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
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
REYNOLDS METALS COMPANY
___________________________________________________________________________
(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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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):
_____________________________________________________
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_____________________________________________________
(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
<PAGE>
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:
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_____________________________________________________
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(4) Date Filed:
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<PAGE>
REYNOLDS METALS COMPANY
6601 West Broad Street
Richmond, Virginia 23230
March 23, 1999
Dear Stockholder:
It is my pleasure to invite you to Reynolds Metals
Company's 1999 annual meeting of stockholders.
We will hold the meeting on Thursday, May 20, 1999, at
4:00 p.m., Eastern Daylight Time, at our offices at 6601
West Broad Street, Richmond, Virginia.
This booklet contains the Notice of Annual Meeting and
the Proxy Statement. The Proxy Statement describes the
business that we will conduct at the meeting and
provides information about the Company.
Only stockholders of record, persons holding proof of
beneficial ownership or who have been granted proxies,
and persons specifically invited by the Company may
attend the meeting. Seating is limited. If you plan to
attend, please mark the attendance box on the proxy card
to help ensure your seating priority.
YOUR VOTE IS IMPORTANT. Whether you plan to attend the
meeting or not, please complete and return the enclosed
proxy card in the postage-paid envelope as soon as
possible. Even if you send in a proxy card, you may
vote in person at the meeting if you wish to do so.
We look forward to seeing you at the meeting.
Sincerely,
/s/ Jeremiah J. Sheehan
Jeremiah J. Sheehan
Chairman of the Board and
Chief Executive Officer
<PAGE>
Notice of
Reynolds Metals Company
1999 Annual Meeting of Stockholders
The 1999 annual meeting of stockholders of Reynolds Metals
Company will be held on Thursday, May 20, 1999, at 4:00
p.m., Eastern Daylight Time, at Reynolds' offices, 6601
West Broad Street, Richmond, Virginia.
The purposes of the meeting are to:
1. Elect directors;
2. Approve the 1999 Nonqualified Stock Option Plan;
3. Approve the amended Performance Incentive Plan;
4. Ratify the selection of Ernst & Young LLP as Reynolds'
independent auditors for 1999;
5. Consider and act upon a stockholder proposal relating
to the CERES Principles, if presented at the meeting;
and
6. Consider and act upon a stockholder proposal relating
to global warming, if presented at the meeting.
In addition, stockholders may transact such other business
as properly comes before the meeting or any adjournment
thereof.
The record date for the annual meeting is March 22, 1999.
Stockholders of record at the close of business on that
date are entitled to vote at the meeting.
By order of the Board of Directors,
/s/ Donna C. Dabney
DONNA C. DABNEY
Secretary
March 23, 1999
<PAGE>
Table of Contents
Page
VOTING PROCEDURES................................................. 1
MATTERS TO BE ACTED UPON
ITEM 1. ELECTION OF DIRECTORS.................................. 3
Nominees..................................................... 3
Certain Relationships........................................ 6
Board and Committee Meetings................................. 6
Committees of the Board of Directors......................... 7
Compensation of Directors.................................... 9
ITEM 2. APPROVAL OF 1999 NONQUALIFIED STOCK OPTION PLAN........ 11
ITEM 3. APPROVAL OF AMENDED PERFORMANCE INCENTIVE PLAN......... 15
ITEM 4. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS...... 18
ITEM 5. STOCKHOLDER PROPOSAL RELATING TO THE CERES PRINCIPLES.. 18
ITEM 6. STOCKHOLDER PROPOSAL RELATING TO GLOBAL WARMING........ 21
Other Matters................................................... 23
STOCK OWNERSHIP INFORMATION
Holders of More Than 5%......................................... 24
Director and Executive Officer Stock Ownership.................. 25
Stock Ownership Guidelines...................................... 26
Section 16(a) Beneficial Ownership Reporting Compliance......... 26
EXECUTIVE COMPENSATION
Report of Compensation Committee on Executive Compensation...... 27
Performance Graph............................................... 32
Summary Compensation Table...................................... 33
Stock Option Grants in 1998..................................... 35
Aggregated Option Exercises in 1998 and Option Values at
December 31, 1998............................................. 36
Long-Term Incentive Plan - Awards in 1998....................... 37
Pension Plan Table.............................................. 38
Change in Control and Termination Arrangements.................. 39
GENERAL INFORMATION
Annual Report................................................... 41
Stockholder Proposals for the 2000 Annual Meeting............... 41
Stockholder Nominations and Notice of Other Business............ 41
YOUR VOTE IS IMPORTANT
PLEASE PROVIDE YOUR PROXY BY COMPLETING, SIGNING, DATING AND
PROMPTLY MAILING THE ENCLOSED PROXY CARD IN THE ENVELOPE
PROVIDED, SO THAT YOUR SHARES WILL BE REPRESENTED AT THE MEETING.
<PAGE>
Proxy Statement
for
1999 Annual Meeting of Stockholders
of Reynolds Metals Company
VOTING PROCEDURES
___________________________________________________________________
General
The Board of Directors of Reynolds Metals Company is soliciting
proxies to be used at the 1999 annual meeting of stockholders.
This proxy statement and the accompanying proxy materials are being
mailed or given to stockholders on or after March 26, 1999.
We sometimes refer to Reynolds Metals Company in this proxy
statement as "Reynolds", "we" or "the Company." The term "common
stock" means Reynolds common stock, without par value.
Who Can Vote
Stockholders who owned Reynolds common stock at the close of
business on March 22, 1999 may vote at the meeting. On that date,
64,457,809 shares of common stock were outstanding. The shares
of common stock in Reynolds' treasury on that date will not be
voted.
How You Can Vote
You may vote by attending the meeting and voting in person, or by
completing and mailing the enclosed proxy card. If you return your
signed proxy card before the annual meeting, we will vote your
shares as you direct.
You have three choices on each matter to be voted upon. For the
election of directors, you may vote:
- - For all of the nominees;
- - For none of the nominees; or
- - For all of the nominees except those you designate.
For each of the other items, you may vote "FOR" or "AGAINST" or
you may "ABSTAIN" from voting.
IF YOU DO NOT SPECIFY ON YOUR PROXY CARD HOW YOU WANT TO VOTE YOUR
SHARES, WE WILL VOTE THEM "FOR" THE ELECTION OF ALL DIRECTOR
NOMINEES AS SET FORTH UNDER ITEM 1; "FOR" APPROVAL OF THE 1999
NONQUALIFIED STOCK OPTION PLAN UNDER ITEM 2; "FOR" APPROVAL OF THE
AMENDED PERFORMANCE INCENTIVE PLAN UNDER ITEM 3; "FOR" APPROVAL OF
AUDITORS UNDER ITEM 4; AND "AGAINST" THE STOCKHOLDER PROPOSALS
UNDER ITEMS 5 AND 6. IF MATTERS OTHER THAN THOSE INDICATED ON THE
ACCOMPANYING PROXY CARD ARE PROPERLY PRESENTED FOR A VOTE AT THE
MEETING, SHARES REPRESENTED BY PROXIES WILL BE VOTED IN ACCORDANCE
WITH THE DISCRETION OF THE HOLDERS OF THE PROXIES.
How You May Revoke Your Proxy
You may revoke your proxy at any time before your proxy is
exercised at the meeting by:
<PAGE> 2
- - notifying Reynolds' Secretary in writing that you have revoked
your proxy;
- - submitting another properly signed proxy that is later dated;
or
- - attending the meeting and voting in person.
Required Votes
You are entitled to cast one vote for each share of common stock
you own. A quorum is required to transact business at the meeting.
A quorum is a majority of the shares entitled to vote present in
person or represented by proxy at the meeting.
The election of each director nominee, and the approval of each of
the other items submitted for a vote of the stockholders, require
the affirmative vote of a majority of the votes cast by
stockholders who are present in person or represented by proxy and
entitled to vote at the meeting.
Abstentions will be counted for purposes of determining whether a
quorum exists and will have the effect of votes against an item.
Proxies submitted by brokers that do not indicate a vote for some
or all of the items of business because the brokers do not have
discretionary voting authority and have not received instructions
as to how to vote on those items from the beneficial owners of the
shares (so-called "broker non-votes") will have no effect on the vote.
Costs of Proxy Solicitation
Reynolds pays the cost of soliciting proxies. We have retained
Morrow & Co., Inc., 445 Park Avenue, New York, New York 10022, to
assist in the solicitation of proxies, at a fee of $11,000 plus
reimbursement of out-of-pocket expenses. Reynolds expects to
solicit proxies primarily by mail, but directors, officers and
other employees of the Company may solicit proxies in person or by
telephone, facsimile transmission or other means of electronic
communication. Reynolds will reimburse brokers, banks, nominees,
fiduciaries and other custodians for their reasonable expenses in
forwarding proxy materials to, and obtaining voting instructions
from, persons for whom they hold Reynolds stock.
<PAGE> 3
Matters to be Acted Upon
_____________________________________________________________________
ITEM 1. ELECTION OF DIRECTORS
The Board of Directors proposes that the eleven nominees
named below be elected to serve as directors of the Company.
Under Reynolds' By-Laws, directors are elected for one year
and hold office until their successors are elected and
qualified. All of the nominees are currently Reynolds
directors and were elected at the 1998 annual meeting of
stockholders.
The Board of Directors recommends a vote FOR the election of
all eleven nominees. If you provide your proxy but do not
specify how you want your shares voted, we will vote them
for the election of all eleven nominees. If unforeseen
circumstances (such as death or disability) make it
necessary for the Board of Directors to substitute another
person for any of the nominees, we will vote your shares for
that other person.
Nominees
____________________________________________________________________
Patricia C. Barron
Age: 56
Director Since: 1994
Principal Executive in Residence and Senior
Occupation: Fellow, Stern School of Business, New York
University
Recent Business Mrs. Barron has been Executive in
Experience: Residence and Senior Fellow, Stern School of
Business, at New York University, since
November 1998. From 1997 to June 1998, she
was Corporate Vice President, Business
Operations Support, Xerox Corporation, a
manufacturer of office systems and equipment.
From 1993 to June 1998, she was Vice
President of Xerox Corporation and President,
Engineering Systems Division, of Xerox
Corporation.
Other ARAMARK Corporation, Frontier Corporation,
Directorships: Quaker Chemical Corporation and
Teleflex Incorporated
___________________________________________________________________
John R. Hall
Age: 66
Director Since: 1985
Principal Retired Chairman of the Board and
Occupation: Chief Executive Officer, Ashland Inc.
Recent Business Mr. Hall most recently served as
Experience: Chairman of the Board of Arch Coal, Inc., a
coal company, from July 1997 to November
1998. From October 1996 to January 1997, he
was Chairman of the Board of Ashland Inc., a
worldwide energy and chemical company engaged
in petroleum refining and marketing. From
1981 to 1996, he was Chairman of the Board
and Chief Executive Officer of Ashland Inc.
Other Banc One Corporation, The Canada Life
Directorships: Assurance Company, CSX Corporation,
Humana Inc., LaRoche Industries Inc., UCAR
International Inc. and USEC Inc.
______________________________________________________________________
<PAGE> 4
Nominees - Continued
______________________________________________________________________
Robert L. Hintz
Age: 68
Director Since: 1986
Principal Chairman of the Board, R. L. Hintz
Occupation: & Associates
Recent Business Mr. Hintz has been Chairman of the
Experience: Board of R. L. Hintz & Associates, a
management services firm, since 1989.
Other Arch Coal, Inc., The Chesapeake
Directorships: Corporation and Scott & Stringfellow, Inc.
_____________________________________________________________________
William H. Joyce
Age: 63
Director Since: 1995
Principal Chairman of the Board, President
Occupation: and Chief Executive Officer, Union Carbide
Corporation
Recent Business Mr. Joyce has been Chairman of the
Experience: Board, President and Chief Executive Officer
of Union Carbide Corporation, a manufacturer
of chemicals and plastics, since January
1996. From April 1995 to December 1995, he
was President and Chief Executive Officer of
Union Carbide Corporation. From 1993 to
April 1995, he was President and Chief
Operating Officer of Union Carbide
Corporation.
Other CVS Corporation
Directorships:
_____________________________________________________________________
Mylle Bell Mangum
Age: 50
Director Since: 1995
Principal Senior Vice President, Expense
Occupation: Management and Strategic Planning, Carlson
Wagonlit Travel
Recent Business Mrs. Mangum has been Senior Vice
Experience: President, Expense Management and Strategic
Planning of Carlson Wagonlit Travel, a travel
services company, since March 1997. From
1992 to February 1997, she was Executive Vice
President, Strategic Management of Holiday
Inn Worldwide, a subsidiary of Bass PLC
engaged in the operation of hotels worldwide.
Other Payless ShoeSource, Inc. and
Directorships: Scientific-Atlanta, Inc.
_____________________________________________________________________
D. Larry Moore
Age: 62
Director Since: 1995
Principal Retired President and Chief
Occupation: Operating Officer, Honeywell Inc.
Recent Business Mr. Moore served as President and
Experience: Chief Operating Officer of Honeywell Inc., a
global manufacturer of automation and control
systems, from 1993 to April 15, 1997. Mr.
Moore retired from Honeywell Inc. on June 30,
1997.
Other The Geon Company, Cordant
Directorships: Technologies Inc. (formerly Thiokol
Corporation) and Howmet International Inc.
_____________________________________________________________________
<PAGE> 5
Nominees - Continued
_____________________________________________________________________
Randolph N. Reynolds
Age: 57
Director Since: 1984
Principal Vice Chairman and Executive Officer
Occupation: of Reynolds Metals Company
Recent Business Mr. Reynolds has been Vice Chairman
Experience: and Executive Officer of Reynolds Metals
Company since October 1996. From 1994 to
1996, he was Vice Chairman of the Board of
the Company, and from 1990 to 1994, he was
Executive Vice President, International of
the Company.
Other First Union Corporation
Directorships:
_____________________________________________________________________
James M. Ringler
Age: 53
Director Since: 1994
Principal Chairman of the Board, President
Occupation: and Chief Executive Officer, Premark
International, Inc.
Recent Business Mr. Ringler has been Chairman of
Experience: the Board, President and Chief Executive
Officer of Premark International, Inc., a
multinational manufacturer and marketer of
food equipment, decorative products and
consumer products, since October 1997. From
1996 to September 1997, he was President and
Chief Executive Officer of Premark
International, Inc. From 1992 to 1996, he
was President and Chief Operating Officer of
Premark International, Inc.
Other Premark International, Inc. and
Directorships: Union Carbide Corporation
_____________________________________________________________________
Samuel C. Scott, III
Age: 54
Director Since: 1997
Principal President and Chief Operating
Occupation: Officer, Corn Products International, Inc.
Recent Business Mr. Scott has been President and
Experience: Chief Operating Officer of Corn Products
International, Inc., a corn refining company
created by the spin-off of the corn refining
business of Bestfoods (formerly known as CPC
International Inc.) since January 1998. From
1991 to 1997, he was Vice President of CPC
International Inc. and from 1995 to 1997, he
was President-Corn Refining Business, a
division of CPC International Inc.
Other Corn Products International, Inc.
Directorships: and Motorola, Inc.
_____________________________________________________________________
<PAGE> 6
Nominees - Continued
_____________________________________________________________________
Jeremiah J. Sheehan
Age: 60
Director Since: 1994
Principal Chairman of the Board and Chief
Occupation: Executive Officer, Reynolds Metals Company
Recent Business Mr. Sheehan has been Chairman of
Experience: the Board and Chief Executive Officer of
Reynolds Metals Company since October 1996.
From 1994 to 1996, he was President and Chief
Operating Officer of the Company, and from
1993 to 1994, he was Executive Vice
President, Fabricated Products of the
Company.
Other Federal Reserve Bank of Richmond,
Directorships: Union Camp Corporation and Universal
Corporation
_____________________________________________________________________
Joe B. Wyatt
Age: 63
Director Since: 1992
Principal Chancellor, Vanderbilt University
Occupation:
Recent Business Mr. Wyatt has been Chancellor of
Experience: Vanderbilt University since 1982.
Other Ingram Micro Inc. and Sonat Inc.
Directorships:
_____________________________________________________________________
Certain Relationships
Randolph N. Reynolds' brother, William G. Reynolds, Jr., is
a Vice President of the Company. The husband of Donna C.
