PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /x /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/x / Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Kaiser Aluminum Corporation
- -------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Kaiser Aluminum Corporation
- -------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-
6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: -/
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(4) Proposed maximum aggregate value of transaction:
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Set forth the amount on which the filing fee is calculated and state
how it was determined.
/x / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
125.00
-----------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
File No. 1-9447
-----------------------------------------------------
(3) Filing Party:
Kaiser Aluminum Corporation
------------------------------------------------------
(4) Date Filed:
February 5, 1996
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<PAGE>
[KAC Logo]
March ____, 1996
To Our Stockholders:
You are cordially invited to attend a Special Meeting of
Stockholders (the "Special Meeting") of Kaiser Aluminum Corporation (the
"Company") to be held at 9:00 a.m. on Wednesday, April 10, 1996, at 5847
San Felipe, Room 1245, Houston, Texas.
At the Special Meeting, the holders of record of the Company's
Common Stock, par value $.01 per share (the "Existing Common Stock") and
8.255% PRIDES, Convertible Preferred Stock, par value $.05 per share (the
"PRIDES"), (all such holders being collectively referred to as the
"Stockholders"), will consider and vote upon a proposed amendment to the
Company's Restated Certificate of Incorporation (the "Recapitalization
Amendment"), which would, among other things, (i) create two classes of
common stock, one class designated as Class A Common Shares and a lesser
voting class designated as Common Stock, (ii) redesignate the 100,000,000
currently authorized shares of Existing Common Stock as Class A Common
Shares and authorize an additional 250,000,000 shares to be designated as
Common Stock, and (iii) change each issued share of Existing Common Stock
into .33 of a Class A Common Share and .67 of a share of Common Stock.
Cash will be paid in lieu of fractional shares. For round lots of 100
shares of the Company's Existing Common Stock, the change would be
equivalent to converting such round lot into 33 Class A Common Shares and
67 shares of Common Stock. The Class A Common Shares would have one vote
per share, and the Common Stock would be lesser voting stock with 1/10 vote
per share. The specific features of the two classes and the details of the
Recapitalization Amendment are described in the accompanying proxy
statement, which also sets forth the reasons for the Board's
recommendation, certain potential advantages and disadvantages of the
Recapitalization Amendment, and other information as to the effects of the
Recapitalization Amendment on existing Stockholders, including MAXXAM Inc.
("MAXXAM"). The Recapitalization Amendment must be approved by the holders
of a majority of votes of the outstanding shares of Existing Common Stock
and PRIDES, tabulated together as a single class, and by a majority of
votes of the outstanding shares of Existing Common Stock, tabulated
separately as a single class, at the Special Meeting.
The New York Stock Exchange (the "NYSE") rules and the Company's
listing agreement with the NYSE require that the Company solicit proxies in
connection with all stockholder meetings. MAXXAM owns approximately 62% of
the Existing Common Stock, on a fully diluted basis assuming the conversion
of each outstanding share of PRIDES into one share of Existing Common
Stock. The shares of Existing Common Stock owned by MAXXAM will be voted
in favor of the Recapitalization Amendment. As a result, the
Recapitalization Amendment can be approved without the affirmative vote of
any Stockholders other than MAXXAM. THE BOARD OF DIRECTORS OF THE COMPANY
HAS APPROVED THE RECOMMENDATION OF A SPECIAL COMMITTEE OF THE BOARD OF
DIRECTORS TO ADOPT THE RECAPITALIZATION AMENDMENT AND RECOMMENDS THAT ALL
STOCKHOLDERS VOTE IN FAVOR OF THE RECAPITALIZATION AMENDMENT.
Each Stockholder of record at the close of business on March 18,
1996 is entitled to receive notice of and to vote at the Special Meeting
and is invited to attend the Special Meeting. Whether or not you intend to
be present at the Special Meeting, we urge you to review the proxy
statement carefully and to complete, date, sign and promptly return the
enclosed proxy card.
We look forward to seeing as many of you as possible at the
Special Meeting.
GEORGE T. HAYMAKER, JR.
Chairman and Chief Executive
Officer
<PAGE>
KAISER ALUMINUM CORPORATION
5847 SAN FELIPE, SUITE 2600
HOUSTON, TEXAS 77057
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 10, 1996
A Special Meeting of Stockholders (the "Special Meeting") of
Kaiser Aluminum Corporation (the "Company") will be held at 9:00 a.m. on
April 10, 1996, at 5847 San Felipe, Room 1245, Houston, Texas, for the
following purposes:
1. To consider and vote upon a proposal to amend the
Company's Restated Certificate of Incorporation (the
"Recapitalization Amendment"), to (i) provide for two
classes of common stock, one class designated as Class
A Common Shares, $.01 par value, with one vote per
share, and a lesser voting class designated as Common
Stock, $.01 par value, with 1/10 vote per share; (ii)
redesignate the 100,000,000 authorized shares of the
Company's existing common stock, par value $.01 per
share (the "Existing Common Stock") as Class A Common
Shares and authorize an additional 250,000,000 shares
to be designated as Common Stock, and (iii) change each
issued share of Existing Common Stock into (a) .33 of
a Class A Common Share and (b) .67 of a share of
Common Stock, as described in the accompanying proxy
statement; and
2. To transact such other business as may be properly
presented to the Special Meeting or any adjournments
thereof.
Holders of record of the Existing Common Stock and 8.255% PRIDES
SM, Convertible Preferred Stock, par value $.05 per share, (all such
holders being collectively referred to as the "Stockholders"), as of the
close of business on March 18, 1996, are entitled to notice of, and to vote
at, the Special Meeting. The Recapitalization Amendment must be approved
by the holders of a majority of votes of the outstanding shares of Existing
Common Stock and PRIDES, tabulated together as a single class, and by a
majority of votes of the outstanding shares of Existing Common Stock,
tabulated separately as a single class, at the Special Meeting.
Stockholders' lists will be available commencing the date of the proxy
statement and may be inspected for purposes germane to the Special Meeting
during normal business hours prior to the Special Meeting at the offices of
the Company, 5847 San Felipe, Suite 2600, Houston, Texas.
By Order of the Board of
Directors
BYRON L. WADE
Secretary
March __, 1996
IMPORTANT
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH HAS BEEN PROVIDED FOR YOUR
CONVENIENCE AND WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
ANY STOCKHOLDER PRESENT AT THE SPECIAL MEETING MAY VOTE PERSONALLY ON ALL
MATTERS BROUGHT BEFORE THE SPECIAL MEETING AND, IN THAT EVENT, HIS OR HER
PROXY WILL NOT BE USED.
<PAGE>
KAISER ALUMINUM CORPORATION
5847 SAN FELIPE, SUITE 2600
HOUSTON, TEXAS 77057
PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 10, 1996
This proxy statement (the "Proxy Statement"), the accompanying
proxy card and the Notice of Special Meeting are being mailed on or about
March 19, 1996 to the holders of the Company's existing common stock, par
value $.01 per share (the "Existing Common Stock"), and 8.255% PRIDES ,
Convertible Preferred Stock, par value $.05 per share (the "PRIDES") (all
such holders being collectively referred to as the "Stockholders"), of
Kaiser Aluminum Corporation (the "Company"), a Delaware corporation.
This Proxy Statement is furnished to Stockholders in connection
with the solicitation of proxies on behalf of the Board of Directors of the
Company to be voted at a Special Meeting of Stockholders (the "Special
Meeting") to be held at 5847 San Felipe, Room 1245, Houston, Texas on April
10, 1996 at 9:00 a.m. and any adjournments thereof, at the time and place
and for the purposes set forth in the accompanying Notice of Special
Meeting. The principal executive offices of the Company are located at
5847 San Felipe, Suite 2600, Houston, Texas 77057, telephone (713) 267-
3777.
We cordially invite you to attend the Special Meeting. Whether
or not you plan to attend, please complete, date, sign and promptly return
your proxy card in the enclosed envelope. Any one or more of the persons
authorized to act as proxies at the Special Meeting as listed on the proxy
card are Charles E. Hurwitz, John T. La Duc and George T. Haymaker, Jr.
You may revoke your proxy at any time prior to its exercise at the Special
Meeting by giving notice to the Company's Secretary, by filing a later
dated proxy or, if you attend the Special 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 approval of the
proposed amendment to the Company's Restated Certificate of Incorporation
(the "Recapitalization Amendment") described in this Proxy Statement.
Under applicable Delaware law, abstentions and broker non-votes will have
the same effect as a vote "AGAINST" the proposal relating to the
Recapitalization Amendment. Abstentions and broker non-votes are counted
for purposes of determining the presence or absence of a quorum for the
transaction of business.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE
RECOMMENDATION OF A SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS TO ADOPT
THE RECAPITALIZATION AMENDMENT AND RECOMMENDS THAT ALL STOCKHOLDERS VOTE IN
FAVOR OF SUCH AMENDMENT.
Only holders of record of the Company's __________ shares of
Existing Common Stock and ___________ shares of PRIDES outstanding as of
the close of business on March 18, 1996, are entitled to vote at the
Special Meeting. Each share of Existing Common Stock is entitled to one
vote and each share of PRIDES is entitled to 4/5 vote. The Recapitalization
Amendment must be approved by the holders of a majority of votes of the
outstanding shares of Existing Common Stock and PRIDES, tabulated together
as a single class, and by a majority of votes of the outstanding shares of
Existing Common Stock, tabulated separately as a single class, at the
Special Meeting. A vote in favor of the proposal to approve the
Recapitalization Amendment may preclude a stockholder from participating in
any action which has been or may be filed on behalf of any or all
stockholders with respect to such transaction.
At the recommendation of a Special Committee of the Board of
Directors of the Company, the Board of Directors of the Company called a
Special Meeting to submit the proposal to adopt the Recapitalization
Amendment to the Stockholders of the Company. The New York Stock Exchange
("NYSE") rules and the Company's listing agreement with the NYSE require
that the Company solicit proxies in connection with all stockholder
meetings. Holders of a majority of votes of the outstanding shares of
Existing Common Stock, separately, and together with the outstanding shares
of PRIDES must be represented in person or by proxy at the Special Meeting
in order to have a quorum. 50,000,000 shares of the Existing Common Stock
are held by MAXXAM Inc. ("MAXXAM"). The shares of Existing Common Stock
owned by MAXXAM will be voted in favor of the Recapitalization Amendment.
As a result, a quorum can be present and the Recapitalization Amendment can
be approved without the presence or affirmative vote of any Stockholders
other than MAXXAM.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of January 31, 1996, the
undiluted beneficial ownership of each class of the Company's capital stock
by (i) those persons known by the Company to own beneficially more than 5%
of the shares of each applicable class of capital stock then outstanding,
(ii) each of the directors and the named executive officers of the Company,
and (iii) all directors 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.(2) Existing Common Stock 50,000,000 69.8
FMR Corp.(3) Existing Common Stock 5,175,251(4) 7.2
PRIDES 1,869,000 21.5
Joseph A. Bonn Existing Common Stock 118,225 *
Robert J. Cruikshank Existing Common Stock 2,000 *
George T. Haymaker, Jr. Existing Common Stock 6,675(5) *
Charles E. Hurwitz Existing Common Stock 62,500(5)(6) *
John T. La Duc Existing Common Stock 134,063 *
Ezra G. Levin -- -0- --
Robert Marcus Existing Common Stock 3,500 *
Robert J. Petris -- -0- --
Anthony R. Pierno -- -0- --
Byron L. Wade Existing Common Stock 500 *
All directors and executive officers of the
Company as a group (21 persons) Existing Common Stock 1,251,917(7) 1.7
<FN>
- ---------------
* 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 on, or within sixty days of, January 31, 1996
to acquire shares of Existing Common Stock.
(2) The address of MAXXAM is 5847 San Felipe, Suite 2600, Houston, Texas
77057.
(3) Information is based solely on the Schedule 13G, as amended, filed
with the Securities and Exchange Commission ("SEC") dated May 4, 1995 (the
"FMR 13G"), as adjusted based on redemption of $.65 Depository Shares
during September 1995. The FMR 13G was filed by FMR Corp., its wholly
owned subsidiary Fidelity Management & Research Company ("Fidelity"), and
Edward C. Johnson 3d, the Chairman and 24.9% owner of the common stock of
FMR Corp. Fidelity is a registered investment advisor. The address of FMR
Corp. is 82 Devonshire Street, Boston, Massachusetts 02109.
(4) Represents 3,617,813 shares of Existing Common Stock held directly and
1,557,438 shares of Existing Common Stock immediately acquirable upon
conversion of 1,869,000 shares of PRIDES at conversion rate of .8333 per
share of PRIDES.
(5) Represents only options exercisable on, or within sixty days of,
January 31, 1996 to acquire such shares.
(6) Mr. Hurwitz also may be deemed to hold beneficial ownership in the
Company as a result of his beneficial ownership in MAXXAM.
(7) Includes options exercisable on, or within sixty days of, January 31,
1996 to acquire 683,653 shares of Existing Common Stock.
</TABLE>
OWNERSHIP OF PARENT OF THE COMPANY
As of January 31, 1996, MAXXAM owned approximately 62% of the
issued and outstanding capital stock in the Company on a fully diluted
basis. The following table sets forth, as of January 31, 1996, the
beneficial ownership of the Common Stock and Class A $.05 Non-Cumulative
Participating Convertible Preferred Stock ("Class A Preferred Stock") of
MAXXAM by the directors of the Company, and by the Company's directors and
executive officers as a group:
<TABLE>
<CAPTION>
Amount and % of
Nature of Combined
Name of Beneficial % Voting
Beneficial Owner Title of Class Ownership(1) of Class Power (2)
---------------------------- ------------------------- ----------------- -------- -----------------
<S> <C> <C> <C> <C>
Charles E. Hurwitz Common Stock 2,733,542(3)(4)(5) 31.1 60.7
Class A Preferred Stock 671,441(4)(5)(6) 99.1
Ezra G. Levin Common Stock 1,125(4)(5)(7) * *
Robert J. Cruikshank Common Stock 1,125(7) * *
All directors and executive Common Stock 2,769,892(8) 31.4
officers of the 60.8
Company as a group (21 Class A Preferred Stock 671,441(9) 99.1
persons)
<FN>
- ---------------
* Less than 1%.
