to be made if performance is at or above the minimum
acceptable level but falls short of full achievement of the specified
performance goals. Each award of performance shares must also specify the value
or the number of shares to be issued, with respect to the maximum performance
goal established by the Committee.
The Board of Directors has historically approved, as a key component of the
Company's compensation structure, continuous stock ownership requirements as a
condition for participation in future awards under the Long-Term Incentive
Program of the MIP. These requirements have now been significantly increased and
will apply to awards under the AMIP. Each executive has been assigned a specific
number of shares and a date (generally, December 31, 1999) by which the
executive will be required to have accumulated the requisite number of shares.
The specific share ownership levels were initially established on a sliding
scale with reference to representative base salaries for the various levels of
management, with more senior executives having targets representing larger
multiples of base salary. Executives will be encouraged and assisted to make
steady progress toward the attainment of these higher ownership levels.
Second, pursuant to the terms of the AMIP, if approved by the stockholders,
the Committee will implement the new Stock Acquisition Program. Acquired shares
will be matched on a one for four
22
<PAGE> 25
basis with restricted shares of Common Stock (i.e., one share matched for every
four acquired). Acquisition of shares may be by direct purchase by the
participant, by deferral of current compensation (which will also result in
deferral of income tax), or by election to receive payment in stock of Annual
Incentive awards otherwise payable in cash. If the acquired shares are retained
for a minimum of three years, the restrictions on the matching shares will be
lifted.
Third, Annual Incentive awards are designed to focus executive attention on
the attainment of key strategic, financial and operational goals. The Committee
will annually approve participants for the Annual Incentive Program, approve the
performance objectives for each participant and fix the schedule of participant
target awards, expressed as a percent of base salary. Currently, the highest
target award will be 65% of base salary. Actual awards may range from zero, if
minimum performance is not achieved, to amounts above target for superior
performance under the award measurement. The attainment of these goals will
result in the payment of awards in either cash or stock (or a combination
thereof). If an executive elects to take payment in stock of an award which
would otherwise be payable in cash, such award will be eligible for matching
grants under the Stock Acquisition Program described above.
SUMMARY OF PRINCIPAL CHANGES FROM THE ORIGINAL PLAN AS APPROVED BY STOCKHOLDERS
AVAILABLE SHARES -- The AMIP increases the number of shares of Common Stock
available by 5,000,000 shares. The original plan authorized the issuance of an
aggregate of 4,250,000 shares of common Stock. At February 28, 1997, 47,850 of
these shares had been issued pursuant to awards under the original plan, and
1,905,468 shares were subject to outstanding grants. Further, 2,296,682 shares
will be carried forward and available for future awards under the AMIP,
including 1,114,126 shares under the Interim Stock Option Program which were not
made subject to grants before the expiration of that Program, and which are no
longer available for issuance under the terms of the MIP, together with shares
from awards which are forfeited and options which expire unexercised. No
separate sublimits are established under the AMIP for particular forms of award,
such as was done for interim stock options and restricted stock under the MIP.
STOCK ACQUISITION AND MATCH PROGRAM -- To increase the levels of stock
ownership by management, the AMIP permits management to make current or deferred
purchases of Common Stock through voluntary payments or deferral of income. Such
purchases would be matched by the Company on the basis of one matching share of
restricted stock for four purchased shares.
COMPLIANCE WITH SECTION 162(M) OF THE INTERNAL REVENUE CODE -- The AMIP
makes provision for compliance with Section 162(m), as did the MIP. The AMIP
includes a provision for the deferral of income in instances where executive
compensation would otherwise exceed the deductibility limits of Section 162(m).
Performance share awards to named executives will provide for objective
performance goals and are intended to qualify for deductibility without regard
to the limits of Section 162(m). The limit on the maximum number of shares of
Common Stock which can be granted to any participant is increased from 250,000
shares covered by options and appreciation rights in any one year to 1,000,000
shares covered by all forms of awards other than performance units during any
period of three consecutive calendar years. A new limit of $2,500,000 has been
established for the aggregate value of performance units, as of their respective
dates of grant, which can be awarded to one participant in any one calendar
year.
DEFERRED STOCK -- Awards of deferred stock are now permitted in
consideration of the performance of services and such other conditions,
including the attainment of performance goals, as the Committee may specify, but
vesting may not occur before three years from the date of grant if vesting is
conditioned on service alone.
ANNUAL INCENTIVE PROGRAM AWARDS -- The MIP limit on Annual Incentive Plan
Awards of one times base salary has been deleted.
23
<PAGE> 26
PERFORMANCE SHARE VESTING -- Performance shares may vest no earlier than
one year from the date of award.
POST-RETIREMENT OPTION EXERCISE PERIOD -- The period following retirement
during which stock options can be exercised is changed from a fixed period of
two years to a matter of Committee discretion.
FORFEITURE OF AWARDS -- Any unpaid, unexpired or deferred award may be
canceled if the participant renders services for an entity which is in
competition with the Company, or such services are otherwise prejudicial to or
in conflict with the interests of the Company.
ESTATE PLANNING OPTION TRANSFERS -- The Committee may authorize the
transfer of unexercised options to the spouse or descendants of a participant,
or to a trust or other vehicle.
SUMMARY OF AMENDED PLAN
The AMIP will be administered by the Compensation and Organization
Committee of the Board of Directors or any subcommittee thereof established by
the Board of Directors (the "Committee") which must consist of at least two
members of the Board, each of whom is a "non-employee director" within the
meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended, and an "outside director" within the meaning of Section 162(m) of the
Internal Revenue Code. The Committee will be given broad powers to interpret the
provisions of the AMIP, including determining which eligible executives will
participate in each program, the types of awards and the terms and conditions of
such awards (such as vesting and forfeiture upon separation from employment).
Approximately 250 employees are currently eligible to participate in the AMIP.
The employees were selected based on an assessment of their individual
responsibility and impact of their position, as well as individual
recommendations by executive officers.
The Board will be permitted to amend or terminate the AMIP except that no
amendment may, without shareholder approval, increase the maximum number of
shares subject to issuance, increase the limitation on the aggregate value of
performance units, decrease an option price, or otherwise materially increase
benefits accruing to participants under the AMIP. Further, no options may be
cancelled or replaced by options with a lower exercise price unless shareholder
approval is obtained. The Committee is authorized to approve design changes for
programs under the three components of the AMIP.
THE LONG-TERM INCENTIVE PROGRAM permits the design of individual awards
using the following long-term incentive techniques: incentive stock options,
non-qualified stock options, performance shares, performance units, stock
appreciation rights, deferred stock and restricted stock. The Committee may
grant differing forms of awards as circumstances change, and from time to time,
restricted stock may be granted in special situations. Vesting of restricted
stock may not occur less than three years from the date of grant if vesting is
conditioned upon service alone.
Stock options granted pursuant to the AMIP will vest with continued
service, as determined by the Committee. The Committee shall also determine in
its discretion all other conditions of the grants, such as performance goals,
exercise price and option term, so long as the terms are in accordance with the
provisions of the AMIP. Except in special circumstances defined in the AMIP, no
options may be granted with exercise prices below fair market value as of the
date of grant.
All options vest immediately in the event of the participant's death,
disability, or retirement or in the event certain change-in-control events
occur. A participant who terminates employment for reasons other than
disability, death or retirement (on or after attainment of age 65) will be
permitted to exercise the vested portion of a stock option during the
three-month period following the termination of employment. In the case of the
disability, death or retirement (on or after attainment of age 65) of a
participant, the participant (or his or her estate or beneficiary, as the case
may be)
24
<PAGE> 27
will be permitted to exercise a stock option for a period following the
disability, death or retirement to be determined by the Committee.
A participant will be required to give notice to the Company of the number
of shares he or she will purchase and provide payment for the option price. A
participant will be allowed to pay for the option shares in cash, check,
previously owned shares, option shares or any combination thereof.
Performance shares granted under the Long-Term Incentive Program will be
subject to such terms and conditions, including performance objectives, as the
Committee may determine. The performance period with respect to each performance
share shall be determined by the Committee prior to the start of the performance
period and may be subject to earlier termination in the event of disability,
death or retirement or in the event of a change-in-control of the Company or
other similar events. Each award of performance shares shall specify the time
and manner of payment of performance shares earned, and any award may be paid in
cash, stock, or any combination thereof.
The Committee may, at its discretion, make grants of any and all other
forms of Long-Term Incentive outlined under the attached AMIP document.
The AMIP provides, as did the MIP, that awards representing no more than
three percent of the shares available under the Program may not be required to
meet certain restrictions otherwise applicable to restricted stock, deferred
stock and performance stock awards under the Program.
The AMIP requires that the Committee establish "performance goals" for
purposes of performance shares and performance units. When so determined by the
Committee, option rights, appreciation rights, restricted stock, deferred stock
and dividend equivalents may also specify performance goals. Performance goals
may be described in terms of Company-wide objectives or objectives that are
related to the performance of the individual participant or of the affiliate,
division, department or function within the Company or affiliate in which the
participant is employed. Performance goals applicable to any award to a
participant who is, or is determined by the Committee likely to become a
"covered employee" within the meaning of Section 162(m)(3) shall be limited to
specified levels of or growth in (i) cash flow, (ii) costs, (iii) earnings per
share, (iv) market share, (v) net income, (vi) product quality, (vii)
productivity improvement, (viii) return on assets, (ix) return on equity, (x)
return on invested capital (xi) sales growth, (xii) shareholder return, (xiii)
stock price, and/or (xiv) value added. Except in the case of such a covered
employee, if the Committee determines that a change in the business, operations,
corporate structure or capital structure of the Company, or the manner in which
it conducts its business, or other events or circumstances render the
performance goals unsuitable, the Committee may modify such performance goals or
the related minimum acceptable level of achievement, in whole or in part, as the
Committee deems appropriate and equitable.