Dabney, Secretary and Assistant General Counsel of the
Company, is a partner of McGuire, Woods, Battle & Boothe,
L.L.P., a law firm which provides legal services to the
Company.
Board and Committee Meetings
The Board of Directors held seven meetings and acted once by
unanimous written consent in 1998. Five standing committees
of the Board also met periodically during 1998. Incumbent
directors' attendance at meetings of the Board and of
standing committees on which they served averaged over 95%
during 1998. All incumbent directors serving in 1998
attended at least 75% of such meetings. The Board also
meets periodically in executive session.
<PAGE> 7
Committees of the Board of Directors
_____________________________________________________________________
Audit Committee
Members: R. L. Hintz (Chairman) J. M. Ringler
P. C. Barron S. C. Scott
J. R. Hall
Number of Meetings or
Consents in 1998: 3 meetings and 1 unanimous written consent
Principal Functions: Recommends to the Board of Directors
the firm to be engaged by the Company as
its independent auditors.
Reviews:
- the system of internal controls
established by management and the Board of
Directors and corporate compliance
activities
- the audit function of the
Company's independent auditors and its
Internal Auditing Department and audit
plans and procedures
- the Company's financial statements
- the Company's policies on conflicts
of interest and the prohibition
of the use of corporate funds or other
assets for improper purposes
- changes in accounting policies
and the use of independent auditors for
nonaudit services
- the Company's risk management
programs
- the status of environmental and
other reserves
_____________________________________________________________________
Committee on Directors
Members: J. M. Ringler (Chairman) R. L. Hintz
P. C. Barron W. H. Joyce
Number of Meetings or
Consents in 1998: 2 meetings
Principal Functions: Recommends to the Board of Directors:
- persons to be considered for election to
the Board
- Board committee memberships and chairs
- compensation to be paid to directors
Evaluates the corporate governance
practices followed by the Board
and its standing committees.
Will consider stockholder suggestions
for nominees for director. Stockholder
nominations for the 2000 annual
meeting must be submitted in writing in
accordance with the procedures set forth
under "General Information - Stockholder
Nominations and Notice of Other Business"
below.
The Board of Directors has adopted
a policy under which it will not
nominate for election to the Board any person
who has attained age 70. An officer of the
Company serving as a member of the Board is
expected to resign as a director at the time
he ceases to be an officer. In addition, if
a non-employee director has a substantial
change in principal employment and/or
responsibility, the director is expected to
offer to resign from the Board. The
Committee on Directors may decide not to
accept the offer if it determines that the
director's continued service on the Board is
in the Company's best interests.
_____________________________________________________________________
<PAGE> 8
Committees of the Board of Directors - Continued
_____________________________________________________________________
Compensation Committee
Members: J. R. Hall (Chairman) S. C. Scott
M. B. Mangum J. B. Wyatt
D. L. Moore
Number of Meetings or
Consents in 1998: 4 meetings and 2 unanimous written consents
Principal Functions: Reviews and recommends to the Board,
or determines, the compensation paid to
the Company's executive officers.
Administers designated executive compensation
plans of the Company, including stock option,
variable compensation, long-term performance
share, and deferral plans. See "Report of
Compensation Committee on Executive
Compensation" below.
_____________________________________________________________________
Executive Committee
Members: J. J. Sheehan (Chairman) R. N. Reynolds
W. H. Joyce J. M. Ringler
Number of Meetings or
Consents in 1998: 10 unanimous written consents
Principal Functions: Has the power to act in place
of the Board of Directors during
intervals between meetings of the Board.
_____________________________________________________________________
Pension and Finance Committee
Members: J. B. Wyatt (Chairman) D. L. Moore
W. H. Joyce R. N. Reynolds
M. B. Mangum
Number of Meetings or
Consents in 1998: 4 meetings
Principal Functions: Oversees:
- the capital structure of the Company
- the financial administration of the
assets of the pension plans of the
Company and certain subsidiaries,
including the selection of trustees
and investment managers for the
assets of these plans and periodic review
of investment results
Maintains a statement of investment
policy for the pension plans.
Appoints independent auditors for the
pension plans.
_____________________________________________________________________
<PAGE> 9
Compensation of Directors
_____________________________________________________________________
FEES. We pay directors who are not employees of Reynolds or any of our
subsidiaries the following fees for serving as a director:
- - Annual Retainer.......................................... $30,000
- - Annual Fee to Chairman of the Audit Committee............ 4,000
- - Annual Fee to Chairman of the Compensation Committee..... 4,000
- - Annual Fee to Chairman of other Board committees......... 3,000
- - Fee for attending each Board and committee meeting....... 1,000
We also reimburse non-employee directors for travel and other
expenses reasonably incurred in connection with Company business.
RESTRICTED STOCK PLAN. We make a one-time grant of 1,000 shares
of restricted common stock to each non-employee director sixty
days after initial election to the Board. These shares are
subject to forfeiture and transfer restrictions. The
restrictions expire as to 200 shares on the April 1 immediately
following the date of grant (or, if later, the date of the six-
month anniversary of the grant date). The restrictions expire as
to an additional 200 shares on each successive April 1. By the
fifth April 1 following the date of grant, restrictions on all
1,000 shares will have expired, assuming continued service by the
non-employee director throughout the period.
If a non-employee director ceases to be a member of the Board
because of death or disability or because of a change in control
of the Company, restrictions on 200 shares will lapse
immediately, with all other restricted shares being forfeited.
If a non-employee director leaves the Board for any other reason,
all restricted shares will be forfeited.
STOCK PLAN. We make an annual grant of 225 shares of phantom
stock to each non-employee director during the director's service
on the Board. This rate is increased to 425 shares of phantom
stock per year once the restrictions have expired on all 1,000
shares of restricted stock awarded under the restricted stock
plan described above.
The phantom stock is credited with dividend equivalents based on
the dividends that would have been paid on the phantom stock if
the director had actually owned shares of common stock. The
annual grant is made in quarterly installments at the end of each
calendar quarter.
The phantom stock accounts are payable in shares of common stock
upon the non-employee director's retirement, resignation or
death, with fractional shares paid in cash. Payments are made in
a lump sum or in five annual installments, as elected by the non-
employee director.
<PAGE> 10
Compensation of Directors - Continued
_____________________________________________________________________
DEFERRED COMPENSATION PLAN. Non-employee directors may elect to
defer part or all of their annual retainer and meeting fees.
Directors may choose to have such amounts deferred into:
- - an interest account, which is credited with interest at an
annual rate set by the plan committee whose members are not
eligible to participate in the plan, or
- - a phantom stock account, which is credited with dividend
equivalents based on the dividends that would have been paid on the
phantom stock if the director had actually owned shares of common
stock.
The amounts deferred, plus any appreciation, are paid in cash on
dates selected by the director in accordance with the plan. The
director may receive payment in a lump sum or in annual
installments over a two- to ten-year period.
STOCK OWNERSHIP GUIDELINES. We have established stock ownership
guidelines that apply to all non-employee directors. See "Stock
Ownership Information -- Stock Ownership Guidelines" below.
<PAGE> 11
ITEM 2. APPROVAL OF 1999 NONQUALIFIED STOCK OPTION PLAN
_____________________________________________________________________
The Board of Directors has adopted, subject to stockholder
approval, the Reynolds Metals Company 1999 Nonqualified Stock
Option Plan (the "1999 Plan"). If approved by stockholders, the
1999 Plan will be effective as of May 20, 1999.
Background
Reynolds has a 1996 Nonqualified Stock Option Plan (the "1996
Plan") that was approved by stockholders at the 1996 annual
meeting. No options may be granted under the 1996 Plan after
December 31, 2000. The 1999 Plan is substantially identical to
the 1996 Plan except:
- - the aggregate number of shares of common stock that may be
sold or delivered is 2,250,000 rather than 2,000,000;
- - the 1999 Plan limits the number of options that an optionee
may be granted during the term of the 1999 Plan to 750,000 shares
rather than 300,000;
- - the 1999 Plan does not prohibit the transfer of options if
the transfer is approved by the Compensation Committee, since SEC
rules no longer restrict the transferability of stock options; and
- - no options may be granted under the 1999 Plan after December 31,
2003.
As under the 1996 Plan, the 1999 Plan prohibits the repricing of
stock options and stock appreciation rights. Also, Reynolds
intends to have compensation paid to Reynolds' executive officers
under the 1999 Plan qualify as performance-based compensation
under Section 162(m) of the Internal Revenue Code.
Summary of the 1999 Plan
The following summary of the principal features of the 1999 Plan
may not contain all of the information that you consider
important. If you would like a copy of the full text of the 1999
Plan, you may obtain it by writing to Reynolds Metals Company,
6601 West Broad Street, P. O. Box 27003, Richmond, Virginia 23261-
7003, Attention: Secretary.
PURPOSE. The 1999 Plan is intended (1) to assist Reynolds in
attracting and retaining key employees by providing them with
additional incentive to contribute to Reynolds' growth and success
and (2) to align key employees' interests with stockholders'
interests by rewarding key employees only when shareholder value
is created.
ADMINISTRATION. The Compensation Committee of the Board of
Directors will be responsible for administering the 1999 Plan.
Each member of the Committee must be both a "non-employee
director" as contemplated by Rule 16b-3 under the Securities
Exchange Act of 1934 and an "outside director" within the meaning
of Treasury Regulation Section 1.162-27(e)(3). No member of the
Committee is eligible to participate in the 1999 Plan.
Among the powers granted to the Committee are the authority to
interpret the 1999 Plan, adopt rules and regulations for its
operation, determine the employees of Reynolds and its
subsidiaries to receive grants and determine the number of shares
and other terms and conditions of such grants.
ELIGIBILITY FOR PARTICIPATION. Key officers and employees of
Reynolds and its subsidiaries who
<PAGE> 12
contribute significantly to the growth and success of Reynolds
or a subsidiary, as determined by the Compensation Committee, are
eligible to be participants. Approximately 250 employees are
currently expected to participate in the 1999 Plan.
TYPES OF AWARDS. Stock options and stock appreciation rights may
be granted under the 1999 Plan.
Stock Options. A stock option entitles the optionee to
purchase one share of common stock from Reynolds and is
exercisable no earlier than one year or later than ten years
from the date of grant. Stock options are exercisable at an
exercise price at least equal to the fair market value of the
underlying common stock on the date of grant. Options may be
exercised by giving written notice to Reynolds specifying the
number of shares to be purchased, accompanied by payment in
full of the purchase price. If required, the optionee must
also pay an amount equal to applicable withholding taxes as
soon as administratively feasible.
An optionee may pay the purchase price of a stock option to
Reynolds:
- in cash;
- if the Compensation Committee approves, in shares of Reynolds
common stock having a fair market value on the date of exercise
equal to the aggregate purchase price;
- in a combination of such stock and cash; or
- by using a broker-assisted stock option financing program (if
such program is available at the time of the option's exercise).
Under such a program, a brokerage firm makes a loan to the
optionee for the payment of the option exercise price and all
applicable withholding taxes. The optionee may repay the loan by
selling the purchased shares immediately through the brokerage
firm, or the loan may remain outstanding until the shares are
later sold or the loan is otherwise repaid by the optionee.
If the Committee approves, an optionee may pay applicable
withholding taxes in shares of Reynolds common stock (including
shares received from exercise of the option).
No stock options may be granted under the 1999 Plan after
December 31, 2003. The 1999 Plan also prohibits the repricing
of stock options. See "Limitation on Repricing; Adjustments"
below.
Stock Appreciation Rights. The Compensation Committee may
grant stock appreciation rights concurrently with a stock
option grant or later. When exercised, such rights entitle the
recipient to receive a payment representing the appreciation in
market value of a specified number of shares from the date of
grant until the date of exercise. The payment may be in cash,
shares of common stock or a combination of both, as determined
by the Committee. A stock appreciation right may be exercised
only to the extent that the underlying option is exercisable,
but no earlier than six months from the date of grant of the
right. The exercise of a stock appreciation right extinguishes
the underlying stock option, and similarly, the exercise of an
option extinguishes the related stock appreciation right.
<PAGE> 13
Under the 1999 Plan, 100% of the shares subject to stock
options may have stock appreciation rights attached. Absent
any changes in the current regulatory environment, Reynolds
does not anticipate that stock options granted under the 1999
Plan will have stock appreciation rights attached.
The 1999 Plan also prohibits the repricing of stock
appreciation rights. See "Limitation on Repricing;
Adjustments" below.
EXERCISE PERIOD. Stock options and stock appreciation rights are
exercisable no earlier than one year or later than ten years from
the date the option is granted. They expire earlier if the
optionee's employment terminates for any reason other than death,
retirement, disability or other reason approved by the
Compensation Committee. Subject to these limitations, the
Committee has discretion to determine the period(s) within which
options and rights may be exercised.
In consideration of the granting of stock options and stock
appreciation rights, the optionee must remain in the employment of
the Company or one of its subsidiaries, at the pleasure of the
Company or such subsidiary, for at least one year after the date
of grant (unless the Committee otherwise approves). Grants are
made without the payment of a purchase price by an optionee.
TRANSFERABILITY. The Compensation Committee has discretion to
permit optionees to transfer stock options and stock appreciation
rights. In addition, stock options and stock appreciation rights
may be transferred or assigned by will or the laws of descent and
distribution on the optionee's death.
CHANGE IN CONTROL. If there is a change in control of the
Company, all options and stock appreciation rights already granted
under the 1999 Plan will become immediately exercisable. In the
case of optionees who are directors or executive officers,
however, the date as of which options and rights first become
exercisable may not be accelerated to occur earlier than six
months from the date of grant if acceleration would cause the
grant to be ineligible for an exemption from short-swing profit
liability under Section 16(b) of the Securities Exchange Act of
1934. Under the 1999 Plan, there is a "change in control" when
any of the following events occurs: (1) a person or group
acquires 15% or more of Reynolds common stock; (2) election within
a two-year period of a new majority of the Board of Directors
without concurrence of the former directors; (3) a consolidation
or merger of Reynolds where Reynolds' stockholders do not retain
voting control of the surviving entity; (4) stockholder approval
of either a liquidation of Reynolds or the sale or disposition of
all or substantially all of its assets; or (5) any other event
that must be reported in response to Item 6(e) of SEC Schedule
14A.
NUMBER OF SHARES. Up to 2,250,000 shares of common stock may be
sold or delivered under the 1999 Plan. This number may be
adjusted to reflect changes in Reynolds' capital structure, as
described below. See "Limitation on Repricing; Adjustments" below.
The shares to be used under the 1999 Plan will be treasury shares.
Shares not purchased or issued under any stock option or stock
appreciation right granted under the 1999 Plan and which are no
longer available for purchase because of the expiration,
termination or voluntary surrender of the option continue to be
available for the purposes of the 1999 Plan. The 1999 Plan
imposes an aggregate limit on the maximum number of shares that
may be granted to an
<PAGE> 14
individual of 750,000. This limit applies regardless of whether
the options lapse or are terminated or surrendered.
LIMITATION ON REPRICING; ADJUSTMENTS. The 1999 Plan prohibits the
repricing of stock options and stock appreciation rights. The
Compensation Committee may make proportionate and appropriate
adjustments under the 1999 Plan, however, to reflect changes in
Reynolds' capital structure, such as (a) a stock dividend on the
common stock; (b) a stock split; (c) a stock distribution or other
recapitalization with respect to the common stock, resulting in a
split-up or combination or exchange of shares; or (d) any special
distribution to the holders of the common stock.
AMENDMENT OR TERMINATION. The Board of Directors may amend,
modify, suspend or terminate the 1999 Plan at any time, except
that stockholder approval is required of any action that would (a)
increase the total number of shares that may be issued under the
1999 Plan or permit repricing (other than as provided above under
"Limitation on Repricing; Adjustments") or (b) permit options to
be granted for less than fair market value.
FEDERAL INCOME TAX CONSEQUENCES. The following is a brief summary
of the principal United States federal income tax consequences
under current federal income tax laws related to grants under the
1999 Plan. This summary is not intended to be complete and, among
other things, does not describe state, local or foreign tax
consequences.
