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-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):
______________________________________________________
(4) Proposed maximum aggregate value of transaction:
______________________________________________________
(5) Total fee paid:
______________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
<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:
__________________________________________________
(2) Form, Schedule or Registration Statement No.:
__________________________________________________
(3) Filing Party:
__________________________________________________
(4) Date Filed:
__________________________________________________
<PAGE>
REYNOLDS METALS COMPANY
6601 West Broad Street
Richmond, Virginia 23230
April 20, 2000
To Our Stockholders:
You are cordially invited to attend the 2000 annual meeting
of stockholders of Reynolds Metals Company to be held on
Thursday, June 15, 2000, at 4:00 p.m., Eastern Daylight Time,
at Reynolds' offices at 6601 West Broad Street, Richmond,
Virginia.
We look forward to our planned merger with Alcoa Inc. and are
pleased that you, our stockholders, approved the merger at
the special meeting held on February 11, 2000. While the
merger is still pending, we must continue to conduct business
as usual. Therefore, we are scheduling our 2000 annual
meeting of stockholders now, while we continue to work toward
completion of the merger.
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 Reynolds.
YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES
YOU OWN. PLEASE VOTE BY COMPLETING AND RETURNING THE
ENCLOSED PROXY CARD IN THE POSTAGE-PAID ENVELOPE. YOU ALSO
MAY CAST YOUR VOTE IN PERSON AT THE ANNUAL MEETING. If you
plan to attend, please mark the attendance box on the proxy
card.
If our merger with Alcoa Inc. is completed before June 15,
2000, the annual meeting will not be held.
Sincerely,
JEREMIAH J. SHEEHAN
Jeremiah J. Sheehan
Chairman of the Board and
Chief Executive Officer
<PAGE>
NOTICE OF
REYNOLDS METALS COMPANY
2000 ANNUAL MEETING OF STOCKHOLDERS
The 2000 annual meeting of stockholders of Reynolds Metals
Company will be held on Thursday, June 15, 2000, at 4:00 p.m.,
Eastern Daylight Time, at Reynolds' offices at 6601 West Broad
Street, Richmond, Virginia, for the following purposes:
1. To elect directors;
2. To ratify the selection of Ernst & Young LLP as
Reynolds' independent auditors for 2000; and
3. To consider and act upon a stockholder proposal
relating to the CERES Principles, if presented
at the meeting.
In addition, stockholders may transact such other business as may
properly come before the meeting or any adjournment or
postponement of the meeting.
The record date for the annual meeting is April 19, 2000.
Stockholders of record at the close of business on that date are
entitled to vote at the meeting.
If Reynolds' merger with Alcoa Inc. is completed before June 15,
2000, the annual meeting will not be held. Reynolds will give
public notice of its cancellation, if applicable, before the time
of the meeting in accordance with Reynolds' By-Laws.
By order of the Board of Directors,
DONNA C. DABNEY
DONNA C. DABNEY
Secretary
April 20, 2000
<PAGE>
TABLE OF CONTENTS
Page
----
VOTING PROCEDURES................................................. 1
MERGER WITH ALCOA INC. ........................................... 2
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. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS...... 11
ITEM 3. STOCKHOLDER PROPOSAL RELATING TO THE CERES PRINCIPLES.. 11
Other Matters................................................... 13
STOCK OWNERSHIP INFORMATION
Holders of More Than 5%......................................... 14
Director and Executive Officer Stock Ownership.................. 15
Stock Ownership Guidelines...................................... 16
Section 16(a) Beneficial Ownership Reporting Compliance......... 16
EXECUTIVE COMPENSATION
Report of Compensation Committee on Executive Compensation...... 17
Performance Graph............................................... 22
Summary Compensation Table...................................... 23
Stock Option Grants in 1999..................................... 25
Aggregated Option Exercises in 1999 and Option Values
at December 31, 1999........................................... 26
Pension Plan Table.............................................. 27
Change in Control and Termination Arrangements.................. 28
GENERAL INFORMATION
Annual Report................................................... 32
Form 10-K Report Requests....................................... 32
Stockholder Proposals for the 2001 Annual Meeting............... 32
Stockholder Nominations and Notice of Other Business............ 32
YOUR VOTE IS IMPORTANT
PLEASE VOTE AS SOON AS POSSIBLE TO MAKE SURE THAT YOUR SHARES ARE
REPRESENTED AT THE MEETING. TO VOTE YOUR SHARES, PLEASE COMPLETE,
SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE
ENVELOPE PROVIDED.
<PAGE>
PROXY STATEMENT
FOR
2000 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 Reynolds' 2000 annual meeting of
stockholders. This proxy statement and the accompanying proxy
materials are first being mailed or given to stockholders on or
about April 24, 2000.
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
Holders of record of Reynolds common stock at the close of business
on April 19, 2000 may vote at the meeting. On that date,
63,677,199 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 completing, dating, signing and returning your
proxy card in the enclosed envelope, or by attending the meeting
and voting in person. When you deliver a valid proxy, the shares
represented by that proxy will be voted in accordance with your
instructions.
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 auditors
under Item 2; and "AGAINST" the stockholder proposal under Item 3.
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 the polls close at the
meeting by:
. 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.
<PAGE> 2
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 Reynolds 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.
- ------------------------------------------------------------------
MERGER WITH ALCOA INC.
- ------------------------------------------------------------------
On August 18, 1999, Reynolds, Alcoa Inc. (Alcoa) and RLM
Acquisition Corp., a wholly owned subsidiary of Alcoa, entered into
an agreement and plan of merger. Under the merger agreement, each
outstanding share of Reynolds common stock would be converted into
1.06 shares<F1> of Alcoa common stock and Reynolds would become wholly
owned by Alcoa. Completion of the merger, which was approved by
Reynolds' stockholders at a special meeting held on February 11,
2000, is subject to customary closing conditions, including review
by antitrust regulatory authorities.
If the merger is completed before June 15, 2000, the annual meeting
of Reynolds' stockholders will not be held. Reynolds will give
public notice of its cancellation, if applicable, before the time
of the meeting in accordance with Reynolds' By-Laws.
[FN]
__________________________
<F1> Alcoa has declared a 2-for-1 stock split, subject to approval by
its shareholders at a meeting scheduled for May 12, 2000. If
approval is received, additional Alcoa common shares will be
distributed on June 9, 2000 to Alcoa shareholders of record on May
26, 2000. If the stock split is approved, and the Reynolds-Alcoa
merger occurs after May 26, 2000, the exchange ratio will be
adjusted from 1.06 to 2.12.
</FN>
2
<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 Reynolds. 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 1999 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: 57
Director Since: 1994
Principal Occupation: Clinical Associate Professor of the Leonard
N. Stern School of Business of New York
University
Recent Business Experience: Mrs. Barron has been Clinical Associate
Professor of the Leonard N. Stern School of
Business of New York University since
September 1999. From November 1998 to
September 1999, she was Executive in
Residence and Senior Fellow of the Leonard N.
Stern School of Business of New York
University. 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 Directorships: ARAMARK Corporation, Quaker Chemical
Corporation and Teleflex Incorporated
- ----------------------------------------------------------------------
JOHN R. HALL
Age: 67
Director Since: 1985
Principal Occupation: Retired Chairman of the Board and Chief
Executive Officer, Ashland Inc.
Recent Business Experience: Mr. Hall has been non-executive Chairman of
the Board of Bank One Corporation, a
financial services corporation, since
December 21, 1999. From July 1997 to
December 1998, he served as non-executive
Chairman of the Board of Arch Coal, Inc., a
coal company. Mr. Hall was elected Chairman
of the Board and Chief Executive Officer of
Ashland Inc., a large multi-industry company
with operations in chemicals, motor oil and
car care products, and highway construction,
on October 1, 1981. He retired as Chief
Executive Officer of Ashland Inc. on
September 30, 1996 and as Chairman of the
Board on January 30, 1997.
Other Directorships: Bank One Corporation, The Canada Life
Assurance Company, CSX Corporation, Humana
Inc., LaRoche Industries Inc., UCAR
International Inc. and USEC Inc.
- -----------------------------------------------------------------------
3
<PAGE> 4
NOMINEES - CONTINUED
- -----------------------------------------------------------------------
ROBERT L. HINTZ
Age: 69
Director Since: 1986
Principal Occupation: Chairman of the Board, R. L. Hintz &
Associates
Recent Business Experience: Mr. Hintz has been Chairman of the Board of
R. L. Hintz & Associates, a management
services firm, since 1989.
Other Directorships: Arch Coal, Inc. and The Chesapeake
Corporation
- ----------------------------------------------------------------------
WILLIAM H. JOYCE
Age: 64
Director Since: 1995
Principal Occupation: Chairman of the Board, President and Chief
Executive Officer, Union Carbide Corporation
Recent Business Experience: Mr. Joyce has been Chairman of the 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, and
from 1993 to April 1995, he was President and
Chief Operating Officer, of Union Carbide
Corporation.
Other Directorships: CVS Corporation and Union Carbide Corporation
- ------------------------------------------------------------------------
MYLLE BELL MANGUM
Age: 51
Director Since: 1995
Principal Occupation: Chief Executive Officer, MMS
Recent Business Experience: Mrs. Mangum has been Chief Executive Officer
of MMS, a private company concentrating on
internet-based business to business loyalty
and incentive programs, since May 1999. From
March 1997 to May 1999, she was Senior Vice
President, Expense Management and Strategic
Planning of Carlson Wagonlit Travel, a travel
and hospitality company. From 1992 to March
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 Directorships: Haverty Furniture Companies, Inc., Payless
ShoeSource, Inc. and Scientific-Atlanta, Inc.
- ------------------------------------------------------------------------
D. LARRY MOORE
Age: 63
Director Since: 1995
Principal Occupation: Retired President and Chief Operating Officer,
Honeywell Inc.
Recent Business Experience: Mr. Moore served as President and 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 Directorships: The Geon Company, Cordant Technologies Inc.
and Howmet International Inc.
- ------------------------------------------------------------------------
4
<PAGE> 5
NOMINEES - CONTINUED
- ------------------------------------------------------------------------
RANDOLPH N. REYNOLDS
Age: 58
Director Since: 1984
Principal Occupation: Vice Chairman and Executive Officer of
Reynolds Metals Company
Recent Business Experience: Mr. Reynolds has been Vice Chairman and
Executive Officer of Reynolds Metals Company
since October 1996. From 1994 to 1996, he
was Vice Chairman of the Board of the
Company.
- ------------------------------------------------------------------------
JAMES M. RINGLER
Age: 54
Director Since: 1994
Principal Occupation: Vice Chairman, Illinois Tool Works Inc.
Recent Business Experience: Mr. Ringler has been Vice Chairman of
Illinois Tool Works Inc., a multinational
manufacturer of highly engineered products
and specialty systems, since December 1999.
From October 1997 to December 1999, he was
Chairman of the Board, President and Chief
Executive Officer of Premark International,
Inc., a multinational manufacturer and
marketer of food equipment, decorative
products and consumer products. 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 Directorships: Union Carbide Corporation
- ------------------------------------------------------------------------
SAMUEL C. SCOTT, III
Age: 55
Director Since: 1997
Principal Occupation: President and Chief Operating Officer, Corn
Products International, Inc.
Recent Business Experience: Mr. Scott has been President and 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., a worldwide consumer
foods and baking company, and from 1995 to
1997, he was President-Corn Refining
Business, a division of CPC International
Inc.
Other Directorships: Corn Products International, Inc. and
Motorola, Inc.
- ------------------------------------------------------------------------
5
<PAGE> 6
NOMINEES - CONTINUED
- ------------------------------------------------------------------------
JEREMIAH J. SHEEHAN
Age: 61
Director Since: 1994
Principal Occupation: Chairman of the Board and Chief Executive
Officer, Reynolds Metals Company
Recent Business Experience: Mr. Sheehan has been Chairman of 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.
Other Directorships: Federal Reserve Bank of Richmond,
International Paper Company and Universal
Corporation
- ------------------------------------------------------------------------
JOE B. WYATT
Age: 64
Director Since: 1992
Principal Occupation: Chancellor, Vanderbilt University
Recent Business Experience: Mr. Wyatt has been Chancellor of Vanderbilt
University since 1982.
Other Directorships: El Paso Energy Corporation and Ingram Micro
Inc.
- ------------------------------------------------------------------------
CERTAIN RELATIONSHIPS
Randolph N. Reynolds' brother, William G. Reynolds, Jr., is a Vice
President of Reynolds. The husband of Donna C. Dabney, Secretary and
Assistant General Counsel of Reynolds, is a partner of McGuire, Woods,
Battle & Boothe, L.L.P., a law firm which provides legal services to
Reynolds.
BOARD AND COMMITTEE MEETINGS
The Board of Directors held eleven meetings in 1999. The Board has
appointed from its members five standing committees of the Board, which met
periodically during 1999. Incumbent directors' attendance at meetings of
the Board and of standing committees on which they served averaged over 95%
during 1999. All incumbent directors serving in 1999 attended at least 75%
of such meetings. The Board also meets periodically in executive session.
6
<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 1999: 3 meetings
Principal Functions: Recommends to the Board of Directors the firm to be
engaged by Reynolds 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 Reynolds' independent
auditors and its Internal Auditing Department
and audit plans and procedures
. Reynolds' financial statements
. Reynolds' 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
. Reynolds' 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 1999: 1 meeting and 1 unanimous written consent
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 2001 annual
meeting (if applicable) 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
Reynolds serving as a member of the Board is
expected to resign as a director at the time he or
she 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
Reynolds' best interests.
- ------------------------------------------------------------------------
7
<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 1999: 6 meetings and 2 unanimous written consents
Principal Functions: Reviews and recommends to the Board, or determines,
the compensation paid to Reynolds' executive officers.
Administers designated executive compensation plans
of Reynolds, 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 1999: 9 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 1999: 2 meetings
Principal Functions: Oversees:
. Reynolds' capital structure
. the financial administration of the assets of the
pension plans of Reynolds 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.
- ------------------------------------------------------------------------
8
<PAGE> 9
COMPENSATION OF DIRECTORS
- ------------------------------------------------------------------------
FEES. Reynolds pays directors who are not employees of Reynolds or any of its
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
Reynolds also reimburses non-employee directors for travel and other expenses
reasonably incurred in connection with Reynolds business.
RESTRICTED STOCK PLAN. Reynolds makes a one-time grant of 1,000 shares of
restricted common stock to each non-employee director sixty days after such
director is initially elected to the Reynolds 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 six-month anniversary of the date they were granted). 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 Reynolds Board because
of death or disability or because of a change in control of Reynolds,
restrictions on 200 shares will expire 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. Reynolds makes 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, or upon a change in
control of Reynolds. Fractional shares are paid in cash.
9
<PAGE> 10
COMPENSATION OF DIRECTORS - CONTINUED
- -----------------------------------------------------------------------
DEFERRED COMPENSATION PLAN. Reynolds' 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. Upon a
change in control of Reynolds, deferrals would be accelerated and paid out in
a lump sum within 10 days of the change in control.
STOCK OWNERSHIP GUIDELINES. Reynolds has established stock ownership
guidelines that apply to all non-employee directors. See "Stock Ownership
Information -- Stock Ownership Guidelines" below.
10
<PAGE> 11
ITEM 2. 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 Reynolds and its consolidated subsidiaries for
2000. The Board is submitting this matter to stockholders for ratification.
Ernst & Young LLP served as Reynolds' independent auditors in 1999 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 2. Shares represented by
proxies will be voted for approval unless instructions to the contrary are
given on the proxy.
- -----------------------------------------------------------------------
Item 3. 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 138,504
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:
"WHEREAS: 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 depend
on using a common format, credible metrics, and a set of generally accepted
standards. This will enable investors to assess environmental progress
within and across industries.
The Coalition for Environmental Responsible Economics (CERES) - a ten-year
partnership between large investors, environmental groups, and corporations -
has established what we believe is the most thorough and well-respected
environmental disclosure form in the United States. CERES has also taken
the lead internationally, convening major organizations together with the
United Nations Environment Programme in the Global Reporting Initiative,
which has produced guidelines for standardizing environmental disclosure
worldwide.
Companies which endorse the CERES Principles engage with stakeholders in
transparent environmental management and agree to a single set of consistent
standard for environmental reporting. That standard is set by the endorsing
companies together with CERES.
11
<PAGE> 12
The CERES Principles and CERES Report have been adopted by leading firms in
various industries: Arizona Public Service; Bank America; BankBoston; Baxter
International; Bethlehem Steel; Coca-Cola; General Motors; Interface; ITT
Industries; Northeast Utilities; 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 natural resource use
3. Waste reduction and disposal
4. Energy conservation
5. Risk reduction
6. Safe products/services
7. Environmental restoration
8. Informing the public
9. Management commitment
10. Audits and reports
(Full text of the CERES Principles and accompanying CERES Report Form
obtainable from: CERES, 11 Arlington Street, Boston, MA 02116; Tel:
617-247-0700/www.ceres.org).
RESOLVED: Shareholders request the Company to 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 provides competitive advantage and improves 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 are indicators of prudent foresight exercised by
management.
Given investors' needs for credible information about a firm's environmental
performance, and given the number of companies that have already endorsed the
CERES Principles and adopted its report format, it is a reasonable, widely
accepted step for a company to endorse those Principles if it wishes to
demonstrate its seriousness about superior environmental performance.
Your vote FOR this resolution serves the best interests of our Company and its
shareholders."
POSITION OF REYNOLDS BOARD OF DIRECTORS
- -------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL. This proposal
was defeated by Reynolds' stockholders at the last two annual meetings. The
Board of Directors continues to believe that endorsement of the CERES
Principles is not in the best interests of Reynolds or its stockholders.
We have carefully reviewed the CERES Principles and do not believe adoption
would help Reynolds better fulfill its continuing commitment to global
environmental responsibility. 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
12
<PAGE> 13
similar to the CERES Principles. For example, Reynolds is committed to:
. identifying and eliminating environmental risks and
promoting health and safety;
. continuing its efforts to minimize releases to the
environment and to reduce energy consumption;
. complying with applicable environmental requirements; and
. providing public information on Reynolds' operations and
their relation to the environment.
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.
We also recognize the importance of performance and accountability in
environmental matters. Reynolds' Audit Committee, which is composed solely of
non-employee directors, receives a presentation at least once a year from
Reynolds' chief environmental manager on Reynolds' overall environmental
compliance activities. In addition, Reynolds has an ongoing program of
facility compliance assessments. 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 all of Reynolds'
stockholders.
We are very conscious that Reynolds' environmental management practices must
be value-adding for all of Reynolds' stockholders (and not just a single group)
to the maximum extent possible. In our view, implementing the proposal would
burden Reynolds and its stockholders with additional reporting requirements and
costs while not providing any greater environmental protection than already
exists.
The Board of Directors therefore recommends a vote AGAINST Item 3. Shares
represented by proxies will be voted against this item unless instructions
to the contrary are given on the proxy.
- -------------------------------------------------------------------------
OTHER MATTERS
- -------------------------------------------------------------------------
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.
13
<PAGE> 14
STOCK OWNERSHIP INFORMATION
- -----------------------------------------------------------------------------
HOLDERS OF MORE THAN 5%
The following table sets forth the name of each person who, based on publicly
available information, beneficially owned at the dates indicated below more
than 5% of the shares of Reynolds common stock outstanding; the number of
shares of Reynolds common stock owned by each such person; and the percentage
of the outstanding shares of Reynolds common stock represented thereby. This
information with respect to beneficial ownership is based on information filed
with the SEC under Section 13(d) or (g) of the Securities Exchange Act of 1934.
- -------------------------------------------------------------------------
<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>
HIGHFIELDS CAPITAL MANAGEMENT LP, Common Stock 4,893,000<F1> 7.7%
HIGHFIELDS GP LLC,
JONATHON S. JACOBSON,
RICHARD L. GRUBMAN, AND
HIGHFIELDS CAPITAL LTD.
200 Clarendon Street, 51st Floor
Boston, Massachusetts 02117
ISP OPCO HOLDINGS INC., Common Stock 3,647,121<F2> 5.7%
ISP INVESTMENTS INC., AND
INTERNATIONAL SPECIALTY PRODUCTS INC.
300 Delaware Avenue, Suite 303
Wilmington, Delaware 19801
SAMUEL J. HEYMAN
1361 Alps Road
Wayne, New Jersey 07470
HEYMAN INVESTMENT ASSOCIATES
LIMITED PARTNERSHIP AND
THE ANNETTE HEYMAN FOUNDATION INC.
333 Post Road West
Westport, Connecticut 06881
- -------------------------------------------------------------------------
<FN>
<F1> As reported in an Amendment No. 4 dated January 28, 2000 to 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 LLC's principal business is
serving as general partner of Highfields Capital Management
LP; (3) Mr. Jacobson and Mr. Grubman are each a managing
member of Highfields GP LLC and a managing director of
Highfields Capital Management LP and in such capacity each
acts as a portfolio manager of the Funds; and (4) Highfields
Capital Ltd. is principally engaged in the business of buying,
selling and owning securities and activities incidental
thereto. The filing stated that each of the reporting persons
had (a) sole voting and dispositive power with respect to all
of the shares, except that Highfields Capital Ltd. had sole
voting and dispositive power with respect to 3,401,797 shares;
and (b) shared voting and dispositive power with respect to
none of the shares.
<F2> As reported in a Schedule 13G dated March 20, 2000. According
to the filing, the reporting persons have sole voting and
dispositive power, and shared voting and dispositive power,
respectively, with respect to the following shares: ISP Opco
Holdings Inc. (0 shares; 11,393 shares); ISP Investments Inc.
(11,393 shares; 0 shares); International Specialty Products
Inc. (17,088 shares; 11,393 shares); Samuel J. Heyman (0
shares; 3,647,121 shares); Heyman Investment Associates
Limited Partnership (3,590,340 shares; 0 shares); and The
14
<PAGE> 15
Annette Heyman Foundation Inc. (28,300 shares; 0 shares). The
filing indicates that in addition to the reported shares a
corporate affiliate of Mr. Heyman is a party to equity
derivative contracts with a broker-dealer relating to an
aggregate of 9,494 shares. The filing states that ISP
Investments Inc. has granted to a trust the right to receive
dividends from, and the right to receive the proceeds from the
sale of, 7,595 shares beneficially owned by ISP Investments
Inc.
</FN>
</TABLE>
- -----------------------------------------------------------------------
DIRECTOR AND EXECUTIVE OFFICER STOCK OWNERSHIP
The following table shows the beneficial ownership of Reynolds
common stock as of April 19, 2000 by each current director and
nominee; the five most highly compensated executive officers of
Reynolds named in the Summary Compensation Table; and all directors
and executive officers as a group.
- -----------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership
(Number of Shares)
-----------------------------------------
Sole Shared
Voting Voting
and/or and/or Percent
Investment Investment of
Title of Class Power<F1> Power<F2> Total<F3> Class<F4>
-------------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
DIRECTORS/NOMINEES:
Patricia C. Barron Common Stock 1,536 --- 1,536
John R. Hall Common Stock 4,200 --- 4,200
Robert L. Hintz Common Stock 1,500 --- 1,500
William H. Joyce Common Stock 3,525 --- 3,525
Mylle Bell Mangum Common Stock 1,584 --- 1,584
D. Larry Moore Common Stock 1,615 --- 1,615
Randolph N. Reynolds* Common Stock 283,125 52,037 335,162 0.5%
James M. Ringler Common Stock 1,131 --- 1,131
Sam Scott Common Stock 2,000 --- 2,000
Jeremiah J. Sheehan* Common Stock 368,741 1,309 370,050 0.6%
Joe B. Wyatt Common Stock 1,500 --- 1,500
NAMED EXECUTIVE OFFICERS:
Thomas P. Christino Common Stock 73,971 5,236 79,207 0.1%
William E. Leahey, Jr. Common Stock 74,200 2,725 76,925 0.1%
Paul Ratki Common Stock 78,498 2,715 81,213 0.1%
ALL DIRECTORS AND
EXECUTIVE OFFICERS
AS A GROUP (29
persons): Common Stock 1,705,512 529,761 2,235,273 3.4%
- ----------------------------------------------------------------------------
<PAGE>
* also a Named Executive Officer
<CAPTION>
Additional
Common
Stock
Equiva-
lents<F5>
------------
<S> <C>
DIRECTORS/NOMINEES:
Patricia C. Barron 1,627
John R. Hall 10,585
Robert L. Hintz 4,605
William H. Joyce 6,510
Mylle Bell Mangum 1,267
D. Larry Moore 2,070
Randolph N. Reynolds* 4,831
James M. Ringler 5,832
Sam Scott 1,224
Jeremiah J. Sheehan* 45,955
Joe B. Wyatt 2,863
NAMED EXECUTIVE OFFICERS:
Thomas P. Christino 7,335
William E. Leahey, Jr. 9,584
Paul Ratki 6,647
ALL DIRECTORS AND
EXECUTIVE OFFICERS
AS A GROUP (29
persons): 139,702
- ---------------------------------
<PAGE>
* also a Named Executive Officer
<FN>
<F1> Reported in this column are shares of Reynolds common stock
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 April 19, 2000 under Reynolds' 1987, 1992, 1996 and 1999
Nonqualified Stock Option Plans: J. J. Sheehan, 353,000
shares; R. N. Reynolds, 206,000 shares; P. Ratki, 76,750
shares; T. P. Christino, 73,600 shares; W. E. Leahey, Jr.,
74,200 shares; and all current directors and executive
officers as a group, 1,543,400 shares. Such shares may not be
voted at the annual meeting.
15
<PAGE> 16
<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 April 19, 2000
to the accounts of participants under Reynolds' 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 Reynolds common stock held by his wife:
Mrs. J. R. Hall, 200 shares; Mrs. R. N. Reynolds, 2,042
shares; and Mrs. J. J. Sheehan, 8,241 shares. An executive
officer not named in the table disclaims beneficial ownership
of 164 shares held by his wife. Another executive officer not
named in the table disclaims beneficial ownership of 5,079
shares 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 Reynolds common stock which can be acquired within
60 days after April 19, 2000 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. Such shares may not
be voted at the annual meeting. Accordingly, directors,
nominees and executive officers as a group own 691,873 shares
which may be voted at the annual meeting, or 1.1% of the total
number of shares that may be voted at the meeting.
<F5> Reported in this column are equivalent shares of common stock
credited as of April 19, 2000 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, an excess benefit plan
and a long-term performance share plan. Such common stock
equivalents may not be voted at the annual meeting.
</FN>
</TABLE>
- -----------------------------------------------------------------
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
See "Report of Compensation Committee on Executive Compensation --
Stock Ownership Guidelines" for the stock ownership guidelines
applicable to executive officers.
- -------------------------------------------------------------
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 1999.
16
<PAGE> 17
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 ten of the companies in the S&P Basic
Materials Index, against which Reynolds' stockholder return is measured in
the Performance Graph on page 22. 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 and 1999 Nonqualified Stock Option
Plans 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
17
<PAGE> 18
payments are deductible under Section 162(m). All compensation paid to
executive officers for 1999 was fully 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 1999, salaries paid to executive officers as a group were approximately 3%
above the size-adjusted median for comparable companies.
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 1999, 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 EVA(R)<F2>
investment, supplemented by balanced scorecard goals including overall
inventory reductions, safety improvement, Year 2000 readiness and other
specific performance improvement goals. 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.
[FN]
___________________
<F2> EVA(R) is a registered trademark of Stern Stewart & Co.
</FN>
18
<PAGE> 19
Accomplishment of business unit goals varied, with payouts ranging from 5% to
234.5% of target. Particularly strong performance was achieved by portions of
Reynolds' Base Materials and Packaging and Consumer global business units.
Overall performance against corporate goals lagged accomplishment of business
unit goals, due in part to the negative effect of shortfalls in return on
EVA(R) investment in some of Reynolds' business units. Performance against
balanced scorecard goals was stronger, and the Committee noted in particular
the continued progress in performance improvements that was sustained during
the period when management of ongoing business operations had to be balanced
with transition efforts required in connection with the proposed Alcoa merger.
In the aggregate, corporate variable compensation averaged 85%, and business
units 96%, of target.
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 1999, 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
19
<PAGE> 20
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. For the 1998-99 performance
cycle, Reynolds' percentile ranking against the Basic Materials Index was
71.7%, resulting in a payout of 129.25% of target.
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. Mr. Sheehan did not receive a salary increase during
1999.
The Committee authorized a variable compensation payment of $501,385 to Mr.
Sheehan for 1999, which was determined on a basis similar to that for other
executive officers, including a supplemental payment equal to 10% of target to
recognize his leadership efforts in working to effect a smooth transition for
the proposed Alcoa merger while continuing to achieve good performance in
day-to-day business operations.
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. The payout to Mr. Sheehan for the 1998-99 performance cycle
under the Long-Term Performance Share Plan was determined on a formula basis in
accordance with the plan.
20
<PAGE> 21
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
April 14, 2000
Richmond, Virginia
21
<PAGE> 22
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; and
. the published S&P Basic Materials Index.
The graph assumes an initial investment of $100 on December 31, 1994 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>
1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
Reynolds $100 $119 $121 $131 $118 $176
S&P 500 Index 100 138 169 226 290 351
S&P Basic Materials 100 120 141 156 147 185
Index
</TABLE>
22
<PAGE> 23
SUMMARY COMPENSATION TABLE
The following table shows the compensation for the last three years of
Reynolds' chief executive officer and the four next highest paid executive
officers who were serving at December 31, 1999.
<PAGE>
<TABLE>
<CAPTION>
Annual Compensation
-------------------------------
Other
Annual
Name and Salary Bonus Compensation
Principal Position Year ($) ($)<F1> ($)<F2>
- -------------------------- ---- -------- -------- ---------
<S> <C> <C> <C> <C>
JEREMIAH J. SHEEHAN,
Chairman of the Board and 1999 $900,000 $501,385 $ 991
Chief Executive Officer 1998 816,667 515,000 2,154
1997 654,167 866,617 5,506
- --------------------------------------------------------------------
RANDOLPH N. REYNOLDS,
Vice Chairman and 1999 $468,000 $237,615 $ 1,899
Executive Officer 1998 450,000 243,090 1,559
1997 433,333 385,000 18,321
- --------------------------------------------------------------------
PAUL RATKI,
Senior Vice President, Global 1999 $287,500 $262,273 $ -0-
Metals and Carbon Products 1998 262,500 283,000 -0-
1997 242,500 226,592 -0-
- --------------------------------------------------------------------
THOMAS P. CHRISTINO,
Senior Vice President, 1999 $324,500 $195,977 $ -0-
Global Packaging and 1998 299,250 289,099 -0-
Consumer Products 1997 274,000 219,700 -0-
- --------------------------------------------------------------------
WILLIAM E. LEAHEY, JR.,
Executive Vice President 1999 $350,000 $165,122 $ -0-
and Chief Financial Officer 1998 308,750 260,779 -0-
1997 275,000 231,765 -0-
- --------------------------------------------------------------------
<CAPTION>
Long-Term Compensation
------------------------
Awards Payouts
------------ ---------
Securities All
Underlying LTIP Other
Name and Options/SARs Payouts Compensation
Principal Position (#)<F3> ($)<F4> ($)<F5>
- -------------------------- ------------ --------- ----------
<S> <C> <C> <C>
JEREMIAH J. SHEEHAN,
Chairman of the Board and 80,000 shs. $1,667,741 $130,359
Chief Executive Officer 65,000 shs. -0- 88,114
70,000 shs. -0- 76,597
- --------------------------------------------------------------------
RANDOLPH N. REYNOLDS,
Vice Chairman and 30,000 shs. $534,052 $79,897
Executive Officer 25,000 shs. -0- 69,532
25,000 shs. -0- 61,653
- --------------------------------------------------------------------
PAUL RATKI,
Senior Vice President, Global 19,000 shs. $440,359 $38,982
Metals and Carbon Products 14,500 shs. -0- 32,323
8,000 shs. -0- 30,610
- --------------------------------------------------------------------
THOMAS P. CHRISTINO,
Senior Vice President, 19,000 shs. $440,359 $48,622
Global Packaging and 14,500 shs. -0- 45,503
Consumer Products 8,500 shs. -0- 41,893
- --------------------------------------------------------------------
WILLIAM E. LEAHEY, JR.,
Executive Vice President 19,000 shs. $440,359 $28,617
and Chief Financial Officer 14,500 shs. -0- 24,677
7,500 shs. -0- 22,481
- --------------------------------------------------------------------
<PAGE>
<FN>
<F1> Amounts shown in this column for 1999 are cash awards of
variable compensation granted under Reynolds' Supplemental
Incentive Plan (in the case of Messrs. Sheehan, Reynolds and
Leahey) and Performance Incentive Plan (in the case of
Messrs. Christino and Ratki). Included in the amounts shown
for Messrs. Sheehan, Reynolds and Leahey are special
discretionary cash awards of $58,986, $27,955 and $19,426,
respectively, in recognition of their efforts in managing
transition efforts for the proposed merger of Reynolds with
Alcoa Inc.
<F2> Reported in this column for 1999 are amounts reimbursed to
the named executive officers for the payment of taxes.
<F3> Option awards in 1999 were granted under Reynolds' 1996
Nonqualified Stock Option Plan, except for J. J. Sheehan's
award, which was granted under Reynolds' 1999 Nonqualified
Stock Option Plan. See "Stock Option Grants in 1999" below.
None of the options has stock appreciation rights attached.
<F4> Amounts shown in this column for 1999 are payouts under
Reynolds' Long-Term Performance Share Plan for the two-year
cycle January 1, 1998 through December 31, 1999. Half of the
award was paid in cash;
23
<PAGE> 24
the other half was in the form of phantom stock to be paid out
in shares of Reynolds common stock following termination of
employment.
<F5> Amounts shown in this column for 1999 include the following:
(a) Company contributions to Reynolds' 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; $4,755 for P. Ratki; $4,766 for T. P.
Christino; and $4,800 for W. E. Leahey, Jr.
(b) Amounts credited as Company contributions under
Reynolds' Benefit Restoration Plan for the Savings Plan
in the amount of $22,200 for J. J. Sheehan; $9,240 for R.
N. Reynolds; $3,873 for P. Ratki; $4,972 for T. P.
Christino; and $5,700 for W. E. Leahey, Jr.
(c) Amounts paid under Reynolds' Financial Counseling
Assistance Plan for Officers in the amount of $8,410 for
J. J. Sheehan; $20,803 for R. N. Reynolds; $570 for P.
Ratki; $275 for T. P. Christino; and $937 for W. E.
Leahey, Jr.
(d) The present value costs of Reynolds' contribution
toward 1999 premiums for split-dollar life insurance,
above the term coverage level provided generally to
salaried employees, in the amount of $94,949 for J. J.
Sheehan; $45,054 for R. N. Reynolds; $28,297 for P.
Ratki; $37,406 for T. P. Christino; and $17,180 for W. E.
Leahey, Jr. Reynolds 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 1999 on deferred compensation under Reynolds' New
Management Incentive Deferral Plan in the amount of
$1,487 for P. Ratki and $1,203 for T. P. Christino.
</FN>
</TABLE>
24
<PAGE> 25
STOCK OPTION GRANTS IN 1999
The following table shows information about stock options granted
by Reynolds in 1999.
- -----------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------
Number of % of
Securities Total Options Exercise
Underlying Granted or Base Grant-Date
Options to Employees Price Per Expiration Present
Name Granted<F1> in 1999<F2> Share<F3> Date Value<F4>
---- ----------- ------------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
J. J. Sheehan ...... 80,000 11.2% $60.875 5/21/2009 $1,443,200
R. N. Reynolds ..... 30,000 4.2 60.875 5/21/2009 541,200
P. Ratki ........... 19,000 2.7 60.875 5/21/2009 342,760
T. P. Christino .... 19,000 2.7 60.875 5/21/2009 342,760
W. E. Leahey, Jr. .. 19,000 2.7 60.875 5/21/2009 342,760
- ------------------------------------------------------------------------------
<PAGE>
<FN>
<F1> The options were granted under Reynolds' stockholder-approved
1996 Nonqualified Stock Option Plan (the "1996 Plan") and
1999 Nonqualified Stock Option Plan (the "1999 Plan"). 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 1999 will become exercisable on May 21, 2000.
Upon a change in control of Reynolds, all options already
granted would become immediately exercisable. See "Change in
Control and Termination Arrangements - Compensation and
Deferral Plans - Nonqualified Stock Option Plans" below.
None of the options has stock appreciation rights attached.
The 1996 Plan and 1999 Plan are substantially identical
except that (1) the aggregate number of shares of common
stock that may be sold or delivered under the 1999 Plan is
2,250,000 rather than 2,000,000; (2) the 1999 Plan limits the
number of options that an optionee may be granted during its
term to 750,000 shares rather than 300,000; (3) the 1999 Plan
does not prohibit the transfer of options if the transfer is
approved by the Compensation Committee of the Board of
Directors; and (4) no options may be granted under the 1999
Plan after December 31, 2003, rather than December 31, 2000.
<F2> In 1999, 334 persons were granted options covering an
aggregate of 712,600 shares of Reynolds common stock.
<F3> The optionee may pay the exercise price under the 1996 Plan
and the 1999 Plan in cash, in shares of Reynolds 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.
<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
5.6%; (2) a dividend yield of 2.1%; (3) a volatility factor
of the expected market price of the common stock of .270; (4)
an option term of 6 years; and (5) an option exercise price
of $60.875 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 and
the 1999 Plan. First, the formula
25
<PAGE> 26
assumes that a liquid market exists for the options;
however, options awarded under the 1996 Plan and 1999
Plan are not fully transferable. Second, it assumes that the
options may be exercised immediately; however, options
awarded under the 1996 Plan and 1999 Plan may not be
exercised earlier than one year from the date of grant
except as noted in footnote (1) above.
The ultimate value of the options will depend on the amount,
if any, by which the market price of the common stock exceeds
the exercise price at any time, and the timing of exercises,
neither of which can be accurately predicted.
On April 19, 2000, the closing price of Reynolds common stock
as reported on the New York Stock Exchange Composite
Transactions Tape was $64.0625 per share.
</FN>
</TABLE>
AGGREGATED OPTION EXERCISES IN 1999 AND
OPTION VALUES AT DECEMBER 31, 1999
The table below shows information about stock options exercised
during 1999 and the number and value of unexercised options held
at the end of 1999.
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Number of
Securities
Underlying
Unexercised
Options at
Number of December 31, 1999
Shares -----------------
Acquired Value Exercisable/
Name on Exercise Realized($) Unexercisable
---- ----------- ------------ -----------------
<S> <C> <C> <C>
J. J. Sheehan ..... - - 280,500 / 80,000
R. N. Reynolds .... - - 192,000 / 30,000
P. Ratki .......... - - 57,750 / 19,000
T. P. Christino ... - - 54,600 / 19,000
W. E. Leahey, Jr. . - - 55,200 / 19,000
- -------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------
Value of
Unexercised
In-the-Money
Options at
December 31, 1999
-----------------------
Exercisable/
Name Unexercisable<F1>
---- -----------------------
<S> <C>
J. J. Sheehan ..... $5,494,750 / $1,260,000
R. N. Reynolds .... 4,191,250 / 472,500
P. Ratki .......... 1,204,281 / 299,250
T. P. Christino ... 1,142,800 / 299,250
W. E. Leahey, Jr. . 1,161,363 / 299,250
- -------------------------------------------------------------
<PAGE>
<FN>
<F1> Based on the difference between the option exercise
price and the closing price of $76.625 per share of Reynolds
common stock on December 31, 1999 as reported on the New York
Stock Exchange Composite Transactions Tape.
</FN>
</TABLE>
26
<PAGE> 27
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
(called the Benefit Restoration Plan for New Retirement Program).
The amounts shown are based on the Social Security Act in effect
for retirement in 2000. 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
- -------------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 150,000 $ 12,640 $ 25,280 $ 37,921 $ 50,561 $ 63,201 $ 69,841
300,000 26,140 52,280 78,421 104,561 130,701 144,841
450,000 39,640 79,280 118,921 158,561 198,201 219,841
600,000 53,140 106,280 159,421 212,561 265,701 294,841
750,000 66,640 133,280 199,921 266,561 333,201 369,841
900,000 80,140 160,280 240,421 320,561 400,701 444,841
1,050,000 93,640 187,280 280,921 374,561 468,201 519,841
1,200,000 107,140 214,280 321,421 428,561 535,701 594,841
1,350,000 120,640 241,280 361,921 482,561 603,201 669,841
1,500,000 134,140 268,280 402,421 536,561 670,701 744,841
1,650,000 147,640 295,280 442,921 590,561 738,201 819,841
1,800,000 161,140 322,280 483,421 644,561 805,701 894,841
1,950,000 174,640 349,280 523,921 698,561 873,201 969,841
2,100,000 188,140 376,280 564,421 752,561 940,701 1,044,841
<CAPTION>
- ----------------------------------------------------------------------------
Years of Benefit Service
at Retirement<F1>
Final Average
Earnings 35 40
- -------------- ---------- ---------
<S> <C> <C>
$ 150,000 $ 76,481 $ 83,122
300,000 158,981 173,122
450,000 241,481 263,122
600,000 323,981 353,122
750,000 406,481 443,122
900,000 488,981 533,122
1,050,000 571,481 623,122
1,200,000 653,981 713,122
1,350,000 736,481 803,122
1,500,000 818,981 893,122
1,650,000 901,481 983,122
1,800,000 983,981 1,073,122
1,950,000 1,066,481 1,163,122
2,100,000 1,148,981 1,253,122
- -------------------------------------
<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 Reynolds 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
27
<PAGE> 28
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, 2000.
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
Final Average Years of Benefit
Name Earnings Service Completed
---- ------------- -----------------
<S> <C> <C>
J. J. Sheehan ........ $1,150,323 12
R. N. Reynolds ....... 675,600 31
P. Ratki ............. 406,463 32
T. P. Christino ...... 439,115 26
W. E. Leahey, Jr. .... 426,545 9
</TABLE>
- -------------------------------------------------------------------
CHANGE IN CONTROL AND TERMINATION ARRANGEMENTS
MERGER
Reynolds and Alcoa have entered into a definitive merger
agreement dated as of August 18, 1999. Under the terms of the
agreement, Alcoa will acquire all outstanding shares of Reynolds
in a tax-free, stock-for-stock transaction. Completion of the
merger, which has been approved by Reynolds' stockholders, is
subject to customary closing conditions, including review by
antitrust regulatory authorities. See "Merger with Alcoa Inc."
above.
SEVERANCE AGREEMENTS
Reynolds has entered into severance agreements with certain key
executives, including each of the executive officers named in the
Summary Compensation Table. If, within three years of a change
in control of Reynolds, Reynolds terminates the executive's
employment without cause or the executive terminates his or her
own employment for good reason, the executive will be entitled to
the following:
. the product of (1) the executive's annual base salary at the
time of termination or, if higher, at the time of the change in
control, plus the highest cash target bonus opportunity
established for the executive for 1998 or any future year times
(2) the lesser of 3 and the number of years pro-rated for the
number of full months until the executive's 65th birthday;
. a cash payment equal to the excess of the pension the
executive would have received if the executive were fully vested
and had three additional years of service over the pension the
executive is entitled to at the date of termination; and
. waiver of any premium required for retiree health benefits.
In addition, the executive will be entitled to:
. continued medical, life and disability benefits for three
years following termination;
. transferred ownership of the car assigned to the executive
at the time of termination;
. reimbursement for any applicable excise tax liability for
excess parachute payments; and
28
<PAGE> 29
. reimbursement for all costs and expenses incurred as a
result of any claim or proceeding relating to the severance
agreement.
The severance agreements require the executive to make himself or
herself available for consultation for no more than five days or
30 hours per month for three years following termination.
The proposed merger of Reynolds with Alcoa would constitute a
change in control of Reynolds for purposes of the severance
agreements. The cash amounts the executive officers named in the
Summary Compensation Table would receive under the severance
agreements if their employment were terminated by Reynolds
without cause or by the executive for good reason immediately
following the proposed merger, including the estimated payment
for excise taxes, are: J. J. Sheehan, $8,841,962; R. N.
Reynolds, $3,817,369; P. Ratki, $2,710,009; T. P. Christino,
$2,897,325; and W. E. Leahey, Jr., $2,862,047. These amounts are
based on a price of Reynolds common stock of $70.89 per share and
assume the merger occurred on January 1, 2000 and such executive
officers were terminated without cause as of such date.
COMPENSATION AND DEFERRAL PLANS
Nonqualified Stock Option Plans. Stock options granted under
Reynolds' nonqualified stock option plans normally become
exercisable one year after they are granted and may be forfeited
upon termination of employment except for reasons of death,
disability or retirement. Upon a change in control of Reynolds,
all options already granted under the plans would become
immediately exercisable. Options would also remain exercisable
in accordance with their terms for any option holder whose
employment was actually or constructively terminated by Reynolds
other than for cause within three years after the change in
control or, in the case of parties to executive severance
agreements, upon the executive's decision to terminate his or her
employment for good reason. In the case of optionees who are
directors or executive officers, the date as of which options
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. The proposed merger with Alcoa would
constitute a change in control for these purposes.
Messrs. J. J. Sheehan, R. N. Reynolds, P. Ratki, T. P. Christino
and W. E. Leahey, Jr. hold 160,000, 60,000, 38,000, 38,000 and
38,000 options, respectively, that will become immediately
exercisable as a result of the merger. At the time the merger
becomes effective, each outstanding option to purchase Reynolds
common stock will be converted into an option to acquire the
number of shares of Alcoa common stock equal to the number of
shares of Reynolds common stock which could have been obtained
upon the exercise of the option immediately before the time the
merger becomes effective multiplied by the exchange ratio. The
exercise price will be adjusted to equal the exercise price for
such option immediately before the time the merger becomes
effective divided by the exchange ratio.
Long-Term Performance Share Plan. Under this plan, executive
officers and other key employees are granted performance share
units for a
29
<PAGE> 30
designated cycle, which will be earned if 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, which 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. 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. Upon a
change in control of Reynolds, awards for the current performance
periods would be paid in cash, as if the change in control date
were the end of the performance cycle, except that pro rata
awards would be paid if the performance cycle has been in effect
for less than one year, and all deferred awards, including any
phantom stock portion, would also be paid immediately following
the change in control. Plan participants would also be made
whole on an after-tax basis for any excise tax liability that
results from change in control payments under the plan. The
proposed merger with Alcoa would constitute a change in control
for purposes of this plan. Assuming a change in control on
January 1, 2000 and a price of Reynolds common stock of $70.89
per share, the following lump sum cash payments (including the
estimated amount for excise taxes) would have been payable under
the plan to the executive officers named in the Summary Compensation
Table: J. J. Sheehan, $3,845,459; R. N. Reynolds, $1,160,215; P.
Ratki, $1,002,748; T. P. Christino, $1,005,953; and W. E. Leahey,
Jr., $1,009,553.
Salary Deferral Plan for Executives. This plan 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. Upon a change in
control of Reynolds, deferrals would be accelerated and paid out
in a lump sum within 10 days of the date of the change in
control. The proposed merger with Alcoa would constitute a
change in control for purposes of this plan.
New Management Incentive Deferral Plan. This plan allows
executive officers 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
30
<PAGE> 31
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. Upon a change in
control of Reynolds, deferrals would be accelerated and paid
out in a lump sum within 10 days of the change in control.
The proposed merger with Alcoa would constitute a change in
control for purposes of this plan.
Benefit Restoration Plan for Savings and Investment Plan. This
nonqualified plan provides for payment from general funds of
amounts otherwise payable under Reynolds' Savings and Investment
Plan for Salaried Employees but for Internal Revenue Code
limitations. Amounts are credited to covered employees' accounts
as if invested in Reynolds common stock. Upon a change in
control of Reynolds, the amounts credited to participants'
accounts would automatically be paid to participants. The
proposed merger with Alcoa would constitute a change in control
for purposes of this plan.
Reynolds Grantor Trust. The Reynolds Metals Company Grantor
Trust Agreement requires Reynolds, within 30 days after a change
in control or a potential change in control, to contribute to the
trust assets to fund the benefits payable under the Benefit
Restoration Plan for New Retirement Program, the Supplemental
Death Benefit Plan for Officers, and the individual supplemental
retirement benefit agreements with W. O. Bourke and W. S.
Leonhardt, each a former director and executive officer of
Reynolds. These amounts would be returned to Reynolds if a
change in control did not occur within one year of a potential
change in control. The term "potential change in control"
generally means the good faith determination by the Chief
Executive Officer and the Chief Financial Officer that a change
in control is reasonably likely to occur in the next thirty days.
The proposed merger with Alcoa would constitute a change in
control of Reynolds for this purpose, and it is expected that the
trust would be funded before completion of the merger.
Directors' Compensation Plans. See "Compensation of Directors"
above.
31
<PAGE> 32
GENERAL INFORMATION
- ------------------------------------------------------------------
ANNUAL REPORT
Reynolds' 1999 Annual Report, containing audited financial
statements for the year 1999, is being mailed to each stockholder
with this proxy statement.
FORM 10-K REPORT REQUESTS
REYNOLDS WILL PROVIDE STOCKHOLDERS, WITHOUT CHARGE, UPON WRITTEN
REQUEST, A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1999 FILED WITH THE SEC. Requests should be
addressed to:
Reynolds Metals Company
6601 West Broad Street
P.O. Box 27003
Richmond, Virginia 23261-7003
Attention: Secretary
STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
If you wish to submit proposals which are proper subjects for
consideration for possible inclusion in the proxy materials for
Reynolds' 2001 annual meeting of stockholders (if applicable),
Reynolds must receive them on or before December 21, 2000.
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
Reynolds' 2001 annual meeting of stockholders (if applicable),
including stockholder nominations for director, must be received
on or before March 21, 2001.
DONNA C. DABNEY
Secretary
April 20, 2000
Richmond, Virginia
32
<PAGE>
==================================================================
Notice of
Annual Meeting
of Stockholders
June 15, 2000
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
JUNE 15, 2000
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 2000 Annual Meeting of Stockholders to be held at the
Company's offices, 6601 West Broad Street, Richmond, Virginia, on
Thursday, June 15, 2000 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 as your instruction form to the trustee under
the relevant plan about 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. Please note that only the trustee of the plan
has the authority to cast a vote in person at the annual meeting
to vote the plan shares. These voting instructions are solicited
and will be carried out in accordance with the applicable
provisions of the respective plan and trust. In accordance with
the terms of the relevant plan, shares that are allocated to
participants who do not send instructions to the trustee, and
shares held in a plan that have not yet been allocated to
participants, will be voted by the trustee in the same
proportions as the allocated shares in that plan as to which
instructions are received, unless the trustee determines that its
fiduciary duty requires otherwise. You are considered to be the
"named fiduciary" for purposes of instructing the trustees as to
how to vote the shares allocated to your account and a
proportionate share of the unallocated shares.
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 AND 2 AND "AGAINST" ITEM 3.
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 AND 2. THE
PROXIES ARE APPOINTED WITH AUTHORITY TO VOTE IN THEIR DISCRETION
UPON MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING AND ANY
ADJOURNMENT OR POSTPONEMENT THEREOF.
- --------------------------------------------------------------------
1. Election of FOR all nominees WITHHOLD
Directors: (except as withheld AUTHORITY
Nominees: in the space to vote for all
Patricia C. Barron, provided) nominees
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. Ratification of Selection of
Ernst & Young LLP as ___ ___ ___
Independent Auditors /___/ /___/ /___/
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEM 3.
- ------------------------------------------------------------------------
3. Stockholder Proposal relating
to the CERES Principles FOR AGAINST ABSTAIN
___ ___ ___
/___/ /___/ /___/
- ------------------------------------------------------------------------
___
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. Joint owners should each sign. 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 2000 Annual Meeting of Stockholders
of Reynolds Metals Company. The meeting will be held on Thursday, June 15,
2000, 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 JUNE 15, 2000 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.
