<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-6348
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Howmet Corporation
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(Exact name of registrant as specified in its charter)
Delaware 13-2838093
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
475 Steamboat Road, Greenwich, CT 06836-1960
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(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code . . . (203) 661-4600
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No X
----- -----
Indicate the number of shares outstnading of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at August 27, 1996
- ----------------------------- ------------------------------
<S> <C>
Common stock, $1.00 par value 10
</TABLE>
<PAGE> 2
Howmet Corporation
Consolidated Condensed Balance Sheets
(In thousands, except share amounts)
<TABLE>
<CAPTION>
June 29, December 31,
1996 1995
---------- ------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 29,320 $ 9,606
Accounts receivable, less allowance of $7,259 and $8,258 75,768 88,533
Inventories 144,519 150,288
Retained receivables 53,007 42,690
Other current assets 22,052 3,481
----------- -----------
Total current assets 324,666 294,598
Property, plant and equipment, net 290,984 301,563
Deferred income taxes 8,621 --
Goodwill, net 311,394 311,092
Acquisition intangibles and other assets, net 163,730 192,250
----------- -----------
$ 1,099,395 $ 1,099,503
=========== ===========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 68,676 $ 58,987
Accrued liabilities 144,593 154,957
Income taxes payable 9,485 6,064
Long-term debt due within one year 78,562 45,303
Deferred income taxes 36,427 28,382
----------- -----------
Total current liabilities 337,743 293,693
Accumulated postretirement benefit obligation 93,706 82,259
Other liabilities 46,636 22,419
Deferred income taxes -- 6,663
Long-term debt 340,315 418,186
----------- -----------
Total liabilities 818,400 823,220
Stockholders' equity:
Common stock, $1 par value; authorized - 1,000 shares;
issued and outstanding - 10 shares
Capital surplus 275,000 275,000
Retained earnings 7,600 160
Cumulative translation adjustment (1,605) 1,123
----------- -----------
Total stockholders' equity 280,995 276,283
----------- -----------
$ 1,099,395 $ 1,099,503
=========== ===========
</TABLE>
See notes to consolidated condensed financial statements.
2
<PAGE> 3
Howmet Corporation
Consolidated Condensed Income Statements (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Successor Predecessor Successor Predecessor
Company Company Company Company
Consolidated Combined Consolidated Combined
---------------------------------- ----------------------------------
Thirteen weeks Thirteen weeks Twenty-six Twenty-six weeks
ended June 29, ended July 2, weeks ended ended July 2,
1996 1995 June 29, 1996 1995
---------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Net sales $ 283,366 $ 237,287 $ 544,814 $ 473,194
Operating costs and expenses:
Cost of sales 208,772 179,175 398,750 357,604
Selling, general and administrative expense 27,455 26,771 57,001 53,050
Depreciation and amortization expense 15,161 8,499 30,280 16,746
Research and development expense 6,007 7,015 12,166 12,908
----------------------------- -----------------------------
257,395 221,460 498,197 440,308
----------------------------- -----------------------------
Earnings from operations 25,971 15,827 46,617 32,886
Interest income, affiliates -- 3,101 -- 6,586
Interest income, third party 692 19 961 27
Interest expense, affiliates -- (338) -- (673)
Interest expense, third party (10,881) (1,412) (22,265) (2,240)
Equity in loss of unconsolidated affiliates (1,183) (1,287) (2,078) (2,227)
Other, net (1,650) 36 (2,735) (179)
----------------------------- -----------------------------
Income before income taxes 12,949 15,946 20,500 34,180
Income taxes 7,774 6,801 13,060 15,633
----------------------------- -----------------------------
Net income $ 5,175 $ 9,145 $ 7,440 $ 18,547
============================= =============================
</TABLE>
See notes to consolidated condensed financial statements.
3
<PAGE> 4
Howmet Corporation
Consolidated Condensed Statements of Cash Flows (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Successor Predecessor
Company Company
Consolidated Combined
------------- ------------
Twenty-six Twenty-six
weeks ended weeks ended
June 29, 1996 July 2, 1995
------------- ------------
<S> <C> <C>
Operating activities
Net income $ 7,440 $ 18,547
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 31,713 18,593
Equity in loss of unconsolidated affiliates 2,078 2,227
Changes in assets and liabilities:
Accounts receivable 4,595 (23,099)
Inventory 4,980 (15,526)
Deferred taxes (1,739) 5,818
Accounts payable 6,541 (9,387)
Accrued liabilities and other liabilities 15,554 8,259
Income taxes payable 3,081 (15,859)
Other - net (1,819) (3,655)
--------- ---------
Net cash provided (used) by operating activities 72,424 (14,082)
Investing activities :
Property, plant and equipment
Purchases (10,965) (14,650)
Disposals 89 1,970
Acquisition of Turbine Components Corporation -- (9,050)
Settlement of December 13, 1995 acquisition price 3,634 --
--------- ---------
Net cash used in investing activities (7,242) (21,730)
Financing activities
Issuance of debt 95,500 7,896
Repayment of debt (141,069) (6,902)
Reduce advance to Parent -- 34,545
--------- ---------
Net cash used in financing activities (45,569) 35,539
Effect of exchange rate changes on cash 101 134
--------- ---------
Increase in cash 19,714 (139)
Cash and cash equivalents at beginning of period 9,606 1,771
--------- ---------
Cash and cash equivalents at end of period $ 29,320 $ 1,632
========= =========
</TABLE>
See notes to consolidated condensed financial statements.
4
<PAGE> 5
HOWMET CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
A. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. The consolidated condensed balance sheet at December 31,
1995, has been derived from audited financial statements at that date. In the
opinion of management all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation have been included. Operating results for the
twenty-six weeks ended June 29, 1996 are not necessarily indicative of the
results to be expected for the year ending December 31, 1996. The financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Registration Statement on
Form S-4 (registration no. 333-00200).
Successor Company
Blade Acquisition Corp. ("Blade") was formed in October 1995 to acquire Pechiney
Corporation from Pechiney International, S.A. and the Cercast group of companies
from Howmet Cercast S.A., a subsidiary of Pechiney International, S.A. The
Carlyle Group and certain of its affiliates ("The Carlyle Group") and Thiokol
Holding Company, a wholly-owned subsidiary of Thiokol Corporation ("Thiokol"),
own 51% and 49%, respectively, of Blade's common stock. The acquisition was
effected through a series of transactions, including the purchase of Pechiney
Corporation by Howmet Holdings Acquisition Corp. ("HHAC"), a wholly-owned
subsidiary of Blade; the purchase of the capital stock of certain Cercast
companies by Howmet Acquisition Corp. ("HAC"), a wholly-owned subsidiary of
HHAC; and the mergers of HHAC with and into Pechiney Corporation and of HAC with
and into Howmet Corporation ("Successor Company" or "Howmet"). After the
mergers, Pechiney Corporation's name was changed to Howmet Holdings Corporation
("Holdings"). Howmet is a wholly-owned subsidiary of Holdings, which is a
wholly-owned subsidiary of Blade. The acquisition was completed on December 13,
1995 for a total purchase price, including transaction fees and expenses, of
approximately $771.6 million (after agreed upon post-closing adjustments).
Financing for the acquisition included (i) borrowing of $300 million under a
senior term loan facility, (ii) the sale of $125 million aggregate principal
amount of senior subordinated notes, (iii) $51.4 million of proceeds from a
special purpose receivables facility, (iv) $10.2 million in borrowings under a
$125 million (excluding standby letters of credit) revolving credit facility,
(v) $10 million of borrowings through a Canadian facility, and (vi) a $250
million cash equity investment from the proceeds of the issuance of $200
million of Blade common stock and $50 million of Blade pay-in-kind preferred
stock. The acquisition financing also included a $25 million pay-in-kind junior
subordinated purchaser note issued to Pechiney International, S.A. by HHAC,
which amount was contributed to the Company's capital. The Stock Purchase
Agreement ("SPA") provides Blade with indemnities for certain pre-closing tax,
environmental and product liabilities.
5
<PAGE> 6
HOWMET CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
A. BASIS OF PRESENTATION (Continued)
The Successor Company Consolidated Condensed Financial Statements reflect the
applicable aforementioned acquisition financing debt and $275 million equity
contribution. The acquisition was accounted for in accordance with the purchase
method of accounting, and accordingly, such financial statements reflect the
allocation of the purchase price and related acquisition costs to the assets
acquired and liabilities assumed based on their fair values. Finalization of the
carrying values of certain assets and liabilities is subject to completion of
data collection, including costs to exit certain aspects of the business, and
the estimation process.
Predecessor Company
The combined financial statements have been prepared to present the combined
operations of Howmet Corporation and Howmet Cercast Group ("Cercast")
(collectively, the "Predecessor Company"), affiliated entities with common
ownership and management, on a historical cost basis prior to their acquisition
by Blade. All transactions between Howmet Corporation and Cercast have been
eliminated. The Predecessor Company had significant transactions with Pechiney
Corporation and Pechiney S.A., a French corporation and majority owner of
Pechiney International, S.A.
B. INVENTORIES
Inventories at June 29, 1996 are as follows:
<TABLE>
<S> <C>
Raw materials and supplies.......................... $ 58,796
Work in process and finished goods.................. 87,004
--------
FIFO inventory...................................... 145,800
LIFO valuation adjustment........................... (1,281)
--------
$144,519
========
</TABLE>
Inventories include $41.0 million that are valued using average cost.
In the 26 weeks ended June 29, 1996 the Successor Company increased the LIFO
valuation adjustment and thereby increased cost of sales by $1.3 million. In the
comparable 1995 period, the Predecessor Company increased its LIFO valuation
adjustment and thereby increased cost of sales by $6.2 million.
6
<PAGE> 7
HOWMET CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
C. ACQUISITION
Effective April 30, 1995 the Company acquired Turbine Components Corporation
("TCC"), a refurbishment operation, in exchange for a payment of $9.1 million
and the assumption of certain liabilities. 1996 results include TCC sales of
$6.2 million and operating losses of $0.9 million in the first seventeen weeks
of 1996, with no comparable 1995 amounts for the seventeen weeks prior to the
April 30, 1995 acquisition date.
D. DEBT
In the first half of 1996, the Company repaid $45.6 million of debt, including
the entire $26 million of borrowings that were outstanding under its revolving
credit facility at December 31, 1995 and $19.3 million of its senior term
facility borrowings. Subsequent to June 29, 1996 and before August 27, 1996, the
Company repaid an additional $53.6 million of senior term facility borrowings.
Such amounts are included in the Consolidated Condensed Balance Sheet on the
line captioned "long-term debt due within one year". At August 27, 1996 there
were $17.6 million of standby letters of credit outstanding. The Company paid
interest of $18.4 million and $2.7 million during the first half of 1996 and
1995, respectively.
E. INCOME TAXES
The 1996 effective rate is significantly higher than statutory rates due to the
effects of certain losses and expenses for which there were no associated tax
benefits, including goodwill amortization and equity in losses of unconsolidated
affiliates. Due primarily to higher estimates of annual income, the estimated
effective tax rate was reduced from 70% at March 31, 1996 to 63.7% at June 29,
1996. This change in estimate resulted in $0.5 million lower tax expense in the
thirteen week period ended June 29, 1996, due to the catch-up effect on pre-tax
income for the first thirteen weeks of 1996. In the first half of 1996 and 1995,
the Company made income tax payments (net of refunds) of $11.4 million and $23.8
million, respectively.
F. CONTINGENCIES
The Company and its subsidiaries are involved in litigation, administrative
proceedings and investigations of various types in several jurisdictions.
Additionally, liabilities arising for cleanup costs associated with hazardous
types of materials in several waste disposal facilities exist. In particular,
the Company has been or may be named a potentially
7
<PAGE> 8
HOWMET CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
F. CONTINGENCIES (Continued)
responsible party under the Comprehensive Environmental Response, Compensation
and Liability Act or similar state laws at seventeen on-site and off-site
locations. Estimated environmental costs are not expected to materially impact
the financial position or the results of the Successor Company's operations in
future periods. However, environmental clean-up periods are protracted in length
and environmental costs in future periods are subject to changes in
environmental remediation regulations. Accordingly, should any losses not
indemnified be sustained in excess of provided reserves, they will be charged to
income in the future. Under the terms of the SPA, Pechiney, S.A. and Pechiney
International, S.A. agreed to indemnify the Successor Company for environmental
liabilities existing as of December 13, 1995 that exceed recorded reserves of
$6.0 million.
At June 29, 1996, the Successor Company guaranteed certain indebtedness of its
50% owned entities aggregating $12.5 million.
8
<PAGE> 9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Results of Operations
Thirteen Weeks Ended June 29, 1996, Compared to Thirteen Weeks Ended July 2,
1995
Net sales increased by $46.1 million (19%) to $283.4 million for the 1996
thirteen week period ended June 29, 1996 ("the 1996 thirteen week period") from
$237.3 million for the 1995 thirteen week period ended July 2, 1995 ("the 1995
period"). The increase was primarily due to volume increases resulting from
increased demand for aerospace and industrial gas turbine airfoils, aluminum
castings, and component repairs.
Gross profit increased by $16.5 million (28%) to $74.6 million for the 1996
thirteen week period from $58.1 million for the 1995 period. The principal
reasons for such improvement were the effect of volume increases and $5.7
million lower adverse LIFO valuation adjustments in the 1996 thirteen week
period.
Selling, general and administrative expense increased by $0.7 million (3%) to
$27.5 million for the 1996 thirteen week period. The increase was due primarily
to performance-based incentive costs and other employee-related costs.
Depreciation and amortization expense increased by $6.7 million (78%) to $15.2
million for the 1996 thirteen week period from $8.5 million for the 1995 period.
$6.1 million of the increase relates to the December 13, 1995 acquisition asset
additions and revaluations, including goodwill, patents, non-compete agreement,
and step-up of property, plant and equipment.
Research and development expense decreased $1 million (14%) to $6 million for
the 1996 thirteen week period from $7 million in the 1995 period. The decrease
was primarily attributable to a decline in the level of new part development
work.
Net interest expense (expense less interest income) amounted to $10.2 million
for the 1996 thirteen week period, and net interest income (income less interest
expense) amounted to $1.4 million for the 1995 period. The expense in 1996
resulted principally from acquisition financing-related debt (Note 1 of Notes to
Consolidated Condensed Financial Statements). In 1995 the Company recorded
interest income on loans to its former owner, which are no longer outstanding.
Other expense is $1.7 million higher in the 1996 thirteen week period than in
the 1995 period, primarily as a result of losses on sales of accounts receivable
and fees for the related receivables sales facility.
The effective tax rate for the 1996 thirteen week period was 60%, compared to an
effective tax rate of 42.7% for the 1995 period. The higher rate in the current
period reflects certain losses and expenses for which there were no associated
tax benefits, including goodwill amortization and equity in losses of
unconsolidated affiliates.
9
<PAGE> 10
As a result of the foregoing, net income was $5.2 million for the 1996 thirteen
week period compared to $9.1 million for the 1995 period.
Twenty-six Weeks Ended June 29, 1996, Compared to Twenty-six Weeks Ended July 2,
1995
Net sales increased by $71.6 million (15%) to $544.8 million for the twenty-six
weeks ended June 29, 1996 ("the 1996 twenty-six week period") from $473.2
million for the twenty-six weeks ended July 2, 1995 ("the 1995 period"). The
increase was primarily due to volume increases resulting from increased demand
for aerospace and industrial gas turbine airfoils, aluminum castings, and
component repairs. Approximately $6.2 million of the increase resulted from the
Company's April 30, 1995 acquisition of Turbine Components Corporation ("TCC"),
a refurbishment operation.
Gross profit increased by $30.5 million (26%) to $146.1 million for the 1996
twenty-six week period from $115.6 million for the 1995 period. The principal
reasons for such improvement were the effect of volume increases and $4.9
million less adverse effect of LIFO valuation adjustments in the 1996 twenty-six
week period.
Selling, general and administrative expenses increased by $4.0 million (7%) to
$57.0 million for the 1996 twenty-six week period. The increase was due
primarily to performance-based incentive costs and other employee-related costs.
Depreciation and amortization expense increased by $13.5 million (81%) to $30.3
million for the 1996 twenty-six week period from $16.7 million for the 1995
period. $12.1 million of the increase relates to the December 13, 1995
acquisition asset additions and revaluations including goodwill, patents,
non-compete agreement, and step-up of property, plant and equipment. The April
30, 1995 acquisition of TCC also contributed to the increase.
Research and development expense decreased $0.7 million (6%) to $12.2 million
for the 1996 twenty-six week period from $12.9 million for the 1995 period. The
decrease was primarily attributable to a decline in the level of new part
development work.
Net interest expense (expense less interest income) amounted to $21.3 million
for the 1996 twenty-six week period, and net interest income (income less
interest expense) amounted to $3.7 million for the 1995 period. The expense in
1996 resulted principally from the December 13, 1995 acquisition
financing-related debt. In 1995, the Company recorded interest income on loans
to its former owner, which are no longer outstanding.
Other expense is $2.6 million higher in the 1996 twenty-six week period than in
the 1995 period, primarily as a result of losses on sales of accounts receivable
and fees for the related receivables sales facility.
The effective tax rate for the 1996 twenty-six week period was 63.7%, compared
to an effective tax rate of 45.7% for the 1995 period. The higher rate in the
current period reflects certain losses and expenses for which there were no
associated tax benefits including goodwill amortization and equity in losses of
unconsolidated affiliates.
10
<PAGE> 11
As a result of the foregoing, net income was $7.4 million for the 1996
twenty-six week period compared to $18.5 million for the 1995 period.
Liquidity and Capital Resources
Since the consummation of the December 13, 1995 acquisition, the Company's
principal sources of liquidity are cash flow from operations and borrowings
under its revolving credit facility. The Company's principal uses of cash are to
provide working capital, service debt and finance capital expenditures.
In the 1996 twenty-six week period the Company generated $72.4 million in cash
from operating activities. $26.0 million was used to repay all outstanding
borrowings under the revolving credit facility. This facility provides $125
million of revolving credit borrowing and letter of credit capacity. At August
27, 1996 there were no borrowings and $17.6 million of standby letters of credit
were outstanding.
In addition to revolving credit facility borrowing repayments, the Company
repaid $19.3 million of senior term facility borrowings by June 29, 1996 and an
additional $53.6 million by August 27, 1996. In making such repayments, the
Company used cash from $7.0 million of second quarter and $21.1 million of July
1996 cash collections that resulted from cost recoveries under, and
modifications of, certain customer agreements. In addition, a significant
portion of cash on hand at June 29, 1996 was used in post-June 29 repayments.
Capital expenditures for the first half of 1996 were $11.0 million. The Company
anticipates full year 1996 capital expenditures to be approximately $40 million.
The accelerated spending in the second half of the year is principally due to
capacity expansion resulting from increased demand.
As part of the December 13, 1995 acquisition purchase price allocation, a $21.0
million restructuring reserve has been established for Howmet S.A. The cash
impact of this restructuring is expected to occur predominately in 1997, and is
expected to be paid out of operating cash flow and/or the revolving credit
facility.
The Company has initiated a process that may result in the sale of its
refurbishment business, although no agreement has been reached. If the
refurbishment business is sold, proceeds will be used to reduce debt or for
general purposes. Apart from the benefits of sale proceeds, if the business is
sold, the impact of the sale will not have a material effect on liquidity. Net
sales of the refurbishment business that may be sold were $63.0 million for the
full year 1995 and $38.4 million for the 1996 twenty-six week period. Earnings
from operations of this business were immaterial in both periods.
Based upon the current level of operations, management believes that cash flow
from operations, together with available borrowings under the revolving credit
facility, will be adequate to meet the Company's anticipated requirements for
working capital, capital expenditures, interest payments and scheduled principal
payments under the senior credit facilities prior to final maturity.
11
<PAGE> 12
The Company guarantees certain indebtedness of its two joint ventures. As of
June 29, 1996 these joint ventures had outstanding indebtedness of approximately
$25 million, of which the Company has guaranteed approximately $12.5 million. It
is anticipated that such joint ventures may continue to incur indebtedness to
fund their operations and that the Company will guarantee its share of such
indebtedness.
Environmental Matters
The Company's capital expenditures for environmental compliance have not been
material in the periods presented. The Company is currently remediating known
environmental contamination (including soil and groundwater contamination) at
five domestic facilities. Also, as a result of off-site waste disposal prior to
the December 13, 1995 acquisition, the Company may be subject to liability for,
and is currently involved in, certain matters relating to the investigation
and/or remediation of environmental contamination at certain properties not
owned or operated by the Company. In this regard, the Company has been or may be
named a potentially responsible party under the Comprehensive Environmental
Response, Compensation and Liability Act and similar state statutes, at
seventeen on-site and off-site locations.
In addition, the Company is remediating similar environmental contamination at
five European facilities. In connection with a review of environmental matters
related to the December 13, 1995 acquisition, independent consultants were
retained to assess the environmental liabilities of the European properties
operated by the Company. The Company has reviewed these reports and conducted
its own assessment, and estimates actual expenditures at these properties to be
not more than $1.3 million.
The amount and timing of payments the Company may be required to make with
respect to environmental matters are uncertain at this time. However, based on
management's best current estimates of potential liability, management believes
that the Company's reserves (approximately $6.1 million at June 29, 1996) are
adequate under current laws and regulations. In addition, as part of the
December 13, 1995 acquisition, Howmet Cercast S.A., Pechiney International, S.A.
and Pechiney S.A. indemnified Blade Acquisition Corp., and Blade Acquisition
Corp. assigned such indemnification rights to the Company, for any environmental
liabilities originating prior to December 13, 1995 (the acquisition closing
date), which exceed the Company's reserves of $6.0 million as of June 30, 1995.
* * * * * * * * * * *
The statements made herein that are not historical facts may be forward looking
statements. In connection with the "Safe Harbor" provision of the Private
Securities Litigation Reform Act of 1995, the Company hereby cautions readers
that the forward looking statements are subject to certain risks and
uncertainties, including without limitation those identified in Exhibit 99.1
hereto, which could cause actual results to differ materially from historical
results or those anticipated, and urges readers to review Exhibit 99.1
carefully. Factors discussed in Exhibit 99.1 include, among others, substantial
leverage and debt service, the effects of aerospace industry economic conditions
and cyclicality, reduced government sales, concentrated customer base,
competition, concentration of ownership, and environmental matters.
12
<PAGE> 13
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Certificate of Incorporation of the Company (incorporated herein by
reference to Exhibit 3.1 to the Company's Registration Statement on Form
S-4 filed January 9, 1996 (registration no. 333-00200)).
3.2 By-laws of the Company (incorporated herein by reference to Exhibit 3.2 to
the Company's Registration Statement on Form S-4 filed January 9, 1996
(registration no. 333-00200)).
4.1 Registration Rights Agreement dated as of December 7, 1995, among the
Company, BT Securities Corporation, and Lehman Brothers, Inc.
(incorporated herein by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-4 filed January 9, 1996 (registration no.
333-00200)).
4.2(a) Indenture dated as of December 7, 1995 between the Company and Marine
Midland Bank, as Trustee (incorporated herein by reference to Exhibit
4.2(a) to the Company's Registration Statement on Form S-4 filed January
9, 1996 (registration no. 333-00200)).
4.2(b) Supplemental Indenture dated as of December 13, 1995 between the Company
and Marine Midland Bank, as Trustee (incorporated herein by reference to
Exhibit 4.2 to Amendment no. 2 to the Company's Registration Statement on
Form S-4 filed April 1, 1996 (registration no. 333-00200)).
4.3 Credit Agreement dated as of December 13, 1995 among Blade Acquisition
Corp., Howmet Holdings Acquisition Corp., Howmet Acquisition Corp.,
Bankers Trust Company, various banks, Citicorp USA, Inc., and The First
National Bank of Chicago as Managing Agents, Bankers Trust Company as
Syndication Agent, Citicorp USA, Inc. as Documentation Agent and The First
National Bank of Chicago, as Administrative Agent, together with certain
collateral documents attached thereto as exhibits, including the
Subsidiary Guaranty, Pledge Agreement and Security Agreement among Blade
Acquisition Corp., Pechiney Corporation, Howmet Corporation, certain
subsidiaries and
<PAGE> 14
affiliates of Howmet Corporation and the First National Bank of Chicago
(incorporated herein by reference to Exhibit 4.3 to Amendment no. 2 to the
Company's Registration Statement on Form S-4 filed April 1, 1996
(registration no. 333-00200)).
4.4 Copies of the executed original 10% Senior Subordinated Notes 2003 of the
Company (the "Original Notes"), authenticated and delivered by Marine
Midland Bank as Trustee on December 7, 1995 (incorporated herein by
reference to Exhibit 4.4 to the Company's Registration Statement on Form
S-4 filed January 9, 1996 (registration no. 333-00200)).
4.5 Form of 10% Senior Subordinated Notes due 2003 of the Company offered in
exchange for the Original Notes (included in Exhibit 4.2(a)).
10.1 Howmet Corporation Annual Bonus Plan (incorporated herein by reference to
Exhibit 10.1 to Amendment No. 1 to the Company's Registration Statement on
Form S-4 filed January 17, 1996 (registration no. 333-00200)).
10.2 Howmet Restructuring Cash Incentive Plan (incorporated herein by reference
to Exhibit 10.2 to Amendment No. 1 to the Company's Registration Statement
on Form S-4 filed January 17, 1996 (registration no. 333-00200)).
10.3 Howmet Corporation Excess Benefit Plan (incorporated herein by reference
to Exhibit 10.4 to Amendment No. 1 to the Company's Registration Statement
on Form S-4 filed January 17, 1996 (registration no. 333-00200)).
10.4 Howmet Corporation Transaction Incentive Payments Plan (incorporated
herein by reference to Exhibit 10.5 to Amendment No. 1 to the Company's
Registration Statement on Form S-4 filed January 17, 1996 (registration
no. 333-00200)).
10.5 Howmet Corporation Enhanced Bonus Program for Employees Grade 22 and Above
(incorporated herein by reference to Exhibit 10.6 to Amendment No. 1 to
the Company's Registration Statement on Form S-4 filed January 17, 1996
(registration no. 333-00200)).
10.6 1986 Howmet Corporation Deferred Compensation Plan (incorporated herein by
reference to Exhibit 10.7 to Amendment No. 1 to the Company's Registration
Statement
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<PAGE> 15
on Form S-4 filed January 17, 1996 (registration no. 333-00200)).
10.7 Howmet Corporation 1995 Executive Deferred Compensation Plan (incorporated
herein by reference to Exhibit 10.8 to Amendment No. 1 to the Company's
Registration Statement on Form S-4 filed January 17, 1996 (registration
no. 333-00200)).
10.8 Employment Agreement dated October 4, 1995, between Howmet Corporation and
Henri Fine (incorporated herein by reference to Exhibit 10.9 to Amendment
No. 1 to the Company's Registration Statement on Form S-4 filed January
17, 1996 (registration no. 333-00200)).
10.9 Employment Agreement dated October 4, 1995, between Howmet Corporation and
Jack Lambert (incorporated herein by reference to Exhibit 10.10 to
Amendment No. 1 to the Company's Registration Statement on Form S-4 filed
January 17, 1996 (registration no. 333-00200)).
10.10 Employment Agreement dated October 4, 1995, between Howmet Corporation and
Mark Lasker (incorporated herein by reference to Exhibit 10.11 to the
Company's Registration Statement on Form S-4 filed January 9, 1996
(registration no. 333-00200)).
10.11 Employment Agreement dated October 4, 1995, between Howmet Corporation and
Neil Paton (incorporated herein by reference to Exhibit 10.12 to Amendment
No. 1 to the Company's Registration Statement on Form S-4 filed January
17, 1996 (registration no. 333-00200)).
10.12 Employment Agreement dated October 4, 1995, between Howmet Corporation and
James Stanley (incorporated herein by reference to Exhibit 10.13 to the
Company's Registration Statement on Form S-4 filed January 9, 1996
(registration no. 333-00200)).
10.13 Employment Agreement dated October 4, 1995, between Howmet Corporation and
Paul Wilson (incorporated herein by reference to Exhibit 10.14 to
Amendment No. 1 to the Company's Registration Statement on Form S-4 filed
January 17, 1996 (registration no. 333-00200)).
10.14 Employment Agreement dated October 4, 1995, between Howmet Corporation and
Ronald Wood (incorporated herein by reference to Exhibit 10.15 to the
Company's
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<PAGE> 16
Registration Statement on Form S-4 filed January 9, 1996 (registration no.
333-00200)).
10.15 Employment Agreement dated October 4, 1995, between Howmet Corporation and
Roland Paul (incorporated herein by reference to Exhibit 10.16 to
Amendment No. 1 to the Company's Registration Statement on Form S-4 filed
January 17, 1996 (registration no. 333-00200)).
10.16 Employment Agreement dated October 4, 1995, between Howmet Corporation and
David Squier (incorporated herein by reference to Exhibit 10.17 to the
Company's Registration Statement on Form S-4 filed January 9, 1996
(registration no. 333-00200)).
10.17 Employment Agreement dated October 4, 1995, between Howmet Turbine
Components Corporation and B. Dennis Albrechtsen (incorporated herein by
reference to Exhibit 10.18 to the Company's Registration Statement on Form
S-4 filed January 9, 1996 (registration no. 333-00200)).
10.18 Letter Agreement regarding payment of life insurance between Howmet
Corporation and David L. Squier (incorporated herein by reference to
Exhibit 10.19 to Amendment No. 1 to the Company's Registration Statement
on Form S-4 filed January 17, 1996 (registration no. 333-00200)).
10.19(a) Tax Sharing Agreement among Howmet Corporation, Howmet Management
Services, Inc., Howmet-Tempcraft, Inc., Howmet Thermatech Canada, Inc.,
Howmet Transport Services, Inc., Howmet Sales, Inc., Howmet Refurbishment,
Inc., Turbine Components Corporation, Blade Receivables Corporation, a
Nevada corporation, and Howmet Cercast (USA), Inc., dated as of December
13, 1995 (incorporated herein by reference to Exhibit 10.20(a) to the
Company's Registration Statement on Form S-4 filed January 9, 1996
(registration no. 333-00200)).
10.19(b) Tax Sharing Agreement among Blade Acquisition Corp., Pechiney
Corporation, Howmet Insurance Co., Inc., Howmet Corporation and all of its
directly and indirectly owned subsidiaries, dated as of December 13, 1995
(incorporated herein by reference to Exhibit 10.20(b) to the Company's
Registration Statement on Form S-4 filed January 9, 1996 (registration no.
333-00200)).
10.20 Management Agreement between Howmet Corporation and
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Thiokol Holding Company dated as of December 13, 1995 (incorporated herein
by reference to Exhibit 10.21 to the Company's Registration Statement on
Form S-4 filed January 9, 1996 (registration no. 333-00200)).
10.21 Management Agreement between Howmet Corporation and TCG Holdings, L.L.C.,
dated as of December 13, 1995 (incorporated herein by reference to Exhibit
10.22 the Company's Registration Statement on Form S-4 filed January 9,
1996 (registration no. 333-00200)).
10.22 Assignment and Assumption Agreement between Howmet Holdings Acquisition
Corp. and Howmet Acquisition Corp., dated as of December 6, 1995 and
Indemnification Provisions of the Stock Purchase Agreement among Pechiney,
Pechiney international S.A., Howmet Cercast S.A. and Blade Acquisition
Corp., dated as of October 12, 1995 (incorporated herein by reference to
Exhibit 10.23 to Amendment No. 1 to the Company's Registration Statement
on Form S-4 filed January 17, 1996 (registration no. 333-00200)).
10.23 Revised Employment Letter dated February 13, 1996, between Howmet
Corporation and John C. Ritter (incorporated herein by reference to
Exhibit 10.24 to Amendment No. 3 to the Company's Registration Statement
on Form S-4 filed June 11, 1996 (registration no. 333-00200)).
10.24 Stock Appreciation Right Agreement between Howmet Corporation and David
L.Squier dated May 17, 1996.
10.25 Stock Appreciation Right Agreement between Howmet Corporation and James
Stanley dated May 17, 1996.
10.26 Stock Appreciation Right Agreement between Howmet Corporation and Mark
Lasker dated May 17, 1996.
10.27 Stock Appreciation Right Agreement between Howmet Corporation and John C.
Ritter dated May 17, 1996.
10.28 Stock Appreciation Right Agreement between Howmet Corporation and Allan
Bergquist dated May 17, 1996.
10.29 Stock Appreciation Right Agreement between Howmet Corporation and B. Denis
Albrechtsen dated May 17, 1996.
10.30 Howmet Corporation Amended and Restated Special 1995
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<PAGE> 18
Executive Deferred Compensation Plan effective as of November 1, 1995.
10.31 The Howmet Corporation Nonqualified Deferred Compensation Trust dated
April 29, 1996.
27.1 Financial Data Schedule
99.1 Cautionary statement for purposes of the "Safe Harbor" provisions of the
Private Securities Litigation Reform Act of 1995.
(b) Reports on Form 8-K
During the quarter ended June 30, 1996, the Company filed no Current
Reports on Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 28, 1996
HOWMET CORPORATION
By: /s/ John C. Ritter
------------------------
John C. Ritter
Vice President-Finance and
Chief Financial Officer
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<PAGE> 19
EXHIBIT INDEX
10.24 Stock Appreciation Right Agreement between Howmet Corporation and David
L.Squier dated May 17, 1996.
10.25 Stock Appreciation Right Agreement between Howmet Corporation and James
Stanley dated May 17, 1996.
10.26 Stock Appreciation Right Agreement between Howmet Corporation and Mark
Lasker dated May 17, 1996.
10.27 Stock Appreciation Right Agreement between Howmet Corporation and John C.
Ritter dated May 17, 1996.
10.28 Stock Appreciation Right Agreement between Howmet Corporation and Allan
Bergquist dated May 17, 1996.
10.29 Stock Appreciation Right Agreement between Howmet Corporation and B. Denis
Albrechtsen dated May 17, 1996.
10.30 Howmet Corporation Amended and Restated Special 1995 Executive Deferred
Compensation Plan effective as of November 1, 1995.
10.31 The Howmet Corporation Nonqualified Deferred Compensation Trust dated
April 29, 1996.
27.1 Financial Data Schedule
99.1 Cautionary statement for purposes of the "Safe Harbor" provisions of the
Private Securities Litigation Reform Act of 1995.
<PAGE> 1
Exhibit 10.24
STOCK APPRECIATION RIGHT AGREEMENT
THIS AGREEMENT dated as of May 17, 1996, is made by and between Howmet
Corporation, a Delaware corporation (the "Company"), and David L. Squier, (the
"Executive"):
WHEREAS, Executive is a key management employee of the Company or one
of the Company's Subsidiaries,
WHEREAS, the Board has determined that it would be to the advantage and
best interest of the Company, and the shareholders of the Company to grant the
Stock Appreciation Rights provided for herein to the Executive as an inducement
to remain in the service of the Company, its Parent Corporation or its
Subsidiaries and as an incentive for increased efforts during such service;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the Company and the Executive do hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings specified below. Other
capitalized terms are defined elsewhere in this Agreement and shall have the
meanings there specified.
Section 1.1 - Acceleration Event
"Acceleration Event" shall mean one of the following events occurring
prior to March 31, 2001: (i) a Merger, (ii) a Sale, (iii) the acquisition by an
unaffiliated entity or person, of more than fifty percent (50%) of Blade Common
Stock then outstanding or of Company Common Stock then outstanding, (iv) the
liquidation, dissolution or winding up of the Company or Blade (other than in a
restructuring transaction which results in the continuation of the Company's (or
Blade's) business by an affiliated entity), (v) exercise of the Thiokol Option
and the transfer pursuant thereto of Blade Common Stock owned by Carlyle-Blade
Acquisition Partners, L.P. to Thiokol Holding Company, (vi) disposition by
Carlyle-Blade and its Affiliates (including, without limitation, in a series of
transactions) of the entirety of their interest in Blade Common Stock, or (vii)
a public offering of more than fifty percent (50%) of Blade Common Stock or
Company Common Stock then outstanding pursuant to a registration statement
(other than pursuant to Form S-8) filed under the Securities Act of 1933.
<PAGE> 2
Section 1.2 - Affiliate
"Affiliate" with respect to any entity, shall mean a person or entity
directly or indirectly controlling, controlled by, or under common control with,
such entity, where "control" has the meaning given such term under Rule 405 of
the Securities Act of 1933.
Section 1.3 - Appreciated Value
"Appreciated Value" per Stock Appreciation Right shall mean (i) one
two-hundredth (1/200th) of the Fair Market Value per share of Blade Common Stock
as of the applicable Valuation Date minus (ii) the Base Value of the Stock
Appreciation Right, but not less than zero.
Section 1.4 - Base Value
"Base Value" shall mean One Hundred Dollars ($100) (subject to
adjustment pursuant to the provisions set forth in Section 2.4).
Section 1.5 - Blade
"Blade" shall mean Blade Acquisition Corp., a Delaware corporation.
Section 1.6 - Blade Common Stock
"Blade Common Stock" shall mean the common stock, par value $0.01 per
share, of Blade.
Section 1.7 - Board
"Board" shall mean the Board of Directors of the Company.
Section 1.8 - Cash Flow
"Cash Flow" shall mean, for any period, the difference between the
level of Net Debt as of the day prior to the first day of such period and the
level of Net Debt as of the last day of such period, without giving effect to
any changes in Net Debt resulting from extraordinary transactions, including the
sale or acquisition of assets or inventory not in the ordinary course of
business, and without giving effect to any changes in Net Debt resulting from
any payment pursuant to purchase price adjustment under the Stock Purchase
Agreement dated as of October 12, 1995 among Pechiney, Pechiney International.
S.A. and Blade. "Net Debt" shall equal the difference between "Consolidated
Total Indebtedness" and the total cash balance reported as a current asset on
the Company's balance sheet. "Consolidated Total Indebtedness" shall include
outstanding balances, including current portions, of all long-term indebtedness
of the Company, its Parent Corporations and its Subsidiaries including off-
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<PAGE> 3
balance sheet financings, including, but not limited to, balances due to third
parties through accounts receivables securitization agreements.
Section 1.9 - Code
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
Section 1.10 - Company Common Stock
"Company Common Stock" shall mean the common stock par value $0.01 per
share, of the Company.
Section 1.11 - Cumulative Cash Flow
"Cumulative Cash Flow" shall mean, with respect to a determination of
the vesting of any portion of the Stock Appreciation Rights pursuant to the
"deferred vesting" provisions of Section 3.1(c), the sum of Cash Flow for each
fiscal year within the period (i) commencing on the first day of the fiscal year
preceding the fiscal year in which falls the Vesting Date on which the
applicable portion of the Stock Appreciation Rights failed to vest pursuant to
the "performance related vesting" provisions of Section 3.1(b) and (ii) ending
on the last day of the fiscal year preceding the fiscal year in which falls the
applicable Deferred Vesting Date.
Section 1.12 - Cumulative Target Cash Flow
"Cumulative Target Cash Flow" shall mean, with respect to a
determination of the vesting of any portion of the Stock Appreciation Rights
pursuant to the "deferred vesting" provisions of Section 3.1(c), the sum of
Target Cash Flow for each fiscal year within the period (i) commencing on the
first day of the fiscal year preceding the fiscal year in which falls the
Vesting Date on which the applicable portion of the Stock Appreciation Rights
failed to vest pursuant to the "performance related vesting" provisions of
Section 3.1(b) and (ii) ending on the last day of the fiscal year preceding the
fiscal year in which falls the applicable Deferred Vesting Date.
Section 1.13 - Fair Market Value
"Fair Market Value" shall mean the fair market value of a share of
Blade Common Stock, which shall be equal to, at the Board's discretion either
(i) the value determined by a reputable firm experienced in valuation of similar
businesses, and selected by the Board, which firm's determination shall be final
and binding on the parties hereto or (ii) the per share value determined
pursuant to an Acceleration Event. Fair Market Value shall be determined as of
the applicable Valuation Date.
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<PAGE> 4
Section 1.14 - GAAP
"GAAP" shall mean generally accepted accounting principles, applied on
a basis consistent with prior periods.
Section 1.15 - Merger
"Merger" shall mean a merger or consolidation of the Company or Blade
with another unaffiliated entity in which the stockholders of the Company or
Blade (as applicable) receive cash, securities and/or other marketable property
in exchange for their Company Common Stock or Blade Common Stock.
Section 1.16 - Parent Corporation
"Parent Corporation" shall mean any corporation in an unbroken chain of
corporations ending with the Company if each of the corporations other than the
Company then owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
Section 1.17 - Payment Date(s)
"Payment Date(s)" shall mean the date (or dates) on which the Executive
is entitled to receive payments with respect to the Stock Appreciation Rights,
in accordance with the provisions of Section 2.3(b).
Section 1.18 - Permitted Transfer
"Permitted Transfer" shall mean the Transfer of Stock Appreciation
Rights by will or intestate succession to the Executive's executors,
administrators, testamentary trustees legatees or beneficiaries.
Section 1.19 - Sale
"Sale" shall mean a sale to an unaffiliated entity of all or
substantially all of the assets of the Company or of Blade.
Section 1.20 - Stock Appreciation Rights
"Stock Appreciation Rights" shall mean the rights granted under this
Agreement to receive the payments set forth in Section 2.3, hereof, calculated
with respect to each Stock Appreciation Right based on the appreciation in value
of one two-hundredth (1/200) of a share of Blade Common Stock over the Base
Value, subject to the limitations and conditions provided in this Stock
Appreciation Right Agreement.
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<PAGE> 5
Section 1.21 - Subsidiary
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company, if each such corporation, other than
the last corporation in the unbroken chain, then owns 50% or more of the total
combined voting power in one of the other corporations in such chain.
Section 1.22 - Target Cash Flow
"Target Cash Flow" shall mean, for each of the five fiscal years
identified on Exhibit A hereto, the amount specified for such year on such
Exhibit; provided, however, that in the case of divestiture or acquisition of a
business unit by the Company or any of its Subsidiaries, the Board shall
determine in good faith an appropriate and equitable adjustment to Target Cash
Flow for the fiscal year in which such event occurs and each subsequent fiscal
year, in the case of a divestiture to reduce Target Cash Flow by the estimated
contribution, if any, that would have been made thereto by the divested unit
during the remainder of such periods, and in the case of an acquisition to
increase Target Cash Flow by the estimated contribution, if any, to be made
thereto by the acquired unit. In the event of such an adjustment, the Board
shall notify the Executive thereof; and any such adjustment made by the Board in
good faith shall be final and binding upon the parties.
Section 1.23 - Termination of Employment
"Termination of Employment" shall mean the time when, for any reason,
there ceases to be an employee-employer relationship between the Executive, on
the one hand, and the Company, a Parent Corporation and/or one or more
Subsidiaries of the Company, on the other hand, including, without limitation,
by reason of resignation, discharge (with or without cause), termination, death,
disability or retirement. The Board, in its absolute discretion, shall determine
the effect of all matters and questions relating to Termination of Employment,
including, but not limited to, all questions of whether a particular leave of
absence constitutes a Termination of Employment.
Section 1.24 - Thiokol Option
"Thiokol Option" shall mean the right granted to Thiokol Holding
Company to purchase Blade Common Stock from Carlyle-Blade Acquisition
Partnership. L.P., pursuant to the Shareholders Agreement dated December 13,
1995.
Section 1.25 - Transfer
"Transfer" when used in reference to the Stock Appreciation Rights
shall mean any sale, encumbrance, pledge, gift, assignment, alienation or other
form of disposition or transfer of the Stock Appreciation Rights, or any portion
thereof, or of
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<PAGE> 6
any legal, beneficial or equitable interest therein or part thereof, whether
voluntary or involuntary or by operation of law. The terms "Transferred,"
"Transferring" and the like shall have similar meanings.
Section 1.26 - Unvested Percentage
"Unvested Percentage" shall mean that percentage of the Stock
Appreciation Rights that has not become "vested" pursuant to Section 3.1 or
Section 4.1 hereof.
Section 1.27 - Valuation Date
"Valuation Date" shall mean the date as of which Appreciated Value is
determined, as set forth in Section 2.3.
Section 1.28 - Vested Percentage
"Vested Percentage" shall mean that percentage of the Stock
Appreciation Rights that has become vested pursuant to Section 3.1 or Section
4.1 hereof.
Section 1.29 - Vesting Date
"Vesting Date" shall mean a date on which a portion of the Stock
Appreciation Rights may become "Vested" pursuant to Section 3.1 hereof.
ARTICLE II
GRANT OF STOCK APPRECIATION RIGHT
Section 2.1 - Grant of Stock Appreciation Right
In consideration of the Executive's promises set forth in Section 2.2,
and for other good and valuable consideration, on the date hereof the Company
grants to the Executive, subject to the terms and conditions set forth in this
Agreement, 20,000 Stock Appreciation Rights, each with respect to one
two-hundredth (1/200th) of a share of Blade Common Stock.
Section 2.2 - Consideration to the Company
In consideration of the granting of the Stock Appreciation Rights, the
Executive agrees to render faithful and efficient services to the Company or a
Parent Corporation or a Subsidiary of the Company, with such duties and
responsibilities as such employer shall from time to time prescribe. Nothing in
this Agreement shall confer upon the Executive any right to continue in the
employ of the Company, any Parent Corporation or any Subsidiary or shall
interfere with any rights of the Company, any Parent Corporation or any
Subsidiary of the Company to discharge the Executive. The Executive also agrees
that he shall not assert that any event occurring prior to the date of execution
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<PAGE> 7
thereof (including, without limitation, the termination of the Company's 1993,
1994 and 1995 Long-Term Incentive plans and its Restructuring Cash Incentive
Plan) constitutes "Good Reason" as defined in the Employment Agreement dated as
of October 4, 1995 to which Executive, the Company and Pechiney are parties.
Section 2.3 - Determination and Method of Payment
(a)(i) Subject to the provisions of Section 3.1(e), the Stock Appreciation
Rights shall entitle the Executive to receive payment, on the applicable Payment
Date(s) set forth below, of an aggregate amount (the "Aggregate Payment Amount")
equal to the product of
(A) the number of Stock Appreciation Rights granted pursuant to
Section 2.1,
(B) the Vested Percentage, and
(C) the Appreciated Value.
(ii) For purposes of determining Appreciated Value, the Valuation Date shall
be the earliest of
(A) March 31, 2001,
(B) the date on which an Acceleration Event occurs, and
(C) a date selected by the Board in its discretion that is not more
than twelve months prior to, or more than six months subsequent
to the date of the Executive's first Termination of Employment
which precedes the earlier of the dates described in (A) and (B)
above (it being understood that the Company does not intend to
conduct a valuation of the Blade Common Stock more frequently
than once per fiscal year).
(b) The Aggregate Payment Amount shall be paid in cash, at
the election of the Company, either:
(i) in a lump sum on a date selected by the Board in its
discretion that is no more that sixty (60) days subsequent to the
earlier of the dates described in subsections(a) (ii) (A) and (B) above
or
(ii) in three equal installments, the first such installment
to be paid on a date (the "Initial Installment Date") selected by the
Board in its discretion that is no more than sixty (60) days subsequent
to the earlier of the dates described in subsections (a)(ii)(A) and
(B) above, and the remaining two installments (the "Deferred
Installments")
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<PAGE> 8
to be paid on the first and second anniversaries of the Initial Installment
Date, respectively. Each Deferred Installment shall be paid together with
interest thereon, at the Applicable Federal Rate for short term obligations (as
set forth in Section 1274(d) of the Code or the Treasury Regulations promulgated
thereunder), calculated from the Initial Installment Date to the date such
Deferred Installment is actually paid.
(c) Notwithstanding anything to the contrary in the foregoing, the
Company's obligation to make any payment provided for in Section 2.3(b) shall be
suspended if:
(i) Such payment would render the Company unable to meet its
obligations in the ordinary course of business;
(ii) The Company is prohibited by applicable law from making
such payment; or
(iii) Such payment would constitute an unwaived breach of, or
default or event of default under, or is otherwise prohibited by, the
terms of any loan agreement or other agreement or instrument to which
the Company or any of the Company's Affiliates is a party,
any of such events constituting a "Payment Disability." In the event of a
Payment Disability, the Company shall make such payment as soon as reasonably
possible after all Payment Disabilities cease to exist. In the event that the
Company suspends its payment obligations pursuant to this Section 2.3(c), the
Company shall pay to the Executive an additional amount equal to interest
calculated on the amount of the suspended payment at the Applicable Federal Rate
for short term obligations (as set forth in Section 1274(d) of the Code or the
Treasury Regulations promulgated thereunder) from the date the payment would
have occurred but for the Payment Disability to (but not including) the date
such payment actually occurs (provided that no interest shall be due pursuant to
the foregoing to the extent that interest on account of such delay in payment
has accrued on such payment pursuant to Section 2.3(b).
Section 2.4 - Certain Adjustments
In the event that Blade Common Stock is changed into or exchanged for a
different number or kind of shares of Blade or securities of another company by
reason of merger, consolidation, recapitalization, reclassification, stock split
up, stock dividend or combination of shares, then the Board shall make an
appropriate and equitable adjustment in the definition of Base Value and/or
Appreciated Value and/or the number of Stock Appreciation Rights to reflect such
event. Any such adjustment made by the Board in good faith shall be final and
binding upon the Executive, the Company and all other interested persons.
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<PAGE> 9
Section 2.5 - Stock Appreciation Right Not Transferable
No Stock Appreciation Right nor any interest or right therein or part
thereof shall be liable for the debts, contracts or engagements of the Executive
or his successors in interest or shall be subject to Transfer, whether by
alienation, anticipation, pledge, encumbrance, assignment or any other means,
and whether such Transfer be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted Transfer thereof shall be
null and void and of no effect; provided, however, that this Section 2.5 shall
not prevent a Permitted Transfer upon the Executive's death (and in the event of
a Permitted Transfer, payments to be made hereunder to the Executive shall
thereafter be made to the Executive's personal representative or such other
person as is empowered under the Executive's will or the then applicable laws of
descent and distribution to enforce the Executive's rights hereunder) .
ARTICLE III
VESTING
Section 3.1 - Vesting
Fifty percent of the Stock Appreciation Rights shall be subject to
Time Vesting and fifty percent shall be subject to Performance Vesting as
follows:
(a) Time Vesting. Provided in each case that no Termination of
Employment has occurred prior to the applicable Vesting Date, fifty percent of
the Stock Appreciation Rights shall become vested as follows:
(i) As of March 31, 1997 10% of the Stock Appreciation Rights
shall become Vested,
(ii) As of March 31, 1998, an additional 10% of the Stock
Appreciation Rights shall become vested,
(iii) As of March 31, 1999, an additional 10% of the Stock
Appreciation Rights shall become vested,
(iv) As of March 31, 2000, an additional 10% of the Stock
Appreciation Rights shall become vested, and
(v) As of March 31, 2001, an additional 10% of the Stock
Appreciation Rights shall become vested.
(b) Performance Related Vesting. Provided in each case that
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(i) no Termination of Employment has occurred prior to
the applicable Vesting Date, and
(ii) Cash Flow for the fiscal year immediately preceding
the fiscal year in which falls the applicable Vesting Date equals or exceeds
Target Cash Flow for such year,
the remaining fifty percent of the Stock Appreciation Right shall become vested
as follows:
(A) As of March 31, 1997, 10% of the Stock
Appreciation Rights shall become vested,
(B) As of March 31, 1998, an additional 10% of
the Stock Appreciation Rights shall become
vested,
(C) As of the March 31, 1999, an additional 10%
of the Stock Appreciation Rights shall
become vested,
(D) As of March 31, 2000, an additional 10% of
the Stock Appreciation Rights shall become
vested, and
(E) As of March 31, 2001, an additional 10% of
the Stock Appreciation Rights shall become
vested.
(c) Deferred Vesting. If any portion of the Stock Appreciation Rights
does not become vested pursuant to the "performance related vesting" provisions
of Section 3.1(b) on the scheduled Vesting Date due to the failure of Cash Flow
to equal or exceed Target Cash Flow in the applicable fiscal year, then such
portion of the Stock Appreciation Rights shall become vested on the next Vesting
Date thereafter (the "Deferred Vesting Date") as of which Cumulative Cash Flow
equals or exceeds Cumulative Target Cash Flow, provided that (i) as of the last
day of the fiscal year preceding the fiscal year in which falls the Deferred
Vesting Date, all material obligations of the Company and Blade (including,
without limitation, satisfaction of financial covenants) under all outstanding
debt agreements have been satisfied and (ii) the Executive shall not have
incurred a Termination of Employment prior to such Deferred Vesting Date and
provided further that the last Deferred Vesting Date shall be March 31, 2001,
after which date the Unvested Percentage of the Stock Appreciation Rights as of
such date shall expire. That portion of the Stock Appreciation Rights that does
not become vested on the scheduled Deferred Vesting Date due to the failure of
the Company or Blade to satisfy debt agreement obligations in accordance with
clause (i) above shall expire and be cancelled as of such Deferred Vesting Date
and shall not be subject to vesting pursuant to Section 4.1.
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(d) Discretion of the Board. The Board may elect, in its discretion, to
cause any portion of the Stock Appreciation Rights to become vested prior to the
date on which it would otherwise become vested pursuant to the provisions of
this Section 3.1 (and whether or not any other conditions to such vesting have
been met); provided, however that the Board shall have no obligation to cause
any portion of the Stock Appreciation Rights to become vested pursuant to this
Section 3.1(d)).
(e) Effect of Termination of Employment.
(i) No portion of the Stock Appreciation Rights shall become
vested (whether pursuant to this Section 3.1, Section 4.1, or
otherwise) following a Termination of Employment, except pursuant to an
exercise of the Board's discretion under Section 3.1(d) and then only
in the event such Termination of Employment is due to the Executive's
death or disability,
(ii) If a Termination of Employment has occurred other than
for cause (as determined by the Board in its discretion), the Executive
will retain ownership of the portion of the Stock Appreciation Rights
that has become vested prior to the date of such Termination of
Employment, but no payments will be made to the Executive with respect
to such Stock Appreciation Rights prior to the applicable Payment
Date(s) specified in Section 2.3 provided, that, except as the Board
may elect otherwise in its discretion, all Stock Appreciation Rights
granted to the Executive (vested and unvested) shall be forfeited and
cancelled as of any date on which the Executive violates any provision
of the Employment Agreement between the Executive, the Company and
Pechiney dated October 4, 1995, and
(iii) Except as the Board may elect otherwise, in its
discretion, in the event of the Executive's Termination of Employment
for cause (as determined by the Board in its discretion), all Stock
Appreciation Rights granted to the Executive (vested and unvested)
shall be forfeited and cancelled as of the date of Termination of
Employment and the Executive shall not be entitled to any payment with
respect to such Stock Appreciation Rights.
ARTICLE IV
ACCELERATION
Section 4.1 - Acceleration Event
(a) If an Acceleration Event shall occur, then the Stock Appreciation
Rights that have not been forfeited or cancelled shall be deemed to be vested to
the extent set forth in Section 4.1(b) below, notwithstanding that the Stock
Appreciation Rights may not yet have become vested to such extent under Section
3.1.
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<PAGE> 12
Any "accelerated vesting" pursuant to this Section 4.1 shall be effective as of
the date the applicable Acceleration Event occurs; and thereafter, all further
vesting (pursuant to Section 3.1 or otherwise) shall cease.
(b) The portion of the Stock Appreciation Rights that shall be deemed
to be vested pursuant to Section 4.1(a) shall be (i) the entire portion of the
Stock Appreciation Rights subject to vesting pursuant to Section 3.1(a), plus
(ii) the portion of the Stock Appreciation Rights subject to vesting pursuant to
Section 3.1(b) that has not expired pursuant to Section 3.1(c), multiplied by a
fraction the numerator of which is the portion of the Stock Appreciation Rights
that has already become vested pursuant to the terms of Section 3.1(b) and
Section 3.1(c), and the denominator of which is the portion of the Stock
Appreciation Rights that would have become vested pursuant to Section 3.1(b) and
Section 3.1(c) on or prior to the date of the Acceleration Event had all
applicable performance tests been met. See the example on Exhibit B.
ARTICLE V
MISCELLANEOUS
Section 5.1 - Stockholder Approval
This Agreement shall be effective upon approval by the stockholders of
the Company as provided in Section 280G(b)(5)(A)(ii) of the Code and regulations
thereunder.
Section 5.2 - Notices
Any and all notices and any other communications provided for herein
shall be given in writing and shall be delivered either personally, by
registered or certified mail, postage prepaid, or by courier service which shall
be addressed, (i) in the case of the Company to the Chief Executive Officer of
the Company (with a copy to the General Counsel of the Company) at the principal
office of the Company at 475 Steamboat Road, Greenwich, Connecticut, 06836,
(203) 661-4600, or such other address as the Company may supply by notice from
time to time, and (ii) in the case of the Executive, to his address appearing in
the records of the Company or to such other address as may be designated in
writing by him. Any notice mailed as provided in this Section shall, unless
provided to the contrary elsewhere in this Agreement, be deemed effective four
business days after having been delivered to the U.S. Postal Service, postage
prepaid, return receipt requested, two business days after been delivered to a
courier service, or if earlier, when actually received.
12
<PAGE> 13
Section 5.3 - Invalid Provision
The invalidity or unenforceability of any particular provision hereof
shall not affect the other provisions hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provision was
omitted.
Section 5.4 - Modifications
No change or modification of this Agreement shall be valid unless the
same is in writing and signed by the parties hereto.
Section 5.5 - Counterparts
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 5.6 - Assignment
Except as otherwise provided herein, no party may assign this Agreement
or any of his or its rights, interests or obligations hereunder without the
prior written consent of the other parties, provided that the Company's rights
and obligations hereunder may be assigned to any Parent Corporation or
Subsidiary or to any successor pursuant to a merger, consolidation or similar
event. Subject to the foregoing, this Agreement and the respective rights and
obligations of the parties hereto shall inure to the benefit of and be binding
upon, the successors and assigns of the parties.
Section 5.7 - Administration
The Board shall have the power to interpret this Agreement and to adopt
such rules for the administration, interpretation and application of this
Agreement as are consistent herewith and to interpret or revoke any such rules.
All actions taken and all interpretations and determinations made by the Board
in good faith shall be final and binding upon the Executive, the Company and all
other interested persons. No member of the Board shall be personally liable for
any action, determination or interpretation made in good faith with respect to
this Agreement or the Stock Appreciation Rights.
Section 5.8 - Withholding
The Executive acknowledges that the Company, a Parent Corporation or a
Subsidiary may have an obligation to withhold a portion of the amounts otherwise
payable to the Executive hereunder pursuant to federal, state and local income
tax laws and regulations, and the Company, any Parent Corporation and any such
Subsidiary are hereby authorized to withhold any such required amount.
13
<PAGE> 14
Section 5.9 - Titles
Titles are provided herein for convenience only and are not to serve as
a basis for interpretation or construction of this Agreement.
Section 5.10 - Law Governing
The laws of the State of New York shall govern the interpretation,
validity and performance of the terms hereof, regardless of the law that might
be applied under principles of conflicts of law.
Section 5.11 - Entire Agreement
This Agreement embodies the entire agreement and understanding of the
parties hereto with respect to the subject matter contained herein.
Section 5.12 - No Rights as Stockholder
The parties acknowledge and agree that the provisions of this Agreement
shall not be construed as conferring upon the Executive any rights or privileges
of a stockholder of the Company, any Parent Corporation or any Subsidiary, the
rights and privileges of the Executive being limited to those expressly set
forth in this Agreement.
Section 5.13 - Effect of Plan Upon Other Compensation Plans
(a) The implementation of this Stock Appreciation Right Agreement shall
not affect any other compensation or incentive plans in effect for the Company,
any Parent Corporation or any Subsidiary. Nothing in this Agreement shall be
construed to limit the right of the Company, any Parent Corporation or any
Subsidiary (i) to establish any other forms of incentives or compensation for
employees of the Company, any Parent Corporation or any Subsidiary or (ii) to
grant or assume options or stock appreciation rights otherwise than under this
Plan in connection with any proper corporate purpose, including, but not by way
of limitation, the grant or assumption of options or stock appreciation rights
in connection with the acquisition by purchase, lease, merger, consolidation or
otherwise, of the business, stock or assets of any corporation, firm or
association.
(b) Grants of Stock Appreciation Rights and any payments with respect
thereto shall not constitute "compensation" for purposes of any pension, welfare
or other benefit plan or policy of the Company unless provided for therein.
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<PAGE> 15
Section 5.14 - Arbitration
Any dispute or controversy arising under, out of, in connection with or
in relation to this Agreement and the Stock Appreciation Rights shall be finally
determined and settled by arbitration in the city of the New York in accordance
with the rules and procedures of the American Arbitration Association, and
judgment upon the award may be entered in any court having jurisdiction thereof.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.
HOWMET CORPORATION
By /s/ Roland Paul
-----------------------------
Vice President
Sign: /s/ David L. Squier
-------------------------------
Print Name Here: David L. Squier
56 Laurel Rd.
- -------------------------------------
Address
New Canaan, CT 06840
- -------------------------------------
City State Zip Code
072 36 7176
- -------------------------------------
Executive's Taxpayer Identification Number
15
<PAGE> 16
Exhibit A
TARGET CASH FLOW
<TABLE>
<CAPTION>
($ Millions)
Fiscal Year Target Cash Flow
----------- ----------------
<S> <C>
1996* 22.3
1997 35.3
1998 41.3
1999 47.6
2000 54.4
</TABLE>
- ---------------------
* For purposes of this Agreement, fiscal year 1996 shall include the
period from December 13, 1995 through December 31, 1995 and the first
day of fiscal year 1996 shall be deemed to be December 13, 1995.
16
<PAGE> 17
Exhibit B
EXAMPLE OF ACCELERATED VESTING:
Assume: Cash Flow for 1996 and 1997 exceed Cash Flow Targets for those years
and Cash Flow for 1998 is less than Target Cash Flow for 1998.
Acceleration Event occurs on June 1, 1999.
As of May 31, 1999, 50% of SARs vested: 30% pursuant to Time Vesting and 20%
pursuant to Performance Vesting.
Accelerated Vesting: Pursuant to Section 4.1(b)(i),
all of the 20% of the SARs
remaining subject to Time
Vesting becomes vested upon
June 1, 1999.
Pursuant to Section 4.1(b)(ii),
two thirds of the 30% of the
SARs remaining subject to Performance
Vesting becomes vested upon June 1,
1999 as follows:
Unexpired Performance
that have vested Performance Vesting SARs
- ---------------- ------------------------------
Vesting SARs X Performance Vesting SARs that
would have vested if all
targets met
= 30% X 20%
---------------
30%
= 20%.
As of June 1, 1999, 50% + 20% + 20% = 90% of SARs vested.
17
<PAGE> 1
Exhibit 10.25
STOCK APPRECIATION RIGHT AGREEMENT
THIS AGREEMENT dated as of May 17, 1996, is made by and between Howmet
Corporation, a Delaware corporation (the "Company"), and James Stanley (the
"Executive"):
WHEREAS, Executive is a key management employee of the Company or one
of the Company's Subsidiaries,
WHEREAS, the Board has determined that it would be to the advantage and
best interest of the Company, and the shareholders of the Company to grant the
Stock Appreciation Rights provided for herein to the Executive as an inducement
to remain in the service of the Company, its Parent Corporation or its
Subsidiaries and as an incentive for increased efforts during such service;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the Company and the Executive do hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings specified below. Other
capitalized terms are defined elsewhere in this Agreement and shall have the
meanings there specified.
Section 1.1 - Acceleration Event
"Acceleration Event" shall mean one of the following events occurring
prior to March 31, 2001: (i) a Merger, (ii) a Sale, (iii) the acquisition by an
unaffiliated entity or person, of more than fifty percent (50%) of Blade Common
Stock then outstanding or of Company Common Stock then outstanding, (iv) the
liquidation, dissolution or winding up of the Company or Blade (other than in a
restructuring transaction which results in the continuation of the Company's (or
Blade's) business by an affiliated entity), (v) exercise of the Thiokol Option
and the transfer pursuant thereto of Blade Common Stock owned by Carlyle-Blade
Acquisition Partners, L.P. to Thiokol Holding Company, (vi) disposition by
Carlyle-Blade and its Affiliates (including, without limitation, in a series of
transactions) of the entirety of their interest in Blade Common Stock, or (vii)
a public offering of more than fifty percent (50%) of Blade Common Stock or
Company Common Stock then outstanding pursuant to a registration statement
(other than pursuant to Form S-8) filed under the Securities Act of 1933.
<PAGE> 2
Section 1.2 - Affiliate
"Affiliate" with respect to any entity, shall mean a person or entity
directly or indirectly controlling, controlled by, or under common control with,
such entity, where "control" has the meaning given such term under Rule 405 of
the Securities Act of 1933.
Section 1.3 - Appreciated Value
"Appreciated Value" per Stock Appreciation Right shall mean (i) one
two-hundredth (1/200th) of the Fair Market Value per share of Blade Common Stock
as of the applicable Valuation Date minus (ii) the Base Value of the Stock
Appreciation Right, but not less than zero.
Section 1.4 - Base Value
"Base Value" shall mean One Hundred Dollars ($100) (subject to
adjustment pursuant to the provisions set forth in Section 2.4).
Section 1.5 - Blade
"Blade" shall mean Blade Acquisition Corp., a Delaware corporation.
Section 1.6 - Blade Common Stock
"Blade Common Stock" shall mean the common stock, par value $0.01 per
share, of Blade.
Section 1.7 - Board
"Board" shall mean the Board of Directors of the Company.
Section 1.8 - Cash Flow
"Cash Flow" shall mean, for any period, the difference between the
level of Net Debt as of the day prior to the first day of such period and the
level of Net Debt as of the last day of such period, without giving effect to
any changes in Net Debt resulting from extraordinary transactions, including the
sale or acquisition of assets or inventory not in the ordinary course of
business, and without giving effect to any changes in Net Debt resulting from
any payment pursuant to purchase price adjustment under the Stock Purchase
Agreement dated as of October 12, 1995 among Pechiney, Pechiney International.
S.A. and Blade. "Net Debt" shall equal the difference between "Consolidated
Total Indebtedness" and the total cash balance reported as a current asset on
the Company's balance sheet. "Consolidated Total Indebtedness" shall include
outstanding balances, including current portions, of all long-term indebtedness
of the Company, its Parent Corporations and its Subsidiaries including off-
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<PAGE> 3
balance sheet financings, including, but not limited to, balances due to third
parties through accounts receivables securitization agreements.
Section 1.9 - Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.10 - Company Common Stock
"Company Common Stock" shall mean the common stock par value $0.01 per
share, of the Company.
Section 1.11 - Cumulative Cash Flow
"Cumulative Cash Flow" shall mean, with respect to a determination of
the vesting of any portion of the Stock Appreciation Rights pursuant to the
"deferred vesting" provisions of Section 3.1(c), the sum of Cash Flow for each
fiscal year within the period (i) commencing on the first day of the fiscal year
preceding the fiscal year in which falls the Vesting Date on which the
applicable portion of the Stock Appreciation Rights failed to vest pursuant to
the "performance related vesting" provisions of Section 3.1(b) and (ii) ending
on the last day of the fiscal year preceding the fiscal year in which falls the
applicable Deferred Vesting Date.
Section 1.12 - Cumulative Target Cash Flow
"Cumulative Target Cash Flow" shall mean, with respect to a
determination of the vesting of any portion of the Stock Appreciation Rights
pursuant to the "deferred vesting" provisions of Section 3.1(c), the sum of
Target Cash Flow for each fiscal year within the period (i) commencing on the
first day of the fiscal year preceding the fiscal year in which falls the
Vesting Date on which the applicable portion of the Stock Appreciation Rights
failed to vest pursuant to the "performance related vesting" provisions of
Section 3.1(b) and (ii) ending on the last day of the fiscal year preceding the
fiscal year in which falls the applicable Deferred Vesting Date.
Section 1.13 - Fair Market Value
"Fair Market Value" shall mean the fair market value of a share of
Blade Common Stock, which shall be equal to, at the Board's discretion either
(i) the value determined by a reputable firm experienced in valuation of similar
businesses, and selected by the Board, which firm's determination shall be final
and binding on the parties hereto or (ii) the per share value determined
pursuant to an Acceleration Event. Fair Market Value shall be determined as of
the applicable Valuation Date.
3
<PAGE> 4
Section 1.14 - GAAP
"GAAP" shall mean generally accepted accounting principles, applied on
a basis consistent with prior periods.
Section 1.15 - Merger
"Merger" shall mean a merger or consolidation of the Company or Blade
with another unaffiliated entity in which the stockholders of the Company or
Blade (as applicable) receive cash, securities and/or other marketable property
in exchange for their Company Common Stock or Blade Common Stock.
Section 1.16 - Parent Corporation
"Parent Corporation" shall mean any corporation in an unbroken chain of
corporations ending with the Company if each of the corporations other than the
Company then owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
Section 1.17 - Payment Date(s)
"Payment Date(s)" shall mean the date (or dates) on which the Executive
is entitled to receive payments with respect to the Stock Appreciation Rights,
in accordance with the provisions of Section 2.3(b).
Section 1.18 - Permitted Transfer
"Permitted Transfer" shall mean the Transfer of Stock Appreciation
Rights by will or intestate succession to the Executive's executors,
administrators, testamentary trustees legatees or beneficiaries.
Section 1.19 - Sale
"Sale" shall mean a sale to an unaffiliated entity of all or
substantially all of the assets of the Company or of Blade.
Section 1.20 - Stock Appreciation Rights
"Stock Appreciation Rights" shall mean the rights granted under this
Agreement to receive the payments set forth in Section 2.3, hereof, calculated
with respect to each Stock Appreciation Right based on the appreciation in value
of one two-hundredth (1/200) of a share of Blade Common Stock over the Base
Value, subject to the limitations and conditions provided in this Stock
Appreciation Right Agreement.
4
<PAGE> 5
Section 1.21 - Subsidiary
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company, if each such corporation, other than
the last corporation in the unbroken chain, then owns 50% or more of the total
combined voting power in one of the other corporations in such chain.
Section 1.22 - Target Cash Flow
"Target Cash Flow" shall mean, for each of the five fiscal years
identified on Exhibit A hereto, the amount specified for such year on such
Exhibit; provided, however, that in the case of divestiture or acquisition of a
business unit by the Company or any of its Subsidiaries, the Board shall
determine in good faith an appropriate and equitable adjustment to Target Cash
Flow for the fiscal year in which such event occurs and each subsequent fiscal
year, in the case of a divestiture to reduce Target Cash Flow by the estimated
contribution, if any, that would have been made thereto by the divested unit
during the remainder of such periods, and in the case of an acquisition to
increase Target Cash Flow by the estimated contribution, if any, to be made
thereto by the acquired unit. In the event of such an adjustment, the Board
shall notify the Executive thereof; and any such adjustment made by the Board in
good faith shall be final and binding upon the parties.
Section 1.23 - Termination of Employment
"Termination of Employment" shall mean the time when, for any reason,
there ceases to be an employee-employer relationship between the Executive, on
the one hand, and the Company, a Parent Corporation and/or one or more
Subsidiaries of the Company, on the other hand, including, without limitation,
by reason of resignation, discharge (with or without cause), termination, death,
disability or retirement. The Board, in its absolute discretion, shall determine
the effect of all matters and questions relating to Termination of Employment,
including, but not limited to, all questions of whether a particular leave of
absence constitutes a Termination of Employment.
Section 1.24 - Thiokol Option
"Thiokol Option" shall mean the right granted to Thiokol Holding
Company to purchase Blade Common Stock from Carlyle-Blade Acquisition
Partnership. L.P., pursuant to the Shareholders Agreement dated December 13,
1995.
Section 1.25 - Transfer
"Transfer" when used in reference to the Stock Appreciation Rights
shall mean any sale, encumbrance, pledge, gift, assignment, alienation or other
form of disposition or transfer of the Stock Appreciation Rights, or any portion
thereof, or of
5
<PAGE> 6
any legal, beneficial or equitable interest therein or part thereof, whether
voluntary or involuntary or by operation of law. The terms "Transferred,"
"Transferring" and the like shall have similar meanings.
Section 1.26 - Unvested Percentage
"Unvested Percentage" shall mean that percentage of the Stock
Appreciation Rights that has not become "vested" pursuant to Section 3.1 or
Section 4.1 hereof.
Section 1.27 - Valuation Date
"Valuation Date" shall mean the date as of which Appreciated Value is
determined, as set forth in Section 2.3.
Section 1.28 - Vested Percentage
"Vested Percentage" shall mean that percentage of the Stock
Appreciation Rights that has become vested pursuant to Section 3.1 or Section
4.1 hereof.
Section 1.29 - Vesting Date
"Vesting Date" shall mean a date on which a portion of the Stock
Appreciation Rights may become "Vested" pursuant to Section 3.1 hereof.
ARTICLE II
GRANT OF STOCK APPRECIATION RIGHT
Section 2.1 - Grant of Stock Appreciation Right
In consideration of the Executive's promises set forth in Section 2.2,
and for other good and valuable consideration, on the date hereof the Company
grants to the Executive, subject to the terms and conditions set forth in this
Agreement, 7,500 Stock Appreciation Rights, each with respect to one
two-hundredth (1/200th) of a share of Blade Common Stock.
Section 2.2 - Consideration to the Company
In consideration of the granting of the Stock Appreciation Rights, the
Executive agrees to render faithful and efficient services to the Company or a
Parent Corporation or a Subsidiary of the Company, with such duties and
responsibilities as such employer shall from time to time prescribe. Nothing in
this Agreement shall confer upon the Executive any right to continue in the
employ of the Company, any Parent Corporation or any Subsidiary or shall
interfere with any rights of the Company, any Parent Corporation or any
Subsidiary of the Company to discharge the Executive. The Executive also agrees
that he shall not assert that any event occurring prior to the date of execution
6
<PAGE> 7
thereof (including, without limitation, the termination of the Company's 1993,
1994 and 1995 Long-Term Incentive plans and its Restructuring Cash Incentive
Plan) constitutes "Good Reason" as defined in the Employment Agreement dated as
of October 4, 1995 to which Executive, the Company and Pechiney are parties.
Section 2.3 - Determination and Method of Payment
(a)(i) Subject to the provisions of Section 3.1(e), the Stock
Appreciation Rights shall entitle the Executive to receive payment, on
the applicable Payment Date(s) set forth below, of an aggregate amount
(the "Aggregate Payment Amount") equal to the product of
(A) the number of Stock Appreciation Rights granted pursuant to
Section 2.1,
(B) the Vested Percentage, and
(C) the Appreciated Value.
(ii) For purposes of determining Appreciated Value, the
Valuation Date shall be the earliest of
(A) March 31, 2001,
(B) the date on which an Acceleration Event occurs, and
(C) a date selected by the Board in its discretion that is not
more than twelve months prior to, or more than six months
subsequent to the date of the Executive's first Termination
of Employment which precedes the earlier of the dates
described in (A) and (B) above (it being understood that the
Company does not intend to conduct a valuation of the Blade
Common Stock more frequently than once per fiscal year).
(b) The Aggregate Payment Amount shall be paid in cash, at
the election of the Company, either:
(i) in a lump sum on a date selected by the Board in its
discretion that is no more that sixty (60) days subsequent to the
earlier of the dates described in subsections(a)(ii)(A) and (B) above
or
(ii) in three equal installments, the first such installment
to be paid on a date (the "Initial Installment Date") selected by the
Board in its discretion that is no more than sixty (60) days subsequent
to the earlier of the dates described in subsections (a)(ii)(A) and
(B) above, and the remaining two installments (the "Deferred
Installments")
7
<PAGE> 8
to be paid on the first and second anniversaries of the Initial
Installment Date, respectively. Each Deferred Installment shall be paid
together with interest thereon, at the Applicable Federal Rate for
short term obligations (as set forth in Section 1274(d) of the Code or
the Treasury Regulations promulgated thereunder), calculated from the
Initial Installment Date to the date such Deferred Installment is
actually paid.
(c) Notwithstanding anything to the contrary in the foregoing, the
Company's obligation to make any payment provided for in Section 2.3(b) shall be
suspended if:
(i) Such payment would render the Company unable to meet its
obligations in the ordinary course of business;
(ii) The Company is prohibited by applicable law from making
such payment; or
(iii) Such payment would constitute an unwaived breach of, or
default or event of default under, or is otherwise prohibited by, the
terms of any loan agreement or other agreement or instrument to which
the Company or any of the Company's Affiliates is a party,
any of such events constituting a "Payment Disability." In the event of a
Payment Disability, the Company shall make such payment as soon as reasonably
possible after all Payment Disabilities cease to exist. In the event that the
Company suspends its payment obligations pursuant to this Section 2.3(c), the
Company shall pay to the Executive an additional amount equal to interest
calculated on the amount of the suspended payment at the Applicable Federal Rate
for short term obligations (as set forth in Section 1274(d) of the Code or the
Treasury Regulations promulgated thereunder) from the date the payment would
have occurred but for the Payment Disability to (but not including) the date
such payment actually occurs (provided that no interest shall be due pursuant to
the foregoing to the extent that interest on account of such delay in payment
has accrued on such payment pursuant to Section 2.3(b).
Section 2.4 - Certain Adjustments
In the event that Blade Common Stock is changed into or exchanged for a
different number or kind of shares of Blade or securities of another company by
reason of merger, consolidation, recapitalization, reclassification, stock split
up, stock dividend or combination of shares, then the Board shall make an
appropriate and equitable adjustment in the definition of Base Value and/or
Appreciated Value and/or the number of Stock Appreciation Rights to reflect such
event. Any such adjustment made by the Board in good faith shall be final and
binding upon the Executive, the Company and all other interested persons.
8
<PAGE> 9
Section 2.5 - Stock Appreciation Right Not Transferable
No Stock Appreciation Right nor any interest or right therein or part
thereof shall be liable for the debts, contracts or engagements of the Executive
or his successors in interest or shall be subject to Transfer, whether by
alienation, anticipation, pledge, encumbrance, assignment or any other means,
and whether such Transfer be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted Transfer thereof shall be
null and void and of no effect; provided, however, that this Section 2.5 shall
not prevent a Permitted Transfer upon the Executive's death (and in the event of
a Permitted Transfer, payments to be made hereunder to the Executive shall
thereafter be made to the Executive's personal representative or such other
person as is empowered under the Executive's will or the then applicable laws of
descent and distribution to enforce the Executive's rights hereunder).
ARTICLE III
VESTING
Section 3.1 - Vesting
Fifty percent of the Stock Appreciation Rights shall be subject to Time
Vesting and fifty percent shall be subject to Performance Vesting as follows:
(a) Time Vesting. Provided in each case that no Termination of
Employment has occurred prior to the applicable Vesting Date, fifty percent of
the Stock Appreciation Rights shall become vested as follows:
(i) As of March 31, 1997 10% of the Stock Appreciation Rights
shall become Vested,
(ii) As of March 31, 1998, an additional 10% of the Stock
Appreciation Rights shall become vested,
(iii) As of March 31, 1999, an additional 10% of the Stock
Appreciation Rights shall become vested,
(iv) As of March 31, 2000, an additional 10% of the Stock
Appreciation Rights shall become vested, and
(v) As of March 31, 2001, an additional 10% of the Stock
Appreciation Rights shall become vested.
(b) Performance Related Vesting. Provided in each case that
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<PAGE> 10
(i) no Termination of Employment has occurred prior to the
applicable Vesting Date, and
(ii) Cash Flow for the fiscal year immediately preceding the
fiscal year in which falls the applicable Vesting Date equals or
exceeds Target Cash Flow for such year,
the remaining fifty percent of the Stock Appreciation Right shall become vested
as follows:
(A) As of March 31, 1997, 10% of the Stock Appreciation
Rights shall become vested,
(B) As of March 31, 1998, an additional 10% of the Stock
Appreciation Rights shall become vested,
(C) As of the March 31, 1999, an additional 10% of the
Stock Appreciation Rights shall become vested,
(D) As of March 31, 2000, an additional 10% of the Stock
Appreciation Rights shall become vested, and
(E) As of March 31, 2001, an additional 10% of the Stock
Appreciation Rights shall become vested.
(c) Deferred Vesting. If any portion of the Stock Appreciation Rights
does not become vested pursuant to the "performance related vesting" provisions
of Section 3.1(b) on the scheduled Vesting Date due to the failure of Cash Flow
to equal or exceed Target Cash Flow in the applicable fiscal year, then such
portion of the Stock Appreciation Rights shall become vested on the next Vesting
Date thereafter (the "Deferred Vesting Date") as of which Cumulative Cash Flow
equals or exceeds Cumulative Target Cash Flow, provided that (i) as of the last
day of the fiscal year preceding the fiscal year in which falls the Deferred
Vesting Date, all material obligations of the Company and Blade (including,
without limitation, satisfaction of financial covenants) under all outstanding
debt agreements have been satisfied and (ii) the Executive shall not have
incurred a Termination of Employment prior to such Deferred Vesting Date and
provided further that the last Deferred Vesting Date shall be March 31, 2001,
after which date the Unvested Percentage of the Stock Appreciation Rights as of
such date shall expire. That portion of the Stock Appreciation Rights that does
not become vested on the scheduled Deferred Vesting Date due to the failure of
the Company or Blade to satisfy debt agreement obligations in accordance with
clause (i) above shall expire and be cancelled as of such Deferred Vesting Date
and shall not be subject to vesting pursuant to Section 4.1.
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<PAGE> 11
(d) Discretion of the Board. The Board may elect, in its discretion, to
cause any portion of the Stock Appreciation Rights to become vested prior to the
date on which it would otherwise become vested pursuant to the provisions of
this Section 3.1 (and whether or not any other conditions to such vesting have
been met); provided, however that the Board shall have no obligation to cause
any portion of the Stock Appreciation Rights to become vested pursuant to this
Section 3.1(d)).
(e) Effect of Termination of Employment.
(i) No portion of the Stock Appreciation Rights shall become
vested (whether pursuant to this Section 3.1, Section 4.1, or
otherwise) following a Termination of Employment, except pursuant to an
exercise of the Board's discretion under Section 3.1(d) and then only
in the event such Termination of Employment is due to the Executive's
death or disability,
(ii) If a Termination of Employment has occurred other than
for cause (as determined by the Board in its discretion), the Executive
will retain ownership of the portion of the Stock Appreciation Rights
that has become vested prior to the date of such Termination of
Employment, but no payments will be made to the Executive with respect
to such Stock Appreciation Rights prior to the applicable Payment
Date(s) specified in Section 2.3 provided, that, except as the Board
may elect otherwise in its discretion, all Stock Appreciation Rights
granted to the Executive (vested and unvested) shall be forfeited and
cancelled as of any date on which the Executive violates any provision
of the Employment Agreement between the Executive, the Company and
Pechiney dated October 4, 1995, and
(iii) Except as the Board may elect otherwise, in its
discretion, in the event of the Executive's Termination of Employment
for cause (as determined by the Board in its discretion), all Stock
Appreciation Rights granted to the Executive (vested and unvested)
shall be forfeited and cancelled as of the date of Termination of
Employment and the Executive shall not be entitled to any payment with
respect to such Stock Appreciation Rights.
ARTICLE IV
ACCELERATION
Section 4.1 - Acceleration Event
(a) If an Acceleration Event shall occur, then the Stock Appreciation
Rights that have not been forfeited or cancelled shall be deemed to be vested to
the extent set forth in Section 4.1(b) below, notwithstanding that the Stock
Appreciation Rights may not yet have become vested to such extent under Section
3.1.
11
<PAGE> 12
Any "accelerated vesting" pursuant to this Section 4.1 shall be effective as of
the date the applicable Acceleration Event occurs; and thereafter, all further
vesting (pursuant to Section 3.1 or otherwise) shall cease.
(b) The portion of the Stock Appreciation Rights that shall be deemed
to be vested pursuant to Section 4.1(a) shall be (i) the entire portion of the
Stock Appreciation Rights subject to vesting pursuant to Section 3.1(a), plus
(ii) the portion of the Stock Appreciation Rights subject to vesting pursuant to
Section 3.1(b) that has not expired pursuant to Section 3.1(c), multiplied by a
fraction the numerator of which is the portion of the Stock Appreciation Rights
that has already become vested pursuant to the terms of Section 3.1(b) and
Section 3.1(c), and the denominator of which is the portion of the Stock
Appreciation Rights that would have become vested pursuant to Section 3.1(b) and
Section 3.1(c) on or prior to the date of the Acceleration Event had all
applicable performance tests been met. See the example on Exhibit B.
ARTICLE V
MISCELLANEOUS
Section 5.1 - Stockholder Approval
This Agreement shall be effective upon approval by the stockholders of
the Company as provided in Section 280G(b)(5)(A)(ii) of the Code and regulations
thereunder.
Section 5.2 - Notices
Any and all notices and any other communications provided for herein
shall be given in writing and shall be delivered either personally, by
registered or certified mail, postage prepaid, or by courier service which shall
be addressed, (i) in the case of the Company to the Chief Executive Officer of
the Company (with a copy to the General Counsel of the Company) at the principal
office of the Company at 475 Steamboat Road, Greenwich, Connecticut, 06836,
(203) 661-4600, or such other address as the Company may supply by notice from
time to time, and (ii) in the case of the Executive, to his address appearing in
the records of the Company or to such other address as may be designated in
writing by him. Any notice mailed as provided in this Section shall, unless
provided to the contrary elsewhere in this Agreement, be deemed effective four
business days after having been delivered to the U.S. Postal Service, postage
prepaid, return receipt requested, two business days after been delivered to a
courier service, or if earlier, when actually received.
12
<PAGE> 13
Section 5.3 - Invalid Provision
The invalidity or unenforceability of any particular provision hereof
shall not affect the other provisions hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provision was
omitted.
Section 5.4 - Modifications
No change or modification of this Agreement shall be valid unless the
same is in writing and signed by the parties hereto.
Section 5.5 - Counterparts
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 5.6 - Assignment
Except as otherwise provided herein, no party may assign this Agreement
or any of his or its rights, interests or obligations hereunder without the
prior written consent of the other parties, provided that the Company's rights
and obligations hereunder may be assigned to any Parent Corporation or
Subsidiary or to any successor pursuant to a merger, consolidation or similar
event. Subject to the foregoing, this Agreement and the respective rights and
obligations of the parties hereto shall inure to the benefit of and be binding
upon, the successors and assigns of the parties.
Section 5.7 - Administration
The Board shall have the power to interpret this Agreement and to adopt
such rules for the administration, interpretation and application of this
Agreement as are consistent herewith and to interpret or revoke any such rules.
All actions taken and all interpretations and determinations made by the Board
in good faith shall be final and binding upon the Executive, the Company and all
other interested persons. No member of the Board shall be personally liable for
any action, determination or interpretation made in good faith with respect to
this Agreement or the Stock Appreciation Rights.
Section 5.8 - Withholding
The Executive acknowledges that the Company, a Parent Corporation or a
Subsidiary may have an obligation to withhold a portion of the amounts otherwise
payable to the Executive hereunder pursuant to federal, state and local income
tax laws and regulations, and the Company, any Parent Corporation and any such
Subsidiary are hereby authorized to withhold any such required amount.
13
<PAGE> 14
Section 5.9 - Titles
Titles are provided herein for convenience only and are not to serve an
a basis for interpretation or construction of this Agreement.
Section 5.10 - Law Governing
The laws of the State of New York shall govern the interpretation,
validity and performance of the terms hereof, regardless of the law that might
be applied under principles of conflicts of law.
Section 5.11 - Entire Agreement
This Agreement embodies the entire agreement and understanding of the
parties hereto with respect to the subject matter contained herein.
Section 5.12 - No Rights as Stockholder
The parties acknowledge and agree that the provisions of this Agreement
shall not be construed as conferring upon the Executive any rights or privileges
of a stockholder of the Company, any Parent Corporation or any Subsidiary, the
rights and privileges of the Executive being limited to those expressly set
forth in this Agreement.
Section 5.13 - Effect of Plan Upon Other Compensation Plans
(a) The implementation of this Stock Appreciation Right Agreement shall
not affect any other compensation or incentive plans in effect for the Company,
any Parent Corporation or any Subsidiary. Nothing in this Agreement shall be
construed to limit the right of the Company, any Parent Corporation or any
Subsidiary (i) to establish any other forms of incentives or compensation for
employees of the Company, any Parent Corporation or any Subsidiary or (ii) to
grant or assume options or stock appreciation rights otherwise than under this
Plan in connection with any proper corporate purpose, including, but not by way
of limitation, the grant or assumption of options or stock appreciation rights
in connection with the acquisition by purchase, lease, merger, consolidation or
otherwise, of the business, stock or assets of any corporation, firm or
association.
(b) Grants of Stock Appreciation Rights and any payments with respect
thereto shall not constitute "compensation" for purposes of any pension, welfare
or other benefit plan or policy of the Company unless provided for therein.
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<PAGE> 15
Section 5.14 - Arbitration
Any dispute or controversy arising under, out of, in connection with or
in relation to this Agreement and the Stock Appreciation Rights shall be finally
determined and settled by arbitration in the city of New York in accordance
with the rules and procedures of the American Arbitration Association, and
judgment upon the award may be entered in any court having jurisdiction thereof.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.
HOWMET CORPORATION
By: /s/ D. L. SQUIER
-----------------------------
President
Sign : /s/ James R. Stanley
------------------------------
Print Name Here: James R. Stanley
101 Hickory Hill Rd.
- -------------------------------------
Address
Wilton, CT 06897
- -------------------------------------
City State Zip Code
###-##-####
- -------------------------------------
Executive's Taxpayer Identification Number
15
<PAGE> 16
Exhibit A
TARGET CASH FLOW
<TABLE>
<CAPTION>
($ Millions)
Fiscal Year Target Cash Flow
----------- ----------------
<S> <C>
1996* 22.3
1997 35.3
1998 41.3
1999 47.6
2000 54.4
</TABLE>
- ---------------
* For purposes of this Agreement, fiscal year 1996 shall include the period from
December 13, 1995 through December 31, 1995 and the first day of fiscal year
1996 shall be deemed to be December 13, 1995.
16
<PAGE> 17
Exhibit B
EXAMPLE OF ACCELERATED VESTING:
Assume: Cash Flow for 1996 and 1997 exceed Cash Flow
Targets for those years and Cash Flow for 1998 is
less than Target Cash Flow for 1998. Acceleration
Event occurs on June 1, 1999.
As of May 31, 1999, 50% of SARs vested: 30% pursuant to Time Vesting and 20%
pursuant to Performance Vesting.
Accelerated Vesting: Pursuant to Section 4.1(b)(i),
all of the 20% of the SARs
remaining subject to Time
Vesting becomes vested upon
June 1, 1999.
Pursuant to Section 4.1(b)(ii),
two thirds of the 30% of the SARs
remaining subject to Performance
Vesting becomes vested upon June
1, 1999 as follows:
Unexpired Performance
that have vested Performance Vesting SARs
- ---------------- -----------------------------------
Vesting SARs X Performance Vesting SARs that
would have vested if all
targets met
= 30% X 20%
----------
30%
= 20%.
As of June 1, 1999, 50% + 20% + 20% = 90% of SARs vested.
17
<PAGE> 1
Exhibit 10.26
STOCK APPRECIATION RIGHT AGREEMENT
THIS AGREEMENT dated as of May 17, 1996, is made by and between Howmet
Corporation, a Delaware corporation (the "Company"), and Mark Lasker (the
"Executive"):
WHEREAS, Executive is a key management employee of the Company or one
of the Company's Subsidiaries,
WHEREAS, the Board has determined that it would be to the advantage and
best interest of the Company, and the shareholders of the Company to grant the
Stock Appreciation Rights provided for herein to the Executive as an inducement
to remain in the service of the Company, its Parent Corporation or its
Subsidiaries and as an incentive for increased efforts during such service;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the Company and the Executive do hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings specified below. Other
capitalized terms are defined elsewhere in this Agreement and shall have the
meanings there specified.
Section 1.1 - Acceleration Event
"Acceleration Event" shall mean one of the following events occurring
prior to March 31, 2001: (i) a Merger, (ii) a Sale, (iii) the acquisition by an
unaffiliated entity or person, of more than fifty percent (50%) of Blade Common
Stock then outstanding or of Company Common Stock then outstanding, (iv) the
liquidation, dissolution or winding up of the Company or Blade (other than in a
restructuring transaction which results in the continuation of the Company's (or
Blade's) business by an affiliated entity), (v) exercise of the Thiokol Option
and the transfer pursuant thereto of Blade Common Stock owned by Carlyle-Blade
Acquisition Partners, L.P. to Thiokol Holding Company, (vi) disposition by
Carlyle-Blade and its Affiliates (including, without limitation, in a series of
transactions) of the entirety of their interest in Blade Common Stock, or (vii)
a public offering of more than fifty percent (50%) of Blade Common Stock or
Company Common Stock then outstanding pursuant to a registration statement
(other than pursuant to Form S-8) filed under the Securities Act of 1933.
<PAGE> 2
Section 1.2 - Affiliate
"Affiliate" with respect to any entity, shall mean a person or entity
directly or indirectly controlling, controlled by, or under common control with,
such entity, where "control" has the meaning given such term under Rule 405 of
the Securities Act of 1933.
Section 1.3 - Appreciated Value
"Appreciated Value" per Stock Appreciation Right shall mean (i) one
two-hundredth (1/200th) of the Fair Market Value per share of Blade Common Stock
as of the applicable Valuation Date minus (ii) the Base Value of the Stock
Appreciation Right, but not less than zero.
Section 1.4 - Base Value
"Base Value" shall mean One Hundred Dollars ($100) (subject to
adjustment pursuant to the provisions set forth in Section 2.4).
Section 1.5 - Blade
"Blade" shall mean Blade Acquisition Corp., a Delaware corporation.
Section 1.6 - Blade Common Stock
"Blade Common Stock" shall mean the common stock, par value $0.01 per
share, of Blade.
Section 1.7 - Board
"Board" shall mean the Board of Directors of the Company.
Section 1.8 - Cash Flow
"Cash Flow" shall mean, for any period, the difference between the
level of Net Debt as of the day prior to the first day of such period and the
level of Net Debt as of the last day of such period, without giving effect to
any changes in Net Debt resulting from extraordinary transactions, including the
sale or acquisition of assets or inventory not in the ordinary course of
business, and without giving effect to any changes in Net Debt resulting from
any payment pursuant to purchase price adjustment under the Stock Purchase
Agreement dated as of October 12, 1995 among Pechiney, Pechiney International,
S.A. and Blade. "Net Debt" shall equal the difference between "Consolidated
Total Indebtedness" and the total cash balance reported as a current asset on
the Company's balance sheet. "Consolidated Total Indebtedness" shall include
outstanding balances, including current portions, of all long-term indebtedness
of the Company, its Parent Corporations and its Subsidiaries including off-
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<PAGE> 3
balance sheet financings, including, but not limited to, balances due to third
parties through accounts receivables securitization agreements.
Section 1.9 - Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.10 - Company Common Stock
"Company Common Stock" shall mean the common stock par value $0.01 per
share, of the Company.
Section 1.11 - Cumulative Cash Flow
"Cumulative Cash Flow" shall mean, with respect to a determination of
the vesting of any portion of the Stock Appreciation Rights pursuant to the
"deferred vesting" provisions of Section 3.1(c), the sum of Cash Flow for each
fiscal year within the period (i) commencing on the first day of the fiscal year
preceding the fiscal year in which falls the Vesting Date on which the
applicable portion of the Stock Appreciation Rights failed to vest pursuant to
the "performance related vesting" provisions of Section 3.1(b) and (ii) ending
on the last day of the fiscal year preceding the fiscal year in which falls the
applicable Deferred Vesting Date.
Section 1.12 - Cumulative Target Cash Flow
"Cumulative Target Cash Flow" shall mean, with respect to a
determination of the vesting of any portion of the Stock Appreciation Rights
pursuant to the "deferred vesting" provisions of Section 3.1(c), the sum of
Target Cash Flow for each fiscal year within the period (i) commencing on the
first day of the fiscal year preceding the fiscal year in which falls the
Vesting Date on which the applicable portion of the Stock Appreciation Rights
failed to vest pursuant to the "performance related vesting" provisions of
Section 3.1(b) and (ii) ending on the last day of the fiscal year preceding the
fiscal year in which falls the applicable Deferred Vesting Date.
Section 1.13 - Fair Market Value
"Fair Market Value" shall mean the fair market value of a share of
Blade Common Stock, which shall be equal to, at the Board's discretion either
(i) the value determined by a reputable firm experienced in valuation of similar
businesses, and selected by the Board, which firm's determination shall be final
and binding on the parties hereto or (ii) the per share value determined
pursuant to an Acceleration Event. Fair Market Value shall be determined as of
the applicable Valuation Date.
3
<PAGE> 4
Section 1.14 - GAAP
"GAAP" shall mean generally accepted accounting principles, applied on
a basis consistent with prior periods.
Section 1.15 - Merger
"Merger" shall mean a merger or consolidation of the Company or Blade
with another unaffiliated entity in which the stockholders of the Company or
Blade (as applicable) receive cash, securities and/or other marketable property
in exchange for their Company Common Stock or Blade Common Stock.
Section 1.16 - Parent Corporation
"Parent Corporation" shall mean any corporation in an unbroken chain of
corporations ending with the Company if each of the corporations other than the
Company then owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
Section 1.17 - Payment Date(s)
"Payment Date(s)" shall mean the date (or dates) on which the Executive
is entitled to receive payments with respect to the Stock Appreciation Rights,
in accordance with the provisions of Section 2.3(b).
Section 1.18 - Permitted Transfer
"Permitted Transfer" shall mean the Transfer of Stock Appreciation
Rights by will or intestate succession to the Executive's executors,
administrators, testamentary trustees legatees or beneficiaries.
Section 1.19 - Sale
"Sale" shall mean a sale to an unaffiliated entity of all or
substantially all of the assets of the Company or of Blade.
Section 1.20 - Stock Appreciation Rights
"Stock Appreciation Rights" shall mean the rights granted under this
Agreement to receive the payments set forth in Section 2.3, hereof, calculated
with respect to each Stock Appreciation Right based on the appreciation in value
of one two-hundredth (1/200th) of a share of Blade Common Stock over the Base
Value, subject to the limitations and conditions provided in this Stock
Appreciation Right Agreement.
4
<PAGE> 5
Section 1.21 - Subsidiary
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company, if each such corporation, other than
the last corporation in the unbroken chain, then owns 50% or more of the total
combined voting power in one of the other corporations in such chain.
Section 1.22 - Target Cash Flow
"Target Cash Flow" shall mean, for each of the five fiscal years
identified on Exhibit A hereto, the amount specified for such year on such
Exhibit; provided, however, that in the case of divestiture or acquisition of a
business unit by the Company or any of its Subsidiaries, the Board shall
determine in good faith an appropriate and equitable adjustment to Target Cash
Flow for the fiscal year in which such event occurs and each subsequent fiscal
year, in the case of a divestiture to reduce Target Cash Flow by the estimated
contribution, if any, that would have been made thereto by the divested unit
during the remainder of such periods, and in the case of an acquisition to
increase Target Cash Flow by the estimated contribution, if any, to be made
thereto by the acquired unit. In the event of such an adjustment, the Board
shall notify the Executive thereof; and any such adjustment made by the Board in
good faith shall be final and binding upon the parties.
Section 1.23 - Termination of Employment
"Termination of Employment" shall mean the time when, for any reason,
there ceases to be an employee-employer relationship between the Executive, on
the one hand, and the Company, a Parent Corporation and/or one or more
Subsidiaries of the Company, on the other hand, including, without limitation,
by reason of resignation, discharge (with or without cause), termination, death,
disability or retirement. The Board, in its absolute discretion, shall determine
the effect of all matters and questions relating to Termination of Employment,
including, but not limited to, all questions of whether a particular leave of
absence constitutes a Termination of Employment.
Section 1.24 - Thiokol Option
"Thiokol Option" shall mean the right granted to Thiokol Holding
Company to purchase Blade Common Stock from Carlyle-Blade Acquisition
Partnership, L.P., pursuant to the Shareholders Agreement dated December 13,
1995.
Section 1.25 - Transfer
"Transfer" when used in reference to the Stock Appreciation Rights
shall mean any sale, encumbrance, pledge, gift, assignment, alienation or other
form of disposition or transfer of the Stock Appreciation Rights, or any portion
thereof, or of
5
<PAGE> 6
any legal, beneficial or equitable interest therein or part thereof, whether
voluntary or involuntary or by operation of law. The terms "Transferred,"
"Transferring" and the like shall have similar meanings.
Section 1.26 - Unvested Percentage
"Unvested Percentage" shall mean that percentage of the Stock
Appreciation Rights that has not become "vested" pursuant to Section 3.1 or
Section 4.1 hereof.
Section 1.27 - Valuation Date
"Valuation Date" shall mean the date as of which Appreciated Value is
determined, as set forth in Section 2.3.
Section 1.28 - Vested Percentage
"Vested Percentage" shall mean that percentage of the Stock
Appreciation Rights that has become vested pursuant to Section 3.1 or Section
4.1 hereof.
Section 1.29 - Vesting Date
"Vesting Date" shall mean a date on which a portion of the Stock
Appreciation Rights may become "Vested" pursuant to Section 3.1 hereof.
ARTICLE II
GRANT OF STOCK APPRECIATION RIGHT
Section 2.1 - Grant of Stock Appreciation Right
In consideration of the Executive's promises set forth in Section 2.2,
and for other good and valuable consideration, on the date hereof the Company
grants to the Executive, subject to the terms and conditions set forth in this
Agreement, 5,000 Stock Appreciation Rights, each with respect to one
two-hundredth (1/200th) of a share of Blade Common Stock.
Section 2.2 - Consideration to the Company
In consideration of the granting of the Stock Appreciation Rights, the
Executive agrees to render faithful and efficient services to the Company or a
Parent Corporation or a Subsidiary of the Company, with such duties and
responsibilities as such employer shall from time to time prescribe. Nothing in
this Agreement shall confer upon the Executive any right to continue in the
employ of the Company, any Parent Corporation or any Subsidiary or shall
interfere with any rights of the Company, any Parent Corporation or any
Subsidiary of the Company to discharge the Executive. The Executive also agrees
that he shall not assert that any event occurring prior to the date of execution
6
<PAGE> 7
thereof (including, without limitation, the termination of the Company's 1993,
1994 and 1995 Long-Term Incentive plans and its Restructuring Cash Incentive
Plan) constitutes "Good Reason" as defined in the Employment Agreement dated as
of October 4, 1995 to which Executive, the Company and Pechiney are parties.
Section 2.3 - Determination and Method of Payment
(a)(i) Subject to the provisions of Section 3.1(e), the Stock
Appreciation Rights shall entitle the Executive to receive payment, on
the applicable Payment Date(s) set forth below, of an aggregate amount
(the "Aggregate Payment Amount") equal to the product of
(A) the number of Stock Appreciation Rights granted pursuant to
Section 2.1,
(B) the Vested Percentage, and
(C) the Appreciated Value.
(ii) For purposes of determining Appreciated Value, the Valuation Date
shall be the earliest of
(A) March 31, 2001,
(B) the date on which an Acceleration Event occurs, and
(C) a date selected by the Board in its discretion that is not
more than twelve months prior to, or more than six months
subsequent to the date of the Executive's first Termination
of Employment which precedes the earlier of the dates
described in (A) and (B) above (it being understood that the
Company does not intend to conduct a valuation of the Blade
Common Stock more frequently than once per fiscal year).
(b) The Aggregate Payment Amount shall be paid in cash, at the
election of the Company, either:
(i) in a lump sum on a date selected by the Board in its discretion
than is no more that sixty (60) days subsequent to the earlier of the
dates described in subsections(a)(ii)(A) and (B) above or
(ii) in three equal installments, the first such installment to be paid
on a date (the "Initial Installment Date") selected by the Board in its
discretion that is no more than sixty (60) days subsequent to the
earlier of the dates described in subsections (a)(ii)(A) and (B)
above, and the remaining two installments (the "Deferred Installments")
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<PAGE> 8
to be paid on the first and second anniversaries of the Initial
Installment Date, respectively. Each Deferred Installment shall be paid
together with interest thereon, at the Applicable Federal Rate for
short term obligations (as set forth in Section 1274(d) of the Code or
the Treasury Regulations promulgated thereunder), calculated from the
Initial Installment Date to the date such Deferred Installment is
actually paid.
(c) Notwithstanding anything to the contrary in the foregoing,
the Company's obligation to make any payment provided for in Section 2.3(b)
shall be suspended if:
(i) Such payment would render the Company unable to meet its
obligations in the ordinary course of business;
(ii) The Company is prohibited by applicable law from making
such payment; or
(iii) Such payment would constitute an unwaived breach of, or
default or event of default under, or is otherwise prohibited by, the
terms of any loan agreement or other agreement or instrument to which
the Company or any of the Company's Affiliates is a party,
any of such events constituting a "Payment Disability." In the event of a
Payment Disability, the Company shall make such payment as soon as reasonably
possible after all Payment Disabilities cease to exist. In the event that the
Company suspends its payment obligations pursuant to this Section 2.3(c), the
Company shall pay to the Executive an additional amount equal to interest
calculated on the amount of the suspended payment at the Applicable Federal Rate
for short term obligations (as set forth in Section 1274(d) of the Code or the
Treasury Regulations promulgated thereunder) from the date the payment would
have occurred but for the Payment Disability to (but not including) the date
such payment actually occurs (provided that no interest shall be due pursuant to
the foregoing to the extent that interest on account of such delay in payment
has accrued on such payment pursuant to Section 2.3(b).
Section 2.4 - Certain Adjustments
In the event that Blade Common Stock is changed into or exchanged for a
different number or kind of shares of Blade or securities of another company by
reason of merger, consolidation, recapitalization, reclassification, stock split
up, stock dividend or combination of shares, then the Board shall make an
appropriate and equitable adjustment in the definition of Base Value and/or
Appreciated Value and/or the number of Stock Appreciation Rights to reflect such
event. Any such adjustment made by the Board in good faith shall be final and
binding upon the Executive, the Company and all other interested persons.
8
<PAGE> 9
Section 2.5 - Stock Appreciation Right Not Transferable
No Stock Appreciation Right nor any interest or right therein or part
thereof shall be liable for the debts, contracts or engagements of the Executive
or his successors in interest or shall be subject to Transfer, whether by
alienation, anticipation, pledge, encumbrance, assignment or any other means,
and whether such Transfer be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted Transfer thereof shall be
null and void and of no effect; provided, however, that this Section 2.5 shall
not prevent a Permitted Transfer upon the Executive's death (and in the event of
a Permitted Transfer, payments to be made hereunder to the Executive shall
thereafter be made to the Executive's personal representative or such other
person as is empowered under the Executive's will or the then applicable laws of
descent and distribution to enforce the Executive's rights hereunder).
ARTICLE III
VESTING
Section 3.1 - Vesting
Fifty percent of the Stock Appreciation Rights shall be subject to Time
Vesting and fifty percent shall be subject to Performance Vesting as follows:
(a) Time Vesting. Provided in each case that no Termination of Employment
has occurred prior to the applicable Vesting Date, fifty percent of the Stock
Appreciation Rights shall become vested as follows:
(i) As of March 31, 1997 10% of the Stock Appreciation Rights
shall become Vested,
(ii) As of March 31, 1998, an additional 10% of the Stock
Appreciation Rights shall become vested,
(iii) As of March 31, 1999, an additional 10% of the Stock
Appreciation Rights shall become vested,
(iv) As of March 31, 2000, an additional 10% of the Stock
Appreciation Rights shall become vested, and
(v) As of March 31, 2001, an additional 10% of the Stock
Appreciation Rights shall become vested.
(b) Performance Related Vesting. Provided in each case that
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<PAGE> 10
(i) no Termination of Employment has occurred prior to the
applicable Vesting Date, and
(ii) Cash Flow for the fiscal year immediately preceding the
fiscal year in which falls the applicable Vesting Date equals or
exceeds Target Cash Flow for such year,
the remaining fifty percent of the Stock Appreciation Right shall become vested
as follows:
(A) As of March 31, 1997, 10% of the Stock Appreciation
Rights shall become vested,
(B) As of March 31, 1998, an additional 10% of the Stock
Appreciation Rights shall become vested,
(C) As of the March 31, 1999, an additional 10% of the
Stock Appreciation Rights shall become vested,
(D) As of March 31, 2000, an additional 10% of the Stock
Appreciation Rights shall become vested, and
(E) As of March 31, 2001, an additional 10% of the Stock
Appreciation Rights shall become vested.
(c) Deferred Vesting. If any portion of the Stock Appreciation Rights
does not become vested pursuant to the "performance related vesting" provisions
of Section 3.1(b) on the scheduled Vesting Date due to the failure of Cash Flow
to equal or exceed Target Cash Flow in the applicable fiscal year, then such
portion of the Stock Appreciation Rights shall become vested on the next Vesting
Date thereafter (the "Deferred Vesting Date") as of which Cumulative Cash Flow
equals or exceeds Cumulative Target Cash Flow, provided that (i) as of the last
day of the fiscal year preceding the fiscal year in which falls the Deferred
Vesting Date, all material obligations of the Company and Blade (including,
without limitation, satisfaction of financial covenants) under all outstanding
debt agreements have been satisfied and (ii) the Executive shall not have
incurred a Termination of Employment prior to such Deferred Vesting Date and
provided further that the last Deferred Vesting Date shall be March 31, 2001,
after which date the Unvested Percentage of the Stock Appreciation Rights as of
such date shall expire. That portion of the Stock Appreciation Rights that does
not become vested on the scheduled Deferred Vesting Date due to the failure of
the Company or Blade to satisfy debt agreement obligations in accordance with
clause (i) above shall expire and be cancelled as of such Deferred Vesting Date
and shall not be subject to vesting pursuant to Section 4.1.
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<PAGE> 11
(d) Discretion of the Board. The Board may elect, in its discretion, to
cause any portion of the Stock Appreciation Rights to become vested prior to the
date on which it would otherwise become vested pursuant to the provisions of
this Section 3.1 (and whether or not any other conditions to such vesting have
been met); provided, however that the Board shall have no obligation to cause
any portion of the Stock Appreciation Rights to become vested pursuant to this
Section 3.1(d)).
(e) Effect of Termination of Employment.
(i) No portion of the Stock Appreciation Rights shall become
vested (whether pursuant to this Section 3.1, Section 4.1, or
otherwise) following a Termination of Employment, except pursuant to an
exercise of the Board's discretion under Section 3.1(d) and then only
in the event such Termination of Employment is due to the Executive's
death or disability,
(ii) If a Termination of Employment has occurred other than
for cause (as determined by the Board in its discretion), the Executive
will retain ownership of the portion of the Stock Appreciation Rights
that has become vested prior to the date of such Termination of
Employment, but no payments will be made to the Executive with respect
to such Stock Appreciation Rights prior to the applicable Payment
Date(s) specified in Section 2.3 provided, that, except as the Board
may elect otherwise in its discretion, all Stock Appreciation Rights
granted to the Executive (vested and unvested) shall be forfeited and
cancelled as of any date on which the Executive violates any provision
of the Employment Agreement between the Executive, the Company and
Pechiney dated October 4, 1995, and
(iii) Except as the Board may elect otherwise, in its
discretion, in the event of the Executive's Termination of Employment
for cause (as determined by the Board in its discretion), all Stock
Appreciation Rights granted to the Executive (vested and unvested)
shall be forfeited and cancelled as of the date of Termination of
Employment and the Executive shall not be entitled to any payment with
respect to such Stock Appreciation Rights.
ARTICLE IV
ACCELERATION
Section 4.1 - Acceleration Event
(a) If an Acceleration Event shall occur, then the Stock Appreciation
Rights that have not been forfeited or cancelled shall be deemed to be vested to
the extent set forth in Section 4.1(b) below, notwithstanding that the Stock
Appreciation Rights may not yet have become vested to such extent under Section
3.1.
11
<PAGE> 12
Any "accelerated vesting" pursuant to this Section 4.1 shall be effective as of
the date the applicable Acceleration Event occurs; and thereafter, all further
vesting (pursuant to Section 3.1 or otherwise) shall cease.
(b) The portion of the Stock Appreciation Rights that shall be deemed
to be vested pursuant to Section 4.1(a) shall be (i) the entire portion of the
Stock Appreciation Rights subject to vesting pursuant to Section 3.1(a), plus
(ii) the portion of the Stock Appreciation Rights subject to vesting pursuant to
Section 3.1(b) that has not expired pursuant to Section 3.1(c), multiplied by a
fraction the numerator of which is the portion of the Stock Appreciation Rights
that has already become vested pursuant to the terms of Section 3.1(b) and
Section 3.1(c), and the denominator of which is the portion of the Stock
Appreciation Rights that would have become vested pursuant to Section 3.1(b) and
Section 3.1(c) on or prior to the date of the Acceleration Event had all
applicable performance tests been met. See the example on Exhibit B.
ARTICLE V
MISCELLANEOUS
Section 5.1 - Stockholder Approval
This Agreement shall be effective upon approval by the stockholders of
the Company as provided in Section 280G(b)(5)(A)(ii) of the Code and
regulations thereunder.
Section 5.2 - Notices
Any and all notices and any other communications provided for herein
shall be given in writing and shall be delivered either personally, by
registered or certified mail, postage prepaid, or by courier service which shall
be addressed, (i) in the case of the Company to the Chief Executive Officer of
the Company (with a copy to the General Counsel of the Company) at the principal
office of the Company at 475 Steamboat Road, Greenwich, Connecticut, 06836,
(203) 661-4600, or such other address as the Company may supply by notice from
time to time, and (ii) in the case of the Executive, to his address appearing in
the records of the Company or to such other address as may be designated in
writing by him. Any notice mailed as provided in this Section shall, unless
provided to the contrary elsewhere in this Agreement, be deemed effective four
business days after having been delivered to the U.S. Postal Service, postage
prepaid, return receipt requested, two business days after been delivered to a
courier service, or if earlier, when actually received.
12
<PAGE> 13
Section 5.3 - Invalid Provision
The invalidity or unenforceability of any particular provision hereof
shall not affect the other provisions hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provision was
omitted.
Section 5.4 - Modifications
No change or modification of this Agreement shall be valid unless the
same is in writing and signed by the parties hereto.
Section 5.5 - Counterparts
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 5.6 - Assignment
Except as otherwise provided herein, no party may assign this Agreement
or any of his or its rights, interests or obligations hereunder without the
prior written consent of the other parties, provided that the Company's rights
and obligations hereunder may be assigned to any Parent Corporation or
Subsidiary or to any successor pursuant to a merger, consolidation or similar
event. Subject to the foregoing, this Agreement and the respective rights and
obligations of the parties hereto shall inure to the benefit of and be binding
upon, the successors and assigns of the parties.
Section 5.7 - Administration
The Board shall have the power to interpret this Agreement and to adopt
such rules for the administration, interpretation and application of this
Agreement as are consistent herewith and to interpret or revoke any such rules.
All actions taken and all interpretations and determinations made by the Board
in good faith shall be final and binding upon the Executive, the Company and all
other interested persons. No member of the Board shall be personally liable for
any action, determination or interpretation made in good faith with respect to
this Agreement or the Stock Appreciation Rights.
Section 5.8 - Withholding
The Executive acknowledges that the Company, a Parent Corporation or a
Subsidiary may have an obligation to withhold a portion of the amounts otherwise
payable to the Executive hereunder pursuant to federal, state and local income
tax laws and regulations, and the Company, any Parent Corporation and any such
Subsidiary are hereby authorized to withhold any such required amount.
13
<PAGE> 14
Section 5.9 - Titles
Titles are provided herein for convenience only and are not to serve an
a basis for interpretation or construction of this Agreement.
Section 5.10 - Law Governing
The laws of the State of New York shall govern the interpretation,
validity and performance of the terms hereof, regardless of the law that might
be applied under principles of conflicts of law.
Section 5.11 - Entire Agreement
This Agreement embodies the entire agreement and understanding of the
parties hereto with respect to the subject matter contained herein.
Section 5.12 - No Rights as Stockholder
The parties acknowledge and agree that the provisions of this Agreement
shall not be construed as conferring upon the Executive any rights or privileges
of a stockholder of the Company, any Parent Corporation or any Subsidiary, the
rights and privileges of the Executive being limited to those expressly set
forth in this Agreement.
Section 5.13 - Effect of Plan Upon Other Compensation Plans
(a) The implementation of this Stock Appreciation Right Agreement shall
not affect any other compensation or incentive plans in effect for the Company,
any Parent Corporation or any Subsidiary. Nothing in this Agreement shall be
construed to limit the right of the Company, any Parent Corporation or any
Subsidiary (i) to establish any other forms of incentives or compensation for
employees of the Company, any Parent Corporation or any Subsidiary or (ii) to
grant or assume options or stock appreciation rights otherwise than under this
Plan in connection with any proper corporate purpose, including, but not by way
of limitation, the grant or assumption of options or stock appreciation rights
in connection with the acquisition by purchase, lease, merger, consolidation or
otherwise, of the business, stock or assets of any corporation, firm or
association.
(b) Grants of Stock Appreciation Rights and any payments with respect
thereto shall not constitute "compensation" for purposes of any pension, welfare
or other benefit plan or policy of the Company unless provided for therein.
14
<PAGE> 15
Section 5.14 - Arbitration
Any dispute or controversy arising under, out of, in connection with or
in relation to this Agreement and the Stock Appreciation Rights shall be finally
determined and settled by arbitration in the city of New York in accordance
with the rules and procedures of the American Arbitration Association, and
judgment upon the award may be entered in any court having jurisdiction thereof.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.
HOWMET CORPORATION
By /s/ D.L. Squier
------------------------------
President
Sign: /s/ Mark Lasker
--------------------
Print Name Here: Mark Lasker
8 Ave. Des Ternes
- --------------------------
Address
Paris France 75017
- --------------------------
City State Zip Code
###-##-####
- --------------------------
Executive's Taxpayer Identification Number
15
<PAGE> 16
Exhibit A
TARGET CASH FLOW
<TABLE>
<CAPTION>
($ Millions)
Fiscal Year Target Cash Flow
----------- ----------------
<S> <C>
1996* 22.3
1997 35.3
1998 41.3
1999 47.6
2000 54.4
</TABLE>
- ---------------
* For purposes of this Agreement, fiscal year 1996 shall include the period from
December 13, 1995 through December 31, 1995 and the first day of fiscal year
1996 shall be deemed to be December 13, 1995.
16
<PAGE> 17
Exhibit B
EXAMPLE OF ACCELERATED VESTING:
Assume: Cash Flow for 1996 and 1997 exceed Cash Flow Targets for those years
and Cash Flow for 1998 is less than Target Cash Flow for 1998.
Acceleration Event occurs on June 1, 1999.
As of May 31, 1999, 50% of SARs vested: 30% pursuant to Time Vesting and 20%
pursuant to Performance Vesting.
Accelerated Vesting: Pursuant to Section 4.1(b)(i), all of the 20% of the
SARs remaining subject to Time Vesting becomes
vested upon June 1, 1999.
Pursuant to Section 4.1(b)(ii), two thirds of the 30%
of the SARs remaining subject to Performance Vesting
becomes vested upon June 1, 1999 as follows:
Unexpired Performance
that have vested Performance Vesting SARs
- ------------------------------ ------------------------
Vesting SARs X Performance Vesting SARs that
would have vested if all
targets met
= 30% X 20%
---------
30%
= 20%.
As of June 1, 1999, 50% + 20% + 20% = 90% of SARs vested.
17
<PAGE> 1
STOCK APPRECIATION RIGHT AGREEMENT
THIS AGREEMENT dated as of May 17, 1996, is made by and between Howmet
Corporation, a Delaware corporation (the "Company"), and John C. Ritter, (the
"Executive"):
WHEREAS, Executive is a key management employee of the Company or one
of the Company's Subsidiaries,
WHEREAS, the Board has determined that it would be to the advantage and
best interest of the Company, and the shareholders of the Company to grant the
Stock Appreciation Rights provided for herein to the Executive as an inducement
to remain in the service of the Company, its Parent Corporation or its
Subsidiaries and as an incentive for increased efforts during such service;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the Company and the Executive do hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings specified below. Other
capitalized terms are defined elsewhere in this Agreement and shall have the
meanings there specified.
Section 1.1 - Acceleration Event
"Acceleration Event" shall mean one of the following events occurring
prior to March 31, 2001: (i) a Merger, (ii) a Sale, (iii) the acquisition by an
unaffiliated entity or person, of more than fifty percent (50%) of Blade Common
Stock then outstanding or of Company Common Stock then outstanding, (iv) the
liquidation, dissolution or winding up of the Company or Blade (other than in a
restructuring transaction which results in the continuation of the Company's (or
Blade's) business by an affiliated entity), (v) exercise of the Thiokol Option
and the transfer pursuant thereto of Blade Common Stock owned by Carlyle-Blade
Acquisition Partners, L.P. to Thiokol Holding Company, (vi) disposition by
Carlyle-Blade and its Affiliates (including, without limitation, in a series of
transactions) of the entirety of their interest in Blade Common Stock, or (vii)
a public offering of more than fifty percent (50%) of Blade Common Stock or
Company Common Stock then outstanding pursuant to a registration statement
(other than pursuant to Form S-8) filed under the Securities Act of 1933.
<PAGE> 2
Section 1.2 - Affiliate
"Affiliate" with respect to any entity, shall mean a person or entity
directly or indirectly controlling, controlled by, or under common control with,
such entity, where "control" has the meaning given such term under Rule 405 of
the Securities Act of 1933.
Section 1.3 - Appreciated Value
"Appreciated Value" per Stock Appreciation Right shall mean (i) one
two-hundredth (1/200th) of the Fair Market Value per share of Blade Common Stock
as of the applicable Valuation Date minus (ii) the Base Value of the Stock
Appreciation Right, but not less than zero.
Section 1.4 - Base Value
"Base Value" shall mean One Hundred Dollars ($100) (subject to
adjustment pursuant to the provisions set forth in Section 2.4).
Section 1.5 - Blade
"Blade" shall mean Blade Acquisition Corp., a Delaware corporation.
Section 1.6 - Blade Common Stock
"Blade Common Stock" shall mean the common stock, par value $0.01 per
share, of Blade.
Section 1.7 - Board
"Board" shall mean the Board of Directors of the Company.
Section 1.8 - Cash Flow
"Cash Flow" shall mean, for any period, the difference between the
level of Net Debt as of the day prior to the first day of such period and the
level of Net Debt as of the last day of such period, without giving effect to
any changes in Net Debt resulting from extraordinary transactions, including the
sale or acquisition of assets or inventory not in the ordinary course of
business, and without giving effect to any changes in Net Debt resulting from
any payment pursuant to purchase price adjustment under the Stock Purchase
Agreement dated as of October 12, 1995 among Pechiney, Pechiney International,
S.A. and Blade. "Net Debt" shall equal the difference between "Consolidated
Total Indebtedness" and the total cash balance reported as a current asset on
the Company's balance sheet. "Consolidated Total Indebtedness" shall include
outstanding balances, including current portions, of all long-term indebtedness
of the Company, its Parent Corporations and its Subsidiaries including off-
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<PAGE> 3
balance sheet financings, including, but not limited to, balances due to third
parties through accounts receivables securitization agreements.
Section 1.9 - Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.10 - Company Common Stock
"Company Common Stock" shall mean the common stock par value $0.01 per
share, of the Company.
Section 1.11 - Cumulative Cash Flow
"Cumulative Cash Flow" shall mean, with respect to a determination of
the vesting of any portion of the Stock Appreciation Rights pursuant to the
"deferred vesting" provisions of Section 3.1(c), the sum of Cash Flow for each
fiscal year within the period (i) commencing on the first day of the fiscal year
preceding the fiscal year in which falls the Vesting Date on which the
applicable portion of the Stock Appreciation Rights failed to vest pursuant to
the "performance related vesting" provisions of Section 3.1(b) and (ii) ending
on the last day of the fiscal year preceding the fiscal year in which falls the
applicable Deferred Vesting Date.
Section 1.12 - Cumulative Target Cash Flow
"Cumulative Target Cash Flow" shall mean, with respect to a
determination of the vesting of any portion of the Stock Appreciation Rights
pursuant to the "deferred vesting" provisions of Section 3.1(c), the sum of
Target Cash Flow for each fiscal year within the period (i) commencing on the
first day of the fiscal year preceding the fiscal year in which falls the
Vesting Date on which the applicable portion of the Stock Appreciation Rights
failed to vest pursuant to the "performance related vesting" provisions of
Section 3.1(b) and (ii) ending on the last day of the fiscal year preceding the
fiscal year in which falls the applicable Deferred Vesting Date.
Section 1.13 - Fair Market Value
"Fair Market Value" shall mean the fair market value of a share of
Blade Common Stock, which shall be equal to, at the Board's discretion either
(i) the value determined by a reputable firm experienced in valuation of similar
businesses, and selected by the Board, which firm's determination shall be final
and binding on the parties hereto or (ii) the per share value determined
pursuant to an Acceleration Event. Fair Market Value shall be determined as of
the applicable Valuation Date.
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<PAGE> 4
Section 1.14 - GAAP
"GAAP" shall mean generally accepted accounting principles, applied on
a basis consistent with prior periods.
Section 1.15 - Merger
"Merger" shall mean a merger or consolidation of the Company or Blade
with another unaffiliated entity in which the stockholders of the Company or
Blade (as applicable) receive cash, securities and/or other marketable property
in exchange for their Company Common Stock or Blade Common Stock.
Section 1.16 - Parent Corporation
"Parent Corporation" shall mean any corporation in an unbroken chain of
corporations ending with the Company if each of the corporations other than the
Company then owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
Section 1.17 - Payment Date(s)
"Payment Date(s)" shall mean the date (or dates) on which the Executive
is entitled to receive payments with respect to the Stock Appreciation Rights,
in accordance with the provisions of Section 2.3(b).
Section 1.18 - Permitted Transfer
"Permitted Transfer" shall mean the Transfer of Stock Appreciation
Rights by will or intestate succession to the Executive's executors,
administrators, testamentary trustees legatees or beneficiaries.
Section 1.19 - Sale
"Sale" shall mean a sale to an unaffiliated entity of all or
substantially all of the assets of the Company or of Blade.
Section 1.20 - Stock Appreciation Rights
"Stock Appreciation Rights" shall mean the rights granted under this
Agreement to receive the payments set forth in Section 2.3, hereof, calculated
with respect to each Stock Appreciation Right based on the appreciation in value
of one two-hundredth (1/200) of a share of Blade Common Stock over the Base
Value, subject to the limitations and conditions provided in this Stock
Appreciation Right Agreement.
4
<PAGE> 5
Section 1.21 - Subsidiary
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company, if each such corporation, other than
the last corporation in the unbroken chain, then owns 50% or more of the total
combined voting power in one of the other corporations in such chain.
Section 1.22 - Target Cash Flow
"Target Cash Flow" shall mean, for each of the five fiscal years
identified on Exhibit A hereto, the amount specified for such year on such
Exhibit; provided, however, that in the case of divestiture or acquisition of a
business unit by the Company or any of its Subsidiaries, the Board shall
determine in good faith an appropriate and equitable adjustment to Target Cash
Flow for the fiscal year in which such event occurs and each subsequent fiscal
year, in the case of a divestiture to reduce Target Cash Flow by the estimated
contribution, if any, that would have been made thereto by the divested unit
during the remainder of such periods, and in the case of an acquisition to
increase Target Cash Flow by the estimated contribution, if any, to be made
thereto by the acquired unit. In the event of such an adjustment, the Board
shall notify the Executive thereof; and any such adjustment made by the Board in
good faith shall be final and binding upon the parties.
Section 1.23 - Termination of Employment
"Termination of Employment" shall mean the time when, for any reason,
there ceases to be an employee-employer relationship between the Executive, on
the one hand, and the Company, a Parent Corporation and/or one or more
Subsidiaries of the Company, on the other hand, including, without limitation,
by reason of resignation, discharge (with or without cause), termination, death,
disability or retirement. The Board, in its absolute discretion, shall determine
the effect of all matters and questions relating to Termination of Employment,
including, but not limited to, all questions of whether a particular leave of
absence constitutes a Termination of Employment.
Section 1.24 - Thiokol Option
"Thiokol Option" shall mean the right granted to Thiokol Holding
Company to purchase Blade Common Stock from Carlyle-Blade Acquisition
Partnership. L.P., pursuant to the Shareholders Agreement dated December 13,
1995.
Section 1.25 - Transfer
"Transfer" when used in reference to the Stock Appreciation Rights
shall mean any sale, encumbrance, pledge, gift, assignment, alienation or other
form of disposition or transfer of the Stock Appreciation Rights, or any portion
thereof, or of
5
<PAGE> 6
any legal, beneficial or equitable interest therein or part thereof, whether
voluntary or involuntary or by operation of law. The terms "Transferred,"
"Transferring" and the like shall have similar meanings.
Section 1.26 - Unvested Percentage
"Unvested Percentage" shall mean that percentage of the Stock
Appreciation Rights that has not become "vested" pursuant to Section 3.1 or
Section 4.1 hereof.
Section 1.27 - Valuation Date
"Valuation Date" shall mean the date as of which Appreciated Value is
determined, as set forth in Section 2.3.
Section 1.28 - Vested Percentage
"Vested Percentage" shall mean that percentage of the Stock
Appreciation Rights that has become vested pursuant to Section 3.1 or Section
4.1 hereof.
Section 1.29 - Vesting Date
"Vesting Date" shall mean a date on which a portion of the Stock
Appreciation Rights may become "Vested" pursuant to Section 3.1 hereof.
ARTICLE II
GRANT OF STOCK APPRECIATION RIGHT
Section 2.1 - Grant of Stock Appreciation Right
In consideration of the Executive's promises set forth in Section 2.2,
and for other good and valuable consideration, on the date hereof the Company
grants to the Executive, subject to the terms and conditions set forth in this
Agreement, 5,000 Stock Appreciation Rights, each with respect to one
two-hundredth (1/200th) of a share of Blade Common Stock.
Section 2.2 - Consideration to the Company
In consideration of the granting of the Stock Appreciation Rights, the
Executive agrees to render faithful and efficient services to the Company or a
Parent Corporation or a Subsidiary of the Company, with such duties and
responsibilities as such employer shall from time to time prescribe. Nothing in
this Agreement shall confer upon the Executive any right to continue in the
employ of the Company, any Parent Corporation or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company, any Parent
Corporation or any Subsidiary of the Company, which are hereby expressly
reserved, to discharge
6
<PAGE> 7
the Executive at any time for any reason whatsoever, with or without cause.
Section 2.3 - Determination and Method of Payment
(a)(i) Subject to the provisions of Section 3.1(e), the Stock
Appreciation Rights shall entitle the Executive to receive payment, on
the applicable Payment Date(s) set forth below, of an aggregate amount
(the "Aggregate Payment Amount") equal to the product of
(A) the number of Stock Appreciation Rights granted
pursuant to Section 2.1,
(B) the Vested Percentage, and
(C) the Appreciated Value.
(ii) For purposes of determining Appreciated Value, the Valuation Date
shall be the earliest of
(A) March 31, 2001,
(B) the date on which an Acceleration Event occurs, and
(C) a date selected by the Board in its discretion that
is not more than twelve months prior to, or more than
six months subsequent to the date of the Executive's
first Termination of Employment which precedes the
earlier of the dates described in (A) and (B) above
(it being understood that the Company does not intend
to conduct a valuation of the Blade Common Stock more
frequently than once per fiscal year).
(b) The Aggregate Payment Amount shall be paid in cash, at
the election of the Company, either:
(i) in a lump sum on a date selected by the Board in its discretion
that is no more that sixty (60) days subsequent to the earlier of the
dates described in subsections(a) (ii) (A) and (B) above or
(ii) in three equal installments, the first such installment to be paid
on a date (the "Initial Installment Date") selected by the Board in its
discretion that is no more than sixty (60) days subsequent to the
earlier of the dates described in subsections (a) (ii) (A) and (B)
above, and the remaining two installments (the "Deferred Installments")
to be paid on the first and second anniversaries of the Initial
Installment Date, respectively. Each Deferred Installment shall be paid
together with interest thereon, at
7
<PAGE> 8
the Applicable Federal Rate for short term obligations (as set forth in
Section 1274(d) of the Code or the Treasury Regulations promulgated
thereunder), calculated from the Initial Installment Date to the date
such Deferred Installment is actually paid.
(c) Notwithstanding anything to the contrary in the
foregoing, the Company's obligation to make any payment provided
for in Section 2.3(b) shall be suspended if:
(i) Such payment would render the Company unable to meet its
obligations in the ordinary course of business;
(ii) The Company is prohibited by applicable law from making
such payment; or
(iii) Such payment would constitute an unwaived breach of, or
default or event of default under, or is otherwise prohibited by, the
terms of any loan agreement or other agreement or instrument to which
the Company or any of the Company's Affiliates is a party,
any of such events constituting a "Payment Disability." In the event of a
Payment Disability, the Company shall make such payment as soon as reasonably
possible after all Payment Disabilities cease to exist. In the event that the
Company suspends its payment obligations pursuant to this Section 2.3(c), the
Company shall pay to the Executive an additional amount equal to interest
calculated on the amount of the suspended payment at the Applicable Federal Rate
for short term obligations (as set forth in Section 1274(d) of the Code or the
Treasury Regulations promulgated thereunder) from the date the payment would
have occurred but for the Payment Disability to (but not including) the date
such payment actually occurs (provided that no interest shall be due pursuant to
the foregoing to the extent that interest on account of such delay in payment
has accrued on such payment pursuant to Section 2.3(b).
Section 2.4 - Certain Adjustments
In the event that Blade Common Stock is changed into or exchanged for a
different number or kind of shares of Blade or securities of another company by
reason of merger, consolidation, recapitalization, reclassification, stock split
up, stock dividend or combination of shares, then the Board shall make an
appropriate and equitable adjustment in the definition of Base Value and/or
Appreciated Value and/or the number of Stock Appreciation Rights to reflect such
event. Any such adjustment made by the Board in good faith shall be final and
binding upon the Executive, the Company and all other interested persons.
8
<PAGE> 9
Section 2.5 - Stock Appreciation Right Not Transferable
No Stock Appreciation Right nor any interest or right therein or part
thereof shall be liable for the debts, contracts or engagements of the Executive
or his successors in interest or shall be subject to Transfer, whether by
alienation, anticipation, pledge, encumbrance, assignment or any other means,
and whether such Transfer be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted Transfer thereof shall be
null and void and of no effect; provided, however, that this Section 2.5 shall
not prevent a Permitted Transfer upon the Executive's death (and in the event of
a Permitted Transfer, payments to be made hereunder to the Executive shall
thereafter be made to the Executive's personal representative or such other
person as is empowered under the Executive's will or the then applicable laws of
descent and distribution to enforce the Executive's rights hereunder).
ARTICLE III
VESTING
Section 3.1 - Vesting
Fifty percent of the Stock Appreciation Rights shall be subject to Time
Vesting and fifty percent shall be subject to Performance Vesting as follows:
(a) Time Vesting. Provided in each case that no Termination of
Employment has occurred prior to the applicable Vesting Date, fifty percent of
the Stock Appreciation Rights shall become vested as follows:
(i) As of March 31, 1997 10% of the Stock Appreciation Rights
shall become Vested,
(ii) As of March 31, 1998, an additional 10% of the Stock
Appreciation Rights shall become vested,
(iii) As of March 31, 1999, an additional 10% of the Stock
Appreciation Rights shall become vested,
(iv) As of March 31, 2000, an additional 10% of the Stock
Appreciation Rights shall become vested, and
(v) As of March 31, 2001, an additional 10% of the Stock
Appreciation Rights shall become vested.
(b) Performance Related Vesting. Provided in each case that
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<PAGE> 10
(i) no Termination of Employment has occurred prior to the
applicable Vesting Date, and
(ii) Cash Flow for the fiscal year immediately preceding the
fiscal year in which falls the applicable Vesting Date equals or
exceeds Target Cash Flow for such year,
the remaining fifty percent of the Stock Appreciation Right shall become vested
as follows:
(A) As of March 31, 1997, 10% of the Stock Appreciation
Rights shall become vested,
(B) As of March 31, 1998, an additional 10% of the Stock
Appreciation Rights shall become vested,
(C) As of the March 31, 1999, an additional 10% of the
Stock Appreciation Rights shall become vested,
(D) As of March 31, 2000, an additional 10% of the Stock
Appreciation Rights shall become vested, and
(E) As of March 31, 2001, an additional 10% of the Stock
Appreciation Rights shall become vested.
(c) Deferred Vesting. If any portion of the Stock Appreciation Rights
does not become vested pursuant to the "performance related vesting" provisions
of Section 3.1(b) on the scheduled Vesting Date due to the failure of Cash Flow
to equal or exceed Target Cash Flow in the applicable fiscal year, then such
portion of the Stock Appreciation Rights shall become vested on the next Vesting
Date thereafter (the "Deferred Vesting Date") as of which Cumulative Cash Flow
equals or exceeds Cumulative Target Cash Flow, provided that (i) as of the last
day of the fiscal year preceding the fiscal year in which falls the Deferred
Vesting Date, all material obligations of the Company and Blade (including,
without limitation, satisfaction of financial covenants) under all outstanding
debt agreements have been satisfied and (ii) the Executive shall not have
incurred a Termination of Employment prior to such Deferred Vesting Date and
provided further that the last Deferred Vesting Date shall be March 31, 2001,
after which date the Unvested Percentage of the Stock Appreciation Rights as of
such date shall expire. That portion of the Stock Appreciation Rights that does
not become vested on the scheduled Deferred Vesting Date due to the failure of
the Company or Blade to satisfy debt agreement obligations in accordance with
clause (i) above shall expire and be cancelled as of such Deferred Vesting Date
and shall not be subject to vesting pursuant to Section 4.1.
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(d) Discretion of the Board. The Board may elect, in its discretion, to
cause any portion of the Stock Appreciation Rights to become vested prior to the
date on which it would otherwise become vested pursuant to the provisions of
this Section 3.1 (and whether or not any other conditions to such vesting have
been met); provided, however that the Board shall have no obligation to cause
any portion of the Stock Appreciation Rights to become vested pursuant to this
Section 3.1(d)).
(e) Effect of Termination of Employment.
(i) No portion of the Stock Appreciation Rights shall become
vested (whether pursuant to this Section 3.1, Section 4.1, or
otherwise) following a Termination of Employment, except pursuant to an
exercise of the Board's discretion under Section 3.1(d) and then only
in the event such Termination of Employment is due to the Executive's
death or disability,
(ii) If a Termination of Employment has occurred other than
for cause (as determined by the Board in its discretion), the Executive
will retain ownership of the portion of the Stock Appreciation Rights
that has become vested prior to the date of such Termination of
Employment, but no payments will be made to the Executive with respect
to such Stock Appreciation Rights prior to the applicable Payment
Date(s) specified in Section 2.3, and
(iii) Except as the Board may elect otherwise, in its
discretion, in the event of the Executive's Termination of Employment
for cause (as determined by the Board in its discretion), all Stock
Appreciation Rights granted to the Executive (vested and unvested)
shall be forfeited and cancelled as of the date of Termination of
Employment and the Executive shall not be entitled to any payment with
respect to such Stock Appreciation Rights.
ARTICLE IV
ACCELERATION
Section 4.1 - Acceleration Event
(a) If an Acceleration Event shall occur, then the Stock Appreciation
Rights that have not been forfeited or cancelled shall be deemed to be vested to
the extent set forth in Section 4.1(b) below, notwithstanding that the Stock
Appreciation Rights may not yet have become vested to such extent under Section
3.1. Any "accelerated vesting" pursuant to this Section 4.1 shall be effective
as of the date the applicable Acceleration Event occurs; and thereafter, all
further vesting (pursuant to Section 3.1 or otherwise) shall cease.
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<PAGE> 12
(b) The portion of the Stock Appreciation Rights that shall be deemed
to be vested pursuant to Section 4.1(a) shall be (i) the entire portion of the
Stock Appreciation Rights subject to vesting pursuant to Section 3.1(a), plus
(ii) the portion of the Stock Appreciation Rights subject to vesting pursuant to
Section 3.1(b) that has not expired pursuant to Section 3.1(c), multiplied by a
fraction the numerator of which is the portion of the Stock Appreciation Rights
that has already become vested pursuant to the terms of Section 3.1(b) and
Section 3.1(c), and the denominator of which is the portion of the Stock
Appreciation Rights that would have become vested pursuant to Section 3.1(b) and
Section 3.1(c) on or prior to the date of the Acceleration Event had all
applicable performance tests been met. See the example on Exhibit B.
ARTICLE V
MISCELLANEOUS
Section 5.1 - Stockholder Approval
This Agreement shall be effective upon approval by the stockholders of
the Company as provided in Section 280G(b) (5) (A) (ii) of the Code and
regulations thereunder.
Section 5.2 - Notices
Any and all notices and any other communications provided for herein
shall be given in writing and shall be delivered either personally, by
registered or certified mail, postage prepaid, or by courier service which shall
be addressed, (i) in the case of the Company to the Chief Executive Officer of
the Company (with a copy to the General Counsel of the Company) at the principal
office of the Company at 475 Steamboat Road, Greenwich, Connecticut, 06836,
(203) 661-4600, or such other address as the Company may supply by notice from
time to time, and (ii) in the case of the Executive, to his address appearing in
the records of the Company or to such other address as may be designated in
writing by him. Any notice mailed as provided in this Section shall, unless
provided to the contrary elsewhere in this Agreement, be deemed effective four
business days after having been delivered to the U.S. Postal Service, postage
prepaid, return receipt requested, two business days after been delivered to a
courier service, or if earlier, when actually received.
Section 5.3 - Invalid Provision
The invalidity or unenforceability of any particular provision hereof
shall not affect the other provisions hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provision was
omitted.
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Section 5.4 - Modifications
No change or modification of this Agreement shall be valid unless the
same is in writing and signed by the parties hereto.
Section 5.5 - Counterparts
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 5.6 - Assignment
Except as otherwise provided herein, no party may assign this Agreement
or any of his or its rights, interests or obligations hereunder without the
prior written consent of the other parties, provided that the Company's rights
and obligations hereunder may be assigned to any Parent Corporation or
Subsidiary or to any successor pursuant to a merger, consolidation or similar
event. Subject to the foregoing, this Agreement and the respective rights and
obligations of the parties hereto shall inure to the benefit of and be binding
upon, the successors and assigns of the parties.
Section 5.7 - Administration
The Board shall have the power to interpret this Agreement and to adopt
such rules for the administration, interpretation and application of this
Agreement as are consistent herewith and to interpret or revoke any such rules.
All actions taken and all interpretations and determinations made by the Board
in good faith shall be final and binding upon the Executive, the Company and all
other interested persons. No member of the Board shall be personally liable for
any action, determination or interpretation made in good faith with respect to
this Agreement or the Stock Appreciation Rights.
Section 5.8 - Withholding
The Executive acknowledges that the Company, a Parent Corporation or a
Subsidiary may have an obligation to withhold a portion of the amounts otherwise
payable to the Executive hereunder pursuant to federal, state and local income
tax laws and regulations, and the Company, any Parent Corporation and any such
Subsidiary are hereby authorized to withhold any such required amount.
Section 5.9 - Titles
Titles are provided herein for convenience only and are not to serve an
a basis for interpretation or construction of this Agreement.
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<PAGE> 14
Section 5.10 - Law Governing
The laws of the State of New York shall govern the interpretation,
validity and performance of the terms hereof, regardless of the law that might
be applied under principles of conflicts of law.
Section 5.11 - Entire Agreement
This Agreement embodies the entire agreement and understanding of the
parties hereto with respect to the subject matter contained herein.
Section 5.12 - No Rights as Stockholder
The parties acknowledge and agree that the provisions of this Agreement
shall not be construed as conferring upon the Executive any rights or privileges
of a stockholder of the Company, any Parent Corporation or any Subsidiary, the
rights and privileges of the Executive being limited to those expressly set
forth in this Agreement.
Section 5.13 - Effect of Plan Upon Other Compensation Plans
(a) The implementation of this Stock Appreciation Right Agreement shall
not affect any other compensation or incentive plans in effect for the Company,
any Parent Corporation or any Subsidiary. Nothing in this Agreement shall be
construed to limit the right of the Company, any Parent Corporation or any
Subsidiary (i) to establish any other forms of incentives or compensation for
employees of the Company, any Parent Corporation or any Subsidiary or (ii) to
grant or assume options or stock appreciation rights otherwise than under this
Plan in connection with any proper corporate purpose, including, but not by way
of limitation, the grant or assumption of options or stock appreciation rights
in connection with the acquisition by purchase, lease, merger, consolidation or
otherwise, of the business, stock or assets of any corporation, firm or
association.
(b) Grants of Stock Appreciation Rights and any payments with respect
thereto shall not constitute "compensation" for purposes of any pension, welfare
or other benefit plan or policy of the Company unless provided for therein.
Section 5.14 - Arbitration
Any dispute or controversy arising under, out of, in connection with or
in relation to this Agreement and the Stock Appreciation Rights shall be finally
determined and settled by arbitration in the city of the New York in accordance
with the rules and procedures of the American Arbitration Association, and
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<PAGE> 15
judgment upon the award may be entered in any court having jurisdiction thereof.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.
HOWMET CORPORATION
By /s/ David L. Squier
---------------------------
President
Sign: /s/ John C. Ritter
------------------------
Print name here: John C. Ritter
190 Blagling Hill Circle
- ------------------------------
Address
Fairfield Ct. 06430
- ------------------------------
City State Zip Code
###-##-####
- ------------------------------
Executive's Taxpayer Identification Number
15
<PAGE> 16
Exhibit A
TARGET CASH FLOW
($ Millions )
-------------
Fiscal Year Target Cash Flow
----------- ----------------
1996* 22.3
1997 35.3
1998 41.3
1999 47.6
2000 54.4
* For purposes of this Agreement, fiscal year 1996 shall include the period from
December 13, 1995 through December 31, 1995 and the first day of fiscal year
1996 shall be deemed to be December 13, 1995.
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<PAGE> 17
Exhibit B
EXAMPLE OF ACCELERATED VESTING:
Assume: Cash Flow for 1996 and 1997 exceed Cash Flow Targets for those years
and Cash Flow for 1998 is less than Target Cash Flow for 1998.
Acceleration Event occurs on June 1, 1999.
As of May 31, 1999, 50% of SARs vested: 30% pursuant to Time Vesting and 20%
pursuant to Performance Vesting.
Accelerated Vesting: Pursuant to Section 4.1(b)(i), all of the 20% of the
SARs remaining subject to Time Vesting becomes vested
upon June 1, 1999.
Pursuant to Section 4.1(b)(ii), two thirds of the 30% of the
SARs remaining subject to Performance Vesting becomes vested
upon June 1, 1999 as follows:
Unexpired Performance Performance Vesting SARs
that have vested ------------------------
- ----------------
Vesting SARs X Performance Vesting SARs that
would have vested if all
targets met
= 30% X 20%
---------------
30%
= 20%.
As of June 1, 1999, 50% + 20% + 20% = 90% of SARs vested.
17
<PAGE> 1
Exhibit 10.28
STOCK APPRECIATION RIGHT AGREEMENT
THIS AGREEMENT dated as of May 17, 1996, is made by and between Howmet
Corporation, a Delaware corporation (the "Company"), and Allan Bergquist, (the
"Executive"):
WHEREAS, Executive is a key management employee of the
Company or one of the Company's Subsidiaries,
WHEREAS, the Board has determined that it would be to the advantage and
best interest of the Company, and the shareholders of the Company to grant the
Stock Appreciation Rights provided for herein to the Executive as an inducement
to remain in the service of the Company, its Parent Corporation or its
Subsidiaries and as an incentive for increased efforts during such service;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the Company and the Executive do hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings specified below. Other
capitalized terms are defined elsewhere in this Agreement and shall have the
meanings there specified.
Section 1.1 - Acceleration Event
"Acceleration Event" shall mean one of the following events occurring
prior to March 31, 2001: (i) a Merger, (ii) a Sale, (iii) the acquisition by an
unaffiliated entity or person, of more than fifty percent (50%) of Blade Common
Stock then outstanding or of Company Common Stock then outstanding, (iv) the
liquidation, dissolution or winding up of the Company or Blade (other than in a
restructuring transaction which results in the continuation of the Company's (or
Blade's) business by an affiliated entity), (v) exercise of the Thiokol Option
and the transfer pursuant thereto of Blade Common Stock owned by Carlyle-Blade
Acquisition Partners, L.P. to Thiokol Holding Company, (vi) disposition by
Carlyle-Blade and its Affiliates (including, without limitation, in a series of
transactions) of the entirety of their interest in Blade Common Stock, or (vii)
a public offering of more than fifty percent (50%) of Blade Common Stock or
Company Common Stock then outstanding pursuant to a registration statement
(other than pursuant to Form S-8) filed under the Securities Act of 1933.
<PAGE> 2
Section 1.2 - Affiliate
"Affiliate" with respect to any entity, shall mean a person or entity
directly or indirectly controlling, controlled by, or under common control with,
such entity, where "control" has the meaning given such term under Rule 405 of
the Securities Act of 1933.
Section 1.3 - Appreciated Value
"Appreciated Value" per Stock Appreciation Right shall mean (i) one
two-hundredth (1/200th) of the Fair Market Value per share of Blade Common Stock
as of the applicable Valuation Date minus (ii) the Base Value of the Stock
Appreciation Right, but not less than zero.
Section 1.4 - Base Value
"Base Value" shall mean One Hundred Dollars ($100) (subject to
adjustment pursuant to the provisions set forth in Section 2.4).
Section 1.5 - Blade
"Blade" shall mean Blade Acquisition Corp., a Delaware
corporation.
Section 1.6 - Blade Common Stock
"Blade Common Stock" shall mean the common stock, par value $0.01 per
share, of Blade.
Section 1.7 - Board
"Board" shall mean the Board of Directors of the Company.
Section 1.8 - Cash Flow
"Cash Flow" shall mean, for any period, the difference between the
level of Net Debt as of the day prior to the first day of such period and the
level of Net Debt as of the last day of such period, without giving effect to
any changes in Net Debt resulting from extraordinary transactions, including the
sale or acquisition of assets or inventory not in the ordinary course of
business, and without giving effect to any changes in Net Debt resulting from
any payment pursuant to purchase price adjustment under the Stock Purchase
Agreement dated as of October 12, 1995 among Pechiney, Pechiney International.
S.A. and Blade. "Net Debt" shall equal the difference between "Consolidated
Total Indebtedness" and the total cash balance reported as a current asset on
the Company's balance sheet. "Consolidated Total Indebtedness" shall include
outstanding balances, including current portions, of all long-term indebtedness
of the Company, its Parent Corporations and its Subsidiaries including off-
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balance sheet financings, including, but not limited to, balances due to third
parties through accounts receivables securitization agreements.
Section 1.9 - Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.10 - Company Common Stock
"Company Common Stock" shall mean the common stock par value $0.01 per
share, of the Company.
Section 1.11 - Cumulative Cash Flow
"Cumulative Cash Flow" shall mean, with respect to a determination of
the vesting of any portion of the Stock Appreciation Rights pursuant to the
"deferred vesting" provisions of Section 3.1(c), the sum of Cash Flow for each
fiscal year within the period (i) commencing on the first day of the fiscal year
preceding the fiscal year in which falls the Vesting Date on which the
applicable portion of the Stock Appreciation Rights failed to vest pursuant to
the "performance related vesting" provisions of Section 3.1(b) and (ii) ending
on the last day of the fiscal year preceding the fiscal year in which falls the
applicable Deferred Vesting Date.
Section 1.12 - Cumulative Target Cash Flow
"Cumulative Target Cash Flow" shall mean, with respect to a
determination of the vesting of any portion of the Stock Appreciation Rights
pursuant to the "deferred vesting" provisions of Section 3.1(c), the sum of
Target Cash Flow for each fiscal year within the period (i) commencing on the
first day of the fiscal year preceding the fiscal year in which falls the
Vesting Date on which the applicable portion of the Stock Appreciation Rights
failed to vest pursuant to the "performance related vesting" provisions of
Section 3.1(b) and (ii) ending on the last day of the fiscal year preceding the
fiscal year in which falls the applicable Deferred Vesting Date.
Section 1.13 - Fair Market Value
"Fair Market Value" shall mean the fair market value of a share of
Blade Common Stock, which shall be equal to, at the Board's discretion either
(i) the value determined by a reputable firm experienced in valuation of similar
businesses, and selected by the Board, which firm's determination shall be final
and binding on the parties hereto or (ii) the per share value determined
pursuant to an Acceleration Event. Fair Market Value shall be determined as of
the applicable Valuation Date.
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<PAGE> 4
Section 1.14 - GAAP
"GAAP" shall mean generally accepted accounting principles, applied on
a basis consistent with prior periods.
Section 1.15 - Merger
"Merger" shall mean a merger or consolidation of the Company or Blade
with another unaffiliated entity in which the stockholders of the Company or
Blade (as applicable) receive cash, securities and/or other marketable property
in exchange for their Company Common Stock or Blade Common Stock.
Section 1.16 - Parent Corporation
"Parent Corporation" shall mean any corporation in an unbroken chain of
corporations ending with the Company if each of the corporations other than the
Company then owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
Section 1.17 - Payment Date(s)
"Payment Date(s)" shall mean the date (or dates) on which the Executive
is entitled to receive payments with respect to the Stock Appreciation Rights,
in accordance with the provisions of Section 2.3(b).
Section 1.18 - Permitted Transfer
"Permitted Transfer" shall mean the Transfer of Stock Appreciation
Rights by will or intestate succession to the Executive's executors,
administrators, testamentary trustees legatees or beneficiaries.
Section 1.19 - Sale
"Sale" shall mean a sale to an unaffiliated entity of all or
substantially all of the assets of the Company or of Blade.
Section 1.20 - Stock Appreciation Rights
"Stock Appreciation Rights" shall mean the rights granted under this
Agreement to receive the payments set forth in Section 2.3, hereof, calculated
with respect to each Stock Appreciation Right based on the appreciation in value
of one two-hundredth (1/200) of a share of Blade Common Stock over the Base
Value, subject to the limitations and conditions provided in this Stock
Appreciation Right Agreement.
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<PAGE> 5
Section 1.21 - Subsidiary
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company, if each such corporation, other than
the last corporation in the unbroken chain, then owns 50% or more of the total
combined voting power in one of the other corporations in such chain.
Section 1.22 - Target Cash Flow
"Target Cash Flow" shall mean, for each of the five fiscal years
identified on Exhibit A hereto, the amount specified for such year on such
Exhibit; provided, however, that in the case of divestiture or acquisition of a
business unit by the Company or any of its Subsidiaries, the Board shall
determine in good faith an appropriate and equitable adjustment to Target Cash
Flow for the fiscal year in which such event occurs and each subsequent fiscal
year, in the case of a divestiture to reduce Target Cash Flow by the estimated
contribution, if any, that would have been made thereto by the divested unit
during the remainder of such periods, and in the case of an acquisition to
increase Target Cash Flow by the estimated contribution, if any, to be made
thereto by the acquired unit. In the event of such an adjustment, the Board
shall notify the Executive thereof; and any such adjustment made by the Board in
good faith shall be final and binding upon the parties.
Section 1.23 - Termination of Employment
"Termination of Employment" shall mean the time when, for any reason,
there ceases to be an employee-employer relationship between the Executive, on
the one hand, and the Company, a Parent Corporation and/or one or more
Subsidiaries of the Company, on the other hand, including, without limitation,
by reason of resignation, discharge (with or without cause), termination, death,
disability or retirement. The Board, in its absolute discretion, shall determine
the effect of all matters and questions relating to Termination of Employment,
including, but not limited to, all questions of whether a particular leave of
absence constitutes a Termination of Employment.
Section 1.24 - Thiokol Option
"Thiokol Option" shall mean the right granted to Thiokol Holding
Company to purchase Blade Common Stock from Carlyle-Blade Acquisition
Partnership. L.P., pursuant to the Shareholders Agreement dated December 13,
1995.
Section 1.25 - Transfer
"Transfer" when used in reference to the Stock Appreciation Rights
shall mean any sale, encumbrance, pledge, gift, assignment, alienation or other
form of disposition or transfer of the Stock Appreciation Rights, or any portion
thereof, or of
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<PAGE> 6
any legal, beneficial or equitable interest therein or part thereof, whether
voluntary or involuntary or by operation of law. The terms "Transferred,"
"Transferring" and the like shall have similar meanings.
Section 1.26 - Unvested Percentage
"Unvested percentage" shall mean that percentage of the Stock
Appreciation Rights that has not become "vested" pursuant to Section 3.1 or
Section 4.1 hereof.
Section 1.27 - Valuation Date
"Valuation Date" shall mean the date as of which Appreciated Value is
determined, as set forth in Section 2.3.
Section 1.28 - Vested Percentage
"Vested Percentage" shall mean that percentage of the Stock
Appreciation Rights that has become vested pursuant to Section 3.1 or Section
4.1 hereof.
Section 1.29 - Vesting Date
"Vesting Date" shall mean a date on which a portion of the Stock
Appreciation Rights may become "Vested" pursuant to Section 3.1 hereof.
ARTICLE II
GRANT OF STOCK APPRECIATION RIGHT
Section 2.1 - Grant of Stock Appreciation Right
In consideration of the Executive's promises set forth in Section 2.2,
and for other good and valuable consideration, on the date hereof the Company
grants to the Executive, subject to the terms and conditions set forth in this
Agreement, 5,000 Stock Appreciation Rights, each with respect to one
two-hundredth (1/200th) of a share of Blade Common Stock.
Section 2.2 - Consideration to the Company
In consideration of the granting of the Stock Appreciation Rights, the
Executive agrees to render faithful and efficient services to the Company or a
Parent Corporation or a Subsidiary of the Company, with such duties and
responsibilities as such employer shall from time to time prescribe. Nothing in
this Agreement shall confer upon the Executive any right to continue in the
employ of the Company, any Parent Corporation or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company, any Parent
Corporation or any Subsidiary of the Company, which are hereby expressly
reserved, to discharge
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the Executive at any time for any reason whatsoever, with or without cause.
Section 2.3 - Determination and Method of Payment
(a)(i) Subject to the provisions of Section 3.1(e), the Stock
Appreciation Rights shall entitle the Executive to receive payment, on
the applicable Payment Date(s) set forth below, of an aggregate amount
(the "Aggregate Payment Amount") equal to the product of
(A) the number of Stock Appreciation Rights granted
pursuant to Section 2.1,
(B) the Vested Percentage, and
(C) the Appreciated Value.
(ii) For purposes of determining Appreciated Value, the Valuation Date
shall be the earliest of
(A) March 31, 2001,
(B) the date on which an Acceleration Event occurs, and
(C) a date selected by the Board in its discretion that is
not more than twelve months prior to, or more than six
months subsequent to the date of the Executive's first
Termination of Employment which precedes the earlier of
the dates described in (A) and (B) above (it being
understood that the Company does not intend to conduct a
valuation of the Blade Common Stock more frequently than
once per fiscal year) .
(b) The Aggregate Payment Amount shall be paid in cash, at the election
of the Company, either:
(i) in a lump sum on a date selected by the Board in its
discretion that is no more that sixty (60) days subsequent to the
earlier of the dates described in subsections(a)(ii)(A) and (B) above
or
(ii) in three equal installments, the first such installment
to be paid on a date (the "Initial Installment Date") selected by the
Board in its discretion that is no more than sixty (60) days subsequent
to the earlier of the dates described in subsections (a) (ii) (A) and
(B) above, and the remaining two installments (the "Deferred
Installments") to be paid on the first and second anniversaries of the
Initial Installment Date, respectively. Each Deferred Installment shall
be paid together with interest thereon, at
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<PAGE> 8
the Applicable Federal Rate for short term obligations (as set forth in
Section 1274(d) of the Code or the Treasury Regulations promulgated
thereunder), calculated from the Initial Installment Date to the date
such Deferred Installment is actually paid.
(c) Notwithstanding anything to the contrary in the foregoing, the
Company's obligation to make any payment provided for in Section 2.3(b) shall be
suspended if:
(i) Such payment would render the Company unable to meet its
obligations in the ordinary course of business;
(ii) The Company is prohibited by applicable law from making
such payment; or
(iii) Such payment would constitute an unwaived breach of, or
default or event of default under, or is otherwise prohibited by, the
terms of any loan agreement or other agreement or instrument to which
the Company or any of the Company's Affiliates is a party,
any of such events constituting a "Payment Disability." In the event of a
Payment Disability, the Company shall make such payment as soon as reasonably
possible after all Payment Disabilities cease to exist. In the event that the
Company suspends its payment obligations pursuant to this Section 2.3(c), the
Company shall pay to the Executive an additional amount equal to interest
calculated on the amount of the suspended payment at the Applicable Federal Rate
for short term obligations (as set forth in Section 1274(d) of the Code or the
Treasury Regulations promulgated thereunder) from the date the payment would
have occurred but for the Payment Disability to (but not including) the date
such payment actually occurs (provided that no interest shall be due pursuant to
the foregoing to the extent that interest on account of such delay in payment
has accrued on such payment pursuant to Section 2.3(b).
Section 2.4 - Certain Adjustments
In the event that Blade Common Stock is changed into or exchanged for a
different number or kind of shares of Blade or securities of another company by
reason of merger, consolidation, recapitalization, reclassification, stock split
up, stock dividend or combination of shares, then the Board shall make an
appropriate and equitable adjustment in the definition of Base Value and/or
Appreciated Value and/or the number of Stock Appreciation Rights to reflect such
event. Any such adjustment made by the Board in good faith shall be final and
binding upon the Executive, the Company and all other interested persons.
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Section 2.5 - Stock Appreciation Right Not Transferable
No Stock Appreciation Right nor any interest or right therein or part
thereof shall be liable for the debts, contracts or engagements of the Executive
or his successors in interest or shall be subject to Transfer, whether by
alienation, anticipation, pledge, encumbrance, assignment or any other means,
and whether such Transfer be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted Transfer thereof shall be
null and void and of no effect; provided, however, that this Section 2.5 shall
not prevent a Permitted Transfer upon the Executive's death (and in the event of
a Permitted Transfer, payments to be made hereunder to the Executive shall
thereafter be made to the Executive's personal representative or such other
person as is empowered under the Executive's will or the then applicable laws of
descent and distribution to enforce the Executive's rights hereunder) .
ARTICLE III
VESTING
Section 3.1 - Vesting
Fifty percent of the Stock Appreciation Rights shall be subject to Time
Vesting and fifty percent shall be subject to Performance Vesting as follows:
(a) Time Vesting. Provided in each case that no Termination of
Employment has occurred prior to the applicable Vesting Date, fifty percent of
the Stock Appreciation Rights shall become vested as follows:
(i) As of March 31, 1997 10% of the Stock Appreciation Rights
shall become Vested,
(ii) As of March 31, 1998, an additional 10% of the Stock
Appreciation Rights shall become vested,
(iii) As of March 31, 1999, an additional 10% of the Stock
Appreciation Rights shall become vested,
(iv) As of March 31, 2000, an additional 10% of the Stock
Appreciation Rights shall become vested, and
(v) As of March 31, 2001, an additional 10% of the Stock
Appreciation Rights shall become vested.
(b) Performance Related Vesting. Provided in each case that
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<PAGE> 10
(i) no Termination of Employment has occurred prior to the
applicable Vesting Date, and
(ii) Cash Flow for the fiscal year immediately preceding the
fiscal year in which falls the applicable Vesting Date equals or
exceeds Target Cash Flow for such year,
the remaining fifty percent of the Stock Appreciation Right shall become vested
as follows:
(A) As of March 31, 1997, 10% of the Stock Appreciation
Rights shall become vested,
(B) As of March 31, 1998, an additional 10% of the Stock
Appreciation Rights shall become vested,
(C) As of the March 31, 1999, an additional 10% of the
Stock Appreciation Rights shall become vested,
(D) As of March 31, 2000, an additional 10% of the Stock
Appreciation Rights shall become vested, and
(E) As of March 31, 2001, an additional 10% of the Stock
Appreciation Rights shall become vested.
(c) Deferred Vesting. If any portion of the Stock Appreciation Rights
does not become vested pursuant to the "performance related vesting" provisions
of Section 3.1(b) on the scheduled Vesting Date due to the failure of Cash Flow
to equal or exceed Target Cash Flow in the applicable fiscal year, then such
portion of the Stock Appreciation Rights shall become vested on the next Vesting
Date thereafter (the "Deferred Vesting Date") as of which Cumulative Cash Flow
equals or exceeds Cumulative Target Cash Flow, provided that (i) as of the last
day of the fiscal year preceding the fiscal year in which falls the Deferred
Vesting Date, all material obligations of the Company and Blade (including,
without limitation, satisfaction of financial covenants) under all outstanding
debt agreements have been satisfied and (ii) the Executive shall not have
incurred a Termination of Employment prior to such Deferred Vesting Date and
provided further that the last Deferred Vesting Date shall be March 31, 2001,
after which date the Unvested Percentage of the Stock Appreciation Rights as of
such date shall expire. That portion of the Stock Appreciation Rights that does
not become vested on the scheduled Deferred Vesting Date due to the failure of
the Company or Blade to satisfy debt agreement obligations in accordance with
clause (i) above shall expire and be cancelled as of such Deferred Vesting Date
and shall not be subject to vesting pursuant to Section 4.1.
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<PAGE> 11
(d) Discretion of the Board. The Board may elect, in its discretion, to
cause any portion of the Stock Appreciation Rights to become vested prior to the
date on which it would otherwise become vested pursuant to the provisions of
this Section 3.1 (and whether or not any other conditions to such vesting have
been met); provided, however that the Board shall have no obligation to cause
any portion of the Stock Appreciation Rights to become vested pursuant to this
Section 3.1(d)).
(e) Effect of Termination of Employment.
(i) No portion of the Stock Appreciation Rights shall become
vested (whether pursuant to this Section 3.1, Section 4.1, or
otherwise) following a Termination of Employment, except pursuant to an
exercise of the Board's discretion under Section 3.1(d) and then only
in the event such Termination of Employment is due to the Executive's
death or disability,
(ii) If a Termination of Employment has occurred other than
for cause (as determined by the Board in its discretion), the Executive
will retain ownership of the portion of the Stock Appreciation Rights
that has become vested prior to the date of such Termination of
Employment, but no payments will be made to the Executive with respect
to such Stock Appreciation Rights prior to the applicable Payment
Date(s) specified in Section 2.3, and
(iii) Except as the Board may elect otherwise, in its
discretion, in the event of the Executive's Termination of Employment
for cause (as determined by the Board in its discretion), all Stock
Appreciation Rights granted to the Executive (vested and unvested)
shall be forfeited and cancelled as of the date of Termination of
Employment and the Executive shall not be entitled to any payment with
respect to such Stock Appreciation Rights.
ARTICLE IV
ACCELERATION
Section 4.1 - Acceleration Event
(a) If an Acceleration Event shall occur, then the Stock Appreciation
Rights that have not been forfeited or cancelled shall be deemed to be vested to
the extent set forth in Section 4.1(b) below, notwithstanding that the Stock
Appreciation Rights may not yet have become vested to such extent under Section
3.1. Any "accelerated vesting" pursuant to this Section 4.1 shall be effective
as of the date the applicable Acceleration Event occurs; and thereafter, all
further vesting (pursuant to Section 3.1 or otherwise) shall cease.
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<PAGE> 12
(b) The portion of the Stock Appreciation Rights that shall be deemed
to be vested pursuant to Section 4.1(a) shall be (i) the entire portion of the
Stock Appreciation Rights subject to vesting pursuant to Section 3.1(a), plus
(ii) the portion of the Stock Appreciation Rights subject to vesting pursuant to
Section 3.1(b) that has not expired pursuant to Section 3.1(c), multiplied by a
fraction the numerator of which is the portion of the Stock Appreciation Rights
that has already become vested pursuant to the terms of Section 3.1(b) and
Section 3.1(c), and the denominator of which is the portion of the Stock
Appreciation Rights that would have become vested pursuant to Section 3.1(b) and
Section 3.1(c) on or prior to the date of the Acceleration Event had all
applicable performance tests been met. See the example on Exhibit B.
ARTICLE V
MISCELLANEOUS
Section 5.1 - Stockholder Approval
This Agreement shall be effective upon approval by the stockholders of
the Company as provided in Section 280G(b)(5)(A)(ii) of the Code and regulations
thereunder.
Section 5.2 - Notices
Any and all notices and any other communications provided for herein
shall be given in writing and shall be delivered either personally, by
registered or certified mail, postage prepaid, or by courier service which shall
be addressed, (i) in the case of the Company to the Chief Executive Officer of
the Company (with a copy to the General Counsel of the Company) at the principal
office of the Company at 475 Steamboat Road, Greenwich, Connecticut, 06836,
(203) 661-4600, or such other address as the Company may supply by notice from
time to time, and (ii) in the case of the Executive, to his address appearing in
the records of the Company or to such other address as may be designated in
writing by him. Any notice mailed as provided in this Section shall, unless
provided to the contrary elsewhere in this Agreement, be deemed effective four
business days after having been delivered to the U.S. Postal Service, postage
prepaid, return receipt requested, two business days after been delivered to a
courier service, or if earlier, when actually received.
Section 5.3 - Invalid Provision
The invalidity or unenforceability of any particular provision hereof
shall not affect the other provisions hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provision was
omitted.
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<PAGE> 13
Section 5.4 - Modifications
No change or modification of this Agreement shall be valid unless the
same is in writing and signed by the parties hereto.
Section 5.5 - Counterparts
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 5.6 - Assignment
Except as otherwise provided herein, no party may assign this Agreement
or any of his or its rights, interests or obligations hereunder without the
prior written consent of the other parties, provided that the Company's rights
and obligations hereunder may be assigned to any Parent Corporation or
Subsidiary or to any successor pursuant to a merger, consolidation or similar
event. Subject to the foregoing, this Agreement and the respective rights and
obligations of the parties hereto shall inure to the benefit of and be binding
upon, the successors and assigns of the parties.
Section 5.7 - Administration
The Board shall have the power to interpret this Agreement and to adopt
such rules for the administration, interpretation and application of this
Agreement as are consistent herewith and to interpret or revoke any such rules.
All actions taken and all interpretations and determinations made by the Board
in good faith shall be final and binding upon the Executive, the Company and all
other interested persons. No member of the Board shall be personally liable for
any action, determination or interpretation made in good faith with respect to
this Agreement or the Stock Appreciation Rights.
Section 5.8 - Withholding
The Executive acknowledges that the Company, a Parent Corporation or a
Subsidiary may have an obligation to withhold a portion of the amounts otherwise
payable to the Executive hereunder pursuant to federal, state and local income
tax laws and regulations, and the Company, any Parent Corporation and any such
Subsidiary are hereby authorized to withhold any such required amount.
Section 5.9 - Titles
Titles are provided herein for convenience only and are not to serve an
a basis for interpretation or construction of this Agreement.
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<PAGE> 14
Section 5.10 - Law Governing
The laws of the State of New York shall govern the interpretation,
validity and performance of the terms hereof, regardless of the law that might
be applied under principles of conflicts of law.
Section 5.11 - Entire Agreement
This Agreement embodies the entire agreement and understanding of the
parties hereto with respect to the subject matter contained herein.
Section 5.12 - No Rights as Stockholder
The parties acknowledge and agree that the provisions of this Agreement
shall not be construed as conferring upon the Executive any rights or privileges
of a stockholder of the Company, any Parent Corporation or any Subsidiary, the
rights and privileges of the Executive being limited to those expressly set
forth in this Agreement.
Section 5.13 - Effect of Plan Upon Other Compensation Plans
(a) The implementation of this Stock Appreciation Right Agreement shall
not affect any other compensation or incentive plans in effect for the Company,
any Parent Corporation or any Subsidiary. Nothing in this Agreement shall be
construed to limit the right of the Company, any Parent Corporation or any
Subsidiary (i) to establish any other forms of incentives or compensation for
employees of the Company, any Parent Corporation or any Subsidiary or (ii) to
grant or assume options or stock appreciation rights otherwise than under this
Plan in connection with any proper corporate purpose, including, but not by way
of limitation, the grant or assumption of options or stock appreciation rights
in connection with the acquisition by purchase, lease, merger, consolidation or
otherwise, of the business, stock or assets of any corporation, firm or
association.
(b) Grants of Stock Appreciation Rights and any payments with respect
thereto shall not constitute "compensation" for purposes of any pension, welfare
or other benefit plan or policy of the Company unless provided for therein.
Section 5.14 - Arbitration
Any dispute or controversy arising under, out of, in connection with or
in relation to this Agreement and the Stock Appreciation Rights shall be finally
determined and settled by arbitration in the city of the New York in accordance
with the rules and procedures of the American Arbitration Association, and
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<PAGE> 15
judgment upon the award may be entered in any court having jurisdiction thereof.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.
HOWMET CORPORATION
By /s/ D. L. Squier
---------------------------
President
Sign: /s/ Allan H. Bergquist
-----------------------------------
Print name here: ALLAN H. BERGQUIST
475 Steamboat Road
- ------------------------------------------
Address
Greenwich, CT 06836-1960
- ------------------------------------------
City State Zip Code
###-##-####
- ------------------------------------------
Executive's Taxpayer Identification Number
15
<PAGE> 16
Exhibit A
TARGET CASH FLOW
<TABLE>
<CAPTION>
($ Millions )
-------------
Fiscal Year Target Cash Flow
----------- ----------------
<S> <C>
1996* 22.3
1997 35.3
1998 41.3
1999 47.6
2000 54.4
</TABLE>
* For purposes of this Agreement, fiscal year 1996 shall include the
period from December 13, 1995 through December 31, 1995 and the first
day of fiscal year 1996 shall be deemed to be December 13, 1995.
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<PAGE> 17
Exhibit B
EXAMPLE OF ACCELERATED VESTING:
Assume: Cash Flow for 1996 and 1997 exceed Cash Flow Targets for those years
and Cash Flow for 1998 is less than Target Cash Flow for 1998.
Acceleration Event occurs on June 1, 1999.
As of May 31, 1999, 50% of SARs vested: 30% pursuant to Time Vesting and 20%
pursuant to Performance Vesting.
Accelerated Vesting: Pursuant to Section 4.1(b)(i), all of the
20% of the SARs remaining subject to Time
Vesting becomes vested upon June 1, 1999.
Pursuant to Section 4.1(b)(ii), two thirds of the 30%
of the SARs remaining subject to Performance Vesting
becomes vested upon June 1, 1999 as follows:
Unexpired Performance Performance Vesting SARs
that have vested ------------------------
----------------
Vesting SARs X Performance Vesting SARs that
would have vested if all
targets met
= 30% X 20%
----------
30%
= 20%.
As of June 1, 1999, 50% + 20% + 20% = 90% of SARs vested.
17
<PAGE> 1
Exhibit 10.29
STOCK APPRECIATION RIGHT AGREEMENT
THIS AGREEMENT dated as of Nay 17, 1996, is made by and between Howmet
Corporation, a Delaware corporation (the "Company"), and B. Dennis Albrechtsen,
(the "Executive"):
WHEREAS, Executive is a key management employee of the
Company or one of the Company's Subsidiaries,
WHEREAS, the Board has determined that it would be to the advantage and
best interest of the Company, and the shareholders of the Company to grant the
Stock Appreciation Rights provided for herein to the Executive as an inducement
to remain in the service of the Company, its Parent Corporation or its
Subsidiaries and as an incentive for increased efforts during such service;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the Company and the Executive do hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings specified below. Other
capitalized terms are defined elsewhere in this Agreement and shall have the
meanings there specified.
Section 1.1 - Acceleration Event
"Acceleration Event" shall mean one of the following events occurring
prior to March 31, 2001: (i) a Merger, (ii) a Sale, (iii) the acquisition by an
unaffiliated entity or person, of more than fifty percent (50%) of Blade Common
Stock then outstanding or of Company Common Stock then outstanding, (iv) the
liquidation, dissolution or winding up of the Company or Blade (other than in a
restructuring transaction which results in the continuation of the Company's (or
Blade's) business by an affiliated entity), (v) exercise of the Thiokol Option
and the transfer pursuant thereto of Blade Common Stock owned by Carlyle-Blade
Acquisition Partners, L.P. to Thiokol Holding Company, (vi) disposition by
Carlyle-Blade and its Affiliates (including, without limitation, in a series of
transactions) of the entirety of their interest in Blade Common Stock, or (vii)
a public offering of more than fifty percent (50%) of Blade Common Stock or
Company Common Stock then outstanding pursuant to a registration statement
(other than pursuant to Form S-8) filed under the Securities Act of 1933.
<PAGE> 2
Section 1.2 - Affiliate
"Affiliate" with respect to any entity, shall mean a person or entity
directly or indirectly controlling, controlled by, or under common control with,
such entity, where "control" has the meaning given such term under Rule 405 of
the Securities Act of 1933.
Section 1.3 - Appreciated Value
"Appreciated Value" per Stock Appreciation Right shall mean (i) one
two-hundredth (1/200th) of the Fair Market Value per share of Blade Common Stock
as of the applicable Valuation Date minus (ii) the Base Value of the Stock
Appreciation Right, but not less than zero.
Section 1.4 - Base Value
"Base Value" shall mean One Hundred Dollars ($100) (subject to
adjustment pursuant to the provisions set forth in Section 2.4).
Section 1.5 - Blade
"Blade" shall mean Blade Acquisition Corp., a Delaware corporation.
Section 1.6 - Blade Common Stock
"Blade Common Stock" shall mean the common stock, par value $0.01 per
share, of Blade.
Section 1.7 - Board
"Board" shall mean the Board of Directors of the Company.
Section 1.8 - Cash Flow
"Cash Flow" shall mean, for any period, the difference between the level
of Net Debt as of the day prior to the first day of such period and the level of
Net Debt as of the last day of such period, without giving effect to any changes
in Net Debt resulting from extraordinary transactions, including the sale or
acquisition of assets or inventory not in the ordinary course of business, and
without giving effect to any changes in Net Debt resulting from any payment
pursuant to purchase price adjustment under the Stock Purchase Agreement dated
as of October 12, 1995 among Pechiney, Pechiney International. S.A. and Blade.
"Net Debt" shall equal the difference between "Consolidated Total Indebtedness"
and the total cash balance reported as a current asset on the Company's balance
sheet. "Consolidated Total Indebtedness" shall include outstanding balances,
including current portions, of all long-term indebtedness of the Company, its
Parent Corporations and its Subsidiaries including off-balance sheet
financings, including, but not limited to, balances
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<PAGE> 3
due to third parties through accounts receivables securitization agreements.
Section 1.9 - Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.10 - Company Common Stock
"Company Common Stock" shall mean the common stock par value $0.01 per
share, of the Company.
Section 1.11 - Cumulative Cash Flow
"Cumulative Cash Flow" shall mean, with respect to a determination of
the vesting of any portion of the Stock Appreciation Rights pursuant to the
"deferred vesting" provisions of Section 3.1(c), the sum of Cash Flow for each
fiscal year within the period (i) commencing on the first day of the fiscal year
preceding the fiscal year in which falls the Vesting Date on which the
applicable portion of the Stock Appreciation Rights failed to vest pursuant to
the "performance related vesting"!! provisions of Section 3.1(b) and (ii) ending
on the last day of the fiscal year preceding the fiscal year in which falls the
applicable Deferred Vesting Date.
Section 1.12 - Cumulative Target Cash Flow
"Cumulative Target Cash Flow" shall mean, with respect to a
determination of the vesting of any portion of the Stock Appreciation Rights
pursuant to the "deferred vesting" provisions of Section 3.1(c), the sum of
Target Cash Flow for each fiscal year within the period (i) commencing on the
first day of the fiscal year preceding the fiscal year in which falls the
Vesting Date on which the applicable portion of the Stock Appreciation Rights
failed to vest pursuant to the "performance related vesting" provisions of
Section 3.1(b) and (ii) ending on the last day of the fiscal year preceding the
fiscal year in which falls the applicable Deferred Vesting Date.
Section 1.13 - Fair Market Value
"Fair Market Value" shall mean the fair market value of a share of Blade
Common Stock, which shall be equal to, at the Board's discretion either (i) the
value determined by a reputable firm experienced in valuation of similar
businesses, and selected by the Board, which firm's determination shall be final
and binding on the parties hereto or (ii) the per share value determined
pursuant to an Acceleration Event. Fair Market Value shall be determined as of
the applicable Valuation Date.
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<PAGE> 4
Section 1.14 - GAAP
"GAAP" shall mean generally accepted accounting principles, applied on a
basis consistent with prior periods.
Section 1.15 - Merger
"Merger" shall mean a merger or consolidation of the Company or Blade
with another unaffiliated entity in which the stockholders of the Company or
Blade (as applicable) receive cash, securities and/or other marketable property
in exchange for their Company Common Stock or Blade Common Stock.
Section 1.16 - Parent Corporation
"Parent Corporation" shall mean any corporation in an unbroken chain of
corporations ending with the Company if each of the corporations other than the
Company then owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
Section 1.17 - Payment Date(s)
"Payment Date(s)" shall mean the date (or dates) on which the Executive
is entitled to receive payments with respect to the Stock Appreciation Rights,
in accordance with the provisions of Section 2.3(b).
Section 1.18 - Permitted Transfer
"Permitted Transfer" shall mean the Transfer of Stock Appreciation
Rights by will or intestate succession to the Executive's executors,
administrators, testamentary trustees legatees or beneficiaries.
Section 1.19 - Sale
"Sale" shall mean a sale to an unaffiliated entity of all or
substantially all of the assets of the Company or of Blade.
Section 1.20 - Stock Appreciation Rights
"Stock Appreciation Rights" shall mean the rights granted under this
Agreement to receive the payments set forth in Section 2.3, hereof, calculated
with respect to each Stock Appreciation Right based on the appreciation in value
of one two-hundredth (1/200) of a share of Blade Common Stock over the Base
Value, subject to the limitations and conditions provided in this Stock
Appreciation Right Agreement.
4
<PAGE> 5
Section 1.21 - Subsidiary
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company, if each such corporation, other than
the last corporation in the unbroken chain, then owns 50% or more of the total
combined voting power in one of the other corporations in such chain.
Section 1.22 - Target Cash Flow
"Target Cash Flow" shall mean, for each of the five fiscal years
identified on Exhibit A hereto, the amount specified for such year on such
Exhibit; provided, however, that in the case of divestiture or acquisition of a
business unit by the Company or any of its Subsidiaries, the Board shall
determine in good faith an appropriate and equitable adjustment to Target Cash
Flow for the fiscal year in which such event occurs and each subsequent fiscal
year, in the case of a divestiture to reduce Target Cash Flow by the estimated
contribution, if any, that would have been made thereto by the divested unit
during the remainder of such periods, and in the case of an acquisition to
increase Target Cash Flow by the estimated contribution, if any, to be made
thereto by the acquired unit. In the event of such an adjustment, the Board
shall notify the Executive thereof; and any such adjustment made by the Board in
good faith shall be final and binding upon the parties.
Section 1.23 - Termination of Employment
"Termination of Employment" shall mean the time when, for any reason,
there ceases to be an employee-employer relationship between the Executive, on
the one hand, and the Company, a Parent Corporation and/or one or more
Subsidiaries of the Company, on the other hand, including, without limitation,
by reason of resignation, discharge (with or without cause), termination, death,
disability or retirement. The Board, in its absolute discretion, shall determine
the effect of all matters and questions relating to Termination of Employment,
including, but not limited to, all questions of whether a particular leave of
absence constitutes a Termination of Employment.
Section 1.24 - Thiokol Option
"Thiokol Option" shall mean the right granted to Thiokol Holding Company
to purchase Blade Common Stock from Carlyle-Blade Acquisition Partnership. L.P.,
pursuant to the Shareholders Agreement dated December 13, 1995.
Section 1.25 - Transfer
"Transfer" when used in reference to the Stock Appreciation Rights shall
mean any sale, encumbrance, pledge, gift, assignment, alienation or other form
of disposition or transfer of the Stock Appreciation Rights, or any portion
thereof, or of any legal, beneficial or equitable interest therein or part
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<PAGE> 6
thereof, whether voluntary or involuntary or by operation of law. The terms
"Transferred," "Transferring" and the like shall have similar meanings.
Section 1.26 - Unvested Percentage
"Unvested Percentage" shall mean that percentage of the Stock
Appreciation Rights that has not become "vested" pursuant to Section 3.1 or
Section 4.1 hereof.
Section 1.27 - Valuation Date
"Valuation Date" shall mean the date as of which Appreciated Value is
determined, as set forth in Section 2.3.
Section 1.28 - Vested Percentage
"Vested Percentage" shall mean that percentage of the Stock Appreciation
Rights that has become vested pursuant to Section 3.1 or Section 4.1 hereof.
Section 1.29 - Vesting Date
"Vesting Date" shall mean a date on which a portion of the Stock
Appreciation Rights may become "Vested" pursuant to Section 3.1 hereof.
ARTICLE II
GRANT OF STOCK APPRECIATION RIGHT
Section 2.1 - Grant of Stock Appreciation Right
In consideration of the Executive's promises set forth in Section 2.2,
and for other good and valuable consideration, on the date hereof the Company
grants to the Executive, subject to the terms and conditions set forth in this
Agreement, 3,000 Stock Appreciation Rights, each with respect to one
two-hundredth (1/200th) of a share of Blade Common Stock.
Section 2.2 - Consideration to the Company
In consideration of the granting of the Stock Appreciation Rights, the
Executive agrees to render faithful and efficient services to the Company or a
Parent Corporation or a Subsidiary of the Company, with such duties and
responsibilities as such employer shall from time to time prescribe. Nothing in
this Agreement shall confer upon the Executive any right to continue in the
employ of the Company, any Parent Corporation or any Subsidiary or shall
interfere with any rights of the Company, any Parent Corporation or any
Subsidiary of the Company to discharge the Executive. The Executive also agrees
that he shall not assert that any event occurring prior to the date of execution
thereof (including, without limitation, the termination of the Company's 1993,
1994 and 1995 Long-Term Incentive plans and its
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<PAGE> 7
Restructuring Cash Incentive Plan) constitutes an event described in section 5
of the Employment Agreement dated as of July 1, 1984 to which Executive and the
Company are parties.
Section 2.3 - Determination and Method of Payment
(a)(i) Subject to the provisions of Section 3.1(e), the Stock Appreciation
Rights shall entitle the Executive to receive payment, on the applicable Payment
Date(s) set forth below, of an aggregate amount (the "Aggregate Payment Amount")
equal to the product of
(A) the number of Stock Appreciation Rights granted pursuant to Section
2.1,
(B) the Vested Percentage, and
(C) the Appreciated Value.
(ii) For purposes of determining Appreciated Value, the Valuation Date
shall be the earliest of
(A) March 31, 2001,
(B) the date on which an Acceleration Event occurs, and
(C) a date selected by the Board in its discretion that is not more
than twelve months prior to, or more than six months subsequent to
the date of the Executive's first Termination of Employment which
precedes the earlier of the dates described in (A) and (B) above
(it being understood that the Company does not intend to conduct a
valuation of the Blade Common Stock more frequently than once per
fiscal year).
(b) The Aggregate Payment Amount shall be paid in cash, at
the election of the Company, either:
(i) in a lump sum on a date selected by the Board in its discretion that
is no more that sixty (60) days subsequent to the earlier of the dates
described in subsections(a) (ii) (A) and (B) above or
(ii) in three equal installments, the first such installment to be paid on
a date (the "Initial Installment Date") selected by the Board in its
discretion that is no more than sixty (60) days subsequent to the earlier
of the dates described in subsections (a) (ii) (A) and (B) above, and the
remaining two installments (the "Deferred Installments") to be paid on the
first and second anniversaries of the Initial Installment Date,
respectively. Each Deferred Installment shall be paid together with
interest thereon, at
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<PAGE> 8
the Applicable Federal Rate for short term obligations (as set forth in
Section 1274(d) of the Code or the Treasury Regulations promulgated
thereunder), calculated from the Initial Installment Date to the date such
Deferred Installment is actually paid.
(c) Notwithstanding anything to the contrary in the foregoing,
the Company's obligation to make any payment provided for in Section 2.3(b)
shall be suspended if:
(i) Such payment would render the Company unable to meet its obligations
in the ordinary course of business;
(ii) The Company is prohibited by applicable law from making such payment;
or
(iii) Such payment would constitute an unwaived breach of, or default or
event of default under, or is otherwise prohibited by, the terms of any
loan agreement or other agreement or instrument to which the Company or
any of the Company's Affiliates is a party,
any of such events constituting a "Payment Disability." In the event of a
Payment Disability, the Company shall make such payment as soon as reasonably
possible after all Payment Disabilities cease to exist. In the event that the
Company suspends its payment obligations pursuant to this Section 2.3(c), the
Company shall pay to the Executive an additional amount equal to interest
calculated on the amount of the suspended payment at the Applicable Federal Rate
for short term obligations (as set forth in Section 1274(d) of the Code or the
Treasury Regulations promulgated thereunder) from the date the payment would
have occurred but for the Payment Disability to (but not including) the date
such payment actually occurs (provided that no interest shall be due pursuant to
the foregoing to the extent that interest on account of such delay in payment
has accrued on such payment pursuant to Section 2.3(b).
Section 2.4 - Certain Adjustments
In the event that Blade Common Stock is changed into or exchanged for a
different number or kind of shares of Blade or securities of another company by
reason of merger, consolidation, recapitalization, reclassification, stock split
up, stock dividend or combination of shares, then the Board shall make an
appropriate and equitable adjustment in the definition of Base Value and/or
Appreciated Value and/or the number of Stock Appreciation Rights to reflect such
event. Any such adjustment made by the Board in good faith shall be final and
binding upon the Executive, the Company and all other interested persons.
Section 2.5 - Stock Appreciation Right Not Transferable
No Stock Appreciation Right nor any interest or right therein or part
thereof shall be liable for the debts, contracts
8
<PAGE> 9
or engagements of the Executive or his successors in interest or shall be
subject to Transfer, whether by alienation, anticipation, pledge, encumbrance,
assignment or any other means, and whether such Transfer be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment or
any other legal or equitable proceedings (including bankruptcy), and any
attempted Transfer thereof shall be null and void and of no effect; provided,
however, that this Section 2.5 shall not prevent a Permitted Transfer upon the
Executive's death (and in the event of a Permitted Transfer, payments to be made
hereunder to the Executive shall thereafter be made to the Executive's personal
representative or such other person as is empowered under the Executive's will
or the then applicable laws of descent and distribution to enforce the
Executive's rights hereunder).
ARTICLE III
VESTING
Section 3.1 - Vesting
Fifty percent of the Stock Appreciation Rights shall be subject to Time
Vesting and fifty percent shall be subject to Performance Vesting as follows:
(a) Time Vesting. Provided in each case that no Termination of
Employment has occurred prior to the applicable Vesting Date, fifty percent of
the Stock Appreciation Rights shall become vested as follows:
(i) As of March 31, 1997 10% of the Stock Appreciation Rights shall
become Vested,
(ii) As of March 31, 1998, an additional 10% of the Stock Appreciation
Rights shall become vested,
(iii) As of March 31, 1999, an additional 10% of the Stock
Appreciation Rights shall become vested,
(iv) As of March 31, 2000, an additional 10% of the Stock Appreciation
Rights shall become vested, and
(v) As of March 31, 2001, an additional 10% of the Stock Appreciation
Rights shall become vested.
(b) Performance Related Vesting. Provided in each case that
(i) no Termination of Employment has occurred prior to the applicable
Vesting Date, and
(ii) Cash Flow for the fiscal year immediately preceding the fiscal
year in which falls the applicable
9
<PAGE> 10
Vesting Date equals or exceeds Target Cash Flow for such year,
the remaining fifty percent of the Stock Appreciation Right shall become vested
as follows:
(A) As of March 31, 1997, 10% of the Stock Appreciation Rights
shall become vested,
(B) As of March 31, 1998, an additional 10% of the Stock
Appreciation Rights shall become vested,
(C) As of the March 31, 1999, an additional 10% of the Stock
Appreciation Rights shall become vested,
(D) As of March 31, 2000, an additional 10% of the Stock
Appreciation Rights shall become vested, and
(E) As of March 31, 2001, an additional 10% of the Stock
Appreciation Rights shall become vested.
(c) Deferred Vesting. If any portion of the Stock Appreciation Rights
does not become vested pursuant to the "performance related vesting" provisions
of Section 3.1(b) on the scheduled Vesting Date due to the failure of Cash Flow
to equal or exceed Target Cash Flow in the applicable fiscal year, then such
portion of the Stock Appreciation Rights shall become vested on the next Vesting
Date thereafter (the "Deferred Vesting Date") as of which Cumulative Cash Flow
equals or exceeds Cumulative Target Cash Flow, provided that (i) as of the last
day of the fiscal year preceding the fiscal year in which falls the Deferred
Vesting Date, all material obligations of the Company and Blade (including,
without limitation, satisfaction of financial covenants) under all outstanding
debt agreements have been satisfied and (ii) the Executive shall not have
incurred a Termination of Employment prior to such Deferred Vesting Date and
provided further that the last Deferred Vesting Date shall be March 31, 2001,
after which date the Unvested Percentage of the Stock Appreciation Rights as of
such date shall expire. That portion of the Stock Appreciation Rights that does
not become vested on the scheduled Deferred Vesting Date due to the failure of
the Company or Blade to satisfy debt agreement obligations in accordance with
clause (i) above shall expire and be cancelled as of such Deferred Vesting Date
and shall not be subject to vesting pursuant to Section 4.1.
(d) Discretion of the Board. The Board may elect, in its discretion, to
cause any portion of the Stock Appreciation Rights to become vested prior to the
date on which it would otherwise become vested pursuant to the provisions of
this Section 3.1 (and whether or not any other conditions to such vesting have
been
10
<PAGE> 11
met); provided, however that the Board shall have no obligation to cause any
portion of the Stock Appreciation Rights to become vested pursuant to this
Section 3.1(d)).
(e) Effect of Termination of Employment.
(i) No portion of the Stock Appreciation Rights shall become vested
(whether pursuant to this Section 3.1, Section 4.1, or otherwise)
following a Termination of Employment, except pursuant to an exercise of
the Board's discretion under Section 3.1(d) and then only in the event
such Termination of Employment is due to the Executive's death or
disability,
(ii) If a Termination of Employment has occurred other than for
cause (as determined by the Board in its discretion), the Executive will
retain ownership of the portion of the Stock Appreciation Rights that
has become vested prior to the date of such Termination of Employment,
but no payments will be made to the Executive with respect to such Stock
Appreciation Rights prior to the applicable Payment Date(s) specified in
Section 2.3 provided, that, except as the Board may elect otherwise in
its discretion, all Stock Appreciation Rights granted to the Executive
(vested and unvested) shall be forfeited and cancelled as of any date on
which the Executive violates any provision of the Employment Agreement
between the Executive and the Company dated July 1, 1984, and
(iii) Except as the Board may elect otherwise, in its discretion, in
the event of the Executive's Termination of Employment for cause (as
determined by the Board in its discretion), all Stock Appreciation
Rights granted to the Executive (vested and unvested) shall be forfeited
and cancelled as of the date of Termination of Employment and the
Executive shall not be entitled to any payment with respect to such
Stock Appreciation Rights.
ARTICLE IV
ACCELERATION
Section 4.1 - Acceleration Event
(a) If an Acceleration Event shall occur, then the Stock Appreciation
Rights that have not been forfeited or cancelled shall be deemed to be vested to
the extent set forth in Section 4.1(b) below, notwithstanding that the Stock
Appreciation Rights may not yet have become vested to such extent under Section
3.1. Any "accelerated vesting" pursuant to this Section 4.1 shall be effective
as of the date the applicable Acceleration Event occurs; and thereafter, all
further vesting (pursuant to Section 3.1 or otherwise) shall cease.
11
<PAGE> 12
(b) The portion of the Stock Appreciation Rights that shall be deemed to
be vested pursuant to Section 4.1(a) shall be (i) the entire portion of the
Stock Appreciation Rights subject to vesting pursuant to Section 3.1(a), plus
(ii) the portion of the Stock Appreciation Rights subject to vesting pursuant to
Section 3.1(b) that has not expired pursuant to Section 3.1(c), multiplied by a
fraction the numerator of which is the portion of the Stock Appreciation Rights
that has already become vested pursuant to the terms of Section 3.1(b) and
Section 3.1(c), and the denominator of which is the portion of the Stock
Appreciation Rights that would have become vested pursuant to Section 3.1(b) and
Section 3.1(c) on or prior to the date of the Acceleration Event had all
applicable performance tests been met. See the example on Exhibit B.
ARTICLE V
MISCELLANEOUS
Section 5.1 - Stockholder Approval
This Agreement shall be effective upon approval by the stockholders of
the Company as provided in Section 280G(b)(5)(A)(ii) of the Code and regulations
thereunder.
Section 5.2 - Notices
Any and all notices and any other communications provided for herein
shall be given in writing and shall be delivered either personally, by
registered or certified mail, postage prepaid, or by courier service which shall
be addressed, (i) in the case of the Company to the Chief Executive Officer of
the Company (with a copy to the General Counsel of the Company) at the principal
office of the Company at 475 Steamboat Road, Greenwich, Connecticut, 06836,
(203) 661-4600, or such other address as the Company may supply by notice from
time to time, and (ii) in the case of the Executive, to his address appearing in
the records of the Company or to such other address as may be designated in
writing by him. Any notice mailed as provided in this Section shall, unless
provided to the contrary elsewhere in this Agreement, be deemed effective four
business days after having been delivered to the U.S. Postal Service, postage
prepaid, return receipt requested, two business days after been delivered to a
courier service, or if earlier, when actually received.
Section 5.3 - Invalid Provision
The invalidity or unenforceability of any particular provision hereof
shall not affect the other provisions hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provision was
omitted.
12
<PAGE> 13
Section 5.4 - Modifications
No change or modification of this Agreement shall be valid unless the
same is in writing and signed by the parties hereto.
Section 5.5 - Counterparts
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 5.6 - Assignment
Except as otherwise provided herein, no party may assign this Agreement
or any of his or its rights, interests or obligations hereunder without the
prior written consent of the other parties, provided that the Company's rights
and obligations hereunder may be assigned to any Parent Corporation or
Subsidiary or to any successor pursuant to a merger, consolidation or similar
event. Subject to the foregoing, this Agreement and the respective rights and
obligations of the parties hereto shall inure to the benefit of and be binding
upon, the successors and assigns of the parties.
Section 5.7 - Administration
The Board shall have the power to interpret this Agreement and to adopt
such rules for the administration, interpretation and application of this
Agreement as are consistent herewith and to interpret or revoke any such rules.
All actions taken and all interpretations and determinations made by the Board
in good faith shall be final and binding upon the Executive, the Company and all
other interested persons. No member of the Board shall be personally liable for
any action, determination or interpretation made in good faith with respect to
this Agreement or the Stock Appreciation Rights.
Section 5.8 - Withholding
The Executive acknowledges that the Company, a Parent Corporation or a
Subsidiary may have an obligation to withhold a portion of the amounts otherwise
payable to the Executive hereunder pursuant to federal, state and local income
tax laws and regulations, and the Company, any Parent Corporation and any such
Subsidiary are hereby authorized to withhold any such required amount.
Section 5.9 - Titles
Titles are provided herein for convenience only and are not to serve as
a basis for interpretation or construction of this Agreement.
13
<PAGE> 14
Section 5.10 - Law Governing
The laws of the State of New York shall govern the interpretation,
validity and performance of the terms hereof, regardless of the law that might
be applied under principles of conflicts of law.
Section 5.11 - Entire Agreement
This Agreement embodies the entire agreement and understanding of the
parties hereto with respect to the subject matter contained herein.
Section 5.12 - No Rights as Stockholder
The parties acknowledge and agree that the provisions of this Agreement
shall not be construed as conferring upon the Executive any rights or privileges
of a stockholder of the Company, any Parent Corporation or any Subsidiary, the
rights and privileges of the Executive being limited to those expressly set
forth in this Agreement.
Section 5.13 - Effect of Plan Upon Other Compensation Plans
(a) The implementation of this Stock Appreciation Right Agreement shall
not affect any other compensation or incentive plans in effect for the Company,
any Parent Corporation or any Subsidiary. Nothing in this Agreement shall be
construed to limit the right of the Company, any Parent Corporation or any
Subsidiary (i) to establish any other forms of incentives or compensation for
employees of the Company, any Parent Corporation or any Subsidiary or (ii) to
grant or assume options or stock appreciation rights otherwise than under this
Plan in connection with any proper corporate purpose, including, but not by way
of limitation, the grant or assumption of options or stock appreciation rights
in connection with the acquisition by purchase, lease, merger, consolidation or
otherwise, of the business, stock or assets of any corporation, firm or
association.
(b) Grants of Stock Appreciation Rights and any payments with respect
thereto shall not constitute "compensation" for purposes of any pension, welfare
or other benefit plan or policy of the Company unless provided for therein.
Section 5.14 - Arbitration
Any dispute or controversy arising under, out of, in connection with or
in relation to this Agreement and the Stock Appreciation Rights shall be finally
determined and settled by arbitration in the city of New York in accordance
with the rules and procedures of the American Arbitration Association, and
judgment upon the award may be entered in any court having
14
<PAGE> 15
jurisdiction thereof.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.
HOWMET CORPORATION
By: /s/ D.L. Squier
-----------------------------
President
Sign: /s/ B. Dennis Albrechtsen
--------------------------
Print Name Here: B. Dennis Albrechtsen
3750 W. Lakewood
Address
Whitehall, MI 49401
City State Zip Code
###-##-####
Executive's Taxpayer Identification Number
15
<PAGE> 16
Exhibit A
TARGET CASH FLOW
<TABLE>
<CAPTION>
($ Millions)
Fiscal Year Target Cash Flow
----------- ----------------
<S> <C>
1996* 22.3
1997 35.3
1998 41.3
1999 47.6
2000 54.4
</TABLE>
- ------------------------
* For purposes of this Agreement, fiscal year 1996 shall include the period
from December 13, 1995 through December 31, 1995 and the first day of
fiscal year 1996 shall be deemed to be December 13, 1995.
16
<PAGE> 17
Exhibit B
EXAMPLE OF ACCELERATED VESTING:
Assume: Cash Flow for 1996 and 1997 exceed Cash Flow Targets for those years
and Cash Flow for 1998 is less than Target Cash Flow for 1998.
Acceleration Event occurs on June 1, 1999.
As of May 31, 1999, 50% of SARs vested: 30% pursuant to Time Vesting and 20%
pursuant to Performance Vesting.
Accelerated Vesting: Pursuant to Section 4.1(b)(i), all of the 20%
of the SARs remaining subject to Time Vesting
becomes vested upon June 1, 1999.
Pursuant to Section 4.1(b)(ii), two thirds of the 30% of the
SARs remaining subject to Performance Vesting becomes vested
upon June 1, 1999 as follows:
Unexpired Performance Performance Vesting SARs
that have vested ------------------------
---------------------
Vesting SARs X Performance Vesting SARs that
would have vested if all
targets met
= 30% X 20%
---
30%
= 20%.
As of June 1, 1999, 50% + 20% + 20% = 90% of SARs vested.
17
<PAGE> 1
Exhibit 10.30
HOWMET CORPORATION
AMENDED AND RESTATED SPECIAL 1995 EXECUTIVE DEFERRED
COMPENSATION PLAN
This Special 1995 Executive Deferred Compensation Plan (the "Plan") was
adopted by Howmet Corporation (the "Employer") on November 1, 1995 to provide a
program for deferring compensation by a select group of management employees.
This Plan is maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees,
within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and is not intended
to comply with the requirements of Section 401(a) of the Internal Revenue Code.
The Plan is intended to be exempt from most of the requirements of ERISA. In
order to reflect accurately the capital ownership of the Employer, the Employer
has adopted the Amended and Restated Howmet Corporation Special 1995 Executive
Deferred Compensation Plan effective as of November 1, 1995.
ARTICLE I
PURPOSE
The purpose of the Plan is to provide designated employees the
opportunity to (1) defer current federal income taxes on their incentive
compensation awards, (2) to have such deferred amounts grow at rates reflecting
the growth of the Employer and other investments and (3) to defer current
federal income taxes on the earnings from such investments until future payout
dates selected by the participants.
ARTICLE II
DEFINITIONS
For the purposes of this Plan the following words and phrases shall have
the meanings indicated, unless the context clearly indicates otherwise:
2.1 Administrator. "Administrator" means the Employer, acting through the Board
or its delegates. The Administrator shall have all duties and responsibilities
imposed by ERISA.
2.2 Affiliate. "Affiliate" means any employer which, at the time of reference,
was, with the Employer, a member of a controlled group of corporations or trades
or businesses under common control, or a member of an affiliated service group,
as determined under regulations issued by the Secretary of the Treasury or his
delegate under Code Sections 414(b), (c), (m) and 415(h) and any other entity
required to be aggregated with the Employer pursuant to regulations issued under
Code Section 414(o).
<PAGE> 2
2.3 Beneficiary. "Beneficiary" means the person, persons or entity designated by
the Participant, or as provided in Article VII, to receive any death benefits
payable under the Plan. Any beneficiary designation shall be made in a written
instrument filed with the Administrator.
2.4 Board. "Board" means the Board of Directors of the Employer.
2.5 Carlyle-Blade. "Carlyle-Blade" means Carlyle-Blade Acquisition Partners,
L.P., a Delaware limited partnership.
2.6 Code. "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
2.7 Deferred Compensation. "Deferred Compensation" means the amount of Incentive
Compensation deferred by a Participant pursuant to this Plan, net of any amount
the Employer is required to withhold pursuant to any federal, state or local
law.
2.8 Deferred Compensation Account. "Deferred Compensation Account" means the
account maintained on the books of the Employer for each Participant pursuant to
Article V.
2.9 Determination Date. "Determination Date" means the date as of which the
value of a Participant's Deferred Compensation Account is determined as provided
in Article V hereof. The first Determination Date will be December 31, 1995 and
the second Determination Date will be the date on which occurs a Distribution
Upon Liquidation; provided, that the Administrator in its discretion, may select
any date as an additional Determination Date.
2.10 Distribution Upon Liquidation. "Distribution Upon Liquidation" means a
distribution to partners of Carlyle-Blade upon liquidation of Carlyle-Blade in
accordance with the provisions of Article 9 (or any successor provision thereto)
of the Partnership Agreement.
2.11 Employer. "Employer" means Howmet Corporation and any successor to the
business thereof.
2.12 Incentive Compensation. "Incentive Compensation" means the amount payable
to the Participant pursuant to the Special Incentive Compensation Plan.
2.13 Non-Liquidation Distribution. "Non-Liquidation Distribution" means any
distribution to partners of Carlyle-Blade other than a Distribution upon
Liquidation.
2.14 Participant. "Participant" means any employee who is a participant in the
Special Incentive Compensation Plan and who files a Participation Agreement as
provided in Article IV.
2.15 Participation Agreement. "Participation Agreement" means an agreement filed
with the Administrator by a Participant on or before November 10, 1995 pursuant
to which Incentive Compensation is to be deferred pursuant to the Plan, as
amended in accordance with the Plan.
2
<PAGE> 3
2.16 Partnership Agreement. "Partnership Agreement" means the Limited
Partnership Agreement of Carlyle-Blade, dated as of December 13, 1995, as
amended.
2.17 Plan. "Plan" means the Howmet Corporation Special 1995 Executive Deferred
Compensation Plan, as amended.
2.18 Rules of the Plan. "Rules of the Plan" means the rules adopted by the
Administrator pursuant to Section 3.2 for the administration, interpretation or
application of the Plan.
2.19 Special Incentive Compensation Plan. "Special Incentive Compensation Plan"
means the Special Incentive Compensation Plan announced by the Employer on June
6, 1995.
2.20 Spouse. "Spouse" with respect to a Participant means such Participant's
wife or husband who is lawfully married to the Participant immediately prior to
the distribution of such Participant's Deferred Compensation Account under this
Plan.
2.21 Termination. "Termination" with respect to a Participant means such
Participant's severance from service with the Employer and all Affiliates of the
Employer. A transfer of service among the Employer and Affiliates will not
constitute a Termination for purposes of this Plan.
ARTICLE III
ADMINISTRATION
3.1 Duties of the Board. This plan shall be administered by the Board. Members
of the Board may be Participants under this Plan. No member of the Board may
act, vote or otherwise influence a decision of the Board specifically relating
to his own participation in the Plan.
3.2 Administrator's Duties and Powers.
(a) The Administrator shall conduct the general administration of the
Plan in accordance with the Plan and shall have all the necessary power and
authority to carry out that function. Among its necessary powers and duties, are
the following:
(i) To delegate all or part of its function as Administrator to
others and to revoke any such delegation.
(ii) To determine questions of eligibility of Participants and
their entitlement to benefits.
3
<PAGE> 4
(iii) To select and engage attorneys, accountants, actuaries,
trustees, appraisers, brokers, consultants, administrators, physicians or other
persons to render service or advice with regard to any responsibility the
Administrator has under the Plan, or otherwise, to designate such persons to
carry out responsibilities, and (with the Employer, the Board and its officers,
trustees and employees) to rely upon the advice, opinions or valuations of any
such persons, to the extent permitted by law, being fully protected in acting or
relying thereon in good faith.
(iv) To interpret the Plan for purpose of the administration and
application of the Plan, in a manner not inconsistent with the Plan or
applicable law and to amend or revoke any such interpretation.
(v) To adopt Rules of the Plan that are not inconsistent with
the Plan or applicable law and to amend or revoke any such rules.
(vi) To determine the form of distribution of Deferred
Compensation Accounts pursuant to Article VI.
(b) Every finding, decision, and determination made by the Administrator
shall, to the full extent permitted by law, be final and binding upon all
parties, except to the extent found by a court of competent jurisdiction to
constitute an abuse of discretion.
3.3 Limitations Upon Powers. The Plan shall be uniformly and consistently
administered, interpreted and applied with regard to all Participants in similar
circumstances. The Plan shall be administered, interpreted and applied fairly
and equitably and in accordance with the specified purposes of the Plan.
3.4 Indemnification by the Employer; Liability Insurance.
(a) The Employer shall pay or reimburse any of the Employer's officers,
directors or employees who administer the Plan for all expenses incurred by such
persons in, and shall indemnify and hold them harmless from, all claims,
liability and costs (including reasonable attorneys' fees) arising out of the
good faith performance of their Plan functions.
(b) The Employer may obtain and provide for any such person, at the
Employer's expense, liability insurance against liabilities imposed on him by
law.
3.5 Recordkeeping.
(a) The Administrator shall maintain suitable records as follows:
4
<PAGE> 5
(i) Records of each Participant's individual Deferred
Compensation Account which, among other things, shall show separately deferrals
and the gains and losses thereon.
(ii) Records which show the operations of the Plan during each
Plan Year.
(iii) Records of its deliberations and decisions.
(b) The Administrator may appoint a secretary to keep the record of
proceedings, to transmit its decisions, instructions, consents or directions to
any interested party, to execute and file, on behalf of the Administrator, such
documents, reports or other matters as may be necessary or appropriate under
ERISA and to perform ministerial acts.
(c) The Administrator shall not be required to maintain any records or
accounts which duplicate any records or accounts maintained by the Employer.
3.6 Inspection of Records. Copies of the Plan and records of a Participant's
Deferred Compensation Account shall be open to inspection by him or his duly
authorized representatives at the office of the Employer at any reasonable
business hour.
3.7 Conflicting Claims. If the Administrator is confronted with conflicting
claims concerning a Participant's Deferred Compensation Account, the
Administrator may interplead the claimants in an action at law, or in an
arbitration conducted in accordance with the rules of the American Arbitration
Association, as the Administrator shall elect in its sole discretion, and in
either case, the attorneys' fees, expenses and costs reasonably incurred by the
Administrator in such proceeding shall be paid from the Participant's Deferred
Compensation Account.
3.8 Service of Process. The Secretary of the Employer is hereby designated as
agent of the Plan for the service of legal process.
3.9 Service in More than One Capacity. Any person or group of persons may serve
in more than one capacity with respect to the Plan.
ARTICLE IV
PARTICIPATION
4.1 Eligibility. All employees of the Employer who file U.S. income tax returns
and who are eligible to participate in the Special Incentive Compensation Plan
will be eligible to participate in this Plan.
5
<PAGE> 6
4.2 Participation. Participation in the Plan shall be limited to eligible
employees who file a Participation Agreement on or before November 10, 1995. The
election to participate shall be effective upon receipt by the Administrator of
a duly executed Participation Agreement.
4.3 Deferred Compensation. Provided that the amount deferred is not less than
$1,000, each Participant may elect to defer receipt of all or any percentage of
his Incentive Compensation until a date specified by the Participant, which may
in no event be later than the occurrence of a Distribution Upon Liquidation. The
Participant's Deferred Compensation will be deducted from the Incentive
Compensation otherwise payable to the Participant pursuant to the Special
Incentive Compensation Plan.
4.4 Irrevocability. The election to defer Incentive Compensation pursuant to a
Participation Agreement filed with the Administrator is irrevocable and may not
be amended except to the extent required, in the discretion of the Board, to
reflect the amendment and restatement of the Plan; provided, that the Board, in
its discretion, may permit further amendment.
4.5 Participation Agreement. The Participant shall set forth on the
Participation Agreement:
(a) his consent that he, his successors in interest and assigns and all
persons claiming under him shall be bound, to the extent authorized by law, by
the statements contained therein and by the provisions of the Plan as they now
exist, and as they may be amended from time to time,
(b) the percentage or specified dollar amount of his Incentive
Compensation to be deferred and the date as of which distribution of his
Deferred Compensation Account shall be made,
(c) his consent to the Administrator's discretion to choose the form of
property (which may include cash and other property as selected by the
Administrator in its discretion) in which such distribution shall be made, and
(d) such other information as may be required for the administration of
the Plan.
Such Participation Agreement shall be in the form specified by the
Administrator.
ARTICLE V
DEFERRED COMPENSATION ACCOUNTS
5.1 Establishment of Deferred Compensation Account. The Administrator shall
establish and maintain for each Participant a Deferred Compensation Account to
which shall be credited the
6
<PAGE> 7
amounts determined under Section 5.2, debited amounts distributed therefrom
pursuant to Article VI and credited or debited the amounts determined under
Section 5.3.
5.2 Deferred Compensation. The amount of Incentive Compensation that a
Participant elects to defer in the Participation Agreement, net of any amount
the Employer is required to withhold pursuant to any federal, state, or local
law, shall be credited by the Employer to the Participant's Deferred
Compensation Account on the first day of the month following the date as of
which such Incentive Compensation was eligible to be paid.
5.3 Investment Credits and Debits. On each Determination Date after December 31,
1995, additional amounts shall be credited (or debited) to each Participant's
Deferred Compensation Account, such amounts to be equal to the earnings (or
losses) that would have been credited (or debited) had such Participant's
Deferred Compensation Account been applied in its entirety to purchase the
interest of a "Limited Partner" of Carlyle-Blade (as defined in the Partnership
Agreement) for the period between successive Determination Dates.
5.4 Determination of Account Value. As of each Determination Date, the
Administrator shall determine, in good faith, the fair market value of each
Participant's Deferred Compensation Account based upon such information as the
Administrator deems appropriate and which is reasonably available to the
Administrator including appraisals by qualified persons, transactions and bona
fide offers in assets of the type in question, data from newspapers and
financial publications of general circulation, statistical and valuation
services, records of securities exchanges, and other information customarily
used in the valuation of property for the purposes of the Code. With respect to
securities for which there is a generally recognized market, the published
selling prices on or nearest to such Determination Date shall establish fair
market value of such security. Fair market value so determined shall be
conclusive for all purposes of the Plan.
5.5 Applicability of Account Values. The value of a Deferred Compensation
Account as determined as of a given date under this Article less any amounts
subsequently distributed under Article VI, shall remain the value thereof for
all purposes of the Plan until revalued hereunder.
5.6 Vesting of Deferred Compensation Account. A Participant shall always be 100%
vested in the value of his Deferred Compensation Account.
5.7 Statement of Accounts. The Administrator shall submit to each Participant
after each Determination Date a statement setting forth the balance to the
credit of such Participant in his Deferred Compensation Account as of the
Determination Date.
7
<PAGE> 8
ARTICLE VI
DISTRIBUTION OF ACCOUNTS
6.1 Distribution Election. Subject to Sections 6.2 and 6.3, the value of each
Participant's Deferred Compensation Account shall be distributed to him or her
in one lump sum payment within 30 days after the date selected by the
Participant in the Participation Agreement.
6.2 Non-Liquidation Distributions. Notwithstanding any Participant's deferral
election or any other provisions of this Plan to the contrary, the Administrator
shall distribute to each Participant, within 60 days after the end of each
calendar year, an amount equal to any Non- Liquidation Distribution (net of any
amount the Employer is required to withhold pursuant to any federal, state or
local law) that would have been credited to such Participant's Deferred
Compensation Account had such Deferred Compensation Account been applied in its
entirety to purchase the interest of a "Limited Partner" of Carlyle-Blade (as
defined in the Partnership Agreement) for the period since the last
Determination Date; provided, however, that such distributions shall be made at
such time as is necessary to entitle the Employer to the applicable federal
income tax deduction for the year to which the Non-Liquidation Distribution
relates.
6.3 Form of Distribution. Distribution of the value of each Participant's
Deferred Compensation Account shall be made in cash (or, if so determined by the
Administrator, in other property including, without limitation, distribution of
the interest of a "Limited Partner" of Carlyle-Blade, to the extent permitted by
the Partnership Agreement).
6.4 Adjustments for Taxes. Any distributions made from a Participant's Deferred
Compensation Account will be subject to appropriate arrangements for the payment
of any applicable withholding required pursuant to any federal, state or local
law.
ARTICLE VII
BENEFICIARY DESIGNATION
7.1 Beneficiary Designation. Each Participant may designate any person, persons,
or entity as his Beneficiary or Beneficiaries to whom payment of the value of
his Deferred Compensation Account shall be made in the event of his death. Any
Beneficiary designation may be made or changed by a Participant by filing a
beneficiary designation form prescribed by the Administrator. The filing of a
new Beneficiary designation form will cancel all Beneficiary designations
previously filed.
8
<PAGE> 9
7.2 Marital Status. If a Participant's Deferred Compensation Account is
community property under applicable state law, no Beneficiary designation shall
be valid or effective if any such Beneficiary (or combination thereof) other
than the Participant's Spouse, if any, is to receive more than 50 percent of
such Participant's Deferred Compensation Account unless the Spouse shall, in
writing, approve the designation.
7.3 No Participant Designation. If a Participant fails to designate a
Beneficiary as provided above, or if his Beneficiary designation is revoked by
operation of law or otherwise without execution of a new designation, or if all
designated Beneficiaries predecease the Participant, then the Participant's
Beneficiary shall be his estate.
ARTICLE VIII
AMENDMENT AND TERMINATION OF PLAN
8.1 Amendment. The Employer may at any time amend the Plan in whole or in part,
provided however, that no amendment shall decrease the balance to the credit of
any Deferred Compensation Account as of the date of such amendment.
8.2 Employer's Right to Terminate. The Employer may at any time terminate the
Plan. Upon termination of the Plan, the Employer may discharge in full its
obligations to any participant upon payment of the Participant's Deferred
Compensation Account balance as of the date of such termination.
ARTICLE IX
GENERAL PROVISIONS
9.1 Creditors of the Employer. The Employer may establish a trust to provide a
source of funding its obligations under this Plan, but the assets of the trust
will remain subject to the claims of the creditors of the Employer.
9.2 Nonassignability. Neither a Participant nor any other person shall have any
right to sell, assign, transfer, pledge, anticipate, mortgage or otherwise
encumber, hypothecate or convey in advance of actual receipt, the amounts
payable hereunder.
9.3 Not a Contract of Employment. The terms and conditions of this Plan and any
Participation Agreement shall not be deemed to constitute a contract of
employment with the Employer, and the Participant (or his Beneficiary) shall
have no rights against the Employer except as may be specifically provided
herein. Moreover, nothing in this Plan shall be deemed
9
<PAGE> 10
to give a Participant the right to be retained in the service of the Employer or
to interfere with the right of the Employer to discipline or discharge him at
any time for any reason whatsoever.
9.4 Protective Provisions. A Participant will cooperate with the Employer and
Administrator by furnishing any and all information requested by the Employer or
the Administrator in order to facilitate the payment of benefits hereunder, and
by taking such other action as may be requested by the Employer or the
Administrator.
9.5 Terms. Whenever any words are used herein in the masculine, they shall be
construed as though they were used in the feminine in all cases where they would
so apply; and wherever any words are used herein in the singular or in the
plural, they shall be construed as though they were used in the plural or in the
singular, as the case may be, in all cases where they would so apply.
9.6 Captions. The captions of the articles, sections and paragraphs of this Plan
are for convenience only and shall not control or affect the meaning or
construction of any of its provisions.
9.7 Governing Law. The provisions of this Plan shall be construed and
interpreted according to the laws of the State of New York.
9.8 Validity. In case any provision of this Plan shall be illegal or invalid for
any reason, said illegality or invalidity shall not affect the remaining parts
hereof but this Plan shall be construed and enforced as if such illegal and
invalid provision had never been inserted herein.
9.9 Notice. Any notice or filing required or permitted to be given to the
Administrator under this Plan shall be sufficient if in writing and hand
delivered, or sent by registered or certified mail, to the Administrator at the
executive office of the Employer. Such notice shall be deemed given as of the
date of delivery or, if delivery is made by mail, as of the date shown on the
postmark on the receipt for registration or certification.
9.10 Successors. The provisions of this Plan shall bind and inure to the benefit
of the Employer and its successors and assigns. The term successors as used
herein shall include any corporate or other business entity which shall, whether
by merger, consolidation, purchase or otherwise, acquire all or substantially
all of the business and assets of the Employer, and successors of any such
corporation or other business entity.
9.11 Incompetency. In the event that it shall be found upon evidence
satisfactory to the Administrator that any Participant or Beneficiary to whom a
benefit is payable under this Plan is unable to care for his affairs because of
illness or accident, any payment due (unless prior claim therefore shall have
been made by a duly authorized guardian or other legal representative) may be
paid, upon appropriate indemnification of the Employer and Administrator, to the
Spouse or other person deemed by the Administrator to have incurred expense for
such Participant (or
10
<PAGE> 11
Beneficiary). Any such payment shall be a payment for the account of the
Participant and shall be a complete discharge of any liability of the Plan and
the Employer with respect to the amount so paid.
ARTICLE X
CLAIMS PROCEDURE
10.1 Claim. Any person claiming a benefit or requesting an interpretation or
ruling under the Plan shall present the request in writing to the Administrator
which shall respond in writing as soon as practicable.
10.2 Denial of Claim. If the claim or request is denied, the written notice of
denial shall state:
(a) The reason for denial with specific reference to the Plan provisions
on which the denial was based.
(b) A description of any additional material or information required and
an explanation of why it is necessary.
(c) An explanation of the Plan's claim review procedure.
10.3 Review of Claim. Any person whose claim or request is denied or who has not
received a response within 60 days may request review by notice given in writing
to the Administrator. The claim or request shall be reviewed by the
Administrator which may grant the claimant a hearing or request a hearing to
clarify any related matters which it deems appropriate. On review, the claimant
may have representation, examine pertinent documents, and submit issues and
comments in writing.
10.4 Final Decision. The decision on review shall normally be made by the
Administrator within 60 days of the date of the review of claim authorized by
10.3. If an extension of time is required for a hearing or other special
circumstances, the claimant shall be notified and the time limit shall be 120
days. The decision shall be in writing and shall state the reason and the
relevant Plan provisions.
10.5 Arbitration. Any claim or dispute arising hereunder which is not resolved
upon conclusion of the procedures heretofore provided in this Article X shall,
upon request of either the Employer or the claiming or requesting person, be
decided by arbitration in the metropolitan area where the Participant is, or was
most recently, employed by the Employer, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. The award rendered in
such arbitration shall be final, and judgment on such award may be entered in
any
11
<PAGE> 12
court, state or federal having jurisdiction thereover. In no event however,
should the arbitrator be given authority to judge any decision which is the
subject of the Administrator's exercise of its discretion in accordance with the
terms of this Plan.
IN WITNESS WHEREOF, the Employer has caused this Amended and Restated
Plan to be executed on this __ day of ________, 1996.
HOWMET CORPORATION
By: __________________
Its: ______________________________
12
<PAGE> 1
EXHIBIT 10.31
THE HOWMET CORPORATION NONQUALIFIED DEFERRED
COMPENSATION TRUST
This Trust Agreement is made this 29th day of April, 1996 by and
between Howmet Corporation, a corporation with offices at 475 Steamboat Road,
Greenwich, Connecticut (the "Company") and Jeffrey A. Jankowski (the
"Trustee"). This Agreement is made with reference to the following:
A. The Company has adopted the Howmet Corporation Special 1995
Executive Deferred Compensation Plan (the "Plan") as a nonqualified deferred
compensation plan.
B. The Company wishes to establish a trust as a means for paying
benefits under the Plan, but wishes to have the trust assets remain subject to
the claims of the creditors of the Company so that the Plan will qualify as an
"unfunded" arrangement maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974
("ERISA").
NOW, THEREFORE, the parties hereby establish the Howmet Corporation
Nonqualified Deferred Compensation Trust which will be held and administered as
follows:
ARTICLE I
ESTABLISHMENT OF TRUST
1.1 Company hereby deposits with Trustee $2,451,554.93 which will
become the principal of the Trust to be held, administered and disposed of by
Trustee as provided in this Trust Agreement.
1.2 The Trust hereby established will be irrevocable.
1.3 The Trust is intended to be a grantor trust, of which Company
is the grantor, within the meaning of subpart E, part I, subchapter J, chapter
1, subtitle A of the Internal Revenue Code of 1986, as amended, and will be
construed accordingly.
1.4 The assets of the Trust will be used exclusively for the uses
and purposes of Plan participants and general creditors as herein set forth.
Plan participants and their beneficiaries will have no preferred claim on, or
any beneficial ownership interest in, any assets of the Trust. Any rights
created under the Plan and this Trust Agreement will be mere unsecured
contractual rights of Plan participants and their beneficiaries against Company.
Any assets held by the Trust will be subject to the claims of Company's general
creditors under federal and state law in the event of Insolvency, as defined in
Section 3.1.
1.5 Company may make additional deposits of cash or other property
in trust with Trustee to augment the principal to be held, administered and
disposed of by Trustee as provided in this Trust Agreement.
<PAGE> 2
ARTICLE II
PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES
2.1 Company will deliver to Trustee from time to time written
instructions concerning payment of benefits from the Trust to or in respect of
Plan participants. Except as otherwise provided herein, Trustee will make
payments to the Plan participants and their beneficiaries in accordance with
such instructions. The Trustee will make provision for the reporting and
withholding of any federal state or local taxes that may be required to be
withheld with respect to payments to plan participants or and beneficiaries,
and will pay amounts withheld to the appropriate taxing authorities or
determine that such amounts have been reported, withheld and paid by Company.
2.2 The entitlement of a Plan participant or beneficiary to benefits
under the Plan will be determined by Company or such party as it shall
designate under the Plan and any claim for benefits will be considered and
reviewed under the procedures set out in the Plan.
2.3 Company may make payment of benefits directly to Plan participants
or beneficiaries as they become due under the terms of the Plan. Company will
notify Trustee of its decision to make payment of benefits directly prior to
the time amounts are payable to participants or their beneficiaries. In
addition, if the assets of the Trust are not sufficient to make payments of
benefits, Trustee will notify Company and Company will make the balance of each
such payment as it falls due.
ARTICLE III
TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARY
WHEN COMPANY IS INSOLVENT
3.1 Trustee will cease payment of benefits to Plan participants and
their beneficiaries if the Company is Insolvent. Company will be considered
"Insolvent" for purposes of this Trust Agreement if Company is unable to pay
its debts as they become due, or Company is subject to a pending proceeding as
a debtor under the United States Bankruptcy Code.
3.2 The assets of the Trust will be subject to claims of general
creditors of Company under federal and state law as set forth below.
a. The Chief Executive Officer of Company will inform Trustee in
writing of Company's Insolvency. If a person claiming to be a creditor
of Company alleges in writing to Trustee that Company has become
Insolvent, Trustee will determine whether Company is Insolvent and,
pending such determination, Trustee will discontinue payment of benefits
to Plan participants or their beneficiaries.
b. Unless Trustee has actual knowledge of Company's Insolvency,
or has received notice from Company or a person claiming to be a
creditor alleging that Company is Insolvent, Trustee will have no duty
to inquire whether Company is Insolvent. Trustee may in all events rely
on such evidence concerning Company's solvency as may be furnished to
Trustee and that provides Trustee with a reasonable basis for making a
determination concerning Company's solvency.
c. If at any time Trustee has determined that Company is
Insolvent, Trustee will discontinue payments to Plan participants or
their beneficiaries and will hold the assets of the
2
<PAGE> 3
Trust for the benefit of Company's general creditors. Nothing in this
Trust Agreement shall in any way diminish any rights of Plan participants
or their beneficiaries to pursue their rights as general creditors of
Company with respect to benefits due under the Plan or otherwise.
d. Trustee will resume the payment of benefits to Plan
participants or their beneficiaries in accordance with Article II of this
Trust Agreement only after Trustee has determined that Company is not or
is no longer Insolvent.
3.3 If the Trustee discontinues the payment of benefits and
subsequently resumes payments, the next payment following such discontinuance
will include the amount of all payments due to Plan participants and
beneficiaries for the period of discontinuance, less the aggregate amount of
any payments made by the Company in lieu of payments provided for hereunder
during the period of discontinuance of payments from the Trust.
ARTICLE IV
PAYMENTS TO COMPANY
Except as provided in Article III hereof, Company will have no right or
power to direct Trustee to return to Company or to divert to others any of the
Trust assets until all payment of benefits have been made to Plan participants
and their beneficiaries pursuant to the term of the Plan.
ARTICLE V
POWERS AND DUTIES OF TRUST
5.1 General Powers. The Trustee will manage and control the assets
of the Trust as directed by the Company. The Trustee will not have any
investment authority and will not be liable for any losses incurred as a result
of investments made in accordance with the written directions of the Company.
5.2 Payments by Trustee. The Trustee will pay benefits from the
Trust to or for the account of participants or beneficiaries in the amount and
manner, and at such time and addresses, as directed in writing by the Company.
The Trustee will make such other payments as directed in writing by the Company.
5.3 Accounts and Records. The Trustee will keep accurate and
detailed records of the Trust. The fiscal year of the Trust will be the year
adopted by the Company for federal income tax purposes unless another year is
agreed upon between the Company and the Trustee. Within 60 days following the
close of each fiscal year of the Trust and within 60 days after the removal or
resignation of Trustee, Trustee shall deliver to Company a written account of
its administration of the Trust during such year or during the period from the
close of the last preceding year to the date of such removal or resignation,
setting forth all investments, receipts, disbursements and other transactions
effected by it, including a description of all securities and investments
purchased and sold with the cost or net proceeds of such purchases or sales
(accrued interest paid or receivable being shown separately), and showing all
cash, securities and other property held in the Trust at the end of such year
or as of the date of such removal or resignation, as the case may be.
3
<PAGE> 4
5.4 Reporting. The Trustee will, within the time prescribed by law,
file with the Internal Revenue Service and with other appropriate regulatory
agencies any reports or statements which by law are required to be filed by it.
The Trustee will have no responsibility for the preparation or filing of any
reports, returns, or documents required by law to be filed by the Company other
than those explicitly agreed upon in writing by the Trustee and the Company.
5.5 Miscellaneous. The Trustee will not be responsible for enforcing
payment of or collecting any contribution to be made by the Company or any
participant or enforcing payment of or collecting any funds held by the Company
on behalf of participants for the purpose of making contribution to the Plan.
ARTICLE VI
INVESTMENT OF THE TRUST
6.1 General Investment Powers. The Trustee will invest and reinvest
the principal and income of the Trust as directed by the Company, and will not
make any distinction between principal and income. The Trustee will not be
required to determine whether the investments chosen by the Company would
otherwise be permissible for the investment of Trust Funds under any present or
future laws.
6.2 Specific Investment Powers. The Trustee is authorized and
empowered as follows:
a. to vote in person or by proxy any stocks, bonds, or other
securities held by it; to exercise any options available to any stocks,
bonds, or other securities; to exercise any rights to subscribe for
additional stocks, bonds, or other securities, and to make necessary
payments for such rights; and to join in or oppose any reorganization,
recapitalization, consolidation, or merger.
b. to make, execute, acknowledge, and deliver deeds, leases,
assignments, documents of transfer, and other instruments that may be
necessary to carry out the powers granted by this Agreement;
c. to enforce any right, obligation, or claim in its absolute
discretion and, in general to protect in any way the interest of the
Trust, either before or after default, and in its absolute discretion to
abstain from the enforcement of any right obligation, or claim and to
abandon any property, whether real or personal which at any time may be
held by it;
d. to cause any investments in the Trust to be registered in or
transferred into its name or the name of its nominee or nominees or to
retain them unregistered or in form permitting transfer by delivery, but
the books and records of the Trustee will at all times show that all
such investments are part of the Trust;
e. to apply for, purchase, hold, or transfer, in accordance with
written instructions from the Company, annuity contracts by which the
Company may choose to provide benefits;
f. to do all other acts and to exercise any other powers which it
may deem necessary and proper to carry out its duties as Trustee under
this Trust Agreement.
4
<PAGE> 5
ARTICLE VII
RESPONSIBILITY OF TRUSTEE
7.1 Trustee will act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided however, that
Trustee will incur no liability to any person for any action taken pursuant to
a direction, request or approval given by Company which is contemplated by, and
in conformity with, the terms of the Plan or this Trust and is given in writing
by Company. In the event of a dispute between Company and a party, Trustee may
apply to a court of competent jurisdiction to resolve the dispute.
7.2 If Trustee undertakes or defends any litigation arising in
connection with this Trust, Company agrees to indemnify Trustee against
Trustee's costs, expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto and to be primarily liable for
such payments. If Company does not pay such costs, expenses and liabilities in
a reasonably timely manner, Trustee may obtain payment from the Trust.
7.3 Trustee may consult with legal counsel (who may also be counsel
for Company generally) with respect to any of its duties or obligations
hereunder.
7.4 Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder.
7.5 Trustee will have all powers conferred on Trustees by
applicable law, unless expressly provided otherwise herein, provided, however,
that if an insurance policy is held as an asset of the Trust, Trustee will have
no power to name a beneficiary of the policy other than the Trust, to assign
the policy (as distinct from conversion of the policy to a different form)
other than to a successor Trustee, or to loan to any person the proceeds of any
borrowing against such policy.
7.6 Notwithstanding any powers granted to Trustee pursuant to this
Trust Agreement or to applicable law, Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
ARTICLE VIII
COMPENSATION AND EXPENSES OF TRUSTEE
Company will pay all administrative and Trustee's fees and expenses. If
not so paid, the fees and expenses will be paid from the Trust.
ARTICLE IX
RESIGNATION AND REMOVAL OF TRUSTEE
9.1 Trustee may resign at any time by written notice to Company,
which will be effective 60 days after receipt of such notice unless Company and
Trustee agree otherwise.
5
<PAGE> 6
9.2 Trustee may be removed by Company on 60 days notice or upon shorter
notice accepted by Trustee.
9.3 Upon registration or removal of Trustee and appointment of a
successor Trustee, all assets will subsequently be transferred to the successor
Trustee. The transfer will be completed within 60 days after receipt of notice
of resignation, removal or transfer, unless Company extends the time limit.
9.4 If Trustee resigns or is removed, the Company will appoint a
successor trustee by the effective date of the resignation or removal. If no
such appointment has been made, Trustee may apply to a court of competent
jurisdiction for appointment of a successor or for instructions. All expenses
of Trustee in connection with the proceeding will be allowed as administrative
expenses of the Trust.
9.5 If Trustee resigns or is removed in accordance with Section 8.1 or
8.2 hereof, Company may appoint any third party, such as a bank trust
department or other party that may be granted corporate trustee powers under
state law, as a successor to replace Trustee upon resignation or removal. The
appointment shall be effective when accepted in writing by the new Trustee, who
shall have all of the rights and powers of the former Trustee, including
ownership rights in the Trust assets. The former Trustee shall execute any
instrument necessary or reasonably requested by Company or the successor Trustee
to evidence the transfer.
9.6 The successor Trustee need not examine the records and acts of any
prior Trustee and may retain or dispose of existing Trust assets, subject to
Articles V and VII hereof. The successor Trustee shall not be responsible for,
and Company shall indemnify and defend the successor Trustee from, any claim or
liability resulting from any action or inaction of any prior Trustee or from
any other past event, or any condition existing at the time it becomes
successor Trustee.
ARTICLE X
AMENDMENT OR TERMINATION
10.1 This Trust Agreement may be amended by a written instrument
executed by Trustee and Company. Notwithstanding the foregoing, no such
amendment will conflict with the terms of the Plan or make the Trust revocable.
10.2 The Trust will not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled to benefits
pursuant to the terms of the Plan. Upon termination of the Trust any assets
remaining in the Trust will be returned to Company.
ARTICLE XI
MISCELLANEOUS
11.1 Any provision of this Trust Agreement prohibited by law will be
ineffective to the extent of any such prohibition, without invalidating the
remain provisions.
11.2 Benefits payable to Plan participants and their beneficiaries
under this Trust
6
<PAGE> 7
Agreement may not be anticipated, assigned, alienated, pledged, encumbered or
subjected to attachment, garnishment, levy, execution or other legal or
equitable process.
11.3 This Trust Agreement will be governed by and construed in
accordance with the laws of the State of New York.
11.4 The effective date of this Trust Agreement shall be April 30,
1996.
HOWMET CORPORATION
By: /s/ D. L. Squier
------------------------
Its President
TRUSTEE
/s/ Jeffrey A. Jankowski
----------------------------
Jeffrey A. Jankowski
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED
CONDENSED BALANCE SHEETS AT JUNE 29, 1996 AND DECEMBER 31, 1995 AND THE
CONSOLIDATED CONDENSED INCOME STATEMENTS FOR THE TWENTY-SIX WEEK PERIODS ENDED
JUNE 29, 1996 AND JULY 2, 1995 AS REPORTED ON FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED JUNE 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995 JAN-01-1995
<PERIOD-END> JUN-29-1996 DEC-31-1995 JUL-02-1995
<CASH> 29,320 9,606 0
<SECURITIES> 0 0 0
<RECEIVABLES> 136,034 139,481 0
<ALLOWANCES> 7,259 8,258 0
<INVENTORY> 144,519 150,288 0
<CURRENT-ASSETS> 324,666 294,598 0
<PP&E> 313,268 303,410 0
<DEPRECIATION> 22,284 1,847 0
<TOTAL-ASSETS> 1,099,395 1,099,503 0
<CURRENT-LIABILITIES> 337,743 293,693 0
<BONDS> 340,315 418,186 0
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> 280,995 276,283 0
<TOTAL-LIABILITY-AND-EQUITY> 1,099,395 1,099,503 0
<SALES> 544,814 0 473,194
<TOTAL-REVENUES> 544,814 0 473,194
<CGS> 398,750 0 357,604
<TOTAL-COSTS> 429,030 0 374,350
<OTHER-EXPENSES> 12,166 0 12,908
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 22,265 0 2,913
<INCOME-PRETAX> 20,500 0 34,180
<INCOME-TAX> 13,060 0 15,633
<INCOME-CONTINUING> 7,440 0 18,547
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 7,440 0 18,547
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
<PAGE> 1
Exhibit 99.1
CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE
HARBOR PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
The Company wishes to inform its investors of the following important
factors that in some cases have affected, and in the future could affect, the
Company's results of operations and that could cause such future results of
operations to differ materially from those expressed in any forward looking
statements made by or on behalf of the Company. Disclosure of these factors is
intended to permit the Company to take advantage of the "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995. Many of these factors
have been discussed in prior SEC filings by the Company.
Although the Company has attempted to list comprehensively these
important cautionary factors, the Company wishes to caution investors that other
factors may in the future prove to be important in affecting the Company's
results of operations. The Company undertakes no obligation to publicly update
or revise any forward looking statements, whether as a result of new
information, future events or otherwise.
Limitations and Risks due to Substantial Leverage and Debt Service
The Company incurred significant indebtedness in connection with the
acquisition by Blade Acquisition Corp. ("Blade") of the Company's parent company
and the Cercast group of companies from affiliates of Pechiney S.A. on December
13, 1995 (the "Acquisition"). At June 29, 1996, the Company's consolidated
total indebtedness and total stockholders' equity was $449.0 million and $281.0
million respectively. The Company's indebtedness under senior credit facilities
provided by the Credit Agreement dated December 13, 1995 among Blade, Howmet
Holdings Acquisition Corp. ("HHAC"), Howmet Acquisition Corp., The First
National Bank of Chicago as Administrative Agent and one of the Managing
Agents, and other banks (the "Senior Credit Facilities") is secured by
guarantees of the Company's
8-21
<PAGE> 2
domestic subsidiaries and by Blade and Howmet Holdings Corporation ("Holdings"),
and the stock of Holdings and the Company is pledged to secure the Blade and
Holdings guarantees, respectively. Pro forma for the Acquisition, the Company's
earnings for the year ended December 31, 1995 would have been inadequate to
cover fixed charges by $25.0 million. In addition, upon consummation of the
Acquisition, the Company entered into the receivables financing program (the
"Receivables Facility") now covered by the Amended and Restated Receivables
Purchase Agreement dated as of April 18, 1996 between the Company, certain of
its subsidiaries and Blade Receivables Corporation (the "Receivables
Subsidiary") and the related Blade Receivables Master Trust Amended and Restated
Pooling and Services Agreement dated as of April 18, 1996 among the Receivables
Subsidiary, the Company, and Manufacturers and Traders Trust Company, as
Trustee, pursuant to which the Company sold certain accounts receivable to a
special purpose trust for aggregate cash proceeds of $51.4 million. The Company
intends to continue such sales of eligible accounts receivable in the future.
The Indenture does not contain significant restrictions on the Company's ability
to sell its accounts receivable pursuant to any such facility or with respect to
the use of proceeds thereof. The Company's ability to make any scheduled
payments of the principal of, or interest on, its indebtedness (including the
10% Senior Subordinated Notes due 2003 (the "Notes")), or to refinance its
indebtedness, depends on its future performance, which to a certain extent is
subject to economic, financial, competitive and other factors beyond its
control, and there can be no assurance that the foregoing payments will be made.
If the Company is unable to generate sufficient cash flow from operations in the
future to service its debt and make necessary capital expenditures, the Company
may be required to refinance all or a portion of its existing debt, including
the Notes, to sell assets or to obtain additional financing. There can be no
assurance that any such refinancing or refinancing of the Senior Credit
Facilities at maturity would be possible, on reasonable terms if at all, or that
any such sales of assets or additional financing could be achieved.
The Company's high level of debt will have several important effects on
its future operations, including the following: (a) the Company will have
significant cash requirements to service debt, reducing funds available for
operations, for capital expenditures and research and development (which are
important factors in the Company's
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technological leadership role), and for acquisitions and future business
opportunities, thus possibly increasing the Company's vulnerability to adverse
general economic and industry conditions, which could be exacerbated by the
cyclical nature of certain of the Company's businesses (see "Effects of
Aerospace Industry Economic Conditions and Cyclicality," below) and greater
capital resources of its principal competitor after giving effect to the
Acquisition, and (b) the financial covenants and other restrictions contained in
the Senior Credit Facilities and other agreements relating to the Company's
borrowing under the Senior Credit Facilities (the "Senior Indebtedness") and the
Indenture dated as of December 7, 1995 between Howmet Acquisition Corp. and
Marine Midland Bank, as Trustee (the "Indenture") will require the Company to
meet certain financial tests and will restrict its ability to borrow additional
funds, to dispose of assets or to pay cash dividends.
Effects of Aerospace Industry Economic Conditions and
Cyclicality
The commercial aerospace industry is a cyclical business, and the demand
by commercial airlines for new aircraft historically has been highly related to
the stability and health of the United States and world economies. Aircraft
delivery trends vary in direct relation to the general economic cycle, with an
approximate two year lag. Aircraft are delivered when completed, regardless of
economic conditions at that time, because substantial deposits are required at
the time of the orders. Although the United States economy entered a period of
slow growth and recession in 1989 and 1990, the aerospace industry made record
deliveries of large commercial aircraft during these years. In fact, aircraft
deliveries continued to increase through 1991 even though the world airline
industry reported record operating losses in the early 1990s.
The large number of aircraft delivered in the early 1990s and the
industry's widespread losses created excess capacity in the air carrier system,
evidenced by a substantial number of inactive new and used aircraft. Operating
losses and excess capacity, combined with the high cost of new aircraft, placed
economic stress on the airlines and aircraft leasing companies. During this
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period, airlines and leasing companies deferred existing new aircraft orders
and, to a lesser degree, canceled orders. These deferrals and cancellations had
a negative impact on the volume and price of orders placed with the
manufacturers of commercial aircraft components, including the Company. Although
the United States airline industry as a whole has reported a return to
profitability in 1995 and 1996 and excess capacity has been reduced, there can
be no assurance that the improved operating performance of the commercial
airlines will continue or that deliveries of engines for large commercial
aircraft will not decline in the future. Any developments in the commercial
aerospace market resulting in a reduction in the rate of aircraft engine
deliveries in the future, including future cancellations and deferrals of
scheduled deliveries, could materially adversely affect the Company's financial
condition and results of operations.
Reduced Government Sales
Military and defense contractor sales comprised approximately 16% of the
Company's 1995 sales. United States defense spending in markets served by the
Company has been declining since the 1980s, and continued reductions in defense
budgets or military aircraft procurement could adversely affect the Company's
financial condition and results of operations.
Concentrated Customer Base; Competition
A substantial portion of the Company's business is conducted with a
relatively small number of large aerospace and industrial gas turbine customers,
including General Electric Aircraft Engines ("GEAE"), General Electric Power
Systems ("GEPS") and Pratt & Whitney Aircraft Division of United Technologies
Corporation ("PWA"). The current three year contract with PWA is scheduled to
expire in 1997 consistent with industry practice regarding contract lifecycles.
The Company's top ten customers accounted in the aggregate for approximately
65% of 1995 net sales. Approximately half of
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Howmet's business is based on multi-year contracts with its customers, usually
for a three-year period, that generally give the Company the right and
obligation to fill a specified percentage of the customer's requirements but
generally do not provide the Company with any minimum order commitments. The
Company typically renegotiates these contracts during the last year of the
contract period and, during the process, customers frequently solicit bids from
the Company's competitors, principally from its strongest competitor, Precision
Castparts Corporation ("PCC"). Most of such contracts include provisions
requiring specified price reductions over the term of the contract based on
lower production costs as programs mature, shared benefits from other cost
reductions resulting from joint production decisions, and negotiated reductions.
The Company has made significant price concessions to customers in recent years,
and management expects customer pressure for such pricing concessions to
continue.
One of Howmet's largest customers, GEPS, in connection with its
corporate-level policy decision to reduce sole sourcing, has exercised its right
to terminate its long-term sole source contract with Howmet effective in early
1997, and has placed orders for certain components with the Company's principal
competitor, PCC.
While Pechiney was in the process of selling Howmet's parent to HHAC,
and before the terms of the Acquisition were known, one of the Company's largest
customers expressed concerns about the potential impact of a leveraged
acquisition on the Company's ability to continue to meet this customer's
requirements, and indicated that its relationship with the Company would be
reassessed if a leveraged acquisition were consummated. Based on subsequent
discussions with the customer regarding the proposed terms of the Acquisition
and its financing, management believes that these concerns have largely been
addressed. Management believes that the Company will be able to continue to
provide the customer the high level of service that it has provided in the past.
However, the Company's financial condition and results of operations
could be materially adversely affected if one or more of the Company's key
customers shifted a material amount of its work from the Company. In addition,
the Company could also be materially adversely affected by any substantial work
stoppage or interruption of production at any of its major customers or at any
of the major aircraft
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manufacturers, and could be materially adversely affected if one or more key
customers reduce or cease conducting operations. Furthermore, competition is
based to a significant extent on technological capabilities and innovations, and
there can be no assurance that one or more of the Company's competitors will not
develop products and/or processes that would give them competitive advantages in
the Company's markets.
Concentration of Ownership
The Carlyle Group ("Carlyle") and Thiokol Corporation ("Thiokol")
through affiliates, have beneficial ownership of 51% and 49%, respectively, of
the voting capital stock of Blade. Pursuant to a stockholders agreement (the
"Stockholders Agreement"), Blade has a board of directors consisting of seven
members, and Carlyle and Thiokol each appointed three directors to the board.
Under the Stockholders Agreement, Blade and its subsidiaries, including the
Company, may not take certain actions, including, but not limited to, certain
mergers, sale transactions, transactions with affiliates, issuances of capital
stock, incurrence of debt, and payments of dividends on or repurchases of
capital stock, without the approval of a supermajority of the board of
directors. The Stockholders Agreement provides that Thiokol may purchase all of
Carlyle's interest in Blade, during the period from the third anniversary
through the sixth anniversary after the closing of the Acquisition on December
13, 1995 (the "Closing Date"). Thiokol has publicly indicated that, subject to
favorable financial and operating performance by the Company and favorable
conditions in the financial markets, it expects to exercise its option to
acquire Carlyle's interest in Blade and thereafter, to cause the Company to
redeem the Notes. As a result of the ownership structure of Blade and the
contractual rights described above, the voting and management control of Blade,
which indirectly controls the Company, is highly concentrated. Carlyle, acting
with the consent of Thiokol, has the ability to direct the actions of Blade with
respect to matters such as the payment of dividends, material acquisitions,
dispositions and certain other corporate transactions. Thiokol and Carlyle
jointly are in a position to exercise control over Blade and ultimately over
the Company, to determine the outcome of all matters required to be submitted
to stockholders for approval, and to
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otherwise direct and control the operations of Blade and, indirectly, the
Company. Carlyle and Thiokol are also parties to management agreements with the
Company, pursuant to which Carlyle and Thiokol render certain management and
advisory services to the Company and receive fees for such services. Carlyle and
Thiokol also received certain fees in connection with the consummation of the
Acquisition.
Environmental Matters
The Company is subject to comprehensive and changing international,
federal, state and local laws, regulations and ordinances that (i) govern
activities or operations that may have adverse environmental effects, such as
discharges to air and water, as well as handling and disposal practices for
solid and hazardous wastes, and (ii) impose liability for the costs of cleaning
up, and certain damages resulting from, sites of past spills, disposals or other
releases of hazardous substances and materials (together, "Environmental Laws").
Management believes that the Company's current operations are in substantial
compliance with such Environmental Laws. However, due to the nature of the
Company's operations, the Company is involved from time to time in legal
proceedings involving remediation of environmental contamination from past or
present operations, as well as compliance with environmental requirements
applicable to ongoing operations. There can be no assurance that material costs
or liabilities will not be incurred in connection with any such proceedings or
claims or to meet such compliance requirements or in connection with currently
unknown environmental liabilities.
If it is determined that the Company is not in compliance with current
Environmental Laws, the Company could be subject to penalties. The amount of any
such penalties could be material. In addition, the Company uses solvents, waxes,
metals, caustics, acids, oils and other hazardous substances, and as is the case
with manufacturers in general, if a release of hazardous substances occurs on or
from the Company's properties the Company may be held liable and may be required
to pay the cost of remedying the condition. The amount of any such liability
could be material.
The Company's facilities have made, and will continue to make,
expenditures to comply with current and future
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environmental laws. The Company anticipates that it will incur additional
capital and operating costs in the future to comply with existing environmental
laws and new requirements arising from new or amended statutes and regulations.
In addition, because the applicable regulatory agencies have not yet promulgated
final standards for some existing environmental programs, the Company cannot at
this time reasonably estimate the cost for compliance with these additional
requirements. The amount of any such compliance costs could be material.
The amount and timing of payments the Company may be required to make
with respect to environmental matters are uncertain at this time. However, based
on management's best current estimates of potential liability, management
believes that the Company's reserves (approximately $6.1 million at June 29,
1996) are adequate to satisfy substantially all of its currently known
environmental liabilities under current laws and regulations. In addition, in
connection with the Acquisition, Howmet Cercast S.A., Pechiney International and
Pechiney S.A. are required to indemnify Blade for environmental liabilities and
obligations stemming from events occurring or conditions existing prior to the
closing of the Acquisition to the extent such liabilities exceed the Company's
reserves of $6.0 million at June 30, 1995. Blade assigned its rights to the
Company with respect to any such indemnification upon consummation of the
Acquisition. There can be no assurance, however, that Howmet Cercast S.A.,
Pechiney International and Pechiney S.A. will indemnify the Company for all such
environmental matters set forth above when demanded by the Company. If Howmet
Cercast S.A., Pechiney International and Pechiney S.A. do not honor their
indemnification obligations, the Company likely would be responsible for such
matters and the cost of addressing such matters could be material.
The Company is subject to liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA") (the
federal "Superfund" statute), and similar state statutes for the investigation
and remediation of environmental contamination at properties owned and/or
operated by it and at off-site locations where it has arranged for the disposal
of hazardous substances. Courts have determined that liability under CERCLA is,
in most cases, joint and several, meaning that any responsible party could be
held liable for all costs necessary for investigating and
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remediating a release or threatened release of hazardous substances. As a
practical matter, liability at most CERCLA (and similar) sites is shared among
all the solvent Potentially Responsible Parties ("PRPs"). The most relevant
factors in determining the probable liability of a PRP at a CERCLA site usually
are the cost of the investigation and remediation, the relative amount of
hazardous substances contributed by the PRP to the site, and the number of
solvent PRPs. The Company has been or may be named a PRP under CERCLA and
similar state statutes at seventeen on-site and off-site locations. The Company
also is currently remediating known contamination at five European facilities,
as is discussed in "Management's Discussion and Analysis of Financial Condition
and Results of Operation."
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