No tax is imposed on the optionee, and no deduction is available
to the Company, upon the grant of a stock option. When an
optionee exercises a stock option, the Company will be entitled to
an income tax deduction equal to the amount required to be
reported by the optionee as income at the time such amount is
included in the optionee's income.
Optionees will, upon the exercise of a stock option paid for in
cash, recognize income for federal income tax purposes in an
amount equal to the excess of the fair market value on the
exercise date of the stock received over the price paid for it.
The tax basis of the shares received by the optionee will be their
fair market value on the exercise date.
If an option is exercised by delivering common stock to the
Company, the number of shares equal to the number delivered will
be received by the optionee without liability for federal income
tax and will retain the tax basis of the shares so delivered. The
fair market value on the exercise date of the additional shares
received by the optionee will be taxable. The optionee's tax
basis in these additional shares will be their fair market value
on the date of exercise.
Section 162(m) of the Internal Revenue Code limits the
deductibility by the Company of certain compensation in excess of
$1 million paid to the Company's chief executive officer and the
other four most highly compensated executive officers. The 1999
Plan has been designed to qualify any grant made by the
Compensation Committee under the 1999 Plan for the "performance-
based compensation" exemption of Section 162(m) of the Internal
Revenue Code. As a result, the Company will receive a tax
deduction when stock options and stock appreciation rights are
exercised under the 1999 Plan.
NEW PLAN BENEFITS. The Compensation Committee has made no
determinations with respect to grants
<PAGE> 15
of stock options or stock appreciation rights under the 1999 Plan.
Since grants under the 1999 Plan are entirely within the Committee's
discretion, it is not possible to determine the number of stock
options, or rights, if any, that would have been granted for 1998
if the 1999 Plan had been in effect. For information concerning
stock option grants under the 1996 Plan in 1998, see "Executive
Compensation -- Stock Option Grants in 1998" below.
RECENT SHARE PRICE. On March 22, 1999, the last reported sale
price of Reynolds common stock on the New York Stock Exchange
Composite Transactions Tape was $46.50 per share.
The Board of Directors recommends a vote FOR the approval of the
1999 Plan under Item 2. Shares represented by proxies will be
voted for approval unless instructions to the contrary are given
on the proxy.
_____________________________________________________________________
ITEM 3. APPROVAL OF AMENDED PERFORMANCE INCENTIVE PLAN
_____________________________________________________________________
The Company has a Performance Incentive Plan that provides
competitive variable compensation opportunities to executive
officers and other key employees based on achievement of annual
business goals. In 1996, stockholders approved an amendment to
the Plan to qualify variable compensation payable under the Plan
to top executives for the "performance-based compensation"
exemption of Section 162(m) of the Internal Revenue Code, so that
the Company would receive a tax deduction for amounts paid to them
under the Plan.
The Board of Directors has authorized amendment of the Plan
effective as of January 1, 1999, subject to stockholder approval.
The amendment would add as one of the objective performance goals
that may form the basis for a top executive to receive a variable
compensation award, if such goal is reached, a measure of
"economic value added" or EVA(R)<F1> of the Company. Stockholder
approval of the Plan as amended will allow payments made under
the amended Plan to continue to be fully tax deductible as
performance-based compensation under Section 162(m) of the
Internal Revenue Code for the next five years.
The following is a summary of the principal features of the Plan
as currently in effect and as proposed to be amended. This
summary may not contain all of the information that you consider
important. If you would like a copy of the full text of the Plan
as proposed to be amended, you may obtain it by writing to
Reynolds Metals Company, 6601 West Broad Street, P.O. Box 27003,
Richmond, Virginia 23261-7003, Attention: Secretary.
Current Provisions
PURPOSE. The purpose of the Plan is to promote the financial
success of the Company by:
- - providing variable compensation opportunities that are
competitive with those of other comparable companies;
[FN]
___________________
<F1> EVA(R) is a registered trademark of Stern Stewart & Co.
</FN>
<PAGE> 16
- - supporting the Company's goal-setting and strategic planning
process; and
- - motivating key executives to achieve annual business goals by
allowing them to share in the rewards of the business.
ADMINISTRATION. The Plan is administered by the Compensation
Committee of the Board of Directors. Each member is both a "non-
employee director" as contemplated by Rule 16b-3 under the
Securities Exchange Act of 1934, and an "outside director" within
the meaning of Treasury Regulation Section 1.162-27(e)(3). None
of the Committee members is eligible to participate in the Plan.
The Committee also administers the Plan in a manner consistent
with the performance-based compensation requirements of Section
162(m) of the Internal Revenue Code.
ELIGIBILITY FOR PARTICIPATION. Officers and other key employees
of the Company and its subsidiaries who are recommended by the
Company's chief executive officer and approved by the Committee
are eligible to participate in the Plan. A total of 266 persons
(including all current executive officers) were eligible to
participate in the Plan in 1998.
In special cases of meritorious performance, after consultation
with management, the Committee may make awards to individuals
(other than top executives) not previously designated as eligible
for participation during the year. In addition, if a participant
has died during the year, an award may be made to the
participant's spouse or legal representative if the Committee so
determines.
AWARDS. Under the Plan, annual variable compensation is paid only
if performance meets or exceeds preestablished goals, with
relatively higher payments for superior performance. The higher
the executive grade level, the greater the proportion of
compensation contingent on accomplishment of business goals. The
Committee establishes threshold, target and maximum award levels
to reward performance based on corporate, business unit and/or
individual goals. For a discussion of the factors considered by
the Committee in setting award levels for 1998, see "Report of
Compensation Committee on Executive Compensation -- Variable
Compensation" below.
A total of 336 persons received awards under the Plan for 1998.
Awards granted for 1998 are included in the Summary Compensation
Table as bonuses.
FORM OF PAYMENT. All awards under the Plan are paid in cash,
except that if a participant who is subject to Reynolds' stock
ownership guidelines for officers does not meet the applicable
minimum stock ownership level as of year-end, the next award to
the participant under the Plan will be paid part in cash and part
in stock (up to one-half the value of the award but not to exceed
the participant's annual rate of base salary in effect at the time
of the award). The mandatory share award provision does not apply
to the extent the participant has already elected under the
Company's New Management Incentive Deferral Plan to defer a
portion of the award under the Plan and to have such deferred
award credited with additional income based on equivalent shares
of common stock of the Company.
PERFORMANCE GOALS. For the Company's chief executive officer and
other participants who are reasonably likely to be subject to the
Section 162(m) deductibility limitations ("top executives"),
payments are made under the Plan only upon the achievement of
objective performance goals established in writing at the
beginning of the year.
<PAGE> 17
The Committee may reduce (or not pay) awards, but may not increase
them. Currently, performance goals may be based on net earnings,
stock price, profit before taxes, return on equity, return on
capital, return on assets, total return to shareholders, earnings
per share or debt rating. Performance goals may vary among the
top executives and from year to year.
In establishing performance goals, the Committee establishes both
the minimum performance goal that must be reached for the top
executive to receive any award for the calendar year and the
maximum performance goal that must be reached for the top
executive to receive the maximum award for the calendar year.
Between the minimum and the maximum goals, the Committee may
establish a range of intermediate performance goals with a
corresponding range of awards between the minimum and maximum
award opportunity. In no event may a top executive's maximum
award under the Plan during any one calendar year exceed
$2,500,000.
AMENDMENT OR TERMINATION. The Board of Directors may amend,
suspend or terminate the Plan at any time.
Plan as Proposed to be Amended
The Plan as proposed to be amended will continue in effect as
described above with the following change relating to EVA(R).
PERFORMANCE GOALS. Under the Plan as proposed to be amended,
EVA(R) will be added as one of the objective performance goals
that may form the basis for a top executive to receive a variable
compensation award. Reynolds has already begun to use EVA(R) at
the business unit level as a tool for measuring performance and
believes it appropriate to include EVA(R) as an objective
performance goal for top executives. The Plan as proposed to be
amended defines EVA(R) as (1) net operating profit (or loss) after
taxes minus (2) a capital charge. As with all other objective
performance goals established under the Plan, the specific EVA(R)
goal or target will be determined on a basis specified by the
Compensation Committee.
NEW PLAN BENEFITS. No determination has been made as to the
amount of any awards that may be made in the future under the Plan
as proposed to be amended. It is also not possible to determine
amounts which would have been paid for the last completed fiscal
year if the Plan as proposed to be amended had been in effect,
given that (a) the performance goals for a year are established in
advance based upon anticipated Company performance for the year
and (b) the Committee has discretion to reduce or not pay awards.
Amounts actually paid under the Plan for 1998 to the chief
executive officer and the other four most highly compensated
executive officers are included in the bonus column of the Summary
Compensation Table below.
The Board of Directors recommends a vote FOR the approval of the
Performance Incentive Plan as amended under Item 3. Shares
represented by proxies will be voted for approval unless
instructions to the contrary are given on the proxy.
<PAGE> 18
ITEM 4. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
_____________________________________________________________________
Upon the recommendation of the Audit Committee, the Board of
Directors has selected Ernst & Young LLP as independent auditors to
examine and report upon the financial statements of the Company and
its consolidated subsidiaries for 1999. The Board is submitting
this matter to stockholders for ratification.
Ernst & Young LLP served as Reynolds' independent auditors in 1998
and in prior years. If stockholders do not ratify the selection
of Ernst & Young LLP, the Board will consider other independent
auditors. Representatives of Ernst & Young LLP will attend the
annual meeting with the opportunity to make a statement if they
desire to do so and to respond to appropriate questions.
The Board of Directors recommends a vote FOR Item 4. Shares
represented by proxies will be voted for approval unless
instructions to the contrary are given on the proxy.
_____________________________________________________________________
ITEM 5. STOCKHOLDER PROPOSAL RELATING TO THE CERES PRINCIPLES
_____________________________________________________________________
The General Board of Pension and Health Benefits of the United
Methodist Church, 1201 Davis Street, Evanston, Illinois 60201-
4118, owning 77,804 shares of common stock, has notified Reynolds
that it intends to present the following proposal at the annual
meeting. The proposal, as submitted, reads as follows:
"ENDORSEMENT OF THE CERES PRINCIPLES
FOR PUBLIC ENVIRONMENTAL ACCOUNTABILITY
WHEREAS:
All leaders of industry in the United States now acknowledge their
obligation to pursue superior environmental performance and to
disclose information about that performance to their investors and
other stakeholders.
The integrity, utility, and comparability of environmental
disclosure depends on the creation of environmental reports that
employ a common format, use credible metrics, and follow a set of
a generally accepted environmental disclosure standards.
The Coalition for Environmentally Responsible Economies (CERES), a
ten year old partnership among some of the largest investors,
environmental groups, and corporations in the country, has
established what we believe is the most thorough and well-
respected environmental disclosure form in the United States.
CERES has also gathered leading international organizations,
including the United Nations Environment Programme, into a
collaborative Global Reporting Initiative to guide and accelerate
the worldwide trend toward standardized environmental reporting.
<PAGE> 19
The CERES Principles and the CERES Report have already been
adopted by leading firms in highly diverse industries such as Bank
America, Baxter International, Bethlehem Steel, Coca-Cola, General
Motors, Interface, ITT Industries, Pennsylvania Power and Light,
Polaroid, and Sun Company.
We believe endorsing the CERES Principles commits a company to the
prudent oversight of its financial and physical resources through:
1) protection of the biosphere; 2) sustainable use of natural
resources; 3) waste reduction; 4) energy conservation; 5) risk
reduction; 6) safe products/services; 7) environmental
restoration; 8) informing the public; 9) management commitment;
10) audits and reports. (The full text of the CERES Principles and
accompanying CERES Report form are obtainable from CERES, 11
Arlington Street, Boston Massachusetts 02116, (617) 247-0700 or
at www.ceres.org).
RESOLVED: Shareholders request that the company endorse the CERES
Principles as a reasonable and beneficial component of their
corporate commitment to be publicly accountable for environmental
performance.
SUPPORTING STATEMENT
Recent studies show that the integration of environmental
commitment into business operations provide competitive advantage
and improve long-term financial performance for companies. In
addition, the depth of a firm's environmental commitment and the
quality with which it manages its environmental performance
provide us with indicators of the foresight of its management.
Given investors' needs for credible information about a firm's
environmental performance, and given the large number of companies
that have already endorsed the CERES Principles and adopted its
report format, endorsement of the CERES Principles is a reasonable,
widely accepted step for any company wishing to demonstrate its
seriousness about superior environmental performance.
The goal of the CERES Principles is continuous improvement in
corporate environmental performance, coupled with public
accountability. One cannot measure improvement without having data
over time. Standardizing that data enables investors to assess
environmental progress within and across industries. By endorsing
the CERES Principles, a company agrees to a single consistent
standard for environmental reporting. An endorsing company works
with CERES and other endorsing companies in setting that reporting
standard.
Your vote FOR this resolution serves the best interests of our
Company and its shareholders."
<PAGE> 20
POSITION OF THE BOARD OF DIRECTORS
_____________________________________________________________________
The Board of Directors recommends a vote AGAINST this proposal.
This proposal was defeated by stockholders at the 1998 annual
meeting. The Board of Directors continues to believe that the
action requested by the proponents is not in the best interests of
Reynolds or its stockholders.
As we noted last year, we have carefully reviewed the CERES
Principles and do not believe adoption would help Reynolds better
fulfill its continuing commitment to global environmental
responsibility. We recognize that good environmental management
is essential to good overall management. In this and other things
we do, we strive for continuous improvement. At the same time, we
are very conscious that our environmental management practices
must be value-adding for all of our stockholders (and not just a
single group) to the maximum extent possible.
Reynolds already has in place an environmental, health and safety
policy that includes a commitment to specific environmental,
health and safety principles, many of which are similar to the
CERES Principles. For example, we are committed to preserving
health, safety and a sound environment, continuing our efforts to
minimize releases to the environment, complying with applicable
environmental requirements and providing public information on our
operations and their relation to the environment. We also
recognize the importance of performance and accountability in
environmental matters. Reynolds' Audit Committee, which is
composed entirely of non-employee directors, receives a
presentation at least once a year from our chief environmental
manager on Reynolds' overall environmental compliance activities.
We also have an ongoing program of facility compliance
assessments.
As an example of our efforts toward continuous improvement, since
last year we have prepared an Environmental, Health and Safety
Report that is now available to stockholders on our World Wide Web
site at http://www.rmc.com. Copies may also be obtained by
writing to: Reynolds Metals Company, 6601 West Broad Street, P.
O. Box 27003, Richmond, Virginia 23261-7003, Attention:
Secretary.
We believe our existing programs and initiatives, together with
the requirement to comply with extensive local, state, federal and
foreign regulations, already provide a strong basis of
accountability on environmental matters to the public and
Reynolds' stockholders. Implementing the proposal would, in our
view, burden Reynolds and its stockholders with additional
reporting requirements and costs while not providing any greater
environmental protection than already exists. We find the
reporting requirements of the CERES Principles, in particular, to
be too inflexible. In short, we do not believe that adopting
another set of principles, on top of our existing environmental,
health and safety policy and principles, would add value to
Reynolds' environmental performance.
The Board of Directors therefore recommends a vote AGAINST Item 5.
Shares represented by proxies will be voted against this item
unless instructions to the contrary are given on the proxy.
<PAGE> 21
ITEM 6. STOCKHOLDER PROPOSAL RELATING TO GLOBAL WARMING
_____________________________________________________________________
The Adrian Dominican Sisters, 1257 East Siena Heights Drive,
Adrian, Michigan 49221-1793, owning 9,800 shares of common stock,
and Brent Blackwelder, President, Friends of the Earth Action,
1025 Vermont Avenue, NW #300, Washington, D.C. 20005-6303, owning
100 shares of common stock, have notified Reynolds that they
intend to present the following proposal at the annual meeting.
The proposal, as submitted, reads as follows:
"GLOBAL WARMING (Reynolds Metals)
WHEREAS: The overwhelming majority of independent, peer-reviewed
atmospheric scientists agree that global warming, or climate
change, is not hypothetical but a real, existing problem posing
serious challenges for modern civilization;
The Intergovernmental Panel on Climate Change (IPCC), composed of
scientists nominated and reviewed by governments, warns that
global warming caused by burning fossil fuels and emitting
greenhouse gases is already under way. The IPCC anticipates that
climate change will result in:
- - global warming over the next century exceeding that over the
whole last 100 centuries;
- - increased spread of infectious diseases, like malaria
spreading northward into the United States, and more frequent and
deadly heat waves;
- - sea-level rises, putting 92 million people at risk in low-
lying coastal areas, and stronger storm surges, exacerbating the
damage from hurricanes and tropical storms;
- - and a more vigorous hydrological cycle, likely causing
stronger precipitation, increased flooding in some areas, greater
drought in others, and greater intensity and force of storms.
