<PAGE>
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:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
ARMCO INC.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
ARMCO INC.
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(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:
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(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
ARMCO INC.
ONE OXFORD CENTRE
301 GRANT STREET
PITTSBURGH, PA 15219-1415
-------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 28, 1995
-------------------------
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of
Armco, Inc. will be held at the Hyatt Regency Pittsburgh at Chatham Center,
located at 112 Washington Place, Pittsburgh, Pennsylvania, on Friday, April
28, 1995, at 10:00 a.m., for the following purposes:
1. To elect directors.
2. To adopt the 1995 Directors Stock Purchase and Deferred
Compensation Plan.
3. To adopt the Annual Incentive Compensation Plan.
4. To transact such other business as may properly come before the
meeting.
The close of business on February 28, 1995, was fixed as the record
date for the determination of shareholders entitled to notice of and to
vote at the meeting. The proxy statement, which follows, contains more
detailed information as to the actions proposed to be taken.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING, PLEASE COMPLETE AND SIGN YOUR PROXY AND PROMPTLY RETURN IT IN THE
ENCLOSED ENVELOPE. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU
WISH, EVEN THOUGH YOU HAVE PREVIOUSLY RETURNED YOUR PROXY.
By Order of the Board of Directors
Gary R. Hildreth, Secretary
Pittsburgh, Pennsylvania
March 15, 1995
<PAGE>
ARMCO INC.
ONE OXFORD CENTRE
301 GRANT STREET
PITTSBURGH, PA 15219-1415
---------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 28, 1995
---------------
SOLICITATION AND VOTING OF PROXIES
The enclosed proxy is being solicited by the Board of
Directors of Armco Inc., an Ohio corporation (hereinafter
"Armco" or the "Corporation"), with its principal executive
offices located at One Oxford Centre, 301 Grant Street,
Pittsburgh, Pennsylvania 15219-1415, for use at the annual
meeting of shareholders (the "Meeting") of the Corporation to
be held on April 28, 1995. This proxy statement and the
accompanying proxy were first sent to shareholders of the
Corporation on or about March 15, 1995.
The close of business on February 28, 1995, has been fixed
as the record date for determining shareholders entitled to
notice of and to vote at the Meeting. On that date, the
Corporation had outstanding and entitled to vote 105,845,473
shares of common stock, $.01 par value (the "common stock"),
1,697,231 shares of Class A, $2.10 Cumulative Convertible
Preferred Stock (the "$2.10 preferred stock") and 2,700,000
shares of Class A, $3.625 Cumulative Convertible Preferred Stock
(the "$3.625 preferred stock"). Holders of shares of common
stock, $2.10 preferred stock and $3.625 preferred stock are each
entitled to one vote for each share owned on all matters to come
before the Meeting.
Shares of common stock, $2.10 preferred stock and $3.625
preferred stock represented by properly executed proxies will,
unless such proxies have previously been revoked, be voted at the
Meeting in accordance with the direction indicated on such
proxies. Prior to its exercise, a proxy may be revoked by a
later proxy received by the Corporation or by giving notice to
the Corporation in writing or in open meeting.
With respect to the election of directors, shareholders may
vote for the election of the entire slate or may withhold their
vote from the entire slate by marking the proper box on the form
of proxy, or may withhold their vote from any one or more
individual nominees by striking a line through the name of such
nominees in the form of proxy.
If no direction is given, an executed proxy will be voted
FOR the election of each of the eight persons named as nominees,
FOR the adoption of the 1995 Directors Stock Purchase and
Deferred Compensation Plan and FOR the adoption of the Annual
Incentive Compensation Plan. If any nominee for election as a
director should be unable to serve, the proxy will be voted for a
nominee, if any, designated by the Board of Directors. Directors
are elected by a plurality of votes cast. Abstentions and broker
non-votes will have the same effect as a vote withheld in the
case of the election of directors and will have the same effect
as a vote against the adoption of the 1995 Directors Stock
Purchase and Deferred Compensation Plan and a vote against the
adoption of the Annual Incentive Compensation Plan.
<PAGE>
The Board of Directors does not anticipate that any matters
other than those set forth herein will be brought before the
Meeting. If, however, other matters are properly presented, the
persons named in the proxy will have discretion, to the extent
provided by applicable law, to vote on such matters.
Under Ohio law, if any shareholder gives notice in writing
to the president, a vice president or the secretary of the
Corporation, not less than 48 hours before the time fixed for
holding the Meeting, that such shareholder desires the voting for
the election of directors to be cumulative, and if an
announcement of the giving of such notice is made upon the
convening of the Meeting by the chairman or secretary or by or on
behalf of the shareholder giving such notice, each shareholder
shall have the right to cumulate his or her voting power for the
election of directors.
In the event of such an announcement, the persons named as
proxies on the enclosed proxy card will use their discretion in
exercising such cumulative voting power with respect to the
shares represented thereby. Under the cumulative voting method,
each shareholder is entitled to the number of votes equal to the
number of shares held by such shareholder on the record date
multiplied by the number of directors to be elected, and all such
votes may be cast for a single nominee or distributed among the
nominees as desired. The Corporation intends that such persons
named as proxies will (except as otherwise provided by the
shareholder submitting such proxy) have discretion to cumulate
votes for the election of directors so as to maximize the number
of directors elected from among the nominees proposed by the
Board.
ELECTION OF DIRECTORS
As provided in Armco's Regulations, the Board of Directors
has fixed the number of directors at eight and eight persons have
been nominated to serve as directors of the Corporation until the
next Annual Meeting of Shareholders and until their successors
are elected and qualified. These nominees are named in the
following table, which also sets forth information for each
nominee respecting age, principal occupation, business experience
during the past five years and certain other information.
Age 63; President and Chief Executive Officer of
Alleghany Corporation, an insurance and financial
services holding company. Prior to 1992, Mr.
Burns was President and Chief Operating Officer of
Alleghany Corporation. A Director of the
Corporation since 1992; a member of the Audit
Review Committee, Compensation Committee and
Corporate Responsibility Committee. Also a
Director of Alleghany Corporation.
John J. Burns, Jr.
Age 59; Vice Chairman, Corning Incorporated, a
broad-based manufacturing and service company.
Senior Vice President, Research & Development
Division, Corning Incorporated from 1985 - 1987.
A Director of the Corporation since 1989; a member
of the Audit Review Committee and Corporate
Responsibility Committee. Also a Director of
Corning Incorporated.
David A. Duke
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Age 65; Chairman of the Board of the Corporation.
Retired Chairman of the Board and Chief Executive
Officer of Business International Corporation, a
publishing, consulting and advisory services firm.
A Director of the Corporation since 1975; a member
of the Audit Review Committee.
John C. Haley
Age 69; Chairman of the Board, Kansas City
Southern Industries Inc., a holding company
providing transportation and financial services;
retired Chairman of the Board, and formerly Chief
Executive Officer, of Sprint Corporation, a
telecommunications company. A Director of the
Corporation since 1972; a member of the
Compensation Committee and Nominating Committee.
Also a Director of Duke Power Company, Hallmark
Cards, Inc., Kansas City Southern Industries, Inc.
and Sprint Corporation.
Paul H. Henson
Age 50; Executive Vice President of PNC Bank
Corp., a provider of broad-based banking and
financial services. Former President and Chief
Executive Officer of PNC Bank, N.A. - Pittsburgh
and former President of PNC Bank, Ohio, N.A. A
Director of the Corporation since 1994; a member
of the Audit Review Committee and Corporate
Responsibility Committee.
Bruce E. Robbins
Age 67; Chairman of Sweetheart Holdings, a private
partnership. Former Chairman of the Board and
Chief Executive Officer of The Mead Corporation,
an integrated manufacturer of paper and forest
products. A Director of the Corporation since
1985; a member of the Audit Review Committee and
Compensation Committee. Also a Director of DPL
Inc., National City Corporation, Perkin-Elmer
Corporation and Rayonier.
Burnell R. Roberts
3
<PAGE>
Age 49; President and Chief Executive Officer of
Copperweld Corporation, a manufacturer of tubular
and bimetallic wire products. A Director of the
Corporation since 1994; a member of the
Compensation Committee and Nominating Committee.
John D. Turner
Age 56; President and Chief Executive Officer of
the Corporation and former Chief Operating Officer
of the Corporation. Formerly President and Chief
Executive Officer of Cyclops Industries, Inc., a
producer of flat-rolled stainless and carbon
steels, tubular steel products and special alloys.
A Director of the Corporation since 1992; a member
of the Corporate Responsibility Committee and
Nominating Committee. Also a Director of
Alleghany Corporation and AK Steel Holding
Corporation.
James F. Will
Board of Directors and Committees of the Board
In 1994, the Board of Directors of the Corporation met 9
times. In addition to the committees described below, the Board
of Directors has appointed a Corporate Responsibility Committee.
The Nominating Committee met once in 1994. This committee
reviews the qualifications of and recommends individuals for
election as directors. It advises on the optimum size and
composition of the Board and reviews and defines the
responsibilities, duties and performance of the committees of the
Board. This committee also reviews and advises the Board on the
Corporation's organization and successors for key personnel.
This committee will review nominees suggested by shareholders in
writing and sent to the attention of the Secretary of the
Corporation.
In accordance with the Corporation's Regulations, which were
approved by the shareholders, shareholders intending to nominate
director candidates for election at any annual meeting of
shareholders must deliver written notice thereof to the Secretary
of Armco not later than 90 days prior to the date one year from
the date of the immediately preceding annual meeting of
shareholders. Such notice timely given by a shareholder shall set
forth certain information concerning such shareholder and his or
her nominee(s). The presiding officer at such annual meeting may
refuse to acknowledge any nomination not made in accordance with
the foregoing and any person not so nominated shall not be
eligible for election as a director. Shareholders intending to
nominate director candidates for election at the 1996 annual
meeting of shareholders must deliver written notice, including
specified information, to the Secretary of the Corporation by
January 29, 1996.
The Audit Review Committee met three times in 1994. This
committee is responsible for nominating the independent auditors,
working with the independent auditors and the internal auditing
staff of the Corporation and other corporate officials, reviewing
the financial statements of the Corporation, monitoring
compliance with corporate policies relating to conflict of
interest, business ethics and antitrust and reporting on the
results of the audits to the Board, as well as submitting to the
Board its recommendations relating to the financial reporting,
accounting practices and policies, and financial accounting and
operation controls.
The Compensation Committee reviews, determines and
recommends to the Board the principal compensation and benefit
programs, including the compensation of executive officers of the
Corporation, reviews the Board's delegation of fiduciary
4
<PAGE>
responsibility relating to certain benefit plans to the Benefit
Plans Administrative Committee and administers and oversees
grants and awards under the Corporation's employee stock and
other incentive plans. This committee met five times in 1994.
See "EXECUTIVE COMPENSATION -- Compensation Committee Report on
Executive Compensation".
During 1994, no director attended less than 75% of the
meetings of the Board and committees on which he served except
for Mr. Henson.
Compensation of Directors
Currently, each director, other than those who are employees
of the Corporation or its subsidiaries, is paid a retainer fee of
$20,400 a year, plus travel and other expenses incurred in
connection with his work for the Corporation. For each Board
meeting attended, each such director receives $1,000. For each
committee meeting attended, each committee member receives $800
and the committee chairperson receives $1,000. Directors who are
employees of the Corporation do not receive any additional
compensation by reason of their membership on, or attendance at
meetings of, the Board or committees thereof. Effective April
22, 1994, Mr. John C. Haley was elected non-executive chairman
for a period of one year. In addition to receiving a retainer
and committee and board fees as described above, Mr. Haley
receives a fee of $125,000 a year, plus travel and other expenses
incurred in connection with his position as Chairman.
The Board of Directors has approved an increase, effective
May 1, 1995, in the annual retainer fee payable to directors to
$24,000, subject to the adoption by the shareholders of the
Corporation of the 1995 Directors Stock Purchase and Deferred
Compensation Plan. The 1995 Directors Stock Purchase and
Deferred Compensation Plan provides that, during the term of such
Plan, 25% of the directors' annual retainer, from time to time,
will be paid in common stock in lieu of cash and permits
directors to receive up to 100% of their annual retainer for
service on the Board in common stock and to defer receipt of
directors' fees. See "1995 DIRECTORS STOCK PURCHASE AND DEFERRED
COMPENSATION PLAN".
Deferred Conpensation Plan for Directors
The Deferred Compensation Plan for Directors became
effective October 1, 1981. Any director, who is not an employee
of the Corporation or its subsidiaries, may elect to defer
payment of all or any portion of fees earned as a director of the
Corporation. Deferred amounts will be hypothetically credited
with interest at the 90-day Treasury Bill rate in effect on the
first day of each quarter or, at the director's election, will be
hypothetically invested in the common stock at the average of the
highest and lowest price per share reported on the New York Stock
Exchange Composite Transactions Tape for the day on which such
amounts are credited to such director's account. A hypothetical
investment in the common stock will be credited as if dividends
have been paid whenever a dividend is paid on the common stock
and shall be accounted for as an additional investment in the
common stock. Payment will be made in cash in either a lump sum
or in annual installments for a period not to exceed five years
with payment usually commencing after a director ceases to be a
director of the Corporation. Subject to the adoption by the
shareholders of the 1995 Directors Stock Purchase and Deferred
Compensation Plan, this plan will be terminated effective May 1,
1995. No director deferred payment of fees under this plan
during 1994.
Pension Plan for Outside Directors
The pension plan for outside directors became effective
June 23, 1989. Under this plan, directors who are not and have
not been employees of the Corporation or its subsidiaries, and
who retire from the Board at age 65 or above with five or more
years of service, will receive an annual pension equal to 100% of
the annual retainer fee payable at retirement, for a period equal
to the years of service with the Board. There is a maximum
benefit period of ten years.
The Board of Directors has determined to lock and freeze the
pension plan for outside directors effective April 30, 1995. As
a result, Mr. Haley, Mr. Henson, Mr. Ladish and Mr. Roberts, each
of whom is fully vested at the maximum benefit, are each entitled
to receive an annual benefit of $20,400 (the annual retainer in
effect through April 30, 1995) in each of the ten years following
5
<PAGE>
his retirement from the Board of Directors. The Board has also
determined that Mr. Burns, Dr. Duke, Mr. Robbins and Mr. Turner,
each of whom is unvested, will each be credited with a
hypothetical investment in 1,000 shares of common stock for each
year of service on the Board of Directors through April 30, 1995
(or a proportionate number of shares for any fractional year of
such service) in settlement of their unvested benefits under this
plan. As of that date, the number of years served on the Board
of Directors by the unvested directors will be as follows: Mr.
Burns, 3 years; Dr. Duke, 5 1/2 years; Mr. Robbins, 1 year and
Mr. Turner, 1 year. The hypothetical investment in the common
stock will be credited as if dividends have been paid whenever a
dividend is paid on the common stock and such dividend shall be
accounted for as an additional investment in the common stock.
Payments will be made in cash after a director ceases to be a
director of the Corporation.
Insurance Coverage for Outside Directors
The Corporation provides up to $100,000 of group life
insurance to any director who is not an employee of the
Corporation. The Corporation also provides non-employee
directors with $250,000 of accidental death and dismemberment
insurance. These insurance benefits terminate upon a director's
resignation or retirement from the Board. During 1994, the
Corporation paid premiums aggregating $16,668 for this coverage.
1995 DIRECTORS STOCK PURCHASE AND DEFERRED COMPENSATION PLAN
On January 27, 1995, the Board of Directors approved for
submission to the shareholders for adoption at the Meeting, the
1995 Directors Stock Purchase and Deferred Compensation Plan (the
"Director Plan"). If adopted by the shareholders, the Director
Plan will become effective as of May 1, 1995. The Board of
Directors believes that the Director Plan will enhance the
Corporation's long-term prospects and serve the interests of the
Corporation's shareholders by giving non-employee directors of
the Corporation a direct and personal financial stake in the
Corporation and aligning the financial interests of such
directors with the interests of the Corporation's shareholders.
The following is a summary description of the Director Plan,
which is qualified in its entirety by reference to the Director
Plan, a copy of which is attached to this Proxy Statement as
Exhibit A.
Eligibility; Mandatory and Elective Awards; Deferral of Fees
Each director of the Corporation who is not also a regular,
salaried employee of the Corporation or a subsidiary of the
Corporation (a "Non-Employee Director") will participate in the
Director Plan. All of the eight nominees for election as
directors of the Corporation at the Meeting, except Mr. Will, are
Non-Employee Directors.
Under the Director Plan, each Non-Employee Director will
receive 25% of his annual retainer fee for service on the Board
of Directors in shares of common stock in lieu of cash during the
term of the Director Plan. In addition, each Non-Employee
Director may elect to receive all or any portion of the balance
of the annual retainer fee for service on the Board of Directors
in shares of common stock in lieu of cash. The number of shares
of common stock issuable to Non-Employee Directors in lieu of
cash fees pursuant to the mandatory and elective features of the
Director Plan generally will be determined based on the market
price of the common stock on the date when the annual retainer
(or other) fee payment is otherwise due and payable (or if there
shall be no trading on such date, on the next preceding date when
sales were made) (the "Stock Price").
Each Non-Employee Director may also elect under the Director
Plan to defer receipt of any or all directors' fees, including
any fees that would automatically be paid in common stock under
the Director Plan. The Corporation will establish an account on
its books in the name of each Non-Employee Director who defers
the receipt of fees under the Director Plan. If a Non-Employee
Director defers receipt of fees that would automatically be paid
in common stock under the Director Plan, his account will be
credited with "Common Stock Units". Each Common Stock Unit is an
unfunded bookkeeping entry representing the right to receive a
share of common stock at a future date. If a Non-Employee
Director defers receipt of any other fees, he may elect whether
to have his account credited with Common Stock Units or with
dollars. The number of Common Stock Units credited to a Non-
Employee Director's account will be determined by dividing the
amount of fees being deferred and as to which he has elected to
receive Common Stock Units by the Stock Price. The cash amount
credited to a director's account will be equal to the amount of
fees being deferred and as to which he has elected not to receive
Common Stock Units. The number of Common Stock Units credited to
a Non-Employee Director's account under the Director Plan will be
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adjusted to reflect any dividends paid on the common stock based
on the average of the high and low sales prices of the common
stock on the dates such dividends are paid. The amount of
dollars credited to a Non-Employee Director's account under the
Director Plan will be credited with interest, at the end of each
calendar quarter, at a rate per annum equal to the prime rate
announced publicly by PNC Bank, N.A. at the end of such calendar
quarter. Distributions in respect of Non-Employee Directors'
accounts under the Director Plan will be made on a date specified
by the Non-Employee Director, upon cessation of service on the
Board of Directors or at the end of the year during which such
cessation occurs, as elected by the Non-Employee Director.
Payments may, at the election of the Non-Employee Directors, be
made in up to ten annual installments.
Shares of common stock issued under the Director Plan and in
settlement of Common Stock Units credited under the Director Plan
will not be subject to any restrictions, except that shares of
common stock issued under the Director Plan may not be sold or
otherwise disposed of by a Non-Employee Director for a period of
six months following the date of the grant of such common stock
to the extent necessary to satisfy certain Securities and
Exchange Commission rules.
The following table sets forth the number of shares of
common stock that would be issued under the Director Plan during
1995 to each of the nominees for election as directors of the
Corporation at the Meeting, assuming their election to the Board
of Directors by the shareholders, and to all current directors as
a group. Additional shares of common stock would be issued under
the Director Plan in subsequent years.
<TABLE>
<CAPTION>
Number of Shares/
Non-Employee Director (1) Dollar Value ($) Common Stock Units (2)
------------------------- ---------------- ----------------------
<S> <C> <C>
John J. Burns, Jr. $ 6,000 950
David A. Duke $ 6,000 950
John C. Haley $ 6,000 950
Paul H. Henson $ 6,000 950
Bruce E. Robbins $ 6,000 950
Burnell R. Roberts $ 6,000 950
John D. Turner $ 6,000 950
All current Non-Employee
Directors as a group (3) $42,000 6,650
</TABLE>
____________________________
(1) The dollar values and numbers of shares shown
assume that (i) the Director Plan was in effect for all
of 1995 (i.e., that each Non-Employee Director will
receive during 1995 annual retainer fees subject to the
Director Plan equal in amount to $24,000) and (ii) none
of the Non-Employee Directors elects to increase the
amount of fees payable in common stock above the 25%
minimum. Assuming all the Non-Employee Directors elect
to have 100% of the annual retainer fee paid in common
stock, each Non-Employee Director would receive 3,800
shares of common stock, giving all Non-Employee
Directors as a group 26,600 shares. The number of
shares of common stock or Common Stock Units shown is
based on an assumed conversion price of $6.3125 per
share, representing the average of the high and low
sales prices of the common stock on February 14, 1995.
(2) Represents the number of shares of common stock
or, if the Non-Employee Directors elect to defer the
receipt of such shares, of Common Stock Units issuable
to the Non-Employee Directors, assuming the conversion
price of $6.3125 per share.
(3) Mr. Ladish is retiring from the Board at the end
of his current term and, therefore, will not receive
any shares under the Director Plan during 1995.
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Administration of Director Plan
The Director Plan will be administered by the Board of
Directors. The Board has the authority to interpret the Director
Plan, to establish, amend and rescind any rules and regulations
relating to the Director Plan, to determine the terms of deferral
agreements entered into under the Director Plan and to make all
other determinations necessary or advisable for the
administration of the Director Plan; provided, however, that the
-----------------
Board shall have no discretion with respect to the eligibility or
selection of Non-Employee Directors to receive shares of common
stock or Common Stock Units under the mandatory feature of the
Director Plan, the number of shares of common stock or Common
Stock Units to be issued under the Director Plan or the timing of
the grant or purchase of such shares or units, or the purchase
price for such shares or units.
The Board of Directors may amend or terminate the Director
Plan at any time, provided that no such action may reduce the
--------
amounts previously credited to a Non-Employee Director's account
under the Director Plan without the director's consent and
provided that no amendment that (i) materially increases the
maximum number of shares of common stock that may be issued under
the Director Plan (except pursuant to the adjustment provisions
described below), (ii) materially increases the benefits accruing
to Non-Employee Directors under the Director Plan or (iii)
materially modifies the requirements as to eligibility to
participate in the Director Plan may be made without shareholder
approval and provided further that the provisions of the Director
----------------
Plan relating to automatic grants shall not be amended more than
once every six months, other than to comport with changes in the
Internal Revenue Code of 1986, as amended, the Employee
Retirement Income Security Act of 1974, as amended, or the
regulations promulgated thereunder.
Shares Subject to Director Plan
Subject to adjustment as described below, 100,000 shares of
common stock shall be available for issuance under the Director
Plan. The closing price per share of the common stock as
reported on the New York Stock Exchange Composite Transactions
Tape on March 1, 1995 was $6.75.
Adjustments
In the event of any change in the common stock (e.g., as a
result of merger, consolidation, recapitalization,
reclassification, stock dividend or reverse split), appropriate
adjustments shall be made to the number of shares of common stock
issuable under the Director Plan and, in certain cases, to the
type of property distributable in respect of Common Stock Units.
In the event of any stock split, stock dividend or stock
consolidation affecting the common stock, appropriate adjustments
also shall be made to the number of Common Stock Units credited
to Non-Employee Directors' accounts.
Voting Required for Approval of Adoption
The affirmative vote of the holders of a majority of the
outstanding shares of common stock, $2.10 preferred stock and
$3.625 preferred stock entitled to vote at the Meeting is
required to ratify the adoption of the Director Plan. If
approved, the Director Plan will become effective as of the date
of such approval.
The Board of Directors recommends a vote FOR the proposal to
approve the adoption of the Director Plan.
8
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ANNUAL INCENTIVE COMPENSATION PLAN --
ESTABLISHMENT OF PERFORMANCE-BASED
PLAN INTENDED TO PRESERVE TAX DEDUCTIBILITY UNDER
SECTION 162(m) OF THE INTERNAL REVENUE CODE
On February 24, 1995, the Board of Directors adopted the
Annual Incentive Compensation Plan (the "Incentive Plan")
effective as of January 1, 1995, subject to approval by the
shareholders at the Meeting. The Incentive Plan is a performance-
based plan for officers and other management that provides annual
incentive opportunities linked directly to specific performance
measures.
The Incentive Plan is intended to allow the Compensation
Committee to make awards that qualify as performance-based
compensation within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended by the Omnibus Budget
Reconciliation Act of 1993. This provision limits to $1 million
the allowable deduction for compensation paid by a publicly held
company to the chief executive officer and to each of the other
four most highly compensated employees for taxable years
beginning on or after January 1, 1994. This limitation, however,
does not apply to performance-based compensation that is tied to
objective performance standards that have been established by a
compensation committee of the board consisting solely of outside
directors and the material terms of which have been approved by
the shareholders. The Incentive Plan has been designed by the
Compensation Committee to meet these criteria. Accordingly, the
Corporation is seeking shareholder approval of the Incentive
Plan.
The Board of Directors believes that the Incentive Plan will
advance the interests of the Corporation by providing
participants annual incentive opportunities linked directly to
specific results.
The following is a summary description of the Incentive
Plan, which is qualified in its entirety by reference to the
Incentive Plan, a copy of which is attached to this Proxy
Statement as Exhibit B.
Eligibility; Awards
All officers and corporate and operating management
employees of the Corporation and its subsidiaries, including the
Named Executives, are eligible for selection to participate in
the Incentive Plan. There are approximately 75 officers and
employees of the Corporation currently eligible to participate in
the Incentive Plan.
Under the Incentive Plan, for each calendar year ("Award
Year"), the Compensation Committee (the "Committee") will set a
Target Award dollar amount for each participant designated by the
Committee. The Committee will also establish performance
measures in accordance with the Incentive Plan for each
participant. The performance measures may relate to a particular
area of the business for which the participant is responsible, to
one or more business units or to the Corporation as a whole, or
to a combination of the foregoing. The Committee will establish
the objective criteria that will determine the percentage (which
may exceed 100%) of the Target Award that will be paid out based
upon the level of achievement of the predetermined performance
goals. The performance goals may include one or more of the
following performance measures for a calendar year: (a) income
before federal taxes and net interest expense; (b) achievement of
specific and measurable operational objectives; (c) working
capital, generally defined to include receivables, inventories
and controllable current liabilities, measured either in absolute
dollars or relative to sales; and/or (d) such other performance
goals as may be established by the Committee which may be based
on earnings growth, revenues, expenses, stock price, market
share, return on assets, equity or investment, regulatory
compliance, satisfactory internal or external audits, improvement
of financial ratings, or achievement of balance sheet, income
statement or cash flow objectives, or any other objective goals
established by the Committee, and may be absolute in their terms
or measured against or in relationship to other companies
comparably, similarly or otherwise situated.
After the end of the calendar year, the Committee will
review the performance measurements and determine the percentages
of the Target Awards that will be paid out under the Incentive
Plan. The Committee may also reduce or eliminate any payout, but
it may not increase a payout under the Incentive Plan. Incentive
payments under the Incentive Plan will be made in cash, provided
that the Committee may determine, including pursuant to an
irrevocable election by a participant made at least six months in
advance of the payment, to make any payment earned under the
Incentive Plan in shares of the Corporation's common stock,
including restricted stock (issued under the Corporation's 1993
Long-Term Incentive Plan or any other stock plan of the
Corporation that has been approved by its shareholders), in lieu
9
<PAGE>
of cash. Payments made under the Incentive Plan in shares of the
common stock, including restricted stock, in lieu of cash may be
made at a discounted price, which shall not in any event be less
than the lesser of $3.50 per share and 70% of the market value of
the common stock on the date the Target Award is set (as adjusted
to reflect any stock splits, reverse stock splits, stock
dividends, mergers, consolidations, recapitalizations,
reclassifications, special dividends or other similar events
affecting the common stock). If all or a portion of a
participant's incentive payments is to be made in shares of
restricted stock, the Committee may also provide that, if any of
such shares are forfeited because such participant's employment
terminates before the restrictions on such shares lapse, such
participant shall be entitled to a cash payment from the
Corporation for such forfeited shares equal to the lesser of (i)
the dollar amount of the incentive payment that was paid in the
forfeited shares in lieu of cash and (ii) the market value of the
forfeited shares at the time of such employment termination.
In no event may the sum of the dollar amount of incentive
payments paid in cash and the market value of incentive payments
paid in common stock, including restricted stock (based on the
market price of the common stock on the date the Target Award is
established), to any participant under the Incentive Plan for any
Award Year exceed $1,500,000. The Committee must certify the
level of achievement of the performance goals before any payments
may be made under the Incentive Plan.
No determination has been made as to the specific amount of
any incentive to be paid under the Incentive Plan in the future.
Participants in the Incentive Plan, including the Named
Executives, may receive annual incentive compensation in addition
to any incentive payments made under the Incentive Plan and
whether or not incentive payments are made to such participants
under the Incentive Plan for the same year. The payment of such
additional incentive compensation will be at the discretion of
the Committee and need not be based upon the achievement of
objective performance goals.
Voting Required for Approval of Adoption
The affirmative vote of the holders of a majority of the
outstanding shares of common stock, $2.10 preferred stock and
$3.625 preferred stock entitled to vote at the Meeting is
required to ratify the adoption of the Incentive Plan. If
approved, the Incentive Plan will become effective as of January
1, 1995.
The Board of Directors recommends a vote FOR the
proposal to approve the adoption of the Incentive Plan.
10
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
Set forth below is certain summary information with respect
to the compensation of Armco's chief executive officer and the
four other most highly compensated executive officers who were
serving as executive officers at December 31, 1994 (based on
amounts reported as salary and bonus for 1994) (the "Named
Executives").
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
----------------------------- -----------------------------------
Awards Payouts
------------------------ --------
Other Restricted Securities All Other
Name Annual Stock Underlying LTIP Compen-
and Principal Compen- Award(s) Options/ Payouts sation
Position Year Salary ($) Bonus ($) sation ($) (1) SARs (#)(2) ($) ($)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. F. Will 1994 530,000 0 0 1,512,739 150,338 0 35,554 (3)
President 1993 495,833 53,000 0 0 65,000 0 30,781
& CEO 1992 465,672 0 0 0 0 0 14,225
R. M. Visokey 1994 292,833 0 0 809,636 78,647 0 23,079 (3)
Executive V.P. - 1993 244,002 167,829 0 0 16,000 0 16,273
Steel Operations 1992 76,668 3,640 0 66,250 0 0 3,100
David A. Higbee 1994 246,000 0 0 607,710 55,526 0 14,846 (3)
V.P. - Diversified 1993 123,000 24,600 0 0 15,000 0 7,201
Businesses (4)
David G. Harmer 1994 225,000 0 0 587,771 55,607 0 16,929 (3)
V.P. & Chief 1993 168,750 22,500 0 142,500 20,000 0 10,091
Financial Officer
G. R. Hildreth 1994 200,000 43,250 0 440,595 37,071 0 13,159 (3)
V.P., 1993 196,667 20,000 0 0 15,000 0 12,449
General Counsel 1992 174,000 32,604 0 58,750 0 0 10,607
& Secretary
- -------------------------------------------------------------------------------------------------------------
</TABLE>
________
(1) The value indicated is based on the closing price of
the common stock on the date of grant. The awards of
restricted stock for 1994 for each of the Named
Executives, are comprised of: (a) an award of shares of
restricted common stock made to such Named Executive in
April 1994 under the 1988 Restricted Stock Plan; and
(b) shares of restricted common stock awarded under the
1993 Long-Term Incentive Plan (the "LTIP") to such
Named Executive in January 1995 in lieu of all or a
portion of the cash bonus payable to such Named
Executive for 1994. The vesting of the awards of
restricted stock for 1994 is 20% of such shares in
April 1997, a further 30% in April 1998 and the
remaining 50% in April 1999. Such awards were made
under an annual incentive compensation plan approved by
the Corporation's Board of Directors, pursuant to a
compensation
11
<PAGE>
program (the "1994 Program") implemented by the
Corporation in April 1994 for its senior executives,
including the Named Executives. Under the 1994 Program,
each participant, including the Named Executives, is
required to receive at least 25% of any annual bonus
under such an annual incentive plan for 1994, 1995 and
1996 in shares of restricted common stock, valued at
$3.50 per share (a 30% discount from the market price
of common stock at the time of the establishment of the
1994 Program). Also under the 1994 Program, each of the
participants, including the Named Executives, was
permitted, at the time of the implementation of the
1994 Program, to elect irrevocably to receive an
additional percentage, up to 100%, of any annual
bonuses earned under an annual incentive compensation
plan approved by the Corporation's Board of Directors
for 1994, 1995 and 1996 in restricted stock awards
(under the LTIP), valued at $3.50 per share.
The following table sets forth for each of the Named
Executives the value of the portion of those shares of
restricted stock reflected above for 1994 on which the
restrictions will lapse in each of 1997, 1998 and 1999.
<TABLE>
<CAPTION>
Total
Name Value of Shares Vesting Value
---- ----------------------- -----
1997 1998 1999
----- ----- -----
<S> <C> <C> <C> <C>
J. F. Will $302,548 $453,822 $756,369 $1,512,739
R. M. Visokey 161,927 242,891 404,818 809,636
D. A. Higbee 121,542 182,313 303,855 607,710
D. G. Harmer 117,554 176,331 293,886 587,771
G. R. Hildreth 88,119 132,178 220,298 440,595
</TABLE>
In addition to their elections under the 1994 Program
for 1994 incentive compensation, which are reflected in
the table above, all of the Named Executives
irrevocably elected in April 1994 to receive 100% of
any incentive bonuses earned under such a plan for 1995
and 1996 in restricted stock awards (had the 1994
Program and the elections made thereunder not been in
effect, the Named Executives would have received the
following cash bonus payments in 1994: Mr. Will -
$526,186; Mr. Visokey - $275,263; Mr. Higbee, $194,340;
Mr. Harmer - $194,625 and Mr. Hildreth $173,000). See
"Compensation Committee Report on Executive
Compensation". The aggregate number and value (based
on the closing price of the common stock of $6.625 at
December 30, 1994) of the restricted shares held by the
Named Executives at December 31, 1994 was: Mr. Will -
106,000, $702,250; Mr. Visokey - 69,200, $458,450; Mr.
Higbee - 49,200, $325,950; Mr. Harmer - 65,000,
$430,625; and Mr. Hildreth - 57,750, $382,594.
Dividends will be paid on restricted shares, if, and
only if, dividends are paid on the common stock.
(2) Also under the 1994 Program, each participant who is
awarded shares of restricted stock in lieu of cash
bonus will be granted an option to purchase an equal
number of shares of common stock at the market value of
the common stock on the date of such grant. Amounts
shown for 1994 represent options granted on January 27,
1995 with respect to bonuses earned for the fiscal year
1994. Such options are exercisable in full on and
after the second anniversary of the grant. See "Stock
Option Plans" and "Compensation Committee Report on
Executive Compensation" below.
(3) These amounts include:
(i) $6,000 for Mr. Will, $9,883 for Mr. Visokey,
$7,500 for Mr. Higbee, $7,875 for Mr. Harmer,
and $7,500 for Mr. Hildreth of matching
contributions under the Armco Inc. Retirement
and Savings Plan;
(ii) $20,500 for Mr. Will, $10,142 for Mr.
Visokey, $4,800 for Mr. Higbee, $ 6,750 for
Mr. Harmer, and $2,500 for Mr. Hildreth
representing contributions allocated to the
trust established under the Armco Inc.
Executive Supplemental Deferred Compensation
Plan in respect of matching contributions not
paid to the Armco Inc. Retirement and Savings
Plan by reason of Internal Revenue Service
limitations; and
12
<PAGE>
(iii) $9,054 for Mr. Will, $3,054 for Mr. Visokey,
$2,546 for Mr. Higbee, $2,304 for Mr. Harmer, and
$3,159 for Mr. Hildreth for premiums for life
insurance benefits provided to them.
(4) Effective March 1, 1994, Mr. Higbee was elected Vice
President - Diversified Businesses.
Stock Option Plans
The Corporation has granted and has authority to make future
grants of stock options and stock appreciation rights ("SARs") to
key employees, including the Named Executives, under stock option
plans previously approved by the shareholders. The exercise
price of all outstanding options is 100% of the fair market value
at the date of grant and SARs have been granted in tandem with
all such options through 1991. The exercise of SARs and the form
of settlement thereof (i.e., cash, shares of common stock or a
combination thereof) are subject to the consent of the
Compensation Committee. No stock options were granted to the
Named Executives during the 1994 fiscal year.
The following table sets forth information with respect to
the unexercised options/SARs held by the Named Executives at
December 31, 1994. None of the Named Executives exercised any
options or SARs during the 1994 fiscal year.
Fiscal Year-End Option/SAR VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at Fiscal at Fiscal
Year End (#) Year End ($) (1)
------------- ----------------
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
---- ------------- ----------------
<S> <C> <C>
J. F. Will 78,624/48,750 211,139/-0-
R. M. Visokey 4,000/12,000 -0-/-0-
D. A. Higbee 3,750/11,250 -0-/-0-
D. G. Harmer 5,000/15,000 -0-/-0-
G. R. Hildreth 24,950/11,250 4,813/-0-
</TABLE>
_________________________
(1) Calculated by determining the difference between the
exercise price and the closing price of the common stock
as reported on the New York Stock Exchange Composite
Transactions Tape at December 30, 1994 ($6.625 per
share).
Pension Plans
Effective January 1, 1995, the Corporation has amended the
Non-Contributory Pension Plan (the "NCPP") by adopting a
different defined benefit formula called the Retirement
Accumulation Pension Plan (the "RAPP") for nonrepresented
salaried employees formerly covered by the NCPP. Each such
participant received an opening balance in the RAPP equal to the
value of the NCPP benefits earned as of December 31, 1994,
calculated based on the accrued regular monthly benefit that
would otherwise have been payable to the employee upon attainment
of age 62 based on final pay-related formulas.
13
<PAGE>
Employees participating in the 2% Defined Contribution Plan
("DCP") will also be covered by the new RAPP but will have an
opening balance of zero dollars. Their account in the 2% DCP
will be vested effective December 31, 1994.
The opening balance for participants in the RAPP is
increased by monthly "pay credits" and by the crediting of
interest on a quarterly basis. Monthly pay credits are equal to
2% of pay for all former participants in the DCP and new hires
and between 2% and 9% of pay depending on age and years of
service on December 31, 1994, for former participants in the
NCPP. Additional pay credit contributions are possible if the
Corporation achieves certain return on asset results each year.
Pay included for purposes of determining pay credits
includes base salary, bonus or other short-term incentive forms
of compensation and certain other amounts (corresponding
generally to the salary and bonus reflected in the Summary
Compensation Table above). The employee's account balance earns
quarterly interest at the per annum rate for five-year U.S.
Treasury notes subject to a maximum rate of 12.5%, except that
the participant's opening account balance is subject to a minimum
rate of 7.5%. The participant's opening account balance ceases
to earn additional interest when the participant attains age 65.
The opening account balances of the Named Executives are as
follows: Mr. Will - $220,202, Mr. Higbee - $250,555 and Mr.
Hildreth - $426,227. Mr. Harmer and Mr. Visokey have opening
account balances of zero because they were never participants in
the NCPP. The percentage of covered compensation to be used to
determine pay credits for each of the Named Executives is as
follows: Mr. Will - 6%, Mr. Visokey - 2%, Mr. Higbee - 9%,
Mr. Harmer - 2%, and Mr. Hildreth - 8%. If employment were
continued until the mandatory retirement age of 65 at the 1994
rates of remuneration, and assuming a constant 7.5% rate of
interest accrual, Messrs. Will, Visokey, Higbee, Harmer, and
Hildreth would have account balances under the RAPP of $523,496,
$62,260, $910,198, $66,066, and $908,214, respectively.
The Corporation has also established a Supplemental
Executive Retirement Plan ("SERP") replacing the former Minimum
Pension Plan ("MPP") for key executives, including the Named
Executives, whose participation has been approved by the Board of
Directors. The SERP provides a supplemental pension benefit for
those whose pension under the RAPP is limited by the Internal
Revenue Code provisions or by reason of short service with the
Corporation. The normal retirement age under the SERP is 65.
Participants who have reached age 62 and have at least ten years
of service with Armco and five years of participation in the SERP
can receive the benefit immediately on an unreduced basis. For
those who retire prior to age 62, this benefit is payable at age
62. Participants who have accumulated at least five years of
service as a participant in the SERP on or before the date of
their termination of employment may elect to receive payments at
or after age 55 in an actuarially reduced amount. Participants
will receive an aggregate minimum pension of 50% of their average
annual earnings before retirement, which includes base salary and
bonuses (corresponding generally to the salary and bonus
reflected in the Summary Compensation Table above), for years
prior to 1991, imputed income resulting from group term life
insurance premiums paid by the Corporation and, for years prior
to 1995, the Corporation's contribution to the Armco Inc.
Retirement and Savings Plan.
The benefit derived from the foregoing calculation will be
offset by the qualified RAPP benefit and any qualified or non-
qualified defined benefit or defined contribution benefit from
prior employers not affiliated with Armco. In addition, the
equivalent of 50% of the normal Social Security retirement
benefits and any employer-provided disability benefits would also
be offset.
If 1994 employment was continued until mandatory retirement
at age 65, at their 1994 rates of remuneration, Messrs. Will,
Visokey, Higbee, Harmer, and Hildreth would be entitled to total
yearly pensions of $294,500, $208,921, $139,050, $126,000, and
$113,750, respectively, under such plans.
14
<PAGE>
Severance Arrangements
Armco's severance policy applicable to each of the Named
Executives provides a minimum severance pay of twelve months'
base salary, plus additional months (up to a maximum of 24) of
pay based on a combination of age and service.
In addition, Armco has agreements with each of the Named
Executives providing for certain benefits upon actual or
constructive termination of employment, or termination of
employment by reason of disability, death or an employee's
resignation under certain circumstances, generally following a
"change in control" of Armco, as defined in the agreements. A
"change of control" under these agreements generally occurs when
(1) any person or group other than the Corporation and certain
related entities becomes the beneficial owner of securities
representing 25% or more of the combined voting power of Armco's
securities, (2) during any period of two consecutive years, there
is a change in the composition of a majority of the Corporation's
Board of Directors that was not approved by at least two-thirds
of the existing directors who were so approved or (3) the
shareholders of the Corporation approve a merger or consolidation
of the Corporation, subject to certain exceptions, or the
complete liquidation of the Corporation or the sale of all or
substantially all of its assets. Under these agreements, Armco
has reserved the right to terminate employment for "cause", as
defined in the agreements, without the payment of such benefits.
Generally, upon the occurrence of an event which triggers these
benefits, an employee would be entitled to a lump sum payment
equal to a multiple (of two times for the Named Executives) the
sum of such employee's base salary (at the highest rate paid
during any month during the 24 months preceding notice of
termination) and bonus and other incentive compensation paid
during the calendar year preceding the termination, and
continuation for two years of coverage under Armco's welfare
benefit plans, including life, health and other insurance
benefits. The agreements also provide, in the event of a change
in control and termination of employment, for (i) a cash payment
in exchange for each employee's outstanding stock options in an
amount equal to the difference between the option price and the
higher of the per share market value of the common stock on the
date of termination and the average value of the consideration
per share paid to Armco shareholders in the transaction resulting
in the change in control and (ii) the lapse, immediately upon the
change in control, of all restrictions applicable to restricted
share awards.
Insurance
Upon the occurrence of an extended illness or accident, key
employees, including the Named Executives, are provided payments
equal to their then base salary for a maximum of six months.
Thereafter, the Corporation will provide such individuals with
long-term disability payments in an amount equal to 60% of their
base salary at the time such disability occurred. Such payments
will continue until age 65, at which time payments cease.
The Corporation provides all exempt salaried employees hired
prior to January 1, 1995, with group term life insurance equal to
24 times an employee's monthly base salary as of December 31,
1994, except that, for exempt salaried employees who were
employed on or before December 31, 1989, this insurance equals
the greater of 30 times the employee's monthly base salary as of
December 31, 1989, or 24 times the employee's monthly base salary
at the time of death. From 1995 and thereafter, that life
insurance benefit will equal the greater of the level as of
December 31, 1994, and 12 times base monthly salary. All
employees hired as of January 1, 1995, or thereafter will have a
life insurance benefit equal to 12 times the employee's monthly
base salary.
Following retirement with attainment of age 65 and at least
five years of service, age 55 and at least 15 years of service,
30 years of service (regardless of age), or permanent
incapacitation with 15 years of service, an employee is eligible
for group term life insurance based upon age and years of service
as of January 1, 1995. An employee that is age 50 or older or
has completed at least 30 years of service with the Corporation
as of January 1, 1995, will receive retiree life insurance
coverage equal to one times annual base pay at retirement for the
first year following retirement, with coverage in each of the 10
succeeding years thereafter declining by 10% per year, provided
that the minimum coverage in the eleventh year after retirement
and beyond will always be $10,000. Any employee who is under age
50 with less than 30 years of service as of January 1, 1995, will
receive life insurance of $10,000 upon retirement.
Certain key employees, including Messrs. Higbee and
Hildreth, could purchase supplemental coverage equal to 18 times
their monthly base salary as of January 1, 1987, at a cost equal
to the amount of imputed income allocated to such individual
under the Internal Revenue Code. Unlike the amount of the group
term life insurance provided to all employees, there is no
decrease in the amount of coverage for such key employees after
retirement.
15
<PAGE>
Participation in this supplemental plan was frozen as of
January 1, 1987. Messrs. Will, Visokey and Harmer are not
eligible for this supplemental coverage plan.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors (the
"Committee") is composed of independent directors (see
"Compensation Committee Interlocks and Insider Participation in
Compensation Decisions"). The Committee is responsible for
reviewing, determining and recommending to the Board the annual
salary, short- and long-term incentive compensation, stock awards
and other compensation of the executive officers of the
Corporation. This report describes the policies and rationales
of the Committee in establishing the principal components of
executive compensation in 1994.
The Committee's review and determination of executive
compensation generally includes consideration of the following
factors: (a) industry, peer group and national compensation
surveys, (b) past and future performance contributions of each
executive officer to corporate performance, (c) the overall
performance of the Corporation, both separately and relative to
similar companies in the steel industry, (d) historical
compensation levels and (e) recommendations of independent
compensation consultants with respect to compensation
competitiveness. Under the direction of the Committee, the
Corporation has developed a compensation strategy designed to
compensate its executives on a competitive basis relative to
specific performance targets and comparable to other companies in
the steel industry, including companies that are not included in
either the S&P Steel Index or Specialty Steels Peer Group
performance graph (as discussed on page 20 hereof), the five-year
cumulative total shareholder returns of which are graphically
depicted under "Performance Graph" below. Those companies, and
the other companies surveyed by the Corporation for their
compensation policies, were selected for comparison on the basis
of industry similarities. The S&P Steel Index was not considered
exclusively for comparison because it does not broadly represent
the specialty steels industry. The compensation program is
intended to (a) attract and retain key executives critical to the
long-term success of the Corporation, (b) facilitate the
Corporation's short- and long-term planning process, and, most
importantly, (c) reward executives for long-term strategic
management and the enhancement of shareholder value.
Compensation for each of the Corporation's executive
officers, including the Named Executives, consists of a fixed
base salary and variable components, including both short- and
long-term incentive compensation, as well as certain compensation
under corporate benefit plans available generally to corporate
officers. At the beginning of each year, an annual salary and
performance incentive plan for each of the Corporation's
executive officers, other than the Chief Executive Officer
("CEO"), is developed and prepared by the Corporation's human
resources staff under the direction of the CEO and submitted for
consideration by the Committee. The Committee reviews and fixes
the CEO's compensation based on criteria similar to those
considered for all executives, as well as an assessment of his
past and future contributions in leading Armco toward its
objectives of becoming the leading, low-cost domestic producer of
specialty steels and achieving improved long-term financial and
operating results.
In evaluating the performance and setting the compensation
of executive officers in 1994, the Committee considered the
factors described above. In determining incentive compensation,
it also took into account improvement in the Corporation's
historical market share in the specialty steel segment, Armco's
strategic market. The Committee also considered management's
successful completion of, or successful negotiation of agreements
providing for, the sale of assets and businesses that do not
enhance Armco's profitability or fit with Armco's core business;
significant increases in productivity, quality, customer service
and profitability of Armco's stainless and electrical steel
businesses, including at Armco's Butler, Zanesville and Coshocton
facilities; and record performance at Douglas Dynamics, Inc.
Based on these factors and accomplishments, the Committee
believes that Armco's executive management made substantial and
objective progress toward achieving the Corporation's overall
objectives described above.
Base Salary. Armco's base salary policy is designed to
-------------
recognize the sustained and cumulative efforts toward achieving
the Corporation's objectives that its executives have
demonstrated. The base salary is a remuneration for services
provided. The levels of base salary for 1994 were determined
primarily by competitive conditions and were fixed at levels that
are below competitive amounts paid to executives with comparable
qualifications at a broad range of industrial companies, as
reported by Hay Management Consultants Salary Surveys. In
addition, the Committee considered specific steel industry
compensation survey data and fixed 1994 salaries at or about the
median level for comparably sized steel companies. Of the Named
Executives, Messrs. Will and Visokey
16
<PAGE>
received increased in annual base salary from the prior year in
recognition of their strong performance discussed below and
increased responsibilities associated with their new executive
positions.
Short-Term Incentives. Short-term incentives are paid to
----------------------
recognize performance that is related to the achievement of key
financial and operating goals that have been established for a
fiscal year. These short-term incentives are set at or about the
middle of the range of short-term incentive bonuses paid to
executives at the steel companies surveyed by Armco. Since short-
term incentives generally reflect one year contributions, the
size of the payments may vary considerably from year to year,
depending on performance. At the beginning of each year,
performance goals for the purposes of determining annual
incentive compensation are established. These goals are
objective, measurable and to a reasonable degree controllable by
the respective executive. The executives are paid an annual
bonus based on achieving these annual goals.
For 1994, the Committee approved specific operating income
and working capital goals for each operating unit based on its
approved annual operating plan and a specific net income goal for
the Corporation's performance. These financial goals provided
70% of the executive's aggregate targeted incentive opportunity.
In addition, the Committee approved specific strategic and
operating goals, including both qualitative and quantitative
measures, such as market share, productivity initiatives,
customer service, safety performance improvements, sale of non-
strategic businesses and certain other discretionary objectives.
Achievement of these goals provided the remaining 30% of the
executive's aggregate targeted incentive opportunity. The total
amount of each executive's targeted incentive opportunity is
based upon a percentage of base salary, which percentage is based
on the comparative compensation data described above. The actual
incentive payment to an executive officer for any year may exceed
the targeted incentive opportunity for that year if applicable
performance targets are exceeded.
The Corporation's key operating units exceeded their
operating income and working capital goals and the Corporation
exceeded the target net income goal for 1994. In addition, the
Corporation achieved a number of specific strategic and operating
goals during 1994, including the divestment of non-strategic
assets and the execution of definitive agreements for such
divestment, the development of new, cost-effective salaried
medical and retirement benefits, the implementation of a new
Human Resources Competency Program, the formation and adoption of
a Strategic Product and Facilities Plan to upgrade and expand
plants, and the completion of a new business information systems
study. Based upon performance equal to or exceeding the
preestablished financial goals and the contributions made by
Messrs. Will, Visokey, Higbee, Harmer, and Hildreth to the
achievement of such strategic and operating goals, the Committee
awarded each of the Named Executives incentive payments for 1994
in excess of their targeted incentive opportunities.
Long-Term Incentives. The Committee recognizes long-term
----------------------
incentive compensation as the key component of the total pay
package linking executive pay and corporate performance. At
Armco, long-term incentive compensation is intended to link the
interests of its executives with the interests of Armco's owners,
its shareholders. Long-term incentive awards are targeted at or
about the middle of the range of long-term incentive compensation
paid to executive officers by the steel companies surveyed by
Armco for their compensation policies. In establishing its
competitive position, Armco considers the frequency and award
size of long-term incentive awards by the surveyed companies, as
well as the prior grants awarded to the Named Executives.
In 1994, the Committee and the Board of Directors,
recognizing that the steel industry had become a highly
competitive environment for strong, qualified senior management
talent, approved a comprehensive long-term incentive compensation
program for the Corporation's senior management, including the
Named Executives, to cover the period 1994 to 1997. The purpose
of the program is threefold: 1) attract and retain top
management for the next 5 years; 2) provide senior management a
meaningful financial incentive to improve the Corporation's
performance, including some personal risk capital the value of
which is tied to the market returns to Armco shareholders; and
3) encourage the acquisition and retention of Armco stock by
Armco's senior management. Under the program:
1. Initial Restricted Stock Award. Each program participant,
--------------------------------
including the Named Executives, received an initial grant of
shares of restricted stock in 1994 under the 1988 Restricted
Stock Plan. The value of these shares of restricted stock on
the date of grant is included in the Restricted Stock column
in the Summary Compensation Table. These shares will vest
20% in 1997, 30% in 1998 and 50% in 1999. If the recipient
leaves Armco before the shares are vested, they are
forfeited. The amounts of these initial grants to the Named
Executives were equal to approximately one year's base
salary and were viewed as an appropriate element of the 1994
Program in light of the requirement that at least 25% of
each participant's annual
17
<PAGE>
bonus under the annual incentive plan approved by the Board
of Directors for 1994, 1995 and 1996 be paid in restricted
stock.
2. Annual Incentive Plan Award. In lieu of payment in cash,
-----------------------------
each program participant, including the Named Executives,
will be paid at least 25% of the participant's annual
incentive payment under the incentive payment plan approved
by the Board of Directors for 1994, 1995 and 1996 to the
extent earned (payable in the first quarter of 1995, 1996
and 1997) in restricted stock granted under the
Corporation's 1993 Long-Term Incentive Plan previously
approved by the Corporation's shareholders. Each
participant may elect at least six months in advance to
increase this percentage up to a maximum of 100% of the
incentive payment in the manner discussed below. Each of
the Names Executives irrevocably elected in April 1994 to
receive 100% of any incentive bonuses earned under such plan
for 1995 and 1996 in restricted stock awards.
The number of shares of restricted stock that is awarded in
lieu of the portion of the incentive payment that is
mandatorily payable in restricted stock or that the
participant elected at the start of the program in April
1994 to receive in restricted stock is determined using a
discounted price of $3.50 per share, i.e., by dividing the
aggregate amount of the incentive payment to be made in
restricted stock by $3.50. These shares of restricted stock
will vest in 1997, 1998 and 1999 on the same dates as the
shares received under the initial restricted stock award
discussed in 1 above. The number of shares of restricted
stock that is awarded in lieu of the portion of the
incentive payment that the participant elects after the
start of the program in April 1994 to receive in restricted
stock is determined using a discounted price equal to 70% of
the average price per share of common stock over the five
trading days preceding the incentive payment date. These
shares of restricted stock will vest 20% in the third year
following the grant year, 30% in the fourth year following
the grant year and 50% in the fifth year following the grant
year. If the recipient leaves Armco before any of the
shares of restricted stock are vested, the recipient will
receive in cash only the lesser of (a) the dollar amount of
the incentive payment that had been applied to the shares or
(b) the value on the date of termination of the shares
awarded in lieu of such amount.
3. Stock Option Awards. At the time that shares of restricted
---------------------
stock are allocated on the incentive payment date in 1995,
1996, and 1997, the recipients, including the Named
Executives, will also receive an option, under the 1993 Long-
Term Incentive Plan, to purchase one share of common stock
for each share of restricted stock allocated. These stock
options will have an exercise price equal to 100% of the
market value of the common stock on the date of grant, and
are not exercisable until the second anniversary of the date
of grant, at which time they will be fully exercisable. If
the option holder leaves the Corporation before his options
are exercisable, those options will lapse.
Pursuant to elections made by the Named Executives in April
1994, all but one of the Named Executives received 100% of his
incentive payment for 1994 and all Named Executives will receive
100% of their incentive payments for 1995 and 1996 in restricted
stock and options in lieu of cash, to the extent earned.
No payments were made to the Named Executives in 1994 for
performance share awards in 1992 under the prior long-term
incentive plan since the Corporation failed to meet the three-
year (1992-94) performance goals established for the performance
share awards as a result of weaker performance during 1992 and
1993.
Chief Executive Officer's 1994 Compensation. As set forth
--------------------------------------------
in the Summary Compensation Table, Mr. Will's 1994 total base
salary, bonus and other compensation (excluding the restricted
stock grant in 1994 and the option grants) was $1,091,740. Mr.
Will earned $530,000 in base salary, $526,186 in annual incentive
bonus, 100% of which was paid to him in restricted stock and
options, and $35,554 in all other compensation. In addition, Mr.
Will received an award of 106,000 shares of restricted stock in
April 1994 pursuant to the startup element of the 1994 Program
discussed above. As was the case for all of the Named
Executives, the amount of this award was approximately equal to
one year's base salary. The Committee believes that this award
further ties Mr. Will's long-term compensation to the longer term
goals of the Corporation and its shareholders.
In determining Mr. Will's 1994 compensation, the Committee
considered the various factors applied to compensation of all
executive officers and discussed above. After reviewing
competitive salary information and Mr. Will's new
responsibilities as Chief Executive Officer, the Committee
approved a 6% increase in base salary for Mr. Will effective
January 1, 1994. Giving effect to this increase, Mr. Will's base
salary is at the middle of the range of the steel companies
surveyed by Armco. Mr. Will also had the opportunity to earn an
annual incentive bonus targeted at 55% of his annual base salary,
which is the middle of the range of annual incentives available
to chief
18
<PAGE>
executive officers of the surveyed steel companies. The
1994 performance of Armco's operating units, including at Armco's
Butler, Zanesville and Coshocton facilities and at Douglas
Dynamics, Inc., was at record levels. In addition, Armco, as a
whole, far exceeded the net income performance goal for the year.
The Committee also recognized Mr. Will's leadership in the sale
or execution of agreements providing for the sale of non-
strategic businesses, the development of a Strategic Product and
Facilities Plan to upgrade and expand plants, development of more
cost effective salaried medical and retirement benefits related
to company performance and the completion of a study to develop
new business information systems. The combination of Armco's
financial performance in excess of performance goals and the
Committee's assessment of Mr. Will's performance relative to his
non-financial objectives resulted in an incentive payment equal
to 1.8 times his 55% target incentive, or $526,186 (approximately
99% of his annual base salary). In April 1994, Mr. Will elected
to receive 100% of his 1994 incentive payment in restricted stock
and options.
Deductibility of Compensation Under Section 162(m) of the
---------------------------------------------------------
Internal Revenue Code. The Committee acknowledges the potential
- ----------------------
impacts of the recent Internal Revenue Code Section 162(m)
change, which limits a publicly held corporation's allowable
deduction for a covered employee's applicable employee
remuneration at $1 million for a taxable year. To enable the
Corporation to better preserve the deductibility of the
Corporation's compensation expenses under Section 162(m), the
Board of Directors approved the Annual Incentive Compensation
Plan for submission to the shareholders at the Meeting. The
Incentive Plan has been designed by the Committee to allow the
Committee to make awards thereunder that will be treated as
performance-based compensation that is exempt from the
limitations of Section 162(m). See "Annual Incentive
Compensation Plan - Establishment of Performance-Based Plan
Intended to Preserve Tax Deductibility Under Section 162(m) of
the Internal Revenue Code". If the shareholders fail to adopt
the Incentive Plan, the Corporation will consider other means of
addressing the impact of Section 162(m), but does not anticipate
that it would reduce the compensation otherwise payable.
The foregoing report has been approved by
all members of the Committee.
Burnell R. Roberts, Chairman
John J. Burns, Jr.
John D. Turner
Paul H. Henson
Compensation Committee Interlocks and
Insider Participation in Compensation Decisions
The Compensation Committee consists of Burnell R. Roberts,
Chairman, John J. Burns, Jr., Paul H. Henson and John D. Turner,
all of whom are independent outside directors. Mr. Burns,
President and Chief Executive Officer of Alleghany Corporation,
has been a director and a member of the Committee since April 24,
1992. Mr. Will, President and Chief Executive Officer of the
Corporation, has been a director of Alleghany Corporation since
June 16, 1992.
19
<PAGE>
Performance Graphs
The following Performance Graph compares the five-year
cumulative total shareholder return (assuming reinvestment of
dividends) of the common stock, the S&P 500 Index, the S&P Steel
Index and a newly defined peer group of specialty steels
companies comprised of Allegheny Ludlum Corp., Carpenter
Technology, J & L Specialty Steel and Lukens Inc. (the "Specialty
Steels Peer Group"). The Corporation believes that, given the
Corporation's specialty steel focus, use of the Specialty Steels
Peer Group is more meaningful than use of the S&P Steel Index,
which does not broadly represent the specialty steels industry.
The S&P Steel Index is included in the Performance Graph because
it was included last year, but is not expected to be included in
subsequent years' proxy statements.
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG ARMCO INC., USER DEFINED PEER GROUP, S&P 500 INDEX AND S&P STEEL INDEX
<CAPTION>
User
Defined
Measurement period Armco Peer S&P 500 S&P Steel
(Fiscal year covered) Inc. Group Index Index
- --------------------- ----- -------- ------- ---------
<S> <C> <C> <C> <C>
Measurement PT-
12/31/89 $100 $100 $100 $100
FYE 12/31/90 50 96 97 84
FYE 12/31/91 53 110 126 103
FYE 12/31/92 66 147 136 135
FYE 12/31/93 60 179 150 177
FYE 12/31/94 65 164 151 172
</TABLE>
20
<PAGE>
MISCELLANEOUS
Information on the Auditors
On the recommendation of the Audit Review Committee, the
Board of Directors has appointed Deloitte & Touche LLP to examine
the financial statements of the Corporation for the fiscal year
ending December 31, 1995 and to perform other appropriate
accounting services.
Representatives of Deloitte & Touche LLP are expected to be
present at the Meeting and will be given the opportunity to make
a statement if they desire to do so and are expected to be
available to respond to appropriate questions.
Stock Ownership
The following table sets forth information as to stock
ownership of directors and executive officers of Armco as of
February 28, 1995.
<TABLE>
<CAPTION>
Shares of
Common Stock
Beneficially
Name Owned (1)(4)
- ---------------------------------------------------------------------
<S> <C>
John J. Burns, Jr. 29,698(2)(3)
David A. Duke 1,000
John C. Haley 1,000
David G. Harmer 141,068
Paul H. Henson 1,000
David A. Higbee 109,301
Gary R. Hildreth 124,394
John H. Ladish 159,000
Bruce E. Robbins 0
Burnell R. Roberts 1,250
John D. Turner 5,000
Robert M. Visokey 156,244
James F. Will 549,728(3)
All Directors and Executive Officers as a Group
(16 persons including those named above) 1,516,482
</TABLE>
(1) No director or executive officer beneficially owns more
than 1% of the total shares of common stock. The
shares that are beneficially owned by all directors and
executive officers as a group constituted 1.43% of the
total shares of common stock outstanding. No director
or executive officer owns any shares of $2.10 preferred
stock, $3.625 preferred stock or $4.50 Cumulative
Convertible Preferred Stock. Except as noted below,
each director or executive officer has sole voting
power and sole investment power with respect to those
shares listed as beneficially owned by such director or
executive officer.
(2) Mr. Burns disclaims beneficial ownership of 1,209
shares held by his wife and 200 shares held by his wife
as custodian for his daughter.
21
<PAGE>
(3) Mr. Burns and Mr. Will are directors, and Mr. Burns is
President and Chief Executive Officer, of Alleghany
Corporation. As set forth below in this section,
"Stock Ownership", Alleghany Corporation beneficially
owned 5,643,554 shares of common stock as of November
10, 1992. Mr. Burns and Mr. Will disclaim beneficial
ownership of such shares.
(4) For the executive officers and directors indicated, the
shares shown as beneficially owned include the number
of shares such persons had the right to acquire within
60 days after February 28, 1995, pursuant to employee
options granted by the Corporation: Mr. Will - 94,874
shares, Mr. Visokey - 8,000 shares, Mr. Higbee - 3,750
shares, Mr. Harmer - 10,000 shares, Mr. Hildreth -
28,700 shares and all directors and executive officers
as a group - 205,624 shares. The shares shown also
include any shares allocated as of such date to the
person's accounts under the Armco Inc. Retirement and
Savings Plan. The numbers of shares beneficially owned
under this plan, in the aggregate, for the persons
indicated are as follows: Mr. Will - 516 shares, Mr.
Visokey - 397 shares, Mr. Higbee - 825 shares
(includes 191 shares of Armco stock held in the
National-Oilwell Retirement and Thrift Plan), Mr.
Harmer - 8,461 shares, Mr. Hildreth - 873 shares and
all directors and executive officers as a group -
14,264 shares. The numbers of restricted shares owned
subject to restrictions under Armco's long-term
incentive plans for the persons indicated are as
follows: Mr. Will - 256,338 shares, Mr. Visokey -
147,847 shares, Mr. Higbee - 104,726 shares, Mr. Harmer
- 120,607 shares, Mr. Hildreth - 86,321 shares and all
directors and executive officers as a group - 872,546
shares. The executive officers have no voting,
dividend or any other rights with respect to shares
subject to options under stock option plans until the
options are exercised. Subject to the restrictions
under Armco's long-term incentive plans, the recipients
have all rights of a shareholder with respect to the
restricted shares awarded thereunder, including the
right to vote and receive all dividends and other
distributions paid or made with respect thereto.
The following table lists the beneficial ownership of common
stock and $3.625 preferred stock with respect to all persons
known by the Corporation to be the "beneficial owners" (as
defined in Securities and Exchange Commission Rule 13d-3) of more
than 5% of any such class. Except as indicated, the information
is as of December 31, 1994, and is based on reports filed with
the Securities and Exchange Commission. The percentage of the
outstanding shares of each class owned by each such person or
entity is based on the outstanding shares of such class as of
December 31, 1994.
<TABLE>
<CAPTION>
Title of Name and Address Number of Shares % of Outstanding
Class of Beneficial Owner Beneficially Owned Shares of Class
- -------- ------------------- ------------------ ----------------
<S> <C> <C> <C>
Common Alleghany Corporation
Park Avenue Plaza
New York, NY 10055 5,643,554 (1) 5.5%
Common Dietche & Field
Advisers, Inc.
437 Madison Avenue
New York, NY 10022 5,564,950 (2) 5.4%
Common FMR Corp.
82 Devonshire Street
Boston, MA 02109 11,458,734 (3) 10.60%
Common Norwest Corporation
Norwest Center
Sixth and Marquette
Minneapolis, MN 55479 15,175,549 (4) 14.4%
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Title of Name and Address Number of Shares % of Outstanding
Class of Beneficial Owner Beneficially Owned Shares of Class
- -------- ------------------- ------------------ ----------------
<S> <C> <C> <C>
Common State of Wisconsin
Investment Board
P. O. Box 7842
Madison, WI 53707 10,265,000(5) 9.78%
Common T. Rowe Price
Associates, Inc.
100 East Pratt Street
Baltimore, MD 21202 5,333,080(6) 5.07%
$3.625 Putnam Investments, Inc.
Preferred One Post Office Square
Boston, MA 02109 380,250(7) 14.1%
$3.625 Norwest Corporation
Preferred Norwest Center
Sixth and Marquette
Minneapolis, MN 55479 204,200(4) 7.6%
$3.625 Neuberger & Berman
Preferred 605 Third Avenue
New York, NY 10158 167,200(8) 6.69%
$3.625 Reliance Financial
Preferred Services Corporation
Park Avenue Plaza
55 East 52nd Street
New York, NY 10055 390,000(9) 8.9%
</TABLE>
____________________
(1) The reported beneficial ownership is as of November 10,
1992. The beneficial owner reported that it had sole
voting and investment power as to 5,643,355 shares,
shared voting power as to 199 shares, as to which
beneficial ownership is disclaimed, and shared
investment power as to no shares.
(2) The reported beneficial ownership is as of June 30,
1992. The beneficial owner reported that it had sole
voting power and no investment power as to all of the
shares beneficially owned.
(3) The reported beneficial ownership is indirectly through
FMR Corp.'s wholly owned investment adviser, Fidelity
Management & Research Company ("Fidelity"), as to
9,775,893 shares owned by investment companies advised
by Fidelity and through FMR Corp.'s wholly owned bank
subsidiary, Fidelity Management Trust Company
("Fidelity Trust"), as to 1,682,841 shares owned by
institutional accounts for which Fidelity Trust acts as
investment manager. The shares of common stock
reported as beneficially owned include 3,205,111 shares
issuable upon conversion of 472,800 shares of the
$3.625 preferred stock. The beneficial owner reported
that each of it and Mr. Edward C. Johnson, 3rd.,
Chairman of FMR Corp., has sole voting power as to
1,204,844 shares and sole power to dispose or to direct
the disposition of 11,458,734 shares.
23
<PAGE>
(4) The reported beneficial ownership is indirectly through
Norwest Corporation's subsidiaries, Norwest Colorado,
Inc. and Norwest Bank Colorado, N.A. (collectively with
Norwest Corporation, "Norwest"). The shares of common
stock reported as beneficially owned include shares
issuable upon conversion of 18,600 shares of $2.10
preferred stock beneficially owned, shares issuable
upon conversion of 204,200 shares of $3.625 preferred
stock beneficially owned and shares issuable upon
conversion of 800 shares of $4.50 cumulative
convertible preferred stock. Norwest reported that it
had sole voting power as to 13,047,709 shares
(including 1,127,334 of the shares issuable upon
conversion of $2.10 preferred stock, $3.625 preferred
stock and $4.50 cumulative convertible preferred
stock), shared voting power as to 88,574 shares
(including 7,874 of the shares issuable upon conversion
of $2.10 preferred stock), sole investment power as to
15,146,947 shares (including 1,403,272 of the shares
issuable upon conversion of $2.10 preferred stock and
$3.625 preferred stock) and shared investment power as
to 6,026 shares (including 4,826 shares issuable upon
conversion of $2.10 preferred stock). Norwest reported
that the shares of $3.625 preferred stock reported as
beneficially owned include 165,000 shares as to which
the beneficial owner had sole voting power, 204,200 as
to which it had sole investment power and no shares as
to which it had shared voting or investment power.
Norwest disclaims beneficial ownership of all the
shares of common stock and $3.625 preferred stock
reported as beneficially owned.
(5) The beneficial owner reported that it had sole voting
and dispostive power as to all of the shares
beneficially owned.
(6) Disclosed to the Corporation as owned of record by a
subsidiary, T. Rowe Price Trust Company, Inc. (the
"Trust Company"), as trustee of the trust for some of
the Corporation's benefit plans, including the Armco
Inc. Retirement and Savings Plan and the Armco Inc.
Thrift Plan for Hourly Employees, and the Trust
Company's nominees. The Corporation believes that for
purposes of the reporting requirements of the
Securities Exchange Act of 1934, both T. Rowe Price
Associates, Inc. and the Trust Company are deemed to be
beneficial owners of the reported securities; however,
both T. Rowe Price Associates, Inc. and the Trust
Company expressly disclaim that they are, in fact, the
beneficial owners of such securities.
(7) The reported beneficial ownership as of December 31,
1993, is indirectly through Putnam Investments, Inc.'s
wholly owned investment advisors, Putnam Investment
Management, Inc. and The Putnam Advisory Company, Inc.,
and through The Putnam Fund for Growth and Income
(collectively with Putnam Investments, Inc., "Putnam").
Putnam reported that it had sole voting power as to no
shares, shared voting power as to 1,700 shares, sole
dispositive power as to no shares and shared
dispositive power as to 380,250 shares. Putnam
Investments, Inc. and Marsh & McClennan Companies,
Inc., of which Putnam Investments, Inc. is a wholly
owned subsidiary, each disclaim beneficial ownership of
such shares and state that neither of them has any
power to vote or dispose of, or direct the voting or
disposition of, such shares.
(8) The beneficial owner reported that as of December 31,
1993, it had sole voting power as to 120,800 shares,
shared investment power as to 167,200 shares and no
shared voting or sole investment power as to any
shares.
(9) The beneficial owner reported that as of December 31,
1993, it had sole voting and investment power as to all
of the shares beneficially owned.
24
<PAGE>
Shareholder Proposals
Any proposals of shareholders intended to be presented at
the 1996 annual meeting must be received by the Corporation by
November 15, 1995, in order to be considered for inclusion in the
proxy statement and form of proxy for that meeting. In addition,
as set forth above under "ELECTION OF DIRECTORS -- Board of
Directors and Committees of the Board", shareholders intending to
nominate director candidates for election at the 1996 annual
meeting must deliver written notice, including specified
information, to the Secretary of Armco at its address set forth
on the first page of this proxy statement by January 29, 1996.
Proxy Solicitation
The cost of soliciting proxies from the shareholders of the
Corporation will be borne by the Corporation. Proxies may be
solicited by mail, personal interviews, telephone and telegraph.
It is anticipated that banks, brokerage houses and other
custodians, nominees or fiduciaries will be requested to forward
soliciting material to their principals and to obtain
authorization for the execution of proxies and will be reimbursed
for their charges and expenses incurred in connection therewith.
The Corporation has retained Georgeson & Company Inc., Wall
Street Plaza, New York, New York 10005, to assist in the
solicitation of proxies by such methods. Georgeson & Company
Inc. will receive for such services a fee not to exceed $15,000
plus out-of-pocket expenses and disbursements. Certain directors,
officers and regular employees of the Corporation may also
solicit proxies by such methods without additional remuneration
therefor.
By Order of the Board of Directors
GARY R. HILDRETH, Secretary
March 15, 1995
25
<PAGE>
DIRECTIONS TO GET TO THE ...
HYATT REGENCY PITTSBURGH AT CHATHAM CENTER
112 Washington Place
Pittsburgh, PA 15219
(412)471-1234
FROM PITTSBURGH INTERNATIONAL AIRPORT:
Exit the airport (follow Pittsburgh signs) onto Route 60 to I-279
East. Take 279 East and follow Civic Arena signs thru the Fort
Pitt Tunnels and across the bridge. When on the bridge, follow the
Liberty Avenue exit ramp (Civic Arena). From Liberty Avenue go
thru 5 lights and make a right onto 6th Avenue. (From 6th Avenue
you can see the "Hyatt" straight ahead.) Continue straight up 6th
Avenue and turn left onto Centre Avenue. Ramada Hotel will be on
your left. From Centre Avenue go to traffic light and make a right
onto Washington Place and turn right into the "Hyatt".
FROM ROUTE 79 (BRIDGEVILLE):
From Bridgeville take Route 79 North onto I-279 East; follow
exact directions above from the Airport.
FROM INTERSTATE 80:
Take Interstate 80
to I-79 South and I-
279 toward downtown
Pittsburgh. Follow
Civic Arena signs.
Hyatt is located
across from the
Civic Arena.
FROM THE NORTH HILLS:
From the North Hills
take I-279 South and
follow I-579 onto
the Veterans Bridge
- - follow the Civic
Arena signs. From [MAP APPEARS HERE]
the Veterans Bridge
ramp make a left
onto 6th Avenue. Go
to one traffic light
and make a left onto
Centre Avenue. From
Centre Avenue go to
traffic light and
make a right onto
Washington Place and
turn right into the
"Hyatt".
FROM ROUTE 28:
From Route 28 take I-
579 onto the
Veterans Bridge -
follow the Civic
Arena signs. Follow
exact directions
above from the North
Hills.
FROM THE SOUTH HILLS:
From the South Hills take Route 19 North (West Liberty Avenue) thru
the Liberty Tunnels across the bridge. (Follow the Civic Arena
signs.) From the bridge take the Centre Avenue exit ramp. From
Centre Avenue make a right onto Washington Place and turn right
into the "Hyatt".
FROM PENNSYLVANIA TURNPIKE (I-76):
From I-76 take exit 6 at Monroeville. Once on the Monroeville exit
ramp take the Pittsburgh ramp to I-376 West. Follow thru the
Squirrel Hill Tunnels and continue until you see signs for the
Civic Arena. Take the Boulevard of the Allies/Crosstown Boulevard
exit ramp (Civic Arena). Continue in the right lane (Crosstown
Boulevard) until you see the Civic Arena ramp. At the end of the
ramp look for Civic Arena sign which will make you merge right
diagonally (across) into oncoming traffic. Go to traffic light and
make a right onto Washington Place and turn right into the "Hyatt".
26
<PAGE>
Exhibit A
ARMCO INC.
1995 DIRECTORS STOCK PURCHASE AND DEFERRED
COMPENSATION PLAN
1. Purpose.
The Armco Inc. 1995 Directors Stock Purchase and Deferred
Compensation Plan (the Plan) is established effective May 1, 1995
for the benefit of directors of Armco Inc. (the Corporation) who
are not employees of the Corporation or any of its subsidiaries.
The Corporation has adopted the Plan in recognition that its long-
term success and achievements are enhanced and the interests of
its shareholders are best served when its outside directors have
a direct and personal stake in the performance of the
Corporation's stock.
2. Definitions
As used herein, the following terms have the meanings hereinafter
set forth unless the context clearly indicates to the contrary:
(a) "Account" shall mean the deferred Fees account established
for a Participant pursuant to Plan Section 5.3.
(b) "Board of Directors" shall mean the board of directors of
the Corporation.
(c) "Common Stock" shall mean shares of the common stock, par
value $.01 per share, of the Corporation.
(d) "Common Stock Unit" shall mean the bookkeeping entry
representing the equivalent of one share of Common Stock.
(e) "Secretary" shall mean the person holding the position of
Secretary of the Corporation.
(f) "Effective Date" shall mean May 1, 1995.
(g) "Fees" shall mean all retainer, meeting and committee fees
payable to a non-employee director for service on the Board of
Directors for any calendar year from and after the Effective
Date, before any reduction pursuant to this Plan.
(h) "Fee Payment Date" shall mean the first calendar day of the
third month of each fiscal quarter or, if such date is not a
business day for the Corporation, the next succeeding business
day.
(i) "Participant" shall mean any member of the Board of
Directors who is not also a regular, salaried employee of the
Corporation or any of its subsidiaries.
(j) "Stock Price" shall mean the simple average of the high and
low sales prices of a share of Common Stock as reported in the
report of composite transactions (or other independent published
source designated by the Board of Directors) on the Fee Payment
Date (or if there shall be no trading on such date then on the
first previous date on which sales were made on a national
securities exchange). Notwithstanding the foregoing, if Common
Stock is purchased in the market for purposes of the Plan on a
Fee Payment Date, Stock Price means the actual average cost per
share of the aggregate purchases of Common Stock for the Plan on
such date.
3. Participation.
All members of the Board of Directors who are not also regular
salaried employees of the Corporation or any of its subsidiaries
shall participate in the Plan.
4. Payment of Fees.
4.1 Automatic Payment of Fees in Common Stock
Twenty-five percent (25%) of that portion of the Fees paid as an
annual retainer to each Participant on and after the Effective
Date shall be applied to the purchase of Common Stock. A
Participant may elect to defer receipt of such Fees by complying
with the requirements of Plan Section 5.1, in which case such
Fees shall be credited as Common Stock Units at the Stock Price
on the Fee Payment Date. If not deferred pursuant to Plan Section
5.1,
A-1
<PAGE>
whole shares of Common Stock purchased in respect of such Fees
shall be issued to the Participant as soon as practicable
after their purchase. Cash shall be paid to a Participant
in lieu of a fractional share of Common Stock.
4.2 Election to Receive Fees in Common Stock
Fees paid as an annual retainer which are not automatically paid
in Common Stock pursuant to Plan Section 4.1 or which are not
deferred pursuant to Plan Section 5.1 may be applied at a
Participant's election to the purchase of Common Stock at the
Stock Price on the Fee Payment Date. A Participant may make such
an election by filing the appropriate election form with the
Secretary at least six (6) months before the beginning of the
period of service to which the election applies. Whole shares of
Common Stock purchased in respect of such Fees shall be issued to
the Participant as soon as practicable thereafter. Cash shall be
paid to a Participant in lieu of a fractional share of Common
Stock.
4.3 Revising An Election
A Participant may amend or terminate an election under this Plan
Section 4.2 by written notice to the Secretary. Such amendment
or termination shall be effective with respect to Fees payable
for service during calendar periods six (6) months after the date
of delivery of such notice to the Secretary.
4.4 Restrictions on Resale of Stock
To the extent necessary to satisfy the requirements of the
exemption afforded by Rule 16b-3 under the Securities Exchange
Act of 1934, no Participant shall be permitted to sell any shares
of Common Stock purchased and issued to such Participant pursuant
to this Paragraph 4 prior to the expiration of a period of six
(6) months from the date of issuance of such shares to such
Participant. Prior to the time the resale restriction described
herein lapses, none of the shares of Common Stock purchased in
respect of Fees may be sold, assigned, bequeathed, transferred,
pledged, hypothecated or otherwise disposed of in any way by the
Participant. The Board of Directors may, in its discretion, take
such action as it shall deem necessary or appropriate to insure
compliance with this Plan Section 4.4 and any applicable
securities laws.
5. Deferral of Fees.
5.1 Deferral Election
A Participant may elect to defer receipt of his or her Fees,
including all or any portion of his or her Fees which are subject
to Plan Section 4.1 hereof, by filing the appropriate deferral
form with the Secretary on or before December 15th of the
calendar year prior to the calendar year in which such deferral
is to be effective; provided that, to the extent such deferral is
to be credited as Common Stock Units, such election must be made
by filing the appropriate deferral form no later than six (6)
months before the beginning of the period of service to which the
deferral applies. Notwithstanding the foregoing, no deferral
shall be permitted to the extent prohibited by applicable law.
5.2 Period of Deferral
Subject to Plan Section 5.8, a Participant may elect to defer
receipt of Fees until (i) a specified date in the future, (ii)
cessation of the Participant's service as a member of the Board
of Directors or (iii) the end of the calendar year in which
cessation of the Participant's service as a member of the Board
of Directors occurs.
5.3 Deferred Fees Account
There shall be established an Account in the Participant's name
on the books of the Corporation for each Participant electing to
defer Fees pursuant to this Paragraph 5.
5.4 Investment of Deferrals
Except as provided in the next sentence, deferrals shall be
credited to a Participant's Account in Common Stock Units. With
respect to that portion of his or her deferrals under the Plan
which is not subject to Plan Section 4.1, the Participant may
elect under the procedures set forth in Plan Section 4.2 that
such deferrals be credited to his or her Account in dollars or
Common Stock Units.
A-2
<PAGE>
5.5 Amounts Credited to Accounts
(a) Investment in Common Stock Units. To the extent the
deferral of a Participant's Fees is deemed to be invested in
Common Stock Units, such amounts shall be credited to his or her
Account on the Fee Payment Date to which the deferral election
applies. The amount deferred shall be converted into a number of
Common Stock Units by dividing the amount of Fees payable by the
Stock Price as of such date. The quotient, which shall be
expressed in whole or fractional Common Stock Units to the
nearest one/one hundredth (1/100th), shall be credited to the
Participant's Account as of such date.
(b) Cash Dividends. Whenever cash dividends are paid with
respect to shares of Common Stock, each Participant's Account
shall be credited on the payment date of such dividend with
additional Common Stock Units (including fractional units to the
nearest one/one hundredth (1/100th)) equal in value to the amount
of the cash dividend paid on a single share of Common Stock
multiplied by the number of Common Stock Units (including
fractional units) credited to a Participant's Account as of the
date of record for dividend purposes. For purposes of crediting
dividends, the value of a Common Stock Unit shall be the Stock
Price as of the payment date of the dividend.
(c) Recapitalizations, Splits and Mergers. The number of Common
Stock Units credited to each Participant's Account shall be
appropriately adjusted and modified upon the occurrence of any
stock split, stock dividend or stock consolidation affecting the
Common Stock. In the event of a merger, consolidation or an
acquisition involving more than 50% of the issued and outstanding
shares of Common Stock, the Board of Directors shall have the
authority to amend the Plan to provide for the conversion of
Common Stock Units credited to Participants' Accounts into units
equal to shares of stock of the resulting or acquiring company
(or a related company), as appropriate, if such stock is publicly
traded or, if not, into cash of equal value on the date of
merger, consolidation or acquisition. If pursuant to the
preceding sentence cash is credited to Participants' Accounts,
income shall be credited thereon from the date such cash is
received to the date of distribution at the rate determined
pursuant to Plan Section 5.5(d). If units representing publicly
traded stock of the resulting or acquired company (or a related
company) are credited to Participants' Accounts, dividends shall
be credited thereto in the same manner as dividends are credited
on Common Stock Units credited to such Accounts.
(d) Deferrals in Cash. To the extent not deemed invested in
Common Stock Units pursuant to Plan Section 5.5(a), the Account
of a Participant will be credited with the dollar amount of the
Participant's deferrals as of the Fee Payment Date. Interest
shall be credited thereon from the date such cash is received to
the date of distribution quarterly, at the end of each calendar
quarter, at a rate per annum (computed on the basis of a 360 day
year and a 91 day quarter) equal to the prime rate announced
publicly by PNC Bank, N.A. at the end of such calendar quarter.
5.6 Distribution of Deferral Account
Subject to Plan Section 5.8, distributions of a Participant's
Account under the Plan shall be made as follows:
(a) if a Participant has elected to defer his or her Fees to a
specified date in the future, payment shall be as of such date
and shall be made or shall commence, as the case may be, within
thirty (30) days after the date specified;
(b) if a Participant has elected to defer his or her Fees until
cessation of his or her service as a member of the Board of
Directors, payment shall be as of the date of such cessation of
service and shall be made or shall commence, as the case may be,
within thirty (30) days after the cessation of the Participant's
service as a director; and
(c) if a Participant has elected to defer his or her Fees until
the end of the calendar year in which the cessation of his or her
service as a member of the Board of Directors occurs, payment
shall be made or commence, as the case may be, on or within
thirty (30) days after December 31st of such year.
5.7 Payment Upon Death
Notwithstanding any elections pursuant to Plan Sections 5.2
and/or 5.9 hereof, in the event of the death of the Participant
prior to the distribution of his or her Account hereunder, the
balance credited to such Participant's Account as of the date of
his or her death shall be paid, as soon as reasonably practicable
thereafter, in a single distribution to the Participant's
beneficiary or beneficiaries designated on such Participant's
deferral election form. If no such election or designation has
been made, such amounts shall be payable to the Participant's
estate.
A-3
<PAGE>
5.8 Timing of Distribution to Satisfy Section 16(b)
Notwithstanding Plan Sections 5.6 and 5.7, the Board of Directors
may delay any distribution of amounts deferred hereunder which
are deemed invested in Common Stock Units until six (6) months
have elapsed from the date Common Stock Units are credited to a
Participant's account, or such earlier date that such
distribution can be made without violating the provisions of
Section 16(b) of the Securities Exchange Act of 1934.
5.9 Form of Payment
A Participant may elect to have his or her Account under the Plan
paid in a single distribution or equal annual installments, not
to exceed ten (10) annual installments. To the extent a
Participant's Account is deemed to be invested in Common Stock
Units, such Common Stock Units shall be converted to Common Stock
on the distribution date as provided in the next paragraph. To
the extent deemed invested in units of any other stock such units
shall similarly be converted and distributed in the form of
stock. To the extent invested in a medium other than Common
Stock Units or other units, each such distribution hereunder
shall be in the medium credited to the Participant's Account.
To the extent a Participant's Account is deemed invested in
Common Stock Units, a single distribution shall consist of the
number of whole shares of Common Stock equal to the number of
Common Stock Units credited to the Participant's Account on the
date as of which the distribution occurs. Cash shall be paid to
a Participant in lieu of a fractional share, determined by
reference to the Stock Price on the date as of which the
distribution occurs.
In the event a Participant has elected to receive annual
installment payments, each such payment shall be determined as
follows:
(a) To the extent his or her Account is deemed to be invested in
Common Stock Units, each such payment shall consist of the number
of whole shares of Common Stock equal to the number of Common
Stock Units (including fractional units) credited to the
Participant's Account on the date as of which the distribution
occurs, divided by the number of annual installments remaining as
of such distribution date. Cash shall be paid to Participants in
lieu of fractional shares, determined by reference to the Stock
Price on the date as of which the distribution occurs.
(b) To the extent his or her Account has been credited in cash,
each such payment shall be calculated by dividing the value on
the date the distribution occurs of that portion of the
Participant's Account which is in cash by the number of annual
installments remaining as of such distribution date.
Each Participant or beneficiary agrees that prior to any
distribution under the Plan, he or she will make such
representations and execute such documents as are deemed by the
Board of Directors to be necessary to comply with applicable
laws.
6. Administration of the Plan.
The Board of Directors shall administer the Plan. The Board of
Directors shall have plenary authority in its discretion to
interpret the Plan; to prescribe, amend and rescind rules and
regulations relating to it; to determine the terms of Fees
deferral agreements executed and delivered under the Plan,
including such terms and provisions as shall be requisite in the
judgment of the Board of Directors to conform to any change in
any law or regulation applicable thereto; and to make all other
determinations deemed necessary or advisable for the
administration of the Plan; provided, however, that the Board
shall have no discretion with respect to the eligibility or
selection of directors to receive shares of Common Stock under
Section 4.1 of the Plan, the number of shares of Common Stock to
be granted or purchased under the Plan or the timing of the grant
or purchase of such shares, or the purchase price for such
shares. The Board of Directors' determination on the foregoing
matters shall be conclusive.
7. Termination and Amendment of the Plan.
The Board of Directors may at any time terminate the Plan or make
such modification or amendment of the Plan as it shall deem
advisable; provided, however, that no amendment may be made,
without the approval of the Corporation's shareholders, which
would (i) materially increase the benefits accruing to
Participants under the Plan, (ii) materially increase the maximum
number of shares reserved for issuance under the Plan (except
pursuant to the last paragraph of "Stock Reserved for the Plan"
below) or (iii) materially amend the requirements as to the class
of persons eligible to participate in the Plan and, provided
further, that no modification or amendment of the Plan shall
reduce any amount already credited to a Participant's Account as
of the effective date of such modification or amendment. This
Plan may be amended without shareholder approval in order
to ensure that this Plan, in form and
A-4
<PAGE>
operation, complies with regulations issued under Section 16 of
the Securities Exchange Act of 1934. In no event may the Plan's
Participation, Payment of Fees or Deferral of Fees provisions be
amended more than once every six (6) months other than to comport
with changes in the Internal Revenue Code of 1986, as amended
(the "Code"), or the Employee Retirement Income Security Act of
1974, as amended.
8. Stock Reserved for the Plan.
One hundred thousand (100,000) shares of authorized but unissued
Common Stock are reserved for issuance and may be issued pursuant
to the terms of the Plan.
In lieu of such unissued shares, the Corporation may, in its
discretion, transfer to Participants under the terms of the Plan
treasury shares, reacquired shares or shares bought in the market
for the purposes of the Plan, provided that (subject to the
provisions of the next paragraph), the total number of shares
which may be granted or sold pursuant to awards granted under the
Plan shall not exceed 100,000.
In the event of any changes in the outstanding Common Stock by
reason of stock dividends, split-ups, spin-offs,
recapitalizations, mergers, consolidations, combinations or
exchanges of shares and the like, the aggregate number and class
of shares available under the Plan shall be appropriately
adjusted.
9. No Interest in Assets.
No Participant or any other person shall have any interest in any
specific asset of the Corporation by reason of any amount
credited to him or her hereunder, nor any right to receive any
distribution under the Plan except as and to the extent expressly
provided in the Plan. There shall be no funding of any benefits
which may become payable hereunder. No trust shall be created by
the execution or adoption of this Plan or be required to be
created in connection herewith. Any amounts which become payable
hereunder shall be paid from the general assets of the
Corporation. Nothing in the Plan shall be deemed to give any
member of the Board of Directors any right to participate in the
Plan, except in accordance with the provisions of the Plan, or to
continue as a director of the Corporation. A Participant whose
Account has been credited with Common Stock Units hereunder shall
not have any rights as a holder of Common Stock until
certificates for shares of such stock are issued to such
Participant.
10. Restriction Against Assignment.
No Common Stock Units credited to a Participant's Account or
shares of Common Stock subject to any Common Stock Unit shall be
sold, assigned, transferred, pledged or otherwise encumbered by a
Participant otherwise than by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order
as defined by the Code prior to the date on which the underlying
Common Stock is issued, except that Participants may designate
beneficiaries to receive Common Stock underlying Common Stock
Units as provided in Plan Section 5.7 hereof.
The Corporation shall pay all amounts payable hereunder only to
the person or persons designated by the Plan as Participant or
beneficiary, as appropriate, and not to any other person or
corporation. No part of a Participant's Account shall be liable
for the debts, contracts or engagements of any Participant, his
or her beneficiaries or successors in interest, nor shall it be
subject to execution by levy, attachment or garnishment or by any
other legal or equitable proceeding, nor shall any such person
have any right to alienate, anticipate, commute, pledge, encumber
or assign any benefits or payments hereunder in any manner
whatsoever.
11. Government Regulations.
The Plan, and the deferral of Fees and purchase of Common Stock
thereunder, and the obligation of the Corporation to issue, sell
and deliver shares, as applicable, under the Plan, shall be
subject to all applicable laws, rules and regulations.
12. Governing Law.
This Plan shall be construed, regulated and administered under
the internal laws of the State of Ohio.
13. Shareholder Approval.
This Plan shall be without force and effect unless and until
approved by the Corporation's shareholders.
A-5
<PAGE>
Exhibit B
ARMCO INC.
ANNUAL INCENTIVE COMPENSATION PLAN
1. Purpose.
The purposes of the Annual Incentive Compensation Plan (the
"Plan") are to advance the interests of Armco Inc. (the
"Corporation") by providing participants in the Plan with annual
incentive opportunities linked directly to specific results. It
is intended that the Plan will: (a) reinforce the Corporation's
goal-setting and strategic planning process; (b) recognize the
efforts of management in achieving objectives; and (c) aid in
attracting and retaining competent management, thus ensuring the
long-range success of the Corporation.
2. Definitions.
(a) "Award" shall mean an incentive payment made under the Plan.
(b) "Board" shall mean the Board of Directors of the
Corporation.
(c) "Committee" shall mean a committee of the Board of Directors
of the Corporation, which will consist of not less than three
directors of the Corporation who are appointed by the Board of
Directors and who will not be and will not have been an officer
or an employee of the Corporation. In addition, in order to be a
member of the Committee, a director must be an "outside director"
within the meaning of Section 162(m) of the Internal Revenue Code
of 1986, as amended, and the regulations thereunder (the "Code").
The Committee shall initially be the Compensation Committee of
the Board of Directors.
(d) "Participant" shall mean a person who is eligible under
Section 5 of the Plan to receive an Award.
3. Administration.
The Committee will administer the Plan, establish and amend rules
relating to the Plan and make all other determinations necessary
under the Plan. Determinations made by the Committee will be
final and binding upon Participants and their legal
representatives and, in the case of deceased Participants, upon
their executors, administrators, estates, beneficiaries, heirs
and legatees. The terms and provisions of the Plan will be
construed under and controlled by the law of the State of Ohio.
4. Effectiveness of the Plan.
The Plan shall be effective as of January 1, 1995, subject to
approval by the shareholders of the Corporation at the Annual
Meeting of the Corporation's Shareholders to be held on April 28,
1995. The Plan shall remain effective until April 28, 2000 or
such earlier date as the Board shall determine.
5. Participants.
All officers and corporate and operating management employees of
the Corporation and its subsidiaries are eligible for selection
to participate in the Plan.
6. Awards.
The Committee may, subject to the terms hereof, make Awards in
each calendar year with respect to the preceding year hereunder
("Award Year"), beginning with an award made in 1996 with respect
to Award Year 1995, to Participants eligible for awards under the
Plan. Awards shall be paid as soon as reasonably practicable
after the Committee's certification of the achievement of
applicable performance goals in the calendar year following the
Award Year, except to the extent that a Participant has made an
election to defer the receipt of such Award pursuant to any
deferred compensation plan of the Corporation.
B-1
<PAGE>
The Committee shall establish a Target Award for each Participant
selected by the Committee to participate in the Plan during the
Award Year. Target Awards shall be established prior to the
start of the Award Year, except Target Awards may be established
after the start of the Award Year if doing so would not cause the
payment of the Award to fail to be deductible by reason of
Section 162(m) of the Code.
Using objective criteria preestablished by the Committee, a
percentage (which may exceed 100%) of the Target Award for each
Award Year will be determined by the Committee for each eligible
Participant based upon achievement of levels during such Award
Year of performance goals, preestablished by the Committee. Such
objective criteria and performance goals shall be established by
the Committee prior to the start of the Award Year, except that
the objective criteria and performance goals may be established
after the start of the Award Year if doing so would not cause the
payment of the Award to fail to be deductible by reason of
Section 162(m) of the Code. The performance goals may relate to
a particular area of the business for which the participant is
responsible, to one or more business units or to the Corporation
as a whole, or a combination of the foregoing. The Committee
shall certify the level of achievement of performance goals
before payment of any Award.
The Award made to an individual Participant may be less
(including no Award) than the percentage of the Target Award
determined based on the level of achievement of applicable
performance goals. The Committee shall be precluded from
increasing such percentage of the Target Award but may apply its
discretion to reduce or eliminate such percentage without the
consent of the Participant.
The performance goals may include one or more of the following
performance measures for a calendar year: (a) income before
federal taxes and net interest expense; (b) achievement of
specific and measurable operational objectives; (c) working
capital, generally defined to include receivables, inventories
and controllable current liabilities, measured either in absolute
dollars or relative to sales and/or (d) such other performance
goals as may be established by the Committee which may be based
on earnings growth, revenues, expenses, stock price, market
share, return on assets, equity or investment, regulatory
compliance, satisfactory internal or external audits, improvement
of financial ratings, or achievement of balance sheet, income
statement or cash flow objectives, or any other objective goals
established by the Committee, and may be absolute in their terms
or measured against or in relationship to other companies
comparably, similarly or otherwise situated.
If a Participant's active employment with the Corporation or a
subsidiary of the Corporation, as the case may be, ceases during
any Award Year because of retirement, disability or death, the
Participant or the Participant's beneficiary designated hereunder
will, subject to achievement of applicable performance goals,
receive a prorated share of the Award for that Award Year based
upon the base salary of the Participant accrued from January 1 of
the Award Year through the date active employment ceases. Such
prorated payment shall be made at the same time payments for that
Award Year are made to other Participants. If employment is
terminated during an Award Year for any reason other than
retirement, disability or death, the Participant will forfeit all
right to receive an Award for that Award Year.
7. Designation of Beneficiaries.
A Participant may designate a beneficiary or beneficiaries to
receive in case of the Participant's death all or part of the
Awards which may be made to the Participant under the Plan. A
designation of beneficiary may be replaced by a new designation
or may be revoked by the Participant at any time. A designation
or revocation shall be on a form to be provided for the purpose
and shall become effective only when filed with the Corporation
during the Participant's lifetime with written acknowledgment of
receipt from the Corporation. In case of the Participant's
death, an Award made under the Plan with respect to which a
designation of beneficiary has been made (to the extent it is
valid and enforceable under applicable law) shall be paid to the
designated beneficiary or beneficiaries.
8. Modification or Termination of Plan.
The Board may modify or terminate the Plan at any time to be
effective at such date as the Board may determine. The Committee
shall be authorized to make changes to the Plan that are
consistent with the purpose of the Plan or changes to comply with
government regulations. A modification may affect present and
future Participants.
B-2
<PAGE>
9. Payment of Awards; Maximum Awards.
Awards shall be paid in cash, provided that the Committee may
determine, including pursuant to an irrevocable election by a
Participant made at least six months in advance of the Award, to
pay any Award earned under the Plan in shares of the
Corporation's stock, including restricted stock (issued under the
Corporation's 1993 Long-Term Incentive Plan or any other stock
plan of the Corporation that has been approved by its
shareholders), in lieu of cash. Awards paid in shares of the
Corporation's stock, including restricted stock, in lieu of cash
may be made at a discounted price, which shall not in any event
be less than the lesser of $3.50 per share and 70% of market
value on the date the Target Award is established (as adjusted to
reflect any stock splits, reverse stock splits, stock dividends,
mergers, consolidations, recapitalizations, reclassifications,
special dividends or other similar events affecting the
Corporation's stock). If all or a portion of a Participant's
incentive payments is to be made shares of restricted stock, the
Committee may also determine to provide that, if any such shares
are forfeited because such Participant's employment terminates
before the restrictions on such shares lapse, such Participant
shall be entitled to a cash payment from the Corporation for such
forfeited shares equal to the lesser of (i) the dollar amount of
the incentive payment that was paid in the forfeited shares in
lieu of cash and (ii) the market value of the forfeited shares at
the time of such employment termination. Such amount shall be
payable by the Corporation within 30 days after the Participant's
termination of employment.
In no event may the sum of the dollar amount of incentive
payments paid in cash and the market value of incentive payments
paid in common stock, including restricted stock (based in all
cases on the market price of the common stock on the date the
Target Award is established), to any Participant under this Plan
for any Award Year exceed $1,500,000.
10. General.
(a) No person shall have any claim to be granted an Award under
the Plan and there is no obligation for uniformity of treatment
of Participants under the Plan. Awards under the Plan may not be
assigned or alienated.
(b) Neither the Plan nor any action taken hereunder shall be
construed as giving to any employee the right to be retained in
the employ of the Corporation or any subsidiary of the
Corporation.
(c) The Corporation shall have the right to deduct from any
Award to be paid under the Plan any federal, state or local taxes
required by law to be withheld with respect to such payment.
B-3
<PAGE>
ARMCO INC.
One Oxford Centre
301 Grant Street
Pittsburgh, PA 15219-1415
The Annual Meeting of Shareholders will be held at the Hyatt
Regency Pittsburgh at Chatham Center located at 112 Washington
Place, Pittsburgh, Pennsylvania, on Friday, April 28, 1995, at
10:00 a.m. The enclosed Notice of Meeting and Proxy Statement
contains additional information about the meeting.
INSTRUCTIONS
------------
1. Review and complete the Proxy Card; be sure to SIGN the
card.
2. Detach and return the SIGNED Proxy Card in the enclosed
return envelope.
IMPORTANT
---------
You are urged to date and sign the enclosed proxy and return it
promptly to ensure a proper representation at this meeting.
DETACH HERE FROM PROXY CARD
ARMCO INC.
Item 1 Authority to vote for the election FOR [ ] WITHHOLD [ ]
- ------ of directors: All nominees Authority
listed (except to vote
as marked to the
contrary)
INSTRUCTION: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name in the list below:
1. John J. Burns, Jr. 3. John C. Haley 5. Bruce E. Robbins 7. John D. Turner
2. David A. Duke 4. Paul H. Henson 6. Burnell R. Roberts 8. James F. Will
Item 2 To adopt the 1995 Directors Stock Purchase and Deferred Compensation
- ------ Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 2.
Item 3 To adopt the Annual Incentive Compensation Plan.
- ------
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 3.
Item 4 To transact such other business as may be properly
- ------ brought before the meeting.
(CONTINUED ON REVERSE SIDE)
DETACH HERE FROM PROXY CARD
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 28, 1995
The undersigned hereby appoints James F. Will, Paul H. Henson and
Gary R. Hildreth, and each or any of them, proxies, with full
power of substitution, to represent and to vote all shares of
common stock and/or preferred stock of Armco Inc. held of record
by the undersigned on February 28, 1995, at the annual meeting of
shareholders to be held on April 28, 1995, and at any adjournment
thereof, notice of which meeting together with the related proxy
statement has been received. The proxies are directed to vote
the shares the undersigned would be entitled to vote if
personally present.
Please vote on the reverse side hereof, date and sign below and
return this proxy form promptly in the enclosed envelope. If you
attend the meeting and wish to change your vote, you may do so
automatically by casting your vote at the meeting.
THIS PROXY FORM, WHEN PROPERLY EXECUTED, WILL BE VOTED AND WILL
BE VOTED IN ACCORDANCE WITH THE DIRECTIONS GIVEN BY THE
SHAREHOLDER. IF NO DIRECTIONS ARE GIVEN HEREON, THE PROXY FORM
WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR ADOPTION OF THE
1995 DIRECTORS STOCK PURCHASE AND DEFERRED COMPENSATION PLAN AND
FOR ADOPTION OF THE ANNUAL INCENTIVE COMPENSATION PLAN. THIS
PROXY DELEGATES DISCRETIONARY AUTHORITY WITH RESPECT TO ANY OTHER
MATTERS WHICH MAY COME BEFORE THE MEETING.
Dated ,1995
--------------------------------
--------------------------------
SIGNATURE
--------------------------------
SIGNATURE IF SHARES HELD JOINTLY
Please sign exactly as name
appears opposite. Executors,
trustees, and administrators
and other fiduciaries should
so indicate.