THE STOCK ACQUISITION PROGRAM permits management employees to make current
or deferred purchases of Common Stock, through voluntary payments or deferral of
income, upon such terms and conditions that the Committee may determine. The
Committee may provide an incentive to employees to purchase and hold Company
shares through this program. The Committee retains the right to change the form
of incentives, to enhance or reduce the terms of incentives, or to terminate the
incentive program in its entirety at any time.
THE ANNUAL INCENTIVE PROGRAM provides for the grant of short-term
performance awards to key employees of the Company based on predetermined goals.
With management input, the Committee will develop measures for performance by
the Company's Corporate and steel group. Management will also develop measures
for individual performance, and may develop other measures for performance. The
Committee will determine the amount of awards to be paid on the attainment of
such performance measures. Awards may be paid in cash or in stock.
The Committee may provide in agreements for individual awards under any of
the three programs to be immediately vested after one of several specified
change-in-control events occurs. These events could include a significant change
in the composition of the Board, a significant
25
<PAGE> 28
change in stock ownership, or a transaction that requires stockholder approval
(such as a sale or merger of the Company).
It is not possible to determine specific amounts that may be awarded in
1997 under the AMIP, nor is it possible to determine the amounts that would have
been awarded in 1996 had AMIP been in effect for such year.
TAX IMPACT: The executive does not incur any tax at the time stock options
are granted.
- Upon exercise of an incentive stock option, the executive incurs no
direct tax; however, the fair market value over the exercise price is a
tax preference item subject to the alternative minimum tax. The executive
is taxed on the subsequent sale of the shares as a sale of a capital
asset based on the difference between the selling price over the exercise
price. The gain to the executive is not tax-deductible to the Company.
However, if the executive sells the incentive stock option shares within
two years of the option grant or one year of exercising the option, he or
she recognizes compensation income generally on the difference between
the option's exercise price and the fair market value on the date of
exercise. The Company can deduct the amount included in the executive's
income.
- A participant does not incur any tax at the time non-qualified stock
options are granted. The Company does not receive any tax deduction at
grant.
- Upon the exercise of such an option, the participant will recognize
ordinary income equal to the difference between the fair market value of
the option stock on the date of exercise and the exercise price. The
Company will receive a corresponding tax deduction equal to such taxable
amount in the year of exercise, subject to any limitations imposed under
Section 162(m) of the Internal Revenue Code.
- With respect to performance shares, the executive will recognize ordinary
income equal to the market value of the number of shares vested at the
end of the Performance Period. The Company will receive a corresponding
deduction, subject to Section 162(m).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDED AND
RESTATED MANAGEMENT INCENTIVE PROGRAM.
- --------------------------------------------------------------------------------
PROPOSAL TO RATIFY SELECTION OF INDEPENDENT AUDITORS
Ernst & Young LLP and their predecessors have been the auditors for the
Company since 1957. Upon the recommendation of the Audit Committee, the Board of
Directors has selected Ernst & Young LLP to be the independent auditors of the
Company for the year ending December 31, 1997. The Board of Directors will offer
a resolution at the 1997 Annual Meeting to ratify this selection. It is
anticipated that representatives of Ernst & Young LLP will be present at the
1997 Annual Meeting to respond to appropriate questions, and they will have an
opportunity, if they desire, to make a statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE SELECTION
OF INDEPENDENT AUDITORS.
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS AND NOMINATIONS FOR 1998 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company by November 11, 1997 to
be considered for inclusion in the Company's Proxy Statement and Form of Proxy
relating to that meeting.
In 1996, the Company adopted amendments to its By-Laws intended to promote
the efficient functioning of its annual meetings. The amendments confirm the
Company's right to determine the
26
<PAGE> 29
time, place and conduct of stockholder meetings, require advance notice by mail
or delivery to the Company of stockholder proposals or director nominations for
annual meetings and require persons wishing to conduct a solicitation of written
consents of stockholders or to call a special meeting of stockholders to apply
to the Board of Directors to set a record date for the consent solicitation or
to determine whether the requisite number of stockholders desire to call a
special meeting.
Under the amended By-Laws, stockholders must provide the Company with at
least 60 days, but no more than 90 days, notice prior to the announced Tentative
Meeting Date of (i) business the stockholder is proposing for consideration at
that meeting and (ii) persons the stockholder intends to nominate for election
as directors at that meeting. The Company expects to announce the Tentative
Meeting Date for the 1998 Annual Meeting during the fourth quarter of 1997.
The Board Affairs Committee will consider nominees recommended by
stockholders as candidates for election to the Board of Directors at the 1998
Annual Meeting. A stockholder wishing to nominate a candidate for election to
the Board should give written notice to the Secretary of the Company of his or
her intention to make such a nomination in accordance with the procedure
described above and furnish a written consent by such nominee that he or she
agrees to the nomination and will serve if elected. The notice of nomination
should contain background information about both the nominee and the stockholder
making the nomination. The Company may also require that the proposed nominee
furnish additional information to determine that person's eligibility to serve
as a director.
Notices and proposals or nominations should be addressed to Glenn J. Moran,
Senior Vice President, General Counsel and Secretary, The LTV Corporation, 200
Public Square, Cleveland, Ohio 44114-2308.
DISCRETIONARY VOTING OF PROXIES ON OTHER MATTERS
Management does not now intend to bring before the 1997 Annual Meeting any
matters other than those specified in the notice of the meeting, and, except for
any stockholder proposals omitted in accordance with the rules and regulations
of the Securities and Exchange Commission, it does not know of any business
which persons other than the management intend to present at the meeting. Should
any business requiring a vote of the stockholders, which is not specified in the
notice, properly come before the meeting, the persons named in the accompanying
proxy intend to vote the shares represented by them in accordance with their
best judgment.
By order of the Board of Directors
Glenn J. Moran
Senior Vice President,
General Counsel and Secretary
Cleveland, Ohio
March 10, 1997
27
<PAGE> 30
EXHIBIT A
THE LTV CORPORATION
MANAGEMENT INCENTIVE PROGRAM
(AMENDED AND RESTATED EFFECTIVE APRIL 24, 1997)
<PAGE> 31
THE LTV CORPORATION
MANAGEMENT INCENTIVE PROGRAM
(AMENDED AND RESTATED EFFECTIVE APRIL 24, 1997)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I -- PURPOSE AND DEFINITIONS
1.1 Purpose...................................................................... A-1
1.2 Effect of Amendment and Restatement.......................................... A-1
1.3 Definitions.................................................................. A-1
1.4 Construction................................................................. A-4
ARTICLE II -- STOCK AVAILABLE UNDER THIS PROGRAM
2.1 Stock Available under this Program........................................... A-4
ARTICLE III -- LONG-TERM INCENTIVE PROGRAM
3.1 Purpose...................................................................... A-4
3.2 Option Rights................................................................ A-5
3.3 Appreciation Rights.......................................................... A-6
3.4 Restricted Stock............................................................. A-7
3.5 Deferred Stock............................................................... A-8
3.6 Performance Shares and Performance Units..................................... A-9
3.7 Transferability.............................................................. A-9
3.8 Fractional Shares............................................................ A-10
3.9 Participation by Employees of a Less-Than-80% Affiliate...................... A-10
3.10 Certain Terminations of Employment, Hardship and Approved Leaves of Absence.. A-10
3.11 Foreign Employees............................................................ A-10
3.12 Certain Forfeitures.......................................................... A-11
ARTICLE IV -- ANNUAL INCENTIVE PROGRAM
4.1 Purpose...................................................................... A-11
4.2 Special Definitions Applicable to this Article............................... A-11
4.3 Participation................................................................ A-11
4.4 Annual Incentives............................................................ A-11
ARTICLE V -- MANAGEMENT STOCK ACQUISITION PROGRAM
5.1 Purpose...................................................................... A-12
5.2 Special Definitions Applicable to this Article............................... A-13
5.3 Participation................................................................ A-13
5.4 Amount of Deferral........................................................... A-13
5.5 Voluntary Purchases of Stock................................................. A-13
5.6 Matching Contributions and Grants............................................ A-13
5.7 Distributions................................................................ A-13
5.8 Dividends.................................................................... A-13
5.9 Administration............................................................... A-13
5.10 Claims Procedure............................................................. A-14
</TABLE>
<PAGE> 32
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE VI -- ADMINISTRATION, GENERAL PROVISIONS
6.1 Administration of this Program............................................... A-14
6.2 Amendments and Other Matters................................................. A-14
6.3 Unfunded Status of Program................................................... A-15
6.4 Change in Control Provisions................................................. A-15
6.5 Adjustments.................................................................. A-16
6.6 Withholding Taxes............................................................ A-16
6.7 General Provisions........................................................... A-16
6.8 Effective Date of Program.................................................... A-17
6.9 Term of Program.............................................................. A-17
6.10 Proceeds and Expenses........................................................ A-17
6.11 Severability................................................................. A-17
6.12 Exclusion from Certain Restrictions.......................................... A-17
</TABLE>
<PAGE> 33
THE LTV CORPORATION
MANAGEMENT INCENTIVE PROGRAM
(AMENDED AND RESTATED EFFECTIVE APRIL 24, 1997)
ARTICLE I
PURPOSE AND DEFINITIONS
1.1 PURPOSE. The LTV Corporation, a Delaware Corporation, hereby amends
and restates The LTV Corporation Management Incentive Program effective April
24, 1997. The purpose of this Program, as amended and restated, is to attract,
retain and motivate officers and key employees of The LTV Corporation and its
Affiliates, to provide such persons with incentives and rewards for superior
performance which share in the growth of the value of the Corporation, and to
promote ownership and holding of Stock of the Corporation by such persons,
thereby reinforcing a mutuality of interest with other stockholders.
