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
[X] Definitive Proxy Statement BY 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
14-a6(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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
ARMCO INC.
ONE OXFORD CENTRE
301 GRANT STREET
PITTSBURGH, PA 15219-1415
-------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 26, 1996
-------------------
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of Armco
Inc. will be held at the Rivers Club, located at One Oxford Centre, 301 Grant
Street, Pittsburgh, Pennsylvania, on Friday, April 26, 1996, at 10:00 a.m.,
for the following purposes:
1. To elect directors.
2. To transact such other business as may properly come before the
meeting.
The close of business on February 29, 1996, 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 14, 1996
<PAGE>
ARMCO INC.
ONE OXFORD CENTRE
301 GRANT STREET
PITTSBURGH, PA 15219-1415
-------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 26, 1996
-------------------
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 26,
1996. This proxy statement and the accompanying proxy were first sent to
shareholders of the Corporation on or about March 14, 1996.
The close of business on February 29, 1996, 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
106,550,937 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. 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.
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.
1
<PAGE>
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 64; President and Chief Executive Officer of Alleghany
Corporation, an insurance and financial services holding
[Photograph of company. Prior to 1992, Mr. Burns was President and Chief
John J. Burns, Operating Officer of Alleghany Corporation. A Director of
Jr.] the Corporation since 1992; a member of the Audit Review
Committee, Compensation Committee and Corporate
Responsibility Committee. Also a Director of Alleghany
Corporation and Burlington Northern Santa Fe Corporation.
John J. Burns, Jr.
Age 48; Corporate Vice President, Owens Corning, an
advanced glass and composite materials company, and
[Photograph of President of Owens Corning's Miraflex Trademark Products
Paula H.J. business unit, and former Vice President Business
Cholmondeley Development and Global Sourcing. Formerly Vice President
and Director - International Division of the Faxon
Company, a library subscription agency. A Director of
the Corporation since 1996; a member of the Audit Review
Committee.
Paula H.J. Cholmondeley
2
<PAGE>
Age 60; Vice Chairman, Corning Incorporated, a broad-based
[Photograph of manufacturing and service company. A Director of the
David A. Duke] Corporation since 1989; a member of the Audit Review
Committee and Corporate Responsibility Committee. Also a
Director of Corning Incorporated.
David A. Duke
Age 66; Former Chairman of the Board of the Corporation.
[Photograph of Retired Chairman of the Board and Chief Executive Officer
John C. Haley] of Business International Corporation, a publishing,
consulting and advisory services firm. A Director of the
Corporation since 1975; a member of the Nominating
Committee.
John C. Haley
Age 51; Executive Vice President of PNC Bank Corp., a
[Photograph of provider of broad-based banking and financial services.
Bruce E. Robbins] 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 Compensation Committee and Corporate Responsibility
Committee.
Bruce E. Robbins
Age 68; Chairman of Sweetheart Holdings, a private
[Photograph of partnership. Former Chairman of the Board and Chief
Burnell R. Executive Officer of The Mead Corporation, an integrated
Roberts] manufacturer of paper and forest products. A Director of
the Corporation since 1985; a member of the Audit Review
Committee, Compensation Committee and Nominating Committee.
Also a Director of DPL Inc., Perkin-Elmer Corporation,
Rayonier and Universal Protective Packaging, Inc.
Burnell R. Roberts
3
<PAGE>
Age 50; President and Chief Executive Officer of Copperweld
[Photograph of Corporation, a manufacturer of tubular and bimetallic wire
John D. Turner] products. A Director of the Corporation since 1994; a
member of the Audit Review Committee, Compensation
Committee and Nominating Committee.
John D. Turner
Age 57; Chairman of the Board, Chief Executive Officer and
[Photograph of President of the Corporation and former Chief Operating
James F. Will] 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. Also a Director of Alleghany Corporation and AK
Steel Holding Corporation.
James F. Will
Board of Directors and Committees of the Board
In 1995, the Board of Directors of the Corporation met eight times.
The Nominating Committee met once in 1995. 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 1997 annual
meeting of shareholders must deliver written notice, including specified
information, to the Secretary of the Corporation by January 26, 1997.
The Audit Review Committee met two times in 1995. 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.
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<PAGE>
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 responsibility relating to certain benefit plans to
the Benefit Plans Administrative Committee and to the Benefit Plans Asset
Review Committee and administers and oversees grants and awards under the
Corporation's employee stock and other incentive plans. This committee met
five times in 1995. See "EXECUTIVE COMPENSATION -- Compensation Committee
Report on Executive Compensation".