(1) Unless otherwise indicated, beneficial owners have sole voting and
investment power with respect to the shares listed in the table.
(2) MAXXAM's Class A 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's common stock owned by a wholly
owned subsidiary of Federated Development Company ("Federated"), a New York
business trust, as to which Mr. Hurwitz 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 shares of beneficial interest in Federated, and his positions
include Chairman of the Board and Chief Executive Officer of MAXXAM and
Federated, and membership on MAXXAM's Executive Committee. Also includes
(a) 16,154 shares of MAXXAM's common stock separately owned by Mr.
Hurwitz's spouse and as to which Mr. Hurwitz disclaims beneficial
ownership, (b) 46,500 shares of MAXXAM's common stock owned by 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) 129,308 shares of MAXXAM's common stock owned by
the 1992 Hurwitz Investment Partnership, L.P., of which 64,654 shares are
owned by Mr. Hurwitz's spouse as separate property and as to which Mr.
Hurwitz disclaims beneficial ownership, (d) 800,954 shares of MAXXAM's
common stock held directly, and (e) 71,175 shares of MAXXAM's common stock
that a wholly owned subsidiary of Federated may acquire in exchange for its
holdings of 7% Cumulative Exchangeable Preferred Stock of MCO Properties
Inc., a wholly owned subsidiary of MAXXAM.
(4) In addition, Federated, Messrs. Hurwitz and Levin, and Mr. James H.
Paulin, Jr., Secretary and Treasurer of Federated, may be deemed a "group"
(the "Stockholder Group") within the meaning of Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). As of
January 31, 1996, in the aggregate, the Stockholder Group beneficially
owned 2,735,019 shares of MAXXAM's common stock and 671,574 shares of
MAXXAM's Class A Preferred Stock, aggregating approximately 60.75% 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 Federated, exercisable options to
purchase 9,000 shares and 1,064 shares owned directly.
(7) Includes exercisable options to purchase 125 shares of MAXXAM common
stock
(8) Includes options exercisable on, or within sixty days of, January 31,
1996 to acquire 34,250 shares of MAXXAM common stock.
(9) Includes options exercisable on, or within sixty days of, January 31,
1996 to acquire 9,000 shares of Class A Preferred Stock.
</TABLE>
As of January 31, 1996, 28,000,000 shares of the Company's
Existing Common Stock owned by MAXXAM were pledged as security for two debt
issues of MAXXAM Group Inc., a wholly owned subsidiary of MAXXAM,
consisting of $100.0 million aggregate principal amount of 11-1/4% Senior
Secured Notes due 2003 and $126.7 million aggregate principal amount of
12-1/4% Senior Secured Discount Notes due 2003.
APPROVAL OF THE RECAPITALIZATION AMENDMENT
SUMMARY DESCRIPTION OF THE RECAPITALIZATION AMENDMENT
At the Special Meeting, the Stockholders of the Company will be
asked to consider and vote upon a proposal to amend the Company's Restated
Certificate of Incorporation to (i) provide for two classes of common
stock, one class designated as Class A Common Shares, $.01 par value
("Class A Common Shares"), and a lesser voting class designated as Common
Stock, $.01 par value ("Common Stock"); (ii)redesignate the 100,000,000
currently authorized shares of Existing Common Stock as Class A Common
Shares and authorize an additional 250,000,000 shares to be designated as
Common Stock; and (iii) change each issued share of the Existing Common
Stock into (a) .33 of a Class A Common Share and (b) .67 of a share of
Common Stock (round lots of 100 shares of Existing Common Stock will change
into 33 Class A Common Shares and 67 shares of Common Stock). Cash will be
paid in lieu of fractional shares. Such proposed amendments are referred
to collectively herein as the "Recapitalization Amendment." The text of
the portion of the Recapitalization Amendment relating to the
reclassification of the Existing Common Stock and of Article Fourth of the
Company's Restated Certificate of Incorporation as proposed to be amended
and restated pursuant to the Recapitalization Amendment are set forth in
Annex A-1 and Annex A-2, respectively, to this Proxy Statement. The Class
A Common Shares and the Common Stock are referred to collectively herein as
the "Common Shares."
If the Recapitalization Amendment is approved by the
Stockholders, the Board of Directors of the Company intends to file the
Recapitalization Amendment with the Secretary of State of the State of
Delaware as promptly after the Special Meeting as practicable. The
Recapitalization Amendment will be effective at the close of business on
the date of filing thereof with the Secretary of State of the State of
Delaware (the "Effective Time"). Upon effectiveness of the
Recapitalization Amendment, and without any further action by the Company
or its Stockholders, each issued share of Existing Common Stock (including
shares held in the treasury of the Company) will automatically be changed
into .33 of a Class A Common Share and .67 of a share of Common Stock.
Fractional Common Shares will not be issued. In lieu thereof, the Company
will, as provided below, pay a cash amount to the stockholders otherwise
entitled to such fractional shares equal to the total fractional amount
represented by such shares times the greater of (i) the average closing
price of a share of the Existing Common Stock on the NYSE for the fifteen
trading days immediately preceding the date on which the Effective Time
occurs and (ii) the closing price of a share of the Existing Common Stock
on the NYSE on the trading day immediately preceding the date on which the
Effective Time occurs. For example, a holder of 10 shares of Existing
Common Stock would receive three Class A Common Shares, six shares of
Common Stock and cash for the fractional Common Shares. For round lots of
100 shares of the Company's Existing Common Stock, the change would be
equivalent to converting such round lot into 33 Class A Common Shares and
67 shares of Common Stock. It is expected that both the Class A Common
Shares and the Common Stock will be listed on the NYSE.
Even if the Recapitalization Amendment is approved by the
Stockholders, the Board of Directors may decline to file the
Recapitalization Amendment if the Board of Directors determines that such
action would be in the best interests of the Company under the
circumstances at the time. The Company currently knows of no reason why
the Recapitalization Amendment would not be filed if approved by the
Stockholders.
As soon as practicable after the Effective Time, the Company's
transfer agent will mail a form of a letter of transmittal ("Letter of
Transmittal") to each record holder of Existing Common Stock as of the
Effective Time. New certificates representing .33 of a Class A Common
Share and .67 of a share of Common Stock for each outstanding share of
Existing Common Stock held by such holders will be issued to each holder of
shares of Existing Common Stock that delivers to the Company's transfer
agent a properly executed Letter of Transmittal accompanied by the
certificates representing the shares of Existing Common Stock. In lieu of
fractional Common Shares that would otherwise have been issuable, a check
for the cash amount calculated pursuant to the formula set out above will
be issued to such record holder. STOCKHOLDERS SHOULD NOT SUBMIT ANY
CERTIFICATES REPRESENTING SHARES OF EXISTING COMMON STOCK WITH THEIR
PROXIES AND INSTEAD SHOULD RETAIN THEM PENDING THE EFFECTIVENESS OF THE
RECAPITALIZATION AMENDMENT AND THE RECEIPT OF A FORM OF LETTER OF
TRANSMITTAL.
Upon the change of the Existing Common Stock, the Class A Common
Shares will have one vote per share, except to the extent voting rights
with regard to those shares would be affected by the Minority Protection
Provisions described below. See "Description of Common Shares--Minority
Protection Provisions." As more fully described below, the shares of
Common Stock will have substantially identical rights as the Class A Common
Shares except as set forth in the Recapitalization Amendment. For
instance, the holders of Common Stock will have only 1/10 vote per share.
The Recapitalization Amendment will apply equally to all holders of the
Existing Common Stock in proportion to the number of shares of Existing
Common Stock owned by them at the Effective Time. However, until
conversion or redemption of the PRIDES, which will occur no later than
December 31, 1997, holders of the shares of PRIDES will continue to have
4/5 vote per share. Accordingly, the relative voting power of the holders
of the PRIDES will increase from 8.8% to 19.6% of the total votes and the
aggregate voting power of the holders of the Common Shares will be 80.4% of
the total votes (as compared to the 91.2% of total votes held by the
holders of Existing Common Stock immediately prior to the Effective Time)
until such time as the PRIDES are converted into or redeemed for Common
Shares, and the voting power of the Common Shares owned by MAXXAM will be
56.1% of the total votes (as compared to 63.6% of the total votes for the
Existing Common Stock held by MAXXAM). Following conversion or redemption
of the PRIDES, the relative voting power held by former holders of the
PRIDES will be approximately the same as it would have been in the absence
of the Recapitalization Amendment.
BACKGROUND OF THE RECAPITALIZATION PROPOSAL
In recent years a number of publicly held companies have adopted
capital structures utilizing two classes of common stock. The operating
management of the Company became interested in effecting such a "dual
class" structure for the Existing Common Stock in order to provide
flexibility in considering, proposing and structuring acquisition and
financing transactions to potentially augment the Company's growth.
Currently, MAXXAM owns 50,000,000 shares of the Company's
Existing Common Stock which after giving effect, on a pro forma basis, to
the conversion of each of the 8,673,850 shares of PRIDES into one share of
Existing Common Stock would result in MAXXAM owning approximately 62% of
the Company's Existing Common Stock. In light of the possible effects of
the Recapitalization Amendment on the ownership interest of, and other
possible effects on, the Stockholders, including MAXXAM, on July 20, 1995
the Board of Directors appointed a Special Committee (the "Special
Committee") of two independent directors. The two members were Robert
Marcus, who served as Chairman of the Committee, and Robert J. Petris. The
Special Committee was asked to consider a recapitalization in detail,
recommend to the Board of Directors whether or not to proceed and if so,
the appropriate terms. The Special Committee formally met twelve times
relating to a proposed recapitalization (such number does not include
informal meetings or discussions that the Special Committee has had with
its independent legal counsel or financial advisor).
On August 25, 1995, the Special Committee met with
representatives of Salomon Brothers Inc ("Salomon") and special legal
counsel to the Company. The objectives sought to be achieved by, and
various proposed terms of, the recapitalization were reviewed. The
anticipated benefits and possible disadvantages of a recapitalization were
discussed. The Special Committee also reviewed in detail a written
presentation prepared by Salomon and distributed before the meeting to the
Special Committee, which included analyses of the impact of similar
proposals on the aggregate market value of outstanding common equity on
companies with dual class structures of common equity, the potential market
price differential between voting and nonvoting or lesser voting shares,
the potential impact on market liquidity, the potential reaction of
institutional investors to nonvoting or lesser voting stock structures and
the potential impact on the Company's ability to raise capital. Salomon
also discussed the market impact of various features of nonvoting or lesser
voting shares.
At a meeting on January 23, 1996, at which time both members were
present, the Special Committee reviewed a draft of the opinion of Salomon
substantially in the form as discussed below under "--Financial Advisor to
the Special Committee" and formulated its recommendation to the Board of
Directors that a new class of lesser voting common stock be authorized and
issued in a recapitalization whereby each outstanding share of Existing
Common Stock would be changed into .33 of a Class A Common Share and .67 of
a share of Common Stock. The Special Committee specified that the Board
should retain the discretion to pay larger dividends in cash or property on
the Common Stock than on the Class A Common Shares. The Special
Committee's purpose for this provision, as well as for the features
designed to protect holders of the lesser voting stock in the event of
mergers or substantial stock purchases, was to attempt to minimize any
disparity that might develop in the market prices of the two classes of
stock. Both of the members of the Special Committee voted to recommend the
Recapitalization Amendment to the Board of Directors.
At its meeting on January 24, 1996, the Board of Directors
considered the Special Committee's recommendation. Following discussions,
four members of the Board of Directors present at the meeting voted to
approve the recommendation of the Special Committee to adopt the
Recapitalization Amendment and to recommend it to the Company's
Stockholders; two directors, Messrs. Hurwitz and Levin, abstained. After
reviewing the Company's market liquidity, stockholder positions, growth
objectives and capital structure and after consultation with the Special
Committee's financial and legal advisors, the Board of Directors came to
believe that such a structure offers the Company a number of possible
advantages that outweigh the potential disadvantages. The Board of
Directors then called the Special Meeting of Stockholders, and authorized
the preparation and filing with the SEC of a proxy statement. The terms of
the proposed recapitalization as set forth in this Proxy Statement and the
precise language of the Recapitalization Amendment were approved on March
4, 1996 at a meeting of the Special Committee, and on March ___, 1996 by
Unanimous Written Consent of the Board of Directors of the Company.
FINANCIAL ADVISOR TO THE SPECIAL COMMITTEE
The Special Committee retained Salomon as its financial advisor
in connection with its consideration of a recapitalization. Salomon
examined the historical market and volume data of companies with multiple
classes of common stock with different voting rights, reviewed voting
rights and other terms of the classes of common stock for such companies
and analyzed data relating to the issuance of stock by companies with
multiple classes of common stock with different voting rights. Among other
things, Salomon also reviewed certain publicly available financial, market
and trading information relating to the Company, including the historical
financial statements of the Company, and examined the historical market and
volume data of the Company.
Thereafter, Salomon rendered an opinion to the Special Committee
that (i) the combined theoretical market value (on a fully distributed
basis) and the liquidity of the Common Shares outstanding immediately after
the recapitalization will not be materially less than the market value and
the liquidity of the Existing Common Stock immediately prior to the
announcement of the recapitalization, and (ii) the Company's ability to
raise equity capital through an offering or offerings of common equity will
not be materially adversely affected by the implementation of the
recapitalization. The form of the opinion of Salomon is set out in full in
Annex B to this Proxy Statement.
Salomon has been paid a retainer fee of $50,000 and was paid an
additional $200,000, plus reimbursement of out-of-pocket expenses, upon
delivery of the opinion attached hereto as Annex B. In addition, the
Company has agreed to indemnify Salomon against certain liabilities and
expenses it may incur in connection with such services. Salomon has acted
as financial advisor to the Company and to MAXXAM with respect to matters
unrelated to the recapitalization and has received fees for its services.
REASONS FOR THE RECAPITALIZATION PROPOSAL; RECOMMENDATION OF THE BOARD
OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE RECAPITALIZATION AMENDMENT.
