SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_]Preliminary Proxy Statement [_]Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X]Definitive Proxy Statement
[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to Rule14a-11(c) or Rule14a-12
HOWMET INTERNATIONAL INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X]No fee required
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_]Fee paid previously with preliminary materials:
[_]Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[LOGO] HOWMET INTERNATIONAL INC.
MARCH 24, 1998
Dear Stockholder:
We invite you to the Annual Meeting of Stockholders of Howmet International
Inc., which will be held at 10:00 a.m. local time on Tuesday, May 12, 1998, at
the Virginia Air & Space Center, 600 Settlers Landing Road, Hampton, Virginia.
Information about the matters to be voted upon at the meeting is in the
enclosed formal Notice of Meeting and Proxy Statement.
It is important that your shares be represented at this meeting whether or
not you personally plan to attend. Please sign, date, and return your proxy
promptly in the enclosed envelope. This will not limit your right to vote in
person or attend the meeting.
The Company's Annual Report for the fiscal year ended December 31, 1997, is
enclosed for you along with this proxy statement.
/s/ David L. Squier /s/ James R. Wilson
David L. Squier James R. Wilson
President and Chief Executive Officer Chairman of the Board
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
TUESDAY, MAY 12, 1998
To the Stockholders:
The Annual Meeting of Stockholders of Howmet International Inc. (the
"Company") will be held on Tuesday, May 12, 1998, at the Virginia Air & Space
Center, 600 Settlers Landing Road, Hampton, Virginia, at 10:00 a.m. local
time, to consider and vote upon:
1. Election of eight Directors to serve until the 1999 Annual Meeting of
Stockholders (see page 2);
2. Approval of the Amended and Restated 1997 Stock Awards Plan (see page
20);
3. Ratification of appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 1998 (see
page 23); and
4. Any other business that may properly come before the meeting.
The close of business on March 16, 1998, has been fixed as the record date
for the meeting. All stockholders of record on that date are entitled to be
present and vote at the meeting.
Attendance at the Annual Meeting will be limited to stockholders of record,
beneficial owners of Company Common Stock entitled to vote at the meeting
having evidence of ownership, the authorized representative (one only) of an
absent stockholder, and invited guests of management. Any person claiming to
be an authorized representative of a stockholder must, upon request, produce
written evidence of such authorization.
The meeting will be conducted pursuant to the Company's By-Laws and rules of
order prescribed by the chairman of the meeting.
March 24, 1998
By Order of the Board of Directors,
Roland A. Paul, Secretary
TABLE OF CONTENTS
SOLICITATION OF PROXIES..................................................... 1
ELECTION OF DIRECTORS....................................................... 2
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF............................ 5
EXECUTIVE COMPENSATION..................................................... 7
ARRANGEMENTS AMONG THE COMPANY, CARLYLE AND THIOKOL........................ 13
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION.............. 16
PERFORMANCE GRAPH........................................................... 19
APPROVAL OF THE AMENDED AND RESTATED 1997 STOCK AWARDS PLAN................. 20
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS......................... 23
DISCRETIONARY VOTING OF PROXIES ON OTHER MATTERS............................ 23
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING............................... 23
1997 ANNUAL REPORT ON FORM 10-K AVAILABLE................................... 23
EXHIBIT A: AMENDED AND RESTATED 1997 STOCK AWARDS PLAN...................... 24
HOWMET INTERNATIONAL INC.
475 STEAMBOAT ROAD
GREENWICH, CONNECTICUT 06830
PROXY STATEMENT
MARCH 24, 1998
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Howmet International Inc. (the "Company") of proxies
for use at its Annual Meeting of Stockholders to be held on Tuesday, May 12,
1998, and at any adjournment thereof (the "1998 Annual Meeting").
Shares represented in person or by properly executed and unrevoked proxies
received in proper form in time for the 1998 Annual Meeting will be voted.
Shares will be voted in accordance with stockholders' instructions on the
accompanying proxy. If any such proxy contains no instructions, the shares
will be voted in accordance with the Directors' recommendations, which are
noted herein. Any proxy given may be revoked at any time before it is voted at
the meeting.
On March 16, 1998, the record date for the 1998 Annual Meeting, there were
100,000,000 shares of Common Stock, $.01 par value, outstanding, each entitled
to one vote, and there is no cumulative voting. The Company's only other class
of equity securities outstanding, its 9.0% Series A Senior Cumulative
Preferred Stock, has no present right to vote at the meeting.
One Judge of Election and one alternate judge have been elected by the
Board of Directors to serve at the 1998 Annual Meeting. In the event the judge
and the alternate judge so elected shall not be present at the meeting, a
judge shall be appointed by the Board of Directors in advance of the meeting
or by the chairman of the meeting in advance of any voting at such meeting.
The presence, in person or by proxy, of the owners of a majority of the
outstanding shares entitled to vote is required for a quorum for the
transaction of business at the 1998 Annual Meeting. Under Delaware corporation
law abstentions, withheld votes and broker no votes (i.e., shares held by a
broker or nominee which are represented at the meeting, but with respect to
which such broker or nominee is not empowered to vote on a particular proposal
or proposals) will be considered part of the quorum. Directors will be elected
and all other proposals, including the approval of the Amended and Restated
1997 Stock Awards Plan and the ratification of the appointment of Ernst &
Young LLP as the Company's independent auditors, will be determined by a
plurality of the votes cast at the 1998 Annual Meeting. This means that
abstentions, withheld votes, and broker no votes will not affect the outcome.
For a ten day period prior to the date of the 1998 Annual Meeting, a list of
stockholders entitled to vote will be open for examination during normal
business hours at the office of Howmet Corporation, Howmet Hampton Casting
Facility, One Howmet Drive, Hampton, Virginia and may be examined by any
stockholder for any purpose germane to the meeting. The approximate mailing
date of the Proxy Statement and Proxy to stockholders is March 24, 1998.
The Company will bear the cost of the solicitation. In addition to
solicitation by mail, the Company will request banks, brokers, and other
custodian nominees and fiduciaries to supply proxy material to the beneficial
owners of the Company's Common Stock of whom they have knowledge, and will
reimburse them for their expenses in so doing. Certain Directors, officers,
and other employees of the Company, not specifically employed for the purpose,
may solicit proxies, without additional remuneration therefor, by personal
interview, mail, telephone, or telecopier. In addition, the Company has
retained D. F. King & Co., Inc. to assist in the solicitation for a fee of
$2,000 plus expenses.
1. ELECTION OF DIRECTORS
The Board of Directors is currently comprised of eight Directors. In
accordance with the By-Laws of the Company, the membership of the Board of
Directors was increased from seven to eight Directors effective November 20,
1997. On December 15, 1997, D. Larry Moore, James R. Mellor and James D. Woods
were elected by the Board of Directors to fill three vacancies created by the
expansion of the Board's membership from seven to eight members and the
resignation of Frank Carlucci and Allan Holt, Board representatives of The
Carlyle Group (see "Change of Control" on page 5). The Company's Amended and
Restated Certificate of Incorporation and By-Laws provide for all members of
the Board of Directors to be elected annually.
The eight nominees for election as Directors at the 1998 Annual Meeting are
listed below. If any nominee should become unavailable, an event the Board of
Directors does not anticipate, it is intended that such shares will be voted
for such substitute nominee as may be selected by the Board of Directors, or
the Board may reduce the number of Directors. All nominees are currently
serving as Directors and have consented to being named herein and to serve if
elected. Nominees elected as Directors will serve until the 1999 Annual
Meeting of Stockholders and until their successors have been elected and have
qualified.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THESE EIGHT
NOMINEES FOR DIRECTORS.
NOMINEES FOR DIRECTORS
JAMES R. WILSON, age 57, has served as a Director of the Company since
October 1995; he was elected Chairman of the Board of Directors on October 8,
1997. He served as a Vice President of the Company from October 1995 to
October 1997. He has served as Chairman of the Board, President and Chief
Executive Officer of Thiokol Corporation since October 1995 and President and
Chief Executive Officer from October 1993 to October 1995. He has served as a
Director of Thiokol since October 1993. He joined Thiokol in 1989 as Vice
President and Chief Financial Officer and became Executive Vice President and
Chief Financial Officer in 1992. Mr. Wilson is a Director of Cooper Industries
Inc., The BF Goodrich Co. and First Security Corporation, and is a member of
the Board of Trustees of the College of Wooster. He holds a Bachelors degree
from the College of Wooster and a Masters of Business Administration from
Harvard University.
WILLIAM E. CONWAY, JR., age 48, was elected a Director of the Company in
October 1995. He served as Chairman of the Board of Directors from then until
October 8, 1997. He has been a Managing Director of The Carlyle Group, a
Washington, D.C.-based private merchant bank, since 1987. Mr. Conway was
Senior Vice President and Chief Financial Officer of MCI Communications
Corporation from 1984 until 1987, and was a Vice President and Treasurer of
MCI from 1981 to 1984. Mr. Conway presently serves on the Boards of Directors
of GTS Duratek, Inc., Tracor Inc., Nextel Communications, Inc., and several
privately held companies. See "Arrangements Among the Company, Carlyle and
Thiokol--Shareholders Agreement" on page 14 with respect to Mr. Conway's being
designated by The Carlyle Group to serve on the Company's Board of Directors.
RICHARD L. CORBIN, age 52, was elected a Director of the Company in
December 1995. He served as Vice President and Treasurer of the Company from
October 1995 to December 1997. Mr. Corbin has been the Senior Vice President
and Chief Financial Officer of Thiokol Corporation since May 1994. From 1991
to 1994 Mr. Corbin served as Chief Financial Officer and Vice President of
Administration of the Space Systems Division of General Dynamics Corporation,
which he joined in 1974.
EDSEL D. DUNFORD, age 62, was elected a Director of the Company in January
1996. He served as President and Chief Operating Officer of TRW, Inc. from
1991 until his retirement in December 1994. He served as Executive Vice
President and General Manager of TRW Space and Defense Business from 1987 to
1991. Mr. Dunford is a Director of Thiokol Corporation and Cooper Tire &
Rubber Company and is a trustee at the University of California at Los
Angeles. Mr. Dunford holds a Bachelor of Science degree from the University of
Washington and a Masters of Engineering degree from the University of
California at Los Angeles.
JAMES R. MELLOR, age 67, was elected a Director of the Company on December
15, 1997. Mr. Mellor was Chairman of the Board of Directors and Chief
Executive Officer of General Dynamics Corporation from
2
1993 until June 1997, when he retired. Mr. Mellor joined General Dynamics in
1981 as Executive Vice President, Commercial Systems and Corporate Planning,
became Executive Vice President, Marine, Land Systems and International in
1986 and became President and Chief Operating Officer in 1990. He was
President of AM International from 1977 to 1981 and worked from 1958 to 1977
at Litton Industries in various senior management positions, ultimately as
Executive Vice President. He is a Director of General Dynamics Corporation,
Bergen Brunswig Corporation, Computer Sciences Corporation, and Pinkerton's
Inc.
D. LARRY MOORE, age 61, was elected a Director of the Company on December
15, 1997. He was the President and Chief Operating Officer of Honeywell, Inc.
from April 1993 until his retirement in June 1997. Joining Honeywell in 1986,
he served in various executive positions including Executive Vice President
and Chief Operating Officer from 1990 to 1993. Dr. Moore is a Director of
Thiokol Corporation, Geon Company, and Reynolds Metals Company. Dr. Moore
holds a Ph.D. in Economics from Arizona State University and a Bachelor of
Science degree and Masters in Business Administration from the University of
Arizona.
DAVID L. SQUIER, age 52, has served as a Director of the Company since
December 1995. He was elected President and Chief Executive Officer of the
Company on October 8, 1997. He has been President and Chief Executive Officer
of Howmet Corporation since 1992. Mr. Squier began his association with Howmet
Corporation when he joined the Corporate Planning department of its
predecessor in December 1971. He was involved in manufacturing management from
1976 to 1978, became General Manager of Howmet Corporation's Wichita Falls
Casting facility in 1979, and was promoted to Vice President of Operations in
1983. He was elected a Director of Howmet Corporation in 1987.
JAMES D. WOODS, age 66, was elected a Director of the Company on December
15, 1997. He is Chairman of the Board of CONEMSCO, Inc. and Chairman Emeritus
of Baker Hughes Incorporated. He was Chairman of the Board, President and
Chief Executive Officer of Baker Hughes Incorporated from 1989 to January
1997. He has worked his entire career at Baker Hughes Incorporated and its
affiliated and predecessor companies, including holding the position of
Corporate Vice President--Finance from 1972 to 1975, Executive Vice President
and Director from 1977 to 1985, President, Chief Operating Officer and
Director from 1985 to 1986 and President, Chief Executive Officer and Director
from 1987 to 1997 at Baker International and Baker Hughes Incorporated. He is
a Director of The Kroger Company, Varco International, Inc. and Wynn's
International, Inc.
