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Delaware
(State or other jurisdiction of incorporation or organization) |
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84-2745636
(I.R.S. employer identification number) |
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201 Isabella Street
Pittsburgh, Pennsylvania (Address of principal executive offices) |
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15212
(Zip code) |
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Title of Each Class to be so Registered
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Name of Each Exchange on which
Each Class is to be Registered |
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Common Stock | | |
New York Stock Exchange
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| Large accelerated filer ☐ | | | Accelerated filer ☐ | |
| Non-accelerated filer ☒ | | | Smaller reporting company ☐ | |
| | | | Emerging growth company ☐ | |
Exhibit 2.3
FORM OF EMPLOYEE MATTERS AGREEMENT
BY AND BETWEEN
ARCONIC INC.
AND
ARCONIC ROLLED PRODUCTS CORPORATION
DATED AS OF [ ]
TABLE OF CONTENTS
Article I DEFINITIONS | 1 |
Section 1.01. Definitions | 1 |
Section 1.02. Interpretation | 8 |
Article II GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES | 8 |
Section 2.01. General Principles | 8 |
Section 2.02. Service Credit | 9 |
Section 2.03. Benefit Plans | 10 |
Section 2.04. Individual Agreements | 11 |
Section 2.05. Collective Bargaining | 12 |
Section 2.06. Non-U.S. Regulatory Compliance | 12 |
Article III ASSIGNMENT OF EMPLOYEES | 12 |
Section 3.01. Active Employees | 12 |
Section 3.02. Nonsolicitation | 14 |
Article IV EQUITY, INCENTIVE AND EXECUTIVE COMPENSATION | 14 |
Section 4.01. Generally | 14 |
Section 4.02. Equity Incentive Awards | 15 |
Section 4.03. Nonequity Incentive Plans | 19 |
Section 4.04. Severance Benefits | 19 |
Section 4.05. Director Compensation | 19 |
Article V QUALIFIED RETIREMENT PLANS | 23 |
Section 5.01. Spinco Pension Plans | 23 |
Section 5.02. Nondivided Qualified Pension Plans | 26 |
Section 5.03. Spinco Savings Plans | 26 |
Section 5.04. Nondivided Savings Plans | 28 |
Article VI NONQUALIFIED DEFERRED COMPENSATION PLANS | 28 |
Section 6.01. Spinco Nonqualified Plans | 28 |
Section 6.02. Nondivided Nonqualified Plans | 29 |
Section 6.03. Rabbi Trust | 29 |
Section 6.04. Participation; Distributions | 29 |
Article VII WELFARE BENEFIT PLANS | 30 |
Section 7.01. Welfare Plans | 30 |
Section 7.02. COBRA and HIPAA | 31 |
Section 7.03. Vacation, Holidays and Leaves of Absence | 32 |
Section 7.04. Severance and Unemployment Compensation | 32 |
Section 7.05. Workers’ Compensation | 32 |
Section 7.06. Insurance Contracts | 32 |
Section 7.07. Third-Party Vendors | 32 |
Section 7.08. Nondivided Welfare Plans | 33 |
Article VIII NON-U.S. EMPLOYEES | 33 |
Article IX MISCELLANEOUS | 33 |
Section 9.01. Employee Records | 33 |
Section 9.02. Preservation of Rights to Amend | 34 |
Section 9.03. Fiduciary Matters | 34 |
Section 9.04. Further Assurances | 35 |
Section 9.05. Counterparts; Entire Agreement; Corporate Power | 35 |
Section 9.06. Governing Law | 35 |
Section 9.07. Assignability | 35 |
Section 9.08. Third-Party Beneficiaries | 36 |
Section 9.09. Notices | 36 |
Section 9.10. Severability | 36 |
Section 9.11. Force Majeure | 36 |
Section 9.12. Headings | 36 |
Section 9.13. Survival of Covenants | 36 |
Section 9.14. Waivers of Default | 37 |
Section 9.15. Dispute Resolution | 37 |
Section 9.16. Specific Performance | 37 |
Section 9.17. Amendments | 37 |
Section 9.18. Interpretation | 37 |
Section 9.19. Mutual Drafting | 37 |
Section 9.20. Provisions Incorporated by Reference | 37 |
FORM OF EMPLOYEE MATTERS AGREEMENT
This EMPLOYEE MATTERS AGREEMENT, dated as of [ ], 2020 (this “Agreement”), is by and between Arconic Inc., a Delaware corporation (“Parent”), and Arconic Rolled Products Corporation, a Delaware corporation (“Spinco”).
R E C I T A L S:
WHEREAS, the board of directors of Parent (the “Parent Board”) has determined that it is in the best interests of Parent and its shareholders to create a new publicly traded company that shall operate the Spinco Business;
WHEREAS, in furtherance of the foregoing, the Parent Board has determined that it is appropriate and desirable to separate the Spinco Business from the Parent Business (the “Separation”) and, following the Separation, make a distribution, on a pro rata basis, to holders of Parent Shares on the Record Date of all the outstanding Spinco Shares owned by Parent (the “Distribution”);
WHEREAS, to effectuate the Separation and Distribution, Parent and Spinco have entered into a Separation and Distribution Agreement, dated as of [ ], 2020 (the “Separation and Distribution Agreement”); and
WHEREAS, in addition to the matters addressed by the Separation and Distribution Agreement, the Parties desire to enter into this Agreement to set forth the terms and conditions of certain employment, compensation and benefit matters.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:
Article
I
DEFINITIONS
Section 1.01. Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below. Capitalized terms used in this Agreement but not otherwise defined herein shall have the meanings ascribed to them in the Separation and Distribution Agreement.
“Action” shall have the meaning set forth in the Separation and Distribution Agreement.
“Affiliate” shall have the meaning set forth in the Separation and Distribution Agreement.
“Agreement” shall have the meaning set forth in the preamble to this Agreement and shall include all Schedules hereto and all amendments, modifications, and changes hereto entered into pursuant to Section 9.17.
“Ancillary Agreement” shall have the meaning set forth in the Separation and Distribution Agreement.
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“Assets” shall have the meaning set forth in the Separation and Distribution Agreement.
“Benefit Plan” shall mean any contract, agreement, policy, practice, program, plan, trust, commitment or arrangement providing for benefits, perquisites or compensation of any nature from an employer to any Employee, or to any family member, dependent, or beneficiary of any such Employee, including pension plans, thrift plans, supplemental pension plans and welfare plans, and contracts, agreements, policies, practices, programs, plans, trusts, commitments and arrangements providing for terms of employment, fringe benefits, severance benefits, change in control protections or benefits, travel and accident, life, accidental death and dismemberment, disability and accident insurance, tuition reimbursement, travel reimbursement, vacation, sick, personal or bereavement days, leaves of absences and holidays; provided, however, that the term “Benefit Plan” does not include any government-sponsored benefits, such as workers’ compensation, unemployment or any similar plans, programs or policies.
“Cash-Settled Units” shall have the meaning set forth in Section 4.05(a).
“COBRA” shall mean the U.S. Consolidated Omnibus Budget Reconciliation Act of 1985, as codified in Section 601 et seq. of ERISA and in Section 4980B of the Code.
“Code” shall have the meaning set forth in the Separation and Distribution Agreement.
“Delayed Transfer Employee” shall have the meaning set forth in Section 3.01(b).
“Destination Employer” shall have the meaning set forth in Section 3.01(b).
“Dispute” shall have the meaning set forth in the Separation and Distribution Agreement.
“Distribution” shall have the meaning set forth in the recitals to this Agreement.
“Distribution Date” shall have the meaning set forth in the Separation and Distribution Agreement.
“Distribution Ratio” shall have the meaning set forth in the Separation and Distribution Agreement.
“Effective Time” shall have the meaning set forth in the Separation and Distribution Agreement.
“Employee” shall mean any Parent Group Employee or Spinco Group Employee.
“ERISA” shall mean the U.S. Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.
“FICA” shall have the meaning set forth in Section 3.01(f).
“Final Trading Day” shall mean the last trading session of the New York Stock Exchange ending prior to the Effective Time during which there occurs both “ex-distribution” trading of Parent Shares and “when-issued” trading of Spinco Shares.
“Force Majeure” shall have the meaning set forth in the Separation and Distribution Agreement.
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“Former Employees” shall mean Former Parent Group Employees and Former Spinco Group Employees.
“Former Nonemployee Director” shall mean each former member of the Parent Board whose service on the Parent Board ended prior to the Effective Time.
“Former Parent Group Employee” shall mean any individual who is a former employee of Parent or any of its Subsidiaries or former Subsidiaries as of the Operational Separation Date and who is not a Former Spinco Group Employee, including any individual whose most recent employment was at a location that was sold or otherwise closed prior to the Operational Separation Date and who is identified as a Former Parent Group Employee on the master list prepared by Parent prior to the Operational Separation Date. Notwithstanding the foregoing or anything else herein to the contrary, any individual who has received a written communication from the Parent Group prior to the Operational Separation Date indicating that such individual will be classified as a former employee of the Parent Group for purposes of compensation and benefits will be treated as a Former Parent Group Employee for purposes of this Agreement.
“Former Spinco Group Employee” shall mean (i) any individual who is a former employee of Parent or any of its Subsidiaries or former Subsidiaries as of the Operational Separation Date, in each case, whose most recent employment with Parent was with a member of the Spinco Group or the Spinco Business, and (ii) any individual who is a former employee of Parent or its Subsidiaries or former Subsidiaries whose most recent employment was at a work location that has been sold or otherwise closed prior to the Operational Separation Date and who is identified as a Former Spinco Group Employee on the master list prepared by Parent prior to the Operational Separation Date. Notwithstanding the foregoing or anything else herein to the contrary, any individual who has received a written communication from the Parent Group prior to the Operational Separation Date indicating that such individual will be classified as a former employee of the Spinco Group for purposes of compensation and benefits will be treated as a Former Spinco Group Employee for purposes of this Agreement.
“FUTA” shall have the meaning set forth in Section 3.01(f).
“Governmental Authority” shall have the meaning set forth in the Separation and Distribution Agreement.
“HIPAA” shall mean the U.S. Health Insurance Portability and Accountability Act of 1996, as amended, and the regulations promulgated thereunder.
“Individual Agreement” shall mean any individual (i) employment contract, (ii) retention, severance or change of control agreement, (iii) expatriate (including any international assignee) contract or agreement (including agreements and obligations regarding repatriation, relocation, equalization of taxes and living standards in the host country), or (iv) other agreement containing restrictive covenants (including confidentiality, noncompetition and nonsolicitation provisions) between a member of the Parent Group and a Spinco Group Employee, as in effect immediately prior to the Operational Separation Date.
“IRS” shall have the meaning set forth in the Separation and Distribution Agreement.
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“Law” shall have the meaning set forth in the Separation and Distribution Agreement.
“Liabilities” shall have the meaning set forth in the Separation and Distribution Agreement.
“Operational Separation Date” shall mean February 1, 2020, except with respect to the Arconic Retirement Plan I, Amended and Restated effective January 1, 2015 and the Arconic Retirement Plan II, Amended and Restated effective January 1, 2015 for which the Operational Separation Date shall mean January 1, 2020.
“Parent” shall have the meaning set forth in the preamble to this Agreement.
“Parent Annual Bonus Plans” shall have the meaning set forth in Section 4.03(a).
“Parent Awards” shall mean Parent Options, Parent RSU Awards and Parent PSU Awards, collectively.
“Parent Benefit Plan” shall mean any Benefit Plan established, sponsored or maintained by Parent or any of its Subsidiaries immediately prior to the Operational Separation Date, excluding any Spinco Benefit Plan.
“Parent Board” shall have the meaning set forth in the recitals to this Agreement.
“Parent Business” shall have the meaning set forth in the Separation and Distribution Agreement.
“Parent Compensation Committee” shall mean the Compensation Committee of the Parent Board.
“Parent Deferred Fee Plans” shall have the meaning set forth in Section 4.05(a).
“Parent Divided Nonqualified Plans” shall mean the Arconic Deferred Compensation Plan, as amended and restated effective August 1, 2016, the Arconic Inc. Employees’ Excess Benefits Plan A, as amended and restated effective August 1, 2016, the Arconic Inc. Employees’ Excess Benefits Plan B, as amended and restated effective August 1, 2016, the Arconic Inc. Employees Excess Benefits Plan C, as amended and restated effective August 1, 2016, the Arconic Supplemental Pension Plan for Senior Executives, as amended and restated effective August 1, 2016 and the Arconic Global Pension Plan, effective August 1, 2016.
“Parent Divided Pension Plans” shall mean the Arconic Retirement Plan I, Amended and Restated effective January 1, 2015 and the Arconic Retirement Plan II, Amended and Restated effective January 1, 2015.
“Parent Equity Plan” shall mean any equity compensation plan sponsored or maintained by Parent immediately prior to the Effective Time, including the 2013 Arconic Stock Incentive Plan, as Amended and Restated, the RTI International Metals, Inc. 2014 Stock and Incentive Plan, as amended, the Amended and Restated 2009 Alcoa Stock Incentive Plan, as amended and the RTI International Metals, Inc. 2004 Stock Plan, as amended.
“Parent Fee Continuation Plan” shall have the meaning set forth in Section 4.05(b).
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“Parent Group” shall have the meaning set forth in the Separation and Distribution Agreement.
“Parent Group Employees” shall have the meaning set forth in Section 3.01(a).
“Parent HSA” shall have the meaning set forth in Section 7.01(c).
“Parent Liability” shall have the meaning set forth in the Separation and Distribution Agreement.
“Parent Nonemployee Director” means each member of the Parent Board as of immediately after the Effective Time who is not a Parent Group Employee.
“Parent Option” shall mean an option to purchase Parent Shares granted pursuant to a Parent Equity Plan that is outstanding as of immediately prior to the Effective Time.
“Parent Pension Trust” shall mean the Arconic Retirement Plans Master Trust, amended and restated effective as of August 1, 2016 by and between Arconic Inc. and The Bank of New York Mellon.
“Parent PSU Award” shall mean a performance-based restricted stock unit award granted pursuant to a Parent Equity Plan that is outstanding as of immediately prior to the Effective Time.
“Parent Ratio” shall mean the quotient obtained by dividing the Parent Stock Value by the Post-Separation Parent Stock Value.
“Parent RSU Award” shall mean a restricted stock unit award granted pursuant to a Parent Equity Plan that is outstanding as of immediately prior to the Effective Time.
“Parent Savings Plan” shall mean the Arconic Salaried Retirement Savings Plan, as Amended and Restated effective January 1, 2015 and the Arconic Bargaining Retirement Savings Plan, as amended and restated effective January 1, 2015.
“Parent Share Fund” shall have the meaning set forth in Section 5.03(b).
“Parent Shares” shall have the meaning set forth in the Separation and Distribution Agreement.
“Parent Stock Value” shall mean the per share closing trading price of Parent Shares trading “regular way” on the Final Trading Day.
“Parent Welfare Plan” shall mean any Welfare Plan established, sponsored, maintained or contributed to by Parent or any of its Subsidiaries for the benefit of Employees or Former Employees, including the Employees’ Group Benefits Plan of Arconic Inc., Plan I, as amended and restated effective August 1, 2016, the Employees’ Group Benefits Plan of Arconic Inc., Plan II, as amended and restated effective August 1, 2016, the Employees’ Group Benefits Plan of Arconic Inc. Plan I for Retirees, the Employees’ Group Benefits Plan of Arconic Inc. Plan II for Retirees, the Arconic Health Reimbursement Arrangement Plan for Medicare Eligible Retirees, the Arconic Medicare Part B Reimbursement Plan for Certain Eligible Retirees, the Arconic Executive Permanent Life Insurance Plan, the Optional Life Insurance Plan, the Involuntary Separation Plan, the Supplemental Unemployment Benefit Plan, the Arconic Change in Control Severance Plan, as amended and restated effective February 1, 2018, the Arconic Executive Severance Plan and the Legal Fee Reimbursement Plan, effective April 30, 2018, but excluding (i) each Welfare Plan identified in Section 7.08, and (ii) any Spinco Welfare Plan.
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“Party” shall mean a party to this Agreement.
“Person” shall have the meaning set forth in the Separation and Distribution Agreement.
“Post-Separation Parent Awards” shall mean Post-Separation Parent Options, Post-Separation Parent RSU Awards, and the Post-Separation Parent PSU Awards, collectively.
“Post-Separation Parent Option” shall mean a Parent Option adjusted as of the Effective Time in accordance with Section 4.02(b).
“Post-Separation Parent PSU Award” shall mean a Parent PSU Award adjusted as of the Effective Time in accordance with Section 4.02(e).
“Post-Separation Parent RSU Award” shall mean a Parent RSU Award adjusted as of the Effective Time in accordance with Section 4.02(c).
“Post-Separation Parent Stock Value” shall mean the per share closing trading price of Parent Shares trading “ex-distribution” on the Final Trading Day.
“Providing Party” shall have the meaning set forth in Section 2.02(b).
“QDRO” shall mean a qualified domestic relations order within the meaning of Section 206(d) of ERISA and Section 414(p) of the Code.
“Record Date” shall have the meaning set forth in the Separation and Distribution Agreement.
“Requesting Party” shall have the meaning set forth in Section 2.02(b).
“Securities Act” shall mean the U.S. Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder.
“Separation” shall have the meaning set forth in the recitals to this Agreement.
“Separation and Distribution Agreement” shall have the meaning set forth in the recitals to this Agreement.
“Severance Benefits” shall have the meaning set forth in Section 4.04.
“Spinco” shall have the meaning set forth in the preamble to this Agreement.
“Spinco Annual Bonus Plans” shall have the meaning set forth in Section 4.03(a).
“Spinco Awards” shall mean Spinco Options, Spinco RSU Awards, and Spinco PSU Awards, collectively.
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“Spinco Benefit Plan” shall mean any Benefit Plan established, sponsored, maintained or contributed to by a member of the Spinco Group as of or after the Operational Separation Date.
“Spinco Board” shall mean the Board of Directors of Spinco.
“Spinco Business” shall have the meaning set forth in the Separation and Distribution Agreement.
“Spinco Deferred Fee Plan for Directors” shall have the meaning set forth in Section 4.05(a).
“Spinco Designees” shall have the meaning set forth in the Separation and Distribution Agreement.
“Spinco Equity Plan” shall mean the Spinco 2020 Stock Incentive Plan.
“Spinco Group” shall have the meaning set forth in the Separation and Distribution Agreement.
“Spinco Group Employees” shall have the meaning set forth in Section 3.01(a).
“Spinco HSA” shall have the meaning set forth in Section 7.01(c).
“Spinco Liability” shall have the meaning set forth in the Separation and Distribution Agreement.
“Spinco Nonemployee Director” shall mean each member of the Spinco Board as of immediately after the Effective Time who is not a Spinco Group Employee.
“Spinco Nonqualified Plans” shall mean the plans established by the Spinco Group pursuant to Section 6.01(a) that correspond to the Parent Divided Nonqualified Plans.
“Spinco Option” shall mean an option to purchase Spinco Shares granted by Spinco pursuant to the Spinco Equity Plan in accordance with Section 4.02(b).
“Spinco Pension Plans” shall have the meaning set forth in Section 5.01(a).
“Spinco Pension Trust” shall have the meaning set forth in Section 5.01(a).
“Spinco PSU Award” shall mean a performance-based restricted stock unit award granted pursuant to the Spinco Equity Plan in accordance with Section 4.02(f).
“Spinco Ratio” shall mean the quotient obtained by dividing the Parent Stock Value by the Spinco Stock Value.
“Spinco RSU Award” shall mean a restricted stock unit award granted pursuant to the Spinco Equity Plan in accordance with Section 4.02(d).
“Spinco Savings Plans” shall have the meaning set forth in Section 5.03(a).
“Spinco Share Fund” shall have the meaning set forth in Section 5.03(c).
“Spinco Shares” shall have the meaning set forth in the Separation and Distribution Agreement.
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“Spinco Stock Value” shall mean the per share closing trading price of Spinco Shares trading on a “when-issued” basis on the Final Trading Day.
“Spinco Welfare Plans” shall mean the Welfare Plans established, sponsored, maintained or contributed to by any member of the Spinco Group for the benefit of Spinco Group Employees and Former Spinco Group Employees, including each such Welfare Plan that corresponds to a Parent Welfare Plan.
“Subsidiary” shall have the meaning set forth in the Separation and Distribution Agreement.
“Third Party” shall have the meaning set forth in the Separation and Distribution Agreement.
“Transferred Account Balances” shall have the meaning set forth in Section 7.01(d).
“Transferred Director” shall have the meaning set forth in Section 4.05(a).
“Transition Services Agreement” shall have the meaning set forth in the Separation and Distribution Agreement.
“U.S.” shall mean the United States of America.
“Welfare Plan” shall mean any “welfare plan” (as defined in Section 3(1) of ERISA) or a “cafeteria plan” under Section 125 of the Code, and any benefits offered thereunder, and any other plan offering health benefits (including medical, prescription drug, dental, vision, mental health, substance abuse and retiree health), disability benefits, or life, accidental death and dismemberment, and business travel insurance, pre-tax premium conversion benefits, dependent care assistance programs, employee assistance programs, paid time-off programs, contribution funding toward a health savings account, flexible spending accounts or cashable credits.
Section 1.02. Interpretation(a). Section 10.16 of the Separation and Distribution Agreement is hereby incorporated by reference.
Article
II
GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES
Section 2.01. General Principles.
(a) Acceptance and Assumption of Spinco Liabilities. On or prior to the Operational Separation Date, Spinco and the applicable Spinco Designees shall, except as otherwise expressly provided herein, accept, assume and agree to faithfully perform, discharge and fulfill all of the following Liabilities in accordance with their respective terms (each of which shall be considered a Spinco Liability):
(i) any and all wages, salaries, incentive compensation (as the same may be modified by this Agreement), equity compensation (as the same may be modified by this Agreement), commissions, bonuses and any other employee compensation or benefits payable to or on behalf of any Spinco Group Employees and Former Spinco Group Employees after the Operational Separation Date, without regard to when such wages, salaries, incentive compensation, equity compensation, commissions, bonuses or other employee compensation or benefits are or may have been awarded or earned;
(ii) any and all Liabilities whatsoever with respect to claims made by or with respect to any Spinco Group Employees or Former Spinco Group Employees in connection with any Benefit Plan not retained or assumed by any member of the Parent Group pursuant to this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement; and
(iii) any and all Liabilities expressly assumed or retained by any member of the Spinco Group pursuant to this Agreement.
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(b) Acceptance and Assumption of Parent Liabilities. On or prior to the Operational Separation Date, Parent and certain members of the Parent Group designated by Parent shall, except as otherwise expressly provided herein, accept, assume and agree to faithfully perform, discharge and fulfill all of the following Liabilities held by Spinco or any Spinco Designee and Parent and the applicable members of the Parent Group shall be responsible for such Liabilities in accordance with their respective terms (each of which shall be considered a Parent Liability):
(i) any and all wages, salaries, incentive compensation (as the same may be modified by this Agreement), equity compensation (as the same may be modified by this Agreement), commissions, bonuses and any other employee compensation or benefits payable to or on behalf of any Parent Group Employees and Former Parent Group Employees after the Operational Separation Date, without regard to when such wages, salaries, incentive compensation, equity compensation, commissions, bonuses or other employee compensation or benefits are or may have been awarded or earned;
(ii) any and all Liabilities whatsoever with respect to claims made by or with respect to any Parent Group Employees or Former Parent Group Employees in connection with any Benefit Plan not retained or assumed by any member of the Spinco Group pursuant to this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement; and
(iii) any and all Liabilities expressly assumed or retained by any member of the Parent Group pursuant to this Agreement.
(c) Unaddressed Liabilities. To the extent that this Agreement does not address particular Liabilities under any Benefit Plan and the Parties later determine that they should be allocated in connection with the Distribution, the Parties shall agree in good faith on the allocation, taking into account the handling of comparable Liabilities under this Agreement.
Section 2.02. Service Credit.
(a) Service for Eligibility, Vesting and Benefit Purposes. The Spinco Benefit Plans shall, and Spinco shall cause each member of the Spinco Group to, recognize each Spinco Group Employee’s and each Former Spinco Group Employee’s full service with Parent or any of its Subsidiaries or predecessor entities at or before the Operational Separation Date, to the same extent that such service was credited by Parent or its Subsidiary for similar purposes prior to the Operational Separation Date as if such full service had been performed for a member of the Spinco Group, for purposes of eligibility, vesting and determination of level of benefits under any such Spinco Benefit Plan. The Parent Benefit Plans shall, and Parent shall cause each member of the Parent Group to, recognize each Parent Group Employee’s and each Former Parent Group Employee’s full service with Spinco or any of its Subsidiaries or predecessor entities at or before the Operational Separation Date, to the same extent that such service was credited by Spinco or its Subsidiary for similar purposes prior to the Operational Separation Date as if such full service had been performed for a member of the Parent Group, for purposes of eligibility, vesting and determination of level of benefits under any such Parent Benefit Plan.
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(b) Evidence of Prior Service. Notwithstanding anything to the contrary in this Agreement, but subject to Section 3.02 and applicable Law, upon reasonable request by either Party (the “Requesting Party”), the other Party (the “Providing Party”) will provide to the Requesting Party copies of any records available to the Providing Party to document the service, plan participation and membership of former Employees of the Providing Party who are then Employees of the Requesting Party, and will cooperate with the Requesting Party to resolve any discrepancies or obtain any missing data for purposes of determining benefit eligibility, participation, vesting and calculation of benefits with respect to any such Employee.
Section 2.03. Benefit Plans.
(a) Establishment of Plans. As of the Operational Separation Date, Spinco shall, or shall cause an applicable member of the Spinco Group to, adopt Benefit Plans (and related trusts, if applicable), with terms comparable (or such other standard as is specified in this Agreement with respect to any particular Benefit Plan) to those of the corresponding Parent Benefit Plans; provided, however, that Spinco may limit participation in any such Spinco Benefit Plan to Spinco Group Employees and Former Spinco Group Employees who participated in the corresponding Parent Benefit Plan immediately prior to the Operational Separation Date.
(b) Information and Operation. Parent shall provide Spinco with information describing each Parent Benefit Plan election made by a Spinco Group Employee or a Former Spinco Group Employee that may have application to Spinco Benefit Plans from and after the Operational Separation Date, and Spinco shall use its commercially reasonable efforts to administer the Spinco Benefit Plans using those elections. Each Party shall, upon reasonable request, provide the other Party and the other Party’s respective Affiliates, agents, and vendors all information reasonably necessary to the other Party’s operation or administration of its Benefit Plans.
(c) No Duplication or Acceleration of Benefits. Notwithstanding anything to the contrary in this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement, no participant in any Spinco Benefit Plan shall receive service credit or benefits to the extent that receipt of such service credit or benefits would result in duplication of benefits provided to such participant by the corresponding Parent Benefit Plan or any other plan, program or arrangement sponsored or maintained by a member of the Parent Group. Furthermore, unless expressly provided for in this Agreement, the Separation and Distribution Agreement or in any Ancillary Agreement or required by applicable Law, no provision in this Agreement shall be construed to create any right to accelerate vesting or entitlements under any compensation or Benefit Plan, program or arrangement sponsored or maintained by a member of the Parent Group or member of the Spinco Group on the part of any Employee or Former Employee.
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(d) No Expansion of Participation. Unless otherwise expressly provided in this Agreement, determined or agreed to by Parent and Spinco, required by applicable Law, or explicitly set forth in a Spinco Benefit Plan, a Spinco Group Employee or a Former Spinco Group Employee shall be entitled to participate in the Spinco Benefit Plans at the Operational Separation Date only to the extent that such Spinco Group Employee or a Former Spinco Group Employee was entitled to participate in the corresponding Parent Benefit Plan as in effect immediately prior to the Operational Separation Date (to the extent that such Spinco Group Employee or a Former Spinco Group Employee does not participate in the respective Spinco Benefit Plan immediately prior to the Operational Separation Date), it being understood that this Agreement does not expand (i) the number of Spinco Group Employees or Former Spinco Group Employees entitled to participate in any Spinco Benefit Plan, or (ii) the participation rights of Spinco Group Employees or Former Spinco Group Employees in any Spinco Benefit Plans beyond the rights of such Spinco Group Employees or Former Spinco Group Employees under the corresponding Parent Benefit Plans, in each case, after the Operational Separation Date.
(e) Transition Services. The Parties acknowledge that the Parent Group or the Spinco Group may provide administrative services for certain of the other Party’s compensation and benefit programs for a transitional period under the terms of the Transition Services Agreement. The Parties agree to cooperate in good faith to negotiate a business associate agreement (if required by HIPAA or other applicable health information privacy Laws) in connection with such Transition Services Agreement.
(f) Beneficiaries. References to Parent Group Employees, Former Parent Group Employees, Spinco Group Employees, Former Spinco Group Employees, and nonemployee directors of either Parent or Spinco (including Transferred Directors), shall be deemed to refer to their beneficiaries, dependents, survivors and alternate payees, as applicable.
Section 2.04. Individual Agreements.
(a) Assignment by Parent. To the extent necessary, Parent shall assign, or cause an applicable member of the Parent Group to assign, to Spinco or another member of the Spinco Group, as designated by Spinco, all Individual Agreements, with such assignment to be effective as of the Operational Separation Date; provided, however, that to the extent that assignment of any such Individual Agreement is not permitted by the terms of such agreement or by applicable Law, effective as of the Operational Separation Date, each member of the Spinco Group shall be considered to be a successor to each member of the Parent Group for purposes of, and a third-party beneficiary with respect to, such Individual Agreement, such that each member of the Spinco Group shall enjoy all of the rights and benefits under such agreement (including rights and benefits as a third-party beneficiary), with respect to the business operations of the Spinco Group; provided, further, that in no event shall Parent be permitted to enforce any Individual Agreement (including any agreement containing noncompetition or nonsolicitation covenants) against a Spinco Group Employee or a Former Spinco Group Employee for action taken in such individual’s capacity as a Spinco Group Employee or a Former Spinco Group Employee.
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(b) Assumption by Spinco. Effective as of the Operational Separation Date, Spinco will assume and honor, or will cause a member of the Spinco Group to assume and honor, any individual agreement to which any Spinco Group Employee or Former Spinco Group Employee is a Party with any member of the Parent Group, including any Individual Agreement.
Section 2.05. Collective Bargaining. Effective as of the Distribution Date, to the extent necessary, Spinco shall cause the appropriate member of the Spinco Group to (a) assume or retain all collective bargaining agreements (including any national, sector or local collective bargaining agreement) that cover Spinco Group Employees or Former Spinco Group Employees, including any such agreements negotiated in connection with the Separation, and the Liabilities arising under any such collective bargaining agreements, and (b) join any industrial, employer or similar association or federation if membership is required for the relevant collective bargaining agreement to continue to apply. In the event of any conflict between a provision of this Agreement and the requirements of a collective bargaining agreement applicable to either Party, the requirements of the collective bargaining agreement shall control and the Parties shall cooperate in good faith to modify the applicable provision of this Agreement to the minimum extent necessary to permit compliance with the applicable collective bargaining agreement requirements while preserving to the maximum extent possible the originally intended result of such modified provision.
Section 2.06. Non-U.S. Regulatory Compliance. Parent shall have the authority to adjust the treatment described in this Agreement with respect to Spinco Group Employees who are located outside of the United States to ensure compliance with the applicable laws or regulations of countries outside of the United States or to preserve the tax benefits provided under such local tax law or regulation.
Article
III
ASSIGNMENT OF EMPLOYEES
Section 3.01. Active Employees.
(a) Assignment and Transfer of Employees. Effective no later than immediately prior to the Operational Separation Date and except as otherwise required by applicable Law or agreed by the Parties, (i) the applicable member of the Parent Group shall have taken such actions as are necessary to ensure that each individual who is intended to be an employee of the Spinco Group as of the Operational Separation Date (including any such individual who is not actively working as of the Operational Separation Date as a result of an illness, injury or approved leave of absence (or leave of absence otherwise taken in accordance with applicable Law) (collectively, the “Spinco Group Employees”)) is employed by a member of the Spinco Group as of the Operational Separation Date, and (ii) the applicable member of the Parent Group shall have taken such actions as are necessary to ensure that each individual who is intended to be an employee of the Parent Group as of the Operational Separation Date (including any such individual who is not actively working as of the Operational Separation Date as a result of an illness, injury or approved leave of absence (or leave of absence otherwise taken in accordance with applicable Law)) and any other individual employed by the Parent Group as of the Operational Separation Date who is not a Spinco Group Employee (collectively, the “Parent Group Employees”) is employed by a member of the Parent Group as of the Operational Separation Date. Each of the Parties agrees to execute, and to seek to have the applicable Employees execute, such documentation, if any, as may be necessary to reflect such assignment and/or transfer.
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(b) Delayed Transfer Employees. To the extent that applicable Law prevents the Parties from causing any (i) Spinco Group Employee to be employed by a member of the Spinco Group as of the Operational Separation Date as contemplated by Section 3.01(a)(i) or (ii) Parent Group Employee to be employed by a member of the Parent Group as of the Operational Separation Date as contemplated by Section 3.01(a)(ii) (each such employee, a “Delayed Transfer Employee” and the Spinco Group or Parent Group entity to which such Delayed Transfer Employee would have been transferred under Section 3.01(a), the “Destination Employer”), the Parties shall use commercially reasonable efforts to ensure that (A) such Delayed Transfer Employee becomes employed by the Destination Employer at the earliest time permitted by applicable Law and, with respect to any Delayed Transfer Employee who is actively employed as of the Operational Separation Date, and (B) the Destination Employer receives the benefit of such Delayed Transfer Employee’s services from and after the Operation Separation Date, including by entering into an employee leasing or similar arrangement. From and after the commencement of a Delayed Transfer Employee’s employment with the Destination Employer, such Delayed Transfer Employee shall be treated for all purposes of this Agreement, including Section 2.02, as if such Delayed Transfer Employee commenced employment with the Destination Employer as of the Operational Separation Date as contemplated by Section 3.01(a).
(c) At-Will Status. Nothing in this Agreement shall create any obligation on the part of any member of the Parent Group or any member of the Spinco Group to (i) continue the employment of any Employee or permit the return from a leave of absence for any period after the date of this Agreement (except as required by applicable Law), or (ii) change the employment status of any Employee from “at-will,” to the extent that such Employee is an “at-will” employee under applicable Law.
(d) Severance. The Parties acknowledge and agree that the Distribution and the assignment, transfer or continuation of the employment of Employees as contemplated by this Section 3.01 shall not be deemed an involuntary termination of employment that entitles any Spinco Group Employee or Parent Group Employee to severance payments or benefits.
(e) Not a Change of Control/Change in Control. The Parties acknowledge and agree that neither the consummation of the Distribution nor any transaction contemplated by this Agreement, the Separation and Distribution Agreement or any other Ancillary Agreement shall be deemed a “change of control,” “change in control,” or term of similar import for purposes of any Benefit Plan sponsored or maintained by any member of the Parent Group or member of the Spinco Group.
(f) Payroll and Related Taxes. With respect to any Spinco Group Employee or group of Spinco Group Employees, the Parties shall, or shall cause their respective Subsidiaries to, (i) treat Spinco (or the applicable member of the Spinco Group) as a “successor employer” and Parent (or the applicable member of the Parent Group) as a “predecessor,” within the meaning of Sections 3121(a)(1) and 3306(b)(1) of the Code, for purposes of taxes imposed under the United States Federal Insurance Contributions Act, as amended (“FICA”), or the United States Federal Unemployment Tax Act, as amended (“FUTA”), (ii) cooperate with each other to avoid, to the extent possible, the restart of FICA and FUTA upon or following the Operational Separation Date or the Distribution Date, as applicable, with respect to each such Spinco Group Employee for the tax year during which the Operational Separation Date or the Distribution Date, as applicable, occurs, and (iii) use commercially reasonable efforts to implement the alternate procedure described in Section 5 of Revenue Procedure 2004-53; provided, however, that to the extent that Spinco (or the applicable member of the Spinco Group) cannot be treated as a “successor employer” to Parent (or the applicable member of the Parent Group) within the meaning of Sections 3121(a)(1) and 3306(b)(1) of the Code with respect to any Spinco Group Employee or group of Spinco Group Employees, (x) with respect to the portion of the tax year commencing on January 1, 2020 and ending on the Operational Separation Date or the Distribution Date, as applicable, Parent will (A) be responsible for all payroll obligations, tax withholding and reporting obligations for such Spinco Group Employees, and (B) furnish a Form W-2 or similar earnings statement to all such Spinco Group Employees for such period, and (y) with respect to the remaining portion of such tax year, Spinco will (A) be responsible for all payroll obligations, tax withholding and reporting obligations regarding such Spinco Group Employees, and (B) furnish a Form W-2 or similar earnings statement to all such Spinco Group Employees.
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Section 3.02. Nonsolicitation. Each Party agrees that, for a period of twelve (12) months from the Operational Separation Date, such Party shall not solicit for employment any individual who is a Parent Group Employee, in the case of a Spinco, or a Spinco Group Employee, in the case of Parent; provided, however, that without limiting the generality of the foregoing prohibition on solicitation of Employees of the other Party, this Section 3.02 shall not prohibit (a) generalized solicitations that are not directed to specific Persons or Employees of the other Party, (b) the solicitation of a Person whose employment was involuntarily terminated by the other Party, or (c) the solicitation of a Person after receipt by the soliciting Party (in advance of any solicitation or, in the case of a response to a general solicitation as permitted under the foregoing clause (a), in advance of any subsequent solicitation in connection with the recruiting process) of the express written consent of the Party that employs the Person who is to be solicited. Except as provided in the foregoing clause (b) with respect to involuntary terminations, without regard to the use of the term “Employee” or “employs,” the restrictions under this Section 3.02 shall be applicable to (i) Parent Group Employees whose employment terminates after the Operational Separation Date, and (ii) Spinco Group Employees whose employment terminates after the Operational Separation Date, in each case, until the date that is six (6) months after such Employee’s last date of employment with Parent or Spinco, as applicable. For the avoidance of doubt, the restrictions under this Section 3.02 shall not apply to Former Parent Group Employees or Former Spinco Group Employees whose most recent employment with Parent and its Subsidiaries was terminated prior to the Operational Separation Date.
Article
IV
EQUITY, INCENTIVE AND EXECUTIVE COMPENSATION1
Section 4.01. Generally. Parent Awards that are outstanding as of immediately prior to the Effective Time shall be adjusted as described below; provided, however, that effective immediately prior to the Effective Time, the Parent Compensation Committee may provide for different adjustments with respect to some or all Parent Awards to the extent that the Parent Compensation Committee deems such adjustments necessary and appropriate. Any adjustments made by the Parent Compensation Committee pursuant to the foregoing sentence shall be deemed incorporated by reference herein as if fully set forth below and shall be binding on the Parties and their respective Affiliates. Before the Effective Time, the Spinco Equity Plan shall be established, with such terms as are necessary to permit the implementation of the provisions of Section 4.02.
1 To be updated to reflect treatment of awards held by chief executive officer once determined.
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Section 4.02. Equity Incentive Awards.
(a) Outstanding Parent Options Held by Parent Group Employees and Former Parent Group Employees. Each Parent Option held by a Parent Group Employee or a Former Parent Group Employee, that is outstanding and unexercised as of immediately prior to the Effective Time, shall be subject to the same terms and conditions after the Effective Time as the terms and conditions applicable to such Parent Option immediately prior to the Effective Time; provided, however, that certain restrictions may be imposed on the Parent Option after the Effective Time if necessary and appropriate to comply with applicable Law; and further, provided, however, that from and after the Effective Time:
(i) the number of Parent Shares subject to such Parent Option, rounded down to the nearest whole number of shares, shall be equal to the product obtained by multiplying (A) the number of Parent Shares subject to such Parent Option immediately prior to the Effective Time by (B) the Parent Ratio; and
(ii) the per share exercise price of such Parent Option, rounded up to the nearest whole cent, shall be equal to the quotient obtained by dividing (A) the per share exercise price of such Parent Option immediately prior to the Effective Time by (B) the Parent Ratio.
(b) Outstanding Parent Options Held by Spinco Group Employees and Former Spinco Group Employees. Each Parent Option held by a Spinco Group Employee or a Former Spinco Group Employee, that is outstanding and unexercised as of immediately prior to the Effective Time, shall be converted into a Spinco Option and shall otherwise be subject to the same terms and conditions after the Effective Time as the terms and conditions applicable to the corresponding Parent Option immediately prior to the Effective Time (except that references to “Parent” in the applicable plan and award agreement shall be deemed to refer to “Spinco,” unless clearly dictated otherwise by context); provided, however, that certain restrictions may be imposed on the Spinco Option after the Effective Time if necessary and appropriate to comply with applicable Law; and further provided, however, that from and after the Effective Time:
(i) the number of Spinco Shares subject to such Spinco Option, rounded down to the nearest whole number of shares, shall be equal to the product obtained by multiplying (A) the number of Parent Shares subject to the corresponding Parent Option immediately prior to the Effective Time by (B) the Spinco Ratio; and
(ii) the per share exercise price of such Spinco Option, rounded up to the nearest whole cent, shall be equal to the quotient obtained by dividing (A) the per share exercise price of the corresponding Parent Option immediately prior to the Effective Time by (B) the Spinco Ratio.
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(c) Outstanding Parent RSU Awards Held by Parent Group Employees and Former Parent Group Employees. Each Parent RSU Award held by a Parent Group Employee or a Former Parent Group Employee that is outstanding as of immediately prior to the Effective Time, shall be subject to the same terms and conditions after the Effective Time as the terms and conditions applicable to such Parent RSU Award immediately prior to the Effective Time, including any deferral election applicable to the delivery of vested shares; provided, however, that certain restrictions may be imposed on the Parent RSU Award after the Effective Time if necessary and appropriate to comply with applicable Law; and further, provided, however, that from and after the Effective Time, the number of Parent Shares to which such Parent RSU Award relates shall be equal to the product obtained by multiplying (i) the number of Parent Shares to which such Parent RSU Award related immediately prior to the Effective Time by (ii) the Parent Ratio (with any resulting fractional share paid to the award holder promptly following the Effective Time in the form of a cash payment equal to the product of such fractional share and the Post-Separation Parent Stock Value; provided, however, that if the cash payment may result in adverse tax or legal treatment of the award holder, Parent or any member of the Parent Group, as determined by Parent in its sole discretion, the shares subject to the Parent RSU Award may instead be rounded down to the nearest whole number of shares).
(d) Outstanding Parent RSU Awards Held by Spinco Group Employees and Former Spinco Group Employees. Each Parent RSU Award held by a Spinco Group Employee or Former Spinco Group Employee that is outstanding as of immediately prior to the Effective Time, shall be converted into a Spinco RSU Award, and shall otherwise be subject to the same terms and conditions after the Effective Time as the terms and conditions applicable to the corresponding Parent RSU Award immediately prior to the Effective Time, including any deferral election applicable to the delivery of vested shares (except that references to Parent in the applicable plan and award agreement shall be deemed to refer to Spinco, unless clearly dictated otherwise by context); provided, however, that certain restrictions may be imposed on the Spinco RSU Award after the Effective Time if necessary and appropriate to comply with applicable Law; and further, provided, however, that from and after the Effective Time, the number of Spinco Shares to which such Spinco RSU Award relates shall be equal to the product obtained by multiplying (i) the number of Parent Shares to which the corresponding Parent RSU Award related immediately prior to the Effective Time by (ii) the Spinco Ratio (with any resulting fractional share paid to the award holder promptly following the Effective Time in the form of a cash payment equal to the product of such fractional share and the Spinco Stock Value; provided, however, that if the cash payment may result in adverse tax or legal treatment of the award holder, Parent, any member of the Parent Group, Spinco or any member of the Spinco Group, as determined by Parent in its sole discretion, the shares subject to the Spinco RSU Award may instead be rounded down to the nearest whole number of shares).
(e) Outstanding Parent PSU Awards Held by Parent Group Employees and Former Parent Group Employees. Each Parent PSU Award held by a Parent Group Employee or a Former Parent Group Employee that is outstanding as of immediately prior to the Effective Time, shall be subject to the same terms and conditions after the Effective Time as the terms and conditions applicable to such Parent PSU Award immediately prior to the Effective Time, including any deferral election applicable to the delivery of vested shares; provided, however, that certain restrictions may be imposed on the Parent PSU Award after the Effective Time if necessary and appropriate to comply with applicable Law; and further, provided, however, that from and after the Effective Time:
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(i) the number of Parent Shares to which such Parent PSU Award relates shall be equal to the product obtained by multiplying (A) the number of Parent Shares to which such Parent PSU Award related immediately prior to the Effective Time by (B) the Parent Ratio (with any resulting fractional share paid to the award holder promptly following the Effective Time in the form of a cash payment equal to the product of such fractional share and the Post-Separation Parent Stock Value; provided, however, that if the cash payment may result in adverse tax or legal treatment of the award holder, Parent or any member of the Parent Group, as determined by Parent in its sole discretion, the shares subject to the Parent PSU Award may instead be rounded down to the nearest whole number of shares); and
(ii) the performance conditions applicable to each such Parent PSU Award shall be (A) for the 2018-2020 performance period with respect to any such Parent PSU Award, deemed achieved at the Effective Time based on the actual level of achievement of the applicable performance goals during the portion of the performance period ending on December 31, 2019, and (B) for the 2020-2022 performance period, the conditions established by the Parent Compensation Committee prior to the Effective Time.