During 1995, no director attended less than 75% of the meetings of the
Board and committees on which he served except for Mr. Burns and Mr. Henson.
Compensation of Directors
Each director, other than those who are employees of the Corporation or
its subsidiaries, is paid a retainer fee of $24,000 a year, plus travel and
other expenses incurred in connection with his or her 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. In addition, Mr. John C. Haley was paid a fee of
$125,000 a year, plus travel and other expenses incurred, in connection with
his position as non-executive chairman. Effective as of February 1, 1996,
Mr. Haley stepped down as non-executive chairman.
Under the 1995 Directors Stock Purchase and Deferred Compensation Plan
(the "Directors Stock Plan"), approved by the shareholders in 1995, each non-
employee director receives 25% (and may elect to receive up to 100%) of his
or her annual retainer fee in shares of common stock and the balance in cash.
Each non-employee director may also elect to defer receipt of any or all of
his or her director's fees. If a director so elects, he or she will be
credited with common stock units (representing a right to receive a share of
common stock at a future date) for any fees required to be received in shares
of common stock and for any other fees as such director may elect, with the
balance of the deferred fees being credited to a cash account. The number of
common stock units will be adjusted to reflect any dividends paid on the
common stock and the cash accounts will be credited quarterly with interest
at the prime rate. Distribution of common stock in respect of any common
stock unit credited to a director's account and of cash in any amounts
credited to his or her cash account will be made after such director ceases
to be a director of the Corporation.
Effective April 30, 1995, the Board of Directors locked and froze the
pension plan for outside directors. As a result, Mr. Haley and Mr. Roberts,
each of whom was 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 his retirement from the
Board of Directors. Mr. Burns, Dr. Duke, Mr. Robbins and Mr. Turner, each of
whom was unvested, were credited with hypothetical investments in 3,000,
5,500, 1,000 and 1,000 shares of common stock, respectively (at a rate of
1,000 shares of common stock for each year of service on the Board of
Directors through April 30, 1995), in settlement of their unvested benefits
under this plan. 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.
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 1995, the Corporation paid
premiums aggregating $14,796 for this coverage.
5
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
Set forth below is certain summary information with respect to the
compensation of Armco's chief executive officer and the four other most
highly compensated executive officers (the "Named Executives") who were
serving as executive officers at December 31, 1995 (based on amounts
reported as salary and bonus for 1995).
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
---------------------------------------------------------------
Awards Payouts
--------------------------------------
Other Restricted Securities All Other
Name Annual Stock Underlying LTIP Compen-
and Principal Compen- Award(s) Options Payouts sation
Position Year Salary ($) Bonus ($) sation ($) (1) (#)(2) ($) ($)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James F. Will 1995 530,000 0 0 749,572 124,929 0 17,040 (3)
----
President 1994 530,000 0 0 1,512,739 150,338 0 35,554
----
& CEO 1993 495,833 53,000 0 0 65,000 0 30,781
----
David A. Higbee 1995 246,000 0 0 274,114 45,686 0 6,236 (3)
----
V.P. 1994 246,000 0 0 607,710 55,526 0 14,846
----
1993 123,000 24,600 0 0 15,000 0 7,201
----
Gary L.
McDaniel 1995 184,168 0 0 323,294 53,882 0 3,224 (3)
----
V.P. - 1994 163,335 0 0 327,776 37,334 0 7,937
----
Operations (4) 1993 115,357 90,822 0 0 0 0 4,125
----
David G. Harmer 1995 237,500 0 0 264,643 44,107 0 5,866 (3)
----
V.P. & Chief 1994 225,000 0 0 587,771 55,607 0 16,929
----
Financial
Officer 1993 168,750 22,500 0 142,500 20,000 0 10,091
----
Gary R. Hildreth 1995 210,003 0 0 239,406 39,901 0 6,300 (3)
----
V.P., 1994 200,000 43,250 0 440,595 37,071 0 13,159
----
General Counsel 1993 196,667 20,000 0 0 15,000 0 12,449
& 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 each of the
Named Executives, are comprised of shares of restricted common stock awarded
under the Corporation's shareholder-approved plans to such Named Executive in
January 1996 in lieu of all of the cash bonus payable to such Named Executive
for 1995 under the 1995 Annual Incentive Compensation Plan ("Annual Incentive
Compensation Plan"). Under a compensation program (the "1994 Program")
implemented by the Corporation in
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<PAGE>
April 1994 for its senior executives, including the Named Executives, each
participant, including the Named Executives, is required to receive at least
25% of any annual bonus under such an annual incentive plan approved by the
Corporation's Board of Directors 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 such an annual incentive
compensation plan in restricted stock awards, valued at $3.50 per share. The
vesting of the awards of restricted stock under the 1994 Program is 20% of
such shares in April 1997, a further 30% in April 1998 and the remaining 50%
in April 1999.
