April 29, 199727, 1998
VIA EDGAR
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Kaiser Aluminum Corporation (the "Company"); Definitive
Proxy Materials
Ladies and Gentlemen:
On behalf of the Company and pursuant to Rule 14a-6(b)
promulgated under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), please find attached the
Definitive Proxy Statement with respect to the 19971998 Annual
Meeting of Stockholders, including the Notice of 19971998 Annual
Meeting, and form of Proxy. It is intended that these
materials will be released to the Company's stockholders
commencing on or about April 29, 1997.27, 1998.
A hard copy of the actual performance graph has been
provided via Federal Express to Charles A. Sjoquist, Branch
Chief, under our cover dated April 28, 1997.27, 1998.
Please be advised that by copy of this letter, six (6)
copies of such materials are being delivered the New York
Stock Exchange.
Please contact the undersigned at (510)(925) 847-5882 with
any questions or comments you may have.
Sincerely,
/s/ John M. Donnan
John M. Donnan
General Attorney
cc: w/ Enclosures
VIA FEDERAL EXPRESS
Mr. Hugh O'Brien
New York Stock Exchange
20 Broad Street, 18th Floor
New York, New York 10005
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /x /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only
(As permitted by Rule 14(a)-6(e)(2))
/x / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
Kaiser Aluminum Corporation
- --------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Kaiser Aluminum Corporation
- --------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/x / No fee required
/ / Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
1) Title of each class of securities to which
transaction applies:
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2) Aggregate number of securities to which transaction
applies:
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3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11 (Set
forth the amount on which the filing fee is calculated and
state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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[KAC Logo]
April 29, 199727, 1998
To Our Stockholders:
You are cordially invited to attend the Annual Meeting
of Stockholders (the "Annual Meeting") of Kaiser Aluminum
Corporation (the "Company") to be held at 9:8:00 a.m. on
Thursday,Wednesday, May 22, 1997,20, 1998, at The Houstonianthe Wyndham Greenspoint Hotel,
& Conference
Center, 111 North Post Oak Lane,12400 Greenspoint Drive, Houston, Texas.
At the Annual Meeting, the holders of the Company's
Common Stock, par value $.01 per share ("Common Stock"), and
8.255% PRIDES SM, Convertible Preferred Stock, par value
$.05 per share (the "PRIDES"), on
March 25, 199723, 1998 (all such holders being collectively
referred to as the "Stockholders") will consider and vote,
as a single class, (i) in the election of directors, (ii) upon a proposal to
approve the Kaiser 1997 Omnibus Stock Incentive Plan, and
(iii)(ii) upon such other business as may properly be presented
to the Annual Meeting or any adjournments or postponements
thereof.
Each Stockholder is entitled to receive notice of and
to vote at the Annual Meeting and is urged to attend.
Holders of shares of Common Stock have one vote for each
share held of record and holders of shares of PRIDES have
4/5 vote for each share held of record. Whether or not you intend to be
present at the Annual Meeting, we urge you to complete,
date, sign and promptly return the enclosed proxy card.
We look forward to seeing as many of you as possible
at the Annual Meeting.
GEORGE T. HAYMAKER, JR. RAYMOND J. MILCHOVICH
Chairman of the Board and President and Chief
Chief Executive Officer
- ----------------------------------------------
Table of Contents
Notice of Annual Meeting of Stockholders
Proxy Statement
Election of Directors . . . . . . 2
The Board of Directors
and its Committees. . . . . . . . 2
Approval of the
Kaiser 1997 Omnibus Stock
Incentive Plan. . . . . . . . . . 4
Executive Officers and
Directors . . . . . . . . . . . . 9
Principal Stockholders. . . . . . 14
Executive Compensation. . . . . . 16
Report of the Compensation
Committees on Executive
Compensation. . . . . . . . . . . 20
Performance Graph . . . . . . . . 24
Certain Transactions. . . . . . . 24
Compliance with Section
16(a) of the Exchange
Act . . . . . . . . . . . . . . . 25
Other Matters . . . . . . . . . . 25
- ---------------------------------------------
[KAC Logo]
-------------------------
Notice of 1997 Annual
Meeting
and
Proxy Statement
-------------------------
Important
Please sign and date your
proxy card and promptly
return it in the enclosed
envelope.
Printed on recycled paper.Operating Officer
KAISER ALUMINUM CORPORATION
5847 San Felipe, Suite 2600
Houston, Texas 77057
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 22, 199720, 1998
The Annual Meeting of Stockholders (the "Annual
Meeting") of Kaiser Aluminum Corporation (the "Company")
will be held at The Houstonianthe Wyndham Greenspoint Hotel, & Conference Center,
111 North Post Oak Lane,12400
Greenspoint Drive, Houston, Texas, on Thursday,Wednesday, May 22, 1997,20,
1998, at 9:8:00 a.m., Houston time, for the following
purposes:
1. To elect six (6) directors to hold office
until the Company's 19981999 Annual Meeting of
Stockholders or until their respective
successors are elected and qualified; 2. To consider and
vote upon a proposal to approve the
Kaiser 1997 Omnibus Stock Incentive Plan; and
3.2. To consider and transact such other business as
may properly be presented to the Annual Meeting
or any adjournments or postponements thereof.
Holders of record of the Company's Common Stock, par
value $.01 per share (the "Common Stock"), and holders of
record of the Company's 8.255% PRIDES SM, Convertible
Preferred Stock, par value $.05 per share (the "PRIDES"), as of the close
of business on March 25, 1997,23, 1998, are entitled to notice of
and to vote at the Annual Meeting (all such holders being
collectively referred to as the "Stockholders").
All Stockholders will vote as a single
class at the Annual Meeting. Stockholder lists will be available commencing May 12, 1997,10,
1998, and may be inspected for purposes germane to the
Annual Meeting during normal business hours prior to the
Annual Meeting at the offices of the Company, 5847 San
Felipe, Suite 2600, Houston, Texas.
By Order of the Board
of Directors
BYRON L. WADE/s/ John Wm. Niemand II
JOHN WM. NIEMAND II
Secretary
April 29, 199727, 1998
IMPORTANT
Please complete, date and sign the enclosed proxy card
and return it promptly in the enclosed envelope provided
for your convenience and which requires no postage if
mailed in the United States. Any Stockholder who attends
the Annual Meeting may vote personally on all matters
brought before the Annual Meeting and, in that event, his
or her proxy will not be used.
KAISER ALUMINUM CORPORATION
5847 San Felipe, Suite 2600
Houston, Texas 77057
PROXY STATEMENT
for
ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 22, 199720, 1998
This proxy statement (the "Proxy Statement") is
furnished to Stockholders (as defined below) in connection
with the solicitation of proxies on behalf of the Board of
Directors of Kaiser Aluminum Corporation (the "Company"), a
Delaware corporation, to be voted at the Company's Annual
Meeting of Stockholders (the "Annual Meeting") to be held
on May 22, 1997,20, 1998, and any adjournments or postponements
thereof, at the time and place and for the purposes set
forth in the accompanying Notice of Annual Meeting of
Stockholders. The principal executive offices of the
Company are located at 5847 San Felipe, Suite 2600,
Houston, Texas 77057, telephone (713) 267-3777.
This Proxy Statement, the accompanying proxy card, and
the Notice of Annual Meeting of Stockholders are being
mailed, commencing on or about April 30, 1997,27, 1998, to the
record holders as of the close of business on March 25, 1997,23,
1998, of the Company's Common Stock, par value $.01 per
share (the "Common Stock"), and
8.255% PRIDES SM, Convertible Preferred Stock, par value
$.05 per share (the "PRIDES"), (all such holders being
collectively referred to as the "Stockholders").
Holders of shares of Common Stock have one vote for
each share held of record and holders of shares of PRIDES
have 4/5 vote for each share held of record. All
Stockholders will vote as a single class at the Annual
Meeting. As of March 25, 1997,23, 1998, there
were 71,709,18379,142,903 outstanding shares of Common Stock and 8,673,850 outstanding
shares of PRIDES.Stock.
We cordially invite you to attend the Annual Meeting.
Whether or not you plan to attend, please complete, date,
sign and promptly return your proxy card in the enclosed
envelope. The persons authorized to act as proxies at the
Annual Meeting, individually or jointly, as listed on the
proxy cards are George T. Haymaker, Jr., Charles E.
Hurwitz, and John T. La Duc.Duc and E. Bruce Butler. You may
revoke your proxy at any time prior to its exercise at the
Annual Meeting by giving notice to the Company's Secretary,
by filing a later-dated proxy or, if you attend the Annual
Meeting, by voting your shares in person. Proxies for the
Common Stock and PRIDES will be voted in accordance with the
directions specified thereon or, in the absence of
instructions, "FOR" the election of the directors and "FOR" the approval of the Kaiser 1997
Omnibus Stock Incentive Plan as set
forth in this Proxy Statement.
The presence, in person or by proxy, of the holders of
shares of the Company's capital stockCommon Stock entitled to cast a
majority of the votes entitled to be cast at the Annual
Meeting is required to constitute a quorum for the
transaction of business at the Annual Meeting. AbstentionsUnder
applicable Delaware law, abstentions and broker non-votes
are counted for purposes of determining the presence or
absence of a quorum for the transaction of business. A
plurality of the votes present, in person or by proxy, is
necessary for the election of directors. With regard to
the election of directors, votes may be cast in favor or
withheld; votes that are withheld will be excluded entirely
from the vote and will have no effect on the outcome.
Abstentions may not be specified on the election of
directors.
Under applicable Delaware law, abstentions
and broker non-votes will have the same effect as a vote
"AGAINST" the proposal to approve the Kaiser 1997 Omnibus
Stock Incentive Plan.
ELECTION OF DIRECTORS
---------------------
At the Annual Meeting, six directors will be elected
by the Stockholders to serve until the 19981999 Annual Meeting
or until their respective successors are duly elected and
qualified. The six nominees receiving the highest number
of votes will be elected.
The six persons nominated for election to the Board of
Directors at the Annual Meeting are Robert J. Cruikshank,
George T. Haymaker, Jr., Charles E. Hurwitz, Ezra G. Levin,
Robert Marcus and Robert J. Petris. All of such nominees
are currently members of the Board of Directors. See,
"Executive Officers and Directors" and "Principal
Stockholders" for information concerning each of the
nominees, including the dates on which they first became
directors, their business experience during the past five
years, and the number of shares of the Company's capital
stockCommon
Stock owned beneficially by each of them as of April 1,
1997.March 31,
1998. Each of the nominees has consented to serve as a
member of the Board of Directors if elected.
The persons named in the proxies will vote the shares
represented thereby for the election of the foregoing named
nominees except where authority has been withheld as to a
particular nominee or as to all such nominees. Should any
nominee decline or be unable to serve as a director of the
Company, which is not anticipated, the persons named in the
proxies will vote for the election in his stead of such
other person as the Board of Directors may recommend.
The Board of Directors recommends a vote "FOR" the
--------------------------------------------------
election of all nominees for director of the Company.
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THE BOARD OF DIRECTORS AND ITS COMMITTEES
-----------------------------------------
The Board of Directors of the Company (sometimes
referred to herein as the "Board") held fivefour meetings and
acted by written consent on ninefour occasions during 1996.1997. In
addition, management confers frequently with its directors
on an informal basis to discuss Company affairs. During
1996,1997, no director attended fewer than 75% of the aggregate
of the meetings of the Board and all committees of the
Board on which he served.
The Board currently has fourfive standing committees.
These committees consist of the Executive, Audit,
Compensation Policy, and Section 162(m) Compensation, Committees. In addition, in 1995, the Board appointed a
Special Committee of two independent directors to consider a
recapitalization of the Company, and
to recommend to the
Board whether or not to proceed and if so, the appropriate
terms. Messrs. Marcus (Chairman) and Petris were the
appointed members of the Special Committee and met three
times during 1996.Strategic Planning Committees.
The Executive Committee meets on call and has
authority to act on most matters during the intervals
between meetings of the entire Board of Directors. The
current members are Messrs. Haymaker and Hurwitz
(Chairman). The Executive Committee, held one meeting andwhich did not meet
during 1997, acted by written consent one
time during 1996.nine times.
The current members of the Audit Committee are Messrs.
Levin, Marcus (Chairman) and Petris. The Audit Committee
meets with appropriate Company financial and legal
personnel, internal auditors and independent public
accountants and reviews the internal controls of the
Company and the objectivity and appropriateness of its
financial reporting. The Audit Committee recommends to the
Board the appointment and retention of the independent
public accountants to serve as auditors in examining the
corporate accounts of the Company and also has the
authority to supervise and direct the financial reporting,
affairs, policies and procedures of the Company, limited
only by restrictions imposed by applicable law, rule or
regulation. The independent public accountants
periodically meet privately with the Audit Committee and
have access to the Audit Committee at any time. The Audit
Committee met on one
occasionthree times during 1996.
-2-
1997.
The Compensation Policy Committee and the Section
162(m) Compensation Committee replaced the Company's
Compensation Committee on May 22, 1996. Prior to its
replacement, the Compensation Committee reviewed and advised
management, made recommendations to the Board, and reviewed
proposals regarding the establishment or change of benefits
plans, salaries or compensation afforded the executive
officers and other employees of the Company. Messrs.
Cruikshank, Levin (Chairman) and Marcus served as members of
the Compensation Committee. The Compensation Committee met
on six occasions and acted by written consent two times
during 1996 before being replaced.
The Compensation Policy Committee(the "Policy
Committee") reviews and approves proposals concerning or
relatedrelating to the establishment or change of benefits plans,
or material amendments to any existing benefit plan,
salaries or other compensation, including, but not limited to, payments awarded pursuant to
bonus and benefit plans maintained by the Company and its
subsidiaries, except to the extent that
(i) such authority has been delegated by the Board to the
Section 162(m) Compensation Committee (the "Section 162(m)
Committee") or (ii) such plans are governed by a plan
committee, a subsidiarysubsidiary's board of directors, or are
covered by a collective bargaining arrangement or other
binding contract of the Board.contract. Notwithstanding the foregoing, the Compensation
Policy Committee also supervises plan committees other than
the Section 162(m) Compensation Committee and may delegate the
administration and investment decisions concerning plans to
committees established for those purposes. Messrs.
Cruikshank, Levin (Chairman) and Marcus currently serve as
members of the Compensation Policy Committee. The Compensation Policy Committee met
on four
occasions11 times and acted by written consent one time during 1996.1997.
The Section 162(m) Compensation Committee administers and approves
amendments to the Company's plans or programs which are
intended to comply with the provisions of Section 162(m) of
the Internal Revenue Code of 1986, as it may be amended
from time to time (the "Code"). The Section 162(m)
Compensation Committee also establishes the criteria to be used in
determining awards to be made pursuant to such plans and
programs. Messrs. Cruikshank and Marcus (Chairman)
currently serve as members of the Section 162(m) Compensation Committee.
The Section 162(m) Compensation
Committee met on four occasions during 199612 times and did not actacted by
written consent.consent one time during 1997.
The Strategic Planning Committee, formed in February
1998 by the Board to serve in an advisory capacity to the
Company's management and the Board, consults with
management from time to time in connection with
management's review and analysis of alternative strategies
to create increased stockholder value. Messrs. Cruikshank
(Chairman), Levin and Marcus currently serve as members of
the Strategic Planning Committee.
The Board of Directors of the Company does not have a
standing nominating committee nor does it have any
committee performing a similar function.
Director Compensation
- ---------------------
Each of the directors who was not an employee of the
Company or its principal subsidiary, Kaiser Aluminum &
Chemical Corporation ("KACC"), received a base fee of
$30,000$40,000 for the 19961997 calendar year.year, $10,000 of which was
paid in the form of an option to purchase shares of the
Company's Common Stock as more fully described below.
Non-employee directors of the Company who were also
non-employee directors of MAXXAM Inc. ("MAXXAM"), the
Company's parent, received director or committee fees for
serving as a director of the Company and/or KACC in
addition to the fees received from MAXXAM. In addition,
the Chairman of each of the committees was paid a fee of
$3,000 per year, or $750 per quarter, for services as
Chairman. All committee members received a fee of $1,500
per day per committee meeting held in person on a date
other than a Board meeting date and $500 per formal
telephonic committee meeting. In respect of 1996,1997, Messrs.
Cruikshank, Levin, Marcus and Petris received an aggregate
of $35,000, $38,000, $44,330$35,500, $39,500, $42,500 and $31,500,$31,000, respectively, in
such director and committee fees from the Company and KACC
in the form of cash payments.
Non-employee directors are also eligible to
participate in the Kaiser 1997 Omnibus Stock Incentive Plan
(the "1997 Omnibus Plan"). In 1997 the Company adopted a
program pursuant to which the annual compensation paid to
each non-employee director of the Company was increased
$10,000, with such amount being paid in the form of an
option to purchase Common Stock at the market price of such
stock as of the close of the market at the New York Stock
Exchange on the day of the grant. The program provides for
such options to be granted annually at the Company's
regularly scheduled meeting of the Board in December. In
each instance the grant is intended to have a value of
$10,000 and the number of shares covered by the options is
determined using a modified Black-Scholes option pricing
method. Each option becomes exercisable as to all of the
shares covered by the option one year from the date of the grant.
In addition, in 1997 the Company adopted a program
pursuant to which a one-time grant of an option to purchase
Common Stock will be made to each new non-employee director
of the Company at the market price of such stock as of the
close of the market at the New York Stock Exchange on the
day of the grant. In each instance the grant is to have a
value of $10,000, and the number of shares covered by the
option is to be determined using a modified Black-Scholes
option pricing method. Each option becomes exercisable as
to all of the shares covered by the option one year from
the date of the grant. The Company also approved a
one-time grant of such an option to each existing
non-employee director of the Company.
In 1997 KACC adopted programs identical to the
programs described in the preceding two paragraphs. Each
of the Company and KACC expressed their intention that the
programs not be deemed to duplicate benefits with respect
to individuals who serve as a director of both the Company
and KACC. On December 10, 1997, Messrs. Cruikshank, Levin
and Marcus each received options to purchase 3,773 shares
of Common Stock at an exercise price of $10.0625 per share
under these programs.
The Company and KACC also adopted a deferred
compensation program in 1997 in which all non-employee
directors are eligible to participate. By executing a
deferred fee agreement, a non-employee director may defer
all or part, of the fees received from the Company and KACC
for services in such capacity for any calendar year. The
deferred fees would be credited to a book account as of the
date such fees would have been paid to the director and
would be deemed "invested" in two investment choices, in
25% increments, in phantom shares of the Company's Common
Stock and/or in an account bearing interest calculated
using one-twelfth of the sum of the prime rate plus 2% on
the first day of each month. If deferred, fees, including
all earnings credited to the book account, will be paid in
cash to the director or beneficiary as soon as practicable
following the date the director ceases for any reason to be
a member of the Board, either in a lump sum or in a
specified number of annual installments not to exceed ten,
at the director's election.
Subject to the approval of the Chairman of the Board,
directors may also be paid additional ad hoc fees for
extraordinary services in the amount of $750 per one-half
day or $1,500 per day. In 1996, Mr. Marcus received fees in
the amount of $13,500 for extraordinary services performed
during 1996 when requested to travel to China to review the
Company's activities there. Directors are reimbursed for travel
and other disbursements relating to Board and committee
meetings.meetings and non-employee directors are provided travel
accident insurance in respect of Company related business
travel. Fees to directors who are also employees of KACC
or MAXXAM are deemed to be included in their salary.
Directors of the Company were also directors of KACC and
received the foregoing compensation for acting in both
capacities.
-3-
APPROVAL OF THE KAISER 1997 OMNIBUS STOCK INCENTIVE PLAN
- ----------------------------------------------------------
The Kaiser 1997 Stock Incentive Plan (the "1997 Plan")
was recommended by the Company's Compensation Policy
Committee and Section 162(m) Compensation Committee, and
adopted by the Board of Directors in April 1997, subject to
approval by the stockholders of the Company and KACC, and is
hereby submitted to the Stockholders of the Company for
approval. If approved, the 1997 Plan will increase the
number of shares of Common Stock available for issuance
pursuant to the Company's compensation programs and permit
the grant of awards to non-employee directors who were not
otherwise eligible to receive awards under the Kaiser 1993
Omnibus Stock Incentive Plan (the "1993 Omnibus Plan"). In
addition the 1997 Plan will facilitate the Company's ability
to reward individuals responsible for implementing these
steps necessary to accomplish the Company's objectives.
During 1996, the Company's management developed a
strategic path to improve the Company's performance against
specific objectives. This path calls for significant change
in the following three areas: (i) achieving better profit
performance from the Company's existing assets and
businesses, including a goal of profit enhancements and
annual pre-tax cost reductions of $120 million to take full
effect in 1998, as measured against 1996 results; (ii)
increasing the earnings of the Company through growth in
targeted areas of the Company's portfolio, both by internal
investment and by acquisition; and (iii) reducing the
Company's leverage and improving its financial ratios in
order to reduce interest costs and increase the Company's
access to financing on more favorable terms. The 1997 Plan
is designed to reward participants instrumental in
accomplishing changes in these areas.
The 1997 Plan will supplement and eventually replace
the 1993 Omnibus Plan and the Kaiser 1995 Executive
Incentive Compensation Program (the "Executive Program").
The 1993 Omnibus Plan has available approximately 525,000 of
the original 2,500,000 shares of the Common Stock reserved
for awards or for payment of rights granted under the 1993
Omnibus Plan. These remaining shares will largely be used
for any awards for long-term performance periods beginning
on or before January 1, 1997, under the Executive Program
and the Kaiser 1995 Employee Incentive Program
(individually, the "Employee Program" and, collectively, the
"Incentive Programs") more fully described in the Report of
the Compensation Committees on Executive Compensation
contained in this Proxy Statement. Any shares remaining
available under the 1993 Omnibus Plan will be rolled into
the shares available for issuance under the 1997 Plan. The
1993 Omnibus Plan will remain in existence and awards
relating to performance periods beginning on or before
January 1, 1997, will generally continue to be governed by
the provisions of the 1993 Omnibus Plan.
Summary Description of the 1997 Plan. The following
summary of the terms of the 1997 Plan is qualified in its
entirety by reference to the full text of the plan. Copies
of the 1997 Plan, as filed with the Securities and Exchange
Commission (the "SEC"), may be obtained without charge by
writing to the Company at 5847 San Felipe, Suite 2600,
Houston, Texas 77057, Attention: Coordinator of Shareholder
Services, telephone number: (713) 267-3675. If adopted by
the stockholders of the Company and KACC, the 1997 Plan will
be effective as of April 1, 1997.
Administration. Administration of the 1997 Plan has
been delegated by the Boards of the Company and KACC to
their respective Compensation Policy Committees, with the
exception of awards to non-employee directors, which will be
administered by the Boards of the Company and KACC, and
awards intended to comply with Section 162(m) of the Code
("Section 162(m)"), which will be administered by the
Section 162(m) Compensation Committees of the Company and
KACC. As used in the following description of the 1997
Plan, "Committee" shall mean the Boards of Directors,
Section 162(m) Compensation Committees or the Compensation
Policy Committees of the Company and KACC, as appropriate.
Eligibility. While all employees of the Company and
KACC, and the non-employee directors of the Company, KACC
and their subsidiaries and affiliates are eligible to
participate in the 1997 Plan subject to the broad discretion
of the Committee in selecting participants, less than 150
persons, including five non-employee directors, are expected
to participate in the 1997 Plan. Neither the benefits that
will be received under the 1997
-4-
Plan in the future, nor the benefits that would have been
received for 1996 if the 1997 Plan had been in effect, are
determinable at this time.
Stock Available for Issuance Through the 1997 Plan. In
addition to cash-based awards, the 1997 Plan provides for
stock-based compensation in a number of forms. Up to
5,500,000 shares of the Company's Common Stock are
authorized for issuance through the 1997 Plan, no more than
1,800,000 of which may be issued in the form of restricted
stock. Assuming the conversion of each outstanding share of
PRIDES into one share of Common Stock and the issuance of
all of the shares authorized for issuance through the 1997
Plan, the shares issued through the plan would constitute
approximately 6.4% of the issued and outstanding shares of
the Company's Common Stock.
Stock-based compensation will typically be issued in
consideration for the performance of services to the Company
or KACC. Provisions in the 1997 Plan permit the reuse or
reissuance of shares underlying canceled, expired, or
forfeited awards of stock-based compensation, as well as
shares tendered in payment of a stock option exercise price
or withheld by the Company to pay taxes on an award, subject
to restrictions imposed under the SEC's short-swing trading
rules. On April 21, 1997, the closing price of the
Company's Common Stock was $10.50 per share.
Description of Awards Under the 1997 Plan. The
Committee may award incentive and nonqualified stock
options, stock appreciation rights, restricted stock,
performance units/performance shares, and cash-based awards.
As separately described under "Performance Measures," the
Committee may also grant awards subject to satisfaction of
specific performance goals. Awards under the 1997 Plan will
be used for annual incentives and long-term incentives. The
forms of awards are described in greater detail below.
Stock Options. The Committee will have discretion to
award incentive stock options ("ISOs"), which are intended
to comply with Section 422 of the Code, or nonqualified
stock options ("NQSOs"), which are not intended to comply
with Section 422 of the Code. Non-employee directors are
ineligible to receive ISOs under the Code. Each option
issued under the 1997 Plan must be exercised within a period
of ten years from the date of grant, and the exercise price
of an option may not be less than the fair market value of
the underlying shares of Common Stock on the date of grant.
If an award of stock options is intended to qualify as
performance-based compensation under Section 162(m), the
maximum number of shares which may be granted in the form of
stock options in any fiscal year to any one participant is
500,000. In this case, the option price will be at or above
the fair market value of such shares as of the date of the
grant. Subject to the specific terms of the 1997 Plan, the
Committee will have discretion to set such additional
limitations on option grants as it deems appropriate.
Options granted to employees under the 1997 Plan will
expire at such times as the Committee determines at the time
of the grant subject to the ten year limitation described
above and each option award agreement will set forth the
extent to which the participant will have the right to
exercise the option following termination of employment.
The termination provisions will be determined within the
discretion of the Committee, may not be uniform among all
participants and may reflect distinctions based on the
reasons for termination of employment.
Upon the exercise of an option granted under the 1997
Plan, the option price is payable in full to the Company,
either: (i) in cash or its equivalent; (ii) by tendering
shares having a fair market value at the time of exercise
equal to the total option price (provided such shares have
been held for at least six months prior to their tender); or
(iii) if permitted in the participant's award agreement, a
combination of (i) and (ii). If permitted in the
participant's award agreement, the option exercise price may
also be paid through a cashless exercise as permitted under
the Federal Reserve Board's Regulation T.
-5-
Stock Appreciation Rights. The Committee may also
award stock appreciation rights ("SARs") under the 1997 Plan
in tandem with, or apart from, stock options, upon such
terms and conditions as it shall establish. The grant price
of a freestanding SAR shall equal the fair market value of a
share of Common Stock while the grant price of a tandem SAR
issued in connection with a stock option shall equal the
option price of the related option. If an award of SARs is
intended to qualify as performance-based compensation under
Section 162(m), the maximum number of shares which may be
granted in the form of SARs in any one fiscal year to any
one participant is 500,000. In this case, the option price
will be at or above the fair market value of such shares as
of the date of the grant.
Restricted Stock. The Committee will also be
authorized to award shares of restricted Common Stock under
the 1997 Plan, up to the overall plan maximum, upon such
terms and conditions as it shall establish. If an award of
restricted stock is intended to qualify as performance-based
compensation under Section 162(m), the maximum number of
shares which may be granted in the form of restricted stock
in any one fiscal year to any one participant is 200,000.
The award agreement will specify the period(s) of
restriction, the number of shares granted, restrictions
based upon achievement of specific performance objectives
and/or restrictions under applicable federal or state
securities laws. Although recipients may have the right to
vote these shares from the date of grant, they will not have
the right to sell or otherwise transfer the shares during
the applicable period of restriction or until earlier
satisfaction of other conditions imposed by the Committee in
its sole discretion. Notwithstanding the expiration of the
applicable period of restriction or the satisfaction of
conditions imposed by the Committee, shares issued to
directors or certain executive officers of the Company or
KACC will remain subject to the restrictions imposed by Rule
144 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Participants may receive dividends on
their shares of restricted stock and the Committee, in its
discretion, will determine if and how dividends on
restricted shares are to be paid.
Each award agreement for restricted stock will set
forth the extent to which the participant will have the
right to retain unvested restricted stock following
termination of the participant's employment. These
provisions will be determined in the sole discretion of the
Committee, need not be uniform among all shares of
restricted stock issued pursuant to the 1997 Plan and may
reflect distinctions based on reasons for termination of
employment. Except in the case of terminations by reason of
death or disability, the vesting of restricted stock which
qualifies for performance-based compensation under Section
162(m) and held by "covered employees" under Section 162(m)
shall occur at the time it otherwise would have, but for the
employment termination.
Performance Units/Shares and Cash-Based Awards. The
Committee will also have the discretion to award performance
units, performance shares, and cash-based awards under the
1997 Plan upon such terms and conditions as it shall
establish. If a cash-based award or an award of performance
units or performance shares is intended to qualify as
performance-based compensation under Section 162(m), the
maximum aggregate payout with respect to such awards which
may be granted in any one fiscal year to any one participant
shall be the value of 300,000 shares of Common Stock.
Performance units will have an initial value as determined
by the Committee while each performance share will have an
initial value equal to one share of Common Stock. The
payout on the number and value of the performance units,
performance shares, and cash-based awards will be a function
of the extent to which corresponding performance goals are
met.
Performance Measures. The Committee may grant awards
under the 1997 Plan to participants subject to attaining
certain specified performance measures. The number of
performance-based awards granted to any participant in any
year is determined by the Committee in its sole discretion,
and the value of each performance-based award will be
determined solely upon achieving certain pre-established
objective performance goals during each performance period.
The duration of a performance period is set by the
Committee. A new performance period may begin every year,
or at more frequent or less frequent intervals, as
determined by the Committee.
The Committee will establish written objective
performance goals applicable to the valuation of
performance-based awards granted in each performance period,
the performance measures which will be used
-6-
to determine the achievement of those performance goals, and
any formulas or methods to be used to determine the value of
the performance-based awards. The value of performance-based
awards may be based on absolute measures or on a
comparison of the Company's financial measures during a
performance period to the financial measures of a group of
competitors. The performance measures by the 1997 Plan
consist of earnings per share, net income (before or after
taxes), return measures (including, but not limited to,
return on assets, equity, or sales), cash flow return on
investments which equals net cash flows divided by owner's
equity, earnings before or after taxes, measures of gross
sales, gross revenues, or growth in sales or revenues, share
price (including, but not limited to, growth measures and
total shareholder return), and operating measures
(including, but not limited to, operating margins and
operating costs).
Following the end of a performance period, the
Committee will determine the value of the performance-based
awards granted for the period. The Committee shall also
have discretion to reduce (but not to increase) the value of
a performance-based award. In addition, the Committee will
certify that the award is based on the degree to which the
pre-established performance goals were obtained. As soon as
practicable thereafter, payment of the awards to
participants, if any, shall be made in accordance with the
guidelines established by the Committee.
Adjustment and Amendments. The 1997 Plan provides for
appropriate adjustments in the number of shares of the
Common Stock subject to awards and available for future
awards in the event of changes in the outstanding Common
Stock by reason of a merger, stock split, recapitalization
or certain other events. In addition, the 1997 Plan may be
modified or amended by the Board of Directors at any time
and for any purpose which the Board deems appropriate.
However, no such amendment shall adversely affect any
outstanding awards without the affected holder's consent.
Stockholder approval of an amendment will be sought if
necessary under regulations promulgated by the Internal
Revenue Service or SEC, the rules of the New York Stock
Exchange or any applicable law.
Nontransferability. No derivative security (including,
without limitation, options) granted pursuant to, and no
right to payment under, the 1997 Plan shall be assignable or
transferable by a plan participant except by will or by the
laws of descent and distribution or as otherwise required by
law, and any option or similar right shall be exercisable
during a participant's lifetime only by the participant or
by the participant's guardian or legal representative.
These limitations may be waived by the Committee, subject to
restrictions imposed under the SEC's short-swing trading
rules and federal tax requirements relating to incentive
stock options.
Duration of the Plan. The 1997 Plan will remain in
effect until all options and rights granted thereunder have
been satisfied or terminated pursuant to the terms of the
plan, and all performance periods for performance-based
awards granted thereunder have been completed. However, in
no event will any awards be granted under the 1997 Plan
after March 31, 2007.
Certain Tax Consequences of the Issuance and Exercise
of Options. With respect to options which qualify as ISOs,
a participant in the 1997 Plan will not recognize income for
federal income tax purposes at the time options are granted
or exercised. If the participant disposes of shares
acquired by exercise of an ISO either before the expiration
of two years from the date the options are granted or within
one year after the issuance of shares upon exercise of the
ISO (the "holding periods"), the participant will recognize
in the year of disposition: (i) ordinary income, to the
extent that the lesser of either (a) the fair market value
of the shares on the date of option exercise, or (b) the
amount realized on disposition, exceeds the option price;
and (ii) capital gain, to the extent the amount realized on
disposition exceeds the fair market value of the shares on
the date of option exercise. If the shares are sold after
expiration of the holding periods, the participant generally
will recognize capital gain or loss equal to the difference
between the amount realized on disposition and the option
price.
With respect to NQSOs, the participant will recognize
no income upon grant of the option, and, upon exercise, will
recognize ordinary income to the extent of the excess of the
fair market value of the shares on the date of option
exercise over the amount paid by the participant for the
shares. Upon a subsequent disposition
-7-
of the shares received under the option, the participant
generally will recognize capital gain or loss to the extent
of the difference between the fair market value of the
shares at the time of exercise and the amount realized on
the disposition.
In general, the Company will receive an income tax
deduction at the same time the participant recognizes
income, and in the same amount as the amount which is
taxable to the participant as ordinary income, except as
provided below under "Section 162(m)". To the extent a
participant recognizes capital gains, as described above,
the Company will not be entitled to any deduction for
federal income tax purposes.
Section 162(m). Under Section 162(m), compensation
paid by the Company in excess of $1 million for any taxable
year to "covered employees" generally is deductible by the
Company or its affiliates for federal income tax purposes if
it is based on the performance of the Company, is paid
pursuant to a plan approved by stockholders of the Company,
and meets certain other requirements. In this regard, the
Company is presenting the 1997 Plan for Stockholder
approval. Generally, "covered employees" under Section
162(m) means the chief executive officer and the four other
highest paid executive officers of the Company as of the
last day of the taxable year. Within 90 days of the
beginning of each fiscal year, the Section 162(m)
Compensation Committees of the Company and KACC must
establish one or more objective performance goals that must
be reached for a covered executive to receive an award under
the 1997 Plan and the amount of the award to be paid if the
goals are achieved. While these awards may be reduced, they
may not be increased.
The Section 162(m) Compensation Committee of the
Company and KACC believe that the 1997 Plan allows for the
grant of awards that are performance based and that such
awards thereunder in excess of $1 million for any taxable
year after 1997 should be tax deductible under Section
162(m). It is presently anticipated that the Section 162(m)
Compensation Committees will at all times consist of
"outside directors" as required for purposes of Section
162(m), and that the committees will take the effect of
Section 162(m) into consideration in structuring 1997 Plan
awards and take all reasonable steps to maintain the 1997
Plan based on performance-based standards.
Approval of the 1997 Plan requires the affirmative vote
-------------------------------------------------------
of the holders of a majority of the Company's capital stock
- -----------------------------------------------------------
represented at the Annual Meeting. The Board of Directors
- ----------------------------------------------------------
recommends a vote "FOR" approving the 1997 Plan.
- ------------------------------------------------
-8-
EXECUTIVE OFFICERS AND DIRECTORS
--------------------------------
The following table sets forth certain information, as
of April 1, 1997,March 31, 1998, with respect to the executive officers
and directors of the Company and certain executive officers
of KACC. All officers and directors hold office until
their respective successors are elected and qualified or
until their earlier resignation or removal.
Name Positions and Offices with the
Company
---- -------------------------------
George T. Haymaker, Jr. Chairman of the Board,
President, Chief Executive
Officer and Director
Joseph A. Bonn Vice President, Planning and
Development
E. Bruce Butler Vice President and General
Counsel
Robert E. Cole Vice President, Government
Affairs, of KACC
John E. Daniel Vice President, and President of
Kaiser Primary Aluminum
Products, of KACC
Jack A. Hockema Vice President, and President of
Kaiser Engineered Products, of
KACC
John T. La Duc Vice President and Chief
Financial Officer
Alan G. Longmuir Vice President, Research and
Development, of KACC
Raymond J. Milchovich Vice President, and President of
Kaiser Flat-Rolled Products, of
KACC
Geoffrey W. Smith Vice President, and President of
Kaiser Aluminum Commodities, of
KACC
Kris S. Vasan Vice President, Financial Risk
Management, of KACC
Byron L. Wade Vice President, Secretary and
Deputy General Counsel
Lawrence L. Watts Vice President, Administration
and President of Kaiser Aluminum
International, of KACC
Arthur S. Donaldson
Name Positions and Offices with the Company
- ----------------------- ---------------------------------------
George T. Haymaker, Jr. Chairman of the Board, Chief Executive
Officer and Director
Raymond J. Milchovich President and Chief Operating Officer
Joseph A. Bonn Vice President, Planning and Development
E. Bruce Butler Vice President and General Counsel
Robert E. Cole* Vice President, Government Affairs
Wayne R. Hale* Vice President, and President of Kaiser
Primary Products
Jack A. Hockema Vice President, and President of Kaiser
Engineered Products
John T. La Duc Vice President and Chief Financial
Officer
Geoffrey W. Smith Vice President, and President of Kaiser
Aluminum Commodities
Kris S. Vasan* Vice President, Financial Risk Management
John H. Walker* Vice President, and President of Kaiser
Flat-Rolled Products
Lawrence L. Watts Vice President, Chief Administrative
Officer and President of Kaiser
Aluminum International
John Wm. Niemand II Secretary
Daniel D. Maddox Controller, Corporate Consolidation and
Reporting
Robert W. Warnock Controller, Corporate Operations
Karen A. Twitchell Treasurer
Robert J. Cruikshank Director
Charles E. Hurwitz Director
Ezra G. Levin Director
Robert Marcus Director
Robert J. Petris Director
* KACC only
George T. Haymaker, Jr. Mr. Haymaker, age 59,60, was
elected to the positions of Chairman of the Board and Chief
Executive Officer of the Company and KACC effective January
1, 1994 and has served as President of the Company and President of KACC sincefrom
May 1996 and June 1996, respectively.respectively, through July 1997.
From May 1993 to December 1993, Mr. Haymaker served as
President and Chief Operating Officer of the Company and
KACC. Mr. Haymaker became a director of the Company in May
1993, and a director of KACC in June 1993. From 1987 to
April 1993, Mr. Haymaker was a partner in a partnership
which acquired, redirected and operated small-small to medium- sizemedium
sized companies in the metals industry. Since July 1987,
Mr. Haymaker has been a director, of Midamerica
Holdings, Inc. or its predecessor, Metalmark Corporation
("Midamerica"), of which he was Presidentand from February 1992
through March 1993.1993 was President, of Midamerica Holdings
(formerly Metalmark Corporation), which is in the business
of semi-fabrication of aluminum extrusions. From May 1986
until February 1993, he also served as President of West
Coast Sales Corp., which provides management and acquisition
services. Mr. Haymaker also served as Chief Executive
Officer and a director of Amarlite Architectural Products,
Inc., a producer of architectural curtain wall and entrance
products, from August 1990 to April 1992 and from April 1989
to February 1993, respectively. He was a director of
American Powdered Metals Company, which is engaged in the
manufacture of powdered metal -9-
components, from August 1988
to March 1993, and Hayken Metals Asia Limited, which
represents manufacturers of aluminum and metal products,
from January 1988 to April 1993. From 1984 to 1986, Mr.
Haymaker served as Executive Vice President AluminumPresident-Aluminum
Operations of Alumax Inc., responsible for all primary
aluminum and semifabricating activities. Mr. Haymaker is
also a director of Flowserve Corporation, a provider of
valves, pumps and seals.
Raymond J. Milchovich. Mr. Milchovich, age 48, became
President and Chief Operating Officer of the Company and
KACC in July 1997. He became a Vice President of the
Company in May 1997 and served in such capacity through July
1997. He served as Vice President-President of Kaiser
Flat-Rolled Products, of KACC from June 1995 through July
1997. From July 1986 to June 1995, Mr. Milchovich served as
Divisional Vice President of KACC's flat-rolled products
business unit and Works Manager of KACC's Trentwood facility
in Spokane, Washington.
Joseph A. Bonn. Mr. Bonn, age 53, became54, has been Vice
President of the Company since May 1997 and has been Vice
President, Planning and Development of the Company and KACC effectivesince March
1997. From February 1992 to March 1997 and
July 1989 to March 1997, Mr. BonnHe served as Vice President, Planning and
Administration of the Company and KACC from February 1992
and July 1989, respectively, through May 1997 and July 1997,
respectively. Mr. Bonn has served as a Vice President of
KACC since April 1987 and served as Senior Vice
President AdministrationPresident-Administration of MAXXAM from September 1991
through December 1992. He was also KACC's Director of
Strategic Planning from April 1987 until July 1989. From
September 1982 to April 1987, Mr. Bonn served as General
Manager of various aluminum fabricating divisions of KACC.divisions.
E. Bruce Butler. Mr. Butler, age 57,58, became Vice
President and General Counsel of the Company and KACC in
March 1997. Prior to becoming Vice President and General
Counsel of both companies, Mr. Butler served as Assistant
General Counsel - Kaiser International of KACC from August
1996. Immediately prior to joining the Company and KACC, Mr.
Butler practiced in the Los Angeles office of Arter &
Hadden. Prior to joining Arter & Hadden, Mr. Butler served
as Vice President and General Counsel of Allied Signal
Aerospace Company from 1988 to 1994 and International
Counsel of Allied Signal, Inc. from 1984 through 1987. From
1971 through 1984, Mr. Butler practiced with Patton, Boggs &
Blow, where he became a partner in 1977 and served as the
Resident Partner in the firm's London office.
Robert E. Cole. Mr. Cole, age 50,51, has been a Vice
President of KACC since March 1981. Since September 1990,
Mr. Cole also has served as Vice President FederalPresident-Federal
Government Affairs of MAXXAM, MAXXAM Group Inc. ("MGI"), an
indirect subsidiary of MAXXAM engaged in forest products
operations, and The Pacific Lumber Company ("Pacific
Lumber"), an indirect subsidiary of MAXXAM engaged in forest
products operations.. Mr. Cole is currently Chairman of the United
States Auto Parts Advisory Committee established by the
United States Congress.
John E. Daniel.Wayne R. Hale. Mr. Daniel,Hale, age 61, has been42, became a Vice
President of KACC since January 1992,effective November 1997 and President of
Kaiser Primary Aluminum Products since June 1995,effective December 1997. From
January 1, 1997, until accepting his current position, Mr.
Hale served as the Managing Director of Anglesey Aluminium
Limited, a United Kingdom corporation 49% owned by KACC
("Anglesey"), on behalf of Rio Tinto plc, the owner of the
51% interest in Anglesey. Anglesey owns and has been the
Generaloperates an
aluminum smelter and port facility in Holyhead, Wales.
Between August 1990 and December 1996, Mr. Hale was employed
by KACC and served as Technical Manager and then Operations
Manager of KACC's primary aluminum products business
unit since November 1990. From November 1990 to January
1992, he was Divisional Vice Presidentthe Anglesey smelter before becoming Managing
Director of KACC's primary
aluminum products business unit. From December 1989 to
November 1990, Mr. Daniel was Reduction Plant Manager of
KACC's Tacoma, Washington plant and from July 1986 to
December 1989, he was Reduction Plant Manager of KACC's
formerly owned Ravenswood, West Virginia plant.Anglesey in August 1995.
Jack A. Hockema. Mr. Hockema, age 50,51, became Vice
President, and President of Engineered Products, of KACC
effective March 1997. From September 1996 to March 1997 Mr.
Hockema served as a Vice
President of KACC,the Company in May 1997. Mr. Hockema became
Vice President of
Kaiser Extruded Products of KACC and President of Kaiser Engineered
Products in March 1997. He served as President of Kaiser
Extruded Products and Engineered Components of KACC. He had beenfrom September
1996 to March 1997. Mr. Hockema served as a consultant to
KACC since September 1995, serving asand acting President of Kaiser Engineered Components
of KACC.from September 1995 until September 1996. Mr. Hockema was
an employee of KACC from 1977 to 1982, working at KACC's
Trentwood facility, and serving as plant manager of its
former Union City, California, can plant and as operations
manager for Kaiser Extruded Products. Mr. Hockema left KACC
to become Vice President and General Manager of Bohn
Extruded Products, a division of Gulf+Western, and later
served as Group Vice President of American Brass Specialty
Products until June 1992. From June 1992 until September
1996, Mr. Hockema provided consulting and investment
advisory services to individuals and companies in the metals
industry.
John T. La Duc. Mr. La Duc, age 54,55, has been Vice
President and Chief Financial Officer of the Company since
June 1989 and May 1990, respectively, and was Treasurer of
the Company from August 1995 -10-
until February 1996 and from
January 1993 until April 1993. He was also Treasurer of
KACC from June 1995 until February 1996, and has been a Vice
President of KACC since June 1989 and Chief Financial
Officer of KACC since January 1990 and a Vice President of KACC since June 1989.1990. Since September 1990,
Mr. La Duc has served as Senior Vice President of MAXXAM.
Mr. La Duc also serves as a Vice President and a director of
MAXXAM Group Holdings Inc. ("MGHI"), a wholly owned
subsidiary of MAXXAM, and MGI's parent ("MGHI"), MGI, Pacific Lumber and Pacific
Lumber's subsidiary, Scotia Pacific Holding Company ("Scotia
Pacific"). He previously served as Chief Financial Officer
of MAXXAM and MGI from September 1990 until December 1994
and February 1995, respectively, and of Pacific Lumber from
October 1990 and Scotia Pacific from November 1992 until
February 1995.
Alan G. Longmuir. Mr. Longmuir, age 56, has been Vice
President Research and Development of KACC since June 1995,
and previously was Divisional Vice President Research and
Development of KACC since October 1988. Mr. Longmuir
served as KACC's Director of Manufacturing Systems from
January 1985 to October 1988. From September 1982 to
January 1985 he acted as KACC's Manager Automated Systems
and Electrical Engineering; and from January 1978 to
September 1982 was KACC's Manager Metals Automation.
Raymond J. Milchovich. Mr. Milchovich, age 47, has
been Vice President President of Kaiser Flat-Rolled
Products, of KACC since June 1995. From July 1986 to June
1995, Mr. Milchovich served as Divisional Vice President of
KACC's Flat-Rolled Products business unit and Works Manager
of KACC's Trentwood facility in Spokane, Washington.
Geoffrey W. Smith. Mr. Smith, age 50,51, has been a Vice
President of the Company since May 1997, President of Kaiser
Aluminum Commodities since June 1996, and a Vice President
of KACC since January 1992, and President of
Kaiser Aluminum Commodities of KACC since June 1996.1992. From June 1995 tountil June 1996,
Mr. Smith wasserved as President of Kaiser Alumina of KACC. FromKACC, and
from December 1994 until June 1995, Mr. Smith was General
Manager of KACC's alumina business unit. Mr. Smith
previously served as Co-General Manager of KACC's alumina
business unit from September 1991 through December 1994.
From September 1990 to January 1992, Mr. Smith was
Divisional Vice President of KACC's alumina business unit.
From August 1988 throughto August 1990, Mr. Smith was Director of
Business Development for the alumina business unit, and from
1982 to August 1988, he was Operations/Technical Manager for
KACC's Gramercy, Louisiana facility.
Kris S. Vasan. Mr. Vasan, age 47,48, has been Vice
President, Financial Risk Management, of KACC since June
1995. Mr. Vasan previously served as Treasurer of the
Company from April 1993 until August 1995 and as Treasurer
of KACC from April 1993 until June 1995. Prior to that, Mr.
Vasan served the Company and KACC as Corporate Director of
Financial Planning and Analysis from June 1990 until April
1993. From October 1987 until June 1990, he served as
Associate Director of Financial Planning and Analysis.
Byron L. Wade.John H. Walker. Mr. Wade,Walker, age 50, has served as Vice
President and Secretary of the Company and KACC since
January 1992, and Deputy General Counsel of the Company and
KACC since May and June 1992, respectively. Mr. Wade has
also served as Vice President and Deputy General Counsel of
MAXXAM since May 1990, and Secretary of MAXXAM since October
1988. He previously served as Assistant Secretary and
Assistant General Counsel of MAXXAM from November 1987 to
October 1988 and May 1990, respectively. In addition, Mr.
Wade has served since May 1993 as a Vice President and
Secretary of SHRP General Partner, Inc. ("SHRP"), the
current managing general partner of Sam Houston Race Park,
Ltd., a Texas limited partnership and subsidiary of MAXXAM
which operates a horse racing facility in Texas ("SHRP,
Ltd."). Mr. Wade has served as Vice President, Secretary
and Deputy General Counsel of Pacific Lumber and Scotia
Pacific since June 1990 and November 1992, respectively, and
as Vice President, Secretary and Deputy General Counsel of
MGHI and MGI since November 1996 and July 1990,
respectively. He had previously served since 1983 as Vice
President, Secretary and General Counsel of MCO Resources,
Inc., a publicly traded oil and gas company, which was
majority owned by MAXXAM.
-11-
Lawrence L. Watts. Mr. Watts, age 50, became Vice
President, Administration, of KACC effective March 1997.
Mr. Watts40, has been a Vice
President of KACC since January
1992November 1997, and President of
Kaiser Flat-Rolled Products from December 1997. From
September 1996 through October 1997, Mr. Walker served as
Vice President, Operations of KACC's Flat-Rolled Products
business unit and Works Manager of KACC's Trentwood facility
in Spokane, Washington. Prior to joining KACC, Mr. Walker
spent eight years with Weirton Steel Company, a fully
integrated steel producer ("Weirton Steel"). From August
1995 to September 1996, Mr. Walker was the Vice President of
Operations for Weirton Steel. From March of 1994 to August
1995, he served as General Manager of Operations for Weirton
Steel and prior to that served as the Director of Operating
Planning from 1991 to 1994.
Lawrence L. Watts. Mr. Watts, age 51, became Vice
President and Chief Administrative Officer of the Company in
October 1997 and Vice President, Chief Administrative
Officer of KACC in June 1997. He served as Vice President,
Administration of KACC from March 1997 through June 1997.
He has been President of Kaiser Aluminum International since
June 1995 and a Vice President of KACC since June 1995.January 1992.
From April 1994 until June 1995, Mr. Watts was General
Manager International Development of KACC.Manager-International Development. Mr. Watts previously
served as Co-General Manager of KACC's alumina business unit
from September 1991 until December 1994. From June 1989 to
January 1992, Mr. Watts was Divisional Vice President,
Governmental Affairs and Human Resources, for the alumina
business unit, and from July 1988 to June 1989, he was
Divisional Vice President, Public Relations and Governmental
Relations, for the alumina business unit. From September
1984 to July 1988, Mr. Watts was Manager, Human Resources
for the alumina business unit.
Arthur S. Donaldson.John Wm. Niemand II. Mr. Donaldson,Niemand, age 54,53, became
Secretary of the Company in May 1997 and Secretary of KACC
in June 1997. He previously served as an Assistant Secretary
of the Company and KACC since July 1988. Mr. Niemand served
as Senior Corporate Counsel of the Company and KACC from May
1992 through December 1995, and has served as Assistant
General Counsel of the Company and KACC since January 1996.
Daniel D. Maddox. Mr. Maddox, age 38, was elected to
the position of Controller, Corporate Consolidation and
Reporting of the Company and KACC effective February 1996.October 1, 1997.
Mr. DonaldsonMaddox previously served as Assistant Corporate
Controller of the Company from May 1997 to September 1997
and KACC since September 1992. From January
1985from June 1997 to September 1992,1997 and
Director-External Reporting of KACC from June 1996 to May
1997. Mr. DonaldsonMaddox was Manager of
External Reporting for the Company.with Arthur Andersen LLP from 1982
until joining KACC in June 1996.
Karen A. Twitchell. Ms. Twitchell, age 41, became42, was elected
to the position of Treasurer of the Company and KACC
effective February 1, 1996. Prior to joining the Company,that time, Ms.
Twitchell was Vice President and Treasurer of Southdown,
Inc., a Houston-based company specializing in portland and
masonry cement, sincefrom April 1994 and Treasurer from 1989.
Robert Warnock. Mr. Warnock, age 51, was elected to the
position of Controller, Corporate Operations of the Company
and KACC effective October 1, 1997. Mr. Warnock previously
served as Controller of KACC's Flat-Rolled Products business
unit since 1989.1993 and, Controller of KACC's Trentwood facility
in Spokane, Washington from 1992 to 1993. Prior to that
time, Mr. Warnock served as controller of various of KACC's
other plants and divisions.
Robert J. Cruikshank. Mr. Cruikshank, age 66,67, has
served as a director of the Company and KACC since January
1994. In addition, he has been a director of MAXXAM since
May 1993. Mr. Cruikshank was a Senior Partner in the
international public accounting firm of Deloitte & Touche
from December 1989 until his retirement in March 1993. PriorMr.
Cruikshank served on the board of directors of Deloitte
Haskins & Sells from 1981 to 1985 and as Managing Partner
from June 1974 until its merger with Touche Ross & Co. in
December 1989,
Mr. Cruikshank served as Managing Partner of the Houston
office of Deloitte Haskins & Sells from June 1974 until the
merger, and served on such firm's board of directors from
1981 to 1985.1989. Mr. Cruikshank also serves as a director and
on the Compensation Committee of Houston Industries
Incorporated, a public utility holding company with
interests in electric utilities, coal and transportation
businesses; a director of Texas Biotechnology Incorporated;
a trust manager of Weingarten Realty Investors; a director
of American Residential Services, Inc.; and as Advisory Directoradvisory
director of Compass Bank Houston.Bank-Houston.
Charles E. Hurwitz. Mr. Hurwitz, age 56,57, was appointed
Vice Chairman of KACC in December 1994 and has served as a
director of the Company and KACC since October and November
1988, respectively. Mr. Hurwitz has also served as a member
of the Board of Directors and the Executive Committee of
MAXXAM since August 1978 and was elected Chairman of the
Board and Chief Executive Officer of MAXXAM in March 1980.
Since May 1982, Mr. Hurwitz has been Chairman of the Board
and Chief Executive Officer of MGI. SinceFrom January 1993 to
January 1998, he also served MAXXAM as President. Mr.
Hurwitz has served as President of MGI since January 1993.
He has also served MAXXAMbeen, since its formation in November 1996,
Chairman of the Board, President and MGI as President.Chief Executive Officer
of MGHI. From May 1986 until February 1993, Mr. Hurwitz
served as a director of Pacific Lumber. Mr. Hurwitz has also served as
Chairman of the Board, President and Chief Executive Officer
of MGHI since November 1996. Mr. HurwitzHe has been, since
January 1974, Chairman of the Board and Chief Executive
Officer of Federated Development Company ("Federated"), a
New York business trust primarily engaged in the management
of real estate investments, and a principal stockholder of
MAXXAM.investments. Mr. Hurwitz has also served SHRP as
a director of SHRP General Partner, Inc. ("SHRP"), the
current managing general partner of Sam Houston Race Park,
Ltd., a subsidiary of MAXXAM which operates a horse racing
facility in Texas ("SHRP, Ltd."), since May 1993, Chairman
of the Board since October 1995, and President from May 1993
until April 1996.
Ezra G. Levin. Mr. Levin, age 63,64, has been a director
of the Company since July 1991. He has been a director of
KACC since November 1988, and a director of MAXXAM since May
1978. Mr. Levin also served as a director of the Company
from April 1988 to May 1990, and as a director of MGI from
May 1982 through December 1993. Mr. Levin is a partner in
the law firm of Kramer, Levin, Naftalis & Frankel. He also
serves as a trustee of Federated and as a director of
Pacific Lumber, Scotia Pacific and Scotia Pacific.United Mizrahi Bank and
Trust Company.
Robert Marcus. Mr. Marcus, age 72,73, has been a director
of the Company and KACC since September 1991. From 1987 to
January 1992, Mr. Marcus was a partner in American
Industrial Partners, a San Francisco
-12-
and New York based firm
specializing in private equity investments in industrial
companies. From 1983 to 1991, Mr. Marcus was a director of
Domtar Inc., a Canadian resource-based multi-business
corporation. From 1982 to 1987, Mr. Marcus served as
President and Chief Executive Officer of Alumax Inc., an
integrated aluminum company.
Robert J. Petris. Mr. Petris, age 71,72, has been a
director of the Company since May 1995 and KACC since June
1995. He becamewas Special Assistant to the International
President of the United Steelworkers of America (the "USWA")
infrom June 1995.1995 until January 1, 1997. From 1977 to 1997,
Mr. Petris was a member of the International Union Executive
Board and Director of District 38, where he was exposed to a
wide range of issues and problems in the aluminum, steel,
container and non-ferrous metals industries.
Mr. Petris retired from the USWA
in January 1997.
-13-
PRINCIPAL STOCKHOLDERS
----------------------
The following table sets forth, as of April 1, 1997,March 31, 1998,
unless otherwise indicated, the undiluted beneficial
ownership of each class of the Company's capital stockequity securities by (i) those
persons known by the Company to own beneficially more than
5% of the shares of each applicableany class of
capital stock then outstanding, (ii) each of
the directors of the Company, (iii) and each of the named
executive officers of the Company listed in the Summary Compensation Table,
and (iv) all directors and executive officers of the Company
and KACC as a group.
% of
Combined
Name of Voting
Beneficial Owner Title of Class # of Shares(1) % of Class
Power(2)
- ---------------------------------------------------- -------------- -------------- ---------- ----------
MAXXAM Inc. Common Stock 50,000,000(3) 69.7 63.6
FMR Corp.50,000,000(2) 63.2
Wellington Management Company, LLP Common Stock 5,635,441(4)(5) 7.7
7.0
PRIDES 1,781,400 20.55,271,634(3) 6.7
Vanguard/Windsor Funds, Inc. Common Stock 5,212,234(4) 6.6
Robert J. Cruikshank Common Stock 2,000 *
*
George T. Haymaker, Jr. Common Stock 59,112(6) *102,436(5) *
Charles E. Hurwitz Common Stock 125,000(7)(8) *187,500(6)(7) *
John T. La Duc Common Stock 108,467(6) *117,828(5) *
Ezra G. Levin --- -0- -- ---
Robert Marcus Common Stock 3,500 *
*
Raymond J. Milchovich Common Stock 55,663(6) *43,327(5) *
Robert J. Petris --- -0- -- ---
Geoffrey W. Smith Common Stock 54,019(6) *50,510(5) *
Lawrence L. Watts Common Stock 53,258(6) *67,713(5) *
All directors and executive Common Stock 604,653(9)694,375(8) * *
executive
officers of the Company and
KACC as a group (20(21 persons)
- ------------------
- --------------------
* Less than 1%.
(1) Unless otherwise indicated, the beneficial owners have
sole voting and investment power with respect to the
shares listed in the table. Also includes options
exercisable within 60 days of April 1, 1997,March 31, 1998, to
acquire such shares.
(2) The PRIDES are generally entitled to 4/5 vote per
share on matters presented to a vote of the Company's
stockholders.
(3) Includes 27,938,250 shares transferred toheld by MGHI, a wholly
owned subsidiary of MAXXAM, on December 23,
1996.MAXXAM. As of March 31, 1998,
27,938,250 shares of the Company's Common Stock owned
by MGHI were pledged as security for two debt issues
of MGI consisting of $100.0 million aggregate
principal amount of 11-1/4% Senior Secured Notes due
2003 and $15.7 million aggregate principal amount of
12-1/4% Senior Discount Notes due 2003. The address
of MAXXAM is 5847 San Felipe, Suite 2600, Houston,
Texas 77057.
(3) Information is based solely on the Schedule 13G filed
with the SEC dated January 14, 1998, by Wellington
Management Company, LLP, a registered investment
advisor ("Wellington"), as a result of its ownership
interest in the Company at December 31, 1997 (the
"Wellington 13G"). The Wellington 13G indicates that
these shares are held of record by clients of
Wellington, that Wellington does not have sole voting
or dispositive power with respect to any of such
shares and that Wellington has shared voting and
dispositive power with respect to 59,400 and 5,271,634
of such shares, respectively. The Wellington 13G
further indicates that only one of Wellington's
clients, Vanguard/Windsor Funds, Inc. ("Vanguard"),
has any rights with respect to more than 5% of the
Company's Common Stock. Additional information with
respect to Vanguard is set forth above in the table
and below in the following footnote. Wellington's
address is 75 State Street, Boston, Massachusetts
02109.
(4) Information is based solely on the Schedule 13G as
amended, filed
with the SEC dated February 14, 1997,9, 1998, by Vanguard, an
investment advisor, as a result of its ownership
interest in connection with FMR Corp.'s beneficial ownership of the Company atas of December 31, 19961997 (the
"FMR"Vanguard 13G"). The FMRVanguard 13G was filed by FMR Corp., its wholly owned
subsidiary, Fidelity Management & Research Company
("Fidelity"), Edward C. Johnson 3d, the Chairmanindicates that
Vanguard has sole voting and 12.0% ownershared dispositive power
with respect to all of the outstanding voting stock of FMR
Corp.,these shares. Vanguard's
address is Post Office Box 2600, Valley Forge,
Pennsylvania 19482-2600.
(5) Includes 80,025, 5,400, 6,900, 17,985 and Abigail P. Johnson, a Director and 24.5%
owner of the outstanding voting stock of FMR Corp.
Members of the Edward C. Johnson 3d family and trusts
for their benefit are the predominant owners of the
Class B shares of common stock of FMR Corp.,
representing approximately 49% of the voting power of
FMR Corp. Fidelity is a registered investment
advisor. The address of FMR Corp. is 82 Devonshire
Street, Boston, Massachusetts 02109.
(5) Represents 4,151,000 shares of Common Stock held
directly and 1,484,441 shares of Common Stock
immediately acquirable upon conversion of 1,781,400
shares of PRIDES at a conversion rate of .8333 shares
of Common Stock per share of PRIDES.
(6) Includes 53,350, 4,600, 3,600, 12,310 and 11,99018,465
options exercisable within 60 days of April 1, 1997,March 31, 1998,
to acquire shares of Common Stock, by Messrs.
Haymaker, Milchovich, La Duc, Milchovich,Watts and Smith,
and Watts,
respectively.
(7)(6) Represents only options exercisable within 60 days of
April 1, 1997,March 31, 1998, to acquire such shares.
(8)(7) Excludes shares owned by MAXXAM. Mr. Hurwitz may be
deemed to hold beneficial ownership in the Company as
a result of his beneficial ownership in MAXXAM.
(9)(8) Includes options exercisable within 60 days of April
1, 1997,March
31, 1998, to acquire 250,080341,850 shares of Common Stock.
-14-
Ownership of Parent of the Company
- ----------------------------------
As of April 1, 1997,15, 1998, MAXXAM owned, directly and
indirectly, approximately 62%63.2% of the issued and
outstanding
capital stock of the Company, assuming conversion of each
outstanding share of PRIDES into one share of Common Stock of the Company. The following
table sets forth, as of April 1, 1997,15, 1998, the beneficial
ownership of the Common Stock and Class A $.05
Non-Cumulative Participating Convertible Preferred Stock
("Class A Preferred Stock") of MAXXAM by the directors of
the Company, and by the directors and executive officers of
the Company and KACC as a group:
% of
Combined
Name of % Voting
Beneficial Owner Title of Class # of Shares(1) % of Class Power(2)Power (2)
- ---------------- -------------- -------------- ------------------ ---------
Charles E. Hurwitz Common Stock 2,733,542(3)2,683,396(3)(4)(5) 31.4
61.438.2 68.8
Class A Preferred Stock 684,941(6)702,941(6)(7) 99.1
Ezra G. Levin Common Stock 1,600(4)1,950(4)(5)(8) * *
Robert J. Cruikshank Common Stock 1,600(8)1,950(8) * *
All directors and Common Stock 2,742,208(3)(4)(9) 31.52,687,546(4)(5) 38.3
executive officers 61.4
of the Company and68.8
as a group Class A Preferred Stock 684,941(6)702,941(6)(7) 99.1
KACC as a group
(20(21 persons)
- ---------------------------------------
* Less than 1%.
(1) Unless otherwise indicated, beneficial owners have sole
voting and investment power with respect to the shares
listed. Includes the number of shares (i) such persons
would have received on April 1, 1997,15, 1998, if any, for
their exercisable SARsstock appreciation rights ("SARs")
(excluding SARs payable in cash only) exercisable
within 60 days of such date if such rights had been
paid solely in shares of MAXXAM common stock, and (ii)
of MAXXAM common stock credited to such person's stock
fund account under MAXXAM's 401(k) savings plan as of
February 28, 1997.1998.
(2) MAXXAM Class A Preferred Stock is generally entitled to
ten votes per share.
(3) Includes 1,669,451 shares of MAXXAM common stock owned
by Federated Development Inc., a wholly owned
subsidiary of Federated ("FDI"), as to which
Mr. Hurwitz indirectly possesses voting and investment
power. Mr. Hurwitz serves as a trustee of Federated,
and together with members of his immediate family and
trusts for the benefit thereof, owns all of the voting
shares of Federated. Also includes (a) 20,89230,201 shares
of MAXXAM common stock separately owned by Mr.
Hurwitz's spouse and as to which Mr. Hurwitz disclaims
beneficial ownership, (b) 46,500 shares of MAXXAM
common stock owned by the Hurwitz Investment
Partnership L.P., a limited partnership controlled by
Mr. Hurwitz and his spouse, 23,250 of which shares were
separately owned by Mr. Hurwitz's spouse prior to their
transfer to such limited partnership and as to which
Mr. Hurwitz disclaims beneficial ownership, (c) 119,832101,214
shares of MAXXAM common stock owned by the 1992 Hurwitz
Investment Partnership L.P., of which 59,91650,607 shares are
owned by Mr. Hurwitz's spouse as separate property and
as to which Mr. Hurwitz disclaims beneficial ownership,
(d) 805,692755,001 shares of MAXXAM common stock held directly
by Mr. Hurwitz, and
(e) 71,17560,000 shares of MAXXAM common
stock thatowned by Federated Development Investments, LLC,
a Texas limited liability company owned 79% by FDI may
acquire in exchange for 7% Cumulative Exchangeable
Preferred Stockand
21% by Mr. Hurwitz, and of MCO Properties Inc.which FDI is the managing
member ("FDILLC"), a wholly owned
subsidiaryand (f) options to purchase 21,029
shares of MAXXAM.MAXXAM common stock within 60 days of April
15, 1998.
(4) In addition, FDI, Federated, FDILLC, the Hurwitz
Investment Partnership L.P., the 1992 Hurwitz
Investment Partnership L.P., Messrs. Hurwitz and Levin,
and Mr. James H. Paulin, Jr., Secretary and Treasurer
of Federated, may be deemed a "group" (the "Stockholder
Group") within the meaning of Section 13(d) of the
Securities Exchange Act.Act of 1934, as amended (the
"Exchange Act"). As of April 1, 1997,15, 1998, in the
aggregate, the Stockholder Group beneficially owned
2,735,4942,685,698 shares of MAXXAM common stock and 685,074703,074
shares of Class A Preferred Stock, aggregating
approximately 61.4%68.8% of the total voting power of
MAXXAM. By reason of the foregoing and their
relationship with the members of the Stockholder Group,
Messrs. Hurwitz and Levin may be deemed to possess
shared voting and investment power with respect to the
shares held by the Stockholder Group.
(5) Does not include shares owned by other members of the
Stockholder Group.
(6) Includes 661,377 shares owned by FDI and 1,064 shares
ownedheld directly.
(7) Includes options exercisable within 60 days of April
1, 1997,15, 1998, to acquire 22,50040,500 shares of Class A Preferred
Stock.
(8) Includes options exercisable within 60 days of April
1, 1997,15, 1998, to purchase 600950 shares of MAXXAM common
stock.
(9) Includes (i) options exercisable within 60 days of
April 1, 1997, to acquire 1,200 shares of MAXXAM
common stock, and 4,577 shares of MAXXAM common stock,
which is the number of shares Mr. Wade would have
received on April 1, 1997, for SARs exercisable within
60 days of such date on 13,000 shares of MAXXAM common
stock, if such SARs had been paid solely in shares of
such common stock.
-15-
As of April 1, 1997, 27,938,250 shares of the Company's
Common Stock owned by MGHI, a wholly owned subsidiary of
MAXXAM, were pledged as security for two debt issues of MGI
consisting of $100.0 million aggregate principal amount of
11-1/4% Senior Secured Notes due 2003 and $125.7 million
aggregate principal amount of 12-1/4% Senior Discount Notes
due 2003.
EXECUTIVE COMPENSATION
-----------------------
Summary Compensation Table
- --------------------------
The following table sets forth compensation
information, cash and non-cash, for each of the Company's
last three completed fiscal years with respect to the Chief
Executive Officer and the four most highly compensated
executive officers of the Company (collectively referred to
as the "named executive officers") for the fiscal year ended
December 31, 1996:1997:
Long-Term Compensation
-----------------------
Annual Compensation Awards Payouts
------------ ------- ------ -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restricted
All Other
Annual Stock Options/ LTIP Compensa-All Other
Name and Salary Bonus Compensation Awards(s)Award(s) SARs Payouts ionCompensation
Principal Position Year ($) ($) ($)(1) ($) (#) ($) ($)
- ------------------------------------------ ---- ------------- ----- ------------ ------------------- -------- ------- ----------
-------- ------------
George T. Haymaker, Jr., 1997 494,083 311,000 -0- -0- -0- 121,122(2) 24,704(3)
Chairman and Chief 1996 487,000 71,638 --- -0- -0- -0- -0-(2) 9,740(3)
Jr.,Executive Officer 1995 465,000 225,000 ----0- -0- -0- -0- 23,250(3)
Chairman,Raymond J. Milchovich, 1997 272,083 211,000 -0- -0- -0- 71,212(2) 17,796(3)(4)
President 1994 450,000 100,000 --- -0- 26,700 -0- 2,079(4) and Chief Executive1996 223,750 42,700 -0- -0- -0- -0-(2) 77,158(3)(4)
Operating Officer 1995 183,000 70,000 -0- -0- -0- -0- 9,150(3)
John T. La Duc, 1997 260,000 184,000(5) -0- -0- -0- 44,236(2) 13,000(3)
Vice President and 1996 260,000 83,200(5) ----0- -0- -0- -0-(2) 5,200(3)
Vice President andChief Financial Officer 1995 248,333 130,000(5) ----0- -0- -0- -0- 12,417(3)
Chief Financial 1994 240,000 103,000(5) ---Lawrence L. Watts, 1997 242,667 130,100 -0- 9,200 -0- 4,800(3)
Officer
Geoffrey W. Smith,-0- 58,981(2) 12,133(3)
Vice President, 1996 246,250 38,000 ---234,000 37,000 -0-(6) -0- -0- -0-(2) 33,550(3)24,180(3)(4)
Vice PresidentChief Administrative 1995 211,171 84,000 ---105,000 -0- -0- -0- -0- 10,559(3)
and President of 1994 175,004 26,000 --- 500,000(7) 7,100 -0- 3,500(3)
Kaiser Aluminum
Commodities, of
KACC
Lawrence L. Watts, 1996 234,000 37,000 --- -0-(6) -0- -0-(2) 24,180(3)(4)
Vice President 1995 211,171 105,000 --- -0- -0- -0- 10,559(3)
Administration, 1994 172,004 26,000 --- 500,000(7) 7,100 -0- 3,440(3)Officer and President
of Kaiser Aluminum
International
of
KACC
Raymond J. Milchovich,Geoffrey W. Smith, 1997 255,000 116,635 -0- -0- -0- 68,250(2) 55,743(3)(4)
Vice President, 1996 223,750 42,700 ---246,250 38,000 -0- -0- -0- -0-(2) 77,158(3)33,550(3)(4)
Viceand President andof Kaiser 1995 183,000 70,000 ---211,171 84,000 -0- -0- -0- 9,150(3)
President of Kaiser 1994 145,500 21,000 --- -0- 7,200 -0- 2,910(3)
Flat-Rolled Products,
of KACC10,559(3)
Aluminum Commodities
- --------------------
(1) Excludes perquisites and other personal benefits
because the aggregate amount of such compensation is
the lesser of either $50,000 or 10% of the total of
annual salary and bonus reported for the named
executive officer. (2) In 1995,Tax preparation fees and the Company implemented an unfunded incentive
compensation program more fully described in the Reportvalue
of the Compensation Committees on Executive
Compensation contained in this Proxy Statement.personal use of company cars with respect to
each named executive officer exceed 25% of the total
perquisites and other personal benefits received by
each such named executive officer.
(2) The long-term component of the Company's incentive
compensation program provides incentive compensation
based on performance against goals over rolling
three-year periods. Payments underThe first installment for the
1994-1996 period was distributed in March 1997, and the
amounts shown in the table reflect the market value of
the stock portion of the grant on the date of
distribution. The second installment was distributed in
March 1998. Total awards for the 1995-1997 period for
Messrs. Haymaker, Milchovich, La Duc, Watts and Smith
were $362,100, $161,500, $164,900, $188,100 and
$152,700, respectively. The first installment for the
1995-1997 period was distributed in March 1998.
Additional information with respect to the long-term
component of the Company's incentive compensation
program are made 57%is set forth below in shares of
Common Stockthe Long-Term Incentive
Plan Awards Table and in the Report of the Company and 43% in cash and are
paid in two installments, the first installment during
the year following the end of the three-year period and
the second installment during the second year following
the end of the three-year period. In each case, such
payments are conditionedCompensation
Committees on the continued employment of
the participant. As a result, if a participant
voluntarily terminates his or her employment for any
reason other than death, disability or retirement prior
to the beginning of the fiscal year the payment is to
be made, any unmade payments are forfeited.
-16-
The total awards for the 1994-1996 period for Messrs.
Haymaker, La Duc, Smith, Watts and Milchovich were
$230,000, $84,000, $129,600, $112,000 and $40,280,
respectively. The first installment was paid in March
1997.Executive Compensation.
(3) Includes contributionsaccruals by KACC of $24,704, $9,740 and
$23,250 for Mr. Haymaker; $13,604, $4,475 and $9,150
for Mr. Milchovich; $13,000, $5,200 $12,417, and $4,800$12,417 for Mr.
La Duc; $4,925,$12,133, $4,680 and $10,559 and $3,500 for Mr. Smith; $4,680,Watts and
$12,750, $4,925 and $10,559 and $3,440 for Mr. Watts;
and $4,475, $9,150 and $2,910 for Mr. Milchovich,Smith under the
Kaiser Savings Plan (asand Kaiser Supplemental Benefits
Plan (each as defined below) for 1996,
1995 and 1994, respectively, and $9,740 and $23,250,
for1997, 1996 and 1995,
respectively, for Mr. Haymaker.respectively.
(4) Includes moving-related items of $28,625 for Mr. Smith,
$19,500 for Mr. Watts,$4,192 and $72,683 for
Mr. Milchovich infor 1997 and 1996, respectively; $19,500
for Mr. Watts for 1996; and $2,079$42,993 and $28,625 for Mr.
Haymaker in 1994.Smith for 1997 and 1996, respectively.
(5) Includes $50,000 (to be paid over a two-year period),
$50,000 (to be paid over a two-year period),
for each of 1997, 1996 and $75,000 (to be paid over a three-year period), awarded
for 1996, 1995, and 1994, respectively, for which KACC
will be reimbursed by MAXXAM.
(6) As of December 31, 1996, Messrs. Smith and Watts each
owned 25,642 shares of restricted Common Stock of the
Company valued at approximately $298,088 based on the
closing market price of $11.625. Restrictions on such
shares were lifted on January 2, 1997. No other named
executive officer held restricted stock of the Company
at fiscal year end 1996.
(7) Amount reflects value of 51,282 shares of Common Stock
of the Company issued on May 24, 1994, based on the
closing price of $9.75 per share on the date issued.
Restrictions were lifted on 12,820 of such shares on
each of May 24, 1995, and May 24, 1996. When issued,
the restrictions on 12,821 of the remaining shares were
scheduled to be lifted on each of May 24, 1997, and May
24, 1998. However, the restrictions were lifted on
January 2, 1997.
Option/SAR Grants
- -----------------
No individual grants of stock options to purchase Common Stock or SARs were granted
bymade
during 1997 to any of the Company in fiscal year 1996.Company's named executive
officers.
Option/SAR Exercises and Fiscal Year End Value Table
- ----------------------------------------------------
The table below provides information on an aggregated
basis concerning each exercise of stock options (or tandem
SARs) and freestanding SARs
during the fiscal year ended December 31, 19961997 by each of
the Company's named executive officers, and the 19961997 fiscal
year-end value of unexercised options and SARs.
(a) (b) (c) (d) (e)
Number of Unexercised Value of Unexercised
Options/SARs in-the-Money Options/SARs
at Year End (#) at Fiscal Year-End ($)
------------------------------------ -------------------------
Shares
Acquired on Value
Name Exercise Realized
(#) ($Exercise(#)(1) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- --------------------- ------------ -------- ------------ ------------ ----------- -------------
-------------------------------------------------------------------------------------------------
George T. Haymaker, Jr. - - 33,350 53,350 87,500(2) 175,000(2)60,025 26,675 66,252(2) 33,126(2)
Raymond J. Milchovich - - 5,400 1,800 -(2) -(2)
John T. La Duc - - 4,600 4,6006,900 2,300 -(2) -(2)
- 64,750 8,000(3) -0-(3) 125,000(3) -(3)
Lawrence L. Watts - 8,000(3) 2,000(3) 157,000(3) 39,250(3)- 13,765 5,995 13,979(2) 6,990(2)
Geoffrey W. Smith - - 7,930 12,310 19,163(2) 38,325(2)
Lawrence L. Watts - - 7,770 11,990 18,463(2) 36,925(2)
Raymond J. Milchovich - - 3,600 3,600 -(2) -(2)14,085 6,155 14,509(2) 7,255(2)
- -----------------------------------------
(1) If no shares received, the number reflected, if any,
represents the number of securities with respect to
which options/SARs were exercised.
(2) Valued at $11.625,$8.875, the closing price of the Company's
Common Stock on December 31, 1996,1997, less exercise
price. If the exercise price is equal to or higher
than the closing price, no value is shown.
(3) Represents SARs relating to MAXXAM's common stock.
Valued at $47.625,$43.625, the closing price of MAXXAM's
common stock on December 31, 1996,1997, less exercise
price.
Except as set forth below, theThe SARs relating to MAXXAM common stock set forth in
the above table for Mr. La Duc were granted under MAXXAM's
1984 Phantom Share Plan (the "MAXXAM Phantom Plan"). All of
Mr. La Duc's SARs under the MAXXAM Phantom Plan are
exercisable for cash only.
All such
SARs
Long-Term Incentive Plan Awards Table
Each of the Company's named executive officers received
awards in 1997 under -17-
the MAXXAM Phantom Plan vestlong-term component of the
Company's incentive compensation program for the 1994-1996
three-year, long-term performance period. The following
table and accompanying footnotes describe the awards
received by each of the Company's named executive officers
in 1997 and the criteria applied in determining the amount
payable for the 1994-1996 performance period.
(a) (b) (c)
Performance
Number of or Other
Shares, Units Periods Until
or Other Maturation or
Name Rights (#) Payout
- ---------------------------------------------------------
George T. Haymaker, Jr. 5,762(1) -(2)
Raymond J. Milchovich 1,009(1) -(2)
John T. La Duc 2,104(1) -(2)
Lawrence L. Watts 2,806(1) -(2)
Geoffrey N. Smith 3,247(1) -(2)
- -----------
(1) Represents the stock portion of the first installment
of long-term incentive award distributed in March 1997
to each of the Company's named executive officers in
connection with the 1994-1996 three year, long-term
performance period. Payments under the long-term
component of the program are generally made 57% in
shares of the Company's Common Stock and 43% in cash
and are paid in two installments; the first installment
during the year following the end of the three-year
period and the second installment during the second
year following the end of the three-year period. The
aggregate number of shares distributed was based on the
average closing price of the Company's Common Stock
during the last December of the long-term performance
period. The average closing price of the Company's
Common Stock during December 1996 was $11.375 per
share. The total awards for the 1994-1996 long-term
performance period for Messrs. Haymaker, Milchovich,
La Duc, Watts and Smith were $230,000, $90,480,
$84,000, $112,000 and $129,600, respectively.
(2) Payment of the second installment for the 1994-1996
long-term performance period was conditioned on
continued employment through the end of the fiscal year
following the end of the performance period. If a
participant voluntarily terminates his or her
employment for any reason other than death, disability
or retirement prior to the beginning of the fiscal year
the payment is to be made; any unmade payments are
forfeited. Each of the Company's named executive
officers were employed by KACC on January 1, 1998, and
the second installment was distributed in March 1998.
Threshold, target and maximum amounts for the long-term
portion of executive compensation are based upon Company
performance. During the 1994-1996 performance period target
incentives were based on the return on assets employed in
the business. Minimum performance criteria must be met
before the threshold amount is earned. In addition, when
incentive awards are determined for the foregoing named
executive officers at the end of each performance period, an
additional 30% of incentive targets based on the achievement
of goals or other accomplishments not reflected in the
return on assets, is added to the incentive payment amount.
Finally, while the Section 162(m) Committee cannot increase
the incentive payment, it may decrease the payment by up to
60% of the target incentive. Additional information with
respect to 20% onlong-term incentive compensation awarded to the
first anniversary date ofCompany's named executive officers is set forth above in the
grant and an additional 20% on
each anniversary date thereafter until fully vested.Summary Compensation Table.
Defined Benefit Plans
- ---------------------
Kaiser Retirement Plan
----------------------
KACC maintains a qualified, defined-benefit retirement
plan (the "Kaiser Retirement Plan") for salaried employees
of KACC and co-sponsoring subsidiaries who meet certain
eligibility requirements. The table below shows estimated
annual retirement benefits payable under the terms of the
Kaiser Retirement Plan to participants with the indicated
years of credited service. These benefits are reflected
without reduction for the limitations imposed by the Code on
qualified plans and before adjustment for the Social
Security offset, thereby reflecting aggregate benefits to be
received, subject to Social Security offsets, under the
Kaiser Retirement Plan and the Kaiser Supplemental Benefits
Plan (as defined below).
Annual Years of Service
-----------------------------------------------------------------------------------------------
Remuneration 15 20 25 30 35
- ------------ --------------------------------------------
---------------------------------------------------
$ 150,000 33,750 45,000 56,250 67,500 78,750
200,000 45,000 60,000 75,000 90,000 105,000 250,000 56,250 75,000 93,750 112,500 131,250
350,000 78,750 105,000 131,250 157,500 183,750
450,000 101,250 135,000 168,750 202,500 236,250
550,000 123,750 165,000 206,250 247,500 288,750
650,000 146,250 195,000 243,750 292,500 341,250
750,000 168,750 225,000 281,250 337,500 393,750
850,000 191,250 255,000 318,750 382,500 446,250
950,000 213,750 285,000 356,250 427,500 498,750
1,050,000 236,250 315,000 393,750 472,500 551,250
The estimated annual retirement benefits shown are based
upon the assumptions that current Kaiser Retirement Plan and
Kaiser Supplemental Benefits Plan provisions remain in
effect, that the participant retires at age 65, and that the
retiree receives payments based on a straight-life annuity
for his lifetime. Messrs. Haymaker, Milchovich, La Duc,
Smith, Watts and MilchovichSmith had 3.7, 27.3, 22.5, 21.04.7, 17.6, 28.3, 22.0 and 16.623.5 years of
credited service, respectively, on December 31, 1996.1997.
Monthly retirement benefits, except for certain minimum
benefits, are determined by multiplying years of credited
service (not in excess of 40) by the difference between
1.50% of average monthly compensation for the highest base
period (of 36, 48 or 60 consecutive months, depending upon
compensation level) in the last 10 years of employment and
1.25% of monthly primary Social Security benefits. Pension
compensation covered by the Kaiser Retirement Plan and the
Kaiser Supplemental Benefits Plan consists of salary and
bonus amounts set forth in the Summary Compensation Table
(column (c) plus column (d) thereof).
Participants are entitled to retire and receive pension
benefits, unreduced for age, upon reaching age 62 or after
30 years of credited service. Full early pension benefits
(without adjustment for Social Security offset prior to age
62) are payable to participants who are at least 55 years of
age and have completed 10 or more years of pension service
(or whose age and years of pension service total 70) and who
have been terminated by KACC or an affiliate for reasons of
job elimination or partial disability. Participants
electing to retire prior to age 62 who are at least 55 years
of age and who have completed 10 or more years of pension
service (or whose age and years of pension service total at
least 70) may receive pension benefits, unreduced for age,
payable at age 62 or reduced benefits payable earlier.
Participants who terminate their employment after five years
or more of pension service, or after age 55 but prior to age
62, are entitled to pension benefits, unreduced for age,
commencing at age 62 or, if they have completed 10 or more
years of pension service, actuarially reduced benefits
payable earlier. For participants with five or more years
of pension service or who have reached age -18-
55 and who die,
the Kaiser Retirement Plan provides a pension to their
eligible surviving spouses. Upon retirement, participants
may elect among several payment alternatives including, for
most types of retirement, a lump-sum payment.
Kaiser Supplemental Benefits Plan
KACC maintains an unfunded, non-qualified Supplemental
Benefits Plan (the "Kaiser Supplemental Benefits Plan"), the
purpose of which is to restore benefits which would
otherwise be paid from the Kaiser Retirement Plan or the
Supplemental Savings and Retirement Plan, a qualified
Section 401(k) plan (the "Kaiser Savings Plan"), were it not
for the Section 401(a)(17) and Section 415 limitations
imposed by the Code. Participation in the Kaiser
Supplemental Benefits Plan includes all employees of KACC
and its subsidiaries whose benefits under the Kaiser
Retirement Plan and Kaiser Savings Plan are likely to be
affected by such limitations imposed by the Code. Eligible
participants are entitled to receive the equivalent of the
Kaiser Retirement Plan and Kaiser Savings Plan benefits
which they may be prevented from receiving under those plans
because of such Code limitations.
Kaiser Termination Payment Policy
Most full-time salaried employees of KACC are eligible
for benefits under an unfunded termination policy if their
employment is involuntarily terminated, subject to a number
of exclusions. The policy provides for lump-sum payments
after termination ranging from one-half month's salary for
less than one year of service graduating to eight months'
salary for 30 or more years of service. The amounts payable
to Messrs. Haymaker, Milchovich, La Duc, Smith, Watts and MilchovichSmith
under the policy if they had been involuntarily terminated
on December 31, 1996,1997 would have been $151,667,$63,000, $129,166,
$151,666, $130,000 and $148,750, $117,000 and
$102,083, respectively.
Employment Contracts and Termination of Employment and
- ------------------------------------------------------
Change-in-Control Arrangements
- ------------------------------
On April 1, 1993, the Company and KACC entered into a
five-year employment agreement with Mr. George T. Haymaker,
Jr., pursuant
to which Mr. Haymakerhe currently serves as Chairman President and Chief Executive
Officer of the Company and KACC. In December 1997, the term
of Mr. Haymaker's employment agreement was extended until
December 5, 1999. As amended, Mr. Haymaker's agreement
providedprovides for aan annual base salary of $450,000 per annumnot less than $569,000
effective February 1, 1998 and a cumulative bonus target in
1998 of 50%
of his salary which began fiscal year 1994. Mr. Haymaker's
base salary is subject to review and possible change on an
annual basis but cannot be reduced below $450,000 without
his consent. In 1995, Mr. Haymaker's agreement was amended
to increase his base salary to $465,000 and increase his
bonus targets in a manner consistent with$1,206,400 under the Executive
ProgramCompany's executive
compensation programs as more fully described below in the
Report of the Compensation Committees on Executive
Compensation. In 1996, Mr.
Haymaker's base salary was increased to $487,000. PursuantOf this amount, $387,900 is attributable to
Mr. Haymaker's short term incentive target and $818,500 is
attributable to his long term incentive target for the three
year period ending December 31, 1998. Pursuant to his
agreement, heMr. Haymaker received an initial award under the
Kaiser 1993 Omnibus Stock Incentive Plan upon its approval by
stockholders(the "1993 Omnibus
Plan") of options to purchase up to 100,000 shares of the
Company's Common Stock at its fair market value on the date
of the award. Such options vestvested at the rate of 20% per
year for a period of five years.years through and including April
1, 1998.
In the event of a change of control of the Company or
KACC which within one year thereafter adversely affects Mr.
Haymaker's title, position, duties, responsibilities or
compensation, Mr. Haymaker's employment agreement provides
that he may elect to be deemed terminated without cause, and
therefore, entitled to a severance payment in an amount
equal to two times his base annual salary reduced by any
payment made as discussed under "Defined Benefit
Plans Kaiser"Kaiser Termination Payment
Policy" above.
Additionally, in the event of such termination,
Mr. Haymaker's options for 100,000 shares of Common Stock
will fully vest.
-19-
Mr. Haymaker's employment agreement further provides
that he vests 20% per year in an unfunded non-qualified
supplemental benefit, payable at retirement after age 62,
equal to a benefit determined as if his Kaiser Retirement
Plan pension were based on his aggregate service with KACC
and a prior employer (25 years), less his pension from that
prior employer and any retirement benefits from KACC. Mr.
Haymaker is now fully vested under this provision.
KACC has agreed to provide Mr. Smith with an unfunded
nonqualified supplemental benefit after retirement equal to
the additional Kaiser Retirement Plan pension he would be
entitled to receive if his prior employment (6.3) years with
an affiliate of KACC were counted as credited service under
such plan. This additional credited service is also counted
in determining his benefits as described above under the
caption "Kaiser Termination Payment Policy" and for purposes
of determining his employee contributions under KACC's
retiree medical program.
Except as otherwise noted above, there are no
employment contracts between the Company or any its
subsidiaries and any of the Company's named executive
officers. Similarly, there are not any compensatory plans
or arrangements which include payments from the Company or
any of its subsidiaries to any of the Company's named
executive officers in the event of any such officer's
resignation, retirement or any other termination of
employment with the Company and its subsidiaries or from a
change-in-control of the Company or a change in the named
executive officer's responsibilities following a
change-in-control except as set forth above under the
caption "Kaiser Termination Payment Policy".
REPORT OF THE COMPENSATION COMMITTEES
ON
EXECUTIVE COMPENSATION
Effective May 22, 1996, the Board replacedTwo compensation committees administer the Company's
Compensation Committee withcompensation plans, the Compensation Policy Committee and the Section
162(m) Compensation
Committee. The Compensation Policy Committee administers and
establishes the Company's overall compensation policies,
except to the extent that suchthis authority has been delegated
by the Board to the Section 162(m) Compensation Committee. The Section
162(m) Compensation Committee administers and approves amendments to the
Company's plans or programs which are intended to comply
with the provisions of Section 162(m) of the Internal
Revenue Code of 1986, as it may be amended from time to time
(the "Code"), and also establishes the criteria to be used
in determining awards to be made pursuant to those plans or
programs. Messrs. Marcus (Chairman) and Cruikshank
currently serve as members of the Section 162(m)
Compensation Committee and for purposes of Section 162(m)
are qualifying directors. Each committee reports to the full Board of Directors. During 1996,and
together they have furnished the members who
servedfollowing report on
each of these committees also served on the
Section 162(m) Committee and the Compensation Policy
Committee (these committees are hereinafter collectively
referred to in this report as the "Committees") of KACC.executive compensation for fiscal year 1997.
Although certain plans or programs in which executive
officers of the Company participate are jointly sponsored by
the Company and KACC, executive officers of the Company are
directly employed and compensated by KACC. During 1997, the
members serving on the Policy Committee and Section 162(m)
Committee also served on KACC's Compensation Policy
Committee and Section 162(m) Compensation Committee (these
committees are hereinafter collectively referred to in this
report as the "Committees"). References to the "Company"
made in the remainder of this report are deemed to include
KACC as well as the Company.
Executive Compensation - ----------------------
CompensationPhilosophy, Structure and Methodology
Philosophy. The Company's philosophy iscontinues to be
that compensation of its executives managers and key
employeesofficers should be
related as closely as possible to the ability of the Company
as a whole, and the area of direct responsibility of each
executive manager and key employee,
to create economic value. Only when earnings and cash flow
exceed the amount necessary to provide a positive rate of
return on the debt and equity capital invested in the
Company and new or added
economic value is created can Company shareholders and
management share in increased economic rewards.
Incentive emphasis. Management's incentive to create
added economic value should be to share in that added value
through additional compensation. To attract
and retain talented individuals, the Company provides the
opportunity to earn total compensation that is not only
competitive with, but, if Company goals are met, potentially
superior to, that available from employers with whom the
Company and its businesses compete.
Total Compensation System
- --------------------------
Compensation components. TotalStructure. Executive officer compensation for Company executives is made up1997
consisted of a combination of base salary, short andshort-term
incentives based on performance during 1997, long-term
incentive targets,incentives based on performance over the 1995-1997
three-year performance period, employee benefits and
executive perquisites. Base salary issalaries were designed to fall
approximately withinsomewhat below the 45th to 50th percentile of the market described
below whileand, together with short and long-term incentive
targets, were designed to fall somewhat above the 50th
percentile of that market. As a result, the combination of
base pay and incentive component,
when addedcompensation allowed executives
officers to base salary, allows executives and other
participants in the Company's incentive programs topotentially earn less, the same as or more than
the total compensation opportunity offered by competing
-20-
employers.employers depending on Company performance.
For 1997, the portion of executive compensation
allocated to base compensation ranged from approximately 32%
to 43% for certain senior executive officers, including the
named executive officers (collectively, the "Senior
Executives"), and 44% to 68% for the remaining executive
officers, with the portion allocated to incentive
compensation in each case generally increasing with position
responsibility. For the Senior Executives the incentive
targets for 1997 were allocated 30% to short-term targets
and 70% to long-term targets. For the remaining executive
officers the allocation was generally split evenly between
short and long-term targets. This structure reflected the
Company's compensation philosophy by structuring a major
portion of each executive's total compensation to be at-risk
and performance-based. The Company's compensation for
executivesexecutive officers also includesincluded other benefits and
perquisites which generally fallfell within the 50th percentile
of its comparative market.
Incentive Compensation. The Incentive Programs reflect
the Company'sMethodology. Target compensation philosophy by (i) providing
annualand incentives based on yearly performance, and long-term
incentives based on three-year performance; (ii) structuring
a major portion of each participant's total compensation to
be at-risk and performance-based; (iii) providing incentive
toward the achievement of excellent safety practices; and
(iv) promoting individual and group contributions that add
value to the Company. The Incentive Programs also reward
aggressive and accurate planning. This component is rooted
in the belief that economic value results that are planned
and controlled by management should be rewarded more
positively than those that occur because of unplanned and
uncontrolled activity.
Methodology of Incentive Programs. Target incentives
under each Incentive Program are set at the beginning of
each annual or three-year long-term performance period. The
target incentives are establishedwere
based on a combination of market survey data, internal
force-ranking and assessment of position responsibilities.
During 1996,Major national surveys, as well as market data from a group
of companies engaged in metals, mining, chemicals and
similar industries, with whom the Company is likely to
compete for managerial talent, were used to establish the
market. In performing its assessment of position
responsibilities, descriptions of various key positions, the
duties and major responsibilities of each position, as well
as the required qualifications, were developed and then
matched to database descriptions to ensure an accurate match
to reasonably comparable positions at comparative companies.
Company performance awards and goals were established
at the beginning of 1997 with respect to the annual
performance period and at the beginning of 1995 with respect
to the three-year long-term performance period. In each
instance performance awards were structured in a manner
which would reward aggressive and accurate planning and
performance goals were based on (i) return on net assets
employed in
the business, plus achievement of goals or financial
accomplishments not reflected in the return on assets of the
Company or its business units. Each year, the Committees
approve performance goals forby the Company, and for eachcertain executive officers,
the return on net assets employed by specific business units
or a combination of Company and business unit performance,
and (ii) safety or group and individual goals and
objectives. Minimum or threshold performance levels which
must be met for there to be any incentive payout, as well as
target and maximum performance levels were also established
for the short and long-term performance periods. With
respect to the short-term performance period, performance
goals were based on "normalized" metal prices to allow for
measurement of the progress toward the $120 million profit
improvement program without fluctuations due to changing
metal prices. In addition, incentive compensation payable
to each one yearof the Senior Executives for the 1997 short-term
performance period was capped at their respective targets if
the average price of the Company's Common Stock during
December 1997 was lower than the average price during
December 1996.
Components of Executive Officer Compensation
Base Salaries. Adjustments to the base salary of
certain executive officers were made during 1997 as
necessary to reflect market related adjustments and
three-yearincreasing responsibilities assumed either as the result of
promotions or additional assignments during the year.
Short-Term Incentive. As described above, short-term
incentive awards for 1997, as well as threshold performance
requirements, were based on the "normalized" return on net
assets. During 1997 Company results exceeded target
performance levels, however the average price of the
Company's Common Stock during December 1997 was lower than
the average price during December 1996. As a result,
short-term awards paid to certain Senior Executive Officers
were "capped" at their respective targets, while awards to
other executive officers were generally approximately 34%
above the target amounts. Short-term awards for 1997 were
paid in cash during the first quarter of 1998.
Long-Term Incentive. Long-term incentive compensation
for the 1995-1997 long-term performance period was based on
the simple average of the return on net assets during each
of the three years included within the performance period.
AnnualDuring the 1995-1997 long-term performance period Company
and business unit results generally exceeded threshold
performance goals, but did not reach target performance
levels. As a result, long-term awards for the 1995-1997
performance period were generally 54% of the target amounts.
Long-term incentive payments underfor the Incentive Programs
are made in cash and1995-1997 long-term
incentive paymentsperformance period are made 43% in cash and 57% in shares of
Common Stock and are paid in two installments, the first
installment during the year
following the end of the three-year periodhaving been distributed in March 1998 and the
second installment during the second year following the end of the
three-year period.being scheduled for distribution in March
1999. In each case, such payments are generally conditioned on
the continued employment of the
participant. Any stock-relatedemployment.
1993 and 1997 Omnibus Plans
All long-term performance awards granted pursuant to
the Incentive Programsdistributed in
connection with long-term performance periods beginning
before January 1, 1997 are issuedmade under the 1993 Omnibus
Plan. Executive Program. During 1996, the participantsAll long-term performance awards distributed in
the Executive Program were limited to Messrs. Haymaker, La
Duc and Bonn. Effectiveconnection with long-term performance periods beginning on
or after January 1, 1997 Messrs.
Milchovich, Smith and Watts were added as participants inwill be made under the Executive Program. The Executive Program is
administered1997 Omnibus
Plan, which was approved by the Section 162(m) Compensation Committee.
When incentive awards are determinedstockholders of the Company
at the end of each
performance period, an additional 30% of incentive targets
based on achievement of goals or other accomplishments not
reflected in1997 annual meeting. In addition, the return on assets, is added to the incentive
payment amount. While the Section 162(m) Compensation
Committee cannot increase the incentive payment, it may
decrease the incentive payment by 1% to 60% of the target
incentive.
Employee Program. During 1996, the participants in the
Employee Program included the Company's executive officers
(other than Messrs. Haymaker, La Duc and Bonn), managers and
other key employees of the Company. The Employee Program is
directed by the Compensation Policy Committee and
administered by the Company's corporate human resources
department.
Base Salaries
- -------------
The Company has set a goal of achieving profit
improvements and significant cost reductions during 1997
with the full effect to be realized in 1998. As part of its
plan to achieve this goal, the Committee determined that, in
general, 1997 base salaries for executive officers,
including Mr. Haymaker, should be maintained at the 1996
level. However, incentive targets for 1997 were increased
to place additional emphasis on achieving desired
performance levels.
-21-
1993 Omnibus
Plan - -----------------
The 1993 Omnibus Plan ismay be utilized as otherwise necessary to provide those
persons who have substantial responsibility for management
and growth of the Company with an opportunity to increase
their ownership of Common Stock, stock options or related
types of benefits. NoDuring 1997, no grants were made under
the 1993 Omnibus Plan, except in 1996. However, in March 1997, shares of
Common Stock were issued fromconnection with the
1993 Omnibus Plan as
partial paymentdistribution of the first installment of awardsshares of Common
Stock awarded for the 1994 - 1996 long-term incentive
compensation performance periodperiod. No grants were made to
executive officers of the long-term component ofCompany under the Incentive Programs.1997 Omnibus
Plan during 1997.
Employment Agreements
- ---------------------
From time to time and for various reasons, management
and the Board of Directors has deemed it appropriate to
enter into specific employment agreements with certain
executive officers. Such agreements may relate, for
example, to the further retention of the officer or a
commitment by the officer to relocate to another location.
Where such agreements are made, they are negotiated by the
Company's General Counsel, or his designee under the
supervision of the Compensation Policy Committee and reviewed and
approved by the Board of Directors or the
Compensation Policy Committee. In making
its compensation decisions, and in supervising the
negotiations and approving such employment agreements, the
Compensation Policy Committee is mindful of the Company's overall
corporate objectives and itsthe compensation objectives
described above as well as the circumstances making the
employment agreement an appropriate compensation mechanism.
Such employment agreements generally range in term from one
to five years. During 1996,1997, Mr. Haymaker was employed under
an employment agreement as discussed under the heading
"Employment Contracts and Termination of Employment and
Change-in-Control Arrangements."
Compensation of the CEO and Other Executives for the Last - ---------------------------------------------------------
Completed Fiscal Year
- ---------------------
Mr. Haymaker served as the Chairman of the Board and
Chief Executive Officer of the Company for all of 19961997 and
has
also served as President of the Company since May 1996.through July 1997.
Mr. Haymaker is employed pursuant to a written employment
agreement which is described above under "Employment
Contracts and Termination of Employment and
Change-in-Control Arrangements." As amended, Mr. Haymaker's employment
agreement provides for anthat his annual base salary of
$465,000 and for his salary towill be
reviewed and possibly changed on an annual basis, provided,
however that his base salary cannot be reduced to less than
$450,000 without Mr.
Haymaker'shis consent. In 1996,mid-1997, Mr. Haymaker's
base salary was increased from $487,000 to $487,000$504,000 as part
of a two-step increase intended to bring Mr. Haymaker's
salary more in accordanceline with market data obtained by the foregoing. In
addition,Company
and the Company's overall compensation structure for its
executive officers. The second increase raised Mr.
Haymaker's salary to $569,000 effective as of February 1,
1998. Mr. Haymaker's employment agreement also contains
target incentives which are consistent with the goals and
objectives of the Company's totalincentive compensation systemprograms
as described above.
In recognitionDuring 1997 the Company's performance slightly
exceeded 1997 performance goals, however, as previously
mentioned, the average price of the Company's overall performance
relative toCommon Stock
during December 1997 was lower than the 1996 performance goals,average price during
December 1996. As a result, the annual paymentshort-term incentive award
earned by Mr. Haymaker in 1996 under1997 was limited to his targeted
amount of $311,000. The long-term award earned by Mr.
Haymaker for the Executive Program1995-1997 three-year long-term performance
period was $71,638 or approximately 29% of the targeted amount.
Similarly, the annual payments earned in 1996 under the
Incentive Programs by the remaining executive officers
eligible to participate in the Incentive Programs during
1996 were approximately 37% of the aggregate targeted
amount.$362,136.
Compensation by MAXXAM
- ----------------------
CertainMr La Duc received a portion of the Company's executive officers were
compensatedhis compensation
during 1996 principally by1997 from MAXXAM, the Company's parent corporation, which establishes salaries and other
elements of compensation for such executive officers.corporation.
Where an executive officer of both the Company and MAXXAM is
compensated by the Company, or where an executive officer of
both the Company and MAXXAM is compensated by MAXXAM, the
respective corporations make intercompany allocations of the
costs of employment of the executive officer based -22-
on the
allocation of that executive officer's time as expended
among the Company, MAXXAM or their respective subsidiaries.
Such allocations are described under "Certain Transactions"
below.
Compliance with Section 162(m)
- ------------------------------
Section 162(m) generally disallows a tax deduction to
public companies for compensation over $1 million paid to
the CEO and four other most highly compensated executive
officers of such corporations.public companies. Qualifying performance-based
compensation will not be subject to the deduction limit if
certain requirements are met. Compensation earned by or
awarded to the Senior Executives whose compensation is
potentially subject to the limitations imposed by Section
162(m) of the Code is covered by a separate program intended
to comply with the provisions of Section 162(m) of the Code
(the "Senior Executive Program"). The Senior Executive
Program, the 1993 Omnibus Plan and the 19931997 Omnibus Plan,
each of which has been approved by the stockholders of the
Company, are performance based and designed to enable
compliance with Section 162(m) and the regulations
thereunder. The executive officers eligible to
participate inIn addition, the Senior Executive Program and
awards under the 1993 and 1997 Omnibus Plans that are
intended to comply with Section 162(m) are administered by
the Section 162(m) Committee. Messrs. Marcus (Chairman) and
Cruikshank currently serve as members of the Section 162(m)
Committee and for purposes of Section 162(m) are qualifying
directors. The Senior Executives are the only executive
officers of the Company to which the deduction limitation imposed by
Section 162(m) of the Code is likely to apply and the
Section 162(m) Compensation
Committee believes that awards thereunderto the Senior
Executives should be tax deductible.deductible under Section 162(m).
Section 162(m) Compensation Compensation Policy Committee
Committee of the Board of Ofof the Board of Directors
Directors
Robert J. Cruikshank Robert J. Cruikshank
Robert Marcus, Chairman Ezra G. Levin, Chairman
Robert Marcus
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
No member of the Compensation Committee, Compensation Policy Committee or the Section
162(m) Compensation
Committee was, during the 19961997 fiscal year, an
officer or employee of the Company or any of its
subsidiaries, or was formerly an officer of the Company or
any of its subsidiaries or, other than Messrs.Mr. Levin, and Marcus, had any
relationships requiring disclosure by the Company under Item
404 of Regulation S-K. Mr. Levin served on the Company's
Compensation Committee, Compensation Policy Committee and Board of Directors during 19961997 and is
also a partner in the law firm of Kramer, Levin, Naftalis &
Frankel, which provided legal services forto the Company and
its subsidiaries during 1996. Mr. Marcus served on the
Company's Compensation Committee, Compensation Policy
Committee, Section 162(m) Compensation Committee, Special
Committee and Board of Directors during 1996 and also
performed extraordinary services in his capacity as a
Director of the Company when requested to travel to China to
review the Company's activities there.1997.
During the Company's 19961997 fiscal year, no executive
officer of the Company served as (i) a member of the
compensation committee (or other board committee performing
equivalent functions) of another entity, one of whose
executive officers served on the Compensation Committee,
Compensation Policy Committee or Section
162(m) Compensation Committee of the Company, (ii) a director of another
entity, one of whose executive officers served on any of
such committees, or (iii) a member of the compensation
committee (or other board committee performing equivalent
functions) of another entity, one of whose executive
officers served as a director of the Company.
-23-
PERFORMANCE GRAPH
The following performance graph compares the
cumulative total stockholder return on the Company's Common
Stock with the cumulative total returns of the S&P 500 Stock
Index and a peer group which consists of companies included
by S&P in its published index for the Aluminum Industry.
The graph assumes that the value of the investment in the
Company's Common Stock and each index was $100 at December
31, 1991,1992, and that all dividends were reinvested. The data
points are calculated as of the last trading day for the
year indicated.
Base
Period
-------
Company/Index Name Dec. Dec. Dec. Dec. Dec. Dec.
1991 1992 1993 1994 1995 1996TOTAL SHAREHOLDER RETURNS
-------------------------
(Dividends Reinvested)
ANNUAL RETURN PERCENTAGE
Years Ending
Kaiser Aluminum 100 82.76 86.36 104.35 125.94 111.55
Corporation
Aluminum 100 102.37 104.81 128.52 158.39 181.91Company/Index Dec93 Dec94 Dec95 Dec96 Dec97
- ---------------------------------------------------------------------------
KAISER ALUMINUM CORP 4.35 20.83 20.69 -11.43 -23.66
ALUMINUM-500 2.38 22.62 23.24 14.85 1.64
S&P 500 INDEX 10.08 1.32 37.58 22.96 33.36
INDEXED RETURNS
Years Ending
Base
Period
Company/Index Dec92 Dec93 Dec94 Dec95 Dec96 Dec97
- ---------------------------------------------------------------------------
KAISER ALUMINUM CORP 100 107.62 118.46 120.03 165.13 203.05104.35 126.09 152.17 134.78 102.90
ALUMINUM-500 100 102.38 125.55 154.72 177.69 180.60
S&P 500 INDEX 100 110.08 111.53 153.45 188.68 251.63
CERTAIN TRANSACTIONS
For certain periodsDuring the period from October 28, 1988 through June
30, 1993, the Company and its domestic subsidiaries (including KACC) were
included in the consolidated Federalfederal income tax returns filed byof
MAXXAM. During 1997, MAXXAM reached a settlement with the
Internal Revenue Service regarding all remaining years where
the Company and its domestic subsidiaries were included in
the MAXXAM consolidated federal income tax returns. As a
result of this settlement, KACC paid approximately $11.8
million to MAXXAM in respect of its liabilities pursuant to
its tax allocation agreement with MAXXAM. Payments to MAXXAM or
refunds from MAXXAM mayfor periods prior to July 1, 1993, related to other
jurisdictions could still be required by or payablepursuant to the
Company or KACC under theCompany's and KACC's respective tax allocation agreements
that governed those periods due towith MAXXAM. In accordance with the
final resolution of audits, amended returns and related
matters with respect to such periods. The Company's and
KACC's credit agreement
dated as of February 15, 1994, as
amended (the "Credit Agreement"), prohibits any cash
paymentsentered into by KACC to MAXXAM pursuant to the relevant tax
allocation agreement after February 15, 1994; however,
MAXXAM may offset amounts owing to it against amounts owed
by it under the relevant tax allocation agreement,Company and KACC may make certain cashwhich provides a $325
million five-year secured, revolving line of credit, any
such payments to MAXXAM that are required
as a result of audits of MAXXAM's tax returns and only to
the extent
-24-
of any amounts paid after February 15, 1994 by MAXXAM to
KACC under the relevantwould require lender
approval, except in certain circumstances. The tax
allocation agreement.agreements of the Company and KACC with MAXXAM
terminated pursuant to their terms, effective for taxable
periods beginning after June 30, 1993. While the Company
and KACC are severally liable for the MAXXAM tax group's
Federalfederal income tax liability for all of 1993 and applicable
prior periods, pursuant to the relevant tax allocation
agreements, MAXXAM indemnifies the Company and KACC to the
extent the tax liability exceeds amounts payable by them
under such agreements.
KACC and MAXXAM have an arrangement pursuant to which
they reimburse each other for certain allocable costs
associated with the performance of services by their
respective employees. KACC paid a total of approximately
$3.8$4.1 million to MAXXAM pursuant to such arrangements and
MAXXAM paid approximately $2.9$3.1 million to KACC pursuant to
such arrangements in respect of 1996.1997. Generally, KACC and
MAXXAM endeavor to minimize the need for reimbursement by
ensuring that employees are employed by the entity to which
the majority of their services are rendered.
Mr. Levin, a director of the Company and KACC, is a
partner in the law firm of Kramer, Levin, Naftalis &
Frankel, which provides legal services forto the Company and
its subsidiaries. In addition, in 1996, Mr. Marcus, who is
a director of the Company and KACC, received fees in the
amount of $13,500 for extraordinary services performed in
such capacity when requested to travel to China to review
the Company's activities there.
On April 17, 1995, SHRP, Ltd. and two affiliated
entities, SHRP Acquisition, Inc. and SHRP Capital Corp.,
filed voluntary corporate petitions under Chapter 11 of the
United States Bankruptcy Code. Their bankruptcy plan has
since been confirmed and the transactions contemplated by
the bankruptcy reorganization plan were consummated on
October 6, 1995. Since July 1993, Mr. WadeHurwitz has served as a director Vice President and
SecretaryChairman of the Board of SHRP, Inc., SHRP, Ltd.'s sole
general partner prior to SHRP Ltd.'s bankruptcy
reorganization, and of SHRP Capital Corp., a subsidiary of
SHRP, Ltd. Also, Mr. Hurwitz has served as a director and
Chairman of the Board of SHRP, Inc., and as a director, Chairman of the Board and
President of SHRP Capital Corp., a subsidiary of SHRP, Ltd.
which was dissolved effective December 31, 1997. Mr.
Hurwitz currently serves as a director and Chairman of the
Board of SHRP, the managing general partner of SHRP, Ltd.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Based solely upon a review of the copies of the Forms
3, 4 and 5 and amendments thereto furnished to the Company
with respect to its most recent fiscal year, and written
representations from reporting persons that no Forms 5 were
required, the Company believes that all filing requirements
were complied with which were applicable to its officers,
directors and greater than ten percent10% beneficial owners.
OTHER MATTERS
Independent Public Accountants
- -------------------------------
The Company has appointed Arthur Andersen LLP served as itsthe Company's independent
public accountants through the conclusion of the audit with
respect to the Company's 19961997 fiscal year. Representatives
of Arthur Andersen LLP plan to attend the Annual Meeting and
will be available to answer appropriate questions. Such
representatives will also have an opportunity to make a
statement at the meeting, if they so desire.
-25-
Stockholder Proposals for the 19981999 Annual Meeting of
- ----------------------------------------------------
Stockholders
- ------------
The Company's Amended and Restated By-laws require that
the Company receive written notice of any proposals which
stockholders intend to present at the 19981999 annual meeting
(other than those submitted for inclusion in the Company's
proxy material pursuant to Rule 14a-8 of the Exchange Act)
by no earlier than February 21, 1998,1999, and no later than
March 23, 1998.1999. The foregoing notice is required to set
forth (i) as to each person proposed to be nominated for
election as a director, all information relating to such
person that is required to be disclosed in solicitation of
proxies for election or reelection of directors, or is
otherwise required, in each case pursuant to Regulation 14A
of the Exchange Act (including such person's written consent
to being named in the proxy statement as a nominee and to
serving as a director if elected); and (ii) as to any other
business proposed to be brought before the meeting, a brief
description of such business, the reasons for conducting
such business and any material interest in such business by
the stockholder submitting the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is
being made, as well as (a) the name and address of such
stockholder, as they appear on the Company's books, and of
such beneficial owner, if applicable, and (b) the class and
number of shares of the Company which are owned beneficially
and of record by such stockholder and such beneficial owner,
if applicable. A copy of the By-law provision referred to above
may be obtained, without charge, upon written request to the
Company's Secretary. Proposals intended to be presented at
the 19981999 Annual Meeting of Stockholders pursuant to Rule
14a-8 of the Exchange Act must be received by December 29, 1997,30,
1998, in order to be included in the Company's proxy
statement and form of proxy relating to that meeting. Any
stockholder proposals must be sent to the Company's
Secretary at the Company's executive offices at 5847 San
Felipe, Suite 2600, Houston, Texas 77057.
Other Matters
- -------------
The cost of mailing and soliciting proxies in
connection with the Annual Meeting will be borne by the
Company. The Company will, if requested, reimburse banks,
brokerage houses and other custodians, nominees and certain
fiduciaries for their reasonable expenses incurred in
mailing proxy material to their principals. Proxies may be
solicited by directors, officers and employees of the
Company without special remuneration. The Company has
retained Corporate Investor Communications, Inc. to assist
in the distribution and solicitation of proxies at an
estimated cost of approximately $5,000 (including expenses).
In addition to the use of mails, proxies may be solicited by
personal interviews, facsimile, telephone or telegraph.
The persons designated to vote shares covered by
management proxies intend to exercise their judgment in
voting such shares on other matters that may properly come
before the meeting. Management knows of no matters which
will be presented for action at the meeting other than as
referred to in this Proxy Statement.
By Order of the Board of
Directors
BYRON L. WADE/s/ John Wm. Niemand II
JOHN WM. NIEMAND II
Secretary
April 29, 199727, 1998
Houston, Texas
-26-
- ----------------------------------------------------
Table of Contents
Notice of Annual Meeting of Stockholders
Proxy Statement
Election of Directors. . . . . 2
The Board of Directors
and its Committees. . . . . . 2
Executive Officers and
Directors. . . . . . . . . . . 5
Principal Stockholders . . . . 10
Executive Compensation . . . . 12
Report of the Compensation
Committees on Executive
Compensation . . . . . . . . . 17
Performance Graph. . . . . . . 21
Certain Transactions . . . . . 21
Compliance with Section
16(a) of the Exchange
Act. . . . . . . . . . . . . . 22
Other Matters. . . . . . . . . 22
- ----------------------------------------------------
[KAC Logo]
--------------------------------
Notice of 1998 Annual Meeting
and
Proxy Statement
--------------------------------
Important
Please sign and date your
proxy card and promptly
return it in the enclosed
envelope.
Printed on recycled paper.
Appendix A
KAISER ALUMINUM CORPORATION
Solicited on behalf of the Board of Directors
for the Annual Meeting of Stockholders to be
held May 22 199720 1998
P The undersigned hereby appoints GEORGE T.
HAYMAKER, JR.,
R CHARLES E. HURWITZ, and JOHN T. LA DUC and E. Bruce
Butler
as proxies (each with
O power to act alone, or jointly, and with power of
substitution) to vote, as designated
X on the reverse side, all shares of Common Stock
or
8.255% PRIDES
Y Convertible Preferred Stock theThe undersigned is entitled to vote at
the Annual Meeting of Stockholders to be held on
May 22, 1997,20, 1998, and
at any and all adjournments or postponements
thereof.
PLEASE COMPLETE, SIGN, DATE AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
/SEE REVERSE SIDE/
/X/ Please mark
votes as in
this example.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS
DESIGNATED BY THE UNDERSIGNED. IF NO CHOICE IS SPECIFIED,
THE PROXY WILL BE VOTED "FOR" THE ELECTION OF NOMINEES TO
THE BOARD OF DIRECTORS AND "FOR" THE APPROVAL OF THE KAISER
1997 OMNIBUS STOCK INCENTIVE PLAN AS SET FORTH IN THE PROXY
STATEMENT.
1. Election of Directors
Nominees: Robert J. Cruikshank, George T. Haymaker, Jr.,
Charles E. Hurwitz, Ezra G. Levin, Robert Marcus and
Robert J. Petris.
FOR ALL WITHHOLD
NOMINEES / / / / FROM ALL
(except as marked NOMINEES
to the contrary)
/ /
---------------------------------------------
To withhold authority to vote for any individual nominee(s)
while voting for the remainder mark the box and write the
name of the nominee(s) for which authority is withheld
in the space above.
2. Approval of the Kaiser 1997 Omnibus Stock Incentive
Plan.
FOR AGAINST ABSTAIN
/ / / / / /
3. In their discretion, the proxies are authorized to
vote upon such other matters as may properly come before
the meeting or any adjournments or postponements
thereof, hereby revoking any instruction(s) heretofore
given by the undersigned.
FOR AGAINST ABSTAIN
/ / / / / /
MARK HERE FOR ADDRESS CHANGE AND
NOTE AT LEFT / /
Please sign name(s) exactly as printed hereon. If stock is
held in the name of more than one person, EACH person should
sign. Executors, administrators, trustees, etc., should give
full title as such. If a corporation, please sign full
corporate name by duly authorized officer. If a
partnership, please sign in partnership name by authorized
person.
Title: Title:
----------------------- --------------------
Signature: Signature:
Date: Date:
APPENDIX A
Kaiser Aluminum Corporation
and
Kaiser Aluminum & Chemical Corporation
Kaiser 1997 Omnibus Stock Incentive Plan
Article 1. Establishment, Objectives, and Duration
- ---------------------------------------------------
1.1. Establishment of the Plan. Kaiser Aluminum
----------------------------------
Corporation ("KAC") and Kaiser Aluminum & Chemical
Corporation ("KACC"), both Delaware corporations (hereinafter
collectively referred to as the "Company"), hereby establish
an incentive compensation plan to be known as the "Kaiser
1997 Omnibus Stock Incentive Plan" (hereinafter referred to
as the "Plan"), as set forth in this document. The Plan
permits the grant of Nonqualified Stock Options, Incentive
Stock Options, Stock Appreciation Rights, Restricted Stock,
Performance Shares, Performance Units, and Cash-Based Awards.
Subject to approval by the Company's stockholders, the
Plan shall become effective as of April 1, 1997 (the
"Effective Date") and shall remain in effect as provided in
Section 1.3 herein.
1.2. Objectives of the Plan. The purpose of the Plan
-------------------------------
is to advance the interests of the Company and optimize the
profitability and growth of the Company through annual and
long-term incentives which are consistent with the Company's
goals by encouraging and providing for the acquisition of
equity interests (or rights measured by the market value of
the equity) in the success of the Company by key employees
and non-employee directors, by providing additional
incentives and motivation toward enhancing the long-term
performance of the Company. The Plan is further intended to
provide increased flexibility to the Company within a single
plan in its ability to motivate, attract, and retain the
services of Participants who make significant contributions
to the Company's success and to allow Participants to share
in the success of the Company.
1.3. Duration of the Plan. The Plan shall commence
-----------------------------
on the Effective Date, as described in Section 1.1 herein,
and shall remain in effect, subject to the right of the Board
of Directors to amend or terminate the Plan at any time
pursuant to Article 15 herein, until all Shares subject to
the Plan shall have been purchased or acquired according to
the Plan's provisions. However, in no event may an Award be
granted under the Plan after March 31, 2007.
Article 2. Definitions
- -----------------------
Whenever used in the Plan, the following terms shall have
the meanings set forth below, and when the meaning is
intended, the initial letter of the word shall be
capitalized:
2.1. "Affiliate" shall have the meaning ascribed to
--------------------
such term in Rule 12b-2 of the General Rules and Regulations
of the Exchange Act.
2.2. "Award" means, individually or collectively, a
----------------
grant under this Plan of Nonqualified Stock Options,
Incentive Stock Options, Stock Appreciation Rights,
Restricted Stock, Performance Shares, Performance Units, or
Cash-Based Awards.
2.3. "Award Agreement" means an agreement entered
--------------------------
into by the Company and each Participant setting forth the
terms and provisions applicable to Awards granted under this
Plan.
2.4. "Board" or "Board of Directors" unless otherwise
----------------
specified, means collectively, the Boards of Directors of KAC
and KACC, collectively.
2.5. "Cash-Based Award" means an Award granted to a
---------------------------
Participant, as described in Article 9 herein.
2.6. Intentionally Left Blank.
---
2.7. "Code" means the Internal Revenue Code of 1986,
---------------
as amended from time to time, and any successor act thereto,
and, to the extent applicable, any federal income tax
regulations, including any temporary or proposed regulations,
promulgated under the Code, as such may be amended from time
to time.
2.8. "Committee" means any committee appointed by the
--------------------
Board to administer Awards to Employees, as specified in
Article 3 herein, including, but not limited to the
Compensation Policy and Section 162(m) Compensation
Committees of KAC and KACC. Any such committee shall be
comprised entirely of Directors.
2.9. "Company" shall have the meaning given to it in
------------------
Section 1.1 herein.
2.10. "Covered Employee" means a Participant who, as
---------------------------
of the date of vesting and/or payout of an Award, as
applicable, is one of the group of "covered employees," as
defined in the regulations promulgated under Code Section
162(m), or any successor statute.
2.11. "Director" means any individual who is a member
-------------------
of the Board of Directors of KAC, KACC, or any Subsidiary or
Affiliate thereof; provided, however, that any Director who
is employed by the Company or any Subsidiary or Affiliate
shall be considered an Employee under the Plan.
2.12. "Disability" shall have the meaning ascribed to
---------------------
such term in the KACC pension plan for salaried employees, or
if no such plan exists, at the discretion of the Board.
2.13. "Effective Date" shall have the meaning ascribed
-------------------------
to such term in Section 1.1 herein.
-2-
2.14. "Employee" means a regular full-time salaried
-------------------
employee (including officers and directors who are also
employees other than directors who serve on the Committee) of
the Company or its Subsidiaries or Affiliates, or any branch,
unit, or division thereof.
2.15. "Exchange Act" means the Securities Exchange Act
-----------------------
of 1934, as amended from time to time, or any successor act
thereto.
2.16. "Fair Market Value" means the average of the
----------------------------
highest and lowest prices of the Shares as reported by the
consolidated tape of the New York Stock Exchange on a
particular date. In the event that there are no Share
transactions on such date, the Fair Market Value shall be
determined as of the immediately preceding date on which
there were Share transactions, provided that such date is not
more than ten (10) business days preceding the applicable
date. If there were no such transaction within the period
stated above, the Fair Market Value of such Shares shall be
determined by the Committee.
2.17. "Freestanding SAR" means an SAR that is granted
---------------------------
independently of any Options, as described in Article 7
herein.
2.18. "Incentive Stock Option" or "ISO" means an
--------------------------------- ------
option to purchase Shares granted under Article 6 herein and
which is designated as an Incentive Stock Option and which is
intended to meet the requirements of Code Section 422.
2.19. "Insider" shall mean an individual who is, on
------------------
the relevant date, an officer, director or ten percent (10%)
beneficial owner of any class of the Company's equity
securities that is registered pursuant to Section 12 of the
Exchange Act, all as defined under Section 16 of the Exchange
Act.
2.20. "Nonqualified Stock Option" or "NQSO" means an
------------------------------------ ------
option to purchase Shares granted under Article 6 herein and
which is not intended to meet the requirements of Code
Section 422.
2.21. "Option" means an Incentive Stock Option or a
-----------------
Nonqualified Stock Option, as described in Article 6 herein.
2.22. "Option Price" means the price at which a Share
-----------------------
may be purchased by a Participant pursuant to an Option.
2.23. "Participant" means an Employee or Director who
----------------------
has been selected to receive an Award or who has outstanding
an Award granted under the Plan.
2.24. "Performance-Based Exception" means the
--------------------------------------
performance-based exception from the tax deductibility
limitations of Code Section 162(m).
-3-
2.25. "Performance Share" means an Award granted to a
----------------------------
Participant, as described in Article 9 herein.
2.26. "Performance Unit" means an Award granted to a
---------------------------
Participant, as described in Article 9 herein.
2.27. "Period of Restriction" means the period during
--------------------------------
which the transfer of Shares of Restricted Stock is limited
in some way (based on the passage of time, the achievement of
performance goals, or upon the occurrence of other events as
determined by the Board, at its discretion), and the Shares
are subject to a substantial risk of forfeiture, as provided
in Article 8 herein.
2.28. "Restricted Stock" means an Award granted to a
---------------------------
Participant pursuant to Article 8 herein.
2.29. "Retirement" shall have the meaning ascribed to
---------------------
such term in the KACC pension plan for salaried employees.
2.30. "Shares" means the Common Stock of KAC, par
-----------------
value $.01.
2.31. "Stock Appreciation Right" or "SAR" means an
----------------------------------- -----
Award, granted alone or in connection with a related Option,
designated as an SAR, pursuant to the terms of Article 7
herein.
2.32. "Subsidiary" means any corporation, partnership,
---------------------
joint venture, or other entity in which the Company has a
majority voting interest.
2.33. "Tandem SAR" means an SAR that is granted in
---------------------
connection with a related Option pursuant to Article 7
herein, the exercise of which shall require forfeiture of the
right to purchase a Share under the related Option (and when
a Share is purchased under the Option, the Tandem SAR shall
similarly be canceled).
Article 3. Administration
- --------------------------
3.1. General. The Plan shall be administered by the
----------------
Board, or (subject to the following) by one or more
Committees appointed by the Board. The members of the
Committee shall be appointed from time to time by, and shall
serve at the discretion of, the Board of Directors. The
Board may delegate to the Committee any or all of the
administration of the Plan; provided, however, that the
administration of the Plan with respect to Awards granted to
Directors may not be so delegated. To the extent that the
Board has delegated to the Committee any authority and
responsibility under the Plan, all applicable references to
the Board in the Plan shall be to the Committee. The
Committee shall have the authority to delegate administrative
duties to officers or Directors of the Company.
-4-
3.2. Authority of the Board. Except as limited by
-------------------------------
law or by the Certificate of Incorporation or Bylaws of the
Company, and subject to the provisions herein, the Board
shall have full power to select Employees and Directors who
shall participate in the Plan; determine the sizes and types
of Awards; determine the terms and conditions of Awards in a
manner consistent with the Plan; construe and interpret the
Plan and any agreement or instrument entered into under the
Plan; establish, amend, or waive rules and regulations for
the Plan's administration; and amend the terms and conditions
of any outstanding Award as provided in the Plan. Further,
the Board shall make all other determinations which may be
necessary or advisable for the administration of the Plan.
As permitted by law (and subject to Section 3.1 herein), the
Board may delegate its authority as identified herein.
3.3. Decisions Binding. All determinations and
--------------------------
decisions made by the Board pursuant to the provisions of the
Plan and all related orders and resolutions of the Board
shall be final, conclusive and binding on all persons,
including the Company, its stockholders, Directors,
Employees, Participants, and their estates and beneficiaries.
Article 4. Shares Subject to the Plan and Maximum Awards
- ---------------------------------------------------------
4.1. Number of Shares Available for Grants. Subject
----------------------------------------------
to adjustment as provided in Section 4.2 herein, the number
of Shares hereby reserved for issuance to Participants under
the Plan shall be Five Million Five Hundred Thousand
(5,500,000), including any Shares remaining available under
the Kaiser 1993 Omnibus Stock Incentive Plan which Shares
shall be rolled into the Shares available for issuance under
the Plan. In addition, no more than One Million Eight
Hundred Thousand (1,800,000) of which may be granted in the
form of Restricted Stock. The Board shall determine the
appropriate methodology for calculating the number of shares
issued pursuant to the Plan. Unless and until the Board
determines that an Award to a Covered Employee shall not be
designed to comply with the Performance-Based Exception, the
following rules shall apply to grants of such Awards under
the Plan:
(a) Stock Options: The maximum aggregate number of
-------------
Shares that may be granted in the form of Stock
Options, pursuant to any Award granted in any
one fiscal year to any one Participant shall be
Five Hundred Thousand (500,000).
(b) SARs: The maximum aggregate number of Shares
----
that may be granted in the form of Stock
Appreciation Rights, pursuant to any Award
granted in any one fiscal year to any one
Participant shall be Five Hundred Thousand
(500,000).
(c) Restricted Stock: The maximum aggregate grant
----------------
with respect to Awards of Restricted Stock
granted in any one fiscal year to any one
Participant shall be Two Hundred Thousand
(200,000) Shares.
-5-
(d) Performance Shares/Performance Units and
----------------------------------------
Cash-Based Awards: The maximum aggregate payout
-----------------
(determined as of the end of the applicable
performance period) with respect to Cash-Based
Awards or Awards of Performance Shares or
Performance Units granted in any one fiscal year
to any one Participant shall be equal to the
value of Three Hundred Thousand (300,000)
Shares.
4.2. Lapsed Awards. If any Award granted under this
----------------------
Plan is canceled, terminates, expires, or lapses for any
reason (with the exception of the termination of a Tandem SAR
upon exercise of the related Option, or the termination of a
related Option upon exercise of the corresponding Tandem
SAR), any Shares subject to such Award again shall be
available for the grant of an Award under the Plan.
4.3. Adjustments in Authorized Shares. In the event
-----------------------------------------
that the Board or any Committee, as appropriate, shall
determine that any dividend or other distribution (whether in
the form of cash, securities, or other property),
recapitalization, forward or reverse split, reorganization,
merger, consolidation, spin-off, combination, repurchase, or
share exchange, or other similar corporate transaction or
event, affects the Shares such that an adjustment is
appropriate in order to prevent dilution or enlargement of
the rights of Participants under the Plan, then the Committee
shall, in such manner as it may deem equitable, adjust any or
all of (i) the number and kind of Shares or securities which
may thereafter be issued in connection with Awards, (ii) the
number and kind of Shares or securities issued or issuable in
respect of outstanding Awards, and (iii) the exercise price,
grant price, or purchase price relating to any Award or, if
deemed appropriate, make provision for payment of cash or
other property with respect to any outstanding Award;
provided in each case, that with respect to ISOs, no such
adjustment shall be authorized to the extent that such
authority would cause the Plan to violate Section 422 of the
Code. In addition, the Board or Committee, as appropriate,
is authorized to make adjustments in the terms and conditions
of, and the criteria included in Awards in recognition of
unusual or nonrecurring events (including, without
limitation, events described in the preceding sentence)
affecting the Company or any subsidiary or the financial
statements of the Company or any subsidiary, or in response
to changes in applicable laws, regulations, accounting
principles, tax rates and regulations of business conditions.
Article 5. Eligibility and Participation
- -----------------------------------------
5.1. Eligibility. Persons eligible to participate in
--------------------
this Plan include all Employees and Directors.
5.2. Actual Participation. Subject to the provisions
-----------------------------
of the Plan, the Board may, from time to time, select from
all eligible Employees and Directors, those to whom Awards
shall be granted and shall determine the nature and amount of
each Award.
-6-
Article 6. Stock Options
- -------------------------
6.1. Grant of Options. Subject to the terms and
-------------------------
provisions of the Plan, Options may be granted to
Participants in such number, and upon such terms, and at any
time and from time to time as shall be determined by the
Board.
6.2. Award Agreement. Each Option grant shall be
------------------------
evidenced by an Award Agreement that shall specify the Option
Price, the duration of the Option, the number of Shares to
which the Option pertains, and such other provisions as the
Board shall determine. The Award Agreement also shall
specify whether the Option is intended to be an ISO within
the meaning of Code Section 422, or an NQSO whose grant is
intended not to fall under the provisions of Code Section
422.
6.3. Option Price. The Option Price for each grant
---------------------
of an Option under this Plan shall be at least equal to one
hundred percent (100%) of the Fair Market Value of a Share on
the date the Option is granted.
6.4. Duration of Options. Each Option granted to a
----------------------------
Participant shall expire at such time as the Board shall
determine at the time of grant; provided, however, that no
Option shall be exercisable later than the tenth (10th)
anniversary of the date of its grant.
6.5. Exercise of Options. Options granted under this
----------------------------
Article 6 shall be exercisable at such times and be subject
to such restrictions and conditions as the Board shall in
each instance approve, which need not be the same for each
grant or for each Participant.
6.6. Payment. Options granted under this Article 6
----------------
shall be exercised by the delivery of a written notice of
exercise to the Company, setting forth the number of Shares
with respect to which the Option is to be exercised,
accompanied by full payment for the Shares.
The Option Price upon exercise of any Option shall be
payable to the Company in full either: (a) in cash or its
equivalent, or (b) by tendering previously acquired Shares
having an aggregate Fair Market Value at the time of exercise
equal to the total Option Price (provided that the Shares
which are tendered must have been held by the Participant for
at least six (6) months prior to their tender to satisfy the
Option Price), or (c) by a combination of (a) and (b).
The Board also may allow cashless exercise as permitted
under Federal Reserve Board's Regulation T, subject to
applicable securities law restrictions, or by any other means
which the Board determines to be consistent with the Plan's
purpose and applicable law.
Subject to any governing rules or regulations, as soon as
practicable after receipt of a written notification of
exercise and full payment, the Company shall deliver to the
Participant, in the Participant's name, Share certificates in
an appropriate amount based upon the number of Shares
purchased under the Option(s).
-7-
6.7. Restrictions on Share Transferability. The
----------------------------------------------
Board may impose such restrictions on any Shares acquired
pursuant to the exercise of an Option granted under this
Article 6 as it may deem advisable, including, without
limitation, restrictions under applicable federal securities
laws, under the requirements of any stock exchange or market
upon which such Shares are then listed and/or traded, and
under any blue sky or state securities laws applicable to
such Shares.
6.8. Termination of Employment/Directorship. Each
-----------------------------------------------
Participant's Option Award Agreement shall set forth the
extent to which the Participant shall have the right to
exercise the Option following termination of the
Participant's employment or directorship with the Company.
Such provisions shall be determined in the sole discretion of
the Board, shall be included in the Award Agreement entered
into with each Participant, need not be uniform among all
Options issued pursuant to this Article 6, and may reflect
distinctions based on the reasons for termination.
6.9. Nontransferability of Options.
--------------------------------------
(a) Incentive Stock Options. No ISO granted under
-----------------------
the Plan may be sold, transferred, pledged,
assigned, or otherwise alienated or hypothe-
cated, other than by will or by the laws of
descent and distribution. Further, all ISOs
granted to a Participant under the Plan shall be
exercisable during his or her lifetime only by
such Participant.
(b) Nonqualified Stock Options. Except as otherwise
--------------------------
provided in a Participant's Award Agreement, no
NQSO granted under this Article 6 may be sold,
transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than by will or
by the laws of descent and distribution.
Further, except as otherwise provided in a
Participant's Award Agreement, all NQSOs granted
to a Participant under this Article 6 shall be
exercisable during his or her lifetime only by
such Participant.
Article 7. Stock Appreciation Rights
- -------------------------------------
7.1. Grant of SARs. Subject to the terms and
----------------------
conditions of the Plan, SARs may be granted to Participants
at any time and from time to time as shall be determined by
the Board. The Board may grant Freestanding SARs, Tandem
SARs, or any combination of these forms of SARs.
The Board shall have complete discretion in determining
the number of SARs granted to each Participant (subject to
Article 4 herein) and, consistent with the provisions of the
Plan, in determining the terms and conditions pertaining to
such SARs. The grant price of a Freestanding SAR shall equal
the Fair Market Value of a Share on the date of grant of the
SAR. The grant price of Tandem SARs shall equal the Option
Price of the related Option.
7.2. Exercise of Tandem SARs. Tandem SARs may be
--------------------------------
exercised for all or part of the Shares subject to the
related Option upon the surrender of the right to exercise
the equivalent portion of the related Option. A Tandem SAR
may be exercised only with respect to the Shares for which
its related Option is then exercisable.
-8-
Notwithstanding any other provision of this Plan to the
contrary, with respect to a Tandem SAR granted in connection
with an ISO: (i) the Tandem SAR will expire no later than the
expiration of the underlying ISO; (ii) the value of the
payout with respect to the Tandem SAR may be for no more than
one hundred percent (100%) of the difference between the
Option Price of the underlying ISO and the Fair Market Value
of the Shares subject to the underlying ISO at the time the
Tandem SAR is exercised; and (iii) the Tandem SAR may be
exercised only when the Fair Market Value of the Shares
subject to the ISO exceeds the Option Price of the ISO.
7.3. Exercise of Freestanding SARs. Freestanding
--------------------------------------
SARs may be exercised upon whatever terms and conditions the
Board, in its sole discretion, imposes upon them.
7.4. SAR Agreement. Each SAR grant shall be
----------------------
evidenced by an Award Agreement that shall specify the grant
price, the term of the SAR, and such other provisions as the
Board shall determine.
7.5. Term of SARs. The term of an SAR granted under
---------------------
the Plan shall be determined by the Board, in its sole
discretion; provided, however, that such term shall not
exceed ten (10) years.
7.6. Payment of SAR Amount. Upon exercise of an SAR,
------------------------------
a Participant shall be entitled to receive payment from the
Company in an amount determined by multiplying:
(a) The difference between the Fair Market Value of
a Share on the date of exercise over the grant
price; by
(b) The number of Shares with respect to which the
SAR is exercised.
At the discretion of the Board, the payment upon SAR
exercise may be in cash, in Shares of equivalent value, or in
some combination thereof. The Board's determination
regarding the form of SAR payout shall be set forth in the
Award Agreement pertaining to the grant of the SAR.
7.7. Termination of Employment/Directorship. Each
-----------------------------------------------
SAR Award Agreement shall set forth the extent to which the
Participant shall have the right to exercise the SAR
following termination of the Participant's employment or
directorship with the Company and/or its subsidiaries. Such
provisions shall be determined in the sole discretion of the
Board, shall be included in the Award Agreement entered into
with Participants, need not be uniform among all SARs issued
pursuant to the Plan, and may reflect distinctions based on
the reasons for termination.
7.8. Nontransferability of SARs. Except as otherwise
-----------------------------------
provided in a Participant's Award Agreement, no SAR granted
under the Plan may be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated, other than by will or
by the laws of descent and distribution and except as
otherwise required by law. Further, except as otherwise
provided in a Participant's
-9-
Award Agreement, all SARs granted to a Participant under the
Plan shall be exercisable during his or her lifetime only by
such Participant.
Article 8. Restricted Stock
- ----------------------------
8.1. Grant of Restricted Stock. Subject to the terms
----------------------------------
and provisions of the Plan, the Board, at any time and from
time to time, may grant Shares of Restricted Stock to
Participants in such amounts as the Board shall determine.
8.2. Restricted Stock Agreement. Each Restricted
-----------------------------------
Stock grant shall be evidenced by a Restricted Stock Award
Agreement that shall specify the Period(s) of Restriction,
the number of Shares of Restricted Stock granted, and such
other provisions as the Board shall determine.
8.3. Transferability. Except as provided in this
------------------------
Article 8, the Shares of Restricted Stock granted herein may
not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated until the end of the applicable
Period of Restriction established by the Board and specified
in the Restricted Stock Award Agreement, or upon earlier
satisfaction of any other conditions, as specified by the
Board in its sole discretion and set forth in the Restricted
Stock Award Agreement. All rights with respect to the
Restricted Stock granted to a Participant under the Plan
shall be available during his or her lifetime only to such
Participant.
8.4. Other Restrictions. Subject to Article 11
---------------------------
herein, the Board shall impose such other conditions and/or
restrictions on any Shares of Restricted Stock granted
pursuant to the Plan as it may deem advisable including,
without limitation, a requirement that Participants pay a
stipulated purchase price for each Share of Restricted Stock,
restrictions based upon the achievement of specific perform-
ance goals (Company-wide, divisional, and/or individual),
time-based restrictions on vesting following the attainment
of the performance goals, and/or restrictions under
applicable federal or state securities laws.
The Company may retain the certificates representing
Shares of Restricted Stock in the Company's possession until
such time as all conditions and/or restrictions applicable to
such Shares have been satisfied.
Except as otherwise provided in this Article 8, Shares of
Restricted Stock covered by each Restricted Stock grant made
under the Plan shall become freely transferable by the
Participant after the last day of the applicable Period of
Restriction.
8.5. Voting Rights. Participants holding Shares of
----------------------
Restricted Stock granted hereunder may be granted the right
to exercise full voting rights with respect to those Shares
during the Period of Restriction.
8.6. Dividends and Other Distributions. During the
------------------------------------------
Period of Restriction, Participants holding Shares of
Restricted Stock granted hereunder may be credited with
regular cash dividends
-10-
paid with respect to the underlying Shares while they are so
held. The Board may apply any restrictions to the dividends
that the Board deems appropriate. Without limiting the
generality of the preceding sentence, if the grant or vesting
of Restricted Shares granted to a Covered Employee is
designed to comply with the requirements of the
Performance-Based Exception, the Board may apply any restrictions
it deems appropriate to the payment of dividends declared with
respect to such Restricted Shares, such that the dividends
and/or the Restricted Shares maintain eligibility for the
Performance-Based Exception.
8.7. Termination of Employment/Directorship. Each
-----------------------------------------------
Restricted Stock Award Agreement shall set forth the extent
to which the Participant shall have the right to receive
unvested Restricted Shares following termination of the
Participant's employment or directorship with the Company.
Such provisions shall be determined in the sole discretion of
the Board, shall be included in the Award Agreement entered
into with each Participant, need not be uniform among all
Shares of Restricted Stock issued pursuant to the Plan, and
may reflect distinctions based on the reasons for
termination; provided, however that, except in the cases of
terminations by reason of death or Disability, the vesting of
Shares of Restricted Stock which qualify for the
Performance-Based Exception and which are held by Covered
Employees shall occur at the time they otherwise would have,
but for the termination.
Article 9. Performance Units, Performance Shares, and
- ------------------------------------------------------
Cash-Based Awards
- -----------------
9.1. Grant of Performance Units/Shares and Cash-Based
---------------------------------------------------------
Awards. Subject to the terms of the Plan, Performance Units,
- ------
Performance Shares, and/or Cash-Based Awards may be granted
to Participants in such amounts and upon such terms, and at
any time and from time to time, as shall be determined by the
Board.
9.2. Value of Performance Units/Shares and Cash-Based
---------------------------------------------------------
Awards. Each Performance Unit shall have an initial value
- ------
that is established by the Board at the time of grant. Each
Performance Share shall have an initial value equal to the
Fair Market Value of a Share on the date of grant. Each
Cash-Based Award shall have a value as may be determined by
the Board. The Board shall set performance goals in its
discretion which, depending on the extent to which they are
met, will determine the number and/or value of Performance
Units/Shares and Cash-Based Award that will be paid out to
the Participant. For purposes of this Article 9, the time
period during which the performance goals must be met shall
be called a "Performance Period."
9.3. Earning of Performance Units/Shares and
------------------------------------------------
Cash-Based Awards. Subject to the terms of this Plan, after
- -----------------
the applicable Performance Period has ended, the holder of
Performance Units/Shares and Cash-Based Awards shall be
entitled to receive payout on the number and value of
Performance Units/Shares and of Cash-Based Awards earned by
the Participant over the Performance Period, to be determined
as a function of the extent to which the corresponding
performance goals have been achieved.
-11-
9.4. Form and Timing of Payment of Performance
--------------------------------------------------
Units/Shares and Cash-Based Awards. Except as provided in
- ----------------------------------
the Participant's Award Agreement, payment of earned
Performance Units/Shares and Cash-Based Awards shall be made
in a single lump sum following the close of the applicable
Performance Period. Subject to the terms of this Plan, the
Board, in its sole discretion, may pay earned Performance
Units/Shares and Cash-Based Awards in the form of cash or in
Shares (or in a combination thereof) which have an aggregate
Fair Market Value equal to the value of the earned
Performance Units/Shares at the close of the applicable
Performance Period. Such Shares may be granted subject to
any restrictions deemed appropriate by the Board. The
determination of the Board with respect to the form of payout
of such Awards shall be set forth in the Award Agreement
pertaining to the grant of the Award.
At the discretion of the Board, Participants may be
entitled to receive any dividends declared with respect to
Shares which have been earned in connection with grants of
Performance Units and/or Performance Shares which have been
earned, but not yet distributed to Participants (such
dividends shall be subject to the same accrual, forfeiture,
and payout restrictions as apply to dividends earned with
respect to Shares of Restricted Stock, as set forth in
Section 8.6 herein). In addition, Participants may, at the
discretion of the Board, be entitled to exercise their voting
rights with respect to such Shares.
9.5. Termination of Employment/Directorship Due to
- ---------------------------------------------------------
Death, Disability, or Retirement. Unless determined
- --------------------------------
otherwise by the Board and set forth in the Participant's
Award Agreement, in the event the employment or directorship
of a Participant is terminated by reason of death,
Disability, or Retirement during a Performance Period, the
Participant shall receive a payout of the Performance
Units/Shares or Cash-Based Awards which is prorated, as
specified by the Board in its discretion.
Payment of earned Performance Units/Shares or Cash-Based
Awards shall be made at a time specified by the Board in its
sole discretion and set forth in the Participant's Award
Agreement. Notwithstanding the foregoing, with respect to
Covered Employees who retire during a Performance Period,
payments shall be made at the same time as payments are made
to Participants who did not terminate employment during the
applicable Performance Period.
9.6. Termination of Employment/Directorship for Other
---------------------------------------------------------
Reasons. In the event that a Participant's employment or
- -------
directorship terminates for any reason other than those
reasons set forth in Section 9.5 herein, all Performance
Units/Shares shall be forfeited by the Participant to the
Company unless determined otherwise by the Board, as set
forth in the Participant's Award Agreement.
9.7. Nontransferability. Except as otherwise
---------------------------
provided in a Participant's Award Agreement, Performance
Units/Shares and Cash-Based Awards may not be sold,
transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent
and distribution. Further, except as otherwise provided in a
Participant's Award Agreement, a Participant's rights under
the Plan shall be exercisable during the Participant's
lifetime only by the Participant or the Participant's legal
representative.
-12-
Article 10. Stock Bonuses
- -------------------------
Subject to the terms and provisions of the Plan, the
Committee may grant Shares of stock of the Company to any
Participant as a bonus, upon such terms and at any time and
from time to time as determined by the Board.
Article 11. Performance Measures
- --------------------------------
Unless and until the Committee proposes for shareholder
vote and shareholders approve a change in the general
performance measures set forth in this Article 11, the
attainment of which may determine the degree of payout and/or
vesting with respect to Awards to Covered Employees which are
designed to qualify for the Performance-Based Exception, the
performance measure(s) to be used for purposes of such grants
shall be chosen from among the following:
(a) Earnings per share;
(b) Net income (before or after taxes);
(c) Return measures (including, but not limited to,
return on assets, revenue, equity, or sales);
(d) Cash flow return on investments which equals net
cash flows divided by owners equity;
(e) Earnings before or after taxes;
(f) Measures of gross sales, gross revenues, or
growth in sales or revenues;
(g) Share price (including, but no limited to,
growth measures and total shareholder return);
and
(h) Operating measures (including, but not limited
to, operating margin and operating costs).
The Board shall have the discretion to adjust the
determinations of the degree of attainment of the
preestablished performance goals; provided, however, that
Awards which are designed to qualify for the
Performance-Based Exception, and which are held by a Covered
Employee, may not be adjusted upward (the Board shall retain the
discretion to adjust such Awards downward).
In the event that applicable tax and/or securities laws
change to permit Board discretion to alter the governing
performance measures without obtaining shareholder approval
of such changes, the Board shall have sole discretion to make
such changes without obtaining shareholder
-13-
approval. In addition, in the event that the Board
determines that it is advisable to grant Awards which shall
not qualify for the Performance-Based Exception, the Board
may make such grants without satisfying the requirements of
Code Section 162(m).
Article 12. Beneficiary Designation
- -----------------------------------
Each Participant under the Plan may, from time to time,
name any beneficiary or beneficiaries (who may be named con-
tingently or successively) to whom any benefit under the Plan
is to be paid in case of his or her death before he or she
receives any or all of such benefit. Each such designation
shall revoke all prior designations by the same Participant,
shall be in a form prescribed by the Company, and will be
effective only when filed by the Participant in writing with
the Company during the Participant's lifetime. In the
absence of any such designation, benefits remaining unpaid at
the Participant's death shall be paid to the Participant's
estate.
Article 13. Deferrals
- ----------------------
The Board may permit or require a Participant to defer
such Participant's receipt of the payment of cash or the
delivery of Shares that would otherwise be due to such
Participant by virtue of the exercise of an Option or SAR,
the lapse or waiver of restrictions with respect to
Restricted Stock, or the satisfaction of any requirements or
goals with respect to Performance Units/Shares. If any such
deferral election is required or permitted, the Board shall,
in its sole discretion, establish rules and procedures for
such payment deferrals.
Article 14. Rights of Employees/Directors
- ------------------------------------------
14.1. Employment. Nothing in the Plan shall interfere
-------------------
with or limit in any way the right of the Company to
terminate any Participant's employment at any time, nor
confer upon any Participant any right to continue in the
employ of the Company.
14.2. Participation. No Employee or Director shall
----------------------
have the right to be selected to receive an Award under this
Plan, or, having been so selected, to be selected to receive
a future Award.
Article 15. Intentionally Left Blank
- -------------------------------------
Article 16. Amendment, Modification, and Termination
- -----------------------------------------------------
16.1. Amendment, Modification, and Termination.
-------------------------------------------------
Subject to the terms of the Plan, the Board may at any time
and from time to time, alter, amend, suspend or terminate the
Plan in whole or in part.
-14-
16.2. Adjustment of Awards Upon the Occurrence of
----------------------------------------------------
Certain Unusual or Nonrecurring Events. The Board may make
- --------------------------------------
adjustments in the terms and conditions of, and the criteria
included in, Awards in recognition of unusual or nonrecurring
events (including, without limitation, the events described
in Section 4.3 herein) affecting the Company or the financial
statements of the Company or of changes in applicable laws,
regulations, or accounting principles, whenever the Board
determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan;
provided that, unless the Board determines otherwise at the
time such adjustment is considered, no such adjustment shall
be authorized to the extent that such authority would be
inconsistent with the Plan's meeting the requirements of
Section 162(m) of the Code, as from time to time amended.
16.3. Awards Previously Granted. Notwithstanding any
----------------------------------
other provision of the Plan to the contrary, no termination,
amendment, or modification of the Plan shall adversely affect
in any material way any Award previously granted under the
Plan, without the written consent of the Participant holding
such Award.
16.4. Compliance with Code Section 162(m). At all
--------------------------------------------
times when Code Section 162(m) is applicable, all Awards
granted under this Plan shall comply with the requirements of
Code Section 162(m); provided, however, that in the event the
Board determines that such compliance is not desired with
respect to any Award or Awards available for grant under the
Plan, then compliance with Code Section 162(m) will not be
required. In addition, in the event that changes are made to
Code Section 162(m) to permit greater flexibility with
respect to any Award or Awards available under the Plan, the
Board may, subject to this Article 16, make any adjustments
it deems appropriate.
Article 17. Withholding
- ------------------------
17.1. Tax Withholding. The Company shall have the
------------------------
power and the right to deduct or withhold, or require a
Participant to remit to the Company, an amount sufficient to
satisfy Federal, state, and local taxes, domestic or foreign,
required by law or regulation to be withheld with respect to
any taxable event arising as a result of this Plan.
17.2. Share Withholding. With respect to withholding
--------------------------
required upon the exercise of Options or SARs, upon the lapse
of restrictions on Restricted Stock, or upon any other
taxable event arising as a result of Awards granted
hereunder, Participants may elect, subject to the approval of
the Board, to satisfy the withholding requirement, in whole
or in part, by having the Company withhold Shares having a
Fair Market Value on the date the tax is to be determined
equal to the minimum statutory total tax which could be
imposed on the transaction. All such elections shall be
irrevocable, made in writing, signed by the Participant, and
shall be subject to any restrictions or limitations that the
Board, in its sole discretion, deems appropriate.
-15-
Article 18. Indemnification
- ----------------------------
Each person who is or shall have been a member of the
Committee, or of the Board, shall be indemnified and held
harmless by the Company against and from any loss, cost,
liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from
any claim, action, suit, or proceeding to which he or she may
be a party or in which he or she may be involved by reason of
any action taken or failure to act under the Plan and against
and from any and all amounts paid by him or her in settlement
thereof, with the Company's approval, or paid by him or her
in satisfaction of any judgement in any such action, suit, or
proceeding against him or her, provided he or she shall give
the Company an opportunity, at its own expense, to handle and
defend the same before he or she undertakes to handle and
defend it on his or her own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under
the Company's Certificate of Incorporation of Bylaws, as a
matter of law, or otherwise, or any power that the Company
may have to indemnify them or hold them harmless.
Article 19. Successors
- -----------------------
All obligations of the Company under the Plan with
respect to Awards granted hereunder shall be binding on any
successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially
all of the business and/or assets of the Company.
Article 20. Legal Construction
- ------------------------------
20.1. Gender and Number. Except where otherwise
--------------------------
indicated by the context, any masculine term used herein also
shall include the feminine; the plural shall include the
singular and the singular shall include the plural.
20.2. Severability. In the event any provision of the
---------------------
Plan shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts
of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
20.3. Requirements of Law. The granting of Awards and
----------------------------
the issuance of Shares under the Plan shall be subject to all
applicable laws, rules, and regulations, and to such
approvals by any governmental agencies or national securities
exchanges as may be required.
20.4. Securities Law Compliance. With respect to
----------------------------------
Insiders, transactions under this Plan are intended to comply
with all applicable conditions or Rule 16b-3 or its
successors under the Exchange Act. To the extent any
provision of the plan or action by the Board fails to so
comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable by the Board.
-16-
20.5. Governing Law. To the extent not preempted by
----------------------
federal law, the Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the
State of Texas.