BOARD MEETING ATTENDANCE AND COMPENSATION OF DIRECTORS
The Company's Board of Directors met five times during fiscal year 1997.
All incumbent Directors were present for 75 percent or more of the total
number of meetings of the Board held while they were Board members.
Directors who are employees of the Company or its subsidiary Howmet
Corporation or of Thiokol Corporation ("Thiokol"), the controlling stockholder
of the Company, receive no compensation for their service as Directors. James
R. Wilson and Richard L. Corbin are officers and employees of Thiokol, and
David L. Squier is an officer and employee of Howmet Corporation, serving as
Directors. William E. Conway, Jr., who is a Managing Director of The Carlyle
Group, also receives no compensation for his services as a Director of the
Company. Other Directors are paid an annual retainer of $40,000, plus out-of-
pocket expenses. James R. Mellor and James D. Woods serve as independent
Directors of the Company on committees of the Board of Directors, and
accordingly each receives an additional annual retainer of $5,000. D. Larry
Moore and Edsel D. Dunford also serve as Directors of Thiokol.
The Company has a management agreement with TCG Holdings, L.L.C. ("TCG
Holdings"), an affiliate of The Carlyle Group, pursuant to which, effective
December 2, 1997, the Company pays TCG Holdings $500,000 per year for certain
management and financial advisory services (see "Arrangements Among the
Company, Carlyle and Thiokol--TCG Management Agreement" on page 13).
The Company maintains a Deferred Compensation Plan for Directors, under
which each Director who is entitled to a Director's fee from the Company may
elect to have payment of part or all of his Director's
3
compensation deferred until such time as he ceases to be a Director. With
respect to all but $20,000 of each Director's compensation, the Plan permits
each Director to elect to defer his Director's fees into a cash or phantom
stock credit account. Amounts credited to the cash account are credited with
increments equivalent to interest at the prime rate, and amounts credited to
the phantom stock account are credited or debited with amounts reflecting the
change in the price of the Company's Common Stock and payment of dividends, if
any. All distributions of a Director's cash or phantom stock account are made
only in cash.
Subject to the stockholders' approval of the Amended and Restated 1997
Stock Awards Plan, each of the Directors entitled to a Director's fee (Messrs.
Dunford, Mellor, Moore and Woods) will receive $20,000 of his annual retainer
in the form of a grant of restricted shares of the Company's Common Stock
calculated as of the end of each prior year (see "Approval of the Amended and
Restated 1997 Stock Awards Plan" on page 20).
COMMITTEES OF THE BOARD
There are four standing committees of the Company's Board of Directors:
Audit, Compensation, Independent Directors, and Executive.
The Audit Committee recommends to the Board the independent auditors to be
selected to audit the Company's annual financial statements and reviews the
fees charged for such audits and for any special assignments given the
auditors. The Audit Committee reviews the annual audit and its scope,
including the independent auditors' comment letter and management's responses;
possible violations of the Company's business ethics and conflict of interest
policies; any major accounting changes made or contemplated; and the
effectiveness and efficiency of the Company's internal audit program. In
addition, the Audit Committee confirms that no restrictions have been imposed
by Company personnel on the independent auditors and that there were no
substantive differences with the Company's management. The Audit Committee
membership was reconstituted on December 15, 1997. The present members of the
Audit Committee are Messrs. Mellor (Chairman) and Woods. The Audit Committee
met one time in 1997. All of the Committee members (at that time, Richard L.
Corbin and Allan M. Holt) attended that meeting.
The Compensation Committee annually reviews and reports to the Board on the
investment performance of the fund managers of the Company's retirement plans
and the appointment of investment managers, trustees, actuaries, auditors and
other fiduciaries with respect to such plans and changes in their investment
guidelines or actuarial assumptions. It also approves and makes
recommendations to the Board with respect to the creation, termination and
amendment of retirement, executive compensation, and other benefit plans of
the Company and its subsidiaries. The Compensation Committee reviews and
approves compensation actions with respect to the Chief Executive Officer,
other executive officers and other key employees and administers the executive
bonus programs. In addition, a subcommittee of the Compensation Committee
comprised of the two independent Directors (Messrs. Mellor and Woods)
administers the Company's stock option and awards plans. Members of the
Compensation Committee are D. Larry Moore (Chairman), James R. Mellor, James
R. Wilson, and James D. Woods. The Compensation Committee was newly
established on December 15, 1997 and did not meet in 1997. The Compensation
Committee's Report on Executive Compensation is set forth below, beginning on
page 16.
The Committee of Independent Directors consists of two or more independent
Directors. The Committee reviews the performance of the Company and Thiokol
under the Intercompany Services Agreement between them, the charges made to
the Company by Thiokol pursuant to that agreement, and any material amendments
to that agreement, and reviews and approves any other material agreements and
transactions between the Company and Thiokol. Members of the Committee are
James D. Woods (Chairman) and James R. Mellor. The Committee was newly
established on December 15, 1997 and did not meet in 1997.
The Executive Committee may exercise all of the powers and authority of the
Company's Board of Directors, except as follows. The Committee does not have
the power to amend the Company's By-Laws or Certificate of Incorporation;
authorize the issuance of stock; declare dividends; adopt an agreement of
merger or consolidation; adopt a certificate of ownership and merger under
Delaware law; or recommend to the Company's
4
stockholders the sale, lease, or exchange of all or substantially all of its
property and assets, a dissolution of the Company or a revocation of a
dissolution; nor does it have the power to act in lieu of the independent
Directors in their capacity as such on the foregoing committees. Members of
this Committee are James R. Wilson (Chairman), William E. Conway, Edsel D.
Dunford, and David L. Squier. The Committee was newly established on December
15, 1997 and did not meet in 1997.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
PRINCIPAL HOLDERS
The following table sets forth information as of March 16, 1998, with
respect to the shares of the Company's Common Stock, par value $.01, which are
held by persons known to the Company to be beneficial owners of more than five
percent of such stock.
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNERS OWNERSHIP(1) OF CLASS
- ------------------------------------- ------------ --------
Thiokol Corporation(2).................................. 62,000,000(3) 62.0
2475 Washington Blvd.
Ogden, Utah 84401-2398
Carlyle-Blade Acquisition............................... 22,650,000(3) 22.7
Partners, L.P., a Delaware
limited partnership(4)
c/o The Carlyle Group
1001 Pennsylvania Ave., N.W.
Washington, D.C. 20004
- --------
(1) As reported on a Schedule 13G filed with the Securities and Exchange
Commission or provided by the stockholder.
(2) Thiokol's investment in the Company is owned of record by Thiokol's
wholly-owned subsidiary, Thiokol Holding Company.
(3) With respect to certain limitations on voting power and investment power
and Thiokol's rights to acquire shares held by Carlyle-Blade Acquisition
Partners, L.P. ("Carlyle-Blade Partners"), see "Arrangements Among the
Company, Carlyle and Thiokol" on page 13.
(4) Carlyle-Blade Partners is the record owner of the shares beneficially
owned by The Carlyle Group. Carlyle Partners II, L.P. and Carlyle Partners
III, L.P. (the "General Partners") are the general partners of Carlyle-
Blade Partners. TC Group, L.L.C., a Delaware limited liability company, is
the sole general partner of each of the General Partners, and TCG
Holdings, L.L.C., a Delaware limited liability company, is the sole
managing member of TC Group, L.L.C. The General Partners, TC Group, L.L.C.
and TCG Holdings, L.L.C. could therefore be deemed to be beneficial owners
of the shares owned by Carlyle-Blade Partners. TC Group, L.L.C. is also
the general partner of certain limited partners of Carlyle-Blade Partners.
CHANGE OF CONTROL
On December 2, 1997 Thiokol Holding Company ("Thiokol Holding"), a
subsidiary of Thiokol, in two separate transactions, purchased a total of
13,000,000 shares of the Common Stock of the Company from Carlyle-Blade
Acquisition Partners, L.P. ("Carlyle-Blade Partners"), an affiliate of The
Carlyle Group, for a purchase price paid in cash in the amount of
$183,787,500. By this purchase Thiokol Holding increased its ownership of
record and beneficially of the Company's voting stock from 49% to 62%. The
source of the funds used by Thiokol to acquire these shares was internally
generated cash and unsecured short-term borrowings of $138 million from a
revolving credit facility managed by The First National Bank of Chicago. The
borrowings were made pursuant to notes with an interest rate of 5.91%. The
notes were refinanced by a portion of the proceeds of a public debt offering
made by Thiokol on February 26, 1998, through the issuance of 6 5/8% senior
notes due in 2008. The purchase of the Company's stock by Thiokol was made
pursuant to an agreement among
5
Thiokol, Thiokol Holding, Carlyle-Blade Partners and the Company, dated
October 8, 1997 and was consummated simultaneously with the first of two
closings of an initial public offering by which Carlyle-Blade Partners sold
15,000,000 shares of the Company's Common Stock to the public (the
"Offering"). Immediately prior to the sale to Thiokol Holding and the
Offering, Carlyle-Blade Partners owned 51,000,000 shares of the Company's
Common Stock, which constituted 51% of the outstanding voting shares of the
Company. On January 5, 1998, in a second closing under the Offering, Carlyle-
Blade Partners sold an additional 350,000 shares of the Company's Common Stock
to the public.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table shows the Company's Common Stock beneficially owned as
of March 16, 1998, by each Director and nominee for Director and each of the
executive officers named in the table on page 7, and the aggregate number of
such shares beneficially owned by all Directors and executive officers of the
Company as a group. Each named person and member of the group has sole voting
and investment power with respect to the shares shown, except for the
restricted shares held by the four Directors indicated below.
SHARES
BENEFICIALLY
NAME OWNED
- ---- ------------
William E. Conway(1)............................................... 70,000
Richard L. Corbin(2)............................................... 1,000
Edsel D. Dunford(3)................................................ 10,000
James R. Mellor(3)................................................. 3,000
D. Larry Moore(3).................................................. 1,000
David L. Squier(1)................................................. 149,000
James R. Wilson(2)................................................. 2,000
James D. Woods(3).................................................. 6,000
B. Dennis Albrechtsen(1)........................................... 20,000
Marklin Lasker(1).................................................. 0
John C. Ritter(1).................................................. 25,000
James R. Stanley(1)................................................ 15,000
All Directors, nominees and executive officers as a group
(13 persons, including those named)............................... 306,280
- --------
(1) Certain executive officers of the Company hold an aggregate interest in
Carlyle-Blade Partners of 4.5%, including Mr. Squier (2.3%), Mr. Stanley
(0.4%), Mr. Lasker (0.3%), Mr. Ritter (0.3%) and Mr. Albrechtsen (0.3%).
These interests are held directly or indirectly through a rabbi trust
maintained by the Company. Mr. Squier acquired part of his interest in
Carlyle-Blade Partners using the proceeds of a $1.0 million loan from
Carlyle-Blade Partners. That loan carried an interest rate of 9.0% and was
repaid in December 1997. Carlyle-Blade Partners distributed to its
partners (including these Named Executive Officers, on a pro rata basis)
the proceeds of the sale of 28.35 million of its shares of the Company's
stock in the Offering and to Thiokol. Mr. Conway, a Director, indirectly
holds a 0.9% interest in Carlyle-Blade Partners.
(2) Mr. Wilson is the Chairman of the Board, President and Chief Executive
Officer and Mr. Corbin is the Senior Vice President and Chief Financial
Officer of Thiokol, the controlling stockholder of the Company.
(3) In addition to the shares listed in the table, subject to stockholder
approval of the Amended and Restated 1997 Stock Awards Plan, each of the
non-employee Directors (Messrs. Dunford, Mellor, Moore and Woods) will
receive 1338.91 restricted shares of the Company's Common Stock (see
"Approval of the Amended and Restated 1997 Stock Awards Plan" on page 20).
Each will hold the voting power of his stock but may not transfer his
shares until termination of his service as a Director of the Company.
None of the beneficial holdings of any individual in the table totals more
than one percent of the outstanding shares; the holdings of the group
represent less than 0.4 percent of the outstanding shares.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the Company's knowledge based on review of copies of such reports
furnished to the Company and written representations, all Forms 3, 4, and 5
required by Section 16(a) of the Securities Exchange Act of 1934 have been
timely filed with respect to the most recently concluded fiscal year.