(f) Outstanding Parent PSU Awards Held by Spinco Group Employees and Former Spinco Group Employees. Each Parent PSU Award held by a Spinco Group Employee or a Former Spinco Group Employee that is outstanding as of immediately prior to the Effective Time shall be converted into a Spinco PSU Award and shall otherwise be subject to the same terms and conditions after the Effective Time as the terms and conditions applicable to the corresponding Parent PSU Award immediately prior to the Effective Time, including any deferral election applicable to the delivery of vested shares (except that references to Parent in the applicable plan and award agreement shall be deemed to refer to Spinco, unless clearly dictated otherwise by context); provided, however, that certain restrictions may be imposed on the Spinco PSU Award after the Effective Time if necessary and appropriate to comply with applicable Law; and further provided, however, that from and after the Effective Time:
(i) the number of Spinco Shares to which such Spinco PSU Award relates shall be equal to the product obtained by multiplying (A) the number of Parent Shares to which the corresponding Parent PSU Award related immediately prior to the Effective Time by (B) the Spinco Ratio (with any resulting fractional share paid to the award holder promptly following the Effective Time in the form of a cash payment equal to the product of such fractional share and the Spinco Stock Value; provided, however, that if the cash payment may result in adverse tax or legal treatment of the award holder, the Parent, any member of the Parent Group, Spinco or any member of the Spinco Group, as determined by the Parent in its sole discretion, the shares subject to the Spinco PSU Award may instead be rounded down to the nearest whole number of shares); and
(ii) the performance conditions applicable to each such Spinco PSU Award shall be (A) for the 2018-2020 performance period with respect to any such Spinco PSU Award, deemed achieved at the Effective Time based on the actual level of achievement of the applicable performance goals during the portion of the performance period ending on December 31, 2019, and (B) for the 2020-2022 performance period, the conditions established by the Parent Compensation Committee prior to the Effective Time.
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(g) Miscellaneous Award Terms. None of the Separation, the Distribution nor any employment transfer described in Section 3.01(a) shall constitute a termination of employment for any Employee for purposes of any Post-Separation Parent Award or any Spinco Award. After the Effective Time, for any award adjusted under this Section 4.02, any reference to a “change in control,” “change of control” or similar definition in an award agreement, employment agreement or Parent Equity Plan applicable to such award (i) with respect to Post-Separation Parent Awards, shall be deemed to refer to a “change in control,” “change of control” or similar definition as set forth in the applicable award agreement, employment agreement or Parent Equity Plan, and (ii) with respect to Spinco Awards, shall be deemed to refer to a “Change in Control” as defined in the Spinco Equity Plan.
(h) Tax Reporting and Withholding. Unless prohibited by applicable Law, following the Effective Time, (i) Parent shall be solely responsible for all Liabilities, including all income, payroll and other tax remittance and reporting, and entitled to all tax deductions, associated with Post-Separation Parent Awards, and (ii) Spinco shall be solely responsible for all Liabilities, including all income, payroll and other tax remittance and reporting, and entitled to all tax deductions associated with, Spinco Awards. Parent and Spinco agree to enter into any necessary agreements regarding the subject matter of this Section 4.02(h) to enable Parent and Spinco to fulfill their respective obligations hereunder, including but not limited to, compliance with all applicable Laws regarding the reporting, withholding or remitting of income and/or taxes.
(i) Registration and Other Regulatory Requirements. Spinco agrees to file Forms S-1, S-3 and S-8 registration statements with respect to, and to cause to be registered pursuant to the Securities Act, the Spinco Shares authorized for issuance under the Spinco Equity Plan, as required pursuant to the Securities Act, before the date of issuance of any Spinco Shares pursuant to the Spinco Equity Plan. The Parties shall take such additional actions as are deemed necessary or advisable to effectuate the foregoing provisions of this Section 4.02(i), including compliance with securities Laws and other legal requirements associated with equity compensation awards in affected non-U.S. jurisdictions. Parent agrees to facilitate the adoption and approval of the Spinco Equity Plan consistent with the requirements of Treasury Regulations Section 1.162-27(f)(4)(iii).
(j) Parent Awards in Certain Non-U.S. Jurisdictions. Notwithstanding the foregoing provisions of this Section 4.02, the Parties may mutually agree, in their sole discretion, not to adjust certain outstanding Parent Awards held by individuals located outside of the United States pursuant to the foregoing provisions of this Section 4.02, where those actions would create or trigger adverse legal, accounting or tax consequences for Parent, Spinco, and/or the affected non-U.S. award holders. In such circumstances, Parent and/or Spinco may take any action necessary or advisable to prevent any such adverse legal, accounting or tax consequences, including, but not limited to, agreeing to modify any aspect of the adjustment method set forth in this Section 4.02 or to apply an alternate adjustment method. Where and to the extent required by applicable Law or tax considerations outside the United States, the adjustments described in this Section 4.02 shall be deemed to have been effectuated immediately prior to the Distribution Date.
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Section 4.03. Nonequity Incentive Plans.
(a) Annual Bonus Plans. Immediately prior to the Effective Time, Spinco Group Employees shall cease participating in each Parent annual bonus plan or policy (the “Parent Annual Bonus Plans”) and, as of the Effective Time, Spinco Group Employees who were eligible to participate in Parent Annual Bonus Plans shall be eligible to participate in the Spinco annual bonus plans or policies (the “Spinco Annual Bonus Plans”). Spinco shall be solely responsible for funding, paying and discharging all obligations under the Spinco Annual Bonus Plans in respect of the annual bonus payable to the Spinco Group Employees in respect of the calendar year in which the Effective Time occurs (and Parent shall have no liability with respect to annual bonuses for such year).
(b) Incentive Plans. As of the Effective Time, (i) the Parent Group shall retain (or assume to the extent necessary) sponsorship of all commission bonus and sales incentive plans covering Parent Group Employees, and, from and after the Effective Time, all Liabilities thereunder shall be Liabilities of the Parent Group, and (ii) the Spinco Group shall retain (or assume to the extent necessary) sponsorship of all commission bonus and sales incentive plans covering Spinco Group Employees, and, from and after the Effective Time, all Liabilities thereunder shall be Liabilities of the Spinco Group.
Section 4.04. Severance Benefits. Spinco shall be solely responsible for all Liabilities in respect of all of the costs of providing benefits under any applicable severance, separation, redundancy, termination or similar plan, program, practice, contract, agreement, law or regulation (such benefits to include, if applicable, any medical or other welfare benefits, outplacement benefits, accrued vacation, and taxes) (collectively, “Severance Benefits”) relating to the termination or alleged termination of employment of any Former Spinco Group Employee and of any Spinco Group Employee that occurs on or after the Operational Separation Date. Parent shall be solely responsible for all Liabilities in respect of all the costs of providing the Severance Benefits relating to the termination or alleged termination of employment of any Former Parent Group Employee and of any Parent Group Employee that occurs on or after the Operational Separation Date.
Section 4.05. Director Compensation.
(a) Establishment of Deferred Fee Plan for Directors. Before the Effective Time, Spinco shall establish the Spinco Deferred Fee Plan for Directors. Each Spinco Nonemployee Director who served on the Parent Board immediately prior to the Effective Time but who will no longer serve on the Parent Board following the Effective Time (a “Transferred Director”), and held a deferred fee account under the Amended and Restated Arconic Deferred Fee Plan for Directors, effective November 1, 2016, or the Arconic Deferred Fee Plan for Directors, as amended effective July 9, 1999, or the Arconic Deferred Fee Estate Enhancement Plan for Directors, effective July 10, 1998 (collectively, the “Parent Deferred Fee Plans”) immediately prior to the Effective Time, shall, as of the Effective Time, be credited under the Spinco Deferred Fee Plan for Directors with the amount of his or her deferred fee account balance under the Parent Deferred Fee Plans and shall cease participation in the Parent Deferred Fee Plans as of the Effective Time (it being understood that such cessation shall not trigger any distribution of payments or benefits under the Parent Deferred Fee Plans), and, as of the Effective Time, except as otherwise provided in clause (f) below, Parent shall cease to have any Liability to any such Spinco Nonemployee Director under the Parent Deferred Fee Plans. All cash-settled Parent Shares notionally credited to each Transferred Director’s deferred fee account under the Parent Deferred Fee Plans (“Cash-Settled Units”), the liability for which is transferred to Spinco and the Spinco Deferred Fee Plan for Directors pursuant to the preceding sentence, shall be adjusted so that, from and after the Effective Time, such Cash-Settled Units relate to a number of Spinco Shares (including any resulting fractional share) equal to the product obtained by multiplying (i) the number of Parent Shares to which such Cash-Settled Units related immediately prior to the Effective Time, by (ii) the Spinco Ratio. Notwithstanding the preceding sentence, if a Transferred Director holds, as of immediately prior to the Effective Time, Parent Shares, Parent RSU Awards, and Cash-Settled Units with a value of at least two times the stock ownership guideline under Parent’s non-employee director compensation policy, all of such Transferred Director’s Cash-Settled Units shall be adjusted so that, immediately after the Effective Time, such Cash-Settled Units relate to (A) a number of Parent Shares equal to the number of Parent Shares to which such Cash-Settled Units related immediately prior to the Effective Time and (B) a number of Spinco Shares equal to the number of Parent Shares to which such Cash-Settled Units related immediately prior to the Effective Time multiplied by the Distribution Ratio, and all such adjusted Cash-Settled Units will otherwise continue to have the same terms and conditions that applied to the original Cash-Settled Units immediately prior to the Effective Time.
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(b) Parent Deferred Fee Plan and Parent Fee Continuation Plan. Parent shall continue to be responsible for Liabilities in respect of the Parent Nonemployee Directors and Former Nonemployee Directors under the Parent Deferred Fee Plans and the Arconic Fee Continuation Plan for Non-Employee Directors as amended effective November 10, 1995 and September 15, 2006 (the “Parent Fee Continuation Plan”) and shall be responsible for Liabilities in respect of Transferred Directors under the Parent Deferred Fee Plans solely to the extent provided by clause (f) below.
(i) All Cash-Settled Units held in the accounts of Parent Nonemployee Directors under the Parent Deferred Fee Plans immediately after the Effective Time shall be adjusted so that, from and after the Effective Time, such Cash-Settled Units relate to a number of Parent Shares (including any resulting fractional share) equal to the product obtained by multiplying (A) the number of Parent Shares to which such Cash-Settled Units related immediately prior to the Effective Time, by (B) the Parent Ratio. Notwithstanding the preceding sentence, if a Parent Nonemployee Director holds, as of immediately prior to the Effective Time, Parent Shares, Parent RSU Awards, and Cash-Settled Units with a value of at least two times the stock ownership guideline under Parent’s non-employee director compensation policy, all of such Parent Nonemployee Director’s Cash-Settled Units shall be adjusted so that, immediately after the Effective Time, such Cash-Settled Units relate to (1) a number of Parent Shares equal to the number of Parent Shares to which such Cash-Settled Units related immediately prior to the Effective Time and (2) a number of Spinco Shares equal to the number of Parent Shares to which such Cash-Settled Units related immediately prior to the Effective Time multiplied by the Distribution Ratio, and all such adjusted Cash-Settled Units will otherwise continue to have the same terms and conditions that applied to the original Cash-Settled Units immediately prior to the Effective Time.
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(ii) All cash-settled Parent Shares notionally credited to the accounts of Former Nonemployee Directors under the Parent Deferred Fee Plans immediately after the Effective Time shall be adjusted so that, from and after the Effective Time, such notionally credited shares represent (A) a number of cash-settled Parent Shares equal to the number of Parent Shares notionally credited to such account immediately prior to the Effective Time and (B) a number of cash-settled Spinco Shares equal to the number of Parent Shares notionally credited to such account immediately prior to the Effective Time multiplied by the Distribution Ratio.
(iii) Each Former Nonemployee Director’s share-based payment entitlement under the Parent Fee Continuation Plan shall be adjusted so that, immediately after the Effective Time, such entitlement relates to (A) a number of Parent Shares equal to the number of Parent Shares to which such payment entitlement related immediately prior to the Effective Time and (B) a number of Spinco Shares equal to the number of Parent Shares to which such payment entitlement related immediately prior to the Effective Time multiplied by the Distribution Ratio.
(c) Director Compensation. Parent shall be responsible for the payment of any fees for service on the Parent Board that are earned at, before, or after the Effective Time, and Spinco shall not have any responsibility for any such payments. With respect to any Spinco Nonemployee Director, Spinco shall be responsible for the payment of any fees for service on the Spinco Board that are earned at any time after the Effective Time and Parent shall not have any responsibility for any such payments. Notwithstanding the foregoing, Spinco shall commence paying quarterly cash retainers to Spinco Nonemployee Directors in respect of the quarter in which the Effective Time occurs; provided that (i) if Parent has already paid such quarter’s cash retainers to Parent nonemployee directors prior to the Effective Time, then within thirty (30) days after the Distribution Date, Spinco will pay Parent an amount equal to the portion of such payment that is attributable to Transferred Directors’ service to Spinco after the Distribution Date (other than any amount that is subject to a deferral election and is credited or to be credited to any such director’s account under the Spinco Deferred Fee Plan for Directors), and (ii) if Parent has not yet paid such quarter’s cash retainers to Parent Nonemployee Directors prior to the Effective Time, then within thirty (30) days after the Distribution Date, Parent will pay Spinco an amount equal to the portion of such payment that is attributable to Transferred Directors’ service to Parent on and prior to the Distribution Date.
(d) Outstanding Parent RSU Awards Held by Parent Nonemployee Directors. Each vested, unvested and/or deferred (including under the Parent Deferred Fee Plans) Parent RSU Award held by a Parent Nonemployee Director that is outstanding as of immediately prior to the Effective Time, shall be subject to the same terms and conditions after the Effective Time as the terms and conditions applicable to such Parent RSU Award immediately prior to the Effective Time, including any deferral election applicable to the delivery of vested shares; provided, however, that certain restrictions may be imposed on the Parent RSU Award after the Effective Time if necessary and appropriate to comply with applicable Law; and further, provided, however, that from and after the Effective Time, the number of Parent Shares to which such Parent RSU Award relates shall be equal to the product obtained by multiplying (i) the number of Parent Shares to which such Parent RSU Award related immediately prior to the Effective Time by (ii) Parent Ratio (with any resulting fractional share paid to the award holder promptly following the Effective Time in the form of a cash payment equal to the product of such fractional share and the Post-Separation Parent Stock Value; provided, however, that if the cash payment may result in adverse tax or legal treatment of the award holder, Parent or any member of the Parent Group, as determined by Parent in its sole discretion, the shares subject to the Parent RSU Award may instead be rounded down to the nearest whole number of shares).
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(e) Outstanding Parent RSU Awards Held by Transferred Nonemployee Directors. Each vested, unvested and/or deferred (including under the Parent Deferred Fee Plans) Parent RSU Award held by a Transferred Nonemployee Director that is outstanding as of immediately prior to the Effective Time, shall be converted into a Spinco RSU Award, and shall otherwise be subject to the same terms and conditions after the Effective Time as the terms and conditions applicable to the corresponding Parent RSU Award immediately prior to the Effective Time, including any deferral election applicable to the delivery of vested shares (except that references to Parent in the applicable plan and award agreement shall be deemed to refer to Spinco, unless clearly dictated otherwise by context); provided, however, that certain restrictions may be imposed on the Spinco RSU Award after the Effective Time if necessary and appropriate to comply with applicable Law; and further provided, however, that from and after the Effective Time, the number of Spinco Shares to which such Spinco RSU Award relates shall be equal to the product obtained by multiplying (i) the number of Parent Shares to which the corresponding Parent RSU Award related immediately prior to the Effective Time by (ii) the Spinco Ratio (with any resulting fractional share paid to the award holder promptly following the Effective Time in the form of a cash payment equal to the product of such fractional share and the Spinco Stock Value; provided, however, that if the cash payment may result in adverse tax or legal treatment of the award holder, Parent, any member of the Parent Group, Spinco or any member of the Spinco Group, as determined by Parent in its sole discretion, the shares subject to the Spinco RSU Award may instead be rounded down to the nearest whole number of shares).
(f) Outstanding Parent RSU Awards Held by Former Nonemployee Directors. Each Former Nonemployee Director who holds a vested Parent RSU Award that is deferred under the Parent Deferred Fee Plans as of immediately prior to the Effective Time shall receive, as of the Effective Time, a vested Spinco RSU Award for a number of Spinco Shares equal to the number of Parent Shares subject to such award immediately prior to the Effective Time multiplied by the Distribution Ratio. Except as set forth in this Section 4.05(f), the vested Parent RSU Award and vested Spinco RSU Award issued in accordance with this Section 4.05(f) shall, from and after the Effective Time, each be subject to the same terms and conditions (including with respect to payment timing) as were applicable to the vested Parent RSU Award immediately prior to the Effective Time.
(g) Tax Reporting and Withholding.
(i) Unless prohibited by applicable Law, following the Effective Time, (A) Parent shall be solely responsible for all Liabilities, including all income, payroll and other tax remittance and reporting, associated with compensation and benefits for Parent Nonemployee Directors and Former Nonemployee Directors (including, without limitation, with respect to Spinco RSU Awards held by Former Nonemployee Directors), and (B) Spinco shall be solely responsible for all Liabilities, including all income, payroll and other tax remittance and reporting, associated with compensation and benefits for Transferred Directors. Parent and Spinco agree to enter into any necessary agreements regarding the subject matter of this Section 4.05(g) to enable Parent and Spinco to fulfill their respective obligations hereunder, including but not limited to, compliance with all applicable Laws regarding the reporting, withholding or remitting of income and/or taxes.
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(ii) After the Effective Time, Parent RSU Awards, regardless of by whom held, shall be settled by Parent, and Spinco RSU Awards, regardless of by whom held, shall be settled by Spinco.
(iii) Cooperation. Each of the Parties shall establish an appropriate administration system in order to administer, in an orderly manner, (A) the settlement of SpinCo RSU Awards held by Former Nonemployee Directors, and (B) the reporting requirements with respect to such Spinco RSU Awards.
Article
V
QUALIFIED RETIREMENT PLANS
Section 5.01. Spinco Pension Plans.
(a) Establishment and Retention of Spinco Pension Plans. As of the Operational Separation Date, Spinco shall establish Spinco pension plans and a Spinco pension trust, each of which shall initially have substantially the same terms as those of the corresponding Parent Divided Pension Plan and Parent Pension Trust, respectively, as in effect immediately prior to the Operational Separation Date (such plans shall be referred to as the “Spinco Pension Plans” and the “Spinco Pension Trust,” respectively). At least thirty (30) days prior to the Operational Separation Date, Parent shall have filed the notice required under Section 6058(b) of the Code. On, or as soon as practicable after, the Operational Separation Date and after receipt by Parent of (i) a copy of the Spinco Pension Plans; and (ii) a copy of certified resolutions of the Spinco Board (or its authorized committee or other delegate) evidencing adoption of the Spinco Pension Plans and the Spinco Pension Trust and the assumption by the Spinco Pension Plans of the Liabilities described in Section 5.01(b), Parent shall direct the trustee of the Parent Pension Trust to transfer assets of the Spinco Pension Plans to the Spinco Pension Trust in the amounts described in Section 5.01(b).
(b) Assumption of Liabilities; ERISA Section 4044 Transfer.
(i) Parent Divided Pension Plans. As of the Operational Separation Date, Spinco shall cause each Spinco Pension Plan to assume Liabilities for Spinco Group Employees and Former Spinco Group Employees under the corresponding Parent Divided Pension Plan and shall cause the Spinco Pension Trust to accept Assets with respect to such assumed Liabilities (including Assets and Liabilities in respect of beneficiaries and/or alternate payees). In accordance with the rules set forth in Section 5.01(b)(ii), the Parent Pension Trust shall transfer such Assets to the Spinco Pension Trust and, upon completion of such Asset transfer, the Parent Divided Pension Plans and the Parent Group shall be relieved of such Liabilities.
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(ii) Transfer of Assets. The amount of Assets (whether in cash or kind, as determined by Parent’s Benefits Management Committee) to be transferred from the Parent Pension Trust to the Spinco Pension Trust in respect of the assumption of Liabilities by Spinco under Section 5.01(b)(i) shall be determined as of the Operational Separation Date in accordance with, and shall comply with, Section 414(l) of the Code and, to the extent deemed applicable by the Parties, ERISA Section 4044. Assumptions used to determine the value (or amount) of the Assets to be transferred shall be the safe harbor assumptions specified for valuing benefits in trusteed plans under Department of Labor Regulations Section 4044.51-57 and, to the extent not so specified, shall be based on the assumptions used in the annual valuation report to determine minimum funding requirements most recently prepared before the transfer by the actuary for the Parent Divided Pension Plans. The transfer amounts described above shall be credited or debited, as applicable, with a pro rata share of the actual investment earnings or losses allocable to the transfer amount for the period between the Operational Separation Date and an assessment date set by Parent that is as close as practicable, taking into account the timing and reporting of valuation of Assets in the Parent Pension Trust, to the date upon which Assets equal in value to the transfer amount are actually transferred from the Parent Pension Trust to the Spinco Pension Trust. During the time before such transfer, benefits for Spinco Group Employees who terminate employment with the Spinco Group shall be paid from the Parent Pension Trust. The ultimate transfer amount shall be reduced by the amount of these benefits and credited or debited by the actual investment earnings or losses from the payment date to the assessment date set above by Parent. In addition, during this period, Spinco will be responsible for a pro rata share of third party fees, costs and expenses, including investment management, trustee and administration fees attributable to the Assets of the Spinco Pension Plan that remain in the Parent Pension Trust. The entries in the Parent Divided Pension Plan funding standard accounts shall be divided between the Parent Divided Pension Plan and the Spinco Pension Plan based on the guidance provided in Revenue Rulings 81-212 and 86-47. The Parties agree that to the extent necessary to effectuate the provisions of this Section 5.01(b), there may be additional transfers of Assets between the Parent Pension Trust and Spinco Pension Trust on such dates as agreed by the Parties.
(c) Spinco Pension Plan Provisions. The Spinco Pension Plans shall provide that:
(i) Spinco Group Employees and Former Spinco Group Employees shall (A) be eligible to participate in the corresponding Spinco Pension Plan as of the Operational Separation Date to the extent that they were eligible to participate in the applicable Parent Divided Pension Plan as of immediately prior to the Operational Separation Date, and (B) receive credit for vesting, eligibility and benefit service for all service credited for those purposes under the applicable Parent Divided Pension Plan as of the Operational Separation Date;
(ii) the compensation paid by the Parent Group to a Spinco Group Employee or a Former Spinco Group Employee that is recognized under the applicable Parent Divided Pension Plan as of immediately prior to the Operational Separation Date shall be credited and recognized for all applicable purposes under the corresponding Spinco Pension Plan;
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(iii) the accrued benefit of each Spinco Group Employee or Former Spinco Group Employee under the applicable Parent Divided Pension Plan as of the Operational Separation Date shall be payable under the corresponding Spinco Pension Plan at the time and in a form that would have been permitted under the corresponding Parent Divided Pension Plan as in effect as of the Operational Separation Date to the extent required by Section 411(d)(6) of the Code, with employment by the Parent Group before the Operational Separation Date treated as employment by the Spinco Group under the applicable Spinco Pension Plan for purposes of determining eligibility for optional forms of benefit, early retirement benefits, or other benefit forms; and
(iv) each Spinco Pension Plan shall assume and honor the terms of all QDROs, beneficiary designations and benefit elections in effect under the corresponding Parent Divided Pension Plan as of immediately prior to the Operational Separation Date with respect to Spinco Group Employees and Former Spinco Group Employees.
(d) Determination Letter Request. Spinco shall submit an application to the IRS as soon as practicable after the Operational Separation Date (but no later than the last day of the applicable remedial amendment period as defined in applicable Code provisions) requesting a determination letter regarding the qualified status of the Spinco Pension Plans under Section 401(a) of the Code and the tax-exempt status of the Spinco Pension Trust under Section 501(a) of the Code as of the Operational Separation Date and shall make any amendments reasonably requested by the IRS to receive such a favorable determination letter.
(e) Parent Divided Pension Plans after Operational Separation Date. From and after the Operational Separation Date, (i) the Parent Divided Pension Plans shall continue to be responsible for Liabilities in respect of Parent Group Employees and Former Parent Group Employees, and (ii) no Spinco Group Employees or Former Spinco Group Employees shall accrue any benefits under the Parent Divided Pension Plans. Without limiting the generality of the foregoing, Spinco Group Employees or Former Spinco Group Employees shall cease to be participants in the Parent Divided Pension Plans, effective as of the Operational Separation Date.
(f) Plan Fiduciaries. For all periods after the Operational Separation Date, the Parties agree that the applicable fiduciaries of each of the Parent Divided Pension Plans and the Spinco Pension Plans, respectively, shall have the authority with respect to the Parent Divided Pension Plans and the Spinco Pension Plans, respectively, to determine the plan investments and such other matters as are within the scope of their duties under ERISA and the terms of the applicable plan documents.
(g) No Loss of Unvested Benefits; No Distributions. The transfer of any Spinco Group Employee’s employment to the Spinco Group will not result in the loss of that Spinco Group Employee’s unvested accrued benefits (if any) under the Parent Divided Pension Plans, the Liability for which benefits shall be assumed under the Spinco Pension Plans as provided herein. No Spinco Group Employee shall be entitled to a distribution of his or her benefit under the applicable Parent Divided Pension Plan or the applicable Spinco Pension Plan as a result of such transfer of employment.
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Section 5.02. Nondivided Qualified Pension Plans. As of the Operational Separation Date, the Parent Group shall retain (or assume to the extent necessary) sponsorship of the Howmet Corporation Pension Plan as amended and restated effective January 1, 2015, the Howmet Corporation Muskegon County Operations Hourly Employees Pension Plan as amended and restated effective January 1, 2015, the Huck International, Inc. Retirement Plan as amended and restated effective January 1, 2015, the Pension Plan of RMI Titanium Co. as amended and restated effective January 1, 2013 and the Pension Plan for Salaried Employees of RMI Titanium Co. as amended and restated effective January 1, 2013, and, from and after the Operational Separation Date, all Assets and Liabilities thereunder shall be Assets and Liabilities of the Parent Group.
Section 5.03. Spinco Savings Plans.
(a) Establishment of Plans. As of the Operational Separation Date, Spinco shall establish the Spinco savings plans (the “Spinco Savings Plans”), each of which shall initially have substantially the same terms as those of the corresponding Parent Savings Plan as in effect immediately prior to the Operational Separation Date. As of the Operational Separation Date, Spinco shall provide Parent with (i) a copy of the Spinco Savings Plans; and (ii) a copy of certified resolutions of the Spinco Board (or its authorized committee or other delegate) evidencing adoption of the Spinco Savings Plans and the related trust(s) and the assumption by the Spinco Savings Plan of the Liabilities described in Section 5.03(b).
(b) Transfer of Account Balances. Effective as of the Operational Separation Date, Parent shall cause the trustee(s) of the Parent Savings Plans to transfer from the trust(s) which forms a part of the Parent Savings Plans to the trust(s) which forms a part of the Spinco Savings Plans the account balances of the Spinco Group Employees and Former Spinco Group Employees under the Parent Savings Plans, determined as of the date of the transfer. Such transfers shall be made in kind, including promissory notes evidencing the transfer of outstanding loans, and, with respect to unitized investments in the Parent Common Stock Fund (the “Parent Share Fund”), Parent Shares. Any Asset and Liability transfers pursuant to this Section 5.03(b) shall comply in all respects with Sections 414(l) and 411(d)(6) of the Code.
(c) Spinco Share Fund in Spinco Savings Plan. The Spinco Savings Plan will provide, effective as of the Effective Time: (i) for the establishment of a share fund for Spinco Shares (the “Spinco Share Fund”); (ii) that such Spinco Share Fund shall receive a transfer of and hold all Spinco Shares distributed in connection with the Distribution in respect of Parent Shares held in Parent Savings Plan accounts of Spinco Group Employees and Former Spinco Group Employees participating in the Spinco Savings Plan immediately prior to the Effective Time; and (iii) that, following the Effective Time, contributions made by or on behalf of such participants shall be allocated to the Spinco Share Fund, if so directed in accordance with the terms of the Spinco Savings Plan.
(d) Parent Share Fund in Spinco Savings Plan. Participants in the Spinco Savings Plans will be prohibited from increasing their holdings in the Parent Share Fund under the Spinco Savings Plans and may elect to liquidate their holdings in the Parent Share Fund and invest those monies in any other investment fund offered under the Spinco Savings Plan. After the Effective Time, but in no event earlier than the date that is six (6) months following the Effective Time or later than approximately the first anniversary of the Effective Time, all outstanding investments in the Parent Share Fund under the Spinco Savings Plans shall be liquidated and reinvested in other investment funds offered under the Spinco Savings Plans, on such dates and in accordance with such procedures as are determined by the administrator and the named fiduciary of the Spinco Savings Plans.
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(e) Spinco Share Fund in Parent Savings Plan. Spinco Shares distributed in connection with the Distribution in respect of Parent Shares held in Parent Savings Plans accounts of Parent Group Employees or Former Parent Group Employees who participate in the Parent Savings Plans shall be deposited in a Spinco Share Fund under the Parent Savings Plans, and such participants in the Parent Savings Plans will be prohibited from increasing their holdings in such Spinco Share Fund under the Parent Savings Plans and may elect to liquidate their holdings in such Spinco Share Fund and invest those monies in any other investment fund offered under the Parent Savings Plans. After the Effective Time, but in no event earlier than the date that is six (6) months following the Effective Time or later than approximately the first anniversary of the Effective Time, all outstanding investments in the Spinco Share Fund under the Parent Savings Plans shall be liquidated and reinvested in other investment funds offered under the Parent Savings Plans, on such dates and in accordance with such procedures as are determined by the administrator and the named fiduciary of the Parent Savings Plans.
(f) Spinco Savings Plans Provisions. The Spinco Savings Plans shall provide that:
(i) Spinco Group Employees and Former Spinco Group Employees shall (A) be eligible to participate in the corresponding Spinco Savings Plan as of the Operational Separation Date to the extent that they were eligible to participate in the applicable Parent Savings Plan as of immediately prior to the Operational Separation Date, and (B) receive credit for all service credited for that purpose under the Parent Savings Plans as of immediately prior to the Operational Separation Date as if that service had been rendered to Spinco; and
(ii) the account balance of each Spinco Group Employee and Former Spinco Group Employee under the applicable Parent Savings Plan as of the date of the transfer of Assets from such Parent Savings Plan (including any outstanding promissory notes) shall be credited to such individual’s account balance under the corresponding Spinco Savings Plan.
(g) Determination Letter Request. Spinco shall submit an application to the IRS as soon as practicable after the Operational Separation Date (but no later than the last day of the applicable remedial amendment period as defined in applicable Code provisions) requesting a determination letter regarding the qualified status of the Spinco Savings Plans under Sections 401(a) and 401(k) of the Code and the tax-exempt status of their related trust under Section 501(a) of the Code and shall make any amendments reasonably requested by the IRS to receive such a favorable determination letter.
(h) Parent Savings Plans after Operational Separation Date. From and after the Operational Separation Date, (i) the Parent Savings Plans shall continue to be responsible for Liabilities in respect of Parent Group Employees and Former Parent Group Employees, and (ii) no Spinco Group Employees or Former Spinco Group Employees shall accrue any benefits under the Parent Savings Plans. Without limiting the generality of the foregoing, Spinco Group Employees and Former Spinco Group Employees shall cease to be participants in the Parent Savings Plans effective as of the Operational Separation Date.
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(i) Plan Fiduciaries. For all periods after the Operational Separation Date, the Parties agree that the applicable fiduciaries of each of the Parent Savings Plan and the Spinco Savings Plan, respectively, shall have the authority with respect to the Parent Savings Plan and the Spinco Savings Plan, respectively, to (subject to Sections 5.03(d) and 5.03(e)) determine the investment alternatives, the terms and conditions with respect to those investment alternatives and such other matters as are within the scope of their duties under ERISA and the terms of the applicable plan documents.
(j) No Loss of Unvested Benefits; No Distributions. The transfer of any Spinco Group Employee’s employment to the Spinco Group will not result in the loss of that Spinco Group Employee’s unvested benefits (if any) under the applicable Parent Savings Plan, the Liability for which benefits will be assumed under the corresponding Spinco Savings Plan as provided herein. No Spinco Group Employee shall be entitled to a distribution of his or her benefit under the Parent Savings Plan or Spinco Savings Plan as a result of such transfer of employment.
Section 5.04. Nondivided Savings Plans. As of the Operational Separation Date, the Parent Group shall retain (or assume to the extent necessary) sponsorship of Arconic Retirement Savings Plan for ATEP Bargaining Employees, effective January 1, 2017, as amended, and, from and after the Operational Separation Date, all Assets and Liabilities thereunder shall be Assets and Liabilities of the Parent Group.
Article
VI
NONQUALIFIED DEFERRED COMPENSATION PLANS
Section 6.01. Spinco Nonqualified Plans.
(a) Establishment of Spinco Nonqualified Plans. Effective as of the Operational Separation Date, Spinco shall establish the Spinco Nonqualified Plans. Each of the Spinco Nonqualified Plans shall initially have substantially the same terms as those of the corresponding Parent Divided Nonqualified Plan as in effect immediately prior to the Operational Separation Date.
(b) Assumption of Liabilities from Parent. As of the Operational Separation Date, Spinco shall, and shall cause each Spinco Nonqualified Plan to, assume all Liabilities under the corresponding Parent Divided Nonqualified Plan for the account balances and accrued benefits of Spinco Group Employees and Former Spinco Group Employees and their respective beneficiaries and/or alternate payees determined as of immediately prior to the Operational Separation Date, and the Parent Group and the Parent Divided Nonqualified Plans shall be relieved of all such Liabilities. All Parent Shares notionally credited to participants’ accounts under the Parent Divided Nonqualified Plans, the liability for which is transferred to Spinco, and the Spinco Nonqualified Plans pursuant to the preceding sentence, shall be adjusted so that, from and after the Effective Time, such notionally credited shares represent: (i) a number of Parent Shares equal to the number of Parent Shares notionally credited to such account immediately prior to the Effective Time and (ii) a number of Spinco Shares equal to the number of Parent Shares notionally credited to such account immediately prior to the Effective Time multiplied by the Distribution Ratio.
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(c) Parent Divided Nonqualified Plans. Parent shall retain all Liabilities under the Parent Divided Nonqualified Plans for the benefits for Parent Group Employees and Former Parent Group Employees and their respective beneficiaries and/or alternate payees. From and after the Operational Separation, Spinco Group Employees and Former Spinco Group Employees shall cease to be participants in the Parent Divided Nonqualified Plans. All Parent Shares notionally credited to participants’ accounts under the Parent Divided Nonqualified Plans shall be adjusted so that, from and after the Effective Time, such notionally credited shares represent: (i) a number of Parent Shares equal to the number of Parent Shares notionally credited to such account immediately prior to the Effective Time and (ii) a number of Spinco Shares equal to the number of Parent Shares notionally credited to such account immediately prior to the Effective Time multiplied by the Distribution Ratio.
Section 6.02. Nondivided Nonqualified Plans. As of the Operational Separation Date, (a) the Parent Group shall retain (or assume to the extent necessary) sponsorship of the Howmet Corporation Supplemental Executive Retirement Plan, as amended and restated effective November 1, 2016, the Howmet Corporation Retirement Income Make-Up Plan “B”, as amended and restated effective November 1, 2016, the Huck International, Inc. Excess Benefit Plan for Selected Employees, as amended and restated effective November 1, 2016, the Howmet (Pechiney) Deferred Compensation Plan and the RTI International Metals, Inc. Supplemental Pension Program, as amended and restated effective January 30, 2015 and, from and after the Operational Separation Date, all Assets and Liabilities thereunder shall be Assets and Liabilities of the Parent Group, and (b) the Spinco Group shall retain (or assume to the extent necessary) sponsorship of the Alumax Deferred Compensation Plan and the Alumax LLC Excess Benefit Plan, as amended and restated August 1, 2016 and, from and after the Operational Separation Date, all Assets and Liabilities thereunder shall be Assets and Liabilities of the Spinco Group.
Section 6.03. Rabbi Trust. From and after the Operational Separation Date, that certain grantor trust sponsored by Alumax Inc. (or a Subsidiary thereof) and relating to certain deferred compensation obligations shall be retained by the Spinco Group.
Section 6.04. Participation; Distributions. The Parties acknowledge that none of the transactions contemplated by this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement will trigger a payment or distribution of compensation under any of the Parent Divided Nonqualified Plans or Spinco Nonqualified Plans for any participant and, consequently, that the payment or distribution of any compensation to which such participant is entitled under any of the Parent Divided Nonqualified Plans or Spinco Nonqualified Plans will occur upon such participant’s separation from service from the Spinco Group or at such other time as provided in the applicable Spinco Nonqualified Plan or participant’s deferral election.
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Article
VII
WELFARE BENEFIT PLANS
Section 7.01. Welfare Plans.
(a) Establishment of Spinco Welfare Plans. As of the Operational Separation Date, Spinco shall, or shall cause the applicable member of the Spinco Group to, establish the Spinco Welfare Plans, which shall initially have terms substantially similar in the aggregate to those of the corresponding Parent Welfare Plans as in effect immediately prior to the Operational Separation Date.
(b) Waiver of Conditions; Benefit Maximums. Spinco shall use commercially reasonable efforts to cause the Spinco Welfare Plans to:
(i) with respect to initial participation as of the Operational Separation Date, waive (A) all limitations as to preexisting conditions, exclusions, and service conditions with respect to participation and coverage requirements applicable to any Spinco Group Employee or Former Spinco Group Employee, other than limitations that were in effect with respect to such Spinco Group Employee or Former Spinco Group Employee under the applicable Parent Welfare Plan as of immediately prior to the Operational Separation Date, and (B) any waiting period limitation or evidence of insurability requirement applicable to a Spinco Group Employee or Former Spinco Group Employee other than limitations or requirements that were in effect with respect to such Spinco Group Employee or Former Spinco Group Employee under the applicable Parent Welfare Plans as of immediately prior to the Operational Separation Date; and
(ii) take into account (A) with respect to aggregate annual, lifetime, or similar maximum benefits available under the Spinco Welfare Plans, any Spinco Group Employee’s or Former Spinco Group Employee’s prior claim experience under the Parent Welfare Plans and any Benefit Plan that provides leave benefits; and (B) any eligible expenses incurred by a Spinco Group Employee or Former Spinco Group Employee and his or her covered dependents during the portion of the plan year of the applicable Parent Welfare Plan ending as of the Operational Separation Date to be taken into account under such Spinco Welfare Plan for purposes of satisfying all deductible, coinsurance, and maximum out-of-pocket requirements applicable to such Spinco Group Employee or Former Spinco Group Employee and his or her covered dependents for the applicable plan year to the same extent as such expenses were taken into account by Parent for similar purposes prior to the Operational Separation Date as if such amounts had been paid in accordance with such Spinco Welfare Plan.
(c) Health Savings Accounts. As of the Operational Separation Date, Spinco shall, or shall cause a member of the Spinco Group to, establish a Spinco Welfare Plan that will provide health savings account benefits to Spinco Group Employees on and after the Operational Separation Date (an “Spinco HSA”). It is the intention of the Parties that all activity under a Spinco Group Employee’s health savings account under a Parent Welfare Plan (a “Parent HSA”) for the year in which the Operational Separation Date occurs be treated instead as activity under the corresponding account under the Spinco HSA, such that (i) any period of participation by a Spinco Group Employee in a Parent HSA during the year in which the Operational Separation Date occurs will be deemed a period when such Spinco Group Employee participated in the corresponding Spinco HSA; (ii) all expenses incurred during such period will be deemed incurred while such Spinco Group Employee’s coverage was in effect under the corresponding Spinco HSA; and (iii) all elections and reimbursements made with respect to such period under the Parent HSA will be deemed to have been made with respect to the corresponding Spinco HSA.
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(d) Flexible Spending Accounts. The Parties shall use commercially reasonable efforts to ensure that as of the Operational Separation Date any health or dependent care flexible spending accounts of Spinco Group Employees (whether positive or negative) (the “Transferred Account Balances”) under Parent Welfare Plans that are health or dependent care flexible spending account plans are transferred, as soon as practicable after the Operational Separation Date, from the Parent Welfare Plans to the corresponding Spinco Welfare Plans. Such Spinco Welfare Plans shall assume responsibility as of the Operational Separation Date for all outstanding health or dependent care claims under the corresponding Parent Welfare Plans of each Spinco Group Employee for the year in which the Operational Separation Date occurs and shall assume and agree to perform the obligations of the corresponding Parent Welfare Plans from and after the Operational Separation Date. As soon as practicable after the Operational Separation Date, and in any event within thirty (30) days after the amount of the Transferred Account Balances is determined or such later date as mutually agreed upon by the Parties, Spinco shall pay Parent the net aggregate amount of the Transferred Account Balances, if such amount is positive, and Parent shall pay Spinco the net aggregate amount of the Transferred Account Balances, if such amount is negative.
(e) Allocation of Welfare Assets and Liabilities. Effective as of the Operational Separation Date, the Spinco Group shall assume all Liabilities relating to, arising out of or resulting from health and welfare coverage or claims incurred by or on behalf of Spinco Group Employees or Former Spinco Group Employees or their covered dependents under the Parent Welfare Plans or Spinco Welfare Plans before, at or after the Operational Separation Date. No Parent Welfare Plan shall provide coverage to any Spinco Group Employee or Former Spinco Group Employee after the Operational Separation Date. Notwithstanding the foregoing or anything else herein to the contrary, with respect to Employees and Former Employees who provide or provided services in Brazil, (i) Parent shall retain all Liabilities relating to Parent or any of its Subsidiaries or predecessor entities in Brazil, and (ii) Spinco shall assume (A) the Liability for compensation and benefits required to be provided to certain Former Spinco Group Employees located in Brazil in accordance with the terms and conditions set forth in Schedule 7.01(e) and (B) all other Employee and Former Employee health and welfare Liabilities relating to operations in Brazil prior to the Separation.
Section 7.02. COBRA and HIPAA. The Parent Group shall continue to be responsible for complying with, and providing coverage pursuant to, the health care continuation requirements of COBRA, the certificate of creditable coverage requirements of HIPAA, and the corresponding provisions of the Parent Welfare Plans with respect to any Parent Group Employees and any Former Parent Group Employees (and their covered dependents) who incur a qualifying event under COBRA before, as of, or after the Operational Separation Date. Effective as of the Operational Separation Date, the Spinco Group shall assume responsibility for complying with, and providing coverage pursuant to, the health care continuation requirements of COBRA, the certificate of creditable coverage requirements of HIPAA, and the corresponding provisions of the Spinco Welfare Plans with respect to any Spinco Group Employees or Former Spinco Group Employees (and their covered dependents) who incur a qualifying event or loss of coverage under the Parent Welfare Plans and/or the Spinco Welfare Plans before, as of, or after the Operational Separation Date. The Parties agree that the consummation of the transactions contemplated by the Separation and Distribution Agreement shall not constitute a COBRA qualifying event for any purpose of COBRA.
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Section 7.03. Vacation, Holidays and Leaves of Absence. Effective as of the Operational Separation Date, the Spinco Group shall assume all Liabilities of the Parent Group with respect to vacation, holiday, annual leave or other leave of absence, and required payments related thereto, for each Spinco Group Employee. The Parent Group shall retain all Liabilities with respect to vacation, holiday, annual leave or other leave of absence, and required payments related thereto, for each Parent Group Employee.
Section 7.04. Severance and Unemployment Compensation. Without limiting the generality of Section 4.04, effective as of the Operational Separation Date, the Spinco Group shall assume any and all Liabilities to, or relating to, Spinco Group Employees and Former Spinco Group Employees in respect of severance and unemployment compensation, regardless of whether the event giving rise to the Liability occurred before, at, or after the Operational Separation Date. The Parent Group shall be responsible for any and all Liabilities to, or relating to, Parent Group Employees and Former Parent Group Employees in respect of severance and unemployment compensation, regardless of whether the event giving rise to the Liability occurred before, at or after the Operational Separation Date.
Section 7.05. Workers’ Compensation. With respect to claims for workers’ compensation in the United States, (a) the Spinco Group shall be responsible for claims in respect of Spinco Group Employees and Former Spinco Group Employees, whether occurring before, at or after the Operational Separation Date, and (b) the Parent Group shall be responsible for all claims in respect of Parent Group Employees and Former Parent Group Employees, whether occurring before, at or after the Operational Separation. The treatment of workers’ compensation claims by Spinco with respect to Parent insurance policies shall be governed by Section 5.1 of the Separation and Distribution Agreement.
Section 7.06. Insurance Contracts. To the extent that any Parent Welfare Plan is funded through the purchase of an insurance contract or is subject to any stop loss contract, the Parties will cooperate and use their commercially reasonable efforts to replicate such insurance contracts for Spinco (except to the extent that changes are required under applicable state insurance Laws or filings by the respective insurers) and to maintain any pricing discounts or other preferential terms for both Parent and Spinco for a reasonable term. Neither Party shall be liable for failure to obtain such insurance contracts, pricing discounts, or other preferential terms for the other Party. Each Party shall be responsible for any additional premiums, charges, or administrative fees that such Party may incur pursuant to this Section 7.06.
Section 7.07. Third-Party Vendors. Except as provided below, to the extent that any Parent Welfare Plan is administered by a third-party vendor, the Parties will cooperate and use their commercially reasonable efforts to replicate any contract with such third-party vendor for Spinco and to maintain any pricing discounts or other preferential terms for both Parent and Spinco for a reasonable term. Neither Party shall be liable for failure to obtain such pricing discounts or other preferential terms for the other Party. Each Party shall be responsible for any additional premiums, charges, or administrative fees that such Party may incur pursuant to this Section 7.07.
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Section 7.08. Nondivided Welfare Plans. As of the Operational Separation Date, (a) the Parent Group shall retain (or assume to the extent necessary) sponsorship of the Howmet Severance Pay Plan, the Occupational Injury Benefit Plan for Texas Employees of Howmet Corp., the Program of Insurance Benefits for Employees of RMI Titanium Co. Hourly Employees-Niles & Extrusion and the Supplemental Unemployment Benefit-Niles Plant, and, from and after the Operational Separation Date, all Assets and Liabilities thereunder shall be Assets and Liabilities of the Parent Group, and (b) the Spinco Group shall retain (or assume to the extent necessary) sponsorship of the Kawneer Severance Pay Plan, the Alumax Executive Post Retirement Life Program and the Alumax Split Dollar Life Insurance Plan, and, from and after the Operational Separation Date, all Assets and Liabilities thereunder shall be Assets and Liabilities of the Spinco Group.
