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)
- ------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] $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 23, 1999
-------------------------
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 23, 1999, 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 26, 1999, was fixed as the record date
for the determination of shareholders entitled to notice of and to vote at the
meeting. The proxy statement that 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 12, 1999
<PAGE>
ARMCO INC.
One Oxford Centre
301 Grant Street
Pittsburgh, PA 15219-1415
-------------------
PROXY STATEMENT
Annual Meeting of Shareholders
April 23, 1999
-------------------
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 23, 1999.
This proxy statement and the accompanying proxy were first sent to
shareholders of the Corporation on or about March 12, 1999.
The close of business on February 26, 1999, 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
107,912,948 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 nine 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 nine and nine 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.
Dan R. Carmichael Age 54; President and Chief Executive Officer,
IVANS, Inc., a data and telecommunications
remarketer and software development company. Former
Chairman, President and CEO of Shelby Insurance
Group (also known as Anthem Casualty Insurance
Group). A Director of the Corporation since 1998; a
member of the Audit Review Committee and
Compensation Committee. Also a Director of
IVANS, Inc. and Alleghany Corporation.
Paula H.J. Cholmondeley Age 51; Consultant. Formerly Vice President and
General Manager Residential Insulation of Owens
Corning, an advanced glass and composite materials
company, where Ms. Cholmondeley previously was Vice
President, and President of Owens Corning's
Miraflex[trademark] Products business unit, and
former Vice President Business Development and
Global Sourcing. A Director of the Corporation
since 1996; a member of the Audit Review Committee
and Corporate Responsibility Committee.
Dorothea C. Gilliam Age 45; Vice President - Investments of Alleghany
Corporation, an insurance and financial services
holding company. A Chartered Financial Analyst and
member of the Association of Investment Management
and Research. A Director of the Corporation since
1997; a member of the Audit Review Committee and the
Corporate Responsibility Committee.
John C. Haley Age 69; Former Non-Executive 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 Compensation
Committee and Corporate Responsibility Committee.
2
<PAGE>
Charles J. Hora, Jr. Age 55; President of Lord Corporation, a
diversified manufacturer of products and systems to
bond and coat materials and to control mechanical
motion and noise. A Director of the Corporation
since 1998; a member of the Audit Review Committee
and Nominating Committee.
Bruce E. Robbins Age 54; 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
Compensation Committee and Nominating Committee.
Jan H. Suwinski Age 57; Professor of Business Operations, Cornell
University, Johnson Graduate School of Management.
Former Executive Vice President of the Opto-
Electronics Group of Corning Incorporated, a broad-
based manufacturing and service company. Formerly
Chairman of Siecor Corporation, a provider of fiber
optic cable, hardware and equipment. A Director of
the Corporation since 1998; a member of the Audit
Review Committee and Nominating Committee. Also a
Director of Tellabs, Inc.
John D. Turner Age 53; 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.
Also a Director of C-E Minerals, Inc. and Shenango
Incorporated.
James F. Will Age 60; Chairman of the Board, President and Chief
Executive Officer of the Corporation and former
Chief Operating Officer of the Corporation. A
Director of the Corporation since 1992; a member of
the Corporate Responsibility Committee. Also a
Director of Alleghany Corporation.
Board of Directors and Committees of the Board
In 1998, the Board of Directors of the Corporation met eight times. In
addition to the committees described below, the Board of Directors has
appointed a Corporate Responsibility Committee.
The Nominating Committee met twice in 1998. 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 Board governance
matters and 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
3
<PAGE>
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 2000 annual meeting of shareholders must
deliver written notice, including specified information, to the Secretary of
the Corporation by January 24, 2000.
The Audit Review Committee met three times in 1998. 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 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
four times in 1998. See "EXECUTIVE COMPENSATION -- Compensation Committee
Report on Executive Compensation".
During 1998, no director attended less than 75% of the meetings of the
Board and committees on which he or she served.
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 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.
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 the then non-employee directors. As a result, Mr. Haley, who
was fully vested at the maximum benefit, is 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. Robbins and Mr. Turner, each of whom was unvested, were credited with
hypothetical investments in 1,000 shares of common stock each (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.
