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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
ALLEGHENY LUDLUM CORPORATION
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
ALLEGHENY LUDLUM CORPORATION
1000 SIX PPG PLACE
PITTSBURGH, PENNSYLVANIA 15222-5479
NOTICE OF
1996 ANNUAL MEETING OF SHAREHOLDERS
AND PROXY STATEMENT
FRIDAY, MAY 17, 1996
11:00 A.M. PITTSBURGH TIME
ROOM 1000 AUDITORIUM, 10TH FLOOR
TWO MELLON BANK CENTER
(UNION TRUST BUILDING)
435 FIFTH AVENUE
PITTSBURGH, PENNSYLVANIA
- --------------------------------------------------------------------------------
TABLE OF CONTENTS PAGE
Letter from the Chairman of the Board......................................... 1
Notice of Annual Meeting of Shareholders...................................... 2
Proxy Statement............................................................... 3
Election of Directors.................................................... 4
Information About the Board of Directors................................. 8
Security Ownership.......................................................11
Approval of the Non-Employee Director Stock Compensation Plan............14
Approval of the Amended Performance Share Plan...........................15
Approval of the Amended Option Incentive Plan............................18
Ratification of Selection of Independent Auditors........................20
Other Business to Come Before the Meeting................................21
Executive Compensation...................................................21
Cumulative Total Shareholder Return......................................32
Certain Transactions.....................................................33
Financial Statements.....................................................34
1997 Annual Meeting and Shareholder Proposals............................35
Exhibit A--Non-Employee Director Stock Compensation Plan................A-1
Exhibit B--Amended Performance Share Plan...............................B-1
Exhibit C--Amended Option Incentive Plan................................C-1
- --------------------------------------------------------------------------------
<PAGE>
[RPS LETTERHEAD]
R. P. Simmons
Chairman of the Board
March 20, 1996
Dear Shareholder:
We are pleased to invite you to attend Allegheny Ludlum's 1996 Annual
Meeting to be held on Friday, May 17, in Pittsburgh, Pennsylvania. The meeting
will begin with a discussion and voting on the matters set forth in the
accompanying Notice of Annual Meeting and Proxy Statement followed by reports on
Company operations. I urge you to attend.
If you plan to attend the meeting, please complete and return the enclosed
postage-paid ticket request card. An admission ticket, which will expedite your
admission to the meeting, will be mailed to you prior to the meeting.
Whether you own few or many shares and whether or not you plan to attend
the meeting, it is important that you vote your shares. Please promptly read the
Proxy Statement and then complete, sign and return your proxy card in the
enclosed postage-paid envelope. If you sign and return your proxy card without
specifying your choices, it will be understood that you wish to have your shares
voted in accordance with the Directors' recommendations.
We look forward to seeing as many of you as possible at the 1996 Annual
Meeting.
Sincerely,
/s/ R. P. Simmons
R. P. Simmons
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ALLEGHENY LUDLUM CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 17, 1996
------------------
The Annual Meeting of the Shareholders of Allegheny Ludlum Corporation will
be held on Friday, May 17, 1996, at 11:00 A.M., Pittsburgh Time, at the Room
1000 Auditorium, 10th Floor, Two Mellon Bank Center (Union Trust Building), 435
Fifth Avenue, Pittsburgh, Pennsylvania, for the following purposes:
1. To elect five Class III directors to serve for a term of three
years.
2. To approve the Non-Employee Director Stock Compensation Plan.
3. To approve the amended and restated Performance Share Plan.
4. To approve the amended and restated Stock Option Incentive Plan.
5. To ratify the selection of Ernst & Young LLP as independent
auditors of the Company for fiscal year 1996.
6. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on March 6, 1996 are
entitled to notice of and to vote at the meeting or any adjournment thereof.
By order of the Board of Directors
/s/ Jon D. Walton
JON D. WALTON
Vice President-General Counsel
and Secretary
Dated: March 20, 1996
YOU ARE REQUESTED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN
THE ENCLOSED POSTAGE-PAID ENVELOPE. THE RETURN OF THE ENCLOSED PROXY CARD WILL
NOT AFFECT YOUR RIGHT TO REVOKE SUCH PROXY OR TO VOTE IN PERSON SHOULD YOU
ATTEND THE MEETING.
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ALLEGHENY LUDLUM CORPORATION
1000 SIX PPG PLACE
PITTSBURGH, PA 15222-5479
PROXY STATEMENT
This Proxy Statement and the accompanying proxy card are being mailed
beginning on or about March 20, 1996 to shareholders in connection with the
solicitation of proxies by the Board of Directors of Allegheny Ludlum
Corporation (the "Company") for use at the 1996 Annual Meeting of Shareholders
to be held on May 17, 1996.
Shareholders whose names appeared of record on the books of the Company at
the close of business on March 6, 1996 are entitled to notice of and to vote at
the meeting. On the record date for the meeting, there were 66,241,891 shares of
Common Stock of the Company outstanding and entitled to vote. Each share of
Common Stock is entitled to one vote per share on each matter properly brought
before the meeting. Shares can be voted at the meeting only if the shareholder
is present in person or is represented by proxy.
When your proxy card is returned properly signed, the shares represented
will be counted for quorum purposes and will be voted in accordance with your
instructions. You can specify your choices by marking the appropriate boxes on
the proxy card. Unless contrary instructions are indicated on your proxy card,
the shares will be voted as recommended by the Board of Directors. You may
revoke your proxy, by written notice to the Corporate Secretary of the Company,
at any time before it is voted at the meeting.
Your vote is important; therefore, you are urged to sign and return the
accompanying proxy card whether or not you plan to attend the meeting. If you do
attend, you may still vote by ballot at the meeting which will automatically
cancel any proxy voting authority previously given. If you are planning to
attend the meeting in person, please complete and return the enclosed
postage-paid ticket request card promptly so that we can mail your admission
ticket. Shareholders without admission tickets will be admitted upon
verification of ownership.
Proxy cards, ballots and voting tabulations that identify individual
shareholders are normally available for examination only by the Judge of
Election, the Corporate Secretary and certain employees associated with
processing proxy cards and tabulating the vote. The Company does not disclose
the vote of any shareholder except as may be necessary to meet legal
requirements.
The trustee of Allegheny Ludlum's Retirement Savings Plan, the Savings and
Security Plan of the Company's Tubular Products Division, the Savings and
Security Plan of the Company's Special Materials Division and the Personal
Retirement Account Plan has the sole right to exercise all rights relating to
Common Stock held for participants in such Plans. Participants have the right,
however, to direct the trustee as to the manner in which voting and other rights
will be exercised with respect to the full number of shares of Common Stock
allocated to their accounts and shown on the voting instruction cards which they
will receive from the Plan Administrator. The trustee will vote shares for which
no participant instructions are received in the same proportion as shares for
which participant instructions have been received. The trustee will exercise its
sole discretion in voting or not voting fractional shares.
If a shareholder is a participant in the Company's Automatic Dividend
Reinvestment Service for Shareholders, the proxy card represents authority to
vote the number of full shares in the participant's dividend reinvestment
service account on the record date, as well as shares registered in the
participant's name.
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The cost of this solicitation of proxies will be borne by the Company.
Solicitations will be made primarily by mail or by facsimile, but employees of
the Company may solicit proxies personally or by telephone.
Brokers, banks and other nominee holders will be requested to obtain voting
instructions of beneficial owners of stock registered in their names. Shares
represented by a duly completed proxy card submitted by a nominee holder on
behalf of beneficial owners will be counted for quorum purposes, and will be
voted to the extent instructed by the nominee holder on the proxy card. The
rules applicable to a nominee holder may preclude it from voting the shares that
it holds on certain kinds of proposals (sometimes referred to as "broker
non-votes") unless it receives voting instructions from the beneficial owners of
the shares. If a nominee holder fails to vote a beneficial owner's shares on a
particular proposal, the shares will not be counted as having been voted for or
against the proposal.
The Company's fiscal year ends on the Sunday nearest to December 31 in each
year. References in this Proxy Statement to fiscal years 1995, 1994 and 1993
mean, respectively, the fiscal years ended December 31, 1995, January 1, 1995,
and January 2, 1994.
ELECTION OF DIRECTORS
(ITEM A ON PROXY CARD)
The business and affairs of the Company are managed under the direction of
the Board of Directors as provided in the By-Laws of the Company and the laws of
the Commonwealth of Pennsylvania. The Board is not, however, involved in
day-to-day operating details. Members of the Board are kept informed of the
Company's business through discussions with the Chairman of the Board, the Vice
Chairman of the Board, the President and Chief Executive Officer, other members
of senior management and the other officers and managers of the Company, by
reviewing analyses and reports sent to them, and by participating in Board and
committee meetings. In fiscal year 1995, regular meetings of the Board were held
seven times. Special meetings are scheduled when required; none were held in
1995. In 1995, the directors' attendance at meetings of the Board and its
committees was 100 percent.
Under the By-Laws of the Company, the Board has the power to fix the number
of directors and to fill vacancies from time to time by resolution, but there
may not be fewer than three directors. No person may serve as a director of the
Company after attaining seventy-one years of age, but a director who becomes
seventy-one years of age may complete the term for which such director was
elected before attaining that age. The Board of Directors currently consists of
fourteen members, two of whom are employees of the Company.
Pursuant to the Company's Restated Articles of Incorporation, the members
of the Board of Directors are divided into three classes. Each class is to
consist, as nearly as may be possible, of one-third of the whole number of the
Board. The term of the Class III directors expires at the 1996 Annual Meeting of
Shareholders. The terms of the Class I and Class II directors will expire at the
1997 and 1998 Annual Meetings of Shareholders, respectively. At each Annual
Meeting the directors elected to succeed those whose terms expire are identified
as being of the same class as the directors they succeed and are elected for a
term to expire at the third Annual Meeting of Shareholders after their election
and until their successors are duly elected and qualified. A director elected to
fill a vacancy is elected to the same class as the director such person
succeeds, and a director elected to fill a newly created directorship holds
office until the next election of the class to which such director is elected.
The five incumbent Class III directors are nominees for election this year
for a three-year term expiring at the 1999 Annual Meeting. In the election, the
five persons who receive the highest number of votes actually cast will be
elected. Broker non-votes will not be treated as votes cast. The proxies named
in the proxy card intend to vote for the election of the five Class III nominees
listed below unless otherwise instructed. If you do not wish
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your shares to be voted for a particular nominee, you must identify the
exception in the appropriate space provided on the proxy card, in which event
your shares will be voted for the other listed nominees. If any nominee becomes
unable to serve, the proxies may vote for another person designated by the Board
of Directors or the Board may reduce the number of directors. The Company has no
reason to believe that any nominee will be unable to serve.
Shareholders may vote cumulatively in the election of directors, meaning
that every shareholder has the right to multiply the number of votes to which
the shareholder is entitled by the total number of directors to be elected and
to cast the whole number of such votes for one nominee or distribute them among
any two or more nominees. The persons named in the proxy cards will allocate the
cumulated votes represented by the proxy cards in the manner they deem proper in
their best judgment. A shareholder wishing to allocate such shareholder's vote
in a particular manner must be present at the meeting and vote by ballot.
The incumbent directors have high level executive or professional
experience in a wide variety of businesses or professions. A brief statement of
the background of each nominee and each continuing Class I and Class II
director, including their principal occupations during the past five years, is
given on the following pages.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE FIVE CLASS
III NOMINEES.
NOMINEES FOR DIRECTOR--TERM EXPIRES 1999
CLASS III
<TABLE>
<S> <C>
ROBERT P. BOZZONE Robert P. Bozzone has been Vice Chairman of the Company
Vice Chairman of the Board since August 1994. Previously, he served as President and
of the Company Chief Executive Officer of the Company. Mr. Bozzone is a
Director since 1981 member of the Executive Committee and of the Committee on
Age: 62 Governance. He is also a director of DQE Inc., whose
principal subsidiary is Duquesne Light Company, an electric
utility.
C. FRED FETTEROLF C. Fred Fetterolf was President and Chief Operating Officer
Former President and Chief Operating of Aluminum Company of America prior to 1991. Mr. Fetterolf
Officer, Aluminum Company of is a member of the Executive Committee, of the Audit and
America Finance Committee and of the Personnel and Compensation
Director since 1987 Committee. He is also a director of CasTech Aluminum Group,
Age: 67 Dentsply International, Inc., Mellon Bank Corporation, Union
Carbide Corporation, Praxair, Inc., Quaker State Corporation
and Urethane Technologies.
</TABLE>
5
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<TABLE>
<S> <C>
ANNE POL Anne Pol has been President, Shipping and Weighing Systems
President, Shipping and Weighing Systems Division, of Pitney Bowes Inc., a provider of products and
Division, Pitney Bowes Inc. services which manage the movement of messages and packages
Director since 1995 through networks, since August 1993. From December 1991 to
Age: 48 July 1993, she was Vice President, New Product Development,
and prior to December 1991, she was Vice President,
Manufacturing Operations, of Pitney Bowes. Mrs. Pol is a
member of the Audit and Finance Committee and of the
Technology and Information Systems Committee. She is also a
director of UGI Corporation and Arrow Electronics Inc.
RICHARD P. SIMMONS Richard P. Simmons is Chairman of the Board of the Company.
Chairman of the Board of the Company He was also Chief Executive Officer of the Company until
Director since 1980 1990. Mr. Simmons is Chairman of the Executive Committee and
Age: 64 a member of the Committee on Governance. He is also a
director of PNC Bank Corp. and Consolidated Natural Gas Co.
STEVEN C. WHEELWRIGHT Steven C. Wheelwright is a Professor of Business
Professor of Business Administration, Administration at the Harvard University Graduate School of
Harvard University Business Administration. Mr. Wheelwright is a member of the
Director since 1988 Technology and Information Systems Committee and of the
Age: 52 Committee on Governance. He is also a director of TJ
International Corporation and Quantum Corporation.
</TABLE>
CONTINUING DIRECTORS--TERM EXPIRES 1997
CLASS I
<TABLE>
<S> <C>
ARTHUR H. ARONSON Arthur H. Aronson has been President and Chief Executive
President and Chief Executive Officer of the Company since August 1994. Previously, he
Officer of the Company served as Executive Vice President and Chief Operating
Director since 1990 Officer of the Company. Mr. Aronson is a member of the
Age: 60 Executive Committee. He is also a director of Cooper Tire &
Rubber Company.
W. CRAIG MCCLELLAND W. Craig McClelland has been Chairman and Chief Executive
Chairman and Chief Executive Officer, Officer of Union Camp Corporation, a manufacturer of paper
Union Camp Corporation products, since July 1994. Prior to that time, he served as
Director since 1987 President and Chief Operating Officer of Union Camp. Mr.
Age: 61 McClelland is Chairman of the Committee on Governance and a
member of the Personnel and Compensation Committee. He is
also a director of Union Camp Corporation and PNC Bank Corp.
</TABLE>
6
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<TABLE>
<S> <C>
RICHARD K. PITLER Richard K. Pitler performs private consulting work. At his
Former Senior Vice President and retirement in 1986, Dr. Pitler was Senior Vice President and
Technical Director of the Company Technical Director of the Company. He is Chairman of the
Director since 1981 Technology and Information Systems Committee.
Age: 68
JAMES E. ROHR James E. Rohr has been President of PNC Bank Corp. since
President, 1992. He also serves as President and Chief Executive
PNC Bank Corp. Officer of its Pennsylvania bank, PNC Bank, National
Director since 1988 Association. Previously, Mr. Rohr held other executive
Age: 47 positions with the bank and the holding company. Mr. Rohr is
a member of the Audit and Finance Committee and of the
Committee on Governance. He is also a director of PNC Bank
Corp. and Sallie Mae (Student Loan Marketing Association).
GEORGE W. TIPPINS George W. Tippins is Chairman of Tippins Incorporated, a
Chairman, privately owned company engaged primarily in the design,
Tippins Incorporated engineering and construction of rolling mills for the steel
Director since 1980 industry. Mr. Tippins is a member of the Technology and
Age: 70 Information Systems Committee.
</TABLE>
CONTINUING DIRECTORS--TERM EXPIRES 1998
CLASS II
<TABLE>
<S> <C>
PAUL S. BRENTLINGER Paul S. Brentlinger is a Partner in Morgenthaler Ventures, a
Partner, venture capital group headquartered in Cleveland, Ohio. Mr.
Morgenthaler Ventures Brentlinger is Chairman of the Audit and Finance Committee
Director since 1987 and a member of the Technology and Information Systems
Age: 68 Committee. He is also a director of Ferro Corporation.
THOMAS MARSHALL Thomas Marshall has been Vice Chairman of Dynamet, Inc., a
Vice Chairman, privately owned company engaged in the manufacture of
Dynamet, Inc. titanium, superalloy products, machine components and die
Director since 1988 forgings, since January 1995. He was Chairman of Aristech
Age: 67 Chemical Corporation, a privately owned company engaged
primarily in the manufacture of chemical and polymer
products, prior to April 1995. He also served as Chief
Executive Officer of Aristech until October 1994. Mr.
Marshall is a member of the Executive Committee, of the
Audit and Finance Committee and of the Personnel and
Compensation Committee. He is also a director of PNC Bank
Corp.
</TABLE>
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<TABLE>
<S> <C>
JAMES L. MURDY James L. Murdy is Senior Vice President-Finance and Chief
Senior Vice President-Finance and Financial Officer of the Company. Mr. Murdy is also a
Chief Financial Officer of the Company director of United Meridian Corporation.
Director since 1988
Age: 57
CHARLES J. QUEENAN, JR. Charles J. Queenan, Jr. is Senior Counsel of Kirkpatrick &
Senior Counsel, Lockhart LLP, outside attorneys for the Company. Prior to
Kirkpatrick & Lockhart LLP January 1996, he was a partner in that firm. Mr. Queenan is
Director since 1980 Chairman of the Personnel and Compensation Committee and a
Age: 65 member of the Executive Committee and of the Committee on
Governance. He is also a director of Crane Co., Fansteel,
Inc. and Medusa Corporation.
</TABLE>
INFORMATION ABOUT THE BOARD OF DIRECTORS
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established five standing committees: the
Executive Committee, the Audit and Finance Committee, the Committee on
Governance, the Personnel and Compensation Committee, and the Technology and
Information Systems Committee.
EXECUTIVE COMMITTEE
The Executive Committee has broad powers to act on behalf of the full Board
of Directors, subject to certain limitations set forth in the By-Laws. In
practice, the Executive Committee acts when emergency issues or scheduling
problems make it difficult to convene a meeting of all directors and on specific
matters referred to the Committee by the Board of Directors. All actions taken
must be reported at the Board's next meeting. The Executive Committee acted
three times during fiscal year 1995. The members of the Executive Committee are
Richard P. Simmons, Chairman of the Committee, Arthur H. Aronson, Robert P.
Bozzone, C. Fred Fetterolf, Thomas Marshall and Charles J. Queenan, Jr.
AUDIT AND FINANCE COMMITTEE
The Audit and Finance Committee is comprised of five directors, none of
whom is an officer or employee of the Company.
Among its principal audit functions, the Committee:
. Recommends to the Board of Directors the appointment of the independent
accountants for the coming year.
. Reviews the scope, general extent and proposed fees of the annual audit
plan and other activities of the independent accountants and the audit
plan of the internal auditors.
