KAISER SEVERANCE PROTECTION AND CHANGE OF CONTROL BENEFITS
PROGRAM
In 1998, Kaiser Aluminum Corporation ("KAC") and Kaiser Aluminum
& Chemical Corporation ("KACC") implemented the Kaiser Severance
Protection and Change of Control Benefits Program (the "Program")
in order to provide certain selected executive officers and key
employees of KACC (collectively, "Participants") with (i)
incentives intended to increase the likelihood of retaining the
services of the Participants and/or (ii) appropriate protection
in the event of a job loss or change of control. The Program
will generally remain in effect through December 31, 2000.
The three components of the Program, each of which is described
more fully below, consist of (i) severance payments and benefits
in the event of termination, (ii) retention payments condition
upon continued employment through specified dates, and (iii)
options relating to KAC Common Stock. Under the Program, KAC and
KACC have the sole discretion to determine which executive
officers and key employees participate in the Program and the
level of participation. Not all components of the Program were
offered or otherwise made available to all Participants.
Severance Benefits
Selected Participants are eligible for severance benefits under
the Program upon termination of employment for any reason other
than (i) the voluntary resignation or retirement of the
Participant, (ii) the discharge of the Participant for serious
cause or other reason prejudicial to KAC or KACC, (iii) the
Participant becoming eligible for sick leave, long term
disability or full early disability benefits under the Kaiser
Aluminum Salaried Employees Retirement Plan, (iv) the
Participant's refusal to accept another suitable position with
KAC or KACC, or (v) the Participant's death. The benefits
payable generally consist of a lump sum cash payment ranging from
six months to one year of base salary (including, in some
instances, prorated incentive awards based upon designated
incentive targets) less whatever severance benefits the
Participant would otherwise be eligible to receive under the
Kaiser Aluminum Termination Payment and Benefits Plan
Continuation Policy generally available to all regular salaried
employees. Participants may also be entitled under the Program
to continued medical, dental, life and accidental death and
disability coverage for designated periods after termination.
In lieu of the severance benefits described above, selected
Participants are also eligible for severance benefits in the
event the Participant's employment terminates or constructively
terminates due to a change of control(1) or significant
restructuring(2) (collectively, a "Fundamental Change") during a
period which commences ninety (90) days prior to a Fundamental
Change and ends on the first anniversary of the Fundamental
Change. These benefits are not available if (i) the purchaser,
new controlling entity, KAC or KACC offer the Participant
suitable employment in a substantially similar capacity at the
Participant's current level of compensation (regardless of
whether the Participant accepts or rejects the suitable
position), (ii) the Participant voluntarily resigns or is
terminated, (iii) the Participant is discharged for serious cause
or other reason prejudicial to KAC or KACC, (iv) the Participant
becomes eligible within ninety (90) days prior to the Fundamental
Change for sick leave, long term disability or full early
disability benefits under the Kaiser Aluminum Salaried Employees
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(1) For purposes of the Program, a "change of control" is
generally defined as the transfer of all or substantially all of
the assets of, or the merger, consolidation or reorganization of,
KAC or KACC to or with another organization or the transfer of
the stock of KAC or KACC to another organization in a manner such
than neither KAC or MAXXAM Inc. controls KACC.
(2) For purposes of the Program, a "significant restructuring"
is generally defined as the sale or other disposition of a
designated portion of KACC's business.
Retirement Plan, or (v) the Participant dies. If a Participant
fails to qualify for severance benefits under the Program as a
result of a termination of the Participant's employment due to a
Fundamental Change because of any of the above exclusions, the
Participant will also fail to qualify for the severance benefits
described above in the preceding paragraph.
The benefits payable under the Program as a result of a
termination of employment due to a Fundamental Change generally
consist of a lump sum cash payment ranging from nine months to
two years of base salary (including, in some instances, prorated
incentive awards based upon designated incentive targets) less
whatever severance benefits the Participant would otherwise be
eligible to receive under the Kaiser Aluminum Termination Payment
and Benefits Plan Continuation Policy generally available to all
regular salaried employees. Participants may also be entitled
under the Program to continued medical, dental, life and
accidental death and disability coverage for designated periods
after termination due to a Fundamental Change.
Retention Payments
Under the Program, selected Participants are also eligible to
receive retention payments conditioned upon continued employment
as of a designated date. In each instance, the retention payment
is also generally payable in the event a Participant's employment
is terminated prior to the designated date unless the termination
is for any reason described above which would preclude severance
payments under the program. Retention payments under the Program
generally consist of a lump sum cash payment and are generally
based upon six months of salary (including, in some instances,
prorated incentive awards based upon designated incentive
targets).
KAC Common Stock Options
Under the Program, selected Participants are also eligible to
receive options to purchase shares of KAC Common Stock. The
number of shares of KAC Common Stock subject to such options and
the specific terms of such options vary depending upon the level
of responsibility and seniority of the Participant.
Notwithstanding the foregoing, such options generally (i) replace
the long term incentive compensation targets otherwise applicable
to the Participant receiving the options for designated long term
incentive periods beginning on or after January 1, 1998, (ii)
expire three to five years after the date of grant, (iii) are
based upon market prices of KAC Common Stock on the date of
grant, (iv) vest over a period of three or five years, and (v)
terminate upon the termination for cause of the Participant.