6
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The Summary Compensation Table sets forth the compensation for the three
fiscal years ended December 31, 1997, 1996 and 1995, both long-term and short-
term, for services in all capacities earned by those individuals who were as
of December 31, 1997, either (i) the Chief Executive Officer or (ii) one of
the other four most highly compensated executive officers of the Company and
its subsidiaries. All of these officers are employees of the Company's
subsidiary, Howmet Corporation, which pays all of their compensation.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION(1) LONG-TERM COMPENSATION
---------------------- ---------------------------
AWARDS PAYOUTS
---------------- ----------
SECURITIES
NAME AND PRINCIPAL UNDERLYING LTIP ALL OTHER
POSITION YEAR SALARY BONUS(2) OPTIONS/SARS (#) PAYOUTS(3) COMPENSATION(4)
- ------------------ ---- -------- -------- ---------------- ---------- ---------------
David L. Squier......... 1997 $370,000 $388,500 1,000,000 $ 42,668
President and 1996 350,000 400,000 1,000,000(5) 34,621
Chief Executive Officer 200,000(6)
1995 325,000 540,926 $512,176 1,336,103
James R. Stanley........ 1997 231,333 162,000 375,000 20,166
Senior Vice President-- 1996 215,000 172,000 375,000(5) 16,644
United States Opera-
tions 50,000(6)
1995 200,000 257,674 252,045 498,385
Marklin Lasker.......... 1997 211,112 146,600 200,000 16,944
Senior Vice President-- 1996 200,004 132,603 250,000(5) 54,899
International Opera-
tions 40,000(6)
1995 190,800 214,686 237,757 476,935
John C. Ritter(7)....... 1997 206,250 144,500 250,000 16,373
Senior Vice President
and 1996 157,602 126,082 250,000(5) 7,880
Chief Financial Officer 40,000(6)
1995 -- -- -- --
B. Dennis Albrechtsen... 1997 177,084 124,000 150,000 16,484
Vice President-- 1996 174,390 152,593 150,000(5) 13,267
Manufacturing (Howmet 1995 173,000 174,002 160,322 11,281
Corporation)
- --------
(1) The column headed "Other Annual Compensation" is omitted because such
compensation included only perquisites in amounts not exceeding the
thresholds for disclosure required by Regulation S-K under the federal
securities laws.
(2) Includes payments under Howmet Corporation's Annual Incentive Compensation
Plan and under its Restructuring Plan, a three year annual incentive plan
which began in 1992 and ended in 1995. It allowed for payments to be made
to the Named Executive Officers in conjunction with the Company's
restructuring efforts. Both types of bonus are reported in the year during
which they were accrued, although they were paid in the following year.
(3) Howmet Corporation's Long-Term Incentive Plan allowed for annual payments
based on threshold, target and maximum goals tied to Howmet's performance
with respect to profits and return on net assets over rolling three-year
periods, beginning in 1991. The Long-Term Incentive Plan was terminated in
connection with the acquisition of Howmet Corporation's parent company,
Pechiney Corporation (now Howmet Holdings Corporation) by Blade
Acquisition Corp. (now the Company) from Pechiney International, a French
company (the "Acquisition"), and the amounts for 1995 were determined and
paid in 1996 to give effect to that termination.
7
(4) Howmet Corporation makes matching contributions for the first five percent
of each employee's compensation paid into its savings plan. Matching
contributions made in the following amounts in 1997 are included in this
column: David L. Squier, $7,917; James R. Stanley, $6,785; Marklin Lasker,
$4,750; John C. Ritter, $7,917; and B. Dennis Albrechtsen, $8,000. Howmet
Corporation also maintains excess non-qualified employee benefit plans
that provide for payment of amounts in the form of taxable compensation
equal to the amounts that would have been otherwise paid to employees
under its savings plan absent the benefit limitations of the Internal
Revenue Code. Such payments made in the following amounts in 1997 are
included in this column: David L. Squier, $30,583; James R. Stanley,
$13,381; Marklin Lasker, $12,194; John C. Ritter, $8,456; and B. Dennis
Albrechtsen, $8,484.
Certain key employees of Howmet Corporation were permitted to defer a
portion of their compensation earned in 1986-89 until retirement or
termination, with interest to be earned on such deferred compensation
generally at the seasoned corporate bond yield published by Moody's
Investors Service plus 3 percentage points. The above-market portion of this
interest in 1997 with respect to Mr. Squier's deferred compensation was
$4,168.
(5) 1996 SAR grants. Pursuant to the Amended SARs Program described below, the
maximum net per share value of the outstanding 1996 SAR grants was limited
in the case of these officers to $13.
(6) 1996 grants of options to purchase Thiokol Common Stock (see "Thiokol
Stock Options" on page 12), adjusted for a two-for-one stock split paid as
a stock dividend on March 13, 1998.
(7) Mr. Ritter joined Howmet Corporation in 1996.
STOCK APPRECIATION RIGHTS; STOCK OPTIONS
In May 1996, the Company introduced a Stock Appreciation Rights ("SARs")
plan. Under the plan, SARs representing approximately 5 percent of the
Company's equity value were issued to certain members of the Company's
management. The SARs, similar to phantom stock options, are generally payable
on the earliest to occur of the following: (i) March 31, 2001; (ii) a merger,
sale of substantially all of the assets, or liquidation of the Company or
Howmet Corporation, the Company's wholly owned operating subsidiary; (iii) the
acquisition by an unaffiliated entity of more than 50% of the Company's or
Howmet Corporation's Common Stock; or (iv) a public offering of more than 50%
of the Company's or Howmet Corporation's Common Stock. The SARs are valued
based on appreciation in value of the Company's Common Stock, as defined in
the plan, from the date of adoption of the plan to the earliest of the
foregoing dates. The SARs vest over a five-year period based upon the passage
of time and the operating performance of Howmet Corporation, with acceleration
in the event of one of the earlier triggering events referred to above.
In connection with the Offering, the Company amended its SARs plan (the
"Amended SARs Program") and committed to grant stock options to certain key
employees, including the Company's executive officers, pursuant to a newly
adopted stock-based awards plan (the "1997 Stock Awards Plan"). Pursuant to
the Amended SARs Program, the maximum per share value of the outstanding SARs
has been limited to the difference between the initial public offering price
and the base price per share (generally $2) of the SARs and, in exchange for
accepting such limitation, each holder of SARs was granted a non-qualified
stock option (an "NQSO") to purchase, at the initial public offering price of
$15 per share, a number of shares of Common Stock equal to the number of
shares with respect to which such employee has SARs. The NQSOs will vest and
become exercisable in 25% increments on January 1 of each year beginning in
1999, until fully vested, and will expire on the eighth anniversary of their
granting. In addition, pursuant to the Amended SARs Program, the Company
offered holders of SARs the opportunity to cash out 20% of their SARs (which
represented the vested portion of the SARs) at the initial public offering
price. Employees making this election, including Mr. Lasker, received their
cash payment in January 1998, and received NQSOs representing 80% of the
number of shares of Common Stock with respect to which such employees had SARs
immediately prior to making such election.
8
The 1997 Stock Awards Plan, under which the NQSOs were issued, was adopted
by the Board of Directors and approved by Thiokol Holding and Carlyle-Blade
Partners as the sole stockholders on November 20, 1997, prior to the Offering.
For the terms of the 1997 Stock Awards Plan, see "Approval of the Amended and
Restated 1997 Stock Awards Plan" on page 20 and Exhibit A hereto on page 24.
STOCK OPTION GRANTS IN FISCAL YEAR 1997
The table below shows the Company's stock option grants in fiscal year 1997
to the Named Executive Officers. The 1997 Stock Awards Plan, pursuant to which
these grants were made, authorizes the grant of stock options, stock
appreciation rights, shares of restricted stock and other awards valued by
reference to the Company's Common Stock.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS(1)
----------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(2)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED (#) FISCAL YEAR PER SHARE DATE 5% 10%
- ---- ------------ ---------------- ----------- ---------- ---------- -----------
David L. Squier......... 1,000,000 22.8 $15 12/2/05 $7,161,832 $17,153,832
James R. Stanley........ 375,000 8.6 15 12/2/05 2,685,687 6,432.687
Marklin Lasker.......... 200,000 4.6 15 12/2/05 1,432,366 3,430,766
John C. Ritter.......... 250,000 5.7 15 12/2/05 1,790,458 4,288,458
B. Dennis Albrechtsen... 150,000 3.4 15 12/2/05 1,074,275 2,573,075
- --------
(1) Stock options granted during fiscal year 1997 pursuant to the 1997 Stock
Awards Plan. See "Stock Appreciation Rights; Stock Options" on page 8
describing the terms of such options.
(2) No gain will be realized by an optionee without an increase in the price
of the Company's Common Stock, which will correspondingly increase the
value of the Common Stock outstanding held by all stockholders. A 5
percent and a 10 percent gain over the eight year option period would
increase the total value of the Company's currently outstanding Common
Stock by $716.2 million and $1,715.4 million, respectively. There can be
no assurance that the gains shown in the table will be realized, since any
gain is dependent on the performance of the Company's Common Stock price,
which is attributable to many factors including but not limited to Company
performance and stock market conditions. The value of the realized gains
shown in this table is provided solely for illustrative purposes in
compliance with rules promulgated by the Securities and Exchange
Commission.
STOCK OPTIONS EXERCISED DURING FISCAL YEAR 1997
The following table presents information regarding the exercise during 1997
of SARs or options to purchase shares of the Company's or Thiokol's Common
Stock by the Named Executive Officers and information regarding unexercised
SARs and options to purchase shares of the Company's and Thiokol's Common
Stock held by the Named Executive Officers on December 31, 1997.
9
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT YEAR-END (#) AT YEAR-END ($)(1)
SARS EXERCISED/ --------------- ------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---- --------------- ------------ --------------- ------------------
David L. Squier......... SARs 0/1,000,000 $0/$13,000,000
Company Options 0/1,000,000 0/0
Thiokol Options 0/200,000(2) 0/4,575,000
James R. Stanley........ SARs 0/375,000 0/4,875,000
Company Options 0/375,000 0/0
Thiokol Options 0/50,000(2) 0/1,143,750
Marklin Lasker.......... SARs 50,000 $650,000 0/200,000 0/2,600,000
Company Options 0/200,000 0/0
Thiokol Options 0/40,000(2) 915,000
John C. Ritter.......... SARs 0/250,000 0/3,250,000
Company Options 0/250,000 0/0
Thiokol Options 0/40,000(2) 0/806,250
B. Dennis Albrechtsen... SARs 0/150,000 0/1,950,000
Company Options 0/150,000 0/0
- --------
(1) Values of Company stock options and SARs are calculated based on the
closing New York Stock Exchange price of the Company's Common Stock as of
December 31, 1997 ($15.00), minus the option exercise price ($15.00) or
the SAR base price ($2.00 for the Named Executive Officers), subject to a
maximum value for the SARs of $15 per share minus the base price. The
Company stock options will vest and become exercisable in 25% increments
on January 1 of each year beginning in 1999. Value of Thiokol options is
calculated based on the closing New York Stock Exchange price of Thiokol's
Common Stock as of December 31, 1997 ($40.625), minus the option exercise
price ($17.75 except for John Ritter ($20.46875)), after giving effect to
a two-for-one stock split in Thiokol stock paid as a stock dividend on
March 13, 1998. For information regarding vesting and exercise of the
Thiokol options, see "Thiokol Stock Options" on page 12.
(2)Adjusted for the two-for-one stock split paid on March 13, 1998.
RETIREMENT PLANS
Howmet Corporation, the Company's wholly owned operating subsidiary,
maintains defined benefit pension plans for substantially all of its
employees. Effective January 2, 1996, Howmet adopted the Howmet Salaried
Employees Pension Plan (the "SEPP"), a defined benefit plan that covers most
salaried employees, and provides for continuing benefits that had been
provided under another defined benefit plan (the "Pechiney Plan") prior to the
acquisition of Howmet's parent company, Pechiney Corporation (now Howmet
Holdings Corporation) by Blade Acquisition Corp. (now the Company) from
Pechiney International, a French company on December 13, 1995 (the
"Acquisition"). The following table shows the estimated annual pension
benefits for salaried employees, including the Named Executive Officers,
payable upon retirement (including amounts attributable to the SEPP, the
Excess Benefit Plans and the Supplemental Retirement Plans, as described
below, and including any benefit payable under the Pechiney Plan) for the
specified compensation and years of service.
