Exhibit 99
DESCRIPTION OF CAPITAL STOCK
General
The authorized capital stock of Armco Inc. ("Armco" or the "Company")
consists of (i) 150,000,000 shares of Common Stock, par value $.01 per share
("Armco Common Stock"), of which, at February 26, 1999, 107,912,948 shares
were issued and outstanding; (ii) 6,697,231 shares of Class A Preferred Stock,
no par value ("Class A Preferred Stock"), issuable in series, of which, at
February 26, 1999, 1,697,231 shares of Armco $2.10 Cumulative Convertible
Preferred Stock ("$2.10 Preferred Stock") were issued and outstanding and
2,700,000 shares of $3.625 Cumulative Convertible Preferred Stock ("$3.625
Preferred Stock") were issued and outstanding; and of which 750,000 shares had
been designated Participating Preferred Stock (the "Participating Preferred
Stock"), none of which have been issued; and (iii) 5,000,000 shares of Class B
Preferred Stock, par value $1 per share ("Class B Preferred Stock"), issuable
in series, of which, at February 26, 1999, 999,900 shares of $4.50 Cumulative
Convertible Preferred Stock ("$4.50 Preferred Stock") were issued and
outstanding. The Class A Preferred Stock and the Class B Preferred Stock are
sometimes referred to herein as the "Armco Preferred Stock." No class of
authorized capital stock of Armco, including the Armco Common Stock, has
preemptive or other subscription rights.
Armco is authorized to issue the Armco Preferred Stock in one or more
series with such designations, powers, preferences and rights, and
qualifications, limitations or restrictions thereon, as are permitted under
Armco's Amended Articles of Incorporation and as shall be stated in the
resolutions providing for the issue thereof as may be adopted by the Armco
Board of Directors. The Class A Preferred Stock and the Class B Preferred
Stock rank equally, whether or not dividend rates, dividend payment dates,
redemption or liquidation prices per share of any series of Class A Preferred
Stock differ from those of the Class B Preferred Stock, and the holders of
Class A Preferred Stock and Class B Preferred Stock shall be entitled to the
receipt of dividends and of the amounts distributable upon liquidation,
dissolution or winding up, in proportion to their respective rates or
liquidation prices, without preference or priority one over the other. Shares
of Class A Preferred Stock that shall have been purchased, redeemed or
otherwise acquired by Armco, including shares that have been converted or
exchanged into another class or series of capital stock or other securities of
Armco, shall be deemed retired and shall not be reissued or resold. Shares of
Class B Preferred Stock purchased, redeemed or otherwise acquired by Armco
will be restored to the status of authorized but unissued shares of Class B
Preferred Stock, without designation as to series, and may thereafter be
issued by the Armco Board of Directors.
Each issued and outstanding share of Armco Preferred Stock is currently
convertible into shares of Common Stock -- each $2.10 Preferred Stock share
into 1.27 shares, each $4.50 Preferred Stock share into 2.22 shares and each
$3.625 Preferred Stock share into 6.78 shares; provided, that the conversion
rights of any shares of Armco Preferred Stock called for redemption shall
terminate at the close of business on the business day (or on the fifth day,
in the case of the $3.625 Preferred Stock) preceding the date fixed for
redemption, unless there shall be a default in payment of the redemption
price. The
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number of shares of Armco Common Stock into which such Armco Preferred Stock
shares are convertible is subject to adjustment under certain circumstances,
such as splits or combinations of the Armco Common Stock or dividends on the
Armco Common Stock paid in Armco Common Stock or non-cash assets. In
addition, under certain circumstances involving a Change of Control (as
defined in the terms of the $3.625 Preferred Stock), each issued and
outstanding share of the $3.625 Preferred Stock may be converted, at the
option of the holder, for a limited period into a number of shares of Armco
Common Stock determined by formula. These special conversion rights of the
$3.625 Preferred Stock may deter certain mergers, tender offers or other
takeover attempts.
