SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant / x /
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Check the appropriate box:
/ / Preliminary Proxy Statement
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permitted by Rule 14a-6(a)(2))
/ x / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or
240.14a-12
Aluminum Company of America
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than
Registrant)
Payment of Filing Fee (Check the appropriate box):
/ x / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of
Schedule 14A.
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Exchange Act Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act
Rules 14a-6(i)(4) and 0-11.
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filing fee is calculated and state how it was
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Aluminum Company of America
425 Sixth Avenue
Pittsburgh, Pennsylvania 15219-1850
1995 Notice of Annual Meeting and
Proxy Statement
To Alcoa Shareholders:
It is my privilege to invite you to the 1995 annual meeting
of Alcoa shareholders. We will meet on Friday, May 12, at
9:30 a.m. in the Allegheny Ballroom of Pittsburgh's Vista
International Hotel. I hope you will be able to attend and
participate in this review of your company's business and
operations.
The Vista Hotel is fully accessible to disabled persons.
In addition, headsets for the hearing-impaired will be
available.
If you plan to attend the meeting, please check the
appropriate box on the proxy card, then detach and retain the
admission ticket that accompanies the proxy form. You will
need this ticket to be admitted to the meeting.
Whether or not you plan to attend, it is important that
your shares are represented at the meeting. Please fill out
and return your proxy card promptly.
Sincerely,
Paul H. O'Neill
Chairman of the Board and
Chief Executive Officer
1
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2
March 14, 1995
Notice of 1995 Annual Meeting
March 14, 1995
The annual meeting of shareholders of Aluminum Company of
America (Alcoa) is scheduled for Friday, May 12, 1995 at 9:30
a.m. We will meet in the Allegheny Ballroom of the Vista
International Hotel in Pittsburgh, Pennsylvania.
The purposes of the meeting are:
(1) to elect four directors for a term of three years and
one director for a term of one year;
(2) to approve amendments to the company's Long Term Stock
Incentive Plan under which stock options are granted;
(3) to vote on a shareholder proposal which recommends that
Alcoa refrain from giving charitable contributions to
organizations that perform abortion; and
(4) to consider any other matters that may properly come
before the meeting or any adjournment of the meeting.
Owners of common stock of record at the close of business
on March 7, 1995 will be entitled to vote at the meeting.
The presence in person or by proxy of shareholders entitled
to cast at least a majority of the votes that all share-
holders are entitled to cast at the meeting will constitute a
quorum for conducting business. If a quorum is not present,
the meeting may be adjourned to a time and place determined
by those shareholders present. If the meeting is adjourned,
the shareholders present at the next meeting will constitute
a quorum for the purpose of electing directors. In the event
that the meeting is adjourned for one or more periods
totaling at least 15 days, the shareholders present at this
latest meeting will constitute a quorum for acting upon any
matter to be voted on at the meeting.
Your attention is directed to the following proxy statement
and the accompanying proxy card.
On behalf of Alcoa's Board of Directors,
Barbara S. Jeremiah
Secretary
Contents
Proxy solicitation and voting information . . . . . . 4
Board of Directors . . . . . . . . . . . . . . . . . 4
Meetings and committees of the Board . . . . . . . 8
Certain relationships and related transactions . . 8
Directors' compensation . . . . . . . . . . . . . . 8
Security ownership. . . . . . . . . . . . . . . . . . 9
Compensation of executive officers . . . . . . . . . 9
Long term stock incentive plan . . . . . . . . . . 11
Retirement plans . . . . . . . . . . . . . . . . 14
Shareholder return . . . . . . . . . . . . . . . . 14
Compensation Committee report on
executive compensation . . . . . . . . . . . . . 15
Alcoa Board proposal to approve amendments to
the Long Term Stock Incentive Plan . . . . . . . . . 17
Shareholder proposal . . . . . . . . . . . . . . . . 19
Other information . . . . . . . . . . . . . . . . . 19
Relationship with independent public accountants . 19
1996 meeting--shareholder proposals. . . . . . . . 19
Other matters. . . . . . . . . . . . . . . . . . . 19
3
Proxy Statement
Proxy solicitation and voting information
The accompanying proxy is solicited by the Board of Directors
of Aluminum Company of America (Alcoa or the company) for use
at the annual meeting of shareholders scheduled for May 12,
1995. These proxies will be voted if properly signed,
received by the secretary of the company prior to the close
of voting at the meeting and not revoked.
Holders of record of Alcoa common stock at the close of
business on March 7, 1995 will be entitled to vote at the
meeting. On that date 178,894,715 shares of common stock
were outstanding. Shareholders are entitled to one vote per
share on each matter properly brought before the meeting.
The shares shown as outstanding on March 7 reflect the two-
for-one split of Alcoa's common stock that occurred in
February 1995. All other numbers of shares shown in this
proxy statement have been adjusted to reflect this split.
Under Pennsylvania law and the company's Articles, a quorum
is required to conduct business at the annual meeting. A
quorum is the presence, in person or by proxy, of a majority
of the votes entitled to be cast at the meeting.
Abstentions, votes withheld from director nominees and broker
non-votes are counted for purposes of determining a quorum.
If a quorum is present, the candidate or candidates receiving
the highest number of votes will be elected directors, and
any other matter being voted on at the meeting will be
approved if a majority of the votes cast by shareholders are
voted in favor of approving or adopting such matter.
Abstentions, broker non-votes or failure to vote are
disregarded in tabulating voting results.
Proxies representing shares of common stock held of record
also will represent full and fractional shares held under the
company's Dividend Reinvestment and Stock Purchase Plan and
full shares held under Alcoa's employee savings plans, if the
registrations are the same. Separate mailings will be made
for shares not held under the same registration.
Employee savings plan shares for which no voting directions
are received from participants will be voted by the
independent trustee in the same proportion (for, against and
abstain) as the shares in all plans for which participant
directions are received.
A shareholder who has returned a proxy may revoke it at any
time before it is voted at the meeting by delivering a
revised proxy, by voting by ballot at the meeting, or by
delivering a written notice withdrawing the proxy to the
company's secretary. This notice may be mailed to the
secretary at the address at the top of the first page of this
booklet or may be given to the judge of election at the
meeting.
Proxies, ballots and voting tabulations that identify
shareholders will be held confidential, except in a contested
proxy solicitation or where necessary to meet applicable
legal requirements. Corporate Election Services, Inc., the
company's independent proxy tabulator, has been appointed
judge of election for the meeting.
Alcoa pays the cost of soliciting proxies. To assist in
the solicitation process, Alcoa has hired the firm of Morrow
& Co., Inc. for a fee of $7,000 plus out-of-pocket expenses.
Also, Alcoa directors and officers and other regular
employees may solicit proxies by mail, in person, or by
telephone or fax. The company will request banks, brokerage
firms and other persons who hold stock in their names for
others, or in the name of nominees for others, to obtain
voting instructions from the beneficial owners of the stock.
Alcoa will reimburse such persons for their reasonable
expenses in obtaining voting instructions.
Shareholders' comments about any aspect of company business
are welcome, and space is provided on the proxy card for this
purpose. Although such comments are not answered on an
individual basis, they do assist Alcoa management in
determining and responding to the needs of shareholders.
Board of Directors
The Alcoa Board of Directors consists of twelve members,
divided into three classes. The terms of office of the three
classes of directors end in successive years.
The four members of the class of directors whose terms of
office expire at the May 1995 annual meeting have been
nominated to serve for a new three-year term that will end in
1998. In addition, Sir Ronald Hampel has been nominated to
serve for a one-year term expiring at the 1996 annual meeting.
Sir Ronald is Deputy Chairman and Chief Executive of Imperial
Chemical Industries PLC. He became an Alcoa director on
January 1, 1995.
The accompanying proxy will be voted for the election of
these nominees, unless authority to vote for one or more
nominees is withheld. In the event that any of the nominees
is unable or unwilling to serve as a director for any reason
(which is not anticipated), the proxy will be voted for the
election of any substitute nominee designated by the Board of
Directors or its Executive Committee.
Certain information about these nominees and the other
directors follows.
4
Nominees to serve for a three-year term expiring 1998
Sir Arvi Parbo
Chairman of Western Mining
Corporation Limited, an Australian
exploration and mining company,
and Chairman of Alcoa of
Australia Limited
Sir Arvi, 69, has been a director since 1980. He has been
Chairman of Western Mining Corporation Limited since 1974.
He served as Managing Director of that company from 1971 to
1986. Western Mining and its affiliates own approximately
40% of the worldwide bauxite, alumina and industrial
chemicals businesses of Alcoa, including the company's
largest offshore subsidiary, Alcoa of Australia Limited.
Sir Arvi is also a director of Hoechst Australian
Investments Pty. Ltd., Munich Reinsurance Company of
Australia Ltd., Sara Lee Corporation, Western Mining
Corporation Holdings Limited and Zurich Australian
Insurance Group.
Henry B. Schacht
Chairman of the Executive Committee,
Cummins Engine Company, Inc.,
a manufacturer of diesel engines
Mr. Schacht, 60, was elected a director in September 1994.
He currently serves as Chairman of the Executive Committee
of the Board of Directors of Cummins Engine Company. Mr.
Schacht was elected President and to the Cummins board in
1969, Chief Executive Officer in 1973, and Chairman and
Chief Executive Officer in 1977. He relinquished the title
of CEO in July 1994 and retired as Chairman in February
1995. He is also a director of American Telephone &
Telegraph Co., CBS Inc., The Chase Manhattan Corp. and The
Chase Manhattan Bank.
Forrest N. Shumway
Former Vice Chairman,
AlliedSignal Inc., a diversified,
technologically-based corporation
Mr. Shumway, 67, has been a director since February 1988
and served previously as a director from 1982 to 1987. He
retired as Vice Chairman of the Board and Chairman of the
Executive Committee of AlliedSignal Inc. in 1987. Prior
to 1985, he had served as Chairman and Chief Executive
Officer of The Signal Companies, Inc. Mr. Shumway is also
a director of American President Companies, Ltd., The
Clorox Company, First Interstate Bancorp and Transamerica
Corporation.
Franklin A. Thomas
President, The Ford Foundation,
a nonprofit charitable foundation
Mr. Thomas, 60, has been a director since 1977. He has
been President of The Ford Foundation since 1979. Mr.