. Reviews with management and the independent accountants, upon
completion of the annual audit, the financial statements and related
reports for their adequacy and compliance with generally accepted
accounting, reporting and disclosure principles.
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. Evaluates the effectiveness of the Company's internal and external
audit efforts, accounting and financial controls, policies and
procedures and business ethics policies and practices through a review
of reports by, and at regular meetings with, the internal and external
auditors and with management, as appropriate.
Among its principal finance functions, the Committee:
. Reviews and evaluates proposed bank credit agreements and other major
financial proposals.
. Reviews and evaluates Company relationships with banks and other
financial institutions.
. Reviews and makes recommendations to the Board of Directors concerning
policies with respect to dividends, capital structure and authorized
stock.
The independent auditors have full and free access to the Committee and
meet with it, with or without management being present, to discuss all
appropriate matters. The present members of the Audit and Finance Committee are
Paul S. Brentlinger, Chairman of the Committee, C. Fred Fetterolf, Thomas
Marshall, Anne Pol and James E. Rohr. The Committee met three times in fiscal
year 1995.
COMMITTEE ON GOVERNANCE
In 1995, the Board of Directors established a new Committee on Governance.
The Committee is comprised of W. Craig McClelland, Chairman of the Committee,
Robert P. Bozzone, Charles J. Queenan, Jr., James E. Rohr, Richard P. Simmons
and Steven C. Wheelwright. None of the Committee members are current employees
of the Company. The Committee held its initial meeting during 1995.
The principal responsibilities and functions of the Committee are to:
. Make recommendations to the Board of Directors with respect to
candidates for nomination as new Board members and with respect to
incumbent directors for nomination as continuing Board members.
. Make recommendations to the Board of Directors concerning the
membership of committees of the Board and the chairpersons of the
respective committees.
. Make recommendations to the Board of Directors with respect to the
remuneration paid and benefits provided to members of the Board in
connection with their service on the Board or on its committees.
. Administer the Company's formal compensation programs for directors,
including the Director Share Incentive Plan.
. Make recommendations to the Board of Directors concerning the
composition, organization and operations of the Board of Directors,
including the orientation of new members and the flow of information.
. Evaluate Board tenure policies as well as policies covering the
retirement or resignation of incumbent directors.
Recommendations by shareholders of potential director nominees may be directed
to the Committee on Governance, in care of the Corporate Secretary of the
Company, at the Company address located on the first page of this Proxy
Statement.
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PERSONNEL AND COMPENSATION COMMITTEE
The Personnel and Compensation Committee is comprised of Charles J.
Queenan, Jr., Chairman of the Committee, C. Fred Fetterolf, Thomas Marshall and
W. Craig McClelland, none of whom is an officer or employee of the Company. See
the "Board Compensation Committee Report on Executive Compensation" at page 21.
The Committee held five meetings during fiscal year 1995.
Among its principal duties, the Committee:
. Makes recommendations to the Board of Directors concerning general
executive management organization matters.
. Makes recommendations to the Board of Directors concerning compensation
and benefits for employees who are also directors of the Company,
consults with the Chief Executive Officer on compensation and benefit
matters relating to other executive officers, and makes recommendations
to the Board of Directors concerning compensation policies and
procedures relating to executive officers generally.
. Makes recommendations to the Board concerning policy matters relating
to employee benefits and employee benefit plans.
. Administers the Company's formal incentive compensation plans,
including the Performance Share Plan for Key Employees, the 1987 Stock
Option Incentive Plan, and the Stock Acquisition and Retention Plan.
TECHNOLOGY AND INFORMATION SYSTEMS COMMITTEE
The Technology and Information Systems Committee is comprised of Richard K.
Pitler, Chairman of the Committee, Paul S. Brentlinger, Anne Pol, George W.
Tippins and Steven C. Wheelwright. It is concerned with the impact of
technologies and information systems which do or could materially affect the
success of the Company. The Committee is also responsible for assessing the
technical and information systems capabilities of the Company and making
recommendations to the Board of Directors concerning priorities, asset
deployment or other matters relevant to the technical activities and information
systems of the Company. The Committee also participates, along with other
members of the Lounsberry Award Committee, in the selection of recipients of the
Frank B. Lounsberry Award, which recognizes extraordinary achievements of
employees in advancing the technological base of the Company relative to its
strategic goals. The Committee held two meetings in fiscal year 1995.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company are paid an annual fee of
$22,000, $1,000 for attendance at each meeting of the Board of Directors and
$1,000 for attendance at each meeting of a committee of the Board on which they
serve. In addition, each non-employee chairman of a committee is paid an annual
fee of $2,000. Directors who are employees of the Company do not receive any
compensation for their service on the Board or its committees. At the Annual
Meeting, shareholders will vote on a proposal to approve the 1996 Non-Employee
Director Stock Compensation Plan which provides that a portion of each
non-employee director's annual fee shall be paid in Company Common Stock (see
page 14).
Each non-employee director also participates automatically in the Director
Share Incentive Plan (the "Incentive Plan"). The Incentive Plan is intended as
an incentive to encourage such directors to increase their
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stock ownership and proprietary interest in the Company and to continue as
directors of the Company, as well as to attract individuals of outstanding
ability to serve as non-employee directors of the Company. Under the Incentive
Plan, on the first business day of each calendar year, each non-employee
director becomes entitled to receive a number of shares of Common Stock (rounded
to the nearest whole share) with a fair market value on such date equal to
$5,000. Pursuant to this Plan, on January 3, 1995, each non-employee director
received 268 shares of Common Stock.
In order to continue to attract and retain outside directors of exceptional
ability, the Company maintains a Fee Continuation Plan for Non-Employee
Directors (the "Fee Continuation Plan"). Under the Fee Continuation Plan,
benefits will be payable to a person who serves as a non-employee director for a
period of five years or more and who retires from service as a director because
of the age limitation established by the Company's By-Laws or because of death,
disability or other circumstances specified in the Plan. The benefit will be an
amount equal to the annual fee for directors in effect immediately prior to the
participant's cessation of service as a director and will continue at the rate
of one year of benefit for each year of the participant's credited service as a
director (as defined in the Fee Continuation Plan) up to a maximum of ten years.
Prior to August 1995, Mr. Bozzone provided consulting services to the
Company as described on page 34.
SECURITY OWNERSHIP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock by each person known to the Company to
beneficially own more than five percent of the outstanding Common Stock of the
Company as of March 6, 1996:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE PERCENT OF
BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP CLASS
------------------- ----------------------- ----------
<S> <C> <C>
Mr. and Mrs. Richard P. Simmons 16,306,897(a)(b) 24.6%
1000 Six PPG Place
Pittsburgh, PA 15222
Robert P. Bozzone 5,269,244(a)(c) 8.0
1000 Six PPG Place
Pittsburgh, PA 15222
J.P. Morgan & Co., Incorporated 12,818,036(d) 19.4
60 Wall Street
New York, NY 10260
Pioneering Management Corporation 6,942,300(e) 10.5
60 State Street
Boston, MA 02109-1820
</TABLE>
(a) Includes shares held by the trustee under the Retirement Savings Plan
(described on page 28) for the account of the named person as of December
31, 1995.
(b) Mr. and Mrs. Simmons own 16,248,785 shares jointly. Mr. Simmons has the
sole power to direct the voting of the jointly-owned shares, and Mr. and
Mrs. Simmons share the power to direct the disposition of such shares. In
addition, Mr. Simmons owns 14,000 shares; Mrs. Simmons disclaims any
beneficial ownership of such shares. Mrs. Simmons also owns 15,000 shares;
Mr. Simmons disclaims any beneficial ownership of
11
<PAGE>
such shares. Does not include 140,500 shares owned by the R.P. Simmons
Family Foundation. Mr. and Mrs. Simmons disclaim any beneficial ownership
of such shares.
(c) Does not include 240,000 shares owned by Mrs. Robert P. Bozzone and 143,700
shares owned by the Bozzone Family Foundation. Mr. Bozzone disclaims any
beneficial ownership of such shares.
(d) J.P. Morgan & Co., Incorporated has filed an amended Schedule 13G under the
Securities Exchange Act of 1934, as amended, dated December 29, 1995,
stating that as of that date it held sole voting power with respect to
8,367,118 shares of Common Stock, shared voting power with respect to
177,680 shares of Common Stock, sole dispositive power with respect to
12,413,156 shares of Common Stock and shared dispositive power with respect
to 307,330 shares of Common Stock and that the Schedule includes 273,466
shares where there is a right to acquire.
(e) Pioneering Management Corporation has filed an amended Schedule 13G under
the Securities Exchange Act of 1934, as amended, dated January 26, 1996,
stating that as of such date, it held sole voting power with respect to
6,942,300 shares, sole dispositive power with respect to 306,000 shares and
shared dispositive power with respect to 6,636,300 shares of Common Stock.
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the number of shares of Common Stock of the
Company reported to the Company as of March 6, 1996 as being beneficially owned
by each nominee for director, each continuing director, each executive officer
listed in the Summary Compensation Table on page 27, and all of such persons and
the other executive officers of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
NAME OF BENEFICIAL OWNERSHIP CLASS
---- ----------------------- ----------
<S> <C> <C>
Arthur H. Aronson 102,329(2)(3) *
Robert P. Bozzone 5,269,244(4) 8.0%
Paul S. Brentlinger 5,974(5) *
C. Fred Fetterolf 2,642(6) *
Thomas Marshall 8,222 *
W. Craig McClelland 3,974(7) *
James L. Murdy 41,438(3)(8) *
Richard K. Pitler 3,974(7) *
Anne Pol 667 *
Charles J. Queenan, Jr. 685,324(7)(9) 1.0%
James E. Rohr 4,619 *
Robert W. Rutherford 65,678(3)(7) 10) *
Jack W. Shilling 48,452(3)(11) *
Richard P. Simmons 16,291,897(12) 24.6%
George W. Tippins 30,974(7) *
Harry R. Wagner 71,035(3)(13) *
Steven C. Wheelwright 3,474(7) *
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
NAME OF BENEFICIAL OWNERSHIP(1) CLASS
---- ----------------------- ----------
<S> <C> <C>
All directors and executive 23,002,049(3)(7) (14) 34.7%
officers as a group
(24 persons)
</TABLE>
*Less than one percent of the outstanding shares.
(1) Each person has sole voting and investment power with respect to the shares
listed, unless otherwise indicated.
(2) Does not include 13,500 shares owned by Mrs. Arthur H. Aronson. Mr. Aronson
disclaims any beneficial ownership of such shares. Includes 63,000 shares
which may be acquired within 60 days pursuant to a stock option plan.
(3) Includes shares held by the trustee under the Retirement Savings Plan
(described on page 28) for the account of the named person as of December
31, 1995.
(4) See notes (a) and (c) on pages 11 and 12.
(5) Does not include 200 shares owned by Mrs. Paul S. Brentlinger. Mr.
Brentlinger disclaims any beneficial ownership of such shares.
(6) Does not include 2,600 shares owned by the Fetterolf Family Foundation. Mr.
Fetterolf disclaims any beneficial ownership of such shares.
(7) Includes shares held jointly.
(8) Does not include shares to be purchased by or granted to Mr. Murdy under
the Allegheny Ludlum Corporation Stock Acquisition and Retention Plan
("SARP"). In January 1996, Mr. Murdy made an irrevocable election under the
SARP to purchase shares of Common Stock with a value as of the applicable
purchase date (as defined in the SARP) of $238,000. Mr. Murdy's election
will become effective at the end of the first window period (as defined in
the SARP) that occurs six months after the date of such election. One
restricted share of Common Stock will be granted for each two shares of
Common Stock purchased by Mr. Murdy under the SARP.
(9) Does not include 54,100 shares owned by Mrs. Charles J. Queenan, Jr. Mr.
Queenan disclaims any beneficial ownership of such shares.
(10) Includes 25,200 shares which may be acquired within 60 days pursuant to a
stock option plan.
(11) Includes 18,525 shares which may be acquired within 60 days pursuant to a
stock option plan.
(12) See notes (a) and (b) on page 11.
(13) Includes 28,800 shares which may be acquired within 60 days pursuant to a
stock option plan.
(14) Includes an aggregate of 285,443 shares which may be acquired within 60
days pursuant to a stock option plan. Does not include an aggregate of
332,800 shares with respect to which beneficial ownership is disclaimed or
shares that executive officers have irrevocably elected to purchase under
the SARP or shares to be granted to executive officers under the SARP as a
result of such purchases or as a result of irrevocable designations of
stock under the SARP.
13
<PAGE>
PROPOSAL TO APPROVE THE
NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN
(ITEM B ON PROXY CARD)
The Board of Directors has adopted the Allegheny Ludlum Corporation 1996
Non-Employee Director Stock Compensation Plan (the "Director Stock Compensation
Plan"), subject to approval by the shareholders.
In brief, if the Director Stock Compensation Plan is approved, non-employee
directors will receive part of their annual fees in the form of shares of
Company Common Stock rather than in the form of cash, and each of them will be
able to elect to receive the entire amount of such fee in the form of shares of
Common Stock instead of cash. (Directors who are employees of the Company do not
receive any compensation for their service on the Board or its committees.)
The following is a summary of the principal provisions of the Director
Stock Compensation Plan. The full text of the Director Stock Compensation Plan
is attached hereto as Exhibit A and should be referred to for a complete
description of its provisions.
Purpose and Administration. The purpose of the Director Stock Compensation
Plan is to promote the interests of the Company and its shareholders by
attracting, retaining and providing an incentive to directors who are not
employees of the Company or its affiliates (the "Non-Employee Directors")
through the acquisition of a proprietary interest in the Company and an
increased personal interest in its continued successful performance and
progress.
A maximum of 250,000 shares of the Company's Common Stock may be issued to
Non-Employee Directors under the Director Stock Compensation Plan. Only
Non-Employee Directors of the Company are eligible to participate in the
Director Stock Compensation Plan.
The Director Compensation Stock Plan will be administered by the Board of
Directors.
Plan Provisions. If the Director Compensation Stock Plan is approved by the
Company's shareholders, each Non-Employee Director will automatically receive on
each Quarterly Payment Date (as defined in the Director Stock Compensation
Plan), beginning in July 1996, a number of shares of Common Stock of the Company
with a Fair Market Value (as defined in the Director Stock Compensation Plan)
equal to one-fourth of the portion of the annual fee that would otherwise be
payable by the Company to a Non-Employee Director as of such Quarterly Payment
Date. In addition, each Non-Employee Director may elect, on an annual basis, to
have up to 100% of the amount of such director's annual fee paid in shares of
Company Common Stock, rather than in cash. If such an election is made, the
number of shares transferred on each Quarterly Payment Date to a Non-Employee
Director shall be determined by dividing the amount of the annual fee specified
by such Non-Employee Director by the Fair Market Value of the Common Stock on
such Quarterly Payment Date. Under the Director Stock Compensation Plan, the
term "Quarterly Payment Date" means each of the quarterly dates on which the
annual fee payable to Non-Employee Directors is paid by the Company. "Fair
Market Value" under the Director Stock Compensation Plan means, on any given
date, the average of the high and low trading prices of the Common Stock of the
Company on such date as reported on the New York Stock Exchange.
The Board of Directors may at any time amend or terminate the Director
Stock Compensation Plan without the consent of the shareholders, except that no
amendment may be made, without the affirmative approval of the shareholders,
which would increase the number of shares available for issuance under the
Director Stock Compensation Plan or which would require shareholder approval for
certain exemptions to be available under the rules of the Securities and
Exchange Commission.
14
<PAGE>
If the Director Stock Compensation Plan is approved by the shareholders, in
July 1996 and during each fiscal quarter thereafter, each of the twelve
Non-Employee Directors will automatically receive shares in lieu of one-fourth
of the quarterly payment of the annual fee. The annual fee is currently $22,000.
For example, assuming a Fair Market Value of $20 per share, each such director
would receive 68 shares of Company Common Stock each fiscal quarter in lieu of a
cash payment of $1,360. If a Non-Employee Director elected to receive all of the
quarterly payment of such director's annual fee in shares of Company Common
Stock, and assuming a Fair Market Value of $20 per share, each such director
would receive 275 shares of Company Common Stock in lieu of a cash payment of
$5,500.
Effective Date and Term of the Director Stock Compensation Plan. The
Director Stock Compensation Plan will become effective on May 17, 1996 if
approved at the Annual Meeting. It will terminate without further action on May
17, 2006 or, if earlier, on the first date on which no shares of Common Stock
remain available for issuance under the Director Stock Compensation Plan.
Vote by Shareholders. The Director Stock Compensation Plan will be approved
if it receives the affirmative vote of a majority of the shares of Common Stock
present or represented and entitled to vote at the Annual Meeting. An abstention
will have the same effect as a vote against the Director Stock Compensation
Plan. Broker non-votes will be treated as shares that are not entitled to vote
for this purpose. Unless otherwise directed in the proxy card, the persons named
in the proxy card will vote for the proposal to approve the Director Stock
Compensation Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE DIRECTOR STOCK COMPENSATION PLAN.
PROPOSAL TO APPROVE THE
AMENDED PERFORMANCE SHARE PLAN
(ITEM C ON PROXY CARD)
The Board of Directors has amended and restated the Performance Share Plan
for Key Employees of Allegheny Ludlum Corporation and Subsidiaries (the "Amended
Performance Share Plan"), subject to approval by the shareholders.
The following is a summary of the principal provisions of the Amended
Performance Share Plan. The full text of the Amended Performance Share Plan is
attached hereto as Exhibit B and should be referred to for a complete
description of its provisions.
Background. The original Performance Share Plan was adopted and approved by
the Company's shareholders in March 1987. The original Plan had a term of
approximately ten years and will expire January 1, 1997. As of March 14, 1996,
no shares of Common Stock remain available for issuance under the Performance
Share Plan except for the shares that have been set aside for possible issuance
in connection with the award made under the Plan for the 1995-1996 Award Period.
The Board of Directors believes that it is in the best interests of the
Company and its shareholders to extend the term of the Performance Share Plan
for an additional ten years and to authorize additional shares of Company Common
Stock for issuance under the Plan. The Amended Performance Share Plan also
contains provisions intended to permit the Company to qualify for a Federal tax
deduction for awards thereunder.
Purpose and Administration. The Amended Performance Share Plan is intended
to provide the Company's executive officers and other key employees who are
responsible to a material extent for the profitability and continued growth of
the Company with awards of cash and/or shares of Company Common Stock as an
incentive
15
<PAGE>
to achieve long-term corporate objectives. The extent to which awards are
received by participants depends on whether corporate objectives are achieved
during a particular award period; awards are paid in installments over a three
year payment schedule following the award period.
Under the Amended Performance Share Plan, the number of shares reserved for
issuance under the Plan would be increased from 900,000 to 2,250,000 shares. If
the Amended Performance Share Plan is approved, up to 49,141 shares of the
additional shares reserved for issuance under the Plan will be available for
payment of the award made to key employees of the Company in 1994 for the
1995-1996 award period.
The Amended Performance Share Plan will be administered by the Personnel
and Compensation Committee of the Board of Directors (the "Committee"). All
determinations necessary for the implementation and administration of the
Amended Performance Share Plan will be made by the Committee.