10
PENSION PLAN TABLE
YEARS OF SERVICE
-----------------------------------------------------
REMUNERATION 15 20 25 30 35 40
- ------------ -------- -------- -------- -------- -------- --------
$200,000.................. $ 43,164 $ 57,552 $ 71,940 $ 86,328 $100,716 $111,716
400,000.................. 88,164 117,552 146,940 176,328 205,716 227,716
600,000.................. 133,164 177,552 221,940 266,328 310,716 343,716
800,000.................. 178,164 237,552 296,940 356,328 415,715 459,716
As of December 31, 1997, the Named Executive Officers had the following
credited service for determining pension benefits: David L. Squier, 26 years;
James R. Stanley, 5 years; John C. Ritter, 1 year; Marklin F. Lasker, 5 years;
B. Dennis Albrechtsen, 23 years.
All the executive officers named in the Summary Compensation Table
participate in the SEPP. For employees who retired before 1997, pension
benefits were based on the average earnings for the highest five consecutive
years of their final ten years of service. Compensation included in the final
average earnings for the pension benefit computation included base annual
salary and annual bonuses but excluded payments for all other compensation.
The plan in effect prior to 1997 provided an increased benefit for employees
with final average pay above one-half of the social security wage base. The
SEPP benefit prior to 1997 took into account the service and compensation
earned prior to the Acquisition and was reduced by any benefit payable under
the Pechiney Plan.
Effective January 1, 1997, the SEPP's design was changed to that of a cash
balance plan. The cash balance plan maintains hypothetical individual accounts
for participants. The annual amount credited to a participant's account
consists of the sum of age-based compensation credits (7 percent for employees
age 50 or older) and interest credits, with an additional age-based annual
credit for the years 1997-2006 for employees age 45 years and older on January
1, 1997 (an additional 7 percent for employees age 50 or older on that date).
The interest credit rate, set once annually, is equal to the one year U.S.
Treasury constant maturities rate plus one percent. Benefits earned before
1997 under the final average earnings formula mentioned above have been
converted to opening account balances.
SEPP benefits are payable at retirement or termination, at the
participant's election. Benefits may be payable as a single life annuity, a
joint and survivor annuity, a ten year certain option, or a lump sum.
Because the SEPP is subject to the benefit and compensation limits under
the Internal Revenue Code (the "Code"), the Company has established two
unfunded Excess Benefit Plans that provide for payment of amounts that would
have been paid to employees under the pension formula absent the benefit and
compensation limits of the Code.
The Company also maintains several Supplemental Executive Retirement Plans
("SERPs") designed to provide unfunded supplemental retirement benefits to
certain employees of the Company. The first is designed to provide the
selected employees a benefit at retirement equal to that which they would have
earned under the SEPP and the Excess Benefit Plans, had the SEPP not been
converted to a cash balance plan. Benefits under this SERP are offset by
benefits received under the SEPP and the Excess Benefit Plans. Currently,
Messrs. Squier, Stanley, Lasker, and Albrechtsen participate in this SERP.
The second SERP is designed to provide the selected employees a benefit at
retirement equal to 50% of the participant's average three highest consecutive
years of compensation during the last ten years. SERP benefits are offset by
amounts the participant receives from certain other plans and social security.
Currently, Mr. Squier is the only employee participating in this SERP (see
"Employment Agreements" on page 12).
11
THIOKOL STOCK OPTIONS
Since December 31, 1995, Thiokol has granted 230,000 contingent stock
options for Thiokol Common Stock (of which 195,000 are still outstanding) (the
"Thiokol Stock Options") to certain Company employees, including certain of
the Named Executive Officers. The options granted to the Named Executive
Officers have exercise prices of either $17.75 or $20.469 per option, the
market price of Thiokol stock on the date of the grant and adjusted to give
effect to a two-for-one stock split in Thiokol stock paid as a stock dividend
on March 13, 1998. The options will vest only if Thiokol acquires 100% of the
Company prior to December 13, 2001 unless otherwise modified by the
Compensation Committee of the Board of Directors of Thiokol. The options vest,
and are exercisable, 50% on the date of such acquisition and 25% each year
thereafter. The options expire not later than ten years after the date of the
grant. In the event that Thiokol acquires 100% of the Company before December
13, 2001, there will be a charge to the Company's earnings upon such
acquisition and in the subsequent two years of the vesting period. The total
charges will be equal to the product of (x) any increase in price of Thiokol's
stock from the date of the grant to the date when Thiokol acquires 100% of the
Company, times (y) the number of options outstanding. If Thiokol had acquired
100% of the Company as of December 31, 1997, the Company would have recorded
compensation expense at that date and in the subsequent two years equal to,
but not in addition to, the amounts being expensed by the Company for the
Revised Plan discussed below.
Thiokol has informed holders of the Thiokol Stock Options of its general
intention to adopt a plan that would allow such holders to benefit from such
options even if Thiokol does not acquire 100% of the Company prior to December
13, 2001 (the "Revised Plan"). Under the Revised Plan, in the event that
Thiokol does not acquire 100% of the Company prior to December 13, 2001, then,
with respect to each holder, the difference as of December 13, 2001 between
the aggregate market value of all of the shares of Thiokol Common Stock
represented by such holder's Thiokol Stock Options and the aggregate exercise
price of all such options shall become vested and contributed to a deferred
payment plan, pursuant to which 25% of the vested amount would be paid out
immediately, if the participant so elected prior to vesting, and the balance
of which would be paid out over a period (not less than five years) elected by
the participant. Deferred balances would accrue investment earnings equal to
those of Thiokol's stock over such period or, at the participant's election,
in part those of Thiokol's stock over such period and in part the interest on
five year U.S. Treasury notes. Pursuant to the Revised Plan, a holder of
Thiokol Stock Options who retires before December 13, 2001 would receive a pro
rata portion of the benefits described in the foregoing sentences based on the
portion of time during the period from December 13, 1995 to December 13, 2001
during which such holder was employed by the Company.
Based on the December 31, 1997 market price of Thiokol stock, the Company
will record compensation expense for this Revised Plan of $5.2 million, after
tax, over the six year period ending December 13, 2001. As of December 31,
1997, $1.8 million of such compensation expense has been reflected in the
Company's financial results.
EMPLOYMENT AGREEMENTS
In October 1995 Howmet Corporation entered into employment agreements (the
"Employment Agreements") with thirteen management employees, including each
Named Executive Officer except Mr. Ritter, who joined Howmet Corporation in
April 1996, and Mr. Albrechtsen. The Employment Agreements set base salary
levels and provide a specified percentage (generally from 30-60%) of base
salary as a target annual bonus amount. The Employment Agreements also
generally provide each such Named Executive Officer (the "Executive") with the
use of a Howmet-owned automobile and participation in benefit plans and
programs available to Howmet management employees generally. The Employment
Agreements generally provide that in the event the Executive's employment is
terminated by Howmet other than for "cause" or by the Executive with "good
reason" (each as defined therein) within 18 months following the date of the
Company's acquisition of Howmet Corporation from Pechiney International, S.A.
(or prior to the Executive's 62nd birthday in the case of Mr. Squier), the
Executive will be entitled to (i) the amount of the Executive's base pay and
target bonus for a specified period ranging from 18 to 36 months, (ii) a
prorated portion of the annual bonus and any long-term
12
incentive awards that would have been payable in the year of termination,
(iii) company-paid outplacement services, (iv) transfer to the Executive of
the company-owned car he was using, (v) accelerated vesting under certain of
Howmet's retirement plans, (vi) the right to continue to participate in
Howmet's medical benefits plan for up to two years at the rates in effect for
active employees, and the right to be treated as a retiree for purposes of
continued coverage thereafter. The severance benefits described above are
generally conditioned on the Executive's agreement not to compete with Howmet
for a period of twelve months following the participant's termination of
employment. In the event of the Executive's death or disability, the
Employment Agreements generally provide for the payment of prorated annual
bonus and long-term incentive plan awards, but not other severance amounts.
Mr. Squier's agreement provides that he is entitled to a supplemental annual
pension payment equal to the excess of 50% of his average base pay during his
final three years of employment over the amounts provided to him under certain
of Howmet's retirement plans and under social security.
In February 1996 Howmet Corporation entered into an employment agreement
with Mr. Ritter that sets a base salary and an annual bonus targeted at 40% of
that amount. Half of the bonus is based on achievement of personal objectives
and half is based on Howmet Corporation's performance. Mr. Ritter was granted
Thiokol stock options and stock appreciation rights and was permitted the
opportunity to purchase an interest in Howmet. Mr. Ritter is also entitled to
use of a company car. In the event Mr. Ritter is terminated within the first
24 months of his employment, he is entitled to receive, in lieu of any other
severance arrangements, 12 months base pay and target bonus, paid in a lump
sum.
Mr. Albrechtsen has an employment agreement that sets a base salary and 35%
of that amount as an annual bonus target, and is generally effective until his
62nd birthday (in 2008). In the event that Mr. Albrechtsen's employment is
terminated by Howmet Corporation without "cause" or by Mr. Albrechtsen with
"good reason" (each as defined therein), Mr. Albrechtsen is generally entitled
to the amount of his base salary and annual bonus for a period of 24 months;
and if such termination occurs after his 55th birthday, he is entitled to such
amounts for a period of 36 months.
TRANSACTIONS WITH MANAGEMENT
On December 1, 1997, Howmet Corporation made an interest-free loan to
Marklin Lasker in the amount of $150,000 to facilitate the purchase by a
member of his family of shares of the Company's Common Stock in the Offering.
The loan was repaid by Mr. Lasker on December 12, 1997.
ARRANGEMENTS AMONG THE COMPANY, CARLYLE AND THIOKOL
TCG MANAGEMENT AGREEMENT
Howmet is party to a management agreement (the "TCG Management Agreement")
with TCG Holdings, L.L.C. ("TCG Holdings") (an affiliate of The Carlyle Group)
for the provision of certain management and financial advisory services to be
provided to the Company and its subsidiaries. Pursuant to the TCG Management
Agreement, which will expire on December 2, 1999, TCG Holdings receives an
annual management fee of $500,000.
SERVICES AGREEMENT
To control administrative costs and avoid duplication of administrative
functions, the Company and Thiokol, upon consummation of the Offering, entered
into an intercompany services agreement (the "Services Agreement") with
respect to the services to be provided by Thiokol to the Company. The Services
Agreement provides that Thiokol will furnish to the Company administrative
services for which the Company shall generally pay Thiokol its costs plus a
fee, both amounts to be determined by Thiokol from time to time on a basis
consistent with its past practices. These intercompany services will be phased
in over time and their cost to the Company will increase as more services are
provided. These costs, when combined with the elimination of certain
management fees previously incurred and anticipated cost savings, are not
expected to result in material incremental costs to the Company.
The services provided to the Company by Thiokol will also include or involve
some services provided by third parties (such as insurance brokers and
carriers, actuaries and financial printers). Generally, such third party
services shall be billed directly to the Company with no "mark up" by Thiokol.
However, the cost of Thiokol's arranging for third parties' services shall be
billed to the Company along with a fee, as described above.
13
The services to be provided by Thiokol shall include but not be limited to
tax; control and audit; risk management and insurance advice and purchasing;
health, safety and environmental; treasury and cash management; human
resources and employee relations; employee benefit plan; in-house legal;
investor relations and public affairs; and executive department services.
SHAREHOLDERS AGREEMENT
Upon consummation of the Offering, the Company, Thiokol and Carlyle-Blade
Partners entered into a shareholders agreement (the "Shareholders Agreement"),
which amends and restates a shareholders agreement entered into by such
parties as of December 13, 1995. Pursuant to the Shareholders Agreement, (1)
for so long as Carlyle-Blade Partners continues to own not less than 5 percent
of the outstanding Common Stock of the Company, the Company has agreed to
nominate, and Thiokol has agreed to vote its shares of Common Stock in favor
of, one designee of Carlyle-Blade Partners to the Company's Board of Directors
(Mr. Conway, who is a nominee for Director, is currently Carlyle-Blade
Partners' designee on the Board of Directors), (2) Carlyle-Blade Partners has
agreed with Thiokol that Carlyle-Blade Partners will not dispose of any of its
shares of Common Stock until the earlier of the second anniversary of the
closing of the Offering or the occurrence of a change of control of Thiokol
and (3) Carlyle-Blade Partners has granted Thiokol an option to purchase all
or a portion (in 25% increments) of the shares of Common Stock owned by
Carlyle-Blade Partners and a right of first refusal to acquire any shares
Carlyle-Blade Partners proposes to sell, in each case at market price and
exercisable between the second and fourth anniversaries of the date of the
initial closing of the Offering. Pursuant to the Shareholders Agreement,
Thiokol has agreed that, in the event Thiokol disposes of any of its shares of
Common Stock to an unaffiliated third party (other than pursuant to an
effective registration statement or under Rule 144) prior to the fourth
anniversary of the closing of the Offering, Carlyle-Blade Partners will have
the right to participate in such sale with respect to a proportionate number
of its shares on the same terms.
CORPORATE AGREEMENT
Upon consummation of the Offering, the Company and Thiokol entered into a
corporate agreement (the "Corporate Agreement"). Under the Corporate
Agreement, the Company granted preemptive rights to Thiokol which give Thiokol
the right, upon any issuance or sale by the Company of its shares of capital
stock, to acquire a number of such shares sufficient to maintain Thiokol's
percentage ownership of the Company's outstanding voting power and equity
immediately prior to such issuance or sale. The purchase of shares of Common
Stock pursuant to the exercise of a preemptive right will be at market price,
or, in the case of a public offering by the Company for cash, at a price per
share equal to the net proceeds per share to the Company in such offering. The
preemptive rights expire in the event Thiokol reduces its ownership interest
to less than 20%.
In addition, under the Corporate Agreement, Thiokol has also agreed that
without the prior consent of the Carlyle-Blade Partners representative on the
Company's Board of Directors and a majority (but not less than two) of the
non-employee Directors of the Company who are not Directors or employees of
Thiokol or Carlyle-Blade Partners, neither Thiokol nor any of its affiliates
may acquire publicly held shares if such acquisition would reduce the number
of publicly held shares to less than 14% of the total number of shares
outstanding, other than (x) pursuant to a tender offer to acquire all of the
outstanding shares of Common Stock of the Company not then beneficially owned
by Thiokol or (y) pursuant to a merger or other business combination in which
holders of all outstanding publicly held shares are treated equally. The
foregoing provision of the Corporate Agreement may not be amended or waived by
the Company without the consent of the Carlyle-Blade Partners representative
on the Company's Board of Directors and a majority (but not less than two) of
the non-employee Directors of the Company who are not Directors or employees
of Thiokol or The Carlyle Group.
REGISTRATION RIGHTS AGREEMENT
Upon the closing of the Offering, the Company and Carlyle-Blade Partners
entered into a Registration Rights Agreement (the "Registration Rights
Agreement") pursuant to which the Company granted certain rights (the
"Registration Rights") to Carlyle-Blade Partners with respect to the
registration under the Securities Act of 1933 ("Securities Act") of the shares
of Common Stock of the Company owned by Carlyle-Blade Partners after
14
the closing of the Offering. Pursuant to the Registration Rights Agreement,
Carlyle-Blade Partners can require the Company, at any time following the
earlier of the second anniversary of the closing of the Offering or the
occurrence of a change of control of Thiokol and prior to the fifth
anniversary thereof (the "Registration Period"), on not more than two
occasions (plus up to an additional two registrations on Form S-3) (the
"Demand Registration Rights"), to file a registration statement under the
Securities Act covering the registration of the Registrable Securities (as
defined in the Registration Rights Agreement). The Demand Registration Rights
are subject to certain limitations, including that any such registration cover
a minimum number of Registrable Securities equal to 25% of the Registrable
Securities currently held by Carlyle-Blade Partners. In addition, the Company
may be able to temporarily defer a Demand Registration to the extent it
conflicts with another underwritten public offering or if the Company is
engaged in any other activity which, in the good faith determination of the
Board of Directors of the Company, would be adversely affected by the Demand
Registration to the substantial detriment of the Company. During the
Registration Period, Carlyle-Blade Partners will also be able to require the
Company to include Registrable Securities in a registration by the Company of
its securities, subject to certain conditions, including the ability of the
underwriters to limit or exclude Registrable Securities from such an offering.
The Company will pay all expenses associated with any registration other
than underwriting discounts and commissions relating to the Registrable
Securities, which will be paid by Carlyle-Blade Partners. The Registration
Rights Agreement contains certain indemnification and contribution provisions
(i) by the Company for the benefit of Carlyle-Blade Partners and related
persons, as well as any potential underwriter, and (ii) by Carlyle-Blade
Partners for the benefit of the Company and related persons. Carlyle-Blade
Partners may transfer its Registration Rights to any affiliate of Carlyle-
Blade Partners or to any transferee acquiring Registrable Securities
representing at least 5 percent of the then outstanding shares of Common
Stock.
CORPORATE OFFICERS
Certain Thiokol corporate officers may also be elected by the Company's
Board of Directors as officers or assistant officers of the Company. Thiokol
corporate officers may also serve as officers or assistant officers of the
Company's operating subsidiary Howmet Corporation and other wholly owned
subsidiaries.
15
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
COMPENSATION POLICY
Prior to the initial offering of the Company's stock (the "Offering"),
compensation decisions with respect to Mr. Squier were made by the Company's
two stockholders, Thiokol Holding Company, a wholly owned subsidiary of
Thiokol Corporation ("Thiokol") and Carlyle-Blade Acquisition Partners, L.P.
("Carlyle-Blade Partners"); compensation decisions with respect to the other
executive officers of the Company and Howmet Corporation were made by the
Boards of Directors of those companies. The Board of Directors of the Company
established a Compensation Committee of the Board on December 15, 1997. The
Compensation Policy adopted by the Compensation Committee is designed to
provide a competitive compensation program to attract, retain, motivate, and
reward talented individuals as executive officers and as key employees of the
Company. The Committee's policies are implemented by Howmet Corporation's
compensation and benefits staff under the direction of Howmet's Vice
President--Human Resources. The components of the program include base annual
salary, short and long-term incentives, employee benefits, and perquisites.
Compensation grades, ranges, and midpoints adopted by the Committee are set
based upon nationally recognized compensation surveys, namely, (i) the Hewitt
Management Compensation Survey 777, consisting of 319 companies, and (ii)
Towers Perrin Compensation Data Bank, consisting of 507 companies. Short and
long-term incentives are designed to provide above average total compensation
when performance of Howmet Corporation or an operating unit exceeds targets
set by the Committee. Annual incentives are related to Howmet Corporation and
operating unit performance and individual achievement of qualitative
individual and strategic goals. Long-term incentives are designed to balance
management focus between short and long-term goals and to provide capital
accumulation linked to Howmet Corporation performance. The total compensation
program is designed to reflect the overall level of Howmet Corporation's or
the operating unit's financial performance and achievement of strategic goals.
Total compensation will vary from year to year depending on the actual
performance achieved against the predetermined goals.
The principal elements of the compensation program for the executive
officers, including the Chief Executive Officer, and other key employees are
as follows:
BASE ANNUAL SALARY
The base salaries of the executive officers and other key employees are
determined in the same manner as the salaries of all exempt salaried employees
of Howmet Corporation, subject to any threshholds set forth in employment
agreements with the executive officers. The goal of Howmet is that executive
officers, and employees in general, are paid salaries which are commensurate
with their qualifications, duties and responsibilities and which are
competitive with like positions of comparable companies.
ANNUAL INCENTIVE COMPENSATION PLAN
The Howmet Corporation Annual Incentive Compensation Plan provides annual
cash incentive opportunities to all exempt employees, including executive
officers. Employment agreements with most of the executive officers provide
minimum annual bonus target percentages. The overall bonus pool for 1997 was
set by the Board of Directors early in the fiscal year in terms of corporate-
wide cash flow and operating income targets. Actual results for 1997 exceeded
this target. Each bonus award was then based upon Howmet Corporation's or the
respective operating unit's achieving predetermined cash flow, earnings and or
operating performance goals and the attainment of individual qualitative
strategic objectives relative to the participant's position, duties, and
responsibilities with Howmet and subject to any threshholds set forth in
employment agreements with the executive officers. For 1997 the Chief
Executive Officer set the earnings and strategic goals for the corporate staff
and operating unit participants effective the beginning of the fiscal year.
These targets were ratified by Howmet Corporation's Board. The Annual
Incentive Compensation Plan is designed to provide
16
above average total compensation when performance of Howmet Corporation or an
operating unit exceeds targets set by the Chief Executive Officer. The Plan
permits discretion in adjusting incentives for Plan participants.
Annual bonuses accrued for fiscal year 1997 reflect the level of earnings
achieved for corporate or operating unit plan participants, and achievement of
strategic goals. All executive officers, including the Chief Executive
Officer, earned bonuses from the Plan.
The Plan also permits the Board or the Committee to designate employees,
including the executive officers, to receive discretionary bonus payments made
in recognition of outstanding achievements or accomplishments.
LONG-TERM INCENTIVE PLANS
The Company's present long-term incentive plans are its stock appreciation
rights ("SARs") program (the "SARs Program") for key employees and the 1997
Stock Awards Plan. The Committee believes that providing stock based
compensation awards to executive officers and other key employees who are in a
position to impact the future performance of the Company is an integral part
of the compensation package. Effective with the Offering, the Committee
amended the SARs Program to include a maximum limit to the per share value of
the outstanding SARs, which is the difference between the Offering price ($15)
and the base price per share of the SARs (generally $2). In exchange for
accepting such limitation, each holder of SARs was granted a non-qualified
stock option to purchase, at the Offering price, a number of shares of Common
Stock equal to the number of shares with respect to which such employee has
SARs. In conjunction with amending the SARs Plan, the Board adopted and
Thiokol and Carlyle-Blade Partners approved the 1997 Stock Awards Plan. The
1997 Stock Awards Plan provides for the grant of stock options, SARs and
restricted stock. No further awards are expected to be made under the amended
SARs Program.
PERQUISITES
The Committee will review annually the perquisites available to the
executive officers, including the Chief Executive Officer, to determine if
they are competitive and reflect the usual and customary industry practices
based on compensation survey data.
DETERMINATION OF THE CHIEF EXECUTIVE OFFICER'S COMPENSATION
The 1997 compensation for David L. Squier, President and Chief Executive
Officer, consisted of a base annual salary, an annual bonus, stock option
grant, employee benefits provided to salaried employees as a group, and
perquisites that are usual and customary for the position. He previously
received a SARs Agreement and stock options to purchase Thiokol Corporation
Common Stock. In 1997 he also received a distribution of compensation deferred
through a Company-maintained rabbi trust, of funds he would otherwise have
received in 1996 as a sale bonus in connection with the December 1995 sale of
Howmet Corporation's parent company to Carlyle-Blade Partners and Thiokol.
In 1997, prior to the Offering, the Company's stockholders determined Mr.
Squier's salary grade, salary range, and midpoint based on his position as
President and Chief Executive Officer using the salary data described above.
The size of the Company and the markets the Company serves were considered by
the stockholders in setting Mr. Squier's salary level. Mr. Squier's base
annual salary was correspondingly increased from $350,000 to $370,000
effective January 1, 1997, as a result of that review.
For 1997 Mr. Squier received an annual bonus award of $388,500 as approved
by the Board of Directors. The payment reflects cash flow and operating income
results that significantly exceeded the 1997 predetermined goals.
17
1993 TAX ACT COMPENSATION LIMITS
Section 162(m) of the Internal Revenue Code, adopted under the 1993 tax law
changes, restricts the tax deductibility for certain executive compensation
exceeding $1 million. The Company's stock appreciation rights and stock
options granted under the Company's 1997 Stock Awards Plan have been designed,
approved and disclosed in a manner such that the Company believes that there
will be no such non-deductible compensation with respect to 1997 or 1998.
In general, the Compensation Committee intends to design the Company's
compensation programs to conform with Section 162(m) so that the total
compensation paid to any employee will not exceed $1 million in any one year,
except for compensation payments in excess of $1 million which qualify as
"performance based" or which are exempt for other reasons. However, the
Committee may approve payment of compensation in excess of $1 million that is
not tax deductible if it believes sound management of the Company so requires.
COMPENSATION COMMITTEE
D. Larry Moore, Chairman
James R. Mellor
James R. Wilson
James D. Woods
The report of the Compensation Committee and the following stock performance
graph are not deemed to be "soliciting material" or to be "filed" with the SEC
or subject to Regulation 14A or 14C or to the liabilities of Section 18 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), except to
the extent the Company specifically requests that such information be treated
as soliciting material or specifically incorporates it by reference into any
filing under the Securities Act of 1933, as amended, or the Exchange Act.
18
PERFORMANCE GRAPH
The Company's Common Stock began public trading on November 26, 1997.