Thomas was President and Chief Executive Officer of Bedford
Stuyvesant Restoration Corporation from its founding in
1967 until 1977. He is also a director of American
Telephone & Telegraph Co., CBS Inc., Citicorp/Citibank,
N.A., Cummins Engine Company, Inc. and Pepsico, Inc.
5
Continuing directors--term expiring 1997
Kenneth W. Dam
Max Pam Professor of American and
Foreign Law, University of Chicago
Law School
Mr. Dam, 62, has been a director since 1987. He is Max
Pam Professor of American and Foreign Law at the
University of Chicago Law School. He served as President
and Chief Executive Officer of the United Way of America in
1992, Vice President for Law and External Relations of
International Business Machines Corporation from 1985 to
1992, Deputy Secretary of State from 1982 to 1985 and
Provost of the University of Chicago from 1980 to 1982. He
serves on the Advisory Board of BMW of North America and on
a number of nonprofit boards, including the Council on
Foreign Relations and the Brookings Institution.
John P. Diesel
Former President, Tenneco, Inc.,
a diversified energy company
Mr. Diesel, 68, has been a director since 1980. He had
been a director of Tenneco since 1976 and its President
since 1979. He retired from both positions at Tenneco at
year-end 1988. Mr. Diesel is also a director of Brunswick
Corporation.
Judith M. Gueron
President, Manpower Demonstration
Research Corporation, a nonprofit
research organization
Dr. Gueron, 53, has been a director since 1988. She has
been President of Manpower Demonstration Research
Corporation (MDRC) since 1986. She was Executive Vice
President for research and evaluation of MDRC from 1978 to
1986. Before joining MDRC, Dr. Gueron was director of
special projects and studies and a consultant at the New
York City Human Resources Administration.
Paul H. O'Neill
Chairman of the Board and Chief
Executive Officer of Alcoa
Mr. O'Neill, 59, has been a director since 1986. He was
elected Chairman of the Board and Chief Executive Officer
of Alcoa effective in June 1987. Before joining Alcoa, Mr.
O'Neill had been an officer since 1977 and President and a
director since 1985 of International Paper Company. He is
also a director of General Motors Corporation, Gerald R.
Ford Foundation, Manpower Demonstration Research
Corporation and The RAND Corporation.
6
Nominee to serve for a one-year term expiring 1996
Sir Ronald Hampel
Deputy Chairman and Chief Executive,
Imperial Chemical Industries PLC,
a chemicals manufacturer
Sir Ronald, 62, has been a director since January 1995. He
has served as Deputy Chairman and Chief Executive of
Imperial Chemical Industries PLC since 1993 and as a
director since 1985. He was chief operating officer of
Imperial Chemical Industries from 1991 until 1993. Sir
Ronald is designated to become Chairman on April 27, 1995
at the Imperial Chemical Industries meeting of
shareholders. He is also a director of British Aerospace
PLC and Commercial Union PLC.
Continuing directors--term expiring 1996
Joseph T. Gorman
Chairman and Chief Executive
Officer, TRW Inc., a global company
serving the automotive, space and
defense, and information systems
markets
Mr. Gorman, 57, became a director in 1991. He has been
Chairman and Chief Executive Officer of TRW since December
1988. Mr. Gorman served as Chief Operating Officer of TRW
from 1985 until 1988 and as President from 1985 until April
1991. He is also a director of TRW and The Procter &
Gamble Company.
John P. Mulroney
President and Chief Operating
Officer, Rohm and Haas Company,
a specialty chemicals manufacturer
Mr. Mulroney, 59, has been a director since 1987. He has
been President and Chief Operating Officer of Rohm and Haas
Company since March 1986. In 1982 he was elected a
director and Group Vice President and Corporate Business
Director of that corporation. Mr. Mulroney is also a
director of Teradyne, Inc.
Marina v.N. Whitman
Professor of Business Administration and
Public Policy, University of Michigan
Ms. Whitman, 59, has been a director since March 1994. She
is Professor of Business Administration and Public Policy,
Graduate School of Business Administration and the
Institute of Public Policy Studies at the University of
Michigan. She was Vice President and Chief Economist of
General Motors Corporation (GMC) from 1979 to 1985, and
Vice President and Group Executive, Public Affairs and
Marketing Staffs of GMC from 1985 to 1992. Ms. Whitman was
a member of the President's Council of Economic Advisers
from 1972 to 1973. Ms. Whitman is also a director of
Browning-Ferris Industries, Inc., Chemical Banking
Corporation, The Procter & Gamble Company and Unocal
Corporation.
7
Meetings and committees of the Board
The Alcoa Board of Directors held six meetings during 1994.
The Board has designated several standing committees,
including the five described below. Attendance by directors
at meetings of the Board and of committees on which they
served averaged over 95%. All directors attended at least
75% of these meetings, except Joseph T. Gorman.
The Audit Committee, composed of Directors Dam, Gueron,
Shumway, Thomas (chairman) and Whitman, reviews the
performance of the independent public accountants and makes
recommendations to the Board concerning the selection of
independent public accountants to audit the company's
financial statements. This Committee also reviews the audit
plans, audit results and findings of the internal auditors and
the independent accountants, reviews the environmental audits
conducted by the company's environmental staff and monitors
compliance with Alcoa business conduct policies. The Audit
Committee meets regularly with the company's management,
Director - Internal Audit and independent public accountants
to discuss the adequacy of internal accounting controls and
the financial reporting process and with the company's
management to discuss environmental matters. The independent
accountants and the Director - Internal Audit have free access
to the Audit Committee, without management's presence. This
Committee held five meetings in 1994.
The Compensation Committee, composed of Directors Dam,
Diesel (chairman), Mulroney, Parbo and Thomas, determines the
compensation of all Alcoa officers (including salary and
bonus), authorizes or approves any contract for remuneration
to be paid after termination of an officer's regular
employment, and performs specified functions under company
compensation plans. A subcommittee of the Compensation
Committee administers the Long Term Stock Incentive Plan under
which stock options are granted. The Compensation Committee
reviews, but is not required to approve, the participation of
officers in the company's other benefit programs for salaried
employees. Three meetings were held in 1994.
The Executive Committee, composed of Directors Diesel,
O'Neill (chairman) and Thomas, has been granted the authority
of the Board in the management of the company's business and
affairs. It meets principally when specific action must be
taken between Board meetings. This Committee met once in
1994.
The Nominating Committee, composed of Directors Diesel,
Gorman, Mulroney (chairman), Parbo and Thomas, reviews the
performance of incumbent directors and the qualifications of
nominees proposed for election to the Board and makes
recommendations to the Board with regard to nominations for
director. This Committee will consider proposed nominees whose
names and information regarding education and experience are
submitted in writing by shareholders to the secretary of the
company. This Committee held one meeting in 1994.
The Pension and Savings Plan Investment Committee, composed
of Directors Gorman, Gueron, Shumway (chairman), Thomas and
Whitman, reviews and makes recommendations to the Board
concerning the investment management of the assets of Alcoa's
retirement plans and principal savings plans. This Committee
held three meetings in 1994.
Certain relationships and related transactions
Alcoa and its subsidiaries have transactions in the ordinary
course of business with a large number of persons and
entities, including corporations of which certain non employee
directors (outside directors) are executive officers.
Transactions with any of these corporations did not exceed 5%
of Alcoa's or the other corporation's consolidated gross
revenues for its last fiscal year. Alcoa does not consider
these transactions to be material.
Directors' compensation
A director who is not an Alcoa employee receives an annual
retainer fee and a meeting fee for each Board or committee
meeting attended. The annual cash retainer fee is $33,000 for
members of the Audit Committee and $30,000 for other non
employee directors. The chairman of each Board committee
also receives an additional annual fee of $2,000. The
meeting fee is $1,000 for Board meetings and $600 for
committee meetings.
Each outside director receives 500 restricted shares of
Alcoa common stock as an additional annual retainer. The
shares carry full voting and dividend rights, but may not
be sold or pledged by the director until after Board service
ends.
Directors may elect to defer receipt of some or all
cash fees. Deferred accounts are credited with
investment results comparable to those of the investment
options under Alcoa's principal savings plan for salaried
employees, as selected by the director. Changes among
investment options are permitted once each month. Deferred
accounts are unfunded and are paid out in cash after Board
service ends.
A fee continuation arrangement also is provided to outside
directors. Benefits vest at 10% per year of service beginning
with 50% for five years. Payments begin after the later of
age 65 or discontinuance of service as a director and continue
for life. The annual amount equals the vesting percentage
multiplied by the minimum annual retainer (cash and common
shares) in effect when Board service ends. However, if
service ends after attaining age 70 with at least five years
of service, 100% of the final retainer is paid.
8
Security ownership
The following table shows the beneficial ownership of Alcoa
common stock as of January 31, 1995 for each director, nominee
for director and the CEO and four other highest paid executive
officers, and for all directors and executive officers as a
group. The shares shown for the group represented less than
1% of the total shares outstanding. The first column shows
shares which the executives had the right to acquire within 60
days through the exercise of employee options. The second
column shows actual ownership, and includes shares in benefit
plans or owned outright that are not presently transferable.
All share numbers have been adjusted to reflect the two-for-
one stock split of February 1995.
Exercisable Shares
employee beneficially
Name options owned
---- ----------- ------------
Kenneth W. Dam -- 2,200
John P. Diesel -- 2,200
Joseph T. Gorman -- 1,644
Judith M. Gueron -- 2,272
Sir Ronald Hampel -- 400
John P. Mulroney -- 2,398
Paul H. O'Neill 583,400 55,190
Sir Arvi Parbo -- 2,926
Henry B. Schacht -- 2,000
Forrest N. Shumway -- 7,700
Franklin A. Thomas -- 2,464
Marina v.N. Whitman -- 1,400
Alain J. P. Belda 104,090 7,152
Richard L. Fischer 36,494 14,758
Ronald R. Hoffman 16,976 21,010
Jan H. M. Hommen 2,776 21,574
Directors and executive
officers as a group 987,790 233,644
Wellington Management Company, 75 State Street, Boston,
Massachusetts 02109, an investment adviser and parent holding
company, reported to the Securities and Exchange Commission
(SEC) that it beneficially owned 15,537,178 shares, or
approximately 8.8% of the company's common stock as of
December 31, 1994. It reported shared power to dispose of
all of these shares and shared voting power over 4,055,578
shares. The Wellington holdings included shares owned by
various investment advisory clients.