Plan Provisions. Under the Amended Performance Share Plan, the Committee
determines at the beginning of, or prior to, each fiscal year whether an award
period should be established. If an award period is established, the Committee
determines which employees, in addition to the executive officers of the
Company, are key employees who are eligible to participate in the Plan and
determines the financial objectives of the Company to be achieved during the
award period. In prior years, the awards made under the Plan have been based on
the achievement by the Company of specified levels of operating income during
the applicable award period.
The Committee selects the key employees to be awarded units under the Plan
and the number of units to be awarded to any participating key employee.
Approximately 50 employees are presently eligible to receive awards under the
Performance Share Plan. Directors who are not also employees of the Company are
not eligible to participate in the Amended Performance Share Plan. The Committee
has the authority to prescribe limitations, restrictions and conditions upon any
award.
Units may be denominated by an amount of cash, a number of shares of
Company Common Stock or a combination of cash and shares of Common Stock. The
grant of units is evidenced by a written agreement between the participant and
the Company. Units awarded under the Plan are nonassignable except by will or by
the laws of descent and distribution. In the event a participant retires with
the consent of the Chief Executive Officer (or, in the case the participant is
the Chief Executive Officer, with the consent of the Committee), dies or is
disabled after the close of an award period, any unpaid installments are to be
paid to the participant or his estate in due course as if he had remained an
employee. If a participant's employment with the Company is terminated for any
reason other than those stated in the immediately preceding sentence, any
nonvested awards and any unpaid installments with respect to that award period
are to be forfeited.
Certain provisions are included in the Amended Performance Share Plan to
permit the Company to qualify for a Federal tax deduction for awards to each
person who is a "named executive officer" covered by Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), which includes the Chief
Executive Officer and the other four most highly compensated executive officers
(the "Covered Employees"). For example, the Amended Performance Share Plan
provides that the performance goals established by the Committee for an award
period shall meet the requirements of an objective formula under the Code unless
the Committee determines otherwise. In addition, the Amended Performance Share
Plan provides that the maximum award payable to a Covered Employee with respect
to any award period shall not exceed 100,000 shares of Company Common Stock and
more than $500,000 in cash.
The Board of Directors may at any time amend or terminate the Amended
Performance Share Plan without the consent of the shareholders, except that no
amendment may be made, without the affirmative approval of the shareholders,
which would increase the number of shares available for issuance under the
Amended Performance
16
<PAGE>
Share Plan, which would extend the term of the Plan or which would extend the
period during which units may be granted under the Plan.
Plan Benefits. With respect to the 1995-1996 Award Period, a total of
76,000 units have been awarded to a total of 45 key employees of the Company,
including 40,500 units which were awarded to 12 executive officers. The base
value of each unit consists of $50 in cash and four shares of Company Common
Stock.
If the Amended Performance Share Plan is approved by the shareholders, of
the 1,350,000 additional shares of Company Common Stock reserved for issuance
under the Plan, the maximum number of shares issuable with respect to the
1995-1996 Award Period if the maximum award payable for such Award Period is
earned is as follows:
<TABLE>
<CAPTION>
NAME AND POSITION MAXIMUM NUMBER OF SHARES
----------------- ------------------------
<S> <C>
Arthur H. Aronson up to 3,362 shares
President and Chief Executive Officer
James L. Murdy up to 2,716 shares
Senior Vice President-Finance
and Chief Financial Officer
Robert W. Rutherford up to 2,457 shares
Senior Vice President-Commercial
Harry R. Wagner up to 2,457 shares
Senior Vice President-Operations
Jack W. Shilling up to 2,457 shares
Senior Vice President-Technical
Executive Group up to 26,186 shares
Non-Executive Director Group 0 shares
Non-Executive Officer Employee Group up to 22,953 shares
</TABLE>
The dollar value of such shares will be determined as of the date the award for
such Award Period is paid; under the terms of the award, payments of the award
will be made in three annual installments, beginning in 1997.
The Summary Compensation Table and the description of "Long Term
Incentives" in the "Board Compensation Committee Report on Executive
Compensation on page 23 contain additional information about awards that have
been made under the Performance Share Plan. It is not possible to indicate the
number of persons who may receive awards in the future under the Amended
Performance Share Plan or the amount of benefits that may be received pursuant
to the Plan since those matters will be determined in the discretion of the
Committee.
Federal Income Taxation. Generally, the award of units under the Amended
Performance Share Plan will not result in taxable income to the participant upon
grant. The participant will recognize income in the year the cash and shares of
Common Stock are distributed under the Plan, in an amount equal to the sum of
the cash and the fair market value of any shares received. The Company is
entitled to a deduction at the same time and in the same amount.
Effective Date and Term of Amended Performance Share Plan. Under the
proposed amendments, which will become effective on May 17, 1996 if approved at
the Annual Meeting, the term of the Performance Share Plan will be extended ten
years so that it will terminate on January 1, 2007.
17
<PAGE>
Vote by Shareholders. The Amended Performance Share Plan will be approved
if it receives the affirmative vote of a majority of the shares of Common Stock
present or represented and entitled to vote at the Annual Meeting. An abstention
will have the same effect as a vote against the Amended Performance Share Plan.
Broker non-votes will be treated as shares that are not entitled to vote for
this purpose. Unless otherwise directed in the proxy card, the persons named in
the proxy card will vote for the proposal to approve the Amended Performance
Share Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE AMENDED PERFORMANCE SHARE PLAN.
PROPOSAL TO APPROVE THE
AMENDED OPTION INCENTIVE PLAN
(ITEM D ON PROXY CARD)
The Board of Directors has amended and restated the Allegheny Ludlum
Corporation Stock Option Incentive Plan (the "Amended Option Incentive Plan"),
subject to approval by the shareholders.
The following is a summary of the principal provisions of the Amended
Option Incentive Plan. The full text of the Amended Option Incentive Plan is
attached hereto as Exhibit C and should be referred to for a complete
description of its provisions.
Background. The original Stock Option Incentive Plan was adopted and
approved by the Company's shareholders in March 1987. The original Plan had a
term of approximately ten years and will expire January 1, 1997. As of March 6,
1996, only 1,038,825 shares of Common Stock were available for issuance under
the Stock Option Incentive Plan. It is anticipated that a regular grant of
options will be made in the 1996 fiscal year. In the last regular grant of
options in 1993, options to purchase 620,400 shares of Common Stock were issued
under the Plan.
The Board of Directors has determined that it is in the best interests of
the Company and the shareholders to extend the term of the Plan for an
additional ten years and to authorize additional shares of Company Common Stock
for issuance under the Plan. The Amended Option Incentive Plan also contains
provisions intended to permit the Company to qualify for a Federal tax deduction
for awards thereunder.
Purpose and Administration. The Amended Option Incentive Plan is intended
to promote the growth and profitability of the Company, to provide key employees
of the Company with an incentive to achieve long-term corporate objectives and
to provide such key employees with an equity interest in the Company.
Under the Amended Option Incentive Plan, the number of shares reserved for
issuance under the Plan would be increased from 2,700,000 to 5,400,000 shares.
The Amended Option Incentive Plan will be administered by the Committee.
The Committee has the authority to prescribe the terms of awards (including
vesting), to interpret the Amended Option Incentive Plan and to make all other
determinations necessary for the administration of the Plan.
Plan Provisions. The Amended Option Incentive Plan provides for both
nonstatutory stock options ("Stock Options") and stock appreciation rights
("SARs"). The Board of Directors, upon recommendations by the Chief Executive
Officer and the Committee, designates which key employees of the Company, in
addition to the Company's executive officers, are eligible to participate in the
Amended Option Incentive Plan. The Committee may grant Stock Options and SARs to
any executive officer of the Company and may, upon the recommendation of the
Chief Executive Officer, grant Stock Options and SARs to any other eligible key
employee.
18
<PAGE>
Approximately 82 employees are presently eligible to receive awards under the
Option Incentive Plan. Directors who are not also employees of the Company are
not eligible to participate in the Option Incentive Plan.
Stock Options may be granted at any option price as determined by the
Committee in accordance with the Amended Option Incentive Plan but the option
price must be no less than the fair market value of the shares covered by the
option at the time of the grant. The mean between the high and low sales prices
of a share of Company Common Stock on the New York Stock Exchange on March 7,
1996 was $19.
The exercise of a Stock Option is subject to terms and conditions
established by the Committee and set forth in an option agreement between the
Company and the optionee. Stock Options may be exercised by the payment of cash,
surrender of shares of Common Stock or a combination of cash and Common Stock,
equal to the exercise price. In certain circumstances, the option agreement may
provide for a variable price option whereby the exercise price declines as the
fair market value of the Common Stock increases, but in no event may the
exercise price be less than $1.00 per share.
Historically, options have been granted to key employee participants in the
Plan at three-year intervals. Options granted at the three year intervals have
been made exercisable in three equal annual installments beginning in the third
year after the grant. From time to time, interim awards have been made in the
case of a new employee, promotion or a significant increase in responsibilities.
SARs may be granted at an initial price not less than the fair market value
of a share of Common Stock on the date of grant. The holder of an SAR is
entitled to surrender the SAR, or any portion thereof, and to receive the
difference between the fair market value of the shares of Common Stock subject
to the surrendered SAR at the time of surrender and the initial grant price of
the SAR. The surrender of SARs is subject to terms and conditions established by
the Committee and set forth in an SAR agreement between the Company and the
participant. The Company, at the sole discretion of the Committee, may pay such
difference either by delivery of shares of Common Stock or in cash.
Except in the event of retirement with the consent of the Company, death or
disability of the participant, all Stock Options and SARs terminate upon the
participant's termination of employment with the Company. In the event of
retirement with the consent of the Company, death or disability of a participant
prior to fully exercising or surrendering the vested portion of a Stock Option
or SAR, no additional Stock Options or SARs are to vest. The participant or the
participant's estate, however, has the right to exercise outstanding and
exercisable Stock Options and SARs at any time prior to the earlier of the
expiration of the Stock Options or SARs or the third anniversary of the date of
retirement, death or disability.
Certain provisions are included in the Amended Option Incentive Plan to
permit the Company to qualify for a Federal tax deduction for awards to each
person who is a "named executive officer" covered by Section 162(m) of the Code,
which includes the Covered Employees. For example, the Amended Option Incentive
Plan provides that the maximum individual award payable to a Covered Employee
shall not exceed 100,000 shares of Company Common Stock.
The Board of Directors may at any time amend or terminate the Amended
Option Incentive Plan without the consent of the shareholders, except that no
amendment may be made, without the affirmative approval of the shareholders,
which would increase the number of shares available for issuance under the
Amended Option Incentive Plan, which would extend the term of the Plan or which
would extend the period during which Stock Options or SARs may be exercised
under the Plan.
The Summary Compensation Table, the table entitled "Aggregate Option/SAR
Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values" and the
description of "Long-Term Incentives" in the "Board
19
<PAGE>
Compensation Committee Report on Executive Compensation" at page 24 contain
additional information about Stock Options awarded under the Option Incentive
Plan. Because the issuance of Stock Options and SARs under the Amended Option
Incentive Plan is in the discretion of the Committee, the amount of Stock
Options and SARs to be awarded in the future with respect to any current
participant in the Plan cannot presently be determined.
Federal Income Taxation. A grantee of a Stock Option will not realize any
taxable income upon the grant of the stock option. Generally, when a participant
exercises the stock option, the amount by which the fair market value (on the
exercise date) of the shares of Common Stock covered by the stock option exceeds
the aggregate exercise price of those shares must be treated as income received
by the participant in the year of exercise, and will be subject to tax at
ordinary income tax rates. Tax withholding is required on such income. If the
participant thereafter sells the shares received upon exercise of the stock
option, the difference between any amount realized and the fair market value of
these shares at the time the stock option was exercised will be taxed as capital
gain or loss, which will be short-term or long-term depending on the length of
time he or she held these shares before sale.
The Company will be entitled to a deduction for Federal income tax purposes
at the same time and in the same amount as the employee is considered to have
realized ordinary income in connection with the exercise of a stock option.
Effective Date and Term of Amended Option Incentive Plan. Under the
proposed amendments, which will become effective on May 17, 1996 if approved at
the Annual Meeting, the term of the Option Incentive Plan will be extended ten
years so that it will terminate on January 1, 2007.
Vote by Shareholders. The Amended Option Incentive Plan will be approved if
it receives the affirmative vote of a majority of the shares of Common Stock
present or represented and entitled to vote at the Annual Meeting. An abstention
will have the same effect as a vote against the Amended Option Incentive Plan.
Broker non-votes will be treated as shares that are not entitled to vote for
this purpose. Unless otherwise directed in the proxy card, the persons named in
the proxy card will vote for the proposal to approve the Amended Option
Incentive Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE AMENDED OPTION INCENTIVE PLAN.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
(ITEM E ON PROXY CARD)
Ernst & Young LLP has served as independent auditors for the Company since
1980. The Board of Directors believes that Ernst & Young LLP is knowledgeable
about the Company's operations and accounting practices and is well qualified to
act in the capacity of independent auditors; therefore, it has selected that
firm as independent auditors for fiscal year 1996. The proposal to ratify the
selection of Ernst & Young LLP will be approved by the shareholders if it
receives the affirmative vote of a majority of the votes actually cast by
shareholders entitled to vote on the proposal. If your proxy card is
specifically marked as abstaining from voting on the proposal, your shares will
not be counted as having been voted for or against the proposal. If the
shareholders do not ratify the selection of Ernst & Young LLP, the appointment
of independent auditors will be reconsidered by the Board. It is expected that
representatives of Ernst & Young LLP will be present at the Annual Meeting and
will have an opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF
THE SELECTION OF
ERNST & YOUNG LLP AS INDEPENDENT AUDITORS.
20
<PAGE>
OTHER BUSINESS TO COME BEFORE THE MEETING
In addition to the matters described above, there will be addresses by
Richard P. Simmons, Chairman of the Board of the Company, and by Arthur H.
Aronson, President and Chief Executive Officer of the Company, and a general
discussion period during which the shareholders will have an opportunity to ask
questions about the Company and its business.
The Company knows of no business which may be presented for consideration
at the Annual Meeting other than as indicated in the Notice of Annual Meeting.
If any other business should properly come before the meeting, the persons
designated as proxies in the proxy cards have discretionary authority to vote in
accordance with their best judgment.
EXECUTIVE COMPENSATION
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The principal duties of the Personnel and Compensation Committee of the
Board of Directors (the "Committee") are described on page 10. These duties
include the making of recommendations to the Board concerning the compensation
and benefits of executives who are also directors of the Company (currently,
Messrs. Aronson and Murdy). The Committee also consults periodically with the
Company's Chief Executive Officer concerning the compensation and benefits of
other executive officers of the Company.
The following is the Committee's report to the shareholders with respect to
the Company's executive compensation policies and with respect to the
compensation of the Chief Executive Officer for fiscal year 1995. In accordance
with the rules of the Securities and Exchange Commission, this report shall not
be incorporated by reference into any of the Company's Registration Statements
under the Securities Act of 1933.
EXECUTIVE OFFICERS' COMPENSATION POLICY
The Company's executive compensation program is strongly oriented toward
incentives designed to achieve specific corporate performance objectives so that
the interests of management will be further aligned with the interests of the
Company's shareholders. The twin goals of the program are to reward the
Company's key employees appropriately for their contributions in years in which
the Company has had significant success, and conversely to impact their
compensation negatively when the Company has been less successful. A meaningful
and substantial portion of an executive's total cash compensation is at risk due
to the variable nature of the incentives.
The Committee shares management's view that the Company's executive
compensation program is an important component in the implementation of the
Company's overall business plans and management philosophy. The Company believes
that its annual and long-term strategic plans should reflect
difficult-to-achieve standards and objectives and that the performance
objectives of its key employees, including its executive officers, should be
linked directly to the Company's plans. The Company also believes that effective
management requires the timely measurement of performance.
Under Section 162(m) of the Code, enacted as part of the Omnibus Budget
Reconciliation Act of 1993 (the "Act"), compensation paid to certain executive
officers of the Company in excess of $1 million in any year may be
non-deductible for Federal income tax purposes unless the compensation qualifies
as "performance-based" compensation or is otherwise exempt under the law. The
Company's Performance Share Plan for Key Employees and the Company's Stock
Option Incentive Plan, as amended and restated, which are intended to meet the
21
<PAGE>
deductibility requirements of the regulations promulgated under the Act, are
being submitted to the shareholders for approval. See "Proposal to Approve the
Amended Performance Share Plan" and "Proposal to Approve the Amended Option
Incentive Plan" above. The Committee is reserving the flexibility to determine
in any year in light of all applicable circumstances that it would be in the
best interests of the Company for an award or awards to be paid under such plans
or otherwise in a manner that would not satisfy the requirements of Section
162(m) and its regulations for deductibility.
BASE SALARY
The base salary component of the Company's compensation program for all
salaried employees, including executive officers, represents the basic rate of
pay provided to an employee for carrying out the overall responsibilities of the
job. Base salary is determined on the basis of performance, experience and other
factors as may be appropriately considered. The base salary for each executive
officer does not exceed the established salary range which is intended to
approximate the ranges of base pay for positions of comparable responsibility in
other companies in the steel industry about which appropriate compensation
information is available to the Company. The minimum base salary specified in
the employment agreement of Mr. Aronson described at page 31 below reflects this
policy. The Company believes that the base salaries of its executive officers
have generally been at or below the median of the base salaries for executive
officers of those steel companies.
The base salary of each executive officer is reviewed on a periodic basis.
Merit increases reflect the officer's individual performance and are based on an
evaluation of (i) the officer's performance in relation to standards which
describe, in measurable terms, the results needed to satisfy the general
responsibilities of the job and
(ii) personal traits and characteristics. The merit program is designed to
reward better performers with larger percentage increases as well as to
recognize employment market conditions. Other increases in base salary are made
to reflect changes in the officer's responsibilities.
INCENTIVE PROGRAMS
It is intended that the incentive payments made to the Company's executive
officers and other key employees, in the form of cash and/or securities, may
vary significantly from year to year, depending upon the results that have been
achieved for the benefit of the Company's shareholders. Short-term incentive
payments represent specific payments for the achievement of measurable
short-term objectives and recognize both the overall performance of the Company
and the performance of individual officers in a given year. Long-term incentives
are designed to reward the accomplishment of specified long-term objectives and
further align management's goals with those of the shareholders through Company
stock ownership.
Profit-Sharing Plan. Incentives to maximize the annual profits of the
Company are provided by the Profit Sharing Plan for all salaried and hourly
employees, including executive officers. Under this plan, bonuses are paid from
a profit-sharing pool which is based on specified percentages of the Company's
pre-tax income in excess of $60 million. Each year, each participant may receive
a cash bonus equal to a percentage of his or her participating wages as defined
in the plan.
Performance Management System Plan. The Company's Performance Management
System Plan is designed to provide additional incentives to executive officers
and other key employees to maximize the Company's annual performance. Funds are
accrued for this plan if the adjusted earnings of the Company are greater than
$10 million. In general, the principal adjustments to earnings include the
adding back of accruals to the Performance Management System Plan, taxes on
income and interest expense.