1.2 EFFECT OF AMENDMENT AND RESTATEMENT. This amendment and restatement of
this Program shall constitute a continuation of this Program. This amendment and
restatement is generally effective April 24, 1997. Grants and awards made under
the Prior Program before April 24, 1997 shall be governed by the terms and
provisions of the Prior Program.
1.3 DEFINITIONS. As used in this Program,
"Affiliate" means a corporation, partnership, joint venture, unincorporated
association or other entity in which the Corporation has a direct or indirect
ownership or other equity interest; provided, however, for purposes of
determining whether any person may be a Participant for purposes of any grant of
Incentive Stock Options, "Affiliate" means any corporation in which the
Corporation owns or controls, directly or indirectly, more than 50% of the total
combined voting power represented by all classes of stock issued by such
corporation at the time of such grant.
"Appreciation Right" means a right granted pursuant to Section 3.3 of this
Program, including a Free-standing Appreciation Right and a Tandem Appreciation
Right.
"Base Price" means the price to be used as the basis for determining the
Spread upon the exercise of a Free-standing Appreciation Right.
"Board" means the Board of Directors of the Corporation.
"Cause" means, in connection with an involuntary termination by the
Corporation or an Affiliate of a Participant's employment, (i) the willful and
continued failure by the Participant to perform substantially the duties of the
Participant's position or (ii) the willful engaging by the Participant in
conduct which is demonstrably injurious to the Corporation or an Affiliate,
monetarily or otherwise.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee described in Section 6.1(a).
"Corporation" means The LTV Corporation, a Delaware corporation, or its
successor or successors.
"Date of Grant" means the date specified by the Committee on which a grant
of Option Rights or Appreciation Rights or Performance Shares or Performance
Units or a grant or sale of Restricted Stock or Deferred Stock shall become
effective, which shall not be earlier than the date on which the Committee takes
action with respect thereto.
"Deferral Period" means the period of time during which shares of Deferred
Stock are subject to deferral limitations under Section 3.5.
"Deferred Stock" means an award pursuant to Section 3.5 of the right to
receive shares of Stock at the end of a specified Deferral Period.
A-1
<PAGE> 34
"Disability" means a physical or mental condition of a Participant
resulting from a bodily injury, disease, or mental disorder which renders him
incapable of continuing in the active employment of the Corporation or an
Affiliate. Such Disability shall be determined by the Committee based upon
appropriate medical advice and examination.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to a share of Stock as of any given
day (i) the last reported closing price for a share of Stock on the New York
Stock Exchange for the day as of which such determination is being made or, if
there was no sale of Stock so reported for such day, on the most recently
preceding day on which there was such a sale; or if the Stock is not listed or
admitted to trading on the New York Stock Exchange on the day as of which the
determination is being made, the amount determined by the Committee to be the
fair market value of a share of Stock on such day, or (ii) if greater, the
lowest price necessary to avoid any adjustment in the exercise price or exercise
quantity of the Series A Warrants pursuant to the Warrant Agreement dated as of
June 28, 1993 between the Corporation and Society Bank.
"Free-standing Appreciation Right" means an Appreciation Right granted
pursuant to Section 3.3 that is not granted in tandem with an Option Right or
similar right.
"Incentive Stock Options" means Option Rights that are intended to qualify
as "incentive stock options" under Section 422 of the Code.
"Less-Than-80% Affiliate" means an Affiliate with respect to which the
Corporation directly or indirectly owns or controls less than 80% of the total
combined voting or other decision-making power.
"Optionee" means the person so designated in an agreement evidencing an
outstanding Option Right.
"Option Price" means the purchase price payable upon the exercise of an
Option Right.
"Option Right" means the right to purchase shares of Stock upon exercise of
an option granted pursuant to Section 3.2.
"Participant" means a person who is selected by the Committee to receive
benefits under this Program and who is at that time an officer, including
without limitation an officer who may also be a member of the Board or any other
key employee of, the Corporation or any Affiliate, or who has agreed to commence
serving in any such capacity.
"Performance Goals" means a performance objective or objectives established
pursuant to this Program for Participants who have received grants of
Performance Shares or Performance Units or, when so determined by the Committee,
Option Rights, Appreciation Rights, Restricted Stock, Deferred Stock and
dividend credits. Performance Goals may be described in terms of Corporation-
wide objectives or objectives that are related to the performance of the
individual Participant or of the Affiliate, division, department or function
within the Corporation or Affiliate in which the Participant is employed. The
Performance Goals applicable to any award to a Participant who is, or is
determined by the Committee to be likely to become, a "covered employee" within
the meaning of Section 162(m) of the Code shall be limited to specified levels
of or growth in:
(i) cash flow;
(ii) costs;
(iii) earnings per share;
(iv) market share;
(v) net income;
(vi) product quality;
(vii) productivity improvement;
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(viii) return on assets;
(ix) return on equity;
(x) return on invested capital;
(xi) sales growth;
(xii) shareholder return;
(xiii) stock price;
(xiv) value added;
and any combination thereof.
Except in the case of such a covered employee, if the Committee determines
that a change in the business, operations, corporate structure or capital
structure of the Corporation, or the manner in which it conducts its business,
or other events or circumstances render the Performance Goals unsuitable, the
Committee may modify such Performance Goals or the related minimum acceptable
level of achievement, in whole or in part, as the Committee deems appropriate
and equitable.
"Performance Period" means, in respect of a Performance Share or
Performance Unit, a period of time established pursuant to Section 3.6 within
which the Performance Goals relating thereto are to be achieved.
"Performance Share" means a bookkeeping entry that records the equivalent
of one share of Stock awarded pursuant to Section 3.6.
"Performance Unit" means a bookkeeping entry that records a dollar
denominated unit awarded pursuant to Section 3.6.
"Prior Program" means The LTV Corporation Management Incentive Program,
approved by its shareholders on April 29, 1994, as amended prior to the adoption
of this Program.
"Program" means The LTV Corporation Management Incentive Program (As
Amended and Restated Effective April 24, 1997) adopted by the Board on January
24, 1997, as it may be amended from time to time.
"Reload Option Rights" means additional Option Rights granted automatically
to an Optionee upon the exercise of Option Rights pursuant to Section 3.2(e).
"Restricted Stock" means Stock granted or sold pursuant to Section 3.4 as
to which neither the substantial risk of forfeiture nor the restrictions on
transfer referred to in Section 3.4 has expired.
"Retirement" means retirement from active employment with the Corporation
and each of its Affiliates on or after attainment of age 65, unless an earlier
retirement is approved by the Committee.
"Rule 16b-3" means Rule 16b-3 of the Securities and Exchange Commission (or
any successor rule to the same effect), as in effect from time to time.
"Spread" means, in the case of a Free-standing Appreciation Right, the
amount by which the Fair Market Value per share of Stock on the date when any
such right is exercised exceeds the Base Price specified in such right or, in
the case of a Tandem Appreciation Right, the amount by which the Fair Market
Value per share of Stock on the date when any such right is exercised exceeds
the Option Price specified in the related Option Right.
"Stock" means (i) shares of the common stock of the Corporation, par value
$.50 per share, and (ii) any security into which Stock may be converted by
reason of any transaction or event of the type referred to in Section 6.5.
"Tandem Appreciation Right" means an Appreciation Right granted pursuant to
Section 3.3 that is granted in tandem with an Option Right or any similar right
granted under any other plan of the Corporation.
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1.4 CONSTRUCTION. To the extent determined by the Committee, Article III
of this Program as hereby amended and restated is intended to continue to meet,
and shall be construed in accordance with, the requirements for deductibility of
compensation under Section 162(m) of the Code. The masculine gender, where
appearing in this Program, shall be deemed to include the feminine gender and
the singular shall be deemed to include the plural, unless the context clearly
indicates to the contrary.
ARTICLE II
STOCK AVAILABLE UNDER THIS PROGRAM
2.1 STOCK AVAILABLE UNDER THIS PROGRAM. (a) Subject to adjustment as
provided in Section 6.5, the number of shares of Stock issued or transferred (i)
upon the exercise of Option Rights or Appreciation Rights, (ii) as Restricted
Stock and released from all substantial risks of forfeiture, (iii) as Deferred
Stock, (iv) in payment of Performance Shares or Performance Units that have been
earned, (v) in payment of dividend equivalents paid with respect to Stock
purchases or awards made under this Program, (vi) upon Stock purchases pursuant
to Article V, (vii) in payment of AIP awards, and (viii) upon distributions of
shares of Stock, shall not in the aggregate exceed 7,296,682 shares of Stock
(2,296,682 of which were approved in 1994 (of which not more than 198,062 may be
shares of Restricted Stock and 1,114,126 were shares under the Interim Stock
Option Program which were not made subject to grants before the expiration of
such Program and which are no longer available for issuance under such Program),
and 5,000,000 of which are being added as of this Amendment and Restatement),
which may be Stock of original issuance or Stock held in treasury or a
combination thereof.
(b) Upon the full or partial payment of any Option Price by the transfer to
the Corporation of shares of Stock or upon satisfaction of tax withholding
provisions in connection with any such exercise or any other payment made or
benefit realized under this Program by the transfer or relinquishment of shares
of Stock, there shall be deemed to have been issued or transferred under this
Program only the net number of shares of Stock actually issued or transferred by
the Corporation.
(c) Upon payment in cash of the benefit provided by any award granted under
this Program, any shares of Stock that were covered by that award shall again be
available for issuance or transfer hereunder.
(d) Subject to adjustment as provided in Section 6.5, the maximum number of
shares of Stock covered by awards under this Program granted to any Participant
during any period of 3 consecutive calendar years shall not exceed 1,000,000
shares of Stock.
(e) In no event shall any Participant in any period of one calendar year be
granted awards of Performance Units having an aggregate maximum value as of the
Date of Grant in excess of $2,500,000.
(f) The aggregate number of shares of Stock actually issued by the
Corporation upon the exercise of Incentive Stock Options shall not exceed the
total number of shares of Stock first specified in Section 2.1(a), subject to
adjustment as provided in Section 6.5.
ARTICLE III
LONG-TERM INCENTIVE PROGRAM
3.1 PURPOSE. The purpose of this long-term incentive component of this
Program is to provide the Corporation a means to devise tailored long-term stock
and other incentive awards to officers and other key employees of the
Corporation or an Affiliate, which will provide incentives for such employees to
act in the best interests of the Corporation's stockholders, will reinforce such
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employees' mutuality of interest with stockholders, and will promote the
long-term interests of the Corporation.
3.2 OPTION RIGHTS. The Committee may from time to time authorize grants to
Participants of options to purchase shares of Stock subject to Section 2.1 upon
such terms and conditions as the Committee may determine in accordance with the
following provisions:
(a) Each grant shall specify an Option Price per share of Stock, which
shall be equal to or greater than the Fair Market Value per share of Stock on
the Date of Grant; provided, however, that in the case of options other than
Incentive Stock Options, if granted in lieu of salary or cash bonus, the Option
Price shall not be less than 85% of the Fair Market Value per share of Stock on
the Date of Grant. Notwithstanding the foregoing, the Committee in its
discretion, may determine a price per share of Stock of less than the Fair
Market Value of the share of Stock at the time of grant, if such option is
granted as substitute for a stock option granted by an entity which has been
merged with or acquired by the Corporation or an Affiliate and such substitute
grant is made in connection with such merger or acquisition.
(b) Each grant shall specify the form of consideration to be paid in
satisfaction of the Option Price and the manner of payment of such
consideration, which may include cash in the form of currency or certified or
cashier's check or other cash equivalent acceptable to the Committee,
nonforfeitable, unrestricted shares of Stock (including by attestation), which
are already owned by the Optionee and have a value at the time of exercise that
is equal to the Option Price, any other legal consideration, that the Committee
may deem appropriate, including without limitation any form of consideration
authorized under Section 3.2(c), on such basis as the Committee may determine in
accordance with this Program and any combination of the foregoing.
(c) Any grant may provide that payment of the Option Price may also be made
in whole or in part in the form of shares of Restricted Stock or other Stock
that are subject to risk of forfeiture or restrictions on transfer. Unless
otherwise determined by the Committee whenever any Option Price is paid in whole
or in part by means of any of the forms of consideration specified in this
Subsection, the shares of Stock received by the Optionee upon the exercise of
the Option Rights shall be subject to the same risks of forfeiture or
restrictions on transfer as those that applied to the consideration surrendered
by the Optionee; provided, however, that such risks of forfeiture and
restrictions on transfer shall apply only to the same number of shares of Stock
received by the Optionee as applied to the forfeitable or restricted Common
Stock surrendered by the Optionee.
(d) Any grant may provide for deferred payment of the Option Price from the
proceeds of sale through a bank or broker on the date of exercise of some or all
of the shares of Stock to which the exercise relates.
(e) Any grant may provide for the automatic grant to the Optionee of Reload
Option Rights upon the exercise of Option Rights, including Reload Option
Rights, for shares of Stock or any other noncash consideration authorized under
Subsections (c) and (d) of this Section.
(f) Successive grants may be made to the same Participant regardless of
whether any Option Rights previously granted to such Participant remain
unexercised.
(g) Each grant shall specify the period or periods of continuous employment
of the Optionee by the Corporation or any Affiliate that are necessary before
the Option Rights or installments thereof shall become exercisable, and any
grant may provide for the earlier exercisability of such rights in the event of
Retirement, death or Disability of the Participant or a change in control of the
Corporation or other similar transaction or event. Unless otherwise determined
by the Committee at or after grant, no option shall be exercisable during the 6
months following the date of the granting of the option.
(h) Any grant of Option Rights may specify Performance Goals that must be
achieved as a condition to the exercise of such rights.
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(i) Option Rights granted under this Program may be (i) options that are
intended to qualify under particular provisions of the Code, including without
limitation Incentive Stock Options, (ii) options that are not intended to so
qualify or (iii) combinations of the foregoing.
(j) On or after the Date of Grant of any Option Rights other than Incentive
Stock Options, the Committee may provide for the payment to the Optionee of
dividend equivalents thereon in cash or shares of Stock on a current, deferred
or contingent basis.
(k) No Option Right granted under this Program which is intended to be an
Incentive Stock Option may be exercised more than 10 years from the Date of
Grant.
(l) Each grant shall be evidenced by an agreement, which shall be executed
on behalf of the Corporation by any officer thereof and delivered to and
accepted by the Optionee and shall contain such terms and provisions as the
Committee may determine consistent with this Program.
(m) Upon receipt of written notice to exercise, the Committee may elect to
cash out all or part of the portion of the Option Rights to be exercised by
paying the Optionee an amount, in cash or Stock, equal to the excess of the Fair
Market Value of the Stock over the Option Price (the "Spread Value") on the
effective date of such cash-out. In addition, the Committee may, at or after the
Date of Grant (with the consent of the Optionee if after the Date of Grant),
require that all or part of the shares of Stock to be issued with respect to the
Spread Value of an exercised Option Right take the form of Restricted Stock,
which shall be valued on the date of exercise on the basis of the Fair Market
Value of such Restricted Stock determined without regard to the forfeiture
restriction involved.
3.3 APPRECIATION RIGHTS. The Committee may also authorize grants to
Participants of Appreciation Rights. An Appreciation Right shall be a right of
the Participant to receive from the Corporation an amount, which shall be
determined by the Committee and shall be expressed as a percentage (not
exceeding 100%) of the Spread at the time of the exercise of such right. Any
grant of Appreciation Rights under this Program shall be upon such terms and
conditions as the Committee may determine in accordance with the following
provisions:
(a) Any grant may specify that the amount payable upon the exercise of an
Appreciation Right may be paid by the Corporation in cash, shares of Stock or
any combination thereof and may (i) either grant to the Participant or reserve
to the Committee the right to elect among those alternatives or (ii) preclude
the right of the Participant to receive and the Corporation to issue shares of
Stock or other equity securities in lieu of cash.
(b) Any grant may specify that the amount payable upon the exercise of an
Appreciation Right shall not exceed a maximum specified by the Committee on the
Date of Grant.
(c) Any grant may specify (i) a waiting period or periods before
Appreciation Rights shall become exercisable and (ii) permissible dates or
periods on or during which Appreciation Rights shall be exercisable.
(d) Any grant may specify that an Appreciation Right may be exercised only
in the event of Retirement, death or Disability of the Participant or a change
in control of the Corporation or other similar transaction or event.
(e) Any grant may provide for the payment to the Participant of dividend
equivalents thereon in cash or shares of Stock on a current, deferred or
contingent basis.
(f) Each grant shall be evidenced by an agreement, which shall be executed
on behalf of the Corporation by any officer thereof and delivered to and
accepted by the Participant and shall contain such terms and provisions as the
Committee may determine consistent with this Program.
(g) Any grant of Appreciation Rights may specify Performance Goals that
must be achieved as a condition of the exercise of such rights.
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(h) Regarding Tandem Appreciation Rights only: Each grant shall provide
that a Tandem Appreciation Right may be exercised only (i) at a time when the
related Option Right (or any similar right granted under any other plan of the
Corporation) is also exercisable and the Spread is positive and (ii) by
surrender of the related Option Right (or such other right) for cancellation.
(i) Regarding Free-standing Appreciation Rights only:
(i) Each grant shall specify in respect of each Free-standing
Appreciation Right a Base Price per share of Stock, which shall be
equal to or greater than the Fair Market Value per share of Stock
on the Date of Grant;
(ii) Successive grants may be made to the same Participant regardless
of whether any Free-standing Appreciation Rights previously
granted to such Participant remain unexercised;
(iii) Each grant shall specify the period or periods of continuous
employment of the Participant by the Corporation or any Affiliate
that are necessary before the Free-standing Appreciation Rights or
installments thereof shall become exercisable, and any grant may
provide for the earlier exercise of such rights in the event of
Retirement, death or Disability of the Participant or a change in
control of the Corporation or other similar transaction or event;
and
(iv) No Free-Standing Appreciation Right granted under this Program may
be exercised more than 10 years from the Date of Grant.
3.4 RESTRICTED STOCK. The Committee may also authorize grants or sales to
Participants of shares of Restricted Stock subject to Section 2.1 upon such
terms and conditions as the Committee may determine in accordance with the
following provisions:
(a) Each grant or sale shall constitute an immediate transfer of the
ownership of shares of Stock to the Participant in consideration of the
performance of services, entitling such Participant to dividend, voting and
other ownership rights, subject to the substantial risk of forfeiture and
restrictions on transfer hereinafter referred to.
