EXHIBIT 10.3
REYNOLDS METALS COMPANY
PERFORMANCE INCENTIVE PLAN
As Amended and Restated
Effective January 1, 1999
TABLE OF CONTENTS
Page
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1. PURPOSE 1
2. ADMINISTRATION 1
3. PARTICIPATION 2
4. TARGET AWARD LEVELS 2
5. PERFORMANCE GOALS 3
6. DETERMINATION OF AWARDS 3
7. COMMUNICATION 3
8. PAYMENT OF AWARDS 4
9. COMPANY STOCK 7
10. EFFECTIVE DATE OF PLAN 7
11. SPECIAL PROVISIONS FOR TOP EXECUTIVES 7
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1. PURPOSE
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The purpose of the Performance Incentive Plan (the "Plan")
is to promote the financial success of Reynolds Metals
Company (the "Company") by:
(a) providing compensation opportunities which are
competitive with those of other major companies;
(b) supporting the Company's goal-setting and
strategic planning process; and
(c) motivating key executives to achieve annual
business goals by allowing them to share in the risks
and rewards of the business.
2. ADMINISTRATION
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(a) The Plan shall be administered by the Compensation
Committee (the "Committee") of the Board of Directors
(the "Board"). No member of the Committee shall be
eligible to participate in the Plan.
(b) The Committee shall have the power and authority
to adopt, amend and rescind any administrative
guidelines, rules, regulations, and procedures deemed
appropriate to the administration of the Plan, and to
interpret and rule on any questions relating to any
provision of the Plan.
(c) The decisions of the Committee shall be final,
conclusive and binding on all parties, including the
Company and participating employees.
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(d) The Board may from time to time amend, suspend or
terminate the Plan, in whole or in part.
Notwithstanding the foregoing, the Board may, in any
circumstance where it deems such approval necessary or
desirable, and shall, to the extent necessary to
maintain compliance with Rule 16b-3 under the
Securities Exchange Act of 1934 as in effect from time
to time, require stockholder approval as a condition to
the effectiveness of any amendment or modification of
the Plan.
3. PARTICIPATION
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Company officers and other key employees of the Company and
its subsidiaries who are recommended by the Chief Executive
Officer of the Company and who are approved by the Committee
shall be eligible for participation in the Plan during a
Plan year.
4. TARGET AWARD LEVELS
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After consultation with management, the Committee may
designate target award levels to be earned by participants
for a given Plan year. Such target awards may vary by
management level.
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5. PERFORMANCE GOALS
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To the fullest extent possible, management shall establish
performance goals for participants to help it determine the
awards it will recommend for the Plan year. Such goals may
relate to corporate performance, divisional performance, and
individual performance as appropriate to the purpose of the
Plan and the positions and responsibilities of the
participants.
6. DETERMINATION OF AWARDS
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As soon as practicable following the close of each Plan
year, the Committee shall, after consultation with
management, determine the award earned by each participant
for the Plan year. In special cases of meritorious
performance, after consultation with management, the
Committee may make awards to individuals who were not
previously designated as eligible for participation during
the Plan year. If a participant has died during the Plan
year, an award may be made to the participant's spouse or
legal representative if the Committee so determines.
7. COMMUNICATION
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Participants shall be advised in writing of their
participation in the Plan and of any performance goals
applicable to their awards.
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8. PAYMENT OF AWARDS
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(a) Awards shall be payable in cash as soon after the close
of the Plan year as feasible; provided, however, that
payment of part or all of any award may be deferred in
accordance with the terms of any incentive deferral
plan maintained from time to time by the Company.
(b) Any other provision of the Plan to the contrary
notwithstanding, except as otherwise determined by the
Committee in accordance with Paragraph 6(a) of the
Company's Stock Ownership Guidelines for Officers (the
"Guidelines"), the following provisions shall apply to
the payment of an award to any participant who is
subject to the Guidelines and who had not met the
applicable minimum stock ownership level of the
Guidelines as of the December 31 immediately preceding
the date of payment of an award under the Plan.
The award to any such participant shall be paid
part in cash and part in the form of shares of Common
Stock of the Company ("Shares"). The number of Shares
issued under this provision shall be equal to the
number of Shares that would have been necessary to
bring the participant into compliance with the
Guidelines as of the December 31 immediately preceding
the date of payment of the award; provided, however,
that in no
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event shall more than half of the value of a
participant's award be paid in the form of Shares; and
provided, further, that the part of the award for any
participant that is payable in Shares shall not exceed
the annual rate of base salary in effect for the
participant at the time of the award. The remainder of
the participant's award shall be paid in cash. Awards
of Shares shall be made without payment of a purchase
price.
Any payment in accordance with this Paragraph 8(b)
shall be subject to the following terms and conditions:
(i) An award shall be converted into Shares by
dividing (y) the cash value of the part
of the award to be paid in Shares by (z) the
arithmetic average of the high and low sales
prices of the Shares as reported on New York Stock
Exchange Composite Transactions on the date
preceding the date on which the award is paid.
Any fractional Share shall be paid in cash.
(ii) The mandatory share award provisions of
this Paragraph 8(b) shall not apply
to the extent the participant has already elected
under the Company's New Management Incentive
Deferral Plan (y) to defer a portion of his or her
award under the Plan and (z) to have such deferred
award be
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credited with additional income based on
shares of phantom stock of the Company.