Article
VIII
NON-U.S. EMPLOYEES
Spinco Group Employees and Former Spinco Group Employees who reside outside of the United States or otherwise are subject to non-U.S. Law and their related benefits and Liabilities shall be treated in the same manner as the Spinco Group Employees and Former Spinco Group Employees, respectively, who are residents of the United States and are not subject to non-U.S. Law. Notwithstanding anything to the contrary in this Agreement, all actions taken with respect to non-U.S. Employees or U.S. Employees working in non-U.S. jurisdictions shall be subject to and accomplished in accordance with applicable Law in the custom of the applicable jurisdictions.
Article
IX
MISCELLANEOUS
Section 9.01. Employee Records.
(a) Sharing of Information. Subject to any limitations imposed by applicable Law, Parent and Spinco (acting directly or through members of the Parent Group or the Spinco Group, respectively) shall provide to the other and their respective authorized agents and vendors all information necessary for the Parties to perform their respective duties under this Agreement. The provision of any information pursuant to Section 9.1 shall not affect the ownership of such information (which shall be determined solely in accordance with the terms of this Agreement and the Separation and Distribution Agreement), or constitute a grant of rights in or to any such information.
(b) Transfer of Personnel Records and Authorization. Subject to any limitation imposed by applicable Law and to the extent that it has not done so before the Operational Separation Date, (i) Parent shall transfer to Spinco any and all employment records (including any Form I-9, Form W-2 or other IRS forms) with respect to Spinco Group Employees and Former Spinco Group Employees and other records reasonably required by Spinco to enable Spinco properly to carry out its obligations under this Agreement, and (ii) Spinco shall transfer to Parent any and all employment records (including any Form I-9, Form W-2 or other IRS forms) with respect to Parent Group Employees and Former Parent Group Employees and other records reasonably required by Parent to enable Parent properly to carry out its obligations under this Agreement. Such transfer of records generally shall occur as soon as administratively practicable at or after the Operational Separation Date; provided that the Parties shall cooperate, subject to applicable Law, to effectuate such transfer at such later date as may be necessary or appropriate with respect to any Delayed Transfer Employee. Each Party will permit the other Party reasonable access to Employee records, to the extent reasonably necessary for such accessing Party to carry out its obligations hereunder.
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(c) Access to Records. To the extent not inconsistent with this Agreement, the Separation and Distribution Agreement or any applicable privacy protection Laws or regulations, reasonable access to Employee-related records after the Operational Separation Date will be provided to members of the Parent Group and members of the Spinco Group pursuant to the terms and conditions of Article VI of the Separation and Distribution Agreement.
(d) Maintenance of Records. With respect to retaining, destroying, transferring, sharing, copying and permitting access to all Employee-related information, Parent and Spinco shall comply with all applicable Laws, regulations and internal policies, and shall indemnify and hold harmless each other from and against any and all Liability, claims, actions, and damages that arise from a failure (by the indemnifying Party or its Subsidiaries or their respective agents) to so comply with all applicable Laws, regulations and internal policies applicable to such information.
(e) Cooperation. After the Effective Time, except in the case of an adversarial Action or Dispute between Parent and Spinco, or any members of their respective groups, each Party shall use commercially reasonable efforts to cooperate and work together to unify, consolidate and share (to the extent permissible under applicable privacy/data protection laws) all relevant documents, resolutions, government filings, data, payroll, employment and benefit plan information on regular timetables and cooperate as needed with respect to (i) any litigation with respect to any employee benefit plan, policy or arrangement contemplated by this Agreement, (ii) efforts to seek a determination letter, private letter ruling or advisory opinion from the IRS or U.S. Department of Labor on behalf of any employee benefit plan, policy or arrangement contemplated by this Agreement, and (iii) any filings that are required to be made or supplemented to the IRS, U.S. Pension Benefit Guaranty Corporation, U.S. Department of Labor or any other Governmental Authority; provided, however, that requests for cooperation must be reasonable and not interfere with daily business operations.
(f) Confidentiality. Notwithstanding anything to the contrary in this Agreement, all confidential records and data relating to Employees to be shared or transferred pursuant to this Agreement shall be subject to Section 6.9 of the Separation and Distribution Agreement and the requirements of applicable Law.
Section 9.02. Preservation of Rights to Amend. The rights of each member of the Parent Group and each member of the Spinco Group to amend, waive, or terminate any plan, arrangement, agreement, program, or policy referred to herein shall not be limited in any way by this Agreement.
Section 9.03. Fiduciary Matters. Parent and Spinco each acknowledges that actions required to be taken pursuant to this Agreement may be subject to fiduciary duties or standards of conduct under ERISA or other applicable Law, and no Party shall be deemed to be in violation of this Agreement if it fails to comply with any provisions hereof based upon its good-faith determination (as supported by advice from counsel experienced in such matters) that to do so would violate such a fiduciary duty or standard. Each Party shall be responsible for taking such actions as are deemed necessary and appropriate to comply with its own fiduciary responsibilities and shall fully release and indemnify the other Party for any Liabilities caused by the failure to satisfy any such responsibility.
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Section 9.04. Further Assurances. Each Party hereto shall take, or cause to be taken, any and all reasonable actions, including the execution, acknowledgment, filing and delivery of any and all documents and instruments that any other Party hereto may reasonably request in order to effect the intent and purpose of this Agreement and the transactions contemplated hereby.
Section 9.05. Counterparts; Entire Agreement; Corporate Power.
(a) This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Party.
(b) This Agreement, the Separation and Distribution Agreement and the Ancillary Agreements and the Exhibits, Schedules and appendices hereto and thereto contain the entire agreement between the Parties with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no agreements or understandings between the Parties other than those set forth or referred to herein or therein.
Section 9.06. Governing Law. Section 10.2 (Governing Law) of the Separation and Distribution Agreement is hereby incorporated herein by reference and shall apply as if fully set forth herein mutatis mutandis.
Section 9.07. Assignability. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. Neither Party may assign its rights or delegate its obligations under this Agreement without the express prior written consent of the other Party hereto; provided, however, that each Party may assign all of its rights and obligations under this Agreement to any of its Subsidiaries; and provided, further, that no such assignment shall release the assigning Party from any of its liabilities or obligations under this Agreement. Notwithstanding the foregoing, no consent for assignment shall be required for the assignment of a Party’s rights and obligations under this Agreement, the Separation and Distribution Agreement and all other Ancillary Agreements in whole (i.e., the assignment of a Party’s rights and obligations under this Agreement and all Ancillary Agreements all at the same time) in connection with a change of control of a Party so long as the resulting, surviving or transferee Person assumes all the obligations of the relevant Party by operation of Law or pursuant to an agreement in form and substance reasonably satisfactory to the other Party. Nothing herein is intended to, nor shall be construed to, prohibit either Party or any of its Subsidiaries from being party to or undertaking a transaction that would result in a change of control.
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Section 9.08. Third-Party Beneficiaries. The provisions of this Agreement are solely for the benefit of the Parties and are not intended to confer upon any other Person except the Parties any rights or remedies hereunder. There are no other third-party beneficiaries of this Agreement and this Agreement shall not provide any other Third Party with any remedy, claim, Liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement. Nothing in this Agreement is intended to amend any employee benefit plan or affect the applicable plan sponsor’s right to amend or terminate any employee benefit plan pursuant to the terms of such plan. The provisions of this Agreement are solely for the benefit of the Parties, and no current or former Employee, officer, director, or independent contractor or any other individual associated therewith shall be regarded for any purpose as a third-party beneficiary of this Agreement. This Agreement may not be assigned by any Party, except with the prior written consent of the other Parties.
Section 9.09. Notices. All notices, requests, claims, demands or other communications under this Agreement shall be delivered in accordance with Section 10.5 of the Separation and Distribution Agreement.
Section 9.10. Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of any such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby. Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the Parties.
Section 9.11. Force Majeure. No Party shall be deemed to be in default of this Agreement or, unless otherwise expressly provided therein, any Ancillary Agreement for any delay or failure to fulfill any obligation hereunder or thereunder so long as and to the extent to which any delay or failure in the fulfillment of such obligations is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure. In the event of any such excused delay, the time for performance shall be extended for a period equal to the time lost by reason of the delay. A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such event, (a) provide written notice to the other Party of the nature and extent of any such Force Majeure condition; and (b) use commercially reasonable efforts to remove any such causes and resume performance under this Agreement and the Ancillary Agreements, as applicable, as soon as reasonably practicable.
Section 9.12. Headings. The Article, Section and Paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
Section 9.13. Survival of Covenants. Except as expressly set forth in this Agreement, the covenants, representations and warranties and other agreements contained in this Agreement, and Liability for the breach of any obligations contained herein, shall survive the Effective Time and shall remain in full force and effect thereafter.
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Section 9.14. Waivers of Default. Waiver by any Party of any default by the other Party of any provision of this Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the waiving Party. No failure or delay by any Party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall a single or partial exercise thereof prejudice any other or further exercise thereof or the exercise of any other right, power or privilege.
Section 9.15. Dispute Resolution. The dispute resolution procedures set forth in Article VII of the Separation and Distribution Agreement shall apply to any dispute, controversy or claim arising out of or relating to this Agreement.
Section 9.16. Specific Performance. Subject to Article VII of the Separation and Distribution Agreement, in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Party or Parties who are, or are to be, thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief (on an interim or permanent basis) in respect of its rights or their rights under this Agreement, in addition to any and all other rights and remedies at Law or in equity, and all such rights and remedies shall be cumulative. The Parties agree that the remedies at Law for any breach or threatened breach, including monetary damages, may be inadequate compensation for any loss and that any defense in any Action for specific performance that a remedy at Law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are hereby waived by each of the Parties.
Section 9.17. Amendments. No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by a Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the Party against whom it is sought to enforce such waiver, amendment, supplement or modification.
Section 9.18. Interpretation. Section 10.6 (Interpretation) of the Separation and Distribution Agreement is hereby incorporated herein by reference and shall apply as if fully set forth herein mutatis mutandis.
Section 9.19. Mutual Drafting(a). This Agreement shall be deemed to be the joint work product of the Parties and any rule of construction that a document shall be interpreted or construed against a drafter of such document shall not be applicable to this Agreement.
Section 9.20. Provisions Incorporated by Reference. The following provisions of the Separation and Distribution Agreement are hereby incorporated herein by reference and shall apply as if fully set forth herein mutatis mutandis: (a) Section 6.3 (Compensation for Providing Information), (b) Section 6.5 (Limitations of Liability); and (c) Section 6.9 (Confidentiality).
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IN WITNESS WHEREOF, the Parties have caused this Employee Matters Agreement to be executed by their duly authorized representatives.
ARCONIC INC. | ||
By: | ||
Name: | ||
Title: | ||
ARCONIC ROLLED PRODUCTS CORPORATION | ||
By: | ||
Name: | ||
Title: |
[Signature Page to Employee Matters Agreement]
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Exhibit 10.1
Form of Arconic Corporation
2020 Stock Incentive Plan
SECTION 1. PURPOSE. The purpose of the Arconic Corporation 2020 Stock Incentive Plan is to encourage selected Directors and Employees to acquire a proprietary interest in the long-term growth and financial success of the Company and to further link the interests of such individuals to the long-term interests of shareholders.
SECTION 2. DEFINITIONS. As used in the Plan, the following terms have the meanings set forth below:
“Affiliate” shall have the meaning set forth in Rule 12b-2 under Section 12 of the U.S. Securities Exchange Act of 1934, as amended.
“Award” means any Option, Stock Appreciation Right, Restricted Share Award, Restricted Share Unit, Converted Award, or any other right, interest, or option relating to Shares or other property granted pursuant to the provisions of the Plan.
“Award Agreement” means any written or electronic agreement, contract, or other instrument or document evidencing any Award granted by the Committee hereunder (and, in the case of a Converted Award, originally between Arconic Inc. and the Participant), which may, but need not, be executed or acknowledged by both the Company and the Participant. For avoidance of doubt, any Converted Award will be governed by the provisions of the original Award Agreement applicable to such Converted Award, except for any adjustment pursuant to the Employee Matters Agreement.
“Board” means the Board of Directors of the Company.
“Change in Control” means the occurrence of an event set forth in any one of the following paragraphs:
(a) | any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the U.S. Securities Exchange Act of 1934, as amended) (a “Person”) becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the U.S. Securities Exchange Act of 1934, as amended) of 30% or more of either (A) the then-outstanding Shares (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that, for purposes hereof, the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its Affiliates, (iv) any acquisition of all or a portion of the Shares by the shareholders of Arconic Inc. as a result of the Distribution or (v) any acquisition pursuant to a transaction that complies with clauses (i), (ii) and (iii) of paragraph (c) of this definition; |
(b) | individuals who, as of the Effective Date, constituted the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board shall be considered as though such individual was a member of the Incumbent Board; but, provided, further, that any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be considered a member of the Incumbent Board unless and until such individual is elected to the Board at an annual meeting of the Company occurring after the date such individual initially assumed office, so long as such election occurs pursuant to a nomination approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board, which nomination is not made pursuant to a Company contractual obligation; |
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(c) | consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving the Company or any of its Subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its Subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (i) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 55% or more of the then-outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors (or, for a non-corporate entity, equivalent governing body), as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more Subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of, respectively, the then-outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) of the entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such entity entitled to vote generally in the election of directors (or, for a non-corporate entity, equivalent securities), except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors (or, for a non-corporate entity, equivalent governing body) of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or |
(d) | the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company. |
“Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time, including rules, regulations and guidance promulgated thereunder and successor provisions and rules and regulations thereto (except as otherwise specified herein).
“Committee” means the Compensation and Benefits Committee of the Board, any successor to such committee or a subcommittee thereof or, if the Board so determines, another committee of the Board, in each case composed of no fewer than two directors, each of whom is a Non-Employee Director. In accordance with Section 3(b) of the Plan, “Committee” shall include the Board for purposes of Awards granted to Directors.
“Company” means Arconic Corporation, a Delaware corporation, including any successor thereto.
“Contingency Period” has the meaning set forth in SECTION 8.
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“Converted Award” means an Award that is granted under the Plan to satisfy the automatic adjustment and conversion, in accordance with the terms of the Employee Matters Agreement, of awards granted by Arconic Inc. over Arconic Inc. common stock prior to the Distribution. Converted Awards may be in the form of Options or Restricted Share Units, including Restricted Share Units that are Performance Awards.
“Director” means a member of the Board who is not an Employee.
“Distribution” means Arconic Inc.’s distribution of all or a portion of the Shares held by Arconic Inc. to holders of its common stock, in order to effect the separation of the Company from Arconic Inc.
“Effective Date” has the meaning set forth in SECTION 16.
“Employee” means any employee (including any officer or employee director) of the Company or of any Subsidiary.
“Employee Matters Agreement” means the Employee Matters Agreement dated [_______] by and between Arconic Inc. and the Company and entered into in connection with the separation of the Company from Arconic Inc. The number of Shares subject to a Converted Award and the other terms and conditions of each Converted Award shall be determined in accordance with the terms of the Employee Matters Agreement.
“Equity Restructuring” means a nonreciprocal transaction between the Company and its shareholders, such as a stock dividend, stock split (including a reverse stock split), spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, that affects the Shares (or other securities of the Company) or the price of Shares (or other securities) and causes a change in the per share value of the Shares underlying outstanding Awards.
“Executive Officer” means an officer who is designated as an executive officer by the Board or by its designees in accordance with the definition of executive officer under Rule 3b-7 of the U.S. Securities Exchange Act of 1934, as amended.
“Exercisable Time-Based Award” has the meaning set forth in SECTION 12.
“Fair Market Value” with respect to Shares on any given date means the closing price per Share on that date as reported on the New York Stock Exchange or other stock exchange on which the Shares principally trade. If the New York Stock Exchange or such other exchange is not open for business on the date fair market value is being determined, the closing price as reported for the immediately preceding business day on which that exchange is open for business will be used. For avoidance of doubt, for tax purposes upon settlement of an Award, the fair market value of the Shares may be determined using such other methodology as may be required by applicable laws or as appropriate for administrative reasons.
“Family Member” has the same meaning as such term is defined in Form S-8 (or any successor form) promulgated under the U.S. Securities Act of 1933, as amended.
“Non-Employee Director” has the meaning set forth in Rule 16b-3(b)(3) under the U.S. Securities Exchange Act of 1934, as amended, or any successor definition adopted by the U.S. Securities and Exchange Commission.
“Option” means any right granted to a Participant under the Plan allowing such Participant to purchase Shares at such price or prices and during such period or periods as the Committee shall determine. All Options granted under the Plan are intended to be nonqualified stock options for purposes of the Code.
“Other Awards” has the meaning set forth in SECTION 10.
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“Participant” means an Employee or a Director who is selected to receive an Award under the Plan.
“Performance Award” means any award granted pursuant to SECTION 11 and, as applicable, SECTION 13 hereof in the form of Options, Stock Appreciation Rights, Restricted Share Units, Restricted Shares or other awards of property, including cash, that have a performance feature described in SECTION 11 and/or SECTION 13.
“Performance Period” means that period established by the Committee at the time any Performance Award is granted or at any time thereafter during which any performance goals specified by the Committee with respect to such Award are to be measured. A Performance Period may not be less than one year, except with respect to Converted Awards.
“Plan” means this Arconic Corporation 2020 Stock Incentive Plan, as may be amended from time to time.
“Replacement Award” means an Award resulting from adjustments or substitutions referred to in Section 4(f) herein, provided that such Award is issued by a company (foreign or domestic) the majority of the equity of which is listed under and in compliance with the domestic company listing rules of the New York Stock Exchange or with a similarly liquid exchange which has comparable standards to the domestic company listing standards of the New York Stock Exchange.
“Restricted Shares” has the meaning set forth in SECTION 8.
“Restricted Share Unit” has the meaning set forth in SECTION 9.
“Shares” means the shares of common stock of the Company, $0.01 par value per share.
“Stock Appreciation Right” means any right granted under SECTION 7.
“Subsidiary” means any corporation or other entity in which the Company owns, directly or indirectly, stock possessing 50% or more of the total combined voting power of all classes of stock in such corporation or entity, and any corporation, partnership, joint venture, limited liability company or other business entity as to which the Company possesses a significant ownership interest, directly or indirectly, as determined by the Committee.
“Substitute Awards” means Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, by a company acquired by the Company or any of its Subsidiaries or with which the Company or any of its Subsidiaries combines.
“Time-Based Award” means any Award granted pursuant to the Plan that is not a Performance Award.
SECTION 3. ADMINISTRATION.
(a) | Administration by the Committee. The Plan shall be administered by the Committee. The Committee shall have full power and authority, subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board, to: (i) select the Employees of the Company and its Subsidiaries to whom Awards may from time to time be granted hereunder; (ii) determine the type or types of Award to be granted to each Employee Participant hereunder; (iii) determine the number of Shares to be covered by each Employee Award granted hereunder; (iv) determine the terms and conditions of any Employee Award granted hereunder, and make modifications to such terms and conditions with respect to any outstanding Employee Award, in each case, which are not inconsistent with the provisions of the Plan; (v) determine whether, to what extent and under what circumstances Employee Awards may be settled in cash, Shares or other property or canceled or suspended; (vi) determine whether, to what extent and under what circumstances cash, Shares and other property and other amounts payable with respect to an Employee Award under this Plan shall be deferred either automatically or at the election of the Participant; (vii) interpret and administer the Plan and any instrument or agreement entered into under the Plan; (viii) determine whether any corporate transaction, such as a sale or spin-off of a division or business unit, or a joint venture, shall be deemed to result in a Participant’s termination of service for purposes of Awards granted under the Plan; (ix) establish such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (x) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan, including, without limiting the generality of the foregoing, make any determinations necessary to effectuate the purpose of Section 12(a)(v) below. Decisions of the Committee shall be final, conclusive and binding upon all persons, including the Company, any Participant and any shareholder; provided that the Board shall approve any decisions affecting Director Awards. |
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(b) | Administration by the Board. The Board shall have full power and authority, upon the recommendation of the Governance and Nominating Committee of the Board to: (i) select the Directors of the Company to whom Awards may from time to time be granted hereunder; (ii) determine the type or types of Award to be granted to each Director Participant hereunder; (iii) determine the number of Shares to be covered by each Director Award granted hereunder; (iv) determine the terms and conditions of any Director Award granted hereunder, and make modifications to such terms and conditions with respect to any outstanding Director Award, in each case, which are not inconsistent with the provisions of the Plan; (v) determine whether, to what extent and under what circumstances Director Awards may be settled in cash, Shares or other property or canceled or suspended; and (vi) determine whether, to what extent and under what circumstances cash, Shares and other property and other amounts payable with respect to a Director Award under this Plan shall be deferred either automatically or at the election of the Director. Notwithstanding any provision to the contrary in the Plan or in any policy of the Company regarding compensation payable to a Director, the sum of the grant date fair value (determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor thereto) of all Awards payable in Shares and the maximum cash value of any other Award granted under the Plan to an individual as compensation for services as a Director, together with cash compensation paid to the Director in the form of Board and Committee retainer, meeting or similar fees, during any calendar year shall not exceed $750,000. For avoidance of doubt, compensation shall count towards this limit for the calendar year in which it was granted or earned, and not later when distributed, in the event it is deferred. |
SECTION 4. SHARES SUBJECT TO THE PLAN.
(a) | Number of Shares Reserved under the Plan. Subject to the adjustment provisions of Section 4(f) below and the provisions of Section 4(b), up to [________] Shares may be issued under the Plan. Each Share issued pursuant to an Award other than an Option or a Stock Appreciation Right shall count as [______] Shares for purposes of the foregoing authorization. Each Share issued pursuant to an Option or Stock Appreciation Right shall be counted as one Share for each Option or Stock Appreciation Right. Any Shares issued pursuant to a Converted Award shall reduce the maximum number of Shares issuable under this Section 4(a) in accordance with its provisions. |
(b) | Share Replenishment. In addition to the Shares authorized by Section 4(a), Shares underlying Awards (including Converted Awards) that are granted under the Plan, which are subsequently forfeited, cancelled or expire in accordance with the terms of the Award shall become available for issuance under the Plan. The following Shares shall not become available for issuance under the Plan: (x) Shares tendered in payment of an Option or other Award, and (y) Shares withheld for taxes. Shares purchased by the Company using Option proceeds shall not be added to the Plan limit and if Stock Appreciation Rights are settled in Shares, each Stock Appreciation Right shall count as one Share whether or not Shares are actually issued or transferred under the Plan. |
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(c) | Issued Shares. Shares shall be deemed to be issued hereunder only when and to the extent that payment or settlement of an Award is actually made in Shares. Notwithstanding anything herein to the contrary, the Committee may at any time authorize a cash payment in lieu of Shares, including without limitation if there are insufficient Shares available for issuance under the Plan to satisfy an obligation created under the Plan. |
(d) | Source of Shares. Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued Shares, treasury Shares or Shares purchased in the open market or otherwise. |
(e) | Substitute Awards. Shares issued or granted in connection with Substitute Awards shall not reduce the Shares available for issuance under the Plan or to a Participant in any calendar year. |
(f) | Adjustments. Subject to SECTION 12: |
(i) | Corporate Transactions other than an Equity Restructuring. In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to shareholders, or any other change affecting the Shares or the price of the Shares other than an Equity Restructuring, the Committee shall make such adjustments, if any, as the Committee in its discretion may deem appropriate to reflect such change with respect to (i) the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Sections 4(a) and 13(d) hereof); (ii) the terms and conditions of any outstanding Awards (including, without limitation, any applicable performance targets or criteria with respect thereto); and (iii) the grant or exercise price per Share for any outstanding Awards under the Plan. |
In the event of any transaction or event described above in this Section 4(f)(i) 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 of changes in applicable laws, regulations or accounting principles, the Committee, on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event (except that action to give effect to a change in applicable laws or accounting principles may be made within a reasonable period of time after such change), is hereby authorized to take actions, including but not limited to any one or more of the following actions, whenever 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 Award under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles, provided that the number of Shares subject to any Award will always be a whole number:
(A) | To provide for either (I) termination of any such Award in exchange for an amount of cash, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Participant’s rights (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction or event described above in this Section 4(f)(i) the Committee determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be terminated by the Company without payment) or (II) the replacement of such Award with other rights or property selected by the Committee in its sole discretion; |
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(B) | To provide that such 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 or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; |
(C) | To make adjustments in the number and type of Shares (or other securities or property) subject to outstanding Awards, and in the number and kind of outstanding Restricted Shares and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding options, rights and awards; |
(D) | To provide that such Award shall be exercisable or payable or fully vested with respect to all Shares covered thereby; or |
(E) | To provide that the Award cannot vest, be exercised or become payable after such event. |
(ii) | Equity Restructuring. In connection with the occurrence of any Equity Restructuring, and notwithstanding anything to the contrary in this Section 4(f), the Committee will adjust the terms of the Plan and each outstanding Award as it deems equitable to reflect the Equity Restructuring, which may include (i) adjusting the number and type of securities subject to each outstanding Award and/or with respect to which Awards may be granted under the Plan (including, but not limited to, adjustments of the limitations in Sections 4(a) and 13(d) hereof); (ii) adjusting the terms and conditions of (including the grant or exercise price), and the performance targets or other criteria included in, outstanding Awards; and (iii) granting new Awards or making cash payments to Participants. The adjustments provided under this Section 4(f)(ii) will be nondiscretionary and final and binding on all interested parties, including the affected Participant and the Company; provided that the Committee will determine whether an adjustment is equitable and the number of Shares subject to any Award will always be a whole number. |
SECTION 5. ELIGIBILITY AND VESTING REQUIREMENTS.
(a) | Eligibility. Any Director or Employee shall be eligible to be selected as a Participant. |
(b) | Minimum Vesting. Notwithstanding any other provision of the Plan to the contrary, all Awards granted under the Plan shall have a minimum vesting period of one year measured from the date of grant; provided, however, that up to 5% of the Shares available for distribution under the Plan may be granted without such minimum vesting requirement. Nothing in this Section 5(b) shall limit the Company’s ability to grant Awards that contain rights to accelerated vesting on a termination of employment or service (or to otherwise accelerate vesting), or limit any rights to accelerated vesting in connection with a Change in Control, as provided in SECTION 12 of the Plan. In addition, the minimum vesting requirement set forth in this Section 5(b) shall not apply to Converted Awards or Substitute Awards or to Director Awards which vest on the earlier of the one-year anniversary of the date of grant and the next annual meeting of the Company’s shareholders (which is at least 50 weeks after the immediately preceding year’s annual meeting) and shall not limit the adjustment provisions of Section 4(f). |
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SECTION 6. STOCK OPTIONS. Options may be granted hereunder to Participants either alone or in addition to other Awards granted under the Plan. Any Option granted under the Plan may be evidenced by an Award Agreement in such form as the Committee from time to time approves. Any such Option shall be subject to the terms and conditions required by this SECTION 6 and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee may deem appropriate in each case.
(a) | Option Price. The purchase price (or Option price) per Share purchasable under an Option shall be determined by the Committee in its sole discretion; provided that, except in connection with an adjustment provided for in Section 4(f) or with respect to Converted Awards or Substitute Awards, such purchase price shall not be less than the Fair Market Value of one Share on the date of the grant of the Option. The Committee may, in its sole discretion, establish a limit on the amount of gain that can be realized on an Option. |
(b) | Option Period. The term of each Option granted hereunder shall not exceed ten years from the date the Option is granted. |
(c) | Exercisability. Options shall be exercisable at such time or times as determined by the Committee at or subsequent to grant, subject to Section 5(b). |
(d) | Method of Exercise. Subject to the other provisions of the Plan, any Option may be exercised by the Participant in whole or in part at such time or times, and the Participant may make payment of the Option price in such form or forms, including, without limitation, payment by delivery of cash, Shares or other consideration (including, where permitted by law and the Committee, Awards) having a fair market value on the exercise date equal to the total Option price, or by any combination of cash, Shares and other consideration as the Committee may specify in the applicable Award Agreement. |
SECTION 7. STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may be granted to Participants on such terms and conditions as the Committee may determine, subject to the requirements of the Plan. A Stock Appreciation Right shall confer on the holder a right to receive, upon exercise, the excess of (i) the Fair Market Value of one Share on the date of exercise or, if the Committee shall so determine, at any time during a specified period before the date of exercise over (ii) the grant price of the right on the date of grant, or if granted in connection with an outstanding Option on the date of grant of the related Option, as specified by the Committee in its sole discretion, which, except in the case of Converted Awards or Substitute Awards or in connection with an adjustment provided in Section 4(f), shall not be less than the Fair Market Value of one Share on such date of grant of the right or the related Option, as the case may be. Any payment by the Company in respect of such right may be made in cash, Shares, other property or any combination thereof, as the Committee, in its sole discretion, shall determine. The Committee may, in its sole discretion, establish a limit on the amount of gain that can be realized on a Stock Appreciation Right.
(a) | Grant Price. The grant price for a Stock Appreciation Right shall be determined by the Committee, provided, however, and except as provided in Section 4(f) or with respect to Converted Awards or Substitute Awards, that such price shall not be less than 100% of the Fair Market Value of one Share on the date of grant of the Stock Appreciation Right. |
(b) | Term. The term of each Stock Appreciation Right shall not exceed ten years from the date of grant, or if granted in tandem with an Option, the expiration date of the Option. |
(c) | Time and Method of Exercise. The Committee shall establish the time or times at which a Stock Appreciation Right may be exercised in whole or in part. |
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SECTION 8. RESTRICTED SHARES.
(a) | Definition. A Restricted Share means any Share issued with the contingency or restriction that the holder may not sell, transfer, pledge or assign such Share and with such other contingencies or restrictions as the Committee, in its sole discretion, may impose (including, without limitation, any contingency or restriction on the right to vote such Share), which contingencies and restrictions may lapse separately or in combination, at such time or times, in installments or otherwise, as the Committee may deem appropriate. |
(b) | Issuance. A Restricted Share Award shall be subject to contingencies or restrictions imposed by the Committee during a period of time specified by the Committee (the “Contingency Period”). Restricted Share Awards may be issued hereunder to Participants, for no cash consideration or for such minimum consideration as may be required by applicable law, either alone or in addition to other Awards granted under the Plan. The terms and conditions of Restricted Share Awards need not be the same with respect to each recipient. |
(c) | Registration. Any Restricted Share issued hereunder may be evidenced in such manner as the Committee in its sole discretion shall deem appropriate, including, without limitation, book-entry registration or issuance of a stock certificate or certificates. In the event any stock certificate is issued in respect of Restricted Shares awarded under the Plan, such certificate shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions, contingencies and restrictions applicable to such Award. |
(d) | Forfeiture. Except as otherwise determined by the Committee at the time of grant or thereafter or as otherwise set forth in the terms and conditions of an Award, upon termination of service for any reason during the Contingency Period, all Restricted Shares still subject to any contingency or restriction shall be forfeited by the Participant and reacquired by the Company. |
(e) | Section 83(b) Election. A Participant may, with the consent of the Company, make an election under Section 83(b) of the Code to report the value of Restricted Shares as income on the date of grant. |
SECTION 9. RESTRICTED SHARE UNITS.
(a) | Definition. A Restricted Share Unit is an Award of a right to receive, in cash or Shares, as the Committee may determine, the Fair Market Value of one Share, the grant, issuance, retention and/or vesting of which is subject to such terms and conditions as the Committee may determine at the time of the grant, which shall not be inconsistent with this Plan. |
(b) | Terms and Conditions. In addition to the terms and conditions that may be established at the time of a grant of Restricted Share Unit Awards, the following terms and conditions apply: |
(i) | Restricted Share Unit Awards may not be sold, pledged (except as permitted under Section 15(a)) or otherwise encumbered prior to the date on which the Shares are issued, or, if later, the date on which any applicable contingency, restriction or performance period lapses. |
(ii) | Shares (including securities convertible into Shares) subject to Restricted Share Unit Awards may be issued for no cash consideration or for such minimum consideration as may be required by applicable law. Shares (including securities convertible into Shares) purchased pursuant to a purchase right granted under this SECTION 9 thereafter shall be purchased for such consideration as the Committee shall in its sole discretion determine, which shall not be less than the Fair Market Value of such Shares or other securities as of the date such purchase right is granted. |
(iii) | The terms and conditions of Restricted Share Unit Awards need not be the same with respect to each recipient. |
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SECTION 10. OTHER AWARDS. Other Awards of Shares and other Awards that are valued in whole or in part by reference to, or are otherwise based on, Shares or other property (“Other Awards”) may be granted to Participants. Other Awards may be paid in Shares, cash or any other form of property as the Committee shall determine. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Participants to whom, and the time or times at which, such Awards shall be made, the number of Shares to be granted pursuant to such Awards and all other conditions of the Awards. The terms and conditions of Other Awards need not be the same with respect to each recipient.
SECTION 11. PERFORMANCE AWARDS. Awards with a performance feature are referred to as “Performance Awards”. Performance Awards may be granted in the form of Options, Stock Appreciation Rights, Restricted Share Units, Restricted Shares or Other Awards with the features and restrictions applicable thereto. The performance criteria to be achieved during any Performance Period and the length of the Performance Period shall be determined by the Committee upon the grant of each Performance Award, provided that the minimum performance period shall be one year, except with respect to Converted Awards. Performance Awards may be paid in cash, Shares, other property or any combination thereof in the sole discretion of the Committee. The performance levels to be achieved for each Performance Period and the amount of the Award to be paid shall be conclusively determined by the Committee. Except as provided in SECTION 12, each Performance Award shall be paid following the end of the Performance Period or, if later, the date on which any applicable contingency or restriction has ended. Unless otherwise determined by the Committee, Performance Awards granted to Executive Officers will be subject to the additional terms set forth in SECTION 13.
SECTION 12. CHANGE IN CONTROL PROVISIONS.
(a) | Effect of a Change in Control on Existing Awards under this Plan. Notwithstanding any other provision of the Plan to the contrary, unless the Committee shall determine otherwise at the time of grant with respect to a particular Award, in the event of a Change in Control: |
(i) | any Time-Based Award consisting of Options, Stock Appreciation Rights or any other Time-Based Award in the form of rights that are exercisable by Participants upon vesting (“Exercisable Time-Based Award”), that is outstanding as of the date on which a Change in Control shall be deemed to have occurred and that is not then vested, shall become vested and exercisable, unless replaced by a Replacement Award; |
(ii) | any Time-Based Award that is not an Exercisable Time-Based Award that is outstanding as of the date on which a Change in Control shall be deemed to have occurred and that is not then vested, shall become free of all contingencies, restrictions and limitations and shall become vested and transferable, unless replaced by a Replacement Award; |
(iii) | any Replacement Award for which an Exercisable Time-Based Award has been exchanged upon a Change in Control shall vest and become exercisable in accordance with the vesting schedule and term for exercisability that applied to the corresponding Exercisable Time-Based Award immediately prior to such Change in Control, provided, however, that if within twenty four (24) months of such Change in Control, the Participant’s service with the Company or a Subsidiary is terminated without Cause (as such term is defined in the Arconic Corporation Change in Control Severance Plan) or by the Participant for Good Reason (as such term is defined in the Arconic Corporation Change in Control Severance Plan), such Award shall become vested and exercisable to the extent outstanding at the time of such termination of service. Any Replacement Award that has become vested and exercisable pursuant to this paragraph shall expire on the earlier of (A) thirty six (36) months following the date of termination of such Participant’s service (or, if later, the conclusion of the applicable post-termination exercise period pursuant to the applicable Award Agreement) and (B) the last day of the term of such Replacement Award; |
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(iv) | any Replacement Award for which a Time-Based Award that is not an Exercisable Time-Based Award has been exchanged upon a Change in Control shall vest in accordance with the vesting schedule that applied to the corresponding Time-Based Award immediately prior to such Change in Control, provided, however, that if within twenty four (24) months of such Change in Control, the Participant’s service with the Company or a Subsidiary is terminated without Cause (as such term is defined in the Arconic Corporation Change in Control Severance Plan) or by the Participant for Good Reason (as such term is defined in the Arconic Corporation Change in Control Severance Plan), such Award shall become free of all contingencies, restrictions and limitations and become vested and transferable to the extent outstanding; |
(v) | any Performance Award shall be converted so that such Award is no longer subject to any performance condition referred to in SECTION 11 above, but instead is subject to the passage of time, with the number or value of such Replacement Award determined as follows: (A) if 50% or more of the Performance Period has been completed as of the date on which such Change in Control is deemed to have occurred, the number or value of such Award shall be based on actual performance during the Performance Period; or (B) if less than 50% of the Performance Period has been completed as of the date on which such Change in Control is deemed to have occurred, the number or value of such Award shall be the target number or value. Paragraphs (i) through (iv) above shall govern the terms of such Time-Based Award. |
(b) | Change in Control Settlement. Notwithstanding any other provision of this Plan, if approved by the Committee, upon a Change in Control, a Participant may receive a cash settlement under clauses (i) and (ii) below of existing Awards that are vested and exercisable as of the date on which such Change in Control shall be deemed to have occurred: |
(i) | a Participant who holds an Option or Stock Appreciation Right may, in lieu of the payment of the purchase price for the Shares being purchased under the Option or Stock Appreciation Right, surrender the Option or Stock Appreciation Right to the Company and receive cash, within 30 days of the Change in Control in an amount equal to the amount by which the Fair Market Value of the Shares on the date of the Change in Control exceeds the purchase price per Share under the Option or Stock Appreciation Right multiplied by the number of Shares granted under the Option or Stock Appreciation Right; and |
(ii) | a Participant who holds Restricted Share Units may, in lieu of receiving Shares which have vested under Section 12(a)(ii) of this Plan, receive cash, within 30 days of a Change in Control (or at such other time as may be required to comply with Section 409A of the Code), in an amount equal to the Fair Market Value of the Shares on the date of the Change in Control multiplied by the number of Restricted Share Units held by the Participant. |
SECTION 13. PERFORMANCE AWARDS GRANTED TO EXECUTIVE OFFICERS.
(a) | Notwithstanding any other provision of this Plan, if the Committee grants a Performance Award to a Participant who is an Executive Officer, such Performance Award will be subject to the terms of this SECTION 13, unless otherwise expressly determined by the Committee. |
(b) | If an Award is subject to this SECTION 13 and is not an Option or a Stock Appreciation Right, then the lapsing of contingencies or restrictions thereon and the distribution of cash, Shares or other property pursuant thereto, as applicable, shall be subject to the achievement by the Company on a consolidated basis, by specified Subsidiaries or divisions or business units of the Company, and/or by the individual Participant, as appropriate, of one or more performance goals established by the Committee. Performance goals shall be based on such measures as selected by the Committee in its discretion, including, without limitation, (i) GAAP or non-GAAP metrics, (ii) total shareholder return or other return-based metrics, (iii) operational, efficiency-based, strategic corporate or personal professional objectives, (iv) sustainability or compliance targets or (v) any other metric that is capable of measurement as determined by the Committee. Performance goals may be calculated to exclude special items, unusual or infrequently occurring items or nonrecurring items or may be normalized for fluctuations in market forces, including, but not limited to, foreign currency exchange rates and the price of aluminum on the London Metal Exchange. Performance goals shall be set by the Committee (and any adjustments shall be made by the Committee, subject to Section 15(d)) within the first 25% of the Performance Period. |
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(c) | Notwithstanding any provision of this Plan other than Section 4(f) and SECTION 12, with respect to any Award that is subject to this SECTION 13 (other than an Option or a Stock Appreciation Right), the Committee may adjust downwards, but not upwards, the amount payable pursuant to such Award, and the Committee may not waive the achievement of the applicable performance goals. |
(d) | Subject to the adjustment provisions of Section 4(f), with respect to Awards subject to this SECTION 13, no Participant may be granted Options and/or Stock Appreciation Rights in any calendar year with respect to more than [________] Shares, or Restricted Share Awards or Restricted Share Unit Awards covering more than [________] Shares. The maximum dollar value payable with respect to Performance Awards that are valued with reference to property other than Shares and granted to any Participant in any one calendar year is $[________]. The foregoing limits shall apply to any Awards made under this SECTION 13, other than to Converted Awards which shall be disregarded for purposes of applying such limits. |
SECTION 14. AMENDMENTS AND TERMINATION. The Board may amend, alter, suspend, discontinue or terminate the Plan or any portion thereof at any time; provided that notwithstanding any other provision in this Plan, no such amendment, alteration, suspension, discontinuation or termination shall be made: (a) without shareholder approval, if such approval would be required pursuant to applicable law or the requirements of the New York Stock Exchange or such other stock exchange on which the Shares trade; or (b) without the consent of the affected Participant, if such action would materially impair the rights of such Participant under any outstanding Award, except as provided in Sections 15(e) and 15(f). Notwithstanding anything to the contrary herein, the Committee may amend the Plan in such manner as may be necessary so as to have the Plan conform to local rules and regulations in any jurisdiction outside the United States or to qualify for or comply with any tax or regulatory requirement for which or with which the Board or Committee deems it necessary or desirable to qualify or comply.
SECTION 15. GENERAL PROVISIONS.