Therefore, it is not possible to provide performance information for the last
five years. The following graph presents a comparison of the cumulative
stockholder return on the Common Stock of the Company for the period beginning
November 26, 1997 and ending December 31, 1997 as measured against (i) the
Standard & Poor's 500 Stock Index, and (ii) the Standard & Poor's 500 Aerospace
and Defense Index.
The returns shown assume that $100 was invested at the closing price on
November 26, 1997 in the Company's Common Stock and the stocks in the two
indices. Although the returns shown are calculated in a manner that assumes in
each case that all dividends paid during the period shown in the graph were
reinvested, no dividends were paid on the Company's Common Stock. Stockholders
are cautioned against drawing any conclusions from the data contained therein,
as past performance is no guarantee of future results.
COMPARISON OF THE CUMULATIVE TOTAL RETURN
[THE PRINTED MATERIAL ALSO CONTAINS A LINE GRAPH
DEPICTING THE INFORMATION IN THE FOLLOWING TABLE]
11/26/97 12/31/97
-------- --------
Howmet International...... $100.00 $99.59
Standard & Poor's 500 In-
dex...................... 100.00 102.09
Standard & Poor's 500
Aerospace/Defense Index.. 100.00 97.47
19
2. APPROVAL OF THE AMENDED AND RESTATED
1997 STOCK AWARDS PLAN
The 1997 Stock Awards Plan was adopted by the Board of Directors and
approved by Thiokol Holding Company and Carlyle-Blade Partners as the sole
stockholders prior to the Company's initial public offering in November 1997
(the "Offering"). Certain stock option awards have been granted to key
employees pursuant to the Plan and are described above (see "Stock
Appreciation Rights; Stock Options" on page 8 and "Stock Option Grants in
Fiscal Year 1997" on page 9). It is intended that these options remain in
effect. On February 9, 1998, the Board of Directors of the Company adopted an
amendment to the 1997 Stock Awards Plan to allow individual Directors selected
by the Board of Directors to receive awards under that Plan.
The stockholders of the Corporation are now being asked to approve the
Amended and Restated 1997 Stock Awards Plan, which incorporates the amendments
made by the Board of Directors on February 9, 1998.
The 1997 Stock Awards Plan, as so amended and restated, provides for the
grant of stock options, stock appreciation rights ("SARs") and restricted
stock (collectively, "Awards") with respect to up to 5,000,000 shares of
Common Stock, par value $.01 of the Company. Of this amount, 4,377,500 are the
non-qualified stock options granted to key employees, including the Named
Executive Officers, under the Amended SARs Program described on page 8. The
1997 Stock Awards Plan is administered by a subcommittee of the Compensation
Committee, consisting of two Directors of the Company who are "outside
Directors" as the term is used in Internal Revenue Code ("Code") Section
162(m) and "non-employee Directors" for the purpose of Rule 16b-3 of the
Securities Exchange Act of 1934, as amended ("Exchange Act"). This
subcommittee (referred to in the 1997 Stock Awards Plan (and hereinafter) as
the "Committee") has the authority, in its sole discretion, to select
participants (in addition to any employees who have become participants by
virtue of the Amended SAR Program), to make such awards in such form and
amount it desires, to impose limitations, restrictions and conditions on the
awards granted and the exercise thereof not otherwise inconsistent with the
terms of the 1997 Stock Awards Plan, and to interpret the Plan. The selection
of Directors as participants and the terms of their awards are determined,
however, by vote of the Board of Directors as a whole instead of by the
Committee.
The terms of the 1997 Stock Awards Plan permit the Committee to make stock
option grants which may be Incentive Stock Options within the meaning of Code
Section 422 or other forms of nonqualified stock options as the Committee may
determine. The exercise price of all options granted must be at not less than
100 percent of the fair market value of the Common Stock on the date of grant.
The term of the option is set by the Committee and in the case of Incentive
Stock Options, the term shall not be more than 10 years. Options may be
exercised in whole or in part during the term of the grant in cash, Common
Stock with fair market value on the date of grant equal to the aggregate
exercise price, a combination of cash and Common Stock, or other consideration
determined by the Committee pursuant to the terms of the 1997 Stock Awards
Plan. The closing price for shares of Common Stock of the Company on March 16,
1998 was $17.5625.
The 1997 Stock Awards Plan also permits the Committee to grant SARs, subject
to the shares remaining available under the plan, on terms and conditions not
inconsistent with the terms of the 1997 Stock Awards Plan at not less than 100
percent of the fair market value of the Common Stock on the date of grant.
SARs may be issued in tandem with an option. The amount payable by the Company
must be paid in Common Stock valued at the fair market value on the date of
exercise, cash, or a combination of both. The provisions of the 1997 Stock
Awards Plan relating to SARs do not affect the terms of any SARs outstanding
prior to the adoption of the 1997 Stock Awards Plan, including those subject
to the Amended SAR Program.
In addition, the 1997 Stock Awards Plan permits the Committee to issue
restricted stock on such terms and conditions as the Committee may determine
not inconsistent with the terms of the 1997 Stock Awards Plan including shares
of Common Stock earned under any of the Company's compensation plans.
The maximum number of shares of Common Stock with respect to which awards
may be granted under the 1997 Stock Awards Plan during any calendar year to a
single plan participant shall not exceed 400,000 shares, except in connection
with non-qualified stock options granted pursuant to the Amended SAR Program.
20
All awards made by the Committee shall be made by written agreement, which
shall contain such terms and conditions that are consistent with Section
162(m) of the Code and with respect to the award of Incentive Stock Options,
Section 422 of the Code. Generally no award made under the 1997 Stock Awards
Plan shall be transferable by a participant except by will or pursuant to the
laws of descent and distribution or a qualified domestic relations order as
defined by the Employee Retirement Income Security Act of 1974, as amended.
The Committee has the power to withhold taxes or require participants to remit
to the Company such amounts as required to satisfy tax withholding obligations
either in cash or Common Stock or a combination of both.
Awards are subject to adjustment to reflect any changes in the outstanding
Common Stock or other changes affecting shares, including adjustments in the
number of shares available for issuance, shares covered by an outstanding
Award, or adjustments in price that become necessary to prevent a dilution or
enlargement of benefits or potential benefits under the 1997 Stock Awards
Plan.
The 1997 Stock Awards Plan will terminate on December 2, 2007. The Board of
Directors or the Committee may amend or terminate the 1997 Stock Awards Plan;
provided, however, that such amendment or termination shall be subject to
stockholder approval to the extent required by law or the rules of any stock
exchanges on which the Common Stock is listed.
Pursuant to the Corporate Agreement between the Company and Thiokol, Thiokol
has preemptive rights to purchase Common Stock of the Company to avoid
dilution arising from the issuance of Common Stock either under the 1997 Stock
Awards Plan or pursuant to the exercise of options granted thereunder (see
"Arrangements Among the Company, Carlyle and Thiokol--Corporate Agreement" on
page 14).
Pursuant to the February 9, 1998 amendment, the definition of "Participant"
in the Plan has been amended to include Directors who are not officers or
other employees of the Company, and the definition of the term "Committee" has
been amended to mean the Board of Directors as a whole, instead of a committee
of non-employee Directors, when the Participant in question is a Director.
The text of the Amended and Restated 1997 Stock Awards Plan is set forth in
its entirety in Exhibit A to this Proxy Statement.
DIRECTORS' RESTRICTED STOCK
If the Amended and Restated 1997 Stock Awards Plan is approved by the
stockholders, the Board of Directors intends to exercise this authority to
provide Directors of the Company who are not either employees of Howmet
Corporation or Thiokol or the representative of The Carlyle Group ("non-
employee Directors") part of their annual retainer as Directors in the form of
restricted shares of the Company's Common Stock.
Each such Director would receive 1338.91 shares of restricted stock promptly
following stockholder approval of the proposed amendment and a number of
shares of restricted stock of the Company as of each January 1, beginning
January 1, 1999, which $20,000 would purchase at the average of the high and
low trading prices for the Company's Common Stock on the New York Stock
Exchange on the last trading day of the previous year. The Director may not
sell this stock until his service as a Director terminates. Dividends, if any,
on such stock would be credited to the Director in the form of phantom stock.
The Board of Directors may from time to time change the amount or proportion
of the non-employee Directors' compensation that will thereafter be
distributed in the form of stock awards under the 1997 Stock Awards Plan.
Thus, the non-executive directors as a group would presently receive
5,355.64 restricted shares of the Company's Common Stock, with an aggregate
dollar value of $94,058, based on the closing price on the New York Stock
Exchange on March 16, 1998. No other grants of restricted stock have been
made, and further awards of such stock are not determinable at this time.
21
STOCK OPTIONS
The following table shows certain information with respect to the non-
qualified stock options to purchase shares of the Company's Common Stock
granted under the 1997 Stock Awards Plan, in addition to the disclosure of the
individual grants to the Named Executive Officers in the table "Option/SAR
Grants in Last Fiscal Year" on page 9.
NEW PLAN BENEFITS
NUMBER OF
POSITION OPTIONS
-------- ---------
Executive Group............................................... 2,095,000
Non-Executive Director Group.................................. 0
Non-Executive Officer Employee Group.......................... 2,290,500
FEDERAL INCOME TAX CONSEQUENCES OF STOCK OPTIONS
The following discussion with respect to stock options is limited to federal
income tax laws and does not discuss income tax laws of any state. There is no
assurance that such federal income tax laws will not change.
The grant of an incentive stock option or a non-qualified stock option would
not result in income for the participant or in a deduction for the Company.
The exercise of a non-qualified stock option would result in ordinary income
for the participant and a deduction for the Company measured by the difference
between the option price and the fair market value of the shares received at
the time of exercise. Income tax withholding would be required.
The exercise of an incentive stock option would not result in ordinary
income for the participant if the participant does not dispose of the shares
within two years after the date of grant or one year after the transfer of
shares upon exercise. If these requirements are met, the basis of the shares
upon later disposition would be the option price. Any gain will be taxed to
the employee as long-term capital gain, and the Company would not be entitled
to a deduction. The excess of the market value on the exercise date over the
option price is an item of tax preference, potentially subject to the
alternative minimum tax.
If the participant disposes of the shares received upon exercise of an
incentive stock option prior to the expiration of either holding period (such
as in the case of a "cashless" stock option exercise or other disposition),
the participant would recognize ordinary income, and the Company would be
entitled to a deduction equal to the lesser of the fair market value of the
shares on the exercise date minus the option price or the amount realized on
disposition minus the option price. Any gain in excess of the ordinary income
portion would be taxable as long-term or short-term capital gain as determined
by the holding period.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE THE
AMENDED AND RESTATED 1997 STOCK AWARDS PLAN.
22
3. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Upon recommendation by the Audit Committee, the Board of Directors has
appointed Ernst & Young LLP ("Ernst & Young") as its independent auditors for
the fiscal year ending December 31, 1998. At the Board's direction, the
appointment of Ernst & Young is being presented to the stockholders for
ratification at the 1998 Annual Meeting. While ratification is not required by
law or the Company's Certificate of Incorporation or By-Laws, the Board
believes that such ratification is desirable. In the event this appointment is
not ratified by stockholders, the Board will consider that fact when it
appoints independent auditors for the next fiscal year.
Ernst & Young were the Company's independent auditors for fiscal year 1997
and for all prior years since fiscal year 1995. Audit services provided to the
Company by Ernst & Young during fiscal year 1997 consisted of examination of
the financial statements of the Company and its subsidiaries for that year and
the preparation of various related reports, as well as services relating to
filings with the Securities and Exchange Commission and pension, savings, and
welfare plan audits.
Representatives of Ernst & Young are expected to be present at the 1998
Annual Meeting with the opportunity to make a statement if they so desire and
to be available to respond to appropriate questions relating to that firm's
examination of the Company's financial statements for fiscal year 1997.
Ernst & Young are the independent auditors of Thiokol Corporation, the
controlling stockholder of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE
APPOINTMENT OF ERNST & YOUNG LLP.
DISCRETIONARY VOTING OF PROXIES ON OTHER MATTERS
Management does not now intend to bring before the 1998 Annual Meeting any
matters other than those disclosed in the notice of the meeting. Should any
matter requiring a vote of stockholders be properly brought before the meeting
by or at the direction of the Board of Directors, the proxies in the enclosed
form confer upon the person or persons entitled to vote the shares represented
by such proxies discretionary authority to vote such shares in respect of any
such matter in accordance with their best judgment.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Stockholder proposals intended for inclusion in the Company's proxy
statement for the 1999 Annual Stockholders' Meeting must be received by the
Secretary of the Company at its principal executive office set forth below no
later than November 23, 1998.