(iii) Except to the extent a participant
has elected to have a deferred award
be credited with additional income based on shares
of phantom stock of the Company, any voluntary
deferral of the payment of part or all of an award
under the Plan shall apply only to the part of the
award that is payable in cash after the
application of this Paragraph 8(b); provided,
however, that any such voluntary deferral shall be
reduced as necessary to ensure the payment of all
applicable payroll taxes.
(iv) To the extent a participant is subject to
a mandatory deferral of the payment of
part or all of an award under the Plan, the
mandatory deferral shall apply first to the part
of the award that is payable in cash. To the
extent the award that would be paid in Shares
remains subject to the mandatory deferral, the
payment that would otherwise be made in the form
of Shares shall instead be deferred under the
Company's New Management Incentive Deferral Plan
to earn income based on shares of phantom stock of
the Company.
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9. COMPANY STOCK
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Shares reserved for issuance under the Plan may be
authorized but unissued shares, shares reacquired by the
Company, or a combination of both, as the Board may from
time to time determine. If any stock dividend is declared
upon the Shares, or if there is any stock split, stock
distribution, or other recapitalization of the Company with
respect to the Shares, resulting in a split-up or
combination or exchange of Shares, or if any special
distribution is made to holders of Shares, the Shares
reserved for issuance under the Plan shall be
proportionately and appropriately adjusted.
10. EFFECTIVE DATE OF PLAN
----------------------
The Plan as originally adopted was effective for the fiscal
year commencing January 1, 1983 and continued in effect
thereafter as amended from time to time. This amended and
restated Plan shall be effective January 1, 1999, subject to
stockholder approval at the 1999 Annual Meeting, and shall
continue in effect, as amended from time to time, until it
is terminated by the Board.
11. SPECIAL PROVISIONS FOR TOP EXECUTIVES
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Anything herein to the contrary notwithstanding, effective
with the 1996 calendar year, the following provisions shall
apply each calendar year to awards to participants who are
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designated by the Committee as "Top Executives" for that
calendar year. Top Executives shall be eligible for awards
only under this Paragraph 11.
(a) The provisions of this Paragraph 11, including the
designation of Top Executives each year, shall be
administered solely by those members of the Committee
(at least two) who are "outside directors" for purposes
of Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"). For the Top Executives, the
Plan shall be administered in a manner consistent with
the performance-based compensation requirements of
Section 162(m)(4) of the Code.
(b) No later than ninety days after the beginning of
each calendar year, the Committee shall establish in
writing (i) one or more Performance Goals (as defined
below) that must be reached in order for a Top
Executive to receive an award under the Plan for the
calendar year and (ii) the amount of the award to be
paid upon attainment of these goals. The Committee
shall have the discretion later to revise the amount to
be paid upon the attainment of these goals solely for
the purpose of reducing or eliminating the amount of
the award otherwise payable upon attainment of these
goals.
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(c) In establishing Performance Goals, the Committee
shall establish both the minimum Performance Goal(s)
(the "Minimum Goals") that must be reached in order for
the Top Executive to receive any award for the calendar
year and the maximum Performance Goal(s) (the "Maximum
Goals") that must be reached in order for the Top
Executive to receive the maximum award for the calendar
year. Between the Minimum Goals and the Maximum Goals,
the Committee may establish a range of intermediate
Performance Goals with a corresponding range of awards
between the minimum and maximum award opportunity. In
no event may a Top Executive's maximum award hereunder
for any calendar year exceed $2,500,000.
(d) A "Performance Goal" is an objective performance
goal established in writing by the Committee; it may be
based on net earnings, stock price, profit before
taxes, return on equity, return on capital, return on
assets, total return to shareholders, earnings per
share, debt rating, or economic value added, with the
specific goal or target in each case determined on a
basis specified by the Committee. For purposes of the
preceding sentence, the term "economic value added"
means (1) net operating profit (or loss) after taxes
minus (2) a capital charge. Performance Goals may be
absolute in their terms or measured against or in
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relationship to other companies comparably or otherwise
situated. Performance Goals may be particular to a Top
Executive or the division, department, branch, line of
business, subsidiary or other unit in which the Top
Executive works or with respect to which the Top
Executive has responsibility and/or may be based on the
performance of the Company generally. Performance
Goals may vary from Top Executive to Top Executive and
from calendar year to calendar year.
(e) The amount payable to a Top Executive shall be
based upon the achievement of the Performance Goals, as
certified in writing by the Committee after the end of
each calendar year. If the Committee believes that
factors outside the Performance Goals should also be
taken into account in determining the amount of the
award, the Committee shall have the discretion to
reduce, but not increase, the amount payable to a Top
Executive based on these outside factors. No payment
shall be made unless the Minimum Goals are achieved.
(f) Awards under this Paragraph 11 shall be paid out
in accordance with the provisions of Paragraph 8.
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Executed and adopted this ____ day of May, 1999, pursuant to
action taken by the Board of Directors of Reynolds Metals Company
at its meeting on March 8, 1999, and approved by the Stockholders
of Reynolds Metals Company at the 1999 Annual Meeting.
REYNOLDS METALS COMPANY
By:______________________
Vice President, Human
Resources
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