(b) Each grant or sale may be made without additional consideration from
the Participant or in consideration of a payment by the Participant that is less
than the Fair Market Value per share of Stock on the Date of Grant.
(c) Each grant or sale shall provide that the shares of Restricted Stock
covered thereby shall be subject to a "substantial risk of forfeiture" within
the meaning of Section 83 of the Code for a period to be determined by the
Committee on the Date of Grant, and any grant or sale may provide for the
earlier termination of such period in the event of Retirement, death or
Disability of the Participant or a change in control of the Corporation or other
similar transaction or event. If the Committee conditions the nonforfeitability
of shares of Restricted Stock upon service alone, such vesting may not occur
before 3 years from the Date of Grant of such shares of Restricted Stock, and if
the Committee conditions the nonforfeitability of shares of Restricted Stock
upon Performance Goals, such nonforfeitability may not occur before 1 year from
the Date of Grant of such shares of Restricted Stock.
(d) Each grant or sale shall provide that, during the period for which such
substantial risk of forfeiture is to continue, the transferability of the shares
of Restricted Stock shall be prohibited or restricted in the manner and to the
extent prescribed by the Committee on the Date of Grant. Such restrictions may
include without limitation rights of repurchase or first refusal in the
Corporation or provisions subjecting the shares of Restricted Stock to a
continuing substantial risk of forfeiture in the hands of any transferee.
(e) Any grant of shares of Restricted Stock may specify Performance Goals
which, if achieved, will result in termination or early termination of the
restrictions applicable to such shares and each
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such grant shall specify in respect of such specified Performance Goals a
minimum acceptable level of achievement and shall set forth a formula for
determining the number of shares of Restricted Stock on which restrictions will
terminate if performance is at or above the minimum level, but falls short of
full achievement of the specified Performance Goals.
(f) Any grant or sale may require that any or all dividends or other
distributions paid on the shares of Restricted Stock during the period of such
restrictions be automatically sequestered. Such distribution may be reinvested
on an immediate or deferred basis in additional shares of Stock, which may be
subject to the same restrictions as the underlying award or such other
restrictions as the Committee may determine.
(g) Each grant or sale shall be evidenced by an agreement, which shall be
executed on behalf of the Corporation by any officer thereof and delivered to
and accepted by the Participant and shall contain such terms and provisions as
the Committee may determine consistent with this Program. Unless otherwise
directed by the Committee, all certificates representing shares of Restricted
Stock, together with a stock power that shall be endorsed in blank by the
Participant with respect to such shares, shall be held in custody by the
Corporation until all restrictions thereon lapse.
3.5 DEFERRED STOCK. The Committee may also authorize grants or sales to
Participants of shares of Deferred Stock subject to Section 2.1 upon such terms
and conditions as the Committee may determine in accordance with the following
provisions:
(a) Each grant or sale shall constitute the agreement by the Corporation to
issue or transfer shares of Stock to the Participant in the future in
consideration of the performance of services, subject to the fulfillment during
the Deferral Period of such conditions as the Committee may specify.
(b) Each grant or sale may be made without additional consideration from
the Participant or in consideration of a payment by the Participant that is less
than the Market Value per Share on the Date of Grant.
(c) Each grant or sale shall provide that the shares of Deferred Stock
covered thereby shall be subject to a Deferral Period, which shall be fixed by
the Committee on the Date of Grant, and any grant or sale may provide for the
earlier termination of such period in the event of Retirement, death or
Disability of the Participant or a change in control of the Corporation or other
similar transaction or event. If the Committee conditions the nonforfeitability
of shares of Deferred Stock upon service alone, such nonforfeitability may not
occur before 3 years from the Date of Grant of such shares of Deferred Stock,
and if the Committee conditions the vesting of shares of Deferred Stock upon
Performance Goals, such nonforfeitability may not occur before 1 year from the
Date of Grant of such shares of Deferred Stock.
(d) Any grant of shares of Deferred Stock may specify Performance Goals
which, if achieved, will result in termination or early termination of the
restrictions applicable to such shares and each such grant shall specify in
respect of such specified Performance Goals, a minimum acceptable level of
achievement and shall set forth a formula for determining the number of shares
of Deferred Stock on which restrictions will terminate if performance is at or
above the minimum level, but falls short of full achievement of the specified
Performance Goals.
(e) During the Deferral Period, the Participant shall not have any right to
transfer any rights under the subject award, shall not have any rights of
ownership in the shares of Deferred Stock and shall not have any right to vote
such shares, but the Committee may on or after the Date of Grant authorize the
payment of dividend equivalents on such shares in cash or additional shares of
Stock on a current, deferred or contingent basis.
(f) Each grant or sale shall be evidenced by an agreement, which shall be
executed on behalf of the Corporation by any officer thereof and delivered to
and accepted by the Participant and shall contain such terms and provisions as
the Committee may determine consistent with this Program.
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3.6 PERFORMANCE SHARES AND PERFORMANCE UNITS. The Committee may also
authorize grants to Participants of Performance Shares and Performance Units,
which shall become payable to the Participant upon the achievement of specified
Performance Goals, upon such terms and conditions as the Committee may determine
in accordance with the following provisions:
(a) Each grant shall specify the number of Performance Shares or
Performance Units to which it pertains, subject to the limitations in Section
2.1, which may be subject to adjustment to reflect changes in compensation or
other factors. The Committee shall establish a dollar denominated value for each
Performance Unit at the Date of Grant.
(b) The Performance Period with respect to each Performance Share or
Performance Unit shall be determined by the Committee on the Date of Grant, but
may not be less than 1 year; provided, however that the Performance Period may
be subject to earlier termination in the event of Retirement, death or
Disability of the Participant or a change in control of the Corporation or other
similar transaction or event.
(c) Each grant shall specify the Performance Goals that are to be achieved
and each grant shall specify in respect of the specified Performance Goals a
minimum acceptable level of achievement below which no payment will be made and
shall set forth a formula for determining the amount of any payment to be made
if performance is at or above the minimum acceptable level but falls short of
full achievement of the specified Performance Goals.
(d) Each grant shall specify the time and manner of payment of Performance
Shares or Performance Units that shall have been earned, and any grant may
specify that any such amount may be paid by the Corporation in cash, shares of
Stock or any combination thereof and may either grant to the Participant or
reserve to the Committee the right to elect among those alternatives.
(e) Any grant of Performance Shares may specify that the amount payable
with respect thereto may not exceed a maximum specified by the Committee on the
Date of Grant. Any grant of Performance Units may specify that the amount
payable, or the number of shares of Stock issued, with respect thereto may not
exceed maximums specified by the Committee on the Date of Grant.
(f) Any grant may provide for the payment to the Participant of dividend
equivalents thereon in cash or in additional shares of Stock on a current,
deferred or contingent basis.
(g) Each grant of Performance Shares or Performance Units shall be
evidenced by an agreement, which shall be executed on behalf of the Corporation
by any officer thereof and delivered to and accepted by the Participant and
shall contain such terms and provisions as the Committee may determine
consistent with this Program.
3.7 TRANSFERABILITY. (a) No Option Right or other security granted under
this Program shall be transferable by a Participant other than by will or the
laws of descent and distribution. Option Rights and Appreciation Rights shall be
exercisable during a Participant's lifetime only by the Participant or, in the
event of the Participant's legal incapacity, by his guardian or legal
representative acting in a fiduciary capacity on behalf of the Participant under
state law and court supervision.
(b) Notwithstanding the provisions of Subsection (a) of this Section, the
Committee may, in its sole discretion, authorize all or a portion of the Option
Rights to be granted to an Optionee which are not intended to be Incentive Stock
Options to be on terms which permit transfer by such Optionee to (i) the spouse,
children or grandchildren of the Optionee ("Immediate Family Members"), (ii) a
trust or trusts for the exclusive benefit of such Immediate Family Members,
(iii) a partnership in which such Immediate Family Members are the only
partners, or (iv) other persons or entities, provided that (A) the agreement
pursuant to which such Option Rights are transferred must be approved by the
Committee, and must expressly provide for transferability in a manner consistent
with Subsection (a) of this Section, and (B) subsequent transfers of transferred
Option Rights shall be prohibited except those in accordance with Subsection (a)
of this Section. Following transfer, any such Option Rights shall continue to be
subject to the same terms and conditions as
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were applicable immediately prior to transfer, provided that for purposes of
Section 3.2, the term "Optionee" shall be deemed to refer to the transferee. The
events of termination of employment of Section 3.2 shall continue to be applied
with respect to the original Optionee, following which the Option Rights shall
be exercisable by the transferee only to the extent, and for the period
specified in the agreement pursuant to which such Option Rights are granted.
(c) Any grant made under this Program may provide that all or any part of
the shares of Stock that are (i) to be issued or transferred by the Corporation
upon the exercise of Option Rights or Appreciation Rights or upon the
termination of the Deferral Period applicable to shares of Deferred Stock, or in
payment of Performance Shares or Performance Units or (ii) no longer subject to
the substantial risk of forfeiture and restrictions on transfer referred to in
Section 3.4 shall be subject to further restrictions upon transfer.
3.8 FRACTIONAL SHARES. The Corporation shall not be required to issue any
fractional shares of Common Stock pursuant to this Program. The Committee may
provide for the elimination of fractions or for the settlement thereof in cash.