22
<PAGE>
The plan is administered according to the Company's Performance Management
System, which provides a corporate-wide system for planning and measuring the
performance of all participating employees, including Messrs. Aronson, Murdy,
Rutherford, Wagner and Shilling. (Approximately 100 employees were eligible to
participate in the plan in 1995.) Under this system, incentive compensation
awards are to be based on the achievement of specific, measurable objectives.
Objectives are to be linked specifically and directly to operating plans and
budgets.
Guideline incentives are established under the plan to reflect the size of
the award that can be expected when performance meets the objectives. Guideline
incentives have been established for each position included in the plan and are
expressed as a percentage of salary. Incentive opportunities are designed to be
large enough to provide a meaningful award. Because executive officers have a
greater impact on performance, they have a greater incentive opportunity as a
percentage of salary. All participants in the plan can earn up to twice the
guideline amount, depending upon corporate and individual performance.
Each year, performance objectives are set under the Performance Management
System Plan for each eligible employee in the areas of operating profit, return
on investment or working capital, and individual performance. Other financial
measurement objectives, such as reductions in inventory, inventory turns or
delivery performance, may also be included when determined to be appropriate.
Individual performance objectives are tailored to the individual position.
Operating profit, return on investment or working capital, and other financial
measurement objectives are set at the corporate level. The Committee shares
management's view that every effort should be made to formulate corporate as
well as individual performance objectives in quantitative terms to provide a
basis for more accurate performance evaluation.
The weight given to each performance goal varies depending on the nature
and level of the position and the strategic importance of the objective. The
relative weights are intended to identify the priority given to any given
objective. To emphasize the direction of the Company's strategic plans, 75
percent of the weight given to the performance goals is given to current overall
corporate financial objectives, while 25 percent of the weight is given to
measurable individual performance objectives.
The actual amount of an award under the Performance Management System Plan
is determined through a quantitative assessment of the employee's performance as
measured against the specific objectives for the employee's position. The
Committee can modify individual awards to recognize outstanding performance even
where individual objectives were not met due to changing business priorities.
The Committee can also modify awards in instances where a participant performs
at less than satisfactory levels even though the individual may have achieved
the pre-determined objectives.
Long-Term Incentives. Awards under the Company's Performance Share Plan for
Key Employees (the "Performance Share Plan"), stock grants under the 1987 Stock
Option Incentive Plan (the "Option Incentive Plan") and participation in the
Stock Acquisition and Retention Plan (the "SARP") are designed to provide
additional incentives to achieve long-term corporate objectives and to further
align management's goals with those of the shareholders.
Under the Performance Share Plan, base value award amounts for each
executive officer and other key employees are established at the beginning of
each award period. For example, in November 1994, the Board of Directors
established fiscal years 1995-1996 as an award period. The Committee granted
awards to key employee participants in the plan, which established as the
performance objective for the 1995-1996 award period a specified amount of
operating income to be achieved by the Company over the two-year award period.
The base value of the award for each unit awarded, assuming targeted operating
income is achieved, is $50 and four shares of Company Common Stock. The amount
of the award generally depends on the executive's salary grade at the
23
<PAGE>
beginning of the award period, which is based on the degree of responsibility
associated with the executive's position in the Company. The amount of the award
for each salary grade was established in 1987, upon the adoption of the
Performance Share Plan. After the end of the award period, the Committee will
determine the actual awards, based on the extent to which the targeted income
level was achieved. Participants will not receive any payment of stock or cash
under the plan if the Company does not achieve the threshold level (80%) of its
performance objectives during the award period. Actual award amounts will be
paid in three annual payments beginning in the year after the end of the award
period.
Awards under the Performance Share Plan, which are to be earned and paid
out over a number of years, are designed to give participants an ongoing
incentive to achieve long-term corporate objectives and to continue the
alignment of the interests of participants with the interests of Company
shareholders in enhancing the value of Company Common Stock, even after the
award has been earned. The multi-year award and payout periods are also designed
to assist in the retention of executive officers and other key employees, since
unpaid installments are forfeited if a participant's employment with the Company
terminates, unless the participant dies, is disabled, or retires with the
consent of the Chief Executive Officer.
Awards under the Option Incentive Plan are also designed to promote the
identity of the long-term interests between Company executives and its
shareholders and assist in the retention of executives. Historically, the
Committee has granted options to key employee participants in the Option
Incentive Plan, including executive officers, at three-year intervals. Options
granted at the three-year intervals have been made exercisable in three equal
annual installments beginning in the third year after the grant. The last
regular grant of options was made in 1993. The first one-third of these options
will become exercisable after May 31, 1996.
The amount of an option award generally depends on the executive's salary
grade, which is based on the degree of responsibility associated with the
executive's position. The amount of the award for each salary grade was
determined in 1987, upon the adoption of the Option Incentive Plan. From time to
time, interim awards have been made in the case of a new employee, promotion or
a significant increase in responsibilities. The number and value of options held
by an executive officer are generally not considered when determining the amount
of options to be granted to that officer. The number of options held by an
executive officer may be considered in the case of a promotion or significant
increase in responsibilities after the regular grant of options that occurs at
three-year intervals; in that case, additional options may be added to the
options granted to the officer at the beginning of the three-year period to
reflect the change in the officer's salary grade or responsibilities.
The SARP was approved by the Company's Board of Directors and adopted by
the shareholders in 1994. This plan is based on the Company's belief that
ownership of Common Stock by officers contributes to strong management by
further aligning the interests of management with those of the shareholders of
the Company. The plan is intended to provide participating officers with an
opportunity to purchase additional shares of Common Stock from the Company and
an incentive to retain ownership of such purchased shares and/or other shares
already owned or otherwise acquired by them. It provides this incentive by
offering participants an opportunity to receive grants of restricted shares of
Common Stock which will vest only if the participants retain the shares that are
purchased under the plan and/or other shares already owned or otherwise acquired
by the participants that are designated by them as subject to the plan. In
general, the restricted shares will vest only if the participant retains the
shares that are purchased and/or designated by the participant as subject to the
plan for a period of five years. The vesting period is shortened in the event of
death, retirement or a "change of control" of the Company as defined in the
plan. All executive officers of the Company who are eligible to participate in
the SARP, including Messrs. Aronson, Murdy, Rutherford, Wagner and Shilling,
elected to participate in the Plan for the 1995 plan year.
24
<PAGE>
Shares issuable under the Performance Share Plan, the Option Incentive Plan
and the SARP are intended to grow in value over time. In the Committee's view,
the share awards under these plans represent compensation which is attributable
to services performed by the employee from the time the award is made and so
long as the employee continues to own the shares.
The Committee also has the discretion to make supplemental awards in
situations in which it deems such awards to be appropriate. In February 1994,
the Committee made cash awards to a total of 43 management personnel to
recognize the contributions of such individuals on behalf of the Company during
1991-1993. The awards were made payable in installments during the first quarter
of 1994, 1995 and 1996.
COMPENSATION OF THE COMPANY'S CHIEF EXECUTIVE OFFICER
As previously noted, the base salaries of the Company's executive officers,
including the Chief Executive Officer, do not exceed established salary ranges
which are intended to reflect the ranges of base pay for positions of comparable
responsibility in other companies in the steel industry. The specific amount of
base salary is determined on the basis of performance, experience and other
factors as may be considered appropriate.
Mr. Aronson was elected President and Chief Executive Officer of the
Company effective August 1, 1994. His base salary was increased from $300,000 to
$400,000, effective January 1, 1996. In discussing the proposed increase, the
Committee reviewed the Company's compensation policy regarding the balance
between base salary and bonus and Mr. Aronson's performance as the Company's
President and Chief Executive Officer. It also considered published information
regarding the compensation paid to chief executive officers in the steel
industry, U.S. industry and in manufacturing. This review indicated that Mr.
Aronson's base salary, as increased, would remain at or below the median of the
base salaries of chief executive officers of the companies reviewed by the
Committee. It was also noted that, in accordance with the Company's compensation
philosophy, a substantial portion of Mr. Aronson's compensation would depend on
the performance of the Company.
Short-term incentive compensation is generally provided to the Company's
Chief Executive Officer through his participation in the Performance Management
System ("PMS") Plan which is described on page 22. Incentives under this Plan
represent specific payments for achievement of measurable results that are
designed to move the Company toward current financial goals and strategic
objectives, as agreed upon in the performance planning process.
Guideline incentives, which reflect the size of the award that can be made
when performance meets objectives, have been developed for the Chief Executive
Officer as well as for all other positions included in the PMS Plan. Because of
the impact that the Chief Executive Officer has on the performance of the
Company, a significant portion of Mr. Aronson's total compensation is at risk.
Corporate and individual performance objectives for the 1995 fiscal year
were set for Mr. Aronson in the early part of 1995. Corporate goals were based
on the achievement of specific levels of operating profit and inventory turns
and the achievement of specific delivery performance targets. Mr. Aronson's
corporate performance objectives were based on the overall performance of the
Company in meeting its financial goals. Mr. Aronson's individual performance
objectives were based on the individual performance of the officers who report
directly to him. To emphasize the direction of the Company's strategic plans, 75
percent of the weight given to the performance goals is given to corporate
financial objectives, while 25 percent of the weight is given to individual
performance objectives.
In December 1995, the Committee determined the amount of the incentive
award paid to Mr. Aronson under the PMS Plan for the 1995 fiscal year through a
quantitative assessment of Mr. Aronson's performance as
25
<PAGE>
measured against his performance standards. In reviewing Mr. Aronson's
performance, the Committee noted that in 1995, the Company had reported its
strongest earnings in six years and that the Company had taken actions to
upgrade its product mix as well as improve productivity and delivery
performance. The Committee discussed the strong and effective leadership that
Mr. Aronson had shown as the Company moved from addressing the challenges it
faced at the end of the 10-week labor strike in 1994 into the period of robust
demand for specialty materials that had occurred during the 1995 fiscal year.
The Committee reviewed the actions the Company had taken, under Mr. Aronson's
leadership, to enhance the Company's performance and financial strength during
the 1995 fiscal year. The Committee noted that, based on the incentive plan
guideline for Mr. Aronson under the PMS Plan, which was based on the strong
performance of the Company's other senior officers in meeting the performance
objectives established for them under the PMS Plan for the 1995 fiscal year, the
PMS award for Mr. Aronson would be $283,680. Following discussion, however,
taking the foregoing and other appropriate factors into account, including the
strength of the Company's performance during the 1995 fiscal year and the
significant contributions Mr. Aronson had made to that performance, the
Committee determined that the incentive award paid to Mr. Aronson under the PMS
Plan for the 1995 fiscal year would be increased to $350,000. The Board of
Directors approved the Committee's decision.
Long-term incentives are provided to Mr. Aronson through his participation
in the Performance Share Plan, the Option Incentive Plan and the SARP. The LTIP
amounts in the Summary Compensation Table on page 27 represent the payment of
awards under the Performance Share Plan that Mr. Aronson earned prior to the
time he became the Company's Chief Executive Officer.
No awards were made to Mr. Aronson under the Option Incentive Plan during
1995.
In 1995, Mr. Aronson elected to designate 8,958 shares of Common Stock as
subject to the SARP. As a result of his election, he received an award of 4,479
restricted shares under the SARP. As previously noted, the restricted shares
will vest five years after the date of grant on the terms and conditions set
forth in this Plan. In general, Mr. Aronson must continue to hold the shares he
designated as subject to the SARP for this five year period. If he does not, the
restricted shares he received under the plan will be forfeited.
The foregoing report has been furnished by the members of the Personnel and
Compensation Committee:
<TABLE>
<S> <C>
Charles J. Queenan, Jr. C. Fred Fetterolf
Thomas Marshall W. Craig McClelland
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Personnel and Compensation Committee during fiscal year
1995 was an officer or employee of the Company. The Company retained the law
firm of which Mr. Queenan was a member to perform services for the Company
during fiscal years 1995 and 1996. Mr. Queenan has been senior counsel of that
firm since January 1, 1996. Other than as indicated in the preceding sentences,
no member of the Committee during fiscal year 1995 had a current or prior
relationship to the Company, and no executive officer of the Company had a
relationship to any other company, required to be described under the proxy
rules relating to executive compensation.
26
<PAGE>
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following Summary Compensation Table shows, for fiscal years 1993, 1994
and 1995, the compensation paid to the Chief Executive Officer of the Company
and to each of the other four most highly compensated executive officers who
were serving as executive officers as of December 31, 1995 (the "named executive
officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------- ------------------------ -------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPEN- AWARD OPTIONS/SARS PAYOUTS COMPENSATION
PRINCIPAL POSITIONS YEAR ($)(2) ($)(3) SATION ($) ($)(4) (POUND)(5) ($)(6) ($)(7)
- ------------------- ---- ------ ------ ---------- --------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Arthur H. Aronson 1995 $ 300,000 $ 374,870 $ 28,955 $ 87,341 0 shs. $ 204,021 $ 206,496
President and Chief 1994 260,417 0 5,676 125,356 0 205,624 248,492
Executive Officer (1) 1993 250,000 193,634 36,000 151,625 121,310
James L. Murdy 1995 $ 238,706 $ 203,114 $ 10,574 $ 223,576 0 shs. $ 164,791 $ 118,027
Senior Vice President- 1994 219,889 0 10,937 0 0 166,086 122,865
Financial and Chief 1993 215,050 148,587 28,000 164,188 72,123
Financial Officer
Robert W. Rutherford 1995 $ 175,000 $ 127,698 $ 12,679 $ 85,895 0 shs. $ 149,103 $ 75,384
Senior Vice President- 1994 158,038 0 12,968 0 1,867 150,275 81,532
Commercial 1993 152,000 82,618 25,200 151,625 42,890
Harry R. Wagner 1995 $ 165,000 $ 122,619 $ 4,032 $ 82,499 0 shs. $ 149,103 $ 56,138
Senior Vice President- 1994 144,238 0 3,370 67,788 1,867 150,275 56,521
Operations 1993 134,400 80,390 25,200 164,188 28,501
Jack W. Shilling 1995 $ 155,000 $ 117,009 $ 7,478 $ 138,179 0 shs. $ 149,103 $ 55,518
Senior Vice President- 1994 132,033 0 7,066 0 1,867 150,275 56,037
Technical 1993 124,521 65,546 25,200 45,488 30,256
</TABLE>
(1) Mr. Aronson was elected President and Chief Executive Officer of the
Company effective August 1, 1994. For a description of the Company's
employment agreement with Mr. Aronson, see page 31.
(2) Includes cash compensation deferred pursuant to the Savings part of the
Company's Retirement Savings Plan, described in note (7) below. 1994
amounts reflect reductions in salary during the 10-week labor strike called
by the United Steelworkers of America on April 1, 1994. For the months of
April and May, 1994, the base salary of each of the named executive
officers was reduced 25%.
(3) Includes payments under the Company's Performance Management System Plan
and payments under the salaried employees' profit-sharing plan, described
in the "Board Compensation Committee Report on Executive Compensation." In
fiscal year 1994, as a result of the 10-week labor strike called by the
United Steelworkers of America on April 1, 1994, the Company did not
achieve the threshold level of earnings under either of these plans and, as
a result, no awards were paid under the plans.
(4) Represents the closing market price on the New York Stock Exchange, on the
award date, of a number of shares of Common Stock equal to the number of
shares of restricted stock awarded to the named executive under the
Company's Stock Acquisition and Retention Plan, which was approved by the
Company's shareholders at the 1994 Annual Meeting. The market price does
not take into account the diminution in value attributable to the
restrictions applicable to the shares awarded under the Plan. See page 24
for a
27
<PAGE>
summary description of this Plan. In general, the restricted shares will
vest only if the participant retains the shares that are purchased and/or
designated by the participant as subject to the Plan for a period of five
years. Dividends are paid on all shares of restricted stock at the same
rate as on non-restricted shares. The number of restricted shares of Common
Stock held by each named executive officer in fiscal year 1995 under the
Plan and the closing market price of that number of shares on the New York
Stock Exchange on December 29, 1995 were: Mr. Aronson, 10,413 shares,
$192,641; Mr. Murdy, 11,796 shares, $218,226; Mr. Rutherford, 4,190 shares,
$77,515; Mr. Wagner, 7,302 shares, $135,087; and Mr. Shilling, 7,548
shares, $139,638.
(5) Reflects options awarded under the Company's Stock Option Incentive Plan.
The amount represents the number of shares which the executive officer
could purchase by exercising the options.
(6) Payments in fiscal years 1994 and 1995 reflect the achievement of 97% of
the performance objectives for the 1991-1993 award period under the
Company's Performance Share Plan for Key Employees. Payment of the awards
to the 43 participants over a three-year period began in 1994. Payments in
fiscal year 1993 reflected the achievement of 120% of the performance
objectives for the 1988-1990 award period under the Performance Share Plan.
Payment of the awards to the 47 participants over a three-year period began
in 1991 and ended in 1993. In each case, the amount represents the cash and
the market value of the shares of Common Stock distributed under the Plan
on the relevant valuation dates.
(7) These amounts include the annual accruals made by the Company with respect
to possible future payments to the named executive officers under the
Company's Supplemental Pension Plan described at page 30. For fiscal year
1995, the amounts accrued were as follows: Mr. Aronson, $146,556; Mr.
Murdy, $69,650; Mr. Rutherford, $37,295; Mr. Wagner, $19,594; and Mr.
Shilling, $20,559. Also included are the Company's contributions to the
accounts of the named executive officers pursuant to the Retirement portion
of the Company's Retirement Savings Plan which in fiscal year 1995 were as
follows: Mr. Aronson, $8,020; Mr. Murdy, $8,251; Mr. Rutherford, $8,751;
Mr. Wagner, $8,826; and Mr. Shilling, $8,901. Also included are the
Company's contributions to the accounts of the named executive officers
pursuant to the Savings part of the Company's Retirement Savings Plan which
in fiscal year 1995 were as follows: Mr. Aronson, $4,500; Mr. Murdy,
$4,620; Mr. Rutherford, $4,594; Mr. Wagner, $4,606; and Mr. Shilling,
$4,585. The amounts also include contributions by the Company to the plan
accounts of the named executive officers under the Company's Benefit
Restoration Plan which, in fiscal year 1995, were as follows: Mr. Aronson,
$21,706; Mr. Murdy, $13,734; Mr. Rutherford, $6,517; Mr. Wagner, $4,931;
and Mr. Shilling, $3,332. For fiscal year 1995, also included are the
dollar values of the benefits to the named persons of the Company-paid
premiums for "split dollar" term life insurance as follows: Mr. Aronson,
$6,864; Mr. Murdy, $6,547; Mr. Rutherford, $4,452; Mr. Wagner, $4,406; and
Mr. Shilling, $4,366. For fiscal 1995, the amounts also include the second
of three annual installments of cash awards made by the Personnel and
Compensation Committee during the first quarter of 1994 to a total of 43
management personnel, including the named executive officers, in order to
recognize their contributions on behalf of the Company during 1991-1993, as
follows: Mr. Aronson, $18,850; Mr. Murdy, $15,225; Mr. Rutherford, $13,775;
Mr. Wagner, $13,775; and Mr. Shilling, $13,775. See page 25.
The Retirement Savings Plan is a qualified defined contribution plan within
the meaning of Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). The Plan has two components: the Retirement part and
the Savings part. Employees eligible for the Retirement part of the
Company's Retirement Savings Plan include all salaried non-union employees.
At the end of 1995, a total of 1,770 employees participated in the
Retirement part of the Plan. The Savings part of the Retirement Savings
Plan
28
<PAGE>
is designed to encourage eligible employees to save for the future and
accumulate a fund to supplement retirement income through tax-deferred
contributions. All contributions by the Company or by participants are subject
to the applicable limits of the Code. The Company matches participants' Basic
Savings contributions on the terms set forth in the Plan. Company contributions
and earnings are invested only in a fund invested solely in Common Stock of the
Company, but may be transferred to any other fund available under the Plan
monthly following due notice. In 1995, a total of 1,526 employees participated
in the Savings part of the Plan.
The Benefit Restoration Plan provides that the Company will supplement the
payments received by participants in the Company's Pension Plan for Salaried
Employees (see "Pension Plans" below) and the Retirement and Savings parts of
the Retirement Savings Plan by making payments to or accruing benefits on behalf
of such participants in amounts which are the equivalent of the portion of the
payments or benefits which cannot be paid or accrued under such plans by reason
of the limitations imposed by the Code.
Compensation and benefits paid or furnished by the Company in the fiscal
years set forth in the above table to the executive officers, other than as set
forth in the table, were less than established reporting thresholds.
STOCK OPTIONS
No stock options or stock appreciation rights were granted to any of the
executive officers named in the Summary Compensation Table during fiscal year
1995 under the Company's Stock Option Incentive Plan.
The following table sets forth information regarding the exercise of stock
options during fiscal year 1995 and the unexercised options held as of the end
of the 1995 fiscal year by the executive officers named in the Summary
Compensation Table. No stock appreciation rights ("SARs") were exercised by any
of the named executive officers and none of the named executive officers held
any unexercised SARs at the end of the fiscal year.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/
SHARES OPTIONS/SARS AT FY-END (POUND) SARS AT FY-END ($)(2)
ACQUIRED ------------------------------ --------------------------
NAME ON EXERCISE (POUND) VALUE REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------------- --------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Arthur H. Aronson 0 0 63,000 shs. 36,000 shs. $ 533,273 $ 0
James L. Murdy 0 0 9,334 28,000 74,089 0
Robert W. Rutherford 12,126 shs. $ 175,615 25,200 27,067 200,025 0
Harry R. Wagner 0 0 28,800 27,067 224,640 0
Jack W. Shilling 8,400 shs. 101,325 18,525 27,067 129,728 0
</TABLE>
(1) The amount shown as "value realized" is calculated by subtracting the
exercise price paid by an optionee upon exercise of an option from the mean
between the high and low sales prices of a share of Allegheny Ludlum
Corporation Common Stock on the New York Stock Exchange on the date the
option was exercised.
(2) The "value of unexercised in-the-money options" is calculated by
subtracting the exercise price from $18.6875, which was the mean between
the high and low sales prices of a share of Allegheny Ludlum Corporation
Common Stock on the New York Stock Exchange on December 29, 1995, the last
trading day in the Company's 1995 fiscal year.
29
<PAGE>
PENSION PLANS
In 1988, the Company adopted the Retirement part of the Retirement Savings
Plan (formerly known as the Retirement Security Program) referred to in note (7)
on page 28, and amended the Company's Pension Plan for Salaried Employees (the
"Pension Plan") to provide that no additional benefits would accrue thereunder
from and after December 31, 1988 except for those employees who were
grandfathered under the Pension Plan. Benefits accrued prior to January 1, 1989
will be paid at the time, in the form and in the amount determined under the
Pension Plan.
The following table shows the estimated annual benefits calculated on a
straight life annuity basis payable under the Pension Plan and the defined
benefit portion of the Benefit Restoration Plan described at note (7) on page 28
to participants in specified compensation and years of service classifications
upon attainment of age 65.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE ANNUAL ELIGIBLE EARNINGS FOR
HIGHEST FIVE CONSECUTIVE YEARS IN
TEN-YEAR PERIOD PRECEDING ESTIMATED ANNUAL PENSION BENEFITS FOR
RETIREMENT REPRESENTATIVE YEARS OF CONTINUOUS SERVICE
- ------------------------------------- ---------------------------------------------------------------------
15 20 25 30 35 40
-- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
$ 200,000 $ 48,000 $ 64,000 $ 80,000 $ 96,000 $112,000 $128,000
300,000 72,000 96,000 120,000 144,000 168,000 192,000
400,000 96,000 128,000 160,000 192,000 224,000 256,000
500,000 120,000 160,000 200,000 240,000 280,000 320,000
600,000 144,000 192,000 240,000 288,000 336,000 384,000
800,000 192,000 256,000 320,000 384,000 448,000 512,000
1,000,000 240,000 320,000 400,000 480,000 560,000 640,000
</TABLE>
The formula used to determine retirement benefits under the Pension Plan
considers the participant's average annual eligible earnings in the highest five
consecutive years of the last ten years prior to retirement and the number of
the participant's years of service. Eligible earnings include base salary,
including tax-deferred contributions by the employee under the Company's savings
plans, and awards when received under the Performance Management System Plan.
Eligible earnings for the purposes of the Pension Plan and the defined benefit
portion of the Benefit Restoration Plan for the 1995 calendar year for the named
executives who are participants under the Pension Plan are as follows: Mr.
Aronson, $318,850; Mr. Murdy, $253,931; Mr. Rutherford, $188,775; Mr. Wagner,
$178,775; and Mr. Shilling, $168,775.
In certain circumstances, pension benefits are subject to integration with
Social Security and reduction for other payments made to the participant or his
or her spouse. The benefits payable from a qualified defined benefit plan are
also limited by Section 415 of the Code to an annual benefit of $120,000 payable
at age 65 with actuarial reduction for earlier commencement. The amounts shown
in the table indicate the aggregate of payments under the Pension Plan and the
defined benefit portion of the Benefit Restoration Plan described at note (7) on
page 28.
As of December 31, 1995, Messrs. Aronson, Murdy, Rutherford, Wagner, and
Shilling had .08, 0.58, 32, 29 and 23 credited years of service, respectively,
for purposes of the Pension Plan. For vesting purposes, Messrs. Aronson and
Murdy each had 7 years of service and are fully vested in the Pension Plan.
In addition, the Company has established a Supplemental Pension Plan which
provides certain key employees of the Company (or their beneficiaries in the
event of death) with monthly payments in the event of retirement, disability or
death, equal to 50 percent of monthly base salary as of the date of retirement,
disability
30
<PAGE>
or death. Monthly retirement benefits start two months following the later of
(i) age 62, if actual retirement occurs prior to age 62 but after age 58 with
the approval of the Board of Directors, or (ii) the date actual retirement
occurs, and continue for a 118-month period. The Plan describes the events which
will terminate an employee's participation in the Plan. Since the payment of
benefits to the named executive officers is contingent on future events, the
amount to be paid in the future with respect to such officers cannot be
determined at this time.
EMPLOYMENT AGREEMENT
Mr. Aronson is employed pursuant to an Employment Agreement with the
Company dated March 1, 1994 with a term that initially will expire on February
28, 1997 but which will automatically be extended for a period of one year
thereafter on March 1 of each year commencing March 1, 1997 unless terminated by
written notice by either party. The agreement provides for a base salary of at
least $250,000 annually exclusive of any compensation he may receive pursuant to
any other plan of the Company or which may be otherwise authorized by the Board
of Directors. The agreement also provides for his participation in any incentive
plan of the Company and in the various benefit plans maintained by the Company,
including its various pension, supplemental pension, disability, medical,
insurance, sick leave and other similar benefit and retirement arrangements.
31
<PAGE>
CUMULATIVE TOTAL SHAREHOLDER RETURN
The first graph set forth below shows the cumulative total shareholder
return (i.e., price change plus reinvestment of dividends) on the Company's
Common Stock during the five year period ended December 31, 19951 as compared to
the S&P 500 Index and the S&P Steel Index. In addition to the five year
performance graph, which is required by the rules of the Securities and Exchange
Commission, a similar presentation for the period commencing on the date of the
Company's initial public offering and ending December 31, 1995 has been included
to provide additional perspective on the Company's Common Stock performance. The
two graphs assume that $100 was invested on January 1, 1991 and May 8, 1987,
respectively, for the periods ended December 31, 1995. In accordance with the
rules of the Securities and Exchange Commission, this presentation shall not be
incorporated by reference into any of the Company's Registration Statements
under the Securities Act of 1933.
1 As noted on page 4, the Company's fiscal year ends on the Sunday nearest to
December 31 in each year.
2 The United Steelworkers of America called a strike in the second quarter of
1994 which lasted 10 weeks.
<TABLE>
ANNUAL RETURNS
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG ALLEGHENY LUDLUM CORP., S&P 500 INDEX AND S&P STEEL INDEX
<CAPTION>
Measurement period ALLEGHENY S&P 500 S&P STEEL
(Fiscal year Covered) LUDLUM CORP Index Index
- --------------------- ----------- ------- ---------
<S> <C> <C> <C>
Measurement PT -
12/31/90 $100 $100 $100
FYE 12/31/91 $121.70 $130.47 $122.88
FYE 12/31/92 $157.24 $140.41 $160.77
FYE 12/31/93 $220.83 $154.56 $211.54
FYE 12/31/94 $177.77 $156.60 $205.74
FYE 12/31/95 $179.72 $215.45 $190.78
</TABLE>
<TABLE>
INDEXED RETURNS
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG ALLEGHENY LUDLUM CORP., S&P 500 INDEX AND S&P STEEL INDEX
<CAPTION>
Measurement period ALLEGHENY S&P 500 S&P STEEL
(Fiscal year Covered) LUDLUM CORP Index Index
- --------------------- ----------- ------- ---------
<S> <C> <C> <C>
Measurement PT -
8/5/87 $100 $100 $100
FYE 12/31/87 $ 91.12 $ 86.20 $103.41
FYE 12/31/88 $125.90 $100.52 $126.21
FYE 12/31/89 $174.97 $132.37 $122.08
FYE 12/31/90 $158.14 $128.26 $102.74
FYE 12/31/91 $192.47 $167.33 $126.24
FYE 12/31/92 $246.67 $180.08 $165.17
FYE 12/31/93 $349.23 $198.23 $217.33
FYE 12/31/94 $281.12 $200.85 $211.37
FYE 12/31/95 $284.22 $276.33 $196.00
</TABLE>
32
<PAGE>
CERTAIN TRANSACTIONS
In 1995, the Company entered into a new credit agreement with a group of
banks, including PNC Bank, National Association ("PNC Bank"), replacing the
prior credit agreement with a similar group of banks, including PNC Bank, which
provided for unsecured borrowings of up to $100 million on a revolving credit
basis. Prior to May 1, 1995, the Company also maintained a second credit
agreement with a group of banks, including PNC Bank, which provided for
additional unsecured borrowings of up to $50 million. No borrowings were
outstanding under any of the credit agreements during the 1995 fiscal year. PNC
Bank has also issued letters of credit with respect to certain indebtedness of
the Company and its subsidiaries. In connection with the above transactions,
during 1995, the Company paid to PNC Bank a total of $174,178 in fees, including
PNC Bank's proportionate amount of the commitment fees under the credit
agreements described above. James E. Rohr, a member of the Company's Board of
Directors, is President of PNC Bank Corp., an affiliate of PNC Bank, and
President and Chief Executive Officer of PNC Bank.
The Company and subsidiaries of the Company have engaged in investment
transactions with two limited partnership funds: Code, Hennessy and Simmons
Limited Partnership ("Fund I"), and Code, Hennessy & Simmons II L. P. ("Fund
II"). The objective of both funds is to seek maximum return by investing in
leveraged buyouts of operating companies. Profits and losses of Fund I and of
Fund II are allocated 80 percent to the limited partners and 20 percent to the
general partner. The general partner of Fund I is CHS Management Limited
Partnership ("CHS I"), and the general partner of Fund II is CHS Management II,
L. P. ("CHS II"). The general partners of CHS I and the shareholders of the
general partner of CHS II are Andrew W. Code, Daniel J. Hennessy and Brian P.
Simmons, each of whom has an equal interest in each of such firms. Brian P.
Simmons is the son of Richard P. Simmons, Chairman of the Board of the Company.
At the end of the first quarter of 1994, the Company voluntarily
contributed the limited partnership interest in Fund I to an irrevocable trust
established for the purpose of partially funding the retiree medical and
insurance benefit obligations the Company has to its employees represented by
the United Steelworkers of America. Later in the 1994 fiscal year and in the
1995 fiscal year, the Company voluntarily contributed investments it had made in
Fund II, in the amount of $5.6 million and $7.5 million, respectively, to the
irrevocable trust. Investors made commitments to invest approximately $155
million in Fund II, which was formed in 1993, including $30 million invested or
to be invested by the Company.
A subsidiary of the Company continues to be the limited partner in CHS I
and to receive 10 percent of CHS I's 20 percent share of Fund I's net profits
and losses (i.e., two percent of Fund I's net profits and losses). During 1995,
the Company subsidiary that invested in CHS I made no investments in CHS I and
received distributions of $345,890 from CHS I. The same Company subsidiary has
made a commitment to invest as a limited partner in CHS II, in exchange for
which that subsidiary will receive five percent of CHS II's 20 percent of Fund
II's profits and losses (i.e., one percent of Fund II's net profits and losses).
CHS I and CHS II are responsible for managing the selection and structuring
of their respective fund's investments. In 1995, the annual base management fee
for CHS I was 2.21% of Fund I's total capital commitments, and the annual base
management fee for CHS II was 1.78% of Fund II's total capital commitments. In
each case, the management fees were offset by fees which the general partner
charges to companies its fund acquires. After the offset for fees, the net
amounts received by CHS I and CHS II were .96% and 0%, respectively.
In addition to the investment by the Company, Richard P. Simmons, Chairman
of the Board of the Company, Robert P. Bozzone, Vice Chairman of the Board of
the Company, and a subsidiary of PNC Bank Corp. have invested or will invest
$4,473,360, $1,250,000 and $5,000,000, respectively, in Fund I. In addition to
the investment by the Company, Messrs. Simmons and Bozzone, and a subsidiary of
PNC Bank Corp., directly or
33
<PAGE>
indirectly, have invested or will invest $5.2 million, $2.5 million and $7.5
million, respectively, in Fund II. James E. Rohr, President of PNC Bank Corp.,
is a member of the Company's Board of Directors.
Pursuant to a written agreement with another subsidiary, the Company has
agreed to furnish consulting services which the subsidiary in turn has agreed to
furnish to CHS I. Under this agreement, no fee is to be paid for the services of
Richard P. Simmons, who is primarily responsible for such consultations, or
James L. Murdy, the Company's Senior Vice President-Finance and Chief Financial
Officer, for up to one day per week each. A similar arrangement may be made with
respect to CHS II. In 1994 and 1995, no substantial services were provided to
CHS I which required the payment of compensation. Richard P. Simmons also serves
as a member of Advisory Boards of Fund I and Fund II.
The Company retained the law firm of Kirkpatrick & Lockhart LLP to perform
services for the Company during fiscal years 1995 and 1996. Charles J. Queenan,
Jr., a member of the Company's Board of Directors, has been senior counsel of
that law firm since January 1, 1996. Prior to that time, he was a partner of
that law firm. See "Compensation Committee Interlocks and Insider
Participation."
Pursuant to an agreement between Robert P. Bozzone, Vice Chairman, and the
Company, dated August 1, 1994, Mr. Bozzone served as an independent consultant
to the Company for compensation at an annual rate of $100,000 from August 1,
1994 through July 31, 1995. Since August 1, 1995, Mr. Bozzone has continued to
provide services to the Company focusing particularly on customers and related
areas. He does not receive any compensation for the services he provides but is
reimbursed for the expenses he incurs in providing these services to the
Company.
Under the terms of the Stock Acquisition and Retention Plan, as approved by
the shareholders of the Company, executive officers of the Company may deliver a
promissory note, payable to the Company, as payment for the purchase price of
the shares of Common Stock purchased under the Plan. Each note has a term of not
more than 10 years and is secured by the shares of Common Stock being purchased
with the note. Interest accrues on the note at a rate, as determined on the
applicable purchase date, equal to the lesser of the average borrowing rate of
the Company or the prime lending rate of PNC Bank, but not lower than the
minimum rate necessary to avoid imputed interest under the applicable federal
income tax laws. During the 1995 fiscal year, Douglas A. Kittenbrink, Vice
President-Engineering and Information Technology, Carl R. Moulton, Group Vice
President, James L. Murdy, Senior Vice President-Finance and Chief Financial
Officer, Richard R. Roeser, Vice President-Controller, Robert W. Rutherford,
Senior Vice President-Commercial, Jack W. Shilling, Senior Vice
President-Technical and Jon D. Walton, Vice President-General Counsel and
Secretary, delivered promissory notes to the Company to pay the purchase price
of Common Stock purchased under the Plan. The largest amount of such
indebtedness outstanding during the 1995 fiscal year and the amount outstanding
as of March 3, 1996 were $227,805 and $230,476 for Mr. Kittenbrink, $122,797 and
$124,184 for Mr. Moulton, $458,752 and $462,630 for Mr. Murdy, $126,698 and
$264,502 for Mr. Park, $120,842 and $121,800 for Mr. Roeser, $176,728 and
$353,415 for Mr. Rutherford, $280,372 and $283,097 for Mr. Shilling, and
$275,758 and $276,555 for Mr. Walton, respectively.
FINANCIAL STATEMENTS
Consolidated financial statements of the Company are included in its Annual
Report to Shareholders for fiscal year 1995. ADDITIONAL COPIES OF THE FINANCIAL
STATEMENTS AND FINANCIAL STATEMENT SCHEDULE AND OF THE COMPANY'S ANNUAL REPORT
TO THE SECURITIES AND EXCHANGE COMMISSION ON FORM 10-K, WITHOUT EXHIBITS, MAY BE
OBTAINED WITHOUT CHARGE FROM THE CORPORATE SECRETARY AT 1000 SIX PPG PLACE,
PITTSBURGH, PENNSYLVANIA 15222-5479. Financial statements are also on file with
the Securities and Exchange Commission, Washington, D.C., and the New York Stock
Exchange.
34
<PAGE>
1997 ANNUAL MEETING AND SHAREHOLDER PROPOSALS
The 1997 Annual Meeting of Shareholders is tentatively scheduled for May
16, 1997. Proposals of shareholders intended to be presented at the 1997 Annual
Meeting of Shareholders must be received no later than November 20, 1996 for
inclusion in the Proxy Statement and proxy card for that meeting.
By order of the Board of Directors
/s/ Jon D. Walton
JON D. WALTON
Vice President-General Counsel
and Secretary
Dated: March 20, 1996
35
<PAGE>
EXHIBIT A
ALLEGHENY LUDLUM CORPORATION
1996 NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN
ARTICLE I. GENERAL
1.01 Purpose. It is the purpose of the Plan to promote the interests of the
Company and its shareholders by attracting, retaining and providing an incentive
to Non-Employee Directors through the acquisition of a proprietary interest in
the Company and an increased personal interest in its continued successful
performance and progress. This purpose will be served by providing for the
automatic payment of a portion of the Director's Fee Payment in the form of
Common Stock and giving Non-Employee Directors an opportunity to elect to
receive Common Stock in lieu of the portion of the Director's Fee Payment
otherwise payable in cash.
1.02 Adoption and Term. The Plan has been approved by the Board and shall
become effective as of the date of the Company's annual meeting of shareholders
to be held in 1996 if approved by the shareholders at such meeting. The Plan
will be approved if at such meeting a quorum is present and the votes of the
holders of a majority of the securities of the Company present or represented at
such meeting and entitled to vote with respect to the Plan are cast in favor of
its approval. The Plan shall terminate without further action upon the earlier
of (a) the tenth anniversary of the effective date and (b) the first date upon
which no shares of Common Stock remain available for issuance under the Plan.
1.03 Definitions. As used herein the following terms have the following
meanings:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended. References
to a section of the Code shall include that section and any comparable section
or sections of any future legislation that amends, supplements or supersedes
said section.
(c) "Common Stock" means the common stock, par value $0.10 per share, of
the Company.
(d) "Company" means Allegheny Ludlum Corporation, a Pennsylvania
corporation, and any successor thereto.
(e) "Compensation Year" means each calendar year or portion thereof during
which the Plan is in effect.
(f) "Director" means a member of the Board.
(g) "Director's Fee Payment" means the dollar value of that portion of the
annual retainer fee payable by the Company to a Non-Employee Director as of a
particular Quarterly Payment Date, as established by the Board and in effect
from time to time. For this purpose, shares of Common Stock issuable to a
Non-Employee Director under the Allegheny Ludlum Corporation Director Share
Incentive Plan shall be disregarded.
(h) "Employee" means any employee of the Company or an affiliate.
(i) "Fair Market Value" means, as of any given date, the average of the
high and low trading prices of the Common Stock on such date as reported on the
New York Stock Exchange or, if the Common Stock is not then traded on the New
York Stock Exchange, on such other national securities exchange on which the
Common Stock is admitted to trade, or, if none, on the National Association of
Securities Dealers Automated Quotation System if the Common Stock is admitted
for quotation thereon; provided, however, if there were no sales
A-1
<PAGE>
reported as of such date, Fair Market Value shall be computed as of the last
date preceding such date on which a sale was reported; provided, further, that
if any such exchange or quotation system is closed on any day on which Fair
Market Value is to be determined, Fair Market Value shall be determined as of
the first date immediately preceding such date on which such exchange or
quotation system was open for trading.
(j) "Non-Employee Director" means a Director who is not an Employee.
(k) "Non-Employee Director Notice" means a written notice by a
Non-Employee Director, filed in accordance with Section 4.02, to receive in the
form of shares of Common Stock all or a portion of the Director's Fees Payment
otherwise payable to the Non-Employee Director in cash.
(l) "Plan" means this Allegheny Ludlum Corporation 1996 Non-Employee
Director Stock Compensation Plan, as it may hereafter be amended from time to
time.
(m) "Quarterly Payment Date" means each of the quarterly dates on which
the Director's Fee Payment is paid by the Company.
1.04 Number of Shares. Subject to adjustment in accordance with Section
5.01, up to an aggregate of 250,000 shares of Common Stock may be issued under
the Plan. Such shares may be authorized and unissued shares or shares which
shall have been issued and subsequently reacquired by the Company.
ARTICLE II. ADMINISTRATION
2.01 The Board. The Plan shall be administered by the Board. Subject to the
provisions of the Plan, the Board shall interpret the Plan, promulgate, amend
and rescind rules and regulations relating to the Plan and make all other
determinations necessary or advisable for its administration. Interpretation and
construction of any provision of the Plan by the Board shall be final and
conclusive. Notwithstanding the foregoing, the Board shall have or exercise no
discretion with respect to the selection of persons eligible to participate
hereunder, the determination of the number of shares of Common Stock issuable to
any person or any other aspect of Plan administration with respect to which such
discretion is not permitted in order for grants of shares of Common Stock to be
exempt under Rule 16b-3 under the Securities Exchange Act of 1934, as amended.
ARTICLE III. PARTICIPATION
3.01 Participants. Each Non-Employee Director shall participate in the Plan
on the terms and conditions hereinafter set forth.
ARTICLE IV. PAYMENT OF DIRECTOR'S FEES
4.01 In General. The Director's Fee Payment shall be paid to each
Non-Employee Director, as of each Quarterly Payment Date, as set forth in the
Plan and subject to such other payment policies and procedures as the Board may
establish from time to time. One-fourth (1/4) of the Director's Fee Payment
shall automatically be paid in the form of shares of Common Stock as set forth
in Section 4.02. The remaining three-fourths (3/4) of the Director's Fee Payment
shall be paid in cash except to the extent that a Non-Employee Director elects
in accordance with Section 4.03 to receive such amount in the form of shares of
Common Stock.
4.02 Automatic Stock Portion. As of each Quarterly Payment Date, each
individual elected, reelected or continuing as a Non-Employee Director shall
receive a number of shares of Common Stock equal to the quotient obtained by
dividing (i) one-fourth (1/4) of the Director's Fee Payment in effect on such
Quarterly Payment Date by (ii) the Fair Market Value per share of the Common
Stock on such Quarterly Payment Date. Cash shall be paid in lieu of any
fractional shares.
A-2
<PAGE>
4.03 Elective Stock Portion.
(a) Election Procedures. A Non-Employee Director may elect to have all or
a portion of the Director's Fee Payment otherwise payable to him or her in cash
for a Compensation Year paid in the form of shares of Common Stock by filing a
Non-Employee Director Notice with the Corporate Secretary of the Company prior
to the commencement of such Compensation Year; provided, however, that in the
case of the first Compensation Year for which the Plan is in effect, such
Non-Employee Director Notice must be filed no later than thirty (30) days after
the effective date of the Plan; and provided further, however, that in the case
of the Compensation Year in which a Non-Employee Director first becomes a member
of the Board, such Non-Employee Director Notice must be filed no later than
thirty (30) days after the commencement of Board service; and in either event
such Non-Employee Director Notice will be effective as of the first Quarterly
Payment Date occurring after the date such Notice is filed. Each Non-Employee
Director Notice shall specify the percentage of the portion of the Director's
Fee Payment otherwise payable in cash, if any, that the Non-Employee Director
elects to receive in the form of shares of Common Stock in accordance with this
Section 4.03. Any election made by a Non-Employee Director under this Section
4.03 shall continue in effect for all future Compensation Years unless it is
revoked in writing by such Non-Employee Director, with any such revocation to be
effective no earlier than the first Compensation Year that commences after such
revocation is received by the Corporate Secretary of the Company. The Company
may impose rules regarding the timing of elections under this Section 4.03(a) if
necessary or desirable to ensure the qualification under Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, of issuances of shares of Common
Stock pursuant to such elections.
(b) Conversion to Shares. Each Non-Employee Director who has duly filed a
Non-Employee Director Notice in accordance with this Section 4.03 with respect
to a Compensation Year and who is elected or reelected or is a continuing
Non-Employee Director as of the date of commencement of such Compensation Year
and as of the applicable Quarterly Payment Date shall receive as of each
Quarterly Payment Date during such Compensation Year a number of shares of
Common Stock equal to the quotient obtained by dividing (i) the amount of the
Non-Employee Director's Director's Fee Payment identified in such Non-Employee
Director Notice by (ii) the Fair Market Value of the Common Stock per share on
such Quarterly Payment Date. Cash shall be paid in lieu of any fractional
shares.
ARTICLE V. MISCELLANEOUS
5.01 Adjustments Upon Changes in Common Stock. The number and kind of
shares available for issuance under the Plan shall be appropriately adjusted to
prevent dilution or enlargement of rights by reason of any stock dividend, stock
split, combination or exchange of shares, recapitalization, merger,
consolidation or other change in capitalization with a similar substantive
effect upon the Plan or the shares issuable under the Plan.
5.02 Amendment. The Board shall have complete power and authority to amend
the Plan at any time; provided, however, that the Board shall not, without the
affirmative approval of the shareholders of the Company, increase the number of
shares of Common Stock available for issuance hereunder or make any other
amendment which requires shareholder approval under Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, unless the Board determines that
such compliance is no longer desired, or under any other applicable law; and
provided, further, that the Board shall not amend more than once every six
months any provisions which may not be so amended in order for issuances of
shares of Common Stock hereunder to be exempt under Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, other than amendments to comport
with changes in the Code, the Employee Retirement Income Security Act of 1974,
or the rules thereunder.
5.03 Termination. The Board shall have the right and the power to terminate
the Plan at any time.
A-3
<PAGE>
5.04 Requirements of Law. The issuance of Common Stock under the Plan shall
be subject to all applicable laws, rules and regulations and to such approval by
governmental agencies as may be required.
5.05 No Guarantee of Membership. Nothing in the Plan shall confer upon a
Non-Employee Director any right to continue to serve as a Director.
5.06 Construction. Words of any gender used in the Plan shall be construed
to include any other gender, unless the context requires otherwise.
A-4
<PAGE>
EXHIBIT B
PERFORMANCE SHARE PLAN FOR KEY EMPLOYEES OF
ALLEGHENY LUDLUM CORPORATION AND SUBSIDIARIES
(AS AMENDED AND RESTATED)
ARTICLE I
PURPOSE
The purposes of the Performance Share Plan For Key Employees of Allegheny
Ludlum Corporation and Subsidiaries are to promote the growth and profitability
of Allegheny Ludlum Corporation and its subsidiaries, to provide key employees
with an incentive to achieve long-term corporate objectives and to attract and
retain key employees of outstanding competence.
ARTICLE II
DEFINITIONS
The following terms shall have the meanings shown:
2.01 "Award Period" shall mean the time period established by the Committee
pursuant to Article IV of the Plan for the purpose of measuring attainment of
performance objectives.
2.02 "Board of Directors" shall mean the Board of Directors of the
Corporation.
2.03 "Chief Executive Officer" shall mean the chief executive officer of
the Corporation.
2.04 "Committee" shall mean the Personnel and Compensation Committee of the
Board of Directors which may be appointed from time to time by the Board of
Directors, subject to the provisions of Section 3.1(a) hereof.
2.05 "Common Stock" shall mean common stock, $0.10 par value per share, of
the Corporation.
2.06 "Corporation" shall mean Allegheny Ludlum Corporation.
2.07 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
2.08 "Executive Officer" shall mean an "officer" of the Corporation as
defined in Rule 16a-1(f) as promulgated by the Securities and Exchange
Commission under the Exchange Act, as such Rule may be amended from time to
time.
2.09 "Fair Market Value" shall mean the fair market value of shares of
Common Stock, as determined by the Committee in its discretion. The Committee
may change from time to time any method or formula by which it determines Fair
Market Value.
2.10 "Grantee" shall mean a Key Employee to whom a Unit or Units have been
granted.
2.11 "Key Employee" shall mean (a) an employee who is an Executive Officer
(subject to the second sentence of this subsection) and (b) any other employee
of the Corporation or a Subsidiary who is, in the judgment of the Chief
Executive Officer, responsible to a material extent for the profitability and
continued growth of the Corporation and Subsidiaries. Directors of the
Corporation who are not otherwise officers or
B-1
<PAGE>
employees of the Corporation and directors who are members of the Committee may
not be designated as Key Employees.
2.12 "Plan" shall mean the Performance Share Plan For Key Employees of
Allegheny Ludlum Corporation and Subsidiaries.
2.13 "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the Securities
and Exchange Commission under the Exchange Act, as in effect prior to May 1,
1991 until the Committee elects otherwise and thereafter as such Rule may be
amended from time to time.
2.14 "Section 162(m)" shall mean Section 162(m) of the Internal Revenue
Code of 1986, as amended, and the regulations promulgated thereunder.
2.15 "Subsidiary" shall mean any corporation at least a majority of whose
outstanding voting shares shall at the time be owned by the Corporation or by
one or more Subsidiaries.
2.16 "Unit" shall mean a unit denominated in a fixed dollar amount and/or
shares of Common Stock in such form and amount as the Committee shall determine
as of the date of grant of such Unit in accordance with the provisions hereof.
ARTICLE III
GENERAL
3.1 Administration.
(a) The Plan shall be administered by the Committee. The Committee will be
constituted so as to qualify awards for exemption under Rule 16b-3 and as
"performance-based compensation" for the purposes of Section 162(m), with
respect to the participation of Executive Officers in the Plan.
(b) The Chief Executive Officer shall designate which employees, in
addition to the Executive Officers, are Key Employees. The Committee shall (i)
grant awards pursuant to the Plan; (ii) prescribe such limitations and
restrictions as the Committee shall deem appropriate; and (iii) interpret the
Plan, adopt, amend and rescind rules and regulations relating to the Plan, and
make all other determinations and take all other action necessary or advisable
for the implementation and administration of the Plan.
(c) All such actions shall be final, conclusive and binding upon the Key
Employees. Neither the Chief Executive Officer nor any member of the Committee
shall be liable for any action taken or decision made in good faith relating to
the Plan or any award thereunder.
3.2 Grant of Units. The Committee shall select from among the Key Employees
those individuals who shall be granted awards under the Plan. The Committee
shall determine the number, form and amount of Units to be granted to a Grantee.
In granting such awards and determining their form and amount, consideration
shall be given to the recommendations of the Chief Executive Officer, the
functions and responsibilities of the Grantee, the Grantee's potential
contributions to the profitability and sound growth of the Corporation and such
other factors as shall be deemed relevant.
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ARTICLE IV
ESTABLISHMENT OF CORPORATE OBJECTIVES
During the first ninety days of a fiscal year or prior to such fiscal year,
the Committee shall determine whether to establish an Award Period commencing
with the beginning of such fiscal year and the appropriate length of the Award
Period. If the Committee establishes an Award Period, the Committee, in
consultation with the Chief Executive Officer, shall determine the financial
objectives of the Corporation and its Subsidiaries to be achieved during such
Award Period and the basis on which Units granted for such Award Period shall
vest upon either partial achievement of the corporate objectives or upon the
meeting or surpassing of the corporate objectives. The performance goals shall
meet the requirements of an objective formula under Section 162(m), unless the
Committee determines otherwise.
ARTICLE V
GRANT OF UNITS
5.1 Grant of Units. The Committee, subject to the provisions of the Plan,
may grant Units, or fractions thereof, to Key Employees and determine (and the
Performance Unit Agreement shall state) the number, form and amount of Units
granted to the respective Grantees and such other terms and conditions as the
Committee may consider appropriate. In taking such action, consideration shall
be given to the recommendations of the Chief Executive Officer. Notwithstanding
any other provision of the Plan, no Executive Officer who is a "covered
employee" under Section 162(m) shall receive, with respect to any Award Period,
Units in respect of more than 100,000 shares of Common Stock and more than
$500,000 in cash.
5.2 Performance Unit Agreements. Units granted to a Key Employee under the
Plan shall be evidenced by a written "Performance Unit Agreement", to be entered
into between the Corporation and the Key Employee and to contain such terms and
conditions as the Committee may consider appropriate in each case.
5.3 Grantee Account. At such time as it shall be determined by the
Committee that the objectives for such Award Period shall have been fully or
partially achieved or surpassed, the Corporation shall establish and maintain a
bookkeeping account for each Grantee who shall have been granted Units for such
Award Period and shall credit to such account a dollar amount and/or the number
of shares of Common Stock equal to the dollar value and/or the number of shares
of Common Stock of the Units to which the Grantee becomes entitled pursuant to
his Performance Unit Agreement.
5.4 Payment of Grantee Account. The dollar amount and/or the number of
shares of Common Stock credited to a Grantee's bookkeeping account shall be paid
to the Grantee in installments; provided, however, that a Grantee must be then
and have continuously been an employee of the Corporation or any of its
Subsidiaries from the date of the grant of the Units to the date of each
installment payment. The installment payments shall be in the amount and/or the
number of shares of Common Stock as follows: thirty-three and one-third percent
(33 1/3%) of the total dollar amount and number of shares of Common Stock
credited to the Grantee's account on or before the first day of the calendar
month following the calendar month in which the amount was credited to the
account and an additional thirty-three and one-third percent (33 1/3%) on or
before the first business day of January of each succeeding calendar year
thereafter, until such amount is completely distributed. Fractional shares shall
not be distributed but shall be aggregated and paid in the last maturing
installment. Notwithstanding the foregoing, in the event of the death of the
Grantee, total disability of the Grantee (as determined by the Committee in its
sole discretion) or retirement of the Grantee with the consent of the Chief
Executive Officer or, in the case the Grantee
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is the Chief Executive Officer, with the consent of the Committee, and pursuant
to a pension plan maintained by the Corporation or a Subsidiary, any unpaid
installments shall be paid to the Grantee or his estate, as the case may be, in
due course as if the Grantee had remained an employee of the Corporation.
ARTICLE VI
AGGREGATE LIMITATION ON SHARES SUBJECT TO PLAN
Shares of Common Stock which may be issued pursuant to Units granted under
the Plan may be either authorized and unissued shares or authorized and issued
shares of Common Stock held by the Corporation as treasury shares. The number of
shares of Common Stock reserved for issuance under the Plan shall not exceed
2,250,000 shares, which amount has been adjusted to reflect the stock splits
effective July 2, 1990 and July 1, 1993, subject to further adjustment pursuant
to Section 7.10 hereof; provided, however, if any Units shall be cancelled prior
to the expiration of the Award Period and prior to its exercise in full for any
reason, the shares subject to such Units shall be thereafter available under the
Plan.
ARTICLE VII
MISCELLANEOUS
7.1 General Restriction. Any Unit denominated in Common Stock under the
Plan shall be subject to the requirement that if at any time the Committee shall
determine that any listing or registration of the shares of Common Stock or any
consent or approval of any governmental body or any other agreement or consent
is necessary or desirable as a condition of the granting of a Unit or issuance
of shares of Common Stock or cash in satisfaction thereof, such grant of a Unit
or issuance of shares of Common Stock may not be consummated unless such
requirement is satisfied in a manner acceptable to the Committee.
7.2 Non-Assignability. No Unit granted under the Plan shall be assignable
or transferable by the recipient thereof, except by will or by the laws of
descent and distribution. During the life of the recipient, any Unit shall be
exercisable only by such individual. No assignment or transfer of a Unit or of
the rights represented thereby, whether voluntary or involuntary, by operation
of law or otherwise (except by will or the laws of descent and distribution),
shall vest in the assignee or transferee any interest or right herein
whatsoever, but immediately upon such assignment or transfer the Units shall
terminate and become of no further effect.
7.3 Withholding Taxes. Whenever the Corporation makes payments under the
Plan, in whole or in part, the Corporation shall notify the Key Employee of the
amount of withholding tax, if any, which must be paid under federal and, where
applicable, state and local law. The Corporation shall, in the discretion of the
Corporation, but with the consent of the Committee, arrange for payment for such
withholding taxes in any one or combination of the following ways: (i)
acceptance of an amount in cash paid by the Key Employee, (ii) deduction of
amounts for withholding taxes from Key Employee's regular salary payments, (iii)
deduction of amounts for withholding taxes from amounts of cash payable as an
installment under the Plan, (iv) reduction in the number of shares to be issued
in an installment by that number of shares having a Fair Market Value equal to
the amount which the Corporation is required to withhold and/or (v) acceptance
of whole shares of Common Stock already owned by the Key Employee, having a Fair
Market Value equal to the amount the Corporation is required to withhold. If the
full amount of the withholding tax is not recovered in the above manner, the Key
Employee shall, forthwith upon receipt of notice, remit the deficiency to the
Corporation. No certificates for shares of Common Stock shall be issued or
delivered to a Key Employee under the Plan until all applicable taxes shall have
been satisfied in full.
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7.4 Delivery of Certificates. As soon as practicable after compliance by a
Key Employee with all applicable conditions, the Corporation will issue and
deliver by mail, or cause delivery by mail to the Key Employee at the address
specified, certificates registered in the name of the Key Employee for the
number of shares of Common Stock which the Key Employee is entitled to receive
(subject to reduction for withholding tax as provided in Section 7.3 hereof)
under the provisions of the Plan and the Performance Unit Agreement.
7.5 No Right to Employment. Nothing in the Plan or in any agreement entered
into pursuant to it shall confer upon any employee the right to continue in the
employ of the Corporation or Subsidiary or affect any right which the
Corporation or a Subsidiary may have to terminate the employment of any
employee.
7.6 Non-Uniform Determinations. The actions and recommendations of the
Chief Executive Officer and the determinations by the Committee under the Plan
(including without limitation the determinations by the Chief Executive Officer
and the Committee of the persons to receive awards, and the determinations by
the Committee of the form, amount and timing of such awards, and the terms and
provisions of such awards) need not be uniform and may be made by the Chief
Executive Officer or the Committee, as the case may be, selectively among
persons who receive, or are eligible to receive awards under the Plan, whether
or not such persons are similarly situated.
7.7 Amendment or Termination of the Plan. The Board may at any time
terminate the Plan or any part thereof and may from time to time amend the Plan
as it may deem advisable; provided, however, that without shareholder approval,
the Board of Directors may not (i) increase the aggregate number of shares of
Common Stock which may be issued under the Plan (other than increases permitted
under Paragraph 7.10 hereof), (ii) extend the term of the Plan, or (iii) extend
the period during which Units may be granted. The termination or amendment of
the Plan shall not, without the consent of a Grantee, affect such Grantee's
rights under a previous grant of Units.
7.8 Investment Representation. Each Performance Unit Agreement may provide
that the Key Employee shall deliver to the Committee, upon demand by the
Committee, at the time of any payment of an installment which contains shares of
Common Stock a written representation that the shares to be acquired are to be
acquired for investment and not for resale or with a view to the distribution
thereof. Upon such demand, delivery of such representation prior to delivery of
any shares shall be a condition precedent to the right of the Key Employee to
receive any shares.
7.9 No Rights as Shareholders. Recipients of Units denominated in Common
Stock under the Plan shall have no rights as shareholders of the Corporation
with respect thereto unless and until certificates for shares of Common Stock
are issued to them.
7.10 Adjustment of Units. In the event of any change or changes in the
outstanding Common Stock of the Corporation by reason of any stock dividend,
recapitalization, reorganization, merger, consolidation, split-up, combination
or exchange of shares or any rights offering to purchase a substantial amount of
Common Stock at below fair market value or of any similar change affecting the
Common Stock, any of which takes effect after the first grant of a Unit under
the Plan, the Committee may, in its discretion, appropriately adjust the number
of shares of Common Stock which may be issued under the Plan, the number of
shares of Common Stock subject to Units theretofore granted under the Plan, and
any and all other adjustments deemed appropriate by the Committee to prevent
substantial dilution or enlargement of the rights granted to a Key Employee in
such manner as the Committee shall deem appropriate.
7.11 Units Not a Bar to Corporate Event. The existence of the Units granted
hereunder shall not affect in any way the right or the power of the Corporation
or its shareholders to make or authorize any or all adjustments,
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recapitalizations, reorganizations or other changes in the Corporation's capital
structure or its business, or any merger or consolidation of the Corporation, or
any issue of bonds, debentures, preferred or prior preference stocks ahead of or
affecting the Common Stock or the rights thereof, or the dissolution or
liquidation of the Corporation, or any sale or transfer of all or any part of
its assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
ARTICLE VIII
EFFECTIVE DATE OF THE PLAN; CONTINGENT EFFECTIVENESS
The Plan became effective on the closing on the initial public offering by
the Corporation of shares of Common Stock in a transaction registered under the
Securities Act of 1933 on Form S-1. The effectiveness of the amendment and
restatement of the Plan is conditioned upon approval, at a regular or special
meeting at which a quorum is present and votes, by the holders of a majority of
the securities of the Corporation present or represented at such meeting and
entitled to vote with respect to the Plan.
ARTICLE IX
TERMINATION OF THE PLAN
The Plan shall expire on January 1, 2007.
ARTICLE X
RULE 16B-3 COMPLIANCE
It is intended, unless the Committee shall determine otherwise, that the
Plan comply with Rule 16b-3, and that all interpretations of the Plan relating
to Executive Officers shall be consistent with such Rule and the Exchange Act.
In order to maintain compliance with such Rule and the Exchange Act and to
facilitate and promote the conformity of the transactions of Executive Officers
under the Plan with such Rule, the Committee may adopt such rules and policies
as it deems advisable, including, but not limited to, rules and policies
restricting the timing of the reduction in the number of shares to be issued in
an installment pursuant to Section 7.3 hereof, and any related rules or policies
delaying payments pursuant to Section 5.4 hereof, and any election with respect
thereto.
ARTICLE XI
SECTION 162(M) COMPLIANCE
It is intended, unless the Committee shall determine otherwise, that the
Plan comply with Section 162(m), and that all interpretations of the Plan
relating to Executive Officers who are "covered employees" as defined in Section
162(m) shall be consistent with such Section. In order to maintain compliance
with such Section, the Committee may adopt such rules and policies as it deems
advisable.
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EXHIBIT C
ALLEGHENY LUDLUM CORPORATION
STOCK OPTION INCENTIVE PLAN
(AS AMENDED AND RESTATED)
ARTICLE I. PURPOSES OF THE PLAN
The purposes of the Allegheny Ludlum Corporation Stock Option Incentive
Plan are to promote the growth and profitability of Allegheny Ludlum
Corporation, to provide key employees of Allegheny Ludlum Corporation and of any
corporation the majority of the voting stock of which is owned by Allegheny
Ludlum Corporation with an incentive to achieve long-term corporate objectives,
to attract and retain key employees of outstanding competence and to provide key
employees with an opportunity to acquire an equity interest in Allegheny Ludlum
Corporation.
ARTICLE II. DEFINITIONS
As used herein, the following terms shall have the meanings set forth:
2.01 "Award" shall mean the grant of a Stock Option and/or a Stock
Appreciation Right under the Plan.
2.02 "Award Agreement" shall mean the agreement between the Optionee and
the Company evidencing the grant of Stock Options and/or Stock Appreciation
Rights under the Plan, which Award Agreement shall contain such terms,
conditions and restrictions as the Committee may deem advisable; provided,
however, Award Agreements entered into at different times or with different
Optionees need not contain similar provisions.
2.03 "Board" shall mean the Board of Directors of the Company.
2.04 "CEO" shall mean the Chief Executive Officer of the Company.
2.05 "Committee" shall mean the Personnel and Compensation Committee of the
Board, subject to the provisions of Section 3.4(a) hereof.
2.06 "Common Stock" shall mean common stock, $0.10 par value per share, of
the Company.
2.07 "Company" shall mean Allegheny Ludlum Corporation.
2.08 "Eligible Participants" shall mean (i) those officers and key
employees of the Company, or of any corporation the majority of the voting stock
of which is owned by the Company, designated by the Board in accordance with the
procedures set forth in Article III hereof as eligible to receive an Award under
the Plan, and (ii) subject to the following sentence, all Executive Officers of
the Company. Directors of the Company who are not otherwise officers or
employees of the Company and Directors who are members of the Committee may not
be designated as Eligible Participants.
2.09 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
2.10 "Executive Officer" shall mean an "officer" of the Company as defined
in Rule 16a-1(f) as promulgated by the Securities and Exchange Commission under
the Exchange Act, as such Rule may be amended from time to time.
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2.11 "Fair Market Value" shall mean the fair market value of shares of
Common Stock, as determined by the Committee in its discretion. The Committee
may change from time to time any method or formula by which it determines Fair
Market Value.
2.12 "Optionee" shall mean an Eligible Participant who has received a grant
of Stock Options and/or Stock Appreciation Rights under the Plan. Whenever the
word "Optionee" is used in any provision of the Plan in circumstances where the
provision should logically be construed to apply to executors, administrators or
the person or persons to whom the Stock Options and/or Stock Appreciation Rights
may be transferred by will or the laws of descent or distribution, the word
"Optionee" shall be deemed to include such executors, administrators or person
or persons.
2.13 "Option Period" shall mean the period or periods beginning on the date
on which a Stock Option or Stock Appreciation Right is granted and ending on the
last day on which such Stock Option or Stock Appreciation Right may be exercised
by an Optionee, as determined by the Committee upon recommendation of the CEO
and as set forth in the Award Agreement; provided, however, no Option Period may
extend beyond the tenth anniversary of the date of granting the related Stock
Option or Stock Appreciation Right.
2.14 "Option Price" shall mean (i) with respect to Stock Options, the price
at which a share of Common Stock may be purchased pursuant to Stock Options
granted under the Plan upon exercise thereof, and (ii) with respect to Stock
Appreciation Rights, the price at which a Stock Appreciation Right may be
exercised, as such Option Price may be adjusted from time to time in accordance
with the provisions of Article V and Section 9.8 hereof and the terms of the
Award Agreement.
2.15 "Plan" shall mean the Allegheny Ludlum Corporation Stock Option
Incentive Plan, as amended from time to time pursuant to Section 9.10 hereof.
2.16 "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the Securities
and Exchange Commission under the Exchange Act, as in effect prior to May 1,
1991 until the Committee elects otherwise and thereafter as such Rule may be
amended from time to time.
2.17 "Section 162(m)" shall mean Section 162(m) of the Internal Revenue
Code of 1986, as amended, and the regulations promulgated thereunder.
2.18 "Stock Appreciation Right" shall mean a right which upon exercise
shall entitle the Optionee to receive for each share of Common Stock subject to
such Stock Appreciation Right the excess, if any, of the Fair Market Value of a
share of Common Stock as of the date of such exercise over the Option Price.
2.19 "Stock Option" shall mean the right and option of an Optionee to
purchase the aggregate number of shares of Common Stock as is set forth in the
Award Agreement.
2.20 "Termination Date" shall mean the date upon which this Plan
terminates, which shall be January 1, 2007.
ARTICLE III. OPERATION OF THE PLAN
3.1 Designation of Eligible Participants
(a) Designation of Eligible Participants by Board
The Board, upon recommendation made in accordance with Section 3.1(b)
hereof, shall determine and designate those officers and key employees of the
Company or of any corporation the majority of the voting stock of which is owned
by the Company, in addition to the Executive Officers, who shall be eligible to
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participate in the Plan. The Board shall make such determination and designation
only from those individuals, job classifications or other descriptions of
officers and key employees recommended to the Board in accordance with Section
3.1(b) hereof.
(b) Procedure for Recommendation to the Board
(i) Recommendation by CEO
Any and all recommendations concerning eligibility to participate in
the Plan shall be initiated by the CEO. The CEO may, at such times and from
time to time as he may determine in his discretion, recommend to the
Committee those officers and key employees, by naming such individuals, by
describing job classifications or otherwise describing the persons or
classes of employees, whom the CEO in his discretion considers to be
officers or key employees eligible to participate in the Plan. The CEO may,
from time to time, as he may determine in his discretion, recommend the
addition of such individuals, job classifications or other descriptions of
employees to those previously designated as Eligible Participants or the
deletion of Eligible Participants from those previously designated as
eligible to participate.
(ii) Review by Committee
The Committee shall review each recommendation of the CEO as soon as
practicable after presentation of such recommendation by the CEO. Upon such
review, the Committee shall recommend to the Board those individuals, job
classifications or other descriptions of employees from among those
recommended by the CEO which the Committee, in its discretion, considers to
be officers or key employees eligible to participate in the Plan.
(c) Designation of Eligibility Does Not Require Grant of Options
Designation of an officer or key employee as an Eligible Participant shall
not require the CEO to recommend the grant of an Award or the Committee to grant
an Award to such Eligible Participant, either upon initial designation or from
time to time thereafter.
3.2 Grant of Stock Options and/or Stock Appreciation Rights
(a) Grant by Committee
The Committee, upon recommendation made in accordance with Section 3.2(b)
hereof, may grant Stock Options and/or Stock Appreciation Rights under the Plan
to any Eligible Participant recommended to receive an Award whether or not such
Eligible Participant has previously received an Award under the Plan, in respect
to an amount of shares and subject to such restrictions as the Committee may
deem appropriate, in its discretion but only upon the recommendation of the CEO
in accordance with Section 3.2(b) hereof. Notwithstanding any other provision of
the Plan, no Executive Officer who is a "covered employee" under Section 162(m)
shall receive, with respect to any Award, awards in respect of more than 100,000
shares of Common Stock.
(b) Procedure for Recommendation
Any and all recommendations concerning the grant of an Award under the
Plan, including but not limited to the identity of the Eligible Participant, the
form of the Award and the number of shares subject to Stock Options or Stock
Appreciation Rights in an Award granted to an Eligible Participant, shall be
initiated by the CEO. The CEO may, at such times and from time to time as he may
determine, recommend to the Committee the identity of the Eligible
Participant(s) to whom an Award should be granted together with (i) the number
of shares subject to Stock Options and/or Stock Appreciation Rights to be
granted to each Eligible Participant so recommended, (ii) the respective Option
Periods applicable thereto and (iii) any restrictions or other terms and
conditions applicable
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to Stock Options and/or Stock Appreciation Rights. The Committee shall review
each recommendation of the CEO as soon as practicable after presentation of such
recommendation by the CEO.
(c) General
The CEO, in recommending, and the Committee, in granting, such Awards and
determining their form and amount, shall give consideration to the functions and
responsibilities of the Eligible Participant, his or her contributions to
profitability and sound growth of the Company and such other factors as the CEO
and the Committee, as the case may be, may deem appropriate. An Optionee, upon
receipt of a grant of an Award, shall state his or her good faith intention to
continue as an employee of the Company for such period (but not less than six
months) from the date of the grant of the Award as shall be provided in the
Award Agreement, subject to the right of the Company to terminate the employment
of the Optionee at any time. No Award may be granted to an Eligible Participant
within six months of the Eligible Participant's expected retirement date. No
Stock Option or Stock Appreciation Right may be granted under the Plan after
December 31, 2006, or such earlier date as may be determined by the Board.
3.3 Vesting of Stock Options and/or Stock Appreciation Rights
Stock Options and Stock Appreciation Rights granted under the Plan shall
not be immediately exercisable but shall become exercisable in accordance with a
vesting schedule set forth in the Award Agreement evidencing such grant. Except
as permitted by the Committee upon recommendation of the CEO, no Award Agreement
may set forth a vesting schedule which provides for vesting more rapid than the
rate of one third of the number of shares subject to such Award Agreement on
each of the third, fourth and fifth anniversaries of the grant of such Award.
Stock Options and Stock Appreciation Rights, to the extent vested under the
schedule set forth in the Award Agreement, shall be separately exercisable in
whole or in part.
3.4 General Administration
(a) The Plan shall be administered by the Committee. The Committee shall
be constituted so as to qualify awards for exemption under Rule 16b-3 and as
"performance-based compensation" for the purposes of Section 162(m), with
respect to the participation of Executive Officers in the Plan.
(b) The Committee shall have the authority in its sole discretion from
time to time: (i) upon recommendation of the CEO, to grant Awards provided for
in the Plan; (ii) to prescribe such limitations, restrictions and conditions
upon any such Stock Options and/or Stock Appreciation Rights as the Committee,
upon recommendation of the CEO, shall deem appropriate; and (iii) to interpret
the Plan, to adopt, amend and rescind rules and regulations relating to the
Plan, and to make all other determinations and to take all other actions
necessary or advisable for the implementation and administration of the Plan. A
majority of the Committee shall constitute a quorum, and the action of a
majority of members of the Committee present at any meeting at which a quorum is
present, or acts unanimously adopted in writing without the holding of a
meeting, shall be the acts of the Committee.
(c) All such actions of the Committee shall be final, conclusive and
binding upon Eligible Participants and Optionees. No member of the Committee
shall be liable for any action taken or decision made in good faith relating to
the Plan or any grant hereunder.
ARTICLE IV. AGGREGATE LIMITATION ON SHARES SUBJECT TO PLAN
Shares of Common Stock which may be issued pursuant to Stock Options or
Stock Appreciation Rights granted under the Plan may be either authorized and
unissued shares or authorized and issued shares of Common
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Stock held by the Company as treasury shares. The number of shares of Common
Stock reserved for issuance under the Plan shall not exceed 5,400,000 shares, as
adjusted to reflect the stock splits effective July 2, 1990 and July 1, 1993,
subject to further adjustment pursuant to Section 9.8 hereof; provided, however,
if any Stock Option or Stock Appreciation Right shall expire or be cancelled
prior to its exercise in full for any reason, the shares subject to such Stock
Option or Stock Appreciation Right shall be thereafter available under the Plan.
ARTICLE V. OPTION PRICE
5.1 Option Price on Date of Grant
The Option Price on the date of grant of Stock Options or Stock
Appreciation Right under the Plan shall be determined by the Committee upon
recommendation of the CEO and shall be an amount not less than the Fair Market
Value of a share of Common Stock at the time such Stock Option or Stock
Appreciation Right is granted.
5.2 Adjustments to Option Price
In addition to the adjustments provided in Section 9.8, upon recommendation
by the CEO the Committee may grant Stock Options and/or Stock Appreciation
Rights which provide that the Option Price on the date of exercise shall be
determined by subtracting from the Option Price on the date of grant, as
determined under Section 5.1 and set forth in the Award Agreement, a percentage
of the excess, if any, of (i) the Fair Market Value of a share of Common Stock
as of the date of exercise over (ii) the Option Price on the date of grant,
provided, however, that in no event may the Option Price, as adjusted, be less
than $1.00.
ARTICLE VI. OPTION PERIODS; RIGHTS UPON RETIREMENT, DEATH OR DISABILITY
6.1 Option Period
Each Award Agreement shall state the period or periods within which a Stock
Option or Stock Appreciation Right may, to the extent then vested, be exercised
or surrendered by the Optionee, in whole or in part, which period shall be as
determined by the Committee upon recommendation of the CEO; provided, however,
except as otherwise determined by the Committee upon recommendation of the CEO,
each Option Period shall cease upon termination of an Optionee's employment with
the Company. Except as so determined by the Committee upon recommendation of the
CEO, an Optionee may not exercise a Stock Option or Stock Appreciation Right, in
whole or in part, after such termination of employment.
6.2 Rights in the Event of Retirement
Notwithstanding Section 6.1 hereof, if an Optionee retires with the consent
of the Company without having fully exercised or surrendered the then vested
portion of a Stock Option or Stock Appreciation Right, no additional shares
shall vest after the date of such retirement unless otherwise provided by the
Committee but the Optionee shall have the right to exercise the outstanding and
then exercisable portion of such Stock Option and/or Stock Appreciation Right,
or to surrender the outstanding and then exercisable portion of such Stock
Option and/ or Stock Appreciation Right pursuant to Article VII hereof at any
time prior to the earlier of (i) the end of the Option Period set forth in the
Award Agreement or (ii) the third anniversary of the date of such retirement.
6.3 Rights in the Event of Death or Disability
Notwithstanding Section 6.1 hereof, if an Optionee dies or becomes disabled
without having fully exercised or surrendered the then vested portion of a Stock
Option and/or Stock Appreciation Right, no additional shares shall vest after
the date of such death or disability unless otherwise provided by the Committee
but the Optionee and the executors, administrators, legatees or distributees of
the Optionee shall have the right, to the extent of
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their respective custody and control, to exercise the outstanding and then
exercisable portion of such Stock Option and/or Stock Appreciation Right, or to
surrender the outstanding and then exercisable portion of the Stock Option
and/or Stock Appreciation Right, pursuant to Article VII hereof, at any time
prior to the earlier of (i) the end of the Option Period set forth in the Award
Agreement or (ii) the third anniversary of the date of death or disability.
Disability shall mean full, permanent disability as determined by the Committee.
The date of disability shall be determined by the Committee.
ARTICLE VII. SURRENDER OF OPTIONS AND STOCK APPRECIATION RIGHTS
In addition to the rights to surrender Stock Options and/or Stock
Appreciation Rights, to the extent then exercisable, as provided in Section 6.2
hereof and Section 6.3 hereof, the Committee may authorize, upon such conditions
and restrictions as it deems advisable, the surrender, to the extent then
exercisable, of the right to exercise a Stock Option and/or Stock Appreciation
Right, or any portion thereof, and the payment by the Company in exchange
therefor of an amount, after withholding for taxes as provided in Section 8.4
hereof, equal to the excess of the Fair Market Value of the shares of Common
Stock covered by the Stock Option and/or Stock Appreciation Right, or portion
thereof, surrendered over the aggregate Option Price of such shares. Such
payment may be made in shares of Common Stock valued at Fair Market Value or in
cash or partly in cash and partly in shares of Common Stock, as the Committee
deems advisable. The shares of Common Stock covered by any Stock Option or Stock
Appreciation Right, or portion of either, as to which the right to exercise
shall have been so surrendered shall not again be available for purposes of the
Plan. Any shares of Common Stock delivered upon any such surrender may be
authorized unissued or reacquired Common Stock and shall not be charged against
the number of shares of Common Stock available for grant of Stock Options under
the Plan.
ARTICLE VIII. MANNER OF EXERCISE, PAYMENT OF PURCHASE PRICE AND WITHHOLDING
8.1 Exercise of Options
A Stock Option may be exercised by an Optionee from time to time, in whole
or in part, independent of any Stock Appreciation Right to the extent then
exercisable by delivering an irrevocable written notice to the Committee of his
or her intent to exercise the Stock Option with respect to a specified number of
shares. The specified number of shares will be issued and transferred to the
Optionee upon receipt by the Committee of (i) such notice and (ii) payment,
including applicable taxes, for such shares.
8.2 Payment of Purchase Price
The purchase price of the shares for which a Stock Option may be exercised
shall be paid to the Company, prior to the delivery of the shares being
purchased in the form of, at the discretion of the Optionee, (i) cash, (ii)
whole shares of Common Stock already owned by the Optionee, valued at their Fair
Market Value as of the day immediately preceding the date of exercise or (iii) a
combination of cash and Common Stock equal in value to the purchase price.
8.3 Exercise of Stock Appreciation Rights
A Stock Appreciation Right may be exercised independently of any Stock
Option by an Optionee from time to time, in whole or in part, to the extent then
exercisable by delivering written notice to the Committee of his or her intent
to exercise the Stock Appreciation Right with respect to a specified number of
shares. Upon exercise of a Stock Appreciation Right, the amount realized by the
Optionee may be payable, in the discretion of the Committee, in the form of
shares of Common Stock valued at their then Fair Market Value or cash or a
combination of Common Stock and cash. The amount of cash or number of shares
payable upon exercise of a
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Stock Appreciation Right, as determined by the Committee, will be delivered to
the Optionee upon receipt of such notice and receipt of payment for, or
withholding of, applicable taxes.
8.4 Withholding
In each case where an Optionee shall exercise a Stock Option and/or Stock
Appreciation Right, in whole or in part, the Company shall notify the Optionee
of the amount of withholding tax, if any, which must be paid under federal,
state and local law. The Company shall, in the discretion of the Company, but
with the consent of the Committee, arrange for payment for such withholding
taxes in any one or combination of the following ways: (i) acceptance of an
amount in cash paid by the Optionee, (ii) deduction of amounts for withholding
taxes from Optionee's regular salary payments, (iii) deduction of amounts for
withholding taxes from amounts of cash payable to Optionee upon exercise, (iv)
reduction in the number of shares to be issued pursuant to such exercise by that
number of shares having a Fair Market Value equal to the amount the Company is
required to withhold and/or (v) acceptance of whole shares of Common Stock
already owned by the Optionee having a Fair Market Value equal to the amount the
Company is required to withhold. If the full amount of the withholding tax is
not recovered in the above manner, the Optionee shall, forthwith upon receipt of
notice, remit the deficiency to the Company. No shares acquired pursuant to
exercise of a Stock Option or Stock Appreciation Right shall be issued or
delivered to an Optionee until all applicable withholding taxes shall have been
satisfied in full.
8.5 Delivery of Shares and/or Cash
As soon as practicable after each exercise and upon compliance by an
Optionee with all applicable conditions, the Company will issue and deliver by
mail, or cause delivery by mail to the Optionee at the address specified, the
number of shares of Common Stock and/or the Company's check for the amount of
cash which the Optionee is entitled to receive (subject to reduction for
withholding tax as provided in Section 8.4 hereof) under the provisions of the
Plan and the Award Agreement. Such shares, and any certificates issued to
evidence such shares, shall be registered in the name of the Optionee or such
other person or entity as the Optionee shall specify in writing at the time such
options are exercised.
8.6. Authorization of Other Procedures
The Committee is authorized to establish procedures in order to facilitate
the sale by an Optionee of a sufficient number of shares of Common Stock
purchased under the Plan to pay the purchase price of such shares and to
facilitate the delivery of shares of Common Stock purchased hereunder.
ARTICLE IX. MISCELLANEOUS
9.1 General Restriction
Any Award granted under the Plan shall be subject to the requirement that,
if at any time the Committee shall determine that any listing or registration of
the shares of Common Stock or any consent or approval of any governmental body,
or any other agreement or consent is necessary or desirable as a condition of
the granting of a Stock Option or issuance of shares of Common Stock or cash in
satisfaction of the exercise of an Award, such grant of a Stock Option or
issuance of shares of Common Stock may not be consummated unless such
requirement is satisfied in a manner acceptable to the Committee.
9.2 Awards to Executive Officers
For the purposes of the Plan, and notwithstanding any provision of the Plan
to the contrary, the selection of Executive Officers to receive Awards, and
decisions concerning the timing, pricing, and amount of Awards to Executive
Officers, shall be made solely by the Committee in its discretion. The Committee
shall receive and
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review recommendations of the CEO relating to Executive Officers other than the
CEO under the Plan, but shall not be bound by such recommendations and may
initiate action under the Plan with respect to Executive Officers although not
initiated by the CEO.
9.3 Non-Assignability
No Stock Option or Stock Appreciation Right granted under the Plan shall be
assignable or transferable by the recipient thereof, except by will or by the
laws of descent and distribution. During the life of the recipient, any Stock
Option or Stock Appreciation Right shall be exercisable only by such individual.
No assignment or transfer of a Stock Option or Stock Appreciation Right, or of
the rights represented thereby, whether voluntary or involuntary, by operation
of law or otherwise (except by will or the laws of descent and distribution),
shall vest in the assignee or transferee any interest or right herein
whatsoever, but immediately upon such assignment or transfer the Stock Option or
Stock Appreciation Right shall terminate and become of no further effect.
9.4 Investment Representation
Each Award Agreement may provide that the Optionee or recipient shall
deliver to the Committee, upon demand by the Committee, at the time of any
exercise of any Stock Option or Stock Appreciation Right for which the Committee
elects to issue shares of Common Stock a written representation that the shares
to be acquired are to be acquired for investment and not for resale or with a
view to the distribution thereof. Upon such demand, delivery of such
representation prior to delivery of any shares shall be a condition precedent to
the right of the Optionee or such other person to acquire any shares.
9.5 No Right to Employment
Nothing in the Plan or in any agreement entered into pursuant to it shall
confer upon any Optionee or Eligible Participant the right to continue in the
employment of the Company or affect any right which the Company may have to
terminate the employment of such Participant.
9.6 Non-Uniform Determinations
The recommendations of the CEO and the Committee and the determinations of
the Board and the Committee under the Plan (including without limitation the
respective determinations or recommendations of the persons to receive an Award,
the form, amount and timing of such Awards and the terms and provisions of such
Awards) need not be uniform and may be made selectively among persons who
receive, or are eligible to receive, an Award under the Plan, whether or not
such persons are similarly situated.
9.7 No Rights as Shareholders
Recipients of Stock Options and/or Stock Appreciation Rights under the Plan
shall have no rights as shareholders of the Company with respect thereto unless
and until shares of Common Stock are issued to them.
9.8 Adjustments of Stock Options and Stock Appreciation Rights
In the event of any change or changes in the outstanding Common Stock of
the Company by reason of any stock dividend, recapitalization, reorganization,
merger, consolidation, split-up, combination or exchange of shares or any rights
offering to purchase a substantial amount of Common Stock at below Fair Market
Value or of any similar change affecting the Common Stock, any of which takes
effect after the first grant of an Award under the Plan, the Committee may, in
its discretion, appropriately adjust the number of shares of Common Stock which
may be issued under the Plan, the number of shares of Common Stock subject to
Stock Options and/or Stock Appreciation Rights theretofore granted under the
Plan, the Option Price of such Stock Options or Stock Appreciation Rights, and
any and all other adjustments deemed appropriate by the Committee to prevent
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<PAGE>
substantial dilution or enlargement of the rights granted to an employee in such
manner as the Committee shall deem appropriate.
9.9 Options and/or Stock Appreciation Rights Not A Bar to Corporate Event
The existence of the Stock Options and/or Stock Appreciation Rights granted
hereunder shall not affect in any way the right or the power of the Company or
its shareholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of bonds,
debentures, preferred or prior preference stocks ahead of or affecting the
Common Stock or the rights thereof, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or business,
or any other corporate act or proceeding, whether of a similar character or
otherwise.
9.10 Amendment or Termination of the Plan
The Board may at any time terminate the Plan or any part thereof and may
from time to time amend the Plan as it may deem advisable; provided, however,
that without shareholder approval, the Board may not (i) increase the aggregate
number of shares of Common Stock which may be issued under the Plan (other than
increases permitted under Paragraph 9.8 hereof), (ii) extend the term of the
Plan, or (iii) extend the period during which Stock Options or Stock
Appreciation Rights may be exercised. The termination or amendment of the Plan
shall not, without the consent of an Optionee, affect such Optionee's rights
under a previous grant of Stock Options or Stock Appreciation Rights.
ARTICLE X. EFFECTIVE DATE OF THE PLAN; CONTINGENT EFFECTIVENESS
The Plan became effective on the closing on the initial public offering by
the Company of shares of Common Stock in a transaction registered under the
Securities Act of 1933 on Form S-1. The effectiveness of the amendment and
restatement of the Plan is conditioned upon approval, at a regular or special
meeting at which a quorum is present and votes, by the holders of a majority of
the securities of the Company present or represented at such meeting and
entitled to vote with respect to the Plan.
ARTICLE XI. TERMINATION OF PLAN
The Plan shall expire on January 1, 2007.
ARTICLE XII. RULE 16B-3 COMPLIANCE
It is intended that, unless the Committee shall determine otherwise, the
Plan comply with Rule 16b-3 and that all interpretations of the Plan relating to
Executive Officers shall be consistent with such Rule and the Exchange Act. In
order to maintain compliance with such Rule and the Exchange Act and to
facilitate and promote the conformity of the transactions of Executive Officer
participants under the Plan with such Rule, the Committee may adopt such rules
and policies as it deems advisable, including, but not limited to, rules and
policies restricting the timing of a surrender of a Stock Option for cash or of
an exercise of a Stock Appreciation Right for cash or of the reduction in the
number of shares to be issued pursuant to the exercise of a Stock Option
pursuant to Section 8.4 hereof and elections with respect thereto.
ARTICLE XIII. SECTION 162(M) COMPLIANCE
It is intended, unless the Committee shall determine otherwise, that the
Plan comply with Section 162(m), and that all interpretations of the Plan
relating to Executive Officers who are "covered employees" as defined in Section
162(m) shall be consistent with such Section. In order to maintain compliance
with such Section, the Committee may adopt such rules and policies as it deems
advisable.
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<PAGE>
ALLEGHENY LUDLUM CORPORATION
VOTING INSTRUCTION CARD FOR 1996 ANNUAL MEETING
Personal Retirement Account Plan
Retirement Savings Plan
Savings and Security Plan of the Special Materials Division
Savings and Security Plan of the Tubular Products Division
Solicited on Behalf of the Board of Directors of Allegheny Ludlum Corporation
The undersigned hereby directs the Trustee of the above Plans to vote the
full number of shares of Common Stock allocated to the account of the
undersigned under the Plans, at the Annual Meeting of Shareholders of Allegheny
Ludlum Corporation on May 17, 1996, and any adjournments thereof, upon the
matters set forth on the reverse of this card, and, in its discretion, upon
such other matters as may properly come before such meeting.
YOU ARE REQUESTED TO COMPLETE, DATE AND SIGN THIS CARD AND TO RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE, NO POSTAGE IS REQUIRED.
THIS VOTING INSTRUCTION CARD, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN. IF NO DIRECTION TO THE CONTRARY IS INDICATED, IT
WILL BE VOTED "FOR" ALL PROPOSALS.
Please vote, date and sign on the reverse side.
FOLD AND DETACH HERE
<PAGE>
(continued from reverse side)
Please mark
your votes as [X]
indicated in
this example
The Board of Directors recommends a vote FOR each of the following Items:
A. Election of Directors.
FOR WITHHELD
all nominees (except from all nominees
as indicated)
[ ] [ ]
A. Election of Robert P. Bozzone, C. Fred Fetterolf, Anne Pol, Richard P.
Simmons and Steven C. Wheelwright as Class III directors.
(To withhold authority to vote for any nominee(s), write the name(s) of
the nominee(s) in the space that follows:
- ------------------------------------------------------------------------.)
B. Approval of Director Stock C. Approval of Amended
Compensation Plan. Performance Share Plan.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ] [ ]
D. Approval of Amended E. Selection of Auditors.
Option Incentive Plan.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ] [ ]
DATE: , 1996
---------------------
---------------------------------
(Signature)
Please sign EXACTLY as your name
appears on the left.
FOLD AND DETACH HERE
<PAGE>
ALLEGHENY LUDLUM CORPORATION
Personal Retirement Account Plan
Retirement Savings Plan
Savings and Security Plan of the Special Materials Division
Savings and Security Plan of the Tubular Products Division
March 20, 1996
Dear Participant:
Enclosed you will find a copy of the Allegheny Ludlum Corporation 1995
Annual Report, a Notice of the 1996 Annual Meeting of Shareholders and Proxy
Statement, a voting instruction card (above), a postage-paid return envelope
addressed to Mellon Bank, N.A., as Trustee of each of the above-named Plans,
and a postage-paid ticket request card.
As a participant in one of the Plans, you have the right to direct the Trustee
as to the manner in which voting rights will be exercised at the meeting
with respect to the full number of shares of Common Stock of the Company
allocated to your Plan account and shown on the above voting instruction
card. Your directions to the Trustee will be held in complete confidence
by the Trustee except as may be necessary to meet legal requirements. The
Trustee will vote shares for which no participant instructions are received
in the same proportion as shares for which participant instructions have
been received. The Trustee will also exercise its sole discretion in voting
or not voting fractional shares.
The enclosed Proxy Statement contains detailed information concerning
voting at the Annual Meeting and the matters that will be acted upon. You
are encouraged to read the enclosed materials carefully and to exercise
your right to direct the Trustee how to vote your Plan shares.
You must complete and sign the above voting instruction card, and it must
be received by the Trustee by May 14, 1996 in order to have your shares
under the Plan voted at the meeting.
You will also receive proxy solicitation materials, including a proxy
card, from the Company if you own shares of Common Stock that are not held
by the Trustee under the Plan. In order to vote your non-Plan shares, you
should complete and sign the proxy card and return it to the Company.
Very truly yours,
/s/ B. A. McGillivray
B. A. McGillivray
Plan Administrator
<PAGE>
ALLEGHENY LUDLUM CORPORATION
PROXY FOR 1996 ANNUAL MEETING
Solicited on Behalf of the Board of Directors of Allegheny Ludlum Corporation
The undersigned hereby appoints J. L. Murdy, Jon D. Walton and Mary W. Snyder
or any of them, each with power of substitution and revocation, proxies
or proxy to vote all shares of Common Stock which the undersigned is entitled
to vote with all powers which the undersigned would possess if personally
present, at the Annual Meeting of Shareholders of Allegheny Ludlum Corporation
on May 17, 1996, and any adjournments thereof, upon the matters set forth
on the reverse of this card, and, in their discretion, upon such other matters
as may properly come before such meeting.
SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THIS PROXY CARD AND
TO RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.
THIS PROXY CARD, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION TO THE CONTRARY IS INDICATED, IT WILL BE VOTED "FOR"
ALL PROPOSALS.
Please vote, date and sign on the reverse side.
FOLD AND DETACH HERE
<PAGE>
(continued from reverse side)
Please mark
your votes as [X]
indicated in
this example
The Board of Directors recommends a vote FOR each of the following Items:
A. Election of Directors.
FOR WITHHELD
all nominees (except from all nominees
as indicated)
[ ] [ ]
A. Election of Robert P. Bozzone, C. Fred Fetterolf, Anne Pol, Richard P.
Simmons and Steven C. Wheelwright at Class III directors.
(To withhold authority to vote for any nominee(s), write the name(s) of
the nominee(s) in the space that follows:
- ------------------------------------------------------------------------.)
B. Approval of Director Stock C. Approval of Amended
Compensation Plan. Performance Share Plan.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ] [ ]
D. Approval of Amended E. Selection of Auditors.
Option Incentive Plan.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ] [ ]
DATE: , 1996
---------------------
---------------------------------
---------------------------------
(Signature or Signatures)
Please sign EXACTLY as your name
appears on the left. When signing
as a fiduciary or corporate
officer, give full title. For
joint accounts, please furnish
both signatures.
FOLD AND DETACH HERE
<PAGE>
[LOGO ALLEGHENY LUDLUM CORPORATION]
Dear Shareholder:
Enclosed are materials relating to Allegheny Ludlum Corporation's 1996
Annual Meeting of Shareholders. The Notice of the Meeting and Proxy Statement
describe the formal business to be transacted at the meeting.
Your vote is important to us. Please complete, sign and promptly return
the attached proxy card in the accompanying postage-paid envelope whether
or not you expect to attend the meeting.
/s/ Jon D. Walton
Jon D. Walton
Vice President--General Counsel and Secretary