RESOLVED: that the shareholders of Reynolds Metals request that
the Board of Directors make a report (at reasonable costs and
omitting proprietary information), available to shareholders by
August 1999, on the greenhouse gas emissions from our company's
own operations, including (with dollar amounts where relevant) (i)
what our company is doing in research and/or action to reduce
those emissions and ameliorate the problem, (ii) the financial
exposure of our company and its shareholders due to the likely
costs of reducing those emissions and potential liability for
damages associated with climate change, and (iii) actions by our
company, or by the industry associations to which it pays dues,
promoting the view that the issue of climate change is exaggerated
or not real.
SUPPORTING STATEMENT
British Petroleum has taken leadership among oil companies in
recognizing the problem of climate change, saying, The time to
consider the policy dimensions of climate change is ... when the
possibility cannot be discounted ... We in BP have reached that
point. John Browne, Group Chief Executive, British Petroleum
(Stanford, 5/19/97). If a major international oil company is now
taking steps to address and reduce climate change, do we want to
be left behind?
We believe that Reynolds Metals is exposing its shareholders to
financial risk by continuing to emit greenhouse gases as the
problem of climate change becomes more severe, more widely
understood, and more likely to lead to legislation that will
penalize greenhouse gas emitters. To express your concern about
climate change, vote YES."
<PAGE> 22
POSITION OF THE BOARD OF DIRECTORS
_____________________________________________________________________
The Board of Directors recommends a vote AGAINST this proposal.
We believe that Reynolds' existing activities and initiatives
relating to global climate change address the concerns raised in
the proposal.
As part of its commitment to global environmental responsibility,
Reynolds is committed to improving energy efficiency and is
voluntarily taking cost-effective action to reduce emissions of
greenhouse gases from its operations. As described below,
Reynolds participates in and supports government/industry programs
dedicated to encouraging private and public sector organizations
to take voluntary measures to limit or reduce their greenhouse gas
emissions. As a participant in these programs, Reynolds has
prepared and submitted action plans and progress reports
describing its operational improvements, investments in technology
and equipment and other activities aimed at reducing greenhouse
gas emissions.
Reynolds' specific initiatives relating to global climate change
include the following:
- - Voluntary Government/Industry Partnerships. Reynolds is
participating in voluntary energy efficiency/greenhouse gas
reduction programs in the United States, Canada, Australia and
Europe. A key example is Reynolds' participation since 1995 in
the U.S. Environmental Protection Agency's Voluntary Aluminum
Industrial Partnership (VAIP). The goal of the VAIP program is to
reduce U.S. perfluorocarbon (PFC) emissions from aluminum smelting
by 30 to 60 percent from 1990 levels by the year 2000.
- - Research and Development Programs. Reynolds is supporting
several research and development projects to better understand the
formation of, and potential ways to reduce, greenhouse gas
emissions from its operations. Reynolds supports industry-wide
projects through its membership in (1) The Aluminum Association,
Inc., which is working in partnership on some projects with the
U.S. Environmental Protection Agency, the Massachusetts Institute
of Technology and the U.S. Department of Energy, and (2) the
International Primary Aluminum Institute.
Some of the industry-wide projects currently underway include
studies focusing on (1) collecting and measuring PFC emissions
from the U.S. primary aluminum industry; (2) atmospheric
modeling of PFC gases; (3) development of inert/carbonless
anode technology; and (4) understanding the electrode kinetics
of greenhouse gas evolution.
Reynolds is also conducting its own research to identify ways
to reduce PFC emissions from the aluminum reduction process and
to improve energy efficiency.
With respect to Reynolds' "financial exposure" arising from global
climate change issues, Reynolds does not believe that any
reasonable estimate may be made at this point, given the numerous
uncertainties and variables involved.
The Board believes that Reynolds' current approach in addressing
the challenge of global
<PAGE> 23
climate change issues is prudent and effective. In the Board's
view, adding another special report, on top of Reynolds' existing
reports and other activities related to global climate change, is
unnecessary and would duplicate effort and expense.
The Board of Directors therefore recommends a vote AGAINST Item 6.
Shares represented by proxies will be voted against this item
unless instructions to the contrary are given on the proxy.
_____________________________________________________________________
Other Matters
We have been advised that a stockholder wishes to present a
proposal at the annual meeting asking that the Board of Directors
"retain an investment banking firm to explore strategic
alternatives for maximizing shareholder value." This proposal was
not included in the proxy statement because it was not received
within the time limits prescribed by SEC rules. If this proposal
is presented, the holders of the proxies will use their
discretionary authority to vote against it.
We believe this proposal serves no purpose. We have already
retained investment bankers to assist in considering alternatives
during our portfolio review process and their analyses have
been presented to the Board. We are continuing to consult with
them during our strategic planning process this year.
The Board of Directors does not know of any other matters to be
presented at the annual meeting. If any matter is properly
presented for a vote at the meeting, your shares will be voted in
accordance with the discretion of the holders of the proxies.
<PAGE> 24
STOCK OWNERSHIP INFORMATION
_____________________________________________________________________
Holders of More Than 5%
The following table shows stockholders who were known to
Reynolds, as of March 22, 1999, to own beneficially more
than 5% of Reynolds common stock. "Beneficial ownership" is
defined under SEC rules to include any shares with respect
to which a person, directly or indirectly, has or shares
voting and/or investment power, whether or not such shares
are held for the person's benefit.
___________________________________________________________________________
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial
Ownership
Name and Address of Title of (Number of Percent
Beneficial Owner Class Shares) of Class
- ------------------- -------- ---------- --------
<S> <C> <C> <C>
Wellington Management Company, LLP Common Stock 6,506,660<F1> 10.1%
75 State Street
Boston, Massachusetts 02109
Vanguard/Windsor Funds Inc. Common Stock 4,704,048<F2> 7.3%
P. O. Box 2600
Valley Forge, Pennsylvania 19482
Highfields Capital Management LP Common Stock 3,550,700<F3> 5.5%
Highfields GP LLC
Jonathon S. Jacobson
Richard L. Grubman
200 Clarendon Street, 51st Floor
Boston, Massachusetts 02117
Citigroup Inc. Common Stock 3,235,826<F4> 5.0%
153 East 53rd Street
New York, New York 10043
___________________________________________________________________________
<FN>
<F1> As reported in an Amendment No. 7 dated December 31, 1998 to a
Schedule 13G dated February 10, 1993. The stockholder, an
investment advisor and parent holding company, reported that
the shares are held of record by its clients, including
Vanguard Windsor Fund, and that it had (a) shared voting power
with respect to 350 shares, (b) shared dispositive power with
respect to all of the shares, and (c) sole voting and
dispositive power with respect to none of the shares.
<F2> As reported in an Amendment No. 6 dated February 10, 1999 to a
Schedule 13G dated February 10, 1993. The stockholder, an
investment company, reported that it had (a) sole voting and
shared dispositive power with respect to all of the shares and
(b) shared voting and sole dispositive power with respect to
none of the shares.
<F3> As reported in a joint filing of a Schedule 13D dated March
17, 1999. According to the filing, (1) Highfields Capital
Management LP is principally engaged in the business of
providing investment management services to the following
investment funds: (a) Highfields Capital I LP; (b) Highfields
Capital II LP; and (c) Highfields Capital Ltd. (the "Funds");
(2) Highfields GP's principal business is serving as general
partner of Highfields Capital Management LP; and (3) Mr.
Jacobson and Mr. Grubman are each a managing member of
Highfields GP and a managing director of Highfields Capital
Management LP and in such capacity each acts as a portfolio
manager of the Funds. The filing stated that each of the
reporting persons had (a) sole voting and dispositive power
with respect to all of the shares and (b) shared voting and
dispositive power with respect to none of the shares.
<F4> As reported in a Schedule 13G dated February 9, 1999. The
stockholder, a parent holding company, reported that the
shares are held by subsidiaries, and that it had (a) sole
voting and dispositive power with respect to none of the
shares and (b) shared voting and dispositive power with
respect to all of the shares.
</FN>
</TABLE>
<PAGE> 25
Director and Executive Officer Stock Ownership
The following table shows the beneficial ownership of Reynolds
common stock as of March 22, 1999 by directors (including all
nominees for director) and the five executive officers named
in the Summary Compensation Table shown on page 33 below.
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership
(Number of Shares)
-------------------------------------------
Sole Shared
Voting Voting Additional
and/or and/or Percent Common
Investment Investment of Stock
Title of Class Power<F1> Power<F2> Total<F3> Class<F4> Equivalents<F5>
-------------- ---------- ---------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Directors/Nominees:
Patricia C. Barron Common Stock 1,534 --- 1,534 1,109
John R. Hall Common Stock 4,200 --- 4,200 8,906
Robert L. Hintz Common Stock 1,500 --- 1,500 4,002
William H. Joyce Common Stock 3,493 --- 3,493 5,260
Mylle Bell Mangum Common Stock 1,568 --- 1,568 955
D. Larry Moore Common Stock 1,587 --- 1,587 1,735
*Randolph N. Reynolds Common Stock 254,397 51,410 305,807 0.5% 953
James M. Ringler Common Stock 1,099 --- 1,099 5,195
Sam Scott Common Stock 2,000 --- 2,000 684
*Jeremiah J. Sheehan Common Stock 288,507<F6> 1,208 289,715 0.4% 19,739
Joe B. Wyatt Common Stock 1,500 --- 1,500 2,310
Named Executive Officers:
Thomas P. Christino Common Stock 54,971 5,036 60,007 0.1% 3,325
William E. Leahey, Jr. Common Stock 55,200 967 56,167 0.1% 6,258
Paul Ratki Common Stock 59,448 2,569 62,017 0.1% 3,434
All Directors and
Executive Officers
as a group
(29 persons): Common Stock 1,483,843 533,252 2,017,095 3.1% 72,140
_____________________________________________________________________________________________
* also a Named Executive Officer
<PAGE>
<FN>
<F1> Reported in this column are shares held of record individually
or held in the name of a bank, broker or nominee for the
person's account and other shares with respect to which
directors, nominees and executive officers (or their spouses,
minor children or other relatives who share their home) have
sole voting and/or investment power, including shares held as
sole trustee or custodian for the benefit of others. Also
included in this column are the following shares of Reynolds
common stock which may be acquired within 60 days after March
22, 1999 under the Company's 1987, 1992 and 1996 Nonqualified
Stock Option Plans: J. J. Sheehan, 280,500 shares; R. N.
Reynolds, 192,000 shares; T. P. Christino, 54,600 shares; W.
E. Leahey, Jr., 55,200 shares; P. Ratki, 57,750 shares; and
all current directors and executive officers as a group,
1,357,200 shares.
<F2> Reported in this column are shares with respect to which
directors, nominees and executive officers (or their spouses
or minor children) share voting and/or investment power,
including shares held jointly with others or as co-trustee for
the benefit of others and shares credited as of March 22, 1999
to the accounts of participants under the Company's Savings
and Investment Plan for Salaried Employees.
<F3> Each director, nominee and executive officer disclaims
beneficial ownership of all securities which are not held for
his or her benefit. Each of J. R. Hall, R. N. Reynolds and J.
J. Sheehan also disclaims beneficial ownership of the
following shares of common stock held by his wife: Mrs. J. R.
Hall, 200 shares; Mrs. R. N. Reynolds, 1,984 shares; and Mrs.
J. J. Sheehan, 8,007 shares. An executive officer not named
in the table disclaims
<PAGE> 26
beneficial ownership of 164 shares of common stock held
by his wife. All disclaimed shares are included in the table.
<F4> Unless otherwise indicated, beneficial ownership of any named
individual does not exceed 0.1% of the outstanding shares.
Shares of common stock that can be acquired within 60 days
after March 22, 1999 through the exercise of stock options by
a director or executive officer named in the table are deemed
outstanding for the purpose of computing the percentage of
outstanding common stock owned by such director or executive
officer, but are not deemed outstanding for the purpose of
computing the percentage of common stock owned by any other
director or executive officer.
<F5> Reported in this column are equivalent shares of common stock
credited as of March 22, 1999 to the accounts of (a) non-
employee directors/nominees under a deferred compensation plan
and a stock plan; and (b) executive officers under variable
compensation and salary deferral plans and an excess benefit
plan.
<F6> Excluded from this column are 150,000 shares of common stock
covered by a performance-based stock option granted to J. J.
Sheehan in 1996. The option becomes exercisable only if the
closing price of the common stock equals or exceeds $80.25 per
share for 30 consecutive calendar days on or before September
30, 1999. If this condition is satisfied, the option may be
exercised any time before March 31, 2000.
</FN>
</TABLE>
<PAGE>
_____________________________________________________________________
Stock Ownership Guidelines
Reynolds has established stock ownership guidelines that apply to
its non-employee directors and executive officers.
Directors
Each non-employee director is expected to own at least 1,500
shares of Reynolds common stock (or its equivalent, including
phantom stock granted under director compensation plans). No
specific period of time is established within which the minimum
level must be reached. The Committee on Directors takes into
consideration the failure of any non-employee director to make
reasonable progress toward meeting the minimum level in weighing
such director's renomination to the Board. All non-employee
directors currently exceed the minimum ownership level.
Executive Officers
The stock ownership guidelines applicable to executive officers
are described on page 31. See "Report of Compensation Committee
on Executive Compensation -- Stock Ownership Guidelines" below.
_____________________________________________________________________
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires
Reynolds' directors and executive officers to file reports of
Reynolds share ownership and changes in ownership. To the best of
the Company's knowledge, all reports required to be filed by
Reynolds' directors and executive officers were filed on a timely
basis in 1998.
W. E. Leahey, Jr. reported a June 30, 1997 sale of 100 shares of
common stock by an independently managed investment fund
maintained for his benefit on a Form 5 for 1998. The sale should
have been reported on a Form 4 for June 1997 and a Form 5 for
1997.
<PAGE> 27
EXECUTIVE COMPENSATION
_____________________________________________________________________
Report of Compensation Committee on Executive Compensation
The Compensation Committee of the Board of Directors has general
oversight responsibilities for compensation paid to executive
officers.
Objectives
Reynolds' executive compensation program aims to:
- - build and retain a management team with exceptional
abilities; and
- - focus management's attention, energy and skill on achieving
short-term business goals, securing long-term profitable growth
and building stockholder value.
Elements of Compensation
The key elements of Reynolds' compensation program are:
- - base salary;
- - variable compensation in the form of annual awards; and
- - long-term compensation consisting of stock option awards and
performance share units.
Benchmarking
The Committee meets regularly with management and with an
independent compensation consultant to review the executive
compensation program. In its review, the Committee compares the
total compensation of executive officers to that of a comparison
group of companies. The comparison group currently consists of 25
comparably sized, capital intensive companies about which
Reynolds' independent consultant has comprehensive compensation
data. The group includes three of the companies in the aluminum,
metals and containers industry peer group and eleven of the
companies in the S&P Basic Materials Index, against which
Reynolds' stockholder return is measured in the Performance Graph
on page 32. Differences in size within the comparison group are
adjusted by regression analysis based on sales levels.
The Committee believes the comparison group is a representative
sample of the types of companies that are Reynolds' most direct
competitors for executive talent. Reynolds targets individual
components of executive compensation against the comparison group
but has no specific target for total compensation.
Tax Limits on Deductibility of Compensation
Section 162(m) of the Internal Revenue Code limits Reynolds'
ability to deduct certain compensation in excess of $1 million
paid to the chief executive officer and the other four most highly
compensated executive officers. Reynolds' Performance Incentive
Plan, 1996 Nonqualified Stock Option Plan and Long-Term
Performance Share Plan are designed so that amounts paid to
executive officers as a result of:
- - variable compensation awards under the Performance Incentive
Plan
- - stock option grants and
- - performance share unit awards
either qualify as "performance-based compensation" or are subject,
if necessary, to mandatory deferrals. As a result, all such
payments are deductible under Section 162(m). All
<PAGE> 28
compensation paid to executive officers for 1998 was fully
deductible, and the Committee anticipates that substantially
all future compensation paid to executive officers should also
be deductible.