4
<PAGE>
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 1998, the Corporation paid
premiums aggregating $6,630 for this coverage.
EXECUTIVE COMPENSATION
Set forth below is certain summary information with respect to the
compensation of Armco's chief executive officer and the four other most highly
compensated executive officers (the "Named Executives") who were serving as
executive officers at December 31, 1998 (based on amounts reported as salary
and bonus for 1998).
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------
Awards
------
Annual Compensation Restricted Securities All Other
------------------- Stock Underlying Compen-
Position Year Salary($) Bonus($) Award(s)($)(1) Options(#)(2) sation ($)(3)
- -------- ---- --------- -------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
James F. Will 1998 594,166 0 1,545,225 312,956 41,958
Chairman, 1997 565,000 229,535 2,190,267 328,420 40,208
President & CEO 1996 559,167 0 0 0 20,735
Jerry W. Albright 1998 270,844 0 541,827 109,736 20,273
V.P. & Chief 1997 260,004 40,500 871,454 117,935 18,563
Financial Officer 1996 0 0 0 0 0
Gary R. Hildreth 1998 234,964 0 470,046 95,199 18,277
V.P. 1997 228,110 71,633 739,488 101,995 16,837
General Counsel 1996 217,284 0 0 0 8,756
& Secretary
Gary L. McDaniel 1998 252,000 250,803 133,263 26,898 16,733
V.P. - Operations 1997 237,600 320,625 356,748 26,368 15,869
1996 213,334 0 0 0 6,744
M. Dennis McGlone 1998 232,156 231,053 122,766 24,864 10,562
V.P. - Commercial 1997 209,636 283,155 330,142 23,264 10,562
1996 179,550 0 0 0 4,832
</TABLE>
(1) The value indicated is based on the closing price of the common
stock on the date of the grant. The award of restricted stock for each of the
Named Executives is comprised of: (a) an award of shares of restricted common
stock made to such Named Executives under the Corporation's shareholder-
approved plans; and (b) shares of restricted common stock awarded under the
Corporation's shareholder-approved plans to such Named Executives in lieu of
all or part of the cash bonus payable to such Named Executives for such year
under the Annual Incentive Compensation Plan. 30.8% of the restricted stock
award to the Named Executives for 1998 is payable in cash at the date the
award vests in lieu of shares. Under a compensation program (the "1997
Program") implemented by the Corporation in April 1997 for its senior
executives, including the Named Executives, each participant is required to
receive at least 25% of any annual bonus under such an annual incentive
program approved by the Corporation's Board of Directors for 1997, 1998 and
1999 in shares of restricted common stock, valued at $3.0975 per share (a 30%
discount from the market price of common stock at the time of the
establishment of the 1997 Program). Also under the 1997 Program, each of the
participants, including the Named Executives, was permitted, at the time of
the implementation of the 1997 Program, to elect irrevocably to receive an
additional percentage, up to 100%,
5
<PAGE>
of any annual bonuses earned under such an annual incentive compensation
program in restricted stock awards, valued at $3.0975 per share. The vesting
of the awards of restricted stock under the 1997 Program is 33 1/3% of such
shares in April 2002, a further 33 1/3% in April 2003 and 33 1/3% in April
2004. Such vesting schedule is subject to acceleration by the Compensation
Committee by one year for any restricted stock awards made in a plan year
based upon the Corporation's adjusted return on assets The vesting of the
restricted stock awards with respect to 1998 was accelerated by the
Compensation Committee as a result of the Corporation's adjusted return on
assets in 1998.
The following table sets forth for each of the Named Executives the value
(based on the closing price of the common stock on the dates of the grant) of
the portion of those shares of restricted stock reflected above for 1998
compensation on which the restrictions will lapse in each of 2001, 2002 and
2003.