FMR Corp., 82 Devonshire Street, Boston, Massachusetts
02109, a parent holding company, reported to the SEC that it
and its affiliates (including Fidelity Management & Research
Company, an investment adviser, and Edward C. Johnson 3rd,
FMR's chairman and major stockholder) beneficially owned
11,263,428 shares, or approximately 6.3% of the company's
common stock as of December 31, 1994. It reported sole power
to dispose of all of these shares and sole voting power over
370,094 shares.
Mellon Bank Corporation (MBC), One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, a bank holding company,
reported to the SEC that it and its subsidiaries beneficially
owned 9,274,876 shares, or approximately 5.2% of the
company's common stock as of December 31, 1994. MBC stated
in its report that it had sole power to vote 1,870,000
shares, shared power to vote 7,164,876 shares, sole power to
dispose of 1,720,000 shares and shared power to dispose of
2,700,000 shares. MBC's holdings included shares held in the
company's principal employee savings plans for which Mellon
Bank, N.A. (a subsidiary of MBC) acts as trustee.
Compensation of executive officers
A summary of the compensation for the company's chief
executive officer and for the four other executive officers
who were the highest paid for the fiscal year ended December
31, 1994 for services to Alcoa and its subsidiaries is shown
in the following table.
9
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Compensation
-------------
Annual Compensation Awards
------------------- -------------
Securities
Name and Underlying All Other
Principal Position Year Salary ($) (1) (2) Bonus ($) Options (#)(3) Compensation ($)(4)
------------------ ---- ------------------ --------- -------------- -------------------
<S> <C> <C> <C> <C> <C>
Paul H. O'Neill 1994 $700,200 $750,000 433,042 $159,012
Chairman of the Board and 1993 700,200 343,000 125,200 170,012
Chief Executive Officer 1992 627,000 575,000 287,896 184,810
Alain J. P. Belda (5) 1994 413,500 260,000 54,754 113,010
Executive Vice President 1993 319,231 152,200 29,000 91,362
Richard L. Fischer 1994 350,400 180,000 197,242 65,024
Executive Vice President - 1993 350,400 112,000 87,980 70,024
Chairman's Counsel 1992 331,454 123,552 95,342 77,610
Ronald R. Hoffman 1994 350,400 180,000 196,810 69,024
Executive Vice President - 1993 350,400 112,000 74,046 74,024
Human Resources, Quality, 1992 331,454 123,552 85,794 83,610
and Communications
Jan H. M. Hommen 1994 310,800 180,000 118,106 56,648
Executive Vice President 1993 300,000 162,200 54,160 62,000
and Chief Financial Officer 1992 260,200 110,150 38,080 49,494
<FN>
(1) The most highly compensated executive officers are those
with the highest annual salary and bonus for the last
completed fiscal year. In addition to base salary, the salary
column in this table includes, when selected by the employee,
an extra week's pay in lieu of vacation as permitted under the
company's vacation plan for employees with 25 or more years of
service. Also included for 1993 is vacation premium for Mr.
Belda, paid pursuant to Brazilian law.
(2) Mr. Belda's 1993 salary was paid by Alcoa Aluminio S.A.
in local Brazilian currency.
(3) The numbers of shares shown in this column have been
adjusted to reflect the two-for-one split of Alcoa common
stock that took place in February 1995. The annual stock
option grant for each named officer in 1994 was only a small
fraction of the total grants reported for 1994 (125,000 shares
for Mr. O'Neill). All of the other option awards relate to
previous years' options grants and the use of the continuation
(reload) feature described in the next section.
(4) Company matching contributions to 401(k) and excess
savings (defined contribution) plans for 1994 were as
follows: Mr. O'Neill, $42,012; Mr. Belda, $21,510;
Mr. Fischer, $21,024; Mr. Hoffman, $21,024; and Mr. Hommen,
$18,648. The present value costs of the company's portion
of 1994 premiums for split-dollar life insurance, above the
term coverage level provided generally to salaried employees,
were as follows: Mr. O'Neill, $117,000; Mr. Belda, $64,000;
Mr. Fischer, $44,000; Mr. Hoffman, $48,000; and Mr. Hommen,
$38,000. Also included for Mr. Belda in 1994 is an addi-
tional one month's salary paid to employees who attain 25
years of service with the company.
(5) Mr. Belda became an executive officer in 1993. Pursuant
to SEC rules, no information regarding his compensation for
years prior to the year in which he became an executive
officer is required to be set forth in this table.
</TABLE>
10
Long term stock incentive plan
This plan provides long term incentives, based on Alcoa stock,
to employees who may influence the long term performance of
Alcoa and its subsidiaries. Key features of the plan include
stock options and performance shares. New performance share
awards were discontinued beginning in 1993. For additional
information about the Plan, see pages 17 and 18.
Stock options are granted annually, currently in the month
of January. The option price generally may not be less than
100% of the fair market value of Alcoa stock on the grant
date.
In 1989, a "reload" or continuation feature was added to the
plan for the purpose of encouraging early option exercise and
increased share ownership by optionees. This feature permits
the optionee to exercise a previously granted option and
receive option appreciation as shares, together with a
continuation option for a lesser number of shares and having a
new option price at current market value. The option
expiration date is the same as for the prior grant. The
continuation option covers the previous number of option
shares less the net "appreciation" shares received after any
share withholding for taxes. One-half of the net appreciation
shares are restricted against sale or pledge during the
employee's Alcoa career. The reload feature has resulted in
substantially increased share ownership by Alcoa executive
officers and other optionees.
The following table shows annual options granted by the
Compensation Committee in 1994 to the named officers. It also
shows continuation (reload) options resulting from the
exercise in 1994 of options granted in prior years. The price
of Alcoa stock must appreciate in order for optionees to
realize any gain. As the stock price increases, all
shareholders benefit proportionately. The potential gain from
future stock appreciation for all Alcoa optionees (over 800
individuals) is less than 2% of the gain to all shareholders
and optionees.
11
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Individual Grants
----------------------------------------------------------------------------------
Number of % of Total Potential Realizable Value at
Securities Options Assumed Annual Rates of Stock
Underlying Granted to Exercise Price Appreciation for Option
Options Employees or Base Expira- Term (4)
-----------------------------
Granted in Fiscal Price tion
Name Type (1) (#) (2) Year ($/Sh)(2)(3) Date(4) 0% ($) 5% ($) 10% ($)
---- --------- -------- -------- ------------- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Potential future Alcoa stock price/share (4) . . . . . . . . . . . . . . . . . . . . $36.72 $59.81 $95.24
P. H. O'Neill Annual 125,200 2.5% $36.719 1/14/04 $ 0 $2,548,508 $6,284,188
Continuation 117,852 2.3 38.968* 1/15/03 0 2,205,948 5,289,484
Continuation 58,964 1.2 38.987* 1/20/02 0 945,338 2,206,630
Continuation 31,220 0.6 39.602* 1/23/01 0 425,343 966,500
Continuation 32,812 0.7 39.674* 1/22/00 0 364,530 806,775
Continuation 31,966 0.6 39.761* 5/4/99 0 299,750 651,161
Continuation 35,028 0.7 39.747* 7/21/98 0 264,098 562,431
A. J. P. Belda Annual 29,000 0.6 36.719 1/14/04 0 590,309 1,455,603
Continuation 8,172 0.2 38.875* 1/23/01 0 109,292 248,342
Continuation 8,976 0.2 38.523* 1/22/00 0 96,827 214,297
Continuation 8,606 0.2 38.625 5/4/99 0 78,394 170,299
R. L. Fischer Annual 36,400 0.7 36.719 1/14/04 0 740,940 1,827,032
Continuation 34,998 0.7 37.550* 1/15/03 0 631,253 1,513,636
Continuation 30,152 0.6 40.632* 1/15/03 0 588,484 1,411,083
Continuation 3,398 0.1 41.656 1/15/03 0 67,991 163,031
Continuation 13,466 0.3 40.867* 1/20/02 0 226,304 528,244
Continuation 8,846 0.2 42.063 1/20/02 0 153,013 357,166
Continuation 4,082 0.1 38.438 1/23/01 0 53,979 122,655
Continuation 6,676 0.1 39.765* 1/23/01 0 91,329 207,524
Continuation 8,054 0.2 42.747* 1/23/01 0 118,442 269,134
Continuation 11,794 0.2 39.711* 1/22/00 0 131,149 290,259
Continuation 11,366 0.2 42.484* 1/22/00 0 135,216 299,259
Continuation 2,114 0.0 38.438 5/4/99 0 19,164 41,630
Continuation 5,478 0.1 42.137* 5/4/99 0 54,438 118,257
Continuation 5,566 0.1 43.375 5/4/99 0 56,937 123,687
Continuation 200 0.0 38.438 7/21/98 0 1,458 3,106
Continuation 9,716 0.2 41.390* 7/21/98 0 76,283 162,455
Continuation 190 0.0 42.813 7/21/98 0 1,543 3,286
Continuation 2,862 0.1 40.642* 7/9/97 0 15,282 31,719
Continuation 1,884 0.0 41.656 7/9/97 0 10,311 21,401
12
R. R. Hoffman Annual 36,400 0.7 36.719 1/14/04 0 740,940 1,827,032
Continuation 23,910 0.5 38.246* 1/15/03 0 439,254 1,053,256
Continuation 10,440 0.2 39.698* 1/15/03 0 199,076 477,351
Continuation 22,864 0.5 41.525* 1/15/03 0 456,050 1,093,529
Continuation 10,012 0.2 42.883* 1/15/03 0 206,232 494,509
Continuation 16,580 0.3 41.040* 1/20/02 0 279,816 653,153
Continuation 10,206 0.2 40.335* 1/23/01 0 141,621 321,802
Continuation 6,118 0.1 42.618* 1/23/01 0 89,700 203,824
Continuation 6,282 0.1 39.313 1/22/00 0 69,156 153,055
Continuation 11,190 0.2 43.532* 1/22/00 0 136,406 301,893
Continuation 10,884 0.2 43.074* 5/4/99 0 110,565 240,185
Continuation 5,768 0.1 39.577* 7/21/98 0 43,303 92,218
Continuation 9,646 0.2 43.351* 7/21/98 0 79,322 168,926
Continuation 5,278 0.1 39.750* 7/9/97 0 27,564 57,211
Continuation 6,794 0.1 41.841* 7/9/97 0 37,347 77,518
Continuation 4,438 0.1 43.063 7/9/97 0 25,109 52,115
J. H. M. Hommen Annual 29,000 0.6 36.719 1/14/04 0 590,309 1,455,603
Continuation 27,950 0.6 37.273* 1/15/03 0 500,411 1,199,898
Continuation 4,080 0.1 39.954* 1/15/03 0 78,302 187,754
Continuation 22,386 0.4 41.477* 1/15/03 0 445,999 1,069,429
Continuation 10,470 0.2 41.672* 1/20/02 0 179,420 418,807
Continuation 3,920 0.1 39.631* 1/23/01 0 53,445 121,443
Continuation 1,582 0.0 41.250 1/23/01 0 22,450 51,013
Continuation 5,328 0.1 40.827* 1/22/00 0 60,912 134,811
Continuation 350 0.0 41.438 1/22/00 0 4,061 8,988
Continuation 4,232 0.1 41.498* 5/4/99 0 41,418 89,974
Continuation 3,400 0.1 40.068* 7/21/98 0 25,842 55,033
Continuation 526 0.0 41.507* 7/21/98 0 4,141 8,820
Continuation 4,882 0.1 40.209* 7/9/97 0 25,790 53,530
<FN>
(1) Annual options become exercisable one year after
grant, and continuation options become exercisable after six
months. For all options, optionees may use shares they own
to pay the exercise price and may have shares withheld for
taxes.
(2) The numbers of shares shown and exercise prices have
been adjusted to reflect the February 1995 two-for-one split
of Alcoa common stock.
(3) Data on continuation options reflect
consolidation of certain individual grants into groupings
(marked by an *) based on common expiration date and a
spread of grant prices not exceeding 3% of the lowest price
for that option grouping. Individual continuation grants
totaled 16 for Mr. O'Neill; 5 for Mr. Belda; 40 for
Mr. Fischer; 43 for Mr. Hoffman; and 34 for Mr. Hommen.
(4) The dollar amounts in the last two columns are
the result of calculations at the 5% and 10% compound annual
rates set by the SEC and are not intended to forecast future
appreciation of Alcoa's stock. The potential future Alcoa
stock prices per share are keyed to the 1994 annual grant.
The company did not use an alternative formula for valuation
at grant because it is not aware of any formula which will
determine with reasonable accuracy a present value based on
unknown future factors. The potential realizable values
shown in the table represent future opportunity and have not
been reduced to present value in 1994 dollars. In the
opinion of the Compensation Committee, inclusion of full
potential values for continuation options, as required by
the SEC, greatly overstates the value this feature adds to
Alcoa's stock option program.
</TABLE>
13
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
and FY-End Option Values
Number of Securi-
ties Underlying
Unexercised Value of Unexercised
Shares Options at Fis- In-the-Money Options
Acquired on Value cal Year-end (#)(1) at Fiscal Year-End ($)
------------------- ----------------------
Exercise Realized Exer- Unexer- Exer- Unexer-
Name (#) (1) (2) ($) (3) cisable cisable cisable cisable
---- ----------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
P. H. O'Neill 326,992 $1,436,508 458,200 125,200 $4,623,667 $825,538
A. J. P. Belda 42,368 644,278 75,090 29,000 746,449 191,219
R. L. Fischer 168,000 543,724 1,674 140,210 71,668 430,708
R. R. Hoffman 168,596 612,534 0 139,604 0 354,961
J. H. M. Hommen 102,476 655,555 0 90,156 0 329,588
<FN>
(1) Share numbers have been adjusted to reflect the two-
for-one split of Alcoa common stock that occurred in
February 1995.
(2) The net number of shares issued to these five
officers was 60,492. The table shows the gross shares
underlying option exercises, as required by SEC rules.
However, most of the shares were not issued, since in
essentially all exercises by these officers, shares were
used to pay the exercise price and shares were withheld
for taxes.
(3) Values were realized in shares and most of these
shares (all for Mr. O'Neill) still are owned by the
officers.
</TABLE>
Retirement plans
The company's retirement plans cover a majority of its
salaried employees on a non-contributory basis. The plans,
which include both tax-qualified plans and non tax-qualified
excess plans, provide the following annual benefits at
executive remunerations levels.
<TABLE>
<CAPTION>
Pension Plan Table
Years of Service
------------------------------------------------
Remuneration 15 20 25 30 35 40
------------- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 21,210 $ 28,280 $ 35,350 $ 42,420 $ 49,850 $ 58,000
150,000 31,730 42,310 52,880 63,460 74,040 84,610
300,000 57,450 76,600 95,750 114,900 129,650 145,120
500,000 94,940 126,580 158,230 189,870 214,180 239,200
700,000 131,910 175,880 219,850 263,820 297,550 332,000
900,000 167,480 223,310 279,140 334,970 377,760 421,280
1,100,000 203,820 271,760 339,700 407,640 459,700 512,480
1,300,000 239,650 319,530 399,410 479,300 540,490 602,400
1,500,000 274,970 366,620 458,280 549,930 620,130 691,040
</TABLE>
The amount of pension is based upon the employee's average
compensation for the highest five years in the last ten years
of service. For the executive level, covered compensation
includes base salary and 50% of annual cash bonus. Data
shown in the table reflect salary at target plus bonus at
target. Payments are made as a straight life annuity,
reduced by 5% where a surviving spouse pension is taken. The
table shows benefits at age 65, before applicable reductions
including the offset which recognizes a portion of the
company's cost for social security benefits. At March 1,
1995, pension service was as follows: Mr. Belda, 26 years;
Mr. Fischer, 29 years; Mr. Hoffman, 40 years; Mr. Hommen, 24
years; and Mr. O'Neill, 18 years, reflecting an employment
contract which provides somewhat more than double credits for
his years with the company, with the resulting pension offset
by pension payments from his previous employer.
Shareholder return
The following graph illustrates the performance of Alcoa
common stock over a five-year period compared to the
performance of the S & P 500 Index and a peer group index,
all with dividends reinvested in additional shares on the
dates paid. The peer group index (market capitalization
weighted) consists of Alcan Aluminium Limited and Reynolds
Metals Company. The peer group index is being used rather
than the S & P Aluminum Industry Index, which includes Alcoa
as well as Alcan and Reynolds, because Alcoa's heavy market
capitalization weighting would distort a comparison to the
full index.
<TABLE>
<CAPTION>
Comparison of five-year cumulative total return *
Measurement Period Alcoa S&P 500 Index Peer Group Index
(Fiscal Year Covered)
<S> <C> <C> <C>
Measurement Pt 12/31/89 $100.00 $100.00 $100.00
FYE 12/31/90 $80.72 $96.89 $97.51
FYE 12/31/91 $92.62 $126.42 $101.07
FYE 12/31/92 $105.42 $136.05 $95.23
FYE 12/31/93 $104.45 $149.76 $100.29
FYE 12/31/94 $133.08 $151.74 $125.11
<FN>
* Assumes the investment of $100 on December 31, 1989 and
the reinvestment of all dividends.
</TABLE>
14
Compensation Committee report on executive compensation
The company's Compensation Committee is composed solely of
independent, non employee directors.
The company's compensation policy, as developed by the
Committee, is to provide compensation and benefit programs
from a total compensation perspective which enables Alcoa to
hire, retain and motivate high-performing employees
worldwide. Total compensation includes salary, annual cash
incentives, long term incentives and employee benefits.
Guiding principles include pay for individual and group
performance, competitive total compensation compared to
leading industrial companies and, particularly for
executives, total compensation which is highly leveraged
based on business performance -- both financial and non-
financial.
The company engages executive compensation consulting firms
to provide comparative market compensation data and to assist
in analysis and interpretation of comparative practices. The
comparison groups surveyed for both total cash compensation
and long term incentives include a cross section of over 20
leading manufacturing companies -- a select sample of well-
managed companies with whom Alcoa competes for talent. These
companies are among the largest and most highly regarded
corporations in a broad range of industries and serve as a
proxy for the market at large. Similar approaches are used
to compare position size within these companies, which
facilitates compensation comparisons.
Since 1987 the Committee has shifted executive compensation
away from higher fixed salaries and toward more at-risk short
term and long term performance-based incentives. Stock-based
incentives are an important element, helping to assure that
executives are focused on increasing shareholder value.
Cash Compensation -- Targets for annual cash compensation
(salary and cash incentives) are set slightly above the
median for the comparison group of high-performing industrial
companies. Payouts at target provide competitive levels of
total cash compensation when predetermined performance
measures of excellence are achieved. For senior management,
the Committee has moved to more leverage based on
performance, with the base salary structure slightly below
the median and annual cash incentive targets above the median
for the comparison group.
Annual cash incentive payouts for executive officers are
based one-half on an approved corporate financial performance
standard which is consolidated return on equity (ROE) and one-
half on the achievement of business plan goals for the year.
These may be financial goals and/or non-financial
measurements. Examples of such goals include electrical
efficiency per pound of aluminum produced, reduced cycle
time, inventory reduction, product quality improvements and
safety performance. The Committee believes that if the
company focuses on achieving excellence in those areas within
its control as measured by the proper non-financial
indicators, long term growth in shareholder value will
result. Target awards, established as a percentage of base
salary, vary by position level. Adjustments to target awards
and special award flexibility may be made by the Committee in
its discretion to reflect individual performance. To provide
further congruency throughout the company, cash incentive
programs were revised in 1992 so that similar performance
measures apply both to executives and, under the performance
pay plan, to most other U.S. employees. The measures for
employees in business units for the portion of their awards
based on business plan goals are the goals of their
individual business unit. For most executive officers, the
aggregate performance against these goals for all business
units is the measure that determines the payout for this half
of their annual cash incentive target. The maximum payout
before adjustment for individual performance is 200% of
target on the business unit portion, while the corporate
portion is uncapped.
Long Term Incentives -- Long term incentives are stock-
based, consistent with the Committee's goal of encouraging
stock ownership and closely aligning management's interests
with those of shareholders.
Annual long term awards are granted in the form of stock
options. They are designed to provide a competitive award
opportunity versus the comparison group of leading industrial
companies; stock performance then determines the amount
earned. The Committee has established guidelines on the
target number of shares to be covered by annual option grants
for executive officer and other management positions. The
guidelines reflect the Committee's assessment of levels of
responsibility of the company's manager and officer positions
as well as the relationship to the size of prior grants and
comparative award data. Individual annual grants are
ordinarily made at the guideline amount. From 1988 through
1992, one-half of the award for senior managers was granted
as performance shares instead of stock options.
New performance share awards were discontinued beginning in
January 1993, and target stock option awards for most
executive officer positions were increased. This change was
instituted because the Committee believes that stock options
are a preferable means for the company to deliver long term
incentive opportunity to key employees. Performance share
award goals, based on attainment of internal financial
measures, do not directly track increased market value of
Alcoa stock. Stock options, on the other hand, more closely
align the interests of management and shareholders.
The continuation (reload) feature of the stock option
program was added in 1989 to provide further incentive for
increased stock ownership, not only for senior management
15
but for about 800 other optionees. This feature encourages
early exercise of options and retention of the Alcoa shares.
To obtain continuation options, employees must already own
shares which are used to pay the exercise price. Further,
one-half of the "appreciation" shares received upon exercise,
after any share withholding for taxes, are restricted against
sale or pledge during the employee's Alcoa career. These
shares may be used for further option exercises. Share
ownership by optionees, including executive officers, has
increased significantly in the last three years through use
of the reload feature.
Report on 1994 compensation of executive officers including
the named officers --Salary and annual incentive dollar
targets were increased from 1993, reflecting comparable
increases in the comparison survey data. Cash payouts for
executive officers under the annual incentive plan based on
1994 performance averaged about 86% of target awards.
Business unit performance against the respective goals, which
represents one-half of the award opportunity for most
executive officers, was well above target. Worldwide ROE
performance did not achieve the threshold so there was no
payout for any employee on the 50% portion which is based on
overall corporate performance.
Stock option awards are granted annually. The Committee
has established guideline option awards by job grade based on
competitive data. The January 1994 stock option grants for
executive officers were made, in accordance with the
established guidelines, at the full levels for these
positions.
A large number of optionees exercised stock options in
1994. Most of the exercises by executive officers involved
the grant of continuation options. Consistent with the
intent of this feature, the exercises resulted in a large
percentage increase in Alcoa share ownership by executive
officers.
There were no performance share payouts in January 1995
from prior years' awards since ROE performance over the 1989
through 1994 measurement period was below the minimum
threshold of 10% required for payout.
Report on 1994 CEO Compensation--The chief executive
officer's compensation is established based on the philosophy
and policies enunciated above for all executive officers.
This includes cash compensation (base salary and annual cash
incentive payouts) and long term incentives (stock option
awards). The Compensation Committee meets annually without
the CEO and evaluates his performance in relation to
financial and non-financial goals previously established. A
consensus is reached and commensurate compensation
adjustments are made. This process is reported in full to
the entire Board for their consideration and concurrence.
This meeting is an executive session of non-employee
directors only.
More specifically, Mr. O'Neill's base salary in 1994 was
the same as in 1993. By design, Mr. O'Neill's salary remains
below the median for the comparison group.
In January 1995, Mr. O'Neill was awarded a bonus of
$750,000, which was 107% of his target incentive award for
1994. The bonus amount was based in part on aggregate
business unit results compared with plan goals, and in part
in recognition by the Committee of Mr. O'Neill's outstanding
leadership during 1994.
Mr. O'Neill's 1994 annual stock option award grant was made
at the established guideline number of shares for his
position.
Summary--The Committee believes the company's compensation
programs help to maintain the company's leadership position
among global industrial companies.
Compensation Committee
John P. Diesel, Chairman
Kenneth W. Dam
John P. Mulroney
Sir Arvi Parbo
Franklin A. Thomas
16
Alcoa Board proposal to approve amendments to the Long Term
Stock Incentive Plan
The Long Term Stock Incentive Plan (formerly the Employees'
Stock Option Plan) has been in effect since 1965, and was last
approved by shareholders in 1992. The Plan is designed to
provide long term incentives based on Alcoa common stock to
key employees who may contribute to the company's continued
growth and profitability. These incentives encourage
participating employees to manage the company's business to
promote its long term growth and success, as measured by
Alcoa's stock price, and thus create an identity of interest
with Alcoa's shareholders.
In January 1995, subject to shareholder approval, Alcoa's
Board of Directors adopted amendments to the Plan. The
principal amendment is to provide additional shares for the
ongoing operation of the Plan. Other changes: establish a
limit on the number of shares for which options may be granted
to any individual (see "Limitation on Awards" below), and
clarify one of the defined terms ("fair market value") in the
Plan (see "Option Price" below).
In order to increase the incentive effect of the Plan and to
remain competitive in the marketplace for managerial talent,
the Compensation Committee of the Board has increased the size
of awards made to eligible employees over the past several
years. In addition, optionees have been encouraged to
exercise their options and acquire Alcoa common stock through
the use of the reload feature of the Plan (see "Reload
Options" below). As a result, the number of shares used for
purposes of the Plan has accelerated, and shares available for
future grants under the Plan at January 1, 1995 were less than
the number required for a full year's operation of the Plan.
Therefore, the Board adopted, and recommends that shareholders
approve, amendments to the Plan which authorize the issuance
of an additional 8.8 million shares under the Plan
(approximately 4.9% of all shares currently outstanding) and
make the two other changes to the Plan referred to above.
The major features of the Plan, as amended, are summarized
below. All share numbers and exercise prices in this section
have been adjusted to reflect the February 1995 two-for-one
split of the company's common stock.
Purpose--The purposes of the Plan are to motivate key
employees, to permit them to share in Alcoa's long term growth
and financial success by giving them an increased incentive to
promote its well-being, and to link the interest of key
employees to the long term interests of Alcoa's shareholders.
Administration--The Plan is administered by a committee of
directors appointed by Alcoa's Board. Committee members must
not have been eligible to participate in the Plan for at least
twelve months. The committee selects employees who are
eligible to be granted awards under the Plan. The Plan
permits the committee to delegate certain authority to senior
officers in limited instances.
Term--The Plan has no fixed expiration date; however, no new
awards may be granted under the Plan after January 1, 2002.
Types of Awards--Awards under the Plan may be in the form of
stock options or performance shares. Since January 1993, only
stock option awards have been granted under the Plan. Stock
option awards entitle an optionee to purchase shares of the
company's common stock at a fixed price during the option
term.
Participation--Participation in the Plan is limited to
employees who play a key role in the management, operation,
growth or protection of a part or all of the business of the
company and who are selected from time to time by the
committee. Approximately 860 current and former employees
hold stock options.
1995 Awards--In January 1995, the committee awarded stock
options to 694 employees. If shareholders do not approve the
amendments to the Plan, those options will be null and void.
The January 1995 options covered 2,934,000 shares at an
exercise price of $44.438 per share. Awards to the named
executive officers were as follows: Mr. O'Neill, 159,400
shares; Mr. Belda, 65,000 shares; Mr. Fischer, 52,800 shares;
Mr. Hoffman, 52,800 shares; Mr. Hommen, 41,800 shares; and all
executive officers as a group (13 individuals), 634,000
shares.
Limitation on Awards--The Plan was amended in 1995 to provide
a limit of one million shares that may be granted as stock
options in a calendar year to any individual optionee.
Option Price--The option price is determined under a formula
set by the committee. This price cannot be less than 100% of
the fair market value of Alcoa stock on the grant date, except
for earnout options delivered upon earning of performance
shares. The Plan also permits the committee to use 100% of an
average market value, as determined by the committee, over a
period of up to 10 business days instead of the value on the
grant date. The committee has authorized the pricing of new
reload options using the alternate method in certain
situations to facilitate administration of the Plan. No
material increase or decrease in benefit to optionees is
intended or expected by this action.
Duration of Options--The option period is limited to 10 years
except for earnout options. If the optionee dies during
employment or retires, existing options must be exercised
within five years. Shorter periods, generally three months,
apply following most other terminations of employment. The
Plan authorizes the committee to establish other rules
regarding the treatment of options upon termination of
employment by reason of death, disability, retirement or other
approved reason. The committee may shorten the period of any
option if the optionee takes any action which is
17
not in Alcoa's best interests. Options are nontransferable
except upon death.
Exercise--The option price must be paid in full upon exercise.
The optionee may pay the price in cash, by surrendering shares
of Alcoa common stock whose value equals the option price, or
by a combination of cash and shares.
Reload Options--Reload options are designed to increase
ownership of Alcoa shares by encouraging early exercise of
options and retention of the shares. An employee exercising
an option using already-owned shares to pay the exercise price
may elect reload treatment if the spread is at least $2.50 per
share. With this election a new reload option is granted at
the market price at the time of exercise and with the same
expiration date as the option being exercised. The reload
option covers the number of shares exercised less the net
number of "profit" shares delivered to the optionee after
withholding for taxes. Half of the profit shares are
restricted--they are not transferable for the optionee's
remaining career with Alcoa. A reload stock option may not be
exercised for six months. Reloads are not available for
earnout options.
Employment Obligation--The optionee must agree to remain in
employment for at least one year, or until retirement at least
six months after the granting of the option. An option is not
exercisable unless this obligation is met. This obligation
does not apply to reload options or earnout options.
Performance Shares/Earnout Options--The Plan provides for
awards of performance shares; however, the granting of new
performance share awards was discontinued in January 1993.
The committee has no current plans to offer performance share
awards in the future.
Performance shares were notional shares of Alcoa common
stock. They were contingently granted and were earned at the
end of a performance cycle only if and to the extent that
Alcoa and its subsidiaries achieved certain performance goals
established by the committee. The committee determined the
actual number of performance shares, from 0% to 200% of the
number contingently awarded, which had been earned based on
corporate performance against goals.
Performance share awards, to the extent earned at the end of
a performance cycle, were distributed in the form of options
for Alcoa stock with an option price of $1 per share (earnout
options) and an aggregate discount from fair market value of
the stock equal to the value of the earned performance shares.
Earnout options are immediately exercisable and generally
expire five years after retirement. Cash dividend equivalents
are paid on these earnout options, which have no reload
feature.
Plan Amendments--The Board may amend, modify, suspend or
terminate the Plan but no such action (1) shall impair,
without the optionee's consent, any outstanding option or
(2) shall be taken without shareholder approval under certain
circumstances. Shareholder approval is required under the
Plan for any such action that would materially increase the
benefits accruing to participants, materially increase the
maximum number of shares which may be issued under the Plan,
or materially modify the Plan's eligibility requirements.
Shares Available--On January 1, 1995, there were 9,659,040
shares of Alcoa common stock reserved for issuance under the
Plan. Options granted in 1994 and in prior years covered
7,900,090 of those shares. Thus, 1,758,950 shares were then
available for the future granting of stock option awards. In
addition, except as otherwise specified by the committee,
shares used upon option exercise to pay withholding taxes
and/or shares delivered in payment of the option exercise
price also will be available for issuance under the Plan.
Future grants under the Plan also may cover shares which cease
to be covered by awards by reason of total or partial
expiration, termination or voluntary surrender of an option or
failure to earn an award. The Plan also provides for
adjustment of awards and the share reserve in the event of
stock splits and other changes in stock.
The amendments add 8.8 million shares to the shares of
company common stock that may be issued under the Plan. This
is approximately 4.9% of the outstanding shares of company
stock.
Recent Share Price--On March 7, 1995 (the record date for the
annual meeting), the closing market price for Alcoa common
stock was $37.25 per share.
Tax Consequences--Upon exercise of a stock option, the company
is entitled to a tax deduction and the optionee realizes
ordinary income. The amount of such deduction and income is
equal to the difference between the option price and the fair
market value of the shares on the date of exercise. The
committee may permit the use of Alcoa shares to pay
withholding taxes.
Requirement for approval
For the amendments to the Plan to be approved, a majority of
the votes cast by shareholders must be voted for approval.
The Alcoa Board of Directors recommends that the
shareholders vote FOR approval of the amendments to the
company's Long Term Stock Incentive Plan (item no. 2 on the
proxy card).
18
Shareholder proposal
Ms. Frances Phillips of 822 Wilfred Avenue, Dayton, Ohio
45410, custodian for 40 shares of Alcoa common stock held by
Bridget Phillips, has written that she intends to introduce
the following resolution at the meeting:
Whereas, the Company is dependent on people as employees
and as customers to conduct business.
Whereas, the decreased availability of workers may have an
inflationary impact and affect the Company's
competitiveness.
Whereas, the decreased number of potential customers may
further impact the Company's profitability.
Whereas, the performance of abortion ends the life of
potential employees and customers.
Whereas, employee morale and shareholder value may be
negatively affected by charitable contributions to
abortion performing organizations.
Therefore, it is recommended that this corporation refrain
from giving charitable contributions to organizations that
perform abortion.
Statement of the Board in response to the proposal
The Alcoa Board of Directors recommends a vote AGAINST this
proposal.
This proposal is directed to the issue of abortion, which
is totally unrelated to the business of the company. Given
the diversity of views and beliefs on this controversial
topic, the Board believes that it would be inappropriate for
the company to take or appear to take a position on the
abortion issue or endorse any organization's position on this
matter.
As a matter of policy, the company does not contribute to
any single-issue organization whose purpose is to advocate for
or against abortion. The programs of broader-based
organizations are and will continue to be evaluated on a case
by case basis.
Requirement for approval
For this proposal to be approved, a majority of the votes
cast by shareholders must be voted for approval.
The Board believes that the action being requested by
this shareholder proposal is inappropriate. Thus, the Board
recommends that shareholders vote AGAINST approval of this
proposal (item no. 3 on the proxy card).
Other information
Relationship with independent public accountants
Coopers & Lybrand L. L. P. (Coopers & Lybrand) has been the
independent public accounting firm auditing the financial
statements of Alcoa and most of its subsidiaries since 1950.
In accordance with standing policy, the Coopers & Lybrand
personnel who work on the audit are changed periodically.
In connection with the audit function, Coopers & Lybrand in
1994 also reviewed the company's periodic filings with the
Securities and Exchange Commission, prepared or reviewed
special financial or audit reports to lenders and others,
including governmental agencies, and examined the effects of
various technical accounting issues. Coopers & Lybrand also
conducted audits and reviews in connection with several
acquisitions made by the company.
In addition, Coopers & Lybrand provides other professional
services to the company and its subsidiaries. A substantial
portion of these other services involves assistance in tax
planning and preparation of tax returns for expatriate
employees, executives and various foreign locations, and
consultation on accounting and information systems.
The Audit Committee of Alcoa's Board reviews summaries of
the actual services, both audit and non-audit, rendered by
Coopers & Lybrand and the related fees.
Upon recommendation of the Audit Committee, the Board has
reappointed Coopers & Lybrand to audit the 1995 financial
statements. As in past years, representatives of Coopers &
Lybrand will be present at the annual meeting of
shareholders. They will be given the opportunity to make a
statement if they desire to do so, and they will be available
to respond to appropriate questions.
1996 meeting--shareholder proposals
Alcoa's 1996 annual meeting of shareholders will be on
May 10, 1996. To enable the Board to adequately analyze and
respond to shareholder proposals, any shareholder proposal to
be presented at that meeting must be received by the
secretary of the company by November 14, 1995 in order to be
timely received for inclusion in Alcoa's proxy statement for
that meeting.
Other matters
The Board of Directors does not know of any other matters
that are to be presented for action at the May 12, 1995
meeting. Should any other matter come before the meeting,
the accompanying proxy will be voted with respect to the
matter in accordance with the best judgment of the persons
voting the proxy.
Barbara S. Jeremiah
Secretary
19
Alcoa
425 Sixth Avenue
Pittsburgh, Pennsylvania 15219-1850
Printed in U.S.A. 9503
Form A07-15647
20
Graphics Appendix List
Page Where
Graphic Appears Description of Graphic or Cross-Reference
page 5 Photograph of Sir Arvi Parbo, Nominee for
Director
page 5 Photograph of Henry B. Schacht, Nominee
for Director
page 5 Photograph of Forrest N. Shumway, Nominee
for Director
page 5 Photograph of Franklin A. Thomas, Nominee
for Director
page 6 Photograph of Kenneth W. Dam, Continuing
Director
page 6 Photograph of John P. Diesel, Continuing
Director
page 6 Photograph of Judith M. Gueron,
Continuning Director
page 6 Photograph of Paul H. O'Neill, Continuing
Director
page 7 Photograph of Sir Ronald Hampel, Nominee
for Director
page 7 Photograph of Joseph T. Gorman, Continuing
Director
page 7 Photograph of John P. Mulroney, Continuing
Director
page 7 Photograph of Marina v.N. Whitman,
Continuing Director
page 14 Comparison of five-year cumulative total
return
To Fellow Alcoa Shareholders:
Here is your 1995 Alcoa proxy card. Please read both sides of
the card, and mark, sign and date it. Then detach and return
it promptly using the enclosed envelope. We urge you to vote
your shares.
You are invited to attend the annual meeting of shareholders
on Friday, May 12, at 9:30 a.m. in the Allegheny Ballroom of
the Vista International Hotel in Pittsburgh, Pennsylvania.
If you plan to attend the meeting, please check the
appropriate box on the proxy card. Then detach and retain
the admission ticket which is required for admission to the
meeting.
Thank you in advance for voting.
Barbara S. Jeremiah
Secretary
Your continuing interest in Alcoa is appreciated and there
is space on the proxy card to the right for your comments.
Shareholder comments about any aspect of company business
are welcome. Although such notes are not answered on an
individual basis, they do assist Alcoa management in
determining and responding to the needs of shareholders.
Aluminum Company of America
425 Sixth Avenue, Alcoa Building
Pittsburgh, PA 15219-1850
The undersigned shareholder hereby authorizes Howard W.
Burdett, Earnest J. Edwards and William J. O'Rourke, or
any one or more of them, with power of substitution to
each, to represent the undersigned at the annual meeting
of shareholders of Aluminum Company of America scheduled
for Friday, May 12, 1995, and any adjournment of the
meeting, and to vote the shares of stock which the
undersigned would be entitled to vote if attending the
meeting, upon the matters referred to on the reverse side
of this card and in accordance with the best judgment of
such persons upon other matters as may properly come
before the meeting or any adjournment of the meeting.
As described more fully in the proxy statement, this card
votes or provides voting instructions for shares of
common stock held under the same registration in any one
or more of the following manners: as a shareholder of
record, in the Alcoa Dividend Reinvestment and Stock
Purchase Plan and in Alcoa's employee savings plan.
THIS PROXY IS SOLICITED ON BEHALF OF THE ALCOA BOARD OF
DIRECTORS.
Please mark, sign, date and return this proxy, using the
enclosed envelope.
(continued on the other side)
Comments:
------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
(continued from the other side)
This proxy will be voted as directed below. Where you do not
give voting instructions, this proxy will be voted for the
nominees listed, for Proposal 2 and against Proposal 3.
1. Election of Directors
Nominees to serve a three-year term:
Sir Arvi Parbo Forrest N. Shumway
Henry B. Schacht Franklin A. Thomas
Nominee to serve a one-year term:
Sir Ronald Hampel
/ / VOTE FOR all nominees listed above, except
vote withheld from the following nominee(s), if any:
---------------------
---------------------
/ / VOTE WITHHELD from all nominees
2. Approve amendments to the Long Term Stock Incentive
Plan
/ / VOTE FOR / / VOTE AGAINST / / ABSTAIN
3. Shareholder proposal regarding certain charitable donations
(Alcoa's Board recommends a VOTE AGAINST this proposal)
/ / VOTE FOR / / VOTE AGAINST / / ABSTAIN
/ / I plan to attend the May 12, 1995 annual meeting in
Pittsburgh.
The signature(s) to the right should correspond to the
name(s) printed on this card. Each joint owner should sign.
Please indicate title if you are signing as executor,
administrator, trustee, custodian, guardian or corporate
officer.
Signature(s) of shareholder
Dated , 1995.
APPENDIX
LONG TERM STOCK INCENTIVE PLAN
OF
ALUMINUM COMPANY OF AMERICA
(Revised January 1, 1992)
ARTICLE I
DEFINITIONS
The following words as used herein shall have the following
meanings unless the context otherwise requires.
PLAN means the Long Term Stock Incentive Plan of Aluminum
Company of America, as amended from time to time, which is a
continuation of the Employees' Stock Option Plan.
COMPANY means Aluminum Company of America.
SUBSIDIARY means any corporation in which the Company owns,
directly or indirectly, stock possessing 50% or more of the
total combined voting power of all classes of stock in such
other corporation, and any corporation, partnership, joint
venture or other business entity as to which the company
possesses a direct or indirect ownership interest where
either (a) such interest equals 50% or more or (b) the
Company directly or indirectly has power to exercise
management control.
BOARD means the Board of Directors of the Company and
includes any duly authorized Committee when acting in lieu
thereof.
EMPLOYEE means any employee of the Company or a Subsidiary.
AWARD means any stock option or performance share award
granted or delivered under the Plan.
PARTICIPANT means any person who has been granted an Award
under the Plan.
OPTIONEE means any person who has been granted a stock option
under the Plan.
COMMITTEE means the Committee established under Section 1 of
Article V to administer the Plan.
COMPANY STOCK means common stock of the Company and such
other stock and securities, described in Section 2 of Article
IV, as shall be substituted therefor.
FAIR MARKET VALUE means, with respect to Company Stock, the
mean of the high and low sales prices of such stock (1) as
reported on the composite tape (or other appropriate
reporting vehicle as determined by the Committee) for a
specified date or, if no such report of such prices shall be
available for such date, as reported for the New York Stock
Exchange for such date or (2) if the New York Stock Exchange
is closed on such date, the mean of the high and low sales
prices of such stock
as reported in accordance with (1) above for the next
preceding day on which such stock was traded on the New York
Stock Exchange.
OPTION PERIOD means the period of time provided pursuant to
Section 4 of Article III or Section 5 of Article VI within
which a stock option may be exercised, without regard to the
limitations on exercise imposed pursuant to Section 5 of
Article III.
PERFORMANCE SHARE means a phantom share, equivalent to one
share of Company Stock, contingently awarded under
Article VI.
ARTICLE II
PARTICIPATION
SECTION 1. Purpose. The purposes of the Plan are to
motivate key employees, to permit them to share in the long-
term growth and financial success of the Company and its
Subsidiaries while giving them an increased incentive to
promote the well-being of those companies, and to link the
interests of key employees to the long-term interests of the
Company's shareholders.
SECTION 2. Eligibility. Employees who, in the sole opinion
of the Committee, play a key role in the management,
operation, growth or protection of some part or all of the
business of the Company and its Subsidiaries (including
officers and employees who are members of the Board), shall
be eligible to be granted Awards under the Plan. The
Committee shall select from time to time the Employees to
whom Awards shall be granted. No Employee shall have any
right whatsoever to receive any Award unless selected
therefor by the Committee.
SECTION 3. Limitation on Optioned Shares. In no event may
any stock option be granted to any Employee who owns stock
possessing more than five percent of the total combined
voting power or value of all classes of stock of the Company.
SECTION 4. No Employment Rights. The Plan shall not be
construed as conferring any rights upon any person for a
continuation of employment, nor shall it interfere with the
rights of the Company or any Subsidiary to terminate the
employment of any person and/or take any personnel action
affecting such person without regard to the effect which such
action might have upon such person as a Participant or
prospective Participant.
ARTICLE III
TERMS OF OPTIONS
SECTION 1. General. The Committee from time to time shall
select the Employees to whom stock options shall be granted,
the type of stock options and the number of shares of Company
Stock to be included in each such option. Each option
granted under the Plan shall be subject to the terms and
conditions required by this Article III, and such other terms
and conditions not inconsistent therewith as the Committee
may deem appropriate in each case.
SECTION 2. Option Price. The price at which each share of
Company Stock covered by an option may be purchased shall be
determined by the Committee. In no event shall such price be
less than one hundred percent of the Fair Market Value of
Company Stock either on the date the option is granted or
over a period of up to ten business days as specified by the
Committee, except as otherwise provided in Article VI. The
option price of each share purchased pursuant to an option
shall be paid in full at the time of such purchase. The
purchase price of an option shall be paid in cash, provided
however that, to the extent permitted by and subject to any
limitations contained in any stock option agreement or in
rules adopted by the Committee, such option purchase price
may be paid by the delivery to the Company of shares of
Company Stock having an aggregate Fair Market Value on the
date of exercise which, together with any cash payment by the
Optionee, equals or exceeds such option purchase price. The
Committee shall determine whether and if so the extent to
which actual delivery of share certificates to the Company
shall be required. The foregoing provisions relating to the
delivery of Company Stock in lieu of payment of cash upon
exercise of an option apply to all outstanding options.
SECTION 3. Types of Options. The Committee shall have the
authority, in its sole discretion, to grant to Employees from
time to time non-qualified stock options and such other types
of options as are permitted by law or the provisions of the
Plan.
SECTION 4. Period for Exercise. The Committee shall
determine the period or periods of time within which the
option may be exercised by the Optionee, in whole or in part,
provided that the Option Period shall not exceed ten years
from the date the option is granted except as otherwise
provided in Article VI.
SECTION 5. Special Limitations. Notwithstanding the Option
Period provided in Section 4 of this Article III, a stock
option (other than a reload stock option) shall not be
exercisable until one year after the date the option is
granted, except as otherwise provided in Section 5 of
Article VI.
SECTION 6. Termination of Employment.
(a) Subject to the provisions of Section 4 and 5 of
this Article III, the Committee shall specify in
administrative rules or otherwise, the rules that shall apply
to stock options (except for options granted as provided in
Article VI) with respect to the exercise of any stock options
upon termination of the Optionee's employment.
(b) Following the Optionee's death, the option may be
exercised by the Optionee's legal representative or
representatives, or by the person or persons entitled to do
so under the Optionee's last will and testament, or, if the
Optionee shall fail to make testamentary disposition of the
option or shall die intestate, by the person or persons
entitled to receive said option under the intestate laws.
(c) The Committee in its sole discretion may shorten
the period of exercise of any such stock option in the event
that the Optionee takes any action which in the judgment of
the Committee is not in the best interests of the Company and
its Subsidiaries.
SECTION 7. Nontransferability. Each stock option shall be
nontransferable by the Optionee except by last will and
testament or the laws of descent and distribution and is
exercisable during the Optionee's lifetime only by the
Optionee or a legal representative. Notwithstanding the
foregoing and the preceding Section 6, at the discretion of
the Committee, some or all Optionees may be permitted to
designate one or more beneficiaries to receive some or all of
their Awards and stock appreciation rights in the event of
death prior to exercise thereof, in which event a permitted
beneficiary or beneficiaries shall then have the right to
exercise or receive payment for each affected Award or stock
appreciation right in accordance with its other terms and
conditions.
SECTION 8. Employment Obligation. In consideration for the
granting of each stock option, except options delivered under
Article VI or under Section 11 of this Article III, the
Optionee shall agree to remain in the employment of the
Company or one or more of its Subsidiaries, at the pleasure
of the Company or such Subsidiary, for a continuous period of
at least one year after the date of grant of such stock
option or until retirement, on a date which is at least six
months after the date of such grant, under any retirement
plan of the Company or a Subsidiary, whichever may be
earlier, at the salary rate in effect on the grant date or at
such changed rate as may be fixed from time to time by the
Company or such Subsidiary. At the discretion of the
Committee, this obligation may be deemed to have been
fulfilled under specified circumstances, such as if the
Optionee enters government service.
SECTION 9. Date Option Granted. For the purposes of the
Plan, a stock option shall be considered as having been
granted on the date on which the Committee authorized the
grant of such stock option, except where the Committee has
designated a later date, in which event such designated date
shall constitute the date of grant of such stock option,
provided, however, that in either case notice of the grant of
the option shall be given to the Employee within a reasonable
time.
SECTION 10. Alternative Settlement Methods. Where local law
may interfere with the normal exercise of an option, the
Committee in its discretion may approve stock appreciation
rights or other alternative methods of settlement for stock
options.
SECTION 11. Reload Stock Options. The Committee shall have
the authority to specify, either at the time of grant of a
stock option or at a later date, that upon exercise of all or
a portion of that stock option (except an option delivered
under Article VI) a reload stock option shall be granted
under specified conditions. A reload stock option may
entitle the Optionee to purchase shares which are covered by
the exercised option or portion thereof at the time of
exercise of such option or portion but are not issued upon
such exercise, at the Fair Market Value on the date of such
exercise. The duration of a reload stock option shall not
extend beyond the expiration date of the option it replaces.
The specific terms and conditions applicable for reload stock
options shall be determined by the Committee and shall be set
forth in rules adopted by the Committee and/or in agreements
or other documentation evidencing reload stock options.
ARTICLE IV
COMPANY STOCK
SECTION 1. Number of Shares. The shares of Company Stock
that may be issued under the Plan, out of authorized but
heretofore unissued Company Stock, or out of Company Stock
held as treasury stock, or partly out of each, shall not
exceed 4.0 million shares plus an additional number of shares
equal to the number of shares which on January 1, 1992 were
reserved for issuance under the Plan as then in effect.
Except as otherwise determined by the Committee, the number
of shares of Company Stock so reserved shall be reduced by
the number of shares issued upon an Option exercise, less (i)
the shares, if any, used to pay withholding taxes and/or (ii)
the shares, if any, delivered by the Optionee in full or
partial payment of the option purchase price. Unless the
Committee otherwise determines, shares not purchased under
any option granted under the Plan which are no longer
available for purchase thereunder by virtue of the total or
partial expiration, termination or voluntary surrender of the
option and which were not issued upon exercise of a related
stock appreciation right and shares referred to in clauses
(i) or (ii) of the preceding sentence shall continue to be
otherwise available for the purposes of the Plan. Payments
for Awards in cash shall reduce the number of shares
available for issuance by such number of shares as has a Fair
Market Value at the time of such payment equal to such cash.
SECTION 2. Adjustments in Stock.
(a) Stock Dividends. If a dividend shall be declared
upon Company Stock payable in shares of said stock, (i) the
number of shares of Company Stock subject to outstanding
Awards and (ii) the number of shares reserved for issuance
pursuant to the Plan shall be adjusted by adding to each such
share the number of shares which would be distributable
thereon if such share had been outstanding on the date fixed
for determining the shareholders entitled to receive such
stock dividend.