3.9 PARTICIPATION BY EMPLOYEES OF A LESS-THAN-80% AFFILIATE. As a
condition to the effectiveness of any grant to be made hereunder to a
Participant who is an employee of a Less-Than-80% Affiliate, regardless whether
such Participant is also employed by the Corporation or another Affiliate, the
Committee may require the Less-Than-80% Affiliate to agree to transfer to the
Participant (as, if and when provided for under this Program and any applicable
agreement entered into between the Participant and the Less-Than-80% Affiliate
pursuant to this Program) the shares of Stock that would otherwise be delivered
by the Corporation upon receipt by the Less-Than-80% Affiliate of any
consideration then otherwise payable by the Participant to the Corporation. Any
such grant may be evidenced by an agreement between the Participant and the
Less-Than-80% Affiliate, in lieu of the Corporation, on terms consistent with
this Program and approved by the Committee and the Less-Than-80% Affiliate. All
shares of Stock so delivered by or to a Less-Than-80% Affiliate will be treated
as if they had been delivered by or to the Corporation for purposes of Section
2.1 and all references to the Corporation in this Program shall be deemed to
refer to the Less-Than-80% Affiliate except with respect to the definitions of
the Board and the Committee and in other cases where the context otherwise
requires.
3.10 CERTAIN TERMINATIONS OF EMPLOYMENT, HARDSHIP AND APPROVED LEAVES OF
ABSENCE. Notwithstanding any other provision of this Article to the contrary, in
the event of termination of employment by reason of death, Disability,
Retirement, early retirement with the consent of the Committee, termination of
employment to enter public service with the consent of the Committee or leave of
absence approved by the Committee, or in the event of hardship or other special
circumstances, of a Participant who holds an Option Right or Appreciation Right
that is not immediately and fully exercisable, any Restricted Stock as to which
the substantial risk of forfeiture or the prohibition or restriction on transfer
has not lapsed, any Deferred Stock as to which the Deferral Period is not
complete, any Performance Shares or Performance Units that have not been fully
earned, or any shares of Stock that are subject to any transfer restriction
pursuant to Section 3.4(d), the Committee may in its sole discretion take any
action that it deems to be equitable under the circumstances or in the best
interests of the Corporation, including without limitation waiving or modifying
any limitation or requirement with respect to any award under this Program.
3.11 FOREIGN EMPLOYEES. In order to facilitate the making of any grant or
combination of grants under this Article, the Committee may provide for such
special terms for grants to Participants who are foreign nationals, or who are
employed by the Corporation or any Affiliate outside of the United States of
America, as the Committee may consider necessary or appropriate to accommodate
differences in local law, tax policy or custom. Moreover, the Committee may
approve such supplements to, or amendments, restatements or alternative versions
of, this Program as it may consider necessary or appropriate for such purposes
without thereby affecting
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the terms of this Program as in effect for any other purpose, and the Secretary
or other appropriate officer of the Corporation may certify any such document as
having been approved and adopted in the same manner as this Program. No such
special terms, supplements, amendments, or restatements shall include any
provisions that are inconsistent with the terms of this Program, as then in
effect, unless this Program could have been amended to eliminate such
inconsistency without further approval by the shareholders of the Corporation
where such approval would be required for such provisions to be effective.
3.12 CERTAIN FORFEITURES. Unless otherwise specified in an agreement
covering a grant made under this Article, the Committee may cancel any
unexpired, unpaid, forfeitable, or deferred grants at any time if the
Participant is not in compliance with each of the following conditions:
(a) A Participant shall not render services for any organization or engage
directly or indirectly in any business which, in the judgment of the chief
executive officer of the Corporation or other senior officer designated by the
Committee, is or becomes competitive with the Corporation or any Affiliate, or
which organization or business, or the rendering of services to such
organization or business, is or becomes otherwise prejudicial to or in conflict
with the interests of the Corporation or any Affiliate.
(b) Upon exercise, payment or delivery pursuant to a grant, or upon a grant
becoming nonforfeitable, the Participant shall certify on a form acceptable to
the Committee that he is in compliance with the terms and conditions of this
Program. Failure to comply with the provisions of Subsection (a) of this Section
prior to, or during the 6 months after, any exercise, payment or delivery
pursuant to a grant, or a grant has become nonforfeitable, shall cause such
exercise, payment or delivery or nonforfeitability to be rescinded. Upon such
recision, the difference between the Fair Market Value on the date of such
exercise, payment or delivery or nonforfeitability and the price, if any, paid
by the Participant, shall be returned to the Corporation by the Participant, in
cash, within 10 days after notice of the rescission has been given to the
Participant by the Corporation's chief executive officer, chief legal officer or
chief personnel officer. Such notice may be given at any time within 2 years of
the date from such exercise, payment or delivery or nonforfeitability.
ARTICLE IV
ANNUAL INCENTIVE PROGRAM
4.1 PURPOSE. The purpose of the Annual Incentive Program ("AIP") component
of this Program is to provide for the grant of short-term performance awards to
certain key employees of the Corporation or an Affiliate based on their
attainment of predetermined goals which will further the interests of the
Corporation and its stockholders.
4.2 SPECIAL DEFINITIONS APPLICABLE TO THIS ARTICLE. For purposes of this
Article, the following terms shall be defined as set forth below:
"AIP Participant" is an employee of the Corporation or an Affiliate
participating in the AIP pursuant to Section 4.3.
"Business Unit" means the business unit in which the AIP Participant is
employed, as determined by the Committee.
4.3 PARTICIPATION. The Committee annually shall select Participants in the
AIP, based on the impact of the employee's position on Corporation performance,
the measurability of such impact, and the employee's performance and potential.
4.4 ANNUAL INCENTIVES.
(a) Determining Amount of Annual Incentives. The amount of an AIP
Participant's annual incentive award shall be determined by the
Committee in its discretion, based upon such performance factors as the
Committee may determine, including, but not limited to
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corporate, his individual, Business Unit and/or departmental
performance. The Committee shall determine annually for each AIP
Participant a target incentive award.
(b) Performance Measures. The Committee shall adopt performance measures
for each performance element used in determining an AIP Participant's
annual incentive award.
(c) Form of Annual Incentive Award. Annual incentive awards shall be paid
in cash, Stock, or any other form permitted under this Program,
following the Committee's determination of the amount of the award
based on performance results.
(d) Adjustment of Awards. In the event of special or unusual events or
circumstances affecting the application of one or more performance
measures to an annual incentive award, the Committee may revise the
performance measures and/or underlying factors and criteria applicable
to the annual incentive awards affected, to the extent deemed
appropriate by the Committee, in its sole discretion, to avoid
unintended windfalls or hardship.
(e) Termination of Employment. Subject to Section 6.4 and unless otherwise
provided in the applicable award agreement, if an AIP Participant
terminates employment with the Corporation and each Affiliate prior to
the end of a period designated for measuring performance because of
death, Disability or Retirement, such AIP Participant may, in the sole
discretion of the Committee, receive payment with respect to each
outstanding annual incentive award at the end of the applicable period
for measuring performance.
Notwithstanding the preceding, the Committee may provide for an earlier
payment in settlement of such award in such amount and under such terms and
conditions as the Committee deems appropriate.
Subject to Section 6.4, if an AIP Participant terminates employment with
the Company during a performance measurement period for any reason other than
death, Disability, or Retirement, then such AIP Participant shall not be
entitled to any payment with respect to the annual incentive awards subject to
such performance measurement period, unless the Committee shall otherwise
determine, in its sole discretion.
(f) Timing and Form of Payment. The earned portion of an annual incentive
award may be paid currently or on a deferred basis with such interest
or earnings equivalent as may be determined by the Committee, in its
sole discretion. Payment shall be made in the form of cash or whole
shares of Stock, including shares of Restricted Stock, either in a
lump sum payment or in installments commencing as soon as practicable
after the end of the relevant performance measurement period, all as
the Committee shall determine at or after grant.
(g) Effect of Annual Incentive Awards on Stock Available under this
Program. If and to the extent an annual incentive award is payable in
shares of Stock and the full amount of such value is not paid in shares
of Stock, then the shares of Stock representing the portion of the
value of the annual incentive award not paid in shares of Stock shall
again become available for award under the Program.
ARTICLE V
MANAGEMENT STOCK ACQUISITION PROGRAM
5.1 PURPOSE. The purpose of the Management Stock Acquisition Program
("MSAP") component of this Program is to provide designated management employees
with the opportunity to make deferred purchases of Stock through deferral of
income or current purchases of Stock through payment with either or both of cash
compensation and bonus, or voluntary payments of cash. In order to encourage
participation in the MSAP, the Corporation may provide matching grants or awards
under Article III for such deferrals and purchases. The MSAP shall be subject to
such terms and conditions as the Committee may determine in accordance with the
provisions of this Article.
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5.2 SPECIAL DEFINITIONS APPLICABLE TO THIS ARTICLE.
"Beneficiary" means:
(a) The person last designated as Beneficiary by the Participant in
a writing on a form prescribed by the Administrator;
(b) If there is no designated Beneficiary or if the person so
designated shall not survive the Participant, such Participant's spouse;
or
(c) If no such designated Beneficiary and no such spouse is living
upon the death of a Participant, or if all such persons die prior to the
full distribution of the Participant's Account balance, then the legal
representative of the last survivor of the Participant and such persons,
or, if the Administrator shall not receive notice of the appointment of
any such legal representative within one year after such death, the
heirs-at-law of such survivor shall be the Beneficiaries to whom the
then remaining balance of the Participant's Account shall be distributed
(in the proportions in which they would inherit his intestate personal
property).
Any Beneficiary designation may be changed from time to time by the
filing of a new form. No notice given under this Section shall be
effective unless and until the Administrator actually receives such
notice.
"Compensation" means cash or other property payable with respect to a
Plan Year to a Participant under any agreement, plan, program or
arrangement of the Corporation or an Affiliate, including an annual
incentive award under Article IV ("Award").
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
5.3 PARTICIPATION. The Committee may select employees eligible to
participate in the MSAP ("Eligible Employees").
5.4 AMOUNT OF DEFERRAL. An Eligible Employee may elect to defer a
percentage, specified by the Eligible Employee, of his Compensation. Such
deferral shall be notionally invested in Stock.
5.5 VOLUNTARY PURCHASES OF STOCK. An Eligible Employee may elect to have a
designated portion of his Compensation paid in Stock in lieu of a cash payment
of such designated portion, or may purchase Stock for cash.
5.6 MATCHING CONTRIBUTIONS AND GRANTS.
(a) The Corporation may notionally match amounts deferred pursuant to
Section 5.4 upon such terms as the Committee may provide.
(b) The Corporation may match payments of Compensation made in Stock
pursuant to Section 5.5 with awards pursuant to Article III upon such terms as
the Committee may provide.
5.7 DISTRIBUTIONS. The Committee may determine the time and manner of
payment of notional Stock purchased pursuant to Section 5.4, and of any match by
the Corporation pursuant to Section 5.6.
5.8 DIVIDENDS. The Committee may determine the time and manner of payment
and/or crediting of dividends with respect to notional Stock under this Article.
5.9 ADMINISTRATION.
(a) The MSAP shall be administered by the Committee, which shall be the
"administrator" for purposes of, and to the extent required by, ERISA. The
Committee shall have such powers as may be necessary to discharge its duties
hereunder, including, but not by way of limitation, to construe and interpret
any provision of the MSAP or related provisions of this Program or of any
related agreement, notification or document (including, without limitation, by
supplying omissions from,
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correcting deficiencies in, or resolving inconsistencies or ambiguities in the
language of the MSAP or related provisions of this Program or such agreement,
notification or document), to determine the rights and status under the MSAP of
Participants and other persons, to decide disputes arising under the MSAP and to
make any determinations and findings with respect to benefits under the MSAP and
the persons entitled thereto as may be required for the purposes of the MSAP.
(b) The Committee may, from time to time, employ and/or designate agents
and delegate to them such administrative duties as it sees fit, and may from
time to time consult with legal counsel who may be counsel to the Corporation.
No member of the Committee shall act in respect of his own Account. All
decisions and determinations by the Administrator shall be final and binding on
all parties. All decisions of the Committee shall be made by the vote of the
majority, including actions in writing taken without a meeting.
(c) All elections, notices and directions under the MSAP by a Participant
shall be made on such forms as the Committee shall prescribe.
5.10 CLAIMS PROCEDURE. To the extent required by ERISA, the Committee will
provide to any Participant or Beneficiary whose claim for benefits under the
MSAP has been fully or partially denied (the "claimant") a written notice
setting forth (a) the specific reasons for such denial, (b) a designation of any
additional material or information required and (c) an explanation of this claim
review procedure. Such notice shall state that the claimant is entitled to
request a review in writing, by the Committee, of the decision denying the
claim. The claim will be reviewed by the Committee who may, but need not, grant
the claimant a hearing. On review, the claimant may have legal representation,
examine pertinent documents and submit issues and comments in writing. The
decision on review will be made within 120 days following the request, will be
provided in writing to the claimant and will be final and binding on all parties
concerned.
ARTICLE VI
ADMINISTRATION, GENERAL PROVISIONS
6.1 ADMINISTRATION OF THIS PROGRAM. (a) This Program shall be administered
by the Compensation and Organization Committee of the Board. The Committee shall
be composed of not less than two members of the Board, each of whom shall be a
"non-employee director" within the meaning of Rule 16b-3 and an "outside
director" within the meaning of Section 162(m) of the Code. A majority of the
Committee shall constitute a quorum, and the acts of the members of the
Committee who are present at any meeting thereof at which a quorum is present,
or acts unanimously approved by the members of the Committee in writing, shall
be the acts of the Committee.
(b) The interpretation and construction by the Committee of any provision
of this Program or of any agreement, notification or document evidencing the
grant of Option Rights, Appreciation Rights, Restricted Stock or Deferred Stock,
Performance Shares and Performance Units and any determination by the Committee
pursuant to any provision of this Program or any such agreement, notification or
document, shall be final and conclusive. No member of the Committee shall be
liable for any such action taken or determination made in good faith.
6.2 AMENDMENTS AND OTHER MATTERS. (a) This Program may be amended, altered
or discontinued at anytime and from time to time by the Board, and the Committee
may amend this Program to eliminate provisions which are no longer necessary as
a result of changes in tax or securities laws or regulations, or in the
interpretation thereof; provided, however, that except as expressly authorized
by this Program no such amendment, alteration or discontinuation shall:
(i) increase the maximum number of shares specified in Section 2.1(a);
(ii) increase the limitation on value of Performance Units specified in
Section 2.1(e); or
(iii) otherwise materially increase the benefits accruing to
Participants under this Program,
without the further approval of the shareholders of the Corporation.
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<PAGE> 47
(b) The Committee shall not, without the further approval of the
shareholders of the Corporation, authorize the amendment of any outstanding
Option Right to reduce the Option Price. Furthermore, no Option Rights shall be
cancelled and replaced with grants having a lower Option Price without the
further approval of the shareholders of the Corporation.
(c) With the concurrence of the affected Optionee or Participant, the
Committee may cancel any agreement evidencing Option Rights or any other award
granted under this Program. In the event of such cancellation, the Committee may
authorize the granting of new Option Rights or other awards hereunder, which may
or may not cover the same number of shares of Stock that had been the subject of
the prior award, at such Option Price and subject to such other terms,
conditions and discretions as would have been applicable under this Program had
the cancelled Option Rights or other awards been granted.
(d) The Committee also may require Participants, or may permit Participants
to elect to, defer the issuance of shares of Stock or the settlement of awards
in cash under this Program pursuant to such rules, procedures or programs as it
may establish for purposes of this Program. The Committee also may provide that
deferred settlements include the payment or crediting of interest on the
deferral amounts, or the payment or crediting of dividend equivalents where the
deferral amounts are denominated in shares of Stock. In addition, the Committee
may provide that the deferral amounts may be credited with a notional return
during the period of deferral based upon the corresponding return on one or more
investments selected by the Committee or elected by the Participant in
accordance with the procedures established by the Committee for this purpose.
The Committee shall have the right at any time to accelerate the payment or
settlement of any grant under this Program, including, without limitation, any
grant subject to any prior deferral election.
(e) This Program shall not confer upon any Participant any right with
respect to continuance of employment or other service with the Corporation or
any Affiliate and shall not interfere in any way with any right that the
Corporation or any Affiliate would otherwise have to terminate any Participant's
employment or other service at any time.
(f) To the extent that any provision of this Program would prevent any
Option Right that was intended to qualify under particular provisions of the
Code from so qualifying, such provision of this Program shall be null and void
with respect to such Option Right; provided, however, that such provision shall
remain in effect with respect to other Option Rights, and there shall be no
further effect on any provision of this Program.
6.3 UNFUNDED STATUS OF PROGRAM. This Program is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant, Beneficiary or Optionee by the
Corporation, nothing contained in this Program shall give any such Participant,
Beneficiary or Optionee any rights that are greater than those of a general
creditor of the Corporation. In its sole discretion, the Committee may authorize
the creation of trusts or other arrangements to meet the obligations created
under this Program to deliver shares of Stock or payments in lieu of or with
respect to awards hereunder, provided, however, that, unless the Committee
otherwise determines with the consent of the affected Participant, the existence
of such trusts or other arrangements shall be consistent with the "unfunded"
status of the Program.
6.4 CHANGE IN CONTROL PROVISIONS. The Committee, in its discretion, may
provide at the time of a grant of any award under this Program that the terms of
the award, including, but not limited to, the method of determining Fair Market
Value, or the date on which an award vests or becomes exercisable, may be
modified in the event of a change in control. Except as otherwise provided under
this Program, the Committee may determine at any time at or after the grant of
an award under this Program, (a) the criteria used to determine whether a change
in control has occurred, and (b) whether a change in control has in fact
occurred.
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<PAGE> 48
6.5 ADJUSTMENTS. The Committee may make or provide for such adjustments in
the (a) number of shares of Stock covered by outstanding Option Rights,
Appreciation Rights, Deferred Stock and Performance Shares granted hereunder,
(b) prices per share applicable to such Option Rights and Appreciation Rights,
and (c) kind of shares (including shares of another issuer) covered thereby, as
the Committee in its sole discretion may in good faith determine to be equitably
required in order to prevent dilution or enlargement of the rights of
Participants that otherwise would result from (i) any stock dividend, stock
split, combination of shares, recapitalization or other change in the capital
structure of the Corporation, (ii) any merger, consolidation, spin-off,
spin-out, split-off, split-up, reorganization, partial or complete liquidation
or other distribution of assets, issuance of rights or warrants to purchase
securities or (iii) any other corporate transaction or event having an effect
similar to any of the foregoing. In the event of any such transaction or event,
the Committee may provide in substitution for any or all outstanding awards
under this Program such alternative consideration as it may in good faith
determine to be equitable under the circumstances and may require in connection
therewith the surrender of all awards so replaced. Moreover, the Committee may
on or after the Date of Grant provide in the agreement evidencing any award
under this Program that the holder of the award may elect to receive an
equivalent award in respect of securities of the surviving entity of any merger,
consolidation or other transaction or event having a similar effect, or the
Committee may provide that the holder will automatically be entitled to receive
such an equivalent award. In any case, such substitution of securities shall not
require the consent of any person who is granted awards pursuant to this
Program.
6.6 WITHHOLDING TAXES. To the extent that the Corporation is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Program,
and the amounts available to the Corporation for such withholding are
insufficient, it shall be a condition to the receipt of such payment or the
realization of such benefit that the Participant or such other person make
arrangements satisfactory to the Corporation for payment of the balance of such
taxes required to be withheld. At the discretion of the Committee, such
arrangements may include relinquishment of a portion of such benefit. The
Corporation and any Participant or such other person may also make similar
arrangements with respect to the payment of any taxes with respect to which
withholding is not required.
6.7 GENERAL PROVISIONS.
(a) The Committee may require each person purchasing shares of Stock
pursuant to an option or otherwise under this Program to represent to and agree
with the Corporation in writing that the optionee or Participant is acquiring
the shares without a view to distribution thereof. The certificates for such
shares may include any legend which the Committee deems appropriate to reflect
any restrictions on transfer.
All certificates for shares of Stock or other securities delivered under
this Program shall be subject to such stock-transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations,
and other requirements of the Exchange Act, any stock exchange upon which the
shares of Stock are then listed, and any applicable Federal or state securities
law, and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(b) Nothing contained in this Program shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases.
(c) No later than the date as of which an amount first becomes includible
in the gross income of the Participant for applicable income tax purposes with
respect to any award under this Program, the Participant shall pay to the
Corporation, or make arrangements satisfactory to the Committee regarding the
payment of, any Federal, state, or local taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined by the
Committee, the minimum required withholding obligations may be settled with
Stock, including shares of Stock that are part of
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<PAGE> 49
the award that gives rise to the withholding requirement. The obligations of the
Corporation under this Program shall be conditional on such payment or
arrangements and the Corporation shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
Participant.
(d) At the time of grant, the Committee may provide in connection with any
grant made under this Program that the shares of Stock received as a result of
such grant shall be subject to a right of first refusal, pursuant to which the
Participant shall be required to offer to the Corporation any shares of Stock
that the Participant wishes to sell, with the price being the then Fair Market
Value of the shares of Stock, subject to such other terms and conditions as the
Committee shall specify at the time of grant.
(e) The reinvestment of dividends in additional Restricted Stock (or in
other types of Program awards) at the time of any dividend payment shall only be
permissible if sufficient shares of Stock are available under ArticleII for such
reinvestment (taking into account then outstanding options and other Program
awards).
(f) The Committee shall establish such procedures as it deems appropriate
for a Participant to designate a beneficiary to whom any amounts payable in the
event of the Participant's death are to be paid.
(g) This Program and all awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Delaware,
to the extent not preempted by federal law.
6.8 EFFECTIVE DATE OF PROGRAM. This Program shall be effective on April
24, 1997; provided, however, that the effectiveness of this Program is
conditioned on its approval by an affirmative vote of the holders of shares of
Stock represented at a meeting duly held in accordance with Delaware law within
12 months after the date this Program is adopted by the Board. All awards under
this Program shall be null and void if this Program is not approved by such
stockholders within such twelve-month period.
6.9 TERM OF PROGRAM. No award under this Program shall be granted pursuant
to the Program on or after the 10th anniversary of the earlier of the date of
stockholder approval or the date this Program is adopted by the Board, but
awards granted prior to such 10th anniversary may extend beyond that date.
6.10 PROCEEDS AND EXPENSES. The proceeds received by the Corporation from
the sale of shares of Stock pursuant to the exercise of Option Rights shall be
used for general corporate purposes. The Corporation shall bear any expenses
associated with the administration of this Program.
6.11 SEVERABILITY. If any provision of this Program shall be held illegal
or invalid for any reason, such illegality or invalidity shall not affect the
remaining provisions of this Program, but this Program shall be construed and
enforced as if such illegal or invalid provision had never been included herein.
6.12 EXCLUSION FROM CERTAIN RESTRICTIONS. Notwithstanding anything in this
Program to the contrary, not more than 274,036 shares of Stock in the aggregate
available under this Program (consisting of 124,036 shares of Stock approved for
such purposes in 1994 and 150,000 shares of Stock added as of this Amendment and
Restatement) may be subject to awards pursuant to Article III:
(a) in the case of grants of Restricted Stock, which do not meet the
requirements of the last sentence of Section 3.4(c);
(b) in the case of grants of Restricted Stock, as to which the Committee
may accelerate or waive any restrictions imposed under Section 3.4(d);
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<PAGE> 50
(c) in the case of grants of Deferred Stock, which do not meet the
requirements of the last sentence of Section 3.5(c); or
(d) in the case of grants of Performance Shares and Performance Units,
which do not meet the requirements of Section 3.6(b).
The undersigned, pursuant to the approval of the Board on January 24, 1997
does herewith execute The LTV Corporation Management Incentive Program (Amended
and Restated Effective April 24, 1997).
<TABLE>
<S> <C>
ATTEST THE LTV CORPORATION
- -------------------------------------------- --------------------------------------------
Assistant Secretary Chairman of the Board of Directors
</TABLE>
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<PAGE> 51
LTV LOGO
The LTV Corporation
200 Public Square - Cleveland, Ohio 44114-2308
<PAGE> 52
THE LTV CORPORATION
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 24, 1997
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE LTV
CORPORATION ("LTV") FOR USE AT THE ANNUAL MEETING OF STOCKHOLDERS ON APRIL 24,
1997. The undersigned hereby appoints David H. Hoag and Glenn J. Moran, and
each of them, as Proxy holders and attorneys, with full power of substitution,
to appear and vote all shares of LTV Common Stock which the undersigned shall
be entitled to vote at the Annual Meeting of Stockholders of LTV to be held on
April 24, 1997, and at any adjournment or postponement thereof, hereby revoking
any and all proxies heretofore given, on all matters as may properly come
before said meeting. Each matter specified on this proxy to be voted upon has
been proposed by the Board of Directors. WITH RESPECT TO SHARES REGISTERED IN
YOUR NAME, THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS
CARD.
This card also provides confidential voting instructions for shares held in The
LTV Steel Group Employee Stock Ownership Plan ("ESOP"), The LTV Steel Stock
Bonus Plan ("Bonus Plan") and The LTV Capital Accumulation Plan ("CAP"). If you
are a participant in any of these plans and have shares of Common Stock of LTV
allocated to your account under any of these plans, please read the following
authorization to the Trustee of these plans as to the voting of such shares.
Trustee's Authorization. The undersigned authorizes Mellon Bank, N.A. as Trustee
under the ESOP, Bonus Plan or CAP, as the case may be, to vote all shares of
Common Stock of LTV allocated to the undersigned's account under such plan(s)
(as shown on the reverse side) at the Annual Meeting in accordance with the
instructions on the reverse side.
If you do not return your signed proxy card, the Trustee will vote any shares
held in the three plans in the same proportion as it votes those plan shares
with respect to which it does receive voting instructions on each matter to be
voted upon at the meeting.
Individual voting instructions will be held in confidence by the Tabulating
Agent and Trustee and will not be divulged to LTV, its employees or other third
parties.
You are encouraged to specify your choices by marking the appropriate boxes,
SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR PROPOSALS NOS. 1, 2, and 3.
- -------------------------------------------------------------------------------
-FOLD AND DETACH HERE-
THE LTV CORPORATION
ANNUAL
MEETING OF
STOCKHOLDERS
APRIL 24, 1997, 9:00 A.M.
IN AN EFFORT TO MINIMIZE THE EXPENSES ASSOCIATED WITH THE SOLICITATION OF
PROXIES, PARTICIPANTS IN THE LTV EMPLOYEE STOCK PLANS REFERENCED ON THE REVERSE
SIDE WHO ARE ALSO REGISTERED OWNERS OF LTV COMMON STOCK WILL RECEIVE ONLY ONE
PROXY CARD. IF YOU ARE A PLAN PARTICIPANT, PLEASE RETURN THE PROXY CARD ON OR
BEFORE APRIL 17, 1997 TO ENSURE THAT YOUR VOTES WILL BE COUNTED.
<PAGE> 53
Please mark [X]
your votes as
indicated in
this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
1. Election of Directors
FOR WITHHELD
[ ] [ ]
NOMINEES: Third Class: David H. Hoag, Paul G. Stern, Stephen B. Timbers,
Farah M. Walters
For, except vote withheld from the following nominee(s):
-------------------------------------------------------
2. Approval of amended and restated Management Incentive Program
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To vote to ratify the selection of auditors
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Plan to [ ]
Attend Meeting
Signature(s)__________________ Signature(s)___________________ Date _____, 1997
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
- -------------------------------------------------------------------------------
-FOLD AND DETACH HERE-
THE LTV CORPORATION
ANNUAL
MEETING OF
STOCKHOLDERS
APRIL 24, 1997, 9:00 A.M.
IN AN EFFORT TO MINIMIZE THE EXPENSES ASSOCIATED WITH THE SOLICITATION OF
PROXIES, PARTICIPANTS IN THE LTV EMPLOYEE STOCK PLANS REFERENCED ON THE REVERSE
SIDE WHO ARE ALSO REGISTERED OWNERS OF LTV COMMON STOCK WILL RECEIVE ONLY ONE
PROXY CARD. IF YOU ARE A PLAN PARTICIPANT, PLEASE RETURN THE PROXY CARD ON OR
BEFORE APRIL 17, 1997 TO ENSURE THAT YOUR VOTES WILL BE COUNTED.