The following table sets forth (based on the closing price of the common
stock of $5.750 on the date of grant) for each of the Named Executives the
value of the portion of those shares of restricted stock reflected above for
1995 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 $143,664 $215,499 $390,409 $749,572
D. A. Higbee $ 52,538 $ 78,804 $142,772 $274,114
G. L. McDaniel $ 61,962 $ 92,949 $168,383 $323,294
D. G. Harmer $ 50,721 $ 76,084 $137,838 $264,643
G. R. Hildreth $ 45,885 $ 68,828 $124,693 $239,406
</TABLE>
All of the Named Executives irrevocably elected in April 1994 to receive
100% of any incentive bonuses earned under such an annual incentive plan for
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 for 1995: Mr. Will - $437,250; Mr. Higbee -
$159,900; Mr. McDaniel - $188,588; Mr. Harmer - $154,375 and Mr. Hildreth -
$139,652). See "Compensation Committee Report on Executive Compensation".
The aggregate number and value (based on the closing price of the common
stock of $5.8125 at December 29, 1995) of the restricted shares held by the
Named Executives at December 31, 1995 (which does not include restricted
stock awards for 1995 discussed above) was: Mr. Will - 256,338, $1,489,965;
Mr. Higbee - 104,726, $608,720; Mr. McDaniel - 53,834, $312,910; Mr. Harmer -
120,607, $701,028 and Mr. Hildreth - 85,071, $494,475. 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 is 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 1995 represent
options granted on February 23, 1996, with respect to bonuses earned for the
fiscal year 1995. 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) $2,250 each for Mr. Will, Mr. Higbee, Mr. McDaniel, Mr.
Harmer and Mr. Hildreth of matching contributions under the Armco Inc.
Retirement and Savings Plan;
(ii) $5,700 for Mr. Will, $1,440 for Mr. Higbee, none for Mr.
McDaniel, $1,312 for Mr. Harmer and $900 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
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<PAGE>
(iii) $9,090 for Mr. Will, $2,546 for Mr. Higbee, $974 for Mr.
McDaniel, $2,304 for Mr. Harmer and $3,150 for Mr. Hildreth for premiums for
life insurance benefits provided to them.
(4) Effective January 1, 1996, Mr. McDaniel was elected Vice
President - Operations.
Stock Option Plans
The Corporation has granted stock options and has authority to make
future grants of stock options and stock appreciation rights ("SARs") to key
employees, including the Named Executives, under stock option plans
previously approved by the shareholders. The exercise price of all
outstanding options is 100% of the fair market value at the date of grant.
The following table sets forth information with respect to all stock
options granted by the Corporation to the Named Executives during 1995:
<TABLE>
Option Grants in Last Fiscal Year
---------------------------------
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term (1)
- ------------------------------------------------------------ ---------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees in or Base Expiration
Name Granted (#)(2) Fiscal Year Price ($/sh) Date 5%( $) 10% ($)
- ---- -------------- ------------ ------------ ----------- ------ -------
<S> <C> <C> <C> <C> <C>
J. F. Will 150,338 15% 6.6250 1/27/05 626,373 1,587,350
D. A. Higbee 55,526 5% 6.6250 1/27/05 231,345 586,273
G. L. McDaniel 37,334 4% 6.6250 1/27/05 155,550 394,193
D. G. Harmer 55,607 5% 6.6250 1/27/05 231,682 587,128
G. R. Hildreth 37,071 4% 6.6250 1/27/05 154,453 391,415
- -------------------------
<FN>
(1) The dollar amounts under these columns are the result of
calculations at assumed 5% and 10% rates set by the Securities and Exchange
Commission and therefore are not intended to forecast possible future
appreciation, if any, of the stock price of the Corporation. The total
increase in value of all common shares outstanding, based upon the 10-year
option term and 5% and 10% compound appreciation assumptions above, would be
$442,068,560 and $1,120,288,527, respectively. The Named Executives would
realize approximately three-tenths of one percent of the total shareholders'
appreciation in value.
(2) All options were granted on January 27, 1995, and each award
becomes 100% exercisable on the second anniversary of the date of the grant.
The following table sets forth information with respect to the options
exercised by the Named Executives in 1995 and the unexercised options held by
the Named Executives at December 31, 1995.