Base Salaries
Reynolds aims to pay base salaries that are competitive with the
comparison group. Each year, management recommends to the
Committee the salaries of all executive officers other than the
chief executive officer. The Committee makes its own assessment
of the chief executive officer's salary.
In making its recommendations to the Board, the Committee
considers:
- - the executive officer's job responsibilities, performance and
experience;
- - the business outlook for Reynolds;
- - the general state of the economy; and
- - pay practices of the comparison group, including salary data
provided by Reynolds' independent compensation consultant.
For 1998, salaries paid to executive officers as a group were
approximately 4% above the size-adjusted median for the comparison
group.
Variable Compensation
Under Reynolds' Performance Incentive Plan, annual variable
compensation is paid only if performance meets or exceeds
preestablished goals, with relatively higher payments for superior
performance. The higher the executive grade level, the greater
the proportion of compensation contingent on accomplishment of
business goals. Except as noted below under "Stock Ownership
Guidelines", all awards are payable in cash.
For those participants who are reasonably likely to be subject to
the Section 162(m) deductibility limitations, payments are made
under the plan only upon the achievement of objective performance
goals established at the beginning of the year. The Committee may
reduce (or not pay) awards, but may not increase them. To allow
the Committee some discretion to reward these participants for
achievement of less objective but still important goals, Reynolds
also has a Supplemental Incentive Plan. Under the supplemental
plan, Reynolds establishes annual performance goals different from
and independent of the objective performance goals under the
Performance Incentive Plan. Reynolds establishes a performance
threshold that must be reached before any award may be paid under
the supplemental plan and sets maximum levels which limit the
amount of the awards. Payments under the supplemental plan do not
qualify as "performance-based compensation" under Section 162(m).
For 1998, Reynolds established threshold, target and maximum award
levels to reward performance based on separate corporate and
business unit goals. The key measures on a corporate basis were
based on return on capital, both relative to aluminum industry
competitors and on an absolute basis. Business unit goals focused
on return on EVA(R) investment, conversion cost improvements,
inventory reductions, safety improvements and other goals critical
to the particular business.
Reynolds exceeded the threshold for return on capital relative to
other aluminum industry participants, but fell below its absolute
target for return on capital, so only a partial payout was made on
these measures. Accomplishment of business unit goals varied,
with payouts ranging from 0% to 234% of target. Particularly
strong performance was achieved by Reynolds' Base Materials global
<PAGE> 29
business unit and its Packaging and Consumer global business unit.
Other corporate measures on which performance met or exceeded
goals included improvement in return on EVA(R) investment,
reductions in inventory dollar days of supply, conversion cost
improvements, reduction in days away from work resulting from
injuries and substantial completion of Year 2000 readiness goals.
In the aggregate, corporate and business unit variable
compensation payments averaged 105% of target levels.
Long-Term Compensation
Stock Options. Each year, the Committee grants to executive
officers and other key employees options to purchase common stock.
All options are exercisable no earlier than one year or later than
ten years from the date of grant at an exercise price equal to the
fair market value of the underlying common stock on the grant
date. The options provide a long-term incentive to build
Reynolds' businesses and align management's objectives with
stockholders' interests by rewarding management only when
stockholder value is created. Except for required adjustments to
reflect changes in Reynolds' capital structure, such as stock
splits, Reynolds has never adjusted the price nor amended the
financial terms of outstanding options. As a result, executive
officers cannot benefit from stock price appreciation unless
stockholders also benefit.
The size of the option award granted to each executive officer is
generally based on a stock option grant schedule approved by the
Committee. The schedule allocates shares authorized for stock
options to eligible employees based on (1) salary grade level and
(2) long-term incentive compensation data provided by Reynolds'
independent compensation consultant.
The schedule is used as a guide for what a typical award might be
for each eligible employee, including each executive officer.
Actual awards may vary based on an individual's experience,
achievements and anticipated future contributions to Reynolds.
(The number of options and shares currently held by an optionee is
not a factor in determining individual grants.) In approving the
schedule and the size of the awards for 1998, the Committee's
decisions were based on its own judgment exercised within the
framework described above, rather than on any particular corporate
performance measure.
Performance Share Units. For a number of years, Reynolds has
lagged substantially behind other companies in the comparison
group with respect to long-term compensation. To bridge this gap,
in 1998 Reynolds adopted a new Long-Term Performance Share Plan.
Under this plan, as currently administered, executive officers are
granted performance share units for a designated cycle (generally
four years, although an initial two-year cycle was also
established for 1998-99). The units may be earned (or not) based
on Reynolds' total shareholder return (i.e., stock price
appreciation plus dividends reinvested quarterly) relative to the
S&P Basic Materials Index. A threshold payment will be made if
Reynolds matches the 40th percentile of the group, while target is
payable at the 60th percentile and a maximum award of 150% is
payable at the 80th percentile. Award levels were determined with
the assistance of Reynolds' independent consultant and were
intended to make long-term compensation opportunities for Reynolds
more competitive with those in the comparison group. Even with
the addition of the new plan, long-term compensation for Reynolds'
executive officers in 1998 remained approximately 5% less than
that for the comparison group.
<PAGE> 30
Chief Executive Officer Compensation
Mr. Sheehan's compensation is established in accordance with the
executive compensation philosophy and policies described above.
The Board of Directors meets after the close of each year in
executive session to review the performance of Reynolds generally,
senior management as a group and Mr. Sheehan individually. The
Chairman of the Committee acts as "lead director" for this
executive session.
Mr. Sheehan's salary level is generally the result of:
- - individual performance and time in his current position;
- - the salary grade level assigned to his position, which takes
into account knowledge and level of responsibility;
- - salary data provided by Reynolds' independent compensation
consultant; and
- - salary budget guidelines for the year, which take into
account the business outlook for Reynolds.
The chief executive officer's salary is designed to be at the size-
adjusted median for the comparison group, consistent with
Reynolds' executive compensation philosophy. Effective November
1, 1998, Mr. Sheehan received a salary increase from $800,000 to
$900,000. This increase was consistent with the Committee's
objective of bringing his salary to a competitive position within
three years of his becoming chief executive officer.
The Committee authorized a variable compensation payment of
$512,934 to Mr. Sheehan for 1998, which was determined on the same
basis as for other executive officers. In particular, the
Committee noted Reynolds' gains through its restructuring program
and substantial accomplishment of corporate goals in a difficult
operating environment, which were offset somewhat by below target
return on capital and disappointing performance of the
Transportation global business unit.
Stock option and performance share unit grants to Mr. Sheehan were
consistent with the scheduled amount for his salary grade level as
chief executive officer and were designed to be competitive with
long-term compensation for the comparison group.
<PAGE> 31
Stock Ownership Guidelines
Reynolds has established stock ownership guidelines that apply to
all executive officers. Under these guidelines, the following
individuals are generally expected to own at least the indicated
amount of common stock (or its equivalent, including equivalent
shares of common stock under variable compensation and salary
deferral plans):
- - Chief Executive Officer........................... 3 times salary
- - Any Vice Chairman or Executive Vice President..... 2 times salary
- - Other officers or senior managers subject to the
guidelines........................................ 1 times salary
No specific period of time is established within which the minimum
level must be reached, although each individual subject to the
guidelines is expected to meet the applicable minimum stock
ownership level as soon as reasonably practicable.
If a participant in the Performance Incentive Plan who is subject
to the guidelines does not meet the applicable minimum stock
ownership level as of year-end, the next award to the participant
will be paid part in cash and part in stock (up to one-half the
value of the award but not to exceed the participant's annual rate
of base salary in effect at the time of the award).
COMPENSATION COMMITTEE
John R. Hall, Chairman
Mylle B. Mangum
D. Larry Moore
Sam Scott
Joe B. Wyatt
February 19, 1999
Richmond, Virginia
<PAGE> 32
Performance Graph
The following graph compares the five-year cumulative total
return on Reynolds common stock with that of:
- - the Standard & Poor's 500 Stock Index;
- - a peer group consisting of a composite of three S&P
published indices: (1) the Aluminum Industry Index, (2) the
Metals Mining Industry Index and (3) the Containers (Metals
and Glass) Industry Index; and
- - the published S&P Basic Materials Index, a newly
selected peer group.
We plan to replace the composite group with the S&P Basic
Materials Index as our sole peer group in next year's proxy
statement. We have included both groups this year in
accordance with SEC rules.
The composite group provided a close correlation to our mix
of primary aluminum, can and packaging businesses. But with
(1) the sale of our North American can operations in 1998,
(2) Alcoa's acquisition of Alumax in 1998, which reduced the
number of companies in the Aluminum Industry Index, and (3)
our move toward using the S&P Basic Materials Index as our
executive compensation comparison group, we believe the S&P
Basic Materials Index provides a more informative comparison
going forward.
The graph assumes an initial investment of $100 on December
31, 1993 and reinvestment of all dividends.
_____________________________________________________________________
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
REYNOLDS, S&P 500, AND PEER GROUP COMPARISONS
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Reynolds $100 $110 $131 $133 $145 $130
S&P 500 100 101 139 171 229 294
Composite Group 100 115 135 153 146 132
Basic Materials Index 100 107 128 150 167 157
</TABLE>
<PAGE> 33
Summary Compensation Table
The following table shows the compensation for the last three
years of Reynolds' chief executive officer and the four next
highest paid executive officers who were serving at December 31,
1998.
_____________________________________________________________________
<PAGE>
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
------------------------------- -------------
Awards
-------------
Other Securities All
Annual Underlying Other
Name and Salary Bonus Compensation Options/SARs Compensation
Principal Position Year ($) ($)<F1> ($)<F2> (#)<F3> ($)<F4>
- -------------------------- ---- -------- -------- ------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Jeremiah J. Sheehan,
Chairman of the Board and 1998 $816,667 $512,934 $ 2,154 65,000 shs. $88,114
Chief Executive Officer, 1997 654,167 866,617 5,506 70,000 shs. 76,597
Reynolds Metals Company 1996 508,750 -0- 2,148 185,000 shs.<F5> 59,709
_________________________________________________________________________________________________
Randolph N. Reynolds,
Vice Chairman and 1998 $450,000 $243,090 $ 1,559 25,000 shs. $69,532
Executive Officer, 1997 433,333 385,000 18,321 25,000 shs. 61,653
Reynolds Metals Company 1996 412,500 -0- 44,883 25,000 shs. 44,800
_________________________________________________________________________________________________
Thomas P. Christino,
Senior Vice President, 1998 $299,250 $289,099 $ -0- 14,500 shs. $45,503
Global Packaging and 1997 274,000 219,700 -0- 8,500 shs. 41,893
Consumer Products, 1996 226,500 1,386 -0- 7,500 shs. 33,034
Reynolds Metals Company
_________________________________________________________________________________________________
William E. Leahey, Jr.,
Executive Vice President 1998 $308,750 $260,779 $ -0- 14,500 shs. $24,677
and Chief Financial Officer, 1997 275,000 231,765 -0- 7,500 shs. 22,481
Reynolds Metals Company 1996 225,833 1,207 -0- 7,500 shs. 17,801
_________________________________________________________________________________________________
Paul Ratki,
Senior Vice President, Global 1998 $262,500 $283,000 $ -0- 14,500 shs. $32,323
Metals and Carbon Products, 1997 242,500 226,592<F6> -0- 8,000 shs. 30,610
Reynolds Metals Company 1996 215,000 1,393 -0- 8,000 shs. 25,289
_________________________________________________________________________________________________
<FN>
<F1> Amounts shown in this column for 1998 are cash awards of variable
compensation granted under the Company's Performance Incentive Plan
and, in the case of Messrs. Sheehan and Reynolds, Supplemental
Incentive Plan. The amount shown for W. E. Leahey, Jr. also includes
a gainsharing award of $779 and a one-time cash award of $100,000 under
the Company's Special Award Program approved in 1997 by the Compensation
Committee to reward performance in successfully completing the disposition
of a business unit in connection with the Company's portfolio review
process.
<F2> Reported in this column for 1998 are amounts reimbursed to the named
executive officers for the payment of taxes.
<F3> Option awards in 1998 were granted under the Company's 1996 Nonqualified
Stock Option Plan. See "Stock Option Grants in 1998" below. None of the
options has stock appreciation rights attached.
<F4> Amounts shown in this column for 1998 include the following:
<PAGE> 34
(a) Company contributions to the Company's Savings and Investment
Plan for Salaried Employees (the "Savings Plan") in the amount of
$4,800 for J. J. Sheehan; $4,800 for R. N. Reynolds; $4,763 for T. P.
Christino; $4,749 for W. E. Leahey, Jr.; and $4,753 for P. Ratki.
(b) Amounts credited as Company contributions under the Company's
Benefit Restoration Plan for the Savings Plan in the amount of $19,700
for J. J. Sheehan; $8,700 for R. N. Reynolds; $4,214 for T. P.
Christino; $4,516 for W. E. Leahey, Jr.; and $3,814 for P. Ratki.
(c) Amounts paid under the Company's Financial Counseling Assistance
Plan for Officers in the amount of $8,405 for J. J. Sheehan;
$13,780 for R. N. Reynolds; $275 for T. P. Christino; $759 for
W. E. Leahey, Jr.; and $210 for P. Ratki.
(d) The present value costs of the Company's contribution toward 1998
premiums for split-dollar life insurance, above the term coverage
level provided generally to salaried employees, in the amount of
$55,209 for J. J. Sheehan; $42,252 for R. N. Reynolds; $34,852 for
T. P. Christino; $14,653 for W. E. Leahey, Jr.; and $23,275 for
P. Ratki. The Company pays all premiums in excess of what the
covered executive pays and retains a collateral interest equal to
this amount, which it will recover when the insured executive
reaches age 65 (or, if later, after 15 policy years). The covered
executive owns the policy and pays premiums equal to the cost of
individual term insurance.
(e) The dollar value of above-market interest earned in 1998 on
deferred compensation under the Company's New Management Incentive
Deferral Plan in the amount of $627 for T. P. Christino and $271
for P. Ratki.
(f) In the case of T. P. Christino, a 25-year service anniversary
award in the amount of $772 paid to him in 1998.
<F5> The stock options granted to Mr. Sheehan in 1996 included a regular grant
covering 35,000 shares and a special performance-based stock option grant
covering 150,000 shares awarded upon his election as chief executive
officer.
<F6> Includes $15,726 paid in common stock under the Performance Incentive
Plan.
</TABLE>
<PAGE>
<PAGE> 35
Stock Option Grants in 1998
The following table shows information about stock options granted
by Reynolds in 1998.
<PAGE>
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------
Number of % of
Securities Total Options
Underlying Granted Exercise or Grant-Date
Options to Employees Base Price Expiration Present
Name Granted<F1> in 1998<F2> Per Share<F3> Date Value<F4>
---- ----------- ------------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
J. J. Sheehan..... 65,000 10.3% $62.125 2/20/2008 $1,139,450
R. N. Reynolds.... 25,000 3.9 62.125 2/20/2008 438,250
T. P. Christino... 14,500 2.3 62.125 2/20/2008 254,185
W. E. Leahey, Jr.. 14,500 2.3 62.125 2/20/2008 254,185
P. Ratki.......... 14,500 2.3 62.125 2/20/2008 254,185
____________________________________________________________________________________
<FN>
<F1> All options were granted under Reynolds' 1996 Nonqualified
Stock Option Plan (the "1996 Plan"), which was approved by
stockholders at the 1996 annual meeting. Each option entitles
the optionee to purchase one share of common stock from
Reynolds. The options are exercisable no earlier than one
year or later than ten years from the date of grant at an
exercise price equal to the fair market value of the
underlying common stock on the date of grant. The options
granted in 1998 became exercisable on February 20, 1999. None
of the options has stock appreciation rights attached.
<F2> In 1998, 318 persons were granted options. The grants covered
an aggregate of 633,000 shares of common stock, which
constituted approximately 69% of the shares remaining
available for options under the 1996 Plan.