The Board of Directors of the Company believes, after careful
consideration of, among other things, the advantages and disadvantages of
the Recapitalization Amendment and the opinion of Salomon, that the
Recapitalization Amendment is in the best interest of the Company. The
material advantages and disadvantages of the Recapitalization Amendment
considered by the Special Committee and the Board of Directors are set
forth herein. The Board of Directors believes that the creation of a
capital structure with both voting and lesser voting Common Shares would
offer a number of potential benefits to the Company and its Stockholders,
which are described below.
Stockholder Flexibility and Liquidity
Stockholders who receive shares of Common Shares as a result of
the effectiveness of the Recapitalization Amendment will be able to
maintain approximately 83% of their voting power, after conversion or
redemption of the PRIDES, even if they decide to sell or otherwise dispose
of up to slightly more than two-thirds of their equity interest in the
Company. The proposed Recapitalization Amendment thus would give all
Stockholders, including MAXXAM, increased flexibility to dispose of a
portion of their equity interest in the Company without significantly
affecting their relative voting power. In January 1996, MAXXAM filed a
shelf registration statement with the SEC for up to $200,000,000 of MAXXAM
secured or unsecured debt securities, including debt securities that could
be exchangeable for Existing Common Stock owned by MAXXAM. Contemporaneous
with such filing, the Company filed a shelf registration with the SEC
covering up to 10,000,000 shares (the "MAXXAM Shares") of Existing Common
Stock owned by MAXXAM (which shares could be offered in connection with
debt securities offered by MAXXAM that are exchangeable, redeemable or
convertible for such shares of the Company or for sale by MAXXAM directly
to purchasers). Neither of such registration statements has been declared
effective by the SEC. MAXXAM has informed the Company that it has not made
any determination regarding the timing of an offering of its debt
securities or of any Existing Common Stock. MAXXAM has also informed the
Company that, if the Recapitalization Amendment becomes effective, MAXXAM
intends to have the shelf registration statements amended to substitute
shares of Common Stock for the Existing Common Stock that would be covered
by such registration statements.
Because Stockholders who are interested in maintaining their
voting interest in the Company may be more willing to sell shares of the
Company if such sale does not result in a corresponding decrease in their
relative voting power, the Recapitalization Amendment may also result in
increased trading of equity securities of the Company, thereby increasing
liquidity. It is anticipated that both classes of the Common Shares will
be listed on the NYSE. Furthermore, the presence of both voting and lesser
voting shares will allow holders of Class A Common Shares, including
MAXXAM, to increase their voting power without necessarily increasing their
equity investment by selling or exchanging shares of Common Stock and
acquiring Class A Common Shares (subject to the Minority Protection
Provisions).
Repurchase Obligation
The implementation of the Recapitalization Amendment will also
lessen the likelihood of possible repurchase obligations under the
Indentures with respect to the 9-7/8% Senior Notes and the 12-3/4% Senior
Subordinated Notes of the Company's subsidiary, Kaiser Aluminum & Chemical
Corporation ("KACC"), which would arise upon the occurrence of a change of
control, defined as MAXXAM not beneficially owning a minimum percentage
(ranging from 30% to 40% depending on various circumstances) of the
Company's voting stock.
Financing Flexibility
By authorizing the Company to issue either voting or lesser
voting shares, the Recapitalization Amendment will provide the Company with
increased flexibility to issue Common Stock or some combination of Common
Shares (i) to raise equity capital (either through direct issuances of
stock or through issuances of convertible securities) to finance future
capital expenditures and to finance the future growth of the Company, (ii)
as consideration for future acquisitions, and (iii) in connection with
employee stock plans as a means of attracting, compensating and retaining
key employees, without materially diluting the voting power of the
Company's existing Stockholders. By providing the Company with the ability
to issue lesser voting equity securities, the Recapitalization Amendment
should help mitigate any reluctance that MAXXAM might otherwise have to
support the issuance of significant additional common stock because of the
accompanying voting dilution.
The Company is evaluating various acquisition and financing
transactions in which the issuance of Common Shares could be involved, but
there is currently no specific plan to issue additional equity or
convertible securities. On February 22, 1996, the Company announced that
it had proposed on February 8, 1996 to acquire all of the outstanding
shares of Alumax Inc. ("Alumax"), a leading corporation in the aluminum
industry, for a combination of cash and equity securities of the Company at
a combined value of $40 to $45 per common share, of which $30 would be paid
in cash and the balance in equity securities of the Company. With
approximately 55 million common shares of Alumax outstanding, on a fully
diluted basis, the transaction would have been valued at between $2.2
billion and $2.5 billion. Alumax rejected the proposal and subsequently
adopted a stockholder rights plan commonly called a "poison pill," which is
a defensive, self-protective measure, instead of agreeing to cooperative
discussions. Although management of the Company remains convinced that a
combination of the Company and Alumax would offer an opportunity to
stockholders of both companies to realize enhanced value, on March 2, 1996,
the Company announced it had decided to withdraw its proposal.
Continuity
Approval of the Recapitalization Amendment would give the Company
the flexibility to issue Common Stock or some combination of Common Shares
for financing, acquisition and compensation purposes without materially
diluting the voting power of the Company's existing Stockholders, including
MAXXAM, although their equity interests would be diluted. As a practical
matter, the Recapitalization Amendment would permit MAXXAM to retain a
majority of the voting power of the Company even if it substantially
reduces its equity position in the Company by more than two-thirds (whether
for financial, diversification or other reasons). Accordingly, the
Recapitalization Amendment is expected to reduce the risk of disruption in
the continuity of the Company's current operating policies and long-range
strategy that might otherwise result if MAXXAM were to dispose of a
significant percentage of its shares of Existing Common Stock.
Key Employees
The Recapitalization Amendment is intended to permit all
employees of the Company to continue to concentrate on their employment
responsibilities by reducing concern, if any, that the future of the
Company could be affected by real or perceived succession issues or by an
unsolicited takeover attempt that might otherwise be triggered by
significant sales of shares of Existing Common Stock by MAXXAM in the
future. By reducing these uncertainties, the Recapitalization Amendment
may enhance the ability of the Company to attract and retain highly
qualified key employees. In addition, the Company's ability to issue
Common Stock should increase the Company's flexibility in structuring
compensation plans and arrangements so that employees may continue to
participate in the growth of the Company without materially diluting the
voting power of existing stockholders, although equity interests may be
diluted.
CERTAIN POTENTIAL DISADVANTAGES OF THE RECAPITALIZATION PROPOSAL
While the Board of Directors has determined that implementation
of the Recapitalization Amendment is in the best interests of the Company,
the Recapitalization Amendment may also be considered to have certain
disadvantages, including, but not limited to, those set forth below and
those set forth under "--Certain Effects of the Recapitalization
Amendment."
Change of Control Impact
MAXXAM currently owns approximately 62% of the Existing Common
Stock on a fully diluted basis assuming the conversion of each outstanding
share of PRIDES into one share of Existing Common Stock, and holds
approximately 63.6% of the voting power of the Company. In the event that
the Recapitalization Amendment is implemented and after the PRIDES are
converted or redeemed, MAXXAM could retain a majority of the voting power
of the Company even if it reduced its total holdings of the Company's
equity securities by more than two-thirds. By permitting MAXXAM to sell
Common Stock while retaining Class A Common Shares, implementation of the
Recapitalization Amendment may limit the future circumstances in which a
sale or transfer of equity by MAXXAM could lead to a merger proposal or
tender offer or to a proxy contest for the removal of incumbent directors.
Consequently, the Recapitalization Amendment may deprive
stockholders of the Company of an opportunity to sell their shares at a
premium over prevailing market prices in a change of control transaction
and may also make it more difficult to replace the current members of the
Board of Directors and management of the Company.
Increased Availability of Number of Authorized Shares
As of January 31, 1996, there were 100,000,000 shares of Existing
Common Stock authorized, of which there were 71,638,514 shares outstanding
and 28,361,486 available for future issuance (19,687,636 if the current
outstanding PRIDES are converted on a one-for-one basis). There were also
20,000,000 shares of preferred stock authorized, of which 8,673,850 shares
of PRIDES were outstanding as of January 31, 1996. If the Recapitalization
Amendment is adopted by the Stockholders, its implementation will result in
100,000,000 shares of Class A Common Shares being authorized, of which
approximately 23,640,709 will be issued and outstanding and approximately
76,359,291 will be available for future issuance without any requirement of
further stockholder approval, except as may be required by the NYSE or by
Delaware law. Additionally, 250,000,000 shares of Common Stock will be
authorized, of which approximately 47,997,804 will be issued and
outstanding and approximately 202,002,196 will be available for future
issuance without any requirement of further stockholder approval, except as
may be required by the NYSE or Delaware law. There will be no change in
the number of authorized shares of the Company's preferred stock. The
Board of Directors believes it desirable that the Company have the
flexibility of being able to issue additional Common Shares without
stockholder approval. Stockholders have no preemptive rights to purchase
any stock of the Company, and may not cumulate votes in the election of
directors. The additional Common Shares might be issued at such times and
under such circumstances as to have a dilutive effect on earnings per share
and on the equity ownership or voting power of the present holders of the
Existing Common Stock.
While the Recapitalization Amendment is not being proposed for
this reason, the availability of additional Common Shares could enhance the
Board of Directors' bargaining capability on behalf of the Company's
stockholders in a takeover situation. The additional Common Shares could
also be used, either alone or in combination, to render more difficult or
discourage a merger, tender offer or proxy contest, the assumption of
control by a holder of a large block of the Company's securities, or the
removal of incumbent management, even if such a transaction were favored by
the holders of the requisite number of shares, by increasing the aggregate
outstanding shares and, thus, the number of shares required to accomplish
such a transaction. The situations referred to in this paragraph seem
unlikely at present by reason of the voting power of MAXXAM.
Investment By Institutions
Implementation of the Recapitalization Amendment may affect the
decision of certain institutional investors that would otherwise consider
investing in or retaining the Existing Common Stock. The holding of lesser
voting shares may not be permitted by the investment policies of certain
institutional investors or may be less attractive to managers of certain
institutional investors. The Company is not aware of the effect, if any,
the implementation of the Recapitalization Amendment will have on the
continued holdings of those institutional investors who currently own
Existing Common Stock.
Acquisition Accounting
In order for the Company to effect a business combination to be
accounted for using the "pooling of interests" method, the Company would be
required to issue Class A Common Shares in order to effect any such
combination. Common Stock may not be used, either alone or in combination
with Class A Common Shares, to effect a business combination utilizing
such method of accounting.
State Statutes
Some state securities law statutes contain provisions which, due
to the issuance of Common Stock, may restrict an offering of equity
securities by the Company or the secondary trading of its equity securities
in those states. However, due to exemptions available if the Class A
Common Shares and shares of Common Stock are trading on the NYSE and the
limited number of states involved, the Company does not believe that such
provisions will have a material adverse effect on the amount of equity
securities that the Company will be able to offer, on the price obtainable
for such equity securities in such an offering, or on the secondary trading
market for the Company's equity securities.
Security For Credit
While there can be no assurance, the Company does not expect that
the adoption of the Recapitalization Amendment will affect the ability of
stockholders to use either the Class A Common Shares or the Common Stock as
security for the extension of credit by financial institutions, securities
brokers or dealers.
DESCRIPTION OF COMMON SHARES
The terms of the Class A Common Shares and the Common Stock are
set forth in full in Article Fourth of the Company's Restated Certificate
of Incorporation as proposed to be amended and restated by the proposed
Recapitalization Amendment. The rights of the two classes of Common Shares
will be identical except as otherwise described below. The text of the
portion of the Recapitalization Amendment relating to the reclassification
of the Existing Common Stock and of Article Fourth as proposed to be
amended and restated pursuant to the Recapitalization Amendment are set
forth in Annex A-1 and Annex A-2, respectively, to this Proxy Statement and
incorporated herein by reference. Although the following is a summary of
all of the material terms of the Recapitalization Amendment, it should
nevertheless be read in conjunction with, and is qualified in its entirety
by reference to, Annex A-1 and Annex A-2.
Voting
Under the Company's current Restated Certificate of
Incorporation, each share of Existing Common Stock is entitled to one vote
per share and each share of PRIDES is entitled to 4/5 vote, and, except as
required by law or as to certain matters as to which separate class voting
rights have been granted to the holders of the PRIDES or may be granted in
the future to the holders of one or more other series of preferred stock,
the holders of the Existing Common Stock and the holders of the PRIDES vote
together with each other, and not as separate classes, on all matters voted
upon by the stockholders. Upon the effectiveness of the Recapitalization
Amendment, each Class A Common Share will, subject to the Minority
Protection Provisions described below, entitle the holder thereof to one
vote per share, the Common Stock will entitle the holders thereof to 1/10
vote per share and, until the PRIDES are converted or redeemed (which will
occur no later than December 31, 1997), the holders of the PRIDES will
continue to be entitled to 4/5 vote per share; except as required by law or
as to certain matters as to which separate class voting rights have been
granted to the holders of the PRIDES or the holders of Common Stock or may
be granted in the future to the holders of one or more other series of
preferred stock, the holders of the Class A Common Shares, the holders of
the Common Stock and the holders of the PRIDES will vote together with each
other, and not as separate classes, on all matters voted upon by the
stockholders. After giving effect to the Recapitalization Amendment, the
voting power of the holders of the shares of PRIDES will increase from 8.8%
to 19.6% of the total votes and the voting power of the holders of the
Common Shares will be 80.4% of the total votes (as compared to the 91.2% of
total votes held by the holders of Existing Common Stock immediately prior
to the Effective Time). Following conversion or redemption of the PRIDES,
the relative voting power held by former holders of the PRIDES will be
approximately the same as it would have been in the absence of the
Recapitalization Amendment. See "--Certain Effects of the Recapitalization
Amendment--Effect on Relative Ownership Interest and Voting Power".
Dividends and Distributions
The Recapitalization Amendment provides that, after the
requirements with respect to preferential dividends on any of the Company's
preferred stock shall have been met and after the Company shall have
complied with all of the requirements, if any, with respect to the setting
aside of sums as sinking funds or redemption or purchase accounts in
respect of any such preferred stock and subject to any other applicable
conditions, dividends and distributions may be declared and paid to the
holders of Class A Common Shares and Common Stock in cash, property, or
other securities of the Company (including shares of any class or series
whether or not shares of such class or series are already outstanding) out
of funds legally available therefor. Each Class A Common Share and each
share of Common Stock will have identical rights with respect to dividends
and distributions, subject to the following: (i) at the discretion of the
Board of Directors, a dividend or distribution in cash or property on a
share of Common Stock may be greater (but not less) than any dividend or
distribution in cash or property on a Class A Common Share; (ii) a stock
dividend on Class A Common Shares may be paid in Class A Common Shares or
shares of Common Stock; and (iii) a stock dividend on shares of Common
Stock may be paid only in shares of Common Stock. If a stock dividend on
Class A Common Shares is paid in Class A Common Shares, a stock dividend on
Common Stock will be paid in a proportionate number of shares of Common
Stock. The dividend provisions of the Recapitalization Amendment provide
the Board of Directors with the flexibility to determine appropriate
dividend levels, if any, under the circumstances from time to time.
The Company is prohibited under the Credit Agreement, dated
February 15, 1994 among the Company, Kaiser Aluminum & Chemical Corporation
("KACC"), the financial institutions which are parties thereto, and
BankAmerica Business Credit, Inc. (as amended, the "1994 Credit Agreement")
from paying dividends on its Existing Common Stock or on the Common Shares
and does not anticipate paying dividends on its Existing Common Stock or,
if the Recapitalization Amendment is approved, on the Common Shares in the
foreseeable future. The 1994 Credit Agreement expressly permits the
declaration and payment of dividends by the Company on the PRIDES to the
extent the Company receives payment on certain intercompany notes or
certain other permitted distributions from KACC under the 1994 Credit
Agreement.
The holders of the PRIDES are entitled to receive (when, as and
if the Board of Directors declares dividends out of funds legally available
therefor) cumulative preferential cash dividends at the rate of $.97 per
annum or $.2425 per quarter for each share of the PRIDES, payable quarterly
in arrears on the last day of each March, June, September and December,
provided however, that, with respect to any dividend period during which a
redemption occurs, the Company may, at its option, declare accrued
dividends on the PRIDES to, and pay such dividends on, the redemption date,
in which case such dividends shall not be included in the calculation of
the Call Price (as defined below) on such redemption date. The
Recapitalization Amendment will have no effect on the dividend rights of
the PRIDES.
Mergers and Consolidations
In the event of a merger, consolidation or combination of the
Company with another entity (whether or not the Company is the surviving
entity) or in the event of dissolution of the Company, the holders of
shares of Common Stock will be entitled to receive the same per share
consideration as the per share consideration, if any, received by holders
of Class A Common Shares in that transaction, except that any common stock
that holders of Common Stock are entitled to receive in any such event may
have terms substantially similar to those of the Common Stock (i.e.,
significantly lesser voting rights) as set forth in the Recapitalization
Amendment.
Splits or Combinations
The Recapitalization Amendment provides that, if the Company
shall in any manner split, subdivide or combine the outstanding Class A
Common Shares or Common Stock, the outstanding shares of the other such
class shall be proportionately split, subdivided or combined in the same
manner and on the same basis as the outstanding shares of the class that
has been split, subdivided or combined.
Convertibility
Except as described below, neither the Common Stock nor the Class
A Common Shares would be convertible into another class of securities of
the Company.
The Common Stock may be converted automatically into Class A
Common Shares on a share-for-share basis by resolution of the Board of
Directors if, as a result of the existence of the Common Stock, the Class A
Common Shares, the Common Stock or both become excluded from trading on the
principal national securities exchange on which the shares are then traded
and all other such exchanges and are also excluded from quotation on the
NASDAQ National Market System and other comparable quotation systems then
in use.
In addition, if at any time the number of outstanding shares of
Class A Common Shares falls below 10% of the aggregate number of
outstanding shares of Common Stock and of Class A Common Shares, then,
immediately upon the occurrence of such event, all the outstanding shares
of Common Stock will be automatically converted into Class A Common Shares,
on a share-for-share basis. For purposes of the immediately preceding
sentence, any shares of Common Stock or Class A Common Shares repurchased
by the Company will no longer be deemed "outstanding" from and after the
date of repurchase. The Company has no present intention to repurchase any
shares of its Common Stock or Class A Common Shares. In view of the
absence of a present intention by the Company to repurchase any shares of
Common Stock or Class A Common Shares and the substantial number of shares
of Common Stock that would be required to be issued to reach the 10%
threshold, the Board of Directors believes it unlikely that this provision
will be triggered in the foreseeable future. However, in the event of any
such change, to the extent that the market price of the Common Stock is
higher or lower than the market price of the Class A Common Shares
immediately prior to such change, the market price of the shares held by
particular holders may be adversely affected by the change. The mechanism
for automatic conversion provided for in this paragraph may be deemed akin
to the Minority Protection Provisions referred to below.
In the event of any such conversion of the Common Stock,
certificates which formerly represented outstanding shares of Common Stock
will thereafter be deemed to represent a like number of Class A Common
Shares.
Minority Protection Provisions
After the Effective Time, voting rights disproportionate to
equity ownership could be acquired through acquisitions of Class A Common
Shares without corresponding purchases of Common Stock. In order to reduce
somewhat the likelihood of Class A Common Shares and shares of Common Stock
trading at significantly different market prices and to give holders of
Common Stock the opportunity to participate in any premium paid in the
future relating to the acquisition of 15% or more of the Class A Common
Shares by a buyer who has not acquired a proportionate number of shares of
Common Stock, the Recapitalization Amendment includes "Minority Protection
Provisions" as described below. The Minority Protection Provisions might
have an anti-takeover effect by making the Company a less attractive target
for a takeover bid. As discussed below, there can be no assurance that the
Company will in all instances be able to readily identify Persons whose
holdings subject them to the Minority Protection Provisions.
Certain Definitions
For purposes of the Minority Protection Provisions, the following
definitional provisions apply:
"Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For purposes of this definition, control when
used with respect to any specified Person means the possession of the power
to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms controlling and controlled have meanings
correlative to the foregoing.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Person" means any individual, partnership, joint venture,
limited liability company, corporation, association, trust, incorporated
organization, government or governmental department or agency or any other
entity (other than the Company).
The following Class A Common Shares shall be excluded for the
purpose of determining the Class A Common Shares beneficially owned or
acquired by any Person or group but not for the purpose of determining
shares outstanding:
(a) shares beneficially owned by such Person or
group (or, in the case of a group, shares beneficially
owned by Persons that are members of such group)
immediately after the Effective Time;
(b) shares acquired by will or by the laws of
descent and distribution, or by gift that is made in
good faith and not for the purpose of circumventing the
Minority Protection Provisions, or by termination or
revocation of a trust or similar arrangement or by a
distribution from a trust or similar arrangement if
such trust or similar arrangement was created, and such
termination, revocation or distribution occurred or was
effected, in good faith and not for the purpose of
circumventing the Minority Protection Provisions, or by
reason of the ability of a secured party (following a
default) to exercise voting rights with respect to, or
to dispose of, shares that had been pledged in good
faith as security for a bona fide loan, or by
foreclosure of a bona fide pledge which secures a bona
fide loan;
(c) shares acquired upon issuance or sale by the
Company;
(d) shares acquired by operation of law
(including a merger or consolidation effected for the
purpose of recapitalizing such Person or
reincorporating such Person in another jurisdiction but
excluding a merger or consolidation effected for the
purpose of acquiring another Person);
(e) shares acquired in exchange for Common Stock
by a holder of Common Stock (or by a parent, lineal
descendant or donee of such holder of Common Stock who
received such Common Stock from such holder) if the
Common Stock so exchanged was acquired by such holder
directly from the Company as a dividend on Class A
Common Shares;
(f) shares acquired by a plan of the Company
qualified under Section 401(a) of the Internal Revenue
Code of 1986, as amended, or any successor provision
thereto, or acquired by reason of a distribution from
such a plan;
(g) shares beneficially owned by a Person or
group immediately after the Effective Time which are
thereafter acquired by an Affiliate of such Person or
group (or by the members of the immediate family (or
trusts for the benefit thereof) or any such Person or
Affiliate) or by a group which includes such Person or
group or any such Affiliate; and
(h) shares acquired indirectly through the
acquisition of securities, or all or substantially all
of the assets, of a Person that has a class of its
equity securities registered under Section 12 (or any
successor provision) of the 1934 Act.
Notwithstanding anything to the contrary contained in the Minority
Protection Provisions, no Person (and no group including such Person) shall
be deemed to have acquired after the Effective Time beneficial ownership of
any Class A Common Shares owned by any other Person solely by reason of
such Person being or becoming an officer, director, executive, trustee,
executor, custodian, guardian, and/or other similar fiduciary or employee
of or for such other Person under circumstances not intended to circumvent
the Minority Protection Provisions.
For purposes of calculating the number of shares of Common Stock
beneficially owned or acquired by any Person or group:
(a) shares of Common Stock acquired by gift shall
be deemed to be beneficially owned by such Person or
member of a group if such gift was made in good faith
and not for the purpose of circumventing the operations
of the Minority Protection Provisions; and
(b) only shares of Common Stock owned of record
by such Person or member of a group or held by others
as nominees of such Person or member of a group and
identified as such to the Company shall be deemed to be
beneficially owned by such Person or group (provided
that shares of Common Stock with respect to which such
Person or member of a group has sole investment and
voting power shall be deemed to be beneficially owned
thereby).
Subject to the other definitional provisions applicable to the
Minority Protection Provisions, "beneficial ownership" shall be determined
pursuant to Rule 13d-3 (as in effect on February 1, 1996) promulgated under
the 1934 Act, and the formation or existence of a "group" shall be
determined pursuant to Rule 13d-5(b) (as in effect on February 1, 1996)
promulgated under the 1934 Act, in each case subject to the following
additional qualifications:
(a) relationships by blood or marriage between or
among any Persons will not constitute any of such
Persons as a member of a group with any such other
Person(s), absent affirmative attributes of concerted
action; and
(b) any Person acting in his official capacity as
a director or officer of the Company shall not be
deemed to beneficially own shares where such ownership
exists solely by virtue of such Person's status as a
trustee (or similar position) with respect to shares
held by plans or trusts for the general benefit of
employees or former employees of the Company, and
actions taken or agreed to be taken by a Person in such
Person's official capacity as an officer or director of
the Company will not cause such Person to become a
member of a group with any other Person.
Description of the Minority Protection Provisions
If any Person or group (excluding the Company, but including
MAXXAM), acquires after the Effective Time beneficial ownership of shares
representing 15% or more of the then outstanding Class A Common Shares, and
such Person or group (a "Significant Stockholder") does not then
beneficially own an equal or greater percentage of all then outstanding
shares of Common Stock, all of which Common Stock must have been acquired
by such Person or group after the Effective Time, the Minority Protection
Provisions require that such Significant Stockholder must, in order to
maintain all of its voting power, make (within a ninety-day period
beginning the day after becoming a Significant Stockholder) a public cash
tender offer to acquire additional shares of Common Stock, as described
below (a "Minority Protection Transaction"). The 15% ownership threshold
of the number of Class A Common Shares which triggers a Minority Protection
Transaction may not be waived by the Board of Directors, nor may this
threshold be amended without stockholder approval, including a majority
vote of the outstanding Common Stock tabulated separately as a class.
For example, if a stockholder owns 4% of the outstanding Class A
Common Shares immediately after the Effective Time and thereafter acquires
additional Class A Common Shares representing an additional 16% of the
outstanding Class A Common Shares without acquiring any additional shares
of Common Stock, such stockholder must either commence a tender offer for
an additional 16% of the Common Stock at the prescribed price or he will
not be allowed to vote the 16% of the Class A Common Shares acquired after
the Effective Time. Alternatively, such stockholder could sell 2% of the
outstanding Class A Common Shares, thus dropping the net amount of the
Class A Common Shares acquired after the Effective Time to 14%, leaving the
stockholder with an aggregate of 18% of the Class A Common Shares, all of
which could be voted.
In a Minority Protection Transaction, the Significant Stockholder
must make a public cash tender offer to acquire from the holders of Common
Stock at least that number of additional shares of Common Stock (the
"Additional Shares") determined by (i) multiplying (x) the percentage of
the number of outstanding Class A Common Shares that are beneficially owned
by such Significant Stockholder and were acquired after the Effective Time
by such Significant Stockholder by (y) the total number of shares of Common
Stock outstanding on the date such Person or group became a Significant
Stockholder, and (ii) subtracting therefrom the number of shares of Common
Stock beneficially owned by such Significant Stockholder on the date such
Person or group became a Significant Stockholder (including shares acquired
at or prior to the time such Person or group became a Significant
Stockholder) which were acquired after the Effective Time (as adjusted for
stock splits, stock dividends and similar recapitalizations). The
Significant Stockholder must acquire all shares of Common Stock validly
tendered and not withdrawn or, if the number of shares of Common Stock
tendered to the Significant Stockholder, and not withdrawn, exceeds the
number determined pursuant to such formula, a pro-rata number from each
tendering holder (based on the number of shares tendered by each tendering
stockholder).
The cash offer price for any Additional Shares required to be
purchased by the Significant Stockholder pursuant to the Minority
Protection Provisions shall be the greatest of: (i) the highest price per
share paid by the Significant Stockholder for any Class A Common Share or
any share of Common Stock during the six-month period ending on the date
such Person or group became a Significant Stockholder (or such shorter
period after the Effective Time if the date such Person or group became a
Significant Stockholder is not more than six months following the Effective
Time); (ii) the highest reported sale price of a Class A Common Share or
share of Common Stock on the NYSE (or such other securities exchange or
quotation system as is then the principal trading market for such shares)
during the thirty-day period preceding the date such Person or group became
a Significant Stockholder; and (iii) the highest reported sale price for a
Class A Common Share or share of Common Stock on the NYSE (or such other
securities exchange or quotation system then constituting the principal
trading market for such shares) on the business day preceding the date the
Significant Stockholder commences the required tender offer.
If a Significant Stockholder fails to make a tender offer
required by the Minority Protection Provisions, or to purchase validly
tendered and not withdrawn shares (after proration, if any), the voting
rights of all of the Class A Common Shares beneficially owned by such
Significant Stockholder which were acquired after the Effective Time would
be automatically suspended until completion of a Minority Protection
Transaction or until divestiture of the excess Class A Common Shares that
triggered such requirement. To the extent that the voting power of any
Class A Common Shares is so suspended, such shares will not be included in
the determination of aggregate voting shares for any purpose.
A Minority Protection Transaction would also be required of any
Significant Stockholder each time that the Significant Stockholder acquires
after the Effective Time beneficial ownership of an additional amount of
Class A Common Shares equal to or greater than the next higher integral
multiple of 5% in excess of 15% (e.g., 20%, 25%, 30%, etc.) of the
outstanding Class A Common Shares and such Significant Stockholder does not
then own an equal or greater percentage of all then outstanding shares of
Common Stock that such Significant Stockholder acquired after the Effective
Time. Such Significant Stockholder would be required to offer to buy that
number of Additional Shares prescribed by the formula set forth above;
provided that, for purposes of such formula, the date on which the
Significant Stockholder acquired the next higher integral multiple of 5% of
the outstanding Class A Common Shares will be deemed to be the date on
which such Person or group became a Significant Stockholder.
The requirement to engage in a Minority Protection Transaction
will be satisfied by making the requisite offer and purchasing validly
tendered and not withdrawn shares, even if the number of shares tendered is
less than the number of shares included in the required offer.
Neither the Minority Protection Transaction requirement nor the
related possibility of suspension of voting rights applies to any increase
in percentage beneficial ownership of Class A Common Shares resulting
solely from a change in the total number of Class A Common Shares
outstanding, provided that any acquisition after such change which results
in any Person or group having acquired after the Effective Time beneficial
ownership of 15% or more of the number of then outstanding Class A Common
Shares (or, after the last acquisition which triggered the requirement for
a Minority Protection Transaction, additional Class A Common Shares in an
amount equal to the next higher integral multiple of 5% in excess of the
number of Class A Common Shares then outstanding) shall be subject to any
Minority Protection Transaction requirement that would be otherwise
imposed. All calculations with respect to percentage beneficial ownership
of issued and outstanding shares of either class of Common Shares shall be
based upon the number of issued and outstanding shares reported by the
Company on the last to be filed of (i) the Company's most recent Annual
Report on Form 10-K, (ii) its most recent Quarterly Report on Form 10-Q,
(iii) its most recent Current Report on Form 8-K, and (iv) its most recent
definitive proxy statement filed with the SEC.
Since the definition of Significant Stockholder is based on the
beneficial ownership percentage of Class A Common Shares acquired after the
Effective Time of the Recapitalization Amendment, a Person or group who is
a stockholder of the Company at the Effective Time will not become a
Significant Stockholder unless such Person or group acquires an additional
15% of the then outstanding Class A Common Shares, regardless of the number
of shares of Existing Common Stock owned prior to the Effective Time of the
Recapitalization Amendment.
The Minority Protection Provisions do not prevent any Person or
group from acquiring a significant or controlling interest in the Company,
provided such Person or group acquires a proportionate percentage of the
Common Stock, undertakes a Minority Protection Transaction or incurs the
suspension of the voting rights of the Class A Common Shares as provided by
the Minority Protection Provisions. If a Minority Protection Transaction
is required, the purchase price to be paid in such offer may be higher than
the price at which a Significant Stockholder might otherwise be able to
acquire an identical number of shares of Common Stock. Such requirement
could make an acquisition of a significant or controlling interest in the
Company more expensive and, if the Minority Protection Transaction is
required, more time consuming, than if such requirement did not exist.
Consequently, a Person or group might be deterred from acquiring a
significant or controlling interest in the Company as a result of such
requirement. See "--Certain Potential Disadvantages of the
Recapitalization Proposal--Change of Control Impact." Moreover, by
restricting the ability of an acquiror to acquire a significant interest in
the Class A Common Shares by paying a "control premium" for such shares
without acquiring a similar percentage of Common Stock, the Minority
Protection Provisions are designed to help reduce or eliminate any discount
on either of these classes of Common Shares.
There can be no assurance that the Company will be able to
readily identify a Person or group as a Significant Stockholder. Although
the 1934 Act will require Persons or groups holding 5% or more of the Class
A Common Shares or the Common Stock to file reports specifying the level of
their ownership with the SEC and to send a copy of such filing to the
Company, there can be no assurance that a Person or group will comply with
such law or that alternative methods of identifying such holders will be
available. As a result, the benefits of the Minority Protection Provisions
may be difficult to enforce.
Preemptive Rights
None of the Class A Common Shares or shares of the Common Stock
will carry any preemptive rights enabling a holder to subscribe for or
receive shares of the Company of any class or any other securities
convertible into any class of the Company's stock.
Sales and Repurchases
As part of the Recapitalization Amendment, Article Fourth of the
Company's Restated Certificate of Incorporation will be revised to make it
clear that the Board of Directors is authorized to repurchase shares of any
class or series without regard to whether a lesser price could be paid for
the same number of shares of any other class or series of stock. The
proposed amendment to Article Fourth of the Company's Restated Certificate
of Incorporation also makes it clear that the Board of Directors is
permitted to authorize the sale of shares of a class or series of stock
even though a higher price could be obtained by selling shares of another
class or series since the two classes of Common Shares may have differing
values and market prices.
Transferability; Trading Market
The Class A Common Shares and the Common Stock will be freely
transferable, subject to the current restrictions on certain shares of the
Existing Common Stock issued to certain employees of the Company. The
Existing Common Stock is traded on the NYSE. It is expected that both the
Class A Common Shares and the Common Stock will be listed on the NYSE. The
NYSE has advised the Company that the issuance of the lesser voting Common
Stock pursuant to the Recapitalization Amendment will not violate the
NYSE's rules and regulations and is permitted thereunder. However, there
can be no assurance that the NYSE will accept either class for trading. In
the unlikely event that both classes of Common Shares are not approved for
trading on the NYSE or other principal national securities exchange and are
also excluded from quotation on the NASDAQ National Market System, the
Company will not go forward with the recapitalization.
Stockholder Information
The Company will deliver to the holders of Common Shares the same
proxy statements, annual reports and other information and reports as it
currently delivers to holders of the Existing Common Stock.
CERTAIN EFFECTS OF THE RECAPITALIZATION AMENDMENT
Effect on Relative Ownership Interest and Voting Power
Upon effectiveness of the Recapitalization Amendment, each share
of Existing Common Stock (with one vote per share) would be changed into
.33 of a Class A Common Share and .67 of a share of Common Stock. Each
share of Class A Common Stock will have one vote per share, each share of
Common Stock will have 1/10 vote per share, and each share of PRIDES will
continue to be entitled to 4/5 vote until conversion or redemption of the
PRIDES (which will occur no later than December 31, 1997). Accordingly,
the relative voting power of the holders of the PRIDES will increase from
8.8% to 19.6% of the total votes and the aggregate voting power of the
holders of the Common Shares will be 80.4% of the total votes (as compared
to the 91.2% of total votes held by the holders of Existing Common Stock
immediately prior to the Effective Time) until such time as the PRIDES are
converted into or redeemed for Common Shares, and the voting power of the
Common Shares owned by MAXXAM will be 56.1% of the total votes (as compared
to 63.6% of the total votes for the Existing Common Stock held by MAXXAM).
Following conversion or redemption of the PRIDES, the relative voting power
held by former holders of the PRIDES will be approximately the same as it
would have been in the absence of the Recapitalization Amendment.
Stockholders who sell their Class A Common Shares after the
Effective Time of the Recapitalization Amendment would lose a greater
amount of voting power in proportion to equity than they would have prior
to such time by the sale of an equal number of shares of Existing Common
Stock. At the same time, stockholders desiring to maintain somewhat more
than 80% of their voting rights in the Company would be free to continue to
hold the Class A Common Shares and elect to sell their shares of Common
Stock.
Effect on Market Value and Price
Based on the advice of Salomon provided to the Special Committee
of the Board of Directors, the Company anticipates that combined market
value of the Common Shares immediately after the Effective Time will not be
materially less than the market value of the Existing Common Stock
immediately prior to the announcement of the proposed recapitalization, but
there can be no assurance as to the trading prices of either class. On
March ___, 1996, the closing sale price of the Existing Common Stock as
reported on the NYSE was $____________. If the market price of the shares
of Common Stock were to drop significantly below the price of the Class A
Common Shares, the potential benefits of the Recapitalization Amendment
with respect to flexibility for financings by the Company or resales by the
stockholders may be limited.
It is possible that either the Class A Common Shares or the
shares of Common Stock may trade from time to time at a premium or discount
to the other. The Minority Protection Provisions and the flexibility
afforded by the provision permitting the Board of Directors, in its
discretion, to declare larger dividends on the Common Stock may somewhat
reduce the reasons for the Class A Common Shares to trade at a premium
compared with the Common Stock. Should a premium on either class of the
Common Shares develop, the Recapitalization Amendment permits the Board of
Directors to issue and sell authorized but unissued shares of any class of
common stock even if the consideration which could be obtained by issuing
or selling shares of another class may be greater. The Recapitalization
Amendment also expressly permits the Board of Directors to purchase shares
of any class of common stock even if the consideration which would be paid
for shares of another class may be less.
Effect on Trading Market
Upon effectiveness of the Recapitalization Amendment, based on
the number of shares of Existing Common Stock issued and outstanding as of
January 31, 1996, approximately 23,640,709 Class A Common Shares and
47,997,804 shares of Common Stock will be issued and outstanding. MAXXAM
has advised the Company that if it decides to sell any Common Shares, it is
more likely over time to sell shares of Common Stock than Class A Common
Shares. Any issuance of additional shares of Common Stock by the Company
or sales of shares of Common Stock by stockholders, including MAXXAM, may
serve to increase market activity in Common Stock relative to the Class A
Common Shares. Greater market activity may result in increased volatility
in pricing and could enlarge any price differential, either higher or
lower, between the Class A Common Shares and Common Stock.
Effect on Benefit Plans
The incentive stock plans of the Company that will be affected by
the Recapitalization Amendment are the (i) Kaiser 1993 Omnibus Stock
Incentive Plan (the "Omnibus Plan"), (ii) Kaiser 1995 Executive Incentive
Compensation Program (the "Executive Plan"), and (iii) Kaiser 1995 Employee
Incentive Compensation Program (the "Employee Plan"). As a result of the
Recapitalization Amendment, each share of Existing Common Stock reserved
for future issuance and each share of Existing Common Stock subject to an
outstanding option will be changed into .33 of a Class A Common Share and
.67 of a share of Common Stock . There are currently no stock appreciation
rights outstanding. In addition, the Company anticipates that the Omnibus
Plan, the Executive Plan and the Employee Plan will be amended to provide
that options and stock appreciation rights granted thereunder after the
Effective Time may relate solely to Class A Common Shares, Common Stock, or
a combination of the two.
Holders of restricted shares of Existing Common Stock issued
under the Omnibus Plan or otherwise will participate in the
recapitalization as any other holder of Existing Common Stock, and
therefore, after the Effective Time, such holders will hold .33 of a Class
A Common Share and .67 of a share of Common Stock for each share of
Existing Common Stock held immediately before the Effective Time of the
Recapitalization Amendment. All such shares, regardless of class, will be
subject to all restrictions that applied previously to the Existing Common
Stock issued under such plans or otherwise.
Effect on Book Value and Earnings per Share
The interest of each stockholder in the total equity of the
Company would remain unchanged as a result of the Recapitalization
Amendment, except as a result of the treatment of fractional shares. The
Company believes that the change of each issued share of Existing Common
Stock into .33 of a Class A Common Share and .67 of a share of Common Stock
will not impact the Company's calculation of book value and earnings per
share attributable to its common equity securities, except as a result of
the treatment of fractional shares.
Effect on Preferred Stock
The Recapitalization Amendment will not have any effect on the
number of shares of preferred stock, including the PRIDES, or the ability
of the Board of Directors to issue shares of preferred stock and to fix the
rights, powers or limitations thereof. The Company has no current plans to
issue any additional shares of preferred stock.
As of January 31, 1996, there were 8,673,850 shares of PRIDES
issued and outstanding. At any time prior to December 31, 1997, unless
previously redeemed, each share of PRIDES is convertible at the option of
the holder into .8333 of a share of Existing Common Stock, subject to
adjustment. On December 31, 1997, the PRIDES must be automatically
converted on a share-for-share basis into Existing Common Stock, unless
earlier redeemed or converted. Shares of PRIDES are not redeemable by the
Company before December 31, 1996. On or after such date until December 31,
1997, the Company may redeem all or any of such shares in exchange for a
number of shares of Existing Common Stock per share of PRIDES equal to the
sum of (i)$11.9925 (which amount declines in stages to $11.75 on or after
November 30, 1997) and (ii) all accrued and unpaid dividends per share of
PRIDES (other than previously declared dividends payable to a holder of
record as of a prior date) (the "Call Price"), divided by the Current
Market Price (as defined) per share of Existing Common Stock; provided,
however, that in no event is the number of shares of Existing Common Stock
to be delivered on such redemption to be less than .8333 of a share of
Existing Common Stock for each share of PRIDES.
Pursuant to the antidilution provisions applicable to the PRIDES,
upon the effectiveness of the Recapitalization Amendment, (i) each share of
PRIDES will be convertible at the option of the holder into .56 of a share
of Common Stock and .27 of a Class A Common Share, (ii) if not previously
redeemed or converted, on December 31, 1997, each share of PRIDES will be
automatically converted into .67 of a share of Common Stock and .33 of a
Class A Common Share, and (iii) on or after December 31, 1996, the Company
may redeem the PRIDES in exchange for (A) a number of shares of Common
Stock per share of PRIDES determined by (x) multiplying the applicable Call
Price by .67 and (y) dividing the amount so obtained by the Current Market
Price per share of Common Stock and (B) a number of Class A Common Shares
per share of PRIDES determined by (x) multiplying the applicable Call
Price by .33 and (y) dividing the amount so obtained by the Current Market
Price per Class A Common Share; provided, however, that in no event is the
number of shares of Common Stock to be delivered on such redemption to be
less than .56 of a share of Common Stock, and in no event is the number of
Class A Common Shares to be delivered on such redemption to be less than
.27 of a Class A Common Share, for each share of PRIDES. See also, "--
Effect on Relative Ownership Interest and Voting Power."
Credit Agreement
In order for the recapitalization to be effected, KACC's 1994
Credit Agreement has to be amended, or a waiver from the lenders thereunder
obtained, to permit the payment of cash in lieu of fractional shares. The
Company expects that such amendment or waiver will be obtained.
Subsequent Amendments
The Recapitalization Amendment would not prevent the Company from
taking any action, or otherwise affect the Company's ability, with the
requisite approval of its stockholders, to adopt any future amendments to
the Company's Certificate of Incorporation for the purpose of further
changing the Company's capital structure or for any other lawful purpose.
Certain United States Federal Income Tax Consequences
The Company has been advised by the law firm of Kramer, Levin,
Naftalis, Nessen, Kamin & Frankel with respect to the principal United
States federal income tax consequences resulting from the exchange (for tax
law purposes) of shares of Existing Common Stock for Class A Common Shares
and shares of Common Stock in connection with the Recapitalization
Amendment. The following discussion is based on existing tax law, which is
subject to change, possibly with retroactive effect. It does not deal with
all tax consequences that may be relevant in the particular circumstances
of each holder (some of which, such as dealers in securities, insurance
companies, tax-exempt organizations and foreign persons, may be subject to
special rules). Stockholders are urged to consult their own tax advisors
with respect to the application of the United States federal income tax
laws to their particular situations as well as any tax consequences arising
under the laws of any state, local or foreign taxing jurisdiction.
No taxable income, gain or loss will be recognized by a holder of
shares of Existing Common Stock with respect to those shares that are
exchanged for Class A Common Shares and shares of Common Stock. The basis
for tax purposes of each such share of Existing Common Stock held
immediately before the Recapitalization Amendment will be allocated between
the Class A Common Shares and shares of Common Stock in proportion to their
relative fair market values at the Effective Time of the Recapitalization
Amendment. The holding period for each Class A Common Share and each share
of Common Stock received in the exchange will be the same as the holding
period of the Existing Common Stock given up in the exchange.
Taxable income, gain or loss will be recognized by a holder of
shares of Existing Common Stock with respect to those shares that are
exchanged for cash in lieu of fractional shares. The holder will be
treated as having received such fractional shares and having exchanged them
for cash in a transaction subject to Section 302 of the Internal Revenue
Code of 1986, as amended, and related provisions. In general, the holder
will recognize a gain or loss equal to the difference between the cash
received and the tax basis in the fractional shares.
No taxable income, gain or loss would be recognized by a holder
of a share of Common Stock upon the conversion of such Common Stock into a
Class A Common Share pursuant to the convertibility feature described
above. The cost or other basis for tax purposes of the resulting Class A
Common Share will be the same as the cost or other basis for tax purposes
of the Common Stock held immediately before the conversion. The holding
period for such Class A Common Share would include the holding period for
the corresponding Common Stock held prior thereto.
Securities Act of 1933
The change of each share of Existing Common Stock into .33 of a
Class A Common Share and .67 of a share of Common Stock is not subject to
the registration requirements of the Securities Act of 1933, as amended
(the "Securities Act"). Consequently, the Company has not registered the
Class A Common Shares or the Common Stock under the Securities Act for
purposes of the Recapitalization Amendment. Class A Common Shares and
shares of Common Stock held immediately upon effectiveness of the
Recapitalization Amendment, other than any such shares held by affiliates
of the Company within the meaning of the Securities Act, may be offered for
sale and sold in the same manner as the Existing Common Stock without
registration under the Securities Act. Affiliates of the Company,
including MAXXAM, would continue to be subject to, among others, the
restrictions specified in Rule 144 under the Securities Act with respect to
sales of Class A Common Shares and shares of Common Stock.
INTERESTS OF CERTAIN PERSONS
MAXXAM has an interest in the implementation of the
Recapitalization Amendment because, as noted above, it may retain somewhat
more than 80% of its current voting power in the Company, even if it
disposes of all of the shares of Common Stock received by it as a result of
the adoption of the Recapitalization Amendment. In addition, as a result
of the Recapitalization Amendment, MAXXAM would be able to increase its
voting power without increasing its equity investment by selling or
exchanging shares of Common Stock and by acquiring Class A Common Shares
(subject to the Minority Protection Provisions).
EXPENSES
The costs associated with the Recapitalization Amendment (such as
transfer agent's fees, printing and shipping costs, legal fees, financial
advisory fees, and NYSE fees) are estimated to be approximately
$__________, inclusive of fees of financial and legal advisors both to the
Company and independently to the Special Committee.
VOTE REQUIRED
The Recapitalization Amendment must be approved by the holders of
a majority of votes of the outstanding shares of Existing Common Stock and
PRIDES, tabulated together as a single class, and by a majority of votes of
the outstanding shares of Existing Common Stock, tabulated separately as a
single class, at the Special Meeting. Unless otherwise directed thereon,
proxies will be voted "FOR" the Recapitalization Amendment.
AS NOTED ABOVE, THE BOARD OF DIRECTORS RECOMMENDS THAT THE
STOCKHOLDERS VOTE "FOR" APPROVAL OF THE RECAPITALIZATION AMENDMENT.
VOTING AND PROXY PROCEDURES
Execution of a proxy card will not affect your right to attend
the Special Meeting and to vote in person. Any proxy may be revoked as to
all matters covered thereby at any time prior to the time a vote is taken
by (i) filing with the Secretary of the Company a later dated written
revocation, (ii) submitting to the Company a duly executed proxy bearing a
later date, or (iii) attending and voting at the Special Meeting in person.
Attendance at the Special Meeting will not in and of itself constitute a
revocation of a prior proxy.
If your shares of Existing Common Stock or PRIDES are held in the
name of a brokerage firm, bank or nominee, only that entity can vote such
shares and only upon receipt of your specific instructions. For further
information concerning how you may ensure that your shares of Existing
Common Stock or PRIDES are voted at the Special Meeting, please contact
your brokerage firm, bank or nominee, or Mr. Byron Wade, Secretary of the
Company, at the address set forth in this Proxy Statement or by calling
(713) 267-3670.
Only holders of record of Existing Common Stock and PRIDES at the
close of business on March 18, 1996, the record date established by the
Board of Directors for the Special Meeting, will be entitled to vote at the
Special Meeting.
FINANCIAL INFORMATION
[To Come]
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act and in accordance therewith files reports, information
statements and other information with the SEC. Such reports, proxy
statements, information statements and other information filed by the
Company can be inspected and copied at the Public Reference Section of the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the SEC at 7 World Trade Center, New York, New York 10048 and at
Northwestern Atrium Center, 500 W. Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Reports, proxy statements, information statements and
other information concerning the Company may also be inspected at the
offices of the NYSE, 20 Broad Street, New York, New York 10005.
OTHER MATTERS
INDEPENDENT PUBLIC ACCOUNTANTS
The Company has appointed Arthur Andersen LLP as its independent
accountants through the conclusion of the audit with respect to the
Company's 1995 fiscal year. Representatives of Arthur Andersen LLP plan to
attend the Special Meeting of Stockholders and will be available to answer
appropriate questions. Such representatives will also have an opportunity
to make a statement at the meeting, if they so desire.
PROXY SOLICITATION
The cost of soliciting proxies in connection with the Special
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 only by directors,
officers and employees of the Company without special remuneration. The
Company has retained Corporate Investor Communications, Inc. ("CIC") to
assist in the distribution of proxies at an estimated cost of approximately
$5,500 (including expenses). CIC will not solicit proxies. In addition to
the use of mails, proxies and instruction cards may be solicited only by
officers and regular employees of the Company by personal interviews,
telephone or telegraph.
The persons designated to vote shares covered by management
proxies intend to exercise their judgment in voting such shares on other
matters that may properly come before the Special Meeting. Management
knows of no other matters which will be presented at the Special Meeting
other than as referred to in this Proxy Statement.
By Order of the Board of
Directors
BYRON L. WADE
Secretary
March __, 1996
Houston, Texas
<PAGE>
ANNEX A-1
PROPOSED TEXT OF THE AMENDMENT TO THE
RESTATED CERTIFICATE OF INCORPORATION OF
KAISER ALUMINUM CORPORATION
RELATING TO THE RECLASSIFICATION OF EXISTING COMMON STOCK
Upon the effectiveness of this Amendment to the Restated
Certificate of Incorporation of the Corporation pursuant to the General
Corporation Law of the State of Delaware (the "Effective Time"), and
without any further action on the part of the Corporation or its
stockholders, each share of the Corporation's common stock existing
immediately prior to the Effective Time, par value One Cent ($.01) per
share (the "Existing Common Stock"), then issued (including shares held in
the treasury of the Corporation) shall be changed automatically into .33 of
a Class A Common Share (as defined below) and .67 of a share of Common
Stock (as defined below), all of which shall be fully paid and non-
assessable. Fractional shares of Class A Common Shares and fractional
shares of Common Stock will not be issued to any holder of Existing Common
Stock or reflected on the stock transfer records of the Corporation by
reason of the reclassification described herein. In lieu thereof, the
Corporation will, as provided in the immediately following paragraph, pay a
cash amount to the stockholders otherwise entitled to such fractional
shares equal to the total fractional amount represented by such shares
times the greater of (i) the average closing price of a share of the
Existing Common Stock on the New York Stock Exchange for the fifteen
trading days immediately preceding the date on which the Effective Time
occurs and (ii) the closing price of a share of the Existing Common Stock
on the New York Stock Exchange on the trading day immediately preceding the
date on which the Effective Time occurs.
As soon as practicable after the Effective Time, the
Corporation's transfer agent shall mail a letter of transmittal (the
"Letter of Transmittal") to each record holder of Existing Common Stock as
of the Effective Time. Subject to the immediately preceding paragraph, new
certificates representing .33 of a Class A Common Share and .67 of a share
of Common Stock for each outstanding share of Existing Common Stock held by
such holders will be issued to each such record holder that delivers to the
Corporation's transfer agent a properly executed Letter of Transmittal
accompanied by the certificates representing the shares of Existing Common
Stock. In lieu of fractional shares of Class A Common Shares or Common
Stock that would otherwise have been issuable, a check for the cash amount
calculated pursuant to the formula set out in the immediately preceding
paragraph will be issued to such record holder.
<PAGE>
ANNEX A-2
ARTICLE FOURTH
OF THE
RESTATED CERTIFICATE OF INCORPORATION
(as proposed to be amended and restated)
FOURTH: The total number of shares of all classes of stock which
the Corporation shall have authority to issue is THREE HUNDRED SEVENTY
MILLION (370,000,000) shares consisting of:
(a) ONE HUNDRED MILLION (100,000,000) shares of the par value of One
Cent ($.01) per share, which shall be designated Class A Common Shares ("Class A
Common Shares");
(b) TWO HUNDRED FIFTY MILLION (250,000,000) shares of
the par value of One Cent ($.01) per share, which shall
be designated Common Stock ("Common Stock"); and
(c) TWENTY MILLION (20,000,000) shares of the par
value of Five Cents ($.05) per share, which shall be
designated Preferred Stock ("Preferred Stock").
A. Statement of Preferences, Limitations and Relative Rights in
Respect of Shares of Preferred Stock and Authority of Board of Directors to
Fix Designations, Powers, Preferences, Rights, Qualifications, Limitations
and Restrictions Thereof Not Fixed Hereby.
Shares of Preferred Stock may be issued from time to time in one
or more classes or one or more series within any class thereof, as may be
determined from time to time by the Board of Directors, each of said
classes and series to be distinctly designated. All shares of any one
series of Preferred Stock shall be alike in every particular. The voting
rights, if any, of each such class and series and the preferences and
relative, participating, optional and other special rights of each such
class and series and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other classes and
series at any time outstanding; and, subject to the provisions of Section C
of this Article Fourth, the Board of Directors of the Corporation is hereby
expressly granted authority to fix, by resolutions duly adopted prior to
the issuance of any shares of a particular class or series of Preferred
Stock, the voting powers, if any, of stock of such class or series and the
designations, preferences and relative, participating, optional and other
special rights, and the qualifications, limitations and restrictions of
such class or series within such class, including, but without limiting the
generality of the foregoing, the following:
(a) The rate and times at which, and the terms and
conditions on which, dividends on Preferred Stock of such class
or series shall be paid;
(b) The right, if any, of the holders of Preferred Stock of
such class or series to convert the same into, or exchange the
same for, shares of other classes or series of stock of the
Corporation and the terms and conditions of such conversion or
exchange;
(c) The redemption price or prices and the time or times at
which, and the terms and conditions on which, Preferred Stock of
such class or series may be redeemed;
(d) The rights of the holders of Preferred Stock of such
class or series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding up, of the Corporation;
(e) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of such
class or series;
(f) The distinctive designation of, and the number of
shares of Preferred Stock which shall constitute such class or
series, which number may be increased (except where otherwise
provided by the Board of Directors) or decreased (but not below
the number of shares thereof then outstanding) from time to time
by like action of the Board of Directors; and
(g) The voting powers, if any, of the holders of such class
or series of Preferred Stock which may, without limiting the
generality of the foregoing, include (i) the right to more or
less than one vote per share on any or all matters voted upon by
the stockholders, and (ii) the right, voting as a class or series
by itself or together with other classes or series of Preferred
Stock or all classes and series of Preferred Stock as a class, to
elect one or more directors of the Corporation if there shall
have been a default in the payment of dividends on any one or
more classes or series of Preferred Stock or under such other
circumstances and on such conditions as the Board of Directors
may determine.
B. Statement of Limitations, Relative Rights and Powers in
Respect of Class A Common Shares and shares of Common Stock.
1. GENERAL. The Class A Common Shares and the Common Stock
shall be subject to the express terms of the Preferred Stock and any class
or series thereof. The powers, preferences and rights of the Class A
Common Shares and the Common Stock and the qualifications, limitations and
restrictions thereof, shall in all respects be identical, except as
otherwise required by law or as expressly provided in this Restated
Certificate of Incorporation.
2. VOTING. Except as may otherwise be required by law or by
the provisions of such resolution or resolutions as may be adopted by the
Board of Directors pursuant to Section A of this Article Fourth or as
otherwise expressly provided in this Restated Certificate of Incorporation:
(a) The holders of Class A Common Shares shall be entitled to
one vote for each Class A Common Share held on all matters voted upon
by the stockholders of the Corporation and shall vote together with
the holders of Common Stock and together with the holders of any other
classes or series of stock who are entitled to vote in such manner and
not as a separate class;
(b) The holders of shares of Common Stock shall be entitled to
one-tenth (1/10) of a vote for each share of Common Stock held on all
matters voted upon by the stockholders and shall vote together with
the holders of Class A Common Shares and together with the holders of
any other classes or series of stock who are entitled to vote in such
manner and not as a separate class.
3. DIVIDENDS AND DISTRIBUTIONS.
(a) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of Section A of this Article Fourth) shall have been met and
after the Corporation shall have complied with all of the
requirements, if any, with respect to the setting aside of sums as
sinking funds or redemption or purchase accounts in respect of the
Preferred Stock (fixed in accordance with the provisions of Section A
of this Article Fourth) and subject to any other conditions that may
be fixed in accordance with the provisions of Section A of this
Article Fourth, including, without limitation, the right of any of the
holders of any class or series of Preferred Stock to participate
therein, then and not otherwise the holders of Class A Common Shares
and shares of Common Stock shall be entitled to receive such dividends
as may be declared from time to time by the Board of Directors in
accordance with this Paragraph 3.
(b) Dividends and distributions may be declared and paid to the
holders of Class A Common Shares and Common Stock in cash, property,
or other securities of the Corporation (including shares of any class
whether or not shares of such class are already outstanding) out of
funds legally available therefor. Each Class A Common Share and each
share of Common Stock shall have identical rights with respect to
dividends and distributions, subject to the following:
(i) subject to Paragraph 4 of this Section B of this
Article Fourth, at the discretion of the Board of Directors, a
dividend or distribution in cash or property on a share of Common
Stock may be greater (but not less) than any dividend or
distribution in cash or property on a Class A Common Share;
(ii) a dividend or distribution in shares of the Corporation
on Class A Common Shares may be paid or made in Class A Common
Shares or shares of Common Stock; and
(iii) a dividend or distribution in shares of the
Corporation on Common Stock may be paid or made only in shares of
Common Stock.
(c) For purposes of paragraph (b) of this Section 3, a dividend
or distribution in shares of the Corporation on Class A Common Shares
paid or made in Class A Common Shares shall be considered identical to
a dividend or distribution in shares of the Corporation on Common
Stock paid or made in a proportionate number of shares of Common
Stock.
4. MERGER, CONSOLIDATION, COMBINATION OR DISSOLUTION OF THE
CORPORATION.
(a) After distribution in full of the preferential amount to be
distributed to the holders of Preferred Stock in the event of the
voluntary or involuntary liquidation, distribution or sale of assets,
dissolution or winding up of the Corporation, the holders of the Class
A Common Shares and shares of Common Stock shall, subject to the
rights, if any, of the holders of any class or series Preferred Stock
to participate therein (fixed in accordance with the provisions of
Section A of this Article Fourth), be entitled to receive all the
remaining assets of the Corporation, tangible and intangible, of
whatever kind available for distribution to stockholders ratably in
proportion to the number of shares of Class A Common Shares or Common
Stock, as the case may be, held by them respectively, subject to the
other provisions set forth in this Paragraph 4.
(b) In the event of a merger, consolidation or combination of
the Corporation with another entity (whether or not the Corporation is
the surviving entity) or in the event of the dissolution of the
Corporation, the holders of shares of Common Stock shall be entitled to
receive in respect of each share of Common Stock the same
indebtedness, other securities, cash, rights, or any other property,
or any combination of shares, evidences of indebtedness, securities,
cash, rights or any other property, as holders of Class A Common
Shares shall be entitled to receive in respect to each share in that
transaction, except that any common stock that holders of Common Stock
shall be entitled to receive in any such event may have terms
substantially similar to those of the Common Stock as set forth in
this Section B of this Article Fourth.
5. SPLITS OR COMBINATIONS OF SHARES. If the Corporation shall
in any manner split, subdivide or combine the outstanding Class A Common
Shares or Common Stock, the outstanding shares of the other such class
shall be proportionately split, subdivided or combined in the same manner
and on the same basis as the outstanding shares of the class that has been
split, subdivided or combined.
6. MINORITY PROTECTION PROVISIONS.
(a) If, at any time after the effective time of the amendment of
Article Fourth which first authorizes the issuance of Class A Common Shares
and Common Stock (the "Effective Time"), any Person or group, each as
hereinafter defined in this Paragraph 6, acquires beneficial ownership of
shares representing 15% or more of the number of then outstanding Class A
Common Shares and such Person or group (a "Significant Stockholder") does
not then beneficially own an equal or greater percentage of all then
outstanding shares of Common Stock, all of which Common Stock must have
been acquired by such Person or group after the Effective Time, such
Significant Stockholder must, within a ninety-day period beginning the day
after becoming a Significant Stockholder, make a public cash tender offer
in compliance with all applicable laws and regulations to acquire
additional shares of Common Stock as provided in this Paragraph 6 (a
"Minority Protection Transaction"). The 15% ownership threshold of the
number of Class A Common Shares which triggers a Minority Protection
Transaction may not be waived by the Board of Directors, nor may this
threshold in this Restated Certificate of Incorporation be amended without
stockholder approval, including a majority vote of the outstanding Common
Stock voting separately as a class.
(b) In each Minority Protection Transaction, the Significant
Stockholder must make a public cash tender offer to acquire from the
holders of Common Stock at least that number of additional shares of Common
Stock determined by (i) multiplying the percentage of the number of
outstanding Class A Common Shares beneficially owned and acquired after the
Effective Time by such Significant Stockholder by the total number of
shares of Common Stock outstanding on the date such Person or group became
a Significant Stockholder, and (ii) subtracting therefrom the number of
shares of Common Stock beneficially owned by such Significant Stockholder
on the date such Person or group became a Significant Stockholder and which
were acquired after the Effective Time (as adjusted for stock splits, stock
dividends and similar recapitalizations). The Significant Stockholder must
acquire all shares of Common Stock validly tendered and not withdrawn or,
if the number of shares of Common Stock tendered to the Significant
Stockholder and not withdrawn exceeds the number of shares required to be
acquired pursuant to this subparagraph (b), the number of shares acquired
from each tendering holder shall be pro rata based on the percentage that
the number of shares tendered by such stockholder bears to the total number
of shares tendered and not withdrawn by all tendering holders.
(c) The cash offer price for any shares of Common Stock required
to be purchased by the Significant Stockholder pursuant to this Paragraph 6
shall be the greatest of: (i) the highest price per share paid by the
Significant Stockholder for any Class A Common Share or any share of Common
Stock during the six-month period ending on the date such Person or group
became a Significant Stockholder (or such shorter period after the
Effective Time if the date such Person or group became a Significant
Stockholder is not more than six months following the Effective Time), (ii)
the highest reported sale price of a Class A Common Share or a share of
Common Stock on the New York Stock Exchange (or such other securities
exchange or quotation system as is then the principal trading market for
such shares) during the thirty-day period preceding the date such Person or
group became a Significant Stockholder, and (iii) the highest reported sale
price for a Class A Common Share or a share of Common Stock on the New York
Stock Exchange (or such other securities exchange or quotation system as is
then the principal trading market for such shares) on the business day
preceding the date the Significant Stockholder makes the tender offer
required by this Paragraph 6. For purposes of subparagraph (d) below, the
applicable date for each calculation required by clauses (i) and (ii) of
the preceding sentence shall be the date on which the Significant
Stockholder becomes required to engage in the Minority Protection
Transaction for which such calculation is required. In the event that the
Significant Stockholder has acquired Class A Common Shares or shares of
Common Stock in the six-month period ending on the date such Person or
group becomes a Significant Stockholder for consideration other than cash,
the value of such consideration per share of Class A Common Shares shall be
as determined in good faith by the Board of Directors.
(d) A Minority Protection Transaction shall also be required to
be effected by any Significant Stockholder each time that the Significant
Stockholder acquires after the Effective Time beneficial ownership of
additional Class A Common Shares in an amount equal to or greater than the
next higher integral multiple of 5% in excess of 15% (e.g., 20%, 25%, 30%,
etc.) of the number of outstanding Class A Common Shares if such
Significant Stockholder does not then own an equal or greater percentage of
all then outstanding shares of Common Stock (all of which shares of Common
Stock must have been acquired by such Significant Stockholder after the
Effective Time, including pursuant to a previous Minority Protection
Transaction). Such Significant Stockholder shall be required to make a
public cash tender offer to acquire that number of shares of Common Stock
prescribed by the formula set forth in subparagraph (b) above, and must
acquire all shares validly tendered and not withdrawn or a pro rata portion
thereof, as specified in such subparagraph (b), at the price determined
pursuant to subparagraph (c) above, even if a previous Minority Protection
Transaction resulted in fewer shares of Common Stock being tendered than
required in the previous offer.
(e) If any Significant Stockholder fails to make an offer
required by this Paragraph 6 of Section B of this Article Fourth, or to
purchase shares validly tendered and not withdrawn (after proration, if
any), such Significant Stockholder shall not be entitled to vote any
Class A Common Shares beneficially owned by such Significant Stockholder
and acquired by such Significant Stockholder after the Effective Time
unless and until such requirements are complied with or unless and until
all Class A Common Shares causing such offer requirement to be effective
are no longer beneficially owned by such Significant Stockholder. To the
extent that the voting power of any Class A Common Shares is so suspended,
such shares shall not be included in the determination of aggregate voting
shares for any purpose under this Restated Certificate of Incorporation or
applicable law. The requirement to engage in a Minority Protection
Transaction shall be satisfied by the making of the requisite offer and
purchasing validly tendered and not withdrawn shares pursuant to this
Paragraph 6, even if the number of shares tendered is less than the number
of shares included in the required offer.
(f) The Minority Protection Transaction requirement shall not
apply to any increase in percentage beneficial ownership of Class A Common
Shares resulting solely from a change in the aggregate amount of Class A
Common Shares outstanding, provided that any acquisition after such change
which results in any Person or group having acquired after the Effective
Time beneficial ownership of 15% or more of the number of then outstanding
Class A Common Shares (or, after the last acquisition which triggered the
requirement for a Minority Protection Transaction, additional Class A
Common Shares in an amount equal to the next higher integral multiple of 5%
in excess of the number of Class A Common Shares then outstanding) shall be
subject to any Minority Protection Transaction requirement that would be
imposed pursuant to this Paragraph 6.
(g) In connection with subparagraphs (a) through (d) and (f)
above, the following Class A Common Shares shall be excluded for the
purpose of determining the Class A Common Shares beneficially owned or
acquired by any Person or group but not for the purpose of determining
shares outstanding:
(i) shares beneficially owned by such Person or group (or,
in the case of a group, shares beneficially owned by Persons that
are members of such group) immediately after the Effective Time;
(ii) shares acquired by will or by the laws of descent and
distribution, or by gift that is made in good faith and not for
the purpose of circumventing this Paragraph 6, or by termination
or revocation of a trust or similar arrangement or by a
distribution from a trust or similar arrangement if such trust or
similar arrangement was created, and such termination, revocation
or distribution occurred or was effected, in good faith and not
for the purpose of circumventing this Paragraph 6, or by reason
of the ability of a secured party (following a default) to
exercise voting rights with respect to, or to dispose of, shares
that had been pledged in good faith as security for a bona fide
loan, or by foreclosure of a bona fide pledge which secures a
bona fide loan;
(iii) shares acquired upon issuance or sale by the
Corporation;
(iv) shares acquired by operation of law (including a merger
or consolidation effected for the purpose of recapitalizing such
Person or reincorporating such Person in another jurisdiction but
excluding a merger or consolidation effected for the purpose of
acquiring another Person);
(v) shares acquired in exchange for Common Stock by a
holder of Common Stock (or by a parent, lineal descendant or
donee of such holder of Common Stock who received such Common
Stock from such holder) if the Common Stock so exchanged was
acquired by such holder directly from the Corporation as a
dividend on Class A Common Shares;
(vi) shares acquired by a plan of the Corporation qualified
under Section 401(a) of the Internal Revenue Code of 1986, as
amended, or any successor provision thereto, or acquired by
reason of a distribution from such a plan;
(vii) shares beneficially owned by a Person or group
immediately after the Effective Time which are thereafter
acquired by an Affiliate, as defined in subparagraph (j) below,
of such Person or group (or by the members of the immediate
family (or trusts for the benefit thereof) of any such Person or
Affiliate) or by a group which includes such Person or group or
any such Affiliate; and
(viii) shares acquired indirectly through the acquisition
of securities, or all or substantially all of the assets, of a
Person that has a class of its equity securities registered under
Section 12 (or any successor provision) of the Securities
Exchange Act of 1934, as amended (the "1934 Act").
Notwithstanding anything to the contrary contained in this Article Fourth,
no Person (and no group including such Person) shall be deemed to have
acquired after the Effective Time beneficial ownership of any Class A
Common Shares owned by any other Person solely by reason of such Person
being or becoming an officer, director, executive, trustee, executor,
custodian, guardian, and/or other similar fiduciary or employee of or for
such other Person under circumstances not intended to circumvent the
provisions of this Paragraph 6.
(h) In connection with subparagraphs (a) through (d) and (f)
above, for purposes of calculating the number of shares of Common Stock
beneficially owned or acquired by any Person or group:
(i) shares of Common Stock acquired by gift shall be deemed
to be beneficially owned by such Person or member of a group if
such gift was made in good faith and not for the purpose of
circumventing the operations of this Paragraph 6; and
(ii) only shares of Common Stock owned of record by such
Person or member of a group or held by others as nominees of such
Person or member of a group and identified as such to the
Corporation shall be deemed to be beneficially owned by such
Person or group (provided that shares of Common Stock with
respect to which such Person or member of a group has sole
investment and voting power shall be deemed to be beneficially
owned thereby).
(i) All calculations with respect to percentage beneficial
ownership of either issued and outstanding Class A Common Shares or Common
Stock shall be based upon the number of issued and outstanding shares
reported by the Corporation on the last to be filed of (i) the
Corporation's most recent Annual Report on Form 10-K, (ii) its most recent
Quarterly Report on Form 10-Q, (iii) its most recent Current Report on Form
8-K, and (iv) its most recent definitive proxy statement filed with the
Securities and Exchange Commission.
(j) For purposes of this Paragraph 6, the term "Person" means
any individual, partnership, joint venture, limited liability company,
corporation, association, trust, incorporated organization, government or
governmental department or agency or any other entity (other than the
Corporation). Subject to subparagraphs (g) and (h) above, "beneficial
ownership" shall be determined pursuant to Rule 13d-3 (as in effect on
February 1, 1996) promulgated under the 1934 Act, and the formation or
existence of a "group" shall be determined pursuant to Rule 13d-5(b) (as in
effect on February 1, 1996) promulgated under the 1934 Act, in each case
subject to the following additional qualifications:
(i) relationships by blood or marriage between or among any
Persons will not constitute any of such Persons as a member of a
group with any such other Person(s), absent affirmative
attributes of concerted action; and
(ii) any Person acting in his official capacity as a
director or officer of the Corporation shall not be deemed to
beneficially own shares where such ownership exists solely by
virtue of such Person's status as a trustee (or similar position) with
respect to shares held by plans or trusts for the general
benefit of employees or former employees of the Corporation, and
actions taken or agreed to be taken by a Person in such Person's
official capacity as an officer or director of the Corporation
will not cause such Person to become a member of a group with any
other Person.
For purposes of this Paragraph 6, an Affiliate of any Person means any
other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such Person. For purposes of this
definition, control when used with respect to any specified Person means
the possession of the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms controlling and
controlled have meanings correlative to the foregoing.
7. CHANGE OF SHARES OF COMMON STOCK. Each outstanding share of
Common Stock shall be changed automatically into one validly issued, fully
paid and non-assessable Class A Common Share upon the earlier to occur of
(i) the time, if any, that the number of outstanding Class A Common Shares
is less than 10% of the aggregate number of outstanding Class A Common
Shares and outstanding shares of Common Stock; or (ii) adoption of a
resolution of the Board of Directors providing for such change if, as a
result of the existence of the Common Stock, either the Class A Common
Shares or the Common Stock or both are excluded from trading on the New
York Stock Exchange, the American Stock Exchange and all other principal
national securities exchanges then in operation and are also excluded from
quotation on the National Association of Securities Dealers Automated
Quotation System - National Market System and other comparable quotation
systems then in use. Upon such change, the total number of Class A Common
Shares the Corporation shall have authority to issue shall be Three Hundred
Fifty Million (350,000,000) and the total number of shares of Common Stock
the Corporation shall have authority to issue shall be zero (0) and all
references in the Corporation's Certificate of Incorporation and By-Laws
to Common Stock shall be of no further force or effect or, if the context
so requires, a reference to Class A Common Shares. At the time set forth
in (i) or (ii) above, the shares of Common Stock shall be deemed changed
automatically into shares of Class A Common Shares and stock certificates
formerly representing shares of Common Stock shall thereupon and thereafter
be deemed to represent a like number of Class A Common Shares. The
determination of the Board of Directors that either (i) or (ii) has
occurred shall be conclusive and binding and the change of each share of
Common Stock into one Class A Common Share shall remain effective
regardless of whether (i) or (ii) has occurred in fact.
C. Other Provisions.
1. No holder of shares of any class or series of stock of the
Corporation shall be entitled as such, as a matter of right, to subscribe
for or purchase any part of any new or additional issue of any stock of any
class, series or kind whatsoever, or to subscribe for or purchase
securities convertible into stock of any class, series or kind whatsoever,
whether now or hereafter authorized, and whether issued for cash, property
or services or by way of dividends or otherwise.
2. The powers and rights of the holders of Class A Common
Shares and shares of Common Stock shall be subordinated to the powers,
preferences and rights of the holders of Preferred Stock. The relative
powers, preferences and rights of each class or series of Preferred Stock
in relation to the powers, preferences and rights of each other class or
series of Preferred Stock shall, in each case, be as fixed from time to
time by the provisions of such resolution or resolutions as have been or
may be adopted by the Board of Directors pursuant to the provisions of
Section A of this Article Fourth, and, except as provided in the
Certificate of Designations of the 8.255% PRIDES, Convertible Preferred
Stock of the Corporation, the consent, by class or series vote or
otherwise, of the holders of such of the classes or series of Preferred
Stock as are from time to time outstanding shall not be required for the
issuance by the Board of Directors of any other classes or series of
Preferred Stock whether or not the powers, preferences and rights of such
other classes or series shall be fixed by the Board of Directors as senior
to, or on a parity with, the powers, preferences and rights of such
outstanding classes or series, or any of them; provided, however, that the
Board of Directors may provide in the resolution or resolutions as to any
classes or series of Preferred Stock adopted pursuant to the provisions of
Section A of this Article Fourth that the consent of the holders of a
majority (or such greater proportion as shall be therein fixed) of the
outstanding shares of such classes or series voting thereon shall be
required for the issuance of any or all other classes or series of
Preferred Stock.
3. Subject to the provisions of Paragraph 2 of Section C of
this Article Fourth, shares of any class or series of Preferred Stock may
be authorized or issued, in aggregate amounts not exceeding the total
number of shares of Preferred Stock authorized by this Restated Certificate
of Incorporation, from time to time as the Board of Directors of the
Corporation shall determine and for such consideration as shall be fixed by
the Board of Directors.
4. Class A Common Shares and shares of Common Stock, in an
aggregate amount not exceeding the total number of Class A Common Shares
and shares of Common Stock authorized in this Restated Certificate of
Incorporation, respectively, may be issued from time to time as the Board
of Directors of the Corporation shall determine and for such consideration
as shall be fixed by the Board of Directors.
5. The authorized number of Class A Common Shares and of shares
of Common Stock and of Preferred Stock may, without a class or series vote,
be increased or decreased from time to time by the affirmative vote of a
majority of the votes of the holders of the stock of the Corporation
entitled to vote thereon.
6. Without limiting the generality of Paragraphs 3 and 4 of
Section C of this Article Fourth, the Board of Directors shall have the
power to cause the Corporation to issue and sell shares of any class or
series of stock now or hereafter authorized to such Persons (as defined in
Paragraph 6(j) of Section B of this Article Fourth), and for such
consideration, as the Board of Directors shall from time to time, in its
discretion determine, whether or not greater consideration could be
received upon the issue or sale of the same number of shares of another
class or series, and as otherwise permitted by law. The Board of Directors
shall have the power to cause the Corporation to purchase, out of funds
legally available therefor, shares of any class or series of stock now or
hereafter authorized from such Persons, and for such consideration, as the
Board of Directors shall from time to time, in its discretion, determine,
whether or not less consideration could be paid upon the purchase of the
same number of shares of another class or series, and as otherwise
permitted by law.
<PAGE>
FORM OF OPINION Annex B
[LETTERHEAD OF]
SALOMON BROTHERS INC
March __, 1996
Special Committee of the Board of Directors
Kaiser Aluminum Corporation
[ ]
[ ]
Dear Sirs:
You have requested our opinion as to certain effects, from a financial
point of view, of aproposed reclassification (the "Reclassification") of
the Common Stock, par value $.01 per share ("Existing Common Stock"), of
Kaiser Aluminum Corporation (the "Company"). In the Reclassification, each
issued and outstanding share of Existing Common Stock will be converted
into .33 of a Class A Common Share, par value $.01 per share ("Class A
Common Shares"), and .67 of a share of Common Stock, par value $.01 per
share ("Common Stock", and, together with Class A Common Shares, "New
Common Stock"), all as set forth in the Company's Proxy Statement dated
March ___, 1996 (the "Proxy Statement"), relating to the Reclassification.
Shares of Class A Common Shares and Common Stock will have substantially
identical rights, except that Class A Common Shares will have one vote per
share and shares of Common Stock will have one-tenth of a vote per share
and may receive, at the discretion of the Company's Board of Directors, a
higher, but in no event lower, dividend per share. The Existing Common
Stock is listed on the New York Stock Exchange, and both the Class A Common
Shares and the Common Stock will be listed on the New York Stock Exchange.
The Common Stock will have certain price protection provisions, as
described in the Proxy Statement.
In arriving at our opinion, we have reviewed certain publicly available
financial, market and trading information relating to the Company, as well
as certain other information provided to us by the Company. We have
considered the terms of the New Common Stock as set forth in the Proxy
Statement. We have also considered such other information, financial
studies, analyses, investigations and financial, economic, market and
trading criteria as we deemed relevant.
We have assumed and relied on the accuracy and completeness of the
information reviewed by us for the purpose of this opinion and we have not
assumed any responsibility for independent verification of such information
or for any independent evaluation or appraisal of the assets of the
Company. Our opinion is necessarily based upon business, market, economic
and other conditions as they exist on, and can be evaluated, as of the date
of this letter and does not address the Company's underlying business
decision to effect the Reclassification or constitute a recommendation to
any holder of Existing Common Stock as to how such holder should vote with
respect to the Reclassification.
The market for the New Common Stock may be affected by changes in the
financial condition of the Company, changes in investors' perception of the
Company and the economic implications of the Reclassification and similar
dual class stock structures, changes in the industries in which the Company
operates and changes in interest rates, dividend rates, market conditions,
general economic conditions and other factors that generally influence the
price of securities (and are independent of the terms of the
Reclassification). Accordingly, our opinion as expressed below excludes
the impact of such factors. The announcement or implementation of the
Reclassification may change investors' perceptions of the future plans of
the Company. Consequently, our opinion assumes that the market has had a
reasonable opportunity to understand and evaluate the Reclassification. In
addition, the New Common Stock to be issued in the Reclassification may
initially trade at market prices below those at which it would trade on a
fully distributed basis.
We have acted as financial advisor to the Special Committee of the Board of
Directors of the Company in connection with the Reclassification and will
receive a fee for our services, part of which is payable upon the initial
submission of this opinion. We have acted as financial advisor to the
Company and to MAXXAM Inc., the Company's largest shareholder, with respect
to matters unrelated to the Reclassification and have received fees for our
services. In the ordinary course of our business, we actively trade the
securities of the Company and MAXXAM Inc. for our own account and for the
accounts of customers and, accordingly, may at any time hold a long or
short position in such securities.
Based upon and subject to the foregoing, it is our opinion that, assuming
the Reclassification had been effective as of the date hereof, (i) the
combined theoretical market value (on a fully distributed basis) and the
liquidity of the New Common Stock outstanding immediately after the
Reclassification will not be materially less than the market value and the
liquidity of the Existing Common Stock immediately prior to the
announcement of the Reclassification and (ii) the Company's ability to
raise equity capital through an offering or offerings of common equity will
not be materially adversely affected by the implementation of the
Reclassification.
Very truly yours,
Salomon Brothers Inc
<PAGE>
PROXY
KAISER ALUMINUM CORPORATION
Solicited on behalf of the Board of Directors for the
Special Meeting of Stockholders to be held April 10, 1996
The undersigned hereby appoints GEORGE T. HAYMAKER, JR., CHARLES E.
HURWITZ and JOHN T. LA DUC as proxies (each with power to act alone and
with power of substitution) to vote, as designated on the reverse side, all
shares of Common Stock or 8.255% PRIDES Convertible Preferred Stock the
undersigned is entitled to vote at the Special Meeting of Stockholders to
be held on April 10, 1996, and at any and all adjournments or postponements
thereof.
PLEASE COMPLETE, SIGN, DATE AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
/SEE REVERSE SIDE/
<PAGE>
/X/ Please mark votes as in this example.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED BY THE
UNDERSIGNED. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED "FOR"
THE PROPOSAL TO ADOPT THE RECAPITALIZATION AMENDMENT AS SET FORTH IN THE
PROXY STATEMENT.
1. Approval of proposal to amend the Company's Restated Certificate of
Incorporation (the Recapitalization Amendment ), to (i) provide for two
classes of common stock, one class designated as Class A Common Shares,
$.01 par value, with one vote per share, and a lesser voting class
designated as Common Stock, $.01 par value, with 1/10 vote per
share; (ii) redesignate the 100,000,000 currently authorized shares of
Existing Common Stock as Class A Common Shares and authorize an additional
250,000,000 shares to be designated as Common Stock, and (iii) change each
issued share of the Company's Existing Common Stock, par value $.01 per
share, into (a) .33 of a Class A Common Share and (b) .67 of a share of
Common Stock as described in, and in the form attached as Annexes A-1 and
A-2 to, the proxy statement.
FOR AGAINST ABSTAIN
/ / / / / /
2. In their discretion, the proxies are authorized to vote upon such
other matters as may properly come before the meeting or any adjournments
or postponements thereof, hereby revoking any proxy or proxies heretofore
given by the undersigned.
MARK HERE FOR ADDRESS CHANGE / /
AND NOTE AT LEFT
Please sign name(s) exactly as printed hereon. If stock is held in the
name of more than one person. EACH person should sign. Executors,
administrators, trustees, etc., should give full title as such. If a
corporation, please sign full corporate name by duly authorized officer.
If a partnership, please sign in partnership name by authorized person.
Signature: Date:
Title:
Signature: Date:
Title:
