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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)(1) 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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NOTICE AND PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
LTV LOGO THE LTV CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY, APRIL 24, 1998
The LTV Corporation
200 Public Square
Cleveland, Ohio 44114-2308
- --------------------------------------------------------------------------------
The Annual Meeting of Stockholders of The LTV Corporation will be held on
Friday, April 24, 1998 at nine o'clock a.m., Boston Time, in the Amphitheater of
the World Trade Center Boston at 164 Northern Avenue, Boston, Massachusetts for
the following purposes:
1. To elect four directors;
2. To ratify the selection of Ernst & Young LLP as the Company's
independent auditors for 1998;
3. To consider and vote on a stockholder proposal described in the Proxy
Statement, if properly presented at the meeting; 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 26, 1998
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 5, 1998
<PAGE> 3
LTV LOGO
THE LTV CORPORATION
March 5, 1998
PROXY STATEMENT
The LTV Corporation
200 Public Square
Cleveland, Ohio 44114-2308
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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 Friday, April 24, 1998 (the "1998 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 1998 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 1998 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 ratification of the selection of independent auditors and against
the stockholder proposal described herein.
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 26, 1998 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 1998 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 26, 1998, there were issued and outstanding
99,818,348 shares of Common Stock and 500,000 shares of Series B Preferred
Stock.
BUSINESS AGENDA
Information relating to the election of directors is set forth immediately
below. The proposal to ratify the selection of the Company's independent
auditors is set forth at page 24. The stockholder proposal, which is also set
forth beginning at page 24, will be considered if properly presented at the
meeting.
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.
Effective July 1, 1997, J. Peter Kelly was elected by the Company's Board
of Directors to the positions of President and Chief Operating Officer of the
Company and was made a Director of the Company. Mr. Poling, age 71, whose term
as a director expires at the 1998 Annual Meeting, has reached retirement age and
is not standing for re-election. In connection with Mr. Poling's 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 1998 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 to fourteen. 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 Dr. Colin C. Blaydon, Mr. William H.
Bricker, Mr. M. Thomas Moore and Mr. Vincent A. Sarni as Directors of the First
Class for a three-year term expiring at the 2001 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, it is intended that
such shares will be voted for such substitute nominee as may be selected by the
Board of Directors. Alternatively, the Board may elect 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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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES FOR DIRECTORS.
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INFORMATION ABOUT DIRECTORS AND NOMINEES FOR DIRECTORS
The names of the directors whose terms of office will continue after the 1998
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. Harold A. Poling whose term expires at the 1998 Annual Meeting
has, as indicated above, reached mandatory retirement age and is not standing
for re-election. Ages shown are as of March 1, 1998.
- --------------------------------------------------------------------------------
Directors of the First Class Nominated for Election at the 1998 Meeting for
Terms Expiring in 2001
<TABLE>
<S> <C>
[Dr. Colin C. Blaydon Dr. Colin C. Blaydon, age 57, became a director of the
photo] Company in 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 Chairman of the Board of
ITP Systems (systems integration). He is also a director of
Valley Forge Dental, Inc. and Mercantile Trust Company 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 66, became a director of the Company
photo] in 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 Petromidia USA and 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 63, became a director of the Company in
photo] June 1993. Mr. Moore was Chairman of the Board of
Cleveland-Cliffs Inc (iron ore) from May 1988 to November
1997 and its Chief Executive Officer from January 1987 to
November 1997. He also is a director of Cleveland-Cliffs
Inc, KeyCorp (banking) and The Lubrizol Corporation
(chemical manufacturing). Chairman of the Company's Board
Affairs Committee and member of the Company's Executive and
Capital and Technology Committees.
[Vincent A. Sarni Vincent A. Sarni, age 69, became a director of the Company
photo] in June 1993. Mr. Sarni 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>
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Directors of the Second Class -- Terms Expire in 1999
<TABLE>
<S> <C>
[Edgar L. Ball photo] Edgar L. Ball, age 71, became a director of the Company in
April 1994. 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 Pension and Investment
Committees.
[John E. Jacob photo] John E. Jacob, age 63, became a director of the Company in
June 1993. 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 68, became a director of the
III photo] Company in 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.
[J. Peter Kelly photo] J. Peter Kelly, age 56, became a director and the President
and Chief Operating Officer of the Company in July 1997.
Prior thereto, he was a Group Vice President of the Company
from February 1991 to July 1997. He also has been the
President, Chief Operating Officer and a director of LTV
Steel Company, Inc. since January 1993. Mr. Kelly also
serves as a director of National City Bank.
[Samuel K. Skinner Samuel K. Skinner, age 59, became a director of the Company
photo] in June 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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Directors of the Third Class -- Terms Expire in 2000
<TABLE>
<S> <C>
[David H. Hoag photo] David H. Hoag, age 58, became Chairman of the Board of the
Company in June 1991 and Chief Executive Officer of the
Company in February 1991. He was also President of the
Company from February 1991 until July 1997. 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. Chairman of the
Company's Executive Committee.
[Dr. Paul G. Stern Dr. Paul G. Stern, age 59, became a director of the Company
photo] in June 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 53, became a director of the Company
photo] in June 1993. In February 1998, he became the President of
Northern Trust Global Investments. From 1995 through 1997,
he was 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. 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 53, became a director of the Company
photo] in June 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 and
Executive Director of University Hospitals of Cleveland. She
also is a director of Kerr-McGee Corporation (oil and gas).
Member of the Company's Audit 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 fifteen times in 1997.
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 and the internal audit function; and reviews the Company's
significant accounting policies, internal controls and financial reporting
practices. The Committee also reviews the Company's policies in respect to
business conduct, environmental operations, safety and health. The Audit
Committee met four times in 1997.
The Board Affairs Committee reviews and recommends to the Board of
Directors nominees for election to the Board. The Committee also reviews and
recommends to the Board all matters relating to its composition, terms, ethics,
procedures, compensation and benefits, committee structures and assignments, and
corporate governance and committee guidelines. The Committee also reviews and
recommends to the Board, Board compensation and benefits, monitors the
effectiveness of the Board and reviews the annual proxy statement before
publication. The Board Affairs Committee met four times in 1997.
The Capital and Technology Committee reviews and recommends to the Board of
Directors the annual capital expenditure budget, designated capital
expenditures, and reviews and recommends to the Board new business ventures. The
Committee also reviews new and emerging technologies relating to the steel
industry. The Capital and Technology Committee met five times in 1997.
The Compensation and Organization Committee determines the annual salary,
bonus and other benefits of the officers of the Company and certain subsidiary
officers, and establishes and reviews, as appropriate, executive compensation
policies and performance standards under compensation programs for such
officers. The Committee also reviews and recommends new or revised employee
benefit plans to the Board of Directors, grants stock related incentives and
administers the Company's employee benefit plans. The Committee also reviews and
recommends to the Board candidates for election as corporate officers, reviews
and monitors 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 seven times
in 1997.
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 1997.
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 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 1997.
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DIRECTOR COMPENSATION
Messrs. Hoag and Kelly receive no compensation for their services as
directors. 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 believes that the overall level of its compensation for
non-employee directors is competitive with the average level of director
compensation at other integrated flat rolled steel companies and selected
industrial companies similar in size to the Company which were reviewed by the
Board Affairs Committee.
The primary objective of the Company in paying 50% of the annual retainer
for Board service in the form of Common Stock is to further align the financial
interests of its directors with those of the Company's stockholders. The Company
also has a 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, 1997 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 % OF CLASS NOTIONAL
----------------------------- ----------------------- COMMON
SHARES OF SHARES OF STOCK
COMMON SERIES A COMMON SERIES A DERIVATIVE
NAME STOCK WARRANTS STOCK WARRANTS Securities(f)
---- --------- -------- --------- -------- -------------
<S> <C> <C> <C> <C> <C>
DIRECTORS
David H. Hoag........................ 356,463(c)(d)(e)(g) 158 (a) (a) 1,124
Edgar L. Ball........................ 2,781(d)(e) 0 (a) 0 0
Dr. Colin C. Blaydon................. 6,781(d)(e) 0 (a) 0 0
William H. Bricker................... 3,075(c)(e) 29 (a) (a) 0
John E. Jacob........................ 6,793(d)(e) 0 (a) 0 1,208
Edward C. Joullian III............... 12,817(b)(c)(e) 50 (a) (a) 0
J. Peter Kelly....................... 112,637(d)(e)(g) 0 (a) 0 1,173
M. Thomas Moore...................... 10,028(d)(e)(f) 0 (a) 0 0
Harold A. Poling..................... 6,781(d)(e) 0 (a) 0 0
Vincent A. Sarni..................... 6,781(d)(e) 0 (a) 0 0
Samuel K. Skinner.................... 6,891(e) 0 (a) 0 0
Dr. Paul G. Stern.................... 6,781(d)(e) 0 (a) 0 0
Stephen B. Timbers................... 14,469(e) 0 (a) 0 0
Farah M. Walters..................... 6,781(d)(e) 0 (a) 0 0
THREE OTHER OFFICERS NAMED IN
SUMMARY COMPENSATION TABLE
Arthur W. Huge....................... 60,832(d)(e)(g) 0 (a) 0 791
Glenn J. Moran....................... 39,211(d)(e)(g) 0 (a) 0 807
James F. Haeck....................... 41,127(d)(e)(g) 0 (a) 0 904
All current directors and executive 794,556(c)(d)(e)
officers (22 including above)...... 248 (a) (a) 8,378
</TABLE>
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(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 restricted 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 -- 69,850 shares; Mr.
Kelly -- 12,220 shares; Mr. Huge -- 5,900 shares; Mr. Moran -- 4,950 shares;
Mr. Haeck -- 5,500 shares and All Current Directors and Executive Officers
as a Group -- 107,503 shares. Additionally, the amounts shown for Messrs.
Ball, Blaydon, Jacob, Moore, Poling, Sarni, and Stern and Mrs. Walters
include 1,781 notional shares payable in Common Stock. Additional amounts of
such notional stock included for other individuals named in the table are as
follows: Mr. Hoag -- 1,945 shares; Mr. Kelly -- 3,112 shares; Mr.
Skinner -- 760 shares; Mr. Haeck -- 1,296 shares and Mr. Moran -- 388
shares. 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) -- 4,000 shares;
Messrs. Ball and Bricker -- 1,000 shares; Mr. Hoag -- 259,999 shares; Mr.
Kelly -- 89,000
9
<PAGE> 12
shares; Mr. Huge -- 48,338 shares; Mr. Moran -- 30,499 shares; Mr.
Haeck -- 31,919 shares and All Current Directors and Executive Officers as a
Group -- 574,663 shares.
(f) 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.
(g) In addition, the named executive officers have purchased shares of Common
Stock in the following amounts using a portion of their payments made in
February 1998 under the Company's Annual Incentive Plan: Mr. Hoag -- 14,507
shares; Mr. Kelly -- 7,461 shares; Mr. Huge -- 2,686 shares; Mr. Moran --
2,487 shares and Mr. Haeck -- 994 shares. Such shares were matched on a
one-for-four share basis pursuant to the terms of the Company's Management
Stock Acquisition Program.
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,
together with its existing shares of the Company's Common Stock, could acquire
up to 6,253,908 shares or more than 6% 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 1998, the Company was notified that affiliates of Franklin
Resources, Inc. owned beneficially 6,880,300 shares of Common Stock of the
Company. As to such shares, Franklin Advisory Services, Inc. and Franklin Mutual
Advisers, Inc. had the sole power to vote or direct the vote of 3,710,000 and
2,538,300 shares, respectively, and the sole power to dispose or direct the
disposition of 4,342,000 and 2,538,300 shares, respectively.
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 1997.
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 1997 645,000 280,000 21,984 107,400 0 243,724
Chairman and Chief 1996 600,000 316,000 0 61,000 0 224,461
Executive Officer 1995 587,500 340,000 0 70,000 0 48,740
J. Peter Kelly 1997 430,000 212,000 14,541 46,500 0 181,075
President and Chief 1996 390,417 216,000 0 19,500 0 151,293
Operating Officer 1995 343,750 201,000 109,200 19,500 0 111,122
Arthur W. Huge 1997 316,700 162,000 5,050 28,700 0 110,402
Senior Vice President 1996 296,000 184,000 0 9,170 0 99,434
& Chief Financial Officer 1995 241,000 135,000 0 9,170 0 50,781
Glenn J. Moran 1997 234,333 115,000 4,780 15,500 0 64,668
Senior Vice President, 1996 225,333 113,000 0 7,750 0 65,657
General Counsel 1995 221,000 115,000 0 7,750 0 48,258
and Secretary
James F. Haeck 1997 234,850 129,000 3,324 15,500 0 83,343
Senior Vice President- 1996 227,333 121,000 0 7,750 0 71,304
Commercial 1995 209,167 125,000 0 7,750 0 51,784
</TABLE>
- ---------------
(1) The number of shares and year-end value of restricted Common Stock awards
held as of December 31, 1997 were as follows: Mr. Hoag -- 70,282 shares and
$694,035; Mr. Kelly -- 12,911 shares and $127,496; Mr. Huge -- 5,900 shares
and $58,263; Mr. Moran -- 5,036 shares and $49,731 and Mr. Haeck -- 5,788
shares and $57,157. Included in these amounts are deferred restricted stock
awards accrued in the form of notional stock and payable in shares of Common
Stock which are subject to a 10% forfeiture provision for early withdrawal.
Dividends are payable on restricted stock awards to the same extent as all
other shares of Common Stock. All restricted stock awards granted under the
Company's Amended and Restated Management Incentive Program, except for
awards of matching restricted shares under the Company's Management Stock
Acquisition Program, vest on the fifth anniversary of the date of grant.
Restricted stock awards granted under the Company's Management Stock
Acquisition Program vest on the third 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 1997: Mr.
Hoag -- $37,845, $188,535, $5,344 and $12,000; Mr. Kelly -- $24,405,
$143,126, $5,344 and $8,200; Mr. Huge -- $15,010, $90,048, $5,344 and $0;
Mr. Moran -- $10,254, $49,141, $5,273 and $0; and Mr. Haeck -- $11,766,
$61,673, $5,284 and $4,620.
11
<PAGE> 14
The following table sets forth certain information concerning options to
purchase Company Common Stock granted in 1997 to the five individuals named in
the Summary Compensation Table.
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED
ANNUAL RATES OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM(3)
--------------------------------------------------- -----------------------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE OR
OPTIONS IN FISCAL BASE PRICE EXPIRATION
NAME GRANTED YEAR(1) ($/SHARE)(2) DATE 0%($) 5%($) 10%($)
---- ---------- ---------- ------------ ---------- ----- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
David H. Hoag 107,400 6% 12.875 4/25/07 0 869,618 2,203,741
J. Peter Kelly 46,500 3% 12.875 4/25/07 0 376,511 954,134
Arthur W. Huge 28,700 2% 12.875 4/25/07 0 232,384 588,895
Glenn J. Moran 15,500 1% 12.875 4/25/07 0 125,504 318,045
James F. Haeck 15,500 1% 12.875 4/25/07 0 125,504 318,045
All Common Stock
Holders(4) 99,879,785 -- -- -- 0 808,726,619 2,049,433,308
</TABLE>
- ------------
(1) A total of 1,718,600 options were granted to employees in 1997. With respect
to those options granted under the Amended and Restated Management Incentive
Program (816,500 shares), one-third of the options becomes exercisable on
April 25, 1998, one-third on April 25, 1999 and one-third on April 25, 2000,
unless the vesting schedule is accelerated to become fully exercisable upon
death, retirement, disability or a change in control as defined in the
Amended and Restated 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. (With
respect to those options granted under the Salaried Employee Stock Option
Plan (902,100 shares), all such options become exercisable on January 24,
2000, three years from the grant date. No stock ownership is required in
connection with such grants.) 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. With respect to options granted under the Amended and
Restated Management Incentive Program, 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 the closing price of a share of Common Stock
as reported on the New York Stock Exchange on the date of grant ($12.875).
(3) The dollar amounts under these columns are the result of theoretical
calculations at 5% and 10% rates set by the Securities and Exchange
Commission, and therefore are not intended to forecast possible future
appreciation, if any, in the Company's stock price.
(4) The potential realizable value for all stockholders is based on 99,879,785
shares of Common Stock outstanding at December 31, 1997.
12
<PAGE> 15
The following table sets forth certain information concerning the exercise
in 1997 of options to purchase Company Common Stock by the individuals named in
the Summary Compensation Table and the unexercised options to purchase Company
Common Stock held by such individuals at December 31, 1997.
AGGREGATED OPTION EXERCISES IN 1997 AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE OPTIONS GRANTED AT YEAR END AT YEAR END($)(1)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David H. Hoag 0 0 259,999 171,401 0 0
J. Peter Kelly 0 0 89,000 66,000 0 0
Arthur W. Huge 0 0 48,338 37,872 0 0
Glenn J. Moran 0 0 30,499 23,251 0 0
James F. Haeck 0 0 31,919 23,251 0 0
</TABLE>
- ------------
(1) The value is calculated based on the aggregate amount of the excess of
$9.875 (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, 1997) over the relevant exercise price.
LONG-TERM INCENTIVE PLAN -- AWARDS MADE IN 1997
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS OF PERFORMANCE SHARES
NUMBER OF PERFORMANCE PERIOD -----------------------------------------------
PERFORMANCE UNTIL MATURATION NO AWARD THRESHOLD TARGET MAXIMUM
NAME SHARES OR PAYOUT (#) (#) (#) (#)
---- ----------- ------------------ ---------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
David H. Hoag 28,000 1997-2001 0 9,333 28,000 84,000
J. Peter Kelly 12,100 1997-2001 0 4,033 12,100 36,300
Arthur W. Huge 7,500 1997-2001 0 2,500 7,500 22,500
Glenn J. Moran 4,000 1997-2001 0 1,333 4,000 12,000
James F. Haeck 4,000 1997-2001 0 1,333 4,000 12,000
</TABLE>
The number of performance shares earned will be determined on the basis of
the Company's total stockholder return (share price appreciation plus reinvested
dividends) over a four-year performance period as compared to the companies
composing the peer group as set forth in the Performance Graph (Armco/AK Steel,
Bethlehem Steel, Inland, National Steel, Weirton, Wheeling-Pittsburgh and
USX-Steel Group) plus Nucor and the Company. The Committee has established an
award achievement schedule for determining the actual shares earned, which will
vary between threshold and maximum levels based on performance. Payment of
shares generally will be made in shares of Common Stock as soon as practicable
after the end of the performance period.
No Award: If the Company's total stockholder return ranks sixth or worse
among the nine steel companies listed above, no performance shares will be
earned.
Threshold Award: The amounts shown in the table represent the number of
shares paid if the Company's total stockholder return ranks fifth among the nine
steel companies listed above and total stockholder return for the period is
negative. (If the Company's total stockholder return is negative for the period,
any performance share award otherwise earned is reduced by two-thirds in
amount.)
13
<PAGE> 16
Target Award: The target award will be earned if the Company's total
stockholder return ranks fifth among the nine steel companies listed above, and
total stockholder return for the period is positive.
Maximum Award: The maximum award will be earned if the Company finishes
with the highest total stockholder return among the steel companies listed
above, and total stockholder return for the period is positive.
During the performance period, participants will be credited with dividend
equivalents which will be used to grant additional performance shares that will
be subject to the same performance requirements and the same terms and
conditions.
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.
Nineteen executives of the Company and its subsidiaries (including Messrs.
Kelly, Huge, Moran and Haeck) currently are included in the Restated Plan. Mr.
Hoag is not 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 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
14
<PAGE> 17
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, 1997, the annualized compensation of Messrs. Hoag, Kelly,
Huge and Moran covered by the Benefit Plan was approximately $1,089,000,
$742,500, $523,840 and $393,600, respectively. As of December 31, 1997, Messrs.
Hoag, Kelly, Huge and Moran were credited with 14, 8, 5 and 5 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 the Company 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.
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
is a participant in the Company's broad-based defined contribution plan, and
those contributions for 1997 are included in the amounts shown in the Summary
Compensation Table.
15
<PAGE> 18
Executive Severance Pay Plan
The Company has an Executive Severance Plan (the "Severance Plan") which
provides severance benefits for certain key executives (including Messrs. Hoag,
Kelly, Huge, Haeck and Moran) if the executive's employment is involuntarily
terminated for reasons other than cause. 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 and/or payments made under the Change in Control Severance
Pay Plan described below. 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.
Executive Change in Control Severance Pay Plan
To promote stockholder interests and insure a totally objective focus on
the Company's business, the Board of Directors implemented in October 1997 an
Executive Change in Control Severance Pay Plan (the "CIC Plan") which covers the
senior executives of the Company and certain senior executives of its
subsidiaries, including Messrs. Hoag, Kelly, Huge, Haeck and Moran. The purposes
of the CIC Plan are to assure continuity of management by establishing certain
minimum severance benefits for such executives in the event of a "change in
control" (as defined below), and to insure that such executives discharge their
duties in respect of any proposed or actual change in control without concern
for their personal employment security. Benefits are payable under the CIC Plan
only if a change in control has occurred and within 24 months thereafter a
covered executive's employment is terminated by the Company other than for cause
(as defined) or, in the case of Messrs. Hoag, Kelly, Huge and Moran, if the
executive terminates his employment for good reason. Good reason is defined in
the CIC Plan as an adverse change in the executive's position, authority,
responsibilities, salary or incentive targets, benefits, location of employment
or travel schedule.
Benefits payable under the CIC Plan include the following: a lump sum
payment equal to two times the executive's current base salary and annual
incentive target award (three times in the case of Messrs. Hoag and Kelly), the
continuation of certain welfare plans, and the provision of financial counseling
and outplacement services. Further, the Company will make an additional payment
in an amount such that, after the payment of all income and excise taxes, the
executive will be in the same after-tax position as if no excise tax under the
Internal Revenue Code had been imposed.
In addition, upon an executive's termination under the terms of the CIC
Plan, awards under the Company's Amended and Restated Management Incentive
Program, and any successor or similar plan, will accelerate, including the
vesting of stock options, the release of restrictions on restricted stock, and
the receipt of performance share awards for the measurement period not yet
expired or otherwise not vested, earned as if management objectives have been
met at the target level. The terminated executive would also receive a
retirement contribution based on the amount of the lump sum payment and a lump
sum payment equal to the executive's balance under the LTV Executive Deferred
Compensation Plan. As a condition to receiving such benefits, the executive must
enter into certain confidentiality, non-solicitation and non-competition
agreements. Payments under the CIC Plan are in lieu of payments under the
Severance Plan described above.
16
<PAGE> 19
For purposes of the CIC Plan, any of the following events will be deemed to
be a change in control of the Company: (a) acquisition by a person or entity
(excluding certain qualified owners such as a Company employee benefit plan or
an owner whose acquisition was approved by the then incumbent Board) of 15% or
more of the Company's voting securities (as defined); (b) change in more than
one-half of the incumbent Board of Directors or their approved successors; (c)
consummation of a reorganization, merger or consolidation of, or sale of
substantially all of the assets of, the Company or its principal steelmaking
subsidiary, LTV Steel Company, Inc., unless substantially all stockholders
receive two-thirds or more of the stock of the resulting entity, a majority of
the Board of Directors of the resulting entity were members of the incumbent
Board, and no person or entity owns more than 20% of the stock of the resulting
company; or (d) liquidation or dissolution of the Company.
The CIC Plan provides for a rolling three-year term, which is automatically
extended on each anniversary of the CIC Plan unless the Company gives notice
that it does not intend to extend the term of the CIC Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Contracts and Certain Commercial Relationships
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, were conducted on an arm's
length basis and on terms competitive with those generally available in the
marketplace at the time.
In 1997, the Company paid $23.5 million for technical assistance and other
fees, steel mill product and interest and dividends on convertible notes and
preferred stock and sold $19.5 million of steel product to Sumitomo and its
affiliates. 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 $109.7 million in processing fees to the
electro-galvanizing partnerships in 1997, and such partnerships paid an
aggregate of $4.6 million in rent and related fees to the Company in 1997.
Additionally, during 1997, the Company redeemed $100 million principal amount of
convertible notes held by a subsidiary of Sumitomo for $106.4 million. Sumitomo
and its affiliates are a significant stockholder of the Company. See "Security
Ownership of Directors, Management and Principal Stockholders."
17
<PAGE> 20
COMPENSATION AND ORGANIZATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Introduction
The Compensation and Organization Committee of the Board of Directors,
composed exclusively of independent, non-management directors, has the
responsibility to review and approve compensation and benefit programs 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 Towers Perrin, an internationally recognized 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 has set forth the following principles that underlie
compensation awards:
In order to align the interests of its executives with those of the
Company and its stockholders, a substantial portion of executive
compensation should be "at risk" and based upon stock price and the
attainment of pre-set performance goals established by the Committee.
The Company's compensation program should strongly encourage
significant management ownership of the Company's Common Stock.
The senior management compensation program should be competitive.
In implementing these principles, 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 Armco/AK
Steel, Bethlehem Steel, Inland, National Steel and USX-Steel Group -- the
"Compensation Comparison Group"). The companies in the Compensation Comparison
Group plus Wheeling-Pittsburgh and Weirton are the companies in the Performance
Graph (the "Performance Graph Companies"). The Committee also reviews
compensation practices of both a broader group of steel companies, which
consists of the Performance Graph Companies plus Nucor, and comparably sized
companies in general industry.
Overview of LTV Senior Management Compensation Program
The mix of salary, annual incentive and long-term incentive varies based on
management level and on competitive market practices. For positions with major
corporate responsibility, including those executive officers named in the
Company's Summary Compensation Table ("Named Executives"), between 55% and 70%
of the value of target total direct compensation (salary, annual incentive and
long-term incentives) is represented by at risk annual and long-term incentives
(with the balance in salary). For positions with lesser impact, salary
represents a higher proportion of total direct compensation.
During 1997 the Company implemented a number of changes to the long-term
portion of its executive compensation program which are discussed later in this
report. These changes, which were approved by stockholders in April 1997 as part
of the Amended and Restated Management Incentive Program ("AMIP"), are designed
to further enhance the alignment between pay and performance and between
management goals and stockholder value. The Committee has broad discretion
within the limitations of the AMIP to administer its provisions.
18
<PAGE> 21
Salary level is determined based on an unweighted consideration of:
- The responsibilities of the position.
- Experience of the incumbent.
- Individual and Company performance.
- Competitive salary levels of the Compensation Comparison Group.
The Annual Incentive Program ("AIP") rewards individuals for:
- Success in meeting specific corporate objectives.
- Successful individual performance.
The Long-Term Incentive Program ("LTIP") 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 addition to existing
awards consisting of stock options and restricted stock (regular grants of
restricted stock were eliminated in 1997), and individual stock ownership
targets originally adopted in 1993, this alignment was strengthened in 1997 by:
- Introduction of a performance share plan for a group of approximately
25 senior managers (including the Named Executives), which provides
payment of awards only if the total stockholder return on the Common
Stock equals or exceeds the median total stockholder return for the
Performance Graph Companies plus Nucor and the Company over a
four-year period. Total stockholder return is measured by appreciation
in stock price plus reinvested dividends.
- Increased individual stock ownership targets.
- Implementation of the Management Stock Acquisition Program.
In its entirety, the senior management compensation program is expected to
focus executives on creating 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.
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 1997, 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 are targeted in the middle range of the Compensation Comparison
Group. 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 and similarly sized general industry companies), the experience of the
incumbent, the performance of the incumbent and the performance of the Company.
Annual Incentive Opportunity
The Annual Incentive Program rewards individuals for meeting annual
corporate and individual objectives. Under the AIP, weighted objectives (using
performance measurements and goals) are established in advance each year by the
Committee. The Committee has currently set annual incentive "targets" which are
5 to 10 percentage points above the middle range of annual incentive targets for
the Compensation Comparison Group, which reflects the risk that payments under
the
19
<PAGE> 22
AIP may be less than target levels because the Committee has established
aggressive performance targets. Annual 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.
The Committee, working with senior management, is responsible for measuring
the attainment of all corporate and individual objectives and goals 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 Common Stock.
For 1997, the Committee established the following financial objectives and
other focus objectives (which will change from year to year). The Committee
placed its primary emphasis on return on net assets ("RONA") relative to an
internal standard, and adjusted earnings per ton relative to the Performance
Graph Companies. The weight of these two measures comprises 70% of the total,
each providing 35%. The remaining 30% weight was allocated equally to various
internal objectives including safety, customer satisfaction, product quality,
cost reduction, plant profitability and business process redesign. 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
The Company's LTIP provides compensation tied to stock performance and
encourages executives to increase their holdings of Common Stock. Prior to 1997,
the LTIP consisted of stock option and restricted stock grants. Long-term
incentive target levels during this period (1994-1996) were fixed in 1994 based
on the middle range of competitive practice in the Compensation Comparison Group
at the time the target levels were established (1994). Since that time, the
Company has maintained fixed grant levels while grant levels in the Compensation
Comparison Group and comparably sized companies in general industry have
increased significantly. As a result, new increased target long-term incentive
levels were established in 1997. The higher targets are intended to position the
Company within the range of current competitive practice for the Compensation
Comparison Group and comparably sized companies in general industry. The
inclusion of general industry data reflects the growing influence of broader
industry practice on the Company's ability to attract and retain senior
executives. The higher targets also recognize the increased risk associated with
the introduction of performance shares and the elimination of regular grants of
restricted stock. These new long-term incentive targets provide more competitive
pay opportunities and result in a greater portion of each executive's total
compensation being at risk and tied to Company performance. Actual total direct
compensation under the LTIP is a function of the Company's performance against
its objectives, changes in the value of the Company's Common Stock and
individual performance.