<F3> The optionee may pay the exercise price in cash, in shares of
common stock valued at fair market value on the date of
exercise, in a combination of such stock or cash, or by using
a broker-assisted or cashless exercise stock option financing
program. The 1996 Plan contains provisions that are
substantially similar in this regard to those contained in the
proposed 1999 Plan described above. See "Item 2 - Approval
of 1999 Nonqualified Stock Option Plan."
<F4> The grant-date present values were determined using the Black-
Scholes method of option valuation, as permitted by SEC rules.
Such values are theoretical and not necessarily indicative of
the ultimate value of the options to the executive officers.
The following assumptions were used in making the
calculations: (1) a risk-free interest rate of 5.5%; (2) a
dividend yield of 2.2%; (3) a volatility factor of the
expected market price of the common stock of .256; (4) an
option term of 6 years; and (5) an option exercise price of
$62.125 per share. The assumptions used should not be
considered indicators of future dividend policy or stock price
appreciation.
The Black-Scholes formula does not take into account, and the
values shown in the table were not adjusted for, two important
aspects of options awarded under the 1996 Plan. First, the
formula assumes that a liquid market exists for the options;
however, options awarded under the 1996 Plan may not be
transferred. Second, it assumes that the options may be
exercised immediately; however, options awarded under the 1996
Plan may not be exercised earlier than one year from the date
of grant.
The ultimate value of the options will depend on the amount,
if any, by which the market price of the common stock at any
point in time exceeds the exercise price, and each optionee's
investment decisions, neither of which can be accurately
predicted. The options had no immediate value on the date of
grant and will have no value until one year after the grant
and then only to the extent that the market price of the
common stock exceeds the exercise price. See page 15 for a
recent price of Reynolds common stock.
</FN>
</TABLE>
<PAGE>
<PAGE> 36
Aggregated Option Exercises in 1998 and
Option Values at December 31, 1998
The table below shows information about stock options exercised
during 1998 and the number and value of unexercised options held
at the end of 1998.
________________________________________________________________________________
<PAGE>
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Number of December 31, 1998 December 31, 1998
Shares ----------------- -----------------
Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized<F1> Unexercisable Unexercisable<F2>
---- ----------- ------------ ----------------- -----------------
<S> <C> <C> <C> <C>
J. J. Sheehan...... 3,500 $ 65,625 223,000/215,000 $391,563/ $-0-<F3>
R. N. Reynolds..... 16,000 100,000 167,000/ 25,000 349,063/ -0-
T. P. Christino.... -0- -0- 40,100/ 14,500 103,875/ -0-
W. E. Leahey, Jr... -0- -0- 40,700/ 14,500 103,875/ -0-
P. Ratki........... 6,000 56,625 43,250/ 14,500 100,156/ -0-
________________________________________________________________________________
<FN>
<F1> Based on the difference between the option exercise price and
the closing price of Reynolds common stock on the date of
exercise as reported on the New York Stock Exchange Composite
Transactions Tape.
<F2> Based on the difference between the option exercise price and
the closing price of $52.6875 per share of Reynolds common
stock on December 31, 1998 as reported on the New York Stock
Exchange Composite Transactions Tape.
<F3> Excluded from this column is the value of 150,000 shares of
common stock covered by a performance-based stock option
granted to J. J. Sheehan in 1996 at an exercise price of
$53.50 per share. The option becomes exercisable only if the
closing price of the common stock equals or exceeds $80.25 per
share for 30 consecutive calendar days on or before September
30, 1999. If this condition is satisfied, the option may be
exercised any time before March 31, 2000.
</FN>
/TABLE
<PAGE>
<PAGE> 37
Long-Term Incentive Plan -- Awards in 1998
The following table provides information about the long-term
performance awards granted by Reynolds in 1998.
<PAGE>
<TABLE>
<CAPTION>
__________________________________________________________________________________________
Performance
Number of or Other Estimated Future Payouts Under
Shares, Units Period Until Non-Stock Price-Based Plans
or Other Maturation ---------------------------------------
Name Rights(#)<F1> or Payout<F2> Threshold(#) Target (#) Maximum (#)
---- ------------- ------------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
J. J. Sheehan...... 17,800 2 years 5,340 17,800 26,700
35,600 4 years 10,680 35,600 53,400
R. N. Reynolds..... 5,700 2 years 1,710 5,700 8,550
11,400 4 years 3,420 11,400 17,100
T. P. Christino.... 4,700 2 years 1,410 4,700 7,050
9,400 4 years 2,820 9,400 14,100
W. E. Leahey, Jr... 4,700 2 years 1,410 4,700 7,050
9,400 4 years 2,820 9,400 14,100
P. Ratki........... 4,700 2 years 1,410 4,700 7,050
9,400 4 years 2,820 9,400 14,100
__________________________________________________________________________________________
<FN>
<F1> All awards were granted under Reynolds' Long-Term Performance
Share Plan, adopted effective January 1, 1998. Under the
plan, executive officers and other key employees are granted
performance share units for a designated cycle (generally four
years, although an initial two-year cycle was also established
for 1998-1999). The Compensation Committee is responsible for
administering the plan.
The units granted in 1998 may be earned (or not) based on
Reynolds' total shareholder return (i.e., stock price
appreciation plus dividends reinvested quarterly) relative to
the S&P Basic Materials Index. The return is measured, in the
case of the two-year cycle, for the period January 1, 1998
through December 31, 1999, and in the case of the four-year
cycle, for the period January 1, 1998 through December 31,
2001. A threshold payment will be made if Reynolds matches
the 40th percentile of the group, while target is payable at
the 60th percentile and a maximum award of 150% is payable at
the 80th percentile.
<F2> After the end of each performance cycle, each participant will
be entitled to receive an award for that cycle only to the
extent the performance goals established for that cycle have
been met. Half of the award will be payable in cash; the
other half will be in the form of phantom stock. The phantom
stock will not be paid out until the year following
termination of employment and will be paid in shares of common
stock. The phantom stock accounts are credited with dividend
equivalents based on the dividends that would have been paid
if the phantom stock had actually been issued and outstanding.
A total of 200,000 treasury shares of common stock are
authorized for issuance under the plan.
Participants may voluntarily defer receipt of up to 85% of the
cash portion payable with respect to a performance cycle. The
plan also contains mandatory deferral provisions applicable to
those participants who are reasonably likely to be subject to
the Section 162(m) deductibility limitations.
The Compensation Committee may accelerate payment in a lump
sum of all unpaid deferred amounts, including phantom stock
and dividend equivalents, if it determines that there is a
major challenge to the control of the Company or in other
extraordinary circumstances. Any payment with respect to
phantom stock may not be accelerated unless the Committee
determines that such payment will be exempt from short-swing
profit liability under Section 16(b) of the Securities
Exchange Act of 1934.
</FN>
</TABLE>
<PAGE>
Pension Plan Table
The following table shows the annual benefits that would be
payable at retirement to persons in specified final average
earnings and years-of-benefit-service classifications under
Reynolds' defined benefit pension plan (called the New
Retirement Program for Salaried Employees) and benefit
restoration plan. The amounts shown are based on the
Social Security Act in effect for retirement in 1999.
Such amounts are not necessarily indicative of amounts that
are or may actually become payable.
<PAGE>
<TABLE>
___________________________________________________________________________________________________
<CAPTION>
Years of Benefit Service at Retirement<F1>
Final Average
Earnings 5 10 15 20 25 30 35 40
- -------------- -------- -------- -------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 150,000 $ 12,680 $ 25,361 $ 38,041 $ 50,722 $ 63,402 $ 70,082 $ 76,763 $ 83,443
300,000 26,180 52,361 78,541 104,722 130,902 145,082 159,263 173,443
450,000 39,680 79,361 119,041 158,722 198,402 220,082 241,763 263,443
600,000 53,180 106,361 159,541 212,722 265,902 295,082 324,263 353,443
750,000 66,680 133,361 200,041 266,722 333,402 370,082 406,763 443,443
900,000 80,180 160,361 240,541 320,722 400,902 445,082 489,263 533,443
1,050,000 93,680 187,361 281,041 374,722 468,402 520,082 571,763 623,443
1,200,000 107,180 214,361 321,541 428,722 535,902 595,082 654,263 713,443
1,350,000 120,680 241,361 362,041 482,722 603,402 670,082 736,763 803,443
1,500,000 134,180 268,361 402,541 536,722 670,902 745,082 819,263 893,443
1,650,000 147,680 295,361 443,041 590,722 738,402 820,082 901,763 983,443
1,800,000 161,180 322,361 483,541 644,722 805,902 895,082 984,263 1,073,443
1,950,000 174,680 349,361 524,041 698,722 873,402 970,082 1,066,763 1,163,443
2,100,000 188,180 376,361 564,541 752,722 940,902 1,045,082 1,149,263 1,253,443
___________________________________________________________________________________________________
<FN>
<F1> Benefits are computed as if paid on the basis of a straight life annuity,
assuming retirement at age 65.
</FN>
/TABLE
<PAGE>
The defined benefit pension plan provides participants an
annual benefit upon retirement determined under a formula
that takes into account:
- - final average earnings;
- - years of benefit service; and
- - Social Security benefits.
Final average earnings include base salary, plus profit
sharing and variable compensation awards, in the five
consecutive years for which the average is highest during
the fifteen years before retirement. Benefits calculated
under the formula are reduced by an amount based on both (a)
the primary Social Security benefit estimated to be payable
upon retirement or, if later, at age 65 and (b) years of
benefit service. Benefits payable under the plan are also
directly offset by benefits payable to participants from a
predecessor pension plan maintained by the Company that was
terminated in 1983.
The nonqualified benefit restoration plan provides for the
payment from general funds of amounts otherwise payable
under Reynolds' defined benefit
<PAGE> 39
pension plan but for Internal Revenue Code limitations.
Such limitations restrict the compensation that may be taken
into account to calculate benefits and the actual benefits
payable under tax-qualified defined benefit plans.
The following table shows the final average earnings and
years of benefit service for each of the executive officers
named in the Summary Compensation Table, assuming retirement
(and eligibility for retirement) at January 1, 1999.
<TABLE>
<CAPTION>
_________________________________________________________________
Final Average Years of Benefit
Name Earnings Service Completed
<S> <C> <C>
J. J. Sheehan<F1>..... $938,323 11
R. N. Reynolds........ 610,000 30
T. P. Christino....... 349,967 25
W. E. Leahey, Jr...... 359,044 8
P. Ratki.............. 321,542 31
_________________________________________________________________
<FN>
<F1> Reynolds has agreed to pay J. J. Sheehan (a) early retirement
benefits equivalent to those he would have received from a
prior employer, if his employment with Reynolds is
involuntarily terminated before age 65, and (b) upon his
death, surviving spouse benefits equal to one-half of any
amounts payable under clause (a).
</FN>
_________________________________________________________________
</TABLE>
Change in Control and Termination Arrangements
Termination Agreements
Reynolds has entered into severance agreements with key executives
designated by the Compensation Committee, including each of the
executive officers named in the Summary Compensation Table. These
agreements entitle the executive to termination compensation if
the executive's employment is terminated without cause by Reynolds
or terminated by the executive in certain circumstances, in either
case within two years after a change in control of Reynolds.
Termination compensation includes:
- - a cash payment equal to three times the sum of (1) annual
base salary at the time of termination plus (2) the highest cash
target variable compensation opportunity established for the
executive for 1998 or any future year;
- - a cash settlement of stock options granted under Reynolds'
stock option plans but not yet exercisable at the date of
termination; and
- - a cash payment to give retirement benefits equal to those
payable had the executive (1) been vested (if not already vested
at the time of termination) and (2) worked for Reynolds three
additional years.
In addition, the executive will be entitled to:
- - continuation of medical, life and disability benefits for
three years;
- - ownership of the car assigned to the executive at the time of
termination; and
- - compensation for any applicable excise tax liability the
executive may incur as a result of payment of the termination
compensation.
<PAGE> 40
Compensation and Deferral Plans
Several of Reynolds' compensation and deferral plans provide for
accelerated benefits upon a change in control of Reynolds.
See "Item 2 - Approval of 1999 Nonqualified Stock Option Plan" for
a summary of the change-in-control provisions in the proposed 1999
Nonqualified Stock Option Plan. The change-in-control provisions
in the Long-Term Performance Share Plan are described under "Long-
Term Incentive Plan - Awards in 1998."
Reynolds also maintains a Salary Deferral Plan for Executives and
a New Management Incentive Deferral Plan. Under these plans, the
Compensation Committee may accelerate payments to participants if
it determines that (a) a major challenge to the control of the
Company exists or (b) other extraordinary circumstances make such
acceleration in the best interest of the Company.
The Salary Deferral Plan for Executives allows eligible employees
whose annual base salary exceeds the compensation that can be
taken into account for qualified pension plan purposes under the
Internal Revenue Code to defer receipt of up to 90% of each year's
base salary to the extent the salary exceeds the statutory limit.
Deferred amounts are credited with phantom earnings equal to what
would be earned if the deferred amounts were actually invested in
any of the investment funds available under Reynolds' Savings and
Investment Plan for Salaried Employees. Deferrals are not paid
out until the participant terminates employment and are paid in cash.
The New Management Incentive Deferral Plan allows executive
officers (including the executive officers named in the Summary
Compensation Table) and other key employees who are recommended by
the chief executive officer to defer receipt of up to 85% of
variable compensation, if any, otherwise payable under Reynolds'
Performance Incentive Plan and Supplemental Incentive Plan for
services performed each year. The variable compensation may be
deferred into (1) an interest account, which is credited with
interest at a rate determined by the Compensation Committee for
that year's deferrals or (2) in certain cases, a phantom stock
account, which is credited with dividend equivalents based on the
dividends that would have been paid on the phantom stock if the
participant had actually owned shares of common stock. Deferrals
must be for a period of at least five years, except in the case of
retirement. A predecessor plan to this plan, under which no
further deferrals are being made, contains substantially similar
provisions.
<PAGE> 41
GENERAL INFORMATION
_____________________________________________________________________
Annual Report
Reynolds' 1998 Annual Report, containing audited financial
statements for the year 1998, is being mailed to each
stockholder with this proxy statement.
Stockholder Proposals for the 2000 Annual Meeting
If you wish to submit proposals which are proper subjects
for consideration for possible inclusion in Reynolds' proxy
materials for the 2000 annual meeting, we must receive them
on or before November 24, 1999. Proposals should be
submitted in writing as specified by SEC rules to:
Reynolds Metals Company
6601 West Broad Street
P.O. Box 27003
Richmond, Virginia 23261-7003
Attention: Secretary
Stockholder Nominations and Notice of Other Business
The Committee on Directors will consider stockholder
nominations for director if submitted in writing in
accordance with the By-Law procedures referred to below,
addressed to:
Committee on Directors
c/o Secretary
Reynolds Metals Company
6601 West Broad Street
P.O. Box 27003
Richmond, Virginia 23261-7003
Reynolds' By-Laws specify procedures for notifying Reynolds
of nominations for director and other business to be
properly brought before any meeting of stockholders. You
may obtain a copy of the relevant By-Law provisions by
writing to Reynolds' Secretary at the address listed above.
Notice of business to be brought before the 2000 annual
meeting, including stockholder nominations for director,
must be received on or before February 22, 2000.
/s/ Donna C. Dabney
DONNA C. DABNEY
Secretary
March 23, 1999
Richmond, Virginia
<PAGE>
Notice of
Annual Meeting
of Stockholders
May 20, 1999
and
Proxy Statement
[LOGO]
REYNOLDS
METALS
COMPANY
<PAGE>
APPENDIX A
REYNOLDS METALS COMPANY
Proxy Solicited by the Board of Directors
for Annual Meeting of Stockholders
May 20, 1999
The undersigned hereby appoints Jeremiah J. Sheehan, D. Michael
Jones and Donna C. Dabney, or any of them, each with full power
of substitution, as proxies for the undersigned, and authorizes
them to vote the shares of common stock of Reynolds Metals
Company (the "Company") which the undersigned is entitled to vote
at the 1999 Annual Meeting of Stockholders to be held at the
Company's offices, 6601 West Broad Street, Richmond, Virginia, on
Thursday, May 20, 1999 at 4:00 P.M. (Eastern Daylight Time), and
at all adjournments thereof, as indicated on the matters set
forth on the reverse side, and in their discretion upon such
other matters as may properly come before the meeting or any
adjournment thereof.