1997 ANNUAL REPORT ON FORM 10-K AVAILABLE
A copy of the Company's 1997 Annual Report to Stockholders is enclosed with
this Proxy Statement. The Company will provide, without charge, upon written
request from any person solicited hereby, a copy of the Howmet International
Inc. Annual Report on Form 10-K filed with the Securities and Exchange
Commission. Requests should be directed to the Vice President--General
Counsel, Howmet International Inc., 475 Steamboat Road, Greenwich, Connecticut
06830.
By Order of the Board of Directors,
Roland A. Paul, Secretary
Greenwich, Connecticut
March 24, 1998
23
EXHIBIT A
HOWMET INTERNATIONAL INC.
AMENDED AND RESTATED 1997 STOCK AWARDS PLAN
1. PURPOSE. The purpose of the Howmet International Inc. Amended and
Restated 1997 Stock Awards Plan (the "Plan") is to promote the long term
financial interests and growth of Howmet International Inc. (the "Company") by
(a) attracting and retaining executive personnel, (b) motivating executive
personnel by means of growth-related incentives, (c) providing incentive
compensation opportunities that are competitive with those of other major
corporations; and (d) furthering the identity of interests of Participants
with those of the stockholders of the Company.
2. DEFINITIONS. The following definitions are applicable to the Plan:
"Affiliate" means any entity in which the Company has a direct or indirect
equity interest which is so designated by the Committee.
"Amended SAR Program" means the stock appreciation rights plan of the
Company adopted in May 1996 as amended thereafter in connection with the
initial public offering of Common Stock.
"Award Limit" means 400,000 shares of Common Stock.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute.
"Committee" means, as to a Participant who is not a Director, a committee
of two or more Directors of the Company who are "outside Directors" as such
term is used in Section 162(m) of the Code and Non-Employee Directors for
purposes of Rule 16b-3. With respect to a Director who is a Participant,
the Committee shall be the Board of Directors of the Company.
"Common Stock" means the common stock, $.01 per share par value, of the
Company or such other securities as may be substituted therefor pursuant to
paragraph 6(e).
"Director" means any person who is a member of the Board of Directors of
the Company and is not also an Employee.
"Employee" means any officer or other employee (as defined in accordance
with Section 3401(c) of the Code) of the Company, or of any Affiliate.
The "Fair Market Value" of a share of Common Stock means the average
between the highest and lowest quoted selling prices of the Common Stock on
the New York Stock Exchange on the pertinent option grant date or exercise
date.
The "IPO Closing Date" means the date on which the initial offering of
Common Stock, whether by the Company or by any stockholder of the Company,
to the public pursuant to an effective registration statement on Form S-1
under the Securities Act of 1933, as amended, is completed.
"Participant" means any Director or key Employee of the Company or an
Affiliate selected by the Committee.
"QDRO" means a qualified domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act of 1974, as amended,
or the rules thereunder.
"Rule 16b-3" means such rule adopted under the Securities Exchange Act of
1934 (the "Exchange Act"), as such rule is amended from time to time, or
any successor rule.
3. LIMITATION ON AGGREGATE SHARES. The number of shares of Common Stock with
respect to which awards may be granted under the Plan shall not exceed
5,000,000 shares. Such 5,000,000 shares of Common Stock may be either
previously authorized but unissued shares, treasury shares, or a combination
thereof, as the Committee shall determine. Other than in connection with the
Amended SAR Program, the maximum number of
24
shares of Common Stock with respect to which awards may be granted under the
Plan during any calendar year to a single Participant may not exceed the Award
Limit. To the extent required by Section 162(m) of the Code, shares subject to
Options (as defined in Section 5 below) which are canceled continue to be
counted against the Award Limit and if, after grant of an Option, the price of
shares subject to such Option is reduced, the transaction is treated as a
cancellation of the Option and a grant of a new Option and both the Option
deemed to be canceled and the Option deemed to be granted are counted against
the Award Limit. Furthermore, to the extent required by Section 162(m) of the
Code, if, after grant of a Stock Appreciation Right ("SAR"), the base amount
on which stock appreciation is calculated is reduced to reflect a reduction in
the Fair Market Value of the Company's Common Stock, the transaction is
treated as a cancellation of the SAR and a grant of a new SAR and both the SAR
deemed to be canceled and the SAR deemed to be granted are counted against the
Award Limit.
4. ADD-BACK OF OPTIONS AND OTHER RIGHTS. If any Option, other right to
acquire shares of Common Stock under this Plan, or any other award, expires or
is canceled without having been fully exercised, the number of shares subject
to such Option or other right but as to which such Option or other right was
not exercised prior to its expiration, cancellation or exercise may again be
optioned, granted or awarded hereunder, subject to the limitations of Section
3. Furthermore, any shares subject to Options or other awards which are
adjusted pursuant to Section 6(e) and become exercisable with respect to
shares of stock of another corporation shall be considered canceled and may
again be optioned, granted or awarded hereunder, subject to the limitations of
Section 3. Shares of Common Stock which are delivered by the Participant or
withheld by the Company upon the exercise of any Option or other award under
this Plan, in payment of the exercise price thereof, may again be optioned,
granted or awarded hereunder, subject to the limitations of Section 3. If any
share of Restricted Stock is forfeited by the Participant or repurchased by
the Company pursuant to Section 5(c)(iii) hereof, such share may again be
optioned, granted or awarded hereunder, subject to the limitations of Section
3. Notwithstanding the provisions of this Section 4, no shares of Common Stock
may again be optioned, granted or awarded if such action would cause an
incentive stock option to fail to qualify as an incentive stock option under
Section 422 of the Code.
5. AWARDS. The Committee may grant stock options ("Options"), to
Participants, in accordance with this paragraph 5 and the other provisions of
the Plan.
(a) Options.
(i) Option Grants. Options granted under the Plan may be incentive
stock options ("ISOs") within the meaning of Section 422 of the Code or
any successor provision, or in such other form, consistent with the
Plan, as the Committee may determine.
(ii) Option Exercise Price. The exercise price of an Option shall be
fixed by the committee at not less than 100% of the Fair Market Value
of a share of Common Stock on the date of grant.
(iii) Option Term. The term of an Option shall be set by the Committee
in its discretion; provided, however, that in the case of ISOs, the
term shall not be more than ten (10) years from the date the ISO is
granted.
(iv) Exercisability. Options shall be exercisable at such time or times
as the Committee shall determine at or subsequent to grant.
(v) Exercise of Options. An exercisable Option may be exercised in
whole or in part. However, an Option shall not be exercisable with
respect to fractional shares and the Committee may require that, by the
terms of the Option, a partial exercise be with respect to a minimum
number of shares. Options shall be exercised in whole or in part by
providing (A) written notice to the Company (to the attention of the
Secretary) complying with the applicable rules established by the
Committee; (B) such representations and documents as the Committee
deems necessary or advisable to effect compliance with all applicable
laws or regulations; (C) in the event that the Option shall be
exercised pursuant to Section 6(d) by any person or persons other than
the optionee, appropriate proof of the right of such person or persons
to exercise the Option; and (D) payment in full of the option price.
Payment of the
25
option price may be made, at the discretion of the optionee, and to the
extent permitted by the Committee, (1) in cash (including check, bank
draft, or money order), (2) in Common Stock with a Fair Market Value on
the date of delivery equal to the aggregate exercise price of the
Option or exercised portion thereof, (3) by a combination of cash and
Common Stock, or (4) with any other good and valuable consideration.
(vi) Rights as Stockholders. The holders of Options shall not be, nor
have any of the rights or privileges of, stockholders of the Company in
respect of any shares purchasable upon the exercise of any part of an
Option unless and until such shares have been issued by the Company to
such holders.
(vii) Ownership and Transfer Restrictions. The Committee may impose
such restrictions on the ownership and transferability of the shares
purchasable upon the exercise of an Option as it deems appropriate. Any
such restriction shall be set forth in the respective Stock Option
Agreement and may be referred to on the certificates evidencing such
shares. The Committee may require the Participant to give the Company
prompt notice of any disposition of shares of Common Stock acquired by
exercise of an ISO within (i) two years from the date of granting such
Option to such Participant or (ii) one year after the transfer of such
shares to such Participant. The Committee may direct that the
certificates evidencing shares acquired by exercise of an Option refer
to such requirement to give prompt notice of disposition.
(b) Stock Appreciation Rights.
(i) Grant and Price of SAR. Subject to such terms and conditions not
inconsistent with this Plan as the Committee shall impose and shall be
evidenced by a written Stock Appreciation Right Agreement, an SAR shall
entitle its holder to receive from the Company, at the time of exercise
of such right, an amount equal to the excess of the Fair Market Value
(at the date of exercise) of a share of Common Stock over the SAR price
multiplied by the number of shares as to which the holder is exercising
the SAR. The SAR price shall be fixed by the Committee at not less than
100% of the Fair Market Value of a share of Common Stock on the date of
grant. SARs may be in tandem with any previously or contemporaneously
granted Option or independent of any Option.
(ii) Tandem SARs. An SAR in tandem with an Option shall be related to
a particular Option and shall be exercisable only when and to the
extent the related Option is exercisable. An SAR in tandem with an
Option may be granted to the Participant for no more than the number of
shares subject to the simultaneously or previously granted Option to
which it is coupled.
(iii) Amount Payable by Company. The amount payable may be paid by the
Company in Common Stock (valued at its Fair Market Value on the date of
exercise), cash or a combination thereof, as the Committee may
determine, which determination shall be made after considering any
preference expressed by the holder.
(c) Restricted Stock.
(i) Restricted Stock Award. The Committee may award to any Participant
shares of Common Stock, including shares earned under any of the
Company's compensation plans, subject to this paragraph 5(c) and such
other terms and conditions as the Committee may prescribe (such shares
being called "Restricted Stock"), which restrictions may include,
without limitation, restrictions concerning voting rights and
transferability and restrictions based on duration of employment with
the Company, Company performance and individual performance. Each
certificate for Restricted Stock shall be registered in the name of the
Participant and deposited, together with a stock power endorsed in
blank, with the Company.
(ii) Restrictions. There shall be established for each Restricted Stock
award a restriction period (the "Restriction Period") of such length as
shall be determined by the Committee. Shares of Restricted Stock may
not be sold, assigned, transferred, pledged or otherwise encumbered,
except as hereinafter
26
provided, during the Restriction Period. Unless otherwise provided by
the Committee, except for such restrictions on transfer and such other
restrictions as the Committee may impose, the Participant shall have
all the rights of a holder of Common Stock as to such Restricted Stock.
The Committee, in its sole discretion, may permit or require the
payment of cash dividends to be deferred and, if the Committee so
determines, reinvested in additional Restricted Stock or otherwise
invested. At the expiration of the Restriction Period, the Corporation
shall redeliver to the Participant (or the Participant's designated
beneficiary under Section 6(h), or, if none, the Participant's legal
representative) the certificates deposited pursuant to this paragraph.
(iii) Forfeiture/Repurchase of Restricted Stock. Except as provided by
the Committee at the time of grant or otherwise, upon a termination of
employment for any reason during the Restriction Period all shares
still subject to restriction shall be forfeited by the Participant or
at the discretion of the Committee may be repurchased by the Company at
a price to be determined by the Committee.
6. MISCELLANEOUS PROVISIONS.
(a) Administration. The Plan shall be administered by the Committee. Subject
to the limitations of the Plan, the Committee shall have the sole and complete
authority to: (i) select Participants in the plan; (ii) subject to Section 3,
to make awards in such forms and amounts as it shall determine, including the
determination whether any such awards which are in the form of Options are to
be ISOs; (iii) to impose such limitations, restrictions and conditions upon
such awards as it shall deem appropriate, (iv) to interpret the Plan and the
agreements pursuant to which Options, Restricted Stock or SARs are granted or
awarded, and to adopt, amend and rescind administrative guidelines and other
rules and regulations relating to the Plan, (v) to correct any defect or
omission or to reconcile any inconsistency in the Plan or in any award granted
hereunder and (vi) to make all other determinations and to take all other
actions necessary or advisable for the implementation and administration of
the Plan. Any such interpretations and rules with respect to ISOs shall be
consistent with the provisions of Section 422 of the Code. The actions and
determinations of the Committee or its delegates on matters within its
authority shall be conclusive and binding upon the Company, all the
Participants and all other interested persons, subject to such allocation to
the Company's Affiliates and operating units as it deems appropriate. The
Committee may, to the extent that any such action will not prevent the Plan
from complying with Rule 16b-3 or Section 162(m) of the Code, delegate any of
its authority hereunder to such persons as it deems appropriate.