(a) | Transferability of Awards. Awards may be transferred by will or the laws of descent and distribution. Except as set forth herein, awards shall be exercisable, during the Participant’s lifetime, only by the Participant or, if permissible under applicable law, by the Participant’s guardian or legal representative. Unless otherwise provided by the Committee or limited by applicable laws, a Participant may, in the manner established by the Committee, designate a beneficiary to exercise the rights of the Participant with respect to any Award upon the death of the Participant. Unless otherwise provided by the Committee or limited by applicable laws, Awards may be transferred to one or more Family Members, individually or jointly, or to a trust whose beneficiaries include the Participant or one or more Family Members under terms and conditions established by the Committee. The Committee shall have authority to determine, at the time of grant, any other rights or restrictions applicable to the transfer of Awards; provided however, that no Award may be transferred to a third party for value or consideration. Except as provided in this Plan or the terms and conditions established for an Award, any Award shall be null and void and without effect upon any attempted assignment or transfer, including, without limitation, any purported assignment, whether voluntary or by operation of law, pledge, hypothecation or other disposition, attachment, divorce or trustee process or similar process, whether legal or equitable. |
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(b) | Award Entitlement. No Employee or Director shall have any claim to be granted any Award under the Plan and there is no obligation for uniformity of treatment of Employees or Directors under the Plan. |
(c) | Terms and Conditions of Award. The prospective recipient of any Award under the Plan shall be deemed to have become a Participant subject to all the applicable terms and conditions of the Award upon the grant of the Award to the prospective recipient, unless the prospective recipient notifies the Company within 30 days of the grant that the prospective recipient does not accept the Award. This Section 15(c) is without prejudice to the Company’s right to require a Participant to affirmatively accept the terms and conditions of an Award. |
(d) | Award Adjustments. The Committee shall be authorized to make adjustments in Performance Award criteria or in the terms and conditions of other Awards in recognition of unusual or nonrecurring events affecting the Company or its financial statements or changes in applicable laws, regulations or accounting principles. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem desirable to carry it into effect. |
(e) | Committee Right to Cancel. The Committee shall have full power and authority to determine whether, to what extent and under what circumstances any Award shall be canceled or suspended at any time prior to a Change in Control: (i) if an Employee, without the consent of the Committee, while employed by the Company or a Subsidiary or after termination of such employment, becomes associated with, employed by, renders services to or owns any interest (other than an interest of up to 5% in a publicly traded company or any other nonsubstantial interest, as determined by the Committee) in any business that is in competition with the Company or any Subsidiary; (ii) in the event of the Participant’s willful engagement in conduct which is injurious to the Company or any Subsidiary, monetarily, reputationally or otherwise; (iii) in the event of an Executive Officer’s misconduct described in Section 15(f); or (iv) in order to comply with applicable laws as described in Section 15(h) below. For purposes of clause (ii), no act, or failure to act, on the Participant’s part shall be deemed “willful” unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that the Participant’s act, or failure to act, was in the best interest of the Company or a Subsidiary. In the event of a dispute concerning the application of this Section 15(e), no claim by the Company shall be given effect unless the Board determines that there is clear and convincing evidence that the Committee has the right to cancel an Award or Awards hereunder, and the Board finding to that effect is adopted by the affirmative vote of not less than three quarters of the entire membership of the Board (after reasonable notice to the Participant and an opportunity for the Participant to provide information to the Board in such manner as the Board, in its sole discretion, deems to be appropriate under the circumstances). |
(f) | Clawback. Notwithstanding any other provision of the Plan to the contrary, in accordance with the Company’s Corporate Governance Guidelines, if the Board learns of any misconduct by an Executive Officer that contributed to the Company having to restate all or a portion of its financial statements, the Board will, to the full extent permitted by governing law, in all appropriate cases, effect the cancellation and recovery of Awards (or the value of Awards) previously granted to the Executive Officer if: (i) the amount of the Award was calculated based upon the achievement of certain financial results that were subsequently the subject of a restatement, (ii) the executive engaged in intentional misconduct that caused or partially caused the need for the restatement, and (iii) the amount of the Award had the financial results been properly reported would have been lower than the amount actually awarded. Furthermore, all Awards (including Awards that have vested in accordance with the Award Agreement) shall be subject to the terms and conditions, if applicable, of any other recoupment policy adopted by the Company from time to time or any recoupment requirement imposed under applicable laws, rules, regulations or stock exchange listing standards, including, without limitation, recoupment requirements imposed pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Section 304 of the Sarbanes-Oxley Act of 2002, or any regulations promulgated thereunder, or recoupment requirements under the laws of any other jurisdiction. |
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(g) | Stock Certificate Legends. All certificates for Shares delivered under the Plan pursuant to any Award shall be subject to such stock transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the U.S. Securities and Exchange Commission, any stock exchange upon which the Shares are then listed and any applicable Federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. |
(h) | Compliance with Securities Laws and Other Requirements. No Award granted hereunder shall be construed as an offer to sell securities of the Company, and no such offer shall be outstanding, unless and until the Company in its sole discretion has determined that any such offer, if made, would be in compliance with all applicable requirements of the U.S. Federal securities laws and any other laws, rules, regulations, stock exchange listing or other requirements to which such offer, if made, would be subject. Without limiting the foregoing, the Company shall have no obligation to issue or deliver Shares pursuant to Awards granted hereunder prior to: (i) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable, and (ii) completion of any registration or other qualification with respect to the Shares under any applicable law in the United States or in a jurisdiction outside of the United States or procurement of any ruling or determination of any governmental body that the Company determines to be necessary or advisable or at a time when any such registration, qualification or determination is not current, has been suspended or otherwise has ceased to be effective. The inability or impracticability of the Company to obtain or maintain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained, and shall constitute circumstances in which the Committee may determine to amend or cancel Awards pertaining to such Shares, with or without consideration to the affected Participants. |
(i) | Dividends. No Award of Options or Stock Appreciation Rights shall have the right to receive dividends or dividend equivalents. A recipient of an Award of Restricted Shares shall receive dividends on the Restricted Shares, subject to this Section 15(i) and such other contingencies or restrictions, if any, as the Committee, in its sole discretion, may impose. Dividend equivalents shall accrue on Restricted Share Units (including Restricted Share Units that have a performance feature) and shall only be paid if and when such Restricted Share Units vest. Dividend equivalents that accrue on Restricted Share Units will be calculated at the same rate as dividends paid on the common stock of the Company. Notwithstanding any provision herein to the contrary, no dividends or dividend equivalents shall be paid on Restricted Share Units that have not vested or on Restricted Share Units that have not been earned during a Performance Period and in no event shall any other Award provide for the Participant’s receipt of dividends or dividend equivalents in any form prior to the vesting of such Award or applicable portion thereof. |
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(j) | Consideration for Awards. Except as otherwise required in any applicable Award Agreement or by the terms of the Plan, recipients of Awards under the Plan shall not be required to make any payment or provide consideration other than the rendering of services. |
(k) | Delegation of Authority by Committee. The Committee may delegate to one or more Executive Officers or a committee of Executive Officers the right to grant Awards to Employees who are not Executive Officers or Directors of the Company and to cancel or suspend Awards to Employees who are not Executive Officers or Directors of the Company. The Committee may delegate other of its administrative powers under the Plan to the extent not prohibited by applicable laws. |
(l) | Tax Obligations. The Company shall be authorized to withhold from any Award granted or payment due under the Plan the amount of Tax Obligations due in respect of an Award or payment hereunder and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such Tax Obligations, including without limitation requiring the Participant to pay cash, withholding otherwise deliverable cash or Shares having a fair market value equal to the amount required to be withheld, forcing the sale of Shares issued pursuant to an Award (or exercise or vesting thereof) having a fair market value equal to the amount required to be withheld, or requiring the Participant to deliver to the Company already-owned Shares having a fair market value equal to the amount required to be withheld. For purposes of the foregoing, “Tax Obligations” means tax, social insurance and social security liability obligations and requirements in connection with the Awards, including, without limitation, (i) all U.S. Federal, state, and local income, employment and any other taxes (including the Participant’s U.S. Federal Insurance Contributions Act (FICA) obligation) that are required to be withheld by the Company (or a Subsidiary, as applicable), (ii) the Participant’s and, to the extent required by the Company (or a Subsidiary, as applicable), the Company’s (or a Subsidiary’s) fringe benefit tax liability, if any, associated with the grant, vesting, or exercise of an Award or sale of Shares issued under the Award, and (iii) any other taxes, social insurance, social security liabilities or premium for which the Participant has an obligation, or which the Participant has agreed to bear, with respect to such Award (or exercise thereof or issuance of Shares or other consideration thereunder). Furthermore, the Committee shall be authorized to, but is not required to, establish procedures for election by Participants to satisfy such obligations for the payment of such taxes by delivery of or transfer of Shares to the Company or by directing the Company to retain Shares otherwise deliverable in connection with the Award. All personal taxes applicable to any Award under the Plan are the sole liability of the Participant. |
(m) | Other Compensatory Arrangements. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to shareholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. |
(n) | Governing Law. The Plan and all determinations made and actions taken thereunder, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Delaware, United States of America, without reference to principles of conflict of laws, and construed accordingly. |
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(o) | Severability. If any provision of this Plan is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan, it shall be stricken and the remainder of the Plan shall remain in full force and effect. |
(p) | Awards to Non-U.S. Employees. Awards may be granted to Employees and Directors who are foreign nationals or residents or employed outside the United States, or both, on such terms and conditions different from those applicable to Awards to Employees and Directors who are not foreign nationals or residents or who are employed in the United States as may, in the judgment of the Committee, be necessary or desirable in order to recognize differences in local law, regulations or tax policy. Without limiting the generality of the foregoing, the Committee or the Board, as applicable, are specifically authorized to (i) adopt rules and procedures regarding the conversion of local currency, withholding procedures and handling of stock certificates which vary with local requirements and (ii) adopt sub-plans, Award Agreements and Plan and Award Agreement addenda as may be deemed desirable to accommodate foreign laws, regulations and practice. The Committee also may impose conditions on the exercise or vesting of Awards in order to minimize the Company’s or a Subsidiary’s obligation with respect to tax equalization for Employees on assignments outside their home countries. Notwithstanding the discretion of the Committee under this section, the Participant remains solely liable for any applicable personal taxes. |
(q) | Repricing Prohibited. Except as provided in Section 4(f), the terms of outstanding Options or Stock Appreciation Rights may not be amended, and action may not otherwise be taken without shareholder approval, to: (i) reduce the exercise price of outstanding Options or Stock Appreciation Rights, (ii) cancel outstanding Options or Stock Appreciation Rights in exchange for Options or Stock Appreciation Rights with an exercise price that is less than the exercise price of the original Options or Stock Appreciation Rights, or (iii) replace outstanding Options or Stock Appreciation Rights in exchange for other Awards or cash at a time when the exercise price of such Options or Stock Appreciation Rights is higher than the Fair Market Value of a Share. Nothing in this Section 15(q) shall be construed to apply to the issuance of Converted Awards. |
(r) | Deferral. The Committee may require or permit Participants to elect to defer the issuance of Shares or the settlement of Awards in cash or other property to the extent that such deferral complies with Section 409A of the Code. The Committee may also authorize the payment or crediting of interest, dividends or dividend equivalents on any deferred amounts. |
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(s) | Compliance with Section 409A of the Code. Except to the extent specifically provided otherwise by the Committee and notwithstanding any other provision of the Plan, Awards under the Plan are intended to satisfy the requirements of Section 409A of the Code so as to avoid the imposition of any additional taxes or penalties under Section 409A of the Code. If the Committee determines that an Award, payment, distribution, transaction or any other action or arrangement contemplated by the provisions of the Plan would, if undertaken, cause a Participant to become subject to any additional taxes or other penalties under Section 409A of the Code, then unless the Committee specifically provides otherwise, such Award, payment, distribution, transaction or other action or arrangement shall not be given effect to the extent it causes such result and the related provisions of the Plan and/or Award Agreement will be deemed modified, or, if necessary, suspended in order to comply with the requirements of Section 409A of the Code to the extent determined appropriate by the Committee, in each case without the consent of or notice to the Participant. No payment that constitutes deferred compensation under Section 409A of the Code that would otherwise be made under the Plan or an Award Agreement upon a Participant’s termination of employment will be made or provided unless and until such termination is also a “separation from service,” as determined in accordance with Section 409A of the Code. Notwithstanding the foregoing or anything elsewhere in the Plan or an Award Agreement to the contrary, if a Participant is a “specified employee” within the meaning of Section 409A of the Code at the time of termination of employment with respect to an Award, then solely to the extent necessary to avoid the imposition of any additional tax under Section 409A of the Code, the commencement of any payments or benefits under the Award shall be delayed to the extent required by Code Section 409A(a)(2)(B)(i). Further notwithstanding anything to the contrary in the Plan, to the extent required under Section 409A of the Code in order to make payment of an Award upon a Change in Control, the applicable transaction or event described in SECTION 2 must qualify as a change in the ownership or effective control of the Company or as a change in the ownership of a substantial portion of the assets of the Company pursuant to Section 409A(a)(2)(A)(v) of the Code, and if it does not, then unless otherwise specified in the applicable Award Agreement, payment of such Award will be made on the Award’s original payment schedule or, if earlier, upon the death of the Participant. Although the Company may attempt to avoid adverse tax treatment under Section 409A of the Code, the Company makes no representation to that effect and expressly disavows any covenant to maintain favorable or avoid unfavorable tax treatment. The Company shall be unconstrained in its corporate activities without regard to the potential negative tax impact on holders of Awards under the Plan. |
(t) | Effect of Headings. The Section headings and subheadings herein are for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. |
SECTION 16. TERM OF PLAN. No Award shall be granted pursuant to the Plan after the 10th anniversary of the Effective Date, but any Award theretofore granted may extend beyond that date. The Plan was approved by Arconic Inc., as the sole shareholder of the Company, prior to the separation of the Company from Arconic Inc. and became effective as of the date of such separation on [DATE], 2020 (the “Effective Date”).
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Exhibit 10.4
FORM OF ARCONIC CORPORATION
2020 DEFERRED FEE PLAN FOR DIRECTORS
(Effective [ ], 2020)
Article | I Introduction |
Arconic Corporation, a Delaware corporation, (the “Company”) has established this 2020 Deferred Fee Plan for Directors (the “Plan”) to provide non-employee directors with an opportunity to defer receipt of fees earned for services as a member of the Company’s Board of Directors (the “Board”), to provide for deferrals of Restricted Share Units (as defined herein) with respect to common stock of the Company granted to non-employee directors, and to receive liabilities transferred from the Arconic Inc. Plan (as defined herein).
Article | II DEFinitions |
2.1 | Definitions. The following definitions apply unless the context clearly indicates otherwise: |
(a) | Annual Equity Award means the annual Restricted Share Unit award that a Director will be entitled to receive as compensation for serving as a Director in a relevant year (not including any Fees), which, unless otherwise determined by the Board, will be granted under the Stock Plan. |
(b) | Arconic Inc. Plan means the Arconic Inc. Amended and Restated Deferred Fee Plan for Directors. |
(c) | Arconic Stock Fund means, with respect to a Director who participated in the Arconic Inc. Plan prior to November 1, 2016, the investment option under the Arconic Inc. Plan relating to the Arconic Stock Fund (formerly known as the Alcoa Stock Fund) under Arconic Inc.’s principal tax-qualified retirement savings plan for salaried employees. |
(d) | Beneficiary means the person or persons designated by a Director under Section 4.1 to receive any amount payable under Section 5.3. |
(e) | Board has the meaning ascribed to such term in Article I. |
(f) | Chairman means the Chairman of the Board. |
(g) | Code means the United States Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. |
(h) | Company has the meaning ascribed to such term in Article I. |
(i) | Converted Director RSUs means any restricted share units granted under the Stock Plan to satisfy the automatic adjustment and conversion, in accordance with the terms of the Employee Matters Agreement, of deferred fee restricted share units or annual equity award restricted share units granted to a Director by Arconic Inc. over Arconic Inc. common stock prior to the Effective Date and deferred under the terms of the Arconic Inc. Plan. |
(j) | Credits means amounts credited to a Director’s Deferred Fee Account, with all Investment Option units valued by reference to the comparable fund offered under the Savings Plan. |
(k) | Deferred Fee Account means a bookkeeping account established by the Company in the name of a Director with respect to amounts deferred into Investment Options hereunder. For the avoidance of doubt, Deferred Fee Account does not include any amounts deferred into Deferred Fee RSU Awards. |
(l) | Deferred Fee RSU Award means each award of Restricted Share Units granted in lieu of Fees pursuant to a deferral election made by a Director pursuant to Article III. |
(m) | Director means a non-employee member of the Board. Any Director who is a director or chairman of the board of directors of a subsidiary or affiliate of the Company shall not, by virtue thereof, be deemed to be an employee of the Company or such subsidiary or affiliate for purposes of eligibility under this Plan. |
(n) | Director Stock Ownership Guideline means the minimum value of Shares or Restricted Share Units (or, if applicable, units in the Legacy Arconic DSU Account), required to be held by each Director until retirement from the Board, as established from time to time by the Board. As of the Effective Date, the Director Stock Ownership Guideline for a Director is $750,000. A Director’s compliance with the Director Stock Ownership Guideline shall be measured based on the value of the Director’s investment on the first Monday in December of each year, or on such other date as may be designated by the Secretary’s office (the “Annual Valuation Date”). |
(o) | Effective Date means [ ], 2020, the effective date of the separation of the Company’s business from Arconic Inc.’s business. |
(p) | Employee Matters Agreement means the Employee Matters Agreement dated [ ], 2020 by and between Arconic Inc. and the Company and entered into in connection with the separation of the Company’s business from Arconic Inc.’s business. |
(q) | Equity Restructuring means a nonreciprocal transaction between the Company and its shareholders, such as a stock dividend, stock split (including a reverse stock split), spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, that affects the Shares (or other securities of the Company) or the price of Shares (or other securities) and causes a change in the per share value of the Shares. |
(r) | Fair Market Value means, unless otherwise defined in the Stock Plan, with respect to Shares on any given date, the closing price per Share on that date as reported on the New York Stock Exchange or other stock exchange on which the Shares principally trade. If the New York Stock Exchange or such other exchange is not open for business on the date fair market value is being determined, the closing price as reported for the immediately preceding business day on which that exchange is open for business will be used. |
(s) | Fees means all cash amounts payable to a Director for services rendered as a member of the Board that are specifically designated as fees, including, but not limited to, annual and/or quarterly retainer fees, fees (if any) paid for attending meetings of the Board or any Committee thereof, fees for serving as a Committee Chair, as Lead Director or Chairman or as a member of a Committee, and any per diem fees. |
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(t) | Investment Options means the respective options established hereunder with reference to the comparable funds under the Savings Plan, with the exception of the Company’s Stock Fund. |
(u) | Legacy Arconic DSU Account means any amount held in a Director’s Deferred Fee Account that relates to an amount previously credited to the Arconic Stock Fund under the Arconic Inc. Plan and notionally credited in Shares under this Plan, in accordance with the terms of the Employee Matters Agreement and Article VII. |
(v) | Plan has the meaning ascribed to such term in Article I. |
(w) | Restricted Share Unit means an award of a right to receive Shares, including any such award that is granted under, and subject to the terms of, the Stock Plan. |
(x) | Shares means the shares of common stock of the Company, $0.01 par value per Share. |
(y) | Savings Plan means the Company’s principal tax-qualified retirement savings plan for salaried employees. |
(z) | Secretary means the Corporate Secretary of the Company. |
(aa) | Separation from Service means a “separation from service” as defined in Section 409A of the Code. |
(bb) | Stock Plan means the Arconic Corporation 2020 Stock Incentive Plan, as may be amended from time to time, and any successor thereto. |
(cc) | Unforeseeable Emergency means a severe financial hardship to the Director resulting from (i) an illness or accident of the Director or his or her spouse or dependent; (ii) loss of the Director’s property due to casualty; or (iii) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the Director’s control. For the avoidance of doubt, a circumstance does not constitute an “Unforeseeable Emergency” for purposes of the Plan unless such circumstance constitutes an “unforeseeable emergency” as defined in Section 409A of the Code. |
Article | III DEFERRAL OF COMPENSATION |
3.1 | Deferral of Fees. A Director may elect, with respect to each calendar year, to defer under the Plan the receipt of all Fees, or a specified portion (in 1% increments) of the Fees, otherwise payable to him or her and may elect to invest such deferred Fees in one or more Investment Options and/or in Deferred Fee RSU Awards. Fees deferred in respect of each calendar year shall be separately designated and tracked in an individual sub-account to the Director’s Deferred Fee Account (each, an “Annual Sub-Account”) and shall be paid in accordance with Article V of the Plan. |
3.2 | Deferral of Restricted Share Units. Unless otherwise determined by the Board or as may be required pursuant to Section 6.6, any Restricted Share Units granted to a Director (whether as a Deferred Fee RSU Award or an Annual Equity Award) shall, once any vesting requirements have been met, be deferred and paid in accordance with Article V of the Plan. Any dividend equivalents on Restricted Share Units shall be deferred and paid in the same manner and at the same time as the Restricted Share Units to which they relate. |
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3.3 | Manner of Electing Deferral. A Director may elect to defer the receipt of all or certain Fees and may elect the form of payment of Restricted Share Units by giving written notice (including by electronic means) to the Secretary on an election form provided by the Company, or in any other manner that is deemed sufficient from time to time by the Board. Such election form will require the Director to specify (i) the percentage (if any) of the Director’s Fees that will be deferred and the manner of investment of such deferred Fees in accordance with Sections 3.5 and 3.6, and (ii) the form of payment of any deferred Fees (including Deferred Fee RSU Awards) and, separately, of the Director’s Annual Equity Award, which in each case, may be either a single lump sum payment or up to ten (10) annual installment payments. In the event and to the extent that a Director fails to specify the form of payment, payment will be made in a lump sum. Payment will be made in accordance with Article V of the Plan. |
3.4 | Annual Elections of Deferral. An election to defer Fees and to elect the form of payment of an Annual Equity Award shall be made prior to the beginning of the calendar year in which the Fees will be earned or, as applicable, the Annual Equity Award will be granted; provided, however, that an election made within thirty (30) days after a person first becomes a Director shall be effective for Fees earned, or any Annual Equity Award granted, in the same calendar year, but after the date of such deferral election. The election to defer receipt of payment may not be canceled or modified after it becomes irrevocable under Section 409A of the Code unless the Chairman, in his sole discretion, determines in accordance with Section 5.1 that an Unforeseeable Emergency exists, or except as otherwise permitted by the Code. |
3.5 | Deferring Fees into Investment Options. A Director may designate all or a portion of his or her deferred Fees to be invested in one or more of the Investment Options, in which case, the Director’s deferred Fees shall be credited to the designated Investment Option(s) at the beginning of the calendar quarter following the quarter in which such Fees were earned. Such Fees shall be credited to the Director’s Deferred Fee Account as Credits for “units” in the Director’s Deferred Fee Account. As of any specified date, the value per unit in the Director’s Deferred Fee Account shall be deemed to be the value determined for the comparable fund under the Savings Plan. |
3.6 | Deferred Fee RSU Awards. A Director may designate all or a portion of his or her deferred Fees to be invested in Deferred Fee RSU Awards, except that a deferral of Fees pursuant to an election made within thirty (30) days after a person first becomes a Director may be invested in Deferred Fee RSU Awards only with respect to any Fees to be earned in the quarter (or other Fees payment period) following the quarter in which the Director commences service on the Board. The number of Restricted Share Units subject to each Deferred Fee RSU Award shall be determined by dividing the dollar amount of the Fees subject to the Director’s election by the Fair Market Value of a Share on the date(s) that such Fees (or any installment thereof) would otherwise have been paid in cash to the Director (the “Fees Payment Date”). Unless otherwise determined by the Board, the Deferred Fee RSU Award shall (i) be granted on the applicable Fees Payment Date(s), (ii) not be subject to vesting requirements or other forfeiture restrictions, and (iii) be granted under, and subject to the terms of, the Stock Plan and evidenced by a form of Award Agreement (as defined in the Stock Plan) that shall be approved by the Board prior to the grant of any such Deferred Fee RSU Award, which Award Agreement is incorporated by reference into this Section 3.6. The Shares subject to the Deferred Fee RSU Award shall be delivered to the Director in accordance with Article V of the Plan. |
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3.7 | Subsequent Deferral Elections. After a deferral election made by a Director in accordance with this Article III has become irrevocable under Section 409A of the Code, the Director may elect to change the time and form of payment of the deferred amount covered by such election only by submitting a payment election change at least (12) months prior to the date on which the deferred amount (or first installment thereof, as applicable) is scheduled to be paid (the “First Scheduled Payment Date”) that will result in a delay of payment (or commencement of payment) of such deferred amount until the date that is at least five (5) years after the First Scheduled Payment Date. A payment election change is irrevocable upon receipt and shall not take effect until the first date that is at least twelve (12) months after the date of receipt. |
3.8 | Transfers Between Investment Options. To the extent that a Director has Credits notionally invested in one or more Investment Options, the Director may elect to designate a different Investment Option for all or any portion of such Credits in accordance with the procedures established by the Board from time to time. |
3.9 | Method of Payment. All payments with respect to a Director’s Deferred Fee Account shall be made in cash, and no Director shall have the right to demand payment in Shares or in any other medium. Subject to the terms of the Stock Plan, if applicable, and except as set forth in Section 5.2, all payments with respect to Deferred Fee RSU Awards and Annual Equity Awards shall be made in Shares. |
Article | IV Beneficiaries |
4.1 | Designation of Beneficiary. Each Director may designate from time to time one or more natural persons or entities as his or her Beneficiary or Beneficiaries to whom the amounts credited to his or her Deferred Fee Account and/or his or her Deferred Fee RSU Awards are to be paid if he or she dies before all such amounts have been paid to the Director. Each Beneficiary designation shall be made on a form prescribed by the Company and shall be effective only when filed with the Secretary during the Director’s lifetime. Each Beneficiary designation filed with the Secretary shall revoke all Beneficiary designations previously made. The revocation of a Beneficiary designation shall not require the consent of any Beneficiary. In the absence of an effective Beneficiary designation, or if payment cannot be made to a Beneficiary, payment shall be made to the Director’s estate. Any beneficiary designation with respect to an Annual Equity Award or Deferred Fee RSU Award will be made in accordance with the terms of the Stock Plan, to the extent applicable. |
Article | V PAYMENTS |
5.1 | Payment upon Unforeseeable Emergency. No payment may be made from a Director’s Deferred Fee Account or in settlement of a Director’s Annual Equity Awards and Deferred Fee RSU Awards except as provided in this Article V, unless an Unforeseeable Emergency exists as determined by the Chairman in his sole discretion. If an Unforeseeable Emergency is determined by the Chairman to exist, the Chairman shall determine when and to what extent Credits in the Director’s Deferred Fee Account and/or Shares underlying the Director’s Annual Equity Awards and Deferred Fee RSU Awards may be paid to such Director prior to or after the Director’s Separation from Service; provided, however, that the amounts distributed in connection with such an emergency cannot exceed the amounts necessary to satisfy the emergency plus what is necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which the hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Director’s assets (to the extent such liquidation would not itself cause severe financial hardship). All payments with respect to an Unforeseeable Emergency shall be made in a lump sum upon the Chairman’s determination that an Unforeseeable Emergency exists, subject to any advance approval by the Board as may be required for purposes of exemption under Section 16(b) of the Securities Exchange Act of 1934, as amended. |
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5.2 | Payment upon a Director’s Separation from Service. |
(a) | Payment of any amount in a Director’s Deferred Fee Account (valued in accordance with the last sentence of Section 3.5) and of the Director’s Deferred Fee RSU Awards (if any) and Annual Equity Awards shall be made following the Director’s Separation from Service, as set forth in this Section 5.2, except as otherwise set forth in Section 5.1 or Section 5.3. |
(b) | To the extent a Director elected to receive a lump sum payment, such payment shall be made in the sixth (6th) calendar month that commences following the date of the Director’s Separation from Service, but in no event earlier than after a full six (6) months following such Separation from Service, subject to any subsequent deferral election by the Director pursuant to Section 3.7. |
(c) | To the extent a Director elected to receive installment payments, the first such installment payment shall be made either (i) during the sixth (6th) calendar month that commences following the Director’s Separation from Service, but in no event earlier than after a full six (6) months following such Separation from Service, or (ii) during the first month of the calendar year following the Director’s Separation from Service, whichever of (i) or (ii) occurs later, subject to any subsequent deferral election by the Director pursuant to Section 3.7. Subsequent installment payments shall be made during the first calendar month of each succeeding year until the Director’s Deferred Fee Account is exhausted or all Restricted Share Units have been paid, as applicable. If the Director elected to receive deferred Fees credited to any Annual Sub-Account or settlement of a Deferred Fee RSU Award or Annual Equity Award in installment payments, the amount of each payment shall be, respectively, a fraction of the value of the Director’s Annual Sub-Account and in such sub-account, or a fraction of the number of Restricted Share Units that remains subject to such Deferred Fee RSU Award or Annual Equity Award, in each case on the last day of the calendar month preceding payment, the numerator of which fraction is one and the denominator of which is the total number of installments elected minus the number of installments previously paid. Any fractional Share portion of an installment payment of a Deferred Fee RSU Award or Annual Equity Award, or any portion of a dividend equivalent on such award that was not reinvested in additional Restricted Share Units pursuant to its terms, will be paid in cash at the same time as the installment payment to which it is attributable. |
5.3 | Payment upon a Director’s Death. If a Director dies with any amount credited to his or her Deferred Fee Account and/or any outstanding Deferred Fee RSU Awards, the value of said Deferred Fee Account and/or Shares underlying such Deferred Fee RSU Awards shall be paid as soon as administratively practicable in a single payment to the Beneficiary (or in separate payments to the Beneficiaries if more than one were designated by the Director) or to the Director’s estate, as the case may be (subject to the terms of the Stock Plan if and to the extent applicable to the Deferred Fee RSU Awards). If a Director dies with any outstanding Annual Equity Awards that are vested (or become vested upon the Director’s death), such awards shall be paid as soon as administratively practicable in a single payment to the party eligible to receive such payment under the terms of the Stock Plan. |
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5.4 | Separate Payments. Each payment payable under this Plan is intended to constitute a separate payment for purposes of Section 409A of the Code. |
Article | VI MISCELLANEOUS |
6.1 | Director’s Rights Unsecured. Payments payable hereunder shall be payable out of the general assets of the Company, and no segregation of assets for such payments shall be made by the Company. The right of any Director or Beneficiary to receive payments from a Deferred Fee Account shall be a claim against the general assets of the Company as an unsecured general creditor. The Company may, in its absolute discretion, establish one or more trusts or reserves, which may be funded by reference to amounts of Credits standing in the Director’s Deferred Fee Accounts hereunder or otherwise. Any such trust or reserve shall remain subject to the claims of creditors of the Company. If any amounts held in a trust of the above described nature are found (due to the creation or operation of said trust) in a final decision by a court of competent jurisdiction, or under a “determination” by the Internal Revenue Service in a closing agreement in audit or final refund disposition (within the meaning of Section 1313(a) of the Code), to have been includable in the gross income of a Director or Beneficiary prior to payment of such amounts from said trust, the trustee for the trust shall, as soon as practicable, pay to such Director or Beneficiary an amount equal to the amount determined to have been includable in gross income in such determination, and shall accordingly reduce the Director’s or Beneficiary’s future benefits payable under this Plan. The trustee shall not make any distribution to a Director or Beneficiary pursuant to this paragraph unless it has received a copy of the written determination described above, together with any legal opinion that it may request as to the applicability thereof. |
6.2 | Responsibility for Taxes. The Director or Beneficiary is liable for any and all taxes that are applicable to the amounts payable under the Plan, including any taxes deemed payable prior to payment out of the Plan. |
6.3 | Non-assignability. The right of any Director or Beneficiary to the payment of Credits in a Deferred Fee Account shall not be assigned, transferred, pledged or encumbered and shall not be subject in any manner to alienation or anticipation. |
6.4 | Administration and Interpretation. The Plan shall be administered by the Board. Subject to the terms of the Plan and applicable law and without limitation, the Board shall have full power and authority to: (i) designate Directors for participation, (ii) determine the terms and conditions of any deferral made under the Plan, (iii) interpret and administer the Plan and any instrument or agreement relating to, or deferral made under, the Plan, (iv) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan, and (v) make any other determination and take any other action that the Board deems necessary or desirable for the administration of the Plan. To the extent permitted by applicable laws, the Board may, in its discretion, delegate to the Secretary’s office any or all authority and responsibility to act with respect to administrative matters relating to the Plan, and to the extent set forth in the Plan, the Board may delegate certain questions of construction and interpretation to the Chairman, whose decision on such matters shall be final and binding. The determination of the Board on all matters within its authority relating to the Plan shall be final, conclusive and binding upon all parties, including the Company, its shareholders, the Directors and any Beneficiary. |
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6.5 | Section 409A of the Code. The Plan is intended to comply with the requirements of Section 409A of the Code, and the provisions of the Plan and any deferral election form shall be interpreted in a manner that satisfies the requirements of Section 409A of the Code, and the Plan shall be operated accordingly. If any provision of the Plan or any term or condition of any deferral election form would otherwise frustrate or conflict with this intent, the provision, such provision, term or condition will be interpreted and deemed amended so as to avoid this conflict. Although the Company may attempt to avoid adverse tax treatment under Section 409A of the Code, the Company makes no representation to that effect and expressly disavows any covenant to maintain favorable or avoid unfavorable tax treatment. The Company shall be unconstrained in its corporate activities without regard to the potential negative tax impact on a Director. |
6.6 | Non-U.S. Directors. Directors who are foreign nationals or residents or employed outside the United States, or both, may participate in the Plan on such terms and conditions different from those applicable to Directors who are not foreign nationals or residents or who are employed in the United States as may, in the judgment of the Board, be necessary or desirable in order to recognize differences in local law, regulations or tax policy. |
6.7 | Amendment and Termination. The Plan may be amended, modified or terminated at any time by the Board. No amendment, modification or termination shall, without the consent of a Director, adversely affect such Director’s rights with respect to amounts theretofore credited to his or her Deferred Fee Account or with respect to Annual Equity Awards or Deferred Fee RSU Awards theretofore granted to such Director. |
6.8 | Notices. All notices to the Company under the Plan shall be in writing and shall be given to the Secretary or to an agent or other person designated by the Secretary. |
6.9 | Governing Law. This Plan shall be construed in accordance with and governed by the laws of the State of Delaware, excluding any choice of law provisions, which may indicate the application of the laws of another jurisdiction. |
Article | VII TRANSFER OF LIABILITIES UNDER ARCONIC INC. PLAN |
7.1 | Transfer of Arconic Inc. Deferred Fee Account Liabilities. In accordance with the terms of the Employee Matters Agreement, if prior to the Effective Date a Director participated in the Arconic Inc. Plan, the Director’s Deferred Fee Account or Legacy Arconic DSU Account, as applicable, will be credited with the applicable amount of such Director’s deferred fee account balance under the Arconic Inc. Plan and all liabilities relating to the participation of the Director in the Arconic Inc. Plan shall be transferred to this Plan and assumed by the Company. To the extent the Director’s deferred fee account balance under the Arconic Inc. Plan was invested in one or more investment options other than the Arconic Stock Fund, it will be reflected as a Credit in an equivalent Investment Option(s) in the Director’s Deferred Fee Account, as determined by the Company. |
7.2 | Adjustment of Credits Transferred from Arconic Stock Fund. Any amount transferred from a Director’s deferred fee account under the Arconic Inc. Plan that was notionally invested in the Arconic Stock Fund will, following adjustment of such amount in accordance with the terms of the Employee Matters Agreement, be held as a Credit in the Legacy Arconic DSU Account and will be subject to the terms set forth in Section 7.4 and Section 7.5. All amounts that were notionally invested in the Arconic Stock Fund and that are held as a Credit in the Legacy Arconic DSU Account have been adjusted so that, from and after the Effective Date, such notionally invested Credits represent a number of notionally credited shares in Arconic Corporation (including any resulting fractional share) as provided for in the Employee Matters Agreement. |
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7.3 | Converted Director RSUs. Any Converted Director RSUs, which were originally deferred under the Arconic Inc. Plan, will remain deferred under this Plan in accordance with the terms of such original deferral, as further set forth in Section 7.6. |
7.4 | Transfers to or from the Legacy Arconic DSU Account. The Legacy Arconic DSU Account has been established solely for the purpose of receiving amounts transferred from a Director’s deferred fee account under the Arconic Inc. Plan and is not an Investment Option under this Plan. No deferred Fees or Credits notionally invested in Investment Options may be credited to, or transferred into, the Legacy Arconic DSU Account. A Director who holds Credits in the Legacy Arconic DSU Account may not transfer such Credits to other Investment Options if, as of the last Annual Valuation Date, the Director is not in compliance with the Director Stock Ownership Guideline. If the Director is in compliance with the Director Stock Ownership Guideline as of the last Annual Valuation Date, the Director may transfer Credits from the Legacy Arconic DSU Account to other Investment Options only upon preclearance of such transaction by the Secretary in accordance with the Company’s Insider Trading Policy. Notwithstanding the foregoing, beginning six (6) months after the Director’s Separation from Service, and prior to a complete distribution of any amounts in the Director’s Deferred Fee Account, the Director may transfer Credits from the Legacy Arconic DSU Account to other Investment Options to the same extent and frequency as a participant in the Savings Plan may transfer investment credits into or out of the Company’s Stock Fund. Any transfer out of the Legacy Arconic DSU Account permitted by this Section 7.4 can be accomplished only once every fifteen (15) days or at such other frequency as may apply under the Savings Plan for credits in the Company’s Stock Fund. In addition, such transfers shall be subject to reasonable administrative minimums, and any other restrictions recommended by counsel to ensure compliance with applicable law. |
7.5 | Capitalization Adjustments. In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to shareholders, or any other change affecting the Shares or the price of the Shares or, alternatively, in the event of an Equity Restructuring, any Credits in the Legacy Arconic DSU Account will be subject to the applicable adjustment provisions of the Stock Plan. |
7.6 | Continuation of Terms of Arconic Inc. Plan. Deferred fee amounts that are transferred to a Director’s Deferred Fee Account from his or her account under the Arconic Inc. Plan and Converted Director RSUs, which were originally deferred under the Arconic Inc. Plan, will be subject to the same terms and conditions under this Plan as applied to such deferred fee amounts and restricted share units under the Arconic Inc. Plan, except to the extent necessary to reflect the Company’s separation from Arconic Inc. and sponsorship of this Plan. Accordingly, unless the context otherwise requires, references in the Arconic Inc. Plan to the following terms shall have the following replacement meanings under this Plan: (i) the “Company” means Arconic Corporation, (ii) the “Board of Directors” or the “Board” means the Board of Directors of Arconic Corporation, (iii) the “Alcoa Stock Fund” means the “Arconic Stock Fund” and amounts transferred from such fund under the Arconic Inc. Plan shall be reflected in the Legacy Arconic DSU Account, (iv) the “2013 Alcoa Stock Incentive Plan, as Amended and Restated” means the “Arconic Corporation 2020 Stock Incentive Plan,” (v) “stock,” “common stock” or “shares” means shares of Arconic Corporation common stock, and (vi) “Investment Options” means the Investment Options under Section 2.1(t) of the Plan; and all other terms of a Director’s deferrals under the Arconic Inc. Plan will remain in effect under this Plan. For avoidance of doubt, in no event will the transfer to this Plan of amounts in a Director’s account under the Arconic Inc. Plan or the Company’s assumption of the Converted Director RSUs under the Stock Plan and deferral of such awards under this Plan result in any change in the time or form of payment of such deferred amounts within the meaning of Section 409A of the Code. |
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Exhibit 10.5
Form of Arconic Corporation 2020 Annual Cash Incentive Plan
The Plan has been approved by the Compensation and Benefits Committee of the Board of Directors of Arconic Corp. (the “Compensation Committee”). The terms of the Plan are as follows:
1. | Purpose |
This Arconic Corporation 2020 Annual Cash Incentive Plan (the “Plan”) is intended to attract, retain, motivate and reward Participants by providing them with the opportunity to earn annual incentive compensation under the Plan based upon achievement of pre-established Performance Goals.
2. | DEFINITIONS |
For purposes of the Plan, the following terms have the meanings set forth below:
2.1 “Arconic Corp.” means Arconic Corporation, a Delaware corporation, and its successors or assigns.
2.2 “Award” means an incentive award providing a Participant the opportunity to earn cash compensation under the Plan, subject to the achievement of one or more Performance Goals established pursuant to Section 6 of this Plan or such other terms as the Compensation Committee may establish.
2.3 “Award Agreement” means any written or electronic agreement, contract, or other instrument or document that the Compensation Committee may deem advisable to evidence an Award and which may set forth additional terms and conditions regarding such Award and such Participant’s participation in the Plan.
2.4 “Award Level” means the amount of incentive compensation (generally expressed as a percentage of the Participant’s Base Salary) that may be paid to a Participant under the Plan for the achievement in a given Plan Year of an associated, specified level of performance measured in terms of Performance Goals established pursuant to Section 6 of this Plan. Award Levels may be established at threshold, target and maximum levels.
2.5 “Award Payment” means the actual dollar or local currency amount paid to a Participant under any Award pursuant to the Plan.
2.6 “Base Salary” means with respect to any Participant the annual base salary actually paid to such Participant during the Plan Year. For the sake of clarity, Base Salary does not include any bonus or incentive compensation, whether under the Plan, any other short-term or long-term incentive plan or otherwise. Base Salary shall be determined without reduction for salary deferrals under any Company-sponsored nonqualified deferred compensation plan and, in the United States, Code Section 401(k) plan or flexible spending account plan (under Code Section 125), and without inclusion of any amounts previously deferred under any company-sponsored nonqualified deferred compensation plan, Code Section 401(k) plan or flexible spending account plan (under Code Section 125) that become subject to inclusion in gross income for Federal tax purposes.
2.7 “Board” means the Board of Directors of Arconic Corp.
2.8 “Cause” means (a) if the Participant participates in the Arconic Corp. Change in Control Severance Plan, “Cause” as defined in such plan; or (b) if the Participant does not participate in the Arconic Corp. Change in Control Severance Plan, (i) the willful and continued failure by the Participant to substantially perform the Participant’s duties with Arconic Corp. or a Subsidiary that has not been cured within 30 days after a written demand for substantial performance is delivered to the Participant by the Board or the Participant’s direct supervisor, which demand specifically identifies the manner in which the Participant has not substantially performed the Participant’s duties, (ii) the willful engaging by the Participant in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise; (iii) the Participant’s fraud or acts of dishonesty relating to the Company, or (iv) the Participant’s conviction of any misdemeanor relating to the affairs of the Company or indictment for any felony. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Participant’s part shall be deemed “willful” unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that the Participant’s act, or failure to act, was in the best interest of the Company.
2.9 “CEO” means Arconic Corp.’s Chief Executive Officer.
2.10 “Code” means the Internal Revenue Code of 1986, as amended including rules, regulations and guidance promulgated thereunder and successor provisions and rules and regulations thereto.
2.11 “Company” means Arconic Corp. and all of its Subsidiaries, collectively, or its successors or assigns.
2.12 “Disability” means a Participant’s inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months.
2.13 “Executive Officer” means each officer of the Company whose compensation is approved by the Compensation Committee on an annual basis.
2.14 “Participant” means an officer, manager or employee of Arconic Corp. or any of its Subsidiaries who is selected by the CEO, or approved by the Compensation Committee, for participation in the Plan for a given Plan Year in accordance with Section 5.
2.15 “Performance Goals” means the Company Performance Goals (as defined below) and/or Personal Performance Goals established for each Award pursuant to Section 6.1 of this Plan, against which a Participant’s performance shall be measured to determine if an Award Payment may be payable under the Plan. Company Performance Goals may be based upon one or more Performance Measures set forth in Section 6.2 of this Plan (collectively, “Company Performance Goals”).
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2.16 “Performance Measures” means the performance measures set forth in Section 6.2 of this Plan for Arconic Corp. or any one or more of its groups, divisions, business units, or Subsidiaries, and other performance metrics as the Compensation Committee deems appropriate under the circumstances.
2.17 “Personal Performance Goal” means goals or levels of performance based upon achievement of certain individual business objectives and/or personal performance objectives, in each case which support the business plan of the Company. Personal Performance Goals may include personal performance objectives such as teamwork, interpersonal skills, employee development, project management skills and leadership, and/or individual business objectives such as the implementation of policies and plans, the negotiation and/or completion of transactions, the development of long-term business goals, formation of joint ventures, research or development collaborations, technology and best practice sharing within the Company, and the completion of other corporate goals.
2.18 “Performance Period” means that period established by the Compensation Committee at the time any Award is granted or at any time thereafter during which any Performance Goals with respect to such Award are to be measured.
2.19 “Retirement” means the termination of a Participant by his or her resignation from continuous service upon or after attainment of (a) normal retirement age of 65; (b) age 55 and completion of 10 years of continuous service; (c) such lesser age for any individual Participant with rights to a pension other than a deferred vested pension benefit under a retirement plan of Arconic Corp. and/or a Subsidiary and/or an affiliate; (d) as defined under or in accordance with, the 2013 Arconic Stock Incentive Plan, as amended and restated; or (e) as may be approved by the Compensation Committee, in its discretion; but in each case under (a), (b), (c) or (d) hereof only if such termination is approved as Retirement by, in the case of an Executive Officer, the Compensation Committee, and, in the case of any other officer or employee, the CEO.
2.20 “Section 409A” means Section 409A of the Code.
2.21 “Subsidiary” means any “subsidiary” within the meaning of Rule 405 under the Securities Act of 1933, as amended.
3. | Administration |
3.1 Power and Authority of the Compensation Committee. The Plan shall be administered by the Compensation Committee, which shall have full power, discretion and authority to, without limitation:
(a) Designate each Performance Period;
(b) Establish the Performance Goals for each Performance Period and determine whether and to what extent such Performance Goals have been achieved;
(c) Determine at any time the cash amount payable with respect to an Award;
(d) Prescribe, amend and rescind rules and procedures relating to the Plan;
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(e) Employ such legal counsel, independent auditors and consultants as it deems desirable for the administration of the Plan and to rely upon any opinion or computation received therefrom;
(f) Amend, modify, or cancel any Award, and authorize the exchange, substitution, or replacement of Awards;
(g) Delegate its administrative powers under the Plan to the extent not prohibited by applicable laws, regulations or stock exchange listing rules; and
(h) Make all determinations, and formulate such procedures, as may be necessary or advisable in the opinion of the Compensation Committee for the administration of the Plan.
3.2 Plan Construction and Interpretation. The Compensation Committee shall have full power and authority to construe and interpret the Plan and to correct any defect or omission, or reconcile any inconsistency, in the Plan or any Award.
3.3 Determinations of Compensation Committee Final and Binding. All determinations by the Compensation Committee in carrying out and administering the Plan and in construing and interpreting the Plan shall be made in the Compensation Committee’s sole discretion and shall be final, binding and conclusive for all purposes and upon all persons interested herein. The Compensation Committee’s decisions regarding the amount of each Award need not be consistent among Participants.
3.4 Limitation on Liability. No member of the Compensation Committee or the Board (or its delegates) shall be liable for any action or determination made in good faith with respect to the Plan or any award pursuant to it. Arconic Corp. shall indemnify and hold harmless each member of the Compensation Committee and the Board, and the estate and heirs of each such member, against all claims, liabilities, expenses, penalties, damages or other pecuniary losses, including legal fees, which such Compensation Committee member or Board member or his or her estate or heirs may suffer as a result of any act or omission to act in connection with the Plan, to the extent that insurance, if any, does not cover the payment of such items.
4. | TERM |
The effective date of this Plan is January 1, 2020. The Plan will remain in effect for successive fiscal years beginning on January 1 of each year (each, a “Plan Year”), until terminated by the Compensation Committee at the Compensation Committee’s sole discretion.
5. | Eligibility |
5.1 In order to be eligible to participate in the Plan for any Plan Year, except as set forth in Sections 5.2 and 6.8 below, an individual must (i) be an officer or employee, employed on a full-time or part-time basis with Arconic Corp. or any of its Subsidiaries in a Plan-eligible position (such positions to be determined in the sole discretion of the Compensation Committee); and (ii) be hired, transferred or promoted to a Plan-eligible position before the commencement of the final two weeks of the Plan Year.
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5.2 Directors who are not employees of the Company, temporary employees, leased employees, interns, consultants and independent contractors shall not be eligible to participate in the Plan.
5.3 An officer or employee who, after January 1 of the Plan Year, is hired, or is transferred or promoted from a position not eligible for an Award to a position which the Compensation Committee has determined is eligible for an Award for the Plan Year, may participate in the Plan on a pro rata basis as of the date the employee was hired, transferred or promoted, as the case may be.
6. | Performance Awards |
6.1 Establishment of Awards.
(a) As promptly as practicable after the beginning of each Plan Year with respect to which any Awards are to be granted to Participants, and, in any event, before April 1 of such Plan Year, the Compensation Committee shall take those actions for which it is responsible under this Plan to (i) establish the Performance Goals, Performance Measures, Award Levels and, if applicable, the threshold Award Level, target Award Level and maximum Award Level, for each Participant, and (iii) establish such other terms and conditions for each Award as it deems appropriate, which terms may be set forth in an Award Agreement.
(b) In the case of the CEO and each of the Executive Officers, the Compensation Committee will establish for each Plan Year the Award Levels, the Performance Goals, Performance Measures and the weighting of the Performance Goals. With respect to all other Participants, the Compensation Committee will approve the Award Levels and Company Performance Goals for each such Participant.
(c) The Award Levels, Performance Goals and the weighting of the Performance Goals will vary among Participants depending on the Participant’s role and responsibilities. The Award Levels and Performance Goals may change from Plan Year to Plan Year.
6.2 Performance Measures. The Performance Measures from which the Compensation Committee may establish Performance Goals shall include the achievement of operational goals based on the attainment by Arconic Corp., on a consolidated basis, and/or by specified Subsidiaries or groups, divisions or business units of Arconic Corp., of specified levels of one or more of the following performance criteria, any one of which, if applicable, may be normalized for fluctuations in currency or the price of aluminum on the London Metal Exchange or established relative to a comparison with other corporations or an external index or indicator, or relative to a comparison with performance in prior periods, as the Compensation Committee deems appropriate: (a) earnings, including operating income, earnings before or after taxes, and earnings before or after interest, taxes, depreciation, and amortization; (b) book value per share; (c) pre-tax income, after-tax income, income from continuing operations, or after tax operating income; (d) operating profit or improvements thereto; (e) earnings per common share (basic or diluted) or improvement thereto; (f) return on assets (net or gross); (g) return on capital; (h) return on invested capital; (i) sales, revenues or returns on sales or revenues or growth in sales, revenues or returns on sales or revenues; (j) share price appreciation; (k) total shareholder return; (l) cash flow, operating cash flow, free cash flow, cash flow return on investment (discounted or otherwise), improvements in cash on hand, reduction of debt, improvements in the capital structure of the Company including debt to capital ratios; (m) implementation or completion of critical projects or processes; (n) economic profit, economic value added or created; (o) cumulative earnings per share growth; (p) achievement of cost reduction goals; (q) return on shareholders’ equity; (r) total shareholders’ return improvement or relative performance as compared with other selected companies or as compared with Company, Subsidiary, group, division or business unit history; (s) reduction of days working capital, working capital or inventory; (t) operating margin or profit margin or growth thereof; (u) cost targets, reductions and savings, productivity and efficiencies; (v) strategic business criteria, consisting of one or more objectives based on meeting specified market penetration, geographic business expansion, customer satisfaction (including improvements in product quality and delivery), employee satisfaction, human resources management including improvements in diversity representation, supervision of litigation, information technology, and goals relating to acquisitions, divestitures, joint ventures and similar transactions, and budget comparisons; (w) the achievement of sustainability measures, community engagement measures or environmental, health or safety goals of Arconic Corp. or a Subsidiary, group, division or business unit of the Company for or within which the Participant is primarily employed; (x) improvement in performance against competition benchmarks approved by the Compensation Committee; or (y) improvements in audit and compliance measures.