(b) Reorganization, Etc. In the event that the
outstanding shares of Company Stock shall be changed into or
exchanged for a different number or kind of shares of stock
or other securities of the Company or of another corporation,
whether through reorganization, recapitalization, stock split-
up, combination of shares, merger or consolidation, or
otherwise, then there shall be substituted for each share of
Company Stock subject to outstanding Awards and for each
share of Company Stock reserved for issuance pursuant to the
Plan, the number and kind of shares of stock or other
securities which would have been substituted therefor if such
share had been outstanding on the date fixed for determining
the shareholders entitled to receive such substituted stock
or other securities.
(c) Other Changes in Stock. In the event there shall
be any change, other than as specified in subsections (a) and
(b) of this Section 2, in the number or kind of outstanding
shares of Company Stock or of any stock or other securities
into which such Company Stock shall be changed or for which
it shall have been exchanged, then and if the Committee shall
at its discretion determine that such change equitably
requires an adjustment in the number or kind of shares
subject to outstanding Awards or which have been reserved for
issuance pursuant to the Plan, such adjustments shall be made
by the Committee and shall be effective and binding for all
purposes of the Plan and each outstanding stock option and
other Award.
(d) General Adjustment Rules. No adjustment or
substitution provided for in this Section 2 shall require the
Company to sell or deliver a fractional share under any stock
option or other Award and the total substitution or
adjustment with respect to each Award shall be handled in the
discretion of the Committee either by deleting any fractional
shares or by appropriate rounding up to the next whole share.
In the case of any such substitution or adjustment, the
option price per share for each stock option shall be
equitably adjusted by the Committee to reflect the greater or
lesser number of shares of stock or other securities into
which the stock subject to the option may have been changed.
ARTICLE V
GENERAL MATTERS
SECTION 1. Administration. The Plan shall be administered
by a Committee of not less than three Directors appointed by
the Board, none of whom shall have been eligible to receive
an Award under the Plan within the twelve months preceding
their appointment.
SECTION 2. Authority of Committee. Subject to the
provisions of the Plan, the Committee shall have full and
final authority to determine the Employees to whom Awards
shall be granted, the type of Awards to be granted, the
number of shares to be included in each Award, and the other
terms and conditions of the Awards. Nothing contained in
this Plan shall be construed to give any Employee the right
to be granted an Award or, if granted, to any terms and
conditions therein except such as may be authorized by the
Committee. The Committee is empowered, in its discretion, to
(i) modify, amend, extend or renew any Award theretofore
granted, subject to the limitations set forth in Article III
and with the proviso that no modification or amendment shall
impair without the Optionees' consent any option theretofore
granted under the Plan, (ii) adopt such rules and regulations
and take such other action as it shall deem necessary or
proper for the administration of the Plan and (iii) delegate
any or all of its authority (including the authority to
select eligible employees and to grant stock options) to one
or more senior officers of the Company, except with respect
to Awards for officers or any performance share awards, and
except in the event that any such delegation would cause this
Plan not to comply with Securities and Exchange Commmission
Rule 16b-3 (or any successor rule). The Committee shall have
full power and authority to construe, interpret and
administer the Plan and the decisions of the Committee shall
be final and binding upon all parties.
SECTION 3. Withholding. The Company or any Subsidiary shall
have the right to deduct from all amounts paid in cash under
this Plan any taxes required by law to be withheld therefrom.
In the case of payments of Awards in the form of Company
Stock, at the Committee's discretion, (a) the Participant may
be required to pay over the amount of any withholding taxes,
(b) the Participant may be permitted to deliver to the
Company the number of shares of Company Stock whose Fair
Market Value is equal to or less than the withholding taxes
due or (c) the Company may retain the number of shares
calculated under (b) above.
SECTION 4. Nonalienation. No Award shall be assignable or
transferable, except by will or the laws of descent and
distribution, and except that in its discretion the Committee
may authorize exercise by or payment to a beneficiary
designated by a Participant. No right or interest of any
Participant in any Award shall be subject to any lien,
obligation or liability.
SECTION 5. General Restriction. Each Award shall be subject
to the requirement that if at any time the Board or the
Committee shall determine in its discretion that the listing,
registration or qualification of shares upon any securities
exchange or under any state or Federal law, rule, regulation
or decision, or the consent or approval of any government
regulatory body, is necessary or desirable as a condition of,
or in connection with, the granting of such Award or the
issue, purchase or delivery of shares or payment thereunder,
such Award may not be exercised in whole or in part and no
payment therefor shall be delivered unless such listing,
registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not
acceptable to the Board or Committee.
SECTION 6. Effective Date and Duration of Plan. The Plan
initially became effective May 1, 1965. The Plan as amended
herein shall become effective January 1, l992. No Awards
shall be granted under the Plan after January 1, 2002
although shares or options thereafter may be delivered in
payment of Performance Shares granted prior thereto.
SECTION 7. Amendments. The Board may from time to time
amend, modify, suspend or terminate the Plan, provided,
however, that no such action shall (a) impair without an
Optionee's consent any option theretofore granted under the
Plan or deprive any Awardee of any shares of Company Stock
which that person may have acquired through or as a result of
the Plan or (b) be made without the approval of the
shareholders of the Company where such change would
materially increase the benefits accruing to participants,
materially increase the maximum number of shares which may be
issued under the Plan, or materially modify the Plan's
eligibility requirements.
SECTION 8. Construction. The Plan shall be interpreted and
administered under the laws of the Commonwealth of
Pennsylvania without application of its rules on conflict of
laws.
ARTICLE VI
PERFORMANCE SHARES
SECTION 1. Authority of Committee. The Committee shall
have sole and complete authority to determine the Employees
who shall be granted Performance Shares and the number of
shares for each "Performance Cycle," and to determine the
duration in years of each Performance Cycle. There may be
more than one Performance Cycle in existence at any one
time, and the duration of Performance Cycles may differ.
SECTION 2. Performance Goals. The Committee shall
establish the objectives for corporate performance (the
"Performance Goals") for each Cycle on the basis of such
criteria and to accomplish such objectives as the Committee
may from time to time select.
SECTION 3. Payment of Performance Shares. The Committee
shall determine the number of Performance Shares, if any, up
to 200% of the number contingently awarded to each
Participant for the Performance Cycle, which have been earned
on the basis of corporate performance of the Company and its
Subsidiaries in relation to the established Performance
Goals. In measuring performance and comparing to Goals the
Committee may make such adjustments as it deems equitable in
recognition of unusual or non-recurring events, changes in
applicable tax laws or accounting principles or other
factors. The Committee shall determine the manner of
payment, which may include (a) cash, (b) shares of Common
Stock or (c) Stock Options with an option price of $1 per
share or more (or the par value per share if higher) and with
an aggregate discount from Fair Market Value on the payment
date not in excess (except for rounding to a whole share) of
the Fair Market Value of the earned Performance Shares for
which payment is being made, in such proportions as the
Committee shall determine. Participants may be offered the
opportunity to defer receipt of payment for earned
Performance Shares under terms established by the Committee.
SECTION 4. Rights During a Cycle. A Participant must be an
Employee at the end of a Performance Cycle in order to be
entitled to payment of Performance Shares in respect of such
Cycle, provided however that in the event a Participant
terminates employment prior to the end of a Cycle by reason
of death, disability or other reason approved by the
Committee, the Committee in its discretion may authorize
payment to the Participant or the beneficiary, heirs or legal
representative with respect to some or all of the Performance
Shares deemed earned for that Cycle. The Committee may amend
or terminate any Performance Share Award prior to payment
without the consent of the Participant.
SECTION 5. Option Provisions. The provisions of Article III
of the Plan shall govern all stock options delivered in
payment of Performance Shares, except as otherwise provided
in this Article VI. For options delivered under this Article
VI, the following provisions shall apply.
(a) The options shall be immediately exercisable and
shall remain so for the duration specified by the Committee
which may exceed ten years.
(b) In the event a Participant terminates employment by
reason of death or other reason approved by the Committee,
the Participant's stock options delivered under this Article
VI shall be exercisable at any time prior to a date or before
the end of a period established by the Committee. If a
Participant terminates employment for any other reason, his
or her rights under all such stock options shall terminate
three months after termination of employment except as
otherwise provided by the Committee.
SECTION 6. Dividend Equivalents. Stock options delivered in
payment of Performance Shares may provide the Participant
with dividend equivalents payable in cash, shares, additional
discount options or other consideration prior to exercise.
Long Term Stock Incentive Plan
Amendment - effective January 1, 1995
1. The definition of "Fair Market Value" in Article I of the
Plan shall be amended to read in its entirety as follows:
FAIR MARKET VALUE means, with respect to Company
Stock, (1) the mean of the high and low sales prices of such
stock (a) as reported on the composite tape (or other appro-
priate reporting vehicle as determined by the Committee) for
specified date or, if no such report of such price shall be
available for such date, as reported for the New York Stock
Exchange for such date or (b) if the New York Stock Exchange
is closed on such date, the mean of the high and low sales
prices of such stock as reported in accordance with (a) above
for the next preceding day on which such stock was traded on
the New York Stock Exchange, or (2) at the option of and as
determined by the Committee, the average of the mean of the
high and low sales prices of such stock as reported in accor-
dance with (1) above for a period of up to ten consecutive
business days.
2. Article II, Section 3 of the Plan shall be amended to
read in its entirety as follows:
Limitation on Optioned Shares. In no event may any stock
option be granted to any Employee who owns stock possessing
more than five percent of the total combined voting power
or value of all classes of stock of the Company. The
maximum number of shares subject to options awarded to any
one individual in any calendar year may not exceed 500,000
shares.
3. Article IV, Section 1 of the Plan shall be amended by
revising the first sentence thereof to read as follows:
Number of Shares. The shares of Company Stock that may be
issued under the Plan, out of authorized but heretofore
unissued Company Stock, or out of Company Stock held as
treasury stock, or partly out of each, shall not exceed
4.4 million shares plus an additional number of shares
equal to the number of shares which at January 1, 1995 were
reserved for issuance under the Plan as then in effect.
(Note: Share numbers in this Amendment do not reflect the
two-for-one common stock split of February 1995.)
