Exhibit 10(gg)

 

  

Alcoa

390 Park Avenue

New York, New York 10022 USA

 

Alain J.P. Belda

Chairman of the Board

Mr. Klaus Kleinfeld

President and Chief Executive Officer

Alcoa Inc.

390 Park Avenue

New York, New York 10022 USA

Dear Klaus,

As President and Chief Executive Officer, you are a key part of the senior
executive management team of Alcoa Inc. (the “Company”). The business
relationships you have developed both inside and outside of the Company, your
knowledge of the Company’s business affairs and your management experience are
all of great importance to the Company, and I value your continuing
contributions. As I am sure you can also appreciate, it is important to the
Company’s future success that you, me and the other members of the senior
executive leadership team are able to enhance our ability to increase
shareholder value, and if necessary, to ease transitions when it is in the best
interest of the Company to do so. Accordingly, it is my pleasure to be able to
provide you with this letter agreement (the “Agreement”) which sets forth the
terms of an arrangement between you and the Company concerning your continuing
and post-employment obligations. This letter agreement supersedes and replaces
in its entirety the letter agreement dated February 15, 2008 between you and the
Company. For avoidance of doubt, this letter agreement does not replace or
supersede the offer letter between you and the Company dated August 14, 2007
(the “offer letter”). It is acknowledged that Section 9(a) of the offer letter
which provides that the executive severance agreement would terminate upon your
appointment as Chief Executive Officer was waived by the Compensation and
Benefits Committee of the Board of Directors.

 

I. You voluntarily resign or retire.

You may terminate your employment with the Company by voluntarily resigning or
by retiring. If you wish to resign or retire, you will provide the Company with
at least three months’ advance written notice (the “Notice,” which shall contain
your selected date of termination, which must be at least three months after the
date the Notice is received by the Company (such date of receipt, the “Notice
Date”)), after which the following conditions shall apply:

Your active service with the Company will be terminated on the date specified in
the Notice (or such later date as you and the Company mutually agree), or such
earlier date as the Company may determine in its sole discretion (the “Voluntary
Termination Date”). During the period from the Notice Date through the Voluntary
Termination Date, (i) the Company may, in its sole discretion, assign you such
duties as it sees fit (but commensurate with your position) and (ii) you agree
to continue to provide at least 20% of the average level of services you
provided to the Company during the preceding 36-month period, such that your
“separation from service” for purposes of Section 409A of the Internal Revenue
Code of 1986, as amended (“409A”), occurs on the Voluntary Termination Date.

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If your employment with the Company terminates pursuant to this Section I, you
will be paid the following amounts (which you acknowledge would not be due you
in the absence of this Agreement) on the first business day which is at least
six months after the Voluntary Termination Date, provided that on or after the
Voluntary Termination Date, and at least 10 days prior to the payment date, you
execute and return to the Company the release agreement attached as Exhibit A
(the “Release Agreement”) and (ii) any period within which you may revoke the
Release Agreement pursuant to the terms thereof has expired without you having
revoked the Release Agreement:

(i) $50,000 in consideration of execution and delivery of the Release Agreement
as provided above; and

(ii) If the Voluntary Termination Date occurs before the date specified in your
Notice and less than three months following the Notice Date (e.g., if the
Company elects a Voluntary Termination Date earlier than the date specified in
the Notice), a lump sum amount equal to your monthly base salary as of the
Voluntary Termination Date for the time between the Voluntary Termination Date
and three months following the Notice Date; or

(iii) If you and the Company mutually agree to extend your service to a later
date than the date stated in your Notice, upon your Voluntary Termination Date,
you will receive: a lump sum amount equal to your monthly base salary for each
month you provided service beyond the date stated in your Notice or for such
period of time as you and the Company may mutually agree, not to exceed 24
months (referred to as the “additional period of time”) ; a lump sum amount as
provided under Section II B (iii) and (iv) below except that the amount will be
calculated for the “additional period of time”; and continued active medical
benefits for the “additional period of time” as described in Section II B below.

If your employment with the Company terminates pursuant to this Section I, upon
and following the Voluntary Termination Date, your other compensation and
benefits continue to be governed by the terms of the plans in which you
participate; provided however, that payments and benefits under this Section I
are in lieu of any other involuntary separation benefits or severance payments
which you may be eligible to receive from the Company; and if you receive
severance pay and benefits under the Company’s Change in Control Severance Plan,
no payments will be made, or benefits provided, under this Agreement.

 

II. Company terminates your employment.

The Company may terminate your employment at any time, with or without Cause,
with the results described below. In such case, the Company shall determine the
effective date of your termination (the “Involuntary Termination Date”).

A. Involuntary Termination With Cause. If the Company terminates your employment
due to Cause, you will receive no severance payment under this Agreement or any
other severance plan, policy or arrangement of the Company or any of its
affiliates. For purposes of this Agreement, “Cause” means: (i) any refusal by
you to follow the lawful directives of the Board of Directors, which are
consistent with the scope and nature of your duties and responsibilities;
(ii) your conviction of, or plea of guilty or nolo contendere to, a felony or of
any crime involving moral turpitude, fraud or embezzlement; (iii) any gross
negligence or willful

 

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misconduct in the conduct of your duties; (iv) any material breach of any one or
more of the restrictive covenants provided in this Agreement; or (v) any
violation of any statutory or common law duty of loyalty to the Company or any
of its subsidiaries; provided no act or omission shall be “willful” if conducted
in good faith and with a reasonable belief that such conduct was in the best
interests of the Company.

B. Involuntary Termination Without Cause. If the Company terminates your
employment for reasons other than Cause, and you fulfill your obligations as set
forth in this Agreement, you shall be paid the following amounts (which you
acknowledge would not be due you in the absence of this Agreement) on the first
business day which is at least six months after the Involuntary Termination
Date, provided that, on or after the Involuntary Termination Date, and at least
10 days prior to the payment date, (i) you execute and return to the Company the
Release Agreement and (ii) any period within which you may revoke the Release
Agreement pursuant to the terms thereof has expired without you having revoked
the Release Agreement:

(i) a lump sum amount equivalent to two times your annual base salary and annual
target bonus as of the Involuntary Termination Date;

(ii) $50,000 in consideration of execution and delivery of the Release Agreement
as provided above;

(iii) a lump sum amount, in cash, equal to two times the Employer Retirement
Income Contributions under the Alcoa Savings Plan contribution percent in effect
on the Involuntary Termination Date multiplied by the portion of your annual
base salary as of your Involuntary Termination Date which is eligible for
contribution to the Alcoa Savings Plan; and

(iv) a lump sum amount, in cash, equal to the excess of (I) the actuarial
equivalent of the aggregate retirement pension under the SERP Benefit provided
in your offer letter as if you had been credited with an additional 24 months of
service following the Involuntary Termination Date; over (II) the actuarial
equivalent of the aggregate retirement pension which you had accrued under the
provisions of the SERP Benefit provided in your offer letter as of the
Involuntary Termination Date.

In addition, for a period of two years after the Involuntary Termination Date
the Company shall arrange to provide you, and anyone entitled to claim through
you, health (including medical, behavioral, prescription drug, dental and
vision) benefits substantially similar to those provided to active employees, at
no greater after tax cost to you than the after tax cost to you immediately
prior to the Involuntary Termination Date. If the company contribution to these
benefits becomes taxable to you, you will be grossed up on these contributions
(with any gross up paid to you promptly but in no event later than the end of
your taxable year following the taxable year in which you or the Company remits
the related taxes). In order to comply with 409A, the following shall apply to
the health care benefits provided pursuant to this paragraph, the costs of which
are not fully paid by you (the “Health Benefits”). Any and all reimbursements of
eligible expenses made pursuant to the Health Benefits shall be made no later
than the end of the calendar year next following the calendar year in which the
expenses were incurred. The amount of expenses that are eligible for
reimbursement or of in-kind benefits that are provided pursuant to the Health
Benefits in any given calendar year shall not affect the expenses that are
eligible for reimbursement or benefits to be provided pursuant to the Health
Benefits in any other calendar year, except as specifically permitted by
Treasury Regulation Section 1.409A-3(i)(iv)(B). Your right to the Health
Benefits may not be liquidated or exchanged for any other benefit.

 

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If your employment with the Company terminates pursuant to this Section II, upon
and following the Involuntary Termination Date, your other compensation and
benefits continue to be governed by the terms of the plans in which you
participate; provided however, that payments and benefits under this Section II
are in lieu of any other involuntary separation benefits or severance payments
which you may be eligible to receive from the Company; and if you receive
severance pay and benefits under the Company’s Change in Control Severance Plan,
no payments will be made, or benefits provided, under this Agreement.

Any voluntary termination of your employment will be deemed an involuntary
termination of your employment “without Cause” under this Agreement (a
“Qualifying Termination”) if such resignation occurs during the thirty day
period following the date on which the Chairman of the Board retires and you are
not immediately thereafter appointed to succeed him as Chief Executive Officer
and Chairman of the Board; provided, the appointment of a non-executive Chairman
of the Board at any time will not constitute a basis for a Qualifying
Termination if you continue to be the Chief Executive Officer reporting directly
to the Board of Directors.

Restrictive Covenants

In light of the unique character of your position with the Company, the business
relationships you have developed and will continue to develop while employed by
the Company, and your knowledge of the Company’s business affairs including the
Confidential Information (as defined below), and with the acknowledgment of the
continuing consideration which you will receive from the Company as a member of
its senior executive management team, and the personal financial security which
is provided under this Agreement, or in the event of a change in control as
defined in the Company’s Change in Control Severance Plan, you agree to the
following Restrictive Covenants:

Noncompetition: During your employment and for a period of two (2) years
thereafter (regardless of whether the termination of your employment is
voluntary or involuntary), you will not directly or indirectly provide services,
whether as a director, officer, partner, owner, employee, inventor, consultant,
advisor, agent, or otherwise, to any domestic or international business or firm
that is engaged or has plans to become engaged in the manufacturing,
fabricating, distributing or selling of aluminum and/or aluminum related
products for the aerospace, automotive, packaging, or other aluminum fabricated
product markets, the mining of bauxite, conversion and refining of bauxite into
alumina and/or the sale or distribution of alumina or alumina related chemical
products or any other line of business in which the Company is involved or
becomes involved during your employment with the Company (collectively, the
“Aluminum Business”). However, you may own up to five percent (5%) of the
outstanding securities of any publicly traded company.

It is not the Company’s intention to restrict or limit your activities, unless
it is believed that there is a substantial possibility that your future
employment, 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 entity in the above identified markets within the two year
period, please consult with me to discuss your intended relationship with the
competitive entity. You and the Company recognize that due to the many different
businesses which presently compete, or which in the future may compete with the
Company in the Aluminum Business, the Company will discuss your desire to enter
into a business or professional relationship with any manufacturer or firm which
may be perceived as a competitor.

 

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Non-solicitation: During your employment and for a period of two (2) years
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 current or future employee of the
Company to leave the Company for any reason, or (ii) solicit business from, or
engage in business with, any current or future customer or supplier of the
Company which you met and dealt with during your employment with the Company for
any purpose. In the event that you become aware that any present or future
employee of the Company has been hired by any business or firm with which you
are then affiliated, you will immediately notify the Company’s chief legal
officer to confirm your non-solicitation of said employee.

Confidentiality: During your employment with the Company and at all times
thereafter, you will maintain the confidentiality of any and all information
about the Company which is not generally known or available outside the Company,
including without limitation, strategic plans, technical and operating know-how,
business strategy, trade secrets, customer information, business operations and
other proprietary information (“Confidential Information”), and you will not,
directly or indirectly, disclose any Confidential Information to any person or
entity, or use any Confidential Information, whether for your benefit or the
benefit of any new employer or any other person or entity, or in any other
manner that is detrimental to or inconsistent with any interest of the Company.
If you receive notice that you may be required to disclose any Confidential
Information pursuant to a subpoena or other lawful process, you must notify the
Company’s chief legal officer immediately.

You acknowledge and agree that given the nature of the Company’s business, which
is conducted throughout the world, and your position of confidence and trust
with the Company, the scope and duration of these Restrictive Covenants are
reasonable and necessary to protect the legitimate business interests of the
Company. You further acknowledge that you have received substantial compensation
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 shall
be entitled to obtain an injunction, without posting a bond, to prevent any
breach or threatened breach of any part of these Restrictive Covenants. You
agree to reimburse the Company for all costs and expenses, including reasonable
attorney’s fees and costs, incurred by the Company in connection with the
enforcement of its rights under this Agreement.

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 shall
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 shall then be enforced as modified. In the event that a
court reduces the duration of the restriction, any unpaid amounts, as set forth
above, shall be reduced on a pro rata basis.

 

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Tax Withholding

All amounts payable pursuant to this Agreement shall be subject to withholding
for taxes as legally required, and for other amounts authorized by you.

Application of 409A Provisions

If you provide a written, unqualified opinion from your tax advisor to the
Company stating that you are a non-resident alien not subject to 409A at the
time of your termination of employment, or that 409A otherwise does not apply to
you at that time, unless the Company has reason to believe that such opinion is
more likely than not incorrect the Company shall cooperate with you to amend
this Agreement in a mutually satisfactory manner to cause any severance payments
payable hereunder to be paid as soon as practicable following your termination
of employment, and to otherwise remove references to Section 409A from this
Agreement; provided that in no event shall such payments be made unless and
until you have returned an executed Release Agreement (signed by you on or
following your termination date) and any period within which you may revoke the
Release Agreement pursuant to the terms thereof has expired without you having
revoked the Release Agreement. The Company shall have no responsibility for any
taxes or penalties you may incur on account of any such amendments, whether
pursuant to 409A or otherwise.

Governing Law; Jurisdiction

This Agreement shall be governed and interpreted in accordance with the laws of
the State of New York without reference to its choice of law principles. Any
action arising out of or related to this Agreement shall be brought in the state
or Federal courts located in New York City, 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 and signed by the Chief
Executive Officer of the Company. Any failure by you or the Company to enforce
any of the provisions of this Agreement shall 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 shall not be construed as a waiver of
any other or subsequent breach.

Successors; Binding Agreement

The Company shall have 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 Company and continues the Company’s business. The rights and obligations of
the Company under this Agreement shall inure to the benefit and shall 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 shall be
held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remainder of this Agreement shall not in way be affected
or impaired thereby.

 

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No Mitigation

If you are entitled to receive severance benefits under this Agreement, you will
not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise, and any amount received from
subsequent employment will not offset your severance payments under this
Agreement.

Entire Agreement

You acknowledge that you have not relied upon any representations (whether oral
or written) from the Company, other than as set forth in this Agreement. This
Agreement and the offer letter set forth the entire agreement and understanding
between you and the Company and merge and supersede any and all prior
discussions, agreements, arrangements and understandings with regard to the
subject matter hereof, and may not be modified, amended, discharged or
supplemented in any respect, except by a subsequent writing signed by you and
the Company. In the event that any payments under this agreement in the
aggregate are more than 2.99 times of your base salary and bonus, the payments
which you will be eligible to receive under this Agreement will be reduced
accordingly. Except for involuntary separation benefits or other similar
severance payments, this Agreement does not supersede the terms of any other
compensation plans, stock option programs, welfare benefit plans, or other such
plans or programs in which you are eligible to participate, or may become
eligible to participate.

If you agree to the terms of this Agreement, please sign on the line provided on
the next page and return two signed copies to the Corporate Secretary. A fully
executed copy will be returned to you for your files after it is signed by the
Company.

 

Sincerely, ALCOA INC. /s/ Alain J.P. Belda By:   Alain J.P. Belda Title:  
Chairman of the Board Dated:   December 8, 2008 Agreed to and accepted:

/s/ Klaus Kleinfeld

Klaus Kleinfeld President and Chief Executive Officer

 

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Exhibit A

RELEASE AGREEMENT

RELEASE AGREEMENT (this “Release Agreement”), dated as of
                                , between Alcoa Inc. (the “Company”), and [Name]
(“Releasor”).                                     
                                                 [DATE]

WHEREAS, Releasor was employed by the Company as
                                

                                        
                                                             [TITLE]

WHEREAS, Releasor and the Company are parties to a letter agreement dated [date]
(the “Letter Agreement”).

WHEREAS, Releasor’s employment with the Company terminated as of
                                

                                        
                                         
                                                [DATE]

NOW, THEREFORE, in consideration of the promises and of the releases,
representations, covenants and obligations contained herein, the parties hereto
agree as follows:

1. Severance Benefits. Subject to Releasor’s execution and non-revocation of
this Release Agreement within the time periods described in this Release
Agreement and the Letter Agreement, and compliance with the other terms of the
Letter Agreement, the Company shall pay Releasor the amounts, and provide
Releasor the benefits, described in the Letter Agreement.

2. Release. Releasor knowingly and voluntarily releases and forever discharges
the Company, its parents, and each of their respective subsidiaries and
affiliates, together with their respective present and former directors,
managers, officers, shareholders, employees, agents, and each of their
respective predecessors, heirs, executors, administrators, successors and
assigns (collectively, the “Releasees”) from any and all debts, obligations,
demands, actions, causes of action, accounts, covenants, contracts, agreements,
damages, omissions, promises, and any and all claims and liabilities whatsoever,
of every name and nature, known or unknown, suspected or unsuspected, both in
law and equity (“Claims”), which Releasor ever had, now has, or may hereafter
claim to have by reason of any matter, cause or thing whatsoever arising out of
or relating to: (a) any events, occurrences or omissions from the beginning of
time to the time Releasor signs this Release Agreement, or (b) Releasor’s
employment with the Company or termination thereof (the “Release”). The Release
shall apply to any Claim of any type, including, without limitation, any and all
Claims of any type that Releasor may have arising under the common law, the Age
Discrimination in Employment Act of 1967, the Older Workers Benefit Protection
Act, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991,
the Americans With Disabilities Act of 1990, the Family and Medical Leave Act of
1993, the Employee Retirement Income Security Act of 1974, or the New York State
and City Human Rights Laws, each as amended, and any other federal, state or
local statutes, regulations, ordinances or common law creating
employment-related causes of action, or under any policy, agreement,
understanding or promise, written or oral, formal or informal, between Releasor
and any of the Releasees, and all Claims for alleged tortious, defamatory or
fraudulent conduct; provided, however, that nothing in the Release shall:
(i) affect any vested employee benefits

 

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(including equity awards) to which Releasor may be entitled under any existing
employee benefit plans of the Company, or (ii) prohibit Releasor from enforcing
this Release Agreement or the Letter Agreement. By signing this Release
Agreement, Releasor represents that he or she shall not be entitled to any
personal recovery in any action or proceeding that may be commenced on his or
her behalf in any way arising out or relating to any of the matters that are the
subject of the Release.

3. Releasor represents that he or she has not commenced or joined in any claim,
charge or action against any of the Releasees, arising out of or relating in any
way to Releasor’s relationship with the Company, or the termination thereof.

4. Releasor represents and agrees that the obligations and representations set
forth in the Restrictive Covenants in the Letter Agreement, on their stated
terms, regarding noncompetition, nonsolicitation and confidentiality, shall
remain in full force and effect.

5. Consultation With Attorney; Voluntary Agreement. Releasor represents that the
Company has advised Releasor to consult with an attorney of Releasor’s choosing
prior to signing this Release Agreement. Releasor further represents that he or
she understands and agrees that he or she has the right and has been given the
opportunity to review this Release Agreement, with an attorney of Releasor’s
choice. Releasor further represents that he or she understands and agrees that
the Company is under no obligation to offer the payments and benefits set forth
in paragraph 1 above, and that Releasor is under no obligation to consent to
this Release Agreement, and that Releasor has entered into this Release
Agreement freely and voluntarily. Releasor shall have twenty-one (21) days to
consider this Release Agreement, unless Releasor is terminated in connection
with a an exit incentive or other group termination program, in which case
Releasor shall have forty-five (45) days to consider this Release Agreement. In
either case, once Releasor has signed this Release Agreement, Releasor shall
have seven (7) additional days from the date of execution to revoke his or her
consent. Any such revocation shall be made in writing to Attn: Corporate
Secretary, Alcoa Inc., 390 Park Avenue, New York, New York 10022, and shall be
deemed to have been duly given when hand delivered or when mailed by United
States certified mail, return receipt requested. If no such revocation occurs,
this Release Agreement shall become effective on the eighth (8th) day after
Releasor shall have executed and returned it to the Company (the “Effective
Date”). In the event that Releasor revokes his or her consent to this Release
Agreement prior to the Effective Date, this Release Agreement shall be null and
void and no payments or benefits shall be due hereunder or under the Letter
Agreement.

6. Entire Agreement. Releasor acknowledges that he or she has not relied upon
any representations (whether oral or written) from the Company, other than as
set forth in this Release Agreement. This Release Agreement sets forth the
entire agreement and understanding between Releasor and the Company and merges
and supersedes any and all prior discussions, agreements, arrangements and
understandings with regard to the subject matter hereof, except for the Letter
Agreement, and may not be modified, amended, discharged or supplemented in any
respect, except by a subsequent writing signed by Releasor and the Company.

7. Successors; Binding Agreement. The Company shall have the right to assign its
rights and obligations under this Release Agreement to any entity that acquires
all or substantially all of the assets of the Company and continues the
Company’s business. The rights and obligations of the Company under this Release
Agreement shall inure to the benefit and shall be binding upon the successors
and assigns of the Company.

 

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8. Severability. In the event that any one or more of the provisions of this
Release Agreement shall be held to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remainder of this Release Agreement
shall not in way be affected or impaired thereby.

9. Governing Law; Jurisdiction. Without reference to any principles concerning
choice of law, this Release Agreement shall be governed and interpreted in
accordance with the laws of the State of New York. Any action arising out of or
related to this Release Agreement shall be brought in the state or Federal
courts located in New York City, and Releasor and the Company consent to the
jurisdiction and venue of such courts.

10. Counterparts. This Release Agreement may be executed in counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.

IN WITNESS WHEREOF, the Company and Releasor have executed this Release
Agreement, on the date and year set forth below.

 

  ALCOA INC. By:        [NAME]   [TITLE]   [NAME]

Dated:                                                  

 

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