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6.3 Measurement.
(a) The Compensation Committee shall have sole discretion to determine (i) with respect to all Participants, the Award Levels which represent the amounts potentially payable under each Award, the Company Performance Goals applicable to each Award, and the method of determining whether each Company Performance Goal has been met, and (ii) with respect to the Executive Officers, the Personal Performance Goals, if applicable, the method of determining whether each such Personal Performance Goal has been met and the weighting of each Performance Goal.
(b) Unless otherwise determined by the Compensation Committee, each Award shall include a threshold Performance Goal that must be attained in order for a threshold Award Level to be payable, a target Performance Goal that must be attained for a target Award Level to be payable, and a maximum Performance Goal that must be attained for a maximum Award Level to be payable. The amount of each Award and the Performance Goals may vary among Participants and may be determined based on the Participant’s ability to directly impact the Company’s performance or on an assessment of the Participant’s overall contributions to the Company’s success.
6.4 Company Performance Goals. To the extent the Compensation Committee elects to base Award opportunities and Performance Goals on a Company Performance Goal, the Compensation Committee shall select the Performance Measures for the Plan Year from the criteria listed in Section 6.2 or establish such other criteria as the Compensation Committee may determine appropriate. The Compensation Committee shall also establish the threshold, target and maximum Performance Goals applicable for each Company Performance Goal.
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6.5 Personal Performance Goals. To the extent the Compensation Committee elects to base Award opportunities and Performance Goals on one or more Personal Performance Goals, the components of the Personal Performance Goals will: (a) be established for the Participant’s position for the Plan Year by the Participant’s supervisor with the approval of the CEO; (b) include only components that support the business plan of the Company; and (c) identify how the Participant will support the achievement of such goals. The Personal Performance Goals for the Executive Officers will be established by the Compensation Committee. The determination of whether a Participant (other than an Executive Officer) has attained his or her Personal Performance Goals and the Award Payment payable with respect to the attainment of such Personal Performance Goals shall be determined by the CEO, subject to final approval by the Compensation Committee. The determination of whether an Executive Officer has attained his or her Personal Performance Goals and the Award Payment payable with respect to the attainment of such Personal Performance Goals shall be determined by the Compensation Committee.
6.6 Certification and Payment.
(a) As soon as practicable after Arconic Corp.’s audited financial statements are available for a Plan Year with respect to which the Awards are outstanding, the performance of Arconic Corp., on a consolidated basis, and each applicable group, division, business unit or Subsidiary will be determined for such Plan Year. The financial and operational performance shall then be evaluated to determine the extent to which the Company Performance Goals have been achieved, based upon standards established for such Plan Year. In performing such evaluation, the Compensation Committee is authorized to make adjustments in the method of calculating attainment of the Company Performance Goals, including, but not limited to, the authority:
(i) to adjust or exclude the dilutive or anti-dilutive effects of acquisitions or joint ventures;
(ii) to adjust the impact of the disposition of any businesses divested by the Company during a Plan Year;
(iii) to exclude, in whole or in part, restructuring and/or other nonrecurring charges;
(iv) to exclude, in whole or in part, exchange rate effects, as applicable, for non-U.S. dollar denominated net sales and operating earnings;
(v) to exclude, in whole or in part, the effects of changes to generally accepted accounting standards (“GAAP”) made by the relevant accounting authority;
(vi) to exclude, in whole or in part, the effects of any statutory adjustments to corporate taxes;
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(vii) to exclude, in whole or in part, the impact of any “unusual or nonrecurring items” as determined under GAAP;
(viii) to exclude, in whole or in part, the effect of any change in the outstanding shares of common stock of Arconic Corp. by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common stockholders other than regular cash dividends;
(ix) to give effect to or to ignore, in whole or in part, any other unusual, non-recurring gain or loss or other extraordinary item; and
(x) to give effect to or to ignore, in whole or in part, any other facts, circumstances or considerations deemed appropriate by the Compensation Committee.
Award Payments for a Plan Year will be included as an expense in determining the Company’s financial performance under the Plan for that Plan Year.
(b) The Compensation Committee and each of its members shall be entitled to rely upon information provided by appropriate officers of the Company with respect to financial and other data in order to determine if the Performance Goals for any Participant in a Plan Year have been met.
(c) Unless otherwise determined by the Compensation Committee or deferred in accordance with Arconic Corp.’s Deferred Compensation Plan, Award Payments for any Plan Year shall be paid in cash as soon as practicable after the Compensation Committee determines that the Performance Goals specified for such Award were in fact satisfied. It is intended that payment will be made no later than required to ensure that no amount paid or to be paid hereunder shall be subject to the provisions of Section 409A(a)(1)(B) of the Code and all payments are intended to be eligible for the short-term deferral exception to Section 409A of the Code, except to the extent a payment is deferred under Arconic Corp.’s Deferred Compensation Plan.
6.7 Limit on Award Payments. Under no circumstances shall the aggregate amount payable to any Participant under an Award for any Plan Year exceed US$9,000,000.
6.8 Termination of Employment.
(a) Other than in cases of Retirement, a Participant who voluntarily terminates employment prior to the date the Award Payment is paid for a given Plan Year shall forfeit any right to receive any Award Payment for that Plan Year.
(b) In the event of a Participant’s involuntary termination by the Company without Cause, the Participant will remain eligible for an Award Payment for the applicable Plan Year only if the Participant has been employed by the Company for a continuous period of not less than six months in such Plan Year.
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(c) In the event of a Participant’s Retirement, the Participant will remain eligible for an Award Payment for the applicable Plan Year only if the Participant has been employed by the Company for a continuous period of not less than six months in such Plan Year, provided that circumstances that would have warranted a termination of the Participant’s employment by the Company for Cause do not exist.
(d) In the event of a Participant’s termination by the Company for Cause, the Participant shall forfeit any right to receive any Award Payment for the Plan Year.
(e) In the event of the Participant’s death or Disability:
(i) if a Participant’s employment is terminated prior to the end of a Plan Year by reason of death or Disability, the Participant or the Participant’s heir or legal representative may, upon the Compensation Committee’s approval, be eligible to be paid a prorated portion of the Award Payment for that Plan Year for the period of time employed during such Plan Year, based on the actual level of attainment of the Performance Goals; and
(ii) if a Participant’s employment is terminated by reason of death or Disability after the end of a Plan Year, but prior to payment to that Participant of the Award Payment otherwise payable (or any portion thereof) under an Award, the Participant or the Participant’s heir or legal representative will be eligible for the amount of the Award Payment earned by the Participant for that Plan Year, based on the actual level of attainment of the Performance Goals.
7. | Withholding Taxes |
The Company shall have the right, at the time of payment of an Award Payment, to make adequate provision for any federal, state, local or foreign taxes (including social contributions and any other applicable taxes) which it believes are or may be required by law to be withheld with respect to an award under the Plan (“Tax Liability”), to ensure the payment of any such Tax Liability. The Company may provide for the payment of any Tax Liability by withholding from the amount of the Award Payment or by any other method deemed appropriate by the Compensation Committee.
8. | Amendment And Termination |
The Compensation Committee may at any time and in its sole discretion suspend, amend or terminate the Plan.
9. | Miscellaneous |
9.1 No Guarantee of Employment. Nothing in this Plan or any Award granted hereunder shall confer upon any employee any right to continue in the employ of the Company or interfere in any way with the right of the Company to terminate his or her employment at any time.
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9.2 Not Compensation for Other Plans. Except as otherwise explicitly required under the terms of an employee benefit plan of the Company that is intended to be qualified under Section 401(a) of the Code, no Award under this Plan and no amount payable or paid under any Award shall be deemed to be or counted as salary or compensation for the purpose of computing benefits under any employee benefit plan or other arrangement of the Company for the benefit of any employee.
9.3 Compliance with Law. The Plan and the grant of awards under it shall be subject to all applicable U.S. federal and state and any applicable foreign laws, rules and regulations and to such approvals by any governmental or regulatory agency as may be required.
9.4 State Law. The Plan shall be construed in accordance with and governed by the laws of the State of Delaware, United States of America, without reference to principles of conflict of laws, and construed accordingly.
9.5 Interpretation. All Awards and any Award Agreements shall be subject to the terms of this Plan, or the terms of this Plan, as amended from time to time, and as interpreted by the Compensation Committee.
9.6 No Alienation. No right or interest of a Participant in any Award may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or an affiliate of the Company, or shall be subject to any lien, obligation, or liability of such Participant to any other party other than the Company or an affiliate of the Company. No Award shall be assignable or transferable, either voluntarily or involuntarily, by a Participant, including as between spouses or pursuant to a domestic relations order in connection with dissolution of marriage, or by operation of law, except pursuant to Section 6.8(e) or the laws of descent.
9.7 Section 409A. This Plan may be amended at any time, without the consent of any party, to avoid the application of Section 409A of the Code in a particular circumstance or that is necessary or desirable to satisfy any of the requirements under Section 409A of the Code, but the Company shall not be under any obligation to make any such amendment. Nothing in the Plan shall provide a basis for any person to take action against the Company or any affiliate based on matters covered by Section 409A of the Code, including the tax treatment of any amount paid or Award made under the Plan, and neither the Company nor any of its affiliates shall under any circumstances have any liability to any Participant or any other party for any taxes, penalties or interest due on amounts paid or payable under the Plan, including taxes, penalties or interest imposed under Section 409A of the Code.
9.8 Forfeiture and Recoupment. Notwithstanding any other provision of this Plan, if a Participant commits fraud or dishonesty toward the Company, wrongfully uses or discloses any trade secret, confidential data or other information proprietary to the Company, engages in misconduct which has or might reasonably be expected to have material reputational or other harm to the Company or intentionally takes any other action materially adverse to the best interests of the Company, as determined by the Compensation Committee in its sole and absolute discretion, such Participant shall forfeit all Awards under the Plan and the Compensation Committee has the discretion to recover Award Payments that were paid under the Plan to the Participant (or, in the case of a deferred incentive, earned by such Participant) in the three-year period prior to the date the misconduct was discovered or prior to the date the full impact of the misconduct was known, as determined by the Compensation Committee. Further, Award Payments are subject to any recoupment requirements under the Sarbanes-Oxley Act or under other applicable laws, rules, regulations or stock exchange listing standards, including, without limitation, Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and shall apply notwithstanding anything to the contrary in the Plan.
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9.9. Participants Outside the United States. Awards may be granted to employees who are foreign nationals or residents or employed outside the United States, or both, on such terms and conditions different from those applicable to Awards to employees who are not foreign nationals or residents or who are employed in the United States as may, in the judgment of the Compensation Committee, be necessary or desirable in order to recognize differences in local law, regulations or tax policy. If any provision of the Plan is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, or as to any person or Award, or would disqualify the Plan or any Award under any law outside the United States where an employee is based, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be construed or deemed amended without, in the sole determination of the Compensation Committee, materially altering the intent of the Plan, such provision shall be stricken as to such jurisdiction, person or Award, and the remainder of the Plan shall remain in full force and effect.
9.10. Severability. If any provision of the Plan is held invalid or unenforceable, the invalidity or unenforceability shall not affect the remaining parts of the Plan, and the Plan shall be enforced and construed as if such provision had not been included.
9.11 Unfunded Plan. The Plan is intended to constitute an unfunded plan for incentive compensation. Prior to the payment of any Award, nothing contained herein shall give any Participant any rights that are greater than those of a general creditor of the Company. No amounts awarded or accrued under the Plan shall be funded, set aside, subject to interest payment or otherwise segregated prior to payment of an Award. Any Award payable under the Plan is voluntary and occasional and does not create any contractual or other right to receive Awards in future years or benefits in lieu of such Awards.
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Exhibit 10.6
FORM OF ARCONIC CORPORATION
NON-EMPLOYEE DIRECTOR COMPENSATION POLICY
Effective [ ], 2020
1. | General. This Non-Employee Director Compensation Policy (the “Policy”), sets forth the cash and equity-based compensation that has been approved by the board of directors of Arconic Inc., a Delaware corporation, (“Parent”) as payable to eligible non-employee members of the board of directors of Arconic Corporation (“Non-Employee Directors”) commencing [ ], 2020, and which shall be additionally approved by the board of directors of Arconic Corporation (the “Board”) as soon as practicable following the date of the separation of Arconic Corporation, a Delaware corporation, (the “Company”) from the Parent (the “Separation Date”). Subject to such approval by the Board, the cash and equity-based compensation described in this Policy shall be paid or be made, as applicable, automatically and without further action of the Parent or the Board, to each Non-Employee Director who may be eligible to receive such compensation. This Policy shall remain in effect until it is revised or rescinded by further action of the Board. |
2. | Cash Compensation. |
(a) | Annual Retainers. Each Non-Employee Director shall be eligible to receive an annual cash retainer of $120,000 for service on the Board. In addition, subject to paragraph 2(b) below, a Non-Employee Director shall receive the following additional annual retainers, as applicable: |
Non-Employee Director Position | Additional Annual Cash Retainer Fee | |||
Lead Director | $30,000 | |||
Audit Committee Chair Fee (includes Audit Committee Member Fee) | $20,000 | |||
Compensation and Benefits Committee Chair Fee | $15,000 | |||
Other Committee Chair Fee | $15,000 |
(b) | Payment of Chair Fees. At any one time, each non-Employee Director may receive only one additional annual retainer fee in connection with service as the Chair of a committee (whether in the position of Lead Director, Audit Committee Chair, Compensation and Benefits Committee Chair or Other Committee Chair), regardless of how many committee Chair positions held by such director. For the avoidance of doubt, a non-Employee Director may simultaneously serve as the Chair of more than one committee, but will receive for such service only one additional annual retainer fee, equal to the highest of the additional annual retainer fees associated with his or her Chair positions. |
(c) | Payment of Retainers. The annual retainers described in Section 2(a) shall be earned on a quarterly basis based on a calendar quarter and shall be paid by the Company in arrears not later than the third business day following the end of each calendar quarter (if not deferred by the Non-Employee Director in accordance with subsection (e) hereof). In the event a Non-Employee Director does not serve as a Non-Employee Director, or in the applicable positions described in Section 2(a), for an entire calendar quarter, the retainer paid to such Non-Employee Director shall be prorated for the portion of such calendar quarter actually served as a Non-Employee Director, or in such positions, as applicable. |
(d) | Exceptional Meeting Fees. A fee of $1,200 shall be paid to a Non-Employee Director for each Board or committee meeting attended by such Non-Employee Director in excess of five (5) special Board or committee meetings during the applicable calendar year and applies only to any non-regularly scheduled meeting in excess of a two-hour duration. Such exceptional meeting fees shall be paid by the Company in arrears not later than the third business day following the end of the calendar quarter in which any such exceptional meeting occurs (if not deferred by the Non-Employee Director in accordance with subsection (e) hereof). |
(e) | Deferral of Retainers. Non-Employee Directors may elect to defer payment of all or a portion of the annual retainers described in Section 2(a) and the exceptional meeting fees described in Section 2(d) into specified investment funds and/or into vested restricted share units for shares of the Company’s common stock, which deferral will be made pursuant to the terms of the Company’s 2020 Deferred Fee Plan for Directors or its successor plan (the “Deferred Fee Plan”). Unless otherwise determined by the Board, any restricted share units will be granted under the Arconic Corporation 2020 Stock Incentive Plan or its successor plan (the “Equity Plan”), on the date on which such retainer(s) would otherwise have been paid in cash. The extent to which a Non-Employee Director may defer annual retainer payments into vested restricted share units will therefore be subject to any limit on awards granted to a Non-Employee Director set forth in the Equity Plan. |
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3. | Equity Compensation. Non-Employee Directors shall be granted the equity awards described below. The awards described below in Sections 3(a) and 3(b) shall be granted under and shall be subject to the terms and provisions of the Equity Plan and shall be granted subject to an award agreement in substantially the same form approved by the Board prior to or as of the grant date, setting forth the terms of the award (the “Award Terms”), consistent with the Equity Plan. For purposes of this Section 3, the number of shares subject to any restricted share unit award will be determined by dividing the grant date dollar value specified under subsection (a) or (b) hereof by the Fair Market Value (as defined in the Equity Plan) of a share of the Company’s common stock on the date of grant. |
(a) | Annual Equity Award. A person who is a Non-Employee Director immediately following each annual meeting of the Company’s stockholders and who will continue to serve as a Non-Employee Director following such annual meeting shall be automatically granted on the second market trading day following the date of each such annual meeting a restricted share unit award with a grant date value equal to $150,000 (the “Annual Equity Award”). The Annual Equity Award shall vest on the earlier of the first anniversary date of the grant date or the date of the Company’s next subsequent annual meeting of stockholders following the grant date. |
(b) | Pro-Rated Annual Equity Award. On the fifth market trading day following a person’s initial appointment as a Non-Employee Director, and provided such person has not otherwise received an Annual Equity Award for the relevant year under Section 3(a), the Non-Employee Director shall be automatically granted a restricted share unit award with a grant date value equal to $150,000, in each case multiplied by a fraction, the numerator of which is 365 less the number of days that have elapsed since the date of the Company’s last annual meeting of stockholders (or if an annual stockholder meeting has yet to be held by the Company, then the Separation Date) and the Non-Employee Director’s date of initial appointment, and the denominator of which is 365 (the “Pro-Rated Award”). The Pro-Rated Award shall vest on the date of the Company’s next subsequent annual meeting of stockholders following the date of the Non-Employee Director’s appointment to the Board. |
(c) | Special Vesting of Equity Awards. Notwithstanding Sections 3(a) or (b) above and as shall be further set forth in the Award Terms: (i) unvested equity awards shall vest in full upon the death of a Non-Employee Director or upon a Change in Control where a Replacement Award is not provided or the Non-Employee Director’s service is terminated (where Change in Control and Replacement Award are as defined in the Equity Plan); and (ii) unvested equity awards shall vest on a pro-rata basis in the event of a Non-Employee Director’s termination of service for any other reason. |
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(d) | Deferral of Equity Award. Payment of the Annual Equity Award or any Pro-Rated Award will be deferred until the Non-Employee Director’s separation from service, in accordance with the terms of the Deferred Fee Plan, unless otherwise required by applicable laws. |
4. | Stock Ownership Guideline. Within a period of six years from the date of a person’s initial appointment as a Non- Employee Director, each Non-Employee Director is required to attain ownership of at least $750,000 in the Company’s common stock and must maintain such ownership until retirement from the Board. |
5. | Director Compensation Limit. As further set forth in the Equity Plan, the sum of the grant date value of all equity awards granted and all cash compensation paid by the Company to a Non-Employee Director as compensation for services as a Non-Employee Director shall not exceed $750,000 during any calendar year. For avoidance of doubt, compensation shall count towards this limit for the calendar year in which it is granted or earned, and not later when distributed, in the event it is deferred. |
6. | Policy Subject to Amendment, Modification and Termination. This Policy may be amended, modified or terminated by the Board in the future at its sole discretion, provided that no such action that would materially and adversely impact the rights with respect to annual retainers payable in the calendar quarter during which a Non-Employee Director is then performing services shall be effective without the consent of the affected Non-Employee Director. |
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Exhibit 10.7
201 Isabella Street Pittsburgh, PA 15212-5858
John C. Plant CEO & Chair, Board of Directors |
January 13, 2020
Timothy Myers
1720 East Haymarket Way
Hudson, OH 44236
Dear Tim:
As we have discussed, on behalf of Arconic Inc. (the “Company”), I am pleased to offer you the position of Chief Executive Officer of Arconic Corporation effective upon the legal separation of Arconic Corporation from Arconic Inc. (such separation, the “Spinoff,” and the date of such separation, “Legal Day 1”), and, from and after the Spinoff, references herein to the Company shall be deemed to refer to Arconic Corporation, unless the context clearly indicates otherwise.
Prior to Legal Day 1, you will continue in your current role and you will report directly to me. On and after Legal Day 1, you will report directly to the Board of Directors of Arconic Corporation (the “Board”). You will also be appointed as a member of the Board, effective as of Legal Day 1. During your employment with the Company, you will devote substantially all of your working time and attention to the business and affairs of the Company (excluding any vacation to which you are entitled) and you will comply with the Company’s policies and rules, as in effect from time to time.
Set forth below is your total compensation package, together with other important information.
Base Salary:
On Legal Day 1, your annual base salary will become $850,000 paid on a monthly basis in accordance with the Company’s normal payroll practices, and subject to all applicable taxes and withholdings.
Incentive Compensation:
You will initially be eligible for a target annual cash incentive compensation opportunity of 125% of your base salary (i.e., $1062,500 based on your initial base salary) for a full year, if individual and business performance targets are met. Actual payouts could be higher or lower than target depending on individual and business performance. Your annual cash incentive compensation opportunity and award for 2020 will be prorated to reflect the portion of the year that you are CEO of Arconic Corporation (i.e., a blended rate will apply, with your current target annual cash incentive opportunity applying to the portion of 2020 prior to Legal Day 1, and with the target annual cash incentive opportunity set forth in this paragraph applying to the remainder of the year).
Equity Compensation:
You will be eligible for annual equity compensation awards in connection with the Company’s regular annual grant cycles. For your first such award, to be issued legal day one, you will be granted (i) a restricted share unit award with a grant date value of $1,720,000, which will vest on the third anniversary of the grant date, subject to your continued employment with the Company through such date and (ii) a performance-based restricted share unit award with a grant date value (at target) of $2,580,000, which will be subject to performance goals applicable to Arconic Corporation, as well as to your continued employment with the Company through the third anniversary of the grant date (together, the “RSUs”). The RSUs shall be granted under the 2013 Arconic Stock Incentive Plan and shall be subject to Restricted Share Unit Terms and Conditions consistent with those applicable to 2020 annual awards to Company senior executives generally, it being understood that it is anticipated that as of the Spinoff the RSUs will be adjusted into awards of Arconic Corporation.
For each subsequent calendar year (starting in 2021) in which you are employed by the Company, you shall be eligible to receive additional grants of equity-based and other long-term incentives offered to senior executives generally, at a level, and on terms and conditions, that are commensurate with your positions and responsibilities at the Company, and appropriate in light of your performance and of corresponding awards (if any) to other senior executives of the Company (in all cases, as determined in good faith by the Board or a committee thereof).
Equity Ownership Requirements:
Consistent with Arconic Inc.’s efforts to align the interests of its senior leadership with the interests of Arconic shareholders, Arconic Inc. has adopted equity ownership requirements for senior Arconic Inc. executives and it is anticipated that Arconic Corporation will adopt similar requirements. You will be subject to these requirements, currently 6.0 times base salary for the Chief Executive Officer, during your employment with the Company. Until equity ownership requirements are met, you are required to retain 50% of shares acquired upon vesting of restricted stock units and performance-based restricted stock units or upon exercise of stock options, after deducting those used to pay for applicable taxes and/or the exercise price.
Relocation:
No later than September 30, 2020, you will relocate and establish a permanent residence in the Pittsburgh, PA metropolitan area. The Company provides a Transfer and Relocation Plan, the terms of which are determined by the Company in its discretion from time to time, to help facilitate your permanent relocation.
Benefits:
You will continue to be eligible to participate in Company benefit plans as in effect from time to time on the terms applicable to Company senior executives generally (subject to the applicable eligibility and other requirements set forth therein).
Confidentiality, Developments, Non-Competition and Non-Solicitation Agreement:
In consideration of your employment with the Company, you agree to execute the Confidentiality, Developments, Non-Competition and Non-Solicitation Agreement attached hereto as Annex A.
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Severance:
On Legal Day 1, you will be designated as a Tier I Employee under each of the Company’s Executive Severance Plan and Change in Control Severance Plan (together, the “Severance Plans”) and you will participate at the same level under the corresponding plans anticipated to be adopted by Arconic Corporation (it being understood that following the Spinoff, references in this letter to the Severance Plans or either Severance Plan shall be deemed to refer to such corresponding plans of Arconic Corporation). Your participation in such plans is subject to the terms and conditions of such plans as in effect from time to time. You acknowledge that the Company has informed you that it anticipates reducing the Tier I Employee multipliers under the Severance Plans by .5 (i.e., the multiplier under Section 2.1(a)(i) of the Company’s Executive Severance Plan would become 1.5 and the Applicable Period thereunder would become 18 months, and the Applicable Multiplier and Applicable Period under the Company’s Change in Control Severance Plan would become 2.5 and 30 months, respectively) and you hereby consent to any amendment effectuating such reductions, without regard to the one-year limitation on effectiveness of amendments under the Company’s Executive Severance Plan.
Indemnification:
You will be covered as an insured officer under the Company’s director and officer liability insurance policy, as in effect from time to time, to the same extent, and on the same terms, as other executive officers of the Company.
Section 409A:
The payments and benefits provided under this letter are intended to comply with, or be exempt from, the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, and the provisions of this letter shall be interpreted and applied consistently with such intent. All reimbursements under this letter that constitute deferred compensation within the meaning of Section 409A will be made or provided in accordance with the requirements of Section 409A, including, without limitation, that (i) in no event will any reimbursement payments be made later than the end of the calendar year next following the calendar year in which the applicable expenses were incurred; (ii) the amount of reimbursement payments that the Company is obligated to pay in any given calendar year shall not affect the amount of reimbursement payments that the Company is obligated to pay in any other calendar year; and (iii) your right to have the Company pay such reimbursements may not be liquidated or exchanged for any other benefit.
Miscellaneous:
Your employment with the Company will at all times be at-will. Subject to your rights to the payments and benefits upon certain termination of employment in accordance with the terms of the Executive Severance Plan and the Change in Control Severance Plan, in each case, as in effect from time to time, and this letter, nothing herein will confer upon you any right to continue in the employment of the Company for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company or you to terminate your employment at any time and for any reason, with or without cause. Upon your termination of employment for any reason and as a condition to any payments and benefits to which you may become entitled under the Company’s Executive Severance Plan, Change in Control Severance Plan, or this letter, at the request of the Board you will immediately resign from the Board, your position as an officer of the Company and all offices and directorships of all subsidiaries and affiliates of the Company. Any waiver of any breach of this letter shall not be construed to be a continuing waiver or consent to any subsequent breach on the part of either you or the Company. All payments hereunder shall be subject to applicable tax withholding.
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Successors:
This Agreement shall be assigned to Arconic Corporation, effective Legal Day 1. Other than Arconic Inc.’s assignment of this Agreement to Arconic Corporation on Legal Day 1, neither party hereto may assign any rights or delegate any duties under this letter without the prior written consent of the other party; provided, however, that this letter shall inure to the benefit of and be binding upon the successors and assigns of the Company upon any sale of all or substantially all of the Company’s assets, or upon any merger, consolidation or reorganization of the Company with or into any other corporation, all as though such successors and assigns of the Company and their respective successors and assigns were the Company.
Entire Agreement:
Except as otherwise contemplated herein, this letter contains the entire agreement between you and the Company with respect to the subject matter hereof. No modification or termination of this letter may be made orally, but must be made in writing and signed by you and the Company.
In the event that the Spinoff has not been consummated as of July 31, 2020 (as such date may be extended by mutual agreement of you and the Company), this letter agreement shall be null and void ab initio.
Governing Law; Jurisdiction:
This letter will be governed and interpreted in accordance with the laws of the State of Delaware without reference to its choice of law principles. Any action arising out of or related to this letter will be brought in the state or federal courts with jurisdiction in Delaware, and you and the Company consent to the jurisdiction and venue of such courts.
[Signature page follows.]
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To accept our offer, please sign and date the bottom of this letter and return it to me by January 14, 2020. If you have any questions, please feel free to call me.
I look forward to your contributions to the future of Arconic Corp.
Best Regards,
/s/ John C. Plant
John C. Plant
CEO and Chair, Arconic Inc. Board of Directors
cc: Neil Marchuk
Attachments:
Confidentiality, Developments, Non-Competition and Non-Solicitation Agreement
I, Timothy Myers, am pleased to accept your offer of employment dated January 13, 2020, for the position of Chief Executive Officer Arconic Corp. in the terms detailed in the offer letter.
Accepted by: | Date: | ||
/s/ Timothy Myers | January 13, 2020 |
Timothy Myers
[Signature Page]
Exhibit A
Confidentiality, Developments, Non-Competition, and Non-Solicitation Agreement
As an employee of Arconic Inc. (“Arconic”) or one of its subsidiaries (Arconic collectively with its subsidiaries, the “Company”), you (“you” or “Employee”) will have access to or may develop confidential and proprietary information (as defined below) of the Company. Therefore, in consideration of your employment, and recognizing the highly competitive nature of the Company’s business, you enter into this Confidentiality, Non-Competition, and Non-Solicitation Agreement (this “Agreement”) intending to be legally bound.
Confidentiality
You acknowledge that, as an employee of the Company, you have access, and are privy, to information which is confidential and proprietary to the Company and which is not generally available to the public from sources outside of the Company.
You agree to regard and preserve as confidential any and all Confidential Information pertaining to the Company’s operations and affairs and all information which is either learned or obtained by you during your employment, and which you know, or have reason to believe, includes Confidential Information. You agree that you will use Confidential Information only for the performance of your duties for the Company and you agree not to disclose any Confidential Information you acquire, except as expressly permitted below. You understand and agree that this obligation of confidentiality shall continue indefinitely following the termination of your employment with the Company.
Nothing in this Agreement shall prohibit or restrict you from: (i) making any disclosure of relevant and necessary information or documents in any action, investigation, or proceeding relating to this Agreement, or as required by law or legal process; or (ii) participating, cooperating, or testifying in any action, investigation, or proceeding with, or reporting possible violations or providing information to, any governmental agency or legislative body regarding this Agreement or the Company, including, but not limited to, the Company’s Legal Department, the Securities & Exchange Commission, and/or pursuant to the Dodd-Frank Act (including without limitations the whistleblower provisions thereof) or Sarbanes-Oxley Act; provided that, other than with respect to providing information to a governmental agency and to the extent permitted by law, upon receipt of any subpoena, court order or other legal process compelling the disclosure of any such information or documents, you will give the General Counsel of the Company prompt written notice so as to permit the Company to protect its interests in confidentiality to the fullest extent possible. Notwithstanding any provision of this Agreement to the contrary, the provisions of this Agreement are not intended to, and shall be interpreted in a manner that does not, limit or restrict you from exercising any legally protected whistleblower rights (including pursuant to Rule 21F under the Securities Exchange Act of 1934, as amended).
Upon termination of your employment or at any time requested by the Company, you will deliver promptly to the Company all memoranda, notes, records, reports and other documents (whether in paper or electronic form and all copies thereof) relating to the business of the Company and all other Company property which you obtained or developed while employed by, or otherwise serving or acting on behalf of, the Company and which you may then possess or have under your control, whether directly or indirectly.
A-1 |
Disclosure of Developments and Other Inventions
Without disclosing any third party confidential information, Employee shall promptly disclose to Company all Developments and any inventions or developments that Employee believes do not constitute a Development, so that Company can make an independent assessment. Employee represents and warrants that if Employee developed, conceived or created any Development or other Intellectual Property prior to the date hereof that relates to Company’s Business, Employee has listed such Intellectual Property on Appendix 1 in a manner that does not violate any third party rights or disclose any third party confidential information.
Ownership of Developments
Ownership: All right, title and interest (including all Intellectual Property rights of any sort throughout the world) relating to any and all Developments (other than Employee Statutorily Exempt Developments) shall be the exclusive property of Company.
Assignment of Rights: In consideration of Employee’s employment by Company as set forth in the Employment Agreement, Employee hereby assigns to Company or its designee any and all right, title and/or interest (including all Intellectual Property rights of any sort throughout the world) in and to any Developments that Employee has or may in the future acquire with respect to any Developments, provided that this section shall not apply to any Employee Statutorily Exempt Developments.
Further Assistance and Assurances: Employee shall, both during and after his/her employment by Company, at the expense of Company, perform all lawful acts requested by, or on behalf of, Company to enable Company to obtain, perfect, sustain, and enforce its ownership interest in any Development(s) in accordance with this Section and to obtain and maintain patents, copyrights and other Intellectual Property rights for such Development(s) throughout the world.
Attorney-In-Fact: Employee hereby irrevocably designates and appoints Company as Employee’s agent and attorney-in-fact, coupled with an interest and with full power of substitution, to act for and on Employee’s behalf to execute and file any document and to do all other lawfully permitted acts to further the purposes of this Section with the same legal force and effect as if executed by Employee.
Acknowledgement of Employee Statutorily Exempt Developments: Employee acknowledges and agrees that, by executing this Agreement, nothing in this Agreement is intended to expand the scope of protection provided to Employee by Sections 2870 through 2872 of the California Labor Code or any other statute of like effect. Employee agrees to promptly advise the Company in writing of any developments that Employee believes may qualify under Sections 2870 through 2872 of the California Labor Code or any other statute of like effect.
Records: Employee agrees to keep and maintain adequate and current records (in the form of notes, sketches, drawings, and in any other form that may be required by the Company) of all Developments made, written, conceived and/or reduced to practice by Employee during the period of employment by Company, which records shall be available to and remain the sole property of the Company at all times.
Employee IP – Ownership and Restrictions; License: Any discovery, invention, improvement, computer program and related documentation or other work that (i) is created during the term of Employee’s employment with the Company and does not fall within the definition of the term “Development” as defined herein, (ii) is an Employee Statutorily Exempt Development, or (iii) was developed, created, or conceived prior to Employee’s employment with Company shall, as between Company and Employee, belong to Employee and shall not be used by Employee in his or her performance on behalf of the Company. Without limiting Company’s other rights and remedies, if, when acting within the scope of Employee’s employment or otherwise on behalf of Company, Employee uses or discloses Employee’s own or any third party’s confidential information or other Intellectual Property in violation of this Agreement (or if any Development cannot be fully made, used, reproduced, distributed and otherwise exploited without using or violating the foregoing), Employee hereby: (a) grants to Company a perpetual, irrevocable, worldwide, fully-paid, royalty-free, non-exclusive, sub-licensable right and license to use, exploit and exercise all such confidential information and/or Intellectual Property rights; and (b) warrants that he/she is entitled to grant such license to the extent the confidential information or Intellectual Property used by Employee in violation of this Section belongs to a third party.
A-2 |
Restrictive Covenants
Non-Competition: During your employment and for a period of one year thereafter (regardless of whether the termination of your employment is voluntary or involuntary), you will not directly or indirectly (i) engage in, carry on, or provide services (paid or unpaid) whether as a director, officer, partner, owner, employee, inventor, consultant, advisor, or agent, to any Competitive Business (as defined below) or (ii) hold any economic interest in any Competitive Business. However, notwithstanding the foregoing, you may own up to five percent (5%) of the outstanding securities of any publicly traded company and you shall not be prohibited from becoming employed by, or associated with, a private equity firm or hedge fund (or one of their portfolio companies) that has an investment in a Competitive Business as long as you have no involvement whatsoever with such Competitive Business (including the formation, planning, or acquisition of, or investment in, any such Competitive Business).
It is not the Company’s intention to restrict or limit your activities following your termination of employment with the Company unless it is believed that there is a substantial possibility that your future services or activities in any of the lines of business in which the Company is engaged may be detrimental to the Company. So as to not unduly restrict your future employment, if you desire to enter into any employment arrangement or relationship with any potential Competitive Business within the one-year restricted period, please consult with the Executive Vice President of Human Resources of Arconic/Howmet to discuss your intended relationship with the entity. Due to the many different businesses in which the Company presently engages, or which in the future the Company may engage, we will discuss your desire to enter into a business or professional relationship with any manufacturer or firm which is a Competitive Business. The Company’s consent will not be unreasonably withheld.
Also, as a reminder, Arconic/Howmet stock incentive awards continue to be subject to forfeiture, under the terms of that program, to the extent you become associated with, employed by, render services to, or own any interest in any business that is in competition with the Company or if you engage in willful conduct that is injurious to the Company.
Non-Solicitation: During your employment and for a period of one year thereafter (regardless of whether the termination of your employment was voluntary or involuntary), you will not directly or indirectly (i) solicit, induce or attempt to solicit or induce any employee of the Company to leave the Company for any reason; (ii) hire or attempt to hire any employee of the Company; or (iii) solicit business from, or engage in business with, any customer or supplier of the Company that you met and/or dealt with during your employment with the Company for any purpose. In the event that you become aware that any employee of the Company has been hired by any business or firm with which you are then affiliated, you will immediately notify the Executive Vice President of Human Resources of Arconic/Howmet to confirm your non-solicitation of said employee.
A-3 |
You acknowledge and agree that given the nature of the Company’s business, which is conducted throughout the world, the unique and extraordinary services you will be providing to the Company and your position of confidence and trust with the Company, the scope and duration of the covenants included in this Agreement (the “Restrictive Covenants”) are reasonable and necessary to protect the legitimate business interests of the Company. You further acknowledge that you have received substantial consideration from the Company and that your general skills and abilities are such that you can be gainfully employed in noncompetitive employment, and that this Agreement will in no way prevent you from earning a living following your employment with the Company.
You also recognize and agree that any breach or threatened or anticipated breach of any part of these Restrictive Covenants will result in irreparable harm to the Company, and that the remedy at law for any such breach or threatened breach will be inadequate. Accordingly, in addition to any other legal or equitable remedies that may be available to the Company, you agree that the Company will be entitled to obtain an injunction, without posting a bond, to prevent any breach or threatened breach of any part of these Restrictive Covenants.
In the event that any court of competent jurisdiction finds that the limitations set forth in these Restrictive Covenants are overly broad with respect to duration, geographic scope or scope of prohibited activities, such court will have the authority to reduce the duration, area or activities of such provisions so as to be enforceable to the maximum extent compatible with applicable law, and such provisions will then be enforced as modified.
Notice of Immunity – Defend Trade Secrets Act of 2016
Company employees, contractors, and consultants may disclose Trade Secrets in confidence, either directly or indirectly, to a Federal, State, or local government official, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law, or in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Additionally, Company employees, contractors, and consultants who file retaliation lawsuits for reporting a suspected violation of law may disclose related Trade Secrets to their attorney and use them in related court proceedings, as long as the individual files documents containing the Trade Secret under seal and does not otherwise disclose the Trade Secret except pursuant to court order.
Definitions for Purposes of this Agreement
“Business” means areas of actual or demonstrably anticipated research and development conducted (or to be conducted) by, or for the benefit of, Company as well as all products or services sold by, on behalf of, or for the benefit of Company worldwide.
“Competitive Business” means any domestic or international business or firm (including any business in the process of being formed or planned) that is engaged, or has active plans to become engaged, in any line of business of the Company with which you have had direct functional accountability, or for which you provided leadership or support, during your last eighteen (18) months of employment with the Company.
“Confidential Information” includes, but is not limited to strategic plans, trade secrets, inventions, discoveries, technical and operating know-how, accounting information, product information, marketing and sales data, business strategies, customer information, and employee data of the Company that is proprietary in nature, and any similar information, data or materials of third parties that the Company has a duty to keep confidential.
A-4 |
“Developments” means all discoveries, inventions, innovations, improvements, computer programs and related documentation, and other works of authorship, mask works, designs, know-how, ideas and information made, written, conceived and/or reduced to practice, in whole or in part, (whether or not patentable or subject to other forms of protection) by Employee, individually or with any other person, during and after the period of Employee’s employment by Company that: (a) relate in any manner to the Business or activities of Company; and/or (b) are created: (i) at any time using Company resources, including, but not limited to, Company computers, cellphones, smartphones, etc.; (ii) during working hours; (iii) at a Company facility; (iv) by, or on behalf of, Company; and/or (v) using Confidential Information.
“Employee Statutorily Exempt Developments” means any Developments which qualify fully under the provisions of any applicable statute (including, e.g., Section 2870 of the California Labor Code) that prohibits the assignment to Company of Employee’s rights in any inventions developed entirely on Employee’s own time without using the Company’s equipment, supplies, facilities, resources, trade secrets or Confidential Information (i.e., excluding inventions that either (i) relate at the time of conception or reduction to practice of the invention to the Company’s Business, or actual or demonstrably anticipated research or development; or (ii) result from any work performed by Employee for the Company).
“Intellectual Property” means any intellectual and industrial property and all rights thereof, including, but not limited to, patents, utility models, semi-conductor topography rights; copyrights, mask works, authors’ rights, registered and unregistered trademarks, brands, domain names, trade secrets, know-how and other rights in information, drawings, logos, plans, database rights, technical notes, prototypes, processes, methods, algorithms, any technical-related documentation, any software, registered designs and other designs, in each case, whether registered or unregistered and including applications for registration, and all rights or forms of protection having equivalent or similar effect anywhere in the world.
Governing Law; Jurisdiction
This Agreement will be governed and interpreted in accordance with the laws of the State of Delaware without reference to its choice of law principles. Any action arising out of or related to this Agreement will be brought in the state or Federal courts located in Delaware, and you and the Company consent to the jurisdiction and venue of such courts.
Amendment; Waiver
No provision of this Agreement may be modified, waived, or discharged unless such waiver, modification or discharge is in writing. Any failure by you or the Company to enforce any of the provisions of this Agreement should not be construed to be a waiver of such provisions or any right to enforce each and every provision in the future. A waiver of any breach of this Agreement will not be construed as a waiver of any other or subsequent breach.
Successors; Binding Agreement
Upon the legal separation of Arconic Corporation from Arconic Inc. (such separation, the “Spinoff”), this Agreement will be assigned to Arconic Corporation and, from and after the Spinoff, all references herein to “Arconic” shall be deemed to refer to Arconic Corporation and all references herein to the “Company” shall be deemed to refer to Arconic Corporation collectively with its subsidiaries, unless the context clearly indicates otherwise.
A-5 |
The Company has the right to assign its rights and obligations under this Agreement to any entity that acquires all or substantially all of the assets of the business for which you work, and continues your employment. The rights and obligations of the Company under this Agreement will inure to the benefit and be binding upon the successors and assigns of the Company
Severability
In the event that any one or more of the provisions of this Agreement is held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remainder of this Agreement will not in any way be affected or impaired thereby.
This Agreement is the entire agreement between the parties with respect to the matters covered by this Agreement and it replaces all previous agreements, oral or written, between the parties regarding such matters. PROVISIONS OF THIS AGREEMENT MAY NOT BE WAIVED OR CHANGED EXCEPT BY A SUBSEQUENT AGREEMENT SIGNED BY YOU AND AN OFFICER OF THE COMPANY.
If you agree to the terms of this Agreement, please sign on the line provided below and return two signed copies. A fully executed copy will be returned to you for your files after it is signed by the Company.
ARCONIC INC.
By: | /s/ Neil Marchuk | |
AGREED TO AND ACCEPTED AS OF THIS 13TH DAY OF JANUARY, 2020: | ||
/s/ Timothy Myers | ||
Timothy Myers |
A-6 |
Appendix 1
Prior Employee Inventions
A-7 |
| Sincerely, | |
| [ ] | |
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John C. Plant
Chairman and Chief Executive Officer Arconic Inc. |
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| Sincerely, | |
| [ ] | |
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Tim D. Myers
Chief Executive Officer Arconic Rolled Products Corporation |
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What is Arconic Corporation and why is ParentCo separating the Arconic Corporation Businesses and distributing Arconic Corporation common stock?
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| | Arconic Corporation, which is currently a wholly owned subsidiary of ParentCo, was formed to own and operate ParentCo’s Arconic Corporation Businesses. The separation of Arconic Corporation from ParentCo and the distribution of Arconic Corporation common stock is intended, among other things, to enable the management of the two companies to pursue opportunities for long-term growth and profitability unique to each company’s business and to allow each business to more effectively implement its own distinct capital structure and capital allocation strategies. ParentCo expects that the separation will result in enhanced long-term performance of each business for the reasons discussed in the section entitled “The Separation and Distribution — Reasons for the Separation.” | |
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Why am I receiving this document?
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| | ParentCo is delivering this document to you because you are a holder of shares of ParentCo common stock. If you are a holder of shares of ParentCo common stock as of the close of business on [ ], 2020, the record date of the distribution, you will be entitled to receive [ ] shares of Arconic Corporation common stock for every share of ParentCo common stock that you hold at the close of business on such date. This document will help you understand how the separation and distribution will affect your post-separation ownership in Howmet Aerospace and Arconic Corporation. | |
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How will the separation of Arconic Corporation from ParentCo work?
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| | As part of the separation, and prior to the distribution, ParentCo and its subsidiaries expect to complete an internal reorganization (which we refer to as the “internal reorganization”) in order to transfer the Arconic Corporation Businesses that Arconic Corporation will own following the separation to Arconic Corporation. To accomplish the separation, ParentCo will distribute all of the outstanding shares of Arconic Corporation common stock to ParentCo stockholders on a pro rata basis in a distribution intended to be generally tax-free to ParentCo stockholders for U.S. federal income tax purposes. Following the separation, the number of shares of ParentCo common stock (which, as a result of ParentCo’s name change to Howmet Aerospace, will be Howmet Aerospace shares) you own will not change as a result of the separation. | |
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What is the record date for the distribution?
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| | The record date for the distribution will be [ ], 2020. | |
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When will the distribution occur?
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| | We expect that all of the outstanding shares of Arconic Corporation common stock will be distributed by ParentCo at [ ], Eastern Time, on [ ], 2020, to holders of record of shares of ParentCo common stock at the close of business on [ ], 2020, the record date for the distribution. | |
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What do stockholders need to do to participate in the distribution?
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| | Stockholders of ParentCo as of the record date for the distribution will not be required to take any action to receive Arconic Corporation common stock in the distribution, but you are urged to read this entire information statement carefully. No stockholder approval of the distribution is required. You are not being asked for a proxy. You do not need to pay any consideration, exchange or | |
| | | | surrender your existing shares of ParentCo common stock or take any other action to receive your shares of Arconic Corporation common stock. Please do not send in your ParentCo stock certificates. The distribution will not affect the number of outstanding shares of ParentCo common stock or any rights of ParentCo stockholders, although it will affect the market value of each outstanding share of ParentCo common stock (which, as a result of ParentCo’s name change to Howmet Aerospace, will be Howmet Aerospace shares). | |
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How will shares of Arconic Corporation common stock be issued?
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| | You will receive shares of Arconic Corporation common stock through the same channels that you currently use to hold or trade shares of ParentCo common stock, whether through a brokerage account, 401(k) plan or other channel. Receipt of Arconic Corporation shares will be documented for you in the same manner that you typically receive stockholder updates, such as monthly broker statements and 401(k) statements. | |
| | | | If you own shares of ParentCo common stock as of the close of business on the record date for the distribution, including shares owned in certificate form, ParentCo, with the assistance of Computershare Trust Company, N.A., the distribution agent for the distribution (the “distribution agent” or “Computershare”), will electronically distribute shares of Arconic Corporation common stock to you or to your brokerage firm on your behalf in book-entry form. Computershare will mail you a book-entry account statement that reflects your shares of Arconic Corporation common stock, or your bank or brokerage firm will credit your account for the shares. | |
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How many shares of Arconic Corporation common stock will I receive in the distribution?
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| | ParentCo will distribute to you [ ] shares of Arconic Corporation common stock for every share of ParentCo common stock held by you as of close of business on the record date for the distribution. Based on approximately [ ] shares of ParentCo common stock outstanding as of [ ], 2020, a total of approximately [ ] shares of Arconic Corporation common stock will be distributed to ParentCo’s stockholders. For additional information on the distribution, see “The Separation and Distribution.” | |
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Will Arconic Corporation issue fractional shares of its common stock in the distribution?
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| | No. Arconic Corporation will not issue fractional shares of its common stock in the distribution. Fractional shares that ParentCo stockholders would otherwise have been entitled to receive will be aggregated and sold in the public market by the distribution agent. The net cash proceeds of these sales will be distributed pro rata (based on the fractional share such holder would otherwise be entitled to receive) to those stockholders who would otherwise have been entitled to receive fractional shares. Recipients of cash in lieu of fractional shares will not be entitled to any interest on the amounts paid in lieu of fractional shares. | |
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What are the conditions to the distribution?
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| | The distribution is subject to the satisfaction (or waiver by ParentCo in its sole and absolute discretion) of the following conditions: | |
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the U.S. Securities and Exchange Commission (the “SEC”) declaring effective the registration statement of which this information statement forms a part; there being no order
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suspending the effectiveness of the registration statement in effect; and no proceedings for such purposes having been instituted or threatened by the SEC;
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this information statement having been made available to ParentCo stockholders;
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the receipt by ParentCo and continuing validity of an opinion of its outside counsel, satisfactory to the ParentCo Board of Directors, regarding the qualification of the distribution, together with certain related transactions, as a “reorganization” within the meaning of Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the “Code”);
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the internal reorganization having been completed and the transfer of assets and liabilities of the Arconic Corporation Businesses from ParentCo to Arconic Corporation, and the transfer of assets and liabilities of the Howmet Aerospace Businesses from Arconic Corporation to ParentCo, having been completed in accordance with the separation and distribution agreement, which is described below in this information statement (the “separation agreement”);
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the receipt of one or more opinions from an independent appraisal firm to the ParentCo Board of Directors as to the solvency of Howmet Aerospace and Arconic Corporation after the completion of the distribution, in each case in a form and substance acceptable to the ParentCo Board of Directors in its sole and absolute discretion;
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all actions necessary or appropriate under applicable U.S. federal, state or other securities or blue sky laws and the rules and regulations thereunder having been taken or made and, where applicable, having become effective or been accepted;
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the execution of certain agreements contemplated by the separation agreement;
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no order, injunction or decree issued by any government authority of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the separation, the distribution or any of the related transactions being in effect;
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the shares of Arconic Corporation common stock to be distributed having been accepted for listing on the NYSE, subject to official notice of distribution;
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ParentCo having received certain proceeds from the financing arrangements described under “Description of Material Indebtedness” and being satisfied in its sole and absolute discretion that, as of the effective time of the distribution, it will have no further liability under such arrangements; and
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no other event or development existing or having occurred that, in the judgment of ParentCo’s Board of Directors, in its sole and absolute discretion, makes it inadvisable to effect the separation, the distribution and the other related transactions.
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| | | | or other nominee understands whether you want to sell your ParentCo common stock with or without your entitlement to Arconic Corporation common stock pursuant to the distribution. | |
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Where will I be able to trade shares of Arconic Corporation common stock?
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| | Arconic Corporation intends to apply for authorization to list its common stock on the NYSE under the symbol “ARNC.” ParentCo will change its name to Howmet Aerospace and its stock symbol from “ARNC” to “HWM” upon completion of the separation. Arconic Corporation anticipates that trading in shares of its common stock will begin on a “when-issued” basis on or shortly before the record date for the distribution and will continue up to and through the distribution date, and that “regular-way” trading in Arconic Corporation common stock will begin on the first trading day following the completion of the distribution. If trading begins on a “when-issued” basis, you may purchase or sell Arconic Corporation common stock up to and through the distribution date, but your transaction will not settle until after the distribution date. Arconic Corporation cannot predict the trading prices for its common stock before, on or after the distribution date. | |
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What will happen to the listing of ParentCo common stock?
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| | ParentCo common stock will continue to trade on the NYSE after the distribution but will be traded as Howmet Aerospace common stock due to ParentCo’s name change to Howmet Aerospace and under the stock symbol “HWM” instead of “ARNC.” | |
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Will the number of shares of ParentCo common stock that I own change as a result of the distribution?
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| | No. The number of shares of ParentCo common stock that you own will not change as a result of the distribution. Following the separation, ParentCo common stock will be Howmet Aerospace common stock as a result of ParentCo’s name change to Howmet Aerospace. | |
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Will the distribution affect the market price of my ParentCo common stock?
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| | Yes. As a result of the distribution, ParentCo expects the trading price of shares of ParentCo common stock (which, as a result of ParentCo’s name change to Howmet Aerospace, will be Howmet Aerospace common stock) immediately following the distribution to be different from the “regular-way” trading price of such shares immediately prior to the distribution because the trading price will no longer reflect the value of the Arconic Corporation Businesses. There can be no assurance whether the aggregate market value of the Howmet Aerospace common stock and the Arconic Corporation common stock following the separation will be higher or lower than the market value of ParentCo common stock if the separation did not occur. This means, for example, that the combined trading prices of a share of Howmet Aerospace common stock and [ ] shares of Arconic Corporation common stock after the distribution may be equal to, greater than or less than the trading price of a share of ParentCo common stock before the distribution. | |
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What are the material U.S. federal income tax consequences of the separation and the distribution?
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| | It is a condition to the distribution that ParentCo receive an opinion of its outside counsel, satisfactory to the ParentCo Board of Directors, regarding the qualification of the distribution, together with certain related transactions, as a “reorganization” within the meaning of Sections 355 and 368(a)(1)(D) of the Code. | |
| | | | If the distribution, together with certain related transactions, so qualifies, generally no gain or loss will be recognized by you, and no | |
| | | | amount will be included in your income, for U.S. federal income tax purposes upon your receipt of Arconic Corporation common stock in the distribution. You will, however, recognize gain or loss for U.S. federal income tax purposes with respect to cash received in lieu of a fractional share of Arconic Corporation common stock. | |
| | | | You should consult your own tax advisor as to the particular consequences of the distribution to you, including the applicability and effect of any U.S. federal, state and local tax laws, as well as any non-U.S. tax laws. For more information regarding the material U.S. federal income tax consequences of the distribution, see the section entitled “Material U.S. Federal Income Tax Consequences.” | |
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What will Arconic Corporation’s relationship be with Howmet Aerospace following the separation?
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| | After the distribution, Howmet Aerospace and Arconic Corporation will be separate companies with separate management teams and separate boards of directors. Arconic Corporation will enter into a separation agreement with ParentCo to effect the separation and to provide a framework for Arconic Corporation’s relationship with Howmet Aerospace after the separation, and will enter into certain other agreements, including a tax matters agreement, an employee matters agreement, intellectual property license agreements, metal supply agreements and real estate and office leases. These agreements will provide for the allocation between Arconic Corporation and Howmet Aerospace of the assets, employees, liabilities and obligations (including, among others, investments, property and employee benefits and tax-related assets and liabilities) of ParentCo and its subsidiaries attributable to periods prior to, at and after the separation and will govern the relationship between Arconic Corporation and Howmet Aerospace subsequent to the completion of the separation. For additional information regarding the separation agreement and other transaction agreements, see the sections entitled “Risk Factors — Risks Related to the Distribution” and “Certain Relationships and Related Party Transactions.” | |
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Who will manage Arconic Corporation after the separation?
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| | Led by Tim D. Myers, who will be Arconic Corporation’s Chief Executive Officer, Arconic Corporation will benefit from a management team with an extensive background in the Arconic Corporation Businesses. For more information regarding Arconic Corporation’s management and directors, see “Management” and “Directors.” | |
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Are there risks associated with owning Arconic Corporation common stock?
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| | Yes. Ownership of Arconic Corporation common stock is subject to both general and specific risks relating to the Arconic Corporation Businesses, the industry in which it operates, its ongoing contractual relationships with Howmet Aerospace and its status as a separate, publicly traded company. Ownership of Arconic Corporation common stock is also subject to risks relating to the separation. Certain of these risks are described in the “Risk Factors” section of this information statement. We encourage you to read that section carefully. | |
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Does Arconic Corporation plan to pay dividends?
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| | We expect that we will pay cash dividends in an aggregate amount of up to approximately $50 million in the first year following the distribution and up to approximately $100 million per annum thereafter. However, the timing, declaration, amount of, and payment of any dividends following the separation will be within the | |
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Transportation consumption 2019:
4,761 and 2023: 6,161 CAGR 5.3% |
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Key Markets
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Key Customers
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Ground Transportation | | | Ford, FCA, General Motors, Daimler, Paccar, Entrans/Heil | |
Aerospace | | | Boeing, Airbus, Spirit AeroSystems, Embraer | |
Building and Construction | | | Fabricators, installers, architects and developers around the world | |
Industrial | | | Ryerson, Thyssenkrupp MA, Reliance, Kloeckner, Champagne Metals | |
Packaging | | | Ball, CANPACK | |
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As of and for the nine months ended September 30,
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As of and for the year ended December 31,
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(in millions)
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Pro forma
2019 |
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2019
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2018
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Pro forma
2018 |
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2018
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2017
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2016
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Sales
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| | | $ | 5,569 | | | | | $ | 5,569 | | | | | | 5,633 | | | | | $ | 7,442 | | | | | $ | 7,442 | | | | | $ | 6,824 | | | | | $ | 6,661 | | |
Net income
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| | | | 81 | | | | | | 39 | | | | | | 71 | | | | | | 209 | | | | | | 170 | | | | | | 209 | | | | | | 155 | | |
Total assets
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| | | | 5,902 | | | | | | 4,790 | | | | | | 4,968 | | | | | | N/A | | | | | | 4,795 | | | | | | 4,902 | | | | | | 4,705 | | |
Total debt
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| | | | 1,160 | | | | | | 250 | | | | | | 260 | | | | | | N/A | | | | | | 250 | | | | | | 255 | | | | | | 256 | | |
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September 30, 2019
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(in millions)
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As Reported
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Pro Forma
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(Unaudited)
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Cash | | | | | | | | | | | | | |
Cash and cash equivalents
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| | | $ | 47 | | | | | $ | 500 | | |
Capitalization: | | | | | | | | | | | | | |
Debt Outstanding | | | | | | | | | | | | | |
Long-term debt
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| | | $ | 250 | | | | | $ | 1,160 | | |
Equity | | | | | | | | | | | | | |
Common stock, par value $0.01
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| | | $ | — | | | | | $ | | | |
Additional capital
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| | | | — | | | | | | | | |
Parent Company net investment
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| | | | 2,416 | | | | | | | | |
Accumulated other comprehensive income
|
| | | | 310 | | | | | | | | |
Sub-total equity
|
| | | | 2,726 | | | | | | 1,407 | | |
Noncontrolling interest
|
| | | | 14 | | | | | | 14 | | |
Total equity
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| | | | 2,740 | | | | | | 1,421 | | |
Total capitalization
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| | | $ | 2,990 | | | | | $ | 2,581 | | |
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As of and for the nine months
ended September 30, |
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As of and for the year ended December 31,
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(in millions)
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2019
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2018
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2018
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2017
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| |
2016
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2015
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2014
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Sales
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| | | $ | 5,569 | | | | | $ | 5,633 | | | | | $ | 7,442 | | | | | $ | 6,824 | | | | | $ | 6,661 | | | | | $ | 7,046 | | | | | $ | 8,321 | | |
Net income (loss)
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| | | | 39 | | | | | | 71 | | | | | | 170 | | | | | | 209 | | | | | | 155 | | | | | | (60) | | | | | | (124) | | |
Total assets
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| | | | 4,790 | | | | | | 4,968 | | | | | | 4,795 | | | | | | 4,902 | | | | | | 4,705 | | | | | | 4,627 | | | | | | 4,886 | | |
Total debt
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| | | | 250 | | | | | | 260 | | | | | | 250 | | | | | | 255 | | | | | | 256 | | | | | | 253 | | | | | | 249 | | |
Supplemental Information(1): | | | | | | | | | |||||||||||||||||||||||||||||||||||
Capital expenditures
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| | | $ | 120 | | | | | $ | 195 | | | | | $ | 317 | | | | | $ | 241 | | | | | $ | 350 | | | | | | | | | | | | | | |
Segment Information: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Rolled Products
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Third-party sales
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| | | | 4,294 | | | | | | 4,333 | | | | | | 5,731 | | | | | | 5,125 | | | | | | 4,996 | | | | | | | | | | | | | | |
Segment operating profit
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| | | | 346 | | | | | | 268 | | | | | | 328 | | | | | | 384 | | | | | | 374 | | | | | | | | | | | | | | |
Extrusions
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Third-party sales
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| | | | 420 | | | | | | 409 | | | | | | 546 | | | | | | 518 | | | | | | 551 | | | | | | | | | | | | | | |
Segment operating profit
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| | | | (29) | | | | | | 2 | | | | | | 1 | | | | | | 34 | | | | | | 74 | | | | | | | | | | | | | | |
Building and Construction Systems
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Third-party sales
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| | | | 855 | | | | | | 866 | | | | | | 1,140 | | | | | | 1,066 | | | | | | 1,011 | | | | | | | | | | | | | | |
Segment operating profit
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| | | | 89 | | | | | | 74 | | | | | | 91 | | | | | | 82 | | | | | | 86 | | | | | ||||||||||
Non-GAAP Financial Measures(2):
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Sales — as adjusted
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| | | $ | 5,415 | | | | | $ | 5,432 | | | | | $ | 7,185 | | | | | $ | 6,443 | | | | | | | | | | | | | | | | | | | | |
Adjusted EBITDA
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| | | | 470 | | | | | | 410 | | | | | | 542 | | | | | | 531 | | | | | | | | | | | | | | | | | | | | |
Further Adjusted EBITDA
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| | | | 595 | | | | | | 472 | | | | | | 632 | | | | | | 671 | | | | | | | | | | | | | | | | | | | | |
Adjusted EBIT
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| | | | 280 | | | | | | 212 | | | | | | 270 | | | | | | 265 | | | | | | | | | | | | | | | | | | | | |
Further Adjusted EBIT
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| | | | 407 | | | | | | 277 | | | | | | 363 | | | | | | 399 | | | | | | | | | | | | | | | | | | | | |
Capital expenditures — as
adjusted |
| | | | 118 | | | | | | 193 | | | | | | 313 | | | | | | 236 | | | | | | | | | | | | | | | | | | | | |
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As of and for the nine months
ended September 30, |
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As of and for the year ended December 31,
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(in millions)
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2019
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2018
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2018
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2017
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2016
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2015
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2014
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Segment Information: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Rolled Products
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Third-party sales — as adjusted
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| | | | 4,179 | | | | | | 4,198 | | | | | | 5,552 | | | | | | 4,909 | | | | | | | | | | | |
Adjusted EBITDA
|
| | | | 485 | | | | | | 422 | | | | | | 540 | | | | | | 589 | | | | | | | | | | | |
Further Adjusted EBITDA
|
| | | | 520 | | | | | | 453 | | | | | | 584 | | | | | | 641 | | | | | | | | | | | |
Extrusions
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Third-party sales — as adjusted
|
| | | | 381 | | | | | | 368 | | | | | | 493 | | | | | | 468 | | | | | | | | | | | |
Adjusted EBITDA
|
| | | | (7) | | | | | | 19 | | | | | | 24 | | | | | | 56 | | | | | | | | | | | |
Further Adjusted EBITDA
|
| | | | (6) | | | | | | 20 | | | | | | 26 | | | | | | 59 | | | | | | | | | | | |
Building and Construction Systems
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Third-party sales — as adjusted
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| | | | N/A | | | | | | N/A | | | | | | N/A | | | | | | N/A | | | | | | | | | | | |
Adjusted EBITDA
|
| | | | 103 | | | | | | 88 | | | | | | 109 | | | | | | 98 | | | | | | | | | | | |
Further Adjusted EBITDA
|
| | | | 105 | | | | | | 90 | | | | | | 111 | | | | | | 101 | | | | | | | | | | | |
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As of and for the nine months
ended September 30, |
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As of and for the year ended December 31,
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(in millions)
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2019
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2018
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2018
|
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2017
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2016
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2015
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2014
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Reconciliation of Adjusted Sales: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Sales | | | | $ | 5,569 | | | | | $ | 5,633 | | | | | $ | 7,442 | | | | | $ | 6,824 | | | | | | | | | | | |
Adjustments: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Divestitures
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| | | | (154) | | | | | | (201) | | | | | | (257) | | | | | | (381) | | | | | | | | | | | |
Sales — as adjusted
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| | | $ | 5,415 | | | | | $ | 5,432 | | | | | $ | 7,185 | | | | | $ | 6,443 | | | | | | | | | | | |
Reconciliation of Adjusted EBITDA: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income
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| | | $ | 39 | | | | | $ | 71 | | | | | $ | 170 | | | | | $ | 209 | | | | | | | | | | | |
Add: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income attributable to noncontrolling interests
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | | | | | | |
Provision for income taxes
|
| | | | 55 | | | | | | 33 | | | | | | 71 | | | | | | 42 | | | | | | | | | | | |
Other (income) expenses, net
|
| | | | (4) | | | | | | 9 | | | | | | 4 | | | | | | (287) | | | | | | | | | | | |
Interest expense
|
| | | | 86 | | | | | | 99 | | | | | | 129 | | | | | | 168 | | | | | | | | | | | |
Restructuring and other charges
|
| | | | 104 | | | | | | — | | | | | | (104) | | | | | | 133 | | | | | | | | | | | |
Provision for depreciation and amortization
|
| | | | 190 | | | | | | 198 | | | | | | 272 | | | | | | 266 | | | | | | | | | | | |
Adjusted EBITDA
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| | | $ | 470 | | | | | $ | 410 | | | | | $ | 542 | | | | | $ | 531 | | | | | | | | | | | |
Adjustments: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other special items*
|
| | | | 63 | | | | | | 7 | | | | | | 13 | | | | | | 48 | | | | | | | | | | | |
Divestitures
|
| | | | (6) | | | | | | (8) | | | | | | (8) | | | | | | (1) | | | | | | | | | | | |
Pension/OPEB
|
| | | | 68 | | | | | | 63 | | | | | | 85 | | | | | | 93 | | | | | | | | | | | |
Further Adjusted EBITDA
|
| | | $ | 595 | | | | | $ | 472 | | | | | $ | 632 | | | | | $ | 671 | | | | | | | | | | | |
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| | |
As of and for the nine months
ended September 30, |
| |
As of and for the year ended December 31,
|
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(in millions)
|
| |
2019
|
| |
2018
|
| |
2018
|
| |
2017
|
| |
2016
|
| |
2015
|
| |
2014
|
| ||||||||||||
Reconciliation of Adjusted EBIT: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income
|
| | | $ | 39 | | | | | $ | 71 | | | | | $ | 170 | | | | | $ | 209 | | | | | | | | | | | |
Add: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income attributable to noncontrolling interests
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | | | | | | |
Provision for income taxes
|
| | | | 55 | | | | | | 33 | | | | | | 71 | | | | | | 42 | | | | | | | | | | | |
Other (income) expenses, net
|
| | | | (4) | | | | | | 9 | | | | | | 4 | | | | | | (287) | | | | | | | | | | | |
Interest expense
|
| | | | 86 | | | | | | 99 | | | | | | 129 | | | | | | 168 | | | | | | | | | | | |
Restructuring and other charges
|
| | | | 104 | | | | | | — | | | | | | (104) | | | | | | 133 | | | | | | | | | | | |
Adjusted EBIT
|
| | | $ | 280 | | | | | $ | 212 | | | | | $ | 270 | | | | | $ | 265 | | | | | | | | | | | |
Adjustments: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other special items*
|
| | | | 63 | | | | | | 7 | | | | | | 13 | | | | | | 48 | | | | | | | | | | | |
Divestitures
|
| | | | (4) | | | | | | (5) | | | | | | (5) | | | | | | (7) | | | | | | | | | | | |
Pension/OPEB
|
| | | | 68 | | | | | | 63 | | | | | | 85 | | | | | | 93 | | | | | | | | | | | |
Further Adjusted EBIT
|
| | | $ | 407 | | | | | $ | 277 | | | | | $ | 363 | | | | | $ | 399 | | | | | | | | | | | |
Reconciliation of Adjusted Capital Expenditures:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Capital expenditures
|
| | | $ | 120 | | | | | $ | 195 | | | | | $ | 317 | | | | | $ | 241 | | | | | | | | | | | |
Adjustments: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Divestitures
|
| | | | (2) | | | | | | (2) | | | | | | (4) | | | | | | (5) | | | | | | | | | | | |
Capital expenditures — as adjusted
|
| | | $ | 118 | | | | | $ | 193 | | | | | $ | 313 | | | | | $ | 236 | | | | | | | | | | | |
Reconciliation of Rolled Products Adjusted Third-Party Sales:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Third-party sales
|
| | | $ | 4,294 | | | | | $ | 4,333 | | | | | $ | 5,731 | | | | | $ | 5,125 | | | | | | | | | | | |
Adjustments: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Divestitures
|
| | | | (115) | | | | | | (135) | | | | | | (179) | | | | | | (216) | | | | | | | | | | | |
Third-party sales — as adjusted
|
| | | $ | 4,179 | | | | | $ | 4,198 | | | | | $ | 5,552 | | | | | $ | 4,909 | | | | | | | | | | | |
Reconciliation of Rolled Products Adjusted EBITDA:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Segment operating profit
|
| | | $ | 346 | | | | | $ | 268 | | | | | $ | 328 | | | | | $ | 384 | | | | | | | | | | | |
Add: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Provision for depreciation and amortization
|
| | | | 139 | | | | | | 154 | | | | | | 212 | | | | | | 205 | | | | | | | | | | | |
Adjusted EBITDA
|
| | | $ | 485 | | | | | $ | 422 | | | | | $ | 540 | | | | | $ | 589 | | | | | | | | | | | |
Adjustments: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Divestitures
|
| | | | — | | | | | | (3) | | | | | | (1) | | | | | | 5 | | | | | | | | | | | |
Pension/OPEB
|
| | | | 35 | | | | | | 34 | | | | | | 45 | | | | | | 47 | | | | | | ||||||
Further Adjusted EBITDA
|
| | | $ | 520 | | | | | $ | 453 | | | | | $ | 584 | | | | | $ | 641 | | | | | | | | | | | |
Reconciliation of Extrusions Adjusted Third-Party Sales:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Third-party sales
|
| | | $ | 420 | | | | | $ | 409 | | | | | $ | 546 | | | | | $ | 518 | | | | | | | | | | | |
Adjustments: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Divestitures
|
| | | | (39) | | | | | | (41) | | | | | | (53) | | | | | | (50) | | | | | | | | | | | |
Third-party sales — as adjusted
|
| | | $ | 381 | | | | | $ | 368 | | | | | $ | 493 | | | | | $ | 468 | | | | | | | | | | | |
|
| | |
As of and for the nine months
ended September 30, |
| |
As of and for the year ended December 31,
|
| |||||||||||||||||||||||||||
(in millions)
|
| |
2019
|
| |
2018
|
| |
2018
|
| |
2017
|
| |
2016
|
| |
2015
|
| |
2014
|
| ||||||||||||
Reconciliation of Extrusions Adjusted EBITDA:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Segment operating profit
|
| | | $ | (29) | | | | | $ | 2 | | | | | $ | 1 | | | | | $ | 34 | | | | | | | | | | | |
Add: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Provision for depreciation and amortization
|
| | | | 22 | | | | | | 17 | | | | | | 23 | | | | | | 22 | | | | | | | | | | | |
Adjusted EBITDA
|
| | | $ | (7) | | | | | $ | 19 | | | | | $ | 24 | | | | | $ | 56 | | | | | | | | | | | |
Adjustments: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Divestitures
|
| | | | (8) | | | | | | (7) | | | | | | (10) | | | | | | (10) | | | | | | | | | | | |
Pension/OPEB
|
| | | | 9 | | | | | | 8 | | | | | | 12 | | | | | | 13 | | | | | | ||||||
Further Adjusted EBITDA
|
| | | $ | (6) | | | | | $ | 20 | | | | | $ | 26 | | | | | $ | 59 | | | | | | | | | | | |
Reconciliation of Building and Construction Systems Adjusted EBITDA:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Segment operating profit
|
| | | $ | 89 | | | | | $ | 74 | | | | | $ | 91 | | | | | $ | 82 | | | | | | | | | | | |
Add: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Provision for depreciation and amortization
|
| | | | 14 | | | | | | 14 | | | | | | 18 | | | | | | 16 | | | | | | | | | | | |
Adjusted EBITDA
|
| | | $ | 103 | | | | | $ | 88 | | | | | $ | 109 | | | | | $ | 98 | | | | | | | | | | | |
Adjustments: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pension/OPEB
|
| | | | 2 | | | | | | 2 | | | | | | 2 | | | | | | 3 | | | | | | | | | | | |
Further Adjusted EBITDA
|
| | | $ | 105 | | | | | $ | 90 | | | | | $ | 111 | | | | | $ | 101 | | | | | | | | | | | |
|
For the nine months ended September 30, 2019
|
| |
As Reported
|
| |
Pro Forma
Adjustments |
| | | | |
Pro Forma
|
| | | | | | | |||||||||
Sales
|
| | | $ | 5,569 | | | | | | | | | | | | | | $ | 5,569 | | | | | | | | |
Cost of goods sold (exclusive of expenses below)
|
| | | | 4,810 | | | | | | (56) | | | |
(a)
|
| | | | 4,754 | | | | | | | | |
Selling, general administrative, and other expenses
|
| | | | 255 | | | | | | (33) | | | |
(a)(b)
|
| | | | 222 | | | | | | | | |
Research and development expenses
|
| | | | 34 | | | | | | (1) | | | |
(a)
|
| | | | 33 | | | | | | | | |
Provision for depreciation and amortization
|
| | | | 190 | | | | | | | | | |
|
| | | | 190 | | | | | | | | |
Restructuring and other charges
|
| | | | 104 | | | | | | | | | | | | | | | 104 | | | | | | | | |
Operating income
|
| | | | 176 | | | | | | 90 | | | |
|
| | | | 266 | | | | | | | | |
Interest expense
|
| | | | 86 | | | | | | (37) | | | |
(c)
|
| | | | 49 | | | | | | | | |
Other income (expenses), net
|
| | | | (4) | | | | | | 74 | | | |
(a)
|
| | | | 70 | | | | | | | | |
Income before income taxes
|
| | | | 94 | | | | | | 53 | | | |
|
| | | | 147 | | | | | | | | |
Provision for income taxes
|
| | | | 55 | | | | | | 11 | | | |
(d)
|
| | | | 66 | | | | | | | | |
Net income
|
| | | | 39 | | | | | | 42 | | | |
|
| | | | 81 | | | | | | | | |
Less: Net income attributable to noncontrolling interest
|
| | | | — | | | | | | | | | |
|
| | | | — | | | | | | | | |
Net income attributable to Arconic Rolled Products Corporation
|
| | | $ | 39 | | | | | | 42 | | | |
|
| | | $ | 81 | | | | | | | | |
Earnings per share:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic
|
| | | | | | | | | | | | | | | | | | | [ ] | | | | | | (e) | | |
Diluted
|
| | | | | | | | | | | | | | | | | | | [ ] | | | | | | (e) | | |
Weighted-average shares outstanding: | | | | | | | | | | | | | | | | | | | ||||||||||
Basic
|
| | | | | | | | | | | | | | | | | | | [ ] | | | | | | (e) | | |
Diluted
|
| | | | | | | | | | | | | | | | | | | [ ] | | | | | | (e) | | |
For the year ended December 31, 2018
|
| |
As Reported
|
| |
Pro Forma
Adjustments |
| | | | |
Pro Forma
|
| | | | | | | |||||||||
Sales
|
| | | $ | 7,442 | | | | | | | | | |
|
| | | $ | 7,442 | | | | | | | | |
Cost of goods sold (exclusive of expenses below)
|
| | | | 6,549 | | | | | | (73) | | | |
(a)
|
| | | | 6,476 | | | | | | | | |
Selling, general administrative, and other expenses
|
| | | | 288 | | | | | | (10) | | | |
(a)
|
| | | | 278 | | | | | | | | |
Research and development expenses
|
| | | | 63 | | | | | | (1) | | | |
(a)
|
| | | | 62 | | | | | | | | |
Provision for depreciation and amortization
|
| | | | 272 | | | | | | | | | | | | | | | 272 | | | | | | | | |
Restructuring and other charges
|
| | | | (104) | | | | | | | | | | | | | | | (104) | | | | | | | | |
Operating income
|
| | | | 374 | | | | | | 84 | | | | | | | | | 458 | | | | | | | | |
Interest expense
|
| | | | 129 | | | | | | (60) | | | |
(c)
|
| | | | 69 | | | | | | | | |
Other expenses, net
|
| | | | 4 | | | | | | 93 | | | |
(a)
|
| | | | 97 | | | | | | | | |
Income before income taxes
|
| | | | 241 | | | | | | 51 | | | | | | | | | 292 | | | | | | | | |
Provision for income taxes
|
| | | | 71 | | | | | | 12 | | | |
(d)
|
| | | | 83 | | | | | | | | |
Net income
|
| | | | 170 | | | | | | 39 | | | | | | | | | 209 | | | | | | | | |
Less: Net income attributable to noncontrolling interest
|
| | | | — | | | | | | | | | | | | | | | — | | | | | | | | |
Net income attributable to Arconic Rolled Products Corporation
|
| | | $ | 170 | | | | | | 39 | | | | | | | | $ | 209 | | | | | | | | |
Earnings per share:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic
|
| | | | | | | | | | | | | | | | | | | [ ] | | | | | | (e) | | |
Diluted
|
| | | | | | | | | | | | | | | | | | | [ ] | | | | | | (e) | | |
Weighted-average shares outstanding: | | | | | | | | | | | | | | | | | | | ||||||||||
Basic
|
| | | | | | | | | | | | | | | | | | | [ ] | | | | | | (e) | | |
Diluted
|
| | | | | | | | | | | | | | | | | | | [ ] | | | | | | (e) | | |
September 30, 2019
|
| |
As Reported
|
| |
Pro Forma
Adjustments |
| | | | |
Pro Forma
|
| |||||||||
Assets | | | | | | | | | | | | | | | | | | | | | | |
Current assets: | | | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents
|
| | | $ | 47 | | | | | | 453 | | | |
(c)
|
| | | $ | 500 | | |
Receivables from customers
|
| | | | 436 | | | | | | 386 | | | |
(f)
|
| | | | 822 | | |
Inventories
|
| | | | 877 | | | | | | | | | | | | | | | 877 | | |
Other current assets
|
| | | | 175 | | | | | | | | | | | | | | | 175 | | |
Total current assets
|
| | | | 1,535 | | | | | | 839 | | | | | | | | | 2,374 | | |
Properties, plants, and equipment, net
|
| | | | 2,711 | | | | | | | | | | | | | | | 2,711 | | |
Other noncurrent assets
|
| | | | 544 | | | | | | 273 | | | |
(d)
|
| | | | 817 | | |
Total assets
|
| | | $ | 4,790 | | | | | | 1,112 | | | | | | | | $ | 5,902 | | |
Liabilities | | | | | | | | | | | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | | | | | | | | | | | |
Accounts payable, trade
|
| | | $ | 1,056 | | | | | | | | | | | | | | $ | 1,056 | | |
Environmental remediation
|
| | | | 77 | | | | | | 7 | | | |
(g)
|
| | | | 84 | | |
Other current liabilities
|
| | | | 206 | | | | | | 61 | | | |
(a)(c)
|
| | | | 267 | | |
Total current liabilities
|
| | | | 1,339 | | | | | | 68 | | | | | | | | | 1,407 | | |
Long-term debt
|
| | | | 250 | | | | | | 910 | | | |
(c)
|
| | | | 1,160 | | |
Accrued pension and other postretirement benefits
|
| | | | 51 | | | | | | 1,549 | | | |
(a)
|
| | | | 1,600 | | |
Environmental remediation
|
| | | | 152 | | | | | | 7 | | | |
(g)
|
| | | | 159 | | |
Other noncurrent liabilities
|
| | | | 258 | | | | | | (103) | | | |
(d)
|
| | | | 155 | | |
Total liabilities
|
| | | | 2,050 | | | | | | 2,431 | | | | | | | | | 4,481 | | |
Equity | | | | | | | | | | | | | | | | | | | | | | |
Common stock
|
| | | | — | | | |
|
| |
(i)
|
| | | | | | | |||
Additional capital
|
| | | | — | | | |
|
| |
(i)
|
| | | | | | | |||
Parent Company net investment
|
| | | | 2,416 | | | | | | 150 | | | |
(h)(i)
|
| | | | | | |
Accumulated other comprehensive income
|
| | | | 310 | | | | | | (1,469) | | | |
(a)(d)
|
| | | | | | |
Sub-total equity
|
| | | | 2,726 | | | | | | (1,319) | | | | | | | | | 1,407 | | |
Noncontrolling interest
|
| | | | 14 | | | | | | | | | | | | | | | 14 | | |
Total equity
|
| | | | 2,740 | | | | | | (1,319) | | | | | | | | | 1,421 | | |
Total liabilities and equity
|
| | | $ | 4,790 | | | | | | 1,112 | | | | | | | | $ | 5,902 | | |
| | |
For the nine months ended
September 30, 2019 |
| |
For the year ended
December 31, 2018 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | |
COGS(1)
|
| |
SG&A(1)
|
| |
R&D(1)
|
| |
Other
expenses, net |
| |
Pretax
income |
| |
COGS(1)
|
| |
SG&A(1)
|
| |
R&D(1)
|
| |
Other
expenses, net |
| |
Pretax
income |
| ||||||||||||||||||||||||||||||
Pro forma adjustments: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Removal of corporate allocation
|
| | | $ | (10) | | | | | $ | (10) | | | | | $ | (1) | | | | | $ | — | | | | | $ | 21 | | | | | $ | (14) | | | | | $ | (11) | | | | | $ | (2) | | | | | $ | — | | | | | $ | 27 | | |
Addition of corporate expense
|
| | | | — | | | | | | — | | | | | | — | | | | | | 28 | | | | | | (28) | | | | | | — | | | | | | 1 | | | | | | 1 | | | | | | 34 | | | | | | (36) | | |
Reclassification of nonservice cost(2)
|
| | | | (46) | | | | | | — | | | | | | — | | | | | | 46 | | | | | | — | | | | | | (59) | | | | | | — | | | | | | — | | | | | | 59 | | | | | | — | | |
| | | | $ | (56) | | | | | $ | (10) | | | | | $ | (1) | | | | | $ | 74 | | | | | $ | (7) | | | | | $ | (73) | | | | | $ | (10) | | | | | $ | (1) | | | | | $ | 93 | | | | | $ | (9) | | |
| | |
For the nine months ended
September 30, 2019 |
| |
For the year ended
December 31, 2018 |
| ||||||||||||||||||||||||||||||
| | |
Gross
Expense |
| |
Amount
Capitalized |
| |
Net
Expense |
| |
Gross
Expense |
| |
Amount
Capitalized |
| |
Net
Expense |
| ||||||||||||||||||
As reported
|
| | | $ | 95 | | | | | $ | 9 | | | | | $ | 86 | | | | | $ | 138 | | | | | $ | 9 | | | | | $ | 129 | | |
Pro forma adjustments: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Removal of cost allocation
|
| | | | (86) | | | | | | — | | | | | | (86) | | | | | | (125) | | | | | | — | | | | | | (125) | | |
Removal of Davenport Bond
|
| | | | (9) | | | | | | — | | | | | | (9) | | | | | | (12) | | | | | | — | | | | | | (12) | | |
New indebtedness
|
| | | | 57 | | | | | | — | | | | | | 57 | | | | | | 77 | | | | | | — | | | | | | 77 | | |
| | | | | (38) | | | | | | — | | | | | | (38) | | | | | | (60) | | | | | | — | | | | | | (60) | | |
Pro forma
|
| | | $ | 57 | | | | | $ | 9 | | | | | $ | 48 | | | | | $ | 78 | | | | | $ | 9 | | | | | $ | 69 | | |
|
|
| |
Transportation consumption 2019: 4,761 and 2023: 6,161 CAGR 5.3%
|
|
Key Markets
|
| |
Key Customers
|
|
Ground Transportation | | | Ford, FCA, General Motors, Daimler, Paccar, Entrans/Heil | |
Aerospace | | | Boeing, Airbus, Spirit AeroSystems, Embraer | |
Building and Construction | | | Fabricators, installers, architects and developers around the world | |
Industrial | | | Ryerson, Thyssenkrupp MA, Reliance, Kloeckner, Champagne Metals | |
Packaging | | | Ball, CANPACK | |
Country
|
| |
Location
|
| |
Products
|
|
Brazil | | | Itapissuma(1) | | | Specialty Foil | |
China | | | Kunshan | | | Sheet and Plate | |
| | | Qinhuangdao(2) | | | Sheet and Plate | |
Hungary | | | Székesfehérvár | | | Sheet and Plate/Slabs and Billets | |
Russia | | | Samara | | |
Sheet and Plate/Extrusions and Forgings
|
|
United Kingdom
|
| | Birmingham | | | Plate | |
United States | | | Davenport, IA | | | Sheet and Plate | |
| | | Danville, IL | | | Sheet and Plate | |
| | | Hutchinson, KS | | | Sheet and Plate | |
| | | Lancaster, PA | | | Sheet and Plate | |
| | | Alcoa, TN | | | Sheet | |
| | |
San Antonio, TX(3)
|
| | Sheet | |
Country
|
| |
Location
|
| |
Products
|
|
Germany | | | Hannover(1) | | | Extrusions | |
United States
|
| | Massena, NY | | | Extrusions | |
| | | Lafayette, IN | | | Extrusions | |
| | |
Halethorpe, MD(1)
|
| | Extrusions | |
| | | Chandler, AZ(1) | | | Extrusions | |
Country
|
| |
Location
|
| |
Products
|
|
Canada | | |
Lethbridge, Alberta
|
| |
Architectural Products and Systems
|
|
France | | | Merxheim(1) | | | Architectural Products | |
United Kingdom
|
| | Runcorn | | |
Architectural Products and Systems
|
|
United States | | | Springdale, AR | | |
Architectural Products and Systems
|
|
| | | Visalia, CA | | |
Architectural Products and Systems
|
|
| | | Eastman, GA | | | Architectural Products | |
| | | Bloomsburg, PA | | |
Architectural Products and Systems
|
|
| | | Cranberry, PA | | |
Architectural Products and Systems
|
|
| | |
For the Years Ended December 31,
|
| |||||||||||||||
| | |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
Flat-rolled aluminum
|
| | | | 77% | | | | | | 75% | | | | | | 75% | | |
Architectural aluminum systems
|
| | | | 15% | | | | | | 16% | | | | | | 16% | | |
| | |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
Cost of goods sold(1)
|
| | | $ | 11 | | | | | $ | 35 | | | | | $ | 30 | | |
Selling, general administrative, and other expenses(2)
|
| | | | 56 | | | | | | 120 | | | | | | 141 | | |
Research and development expenses
|
| | | | 24 | | | | | | 28 | | | | | | 33 | | |
Provision for depreciation and amortization
|
| | | | 10 | | | | | | 10 | | | | | | 8 | | |
Restructuring and other charges(3)
|
| | | | 50 | | | | | | 6 | | | | | | 9 | | |
Interest expense
|
| | | | 125 | | | | | | 162 | | | | | | 94 | | |
Other expenses (income), net(4)
|
| | | | (12) | | | | | | (285) | | | | | | (11) | | |
| | |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
Third-party sales*
|
| | | $ | 5,731 | | | | | $ | 5,125 | | | | | $ | 4,996 | | |
Intersegment sales
|
| | | | 15 | | | | | | 15 | | | | | | 9 | | |
Total sales
|
| | | $ | 5,746 | | | | | $ | 5,140 | | | | | $ | 5,005 | | |
Segment operating profit
|
| | | $ | 328 | | | | | $ | 384 | | | | | $ | 374 | | |
Third-party aluminum shipments (kmt)*
|
| | | | 1,309 | | | | | | 1,257 | | | | | | 1,400 | | |
| | |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
Third-party sales*
|
| | | $ | 546 | | | | | $ | 518 | | | | | $ | 551 | | |
Segment operating profit
|
| | | $ | 1 | | | | | $ | 34 | | | | | $ | 74 | | |
Third-party aluminum shipments (kmt)*
|
| | | | 59 | | | | | | 59 | | | | | | 57 | | |
| | |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
Third-party sales
|
| | | $ | 1,140 | | | | | $ | 1,066 | | | | | $ | 1,011 | | |
Segment operating profit
|
| | | $ | 91 | | | | | $ | 82 | | | | | $ | 86 | | |
| | |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
Total segment operating profit
|
| | | $ | 420 | | | | | $ | 500 | | | | | $ | 534 | | |
Unallocated amounts: | | | | | | | | | | | | | | | | | | | |
Cost allocations(1)
|
| | | | (101) | | | | | | (193) | | | | | | (212) | | |
Restructuring and other charges(2)
|
| | | | 104 | | | | | | (133) | | | | | | (67) | | |
Other
|
| | | | (49) | | | | | | (42) | | | | | | 1 | | |
Combined operating income
|
| | | $ | 374 | | | | | $ | 132 | | | | | $ | 256 | | |
Interest expense(2)
|
| | | | (129) | | | | | | (168) | | | | | | (97) | | |
Other (expenses) income, net(2)
|
| | | | (4) | | | | | | 287 | | | | | | 9 | | |
Combined income before income taxes
|
| | | $ | 241 | | | | | $ | 251 | | | | | $ | 168 | | |
|
| | |
Total
|
| |
2019
|
| |
2020 – 2021
|
| |
2022 – 2023
|
| |
Thereafter
|
| |||||||||||||||
Operating activities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Raw material purchase obligations
|
| | | $ | 324 | | | | | $ | 316 | | | | | $ | 8 | | | | | $ | — | | | | | $ | — | | |
Energy-related purchase obligations
|
| | | | 67 | | | | | | 33 | | | | | | 28 | | | | | | 6 | | | | | | — | | |
Other purchase obligations
|
| | | | 19 | | | | | | 4 | | | | | | 7 | | | | | | 6 | | | | | | 2 | | |
Operating leases
|
| | | | 158 | | | | | | 34 | | | | | | 50 | | | | | | 31 | | | | | | 43 | | |
Interest related to debt
|
| | | | 285 | | | | | | 12 | | | | | | 24 | | | | | | 24 | | | | | | 225 | | |
Estimated minimum required pension funding
|
| | | | 12 | | | | | | 3 | | | | | | 6 | | | | | | 3 | | | | | | — | | |
Other postretirement benefit payments
|
| | | | 1 | | | | | | — | | | | | | — | | | | | | — | | | | | | 1 | | |
Layoff and other restructuring payments
|
| | | | 4 | | | | | | 4 | | | | | | — | | | | | | — | | | | | | — | | |
Deferred revenue arrangements
|
| | | | 18 | | | | | | 12 | | | | | | 6 | | | | | | — | | | | | | — | | |
Uncertain tax positions
|
| | | | 18 | | | | | | — | | | | | | — | | | | | | — | | | | | | 18 | | |
Financing activities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Debt
|
| | | | 250 | | | | | | — | | | | | | — | | | | | | — | | | | | | 250 | | |
Investing activities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Capital projects
|
| | | | 207 | | | | | | 155 | | | | | | 52 | | | | | | — | | | | | | — | | |
Totals
|
| | | $ | 1,363 | | | | | $ | 573 | | | | | $ | 181 | | | | | $ | 70 | | | | | $ | 539 | | |
| | | | | |
Pension benefits
|
| |
Other postretirement
benefits |
| ||||||||||||||||||||||||||||||
| | | | | |
For the year ended
December 31, |
| |
For the year ended
December 31, |
| ||||||||||||||||||||||||||||||
Type of Plan
|
| |
Type of Expense
|
| |
2018
|
| |
2017
|
| |
2016
|
| |
2018
|
| |
2017
|
| |
2016
|
| ||||||||||||||||||
Direct Plans
|
| | Net periodic benefit cost* | | | | $ | 5 | | | | | $ | 5 | | | | | $ | 5 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
Shared Plans
|
| |
Multiemployer contribution expense
|
| | | | 67 | | | | | | 82 | | | | | | 78 | | | | | | 21 | | | | | | 20 | | | | | | 23 | | |
Shared Plans
|
| | Cost allocation | | | | | 20 | | | | | | 39 | | | | | | 31 | | | | | | 5 | | | | | | 4 | | | | | | 8 | | |
| | | | | | | $ | 92 | | | | | $ | 126 | | | | | $ | 114 | | | | | $ | 26 | | | | | $ | 24 | | | | | $ | 31 | | |
For the nine months ended September 30,
|
| |
2019
|
| |
2018
|
| ||||||
Cost of goods sold(1)
|
| | | $ | 11 | | | | | $ | 9 | | |
Selling, general administrative, and other expenses(2)
|
| | | | 80 | | | | | | 49 | | |
Research and development expenses
|
| | | | 8 | | | | | | 18 | | |
Provision for depreciation and amortization
|
| | | | 9 | | | | | | 7 | | |
Restructuring and other charges
|
| | | | 5 | | | | | | (3) | | |
Interest expense
|
| | | | 86 | | | | | | 95 | | |
Other expenses (income), net
|
| | | | 4 | | | | | | (4) | | |
| | |
Nine months ended
September 30, |
| |||||||||
| | |
2019
|
| |
2018
|
| ||||||
Third-party sales*
|
| | | $ | 4,294 | | | | | $ | 4,333 | | |
Intersegment sales
|
| | | | 20 | | | | | | 12 | | |
Total sales
|
| | | $ | 4,314 | | | | | $ | 4,345 | | |
Segment operating profit
|
| | | $ | 346 | | | | | $ | 268 | | |
Third-party aluminum shipments (kmt)*
|
| | | | 1,058 | | | | | | 986 | | |
| | |
Nine months ended
September 30, |
| |||||||||
| | |
2019
|
| |
2018
|
| ||||||
Third-party sales*
|
| | | $ | 420 | | | | | $ | 409 | | |
Segment operating profit
|
| | | $ | (29) | | | | | $ | 2 | | |
Third-party aluminum shipments (kmt)*
|
| | | | 45 | | | | | | 46 | | |
| | |
Nine months ended
September 30, |
| |||||||||
| | |
2019
|
| |
2018
|
| ||||||
Third-party sales
|
| | | $ | 855 | | | | | $ | 866 | | |
Segment operating profit
|
| | | $ | 89 | | | | | $ | 74 | | |
For the nine-months ended September 30,
|
| |
2019
|
| |
2018
|
| ||||||
Total segment operating profit
|
| | | $ | 406 | | | | | $ | 344 | | |
Unallocated amounts: | | | | ||||||||||
Cost allocations(1)
|
| | | | (108) | | | | | | (83) | | |
Restructuring and other charges(2)
|
| | | | (104) | | | | | | — | | |
Other
|
| | | | (18) | | | | | | (49) | | |
Combined operating income
|
| | | $ | 176 | | | | | $ | 212 | | |
Interest expense(2)
|
| | | | (86) | | | | | | (99) | | |
Other income (expenses), net(2)
|
| | | | 4 | | | | | | (9) | | |
Combined income before income taxes
|
| | | $ | 94 | | | | | $ | 104 | | |
Name
|
| |
Age
|
| |
Position
|
|
| | | | ||||
Tim D. Myers | | |
54
|
| | Chief Executive Officer | |
[ ] | | |
[ ]
|
| | [ ] | |
Name
|
| |
Age
|
| |
Position
|
|
Tim D. Myers | | |
54
|
| | Director and Chief Executive Officer | |
William F. Austen | | |
61
|
| | Director | |
Christopher L. Ayers | | |
53
|
| | Director | |
Margaret “Peg” S. Billson | | |
58
|
| | Director | |
Jacques Croisetiere | | |
65
|
| | Director | |
Elmer L. Doty | | |
65
|
| | Director | |
Carol S. Eicher | | |
61
|
| | Director | |
Frederick “Fritz” A. Henderson
|
| |
61
|
| | Director | |
E. Stanley O’Neal | | |
68
|
| | Director | |
Jeffrey Stafeil | | |
50
|
| | Director | |
|
Compensation and Benefits Committee
|
| |
•
Establishes the Chief Executive Officer’s compensation for Board ratification, based upon an evaluation of performance in light of approved goals and objectives
•
Reviews and approves the compensation of Arconic Corporation’s officers
•
Oversees the implementation and administration of Arconic Corporation’s compensation and benefits plans, including pension, savings, incentive compensation and equity-based plans
•
Reviews and approves general compensation and benefit policies
•
Approves the Compensation Discussion and Analysis for inclusion in the proxy statement
•
Has the sole authority to retain and terminate a compensation consultant, as well as to approve the consultant’s fees and other terms of engagement
|
|
|
Governance and Nominating Committee
|
| |
•
Identifies individuals qualified to become Board members and recommends them to the full Board for consideration, including evaluating all potential candidates, whether initially recommended by management, other Board members or stockholders
•
Reviews and makes recommendations to the Board regarding the appropriate structure and operations of the Board and Board committees
•
Makes recommendations to the Board regarding Board committee assignments
•
Develops and annually reviews corporate governance guidelines for the Company, and oversees other corporate governance matters
•
Reviews related person transactions
•
Oversees an annual performance review of the Board, Board committees and individual director nominees
•
Periodically reviews and makes recommendations to the Board regarding director compensation
|
|
|
Compensation Type
|
| |
Guiding Principle
|
|
| Base Salary | | | Target total direct compensation, including salary, at median of market to provide competitive pay | |
| Short-Term Annual Incentive Compensation | | |
Choose annual IC weighted metrics that focus management’s actions on achieving greatest positive impact on ParentCo’s financial performance and that include a means to assess and motivate performance relative to peers
Set annual IC targets that challenge management to achieve continuous improvement as part of an overall strategy to deliver long-term growth
Take into account individual performance that may include non-financial measures of the success of ParentCo
|
|
| Alcoa Corp. | | | Spirit AeroSystems | |
| U.S. Steel | | | TransDigm Group | |
| Reliance Steel & Aluminum | | | Triumph Group | |
| AK Steel Holding | | | Oshkosh | |
| Commercial Metals | | | Terex Corp. | |
| Allegheny Technologies | | | AGCO Corp. | |
| Olin Corp. | | | Stanley Black & Decker | |
| The Chemours Co. | | | Dover Corp. | |
| Ball Corp. | | | Flowserve Corp. | |
| Harris | | | AMETEK | | | Worthington Industries | |
| L3 Technologies | | | General Cable | | | Xylem | |
| Rockwell Collins | | | TE Connectivity | | | CSX | |
| SAIC | | | Ameren | | | Norfolk Southern | |
| Spirit AeroSystems | | | AVANGRID | | | Agilent Technologies | |
| Textron | | | CMS Energy | | | Boston Scientific | |
| Triumph Group | | | Eversource Energy | | | Zimmer Biomet | |
| Air Products and Chemicals | | | PPL | | | Alcoa | |
| Axalta Coating Systems | | | UGI | | | Allegheny Technologies | |
| Chemours Company | | | Vistra Energy | | | Commercial Metals | |
| Eastman Chemical | | | WEC Energy Group | | | Newmont Mining | |
| Ecolab | | | Williams Companies | | | Peabody Energy | |
| Mosaic | | | Ball | | | United States Steel | |
| Praxair | | | Crown Holdings | | | CVR Energy | |
| Westlake Chemical | | | Fortive Corporation | | | DCP Midstream | |
| EMCOR Group | | |
Goodyear Tire & Rubber
|
| | EnLink Midstream | |
| Jacobs Engineering | | | Greif | | | Occidental Petroleum | |
|
Fortune Brands Home & Security
|
| | Ingersoll Rand | | | ONEOK | |
| Masco | | | Owens Corning | | | BorgWarner | |
| Newell Brands | | | Parker Hannifin | | |
Cooper Standard Automotive
|
|
| Polaris Industries | | | Rockwell Automation | | | Dana | |
| Sonoco Products | | | Snap-on Inc. | | | Harley-Davidson | |
| Avery Dennison | | |
Stanley Black & Decker
|
| | Oshkosh | |
| Berry Plastics | | | Terex | | | Tenneco | |
| Clorox | | | Timken | | | Trinity Industries | |
| PVH Corp. | | | Vulcan Materials | | | | |
Arconic Corporation Named Executive Officer
|
| |
Base Salary
|
| |||
Timothy D. Myers, Chief Executive Officer
|
| | | $ | 850,000 | | |
|
Arconic Corporation Named Executive Officer
|
| |
Annual Incentive Compensation Opportunity
|
|
| Timothy D. Myers, Chief Executive Officer | | |
125% of base salary
|
|
Arconic Corporation Named
Executive Officer |
| |
Grant Date Value of
2020 Time-Based Annual LTI Award |
| |
Grant Date Value of
2020 Performance-Based Annual LTI Award (at Target) |
| ||||||
Timothy D. Myers, Chief Executive Officer
|
| | | $ | 1,720,000(1) | | | | | $ | 2,580,000(2) | | |
Name and Principal
Position |
| |
Year
|
| |
Salary
($) |
| |
Bonus
($) |
| |
Stock
Awards ($) |
| |
Option
Awards ($) |
| |
Non-Equity
Incentive Plan Compensation ($) |
| |
Change in
Pension Value and Non- Qualified Deferred Compensation Earnings ($) |
| |
All Other
Compensation ($) |
| |
Total
($) |
| |||||||||||||||||||||||||||
(a)
|
| |
(b)
|
| |
(c)
|
| |
(d)
|
| |
(e)
|
| |
(f)
|
| |
(g)
|
| |
(h)
|
| |
(i)
|
| |
(j)
|
| |||||||||||||||||||||||||||
Timothy D. Myers(1)
Chief Executive Officer |
| | | | 2019 | | | | | $ | 574,333 | | | | | $ | 0 | | | | | $ | 1,200,001 | | | | | $ | 0 | | | | | $ | [ ] | | | | | $ | 657,119 | | | | | $ | 58,705 | | | | | $ | [ ] | | |
| | | 2018 | | | | | $ | 542,500 | | | | | $ | 0 | | | | | $ | 1,056,189 | | | | | $ | 264,036 | | | | | $ | 233,818 | | | | | $ | 0 | | | | | $ | 57,120 | | | | | $ | 2,153,663 | | | ||
| | | 2017 | | | | | $ | 436,250 | | | | | $ | 0 | | | | | $ | 949,308 | | | | | $ | 228,052 | | | | | $ | 396,356 | | | | | $ | 516,994 | | | | | $ | 19,333 | | | | | $ | 2,546,293 | | |
| | |
Company Matching Contribution
|
| |
3% Retirement Contribution
|
| |
Total Company
Contribution |
| |||||||||||||||||||||
Name
|
| |
Savings Plan
|
| |
Def. Comp. Plan
|
| |
Savings Plan1
|
| |
Def. Comp. Plan
|
| ||||||||||||||||||
Timothy D. Myers
|
| | | $ | 16,800 | | | | | $ | 17,660 | | | | | $ | 8,400 | | | | | $ | 15,844 | | | | | $ | 58,705 | | |
| | | | | | | | |
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards(1) |
| |
All Other
Stock Awards: Number of Shares of Stock or Units(2) (#) |
| |
2019 Grant
Date Fair Value of Stock and Option Awards ($) |
| |||||||||||||||||||||
Name
|
| |
Grant Dates
|
| |
Threshold ($)
|
| |
Target ($)
|
| |
Maximum ($)
|
| | | | | | | | | | | | | ||||||||||||
(a)
|
| |
(b)
|
| |
(c)
|
| |
(d)
|
| |
(e)
|
| |
(i)
|
| |
(l)
|
| ||||||||||||||||||
Timothy D. Myers
|
| | | | | | | | | $ | 287,167 | | | | | $ | 574,333 | | | | | $ | 1,723,000 | | | | | | | | | | | | | | |
| | | | | 2/28/2019 | | | | | | | | | | | | | | | | | | | | | | | | 64,900 | | | | | $ | 1,200,001 | | |
| | |
Option Awards
|
| |
Stock Awards
|
| ||||||||||||||||||||||||||||||||||||||||||||||||
Name
|
| |
Number of
Securities Underlying Unexercised Options (Exercisable) (#) |
| |
Number of
Securities Underlying Unexercised Options (Unexercisable) (#) |
| |
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
| |
Option
Exercise Price ($) |
| |
Option
Expiration Date |
| |
Number
of Shares or Units of Stock That Have Not Vested (#) |
| |
Market
Value of Shares or Units of Stock That Have Not Vested ($) |
| |
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
| |
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
| |||||||||||||||||||||||||||
(a)
|
| |
(b)
|
| |
(c)
|
| |
(d)
|
| |
(e)
|
| |
(f)
|
| |
(g)
|
| |
(h)
|
| |
(i)
|
| |
(j)
|
| |||||||||||||||||||||||||||
Timothy D. Myers
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Stock Awards1
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 64,900 | | | | | $ | 399,395 | | | | | | 78,120 | | | | | $ | 4,001,331 | | |
Time-Vested Options2
|
| | | | 12,144 | | | | | | 12,143 | | | | | | — | | | | | $ | 21.13 | | | | | | 1/13/2027 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 8,990 | | | | | | 17,980 | | | | | | — | | | | | $ | 30.22 | | | | | | 1/19/2028 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
Option Awards
|
| |
Stock Awards
|
| ||||||||||||||||||
Name
|
| |
Number of Shares
Acquired on Exercise (#) |
| |
Value Realized
on Exercise ($) |
| |
Number of Shares
Acquired on Vesting (#) |
| |
Value Realized
on Vesting ($) |
| ||||||||||||
(a)
|
| |
(b)
|
| |
(c)
|
| |
(d)
|
| |
(e)
|
| ||||||||||||
Timothy D. Myers
|
| | | | 31,502 | | | | | $ | 192,134 | | | | | | 18,487 | | | | | $ | 315,943 | | |
Name(1)
|
| |
Plan Name(s)
|
| |
Years of
Credited Service |
| |
Present Value of
Accumulated Benefits |
| |
Payments During
Last Fiscal Year |
| |||||||||
Timothy D. Myers
|
| |
ParentCo Retirement Plan
|
| | | | 26.52 | | | | | $ | 1,213,338 | | | | | | | | |
| | |
Excess Benefits Plan C
|
| | | | | | | | | $ | 1,661,316 | | | | | | | | |
| | |
Total
|
| | | | | | | | |
$
|
2,874,654
|
| | | | | N/A | | |
Name
|
| |
Executive
Contributions in 2019 ($) |
| |
Registrant
Contributions in 2019 ($) |
| |
Aggregate
Earnings in 2019 ($) |
| |
Aggregate
Withdrawals Distributions ($) |
| |
Aggregate
Balance at 12/31/2019 FYE ($) |
| |||||||||||||||
(a)
|
| |
(b)
|
| |
(c)
|
| |
(d)
|
| |
(e)
|
| |
(f)
|
| |||||||||||||||
| | | | | | | | | | | | | | | | $ | 272,235 E | | | | | | | | | | | | | | |
Timothy D. Myers
|
| | | $ | 17,660 | | | | | $ | 33,505 | | | | | $ | 2,169 D | | | | | | — | | | | | $ | 680,629 | | |
Name
|
| |
Estimated Net
Present Value of Cash Severance Payments |
| |
Estimated Net
Present Value of Two Years Additional Retirement Accrual |
| |
Estimated net
present value of continued active health care benefits |
| |
Total
|
| ||||||||||||
Timothy D. Myers
|
| | | $ | 1,138,237 | | | | | $ | 1,377,103 | | | | | $ | 41,664 | | | | | $ | 2,557,004 | | |
Name
|
| |
Estimated net present value of change
in control severance and benefits |
| |||
Timothy D. Myers
|
| | | $ | 6,092,905 | | |
Compensation Element
|
| |
Amount
|
| |||
Annual Cash Retainer
|
| | | $ | 120,000 | | |
Annual Equity Award (Restricted Share Units Granted Following Each Annual Meeting of Stockholders)
|
| | | $ | 150,000 | | |
Other Annual Fees
|
| | | | | | |
•
Lead Director Fee
|
| | | $ | 30,000 | | |
•
Audit Committee Chair Fee (includes Audit Committee Member Fee)
|
| | | $ | 20,000 | | |
•
Compensation and Benefits Committee Chair Fee
|
| | | $ | 15,000 | | |
•
Other Committee Chair Fee
|
| | | $ | 15,000 | | |
Per Meeting Fee for Meetings in Excess of Regularly Scheduled Meetings
|
| | | $ | 1,2001 | | |
Name and Address of Beneficial Owner
|
| |
Amount and Nature of Beneficial
Ownership |
| |
Percent of Class
|
| ||||||
[ ]
|
| | | | [ ] | | | | | | [ ] | | |
Name of Beneficial Owner
|
| |
Shares of
Common Stock(1) |
| |
Deferred Share
Units(2) |
| |
Deferred
Restricted Share Units(3) |
| |
Total
|
| ||||||||||||
Tim D. Myers
|
| | | | [ ] | | | | | | [ ] | | | | | | [ ] | | | | | | [ ] | | |
William F. Austen
|
| | | | [ ] | | | | | | [ ] | | | | | | [ ] | | | | | | [ ] | | |
Christopher L. Ayers
|
| | | | [ ] | | | | | | [ ] | | | | | | [ ] | | | | | | [ ] | | |
Margaret “Peg” S. Billson
|
| | | | [ ] | | | | | | [ ] | | | | | | [ ] | | | | | | [ ] | | |
Jacques Croisetiere
|
| | | | [ ] | | | | | | [ ] | | | | | | [ ] | | | | | | [ ] | | |
Elmer L. Doty
|
| | | | [ ] | | | | | | [ ] | | | | | | [ ] | | | | | | [ ] | | |
Carol S. Eicher
|
| | | | [ ] | | | | | | [ ] | | | | | | [ ] | | | | | | [ ] | | |
Frederick “Fritz” A. Henderson
|
| | | | [ ] | | | | | | [ ] | | | | | | [ ] | | | | | | [ ] | | |
E. Stanley O’Neal
|
| | | | [ ] | | | | | | [ ] | | | | | | [ ] | | | | | | [ ] | | |
Jeffrey Stafeil
|
| | | | [ ] | | | | | | [ ] | | | | | | [ ] | | | | | | [ ] | | |
[ ] | | | | | [ ] | | | | | | [ ] | | | | | | [ ] | | | | | | [ ] | | |
All directors and executive officers as a group
([ ] persons) |
| | | | [ ] | | | | | | [ ] | | | | | | [ ] | | | | | | [ ] | | |
| | |
Page
|
| |||
Audited Combined Financial Statements | | | | | | | |
| | | | F-2 | | | |
| | | | F-3 | | | |
| | | | F-4 | | | |
| | | | F-5 | | | |
| | | | F-6 | | | |
| | | | F-7 | | | |
| | | | F-8 | | | |
Unaudited Combined Financial Statements | | | | | | | |
| | | | F-44 | | | |
| | | | F-45 | | | |
| | | | F-46 | | | |
| | | | F-47 | | | |
| | | | F-48 | | | |
| | | | F-49 | | |
For the year ended December 31,
|
| |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
Sales to unrelated parties
|
| | | $ | 7,236 | | | | | $ | 6,642 | | | | | $ | 6,481 | | |
Sales to related parties (A)
|
| | | | 206 | | | | | | 182 | | | | | | 180 | | |
Total Sales (C and D)
|
| | | | 7,442 | | | | | | 6,824 | | | | | | 6,661 | | |
Cost of goods sold (exclusive of expenses below)
|
| | | | 6,549 | | | | | | 5,866 | | | | | | 5,602 | | |
Selling, general administrative, and other expenses
|
| | | | 288 | | | | | | 361 | | | | | | 396 | | |
Research and development expenses
|
| | | | 63 | | | | | | 66 | | | | | | 83 | | |
Provision for depreciation and amortization
|
| | | | 272 | | | | | | 266 | | | | | | 257 | | |
Restructuring and other charges (E)
|
| | | | (104) | | | | | | 133 | | | | | | 67 | | |
Operating income
|
| | | | 374 | | | | | | 132 | | | | | | 256 | | |
Interest expense (F)
|
| | | | 129 | | | | | | 168 | | | | | | 97 | | |
Other expenses (income), net (G)
|
| | | | 4 | | | | | | (287) | | | | | | (9) | | |
Income before income taxes
|
| | | | 241 | | | | | | 251 | | | | | | 168 | | |
Provision for income taxes (I)
|
| | | | 71 | | | | | | 42 | | | | | | 13 | | |
Net income
|
| | | | 170 | | | | | | 209 | | | | | | 155 | | |
Less: Net income attributable to noncontrolling interests
|
| | | | — | | | | | | — | | | | | | — | | |
Net income attributable to Arconic Rolled Products Corporation
|
| | | $ | 170 | | | | | $ | 209 | | | | | $ | 155 | | |
| | |
Arconic Rolled Products
Corporation |
| |
Noncontrolling
interests |
| |
Total
|
| |||||||||||||||||||||||||||||||||||||||||||||
For the year ended December 31,
|
| |
2018
|
| |
2017
|
| |
2016
|
| |
2018
|
| |
2017
|
| |
2016
|
| |
2018
|
| |
2017
|
| |
2016
|
| |||||||||||||||||||||||||||
Net income
|
| | | $ | 170 | | | | | $ | 209 | | | | | $ | 155 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | 170 | | | | | $ | 209 | | | | | $ | 155 | | |
Other comprehensive (loss) income, net
of tax (K): |
| | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||
Change in unrecognized net actuarial loss and prior service cost related to pension and other postretirement benefits
|
| | | | 4 | | | | | | (4) | | | | | | (4) | | | | | | — | | | | | | — | | | | | | — | | | | | | 4 | | | | | | (4) | | | | | | (4) | | |
Foreign currency translation adjustments
|
| | | | (164) | | | | | | (214) | | | | | | 334 | | | | | | — | | | | | | 2 | | | | | | (1) | | | | | | (164) | | | | | | (212) | | | | | | 333 | | |
Total Other comprehensive (loss) income, net of tax
|
| | | | (160) | | | | | | (218) | | | | | | 330 | | | | | | — | | | | | | 2 | | | | | | (1) | | | | | | (160) | | | | | | (216) | | | | | | 329 | | |
Comprehensive income (loss)
|
| | | $ | 10 | | | | | $ | (9) | | | | | $ | 485 | | | | | $ | — | | | | | $ | 2 | | | | | $ | (1) | | | | | $ | 10 | | | | | $ | (7) | | | | | $ | 484 | | |
December 31,
|
| |
2018
|
| |
2017
|
| ||||||
Assets | | | | | | | | | | | | | |
Current assets: | | | | | | | | | | | | | |
Cash and cash equivalents
|
| | | $ | 81 | | | | | $ | 126 | | |
Receivables from customers, less allowances of $2 in 2018 and $5 in 2017(A)
|
| | | | 408 | | | | | | 423 | | |
Other receivables
|
| | | | 127 | | | | | | 123 | | |
Inventories (L)
|
| | | | 818 | | | | | | 804 | | |
Prepaid expenses and other current assets
|
| | | | 42 | | | | | | 64 | | |
Total current assets
|
| | | | 1,476 | | | | | | 1,540 | | |
Properties, plants, and equipment, net (M)
|
| | | | 2,861 | | | | | | 2,861 | | |
Goodwill (N)
|
| | | | 385 | | | | | | 394 | | |
Deferred income taxes (I)
|
| | | | 15 | | | | | | 26 | | |
Other noncurrent assets
|
| | | | 58 | | | | | | 81 | | |
Total assets
|
| | | $ | 4,795 | | | | | $ | 4,902 | | |
Liabilities | | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | | |
Accounts payable, trade
|
| | | $ | 1,165 | | | | | $ | 958 | | |
Accrued compensation and retirement costs
|
| | | | 66 | | | | | | 74 | | |
Taxes, including income taxes
|
| | | | 37 | | | | | | 51 | | |
Environmental remediation (S)
|
| | | | 69 | | | | | | 30 | | |
Other current liabilities
|
| | | | 56 | | | | | | 77 | | |
Total current liabilities
|
| | | | 1,393 | | | | | | 1,190 | | |
Long-term debt (O)
|
| | | | 250 | | | | | | 250 | | |
Deferred income taxes (I)
|
| | | | 82 | | | | | | 92 | | |
Accrued pension and other postretirement benefits (H)
|
| | | | 55 | | | | | | 59 | | |
Environmental remediation (S)
|
| | | | 170 | | | | | | 236 | | |
Other noncurrent liabilities and deferred credits (P)
|
| | | | 168 | | | | | | 68 | | |
Total liabilities
|
| | | | 2,118 | | | | | | 1,895 | | |
Contingencies and commitments (S)
|
| | | | | | | | | | | | |
Equity | | | | | | | | | | | | | |
Parent Company net investment (A)
|
| | | | 2,415 | | | | | | 2,584 | | |
Accumulated other comprehensive income (K)
|
| | | | 250 | | | | | | 410 | | |
Sub-total equity
|
| | | | 2,665 | | | | | | 2,994 | | |
Noncontrolling interests
|
| | | | 12 | | | | | | 13 | | |
Total equity
|
| | | | 2,677 | | | | | | 3,007 | | |
Total liabilities and equity
|
| | | $ | 4,795 | | | | | $ | 4,902 | | |
For the year ended December 31,
|
| |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
Operating Activities | | | | | | | | | | | | | | | | | | | |
Net income
|
| | | $ | 170 | | | | | $ | 209 | | | | | $ | 155 | | |
Adjustments to reconcile net income to cash provided from operations: | | | | | | | | | | | | | | | | | | | |
Depreciation and amortization
|
| | | | 272 | | | | | | 266 | | | | | | 257 | | |
Deferred income taxes (I)
|
| | | | (4) | | | | | | 29 | | | | | | (31) | | |
Restructuring and other charges (E)
|
| | | | (104) | | | | | | 133 | | | | | | 67 | | |
Net loss (gain) from investing activities — asset sales (G)
|
| | | | 4 | | | | | | (267) | | | | | | 3 | | |
Net periodic pension benefit cost (H)
|
| | | | 5 | | | | | | 5 | | | | | | 5 | | |
Stock-based compensation (J)
|
| | | | 22 | | | | | | 30 | | | | | | 26 | | |
Other
|
| | | | 1 | | | | | | (2) | | | | | | 7 | | |
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments:
|
| | | | | | | | | | | | | | | | | | |
(Increase) in receivables
|
| | | | (24) | | | | | | (32) | | | | | | (7) | | |
(Increase) in inventories
|
| | | | (51) | | | | | | (137) | | | | | | (25) | | |
Decrease (Increase) in prepaid expenses and other current assets
|
| | | | 24 | | | | | | (4) | | | | | | (8) | | |
Increase in accounts payable, trade
|
| | | | 247 | | | | | | 71 | | | | | | 190 | | |
(Decrease) in accrued expenses
|
| | | | (38) | | | | | | (51) | | | | | | (21) | | |
Increase (Decrease) in taxes, including income taxes
|
| | | | 1 | | | | | | (32) | | | | | | 12 | | |
Pension contributions (H)
|
| | | | (4) | | | | | | (4) | | | | | | (2) | | |
(Increase) in noncurrent assets
|
| | | | (2) | | | | | | (14) | | | | | | (19) | | |
(Decrease) Increase in noncurrent liabilities
|
| | | | (16) | | | | | | (18) | | | | | | 9 | | |
Cash provided from operations
|
| | | | 503 | | | | | | 182 | | | | | | 618 | | |
Financing Activities | | | | | | | | | | | | | | | | | | | |
Net transfers (to) from Parent Company
|
| | | | (531) | | | | | | 148 | | | | | | (292) | | |
Contributions from noncontrolling interests
|
| | | | — | | | | | | — | | | | | | 11 | | |
Distributions to noncontrolling interests
|
| | | | — | | | | | | (14) | | | | | | — | | |
Other
|
| | | | (5) | | | | | | 2 | | | | | | 3 | | |
Cash (used for) provided from financing activities
|
| | | | (536) | | | | | | 136 | | | | | | (278) | | |
Investing Activities | | | | | | | | | | | | | | | | | | | |
Capital expenditures
|
| | | | (317) | | | | | | (241) | | | | | | (350) | | |
Proceeds from the sale of assets and businesses (R)
|
| | | | 307 | | | | | | (9) | | | | | | — | | |
Cash used for investing activities
|
| | | | (10) | | | | | | (250) | | | | | | (350) | | |
Effect of exchange rate changes on cash and cash equivalents and restricted cash
|
| | | | (2) | | | | | | 4 | | | | | | (3) | | |
Net change in cash and cash equivalents and restricted cash (B)
|
| | | | (45) | | | | | | 72 | | | | | | (13) | | |
Cash and cash equivalents and restricted cash at beginning of year (B)
|
| | | | 126 | | | | | | 54 | | | | | | 67 | | |
Cash and cash equivalents and restricted cash at end of year (B)
|
| | | $ | 81 | | | | | $ | 126 | | | | | $ | 54 | | |
| | |
Parent
Company net investment |
| |
Accumulated
other comprehensive income |
| |
Noncontrolling
interests |
| |
Total
equity |
| ||||||||||||
Balance at December 31, 2015
|
| | | $ | 2,645 | | | | | $ | 298 | | | | | $ | 13 | | | | | $ | 2,956 | | |
Net income
|
| | | | 155 | | | | | | — | | | | | | — | | | | | | 155 | | |
Other comprehensive income (loss) (K)
|
| | | | — | | | | | | 330 | | | | | | (1) | | | | | | 329 | | |
Change in ParentCo contribution
|
| | | | (623) | | | | | | — | | | | | | — | | | | | | (623) | | |
Contributions
|
| | | | — | | | | | | — | | | | | | 11 | | | | | | 11 | | |
Other
|
| | | | — | | | | | | — | | | | | | 2 | | | | | | 2 | | |
Balance at December 31, 2016
|
| | | $ | 2,177 | | | | | $ | 628 | | | | | $ | 25 | | | | | $ | 2,830 | | |
Net income
|
| | | | 209 | | | | | | — | | | | | | — | | | | | | 209 | | |
Other comprehensive (loss) income (K)
|
| | | | — | | | | | | (218) | | | | | | 2 | | | | | | (216) | | |
Change in ParentCo contribution
|
| | | | 198 | | | | | | — | | | | | | — | | | | | | 198 | | |
Distributions
|
| | | | — | | | | | | — | | | | | | (14) | | | | | | (14) | | |
Balance at December 31, 2017
|
| | | $ | 2,584 | | | | | $ | 410 | | | | | $ | 13 | | | | | $ | 3,007 | | |
Net income
|
| | | | 170 | | | | | | — | | | | | | — | | | | | | 170 | | |
Other comprehensive loss (K)
|
| | | | — | | | | | | (160) | | | | | | — | | | | | | (160) | | |
Change in ParentCo contribution
|
| | | | (339) | | | | | | — | | | | | | — | | | | | | (339) | | |
Other
|
| | | | — | | | | | | — | | | | | | (1) | | | | | | (1) | | |
Balance at December 31, 2018
|
| | | $ | 2,415 | | | | | $ | 250 | | | | | $ | 12 | | | | | $ | 2,677 | | |
| | |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
Cost of goods sold(1)
|
| | | $ | 11 | | | | | $ | 35 | | | | | $ | 30 | | |
Selling, general administrative, and other expenses(2)
|
| | | | 56 | | | | | | 120 | | | | | | 141 | | |
Research and development expenses
|
| | | | 24 | | | | | | 28 | | | | | | 33 | | |
Provision for depreciation and amortization
|
| | | | 10 | | | | | | 10 | | | | | | 8 | | |
Restructuring and other charges (E)(3)
|
| | | | 50 | | | | | | 6 | | | | | | 9 | | |
Interest expense (F)
|
| | | | 125 | | | | | | 162 | | | | | | 94 | | |
Other expenses (income), net (G)(4)
|
| | | | (12) | | | | | | (285) | | | | | | (11) | | |
| | |
Structures
|
| |
Machinery
and equipment |
| ||||||
Rolled Products
|
| | | | 31 | | | | | | 21 | | |
Extrusions
|
| | | | 32 | | | | | | 19 | | |
Building and Construction Systems
|
| | | | 24 | | | | | | 18 | | |
| | |
Software
|
| |
Other
intangible assets |
| ||||||
Rolled Products
|
| | | | 5 | | | | | | 9 | | |
Extrusions
|
| | | | 4 | | | | | | 10 | | |
Building and Construction Systems
|
| | | | 4 | | | | | | 16 | | |
For the year ended December 31,
|
| |
Rolled
Products |
| |
Extrusions
|
| |
Building and
Construction Systems |
| |
Total
Segments |
| ||||||||||||
2018 | | | | | | | | | | | | | | | | | | | | | | | | | |
Ground Transportation
|
| | | $ | 2,585 | | | | | $ | 107 | | | | | $ | — | | | | | $ | 2,692 | | |
Building and Construction
|
| | | | 217 | | | | | | — | | | | | | 1,140 | | | | | | 1,357 | | |
Aerospace
|
| | | | 895 | | | | | | 285 | | | | | | — | | | | | | 1,180 | | |
Industrial Products
|
| | | | 994 | | | | | | 104 | | | | | | — | | | | | | 1,098 | | |
Packaging
|
| | | | 1,005 | | | | | | — | | | | | | — | | | | | | 1,005 | | |
Other
|
| | | | 35 | | | | | | 50 | | | | | | — | | | | | | 85 | | |
Total end-market revenue
|
| | | $ | 5,731 | | | | | $ | 546 | | | | | $ | 1,140 | | | | | $ | 7,417 | | |
2017 | | | | | | | | | | | | | | | | | | | | | | | | | |
Ground Transportation
|
| | | $ | 2,110 | | | | | $ | 92 | | | | | $ | — | | | | | $ | 2,202 | | |
Building and Construction
|
| | | | 204 | | | | | | — | | | | | | 1,065 | | | | | | 1,269 | | |
Aerospace
|
| | | | 887 | | | | | | 273 | | | | | | — | | | | | | 1,160 | | |
Industrial Products
|
| | | | 894 | | | | | | 123 | | | | | | — | | | | | | 1,017 | | |
Packaging
|
| | | | 995 | | | | | | — | | | | | | — | | | | | | 995 | | |
Other
|
| | | | 35 | | | | | | 30 | | | | | | 1 | | | | | | 66 | | |
Total end-market revenue
|
| | | $ | 5,125 | | | | | $ | 518 | | | | | $ | 1,066 | | | | | $ | 6,709 | | |
2016 | | | | | | | | | | | | | | | | | | | | | | | | | |
Ground Transportation
|
| | | $ | 1,683 | | | | | $ | 81 | | | | | $ | — | | | | | $ | 1,764 | | |
Building and Construction
|
| | | | 200 | | | | | | — | | | | | | 1,010 | | | | | | 1,210 | | |
Aerospace
|
| | | | 944 | | | | | | 309 | | | | | | — | | | | | | 1,253 | | |
Industrial Products
|
| | | | 820 | | | | | | 136 | | | | | | — | | | | | | 956 | | |
Packaging
|
| | | | 1,328 | | | | | | — | | | | | | — | | | | | | 1,328 | | |
Other
|
| | | | 21 | | | | | | 25 | | | | | | 1 | | | | | | 47 | | |
Total end-market revenue
|
| | | $ | 4,996 | | | | | $ | 551 | | | | | $ | 1,011 | | | | | $ | 6,558 | | |
| | |
Rolled
Products |
| |
Extrusions
|
| |
Building and
Construction Systems |
| |
Total
|
| ||||||||||||
2018 | | | | | | | | | | | | | | | | | | | | | | | | | |
Sales: | | | | | | | | | | | | | | | | | | | | | | | | | |
Third-party sales – unrelated party
|
| | | $ | 5,586 | | | | | $ | 485 | | | | | $ | 1,140 | | | | | $ | 7,211 | | |
Third-party sales – related party
|
| | | | 145 | | | | | | 61 | | | | | | — | | | | | | 206 | | |
Intersegment sales
|
| | | | 15 | | | | | | 3 | | | | | | — | | | | | | 18 | | |
Total sales
|
| | | $ | 5,746 | | | | | $ | 549 | | | | | $ | 1,140 | | | | | $ | 7,435 | | |
Segment operating profit
|
| | | $ | 328 | | | | | $ | 1 | | | | | $ | 91 | | | | | $ | 420 | | |
Supplemental information: | | | | | | | | | | | | | | | | | | | | | | | | | |
Provision for depreciation and amortization
|
| | | $ | 212 | | | | | $ | 23 | | | | | $ | 18 | | | | | $ | 253 | | |
Restructuring and other charges
|
| | | | (156) | | | | | | — | | | | | | (3) | | | | | | (159) | | |
2017 | | | | | | | | | | | | | | | | | | | | | | | | | |
Sales: | | | | | | | | | | | | | | | | | | | | | | | | | |
Third-party sales – unrelated party
|
| | | $ | 4,992 | | | | | $ | 469 | | | | | $ | 1,066 | | | | | $ | 6,527 | | |
Third-party sales – related party
|
| | | | 133 | | | | | | 49 | | | | | | — | | | | | | 182 | | |
Intersegment sales
|
| | | | 15 | | | | | | 2 | | | | | | 1 | | | | | | 18 | | |
Total sales
|
| | | $ | 5,140 | | | | | $ | 520 | | | | | $ | 1,067 | | | | | $ | 6,727 | | |
Segment operating profit
|
| | | $ | 384 | | | | | $ | 34 | | | | | $ | 82 | | | | | $ | 500 | | |
Supplemental information: | | | | | | | | | | | | | | | | | | | | | | | | | |
Provision for depreciation and amortization
|
| | | $ | 205 | | | | | $ | 22 | | | | | $ | 16 | | | | | $ | 243 | | |
Restructuring and other charges
|
| | | | 73 | | | | | | — | | | | | | 11 | | | | | | 84 | | |
| | |
Rolled
Products |
| |
Extrusions
|
| |
Building and
Construction Systems |
| |
Total
|
| ||||||||||||
2016 | | | | | | | | | | | | | | | | | | | | | | | | | |
Sales: | | | | | | | | | | | | | | | | | | | | | | | | | |
Third-party sales – unrelated party
|
| | | $ | 4,864 | | | | | $ | 504 | | | | | $ | 1,010 | | | | | $ | 6,378 | | |
Third-party sales – related party
|
| | | | 132 | | | | | | 47 | | | | | | 1 | | | | | | 180 | | |
Intersegment sales
|
| | | | 9 | | | | | | 2 | | | | | | — | | | | | | 11 | | |
Total sales
|
| | | $ | 5,005 | | | | | $ | 553 | | | | | $ | 1,011 | | | | | $ | 6,569 | | |
Segment operating profit
|
| | | $ | 374 | | | | | $ | 74 | | | | | $ | 86 | | | | | $ | 534 | | |
Supplemental information: | | | | | | | | | | | | | | | | | | | | | | | | | |
Provision for depreciation and amortization
|
| | | $ | 201 | | | | | $ | 20 | | | | | $ | 16 | | | | | $ | 237 | | |
Restructuring and other charges
|
| | | | 40 | | | | | | 1 | | | | | | — | | | | | | 41 | | |
2018 | | | | | | | | | | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | | | | | | | | | | |
Segment assets
|
| | | $ | 3,627 | | | | | $ | 490 | | | | | $ | 469 | | | | | $ | 4,586 | | |
Supplemental information:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Capital expenditures
|
| | | | 255 | | | | | | 32 | | | | | | 21 | | | | | | 308 | | |
Goodwill
|
| | | | 245 | | | | | | 71 | | | | | | 69 | | | | | | 385 | | |
2017 | | | | | | | | | | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | | | | | | | | | | |
Segment assets
|
| | | $ | 3,667 | | | | | $ | 462 | | | | | $ | 475 | | | | | $ | 4,604 | | |
Supplemental information:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Capital expenditures
|
| | | | 178 | | | | | | 28 | | | | | | 25 | | | | | | 231 | | |
Goodwill
|
| | | | 252 | | | | | | 71 | | | | | | 71 | | | | | | 394 | | |
For the year ended December 31,
|
| |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
Sales: | | | | | | | | | | | | | | | | | | | |
Total segment sales
|
| | | $ | 7,435 | | | | | $ | 6,727 | | | | | $ | 6,569 | | |
Elimination of intersegment sales
|
| | | | (18) | | | | | | (18) | | | | | | (11) | | |
Other*
|
| | | | 25 | | | | | | 115 | | | | | | 103 | | |
Combined sales
|
| | | $ | 7,442 | | | | | $ | 6,824 | | | | | $ | 6,661 | | |
For the year ended December 31,
|
| |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
Income before income taxes: | | | | | | | | | | | | | | | | | | | |
Total segment operating profit
|
| | | $ | 420 | | | | | $ | 500 | | | | | $ | 534 | | |
Unallocated amounts:
|
| | | | | | | | | | | | | | | | | | |
Cost allocations (A)
|
| | | | (101) | | | | | | (193) | | | | | | (212) | | |
Restructuring and other charges (E)
|
| | | | 104 | | | | | | (133) | | | | | | (67) | | |
Other
|
| | | | (49) | | | | | | (42) | | | | | | 1 | | |
Combined operating income
|
| | | $ | 374 | | | | | $ | 132 | | | | | $ | 256 | | |
Interest expense (F)
|
| | | | (129) | | | | | | (168) | | | | | | (97) | | |
Other (expenses) income, net (G)
|
| | | | (4) | | | | | | 287 | | | | | | 9 | | |
Combined income before income taxes
|
| | | $ | 241 | | | | | $ | 251 | | | | | $ | 168 | | |
|
December 31,
|
| |
2018
|
| |
2017
|
| ||||||
Assets: | | | | | | | | | | | | | |
Total segment assets
|
| | | $ | 4,586 | | | | | $ | 4,604 | | |
Unallocated amounts:
|
| | | | | | | | | | | | |
Cash and cash equivalents
|
| | | | 81 | | | | | | 126 | | |
Corporate fixed assets, net
|
| | | | 102 | | | | | | 103 | | |
Deferred income taxes (I)
|
| | | | 15 | | | | | | 26 | | |
Other
|
| | | | 11 | | | | | | 43 | | |
Combined assets
|
| | | $ | 4,795 | | | | | $ | 4,902 | | |
For the year ended December 31,
|
| |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
Sales: | | | | | | | | | | | | | | | | | | | |
Flat-rolled aluminum
|
| | | | 5,700 | | | | | | 5,097 | | | | | | 4,985 | | |
Architectural aluminum systems
|
| | | | 1,152 | | | | | | 1,113 | | | | | | 1,055 | | |
Extrusions
|
| | | | 559 | | | | | | 584 | | | | | | 609 | | |
Other
|
| | | | 31 | | | | | | 30 | | | | | | 12 | | |
| | | | $ | 7,442 | | | | | $ | 6,824 | | | | | $ | 6,661 | | |
For the year ended December 31,
|
| |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
Sales: | | | | | | | | | | | | | | | | | | | |
United States
|
| | | $ | 4,713 | | | | | $ | 4,146 | | | | | $ | 4,120 | | |
Hungary*
|
| | | | 675 | | | | | | 608 | | | | | | 497 | | |
Russia*
|
| | | | 553 | | | | | | 500 | | | | | | 433 | | |
For the year ended December 31,
|
| |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
China
|
| | | | 487 | | | | | | 486 | | | | | | 484 | | |
France
|
| | | | 328 | | | | | | 293 | | | | | | 275 | | |
Other
|
| | | | 686 | | | | | | 791 | | | | | | 852 | | |
| | | | $ | 7,442 | | | | | $ | 6,824 | | | | | $ | 6,661 | | |
|
December 31,
|
| |
2018
|
| |
2017
|
| ||||||
Long-lived assets: | | | | | | | | | | | | | |
United States
|
| | | $ | 2,028 | | | | | $ | 1,960 | | |
China
|
| | | | 274 | | | | | | 301 | | |
Russia
|
| | | | 253 | | | | | | 276 | | |
Hungary
|
| | | | 112 | | | | | | 117 | | |
Other
|
| | | | 194 | | | | | | 207 | | |
| | | | $ | 2,861 | | | | | $ | 2,861 | | |
| | |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
Net (gain) loss on divestitures of assets and businesses (R)
|
| | | $ | (152) | | | | | $ | 60 | | | | | $ | — | | |
Asset impairments
|
| | | | 4 | | | | | | 43 | | | | | | 27 | | |
Layoff costs
|
| | | | 1 | | | | | | 31 | | | | | | 18 | | |
Other*
|
| | | | 53 | | | | | | 2 | | | | | | 29 | | |
Reversals of previously recorded layoff costs
|
| | | | (10) | | | | | | (3) | | | | | | (7) | | |
Restructuring and other charges
|
| | | $ | (104) | | | | | $ | 133 | | | | | $ | 67 | | |
| | |
Layoff costs
|
| |
Other costs
|
| |
Total
|
| |||||||||
Reserve balances at December 31, 2015
|
| | | $ | 8 | | | | | $ | 9 | | | | | $ | 17 | | |
2016 | | | | | | | | | | | | | | | | | | | |
Cash payments
|
| | | | (10) | | | | | | (12) | | | | | | (22) | | |
Restructuring charges
|
| | | | 18 | | | | | | 14 | | | | | | 32 | | |
Other(1) | | | | | (4) | | | | | | (7) | | | | | | (11) | | |
Reserve balances at December 31, 2016
|
| | | | 12 | | | | | | 4 | | | | | | 16 | | |
2017 | | | | | | | | | | | | | | | | | | | |
Cash payments
|
| | | | (18) | | | | | | (2) | | | | | | (20) | | |
Restructuring charges
|
| | | | 31 | | | | | | 1 | | | | | | 32 | | |
Other(1) | | | | | (3) | | | | | | (1) | | | | | | (4) | | |
Reserve balances at December 31, 2017
|
| | | | 22 | | | | | | 2 | | | | | | 24 | | |
2018 | | | | | | | | | | | | | | | | | | | |
Cash payments
|
| | | | (12) | | | | | | (1) | | | | | | (13) | | |
Restructuring charges
|
| | | | 1 | | | | | | 1 | | | | | | 2 | | |
Other(1) | | | | | (10) | | | | | | 1 | | | | | | (9) | | |
Reserve balances at December 31, 2018(2)
|
| | | $ | 1 | | | | | $ | 3 | | | | | $ | 4 | | |
For the year ended December 31,
|
| |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
Amount charged to expense
|
| | | $ | 129 | | | | | $ | 168 | | | | | $ | 97 | | |
Amount capitalized
|
| | | | 9 | | | | | | 8 | | | | | | 10 | | |
| | | | $ | 138 | | | | | $ | 176 | | | | | $ | 107 | | |
For the year ended December 31,
|
| |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
Interest income
|
| | | $ | (13) | | | | | $ | (10) | | | | | $ | (6) | | |
Foreign currency losses (gains), net
|
| | | | 17 | | | | | | 1 | | | | | | (1) | | |
Net loss (gain) from asset sales
|
| | | | 4 | | | | | | (267) | | | | | | 3 | | |
Other, net
|
| | | | (4) | | | | | | (11) | | | | | | (5) | | |
| | | | $ | 4 | | | | | $ | (287) | | | | | $ | (9) | | |
| | | | | |
Pension benefits
|
| |
Other postretirement benefits
|
| ||||||||||||||||||||||||||||||
| | | | | |
For the year ended December 31,
|
| |
For the year ended December 31,
|
| ||||||||||||||||||||||||||||||
Type of Plan
|
| |
Type of Expense
|
| |
2018
|
| |
2017
|
| |
2016
|
| |
2018
|
| |
2017
|
| |
2016
|
| ||||||||||||||||||
Direct Plans
|
| | Net periodic benefit cost | | | | $ | 5 | | | | | $ | 5 | | | | | $ | 5 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
Shared Plans
|
| |
Multiemployer contribution
|
| | | | 67 | | | | | | 82 | | | | | | 78 | | | | | | 21 | | | | | | 20 | | | | | | 23 | | |
Shared Plans
|
| | Cost allocation | | | | | 20 | | | | | | 39 | | | | | | 31 | | | | | | 5 | | | | | | 4 | | | | | | 8 | | |
| | | | | | | $ | 92 | | | | | $ | 126 | | | | | $ | 114 | | | | | $ | 26 | | | | | $ | 24 | | | | | $ | 31 | | |
| | |
Pension benefits
|
| |||||||||
December 31,
|
| |
2018
|
| |
2017
|
| ||||||
Change in benefit obligation | | | | | | | | | | | | | |
Benefit obligation at beginning of year
|
| | | $ | 134 | | | | | $ | 115 | | |
Service cost
|
| | | | 3 | | | | | | 3 | | |
Interest cost
|
| | | | 4 | | | | | | 4 | | |
Actuarial (gains) losses
|
| | | | (5) | | | | | | 6 | | |
Benefits paid
|
| | | | (7) | | | | | | (5) | | |
Foreign currency translation impact
|
| | | | (7) | | | | | | 11 | | |
Benefit obligation at end of year
|
| | | $ | 122 | | | | | $ | 134 | | |
Change in plan assets | | | | | | | | | | | | | |
Fair value of plan assets at beginning of year
|
| | | $ | 79 | | | | | $ | 68 | | |
Actual return on plan assets
|
| | | | (3) | | | | | | 6 | | |
Employer contributions
|
| | | | 4 | | | | | | 4 | | |
Benefits paid
|
| | | | (5) | | | | | | (4) | | |
Foreign currency translation impact
|
| | | | (5) | | | | | | 5 | | |
Fair value of plan assets at end of year
|
| | | $ | 70 | | | | | $ | 79 | | |
Funded status
|
| | | $ | (52) | | | | | $ | (55) | | |
Amounts recognized in the Combined Balance Sheet consist of: | | | | | | | | | | | | | |
Noncurrent assets
|
| | | $ | 2 | | | | | $ | 3 | | |
Current liabilities
|
| | | | (1) | | | | | | (1) | | |
Noncurrent liabilities
|
| | | | (53) | | | | | | (57) | | |
Net amount recognized
|
| | | $ | (52) | | | | | $ | (55) | | |
Amounts recognized in Accumulated Other Comprehensive Income consist of: | | | | | | | | | | | | | |
Net actuarial loss, before tax effect
|
| | | $ | 45 | | | | | $ | 51 | | |
Other changes in plan assets and benefit obligations recognized in Other Comprehensive Loss consist of:
|
| | | | | | | | | | | | |
Net actuarial (gain) loss
|
| | | $ | (3) | | | | | $ | 8 | | |
Amortization of accumulated net actuarial loss
|
| | | | (3) | | | | | | (3) | | |
Total, before tax effect
|
| | | $ | (6) | | | | | $ | 5 | | |
|
| | |
Pension benefits
|
| |||||||||
| | |
2018
|
| |
2017
|
| ||||||
The projected benefit obligation and accumulated benefit obligation for all defined benefit pension plans was as follows:
|
| | | | | | | | | | | | |
Projected benefit obligation
|
| | | $ | 122 | | | | | $ | 134 | | |
Accumulated benefit obligation
|
| | | | 115 | | | | | | 130 | | |
The aggregate projected benefit obligation and fair value of plan assets for pension plans with projected benefit obligations in excess of plan assets was as follows:
|
| | | | | | | | | | | | |
Projected benefit obligation
|
| | | | 104 | | | | | | 114 | | |
Fair value of plan assets
|
| | | | 50 | | | | | | 56 | | |
The aggregate accumulated benefit obligation and fair value of plan assets for pension plans
with accumulated benefit obligations in excess of plan assets was as follows: |
| | | | | | | | | | | | |
Accumulated benefit obligation
|
| | | | 98 | | | | | | 106 | | |
Fair value of plan assets
|
| | | | 50 | | | | | | 56 | | |
| | |
Pension benefits
|
| |||||||||||||||
For the year ended December 31,
|
| |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
Service cost
|
| | | $ | 3 | | | | | $ | 3 | | | | | $ | 3 | | |
Interest cost
|
| | | | 4 | | | | | | 4 | | | | | | 3 | | |
Expected return on plan assets
|
| | | | (5) | | | | | | (5) | | | | | | (4) | | |
Recognized net actuarial loss(1)
|
| | | | 3 | | | | | | 3 | | | | | | 3 | | |
Net periodic benefit cost(2)
|
| | | $ | 5 | | | | | $ | 5 | | | | | $ | 5 | | |
| | |
Benefit obligations
|
| |
Net periodic benefit cost
|
| ||||||||||||||||||||||||
| | |
December 31,
|
| |
For the year ended December 31,
|
| ||||||||||||||||||||||||
| | |
2018
|
| |
2017
|
| |
2018
|
| |
2017
|
| |
2016
|
| |||||||||||||||
Discount rate
|
| | | | 3.12% | | | | | | 2.94% | | | | | | 2.94% | | | | | | 3.26% | | | | | | 3.31% | | |
Rate of compensation increase
|
| | | | 3.42 | | | | | | 3.33 | | | | | | 3.33 | | | | | | 3.31 | | | | | | 3.27 | | |
Expected long-term rate of return on plan assets
|
| | | | — | | | | | | — | | | | | | 6.72 | | | | | | 6.76 | | | | | | 6.79 | | |
| | | | | |
Plan assets
at December 31, |
| |||||||||
Asset class
|
| |
Policy range
|
| |
2018
|
| |
2017
|
| ||||||
Equities
|
| |
20 – 50%
|
| | | | 40% | | | | | | 42% | | |
Fixed income
|
| |
20 – 50%
|
| | | | 40 | | | | | | 40 | | |
Other investments
|
| |
15 – 30%
|
| | | | 20 | | | | | | 18 | | |
Total
|
| | | | | | | 100% | | | | | | 100% | | |
December 31,
|
| |
2018
|
| |
2017
|
| ||||||
Equity securities(1)
|
| | | $ | 28 | | | | | $ | 33 | | |
Fixed income: | | | | | | | | | | | | | |
Intermediate and long duration government/credit(2)
|
| | | $ | 23 | | | | | $ | 26 | | |
Other
|
| | | | 1 | | | | | | 2 | | |
| | | | $ | 24 | | | | | $ | 28 | | |
Other investments(3): | | | | | | | | | | | | | |
Real estate
|
| | | $ | 7 | | | | | $ | 9 | | |
Other
|
| | | | 7 | | | | | | 5 | | |
| | | | $ | 14 | | | | | $ | 14 | | |
Net asset value sub-total
|
| | | $ | 66 | | | | | $ | 75 | | |
Other fixed income
|
| | | | 4 | | | | | | 4 | | |
Total
|
| | | $ | 70 | | | | | $ | 79 | | |
For the year ended December 31,
|
| |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
United States
|
| | | $ | 171 | | | | | $ | 264 | | | | | $ | 86 | | |
Foreign
|
| | | | 70 | | | | | | (13) | | | | | | 82 | | |
| | | | $ | 241 | | | | | $ | 251 | | | | | $ | 168 | | |
For the year ended December 31,
|
| |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
Current: | | | | | | | | | | | | | | | | | | | |
Federal
|
| | | $ | 47 | | | | | $ | (7) | | | | | $ | 19 | | |
Foreign
|
| | | | 20 | | | | | | 17 | | | | | | 21 | | |
State and local
|
| | | | 8 | | | | | | 3 | | | | | | 4 | | |
| | | | | 75 | | | | | | 13 | | | | | | 44 | | |
Deferred: | | | | | | | | | | | | | | | | | | | |
Federal
|
| | | | (13) | | | | | | (1) | | | | | | (7) | | |
Foreign
|
| | | | 9 | | | | | | 28 | | | | | | (24) | | |
State and local
|
| | | | — | | | | | | 2 | | | | | | — | | |
| | | | | (4) | | | | | | 29 | | | | | | (31) | | |
Total
|
| | | $ | 71 | | | | | $ | 42 | | | | | $ | 13 | | |
|
For the year ended December 31,
|
| |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
U.S. federal statutory rate
|
| | | | 21.0% | | | | | | 35.0% | | | | | | 35.0% | | |
Taxes on foreign operations
|
| | | | 0.8 | | | | | | (6.2) | | | | | | (5.9) | | |
Net income/loss related to intercompany amounts capitalized
|
| | | | 0.4 | | | | | | (2.9) | | | | | | (5.1) | | |
U.S. state and local taxes
|
| | | | 2.1 | | | | | | 1.9 | | | | | | 1.0 | | |
Permanent differences on restructuring and other charges and asset disposals
|
| | | | — | | | | | | (12.1) | | | | | | (1.2) | | |
Statutory tax rate and law changes*
|
| | | | — | | | | | | (19.9) | | | | | | (9.8) | | |
Changes in valuation allowances
|
| | | | 6.3 | | | | | | 14.7 | | | | | | (4.9) | | |
Changes in uncertain tax positions
|
| | | | — | | | | | | 7.0 | | | | | | (0.1) | | |
Tax holidays
|
| | | | (1.1) | | | | | | (0.6) | | | | | | (1.2) | | |
Other
|
| | | | — | | | | | | (0.2) | | | | | | (0.1) | | |
Effective tax rate
|
| | | | 29.5% | | | | | | 16.7% | | | | | | 7.7% | | |
| | |
2018
|
| |
2017
|
| ||||||||||||||||||
December 31,
|
| |
Deferred
tax assets |
| |
Deferred
tax liabilities |
| |
Deferred
tax assets |
| |
Deferred
tax liabilities |
| ||||||||||||
Depreciation
|
| | | $ | 23 | | | | | $ | 185 | | | | | $ | 24 | | | | | $ | 194 | | |
Employee benefits
|
| | | | 33 | | | | | | — | | | | | | 35 | | | | | | — | | |
Loss provisions
|
| | | | 61 | | | | | | — | | | | | | 79 | | | | | | — | | |
Deferred income/expense
|
| | | | 7 | | | | | | 3 | | | | | | 2 | | | | | | 3 | | |
Tax loss carryforwards
|
| | | | 109 | | | | | | — | | | | | | 98 | | | | | | — | | |
Other
|
| | | | 6 | | | | | | 11 | | | | | | 9 | | | | | | 13 | | |
| | | | $ | 239 | | | | | $ | 199 | | | | | $ | 247 | | | | | $ | 210 | | |
Valuation allowance
|
| | | | (107) | | | | | | — | | | | | | (103) | | | | | | — | | |
| | | | $ | 132 | | | | | $ | 199 | | | | | $ | 144 | | | | | $ | 210 | | |
December 31, 2018
|
| |
Expires
within 10 years |
| |
Expires
within 11 – 12 years |
| |
No
Expiration(1) |
| |
Other(2)
|
| |
Total
|
| |||||||||||||||
Tax loss carryforwards
|
| | | $ | 52 | | | | | $ | 5 | | | | | $ | 52 | | | | | $ | — | | | | | $ | 109 | | |
Other
|
| | | | — | | | | | | — | | | | | | 16 | | | | | | 114 | | | | | | 130 | | |
Valuation allowance
|
| | | | (52) | | | | | | (1) | | | | | | (54) | | | | | | — | | | | | | (107) | | |
| | | | $ | — | | | | | $ | 4 | | | | | $ | 14 | | | | | $ | 114 | | | | | $ | 132 | | |
December 31,
|
| |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
Balance at beginning of year
|
| | | $ | 103 | | | | | $ | 88 | | | | | $ | 100 | | |
Establishment of new allowances(1)
|
| | | | — | | | | | | 3 | | | | | | 8 | | |
Net change to existing allowances(2)
|
| | | | 7 | | | | | | 7 | | | | | | 3 | | |
Release of allowances(3)
|
| | | | — | | | | | | — | | | | | | (19) | | |
Foreign currency translation
|
| | | | (3) | | | | | | 5 | | | | | | (4) | | |
Balance at end of year
|
| | | $ | 107 | | | | | $ | 103 | | | | | $ | 88 | | |
December 31,
|
| |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
Balance at beginning of year
|
| | | $ | 23 | | | | | $ | — | | | | | $ | 1 | | |
Additions for tax positions of the current year
|
| | | | — | | | | | | 23 | | | | | | — | | |
Reductions for tax positions of prior years
|
| | | | (4) | | | | | | — | | | | | | — | | |
Expiration of the statute of limitations
|
| | | | — | | | | | | — | | | | | | (1) | | |
Foreign currency translation
|
| | | | (1) | | | | | | — | | | | | | — | | |
Balance at end of year
|
| | | $ | 18 | | | | | $ | 23 | | | | | $ | — | | |
| | |
Stock options
|
| |
Stock units
|
| ||||||||||||||||||
| | |
Number of
options |
| |
Weighted
average exercise price |
| |
Number of
units |
| |
Weighted
average FMV per unit |
| ||||||||||||
Outstanding, January 1, 2018
|
| | | | 1,743,703 | | | | | $ | 23.94 | | | | | | 1,257,500 | | | | | $ | 21.47 | | |
Granted
|
| | | | 99,680 | | | | | | 28.94 | | | | | | 397,500 | | | | | | 27.22 | | |
Exercised
|
| | | | (166,389) | | | | | | 17.48 | | | | | | — | | | | | | — | | |
Converted
|
| | | | — | | | | | | — | | | | | | (222,191) | | | | | | 34.53 | | |
Expired or forfeited
|
| | | | (62,789) | | | | | | 24.13 | | | | | | (59,387) | | | | | | 19.27 | | |
Performance share adjustment
|
| | | | — | | | | | | — | | | | | | (36,883) | | | | | | 18.79 | | |
Other
|
| | | | 115 | | | | | | 23.12 | | | | | | 43,183 | | | | | | 21.04 | | |
Outstanding, December 31, 2018
|
| | | | 1,614,320 | | | | | | 24.93 | | | | | | 1,379,722 | | | | | | 21.18 | | |
| | |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
Pension and other postretirement benefits (H) | | | | | | | | | | | | | | | | | | | |
Balance at beginning of period
|
| | | $ | (36) | | | | | $ | (32) | | | | | $ | (28) | | |
Other comprehensive income (loss):
|
| | | | | | | | | | | | | | | | | | |
Unrecognized net actuarial loss and prior service cost
|
| | | | 1 | | | | | | (8) | | | | | | (7) | | |
Tax benefit
|
| | | | 1 | | | | | | 2 | | | | | | 1 | | |
Total Other comprehensive income (loss) before reclassifications, net
of tax |
| | | | 2 | | | | | | (6) | | | | | | (6) | | |
Amortization of net actuarial loss and prior service cost(1)
|
| | | | 3 | | | | | | 3 | | | | | | 3 | | |
Tax expense(2)
|
| | | | (1) | | | | | | (1) | | | | | | (1) | | |
Total amount reclassified from Accumulated other comprehensive loss, net of tax(4)
|
| | | | 2 | | | | | | 2 | | | | | | 2 | | |
Total Other comprehensive income (loss)
|
| | | | 4 | | | | | | (4) | | | | | | (4) | | |
Balance at end of period
|
| | | $ | (32) | | | | | $ | (36) | | | | | $ | (32) | | |
Foreign currency translation | | | | | | | | | | | | | | | | | | | |
Balance at beginning of period
|
| | | $ | 446 | | | | | $ | 660 | | | | | $ | 326 | | |
| | |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
Other comprehensive (loss) income(3)
|
| | | | (164) | | | | | | (214) | | | | | | 334 | | |
Balance at end of period
|
| | | $ | 282 | | | | | $ | 446 | | | | | $ | 660 | | |
Total balance at end of period
|
| | | $ | 250 | | | | | $ | 410 | | | | | $ | 628 | | |
|
December 31,
|
| |
2018
|
| |
2017
|
| ||||||
Finished goods
|
| | | $ | 235 | | | | | $ | 238 | | |
Work-in-process
|
| | | | 812 | | | | | | 760 | | |
Purchased raw materials
|
| | | | 79 | | | | | | 91 | | |
Operating supplies
|
| | | | 65 | | | | | | 65 | | |
| | | | | 1,191 | | | | | | 1,154 | | |
LIFO reserve
|
| | | | (373) | | | | | | (350) | | |
| | | | $ | 818 | | | | | $ | 804 | | |
December 31,
|
| |
2018
|
| |
2017
|
| ||||||
Land and land rights
|
| | | $ | 27 | | | | | $ | 30 | | |
Structures: | | | | | | | | | | | | | |
Rolled Products
|
| | | | 1,068 | | | | | | 1,090 | | |
Extrusions
|
| | | | 152 | | | | | | 152 | | |
Building and Construction Systems
|
| | | | 96 | | | | | | 99 | | |
Other
|
| | | | 24 | | | | | | 45 | | |
| | | | | 1,340 | | | | | | 1,386 | | |
Machinery and equipment: | | | | | | | | | | | | | |
Rolled Products
|
| | | | 4,629 | | | | | | 4,641 | | |
Extrusions
|
| | | | 537 | | | | | | 493 | | |
Building and Construction Systems
|
| | | | 191 | | | | | | 182 | | |
Other
|
| | | | 164 | | | | | | 214 | | |
| | | | | 5,521 | | | | | | 5,530 | | |
| | | | | 6,888 | | | | | | 6,946 | | |
Less: accumulated depreciation and amortization
|
| | | | 4,341 | | | | | | 4,333 | | |
| | | | | 2,547 | | | | | | 2,613 | | |
Construction work-in-progress
|
| | | | 314 | | | | | | 248 | | |
| | | | $ | 2,861 | | | | | $ | 2,861 | | |
| | |
Rolled
Products |
| |
Extrusions
|
| |
Building and
Construction Systems |
| |
Other*
|
| |
Total
|
| |||||||||||||||
Balances at December 31, 2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Goodwill
|
| | | $ | 241 | | | | | $ | 71 | | | | | $ | 95 | | | | | $ | 25 | | | | | $ | 432 | | |
Accumulated impairment losses
|
| | | | — | | | | | | — | | | | | | (28) | | | | | | (25) | | | | | | (53) | | |
Goodwill, net
|
| | | | 241 | | | | | | 71 | | | | | | 67 | | | | | | — | | | | | | 379 | | |
Translation
|
| | | | 11 | | | | | | — | | | | | | 4 | | | | | | — | | | | | | 15 | | |
Balances at December 31, 2017 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Goodwill
|
| | | | 252 | | | | | | 71 | | | | | | 99 | | | | | | 25 | | | | | | 447 | | |
Accumulated impairment losses
|
| | | | — | | | | | | — | | | | | | (28) | | | | | | (25) | | | | | | (53) | | |
Goodwill, net
|
| | | | 252 | | | | | | 71 | | | | | | 71 | | | | | | — | | | | | | 394 | | |
Translation
|
| | | | (7) | | | | | | — | | | | | | (2) | | | | | | — | | | | | | (9) | | |
Balances at December 31, 2018 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Goodwill
|
| | | | 245 | | | | | | 71 | | | | | | 97 | | | | | | — | | | | | | 413 | | |
Accumulated impairment losses
|
| | | | — | | | | | | — | | | | | | (28) | | | | | | — | | | | | | (28) | | |
Goodwill, net
|
| | | $ | 245 | | | | | $ | 71 | | | | | $ | 69 | | | | | $ | — | | | | | $ | 385 | | |
December 31, 2018
|
| |
Gross
carrying amount |
| |
Accumulated
amortization |
| |
Net carrying
amount |
| |||||||||
Computer software
|
| | | $ | 194 | | | | | $ | (172) | | | | | $ | 22 | | |
Patents and licenses
|
| | | | 28 | | | | | | (28) | | | | | | — | | |
Other
|
| | | | 34 | | | | | | (14) | | | | | | 20 | | |
Total other intangible assets
|
| | | $ | 256 | | | | | $ | (214) | | | | | $ | 42 | | |
|
December 31, 2017
|
| |
Gross
carrying amount |
| |
Accumulated
amortization |
| |
Net carrying
amount |
| |||||||||
Computer software
|
| | | $ | 227 | | | | | $ | (189) | | | | | $ | 38 | | |
Patents and licenses
|
| | | | 28 | | | | | | (28) | | | | | | — | | |
Other
|
| | | | 34 | | | | | | (11) | | | | | | 23 | | |
Total other intangible assets
|
| | | $ | 289 | | | | | $ | (228) | | | | | $ | 61 | | |
December 31,
|
| |
2018
|
| |
2017
|
| ||||||
Sale-leaseback financing obligation
|
| | | $ | 119 | | | | | $ | — | | |
Accrued compensation and retirement costs
|
| | | | 38 | | | | | | 42 | | |
Other
|
| | | | 11 | | | | | | 26 | | |
| | | | $ | 168 | | | | | $ | 68 | | |
| | |
2018
|
| |
2017
|
| |
2016
|
| |||||||||
Interest, net of amount capitalized*
|
| | | $ | 120 | | | | | $ | 146 | | | | | $ | 88 | | |
Income taxes, net of amount refunded
|
| | | $ | 24 | | | | | $ | 37 | | | | | $ | 10 | | |
For the nine months ended September 30,
|
| |
2019
|
| |
2018
|
| ||||||
Sales to unrelated parties
|
| | | $ | 5,427 | | | | | $ | 5,472 | | |
Sales to related parties (A)
|
| | | | 142 | | | | | | 161 | | |
Total Sales (C and D)
|
| | | | 5,569 | | | | | | 5,633 | | |
Cost of goods sold (exclusive of expenses below)
|
| | | | 4,810 | | | | | | 4,952 | | |
Selling, general administrative, and other expenses
|
| | | | 255 | | | | | | 224 | | |
Research and development expenses
|
| | | | 34 | | | | | | 47 | | |
Provision for depreciation and amortization
|
| | | | 190 | | | | | | 198 | | |
Restructuring and other charges (E)
|
| | | | 104 | | | | | | — | | |
Operating income
|
| | | | 176 | | | | | | 212 | | |
Interest expense
|
| | | | 86 | | | | | | 99 | | |
Other (income) expenses, net (F)
|
| | | | (4) | | | | | | 9 | | |
Income before income taxes
|
| | | | 94 | | | | | | 104 | | |
Provision for income taxes (H)
|
| | | | 55 | | | | | | 33 | | |
Net income
|
| | | | 39 | | | | | | 71 | | |
Less: Net income attributable to noncontrolling interest
|
| | | | — | | | | | | — | | |
Net income attributable to Arconic Rolled Products Corporation
|
| | | $ | 39 | | | | | $ | 71 | | |
| | |
Arconic Rolled Products Corporation
|
| |
Noncontrolling
interest |
| |
Total
|
| |||||||||||||||||||||||||||
For the nine months ended September 30,
|
| |
2019
|
| |
2018
|
| |
2019
|
| |
2018
|
| |
2019
|
| |
2018
|
| ||||||||||||||||||
Net income
|
| | | $ | 39 | | | | | $ | 71 | | | | | $ | — | | | | | $ | — | | | | | $ | 39 | | | | | $ | 71 | | |
Other comprehensive income (loss), net of tax (I):
|
| | | | | | | ||||||||||||||||||||||||||||||
Change in unrecognized net actuarial loss and prior service cost related to pension and other postretirement benefits
|
| | | | 1 | | | | | | 6 | | | | | | — | | | | | | — | | | | | | 1 | | | | | | 6 | | |
Foreign currency translation adjustments
|
| | | | 59 | | | | | | (10) | | | | | | — | | | | | | — | | | | | | 59 | | | | | | (10) | | |
Total Other comprehensive income (loss), net of tax
|
| | | | 60 | | | | | | (4) | | | | | | — | | | | | | — | | | | | | 60 | | | | | | (4) | | |
Comprehensive income
|
| | | $ | 99 | | | | | $ | 67 | | | | | $ | — | | | | | $ | — | | | | | $ | 99 | | | | | $ | 67 | | |
| | |
September 30,
2019 Pro Forma (Note A) |
| |
September 30,
2019 |
| |
December 31,
2018 |
| |||||||||
Assets | | | | | | | | | | ||||||||||
Current assets: | | | | | | | | | | ||||||||||
Cash and cash equivalents
|
| | | $ | 47 | | | | | $ | 47 | | | | | $ | 81 | | |
Receivables from customers, less allowances of $3 in 2019 and $2 in 2018
|
| | | | 436 | | | | | | 436 | | | | | | 408 | | |
Other receivables
|
| | | | 126 | | | | | | 126 | | | | | | 127 | | |
Inventories (J)
|
| | | | 877 | | | | | | 877 | | | | | | 818 | | |
Prepaid expenses and other current assets
|
| | | | 49 | | | | | | 49 | | | | | | 42 | | |
Total current assets
|
| | | | 1,535 | | | | | | 1,535 | | | | | | 1,476 | | |
Properties, plants, and equipment
|
| | | | 7,131 | | | | | | 7,131 | | | | | | 7,202 | | |
Less: Accumulated depreciation and amortization
|
| | | | 4,420 | | | | | | 4,420 | | | | | | 4,341 | | |
Properties, plants, and equipment, net
|
| | | | 2,711 | | | | | | 2,711 | | | | | | 2,861 | | |
Goodwill
|
| | | | 380 | | | | | | 380 | | | | | | 385 | | |
Operating lease right-of-use assets (K)
|
| | | | 127 | | | | | | 127 | | | | | | — | | |
Deferred income taxes
|
| | | | 2 | | | | | | 2 | | | | | | 15 | | |
Other noncurrent assets
|
| | | | 35 | | | | | | 35 | | | | | | 58 | | |
Total assets
|
| | | $ | 4,790 | | | | | $ | 4,790 | | | | | $ | 4,795 | | |
Liabilities | | | | | | | | | | ||||||||||
Current liabilities: | | | | | | | | | | ||||||||||
Accounts payable, trade
|
| | | $ | 1,056 | | | | | $ | 1,056 | | | | | $ | 1,165 | | |
Accrued compensation and retirement costs
|
| | | | 74 | | | | | | 74 | | | | | | 66 | | |
Taxes, including income taxes
|
| | | | 38 | | | | | | 38 | | | | | | 37 | | |
Environmental remediation (M)
|
| | | | 77 | | | | | | 77 | | | | | | 69 | | |
Operating lease liabilities (K)
|
| | | | 31 | | | | | | 31 | | | | | | — | | |
Distribution payable to ParentCo (A)
|
| | | | 707 | | | | | | — | | | | | | — | | |
Other current liabilities
|
| | | | 63 | | | | | | 63 | | | | | | 56 | | |
Total current liabilities
|
| | | | 2,046 | | | | | | 1,339 | | | | | | 1,393 | | |
Long-term debt
|
| | | | 250 | | | | | | 250 | | | | | | 250 | | |
Deferred income taxes
|
| | | | 113 | | | | | | 113 | | | | | | 82 | | |
Accrued pension and other postretirement benefits
|
| | | | 51 | | | | | | 51 | | | | | | 55 | | |
Environmental remediation (M)
|
| | | | 152 | | | | | | 152 | | | | | | 170 | | |
Operating lease liabilities (K)
|
| | | | 97 | | | | | | 97 | | | | | | — | | |
Other noncurrent liabilities and deferred credits (B)
|
| | | | 48 | | | | | | 48 | | | | | | 168 | | |
Total liabilities
|
| | | | 2,757 | | | | | | 2,050 | | | | | | 2,118 | | |
Contingencies and commitments (M) | | | | | | | | | | | | | | | | | | | |
Equity | | | | | | | | | | | | | | | | | | | |
Parent Company net investment (A)
|
| | | | 1,709 | | | | | | 2,416 | | | | | | 2,415 | | |
Accumulated other comprehensive income (I)
|
| | | | 310 | | | | | | 310 | | | | | | 250 | | |
Sub-total equity
|
| | | | 2,019 | | | | | | 2,726 | | | | | | 2,665 | | |
Noncontrolling interest
|
| | | | 14 | | | | | | 14 | | | | | | 12 | | |
Total equity
|
| | | | 2,033 | | | | | | 2,740 | | | | | | 2,677 | | |
Total liabilities and equity
|
| | | $ | 4,790 | | | | | $ | 4,790 | | | | | $ | 4,795 | | |
For the nine months ended September 30,
|
| |
2019
|
| |
2018
|
| ||||||
Operating Activities | | | | | | | | | | | | | |
Net income
|
| | | $ | 39 | | | | | $ | 71 | | |
Adjustments to reconcile net income to cash provided from operations: | | | | | | | | | | | | | |
Depreciation and amortization
|
| | | | 190 | | | | | | 198 | | |
Deferred income taxes
|
| | | | 20 | | | | | | (3) | | |
Restructuring and other charges (E)
|
| | | | 104 | | | | | | — | | |
Net loss from investing activities – asset sales (F)
|
| | | | 1 | | | | | | 3 | | |
Net periodic pension benefit cost (G)
|
| | | | 4 | | | | | | 4 | | |
Stock-based compensation
|
| | | | 28 | | | | | | 18 | | |
Other
|
| | | | 6 | | | | | | 1 | | |
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments:
|
| | | | | | | | | | | | |
(Increase) in receivables
|
| | | | (48) | | | | | | (74) | | |
(Increase) in inventories
|
| | | | (69) | | | | | | (117) | | |
(Increase) Decrease in prepaid expenses and other current assets
|
| | | | (12) | | | | | | 3 | | |
(Decrease) Increase in accounts payable, trade
|
| | | | (96) | | | | | | 225 | | |
(Decrease) in accrued expenses
|
| | | | (48) | | | | | | (27) | | |
Increase in taxes, including income taxes
|
| | | | 13 | | | | | | 21 | | |
Pension contributions
|
| | | | (2) | | | | | | (3) | | |
(Increase) in noncurrent assets
|
| | | | (6) | | | | | | (6) | | |
Increase (Decrease) in noncurrent liabilities
|
| | | | 21 | | | | | | (8) | | |
Cash provided from operations
|
| | | | 145 | | | | | | 306 | | |
Financing Activities | | | | | | | | | | | | | |
Net transfers to Parent Company
|
| | | | (69) | | | | | | (131) | | |
Other
|
| | | | 1 | | | | | | 5 | | |
Cash used for financing activities
|
| | | | (68) | | | | | | (126) | | |
Investing Activities | | | | | | | | | | | | | |
Capital expenditures
|
| | | | (120) | | | | | | (195) | | |
Proceeds from the sale of assets and businesses (L)
|
| | | | 11 | | | | | | 5 | | |
Cash used for investing activities
|
| | | | (109) | | | | | | (190) | | |
Effect of exchange rate changes on cash and cash equivalents and restricted cash
|
| | | | (2) | | | | | | (2) | | |
Net change in cash and cash equivalents and restricted cash
|
| | | | (34) | | | | | | (12) | | |
Cash and cash equivalents and restricted cash at beginning of year
|
| | | | 81 | | | | | | 126 | | |
Cash and cash equivalents and restricted cash at end of period
|
| | | $ | 47 | | | | | $ | 114 | | |
| | |
Parent
Company net investment |
| |
Accumulated
other comprehensive income |
| |
Noncontrolling
interest |
| |
Total
equity |
| ||||||||||||
Balance at December 31, 2017
|
| | | $ | 2,584 | | | | | $ | 410 | | | | | $ | 13 | | | | | $ | 3,007 | | |
Net income
|
| | | | 71 | | | | | | — | | | | | | — | | | | | | 71 | | |
Other comprehensive loss (I)
|
| | | | — | | | | | | (4) | | | | | | — | | | | | | (4) | | |
Change in ParentCo contribution
|
| | | | (147) | | | | | | — | | | | | | — | | | | | | (147) | | |
Balance at September 30, 2018
|
| | | $ | 2,508 | | | | | $ | 406 | | | | | $ | 13 | | | | | $ | 2,927 | | |
Balance at December 31, 2018
|
| | | $ | 2,415 | | | | | $ | 250 | | | | | $ | 12 | | | | | $ | 2,677 | | |
Adoption of accounting standard (B)
|
| | | | 73 | | | | | | — | | | | | | — | | | | | | 73 | | |
Net income
|
| | | | 39 | | | | | | — | | | | | | — | | | | | | 39 | | |
Other comprehensive income (I)
|
| | | | — | | | | | | 60 | | | | | | — | | | | | | 60 | | |
Change in ParentCo contribution
|
| | | | (111) | | | | | | — | | | | | | — | | | | | | (111) | | |
Other
|
| | | | — | | | | | | — | | | | | | 2 | | | | | | 2 | | |
Balance at September 30, 2019
|
| | | $ | 2,416 | | | | | $ | 310 | | | | | $ | 14 | | | | | $ | 2,740 | | |
For the nine months ended September 30,
|
| |
2019
|
| |
2018
|
| ||||||
Cost of goods sold(1)
|
| | | $ | 11 | | | | | $ | 9 | | |
Selling, general administrative, and other expenses(2)
|
| | | | 80 | | | | | | 49 | | |
Research and development expenses
|
| | | | 8 | | | | | | 18 | | |
Provision for depreciation and amortization
|
| | | | 9 | | | | | | 7 | | |
Restructuring and other charges (E)
|
| | | | 5 | | | | | | (3) | | |
Interest expense
|
| | | | 86 | | | | | | 95 | | |
Other expenses (income), net (F)
|
| | | | 4 | | | | | | (4) | | |
For the nine-months ended September 30,
|
| |
Rolled
Products |
| |
Extrusions
|
| |
Building and
Construction Systems |
| |
Total
Segments |
| ||||||||||||
2019 | | | | | | | | | | | | | | | | | | | | | | | | | |
Ground Transportation
|
| | | $ | 1,878 | | | | | $ | 88 | | | | | $ | — | | | | | $ | 1,966 | | |
Building and Construction
|
| | | | 149 | | | | | | — | | | | | | 855 | | | | | | 1,004 | | |
Aerospace
|
| | | | 754 | | | | | | 221 | | | | | | — | | | | | | 975 | | |
Industrial Products
|
| | | | 804 | | | | | | 75 | | | | | | — | | | | | | 879 | | |
Packaging
|
| | | | 687 | | | | | | — | | | | | | — | | | | | | 687 | | |
Other
|
| | | | 22 | | | | | | 36 | | | | | | — | | | | | | 58 | | |
Total end-market revenue
|
| | | $ | 4,294 | | | | | $ | 420 | | | | | $ | 855 | | | | | $ | 5,569 | | |
|
For the nine-months ended September 30,
|
| |
Rolled
Products |
| |
Extrusions
|
| |
Building and
Construction Systems |
| |
Total
Segments |
| ||||||||||||
2018 | | | | | | | | | | | | | | | | | | | | | | | | | |
Ground Transportation
|
| | | $ | 1,942 | | | | | $ | 78 | | | | | $ | — | | | | | $ | 2,020 | | |
Building and Construction
|
| | | | 167 | | | | | | — | | | | | | 866 | | | | | | 1,033 | | |
Aerospace
|
| | | | 648 | | | | | | 207 | | | | | | — | | | | | | 855 | | |
Industrial Products
|
| | | | 760 | | | | | | 90 | | | | | | — | | | | | | 850 | | |
Packaging
|
| | | | 788 | | | | | | — | | | | | | — | | | | | | 788 | | |
Other
|
| | | | 28 | | | | | | 34 | | | | | | — | | | | | | 62 | | |
Total end-market revenue
|
| | | $ | 4,333 | | | | | $ | 409 | | | | | $ | 866 | | | | | $ | 5,608 | | |
|
For the nine-months ended September 30,
|
| |
Rolled
Products |
| |
Extrusions
|
| |
Building and
Construction Systems |
| |
Total
|
| ||||||||||||
2019 | | | | | | | | | | | | | | | | | | | | | | | | | |
Sales: | | | | | | | | | | | | | | | | | | | | | | | | | |
Third-party sales—unrelated party
|
| | | $ | 4,193 | | | | | $ | 379 | | | | | $ | 855 | | | | | $ | 5,427 | | |
Third-party sales—related party
|
| | | | 101 | | | | | | 41 | | | | | | — | | | | | | 142 | | |
Intersegment sales
|
| | | | 20 | | | | | | 1 | | | | | | — | | | | | | 21 | | |
Total sales
|
| | | $ | 4,314 | | | | | $ | 421 | | | | | $ | 855 | | | | | $ | 5,590 | | |
Segment operating profit
|
| | | $ | 346 | | | | | $ | (29) | | | | | $ | 89 | | | | | $ | 406 | | |
Supplemental information: | | | | | | | | | | | | | | | | | | | | | | | | | |
Provision for depreciation and amortization
|
| | | $ | 139 | | | | | $ | 22 | | | | | $ | 14 | | | | | $ | 175 | | |
Restructuring and other charges
|
| | | | 69 | | | | | | (1) | | | | | | 31 | | | | | | 99 | | |
2018 | | | | | | | | | | | | | | | | | | | | | | | | | |
Sales: | | | | | | | | | | | | | | | | | | | | | | | | | |
Third-party sales—unrelated party
|
| | | $ | 4,223 | | | | | $ | 358 | | | | | $ | 866 | | | | | $ | 5,447 | | |
Third-party sales—related party
|
| | | | 110 | | | | | | 51 | | | | | | — | | | | | | 161 | | |
Intersegment sales
|
| | | | 12 | | | | | | 3 | | | | | | — | | | | | | 15 | | |
Total sales
|
| | | $ | 4,345 | | | | | $ | 412 | | | | | $ | 866 | | | | | $ | 5,623 | | |
Segment operating profit
|
| | | $ | 268 | | | | | $ | 2 | | | | | $ | 74 | | | | | $ | 344 | | |
Supplemental information: | | | | | | | | | | | | | | | | | | | | | | | | | |
Provision for depreciation and amortization
|
| | | $ | 154 | | | | | $ | 17 | | | | | $ | 14 | | | | | $ | 185 | | |
Restructuring and other charges
|
| | | | 2 | | | | | | 1 | | | | | | — | | | | | | 3 | | |
For the nine-months ended September 30,
|
| |
2019
|
| |
2018
|
| ||||||
Total segment operating profit
|
| | | $ | 406 | | | | | $ | 344 | | |
Unallocated amounts: | | | | | | | | | | | | | |
Cost allocations (A)
|
| | | | (108) | | | | | | (83) | | |
Restructuring and other charges (E)
|
| | | | (104) | | | | | | — | | |
Other
|
| | | | (18) | | | | | | (49) | | |
Combined operating income
|
| | | $ | 176 | | | | | $ | 212 | | |
Interest expense
|
| | | | (86) | | | | | | (99) | | |
Other income (expenses), net (F)
|
| | | | 4 | | | | | | (9) | | |
Combined income before income taxes
|
| | | $ | 94 | | | | | $ | 104 | | |
| | |
Layoff costs
|
| |
Other costs
|
| |
Total
|
| |||||||||
Reserve balances at December 31, 2017
|
| | | $ | 22 | | | | | $ | 2 | | | | | $ | 24 | | |
Cash payments
|
| | | | (12) | | | | | | (1) | | | | | | (13) | | |
Restructuring charges
|
| | | | 1 | | | | | | 1 | | | | | | 2 | | |
Other(1)
|
| | | | (10) | | | | | | 1 | | | | | | (9) | | |
Reserve balances at December 31, 2018
|
| | | | 1 | | | | | | 3 | | | | | | 4 | | |
Cash payments
|
| | | | (7) | | | | | | (3) | | | | | | (10) | | |
Restructuring charges
|
| | | | 28 | | | | | | 1 | | | | | | 29 | | |
Other(1)
|
| | | | (1) | | | | | | — | | | | | | (1) | | |
Reserve balances at September 30, 2019(2)
|
| | | $ | 21 | | | | | $ | 1 | | | | | $ | 22 | | |
For the nine months ended September 30,
|
| |
2019
|
| |
2018
|
| ||||||
Interest income
|
| | | | (11) | | | | | | (9) | | |
Foreign currency (gains) losses, net
|
| | | | (3) | | | | | | 13 | | |
Net loss from asset sales
|
| | | | 1 | | | | | | 3 | | |
Other, net
|
| | | | 9 | | | | | | 2 | | |
| | | | $ | (4) | | | | | $ | 9 | | |
| | | | | |
Pension benefits
|
| |
Other postretirement
benefits |
| ||||||||||||||||||
| | | | | |
For the nine months ended
September 30, |
| |
For the nine months ended
September 30, |
| ||||||||||||||||||
Type of Plan
|
| |
Type of Expense
|
| |
2019
|
| |
2018
|
| |
2019
|
| |
2018
|
| ||||||||||||
Direct Plans
|
| | Net periodic benefit cost | | | | $ | 4 | | | | | $ | 4 | | | | | $ | — | | | | | $ | — | | |
Shared Plans
|
| |
Multiemployer contribution
|
| | | | 46 | | | | | | 51 | | | | | | 15 | | | | | | 15 | | |
Shared Plans
|
| | Cost allocation | | | | | 15 | | | | | | 15 | | | | | | 4 | | | | | | 4 | | |
| | | | | | | $ | 65 | | | | | $ | 70 | | | | | $ | 19 | | | | | $ | 19 | | |
For the nine months ended September 30,
|
| |
2019
|
| |
2018
|
| ||||||
Service cost
|
| | | $ | 2 | | | | | $ | 2 | | |
Interest cost
|
| | | | 3 | | | | | | 3 | | |
Expected return on plan assets
|
| | | | (4) | | | | | | (4) | | |
Recognized net actuarial loss
|
| | | | 3 | | | | | | 3 | | |
Net periodic benefit cost*
|
| | | $ | 4 | | | | | $ | 4 | | |
For the nine months ended September 30,
|
| |
2019
|
| |
2018
|
| ||||||
Pre-tax income at estimated annual effective income tax rate before discrete items
|
| | | $ | 54 | | | | | $ | 31 | | |
Interim period treatment of operational losses in foreign jurisdictions for which no tax benefit
is recognized |
| | | | — | | | | | | 1 | | |
Other discrete items
|
| | | | 1 | | | | | | 1 | | |
Provision for income taxes
|
| | | $ | 55 | | | | | $ | 33 | | |
For the nine months ended September 30,
|
| |
2019
|
| |
2018
|
| ||||||
Pension and other postretirement benefits (G) | | | | | | | | | | | | | |
Balance at beginning of period
|
| | | $ | (32) | | | | | $ | (36) | | |
Other comprehensive income: | | | | | | | | | | | | | |
Unrecognized net actuarial loss and prior service cost
|
| | | | (1) | | | | | | 6 | | |
Tax expense
|
| | | | — | | | | | | (2) | | |
Total Other comprehensive (loss) income before reclassifications, net of tax
|
| | | | (1) | | | | | | 4 | | |
Amortization of net actuarial loss and prior service cost(1)
|
| | | | 3 | | | | | | 3 | | |
Tax expense(2)
|
| | | | (1) | | | | | | (1) | | |
Total amount reclassified from Accumulated other comprehensive loss, net of tax(4)
|
| | | | 2 | | | | | | 2 | | |
Total Other comprehensive income
|
| | | | 1 | | | | | | 6 | | |
Balance at end of period
|
| | | $ | (31) | | | | | $ | (30) | | |
Foreign currency translation
|
| | | | | | | | | | | | |
Balance at beginning of period
|
| | | $ | 282 | | | | | $ | 446 | | |
Other comprehensive income (loss)(3)
|
| | | | 59 | | | | | | (10) | | |
Balance at end of period
|
| | | $ | 341 | | | | | $ | 436 | | |
Total balance at end of period
|
| | | $ | 310 | | | | | $ | 406 | | |
| | |
September 30,
2019 |
| |
December 31,
2018 |
| ||||||
Finished goods
|
| | | $ | 256 | | | | | $ | 235 | | |
Work-in-process
|
| | | | 804 | | | | | | 812 | | |
Purchased raw materials
|
| | | | 80 | | | | | | 79 | | |
Operating supplies
|
| | | | 70 | | | | | | 65 | | |
| | | | | 1,210 | | | | | | 1,191 | | |
LIFO reserve
|
| | | | (333) | | | | | | (373) | | |
| | | | $ | 877 | | | | | $ | 818 | | |
| | |
September 30,
2019 |
| |
December 31,
2018 |
| ||||||
2019
|
| | | $ | 10 | | | | | $ | 34 | | |
2020
|
| | | | 35 | | | | | | 28 | | |
2021
|
| | | | 27 | | | | | | 22 | | |
2022
|
| | | | 20 | | | | | | 17 | | |
2023
|
| | | | 16 | | | | | | 14 | | |
Thereafter
|
| | | | 50 | | | | | | 43 | | |
Total lease payments
|
| | | $ | 158 | | | | | $ | 158 | | |
Less: imputed interest
|
| | | | 30 | | | | | | | | |
Present value of lease liabilities
|
| | | $ | 128 | | | | | | | | |