The undersigned hereby confers upon the proxies and each of them
authority to vote for a substitute nominee or substitute nominees
designated by the Board of Directors with respect to the election
of directors if any nominee is unavailable to serve for any
reason if elected.
Note to participants in the Reynolds Metals Company Savings and
Investment Plan for Salaried Employees, Reynolds Metals Company
Savings Plan for Hourly Employees, and Employees Savings Plan:
This card serves to instruct the trustee under the respective
plan how to vote your allocable portion, if any, of the total
number of shares of Company common stock held by the plan. The
number of plan shares shown on this card may not be the same as
the number of plan shares shown on your last account statement
due to the use of a different valuation date or accounting
method. These voting instructions are solicited and will be
carried out in accordance with the applicable provisions of the
respective plan.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER; WHERE NO DIRECTION IS GIVEN, SUCH SHARES WILL BE
VOTED "FOR" ITEMS 1, 2, 3 AND 4 AND "AGAINST" ITEMS 5 AND 6.
IMPORTANT - This Proxy must be signed and dated on
the reverse side.
- -----------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
Please mark your ____
votes as indicated /_x_/
in this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3 AND 4.
1. Election of Directors:
FOR all nominees WITHHOLD
(except as withheld in the AUTHORITY
space provided) to vote for all nominees
___ ___
/___/ /___/
Nominees: Patricia C. Barron, John R. Hall, Robert L. Hintz,
William H. Joyce, Mylle Bell Mangum, D. Larry Moore, Randolph N.
Reynolds, James M. Ringler, Samuel C. Scott, III, Jeremiah J.
Sheehan, Joe B. Wyatt
(To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
_____________________________________________________________________
FOR AGAINST ABSTAIN
2. Approval of 1999 Nonqualified Stock ___ ___ ___
Option Plan /___/ /___/ /___/
3. Approval of Amended Performance ___ ___ ___
Incentive Plan /___/ /___/ /___/
4. Ratification of Selection of ___ ___ ___
Ernst & Young LLP as /___/ /___/ /___/
Independent Auditors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEMS 5 AND 6.
5. Stockholder Proposal relating FOR AGAINST ABSTAIN
to the CERES Principles ___ ___ ___
/___/ /___/ /___/
6. Stockholder Proposal relating ___ ___ ___
to Global Warming /___/ /___/ /___/
_____________________________________________________________________
___
I WILL ATTEND THE ANNUAL MEETING /___/
Signature_________________Signature__________________Date ___________
Please mark, date and sign as your name appears above and return in
the enclosed envelope. If signing as attorney, executor,
administrator, trustee, guardian or in another representative
capacity, please give your full title as such. If the signer is a
corporation, sign the full corporate name by a duly authorized
officer.
.....................................................................
FOLD AND DETACH HERE
Enclosed are materials relating to the 1999 Annual Meeting of
Stockholders of Reynolds Metals Company. The meeting will be held
on Thursday, May 20, 1999, at 4:00 p.m., Eastern Daylight Time.
The Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the meeting.
Whether you plan to attend the meeting or not, please complete,
sign and return before the annual meeting on May 20, 1999 the
attached proxy card in the accompanying envelope, which requires no
postage if mailed in the United States. If you plan to attend the
annual meeting, please mark the attendance box on the proxy card.
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
<PAGE>
APPENDIX B
REYNOLDS METALS COMPANY
1999 NONQUALIFIED STOCK OPTION PLAN
Effective May 20, 1999
<PAGE> 1
ARTICLE I
DEFINITIONS
1.01 "Board" means the Board of Directors of the
Company.
1.02 "Code" means the Internal Revenue Code of 1986,
as amended from time to time.
1.03 "Committee" means the Committee established under
Section 3.01 to administer the Plan.
1.04 "Company" means Reynolds Metals Company, a
Delaware corporation.
1.05 "Company Stock" means common stock of the Company
or other stock and securities substituted for common stock under
Section 6.02.
1.06 "Eligible Employee" means any officer or regular
salaried employee of the Company or a Subsidiary who satisfies
all of the requirements of Section 2.02.
1.07 "Fair Market Value" means the closing price of
Company Stock (a) as reported on New York Stock Exchange-
Composite Transactions (or other appropriate reporting vehicle as
determined by the Committee) for a specified date or (b) if no
such report is available, the closing price of Company Stock for
the next preceding day on which Company Stock was traded and for
which such report is available.
1.08 "Grantee" means any person who has been granted a
stock option, either with or without related stock appreciation
rights, under the Plan.
<PAGE> 2
1.09 "Option Period" means the period of time provided
under Section 4.03 within which a stock option may be exercised.
1.10 "Plan" means the Reynolds Metals Company 1999
Nonqualified Stock Option Plan, as amended from time to time.
1.11 "Stockholder Approval" means approval by the
affirmative vote of stockholders of the Company present in person
or by proxy and entitled to vote representing a majority of the
votes cast on the matter at an annual or special meeting of
stockholders at which a quorum is present.
1.12 "Subsidiary" means any corporation or other
entity in which the Company owns, directly or indirectly, a
voting stock interest (or its equivalent) of more than fifty
percent (50%).
1.13 "1934 Act" means the Securities Exchange Act of
1934, as amended from time to time.
<PAGE> 3
ARTICLE II
PARTICIPATION
2.01 Purpose. The purpose of the Plan is to further
the growth and success of the Company and its Subsidiaries by
providing key officers and employees with additional incentive to
contribute to such growth and success and by aiding the Company
in attracting and retaining key officers and employees.
2.02 Eligibility. Key officers and employees of the
Company and its Subsidiaries (including officers and employees
who may be members of the Board) who, in the sole opinion of the
Committee, contribute significantly to the growth and success of
the Company or a Subsidiary are eligible for options to purchase
Company Stock and related stock appreciation rights under the
Plan. From among all such Eligible Employees, the Committee will
determine from time to time those to whom options and related
stock appreciation rights, if any, will be granted. No Eligible
Employee has any right to receive options or stock appreciation
rights unless so determined by the Committee.
2.03 No Employment Rights. The Plan does not confer
any rights upon any person for continued employment, nor does it
interfere with the rights of the Company or any Subsidiary to
terminate such person's employment or to take any other action
affecting such person.
<PAGE> 4
ARTICLE III
COMMITTEE
3.01 Administration. The Plan will be administered by
a Committee of at least three (3) persons, all of whom must be
members of the Board, designated from time to time by the Board.
The Board shall appoint one member of the Committee to act as
Chairman. Vacancies shall be filled in the same manner as
original appointments. The Committee shall hold meetings upon
such notice and at such place or places, and at such time or
times as it may from time to time determine. A majority of the
members of the Committee at the time in office shall constitute a
quorum for the transaction of business, and the acts of a
majority of the members participating in any meeting at which a
quorum is present shall be the acts of the Committee. The
Committee may act without a meeting if a consent in writing
setting forth the action so taken shall be signed by all of the
members of the Committee and filed with the minutes of the
Committee. As of any time the Committee exercises its discretion
in administering the Plan, all of the members of the Committee
must be "Non-Employee Directors" as contemplated by Rule l6b-3,
as in effect at such time, under the 1934 Act.
3.02 Authority of Committee. Subject to the
provisions of the Plan, the Committee has full and final
authority to determine:
(a) the persons to whom options are granted,
<PAGE> 5
(b) the number of shares to be included in each
option,
(c) the price at which the shares included in each
option may be purchased,
(d) the Option Period or Periods, and
(e) the stock appreciation rights, if any, related to
each option.
No Grantee may be awarded options to purchase in the aggregate
more than seven hundred fifty thousand (750,000) shares of
Company Stock under the Plan; this limit applies regardless of
whether the options lapse or are terminated or surrendered. The
Committee is empowered, in its discretion, (i) to modify, extend
or renew any option or stock appreciation right previously
granted, subject to the limitations in Articles IV and V, and
(ii) to adopt such rules and regulations and take such other
action as it considers necessary or proper for the administration
of the Plan; provided, however, that except to the extent
provided under Section 6.02, the Committee does not have the
power to reprice options or stock appreciation rights previously
granted under the Plan. The Committee has authority to interpret
the Plan, and the Committee's decision on any questions
concerning the interpretation of the Plan is final and
conclusive. The Committee may consult with counsel, who may be
counsel for the Company, and will not be liable for any action
taken in good faith in reliance upon the advice of counsel.
3.03 1934 Act Compliance. Anything in the Plan to the
contrary notwithstanding, the Committee also has the authority at
<PAGE> 6
any time to impose any rules and regulations that may be
necessary to ensure that a grant or exercise of an option or
stock appreciation right will not trigger liability under Section
16(b) of the 1934 Act.
<PAGE> 7
ARTICLE IV
TERMS OF OPTIONS
4.01 General. Grants of options do not require the
payment of a purchase price by any Grantee. Each option granted
under the Plan will be evidenced by a stock option agreement
between the Company and the Grantee containing the terms and
conditions required by this Article IV and such other terms and
conditions consistent with this Article IV as the Committee
considers appropriate.
4.02 Option Price. The price at which each share of
Company Stock covered by an option may be purchased must be
determined in each case by the Committee and set forth in a stock
option agreement. Such price must not be less than the Fair
Market Value of Company Stock on the date the option is granted.
4.03 Period for Exercise. Each stock option agreement
must state the period or periods of time within which the option
may be exercised by the Grantee, in whole or in part, as
determined by the Committee, provided that:
(a) No option may be exercised within one year from
the date the option is granted;
(b) No Option Period may exceed ten years from the
date the option is granted;
(c) If the Grantee's employment by the Company and
its Subsidiaries terminates because of the Grantee's
retirement or disability, or for any other reason the
Committee approves, any option outstanding and exercisable
<PAGE> 8
as of the date of termination (and, in the Committee's sole
discretion, any option outstanding but not yet exercisable
as of such date) may be exercised by the Grantee following
the date of termination in accordance with the terms of the
applicable stock option agreement;
(d) If the Grantee dies during the Option Period, any
outstanding and exercisable option may be exercised in
accordance with the terms of the applicable stock option
agreement by the person or persons entitled to do so under
the Grantee's last will and testament, or if the Grantee has
not made a testamentary disposition of the option or dies
intestate, by the person or persons entitled to receive the
option under the intestate laws; and
(e) If the Grantee's employment by the Company and
its Subsidiaries terminates for reasons other than death,
retirement, disability, or other reasons approved by the
Committee under subsection (c) above, then any outstanding
option terminates immediately and is not exercisable by the
Grantee or any other person.
4.04 Exercise of Option. Subject to Section 4.03,
each option may be exercised in whole or in part from time to
time as specified in the stock option agreement. Each Grantee
may exercise an option by giving written notice of the exercise
to the Company, specifying the number of shares to be purchased,
accompanied by payment in full of the purchase price for such
shares. If required, the Grantee must also pay an amount equal
to the applicable withholding taxes as soon as administratively
<PAGE> 9
feasible. The purchase price may be paid in cash; by check; with
the approval of the Committee, in shares of Company Stock having
at the time the option is exercised an aggregate Fair Market
Value equal to the purchase price of the shares acquired on
exercise; or a combination. Likewise, the applicable withholding
taxes may be paid in cash; by check; with the approval of the
Committee, in shares of Company Stock (including shares received
from the exercise of the option) having at the time the option is
exercised an aggregate Fair Market Value equal to the withholding
taxes; or a combination. A Grantee may also exercise an option
by way of the Company's broker-assisted stock option exercise
program, if such program is available to the Grantee at the time
of the option's exercise. An option becomes nonexercisable and
is treated as voluntarily surrendered to the extent that any
related stock appreciation right is exercised. No Grantee is
under any obligation to exercise any option. Grantees may
exercise options or not at their sole discretion.
4.05 Date Option Granted. For purposes of the Plan, a
stock option is considered as having been granted on the date on
which the Committee authorizes the grant, unless the Committee
designates a later date, in which case the later date is the date
of grant. Notice of the grant of an option will be given to the
employee within a reasonable time.
4.06 No Incentive Stock Options. No option granted
under the Plan is, or is to be treated as, an "incentive stock
option" for purposes of Sections 421 and 422 of the Code.
<PAGE> 10
ARTICLE V
STOCK APPRECIATION RIGHTS
5.01 General. Each stock appreciation right granted
under the Plan will be evidenced by a stock appreciation right
agreement between the Company and the Grantee containing the
terms and conditions required by this Article V and such other
terms and conditions consistent with this Article V as the
Committee considers appropriate. Each stock appreciation right
will relate to a specific option granted under the Plan and will
be granted to the Grantee either concurrently with the grant of
the option or at a later time as determined by the Committee;
provided, however, that the grant of a stock appreciation right
does not otherwise change the terms of the underlying option. A
stock appreciation right entitles a Grantee to receive a number
of shares of Company Stock (without payment to the Company,
except for applicable withholding taxes), cash, or shares and
cash, as determined by the Committee in accordance with this
Article V.
5.02 Number of Shares or Amount of Cash. Unless
otherwise determined by the Committee, in its sole discretion,
and provided in the stock appreciation right agreement, the
number of shares issued upon the exercise of a right shall be
determined by dividing:
(a) that portion, as elected by the Grantee in the
notice of exercise, of the total number of shares of Company
Stock (i) which the Grantee is eligible to purchase as of
<PAGE> 11
the exercise date under the related option and (ii) as to
which stock appreciation rights have been granted, but not
exercised, multiplied by the amount (if any) by which the
Fair Market Value of Company Stock on the exercise date
exceeds the price per share at which the related option
could have been exercised on the exercise date, by
(b) the Fair Market Value of Company Stock on the
exercise date;
provided, however, that fractional shares will not be issued.
Instead, a cash adjustment equal to the same fraction of the Fair
Market Value of Company Stock on the exercise date will be paid
to the Grantee. Instead of issuing Company Stock on the exercise
of a right, the Committee, in its sole discretion, may elect to
pay the cash equivalent of the Fair Market Value on the exercise
date of any or all of the shares of Company Stock which would
otherwise be issuable upon exercise of the right.
5.03 Exercise. Each stock appreciation right may be
exercised in whole or in part from time to time, only to the
extent that the option to which it relates is exercisable and as
permitted by the applicable stock appreciation right agreement;
provided, however, that no stock appreciation right may be
exercised until the expiration of six months from the date of its
grant. Each Grantee may exercise a stock appreciation right by
giving written notice to the Company, specifying the number of
shares as to which such right is being exercised, accompanied by
an amount equal to the applicable withholding taxes, if
necessary. The date the Company receives the written notice is
<PAGE> 12
the "exercise date." No Grantee is under any obligation to
exercise any stock appreciation right. Grantees may exercise
rights or not in their sole discretion. A stock appreciation
right will become nonexercisable and will be forfeited to the
extent that the related option is exercised.
<PAGE> 13
ARTICLE VI
COMPANY STOCK
6.01 Number of Shares. The aggregate number of shares
of Company Stock that may be sold or delivered under the Plan
shall not exceed two million two hundred fifty thousand
(2,250,000) shares. Shares of Company Stock sold or delivered
under the Plan may be authorized but unissued shares, treasury
shares, or a combination, as the Board may from time to time
determine. Shares of Company Stock no longer available for
purchase under the Plan by virtue of the total or partial
expiration or termination of an option and any related stock
appreciation right will continue to be otherwise available for
the purposes of the Plan. Upon surrender of any portion of an
option in connection with the exercise of the related stock
appreciation right, the number of shares of Company Stock subject
to the surrendered portion of the option (and not the number of
shares, if any, issued upon the exercise of the related stock
appreciation rights) will be charged against the maximum number
of shares of Company Stock issuable under the Plan, and such
number of shares of Company Stock will not be available for
future options and/or stock appreciation rights.