The Company also introduced a new performance share grant in 1997, which
was approved by stockholders in April 1997 as part of the LTIP portion of the
AMIP. This grant is intended to increase the emphasis of performance-based pay
by providing awards only if the Company's total stockholder return over a
four-year period equals or exceeds the median total stockholder return for the
Performance Graph Companies (Armco/AK Steel, Bethlehem Steel, Inland, National
Steel, Weirton, Wheeling-Pittsburgh and USX-Steel Group) plus Nucor and the
Company. The ultimate value of the awards is based on the Company's total
stockholder return relative to the stockholder returns of such companies.
In total, the expected value at grant of stock options and performance
shares is intended to result in target long-term incentive awards within the
range of current competitive practice for the
20
<PAGE> 23
Compensation Comparison Group and comparably sized companies in general
industry. For those executives who receive grants of performance shares
(including each Named Executive), stock options represent approximately 70% of
the target value, and performance shares make up the remaining 30%. For all
other participants, the entire long-term incentive value is provided through
stock options.
The Company made two additional changes to its executive compensation
program in 1997 to encourage greater stock ownership among executives. Executive
stock ownership guidelines were doubled for most senior executives (including
each of the Named Executives). This results in target ownership levels in excess
of two times base salary at the time the guidelines were adjusted. These
guidelines must be met by December 31, 1999 in order for the executive to
continue to be eligible for future grants under the LTIP.
The Company also introduced a Management Stock Acquisition Program for 1997
and 1998. Prior to the introduction of this program, the ability of executives
to purchase the Company's Common Stock had been limited by the Company's
bankruptcy and reorganization, which ended in 1993. This program is intended to
encourage executives to increase their holdings of the Company's Common Stock
through direct purchases or exchanges of current cash compensation on a deferred
basis for the Company's Common Stock. For every four shares of Common Stock
acquired under this program, the Company grants the executive one restricted
share. If the acquired shares are held for a minimum of three years, the
restrictions are lifted on the restricted shares. All of the Named Executives
participated in this program during 1997.
The Committee believes that its executive compensation program, with the
changes made in 1997, further enhances the alignment of management's interests
with those of the stockholders.
1997 Corporate Performance and CEO Compensation
Mr. Hoag's salary was increased in 1997 from $600,000 to $660,000. The last
change to Mr. Hoag's salary was in 1995. The increase was made to maintain Mr.
Hoag's salary within 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 $280,000 is based upon 1997
performance against the goals discussed earlier under the section titled "Annual
Incentive Opportunity".
In 1997, a stock option for 107,400 shares was granted to Mr. Hoag under
the LTIP. In addition, Mr. Hoag was granted 28,000 performance shares for the
1997-2001 cycle of the new performance share plan. In combination, these grants
have an expected value equivalent to the target value established in 1997
required to position the CEO's long-term incentive at the middle range of
competitive practice in the steel and general industries. Mr. Hoag also deferred
$196,000 of cash compensation with respect to 1997 compensation into Company
Common Stock and received 5,308 shares of restricted stock under the Management
Stock Acquisition Program. The Committee believes that these actions, in
conjunction with prior grants and existing stock ownership, place Mr. Hoag's
interests in direct alignment with the Company's stockholders.
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.
21
<PAGE> 24
Conclusion
The Committee believes the compensation program was prudently administered
during 1997 and that the overall design, including changes made and approved by
stockholders during 1997, and objectives of the program are consistent with the
long-term interests of the Company and its stockholders.
THE COMPENSATION AND ORGANIZATION COMMITTEE
STEPHEN B. TIMBERS--CHAIRMAN
WILLIAM H. BRICKER
JOHN E. JACOB
EDWARD C. JOULLIAN III
VINCENT A. SARNI
22
<PAGE> 25
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-93 100.000 100.000 100.000
DEC-93 104.943 101.575 102.130
DEC-94 106.373 103.937 85.920
DEC-95 146.183 86.614 79.730
DEC-96 179.644 74.892 72.180
DEC-97 239.536 62.390 72.680
</TABLE>
PEER GROUP: MARKET WEIGHTED INDEX COMPRISED OF ARMCO/AK STEEL, BETHLEHEM STEEL,
INLAND, NATIONAL STEEL, WEIRTON, WHEELING-PITTSBURGH AND USX-STEEL GROUP.
CLOSING PRICE INDEXED ON JUNE 29, 1993=100
23
<PAGE> 26
- --------------------------------------------------------------------------------
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, 1998. The Board of Directors will offer
a resolution at the 1998 Annual Meeting to ratify this selection. It is
anticipated that representatives of Ernst & Young LLP will be present at the
1998 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 PROPOSAL
Two stockholders have stated their intention to present the following
proposal at the Annual Meeting. The proposal and the proponents' statement in
support thereof, for which the Company accepts no responsibility, are set forth
below along with the reasons why the Company's Board recommends a vote AGAINST
the proposal.
The following proposal was submitted by Mr. Ron Flors, 7462 Bradenton
Boulevard, Parma, Ohio 44134 and Mr. Sulliman Thornton, 136 Talbot Drive,
Bedford, Ohio 44146:
"RESOLVED: That the shareholders of The LTV Corporation (the "Company")
urge the Board of Directors to take the necessary steps to terminate
prospectively the Company's Amended Management Incentive Plan ("Management
Incentive Plan," "the Plan"), which became effective April 24, 1997, and
submit a new Plan for shareholder approval after conducting a comprehensive
review of the Company's management compensation policies."
SUPPORTING STATEMENT OF PROPOSING STOCKHOLDERS: "This resolution will
promote a more effective alignment of interests between the Company's managers
and shareholders by urging the Board to terminate its existing Management
Incentive Plan and devise a new one. We believe the current Plan is too large,
needlessly complex, inadequately governed, and, as presently devised, has too
great a dilutive effect on shareholder value.
Since April 24, 1997, the amount of stock available, issued or outstanding
to the Company's managers has more than doubled to over 9.25 million shares,
amounting to 8.7% of the current outstanding stock of the Company. Under the
existing Plan, one manager could be awarded 1 million shares of stock in one
year and can receive $2.5 million in "performance units" of compensation.
The Amended Management Incentive Plan was privately approved by the Board
of Directors on January 24, 1997, the same day the Board publicly announced a
Plan to repurchase up to $75 million of the Company's common shares. The
publicly stated purpose of the repurchase plan was to increase shareholder
value. However, virtually all of the stock repurchased appears to have been, in
effect, re-registered and made available for re-distribution to key management
employees of the Company.
We believe that the Management Incentive Plan has failed shareholders.
Since the original Plan was approved by stockholders on April 29, 1994 to
November 11, 1997, the value of the Company's common stock has declined. In
addition, through October, 1997, shareholder return for the Company's common
stock has lagged behind its peer group for the trailing 12 months.
We also find that the Management Incentive Plan is long on compensation
techniques and short on specific performance requirements. The long-term
incentive component of the Plan alone features option rights, tandem
appreciation rights, free standing appreciation rights, restricted stock
24
<PAGE> 27
grants, deferred stock grants, divided equivalents, performance shares, and
performance units. Its complex compensation techniques make the Management
Incentive Plan difficult for shareholders to monitor. The Compensation and
Organization Committee of the Board is also given too much leeway in determining
the size of the incentive awards.
In sum, we believe the current Management Incentive Plan has failed and
will continue to fail to promote shareholder value and therefore should be
terminated. Accordingly, the Board of Directors should also be urged to take the
steps necessary to devise a new Plan. Shareholders who have seen the value of
their investment in the Company stagnate since the Management Incentive Plan
became effective in 1994 can ill-afford a further dilution of the value of their
investment envisioned in the Amended Management Incentive Plan.
For the above reasons, we urge a vote FOR the resolution."
RECOMMENDATION OF DIRECTORS AGAINST THE PROPOSAL
THE BOARD OF DIRECTORS ASKS THAT YOU VOTE AGAINST THIS PROPOSAL. (MR. BALL
VOTED AGAINST SUCH RECOMMENDATION.)
The Company's Board of Directors (12 of 14 of whom are independent
non-management directors) believes that the Company's Amended and Restated
Management Incentive Program (the "Plan") is in the best interests of the
Company and its stockholders. The Plan is a key part of the Company's strategy
to enhance stockholder value. The Plan resulted from an exhaustive review of
management compensation design practices among major integrated steel companies
and leading U.S. companies, as well as the business needs of the Company,
conducted by the Board's Compensation and Organization Committee, which is made
up entirely of independent outside directors (the "Committee"). The amended
Plan, which was overwhelmingly approved by stockholders at the Company's 1997
Annual Meeting of Stockholders, contains numerous provisions designed to tie
directly the interests of the Company's management with the Company's
stockholders.
The Plan has three components, each of which is 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 the Company's Common Stock; a Management Stock Acquisition Program,
which provides the opportunity to elect (prior to July 11, 1998) to purchase
shares of Common Stock with matching grants of restricted 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 major features of the Plan are discussed in the
Committee's Report on Executive Compensation included in this Proxy Statement.
These amendments were carefully considered and discussed by the Committee
over two and one-half years, including eight formal meetings and consideration
of numerous materials submitted by management and independent compensation
experts at the internationally recognized firms of Towers Perrin and Jones, Day,
Reavis & Pogue. The Committee is responsible for administering the Plan and,
similar to the practice at many other organizations, retains the discretion to
amend the Plan or determine final awards under the Plan with the exception of
the following actions, which are subject to stockholder approval:
- Increase in the maximum number of shares available under the Plan
- Direct or indirect repricing of options
- Exceeding limits on number of non-performance vested restricted stock,
deferred stock and performance shares
- Exceeding limits on number of stock options or performance shares that
may be granted to any person
25
<PAGE> 28
Prior to approving the Plan, the Committee reviewed a series of analyses
regarding the financial impact of the Plan, particularly the stock-based
components, on the Company and its stockholders. The strength of the alignment
between compensation opportunities for management and stockholder returns was
assessed by examining, under a wide range of performance scenarios, the
potential gains that would accrue to management under the Plan as a percent of
the total change in stockholder value, the impact of changes in the Company's
stock price on management's investment in Common Stock, and the total dilution
of the Plan. In each case, the Plan's cost to LTV stockholders for the
executives named in the summary compensation table was comparable to the cost of
incentives paid to those executives named in the summary compensation tables at
the companies included in the Company's Compensation Comparison Group (as
defined in the Committee Report).
A compensation system should, and the Board believes the Plan does, provide
competitive pay opportunities only when the goals that contribute to the
creation or preservation of stockholder value are achieved. The Plan's purpose
is to reward management based on its success in implementing the Company's
strategic plan, which is expected to significantly increase long-term value for
both stockholders and management of the Company. The effectiveness of this
alignment of stockholders' and management interests is demonstrated by the fact
that management can realize no value from the options unless the stock
appreciates from the stock price at date of grant.
The Company's Board of Directors asks that you vote AGAINST the proposal
for the foregoing and the following principal reasons:
THE PLAN IS CONSISTENT WITH CONTEMPORARY MANAGEMENT COMPENSATION PRACTICES
AMONG PUBLICLY HELD U.S. COMPANIES: The Plan was designed to reflect and is
consistent with contemporary practice with respect to management compensation
practices among public U.S. companies. The Company believes, based on its
contacts with these groups, that most financial analysts and large institutional
stockholders view the following Plan design features as supportive of
stockholders' interests:
- Stock options
- Cash incentives based on a goal-driven process -- based on return on net
assets ("RONA") and profits for 1997, as well as various operational
items
- Performance shares
- Stock ownership requirements
According to Towers Perrin, based on a sample of S&P 500 companies,
approximately 70% of U.S. companies have management incentive plans that allow
the use of a variety of incentive types such as those authorized under the Plan
as this design provides flexibility necessary to manage compensation issues as
they arise.
THE PLAN IS PERFORMANCE FOCUSED, DESIGNED TO PROVIDE COMPETITIVE
COMPENSATION TO MANAGEMENT ONLY IF COMPANY AND INDIVIDUAL PERFORMANCE MEET OR
EXCEED INTERNAL STANDARDS OR THE PERFORMANCE OF A GROUP OF COMPETITORS (AS
DEFINED IN THE COMMITTEE REPORT): The Plan is designed to provide target award
opportunities that are within the range of competitive practice for the
Compensation Comparison Group (as defined in the Committee Report) for
comparable performance. Specifically, each Plan element is designed to deliver
competitive pay levels only if the Company's performance equals or exceeds
internal and external performance standards. Specific performance-based elements
include:
- Annual cash incentive: awards are currently based primarily on the
Company's profits relative to a group of competitors (as defined in the
Committee Report) and RONA relative to the Company's cost of capital.
Below target payments may be made if performance standards are not
achieved; however, no awards are paid unless the Company is profitable
26
<PAGE> 29
- Stock options: management receives value only if the Company's stock
price appreciates over time
- Performance shares: participating management (limited to approximately
25 senior executives) receive value only if the Company's total
stockholder return (as defined in the Committee Report) equals or exceeds
median total stockholder return among a group of nine steel companies
over a four-year period
THE PLAN REQUIRES STOCK OWNERSHIP BY MANAGEMENT: In addition to these
performance elements, the Plan requires management to maintain specific stock
ownership levels, based on a multiple of salary at the time the levels were
established, in order to continue participation in the long-term incentive
portion of the Plan. For most participants, stock-based incentive awards will
not be sufficient to meet these ownership levels. As a result, management must
purchase shares outside the incentive portion of the Plan. This requirement
builds true economic risk for the management participants into the Plan by
linking directly the personal economic well being of management to the value
created for stockholders.
THE "COST" OF THE PLAN, IN TERMS OF DILUTION AND AS A PERCENT OF EARNINGS,
IS WELL WITHIN TYPICAL PRACTICE ACROSS U.S. INDUSTRY: The total shares allocated
for use under the Plan amount to slightly less than 9% of total shares
outstanding as of the time the Plan was approved, without the effect of stock
buybacks. Of these, approximately 4% was approved by stockholders in 1994 under
the Company's original Management Incentive Plan and the remaining 5% was added
as part of the Plan approved by stockholders in 1997. According to studies
conducted by and available to Towers Perrin, the typical percentage of shares
allocated for this purpose by companies across U.S. industry of like size to the
Company is equal to or in excess of 10%. Among the Company's Compensation
Comparison Group (as defined in the Committee Report), the percentage ranges
from 2.2% to 10.8%.
According to a recent Towers Perrin study, general industry companies spend
between 2% and 10% of after tax net income on management annual incentive
awards, with a median payout of 5.1% for companies of similar size to the
Company. Over the past three years, awards earned under the Company's current
and predecessor annual cash incentive plans, expressed as a percentage of
Company earnings, have averaged below the median of similar percentages for
companies of like size across U.S. industry. Thus, in the case of both shares
and cash, the "cost" of the Plan is well within common practice.
ONE YEAR IS TOO EARLY TO JUDGE PERFORMANCE OF THE LONG-TERM PORTION OF THE
PLAN: The Plan was approved by approximately 85% of the stockholder votes cast
at the Company's 1997 Annual Meeting of Stockholders; only 14% of the votes were
cast against the Plan. The Company's Board of Directors is not aware of anything
to cause sudden reconsideration of that approval less than one year later. The
long-term incentive portion of the Plan provides for stock options and awards
that require the attainment of performance goals measured over a one-to-ten year
horizon. This includes a four-year period for performance awards and a ten-year
period for stock options with three-year vesting. The Company's Board of
Directors and the Committee believe that it is premature to ask stockholders to
judge how well these multi-year Plan features are working only one year after it
was approved by stockholders.
ACCORDINGLY, YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST THE
PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS
STOCKHOLDERS SPECIFY OTHERWISE.
27
<PAGE> 30
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS AND NOMINATIONS FOR 1999 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Company by November 11, 1998 to
be considered for inclusion in the Company's Proxy Statement and Form of Proxy
relating to that meeting.
The Company has provisions in its By-Laws intended to promote the efficient
functioning of its annual meetings. The provisions describe the Company's right
to determine the 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 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 Tentative Meeting Date for the 1999 Annual
Meeting is April 23, 1999.
The Board Affairs Committee will consider nominees recommended by
stockholders as candidates for election to the Board of Directors at the 1999
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 1998 Annual Meeting any
matters other than those specified in the notice of the meeting, and, except for
one stockholder proposal 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 5, 1998
28
<PAGE> 31
LTV LOGO
The LTV Corporation
200 Public Square - Cleveland, Ohio 44114-2308
<PAGE> 32
<TABLE>
<CAPTION>
Please mark
your vote as / X /
indicated in
the example
<S> <C>
- -------------------------------------------------------------- --------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2. THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 3.
- -------------------------------------------------------------- --------------------------------------------------------------
1. Election of Directors 3. Stockholders' proposal to recommend termination of Amended
NOMINEES: First Class: Colin C. Blaydon, William H. and Restated Management Incentive Program
Bricker, M. Thomas Moore, Vincent A. Sarni.
FOR WITHHELD For, except vote withheld from the FOR AGAINST ABSTAIN
[ ] [ ] following nominee(s). [ ] [ ] [ ]
__________________________________
2. To vote to ratify the selection of auditors
FOR AGAINST ABSTAIN
[ ] [ ] [ ] Plan to [ ]
Attend Meeting
Signature(s)_____________________________ Signature(s)___________________________________ Date ____________, 1998
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.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FOLD AND DETACH HERE
THE LTV CORPORATION
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 THIS PROXY
CARD ON OR BEFORE APRIL 17, 1998 TO ENSURE THAT YOUR VOTES WILL BE COUNTED.
ANNUAL MEETING OF STOCKHOLDERS
April 24, 1998, 9:00 a.m.
<PAGE> 33
THE LTV CORPORATION
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 24, 1998
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,
1998. 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
April 24, 1998, 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.
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 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 plan account, 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 these 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 and 2 and AGAINST proposal No. 3.
FOLD AND DETACH HERE
THE LTV CORPORATION
ANNUAL
MEETING OF
STOCKHOLDERS
April 24, 1998, 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 THIS PROXY
CARD ON OR BEFORE APRIL 17, 1998 TO ENSURE THAT YOUR VOTES
WILL BE COUNTED.