</TABLE>
8
<PAGE>
<TABLE>
Aggregated Option Exercises in Last
Fiscal Year and Fiscal Year-End Option Values
---------------------------------------
<CAPTION>
Number of
Securities
Underlying Value of
Unexercised In-the-Money
Options Options
Shares at Fiscal at Fiscal
Acquired Year End (#) Year End ($) (2)
on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) (1) Unexercisable Unexercisable
- ---- ------------ ---------------- ------------ -----------------
<S> <C> <C> <C> <C>
J. F. Will 62,374 183,847 32,500/182,838 -0-/-0-
D. A. Higbee -0- -0- 7,500/63,026 -0-/-0-
G. L. McDaniel -0- -0- 4,000/41,334 -0-/-0-
D. G. Harmer -0- -0- 10,000/65,607 -0-/-0-
G. R. Hildreth -0- -0- 28,700/44,571 -0-/-0-
<FN>
- -------------------------
(1) Calculated by determining the difference between the exercise
price(s) and the average of the high and low price of common stock as
reported on the New York Stock Exchange Composite Transactions Tape on the
date of exercise.
(2) 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 29, 1995 ($5.8125 per
share).
</TABLE>
Pension Plans
Effective January 1, 1995, the Corporation amended the Non-Contributory
Pension Plan (the "NCPP") by adopting a different defined benefit formula
called the Retirement Accumulation Pension Plan (the "RAPP") for eligible
nonrepresented salaried employees participating in the NCPP ("NCPP
participants") or the 2% Defined Contribution Plan ("DCP") as of December 31,
1994. NCPP participants received an opening balance in the RAPP equal to the
value of the NCPP benefit 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.
Eligible nonrepresented salaried employees, including Mr. Harmer and Mr.
McDaniel, ceased participation in the DCP and all contributions to the 2% DCP
are 100% vested in the Armco Inc. Retirement & Savings Plan.
Each RAPP participant receives "pay credits" to a future account. For
former participants in the DCP and employees hired after December 31, 1994,
pay credits are 2% of annual pensionable earnings. Former NCPP participants
receive between 2% and 9% of annual pensionable earnings depending on age and
years of service on December 31, 1994. Annual pensionable earnings include
base salary, bonus and other incentive forms of compensation (corresponding
generally to the salary and bonus reflected in the Summary Compensation Table
above).
NCPP participants' opening accounts earn a minimum annual rate of 7.5%
and a maximum of 12.5%. Future accounts earn a minimum annual rate of 3% and
a maximum of 12.5%. Rates are based on the annualized 5-year treasury bond
rate at November 30 of the prior year. A participant's opening account
ceases to earn interest when the participant attains age 65. Pay credits and
interest are posted to participants' accounts at the end of each quarter.
9
<PAGE>
The Corporation has established an Excess Retirement Accumulation
Pension Plan ("Excess RAPP") to provide highly compensated employees a
nonqualified benefit equivalent to that which would be payable under the RAPP
but for limitations under the Internal Revenue Code.
On January 1, 1995, the combined RAPP and Excess RAPP opening accounts
of the Named Executives were as follows: Mr. Will - $727,386, Mr. Higbee -
$462,916 and Mr. Hildreth - $492,911. Mr. Harmer and Mr. McDaniel do not
have opening accounts because they were participants in the DCP. The pay
credits for each of the Named Executives is as follows: Mr. Will - 6%,
Mr. Higbee - 8%, Mr. McDaniel - 2%, Mr. Harmer - 2% and Mr. Hildreth - 8%.
If employment were continued until the mandatory retirement age of 65 at the
1995 rates of remuneration, and assuming a constant 7.5% rate of interest
accrual for both future and opening accounts, Messrs. Will, Higbee, McDaniel,
Harmer and Hildreth would have account balances under the RAPP and Excess
RAPP of $2,136,244, $1,895,097, $198,269, $190,325 and $1,237,743
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 and Excess RAPP is limited 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. Participants with
5 years of participation in the SERP who attain age 55 with at least 10 years
of service or who complete at least 30 years of service at any age may elect
an early retirement and receive a reduced benefit. Participants would
receive, at normal retirement age, an aggregate minimum pension of 50% of
their average annual pensionable earnings before retirement.
The benefit derived from the foregoing calculation is offset by RAPP and
Excess RAPP benefits 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
benefit and any employer-provided disability benefits would also be offset.
If 1995 employment were continued until mandatory retirement at age 65,
at their 1995 rates of remuneration, Messrs. Will, Higbee, McDaniel, Harmer
and Hildreth would be entitled to total yearly pensions of $520,170,
$223,500, $149,480, $208,270 and $183,580, respectively, under all plans.
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 annual base salary (annualized
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
10
<PAGE>
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, eligible
nonrepresented salaried employees, including the Named Executives, are
provided payments equal to their then base salary for up to 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, less Social Security benefits. Such payments
will continue until age 65, at which time payments cease.
The Corporation provides all eligible nonrepresented 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 monthly base 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 who 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-half the
coverage provided immediately prior to 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 was under age 50 and had less than 30 years of service as of
January 1, 1995, will have life insurance of $10,000 during retirement.
Mr. Will participates in an executive life insurance program for former
Cyclops Industries, Inc. key executives (in lieu of full participation in the
Corporation's group term life insurance) which provides greater coverage than
the group term life insurance would provide at the same cost to the
Corporation. There is no reduction at retirement. Mr. Will's group term
life insurance under the Corporation's plan is set at $50,000 while he is an
active employee and is subject to reduction at his retirement as stated
above.
Certain key employees, including Mr. Hildreth, could purchase
supplemental coverage equal to 18 times their monthly base salary as of
January 1, 1987, at a personal cost equal to the amount of imputed income
allocated to such individual under the Internal Revenue Code. Participant
contributions cease upon retirement, and there is no decrease in the amount
of coverage for such key employees during retirement. If the value of the
policy at the time of death exceeds the amount of coverage, the Corporation
would recoup all or a portion of premiums paid by the Corporation.
Participation in this supplemental plan was frozen as of January 1, 1987.
Messrs. Will, Higbee, Harmer and McDaniel 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 1995.
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,
11
<PAGE>
(c) the overall performance of the Corporation, both separately and
relative to similar companies in the specialty 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
the Specialty Steel Peer Group performance graph under "Performance Graph"
below, the five-year cumulative total shareholder returns of which are
graphically depicted in such graph. 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 Specialty Steel
Peer Group was not considered exclusively because the Committee felt that it
provided too small a group for an appropriate basis and that other steel
companies should also be considered to provide a more meaningful comparison
of competitive compensation. 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
(c) most importantly, 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 steel and achieving improved
long-term financial and operating results.
In evaluating the performance and setting the compensation of executive
officers in 1995, the Committee considered the factors described above. In
determining incentive compensation, it also took into account improvement in
the Corporation's shipments of stainless and electrical flat-rolled steels,
which grew eight percent (8%) in 1995 versus 1994. The Committee also
considered management's successful efforts in divesting non-strategic or
unprofitable businesses and generation of funds for investment in the core
specialty steel business, the increases in productivity and profitability at
Armco's Butler, Zanesville and Coshocton Operations and the slower than
expected start-up of the Mansfield Operations. Based on these factors and
considerations, the Committee concluded that Armco's executive management
made substantial and objective progress toward achieving the Corporation's
overall objectives.
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 1995 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 1995 salaries at
or about the twenty-fifth percentile for steel companies. Of the Named
Executives, Messrs. Harmer, McDaniel and Hildreth received increases in
annual base salary from the prior year in recognition of their strong
performance and/or increased responsibilities associated with their 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 mid-percentile ranges of short-term
incentive bonuses paid to executives at the steel
12
<PAGE>
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 under the Corporation's Annual Incentive
Compensation Plan, approved by shareholders in 1995. 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 1995, the Committee approved specific operating income and working
capital goals for each operating unit based on its approved annual operating
plan. These financial goals provided 70% to 80% 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 20% to 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.
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. The current core of Armco's long-term
incentives is the comprehensive 1994-1996 long-term incentive compensation
program for senior management, including the Named Executives, adopted in
1994, under which a substantial portion of the executives' annual (short-
term) incentive compensation is paid in restricted stock and stock options.
The purpose of the program is threefold:
1) attract and retain top management;
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. Restricted Stock Awards. In lieu of payment in cash, each program
-----------------------
participant, including the Named Executives, is paid at least 25% of the
participant's annual (short-term) incentive payment under the annual
incentive payment plans approved by the Board of Directors for 1994, 1995 and
1996 (payable in the first quarters of 1995, 1996 and 1997) in restricted
stock issued under the Corporation's shareholder-approved stock plans. Each
participant may irrevocably 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 Named Executives irrevocably elected in
April 1994 to receive 100% of any incentive bonuses earned under such annual
incentive payment 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 vest in 1997, 1998 and 1999. 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
13
<PAGE>
(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.
2. 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, 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 generally will lapse.
Pursuant to elections made by the Named Executives under the program in
April 1994, all of the Named Executives received 100% of their incentive
payments for 1995, and all Named Executives will receive 100% of their
incentive payments for 1996, in restricted stock and options in lieu of cash,
to the extent earned.
Chief Executive Officer's 1995 Compensation. As set forth in the
-------------------------------------------
Summary Compensation Table, Mr. Will's 1995 total base salary, bonus and
other compensation (excluding the restricted stock grant in 1995 and the
option grants) was $984,290. Mr. Will earned $530,000 in base salary,
$437,250 in annual incentive bonus, 100% of which was paid to him in
restricted stock and options, and $17,040 in all other compensation.
In determining Mr. Will's 1995 compensation, the Committee considered
the various factors applied to compensation of all executive officers and
discussed above. Mr. Will's base salary for 1995 remained unchanged. Mr.
Will also had the opportunity to earn an annual incentive bonus targeted at
60% of his annual base salary, which is comparable to other steel companies
surveyed by Armco. The 1995 performance of Armco's operating units,
including Armco's Butler, Zanesville and Coshocton Operations, reached record
profitability during 1995 led by strong productivity improvements. In
addition, Sawhill Tubular returned to profitability and Douglas Dynamics,
L.L.C. shipped the third highest level of snow plows in its history. The
Committee also recognized Mr. Will's leadership in the sale of non-strategic
businesses and assets, the development of marketing plans to build specialty
steel shipments as the new capacity at Mansfield comes onstream, and the
continued implementation of projects to upgrade and expand the capabilities
of equipment throughout the company. The combination of the overall results
of these factors and Mr. Will's performance relative to his non-financial
objectives resulted in an incentive payment under the Annual Incentive
Compensation Plan equal to 1.375 times his 60% target incentive, or $437,250
(approximately 83% of his annual base salary). In April 1994, Mr. Will had
elected to receive 100% of his 1995 incentive payment in restricted stock and
options under the program described above.
Deductibility of Compensation Under Section 162(m) of the Internal
------------------------------------------------------------------
Revenue Code. The Committee acknowledges the potential impacts of Internal
- ------------
Revenue Code Section 162(m), 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 and the shareholders approved it at the April 28, 1995
meeting. The Incentive Plan was designed 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).
The foregoing report has been approved by
all members of the Committee.
Burnell R. Roberts, Chairman
John J. Burns, Jr.
Paul H. Henson
Bruce E. Robbins
John D. Turner
14
<PAGE>
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, Bruce E. Robbins 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, Chairman of the Board,
President and Chief Executive Officer of the Corporation, has been a director
of Alleghany Corporation since June 16, 1992.
Performance Graph
The following Performance Graph compares the five-year cumulative total
shareholder return (assuming reinvestment of dividends) of the common stock,
the S&P 500 Composite Index and a defined peer group of specialty steel
companies comprised of Allegheny Ludlum Corp., J & L Specialty Steel and
Lukens Inc. (the "Specialty Steel Peer Group"). The Corporation believes
that, given the Corporation's specialty flat-rolled steel focus, use of the
newly defined Specialty Steel Peer Group is more meaningful than use of the
Old Peer Group, which included Carpenter Technology. Carpenter Technology is
in the specialty long products business, a market in which the Corporation
does not participate. The Old Peer Group 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 Cumulative Total Return
Among Armco Inc., Old Peer Group, S&P 500 Composite Index
and Specialty Steel Peer Group
<CAPTION>
Measurement period Armco Old Peer S&P 500 Specialty Steel
(Fiscal year covered) Inc. Group Composite Index Peer Group
- --------------------- ----- -------- --------------- --------------
<S> <C> <C> <C> <C>
Measurement PT -
FYE 12/31/90 $100 $100 $100 $100
FYE l2/31/91 $105 $115 $130 $117
FYE 12/31/92 $132 $153 $140 $162
FYE 12/31/93 $120 $187 $154 $199
FYE 12/31/94 $129 $171 $171 $179
FYE 12/31/95 $115 $185 $214 $179
<FN>
The Specialty Steel Peer Group consists of Allegheny Ludlum Corp., J&L
Specialty Steel and Lukens Inc.
The Old Peer Group consists of the above three companies and Carpenter
Technology.
</TABLE>
15
<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, 1996
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 29, 1996.
<TABLE>
<CAPTION>
Shares of
Common Stock
Beneficially
Name Owned (1)(4)
- -----------------------------------------------------------------------------
<S> <C>
John J. Burns, Jr. 32,010.26 (2)(3)
Paula H.J. Cholmondeley 0 (5)
David A. Duke 2,156
John C. Haley 3,312.26
David G. Harmer 193,837
Paul H. Henson 1,578
David A. Higbee 159,331
Gary R. Hildreth 168,639
Gary L. McDaniel 114,807
Bruce E. Robbins 578.06
Burnell R. Roberts 1,828.06
John D. Turner 5,578
James F. Will 647,556 (3)
All Directors and Executive Officers as a Group
(19 persons including those named above) 1,797,344.64
<FN>
(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 1.69% 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.
(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.
16
<PAGE>
(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 29, 1996, pursuant to employee
options granted by the Corporation: Mr. Will - 48,750 shares, Mr. Higbee -
7,500 shares, Mr. McDaniel - 6,000, Mr. Harmer - 15,000 shares, Mr. Hildreth
- - 32,450 shares and all directors and executive officers as a group - 187,250
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 - 1,110 shares, Mr.
Higbee - 1,419 shares (includes 191 shares of Armco stock held in the
National-Oilwell Retirement and Thrift Plan), Mr. McDaniel - 992 shares, Mr.
Harmer - 12,123 shares, Mr. Hildreth - 1,467 shares and all directors and
executive officers as a group - 26,869 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 - 381,267 shares, Mr.
Higbee - 150,412 shares, Mr. McDaniel - 107,716 shares, Mr. Harmer - 164,714
shares, Mr. Hildreth - 124,972 shares and all directors and executive
officers as a group - 1,294,758 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 shares shown as
beneficially owned by certain of the directors of the Corporation also
include shares that would be received under outstanding common stock units
under the Directors Stock Plan upon retirement: Mr. Burns - 2,312.26; Mr.
Haley - 2,312.26; Mr. Robbins - 578.06; and Mr. Turner - 578.06.
(5) Effective January 1, 1996, Ms. Cholmondeley was elected to the Board
of Directors.
</TABLE>
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, 1995, 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, 1995.
<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) 5.32%
Common Dietche & Field
Advisers, Inc.
437 Madison Avenue
New York, NY 10022 5,564,950 (2) 5.24%
Common FMR Corp.
82 Devonshire Street
Boston, MA 02109 6,081,451 (3) 5.73%
Common Norwest Corporation
Norwest Center
Sixth and Marquette
Minneapolis, MN 55479 11,542,891 (4) 10.88%
17
<PAGE>
<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 Sasco Capital, Inc.
10 Sasco Hill Road
Fairfield, CT 06430 7,335,300 (5) 6.91%
Common State of Wisconsin
Investment Board
P. O. Box 7842
Madison, WI 53707 10,197,700 (6) 9.61%
$3.625 FMR Corp.
Preferred 82 Devonshire Street
Boston, MA 02109 521,500 (3) 19.31%
$3.625 Putnam Investments, Inc.
Preferred One Post Office Square
Boston, MA 02109 380,250 (7) 14.1%
$3.625 Neuberger & Berman
Preferred 605 Third Avenue
New York, NY 10158 167,200 (8) 6.19%
$3.625 OppenheimerFunds, Inc.
Preferred Two World Trade Center
Suite 3400
New York, NY 10048-0203 200,000 (9) 7.41%
$3.625 Reliance Financial
Preferred Services Corporation
Park Avenue Plaza
55 East 52nd Street
New York, NY 10055 390,000 (10) 14.44%
<FN>
- --------------------
(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 5,214,993 shares owned by investment companies advised by
Fidelity. The number of shares of common stock owned by the investment
companies included 2,946,588 shares of common stock issuable upon the
conversion of 434,600 shares of the $3.625 preferred stock. The beneficial
owner and Mr. Edward C. Johnson 3rd, Chairman of FMR Corp., each has sole
power to dispose of the 5,214,993 shares owned by the Fidelity Funds.
Neither Mr. Johnson nor FMR has the sole power to vote or direct the voting
of the shares owned directly by the Fidelity Funds. Through FMR Corp.'s
wholly owned bank subsidiary, Fidelity Management Trust Company ("Fidelity
Trust"), as to 866,458 shares owned by institutional accounts for which
Fidelity Trust acts as investment manager, including 589,182 shares of common
18
<PAGE>
stock issuable upon the conversion of 86,900 shares of the $3.625 preferred
stock. The beneficial owner reported that as to the common shares owned by
Fidelity Trust, each of it and Mr. Johnson has sole dispositive power over
866,458 shares and sole power to vote or to direct the voting of 535,826
shares and no power to vote or to direct the voting of 330,632 shares.
(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 16,891 shares of $2.10 preferred stock beneficially owned.
Norwest reported that it had sole voting power as to 9,457,332 shares, shared
voting power as to 2,000 shares, sole investment power as to 11,539,191
shares and shared investment power as to 300 shares.
(5) The beneficial owner reported that it has sole voting power of
3,566,500 shares, no shared voting power and sole dispositive power of
7,335,300 shares.
(6) The beneficial owner reported that it had sole voting and dispositive
power as to all of the shares beneficially owned.
(7) The reported beneficial ownership is as of December 31, 1993, and 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 it had shared dispositive power as
to all of the shares beneficially owned and no voting power as to any such
shares.
(10) 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.
</TABLE>
Shareholder Proposals
Any proposals of shareholders intended to be presented at the 1997
annual meeting must be received by the Corporation by November 14, 1996, 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 1997 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 26, 1997.
19
<PAGE>
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
of $10,000 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 14, 1996
20
<PAGE>
DIRECTIONS TO THE ...
RIVERS CLUB
One Oxford Centre
301 Grant Street
Pittsburgh, PA 15219
(412) 391-5227
FROM PITTSBURGH INTERNATIONAL AIRPORT:
Leaving the airport, follow Route 60 East to Pittsburgh. Take Parkway (376
East) following "Pittsburgh" signs to AND through the Ft. Pitt Tunnel. (Stay
in right lane.) Cross the Bridge bearing right, follow the Monroeville Exit.
Move to left lane to take the Grant Street Exit. Proceed on Grant Street to
3rd light, make a left turn onto 3rd Avenue. After proceeding through the
Stop sign make a right turn into the Oxford Centre Garage.
FROM MONROEVILLE:
Take Parkway (376 West) following "Pittsburgh" signs. Nearing Downtown, watch
for Grant Street Exit. Exit will be from the left lane of the Parkway. Take
Grant Street to the 3rd light. Make a left turn onto 3rd Avenue. After
proceeding through the Stop sign make a right turn into the Oxford Centre
Garage.
FROM NORTH:
Take 279 South following
"Pittsburgh" signs. As
you approach the city,
follow signs for 579
(Veterans Bridge) to
downtown. Exit at 6th
Avenue. Make a right
turn at the light. Go to
second light (William
Penn Highway), make a
left turn. This street
will become Cherry Way
after 2 blocks. After 4
lights, One Oxford Centre
Garage is on your right.
FROM SOUTH:
(From the Intersection of West
Liberty Avenue [Route 19] and
Saw Mill Run Boulevard [Route
51] the south end of the
Liberty Tunnels.) Go through
the Liberty Tunnels staying in
the right lane. Cross the
Liberty Bridge bearing right [MAP OF DOWNTOWN PITTSBURGH
going up the ramp staying to APPEARS HERE]
the left of the stop sign.
Make the left onto the
Boulevard of the Allies
staying in the right lane. Go
through the light switching to
the right lane (watching for
traffic coming up on your
right). At the 3rd light make
a right onto Smithfield
Street. At the light make a
right onto 3rd Avenue. One
Oxford Centre's Garage is on
the left.
FINDING THE CLUB:
(From the Garage)
The entrance to the Rivers Club is on the 4th level of the Oxford Centre
Parking Garage. As you enter from the garage on level 4 a door marked Rivers
Club will be on your right. Go through that door and a Brass elevator will be
on your right. You will be in a marble lobby. Take the elevator to level 3
(dining) on the button.
(From Oxford Centre)
Take the glass elevator to level 4. Follow the Rivers Club signs down the
Hallway through the double doors into the marble lobby. Take the Brass
elevator to level 3 (dining).
21
<PAGE>
ARMCO INC.
One Oxford Centre
301 Grant Street
Pittsburgh, PA 15219-1415
The Annual Meeting of Shareholders will be held at the Rivers Club located at
One Oxford Centre, 301 Grant Street, Pittsburgh, Pennsylvania, on Friday,
April 26, 1996, 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 FOR [ ] WITHHOLD [ ]
- ----- election of directors: All nominees Authority to vote
listed (except
as marked to
the contrary below)
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. 4. John C. Haley 7. John D. Turner
2. Paula H.J. Cholmondeley 5. Bruce E. Robbins 8. James F. Will
3. David A. Duke 6. Burnell R. Roberts
Item 2 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 26, 1996
The undersigned hereby appoints James F Will, John C. Haley 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 29, 1996, at the
annual meeting of shareholders to be held on April 26, 1996, 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.
THIS PROXY DELEGATES DISCRETIONARY AUTHORITY WITH RESPECT TO ANY OTHER MATTERS
WHICH MAY COME BEFORE THE MEETING.
Dated , 1996
--------------------------
--------------------------------------
SIGNATURE
--------------------------------------
SIGNATURE IF SHARES HELD JOINTLY
Please sign exactly as name appears
opposite. Executors, trustees, and
administrators and other fiduciaries should
so indicate.