6.02 Recapitalization. If any stock dividend is
declared upon Company Stock, or if there is any stock split,
stock distribution, or other recapitalization with respect to
Company Stock, resulting in a split-up, combination or exchange
of shares, or if any special distribution is made to holders of
<PAGE> 14
Company Stock, the aggregate number and kind of shares offered
under the Plan will be proportionately and appropriately adjusted
and the number and kind of shares then subject to options granted
under the Plan and the per share option price will be
proportionately and appropriately adjusted, without any change in
the aggregate purchase prices to be paid, all as the Committee
determines is appropriate. Such adjusted option price and number
and kinds of shares will also be used to determine the amount
payable by the Company upon the exercise of any stock
appreciation rights associated with any such option as set forth
in Article V. If the Company is merged or consolidated with or
into another corporation or entity, or substantially all of its
assets are sold to another corporation or entity, appropriate
provisions will be made for the protection and continuation of
any outstanding options and stock appreciation rights by the
substitution, on an equitable basis, of appropriate stock or
other securities of the surviving or purchasing or new parent
corporation or entity.
<PAGE> 15
ARTICLE VII
GENERAL
7.01 Nontransferability. Except as otherwise
specifically determined by the Committee, (a) no option or stock
appreciation right granted under the Plan may be transferred or
assigned except by the Grantee's last will and testament or the
laws of descent and distribution, and (b) during the Grantee's
lifetime, options and stock appreciation rights may be exercised
only by the Grantee or by the Grantee's guardian or legal
representative.
7.02 General Restriction. Each option and each stock
appreciation right is subject to the requirement that if at any
time the Board or the Committee determines, in its discretion,
that the listing, registration, or qualification of securities
upon any securities exchange or under any state, federal or other
applicable law, or the consent or approval of any government
regulatory body, is necessary or desirable as a condition of, or
in connection with, the granting of such option or right or the
issue or purchase of securities under the Plan, such option or
right may not be exercised in whole or in part unless such
listing, registration, qualification, consent or approval has
been effected or obtained free of any conditions not acceptable
to the Board or the Committee.
7.03 No Rights as Stockholder. The holders of options
or stock appreciation rights have no rights as a stockholder
unless and until they are issued shares of stock under the Plan.
<PAGE> 16
7.04 Effective Date and Duration of Plan. The Plan
shall become effective May 20, 1999, subject to Stockholder
Approval. No stock options may be granted under the Plan after
December 31, 2003.
7.05 Amendments. The Board may from time to time
amend, modify, suspend or terminate the Plan; provided, however,
that no such action may (a) except as provided in Section 3.03,
impair without the Grantee's consent any option or stock
appreciation right previously granted under the Plan or deprive
any Grantee of any shares of Company Stock acquired under the
Plan or (b) be made without Stockholder Approval if such change
would (i) increase the total number of shares that may be issued
under the Plan (other than as provided in Section 6.02), (ii)
permit repricing of options, or (iii) permit options to be
granted for less than Fair Market Value. Anything in the Plan to
the contrary notwithstanding, at any time before a Change in
Control (as defined in Section 7.07(b)) occurs, the Board may
amend Section 7.07(b)(i) to change the percentage referred to
therein to a percentage that is not more than 25%, so long as
such change is consistent with contemporaneous change of a
similar nature in the Rights Agreement (as defined in Section
7.07(b)(vi)).
7.06 Construction. Except as otherwise required by
applicable federal laws, the Plan will be governed by, and
construed in accordance with, the laws of the Commonwealth of
Virginia.
<PAGE> 17
7.07 Change in Control. (a) Anything in the Plan to
the contrary notwithstanding, if there is a Change in Control of
the Company (as defined below), all options and stock
appreciation rights already granted under this Plan will become
immediately exercisable; provided that to the extent necessary to
be exempt from Section 16(b) of the 1934 Act, the date as of
which options and stock appreciation rights first become
exercisable pursuant to this Section 7.07 by grantees who are
officers or directors of the Company may in no event be earlier
than six months from the date the option or stock appreciation
right is granted.
(b) For purposes of this Section 7.07, "Change in
Control" shall mean the occurrence of any of the following:
(i) Any Person (as defined below) becomes
the Beneficial Owner (as defined below), directly or
indirectly, of 15% or more of the Company's common
stock, unless such Person is not deemed an "Acquiring
Person" in accordance with Section 1(a) of the Rights
Agreement (as defined below);
(ii) During any period of two consecutive
years, individuals who at the beginning of such period
constitute the Board, and any new directors (other than
a director designated by a person who has entered into
an agreement with the Company to effect a transaction
described in Sections 7.07(b)(i), (iii) or (iv)) whose
election by the Board or nomination for election by the
Company's shareholders was approved by a vote of at
<PAGE> 18
least two-thirds of the directors then still in office
who either were directors at the beginning of the
period or whose election or nomination for election was
previously so approved, cease for any reason to
constitute a least a majority of the members of the
Board;
(iii) The effective date of a merger or
consolidation of the Company with any other entity,
other than a merger or consolidation which would result
in the voting securities of the Company outstanding
immediately before such merger or consolidation
continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving entity) more than 51% of
the combined voting power of the voting securities of
the surviving entity outstanding immediately after such
merger or consolidation and with the power to elect at
least a majority of the board of directors or other
governing body of such surviving entity;
(iv) The approval by the shareholders of the
Company of a complete liquidation of the Company or an
agreement for the sale or disposition by the Company of
all or substantially all of the Company's assets; and
(v) There occurs any other event of a nature
that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A (or a
response to any similar item on any similar schedule or
form)
<PAGE> 19
under the 1934 Act, whether or not the Company is
then subject to such reporting requirement.
(vi) Certain Definitions. For purposes of
this Section 7.07(b), the following terms shall have
the following meanings:
(A) "Person" shall have the meaning as set
forth in Sections 13(d) and 14(d) of the 1934 Act;
provided, however, that Person shall exclude (i)
the Company, (ii) any trustee or other fiduciary
holding securities under an employee benefit plan
of the Company, and (iii) any corporation owned,
directly or indirectly, by the shareholders of the
Company in substantially the same proportions as
their ownership of stock of the Company.
(B) "Beneficial Owner" shall have the
meaning given to such term in Rule 13d-3 under the
1934 Act; provided, however, that Beneficial Owner
shall exclude any Person otherwise becoming a
Beneficial Owner by reason of the shareholders of
the Company approving a merger of the Company with
another entity.
(C) "Rights Agreement" shall mean the
Amended and Restated Rights Agreement dated as of
March 8, 1999 between the Company and ChaseMellon
Shareholder Services, L.L.C., as initially in
effect.
<PAGE>
APPENDIX C
REYNOLDS METALS COMPANY
-----------------------
Performance Incentive Plan
--------------------------
As Amended and Restated
Effective January 1, 1999
<PAGE>
TABLE OF CONTENTS
Page
1. PURPOSE 1
2. ADMINISTRATION 1
3. PARTICIPATION 2
4. TARGET AWARD LEVELS 2
5. PERFORMANCE GOALS 3
6. DETERMINATION OF AWARDS 3
7. COMMUNICATION 3
8. PAYMENT OF AWARDS 4
9. COMPANY STOCK 7
10. EFFECTIVE DATE OF PLAN 7
11. SPECIAL PROVISIONS FOR TOP EXECUTIVES 7
<PAGE>
1. PURPOSE
-------
The purpose of the Performance Incentive Plan (the "Plan")
is to promote the financial success of Reynolds Metals
Company (the "Company") by:
(a) providing compensation opportunities which are
competitive with those of other major companies;
(b) supporting the Company's goal-setting and
strategic planning process; and
(c) motivating key executives to achieve annual
business goals by allowing them to share in the risks
and rewards of the business.
2. ADMINISTRATION
--------------
(a) The Plan shall be administered by the Compensation
Committee (the "Committee") of the Board of Directors
(the "Board"). No member of the Committee shall be
eligible to participate in the Plan.
(b) The Committee shall have the power and authority
to adopt, amend and rescind any administrative
guidelines, rules, regulations, and procedures deemed
appropriate to the administration of the Plan, and to
interpret and rule on any questions relating to any
provision of the Plan.
(c) The decisions of the Committee shall be final,
conclusive and binding on all parties, including the
Company and participating employees.
<PAGE> 2
(d) The Board may from time to time amend, suspend or
terminate the Plan, in whole or in part.
Notwithstanding the foregoing, the Board may, in any
circumstance where it deems such approval necessary or
desirable, and shall, to the extent necessary to
maintain compliance with Rule 16b-3 under the
Securities Exchange Act of 1934 as in effect from time
to time, require stockholder approval as a condition to
the effectiveness of any amendment or modification of
the Plan.
3. PARTICIPATION
-------------
Company officers and other key employees of the Company and
its subsidiaries who are recommended by the Chief Executive
Officer of the Company and who are approved by the Committee
shall be eligible for participation in the Plan during a
Plan year.
4. TARGET AWARD LEVELS
-------------------
After consultation with management, the Committee may
designate target award levels to be earned by participants
for a given Plan year. Such target awards may vary by
management level.
<PAGE> 3
5. PERFORMANCE GOALS
-----------------
To the fullest extent possible, management shall establish
performance goals for participants to help it determine the
awards it will recommend for the Plan year. Such goals may
relate to corporate performance, divisional performance, and
individual performance as appropriate to the purpose of the
Plan and the positions and responsibilities of the
participants.
6. DETERMINATION OF AWARDS
-----------------------
As soon as practicable following the close of each Plan
year, the Committee shall, after consultation with
management, determine the award earned by each participant
for the Plan year. In special cases of meritorious
performance, after consultation with management, the
Committee may make awards to individuals who were not
previously designated as eligible for participation during
the Plan year. If a participant has died during the Plan
year, an award may be made to the participant's spouse or
legal representative if the Committee so determines.
7. COMMUNICATION
-------------
Participants shall be advised in writing of their
participation in the Plan and of any performance goals
applicable to their awards.
<PAGE> 4
8. PAYMENT OF AWARDS
-----------------
Awards shall be payable in cash as soon after the close of
the Plan year as feasible; provided, however, that payment
of part or all of any award may be deferred in accordance
with the terms of any incentive deferral plan maintained
from time to time by the Company.
(c) Any other provision of the Plan to the contrary
notwithstanding, except as otherwise determined by the
Committee in accordance with Paragraph 6(a) of the
Company's Stock Ownership Guidelines for Officers (the
"Guidelines"), the following provisions shall apply to
the payment of an award to any participant who is
subject to the Guidelines and who had not met the
applicable minimum stock ownership level of the
Guidelines as of the December 31 immediately preceding
the date of payment of an award under the Plan.
The award to any such participant shall be paid
part in cash and part in the form of shares of Common
Stock of the Company ("Shares"). The number of Shares
issued under this provision shall be equal to the
number of Shares that would have been necessary to
bring the participant into compliance with the
Guidelines as of the December 31 immediately preceding
the date of payment of the award; provided, however,
that in no
<PAGE> 5
event shall more than half of the value of a
participant's award be paid in the form of Shares; and
provided, further, that the part of the award for any
participant that is payable in Shares shall not exceed
the annual rate of base salary in effect for the
participant at the time of the award. The remainder of
the participant's award shall be paid in cash. Awards
of Shares shall be made without payment of a purchase
price.
Any payment in accordance with this subsection (c)
shall be subject to the following terms and conditions:
(i) An award shall be converted into Shares
by dividing (y) the cash value of the
part of the award to be paid in Shares by (z) the
arithmetic average of the high and low sales
prices of the Shares as reported on New York Stock
Exchange Composite Transactions on the date
preceding the date on which the award is paid.
Any fractional Share shall be paid in cash.
(ii) The mandatory share award provisions of
this subsection (c) shall not apply
to the extent the participant has already elected
under the Company's New Management Incentive
Deferral Plan (y) to defer a portion of his or her
award under the Plan and (z) to have such deferred
award be
<PAGE> 6
credited with additional income based on
shares of phantom stock of the Company.
(iii) Except to the extent a participant has
elected to have a deferred award be credited
with additional income based on shares
of phantom stock of the Company, any voluntary
deferral of the payment of part or all of an award
under the Plan shall apply only to the part of the
award that is payable in cash after the
application of this subsection (c); provided,
however, that any such voluntary deferral shall be
reduced as necessary to ensure the payment of all
applicable payroll taxes.
(iv) To the extent a participant is subject to
a mandatory deferral of the payment of
part or all of an award under the Plan, the
mandatory deferral shall apply first to the part
of the award that is payable in cash. To the
extent the award that would be paid in Shares
remains subject to the mandatory deferral, the
payment that would otherwise be made in the form
of Shares shall instead be deferred under the
Company's New Management Incentive Deferral Plan
to earn income based on shares of phantom stock of
the Company.
<PAGE> 7
9. COMPANY STOCK
-------------
Shares reserved for issuance under the Plan may be
authorized but unissued shares, shares reacquired by the
Company, or a combination of both, as the Board may from
time to time determine. If any stock dividend is declared
upon the Shares, or if there is any stock split, stock
distribution, or other recapitalization of the Company with
respect to the Shares, resulting in a split-up or
combination or exchange of shares, the Shares reserved for
issuance under the Plan shall be proportionately and
appropriately adjusted.
10. EFFECTIVE DATE OF PLAN
----------------------
The Plan as originally adopted was effective for the fiscal
year commencing January 1, 1983 and continued in effect
thereafter as amended from time to time. This amended and
restated Plan shall be effective January 1, 1999, subject to
stockholder approval at the 1999 Annual Meeting, and shall
continue in effect, as amended from time to time, until it
is terminated by the Board.
11. SPECIAL PROVISIONS FOR TOP EXECUTIVES
-------------------------------------
Anything herein to the contrary notwithstanding, effective
with the 1996 calendar year, the following provisions shall
apply each calendar year to awards to participants who are
designated by the Committee as "Top Executives" for that
<PAGE> 8
calendar year. Top Executives shall be eligible for awards
only under this Paragraph 11.
(a) The provisions of this Paragraph 11, including the
designation of Top Executives each year, shall be
administered solely by those members of the Committee
(at least two) who are "outside directors" for purposes
of Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"). For the Top Executives, the
Plan shall be administered in a manner consistent with
the performance-based compensation requirements of
Section 162(m)(4) of the Code.
(b) No later than ninety days after the beginning of
each calendar year, the Committee shall establish in
writing (i) one or more Performance Goals (as defined
below) that must be reached in order for a Top
Executive to receive an award under the Plan for the
calendar year and (ii) the amount of the award to be
paid upon attainment of these goals. The Committee
shall have the discretion later to revise the amount to
be paid upon the attainment of these goals solely for
the purpose of reducing or eliminating the amount of
the award otherwise payable upon attainment of these
goals.
(c) In establishing Performance Goals, the Committee
shall establish both the minimum Performance Goal(s)
(the
<PAGE> 9
"Minimum Goals") that must be reached in order for
the Top Executive to receive any award for the calendar
year and the maximum Performance Goal(s) (the "Maximum
Goals") that must be reached in order for the Top
Executive to receive the maximum award for the calendar
year. Between the Minimum Goals and the Maximum Goals,
the Committee may establish a range of intermediate
Performance Goals with a corresponding range of awards
between the minimum and maximum award opportunity. In
no event may a Top Executive's maximum award hereunder
for any calendar year exceed $2,500,000.
(d) A "Performance Goal" is an objective performance
goal established in writing by the Committee; it may be
based on net earnings, stock price, profit before
taxes, return on equity, return on capital, return on
assets, total return to shareholders, earnings per
share, debt rating, or economic value added, with the
specific goal or target in each case determined on a
basis specified by the Committee. For purposes of the
preceding sentence, the term "economic value added"
means (1) net operating profit (or loss) after taxes
minus (2) a capital charge. Performance Goals may be
absolute in their terms or measured against or in
relationship to other companies comparably or otherwise
situated. Performance Goals may be particular to a Top
<PAGE> 10
Executive or the division, department, branch, line of
business, subsidiary or other unit in which the Top
Executive works or with respect to which the Top
Executive has responsibility and/or may be based on the
performance of the Company generally. Performance
Goals may vary from Top Executive to Top Executive and
from calendar year to calendar year.
(e) The amount payable to a Top Executive shall be
based upon the achievement of the Performance Goals, as
certified in writing by the Committee after the end of
each calendar year. If the Committee believes that
factors outside the Performance Goals should also be
taken into account in determining the amount of the
award, the Committee shall have the discretion to
reduce, but not increase, the amount payable to a Top
Executive based on these outside factors. No payment
shall be made unless the Minimum Goals are achieved.
(f) Awards under this Paragraph 11 shall be paid out
in accordance with the provisions of Paragraph 8.