(b) Professional Assistance; Good Faith Actions. All expenses and
liabilities which members of the Committee incur in connection with the
administration of this Plan shall be borne by the Company. The Committee may
employ attorneys, consultants, accountants, appraisers, brokers, or other
persons. The Committee, the Company and the Company's officers and Directors
shall be entitled to rely upon the advice, opinions or valuations of any such
persons. No members of the Committee or Board shall be personally liable for
any action, determination or interpretation made in good faith with respect to
this Plan, Options, awards of Restricted Stock or SARs; and all members of the
Committee and the Board shall be fully protected by the Company in respect of
any such action, determination or interpretation.
(c) Written Agreement. Each award shall be evidenced by a written agreement,
which shall be executed by the Participant and an authorized officer of the
Company and which shall contain such terms and conditions as the Committee
shall determine, consistent with this Plan. Stock Option Agreements evidencing
Options intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall contain such terms and conditions as
may be necessary to meet the applicable provisions of Section 162(m) of the
Code. Stock Option Agreements evidencing ISOs shall contain such terms and
conditions as may be necessary to meet the applicable provisions of Section
422 of the Code.
(d) Non-Transferability. Subject to the provisions of paragraph 6(h), no
award under the Plan and no interest therein, shall be transferable by the
Participant otherwise than (i) by will or the laws of descent and
distribution, (ii) pursuant to a QDRO or (iii) as expressly permitted under
the applicable option agreement including, if so permitted, pursuant to a gift
to such optionee's family, whether directly or indirectly or by means of a
trust or partnership or otherwise, unless and until such rights or awards have
been exercised, or the shares
27
underlying such rights or awards have been issued, and all restrictions
applicable to such shares have lapsed. All awards shall be exercisable or
received during the Participant's lifetime only by the Participant or the
Participant's legal representative. Any purported transfer contrary to this
provision will nullify the award. During the lifetime of the Participant, only
he may exercise an Option or other right or award (or any portion thereof)
granted to him under the Plan, unless it has been disposed of pursuant to a
QDRO. After the death of the Participant, any exercisable portion of an Option
or other right or award may, prior to the time when such portion becomes
unexercisable under the Plan or the applicable Stock Option Agreement or other
agreement, be exercised by his beneficiary designated under 6(h) or, if none,
his personal representative or by any person empowered to do so under the
deceased Participant's will or under the then applicable laws of descent and
distribution.
(e) Adjustments Upon Certain Changes. In the event of a reorganization,
recapitalization, spin-off, stock dividend, stock split, combination,
reclassification, reverse stock split, merger, consolidation, split-up, spin-
off, repurchase, liquidation, dissolution, or sale, transfer, exchange or
other disposition of all or substantially all of the assets of the Company, or
exchange of Common Stock or other securities of the Company, issuance of
warrants or other rights to purchase Common Stock or other securities of the
Company, or other similar corporate transaction or event or other increase or
reduction in the number of issued shares of Common Stock, the Committee may,
in order to prevent the dilution or enlargement of rights under awards, make
such adjustments in the number and type of shares authorized by the Plan, or
the number and type of shares covered by, or with respect to which payments
are measured under, outstanding awards and the exercise prices specified
therein as may be determined to be appropriate and equitable. In the event of
any of the events or transactions described in the preceding sentence, a
change in control, or similar transaction by the Company or any unusual or
nonrecurring transactions or events affecting the Company, any Affiliate of
the Company, or the financial statements of the Company or any Affiliate, or
changes in applicable laws, regulations, or accounting principles, if the
Committee determines that such action is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to any option, right or other
award under this Plan, to facilitate such transactions or events or to give
effect to such changes in laws, regulations or principles, the Committee in
its discretion is hereby authorized to provide in the agreement evidencing any
award or otherwise: (i) for adjustments to such award in order to prevent the
dilution or enlargement of rights thereunder or to provide for acceleration of
benefits thereunder; (ii) for either the purchase of any such Option, SAR, or
any Restricted Stock for the payment of an amount of cash equal to the amount
that could have been attained upon the exercise of such option, right or award
or realization of the Participant's rights had such option, right or award
been currently exercisable or payable or fully vested or the replacement of
such option, right or award with other rights or property selected by the
Committee in its sole discretion; (iii) that it cannot be exercised after such
event; (iv) that upon such event, such option, right or award be assumed by
the successor or survivor corporation, or a parent or subsidiary thereof, or
shall be substituted for by similar options, rights or awards covering the
stock of the successor survivor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kind of shares and
prices; and (v) that the restrictions imposed under a restricted stock
agreement upon some or all shares of Restricted Stock may be terminated, and
some or all shares of such Restricted Stock may cease to be subject to
repurchase or forfeiture under Section 5(c)(iii) after such event. With
respect to Options and SARs intended to qualify as performance-based
compensation under Section 162(m), no adjustment or action described in this
Section 6(e) or in any other provision of the Plan shall be authorized to the
extent that such adjustment or action would cause the Plan to violate Section
422(b)(1) of the Code or would cause such Option or SAR to fail to so qualify
under Section 162(m), as the case may be, or any successor provisions thereto.
Furthermore, no such adjustment or action shall be authorized to the extent
such adjustment or action would result in short-swing profits liability under
Section 16 or violate the exemptive conditions of Rule 16b-3 unless the
Committee determines that the option or other award is not to comply with such
exemptive conditions.
(f) Tax Withholding. The Committee shall have the power to withhold, or
require a Participant to remit to the Company, an amount to satisfy any
withholding or other tax due with respect to any amount payable and/or shares
issuable under the Plan, and the Committee may defer such payment or issuance
unless indemnified to its satisfaction. Subject to the consent of the
Committee, a Participant may make an irrevocable election to have
28
shares of Common Stock otherwise issuable under an award withheld, tender back
to the Company shares of Common Stock received pursuant to an award or deliver
to the Company previously-acquired shares of Common Stock having a fair market
value sufficient to satisfy all or part of the Participant's estimated tax
obligations associated with the transaction. Such election must be made by a
Participant prior to the date on which the relevant tax obligation arises. The
Committee may disapprove of any election and may limit, suspend or terminate
the right to make such elections.
(g) Listing and Legal Compliance. The Committee may suspend the exercise or
payment of any award so long as it determines that securities exchange listing
or registration or qualification under any securities laws is required in
connection therewith and has not been completed on terms acceptable to the
Committee. The Company shall not be required to issue or deliver any
certificate or certificates for shares of stock purchased upon the exercise of
any Option or portion thereof prior to fulfillment of all of the following
conditions:
(i) The admission of such shares to listing on all stock exchanges on which
such class of stock is then listed;
(ii) The completion of any registration or other qualification of such
shares under any state or federal law, or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental
regulatory body which the Committee or Board shall, in its absolute
discretion, deem necessary or advisable;
(iii) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable;
(iv) The lapse of such reasonable period of time following the exercise of
the Option as the Committee may establish from time to time for reasons of
administrative convenience; and
(v) The receipt by the Company of full payment for such shares, including
payment of any applicable withholding tax.
The Committee may, in its absolute discretion, also take whatever additional
actions it deems appropriate to effect such compliance including, without
limitation, placing legends on share certificates and issuing stop-transfer
notices to agents and registrars.
(h) Beneficiary Designation. Subject to paragraph 6(d), Participants may
name, from time to time, beneficiaries (who may be named contingently or
successively) to whom benefits under the Plan are to be paid in the event of
their death before they receive any or all of such benefit. Each designation
will revoke all prior designations by the same Participant, shall be in a form
prescribed by the Committee, and will be effective only when filed by the
Participant in writing with the Committee during the Participant's lifetime.
In the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.
(i) Rights of Participants. Nothing in the Plan shall interfere with or
limit in any way the right of the Company to terminate any Participant's
employment at any time, nor confer upon any Participant any right to continue
in the employ of the Company for any period of time or to continue his or her
present or any other rate of compensation. No employee or director shall have
the right to be selected as a Participant, or, having been so selected, to be
selected again as a Participant.
(j) Amendment, Suspension and Termination of Plan. This Plan will terminate
on, and no Options, SARs or Restricted Stock may be granted after, the tenth
anniversary of the IPO Closing Date, December 2, 1997. The Board of Directors
or the Committee may amend the Plan from time to time in such respects as the
Board of Directors or the Committee may deem advisable; provided, however,
that no such amendment shall be made without stockholder approval to the
extent such approval is required by law, agreement or the rules of any
exchange upon which the Common Stock is listed. No such amendment, suspension
or termination shall impair the rights of Participants under outstanding
awards without the consent of the Participants affected thereby or make any
change that would disqualify the Plan, or any other plan of the Company
intended to be so qualified, from the exemption provided by Rule 16b-3. No
such amendment shall be made that would prevent the Options and the SARs from
qualifying as performance based compensation as that term is used Section
162(m) of the Code.
29
The Committee may amend or modify any award in any manner to the extent that
the Committee would have had the authority under the Plan to initially grant
such award. No such amendment or modification shall impair the rights of any
Participant under any award without the consent of such Participant.
(k) Effective Date of Plan. The Plan shall become effective on November 20,
1997.
(l) Governing Law. This Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflicts of laws principles.
(m) Limitations Applicable to Section 16 Persons and Performance-Based
Compensation. Notwithstanding any other provision of this Plan, any Option,
SAR, or Restricted Stock granted to any individual who is then subject to
Section 16 of the Exchange Act shall be subject to any additional limitations
set forth in any applicable exemptive rule under Section 16 of the Exchange
Act (including any amendment to Rule 16b-3 under the Exchange Act) that are
requirements for the application of such exemptive rule. To the extent
permitted by applicable law, the Plan, Options, SARs and Restricted Stock
granted hereunder shall be deemed amended to the extent necessary to conform
to such applicable exemptive rule. Furthermore, notwithstanding any other
provision of this Plan, any Option or SAR intended to qualify as performance-
based compensation as described in Section 162(m)(4)(C) of the Code shall be
subject to any additional limitations set forth in Section 162(m) of the Code
(including any amendment to Section 162(m) of the Code) or any regulations or
rulings issued thereunder that are requirements for qualification as
performance-based compensation as described in Section 162(m)(4)(C) of the
Code, and this Plan shall be deemed amended to the extent necessary to conform
to such requirements.
(n) Consideration. In all cases, legal consideration shall be required for
each issuance of Options, Restricted Stock and SARs.
30
[X] Please mark your 2575
votes as in this
example
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder(s). If no direction is made, this proxy
will be voted FOR proposals 1, 2 and 3.
- -------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR proposals 1, 2 and 3.
- -------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Approval of [ ] [ ] [ ]
Directors Amended and
(See Restated 1997
Reverse) Stock Awards
Plan
To withhold authority to vote for any
nominee(s), mark the "FOR" box and 3. Appointment [ ] [ ] [ ]
write the name of each such nominee of Ernst &
below Young LLP as
independent
auditors for
- ------------------------------------- fiscal year 1998
- -------------------------------------------------------------------------------
Note: Please sign exactly as name
appears on this form. Joint
owners should each sign
personally. Corporation
proxies should be signed by
an authorized officer.
Executors, administrators,
trustees, etc. should so
indicate when signing.
--------------------------------------
--------------------------------------
SIGNATURE(S) DATE
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
HOWMET INTERNATIONAL INC. PROXY/VOTING INSTRUCTION CARD
Greenwich, Connecticut
- -------------------------------------------------------------------------------
This proxy is solicited on behalf of the Board of Directors for the Annual
Meeting on May 12, 1998.
The undersigned hereby appoints James R. Wilson, David L. Squier and Roland A.
Paul, or any of them, each with power of substitution, as proxies to vote as
specified on this card all shares of common stock of Howmet International Inc.
(the "Company") owned of record by the undersigned on March 16, 1998, at the
Company's Annual Meeting of Stockholders on May 12, 1998, and at any adjournment
thereof. Said proxies are authorized to vote in their discretion as to any other
business which may properly come before the meeting. If a vote is not specified,
said proxies will vote FOR proposals 1, 2 and 3.
Receipt is acknowledged of the Company's Annual Report to Stockholders for the
fiscal year ended December 31,1997, and the Notice and Proxy Statement for the
above Annual Meeting.
Nominees for Election as Directors: James R. Wilson, William E. Conway, Jr.,
Richard L. Corbin, Edsel D. Dunford, James R. Mellor, D. Larry Moore, David L.
Squier, James D. Woods
You are encouraged to specify your choices by marking the appropriate boxes (SEE
REVERSE SIDE), but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendations. The proxies cannot vote your
shares unless you sign and return this card.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE