<PAGE> 1
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
Kaiser Aluminum & Chemical Corporation
- ------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Kaiser Aluminum & Chemical Corporation
- ------------------------------------------------------------
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[X] No fee required
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previously. Identify the previous filing by registration statement number, or
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and the date of its filing.
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<PAGE> 3
Kaiser Aluminum & Chemical Corporation
April 29, 1999
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders
(the "Annual Meeting") of Kaiser Aluminum & Chemical Corporation (the
"Company") to be held at 9:00 a.m. on Tuesday, June 8, 1999, at The Power
Center, 12401 South Post Oak, Houston, Texas.
At the Annual Meeting, the holders of the Company's Common Stock, par
value $.331/3 per share ("Common Stock"), Cumulative (1985 Series A) Preference
Stock and Cumulative (1985 Series B) Preference Stock as of the close of
business on April 16, 1999 (all such holders being collectively referred to as
the "Stockholders") will consider and vote, as a single class, (i) in the
election of directors, and (ii) upon such other business as may properly be
presented to the Annual Meeting or any adjournments or postponements thereof.
Each Stockholder is entitled to receive notice of and to vote at the
Annual Meeting and is urged to attend. Whether or not you intend to be present
at the Annual Meeting, we urge you to complete, date, sign and promptly return
the enclosed proxy card.
We look forward to seeing as many of you as possible at the Annual
Meeting.
GEORGE T. HAYMAKER, JR. RAYMOND J. MILCHOVICH
Chairman of the Board and President and Chief Operating
Chief Executive Officer Officer
<PAGE> 4
KAISER ALUMINUM & CHEMICAL CORPORATION
6177 SUNOL BOULEVARD
PLEASANTON, CALIFORNIA 94566
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 8, 1999
The Annual Meeting of Stockholders (the "Annual Meeting") of Kaiser
Aluminum & Chemical Corporation (the "Company") will be held at The Power
Center, 12401 South Post Oak, Houston, Texas, on Tuesday, June 8, 1999, at 9:00
a.m., Houston time, for the following purposes:
1. To elect six (6) directors to hold office until the Company's
2000 Annual Meeting of Stockholders or until their respective
successors are elected and qualified; and
2. To consider and transact such other business as may properly
be presented to the Annual Meeting or any adjournments or
postponements thereof.
Holders of record of the Company's Common Stock, par value $.331/3 per
share (the "Common Stock"), Cumulative (1985 Series A) Preference Stock and
Cumulative (1985 Series B) Preference Stock as of the close of business on
April 16, 1999 (all such holders being collectively referred to as the
"Stockholders") are entitled to notice of and to vote at the Annual Meeting.
Stockholder lists will be available commencing May 28, 1999, and may be
inspected for purposes germane to the Annual Meeting during normal business
hours prior to the Annual Meeting at the offices of the Company, 5847 San
Felipe, Suite 2600, Houston, Texas.
By Order of the Board of Directors
JOHN WM. NIEMAND II
Secretary
April 29, 1999
IMPORTANT
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE PROVIDED FOR YOUR CONVENIENCE AND WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. ANY STOCKHOLDER WHO ATTENDS
THE ANNUAL MEETING MAY VOTE PERSONALLY ON ALL MATTERS BROUGHT BEFORE THE ANNUAL
MEETING BY FOLLOWING THE PROCEDURES DESCRIBED IN THE ATTACHED PROXY STATEMENT.
IN THAT EVENT, YOUR PROXY WILL NOT BE USED.
<PAGE> 5
KAISER ALUMINUM & CHEMICAL CORPORATION
6177 SUNOL BOULEVARD
PLEASANTON, CALIFORNIA 94566
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 8, 1999
This proxy statement (the "Proxy Statement") is furnished to
Stockholders (as defined below) in connection with the solicitation of proxies
on behalf of the Board of Directors of Kaiser Aluminum & Chemical Corporation
(the "Company"), a Delaware corporation, to be voted at the Company's Annual
Meeting of Stockholders (the "Annual Meeting") to be held on Tuesday, June 8,
1999, and any adjournments or postponements thereof, at the time and place and
for the purposes set forth in the accompanying Notice of Annual Meeting of
Stockholders. The principal executive offices of the Company are located at
6177 Sunol Boulevard, Pleasanton, California 94566, telephone (925) 462-1122.
This Proxy Statement, the Notice of Annual Meeting of Stockholders,
and the accompanying proxy card are being mailed, commencing on or about May 7,
1999, to the record holders as of the close of business on April 16, 1999, of
the Company's Common Stock, par value $.331/3 per share (the "Common Stock"),
Cumulative (1985 Series A) Preference Stock ("1985 Series A Stock"), and
Cumulative (1985 Series B) Preference Stock ("1985 Series B Stock") (all such
holders being collectively referred to as the "Stockholders"). The Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1998, is
being mailed to Stockholders together with, but is not part of, this Proxy
Statement and other proxy materials.
The Company's Common Stock is 100% owned by Kaiser Aluminum
Corporation ("KAC"). There is no established public trading market for the
Common Stock. The holders of record of approximately 84.2% of the 1985 Series A
Stock and approximately 35.3% of the 1985 Series B Stock are the trustees under
the Trust Agreement of the Company's USWA Employee Stock Ownership Plan and the
Trust Agreement of the Company's Salaried Employee Stock Ownership Plan,
respectively. The trustees have agreed to vote the shares of the 1985 Series A
Stock and 1985 Series B Stock held by them as directed by the beneficial owners
of such shares, or with respect to shares of such stock as to which no voting
instructions are received, in the same proportions as the shares as to which
instructions are received are voted. As of April 16, 1999, there were
46,171,365 shares of Common Stock, 352,613 shares of 1985 Series A Stock and
42,156 shares of Series B Stock outstanding. Holders of shares of Common Stock,
1985 Series A Stock and 1985 Series B Stock have one vote for each share held
of record with respect to any matter to be presented at the Annual Meeting.
We cordially invite you to attend the Annual Meeting. Whether or not
you plan to attend, please complete, date, sign and promptly return your proxy
card in the enclosed envelope. The persons authorized to act as proxies at the
Annual Meeting, individually or jointly, as listed on the proxy card are George
T. Haymaker, Jr., John T. La Duc, E. Bruce Butler and John Wm. Niemand II. You
may revoke your proxy at any time prior to its exercise at the Annual Meeting
by giving notice to the Company's Secretary, by filing a later-dated proxy or,
if you attend the Annual Meeting, by voting your shares in person. Proxies will
be voted in accordance with the directions specified thereon or, in the absence
of instructions, "FOR" the election of the directors as set forth in this Proxy
Statement.
All Stockholders, or their duly appointed proxies, may attend the
Annual Meeting. Seating, however, is limited. Admission to the Annual Meeting
will be on a first-come, first-served basis. Registration is expected to begin
at 8:00 a.m., and seating is expected to be available at that time. Cameras,
recording equipment,
<PAGE> 6
communication devices or other similar equipment will not be permitted in the
meeting room without the prior written consent of the Company. In addition,
posters, placards and other signs and materials may not be displayed in the
meeting room. The Annual Meeting will be conducted in accordance with certain
rules and procedures established by the Company. These rules and procedures
will be announced or otherwise made available at the Annual Meeting.
PLEASE NOTE THAT IF YOU HOLD YOUR SHARES IN "STREET NAME" (THAT IS,
THROUGH A BROKER, BANK OR OTHER NOMINEE), YOU WILL NEED TO BRING A COPY OF A
BROKERAGE OR SIMILAR STATEMENT REFLECTING YOUR STOCK OWNERSHIP AS OF THE RECORD
DATE. ALL STOCKHOLDERS, OR THEIR DULY APPOINTED PROXIES, WILL BE REQUIRED TO
CHECK IN AT THE REGISTRATION DESK PRIOR TO THE ANNUAL MEETING. IN ADDITION, ALL
STOCKHOLDERS, REGARDLESS OF THEIR FORM OF OWNERSHIP, AND ALL PROXIES WILL ALSO
BE REQUIRED TO VERIFY THEIR IDENTITY WITH A DRIVER'S LICENSE OR OTHER
APPROPRIATE IDENTIFICATION BEARING A PHOTOGRAPH.
The presence, in person or by proxy, of the holders of shares of the
Company's capital stock entitled to cast a majority of the votes entitled to be
cast at the Annual Meeting is required to constitute a quorum for the
transaction of business at the Annual Meeting. Under Delaware law, abstentions
and broker non-votes (i.e., shares held in street name as to which the broker,
bank or other nominee has no discretionary power to vote on a particular
matter, has received no instructions from the persons entitled to vote such
shares, and has appropriately advised the Company that it lacks voting
authority) are counted for purposes of determining the presence or absence of a
quorum for the transaction of business, but will not be treated as shares
present and entitled to vote at the Annual Meeting (and not counted in the vote
totals) with respect to such matters on which the broker could not vote. A
plurality of the votes present, in person or by proxy, is necessary for the
election of directors. With regard to the election of directors, votes may be
cast in favor or withheld; votes that are withheld and broker non-votes will be
excluded entirely from the vote and will have no effect on the outcome.
Abstentions may not be specified in the election of directors.
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENVELOPE PROVIDED. IF YOUR SHARES ARE REGISTERED IN THE NAME OF
A BROKER, BANK OR OTHER NOMINEE, PLEASE CONTACT THE PERSON RESPONSIBLE FOR YOUR
ACCOUNT AND INSTRUCT HIM OR HER TO VOTE THE PROXY CARD AS SOON AS POSSIBLE. IF
YOU PLAN TO ATTEND THE ANNUAL MEETING TO VOTE IN PERSON AND YOUR SHARES ARE
REGISTERED IN THE NAME OF A BROKER, BANK OR OTHER NOMINEE, YOU MUST SECURE A
PROXY FROM SUCH NOMINEE ASSIGNING VOTING RIGHTS TO YOU FOR YOUR SHARES.
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<PAGE> 7
ELECTION OF DIRECTORS
At the Annual Meeting, six directors will be elected by the
Stockholders to serve until the 2000 Annual Meeting or until their respective
successors are duly elected and qualified. The six nominees receiving the
highest number of votes will be elected.
The six persons nominated for election to the Board of Directors at
the Annual Meeting are Robert J. Cruikshank, George T. Haymaker, Jr., Charles
E. Hurwitz, Ezra G. Levin, Raymond J. Milchovich and James D. Woods. Messrs.
Cruikshank, Haymaker, Hurwitz and Levin are currently members of the Board of
Directors. See, "Executive Officers and Directors" and "Principal Stockholders"
for information concerning each of the nominees, including their business
experience during the past five years and the number of shares of the Company's
capital stock owned beneficially by each of them as of April 16, 1999. Each of
the nominees has consented to serve as a member of the Board of Directors if
elected.
The persons named in the proxies will vote the shares represented
thereby for the election of the foregoing named nominees except where authority
has been withheld as to a particular nominee or as to all such nominees. Should
any nominee decline or be unable to serve as a director of the Company, which
is not anticipated, the persons named in the proxies will vote for the election
of such other person as the Board of Directors may recommend.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL
SUCH NOMINEES.
OTHER BUSINESS
Neither the Board of Directors nor management intends to bring before
the Annual Meeting any business other than the matter referred to in the Notice
of Annual Meeting of Stockholders and this Proxy Statement. Nonetheless, if any
other business should properly come before the Annual Meeting, or any
adjournments or postponements thereof, the persons named on the enclosed proxy
card will vote on such matters according to their best judgment.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors of the Company (sometimes referred to herein as
the "Board") held eight meetings and acted by written consent on six occasions
during 1998. In addition, management confers frequently with its directors on
an informal basis to discuss Company affairs. During 1998, no director attended
fewer than 75% of the aggregate of the meetings of the Board and all committees
of the Board on which he served.
The Board currently has four standing committees. These committees
consist of the Executive, Audit, Compensation Policy, and Section 162(m)
Compensation Committees.
The Executive Committee meets on call and has authority to act on most
matters during the intervals between meetings of the entire Board. The current
members are Messrs. Haymaker and Hurwitz (Chairman). The Executive Committee,
which did not meet during 1998, acted by written consent eight times.
The current members of the Audit Committee are Messrs. Levin, Marcus
(Chairman) and Petris. The Audit Committee meets with appropriate Company
financial and legal personnel, internal auditors and independent public
accountants and reviews the internal controls of the Company and the
objectivity and appropriateness of its financial reporting. The Audit Committee
also recommends to the Board the appointment and retention of the independent
public accountants to serve as auditors in examining the corporate accounts of
the Company and has the authority
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<PAGE> 8
to supervise and direct the financial reporting, affairs, policies and
procedures of the Company, limited only by restrictions imposed by applicable
law, rule or regulation. The independent public accountants periodically meet
privately with the Audit Committee and have access to the Audit Committee at
any time. The Audit Committee met two times during 1998.
The Compensation Policy Committee (the "Policy Committee") reviews and
approves proposals concerning or relating to the establishment or change of
benefits plans, material amendments to any existing benefit plan, salaries or
other compensation, except to the extent that (i) such authority has been
delegated by the Board to the Section 162(m) Compensation Committee (the
"Section 162(m) Committee") or designated officers, or (ii) such plans are
governed by the Board or a subsidiary's board of directors or covered by a
collective bargaining arrangement or other agreement. Notwithstanding the
foregoing, the Policy Committee also supervises plan committees other than the
Section 162(m) Committee and may delegate the administration and investment
decisions concerning plans to committees established for those purposes.
Messrs. Cruikshank, Levin (Chairman) and Marcus currently serve as members of
the Policy Committee. The Policy Committee, which met 30 times during 1998, did
not act by written consent during 1998.
The Section 162(m) Committee administers and approves amendments to
the Company's plans or programs which are intended to comply with the
provisions of Section 162(m) of the Internal Revenue Code of 1986, as it may be
amended from time to time (the "Code"). The Section 162(m) Committee also
establishes the criteria to be used in determining awards to be made pursuant
to such plans and programs. Messrs. Cruikshank and Marcus (Chairman) currently
serve as members of the Section 162(m) Committee. The Section 162(m) Committee,
which met 30 times during 1998, did not act by written consent during 1998.
The Board does not have a standing nominating committee nor does it
have any committee performing a similar function.
DIRECTOR COMPENSATION
Each of the directors who was not an employee of the Company, KAC, or
KAC's parent, MAXXAM Inc. ("MAXXAM"), received a base fee of $40,000 for 1998,
$10,000 of which was paid in the form of an option to purchase shares of KAC
Common Stock as more fully described below. Non-employee directors of the
Company who were also non-employee directors of MAXXAM received director or
committee fees for serving as a director of the Company and/or KAC in addition
to the fees received from MAXXAM. In addition, the Chairman of each of the
committees was paid a fee of $3,000 per year for services as Chairman. All
committee members also received a fee of $1,500 per day per committee meeting
held in person on a date other than a Board meeting date and $500 per formal
telephonic committee meeting. In respect of 1998, Messrs. Cruikshank, Levin,
Marcus and Petris received an aggregate of $20,000, $20,500, $23,000 and
$2,500, respectively, in such committee fees from the Company and KAC in the
form of cash payments.
Non-employee directors are also eligible to participate in the Kaiser
1997 Omnibus Stock Incentive Plan (the "1997 Omnibus Plan") and a program
pursuant to which each non-employee director of the Company is eligible to
receive an option to purchase KAC Common Stock at the average of the high and
low market price of the KAC Common Stock on the day of the grant. In each
instance the grant is intended to have a value of $10,000, and the number of
shares covered by the options is determined using a modified Black-Scholes
option pricing method. The program provides for such options to be granted
annually at the Company's regularly scheduled meeting of the Board in December.
Each option becomes exercisable as to all of the shares covered by the option
one year from the date of the grant. On December 8, 1998, Messrs. Cruikshank,
Levin, Marcus and Petris each received options under the program to purchase
2,439 shares of KAC Common Stock at an exercise price of $6.125 per share.
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<PAGE> 9
The Company also has a program pursuant to which a one-time grant of
an option to purchase KAC Common Stock is made to each new non-employee
director of the Company based on the market price of such stock on the day of
the grant. In each instance the grant is to have a value of $10,000, and the
number of shares covered by the option is to be determined using a modified
Black-Scholes option pricing method. Each option becomes exercisable as to all
of the shares covered by the option one year from the date of the grant. No
options were granted under this program in 1998.
KAC has adopted programs identical to the programs described in the
two preceding paragraphs, and each of the Company and KAC has expressed its
intention that the programs not be deemed to duplicate benefits with respect to
individuals who serve as a director of both the Company and KAC.
The Company and KAC also have a deferred compensation program in which
all non-employee directors are eligible to participate. By executing a deferred
fee agreement, a non-employee director may defer all or part of the fees from
the Company and KAC for services in such capacity for any calendar year. The
deferred fees are credited to a book account as of the date such fees would
have been paid to the director and are deemed "invested", in 25% increments, in
two investment choices: in phantom shares of KAC Common Stock and/or in an
account bearing interest calculated using one-twelfth of the sum of the prime
rate plus 2% on the first day of each month. If deferred, fees, including all
earnings credited to the book account, are paid in cash to the director or
beneficiary as soon as practicable following the date the director ceases for
any reason to be a member of the Board, either in a lump sum or in a specified
number of annual installments not to exceed ten, at the director's election.
Subject to the approval of the Chairman of the Board, directors may
also be paid additional ad hoc fees for extraordinary services in the amount of
$750 per one-half day or $1,500 per day. Directors are reimbursed for travel
and other disbursements relating to Board and committee meetings and
non-employee directors are provided travel accident insurance in respect of
Company-related business travel.
Fees to directors who are also employees of the Company or MAXXAM are
deemed to be included in their salary. Directors of the Company were also
directors of KAC and received the foregoing compensation for acting in both
capacities.
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<PAGE> 10
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information, as of April 16,
1999, with respect to the executive officers, directors and nominees for
director of the Company. All officers and directors hold office until their
respective successors are elected and qualified or until their earlier
resignation or removal.
<TABLE>
<CAPTION>
NAME POSITIONS AND OFFICES WITH THE COMPANY
- --------------------------------- --------------------------------------------------------------------
<S> <C>
George T. Haymaker, Jr. Chairman of the Board, Chief Executive Officer and Director
Raymond J. Milchovich President and Chief Operating Officer
John T. La Duc Executive Vice President and Chief Financial Officer
Joseph A. Bonn Vice President, Planning and Development
E. Bruce Butler Vice President and General Counsel
Robert E. Cole Vice President, Government Affairs
Wayne R. Hale Vice President, and President of Kaiser Primary Products
Jack A. Hockema Vice President, and President of Kaiser Engineered Products
W. Scott Lamb Vice President, Investor Relations and Corporate Communications
Daniel D. Maddox Vice President and Controller
Keith T. Milne Vice President, Corporate Development
Ronald L. Reman Vice President, Taxes
Geoffrey W. Smith Vice President, and President of Kaiser Alumina
Karen A. Twitchell Vice President and Treasurer
Kris S. Vasan Vice President, Financial Risk Management
John H. Walker Vice President, and President of Kaiser Flat-Rolled Products
John Wm. Niemand II Secretary
Charles E. Hurwitz Vice Chairman of the Board and Director
Robert J. Cruikshank Director
Ezra G. Levin Director
Robert Marcus Director
Robert J. Petris Director
James D. Woods --
</TABLE>
George T. Haymaker, Jr. Mr. Haymaker, age 61, was elected to the
positions of Chairman of the Board and Chief Executive Officer of the Company
and KAC effective January 1, 1994 and served as President of the Company and
KAC from June 1996 and May 1996, respectively, through July 1997. From May 1993
to December 1993, Mr. Haymaker served as President and Chief Operating Officer
of the Company and KAC. Mr. Haymaker became a director of the Company in June
1993, and a director of KAC in May 1993. From 1987 to April 1993, Mr. Haymaker
was a partner in a partnership which acquired, redirected and operated small to
medium sized companies in the metals industry. Since July 1987, Mr. Haymaker
has been a director, and from February 1992 through March 1993 was President,
of Midamerica Holdings (formerly Metalmark Corporation), which is in the
business of semi-fabrication of aluminum extrusions. From May 1986 until
February 1993, he also served as President of West Coast Sales Corp., which
provides management and acquisition services. Mr. Haymaker also served as Chief
Executive Officer and a director of Amarlite Architectural Products, Inc., a
producer of architectural curtain wall and entrance products, from August 1990
to April 1992 and from April 1989 to February 1993, respectively. He was a
director of American Powdered Metals Company, which is engaged in the
manufacture of
-6-
<PAGE> 11
powdered metal components, from August 1988 to March 1993, and Hayken Metals
Asia Limited, which represents manufacturers of aluminum and metal products,
from January 1988 to April 1993. From 1984 to 1986, Mr. Haymaker served as
Executive Vice President--Aluminum Operations of Alumax Inc., responsible for
all primary aluminum and semifabricating activities. Mr. Haymaker is also a
director of Flowserve Corporation, a provider of valves, pumps and seals.
Raymond J. Milchovich. Mr. Milchovich, age 49, became President and
Chief Operating Officer of the Company and KAC in July 1997. He served as Vice
President, President of Kaiser Flat-Rolled Products, of the Company from June
1995 through July 1997, and as a Vice President of KAC from May 1997 through
July 1997. From July 1986 to June 1995, Mr. Milchovich served as Divisional
Vice President of the Company's flat-rolled products business unit and Works
Manager of the Company's Trentwood facility in Spokane, Washington. Mr.
Milchovich is a nominee for director of the Company.
John T. La Duc. Mr. La Duc, age 56, was elected Executive Vice
President and Chief Financial Officer of the Company effective July 31, 1998,
and of KAC effective September 1, 1998. Mr. La Duc served as Treasurer of the
Company from June 1995 until February 1996, and served as Vice President and
Chief Financial Officer of the Company from June 1989 and January 1990,
respectively. He was also Vice President and Chief Financial Officer of KAC
from June 1989 and May 1990, respectively, and was Treasurer of KAC from August
1995 until February 1996 and from January 1993 until April 1993. Since
September 1990, Mr. La Duc has served as Senior Vice President of MAXXAM. Mr.
La Duc also serves as a Vice President and a director of MAXXAM Group Holdings
Inc., a wholly owned subsidiary of MAXXAM and parent of MAXXAM's forest
products operations ("MGHI"), as a Vice President and manager on the Board of
Managers of Scotia Pacific Company LLC ("Scopac LLC"), a wholly owned
subsidiary of MAXXAM engaged in forest product operations and successor by
merger in July 1998 to Scotia Pacific Holding Company, and as a director and
Vice President of The Pacific Lumber Company, the parent of Scopac LLC
("Pacific Lumber"). He previously served as Chief Financial Officer of MAXXAM
from September 1990 until December 1994.
Joseph A. Bonn. Mr. Bonn, age 55, has been Vice President, Planning
and Development of the Company since March 1997, and has been a Vice President
of KAC since May 1997. He served as Vice President, Planning and Administration
of the Company and KAC from July 1989 and February 1992, respectively, through
July 1997 and May 1997, respectively. Mr. Bonn has served as a Vice President
of the Company since April 1987 and served as Senior Vice
President--Administration of MAXXAM from September 1991 through December 1992.
He was also the Company's Director of Strategic Planning from April 1987 until
July 1989. From September 1982 to April 1987, Mr. Bonn served as General
Manager of various aluminum fabricating divisions.
E. Bruce Butler. Mr. Butler, age 59, became Vice President and General
Counsel of the Company and KAC in March 1997. Prior to becoming Vice President
and General Counsel of both companies, Mr. Butler served as Assistant General
Counsel -- Kaiser International of the Company from August 1996. Immediately
prior to joining the Company and KAC, Mr. Butler practiced in the Los Angeles
office of Arter & Hadden. Prior to joining Arter & Hadden, Mr. Butler served as
Vice President and General Counsel of Allied Signal Aerospace Company from 1988
to 1994 and International Counsel of Allied Signal, Inc. from 1984 through
1987. From 1971 through 1984, Mr. Butler practiced with Patton, Boggs & Blow,
where he became a partner in 1977 and served as the Resident Partner in the
firm's London office.
Robert E. Cole. Mr. Cole, age 52, has been a Vice President of the
Company since March 1981. Since September 1990, Mr. Cole also has served as
Vice President--Federal Government Affairs of MAXXAM and as a Vice President of
Pacific Lumber.
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<PAGE> 12
Wayne R. Hale. Mr. Hale, age 43, became a Vice President of the
Company effective November 1997 and President of Kaiser Primary Products
effective December 1997. From January 1, 1997, until accepting his current
position, Mr. Hale served as the Managing Director of Anglesey Aluminium
Limited, a United Kingdom corporation 49% owned by the Company ("Anglesey"), on
behalf of Rio Tinto plc, the owner of the 51% interest in Anglesey. Anglesey
owns and operates an aluminum smelter and port facility in Holyhead, Wales.
Between August 1990 and December 1996, Mr. Hale was employed by the Company and
served as Technical Manager and then Operations Manager of the Anglesey smelter
before becoming Managing Director of Anglesey in August 1995.
Jack A. Hockema. Mr. Hockema, age 52, became Vice President of the
Company and President of Kaiser Engineered Products in March 1997, and a Vice
President of KAC in May 1997. He served as President of Kaiser Extruded
Products and Engineered Components from September 1996 to March 1997. Mr.
Hockema served as a consultant to the Company and acting President of Kaiser
Engineered Components from September 1995 until September 1996. Mr. Hockema was
an employee of the Company from 1977 to 1982, working at the Company's
Trentwood facility, and serving as plant manager of its former Union City,
California, can plant and as operations manager for Kaiser Extruded Products.
Mr. Hockema left the Company to become Vice President and General Manager of
Bohn Extruded Products, a division of Gulf+Western, and later served as Group
Vice President of American Brass Specialty Products until June 1992. From June
1992 until September 1996, Mr. Hockema provided consulting and investment
advisory services to individuals and companies in the metals industry.
W. Scott Lamb. Mr. Lamb, age 44, was elected Vice President, Investor
Relations and Corporate Communications of the Company effective July 31, 1998,
and of KAC effective September 1, 1998. Mr. Lamb previously served as Director
of Investor Relations and Corporate Communications of the Company and KAC from
June 1997 through July 1998. From July 1995 through June 1997, he served as
Director of Investor Relations of the Company and KAC and from January 1995
through July 1995, he served as Director of Public Relations of the Company and
KAC. From January 1992 through January 1995, Mr. Lamb served as Director of
Public Relations of MAXXAM.
Daniel D. Maddox. Mr. Maddox, age 39, was elected to the position of
Vice President and Controller of the Company effective July 31, 1998, and of
KAC effective September 1, 1998. He served as Controller, Corporate
Consolidation and Reporting of the Company and KAC from October 1, 1997,
through July 1998 and September 1998, respectively. Mr. Maddox previously
served as Assistant Corporate Controller of the Company from June 1997 to
September 1997, and of KAC from May 1997 to September 1997 and as
Director--External Reporting of the Company from June 1996 to May 1997. Mr.
Maddox was with Arthur Andersen LLP from 1982 until joining the Company in June
1996.
Keith T. Milne. Mr. Milne, age 44, was elected Vice President,
Corporate Development of the Company effective July 31, 1998, and of KAC
effective September 1, 1998. Mr. Milne previously served as Vice President,
Corporate Development of the Company from September 1997. From September 1995,
Mr. Milne served as Vice President, Kaiser Aluminum International of the
Company. He previously served as Business Manager of the Company's Primary
Aluminum Business Unit from June 1993 until September 1995, and as Assistant
Treasurer of the Company from August 1992 until June 1993.
Ronald L. Reman. Mr. Reman, age 41, was elected Vice President, Taxes
of the Company effective July 31, 1998 and of KAC effective September 1, 1998.
From September 1992 through September 1998, Mr. Reman served as Assistant
Treasurer of the Company and KAC. Mr. Reman has served as Vice President--Taxes
of MAXXAM since September 1992. From July 1984 until October 1986, Mr. Reman
was a Senior Manager in the Tax Department of the New York office of Price
Waterhouse after having served seven years with the New York office of Coopers
& Lybrand. Mr. Reman also serves as Vice President--Taxes of MGHI, Pacific
Lumber and Scopac LLC.
-8-
<PAGE> 13
Geoffrey W. Smith. Mr. Smith, age 52, has been a Vice President of the
Company since January 1992, President of Kaiser Alumina since March 1999, and a
Vice President of KAC since May 1997. From June 1996 through March 1999, Mr.
Smith served as President of Kaiser Aluminum Commodities of the Company. From
June 1995 until June 1996, Mr. Smith served as President of Kaiser Alumina of
the Company, and from December 1994 until June 1995, Mr. Smith was General
Manager of the Company's alumina business unit. Mr. Smith previously served as
Co-General Manager of the Company's alumina business unit from September 1991
through December 1994. From September 1990 to January 1992, Mr. Smith was
Divisional Vice President of the Company's alumina business unit. From August
1988 to August 1990, Mr. Smith was Director of Business Development for the
alumina business unit, and from 1982 to August 1988, he was
Operations/Technical Manager for the Company's Gramercy, Louisiana facility.
Karen A. Twitchell. Ms. Twitchell, age 43, was elected to the position
of Vice President and Treasurer of the Company effective July 31, 1998, and of
KAC effective September 1, 1998. She has served as Treasurer of the Company and
KAC since February 1996. Prior to that time, Ms. Twitchell was Vice President
and Treasurer of Southdown, Inc., a Houston-based company specializing in
portland and masonry cement, from April 1994 and Treasurer from 1989.
Kris S. Vasan. Mr. Vasan, age 49, has been Vice President, Financial
Risk Management, of the Company since June 1995. Mr. Vasan previously served as
Treasurer of the Company from April 1993 until June 1995 and as Treasurer of
KAC from April 1993 until August 1995. Prior to that, Mr. Vasan served the
Company and KAC as Corporate Director of Financial Planning and Analysis from
June 1990 until April 1993. From October 1987 until June 1990, he served as
Associate Director of Financial Planning and Analysis.
John H. Walker. Mr. Walker, age 41, has been a Vice President of the
Company since November 1997, and President of Kaiser Flat-Rolled Products from
December 1997. From September 1996 through October 1997, Mr. Walker served as
Vice President, Operations of the Company's Flat-Rolled Products business unit
and Works Manager of the Company's Trentwood facility in Spokane, Washington.
Prior to joining the Company, Mr. Walker spent eight years with Weirton Steel
Company, a fully integrated steel producer ("Weirton Steel"). From August 1995
to September 1996, Mr. Walker was the Vice President of Operations for Weirton
Steel. From March of 1994 to August 1995, he served as General Manager of
Operations for Weirton Steel and prior to that served as the Director of
Operating Planning from 1991 to 1994.
John Wm. Niemand II. Mr. Niemand, age 54, became Secretary of the
Company in June 1997 and of KAC in May 1997. He previously served as an
Assistant Secretary of the Company and KAC since July 1988. Mr. Niemand served
as Senior Corporate Counsel of the Company and KAC from May 1992 through
December 1995, and has served as Assistant General Counsel of the Company and
KAC since January 1996.
Charles E. Hurwitz. Mr. Hurwitz, age 58, was appointed Vice Chairman
of the Company in December 1994 and has served as a director of the Company and
KAC since November and October 1988, respectively. Mr. Hurwitz has also served
as a member of the Board of Directors and the Executive Committee of MAXXAM
since August 1978 and was elected Chairman of the Board and Chief Executive
Officer of MAXXAM in March 1980. From January 1993 to January 1998, he also
served MAXXAM as President. Mr. Hurwitz has also been, since its formation in
November 1996, Chairman of the Board, President and Chief Executive Officer of
MGHI. He has been, since January 1974, Chairman of the Board and Chief
Executive Officer of Federated Development Company ("Federated"), a New York
business trust primarily engaged in the management of real estate investments
and principal stockholder of MAXXAM. Mr. Hurwitz has also served, since May
1993 and October 1995, respectively, as a director and Chairman of the Board of
SHRP General Partner, Inc. ("SHRP"), the managing general partner of Sam
Houston Race Park, Ltd., a Texas limited partnership which operates a horse
racing facility in Texas and in which MAXXAM holds a controlling interest
("SHRP, Ltd.").
-9-
<PAGE> 14
Robert J. Cruikshank. Mr. Cruikshank, age 68, has served as a director
of the Company and KAC since January 1994. In addition, he has been a director
of MAXXAM since May 1993. Mr. Cruikshank was a Senior Partner in the
international public accounting firm of Deloitte & Touche from December 1989
until his retirement in March 1993. Mr. Cruikshank served on the board of
directors of Deloitte Haskins & Sells from 1981 to 1985 and as Managing Partner
from June 1974 until its merger with Touche Ross & Co. in December 1989. Mr.
Cruikshank also serves as a director and on the Compensation Committee of
Reliant Energy Incorporated (formerly Houston Industries Incorporated), a
public utility holding company with interests in electric and natural gas
utilities, coal and transportation businesses; a director of Texas
Biotechnology Incorporated; a trust manager of Weingarten Realty Investors; a
director of American Residential Services, Inc.; and as advisory director of
Compass Bank--Houston.
Ezra G. Levin. Mr. Levin, age 65, has been a director of the Company
since November 1988, of KAC since July 1991, and of MAXXAM since May 1978. Mr.
Levin also served as a director of KAC from April 1988 to May 1990. Mr. Levin
has served as a director of Pacific Lumber since February 1997, and as a
manager on the Board of Managers of Scopac LLC since June 1998. From January
1974 through December 1995, he served as a trustee of Federated. Mr. Levin is a
partner in the law firm of Kramer Levin Naftalis & Frankel LLP.
James D. Woods. Mr. Woods, age 67, is a nominee for director of the
Company. Mr. Woods has served as Chairman Emeritus and Consultant for Baker
Hughes Incorporated from 1997 to the present, and he was Chairman of the Board
and Chief Executive Officer of Baker Hughes Incorporated from 1987 to 1996. Mr.
Woods is a director of The Kroger Co.; Varco International, Inc.; Howmet
International, Inc.; Wynn's International, Inc.; and OMI Corporation.
-10-
<PAGE> 15
PRINCIPAL STOCKHOLDERS
The following tables contain information with respect to persons
known to the Company to be the beneficial owners of more than 5% of the Common
Stock, the 1985 Series A Stock and the 1985 Series B Stock as of April 16,
1999. Shares are considered to be "beneficially" owned if the person has or
shares the power to vote or direct the voting for the securities, the power to
dispose of or direct the disposition of the securities, or the right to acquire
beneficial ownership within 60 days. As of April 16, 1999, no such shares were
beneficially owned by any executive officers, directors or nominees for
director of the Company.
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS--COMMON STOCK
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS(1)
---------------- -------------------- -----------
Kaiser Aluminum Corporation 46,171,365 shares 100%
5847 San Felipe, Suite 2600
Houston, Texas 77057
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS--CUMULATIVE (1985 SERIES A) PREFERENCE
STOCK
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS(1)
---------------- -------------------- -----------
Kaiser Aluminum USWA 296,936 shares 84.2%
Employee Stock Ownership Plan(2)
c/o Frank Russell Trust Company
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS--CUMULATIVE (1985 SERIES B) PREFERENCE
STOCK
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS(1)
---------------- -------------------- -----------
Kaiser Aluminum Salaried 14,900 shares 35.3%
Employee Stock Ownership Plan(2)
c/o Frank Russell Trust Company
- ------------------------------------
(1) The "Percent of Class" is computed using the shares outstanding on
April 16, 1999.
(2) Individual participants in such plan may direct such plan's Trustee
how to vote their shares; undirected shares are voted by the Trustee
in the same proportion as shares voted upon participant direction. The
address of Frank Russell Trust Company is 909 A Street, Tacoma,
Washington 98402.
-11-
<PAGE> 16
OWNERSHIP OF KAC
The following table sets forth, as of April 16, 1999, unless
otherwise indicated, the undiluted beneficial ownership of KAC's equity
securities by (i) those persons known by the Company to own beneficially more
than 5% of the shares of any class then outstanding, (ii) each of the directors
and nominees for director of the Company, (iii) each of the named executive
officers listed in the Summary Compensation Table, and (iv) all directors,
nominees for director and executive officers of the Company as a group.
<TABLE>
<CAPTION>
NAME OF
BENEFICIAL OWNER TITLE OF CLASS # OF SHARES(1) % OF CLASS
---------------- -------------- -------------- ----------
<S> <C> <C> <C>
MAXXAM Inc. Common Stock 50,000,000(2) 63.2
Vanguard Windsor Funds-Windsor Fund Common Stock 5,929,334(3) 7.5
Robert J. Cruikshank Common Stock 5,773(4) *
George T. Haymaker, Jr. Common Stock 237,428(5) *
Charles E. Hurwitz Common Stock 250,000(6)(7) *
John T. La Duc Common Stock 230,121(5) *
Ezra G. Levin Common Stock 3,773(6) *
Robert Marcus Common Stock 3,773(6) *
Raymond J. Milchovich Common Stock 189,840(5) *
Robert J. Petris Common Stock 3,773(6) *
Geoffrey W. Smith Common Stock 63,600(5) *
John H. Walker Common Stock 2,754 *
James D. Woods Common Stock -0- *
All directors, nominees for director and executive Common Stock 1,287,889(8) 1.6
officers of the Company as a group (23 persons)
</TABLE>
- ------------------------------------
* Less than 1%.
(1) Unless otherwise indicated, the beneficial owners have sole voting and
investment power with respect to the shares listed in the table. Also
includes options exercisable within 60 days of April 16, 1999, to
acquire such shares.
(2) Includes 27,938,250 shares beneficially owned by MGHI. As of April 16,
1999, such shares were pledged as security for $130.0 million
principal amount of 12% Senior Secured Notes due 2003. An additional
7,915,000 shares of KAC Common Stock were pledged by MAXXAM under a
separate agreement under which $16.0 million had been borrowed by
MAXXAM as of December 31, 1998. In addition to the foregoing, MAXXAM
has agreed to secure each $1.0 million of borrowings with 400,000
shares of KAC Common Stock under the terms of another $25 million
credit facility ($2.5 million outstanding at December 31, 1998). The
address of MAXXAM is 5847 San Felipe, Suite 2600, Houston, Texas
77057.
(3) Information is based solely on the Schedule 13G filed with the SEC on
February 10, 1999, by Vanguard Windsor Funds-Windsor Fund ("Vanguard")
as a result of its ownership interest in KAC at December 31, 1998 (the
"Vanguard 13G"). The Vanguard 13G indicates that these shares are held
of record by Vanguard and that Vanguard has sole voting power and
shared dispositive power with respect to these shares. Vanguard's
address is P.O. Box 2600, Valley Forge, Pennsylvania 19482. In
addition, Wellington Management Company, LLP, a registered investment
advisor ("Wellington"), filed a Schedule 13G with the SEC on February
10, 1999, as a result of its ownership interest in these shares at
December 31, 1998 (the "Wellington 13G"). The Wellington 13G indicates
that Wellington does not have sole or shared voting power with respect
to any of such shares and that Wellington has shared dispositive power
with respect to all of such shares. Wellington's address is 75 State
Street, Boston, Massachusetts 02109.
(4) Includes options exercisable within 60 days of April 16, 1999, to
acquire 3,773 shares of KAC Common Stock.
(5) Includes 181,033, 134,200, 102,950 and 20,240 options exercisable
within 60 days of April 16, 1999, to acquire shares of KAC Common
Stock, by Messrs. Haymaker, Milchovich, La Duc and Smith,
respectively.
(6) Represents only options exercisable within 60 days of April 16, 1999,
to acquire such shares.
(7) Excludes shares owned by MAXXAM. Mr. Hurwitz may be deemed to hold
beneficial ownership in KAC as a result of his beneficial ownership in
MAXXAM.
(8) Includes options exercisable within 60 days of April 16, 1999, to
acquire 843,966 shares of KAC Common Stock.
-12-
<PAGE> 17
OWNERSHIP OF MAXXAM
As of April 16, 1999, MAXXAM owned, directly and indirectly,
approximately 63.2% of the issued and outstanding KAC Common Stock. The
following table sets forth, as of April 16, 1999, the beneficial ownership of
the common stock and Class A $.05 Non-Cumulative Participating Convertible
Preferred Stock ("Preferred Stock") of MAXXAM by the directors of the Company,
and by the directors and nominees for director of the Company and the executive
officers of the Company as a group:
<TABLE>
<CAPTION>
NAME OF % OF COMBINED
BENEFICIAL OWNER TITLE OF CLASS # OF SHARES(1) OF CLASS VOTING POWER (2)
- ------------------------------------- ------------------- ---------------- -------- ----------------
<S> <C> <C> <C> <C>
Charles E. Hurwitz Common Stock 2,644,896(3)(4)(5) 37.6 68.9
Preferred Stock 720,941(6)(7) 99.2
Ezra G. Levin Common Stock 2,400(4)(5)(8) * *
Robert J. Cruikshank Common Stock 2,400(8) * *
All directors, nominees for director and Common Stock 2,650,828(9) 37.6 68.9
executive officers as a group (23 persons) Preferred Stock 720,941(6)(7) 99.2
</TABLE>
- ------------------------------------
* Less than 1%.
(1) Unless otherwise indicated, beneficial owners have sole voting and
investment power with respect to the shares listed in the table.
Includes the number of shares such persons would have received on
April 16, 1999, if any, for their exercisable stock appreciation
rights ("SARs") (excluding SARs payable in cash only) exercisable
within 60 days of such date if such rights had been paid solely in
shares of MAXXAM common stock.
(2) MAXXAM Preferred Stock is generally entitled to ten votes per share on
matters presented to a vote of MAXXAM's stockholders.
(3) Includes 1,669,451 shares of MAXXAM common stock owned by Federated
Development Inc., a wholly owned subsidiary of Federated ("FDI"), as
to which Mr. Hurwitz indirectly possesses voting and investment power.
Mr. Hurwitz serves as a trustee of Federated, and together with
members of his immediate family and trusts for the benefit thereof,
owns all of the voting shares of Federated. Also includes (a) 34,845
shares of MAXXAM common stock separately owned by Mr. Hurwitz's spouse
and as to which Mr. Hurwitz disclaims beneficial ownership, (b) 46,500
shares of MAXXAM common stock owned by the Hurwitz Investment
Partnership L.P., a limited partnership controlled by Mr. Hurwitz and
his spouse, 23,250 of which shares were separately owned by Mr.
Hurwitz's spouse prior to their transfer to such limited partnership
and as to which Mr. Hurwitz disclaims beneficial ownership, (c) 91,926
shares of MAXXAM common stock owned by the 1992 Hurwitz Investment
Partnership L.P., of which 45,963 shares are owned by Mr. Hurwitz's
spouse as separate property and as to which Mr. Hurwitz disclaims
beneficial ownership, (d) 704,645 shares of MAXXAM common stock held
directly by Mr. Hurwitz, (e) 60,000 shares of MAXXAM common stock
owned by Federated Development Investments, LLC, which is owned 79% by
FDI and 21% by Mr. Hurwitz, and of which FDI is the managing member
("FDILLC"), (f) options to purchase 21,029 shares of MAXXAM common
stock held by FDI, and (g) options held by Mr. Hurwitz to purchase
16,500 shares of MAXXAM common stock within 60 days of April 16, 1999.
(4) FDI, Federated, FDILLC, the Hurwitz Investment Partnership L.P., the
1992 Hurwitz Investment Partnership L.P., Messrs. Hurwitz and Levin,
and Mr. James H. Paulin, Jr., may be deemed a "group" (the
"Stockholder Group") within the meaning of Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). As
of April 16, 1999, in the aggregate, the members of the Stockholder
Group who are also officers or directors of the Company beneficially
owned 2,647,296 shares of MAXXAM common stock and 720,941 shares of
Preferred Stock, aggregating approximately 68.9% of the total voting
power of MAXXAM. By reason of the foregoing and their relationship
with the members of the Stockholder Group, Messrs. Hurwitz and Levin
may be deemed to possess shared voting and investment power with
respect to the shares held by the Stockholder Group.
(5) Does not include shares owned by other members of the Stockholder
Group.
(6) Includes 661,377 shares owned by FDI as to which Mr. Hurwitz possesses
voting and investment power and 1,064 shares held directly.
(7) Includes options exercisable within 60 days of April 16, 1999, to
acquire 58,500 shares of Preferred Stock.
(8) Includes options exercisable within 60 days of April 16, 1999, to
acquire 1,400 shares of MAXXAM common stock.
(9) Includes (i) options exercisable within 60 days of April 16, 1999, to
acquire 40,329 shares of MAXXAM common stock, and (ii) 882 shares of
MAXXAM common stock which would have been received on April 16, 1999
for 4,000 SARs exercisable within 60 days of such date, if such SARs
had been paid solely in shares of MAXXAM common stock.
-13-
<PAGE> 18
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
Although certain plans or programs in which executive officers of
the Company participate are jointly sponsored by the Company and KAC, executive
officers of the Company are directly employed and compensated by the Company.
The following table sets forth compensation information, cash and non-cash, for
each of the Company's last three completed fiscal years with respect to the
Chief Executive Officer and the four most highly compensated executive officers
of the Company (collectively referred to as the "named executive officers") for
the fiscal year ended December 31, 1998:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------- ------ -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
OTHER RESTRICTED
ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($) (#) ($)(2) ($)
- ---------------------------- ----- ------- -------- -------------- ---------- -------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
George T. Haymaker, Jr 1998 563,583 290,000 -0- -0- 669,000 294,328 28,179(3)
Chairman and Chief 1997 494,083 311,000 -0- -0- -0- 121,122 24,704(3)
Executive Officer 1996 487,000 71,638 -0- -0- -0- -0- 9,740(3)
Raymond J. Milchovich 1998 419,583 250,000 -0- -0- 635,000 102,211 20,979(3)
President and Chief 1997 272,083 211,000 -0- -0- -0- 71,212 17,796(3)(4)
Operating Officer 1996 223,750 42,700 -0- -0- -0- -0- 77,158(3)(4)
John T. La Duc 1998 320,000 220,000(5) -0- -0- 468,750 124,356 16,000(3)
Executive Vice President and 1997 260,000 184,000(5) -0- -0- -0- 44,236 13,000(3)
Chief Financial Officer 1996 260,000 83,200(5) -0- -0- -0- -0- 5,200(3)
John H. Walker 1998 216,250 300,000 20,000(6) -0- -0- 25,877 9,839(3)
Vice President, and 1997 192,500 155,715(7) -0- -0- -0- 1,652 9,943(3)(4)
President of Kaiser Flat- 1996 45,714 83,979(7) -0- -0- -0- -0- 9,292(4)
Rolled Products
Geoffrey W. Smith 1998 255,000 155,325 -0- -0- -0- 139,300 85,083(3)(4)
Vice President, and President 1997 255,000 116,635 -0- -0- -0- 68,250 55,743(3)(4)
of Kaiser Alumina 1996 246,250 38,000 -0- -0- -0- -0- 33,550(3)(4)
</TABLE>
- ------------------------------------
(1) Excludes perquisites and other personal benefits because the aggregate
amount of such compensation does not exceed the lesser of $50,000 or
10% of the total of annual salary and bonus reported. Tax preparation
fees for each of the named executive officers, other than Mr. Walker,
and the value of the personal use of company cars with respect to each
named executive officer exceed 25% of the total perquisites and other
personal benefits received by each such named executive officer.
(2) The long-term component of the Company's incentive compensation
program in effect for the periods covered above provides incentive
compensation based on performance against goals over rolling
three-year periods. Payments are generally made 57% in shares of KAC
Common Stock and 43% in cash and are paid in two equal installments;
the first during the year following the end of the three-year period
and the second during the following year. The amounts indicated
reflect the value of the actual payment received under the program
during the year indicated with the stock portion of each amount being
based on the market value on the date of distribution. No payments
were made under the program in 1996. Total awards for the 1994-1996,
1995-1997 and 1996-1998 periods were $230,000, $362,100 and $250,000
for Mr. Haymaker; $40,280, $161,500 and $150,000 for Mr. Milchovich;
$84,000, $164,900 and $120,000 for Mr. La Duc; $1,456, $21,900 and
$27,500 for Mr. Walker; and $129,600, $152,700 and $128,395 for Mr.
Smith, respectively. Additional information with respect to the
long-term component of the Company's incentive compensation program is
set forth below in the Long-Term Incentive Plan Awards Table and in
the Report of the Compensation Committees on Executive Compensation.
-14-
<PAGE> 19
(3) Includes accruals by the Company of $28,179, $24,704 and $9,740 for
Mr. Haymaker; $20,979, $13,604 and $4,475 for Mr. Milchovich; $16,000,
$13,000 and $5,200 for Mr. La Duc; $9,839, $800 and $0 for Mr. Walker;
and $12,750, $12,750 and $4,925 for Mr. Smith under the Kaiser Savings
Plan and Kaiser Supplemental Benefits Plan (each as defined below) for
1998, 1997 and 1996, respectively.
(4) Includes moving-related items of $4,192 and $72,683 for Mr. Milchovich
for 1997 and 1996; $9,143 and $9,292 for Mr. Walker for 1997 and 1996;
and $72,333, $42,993 and $28,625 for Mr. Smith for 1998, 1997 and
1996.
(5) Includes $50,000 (to be paid over a two-year period) for each of 1998,
1997 and 1996, respectively, which will be reimbursed by MAXXAM.
(6) Additional compensation pursuant to program established to compensate
salaried employees at pre-determined hourly rates for additional
services performed in connection with the strike by the United
Steelworkers of America.
(7) Includes payments of $50,000 and $75,000 made in 1997 and 1996,
respectively, in connection with Mr. Walker's signing bonus.
OPTION GRANTS
The following table sets forth certain information concerning stock
options granted in fiscal year 1998 to each of the Company's named executive
officers who were granted stock options during that period:
INDIVIDUAL GRANTS(1)
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f)
# OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION GRANT DATE
NAME GRANTS 1998 ($/SHARE) DATE PRESENT VALUE ($)
- ------------------------- ---------- ------------ ----------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
George T. Haymaker, Jr. 386,000 17.1 12.0000 01/01/07 1,604,404(2)
283,000 12.5 9.3594 12/31/02 999,076(3)
Raymond J. Milchovich 635,000 28.2 9.4063 07/02/03 3,150,000(4)
John T. La Duc 468,750 20.8 9.3125 07/10/03 2,325,000(4)
</TABLE>
- ------------------------------------
(1) Represents options with respect to shares of KAC Common Stock only.
(2) Valuation utilizing modified Black-Scholes Option Price Model with the
following assumptions: 3-year monthly volatility for KAC Common Stock,
5.84% risk-free rate (based on U.S. Treasury strip rate on the date of
grant with a term equal to that of the option), no dividend yield and
9-year exercise date. No adjustments were made for non-transferability
or risk of forfeiture.
(3) Valuation utilizing modified Black-Scholes Option Price Model with the
following assumptions: 3-year monthly volatility for KAC Common Stock,
5.66% risk-free rate (based on U.S. Treasury strip rate on the date of
grant with a term equal to that of the option), no dividend yield and
5-year exercise date. No adjustments were made for non-transferability
or risk of forfeiture. One-third of these stock options vested on
December 31, 1998. An additional one-third vests on each December 31,
thereafter until fully vested.
(4) Valuation utilizing Black-Scholes Option Price Model with the
following assumptions: 3-year monthly volatility for KAC Common Stock,
5.8% risk-free rate (based on estimated 5-year T-Bond rate as of the
grant date), no dividend yield and 5-year exercise date. No
adjustments were made for non-transferability or risk of forfeiture.
One-fifth of these stock options vested on December 31, 1998. An
additional one-fifth vests on each December 31, thereafter until fully
vested.
The stock options set forth in the above table were granted under the
1997 Omnibus Plan. Each of the foregoing options is exercisable for cash, KAC
Common Stock or a combination thereof. Additional information with respect to
the terms of each grant are set forth below under the caption "Employment
Contracts and Termination of Employment and Change-in-Control Arrangements".
-15-
<PAGE> 20
OPTION/SAR EXERCISES AND FISCAL YEAR END VALUE TABLE
The table below provides information on an aggregated basis concerning
each exercise of stock options and SARs during the fiscal year ended December
31, 1998, by each of the Company's named executive officers, and the 1998
fiscal year-end value of unexercised options and SARs.
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
AT YEAR END (#)(1) AT FISCAL YEAR-END ($)
------------------ ----------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE (#)(2) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
George T. Haymaker, Jr. -0- -0- 181,033 574,667 --(3) --(3)
Raymond J. Milchovich -0- -0- 134,200 508,000 --(3) --(3)
John T. La Duc -0- -0- 102,950 375,000 --(3) --(3)
-0- 134,250 4,000(4) -0- 117,500(4) --
John H. Walker -0- -0- -0- -0- -- --
Geoffrey W. Smith -0- -0- 20,240 -0- --(3) --
</TABLE>
- ------------------------------------
(1) Except as otherwise indicated, all references are to options to
purchase shares of KAC Common Stock.
(2) If no shares received, the number reflected, if any, represents the
number of securities with respect to which options/SARs were
exercised.
(3) Valued at $4.875, the closing price of KAC Common Stock on December
31, 1998, less exercise price. No value is shown because the exercise
price is higher than the closing price.
(4) Represents SARs relating to MAXXAM common stock. Valued at $57.375 per
share, the closing price of MAXXAM common stock on December 31, 1998,
less exercise price. The SARs relating to MAXXAM common stock set
forth in the above table for Mr. La Duc were granted under MAXXAM's
1984 Phantom Share Plan (the "MAXXAM Phantom Plan"). All of Mr. La
Duc's SARs under the MAXXAM Phantom Plan are exercisable for cash
only.
LONG-TERM INCENTIVE PLAN AWARDS TABLE
Each of the Company's named executive officers received awards in 1998
under the long-term component of the Company's incentive compensation program
for the 1994-1996 and 1995-1997 three-year, long-term performance periods. The
following table and accompanying footnotes describe the awards received by each
of the Company's named executive officers in 1998.
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK PRICE BASED PLANS (5)
-------------------------------------
(a) (b) (c) (d) (e) (f)
PERFORMANCE OR
OTHER PERIODS
NUMBER OF UNTIL MATURATION
NAME SHARES (1) OR PAYOUT THRESHOLD TARGET MAXIMUM
------ ------------ ----------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
George T. Haymaker, Jr. 5,762(2) -- -- -- --
10,887(3) --(4) -- -- --
Raymond J. Milchovich 1,009(2) -- -- -- --
4,855(3) --(4) -- -- --
John T. La Duc 2,104(2) -- -- -- --
4,957(3) --(4) -- -- --
John H. Walker -0-(2) -- -- -- --
657(3) --(4) -- -- --
Geoffrey W. Smith 3,247(2) -- -- -- --
4,589(3) --(4) -- -- --
</TABLE>
- ------------------------------------
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<PAGE> 21
(1) Represents shares of KAC Common Stock only.
(2) Represents the stock portion of the second installment of long-term
incentive award distributed in March 1998 in connection with the
1994-1996 three-year, long-term performance period. The average
closing price of KAC Common Stock during December 1996 was $11.375 per
share. The total awards for the 1994-1996 long-term performance period
for Messrs. Haymaker, Milchovich, La Duc, Walker and Smith were
$230,000, $90,480, $84,000, $1,456 and $129,600, respectively.
(3) Represents the stock portion of the first installment of long-term
incentive award distributed in March 1998 in connection with the
1995-1997 three-year, long-term performance period. The average
closing price of KAC Common Stock during December 1997 was $9.48 per
share. The total awards for the 1995-1997 long-term performance period
for Messrs. Haymaker, Milchovich, La Duc, Walker and Smith were
$362,100, $161,500, $164,900, $21,900 and $152,700, respectively.
(4) As more fully described below, payment of the second installment for
the 1995-1997 long-term performance period was conditioned on
continued employment through December 31, 1998. Each of the Company's
named executive officers were employed by the Company on January 1,
1999, and the second installment was distributed in April 1999.
(5) All payments in connection with the 1994-1996 and 1995-1997
three-year, long-term performance periods have been made. As more
fully described below, the total award for the 1996-1998 three-year,
long-term performance period has been determined. The first
installment was distributed in April 1999 and the second installment
will, subject to certain conditions, be distributed in 2000.
Threshold, target and maximum dollar amounts for the long-term portion
of executive compensation are based upon Company performance. Minimum
performance criteria must be met before the threshold amount is earned.
Payments under the long-term portion of the program are generally made 57% in
shares of KAC Common Stock and 43% in cash. The aggregate number of shares
distributed is based on the average closing price of KAC Common Stock during
the last December of the performance period.
Awards are paid in two equal installments: the first during the year
following the end of the three-year period and the second during the following
year. Payment of the second installment is generally conditioned on continued
employment through the end of the fiscal year following the end of the
performance period. If a participant voluntarily terminates his or her
employment for any reason other than death, disability or retirement prior to
the beginning of the fiscal year the payment is to be made, any unmade payments
are forfeited.
During the 1994-1996 and 1995-1997 performance periods target
incentives were based on the return on assets employed in the business. When
incentive awards are determined at the end of each performance period, up to an
additional 30% of each individuals incentive target based on the achievement of
goals or other accomplishments not reflected in the return on assets, may be
added to the incentive payment amount. Although the Section 162(m) Committee
cannot increase the incentive payment, it may decrease the payment by up to 60%
of the target incentive. Additional information with respect to long-term
incentive compensation awarded to the Company's named executive officers,
including information with respect to the 1996-1998 performance period, is set
forth above in the Summary Compensation Table and below in the Report of the
Compensation Committees on Executive Compensation.
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<PAGE> 22
DEFINED BENEFIT PLANS
Kaiser Retirement Plan
The Company maintains a qualified, defined-benefit retirement plan
(the "Kaiser Retirement Plan") for salaried employees of the Company and
co-sponsoring subsidiaries who meet certain eligibility requirements. The table
below shows estimated annual retirement benefits payable under the terms of the
Kaiser Retirement Plan to participants with the indicated years of credited
service. These benefits are reflected without reduction for the limitations
imposed by the Code on qualified plans and before adjustment for the Social
Security offset, thereby reflecting aggregate benefits to be received, subject
to Social Security offsets, under the Kaiser Retirement Plan and the Kaiser
Supplemental Benefits Plan (as defined below).
<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE ANNUAL ----------------
REMUNERATION 15 20 25 30 35
- ------------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$ 250,000 56,250 75,000 93,750 112,500 131,250
350,000 78,750 105,000 131,250 157,500 183,750
450,000 101,250 135,000 168,750 202,500 236,250
550,000 123,750 165,000 206,250 247,500 288,750
650,000 146,250 195,000 243,750 292,500 341,250
750,000 168,750 225,000 281,250 337,500 393,750
850,000 191,250 255,000 318,750 382,500 446,250
950,000 213,750 285,000 356,250 427,500 498,750
1,050,000 236,250 315,000 393,750 472,500 551,250
</TABLE>
The estimated annual retirement benefits shown are based upon the assumptions
that current Kaiser Retirement Plan and Kaiser Supplemental Benefits Plan
provisions remain in effect, that the participant retires at age 65, and that
the retiree receives payments based on a straight-life annuity for his
lifetime. Messrs. Haymaker, Milchovich, La Duc, Walker and Smith had 5.7, 18.6,
29.3, 2.25 and 24.5 years of credited service, respectively, on December 31,
1998. Monthly retirement benefits, except for certain minimum benefits, are
determined by multiplying years of credited service (not in excess of 40) by
the difference between 1.50% of average monthly compensation for the highest
base period (of 36, 48 or 60 consecutive months, depending upon compensation
level) in the last 10 years of employment and 1.25% of monthly primary Social
Security benefits. Pension compensation covered by the Kaiser Retirement Plan
and the Kaiser Supplemental Benefits Plan consists of salary and bonus amounts
set forth in the Summary Compensation Table (column (c) plus column (d)
thereof). As more fully described below under the caption "Employment Contracts
and Termination of Employment and Change-in-Control Arrangements", Messrs.
Haymaker and Smith have agreements which provide additional years of credited
service.
Participants are entitled to retire and receive pension benefits,
unreduced for age, upon reaching age 62 or after 30 years of credited service.
Full early pension benefits (without adjustment for Social Security offset
prior to age 62) are payable to participants who are at least 55 years of age
and have completed 10 or more years of pension service (or whose age and years
of pension service total 70) and who have been terminated by the Company or an
affiliate for reasons of job elimination or partial disability. Participants
electing to retire prior to age 62 who are at least 55 years of age and who
have completed 10 or more years of pension service (or whose age and years of
pension service total at least 70) may receive pension benefits, unreduced for
age, payable at age 62 or reduced benefits payable earlier. Participants who
terminate their employment after five years or more of pension service, or
after age 55 but prior to age 62, are entitled to pension benefits, unreduced
for age, commencing at age 62 or, if they have completed 10 or more years of
pension service, actuarially reduced benefits payable earlier. For participants
with five or more years of pension service or who have reached age 55 and who
die, the Kaiser Retirement Plan provides a pension to their eligible surviving
spouses. Upon retirement, participants may elect among several payment
alternatives including, for most types of retirement, a lump-sum payment.
-18-
<PAGE> 23
Kaiser Supplemental Benefits Plan
The Company maintains an unfunded, non-qualified Supplemental
Benefits Plan (the "Kaiser Supplemental Benefits Plan"), the purpose of which
is to restore benefits which would otherwise be paid from the Kaiser Retirement
Plan or the Supplemental Savings and Retirement Plan, a qualified Section
401(k) plan (the "Kaiser Savings Plan"), were it not for the Section 401(a)(17)
and Section 415 limitations imposed by the Code. Participation in the Kaiser
Supplemental Benefits Plan includes all employees of the Company and its
subsidiaries whose benefits under the Kaiser Retirement Plan and Kaiser Savings
Plan are likely to be affected by such limitations imposed by the Code.
Eligible participants are entitled to receive the equivalent of the Kaiser
Retirement Plan and Kaiser Savings Plan benefits which they may be prevented
from receiving under those plans because of such Code limitations.
Kaiser Termination Payment Policy
Most full-time salaried employees of the Company are eligible for
benefits under an unfunded termination policy if their employment is
involuntarily terminated, subject to a number of exclusions. The policy
provides for lump-sum payments after termination ranging from one-half month's
salary for less than one year of service graduating to eight months' salary for
30 or more years of service. The amounts payable to Messrs. Haymaker,
Milchovich, La Duc, Walker and Smith under the policy if they had been
involuntarily terminated on December 31, 1998 would have been $94,833,
$197,917, $204,167, $18,750 and $170,000, respectively.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
George T. Haymaker, Jr.
On April 1, 1993, the Company and KAC entered into a five-year
employment agreement with Mr. Haymaker, pursuant to which he currently serves
as Chairman and Chief Executive Officer of the Company and KAC. Mr. Haymaker's
employment agreement, as amended, terminates December 5, 1999, and provides for
an annual base salary of not less than $569,000, and a cumulative bonus target
in 1999 of $1,245,000 under the Company's executive compensation programs as
more fully described below in the Report of the Compensation Committees on
Executive Compensation. Of this amount, $395,000 is attributable to Mr.
Haymaker's short-term incentive target and $850,000 is attributable to his
long-term incentive target for the three-year period ending December 31, 1999.
Pursuant to his employment agreement, Mr. Haymaker received an
initial award under the Kaiser 1993 Omnibus Stock Incentive Plan (the "1993
Omnibus Plan") of options to purchase up to 100,000 shares of KAC Common Stock
at its fair market value on the date of the award. Such options vested at the
rate of 20% per year and are now fully vested.
In the event of a change of control of the Company or KAC which
within one year thereafter adversely affects Mr. Haymaker's title, position,
duties, responsibilities or compensation, Mr. Haymaker's employment agreement
provides that he may elect to be deemed terminated without cause, and
therefore, entitled to a severance payment in an amount equal to two times his
base annual salary reduced by any payment made as discussed under "Kaiser
Termination Payment Policy" above.
Under the terms of his employment agreement, Mr. Haymaker vested 20%
per year in an unfunded non-qualified supplemental benefit, payable at
retirement after age 62, equal to a benefit determined as if his Kaiser
Retirement Plan pension were based on his aggregate service with the Company
and a prior employer (25 years), less his pension from that prior employer and
any retirement benefits from the Company. Mr. Haymaker is now fully vested
under this provision.
-19-
<PAGE> 24
In 1998, Mr. Haymaker also received two stock option grants. The
first grant, made under the 1997 Omnibus Plan, consisted of options to purchase
386,000 shares of KAC Common Stock at an exercise price of $12.00 per share,
subject to adjustment under certain circumstances. The options covered by this
grant become effective (i) if prior to January 1, 2001, the value of KAC Common
Stock equals or exceeds $18 per share (less certain distributions) as
determined under the terms of the grant (the "Performance Hurdle"), (ii) if the
Performance Hurdle is not achieved, then on January 1, 2007, provided that Mr.
Haymaker's employment has not terminated as of such date, or (iii) if a
significant transaction such as the sale of all or substantially all of the
assets of the Company or KAC or a change of control arising from a fundamental
corporate transaction occurs prior to December 31, 2000, then on the date the
transaction is consummated. Notwithstanding the foregoing, upon becoming
effective, not more than one-half of the options covered by this grant may be
exercised prior to the earlier of March 1, 2001 or the occurrence of a
fundamental corporate transaction. In the event of Mr. Haymaker's termination
of employment by the Company (other than for cause) prior to March 1, 2001, all
of the stock options covered by this grant become exercisable in full subject
to the terms of the grant and provided that they have otherwise become
effective.
The second grant, also under the 1997 Omnibus Plan, consisted of
options to purchase 283,000 shares of KAC Common Stock at an exercise price of
$9.3594 per share, subject to adjustment under certain circumstances. The
options covered by the second grant generally vest at the rate of one-third per
year, beginning on December 31, 1998, with an additional one-third vesting each
December 31, thereafter until fully vested. In the event of Mr. Haymaker's
termination of employment by the Company (other than for cause), all of the
unvested stock options covered by this grant immediately vest and become
exercisable in full.
Raymond J. Milchovich
Mr. Milchovich and the Company entered into a five-year employment
agreement effective January 1, 1998. Pursuant to the terms of the agreement,
Mr. Milchovich is currently entitled to a base salary of $475,000 per year.
This amount is reviewed annually by the Policy Committee to evaluate Mr.
Milchovich's performance, and in any event adjusted for inflation consistent
with the general program of increases for other executives and management
employees. Mr. Milchovich's agreement also establishes an annual target bonus
of $270,000 (subject to adjustment for inflation) payable upon the Company
achieving short-term objectives under the executive bonus plan which are to be
agreed upon annually and otherwise consistent with the Company's business plan.
Pursuant to the terms of the agreement, Mr. Milchovich received a
grant under the 1997 Omnibus Plan of options to purchase 635,000 shares of KAC
Common Stock at an exercise price of $9.4063 per share. This grant was intended
to have a value at the date of grant equivalent to a value of five times Mr.
Milchovich's annual long-term incentive target of $630,000 and to be in lieu of
any payment of long-term incentive compensation under the Company's executive
bonus plan for the five-year period beginning January 1, 1998, although Mr.
Milchovich remains eligible for additional option grants. The options granted
pursuant to the terms of Mr. Milchovich's agreement generally vest at the rate
of 20% per year, beginning on December 31, 1998, with an additional 20% vesting
each December 31, thereafter until fully vested.
Mr. Milchovich's agreement provides that upon the termination of his
employment (other than for cause, by reason of his acceptance of an offer of
employment with an affiliate or because of voluntary termination for other than
good reason), Mr. Milchovich is entitled to a lump sum payment equal to the sum
of (i) the benefit he would have received under the Kaiser Retirement Plan and
Kaiser Supplemental Benefits Plan as if he had qualified for a fully early
pension less benefits payable from such plans, (ii) an amount equal to his base
salary as of the date of termination for a period equal to the greater of (a)
the number of months remaining in the term of his agreement or (b) two years,
and (iii) his annual target bonus for the year of termination (but not less
than the initial target established by the agreement). In addition, in the
event of Mr. Milchovich's termination under the circumstances described above,
all of the unvested stock options held by Mr. Milchovich on the date of
termination that would have vested during the term of his agreement immediately
vest and become exercisable in full. In the event of a change of control, the
benefits described above are also payable upon either the subsequent
termination of Mr. Milchovich's
-20-
<PAGE> 25
employment by the Company other than for cause or the subsequent termination of
employment by Mr. Milchovich for any reason within twelve months following a
change of control.
John T. La Duc
Mr. La Duc and the Company entered into a five-year employment
agreement effective January 1, 1998. The terms of Mr. La Duc's employment
agreement are substantially similar to the terms of Mr. Milchovich's agreement
as described above, the primary differences being that under the terms of his
agreement, Mr. La Duc (i) is currently entitled to a base salary of $350,000
per year, (ii) has an annual target bonus of $200,000, and (iii) received a
grant under the 1997 Omnibus Plan of options to purchase 468,750 shares of KAC
Common Stock at an exercise price of $9.3125 per share, which amount was based
on Mr. La Duc's annual long-term incentive target of $465,000.
John H. Walker
Mr. Walker and the Company entered into a letter agreement dated July
27, 1998, pursuant to which Mr. Walker is entitled to the severance benefits
described below under the caption "Kaiser Severance Protection and Change of
Control Benefits Program". Pursuant to the terms of the letter agreement Mr.
Walker is entitled to the maximum level of severance benefits available under
the Program (as defined below).
Geoffrey W. Smith
The Company has agreed to provide Mr. Smith with an unfunded
nonqualified supplemental benefit after retirement equal to the additional
Kaiser Retirement Plan pension he would be entitled to receive if his prior
employment (6.3) years with an affiliate of the Company were counted as
credited service under such plan. This additional credited service is also
counted in determining his benefits as described above under the caption
"Kaiser Termination Payment Policy" and for purposes of determining his
employee contributions under the Company's retiree medical program.
Kaiser Severance Protection and Change of Control Benefits Program
In 1998, the Company and KAC implemented the Kaiser Severance
Protection and Change of Control Benefits Program (the "Program") in order to
provide certain selected executive officers of the Company and KAC and key
employees of the Company (collectively, "Participants") with (i) incentives
intended to increase the likelihood of retaining the services of the
Participants and/or (ii) appropriate protection in the event of a job loss or
change of control. The Program will generally remain in effect through December
31, 2000.
The three components of the Program, each of which is described more
fully below, consist of (i) severance payments and benefits in the event of
termination, (ii) retention payments conditioned upon continued employment
through specified dates, and (iii) options relating to KAC Common Stock. Under
the Program, the Company and KAC have the sole discretion to determine which
persons will participate in the Program and the level of participation. Not all
components of the Program were made available to all Participants.
Selected Participants are eligible for severance benefits under the
Program upon termination of employment for any reason other than (i) the
voluntary resignation or retirement of the Participant, (ii) the discharge of
the Participant for serious cause or other reason prejudicial to the Company or
KAC, (iii) the Participant becoming eligible for sick leave, long-term
disability or full early disability benefits under the Kaiser Retirement Plan,
(iv) the Participant's refusal to accept another suitable position with the
Company or KAC, or (v) the Participant's death. The benefits payable generally
consist of a lump sum cash payment ranging from six months to one year of base
salary (including, in some instances, prorated incentive awards based upon
designated incentive targets) less whatever severance benefits the Participant
would otherwise be eligible to receive under the Kaiser Termination Payment
Policy. Participants may also be entitled under the Program to continued
medical, dental, life and accidental death and disability coverage for
designated periods after termination.
-21-
<PAGE> 26
In lieu of the severance benefits described above, selected
Participants are also eligible for severance benefits in the event the
Participant's employment terminates or constructively terminates due to a
change of control or significant restructuring (collectively, a "Fundamental
Change") during a period which commences ninety (90) days prior to a
Fundamental Change and ends on the first anniversary of the Fundamental Change.
These benefits are not available if (i) the purchaser, new controlling entity,
the Company or KAC offer the Participant suitable employment in a substantially
similar capacity at the Participant's current level of compensation (regardless
of whether the Participant accepts or rejects the suitable position), (ii) the
Participant voluntarily resigns or is terminated, (iii) the Participant is
discharged for serious cause or other reason prejudicial to the Company or KAC,
(iv) the Participant becomes eligible within ninety (90) days prior to the
Fundamental Change for sick leave, long-term disability or full early
disability benefits under the Kaiser Retirement Plan, or (v) the Participant
dies. If a Participant fails to qualify for severance benefits under the
Program as a result of a termination of the Participant's employment due to a
Fundamental Change, the Participant will also fail to qualify for the severance
benefits described above in the preceding paragraph.
The benefits payable under the Program as a result of a termination
of employment due to a Fundamental Change generally consist of a lump sum cash
payment in an amount ranging from nine months to two years of base salary
(including, in some instances, prorated incentive awards based upon designated
incentive targets) less whatever severance benefits the Participant would
otherwise be eligible to receive under the Kaiser Termination Payment Policy.
Participants may also be entitled under the Program to continued medical,
dental, life and accidental death and disability coverage for designated
periods after termination due to a Fundamental Change.
Under the Program, selected Participants are also eligible to
receive retention payments conditioned upon continued employment as of a
designated date. In each instance, the retention payment is also generally
payable in the event a Participant's employment is terminated prior to the
designated date unless the termination is for any of the reasons described
above which preclude severance payments under the Program. Retention payments
under the Program generally consist of a lump sum cash payment and are
generally based upon six months of salary (including, in some instances,
prorated incentive awards based upon designated incentive targets).
Selected Participants are also eligible under the Program to receive
options to purchase shares of KAC Common Stock. The number of shares of KAC
Common Stock subject to such options and the specific terms of such options
vary depending upon the level of responsibility and seniority of the
Participant. Notwithstanding the foregoing, such options generally (i) replace
the long-term incentive compensation otherwise applicable to the Participant
receiving the options for designated long-term incentive periods beginning on
or after January 1, 1998, (ii) expire five years after the date of grant, (iii)
are based upon the market price of KAC Common Stock on the date of grant, (iv)
vest over a period of three or five years, and (v) terminate upon the
termination of employment for cause.
Except as otherwise noted above, there are no employment contracts
between the Company or any of its subsidiaries and any of the Company's named
executive officers. Similarly, except as otherwise noted above, there are not
any compensatory plans or arrangements which include payments from the Company
or any of its subsidiaries to any of the Company's named executive officers in
the event of any such officer's resignation, retirement or any other
termination of employment with the Company and its subsidiaries or from a
change in control of the Company or a change in the named executive officer's
responsibilities following a change in control.
-22-
<PAGE> 27
REPORT OF THE COMPENSATION COMMITTEES
ON
EXECUTIVE COMPENSATION
Two compensation committees administer the Company's compensation
plans, the Policy Committee and the Section 162(m) Committee. The Policy
Committee administers and establishes the Company's overall compensation
policies, except to the extent that this authority has been delegated by the
Board to the Section 162(m) Committee. The Section 162(m) Committee administers
and approves amendments to the Company's plans or programs which are intended
to comply with the provisions of Section 162(m), and also establishes the
criteria to be used in determining awards to be made pursuant to those plans or
programs. Each committee reports to the full Board and together they have
furnished the following report on executive compensation for fiscal year 1998.
Although certain plans or programs in which executive officers of
the Company participate are jointly sponsored by the Company and KAC, executive
officers of the Company are directly employed and compensated by the Company.
During 1998, the members serving on the Policy Committee and Section 162(m)
Committee also served on KAC's Compensation Policy Committee and Section 162(m)
Compensation Committee, respectively (these committees are hereinafter
collectively referred to in this report as the "Committees"). References to the
"Company" made in the remainder of this report are deemed to include KAC as
well as the Company.
COMPENSATION PHILOSOPHY, STRUCTURE AND METHODOLOGY
Philosophy. The Company's philosophy continues to be that
compensation of its executives officers should be related as closely as
possible to the ability of the Company as a whole, and the area of direct
responsibility of each executive, to create economic value. To attract and
retain talented individuals, the Company provides the opportunity to earn total
compensation that is not only competitive with, but, if Company goals are met,
potentially superior to, that available from employers with whom the Company
and its businesses compete.
Structure. Executive compensation for 1998 consisted of a
combination of base salary, short-term incentives based on performance during
1998, long-term incentives based on performance over the 1996-1998 three-year
performance period, employee benefits and executive perquisites. Base salaries,
together with short and long-term incentive targets, were designed to fall near
the 50th percentile (mid-point) of the market. As a result, the combination of
base pay and incentive compensation allowed executive officers to potentially
earn less, the same as or more than the total compensation opportunity offered
by competing employers depending on Company performance.
For 1998, the portion of executive compensation allocated to base
compensation ranged from approximately 30% to 49% for certain senior executive
officers, including the named executive officers, and 43% to 70% for the
remaining executive officers, with the portion allocated to incentive
compensation in each case generally increasing with position responsibility.
For certain senior executives, including Messrs. Haymaker, Milchovich, La Duc
and Smith, the incentive targets for 1998 were allocated 30% to short-term
targets and 70% to long-term targets. For the remaining executive officers the
allocation was generally split evenly between short and long-term targets. This
structure reflected the Company's compensation philosophy by structuring a
major portion of each executive's total compensation to be at-risk and
performance-based. The Company's compensation for executive officers also
included other benefits and perquisites which generally fell within the 50th
percentile of its comparative market.
Methodology. Target compensation and incentives were based on a
combination of market survey data, internal force-ranking and assessment of
position responsibilities. Major national surveys, as well as market data from
a group of companies engaged in metals, mining, chemicals and similar
industries, with whom the Company is likely to compete for managerial talent,
were used to establish the market. In performing its assessment of position
-23-
<PAGE> 28
responsibilities, descriptions of various key positions, the duties and major
responsibilities of each position, as well as the required qualifications, were
developed and then matched to database descriptions to ensure an accurate match
to reasonably comparable positions at comparative companies.
Company performance awards and goals were established at the
beginning of 1998 with respect to the annual performance period and at the
beginning of 1996 with respect to the 1996-1998 three-year, long-term
performance period. Long-term performance awards were structured to reward
aggressive and accurate planning during the period, while short-term
performance awards and goals emphasized (i) return on net assets employed by
the Company and, for business unit presidents, including Messrs. Walker and
Smith, business unit earnings before interest and taxes ("EBIT"), and (ii)
safety or group and individual goals and objectives. Minimum or threshold
performance levels, which must be met for there to be any incentive payout, as
well as target performance levels and target and maximum incentive payouts were
also established for the short and long-term performance periods. With respect
to the short-term performance period, performance goals for executive officers
other than business unit presidents were generally based on "normalized" metal
prices to allow for measurement of the progress toward the $120 million profit
improvement program without fluctuations due to changing metal prices and to
adjust the effect of certain other factors beyond the reasonable control of the
Company's management. In addition, incentive compensation payable to certain
senior executives, including Messrs. Haymaker, Milchovich, La Duc and Smith,
for the 1998 short-term performance period was capped at their respective
targets if the average price of KAC Common Stock during December 1998 was lower
than the average price during December 1997.
COMPONENTS OF EXECUTIVE OFFICER COMPENSATION FOR 1998
Base Salaries. Adjustments to the base salary of certain executive
officers were made during 1998 as necessary to (i) reflect market related
adjustments and increasing responsibilities assumed either as the result of
promotions or additional assignments during the year and (ii) increase the
likelihood of retaining such executive officers as the Company pursues its
strategy for creating stockholder value.
Short-Term Incentive. As described above, short-term incentive
awards for 1998, as well as threshold performance requirements, were generally
based on the "normalized" return on net assets for executive officers other
than business unit presidents whose awards and thresholds were based on
business unit EBIT. During 1998 Company and business unit results exceeded
threshold performance goals. However, Company results generally fell below
target performance levels, while certain business unit results exceeded target
performance levels. As a result, short-term awards paid to the corporate
executive officers, including Messrs. Haymaker, Milchovich and La Duc, were
approximately 83% of the target amounts, while short-term awards paid to
business unit presidents, including Messrs. Smith and Walker, ranged from 79%
of target amounts to the maximum payout of three times the target amounts.
Short-term awards for 1998 were paid in cash shortly after the first quarter of
1999. The short-term awards earned by the named executive officers are set
forth above in column (c) of the Summary Compensation Table.
Long-Term Incentive. Long-term incentive compensation for the
1996-1998 long-term performance period was based on the average return on net
assets during each of the three years included within the performance period.
During the 1996-1998 long-term performance period Company and business unit
results generally exceeded threshold performance goals, but generally did not
reach target performance levels. As a result, long-term awards for the
1996-1998 performance period for the named executive officers were on average
approximately 36% of the target amounts. Additional information with respect to
the long-term component of executive compensation is set forth above in the
Summary Compensation Table and Long-Term Incentive Plan Awards Table.
-24-
<PAGE> 29
1993 AND 1997 OMNIBUS PLANS
All long-term performance awards distributed in connection with
long-term performance periods beginning before January 1, 1997 are made under
the 1993 Omnibus Plan. All long-term performance awards distributed in
connection with long-term performance periods beginning on or after January 1,
1997, will be made under the 1997 Omnibus Plan. In addition, the 1997 Omnibus
Plan may be utilized as otherwise necessary to provide those persons who have
substantial responsibility for management and growth of the Company with an
opportunity to increase their ownership of KAC Common Stock, stock options or
related types of benefits.
During 1998, no grants were made under the 1993 Omnibus Plan, except
in connection with the distribution of the second installment of shares of KAC
Common Stock awarded for the 1994-1996 long-term incentive compensation
performance period and the first installment of shares of KAC Common Stock
awarded for the 1995-1997 long-term incentive compensation performance period.
In addition, as more fully described above under the caption
"Employment Contracts and Termination and Change-in-Control Arrangements" the
Company implemented the Kaiser Severance Protection and Change of Control
Program (the "Program"), in order to provide Participants with (i) incentives
intended to increase the likelihood of retaining the services of the
Participants, (ii) appropriate protection in the event of a job loss or change
of control and (iii) a long-term incentive program for periods beginning on or
after January 1, 1998 and extending for three to five years. In furtherance of
these objectives as well to further increase the alignment of the interests of
the Participants and stockholders of the Company, certain Participants received
options under the 1997 Omnibus Program to purchase shares of the KAC Common
Stock. The Section 162(m) Committee approved the grant of options to Messrs.
Haymaker, Milchovich and La Duc under the 1997 Omnibus Plan for the same
reasons. In total, options to purchase 2,090,714 shares of KAC Common Stock
were granted to executive officers of the Company under the 1997 Omnibus Plan
during 1998.
EMPLOYMENT AGREEMENTS
From time to time and for various reasons, management and the Board
has deemed it appropriate to enter into specific employment agreements with
certain executive officers. Such agreements may relate, for example, to the
further retention of the officer or a commitment by the officer to relocate to
another location. Where such agreements are made, they are negotiated by the
Company's General Counsel, or his designee under the supervision of the Policy
Committee and reviewed and approved by the Board or the Policy Committee and,
if appropriate, the Section 162(m) Committee. In making its compensation
decisions, and in supervising the negotiations and approving such employment
agreements, the Policy Committee is mindful of the Company's overall corporate
objectives and the compensation objectives described above as well as the
circumstances making the employment agreement an appropriate compensation
mechanism. Such employment agreements generally range in term from one to five
years. During 1998, Mr. Haymaker continued to be employed under the employment
agreement discussed above under the caption "Employment Contracts and
Termination of Employment and Change-in-Control Arrangements". In addition, as
discussed above under the same caption, during 1998 the Company entered into
employment agreements with Messrs. Milchovich and La Duc and implemented the
Program.
COMPENSATION OF THE CEO FOR THE LAST COMPLETED FISCAL YEAR
Mr. Haymaker served as the Chairman of the Board and Chief Executive
Officer of the Company for all of 1998. Mr. Haymaker is employed pursuant to a
written employment agreement which is described above under the caption
"Employment Contracts and Termination of Employment and Change-in-Control
Arrangements". Mr. Haymaker's employment agreement provides that his annual
base salary will be reviewed and possibly changed on an annual basis. Effective
February 1, 1998, Mr. Haymaker's base salary was increased from $504,000 to
$569,000 to complete a two-step increase intended to bring Mr. Haymaker's
salary more in line with market data obtained by
-25-
<PAGE> 30
the Company and the Company's overall compensation structure for its executive
officers. Mr. Haymaker's employment agreement also contains target incentives
which are consistent with the goals and objectives of the Company's incentive
compensation programs as described above. As previously noted, during 1998, Mr.
Haymaker received options under the 1997 Omnibus Plan as part of his long-term
incentives.
During 1998 the Company's performance fell below 1998 performance
goals. As a result, the short-term incentive award earned by Mr. Haymaker in
1998 was limited to $290,000, or approximately 74.8% of his targeted amount of
$387,900. Similarly, the Company's performance during the 1996-1998 long-term
incentive compensation performance period fell below performance goals. As a
result, the long-term award earned by Mr. Haymaker for the 1996-1998 three-year
long-term performance period was $250,000, or approximately 30.5% of his
targeted amount of $818,500.
COMPENSATION BY MAXXAM
Mr. La Duc received a portion of his compensation during 1998 from
MAXXAM, KAC's parent corporation. Where an executive officer of both the
Company and MAXXAM is compensated by the Company, or where an executive officer
of both the Company and MAXXAM is compensated by MAXXAM, the respective
corporations make intercompany allocations of the costs of employment of the
executive officer based on the allocation of that executive officer's time as
expended among the Company, MAXXAM or their respective subsidiaries. Such
allocations are described under "Certain Transactions" below.
COMPLIANCE WITH SECTION 162(M)
Section 162(m) generally disallows a tax deduction to public
companies for compensation over $1 million paid to the CEO and four other most
highly compensated executive officers of public companies. Qualifying
performance-based compensation will not be subject to the deduction limit if
certain requirements are met. Compensation earned by or awarded to certain
senior executives whose compensation is potentially subject to the limitations
imposed by Section 162(m) of the Code is covered by a separate program intended
to comply with the provisions of Section 162(m) of the Code (the "Senior
Executive Program"). The Senior Executive Program, the 1993 Omnibus Plan and
the 1997 Omnibus Plan, each of which has been approved by the stockholders of
the Company, are performance based and designed to enable compliance with
Section 162(m) and the regulations thereunder. In addition, the Senior
Executive Program and awards under the 1993 and 1997 Omnibus Plans that are
intended to comply with Section 162(m) are administered by the Section 162(m)
Committee. Messrs. Marcus (Chairman) and Cruikshank currently serve as members
of the Section 162(m) Committee and for purposes of Section 162(m) are
qualifying directors. The senior executives covered by the Senior Executive
Program are the only executive officers of the Company to which the limitation
imposed by Section 162(m) of the Code is likely to apply and the Section 162(m)
Committee believes that awards to these senior executives should be tax
deductible under Section 162(m).
Section 162(m) Compensation Compensation Policy Committee of the
Committee of the Board of Board of Directors
Directors
Robert J. Cruikshank Robert J. Cruikshank
Robert Marcus, Chairman Ezra G. Levin, Chairman
Robert Marcus
-26-
<PAGE> 31
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Policy Committee or the Section 162(m) Committee
was, during the 1998 fiscal year, an officer or employee of the Company or any
of its subsidiaries, or was formerly an officer of the Company or any of its
subsidiaries or, other than Mr. Levin, had any relationships requiring
disclosure by the Company under Item 404 of Regulation S-K. Mr. Levin served on
the Company's Policy Committee and Board of Directors during 1998 and is also a
partner in the law firm of Kramer Levin Naftalis & Frankel LLP, which provided
legal services to KAC, the Company and the Company's subsidiaries during 1998.
During the Company's 1998 fiscal year, no executive officer of the
Company served as (i) a member of the compensation committee (or other board
committee performing equivalent functions) of another entity, one of whose
executive officers served on the Policy Committee or Section 162(m) Committee
of the Company, (ii) a director of another entity, one of whose executive
officers served on any of such committees, or (iii) a member of the
compensation committee (or other board committee performing equivalent
functions) of another entity, one of whose executive officers served as a
director of the Company.
CERTAIN TRANSACTIONS
During the period from October 28, 1988, through June 30, 1993, KAC
and its domestic subsidiaries, including the Company, were included in the
consolidated federal income tax returns of MAXXAM. Payments or refunds for
periods prior to July 1, 1993, related to foreign jurisdictions could still be
required pursuant to the Company's tax allocation agreement with MAXXAM. In
accordance with the credit agreement entered into by the Company and KAC, any
such payments to MAXXAM by the Company would require lender approval, except in
certain circumstances. The tax allocation agreement with MAXXAM terminated
pursuant to its terms, effective for taxable periods beginning after June 30,
1993. While the Company is severally liable for the MAXXAM tax group's federal
income tax liability for all of 1993 and applicable prior periods, pursuant to
the tax allocation agreement, MAXXAM indemnifies the Company to the extent the
tax liability exceeds amounts payable by the Company under such agreement.
On June 30, 1993, the Company and KAC entered into a tax allocation
agreement (the "KACC Tax Allocation Agreement") effective for periods beginning
on or after July 1, 1993. Pursuant to the terms of the KACC Tax Allocation
Agreement, KAC pays any consolidated Federal income tax liability for KAC and
its subsidiaries which are members of an affiliated group of corporations (an
"Affiliated Group") within the meaning of Section 1504 of the Code, of which
KAC is the common parent corporation (the "KAC Tax Group"). The Company is
liable to KAC for the Federal income tax liability of the Company and its
subsidiaries (collectively, the "KACC Subgroup") computed as if the KACC
Subgroup were a separate Affiliated Group which was never affiliated with the
KAC Tax Group (taking into account all limitations under the Code and
regulations applicable to the KACC Subgroup), except that the KACC Subgroup
excludes interest income received or accrued on an intercompany note issued by
KAC in connection with a financing consummated in December 1989 (the "KACC
Subgroup's Separate Income Tax Liability"). To the extent such calculation
results in a net operating loss or a net capital loss or credit which the KACC
Subgroup could have carried back to a prior applicable taxable period under the
principles of Sections 172 and 1502 of the Code, KAC pays to the Company an
amount equal to the tax refund to which the Company would have been entitled
(but not in excess of the aggregate amount previously paid by the Company to
KAC for the current year and the three prior taxable years). If such separately
calculated net operating loss or net capital loss or credit of the KACC
Subgroup cannot be carried back to a prior taxable year of the KACC Subgroup
for which the KACC Subgroup paid its separate tax liability to KAC, the net
operating loss or net capital loss or credit becomes a loss or credit carryover
of the KACC Subgroup to be used in computing the KACC Subgroup's Separate
Income Tax Liability for future taxable years. The same principles are applied
to any consolidated or combined state or local income tax returns filed by the
KAC Tax Group with respect to the Company and its
-27-
<PAGE> 32
subsidiaries. Although, under Treasury regulations, all members of the KAC Tax
Group, including the members of the KACC Subgroup, are severally liable for the
KAC Tax Group's Federal income tax liability, under the KACC Tax Allocation
Agreement, KAC indemnifies each KACC Subgroup member for all Federal income tax
liabilities relating to taxable years during which such KACC Subgroup member
was a member of the KAC Tax Group except for payments required under the KACC
Tax Allocation Agreement.
The Company and MAXXAM have an arrangement pursuant to which they
reimburse each other for certain allocable costs associated with the
performance of services by their respective employees. The Company paid a total
of approximately $2.3 million to MAXXAM pursuant to such arrangements and
MAXXAM paid approximately $3.0 million to the Company pursuant to such
arrangements in respect of 1998. Generally, the Company and MAXXAM endeavor to
minimize the need for reimbursement by ensuring that employees are employed by
the entity to which the majority of their services are rendered.
Mr. Levin, a director of the Company and KAC, is a partner in the
law firm of Kramer Levin Naftalis & Frankel LLP, which provides legal services
to KAC and its subsidiaries, including the Company.
On April 17, 1995, SHRP, Ltd. and two affiliated entities, SHRP
Acquisition, Inc. and SHRP Capital Corp., filed voluntary corporate petitions
under Chapter 11 of the United States Bankruptcy Code. Their bankruptcy plan
has since been confirmed and the transactions contemplated by the bankruptcy
reorganization plan were consummated on October 6, 1995. Mr. Hurwitz has served
as a director and Chairman of the Board of SHRP, Inc., SHRP, Ltd.'s sole
general partner prior to SHRP Ltd.'s bankruptcy reorganization, and as a
director, Chairman of the Board and President of SHRP Capital Corp., a
subsidiary of SHRP, Ltd. which was dissolved effective December 31, 1997.
Mr. Haymaker's son, George T. Haymaker III, is an executive officer
of Coast Aluminum and Architectural ("Coast"), a distributor of aluminum
products, including products manufactured by the Company. During 1998 Coast
purchased approximately $14 million of products from the Company.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Based solely upon a review of the copies of the Forms 3, 4 and 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year, and written representations from reporting persons that no other
Form 5s were required, the Company believes that all filing requirements were
complied with which were applicable to its officers, directors and greater than
10% beneficial owners.
OTHER MATTERS
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, the Company's independent public accountants,
has completed its audit with respect to the Company's 1998 fiscal year.
Representatives of Arthur Andersen LLP plan to attend the Annual Meeting and
will be available to answer appropriate questions. Such representatives will
also have an opportunity to make a statement at the Annual Meeting, if they so
desire.
-28-
<PAGE> 33
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING OF STOCKHOLDERS
Stockholders may submit proposals on matters appropriate for
stockholder action at the Company's annual meeting of stockholders, consistent
with regulations adopted by the Securities and Exchange Commission (the
"Commission"). Proposals submitted for inclusion in the Company's proxy
statement and form of proxy for the 2000 annual meeting of stockholders are
subject to the requirements of Rule 14a-8 of the proxy rules adopted by the
Commission, and must be received by the Company not later than December 31,
1999. Timely submission of a proposal does not necessarily mean that such
proposal will be included. If a stockholder intends to present a proposal for
consideration at the 2000 annual meeting outside of Rule 14a-8, the Company
must receive notice of such proposal on or before March 23, 2000, or such
notice will be considered untimely under Rule 14a-4 (c)(1) of the Commission's
proxy rules, and the Company's proxies will have discretionary voting authority
with respect to such proposal, if presented at the meeting, without including
information regarding such proposal in its proxy materials. Proposals must be
sent to the Company's Secretary at 6177 Sunol Boulevard, Pleasanton, California
94566.
OTHER MATTERS
The cost of mailing and soliciting proxies in connection with the
Annual Meeting will be borne by the Company. The Company will, if requested,
reimburse banks, brokerage houses and other custodians, nominees and certain
fiduciaries for their reasonable expenses incurred in mailing proxy material to
their principals. Proxies may be solicited by directors, officers and employees
of the Company without special remuneration. The Company has retained Corporate
Investor Communications, Inc. to assist in the distribution and solicitation of
proxies at an estimated cost of approximately $5,000, plus reasonable
out-of-pocket expenses. In addition to the use of mails, proxies may be
solicited by personal interviews, facsimile or telephone.
By Order of the Board of Directors
JOHN WM. NIEMAND II
Secretary
April 29, 1999
Houston, Texas
-29-
<PAGE> 34
===============================================================================
TABLE OF CONTENTS
Notice of Annual Meeting of Stockholders
Proxy Statement
Election of Directors..................... 3
Other Business............................ 3
The Board of Directors and its
Committees............................. 3
Executive Officers and Directors.......... 6
Principal Stockholders.................... 11
Executive Compensation.................... 14
Report of the Compensation
Committees on Executive
Compensation........................... 23
Certain Transactions...................... 27
Compliance with Section 16(a)
of the Exchange Act.................... 28
Other Matters............................. 28
===============================================================================
KAISER ALUMINUM & CHEMICAL CORPORATION
===============================================================================
NOTICE OF 1999 ANNUAL MEETING
AND
PROXY STATEMENT
===============================================================================
IMPORTANT
PLEASE SIGN AND DATE YOUR PROXY CARD
AND PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE> 35
APPENDIX A
DIRECTION BY PARTICIPANT TO TRUSTEE OF KAISER ALUMINUM
USWA EMPLOYEE STOCK OWNERSHIP PLAN (USWA STOCK PLAN)
PROXY FOR CUMULATIVE (1985 SERIES A) PREFERENCE STOCK
KAISER ALUMINUM & CHEMICAL CORPORATION
Solicited on behalf of the Board of Directors for the
Annual Meeting of Stockholders to be held June 8, 1999
The undersigned hereby directs the Trustee of the USWA Stock Plan to vote
all the shares (in person or by proxy) allocated to the undersigned's account
as of April 16, 1999, at the Annual Meeting of Stockholders to be held on June
8, 1999, and at any and all adjournments or postponements thereof. The Trustee
or its proxy, acting at the meeting, may exercise all powers hereby conferred.
THE TRUSTEE OR ITS PROXY IS DIRECTED TO VOTE AS INDICATED ON THE REVERSE
SIDE. IF THIS CARD IS RETURNED AND NO CHOICE IS SPECIFIED, THE SHARES
REPRESENTED HEREBY WILL BE VOTED "FOR" THE ELECTION OF NOMINEES TO THE BOARD OF
DIRECTORS AS SET FORTH IN THE PROXY STATEMENT. THE TRUSTEE WILL KEEP ALL VOTES
CONFIDENTIAL AND WILL VOTE SHARES AS TO WHICH NO VOTING INSTRUCTION CARDS ARE
RECEIVED IN THE SAME PROPORTIONS AS THE SHARES TO WHICH VOTING INSTRUCTION
CARDS ARE RECEIVED ARE VOTED.
PLEASE COMPLETE, SIGN, DATE AND RETURN PROMPTLY
IN ENCLOSED ENVELOPE BY THURSDAY, JUNE 3, 1999.
(SEE REVERSE SIDE)
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
May 7, 1999
To: Participants in Kaiser Aluminum USWA Employee Stock
Ownership Plan (USWA Plan)
As a participant in the USWA Plan, you have an interest in the forthcoming
Annual Meeting of Stockholders of Kaiser Aluminum & Chemical Corporation
("Kaiser Aluminum") to be held on June 8, 1999. Each participant is entitled to
direct the USWA Plan Trustee how to vote the shares of Kaiser Aluminum's
Cumulative (1985 Series A) Preference Stock credited to his or her account as
of April 16, 1999. Shares credited to your account, which you are entitled to
vote, are shown on this voting direction card.
The item to be voted on at this year's Annual Meeting is the election of
Directors. If you wish to instruct the Trustee how to vote on these items, you
may use this card.
If the Trustee does not receive a signed direction card from you before 5:00
p.m. Eastern Daylight Time on June 3, 1999, the Trustee or its proxy will vote
the shares in your account in the same manner proportionally as it votes the
other shares for which timely voting instructions are received.
For you information, enclosed are Kaiser Aluminum's Notice of Annual Meeting of
Stockholders and Proxy Statement and its 1998 Annual Report on Form 10-K to the
Securities and Exchange Commission. Please return your card in the enclosed
postage-paid envelope before 5:00 p.m. Eastern Daylight Time on June 3, 1999.
Individual voting instructions received by the Trustee will be held in complete
confidence.
Your participation in this vote is encouraged.
Frank Russell Trust Company as Trustee of
Kaiser Aluminum USWA
Employee Stock Ownership Plan
Enclosures
same manner proportionally as it votes the other shares for which timely voting
instructions are received.
For you information, enclosed are Kaiser Aluminum's Notice of Annual Meeting of
Stockholders and Proxy Statement and its 1998 Annual Report on Form 10-K to the
Securities and Exchange Commission. Please return your card in the enclosed
postage-paid envelope before 5:00 p.m. Eastern Daylight Time on June 3, 1999.
Individual voting instructions received by the Trustee will be held in complete
confidence.
Your participation in this vote is encouraged.
Frank Russell Trust Company as Trustee of
Kaiser Aluminum USWA
Employee Stock Ownership Plan
Enclosures
<PAGE> 36
Please mark your
votes as [X]
indicated in
this example
THE TRUSTEE OR ITS PROXY IS DIRECTED TO VOTE AS INDICATED
BELOW.
1. ELECTION OF DIRECTORS
NOMINEES: Robert J. Cruikshank, George T. Haymaker,
Jr., Charles E. Hurwitz, Ezra G. Levin, Raymond J. Milchovich
and James D. Woods
To withhold authority to vote for any individual
nominee(s) while voting for the remainder, write the
name of the nominee(s) for which authority is withheld
in the space below:
-------------------------------------------------------------
FOR ALL WITHHOLD
NOMINEES FROM ALL
(except as NOMINEES
marked to the
contrary)
[ ] [ ]
2. In their discretion, the Trustee or its proxy is authorized to vote upon
such other matters as may properly come before the meeting or any
adjournment or postponements thereof, hereby revoking any direction
heretofore given by the undersigned.
Please sign name(s) exactly as printed hereon. If stock is held in the name
of more than one person, EACH person should sign. Executors,
administrators, trustees, etc. should give full title as such. If a
corporation, please sign full corporate name by duly authorized officer. If
a partnership, please sign in partnership name by authorized person.
Dated: , 1999
------------------------
---------------------------------------
Signature
---------------------------------------
Signature if held jointly
---------------------------------------
Title
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 37
APPENDIX B
DIRECTION BY PARTICIPANT TO TRUSTEE OF KAISER ALUMINUM
SALARIED EMPLOYEE STOCK OWNERSHIP PLAN (SALARIED PLAN)
PROXY FOR CUMULATIVE (1985 SERIES B) PREFERENCE STOCK
KAISER ALUMINUM & CHEMICAL CORPORATION
Solicited on behalf of the Board of Directors for the
Annual Meeting of Stockholders to be held June 8, 1999
The undersigned hereby directs the Trustee of the Salaried Plan to vote
all the shares (in person or by proxy) allocated to the undersigned's account
as of April 16, 1999, at the Annual Meeting of Stockholders to be held on June
8, 1999, and at any and all adjournments or postponements thereof. The Trustee
or its proxy, acting at the meeting, may exercise all powers hereby conferred.
THE TRUSTEE OR ITS PROXY IS DIRECTED TO VOTE AS INDICATED ON THE REVERSE
SIDE. IF THIS CARD IS RETURNED AND NO CHOICE IS SPECIFIED, THE SHARES
REPRESENTED HEREBY WILL BE VOTED "FOR" THE ELECTION OF NOMINEES TO THE BOARD OF
DIRECTORS AS SET FORTH IN THE PROXY STATEMENT. THE TRUSTEE WILL KEEP ALL VOTES
CONFIDENTIAL AND WILL VOTE SHARES AS TO WHICH NO VOTING INSTRUCTION CARDS ARE
RECEIVED IN THE SAME PROPORTIONS AS THE SHARES TO WHICH VOTING INSTRUCTION
CARDS ARE RECEIVED ARE VOTED.
PLEASE COMPLETE, SIGN, DATE AND RETURN PROMPTLY
IN ENCLOSED ENVELOPE BY THURSDAY, JUNE 3, 1999.
(SEE REVERSE SIDE)
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
May 7, 1999
To: Participants in Kaiser Aluminum Salaried Employee Stock
Ownership Plan (Salaried Plan)
As a participant in the Salaried Plan, you have an interest in the forthcoming
Annual Meeting of Stockholders of Kaiser Aluminum & Chemical Corporation
("Kaiser Aluminum") to be held on June 8, 1999. Each participant is entitled to
direct the Salaried Plan Trustee how to vote the shares of Kaiser Aluminum's
Cumulative (1985 Series B) Preference Stock credited to his or her account as
of April 16, 1999. Shares credited to your account, which you are entitled to
vote, are shown on this voting direction card.
The item to be voted on at this year's Annual Meeting is the election of
Directors. If you wish to instruct the Trustee how to vote on these items, you
may use this card.
If the Trustee does not receive a signed direction card from you before 5:00
p.m. Eastern Daylight Time on June 3, 1999, the Trustee or its proxy will vote
the shares in your account in the same manner proportionally as it votes the
other shares for which timely voting instructions are received.
For you information, enclosed are Kaiser Aluminum's Notice of Annual Meeting of
Stockholders and Proxy Statement, and its 1998 Annual Report on Form 10-K to
the Securities and Exchange Commission. Please return your card in the enclosed
postage-paid envelope before 5:00 p.m. Eastern Daylight Time on June 3, 1999.
Individual voting instructions received by the Trustee will be held in complete
confidence.
Your participation in this vote is encouraged.
Frank Russell Trust Company as Trustee of
Kaiser Aluminum Salaried
Employee Stock Ownership Plan
Enclosures
<PAGE> 38
Please mark
your votes as [X]
indicated in
this example
THE TRUSTEE OR ITS PROXY IS DIRECTED TO VOTE AS INDICATED
BELOW.
1. ELECTION OF DIRECTORS
NOMINEES: Robert J. Cruikshank, George T. Haymaker,
Jr., Charles E. Hurwitz, Ezra G. Levin, Raymond J. Milchovich
and James D. Woods
To withhold authority to vote for any individual
nominee(s) while voting for the remainder, write the
name of the nominee(s) for which authority is withheld
in the space below:
-------------------------------------------------------------
FOR ALL WITHHOLD
NOMINEES FROM ALL
(except as NOMINEES
marked to the
contrary)
[ ] [ ]
2. In their discretion, the Trustee or its proxy is authorized to vote upon
such other matters as may properly come before the meeting or any
adjournment or postponements thereof, hereby revoking any direction
heretofore given by the undersigned.
Please sign name(s) exactly as printed hereon. If stock is held in the name
of more than one person, EACH person should sign. Executors,
administrators, trustees, etc. should give full title as such. If a
corporation, please sign full corporate name by duly authorized officer. If
a partnership, please sign in partnership name by authorized person.
Dated: , 1999
------------------------
---------------------------------------
Signature
---------------------------------------
Signature if held jointly
---------------------------------------
Title
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 39
APPENDIX C
PROXY FOR CUMULATIVE (1985 SERIES B) PREFERENCE STOCK
KAISER ALUMINUM & CHEMICAL CORPORATION
Solicited on behalf of the Board of Directors for the
Annual Meeting of Stockholders to be held June 8, 1999
The undersigned hereby appoints E. BRUCE BUTLER, GEORGE T. HAYMAKER, JR., JOHN
T. LA DUC, and JOHN WM. NIEMAND II as proxies (each with power to act alone, or
jointly, and with the power of substitution) to vote, as designated on the
reverse side, all shares of Cumulative (1985 Series B) Preference Stock the
undersigned is entitled to vote at the Annual Meeting of Stockholders to be
held on June 8, 1999, and at any and all adjournments or postponements thereof.
PLEASE COMPLETE, SIGN, DATE AND RETURN PROMPTLY IN
ENCLOSED ENVELOPE.
(SEE REVERSE SIDE)
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 40
Please mark
your votes as [X]
indicated in
this example
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED BY THE
UNDERSIGNED. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED "FOR" THE
ELECTION OF NOMINEES TO THE BOARD OF DIRECTORS.
1. ELECTION OF DIRECTORS
NOMINEES: Robert J. Cruikshank, George T. Haymaker,
Jr., Charles E. Hurwitz, Ezra G. Levin, Raymond J. Milchovich
and James D. Woods
To withhold authority to vote for any individual
nominee(s) while voting for the remainder, write the
name of the nominee(s) for which authority is withheld
in the space below:
-------------------------------------------------------------
FOR ALL WITHHOLD
NOMINEES FROM ALL
(except as NOMINEES
marked to the
contrary)
[ ] [ ]
2. In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournment or
postponements thereof, hereby revoking any direction heretofore given by
the undersigned.
Please sign name(s) exactly as printed hereon. If stock is held in the name
of more than one person, EACH person should sign. Executors,
administrators, trustees, etc. should give full title as such. If a
corporation, please sign full corporate name by duly authorized officer. If
a partnership, please sign in partnership name by authorized person.
Dated: , 1999
------------------------
---------------------------------------
Signature
---------------------------------------
Signature if held jointly
---------------------------------------
Title
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 41
APPENDIX D
PROXY FOR CUMULATIVE (1985 SERIES A) PREFERENCE STOCK
KAISER ALUMINUM & CHEMICAL CORPORATION
Solicited on behalf of the Board of Directors for the
Annual Meeting of Stockholders to be held June 8, 1999
The undersigned hereby appoints E. BRUCE BUTLER, GEORGE T. HAYMAKER, JR., JOHN
T. LA DUC, and JOHN WM. NIEMAND II as proxies (each with power to act alone, or
jointly, and with the power of substitution) to vote, as designated on the
reverse side, all shares of Cumulative (1985 Series A) Preference Stock the
undersigned is entitled to vote at the Annual Meeting of Stockholders to be
held on June 8, 1999, and at any and all adjournments or postponements thereof.
PLEASE COMPLETE, SIGN, DATE AND RETURN PROMPTLY IN
ENCLOSED ENVELOPE.
(SEE REVERSE SIDE)
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FOLD AND DETACH HERE
<PAGE> 42
Please mark
your votes as [X]
indicated in
this example
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED BY THE
UNDERSIGNED. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED "FOR" THE
ELECTION OF NOMINEES TO THE BOARD OF DIRECTORS.
1. ELECTION OF DIRECTORS
NOMINEES: Robert J. Cruikshank, George T. Haymaker,
Jr., Charles E. Hurwitz, Ezra G. Levin, Raymond J. Milchovich
and James D. Woods
To withhold authority to vote for any individual
nominee(s) while voting for the remainder, write the
name of the nominee(s) for which authority is withheld
in the space below:
-------------------------------------------------------------
FOR ALL WITHHOLD
NOMINEES FROM ALL
(except as NOMINEES
marked to the
contrary)
[ ] [ ]
2. In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournment or
postponements thereof, hereby revoking any direction heretofore given by
the undersigned.
Please sign name(s) exactly as printed hereon. If stock is held in the name
of more than one person, EACH person should sign. Executors,
administrators, trustees, etc. should give full title as such. If a
corporation, please sign full corporate name by duly authorized officer. If
a partnership, please sign in partnership name by authorized person.
Dated: , 1999
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Signature
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Signature if held jointly
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Title
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FOLD AND DETACH HERE
<PAGE> 43
APPENDIX E
PROXY FOR COMMON STOCK
KAISER ALUMINUM & CHEMICAL CORPORATION
Solicited on behalf of the Board of Directors for the
Annual Meeting of Stockholders to be held June 8, 1999
The undersigned hereby appoints E. BRUCE BUTLER, GEORGE T. HAYMAKER, JR., JOHN
T. LA DUC, and JOHN WM. NIEMAND II as proxies (each with power to act alone, or
jointly, and with power of substitution) to vote, as designated on the reverse
side, all shares of Common Stock the undersigned is entitled to vote at the
Annual Meeting of Stockholders to be held on June 8, 1999, and at any and all
adjournments or postponements thereof.
PLEASE COMPLETE, SIGN, DATE AND RETURN PROMPTLY IN
ENCLOSED ENVELOPE.
(SEE REVERSE SIDE)
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 44
Please mark
your votes as [X]
indicated in
this example
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS
DESIGNATED BY THE UNDERSIGNED. IF NO CHOICE IS SPECIFIED,
THE PROXY WILL BE VOTED "FOR" THE ELECTION OF NOMINEES TO
THE BOARD OF DIRECTORS.
1. ELECTION OF DIRECTORS
NOMINEES: Robert J. Cruikshank, George T. Haymaker,
Jr., Charles E. Hurwitz, Ezra G. Levin, Raymond J. Milchovich
and James D. Woods
To withhold authority to vote for any individual
nominee(s) while voting for the remainder, write the
name of the nominee(s) for which authority is withheld
in the space below:
-------------------------------------------------------------
FOR ALL WITHHOLD
NOMINEES FROM ALL
(except as NOMINEES
marked to the
contrary)
[ ] [ ]
2. In their discretion, the proxies are authorized to vote upon such
other matters as may properly come before the meeting or any
adjournment or postponements thereof, hereby revoking any direction
heretofore given by the undersigned.
Please sign name(s) exactly as printed hereon. If stock is held in the
name of more than one person, EACH person should sign. Executors,
administrators, trustees, etc. should give full title as such. If a
corporation, please sign full corporate name by duly authorized
officer. If a partnership, please sign in partnership name by
authorized person.
Dated: , 1999
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Signature
---------------------------------------
Signature if held jointly
---------------------------------------
Title
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FOLD AND DETACH HERE