<TABLE>
<CAPTION>
Total
Name Value of Shares Vesting ($) Value ($)
- ---- --------------------------- ---------
2001 2002 2003
---- ---- ----
<S> <C> <C> <C> <C>
J. F. Will 515,075 515,075 515,075 1,545,225
J. W. Albright 180,609 180,609 180,609 541,827
G. R. Hildreth 156,682 156,682 156,682 470,046
G. L. McDaniel 44,421 44,421 44,421 133,263
M. D. McGlone 40,922 40,922 40,922 122,766
</TABLE>
Three of the Named Executives irrevocably elected in April 1997 to receive
100% of any incentive bonuses earned under the Annual Incentive Compensation
Plan in restricted stock (had the elections made by the Named Executives under
the 1997 Program not been in effect, the amounts listed under Bonus in the
compensation table above would have reflected for the Named Executives the
following additional amounts in lieu of the restricted stock awards for 1998:
Mr. Will - $969,383; Mr. Albright - $339,909; Mr. Hildreth - $294,880;
Mr. McDaniel - $83,601; Mr. McGlone - $77,018). See "Compensation Committee
Report on Executive Compensation". The aggregate number and value (based on
the closing price of the common stock of $4.375 at December 31, 1998) of the
restricted shares held by the Named Executives at December 31, 1998 (which
does not include the 1998 restricted stock award in lieu of the cash bonus or
any shares that are payable in cash on the date the award vests discussed
above) was: Mr. Will - 377,980, $1,653,663; Mr. Albright - 123,983, $542,426;
Mr. Hildreth - 163,260, $714,263; Mr. McDaniel - 109,590, $479,456; and
Mr. McGlone - 71,400, $312,375. Dividends will be paid on restricted shares
if, and only if, dividends are paid on the common stock.
(2) Also under the 1997 Program, each participant who is awarded
shares of restricted stock in lieu of cash bonus is granted an option to
purchase shares of common stock at the fair market value of the common stock
on the date of such grant equal to the number of restricted shares which would
have been awarded if no election to reduce the number of restricted shares for
federal and state income tax withholding purposes had been made. Amounts
shown for 1998 represent options granted on January 29, 1999, with respect to
bonuses earned for the fiscal year 1998. 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) The amounts for 1998 include:
(i) $9,600 each for Mr. Will, Mr. Albright, Mr. Hildreth,
Mr. McDaniel and Mr. McGlone, of matching contributions under the Armco Inc.
Retirement and Savings Plan;
(ii) $26,050 for Mr. Will, $6,651 for Mr. Albright, $4,498 for
Mr. Hildreth and $5,520 for Mr. McDaniel (Mr. McGlone is not a participant in
this plan), representing contributions allocated to the trust established
under the Armco Inc. Executive Supplemental Deferred Compensation Plan for
matching contributions not paid to the Armco Inc. Retirement and Savings Plan
by reason of Internal Revenue Code limitations; and
6
<PAGE>
(iii) $6,308 for Mr. Will, $4,022 for Mr. Albright, $4,179 for
Mr. Hildreth, $1,613 for Mr. McDaniel and $962 for Mr. McGlone as imputed
income for life insurance benefits provided to them.
Stock Option Plans
The Corporation has granted stock options and has authority to make
future grants of stock options and stock appreciation rights to key employees,
including the Named Executives, under stock option plans previously approved
by the shareholders. The exercise price of all outstanding options is 100% of
the fair market value on the date of grant.
The following table sets forth information with respect to all stock
options granted by the Corporation to the Named Executives during 1998:
<TABLE>
Option Grants in Last Fiscal Year
---------------------------------
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term (1)
- ------------------------------------------------------------ -------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees in or Base Expiration
Name Granted(#)(2) Fiscal Year Price($/sh) Date 5%($) 10%($)
- ---- ------------ ------------- ----------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
J. F. Will 328,420 29% 5.3125 2/27/08 1,097,252 2,780,652
J. W. Albright 117,935 11% 5.3125 2/27/08 394,021 998,527
G. R. Hildreth 101,995 9% 5.3125 2/27/08 340,766 863,567
G. L. McDaniel 26,368 2% 5.3125 2/27/08 88,096 223,251
M. D. McGlone 23,264 2% 5.3125 2/27/08 77,725 196,971
<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
$350,282,564 and $887,684,791, respectively. The Named Executives would
realize approximately one-half of one percent of the total shareholders'
appreciation in value.
(2) All options were granted on February 27, 1998, and each award
becomes 100% exercisable on the second anniversary of the date of the grant.
</TABLE>
7
<PAGE>
The following table sets forth information with respect to the options
exercised by the Named Executives in 1998 and the unexercised options held by
the Named Executives at December 31, 1998.
<TABLE>
Aggregated Option Exercises in Last
Fiscal Year and Fiscal Year-End Option Values
---------------------------------------------
<CAPTION>
Number of
Securities
Underlying Value of
Unexercised In-the-Money
Options Options
Shares at Fiscal at Fiscal
Acquired Year End(#) Year End ($)
on Value Exercisable/ Exercisable/
Name Exercise(#) Realized ($) Unexercisable Unexercisable
- ---- ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
J. F. Will -0- -0- 340,267/328,420 -0-/-0-
J. W. Albright -0- -0- -0-/117,935 -0-/-0-
G. R. Hildreth -0- -0- 104,372/101,995 -0-/-0-
G. L. McDaniel -0- -0- 99,216/ 26,368 -0-/-0-
M. D. McGlone -0- -0- 31,894/ 23,264 -0-/-0-
</TABLE>
- -----------------------
Pension Plans
Effective January 1, 1995, the Corporation amended the Armco Inc. 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. McDaniel, ceased
participation in the DCP and all contributions to the 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. The 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.
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.
8
<PAGE>
On December 31, 1998, the combined RAPP and Excess RAPP accounts of the
Named Executives were as follows: Mr. Will - $1,270,543; Mr. Albright -
$19,673; Mr. Hildreth - $800,585; Mr. McDaniel - $35,802 and Mr. McGlone -
$259,964. The pay credits for each of the Named Executives is as follows:
Mr. Will - 6%; Mr. Albright - 2%; Mr. Hildreth - 8%; Mr. McDaniel - 2% and
Mr. McGlone - 6%. If employment were continued until the retirement age of
65, based upon the average rates of remuneration over the last four years, and
assuming a constant 7.5% rate of interest accrual for future accounts, Messrs.
Will, Albright, Hildreth, McDaniel and McGlone would have account balances
under the RAPP and Excess RAPP of $2,196,648, $54,783, $1,271,021, $264,844
and $1,519,740, respectively.
The Corporation has also established a Supplemental Executive Retirement
Plan ("SERP") for key executives, including the Named Executives, whose
participation has been approved by the Board of Directors. 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 (with
respect to Mr. McDaniel, upon an involuntary termination of employment, he
will be deemed to have completed 30 years of service with the Corporation for
purposes of SERP benefits). 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 1998 employment were continued until retirement at age 65, based upon
the current year's base salary and the average rates of remuneration over the
last four years for incentives, Messrs. Will, Albright, Hildreth, McDaniel and
McGlone would be entitled to total annual pensions of $564,260, $111,892,
$195,900, $207,060 and $187,020, 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 12 additional months) 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 20% 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 that triggers these benefits, an employee would be
entitled to: (a) a lump sum payment equal to a multiple (two times for each of
the Named Executives, except for Mr. Will, which is three times) of 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); (b) an amount
representing the average annual incentive bonus paid in the four calendar
years preceding the termination; (c) a pro-rata bonus of any incentive
compensation payable for the year of termination; and (d) 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
9
<PAGE>
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 and any pension
benefits paid by the Corporation prior to age 65. 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 is covered under an individual insurance policy originally
provided under a life insurance program for Cyclops Industries, Inc. key
executives in lieu of participating in the Corporation's group term life
insurance program described above. Mr. Will pays a variable premium for this
policy and the Corporation pays a fixed amount towards the total annual
premium. Mr. Will's group term life insurance under the Corporation's program
is fixed 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 will
recoup all or a portion of premiums paid by the Corporation. Participation in
this supplemental plan was frozen as of January 1, 1987. Pursuant to a notice
of termination sent to participants, the supplemental coverage plan was to be
terminated on June 30, 1998. A group of individual plaintiffs who are
retirees and former members of Armco general management have filed an action
against Armco to prevent the Corporation from terminating the plan. The court
has granted a motion to prevent the Corporation from terminating the plan
during the pendency of the litigation. Messrs. Will, Albright, McDaniel and
McGlone 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. 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 1998.
10
<PAGE>
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
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.
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 incentives, 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 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.
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. In aggregate, the levels of base
salary for 1998 were determined primarily by competitive conditions but were
fixed at levels that are below competitive amounts paid to executives with
comparable qualifications at a broad range of industrial companies. All of
the Named Executives received increases in annual base salary from the prior
year in recognition of their performance and/or increased responsibilities
associated with their executive positions.
Short-Term Incentives. Short-term incentives are paid to recognize
---------------------
performance that is related generally 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 other 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 1998, the Committee approved specific operating income goals for each
operating unit and net income for the Corporation based on its approved annual
operating plan. Either one or both of these financial goals, depending on the
responsible executive, provided 100% of the executive's incentive opportunity.
In all cases minimum threshold financial objectives were established. Had
these minimum thresholds not been met, no incentive would have been payable
for 1998. Each executive has a targeted incentive opportunity 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.
11
<PAGE>
The total cash compensation package (i.e. base salary and short-term
incentives) has been designed to emphasize the executive's variable pay
opportunity, which, as in the case of the long-term incentives, is designed to
link variable compensation to corporate performance results.
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
shareholders. The core of Armco's long-term incentives is the comprehensive
1997-1999 long-term incentive compensation program for senior management,
including the Named Executives, adopted in 1997, under which a substantial
portion of the executives' annual (short-term) incentive compensation, when
earned, is paid in restricted stock and stock options in lieu of cash. 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 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 1997, 1998 and 1999
(payable in the first quarters of 1998, 1999 and 2000 respectively) in
restricted stock issued under the Corporation's shareholder-approved stock
plans. Of the Named Executives, three elected at the start of the current
three-year program to receive 100% of any incentive bonuses earned under such
annual incentive payment plan for 1997, 1998 and 1999 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
1997 to receive in restricted stock is determined using a discounted price of
$3.0975 per share, i.e., by dividing the aggregate amount of the incentive
payment to be made in restricted stock by $3.0975. 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
1997 to receive in restricted stock is determined using a discounted price
equal to 80% of the average fair market value (average of high and low) of
common stock on the date of issue. These shares of restricted stock will
vest 33 1/3% in each of years three through five following the year of grant,
except that for any restricted stock awarded with respect to a plan year, the
Compensation Committee may, based upon the level of the Corporation's adjusted
return of assets, accelerate the five year vesting schedule by one year. For
1998, the Compensation Committee determined that the Corporation's adjusted
return on assets level warranted the one year acceleration of the schedule for
the applicable restricted stock. 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.
2. Stock Option Awards. At the time that shares of restricted stock
-------------------
are allocated on the incentive payment date in 1998, 1999 and 2000, the
recipients, including the Named Executives, also receive an option, under the
Corporation's shareholders approved stock plans, 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 fair 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 terminate.
12
<PAGE>
Chief Executive Officer's 1998 Compensation. As set forth in the Summary
-------------------------------------------
Compensation Table and footnote (1) to the table, Mr. Will's 1998 total base
salary, bonus and other compensation was $1,605,507. Mr. Will earned $594,166
in base salary, $969,383 in annual incentive bonus, 100% of which was paid to
him in restricted stock and options, and $41,958 in all other compensation.
In determining Mr. Will's 1998 compensation, the Committee considered the
various factors applied to compensation of all executive officers discussed
above. Mr. Will also had the opportunity to earn an annual incentive bonus
targeted at 65% of his annual base salary.
Armco's net income (before cumulative effect of accounting change) of
$109.6 million in 1998 represented a $32.8 million improvement over 1997.
Strong performance in our Specialty Flat-Rolled Steel Operations, combined
with lower than anticipated corporate related overhead, as well as several
one-time gains, were the significant factors in achieving these results.
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.
John D. Turner, Chairman
Dan R. Carmichael
John C. Haley
Bruce E. Robbins
13
<PAGE>
Performance Graph
The following Performance Graph compares the five-year cumulative total
shareholder return (assuming reinvestment of dividends) of the common stock of
Armco Inc., the S&P Steel Index, the S&P 500 Composite Index and the common
stock of a defined peer group of specialty steel companies comprised of J&L
Specialty Steel (J&L Specialty Steel was included in the Group until its sale
late in 1998) and Allegheny Teledyne Inc. (the "Specialty Steel Peer Group").
The Specialty Steel Peer Group previously included Lukens Inc. In 1998,
Lukens Inc. merged with Bethlehem Steel Corp. Lukens Inc. became a division
of Bethlehem Steel Corp. know as Bethlehem Lukens Plate ("BLP"). After this
merger, two of BLP's stainless steel operations were sold to Allegheny
Teledyne Inc. ("Allegheny") and Allegheny was granted exclusive access to most
of BLP's other stainless steel operations. Because of these changes,
Bethlehem Steel Corp. is not considered to be in Armco's line of business and
Lukens Inc. has been removed from the Specialty Steel Peer Group for all years
presented. Additionally, Allegheny, which had previously been a member of the
Specialty Steel Peer Group and was removed in 1997, is now considered to be in
Armco's line of business and has been added to the Specialty Steel Peer Group.
The S&P 500 Composite 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 Cumulative Total Return
Among Armco Inc., Specialty Steel Peer Group, S&P Steel Index
and the S&P 500 Composite Index
<CAPTION>
Measurement period Armco Specialty Steel S&P S&P 500
(Fiscal year covered) Inc. Peer Group Steel Index Composite Index
- --------------------- ----- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Measurement PT -
FYE 12/31/93 $100 $100 $100 $100
FYE l2/31/94 $108 $ 89 $ 97 $101
FYE 12/31/95 $ 96 $ 89 $ 90 $139
FYE 12/31/96 $ 67 $ 98 $ 80 $171
FYE 12/31/97 $ 81 $111 $ 77 $228
FYE 12/31/98 $ 71 $ 89 $ 67 $289
</TABLE>
14
<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, 1999 and
to perform other appropriate auditing and tax 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 26, 1999.
<TABLE>
<CAPTION>
Shares of
Common Stock
Beneficially
Name Owned (1)(3)
- --------------------------------------------------------------------------
<S> <C>
Jerry W. Albright 204,404
Dan R. Carmichael 5,286
Paula H.J. Cholmondeley 3,936
Dorothea C. Gilliam 6,147 (2)
John C. Haley 20,869
Gary R. Hildreth 401,847
Charles J. Hora, Jr. 820
Gary L. McDaniel 264,297
M. Dennis McGlone 137,230
Bruce E. Robbins 4,403
Jan H. Suwinski 820
John D. Turner 9,400
James F. Will 1,590,144 (2)
All Directors and Executive Officers as a Group
(19 persons including those named above) 4,082,358
<FN>
(1) Other than Mr. Will, who beneficially owns 1.47%, no director or
executive officer beneficially owns more than 1.0 % of the total shares of
common stock. The shares that are beneficially owned by all directors and
executive officers as a group constituted 3.78% 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. Will is a director, and Ms. Gilliam is Vice President -
Investments, of Alleghany Corporation. As set forth below in this section,
"Stock Ownership", Alleghany Corporation beneficially owned 5,643,355 shares
of common stock as of December 31, 1998. Ms. Gilliam and Mr. Will disclaim
beneficial ownership of such shares.
(3) 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 26, 1999, pursuant to
15
<PAGE>
stock options granted by the Corporation: Mr. Will - 340,267 shares;
Mr. Albright - 0 shares; Mr. Hildreth - 104,372 shares; Mr. McDaniel - 99,216;
Mr. McGlone - 31,894 shares and all directors and executive officers as a
group - 959,244 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 - 150,150
shares; Mr. Albright - 2,484 shares; Mr. Hildreth - 16,102 shares; Mr.
McDaniel - 4,501 shares; Mr. McGlone - 4,990 shares and all directors and
executive officers as a group - 207,347 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 - 711,546 shares; Mr.
Albright - 199,920 shares; Mr. Hildreth - 229,138 shares; Mr. McDaniel -
128,266 shares; Mr. McGlone- 88,606 shares and all directors and executive
officers as a group - 2,191,702 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: Ms. Cholmondeley - 3,736; Ms. Gilliam -
5,147; Mr. Haley - 9,869 and Mr. Robbins - 4,403.
</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, 1998, 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, 1998.
<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 5,643,355 (1) 5.23%
Common Sasco Capital, Inc.
10 Sasco Hill Road
Fairfield, CT 06430 8,272,314 (2) 7.67%
Common State of Wisconsin
Investment Board
P. O. Box 7842
Madison, WI 53707 8,993,600 (3) 8.33%
$3.625 Reliance Financial
Preferred Services Corporation
Park Avenue Plaza
55 East 52nd Street
New York, NY 10055 390,000 (4) 8.87%
$3.625 Ryback Management Corporation
Preferred Corporation
7711 Carondelet Avenue, Suite 700
(Clayton) St. Louis, MO 63105
434,000 (5) 9.87%
- --------------------
16
<PAGE>
<FN>
(1) The reported beneficial ownership is as of December 31, 1998.
The beneficial owner reported that it had sole voting and investment power as
to 946,667 shares, shared voting power as to 4,696,688 shares.
(2) The beneficial owner reported that it has sole voting power of
4,862,548 shares, no shared voting power and sole dispositive power as to
8,272,314 shares.
(3) The beneficial owner reported that it had sole voting and
dispositive power as to all of the shares beneficially owned.
(4) The beneficial owner reported that it had sole voting and
investment power as to all of the shares beneficially owned.
(5) The beneficial owner reported that it had sole power to vote and
sole power to dispose of such shares.
</TABLE>
Shareholder Proposals
Under Rule 14a-8(e) of the Securities and Exchange Commission,
shareholder proposals intended for inclusion in next year's proxy statement
must be received by the Corporation by November 15, 1999. Any shareholder
proposal for next year's annual meeting submitted after January 27, 2000 will
not be considered filed on a timely basis with the Corporation under SEC Rule
14a-4(c)(1). For proposals that are not timely filed, the Corporation retains
discretion to vote proxies it receives. For proposals that are timely filed,
the Corporation retains discretion to vote proxies it receives provided 1) the
Corporation includes in its proxy statement advice on the nature of the
proposal and how it intends to exercise its voting discretion and 2) the
proponent does not issue a proxy statement. 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 2000 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 24, 2000.
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 12, 1999
17
<PAGE>
RIVERS CLUB
One Oxford Centre Admission Ticket
301 Grant Street Retain for Admittance
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).
ARMCO INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 23, 1999
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 26, 1999, at the
annual meeting of shareholders to be held on April 23, 1999, 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.
Item 1 Authority to vote for the election of directors:
- ------
[ ] FOR - All nominees listed (except as marked to the contrary below)
[ ] WITHHOLD Authority to vote
INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below:
1. Dan R. Carmichael 4. John C. Haley 7. Jan H. Suwinski
2. Paula H.J. Cholmondeley 5. Charles J. Hora, Jr. 8. John D. Turner
3. Dorothea C. Gilliam 6. Bruce E. Robbins 9. James F. Will
Item 2 In their discretion, as to such other business as may properly come
- ------
before the meeting or any adjournment thereof.
(CONTINUED ON REVERSE SIDE)
<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 23, 1999, 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.
Fold and detach here
- ------------------------------------------------------------------------------
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 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 , 1999
--------------------------------------
--------------------------------------
SIGNATURE
--------------------------------------
SIGNATURE IF SHARES HELD JOINTLY
Please sign exactly as name appears
opposite. Executors, trustees, and
administrators and other fiduciaries
should so indicate.
<PAGE>
