UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No.____)
Filed by the Registrantx
Filed by a Party other than the Registranto¨
Check the appropriate box:
| Preliminary Proxy Statement |
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| Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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| Definitive Proxy Statement |
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| Definitive Additional Materials |
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| Soliciting Material Pursuant to §240.14a-12 |
ALCOA INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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| Fee computed on table below per Exchange Act Rules 14a-6(i) | |
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(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |
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TO ALCOA SHAREHOLDERS:
I cordially invite you to the 2005 annual meeting of Alcoa shareholders. The meeting this year will be held on Friday, April 22, 2005 at 9:30 a.m. in the Allegheny Ballroom of the Westin Convention Center Hotel in Pittsburgh, Pennsylvania. The location is accessible to disabled persons, and we will have headsets available for the hearing impaired. I hope you will participate in this review of our company’s business and operations.
This proxy statement describes the items to be voted on at the meeting. In addition to voting, we will review the company’s major developments of 2004 and answer your questions.
You will need an admission ticket if you plan to attend the meeting. For registered holders, we have included an admission ticket with your proxy card. Other shareholders may obtain tickets by contacting the corporate secretary.
Whether or not you will be attending the meeting, your vote is very important. Please vote. There are three ways that you can cast your ballot – by telephone, by Internet or by mailing the proxy card.
I look forward to seeing you at the annual meeting.
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Sincerely, | |
Alain J. P. Belda Chairman of the Board and Chief Executive Officer | |
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NOTICE OF 2005 ANNUAL MEETING February 22, 2005 Alcoa’s annual meeting of shareholders will be held on Friday, April 22, 2005 at 9:30 a.m. We will meet in the Allegheny Ballroom of the Westin Convention Center Hotel, 1000 Penn Avenue, Pittsburgh, Pennsylvania 15222. You may vote at this meeting if you owned common stock at the close of business on January 24, 2005. At the meeting, we plan to: On behalf of Alcoa’s Board of Directors, Donna Dabney NOTICE OF 2005 ANNUAL MEETING AND PROXY STATEMENT
TABLE OF CONTENTS(continued)
THE ANNUAL MEETING AND VOTING – QUESTIONS AND ANSWERS The Alcoa Board of Directors is soliciting proxies for the Who is entitled to vote and how many votes do I have? If you are a common stockholder of record at the close of business on How do I vote? You may vote in person by attending the meeting or by completing and returning a proxy by mail, by telephone or electronically, using the Internet. To vote your proxy by mail, mark your vote on the enclosed proxy card, then follow the directions on the card. To vote your proxy by telephone or electronically using the Internet, see the instructions on the proxy form and have the proxy form available when you call or access the Internet web site. The proxy committee will vote your shares according to your directions. If you sign and return your proxy card but do not mark any selections, your shares represented by that proxy will be voted as recommended by the Board of Directors. Whether you plan to attend the meeting or not, we encourage you to vote by proxy as soon as possible. What does it mean if I receive more than one proxy card? If you are a stockholder of record or participate in Alcoa’s Dividend Reinvestment and Stock Purchase Plan or employee savings or stock purchase plans, you will receive one proxy card (or if you are an employee with an Alcoa email address, an email proxy form) for all shares of common stock held in or credited to your accounts as of the record date, if the account names are exactly the same. If your shares are registered differently and are in more than one account, you will receive more than one proxy card or email proxy form, and in that case, you can and are urged to complete each of the How do I vote if I participate in one of the employee savings plans? You must provide the trustee of the employee plan with your voting instructions in advance of the meeting. You may do so by returning your voting instructions by mail, or submitting them by telephone or electronically, using the Internet. You cannot vote your shares in person at the annual meeting; the trustee is the only one who can vote your shares. The trustee will vote your shares as you have instructed. If the trustee does not receive your instructions, your shares generally will be voted in proportion to the way the other plan participants voted. Can I change my vote? There are several ways in which you may revoke your proxy or change your voting instructions before the time of voting at the meeting. (Please note that, in order to be counted, the revocation or change must be received by the cutoff time indicated on the proxy
Mail a revised proxy card or voting instruction form that is dated later than the prior one. Vote again by telephone or at the Internet web site. Common stockholders of record may vote in person at the annual meeting. Common stockholders of record may notify Alcoa’s corporate secretary in writing that a prior proxy is revoked or voting instructions are changed. Employee savings plan participants may notify the plan trustee in writing that prior voting instructions are revoked or are changed. Is my vote confidential? Yes. Proxy cards, ballots and voting tabulations that identify shareholders are kept confidential. There are exceptions for contested proxy solicitations or when necessary to meet legal requirements. Corporate Election Services, Inc., the independent proxy tabulator used by Alcoa, counts the votes and acts as the inspector of election for the meeting. Who can attend the annual meeting, and how do I obtain an admission ticket? You may attend the meeting if you were a shareholder as of the close of business on What constitutes a “quorum” for the meeting? A quorum consists of a majority of the outstanding shares, present or represented by proxy. A quorum is necessary to conduct business at the annual meeting. You are part of the quorum if you have voted by proxy. Abstentions, broker non-votes and votes withheld from director nominees count as “shares present” at the meeting for purposes of determining a quorum. However, abstentions and broker non-votes do not count in the voting results. A broker non-vote occurs when a broker or other nominee who holds shares for another does not vote on a particular item because the nominee does not have discretionary voting authority for that item and has not received instructions from the owner of the shares. Director candidates who receive the highest number of votes cast will be elected. Approval of each other item being considered requires a majority of the votes cast. At the close of business on Who pays for the solicitation of proxies? Alcoa pays the cost of soliciting proxies. Proxies will be solicited on behalf of the Board of Directors by mail, telephone, other electronic means or in person. We retain Morrow & Company, Inc. to assist with the solicitation for a fee of How do I comment on company business? Space for your comments is provided on the proxy card, or you may send your comments to us in care of the corporate secretary. Although it is not possible to respond to each shareholder, your comments help us to understand your concerns and address your needs. May I nominate someone to be a director of Alcoa? Yes, please see page When are the The next Alcoa annual meeting is on April We have adopted a procedure approved by the Securities and Exchange Commission called “householding.” Under this procedure, shareholders of record who have the same last name and address and do not participate in electronic delivery of proxy materials will receive only one copy of our Annual Report for 2004, unless one or more of these shareholders notifies us that they wish to continue receiving individual copies. This procedure will reduce our printing costs and postage fees. Shareholders who participate in householding will continue to receive separate proxy statements this year, as well as proxy cards. Also, householding will not in any way affect dividend check mailings. If you participate in householding and wish to receive a separate copy of the 2004 Annual Report, please call 1 800 522-6757, or request a copy in writing from Alcoa, Corporate Communications, 201 Isabella Street at 7th Street Bridge, Pittsburgh, PA 15212-5858, and a copy will be provided to you promptly. If you do not wish to continue participating in householding and prefer to receive separate copies of future Annual Reports and other shareholder communications, notify Alcoa in writing at the following address: Alcoa, Corporate Secretary’s Office, 390 Park Avenue, New York, NY 10022-4608. If you are eligible for householding, but you and other shareholders of record with whom you share an address currently receive multiple copies of the Annual Report, and you wish to receive only a single copy for your household, please contact the Corporate Secretary’s Office as indicated above. CORPORATE GOVERNANCE INFORMATION
Alcoa is a values-based company. OurValuesguide our behavior at every level and apply across the company on a global basis. We expect all Alcoans to conduct business in compliance with ourBusiness Conduct Policiesand we survey compliance with these policies on an annual basis. The The Director Independence Standards and (b) each committee of the The business and affairs of the company are managed by the Board of Directors. The board operates under Corporate Governance Guidelines, which, among other things, describe director responsibilities. Lead Director The Meetings and Attendance The There are five standing committees of the Audit Committee
The
Compensation and Benefits Committee The Compensation and Benefits Committee discharges the Executive Committee
The Executive Committee has authority to act on behalf of the Governance and Nominating Committee The Governance and Nominating Committee is responsible for identifying individuals qualified to become Public Issues Committee The Public Issues Committee provides advice and guidance on public issues, oversees corporate giving, makes recommendations to the From 2001 through 2004, Alcoa
directors do not receive stock options. Alcoa does not fund directors’ deferred accounts, but pays them out in cash from general funds of the company after
The company pays or reimburses directors for travel expenses incurred in connection with attending board, committee and shareholder meetings and for other company-business related expenses (including the travel expenses of spouses if they are specifically invited to attend the event for appropriate business purposes), and provides use of company aircraft if available and approved in advance by the chief executive officer. The company does not provide retirement benefits to non-employee directors under any current program. The following directors who served as directors during 2004 will receive the following annual payments in cash and stock for life upon retirement from the board, or age 65 (whichever is later), under a former fee continuation arrangement (called the Alcoa Fee Continuation Plan for Non-Employee Directors) upon leaving the board, based on their years of board service as of December 31, 1995 and the base annual stock and cash retainer in effect on that date: Joseph T. Gorman ($12,000/800 shares), Judith M. Gueron ($21,000/1,400 shares), Sir Ronald Hampel ($3,000/200 shares), Henry B. Schacht ($3,000/200 shares), and Franklin A. Thomas ($30,000/2,000 shares). In 1995, the board froze future annual payments to eligible directors at a maximum of $30,000 and 2,000 shares (or a lesser proportion based on service). The plan was otherwise terminated at that time. All cash benefits under the terminated arrangement are payable from the general assets of the company, and no segregation of assets for this purpose has been made. Alcoa’s practice has been to use treasury shares for the share payments. A director who is an employee of Alcoa does not receive compensation for services as a director. TRANSACTIONS WITH DIRECTORS’ COMPANIES In the course of ordinary business, Alcoa and its subsidiaries may have transactions with companies and organizations whose executive officers are also Alcoa directors. None of these transactions in OTHER CORPORATE GOVERNANCE MATTERS Board, Committee and Director Evaluations The Governance and Nominating Committee Communications with Directors The Board of Directors welcomes shareholder input and suggestions. Those wishing to contact the Lead Director or the non-management directors as a group may do so by Director or the non-management directors c/o Alcoa, Corporate Secretary’s Office, 390 Park Avenue, New York, NY 10022-4608. To communicate may place an anonymous, confidential, toll free call in the United States to Alcoa’s Compliance Line at 1
Communications received are distributed to the Mass mailings; Product complaints and product inquiries; New Job inquiries and resumes; and Advertisements, solicitations and surveys. Business Conduct Policies and Code of Ethics The In November 2003, the
ADDITIONAL GOVERNANCE AND NOMINATING COMMITTEE DISCLOSURE Shareholder Recommendations for Directors Any shareholder wishing to recommend a candidate for director should submit the recommendation in writing to Alcoa, Shareholder Nominations from the Floor of the Annual Meeting The company’s Articles provide that any shareholder entitled to vote at an annual shareholders’ meeting may nominate one or more director candidates for election at that annual meeting by following certain prescribed procedures.
Any such notice must be sent to: Alcoa, Corporate Secretary, 390 Park Avenue, New York,
Minimum Qualifications for Director Nominees and Board Member Attributes During 2004, the Governance and Nominating Committee adopted Criteria for Identification, Evaluation and Selection of Directors. Those criteria are:
Process of Evaluation for Director Candidates The Governance and Nominating Committee
At the conclusion of this process, the Use of Consultants The Governance and Nominating Committee has retained the services of consulting firms who specialize in identifying and evaluating director
ITEM 1 – ELECTION OF DIRECTORS As of the date of this proxy statement, Alcoa’s Board of Directors had
The Board of Directors has nominated The proxy committee will vote your proxy for the election of NOMINEES TO SERVE FOR A THREE-YEAR EXPIRING IN 2008
NOMINEES TO SERVE FOR A THREE-YEAR TERM EXPIRING IN
DIRECTORS WHOSE TERMS EXPIRE IN 2007
DIRECTORS WHOSE TERMS EXPIRE IN 2006
DIRECTORS WHOSE TERMS EXPIRE IN 2006(continued)
DIRECTORS WHOSE TERMS EXPIRE IN 2006(continued)
ALCOA STOCK OWNERSHIP AND PERFORMANCE
The following shareholders reported to the Securities and Exchange Commission that they owned more than 5% of Alcoa common stock on December 31,
The following table sets forth, as of December 31, No individual director, nominee or executive officer beneficially owned more than 1% of Alcoa’s common stock. The total beneficial ownership by directors, nominees and executive officers as a group represented less than 2% of outstanding shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE The rules of the Securities and Exchange Commission require that we disclose late filings of reports of stock ownership by Alcoa directors and executive officers. Due to the complexity of the reporting rules, the company has assumed certain responsibilities for filing compliance and has instituted procedures to assist officers and directors with these obligations. Based on a review of the filings made during and with respect to the last fiscal year, we believe that all required reports were filed on a timely basis in STOCK PERFORMANCE GRAPH This graph compares the most recent five-year performance of Alcoa common stock with the
CUMULATIVE TOTAL RETURN AT YEAR END Based upon an initial investment of $100 on December 31, ITEM 2 – PROPOSAL TO APPROVE THE INDEPENDENT AUDITOR The company’s Audit Committee Charter provides in relevant part: “The Committee shall have sole authority and be directly responsible for the retention, compensation, oversight, evaluation and termination (subject, if applicable, to shareholder ratification) of the work of the Company’s outside auditors for the purpose of preparing or issuing an audit report or related work. The Company’s outside auditors shall report directly to the Committee.” In 2004, the board determined that the annual selection of the outside auditor would be submitted to shareholders for approval. The board ratified the selection by the Audit Committee of PricewaterhouseCoopers LLP to serve as our independent auditor for 2005, subject to approval by our shareholders. Representatives of PricewaterhouseCoopers LLP will be present at the 2005 annual meeting of shareholders to answer questions and to make a statement if they desire to do so.
For this proposal to be adopted, a majority of the votes cast by shareholders must be voted for approval. The Board of Directors recommends a vote FOR ITEM 2. The proxy committee will vote your proxy for this item unless you give instructions to the contrary on the proxy. INDEPENDENT AUDITOR: SERVICES AND FEES PricewaterhouseCoopers LLP, or its predecessor firm, has served for a number of years as the company’s independent auditor. We believe that the knowledge of the company’s business gained through those years of service is valuable. To ensure independence, current Securities and Exchange Commission rules require rotation of the lead audit partner after five years, and the committee’s charter requires consideration from time to time of possible rotation beyond what is required by law. The following table shows fees for professional services rendered by PricewaterhouseCoopers LLP for the past two fiscal years ended December 31 (in millions):
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF THE INDEPENDENT AUDITOR To assist it in carrying out its responsibility for appointing, setting compensation and overseeing the work of the independent auditor, the Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by the independent auditor. The pre-approval policies and procedures adopted by the Audit Committee for audit and non-audit services in 2004, including specific definitions of the categories of services, are attached as Attachment A. All services provided during the year were within the pre-approval policy and authorization. All fees are budgeted at the beginning of the year, and throughout the year, the Audit Committee requires the independent auditor and management to report actual fees versus budget by category of service. During the year it may become necessary to engage the independent auditor for additional services not contemplated in the original pre-approval categories, or to increase an estimated amount for services already approved. In that situation, the Audit Committee requires specific pre-approval before the independent auditor is engaged for the work or the additional work is undertaken. The Audit Committee may delegate pre-approval authority to one or more of its members. In that case, the member must report to the full Audit Committee at its next meeting any pre-approval decisions taken.
The Audit Committee
The committee has discussed with
The committee has considered whether the independent
The committee meets every regular meeting separately, and without management present,
In that context, the committee has met and discussed with management and the independent
Relying on the
See page Charter, The Audit Committee Henry B. Schacht,Chairman Joseph T. Gorman Judith M. Gueron Klaus Kleinfeld Ernesto Zedillo February
REPORT OF THE COMPENSATION AND BENEFITS COMMITTEE The Board’s Compensation and Benefits Committee is Compensation We use survey data provided by Towers Perrin for
Our Components of the Cash Compensation– As a result of evaluations completed late in 2003, we did not change the 2004 salary structure and incentive compensation targets for Annual Cash Incentives– Annual incentive compensation targets had been reduced by 10% for senior executives
stock options, stock awards and performance share awards, with all awards being made under the The
Below the senior executive group, some managers were awarded restricted shares in addition to
Multi-Year Incentive Program: PLUS– The company did not achieve the
Compensation of the Chief Executive Officer–The compensation design for our chief executive
The committee meets annually, without the chief executive officer
Our consultant provides us with independent recommendations for target total compensation for Mr. Belda for the
Mr. Belda has been Alcoa’s chairman and chief executive officer since January 1, 2001. For 2004, we analyzed the financial and non-financial performance of the company and assigned a company we set his annual bonus for 2004 In 2004, we granted to Mr. Belda options to purchase 434,900 shares at $35.66 per share, the Stock Ownership Income Tax See page 11 of this proxy statement, “Committees – Compensation and Benefits Committee,” for information on the Committee’s 2004 meetings. For a copy of the Committee’s Charter, go to the “About Alcoa – Corporate Governance – Committees” section of thehttp://www.alcoa.comsite. The Compensation and Benefits Committee Joseph T. Gorman,Chairman Carlos Ghosn Sir Ronald Hampel Franklin A. Thomas February
SUMMARY COMPENSATION TABLE This table summarizes the compensation for services in all capacities to Alcoa and its subsidiaries for the
The salary column includes base salary, and for employees with 25 or more years of service, when chosen by the employee, an extra week’s pay instead of vacation.
the Board of Directors has required the company’s chief executive officer to use company aircraft for all travel whenever practicable for security reasons. The amounts reported reflect a change in valuation methodology from prior years in which the cost of the personal use of company aircraft had been calculated using the Standard Industrial Fare Level (SIFL) tables found in the tax regulations. The 2003 and 2002 amounts have been re-calculated so that amounts are reported on a consistent basis. Expenses for spouse travel include amounts paid or reimbursed by the company, although the spouse was invited to attend the event for appropriate business purposes.
The following table shows examples of the number of shares of Alcoa common stock that would be received by the named executive officers if the earned awards for 2004 are determined to be issuable at various levels ranging from 0% to 200% of target: Number of Shares of Alcoa Common Stock Issuable Under 2004 Performance Share Awards at Various Percentages of Target
Performance share awards are subject to forfeiture if the executive officer’s employment terminates during the three-year vesting period for any reason other than death, retirement on a date at least six months from the grant date, or as a result of certain divestitures of businesses. The awards will vest immediately and the shares of stock issuable under the awards (or the target number of shares if a change in control event occurs during the performance period) will be issuable immediately upon the occurrence of certain events described in the plan constituting a change in control of Alcoa. Until the awards vest, they confer no voting rights. Common stock dividend equivalents are paid on the performance shares during the performance period until the actual award is determined based on the target number of shares covered by the award, and after the actual award is determined until the award vests, on the actual number of shares to be issued (if any). All such dividend equivalents are paid at the same rate as paid on the company’s common stock. The number and value of aggregated restricted stock unit holdings (all currently unvested) as of December 31, 2004, were as follows: Mr. A. Belda 50,000 shares/$1,570,500; Mr. R. Belda 20,350 shares/$639,194; Mr. Kelson, 20,350 shares/$639,194; Mr. Reitan, 20,350 shares/$639,194; and Mr. Thomas, 20,350 shares/$639,194. These restricted stock units consist solely of the target number of performance share awards granted in 2004 as described above and are subject to the performance and vesting contingencies described above. The value of such holdings is calculated by assuming that all such units are vested at the target level at 2004 year-end and by using the closing price of Alcoa common stock on the New York Stock Exchange on December 31, 2004 ($31.41 per share).
For Mr. Reitan, the amount shown for 2004 includes a company matching contribution of $83,454 under a stock acquisition plan that provides an incentive for eligible executives who are of relatively short tenure with the company to achieve their stock ownership guideline requirement by deferring all or a portion of their annual cash bonus into an Alcoa equivalent share fund, and a company contribution of $62,267 under a global pension plan for eligible expatriates. Savings plan differential payments made by the company in 2004 for expatriates who do not participate in the company’s 401(k) plan were $27,600 for Mr. R. Belda and $12,600 for Mr. Reitan. The present value costs of the company’s portion of 2004 premiums for split-dollar life insurance under policies provided prior to enactment of the Sarbanes-Oxley Act of 2002, above the term coverage level provided generally to salaried employees, were: Mr. A. Belda $72,572; Mr. Kelson $24,649; and Mr. Thomas $6,186. The reported amounts for 2004 also include $101,525 for Mr. A. Belda and $1,865 for Mr. Reitan, which is the annual premium paid by the company for additional term life insurance. This insurance is designed to offset the estimated additional U.S. estate tax liability in the event of the executives’ death while on active assignment in the U.S. The company offers this benefit to designated executives who are non-U.S. citizens asked to take assignments in the U.S. and who, as a result of taking such an assignment, may become liable for U.S. estate taxes. The company also provides tax reimbursement payments for the premiums paid on this insurance. For 2004, the amount of tax reimbursement to Mr. A. Belda was $102,259 and to Mr. Reitan was $1,504, which is included in the “Other Annual Compensation” column and noted in note (2).
OPTION GRANTS IN
The reload feature was introduced in 1990 to promote the early exercise of options and the retention of Alcoa shares, while continuing the opportunity to gain from future appreciation on the stock. By exercising an outstanding option, the participant realizes, in shares, the net profit or growth in value of that option (the excess of the current fair market value over the option grant price), less required withholding for taxes. Certain conditions apply: (i) the market value of Alcoa stock on the exercise date of the underlying option must be at least $2.50 more than the grant price of that option; and (ii) the participant must agree that one-half of the net profit shares received on exercise of the underlying option will be held by the participant (directly or in trust) for five years or until the participant’s employment with Alcoa terminates, whichever is earlier. A reload option has the same expiration date as the underlying option and is granted at 100% of the market value of Alcoa stock on the grant date. The reload option covers the number of shares exercised in the underlying option less the number of profit shares delivered to the participant after withholding for taxes. Reload options may be granted where the exercise price of the underlying option is paid using previously owned mature shares or cash, subject to certain limitations.
This chart shows the number and value of stock options, both exercised and unexercised, for the named officers during
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PENSION PLANS
Alcoa’s pension plans cover a majority of salaried employees. Alcoa pays the full cost of these plans, which include both tax-qualified and non tax-qualified excess plans. This table shows the annual benefits payable for the majority of salaried employees at executive compensation levels.
PENSION PLAN TABLE
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| 25 |
| 30 |
| 35 |
| 40 |
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$ 100,000 |
| $ | 19,650 |
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| $ | 26,200 |
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| $ | 32,750 |
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| $ | 39,300 |
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| $ | 46,270 |
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| $ | 54,420 |
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250,000 |
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| 52,840 |
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| 70,450 |
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| 88,060 |
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| 105,680 |
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| 123,290 |
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| 140,900 |
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500,000 |
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| 108,150 |
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| 144,200 |
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| 180,250 |
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| 216,300 |
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| 252,350 |
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| 288,400 |
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750,000 |
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| 163,460 |
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| 217,950 |
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| 272,440 |
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| 326,930 |
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| 381,410 |
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| 435,900 |
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1,000,000 |
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| 218,780 |
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| 291,700 |
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| 364,630 |
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| 437,550 |
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| 510,480 |
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| 583,400 |
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1,250,000 |
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| 365,450 |
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| 456,810 |
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| 548,180 |
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| 639,540 |
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| 730,900 |
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1,500,000 |
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| 549,000 |
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| 658,800 |
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| 768,600 |
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| 878,400 |
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2,000,000 |
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2,500,000 |
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| 917,750 |
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| 1,284,850 |
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| 1,468,400 |
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3,000,000 |
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| 661,280 |
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| 881,700 |
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| 1,102,300 |
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| 1,322,550 |
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| 1,542,980 |
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| 1,763,400 |
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3,500,000 |
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| 771,900 |
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| 1,029,200 |
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| 1,286,500 |
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| 1,543,800 |
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| 1,801,100 |
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| 2,058,400 |
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Average Annual Compensation | Annual Benefits for Years of Service Indicated | |||||||||||||||||
15 | 20 | 25 | 30 | 35 | 40 | |||||||||||||
$100,000 | $ | 19,540 | $ | 26,050 | $ | 32,570 | $ | 39,080 | $ | 46,140 | $ | 54,290 | ||||||
250,000 | 52,710 | 70,270 | 87,840 | 105,410 | 122,980 | 140,550 | ||||||||||||
500,000 | 108,020 | 144,020 | 180,030 | 216,040 | 252,040 | 288,050 | ||||||||||||
750,000 | 163,330 | 217,770 | 272,220 | 326,660 | 381,110 | 435,550 | ||||||||||||
1,000,000 | 218,640 | 291,520 | 364,410 | 437,290 | 510,170 | 583,050 | ||||||||||||
1,250,000 | 273,960 | 365,270 | 456,590 | 547,910 | 639,230 | 730,550 | ||||||||||||
1,500,000 | 329,270 | 439,020 | 548,780 | 658,540 | 768,290 | 878,050 | ||||||||||||
2,000,000 | 439,890 | 586,520 | 733,160 | 879,790 | 1,026,420 | 1,173,050 | ||||||||||||
2,500,000 | 550,520 | 734,020 | 917,530 | 1,101,040 | 1,284,540 | 1,468,050 | ||||||||||||
3,000,000 | 661,140 | 881,520 | 1,101,910 | 1,322,290 | 1,542,670 | 1,763,050 | ||||||||||||
3,500,000 | 771,900 | 1,029,020 | 1,286,280 | 1,543,540 | 1,801,790 | 2,058,050 | ||||||||||||
4,000,000 | 882,390 | 1,176,520 | 1,470,660 | 1,764,790 | 2,058,920 | 2,353,050 |
The company bases the employee’s amount of pension upon the average compensation for the highest five years in the last 10 years of service. For the executive level, covered compensation includes base salary and annual cash incentive. A foreign service premium of up to $15,000 per year is also included as covered compensation for eligible employees on international assignment under the company’s expatriate program. We calculate the amounts in the table using salary at target and annual incentive at target. We also make payments as a straight life annuity, reduced by 5% when an employee elects the surviving spouse feature. The table shows benefits at age 65, before any reduction for surviving spouse coverage. The amounts shown do not include social security benefits.
At December 31, 2003,2004, pension service for the named officers was: Mr. A. Belda, 3536 years; Mr. Coleman, 6R. Belda, 36 years; Mr. Kelson, 29 years; Mr. Leahey, 1330 years; and Mr. Pizzey, 33Thomas, 26 years.
37
EQUITY COMPENSATION PLAN INFORMATION
The following table gives information about Alcoa’s common stock that could be issued under the company’s equity compensation plans as of December 31, 2003.
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Plan Category |
| Number of securities |
| Weighted-average |
| Number of securities remaining |
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| |
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| (a) |
| (b) |
| (c) |
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Equity compensation plans |
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| 77,944,680 |
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| $ | 33.37 |
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| 13,097,943 | (2) |
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Equity compensation plans not |
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| 0 |
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| 0 |
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| 0 |
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Total |
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| 77,944,680 |
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| $ | 33.37 |
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| 13,097,943 | (2) |
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38
ITEM 2 – PROPOSAL TO APPROVE THE 2004 ALCOA STOCK INCENTIVE PLAN
In February 2004, Alcoa’s Board of Directors approved the 2004 Alcoa Stock Incentive Plan (the Plan), subject to approval by shareholders at the 2004 annual meeting. If approved, the Plan will become effective on May 1, 2004 and will replace the Alcoa Stock Incentive Plan (the Prior Plan)for certain expatriates under which Alcoa has primarily made stock option awards. The Board recommends that you vote for approval of the Plan.
In the following pages we have summarized the principal features of the Plan. This summary does not purportcompany makes an annual contribution equal to be complete and is qualified in its entirety by reference to the specific language of the Plan. A copy of the Plan is appended to this proxy statement as Attachment G.
Purpose of the PlanIn reviewing the Prior Plan against current and emerging competitive practices, new legal and regulatory developments and good corporate governance trends, management and the Board determined that changes to the long-term incentive design were desirable. The Plan authorizes the Board of Directors, or an authorized committee or subcommittee of the Board, to make stock-based awards to company employees. The purpose of the Plan is to attract, motivate, retain and reward employees by giving them an ownership interest in Alcoa and a proprietary and vested interest in the company's growth and financial success, thereby aligning the interests of management employees with the company’s shareholders. The Board believes that the Plan will enhance the company’s ability to attract and retain individuals of exceptional managerial, technical and professional talent upon whom, in large measure, the sustained progress, growth and profitability of Alcoa depend.
Differences Between the Plan and the Prior PlanThe Plan offers a number of features differentiating it from the Prior Plan. Those features include:
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39
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The Plan also contains annual limits on awards to individual participants. In any calendar year, no participant may be granted stock options or stock appreciation rights covering more than 2,000,000 shares or contingent stock or performance shares covering more than 300,000 shares. The maximum dollar value payable to an individual with respect to performance unit awards and other stock unit awards (valued with reference to property other than Alcoa shares) granted in any calendar year is $2,000,000.
AdministrationThe Compensation and Benefits Committee of the Board, or a subcommittee of that committee, will administer the Plan. Committee members must be independent directors and outside directors to satisfy applicable regulatory requirements. This means that they cannot be current or former Alcoa officers or employees, and they may not receive compensation from Alcoa except in their capacity as directors. The Board may assume responsibilities otherwise assigned to the committee, and it may amend, alter or discontinue the Plan at any time. The Board or the committee may amend the terms of any award previously granted, provided, however, that none of the foregoing actions may impair the existing rights of a participant without the participant’s consent, and neither the Board nor the committee may amend the terms of any option to reduce its exercise price. The Board may not amend the Plan without shareholder approval if: a) such amendment would materially increase the benefits received by participants, materially increase the maximum number of shares that may be issued under the Plan, or materially modify the Plan’s eligibility requirements; or b) such amendment requires shareholder approval pursuant to tax or regulatory requirements.
The committee has the authority, subject to the terms of the Plan, to select employees to whom it will grant awards, to determine the types of awards and the number of shares covered, to set the terms and conditions of the awards and to cancel or suspend awards. The committee also has authority to interpret the Plan, to establish, amend and rescind rules applicable to the Plan or awards under the Plan, to approve the terms and provisions of any agreements relating to Plan awards and to make all determinations relating to awards under the Plan.
40
The Plan permits delegation of certain authority to senior officers in limited instances to make, cancel or suspend awards to employees who are not Alcoa directors or executive officers.
Eligibility and ParticipationAll employees of Alcoa and its subsidiaries are eligible to be selected as participants. About 2,500 current and former employees hold stock option awards under the Prior Plan.
TermIf shareholders approve the Plan, it will become effective on May 1, 2004. No award may be granted under the Plan after April 30, 2009.
Types of AwardsThe following types of awards can be granted under the Plan:
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Stock Option AwardsThe committee may grant nonqualified stock option awards under the Plan. Stock option awards entitle a participant to purchase shares of Alcoa stock at a fixed price during the option term. The committee determines the option grant price, but the price may not be less than the fair market value per share on the grant date. The minimum vesting period for stock options is one year. The maximum term of original stock options granted in 2004 and after is six years.
The participant must pay the option grant price in full upon exercise. The participant may pay the price in cash, or by surrendering shares of Alcoa common stock the value of which equals the option price, or by a combination of cash, shares or other consideration approved by the committee.
Options with a reload feature will not be granted under the Plan. However, since grants under the Prior Plan having a reload feature are still outstanding, and all grants under the Prior Plan will be administered under the Plan if the Plan is approved by shareholders, the Plan does permit grant of a reload option in limited circumstances on those options granted under the Prior Plan. With respect to options granted in 2002 or any year prior to that, a participant may, beginning January 1, 2004, be granted a reload option only once during the remaining term of the underlying option. For original options granted in 2003, a participant may be granted only one reload option, and only with respect to the first one-third of the grant vesting in 2004, and that grant must occur on or before December 31, 2004. The term of a reload option will be the same as the remaining term of the underlying option. As a condition to the grant of a reload option, a participant must elect that one-half of the profit shares issued upon exercise of the underlying option may not be sold or transferred for the shorter of five years from the issuance date of the shares or the remainder8% of the participant’s careerbase salary and annual cash incentive. Participants’ account balances are credited with Alcoa. The participant then receives a new option having a grant price equal to the current market price, with the same expiration date as the underlying option. The new option covers the number of shares exercised, less the net number of profit shares delivered to the optionee after withholding for taxes. Reload options may be granted where the exercise price of the underlying option is paid using shares owned for a minimum period set by the committee or, in limited instances, using cash.
The committee may permit participants to transfer stock option awards to family members or family trusts. Otherwise, stock option awards are not transferable during the participant’s lifetime.
41
Stock Appreciation RightsA stock appreciation right (SAR) entitles the holder to receive, on exercise, the excess of the fair market value of the shares on the exercise date (or, if the committee so determines, as of any time during a specified period before the exercise date) over the SAR grant price. The committee may grant SAR awards as stand-alone awards or in combination with a related option award under the Plan. The SAR grant price is set by the committee and may not be less than the fair market value of the shares on the date of grant. Payment upon exercise will be in cash, stock or other property or any combination of cash, stock or other property as the committee may determine. Unless otherwise determined by the committee, any related option will no longer be exercisable to the extent the SAR has been exercised, and the exercise of an option will cancel the related SAR.
Due to current accounting treatment, SAR awards likely will be granted only to non-U.S. residents in locales where option awards have less favorable tax or security law implications for participants.
Contingent StockContingent stock means shares issued with conditions or contingencies and, until the conditions or contingencies are satisfied or lapse, the stock is subject to forfeiture. The committee establishes the terms and conditions applicable to a contingent stock award. The minimum contingency period for a contingent stock award that is not subject to performance conditions is three years from the date of grant, except that the committee may approve contingent stock awards covering up to 200,000 shares with contingency periods of less than three years.
A recipient of a contingent stock award has the right to vote the shares and receive dividends on them unless the committee decides otherwise. If the participant ceases to be an employee beforeinterest at the end of the contingency period, the award is forfeited, subject to such exceptions as authorized by the committee.
Performance AwardsA performance award may be in the form of performance shares (units valued by reference to shares of stock) or performance units (units valued by reference to cash or property other than stock). The committee may select periods of at least oneeach year during which performance criteria chosen by the committee are measured for the purpose of determining the extent to which a performance award has been earned. The committee decides whether the performance levels have been achieved, what amount of the award will be paid and the form of payment, which may be cash, stock or other property or any combination.
Other Stock Unit AwardsThe committee may make other awards of shares or of units valued by reference to shares or other property. The committee determines all conditions and terms that apply to these awards. A participant may not sell, assign, transfer, pledge or encumber any award issued with conditions or contingencies until after those conditions lapse. If the only condition to vesting is passage of time, the minimum vesting period is three years.
Deferrals of Awards; DividendsThe committee may permit participants to defer the distribution of all or part of an earned award. The committee also may provide that payments will be made in installments and that dividends or dividend equivalents will be paid on shares covered by outstanding awards.
Substitute AwardsThe committee may grant awards to employees of companies acquired by Alcoa or a subsidiary in exchange for or assumption of outstanding stock-based awards issued by the acquired company. Shares covered by substitute awards will not reduce the number of shares otherwise available for award under the Plan. Substitute awards may be granted at a discount rate equal to the fair market value of Alcoa stock since those awards will be replacing awards that may be “in the money”.
42
Option and SAR Repricing ProhibitedThe Plan prohibits repricing of options or SARs. Repricing means the grant of a new option, SAR or other award in return for the cancellation, exchange or forfeiture of an award that has a higher grant price than the new award,5.5% per annum, or the amendment of an outstanding award to reduce the grant price. The grant of a substitute award is not a repricing.
AdjustmentsThe Plan provides for adjustments of awards and shares authorized for issuance under the Plan in the event of stock splits, recapitalizations, mergers, consolidations, and other changes in the stock. In that event, the committee will make such substitutions or adjustments in the aggregate number or class of shares that may be distributed under the Plan (including the substitution of similar awards denominated in the shares of another company) and in the number, class and option price or other price of shares subject to outstanding awards as it believes equitable or appropriate to maintain the purpose of the original grant.
Change in Control ProvisionsIn order to preserve the value of outstanding awards for participants in the event of a change in control of Alcoa, unless the committee determines otherwise at the time of grant of a particular award:
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Holders of options and SARs may elect to receive a cash settlement of their awards in the event of a change in control. The cash settlement per share is equal to the excess of the highest sales price during the 60-day period leading up to a change in control or,average annual LIBOR, if the change in control event is a merger or tender offer or similar transaction, the highest price paid in that transaction over the grant price per share of the option or SAR.
Change in control of Alcoa means any of the following events:
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43
Performance-Based CompensationSection 162(m) of the Internal Revenue Code limits the amount of the deduction that the company may take on its U.S. federal tax return for compensation paid to any of the named officers in the proxy statement (the Code refers to these officers as “covered employees”). The limit is $1 million per covered employee per year, with certain exceptions. This deductibility cap does not apply to “performance-based compensation,” if approved by shareholders. We believe that awards under the Plan will qualify as performance-based compensation if shareholders vote to approve the Plan and it is otherwise administered in compliance with Code section 162(m).
The Plan contains a number of measurement criteria that the committee may use to determine whether and to what extent any covered employee has earned a contingent stock award, performance award or other stock unit award. The measurement criteria that the committee may use to establish specific levels of performance goals include any one or a combination of the following: cumulative net income or cumulative net income per share; return on sales; return on assets; return on capital; return on shareholders’ equity; cash flow; economic value added; cumulative operating income; total shareholders’ return; cost reductions; or achievement of environment, health and safety goals. The committee may set performance goals based on the achievement of specified levels of corporate-wide performance or performance of the Alcoa subsidiary or business unit in which the participant works. The committee may make downward adjustments in the amounts payable under an award, but it may not increase the award amounts or waive the achievement of a performance goal.
Tax Aspects of the PlanThe grant of a nonqualified stock option or SAR under the Plan has no U.S. federal income tax consequences for the participant or the company. Upon exercise of a stock option or SAR, Alcoa may take a tax deduction, and the participant realizes ordinary income. The amount of this deduction and income is equal to the difference between the fair market value of the shares on the date of exercise and the grant price of the stock option or SAR. The committee may permit participants to surrender Alcoa shares in order to satisfy the required withholding tax obligation.
Regarding Plan awards (other than options or SARs) that are settled either in cash or in stock or other property that is either transferable or not subject to substantial risk of forfeiture, the participant will generally recognize ordinary income equal to the cash or the fair market value of shares or other property received. Alcoa may take a deduction for the same amount.
Regarding Plan awards (other than options or SARs) that are settled in stock or other property that is subject to contingencies restricting transfer and to a substantial risk of forfeiture, the participant will generally recognize ordinary income equal to the fair market value of the shares or other property received (less any amount paid by the participant) when the shares or other property first become transferable or not subject to substantial risk of forfeiture, whichever occurs first. Alcoa may take a deduction at the same time and for the same amount.
The committee may adjust awards to employees who are not U.S. citizens or U.S. residents to recognize differences in local law or tax policy and may impose conditions on the exercise or vesting of awards to minimize tax equalization obligations for expatriate employees.
Recent Share PriceOn February 20, 2004, the closing market price for Alcoa common stock on the New York Stock Exchange was $36.83 per share.
Awards to Named Officers and Other EmployeesThe Plan is new and no awards have been made under it. The committee has not yet established guidelines or standards on the types of awards it may grant under the Plan to the named officers or other participants or the number of shares that the awards will cover.
44
Share Repurchases to Prevent DilutionTo prevent or minimize the dilutive effect of stock-based compensation plans, Alcoa’s practice has been to repurchase shares in the open market in amounts at least equal to the number of shares issued under employee stock option and other stock incentive plans. Alcoa intends to use the proceeds of stock option award exercises under the Plan for this purpose as well as other funds available from time to time. The continuation of this practice is subject to the company’s capital needs and resources and compliance with corporate, securities and regulatory requirements that apply to share repurchases.
Vote Required for ApprovalFor this proposal to be adopted, a majority of the votes cast by shareholders must be voted for approval.
The Board of Directors recommends a vote FOR ITEM 2. The proxy committee will vote your proxy for this item unless you give instructions to the contrary on the proxy.
45
ITEM 3 – SHAREHOLDER PROPOSALS
ITEM 3(a) – SHAREHOLDER PROPOSAL RELATING TO PAY DISPARITY
The Catholic Funds, 1100 West Wells Street, Milwaukee, Wisconsin 53233, owning 2,300 shares of common stock, have notified Alcoa that they intend to present the following proposal at the annual meeting. The names, addresses and shareholdings of the proposal’s co-filers will be supplied upon oral or written request. The proposal, as submitted, reads as follows:
WHEREAS:Commentators note that U.S. CEO compensation is excessive,1an “occasion of sin” tempting CEO’s to undertake self-serving ventures2that often degrade long-term stock performance.3Often CEO pay is driven mainly by what other companies pay. As a result, “bosses’ pay spirals upward,”4creating a “Lake Wobegon effect” (where all children have to be above average).5
CEO pay once bore a reasonable relationship to the pay of the average or lowest-paid worker. Now the ratio of CEO pay to average-worker pay has skyrocketed from about 40 in 1980 to several hundred currently.6The ratio is only 15 to 20 in Japan and Germany today.7A huge CEO-to-worker pay gap not only degrades worker and therefore company performance but also violates common moral principles of the common good, love of neighbor, and the dignity and worth of every human being.
Alcoa appears to be part of this national problem.Business Weekagain gave Alcoa a ranking of 1 (the worst) in its 2003 study of CEO compensation versus stock performance.8Another study shows Alcoa’s 2002 CEO compensation to be 1,358 times the pay of a minimum-wage worker,9compared to the S&P500 median of 625 times.10
If Alcoa has an unjustifiable gap between the pay of the CEO and the lowest paid worker, the CEO and board should, as New York Fed President William J. McDonough urged, “simply reach the conclusion that executive pay is excessive and adjust it to more reasonable and justifiable levels.”11
RESOLVED: shareholders request the Board’s Compensation Committee to initiate a review of our company’s executive compensation policies and to make available, upon request, a report of that review by January 1, 2005 (omitting confidential information and processed at a reasonable cost). We request the report include:
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46
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POSITION OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote“Against” the proposal.
We believe Alcoa’s compensation is established in a fair and equitable manner, and that the proposed study would not yield any relevant or meaningful data. Last year, we recommended a vote against a similar proposal. While this year’s proposed study is more limited in scope, our objection remains that such a study would not produce any meaningful information to help the Board judge whether Alcoa’s current compensation policies and pay levels for the company’s management are appropriate.
The Compensation andhigher. Benefits Committee of Alcoa’s Board of Directors, comprised entirely of independent directors, regularly reviews the company’s compensation design. In 2002, the Committee used its own independent compensation consultant to review the results of a comprehensive study of executive compensation that had been completed by management. At the completion of that study, the Board changed the company’s total cash compensation targets for executives from above the median down to the median, as compared with an expanded database of approximately 150 comparable companies. In 2003, the Board made significant changes to the company’s long-term incentive compensation design to place more executive compensation at risk and link it directly to the attainment of specific transparent financial goals. For 2004, we concluded that both salary and incentive compensation targets for the company’s executives are competitive, so both are being held firm at 2003 levels.
The Board believes that the company’s executive compensation design is competitive, fair and appropriate and helps the company attract, motivate and retain individuals who can successfully manage a complex, multinational enterprise. Alcoa’s compensation framework is designed to reward executives for performance against both financial and non-financial goals, thereby delivering superior value to its shareholders.
We are a values-based company, and we believe that all employees should be treated fairly. We work to ensure that all employees are compensated fairly in accordance with their accountabilities, the relevant regional labor market and individual performance.
The Board of Directors therefore recommends a vote AGAINST ITEM 3(a). The proxy committee will vote your proxy against this item unless you give instructions to the contrary on the proxy.
47
ITEM 3(b) – SHAREHOLDER PROPOSAL RELATING TO CHANGE IN CONTROL SEVERANCE PLAN
The American Federation of Labor and Congress of Industrial Organizations, 815 Sixteenth Street, N.W., Washington, D.C. 20006, owning 500 shares of common stock, has notified Alcoa that it intends to present the following proposal at the annual meeting. The proposal, as submitted, reads as follows:
Shareholder ProposalResolved: Shareholders of Alcoa Inc. (“Alcoa” or the “Company”) urge the Board of Directors to seek shareholder approval of the Alcoa Inc. Change in Control Severance Plan (the “Severance Plan”), or modify the Severance Plan to provide benefits, not to exceed 2 times the sum of any participating executive’s base salary plus bonus.
Supporting StatementAt the 2003 annual shareholder meeting, almost 65 percent of Alcoa shareholders casting votes voted in favor of requiring shareholder approval of future executive severance benefits, commonly known as golden parachutes. In response to this vote, the Board of Directors adopted a policy to require shareholder approval of future severance agreements when any such agreement would result in a payment in excess of 2.99 times the salary and bonus of the executive.
However, the Board of Directors did not modify the existing Alcoa Inc. Change in Control Severance Plan. The Severance Plan was adopted by the Board of Directors in 2002 without first seeking shareholder approval. Under the Severance Plan, senior executives are entitled to the equivalent to three years’ salary, bonus, benefits, pension credit, as well as reimbursement of excise taxes, and six months of outplacement assistance.
In addition to these benefits, stock options granted to Alcoa executives on or after June 1, 1999 provide for acceleration of vesting and become immediately exercisable upon a change in control of Alcoa. We believe that the immediate vesting of stock option compensation, combined with generous severance benefits, may reward underperformance leading up to a change in control and is unnecessary given the high levels of executive compensation at our Company.
In the event of a change in control, we are concerned that the potential cost of the Severance Plan may reduce the value ultimately received by shareholders. We also believe that golden parachutes can encourage senior executives to support a takeover that may not be in the best interests of shareholders because executives know that they will be rewarded if a takeover occurs.
If payments are made under Alcoa’s Severance Plan as it is currently structured, the Company will be penalized under the Tax Reform Act of 1984. When severance benefits exceed 3 times an executive’s average W-2 compensation, all benefits in excess of one year’s compensation are subject to a 20 percent golden parachutes excise tax. Not only has Alcoa promised to reimburse executives for these taxes, but the Company will lose its tax deduction for the cost of these benefits.
The Council of Institutional Investors, a coalition of over 130 pension funds whose assets exceed $2 trillion, believes that Boards of Directors should take actions recommended in shareholder proposals that receive a majority of votes cast for and against. In 2003, several other companies including Tyco, Sprint, Union Pacific, International Paper, and Hewlett Packard revised their severance policies after a majority of their shareholders voted in favor or similar proposals.
For the above reasons, please vote FOR this proposal.
48
POSITION OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote“Against” the proposal.
The proponents’ 2003 shareholder proposal, favored by less than a majority of the total voting shares outstanding, but 65% of the votes cast, was that “the Board of Directors seek shareholder approval for future severance agreements with senior executives that provide benefits in an amount exceeding 2.99 times the sum of the executive’s base salary and bonus.” Following the annual shareholders’ meeting, the Compensation and Benefits Committee of the Board (“Compensation Committee”) took the matter under advisement, and in September 2003, the full Board passed a resolution requiring submission of any such agreement to shareholders for approval.
The Board originally approved a Change in Control plan in 2002 after careful review by the Compensation Committee, which consulted with its own outside compensation expert. The plan would become effective in very limited circumstances, and is designed to ensure that the Board receives steady and objective advice from executive management if faced with the prospect of a change in the company’s ownership. By providing executives with financial security when their jobs may be threatened, the plan is designed to protect the interests of shareholders by keeping key employees focused on negotiating the best possible value for the company in a change in control situation. Payments under the plan would occur onlyvest after a change in control occurred. The plan would not pay a windfall to a voluntarily departing executive.
The Board concluded from its study that the majority of comparable companies have in place change in control plans, or they put one in place when the prospect of a change in ownership arises. The Board also determined that the terms of the plan, which are essentially three times salary and bonus, threeparticipant has two years of continuation of benefits, three years of pension credits, outplacement assistancecontinuous service and reimbursement of excise taxes and gross-up, were appropriate. Approval ofare paid in cash in a lump sum after the plan was appropriately disclosed. participant’s continuous service terminates.
The accelerated vesting of stock options upon the occurrence of a change in control, which the proponents mention in their statement, is a specific provision in the Alcoa Stock Incentive Plan that was approved by the shareholders in 1999.
Although the proponents last year favored a 2.99 cap on severance agreements prior to requiring them to be submitted for shareholder approval, this year they’ve deemed a 2.0 cap to be appropriate. We believe that arbitrarily selected caps are not the issue. The Board is very aware of its fiduciary responsibilities to the company (for the benefit of the shareholders), and its obligation to exercise its business judgment in the decisions it makes. We are confident that in approving this plan we have satisfied both obligations.
The Board of Directors therefore recommends a vote AGAINST ITEM 3(b). The proxy committee will vote your proxy against this item unless you give instructions to the contrary on the proxy.OTHER ARRANGEMENTS WITH EXECUTIVES
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LEGAL PROCEEDING INVOLVING DIRECTORS AND CERTAIN ALCOA OFFICERS
As previously reported, on October 15, 1999, Victoria Shaev, who represents that she is an Alcoa shareholder, filed a purported derivative action on behalf of the company in the United States District Court for the Southern District of New York, naming as defendants the company, each member of Alcoa’s Board of Directors, certain officers of the company and PricewaterhouseCoopers LLP, Alcoa’s independent accountants. The lawsuit alleged, among other things, that Alcoa’s proxy statement dated March 8, 1999 contained materially false and misleading statements and omissions regarding the proposed Alcoa Stock Incentive Plan. On March 19, 2001, the court granted without prejudice the defendants’ motion to dismiss the plaintiff’s claims. On May 31, 2001, Ms. Shaev served an amended complaint making the same allegations as in the previous complaint but styling the complaint as a class action on behalf of shareholders. The company served a motion to dismiss on June 25, 2001. On October 25, 2002, the amended complaint was dismissed on the factual and legal merits of the matter. The plaintiff filed a notice of appeal, and on September 17, 2003, the Second Circuit Court of Appeals affirmed the dismissal of the amended complaint.
CHANGE IN CONTROL PLAN
In 2002, the Boardboard approved a change in control severance plan for key executives designated by the Compensation and Benefits Committee. The severance plan entitles these executives to termination compensation if the executive’s employment is terminated without cause or terminated by the executive in certain circumstances, in either case within three years after a change in control of the company. Termination compensation includes: a cash payment equal to three times annual salary plus target annual variable compensation; continuation of benefits for three years; growth on pension credits for three years; reimbursement of excise taxes and gross-up, and six months outplacement.
SEVERANCE AGREEMENTS
HOUSEHOLDING INFORMATIONWe have adopted
As previously reported in a procedure approved byForm 8-K filed with the Securities and Exchange Commission, called “householding.”in December 2004, the company entered into a standard severance agreement with 11 key executives, including each of the named executive officers, excluding the CEO. Under this procedure, shareholders of record who have the same last name and addressagreement, if the executive’s employment is terminated without cause, the executive will receive only one copyfor two years following termination: his or her monthly base salary and continued healthcare benefits, in addition to two additional years of our Annual Report for 2003. This procedurepension accrual. The executive will reduce our printing costs and postage fees. Shareholders who participate in householding will continue to receive separate proxy statements this year, as well as proxy cards. Also, householding will not in any way affect dividend check mailings.
If you participate in householding and wish toalso receive a separate copylump sum severance payment of $50,000 upon execution of a general release of legal claims against the 2003 Annual Report, please call 1 (800) 522-6757,company. In no case will total payments to any executive under the standard agreement exceed 2.99 times his or request a copyher salary and bonus. To the extent that severance payments or benefits under the change in writing from Alcoa, Corporate Communications, 201 Isabella Street, Pittsburgh, Pennsylvania 15212-5858, and a copycontrol plan described above are payable to an executive, no salary continuation payments will be provided to you promptly.paid under his or her executive severance agreement.
If you do not wish to continue participating in householding and prefer to receive separate copies of future Annual Reports and other shareholder communications, please notify Alcoa in writing at the following address: Corporate Election Services, P.O.Box 1150, Pittsburgh Pennsylvania 15230-1150.
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DIRECTOR INDEPENDENCE STANDARDS
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AUDIT COMMITTEE CHARTER
Mission StatementThe primary purpose of the Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of Alcoa Inc. (the “Company”) is:
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MembershipThe Committee shall consist of at least three directors, the exact number to be determined from time to time by the Board.
The members of the Committee shall meet the independence requirements imposed by the listing standards of the New York Stock Exchange (the “NYSE”), law or regulation. At least one member of the Committee shall be an audit committee financial expert, as determined by the Board.
The members of the Committee shall be appointed by a majority vote of the Board from among its members based on the recommendations of the Governance and Nominating Committee and shall serve until such member’s successor is duly appointed and qualified or until such member’s resignation or removal by a majority vote of the Board.
No member of the Committee may serve simultaneously on the audit committees of more than two other public companies, unless the Board determines that such simultaneous service would not impair such director’s ability to serve effectively on the Committee and such determination is disclosed in the Company’s annual proxy statement.
Authority and ResponsibilitiesThe Committee’s function is not to replace the Company’s management, internal auditors and outside auditors, but rather one of oversight. It is the responsibility of the Company’s management to prepare the Company’s financial statements and to develop and maintain adequate systems of internal accounting and financial controls, and it is the internal and outside auditors’ responsibility to review, and when appropriate, audit these financial statements and internal controls. The Committee recognizes that the financial management and the internal and outside auditors have more knowledge and information about the Company than do Committee members. Consequently, in carrying out its oversight responsibilities, the Committee cannot provide any expert or special assurance as to the Company’s financial statements or internal controls or any professional certification as to the outside auditors’ work.
In carrying out its oversight responsibilities, the Committee shall undertake the following activities and have the following authority (in addition to any others that the Board may from time to time delegate to the Committee):
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Structure and OperationsThe Board shall designate one member of the Committee to act as its chairperson. The Committee shall meet in person or telephonically at least four times per year at such times and places determined by the Committee chairperson, with further meetings to occur, or actions to be taken by unanimous written consent, when deemed necessary or desirable by the Committee or its chairperson. The chairperson, with input from the other members of the Committee, shall set the agendas for Committee meetings; such agendas shall be distributed to the full Board. Two members of the Committee shall constitute a quorum; when more than two members are present, the act of a majority of such members at a meeting at which a quorum exists shall be the act of the Committee, and when only two members are present, the unanimous vote of the two members shall constitute the act of the Committee.
The Committee may request that any directors, officers or other employees of the Company, or any other persons whose advice and counsel are sought by the Committee, attend any meeting of the Committee to provide such pertinent information as the Committee requests. The Committee may exclude from its meetings any persons it deems appropriate in order for it to fulfill its responsibilities.
The Committee may form and delegate authority to subcommittees when appropriate. In particular, the Committee may also delegate to one or more of its members the authority to pre-approve audit and/or non-audit services, provided that the decisions of any member(s) to whom pre-approval authority is delegated shall be presented to the Committee at the next Committee meeting.
The Committee shall maintain minutes or other records of its meetings and shall give regular reports to the Board on these meetings, including the Committee’s actions, conclusions and recommendations and such other matters as required by this Charter or as the Board may from time to time specify.
Except as expressly provided in this Charter, the Company’s by-laws or the Company’s Corporate Governance Guidelines, or as required by law, regulation or NYSE listing standards, the Committee shall set its own rules of procedure.
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CompensationNo member of the Committee may receive, directly or indirectly, any compensation from the Company other than (i) fees paid to directors for service on the Board (including customary perquisites and other benefits that all directors receive), (ii) additional fees paid to directors for service on a committee of the Board (including the Committee) or as the chairperson of any committee and (iii) a pension or other deferred compensation for prior service that is not contingent on future service on the Board.
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COMPENSATION AND BENEFITS COMMITTEE CHARTER
Mission StatementThe purpose of the Compensation and Benefits Committee (the “Committee”) of the Board of Directors (the “Board”) of Alcoa Inc. (the “Company”) is to (i) discharge the Board’s responsibilities relating to the compensation of the Company’s officers, (ii) oversee the administration of the Company’s compensation and benefits plans, in particular the incentive compensation and equity-based plans of the Company (and, to the extent appropriate, the significant subsidiaries of the Company) and (iii) prepare the annual report on executive compensation required by the rules and regulations of the Securities and Exchange Commission (the “SEC”) to be included in the Company’s annual proxy statement.
MembershipThe Committee shall consist of no fewer than three members, the exact number to be determined from time to time by the Board.
Each member of the Committee shall meet the independence requirements imposed by the listing standards of the New York Stock Exchange (the “NYSE”).
The members of the Committee shall be appointed by a majority vote of the Board from among its members based on the recommendations of the Governance and Nominating Committee and shall serve until such member’s successor is duly appointed and qualified or until such member’s resignation or removal by a majority vote of the Board.
Authority and ResponsibilitiesThe Committee shall have the following specific authority and responsibilities (in addition to any others that the Board may from time to time delegate to the Committee):
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Structure and OperationsThe Board shall designate one member of the Committee to act as its chairperson. The Committee shall meet in person or telephonically at least three times a year at such times and places determined by the Committee chairperson, with further meetings to occur, or actions to be taken by unanimous written consent, when deemed necessary or desirable by the Committee or its chairperson. The chairperson, with input from the other members of the Committee, shall set the agendas for Committee meetings;
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such agendas shall be distributed to the full Board. Two members of the Committee shall constitute a quorum; when more than two members are present, the act of a majority of such members at a meeting at which a quorum exists shall be the act of the Committee, and when only two members are present, the unanimous vote of the two members shall constitute the act of the Committee.
The Committee may request that any directors, officers or other employees of the Company, or any other persons whose advice and counsel are sought by the Committee, attend any meeting of the Committee to provide such pertinent information as the Committee requests. The Committee may exclude from its meetings any persons it deems appropriate in order for it to fulfill its responsibilities.
The Committee may form and delegate authority to subcommittees when appropriate.
The Committee shall maintain minutes or other records of its meetings and shall give regular reports to the Board on these meetings, including the Committee’s actions, conclusions and recommendations and such other matters as required by this Charter or as the Board shall from time to time specify. Reports to the Board may take the form of oral reports by the chairperson of the Committee or any other member of the Committee designated by the Committee to give such report.
Except as expressly provided in this Charter, the Company’s by-laws or the Company’s Corporate Governance Guidelines, or as required by law, regulation or NYSE listing standards, the Committee shall set its own rules of procedure.
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GOVERNANCE AND NOMINATING COMMITTEE CHARTER
Mission StatementThe purpose of the Governance and Nominating Committee (the “Committee”) of the Board of Directors (the “Board”) of Alcoa Inc. (the “Company”) is to (i) identify individuals qualified to become Board members and recommend such individuals to the Board for nomination for election to the Board, (ii) make recommendations to the Board concerning committee appointments other than this Committee, (iii) develop, recommend and annually review corporate governance guidelines for the Company and oversee corporate governance matters and (iv) coordinate an annual review of the Board’s performance.
MembershipThe Committee shall consist of no fewer than three members, the exact number to be determined from time to time by the Board.
Each member of the Committee shall meet the independence requirements imposed by the listing standards of the New York Stock Exchange (the “NYSE”).
The members of the Committee shall be appointed by a majority vote of the Board from among its members and shall serve until such member’s successor is duly appointed and qualified or until such member’s resignation or removal by a majority vote of the Board.
Authority and ResponsibilitiesThe Committee shall have the following specific authority and responsibilities (in addition to any others that the Board may from time to time delegate to the Committee):
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Structure and OperationsThe Board shall designate one member of the Committee to act as its chairperson. The Committee shall meet in person or telephonically at least two times a year at such times and places determined by the Committee chairperson, with further meetings to occur, or actions to be taken by unanimous written consent, when deemed necessary or desirable by the Committee or its chairperson. The chairperson, with input from the other members of the Committee, shall set the agendas for Committee meetings; such agendas shall be distributed to the full Board. Two members of the Committee shall constitute a quorum; when more than two members are present, the act of a majority of such members at a meeting at which a quorum exists shall be the act of the Committee, and when only two members are present, the unanimous vote of the two members shall constitute the act of the Committee.
The Committee may request that any directors, officers or other employees of the Company, or any other persons whose advice and counsel are sought by the Committee, attend any meeting of the Committee to provide such pertinent information as the Committee requests. The Committee may exclude from its meetings any persons it deems appropriate in order for it to fulfill its responsibilities.
The Committee may form and delegate authority to subcommittees when appropriate.
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The Committee shall maintain minutes or other records of its meetings and shall give regular reports to the Board on these meetings, including the Committee’s actions, conclusions and recommendations and such other matters as required by this Charter or as the Board shall from time to time specify. Reports to the Board may take the form of oral reports by the chairperson of the Committee or any other member of the Committee designated by the Committee to give such report.
Except as expressly provided in this Charter, the Company’s by-laws or the Company’s corporate governance guidelines, or as required by law, regulation or NYSE listing standards, the Committee shall set its own rules of procedure.
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PUBLIC ISSUES COMMITTEE CHARTER
Mission StatementThe purpose of the Public Issues Committee (the “Committee”) of the Board of Directors (the “Board”) of Alcoa Inc. (the “Company”) is to provide advice and guidance on public issues that may affect the Company.
MembershipThe Committee shall consist of no fewer than three members, the exact number to be determined from time to time by the Board.
The members of the Committee shall be appointed by a majority vote of the Board from among its members based on the recommendations of the Governance and Nominating Committee and shall serve until such member’s successor is duly appointed and qualified or until such member’s resignation or removal by a majority vote of the Board.
Authority and ResponsibilitiesThe Committee shall have the following specific authority and responsibilities (in addition to any others that the Board may from time to time delegate to the Committee):
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Performance EvaluationThe Committee shall review its own performance and reassess the adequacy of this Charter at least annually in such manner as it deems appropriate, and submit such evaluation, including any recommendations for change, to the full Board for review, discussion and approval.
Structure and OperationsThe Board shall designate one member of the Committee to act as its chairperson. The Committee shall meet in person or telephonically at least two times a year at such times and places determined by the Committee chairperson, with further meetings to occur, or actions to be taken by unanimous written consent, when deemed necessary or desirable by the Committee or its chairperson. The chairperson, with input from the other members of the Committee, shall set the agendas for Committee meetings; such agendas shall be distributed to the full Board. Two members of the Committee shall constitute a quorum; when more than two members are present, the act of a majority of such members at a meeting at which a quorum exists shall be the act of the Committee, and when only two members are present, the unanimous vote of the two members shall constitute the act of the Committee.
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The Committee may request that any directors, officers or other employees of the Company, or any other persons whose advice and counsel are sought by the Committee, attend any meeting of the Committee to provide such pertinent information as the Committee requests. The Committee may exclude from its meetings any persons it deems appropriate in order for it to fulfill its responsibilities.
The Committee may form and delegate authority to subcommittees when appropriate.
The Committee shall maintain minutes or other records of its meetings and shall give regular reports to the Board on these meetings, including the Committee’s actions, conclusions and recommendations and such other matters as required by this Charter or as the Board shall from time to time specify. Reports to the Board may take the form of oral reports by the chairperson of the Committee or any other member of the Committee designated by the Committee to give such report.
Except as expressly provided in this Charter, the Company’s by-laws or the Company’s Corporate Governance Guidelines, or as required by law, regulation or NYSE listing standards, the Committee shall set its own rules of procedure.
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PRE-APPROVAL POLICIES AND PROCEDURES ADOPTED BY THE AUDIT COMMITTEE IN APRIL 20032004 FOR AUDIT AND NON-AUDIT SERVICES
I. | Statement of Policy | |
The Audit Committee is required to pre-approve the audit and non-audit services performed by the independent auditor in order to assure that the provision of such services does not impair the auditor’s independence. Unless a type of service to be provided by the independent auditor has received pre-approval under this policy, it will require specific pre-approval by the Audit Committee before the service is provided. Any proposed services exceeding pre-approved cost levels under this policy will require specific pre-approval by the Audit Committee before the service is provided.
The Audit Committee is required to pre-approve the audit and non-audit services performed by the independent auditor in order to assure that the provision of such services does not impair the auditor’s independence. Unless a type of service to be provided by the independent auditor has received general pre-approval under this policy, it will require specific approval by the Audit Committee before the service is provided. Any proposed services exceeding pre-approved cost levels under this policy will require specific approval by the Audit Committee before the service is provided.
The appendices to this Policy describe the Audit, Audit-related, Tax and All Other services that have the pre-approval of the Audit Committee. The term of any pre- approval is 12 months from the date of pre-approval, unless the Audit Committee specifically provides for a different period. The Audit Committee will periodically revise the list of pre-approved services, based on subsequent determinations.
II. | Delegation |
The Audit Committee delegates pre-approval authority to the Chairman of the Committee. In addition, the Chairman may delegate pre-approval authority to one or more of the other members of the Audit Committee. The Chairman or member or members to whom such authority is delegated shall report any pre-approval decisions to the Audit Committee at its next scheduled meeting. The Audit Committee does not delegate its responsibilities to pre-approve services performed by the independent auditor to management.
III. | Audit Services |
The annual Audit services engagement terms and fees will be subject to the specific pre-approval of the Audit Committee. The Audit Committee will approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope, company structure or other matters.
In addition to the annual Audit services engagement approved by the Audit Committee, the Audit Committee may grant pre-approval for other Audit services, which are those services that only the independent auditor reasonably can provide. The Audit Committee has pre-approved the Audit services listed in Appendix A. All other Audit services not listed in Appendix A must be separately pre-approved by the Audit Committee.
IV. | Audit-Related Services |
Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the company’s financial statements and that are traditionally performed by the independent auditor. The Audit Committee believes that the provision of Audit-related services does not impair the independence of the auditor, and has pre-approved the Audit-related services listed in Appendix B. All other Audit-related services not listed in Appendix B must be separately pre-approved by the Audit Committee.
V. | Tax Services |
The Audit Committee believes that the independent auditor can provide Tax services to the company such as tax compliance and support, without impairing the auditor’s independence. However, the Audit Committee will not permit the retention of the independent auditor in connection with a transaction initially recommended by the independent auditor, the sole purpose of which may be tax avoidance and the tax treatment of which may not be supported in the Internal Revenue Code and related regulations. The Audit Committee has pre-approved the Tax services listed in Appendix C. All Tax services involving large and complex transactions not listed in Appendix C (with aggregate fees over $200,000) must be separately pre-approved by the Audit Committee.
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The Audit Committee may grant pre-approval to those permissible non-audit services classified as All Other services that it believes are routine and recurring services, and would not impair the independence of the auditor. The Audit Committee has pre-approved the All Other services listed in Appendix D. Permissible All Other services not listed in Appendix D must be separately pre-approved by the Audit Committee.
A list of the SEC’s prohibited non-audit services is attached to this policy as Exhibit 1. The SEC’s rules and relevant guidance should be consulted to determine the precise definitions of these services and the applicability of exceptions to certain of the prohibitions.
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Pre-approval fee levels for all services to be provided by the independent auditor will be established periodically by the Audit Committee. Any proposed services exceeding these levels will require specific pre-approval by the Audit Committee.
VIII. | Supporting Documentation |
With respect to each proposed pre-approved service, the independent auditor has provided detailed descriptions regarding the specific services to be provided, which are included in the Appendices. Upon completion of services, the independent auditor will provide to management detailed back-up documentation, including hours, personnel and task description relating to the specific services provided.
IX. | Procedures |
Requests or applications to provide services that require separate approval by the Audit Committee will be submitted to the Audit Committee by both the independent auditor and the Chief Financial Officer and must include a joint statement as to whether, in their view, the request or application is consistent with the SEC’s rules on auditor independence.
Appendix A
Pre-Approved Audit Services for Fiscal Year 2003Dated: April 20032004
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Appendix B
Pre-Approved Audit-Related Services for Fiscal Year 2003Dated: April 20032004
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Appendix C
Pre-Approved Tax Services for Fiscal Year 2003Dated: September 20032004
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Appendix D
Pre-Approved All Other Services for Fiscal Year 2003Dated: April 20032004
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2004 ALCOA STOCK INCENTIVE PLAN
“Award” means any Option, Stock Appreciation Right, Contingent Stock Award, Performance Share, Performance Unit, Other Stock Unit Award, or any other right, interest, or option relating to Shares or other property granted pursuant to the provisions of the Plan.
“Award Agreement” means any written agreement, contract, or other instrument or document evidencing any Award granted by the Committee hereunder, which may, but need not, be executed or acknowledged by both the Company and the Participant.
“Beneficial Owner” means beneficial owner as defined in Rule 13d-3 under the Exchange Act.
“Board” means the Board of Directors of the Company.
“Change in Control” means the first to occur of any of the following events:
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“Change in Control Price” means the higher of (a) the highest reported sales price, regular way, of a Share in any transaction reported on the New York Stock Exchange Composite Tape or other national exchange on which Shares are listed or on NASDAQ during the 60-day period prior to and including the date of a Change in Control or (b) if the Change in Control is the result of a tender or exchange offer or a merger, consolidation or other corporate transaction, the highest price per Share paid in such tender or exchange offer or corporate transaction. To the extent that the consideration paid in any such transaction described above consists all or in part of securities or other non-cash consideration, the value of such securities or other non-cash consideration shall be determined in the sole discretion of the Board.
“Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto.
“Committee” means the Compensation and Benefits Committee of the Board, or any successor to such committee, or a subcommittee thereof, composed of no fewer than two directors, each of whom is a Non-Employee Director and an “outside director” within the meaning of Section 162(m) of the Code, or any successor provision thereto.
“Company” means Alcoa Inc., a Pennsylvania corporation.
“Contingent Stock” means any Share issued with the contingency or restriction that the holder may not sell, transfer, pledge or assign such Share and with such other contingencies or restrictions as the Committee, in its sole discretion, may impose (including, without limitation, any contingency or restriction on the right to vote such Share and the right to receive any cash dividends), which contingencies and restrictions may lapse separately or in combination, at such time or times, in installments or otherwise, as the Committee may deem appropriate.
“Contingent Stock Award” means an award of Contingent Stock under Section 8 hereof.
“Covered Employee” means a “covered employee” within the meaning of Section 162(m)(3) of the Code, or any successor provision thereto.
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“Employee” means any employee of the Company or of any Subsidiary.
“Entity” means any individual, entity, person (within the meaning of Section 3(a)(9) of the Exchange Act) or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act), other than (a) any employee plan established by the Company, (b) any affiliate (as defined in Rule 12b-2 promulgated under the Exchange Act) of the Company, (c) an underwriter temporarily holding securities pursuant to an offering of such securities, or (d) a corporation owned, directly or indirectly, by shareholders of the Company in substantially the same proportions as their ownership of the Company.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Fair Market Value” means, with respect to any property, the market value of such property determined by such methods or procedures as shall be established from time to time by the Committee.
“Non-Employee Director” has the meaning set forth in Rule 16b-3(b)(3) under the Exchange Act, or any successor definition adopted by the Securities and Exchange Commission.
“Option” means any right granted to a Participant under the Plan or predecessor plan allowing such Participant to purchase Shares at such price or prices and during such period or periods as the Committee shall determine. All Options granted under the Plan or predecessor plan are intended to be nonqualified stock options for purposes of the Code.
“Other Stock Unit Award” means any right granted to a Participant by the Committee pursuant to Section 10 hereof.
“Original Option” means any Option other than a Reload Option granted by the company in connection with the Prior Plan or the predecessor plan.
“Participant” means an Employee who is selected by the Committee to receive an Award under the Plan.
“Performance Award” means any Award of Performance Shares or Performance Units pursuant to Section 9 hereof.
“Performance Period” means that period established by the Committee at the time any Performance Award is granted or at any time thereafter during which any performance goals specified by the Committee with respect to such Award are to be measured. A Performance Period may not be less than one year.
“Performance Share” means any grant pursuant to Section 9 hereof of a unit valued by reference to a designated number of Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including, without limitation, cash, Shares or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter.
“Performance Unit” means any grant pursuant to Section 9 hereof of a unit valued by reference to a designated amount of property other than Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including, without limitation, cash, Shares or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter.
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“Person” means any individual, corporation, partnership, association, joint stock company, trust, unincorporated organization or government or political subdivision thereof.
“Plan” means this 2004 Alcoa Stock Incentive Plan.
“Prior Plan” means the Alcoa Stock Incentive Plan adopted by the Company shareholders at the Company’s 1999 annual meeting.
“Reload Option” means an Option described in Section 6(e) of the Plan, granted in connection with the exercise of an option under the Prior Plan or predecessor plan (an “antecedent award”). As a condition to the grant of a Reload Option, a Participant must elect at the time of exercise of the antecedent award that a designated portion, as determined by the Committee, of the Shares issued upon exercise of the antecedent award shall be restricted in terms of transfer for the shorter of five years from the issuance date of the shares or the remainder of the participant’s career with Alcoa.
“Shares” means the shares of common stock of the Company, $1.00 par value.
“Stock Appreciation Right” means any right granted to a Participant pursuant to Section 7 hereof to receive, upon exercise by the Participant, the excess of (a) the Fair Market Value of one Share on the date of exercise or, if the Committee shall so determine, at any time during a specified period before the date of exercise over (b) the grant price of the right on the date of grant, or if granted in connection with an outstanding Option on the date of grant of the related Option, as specified by the Committee in its sole discretion, which, except in the case of Substitute Awards or in connection with an adjustment provided in Section 4(g), shall not be less than the Fair Market Value of one Share on such date of grant of the right or the related Option, as the case may be. Any payment by the Company in respect of such right may be made in cash, Shares, other property or any combination thereof, as the Committee, in its sole discretion, shall determine.
“Subsidiary” means any corporation in which the Company owns, directly or indirectly, stock possessing 50 percent or more of the total combined voting power of all classes of stock in such corporation, and any corporation, partnership, joint venture, limited liability company or other business entity as to which the Company possesses a significant ownership interest, directly or indirectly, as determined by the Committee.
“Substitute Awards” means Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, by a company acquired by the Company or any of its Subsidiaries or with which the Company or any of its Subsidiaries combines.
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(vii) interpret and administer the Plan and any instrument or agreement entered into under the Plan; (viii) establish such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (ix) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan. Decisions of the Committee shall be final, conclusive and binding upon all persons, including the Company, any Participant, any shareholder and any Employee.
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The Committee may amend the terms of any Award theretofore granted, prospectively or retroactively, but no such amendment shall impair the rights of any Participant without his or her consent.Notwithstanding any provision of this Plan, the Committee may not amend the terms of any Option to reduce the option price.
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Alcoa | |
201 Isabella Pittsburgh, PA 15212-5858 | |
Alcoa Annual Meeting of Shareholders | Admission Ticket | |
9:30 a.m. Friday, April Westin Convention Center Hotel Allegheny Ballroom Pittsburgh, Pennsylvania | This ticket is not transferable. |
Please keep this ticket to be admitted to the annual meeting.
¯ Fold and detach here¯
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THREE WAYS TO VOTE | |||
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| Vote By Mail—Please mark, sign and date your proxy card and return it in the postage-paid envelope provided. | ||
Return your proxy in the postage-paidenvelope provided. | |||
VOTE BY INTERNET | Vote By Internet—Have your proxy card available when you access the Web sitewww.votefast.com and follow the simple directions presented to record your vote. | ||
Access thisWeb siteto cast your vote. | |||
www.votefast.com | |||
VOTE BY TELEPHONE | Vote By Telephone—Have your proxy card available when you call toll-free 1-800-542-1160 using a touch-tone phone and follow the simple directions presented to record your vote. | ||
Call toll-free using a touch-tone telephone. 1-800-542-1160 | |||
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Vote 24 hours a day, 7 days a |
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Alcoa 201 Isabella St. at 7th St. Bridge Pittsburgh, PA 15212-5858 |
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
I authorize Ronald D. Dickel, Charles D. McLane, Jr. and Dale C. Perdue,Russell W. Porter, Jr., together or separately, to represent me at the Annual Meeting of Shareholders of Alcoa Inc. scheduled for Friday, April 30, 2004,22, 2005, and at any adjournment of the meeting. I authorize them to vote the shares of stock that I could vote if attending the meeting, in accordance with the instructions on the reverse side of this card. The representatives are authorized in their discretion to vote upon other business that might properly come before the meeting, and they may name others to take their place.
As described more fully in the proxy statement, this card votes or provides voting instructions for shares of common stock held under the same registration in any one or more of the following: as a shareholder of record, in the Alcoa Dividend Reinvestment and Stock Purchase Plan, the Alcoa Employee Stock Purchase Plan and in employee savings plans sponsored by Alcoa, its subsidiaries or affiliates.
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Comments: | ||||
(Vote on the other side) |
(continued from the other side) | (RETURN IN THE ENCLOSED ENVELOPE IF VOTING BY MAIL) | (fold and detach here) |
Please mark your choices clearly in the appropriate boxes. | |||||
P R O X Y | Unless specified, the proxy committee will vote FOR items 1 and | ||||
DIRECTORS RECOMMEND A VOTEFOR THESE DIRECTORS /CANDIDATES |
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| 1. Election of Directors – Nominees to serve a three-year term: | |||
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| DIRECTORS |
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RECOMMEND A VOTE |
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| FOR THIS ITEM (#2) |
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2. Proposal to Approve the Independent Auditor
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If you plan to attend the annual meeting, please check the box on the right. | ¨ |
PLEASE VOTE, SIGN, | ||||||||||
DATE AND RETURN | Ø |
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(Sign exactly as name appears on the reverse side, indicating position or representative capacity, where applicable) |
Alcoa Annual Meeting of Shareholders | Admission Ticket | |
9:30 a.m. Friday, April | This ticket is not transferable. | |
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Pittsburgh, Pennsylvania |
Please keep this ticket to be admitted to the annual meeting.
¯Fold and detach here¯
Dear Preferred Shareholder:
We invite you to attend the 2005 Alcoa Annual Meeting of Shareholders on Friday, April 22, at 9:30 a.m. in the Allegheny Ballroom of the Westin Convention Center Hotel in Pittsburgh, Pennsylvania. All shareholders are welcome to attend, although only holders of Alcoa common stock are eligible to vote at this meeting.
If you plan to attend this meeting, please check the box below. Then detach and return the card in the enclosed postage-paid envelope by April 1, 2005.
Shareholder comments about any aspect of company business are welcome, and we provide space on the card for this purpose. Although we do not answer these comments on an individual basis, they do assist management in determining and responding to your needs as shareholders.
Donna C. Dabney
Secretary
¯ Fold and detach here¯
Alcoa Annual Meeting Attendance
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If you plan to attend the annual meeting, please check the box below.
¨qI will attend the 20042005 annual meeting.
For your comments . . .
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