On February 23, 1996, the Armco Board of Directors adopted a Stockholder
Rights Plan and declared a dividend distribution of one preferred stock
purchase right (a "Right") for each outstanding share of Armco Common Stock to
stockholders of record at the close of business on June 26, 1996. Each Right,
when exercisable, entitles the registered holder to purchase from Armco a unit
consisting of one two-hundredths of a share of Participating Preferred Stock.
Prior to the earlier of the Distribution Date and the Expiration Date (each as
hereinafter defined), one Right will be distributed with each share of Armco
Common Stock issued. See "Preferred Stock Purchase Rights." Armco's prior
existing Stockholder Rights Plan expired on June 26, 1996.
The documents defining the terms and provisions of the Armco Common
Stock, the Rights and the Armco Preferred Stock are available for inspection
upon request at the office of the Secretary of Armco. Such documents are also
on file with and available for inspection at the Securities and Exchange
Commission, 450 Fifth Street N.W., Washington, D.C. 20549, and the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. The
statements set forth below are only summaries of such terms and provisions and
reference should be made to such documents and instruments for complete
statements of such terms and provisions.
Dividend Rights
Subject to the prior rights of the holders of Armco Preferred Stock to
receive dividends in cash at the rate provided for, and subject to any
restrictions or limitations contained in the express terms and provisions of
any shares of Armco Preferred Stock, dividends may be declared and paid upon
the Armco Common Stock, as and when determined by the Armco Board of
Directors, out of funds legally available therefor. The corporate statute of
Ohio, the Company's state of incorporation, provides that Ohio corporations
that recognize immediately the full amount of their transition obligation
under Statement of Financial Accounting Standards ("SFAS"), SFAS 106, as Armco
did, could increase the amount available for payment of dividends by adding to
the corporation's surplus at the time of the dividend the amount of the
difference between the reduction in the corporation's surplus that resulted
from the immediate recognition of the SFAS 106 transition obligation and the
amount of the transition obligation that would have been recognized at the
time of the dividend had the corporation elected to amortize its recognition
of such transition obligation.
The express terms and provisions of the $4.50 Preferred Stock provide
that the holders of shares of $4.50 Preferred Stock are entitled to receive
cumulative dividends at the annual rate of $4.50 per share before cash
dividends are paid on the Armco Common Stock. The express terms and
provisions of the $3.625 Preferred Stock provide that the holders of shares of
$3.625 Preferred Stock are entitled to receive cumulative dividends at the
annual rate of $3.625 per share before cash dividends are paid on the
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Armco Common Stock. The express terms and provisions of the $2.10 Preferred
Stock provide that the holders of shares of $2.10 Preferred Stock are entitled
to receive cumulative dividends at the annual rate of $2.10 per share before
cash dividends are paid on the Armco Common Stock. If Armco has failed to pay
any accrued cumulative dividends on any shares of Armco Preferred Stock or has
not paid or declared and provided for the dividends on outstanding shares of
Armco Preferred Stock for the then current dividend period, Armco may not
purchase or redeem any shares of Armco Common Stock. See "Dividend Payment
and Stock Purchase Restrictions".
Voting Rights
Except as otherwise required by law, the holders of Armco Common Stock,
as well as the holders of Class A Preferred Stock, are entitled at all times
to one vote for each share of such stock owned by them. Except as set forth
below, the holders of Class B Preferred Stock are not entitled to vote on any
matter.
If proper and timely notice is given by any shareholder before the time
fixed for holding a meeting for the election of directors that such
shareholder desires to cumulate his votes at such election, and if an
announcement of the giving of such notice is made upon the convening of the
meeting, each shareholder shall have the right to cumulate his votes and give
one candidate as many votes as equal the number of directors to be elected
multiplied by the number of votes to which he is entitled, or to distribute
them on the same principle among as many candidates as such shareholder sees
fit.
Shareholders who are entitled to vote in the election of directors
generally may nominate director candidates for election. Such shareholders
must deliver written notice thereof to the Secretary of Armco not later than
(i) with respect to an election to be held at any annual meeting of
shareholders, 90 days prior to the date that is one year from the date of the
immediately preceding annual meeting of shareholders, and (ii) with respect to
an election to be held at any special meeting of shareholders for the election
of directors, the close of business on the tenth day following the date on
which notice of such meeting is first given to shareholders. The provision
relating to director nomination may have the effect of delaying, deferring or
preventing a change in control of Armco.
In the event of a default in the payment of the equivalent of six
quarterly dividends payable to holders of the Class A Preferred Stock or the
Class B Preferred Stock, the respective holders of the outstanding shares of
the Class A Preferred Stock or the Class B Preferred Stock, as the case may
be, voting as a class, are entitled to elect two additional directors to serve
on the Armco Board of Directors until such default is cured. In addition, as
a prerequisite to the adoption of (i) any amendment of the Armco Amended
Articles of Incorporation (the "Armco Articles") materially altering any
existing provision of the Class A Preferred Stock or the Class B Preferred
Stock, such amendment must receive the affirmative approval of at least two-
thirds of the outstanding shares of the Class A Preferred Stock or the Class B
Preferred Stock, as the case may be, voting as a class, and (ii) any amendment
of the Armco Articles that increases the authorized number of shares of the
Class A Preferred Stock or the Class B Preferred Stock or creates any class of
shares that ranks equally with or prior to the Class A Preferred Stock or the
Class B Preferred Stock, such amendment must receive the affirmative approval
of a majority of the outstanding shares of the Class A Preferred Stock or the
Class B Preferred Stock, as the case may be, voting as a class.
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Liquidation Rights
In the event of any voluntary or involuntary liquidation of Armco, the
holders of shares of the $4.50 Preferred Stock will be entitled to receive
from the assets of Armco, prior to any payment to the holders of Armco Common
Stock, the sum of $50 per share, plus dividends accrued and unpaid to the date
of payment. In the event of any voluntary or involuntary liquidation of
Armco, the holders of shares of the $3.625 Preferred Stock will be entitled to
receive from the assets of Armco, prior to any payment to the holders of Armco
Common Stock, the sum of $50 per share, plus dividends accrued and unpaid to
the date of payment. In the event of the voluntary liquidation of Armco, the
holders of shares of the $2.10 Preferred Stock will be entitled to receive
from the assets of Armco, prior to any payment to the holders of Armco Common
Stock, the sum of $40 per share, plus dividends accrued and unpaid to the date
of payment. In the event of the involuntary liquidation of Armco, the holders
of shares of the $2.10 Preferred Stock similarly will be entitled to receive
from the assets of Armco the sum of $15 per share, plus dividends accrued and
unpaid to the date of payment, prior to any distribution to holders of Armco
Common Stock. After such payments to the holders of Armco Preferred Stock,
any remaining assets available for distribution to common shareholders will be
distributed to the holders of the Armco Common Stock pro rata in accordance
with their respective shares.
Redemptions
Shares of the $4.50 Preferred Stock may be redeemed at Armco's option for
a purchase price of $50 per share, plus dividends accrued and unpaid to the
date of redemption. Shares of the $3.625 Preferred Stock may be redeemed at
Armco's option for a purchase price of $51.45 per share and declining, at 12-
month intervals, to $50 on and after October 15, 2002, plus dividends accrued
and unpaid to the date of redemption. Shares of the $2.10 Preferred Stock may
be redeemed at Armco's option for a purchase price of $40 per share, plus
dividends accrued and unpaid to the date of redemption. Notice of any
redemption of shares of Armco Preferred Stock shall be given not less than
thirty days prior to the date fixed for redemption to the holders of record of
the shares to be redeemed by mail to the respective addresses of such holders
as the same shall appear on the stock books of Armco and, if the Armco Board
of Directors so determines, by publication of notice in the manner prescribed
by the Board of Directors.
Dividend Payment and Stock Purchase Restrictions
Armco has restrictive covenants under various loan agreements relating to
the payment of dividends on, or the purchase of, its capital stock. At
December 31, 1998, Armco and Armco Funding Corporation, a wholly owned
subsidiary, had two credit facilities with a group of banks, which together
provide for borrowings of up to $170 million on a revolving credit basis with
security provided by certain of Armco's receivables and inventories. Under a
receivables purchase agreement, Armco sells substantially all of its trade
receivables to Armco Funding Corporation. These receivables are used to
secure a $100 million receivables credit facility between Armco Funding
Corporation and the banks. Under an inventory credit facility, Armco has a
revolving credit agreement with a group of banks providing $70 million for
revolving credit loans secured by Armco's inventories. Both facilities expire
in 2001.
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The inventory credit agreement subjects Armco to certain restrictions and
covenants related to, among other things, minimum net worth, leverage ratio
and interest coverage ratio requirements. The inventory credit facility
permits the payment of dividends on the outstanding $4.50 Preferred Stock, the
outstanding $3.625 Preferred Stock and the outstanding $2.10 Preferred Stock
so long as Armco is not in default under the credit facility. Under the terms
of the inventory credit facility, Armco is permitted to pay cash dividends on
its common stock up to an amount not exceeding 30% of Net Income (as defined
therein) for the immediately preceding fiscal year so long as it is not in
default under the credit facility.
Under the terms of Ohio law, Armco is currently permitted to purchase
shares of its capital stock only to the extent that it has positive equity
surplus. At December 31, 1998, Armco had a negative equity surplus of $8.3
million.
Preferred Stock Purchase Rights
The Rights are issued under a Rights Agreement between Armco and Fifth
Third Bank. Each Right entitles the registered holder to purchase a unit
consisting of one two-hundredths of a share (a "Unit") of Participating
Preferred Stock at a purchase price of $20.00 per Unit, subject to adjustment.
The Rights are attached to all Armco Common Stock certificates
representing shares outstanding, and no separate Rights Certificates were
distributed. The Rights will separate from the Armco Common Stock and a
distribution date (the "Distribution Date") will occur upon the earliest of
(i) ten business days following a public announcement (the "Stock Acquisition
Date") that a person or group of affiliated or associated persons (a "Person")
has acquired, or obtained the right to acquire, beneficial ownership of 20% or
more of the outstanding shares of Armco Common Stock (an "Acquiring Person")
or (ii) ten business days following the commencement of a tender offer or
exchange offer that would, if consummated, result in a Person becoming an
Acquiring Person or (iii) ten business days after the Board of Directors of
the Company shall declare any Person to be an "Adverse Person," upon a
determination that such Person has or will become the beneficial owner of 10%
or more of the outstanding shares of Armco Common Stock (provided that any
such determination shall not be effective until such Person has become the
Beneficial Owner of 10% or more of the outstanding shares of Armco Common
Stock) and a determination by at least a majority of the "Continuing
Directors" (who generally are those directors who were directors of Armco on
February 23, 1996 or who subsequently became directors and whose elections or
nominations were approved by a majority of the continuing directors) including
consultation with such persons as such directors shall deem appropriate, that
(a) such beneficial ownership by such Person is intended to cause, is
reasonably likely to cause or will cause the Company to repurchase the Armco
Common Stock beneficially owned by such Person or to cause pressure on the
Company to take action or enter into a transaction or series of transactions
intended to provide such Person with short-term financial gain under
circumstances where the Board of Directors determines that the best long-term
interests of the Company and its stockholders would not be served by taking
such action or entering into such transactions or series of transactions at
the time or (b) such beneficial ownership is causing or is reasonably likely
to cause a material adverse impact (including, but not limited to, impairment)
of relationships with customers or impairment of the Company's ability to
maintain its competitive position) on the business or prospects of the Company
or (c) such beneficial ownership otherwise is determined to be not in the best
interests of the Company and its stockholders, employees, customers and
communities in which the Company and its subsidiaries do business.
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However, the Board of Directors may not declare a Person to be an Adverse
Person if, prior to the time that the Person acquired 10% or more of the
shares of Armco Common Stock then outstanding, such Person provided to the
Board of Directors in writing a statement of the Person's purpose and
intentions in connection with the proposed acquisition of Armco Common Stock,
together with any other information reasonably requested of the Person by the
Board of Directors, and the Board of Directors, based on such statement and
reasonable inquiry and investigation as it deems appropriate, determines to
notify and notifies such person in writing that it will not declare the Person
to be an Adverse Person; provided, however, that the Board of Directors may
expressly condition in any manner a determination not to declare a Person an
Adverse Person on such conditions as the Board of Directors may select,
including, without limitation, such Person's not acquiring more than a
specified amount of stock and/or on such Person's not taking actions
inconsistent with the purposes and intentions disclosed by such Person in the
statement provided to the Board of Directors. In the event that the Board of
Directors should at any time determine, upon reasonable inquiry and
investigation, that such Person has not met or complied with any conditions
specified by the Board of Directors, the Board of Directors may at any time
thereafter declare the Person to be an Adverse Person.
Until the Distribution Date (i) the Rights will be evidenced by the Armco
Common Stock certificates and will be transferred with and only with such
Armco Common Stock certificates, (ii) new Armco Common Stock certificates
issued after June 26, 1996 will contain a notation incorporating the Rights
Agreement by reference and (iii) the surrender for transfer of any
certificates for Armco Common Stock outstanding will also constitute the
transfer of the Rights associated with the Armco Common Stock represented by
such certificate.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on June 26, 2006 (the "Expiration Date"),
unless earlier redeemed by the Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Armco Common Stock as of the close
of business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except for certain issuances in
connection with outstanding options and convertible securities and as
otherwise determined by the Board of Directors, only shares of Armco Common
Stock issued prior to the Distribution Date will be issued with Rights.
In the event that the Board of Directors determines that a Person is an
Adverse Person or, at any time following the Distribution Date, a Person
becomes the beneficial owner of 25% or more of the then-outstanding shares of
Armco Common Stock, each holder of a Right will thereafter have the right to
receive at the time specified in the Rights Agreement, (x) upon exercise and
payment of the exercise price, Armco Common Stock (or, in certain
circumstances, cash, property or other securities of Armco) having a value
equal to two times the exercise price of the Right or (y) at the discretion of
the Board of Directors, upon exercise and without payment of the exercise
price, Armco Common Stock (or, in certain circumstances, cash, property or
other securities of Armco) having a value equal to the difference between the
exercise price of the Right and the value of the consideration which would be
payable under clause (x). Notwithstanding the foregoing, following the
occurrence of any of the events set forth in this paragraph, all Rights that
are, or (under circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person or Adverse Person will be null and
void. However, Rights are not exercisable following the occurrence of either
of the events set forth above until such time as the Rights are no longer
redeemable by Armco as set forth below.
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In the event that, at any time following the Stock Acquisition Date, (i)
Armco is acquired in a merger or other business combination transaction in
which the Company is not the surviving corporation (other than a merger which
follows an offer described above), or (ii) 50% or more of the Company's assets
or earning power is sold or transferred, each holder of a Right (except Rights
that previously have been voided) shall thereafter have the right to receive,
upon exercise, common stock of the acquiring company having a value equal to
two times the exercise price of the Right. The events set forth are
hereinafter referred to as the "Triggering Events."
The Purchase Price payable, and the number of Units of Preferred Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a
stock dividend on, or a subdivision, combination or reclassification of, the
Preferred Stock, (ii) if holders of the Preferred Stock are granted certain
rights or warrants to subscribe for Preferred Stock or convertible securities
at less than the current market price of the Preferred Stock, or (iii) upon
the distribution to holders of the Preferred Stock of evidences of
indebtedness or assets (excluding regular quarterly cash dividends) or of
subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Units will be issued and, in lieu thereof, an adjustment
in cash will be made based on the market price of the Preferred Stock on the
last trading date prior to the date of exercise.
In general, the Company may redeem the Rights in whole, but not in part,
at a price of $0.0025 per Right, at any time until 10 business days following
the Stock Acquisition Date; provided, however, that with certain exceptions
the Company shall be so entitled to redeem the Rights only if the Board of
Directors then consists of a majority of Continuing Directors. Moreover,
redemption would not be permitted after 10 business days following the
effective date of any declaration by the Board of Directors that any Person is
an Adverse Person. After the redemption period has expired, the Company's
right of redemption may be reinstated if an Acquiring Person or Adverse Person
reduces his beneficial ownership to less than 10% of the outstanding shares of
Armco Common Stock in a transaction or series of transactions not involving
the Company and there are no other Acquiring Persons or Adverse Persons.
Immediately upon the action of the Board of Directors ordering redemption of
the Rights, the Rights will terminate and the only right of the holders of
Rights will be to receive the $0.0025 redemption price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders or to the Company, stockholders may,
depending upon the circumstances, recognize taxable income in the event that
the Rights become exercisable for stock (or other consideration) of the
Company or for common stock of the acquiring company as set forth above.
Other than those provisions relating to the principal economic terms of
the Rights, any of the provisions of the Rights Agreement may be amended by
the Board of Directors prior to the Distribution Date. After the Distribution
Date, the provisions of the Rights Agreement may be amended by the Board of
Directors in order to cure any ambiguity, to make changes that do not
adversely affect the interests of holders of Rights (excluding the interests
of any Acquiring Person or Adverse Person), or to shorten or lengthen any time
period under the Rights Agreement; provided, however, that no amendment to
adjust
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the time period governing redemption shall be made when the Rights are not
redeemable; and provided further, that any amendment to the redemption
provision shall be effective only if the Board of Directors consists of a
majority of Continuing Directors.
Participating Preferred Stock
The Participating Preferred Stock purchasable upon exercise of the Rights
will be non-redeemable and will rank in parity with all other series of Armco
Preferred Stock as to the payment of dividends and distribution of assets.
Each share of Participating Preferred Stock will be entitled to receive a
preferential quarterly dividend equal to the greater of (i) $75 or (ii),
subject to certain adjustments, 200 times all dividends or other
distributions, other than a dividend payable in shares of Armco Common Stock
or a subdivision of the outstanding shares of Armco Common Stock, declared on
the Armco Common Stock, since the last dividend payment date. In the event of
any liquidation of Armco, the holders of the Participating Preferred Stock
will receive a preferred liquidation payment of $7,000 per share, plus an
amount equal to accrued and unpaid dividends and distributions thereon, and,
if greater, will be entitled to receive an aggregate liquidation payment equal
to 200 times the payment made per share of Armco Common Stock, subject to
certain adjustments. Each share of Participating Preferred Stock will have
one vote. The Participating Preferred Stock is not convertible into Armco
Common Stock or any other security of Armco and is not redeemable. The
foregoing rights of the Participating Preferred Stock are protected against
dilution in the event additional shares of Armco Preferred Stock or other
capital stock are issued pursuant to a stock split, stock dividend or similar
recapitalization.
Miscellaneous
The Armco Common Stock has no conversion rights, and there are no
redemption or sinking fund provisions applicable thereto.
The Fifth Third Bank is transfer agent and registrar for the Armco Common
Stock, $4.50 Preferred Stock , $3.625 Preferred Stock and $2.10 Preferred
Stock.
The Armco Common Stock, $4.50 Preferred Stock, $3.625 Preferred Stock and
$2.10 Preferred Stock are traded on the New York Stock Exchange, the principal
market therefor. In addition, the Armco Common Stock is traded on the Midwest
Stock Exchange and other regional exchanges.